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, 2013
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 190TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 190th Ordinary General Meeting of Shareholders of Kawasaki Heavy
Industries, Ltd. (the “Company” or “KHI”). The meeting will be held for the purposes as described below.
If you are unable to attend on the day of the meeting we kindly ask you to review the “Reference
Documents for the General Meeting of Shareholders” (described hereinafter), and exercise your voting
right in writing or electronically (via the Internet, and so forth) by 5:00 p.m. on June 25, 2013.
Exercise of Voting Rights in Writing
Please indicate your vote for or against the proposals on the enclosed Voting Rights Exercise Form, andreturn it so that it is delivered by the above-mentioned exercise date.
Exercise of Voting Rights via the Internet
Please exercise your voting right by logging on to the Internet website (http://www.web54.net) and entering
the voting right exercise code and password stated on the enclosed Voting Rights Exercise Form, and follow
the online instructions to submit your vote.
1. Date and Time:

Wednesday, June 26, 2013 at 10:00 a.m. (Door opens at 9 a.m.)

2. Place:

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

–1–

3. Meeting Agenda:
1.
Matters to bereported:

The Business Report, Consolidated Financial Statements for the Company’s 190th
Fiscal Year (April 1, 2012 - March 31, 2013) and results of audits by the
Accounting Auditor and the Board of Corporate Auditors of the Consolidated
Financial Statements
2. Non-Consolidated Financial Statements for the Company’s 190th Fiscal Year
(April 1, 2012 - March 31, 2013)
Proposal No. 1: Appropriation of Retained Earnings
Proposal No. 2: Partial Amendments to the Articles of Incorporation
Proposal No. 3: Election of Thirteen Directors
Proposal No. 4: Election of Three Corporate Auditors
Proposal No. 5: 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:(1) When voting rights have been exercised twice in writing or electronically, the latter vote received shallbe deemed valid, however when votes are received on the same day, the voting right exercised
electronically shall be deemed valid.
Shareholders who intend to diversely exercise voting rights are requested to give written notification tothat effect, and the reason(s) thereof, no later than three (3) days prior to the day of the General
Meeting of Shareholders.
(2) Among the documents to be submitted when sending the Notice, “Notes to the Consolidated Financial
Statements” and “Notes to the Non-consolidated Financial Statements” are posted on our Website(http://www.khi.co.jp/english/ir/) according to laws and the Article 16 of the Articles of Incorporation,and they are not included in the Appendix regarding matters to be reported. “Notes to the Consolidated
Financial Statements” and “Notes to the Non-consolidated Financial Statements” have been combinedwith the Consolidated Financial Statements and the Non-Consolidated Financial Statements for theauditing process when preparing the results of audits by the Accounting Auditor and the Board of
Corporate Auditors.

Notes:
1. When attending the meeting, please submit the enclosed Voting Rights Exercise Form at the reception
desk at the venue on the day of the meeting. Please note that persons other than shareholders who are able
to exercise voting rights, including representatives and their companions who are not shareholders, are notpermitted to enter the venue.
In order to save resources, please bring this Notice with you to the Meeting.
2. Any updates to the Appendix and the Reference Documents for the General Meeting of Shareholders, will
be posted on the Company’s Website at the following URL: (http://www.khi.co.jp/english/ir/).

–2–

Reference Documents for the General Meeting of Shareholders
Proposals and References
Proposal No. 1: Appropriation of Retained Earnings
The Company’s basic policy is to pay stable cash dividends to its shareholders, giving due attention toincreased internal reserves to strengthen and expand its business foundations for future growth.
Taking into consideration the earnings forecasts and the level of internal reserves, and so forth, the annual
cash dividend will amount to ¥5 per ordinary share for a total of ¥8,358,962,715.
In addition, the Company’s year-end dividend distribution is June 27, 2013.
Proposal No. 2: Partial Amendments to the Articles of Incorporation
1. Reasons for amendment
As proposed in Proposal No. 3 below, the Company wishes to be able to invite competent personnel
as Outside Directors more easily and help the personnel to fully play the expected roles. Hence, theCompany proposes, relating to the new election of Outside Directors, the new establishment ofprovisions allowing the Company to enter into an agreement to limit Outside Directors’ liabilities incases where the Outside Directors have performed their duties without intent or gross negligence,
pursuant to the provisions of Article 427 of the Companies Act.
We have obtained the prior approval of each Corporate Auditor on the establishment of this new
Article.
2. Contents of proposed amendments
The contents of the proposed amendments are as follows:(Underline indicates amendment)
Current Articles of Incorporation(Exemption of Liabilities of Directors)
Art. 32: Pursuant to Art. 427, Paragraph 1, of the Companies
Act, the Company may enter into an agreement withoutside directors to limit such outside directors’
liabilities for damage attributable to such outside
directors’ negligence of duties. However, the upper
limit of liabilities based on the agreement shall be
the higher of either ¥10 million or the amountprovided by law.

(New)

Art.32 to Art. 50:

Proposed provisions after amendment(Omitted)

Art. 33 to Art. 51:(Changes in article numbers only)

Proposal No. 3: Election of Thirteen Directors
The term of office of all thirteen Directors will expire at the conclusion of this Ordinary General Meetingof Shareholders. Accordingly, we propose to elect thirteen Directors to promote various efforts toward theenhancement of our corporate value. Such efforts include the new appointment of one Outside Director in theaim of further strengthening the internal control system and increasing transparency and objectivity of the
management.
The new election of the Outside Director will become effective with a proviso that Proposal No. 2 isapproved in its original form.
The candidates for Director are as follows:

–3–

No.

Name
(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1972
Jun. 2007

1

Satoshi Hasegawa(Aug. 16, 1947)

Apr. 2009
Jun. 2009
Apr. 1972
Jun. 2008
Apr. 20122

Mitsutoshi Takao(Apr. 1, 1950)
Apr. 2013

Apr. 1973
Apr. 2008
3

Kyohei Matsuoka(Sep. 16, 1949)

Apr. 2009
Jun. 2009

Apr. 1972
Apr. 2007
Apr. 2009
4

Hiroshi Takata(Jan. 5, 1950)

Jun. 2009
Apr. 2010

5

Makoto Sonoda(Dec. 7, 1948)

Apr. 1971
Jun. 2007
Jun. 2010
Oct. 2010

Apr. 1974
Apr. 2008
6

Shigeru Murayama(Feb. 27, 1950)

Apr. 2010
Jun. 2010

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.
Senior Vice President
General Manager, Finance & Accounting Department
Senior Executive Vice President
Assistant to the President, In charge of Corporate Planning
Division, Finance & Accounting Division, CSR Division,
Personnel & Labor Administration Division and General
Administration Division
Senior Executive Vice President
Assistant to the President, In charge of Corporate Planning
Division, Finance & Accounting Division, CSR Division,
Personnel & Labor Administration Division, General
Administration Division and Procurement Division(current position)
Joined Kawasaki Heavy Industries, Ltd.
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.
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(current position)
Joined Kawasaki Heavy Industries, Ltd.
President, Kawasaki Precision Machinery, Limited.
Director, Kawasaki Heavy Industries, Ltd.
President, Kawasaki Precision Machinery, Limited.
Senior Vice President
President, Precision Machinery Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
Managing Executive Officer
Vice President, Aerospace Company
Managing Executive Officer
President, Aerospace Company
Senior Vice President
President, Aerospace Company(current position)–4–

Shares oftheCompany

126,000
shares111,000
shares

83,000shares

58,000shares56,000shares107,000
sharesNo.

Name(Date of Birth)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1977
July. 2006
Apr. 20097

Joji Iki(Sep. 5, 1951)

Apr. 2012
Jun. 2012

Apr. 1975
Apr. 2008

Apr. 2011
8

Masahiko Hirohata(Sep. 20, 1951)
Apr. 2012
Jun. 2012

Apr. 1974
Jun, 2008
Jun. 2010

Oct. 2010
9

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

Apr. 1976
Dec. 2008

Jan. 200910

Yoshinori
Kanehana(Feb. 19, 1954)

Apr. 2009
Apr. 2011
Apr. 2012
Jun. 2012

Joined Kawasaki Heavy Industries, Ltd.
Deputy General Manager, 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.
Executive Officer
General Manager, Planning & Control Division, Gas Turbine &Machinery Company
Managing Executive Officer
General Manager, Corporate Planning Division
Senior Manager, Infrastructure Strategy Office
Managing Executive Officer
General Manager, Corporate Planning Division
Senior Vice President
General Manager, Corporate Planning Division(current position)
Joined Kawasaki Heavy Industries, Ltd.
Director, Kawasaki Plant Systems, Ltd.
Senior Vice President
General Manager, Project Engineering Center, Kawasaki Plant
Systems, Ltd.
Executive Officer
General Manager, Project Engineering Center, In charge of Kobe
Engineering Department, Plant & Infrastructure Company,
Kawasaki Heavy Industries, Ltd.
Executive Officer
Vice President, Plant & Infrastructure Company
Managing Executive Officer
President, Plant & Infrastructure Company
Senior Vice President
President, Plant & Infrastructure Company(current position)
Joined Kawasaki Heavy Industries, Ltd.
General Manager, Rolling Stock Division,
General Manager, Project Management Center, Rolling Stock
Division, Rolling Stock Company
General Manager, Rolling Stock Division, Rolling Stock
Company
Executive Officer
Vice President, Rolling Stock Company
Managing Executive Officer
Vice President, Rolling Stock Company
Managing Executive Officer
General Manager, Marketing Division
Senior Vice President
General Manager, Marketing Division(current position)–5–

Shares oftheCompany

21,000shares

66,000shares

36,000shares37,000SharesNo.

