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, the originals
shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any otherforms of damages arising from the translations.

(Securities Code 7012)
June 4, 2014
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 OF
THE 191ST ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 191st 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 25, 2014.
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) and entering
the voting right exercise code and password stated on the enclosed Voting Rights Exercise Form, and follow
the online instructions to submit your vote.
1. Date and Time:Thursday, June 26, 2014 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

–1–

3. Meeting Agenda:
1.
Matters to bereported:

The Business Report, Consolidated Financial Statements for the Company’s 191st
Fiscal Year (April 1, 2013 - March 31, 2014) and results 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 191st Fiscal Year (April
1, 2013 - March 31, 2014)
Proposal No. 1: Appropriation of Retained Earnings
Proposal No. 2: Election of Thirteen 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.)

4. Other decisions regarding the General Meeting of Shareholders:(1) When voting rights have been exercised twice in writing or electronically, the latter vote received shallbe deemed valid, however when votes are received on the same day, the voting right exercised
electronically shall be deemed valid.
Shareholders who intend to diversely exercise voting rights are requested to give written notification tothat effect, and the reason(s) thereof, no later than three (3) days prior to the day of the General
Meeting of Shareholders.
(2) Among the documents to be submitted when sending the Notice, “Notes to the Consolidated Financial
Statements” and “Notes to the Non-consolidated Financial Statements” are posted on the Website(http://www.khi.co.jp/english/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. “Notes to the Consolidated
Financial Statements” and “Notes to the Non-consolidated Financial Statements” have been combinedwith the Consolidated Financial Statements and the Non-Consolidated Financial Statements for theauditing process when preparing the results of audits by the Accounting Auditor and the Board of
Corporate Auditors.

Notes:
1. 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. Please note that persons other than shareholders who are able
to exercise voting rights, including representatives and their companions who are not shareholders, are notpermitted to enter the venue.
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://www.khi.co.jp/english/ir/).

–2–

Reference Documents for the General Meeting of Shareholders
Proposals and References
Proposal No. 1: Appropriation of Retained Earnings
The Company’s basic policy is to pay cash dividends to its shareholders based on business results, giving
due attention to increased internal reserves to maintain and strengthen a cycle to return business profits to its
stakeholders, and to live up to shareholders’ expectations by striving to improve its enterprise value.
Taking into consideration the strategic investment necessary to improve enterprise value, earning trends,
financial position, and so forth, in accordance with the said policy, the annual cash dividend will amount to¥6 per ordinary share for a total of ¥10,030,505,694, up ¥1 per share from the previous fiscal year.
In addition, the Company’s year-end dividend distribution is June 27, 2014.
Proposal No. 2: Election of Thirteen Directors
The term of office of all ten Directors will expire at the conclusion of this Ordinary General Meeting of
Shareholders. Accordingly, we propose to elect thirteen Directors to promote various efforts toward theimprovement of the Company’s enterprise value. Such efforts include establishment for a solid managementbase of KHI Group and expansion of business foundation of in-house companies.
The candidates for Director are as follows:
No.

Name
(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1973
Jun. 2009
Jun. 2013

1

Kyohei Matsuoka(Sep. 16, 1949)
July. 2013

Apr. 1972
Jun. 2009
Apr. 2010
Jun. 2013

2

Hiroshi Takata(Jan. 5, 1950)

Nov. 2013

Apr. 2014

Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
President, Rolling Stock Company
Senior Executive Vice President
Assistant to the President, in charge of Head Office
Administration Department,
General Manager, Corporate Planning Division
Senior Executive Vice President
Assistant to the President, in charge of Head Office
Administration Department(current position)
Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
President, Consumer Products & Machinery Company
Senior Vice President
President, Motorcycle & Engine Company
Senior Executive Vice President
Assistant to the President, in charge of technology and sales
department
Senior Executive Vice President
Assistant to the President, in charge of technology, sales andprocurement department, and in charge of special matters(relate to development and logistics) in Motorcycle & Engine
Company
Senior Executive Vice President
Assistant to the President, in charge of technology, sales andprocurement department, and in charge of Motorcycle & Engine
Company(current position)–3–

Shares oftheCompany

90,000shares65,000sharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1974
Apr. 2008
Apr. 20103

Shigeru Murayama(Feb. 27, 1950)

Jun. 2010
Jun. 2013

Apr. 1977
Apr. 20094

Joji Iki(Sep. 5, 1951)

Apr. 2012
Jun. 2012

Apr. 1974
Jun, 2008
Jun. 2010

Oct. 2010
5

Eiji Inoue(Feb. 22, 1952)
Apr. 2011
Apr. 2012
Jun. 2012

Apr. 1976
Apr. 2009
Apr. 20116

Yoshinori
Kanehana(Feb. 19, 1954)

Apr. 2012
Jun. 2012
Jun. 2013

Apr. 1975
Apr. 2008

Apr. 2011
Minoru Makimura(Nov. 18, 1950)

Apr. 2012
Jun. 2013

Joined Kawasaki Heavy Industries, Ltd.
Managing Executive Officer
Vice President, Aerospace Company
Managing Executive Officer
President, Aerospace Company
Senior Vice President
President, Aerospace Company
President(current position)[Significant concurrent position]
President(representative director), Commercial Airplane
Company
Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
General Manager, Machinery Division, Gas Turbine &Machinery Company
Managing Executive Officer
President, Gas Turbine & Machinery Company
Senior Vice President
President, Gas Turbine & Machinery Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Director, Kawasaki Plant Systems, Ltd.
Senior Vice President
General Manager, Project Engineering Center, Kawasaki Plant
Systems, Ltd.
Executive Officer
General Manager, Project Engineering Center, in charge of Kobe
Engineering Department, Plant & Infrastructure Company,
Kawasaki Heavy Industries, Ltd.
Executive Officer
Vice President, Plant & Infrastructure Company
Managing Executive Officer
President, Plant & Infrastructure Company
Senior Vice President
President, Plant & Infrastructure Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
Vice President, Rolling Stock Company
Managing Executive Officer
Vice President, Rolling Stock Company
Managing Executive Officer
General Manager, Marketing Division
Senior Vice President
General Manager, Marketing Division
Senior Vice President
President, Rolling Stock Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
Deputy General Manager, Corporate Technology Division andSenior Manager, Technical InstituteManaging Executive Officer
General Manager, Corporate Technology Division and Senior
Manager, Technical InstituteManaging Executive Officer
General Manager, Corporate Technology Division
Senior Vice President
General Manager, Corporate Technology Division(current position)–4–

Shares oftheCompany

114,000
shares

31,000shares

45,000shares

47,000Shares

48,000SharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1975
Jun. 2008

Jun. 2010

Oct. 20108

Akio Murakami(May. 9, 1952)

Apr. 2013
Jun. 2013

Apr. 1969
Oct. 2008

Jun. 2011
Yoshihiko Morita
9（Mar. 7, 1947）

Dec. 2011
Jun. 2012
Jun. 2013
Jun. 2013

Apr. 1975
Apr. 2009
Apr. 201210(Newly-appointed)
Munenori Ishikawa(Feb. 26, 1953)

Apr. 2013
Jun. 2013

Apr. 1978
Jun. 2009
Oct. 2010
Apr. 201111(Newly-appointed)
Kazuo Hida
(Feb. 1, 1954)

Sep. 2011

Apr. 2013

Apr. 2014

Joined Kawasaki Heavy Industries, Ltd.
Director
General Manager, Technology Division, Kawasaki Shipbuilding
Corporation
Senior Vice President
General Manager, Technology Division, Kawasaki Shipbuilding
Corporation
Executive Officer
General Manager, Planning & Control Division, Ship & Offshore
Structure Company
Managing Executive Officer
President, Ship & Offshore Structure Company
Senior Vice Presindet
President, Ship & Offshore Structure Company(current position)[Significant concurrent position]
Director, Nantong COSCO KHI Ship Engineering Co., Ltd.
Director, Dalian COSCO KHI Ship Engineering Co., Ltd.
Director, ENSEADA INDÚSTRIA NAVAL S.A.
Joined Export-Import Bank of Japan (At present: Japan Bank forInternational Cooperation)
Representative Director and Senior Managing Executive Officer
Deputy CEO of Japan Bank for International Cooperation, Japan
Finance Corporation
Resigned Deputy CEO of Japan Bank for International
Cooperation, Japan Finance Corporation
Advisor, Sumitomo Mitsui Banking Corporation
President, Japan Institute for Overseas Investment
Outside Corporate Auditor, TOKYO GAS Co., Ltd.
Outside Director, Kawasaki Heavy Industries, Ltd.
Resigned Advisor, Sumitomo Mitsui Banking Corporation(current position)[Significant concurrent position]
President, Japan Institute for Overseas Investment
Outside Corporate Auditor, TOKYO GAS Co., Ltd.
Joined Kawasaki Heavy Industries, Ltd.
General Manager, Manufacturing Division, Aerospace Company
Executive Officer
General Manager, Manufacturing Division, Aerospace Company
Executive Officer
Vice President, Aerospace Company
Managing Executive Officer
President, Aerospace Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Seconded to Kawasaki Precision Machinery (UK) Ltd.
Senior Associate Officer, Kawasaki Heavy Industries, Ltd.
Seconded to Kawasaki Precision Machinery (UK) Ltd.
Executive Officer, Kawasaki Heavy Industries, Ltd.
Seconded to Kawasaki Precision Machinery (UK) Ltd.
Executive Officer
General Manager, Engineering Division, Precision Machinery
Company
Executive Officer
Vice President and General Manager, Engineering Division,
Precision Machinery Company
Managing Executive Officer
President, Precision Machinery Company(current position)–5–

