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, 2010
Dear Shareholders
Satoshi Hasegawa
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 187TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 187th Ordinary General Meeting of Shareholders of Kawasaki Heavy
Industries, Ltd. (“the Company ”). 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, etc.) by 5:00 p.m. on June 24, 2010.
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 abovementioned 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:

Friday, June 25, 2010 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:
2.

The Business Report, Consolidated Financial Statements for the Company’s 187th
Fiscal Year (April 1, 2009 - March 31, 2010) and results of audits by the
Accounting Auditor and the Board of Corporate Auditors of the Consolidated
Financial Statements
Non-Consolidated Financial Statements for the Company’s 187th Fiscal Year
(April 1, 2009 - March 31, 2010)

Proposal No. 1: Appropriation of Retained Earnings
Proposal No. 2: Election of Twelve Directors
Proposal No. 3: Election of One Substitute 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:.
Where 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.
Notes:
1. When attending the meeting, please submit the enclosed Voting Right Exercise Form at the Company’shead office reception desk 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 not permitted 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).

Information Concerning Characters Used in Shareholders’ Names and Addresses
Due to the conversion to an electronic system for stock transfers, characters in shareholders’ names andaddresses may contain some kanji characters which are not designated in Japan Securities Depositary Center,
Inc.’s (JASDEC) transfer system, and in such cases some or all of the characters may be converted tocharacters or katakana syllabary designated by JASDEC, and recorded in the shareholders register.
For this reason we would like to inform you that in the notices we send to shareholders there may be cases
where names and/or addresses contain characters which are replaced with characters designated by JASDEC.
If shareholders wish to make any enquiries regarding the characters registered for their names and/or
addresses they should contact the securities firm etc. where their account is held (in the case of special
accounts, The Chuo Mitsui Trust and Banking Company, Ltd. which is the regulatory agency for special
accounts).

2

(Appendix)

Business Report(April 1, 2009 - March 31, 2010)

1. Overview of the Company Group(1)

Business Progress and Results(i) General Conditions
In the current consolidated fiscal year the Japanese economy started to show signs of economic
recovery due to an increase in external demand from emerging countries and the lifting of domestic
demand, however, conditions continued to be harsh owing to the appreciation of the yen against the US
dollar, continued stagnation of capital expenditure, and no signs of improvement of the employment
situation and falling personal consumption.
With respect to the global economy, although there were signs of growth in some emerging
countries, countries in Europe and North America experienced only moderate recovery.
Amid this operating environment, business operations of KHI Group’s business segments continued
to be under severe pressure in the current consolidated fiscal year, with orders declining in all businesssegments except the Plant & Infrastructure Engineering segment, resulting in overall orders received
amounting to ¥1,001.2 billion, 35% lower than the previous fiscal year.
Net sales were ¥1,173.4 billion, 12% lower than the previous fiscal year, although the Shipbuilding
segment reported increased revenue, revenue decreased for the Group overall.
In terms of profit, the appreciation of the yen and the falling markets in Europe and North America
had a significant impact, and with the exception of the Aerospace and Shipbuilding segments, profits
fell, resulting in a ¥1.3 billion operating loss, which was significantly lower than the previous fiscal year
in which a profit was posted, and recurring profit was ¥14.2 billion, 63% lower than the previous fiscal
year.
An extraordinary loss of ¥19.6 billion was posted for items including business structure
improvement expenses, provision for losses on damages suit and loss on impairment of fixed assets atsome consolidated subsidiaries, resulting in a current net loss of ¥10.8 billion, significantly lower thanthe previous fiscal year in which a profit was posted.
(ii) Operating conditions by business segment
The Shipbuilding segment orders received were ¥16.1 billion, significantly lower than the previous
fiscal year, due to a significant decline in orders for new vessels.
Net sales were ¥151.8 billion, higher than the previous fiscal year, due to an increase in sales oflarge carriers.
Operating income was ¥1.4 billion, a significant improvement on the previous fiscal year in which aloss was posted, due to among other factors, higher net sales and improved profitability as a result of
lower costs of raw materials.
The Rolling Stock segment, despite having received such overseas orders as subway cars for
Singapore, orders received were ¥77.1 billion, significantly lower than the previous fiscal year in whichlarge orders were received.
Despite increased sales to JR Group companies and overseas markets for rolling stock, net sales
were ¥167.1 billion, lower than the previous fiscal year, due to segment reclassification of theConstruction Machinery division, and other factors.
Operating income declined ¥3.6 billion from the previous fiscal year to ¥7.7 billion, due to factors
such as lower profitability of exports as a result of the strong yen.
The Aerospace segment orders received were ¥171.3 billion, significantly lower than the previous
fiscal year due among other factors to a decline in orders received from Japan’s Ministry of Defense(MOD) for aircraft, and from The Boeing Company for component parts for the B777 aircraft.
Net sales were ¥188.8 billion, a decline on the previous year due among other factors to a decreasein sales to MOD.
Despite a decrease in net sales, operating income was ¥1.7 billion, improving significantly from theprevious fiscal year in which a loss was posted, due mainly to a revision of the timing of expense
recognition resulting from changes to the development schedule of the B787 for The Boeing Company.

3

The Gas Turbines & Machinery segment orders received were ¥226.2 billion, significantly lower
than the previous fiscal year, due to a decline in orders received for components for aircraft engines
which the segment received large orders in the previous fiscal year, and propulsion systems for ships.
Net sales were ¥191.3 billion, lower than the previous fiscal year, due to a decline in sales of suchitems as marine diesel engines, despite an increase in sales of steam turbines for land and otherproducts.
Operating income declined ¥4.3 billion from the previous fiscal year to ¥6.6 billion due among otherfactors to the impact of the strong yen.
The Plant & Infrastructure Engineering segment orders received were ¥124.7 billion, asignificant increase over the previous fiscal year, due to orders received from overseas customers for a
fertilizer plant and other items.
Net sales were ¥90.4 billion, lower than the previous fiscal year, due to a decrease in sales oflarge-scale plants to overseas customers, and other factors.
Operating income declined ¥2.6 billion from the previous fiscal year to ¥6.2 billion, due among
other factors to a decline in net sales.
The Consumer Products & Machinery segment’s net sales were ¥216.9 billion, significantly
lower than the previous fiscal year, due mainly to a decline in sales of motorcycles to Europe and the
U.S., as well as a decline in sales of various industrial robots.
Operating loss deteriorated ¥21.5 billion from the previous fiscal year to ¥31.6 billion, due to a
decline in net sales as well as the impact of the strong yen and other factors, despite improvement of themarginal profit ratio and measures to cut fixed expenses.
The Hydraulic Machinery segment’s orders received, predominantly from the construction
machinery industry, declined from the previous fiscal year to ¥71.0 billion.
Net sales were lower than the previous fiscal year at ¥68.8 billion, owing to the decrease of sales tothe construction machinery industry.
Operating income declined by ¥1.4 billion from the previous fiscal year to ¥6.9 billion due to adecrease in net sales.
In the Other segment net sales were lower than the previous fiscal year at ¥97.8 billion.
Operating income/loss declined ¥4.6 billion from the previous fiscal year, resulting in a loss of ¥400
million, due mainly to the impact of the segment reclassification of the Construction Machinery
division.
Unit: 100 million yen(Orders Received, Net Sales and Operating Income/Loss by Segment)
Orders Received
Segment

Net Sales

Year-on-Year
ChangeAmountOperating Income/Loss

Year-on-Year
ChangeAmountYear-on-Year
ChangeAmountShipbuilding segment

161

(553)

1,518

254

14

25

Rolling Stock segment771(1,874)

1,671

(192)

77

(36)

Aerospace segment

1,713

(677)

1,888

(115)

17

59

Gas Turbines & Machinery
segment

2,262(1,292)

1,913

(37)

66

(43)

Plant & Infrastructure
Engineering segment

1,247

411

904

(146)

62

(26)

Consumer Products & Machinery
segment

2,169(1,194)

2,169(1,194)

(316)

(215)

Hydraulic Machinery segment

710

(130)

688

(161)

69

(14)

Other segment

975

(79)

978

(57)

(4)

(46)

-

-

-

-

(1)

(2)

10,012(5,392)

11,734(1,651)

(13)

(300)

Eliminations and corporate
Total

4

(Notes) 1. Net sales recorded are for sales to external customers.
2. The net sales figure for Consumer Products & Machinery is also used as the figure for orders received.
3. From the current consolidated fiscal year (ended March 31, 2010) the Construction Machinery division is
excluded from the Rolling Stock segment and is incorporated in the Other segment.

(2)

Capital Investments, etc.
In the current consolidated fiscal year (ended March 31, 2010) KHI Group’s total amount of capital
investment was ¥59.2 billion, predominantly for renewal of aging equipment and facilities for
streamlining production, which also includes necessary facilities to handle new machine types andproducts.
Main capital investments completed and/or acquired during the current consolidated fiscal year, andmain capital investments under construction as at 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・ Facilities for streamlining ship production(Shipbuilding segment)
・ Rolling stock production facilities(Rolling Stock segment)
・ Aircraft production facilities, production management systems(Aerospace segment)
・ Gas Turbines production facilities(Gas Turbines & Machinery segment)
・ Facilities for development of new motorcycle models,
production streamlining facilities(Consumer Products & Machinery segment)(ii) Main capital investments under construction as at the end of the consolidated fiscal year underreview・ Rolling stock production management systems(Rolling Stock segment)
・ Aircraft production facilities(Aerospace segment)(3)

FinancingFunds of ¥74.7 billion from long-term loans and ¥20 billion from domestic unsecured straight bonds
and other funds from various sources were raised in the current consolidated fiscal year. The funds wereallocated to such items as redemption of bonds, long-term loan repayments, capital investments andworking capital.

(4)

Assignment of businesses, absorption-type splits and incorporation-type corporate splits
On April 1, 2009 we carried out a corporate split by succeeding our Construction Machinery
business to KCM Corporation, which is a wholly-owned subsidiary of our company.

(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
KHI Group unavoidably suffered a downturn in business performance, in particular for businesses
engaged in mass production, due among other factors to constraints on fixed expenses beyond
appropriate levels, occasioned by the global economic recession which began in 2008. The operating
environment surrounding KHI Group continues to be harsh, due among other factors to a sharp decline
in new order bookings in businesses engaged in custom-ordered production, which usually maintainstable revenues. Meanwhile, the world economic order surrounding KHI Group is undergoing asignificant transformation due to factors such as heightened global interest in the areas of energy andthe environment, and increasing multipolarity at the global level, centered on growth of emerging
countries.
5

Amid these conditions, KHI Group is tasked with rapidly achieving optimization of inventory levels,
fixed expense levels which correspond to the size of the market, and improvement of the marginal profit
ratio for businesses engaged in mass production, while at the same time improving profitability of large
mass-production projects and promptly dealing with foreseen loss risk for businesses engaged incustom-ordered production. KHI’s recently established “Medium-Term Business Plan
(FY2010-FY2012)” (“MTBP2010”), which covers the three year period from FY2010 to FY2012, aims
to undertake measures to restructure KHI Group’s revenue base and improve cashflows, and return to
the growth path followed until the first half of FY2008.
In order for KHI Group to achieve sustained growth into the future, measures are required for thedevelopment and strengthening of new products and businesses from a medium to long-term
perspective; to that end, KHI established “Kawasaki Business Vision 2020”, which targets its vision for
the Group in FY2020, and set forth a roadmap and strategy to attain the vision, while undertaking toconcurrently implement the policies and measures defined in the Medium-Term Business Plan
(FY2010-FY2012) to strategically position the Group for future growth. Moreover, through there-unification of four Group companies, which is planned for this October, KHI will promotegroup-wide sharing and utilization of intellectual assets such as those related to technology and humanresources which have been built up in each of the business units, and accelerate measures to attain theaims of the recently established Business Vision 2020.
The initiatives to be undertaken by each business segment are as follows. From April 2010 thedenomination of the Consumer Products & Machinery segment was changed to the Motorcycle &Engine segment, and the denomination of the Hydraulic Machinery segment was changed to thePrecision Machinery segment.
(i)