Name(Date of Birth)

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

11

Minoru Makimura(Nov. 18, 1950)

Apr. 2011

Apr. 2012

Apr. 1975
Jun. 2008

Jun. 201012

Akio Murakami(Nov. 18, 1950)

Oct. 2010

Apr. 2013

Apr. 1969
Oct. 2004
Oct. 200813

Yoshihiko Morita（Mar, 7, 1947）

Jun. 2011
Dec. 2011
Jun. 2012

Joined Kawasaki Heavy Industries, Ltd.
Executive Officer
Deputy General Manager, Corporate Technology Division andSenior Manager, Technical InstituteManaging Executive Officer
General Manager, Corporate Technology Division and Senior
Manager, Technical InstituteManaging Executive Officer
General Manager, Corporate Technology Division(current position)
Joined Kawasaki Heavy Industries, Ltd.
Director,
General Manager, Technology Division, Kawasaki Shipbuilding
Corporation
Senior Vice President
General Manager, Technology Division, Kawasaki Shipbuilding
Corporation
Executive Officer
General Manager, Planning & Control Division, Ship & Offshore
Structure Company
Managing Executive Officer
President, Ship & Offshore Structure Company(current position)
Joined Export-Import Bank of Japan (At present: Japan Bank forInternational Cooperation)
Vice Governor of Japan Bank for International Cooperation
Representative Director and Senior Managing Executive Officer
Deputy CEO of Japan Bank for International Cooperation, Japan
Finance Corporation
Resigned Deputy CEO of Japan Bank for International
Cooperation, Japan Finance Corporation
Advisor, Sumitomo Mitsui Banking Corporation
President, Japan Institute for Overseas Investment
Corporate Auditor, TOKYO GAS Co., Ltd.
(current position)[Significant concurrent position]
President, Japan Institute for Overseas Investment
Corporate Auditor, TOKYO GAS Co., Ltd.

Shares oftheCompany

43,000Shares

19,000Shares2,000
Shares(Notes)1. There is no special interest relationship between the candidates and the Company.
2. Contents of the matter stipulated regarding candidates for Outside Director pursuant to Article 74, Paragraph 4 of theOrdinance for Enforcement of the Companies Act(1) Mr. Yoshihiko Morita is a candidate for Outside Director.
(2) Mr. Yoshihiko Morita has been chosen as a candidate for Outside Director as the Company has judged that he isable to express useful opinions and advice in determining important matters of the Company’s management. The
Company believes he can do so from a position independent from the Company’s execution of duties in light of his
substantial overseas experiences and knowledge as a specialist, acquired in the Japan Bank for International
Cooperation and other institutions. The Company believes he will be able to fully perform his roles as an Outside
Director in the supervision of the execution of duties of the Company. Mr. Yoshihiko Morita will resign as advisor of
Sumitomo Mitsui Banking Corporation on June 30, 2013.
(3) After the proposed election, Mr. Yoshihiko Morita will enter into a limited liability agreement pursuant to theprovisions of Article 427, Paragraph 1 of the Companies Act with the Company on condition that Proposal No. 2 isapproved in its original form. The liability for damages under said agreement shall be limited to either an amount of¥10 million, or an amount specified by law and regulation, whichever is higher.
3. Mr. Yoshihiko Morita satisfies the requirements of independent directors/corporate auditors stipulated by the Tokyo
Stock Exchange, Osaka Securities Exchange and Nagoya Stock Exchange.

–6–

Proposal No. 4: Election of Three Corporate Auditors
As the term of office of the Corporate Auditors, Mr. Kenzo Doi, Mr. Tatsuyoshi Ogushi and Mr. Michio
Oka will expire at the conclusion of this Ordinary General Meeting of Shareholders, we propose to electthree Corporate Auditors.
We have obtained the prior approval of the Board of Corporate Auditors on this proposal.
The candidate for Corporate Auditor is as follows.
No.

Name
(Date of Birth)

1

Tatsuyoshi
Ohgushi(Jan. 3, 1952)

2

Michio Oka(Mar. 19, 1946)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1974
Apr. 2008
Apr. 2009
Jun. 2009
Apr. 1969
Jun. 2000
Jun. 2002

Jun. 2009
Jun. 20093

Nobuyuki Fujikake(Apr. 24, 1955)

Apr. 1991
Apr. 1991
Apr. 1993
Nov. 2001
Jun. 2010

Joined Kawasaki Heavy Industries, Ltd.
Senior Manager, Personnel & Labor Administration Department
Staff Officer to Corporate Auditor
Corporate Auditor
Kawasaki Kisen Kaisha, Ltd.
Senior Vice President
Resigned Senior Vice President
President, Kawaki Kosan Kaisha, Ltd.
President, “K” Line Accounting and Finance Co., Ltd.
Resigned President, Kawaki Kosan Kaisha, Ltd.
Resigned President, “K” Line Accounting and Finance Co., Ltd.
Corporate Auditor, Kawasaki Heavy Industries, Ltd.
(current position)
Admitted to Bar in Japan
Joined Iseki Law Office
Established Takashima-Fujikake Law Office
Established Fujikake Law Office (At present Kobe-Minatogawa
Law Office)Substitute Corporate Auditor, Kawasaki Heavy Industries, Ltd.
(current position)

Shares oftheCompany
14,000shares0
shares0
shares(Notes) 1. There is no special conflict of interest between the Company and the candidate for Corporate Auditor.
2. Contents of the matter stipulated regarding candidates for Outside Corporate Auditor pursuant to Article 76,
Paragraph 4 of the Ordinance for Enforcement of the Companies Act(1) Mr. Michio Oka and Mr. Nobuyuki Fujikake are candidates for Outside Corporate Auditor.
(2) Mr. Michio Oka has been chosen as a candidate for Outside Corporate Auditor as the Company has judged that
he is able to continue to perform duties as Outside Corporate Auditor in light of his substantial experience ascorporate management.
(3) Mr. Jiro Noguchi, formerly Senior Vice President of KHI, has been appointed as Outside Corporate Auditor of
Kawasaki Kisen Kaisha, Ltd. (“Kawasaki Kisen”), to which Mr. Michio Oka belonged. Kawasaki Kisen owns a totalof 1.03% of the outstanding shares in KHI. Meanwhile, KHI owns a total of 0.31% of the outstanding shares in
Kawasaki Kisen, and 3.19% of the voting rights of the outstanding shares in Kawasaki Kisen, which are held byTrust & Custody Services Bank, Ltd. (Kawasaki Heavy Industries, Ltd. retirement benefit trust account re-entrusted
by Mizuho Trust and Banking Co., Ltd.). However, Kawasaki Kisen is not a company of KHI Group. In addition,although Kawasaki Kisen is a business partner of KHI mainly in ship-related transactions, the annual averagetransactions between the Kawasaki Kisen Group and KHI Group for the most recent five fiscal years accounted forless than 2% of the total annual average sales each for the Kawasaki Kisen Group and KHI Group over thecorresponding period.
(4) Four years have passed since Mr. Michio Oka commenced his service as Outside Corporate Auditor of theCompany at the conclusion of this Ordinary General Meeting of Shareholders.
(5) Mr. Nobuyuki Fujikake has been chosen as a candidate for Outside Corporate Auditor as the Company has
judged that he is able to perform duties as Outside Corporate Auditor appropriately in light of his substantial
experience and knowledge as a lawyer even though he has not yet been directly involved in corporate management.
(6) After the proposed election, Mr. Michio Oka and Mr. Nobuyuki Fujikake will enter into a limited liability
agreement pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act with the Company. The
liability for damages under said agreement shall be limited to either an amount of ¥10 million, or an amountspecified by law and regulation, whichever is higher.