Shares oftheCompany

23,000Shares2,000
Shares

25,000Shares

22,000SharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Aug. 1980
Apr. 2009
Apr. 201012(Newly-appointed)
Shigehiko Kiyama(Feb. 4 1954)

Apr. 2012

Jun. 2013

Sep. 2013

Apr. 1978
Apr. 2009
Apr. 2010
Apr. 201213(Newly-appointed)
Kenji Tomida(Aug. 7, 1955)

Apr. 2013

July. 2013
Apr. 2014

Joined Kawasaki Heavy Industries, Ltd.
General Manager, Supply Chain Division, Consumer Products &Machinery Company
General Manager, Supply Chain Division, Motorcycle & Engine
Company
Executive Officer,
General Manager, Supply Chain Division, Motorcycle & Engine
Company
Managing Executive Officer
President, and General Manager, Supply Chain Division,
Motorcycle & Engine Company
Managing Executive Officer
President, Motorcycle & Engine Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Deputy General Manager, Corporate Planning Division, andSenior Manager, Corporate Business Planning Department
Deputy General Manager, Corporate Planning Division
Executive Officer
Deputy General Manager, Corporate Planning DivisionMarketing Division
Executive Officer
General Manager, Planning & Control Division, Ship & Offshore
Structure Company
Executive Officer
General Manager, Corporate Planning Division
Managing Executive Officer
General Manager, Corporate Planning Division(current position)[Significant concurrent position]
Director, ENSEADA INDÚSTRIA NAVAL S.A.

Shares oftheCompany

39,000Shares

26,000Shares(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. Mr. Akio Murakami also serves as Director of Nantong COSCO KHI Ship Engineering Co., Ltd., Dalian Cosco Khi
Ship Engineering Co., Ltd., and ENSEADA INDÚSTRIA NAVAL S.A. Each company engages in a business that is
the same type as the Company’s Ship & Offshore Structure segment.
3. Mr. Kenji Tomida also serves as Director of ENSEADA INDÚSTRIA NAVAL S.A., which engages in business thatis the same type as the Company's Ship & Offshore Structure segment.
4. There is no special interest relationship between the other candidates and the Company.
5. Contents of the matter stipulated regarding candidates for Outside Director pursuant to Article 74, Paragraph 4 of theOrdinance for Enforcement of the Companies Act(1) Mr. Yoshihiko Morita is a candidate for Outside Director.
(2) One year has passed since Mr. Yoshihiko Morita commenced his service as Outside Director of the Company at theconclusion of this Ordinary General Meeting of Shareholders.
(3) Mr. Yoshihiko Morita has been chosen as a candidate for Outside Director as the Company has judged that he isable to express useful opinions and advice in determining important matters of the Company’s management. The
Company believes he can do so from a position independent from the Company’s execution of duties in light of his
substantial overseas experiences and knowledge as a specialist, acquired in the Japan Bank for International
Cooperation and other institutions. The Company believes he will be able to fully perform his roles as an Outside
Director in the supervision of the execution of duties of the Company.
(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 an amount of¥10 million, or an amount specified by law and regulation, whichever is higher. Should the appointment of Mr.
Yoshihiko Morita be approved, the Company will extend the above agreement with him.
6. Mr. Yoshihiko Morita satisfies the requirements of independent Officer stipulated by the Tokyo Stock Exchange, Inc.
and Nagoya Stock Exchange, Inc.

–6–

Proposal No. 3: Election of One Corporate Auditor
As the term of office of the Corporate Auditor, Mr. Tatsuyoshi Ogushi will expire at the conclusion of thisOrdinary General Meeting of Shareholders, we propose to elect one Corporate Auditor.
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)
Apr. 1976
Apr. 2009

Apr. 2010

Takafumi
Shibahara(Aug. 5, 1953)

Oct. 2010
Oct. 2010

Apr. 2012
Apr. 2014

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

Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
Deputy General Manager (in charge of Procurement Planningand Administration Department), Corporate Planning Division,and Senior Manager, Subsidiaries & Affiliates Control
Department
Executive Officer
Deputy General Manager, Corporate Planning Division, andSenior Manager, Subsidiaries & Affiliates Control Department,
and in charge of procurement overview
Executive Officer
General Manager, General Administration Division
Executive Officer
General Manager, General Administration Division and
Personnel & Labor Administration Division, and in charge ofKobe Works Office, Akashi Works Office and Harima Works
OfficeExecutive Officer
General Manager, Personnel & Labor Administration Division
Executive Officer
Staff Officer to Corporate Auditor(current potition)

34,000Shares(Note) There is no special conflict of interest between the Company and the candidate for Corporate Auditor.

–7–

Business Report(April 1, 2013 - March 31, 2014)

1. Overview of the Company Group(1)

Business Progress and Results(i) General Conditions
The global economy recovered moderately, spearheaded by developed economies, in the wake of
US economic recovery and improvement in European economies. Emerging market economies, bycontrast, downshifted from their historical growth trend, largely due to weakness in domestic demand.
The Japanese economy was shored up by the effect of various fiscal and monetary policies, alongwith an increase in consumer spending due to a last-minute demand before a consumption tax increase,leading to a mild recovery.
Amid this operating environment, the overall orders received by KHI Group for the fiscal year
under review amounted to ¥1,455.4 billion, 6% higher than the previous fiscal year despite decreasedorders in certain segments. The increase in overall orders was chiefly attributable to the Motorcycle &Engine segment, the Precision Machinery segment, and the Ship & Offshore Structure segment. Net
sales were ¥1,385.4 billion, 7% higher than the previous fiscal year due to increases in the Motorcycle& Engine segment and the Aerospace segment, while decreases were seen in the Plant & Infrastructure
segment and the Ship & Offshore Structure segment.
In terms of profit, the Motorcycle & Engine segment, the Aerospace segment, the Rolling Stocksegment and others reported a profit increase, resulting in an operating income of ¥72.3 billion, 72%
higher than the previous fiscal year. Recurring profit was ¥60.6 billion, 54% higher than the previous
fiscal year, and net income was ¥38.6 billion, 25% higher than the previous fiscal year.
(ii) Operating conditions by business segment
The Ship & Offshore Structure segment received orders amounting to ¥117.8 billion, which was
higher than the previous fiscal year, owing to orders for nine vessels including liquefied gas carriers(LNG/LPG carriers) and a large offshore work vessel.
Net sales were ¥80.8 billion, which was lower than the previous fiscal year. This was attributable toa decrease in the construction of bulk carriers and others, while the construction of liquefied gas carriers
increased.
Operating loss deteriorated ¥6.1 billion from the previous fiscal year to ¥2.0 billion, mainly due to a
new provision for loss on construction contracts and a rise in the price of steel materials.
The Rolling Stock segment received orders worth ¥133.0 billion, which was higher than theprevious fiscal year. This was mainly attributable to orders received for commuter trains for the Long
Island Rail Road and Metro-North Railroad, subway cars for the Washington Metropolitan Area Transit
Authority and subway cars for the Sapporo City Transportation Bureau.
Net sales were ¥147.9 billion, which was higher than the previous fiscal year, owing to increased
sales for overseas markets including North America and Singapore.
Operating income increased ¥5.3 billion from the previous fiscal year to ¥7.5 billion, due to the cost
reduction and the effect of depreciation of the yen.
The Aerospace segment orders received were ¥286.3 billion, which was higher than the previous
fiscal year, due to an increase in orders from The Boeing Company for component parts for the Boeing
787 aircraft.
Net sales were ¥280.7 billion, an increase from the previous fiscal year, due to an increase in sales
to The Boeing Company for component parts for the Boeing 777 and Boeing 787 aircrafts, in addition
to an increase in sales to the Japan’s Ministry of Defense.
Operating income increased ¥11.4 billion from the previous fiscal year to ¥26.2 billion, mainly due
to increased sales, productivity improvement, and the effect of yen depreciation.
The Gas Turbine & Machinery segment orders received were ¥222.0 billion, which was lower
than the previous fiscal year. However, when the decrease of ¥56.8 billion produced by changes inaccounting policies for component parts of aircraft jet engines is excluded, orders were in fact
substantially higher than the previous fiscal year. This was mainly attributable to an increase in orders–8–

for gas engines and component parts of aircraft jet engines.
Net sales were ¥189.2 billion, which was lower than the previous fiscal year. However, when thedecrease of ¥37.4 billion caused by changes in accounting policies for component parts of aircraft jetengines is excluded, the result was substantially higher than the previous fiscal year. This was mainly
attributable to a decrease in sales for marine gas turbines and marine diesel engines and an increase insales for component parts of aircraft jet engines and gas engines.
Operating income increased ¥3.4 billion from the previous fiscal year to ¥10.4 billion, partly owing
to an increase in substantial net sales from which a decrease produced by changes in accounting policies
for component parts of aircraft jet engines is excluded.
In the Plant & Infrastructure segment, orders received were ¥103.9 billion, which was lower thanthe previous fiscal year, despite receiving orders for LNG tanks of the CPC Corporation, Taiwan’s
Taichung LNG Terminal Expansion Project.
Net sales were ¥103.8 billion, which was lower than the previous fiscal year. This was due todecreased sales of conveyance equipment and large-scale projects to overseas customers, despite a sales
increase in environmental equipment projects.
Operating income decreased ¥3.4 billion from the previous fiscal year to ¥6.3 billion, due todecreased sales and profit margin.
Net sales of the Motorcycle & Engine segment were ¥322.2 billion, which was significantly higher
than the previous fiscal year, mainly due to increased sales of motorcycles in the U.S. and emerging
countries, particularly Indonesia and Thailand.
Operating income was ¥16.1 billion, an improvement of ¥13.7 billion from the previous fiscal year,
owing to increased sales and profitability.
In the Precision Machinery segment, orders received were ¥127.2 billion, which was higher thanthe previous fiscal year, mainly due to an increase in orders for clean robots used for semiconductor
manufacturing equipment and robots for the automotive industry.
Net sales were lower than the previous fiscal year at ¥123.2 billion, mainly due to a decrease insales of hydraulic components, despite an increase in sales of clean robots used for semiconductor
manufacturing equipment and robots for the automotive industry.
Operating income increased ¥1.9 billion from the previous fiscal year to ¥10.4 billion, mainly due toan increase in sales of clean robots used for semiconductor manufacturing equipment and robots for the
automotive industry and the effect of the depreciation of the yen.
In the Others segment, net sales were higher than the previous fiscal year at ¥137.2 billion.
Operating income increased ¥3.2 billion from the previous fiscal year to ¥4.4 billion.
(Orders Received, Net Sales and Operating Income/Loss by Segment)
Orders Received
Segment