Shipbuilding: Maintain competitiveness for the business in China, bolster the role of thedomestic plants as the engineering and leading technology development center(ii) Rolling Stock: Ensure profitability of overseas projects, particularly for the North America
market, improve project management capabilities for handling overseas system projects, lowcost rolling stock and high-speed rolling stock, etc.
(iii) Aerospace: Move ahead with major projects, including moving into the mass production of thenext maritime patrol aircraft, next transport aircraft, and component parts for the Boeing 787(iv) Gas Turbines & Machinery: Promote development of new models of jet engines forcommercial aircraft, strengthen the energy and environment business areas through promoting
development of new products and models, including industrial gas turbines and high-efficiency
gas engines, and increase competitiveness by improving overall productivity(v) Plant & Infrastructure Engineering: Bolster research and development in order to expand in thefields of energy and the environment, and accelerate efforts to commercialize new products andnew business concepts(vi) Motorcycle & Engine: Optimize inventory levels for motorcycles marketed to industrializedcountries, lower the breakeven point, increase sales in Asia and Brazil, enter the Indian market,
develop leading technology to respond to environmental requirements(vii) Precision Machinery: Ensure stable profitability of construction machinery products, expand
into other business areas, and strengthen system-handling capabilities for industrial robots(viii)Other Businesses: Improve development and sales capabilities with respect to the construction
machinery division through an alliance with Hitachi Construction Machinery Co., Ltd.
Needless to say, compliance is a fundamental premise in carrying out business activities such as
those above. KHI Group strives to ensure that employees are made thoroughly aware of the provisionsof the various laws and regulations which apply to them, by implementing such measures asestablishing internal regulations concerning corporate ethics, carrying out staff training for each positionlevel, distribution of compliance guidebooks, and setting up CSR committees in each organization.
Furthermore, we are continuing to take thoroughgoing organizational compliance initiatives, principally
through the CSR Department which is the umbrella organization cooperating with the Corporate
Planning Division which presides over internal controls, with respect to the promotion of complianceand CSR including the creation of units in charge of compliance within each business unit, while also
striving to create a corporate culture that places the highest priority at all times on information
disclosure and its transparency.
KHI Group aims to increase profitability across all businesses in this way, and along with enhancing
corporate value through thorough compliance, it aims to establish the Kawasaki brand as one that can betrusted.
6(9)Trends in Assets and Income(i) Company Group Assets and Income
Unit: 100 million yen
The 184th fiscal
year

The 185th fiscal
year

The 186th fiscal
year

The 187th fiscal year
(under review)

Orders received

15,926

16,107

15,405

10,012

Net sales

14,38615,01013,385

11,734

Recurring profit

490

639

387

142

Net income (loss)

297

351

117

(108)

Net income (loss) per share (yen)¥18.94¥21.08¥7.02(¥6.51)

Total assets

13,57913,787

13,997

13,524

Net assets

2,953

3,190

2,952

2,830

The 184th fiscal
year

The 185th fiscal
year

The 186th fiscal
year

The 187th fiscal year
(under review)

Orders received

9,595

8,913

10,545

5,786

Net sales

9,196

8,899

7,714

6,441

Recurring profit

338

317

26

86

Net income (loss)

213

208

(61)

(54)

Net income (loss) per share (yen)¥13.56¥12.49(¥3.66)(¥3.24)

Total assets

9,382

9,229

9,779

9,764

Net assets

2,431

2,553

2,307

2,207

Item

(ii) Company Assets and Income
Unit: 100 million yen
Item7

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

Company name

Kawasaki Shipbuilding Corporation

Kawasaki Trading Co., Ltd.

The
Company’s
percentage ofequityparticipation

Main business¥ 10,000 million

100%

Design, manufacture, sale and maintenance ofcommercial and naval vessels and marine
application equipment, other transportationequipment and their facilities and parts¥ 600 million

70%

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

CapitalKawasaki Precision Machinery Ltd.

¥ 3,000 million

100%

Design, manufacture, sales, after-sales service,
and maintenance of hydraulic machinery andequipment, electric-powered devices, andcontrol systems

Kawasaki Plant Systems, Ltd.

¥ 8,500 million

100%

Design, manufacture, installation andmaintenance of various types of industrial
plants, 3D-CAD pipe design, and design andmanufacture of control software¥ 796 million

100%

Sale and repair of gas turbine generators,
industrial robots, and other industrial machinery

100%

Manufacture, maintenance, and modification of
aircrafts; manufacture of rocket components,
aerospace equipment, targeting systems,
nondestructive testing systems, and industrial
fans

Kawasaki Machine Systems, Ltd.

NIPPI Corporation¥ 6,048 million

EarthTechnica Co., Ltd.

¥ 1,200 million

100%

Design, execution and supervision ofengineering, construction, installation ofmachinery and appliances; design, manufacture,and sale of crushers, grinders, sorters, and otherequipment

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.

KCM Corporation¥ 3,000 million

100%

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

Kawasaki Motors Corporation Japan¥ 100 million

100％

Sole distributor of motorcycles and personal
water craft in Japan

Kawasaki Life Corporation¥ 400 million

100％Real estate sales and rental, building
management, insurance agency business,leasing, and provision of loans

KCMJ Corporation¥ 300 million

Note 2

Sale and repair of construction machinery,
hydraulic machinery, and other industrial
machinery

Canadian Kawasaki Motors Inc.

C$ 2 million

100％

Sales of motorcycles, 4-wheel buggies, personal
water craft , general purpose gasoline engines in
Canada100％

Sales of motorcycles, 4-wheel buggies, personal
water craft , general purpose gasoline engines in
the U.S.

100％

Manufacture of motorcycles, 4-wheel buggies,
personal water craft , general purpose gasoline
engines, rolling stock, and industrial robots in
the U.S.

Kawasaki Motors Corp., U.S.A.

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

U.S.$ 165 million

U.S.$ 120 million

8Capital

The
Company’s
percentage ofequityparticipation

Main business

U.S.$60 million

Note 3

Manufacture and after-sales service for rollingstock and related products, various engineering
services€64 million

100%

Sole distributorship of motorcycles, 4-wheel
buggies, personal water craft , general purpose
gasoline engines in Europe

Kawasaki Motors Enterprise(Thailand) Co., Ltd.

1,900 million baht

100%

Manufacture and sale of motorcycles inThailandKawasaki Motors (Phils.) Corporation

101 million peso

50%

Manufacture and sale of motorcycles in thePhilippines

P.T. Kawasaki Motor Indonesia

U.S.$ 40 million

83%

Manufacture and sale of motorcycles inIndonesia

Company name

Kawasaki Rail Car, Inc.

Kawasaki Motors Europe N.V.

(Notes) 1. In the current consolidated fiscal year the following changes were made in relation to companies classified as
major subsidiaries: two companies - KCM Corporation and KCMJ Corporation - were added; Kawasaki
Precision Machinery (U.K.) Ltd. was excluded.
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.

(iii) Progress of Business Combinations
There are 97 consolidated subsidiaries, including 20 companies which are cited in (ii) above as
major subsidiaries, and there are 14 companies which are accounted for using the equity method.
(iv) Results of Business Combinations
As stated above in “Business Progress and Results”, for the current consolidated fiscal year net sales
declined ¥165.1 billion (12%) compared to the previous fiscal year, to ¥1,173.4 billion, andconsolidated current net loss was ¥10.8 billion.
(11) Company Groups’ Main Business and Number of Employees
Segment

Main Business

Number of Employees

Shipbuilding segments

Manufacture and sale of ships, etc.

2,827

Rolling Stock segments

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

3,481

Aerospace segments

Manufacture and sale of aircraft, etc.

5,269

Gas Turbines & Machinery segments

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

3,481

Plant & Infrastructure Engineering
segments

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

2,530

Consumer Products & Machinery
segments

Manufacture and sale of motorcycles, four-wheel buggies(ATVs), multi-purpose four-wheel vehicles, personal
watercraft (“jet skis”), general purpose gasoline engines,
industrial robots, etc.

9,669

Hydraulic Machinery segments

Manufacture and sale of hydraulic machinery, etc.

1,151

Other

Manufacture and sale of construction machinery,
Administration of commercial and welfare facilities, etc.

3,110

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

779

Total

-

32,297(Japan24,396
Overseas 7,901)(Note) This company has 10,537 employees (average age; 42.1 years; average years of service: 18.6 years)9(12) Company Groups’ Principal Offices and Plants(i) The Company
Name and location
Principal
officesHead office

Kobe Head Office, Tokyo Head Office

2 Head Offices

Branches

Sapporo Office, Nagoya Office, Osaka Office, Fukuoka Office 4 Offices
Gifu Works (Kakamigahara), Nagoya Works 1 (Yatomi, Aichi), Nagoya Works 2 (Ama-gun,
Aichi), Kobe Works, Hyogo Works, Seishin Works (Kobe), Akashi Works (Akashi),
Kakogawa Works (Kakogawa), Harima Works (Kako-gun, Hyogo), Technical Institute(Akashi) 10 Works (including a Technical Institute)

Plants, etc.

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

Location of plants

Kobe

Kobe, Sakaide

Kobe, Koto-ku, Tokyo

-

Kobe

Kobe

Kobe, Koto-ku, Tokyo

-

Osaka

-

Yokohama

Yokohama, Yamato

Chiyoda-ku, Tokyo

YachiyoKusatsu, Osaka, Koto-ku, Tokyo

Kusatsu

Kako-gun, Hyogo

Kako-gun, Hyogo

Kawasaki Motors Corporation Japan

Akashi-

Kawasaki Life Corporation

Kobe

-

Kakogawa-

Kawasaki Shipbuilding Corporation
Kawasaki Trading Co., Ltd.
Kawasaki Precision Machinery Ltd.
Kawasaki Plant Systems, Ltd.
Kawasaki Machine Systems, Ltd.
NIPPI Corporation
EarthTechnica Co., Ltd.
Kawasaki Thermal Engineering Co., Ltd.
KCM Corporation

KCMJ Corporationii) Overseas
Company nameLocation

Canadian Kawasaki Motors Inc.

CanadaKawasaki Motors Corp., U.S.A.

U.S.

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

U.S.

Kawasaki Rail Car, Inc.

U.S.

Kawasaki Motors Europe N.V.

The Netherlands

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

ThailandKawasaki Motors (Phils.) Corporation

Philippines

P.T. Kawasaki Motor Indonesia

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

Lenders

Long term

Short term

Total

Mizuho Corporate Bank, Ltd.

196

417

613

Sumitomo Mitsui Banking Corporation

238

196

434

The Sumitomo Trust and Banking Co., Ltd.

165

114

279

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

22

171

194

Development Bank of Japan Inc.

163

1

165

10

(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 etc. We have, however, lodged an
appeal with the Tokyo High Court to seek for the cancellation of the decision. In that appeal, the Tokyo High
Court ruled against our company (i.e. not agreeing to cancel the decision). We therefore appealed to theSupreme Court on October 9, 2008, however, on October 6, 2009, the appeal was declined, which confirms
our company lost the suit. Although the Japan Fair Trading 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 theJapan Fair Trading Commission and demanded a trial. The matter is currently under dispute.
Meanwhile, in relation to this matter, law suits have been filed against our company alone or together withother companies as follows, in order to seek damages from us on the grounds that we caused damages against
the ordering parties due to the bid rigging.
Municipalities, etc.

Status of the law suits

Atami City
(Civil lawsuits)

The Supreme Court ruled in favor of our company on April 13, 2009 (i.e. declined the appeal of thecitizens seeking for damages of ¥1,357 million against the seven companies including our company),
which confirmed our company’s winning of the suit.

Kobe City(Civil lawsuits)

Osaka High Court ruled against our company (i.e. ordered a payment of ¥1,637 million against ourcompany) on October 30, 2007. We have appealed to the Supreme Court on November 9, 2007,
however, on April 23, 2009, the appeal was declined, which confirms our company lost the suit.

Fukuoka City
(Civil lawsuits)

Fukuoka High Court ruled against our company (i.e. ordered a payment of ¥2,088 million against fivecompanies including our company) on November 30, 2007. We have appealed to the Supreme Court
on December 12, 2007, however, on April 23, 2009, the appeal was declined, which confirms ourcompany lost the suit.

Amagasaki City
(Civil lawsuits)

Osaka High Court ruled in favor of our company on November 30, 2007 (i.e. declined the demand by
the citizens for the payment of ¥848 million against the six companies including our company). The
citizen group appealed to the Supreme Court. The Supreme Court has reversed the High Court
decision and remanded the case back to Osaka High Court on April 28, 2009. The case is currently
under dispute.

