(Translation)

Reference Document Attached to theNotice of the Company’s 117th OrdinaryGeneral Shareholders’ Meeting

Sumitomo Heavy Industries, Ltd.

117th Business and Financial Report

(April 1, 2012 through March 31, 2013)

CONTENTS

BUSINESS AND FINANCIAL REPORT ..................................................................................... 1I. CURRENT STATUS OF THE COMPANY GROUP

1. PERFORMANCE AND RESULTS OF OPERATIONS ................................................. 12. CAPITAL INVESTMENT ............................................................................................. 53. FINANCING. ................................................................................................................. 64. BUSINESS RESTRUCTURING. ................................................................................... 65. CHALLENGES FACING THE COMPANY GROUP .................................................... 66. CHANGES IN STATE OF ASSETS AND PROFIT/LOSS OF

THE COMPANY GROUP AND THE COMPANY...................................................... 107. MAJOR LINES OF BUSINESS ................................................................................. 128. MAJOR SUBSIDIARIES, ETC. ................................................................................... 139. MAJOR LENDERS...................................................................................................... 15

10. EMPLOYEES. ............................................................................................................. 1511. MAJOR PLACES OF BUSINESS AND PLANTS ....................................................... 16

II. CURRENT CONDITIONS OF THE COMPANY1. STOCK ........................................................................................................................ 182. DIRECTORS AND AUDITORS OF THE COMPANY................................................ 193. INDEPENDENT AUDITORS ...................................................................................... 234. OPERATIONAL STRUCTURE TO ENSURE THE APPROPRIATE CONDUCT

OF OPERATIONS ....................................................................................................... 245. BASIC POLICY ON CONTROL OVER DECISIONS ON FINANCIAL AND

BUSINESS POLICIES OF THE COMPANY............................................................... 27

CONSOLIDATED BALANCE SHEET ...................................................................................... 31CONSOLIDATED STATEMENT OF INCOME......................................................................... 32CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ........................................ 33(FOR REFERENCE PURPOSES) CONSOLIDATED CASH FLOW STATEMENT .................. 35BALANCE SHEET..................................................................................................................... 36STATEMENT OF INCOME....................................................................................................... 37STATEMENTS OF CHANGES IN NET ASSETS...................................................................... 38

(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and NOTES TO FINANCIAL STATEMENTS are posted on the Company’s Web site (http://www.shi.co.jp) pursuant to the applicable laws and regulations and Article 16 of the Company’s Articles of Incorporation. Therefore, these items are not included in this document.)

In this English translation, Sumitomo Heavy Industries, Ltd. is referred to as the “Company” and the Sumitomo Heavy Industries Group as the “Company Group” or the “Group.”

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BUSINESS AND FINANCIAL REPORT(April 1, 2012, through March 31, 2013)

I. CURRENT STATUS OF THE COMPANY GROUP

1. PERFORMANCE AND RESULTS OF OPERATIONS

The overall Japanese economy for the fiscal year under review continued to face uncertain conditions despite several positive signs in the second half such as the correction in yen appreciation and the increasing trendsof public investment. Overseas markets remained unstable affected by negative factors such as the falling growth rate of the Chinese economy, which had driven the global economy, and the negative effects of the European fiscal and financial market turmoil on real economies, despite several signs of recovery seen inparts of the U.S. economy.In this business environment, the Company Group promoted measures to reinforce its competitive edge based on the medium-term management plan “Innovation 21,” including the decision for organizational integration aimed at enhancing management efficiency as well as reinforcing sales capabilities. Nevertheless, partly due to deteriorated overall market conditions, all the key performance indices of orders, sales, operating income, ordinary income and net income were lower than the corresponding figures for the previous fiscal year.The Company Group implemented measures to cope with the deteriorating market conditions by carefully assessing overseas market conditions and addressed the following priority managerial measures for the fiscal year under review.

(1) Enhancement and effective employment of the SHI Global Network

In the power transmission equipment and controls business, we strengthened collaboration among the Tangshan plant in China, a plant in Brazil and Hansen Industrial Transmissions NV, a subsidiary in Belgium, and our domestic plants in the gearbox business to streamline our global supply structure. In addition, in the small gear motor field, we accelerated our entry into new markets in Japan and overseas by leveraging ourconsolidated production plant in Vietnam.

In the plastics machinery business, we further reinforced the collaboration and synergies between Sumitomo(SHI) Demag Plastics Machinery GmbH, a subsidiary in Germany, and our domestic plant.

In the hydraulic excavator business, we ensured stable supply in the domestic and overseas markets through close collaboration among the Tangshan plant in China and our plant in Indonesia and domestic plant.

(2) Development and marketing of innovative products (“product innovation”)

We are focusing our efforts on the development of Green Products that contribute to the conservation of the global environment. In the fiscal year under review, our SE-EV series all-electric injection molding machinesreceived the Minister of Economy, Trade and Industry Award at the Energy-Saving Awards of Excellence sponsored and selected by The Japan Machinery Federation.

In the medical equipment field, we focused on the enhanced use of leading-edge cancer treatment systems. In that regard, we received orders for the BNCT*1 system, which selectively destroys cancer cells with neutrons taken from an accelerator.

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(3) Introducing innovation into manufacturing and sales to enhance productivity and business execution functions (“process innovation”)

We have addressed various innovations to accelerate each process: product planning, development design, manufacturing, sales and service. In addition, at some business divisions, we decided to carry out structural reforms to improve managerial efficiency through organizational integration. Meanwhile, to enhance the efficiency and sophistication of the functions at the Head Office of the Company Group, we have consolidated the Head Office’s functions into a shared service-dedicated subsidiary, which provides the relevant shared services to the Group companies. The number of Group companies receiving the services provided by the subsidiary increased, and the standardization of operations was extended during the fiscal year under review.

(4) Downturn in the Shipbuilding Business avoided

An extremely severe business environment continues for the shipbuilding business of the Company Group with negative factors such as China’s increasing supply capacity and the increased competitiveness of South Korea, in addition to deteriorating market conditions.In these circumstances, we have refrained from accepting unfavorable orders and retained an order for thebuilding of only one new ship in the fiscal year under review. In addition, we have minimized any adverse effects to the overall performance of the Company Group by curtailing our production system to a minimal level that would enable us to continue the shipbuilding business.Furthermore, based on recognition that the recovery of market conditions will require considerable time, we examined the recoupment potential of our business properties in light of the emerging signs of a possible impairment loss due to deteriorating earnings forecasts. As a result, we posted an impairment loss of ¥16.4billion under special losses for the year through the disposition of several fixed assets in connection with the building of new ships.

(5) Rigorous Compliance

Pursuant to the basic principle of “Compliance Comes First,” we promoted the importance of compliance to employees of all Group companies. During the fiscal year under review, to reinforce the compliance system of the Company Group in its overseas business activities as globalization expands, we conducted various activities such as a training course for employees to be dispatched overseas, a training course for the compliance of Japanese and foreign antimonopoly laws, “power harassment” prevention training sessions and discussion-based compliance training sessions.In regard to the overbilled expenses relating to the Ministry of Defense (MOD) contracts, an order by the MOD to suspend bidding rights was issued to the Company and Sumiju Tokki Service Co., Ltd., oursubsidiary. Because we made the required refund to the MOD with regard to the overbilled expenses in February 2013, the aforementioned order was subsequently lifted. The Company Group addressed the situation with utmost seriousness and established an Internal Fact-Finding Committee to thoroughly investigate and address the causes for this event. The Company Group has taken stringent actions against employees involved in the misconduct in accordance with its disciplinary rules, and several directors returned part of their remuneration on a voluntary basis. Moreover, the Company Group reviewed its group-wide business operating systems from the perspective of sound business operations and has taken preventive measures to ensure that such incidents will not recur, including reviewing business processes, periodic rotations of responsible persons, screening estimates to accept orders, improving compliance training sessions and revising disciplinary rules. The Group intends to continuously promote compliance awareness throughout the Group by providing education and training on compliance to all of the executives and employees of our companies and groups.

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As a result of implementing the above managerial measures in the fiscal year under review, total orders of the Company Group were ¥550.7 billion, a 4% decrease compared with the previous fiscal year, and sales on a consolidated basis were ¥585.9 billion, a 6% decrease.

As for our profits and losses, a decrease in sales led to a decrease of 34% in our operating income to ¥31.3billion compared with the previous fiscal year, and ordinary income decreased 31% year over year to ¥31.0billion and net income dropped 70% to ¥5.9 billion. In addition, the after-tax ROIC*2 was 4.9%.

The non-consolidated financial results of the Company for the fiscal year under review were orders of ¥156.9billion, sales of ¥177.4 billion, operating income of ¥0 billion, ordinary income of ¥14.3 billion and net lossof ¥100.0 million.

Taking into account the above business results and financial position, the Company proposes a dividenddecrease of ¥2 from the previous fiscal year to ¥8 per share including an interim dividend of ¥4 per share, which has already been distributed.

*1 BNCT stands for Boron Neutron Capture Therapy.

