These documents have been translated from Japanese originals for reference purposes only.
In the event of any discrepancy between these translated documents and the Japanese originals, theoriginals shall prevail. The Company assumes no responsibility for this translation or for direct, indirect
or any other forms of damages arising from the translations.

(Securities Code: 7012)
June 5, 2018
Dear Shareholders:
Yoshinori Kanehana
President
Kawasaki Heavy Industries, Ltd.
1-1 Higashikawasaki-cho 3-chome,
Chuo-ku, Kobe
(Registered Office)
1-3 Higashikawasaki-cho 1-chome,
Chuo-ku, Kobe

NOTICE OF
THE 195th ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 195th Ordinary General Meeting of Shareholders of
Kawasaki Heavy Industries, Ltd. (the “Company” or “KHI”). The meeting will be held as
described below.
If you are unable to attend on the day of the meeting, we kindly ask you toreview the “Reference Documents for the General Meeting of Shareholders”(described hereinafter), and exercise your voting right in writing or via theInternet, etc., by 5:00 p.m. on Tuesday, June 26, 2018 (JST).
1. Date and Time:
2. Place:

Wednesday, June 27, 2018 at 10:00 a.m. (JST) (Dooropens at 9 a.m.)
Kokusai Hall at The Kobe International House
1-6 Gokoudori 8-chome, Chuo-ku, Kobe

3. Meeting Agenda:
Matters to be reported:
1. The Business Report, Consolidated Financial Statements for the Company’s 195th
Fiscal Year (from April 1, 2017 to March 31, 2018) and results of audits of theConsolidated Financial Statements by the Accounting Auditor and the Board of
Corporate Auditors
2. Non-Consolidated Financial Statements for the Company’s 195th Fiscal Year (from
April 1, 2017 to March 31, 2018)
Matters to be resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Election of Twelve Directors
Proposal No. 3: Election of One Corporate Auditor(Please refer to the “Reference Documents for the General Meeting of Shareholders”
hereinafter for information on each of the proposals.)–1–

4. Other matters regarding procedures of the General Meeting of Shareholders:(1) Concerning web disclosure
Among the documents to be submitted when sending the Notice, “System to ensure that
Directors’ execution of duties complies with laws and regulations and the Articles ofIncorporation, other systems to ensure proper execution of business and overview ofoperation status of such systems” in the Business Report, “Consolidated Statement of
Changes in Net Assets” “Notes to the Consolidated Financial Statements” and“Non-consolidated Statement of Changes in Net Assets” “Notes to the Non-consolidated
Financial
Statements”
arepostedontheCompany’s
Website(http://global.kawasaki.com/en/corp/ir/) pursuant to laws and regulations as well as
Article 16 of the Company’s Articles of Incorporation, and they are not included in the
Appendix regarding matters to be reported. “Consolidated Statement of Changes in Net
Assets” “Notes to the Consolidated Financial Statements” “Non-consolidated Statement of
Changes in Net Assets” and “Notes to the Non-consolidated Financial Statements” havebeen combined with the Consolidated Financial Statements and the Non-Consolidated
Financial Statements for the auditing process when preparing the results of audits by the
Accounting Auditor and the Board of Corporate Auditors.
(2) Concerning amendments on the web
Any amendments to the Business Report, the Consolidated Financial Statements, theNon-Consolidated Financial Statements and the Reference Documents for the General
Meetingof
Shareholders,willbepostedontheCompany’s
Website(http://global.kawasaki.com/en/corp/ir/).
(3) Concerning entrance of persons other than shareholders
Please note that persons other than shareholders who are able to exercise voting rights,
including representatives and their companions who are not shareholders, are notpermitted to enter the venue.
(4) Concerning photography, video and audio recording inside the General Meeting of
Shareholders
Photography, video and audio recording inside the General Meeting of Shareholders is
prohibited. We appreciate your cooperation.
(5) Concerning proceedings on the day of the General Meeting of Shareholders
Please note that the proceedings on the day of the General Meeting of Shareholders will
be conducted in the Japanese language. Please kindly accept that we will not be
preparing any interpreters.
(6) Abolition of presents
Please kindly accept abolition of presents from last year to the shareholders on the dayof the General Meeting of Shareholders. We greatly appreciate your understanding.

–2–

Exercise of Voting Rights in Writing
Please indicate your vote for or against the proposals on the enclosed Voting Rights Exercise
Form, and return it so that it is delivered by the above-mentioned exercise date.
Exercise of Voting Rights via the Internet, etc.
Please exercise your voting right by logging on to the Internet website(https://www.web54.net) and entering the voting right exercise code and password statedon the enclosed Voting Rights Exercise Form, and follow the online instructions to submit
your vote.
Notes:
1. If you duplicate your vote, i.e., if you exercise your voting rights both in writing and via
the Internet, we will consider only the Internet vote to be valid. Also, if you vote a
number of times, we will consider the final vote to be the valid one.
2. Shareholders who intend to diversely exercise voting rights are requested to give
written notification to that effect, and the reason(s) thereof, no later than three days
prior to the day of the General Meeting of Shareholders.
3. When attending the meeting, please submit the enclosed Voting Rights Exercise Form at
the reception desk at the venue on the day of the meeting.

–3–

Reference Documents for the General Meeting of Shareholders
Proposals and References
Proposal No. 1: Appropriation of Surplus
The Company considers the improvement of enterprise value, i.e., creating stable profit
that exceeds capital costs over the future, as being a fundamental policy, and return ofprofits to shareholders by enhancing shareholder value over the long term throughcontinuous, advanced research and development and innovative capital investment,
which is necessary for future growth, as being an important management issue.
In addition, in order to keep a balance between shareholder value and returning profits
to shareholders through dividends, the Company takes its overall financial position into
consideration, including free cash flow and debt-equity ratio (D/E ratio) etc., in addition
to future earnings trends, and, with stable dividends in mind, has established 30% as
the basis for the medium- to long-term dividend payout ratio with respect to net income
attributable to owners of parent.
The Company’s basic policy is to distribute dividend surplus twice a year as an interim
dividend and a year-end dividend. The Board of Directors determines the amount of theinterim dividend and the shareholders determine the year-end dividend at a General
Meeting of Shareholders.
Based on the policy above, the year-end dividend for the 195th term will amount to ¥30
per ordinary share of the Company for a total distribution of ¥5,011,424,490. As a result,annual dividend will be ¥33 per ordinary share of the Company, including interim
dividend (¥3 yen per ordinary share of the Company (equivalent to ¥30 after the shareconsolidation)).
(Note) The Company consolidated 10 ordinary shares into 1 ordinary share as of
October 1, 2017, based on a resolution passed at the 194th Ordinary General
Meeting of Shareholders held on June 28, 2017.
In addition, the effective date for the dividends from surplus shall be June 28, 2018.
Type of dividend property
Dividend per share
Total amount of dividend
Effective date of dividends of surplus

Cash
¥30
¥5,011,424,490
June 28, 2018

–4–

Proposal No. 2:

Election of Twelve Directors

The terms of office of all twelve Directors will expire at the conclusion of this Ordinary
General Meeting of Shareholders. Accordingly, we propose to elect twelve Directors(eight Directors to be reappointed (including one Outside Director) and four Directors tobe newly appointed (including two Outside Directors)) to establish corporate governanceat a higher level and further improve the enterprise value. Candidates for Directors were
nominated by the Board of Directors in accordance with “Qualifications Expected of
Directors,” which is described on page 19. The Company has obtained a report to theeffect that this nomination is appropriate from the Nomination Advisory Committee,
which consists mainly of independent outside officers.
The candidates for Directors are as follows:
No.

Name

Duties, Significant concurrent positions etc.

1

Reappointed

Shigeru Murayama

2

Reappointed

Yoshinori Kanehana

Reappointed

3

Munenori Ishikawa
Reappointed

4

Kenji Tomida

Chief Executive Officer
Assistant to the President, with overall responsibility
for technology, production and procurement, and, incharge of Quality Control and Rolling Stock Company
Assistant to the President, with overall responsibility
for finance and accounting, and, in charge of Head
Office Administration Department and Ship &Offshore Structure Company

5

Reappointed

Kazuo Ota

6

Reappointed

Tatsuya Watanabe

President, Energy System & Plant Engineering
Company

Michio Yoneda

Outside Corporate Auditor, The Resolution andCollection Corporation

Katsuya Yamamoto

General Manager, Corporate Planning Division, incharge of Risk Management
President, Aerospace Systems Company

7

Reappointed
Outside Independent

8

Reappointed

9

New

Sukeyuki Namiki

10

New

Yasuhiko Hashimoto

11

12

New
Outside Independent
New
Outside Independent

President, Motorcycle & Engine Company

President, Precision Machinery & Robot Company, incharge of promoting automation

Yoshiaki Tamura

Outside Director, DIC Corporation

Jenifer Rogers

Outside Director, Mitsui & Co., Ltd.

–5–

No.

Name
(Date of Birth)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1974

Joined Kawasaki Heavy Industries, Ltd.

Jun. 2010

Senior Vice President
President, Aerospace Company

Jun. 2013

President

Jun. 2016

Chairman of the Board(current position)

Number of theCompany’s
shares held

(Reappointed)

1

Reasons for nomination as candidate for Director
Mr. Murayama has been mainly engaged in business related
Shigeru Murayama to technology and development of the aerospace segment of
the Company for many years. He assumed the office of its(February 27,
Senior Vice President in 2010 and its President in 2013. He
1950)
has served as Chairman of the Board since 2016. Presently,
as Chairman of the Board, he has been demonstrating
outstanding leadership, thereby making a significant
contribution to the Company’s business growth andenhancing its enterprise value. Considering these points, wehave determined that he is suitable for a Director andnominated him again as a candidate for Director.

–6–

19,200sharesNo.

Name(Date of Birth)(Reappointed)
2

Yoshinori
Kanehana(February 19,
1954)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1976

Joined Kawasaki Heavy Industries, Ltd.