Net Sales

Year-on-Year
ChangeAmount

Unit: 100 million yen
Operating Income/Loss

Year-on-Year
ChangeAmountYear-on-Year
ChangeAmountShip & Offshore Structure

1,178

121

808

(94)

(20)

(61)

Rolling Stock

1,330

86

1,479

179

75

53

Aerospace

2,863

28

2,807

415

262

114

Gas Turbine & Machinery

2,220

(335)

1,892

(177)

104

34

Plant & Infrastructure

1,039

(96)

1,038

(119)

63

(34)

Motorcycle & Engine

3,222

703

3,222

703

161

137

Precision Machinery

1,272

175

1,232

(71)

104

19

Others

1,426

174

1,372

130

44

32

－

－

－

－

(72)

8

14,554858

13,854

966

723

302

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.

–9–

(2)

Capital Investments, etc.
In the current consolidated fiscal year, KHI Group’s total amount of capital investment was ¥87.7
billion, predominantly for the renewal of aging equipment and facilities for streamlining production,necessary facilities to handle new model and products, and facilities to increase the production capacityof the Aerospace segment.
Main capital investments completed and/or acquired during the current consolidated fiscal year, andmain capital investments under construction as of the end of the current consolidated fiscal year are
listed below.
(i) Main capital investments completed and/or acquired during the consolidated fiscal year underreview・ Aircraft production facilities(Aerospace segment)
・ Production facilities for large engines/turbines(Gas Turbine & Machinery segment)
・ Facilities for streamlining production of hydraulic equipment(Precision Machinery segment)
・ Akashi Works general office(company-wide)
・ Kobe Works office building(company-wide)(ii) Main capital investments under construction as at the end of the consolidated fiscal year underreview・ Aircraft production facilities(Aerospace segment)
・ Production facilities for jet engines(Gas Turbine & Machinery segment)
・ Facilities for energy-related verification tests(company-wide)(3)

FinancingFunds of ¥40.3 billion from long-term debt, ¥40.0 billion from domestic unsecured straight bonds
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 redemption of bonds, long-term loan repayments,
capital investments and working capital.

(4)

Assignment of businesses, absorption-type splits and incorporation-type corporate splits
Not 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.
Not applicable.

(8)

Issues to be addressed
1. Improvement of enterprise value
KHI Group has implemented “ROIC management” as a concrete means to improve its enterprise value.
This involves visualizing the actual status and future growth of business segments by Business Unit (BU),
addressing financial issues based on ROIC (return on invested capital) and making efforts to strengthen
the core competence of each BU. With regard to formulation of the FY2014 business plan, we haveidentified what hurdles must be surmounted and what issues must be tackled by each BU for future growth,through giving overall consideration to not only their financial challenges but also business environments,
growth prospects, core competences and other necessary factors. Especially, we will provide
company-wide assistance to BUs in which ROIC needs to be improved by getting the most of theadvantage of comprehensive management, striving to improve the BU’s structure so that it contributes toenhancing the enterprise value in a “without strain, without risk and without delay” manner.
2. Pursuit of synergy
In addition to each BU’s respective efforts, we believe that pursuing synergistic effects across BUs or
in-house company boundaries will led to a mutual increase in competitive superiority. Thus, to reach our– 10 –

aims in the medium-term business plan, the new challenge is to establish a framework combining multiple
BUs’ core competences across the barrier of organization units to achieve early commercialization of new
products/businesses. Moreover, in order to continuously enhance synergistic effects at the Company-level,
we will strengthen cross-sectional activities centering on the Corporate Technology Division and theMarketing Division in our Head Office, striving to secure, develop and strengthen engineering humanresources, which support KHI Group’s technological ability.
3. Creation of investment capacity
We were able to reduce our interest-bearing liabilities as of the end of FY2013 to the target level.
and will make continuous efforts to improve free cash flow by assigning concrete tasks set out based oneach BU’s cash conversion cycle to related units, and further lower our interest-bearing liabilities
toward FY2015 to achieve the ROIC target. The biggest purpose of reducing interest-bearing liabilities
is to create a capacity to make investments for future growth. To that end, we will continue with to thepolicy in FY2014 to further to invest in the necessary human resources, facilities and R&D, keeping aneye on investment efficiency.
4. Strengthening of risk management
KHI Group strives to strengthen risk management when participating in large projects and new
development projects, and conducting large capital investments and R&D. More specifically, thisincludes understanding various risks that can be predicted in advance and implementing measures tominimize those risks, and strengthening front loading to respond to diverse specifications requested bycustomers in orders received. When laying out growth strategies, KHI Group places emphasis on
thorough prior management of large risk projects and solid management decision-making.
One of KHI Group’s greatest risks relating to profitability is fluctuations in foreign exchange rates.
We believe that under the basics of risk management, this risk should be addressed through businessactivities including strengthening core competence to be capable of resisting fluctuations in exchange
rates, enhancing our global production system, and thoroughly reducing costs. Therefore, we makeefforts to strengthen our resistance to fluctuations in exchange rates on a day-to-day basis.
5. Enhancement of corporate governance
KHI Group has adopted the company system, and each in-house company endeavors to executebusiness operations under delegated authority and responsibility. As a result, KHI Group’s profit levelis steadily increasing, and we will continue to keep the policy to pursue the greatest possible advantagesof the company system. Meanwhile, it is also true to say that interest-bearing liabilities have been
tending to increase for the last several years, giving rise to the urgent issue of controlling management
resources at the Group-wide level. To that end, we need to further search for a policy to develop a
corporate governance system that is appropriate for KHI Group, in ways including clarifying the rolesof Head Office and in-house companies.
With regard to management decision-making, we aim to become a “sincere business group” inwhich each and every decision-making member, including Outside Directors and Outside Corporate
Auditors, takes the necessary actions by following a policy determined thorough “free and open”
discussions, which are encouraged by the Group. We will continue our ceaseless efforts to increase thetransparency and objectivity of the management for shareholders and investors by actively interactingwith capital markets.
6. Fostering of CSR activities
Across the range of our CSR activities, our efforts are based on setting a “target profile” for eachthematic area. We also actively listen to opinions of external parties through our Dialogues with Experts
and feedback from outside parties’ evaluations. In the area of compliance, in addition to putting in place
regulations on corporate ethics and providing grade-specific training and e-learning, we distribute a
range of guidance handbooks and take other measures to ensure our staff are fully familiar with the laws
and regulations which they need to observe. Going forward, we will strive to further enhancecompliance measures. In the field of environmental management, we are working to strengthen
environmental management on the basis of our Eighth Environmental Management Activities Plan andare proceeding with measures including “promotion activities of procurement of green products” and“development of energy visualization system.” Meanwhile, we are working on measures to support
child-rearing as part of a strategy to improve our employees’ work-life balance and introducing
measures to create a diversity-friendly workplace environments, for instance by recruiting moreinternational human resources, ensuring a barrier-free environment at all business sites, and further– 11 –

strengthening the employment of people with disabilities through establishment of a special subsidiary.
Going forward, we intend to promote initiatives at the level of the entire KHI Group including overseas
operations by further deepening the coordination between business management and CSR activities, andto step up our cooperation with business partners in the field of CSR.
The initiatives to be undertaken by each business segment are as follows.
(i)

