2009annual report 2009 01 notes: 1. the above amounts were prepared under accounting principles...

Keihin Corporation

Making tracks into the future _

2009Annual Report

Profile Contents

Keihin Corporation is guided by two fundamental beliefs

—“Respect for the individual” and “The five joys.”

We believe that “Respect for the individual” encourages

self-reliance—to be free to express ideas and opinions and to

follow personal beliefs. The concept also emphasizes respect

for different perspectives and customs, and encourages

employees to treat each other with fairness and sincerity to

promote mutual trust.

“The five joys”—comprising society, customers, suppliers,

shareholders and ourselves—represent a shared commitment

to meeting multiple expectations.

These two fundamental beliefs have been a constant

corporate companion, instituted when the Company was

established in December 1956.

The Company has grown alongside progress in

motorization, and its scope of operations has expanded from

development and production of fuel injection systems for

motorcycles and automotive components, such as electronic

control units and air-conditioning systems. Today, Keihin has

28 Group companies in 11 countries and has approximately

15,000 employees.

Keihin will continue to contribute to the future of mankind

by the continuous creation of new value.

Forward-Looking Statements

　This annual report contains predictions and

forecasts concerning Keihin’s future plans,

strategies and results. These predictions and

forecasts are not historical facts but represent

judgments formed by management based

on the information available at the time they

were formed. As such, actual results may differ

significantly due to factors including, but

not limited to, economic trends, changes in

the automobile and automobile component

industries, market demand, foreign exchange

rates and tax systems.

Financial Highlights 0 1

Global Network 0 2

Main Products 0 4

President’s Message 0 5

Results by Business Segment 0 8

Results by Geographical Region 0 9

Topics 1 0

Corporate Governance and Risk Factors

12

Directors and Corporate Auditors 13

Five-Year Summary of Selected Financial Data

14

Financial Review 15

Consolidated Balance Sheets 18

Consolidated Statements of Income 2 0

Consolidated Statements of Changes in Net Assets

2 1

Consolidated Statements of Cash Flows

2 2

Notes to the Consolidated Financial Statements

2 3

Report of Independent Auditors 3 2

Corporate Data 3 3

01Annual Report 2009

Notes:

1. The above amounts were prepared under accounting principles generally accepted in Japan.

2. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥98.23=US$1.

(See Note 3 to the Consolidated Financial Statements.)

3. Effective for the year ended March 31, 2007, “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (“Accounting Standard No. 5” issued by the Accounting Standards Board of Japan on December 9, 2005), and “Guidance on the Accounting Standard for Presentation of Net Assets in the Balance Sheet” (“Accounting Implementation Guidance No. 8” issued by the Accounting Standards Board of Japan on December 9, 2005) have been adopted. Net assets for the year ended March 31, 2006 have been reclassified to conform to the 2008 presentation.

Millions of yen(except per share amounts)

Thousands of U.S. dollars(except per share amounts)

2006 2007 2008 2009 2009

For the year:

Net sales ¥300,960 ¥330,612 ¥339,321 ¥288,337 $2,935,326

Operating income 24,846 22,113 24,009 11,609 118,181

Income before income taxes and minority interests 31,141 23,554 20,781 1,798 18,308

Net income 17,501 12,846 11,201 (5,625) (57,264)

At year-end:

Total net assets ¥127,094 ¥143,454 ¥148,183 ¥126,938 $1,292,250

Total assets 196,126 210,758 213,502 183,751 1,870,622

Per share of common stock (yen and U.S. dollars):

Net income: Basic ¥ 236.60 ¥ 173.38 ¥ 151.44 ¥ (76.05) $ (0.77)

Cash dividends 23.00 32.00 36.00 28.00 0.29

Net sales and operating IncomeNet sales (left scale)

Operating income (right scale)

(yen)

Net income and net income per shareNet income (left scale)

Net income per share (basic, right scale)

Total assets and Total net assetsTotal assets

Total net assets

400,000

300,000

200,000

100,000

0

40,000

30,000

20,000

10,000

0

(Millions of yen)

2005 2006 2007 2008 2009

18,000

12,000

6,000

0

-6,000

300

200

100

0

-100

(Millions of yen)

2005 2006 2007 2008 2009

240,000

180,000

120,000

60,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Financial Highlights

Keihin Corporation and Keihin’s consolidated subsidiaries

For the years ended March 31, 2006, 2007, 2008 and 2009

Global Network We will meet customer expectations by providing high-quality products through a global network. Domestic & Overseas Offices

Keihin Group

11countries, 28 companies

15,578 employees

*2 Keihin North America, Inc. (North American headquarters)Indiana

Keihin Fuel Systems, Inc.WisconsinKeihin Carolina System Technology, Inc.North Carolina

Keihin Aircon North America, Inc.IndianaKeihin IPT Manufacturing, Inc.Indiana

Keihin Michigan Manufacturing, LLC.Michigan

U.S.A.

Brazil

The Philippines

Motorcycles and Power Products

Mechanical Products for Automobiles

Research & Development

Keihin Europe Ltd.Glasgow

Taiwan Keihin Carburetor Co., Ltd.Taichung

Keihin Tecnologia do Brasil Ltda.Amazonas

Keihin Philippines Corp.Laguna

Keihin Auto Parts (Philippines) Corp.Laguna

Keihin Panalfa Ltd.Uttar Pradesh

Keihin FIE Pvt. Ltd.Maharashtra

Keihin (Thailand) Co., Ltd.Lamphun

Keihin Auto Parts (Thailand) Ltd.Ayutthaya

Nanjing Keihin Carburetor Co., Ltd.Jiangsu

Dongguan Keihin Engine Management System Co., Ltd.Guangdong

Keihin R&D China Co., Ltd.Shanghai

*1 Zhanjiang Deni Carburetor Co., Ltd.Guangdong

*1 Zhanjiang Deni Carburetor Co., Ltd. is not an equity method affiliate.*2 On April 1, 2009, Keihin Indiana Precision Technology, Inc. changed its name to Keihin North America, Inc.

Keihin Sales and Development Europe GmbHBayern

Overseas Network

Taiwan

China

India

United Kingdom

Thailand

P.T. Keihin IndonesiaWest Java

Indonesia

Germany

Head o�ceShinjuku-ku

Iwate PlantIwate-machi

Kakuda Plant 1

Kakuda Plant 2

Kakuda Plant 3

Kakuda Research & Development Center (Training & Welfare Center)Kakuda-shi

Marumori PlantMarumori-machi

Kanazu Mfg. Co., Ltd.Kakuda-shi

Keihin Sogyo Co., Ltd.Kakuda-shi

Keihin Watari Co., Ltd.Watari-cho

Keihin Electronics Technology, Inc.Sendai-shi

Suzuka PlantSuzuka-shi

Sayama PlantSayama-shi

Asaka O�ceAsaka-shi

Kawasaki PlantKawasaki-shi

Keihin Valve Corp.Yokohama-shi

Hamamatsu O�ceHamamatsu-shi

Tochigi Research & Development CenterTakanezawa-machi

Nasu Seiki Mfg. Co., Ltd.Nasukarasuyama-shi

Domestic Network

Iwate

MiyagiTokyo

Tochigi

Kanagawa

Saitama

Shizuoka

Mie

(The combined workforce as of March 31, 2009)

Taiwan Keihin Carburetor Co., Ltd., established in 1981 in Taiwan, marked the beginning

of our expansion abroad. Today, the Company operates in 11 countries, through 28 Group

companies and employs some 15,000 people. Wherever our customers are in the world,

they can rely on us for timely access to high-quality products.

02

Global Network We will meet customer expectations by providing high-quality products through a global network. Domestic & Overseas Offices

Keihin Group

11countries, 28 companies

15,578 employees

*2 Keihin North America, Inc. (North American headquarters)Indiana

Keihin Fuel Systems, Inc.WisconsinKeihin Carolina System Technology, Inc.North Carolina

Keihin Aircon North America, Inc.IndianaKeihin IPT Manufacturing, Inc.Indiana

Keihin Michigan Manufacturing, LLC.Michigan

U.S.A.

Brazil

The Philippines



Research & Development

Keihin Europe Ltd.Glasgow

Taiwan Keihin Carburetor Co., Ltd.Taichung

Keihin Tecnologia do Brasil Ltda.Amazonas

Keihin Philippines Corp.Laguna

Keihin Auto Parts (Philippines) Corp.Laguna

Keihin Panalfa Ltd.Uttar Pradesh

Keihin FIE Pvt. Ltd.Maharashtra

Keihin (Thailand) Co., Ltd.Lamphun

Keihin Auto Parts (Thailand) Ltd.Ayutthaya

Nanjing Keihin Carburetor Co., Ltd.Jiangsu

Dongguan Keihin Engine Management System Co., Ltd.Guangdong

Keihin R&D China Co., Ltd.Shanghai

*1 Zhanjiang Deni Carburetor Co., Ltd.Guangdong

*1 Zhanjiang Deni Carburetor Co., Ltd. is not an equity method affiliate.*2 On April 1, 2009, Keihin Indiana Precision Technology, Inc. changed its name to Keihin North America, Inc.

Keihin Sales and Development Europe GmbHBayern

Overseas Network

Taiwan

China

India

United Kingdom

Thailand

P.T. Keihin IndonesiaWest Java

Indonesia

Germany

Head o�ceShinjuku-ku

Iwate PlantIwate-machi

Kakuda Plant 1

Kakuda Plant 2

Kakuda Plant 3

Kakuda Research & Development Center (Training & Welfare Center)Kakuda-shi

Marumori PlantMarumori-machi

Kanazu Mfg. Co., Ltd.Kakuda-shi

Keihin Sogyo Co., Ltd.Kakuda-shi

Keihin Watari Co., Ltd.Watari-cho

Keihin Electronics Technology, Inc.Sendai-shi

Suzuka PlantSuzuka-shi

Sayama PlantSayama-shi

Asaka O�ceAsaka-shi

Kawasaki PlantKawasaki-shi

Keihin Valve Corp.Yokohama-shi

Hamamatsu O�ceHamamatsu-shi

Tochigi Research & Development CenterTakanezawa-machi

Nasu Seiki Mfg. Co., Ltd.Nasukarasuyama-shi

Domestic Network

Iwate

MiyagiTokyo

Tochigi

Kanagawa

Saitama

Shizuoka

Mie

(The combined workforce as of March 31, 2009)

Taiwan Keihin Carburetor Co., Ltd., established in 1981 in Taiwan, marked the beginning

of our expansion abroad. Today, the Company operates in 11 countries, through 28 Group

companies and employs some 15,000 people. Wherever our customers are in the world,

they can rely on us for timely access to high-quality products.



