Table of Contents

No.1-7628

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF MAY 2014

COMMISSION FILE NUMBER: 1-07628

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(Name of registrant)

HONDA MOTOR CO., LTD.

(Translation of registrant’s name into English)

1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F        *         Form 40-F                    

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                    

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                    

 

 

 

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Contents

Exhibit 1:

The Board of Directors of Honda Motor Co., Ltd., (the “Company”), at its meeting held on May 14, 2014, resolved to convene the Company’s 90th ordinary general meeting of shareholders as follows.

Exhibit 2:

Notice of Convocation of the 90th Ordinary General Meeting of Shareholders of the Company has become available on May 20, 2014 on the Company’s website written below.

http://world.honda.com/investors/stock_bond/meeting/

Exhibit 3:

The English translation of unconsolidated financial information for the fiscal year ended March 31, 2014 included in exhibit of Notice of Convocation of the 90th Ordinary General Meeting of Shareholders of Honda Motor Co., Ltd.

Exhibit 4:

The English translation of Report of Independent Directors/Auditors of the Company.

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: June 11, 2014

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[Translation]

May 14, 2014

 

To:		Shareholders of Honda Motor Co., Ltd.
From:		Honda Motor Co., Ltd.
		1-1, Minami-Aoyama 2-chome,
		Minato-ku, 107-8556 Tokyo
		Takanobu Ito
		President and Representative Director

Notice Concerning 90th Ordinary General Meeting of Shareholders

The Board of Directors of Honda Motor Co., Ltd., (the “Company”), at its meeting held on May 14, 2014, resolved to convene the Company’s 90th ordinary general meeting of shareholders as follows.

Particulars

 

1.	Date and time

10:00 a.m. on Friday, June 13, 2014

 

2.

Place

GRAND PACIFIC LE DAIBA

Palais Royal on the first basement level

2-6-1 Daiba, Minato-Ku, Tokyo

 

3.

Agenda:

Matters to be reported:

 

1.

Report on the business report, consolidated financial statements and unconsolidated financial statements for the 90th Fiscal Year (from April 1, 2013 to March 31, 2014); and

 

2.

Report on the results of the audit of the consolidated financial statements for the 90th Fiscal Year (from April 1, 2013 to March 31, 2014) by the independent auditors and the Board of Corporate Auditors.

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Matters to be resolved:

First Item:

Distribution of Dividends

Second Item:

Election of Thirteen (13) Directors

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				Securities Code Number: 7267

NOTICE OF CONVOCATION OF

THE 90TH ORDINARY GENERAL MEETING OF SHAREHOLDERS

TO BE HELD AT GRAND PACIFIC LE DAIBA, TOKYO, JAPAN

ON JUNE 13, 2014 AT 10:00 A.M.

(This is a translation of the original notice

in the Japanese language mailed on May 27, 2014

to stockholders in Japan, and is for reference purposes only.)

HONDA MOTOR CO., LTD.

(HONDA GIKEN KOGYO KABUSHIKI KAISHA)

TOKYO, JAPAN

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[Translation]

May 27, 2014

To Stockholders:

Notice of Convocation of the 90th

Ordinary General Meeting of Shareholders

Dear Stockholders:

You are hereby notified that the 90th Ordinary General Meeting of Shareholders will be held as stated below. You are respectfully requested to attend the meeting.

Please note that, if you do not plan to attend the annual meeting, you may vote by the method outlined below. We request that you exercise your vote after examining the reference documents and other materials enclosed that are related to the annual meeting.

Vote by mail: Please indicate whether you are in favor of, or opposed to, the proposals on the enclosed Annual Meeting Proxy Card, and then send the proxy card to arrive no later than 6:00 p.m. on Thursday, June 12, 2014.

 

Request: We request that when arriving at the meeting you present the voting right exercise form enclosed herewith to the meeting hall receptionist.

 

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Particulars

 

1. Time and Date:		10:00 a.m. on June 13, 2014 (Friday)
2. Place:		GRAND PACIFIC LE DAIBA
		Palais Royal on the first basement level, at 2-6-1 Daiba, Minato-ku, Tokyo

3. Agenda:

Matters to be reported:

 

1.

Report on the Business Report, Consolidated Balance Sheets and Consolidated Statements of Income for the 90th Fiscal Year (from April 1, 2013 to March 31, 2014);

 

2.

Report on the results of the audit of the consolidated financial statements for the 90th Fiscal Year (from April 1, 2013 to March 31, 2014) by the independent auditors and the Board of Corporate Auditors.

Matters to be resolved:

First Item:

Distribution of Dividends

Second Item:

Election of Thirteen (13) Directors

4. Matters to Be Resolved at the Meeting

 

(1)	When proxies submitted show no indication of approval or disapproval on the voting right exercise form, these will be treated as votes of approval for proposals.