–7–3. Mr. Michio Oka and Mr. Nobuyuki Fujikake satisfy the requirements of independent directors/corporate auditors
stipulated by the Tokyo Stock Exchange, Osaka Securities Exchange and Nagoya Stock Exchange.

Proposal No. 5: Election of One Substitute Corporate Auditor
We propose in Proposal No. 4 to elect Mr. Nobuyuki Fujikake, who was elected as a substitute Corporate
Auditor at the 187th Ordinary General Meeting of Shareholders held on June 25, 2010, as an Outside
Corporate Auditor. For that reason, we propose anew electing a substitute Corporate Auditor on condition
that Proposal No. 4 is approved in its original form in readiness for cases where there is a shortfall in thenumber of Corporate Auditors.
Furthermore, if the candidate for the position of substitute Corporate Auditor is elected as a substituteCorporate Auditor, the Company may, with the resolution of the Board of Directors and consent of the Board
of Auditors, cancel the appointment, as stipulated in Article 96, Paragraph 2, Item 6 of the Ordinance for
Enforcement of the Companies Act.
We have obtained the prior approval of the Board of Corporate Auditors for this proposal.
The candidate for substitute Corporate Auditor is as follows.
Name(Date of Birth)

Satoru Kohdera(Dec. 30, 1958)

Abridged Personal Records, Positions and Duties[Significant concurrent positions]Apr. 1991
Apr. 1991
Apr. 1993
Jun. 2010

Admitted to Bar in Japan
Joined Ohshiro Law Office (At present: Higashimachi LPC)
Partner, Higashimachi Law OfficePartner, Higashimachi LPC(current position)

Shares oftheCompany
0shares(Notes) 1. There is no special interest relationship between the candidate for substitute Corporate Auditor and the Company.
2. Contents of the matter stipulated regarding candidate for substitute Outside Corporate Auditor pursuant to Article
76, Paragraph 4 of the Ordinance for Enforcement of the Companies Act(1) Mr. Satoru Kohdera is a candidate for substitute Outside Corporate Auditor.
(2) Mr. Satoru Kohdera has been chosen as a candidate for substitute Outside Corporate Auditor as the Company has
judged that he is able to perform duties as Outside Corporate Auditor appropriately in light of his substantial
knowledge as a lawyer even though he has not yet been directly involved in corporate management.
(3) When Mr. Satoru Kohdera assumes office as Corporate Auditor, he will enter into a limited liability agreement
pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act with the Company. The liability fordamages under said agreement shall be limited to either an amount of ¥10 million, or an amount specified by law andregulation, whichever is higher.

–8–

(Appendix)

Business Report(April 1, 2012 - March 31, 2013)

1. Overview of the Company Group(1)

Business Progress and Results(i) General Conditions
During the current consolidated fiscal year, the global economy saw mild growth overall with thedecelerating economic growth in emerging countries such as China, which had previously been a driverof the world economy.
The Japanese economy, despite making progress in restoration from the damage of the Great East
Japan Earthquake, continued to be unstable overall with concern about a downturn in the global
economy.
Amid this operating environment, the overall orders received by KHI Group for the fiscal year
under review amounted to ¥1,369.5 billion, 4% higher than the previous fiscal year. This was because adecrease in orders in some segments including the Precision Machinery segment were made up for by
an increase in the Ship & Offshore Structure segment and the Rolling Stock segment.
Net sales were ¥1,288.8 billion, remained at the same level as in the previous year. That is because
sales decreased in the Precision Machinery segment due to the effect of the decelerating Chinese
economy and in the Ship & Offshore Structure segment, while net sales increased in the Aerospacesegment.
In terms of profit, although the Aerospace segment and the Motorcycle & Engine segment reported
increased sales and profits or reported improved performance, the Precision Machinery segment and thePlant & Infrastructure segment reported lower profits, resulting in operating income of ¥42.0 billion,
27% lower than the previous fiscal year. Recurring profit was ¥39.3 billion, 38% lower than theprevious fiscal year. However, the favorable extraordinary income and decrease of tax expenses resulted
in current net income of ¥30.8 billion, 32% higher than the previous fiscal year.
(ii) Operating conditions by business segment
The Ship & Offshore Structure segment received orders amounting to ¥105.7 billion, which wassignificantly higher than the previous fiscal year, owing to orders for one submarine and five carriers
including LNG carriers.
Net sales were ¥90.3 billion, which was significantly lower than the previous fiscal year. This is
attributable to a decrease in the construction of capesize bulk carriers and others, while the constructionof liquefied gas carriers including LNG/LPG carriers increased.
In spite of a sales decrease, operating income was ¥4.1 billion, nearly at the same level as in theprevious year, because of the effect of cost reductions and the yen depreciation.
The Rolling Stock segment received orders worth ¥124.4 billion, which was significantly higher
than the previous fiscal year, thanks to orders received for high-speed rail vehicle from Taiwan andsubway car from Singapore.
Net sales were ¥129.9 billion, nearly at the same level as in the previous year. This was mainly
attributable to a sales decrease in overseas markets, while sales to Japan Railway companies contributed
to an increase in sales in the Japanese market.
Operating income declined ¥2.9 billion from the previous fiscal year to ¥2.2 billion, due to the fallin profitability of overseas projects.
The Aerospace segment orders received were ¥283.4 billion, which was lower than the previous
fiscal year when large-scale orders for Japan’s Ministry of Defense (MOD) were received, despite anincrease in orders for component parts for the Boeing 777 and Boeing 787 aircrafts.
Net sales were ¥239.1 billion, an increase from the previous fiscal year, thanks to an increase insales to The Boeing Company for component parts for the Boeing 777 and Boeing 787 aircrafts, inaddition to an increase in sales to the MOD, including C-2 transport aircraft.
Operating income increased ¥7.0 billion from the previous fiscal year to ¥14.8 billion, due in part toincreased sales and cost reduction.

–9–

The Gas Turbine & Machinery segment orders received were ¥255.5 billion, which was higher
than the previous fiscal year, due to an increase in orders for component parts of aircraft jet engines andothers.
Net sales were ¥207.0 billion, which was higher than the previous fiscal year, due to an increase inorders for component parts of aircraft jet engines and gas engines, although sales of the items such as
marine diesel engines decreased.
Operating income decreased ¥0.7 billion from the previous fiscal year to ¥7.0 billion, due in part todepreciation of development expenses of a new project.
The Plant & Infrastructure segment orders received were ¥113.6 billion, which was lower thanthe previous fiscal year. This was attributable to a decrease in orders for an LNG tank project andcarrier equipment from Japanese customers, despite receiving orders for cryogenic tanks for the
Ichthys LNG Project, and so forth.
Net sales were ¥115.8 billion, which was lower than the previous fiscal year. This was because of
decreased sales of large-scale projects to overseas customers, while sales of the LNG tank projectremained high and increased sales in conveyance equipment and refuse incineration plants.
Operating income decreased ¥4.3 billion from the previous fiscal year to ¥9.7 billion, due todecreased sales and profitability.
Net sales of the Motorcycle & Engine segment were ¥251.8 billion, which was higher than theprevious fiscal year, due in part to increased sales of motorcycles in the U.S. and emerging countries
including Indonesia, despite a decrease in sales of motorcycles to European customers.
Operating income was ¥2.3 billion, an improvement of ¥5.3 billion from the previous fiscal year,
owing to increased sales and profitability.
The Precision Machinery segment orders received were ¥109.7 billion, which was significantly
lower than the previous fiscal year, due in part to a decrease in orders for hydraulic components for theconstruction machinery market in emerging countries mainly China.
Net sales were significantly lower than the previous fiscal year at ¥130.4 billion, due in part to adecrease in sales of hydraulic components for the construction machinery market in emerging countries
mainly China.
Operating income decreased ¥18.1 billion from the previous fiscal year to ¥8.4 billion, due in part toan increase in fixed costs associated with capital spending in the prior years in addition to decreased
sales.
In the Others segment net sales were higher than the previous fiscal year at ¥124.2 billion.
Operating income decreased ¥2.5 billion from the previous fiscal year to ¥1.2 billion.
(Orders Received, Net Sales and Operating Income/Loss by Segment)
Orders Received
Segment
Amount

Unit: 100 million yen

Net Sales

Year-on-Year
ChangeAmountOperating Income/Loss

Year-on-Year
ChangeYear-on-Year
ChangeAmountShip & Offshore Structure

1,057

658

903

(231)

41

1

Rolling Stock

1,244

583

1,299

(27)

22

(29)

Aerospace

2,834

(437)

2,391

325

148

70

Gas Turbine & Machinery

2,555

282

2,070

123

70

(7)

Plant & Infrastructure

1,136

(56)