Kohoku Greater Area
Administrative Affairs
CentreOsaka High Court ruled against our company (i.e. ordered a payment of ¥422 million against 5companies, including our company) on June 18, 2009, and since Mitsubishi Heavy Industries, Ltd.
which had received the order made a payment on July 3, 2009, the suit is now closed.

Ichinomiya City

Nagoya District Court ruled against our company (i.e. ordered the payment of ¥1,215 million against
five companies including our company) on December 8, 2009. We appealed to Nagoya High Court on
December 25, 2009. The case is currently under dispute.

Sado City

An action for damages of ¥621 million has been brought against our company at Niigata District Court
on May 26, 2009. The case is currently under dispute.

Greater Chichibu
Municipal Association

An action for damages of ¥952 million has been brought against five companies including ourcompany at Tokyo District Court on June 18, 2009. The case is currently under dispute.

Yachiyo City

An action for damages of ¥585 million has been brought against our company at Tokyo High Court on
March 29, 2010. The case is currently under dispute.

11

2. Status of Shares (as of March 31, 2010)(1)

Total number of shares authorized to be issued

3,360,000,000 shares(2)

Total number of shares issued

1,669,629,122 shares(including 1,780,388 shares of treasury stock)(3)

Number of shareholders

167,090 persons(4)

Major shareholders (top 10)
Shareholders’ investment in the company

Shareholder name

Number of shares held

Shareholding ratio

thousand shares％

Japan Trustee Services Bank, Ltd. (Trust Account)

66,0433.9

Mizuho Bank, Ltd.

57,443

3.4

JFE Steel Corporation

56,174

3.3

Nippon Life Insurance Company

54,016

3.2

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

49,4002.9

Tokio Marine & Nichido Fire Insurance Co., Ltd.

43,304

2.5

Kawasaki Heavy Industries, Ltd. Kyoueikai

32,181

1.9

Kawasaki Heavy Industries, Ltd. Employees Shareholder Association

31,8291.9

Sumitomo Mitsui Banking Corporation

26,828

1.6

NIPPONKOA Insurance CO., LTD.

24,7691.4(Note) The shareholding ratio is calculated after subtracting treasury stock (1,780,388 shares).

12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.
Share options already issued and currently existing
Type

Euro Yen convertible bonds due 2010 with stock acquisition rights

Number of share options

477

Type and number of underlying shares

Common stock: 2,620,879 shares

Share option issue priceFree of cost

Balance of bonds with stock acquisition rights¥ 477,000 thousand(Note) The number of underlying shares is the balance of bonds with stock acquisition rights divided by the conversion
price of ¥182.
Type

Euro Yen convertible bonds due 2011 with stock acquisition rights

Number of share options

3,475

Type and number of underlying shares

Common stock: 15,089,014 shares

Share option issue priceFree of cost

Balance of bonds with stock acquisition rights¥ 3,475,000 thousand(Note) The number of underlying shares is the balance of bonds with stock acquisition rights divided by the conversion
price of ¥230.3.

In addition to the above, we have also issued convertible bonds pursuant to the previous provisionsof the Commercial Code.
Type

No. 9 unsecured convertible bond

Balance of convertible bonds¥ 7,038,000 thousand

Type of shares issued upon conversion

Common stock

Number of shares issued upon conversion

11,769,230 shares

Conversion price¥ 598(Note) The number of shares issued upon conversion is the balance of convertible bonds divided by the conversion
price.

13

4. Company Officers(1)

Directors and Corporate Auditors
Position

Name

Areas of Responsibility within the Company and othersignificant concurrent positions*

ChairmanTadaharu Ohashi

Chairman, Japan Aircraft Development Corporation*

President

Satoshi Hasegawa*

Senior Executive Vice
President

Shuji Mihara*

Senior Executive Vice
President

Masashi Segawa*

Senior Vice President

Chikashi Motoyama

President, Aerospace Company*

Senior Vice President

Mitsutoshi Takao

General Manager, Corporate Planning Division

Assistant to the President, in charge of the head officeadministrative departments and the Consumer Products &Machinery Company
Assistant to the President, General Manager, Corporate Technology
Division, in charge of technology and marketing, Industrial
Facilities and Tunneling Equipment Division and Robot Division○*

Senior Vice President

Yuichi Asano○*

Senior Vice President

Nobumitsu Kambayashi○*

Senior Vice President

Kyohei Matsuoka

President, Rolling Stock Company○*

Senior Vice President

Hiroshi Takata

President, Consumer Products & Machinery Company

Corporate Auditor

Nobuyuki Okazaki(Standing)Corporate Auditor

Tatsuyoshi Ogushi(Standing)○○Corporate Auditor

Kenzo Doi

Corporate Auditor

Michio Oka

President, Gas Turbine & Machinery Company
General Manager, Corporate Business Development Division

Attorney, Outside Corporate Auditor of World Co., Ltd.

(Notes) 1.
2.
3.
4.

* means a Representative Director.
Corporate Auditors Kenzo Doi and Michio Oka are both Outside Corporate Auditors.
Corporate Auditor Michio Oka is an Independent Officer.
○ means new Directors and Corporate Auditors appointed at the 186th ordinary general meeting ofshareholders held on June 25, 2009.
5. Masamoto Tazaki, Akira Matsuzaki and Shinichi Tamba, all Directors, and Akira Tanoue and Hiroshi
Kawamoto, both Corporate Auditors, have resigned during the relevant business year with the conclusionof the 186th ordinary general meeting of shareholders.
6. As of April 1, 2010, the positions of Directors have changed: Chikashi Motoyama, formerly Senior Vice
President (Representative Director) has become Director; and Nobumitsu Kambayashi, formerly SeniorVice President (Representative Director) has become Senior Vice President.
7. Nobuyuki Okazaki, Corporate Auditor, who has many years of experience with administration andaccounting operations at our company and its subsidiaries, has substantial knowledge about finance andaccounting matters.

14

8. Executive Officers as of April 1, 2010 are as follows.
Position

Name

Areas of Responsibility within the Company

President

Satoshi Hasegawa

Senior Executive Vice President

Shuji Mihara

Assistant to the President, in charge of the head officeadministrative departments and Mortorcycle & Engine
Company

Senior Executive Vice President

Masashi Segawa

Assistant to the President, General Manager, Corporate
Technology Division, in charge of technology and businessdevelopment, Industrial Facilities and Tunneling Equipment
Division and Robot Division

Senior Vice President

Mitsutoshi Takao

General Manager, Corporate Planning Division, in charge ofFinance & Accounting Department

Senior Vice President

Yuichi Asano

President, Gas Turbine & Machinery Company

Senior Vice President

Nobumitsu Kambayashi

In charge of matters specially assigned by the President(Managing Director, Kawasaki Shipbuilding Corporation)

Senior Vice President

Kyohei Matsuoka

President, Rolling Stock Company

Senior Vice President

Hiroshi Takata

President, Mortorcycle & Engine Company

Managing Executive Officer

Shigeru Murayama

President, Aerospace Company

Executive Officer

Toru Yamaguchi

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

Executive Officer

Sosuke Kinouchi

General Manager, Quality Assurance Division, Mortorcycle &Engine Company

Executive Officer

Seiji Yamashita

General Manager, CSR Division

Executive Officer

Takeshi Sugawara

Deputy General Manager, Corporate Technology Division (incharge of manufacturing improvement)

Executive Officer

Takeshi Watanabe

Overall administration of the next large aircraft project,
Aerospace Company

Executive Officer

Yasuo Murata

General Manager, General Administration Division

Executive Officer

Minoru Makimura

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

Tamaki Miyatake

General Manager, Planning Division, Mortorcycle & Engine
Company

Executive Officer

Shuichi Yamanaka

General Manager, Planning & Control Division, Rolling Stock
Company

Executive Officer

Masahiko Hirohata

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

Executive Officer

Shinsuke Tanaka

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

Executive Officer

Masatoshi Yamaguchi

General Manager, Robot Division

Executive Officer

Naomi Sera

General Manager, Engineering Division, Aerospace Company

Executive Officer

Joji Iki

General Manager, Machinery Division, Gas Turbine &Machinery Company

Executive Officer

Yoshizumi Hashimoto

General Manager, Personnel & Labor Administration
Division, in charge of Harima Works Office

Executive Officer

Yukio Hayano

General Manager, Planning & Control Division, Aerospace
Company

15

Position

Name

Areas of Responsibility within the Company

Executive Officer

Masahiro Ibi

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

Executive Officer

Takafumi Shibahara

Deputy General Manager, Corporate Planning Division andSenior Manager, Subsidiaries & Affiliates Control
Department, in charge of Procurement Planning and
Administration Department

Executive Officer

Yoshinori KanehanaVice President, Rolling Stock Company

Executive Officer

Nobuyoshi Kobayashi

General Manager, Industrial Facilities and Tunneling
Equipment Division

Executive Officer

Minoru Akioka

General Manager, Finance & Accounting Division

Executive Officer

Yukinobu Kouno

Deputy General Manager, Corporate Technology Division andSenior Manager, System Technology Development Center

Executive Officer

Masafumi Nakagawa

General Manager, Marketing & Sales Division, Motorcycle &Engine Company, and Senior Manager, CP Sales Department

16

(2)

Compensation to Directors and Corporate Auditors
Directors

13 persons

Corporate Auditors

6 persons¥ 575,735 thousand¥ 75,113 thousand (of which ¥ 13,920 thousand to three Outside Corporate Auditors)(Notes) The maximum amount of remuneration for the Directors is ¥60 million per month (as resolved at the 178thordinary general meeting of shareholders held on June 28, 2001). The maximum amount of remuneration for
the Corporate Auditors is ¥8 million (which was resolved at the 170th ordinary general meeting of shareholders
held on June 29, 1993).

(3)

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
Corporate Auditor, Kenzo Doi concurrently holds a position outside the company as a Corporate
Auditor at World Co., Ltd. Our company does not have any dealings or other special relationship withsaid 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
Kenzo Doi, Corporate Auditor, attended all of the 12 Board of Directors meetings, and all of the 17
Board of Corporate Auditors meetings held during the business year, and mainly made comments basedon his expert standpoint as an attorney.
Michio Oka, Corporate Auditor, attended all of the 10 Board of Directors meetings, and all of the 13
Board of Corporate Auditors meetings held following his appointment as a Corporate Auditor on June
25 2009, and mainly made comments based on his experience as a company manager.
(v) Overview of provisions in contracts for limitation of liability
The company has concluded contracts for limitation of liability with Corporate Auditors Kenzo Doi
and Michio Oka, pursuant to the provisions of Article 427 Paragraph 1 of the Companies Act. The
liability under said contract shall limited to either an amount of ¥ 10 million, or an amount specified bylaw, whichever is higher.

17

5. Accounting Auditors(1)

Accounting Auditor’s Name
KPMG AZSA & Co.

(2)

Accounting Auditors’ Compensation, etc., for the fiscal year under review(i) Accounting Auditors’ Compensation, etc., for the fiscal year under review¥ 138,445 thousand(ii) Cash and Other Profits Payable by the Company or its Subsidiaries to Accounting
Auditors¥ 222,965 thousand(Note) Under the audit agreement between the Company and its Accounting Auditors, compensation for audits
pursuant to the Companies Act and audits pursuant to Financial Instruments and Exchange Act are notseparated, and otherwise cannot be separated. Consequently, the above amounts reflect totalcompensation.

(3)

Details of Non-audit Services
Operations such as procedures relating to the confirmation of balances of certain accounts issued tocustomers when orders are received for overseas projects, etc.

(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.

