KEIHIN CORPORATION Annual Report 2005KEIHIN CORPORATION Annual Report 2005 The Company was established in December 1956 as Keihin Seiki Manufacturing Co., Ltd. In 1997, through a merger

New value through constant innovation

KEIHIN CORPORATION

A n n u a l R e p o r t 2 0 0 5

The Company was established in December 1956 as Keihin Seiki Manufacturing Co., Ltd. In 1997,

through a merger with two other Honda Motor Co., Ltd.-affiliated automotive product makers, the

Company became Keihin Corporation, a comprehensive automotive systems manufacturer.

Keihin has grown to become a truly global company, expanding its network beyond the borders

of Japan to include operating units in China, Thailand, India, and other parts of Asia; North

America; Brazil in South America; and, in Europe, the United Kingdom.

Keihin boasts the top global market share in motorcycle carburetors, and its automobile fuel

injection systems are also highly regarded by customers the world over. To help meet new envi-

ronmental standards, the Company has also developed and now manufactures fuel injection sys-

tems for motorcycles, which it supplies to numerous manufacturers, both in Japan and overseas.

Keihin has also expanded its product range beyond fuel supply systems and now manufactures and

supplies customers worldwide with a wide range of automotive components, including air-

conditioning systems and electronic control units of all types.

With a strong concern for the natural environment, Keihin manufactures such environment-

friendly products as components for compressed natural gas and liquefied petroleum gas vehicles

and is currently developing components for fuel-cell vehicles and other products offering

significant potential.

Keihin will contribute to the success and development of the automotive industry by continuing

to supply products at the cutting edge of motorization.

Contents

1 Financial Highlights

2 To Our Shareholders, Employees, and Customers

5 Topics

6 Review by Business Segment

7 Expanding Our Global Operations

8 Five-Year Summary of Selected Financial Data

9 Financial Review

12 Consolidated Balance Sheets

14 Consolidated Statements of Income

15 Consolidated Statements of Shareholders’ Equity

16 Consolidated Statements of Cash Flows

17 Notes to the Consolidated Financial Statements

26 Report of Independent Auditors

27 Board of Directors

28 Network

29 Corporate Data

Forward-Looking StatementsThis annual report contains predictions and forecasts concerning Keihin’s futureplans, strategies, and results. These predictions and forecasts are not historicalfacts but represent judgments formed by management based on the informationavailable at the time they were formed. As such, actual results may differ signifi-cantly due to factors including, but not limited to, economic trends, changes in theautomobile and automobile component industries, market demand, foreignexchange rates, and tax systems.

Profile

Annual Report 2005 1

Thousands ofU.S. dollars

Millions of yen (except per(except per share amounts) share amounts)

2005 2004 2003 2005

For the year:

Net sales ..................................................................................................... ¥271,496 ¥253,051 ¥255,292 $2,528,127

Operating income ....................................................................................... 20,872 17,126 20,438 194,359

Income before income taxes and minority interests

in net income of consolidated subsidiaries .............................................. 20,191 16,317 18,855 188,011

Net income ................................................................................................. 10,856 8,380 9,610 101,089

At year-end:

Total shareholders’ equity .......................................................................... ¥ 90,085 ¥ 79,925 ¥ 75,010 $ 838,861

Total assets ................................................................................................ 170,365 150,772 149,405 1,586,411

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

Net income:

Basic .................................................................................................... ¥ 146.76 ¥ 112.46 ¥ 128.81 $ 1.37

Cash dividends ........................................................................................... 16.00 14.00 14.00 0.15

Notes: 1. The above amounts were prepared under generally accepted accounting principles in Japan.2. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥107.39=US$1. (See Note 3 to the Consolidated

Financial Statements.)

Financial HighlightsKeihin Corporation and Consolidated SubsidiariesYears ended March 31, 2005, 2004 and 2003

’05’04’03’02’01’05’04’03’02’01 ’05’04’03’02’01

Total Assets and Total Shareholders’ Equity (Millions of yen)

Total assets (left scale)Total shareholders’ equity (right scale)

0

30,000

60,000

90,000

120,000

180,000

150,000

0

20,000

40,000

60,000

80,000

100,000

Net Sales and Operating Income (Millions of yen)

Net sales (left scale)Operating income (right scale)

0

60,000

120,000

180,000

240,000

300,000

0

5,000

10,000

15,000

20,000

25,000

Net Income (Loss) and Net Income (Loss) per Share (Basic)(Millions of yen, yen)

Net income (loss) (left scale)Net income (loss) per share (basic) (right scale)

-3,000

0

3,000

6,000

9,000

12,000

-50

0

50

100

150

200

2005 ReviewI would like to begin my review of fiscal 2005, ended March 31,

2005, with the results of Keihin Corporation’s operations for the

term. Keihin turned in record earnings in fiscal 2005. While net

sales rose 7.3%, to ¥271.5 billion, operating income jumped

21.9%, to ¥20.9 billion, as strong earnings in Japan and other

regions in Asia, primarily China, more than offset the damage

from a strong yen and weak dollar. Net income climbed 29.5%,

to a record-high ¥10.9 billion, as a result of higher sales, Group-

wide rationalization measures, including measures to reduce the

cost of sales, and gains from the return of the substitutional por-

tion of the national employees’ pension plan. Reflecting this

strong performance, ROE was 12.8% and ROA was 6.8%.

Under its Eighth Medium-Term Business Plan, the Keihin Group

focused on the implementation of six key policies and business

strategies focused on specific product groups in order to achieve

“a dramatic expansion in development capability,” “the establish-

ment of a global supply framework,” and “the broadening of busi-

ness operations.” I am pleased to report that reform measures

enacted midway through the plan enabled the achievement of our

final-year targets (fiscal 2005) for both sales and earnings.

2 KEIHIN CORPORATION

(1) Fuel Supply Systems for Motorcycles, Recreational

Vehicles, and Power Products

The markets for motorcycles, recreational vehicles, and power

products saw an acceleration of the shift in fuel supply systems

from carburetors to electronic fuel injection, reflecting action on

the part of assemblers to comply with increasingly stringent glob-

al exhaust gas emission regulations. In response, Keihin has

teamed up with Honda Motor Co., Ltd., to develop electronic fuel

injection systems designed specifically for motorcycles. This joint

effort has mainly involved compact, high-performance injectors

that are competitively priced to further encourage the adoption of

electronic fuel injection systems in this market segment. Offering

precise fuel-flow control, these compact, lightweight injectors are

ideal for meeting emissions standards for motorcycles.

Meanwhile, in Europe, Keihin has started supplying throttle bod-

ies, electronic control units, fuel pump modules, and other elec-

tronic fuel injection system components to Triumph Motorcycles

Limited (United Kingdom) and KTM-Sportmotorcycle AG

(Austria).

In the motor-sports field, Keihin has developed and started

supplying several motorcycle manufacturers with its FCR-MX car-

buretor, which is designed for use in extreme off-road environ-

ments, including punishing terrains and muddy water. The

FCR-MX is based on the Company’s FCR carburetor, which has

already won high acclaim in the road-racing field. In recent years,

the motor-sports world has been hit with a tide of environmental

regulations, prompting a shift to four-stroke engines, and this has

in turn led to an increase in the number of models equipped with

Keihin’s FCR-MX carburetor.

(2) Automobile Products

In automobile products, Keihin makes fuel control systems and

electronic fuel injection systems for new models launched by

Honda, including the Elysion, Edix, and Legend in Japan and the

Odyssey, Accord hybrid, and Ridgeline next-generation truck in

North America. As further testimony to our enhanced develop-

ment capabilities, we supply the electronic control unit for

Honda’s Super Handling All-Wheel Drive (SH-AWD) system. The

world’s first all-wheel drive system, the SH-AWD freely distributes

the optimum amount of torque to all four wheels in accordance

with driving conditions, thereby achieving cornering performance

that responds faithfully to driver input as well as outstanding

To Our Shareholders, Employees, and Customers

Kentaro KatoPresident & CEO


vehicle stability. For the Odyssey, marketed in North America, we

supply an electronic control unit that is heat and water resistant

and thus suitable for installation in the engine compartment. We

also supply a reasonably priced aluminum high-pressure die cast

(HPDC) intake manifold that features thinner walls and is 20%

lighter than comparable manifolds.

In addition, we began supplying several components used in

the fuel supply system of the Subaru Legacy B4 2.0 CNG, a

compressed natural gas vehicle introduced by Fuji Heavy

Industries Ltd. in July 2004. The Legacy B4 2.0 CNG is equipped

with Keihin’s two-stage pressure regulator, gaseous fuel injec-

tors, injector drivers, and water temperature sensors.

(3) Restructuring Measures

The Keihin Group is pursuing productivity improvement activities

(PIA) to strengthen its production bases. Aimed at restructuring

the Company’s manufacturing framework as well as further

developing and training personnel, these policies are based on

the concept of adding to our pool of expertise and creating prod-

ucts without recruiting more staff or increasing investment. These

policies are intended to boost productivity through methods

based on physical experience, practicality, and activities on-site.

These activities have been mainly conducted in our domestic

manufacturing facilities and we are currently in the process of

expanding them to our overseas locations as well.

We have also implemented a program termed “1/2

Investment” as part of an overall drive to strengthen our produc-

tion facilities and speed up production start-up processes

through greater integration among the development, engineering,

and production divisions. Underpinned by our commitment to

supplying parts at reasonable prices, this program involves the

deployment of highly efficient, zero-waste manufacturing lines as

part of a push to establish a production system that is among the

most competitive in the world. In fiscal 2005, such activities were

concentrated on production lines for models slated for release in

fiscal 2006.

(4) Establishment of a Global Supply Framework

In fiscal 2005, we made further progress in localizing production

as part of our push to establish a global supply framework.