*2 The ROIC (Return on Invested Capital) of the Company Group is calculated based on the following numerical formula:

ROIC (Return on Invested Capital)(operating income + interest income and dividend income) ×55% (= 1 - effective tax rate)

=(average of shareholder equity at the beginning and end of the term + average of interest-bearing liability at the beginning and end of the term)

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(SUMMARY OF OPERATIONS AND PERFORMANCE BY SEGMENT)

(1) Machinery ComponentsBoth orders and sales decreased, reflecting weak performance of gear boxes for the resources and energy field in addition to faltering European market conditions.

As a result, in the overall segment, orders were ¥89.2 billion, a 6% decrease compared with the previous fiscal year; sales were ¥91.2 billion, a 2% decrease year over year; and operating income decreased 35% to¥2.8 billion.

(2) Precision EquipmentBoth orders and sales in the plastic machinery business decreased, reflecting weak market conditions in the electronics- and electric-related products fields principally in Japan and Asia.

Both orders and sales in other businesses decreased due to weak performance in the electronics-related products field.

As a result, in the overall segment, orders were ¥134.4 billion, down 7% year over year; sales were ¥139.2billion, a 3% decrease compared with the previous fiscal year; and operating income decreased 39% to ¥7.7billion.

(3) Construction MachineryThe hydraulic excavator business recorded decreases in both orders and sales due to deteriorating conditions in the Chinese market despite firm conditions in the Japanese market.

The construction crane business recorded increases in both orders and sales due to steady conditions in the North American market.

As a result, in the overall segment, orders were ¥151.2 billion, a 7% decrease compared with the previous fiscal year; sales were ¥152.8 billion, down 4% year over year; and operating income decreased 26% to ¥6.1billion.

(4) Industrial Machinery In the turbine and pumps business, orders decreased partly due to the deteriorated conditions in the Southeast Asian markets, but sales improved thanks to the backlog of orders from the previous fiscal year.

The material handling systems business was stagnant, reflecting weak market conditions of products for the domestic steel and shipbuilding industries, which led to decreases in both orders and sales.

As a result, in the overall segment, orders were ¥63.6 billion, a 9% decrease compared with the previous fiscal year; sales were ¥69.6 billion, down 14% year over year; and operating income decreased 44% to ¥5.4billion.

(5) ShipsWith continuously sluggish market conditions following the previous fiscal year, we received an order tobuild a new ship during the fiscal year under review after having received no orders to build new ships in the previous fiscal year. Sales declined, with five deliveries of ships, two less than the previous fiscal year.

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As a result, in the overall segment, orders were ¥12.3 billion, an 82% increase compared with the previous fiscal year; sales were ¥46.0 billion, down 21% year over year; and operating income decreased 78% to ¥2.4billion.

(6) Environmental Protection Facilities, Plants In the energy-related plant business, sales decreased due to a smaller backlog of orders compared with the previous fiscal year despite an increase in orders, reflecting vigorous sales in Japan of domestic biomass power generation boiler systems and of a large project for power generation system slated for a mine in Indonesia.

In the water treatment plant business, both orders and sales decreased due to sluggish conditions in the overall water treatment system market.

As a result, in the overall segment, orders were ¥91.4 billion, a 7% increase compared with the previous fiscal year; sales were ¥78.6 billion, down 2% year over year; and operating income was ¥5.6 billion.

(7) OtherIn the overall segment, compared with the previous fiscal year, orders were ¥8.7 billion, a 1% increase; sales were ¥8.5 billion, down 5%; and operating income decreased 17% to ¥1.4 billion.

Orders, Sales and Backlog of Orders by Segment of the Company Group

(Billions of yen)Order Bookings Sales Year-end Backlog of

Orders as of March 31Segment

FY2011 FY2012 FY2011 FY2012 2012 2013

Machinery Components 95.1 89.2 93.2 91.2 29.5 27.6

Precision Equipment 143.9 134.4 144.1 139.2 60.7 55.9

Construction Machinery 162.4 151.2 158.9 152.8 26.2 24.6

Industrial Machinery 69.6 63.6 80.7 69.6 68.1 62.1

Ships 6.7 12.3 58.1 46.0 44.5 10.7Environmental Protection Facilities, Plants

85.0 91.4 80.1 78.6 74.8 87.6

Other 8.6 8.7 8.9 8.5 1.6 1.8

Total 571.3 550.7 624.1 585.9 305.4 270.2

(Note) Business terminated by customers and similar items are adjusted under the year-end backlog of orders as of March 31, 2012.

2. CAPITAL INVESTMENT

Following the previous fiscal year, overall investment for the fiscal year under review focused on the promotion of globalization based on the medium-term management plan “Innovation 21” and the reinforcement of competitiveness. As a result, total capital investment was ¥29.9 billion, up 52% from the previous fiscal year.

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In the Machinery Components segment, we streamlined facilities and reinforced production capability at production bases in China, Vietnam and Brazil, whereas in the Construction Machinery segment, we streamlined facilities and reinforced production capability at production bases in Indonesia.

The Company Group as a whole implemented IT investments required for operational innovation, environmental investments to comply with various legal requirements and capital investments aimed atimproving work environments while fully taking advantage of existing facilities.

3. FINANCING

During the fiscal year under review, the Company Group applied cash reserves for capital investments and working capital. As of the fiscal year-end, however, the Company Group’s interest-bearing liabilities were ¥98.5 billion, up ¥2.0 billion from the previous fiscal year, partly due to the effect of exchange rate fluctuations.

4. BUSINESS RESTRUCTURING

(1) The Company, at the Board of Directors meeting held on January 31, 2013, resolved to conduct an absorption-type company split with April 1, 2013 as the effective date. According to the split, the Company shall split off its logistics and parking systems business to be succeeded by Sumitomo Heavy Industries Material Handling Systems Co., Ltd. (former corporate name: Sumitomo Heavy Industries Engineering & Services Co., Ltd.), a subsidiary of the Company.

(2) The Company, at the Board of Directors meeting held on January 31, 2013, resolved to conduct a merger by absorption with April 1, 2013 as the effective date, leaving the Company as the surviving company and Sumitomo Heavy Industries Techno-Fort Co., Ltd., a subsidiary of the Company as the non-surviving company.

5. CHALLENGES FACING THE COMPANY GROUP

The economic environment surrounding our businesses showed signs of improvement with a trend toward asteady recovery in the U.S. economy and signs of bottoming and a gradual recovery in 2012 of the Chinese economy following deceleration although an unpredictable situation with the debt crisis in Europe continues. Domestically, expectations of an autonomous recovery due to the expansion of exports and the increase in capital investments have been rising in view of government-led monetary easing and other economy-boosting measures that have been implemented, as well as the progressing depreciation of the yen.

In such an operating environment, based on the medium-term management plan “Innovation 21,” the Company Group will promote product and process innovations, thereby reinforcing our competitive edge, aiming to become “Strong Sumitomo Heavy Industries,” which will enable us to achieve sustainable growth.

Furthermore, we will make a new start by making fiscal 2013 a turnaround year for us to move beyond the recent sluggishness in our markets. To this end, we will carry out structural reforms for overall businesses by building on our solid footing with sound management practices.

(1) Medium-Term Management Plan “Innovation 21”The financial targets for the medium-term management plan “Innovation 21,” which started in fiscal 2011are sales of ¥730 billion and operating income of ¥73 billion by fiscal 2013. As for ROIC, the Group’s key

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management indicator, we will continue to ensure that ROIC is greater than the weighted average of cost of capital (WACC) and aim to secure an ROIC of 10% or more.

To achieve these financial targets, the Company Group will implement three managerial strategies: (a)enhancement and effective employment of the SHI Global Network, (b) development and marketing of innovative products (“product innovation”) and (c) introducing innovation into manufacturing and sales to enhance productivity and business execution functions (“process innovation”). Furthermore, under the slogan “Innovation of Half and Double,” giving the targets such as “half the cost” and “double the performance,” the Company Group will restructure its financial competitive structure to firmly establish its superiority in the global market.

(2) Priority Issues for Fiscal 2013The Company Group intends to undertake the following measures in fiscal 2013, the final year of itsmedium-term management plan.

1) Enhancement and Effective Employment of the SHI Global NetworkAs a priority issue for corporate growth, the Company Group will expand and utilize to the maximum extent its global network for production, sales and service in worldwide markets.

In the power transmission and controls business, in regard to gear boxes, the Company Group intends to raise its global market share by improving the rate of operation of the Tangshan plant in China and a plant in Brazil, and by reinforcing their collaboration with Hansen Industrial Transmissions NV, our subsidiary in Belgium and domestic factories. In the small gear motor field, we will exploit new markets globally by drawing on the cost competitiveness of our consolidated production plant in Vietnam.

In the plastics machinery business, we intend to increase our market share in potential high-growth fields and regions through close collaboration and enhanced synergies between Sumitomo (SHI) Demag Plastics Machinery GmbH, our subsidiary in Germany and domestic works.

In the hydraulic excavator business, we will make efforts to increase regional market shares in the growing markets of Southeast Asia and North and South America by optimizing our collaboration among the Tangshan plant in China, a plant in Indonesia and the domestic plant.