18

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.
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, work as one for thegood of the planet”, “Kawasaki Value”, the “Group Management Principles” and “Group Code of
Conduct”; is embodied in each and every officer and employee of the KHI Group. KHI strives to improve
its internal controls by constantly reviewing them, and in doing so improves the efficiency and lawfulnessof company 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 going forward KHI will review them asnecessary, taking into account such factors as changes in the company’s operating environment.
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 protectionof the environment, comply with laws and social rules, and use proper accounting practices andensure reliability of financial reports (hereinafter, “Fundamental Principles of Corporate Ethics).
2) We established the CSR Committee Regulations, under the governance of the President, andestablished the CSR Committee comprising of directors and other members, and deliberate andmake decisions on policies and measures, and conduct monitoring of the implementation thereof,
to enhance policies and measures and Group internal controls to ensure compliance with theFundamental Principles of Corporate Ethics which are stipulated in KHI Corporate Ethics
Regulations.
3) We established the Compliance Committee Regulations and set up compliance committees inheadquarters and each business divisions, and strive to ensure thorough compliance within the
KHI Group.
4) We continuously strive to improve understanding and awareness of compliance by ongoingeducation and training activities for various types of legal compliance.
5) We established Compliance Reporting and Consultation System Regulations, and strive toenhance compliance systems by establishing an internal whistleblower system to report
information regarding compliance breaches in cases where it is difficult to correct compliancebreaches through management or concerned divisions.
6) Executive Officers who are delegated by Representative Directors with execution of business
operations are appointed at the Board of Directors Meeting, and although Executive Officers aredelegated with execution of business operations, a Director who does not concurrently serve as
an Executive Officer shall be appointed in order to enhance supervisory and monitoring
functions of the Board of Directors for overall management.
7) We ensure the appropriateness of business operations through the conduct of business audits by
the Auditing Department (Internal Audit Department).
8) 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.
19

(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 Policies 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) The basic principles concerning identification, evaluation and handling of risk arearticulated in the Risk Management Regulations, and risk management is conducted in thecourse of making various decisions.
2) With respect to risks pertaining to business strategies, risk analysis and consideration ofcountermeasures shall be conducted in advance by concerned divisions in accordance with
Regulations of Board of Directors, Management Meeting Regulations and Approval
Regulations, and discussions and decisions regarding those risks shall be carried out at
Board of Directors Meetings or management meetings in accordance with thoseregulations.
3) We have also systemized implementation of appropriate risk management for major
projects which have a significant impact on business operations, in accordance with Major
Project Risk Management Regulations.
4) We have set down Crisis Management Regulations and articulated codes of conduct inevent of emergencies, and have also appointed persons in charge of crisis management ineach business place to construct crisis management systems.
(4) Systems to ensure efficient execution of Directors’ duties
1) Through the establishment of the Kawasaki Group Mission Statement, we have articulated
KHI Group’s role and its meaning of existence, while at the same time sharing final goals
for the future, by setting forth a long-term vision for each business division in themedium-term business plan.
2) To attain the goals set forth in the Kawasaki Group Mission Statement and the long-term
vision, we have formulated a medium-term business plan and a short-term business plan,and have introduced systems to establish performance goals for each officer and employee
based on those plans. As a result thereof, we are able to clarify goals which should beachieved, while at the same time strive to link those goals. Furthermore, by conducting
regular reviews of those respective plans and goals we aim to create a system whichenables more appropriate and efficient execution of business operations.
3) We have stipulated matters such as division of roles and authority for execution of business
operations and lines of responsibility and chains of command, etc. in Regulations forManaging Segregation of Business Operations and Approval Regulations, etc. in order toclarify the authority and discretion limits of officers and employees. We have alsoestablished Executive Officers Regulations, and Executive Officers are determined inaccordance with a resolution at the Board of Directors meeting, and we clarify “Systems
for Execution of Business Operations” to achieve efficient execution of business operations
in each business and function area.
4) To ensure efficient execution of duties we instituted management meetings, at which
policies and implementation are discussed, and which acts as a consultative organ tosupport Board of Directors meeting resolutions and the President’s decision making.
Furthermore, we hold Group Business Operations Meetings for all Executive Officers toensure familiarity with, and a common understanding of management strategies and plans.
5) To enable agile business operations, we have introduced and operate a company system.
2. Internal controls systems in the company group• Systems to ensure proper business execution within the company group which is composed of the20

company and subsidiaries
1) With respect to management at each company within the KHI Group, while respecting the autonomy
thereof, KHI and each company within KHI Group share the basic philosophy and vision indicated in
the Kawasaki Mission Statement and the Medium-Term Business Plan, etc.
2) 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,etc. concerning the operation of subsidiaries and affiliates through the Subsidiaries and Affiliates
Regulations and Approval Regulations.
3) We carry out management supervision and monitoring by dispatching non-full-time Directors andnon-full-time Corporate Auditors to subsidiaries, and also with the establishment of the Subsidiaries& Affiliate Control Department which presides over subsidiaries, and clarification of the roles ofeach company, we are establishing appropriate Group business management systems. Furthermore,
we have established Internal Regulations for Non-full-time Officers of Subsidiaries and Affiliates,
and also carry out education and training for non-full-time officers dispatched from KHI.
4) We established an Auditing Department which presides over Group internal audits, and through theassessment of business audits and internal controls over financial reporting at KHI and subsidiaries,
we are able to ensure appropriateness of operations and ensure systems to prevent unfair transactions
between Group companies.
5) Pursuant to the CSR Committee Regulations, we discuss strategies and policies and measuresconcerning the Fundamental Principles of Corporate Ethics and Group internal controls with respect
to the entire KHI Group, and establish 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.
(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 meetings, andcompany-wide meetings, including Group business operations meetings and CSR committees; atthese meetings Directors and employees provide reports concerning important matters aboutcompany management and business operations, including matters regarding compliance, risk
management and internal controls, and the status of execution of duties. Furthermore, Directors
shall immediately report to the Board of Auditors when discovering that there is a risk of thecompany 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 meetings andmanagement meetings, and directly expresses his/her opinion regarding Directors’ execution ofduties.
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 etc. aredetermined in accordance with laws and the Articles of Incorporation, by obtaining the consent
of Corporate Auditors, or approval of the Board of Auditors.
21

4. Basic stance on expulsion of anti-social forces and countermeasures
KHI resolutely refuses to comply with any unreasonable demands from anti-social forces, andstrives to cut off all relations with anti-social forces.
With respect to specific measures, Paragraph 1 of the Compliance Guidebook which was
distributed to all employees prohibits “giving favors to anti-social forces”, and specific examples
of prohibited acts are listed. We strive to ensure that employees are thoroughly familiar with thematters contained in the Compliance Guidebook by conducting training, etc., 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 concerned departments we systematically handle unreasonable requests
from anti-social forces.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(Note) Amounts in this Business Report are rounded down to the nearest unit.

22Consolidated Balance Sheet(As of March 31, 2010)(Unit: million yen)
Description

Amount(Assets)
Current assets

Description

Amount(Liabilities)
931,678

Current liabilities

692,923

Cash on hand and in banks

34,745Trade payables

302,739

Trade receivables

400,264

Short-term borrowings

125,614Merchandise and finished products

56,807

Commercial papers

32,000Work in process

281,023

Raw materials and supplies

80,392Current portion of lease obligations

Deferred tax assets

25,204

Income taxes payable

Other current assets

55,663

Deferred tax liabilities

Allowance for doubtful receivables(2,424)

Advances from customers

99,532

420,761

Accrued bonuses

14,202

284,407

Provision for product warranties

6,640

Fixed assets
Net property, plant and equipment

Current portion of bonds with stock acquisitionrights

477
708
4,833
859

Buildings and structures

116,123

Provision for losses on construction contracts

17,991

Machinery and equipment

79,868Provision for business structure improvement

6,326

Land

64,282

Provision for losses on damages suit

5,165

282

Provision for environmental measures

778

Leased assets
Construction in progress

9,744

Other

14,106Long-term liabilities

Other current liabilities

376,463

75,053

Intangible assets

20,718

Bonds payable

50,000Investments and other assets

115,635

Convertible bonds

7,038

Investments in securities

28,448

Bonds with stock acquisition rights

3,475

Long-term loans

515Long-term debt

209,360

Deferred tax assets

51,503

Lease obligations

Other investments and other assets

36,438Deferred tax liabilities

2,526

Allowance for doubtful receivables(1,270)236

Provision for losses on damages suit

6,706

Provision for environmental measures

3,713

Employees’ retirement and severance benefits

89,240

Other

4,166

Total liabilities

1,069,386(Net assets)
Shareholders’ equity

295,741

Common stock

104,328

Capital surplus

54,275Retained earnings

137,689

Treasury stock
Valuation and translation adjustments(18,659)

Net unrealized gains on securities

5,305

Gains(losses) on hedging items
Foreign currency translation adjustments

Total assets

(552)

(162)
(23,803)

Minority interests

5,972

Total net assets

283,053

1,352,439

Total liabilities and net assets

23

1,352,439

Consolidated Statement of Income(April 1, 2009 - March 31, 2010)(Unit: million yen)
Description

AmountNet sales

1,173,473

Cost of sales

1,023,609

Gross profit

149,863

Selling, general and administrative expenses

151,180

Operating loss

(1,316)

Non-operating income

29,575Interest income

3,065

Dividend income

549

Gain on sales of marketable and investment securities

1,739

Equity in income of non-consolidated subsidiaries andaffiliates

6,522

Foreign exchange gains, net

10,955

Other, net

6,743

Non-operating expenses

13,965Interest expense

5,399

Other, net

8,566

Recurring profit

14,293Extraordinary income

1,537

Gain on reversal of provision for environmental measures

1,077

Gain on reversal of allowance for doubtful receivables for
subsidiaries and affiliates

460
19,651

Extraordinary losses
Business structure improvement expenses

7,648

Provision for losses on damages suit

6,983

Loss on impairment of fixed assets

3,132

Provision for environmental measures

1,489

Loss on liquidation of subsidiaries and affiliates

399

Loss before income taxes and minority interests(3,821)

Income taxes-current

8,805

Income taxes-deferred(2,822)

Minority interests in net income of consolidated subsidiaries

1,055

Net loss(10,860)24

Consolidated Statement of Changes in Net Assets(April 1, 2009 - March 31, 2010)(Unit: million yen)
Shareholders’ equity
Common stock
Balance at March 31, 2009

Capital surplus Retained earnings

104,328

54,281

Treasury stock

154,272

(467)

Total
shareholders’equity312,415

Changes of items during the period
Cash dividends(5,004)(5,004)

Net loss for the year

(10,860)(10,860)

Treasury stock purchased
Treasury stock disposed

(6)

Other

(107)

(107)

23

17

(718)

(718)

Net changes of items other thanshareholders’ equity
Total changes of items during theperiodBalance at March 31, 2010

104,328(6)(16,583)(84)(16,674)

54,275

137,689(552)

295,741

Valuation and translation adjustments
Net unrealized
Gains (losses) on
gains on securities hedging items

Balance at March 31, 2009

3,139

(263)

Foreign currencytranslation
adjustments

Total valuation andtranslation
adjustments(24,850)(21,974)

Minority
interests
4,804

Total
net assets
295,245

Changes of items during the period
Cash dividends(5,004)

Net loss for the year

(10,860)

Treasury stock purchased(107)

Treasury stock disposed

17

Other

(718)

Net changes of items other thanshareholders’ equity

2,166

101

1,047

3,314

1,167

4,482

Total changes of items during theperiod

2,166

101

1,047

3,314

1,167

(12,192)

Balance at March 31, 2010

5,305

(162)

(23,803)(18,659)

5,972

283,05325

Notes to the Consolidated Financial Statements(Notes to the basis for preparation of consolidated financial statements)
1. Scope of consolidation
Number of consolidated subsidiaries and names of principal
97 in total
subsidiaries(Domestic) Kawasaki Shipbuilding Corporation, Kawasaki Trading Co., Ltd., Kawasaki Precision
Machinery Ltd., Kawasaki Plant Systems, Ltd., Kawasaki Machine Systems, Ltd., NIPPICorporation, EarthTechnica Co., Ltd., Kawasaki Thermal Engineering Co., Ltd., KCM
Corporation, Kawasaki Motors Corporation Japan, Kawasaki Life Corporation, KCMJ
Coporation(Overseas)
Canadian Kawasaki Motors Inc., Kawasaki Motors Corp., U.S.A., Kawasaki Motors
Manufacturing Corp., U.S.A., Kawasaki Rail Car, Inc., Kawasaki Motors Europe N.V.,
Kawasaki Motors Enterprise (Thailand) Co., Ltd., Kawasaki Motors (Phils.) Corporation,
P.T. Kawasaki Motor Indonesia
The three additional consolidated subsidiaries, Kawasaki Chunhui Precision Machinery (Zhejiang) Ltd.,
Kawasaki Heavy Industries Machinery Trading (Shanghai) Co., Ltd., and one other newly establishedcompany, were included in the scope of consolidation.
Three consolidated subsidiaries were eliminated due to an absorption-type merger with anotherconsolidated subsidiary, and were excluded from the scope of consolidation.
(Changes in accounting policies)
From this consolidated fiscal year we have applied the Guidance on Accounting Standard for Determininga Subsidiary and an Affiliate (Accounting Standards Board of Japan Guidance No. 22, May 13, 2008).
This change has no impact on profit/loss.
2. Application of the equity method(1) Number of non-consolidated subsidiaries and affiliates
and names of principal companies which are subject tothe equity method
Affiliates

14 in total

14, Nantong COSCO KHI ShipEngineering Co.,Ltd.
Of the additional two affiliate companies which are accounted for by the equity method, with respect
to Anhui Conch Kawasaki Equipment Manufacturing Co., Ltd., KHI acquired its shares, andChangzhou Kawasaki and Kwang Yang Engine Co., Ltd. was newly established, accordingly they
have been included in the scope of accounting by the equity method.
(2) Names of principal companies of non-consolidated
subsidiaries and affiliates not subject to the equity
methodAffiliates
Commercial Airplane Co., Ltd., Asahi
Aluminium Co.,Ltd.
These affiliates are excluded from application of the equity method because they do not have any
material impact on the consolidated financial statements with respect to net income and retained
earnings.