In China, in September 2004, Dongguan Keihin Engine

Management System Co., Ltd., started producing electronic

control units for the Honda Fit to be marketed locally. In February

2005, the company started producing electronic control systems

and intake manifolds for the new Honda Odyssey for local

consumption. In March 2005, Nanjing Keihin Carburetor Co.,

Ltd., completed a plant expansion project that was carried out to

increase production capacity.

In February 2005, P.T. Keihin Indonesia started producing car-

buretors for motorcycles, and in March 2005, Keihin (Thailand)

Co., Ltd., started producing fuel pump modules, throttle body

modules, and fuel injectors for motorcycles at a new plant.

Medium-Term Business PlanProposing Truly Innovative Solutions

Reflecting an increasingly free flow of people, goods, and capital

around the world, automobile markets are demonstrating rapid

growth, especially in China and other parts of Asia that are enjoy-

ing strong economic expansion. Escalating competition in the

automobile market has brought with it growing demand for ever-

higher levels of product quality, cost-competitiveness, and techni-

cal expertise from the components industry. Additionally,

component suppliers are facing significantly increased social

responsibilities in terms of safety and the environment. Taking

into account these challenging conditions, Keihin formulated its

Ninth Medium-Term Business Plan as a road map for becoming a

company that is widely recognized for proposing truly innovative

solutions in the automotive field.

This objective will entail refocusing our management policies

toward the creation of a corporate framework reaching the top

level in the industry by supplying products that fully address cus-

tomer needs and successfully implementing PIA efforts in every

aspect of our organization.

Specifically, we aim to 1) create a development system that is

driven by the proposal of innovative solutions, 2) achieve unparal-

leled levels of quality in our operations worldwide, 3) implement

PIA in all business areas of the Keihin Group around the globe,

and 4) enact policies that benefit all of our stakeholders and soci-

ety as a whole.

(1) Creating a Development System Driven by the Proposal

of Innovative Solutions

To realize products based on concepts generated by the propos-

al of innovative solutions, we will strengthen departments involved


in the development of core technologies and enhance our devel-

opment infrastructure. We will also establish a system for

developing future strategic products, while utilizing the Keihin

Group’s entire collective expertise and implementing new PIA

efforts to shorten the time it takes for new product ideas to evolve

from concept to concrete realization and market application. As

always, our overriding goal in these endeavors is to create new

value for which Keihin can be acclaimed.

(2) Achieving Unparalleled Levels of Quality in Operations

Worldwide

For manufacturers, establishing a global production system capa-

ble of making products of unparalleled quality increasingly hinges

on their relationships with their product’s users, especially when it

comes to ensuring the ability to pinpoint the particular needs of

individual automakers and specific geographic regions. Another

essential element is the logical construction of a quality assurance

program based on these needs. Always proactive, Keihin has

upgraded and expanded its quality assurance system, beginning

with the establishment of a new Reliability Engineering Division.

We are confident that these moves will ensure that our global

production system turns out products of unmatched quality.

(3) Implementing PIA in All Business Areas of the Keihin

Group around the Globe

Under our previous medium-term business plan, we implemented

PIA mainly as a means to boost manufacturing efficiency.

However, starting with our Ninth Medium-Term Business Plan,

we will expand our PIA efforts to cover research & development

and other indirect areas as well as our overseas locations, as part

of a program to re-engineer our complete corporate structure.

We will be proceeding with this plan in close cooperation with our

suppliers, both in Japan and abroad. In addition, we are upgrad-

ing our product supply systems in China and other areas of Asia,

where the automobile markets are expanding. In conjunction with

the above, we are also in the process of reinforcing our systems

for the localization of components.

(4) Enacting Policies that Benefit All Stakeholders and

Society as a Whole

In accordance with the concepts of the “Keihin Philosophy,” we

continually strive to share joy with society, our customers, our

suppliers, our shareholders, and among ourselves. These activi-

ties are carried out not only at our facilities in Japan but also by

overseas members of the Keihin Group, thereby ensuring that the

“Keihin Philosophy” extends throughout our global business

operations. Rather than simply developing technologies that

improve safety and help protect the environment, as summarized

in our corporate principle of “contributing to the future of mankind

by the continuous creation of new value,” our goal is to ensure

that all of our activities embody the “Keihin Philosophy.”

Additionally, we will continue to be actively engaged in the develop-

ment of personnel who hold themselves true to Keihin’s principles.

We are confident that these policies, which entail a shift to cre-

ating a corporate framework reaching the top level in the industry

through the proposal of innovative solutions and the pursuit of

PIA efforts in all areas of our operations, will enable us to meet

the final-year targets of our Ninth Medium-Term Business Plan,

which calls for an ordinary profit ratio of at least 8% in the fiscal

year ending March 31, 2008.

July 2005

Kentaro Kato

President & CEO


Topics

Thai Plant Starts Production of Fuel Injection Systems forMotorcyclesKeihin (Thailand) Co., Ltd., started production of fuel injection systems for motor-

cycles in March 2005. In view of projections that exhaust gas emission regulations

will continue to tighten, Keihin has quickly met demand for motorcycle fuel injection

systems that help reduce exhaust gas pollutants and taken steps to strengthen its

supply system capabilities for responding to future growth in the market for such

systems.

Indonesia Plant Starts Mass ProductionP.T. Keihin Indonesia started full-fledged mass production in February 2005, as a

result of solid preparations made following the completion of plant construction in

July 2004. Demand for motorcycle carburetors is expected to expand in Indonesia,

which is experiencing rapid economic growth and is starting to rival China and India

in terms of demand for motorcycles. In addition to supplying products that meet ris-

ing demand for motorcycles in Indonesia, P.T. Keihin Indonesia is positioned as a

key base in the global, optimal supply system that the Company is constructing.

Support for People Affected by the Sumatra Earthquakes and Resulting TsunamisTo provide support for people along the coastlines bordering the Indian Ocean who have suffered and continue to face hardship due to

the devastating Sumatra earthquakes and resulting tsunamis, Keihin Group companies and employees both in Japan and overseas

donated approximately ¥8 million, which was contributed to the Japan Red Cross Society and other aid groups. In the future, Keihin

intends to continue proactively promoting various activities designed to contribute to society.

The motorcycle fuel injection systems manufacturingplant of Keihin (Thailand) Co., Ltd.

The new plant of P.T. Keihin Indonesia


Review by Business Segment

Strong revenues in Japan, Asia, and the Americas

boosted sales by 13.5% from the previous fiscal

year, to ¥57,207 million.

Despite lower revenues in North America due to

foreign exchange effects, brisk sales in Japan, Asia,

and Europe increased sales by 7.6%, to ¥99,016

million.

Electronic Control Units

Air-Conditioning Systems

Fuel Control Systems for Automobiles

Sales in Thailand and Indonesia were strong, but

foreign exchange effects and lower revenues in

North America restrained growth in sales, which

rose only 0.1%, to ¥58,010 million.

Fuel Supply Systems for Motorcycles,Recreational Vehicles, and Power Products

¥50,398 million

19.9%

¥57,207 million

21.1%

¥99,016 million

36.5%

¥57,262 million

21.1%

¥58,010 million

21.3%

As a result of a large increase in product sales in

Japan and despite the liquidation of a domestic

subsidiary, sales rose 8.6%, to ¥57,262 million, on

brisk revenues in Japan, North America, and Asia.

*

*

*

*

* Segment sales as a percentage of consolidated net sales


EUROPE

ASIA

Sales surged 18.7% on strong sales of automobile

parts. Keihin expects sales to decline in fiscal 2006

due to lower sales of electronic control units and

automobile parts.

Strong sales in China, Taiwan, India, and Southeast

Asia helped boost sales 25.0% year on year. In fis-

cal 2006, the Company expects sales to rise

sharply again on the start of operations at a new

plant in Indonesia and strong demand for motorcy-

cle parts in India.

0

2,000

4,000

6,000

8,000

’05’04’03’02’01

6,098

Net Sales (Millions of yen)

0

10,000

20,000

30,000

40,000

50,000

’05’04’03’02’01

43,033


Sales rose 9.1% from the previous fiscal year on

strong demand for parts for motorcycles and auto-

mobiles. Although the Company projects a rise in

sales of electronic control units and automobile parts

in fiscal 2006, it expects overall performance to be

largely unchanged owing to such factors as the

transfer of motorcycle product manufacturing over-

seas and lower sales of air-conditioning products.

Despite brisk sales of electronic control units and

general-purpose and motorcycle parts, the signifi-

cant impact of exchange rate fluctuations and lower

sales of air-conditioning products caused sales on

the whole to drop 1.9% from the previous fiscal year.

In fiscal 2006, the Company projects a slight rise in

overall sales, with higher sales of electronic control

units and general-purpose and motorcycle parts

compensating for lower sales of air-conditioning

products.