Automobile Products

Airbag system control unitElectronically controls airbag using signals picked up by sensors

Injector Throttle body

Engine control unit Fuel pump module

Intake manifold assemblyMixes the air with fuel delivered from the injector and supplies the mixture to the engine

Airbag system control unitDetects impact and sends a signal to deploy airbags

HVAC (Heating, ventilation and air-conditioning) UnitAir-conditioning system that maintains interior conditions, such as temperature and humidity, at comfortable levels

Engine control unitUses sensor-relayed information to ensure optimum quantity of air and fuel in the engine

Power control unitElectronically controls the battery and motor in a hybrid vehicle

CarburetorMechanically adjusts the air-fuel mixture supplied to the engine

Electronic fuel injection system

Electronically controls the optimal supply of fuel to the engine

04

Main Products With products that always bring leading-edge technologies into full play, Keihin will continue to contribute to the success and further development of the motorcycle and automobile industry.


President’s Message

In fiscal 2009, ended March 31, 2009, the global economy fell solidly into recession, as the financial fire ignited in the United States spread around the world, badly burning the real economy in the process. The ensuing economic slump is expected to persist, largely because of a general decline in consumption, and the earnings of companies in developed countries are leaning toward deterioration rather than recovery. At Keihin, management’s first courses of action for coping with the massive changes in the operating environment are to place a limit on investments, apply production adjustments matched to market conditions, review the production structure and strive to curb costs throughout the Group. These efforts should lead to higher earnings. Next, looking to the future, we aim to boost operating efficiency and will achieve this by realigning domestic operations. Some serious quality issues were experienced by our primary customer and led to product recalls. We duly acknowledge that these issues can be traced back to faulty components supplied by us. We will therefore direct concerted efforts toward reinforcing our ability to ensure quality by eliminating the potential for substandard products and, most importantly, preventing a reoccurrence of the problem that did appear. Over the medium term, we anticipate wider demand for products with enhanced safety and environment-friendly features. However, this will accelerate heightened competition on a global scale, leading to a severe operating environment. We must be ready for anything and draw on our combined expertise to overcome such difficulties. Toward this end, we will focus on the four overriding themes of the Tenth Medium-term Business Plan, which began on April 1, 2008: 1) create a structure that enables the Group to demonstrate its capacity for innovation; 2) achieve and maintain unparalleled levels of product quality worldwide; 3) build a highly price-competitive cost structure; and 4) cultivate a corporate culture that promotes originality. Success on these four fronts will lead to higher corporate value, an indispensable tool in the struggle to secure longevity in a tough operating environment.

Seeking to Implement

the Industry’s Best Environment

Management System

06

Impact of the Recession on the GroupEconomic developments adversely affecting the Group in fiscal 2009 included skyrocketing fuel and raw material costs, and an increasingly sluggish real economy. This paralleled the financial crisis that erupted in the United States and caused the world economy to take a large step back from potential recovery. In Japan, the business climate quickly deteriorated, mainly because the sudden appreciation of the yen and a drop in exports caused a massive decrease in corporate earnings. Overseas, in Europe and North America personal spending trends cooled, pulling their economies into recession. Even in Asia, particularly China, where conditions were trending upward, export activity began to falter in the second half of fiscal 2009 and slowed the pace of expansion.

Motorcycle ProductsNotable developments in this business include our first delivery of electronic fuel injection systems to BMW, and the application of a newly developed electronic fuel injection system for motocross bikes, including models such as Honda’s CRF 450R. We developed an electronic fuel injection system that conforms to tougher next-generation emission regulations, and can be used with ethanol blends. This system was installed in such models as Honda’s CZ-i110, which is sold in Thailand. We also developed and delivered a fuel injection system for Honda’s CG150 TITAN MAX, which is sold in Brazil. This system features flex-fuel technology, which in this case allows the engine to run on either gasoline or bio-ethanol—considered an environmentally friendly fuel—or even a mixture of the two.

Automobile ProductsOur newly developed electronic control units and hydrogen control system products for fuel-cell vehicles were installed in Honda’s FCX Clarity. We developed and delivered an electronic control unit for the pop-up hood system in Honda’s Legend. This system lessens the possibility of a serious head injury in the event the car hits a pedestrian. We also made efforts to develop products for hybrid vehicles. Most notably, we developed and delivered an electronic control unit to be used in Honda’s Insight, to control the motor and battery.

Reinforced Production PlatformOn the production front, we increased capacity in Asia where demand for motorcycles is growing. Keihin (Thailand) Co., Ltd. completed construction of its second factory in December 2008. The facility boosts output of electronic fuel injection system components and carburetors for motorcycles. P.T. Keihin Indonesia expanded its facility in September 2008, to increase capacity for motorcycle-use carburetors. Keihin Tecnologia do Brasil Ltda. expanded capacity to start production of electronic fuel injection systems for motorcycles. In Japan and North America, where demand has rapidly shrunk, we executed production adjustments designed to rightsize inventories as quickly as possible. In North America, we also took steps to raise production efficiency, including operational restructuring.

Honda’s CG150 TITAN MAX

(For Brazil)

Pop-up hood control unit for

Honda’s Legend

Second factory at Keihin (Thailand)

Co., Ltd.

President’s Message


Business PerformanceOn a consolidated basis, net sales fell ¥50,983 million to ¥288,337 million. Operating income tumbled ¥12,399 million to ¥11,609 million, as the benefits of cost cutting and internal rationalization were overshadowed by reduced income paralleling a lower net sales starting point and eroded results from overseas due to yen appreciation. After accounting for such fiscal events as addition to allowance for product warranties, operational improvement costs in North America and reversal of non-consolidated deferred tax assets, the Group was left with a net loss of ¥5,625 million, compared with net income of ¥16,826 million in fiscal 2008.

Return of Profits to ShareholdersWe consider the return of profits to shareholders to be one of our most important management objectives. Our dividend policy hinges on consolidated operating performance over the long term, and we consider future business development in determining an appropriate dividend. The annual dividend for fiscal 2009 was ¥28 per share, down ¥8 over fiscal 2008. The decrease comes from the year-end dividend, which was ¥10 per share rather than ¥18 per share, paid in the previous fiscal year. This reflects the extremely challenging business conditions we encountered in fiscal 2009. The interim dividend, paid on December 8, 2008, was ¥18 per share, the same as in the corresponding period a year earlier.

Outlook for Fiscal 2010 By geographical breakdown, we expect sales in Japan to decrease, as sluggish exports to developed countries compound the effect of reduced domestic demand for motorcycle and automobile-oriented products. Sales in the Americas may falter, due to poor demand for automobile products, while exchange rate pressure squeezes the yen-based translations of foreign currency-denominated amounts. Sales in Asia, excluding the home market of Japan, may increase, but the improvement will be negated by exchange rate fluctuations. Operations in Europe will see lower sales, owing to diminished demand for automobile products and the impact of exchange rates. On the profit front, we remain committed to measures designed to raise production efficiency and cut costs. However, both the lower net sales starting point and the effect of yen appreciation on overseas sales will probably cause a major drop in profits. On a consolidated basis, net sales may fall 16.8% year on year, to ¥240 billion. We are prepared for the possibility of a 98.3% tumble in operating income, to ¥200 million, and a deeper net loss, settling at ¥6.2 billion.

In ConclusionOn behalf of the Board of Directors, I ask all stakeholders for their continued support of our efforts as we tackle the challenges that characterize our business environment.

Kunimichi OdagakiPresident & CEO

July 2009

Expanded facility at P.T. Keihin

Indonesia

Commenced production of

electronic fuel injection systems for

motorcycles (Keihin Technologia

do Brasil Ltda.)

08

Results by Business Segment


Net Sales: ¥211.5 billion


Worldwide, the Keihin Group sold 19.2 million carburetors in fiscal 2009, up 2%

year on year. Sales of throttle bodies for electronic fuel injection systems jumped

23%, to 1.67 million units. Geographically, Asia was the focus of higher carburetor

sales, with India accounting for 6.23 million units, up 1 %; 3.9 million units in

Thailand, up 3 %; and 3.34 million units in Indonesia, up 45 %.

Sales reached ¥76,862 million.

In fiscal 2009, Keihin developed two products for Honda’s FCX Clarity, a fuel-

cell vehicle, as well as an electronic control unit for Honda’s Insight, a hybrid

vehicle.

Sales amounted to ¥211,475 million.

26.7%

Percentage of Total Net Sales

73.3%


Sales of Carburetors

Carburetor Sales by Geographic Region (2009)

2,000

1,500

1,000

500

0

(10,000s of units)

2005 2006 2007 2008 2009

Region Unit Sales(10,000s of units)

Percent Change from Prior Year (%)

1308

14771

390217623334

1,920

JapanU.S.A.BrazilTaiwanThailandChinaIndiaIndonesiaTotal

-20-3311

-203

-181

452

26.7%


73.3%




2,000

1,500

1,000

500

0

(10,000s of units)

2005 2006 2007 2008 2009



1308

14771

390217623334

1,920


-20-3311

-203

-181

452

26.7%


73.3%




2,000

1,500

1,000

500

0

(10,000s of units)

2005 2006 2007 2008 2009



1308

14771

390217623334

1,920


-20-3311

-203

-181

452

26.7%


73.3%




2,000

1,500

1,000

500

0

(10,000s of units)

2005 2006 2007 2008 2009



1308

14771

390217623334

1,920


-20-3311

-203

-181

452

Net Sales: ¥76.9 billion

Environment-Oriented Products for AutomobilesWith greater awareness about the environment and the imminent possibility of soaring oil prices, demand for vehicles powered by alternative fuels will grow. Keihin has already developed products for vehicles that run on bio-fuel and compressed natural gas/liquefied petroleum gas, as well as hybrid vehicles and fuel-cell vehicles. The environment and next-generation fuel technology remain priority themes in the Company’s efforts to engineer products that match market needs.

CNG/LPGvehicles

Hybridvehicles

Shift toward petroleum alternatives

Bio-fuelvehicles

Fuel-cellvehicles

Net sales

Japan

200,000

150,000

100,000

50,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Higher demand for products installed in Freed and Fit, two existing Honda vehicles, and for a product installed in a new Honda model, Insight. However, a shift in production to North America lowered sales by operations in Japan. This situation was compounded by lackluster sales and exports of motorcycle products from the end of 2008, due to the worldwide recession. Consequently, sales by domestic members of the Keihin Group fell ¥29,364 million to ¥152,729 million.

The shift in production from Japan buoyed sales of automo-bile products by subsidiaries in the Americas. However, negative factors—namely, a shrinking North American market following greater consumer interest in compact cars, as well as a major exchange rate squeeze—caused sales generated by operations in the Americas to tumble ¥25,024 million to ¥83,202 million.

The results achieved by operations in Asia were affected by yen appreciation. However, solid demand for motorcycle products in Thailand and Indonesia complemented higher demand for automobile products in Thailand and China, nudging sales up ¥833 million on a yen basis to ¥92,336 million.

Although the inclusion of new companies under the scope of consolidation boosted sales from operations in Europe, the impact of yen appreciation on converted local amounts compounded the effect of sluggish conditions in the markets of Europe and culminated in a drop of ¥3,097 million in regional sales to ¥7,764 million.