 

(2)	When proxy voting rights are exercised through indications on the voting right exercise form and, in addition, through voting via the Internet and, therefore, voting rights are exercised more than once, the votes submitted via the Internet will be regarded as the effective votes.

 

(3)	When voting rights are exercised more than once via the Internet, the last votes submitted via the Internet will be regarded as the effective votes.

Details regarding these agenda items are contained in the “Business Report for the 90th Fiscal Year,” which is appended to this Notice of Convocation.

 

*	In the case that revisions are made to the general shareholders’ meeting reference materials or attached materials, the revised items will be posted on the Company’s website.

Japanese    http://www.honda.co.jp/investors/     English     http://world.honda.com/investors/

 

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REFERENCE DOCUMENTS

CONCERNING EXERCISE OF VOTING RIGHT

Reference matters with respect to the proposals:

FIRST ITEM: Distribution of Dividends

The Company strives to maintain a global perspective, to develop its operations in many countries throughout the world and to increase its corporate value.

With respect to the distribution of profits, the Company regards the distribution of profits to its stockholders to be one of the most important issues for management. The Company will make dividend distributions after taking into account its long-term strategy and consolidated earnings performance and will also acquire its own stock from time to time with the objectives of improving capital efficiency and flexibly implementing capital policies.

Retained earnings will be allocated toward financing R&D activities that are essential for the future growth of the Company and toward capital expenditures and investment programs that will expand the Company’s operations for the purpose of improving business results and strengthening the Company’s financial condition.

Regarding the year-end dividends for the fiscal year under review, the following conditions are proposed:

(1) Conditions and Total Value of Dividend Assets Allocated to Stockholders

¥22 per share of common stock

Total value of ¥39,650,406,312

(2) Effective Date of Distribution of Dividends

June 16, 2014

 

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SECOND ITEM: Election of Thirteen (13) Directors

The term of office of each of the thirteen (13) current Directors is due to expire at the close of this meeting. It is proposed that thirteen (13) Directors be elected at the meeting. The names and particulars of the candidates for the position of Director are provided below.

Candidates for the Position of Directors

 

Candidate No. 1				Current position
		Fumihiko Ike		Chairman and Representative Director
				Resume, current position and responsibilities
				Joined Honda in February 1982
				Chief Operating Officer for Power Product Operations in April 2003
				Director of the Company in June 2003
Reappointment				Chief Operating Officer for Business Management Operations in April 2006
				Managing Director of the Company in June 2007
Date of birth May 26, 1952				Chief Operating Officer for Regional Operations (Asia & Oceania) in April 2008
Number of shares of the Company held 30,700				President and Director of Asian Honda Motor Co., Ltd. in April 2008
				Senior Managing Officer and Director of the Company in April 2011
				Chief Operating Officer for Business Management Operations in April 2011
Special interest between the candidate and the Company				Risk Management Officer in April 2011
None				General Supervisor, Information Systems in April 2011
				Chief Operating Officer for IT Operations in April 2012
Attendance record of the Board of Directors				Government & Industrial Affairs in April 2012
Attended all 9 meetings				Chairman and Representative Director of the Company in April 2013 (present)
Candidate No. 2				Current position
		Takanobu Ito		President, Chief Executive Officer and Representative Director
				Resume, current position and responsibilities
				Joined Honda in April 1978
				Executive Vice President of Honda R&D Americas, Inc. in April 1998
				Director of the Company in June 2000
Reappointment				Senior Managing Director of Honda R&D Co., Ltd. in June 2001
				Managing Director of the Company in June 2003
Date of birth				Motor Sports in June 2003
August 29, 1953				President and Director of Honda R&D Co., Ltd. in June 2003
				General Supervisor, Motor Sports in April 2004
Number of shares of the Company held				General Manager of Suzuka Factory of Production Operations in April 2005
29,700				Managing Officer of the Company in June 2005
Special interest between the candidate and the Company				Chief Operating Officer for Automobile Operations in April 2007
None				Senior Managing Director of the Company in June 2007
				President and Director of Honda R&D Co., Ltd. in April 2009
Attendance record of the Board of Directors				President and Director of the Company in June 2009
Attended all 9 meetings				President, Chief Executive Officer and Representative Director of the Company in April 2011 (present)
				Chief Operating Officer for Automobile Operations in April 2011

 