JAPAN

AMERICAS

0

30,000

60,000

90,000

120,000

150,000

’05’04’03’02’01

127,898


0

20,000

40,000

60,000

80,000

100,000

’05’04’03’02’01

94,467


Expanding Our Global Operations


Thousands ofU.S. dollars

Millions of yen (except per(except per share amounts) share amounts)

2005 2004 2003 2002 2001 2005

For the year:

Net sales .................................................................... ¥271,496 ¥253,051 ¥255,292 ¥219,442 ¥192,133 $2,528,127

Fuel Supply Systems for Motorcycles,

Recreational Vehicles, and Power Products..... 57,207 50,398 45,307 39,906 532,703

Fuel Control Systems for Automobiles ............... 99,016 91,989 97,306 85,277 922,050

Electronic Control Units ...................................... 57,262 52,712 57,545 47,519 533,215

Air-Conditioning Systems ................................... 58,010 57,952 55,133 46,741 540,181

Cost of sales .............................................................. 229,911 218,913 219,145 191,017 169,662 2,140,896

Selling, general and administrative expenses............ 20,713 17,012 15,710 13,001 11,720 192,872

Operating income ...................................................... 20,872 17,126 20,438 15,424 10,751 194,359

Income (loss) before income taxes

and minority interests in net income

of consolidated subsidiaries .................................... 20,191 16,317 18,855 14,033 (1,296) 188,011

Net income (loss) ....................................................... 10,856 8,380 9,610 7,312 (1,518) 101,089

Depreciation and amortization................................... 12,428 11,744 11,194 11,139 9,987 115,723

Research and development expenses ...................... 12,154 11,606 10,573 9,228 8,505 113,178

Capital expenditures.................................................. 14,109 16,750 15,483 13,336 14,545 131,383

At year-end:

Total shareholders’ equity ......................................... ¥ 90,085 ¥ 79,925 ¥ 75,010 ¥ 69,534 ¥ 61,804 $ 838,861

Total assets................................................................ 170,365 150,772 149,405 141,090 130,664 1,586,411

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

Net income (loss):

Basic ................................................................... ¥ 146.76 ¥ 112.46 ¥ 128.81 ¥ 98.84 ¥ (22.38) $ 1.37

Cash dividends .......................................................... 16.00 14.00 14.00 14.00 14.00 0.15

Shareholders’ equity .................................................. 1,217.88 1,079.67 1,012.93 939.95 835.36 11.34

Notes: 1. The above amounts were prepared under generally accepted accounting principles in Japan.2. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥107.39=US$1. (See Note 3 to the Consolidated

Financial Statements.)3. In the year ended March 31, 2003, Keihin changed the segmentation of its operations. Amounts for the year ended March 31, 2002 have been restated.

Five-Year Summary of Selected Financial DataKeihin Corporation and Consolidated SubsidiariesYears ended March 31, 2005, 2004, 2003, 2002 and 2001


Net Sales by Geographic Area(Millions of yen)

Japan

Asia

Americas

Europe

’05’04’03’02’010

60,000

120,000

180,000

240,000

300,000

The scope of consolidation includes 23

of the Company’s 24 subsidiaries.

Principal companies among these

are Keihin (Thailand), Keihin Indiana

Precision Technology, Inc., Keihin

Carolina System Technology, Inc.,

and Dongguan Keihin Engine Manage-

ment System. Keihin R&D China Co.,

Ltd., was newly consolidated during

fiscal 2005 due to its increased impor-

tance within the Keihin Group. The

equity method has not been applied

to Keihin’s one non-consolidated sub-

sidiary and one affiliate. The apprecia-

tion of the yen during the term resulted

in a yen-dollar exchange rate at fiscal

year-end of ¥107.39 to US$1.00, com-

pared with ¥105.69 to US$1.00 at the

previous fiscal year-end. The average

yen-dollar exchange rate was ¥107.60

for fiscal 2005 and ¥112.76 for the pre-

vious fiscal year.

Results of OperationsNet Sales

In fiscal 2005, consolidated net sales

were negatively affected by the appre-

ciation of the yen vis à vis the U.S. dol-

lar, but strong sales performance in

Japan as well as China and other Asian

markets helped boost consolidated net

sales to ¥271,496 million (US$2,528

million), up 7.3% from the level in the

previous fiscal year.

By geographic segment, sales in

Japan rose 9.1%, to ¥127,898 million

(US$1,191 million), owing to the strength

of domestic sales of components for

automobiles.

Sales in the Americas declined

1.9%, to ¥94,467 million (US$879 mil-

lion), as the strength of fuel supply

systems for motorcycles, recreational

vehicles, and power products was

more than offset by the effects of cur-

rency exchange rate fluctuations and

a drop in air-conditioner products.

Sales in Asia surged 25.0%, to

¥43,033 million (US$401 million), reflect-

ing increased sales in China, Taiwan,

India, and Southeast Asian markets.

Sales in Europe advanced 18.7%,

to ¥6,098 million (US$57 million), as a

result of robust sales of components

for automobiles.

Overall, overseas sales increased

6.1%, to ¥148,415 million (US$1,382

million).

Income and Expenses

The Company’s endeavors to reduce

costs and increase efficiency enabled

it to restrain the rate of year-on-year

growth in cost of sales to 5.0%, and

cost of sales amounted to ¥229,911

million (US$2,141 million). Due to in-

creased expenses related to struc-

tural improvements for future growth,

selling, general and administrative

expenses rose 21.8%, to ¥20,713 mil-

lion (US$193 million). As a result of the

rise in net sales, operating income

rose 21.9%, to ¥20,872 million

(US$194 million).

By geographic segment (before

the elimination of intersegment trans-

actions), operating income in Japan

rose 51.5%, to ¥8,451 million (US$79

million). Operating income in the

Americas rose 3.7%, to ¥6,694 million

(US$62 million). Benefiting from firm

sales in the region, operating income in

Asia climbed 18.4%, to ¥5,737 million

(US$53 million), and operating income

Financial Review

Net Sales by Business Segment(Millions of yen)

Fuel Supply Systems for Motorcycles, Recreational Vehicles, and Power Products

Fuel Control Systems for Automobiles

Electronic Control Units

Air-Conditioning Systems

’05’04’03’02’010

60,000

120,000

180,000

240,000

300,000


in Europe rose 48.1%, to ¥353 million

(US$3 million).

The Company continued to make

progress in reducing costs and other

streamlining initiatives across the entire

Group, and consolidated recurring

profit rose 23.9%, to ¥20,756 million

(US$193 million).

Interest and dividend income, net of

interest expense, amounted to ¥64 mil-

lion (US$1 million), compared with a net

expense of ¥209 million in the previous

fiscal year, and a foreign exchange

gain of ¥118 million (US$1 million) was

recorded in fiscal 2005, whereas the

foreign exchange loss logged in the

previous year was ¥932 million.

Income before income taxes and

minority interests in net income of con-

solidated subsidiaries amounted to

¥20,191 million (US$188 million), com-

pared with ¥16,317 million in the previ-

ous fiscal year, and net income worked

out to ¥10,856 million (US$101 million),

compared with ¥8,380 million in the

previous year.

Net income per share, basic,

amounted to ¥146.76 (US$1.37),

compared with ¥112.46 in the pre-

vious year.

R&D Expenses

The basic policy for the R&D activities

of the Keihin Group is to support the

core needs of automobile manufactur-

ing. The primary goal of these pro-

grams is to promote the advancement

of environmental friendliness, safety,

and comfort through the systemati-

zation and modularization of these

commodities—as well as the devel-

opment of intelligent features—

undertakings that are being conducted

by the development departments of

Keihin. Production on a global scale,

adaptation to alternative energy sources,

and environmental businesses are

also proactively incorporated into the

Company’s R&D activities. Total R&D

expenses for the year under review

amounted to ¥12,154 million (US$113

million).

Capital Expenditures

Capital expenditures for the year under

review were down 15.8%, to ¥14,109

million (US$131 million). Of this, ¥2,563

million (US$24 million) was invested in

motorcycle and power product prod-

uction facilities, ¥4,070 million (US$38

million) in automobile part production

facilities, ¥2,356 million (US$22 million)

in electronic control unit production

facilities, ¥886 million (US$8 million) in

air-conditioning unit production facili-

ties, ¥2,094 million (US$20 million) in

R&D investments, and ¥2,140 million

(US$19 million) in buildings and struc-

tures. Depreciation and amortization

increased 5.8%, to ¥12,428 million

(US$116 million).

Cash Flows

Cash and cash equivalents at end of

year totaled ¥22,609 million (US$211

million). Although purchases of tangible

and intangible assets amounted to

¥14,109 million (US$131 million) and

trade notes and accounts receivable

grew ¥5,537 million (US$52 million),

these items were compensated for

by net cash provided by operating

activities, and the addition of newly

consolidated subsidiaries also drove

up cash and cash equivalents.

-5

0

5

10

15

20

ROE and ROA (%)

ROEROA

’05’04’03’02’01

-5,000

0

5,000

10,000

15,000

20,000

25,000

-2,500

0

2,500

5,000

7,500

10,000

12,500

Operating Income and Net Income (Loss) (Millions of yen)

Operating income (left scale)Net income (loss) (right scale)

’05’04’03’02’01


Net cash provided by operating

activities declined ¥1,141 million, or

4.3% compared with the previous fiscal

year, to ¥25,243 million (US$235 mil-

lion). This reflected rises in trade notes

and accounts receivable and invento-

ries, which partially offset the effect of

the strength of income before income

taxes and minority interests in net

income of consolidated subsidiaries.

Net cash used in investing activities

was down ¥1,738 million, or 10.1%, to

¥15,532 million (US$145 million), mainly

on account of the acquisition of proper-

ty, plant and equipment and investment

securities.

Net cash used in financing activities

declined ¥3,555 million, to ¥1,075 mil-

lion (US$10 million), primarily as a result

of a decrease in loan repayment.

Financial Position

Total assets at fiscal 2005 year-end

increased 13.0%, to ¥170,365 million

(US$1,586 million), compared with the

previous fiscal year-end, and current

assets decreased 21.0%, to ¥94,707

million (US$882 million). Cash climbed

¥9,791 million, to ¥23,788 million

(US$222 million), and property, plant

and equipment rose ¥2,430 million,

to ¥60,567 million (US$564 million).

Investments and other assets

increased ¥703 million, to ¥15,091

million (US$140 million).

Current liabilities increased ¥7,657

million, to ¥53,182 million (US$495 mil-

lion), primarily as a result of growth in

trade notes and accounts payable and

in provisions for product warranties.

Shareholders’ equity increased

12.7%, to ¥90,085 million (US$839 mil-

lion). Shareholders’ equity per share

climbed ¥138.21, from ¥1,079.67 in the

previous year to ¥1,217.88 (US$11.34).

The equity ratio declined 0.1 percent-

age point, to 52.9%.