39.3%

Net sales

Americas

120,000

90,000

60,000

30,000

0

(Millions of yen)

2005 2006 2007 2008 2009

28.7%

Net sales

Europe

12,000

9,000

6,000

3,000

0

(Millions of yen)

2005 2006 2007 2008 2009

100,000

75,000

50,000

25,000

02005 2006 2007 2008 2009

2.5%

Net sales

Asia

(Millions of yen)

29.5%

Percentage of Total Net Sales Percentage of Total Net Sales

Percentage of Total Net SalesPercentage of Total Net Sales

Net Sales

¥152.7 billion

Net Sales

¥83.2 billion

Net Sales

¥92.3 billion

Net Sales

¥7.8 billion


Results by Geographical Region*

*Includes intersegment sale

10

Topics

Realigning domestic operations to improve operating efficiency

The slowdown that has plagued economies worldwide since the latter half of fiscal 2008 has caused market conditions to deteriorate. To address this situation, the Company is directing particular efforts toward measures that will raise productivity and streamline costs. Seeking to enhance operating efficiency, management decided to realign domestic operations. In production activities, operations at the Kawasaki Plant and the Iwate Plant will be transferred to plants in Miyagi Prefecture. The centralization of production is expected to underpin greater flexibility in responding to production changes.

In development activities, the development division at the Kawasaki Plant will be integrated into the Tochigi Research and Development Center to improve development efficiency. Personnel currently working in the production divisions at the Kawasaki Plant and Iwate Plant will be reassigned to Miyagi Prefecture, while personnel in the development division at the Kawasaki Plant are planned to relocate to the Tochigi Research and Development Center. Realigning domestic operations this way should create a more resilient corporate structure.

Keihin will realign its domestic operations to enhance operating efficiency and build a more resilient corporate structure.

ProductionDivision

DevelopmentDivision

To Plants in Kakuda, Miyagi Prefecture

Domestic production:8 locations 6 locations

Transferperiod

August 2009

January 2010

Kawasaki PlantManufacture of motorcycles

and power productsCommenced operations

in March 1957

To Tochigi Research and Development Center

in Takanezawa-machi, Tochigi Prefecture

Domestic development:3 locations 2 locations

Transferperiod

September 2010

Development Divisionat the Kawasaki PlantResearch and development of

motorcyclesand power products

Iwate PlantManufacture of mechanical

products for automobilesCommenced operations

in August 1982


Newly developed electronic control unit for Honda’s new Insight

Honda’s Insight

Market demand for automobiles that are environmentally friendly is increasing. Keihin has made the development of environmentally friendly technology a priority and pursues research and development (R&D) aimed at the shift toward alternative fuels. Last year, we developed several products to be installed in Honda’s FCX Clarity, a fuel-cell vehicle that emits no CO2 whatsoever. However, it will be some time before widespread use of fuel-cell vehicles is achieved, primarily because of infrastructure issues. Low-fuel consumption hybrids are seen as the more promising vehicular option right now, thanks to the existence of practical technology that delivers impressive results. Keihin has developed a number of hybrid-oriented

products, including power drive units, which pick up signals from the engine control unit to run the motor, and battery controllers. These products are found in Honda’s Civic Hybrid. Honda recently debuted a redesigned Insight. Keihin applied accumulated technology from its involvement in the first-generation Insight and the Civic Hybrid to engineer products for the new model Insight. These include the electronic control unit, the fuel supply system and the air-conditioning system. We combined several features, such as motor control and battery control, into a single electronic control unit and developed an advanced power control unit. We will continue to pursue R&D on products for hybrid vehicles.

Power control unit Compressor Throttle body

Keihin provides key products for Honda’s Insight

12

Corporate Governance

Risk Factors

1. Management StructureBoard of DirectorsThe Board of Directors comprises 17 directors, none of whom are external. The Board makes decisions related to legal matters and the execution of important business activities, and oversees the execution of business activities. In fiscal 2009, the Board of Directors met 20 times.Board of Corporate Auditors The Board of Corporate Auditors comprises four auditors, three of whom are external. In accordance with such factors as auditing policy, examination methods and the division of duties determined by the Board of Corporate Auditors, auditors attend Board of Directors’ meetings and voice their opinions on issues put forward at these meetings, and audit the execution of directors’ activities through reviews, such as assessments of business and assets. In fiscal 2009, the Board of Corporate Auditors met 11 times.Selection of Director and Corporate Auditor CandidatesCandidates for the position of director are chosen through a resolution by the Board of Directors. Candidates for the position of corporate auditor are chosen through a resolution by the Board of Directors with the approval of the Board of Corporate Auditors.Compensation for Directors and Corporate AuditorsCompensation for directors and corporate auditors is linked to fiscal results and various other factors, and must not exceed the maximum

amount approved by shareholders at the General Shareholders’ Meeting. Amounts are approved by the Board of Directors and discussed by the Board of Corporate Auditors in consideration of these criteria. Accounting AuditsThe certified public accountants assigned to audit the Company’s books are Toshihiro Yasada, Takayuki Ozaki and Yasushi Fujima, all of whom belong to Ernst & Young ShinNihon LLC. All three have audited the Company’s books for less than seven consecutive years. They are assisted by eight certified public accountants, seven assistant accountants and seven other assistants.

2. Business Execution SystemThe Keihin philosophies—“Respect for the individual” and “The five joys”—are central to the execution of business. Guided by these philosophies, the Company maintains a structure through which each business headquarters supports each operational headquarters, and coordinates activities according to their respective business segments. Directors are also duly assigned to key business and operational headquarters and divisions. In addition, Keihin maintains a highly effective and efficient business execution system to facilitate discussion of issues at meetings attended by directors and also by the Executive Council, which discusses important management topics within the scope of authority delegated by the Board of Directors.

1. Changes in Market EnvironmentsThe Keihin Group undertakes business on a global scale. Economic downturns in the markets where the Group maintains a presence could dampen demand for motorcycle products, automobile products, power products and recreational vehicles, which could, in turn, exert a negative impact on the Group’s fiscal results.

2. Exchange Rate FluctuationsThe Keihin Group pursues business activities on a global scale. Consequently, fluctuations in exchange rates could influence the financial standing of the Group, its business results and its competitive edge.

3. QualityThe Keihin Group seeks to establish a worldwide product guarantee system and will meticulously strive to maintain and further improve the quality of its products. However, unexpected malfunctions could arise, which have the potential to reflect badly on the Company and thus impair fiscal results.

4. Motorcycle and Automobile Industry Environment and RulesThe motorcycle and automobile industries are governed by an extensive assortment of rules pertaining to fuel, noise, safety, exhaust gas, toxic substances and wastewater from manufacturing plants. Existing rules may be amended and, more often than not, these new rules are more stringent. The cost of obeying these rules could limit the range of the Group’s business activities.

5. Protecting Intellectual PropertyOver the years, the Keihin Group has accumulated patents and

trademarks for the products it manufactures or has acquired these rights. These patents and trademarks played an integral role in the growth processes of the Company and the Group to date, and the importance of these assets will not change. However, unlawful use of the Company’s intellectual assets could adversely affect the Company’s business activities.

6. High Reliance on the Honda GroupIn fiscal 2009, ended March 31, 2009, transactions with the Honda Group represented roughly 90% of consolidated net sales. If the business strategies of the Honda Group were to change, or for some reason the business status that the Keihin Group currently enjoys with the Honda Group were to change, the business activities, fiscal results and financial standing of the Keihin Group could be significantly impacted.

7. Changing Raw Materials Market Conditions Most of the costs involved in manufacturing the products of the Keihin Group are raw materials costs. Changes in the prices of the raw materials that the Group uses could have a detrimental impact on the Group’s fiscal results.

8. Impact of Destructive Events, including Disease, War, Terrorism, Strikes and Natural DisastersThe Keihin Group undertakes business on a global scale. Unexpected events, such as strikes, the outbreak of disease, the eruption of war, acts of terrorism and natural disasters, could delay or completely stop procurement of raw materials and components, production, the sale of products and logistics services. Such delays to, or suspension of, operations, especially if they prove to be lengthy, could adversely affect the Group’s business pursuits, financial standing and business results.

At Keihin, we believe that enriching corporate governance practices is a particularly vital management priority. Good governance will earn us solid confidence from shareholders, customers and society as a whole, and enable us to reinforce corporate value as we undertake our operations. With this in mind, we have implemented various measures to strengthen compliance and risk management, and uphold a high level of corporate ethics.

Risks with the potential to affect Keihin’s operating results and financial condition include, but are not limited to, the following major risks.

B a s i c Co n c e p t


Directors and Corporate Auditors

Executive Vice President and Representative Director

Kazuyuki Sasa

President & CEO and Representative Director

Kunimichi Odagaki

Senior Managing Director and Representative Director

Kazuoki Ukiana

（As of June 19, 2009）

President & CEO and Representative Director

Kunimichi Odagaki

Executive Vice President and Representative Director

Kazuyuki Sasa

Senior Managing Director and Representative Director

Kazuoki Ukiana

Managing Directors Masami Watanabe Hiroshi Irino Kazuhiro Hashiyama Masaaki Koike

Directors Shoichi Hatanaka Masashi Matsuo Chugo Sato Hiroshi Yoshizawa

Koki Onuma Takeshi Iwata Takashi Namari Hiroshi Seikai

Nobuaki Suzuki Toru Mitsubori

Auditors Tadashi Endo Tetsuro Suzuki Katsumi Oya Naoya Watanabe

14

Five-Year Summary of Selected Financial Data

Notes :

1. The above amounts were prepared under accounting principles generally accepted in Japan.

2. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥98.23=US$1.

(See Note 3 to the Consolidated Financial Statements.)

3. Effective for the year ended March 31, 2007, “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (“Accounting Standard No. 5” issued by the Accounting Standards Board of Japan on December 9, 2005), and “Guidance on the Accounting Standard for Presentation of Net Assets in the Balance Sheet” (“Accounting Implementation Guidance No. 8” issued by the Accounting Standards Board of Japan on December 9, 2005) have been adopted. Net assets for the years ended March 31, 2005 and 2006, have been reclassified to conform to the 2008 presentation.