1,158

(69)

97

(43)

Motorcycle & Engine

2,518

166

2,518

166

23

53

Precision Machinery

1,097

(648)

1,304

(446)

84

(181)

Others

1,251

29

1,242

10

12

(25)

－

－

－

－

(80)

7

13,695577

12,888

(148)

420

(154)

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

– 10 –

(2)Capital Investments, etc.
In the current consolidated fiscal year, KHI Group’s total amount of capital investment was ¥78.6
billion, predominantly for the renewal of aging equipment and facilities for streamlining production andnecessary facilities to handle new model and products, as well as facilities to increase the production
capacity of the Aerospace segment.
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・ Aircraft production facilities(Aerospace segment)
・ Production facilities for jet engines(Gas Turbine & Machinery segment)
・ Production facilities for marine machinery(Gas Turbine & Machinery segment)・ Assembly Plant, Harima Works Office(Plant & Infrastructure segment)(ii) Main capital investments under construction as at the end of the consolidated fiscal year underreview・ Facilities for streamlining production of hydraulic equipment(Precision Machinery segment)
・ Facilities for energy-related verification tests(company-wide)・ Welfare facilities(company-wide)(3)

FinancingFunds of ¥44.3 billion from long-term debt, ¥20.0 billion from domestic unsecured straight bonds
and short-term borrowings and other funds from various sources were raised in the current consolidated
fiscal year. The funds were allocated to such items as redemption of bonds, long-term loan repayments,
capital investments and working capital.

(4)

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

(5)

Transfer of business from other companies
Not applicable.

(6)

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

(7)

Acquisition or disposal of another company’s stocks or other holdings, or share options, etc.
Not applicable.

(8)

Issues to be addressed
While the global economy is on a track for mild growth, we believe that emerging countries andresource-producing countries will achieve steady economic growth. This will be in contrast to the situation
where the Chinese economy was driving the whole world economy as an engine of significant growthduring the period of the previous Medium-term Business Plan (fiscal 2010 to 2012). Developed countries
are also expected to grow in the domains of energy saving, environment and advanced technologies. KHI
Group will strive to steadily respond to increased demand in various growth markets and domains, andaccelerate the global strategy in respective business segments and the Marketing Division.
Meanwhile, amid the growing interest worldwide in energy issues, guaranteeing the security ofresources such as energy and rare earth metals has become a major issue, due to an increase in demand forthem triggered by the Great East Japan Earthquake and emerging countries’ growth. Given the above,
business expansion in the energy area as well as the Energy and Environment Engineering area has
become an important issue for KHI Group. We need to swiftly respond to diverse customer needs in
expectation of increasing demand for dispersed power energy system that suits local situations not onlyin the Japanese market but also in emerging countries’ markets where there is a fear of energy shortages.
As more concrete measures, we will shift KHI Group’s business style from a product-oriented to acustomer-oriented concept and share various pieces of knowledge that have been cultivated in each– 11 –

business segment beyond the framework of each organization so as to strengthen the solution businessthat we will offer to our customers as an overall energy system.
In addition, shale gas development in the U.S. and resources development in Australia and Brazil
are becoming more active. Therefore, we will expand business in a variety of areas, including resource
development, storage and transportation as well as use of energy. Furthermore, we aim to expand
business through energy-saving and high efficiency technologies in the areas of land, marine and airtransportation equipment and industrial equipment. We will also work to achieve earlycommercialization of new propulsion systems in the transportation equipment, and enter into advanced
production systems and mobile hydraulic systems in the field of industrial equipment.
Under such circumstances, KHI Group has formulated a new Medium-term Business Plan(“MTBP2013”), which spans the period from fiscal 2013 to fiscal 2015, based on the result of thethree-year medium-term business plan (“MTBP2010”), which was drawn up in 2010. In MTBP2013,
we have set the target of achieving net sales of ¥1,600.0 billion, operating income of ¥90.0 billion andrecurring profit of ¥85.0 billion for fiscal 2015, the final year of the plan. To facilitate the achievementof these goals, we are implementing the following key measures: “expanding the business foundation”
primarily by providing first-class solutions; “establishing a future earnings structure” mainly bypromoting research and development; and “establishing a solid management base” chiefly by
reinforcing the financial foundation.
Through these measures, KHI Group, as a company which continuously grows together with society,will play a part in the growth strategy currently promoted by the government.
The initiatives to be undertaken by each business segment are as follows.
(i)

Ship & Offshore Structure: Increase orders received for LNG carriers, develop technologies of
new propulsion plant for LNG carriers and LNG fuel propulsion vessels, expand business in
China and establish business in Brazil, enter into the ocean development field, and strengthen thefoundations of the business for naval vessels.
(ii) Rolling Stock: Enhance competitiveness through technologies and products that meet customer
needs including cutting-edge technological development and new rolling stock, reinforce our
project management to respond to an increase in overseas projects, and construct a global
optimal business execution system including adoption of overseas production and procurement
and effective use of partnerships(iii) Aerospace: Establish a mass production system for P-1 patrol aircraft and C-2 transport aircraft
including repair and component support, develop derivative products, and respond to boost
production of component parts for the Boeing 787 and develop derivative products(iv) Gas Turbine & Machinery: Develop the energy solution business based on high efficiency
industrial gas turbines and gas engines for industrial use, expand these models in the overseas
markets, respond to demand in Japan for dispersed power sources and expand operations inoverseas markets, promote the development of new models of jet engines for commercial
aircraft and improve the productivity of these models(v) Plant & Infrastructure: Enhance competitiveness through sophistication of existing products inthe Energy & Environmental Engineering business sector, achieve early commercialization of
new products and technologies, and expand the overseas business to emerging countries andresource-rich countries through personnel development and strengthening of overseas
partnerships(vi) Motorcycle & Engine: Enhance cost competitiveness through optimized production andexpansion of overseas procurement on a global basis, expand sales channels in emerging
countries we have already entered (Southeast Asia, Brazil, and so forth.) and develop newmarkets, and develop leading technologies to respond to environmental requirements(vii) Precision Machinery: Maintain a high market share in the area of hydraulic excavation systems
while developing other construction machinery products in the global market, enhance costcompetitiveness in the robot business, and expand sales in emerging markets(viii)Others: Improve development capabilities with respect to the construction machinery business
unit through our alliance with Hitachi Construction Machinery Co., Ltd., and increase our
global market share and profitability
Compliance is a major premise in carrying out business activities such as those above. KHI Group
strives to ensure that employees are made thoroughly aware of the provisions of various laws andregulations which they should conform to. We do so by implementing such measures as establishinginternal regulations concerning corporate ethics, carrying out staff training for each position level, and– 12 –

distributing various guidebooks. In addition to continuing these efforts, in order to improve managerialtransparency and objectivity, we have lately decided to strengthen the monitoring of management bycorporate auditors including outside corporate auditors who have no conflict of interest with KHI, andby newly introducing outside directors. Through these measures, we are endeavoring to enhance ourcorporate governance system.
As described above, KHI Group will aim to improve corporate value through reinforcing its earnings
capability in all businesses and thoroughly implementing compliance, while establishing the Kawasaki
brand that customers trust.
(9)

Trends in Assets and Income(i) Company Group Assets and Income
Unit: billions of yen
The 187th fiscal
year

The 188th fiscal
year

The 189th fiscal
year

The 190th fiscal year
(under review)

Orders received

1,001.2

1,270.6

1,311.8

1,369.5

Net sales

1,173.4

1,226.9

1,303.7

1,288.8

Recurring profit

14.2

49.1

63.6

39.3

Net income (loss)(10.8)

25.9

23.3

30.8

Net income (loss) per share (yen)(¥6.51)¥15.55¥13.95¥18.46

Total assets

1,352.4

1,354.2

1,362.1

1,466.2

Net assets

283.0

297.4

315.9

349.8

The 187th fiscal
year

The 188th fiscal
year

The 189th fiscal
year

The 190th fiscal year
(under review)

Orders received

578.6

816.0

1,018.1

1,086.2

Net sales

644.1

817.4

1,003.3

983.9

Recurring profit

8.6

32.8

38.0

19.4

Net income (loss)

(5.4)

33.3

11.4

17.1

Net income (loss) per share (yen)(¥3.24)¥19.97¥6.87¥10.26

Total assets

976.4

1,116.0

1,144.6

1,195.1

Net assets

220.7

246.8

255.0

258.4

Item

(ii) Company Assets and Income
Unit: billions of yen
Item– 13 –

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

Company name

Kawasaki Trading Co., Ltd.

Capital¥600 million

The
Company’s
percentage ofequityparticipation

Main business

70%

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

NIPPI Corporation¥6,048 million

100%

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

KCM Corporation¥4,825 million

66%

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

Kawasaki Machine Systems, Ltd.