Cash Provided by Operating Activities (Millions of yen)

0

5,000

10,000

20,000

15,000

30,000

25,000

’05’04’03’02’01

0

5,000

10,000

15,000

20,000

Capital Expenditures (Millions of yen)

’05’04’03’02’01


Thousands ofMillions of yen U.S. dollars

ASSETS 2005 2004 2005

Current assets:

Cash .................................................................................................................................. ¥ 23,788 ¥ 13,997 $ 221,509

Notes and accounts receivable—trade:

Third-party customers ................................................................................................ 41,542 36,183 386,830

Unconsolidated subsidiaries and affiliates ................................................................. 469 54 4,372

............................................................................................................................. 42,011 36,237 391,202

Inventories ......................................................................................................................... 22,703 20,929 211,407

Deferred income taxes ...................................................................................................... 3,588 2,660 33,415

Other current assets.......................................................................................................... 2,617 4,424 24,361

Total current assets ............................................................................................. 94,707 78,247 881,894

Property, plant and equipment:

Land................................................................................................................................... 6,567 6,077 61,147

Buildings and structures.................................................................................................... 29,787 27,925 277,369

Machinery and equipment................................................................................................. 99,877 93,988 930,043

Furniture and tools ............................................................................................................ 25,790 24,371 240,150

Construction in progress ................................................................................................... 4,892 5,359 45,567

............................................................................................................................. 166,913 157,721 1,554,276

Less: Accumulated depreciation ....................................................................................... (106,346) (99,583) (990,282)

............................................................................................................................. 60,567 58,137 563,994

Investments and other assets:

Investments in securities ................................................................................................... 5,741 5,352 53,457

Investments in unconsolidated subsidiaries and affiliates ............................................... 1,393 1,816 12,970

Long-term loans to employees.......................................................................................... 468 595 4,356

Intangible assets................................................................................................................ 2,980 2,641 27,757

Deferred income taxes ...................................................................................................... 2,044 2,877 19,032

Other assets ...................................................................................................................... 2,496 1,118 23,241

............................................................................................................................. 15,122 14,399 140,813

Less: Allowance for doubtful accounts ............................................................................. (31) (12) (290)

............................................................................................................................. 15,091 14,388 140,523

Total assets.......................................................................................................... ¥170,365 ¥150,772 $1,586,411

The accompanying notes are an integral part of these financial statements.

Consolidated Balance SheetsKeihin Corporation and Consolidated SubsidiariesAs of March 31, 2005 and 2004



LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY 2005 2004 2005

Current liabilities:

Short-term bank loans....................................................................................................... ¥ 4,466 ¥ 3,912 $ 41,585

Notes and accounts payable—trade................................................................................. 30,309 27,433 282,237

Accrued expenses............................................................................................................. 8,690 8,022 80,922

Warranty reserve ............................................................................................................... 1,557 32 14,500

Income taxes payable ....................................................................................................... 3,230 2,675 30,075

Other current liabilities....................................................................................................... 4,930 3,451 45,902

Total current liabilities................................................................................................. 53,182 45,525 495,221

Accrued retirement benefits:

Directors and statutory auditors........................................................................................ 437 378 4,072

Employees ......................................................................................................................... 10,255 11,366 95,494

Deferred income taxes .......................................................................................................... 2,116 1,908 19,702

Other non-current liabilities .................................................................................................. 1,466 1,119 13,646

Total liabilities ............................................................................................................. 67,456 60,296 628,135

Minority interests ................................................................................................................... 12,824 10,551 119,415

Shareholders’ equity:

Common stock:

Authorized:

2004 and 2005—240,000,000 shares

Issued:

2004 and 2005—73,985,246 shares.................................................................... 6,932 6,932 64,553

Capital surplus................................................................................................................... 7,941 7,941 73,943

Earnings surplus ................................................................................................................ 77,738 68,091 723,886

Net unrealized gains on securities..................................................................................... 2,288 2,072 21,308

Adjustment for foreign currency statement translation ..................................................... (4,795) (5,094) (44,650)

............................................................................................................................. 90,104 79,942 839,040

Less: Treasury common stock, at cost

2004—14,275 shares, 2005—16,044 shares....................................................... (19) (16) (179)

Total shareholders’ equity .......................................................................................... 90,085 79,925 838,861

Contingent liabilities

Total liabilities, minority interests and shareholders’ equity ............................................. ¥170,365 ¥150,772 $1,586,411



2005 2004 2005

Net sales.................................................................................................................................. ¥271,496 ¥253,051 $2,528,127

Cost of sales ........................................................................................................................... 229,911 218,913 2,140,896

Gross profit........................................................................................................................ 41,585 34,138 387,231

Selling, general and administrative expenses ..................................................................... 20,713 17,012 192,872

Operating income.............................................................................................................. 20,872 17,126 194,359

Other income (expenses):

Interest and dividend income ............................................................................................ 211 417 1,967

Interest expense ................................................................................................................ (147) (208) (1,364)

Foreign exchange gain (loss)............................................................................................. 118 (932) 1,102

Loss on disposal of property and equipment.................................................................... (224) (91) (2,089)

Compensation cost for dies .............................................................................................. (223) (88) (2,078)

Social insurance taxes for previous year........................................................................... — (298) —

Provision for warranty reserve........................................................................................... (600) — (5,587)

Other, net........................................................................................................................... 184 391 1,701

Income before income taxes and minority interests

in net income of consolidated subsidiaries .............................................................. 20,191 16,317 188,011

Income taxes:

Current............................................................................................................................... 6,297 4,747 58,640

Deferred............................................................................................................................. 253 825 2,352

Income before minority interests in net income

of consolidated subsidiaries..................................................................................... 13,641 10,745 127,019

Minority interests in net income of consolidated subsidiaries .......................................... (2,785) (2,365) (25,930)

Net income ........................................................................................................................ ¥ 10,856 ¥ 8,380 $ 101,089

Yen U.S. dollars

Per share of common stock:

Net income:

Basic ........................................................................................................................... ¥146.76 ¥112.46 $1.37

Cash dividends.................................................................................................................. 16.00 14.00 0.15


Consolidated Statements of IncomeKeihin Corporation and Consolidated SubsidiariesFor the years ended March 31, 2005 and 2004


Millions of yen

AdjustmentNumber of Net for foreign Treasuryshares of unrealized currency commoncommon Common Capital Earnings gains on statement stock,

stock stock surplus surplus securities translation at cost

Balance at March 31, 2003 .................................. 73,985,246 ¥6,932 ¥7,941 ¥60,977 ¥1,431 ¥(2,256) ¥(16)Net income for the year ..................................... — — — 8,380 — — —Cash dividends paid .......................................... — — — (1,036) — — —Bonuses to directors and statutory auditors ..... — — — (96) — — —Decrease due to inclusion of a subsidiary into consolidation............................................. — — — (120) — — —

Decrease due to change in interests in a consolidated subsidiary ............................ — — — (3) — — —

Decrease due to exclusion of a subsidiary from consolidation ........................................... — — — (12) — — —

Unrealized gains on securities ........................... — — — — 641 — —Foreign currency translation adjustment ........... — — — — — (2,838) —Treasury common stock acquired ..................... — — — — — — (1)

Balance at March 31, 2004 .................................. 73,985,246 6,932 7,941 68,091 2,072 (5,094) (16)Net income for the year ..................................... — — — 10,856 — — —Cash dividends paid .......................................... — — — (1,110) — — —Bonuses to directors and statutory auditors ..... — — — (99) — — —Unrealized gains on securities ........................... — — — — 216 — —Foreign currency translation adjustment ........... — — — — — 299 —Treasury common stock acquired ..................... — — — — — — (3)

Balance at March 31, 2005 .................................. 73,985,246 ¥6,932 ¥7,941 ¥77,738 ¥2,288 ¥(4,795) ¥(19)

Thousand of U.S. dollars

Adjustment Net for foreign Treasury

unrealized currency commonCommon Capital Earnings gains on statement stock,

stock surplus surplus securities translation at cost

Balance at March 31, 2004 ........................................................... $64,553 $73,943 $634,049 $19,295 $(47,434) $(152)Net income for the year............................................................... — — 101,089 — — —Cash dividends paid ................................................................... — — (10,332) — — —Bonuses to directors and statutory auditors .............................. — — (920) — — —Unrealized gains on securities .................................................... — — — 2,013 — —Foreign currency translation adjustment .................................... — — — — 2,784 —Treasury common stock acquired .............................................. — — — — — (26)

Balance at March 31, 2005 ........................................................... $64,553 $73,943 $723,886 $21,308 $(44,650) $(178)


Consolidated Statements of Shareholders’ EquityKeihin Corporation and Consolidated SubsidiariesFor the years ended March 31, 2005 and 2004



2005 2004 2005

Cash flows from operating activities:Income before income taxes and minority interests in net income of consolidated subsidiaries.................................................................................................. ¥20,191 ¥16,317 $188,011

Adjustments to reconcile income before income taxes and minority interests in net income of consolidated subsidiaries to net cash provided by operating activities:

Depreciation and amortization.......................................................................................... 12,428 11,744 115,723Amortization of goodwill ................................................................................................... — 278 —Loss on disposal of property and equipment ................................................................... 217 133 2,017Increase (decrease) in warranty reserve ........................................................................... 1,523 (107) 14,187Decrease in accrued retirement benefits of employees ................................................... (2,267) (489) (21,109)Increase (decrease) in accrued retirement benefits of directors and statutory auditors ................................................................................. 59 (79) 551

Interest and dividend income ........................................................................................... (211) (417) (1,967)Interest expense ............................................................................................................... 147 208 1,364(Increase) decrease in notes and accounts receivable—trade......................................... (5,537) 3,296 (51,559)(Increase) decrease in inventories .................................................................................... (1,730) 1,094 (16,106)Increase (decrease) in notes and accounts payable—trade............................................. 2,664 (168) 24,809Payment of directors’ bonuses......................................................................................... (99) (96) (920)Other, net .......................................................................................................................... 3,731 (573) 34,741