3. Significant accounting policies(1) Standards and methods for evaluation of assets(i) Marketable securities
Bonds held to maturity
Principally stated by the amortized cost method
Other marketable securities- Securities with market quotations
Stated at market based on the market price on the settlement date of the accounting period(with all valuation differences charged to net assets and the cost of sale computed mainly by
the moving average method).
- Securities without market quotations
Stated at cost principally using the moving average method26

No trading securities are held by the Company.
(ii) Inventories
Stated at cost principally using the specific identification method, the moving-average method,
and the fist-in first-out method (a method for lowering the book value due to deterioration of
profitability)(iii) Net credit and net liability incurred by derivative transactions
Stated at market(2) Depreciation methods for fixed assets(i) Property, plant and equipment- Other than leased assets
The declining balance method is principally used for depreciation. However, the straight line
method is used for buildings acquired on or after April 1, 1998 (excluding buildings
fixtures).
- Leased assets
The leased assets involved in finance lease transactions that do not involve transfer ofownership are subject to the straight-line method, whereby the leasing period is deemed tobe the duration of useful life and the residual value as zero.
With respect to finance lease transactions not involving the transfer of ownership undertaken
prior to the first year of implementation of the revision of the lease accounting standards, theCompany continues to apply accounting treatment similar to that for ordinary operating
leasing transactions.
(ii) Intangible assets- Other than leased assets
The straight line method is used. The Company’s own software (used by the Company) is
subject to amortization based on the period of internal use (generally five years).
- Leased assets
The leased assets involved in finance lease transactions that do not involve transfer ofownership are subject to the straight-line method, whereby the leasing period is deemed tobe the duration of useful life and the residual value as zero.
With respect to finance lease transactions not involving transfer of ownership undertaken
prior to the first year of the implementation of the revision of the lease accounting standards,
the Company continues to apply an accounting treatment similar to that for ordinary
operating leasing transactions.
(3) Standards for translation of assets and liabilities denominated in foreign currencies into yen
The Company applies the revised accounting standards for transactions denominated in foreign
currencies (Opinion Concerning the Revision of Accounting Standards for Transactions Denominated in
Foreign Currencies issued by the Business Accounting Deliberation Council on October 22, 1999).
(4) Methods of accounting for provisions(i) Allowance for doubtful receivables
In order to provide losses due to doubtful receivables, an amount mainly based on the historical
write-off rate is recorded for ordinary receivables, and the necessary amount based on theestimated recoverability of individual cases is recorded for specified receivables such as
doubtful receivables.
(ii) Accrued bonuses
A provision is recorded based on estimated bonuses to employees.
(iii) Provision for product warranties
A provision is recorded for expenditures for warranties concerning construction contracts basedon past experience or on estimations of individual cases.
(iv) Provision for losses on construction contracts
A provision for an estimated amount of losses is recorded for the next fiscal year and thereafterconcerning construction works which are anticipated to incur significant losses and which allow
reasonable estimation of the loss incurred at the end of fiscal year under review among those
construction works that have not been delivered as of the end of the fiscal year.
(v) Employees’ retirement and severance benefits
A provision is recorded for the amount deemed to have been incurred as of fiscal year-end underreview based on the estimated retiree benefits and plan assets as of this fiscal year-end
27

(including the retirement benefit trust) in order to cover employee retirement benefits, and any
difference at the time of change in accounting standards is expensed by the amount computed ona pro rata basis for a ten year period, with the exception of certain consolidated subsidiaries.
Actuarial differences are expensed effective from the next fiscal year mainly by the straight line
method over a period of ten years, and past service liabilities are expensed effective from thisfiscal year chiefly by the straight line method for a period of ten years.
(vi) Provision for losses on damages suit
In preparedness for litigation losses, we have estimated future potential losses, and have posted
an amount deemed necessary.
(vii) Provision for environmental measures
The Company provided an estimated amount to cover expenditures for environmental measure
expenses such as the disposal of PCB waste and soil improvement required under the “Law
Concerning Special Measures for Promotion of Appropriate Disposal of PCB (poly chlorinatedbiphenyl) Waste.”(viii)Provision for business structure improvement
We have posted an estimated amount required for expenses for business structure improvementof the Consumer Products & Machinery Business in North America.
(5) Hedge accounting policy
The Company employs deferred hedge accounting and defers recognition of unrealized losses,
unrealized gains, and evaluation differences incurred by the marking to market of hedges such asderivative transactions as net assets until losses and gains due to the target of hedging are recognized.
(6) Standards for revenue recognition
The standard applied for posting revenue for construction contracts is in accordance with the
Accounting Standard for Construction Contracts (Accounting Standards Board of Japan, Statement No.
15, December 27, 2007) and Guidance on Accounting Standard for Construction Contracts (AccountingStandards Board of Japan, Guidance No. 18, December 27, 2007). However, with respect to posting ofrevenue for long-term or major construction works (principally those with a construction period longer
than 1 year, and a contract amount of ¥3 billion or more) for which construction started prior to March
31, 2009, we apply the construction progress standard (the estimate for the rate of construction progress
is mainly according to the cost accounting method), and with respect to other construction we apply thecompleted-contract method.
With regard to contracts for which the amount of revenue from delivery is not determined and/or costof sales is not finalized, both sales and cost of sales are estimated.
The standard for posting revenues related to finance lease transactions is principally done by themethod of posting the net sales and cost of sales at the time the lease fees are received.
(7) Consumption tax and local consumption tax are subject to accounting treatment using the tax
excluded method.
(8) Evaluation method for assets and liabilities of consolidated subsidiaries
The mark-to-market method is used for the evaluation of assets and liabilities of consolidated
subsidiaries.
(9) Method for amortizing goodwill and negative goodwill
Goodwill and negative goodwill are amortized over the relevant period by the straight line method
based on an estimate of their effective duration. However, all goodwill that is monetarily insignificant isamortized at the same time in the fiscal year under review.

(Notes to changes in accounting policies)
Changes to standards for posting of revenue for completed construction and cost of completed construction
With respect to posting of revenue for construction contracts, to date we have principally applied theconstruction progress standard for construction works with a period longer than 1 year and a contract amountof ¥3 billion or more, and with respect to other construction we applied the completed-contract method,
however from this consolidated fiscal year we applied the Accounting Standard for Construction Contracts(Accounting Standards Board of Japan, Statement No. 15, December 27, 2007) and Guidance on AccountingStandard for Construction Contracts (Accounting Standards Board of Japan, Guidance No. 18, December 27,
28

2007), and we applied the construction progress standard (the estimate for the rate of construction progress ismainly according to the cost accounting method) for construction works which have started from thisconsolidated fiscal year for which the results can be ascertained on the part which has been partiallycompleted by the end of this consolidated fiscal year, and with respect to other construction we applied thecompleted construction method. As a result, net sales increased by ¥32,214 million, and operating loss andcurrent net loss before taxes and minority interests both decreased by ¥3,088 million, resulting in an increase
in recurring profit of the same amount.
With respect to construction contracts which started prior to March 31, 2009 and are long-term or major
construction contracts (principally those with a construction period longer than 1 year, and a contract amountof ¥3 billion or more), we applied the construction progress standard, and with respect to other construction
we applied the completed-contract method.
Changes to the method for calculating discount rate for allowances for retirement benefits
From this consolidated fiscal year we applied the Partial Amendments to Accounting Standard for
Retirement Benefits (Part3) (Accounting Standards Board of Japan, Statement No. 19, July 31, 2008). Thischange has no impact on profit/loss.
(Change in presentation methods)
Consolidated statement of income
This consolidated fiscal year "loss on valuation of securities” (¥32 million in the current consolidated
fiscal year) was included and presented in “Other” under non-operating expenses as a result of the decline in
the significance of the amount.
(Notes regarding the Consolidated Balance Sheet)
1. The amounts presented are rounded down to the nearest unit.
2. Accumulated depreciation of property, plant and equipment
3. Assets pledged as collateral
Buildings and structures
Land
Securities hold for investment purpose
Other
Liabilities relating to collateral
Short-term borrowings
Long-term debt
Other
4. Guarantee obligations for bank loans of subsidiaries andaffiliates, etc. and employees

29¥615,228 million¥4,481 million¥291 million¥300 million¥13 million¥181 million¥532 million¥34 million¥34,409 million

(Notes regarding the consolidated Statement of Income)1. The amounts presented are rounded down to the nearest unit.
2. The gain on reversal of provision for environmental measures is the amount which was reversed as it wasdeemed not to be required as a result of re-estimation of expenses for such environmental measures as soil
improvement.
3. The gain on reversal of allowance for doubtful receivables for subsidiaries and affiliates was due to therecovery of a loan to Shanghai Cosco Kawasaki Heavy Industries Steel Structure Co., Ltd.
4. The business structure improvement expenses charges were the total sum of the estimated required amountfor the discharge of excess inventory in the Consumer Products & Machinery business in North America(the full amount of ¥6,326 million was allocated to provision for business structure improvement) and theexpenses incurred in relation to early retirement of employees carried out at a consolidated subsidiary in
the Consumer Products & Machinery business (¥1,321 million).
5.

Loss on impairment of fixed assets(1) Outline of the asset group that recognized an impairment loss
Use

Place

Type

Assets used for business operations

Inami-cho, Kako-gun,
Hyogo

Buildings and structures, Machineryand equipment

Assets used for business operations

Yokkaichi, Mie

Buildings and structures, Machineryand equipment(2) Method for classifying individual asset groups
Classification of individual asset groups is conducted principally on the basis of operating activities,
and significant leasing assets and idle assets are treated individually as a specific asset group.
(3) Developments that led to the recognition of an impairment loss
Certain assets experienced a deterioration of operating results, decline of market price, and loss ofusability. Accordingly, the Company lowered the book values of the relevant assets to recoverable
amounts.
(4) Method for computation of recoverable amount
A recoverable amount is estimated by the net sale price or the use value. The net sale price isdetermined based on the real estate appraisal or the assessed value for real estate tax, and the use
value is computed based on future cash flow.
(5) Amount of impairment loss
The amount of ¥3,132 million for impairment loss was posted under extraordinary losses as
impairment loss, and the breakdown of the types of fixed assets is as follows.
Buildings and structures¥1,199 million

Machinery and equipment¥1,556 million

Others¥376 million

Total¥3,132 million

6. The amount allocated for provision for environmental measures is the amount which was deemed to berequired as a result of re-estimation of expenses for such environmental measures as disposal of PCB
waste and soil improvement in accordance with the “Law Concerning Special Measures for Promotion ofAppropriate Disposal of PCB (poly chlorinated biphenyl) Waste”.
7. The loss on liquidation of subsidiaries and affiliates was due to the loss involving the liquidation of the
Kawasaki Oita Manufacturing Co., Ltd.
(Notes regarding consolidated Statement of Changes in Net Assets)
1. Total number of shares outstanding as of end of the fiscal year under review
Common stock30

1,669,629,122 shares2. Dividends
Resolution

Total dividend(million yen)

General Meeting of
Shareholders on
June 25, 2009
Scheduled date ofresolution
General Meeting of
Shareholders on
June 25, 2010

Dividend per share
(yen)

5,004

Total dividend(million yen)