4. From fiscal 2009, Keihin’s four previous business segments have been consolidated into two business segments.

Millions of yen(except per share amounts)

Thousands of U.S. dollars(except per share amounts)

2005 2006 2007 2008 2009 2009

For the year :

Net sales ¥ 271,496 ¥ 300,960 ¥ 330,612 ¥ 339,321 ¥ 288,337 $ 2,935,326 Results by geographical region

Japan 185,899 180,413 185,583 182,094 152,729 1,554,813 Americas 96,257 106,803 111,807 108,227 83,203 847,020 Asia 49,226 61,047 75,560 91,453 92,336 939,997 Europe 6,217 6,304 8,704 10,862 7,764 79,042 Consolidated adjustments (66,103) (53,607) (51,042) (53,315) (47,695) (485,546)

Results by business segment

　　　Motorcycles and power products - - - - 76,862 782,470 　　　Mechanical products for automobiles - - - - 211,475 2,152,856

Results by business segment

　　　Motorcycles and power products 57,207 67,104 74,181 81,603 - - 　　　Mechanical products for automobiles 99,017 111,950 120,310 117,055 - - 　　　Electronic control units 57,262 65,777 73,051 74,720 - - 　　　Air-conditioning systems 58,010 56,129 63,070 65,943 - -

　Operating income 20,872 24,846 22,113 24,009 11,609 118,181 　Ordinary income 20,756 25,801 23,375 24,457 9,887 100,651 　Income before income taxes and minority interests 20,191 31,141 23,554 20,781 1,798 18,308 　Net income (loss) 10,856 17,501 12,846 11,201 (5,625) (57,264)　Research and development expenses 12,154 14,217 15,946 14,983 14,404 146,635 　Capital expenditures 14,109 16,806 22,538 19,129 17,975 182,987

At year-end :

Total net assets ¥ 102,909 ¥ 127,094 ¥ 143,454 ¥ 148,183 ¥ 126,938 $ 1,292,250 Total assets 170,365 196,126 210,758 213,502 183,751 1,870,622 Per share of common stock (yen and U.S. dollars):

Net income (loss) : Basic 146.76 236.60 173.38 151.44 (76.05) (0.77) Cash dividends 16.00 23.00 32.00 36.00 28.00 0.29 Net assets 1,217.88 1,493.80 1,669.98 1,716.16 1,481.22 15.08

Cash flows

　Cash flows from operating activities ¥ 25,243 ¥ 25,434 ¥ 27,689 ¥ 33,734 ¥ 17,858 $ 181,802 　Cash flows from investing activities (15,532) (15,239) (25,109) (23,038) (16,814) (171,173)　Cash flows from financing activities (1,075) (3,172) (3,691) (6,119) 54 555 　Cash and cash equivalents at end of year 22,609 31,022 31,125 34,369 31,856 324,302

For the years ended March 31, 2005, 2006, 2007, 2008 and 2009


Financial Review

Results of Operations

Net Sales

Deteriorating market conditions, caused by the worldwide economic slowdown that began in the second half of 2008, squeezed

demand for motorcycles and power products as well as automobiles, and led to lower demand for the components that the

Keihin Group provides. As a result, consolidated net sales fell 15.0%, to ¥288,337 million (US $2,935 million).

By geographical region, sales in Japan declined 16.1%, to ¥152,729 million (US $1,555 million). This change reflects a shift in

production to the Americas for automobile products and a drop in exports of motorcycle products.

Sales in the Americas, meanwhile, showed a 23.1% decrease, to ¥83,203 million (US $847 million). This stems largely from the

market-shrinking impact of the global economic downturn, which suppressed demand for automobile products, and also from

the repercussions of a high yen–low dollar exchange rate.

Sales in Asia, local operations delivered a 1.0% increase, to ¥92,336 million (US $940 million). This improvement was due to

higher sales in Thailand, Indonesia and China.

Sales in Europe rose 28.5%, to ¥7,764 million (US $79 million). This performance reflects sluggish demand in the local market

and the impact of exchange rates on amounts in Japanese yen.

Income and Expenses

Consolidated operating income tumbled 51.6%, to ¥11,609 million (US$ 119 million), owing to a lower net sales starting point

and the performance-eroding effect of Japanese yen appreciation on other currencies.

A breakdown of operating income by geographical region showed a ¥9,901 million (US $10 million) operating loss for Japan,

compared with an operating income position in fiscal 2008. The Americas recorded a 78.1% slide, to ¥1,681 million (US $17

million). Asia bucked the downward trend with an 8.5% increase, to ¥11,182 million (US $114 million). Europe posted a 32.0%

decrease, to ¥656 million (US $7 million).

Ordinary income hit ¥9,887 million (US $101 million), down 59.6% from the previous year. Income before income taxes and

minority interests plummeted 91.3%, to ¥1,798 million (US $18 million). Following a transfer to accrued product warranties,

restructuring changes in America and a parent-only reversal of deferred tax assets, the Company recorded a consolidated net

loss of ¥5,625 million (US $57 million). This was a turnaround from a net income position in fiscal 2008.

Operating income

Net income (loss)

Operating income and net Income (loss) Capital expenditures

24,000

18,000

12,000

6,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Research and development expenses

20,000

15,000

10,000

5,000

0

(Millions of yen)

2005 2006 2007 2008 2009

40,000

30,000

20,000

10,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Japan

Americas

Net sales by geographical segmentMotorcycles and power products

Mechanical products for automobiles

Net sales by business segmentElectronic control units

Air-conditioning systems

Asia

Europe

400,000

300,000

200,000

100,000

0

(Millions of yen)

2005 2006 2007 2008 2009

400,000

300,000

200,000

100,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Total assets

Total net assets

Total assets and total net assets

240,000

180,000

120,000

60,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Cash provided by operating activities

30,000

20,000

10,000

0

-10,000

(Millions of yen)

2005 2006 2007 2008 2009

Note : From the fiscal 2009, Keihin’s four previous business segments have been consolidated into two business segments.

16

R&D Expenses

The basic goal of R&D within the Keihin Group is to create systematized products backed by sophisticated technology. Toward

this end, the Group applies a front-loading approach to its R&D pursuits by anticipating its clients’ needs.

R&D is the domain of the Company’s development departments. From fiscal 2009, these development departments fall

under the Motorcycles and Power Product Business Headquarters and the Automobile Product Business Headquarters. This will

enable the Group to fine-tune R&D according to its product plans.

R&D expenses in fiscal 2009 reached ¥14,404 million (US $147 million).

Capital Expenditures

In fiscal 2009, capital expenditures were down 6.0%, to ¥17,975 million (US $183 million) from fiscal 2008. By application, ¥4,689

million (US $48 million) was invested in facilities that manufacture motorcycle and power products and ¥7,165 million (US $73

million) was used for facilities that make automobile products. Funds allocated to R&D accounted for ¥1,269 million (US $13

million), while other investments accounted for ¥4,852 million (US $49 million).

Operating income

Net income (loss)


24,000

18,000

12,000

6,000

0

(Millions of yen)

2005 2006 2007 2008 2009


20,000

15,000

10,000

5,000

0

(Millions of yen)

2005 2006 2007 2008 2009

40,000

30,000

20,000

10,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Japan

Americas





Asia

Europe

400,000

300,000

200,000

100,000

0

(Millions of yen)

2005 2006 2007 2008 2009

400,000

300,000

200,000

100,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Total assets

Total net assets


240,000

180,000

120,000

60,000

0

(Millions of yen)

2005 2006 2007 2008 2009


30,000

20,000

10,000

0

-10,000

(Millions of yen)

2005 2006 2007 2008 2009


Cash Flows

Cash and cash equivalents as of March 31, 2009, totaled ¥31,856 million (US $ 324 million), down 7.3% from the previous year.

Net cash provided by operating activities dropped 47.1%, to ¥17,858 million (US $182 million). Notable boosts to cash flow

were ¥17,197 million (US $175 million) in depreciation and amortization and a ¥11,052 million (US $113 million) decrease in trade

notes and accounts receivable. Negative cash flow factors were a ¥3,101 million (US $32 million) increase in inventories and a

¥9,870 million (US $105 million) decrease in trade notes and accounts payable.

Net cash used in investing activities declined 27.0%, to ¥16,814 million (US $171 million). The primary application of funds was

¥18,346 million (US $187 million) for purchases of property, plant and equipment and intangible assets.

Net cash (used in) provided by financing activities amounted to ¥54 million (US $1 million). This change reflects an increase in

short-term loan.

Financial Position

Total assets stood at ¥183,751 million (US $1,871 million) as of March 31, 2009, down 13.9% from the previous year. Net assets

decreased ¥14.3%, to ¥126,938 million (US $1,292 million), and net assets per share came to ¥1,481.22, down ¥234.94 from the

previous year. The equity ratio edged up 0.1 percentage point, to 59.6%.

Operating income

Net income (loss)


24,000

18,000

12,000

6,000

0

(Millions of yen)

2005 2006 2007 2008 2009


20,000

15,000

10,000

5,000

0

(Millions of yen)

2005 2006 2007 2008 2009

40,000

30,000

20,000

10,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Japan

Americas





Asia

Europe

400,000

300,000

200,000

100,000

0

(Millions of yen)

2005 2006 2007 2008 2009

400,000

300,000

200,000

100,000

0

(Millions of yen)

2005 2006 2007 2008 2009

Total assets

Total net assets


240,000

180,000

120,000

60,000

0

(Millions of yen)

2005 2006 2007 2008 2009


30,000

20,000

10,000

0

-10,000

(Millions of yen)

2005 2006 2007 2008 2009

18

12

Consolidated Balance Sheets Keihin Corporation and Consolidated Subsidiaries As of March 31, 2008 and 2009

Millions of yen

Thousands of U.S. dollars

ASSETS 2008 2009 2009

Current assets:

Cash and deposits ¥ 26,055 ¥ 24,898 $ 253,467

Trade notes and accounts receivable 44,260 28,927 294,484

Securities 9,633 9,000 91,622

Merchandise and finished products 7,693 6,043 61,521

Work in process 5,304 3,669 37,352

Raw materials and supplies 13,740 16,288 165,817

Deferred tax assets 3,844 1,959 19,940

Other current assets 5,305 5,422 55,190

Total current assets 115,834 96,206 979,393

Non-current assets:

Property, plant and equipment:

Buildings and structures 38,859 39,818 405,360

Less: accumulated depreciation (19,248) (19,955) (203,150)

Buildings and structures, net 19,611 19,863 202,210

Machinery, equipment and vehicles 119,420 119,273 1,214,222


Machinery, equipment and vehicles, net 37,673 35,666 363,090

Tools, furniture and fixtures 32,333 31,487 320,549


Tools, furniture and fixtures, net 6,860 6,314 64,284

Land 7,473 7,834 79,747

Construction in progress 9,440 4,607 46,898

Total property, plant and equipment 81,057 74,284 756,229

Intangible assets 3,104 2,683 27,315

Investments and other assets:

Investment securities 8,453 4,966 50,551

Long-term loans receivable 279 439 4,471

Deferred tax assets 1,560 2,253 22,931

Other assets 3,247 2,944 29,979

Less: allowance for doubtful accounts (32) (24) (247)

Total investments and other assets 13,507 10,578 107,685

Total non-current assets 97,668 87,545 891,229

Total assets ¥ 213,502 ¥ 183,751 $ 1,870,622

See accompanying notes to consolidated financial statements.