Subtotal...................................................................................................................... 31,116 31,139 289,742Proceeds from interest and dividend income................................................................... 326 632 3,038Payment of interest expenses .......................................................................................... (147) (208) (1,364)Payment of income taxes ................................................................................................. (6,052) (5,180) (56,354)

Net cash provided by operating activities ................................................................. 25,243 26,384 235,062Cash flows from investing activities:

Payment for purchases of property, plant and equipment and intangible assets................... (14,109) (16,750) (131,383)Proceeds from sales of property, plant and equipment .......................................................... 809 366 7,532Payment for purchases of investment securities..................................................................... (33) (1,985) (303)Proceeds from sales of investment securities......................................................................... 2 982 14Proceeds from collections on loans ........................................................................................ 22 76 205Payment for purchases of investments in capital.................................................................... — (0) —Other, net................................................................................................................................. (2,223) 41 (20,692)

Net cash used in investing activities.......................................................................... (15,532) (17,270) (144,627)Cash flows from financing activities:

Increase (decrease) in short-term loans, net ........................................................................... 651 (2,657) 6,063Repayment of long-term debt ................................................................................................. — (437) —Issuance of common stock ..................................................................................................... — 36 —Payment for purchases of treasury stock................................................................................ (3) (1) (26)Payment of cash dividends by parent company ..................................................................... (1,110) (1,036) (10,332)Payment of cash dividends to minority interest shareholders................................................. (613) (536) (5,718)

Net cash used in financing activities.......................................................................... (1,075) (4,630) (10,013)Effect of exchange rate changes on cash and cash equivalents ............................................ 113 (1,983) 1,051Net change in cash and cash equivalents.................................................................................. 8,749 2,500 81,473Cash and cash equivalents at beginning of year....................................................................... 13,614 10,677 126,772Increase in cash and cash equivalents due to inclusion of a subsidiary into consolidation .... 246 650 2,289Decrease in cash and cash equivalents due to exclusion of a subsidiary from consolidation.. — (213) —Cash and cash equivalents at end of year ................................................................................. ¥22,609 ¥13,614 $210,534The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Cash FlowsKeihin Corporation and Consolidated SubsidiariesFor the years ended March 31, 2005 and 2004

1. Basis of Presentation of Consolidated Financial StatementsThe accompanying consolidated financial statements of Keihin

Corporation (the “Company”) and its subsidiaries (together, the

“Companies”) are prepared on the basis of accounting principles

generally accepted in Japan, which are different in certain respects

as to application and disclosure requirements of International

Financial Reporting Standards, and are compiled from the consoli-

dated financial statements prepared by the Company as required

by the Securities and Exchange Law of Japan.

2. Summary of Significant Accounting Policies(1) Consolidation and Investments in Affiliates

The consolidated financial statements include the accounts of the

Company and all significant subsidiaries where the Company has

the ability to exercise significant influence over the subsidiaries’

operating and financial policies. All significant intercompany transac-

tions, accounts and unrealized intercompany profits are eliminated

on consolidation. Certain consolidated subsidiaries are consolidated

on the basis of their fiscal years ended December 31 and material

differences in intercompany transactions and accounts arising from

the use of the different fiscal year-end are appropriately adjusted on

consolidation. The difference between the cost and the underlying

net equity of investment in consolidated subsidiaries at the time of

acquisition is charged to income when recognized.

Investments of 50% or less in companies over which the parent

company does not have control but has the ability to exercise signifi-

cant influence and investments in unconsolidated subsidiaries are

stated at cost or less. The carrying value of the investments is written

down to fair value when a decline in the fair value below cost is deter-

mined to be a permanent impairment of value. The equity method of

accounting for investments in affiliates and unconsolidated subsidiaries

has not been applied by the Company since the effect of its applica-

tion is not material.

(2) Translation of Foreign Currency Transactions and Accounts

Foreign currency transactions are recorded using the prevailing for-

eign exchange rates at the transaction dates. Receivables and

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

rent exchange rates.

All the asset and liability accounts of foreign subsidiaries are trans-

lated 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 compo-

nent of shareholders’ equity.

(3) Valuation of Securities

Investment securities expected to be held in the long term are

classified as other securities. Other securities whose fair values are

readily determinable are carried at fair value, with unrealized gains

and losses recorded in shareholders’ equity, net of applicable

income taxes. Other securities without fair values are carried at

moving average cost.

(4) Derivative Financial Instruments

Derivative financial instruments, which include foreign currency

forward exchange contracts and currency options, are used in the

Company’s risk management of foreign currency risk exposures of

its financial assets and liabilities based on an internal policy that stip-

ulates that at least 60% of the foreign currency receivables balance is

to be hedged. The Company evaluates the effectiveness of its hedg-

ing activities by reference to the accumulated gains or losses on the

hedging instruments and the related hedged items from their inception.

The Company enters into foreign currency forward exchange

contracts and currency options to limit exposure to changes in for-

eign currency exchange rates on accounts receivable and cash

flows generated from anticipated transactions denominated in for-

eign currencies. With regard to foreign currency forward exchange

contracts, which are designated and effective as hedges of such

currency exchange rate risks on existing assets and liabilities, the

Company adopted the accounting method whereby foreign curren-

cy denominated assets and liabilities are measured at the contract

rate of the respective foreign currency forward exchange contract.

With respect to foreign currency forward contracts and currency

options on anticipated transactions, the contracts are marked to

market and unrealized gains/losses are deferred in the balance

sheets to be recorded in operations when exchange gains/losses

on the hedged items or transactions are recognized.

(5) Inventories

Inventories are generally stated at cost determined by the first-in,

first-out method.

Notes to the Consolidated Financial Statements



(6) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is

computed at rates based on the estimated useful lives of assets using

the declining balance method, except for depreciation of buildings

of the Company and its domestic consolidated subsidiaries acquired

on or after April 1, 1998, for which the straight-line method is applied.

Depreciable assets of more than ¥100,000 and less than ¥200,000 are

depreciated by the straight-line method over three years in accor-

dance with corporate income tax laws in Japan. When assets are sold

or otherwise disposed of, the profits or losses thereon, computed on

the basis of the difference between depreciated cost and proceeds,

are credited or charged to operations in the year of disposal, and cost

and accumulated depreciation are removed from the respective

accounts.

The ranges of estimated useful lives are as follows:

Buildings and structures 2-50 years

Machinery and equipment 2-12 years

(7) Amortization of Intangible Assets

The amortization of intangible assets is computed using the straight-

line method. Software for internal usage purposes is amortized over

five years, the estimated useful life, using the straight-line method.

(8) Research and Development

Research and development expenses are charged to income when

incurred.

(9) Income Taxes

The asset-and-liability approach is used to recognize deferred tax

assets and liabilities for the expected future tax consequences of

temporary differences between the carrying amounts and the tax

bases of assets and liabilities. Valuation allowances are recorded

to reduce deferred tax assets when it is more likely than not that

a tax benefit will not be realized.

(10) Warranty Reserve

The reserve for warranty claims is provided based on the estimated

amount of future expenditures for the servicing of after-sales returns

of products based on the warranty agreement with customers.

(11) Retirement Benefits and Pension Plans

Employees of the Companies whose services are terminated are,

under most circumstances, entitled to lump-sum severance indem-

nities or are eligible for pension benefits.

Lump-sum severance indemnities provided for employees are

determined by reference to an employee’s current basic rate of pay,

length of service, position in their respective companies and termina-

tion circumstances. The Company maintains a contributory defined

benefit welfare pension plan, which is pursuant to the Japanese

Welfare Pension Insurance Law. Also, the Company and certain

consolidated subsidiaries act as trustees for non-contributory

defined benefit pension plans.

Retirement benefits, including pension costs and related liabilities,

were recognized and computed using an actuarial appraisal approach

known as the projected unit credit method. Under a defined benefit

plan, the net pension cost for a period includes: i) service cost,

ii) interest cost, iii) expected return on plan assets, iv) amortization

of unrecognized prior service cost, v) amortization of unrecognized

actual differences and vi) amortization of transition assets or liabilities

at the date of initial application of the accounting standard. Any differ-

ence between the net pension cost and the amount actually funded

for the period is reported as unfunded accrued retirement benefits or

prepaid pension costs on the balance sheets. In respect of the policy

for the amortization of prior service cost and unrecognized actuarial

differences, the Companies amortize on a straight-line basis over 3

years and 17 years, respectively, those that are within the period of

the estimated remaining service periods.

Keihin participates in the Honda Motor employees’ pension fund

(mutually established by Honda and Keihin). Under the Defined

Benefit Corporate Pension Law, Keihin received approval from the

Ministry of Health, Labour and Welfare on April 1, 2004, to forego

future contributions to the substitutional portion of the employees’

welfare pension fund. Additionally, procedures are now under way

for the return of past contributions of the substitutional portion.

The amount to be returned with regard to the substitutional portion

(the minimum actuarial liability) on March 31, 2005, was estimated at

¥11,802 million (US$109,898 thousand). Assuming that this amount

was paid on the above date, the Company estimates a related extra-

ordinary gain of ¥6,793 million (US$63,254 thousand), based on the

application of Section 44-2 of the interim report of the Practical

Guideline for Accounting for Retirement Benefits (the 13th issue of

the Accounting Committee Report issued by the Japanese Institute

of Certified Public Accountants).

The Company and its consolidated subsidiaries provide for future

severance payments to directors and statutory auditors at the full

amount which would be required under the Companies’ policies if

all eligible directors and statutory auditors retired at the balance

sheet date.


(12) Appropriations of Retained Earnings

Under the Commercial Code of Japan and the Articles of lncorpora-

tion of the Company, the appropriations of retained earnings (includ-

ing year-end cash dividend payments) proposed by the Board of

Directors must be approved at the shareholders’ meeting, which

must be held within three months after the end of each financial year.