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Candidate No. 3				Current position
		Tetsuo Iwamura		Executive Vice President, Executive Officer and Representative Director
				Responsibilities
				Risk Management Officer
				Corporate Brand Officer
				Resume, current position and responsibilities
				Joined Honda in April 1978
Reappointment				Chief Operating Officer for Parts Operations in April 2000
Date of birth				Director of the Company in June 2000
May 30, 1951				Chief Operating Officer for Regional Operations (Latin America) in April 2003
Number of shares of the Company held 29,800				President and Director of Honda South America Ltda. in April 2003   President and Director of Moto Honda da Amazonia Ltda. in April 2003
Special interest between the candidate and the Company None				President and Director of Honda Automoveis do Brasil Ltda. in April 2003
				Managing Director of the Company in June 2006
Attendance record of the Board of Directors Attended all 9 meetings				Chief Operating Officer for Regional Operations (North America) in April 2007
				President and Director of Honda North America, Inc. in April 2007
				President and Director of American Honda Motor Co., Inc. in April 2007
				Senior Managing Director of the Company in June 2008
				Senior Managing Officer and Director of the Company in April 2011
				Senior Managing Officer of the Company in June 2011
				Executive Vice President, Executive Officer of the Company in April 2012 (present)
				Representative Director of the Company in June 2012 (present)
				Chief Operating Officer for Automobile Operations in April 2013
				Risk Management Officer in April 2013 (present)
				Corporate Brand Officer in April 2014 (present)
				Chairman and Director of American Honda Motor Co., Inc. in April 2014 (present)
				(Important concurrent positions in other companies or organizations)
				Chairman and Director of American Honda Motor Co., Inc.

 

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Candidate No. 4				Current position
		Takashi Yamamoto		Senior Managing Officer and Director
				Responsibilities
				Production Operation
				Representative of Automobile Development, Purchasing and Production for Automobile Operations
				Head of Automobile Production for Automobile Operations
Reappointment				Resume, current position and responsibilities
Date of birth				Joined Honda in April 1977
January 12, 1953				General Manager of Automobile Purchasing Division 1 for Purchasing Operations in April 2000
Number of shares of the Company held 21,400				Director of the Company in June 2000   Quality, Certification & Regulation Compliance and Service Technology in April 2002
Special interest between the candidate and the Company None				Quality, Certification & Regulation Compliance in April 2004
				President and Director of Honda Manufacturing of Alabama, LLC in April 2005
Attendance record of the Board of Directors Attended all 9 meetings				Operating Officer of the Company in June 2005
				General Manager of Saitama Factory of Production Operations in April 2007
				Managing Officer of the Company in June 2007
				President and Director of Yutaka Giken Co., Ltd. in June 2009
				Managing Officer of the Company in April 2011
				General Manager of Automobile Production Planning Office in Production Operations in April 2011
				Senior Managing Officer of the Company in April 2012 (present)
				Chief Operating Officer for Production Operations in April 2012
				Director of the Company in June 2012 (present)
				Production Operation in April 2013 (present)
				General Manager of Automobile Production Oversight Unit for Automobile Operations in April 2013
				Representative of Automobile Development, Purchasing and Production for Automobile Operations in April 2014 (present)
				Head of Automobile Production for Automobile Operations in April 2014 (present)
				President, Chief Executive Officer and Representative Director,
				Honda Engineering Co., Ltd. in April 2014 (present)
				(Important concurrent positions in other companies or organizations)
				President, Chief Executive Officer and Representative Director,
				Honda Engineering Co., Ltd.

 

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Candidate No. 5				Current position
		Yoshiharu Yamamoto		Senior Managing Officer and Director of the Company   Responsibilities Chief Operating Officer for IT Operations   Resume, current position and responsibilities Joined Honda in April 1973
				Managing Director of Honda R&D Co., Ltd. in June 2005
Reappointment				Senior Managing Director of Honda R&D Co., Ltd. in June 2007
Date of birth				Executive Vice President and Director of Honda R&D Co., Ltd. in June 2010
March 19, 1953				Managing Officer of the Company in April 2011
Number of shares of the Company held 21,400				President, Chief Executive Officer and Director of Honda R&D Co., Ltd. in April 2011 (present)
				Director of the Company in June 2011
Special interest between the candidate and the Company None				Senior Managing Officer and Director of the Company in April 2012 (present)   Chief Operating Officer for IT Operations in April 2013 (present)
				(Important concurrent positions in other companies or organizations)
Attendance record of the Board of Directors				President, Chief Executive Officer and Director of Honda R&D Co., Ltd.
Attended all 9 meetings
Candidate No. 6				Current position
		Toshihiko Nonaka		Managing Officer of the Company   Responsibilities Chief Operating Officer for Automobile Operations   Resume, current position and responsibilities Joined Honda in April 1978   Senior Managing Director of Honda R&D Co., Ltd. in June 2010   Managing Officer of the Company in April 2011 (present)   Executive in Charge of Production for Automobile Operations in April 2011   Senior Managing Officer and Director of Honda R&D Co., Ltd. in April 2011   Executive Vice President, Executive Officer and Director of Honda R&D Co., Ltd. in April 2012   Executive in Charge of Product and Brand Strategy for Automobile Operations in April 2013   Chief Operating Officer for Automobile Operations in April 2014 (present)
New appointment
Date of birth
September 15, 1957
Number of shares of the Company held
21,400
Special interest between the candidate
and the Company
None
Attendance record of the Board of Directors