Jun. 2012

Senior Vice President
General Manager, Marketing DivisionJun. 2013

Senior Vice President
President, Rolling Stock Company

Apr. 2016

Senior Executive Vice President
Assistant to the President

Jun. 2016

President

Apr. 2018

President and Chief Executive Officer(current position)

Reasons for nomination as candidate for Director
Mr. Kanehana has been mainly engaged in business related totechnology and development of the rolling stock segment of
the Company and its overseas business for many years. He
assumed the office of its Senior Vice President in 2012 and its
Senior Executive Vice President in April 2016. He has served
as its President since June 2016. Presently, as President andChief Executive Officer, he has been demonstrating
outstanding leadership, thereby making a significant
contribution to the Company’s business growth andenhancing its enterprise value. Considering these points, wehave determined that he is suitable for a Director andnominated him again as a candidate for Director.

–7–

Number of theCompany’s
shares held

12,600sharesNo.

Name(Date of Birth)(Reappointed)
3

Munenori Ishikawa(February 26,
1953)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1975

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
Vice President, Aerospace Company

Jun. 2013

Managing Executive Officer
President, Aerospace Company

Jun. 2014

Senior Vice President
President, Aerospace Company

Apr. 2016

Senior Executive Vice President
Assistant to the President, in charge of
Production and Procurement Department andin charge of Aerospace Company

Apr. 2017

Senior Executive Vice President
Assistant to the President, in charge ofTechnology, Production, Sales andProcurement Department

Apr. 2018

Director

May 2018

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for technology, production andprocurement, and, in charge of Quality Control
and Rolling Stock Company(current position)

Reasons for nomination as candidate for Director
Mr. Ishikawa has been mainly engaged in business related totechnology, development and production of the aerospacesegment of the Company for many years. He was appointed
as its Senior Vice President in 2014 and has served as its
Senior Executive Vice President since 2016. Presently, as
Director, Vice President and Senior Executive Officer, he has
an overall responsibility for technology, production andprocurement, while also being in charge of Quality Control
and Rolling Stock Company, making a significant contribution
to the Company’s business growth and enhancing its
enterprise value. Considering these points, we havedetermined that he is suitable for a Director and nominatedhim again as a candidate for Director.

–8–

Number of theCompany’s
shares held

8,800
sharesNo.

Name(Date of Birth)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1978

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
General Manager, Planning & Control Division of
Ship & Offshore Structure Company

Jul. 2013

Executive Officer
General Manager, Corporate Planning Division

Apr. 2014

Managing Executive Officer
General Manager, Corporate Planning DivisionJun. 2014

Senior Vice President
General Manager, Corporate Planning Division

Apr. 2015

Senior Vice President
President of Motorcycle & Engine Company

Dec. 2016

Senior Vice President
General Manager, Corporate Planning Division,in charge of Finance & Accounting and
Personnel & Labor Administration Department

Apr. 2017

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

Apr. 2018

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for finance and accounting, incharge of Head Office Administration
Department(Reappointed)
4

Kenji Tomida(August 7, 1955)
May 2018

Director, Vice President and Senior Executive
Officer
Assistant to the President, with overall
responsibility for finance and accounting, incharge of Head Office Administration
Department and Ship & Offshore Structure
Company(current position)

Reasons for nomination as candidate for Director
Mr. Tomida has been mainly engaged in business related tofinance & accounting and corporate planning of the Company
and its overseas business for many years. He was appointed
as its Senior Vice President in 2014 and has served as its
Senior Executive Vice President since 2017. Presently, as
Director, Vice President and Senior Executive Officer, he has
an overall responsibility for corporate finance and accounting,while also being in charge of the Head Office Administration
Department and Ship & Offshore Structure Company, making
a significant contribution to the Company’s business growthand enhancing its enterprise value. Considering these points,
we have determined that he is suitable for a Director andnominated him again as a candidate for Director.

–9–

Number of theCompany’s
shares held

7,100
sharesNo.

Name(Date of Birth)
Apr. 1978

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
General Manager of Planning & Control
Division, Aerospace Company

Apr. 2015

Managing Executive Officer
General Manager, Corporate Planning Division,in charge of Finance & Accounting and Personnel& Labor Administration Department

Jun. 2015

Senior Vice President
General Manager, Corporate Planning Division,in charge of Finance & Accounting and Personnel& Labor Administration Department

Dec. 2016

Senior Vice President
President, Motorcycle & Engine Company

Kazuo Ota
Apr. 2018(January 13, 1955)

Director, Managing Executive Officer
President, Motorcycle & Engine Company(current position)(Reappointed)
5Career Summary, Positions and Duties[Significant concurrent positions]

Number of theCompany’s
shares held

7,500
sharesReasons for nomination as candidate for Director
Mr. Ota has been mainly engaged in business related tocorporate planning and finance & accounting of the Company
and its overseas business for many years. He has served as
its Senior Vice President since 2015. Presently, as Director,
Managing Executive Officer and President of Motorcycle &Engine Company, he has been demonstrating outstanding
leadership, thereby making a significant contribution to theCompany’s business growth and enhancing its enterprisevalue. Considering these points, we have determined that heis suitable for a Director and nominated him again as a
candidate for Director.

(Reappointed)
6

Tatsuya Watanabe(September 30,
1957)

Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
Senior Manager, Energy Plant Engineering
Division of Plant & Infrastructure Company

Apr. 2015

Executive Officer
Vice President, Plant & Infrastructure Company

Apr. 2016

Managing Executive Officer
President, Plant & Infrastructure Company

Jun. 2016

Senior Vice President
President, Plant & Infrastructure Company

Apr. 2018

Director, Managing Executive Officer
President, Energy System & Plant Engineering
Company(current position)

Reasons for nomination as candidate for Director
Mr. Watanabe has been mainly engaged in business related
to technology and development of the plant & infrastructure
segment of the Company for many years. He has served as
Senior Vice President since 2016. Presently, as Director,
Managing Executive Officer and President of Energy System &Plant Engineering Company, he has been demonstrating
outstanding leadership, thereby making a significant
contribution to the Company’s business growth andenhancing its enterprise value. Considering these points, wehave determined that he is suitable for a Director andnominated him again as a candidate for Director.

– 10 –

3,700
sharesNo.

Name(Date of Birth)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1973

7(Reappointed)(Outside Director
Candidate)(Independent
Officer)
Michio Yoneda(June 14, 1949)

Number of theCompany’s
shares held

Joined Bank of Japan

Apr. 2000

Resigned Bank of Japan

Apr. 2000

Executive Director, Osaka Securities Exchange

Apr. 2001

Executive Director (Member of the Board),
Osaka Securities Exchange Co., Ltd.

Dec. 2003

President & CEO (Member of the Board),
Osaka Securities Exchange Co., Ltd.

Jan. 2013

Director & Representative Executive Officer,
Group COO, Japan Exchange Group, Inc.
Director, Tokyo Stock Exchange, Inc.

Jun. 2015

Resigned Director & Representative Executive
Officer, Group COO of Japan Exchange Group,
Inc.
Resigned Director of Tokyo Stock Exchange,
Inc.

Jun. 2015

Outside Corporate Auditor, The Resolution andCollection Corporation

Jun. 2016

Outside Director, Kawasaki Heavy Industries,Ltd.
(current position)[Significant concurrent positions]
Outside Corporate Auditor, The Resolution and Collection
Corporation
Reasons for nomination as candidate for Director
Mr. Yoneda previously served as President & CEO (Member ofthe Board) of Osaka Securities Exchange Co., Ltd., andDirector & Representative Executive Officer and Group COO
of Japan Exchange Group, Inc., and other important
positions. We have received helpful opinions and advice on
important management decisions based on his deep insightfor corporate governance and abundant management
experience cultivated in those positions from a standpoint
independent from the Company’s execution of duties.
Considering these points, we have nominated him again as a
candidate for Director as we have judged that he will be able
to fully perform his roles as an Outside Director supervising
the execution of duties and enhancing its enterprise value.

– 11 –

200
sharesNo.

Name(Date of Birth)(Reappointed)
8

Katsuya
Yamamoto(November 21,
1957)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2011

General Manager, Planning & Control Division,and Senior Manager, Planning Department,
Precision Machinery Company

Jul. 2013

General Manager, Planning & Control Division,
Precision Machinery Company

Apr. 2015

Executive Officer
General Manager, Planning & Control Division,
Precision Machinery Company

Apr. 2017Managing Executive Officer
General Manager, Corporate Planning DivisionJun. 2017

Senior Vice President
General Manager, Corporate Planning Division

Apr. 2018

Director, Managing Executive Officer
General Manager, Corporate Planning Division,in charge of Risk Management(current position)

Reasons for nomination as candidate for Director
Mr. Yamamoto has been mainly engaged in business related
to corporate planning and finance & accounting of the plant &infrastructure segment and the precision machinery segmentof the Company for many years. He has served as Senior Vice
President since 2017. Presently, as Director, Managing
Executive Officer and General Manager of Corporate Planning
Division, he exercises control over operations including
corporate planning and investor relations, and companywide
risk management, thereby making a significant contribution
to the Company’s business growth and enhancing its
enterprise value.
Considering these points, we have determined that he issuitable for a Director and nominated him again as a
candidate for Director.

– 12 –

Number of theCompany’s
shares held

3,300
sharesNo.

Name(Date of Birth)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1980

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2009

Staff officer to Engineering Division, Aerospace
Company (In charge of P-X, C-X Project)

Apr. 2014

Staff officer to Aerospace Company (In chargeof Next-Generation Wide-Body Project
Promotion Department)

Apr. 2015

Executive Officer
Vice President, Aerospace Company

Apr. 2016

Managing Executive Officer
President, Aerospace Company

Apr. 2018

Managing Executive Officer
President, Aerospace Systems Company, withoverall responsibility for production

May 2018

Managing Executive Officer
President, Aerospace Systems Company(current position)(Newly-appointed)
9

Sukeyuki Namiki(June 6, 1955)

Reasons for nomination as candidate for Director
Mr. Namiki has been mainly engaged in businesses related totechnology and developing the aerospace segment of theCompany for many years. He was appointed Executive Officerof the Company in 2015 and Managing Executive Officer of
the Company in 2016. Presently, as Managing Executive
Officer and President of Aerospace Systems Company, he has
demonstrated outstanding leadership, thereby making asignificant contribution to the Company’s business growthand enhancing its enterprise value. Considering these points,
we have determined that he is suitable for a Director andnewly nominated him as a candidate for Director.