¥350 million

100%

Sale, repair and after-sales service of gas turbine
generators (Note 2)

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.

¥300 million

Note 3

Sale, repair and lease of construction machinery,etc.

¥1,200 million

100%

Design, manufacture, and sale of crushers,
grinders, castings, and other equipment; design,
execution and supervision of engineering,
construction, installation of machinery andappliances¥100 million

100%

Sole distributor of motorcycles and JET SKI® in
Japan

Kawasaki Motors Corp., U.S.A.

U.S.$165 million

100%

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

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

U.S.$170 million

100%

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

Kawasaki Rail Car, Inc.

U.S.$60 million

Note 4

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

€64 million

100%

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

1,900 million baht

100%

Manufacture and sale of motorcycles inThailand

P.T. Kawasaki Motor Indonesia

U.S.$40 million

83%

Manufacture and sale of motorcycles inIndonesia

Kawasaki Motors (Phils.) Corporation

101 million peso

50%

Manufacture and sale of motorcycles in thePhilippines¥400 million

100%

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

1,310 million
won

50%

Assembly and after-sales services for hydraulicequipment in Korea

KCMJ Corporation

EarthTechnica Co., Ltd.

Kawasaki Motors Corporation Japan

Kawasaki Motors Europe N.V.

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

– 14 –

(Notes)1.
From this current consolidated fiscal year, the following changes were made in relation to companies classified as major
subsidiaries: Two companies — Kawasaki Motores do Brasil Ltda. and Kawasaki Precision Machinery (U.K.) Ltd. —were excluded.
2.
As of April 1, 2012, Kawasaki Machine Systems, Ltd. carried out an absorption-type company split of the department
related to industrial robots with Kawasaki Robot Service, Ltd., KHI’s wholly-owned subsidiary.
3.
KCMJ Corporation is a wholly-owned subsidiary of KCM Corporation.
4.
Kawasaki Rail Car, Inc. is a wholly-owned subsidiary of Kawasaki Motors Manufacturing Corp., U.S.A.

(iii) Progress of Business Combinations
There are 95 consolidated subsidiaries, including 17 companies which are cited in (ii) above as
major subsidiaries, and there are 17 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
decreased ¥14.8 billion (1%) compared to the previous fiscal year, to ¥1,288.8 billion, and consolidated
current net income was ¥30.8 billion.
(11) Company Group’s Main Business and Number of Employees
Segment

Main Business

Number of Employees

Ship & Offshore Structure

Manufacture and sale of ships, etc.

2,577

Rolling Stock

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

3,123

Aerospace

Manufacture and sale of aircraft, etc.

5,648

Gas Turbine & Machinery

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

3,915

Plant & Infrastructure

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

2,930

Motorcycle & Engine

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

9,052

Precision Machinery

Manufacture and sale of hydraulic components andindustrial robots, etc.

2,514

Other

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

3,293

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

958

Total

34,010Japan
25,222
Overseas 8,788-(Note)This company has 15,067 employees (average age: 41.3 years; average years of service: 15.7 years)(12) Company Group’s Principal Offices and Plants(i) The Company
Name and location
Principal
officesHead office

Kobe Head Office, Tokyo Head Office

Branches

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

Plants, etc.

2 Head Offices

Gifu Works (Kakamigahara), Nagoya Works 1 (Yatomi, Aichi), Nagoya Works 2 (Ama-gun,
Aichi), Kobe Works, Hyogo Works, Seishin Works, Nishi Kobe Works (Kobe), Akashi Works(Akashi), Kakogawa Works (Kakogawa), Harima Works (Kako-gun, Hyogo), Sakaide Works(Sakaide, Kagawa), Technical Institute (Akashi) 12 Works (including a Technical Institute)– 15 –

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

Location of plants

Kobe / Chiyoda-ku, Tokyo-

NIPPI Corporation

Yokohama

Yokohama / Yamato

KCM Corporation

Kako-gun, Hyogo

Kako-gun, Hyogo

Osaka

-

Kusatsu / Osaka / Koto-ku, Tokyo

Kusatsu

Kakogawa-

Chiyoda-ku, Tokyo

YachiyoAkashi-

Kawasaki Trading Co., Ltd.

Kawasaki Machine Systems, Ltd.
Kawasaki Thermal Engineering Co., Ltd.
KCMJ Corporation
EarthTechnica Co., Ltd.
Kawasaki Motors Corporation Japanii) Overseas
Company nameLocation

Kawasaki Motors Corp., U.S.A.

U.S.

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

U.S.

Kawasaki Rail Car, Inc.

U.S.

Kawasaki Motors Europe N.V.

The Netherlands

Kawasaki Motors Enterprise (Thailand) Co., Ltd.

Thailand

P.T. Kawasaki Motor Indonesia

Indonesia

Kawasaki Motors (Phils.) Corporation

Philippines

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

China

Flutek, Ltd.

Korea

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

Lenders
Long term

Short term

Total

Mizuho Corporate Bank, Ltd.

90

510

600

Sumitomo Mitsui Banking Corporation

180

210

390

Sumitomo Mitsui Trust Bank, Ltd.

130

110

240

Development Bank of Japan Inc.

219

5

225

Bank of Tokyo-Mitsubishi UFJ, Ltd.

18

134

153

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

with other companies as follows as of the end of March 2013, in order to seek damages from us on the
grounds that we caused damage to the ordering parties due to bid rigging. Lawsuits settled during FY2012 arealso included.
Municipalities, etc.

Status of the law suits

Atami City

Regarding the action filed by citizens of Atami City seeking damages of ¥1,357 million against sevencompanies including our company, the Supreme Court ruled in favor of our company and others on
April 13, 2009, confirming that our company won the suit. However, a new action for damages of¥512 million was brought against five companies including our company by Atami City at Tokyo High
Court on August 19, 2010. The Tokyo High Court ruled against our company and ordered KHI andothers to pay ¥315 million on March 15, 2013. The five companies including our company thenappealed to the Supreme Court and the case is currently under dispute.

Sado City

An action for damages of ¥621 million was brought against our company at Niigata District Court on
May 26, 2009. The District Court ruled against our company and ordered KHI to pay ¥273 million on
October 14, 2011. However, both Sado City and our company filed an appeal to the Tokyo High
Court. The Tokyo High District Court ruled against our company and ordered KHI to pay ¥265 million
on May 24, 2012. Neither Sado City nor our company filed an appeal, which confirmed the above
ruling. The case is now closed.

Manatsuru-machi,
Yugawara-machi
Hygiene Association

An action for damages of ¥256 million was brought against our company at Tokyo High Court on
October 31, 2011. The Tokyo High Court ruled in favor of our company on November 27, 2012,
confirming that the allegation of bid rigging by our company was not valid. Yugawara Town andManazuru Town Health Association did not file an appeal, which confirmed the above ruling. The caseis now closed.

Sasebo City

An action for damages of ¥463 million was brought against our company at the Sasebo Branch of theNagasaki District Court on November 30, 2011. A settlement was reached on April 12, 2013, with ourcompany agreeing to pay a settlement in the amount of ¥115 million to Sasebo City based on advice tosettle issued by the Sasebo Branch of the Nagasaki District Court and both Sasebo City and ourcompany agreed. The case is now closed.

2. Status of Shares (as of March 31, 2013)(1)

Total number of shares authorized to be issued

3,360,000,000 shares(2)

Total number of shares issued

1,671,892,659 shares(including 100,116 shares of treasury stock)(3)

Number of shareholders

146,087 persons(4)

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

Shareholding ratio%

Japan Trustee Services Bank, Ltd. (Trust Account)

85,654

5.1

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

80,797

4.8

Nippon Life Insurance Company

57,516

3.4

Mizuho Bank, Ltd.

57,443

3.4

JFE Steel Corporation

56,174

3.3

Kawasaki Heavy Industries, Ltd. Kyoueikai

35,916

2.1

SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS

34,361

2.0

Kawasaki Heavy Industries, Ltd. Employees Shareholder Association

33,9812.0

Tokio Marine & Nichido Fire Insurance Co., Ltd.

27,838

1.6

Sumitomo Mitsui Banking Corporation

26,8281.6(Note) The shareholding ratio is calculated after subtracting treasury stock (100,116 shares).
– 17 –

3. Company Share Options(1)

Share options held by company officers at the end of the fiscal year under review
Not applicable.

(2)

Share options delivered to employees, etc. during the fiscal year under review
Not applicable.