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Candidate No. 7				Current position
Reappointment		Masahiro Yoshida		Managing Officer and Director of the Company   Responsibilities Chief Operating Officer for Business Support Operations, Compliance Officer   Resume, current position and responsibilities Joined Honda in April 1979   General Manager of Human Resources and Associate Relations for Business Support Operations in April 2007   Operating Officer of the Company in June 2007   General Manager of Hamamatsu Factory of Production Operations in April 2008   Chief Operating Officer for Business Support Operations in April 2010 (present)   Director of the Company in June 2010   Operating Officer and Director of the Company in April 2011   Compliance Officer in April 2012 (present)   Managing Officer and Director of the Company in April 2013 (present)
Date of birth
March 5, 1957
Number of shares of the Company held
25,200
Special interest between the candidate and the Company
None
Attendance record of the Board of Directors
Attended all 9 meetings

 

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Candidate No. 8				Current position
Outside Director candidate		Nobuo Kuroyanagi		Outside Director   Resume, important concurrent positions in other companies or organizations President and CEO of Mitsubishi UFJ Financial Group, Inc. (MUFG) in October 2005   Chairman of The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) in April 2008   Director of the Company in June 2009 (present)   Director of MUFG in April 2010   End of tenure as Director of MUFG in June 2010   End of tenure as Director of BTMU in March 2012   Senior Advisor of BTMU in April 2012 (present)   (Important concurrent positions in other companies or organizations)   Senior Advisor of BTMU   Outside Director of Isetan Mitsukoshi Holdings Ltd.   Outside Director of Mitsubishi Research Institute, Inc.   Outside Director of Tokio Marine & Nichido Fire Insurance Co., Ltd.   Outside Corporate Auditor of Mitsubishi Heavy Industries, Ltd.   Outside Corporate Auditor of Tokyo Kaikan Co., Ltd.
Reappointment
Date of birth
December 18, 1941
Number of shares of the Company held
2,300
Special interest between the candidate and the Company
None
Attendance record of the Board of Directors
Attended all 9 meetings
Number of years since the candidate initially assumed the position of Director
(up to the end of this general meeting of shareholders)
5 years

 

Notes:

1.

Reasons for selection of candidates for the position of Outside Director

Nobuo Kuroyanagi is proposed as a candidate because the Company wishes to receive his advice on the Company’s activities given from an objective, broad-ranging and high-level perspective, and based on his rich experience and high level of insight regarding corporate management.

 

2.

Incidence of inappropriate corporate operations at other companies for which the candidate was serving as an officer (during the past five years), acts which were done to prevent the occurrence of such incidences and acts which were done as measures taken after the occurrence of such incidence

At The Senshu Ikeda Bank, Ltd., where Nobuo Kuroyanagi served as an Outside Director from June 2010 until June 2012, the following were discovered: an incidence of embezzlement of customers’ savings by a part-time worker in November 2010, an incidence of fraudulent withdrawal by an employee through the misuse of the maximum amount of overdraft in March 2011 and, finally, an incidence of embezzlement of customers’ savings by an employee in June 2011. While Nobuo Kuroyanagi was unaware of such facts in advance, he made various recommendations regarding legal compliance, at meetings of the Board of Directors, on a regular basis and, after the discovery of the aforesaid incidence, Nobuo Kuroyanagi has proactively advised the Company on the implementation of measures to prevent the recurrence of such incidence through the strengthening of the Company’s internal systems for checks, etc. and the enhancement of employee training, etc.

In addition, in September 2013, Mitsubishi Heavy Industries, Ltd. signed a plea bargaining agreement with the U.S. Department of Justice, including matters related to the payment of a penalty for violations of the U.S. antitrust laws in connection with certain automotive parts businesses, which may have occurred during Mr. Kuroyanagi’s term of service as outside auditor of Mitsubishi Heavy Industries, that began in June 2009. He was not aware of these matters until they were revealed, but he made a number of proposals from the perspective of legal compliance in his day-to-day participation in meetings of the board of directors and board of auditors. After the facts of the matter were made clear, he has proactively expressed opinions regarding the prevention of a recurrence of such matters.