The appropriation of retained earnings reflected in the accompanying

consolidated financial statements represents the results of appropria-

tions which were applicable to the immediately preceding financial

year and approved at the shareholders’ meeting and disposed of

during that year. Year-end cash dividends are paid to shareholders

on the shareholders’ register at the end of each financial year.

As is customary practice in Japan, the payment of bonuses to

directors and statutory auditors is made out of retained earnings,

instead of being charged to operations for the year, and constitutes

a part of the appropriations cited above.

The Commercial Code of Japan provides that interim cash

dividends may be distributed upon the approval of the Board of

Directors. The Company has paid such interim cash dividends

to shareholders of record as of September 30 each year.

(13) Net Income and Dividends per Share

Net income per share of common stock is based upon the weighted

average number of shares of common stock outstanding during

each year. Cash dividends per share shown for each year in the

consolidated statements of income represent dividends declared

as applicable to the respective period.

As there was no dilutive effect of convertible bonds and bonds with

warrants on net income per share, such information is not required

to be disclosed.

(14) Consumption Taxes

Consumption taxes are imposed at the flat rate of 5% on all domestic

consumption of goods and services (with certain exemptions).

The consumption tax withheld upon sales is not included in net

sales in the accompanying consolidated statements of income but

is recorded as a liability. The balances of consumption tax withheld

and consumption tax paid (an asset item), which is borne by the

Company and its consolidated subsidiaries on purchases of goods

and services, are not included in revenue and expenses in the con-

solidated statements of income but are offset, and the net balance

is included in other current assets or other current liabilities in the

consolidated balance sheets at March 31, 2004 and 2005.

(15) Accounting for Leases

Leases that transfer substantially all the risks and rewards of owner-

ship of the assets are accounted for as capital leases, except for

leases that do not transfer ownership of the assets at the end of the

lease term, which are accounted for as operating leases, in accordance

with accounting principles and practices generally accepted in Japan.

(16) Cash and Cash Equivalents

Cash and cash equivalents in the consolidated statements of cash

flows are composed of cash on hand, bank deposits able to be with-

drawn on demand and short-term investments with original maturities

of three months or less and which represent a minor risk of fluctua-

tions in value.

(17) Reclassification

Certain accounts in the consolidated financial statements for the year

ended March 31, 2004 have been reclassified to conform to the 2005

presentation.

(18) Accounting Standard for Impairment of Fixed Assets

On August 9, 2002, the Business Accounting Council in Japan issued

the “Accounting Standard for Impairment of Fixed Assets.” The stan-

dard requires that fixed assets be reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount

of an asset may not be recoverable. An impairment loss shall be rec-

ognized in the income statement by reducing the carrying amount of

impaired assets or a group of assets to the recoverable amount to be

measured as the higher of net selling price and value in use.

The standard shall be effective for fiscal years beginning April 1,

2005. However, an earlier adoption is permitted for fiscal years begin-

ning April 1, 2004 and for fiscal years ending between March 31, 2004

and March 30, 2005.

The Company has not yet applied this new standard nor has it

determined the effect of applying it on the Company’s consolidated

financial statements.

3. U.S. Dollar AmountsThe consolidated financial statements are prepared in yen. The U.S.

dollar amounts included in the consolidated financial statements and

notes thereto represent the arithmetical results of translating yen to

dollars on the basis of ¥107.39=US$1, the approximate rate of

exchange prevailing at March 31, 2005. The inclusion of such dollar

amounts is solely for the convenience of readers and is not intended

to imply that yen amounts have been or could be converted, realized

or settled in dollars at ¥107.39=US$1 or at any other rate.


4. Cash and Cash EquivalentsA reconciliation of cash in the consolidated balance sheets and cash

and cash equivalents in the consolidated statements of cash flows is

as follows:Thousands of

Millions of yen U.S. dollars

2005 2004 2005

Cash (balance sheets) .................... ¥23,788 ¥13,997 $221,509

Time deposits with deposit terms

of over three months .................... (1,179) (383) (10,975)

Cash and cash equivalents ............ ¥22,609 ¥13,614 $210,534

5. Investment SecuritiesAs of March 31, 2005 and 2004, the carrying values and acquisition

costs of investment securities were set out as follows:

(1) Investment Securities with Market Value

Millions of yen

AcquisitionAs of March 31, 2005 Cost Carrying Value Difference

Carrying value exceeds

acquisition cost:

Shares............................. ¥ 872 ¥4,667 ¥3,795

Others ............................. 990 991 1

Subtotal .............................. 1,862 5,658 3,796

Carrying value does not exceed

acquisition cost:

Shares............................. — — —

Others ............................. 20 19 (1)

Subtotal .............................. 20 19 (1)

Total ....................................... ¥1,882 ¥5,677 ¥3,795

Millions of yen



acquisition cost:

Shares............................. ¥ 872 ¥4,290 ¥3,418

Others ............................. 990 1,010 21

Subtotal .............................. 1,862 5,300 3,438

Carrying value does not

exceed acquisition cost:

Shares............................. — — —

Others ............................. 21 19 (2)

Subtotal .............................. 21 19 (2)

Total ....................................... ¥1,883 ¥5,319 ¥3,436

Thousand of U.S. dollars



acquisition cost:

Shares ................................ $ 8,122 $43,462 $35,340

Others................................. 9,214 9,221 7

Subtotal .................................. 17,336 52,683 35,347

Carrying value does not

exceed acquisition cost:

Shares ................................ — — —

Others................................. 189 178 (11)

Subtotal .................................. 189 178 (11)

Total ........................................... $17,525 $52,861 $35,336

(2) Other Investment Securities without Market Value


2005 2004 2005

Carrying value of investment

securities not listed except

for over-the-counter dealings.................. ¥32 ¥32 $295

6. Short-Term Bank LoansShort-term bank loans consist principally of bank overdrafts, bearing

interest at average annual rates of 3.1% and 2.9% in the years ended

March 31, 2005 and 2004, respectively.

Short-term bank loans as at March 31, 2005 and 2004 were as follows:


2005 2004 2005

Bank overdrafts:

Unsecured ...................................... ¥4,466 ¥3,912 $41,585


7. Income TaxesThe statutory tax rate used for calculating deferred tax assets and

deferred tax liabilities as of March 31, 2005 was 39.7% and as of

March 31, 2004 was 41.0%.

Reconciliations of the difference between the statutory tax rate

and the effective income tax rate in the accompanying consolidated

statements of income for the years ended March 31, 2005 and 2004

are as follows:

2005 2004

Statutory tax rate ........................................................ 39.7% 41.0%

(Adjustment)

Inhabitants’ tax on a per-capita basis..................... 0.2 0.2

Differences in subsidiaries’ tax rates ...................... (2.2) (2.8)

Foreign tax credits .................................................. (1.4) (1.6)

Tax reduction for research

and development expenses.................................. (2.4) (1.7)

Others ..................................................................... (1.5) (1.0)

Effective income tax rate ............................................ 32.4% 34.1%

At March 31, 2005 and 2004, significant components of deferred tax

assets and liabilities were as follows:Thousands of


2005 2004 2005

Current:

Deferred tax assets:

Unrealized profits on inventories..... ¥ 478 ¥ 343 $ 4,448

Write-down of inventories ............... 299 207 2,784

Bonus reserve ................................. 1,177 1,142 10,963

Accrued enterprise taxes ................ 252 110 2,350

Accrued expenses........................... 455 479 4,238

Other ............................................... 944 379 8,792

Total deferred tax assets ......... 3,605 2,661 33,575

Offset against deferred

tax liabilities ........................... 17 1 160

Net deferred tax assets ........... ¥3,588 ¥2,660 $33,415

Deferred tax liabilities:

Other ............................................... ¥ 17 ¥ 6 $ 160

Total deferred tax liabilities...... 17 6 160


tax assets .............................. 17 1 160

Net deferred tax liabilities ........ ¥ — ¥ 5 $ —

Non-Current:

Deferred tax assets:

Accrued retirement benefits:

Directors and statutory auditors.. ¥ 167 ¥ 150 $ 1,551

Employees................................... 3,531 4,333 32,878

Unrealized profits

on depreciable assets ................... 317 308 2,955

Other ............................................... 322 56 3,001

Total deferred tax assets ......... 4,337 4,847 40,385


tax liabilities ........................... 2,293 1,970 21,353

Net deferred tax assets ........... ¥2,044 ¥2,877 $19,032

Deferred tax liabilities:

Depreciation of overseas

subsidiaries ................................... ¥2,242 ¥1,869 $20,880

Valuation of securities ..................... 1,507 1,365 14,033

Other ............................................... 660 643 6,142

Total deferred tax liabilities....... 4,409 3,878 41,055


tax assets .............................. 2,293 1,970 21,353

Net deferred tax liabilities ........ ¥2,116 ¥1,908 $19,702


8. Lease TransactionsThe Companies lease furniture and tools. Pro-forma information relat-

ing to acquisition costs, accumulated depreciation and future mini-

mum lease payments for property held under finance leases which do

not transfer ownership of the leased property to the lessee on an “as if

capitalized” basis for the years ended March 31, 2005 and 2004 is as

follows:Thousands of


2005 2004 2005

Furniture and Tools

Acquisition costs.................................... ¥27 ¥27 $253

Accumulated depreclation ..................... 27 20 253

Net leased property ............................... ¥— ¥ 7 $ —

Future minimum lease payments under finance leases as of March

31, 2005 and 2004 were as follows:Thousands of


2005 2004 2005

Due within one year ............................... ¥— ¥ 7 $—

Due after one year.................................. — — —

Total ................................................... ¥— ¥ 7 $—

The acquisition costs and future minimum lease payments under

finance leases include the imputed interest expense portion.

Depreciation expense, which is not reflected in the accompanying

consolidated statements of income, computed by the straight-line

method and with zero residual value for the years ended March 31, 2005

and 2004, would have been ¥7 million (US$63 thousand) and ¥7 million,

respectively.