Furthermore, the Group intends to reinforce the functions of the regional headquarters companies established in China, the United States, Indonesia and Brazil and structure a mechanism to speedily carryout managerial measures in response to actual conditions in the respective regions and markets. The Group will thus develop its global network to demonstrate its competitive edge based on the philosophy of “Autonomy and Alliance.”

2) Development and Marketing of Innovative Products (“Product Innovation”)We intend to focus our efforts on the following markets and products as priority fields. In the power transmission and controls business, we will promote the sales expansion of small and medium-sized power transmission equipment that adopts high-efficiency motors, which are compliant with IE3 international efficiency standards, to promote the reduction of power consumption in various industrial fields and the worldwide social infrastructure.

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In the hydraulic excavator business, we will pursue robust sales expansion by focusing on launching products with excellent energy-saving and safety performance for developed countries while increasing the lineup of models slated for emerging countries.

In the plastics machinery business, we will significantly enhance productivity and energy-saving performance, and promote sales expansion of the SE-EV series, a new array of plastic injection molding machines with an expanded product lineup.

The Company Group will also accelerate the development of Green Products featuring energy savings and the use of renewable energy in many other product lines.

We will further reinforce the project-based collaboration between the Corporate Technology Operations Group and the business divisions to promote such product innovation.

3) Introducing Innovation into Manufacturing and Sales to Enhance Productivity and Business Execution Functions (“Process Innovation”)The Company Group has implemented various innovations to each process — product planning, development design, manufacturing, sales and service — to promote process innovation. We will further develop our process innovation and effectively employ it in the SHI Global Network to achieve significant cost reduction and market share expansion in growth markets. Furthermore, we remain committed to promoting organizational integration having synergistic effects to improve our organizational ability tocomplement our technological capabilities and reinforce our project-execution ability.

4) Implementing Structural Reforms for Overall BusinessesOur core approach to structural reforms for our overall businesses is as follows.First, we intend to recover profitability in the mass-produced machinery business. We intend to rapidlyimprove profitability by launching new products and conducting structural reforms, as required.The second pillar is to promote structural reforms in the heavy machinery business. To pursue overseas development of the relevant businesses in the pursuit of reinforced profit-earning capability, we will streamline organizational systems that ensure the optimal deployment and efficient operation of management resources through the combination of technologies and skills nurtured by our respective Group companies. In addition to the recently implemented split-off of our logistics and parking systems business and the integration of our industrial machinery business, we will therefore implement organizational restructuring measures in other heavy machinery businesses, as required.

5) Future Development of the Shipbuilding BusinessDespite the continued stagnant conditions in the shipbuilding market, the over tonnage for our mainstay tankers has tended to decline and the tonnage value is gradually improving thanks to the progressing depreciation of the yen. However, we recognize that a full-fledged recovery of market conditions will require prolonged time and the severe business environment will likely continue in the foreseeable future.

In these difficult circumstances, we are determined to persevere in such hard times by curtailing ourproduction system to a minimal level that would enable us to continue the shipbuilding business while carefully assessing market conditions and promoting the development of high-value-added ships that satisfy

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the requirements for enhanced energy-saving performance and anticipated international environmental regulations.

6) Rigorous ComplianceThe Company Group regards compliance as one of its highest priorities. As globalization of the business proceeds, all the Group companies in the world will continue to strive for rigorous compliance with laws and regulations. The Group intends to continuously promote compliance awareness throughout the Group by providing education and training on compliance to all of the executives and employees of the Company and all our Group companies.

(3) Development of a New Medium-Term Management PlanFiscal 2013 is the last year of the current medium-term management plan “Innovation 21.” The initial financial targets of the management plan have not been achieved quantitatively, partly affected by challenging incidents that repeatedly occurred from the first year of the plan such as the Great East Japan Earthquake, the European debt crisis and the decline of the Chinese economy. Nevertheless, we are confident that the basic concepts of Globalization and Innovation are still effective amidst such fluctuating environmental changes.

Taking into account the results of Innovation 21 and changes in the business environment, the Company, as a truly global company, plans to formulate a new medium-term management plan with its initial year commencing in fiscal 2014, with the aim of enabling the Company Group to achieve sustainable growth by increasing value for customers worldwide.

The Company Group intends to steadily implement and advance the above measures. Our shareholders’ continued understanding and support would be greatly appreciated.

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6. CHANGES IN STATE OF ASSETS AND PROFIT/LOSS OF THE COMPANY GROUP AND THE COMPANY

(1) Changes in State of Assets and Profit/Loss of the Company Group

(Billions of yen, unless otherwise indicated)

Items FY2009 FY2010 FY2011FY2012

(this fiscal year)

Orders 403.4 534.9 571.3 550.7

Sales 516.2 548.0 624.1 585.9

Operating income 28.3 45.8 47.1 31.3

Ordinary income 26.3 44.3 44.6 31.0

Net income 13.3 27.9 19.5 5.9

Net income per share of common stock (yen) 22.01 45.87 31.75 9.56

Total assets 610.1 626.8 691.8 647.7

Shareholders’ equity 254.2 269.4 282.1 292.8Shareholders’ equity per share of common stock (yen) 404.73 435.10 454.43 470.69

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(2) Changes in State of Assets and Profit/Loss of the Company

(Billions of yen, unless otherwise indicated)

Items FY2009 FY2010 FY2011 FY2012(this fiscal year)

Orders 133.1 173.9 156.2 156.9

Sales 196.7 213.2 208.5 177.4

Operating income (or loss) -1.2 1.6 -2.9 0

Ordinary income 10.4 8.0 5.4 14.3

Net income (or loss) 9.1 8.7 -0.2 -0.1Net income (or loss) per share of common stock (yen)

15.13 14.37 -0.35 -0.22

Total assets 443.9 451.0 470.4 412.4

Shareholders’ equity 134.9 144.7 141.4 134.7

Shareholders’ equity per share of common stock (yen)

223.52 235.59 230.37 219.54

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7. MAJOR LINES OF BUSINESS (as of March 31, 2013)

Operating Group Major ProductsMachinery Components Power Transmission Equipment, Motors

Precision Equipment

Plastic Injection Molding Machines, Extrusion Laminators, Semiconductor Equipment Machines, Laser Processing Systems, Cryogenic Equipment, Precision-Positioning Stages, Cyclotrons, Medical Care Equipment, Liquid Crystal Display Manufacturing Equipment, Precision Forgings & Castings, Control Systems,Defense Equipment, Machining Tools

Construction Machinery Hydraulic Excavators, Cranes, Road Construction Machinery

Industrial MachineryForging Machines, Material Handling Systems, Logistics & Handling Systems, Automated Parking Systems, Turbines, Pumps

Ships Ships

Environmental Protection Facilities, Plants

Power Generation Systems, Boiler Systems, Industrial Waste Incineration Plants, Air Pollution Prevention Equipment, Water Treatment Systems, Chemical Process Equipment & Plants, Pressure Vessels, Stirring Tanks, Air Pollution Control Conditioner, Food Production Equipment

Other Real Estate, Software

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8. MAJOR SUBSIDIARIES, ETC. (as of March 31, 2013)

NameStated Capital

(Millions of yen)

Company’s Shareholding

Ratio (%)Major Line of Business

Sumitomo (S.H.I.) Construction Machinery Co., Ltd.

16,000 100Manufacturing and distribution of hydraulic excavators, road construction machinery, etc.

Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd

4,000 100Domestic distribution of hydraulic excavators, road construction machinery, etc.

Nihon Spindle Manufacturing. Co., Ltd. 3,276 100

Manufacturing and distribution of environmental, air pollution controlConditioner and industrial equipment, etc.

Shin Nippon Machinery Co., Ltd. 2,408 100 Manufacturing and distribution of

turbines, pumps, etc.Sumitomo Heavy Industries Marine & Engineering Co., Ltd.

2,000 100 Manufacturing and distribution of ships, etc.

SEISA Gear, Ltd. 841 100 Manufacturing and distribution of gears and power transmission equipment

Sumitomo Heavy Industries Engineering & Services Co., Ltd.

480 100 Manufacturing and distribution of material handling systems

Sumitomo Heavy Industries Techno-Fort Co., Ltd.

480 100 Manufacturing and distribution of forging machines, etc.

Sumitomo Heavy Industries Environment Co., Ltd.

480 100 Manufacturing and distribution of water and sewerage treatment systems, etc.

Sumitomo Heavy Industries Process Equipment Co., Ltd.

480 100 Manufacturing and distribution of stirring tanks, pressure vessels, etc.

SEN Corporation 480 100 Manufacturing and distribution of ion implanters

Sumitomo Heavy Industries PTC Sales Co., Ltd.

400 100Distribution of power transmission equipment, etc., and provision of related services

Sumiju Environmental Engineering, Inc. 400 100

Maintenance, operation and administration, etc., of environmental and hygiene facilities and pollution prevention facilities

LBX Company, LLC (U.S.A.)

41,000(Thousands ofU.S. Dollars)

100 Distribution of hydraulic excavators and provision of related services

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Name Stated Capital(Millions of yen)

Company’s Shareholding Ratio

(%)Major Line of Business

Sumitomo Machinery Corporation of America (U.S.A.)