– 13 –

Number of theCompany’s
shares held

3,900
sharesNo.

Name(Date of Birth)(Newly-appointed)
10

Yasuhiko
Hashimoto(May 15, 1957)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1981

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

Executive Officer
General Manager, Robot Business Division,
Precision Machinery Company

Apr. 2016

Managing Executive Officer
In charge of promoting automation, General
Manager, Robot Business Division, Precision
Machinery Company

Apr. 2018

Managing Executive Officer
President, Precision Machinery & Robot
Company, in charge of promoting automation(current position)

Reasons for nomination as candidate for Director
Mr. Hashimoto has been mainly engaged in businesses
related to technology and developing of the industrial robots
business unit of the Company for many years. He wasappointed Executive Officer of the Company in 2013 and has
served as Managing Executive Officer of the Company since2016. Presently, as Managing Executive Officer and Presidentof Precision Machinery & Robot Company, he has
demonstrated outstanding leadership, while also having
promotingcompanywide
overall
responsibility
forautomation, thereby making a significant contribution to theCompany’s business growth and enhancing its enterprisevalue. Considering these points, we have determined that heis suitable for a Director and newly nominated him as a
candidate for Director.

– 14 –

Number of theCompany’s
shares held

2,700
shares

No.

11

Name
(Date of Birth)

Career Summary, Positions and Duties[Significant concurrent positions]Apr. 1979

Joined Asahi Glass Co., Ltd.

Mar. 2013

Representative Director and Executive Vice
President, Asahi Glass Co., Ltd.
Overall Business Management, GM of
Technology General Division, Deputy Leader of
AGC Group Improvement Activities

Jan. 2014

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

Mar. 2014

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

Jan. 2017
Assistant to CEO, Asahi Glass Co., Ltd.
(Newly-appointed)
Executive Fellow, Asahi Glass Co., Ltd.
(Outside Director Mar. 2017
Candidate)Mar. 2018
Outside Director, DIC Corporation(Independent(current position)
Officer)[Significant concurrent positions]
Outside Director, DIC Corporation
Yoshiaki Tamura(October 3, 1954) Reasons for nomination as candidate for Director
Mr. Tamura served as Representative Director and Executive
Vice President, Asahi Glass Co., Ltd., Overall Business
Management, GM of Technology General Division, Deputy
Leader of AGC Group Improvement Activities and Executive
Vice President, President of Glass Company and otherimportant positions. He has extensive experience incorporate
management
anddeep
insights
intomanufacturing. Considering these points, we have judgedthat he will be able to fulfill his role as an Outside Director
supervising the execution of duties of the Company andenhancing its enterprise value, and newly nominated him as a
candidate for Director.

– 15 –

Number of theCompany’s
shares held0
shares

No.

12

Name
(Date of Birth)

Career Summary, Positions and Duties[Significant concurrent positions]Sep. 1989

Joined Haight Gardner Poor & Havens (Atpresent: Holland & Knight LLP)

Dec. 1990

Registered as Attorney at Law admitted in New
York

Feb. 1991

Joined Industrial Bank of Japan Limited (Atpresent: Mizuho Bank, Ltd.)

Nov. 1994

Retired from Industrial Bank of Japan Limited(At present: Mizuho Bank, Ltd.)

Dec. 1994

Joined Merrill Lynch Japan Securities Co., Ltd.

Nov. 2000

Merrill Lynch Europe Plc(Newly-appointed)
Jul. 2006(Outside Director
Nov. 2012
Candidate)(Independent
Officer)Jun. 2015
Jenifer Rogers(June 22, 1963)

Number of theCompany’s
shares held

Bank of America Merrill Lynch (Hong Kong)
General Counsel Asia, Asurion Japan Holdings
G.K.
Outside Director, Mitsui & Co., Ltd.
(current position)0
shares[Significant concurrent positions]
Outside Director, Mitsui & Co., Ltd.
Reasons for nomination as candidate for Director
Ms. Rogers has extensive international experience and deep
insights into legal affairs, compliance, and risk management,
having served as an in-house lawyer and counsel atinternational financial institutions for many years.
Considering these points, we have judged that she will beable to fulfill her role as an Outside Director supervising theexecution of duties of the Company and enhancing its
enterprise value, and newly nominated her as a candidate for
Director.

(Notes) 1. There is no special interest relationship between each candidate and the Company.
2. Contents of the matter stipulated regarding candidates for Outside Director pursuant to
Article 74, Paragraph 4 of the Ordinance for Enforcement of the Companies Act(1) Mr. Michio Yoneda, Mr. Yoshiaki Tamura and Ms. Jenifer Rogers are candidates for
Outside Director.
(2) Mr. Michio Yoneda’s tenure as Outside Director of the Company will have been two years
at the conclusion of this Ordinary General Meeting of Shareholders.
3. Mr. Michio Yoneda has entered into a limited liability agreement pursuant to the provisionsof 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 laws andregulations, whichever is higher. Should the appointment of Mr. Michio Yoneda be approved,
the Company will extend the above agreement with him.
4. Mr. Yoshiaki Tamura and Ms. Jenifer Rogers will enter into a limited liability agreement after
their election pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act
with the Company on condition that Proposal No. 2 is adopted in its original form. Liability
under the said agreement shall be limited to either ¥10 million or an amount specified bylaws and regulations, whichever is higher.
5. Mr. Michio Yoneda, Mr. Yoshiaki Tamura and Ms. Jenifer Rogers satisfy the requirements ofIndependent Officer stipulated by Tokyo Stock Exchange, Inc. and Nagoya Stock Exchange,Inc.
6. The Company has no special transactional relationship, with the exception of transactions
based on the listing agreement between Tokyo Stock Exchanges, Inc., where Mr. Michio
Yoneda served as Director, and the Company. Because a conflict of interest is not likely to becaused with general shareholders, we have judged that he will be able to fulfill his role as an
Independent Officer.
7. Although Asahi Glass Co., Ltd., where Mr. Yoshiaki Tamura served as a Director, is a business
partner of the Company, the annual average transactions between the Group of Asahi GlassCo., Ltd and the KHI Group for the most recent five fiscal years account for less than 1% of
the annual average net sales each for the said Group and the KHI Group over the– 16 –

corresponding period. Consequently, we have determined that there is no issue as to the
independence of Mr. Tamura and he will be able to fulfill his role as an Independent Officer.
8. Although Mitsui Co. & Ltd., where Ms. Jenifer Rogers serves as Director, is a business partnerof the Company, the annual average transactions between the Group of Mitsui Co. & Ltd.
and the KHI Group for the most recent five fiscal years account for less than 1% of theannual average net sales each for the said Group and the KHI Group over the corresponding
period. Consequently, we have determined that there is no issue as to the independence of
Ms. Rogers and she will be able to fulfill her role as an Independent Officer.

– 17 –

Proposal No. 3: Election of One Corporate Auditor
The term of office of Corporate Auditor Mr. Takafumi Shibahara will expire at theconclusion of this Ordinary General Meeting of Shareholders. Accordingly, we propose toelect one Corporate Auditor. Candidate for Corporate Auditor was nominated by the
Board of Directors in accordance with “Qualifications Expected of Corporate Auditors,”
which is described on page 19. The Company has obtained a report to the effect that thisnomination is appropriate from the Nomination Advisory Committee, which consists
mainly of independent outside officers.
We have obtained the prior consent of the Board of Corporate Auditors on this proposal.
The candidate for Corporate Auditor is as follows:
Name(Date of Birth)

No.

(Newly-appointed)

Akio Nekoshima(September 30, 1958)

Carrier Summary and Positions[Significant concurrent positions]Apr. 1982

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

Apr. 2012Retired from The Dai-Ichi Kangyo Bank,
Limited (At present: Mizuho Bank, Ltd.)May 2012

Joined Kawasaki Heavy Industries, Ltd.

Apr. 2013

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

Jul. 2013

General Manager, Finance & Accounting
Division

Apr. 2014

Executive Officer
General Manager, Finance & Accounting
Division

Apr. 2016

Executive Officer
General Manager, Marketing Division

Apr. 2018

Executive Officer
Staff officer to Corporate Auditor(current position)

Number oftheCompany’s
shares held

2,900
sharesReasons for nomination as candidate for
Corporate Auditor
Mr. Nekoshima has been engaged in business related tofinance and accounting and sales promotion, andoverseas business, and has served as Executive Officerof the Company since 2014. He has an intimate
knowledge of the business of the Company andsubstantial knowledge of finance and accounting,having served as General Manager of Finance &Accounting Division and General Manager of Marketing
Division and other important positions. Considering
these points, we have determined that he is suitable fora Corporate Auditor and newly nominated him as a
candidate for Corporate Auditor.
(Note)

There is no special conflict of interest between the Company and the candidate for Corporate
Auditor.