13

Millions of yen


LIABILITIES AND NET ASSETS 2008 2009 2009

Current liabilities:

Trade notes and accounts payable ¥ 35,383 ¥ 21,536 $ 219,242

Short-term loans payable 2,468 6,392 65,074

Current portion of long-term debt 22 22 225

Accrued expenses 10,603 8,863 90,231

Income taxes payable 1,596 1,381 14,061

Accrued product warranties 2,715 7,214 73,445

Accrued bonuses for directors and statutory auditors 105 38 384

Deferred tax liabilities 1 ― ―

Other current liabilities 5,739 5,814 59,183

Total current liabilities 58,632 51,260 521,845

Long-term liabilities:

Long-term debt 33 217 2,210

Deferred tax liabilities 1,304 489 4,981

Accrued retirement benefits for employees 2,812 3,058 31,127

Accrued retirement benefits for directors and statutory auditors 490 359 3,651

Other long-term liabilities 2,048 1,430 14,558

Total long-term liabilities 6,687 5,553 56,527

Total liabilities 65,319 56,813 578,372

Shareholders’ equity:

Common stock, no par value: 6,932 6,932 70,573

Authorized: 240,000,000 shares

Issued: 73,985,246 shares in 2008 and 2009

Capital surplus 7,941 7,941 80,839

Retained earnings 112,810 104,407 1,062,883

Less: Treasury stock, at cost; 20,174 shares in 2008 and 21,613 shares in 2009 (29) (31) (313)

Total shareholders’ equity 127,654 119,249 1,213,982

Valuation and translation adjustments:

Unrealized valuation gains on available-for-sale securities, net 2,228 1,639 16,688

Foreign currency translation adjustments, net (2,946) (11,332) (115,368)

Total valuation and translation adjustments (718) (9,693) (98,680)

Minority interests 21,247 17,382 176,948

Total net assets 148,183 126,938 1,292,250

Total liabilities and net assets ¥ 213,502 ¥ 183,751 $ 1,870,622


20

14

Consolidated Statements of Operations Keihin Corporation and Consolidated Subsidiaries For the years ended March 31, 2008 and 2009

Millions of yen


2008 2009 2009 Net sales ¥ 339,321 ¥ 288,337 $ 2,935,326 Cost of sales 289,338 250,924 2,554,451

Gross profit 49,983 37,413 380,875 Selling, general and administrative expenses:

Freight and packing expenses

3,263 2,982

30,361 Provision for product warranties 477 70 710 Salaries 4,862 4,834 49,209 Retirement benefit expenses 156 182 1,850 Provision for retirement benefits for directors and statutory auditors 126 102 1,043 Provision for bonuses for directors and statutory auditors 105 38 384 Other 16,985 17,596 179,137 Total selling, general and administrative expenses 25,974 25,804 262,694

Operating income 24,009 11,609 118,181 Non-operating income:

Interest income 923 889 9,053 Dividend income 137 161 1,633 Other 1,235 736 7,492 Total non-operating income 2,295 1,786 18,178

Non-operating expenses: Interest expense 193 353 3,597 Foreign currency exchange loss, net 823 2,846 28,970 Loss on disposal of property, plant and equipment 270 198 2,015 Loss on disposal of inventories 90 ― ― Write-down of inventories 181 ― ― Other 290 111 1,126 Total non-operating expenses 1,847 3,508 35,708

Ordinary income 24,457 9,887 100,651 Extraordinary income： Reversal of accrued product warranties ― 553 5,636 Total extraordinary income ― 553 5,636 Extraordinary losses： Impairment loss on property, plant and equipment 37 849 8,647 Provision for product warranties 3,639 5,942 60,484 Write-down of investment securities ― 43 439 Restructuring charges ― 1,808 18,409 Total extraordinary losses 3,676 8,642 87,979 Income before income taxes and minority interests 20,781 1,798 18,308 Income taxes:

Current 7,273 4,627 47,102 Deferred (1,178) 826 8,411

Total income taxes 6,095 5,453 55,513 Minority interests (3,485) (1,970) (20,059)Net income (loss) ¥ 11,201 ¥ (5,625) $ (57,264) Yen U.S. dollars Per share of common stock: Net income: Basic net income (loss) ¥ 151.44 ¥ (76.05) $ (0.77)

Cash dividends ¥ 36.00 ¥ 28.00 $ 0.29



15

Consolidated Statements of Changes in Net Assets Keihin Corporation and Consolidated Subsidiaries For the years ended March 31, 2008 and 2009

Millions of yen


2008 2009 2009Common Stock

Balance at end of previous fiscal year ¥ 6,932 ¥ 6,932 $ 70,573

Changes during current fiscal year

Net change ― ― ―

Balance at end of current fiscal year ¥ 6,932 ¥ 6,932 $ 70,573

Capital surplus Balance at end of previous fiscal year ¥ 7,941 ¥ 7,941 $ 80,839


Net change ― ― ―


Retained earnings Balance at end of previous fiscal year ¥ 104,198 ¥ 112,810 $ 1,148,431

Increase due to adoption of new accounting standards ― 98 996


Dividends from surplus (2,589) (2,663) (27,107)

Net income (loss) 11,201 (5,625) (57,264)

Decrease due to changes in scope of consolidation ― (213) (2,173)

Net change 8,612 (8,501) (86,544)

Balance at end of current fiscal year ¥ 112,810 ¥ 104,407 $ 1,062,883

Treasury stock Balance at end of previous fiscal year ¥ (27) ¥ (29) $ (297)


Purchase of treasury stock (2) (2) (16)

Net change (2) (2) (16)

Balance at end of current fiscal year ¥ (29) ¥ (31) $ (313)

Total shareholders’ equity Balance at end of previous fiscal year ¥ 119,044 ¥ 127,654 $ 1,299,546




Net income (loss) 11,201 (5,625) (57,264)



Net change 8,610 (8,503) (86,560)


Unrealized valuation gains on available-for-sale securities Balance at end of previous fiscal year ¥ 3,449 ¥ 2,228 $ 22,686


Changes in items other than shareholders’ equity, net (1,221) (589) (5,998)

Net change (1,221) (589) (5,998)


Foreign currency translation adjustments Balance at end of previous fiscal year ¥ 1,029 ¥ (2,946) $ (30,004)


Changes in items other than shareholders’ equity, net (3,975) (8,386) (85,364)

Net change (3,975) (8,386) (85,364)

Balance at end of current fiscal year ¥ (2,946) ¥ (11,332) $ (115,368)

Total valuation and translation adjustments Balance at end of previous fiscal year ¥ 4,478 ¥ (718) $ (7,318)



Net change (5,196) (8,975) (91,362)

Balance at end of current fiscal year ¥ (718) ¥ (9,693) $ (98,680)

Minority interests Balance at end of previous fiscal year ¥ 19,932 ¥ 21,247 $ 216,301


Changes in items other than shareholders’ equity, net 1,315 (3,865) (39,353)

Net change 1,315 (3,865) (39,353)


Total net assets Balance at end of previous fiscal year ¥ 143,454 ¥ 148,183 $ 1,508,529


Net change


Net income (loss) 11,201 (5,625) (57,264)




Net change 4,729 (21,343) (217,275)



22

16

Consolidated Statements of Cash Flows Keihin Corporation and Consolidated Subsidiaries For the years ended March 31, 2008 and 2009

Millions of yen


2008 2009 2009 Cash flows from operating activities:

Income before income taxes and minority interests ¥ 20,781 ¥ 1,798 $ 18,308 Depreciation and amortization 16,345 17,197 175,064 Impairment loss on property, plant and equipment 37 849 8,647 Write-down of investment securities ― 43 439 Loss on disposal and sale of property, plant and equipment, net 270 198 2,015 Increase in accrued product warranties 1,723 4,542 46,243 (Increase) decrease in accrued retirement benefits for employees (149) 292 2,977 (Decrease) increase in prepaid pension costs (93) 211 2,151 Increase (decrease) in accrued retirement benefits for directors and statutory auditors 82 (131) (1,336)Interest and dividend income (1,060) (1,050) (10,686)Interest expense 193 353 3,597 Decrease in trade notes and accounts receivable 1,093 11,052 112,508 Increase in inventories (182) (3,101) (31,571)Increase (decrease) in trade notes and accounts payable 63 (9,870) (100,481)Other, net 878 (464) (4,725)

Subtotal 39,981 21,919 223,150 Interest and dividend received 1,060 1,030 10,487 Interest paid (193) (352) (3,587)Income taxes paid (7,114) (4,739) (48,248)

Net cash provided by operating activities 33,734 17,858 181,802 Cash flows from investing activities:

Purchase of property, plant and equipment and intangible assets (22,774) (18,346) (186,767)Proceeds from sale of property, plant and equipment and intangible assets 628 754 7,673 Purchase of investment securities (3,359) (420) (4,274)Proceeds from sale of investment securities 1,188 2,045 20,815 Payments for long-term loans receivable (63) (756) (7,699)Collection of loans 788 608 6,189 Other, net 554 (699) (7,110)

Net cash used in investing activities (23,038) (16,814) (171,173) Cash flows from financing activities:

(Increase) decrease in short-term loans, net (971) 4,925 50,141 Proceeds from long-term debt ― 221 2,250 Repayment of long-term debt (588) (91) (929)Purchase of treasury stock (2) (2) (17)Payments for dividends (2,589) (2,663) (27,107)Payments for dividends to minority shareholders (1,969) (2,336) (23,783)

Net cash (used in) provided by financing activities (6,119) 54 555 Effect of exchange rate changes on cash and cash equivalents (1,333) (3,732) (37,996)Net increase (decrease) in cash and cash equivalents 3,244 (2,634) (26,812)Cash and cash equivalents at beginning of year 31,125 34,369 349,880 Increase in cash and cash equivalents due to changes in scope of consolidation ― 121 1,234 Cash and cash equivalents at end of year ¥ 34,369 ¥ 31,856 $ 324,302



17

Notes to Consolidated Financial Statements

1. Basis of Presentation of Consolidated Financial

Statements

Keihin Corporation (the “Company”) and its domestic subsidiaries

maintain their accounting records in accordance with accounting

principles generally accepted in Japan, and foreign subsidiaries of the

Company maintain their books of account in conformity with those of

their countries of domicile.

The accompanying consolidated financial statements have been

complied from the consolidated financial statements prepared by the

Company as required under the Financial Instruments and Exchange

Law and, therefore, have been prepared in conformity with accounting

principles generally accepted in Japan, which are different in certain

respects as to the application and disclosure requirements of

International Financial Reporting Standards.

The notes to the consolidated financial statements include

information which is not required under accounting principles generally

accepted in Japan, but is presented herein as additional information

solely for the convenience of readers outside Japan.

Beginning in fiscal 2009, the Company has applied the Practical

Solution on Unification of Accounting Policies Applied to Foreign

Subsidiaries for Consolidated Financial Statements (Accounting

Standards Board of Japan (ASBJ) Practical Issues Task Force No.18,

May 17, 2006) and made any necessary adjustments to conform the

consolidated financial statements to accounting principles generally

accepted in Japan.

In the accompanying consolidated financial statements, amounts of

less than one million yen have been rounded.

Certain amounts in the prior year’s consolidated financial statements

have been reclassified to conform to the current year’s presentation.

2. Summary of Significant Accounting Policies

(1) Consolidation and Investments in Affiliates

The consolidated financial statements include the accounts of the

Company’s 26 domestic and foreign subsidiaries which the Company

has the ability to control effectively.

Keihin Michigan Manufacturing, LLC, and Keihin Sales and

Development Europe GmbH are newly included in the scope of

consolidation from fiscal 2009 due to their increase in materiality.

The Company does not apply the equity method with respect to one

affiliate, as the Company determined it was insignificant to net income

and retained earnings of the accompanying consolidated financial

statements.