Ship & Offshore Structure: Increase orders received for liquefied gas carriers (LNG/LPG
carriers), commercialize new fields including offshore vessels and LNG fuel propulsion vessels,
expand business in China and establish business in Brazil, and strengthen the foundations of thebusiness for naval vessels(ii) Rolling Stock: Enhance competitiveness through technologies and products that meetcustomer needs including cutting-edge technological development and new rolling stock,
reinforce our project management to respond to an increase in overseas projects, and construct
a global optimal business execution system including adoption of overseas production andprocurement and effective use of partnerships(iii) Aerospace: Establish a mass production system and develop derivative products for P-1 patrolaircraft and C-2 transport aircraft including repair and component support, respond to boosted
production of component parts for the Boeing 787 and develop derivative products including
777-X(iv) Gas Turbine & Machinery: Develop the energy solution business based on high efficiency
gas turbines and gas engines for industrial use, expand these models in the overseas markets,
respond to demand in Japan for dispersed power sources and expand operations in overseas
markets, promote the development of new models of jet engines for commercial aircraft andimprove the productivity of these models(v) Plant & Infrastructure: Enhance competitiveness through sophistication of existing products
and achieve early commercialization of new products and technologies in the Energy &Environmental Engineering business sector, expand the overseas business to emerging countries
and resource-rich countries through strengthening of overseas partnerships, and enhanceengineering capability by cultivating human resources.
(vi) Motorcycle & Engine: Establish a premium brand, enhance cost competitiveness throughoptimized production and expansion of overseas procurement on a global basis, expand sales
channels in emerging countries the Company has already entered (Southeast Asia, Brazil, and soforth) and develop new markets, and refine leading technologies to respond to environmental
requirements(vii) Precision Machinery: Maintain a high market share in the area of hydraulic excavation
systems while developing other construction machinery products in the global market, enhancecost competitiveness in the robot business, and expand sales in emerging markets(viii)Others: Improve development capabilities with respect to the construction machinery business
unit through our alliance with Hitachi Construction Machinery Co., Ltd., and increase our
global market share and profitability(9)

Trends in Assets and Income(i) Company Group Assets and Income
Unit: billions of yen
The 188th fiscal
year

The 189th fiscal
year

The 190th fiscal
year

The 191st fiscal year
(under review)

Orders received

1,270.6

1,311.8

1,369.5

1,455.4

Net sales

1,226.9

1,303.7

1,288.8

1,385.4

Recurring profit

49.1

63.6

39.3

60.6

Net income

25.9

23.3

30.8

38.6

Net income per share (yen)¥15.55¥13.95¥18.46¥23.09Total assets

1,354.2

1,362.1

1,466.2

1,554.4

Net assets

297.4

315.9

349.8

376.6

Item

(ii) Company Assets and Income– 12 –

Unit: billions of yen
The 188th fiscal
year

The 189th fiscal
year

The 190th fiscal
year

The 191st fiscal year
(under review)

Orders received

816.0

1,018.1

1,086.2

1,089.5

Net sales

817.4

1,003.3

983.9

1,011.6

Recurring profit

32.8

38.0

19.4

35.9

Net income

33.3

11.4

17.1

32.0

Net income per share (yen)¥19.97¥6.87¥10.26¥19.20Total assets

1,116.0

1,144.6

1,195.1

1,243.5

Net assets

246.8

255.0

258.4

273.1

Item

– 13 –

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

Company name

Kawasaki Trading Co., Ltd.

Capital¥600 million

The
Company’s
percentage ofequityparticipation

Main business

70%

Sale of various industrial machinery, petroleum,steel stock, etc.

NIPPI Corporation¥6,048 million

100%

Manufacture of aircraft components, targetingsystems, rocket components, aerospaceequipment, wind power generation system andmarine systems; repair, maintenance andmodification of aircraft

KCM Corporation¥4,825 million

66%

Design, manufacture, sale, repair, etc. of
construction machinery

Kawasaki Machine Systems, Ltd.

¥350 million

100%

Sale, repair and after-sales service of gas turbine
generators

KCMJ Corporation¥300 million

Note 2

Sale, repair and lease of construction machinery,etc.

Kawasaki Motors Corporation Japan¥100 million

100%

Sole distributor of motorcycles, JET SKI® andgeneral purpose gasoline engines in Japan

Kawasaki Thermal Engineering Co.,Ltd.

¥1,460 million

83%

Manufacture, sales, installation and after-sales
service for boilers, air-conditioning equipment
and absorption-style heat pumps, etc.

¥1,200 million

100%

Design, manufacture, and sale of crushers,
grinders, castings, and other equipment; design,
execution and supervision of engineering,
construction, installation of machinery andappliances

Kawasaki Motors Corp., U.S.A.

U.S.$165 million

100%

Sales of motorcycles, JET SKI®, 4-wheel
buggies, and general purpose gasoline engines in
the U.S.

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

U.S.$170 million

100%

Manufacture of JET SKI®, 4-wheel buggies,
and general purpose gasoline engines in the
U.S.; manufacture, servicing and engineering ofrolling stock

Kawasaki Rail Car, Inc.

U.S.$60 million

Note 3

Manufacture, sale, servicing and engineering ofrolling stock in the U.S.

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

U.S.$1 million

Note 4

Sale and service of robots in the U.S.

Kawasaki Motors Europe N.V.

€64 million

100%

Sales of motorcycles, JET SKI®, 4-wheel
buggies, and general purpose gasoline engines in
EuropeKawasaki Motors Enterprise(Thailand) Co., Ltd.

1,900 million baht

100%

Manufacture and sale of motorcycles inThailand

P.T. 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

1,310 million won

50%

Assembly and after-sales services for hydraulicequipment in Korea¥400 million

100%

Customer service, sales and CS activities
relating to precision machinery products(including products of joint company) in China

EarthTechnica Co., Ltd.

Flutek, Ltd.
Kawasaki Precision Machinery
Trading (Shanghai) Co., Ltd.

– 14 –

(Notes)1.
From this current consolidated fiscal year, the following changes were made in relation to companies classified as major
subsidiaries: Kawasaki Robotics (U.S.A.), Inc. was included.
2.
KCMJ Corporation is a wholly-owned subsidiary of KCM Corporation.
3.
Kawasaki Rail Car, Inc. is a wholly-owned subsidiary of Kawasaki Motors Manufacturing Corp., U.S.A.
4.
Kawasaki Robotics (U.S.A.), Inc. is a wholly-owned subsidiary of Kawasaki Motors Corp., U.S.A.
5.
There are 96 consolidated subsidiaries, including 18 companies as major subsidiaries, and there are 18 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.

2,444

Rolling Stock

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

3,139

Aerospace

Manufacture and sale of aircraft, etc.

5,869

Gas Turbine & Machinery

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

3,952

Plant & Infrastructure

Manufacture and sale of industrial machinery, boilers,
environmental equipment, steel structures and crushingmachines, etc.

2,976

Motorcycle & Engine

Manufacture and sale of motorcycles, four-wheel buggies(ATVs), multi-purpose four-wheel vehicles, personal
water craft (“JET SKI®”), general purpose gasoline
engines, etc.

9,235

Precision Machinery

Manufacture and sale of hydraulic components andindustrial robots, etc.

2,589

Other

Manufacture and sale of construction machinery,commerce, brokerage and mediation for sale and order
reception and administration of welfare facilities, etc.

3,462

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

954

Total

34,620Japan
25,531
Overseas 9,089-(Note) The Company has 15,196 employees (average age: 38.7 years; average years of service: 14.4 years)(12) Company Group’s Principal Offices and Plants(i) The Company
Name and location
Principal
officesHead office

Kobe Head Office, Tokyo Head Office

Branches

Sapporo Office, Sendai Office, Nagoya Office, Osaka Office, Hiroshima Office, Fukuoka
Office, Okinawa Office 7 Offices

Plants, etc.

2 Head 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)– 15 –

(ii) Material Subsidiariesi) Domestic
Company nameLocation of principal offices

Location of plants

Kobe / Chiyoda-ku, Tokyo-

NIPPI Corporation

Yokohama

Yokohama / Yamato

KCM Corporation

Kako-gun, Hyogo

Kako-gun, Hyogo

Osaka

-

Kakogawa-

Akashi-

Kusatsu / Osaka / Koto-ku, Tokyo

Kusatsu

Chiyoda-ku, Tokyo

YachiyoKawasaki Trading Co., Ltd.

Kawasaki Machine Systems, Ltd.
KCMJ Corporation
Kawasaki Motors Corporation Japan
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.

Thailand

P.T. Kawasaki Motor Indonesia

Indonesia

Kawasaki Motors (Phils.) Corporation

Philippines

Flutek, Ltd.

Korea

Kawasaki Precision Machinery Trading (Shanghai) Co., Ltd.

China

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

Lenders

Long term

Short term

Total

Mizuho Bank, Ltd.

78

491

570

Sumitomo Mitsui Banking Corporation

65

318

383

Sumitomo Mitsui Trust Bank, Ltd.

60

179

239

Development Bank of Japan Inc.

173

45

219

Bank of Tokyo-Mitsubishi UFJ, Ltd.

19

138

157

(14) Other important issues concerning the current situation of corporate groups
Important law suits cases, etc.
The Japan Fair Trade Commission issued on June 27, 2006 a cease and desist order against our company on
the grounds that there was illegal conduct (bid rigging) in violation of the Antimonopoly Act in relation to theconstruction of refuse incineration plants ordered by municipal governments, and so forth. However, we
lodged an appeal with the Tokyo High Court to seek for the cancellation of the decision. In that appeal, theTokyo High Court ruled against our company (i.e. not agreeing to cancel the decision). We therefore appealed
to the Supreme Court on October 9, 2008, however, on October 6, 2009, the appeal was declined, which
confirms our company lost the suit.
The Japan Fair Trade Commission issued a surcharge payment order on March 23, 2007 for the amount of¥5,165 million against our company. We have appealed the decision to the Japan Fair Trade Commission anddemanded a trial. However, the same payment order for the amount of ¥5,165 million was issued in thedecision made on November 10, 2010, and thus we decided not to challenge the decision. We paid thesurcharge in full on January 11, 2011, which closed this case.
– 16 –Meanwhile, in relation to this matter, several lawsuits have been filed against our company alone or
together with other companies, in order to seek damages from us on the grounds that we caused damage to theordering parties due to the bid rigging. With the end of the following case within FY2013, all the lawsuits that
had been previously filed are now closed.
Municipalities, etc.