Lease expenses on finance lease contracts without ownership

transfer for the years ended March 31, 2005 and 2004 are summa-

rized as follows:Thousands of


2005 2004 2005

Lease expenses ....................................... ¥7 ¥7 $63

9. Derivative TransactionsThe Company’s policy is to enter into derivative transactions, such as

foreign currency forward exchange contracts, only for hedging, rather

than for speculative purposes.

All counterparties are financial institutions with high credit ratings;

management believes that the credit risk through potential default is

very low.

These derivative transactions are entered into in compliance with

the Company’s internal procedures, which include a requirement for

reporting to the financial director and to the Board of Directors where

appropriate.

10. Contingent LiabilitiesAt March 31, 2005, the Company was contingently liable as follows:


As a guarantor of indebtedness of:

Employees ........................................... ¥ 386 $ 3,590

11. Related Party TransactionsThe Company is a 42.2%-owned affiliate of Honda Motor Co., Ltd.

Consolidated net sales included sales to Honda Motor Co., Ltd. in the

amounts of ¥103,496 million (US$963,744 thousand) and ¥97,092 mil-

lion for the years ended March 31, 2005 and 2004, respectively.

The terms of transactions referred to above were negotiated and

have been determined on an arm’s-length basis.

The receipt of raw materials and components totaled ¥12,544 mil-

lion (US$116,811 thousand) in fiscal 2005, compared with ¥14,883

million in the previous fiscal year.


12. Segment Information(1) Geographic Areas

The operations of the Company and its consolidated subsidiaries for the years ended March 31, 2005 and 2004 by geographic area were as follows:

Millions of yen

EliminationDomestic and/or Corporate

Year ended March 31, 2005 (Japan) Americas Asia Europe Total Assets Consolidated

Sales:

Outside customers ......................................... ¥127,898 ¥94,467 ¥43,033 ¥6,098 ¥271,496 ¥ — ¥271,496

Intersegment................................................... 58,001 1,790 6,193 119 66,103 (66,103) —

Total ................................................................ 185,899 96,257 49,226 6,217 337,599 (66,103) 271,496

Operating costs and expenses....................... 177,448 89,563 43,489 5,864 316,364 (65,740) 250,624

Operating income ............................................... ¥ 8,451 ¥ 6,694 ¥ 5,737 ¥ 353 ¥ 21,235 ¥ (363) ¥ 20,872

Identifiable assets............................................... ¥115,597 ¥48,817 ¥32,461 ¥2,262 ¥199,137 ¥(28,772) ¥170,365

Millions of yen



Sales:

Outside customers ......................................... ¥117,224 ¥96,265 ¥34,427 ¥5,135 ¥253,051 ¥ — ¥253,051

Intersegment................................................... 55,986 1,528 4,171 96 61,781 (61,781) —

Total ................................................................ 173,210 97,794 38,598 5,231 314,832 (61,781) 253,051

Operating costs and expenses....................... 167,632 91,337 33,754 4,992 297,714 (61,789) 235,925

Operating income ............................................... ¥ 5,578 ¥ 6,457 ¥ 4,844 ¥ 239 ¥ 17,118 ¥ 8 ¥ 17,126

Identifiable assets............................................... ¥104,795 ¥43,754 ¥27,738 ¥3,290 ¥179,577 ¥(28,805) ¥150,772

Thousands of U.S. dollars



Sales:

Outside customers........................................ $1,190,968 $879,664 $400,720 $56,775 $2,528,127 $ — $2,528,127

Intersegment ................................................. 540,101 16,671 57,668 1,110 615,550 (615,550) —

Total .............................................................. 1,731,069 896,335 458,388 57,885 3,143,677 (615,550) 2,528,127

Operating costs and expenses ..................... 1,652,375 834,001 404,966 54,594 2,945,936 (612,168) 2,333,768

Operating income ............................................. $ 78,694 $ 62,334 $ 53,422 $ 3,291 $ 197,741 $ (3,382) $ 194,359

Identifiable assets ............................................. $1,076,426 $454,574 $302,272 $21,061 $1,854,333 $(267,922) $1,586,411


(2) Overseas Sales

Overseas sales, which include export sales of the Company and sales (other than exports to Japan) of its foreign consolidated subsidiaries, for the

years ended March 31, 2005 and 2004 were as follows:

Millions of yen

Year ended March 31, 2005 Americas Asia Europe Others Consolidated

Overseas sales ............................................................................................................... ¥94,553 ¥43,645 ¥10,081 ¥136 ¥148,415

Consolidated net sales ................................................................................................... — — — — 271,496

Ratio of overseas sales to consolidated sales ............................................................... 34.8% 16.1% 3.7% 0.1% 54.7%

Millions of yen


Overseas sales ............................................................................................................... ¥96,456 ¥34,893 ¥8,362 ¥125 ¥139,836

Consolidated net sales ................................................................................................... — — — — 253,051

Ratio of overseas sales to consolidated sales ............................................................... 38.1% 13.8% 3.3% 0.1% 55.3%

Thousands of U.S. dollars


Overseas sales.............................................................................................................. $880,460 $406,412 $93,868 $1,279 $1,382,019

Consolidated net sales.................................................................................................. — — — — 2,528,127

13. Retirement Benefit PlanThe accrued retirement benefits for employees as of March 31, 2005

and 2004 are summarized as follows:Thousands of


2005 2004 2005

Projected benefit obligations ....... ¥(58,033) ¥(60,389) $(540,399)

Plan assets ................................... 36,908 33,083 343,679

Unrecognized prior service cost .. (2,529) 146 (23,553)

Unrecognized actuarial

differences.................................. 14,555 15,795 135,542

Prepaid pension expense............. (1,156) — (10,763)

Reserve for retirement benefits .. ¥(10,255) ¥(11,366) $ (95,494)

Note: The above table includes the amounts related to the portion subjectto the Japanese Welfare Pension Insurance Law.

The net pension expense related to retirement benefits for the years

ended March 31, 2005 and 2004 was as follows:Thousands of


2005 2004 2005

Service cost ..................................... ¥1,650 ¥2,554 $15,366

Interest cost ..................................... 1,115 1,172 10,386

Expected return on plan assets ....... (1,156) (877) (10,765)

Amortization of unrecognized

actuarial differences....................... (1,119) 1,406 (10,419)

Amortization of prior service cost .... 1,084 (335) 10,089

Net pension expense................ ¥1,574 ¥3,921 $14,657


Assumptions used in the calculation of the preceeding information

are as follows:

As of March 31 2005 2004

Discount rate........................... 2.0% 2.0%

Expected rate of return

on plan assets ....................... 3.5% 3.5%

Method of attributing

the projected benefits

to periods of service.............. Straight-line basis Straight-line basis


prior service cost................... 3 years 3 years


actuarial differences.............. 17 years 17 years

14. Research and Development ExpensesResearch and development expenses included in selling, general

and administrative expenses for the years ended March 31, 2005

and 2004 were as follows:Thousands of


2005 2004 2005

Research and development

expenses............................................ ¥735 ¥952 $6,849

15. Appropriations of Retained EarningsThe appropriations of retained earnings with respect to the year ended

March 31, 2005 proposed by the Board of Directors and approved at

the shareholders’ meeting held on June 22, 2005 were as follows:


Cash dividends

(¥8 (US$0.07) per share)...................... ¥ 592 $ 5,510

Transfer to voluntary reserves, net........ 2,895 26,957

Total appropriations .......................... ¥3,487 $32,467


Report of Independent Auditors


President & CEO

Kentaro Kato

Senior Managing Directors

Katsumi Ichida

Yoshitada Sato

Eiji Yamamoto

Managing Directors

Akihiro Yamato

Kanji Fujikawa

Rikio Otomo

Kazuyuki Sasa

Tomio Aoi

Directors

Fumio Yamagata

Masami Watanabe

Sosuke Sese

Kazuhiro Hashiyama

Kouzou Kusakari

Syoichi Hatanaka

Hiroshi Irino

Auditors

Jitsuro Ikeshita

Tadashi Endo

Hitoshi Ohara

Katsumi Oya

(As of June 22, 2005)

Board of Directors


Domestic Offices and Plants

Head OfficeShinjuku Nomura Bldg. 39F,1-26-2, Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0539, JAPANTel: 03-3345-3411 Fax: 03-3345-3414

Iwate Plant8-58-1, Ikkatai, Iwate-machi, Iwate-gun, Iwate 028-4421, JAPANTel: 0195-62-5137 Fax: 0195-62-5138

Kakuda Plant 1213, Takabatake-minami, Kajika, Kakuda-shi, Miyagi 981-1581, JAPANTel: 0224-63-1111 Fax: 0224-62-1283

Kakuda Plant 23, Miyayachi, Sakura, Kakuda-shi, Miyagi 981-1582, JAPANTel: 0224-63-3111 Fax: 0224-63-2886

Kakuda Plant 34-3, Miyayachi, Sakura, Kakuda-shi, Miyagi 981-1583, JAPANTel: 0224-63-3611 Fax: 0224-63-3616

Marumori Plant97, Terauchi-mae, Marumori-cho, Igu-gun, Miyagi 981-2112, JAPANTel: 0224-72-2772 Fax: 0224-72-6852

Kakuda Research & Development Center(Training & Welfare Center)197-1, Nagare, Kakuda, Kakuda-shi, Miyagi 981-1505, JAPANTel: 0224-63-3480 Fax: 0224-63-3490

Tochigi Research & Development Center2021-8, Hoshakuji, Takanezawa-machi, Shioya-gun, Tochigi 329-1233, JAPAN Tel: 028-680-1500 Fax: 028-680-1520

Sayama Plant481-1, Hiranoshita, Nakashinden, Sayama-shi, Saitama 350-1311, JAPANTel: 042-958-6000 Fax: 042-956-1122

Asaka Office T-BLD Asaka 5F, 2-4-25, Hon-cho, Asaka-shi,Saitama 351-0011, JAPANTel: 048-469-1208 Fax: 048-469-0674

