Honda Motors Annual Report to Shareholders, 'Preparing for the Next Leap Forward'

Tokyo, Japan, Aug. 28, 2006 - (JCN Newswire) - Honda Motor Co., Ltd. has published its Annual Report to Shareholders for the year ended March 31, 2006.

In his detailed review of the year, Takeo Fukui, President and Chief Executive Officer, is pleased to report that "Fiscal 2006, which ended March 31, 2006, was the first year of Honda's new mid-term business plan, launched in April 2005. During the year, we strengthened our position in each business and region and enhanced local operations.

"Seeking to lead the world in 'creating new value for the customer,' we harnessed our resources in an effort to further pursue the creation of advanced technologies and products that represent the uniqueness of Honda. As a result, consolidated net sales in Fiscal 2006 reached 9,907.9 billion yen, up 14.5% from the previous year, while net income rose 22.8%, to 597.0 billion yen"

Following a discussion of the Company's initiatives for Fiscal 2007, President Fukui moves next to talk about his vision for the future, and 'Preparing for the Next Leap Forward.'

"Honda believes that an even stronger spirit of innovation and creativity is essential to its goal of stepping up the pace of its effort to become number one in "creating new value" for customers throughout the world. Although the environment in which Honda operates is likely to grow increasingly challenging, to take our next leap forward Honda will accelerate its efforts to bolster "at the spot" activity, strengthening the core characteristics that make Honda unique and achieve further growth.

"More specifically, I will discuss Honda's medium- to long-term vision, which identifies three themes - 'Establishing advanced manufacturing systems and capabilities,' 'Strengthening the foundation for overseas growth' and 'Strengthening our commitment to reduce Honda's environmental footprint.'

Establishing Advanced Manufacturing Systems and Capabilities

"We will strengthen our production and R&D systems in Japan to support the development of our overseas business, and build innovative manufacturing systems that help create new value.

"Addressing production in Japan, we are building a leading-edge automobile plant that will allow integrated production of everything from engines to entire automobiles. Our new plant in Japan will employ a high-quality and highly efficient production system featuring the most advanced technology, and strengthen our global production network by taking on the leader function for Honda facilities throughout the world.

"So that each of our engineers will set their sights as high as possible, in April 2006 we reorganized our R&D operations in Japan. We are also building a new R&D center to enhance the development of next-generation vehicles and to upgrade our R&D structure, which serves as the starting point of manufacturing.

"By improving our production and R&D systems in these ways, we will continue to provide products that exceed our customers' expectations. As a result, we will hone further our ability to 'create new value.'

Strengthening the Foundation for Overseas Growth

"We are constructing a new automobile plant in the United States and an automobile engine plant in Canada to strengthen our business in North America. We are also setting our sights on Asia and South America, which in recent years have experienced remarkable growth. To benefit from this growth, we are expanding our local production capacity in these regions.

"These measures are designed to take Honda's worldwide sales to more than 18 million motorcycles, more than 4.5 million automobiles and more than 7 million power products by 2010.

"Strengthening our commitment to reduce Honda's environmental footprint Honda regards environmental issues as one of the most important management issues, based on the direction of our 'Commitment for the future'. To demonstrate this awareness, we are working aggressively on reducing the burden that we place on the environment. Global warming is an environmental issue that we are addressing through concerted efforts at our facilities throughout the entire world, and we consider it important to accelerate these initiatives even further.

"Based on this belief, we are working to develop manufacturing plants that generate as little CO2 as possible and to become a manufacturer of products that emit minimal levels of CO2. To these ends, we have set voluntary CO2 reduction goals. To achieve these goals from a product standpoint, we are aggressively pursuing a host of advanced environmental technologies, including a new dedicated hybrid vehicle, a new clean diesel engine with emissions as low as those of gasoline engines and a new fuel cell vehicle. From a manufacturing standpoint, we are installing cogeneration systems and accelerating efforts to reduce environmental load from each of our plants.

"As a leading company that creates mobility products, reducing CO2 emissions is a top concern for Honda. Accordingly, we are prioritizing our global environmental initiatives. By strengthening the foundation for overseas growth and creating the innovative manufacturing systems as I described earlier, we expect to succeed in our goal of providing products that exceed customers' expectations.

Returning Profits to Shareholders

"Honda strives to carry out its operations from a global perspective and to increase its corporate value. With respect to the redistribution of profits to our shareholders, which we consider to be one of the most important management issues, Honda's basic policy for dividends is to make distributions after taking into account our long-term consolidated earnings performance. Honda will also acquire its own shares at the optimal timing with the goal of improving efficiency of the Company's capital structure.

"The present goal is to maintain a shareholder return ratio (i.e. the ratio of the total of the dividend payment and the repurchase of Company shares to consolidated net income) of approximately 30%. Retained earnings will be allocated toward financing R&D activities that are essential for the future growth of Honda and capital expenditures and investment programs that will expand operations for the purpose of improving business results and strengthening Honda's financial condition.

"The recent enactment of the new Company Law in Japan lifts restrictions on the number of dividend payments a company can make each year. With this in mind, Honda is considering a flexible shareholder return policy, such as quarterly dividend payments. We will continue striving to meet the expectations of all shareholders.

"Based on these policies, Honda decided on a fiscal 2006 year-end cash dividend of 60 yen per share, bringing total cash dividends for the year to 100 yen, when adding the 40 yen interim dividend. In fiscal 2007, we plan to pay interim and year-end dividends of 30 yen each, for total cash dividends for the year of 60 yen per share. To make Honda shares more accessible to investors, we will implement a two-for-one stock split on July 1, 2006. Had the stock split not been carried out, dividends would have been equal to 60 yen per share for both interim and year-end dividends, which would have been an increase of 20 yen per share for the interim dividend and, as a result, an increase of 20 yen per share for the year, to 120 yen.

In Closing

"Honda's overriding quest is to become a company that society wants to exist around the world. To this end, we will further hone our ability to create advanced technologies and products to lead the global industry in terms of providing people with enjoyment and inspiration. We look forward to the continued understanding and support of shareholders and other investors as we embrace the challenges of the future." (Excerpts from the 2006 Shareholders' Report)

To download the Honda 2006 Annual Report for Shareholders, please visit the Honda website at http://world.honda.com/investors/annualreport/2006/ or visit the Japan Corporate News (JCN) Annual Report gallery at http://www.japancorp.net/reports.asp

About Honda Motor Co., Ltd.

Honda Motor Co., Ltd. is one of the leading manufacturers of automobiles and power products and the largest manufacture of motorcycles in the world. Honda has always sought to provide genuine satisfaction to people worldwide. The result is more than 120 manufacturing facilities in 30 countries worldwide, producing a wide range of products, including motorcycles, ATVs, generators, marine engines, lawn and garden equipment and automobiles that bring the company into contact with over 19 million customers annually. For more information, please visit http://world.honda.com.

For further information, please visit the Honda Motor Co., Ltd. home page at: world.honda.com <http://world.honda.com>