Status of the law suits

Atami City

Regarding the action filed by citizens of Atami City seeking damages of ¥1,357 million against sevencompanies including our company, the Supreme Court ruled in favor of our company and others on
April 13, 2009, confirming that our company won the suit. However, a new action for damages of¥512 million was brought against five companies including our company by Atami City at the Tokyo
High Court on August 19, 2010. The Tokyo High Court ruled against our company and ordered KHI
and others to pay ¥315 million on March 15, 2013. The five companies including our company thenappealed to the Supreme Court; however, on January 16, 2014, the court declined the appeal. The caseis now closed.

2. Status of Shares (as of March 31, 2014)(1)

Total number of shares authorized to be issued

3,360,000,000 shares(2)

Total number of shares issued

1,671,892,659 shares(including 141,710 shares of treasury stock)(3)

Number of shareholders

128,248 persons(4)

Major shareholders (top 10)
Shareholders’ investment in the Company
Shareholder name
Number of shares held
thousand shares

Shareholding ratio%

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

108,666

6.5

Japan Trustee Services Bank, Ltd. (Trust Account)

79,9894.7

Mizuho Bank, Ltd.

59,207

3.5

Nippon Life Insurance Company

57,516

3.4

JFE Steel Corporation

56,174

3.3

Kawasaki Heavy Industries, Ltd. Kyoueikai

34,871

2.0

Kawasaki Heavy Industries, Ltd. Employees Shareholder Association

30,975

1.8

Tokio Marine & Nichido Fire Insurance Co., Ltd.

27,838

1.6

Sumitomo Mitsui Banking Corporation

26,828

1.6

Japan Trustee Services Bank, Ltd. (Trust Account 9)21,4651.2(Note) The shareholding ratio is calculated after subtracting treasury stock (141,710 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.

– 17 –

4. Company Officers(1)

Directors and Corporate Auditors
Position

Name

Areas of Responsibility within the Company and othersignificant concurrent positions*

President

Shigeru Murayama

President(representative director), Commercial Airplane
Company*

Senior Executive Vice
President

Kyohei Matsuoka

Assistant to the President, in charge of Head Office Administration
Department*

Senior Executive Vice
President

Hiroshi Takata

Assistant to the President, in charge of technology, sales andprocurement department and special matters of the Motorcycle &Engine Company (relating to development and logistics)*

Senior Vice President

Makoto Sonoda

President, Precision Machinery Company*

Senior Vice President

Joji Iki

President, Gas Turbine & Machinery Company*

Senior Vice President

Eiji Inoue

President, Plant & Infrastructure Company*

Senior Vice President

Yoshinori Kanehana

President, Rolling Stock Company

Senior Vice President

Minoru Makimura

Senior Vice President

Akio Murakami

General Manager, Corporate Technology Division
President, Ship & Offshore Structure Company,
Director, Nantong COSCO KHI Ship Engineering Co., Ltd.
Director, Dalian COSCO KHI Ship Engineering Co., Ltd.
Director, ENSEADA INDÚSTRIA NAVAL S.A.

Director (Outside)

Yoshihiko Morita

Full-Time Corporate
Auditor

Tatsuyoshi Ogushi

Full-Time Corporate
AuditorYuji Murakami

Corporate Auditor(Outside)

Michio Oka

Corporate Auditor(Outside)

Nobuyuki Fujikake*

President, Japan Institute for Overseas Investment,
Outside Corporate Auditor, TOKYO GAS Co., Ltd.

Attorney at law(Notes) 1. * means a Representative Director.
2. Director Yoshihiko Morita and Corporate Auditors Michio Oka and Nobuyuki Fujikake are
Independent Officers stipulated by the Tokyo Stock Exchange, Inc. and Nagoya Stock Exchange, Inc..
3. Mr. Jiro Noguchi, formerly Senior Vice President of KHI, has been appointed as Outside Corporate Auditorof Kawasaki Kisen Kaisha, Ltd. (“Kawasaki Kisen”), to which Mr. Michio Oka belonged. Kawasaki Kisen
owns a total of 1.03% of the outstanding shares in KHI. Meanwhile, KHI owns a total of 3.50% of thevoting 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 Trustand 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 averagetransactions 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 the corresponding period. Consequently, we have determined that there is no issue as regards tothe independence of Mr. Michio Oka and he is therefore suitable as an independent officer.
4. Tadaharu Ohashi, Satoshi Hasegawa, Masashi Segawa, Mitsutoshi Takao, Nobumitsu Kambayashi and
Masahiko Hirohata, Directors, and Kenzo Doi, Corporate Auditor, resigned during the relevant businessyear with the conclusion of the 190th Ordinary General Meeting of Shareholders.
5. As of April 1, 2014, the Director positions have changed: Makoto Sonoda, formerly Senior Vice
President (Representative Director), has become Director.
6. Yuji Murakami, Corporate Auditor, who has many years of experience with administration and accounting
operations at our company, has substantial knowledge about finance and accounting matters.

– 18 –

7. Executive Officers as of April 1, 2014 are as follows.
Position

Name

Areas of Responsibility within the Company

President

Shigeru Murayama

Senior Executive Vice President

Kyohei Matsuoka

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

Senior Executive Vice President

Hiroshi Takata

Assistant to the President, in charge of Technology, Sales andProcurement Division and the Motorcycle & Engine Company

Senior Vice President

Joji Iki

President, Gas Turbine & Machinery Company

Senior Vice President

Eiji Inoue

President, Plant & Infrastructure Company

Senior Vice President

Yoshinori Kanehana

President, Rolling Stock Company

Senior Vice President

Minoru Makimura

General Manager, Corporate Technology Division

Senior Vice President

Akio Murakami

President, Ship & Offshore Structure Company

Managing Executive Officer

Masahiro Ibi

General Manager, Marketing Division and Senior Manager
of MD Project Department

Managing Executive Officer

Munenori Ishikawa

President, Aerospace Company

Managing Executive Officer

Shigehiko Kiyama

President, Motorcycle & Engine Company

Managing Executive Officer

Kazuo Hida

President, Precision Machinery Company

Managing Executive Officer

Kenji Tomida

General Manager, Corporate Planning Division

Executive Officer

Shinsuke Tanaka

Deputy General Manager, Corporate Planning Division. (Incharge of special matters)

Executive Officer

Takafumi Shibahara

Staff Officer to Corporate Auditor

Executive Officer

Yukinobu Kono

Deputy General Manager, Corporate Technology Division andGeneral Manager, System Technology Development Centerand Marketing Division

Executive Officer

Masafumi Nakagawa

Motorcycle & Engine Company (seconded to Kawasaki
Motors Corp., U.S.A.)

Executive Officer

Kaoru Kawabe

Vice President, Ship & Offshore Structure Company

Executive Officer

Makoto Ogawara

Vice President, Rolling Stock Company

Executive Officer

Hirokazu Komaki

Vice President, Aerospace Company

Executive Officer

Shiro Nakabayashi

General Manager, General Administration Division

Executive Officer

Toshiyuki Kuyama

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

Executive Officer

Genichi Abe

General Manager, Project Division and in charge of special
matters, Ship & Offshore Structure Company

Executive Officer

Kazuo Ota

General Manager, Planning & Control Division, Aerospace
Company

Executive Officer

Masami Maeda

General Manager, Project Division, Precision Machinery
Company

Executive Officer

Hiroji Iwasaki

General Manager, Planning & Control Division, Rolling Stock
Company

Executive Officer

Koji Kadota

Deputy General Manager, Corporate Technology Division andGeneral Manager, Technical InstituteExecutive Officer

Yasuhiko Hashimoto

General Manager, Robot Division, Precision Machinery
Company

Executive Officer

Tatsuya Watanabe

Senior Manager, Energy Plants Engineering Division, Plant &Infrastructure Company– 19 –

Executive Officer

Takeshi Ohata

General Manager, Machinery Division, Gas Turbine &Machinery Company

Executive Officer

Ikuhiro Narimatsu

General Manager, Personnel & Labor Administration Division

Executive Officer

Takeshi Asano

General Manager, Marketing & Sales Division, Motorcycle &Engine Company

Executive Officer

Toshiyuki Mimura

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

Executive Officer

Akio Nekoshima

General Manager, Finance & Accounting Division(2)

Compensation to Directors and Corporate Auditors
Directors 16 persons¥600,997 thousand

Corporate Auditors 5 persons¥88,980 thousand

Total 21 persons
Note

(3)

¥689,977 thousand (of which ¥27,180 thousand to four Outside Directors/Corporate
Auditors)

The maximum amount of remuneration for the Directors is ¥1,200 million per year (as resolved at the 189th
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 170th Ordinary 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 the relationshipbetween our company and said companies
Director Yoshihiko Morita concurrently holds a position as President of the Japan Institute forOverseas Investment and Outside Corporate Auditor of TOKYO GAS Co., Ltd. Our company does nothave any important dealings or other special relationships with the said institute and the company.
(iii) Relationships between the Company or specific related business operators and Directors andemployees, etc.
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 11 Board of Directors Meetings held following his
appointment as a Director on June 26, 2013, and made comments based on his substantial overseas
experience and knowledge as a specialist, acquired in the Japan Bank for International Cooperation andother institutions.
Corporate Auditor Michio Oka attended 13 of 14 Board of Directors Meetings, and 21 of 22 Boardof Corporate Auditors meetings held during the business year, and mainly made comments based on his
experience as a company manager.
Corporate Auditor Nobuyuki Fujikake attended all of the 11 Board of Directors Meetings, and all of
the 17 Board of Corporate Auditors meetings held following his appointment as a Corporate Auditor onJune 26, 2013, and mainly made comments based on his expert standpoint as an attorney at law.
(v) Overview of provisions in contracts for limitation of liability
The Company has concluded contracts for limitation of liability with Director Yoshihiko Morita andCorporate Auditors Michio Oka and Nobuyuki Fujikake, pursuant to the provisions of Article 427
Paragraph 1 of the Companies Act. The liability under said contract shall be limited to either an amountof ¥10 million, or an amount specified by law, whichever is higher.

