HONDA MOTOR CO., LTD.

ANNUAL REPORTPresented to:-

Sir.Umar Iftikhar

Presented by:-Aliya Rubab

Executive Summary

Honda Motor Company has established itself as one of the world’s leading producers of automobiles, as well as the largest manufacturer of motorcycles. At the beginning of their three year mid-term business plan, Honda set some goals that allowed them to “make 20 million customers happy,” and this challenge allowed them to grow in all business segments. They achieved virtually all of their goals.

http://www.world.honda.com/investors

INTRODUCTION Honda’s President and Chief Executive Officer is Taeko Fukui. Honda’s home office is located at:

2-1-1 Minami Aoyama

Minato-ku, Tokyo 107-85566, Japan The U.S. home office is located at:

540 Madison Ave., 32nd Floor

New York, NY 10022

The ending date of their last fiscal year was March 31, 2005 Honda operates in three main geographic locations:

Japan

United Kingdom

United States The company produces automobiles, motorcycles and power products, as well as

providing financial services to its customers.

AUDITOR’S REPORT

The company’s independent auditor is a company known as KPMG, located in Tokyo, Japan.

The independent auditors of Honda claim that they have reviewed the company’s financial reports fairly, according to the standards set by the Public Company Accounting Oversight Board in the United States.

STOCK MARKET INFORMATION

The most recent stock price on the New York Stock Exchange was $28.77.Honda had a twelve month trading range going from $23.55 in October 2004, to $29.15 in October 2005. The dividends per share were $0.47.This stock information is dated October 4, 2005.It is my opinion that current stockholders hold their stock. The stock price seems fairly stable.

INDUSTRY SITUATION

Honda is among one of the top producers of motorcycles and automobiles.

They focus on trying to make their vehicles environmental friendly by producing a number of hybrid models.

Honda also has its own financing division to assist their customers in purchasing vehicles and other power products.

COMPANY PLANS

Honda’s primary market is in Japan, where its head office and CEO are located. Therefore, that is the area where they centralize their growth. Consumer spending has increased in Japan, and because of this, they expect the competition in the Japanese market to intensify.

They feel that there are some specific areas in need of improvement that are essential to their success:

-Research and Development

-Production Efficiency

-Sales Efficiency

-Product Quality

-Safety Technologies

-The Environment

-Continuing to Increase Society’s Trust in and

Understanding Toward Honda They feel that, through improving in these seven areas, they will achieve

the Honda visions, which consist of “Value Creation,” “Globalization,” and “Commitment to the Future.”

INCOME STATEMENT

The income statement appears to be similar to a single-step income statement.

The increases in these numbers seem to be quite small, considering how large of a corporation Honda is.

Most of the Net Income for the year ended March 31, 2005, was generated by other subsidiaries operating outside of Japan.

In Millions 2004 2005

Gross Profit $23,771 $24,322

Income from Operations

5,588 5,875

Net Income 4,324 4,527

BALANCE SHEET (IN YEN)

Assets Liabilities Stockholders’ Equity

2004 8,328,768 = 5,454,368 + 2,874,400

2005 9,316,970 = 6,027,676 + 3,289,294

It appears that the numbers on the Balance Sheet have increased from 2004 – 2005. The total assets seem to have increased the most.

STATEMENT OF CASH FLOWS (IN YEN)

For the past two years, cash flow from operations have been greater than net income.

The cash flow from investing seems to be getting smaller and smaller from past years.

Their primary source of financing is the proceeds from long-term debt.

In 2004, cash increased a great deal. In 2005, however, cash only increased a little bit.

ACCOUNTING POLICIES

The following are the topics of significant accounting policies that the company mentions in their financial statements.

-Description of Business

-Basis of Presenting Financial Statements

-Consolidation Policy

-Use of Estimates

-Revenue Recognition

-Cash Equivalents

-Inventories

-Investments in Securities

-Goodwill

-Depreciation

-Impairment of Long-Lived Assets

-Income Taxes

-Product-Related Expenses

-Basic Net Income per Common Share

-Foreign Currency Translation

-Shipping and Handling Costs

-New Accounting Pronouncements not Adopted Yet

-Reclassification

NOTES TO FINANCIAL STATEMENTS

General and Summary of Accounting Policies

Basis of Translating Financial Statements

Presentation of Finance Subsidiaries-Receivables in the Consolidated Statement of Cash Flows and the Consolidated Balance Sheet

Finance Subsidiaries-Receivables and Securitization

Inventories

Investments and Advances-Other

Short-Term and Long-Term Debt

Other Liabilities

Income Taxes

Dividends and Legal Reserves

Pension and Other Postretirement Benefits

Investments and Advances-Affiliates