12,423 (Thousands ofU.S. Dollars)

100Manufacturing and distribution of power transmission equipment, etc.

LBCE Holdings Inc. (U.S.A.)10,618

(Thousands ofU.S. Dollars)

100 Control of overall business of construction cranes, etc.

Hansen Industrial Transmissions NV (Belgium)

7,000(Thousands of

Euros)100 Manufacturing and distribution

of power transmission equipment

Sumitomo (SHI) Demag Plastics Machinery GmbH (Germany)

20,025(Thousands of

Euros)100

Manufacturing and distribution of plastic injection molding machines

Sumitomo (S.H.I.) Construction Machinery (Tangshan) Co., Ltd.(China)

798,938(Thousands of

Yuan)100 Manufacturing and distribution

of hydraulic excavators

Sumitomo Heavy Industries (Tangshan), Ltd. (China)

498,761(Thousands of

Yuan)100 Manufacturing and distribution

of power transmission equipment

Note: 1. The Company’s Shareholding Ratio includes the indirect holdings.2. The Company conducted an absorption-type company split with April 1, 2013 as the effective

date, according to which the Company split off its logistics and parking systems business to be succeeded by Sumitomo Heavy Industries Engineering & Services Co., Ltd. Sumitomo Heavy Industries Engineering & Services Co., Ltd. changed its corporate name to Sumitomo Heavy Industries Material Handling Systems Co., Ltd., as of April 1, 2013.

3. The Company conducted a merger by absorption with April 1, 2013 as the effective date, leaving the Company as the surviving company and Sumitomo Heavy Industries Techno-Fort Co., Ltd. as the non-surviving company.

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9. MAJOR LENDERS (as of March 31, 2013)

Name Loans Outstanding (Millions of yen)

Sumitomo Mitsui Banking Corporation 36,408

Sumitomo Mitsui Trust Bank, Limited 10,456

Mizuho Corporate Bank, Ltd. 7,035

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6,868

The Iyo Bank, Ltd. 2,900

10. EMPLOYEES (as of March 31, 2013)

Segment Number of Employees Increase or Decreasefrom End of Last Fiscal Year

Machinery Components 5,532 -340Precision Equipment 4,678 234Construction Machinery 2,915 300Industrial Machinery 1,250 -22Ships 533 -77Environmental Protection Facilities, Plants

2,282 -6

Corporate Operations & Others 1,055 17Total 18,245 106

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11. MAJOR PLACES OF BUSINESS AND PLANTS (as of March 31, 2013)

Company Principal office 1-1, Osaki 2-chome, Shinagawa-ku, Tokyo, Japan Business offices Chubu Office (Nagoya-shi),

Kansai Office (Osaka-shi),Kyushu Office (Fukuoka-shi)

Plants Tanashi Works (Nishitokyo-shi, Tokyo),Chiba Works (Chiba-shi),Yokosuka Works (Yokosuka-shi, Kanagawa Pref.),Nagoya Works (Obu-shi, Aichi Pref.),Okayama Works (Kurashiki-shi, Okayama Pref.),Niihama Plant of Ehime Works (Niihama-shi, Ehime Pref.),Saijo Plant of Ehime Works (Saijo-shi, Ehime Pref.)

Laboratories Technology Research Center(Yokosuka-shi, Kanagawa Pref.)

Subsidiaries Plants Sumitomo (S.H.I.) Construction Machinery Co., Ltd., Chiba Works (Chiba-shi)

Sumitomo Heavy Industries Marine & Engineering Co., Ltd., Yokosuka Shipyard (Yokosuka-shi, Kanagawa Pref.)

SEISA Gear, Ltd., Head Office and Head Plant (Kaizuka-shi, Osaka Pref.)

Nihon Spindle Manufacturing Co., Ltd., Head Office and Head Plant (Amagasaki-shi, Hyogo Pref.)

Shin Nippon Machinery Co., Ltd., Kure Works (Kure-shi, Hiroshima Pref.)

Sumitomo Heavy Industries Engineering & Services Co., Ltd., Niihama office (Niihamashi, Ehime Pref.)

Sumitomo Heavy Industries Techno-Fort Co., Ltd.,Head Office and Head Plant (Niihamashi, Ehime Pref.)

Sumitomo Heavy Industries Process Equipment Co., Ltd.,Head Office and Head Plant (Saijo-shi, Ehime Pref.)

SEN Corporation, Ehime Plant (Saijo-shi, Ehime Pref.)Sumitomo Machinery Corporation of America (U.S.A.)Link-Belt Construction Equipment Company L.P., LLLP

(U.S.A.)Hansen Industrial Transmissions NV (Belgium)Sumitomo (SHI) Demag Plastics Machinery GmbH

(Germany)Sumitomo (SHI) Cyclo Drive Germany, GmbH (Germany)Sumitomo (S.H.I.) Construction Machinery (Tangshan) Co.,

Ltd. (China)Sumitomo Heavy Industries (Tangshan), Ltd. (China)Sumitomo (SHI) Cyclo Drive China, Ltd. (China)Ningbo Sumiju Machinery Ltd. (China)Sumitomo Heavy Industries (Vietnam) Co., Ltd. (Vietnam)

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(Notes) 1. The Company conducted an absorption-type company split with April 1, 2013 as the effective date, according to which the Company split off its logistics and parking systems business to be succeeded by Sumitomo Heavy Industries Engineering & Services Co., Ltd. Sumitomo Heavy Industries Engineering & Services Co., Ltd. changed its corporate name to Sumitomo Heavy Industries Material Handling Systems Co., Ltd., as of April 1, 2013.

2. The Company conducted a merger by absorption with April 1, 2013 as the effective date, leavingthe Company as the surviving company and Sumitomo Heavy Industries Techno-Fort Co., Ltd. as the non-surviving company.

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II. CURRENT CONDITIONS OF THE COMPANY1. STOCK (as of March 31, 2013)

(1) Total number of authorized shares: 1,800,000,000

(2) Total number of issued shares: 614,527,405

(3) Number of shareholders: 56,541

(4) Major shareholders:

Name of Shareholders Number of Shares in Thousands

Shareholding Ratio (%)

The Master Trust Bank of Japan, Ltd. (trust account) 44,452 7.2

Japan Trustee Services Bank, Ltd. (trust account) 42,881 7.0

Sumitomo Life Insurance Company 21,666 3.5Japan Trustee Services Bank, Ltd. (trust account 9) 16,596 2.7

Sumitomo Mitsui Banking Corporation 15,531 2.5Sumitomo Heavy Industries, Ltd. Kyoeikai 12,259 2.0SSBT OD05 Omnibus Account – Treaty Clients 10,608 1.7

Trust & Custody Services Bank, Ltd.(portfolio investment trust account) 8,301 1.4

Japan Trustee Services Bank, Ltd. The Sumitomo Trust and Banking Corporation retirement benefit trust

8,244 1.3

State Street Bank and Trust Company 505224 7,790 1.3

(Note) Shareholding ratios are calculated based on the total number of shares excluding treasury shares (858,899 shares). The treasury shares include 1,000 shares registered in the name of the Company in the Register of Shareholders but not substantially owned by the Company.

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2. DIRECTORS AND AUDITORS OF THE COMPANY

(1) Directors and Auditors (as of March 31, 2013)

Name Title Position, Responsibilities, and Significant Positions Held at Other Companies

Yoshiro Hinoh Representative Director Chairman of the Board

Yoshinobu Nakamura# Representative Director President (CEO) Shinji Nishimura# Representative Director (Senior Executive Vice President; General

Manager of Power Transmission & Controls Group)

Shunsuke Betsukawa# Representative Director (Senior Executive Vice President, CFO,General Manager of Export Administration Dept.)

Yuji Takaishi# Director (Executive Vice President, General Manager of Corporate Planning and Development Department)

Hitoshi Kashimoto# Director (Executive Vice President, General Manager of Ship & Marine Division; Representative Director and President of Sumitomo Heavy Industries Marine & Engineering Co., Ltd.)

Yoshiyuki Tomita* Director (Vice President, General Manager of Research & Development Center, Corporate Technology Operations Group)

Kensuke Shimizu Director (Representative Director and Chairman of Sumitomo (S.H.I.) Construction Machinery Co., Ltd.,)

Mikio Ide Director (Representative Director and President of Sumitomo (S.H.I.) Construction Machinery Co., Ltd.; Representative Director and President of Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd.)

Toshiaki Kakimoto Director (Outside Director of Hashimoto Sogyo Co., Ltd.)

Yukio Kinoshita Standing Corporate Auditor

Shigeru Toyosumi Standing Corporate Auditor

Hideo Kojima Auditor (CPA, Hideo Kojima CPA Office; OutsideAuditor of Alpine Electronics, Inc.)

Takeo Wakae* Auditor (Lawyer, Kumagai & Wakae Law Firm)

(Notes)1. The persons marked with * are new Director and Auditor who assumed office on June 28, 2012.2. Director Toshiaki Kakimoto is an Outside Director.3. Auditors Hideo Kojima and Takeo Wakae are Outside Auditors.4. There is no material relationship between companies where Outside Director or Outside Auditor holds

a significant position and the Company.5. The Company reported the appointments of Director Toshiaki Kakimoto and Auditors Hideo Kojima

and Takeo Wakae to the Tokyo Stock Exchange and the Osaka Securities Exchange as Independent Directors/Auditors.