– 20 –

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¥169,256 thousand(ii) Cash and Other Profits Payable by the Company or its Subsidiaries to the Accounting
Auditors¥223,991 thousand(Note 1) Under the audit agreement between the Company and its Accounting Auditor, compensation for audits
pursuant to the Companies Act and audits pursuant to the Financial Instruments and Exchange Act are notseparated, and they cannot be separated in a practical way. Consequently, the above amounts reflect
total compensation.
(Note 2) 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
IFRS advisory services, procedures relating to the confirmation of balances of certain accounts
submitted to the authorities concerned to proceed liquidation of receivables and so forth.

(4)

Policy Regarding Determination of Termination or Nonrenewal of Appointment of
Accounting Auditors
Where the Accounting Auditor violates or contravenes laws such as the Companies Act andCertified Public Accountant Act, and where it is determined acts have been committed which go against
public order and morality, the Board of Corporate Auditors shall consider whether to terminate or not
renew the Accounting Auditors based on those facts, and make a decision in accordance with the Boardof Corporate Auditors Regulations. Where the Board of Corporate Auditors determines that it isappropriate to terminate or not renew the appointment of Accounting Auditors, it will request the Boardof Directors to terminate the Accounting Auditors’ appointment, or put forward a proposal at theGeneral Meeting of Shareholders to not renew the appointment of the Accounting Auditors, and theBoard of Directors shall discuss the matter.

– 21 –

6. System to ensure that Directors’ execution of duties complies with laws and the
Articles of Incorporation and other systems to ensure proper execution of business
A resolution was made with respect to the Company’s internal control systems, pursuant to the Companies
Act, at the Board of Directors Meeting of May 24, 2006 regarding confirmation of the basic policies andstatus of established internal control systems, and henceforth whenever there are organizational changes orchanges to internal regulations, resolutions are made again at Board of Directors Meetings. The overview
thereof is as follows. In addition, KHI conducts year-end assessment of the operation status of resolved
internal control systems to ensure proper operation and provides reports to the Board of Directors.
I. Basic policy for developing a system for internal controls
KHI Group develops and maintains systems for internal controls to establish systems to ensure formationof proper organizational structures, development of company rules and regulations, dissemination of
information and proper execution of operations; since KHI’s management philosophy, which is indicatedin our Group Mission (missions and roles which must be carried out) “Kawasaki, working as one for thegood of the planet” (Enriching lifestyles and helping safeguard the environment: Global Kawasaki),“Kawasaki Value,” the “The Kawasaki Group Management Principles” and “The Kawasaki Group Codeof Conduct”; is embodied in each and every officer and employee of our Group. KHI strives to improve its
internal controls by constantly reviewing them, and in doing so improves the efficiency and lawfulness ofcompany systems which contribute to the Group’s sound and sustained growth.
II. Development of internal control systems
KHI has established the following internal control systems and is streamlining, maintaining, andimproving them. Going forward, KHI will review them as necessary, taking into account such factors aschanges in the Company’s operating environment. In addition, KHI will conduct a year-end assessment of
the operation status of internal control systems to ensure proper operation.
1. Internal control systems concerning Directors and employees(1) Systems to ensure that Directors’ and employees’ execution of duties are compliant with laws andthe Articles of Incorporation
1) We established KHI Corporate Ethics Regulations, and are thoroughgoing in ensuring
compliance with laws and the Articles of Incorporation and other KHI regulations and policies,
and bind KHI’s directors and employees to: “put ethics regulations into practice as corporate
citizens”, “respect individuals and individual rights and prohibit discrimination”, “promote
protection of the environment”, “comply with laws and social rules”, and “use proper accounting
practices and ensure reliability of financial reports” (hereinafter, “Fundamental Principles ofCorporate Ethics).
2) According to the Internal Controls Management Regulations, we appropriately manage thesystem to promote measures, with the President as the chief executive of internal controls andGeneral Manager of each division as the manager in charge of internal controls, and deliberate
and make decisions on policies and measures at Management Committee, which are designed to
streamline, maintain, and improve internal control systems, in order to ensure theappropriateness of business operations by achieving objectives such as effective and efficientbusiness operations, reliable financial reporting, compliance with laws, and safeguarding ofassets. Based on the roles and responsibilities given to Executive Officers, officers, andemployees, we manage internal control systems in a unified way.
3) According to the Company-wide CSR Committee Regulations and the CSR Committee Rules
for Business Divisions, we deliberate and make decisions on policies and measures, under thegovernance of the President, for the Company-wide CSR Committee and the CSR Committee
for Business Divisions (consisting of officers and employees) to comply with the Fundamental
Principles of Corporate Ethics stipulated in KHI Corporate Ethics Regulations, and to takethoroughgoing compliance initiatives for KHI Group. We continue to improve understanding andawareness of compliance through ongoing education and training activities for various types oflegal compliance and also monitor operational status.
4) According to the Compliance Reporting and Consultation System Regulations, we work toenhance compliance systems by managing the internal whistleblower system to report
information regarding compliance breaches in cases where it is difficult to correct compliance– 22 –

breaches through ladders or concerned divisions.
5) While Executive Officers who are delegated to execute business operations are appointed at
Board of Directors Meetings and Executive Officers are delegated to execute business operations,
Outside Directors who do not concurrently serve as Executive Officers and Outside Corporate
Auditors are appointed as Independent Officers established by the Tokyo Stock Exchange toenhance the supervisory and monitoring functions of the Board of Directors for overallmanagement.
6) According to the Internal Controls Regulations, we ensure the appropriateness of business
operations through business audits conducted by the Auditing Department.
7) Based on our Basic Policy on Internal Controls over Financial Reporting, we establish internal
controls over financial reporting and appropriately carry out evaluation and assessment thereof
to ensure the reliability of financial reporting.
(2) Systems for storage and management of information related to Directors’ execution of duties
1) Information pertaining to Directors’ execution of duties (meeting minutes, decision making
records and appurtenant materials, account books, account invoices and other information) shallbe appropriately stored and managed in accordance with Document Handling Regulations andother related policies and regulations. The information shall be made accessible at any time to
Directors, Corporate Auditors and employees nominated thereby.
2) With respect to protection of confidential information, we have established a Rules for Handling
Corporate Secrets, and with respect to personal information we have established Regulations forProtecting Personal Information to ensure appropriate handling is thoroughly observed, and we
ensure enforcement thereof through such measures as inspections and business audits, which arecarried out according to methods stipulated in the regulations.
(3) Systems for management of risk of loss
1) According to the Risk Management Regulations, with the President as the chief executiveof risk management and General Manager of each division as manager in charge of risk
management, we grasp the assumed risk in detail using a unit of measurement common to
the entire Group, and appropriately manage the 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 the Regulations of Board of Directors, the Management Committee Regulations andthe Approval Regulations, and deliberations and decision making regarding those risks
shall be carried out at Board of Directors Meetings or Management Committees inaccordance with those regulations. We also implement appropriate risk management for
major projects that have a significant impact on business operations, in accordance with the
Major Project Risk Management Regulations particularly.
3) As a measure to be taken when risk becomes evident, according to the Risk Management
Regulations, we articulate codes of conduct in event of emergencies, and also appoint
persons in charge of crisis management at each place of business to appropriately manage
the system, which is designed to minimize losses. In particular, in anticipation of theoccurrence of disasters, including large-scale earthquake and pandemic diseases, we
specify important operations to which priority should be given to ensure the continuation or
recovery of the operations in order to minimize the impact on business and formulate abusiness continuity plan to shorten the length of time until recovery.
(4) Systems to ensure efficient execution of Directors’ duties
1) Based on 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 eachbusiness division in the Medium-Term Business Plan.
2) To attain the goals set forth in the Kawasaki Group Mission Statement and the long-term
vision (“Kawasaki Business Vision 2020”), we have formulated a Medium-Term Business
Plan and a Short-Term Business Plan, and have determined goals at each organization levelbased on these plans. We have also established performance goals for each officer andemployee, and work on activities that articulate goals to be achieved. Furthermore, byconducting regular reviews of these respective plans and goals, we aim to secure a systemthat enables more appropriate and efficient execution of business operations.
– 23 –