– 18 –

(Reference)[Qualifications Expected of Directors]
1. Deeply understand and agree to the management philosophy and vision of the KHI
Group
2. Be able to contribute to sustainable growth and enhancement of enterprise value in themedium- to long-term
3. Hold companywide standpoints and have abundant and broad experience, deep insightand expertise to do so
4. Be able to supervise the management and execution of business operations from an
independent and objective standpoint as a member of the Board of Directors[Qualifications Expected of Corporate Auditors]
1. Be able to contribute to ensuring the soundness of the KHI Group’s management
2. Have the ability to make fair and appropriate judgment from an independent andobjective standpoint
3. Be able to exercise one’s authority in an active and positive manner, and properly
express one’s opinions to the Board of Directors or the management
4. Be familiar with the Company’s business and corporate management or have abundantand broad experience, deep insight and expertise
5. At least one Corporate Auditor must have substantial knowledge about finance andaccounting[Independence Standards for Officers]
When the outside officer does not fall under all the following items, Outside
Officer is deemed to satisfy the independence requirements:
1. The Outside Officer presently serves or previously served in the last ten years as amanaging director, executive officer, operating officer or other important employee ofa company (including major subsidiaries designated by the Company) (hereinafter,
the “Home Company”) that has a business relationship with the KHI Group, where theaverage amount of transaction from the said business for the last five fiscal years
exceeds 2% of average net sales of the KHI Group and the Home Company.
2. The Outside Officer serves as a specialist or consultant (corporation if it has judicial
personality) of legal, accounting or tax affairs and the average remuneration directly
received from the KHI Group (excluding remuneration for the Company’s officer) forthe last five fiscal years exceeds ¥10 million.
3. The Outside Officer serves as executive officer of a non-profit organization and theaverage donations from the KHI Group to the organization for the last five fiscal years
exceeds ¥10 million and exceeds 2% of the total revenue or the current balance of theorganization.
4. Home Company of the Outside Officer is a major shareholder of the Company as it
holds 10% or more of total number of shares issued in KHI.
5. A relative of the Outside Officer within the second degree falls under the preceding four
items or serves as managing director, executive officer, operating officer or otherimportant employee of the KHI Group.

– 19 –

Attachment:

Business Report(April 1, 2017 - March 31, 2018)
1. Overview concerning the Current Situation of Company Group
Prior to reporting on Business Progress and Results, we would like to sincerely
apologize to our shareholders and other stakeholders for causing significant
inconvenience and concern over “Notice of Series N700 Shinkansen Train Bogie
Frames matter” (announced on February 28, 2018).
We established the Companywide Quality Control Committee chaired byProfessor Takeshi Nakajo of Chuo University’s Faculty of Science andEngineering (announced on March 30, 2018). We are working on identifying
the causes of the bogie frames’ manufacturing defects and devising measures
to prevent their recurrence. We are also conducting a comprehensive
inspection of companywide quality management systems. We will respond
appropriately based on these initiatives’ outcomes. We request yourunderstanding on this matter.
(1) Business Progress and Results(i) General conditions
While the global economy, primarily the US and China, continues to growmoderately, sufficient attention must be paid to the risk of a global economic
downturn due to the impacts of the UK’s departure from the EU, concerns overthe expansion of protectionist policies in the US and other issues, in addition toan economic slowdown in emerging countries and resource-rich countries.
The Japanese economy is recovering moderately, mainly due to improvements
in corporate earnings, but sufficient attention must be paid to the foreignexchange markets where exchange rates can fluctuate sharply and drastically,
mainly due to economic policies and geopolitical risks in countries around theworld.
Amid such an operating environment, the KHI Group achieved growth in orders
received, mainly in the Aerospace, Rolling Stock and Precision Machinery
segments, with total orders received increasing 19% year on year to ¥1,608.0
billion in the fiscal year ended March 31, 2018. Net sales, as a whole, were
¥1,574.2 billion, 3% higher than the previous fiscal year, due to increased
sales primarily in the Precision Machinery segment, the Gas Turbine &Machinery segment, and the Motorcycle & Engine segment, while sales of the
Plant & Infrastructure segment decreased. In terms of profit, operating income
was ¥55.9 billion, 21% higher than the previous fiscal year, due to increased
profit in the Precision Machinery segment and an improvement in the Ship &Offshore Structure segment and others, while the Rolling Stock segment
experienced a deterioration and the Aerospace segment suffered a profit
decrease. Recurring profit was ¥43.2 billion, 17% higher than the previous
fiscal year. Net income attributable to owners of parent was ¥28.9 billion, 10%higher than the previous fiscal year, mainly due to extraordinary income (gain– 20 –

on sale of fixed asset) and a reduction in the burden of taxes accompanying therecording of deferred tax assets related to losses from a joint operations for theconstruction of ships in Brazil, while losses on the cancellation of a contract forthe construction of offshore service vessels were recorded as an extraordinaryloss.

(ii) Operating conditions by business segment
Ship & Offshore Structure segment
The Ship & Offshore Structure segment received orders amounting to ¥4.7
billion, a decrease of ¥32.2 billion from the previous fiscal year, due to thecancellation of an agreement for the construction of ships related to offshore
service vessels, while orders were received for LPG carriers, jet foils, andothers.
Net sales were ¥95.6 billion, a decrease of ¥7.5 billion from the previous fiscal
year, mainly due to a decrease in construction related to submarines.
Operating income improved ¥17.6 billion, with an operating loss of ¥3.8 billion
due to an increase in the allowance for doubtful receivables and an increase in
the provision for losses on construction contracts.
Rolling Stock segment
In the Rolling Stock segment, orders received were ¥257.1 billion, an increaseof ¥98.5 billion from the previous fiscal year, due to orders received for large
projects including new subway cars for New York City Transit and city
high-speed train cars (MRT) for Bangladesh.
Net sales increased ¥4.6 billion from the previous fiscal year to ¥141.7 billion,
primarily due to increased sales in the domestic market, while overseas sales
to North America and Asia declined.
Operating income decreased ¥15.9 billion from the previous fiscal year,
resulting in an operating loss of ¥12.4 billion, mainly due to a provision forlosses on construction contracts in a commuter train car project for the Long
Island Rail Road, U.S.A. and the cost of changing the N700 Shinkansen train
bogie frames.
Aerospace segment
In the Aerospace segment, orders received were ¥374.4 billion, an increase of¥137.3 billion from the previous fiscal year, when component parts forcommercial aircraft remained high, in addition to an increase in orders received
from the Japan’s Ministry of Defense (MOD).
Net sales increased ¥0.2 billion from the previous fiscal year to ¥330.2 billion,
primarily due to increased sales to MOD, while sales of component parts forcommercial aircraft decreased.

– 21 –

Operating income decreased ¥4.1 billion from the previous fiscal year to ¥20.9
billion, which was mainly attributable to the decreased profitability ofcomponent parts for commercial aircraft.
Gas Turbine & Machinery segment
In the Gas Turbine & Machinery segment, orders received were ¥248.1 billion,a decrease of ¥12.2 billion from the previous fiscal year. This was mainly
attributable to a decrease in gas engine power plant projects for the domestic
market.
Net sales increased ¥24.5 billion from the previous fiscal year to ¥266.4 billion,
which was mainly due to increased sales of component parts of commercial
aircraft jet engines.
Operating income decreased ¥0.5 billion from the previous fiscal year to ¥14.7
billion, which was primarily attributable to a decrease in profitable projects inthe energy business, while sales increased.
Plant & Infrastructure segment
In the Plant & Infrastructure segment, orders received were ¥100.1 billion, an
increase of ¥5.0 billion from the previous fiscal year, which was mainly due toincreases in the construction of municipal waste treatments facilities and in theplant operation and management business in the domestic market, while
projects in overseas markets decreased.
Net sales decreased ¥36.4 billion from the previous fiscal year to ¥124.4 billion
yen, which was mainly due to a decrease in the volume of construction works
for chemical plants in overseas markets.
Operating income increased ¥0.3 billion from the previous fiscal year, when
there was an increase in the provision for losses on construction contracts, to¥2.9 billion, although sales decreased.
Motorcycle & Engine segment
Net sales of the Motorcycle & Engine segment increased ¥18.6 billion from theprevious fiscal year to ¥331.6 billion. This was attributable to increased sales ofmotorcycles, utility vehicles, and general-purpose gasoline engines indeveloped countries, while sales of motorcycles for emerging markets
decreased.
Operating income increased ¥3.5 billion from the previous fiscal year to ¥15.2
billion due to increased sales.
(Note)The net sales figure for the Motorcycle & Engine segment is also used as the figurefor orders received.

– 22 –

Precision Machinery segment
In the Precision Machinery segment, orders received were ¥207.1 billion, an
increase of ¥40.2 billion from the previous fiscal year, due to increased sales ofhydraulic components for the construction machinery market and various
industrial robots.
Net sales increased ¥43.7 billion from the previous fiscal year to ¥198.9 billion
due to an increase in sales of hydraulic components for the construction
machinery market and various industrial robots.
Operating income increased ¥8.5 billion from the previous fiscal year to ¥21.6
billion due to increased sales.
Others segment
In the Others segment, net sales increased ¥7.6 billion from the previous fiscal
year to ¥85.0 billion.
Operating income decreased ¥0.2 billion from the previous fiscal year to ¥2.9
billion.
[Major businesses]
Kawasaki Trading Co., Ltd.
(Sale of various types of industrial machinery, petroleum, steel stock and air
conditioning equipment, etc.)
Kawasaki Life Corporation(Sale, rental and management of real estate, insurance agency business, andbuilding management)– 23 –

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

Net Sales

Operating Income/Loss

AmountYear-on-Year
ChangeAmountYear-on-Year
ChangeAmount4.7(32.2)

95.6

(7.5)

(3.8)

17.6

Rolling Stock

257.1

98.5

141.7

4.6

(12.4)(15.9)

Aerospace

374.4

137.3

330.2

0.2

20.9

(4.1)

Gas Turbine & Machinery

248.1(12.2)

266.4

24.5

14.7

(0.5)

Plant & Infrastructure

100.1

5.0

124.4

(36.4)

2.9

0.3

Motorcycle & Engine

331.6

18.6

331.6

18.6

15.2

3.5

Precision Machinery

207.1

40.2

198.9

43.7

21.6

8.5

84.8

3.8

85.0

7.6

2.9

(0.2)

–

–

–

–

(6.2)

0.8

55.4

55.9

9.9

Ship & Offshore
Structure

OthersAdjustment
Total

1,608.0

259.3

1,574.2

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

ii) ROIC and ROE
FY2016 (194th fiscal year)

FY2017 (195th fiscal year)

ROIC

5.0%

3.9%

ROE

6.0%

6.4%

(Notes) 1. ROIC (return on invested capital) = EBIT (income before income taxes + interest expense)÷ Invested capital at the end of the period (debt obligation + shareholders’ equity)
2. ROE (return on equity) = Net income attributable to owners of the parent ÷ {(shareholders’equity at the end of the previous period + shareholders’ equity at the end of the current
period) ÷ 2}iii) Cash flows(Billions of yen)
FY2016 (194th fiscal year)

FY2017 (195th fiscal year)

Cash flows from operating activities

93.5

56.0

Cash flows from investing activities(64.8)(80.5)Cash flows from financing activities(15.8)

37.7– 24 –

(2) Capital Investments, etc.
In the KHI Group, capital investments were made predominantly for thedevelopment of facilities to handle new models and products in the Aerospacesegment, and for the development of facilities to increase the streamlining ofproduction and the production capacity especially in the Motorcycle & Engine
segment and the Precision Machinery segment. As a result, the KHI Group spent a
total of ¥82.1 billion (including spending on intangible assets) on capital
investments in the consolidated fiscal year under review. The investments werecovered by internally generated funds and borrowed money.
Details of major investments in the respective segments are as follows:(Billions of yen)Segment

Major investments

Investment
amounts in the
consolidated
fiscal year underreview

Ship & Offshore
Structure

Facilities for streamlining ship construction, etc.