3

Dividend per share
(yen)

5,003

3

Record date

Effective date

March 31, 2009

June 26, 2009

Record date

Effective date

March 31, 2010

June 28, 2010

3. Type and number of stock for share options
Common stock

17,709,893 shares(Notes regarding financial instruments)
1. Matters regarding financial instruments
KHI Group raises necessary funds, in light of its business plans; for long-term working capital and capital
expenditure funds the Group predominantly raises funds through bank loans and issuance of corporate bonds,
for short-term working capital it raises funds through bank loans and issuance of short-term bonds (electroniccommercial paper), etc. Temporary surplus funds are invested in highly-secure financial assets.
Operating receivables, namely, trade receivables are exposed to counterparty credit risk. The currency
exchange risk of the debts and credits in foreign currencies which arise from global business operations ishedged by using foreign exchange forward contracts and currency swaps etc. in principle against the net
amount of the debts and credits in the foreign currency. Investments in securities are mainly shares ofcorporations which we have business dealings with, and of these the investments, those shares that are listed
are exposed to the risk of market price fluctuations.
Trade payables which are operating liabilities, mostly have maturities of less than one year. Some of thoseare denominated in foreign currencies due to the import of materials, etc., and although they are exposed to
the risk of currency fluctuation, most are within the limit of the balance of accounts receivable in the same
foreign currency. Debts payable composed of loans, corporate bonds, and lease obligations related to financelease transactions are raised for the purpose of securing working capital and capital expenditure funds, and thelongest maturity from the date of settlement is about 10 years. Some of those instruments have floatinginterest and are therefore exposed to the risk of interest rate fluctuations, however we hedge those risks asrequired by using derivatives transactions (interest rate swaps).
Derivatives are used for mitigating the aforementioned risks and it is our policy to not conduct speculative
trading. Derivative transactions are transactions which include exchange forward contracts and currency
options for the purpose of hedging exchange fluctuation risks of the debts and credits in foreign currencies,
and interest rates swap transactions etc. for the purpose of hedging interest fluctuation risks of debts payable.

312. Matters concerning fair market value, etc. of financial instruments
The prices recorded in the consolidated balance sheet, fair market value and the difference between those
as of the end of this consolidated fiscal year are as follows.
Price recorded in
the consolidatedbalance sheet(*)
34,745400,264
19,009[302,739][125,614][32,000][477]

Fair market
value(*)

Difference(1) Cash on hand and in banks
34,745(2) Trade receivables
400,129(135)5(3) Investments in securities
19,015(4) Trade payables[302,739](5) Short-term borrowings[125,614](6) Commercial papers[32,000](7) Current portion of bonds with[477]
stock acquisition rights(8) Bonds payable[60,513][61,845](1,332)(9) Long-term debt
[209,360][210,253](892)(10) Derivative transactions
2,313
2,313
(*) Figures which are posted as liabilities are shown in [ ].
(Note 1) Matters concerning the method for calculating the fair market value of financial instruments andmarketable securities and derivatives transactions(1) Cash on hand and in banks
These instruments can be settled within short term and fair market value is roughly equal to book value,
therefore the fair market value is stated at book value.
(2) Trade receivables
Trade receivables are grouped into a specified period, and are stated at present value calculated by thediscount rate, which takes into account the respective period and credit risk.
(3) Investments in securities
The fair market value for these securities is stated at the price listed on the exchange.
(4) Trade payables, short-term borrowings, commercial papers and current portion of bonds with stockacquisition rights
These instruments can be settled within short term and fair market value is roughly equal to book value,
therefore the fair market value is stated at book value.
(5) Bonds payable
The fair market value of these instruments is stated at market price.
(6) Long-term debt
The fair market value of long-term debt is determined by discounting the total of principal and interest by
the interest rate on similar new debt.
(7) Derivatives transactions
The fair market value of exchange forward contracts is stated at the forward exchange rate. Of instruments
which are subject to hedge accounting, those which are subject to appropriation of forward exchange
contracts are stated in association with hedged trade receivables, and trade payables. Their fair market
value is therefore included in the fair market value of the relevant trade receivables, and trade payables.
Instruments subject to special treatment such as interest rate swaps are stated in association with hedged
long-term debt and their fair market value is therefore included in the fair market value of the relevant
long-term debt.
(Note 2) Unlisted equities and investments in silent partnership (amount recorded in the consolidatedbalance sheet was ¥9,439 million) are not included in “3. Investments in securities,” as it isdeemed to be extremely difficult to ascertain the fair market value as those instruments have nomarket prices, and it is not possible to estimate their future cash flows(Notes regarding per share information)
1. Net assets per share¥ 166.13
2. Net loss per share¥ 6.5132

Non-consolidated Balance Sheet(As of March 31, 2010)(Unit: million yen)
Description(Assets)
Current assets
Cash on hand and in banks
Notes receivable-trade
Accounts receivable-trade
Raw materials and supplies
Work in process
Advance payments

AmountDescription

617,175
17,495
1,372
229,499
50,570221,869
15,829Prepaid expenses
Deferred tax assets
Short-term loans
Accounts receivable-otherAccrued income
Other current assets
Allowance for doubtful receivables
Fixed assets
Net property, plant and equipment
Buildings
Structures
Machinery and equipment
Vessels
Aircraft

371
13,76544,621
12,280
50
9,848
(399)
359,285
151,615
53,671
10,446
39,580094

VehiclesTools, Furniture and fixtures
Land
Leased assets
Construction in progress

498
7,886
33,698144
5,594

Intangible assets
SoftwareLicense production and licensee’s
execution right

15,091
8,716
726

Other intangible assets

5,649

Investments and other assets

192,577

Investments in securities

25,394

Stock of affiliates
Investments in capital of affiliates
Long-term loans
Deferred tax assets
Other investments and other assets
Allowance for doubtful receivables

111,8533,537
11,36235,7796,806(2,157)

Total assets

976,460

33(Liabilities)
Current liabilities
Notes payable-trade
Accounts payable-trade
Short-term borrowings
Current portion of long-term debt
Commercial papers
Current portion of bonds withstock acquisition rights
Notes payable-facilities
Current portion of lease obligations
Accounts payable-otherAccrued expenses
Income taxes payable
Advances from customers
Deposits received
Unearned revenue
Accrued bonuses

Amount453,541
20,480190,559
93,5293,613
32,000477
1,488
4
12,56924,981
462
41,297
1,620
17
6,615

Provision for product warranties

744

Provision for losses on construction
contracts
Provision for business structure
improvement
Provision for losses on damages suit
Provision for environmental measures
Other current liabilities
Long-term liabilities
Bonds payable
Convertible bond
Bond with stock acquisition rights
Long-term debt

8,717
6,326
5,165
778
2,092
302,198
50,0007,038
3,475
205,587

Lease obligations

1

Long-term accounts payable-other91

Provision for losses on damages suit
Provision for environmental measures
Employees’ retirement and severance
benefits
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
depreciation of fixed assets
Retained earnings brought forward
Treasury stock
Valuation and translation adjustments
Net unrealized gains on securities
Gains(losses) on hedging items
Total net assets

6,706
2,461

Total liabilities and net assets

26,131
706
755,740
215,764
104,328
52,09152,05833
59,89559,895715
7,044
52,316
(552)
4,955
4,775
180
220,720
976,460

Non-consolidated Statement of Income(April 1, 2009 - March 31, 2010)(Unit: million yen)
Description

AmountNet sales

644,133

Cost of sales

597,898

Gross profit

46,234

Selling, general and administrative expenses

65,229Operating loss

(18,995)

Non-operating income

36,747

Interest income

1,054

Dividend income

20,888Gain on sales of marketable and investment securities

1,741

Foreign exchange gains

9,745

Other

3,317

Non-operating expenses

9,125Interest expense

3,761Interest on bonds

805

Other

4,558

Recurring profit

8,627

Extraordinary income

1,537

Gain on reversal of provision for environmental measures

1,077

Gain on reversal of allowance for doubtful receivables for
subsidiaries and affiliates

460
21,912Extraordinary losses
Loss on investment in subsidiaries and affiliates

7,234

Provision for losses on damages suit

6,983

Business structure improvement expenses

6,326

Provision for environmental measures

1,368

Loss before income taxes(11,748)

Income taxes-current

260

Income taxes-deferred(6,591)(6,330)Net loss(5,417)34

Non-consolidated Statement of Changes in Net Assets(April 1, 2009 - March 31, 2010)(Unit: million yen)
Shareholders’ equity
Retained earnings
Other retained earnings
Reserve for
specialReserve forReserve foradvancedaccount for
specialdepreciation
advanceddepreciation
depreciationof fixed
assetsof fixed
assetsCapital surplus
Commonstock

Balance at March 31, 2009

Legal
capitalsurplus104,328

Other
capitalsurplus52,058

39

146

6,798

384

Retainedearnings
brought
forward
62,988Treasury
stock

(467)

Total
shareholders’equity226,277

Changes of items during the period
Cash dividends(5,004)(5,004)

Net loss for the year

(5,417)(5,417)

Treasury stock purchased
Treasury stock disposed(6)

Provision for special depreciation
Reversal of provision for special
depreciation
Provision for advanced
depreciation of fixed assets
Reversal of provision for advanced
depreciation of fixed assets
Provision for special account foradvanced depreciation of fixed
assetsNet changes of items other thanshareholders’ equity
Total changes of items during theperiodBalance at March 31, 2010–
104,328(6)–
52,058

Balance at March 31, 2009

2,872

672

–

103

–

411

(411)

–

(165)

165

–

(384)

384

–

(384)

(10,852)(84)(10,512)52,136(552)

215,764

569
715

Total
Gains (losses)
valuation andon hedging
translation
items
adjustments

Total
net assets

4,522

230,799

Changes of items during the period
Cash dividends(5,004)

Net loss for the year

(5,417)

Treasury stock purchased(107)

Treasury stock disposed

17

Provision for special depreciation–

Reversal of provision for special
depreciation–

Provision for advanced
depreciation of fixed assets–

Reversal of provision for advanced
depreciation of fixed assets–

Provision for special account foradvanced depreciation of fixed
assets–Net changes of items other thanshareholders’ equity

1,902(1,469)433

433

Total changes of items during theperiod1,902(1,469)433(10,079)

Balance at March 31, 2010

4,775

180

4,955

220,720

35

17

(103)

33

1,649

(107)

23
(672)

Valuation and translation adjustments
Net
unrealized
gains onsecurities

(107)

245
7,044

–

Notes to the Non-consolidated Financial Statements(Notes to significant accounting policies)
1. Marketable securities are evaluated by the following methods:(1) Investment securities of subsidiaries and affiliates
Stated at cost using the moving-average method(2) Other marketable securities
・ Securities with market quotations
Stated at market based on the market price on the settlement date of the fiscal year.
Evaluation differences are all charged to net assets, and the amount obtained by subtracting theamount of tax effect from the total amount of the evaluation difference is represented in thesection of net assets as “Net unrealized gains on securities.”
The cost of sales is calculated chiefly by the moving average method.
・ Securities without market quotations
Stated at cost using the moving average method
Trading securities and held-to-maturity bonds are not held by the Company.
2. Inventories are stated at cost using the specific identification method and the moving-average method (amethod for lowering the book value due to deterioration of profitability)
3. Derivatives are stated at market
4. Property, plant and equipment are subject to depreciation conducted by the following methods:(1) Other than leased assets
The Company mainly employs the declining balance method for depreciation. However, the straightline method is used for buildings acquired on April 1, 1998, or thereafter (excluding buildings
fixtures).
(2) Leased assets
The leased assets involved in finance lease transactions that do not involve transfer of ownership are
subject to the straight-line method, whereby the leasing period is deemed to be the duration of usefullife and the residual value as zero.
With respect to finance lease transactions not involving the transfer of ownership undertaken prior to
the first year of implementation of the revision of the lease accounting standards, the Company
continues to apply accounting treatment similar to that for ordinary operating leasing transactions.
5. Intangible assets are subject to amortization conducted by the following methods:(1) Other than leased assets
The straight line method is used. The Company’s own software (used by the Company) is subject toamortization based on the period of internal use (five years).
(2) Leased assets
The leased assets involved in finance lease transactions that do not involve transfer of ownership are
subject to the straight-line method, whereby the leasing period is deemed to be the duration of usefullife and the residual value as zero.
With respect to finance lease transactions not involving transfer of ownership undertaken prior to thefirst year of the implementation of the revision of the lease accounting standards, the Company
continues to apply an accounting treatment similar to that for ordinary operating leasing transactions.
6. The Company applies the revised accounting standards for transactions denominated in foreign currencies(Opinion Concerning the Revision of Accounting Standards for Transactions Denominated in Foreign
Currencies issued by the Business Accounting Deliberation Council on October 22, 1999) as standards fortranslation of assets and liabilities denominated in foreign currencies into yen.
7. Standards of accounting for provisions(1) Allowance for doubtful receivables
In order to provide losses due to doubtful receivables, an amount based on the historical write-off rate
is recorded for ordinary receivables, and the necessary amount based on the estimated recoverabilityof individual cases is recorded for specified receivables such as doubtful receivables.
(2) Accrued bonuses
The Company has recorded a provision based on the estimated amount of payments in order to cover
the bonus payouts to employees in accordance with the Company’s Rules for Bonus Payment(3) Provision for product warranties
A provision is recorded for expenditures for warranties concerning construction contracts based on
past experience or on estimations of individual cases.