(3)

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

4. Company Officers(1)

Directors and Corporate Auditors
Name

Areas of Responsibility within the Company and othersignificant concurrent positions

Chairman of the
Board

Tadaharu Ohashi

Chairman, The Kobe Chamber of Commerce and Industry
Vice Chairman, Kansai Economic Federation*

President

Satoshi Hasegawa*

Senior Executive Vice
President

Masashi Segawa

Assistant to the President, in charge of Marketing Division,
Procurement Division and Corporate Technology Division*

Senior Executive Vice
President

Mitsutoshi Takao

Assistant to the President, in charge of Corporate Planning
Division, Finance & Accounting Division, CSR Division,
Personnel & Labor Administration Division and General
Administration Division*

Senior Vice President

Nobumitsu Kambayashi

President, Ship & Offshore Structure Company, Chairman,
Nantong COSCO KHI Ship Engineering Co., Ltd.

*

Senior Vice President

Kyohei Matsuoka

President, Rolling Stock Company*

Senior Vice President

Hiroshi Takata

President, Motorcycle & Engine Company*

Senior Vice President

Shigeru Murayama

President, Aerospace Company*

Senior Vice President

Makoto Sonoda

President, Precision Machinery Company*

Senior Vice President

Joji Iki

President, Gas Turbine & Machinery Company

Senior Vice President

Masahiko Hirohata

General Manager, Corporate Planning Division

Senior Vice President

Eiji Inoue

President, Plant & Infrastructure Company

Senior Vice President

Yoshinori Kanehana

General Manager, Marketing DivisionCorporate Auditor

Tatsuyoshi Ogushi(Standing)Corporate Auditor

Yuji Murakami(Standing)Corporate Auditor

Kenzo Doi

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

Corporate Auditor

Michio Oka

Position*(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.
Mr. Jiro Noguchi, formerly Senior Vice President of KHI, has been appointed as Outside Corporate
Auditor of Kawasaki Kisen, to which Mr. Michio Oka belonged. Kawasaki Kisen owns a total of 1.03% of
the outstanding shares in KHI. Meanwhile, KHI owns a total of 0.31% of the outstanding shares in
Kawasaki Kisen, and 3.19% of the voting rights of the outstanding shares in Kawasaki Kisen, which areheld by Trust & Custody Services Bank, Ltd. (Kawasaki Heavy Industries, Ltd. retirement benefit trust
account re-entrusted by Mizuho Trust and Banking Co., Ltd.). However, Kawasaki Kisen is not a company
of KHI Group. In addition, although Kawasaki Kisen is a business partner of KHI mainly in ship-relatedtransactions, the annual average transactions between the Kawasaki Kisen Group and KHI Group for themost recent five fiscal years account for less than 2% of the total annual average sales each for the
Kawasaki Kisen Group and KHI Group over the corresponding period. Consequently, we have determinedthat there is no issue as regards to the independence of Mr. Michio Oka and he is therefore suitable as anindependent officer.

– 18 –

5. Both Yuichi Asano and Toshikazu Hayashi, Directors, have resigned during the relevant business yearwith the conclusion of the 189th Ordinary General Meeting of Shareholders.
6. As of April 1, 2013, the Director positions have changed: Masashi Segawa, formerly Senior
Executive Vice President (Representative Director), and Nobumitsu Kambayashi, formerly SeniorVice President (Representative Director), have become Directors.
7. Yuji Murakami, Corporate Auditor, who has many years of experience with administration and accounting
operations at our company, has substantial knowledge about finance and accounting matters.
8. Executive Officers as of April 1, 2013 are as follows.
Position

Name

Areas of Responsibility within the Company

President

Satoshi Hasegawa

Senior Executive Vice President

Mitsutoshi Takao

Assistant to the President, in charge of Corporate Planning
Division, Finance & Accounting Division, CSR Division,
Personnel & Labor Administration Division ,General
Administration Division and Procurement Division

Senior Vice President

Kyohei Matsuoka

President, Rolling Stock Company

Senior Vice President

Hiroshi Takata

President, Motorcycle & Engine Company

Senior Vice President

Shigeru Murayama

President, Aerospace Company

Senior Vice President

Makoto Sonoda

President, Precision Machinery Company

Senior Vice President

Joji Iki

President, Gas Turbine & Machinery Company

Senior Vice President

Masahiko Hirohata

General Manager, Corporate Planning Division

Eiji Inoue

President, Plant & Infrastructure Company

Senior Vice President

Yoshinori Kanehana

General Manager, Marketing Division

Managing Executive Officer

Minoru Makimura

General Manager, Corporate Technology Division

Managing Executive Officer

Akio Murakami

President, Ship & Offshore Structure Company

Managing Executive Officer

Masahiro Ibi

Deputy General Manager, Marketing Division

Executive Officer

Takeshi Sugawara

Deputy General Manager, Corporate Technology Division (incharge of Manufacturing Improvement)

Executive Officer

Shinsuke Tanaka

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

Executive Officer

Yoshizumi Hashimoto

General Manager, CSR Division

Executive Officer

Takafumi Shibahara

General Manager, Personnel & Labor Administration Division

Executive Officer

Minoru Akioka

General Manager, Finance & Accounting Division

Executive Officer

Yukinobu Kono

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

Executive Officer

Masafumi Nakagawa

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

Executive Officer

Atsuhiko Yamanaka

General Manager, Procurement Division

Executive Officer

Kaoru Kawabe

General Manager, Kobe Shipyard, Ship & Offshore Structure
Company

Executive Officer

Kazuo Hida

Vice President and General Manager, Engineering Division,
Precision Machinery Company

Senior Vice President– 19 –

Executive Officer

Makoto Ogawara

Vice President, Rolling Stock Company

Executive Officer

Yugo Nakagami

Overall administration of Marketing & Sales Division, Tokyo
Engineering Department and Chinese JV business, Plant &Infrastructure Company

Executive Officer

Hirokazu Komaki

General Manager, Engineering Division, Aerospace Company

Executive Officer

Shiro Nakabayashi

General Manager, General Administration Division

Executive Officer

Munenori Ishikawa

Vice President, Aerospace Company

Executive Officer

Toshiyuki Kuyama

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

Executive Officer

Shigehiko Kiyama

General Manager, Supply Chain Division, Motorcycle &Engine Company

Executive Officer

Kenji Tomida

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

Executive Officer

Genichi Abe

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

Executive Officer

Kazuo Ota

General Manager, Corporate Planning Division, Aerospace
Company

Executive Officer

Masami Maeda

General Manager, Project Division, Precision Machinery
Company

Executive Officer

Hiroji Iwasaki

Rolling Stock Company (in charge of and having control over
North American operation, seconded to Kawasaki Rail Car,Inc.)

Executive Officer

Koji Kadota

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

Yasuhiko Hashimoto

General Manager, Robot Division, Precision Machinery
Company

Executive Officer

Tatsuya Watanabe

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

Executive Officer

Takeshi Ohata

General Manager, Machinery Division, Gas Turbine &Machinery Company(2)Compensation to Directors and Corporate Auditors
Directors 15 persons¥739,919 thousand

Corporate Auditors 5 persons¥88,080 thousand

Total 20 persons¥827,999 thousand (of which ¥17,280 thousand to two Outside Corporate Auditors)(Notes) The maximum amount of remuneration for the Directors is ¥1,200 million per year (as resolved at the 189th
Ordinary General Meeting of Shareholders held on June 27, 2012). The maximum amount of remuneration for
the Corporate Auditors is ¥8 million (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 as an Outside Corporate Auditor at
World Co., Ltd. Our company does not have any dealings or other special relationship with thiscompany.

– 20 –

(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 13 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 13 Board of Directors Meetings, and all of the
17 Board of Corporate Auditors meetings held during the business year, 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 Japan’s Companies Act. The
liability under said contract shall be limited to either an amount of ¥10 million, or an amount specified
by law, whichever is higher.

5. Accounting Auditors(1)

Accounting Auditor’s Name
KPMG AZSA LLC(2)Accounting Auditors’ Compensation, etc., for the fiscal year under review(i) Accounting Auditors’ Compensation, etc., for the fiscal year under review¥162,540 thousand(ii) Cash and Other Profits Payable by the Company or its Subsidiaries to Accounting
Auditors¥222,390 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 the Financial Instruments and Exchange Act are notseparated, and otherwise cannot be separated. Consequently, the above amounts reflect totalcompensation.

(3)

Details of Non-audit Services
IFRS advisory services, Procedures relating to the confirmation of balances of certain accounts
submitted to the authorities concerned to proceed liquidation of receivables and so forth.