4.7

Rolling Stock

Facilities for increasing rolling stock production, etc.

2.5

Aerospace
Gas Turbine & Machinery
Plant & Infrastructure
Motorcycle & Engine
Precision Machinery
OthersFacilities for streamlining aircraft production and facilities
for handling new models and products, etc.
Facilities for increasing jet engine and other productions
and facilities for streamlining production, etc.
Facilities for streamlining production of industrial
machinery, etc.
Facilities for handling new models and products ofmotorcycles and facilities for streamlining production,
etc.
Facilities for increasing hydraulic components andindustrial robot production, etc.
Welfare facilities, etc.

28.8
7.7
1.6
20.5
10.9
5.0

Total

82.1

(3) Financing
Funds of ¥64.0 billion from long-term debt, ¥20.0 billion from domestic unsecured
straight bonds and short-term debts and other funds from various sources wereraised in the current consolidated fiscal year. The funds were allocated to such items
as the scheduled payment for long-term debt, capital investments and working
capital.
(4) Assignment of businesses, absorption-type company split andincorporation-type company split
Not applicable.

– 25 –

(5) Transfer of business from other companies
Not applicable.
(6) Succession of rights and obligations pertaining to the business ofanother juridical person, etc., due to absorption-type merger orabsorption-type company split
Not applicable.
(7) Acquisition or disposal of other company’s shares or other holdings, orshare options, etc.
Not applicable.
(8) Corporate Management Strategies in the Medium- to Long-Term andIssues to be Addressed(i) Comprehensive Inspection of Quality Management System
We set up the Companywide Quality Management Committee, which consists
mainly of outside experts, and are seeking to identify the causes of production
defects in the N700 Shinkansen train bogie frames and to develop measures toprevent their recurrence. Besides, we will strive to regain customers’ trust by
thoroughly inspecting the companywide quality management system.
(ii) ROIC Management (improvement of enterprise value)
We will make aggressive investments in growth areas (aerospace system,
energy, robots, etc.) and, at the same time, make efforts to create synergies
through the combined use of our internal technologies, and differentiate
ourselves in terms of technologies and products with an eye toward future,
thereby strengthening profitability and competitiveness. Besides, we aim tocreate free cash flows by improving cash flows from operating activities throughmeasures that include improving the conditions on money reception andreducing assets. Furthermore, we will work on measures such as cutting costs
and strengthening the global supply chain, and build a business operating
system that is unaffected by exchange rate fluctuations in a way that secures astable ROIC of a minimum of 8% in the medium- to long-term, even with asignificant appreciation of the yen.
(iii) Strengthen project risk management
We will strengthen the risk check function prior to order-reception in an effort tothoroughly remove risks. Besides, in the Project Risk Management Committee,
we will identify the progress of on-going projects to prevent losses and respondpromptly to situational changes. By strengthening these activities, we willcontinue to take up the challenge of achieving sustainable growth.
(iv) Enhancement of manufacturing and service businesses with the use of
information and communications technologies
We will continue to use information and communication technologies tovisualize production conditions, and in the future, we will strengthen our
manufacturing capabilities by enhancing cooperation between factories. In
addition, we will establish a high-profit business structure throughout productlifecycles by developing and providing products and services that meet the
expanding and diversifying needs of customers, such as motorcycles using
artificial intelligence, remote monitoring and fault diagnosis technologies forelectric power generation plants, etc.

– 26 –

(v) Reforms in the way of working and promotion of diversity
We will raise productivity by pushing ahead with reforms in the way of working,called “Kawasaki Workstyle Innovation Activities (K-Win Activities),” whichcenter around administrative and technical employees to maximize theircapabilities. In addition, we will respect for diversity and improve our
employees’ work-life balance through the promotion of women’s participation in
the work place and the support for child-rearing, etc., and promote the creationof an environment in which people with disabilities find more accessible, as wellas the securing of jobs matching their respective abilities.

– 27 –

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

The 192nd
fiscal year

The 193rd fiscal
year

The 194th fiscal
year

The 195th fiscal
year (underreview)

Orders received

1,712.9

1,693.6

1,348.7

1,608.0

Net sales

1,486.1

1,541.0

1,518.8

1,574.2

Operating income

87.2

95.9

45.9

55.9

Recurring profit

84.2

93.2

36.6

43.2

Net income attributable toowners of parent

51.6

46.0

26.2

28.9

Net income per share(yen)¥308.91¥275.61¥156.85¥173.09

Total assets

1,662.2

1,620.4

1,687.3

1,785.0

Net assets

447.9

445.6

451.3

481.3

(Note) The Company consolidated 10 ordinary shares into 1 ordinary share as of October 1, 2017, basedon a resolution passed at the 194th Ordinary General Meeting of Shareholders held on June 28,
2017. Net income per share was calculated on the assumption that the share consolidation took
place at the beginning of the 192nd term.

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

The 192nd
fiscal year

The 193rd fiscal
year

The 194th fiscal
year

The 195th fiscal
year (underreview)

Orders received

1,344.5

1,309.0

1,005.0

1,184.6

Net sales

1,098.0

1,161.0

1,172.4

1,213.6

Operating income

46.4

56.8

4.7

13.6

Recurring profit

55.5

68.5

12.5

23.0

Net income attributable toowners of parent

36.4

30.7

17.4

24.6

Net income per share(yen)¥218.14¥184.34¥104.71¥147.70

Total assets

1,301.1

1,300.7

1,388.0

1,469.9

Net assets

294.0

306.8

304.7

322.7

(Note) The Company consolidated 10 ordinary shares into 1 ordinary share as of October 1, 2017, basedon a resolution passed at the 194th Ordinary General Meeting of Shareholders held on June 28,
2017. Net income per share was calculated on the assumption that the share consolidation took
place at the beginning of the 192nd term.

– 28 –

(10) Major Parent Companies and Subsidiaries(i)

Parent Companies
Not applicable.

(ii) Major Subsidiariesi) JapanCompany name
(Location)

Kawasaki Trading Co., Ltd.
(Kobe, Hyogo)
Kawasaki Machine Systems,
Ltd.

The
Company’s
percentageof equity
participation

Main business

70%

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

100%

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

100%

Manufacture of aircraft components,
targeting systems, rocket components,
aerospace equipment and marine
equipment; repair and maintenance of
aircraft100%

Sole distributor of motorcycles,
personal watercraft (“JET SKI®”),
general-purpose gasoline engines andengine components in Japan

83%

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

¥1,200 million

100%

Design, manufacture, and sale ofcrushers, grinders, castings, and otherequipment; design, execution andsupervision of engineering,
construction, installation of machineryand appliances¥400 million

100%

Sale, rental and management of realestate; insurance agency business andbuilding management

Capital¥600 million¥350 million(Osaka, Osaka)

NIPPI Corporation(Yokohama, Kanagawa)Kawasaki Motors Corporation
Japan¥6,048 million¥100 million(Akashi, Hyogo)
Kawasaki ThermalEngineering Co., Ltd.

¥1,460 million(Kusatsu, Shiga)

EarthTechnica Co., Ltd.
(Chiyoda-ku, Tokyo)

Kawasaki Life Corporation(Kobe, Hyogo)(Note)“JET SKI®” is a registered trademark of Kawasaki Heavy Industries, Ltd.

– 29 –

ii) Overseas
Company name
(Location)

Kawasaki Motors Corp., U.S.A.
(United States)

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

The
Company’s
percentageof equity
participation

Main business

100%

Sale of motorcycles, ATVs (all-terrain
vehicles), utility vehicles, personal
watercraft “JET SKI®” andgeneral-purpose gasoline engines in
the U.S. and South and Central
America

US$170 million

100%

Manufacture of ATVs (all-terrain
vehicles), utility vehicles, personal
watercraft “JET SKI®” andgeneral-purpose gasoline engines;
manufacture, servicing andengineering of rolling stock;
manufacture of aircraft components

THB 1,900
million100%

Manufacture and sale of motorcycles inThailandEUR 64 million

100%

Sale of motorcycles, ATVs (all-terrain
vehicles), utility vehicles, personal
watercraft “JET SKI®” andgeneral-purpose gasoline engines in
Europe

US$60 million

Note 1

Manufacture, sale, servicing andengineering of rolling stock

PHP 101 million

50%

Manufacture and sale of motorcycles in
the Philippines

US$ 1 million

Note 2

Sale and servicing of industrial robots
in North America

US$80 million

90%

Manufacture and sale of motorcycles inIndonesia

KRW 1,310
million50%

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

JPY 1,680
million100%

Procurement of parts andcomponents of robots and related
equipment in China

JPY 400
million100%

Sale and servicing of precision
machinery in China

JPY 200
million100%

Sale and servicing of industrial robots
in China

Capital

US$165 million(United States)

Kawasaki Motors Enterprise(Thailand) Co., Ltd.
(Thailand)
Kawasaki Motors Europe N.V.
(Netherlands)
Kawasaki Rail Car, Inc.
(United States)
Kawasaki Motors (Phils.)
Corporation(Philippines)
Kawasaki Robotics (U.S.A.),
Inc.
(United States)
PT. Kawasaki Motor Indonesia(Indonesia)
Flutek, Ltd.
(South Korea)
Kawasaki Robotics(Kunshan) Co., Ltd.
(China)Kawasaki Precision
Machinery Trading(Shanghai) Co., Ltd.
(China)Kawasaki Robotics (Tianjin)
Co., Ltd.
(China)(Notes) 1. Kawasaki Rail Car, Inc. is a wholly-owned subsidiary of Kawasaki Motors Manufacturing
Corp., U.S.A.
2. Kawasaki Robotics (U.S.A.), Inc. is a wholly-owned subsidiary of Kawasaki Motors Corp.,
U.S.A.