6. Auditor Hideo Kojima has adequate expertise with regard to finance and accounting as a CPA.

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7. The Director and the Auditor who resigned during this term (resigned as of June 28, 2012):Director Kohei Takase (expiration of term of office)Auditor Seishiro Tsukada (expiration of term of office)

8. As of April 1, 2013, the positions of the following Directors changed as below.

Name Position after Change Position before ChangeYoshiro Hinoh Director and Counsellor Representative Director and Chairman

Yoshinobu Nakamura Representative Director,Chairman

Representative Director, President and CEO

Shunsuke Betsukawa Representative Director, President and CEO

Representative Director, Senior Executive Vice President, CFO

Yuji Takaishi Representative Director, Executive Vice President

Director, Executive Vice President

9. The Company adopts a system of Executive Officers. The individuals marked with # are Executive Officers, and their title and responsibilities are as indicated in parentheses.- Executive Officers who are not Directors

Name Title Position or Principal ResponsibilitiesKatsuhiko Taniguchi Executive Vice

President General Manager of Corporate Technology Operations Group; General Manager of Information Systems Development Group

Osamu Sekiya Executive Vice President

General Manager of Energy & Environment Group

Katsuhide Yokota Executive Vice President

General Manager of Ehime Works, Representative Director and President ofSumitomo Heavy Industries Engineering andServices Co., Ltd.

Chuck Martz Senior Vice President

President, CEO & Chairman of LBCE Holdings, Inc.

Junjiro Nogami Senior Vice President

General Manager of Kansai Regional Office;General Manager of Corporate Marketing Dept.

Hitoshi Ushiyama Senior Vice President

Representative Director and President of Sumitomo Heavy Industries Environment Co., Ltd.

Kazumi Fujita Senior Vice President

General Manager of Internal Control Group

Yukio Kumata Senior Vice President

General Manager of Quantum Equipment Division

Kazuto Kaneshige Senior Vice President

Representative Director & President ofSumitomo Heavy Industries Techno-Fort Co.,Ltd.

Tetsuya Okamura Senior Vice President

CEO of Sumitomo (SHI) Demag Plastics Machinery GmbH

Akihiro Morita Vice President Assistant General Manager of Quantum Equipment Division

Akio Yoshikawa Vice President Senior Vice President of Sumitomo (S.H.I.) Construction Machinery Co., Ltd.

Isao Kono Vice President General Manager of Gear Motor, Power Transmission & Controls Group

(Notes)

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1. As of March 31, 2013, the following persons resigned as Executive Officers.Hitoshi Kakimoto Executive Vice PresidentAkihiro Morita Vice President

2. As of April 1, 2013, the positions of the following Executive Officers changed as below.

Name Position after Change Position before ChangeChuck Martz Executive Vice President Senior Vice President

Akio Yoshikawa Senior Vice President Vice President

Yukio Kumata Vice President Senior Vice President

3. As of April 1, 2013, the following persons were elected as Executive Officers.Nobutaka Miyawaki Senior Vice PresidentToshiharu Tanaka Senior Vice President

4. The Company conducted an absorption-type company split with April 1, 2013 as the effective date, according to which the Company split off its logistics and parking systems business to be succeeded by Sumitomo Heavy Industries Engineering & Services Co., Ltd. Sumitomo Heavy Industries Engineering & Services Co., Ltd., changed its corporate name to Sumitomo Heavy Industries Material Handling Systems Co., Ltd., as of April 1, 2013.

5. The Company conducted a merger by absorption with April 1, 2013 as the effective date, leaving the Company as the surviving company and Sumitomo Heavy Industries Techno-Fort Co., Ltd. as the non-surviving company. Meanwhile, Mr. Kazuto Kaneshige was appointed as General Manager of the Industrial Equipment Division of the Company as of the same date.

(2) Total Amount of Compensation, etc., Paid to Directors and Auditors

11 Directors ¥311 million5 Auditors ¥81 million

(Notes) 1. The maximum compensation per month is ¥40 million in total for all Directors as a group (under the resolution of the 110th Ordinary General Meeting of Shareholders held on June 29, 2006), and ¥7.5 million in total for the Auditors (under the resolution of the 109th Ordinary General Meeting of Shareholders held on June 29, 2005).

2. In addition to the above, ¥17 million was paid as employee compensation for Directors who also serve as employees.

(3) Outside Officers

(i) Total amount of compensation etc. paid to Outside Officers

¥19 million for four outside officers

(ii) Primary activities by Outside Officers

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Name Primary ActivitiesToshiaki Kakimoto Attended all 16 meetings of the Board of Directors held during this

fiscal year and expressed opinions based on his specialized knowledge about the economy and management, and his broad experience. Although he did not recognize said fact before the fact was revealed in regard to the overbilled expenses relating to Ministry of Defense contracts, he had routinely demanded that the Company comply with laws and regulations and, after the fact was detected, requested that the Company conduct a complete investigation and take steps to prevent a reoccurrence. Accordingly, he has appropriately performed his duties including the monitoring of the reoccurrence prevention status.

Hideo Kojima Attended 15 of 16 meetings of the Board of Directors and all 18meetings of the Board of Auditors held during this fiscal year and expressed opinions particularly from the perspective of an expert on finance and accounting as a CPA. Although he did not recognize said fact before the fact was revealed with regard to the incident of overbilling expenses relating to some Ministry of Defense contracts, he had routinely demanded that the Company comply with laws and regulations and, after the fact was detected, requested that the Company conduct a complete investigation and take steps to prevent a reoccurrence. Accordingly, he has appropriately performed his duties including the monitoring of the reoccurrence prevention status. Moreover, he took the lead in investigating and addressing the causes for this event, and presented his recommendations on steps to prevent a reoccurrence and the like as Chairman of the Internal Fact-Finding Committee.

Takeo Wakae Attended all 12 meetings of the Board of Directors and all 11meetings of the Board of Auditors held after he was elected as an auditor on June 28, 2012, and expressed opinions particularly from the perspective of an expert on legal issues as a lawyer. Meanwhile, in regard to the overbilled expenses relating to Ministry of Defense contracts, he requested that the Company take steps to prevent a reoccurrence as an auditor. Accordingly, he has appropriately performed duties including the monitoring of the reoccurrence prevention status.

(iii) Outline of agreement for limited liabilityThe Company has entered into a contract with Outside Director Toshiaki Kakimoto and Outside Auditors Hideo Kojima and Takeo Wakae respectively, to limit their liability to the Company for damages under Article 423, paragraph 1, of the Companies Act, to ¥10 million or the minimum liability amount as provided in Article 425, paragraph 1, of the Companies Act, whichever is higher.

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3. INDEPENDENT AUDITORS

(1) Name: KPMG AZSA LLC.

(2) Amount of Compensation, etc.(i) Amount of compensation, etc., to be paid to the Independent Auditors related to this fiscal year

149 million yen(ii) Total amount of compensation, etc., and other financial benefits to be provided to the Independent

Auditors by the Company and its subsidiaries 225 million yen

(Notes) 1. The compensation for auditing under the Companies Act and auditing under the Financial Instruments and Exchange Act is not clearly differentiated in the Audit Agreement between the Company and the Independent Auditors and cannot be differentiated as a practical matter. Accordingly, the above-indicated amount of compensation, etc., related to this fiscal year includes the total of such compensation amounts.

2. Among the important subsidiaries of the Company, LBX Company, LLC, Sumitomo Machinery Corporation of America, LBCE Holdings, Inc., Hansen Industrial TransmissionsNV, Sumitomo (SHI) Demag Plastics Machinery GmbH, Sumitomo (S.H.I.) Construction Machinery (Tangshan) Co., Ltd., and Sumitomo Heavy Industries (Tangshan), Ltd. were audited by auditing firms other than the Independent Auditors engaged by the Company.

(3) Policy for Determination to Dismiss or Not to Reappoint Independent Auditors

The Board of Auditors shall dismiss the Independent Auditors upon the consent of all Auditors in the event it is determined that any item under paragraph 1 of Article 340 of the Companies Act applies to the Independent Auditors. In this case, an Auditor appointed by the Board of Auditors shall report the dismissal and the reason thereof at the Shareholders’ Meeting first called after such dismissal. In addition, if it is determined that it is difficult for the Independent Auditors to perform their duties appropriately, the Directors shall, upon the consent of, or a request from, the Board of Auditors, propose the dismissal or non-reappointment of the Independent Auditors at a Shareholders’ Meeting.