 

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Candidate No. 9				Current position
		Hideko Kunii		—
New Independent
Outside Director				Resume, important concurrent positions in other companies
candidate				or organizations
				Ochanomizu University, Master of Science—Physics in March 1973
				San Jose State University, Master of Science—Computer and Information
				Sciences in January 1976
				Joined Ricoh Co., Ltd. in May 1982
New appointment				The University of Texas at Austin, Doctor of Philosophy in May 1983
Date of birth				Corporate Vice President of Ricoh Co., Ltd. in June 2000
December 13, 1947				General Manager of Software Research & Development of Ricoh Co., Ltd.
				in October 2002
Number of shares of the Company held None				Corporate Senior Vice President of Ricoh Co., Ltd. in June 2005
Special interest between the candidate and the Company None   Attendance record of the Board of Directors —   Number of years since the candidate initially assumed the position of Director (up to the end of this general meeting of shareholders) —				Chairperson of Ricoh Software Co., Ltd. (Current Ricoh IT Solutions Co., Ltd.) in April 2008
				Associate Director of Ricoh Co., Ltd. in April 2009
				Chairperson of Ricoh IT Solutions Co., Ltd. in July 2009
				Committee of Innovation Network Corporation of Japan in July 2009 (present)
				Member of Gender Equality Bureau Cabinet Office in August 2009 (present)
				Vice Chairperson of Japan Information Technology Service Industry Association in June 2011 (present)
				Professor, Graduate School of Engineering Management, Shibaura Institute of Technology in April 2012 (present)
				End of tenure as Chairperson of Ricoh IT Solutions Co., Ltd. in March 2013
				End of tenure as Associate Director of Ricoh Co., Ltd. in March 2013
				Deputy President, Professor, Shibaura Institute of Technology Graduate School of Engineering Management in April 2013 (present)
				General Manager of Gender Equality Promotion Office, Shibaura Institute of Technology in October 2013 (present)
				(Important concurrent positions in other companies or organizations)
				Deputy President, Professor, General Manager of Gender Equality Promotion Office of Shibaura Institute of Technology Graduate School of Engineering Management
				Vice Chairperson of Japan Information Technology Service Industry Association

 

Note:

Reasons for candidacy for Outside Director

Hideko Kunii has extensive experience and considerable knowledge regarding corporate activities and the software field in Japan as well as overseas and is active in the area of gender equality. She has been selected as a candidate for Outside Director to provide her advice from an objective and broad perspective, drawing on her experience and knowledge.

 

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Candidate No. 10				Current position
		Yuji Shiga		Operating Officer and Director   Responsibilities Chief Operating Officer for Power Product Operations   Resume, current position and responsibilities Joined Honda in April 1982   General Manager of Operation Office No. 1 in Regional Operations (North America) in April 2009   General Manager of Operation Office No. 2 in Regional Operations (Asia & Oceania) in April 2010   Operating Officer of the Company in April 2011 (present)   Responsible for CIS countries, the Middle & Near East and Africa for Regional Operations in April 2011   Chief Operating Officer for Power Product Operations in April 2012 (present)   Director of the Company in June 2012 (present)
Reappointment
Date of birth October 7, 1958   Number of shares of the Company held 13,500   Special interest between the candidate and the Company None   Attendance record of the Board of Directors Attended all 9 meetings
Candidate No. 11				Current position
		Kohei Takeuchi		Operating Officer and Director   Responsibilities Chief Operating Officer for Business Management   Resume, current position and responsibilities Joined Honda in April 1982   General Manager of Accounting Division for Business Management Operations in April 2010   Operating Officer of the Company in April 2011 (present)   Chief Operating Officer for Business Management in April 2013 (present)   Director in June 2013 (present)
Reappointment
Date of birth February 10, 1960   Number of shares of the Company held 13,100   Special interest between the candidate and the Company None   Attendance record of the Board of Directors Attended all 9 meetings

 

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Candidate No. 12				Current position
		Shinji Aoyama		Operating Officer and Director   Responsibilities Chief Operating Officer for Motorcycle Operations   Resume, current position and responsibilities Joined Honda in April 1986   General Manager of Motorcycle Business Planning Office for Motorcycle Operations in April 2011   Operating Officer of the Company in April 2012 (present)   Chief Operating Officer for Motorcycle Operations in April 2013 (present)   Director in June 2013 (present)
Reappointment
Date of birth December 25, 1963   Number of shares of the Company held 9,300   Special interest between the candidate and the Company None   Attendance record of the Board of Directors Attended all 9 meetings
Candidate No. 13				Current position
		Noriya Kaihara		Operating Officer and Director   Responsibilities Responsible for Quality, General Manager of Customer Service Operations, General Manager of Service Division for Automobile Operations   Resume, current position and responsibilities Joined Honda in April 1984   General Manager of Parts Sales and Service Division for Customer Service Operations in April 2010   General Manager of Automobile Quality Assurance Division in April 2012   Operating Officer of the Company in April 2013 (present)   Responsible for Quality in April 2013 (present)   Director in June 2013 (present)   General Manager of Customer Service Operations in April 2014 (present)   General Manager of Service Division for Automobile Operations in April 2014 (present)
Reappointment
Date of birth August 4, 1961   Number of shares of the Company held 5,600   Special interest between the candidate and the Company None   Attendance record of the Board of Directors Attended all 9 meetings

Note:  Matters related to Outside Director candidates are as follows:

 

(1)

Nobuo Kuroyanagi and Hideko Kunii are candidates for the position of Outside Director as defined in Article 2, Paragraph 3, Item 7 of the Enforcement Regulations of the Company Law.