(2) Fiscal Year-end of Consolidated Subsidiaries

Of the Company’s 26 consolidated subsidiaries, Dongguan Keihin

Engine Management System Co., Ltd., Keihin (Thailand) Co., Ltd.,

Keihin Auto Parts (Thailand) Co., Ltd., and eight other subsidiaries have

December 31 as their fiscal year-end. In preparing the consolidated

financial statements, the Company uses the accounts prepared by

these subsidiaries as of December 31, and makes adjustments as

necessary for significant transactions that occur between December 31

and March 31, the date of the consolidated financial statements.

(3) Valuation Methods for Significant Assets

(a) Securities

Available-for-sale securities with fair market value are stated at fair

market value as of the year-end. Unrealized gains and losses on these

securities are directly reported as a separate component of net assets.

The cost of securities sold is determined by the moving average method.

Available-for-sale securities without fair market value are stated at the

cost based on the moving-average method.

(b) Derivative Financial Instruments

Derivative financial instruments are valued at fair market value.

(c) Inventories

The Company and its domestic consolidated subsidiaries principally

apply the weighted-average cost method wherein the carrying amounts

of inventories are devalued to net realizable value based on lower

profitability. Foreign subsidiaries principally apply the lower of cost or

market method or the cost method, based on the first-in, first-out

method.

24

• an estimate of specifically identified warranty claim. Change in Accounting Policy

From fiscal 2009, the Company and its domestic consolidated

subsidiaries apply the Accounting Standard for Measurement of

Inventories (ASBJ, Report No. 9, July 5, 2006).

(b) Accrued Bonus for Directors and Statutory Auditors

The Company accrues directors’ bonus based on the estimated

bonus payment amount. Due to the adoption, operating income, ordinary income and income

before income taxes and minority interests each decreased by ¥635

million (U.S.$6,468 thousand) for fiscal 2009.

(c) Accrued Retirement Benefits for Employees

The Company and its certain of its consolidated subsidiaries provide

for employee retirement benefits principally at an amount calculated

based on the retirement benefit obligation and the fair value of the

pension plan assets as of the balance sheet date.

The impact of this change on segment information is described in

the relevant section of these notes.

(4) Method of Depreciation for Significant Depreciable and

Amortizable Assets Actuarial gain or loss is amortized by the straight-line method over a

period of 17 years, which is shorter than the average remaining years of

service of the employees. Amortization of actuarial gain or loss begins

in the year following the year when actuarial gain or loss occurs. Prior

service cost is amortized by the straight-line method principally over a

period of 3 years, which is shorter than the average remaining years of

service of the employees.

(a) Property, Plant and Equipment

Property, plant and equipment are principally depreciated using the

declining-balance method.

However, the Company and its domestic consolidated subsidiaries

principally apply the straight-line method for depreciation of buildings

which were those acquired on or after April 1, 1998, excluding

building-related facilities and dies included in tools, furniture and

fixtures. In addition, depreciable assets with an acquisition price of more

than ¥100,000 and less than ¥200,000 are depreciated by the

straight-line method over three years.

(d) Accrued Retirement Benefits for Directors and Statutory

Auditors

The Company also accrues retirement benefits for directors and

statutory auditors of the Company and its domestic consolidated

subsidiaries. The provision amount is determined at an amount what

would be payable in accordance with internal company rules if all

eligible directors and statutory auditors were to resign at the fiscal year

end.

The ranges of estimated useful lives are as follows:

Buildings and structures 2–50 years

Machinery, equipment and vehicles 2–12 years

(b) Intangible Assets

The amortization of intangible assets is computed using the

straight-line method. Software for internal use is amortized over the

estimated useful life of five years on a straight-line basis.

(6) Policy for Translation of Assets and Liabilities Denominated in

Foreign Currency into Japanese Yen

Foreign currency transactions are recorded using the foreign

exchange rates prevailing at the transaction dates. Receivables and

payables in foreign currencies are valued at year-end using the current

exchange rates.

(5) Policy for Significant Provision

(a) Accrued Product Warranties

Accrued product warranties are provided based on an estimate of

warranty expense to be incurred under the warranty agreements with

customers. Included in accrued product warranties are the following:

The assets and liabilities of foreign subsidiaries are translated at

appropriate year-end current rates, and income and expense accounts

are translated using average rates in the respective years. The resulting

translation adjustments are accumulated as a component of valuation

and translation adjustments.

• an estimate of warranty expenses to be incurred during the remaining

warranty periods based on historical warranty claim experiences and an

estimate of the probability of future warranty expenses; and,

18


(7) Significant Policy for Hedge Accounting

(10) Scope of Cash Presented in the Consolidated Statements of

Cash Flows

(a) Hedge Accounting Methods, Including Deferred Hedge

Accounting

For the purposes of consolidated statements of cash flows, the

Company considers all cash on hand or on call and all highly liquid

investments with insignificant risk of changes in value, with maturities of

three months or less when purchased, to be cash equivalents.

The Company applies deferred hedge accounting.

For foreign currency-denominated receivables hedged by forward

exchange contracts, the Company applies short-cut method.

(b) Hedging Instruments and Hedged Items

The Company uses forward exchange contracts. Hedged items are

foreign currency-denominated receivables and planned transactions

denominated in foreign currency.

(11) Changes in Accounting Policy

(a) Practical Solution on Unification of Accounting Policies Applied

to Foreign Subsidiaries for Consolidated Financial Statements

From fiscal 2009, the Company applied the Practical Solution on

Unification of Accounting Policies Applied to Foreign Subsidiaries for

Consolidated Financial Statements (ASBJ Practical Issues Task Force

No.18, May 17, 2006) and made any necessary adjustments to conform

the consolidated financial statements to accounting principles generally

accepted in Japan. Due to the adoption, there was no material impact on

operating income, ordinary income or income before income taxes and

minority interests.

(c) Hedging Policy

Based on internal Company rules, including “Foreign Exchange

Management Rules” and “Detailed Rules for the Execution of Foreign

Exchange Management Rules,” the Company hedges currency

fluctuation risk.

With regard to currency fluctuation risk relating to foreign

currency-denominated receivables in principal trading currencies, in

principle, the Company hedges at least 60% of the outstanding

receivables.

(b) Accounting Standard for Lease Transactions

The Company and its domestic consolidated subsidiaries previously

accounted for finance lease transactions that do not involve the transfer

of ownership in a similar manner to the accounting treatment for

operating lease transactions. However, from fiscal 2009, the Company

adopted the “Accounting Standard for Lease Transactions” (ASBJ,

Statement No. 13, originally issued by the First Subcommittee of the

Business Accounting Council on June 17, 1993, and revised on March

30, 2007) and the “Guidance on Accounting Standard for Lease

Transactions” (ASBJ, Guidance No. 16, originally issued by the

Japanese Institute of Certified Public Accountants (JICPA) on January

18, 1994, and revised on March 30, 2007) to account for such

transactions.

(d) Method for Evaluating the Effectiveness of Hedging

For forward exchange contracts, since the effectiveness of hedging

is recognized as high, the Company omits effectiveness evaluation.

(8) Other Material Matters relating to the Presentation of

Consolidated Financial Statements

(a) Accounting for Consumption Tax and Local Consumption

Taxes

Transactions subject to consumption tax are recorded at amounts

exclusive of consumption tax.

Due to the adoption, there was no material impact on income. (9) Method of Valuation of Assets and Liabilities of Consolidated

Subsidiaries Assets and liabilities of consolidated subsidiaries acquired through

business combinations are carried at fair value at the time of

acquisition.

19

26

20

3. U.S. Dollar Amounts The consolidated financial statements are stated in Japanese yen,

the currency of the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥98.23 to US$1, the approximate rate of exchange at March 31, 2009. Such translations should not be construed as representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other amount.

4. Contingent Liabilities The Company guarantees bank loans held by employees who belong

to the Honda Housing Mutual Aid Society to honor the right to demand compensation, based on guarantee and indemnification agreements entered into by Honda Motor Co., Ltd.

Guarantee obligations as of March 31, 2008 and 2009 are as follows:

Millions of yen Thousands of U.S. dollars

2008 2009 2009 Borrowers

Employees ¥ 241 ¥ 214 $ 2,177

5. Research and Development Expenses

Research and development expenses, which are included in selling, general and administrative expenses for fiscal 2008 and 2009 are as follows:

Millions of yen


2008 2009 2009 Research and development expenses ¥ 1,714 ¥ 1,270 $ 12,933

6. Loss on Disposal of Property, Plant and Equipment A breakdown of non-current assets for fiscal 2008 and 2009 is as

follows:

Millions of yen


2008 2009 2009 Buildings and structures ¥ 18 ¥ 14 $ 140Machinery, equipment and vehicles 188 146 1,488

Tools, furniture and fixtures 64 38 387

Total ¥ 270 198 $ 2,015

7. Impairment Loss on Property, Plant and equipment

A breakdown of impairment losses recognized by the Company and its consolidated subsidiaries, in fiscal 2008 and 2009, is as follows: Year ended March 31, 2008 Millions of yenDescription Category Location Impairment lossIdle facilities Machinery and equipment Miyagi , Japan ¥37 Year ended March 31, 2009 Millions of yenDescription Category Location Impairment lossIdle facilities Machinery and equipment Kanagawa, Japan ¥ 7Idle facilities Machinery and equipment Indiana, U.S.A. 482Idle facilities Machinery and equipment North Carolina, U.S.A. 297Idle facilities Machinery and equipment Guangdong, China 63

Year ended March 31, 2009 Thousands of U.S. dollars

Description Category Location Impairment lossIdle facilities Machinery and equipment Kanagawa, Japan $ 74Idle facilities Machinery and equipment Indiana, U.S.A. 4,911Idle facilities Machinery and equipment North Carolina, U.S.A. 3,019Idle facilities Machinery and equipment Guangdong, China 643 The Company and its consolidated subsidiaries assessed the impairment of each group of assets, which are grouped on the basis of managerial

accounting. The Company and its consolidated subsidiaries group the idle assets on an individual asset basis. As the future use of idle assets has not yet been determined, the carrying value of such assets was reduced to recoverable value and the difference

between carrying amounts and recoverable value of ¥849 million ($8,647 thousand) was recorded as an impairment loss under extraordinary losses. Recoverable value is based on net selling price. In the case of idle property, this corresponds to the property appraisal value, and in the case of idle

facilities, it corresponds to the memorandum value.