(4)

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

– 21 –

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

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

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

1) Corporate Auditors attend Board of Directors Meetings, Management Committee, Executive
Officers Committee and company-wide meetings, including Company-wide CSR Committees
and Company-wide Risk Management Committees; at these meetings, Directors and employees
provide reports concerning important matters about company management and business
operations, including matters regarding compliance, risk management and internal controls, andthe status of execution of duties. Furthermore, Directors shall immediately report to the Board of
Corporate Auditors when discovering that there is a risk of the company suffering significant
damages.
2) Employees shall, in accordance with the Approval Regulations, report to the Corporate Auditor
regarding the execution of business operations by circulation of internal memos.
3) The Auditing Department and Accounting Auditors from time to time report to, and exchange
information with Corporate Auditors regarding the status of audits on each place of business andGroup companies.
(4) Other systems to ensure the effective conduct of audits by the Board of Corporate Auditors
1) Directors and Corporate Auditors regularly hold meetings to ensure mutual understanding, andthe Corporate Auditor also attends important meetings such as Board of Directors Committee
and Management Committee, and directly expresses his/her opinion regarding Directors’
execution of duties.
2) Directors promote collaboration between Corporate Auditors and the Auditing Department, andcooperate to establish systems which enable greater effectiveness in the conduct of audits.
3) Matters concerning the election of Corporate Auditors and their remuneration, and so forth, aredetermined in accordance with laws and the Articles of Incorporation, by obtaining the consent
of Corporate Auditors, or approval of the Board of Corporate Auditors.
4. Basic stance on expulsion of anti-social forces and countermeasures
Because our Group resolutely refuses to comply with any unreasonable demands fromanti-social forces, and works to cut off all relations with anti-social forces, we distribute the“Compliance Guidebook” to all employees. Paragraph 1 of the Guidebook prohibits “giving
favors to anti-social forces,” and lists specific examples of prohibited acts. We work to ensurethat employees are thoroughly familiar with the matters contained in the Compliance Guidebook
by conducting training, and so forth, and do not merely distribute the guidebook.
Furthermore, with respect to internal systems, we have established a department inheadquarters which is responsible for overseeing handling of expulsion of anti-social forces,
established close cooperation with external specialized organizations such as the police force, andin collaboration with concerning departments we systematically handle unreasonable requests
from anti-social forces.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(Note) Amounts in this Business Report are rounded down to the nearest unit.

– 25 –

Consolidated Balance Sheet(As of March 31, 2013)(Unit: million yen)
Description

AmountDescription(Assets)
Current assets
Cash on hand and in banks
Trade receivables

Amount(Liabilities)
1,016,813

Current liabilities

782,540

38,525Trade payables

281,062432,649

Short-term debt and current portion of

213,510long-term debt

Merchandise and finished products

61,446

Current bonds payable

10,000Work in process

311,107

Commercial papers

6,000

Raw materials and supplies

87,551

Current portion of lease obligations

Deferred tax assets

37,648

Income taxes payable

Other current assets

50,671

Deferred tax liabilities

Allowance for doubtful receivables(2,785)

Advances from customers

108,213

Accrued bonuses

20,060

Provision for product warranties

6,148

Provision for losses on construction contracts

18,719

347
3,756
1,793

Provision for environmental measures45

449,476

Asset retirement obligations

133

Net property, plant and equipment

305,792

Other current liabilities

Buildings and structures

124,206

Long-term liabilities

333,868

Machinery and equipment

86,141

Bonds payable

70,000Land

62,318Long-term debt, less current portion

184,362

Fixed assets

Leased assets

111

Lease obligations

112,747

433

Construction in progress

19,198Deferred tax liabilities

Other

13,815

Provision for losses on legal proceeding

569

Intangible assets

19,446

Provision for environmental measures

4,512

Investments and other assets

124,236

Employees’ retirement and severance benefits

62,300Investments in securities

22,729Asset retirement obligations

Long-term loans

409

Other

Deferred tax assets

36,428Other investments and other assets

65,605

Allowance for doubtful receivables(936)

Total liabilities

551
5,626
1,116,409(Net assets)
Shareholders’ equity

357,379

Common stock

104,484

Capital surplus

54,393Retained earnings

198,528

Treasury stock
Accumulated other comprehensive income

Total assets

5,511

(27)
(19,139)

Net unrealized gains on securities, net tax

4,524

Deferred gains (losses) on hedges(5,998)Foreign currency translation adjustments(17,665)

Minority interests

11,641

Total net assets

349,881

1,466,290

Total liabilities and net assets– 26 –

1,466,290

Consolidated Statement of Income(April 1, 2012 - March 31, 2013)(Unit: million yen)
Description

AmountNet sales

1,288,881

Cost of sales

1,085,469

Gross profit

203,412Selling, general and administrative expenses

161,349

Operating income

42,062Non-operating income

17,576

Interest income

876

Dividend income

765

Gain on sales of securities

1,424

Equity in income of non-consolidated subsidiaries andaffiliates

8,530

Other non-operating income

5,980

Non-operating expenses

20,310Interest expense

4,151

Foreign exchange losses, net

9,919

Other non-operating expenses

6,239

Recurring profit

39,328Extraordinary income

8,624

Gain on transfer of benefit obligation relating toemployees’ pension fund

8,624

Extraordinary losses

1,800

Loss on environmental measures

1,437

Loss on impairment of fixed assets

363

Income before income taxes

46,152

Income taxes-current

10,590

Income taxes-deferred

2,550

Income before minority interests

33,011

Minority interests in income

2,147

Net income

30,864– 27 –

Consolidated Statement of Changes in Net Assets(April 1, 2012 - March 31, 2013)(Unit: million yen)
Shareholders’ equity
Common stock
Balance at the beginning of the period

104,484

Capital surplus Retained earnings
54,393

Total
shareholders’equityTreasury stock

176,414(22)

335,270

Changes of items during the period
Cash dividends(8,359)(8,359)Net income for the year

30,86430,864

Treasury stock purchased
Treasury stock disposed

(0)

(5)

(5)

0

0

Effect of changes in accounting
periods of consolidated subsidiaries

(204)

(204)

Decrease with addition of affiliatecompanies which are accounted forby the equity method

(185)

(185)

Net changes of items other thanshareholders’ equity
Total changes of items during theperiod−−22,114(4)

22,109Balance at the end of the period

104,484

54,393

198,528(27)

357,379

Accumulated other comprehensive income
Net unrealized
Gains (losses) on
gains on securities
hedging items
net of tax

Balance at the beginning of the period

3,989

246

Foreign currency Total accumulatedtranslation
other comprehensive
adjustments
income(33,451)(29,215)

Minority
interests
9,868

Total
net assets
315,922

Changes of items during the period
Cash dividends(8,359)Net income for the year

30,864

Treasury stock purchased(5)

Treasury stock disposed0

Effect of changes in accounting
periods of consolidated subsidiaries(204)

Decrease with addition of affiliatecompanies which are accounted forby the equity method(185)

Net changes of items other thanshareholders’ equity

535(6,244)

15,785

10,076

1,772

11,848

Total changes of items during theperiod535(6,244)

15,785

10,076

1,772

33,958

Balance at the end of the period

4,524(5,998)(17,665)(19,139)

11,641

349,881– 28 –

Non-consolidated Balance Sheet(As of March 31, 2013)
Description(Assets)
Current assets
Cash on hand and in banks
Notes receivable-trade
Accounts receivable-trade
Lease investment assets
Raw materials and supplies
Work in process
Advance payments
Prepaid expenses

Amount788,014
21,0257,000
317,327
5,332
58,014
254,644
26,094
519

Deferred tax assets

27,460

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

46,052
22,353
171
2,878
(861)

Fixed assets
Net property, plant and equipment

407,102
196,957

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

67,72013,603616
58,231
6
62
522
8,789

Land

35,677

Leased assets
Construction in progress

Intangible assets
SoftwareLicense production and licensee’s
execution right
Other intangible assets
Investments and other assets
Investments in securities
Stock of affiliates
Investments in capital of affiliates
Long-term loans
Deferred tax assets
Other investments and other assets
Allowance for doubtful receivables

Total assets

52
11,67416,302
9,919
511

Description(Liabilities)
Current liabilities
Notes payable-trade
Accounts payable-trade
Short-term debt
Current portion of long-term debt
Commercial papers
Current bonds payable
Notes payable-facilities
Lease obligations
Accumulated impairment loss on
leased assets
Accounts payable-otherAccrued expenses
Income taxes payable
Advances from customers
Deposits received
Unearned revenue
Accrued bonuses
Provision for product warranties
Provision for losses on construction
contracts
Asset retirement obligations
Derivatives liabilities
Other current liabilities
Noncurrent liabilities
Bonds payable, less current portionLong-term debt, less current portion
Accumulated impairment loss on
leased assets
Long-term accounts payable-other
Provision for losses on legal
proceeding
Provision for environmental measures
Employees’ retirement and severance
benefits
Asset retirement obligations
Other long-term liabilities
Total liabilities