3) We have stipulated matters such as division of roles and authority for executing business
operations and lines of responsibility and chains of command, and so forth, in regulations
such as the Rules for Managing Segregation of Business Operations and the Approval
Regulations, in order to clarify the authority and limits of discretion of officers andemployees. According to the Executive Officers Regulations, Executive Officers areappointed based on a resolution passed at Board of Directors Meetings to clarify the“Systems for Execution of Business Operations.” As a result of appropriately managing
these systems, we aim to efficiently execute business operations in each business andfunction area.
4) We have established Management Committee, which act as a deliberative organ to support
the Board of Directors Meetings’ resolutions and the President’s decision making, to ensure
efficient execution of duties by Board Members through discussions at Management
Committees. Furthermore, we hold Executive Officers Committee Meeting for all
Executive Officers to ensure familiarity and a common understanding of management
strategies and plans.
5) According to the company system, each business division makes decisions on its own
under delegated authority and responsibility, and executes flexible business operations toadapt to changes in the environment.
2. Internal controls systems in the Company Group• Systems to ensure proper business execution within the Company Group which is composed of thecompany and subsidiaries
1) With respect to the management at each company within our Group, while respecting the autonomy
thereof, we ensure the appropriateness of business operations as a whole by KHI and each company
within our Group sharing the basic philosophy and vision indicated in the Kawasaki Group Mission
Statement and the Medium-Term Business Plan, and so forth.
2) According to the Internal Controls Management Regulations, we govern internal controls of our
subsidiaries and affiliates from the perspective of the parent company and appropriately manage thesystem to ensure the appropriateness of business operations by achieving objectives such as theeffectiveness and efficiency of business operations, reliability of financial reporting, compliance withlaws and safeguarding of assets as a whole group.
3) We implement controls as shareholders of subsidiaries and affiliates through the execution of voting
rights at the General Meeting of Shareholders, and also implement controls over important decisions,and so forth, concerning the operation of subsidiaries and affiliates through the Subsidiaries andAffiliates Regulations and the Approval Regulations. Specifically, we carry out management
supervision and monitoring by dispatching non-full-time Directors and non-full-time Corporate
Auditors to subsidiaries, and also through the establishment of the Subsidiaries & Affiliates Control
Department which presides over subsidiaries to clarify the roles of each company, we secure
appropriate Group business management systems. Furthermore, according to the Internal Regulations
for Non-full-Time Officers of Subsidiaries and Affiliates, we also carry out education and training fornon-full-time officers dispatched from KHI.
4) The Auditing Department, which presides over the Group internal audits, ensures the appropriatenessof operations and prevents unfair transactions between the Group companies through business audits
and assessment of internal controls over financial reporting at KHI and subsidiaries.
5) According to the Company-wide CSR Committee Regulations, we deliberate strategies and policies
and measures concerning the Fundamental Principles of Corporate Ethics and compliance as theentire KHI Group, and secure systems to check operational status.
3. Internal controls systems for ensuring appropriate audits by Corporate Auditors(1) Systems for employees in cases where the Corporate Auditor requests appointment of employees toassist with the Corporate Auditor’s duties• We allocate the required staff (to the Corporate Auditor) according to the Corporate Auditors’requests.
(2) Systems to ensure employees who assist with the Corporate Auditors duties are independent from
Directors.
• The person employed to assist with the duties of the Corporate Auditor (assistant of the Corporate
Auditor) shall follow the Corporate Auditor’s directions and orders, and the consent of the
Corporate Auditor is required in relation to the hiring or firing of the staff.
– 24 –

(3) Systems for Directors and employees to report to the Board of Corporate Auditors and othersystems for reports to the Board of Corporate Auditors.
1) Corporate Auditors attend Board of Directors Meetings, Management Committee, Executive
Officers Committee and company-wide meetings, including Company-wide CSR Committees
and Company-wide Risk Management Committees; at these meetings, Directors and employees
provide reports concerning important matters about company management and business
operations, including matters regarding compliance, risk management and internal controls, andthe status of execution of duties. Furthermore, Directors shall immediately report to the Board of
Corporate Auditors when discovering that there is a risk of the company suffering significant
damages.
2) Employees shall, in accordance with the Approval Regulations, report to the Corporate Auditor
regarding the execution of business operations by circulation of internal memos.
3) The Auditing Department and Accounting Auditors from time to time report to, and exchange
information with Corporate Auditors regarding the status of audits on each place of business andGroup companies.
(4) Other systems to ensure the effective conduct of audits by the Board of Corporate Auditors
1) Directors and Corporate Auditors regularly hold meetings to ensure mutual understanding, andthe Corporate Auditor also attends important meetings such as Board of Directors Committee
and Management Committee, and directly expresses his/her opinion regarding Directors’
execution of duties.
2) Directors promote collaboration between Corporate Auditors and the Auditing Department, andcooperate to establish systems which enable greater effectiveness in the conduct of audits.
3) Matters concerning the election of Corporate Auditors and their remuneration, and so forth, aredetermined in accordance with laws and the Articles of Incorporation, by obtaining the consent
of Corporate Auditors, or approval of the Board of Corporate Auditors.
4. Basic stance on expulsion of anti-social forces and countermeasures
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 employees. The Guidebook prohibits “giving favors to anti-social
forces,” and lists specific examples of prohibited acts. We work to ensure that employees arethoroughly 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 inheadquarters which is responsible for overseeing handling of expulsion of anti-social forces,
established close cooperation with external specialized organizations such as the police force, andin collaboration with concerning departments we systematically handle unreasonable requests
from anti-social forces.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(Note) Amounts in this Business Report are rounded down to the nearest unit.

– 25 –

Consolidated Balance Sheet(As of March 31, 2014)(Unit: million yen)
Description

AmountDescription(Assets)
Current assets

Amount(Liabilities)
1,005,754

Current liabilities

795,415

Cash on hand and in banks

47,949Trade payables

252,107

Trade receivables

415,664

Electronically recorded obligations

53,923Merchandise and finished products

56,673

Short-term debt and current portion of

190,757

Work in process

302,511

Current portion of lease obligations

Raw materials and supplies

98,848

Income taxes payable

10,100

Deferred tax assets

33,046

Deferred tax liabilities

442

Other current assets

54,165

Advances from customers

137,598

Allowance for doubtful receivables(3,104)

Accrued bonuses

22,118Provision for product warranties

10,535

Provision for losses on construction contracts

13,560long-term debt

Asset retirement obligations
Other current liabilities
Fixed assets

404

49
103,818

548,675

Net property, plant and equipment

383,912Long-term liabilities

382,328

Buildings and structures

144,147

Bonds payable

110,000

Machinery and equipment

99,768Long-term debt, less current portion

141,343

Land

62,866

Lease obligations

2,139

Leased assets

1,987

Deferred tax liabilities

6,630

Construction in progress

29,330

Provision for losses on legal proceeding

395

Other

45,810

Provision for environmental measures

3,669

Intangible assets

17,262

Investments and other assets

147,500

Asset retirement obligations

Investments in securities

14,167

Other

97,048

Total liabilities

487
20,614Long-term loans

424

Deferred tax assets

52,711(Net assets)

Other investments and other assets

80,906

Shareholders’ equity

376,284

Allowance for doubtful receivables(710)

Common stock

104,484

Capital surplus

54,393Retained earnings

217,449

Treasury stock
Accumulated other comprehensive income(43)(13,243)

Net unrealized gains on securities, net tax

2,652

Deferred gains (losses) on hedges(3,803)Foreign currency translation adjustments

6,416

Accumulated adjustment for retirement benefits

Total assets

1,177,744(18,509)

Minority interests

13,645

Total net assets

376,686

1,554,430

Total liabilities and net assets– 26 –

1,554,430

Consolidated Statement of Income(April 1, 2013 - March 31, 2014)(Unit: million yen)
Description

AmountNet sales

1,385,482

Cost of sales

1,140,293

Gross profit

245,189

Selling, general and administrative expenses

172,837

Operating income

72,351Non-operating income

12,190Interest income

919

Dividend income

397

Gain on sales of securities

1,187

Equity in income of non-consolidated subsidiaries andaffiliates

7,016

Other non-operating income

2,669

Non-operating expenses

23,936

Interest expense

3,991

Foreign exchange losses, net

14,785

Other non-operating expenses

5,159

Recurring profit

60,605Extraordinary income

3,323

Gain on contribution of securities to retirement benefit trust

3,323

Extraordinary losses

2,618

Loss on disaster

2,142

Loss on impairment of fixed assets

476

Income before income taxes

61,310

Income taxes-current

15,902

Income taxes-deferred

4,409

Income before minority interests

40,998

Minority interests in income

2,396

Net income

38,601– 27 –

Consolidated Statement of Changes in Net Assets(April 1, 2013 - March 31, 2014)(Unit: million yen)
Shareholders’ equity
Common stock
Balance at the beginning of the period

Capital surplus Retained earnings

104,484

54,393

198,528(27)(11,523)

Cumulative effect of changes inaccounting policies
Restated balance

Totalshareholders’equityTreasury stock

104,484

54,393

187,005357,379(11,523)(27)

345,856

Changes of items during the period
Cash dividends(8,358)(8,358)Net income for the year

38,601

38,601

Treasury stock purchased
Treasury stock disposed

0

(16)

(16)

0

0

201

Effect of changes in accounting
periods of consolidated subsidiaries

201

Net changes of items other thanshareholders’ equity
Total changes of items during theperiod−030,444(16)

30,428

Balance at the end of the period

104,484

54,393

217,449(43)

376,284

Accumulated other comprehensive income
Net unrealized
Gains (losses)
gains onon hedging
securities net
items
of taxBalance at the beginning of the period

4,524(5,998)Foreigncurrencytranslation
adjustments(17,665)

Cumulative effect of changes inaccounting policies
Restated balance

4,524(5,998)(17,665)