21

8. Restructuring Charges A breakdown of restructuring charges in fiscal 2009 is as follows:

Millions of yen


2009 2009 Special retirement benefits ¥ 1,808 $ 18,409

9. Cash and Cash Equivalents A reconciliation of cash and deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash

flows is as follows:

Millions of yen


2008 2009 2009 Cash and deposits ¥ 26,055 ¥ 24,898 $ 253,467Short-term investments included in securities account

9,000 9,000 91,622

Time deposits with duration exceeding three months (686) (2,042) (20,787)

Cash and cash equivalents ¥ 34,369 ¥ 31,856 $ 324,302 10. Investment Securities

Information regarding held-to-maturity debt securities and available-for-sale securities for fiscal 2008 and 2009 is as follows: (1) Held-to-Maturity Debt Securities with Fair Market Value Millions of yen As of March 31, 2008 Carrying

amount Fair market

value DifferenceSecurities with fair market value exceeding carrying amount

National and local government bonds ¥ 2,099 ¥ 2,168 ¥ 69

Total ¥ 2,099 ¥ 2,168 ¥ 69 Millions of yen As of March 31, 2009 Carrying

amount Fair market


National and local government bonds ¥ ― ¥ ― ¥ ―

Total ¥ ― ¥ ― ¥ ― Thousands of U.S. dollarsAs of March 31, 2009 Carrying

amount Fair market


National and local government bonds $ ― $ ― $ ―

Total $ ― $ ― $ ―

(2) Available-for-Sale Securities with Fair Market Value Millions of yen

As of March 31, 2008 Acquisition cost

Carrying amount Difference

Securities with carrying amount exceeding acquisition cost

Equity securities ¥ 759 ¥ 4,489 ¥ 3,730Other 1,385 1,413 28

Subtotal 2,144 5,902 3,758Securities with carrying amount not exceeding acquisition cost

Equity securities 59 34 (25)Other 20 17 (3)

Subtotal 79 51 (28)Total ¥ 2,223 ¥ 5,953 ¥ 3,730

Millions of yen




Equity securities ¥ 486 ¥ 3,259 ¥ 2,773Other 989 999 10


Equity securities 289 272 (17)Other 416 404 (12)

Subtotal 705 676 (29)Total ¥ 2,180 ¥ 4,934 ¥ 2,754





Equity securities $ 4,948 $ 33,182 $ 28,234Other 10,073 10,168 95


Equity securities 2,940 2,763 (177)Other 4,236 4,116 (120)

Subtotal 7,176 6,879 (297)Total $ 22,197 $ 50,229 $ 28,032

28

KEIHIN CORPORATION 22

(3) Other Major Securities without Market Value

Millions of yen


2008 2009 2009 Certificates of deposit ¥ 9,000 ¥ 9,000 $ 91,622Unlisted stock 1,034 32 322Total ¥ 10,034 ¥ 9,032 $ 91,944 (4) Held-to-Maturity Debt Securities Sold in This Fiscal Year Millions of yen Year ended March 31, 2009

Cost of securities

sold Sales

amount Profit and loss on sales

National and local government bonds ¥ 2,032 ¥ 2,032 ¥ 0

Total ¥ 2,032 ¥ 2,032 ¥ 0 Thousands of U.S. dollarsYear ended March 31, 2009

Cost of securities

sold Sales

amount Profit and loss on sales

National and local government bonds $ 20,187 $ 20,187 $ 0

Total $ 20,187 $ 20,187 $ 0Note: Securities are sold as a result of changing the policy of reserve fund at one of foreign consolidated subsidiaries. 11. Borrowings and Debt

A breakdown of short-term loans payable and long-term debt as of March 31, 2008 and 2009 is as follows:


2008 2009 2009 Balance Balance Average interest rate Due BalanceShort-term loans payable ¥ 4,819 ¥ 9,172 2.16% $$ 93,372Current portion of long-term debt 505 854 2.19% 8,699Long-term debt 1,148 229 10.52% March 2012 2,327

Subtotal 6,472 10,255 104,398Elimination of intercompany transactions (3,949) (3,624) (36,889)

Total ¥ 2,523 ¥ 6,631 $$ 67,509Note: The average interest rate is the weighted average on the year-end balance of borrowings.

The aggregate amount of long-term debt, excluding current portion of long-term debt as of March 31, 2009, which will be repaid each year over the five years is broken down as follows:

Duration Millions of

yen


1 to 2 years ¥ 190 $ 1,9302 to 3 years 39 3973 to 4 years ― ―4 to 5 years ― ―

Total ¥ 229 $ 2,327


23

12. Derivative Financial Instruments The Company enters into foreign currency forward exchange

contracts to manage its exposures to fluctuations in foreign exchange markets that would adversely affect its foreign currency-denominated assets.

The Company’s policy is to use forward exchange contracts up to the balance of foreign currency-denominated receivables and prohibit use of derivatives for speculative purposes.

Because the counterparties to these derivatives are limited to major financial institutions, the Company does not anticipate any losses arising from credit risk.

These derivative transactions are undertaken in compliance with internal rules. Detail of transactions is reported to the director responsible for finance and accounting and, when necessary, to the Executive Council, the Company’s decision-making body.

Foreign currency forward exchange contracts outstanding as of March 31, 2008 and 2009 are as follows:

Millions of yen 2008

Type Contract amount

Portion due after one

year Fair

value Unrealized (gain) loss

Foreign currency forward

exchange contracts

Sell U.S. dollars ¥ 726 — ¥ 677 ¥ 49

Total ¥ 726 — ¥ 677 ¥ 49 Millions of yen 2009



year Fair



exchange contracts

Sell U.S. dollars ¥ 750 — ¥ 775 ¥ (25)

Total ¥ 750 — ¥ 775 ¥ (25)

Thousands of U.S. dollars 2009



year Fair



exchange contracts

Sell U.S. dollars $ 7,639 — $ 7,894 $ (255)

Total $ 7,639 — $ 7,894 $ (255) Notes: 1．Fair value of foreign currency forward exchange contracts is based

on forward exchange rates. 2．The transactions above are forward exchange contracts entered

into for the purpose of hedging foreign currency-denominated receivables against consolidated subsidiaries that have been eliminated from the consolidated balance sheets.

13. Retirement Benefit Plans The Company maintains the following defined benefit pension

plans: a welfare pension fund plan, a tax-qualified pension plan and a lump-sum payment plan.

Some of the Company’s consolidated subsidiaries have defined contribution pension plans in addition to defined benefit pension plans.

The table below shows contributions and current status of defined benefit pension plans at the Company and consolidated subsidiaries with such plans as reflected in the consolidated balance sheets as of March 31, 2008 and 2009:

Millions of yen


2008 2009 2009 Retirement benefit obligation ¥ (38,245) ¥ (36,585) $ (372,444)Plan assets 30,745 24,411 248,512

Subtotal (7,500) (12,174) (123,932)Unrecognized actuarial gain 6,114 12,440 126,638Unrecognized prior service cost (credit) 94 (2,015) (20,511)

Prepaid pension expenses (1,520) (1,309) (13,322)Accrued retirement benefits ¥ (2,812) ¥ (3,058) $ (31,127)

Amounts related to net periodic retirement benefit costs for fiscal

2008 and 2009 are summarized as follows:

Millions of yen


2008 2009 2009 Service cost ¥ 1,908 ¥ 1,990 $ 20,258Interest cost 811 823 8,382Expected return on plan assets (1,247) (1,128) (11,484)

Amortization of actuarial gain 283 538 5,479Amortization of prior service cost (463) (310) (3,164)

Net periodic retirement benefit costs ¥ 1,292 ¥ 1,913 $ 19,471

Notes: 1. Contributions by employees to employee welfare pension plans

have been excluded. 2. In addition to the net periodic retirement benefit costs above,

some foreign subsidiaries made and expensed matching contributions to defined contribution plans. These contributions amounted to ¥357 million and ¥342 million ($3,483 thousand) in fiscal 2008 and 2009, respectively.

3. In addition to the net periodic retirement benefit costs above, ¥1,808 million ($18,409 thousand) in special retirement benefits, due to early retirement, were recorded under extraordinary loss for fiscal 2009.

Assumptions used as of March 31, 2008 and 2009 are set forth as

follows: As of March 31 2008 2009Periodic allocation method for projected benefits

Straight-line method

Straight-line method

Discount rate Mainly 2.0% Mainly 2.0%Expected return on assets Mainly 3.5% Mainly 3.5%Years to amortize unrecognized prior service cost Mainly 3 Mainly 3

Years to amortize unrecognized actuarial gain Mainly 17 Mainly 17

30

24

14. Income Taxes (1) A breakdown of deferred tax assets and deferred tax liabilities as of March 31, 2008 and 2009 is as follows:


2008 2009 2009 Current: Deferred tax assets

Unrealized gain on inventories ¥ 427 ¥ 133 $ 1,355Loss on devaluation of inventories 566 572 5,819Accrued bonuses 1,320 1,120 11,400Accrued business taxes 71 41 417Accrued expenses 515 483 4,913Accrued product warranties 972 2,878 29,303Other 433 366 3,730Subtotal of deferred tax assets Less: valuation allowance

4,304 ―

5,593 (3,559) 56,937

(36,232)Total deferred tax assets Offset against deferred tax liabilities

4,304 (460)

2,034 (75) 20,705

(765)Net deferred tax assets ¥ 3,844 ¥ 1,959 $ 19,940

Deferred tax liabilities

Retained earnings of foreign consolidated subsidiaries ¥ 338 ¥ 33 $ 341Other 123 42 424Total deferred tax liabilities 461 75 765Offset against deferred tax assets (460) (75) (765)Net deferred tax liabilities ¥ 1 ¥ ― $ ―

Non-current: Deferred tax assets

Accrued retirement benefits for employees ¥ 524 ¥ 644 $ 6,560Accrued retirement benefits for directors and statutory auditors 196 144 1,464Unrealized gain on property, plant and equipment 2,405 3,136 31,926Excess depreciation ― 219 2,231Impairment loss ― 283 2,877Tax credit ― 196 1,994Other 609 621 6,325Subtotal of deferred tax assets 3,734 5,243 53,377Less: valuation allowance (16) (633) (6,447)Total deferred tax assets 3,718 4,610 46,930Offset against deferred tax liabilities (2,158) (2,357) (23,999)Net deferred tax assets ¥ 1,560 ¥ 2,253 $ 22,931

Deferred tax liabilities

Depreciation costs of foreign consolidated subsidiaries ¥ 1,392 ¥ 1,405 $ 14,299Unrealized valuation gain on available-for-sale securities, net 1,498 1,113 11,332Reserve for special depreciation 290 169 1,726Other 282 159 1,623Total deferred tax liabilities 3,462 2,846 28,980Offset against deferred tax assets (2,158) (2,357) (23,999)Net deferred tax liabilities ¥ 1,304 ¥ 489 $ 4,981

(2) Reconciliation of the statutory income tax rate to the effective income tax rate for fiscal 2008 and 2009 is as follows: 2008 2009 Statutory tax rate 40.0% 40.0%

Per capital levy of inhabitants’ tax 0.1 1.7 Differences in foreign subsidiaries’ tax rates (7.8) (60.7) Tax-exempt portion of foreign consolidated subsidiaries (3.9) (40.5) Undistributed retained earnings of foreign consolidated subsidiaries 0.5 (16.9) Nondeductible foreign tax credit (3.2) 24.3 Tax credit for research and development (1.8) (12.8) Elimination of dividend income 7.0 144.4 Valuation allowance ― 231.4 Other (1.6) (7.7)

Effective income tax rate 29.3% 303.2%


15. Segment Information (1) By geographical area

Geographic segment information for the Company and its consolidated subsidiaries for fiscal 2008 and 2009 is as follows:

Millions of yen Year ended March 31, 2008 Japan Americas Asia Europe Total Eliminations Consolidated