5,872
193,841
21,11094,72934,096
6,518
29,816
8,193(622)

1,195,116– 29 –Net assets
Shareholders’ equity
Common stock
Capital surplus
Legal capital surplus
Retained earnings
Other retained earnings
Provision for special depreciation
Provision for advanced depreciationof fixed assets
Retained earnings brought forward
Treasury stock
Valuation and translation adjustments
Net unrealized gains on securities, net
tax
Deferred gains (losses) on hedges
Total net assets
Total liabilities and net assets(Unit: million yen)Amount640,841
27,251
229,025
99,65558,7156,000
10,0002,076
3294
28,63129,736306
82,041
1,446
15
13,463
3,765
15,797120
31,945549
295,795
70,000183,929
398
974
569
4,324
35,168428
0936,637

260,161
104,484
52,21052,210103,494
103,494
917
7,220
95,356(27)(1,682)
3,988(5,670)258,479
1,195,116

Non-consolidated Statement of Income(April 1, 2012 - March 31, 2013)(Unit: million yen)
Description

AmountNet sales

983,921

Cost of sales

879,924

Gross profit

103,997

Selling, general and administrative expenses

91,423Operating income

12,573Non-operating income

25,839Interest income

809

Dividend income

19,533Gain on sales of securities

1,367

Other non-operating income

4,128

Non-operating expenses

18,979Interest expense

2,776Interest on bonds

863

Foreign exchange losses

10,647

Loss on disposal of fixed assets

900

Other non-operating expenses

3,792

Recurring profit

19,433Extraordinary losses

1,756

Loss on impairment of fixed assets

363

Loss on environmental measures

1,393

Income before income taxes

17,676

Income taxes-current(607)

Income taxes-deferred

1,126

Net income

17,158– 30 –

Non-consolidated Statement of Changes in Net Assets(April 1, 2012 - March 31, 2013)(Unit: million yen)
Shareholders’ equity
Retained earnings
Other retained earnings
Reserve for
Retained
advanced
Reserve for
earnings
specialdepreciation
brought
depreciationof fixed
forwardassetsCapital surplus
Commonstock

Balance at beginning of period
Changes of items during the period
Cash dividends
Net income for the year
Treasury stock purchased
Treasury stock disposed
Provision for special depreciation
Reversal of provision for special
depreciation
Reversal of provision for advanced
depreciation of fixed assets
Net changes of items other thanshareholders’ equity
Total changes of items during theperiodBalance at end of period

Legalcapitalsurplus104,484

Other
capitalsurplus52,210

-

1,085

(5)
0

(8,359)17,158
(5)
0
-

99
(268)

268

-

(142)

142

-

-

-

(168)

(142)

9,110

(4)

8,794

104,484

52,210

-

917

7,220

95,356(27)

260,161

3,410

262

3,672

Total
net assets

255,039

Cash dividends(8,359)Net income for the year

17,158Treasury stock purchased(5)

Treasury stock disposed

0

Provision for special depreciation-

Reversal of provision for special
depreciation-

Reversal of provision for advanced
depreciation of fixed assets-

Balance at end of period

251,366(0)(99)

Changes of items during the period

Total changes of items during theperiod

(22)

-

Net
Total
unrealized Gains (losses)
valuation andgains onon hedging
translation
securities net
items
adjustmentsof tax

Net changes of items other thanshareholders’ equity

86,245

Total
shareholders’equity(8,359)17,158Valuation and translation adjustments

Balance at beginning of period

7,363

Treasury stock

578(5,932)(5,354)(5,354)578(5,932)(5,354)

3,439

3,988

(5,670)(1,682)

258,479– 31 –

Board of Corporate Auditors’ audit report (duplicated copy)

Audit Report(English Translation)
Regarding the performance of duties by the Directors for the 190th fiscal year from April 1, 2012 toMarch 31, 2013, the Board of Corporate Auditors hereby submits its audit report, which has been prepared
upon careful consideration based on the audit report prepared by each Corporate Auditor.
1. Summary of Auditing Methods by the Corporate Auditors and Board of Corporate Auditors(1) The Board of Corporate Auditors established auditing policies, allocation of duties, and other relevant
matters, and received reports from each Corporate Auditor regarding his audits and results thereof, as
well as received reports from the Directors, other relevant personnel, and the Accounting Auditor
regarding performance of their duties, and sought explanations as necessary.
(2) Each Corporate Auditor complied with the auditing standards of the Corporate Auditors establishedby the Board of Corporate Auditors, followed the auditing policies, allocation of duties, and otherrelevant matters, communicated with the Directors, internal control development division, Auditing
Department (internal audit dept.) and other employees, and any other relevant personnel, and madeefforts to prepare the environment for information collection and audit, as well as participated inmeetings of the Board of Directors and other important meetings, received reports from the Directors,
Executive Officers, employees, and other relevant personnel regarding performance of their duties,
sought explanations as necessary, examined important authorized documents and associatedinformation, and studied the operations and financial positions at the head office and principal
business offices.
(3) Each Corporate Auditor received reports from the Directors, employees, and other relevant personnel
regarding the structure and operation status of the system for ensuring that the performance of duties
by the Directors conforms to the related laws and regulations and Articles of Incorporation, and thesystem prepared based on the contents of the resolutions of the Board of Directors and such
resolutions regarding preparation of the system stipulated in Article 100, Paragraphs 1 and 3, of theOrdinance for Enforcement of the Companies Act (internal control system), which system isnecessary for ensuring that a joint stock corporation’s business is proper, and sought explanations asnecessary.
Furthermore, with respect to internal controls on financial reporting under the Financial Instruments
and Exchange Act, each Corporate Auditor received reports from the Directors and other relevant
personnel as well as KPMG AZSA LLC regarding the assessment of the internal controls concerned
and the status of auditing thereof, and sought explanations as necessary.
(4) Each Corporate Auditor communicated and exchanged information with Directors, Corporate
Auditors, and other relevant personnel of the subsidiaries, and received business reports fromsubsidiaries as necessary.
Based on the above methods, we examined the business report and annexed specifications related to therelevant fiscal year.
(5) Each Corporate Auditor audited whether the Accounting Auditor maintained their independence andimplemented appropriate audits, as well as received reports from the Accounting Auditor regarding
the performance of their duties and sought explanations as necessary.
(6) Each Corporate Auditor received notice from the Accounting Auditor that “the system for ensuringthat duties are performed properly” (matters set forth in each item of Article 131 of the Ordinance for
Corporate Accounting) has been prepared in accordance with the Product Quality Management
Standards Regarding Audits (issued by the Business Accounting Deliberation Council (BACD) on
October 28, 2005) and other relevant standards, and sought explanations as necessary.
Based on the above methods, we examined the non-consolidated financial statements (non-consolidatedbalance sheet, non-consolidated statement of income, non-consolidated statement of changes in net assets,– 32 –

and non-consolidated notes) and their annexed specifications, as well as consolidated financial statements(consolidated balance sheet, consolidated statement of income, consolidated statement of changes in net
assets, and consolidated notes) related to the relevant fiscal year.
2. Results of Audit(1) Results of Audit of Business Report and Other Relevant Documents(i) In our opinion, the business report and the supplementary schedules are in accordance with therelated laws and regulations and Articles of Incorporation, and fairly represent the Company’s
condition.
(ii) We have found no evidence of wrongful action or material violation of related laws and regulations,nor of any violation with respect to the Articles of Incorporation, related to performance of duties
by the Directors.
(iii) In our opinion, the contents of the resolutions of the Board of Directors related to the internal
controls system are fair and reasonable. In addition, we have found no matters on which to remark
regarding the information contained in this Business Report and the performance of duties by the
Directors related to such internal controls system.
In addition, with respect to internal controls over financial reporting, at the time of preparation ofthis audit report, we received report from the directors and other relevant personnel that states thatthe said controls were effective, and also received report from KPMG AZSA LLC that states that nomaterial weakness in the said controls.
(2) Results of Audit of Non-consolidated Financial Statements and Supplementary Schedules
In our opinion, the methods and results employed and rendered by KPMG AZSA LLC are fair andreasonable.
(3) Results of Audit of Consolidated Financial Statements
In our opinion, the methods and results employed and rendered by KPMG AZSA LLC are fair andreasonable.

May 22, 2013
Board of Corporate Auditors, Kawasaki Heavy Industries, Ltd.
Full-Time Corporate Auditor
Full-Time Corporate Auditor
Outside Corporate Auditor
Outside Corporate Auditor– 33 –

Tatsuyoshi Ogushi
Yuji Murakami
Kenzo Doi
Michio Oka