36

(4) Provision for losses on construction contracts
A provision for an estimated amount of losses is recorded for the next fiscal year and thereafterconcerning construction works which are anticipated to incur significant losses and which allow
reasonable estimation of the loss incurred at the end of this fiscal year among those construction
works that have not been delivered as of the end of the fiscal year.
(5) Employees’ retirement and severance benefits
A provision is recorded for the amount deemed to have been incurred as of this fiscal year-end basedon the estimated retiree benefits and plan assets as of this fiscal year-end (including the pensiontrust)in order to cover employee retirement benefits, and any difference at the time of change in accounting
standards is expensed by the amount computed on a pro rata basis for a ten year period. Actuarial
differences are expensed by the straight line method over a period of ten years commencing with thefollowing fiscal year, and past service liabilities are expensed by the straight line method over a
period of ten years commencing with the current fiscal year. The employees’ retirement andseverance benefits is presented after offsetting the amount of pension trust, which is ¥53,793 million(market value at the time when shares were contributed to the trust).
(6) In preparedness for litigation losses, we have estimated future potential losses, and have posted anamount deemed necessary.
(7) Provision for environmental measures
The Company provided an estimated amount to cover expenditures for environmental measure
expenses such as the disposal of PCB waste and soil improvement required under the “Law
Concerning Special Measures for Promotion of Appropriate Disposal of PCB (poly chlorinatedbiphenyl) Waste.”(8) In a provision for business structure improvement, we have posted an estimated amount required for
expenses for restructuring of the Consumer Products & Machinery Business in North America.
8. Hedge accounting policy
The Company employs deferred hedge accounting and defers recognition of unrealized losses, unrealized
gains, and evaluation differences incurred by the marking to market of hedges such as derivativetransactions as net assets until losses and gains due to the target of hedging are recognized.
9. Standards for revenue recognition
The standard applied for posting revenue for construction contracts is in accordance with the AccountingStandard for Construction Contracts (Accounting Standards Board of Japan, Statement No. 15, December
27, 2007) and Guidance on Accounting Standard for Construction Contracts (Accounting Standards Boardof Japan, Guidance No. 18, December 27, 2007). However, with respect to posting of revenue forlong-term or major construction works (those with a construction period longer than 1 year, and a contract
amount of ¥3 billion or more) for which construction started prior to March 31, 2009 we apply theconstruction progress standard (the estimate for the rate of construction progress is mainly according to thecost accounting method), and with respect to other construction we apply the completed-contract method.
With regard to contracts for which the amount of revenue from delivery is not determined and/or cost of
sales is not finalized, both sales and cost of sales are estimated.
10. Consumption tax and local consumption tax are subject to the accounting treatment using the tax excluded
method.
(Notes to changes in accounting policies)
Changes to standards for posting of revenue for completed construction and cost of completed construction
With respect to posting of revenue for construction contracts, to date we have applied the construction
progress standard for construction works with a period longer than 1 year and a contract amount of ¥3 billion
or more, and with respect to other construction we applied the completed-contract method, however from thisfiscal year we applied the Accounting Standard for Construction Contracts (Accounting Standards Board ofJapan, Statement No. 15, December 27, 2007) and Guidance on Accounting Standard for Construction
Contracts (Accounting Standards Board of Japan, Guidance No. 18, December 27, 2007), and we applied theconstruction progress standard (the estimate for the rate of construction progress is mainly according to thecost accounting method) for construction works which have started from this fiscal year for which the results
can be ascertained on the part which has been partially completed by the end of this fiscal year, and withrespect to other construction we applied the completed construction method. As a result, net sales increased by¥14,299 million, and operating loss and loss before income taxes both decreased by ¥1,287 million, resulting
in an increase in recurring profit of the same amount.
37

With respect to construction contracts which started prior to March 31, 2009 and are long-term or major
construction contracts (principally those with a construction period longer than 1 year, and a contract amountof ¥3 billion or more), we applied the construction progress standard, and with respect to other construction
we applied the completed-contract method.
Changes to the method for calculating the discount rate for allowances for retirement benefits
From this fiscal year we applied the Partial Amendments to Accounting Standard for Retirement Benefits(Part3) (Accounting Standards Board of Japan, Statement No. 19, July 31, 2008). This change has no impact
on profit/loss.
(Change in presentation methods)
Non-consolidated statement of income
This fiscal year "loss on valuation of securities” (¥22 million in the current fiscal year) was included andpresented in “Other” under non-operating expenses as a result of the decline in the significance of the amount.

(Notes to Non-Consolidated Balance Sheet)
1. The amounts presented are rounded down to the nearest unit.
2. Accumulated depreciation of property, plant and equipment
3. Monetary receivables from and payables to affiliates
Short-term monetary assets
Long-term monetary assets
Short-tem monetary liabilities
4. Asset pledged as collateral and liability relating to collateral(1) Assets pledged as collateral
Land
Buildings
Total(2) Liability relating to collateralLong-term debt (due for repayment within one year)
Long-term debt
5.
Guarantee liability for bank borrowings by affiliatesand employees¥ 374,951 million¥ 135,244 million¥ 12,205 million¥ 76,886 million¥ 5 million¥ 106 million¥ 111 million¥ 16 million¥ 203 million¥ 116,002 million(Notes to the Non-consolidated Statement of Income)1. The amounts presented are rounded down to the nearest unit.
2. Transactions with affiliates
Net sales¥ 244,149 million
Purchases¥ 107,339 million
Transactions other than operating transactions¥ 20,515 million
3. The gain on reversal of provision for environmental measures is the amount which was reversed as it wasdeemed to not be required as a result of re-estimation of expenses for such environmental measures as soil
improvement.
4. The gain on reversal of allowance for doubtful receivables for subsidiaries and affiliates was due to therecovery of a loan to Shanghai Cosco Kawasaki Heavy Industries Steel Structure Co., Ltd.
5. The loss on investment in subsidiaries and affiliates were related to KCM Corporation, Kawasaki Oita
Manufacturing Co., Ltd and Kawasaki Metal Industries, Ltd. and consisted of valuation losses on shares,¥6,131 million; allowance for bad debts, ¥753 million; and other losses ¥349 million.
6. The business structure improvement expenses were allocated to provisions for business structure
improvement for the estimated required amount for the discharge of excess inventory in the Consumer
Products & Machinery business in North America.
7. The amount of provision for environmental measures is the allocated amount which was deemed to berequired as a result of re-estimation of expenses for such environmental measures as disposal of PCB
waste and soil improvement in accordance with the “Law Concerning Special Measures for Promotion ofAppropriate Disposal of PCB (poly chlorinated biphenyl) Waste”.

38

(Notes to Non-consolidated Statement of Changes in Net Assets)
Number of treasury stock at the end of fiscal year under review
Common stock

1,780,388 shares(Notes to Tax Effect Accounting)Among other factors, the main contributing factor to deferred tax assets is the disallowance of various
provisions such as the employees’ retirement and severance benefits and the accrued bonuses, and the main
contributing factor to the deferred tax liabilities incurred is net unrealized gain on securities.
(Notes to Leased Fixed Assets)
Other than the fixed assets recorded on the balance sheet, certain manufacturing facilities are used underfinance lease contracts not involving the transfer of the ownership of the leased property.
(Notes for transactions with interested parties)
Unit: million yen
Balanceat fiscal
year-end

Attributes

Company name

Percentage ofvoting rights
held

Relationshipwith interested
party

Content oftransaction

Amount oftransaction

Subsidiary

Kawasaki Motors
Corp., U.S.A.

100% directly
heldSale of thecompany’s
products

Loanguarantees

39,769100% directly
heldDirectors
concurrently
servingLoanguarantees

14,620Subsidiary

Kawasaki
Shipbuilding
Corporation

Money
lending

10,615

Short-term
loans

14,348Companies,
etc. in which
the officers
havesignificant
influence

Japan Aircraft
Development
Corporation

Ownership
0% directly

Directors
concurrently
servingLoanguarantees

14,196--

Subsidiary

Kawasaki Motors
Europe. N.V.

100% directly
heldSale of thecompany’s
products

Loanguarantees

13,420--Subsidiary

Kawasaki Plant
Systems, Ltd.

100% directly
heldSale of thecompany’s
products
Directors
concurrently
servingLoanguarantees
Moneyborrowing

12,43926,407

Item

-

-

-

-

Short-termborrowings

15,918--Businesstransfer

Subsidiary

KCM
Corporation

100% directly
heldDirectors
concurrently
servingAmount oftransferredassetsAmount oftransferredliabilities

19,39013,417

Consideration
5,997
for transfers
Transaction conditions and policies for determining transaction conditions(Note 1) For debt guarantees we charge a certain ratio for guarantee fees, and perform guarantee of debts for bank loans, etc.
when requested by financial institutions.
(Note 2) With respect to lending and borrowing of money we reasonably decide the interest rate taking into consideration market
interest rates, and do not receive collateral. The transaction amount stated is the average balance in this fiscal year.
(Note 3) With respect to business transfer, we transferred the Construction Machinery business, and the price was determinedthrough negotiation, based on the value calculated by the company.

39

(Notes to per Share Information)
1. Net assets per share
2. Net loss per share¥ 132.33¥ 3.2440

Board of Corporate Auditors’ audit report (duplicated copy)

Audit Report(English Translation of the Board of Corporate Auditors’ Report Originally Issued in the Japanese Language)
Regarding the performance of duties by the Directors for the 187th fiscal year from April 1, 2009 to
March 31, 2010, 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. Methods and Substance of Audit by Each Corporate Auditor and the Board of Corporate Auditors
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 requested their explanations as necessary.
Each Corporate Auditor complied with the Auditing Standards of the Corporate Auditors established by
the Board of Corporate Auditors, followed the auditing policies, allocation of duties, and other relevant
matters, communicated with the Directors, internal control development division, Auditing Department(internal audit dept.) and other employees, and any other relevant personnel, and made efforts to collectinformation and to improve the auditing environment, as well as participated in meetings of the Board of
Directors and other important meetings, received reports from the Directors, the Executive Officers,
employees, and other relevant personnel regarding performance of their duties, requested their explanations
as necessary, examined important documents and associated information, and studied the operations andfinancial positions at the headquarters and principal business offices. In addition, we audited the contents of
the resolutions of the Board of Directors on establishing systems necessary to ensure that the execution ofduties by the Directors complies with laws and regulations and the Articles of Incorporation, as well as thesystems prescribed by Article 100, Paragraphs 1 and 3, of the Ordinance for Enforcement of the Companies
Act as necessary to ensure the properness of operations of a joint stock corporation（internal control
systems）. We also audited the status of the internal control systems established in accordance with thisresolution. Furthermore, with respect to internal controls on financial reporting under the Financial
Instruments and Exchange Act, we received reports from the Directors as well as KPMG AZSA & Co.
regarding the assessment of the internal controls concerned and the status of auditing thereof, and requested
their explanations as necessary. With respect to subsidiaries, we communicated and exchanged information
with Directors, Corporate Auditors, and other relevant personnel of the subsidiaries, and received business
reports from subsidiaries as necessary. Based on the above methods, we examined the reports regarding theirbusinesses and supporting schedules related to the relevant fiscal year.
Furthermore, we audited whether the Accounting Auditor maintained their independence andimplemented appropriate audits, as well as received reports from the Accounting Auditor regarding theperformance of their duties and requested their explanations as necessary. In addition, we received noticefrom the Accounting Auditor that “the system for ensuring that duties are performed properly” (matters set
forth in each item of Article 131 of the Ordinance for Corporate Accounting) has been prepared inaccordance with the Product Quality Management Standards Regarding Audits (issued by the BusinessAccounting Deliberation Council (BACD) on October 28, 2005) and other relevant standards, and requested
their explanations as necessary. Based on the above methods, we examined the non-consolidated financial
statements (non-consolidated balance sheet, non-consolidated statement of income, non-consolidated
statement of changes in net assets, and non-consolidated notes) and the supplementary schedules, as well as
consolidated financial statements (consolidated balance sheet, consolidated statement of income,consolidated statement of changes in net assets, and consolidated notes) related to the relevant fiscal year.