Sales: Outside customers ¥ 137,262 ¥ 107,491 ¥ 83,727 ¥ 10,841 ¥ 339,321 ¥ ― ¥ 339,321 Intersegment 44,832 736 7,726 21 53,315 (53,315) ― Total 182,094 108,227 91,453 10,862 392,636 (53,315) 339,321 Operating expenses 176,400 100,568 81,146 9,910 368,024 (52,712) 315,312

Operating income ¥ 5,694 ¥ 7,659 ¥ 10,307 ¥ 952 ¥ 24,612 ¥ (603) ¥ 24,009 Identifiable assets ¥ 127,392 ¥ 54,766 ¥ 71,035 ¥ 4,340 ¥ 257,533 ¥ (44,031) ¥ 213,502 Millions of yen

Year ended March 31, 2009 Japan Americas Asia Europe Total Eliminations ConsolidatedSales:

Outside customers ¥ 113,204 ¥ 82,676 ¥ 85,095 ¥ 7,362 ¥ 288,337 ¥ ― ¥ 288,337Intersegment 39,525 527 7,241 402 47,695 (47,695) ―Total 152,729 83,203 92,336 7,764 336,032 (47,695) 288,337Operating expenses 153,720 81,522 81,154 7,108 323,504 (46,776) 276,728

Operating income (loss) ¥ (991) ¥ 1,681 ¥ 11,182 ¥ 656 ¥ 12,528 ¥ (919) ¥ 11,609Identifiable assets ¥ 111,143 ¥ 49,332 ¥ 64,986 ¥ 2,391 ¥ 227,852 ¥ (44,101) ¥ 183,751 Thousands of U.S. dollars

Year ended March 31, 2009 Japan Americas Asia Europe Total Eliminations ConsolidatedSales:

Outside customers $ 1,152,445 $ 841,656 $ 866,280 $ 74,945 $ 2,935,326 $ ― $ 2,935,326 Intersegment 402,368 5,364 73,717 4,097 485,546 (485,546) ― Total 1,554,813 847,020 939,997 79,042 3,420,872 (485,546) 2,935,326 Operating expenses 1,564,898 829,912 826,163 72,366 3,293,339 (476,194) 2,817,145

Operating income (loss) $ (10,085) $ 17,108 $ 113,834 $ 6,676 $ 127,533 $ (9,352) $ 118,181 Identifiable assets $ 1,131,460 $ 502,205 $ 661,568 $ 24,339 $ 2,319,572 $ (448,950) $ 1,870,622 Notes: 1. Method of geographical classification and major countries and regions within each geographical segment (1) Classification of country and area are based on geographical distance. (2) Major countries or areas included in each segment except for Japan are as follows:

Americas: U.S. A., Canada, Brazil Asia: China, Taiwan, Thailand, the Philippines, Indonesia, India Europe: U.K., Germany (3) Canada is excluded from Americas in fiscal 2009, as a result of liquidation of Keihin Canada Service, Inc. in fiscal 2008. 2. Changes in accounting policy

Inventories As described in Note 2. (3) (c), the Company and its domestic consolidated subsidiaries principally applied the cost method based on the weighted-average cost method until previous year. However, from fiscal 2009, in accordance with the “Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9, issued on July 5, 2006), the Company and its domestic consolidated subsidiaries have adopted weighted-average cost method wherein the carrying amounts of inventories are devalued to net realizable value based on lower profitability. Consequently, an operating loss of Japan segment in fiscal 2009, increased by ¥635 million ($6,468 thousand).

3. Corporate assets, which are included in “Eliminations” in the tables above, amounted to ¥6,311 million and ¥5,095 million ($51,869 thousand) at

March 31, 2008 and 2009, respectively. The corporate assets principally consists of long-term investments (investment securities) and assets associated with administrative divisions of the parent company.

25

32

(2) Overseas sales

Overseas sales of the Company and its consolidated subsidiaries for fiscal years 2008 and 2009 is as follows: Millions of yen

Year ended March 31, 2008 Americas Asia Europe Other areas ConsolidatedOverseas sales ¥ 107,613 ¥ 82,898 ¥ 17,553 ¥ 66 ¥ 208,130Consolidated net sales ¥ 339,321Ratio of overseas sales to consolidated sales 31.7% 24.4% 5.2% 0.0% 61.3%

Millions of yen Year ended March 31, 2009 Americas Asia Europe Other areas Consolidated

Overseas sales ¥ 82,718 ¥ 84,695 ¥ 12,493 ¥ 0 ¥ 179,906Consolidated net sales ¥ 288,337Ratio of overseas sales to consolidated sales 28.7% 29.4% 4.3% 0.0% 62.4%

Thousands of U.S. dollars Year ended March 31, 2009 Americas Asia Europe Other areas Consolidated

Overseas sales $ 842,080 $ 862,208 $ 127,187 $ 5 $ 1,831,480Consolidated net sales $ 2,935,326Ratio of overseas sales to consolidated sales 28.7% 29.4% 4.3% 0.0% 62.4% Notes: 1. Overseas sales include export sale of the Company and sales (other than export to Japan) of its foreign consolidated subsidiaries, 2. Classification of country and area are based on geographical distance.

Major countries or areas included in each segment except for Japan are as follows: Americas: U.S.A., Canada, Brazil Asia: China, Taiwan, Thailand, the Philippines, Indonesia, India Europe: Belgium, Italy, U.K., Austria, the Netherlands, Germany Other areas: South Africa 16. Net Assets and Cash Dividends

The Company's common stock has no par value in accordance with the Japanese Corporate Law (JCL). Under JCL, at least 50% of the amount actually paid in or provided in consideration for newly issued stocks is designated as stated common stock, and proceeds in excess of the amount designated as stated common stock are recorded as capital surplus.

The JCL requires an amount equal to at least 10% of distributions of retained earnings be appropriated as legal reserve, which are included in capital surplus and retained earnings, until legal reserve equals 25% of stated common stock. In addition, common stock, capital surplus and retained earnings, including legal reserves, can generally be transferred to each other upon resolution of the shareholders’ meeting.

Capital surplus and retained earnings less legal reserves and certain adjustments thereto may be available for dividends by resolution of the board of directors’ meeting. The accompanying consolidated financial statements did not include any provision for the dividends of ¥10 ($0.10) per share totaling ¥740 million ($7,532 thousand), which were subsequently proposed by the Board of Directors in respect of fiscal 2009 and approved by shareholders at the annual shareholders’ meeting held on June 19, 2009.

26


27

17. Related Party Transactions

The Company is a 42.2%-owned affiliate of Honda Motor Co., Ltd.

From fiscal 2009, the Company applies the “Accounting Standard for Related Party Disclosures and its Implementation Guidance” (ASBJ,

Statement No. 11, October 17, 2006) and the “Guidance on Accounting Standard for Related Party Disclosures” (ASBJ, Guidance No. 13, October 17,

2006).

Consequently, Honda of America Manufacturing, Inc., becomes a related party to be disclosed for fiscal 2009.

A detailed breakdown of related party transactions for fiscal 2008 and 2009 is as follows:


Type Sales Trade accounts receivable Purchase of raw materials and components Trade accounts payable

Affiliates: Honda Motor Co., Ltd. ¥ 111,801 ¥15,158 ¥21,622 ¥1,889



Affiliates: Honda Motor Co., Ltd. ¥ 91,898 ¥ 8,004 ¥ 16,906 ¥ 1,228

Subsidiaries of affiliates: Honda of America Manufacturing, Inc. ¥ 40,852 ¥ 2,114 ¥ 7,770 ¥ 424

Thousands of U.S. dollars 2009


Affiliates: Honda Motor Co., Ltd. $ 935,538 $ 81,487 $ 172,109 $ 12,505

Subsidiaries of affiliates:

Honda of America Manufacturing, Inc. $ 415,884 $ 21,523 $ 79,105 $ 4,319

Notes: 1. In the tables above, consumption tax is included in the trade accounts receivable and trade accounts payable but not in the sales or the purchases

of raw materials and components. 2. Transaction conditions and policy on determining transaction conditions (1) The sale of merchandise is determined based on price negotiations considering market price or total cost. (2) Receipt of raw materials and components is based on market prices.

18. Subsequent Events At the meeting on April 28, 2009, the Board of Directors resolved to restructure its operating facilities to improve operating efficiency.

1. Background of this decision The worldwide economic slowdown since the latter half of 2008 has deteriorated market conditions. To address this situation, the Company is

working to raise productivity and streamline costs. Seeking to enhance operating efficiency, management has decided to restructure domestic facilities. 2. Schedule Kawasaki Plant: By August 2009, the production division will be transferred to Kakuda, Miyagi, and production activities at the Kawasaki Plant will

cease. By September 2010, the development division will be transferred to Takanezawa, Tochigi, and the Kawasaki Plant will be closed.

Iwate Plant: By January 2010, the production division will be transferred to Kakuda, Miyagi, and the Iwate Plant will be closed. 3. Impact on business activities

Management does not expect the restructuring of operating facilities to have any major impacts on business activities.


Corporate Data

Established December 19, 1956

Capital ¥6,932,340,000

Fiscal Year-end March 31

Number of Employees 15,578 (Consolidated) 4,361 (Non-Consolidated)

Independent Auditors Ernst & Young ShinNihon LLC

Head Office Shinjuku Nomura Bldg. 39F, 1-26-2, Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0539, Japan

　Home Page http://www.keihin-corp.co.jp/english

Stock Information

Number of Shares Authorized 240,000,000 Shares

Total Number of Shares Issued 73,985,246 Shares

Number of Shareholders 5,978

Stock Listing Tokyo Stock Exchange

　General Meeting of Shareholders June

Share Registrar The Mitsubishi Trust and Banking Corporation 1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan

Principal Shareholders

Share Price (Yen)

2005 2006 2007 2008 2009

First QuarterHighLow

1,4171,084

1,8951,590

3,5502,220

2,7752,210

1,8801,437

Second QuarterHighLow

1,7671,215

2,3951,808

3,0502,075

2,4801,912

1,8321,179

Third QuarterHighLow

1,8341,420

3,2502,240

3,2202,545

2,3901,843

1,250 613

Fourth QuarterHighLow

2,0001,669

3,4002,655

3,2202,630

1,9061,171

1,125 653

Corporate Data （As of March 31, 2009）

Keihin Corporation

Number of shares held

(Thousands)

Percentage of total shares outstanding

(%)

Honda Motor Co., Ltd. 30,581 41.33

Japan Trustee Services Bank, Ltd. (Trust Account) 4,255 5.75

The Master Trust Bank of Japan, Ltd. (Trust Account) 3,669 4.96

Japan Trustee Services Bank, Ltd. (Trust Account 4G) 2,848 3.85

Bank of Tokyo-Mistubishi UFJ, Ltd. 2,758 3.73

State Street Bank and Trust Client Omnibus Account OM02 1,976 2.67

SAJAP 1,849 2.50

RBC Dexia Investor Services Trust, London-Clients Account 1,029 1.39

Mellon Bank Treaty Clients Omnibus 940 1.27

The Bank of New York Europe Limited 131705 893 1.21

Keihin Corporation

Making tracks into the future _

2009Annual Report

2009annual report 2009 01 notes: 1. the above amounts were prepared under accounting principles...

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