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4. OPERATIONAL STRUCTURE TO ENSURE THE APPROPRIATE CONDUCT OF OPERATIONS

The Company has developed the following basic policies to ensure appropriate conduct of its operations:

Structure and basic policies of the internal control system

(1) Purpose

The Company considers a properly functioning internal control system to be an indispensable precondition for improvement of the corporate value and the sustainable development of the Company Group, and thus sets out below the structure of this internal control system and the basic principles to be observed in its operation as follows:

(2) Basic Policies

A. Structure to ensure the execution of duties by the Directors in compliance with laws and regulations, and the Articles of Incorporation.

a. The Board of Directors shall determine the basic policies to organize an internal control system as the foundation of our corporate governance system, and shall verify the effectiveness of such internal control system as necessary and strive toward the continuous enhancement and improvement of such internal control system.

b. Outside Director(s) shall be appointed, and resolutions of the Board of Directors shall be adopted which reflect an outside viewpoint.

c. The Auditors shall audit the appropriateness of the execution of duties by the Directors concerning the establishment and operation of the internal control system.

B. Matters relating to the structure for the execution of duties

a. Structure for maintenance and administration of information relating to the execution of duties by the Directors

(i) The information relating to the execution of duties by the Directors shall be recorded and maintained under our document management policy and procedures and confidential information management rules, and such records shall be made available to the Directors and the Auditors for inspection at any time.

(ii) The Company shall make efforts to disclose material information in an appropriate and timely manner.

b. Rules on loss-risk management and other relevant corporate structures

(i) Risk management shall be conducted through the internal control system established company-wide.

(ii) Regarding specific categories of risks such as environmental risk, legal risk, disaster risk, IT risk and export regulation risk, risk reduction shall be achieved through the development of relevant rules and implementation of education, training, auditing, etc., by the responsible section(s).

(iii) In an emergency situation, such emergency situation shall be reported promptly to the top management through the “Information Liaison Procedures for Emergencies” and appropriate actions shall be taken in a timely manner.

c. Structure to ensure adequacy in financial reporting

(i) The Company shall develop the necessary structure to ensure appropriateness of financialinformation, and to prepare and disclose reliable financial reports.

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(ii) In order to ensure adequacy in financial reporting, the Company shall develop an internal control system over financial reporting and the operational conditions of such system shall be audited by the responsible section(s).

d. Structure to ensure the efficient execution of duties by the Directors

(i) In order for the Directors to execute their duties efficiently, the Company shall adopt a system of Executive Officers wherein the Directors delegate authority to Executive Officers under the organizational rules and the rules on approval authority.

(ii) The Company shall adopt a structure to maintain constant control of operational conditions wherein medium-term management plans and annual budgets are determined by the Board of Directors and progress made under the medium-term management plans and in line with the annual budget is reported by the responsible Executive Officer(s) to the monthly meetings of the Executive & Operating Officers Committee, etc.

(iii) In order to make decisions on material managerial matters based on a multi dimensional review, the Management Strategy Committee shall be established as an advisory organ to the President to consider and discuss such matters.

e. Structure to ensure the execution of duties by the Executive Officers and employees in compliance with laws and regulations, and the Articles of Incorporation

(i) The Ethics Committee chaired by the President shall determine the basic policies on compliance, and the Internal Control Group shall promote rigorous observance of such policies through the internal control system established company-wide.

(ii) Copies of the code of ethics and the compliance manual shall be distributed to the Directors, the Executive Officers and all employees, and continuing training concerning such code and manual shall be undertaken. The Directors, the Executive Officers and all managerial staff shall be required to submit a pledge to observe specific compliance requirements as necessary.

(iii) A resolute position shall be taken against individuals or entities that threaten the order and safety of civil society and any relations with such individuals or entities shall be severed.

(iv) The Ethics Hotline (an in-house whistleblower system) through which actual or suspectedviolations of laws and regulations or corporate ethics should be reported shall be set up, and employees shall be encouraged to use such hotline to enable the management to detect problems at an early stage.

(v) The execution of duties by the Executive Officers and employees shall be audited by the responsible section(s) to ensure such execution of duties is in compliance with laws and regulations and the Articles of Incorporation.

f. Structure to ensure the appropriate conduct of business by the entire Group comprising the Company and its subsidiaries

(i) The Company shall pursue strengthened governance and the efficient execution of duties in the entire Group under the Management Policies concerning the Business of the Group.

(ii) The Company shall adopt the following structure to control the operational conditions of the entire Group: medium-term management plans and annual budgets of main Group companies are approved by the Board of Directors of the Company and thereupon are put into action; progress made under the medium-term management plan and in line with the annual budget is reported to the Executive & Operating Officers Committee, etc.

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(iii) In order to ensure the appropriate conduct of business by the entire Group, the Company shall adopt the following structure: an Internal Control System is established in each main Group Company thereby promoting rigorous compliance; the Internal Control Group of the Company holds the authority and responsibility for the internal control concerning the entire Group.

(iv) In order to strengthen the auditing systems of the entire Group, the Company shall appoint the directors or auditor(s) of the main Group companies, and the responsible section(s) of the Company shall conduct internal auditing of the Group companies.

(v) The occurrence of an emergency in the main Group companies shall be reported promptly to the top management of the Company in accordance with the “Information Liaison Procedures for Emergencies,” and appropriate actions shall be taken in a timely manner.

C. Matters relating to the structure for the execution of auditing duties by Auditor(s)

a. Matters relating to the staff to assist the Auditors when the Auditors request to place such assistant staff

The Corporate Auditor’s Department shall be established under the control of the Board of Auditors.

b. Matters relating to independence from the Directors of the staff prescribed in the preceding item

The personnel changes and performance appraisals of the staff of the Corporate Auditor’s Departmentshall be subject to prior consultation between the Auditors, the Directors and the Executive Officers.

c. The structure for the Directors and employees reporting to the Auditors and other reporting to the Auditors

(i) In order to audit the execution of duties by the Directors and the Executive Officers, the Auditors shall attend the meetings of the Board of Directors and the Executive & Operating Officers Committees and other important meetings and may inspect major ringisho (documents for approval) and other important documents relating to the execution of duties by the Directors and the Executive Officers.

(ii) The Directors, the Executive Officers and employees shall report to the Auditors in a timely manner on actual and potential violations of laws and regulations or the Articles of Incorporation, facts which may cause a substantial detriment to the Company, or grossly inappropriate matters.

d. Other structures to ensure effective auditing by the auditors

(i) The Directors and the Executive Officers shall cooperate with the Auditors in order to enable the Auditors to conduct effective auditing through liaison and cooperation with the internal auditing department, the internal control department, the auditors of the Group companies, accounting auditor(s), etc.

(ii) Where the auditor(s) of each Group company find actual or potential violations of laws and regulations or the Articles of Incorporation and facts which may cause a substantial detriment to such Group company or the entire Group, or grossly inappropriate matters, the auditor(s) shall promptly report such matters to the Auditors of the Company.

(3) Revision and Abolition

The necessary revision of these policies shall be undertaken by resolution of the Board of Directors.

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5. BASIC POLICY ON CONTROL OVER DECISIONS ON FINANCIAL AND BUSINESSPOLICIES OF THE COMPANY

(1) Basic Policy

The Company believes that the issue of control over the financial and business policies of the Company should ultimately be determined by shareholders from the perspective of increasing corporate value and ensuring shareholders’ common interests. Therefore, the Company believes that the issue of whether to accept a large-scale acquisition action resulting in change in control of the Company, etc., should be ultimately determined by the intention of the shareholders.

However, the Company anticipates that certain large-scale acquisitions of shares may materially affect the corporate value or the shareholders’ common interests, for instance, where they expect to plainly infringe upon corporate value or the shareholders’ common interests in light of the purpose of the acquisition and the managerial policy to be adopted after the acquisition, or fail to provide shareholders with reasonablynecessary information to enable a judgment on the acquisition proposal. The Company believes that the Company should make an exception in the above instances wherein a party who makes such a large-scale acquisition of shares is inappropriate as an entity to hold control over decisions regarding the financial and business policies of the Company.

The Company’s corporate value derives from the following: offering first class products; the synergy generated by the value chain throughout its businesses and global network; and the bond of reputation and reliance among customers, business partners, employees and society maintained and enhanced by management in conformity with the “Sumitomo Business Spirit.” These strengths function in an integrated manner, thereby generating even greater value.

The Company therefore has adopted the following basic policy: Our primary duty is to increase corporate value and maximize the shareholders’ common interests through sharing generated profits with shareholders, and the Company accepts in principle the fact that the Company is supported by shareholders who have obtained shares of the Company through free trading in the market. However, when a party who intends to obtain 20% or more of all the voting rights of the Company, is likely to infringe upon corporate value or the shareholders’ common interests, the Company will consider such party who intends to acquire shares of the Company to be inappropriate to hold control over decisions regarding financial and business policies of the Company and shall take measures to ensure and increase the corporate value or the shareholders’ common interests to the extent necessary and reasonable.

(2) Special Measures to Pursue the Basic Policy

The Company Group will take the following measures in order to pursue the above-stated basic policy.

1) Medium-term management plan and its implementation

Under the medium-term management plan “Innovation 21,” with 2013 as its final year, the Company Group intends to promote product and process innovation, thereby reinforcing its competitive edge, aiming to establish a corporate structure that can achieve sustainable growth and improve profitability regardless of the business environment.