 

(2)

Hideko Kunii is a candidate for Independent Outside Director as stipulated by the rules of the Tokyo Stock Exchange, Inc.

 

(3)

Outline of contents of the limited liability contracts with candidates for the position of Outside Directors

Based on Article 427, Paragraph 1 of the Company Law and Article 28 of the Articles of Incorporation, the Company has entered into contracts with Nobuo Kuroyanagi which limit his liabilities, in accordance with Article 423, Paragraph 1 of the Company Law, to the minimum liability amount that is stipulated in Article 425, Paragraph 1 of the Company Law.

If he is re-elected, the Company plans to extend the term of each of their limited liability contracts.

In addition, if Outside Director candidate Hideko Kunii is appointed, the Company is scheduled to conclude a minimum limited liability amount contract with her.

 

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Business Report for the 90th Fiscal Year

For the Period From: April 1, 2013 To: March 31, 2014

1. OUTLINE OF BUSINESS

(1) Review of Operations

Honda’s consolidated net sales and other operating revenue for the year amounted to ¥11,842.4 billion, an increase of 19.9% from the previous fiscal year, due primarily to increased revenue in automobile and motorcycle business operations as well as favorable foreign currency translation effects.

Consolidated operating income for the year amounted to ¥750.2 billion, an increase of 37.7% from the previous fiscal year, due primarily to increases in sales volume and model mix as well as favorable foreign currency effects, despite increased SG&A and R&D expenses.

Consolidated income before income taxes and equity in income of affiliates for the year totaled ¥728.9 billion, an increase of 49.1% from the previous fiscal year.

Equity in income of affiliates amounted to ¥132.4 billion for the year, an increase of 60.1% from the previous fiscal year.

Consolidated net income attributable to Honda Motor Co., Ltd. for the fiscal year ended March 31, 2014 totaled ¥574.1 billion, an increase of 56.4% from the previous fiscal year. Basic net income attributable to Honda Motor Co., Ltd. per common share for the fiscal year amounted to ¥318.54, an increase of ¥114.83 from ¥203.71 for the previous fiscal year.

Motorcycle Business

For the years ended March 31, 2013 and 2014

 

		Unit (thousands)
		Honda Group Unit Sales																Consolidated Unit Sales
		Year ended Mar. 31, 2013				Year ended Mar. 31, 2014				Change				(%)				Year ended Mar. 31, 2013				Year ended Mar. 31, 2014				Change				(%)
Motorcycle business			15,494				17,021				1,527				9.9				9,510				10,343				833				8.8
Japan			217				226				9				4.1				217				226				9				4.1
North America			250				276				26				10.4				250				276				26				10.4
Europe			179				166				-13				-7.3				179				166				-13				-7.3
Asia			13,035				14,536				1,501				11.5				7,051				7,858				807				11.4
Other Regions			1,813				1,817				4				0.2				1,813				1,817				4				0.2

 

Note:

Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates accounted for under the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated net sales to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries.

With respect to Honda’s sales for the fiscal year by business segment, in motorcycle business operations, revenue from sales to external customers increased by 24.2%, to ¥1,663.6 billion from the previous fiscal year, due mainly to increased consolidated unit sales and favorable foreign currency translation effects. Operating income totaled ¥165.6 billion, an increase of 50.2% from the previous fiscal year, due primarily to increases in sales volume and model mix and favorable foreign currency effects, despite increased SG&A and R&D expenses.

 

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Automobile Business

For the years ended March 31, 2013 and 2014

 

		Unit (thousands)
		Honda Group Unit Sales																Consolidated Unit Sales
		Year ended Mar. 31, 2013				Year ended Mar. 31, 2014				Change				(%)				Year ended Mar. 31, 2013				Year ended Mar. 31, 2014				Change				(%)
Automobile business			4,014				4,323				309				7.7				3,408				3,560				152				4.5
Japan			692				818				126				18.2				685				812				127				18.5
North America			1,731				1,757				26				1.5				1,731				1,757				26				1.5
Europe			171				169				-2				-1.2				171				169				-2				-1.2
Asia			1,122				1,286				164				14.6				523				529				6				1.1
Other Regions			298				293				-5				-1.7				298				293				-5				-1.7

 

Note:

Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates accounted for under the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated net sales to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans by our Japanese finance subsidiaries are accounted for as operating leases in conformity with U.S. generally accepted accounting principles and are not included in consolidated net sales to the external customers in our automobile business. As a result, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our automobile business.