– 30 –

3. There are 93 consolidated subsidiaries, including 19 companies (7 in Japan and 12
overseas) as major subsidiaries, and there are 17 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.

2,542

Rolling Stock

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

3,297

Aerospace

Manufacture and sale of aircraft, etc.

6,178

Gas Turbine & Machinery

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

4,353

Plant & Infrastructure

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

3,163

Motorcycle & Engine

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

8,816

Precision Machinery

Manufacture and sale of hydraulic components
and industrial robots, etc.

3,420

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

2,902

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

1,134
35,805
Japan
26,747
Overseas 9,058

Total

-

(Note)The Company has 16,423 employees (average age: 38.4 years old; average years of service:13.5 years).

– 31 –

(12) Company Group’s Principal Offices and Plants
Name and location

Principal
officesHead office

Kobe Head Office (Kobe), Tokyo Head Office (Minato-ku, Tokyo): 2 Head
Offices

Branches

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

Plants, etc.

Location of principal offices of major subsidiaries are provided in “(10) Major Parent
Companies and Subsidiaries.”(13) Principal lenders(Billions of yen)
Lenders

Balance of borrowings
Long term

Short term

Total

Mizuho Bank, Ltd.

5.3

29.3

34.7

Sumitomo Mitsui Banking Corporation

6.5

14.3

20.8

Development Bank of Japan Inc.

18.7

0.1

18.9

Sumitomo Mitsui Trust Bank, Ltd.

11.0

7.0

18.0

Nippon Life Insurance Company

8.0

0.0

8.0

Mitsubishi UFJ Trust and Banking Corporation

4.5

3.5

8.0

(14) Other important issues concerning the current situation of company
groupsNot applicable.

– 32 –

2. Status of Shares (as of March 31, 2018)(1) Aggregate number of issuable shares

336,000,000 shares(Note) The Company consolidated 10 ordinary shares into 1 ordinary share as of October 1, 2017, basedon a resolution passed at the 194th Ordinary General Meeting of Shareholders held on June 28,
2017. Accordingly, the aggregate number of issuable shares decreased by 3,024,000,000 sharescompared to that at the end of the previous fiscal term (3,360,000,000 shares).

(2) Total number of shares issued

167,080,532 shares(including 33,049 shares of treasury stock)(Note) Due to the above share consolidation, the total number of shares issued decreased by
1,503,724,788 shares compared to that at the end of the previous term (1,670,805,320 shares).

(3) Number of shareholders

113,908 persons(4) Major shareholders (top 10)
Shareholders’ investment in the
Company
Shareholder name

Number of shares
held

Shareholding ratio

thousand shares%

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

9,268

5.5

Japan Trustee Services Bank, Ltd. (Trust Account)

6,388

3.8

Nippon Life Insurance Company

5,751

3.4

JFE Steel Corporation

4,578

2.7

Mizuho Bank, Ltd.

4,176

2.5

Kawasaki Heavy Industries, Ltd. Kyoueikai

3,607

2.1

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

3,488

2.0

Sompo Japan Nipponkoa Insurance Inc.

3,057

1.8

Kawasaki Heavy Industries, Ltd. Employees Shareholder
Association

2,980

1.7

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

2,973

1.7

(Note)The shareholding ratio is calculated after subtracting treasury stock (33,049 shares).

3. Company Share Options(1) Share options held by company officers at the end of the fiscal year
under review
Not applicable.
(2) Share options delivered to employees, etc. during the fiscal year underreview
Not applicable.

– 33 –

(3) Other important issues concerning share options, etc.
Not applicable.
4. Company Officers(1) Directors and Corporate Auditors (as of March 31, 2018)
Areas of Responsibility within the Company andOther Significant Concurrent Positions

Position

Name

Chairman of the
Board

Shigeru Murayama*

President

Yoshinori Kanehana*

Senior Executive
Vice President

Munenori Ishikawa

Assistant to the President, in charge of Technology,
Production, Sales and Procurement Department*

Senior Executive
Vice President

Kenji Tomida

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

Senior Vice
President

Kazuo Hida

President, Precision Machinery Company

Senior Vice
President

Toshiyuki Kuyama

President, Gas Turbine & Machinery Company

Senior Vice
President

Kazuo Ota

President, Motorcycle & Engine Company

Senior Vice
President

Makoto Ogawara

President, Rolling Stock Company

Senior Vice
President

Tatsuya Watanabe

President, Plant & Infrastructure Company

Senior Vice
President

Katsuya Yamamoto

General Manager, Corporate Planning Division

Director (Outside)

Yoshihiko Morita

Outside Corporate Auditor, TOKYO GAS Co., Ltd.

Director (Outside)

Michio Yoneda

Outside Corporate Auditor, The Resolution andCollection Corporation

Full-Time Corporate
AuditorTakafumi Shibahara

Full-Time Corporate
Auditor

Katsuyoshi Fukuma

Corporate Auditor(Outside)

Takashi Torizumi

Corporate Auditor(Outside)

Satoru Kohdera

Attorney at law

Corporate Auditor(Outside)

Atsuko Ishii

Auditor of the Board (Outside), Mitsui Sumitomo
Insurance Company, Limited(Notes)1. * means a Representative Director.
2. Directors Yoshihiko Morita and Michio Yoneda and Corporate Auditors Takashi Torizumi,
Satoru Kohdera and Atsuko Ishii are Independent Officers.
3. Mr. Hayashi, formerly Senior Vice President of the Company, has been appointed as
Outside Corporate Auditor of Kawasaki Kisen Kaisha, Ltd. (“Kawasaki Kisen”), to which
Mr. Torizumi belonged. Kawasaki Kisen owns 1.03% of total number of shares issued in
the Company. Meanwhile, the Company owns voting rights of 3.61% of total number ofshares issued in Kawasaki Kisen, which are held by Trust & Custody Services Bank, Ltd.
(Kawasaki Heavy Industries, Ltd. retirement benefit trust account re-entrusted by
Mizuho Trust and Banking Co., Ltd.). However, Kawasaki Kisen is not a company of the
KHI Group. In addition, although Kawasaki Kisen is a business partner of the Company
mainly in ship-related transactions, the annual average transactions between the
Kawasaki Kisen Group and KHI Group for the most recent five fiscal years account forless than 1% of the total annual average net sales each for the Kawasaki Kisen Group– 34 –

and KHI Group over the corresponding period. Consequently, we have determined that
there is no issue as regards to the independence of Mr. Torizumi and he is therefore
suitable for an Independent Officer.
4. Director Joji Iki and Corporate Auditor Nobuyuki Fujikake resigned during the fiscal
year under review at the conclusion of the 194th Ordinary General Meeting of
Shareholders.
5. Corporate Auditor Katsuyoshi Fukuma, who has many years of experience withadministration and accounting operations at the Company, has substantial knowledge
about finance and accounting.

(Reference)

Executive Officers (as of May 22, 2018)

Position
President and Chief
Executive Officer

Name

Areas of Responsibility within the Company

Yoshinori Kanehana

Chief Executive Officer

Kenji Tomida

Assistant to the President, with overall
responsibility for finance and accounting, and in
charge of Head Office Administration Department
and Ship & Offshore Structure Company

Vice President and Senior
Executive Officer

Munenori Ishikawa

Assistant to the President, with overall
responsibility for technology, production andprocurement, and, in charge of Quality Control andRolling Stock Company

Managing Executive Officer

Kazuo Ota

President, Motorcycle & Engine Company

Managing Executive Officer

Tatsuya Watanabe

President, Energy System & Plant Engineering
Company

Managing Executive Officer

Katsuya Yamamoto

General Manager, Corporate Planning Division, incharge of Risk Management

Managing Executive Officer

Ikuhiro Narimatsu

In charge of General Administration Department,
CSR Department and Legal Department, in chargeof complianceManaging Executive Officer

Koji Kadota

General Manager, Corporate Technology Division
and Manufacturing Improvement Center, in chargeof IT Strategy

Managing Executive Officer

Yoshinori Mochida

President, Ship & Offshore Structure Company

Managing Executive Officer

Sukeyuki Namiki

President, Aerospace Systems Company

Managing Executive Officer

Yasuhiko
HashimotoPresident, Precision Machinery & Robot Company,in charge of promoting automation

Managing Executive Officer

Takeshi Ohata

Vice President, Energy System & Plant Engineering
Company

Managing Executive Officer

Kazutoshi Honkawa

President, Rolling Stock Company

Executive Officer

Hiroji Iwasaki

In charge of North America Business
management, staff officer to Rolling Stock
Company

Executive Officer

Toshiyuki Mimura

General Manager, Planning & Control Division,
Energy System & Plant Engineering Company

Executive Officer

Akio Nekoshima

Staff officer to Corporate Auditor

Executive Officer

Eiichi Harada

General Manager, Hydrogen Project Development
Center and Deputy General Manager, Corporate
Technology Division

Executive Officer

Yuji Horiuchi

Vice President, Motorcycle & Engine Company

Executive Officer

Yoshihiro Uetake

Vice President, Aerospace Systems Company (inVice President and Senior
Executive Officer– 35 –

Position

Name

Areas of Responsibility within the Company
charge of Engine Business)

Executive Officer

Ichiro Kono

General Manager, Sakaide Shipyard and Vice
President, Ship & Offshore Structure Company