41

2. Results of Audit(1) Results of Audit of Business Report and Other Relevant Documents(i) In our opinion, the business report and its supplementary schedules fairly represent the Company’s
condition in accordance with the related laws and regulations and the Articles of Incorporation.
(ii) We have found no evidence of unfair conduct 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 appropriate. In addition, we have found no matters on which to remark
regarding the performance of duties by the Directors in connection with the 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 that states that the said controls wereeffective, and also received report from KPMG AZSA & Co. that states that there was no material
defect in the said controls.
(2)

Results of Audit of Non-consolidated Financial Statements and Supplementary Schedules
In our opinion, the auditing method and results of the Accounting Auditors, KPMG AZSA & Co.,are appropriate.

(3)

Results of Audit of Consolidated Financial Statements
In our opinion, the auditing method and results of the Accounting Auditors, KPMG AZSA & Co.,are appropriate.

May 24, 2010
The Board of Corporate Auditors, Kawasaki Heavy Industries, Ltd.
Full-Time Corporate Auditor
Full-Time Corporate Auditor
Outside Corporate Auditor
Outside Corporate Auditor

42

Nobuyuki Okazaki
Tatsuyoshi Ohgushi
Kenzo Doi
Michio Oka

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 stable cash dividends to its shareholders, giving due attention toincreased retained earnings to strengthen and expand its business foundations for future growth, whereas
taking into consideration the earnings forecasts and the level of retained earnings etc., the annual cash
dividend will amount to ¥3 per ordinary share for a total of ¥5,003,546,202.
In addition, the Company’s year-end dividend distribution is June 28, 2010.

Proposal No. 2 Election of Twelve Directors
The term of office of all ten Directors will expire at the conclusion of this Ordinary General Meeting of
Shareholders.
Therefore, in preparation for the absorption-type merger on October 1, 2010 of three of KHI’s
wholly-owned subsidiaries (Kawasaki Shipbuilding Corporation, Kawasaki Precision Machinery Ltd., andKawasaki Plant Systems, Ltd.), we propose appointing an additional two Directors, resulting in a total of
twelve Directors to be elected anew.
The candidates for Director are as follows:
No.

1

Name
(Date of Birth)Tadaharu Ohashi(Nov. 9, 1944)

Apr. 1969
Jun. 2003
Apr. 2005
Jun. 2005
Jun. 2009

Apr. 1970
Jun. 2005
2

Masashi Segawa(Nov. 22, 1947)

Apr. 2009

Apr. 1969
Jun. 2007
Apr. 20083

Shuji Mihara(Jan. 27, 1946)

Apr. 2009

Apr. 2010

Abridged Personal Records, Positions and Duties[Significant concurrent positions]
Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
Senior Executive Vice President, Assistant to the President
President
Chairman of the Board(current position)[Significant concurrent positions]
Chairman, Japan Aircraft Development Corporation (Note)
Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
President, Rolling Stock & Construction Machinery Company
Senior Executive Vice President, Assistant to the President, In
charge of technology and marketing General Manager, Corporate
Technology Division,
In charge of Industrial Facilities and Tunneling Equipment
Division and Robot Division(current position)
Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
Senior Manager, Personnel & Labor Administration Department,
In charge of Outside Activity for Kansai Region
Senior Vice President
Senior Manager, Corporate Planning Department,
In charge of Subsidiaries & Affiliates Control Department andLegal Department and Personnel & Labor Administration
Department
Senior Executive Vice President,
Assistant to the President
In charge of the Head Office administrative departments
In charge of Consumer Products & Machinery Company
Senior Executive Vice President,
Assistant to the President
In charge of the Head Office administrative departments
In charge of Motorcycle & Engine Company(current position)

43

Shares of theCompany
122,000
shares112,000
shares80,000sharesNo.

Name(Date of Birth)
Apr. 1972
Jun. 2007

4

Satoshi Hasegawa(Aug. 16, 1947)

Apr. 2009
Jun. 2009
Apr. 1972
Apr. 2005
Jun. 2008

5

Mitsutoshi Takao(Apr. 1, 1950)

Apr. 2009
Apr. 2010

Apr. 1970
Apr. 2005

Nov. 2007

6

Yuichi Asano(Sep. 13,1947)
Apr. 2008
Apr. 2009
Jun. 2009
Apr. 1971
Oct. 2002
Jun. 2005
Apr. 2008

7

Nobumitsu
Kambayashi(May 28, 1948)

Jun. 2009

Apr. 2010

Abridged Personal Records, Positions and Duties[Significant concurrent positions]
Joined Kawasaki Heavy Industries, Ltd.
Senior Vice President
President, Gas Turbine & Machinery Company
Senior Executive Vice President,
Assistant to the President
President(current position)
Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
General Manager, Finance & Accounting Department
Senior Vice President
General Manager, Finance & Accounting Department
Senior Vice President
General Manager, Corporate Planning Division
Senior Vice President
General Manager, Corporate Planning Division
In charge of Finance & Accounting Division(current position)
Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
Vice President, Gas Turbine & Machinery Company
Senior Manager, Manufacturing Center, Machinery Division, Gas
Turbine & Machinery Company
Executive Officer
Vice President, Gas Turbine & Machinery Company
General Manager, Machinery Division, Gas Turbine &Machinery Company
Senior Manager, Manufacturing Center, Machinery Division, Gas
Turbine & Machinery Company
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
Senior Manager, Marketing & Sales Division, Kawasaki
Shipbuilding Corporation
Senior Vice President
Senior Manager, Marketing & Sales Division
Managing Executive Officer
General Manager, Corporate Business Development Division,
Kawasaki Heavy Industries, Ltd.
Senior Vice President
Kawasaki Shipbuilding Corporation
Senior Vice President
General Manager, Corporate Business Development Division,
Kawasaki Heavy Industries, Ltd.
Senior Executive Vice President
Kawasaki Shipbuilding Corporation
Senior Vice President
Kawasaki Heavy Industries, Ltd.
President, Kawasaki Shipbuilding Corporation(current position)[Significant concurrent position]
President, Kawasaki Shipbuilding Corporation

44

Shares of theCompany

81,000shares62,000shares

24,000shares

26,000sharesNo.

Name(Date of Birth)
Apr. 1973
Apr. 2003

Apr. 2006
8

Kyohei Matsuoka(Sep. 16, 1949)

Apr. 2008
Apr. 2009
Jun. 2009
Apr. 1972
Apr. 2004

Apr. 2006
9

Hiroshi Takata(Jan. 5, 1950)

Apr. 2007
Apr. 2009
Jun. 2009
Apr. 2010
Apr. 1969
Apr. 200410

11

Toshikazu Hayashi(Dec. 3, 1946)

Makoto Sonoda(Dec. 7, 1948)

Apr. 2005

Apr. 1971
Oct. 2002
Jun. 2005
Jun. 2007

Apr. 1974
Jan. 2005
Apr. 2005
12

Shigeru Murayama(Feb. 27, 1950)

Apr. 2008
Apr. 2010

Abridged Personal Records, Positions and Duties[Significant concurrent positions]
Joined Kawasaki Heavy Industries, Ltd.
General Manager, Planning & Control Division, Rolling Stock,
Construction Machinery & Crushing Plant Company
Senior Manager, Rolling Stock Control Department, Rolling
Stock, Construction Machinery & Crushing Plant Company
Executive Officer
General Manager, Planning & Control Division, Rolling Stock &Construction Machinery Company
Managing Executive Officer
Vice President, Rolling Stock Company
Managing Executive Officer
President, Rolling Stock Company
Senior Vice President
President, Rolling Stock Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Deputy General Manager, Research & Development Division,
Consumer Products & Machinery Company
Senior Manager, Research Department, Consumer Products &Machinery Company
Senior Manager, Quality Division, Consumer Products &Machinery Company
General Manager, Research & Development Division, Consumer
Products & Machinery Company
Managing Executive Officer
President, Consumer Products & Machinery Company
Senior Vice President
President, Consumer Products & Machinery Company
Senior Vice President
President, Motorcycle & Engine Company
Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
Vice President, Plant & Infrastructure Engineering Company
General Manager, Power Plant & Industrial Plant Engineering
Division, Plant & Infrastructure Engineering Company
President, Kawasaki Plant Systems, Ltd.
(current position)[Significant concurrent position]
President, Kawasaki Plant Systems, Ltd.
Joined Kawasaki Heavy Industries, Ltd.
Director, Kawasaki Precision Machinery, Ltd.
Senior Vice President, Kawasaki Precision Machinery, Ltd.
President, Kawasaki Precision Machinery, Ltd.
(current position)[Significant current position]
President, Kawasaki Precision Machinery, Ltd
Joined Kawasaki Heavy Industries, Ltd.
Aerospace Company
Executive Officer
Vice President, Aerospace Company
Managing Executive Officer
Vice President, Aerospace Company
Managing Executive Officer
President, Aerospace Company(current position)

Shares of theCompany

51,000shares

29,000shares

29,000shares

26,000shares73,000shares(Note) Tadaharu Ohashi holds Chairman of Japan Aircraft Development Corporation concurrently and we are dealing
with this corporation for following business.
・ Fiscal year 2010 (ended March 31, 2010) : Supplying our guarantee against borrowings from the bank to Japan
Aircraft Development Corporation
There is no special conflict of interest between the company and the other candidates.

45

Proposal No. 3 Election of One Substitute Corporate Auditor
At the conclusion of this Ordinary General Meeting of Shareholders, the term of office will expire for
substitute Corporate Auditor, Tomoko Sasaki, who was elected at the 183rd Ordinary General Meeting of
Shareholders on June 27, 2006, and we propose electing anew a substitute Corporate Auditor in preparedness
for cases where there is a shortfall in the number of Corporate Auditors.
Furthermore, if the candidate for the position of substitute Corporate Auditor is elected as the substituteCorporate Auditor, we are capable of, with the resolution of the Board of Directors and consent of the Board
of Auditors, canceling the appointment, as prescribed in Article 96, Paragraph 2, Item 6 of the Companies
Act Enforcement Regulations.
We have obtained the prior approval of the Board of Corporate Auditors on this proposal.
The candidate for substitute Corporate Auditor is as follows.
No.

Name
(Date of Birth)
Apr. 1991

1

Nobuyuki Fujikake(Apr. 24, 1955)

Apr. 1993
Nov. 2001

Abridged Personal Records, Positions and Duties[Significant concurrent positions]
Admitted to Bar in Japan
Joined Iseki Law Office
Established Takashima-Fujikake Law Office
Established Fujikake Law Office (At present Kobe-Minatogawa
Law Office)(current position)

Shares of theCompany
0shares(Notes) 1. There is no special conflict of interest between the Company and the candidate for substitute Corporate Auditor.
2. Contents of the provisions in Article 76, Paragraph 4 of the Companies Act Enforcement Regulations regarding
candidates for substitute Outside Corporate Auditors.
1) Nobuyuki Fujikake is a candidate for substitute Outside Corporate Auditor.
2) Nobuyuki Fujikake has been chosen as a candidate for substitute Outside Corporate Auditor as the Company has
judged that he is able to perform duties as substitute Outside Corporate Auditor appropriately in light of his
substantial experience and knowledge as an attorney.
3) In the event that Mr. Nobuyuki Fujikake assumes the role of Corporate Auditor, he intends to conclude anagreement with the Company that limits his responsibilities pursuant to the provisions of Article 427, Paragraph 1of the Companies Act. The amount of limit pursuant to the contract concerned will be the higher of ¥10,000,000
or the amount stipulated by law.

46