In automobile business operations, revenue from sales to external customers increased by 19.0%, to ¥9,176.3 billion from the previous fiscal year due mainly to increased consolidated unit sales and favorable foreign currency translation effects. Operating income totaled ¥403.7 billion, an increase of 41.2% from the previous fiscal year, due primarily to continuing cost reduction efforts as well as favorable foreign currency effects, despite increased SG&A and R&D expenses.

Financial Service Business

Revenue from customers in the financial services business operations increased by 27.3%, to ¥698.1 billion from the same period last year due mainly to an increase in revenue from operating leases and favorable foreign currency translation effects. Operating income increased by 15.6%, to ¥182.7 billion from the same period last year due mainly to favorable foreign currency effects, despite an increase in SG&A expenses.

Power Product and Other Businesses

For the years ended March 31, 2013 and 2014

 

		Unit (thousands)
		Honda Group Unit Sales/Consolidated Unit Sales
		Year ended Mar. 31, 2013				Year ended Mar. 31, 2014				Change				(%)
Power product business			6,071				6,036				-35				-0.6
Japan			314				314				0				0.0
North America			2,604				2,718				114				4.4
Europe			1,004				1,032				28				2.8
Asia			1,572				1,500				-72				-4.6
Other Regions			577				472				-105				-18.2

 

Note:

Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates accounted for under the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated net sales to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. In power product business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales for the year ended March 31, 2013 and for the year ended March 31, 2014, since no affiliate accounted for under the equity method was involved in the sale of Honda power products.

Revenue from sales to external customers in power product and other businesses increased by 8.4%, to ¥304.2 billion from the previous fiscal year, due mainly to favorable foreign currency translation effects. Honda reported an operating loss of ¥1.7 billion, an improvement of ¥7.7 billion from the previous fiscal year, due mainly to favorable foreign currency effects.

 

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¡ Net Sales Breakdown

 

		Yen (millions)
Business Segment		FY2013 From April  1, 2012 to March 31, 2013 (reference)				FY2014 From April  1, 2013 to March 31, 2014				Change from the previous fiscal year (reference)
														(%)
Grand Total			9,877,947				11,842,451				1,964,504				19.9
Japan			1,652,995				1,912,504				259,509				15.7
North America			4,586,412				5,567,594				981,182				21.4
Europe			534,517				667,187				132,670				24.8
Asia			2,093,034				2,515,881				422,847				20.2
Other Regions			1,010,989				1,179,285				168,296				16.6
Motorcycle Business (motorcycles only)			1,339,549				1,663,631				324,082				24.2
Japan (motorcycles only)			72,949				79,455				6,506				8.9
North America (motorcycles only)			112,176				141,563				29,387				26.2
Europe (motorcycles only)			86,424				102,634				16,210				18.8
Asia (motorcycles only)			667,473				868,464				200,991				30.1
Other Regions (motorcycles only)			400,527				471,515				70,988				17.7
Automobile Business			7,709,216				9,176,360				1,467,144				19.0
Japan			1,462,664				1,714,752				252,088				17.2
North America			3,905,276				4,717,769				812,493				20.8
Europe			388,464				487,673				99,209				25.5
Asia			1,385,449				1,599,069				213,620				15.4
Other Regions			567,363				657,097				89,734				15.8
Financial Services Business			548,506				698,185				149,679				27.3
Japan			34,282				40,333				6,051				17.7
North America			484,275				610,848				126,573				26.1
Europe			7,256				12,646				5,390				74.3
Asia			3,145				8,051				4,906				156.0
Other Regions			19,548				26,307				6,759				34.6
Power Product & Other Businesses			280,676				304,275				23,599				8.4
Japan			83,100				77,964				-5,136				-6.2
North America			84,685				97,414				12,729				15.0
Europe			52,373				64,234				11,861				22.6
Asia			36,967				40,297				3,330				9.0
Other Regions			23,551				24,366				815				3.5

 

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(2) Capital Expenditures

Capital expenditures during the fiscal year totaled ¥726,187 million. The breakdown of capital expenditures by business segment was as follows:

 

		Yen (millions), %
Business Segment		FY2013 (reference)				FY2014				Change in  amount (reference)				Change  (%) (reference)
Motorcycle Business			73,513				55,575				-17,938				-24.4
Automobile Business			505,045				656,412				151,367				30.0
Financial Services Business			551				620				69				12.5
Power Product & Other Businesses			14,519				13,580				-939				-6.5
Total			593,628				726,187				132,559				22.3
Operating Lease Assets			793,118				1,127,840				334,722				42.2

Note:  Intangible assets are not included in the table above.