Executive Officer

Akihisa Yamamoto

In charge of Plant Technology Department, staff
officer to Energy System & Plant Engineering
Company

Executive Officer

Akira MatsufujiVice President, Rolling Stock Company

Executive Officer

Hiroshi Nakatani

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

Mitsumasa Sato

General Manager, Defense and Aerospace Project
Division, Aerospace Systems Company

Executive Officer

Makoto Shiota

General Manager, Marketing Division

Executive Officer

Hiroyoshi
ShimokawaVice President, Aerospace Systems Company (incharge of Aerospace segment)

Executive Officer

Keigo Imamura

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

Executive Officer

Nobuhisa Kato

General Manager, Finance & Accounting Division

Executive Officer

Hidehiko
Shimamura

Senior Manager, Project Division and General
Manager, Precision Machinery Business Division,
Precision Machinery & Robot Company

Executive Officer

Shinji Fujita

General Manager, Robot Business Division,
Precision Machinery & Robot Company

Executive Officer

Kouzou Tomiyama

General Manager, Personnel & Labor
Administration Division

Executive Officer

Hiroshi Ito

Senior Manager, New Business Promotion
Department, Senior Manager, Business Planning
Office, and General Manager, Planning Division,
Motorcycle & Engine Company

Executive Officer

Takeshi Koshiyama

General Manager, Commercial Engine Project
Division, Aerospace Systems Company– 36 –

(2) Remuneration to Directors and Corporate Auditors(Millions of yen)

Total amount of remuneration, etc. by category

Total amountof
remuneration

Basic
remuneration

Performancebased
remuneration

Stock purchase
fund

Directors
13 persons

675

473

134

67

Corporate Auditors
6 persons

103

103

–

–

Total 19 persons(including 6
persons fromoutside)

778
(60)

576
(60)

134
(–)

67
(–)

(Notes)1. The amount of remuneration for the Directors is ¥1,200 million per year (which was
resolved at the 189th Ordinary General Meeting of Shareholders held on June 27,2012).
2. The amount of remuneration for the Corporate Auditors is ¥120 million per year (which
was resolved at the 194th Ordinary General Meeting of Shareholders held on June 28,2017).

(3) Policy concerning the Amount of Remuneration and others to officers or its
Calculation Method
With respect to remuneration for Directors and Corporate Auditors of the Company,a remuneration scheme that corresponds to the duties of individual officers has
been adopted for the purpose of sustainably enhancing corporate performance andenterprise value, and securing competent human resources.
Remuneration for Directors, excluding outside Directors, consists of basic
remuneration, performance-based remuneration, and stock purchase fund. Amongthese, performance-based remuneration is determined by linking profits and ROICof the Company overall and Business Companies with the aim of using remuneration
as an incentive for achieving business goals. The stock purchase fund is distributed
in fixed amounts each month for the purpose of sharing value with shareholders andincentivizing Directors to enhance medium- to long-term corporate value, with theentire amount contributed to the officers’ stock ownership plan in order to purchaseshares of the Company on a continuous basis.
Remuneration for outside Directors is fixed compensation that is not linked toperformance from the perspective of the independence of their duties.
Remuneration for each Director is deliberated by the Remuneration Advisory
Committee, which consists mainly of independent outside officers, and is decided by
the President, who is delegated by the Board of Directors.
Remuneration for corporate auditors is fixed compensation that is not linked toperformance from the perspective of the independence of their duties, and is– 37 –

decided by the Board of Corporate Auditors. The above remuneration for Directors
and Corporate Auditors is set and operated in such a way as to fall within the rangeof remuneration approved at the General Meeting of Shareholders.
(4) Outside Officers(i) Concurrent Managing Officer positions at other companies and therelationship between the Company and said companies
Not applicable.
(ii) Concurrent Outside Officer positions at other companies and therelationship between the Company and said companies
Position

Director

Corporate
AuditorName

Significant concurrent positions

Relationships
with the Company

YoshihikoMoritaOutside Corporate Auditor,
TOKYO GAS Co., Ltd.
Outside Corporate Auditor,
The Resolution and Collection
Corporation
Auditor of the Board (Outside),
Mitsui Sumitomo Insurance
Company, Limited

The Company does not have
any important dealing or otherspecial relationship with thesaid companies.

MichioYonedaAtsukoIshii(iii) Family relationships with managing officers or officers, of theCompany or of specific related business operators of the Company
Not applicable.
(iv) Main activities during the fiscal year under review
Attendance and comments at Board of Directors meetings and Boardof Corporate Auditors meetings
Position

Name

Attendance
Board ofBoard ofCorporate
Directors
Auditors
meetings
meetings

YoshihikoMorita15/15
meetings–

MichioYoneda15/15
meetings–

TakashiTorizumi

14/15
meetings

17/17
meetings

SatoruKohdera13/13
meetings

13/13
meetings

AtsukoIshii

13/13
meetings

13/13
meetings

Director

Corporate
Auditor(Note)

Main activities

He made comments mainly basedon his substantial overseas
experience and knowledge as a
specialist acquired at the Japan
Bank for International Cooperationand other institutions.
He made comments mainly basedon his substantial corporate
management experience acquired
at Japan Exchange Group, Inc. andhis professional knowledge.
He made comments mainly basedon his vast experience and expertisein corporate management.
He made comments mainly basedon his vast experience and expert
perspective as an attorney.
She made comments mainly basedon her vast governmental
experience and expertise in thefields of welfare and labor.

With respect to the Corporate Auditors Satoru Kohdera and Atsuko Ishii, the description
refers to attendance at Board of Directors meetings and Board of Corporate Auditors
meetings, which were held after they assumed their positions of Corporate Auditors on
June 28, 2017.

– 38 –

(v) Overview of limited liability agreement
The Company has concluded limited liability agreement with Directors
Yoshihiko Morita and Michio Yoneda and Corporate Auditors Takashi Torizumi,
Satoru Kohdera and Atsuko Ishii, pursuant to the provisions of Article 427,
Paragraph 1 of the Companies Act. The liability under said agreement shall belimited to either an amount of ¥10 million, or an amount specified by laws andregulations, whichever is higher.
5. Accounting Auditor(1) Accounting Auditor’s Name
KPMG AZSA LLC(2) Accounting Auditors’ Remuneration, etc., for the fiscal year underreview(i) Remuneration, etc. as an Accounting Auditor for the fiscal year underreview¥185 million(ii) Cash and Other Profits Payable by the Company or its Subsidiaries to
the Accounting Auditors¥240 million(Notes) 1. The Board of Corporate Auditors verifies the reasonableness of audit plans, audit
performance and progress, and estimate and calculation of remuneration regarding its
Accounting Auditor in accordance with the “Practical Guidelines for Cooperation withAccounting Auditors” issued by Japan Audit & Supervisory Board Members Association.
Following such verification, the Board of Corporate Auditors determines whether it agrees tothe amount of remuneration and other related costs payable to the Accounting Auditor.
2. Under the audit agreement between the Company and its Accounting Auditor, remuneration,etc., for audits pursuant to the Companies Act and audits pursuant to the Financial
Instruments and Exchange Act are not separated, and they cannot be separated in apractical way. Consequently, the above amounts reflect total remuneration.
3. Of the Company’s major subsidiaries, some overseas subsidiaries have been audited bycertified public accountants or audit corporations (including those who possess equivalentqualifications in foreign countries) other than the Company’s Accounting Auditor.

(3) Details of Non-audit Services
Procedures relating to the confirmation of balances of certain accounts submitted tothe authorities concerned to proceed liquidation of receivables and so forth.

– 39 –

(4) Policy Regarding Determination of Dismissal or Non-reappointment of
Accounting Auditors
When it is recognized that the Accounting Auditor has engaged in an activity fallingunder any of causes for dismissal set forth in Article 340, Paragraph 1 of theCompanies Act, the Board of Corporate Auditors shall dismiss the Accounting
Auditor with the approval of all the Corporate Auditors. In this case, a Corporate
Auditor who is selected by the Board of Corporate Auditors shall report the dismissalof the Accounting Auditor and the reason for dismissal at the first General Meeting of
Shareholders convened after dismissal.
Besides, when the Board of Corporate Auditors assesses independence inaccordance with laws and regulations etc., auditing system, status of executing
duties, and others in a comprehensive manner, and judges that there is a need forchange, it shall determine the contents of the proposal concerning dismissal andnon-reappointment of the Accounting Auditor to submit to the General Meeting of
Shareholders.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(Note)

Amounts in this Business Report are rounded down to the nearest unit.

– 40 –

Consolidated Balance Sheet(As of March 31, 2018)(Unit: Millions of yen)

Description(Assets)
Current assets

Amount1,148,322

Cash on hand and in banks

70,632

Trade receivables

470,110Merchandise and finished products

62,385Work in process

326,459

Raw materials and supplies

115,893

Deferred tax assets

32,546

Other current assets

72,542

Allowance for doubtful receivables(2,247)

Fixed assets

636,705

Net property, plant and equipment

479,797

Buildings and structures, net

186,623

Machinery and equipment, net

144,399

Land

62,694

Leased assets, net

2,199

Construction in progress

25,724

Other, net

58,155Intangible assets

16,178Investments and other assets

140,730

Investments in securities

14,798Net defined benefit assets

88

Deferred tax assets

37,086

Other investments and otherassets

92,441

Allowance for doubtfulreceivables(3,685)

Description(Liabilities)
Current liabilities

1,785,028

869,643

Trade payables

245,398

Electronically recorded obligations

117,772

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

108,978

Current portion of bonds

20,000Current portion of lease obligations

283

Income taxes payable

6,042

Deferred tax liabilities

244

Accrued bonuses

19,903

Provision for product warranties

13,000

Provision for losses on construction
contracts

18,258Advances from customers

194,306

Other current liabilities

125,454

Long-term liabilities

433,999

Bonds payable

130,000

Long-term debt, less current
portion

185,685

Lease obligations

1,697

Deferred tax liabilities

8,942

Liabilities for retirement benefits

86,836

Other

20,837

Total liabilities(Net assets)
Shareholders’ equity
Common stock

1,303,642
466,944
104,484

Capital surplus

54,573Retained earnings

308,010

Treasury stock
Accumulated othercomprehensive income

(124)
(883)