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To achieve the aims of the medium-term management plan, we will vigorously implement the followingmanagement measures: (a) enhancement and effective employment of the SHI Global Network; (b)development and marketing of innovative products (“product innovation”); and (c) introducing innovation into manufacturing and sales to enhance productivity and business execution capabilities (“process innovation”), while addressing environmental changes after the formulation of the plan.

2) Reinforcement of corporate governance

The Company has continued to reinforce corporate governance. Specifically, the Company Group has continued to make an effort to reinvigorate the Board of Directors and ensure managerial transparency through the Executive Officer system introduced in 1999, the election of Outside Director since 2002, the shortening of the term of office as Director from two years to one year in 2007, etc.

The Corporate Auditors regularly hold meetings attended by the auditors of the Group companies to reinforce the audit function covering the entire Company Group. To address globalization, the Company conducts annual onsite audits of its overseas subsidiaries.

The Company also ensures that all of its outside officers have no risk of conflicts of interest with the Company’s general shareholders and has reported them as independent officers to the financial product exchange organizations on which the Company is listed. The independent officers are expected to act to protect the shareholders’ interest. For instance, it is important for the independent officers to express necessary opinions to encourage consideration of the interests of the Company’s general shareholders when the Board of Directors make important decisions related to business execution at its meetings.

3) Measures to share generated profits with shareholders

By carrying out the above-stated measures and strategies, the Company Group will continue to make further efforts to improve the shareholders’ common interests by increasing corporate value through further growth of the businesses and sharing with shareholders the generated profits by increasing dividends.

(3) Plan to Prevent Any Inappropriate Party, According to the Company’s Basic Policy, from Controlling Decisions of the Financial and Business Policies of the Company

The Company’s proposal regarding the introduction of a plan for countermeasures against a large-scale acquisition of shares of the Company was approved at the 112th Ordinary General Meeting of Shareholders of the Company held on June 27, 2008. Thereafter, necessary changes thereto were made at the Board of Directors meeting held on May 9, 2011, and the Company passed a resolution to continue the aforementioned plan and a subsequent proposal for such continuation of the plan was approved by a majority vote of the shareholders at the 115th Ordinary General Meeting of Shareholders of the Company held on June 29, 2011(hereinafter such continued plan is referred to as the “Plan”).

The Plan requires an acquirer to comply with the Large-Scale Acquisition Rules. The Large-Scale Acquisition Rules provide that a Large-Scale Acquirer shall furnish the Company with necessary and sufficient information prior to actually performing the acquisition; the Board of Directors shall assess and consider such acquisition action; the Board of Directors or a meeting of the Shareholders as necessary shall resolve to take, not to take, or cease to take countermeasures while respecting as much as possible the proposal of the Corporate Value Committee; and the acquirer may actually perform such acquisition only where a resolution not to take or to cease to take countermeasures is made.

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Our countermeasures may be implemented in order to ensure corporate value and the shareholders’ common interests where (i) the acquirer does not comply with the Large-Scale Acquisition Rule or (ii) it is determinedthat the large-scale acquisition will bring substantial damage to the corporate value and the shareholders’ common interests in spite of its compliance with such rules. Our countermeasures to be implemented under the Plan shall include an allotment of stock acquisition rights without consideration under Article 277 and subsequent articles of the Companies Act or such measures as the Board of Directors deems to be most appropriate at that time after considering the opinions of the Corporate Value Committee, provided these countermeasures shall be implemented to whatever extent necessary and reasonable to ensure maximization of corporate value and the shareholders’ common interests or otherwise to protect such value and interests.

(4) Opinion on Specific Measures and Actions and Grounds for Opinion of the Board of Directors

The Company believes that the medium-term management plan and implementation thereof is a specific measure to produce a continuous and sustainable increase in corporate value and the shareholders’ common interests, and thus is in conformity with our basic policy.

Moreover, the Company believes that the Plan is in conformity with our basic policy because it has been adopted in order to ensure and increase corporate value and the shareholders’ common interests in the following respects: an acquirer is required to furnish the Company with necessary and sufficient information prior to actually performing the acquisition and to provide time for consideration or negotiation by theCompany, which enables shareholders to make an appropriate judgment whether to accept such acquisition proposal and enable the Board of Directors to provide its opinion on whether or not to accept such acquisition proposal, make any alternative proposals to shareholders, or negotiate with the acquirer on behalf of shareholders.

The Company would like to emphasize the following regarding the Plan: in the Plan, disclosure in advance by the acquirer is made more effective; shareholders’ intention is respected effectively; hearing of opinions from outside experts is allowed; possible arbitrary decisions by the Board of Directors of the Company are eliminated by establishing the Corporate Value Committee; setting guidelines enhances objectivity and transparency with respect to the standards upon which judgments to take, not to take or to cease to take countermeasures are to rely; and no dead-hand or slow-hand type defensive measures are included. These and other points lead to our conclusion that the Plan meets the three principles stipulated in the “Guideline on Takeover Defense Measures to Ensure and Enhance Corporate Value and Shareholders’ Common Interests” released by the Ministry of Economy, Trade and Industry and the Ministry of Justice on May 27, 2005: (a)the principle to ensure corporate value and the shareholders’ common interests, (b) the principle to ensure prior disclosure and shareholders’ intention, and (c) the principle to ensure the necessity and reasonablenessof countermeasures. Also, the Plan’s content is based on the “Takeover Defense Measures in Light of Recent Environmental Changes” released by the Corporate Value Study Group set up at the Ministry of Economy, Trade and Industry on June 30, 2008, as well as other practices and discussion regarding takeover defense measures. For all these reasons, the Plan is highly reasonable and does not aim to maintain the positions of the officers of the Company.

Note: Figures indicated in this BUSINESS AND FINANCIAL REPORT are rounded off for fractions less than units.

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CONSOLIDATED FINANCIAL STATEMENTS(From April 1, 2012 to March 31, 2013)

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

(For Reference Purposes)CONSOLIDATED STATEMENT OF CASH FLOWS

(From April 1, 2012 to March 31, 2013)

FINANCIAL STATEMENTS(From April 1, 2012 to March 31, 2013)

BALANCE SHEET

STATEMENT OF INCOME

STATEMENT OF CHANGES IN NET ASSETS

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CONSOLIDATED BALANCE SHEET(As of March 31, 2013)

(Millions of yen)Assets Liabilities

Current assets 386,628 Current liabilities 243,014Cash and deposits 47,814 Trade payable 113,575Trade receivables 173,300 Short-term bank loans 48,032Inventories 139,217 Commercial paper 10,000Deferred tax assets 12,191 Long-term debt due within one

year1,245

Other current assets 15,223 Accrued Income taxes 3,014Allowance for doubtful receivables

-1,117 Advances payments received on contracts

20,937

Fixed assets 261,096 Allowance for warranty 5,115Property, plant and equipment 210,652 Allowance for losses on

construction contract2,017

Buildings and structure 48,807 Allowance for losses on business transfer

161

Machinery and delivery equipment

43,447 Other current liabilities 38,919

Land 108,033 Long-term liabilities 111,883Construction in progress 2,614 Bonds payable 10,000Other tangible fixed assets 7,750 Long-term debt 29,270

Intangible fixed assets 7,765 Allowance for retirement benefits

39,169

Other intangible fixed assets 7,765 Allowance for losses from product liability

48

Investments, and other assets 42,679 Deferred tax liabilities on land revaluation

24,608

Investment securities 25,188 Other long-term liabilities 8,789Deferred tax assets 11,838 Total liabilities 354,898

Net assetsStockholders’ Equity 261,786

Other assetsAllowance for doubtfulreceivables

7,471-1,817

Common Stock 30,872Capital surplus 23,789Retained earnings 207,580Treasury stock -455

Accumulated other comprehensive income

27,064

Unrealized gains (losses) on securities, net of income taxes

2,694

Unrealized gains (losses) on hedging derivatives, net of income taxes

-562

Adjustment regarding pension obligations of consolidated overseas subsidiaries

-3,808

Revaluation difference on land

38,197

Foreign currency translation adjustments

-9,458

Minority interests 3,977Total net assets 292,826

Total Assets 647,724 Total liabilities and net assets 647,724“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

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CONSOLIDATED STATEMENT OF INCOME(From April 1 2012 to March 31, 2013)

(Millions of yen)585,871465,309120,56289,274

2,3771,3472,901

31,288

6,624

2,0974,818 6,915

30,997

1,343802 2,145

17,3924,986 22,378

10,553-5,959

10,764

4,5946,170

305

Net salesCost of sales

Gross profitSelling, general and administrative expensesOperating income

Other incomeInterest and dividend incomeGain on foreign currency exchangeOther – net

Other expensesInterest expenseOther – net

Ordinary incomeSpecial income

Gain on sales of investment securitiesReversal of reserve for legal actions

Special lossesImpairment lossesLoss relating to defense equipment business

Income before income taxes and minority interests Income tax – currentIncome tax – deferredIncome before minority interestsMinority interests in net income

Net income 5,865“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

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CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS(From April 1, 2012 to March 31, 2013)

(Millions of yen)Shareholders’ Equity

CommonStock

CapitalSurplus

RetainedEarnings

TreasuryStock

Total Shareholders’