Kawasaki Plant386, Ichinotsubo, Nakahara-ku, Kawasaki-shi, Kanagawa 211-8580, JAPANTel: 044-411-6301 Fax: 044-433-0086

Kawasaki Development Division386, Ichinotsubo, Nakahara-ku, Kawasaki-shi, Kanagawa 211-8580, JAPANTel: 044-411-6331 Fax: 044-433-2545

Suzuka Plant3361-1, Ichigaya, Kou-cho, Suzuka-shi, Mie 513-0836, JAPANTel: 0593-78-6701 Fax: 0593-78-1024

Hamamatsu OfficeKI Bldg. 7F, 2-4, Tokiwacho, Hamamatsu-shi, Shizuoka 430-0917, JAPAN Tel: 053-457-3031 Fax: 053-457-3036

Domestic Subsidiaries

Nasu Seiki Mfg. Co., Ltd.818, Kanaga, Karasuyama-machi, Nasu-gun, Tochigi 321-0632, JAPANTel: 0287-82-3641 Fax: 0287-84-3751

Kanazu Mfg. Co., Ltd.125-3, Aramachi, Oyama, Kakuda-shi, Miyagi 981-1502, JAPANTel: 0224-63-2202 Fax: 0224-63-1201

Keihin Sogyo Co., Ltd.7, Kurouchi, Oda, Kakuda-shi, Miyagi 981-1514, JAPANTel: 0224-62-0650 Fax: 0224-62-5910

Keihin Watari Co., Ltd.1-5, Doda, Okuma-koya, Watari-cho, Watari-gun, Miyagi 989-2324, JAPANTel: 0223-34-0451 Fax: 0223-34-0453

Keihin Electronics Technology Inc.Senshu Bldg. 2F, 5-1-12 Tsutsujigaoka, Miyagino-ku, Sendai-shi, Miyagi 981-1581, JAPAN Tel: 022-257-6201 Fax: 022-257-6217

Keihin Valve Corp.1-9-1 Maruyama, Isogo-ku, Yokohama-shi,Kanagawa 235-0011, JAPANTel: 045-752-6391 Fax: 045-752-6281

Overseas Network

United StatesKeihin Fuel Systems, Inc.16341 West Lincoln Ave., New Berlin, WI 53151, U.S.A.Tel: +1-262-860-6000 Fax: +1-262-860-6001

Keihin Indiana Precision Technology, Inc.400 West New Rd., Greenfield, IN 46140, U.S.A.Tel: +1-317-462-3015 Fax: +1-317-462-2983

Keihin IPT Manufacturing, Inc.400 West New Rd., Greenfield, IN 46140, U.S.A.Tel: +1-317-462-3015 Fax: +1-317-462-2983

Keihin Carolina System Technology, Inc.4047 McNair Rd., Tarboro, NC 27886, U.S.A.Tel: +1-252-641-6750 Fax: +1-252-824-1446

Keihin Aircon North America, Inc.4400 North Superior Dr., Muncie, IN 47303, U.S.A.Tel: +1-765-213-4915 Fax: +1-765-213-4930

CanadaKeihin Canada Service, Inc. 46 Wellington St. West, Unit #5, Alliston, ON L9R 2B8, CANADATel: +1-705-434-4973 Fax: +1-705-434-4978

BrazilKeihin Tecnologia do Brasil Ltda.Av. Torquato Tapajos, No 8003-Taruma, Manaus, Amazonas, BRAZIL 69048-660Tel: +55-92-228-4611 Fax: +55-92-228-4107

Keihin Tecnologia do Brasil Ltda. - São PauloRua Galvão Bueno, 212-Sala 71São Paulo, SP, BRAZIL 01506-000Tel: +55-11-3277-8644 Fax: +55-11-3271- 0793

TaiwanTaiwan Keihin Carburetor Co., Ltd.No. 7, 7th Rd., Industrial Zone, Shi-ton District,Taichung, TAIWANTel: +886-4-2359-1483 Fax: +886-4-2359-3625

ThailandKeihin (Thailand) Co., Ltd.Northern Region Industrial Estate 74, Moo 4,Tambon Ban-klang, Amphur Muang, Lamphun 51000, THAILANDTel: +66-53-58-1189 Fax: +66-53-58-1193

Keihin (Thailand) Co., Ltd., Bangkok Office22nd Flr., UBC II Bldg., 591 Sukhumvit Rd., North Klongton, Wattana, Bangkok 10110, THAILANDTel: +66-2-261-0251 Fax: +66-2-261-0254

Keihin Auto Parts (Thailand) Co., Ltd.Rojana Industrial Park 1/74, Moo 5, Rojana Road, Tambol Karnharm, Amphur U-tahi, Pranakorn, Sri Ayutthaya Province 13210, THAILANDTel: +66-35-33-0916 Fax: +66-35-33-0915

PhilippinesKeihin Philippines Corp.105 Trade Ave., Phase 4, Laguna Technopark Brgy Loma, Binan, Laguna 4024, PHILIPPINESTel: +63-49-541-1840 Fax: +63-49-541-1855

Keihin Auto Parts (Philippines) Corp.105 Trade Ave., Phase 4, Laguna Technopark Brgy Loma, Binan, Laguna 4024, PHILIPPINESTel: +63-49-541-1840 Fax: +63-49-541-1855

IndonesiaP.T. Keihin IndonesiaKawasan Industri MM2100, Blok JJ-1 ChikarangBarat, Bekasi 17520, INDONESIATel: +62-21-8998-1645 Fax: +62-21-8998-1644

IndiaKeihin Panalfa Ltd.A-1 & A-2, Sector 81, NOIDA Phase-II, Uttar Pradesh 201 301, INDIATel: +91-120-256-8941 Fax: +91-120-256-8155

Keihin FIE Pvt. Ltd.B-3, MIDC, Chakan, Phase 1, Village Mahalunge, Taluka-Khed, District-Pune, Maharashtra, INDIATel: +91-2135-561451~3 Fax: +91-2135-561454

ChinaNanjing Keihin Carburetor Co., Ltd.Economic Development Area, Luhe Nanjing, Jiangsu, CHINATel: +86-25-5715-2305 Fax: +86-25-5715-2800

Zhanjiang Deni Carburetor Co., Ltd.27 Hai Tian Rd., Chikan, Zhanjiang, Guangdong, CHINATel: +86-759-336-3245 Fax: +86-759-332-4974

Dongguan Keihin Engine Management SystemCo., Ltd.Guancheng Science of Dongguan China’s Famous Universities HI-TECH City, Guanlong Road, Dongguan City, Guangdong, CHINATel: +86-769-265-8290 Fax: +86-769-265-5622

Keihin R&D China Co., Ltd.No. 3988 Wenxiang Road,West New Area of Songjiang Industrial Zone,Shanghai, CHINATel: +86-21-5776-0208 Fax: +86-21-5776-0207

United KingdomKeihin Europe Ltd.Craven House, 40 Uxbridge Rd.,London W5 2BS, U.K.Tel: +44-20-8810-1266 Fax: +44-20-8810-1277

Keihin Europe Ltd., Scotland FactoryUnit D, Watt Place, Hamilton InternationalTechnology Park, Hamilton, Glasgow, G72 0AG, U.K.Tel: +44-(0)-1698-727100Fax: +44-(0)-1698-727101

(As of July 31, 2005)

Network

Annual Report 2005 29Annual Report 2005 29

Date Established December 19, 1956

Capital ¥6,932,340,000

Network Head Office Shinjuku Nomura Bldg. 39F,

1-26-2, Nishi-Shinjuku,

Shinjuku-ku,

Tokyo 163-0539, Japan

Plants 8

Research and

Development Centers 3

Offices 2

Subsidiaries Japan: 6

Americas: 7

Asia: 11

Europe: 1

(As of July 31, 2005)

Number of Employees 11,444

Independent Auditors ChuoAoyama

PricewaterhouseCoopers

Common Stock Authorized: 240,000,000 shares

Issued: 73,985,246 shares

Number of Shareholders 4,059

Stock Listing Tokyo Stock Exchange

Transfer Agent The Mitsubishi Trust and Banking

Corporation

1-4-5, Marunouchi, Chiyoda-ku,

Tokyo 100-8212, Japan

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

Principal Shareholders

Number of Percentage of shares total shares

held outstanding(thousands) (%)

Honda Motor Co., Ltd. 30,581 41.33

The Master Trust Bank of Japan, Ltd. 4,989 6.74

Japan Trustee Services Bank, Ltd. 3,923 5.30

The Bank of Tokyo-Mitsubishi, Ltd. 1,691 2.29

Dexia-Bil S/A Julius Baer Multistock

Japan Leading Stock Fd 1,227 1.66

Trust & Custody Services Bank, Ltd. 1,190 1.61

UFJ Bank Limited 1,067 1.44

Mellon Bank Treaty Clients Omnibus 1,044 1.41

The Nomura Trust and Banking Co., Ltd. 999 1.35

State Street Bank and Trust Company 505103 834 1.13

Stock Price (¥)

FY2001 FY2002 FY2003 FY2004 FY2005

First High 910 1,300 1,460 1,270 1,417

Quarter Low 671 950 1,214 1,004 1,084

Second High 865 1,510 1,440 1,258 1,767

Quarter Low 720 854 1,151 940 1,215

Third High 1,028 1,200 1,375 1,218 1,834

Quarter Low 786 978 1,070 954 1,420

Fourth High 1,010 1,329 1,273 1,195 2,000

Quarter Low 778 1,051 1,020 966 1,669

Retroactively adjusted for stock split

(As of March 31, 2005)

Corporate Data

This annual report was printed on 100% recycled paper with soy ink.

Printed in Japan

Documents

KEIHIN CORPORATION Annual Report 2005KEIHIN CORPORATION Annual Report 2005 The Company was established in December 1956 as Keihin Seiki Manufacturing Co., Ltd. In 1997, through a merger