Net unrealized gains on securities,
net tax

3,526

Deferred gains (losses) on hedges

403

Foreign currency translation
adjustments

719

Accumulated adjustment for
retirement benefits(5,532)

Non-controlling interests
Total assets

AmountTotal net assets
Total liabilities and net assets– 41 –

15,324
481,386
1,785,028

Consolidated Statement of Income(April 1, 2017 - March 31, 2018)(Unit: Millions of yen)

Description

AmountNet sales

1,574,242

Cost of sales

1,319,715

Gross profit

254,527

Selling, general and administrative expenses

198,602

Operating income

55,925Non-operating income

9,131Interest income

720

Dividend income

291

Equity in income of non-consolidated
subsidiaries and affiliates

4,492

Other non-operating income

3,626

Non-operating expenses

21,830Interest expense

2,794

Foreign exchange losses, net

7,017

Payments for contract adjustment forcommercial aircraft jet engines

2,505

Other non-operating expenses

9,513

Recurring profit

43,225Extraordinary income

2,606

Gain on sale of fixed assets

2,606

Extraordinary losses

12,833Losses from the termination of a shipbuilding
contract for an offshore service vessel

12,833

Income before income taxes

32,999

Income taxes-current

11,634

Income taxes-deferred(9,982)

Net income

1,652
31,347

Net income attributable to non-controllinginterests

2,431

Net income attributable to owners of parent

28,915– 42 –

Non-consolidated Balance Sheet(As of March 31, 2018)(Unit: Millions of yen)

Description

Amount(Assets)
Current assets
Cash on hand and in banks
Notes receivable-trade
Accounts receivable-trade
Raw materials and supplies
Work in process
Advance payments
Prepaid expenses
Deferred tax assets
Other current assets
Allowance for doubtful receivables
Fixed assets
Net property, plant and equipment
Buildings
Structures
Docks and building berths
Machinery and equipment
Vessels
Aircraft
VehiclesTools, Furniture and fixtures

Current liabilities
Notes payable-trade
Electronically recorded obligations
11,332
Accounts payable-trade380,994
Short-term debt
84,181
Accounts payable-other278,625
Accrued expenses
24,638
Income taxes payable
Advances from customers
1,299
Deposits received
26,523
Accrued bonuses
57,080
Provision for product warranties(139)
Provision for losses on construction
563,701
contracts
Lease obligations
350,882
Other current liabilities
110,525
Noncurrent liabilities
18,479Bonds payable, less current portion
2,618
Long-term debt, less current
108,150
portion157
Lease obligations
Employees’ retirement and545
severance benefits
1,622
Other long-term liabilities
49,417906,257

41,720Land

35,472

Leased assets

1,849

Construction in progress

22,041Intangible assets

12,468

Software

7,767

Other intangible assets
Investments and other assets
Investments in securities
Stock of affiliates
Investments in capital of affiliates
Long-term loans receivable fromsubsidiaries and associates
Claims provable in bankruptcy,
claims provable in rehabilitationand other
Prepaid pension cost
Deferred tax assets
Other investments and other assets
Allowance for doubtful receivables

Description

Total liabilities

Shareholders’ equity
Common stock
200,351
Capital surplus
12,417
Legal capital surplus
Other capital surplus
105,448
Retainedearnings
40,022Other retained earnings
12,296
Reserve for special depreciation
Provision for advanced
3,603
depreciation of fixed assets
Retained earnings brought
forward44
Treasury stock
26,505 Valuation and translation
3,282 adjustments
Net unrealized gains on securities,(3,268)net tax
Deferred gains (losses) on hedges
4,700

1,469,959

764,800
11,380101,789
189,187
123,988
22,32845,685
1,175
169,232
3,339
12,804
10,41017,796276
55,404382,366
130,000
185,302
1,678
49,29916,085

1,147,166(Net assets)

Total net assets
Total assets

Amount(Liabilities)

Total liabilities and net assets– 43 –

319,710
104,484
52,21052,2100
163,139
163,1392,630
9,599
150,909
(124)
3,082
2,688
393
322,792
1,469,959

Non-consolidated Statement of Income(April 1, 2017 - March 31, 2018)(Unit: Millions of yen)

Description

AmountNet sales

1,213,607

Cost of sales

1,090,104

Gross profit

123,502

Selling, general and administrative
expenses

109,844

Operating income

13,658Non-operating income

28,295Interest income

412

Dividend income

25,744

Other non-operating income

2,139

Non-operating expenses

18,950Interest expense

1,368

Foreign exchange losses

5,969

Loss on retirement of non-current assets

1,940

Payments for contract adjustment forcommercial aircraft jet engines

2,505

Other non-operating expenses

7,167

Recurring profit

23,003Extraordinary income

2,606

Gain on sale of fixed assets

2,606

Extraordinary losses

12,833Losses from the termination of a shipbuilding
contract for an offshore service vessel

12,833

Income before income taxes

12,776

Income taxes-current(619)

Income taxes-deferred(11,277)

Net income(11,897)
24,674– 44 –

Board of Corporate Auditors’ audit report (duplicated copy)

Audit Report(English Translation)
Regarding the performance of duties by the Directors for the 195th fiscal year from April
1, 2017 to March 31, 2018, 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, audit plans andother relevant matters, and received reports from each Corporate Auditor
regarding his/her audits and results thereof, as well as received reports from the
Directors, and the Accounting Auditor regarding performance of their duties, andsought explanations as necessary.
(2) Each Corporate Auditor complied with the auditing standards of the Corporate
Auditors established by the Board of Corporate Auditors, followed the auditing
policies, audit plans and other relevant matters, communicated with the Directors,
internal control development division, Auditing Department (Internal Audit
Department) and other employees, and any other relevant personnel, as well as
making efforts to prepare the environment for information collection and audit,
and conducted the audit by the following methods.
(i) Participated in the Board of Directors meetings and other important meetings,
received reports from the Directors, Executive Officers, employees and otherrelevant personnel regarding performance of their duties, sought explanations
as necessary, examined important authorized documents and associatedinformation, and studied the operations and financial positions at the head
office and principal business offices.
As for subsidiaries, each Corporate Auditor communicated and exchanged
information with Directors, Corporate Auditors and other relevant personnel ofthe subsidiaries, and received business reports from subsidiaries as necessary.
(ii) Received reports from the Directors, employees and other relevant personnel
regarding the structure and operation status of the system for ensuring thatthe performance of duties by the Directors, described in the Business Report,
conforms to the related laws and regulations and the Articles of Incorporation,and the system prepared based on the contents of the resolutions of the Boardof Directors and such resolutions regarding preparation of the systemstipulated in Article 100, Paragraphs 1 and 3 of the Ordinance for Enforcementof the Companies Act (internal control systems), which system is necessary forensuring that a joint stock corporation’s business is proper, and sought
explanations as necessary.
Furthermore, with respect to internal controls on financial reporting under the
Financial Instruments and Exchange Act, each Corporate Auditor received
reports from the Directors and other relevant personnel as well as KPMG AZSA
LLC regarding the assessment of the internal controls concerned and thestatus of auditing thereof, and sought explanations as necessary.
(iii) Audited whether the Accounting Auditor maintained their independence andimplemented appropriate audits, as well as received reports from the
Accounting Auditor regarding the performance of their duties and sought
explanations as necessary. Also, each Corporate Auditor received notice fromthe Accounting Auditor that “the system for ensuring that duties are performed
properly” (matters set forth in each item of Article 131 of the Ordinance on– 45 –

Company Accounting) has been prepared in accordance with the “ProductQuality Management Standards Regarding Audits” (issued by the BusinessAccounting Deliberation Council (BACD) on October 28, 2005) and otherrelevant standards, and sought explanations as necessary.
Based on the above methods, we examined the Business Report and supplementaryschedules, the non-consolidated financial statements (non-consolidated balance sheet,non-consolidated statement of income, non-consolidated statement of changes in net
assets, and notes to the non-consolidated financial statements) and their supplementaryschedules, as well as consolidated financial statements (consolidated balance sheet,consolidated statement of income, consolidated statement of changes in net assets, andnotes to the consolidated financial statements) related to the relevant fiscal year.
2. Results of Audit(1) Results of Audit of Business Report and Other Relevant Documents(i) In our opinion, the business report and the supplementary schedules are inaccordance with the related laws and regulations and the Articles ofIncorporation, and fairly represent the Company’s condition.
(ii) We have found no evidence of wrongful action or material violation of related
laws and regulations, nor of any violation with respect to the Articles ofIncorporation, related to performance of duties by the Directors.
(iii) In our opinion, the contents of the resolutions of the Board of Directors
related to the internal controls system are fair and reasonable. We have foundno matters on which to remark regarding the information contained in thisBusiness Report and the performance of duties by the Directors related to suchinternal controls system, including internal controls on financial reporting.
As noted in the Business Report, the Company established the Companywide
Quality Control Committee and is conducting a comprehensive inspection of its
quality management systems in response to the discovery of defects in
Shinkansen train bogie frames in 2017. We will continue to closely monitor the
status of the Companywide Quality Control Committee’s activities and theresults of its investigations.
(2) Results of Audit of Non-consolidated Financial Statements and Supplementary
Schedules
In our opinion, the methods and results of audit employed and rendered by KPMG
AZSA LLC are fair and reasonable.
(3) Results of Audit of Consolidated Financial Statements
In our opinion, the methods and results of audit employed and rendered by KPMG
AZSA LLC are fair and reasonable.
May 21, 2018
Board of Corporate Auditors, Kawasaki Heavy Industries, Ltd.
Full-Time Corporate Auditor

Takafumi Shibahara

Full-Time Corporate Auditor

Katsuyoshi Fukuma

Outside Corporate Auditor

Takashi Torizumi

Outside Corporate Auditor

Satoru Kohdera

Outside Corporate Auditor

Atsuko Ishii– 46 –