EquityBalance at April 1, 2012 30,872 23,789 201,433 -445 255,649Changes in the period

Dividends from surplus -6,137 -6,137Net income 5,865 5,865Acquisition of treasury stock -27 -27

Disposal of treasury stock -6 16 10Increase due to transfer of revaluation difference on land

5,184 5,184

Increase due to inclusion of consolidated subsidiaries from the scope of consolidation

1,124 1,124

Increase due to mergers between consolidated and non-consolidated subsidiaries

118 118

Changes in items other than owners’ equity in the period (net)

Total changes in the period ― ― 6,147 -10 6,137

Balance at March 31, 2013 30,872 23,789 207,580 -455 261,786

34

Valuation and Translation Adjustment

Unrealized Holding Gains/ Losses on Other

Securities

Gains/ Losses on Deferred

Hedge

Adjustment of Pension Obligation of Overseas Subsidiaries

Revaluation Difference

on Land

Foreign Exchange

Translation Adjustments

Sub-Total

MinorityInterests Total

Balance at April 1, 2012 2,267 277 (3,573) 43,381 (19,113) 23,239 3,258 282,145Changes in the period

Dividends from surplus -6,137Net income 5,865Acquisition of treasury stock -27

Disposal of treasury stock 10Increase due to transfer of revaluation difference on land

5,184

Increase due to inclusion of consolidated subsidiaries from the scope of consolidation

1,124

Increase due to mergers between consolidated and non-consolidated subsidiaries

118

Changes in items other than owners’ equity in the period (net)

427 -838 -234 -5,184 9,654 3,824 719 4,544

Total changes in the period 427 -838 -234 -5,184 9,654 3,824 719 10,681

Balance at March 31, 2013 2,694 -562 -3,808 38,197 -9,458 27,064 3,977 292,826“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

35

(For Reference Purposes)

CONSOLIDATED CASH FLOW STATEMENT(From April 1, 2012 to March 31, 2013)

(Millions of yen)Item Amount

Cash flows from operating activities 2,660Cash flows from investing activities -19,660Cash flows from financing activities -11,428Effect of exchange rate changes on cash and cash equivalents 2,073Net increase in cash and cash equivalents -26,356Cash and cash equivalents at beginning of year 72,376Increase from the change in consolidation scope 327Increase from the mergers between consolidated and non-consolidated subsidiaries 128

Cash and cash equivalents at the end of year 46,476

“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

36

BALANCE SHEET(As of March 31, 2013)

(Millions of yen)Assets Liabilities

Current liabilities 141,490Current assets 124,261 Notes payable 2,553Cash and deposits 20,655 Accounts payable 38,852Notes receivable 551 Short-term bank loans 7,100Accounts receivable 54,948 Commercial paper 10,000Finished goods 11,390 Long-term payable debt due within

one year1,000

Work in process 12,779 Lease obligations 180Raw materials and supplies 646 Accounts payable, other 8,219Advances to suppliers 2,325 Accrued expenses 3,267Prepaid expenses 401 Accrued income taxes 1,050Deferred tax assets 4,472 Advances payments received on

contracts10,190

Accounts receivable, other 13,046 Deposits received 55,288Other current assets 6,031 Allowance for warranty 1,978Allowance for doubtful receivables

-2,983 Allowance for losses on construction contract

987

Fixed assets 288,144 Allowance for losses on business transfer

161

Property, plant and equipment 119,000 Other current liabilities 665Buildings 19,246 Long-term liabilities 136,192Structures 2,509 Bonds 10,000Machinery and equipment 4,973 Long-term payable debt 25,200Ships 0 Lease obligations 338Vehicles and delivery equipment 17 Provision for losses on business of

subsidiaries and affiliates5,477

Tools, furniture and fixtures 966 Allowance for retirement benefits 14,774Land 90,585 Asset retirement obligations 288Leased assets 370 Deferred tax liabilities on land

revaluation24,608

Construction in progress 333 Long-term deposits received 54,892Intangible fixed assets 2,324 Other long-term liabilities 616

Software 1,428 Total liabilities 277,683Other intangible fixed assets 896 Net Assets

Investments and other assets 166,820 Stockholders’ Equity 94,517Investment securities 13,417 Common Stock 30,872Stock of subsidiaries and affiliates 102,996 Capital Surplus 27,073

Capital reserve 27,073Investment in capital ofsubsidiaries and affiliates

39,394Retained earnings 37,028

Long-term loans to employees 4 Legal reserve of retained earnings 6,295Other retained earnings 30,733Claims in bankruptcy and

rehabilitation75

Retained earnings brought forward 30,733Long-term prepaid expenses 160 Treasury stock -455Deferred tax assets 7,816 Valuation and translation

adjustments40,205

Other assets 3,385 Unrealized gains (losses) on securities, net of income taxes

2,289

Allowance for doubtful receivables

-429 Unrealized gains (losses) on hedging derivatives, net of income taxes

-281

Revaluation difference on land 38,197Total net assets 134,723

Total assets 412,405 Total liabilities and net assets 412,405“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

37

STATEMENT OF INCOME(From April 1, 2012 to March 31, 2013)

(Millions of yen)177,417157,02720,38920,344

Net salesCost of sales

Gross profitSelling, general and administrative expenses

Operating incomeOther income

45

Interest and dividend income 15,200Other-net 2,844 18,044

Other expensesInterest expenseOther-net

1,0122,800 3,812

14,277

1,073 1,073

Ordinary incomeSpecial gains

Gain on sales of investment securitiesSpecial losses

Impairment lossLoss relating to defense equipment businessProvision of allowance for doubtful accounts for subsidiaries and affiliates

16,9482,2962,140 21,383

-1,540-4,360

6,033

-5,900

Loss before income taxesIncome tax – currentIncome tax – deferred

Net loss 133“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

38

STATEMENTS OF CHANGES IN NET ASSETS(From April 1, 2012 to March 31, 2013)

(Millions of yen)Shareholders’ Equity

Capital Surplus Retained EarningsOther

Retained EarningsCommon

Stock Capital Reserve

TotalCapitalSurplus

Legal Reserve of Retained Earnings

Retained Earnings Brought Forward

Total Retained Earnings

Treasury Stock

Total Share-

holders’ Equity

Balance at April 1, 2012 30,872 27,073 27,073 6,295 31,826 38,120 -445 95,620Changes in the Period

Dividends from surplus -6,137 -6,137 -6,137Net loss -133 -133 -133Acquisition of treasury stock -27 -27Disposal of treasury stock -6 -6 16 10Increase due to transfer of revaluation difference on land 5,184 5,184 5,184Changes in items other than owners’ equity in the period (net)

Total changes in the period ― ― ― ― -1,092 -1,092 -10 -1,103Balance at March 31, 2013 30,872 27,073 27,073 6,295 30,733 37,028 -455 94,517

Valuation and Translation AdjustmentsUnrealized

Holding Gains on

Other Securities

Gains/ Losses on Deferred

Hedge

Revaluation Difference on

LandSub-Total Total

Balance at April 1, 2012 1,943 438 43,381 45,762 141,382Changes in the Period

Dividends from surplus -6,137Net loss -133Acquisition of treasury stock -27Disposal of treasury stock 10Increase due to transfer of revaluation difference on land 5,184Changes in items other than owners’ equity in the period (net) 346 -719 -5,184 -5,556 -5,556

Total changes in the period 346 -719 -5,184 -5,556 -6,659Balance at March 31, 2013 2,289 -281 38,197 40,205 134,723“English Translation of Financial Statements Originally Issued in the Japanese Language”(Note) Amounts shown in this financial statement have been rounded to the nearest million yen.

39

OTHER SHAREHOLDER INFORMATION

The fiscal year of the Company is April 1 each year through March 31 of the following year.

The Ordinary General Meeting of Shareholders is held in the month of June every year.

Record dates: March 31st for Ordinary Shareholders Meeting; March 31st for payment of year-end dividends; and September 30th for payment of interim dividends

Custodian of the Register of Shareholders and the Institution that Manages the Special Accounts: Sumitomo Mitsui Trust Bank, Limited 1-4-1, Marunouchi, Chiyoda-ku, Tokyo, Japan

Handling Place of Register of Shareholders: Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Department1-4-1, Marunouchi, Chiyoda-ku, Tokyo, Japan

Mailing Address*: Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Department2-8-4, Izumi, Suginami-ku, Tokyo 168-8701, Japan

Telephone Inquiries*: Toll free number: 0120-782-031

* The mailing address and the telephone number for inquiries were changed as above from January 2013.

Website: http://www.smtb.jp/personal/agency/index.html

[Special Accounts]For shareholders who did not use Japan Securities Depository Center, Inc. (JASDEC) before share certificates were made electronic, we have set up an account (“special account”) at Sumitomo Mitsui Trust Bank, Limited, our Custodian of the Register of Shareholders.For any inquiry about the special account or to report a change of address, etc., please contact the phone number indicated above.

Method of Public Notices: To be posted on the Company’s Website (http://www.shi.co.jp).

However, where required by unavoidable circumstances, public notices will be made in the Nihon Keizai Shimbun.

SUMITOMO HEAVY INDUSTRIES, LTD.