Total
Accumulated
accumulated
adjustment forotherretirement
comprehensive
benefits
income−(19,139)(20,410)(20,410)(20,410)(39,549)

Minority
interests

11,641Total
net assets

349,881(31,933)

11,641

317,947

Changes of items during the period
Cash dividends(8,358)Net income for the year

38,601

Treasury stock purchased(16)

Treasury stock disposed

0201

Effect of changes in accounting
periods of consolidated subsidiaries
Net changes of items other thanshareholders’ equity(1,871)

2,195

24,081

1,900

26,3062,004

28,310Total changes of items during theperiod(1,871)

2,195

24,081

1,900

26,306

2,004

58,738

Balance at the end of the period

2,652(3,803)

6,416(18,509)(13,243)

13,645

376,686– 28 –

Non-consolidated Balance Sheet(As of March 31, 2014)
Description(Assets)
Current assets
Cash on hand and in banks
Notes receivable-trade
Accounts receivable-trade
Lease investment assets
Raw materials and supplies
Work in process
Advance payments
Prepaid expenses

Amount777,732
28,285
4,389
316,878
1,996
70,391
246,840
32,068
1,396

Deferred tax assets

21,196

Short-term loans
Accounts receivable-otherAccrued income
Other current assets
Allowance for doubtful receivables

27,93924,679
77
2,528
(936)

Fixed assets
Net property, plant and equipment

465,800
259,708

Buildings
Structures
Docks and building berths
Machinery and equipment
Vessels
Aircraft
VehiclesTools, Furniture and fixtures

80,435
14,792543
65,3311440
1,134
39,665

Land

36,275

Leased assets

1,905

Construction in progress

19,571Intangible assets
SoftwareLicense production and licensee’s
execution right
Other intangible assets

13,931
11,314

Investments and other assets
Investments in securities
Stock of affiliates
Investments in capital of affiliates
Long-term loans
Deferred tax assets
Other investments and other assets

192,160
12,36696,99334,0846,208
35,829
7,236

Allowance for doubtful receivables(558)

Total assets

Description(Liabilities)
Current liabilities
Notes payable-trade
Electronically recorded obligations
Accounts payable-trade
Short-term debt
Current portion of long-term debt
Notes payable-facilities
Electronically recorded obligations
Lease obligations
Accumulated impairment loss on
leased assets
Accounts payable-otherAccrued expenses
Income taxes payable
Advances from customers
Deposits received
Unearned revenue
Accrued bonuses
Provision for product warranties
Provision for losses on construction
contracts
Derivatives liabilities
Other current liabilities
Noncurrent liabilities

270
2,346

1,243,533– 29 –

Bonds payable, less current portionLong-term debt, less current portion
Lease obligations
Accumulated impairment loss on
leased assets
Long-term accounts payable-other
Provision for losses on legal
proceeding
Provision for environmental measures
Employees’ retirement and severance
benefits
Asset retirement obligations
Other long-term liabilities
Total liabilities
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 depreciationof fixed assets
Retained earnings brought forward
Treasury stock
Valuation and translation adjustments
Net unrealized gains on securities, net
tax
Deferred gains (losses) on hedges
Total net assets
Total liabilities and net assets(Unit: million yen)Amount657,336
18,23046,575
192,498
82,843
85,215
272
6,648
88
226
27,001
37,654
1,122
107,6457,507
653
15,106
7,444
11,8897,939
771
313,002110,000
140,483
1,569
172
16,457395
3,425
40,078409
11970,339

272,842
104,484
52,21052,2100116,190
116,190646
7,453
108,090
(43)
351
2,004
(1,653)
273,193
1,243,533

Non-consolidated Statement of Income(April 1, 2013 - March 31, 2014)(Unit: million yen)
Description

AmountNet sales

1,011,603

Cost of sales

882,346

Gross profit

129,257

Selling, general and administrative expenses

93,148Operating income

36,108Non-operating income

24,511

Interest income

769

Dividend income

21,505Gain on sales of securities

1,233

Other non-operating income

1,002

Non-operating expenses

24,714

Interest expense

2,342Interest on bonds

948

Foreign exchange losses

17,704

Other non-operating expenses

3,718

Recurring profit

35,905Extraordinary income

3,323

Gain on contribution of securities to retirement benefit trust

3,323

Extraordinary losses

2,973

Loss on disaster

349

Adjustment on transfer pricing taxation

2,624

Income before income taxes

36,255

Income taxes-current(874)

Income taxes-deferred

5,030

Net income

32,099– 30 –

Non-consolidated Statement of Changes in Net Assets(April 1, 2013 - March 31, 2014)(Unit: million yen)
Shareholders’ equity
Retained earnings
Other retained earnings
Reserve for
Retained
Reserve foradvancedearnings
specialdepreciation
brought
depreciationof fixed
forwardassetsCapital surplus
Commonstock

Balance at beginning of the period

Cumulative effect of changes inaccounting policies
Restated balance
Changes of items during the period
Cash dividends
Net income for the year
Treasury stock purchased
Treasury stock disposed
Reversal of provision for special
depreciation
Reserve for advanced depreciationof fixed assets
Reversal of provision for advanced
depreciation of fixed assets
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of the period

Legalcapitalsurplus104,484

Other
capitalsurplus52,210

-

917

7,220

95,356

104,484

52,210

-

917

7,220

84,312(27)

260,161(11,043)(27)

249,117(16)
0(8,358)32,099(16)
0(8,358)32,099
0
(270)

270

-

456

(456)

-

(223)

223

-

-

-

0

(270)

232

23,778(16)

23,724

104,484

52,210

0

646

7,453

108,090(43)

272,842

Valuation and translation adjustments

3,988(5,670)Total valuationand translation
adjustments(1,682)

Cumulative effect of changes inaccounting policies
Restated balance

Totalshareholders’equity(11,043)

Net
Gains (losses)
unrealized gains
on hedging
on securities net
items
of taxBalance at beginning of the period

Treasury stock

Total
net assets

258,479(11,043)

3,988(5,670)(1,682)

247,435

Changes of items during the period
Cash dividends(8,358)Net income for the year

32,099Treasury stock purchased(16)

Treasury stock disposed

0

Reversal of provision for special
depreciation-

Reserve for advanced depreciation of
fixed assets-

Reversal of provision for advanced
depreciation of fixed assets-

Net changes of items other thanshareholders' equity(1,983)

Total changes of items during the period
Balance at end of the period

4,017

2,033

(1,983)

4,017

2,033

25,7572,004(1,653)351

273,193– 31 –

2,033

Board of Corporate Auditors’ audit report (duplicated copy)

Audit Report(English Translation)
Regarding the performance of duties by the Directors for the 191st fiscal year from April 1, 2013 toMarch 31, 2014, 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 other relevant
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 establishedby the Board of Corporate Auditors, followed the auditing policies, allocation of duties, and otherrelevant matters, communicated with the Directors, internal control development division, Auditing
Department (internal audit dept.) and other employees, and any other relevant personnel, and madeefforts to prepare the environment for information collection and audit, as well as participated inmeetings 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 associatedinformation, and studied the operations and financial positions at the head office and principal
business offices.
(3) Each Corporate Auditor received reports from the Directors, employees, and other relevant personnel
regarding the structure and operation status of the system for ensuring that the performance of duties
by the Directors conforms to the related laws and regulations and Articles of Incorporation, and thesystem 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 theOrdinance for Enforcement of the Companies Act (internal control system), which system isnecessary for ensuring that a joint stock corporation’s business is proper, and sought explanations asnecessary.
Furthermore, with respect to internal controls on financial reporting under the Financial Instruments
and Exchange Act, each Corporate Auditor received reports from the Directors and other 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.
(4) Each Corporate Auditor communicated and exchanged information with Directors, Corporate
Auditors, and other relevant personnel of the subsidiaries, and received business reports fromsubsidiaries as necessary.
Based on the above methods, we examined the business report and annexed specifications related to therelevant fiscal year.
(5) Each Corporate Auditor audited whether the Accounting Auditor maintained their independence andimplemented appropriate audits, as well as received reports from the Accounting Auditor regarding
the performance of their duties and sought explanations as necessary.
(6) Each Corporate Auditor received notice from the Accounting Auditor that “the system for ensuringthat 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 non-consolidated financial statements (non-consolidatedbalance sheet, non-consolidated statement of income, non-consolidated statement of changes in net assets,
and non-consolidated notes) and their annexed specifications, as well as consolidated financial statements(consolidated balance sheet, consolidated statement of income, consolidated statement of changes in net– 32 –

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 accordance with therelated laws and regulations and Articles of Incorporation, and fairly represent the Company’s
condition.
(ii) We have found no evidence of wrongful action or material violation of related laws and regulations,nor of any violation with respect to the Articles of Incorporation, related to performance of duties
by the Directors.
(iii) In our opinion, the contents of the resolutions of the Board of Directors related to the internal
controls system are fair and reasonable. In addition, we have found no matters on which to remark
regarding the information contained in this Business Report and the performance 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 ofthis audit report, we received report from the directors and other relevant personnel that states thatthe said controls were effective, and also received report from KPMG AZSA LLC that states that nomaterial 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 22, 2014
Board of Corporate Auditors, Kawasaki Heavy Industries, Ltd.
Full-Time Corporate Auditor
Full-Time Corporate Auditor
Outside Corporate Auditor
Outside Corporate Auditor– 33 –

Tatsuyoshi Ogushi
Yuji Murakami
Michio Oka
Nobuyuki Fujikake