In addition to investments for new model introductions, the Company’s capital investments were predominantly utilized for expanding, rationalizing and renovating manufacturing facilities as well as for expanding sales and R&D facilities.

(3) Liquidity and Capital Resources

Funds for financing capital investments in Honda’s manufacturing and sales businesses are provided mainly from cash generated by operating activities and bank loans. The outstanding balance of funds for Honda’s manufacturing and sales businesses at the end of the fiscal year under review was ¥565.3 billion.

Honda funds its financial programs for customers and dealers primarily from medium-term notes, bank loans, securitization of monetary assets, commercial paper, corporate bonds and from operating companies. The outstanding balance of funds for Honda’s financial services subsidiaries at the end of the fiscal year under review was ¥5,838.2 billion.

(4) Preparing for the Future

Honda aims to achieve global growth by further encouraging and strengthening innovation and creativity and creating quality products that please the customers and exceed their expectations.

Honda will focus all its energies on the tasks set out below, aiming to get back on a growth trajectory as it pursues the vision toward 2020 of “providing good products to customers with speed, affordability and low CO₂ emissions.”

 

1.	Research and Development

In connection with its efforts to develop the most effective safety and environmental technologies, Honda will continue to be innovative in advanced technology and products. Honda aims to create and introduce new value-added products to quickly respond to specific needs in various markets around the world. Honda will also continue its efforts to conduct research on experimental technologies for the future.

 

2.	Production Efficiency

Honda will establish and enhance efficient and flexible production systems at its global production bases and supply high-quality products, with the aim of meeting the needs of its customers in each region. Learning from the experience of disasters such as the Great East Japan Earthquake and the Thai floods, Honda will work at improving its global supply chain, implementing disaster prevention measures at each place of business and devising more effective business continuity plans (BCPs).

 

3.	Sales Efficiency

Honda will remain proactive in its efforts to expand product lines through the innovative use of IT and will show its continued commitment to different customers throughout the world by upgrading its sales and service structure.

 

4.	Product Quality

In response to increasing customer demand, Honda will upgrade its quality control by enhancing the functions of and coordination among the development, purchasing, production, sales and service departments.

 

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5.	Safety Technologies

Honda is working to develop safety technologies that enhance accident prediction and prevention, technologies to help reduce the risk of injuries to passengers and pedestrians from car accidents and technologies that enhance compatibility between large and small vehicles, as well as expand its lineup of products incorporating such technologies. Honda will reinforce and continue to advance its contribution to traffic safety in motorized societies in Japan and abroad. Honda also intends to remain active in a variety of traffic safety programs, including advanced driving and motorcycling training programs provided by local dealerships.

 

6.	The Environment

Honda will step up its efforts to create better, cleaner and more fuel-efficient engine technologies and to further improve recyclables throughout its product lines. Honda has now set a target to reduce CO₂ emissions from its global products by 30% by the end of 2020 compared to year 2000 levels. In addition to reducing CO₂ emissions during production and its supply chain, Honda will strengthen its efforts to realize reductions in CO₂ emissions through its entire corporate activities. Furthermore, Honda will strengthen its efforts in advancing technologies in the area of total energy management, to reduce CO₂ emissions through mobility and people’s everyday lives.

 

7.	Continuing to Enhance Honda’s Social Reputation and Communication with the Community

In addition to continuing to provide products incorporating Honda’s advanced safety and environmental technologies, Honda will continue striving to enhance its social reputation by, among other things, strengthening its corporate governance, compliance and risk management as well as participating in community activities and making philanthropic contributions.

Through these company-wide activities, Honda will strive to be a company that its shareholders, investors, customers and society want to exist.

(5) Employees of the Group and the Parent Company

(a) Honda Employees

 

Business Segment		Number of Employees
		FY2013 (reference)								FY2014								Change (reference)
Motorcycle Business			40,430				(14,404	)			42,276				(14,478	)			1,846				(74	)
Automobile Business			138,443				(13,052	)			145,585				(15,249	)			7,142				(2,197	)
Financial Services Business			2,157				(113	)			2,160				(163	)			3				(50	)
Power Product & Other Businesses			9,308				(3,354	)			8,540				(2,958	)			-768				(-396	)
Total			190,338				(30,923	)			198,561				(32,848	)			8,223				(1,925	)
(b) Employees of the Parent Company
		FY2013 (reference)								FY2014								Change (reference)
Number of employees			23,983				(4,261	)			23,467				(4,931	)			-516				(670	)
Average age			44.3								44.5								0.2
Average number of years employed by the Company			23.0								23.3								0.3

 

Note:

The number of employees of the Honda Group and the Company refers to full-time employees. The average number of temporary employees is shown in parentheses.

 

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2. COMMON STOCK

 

(1) Total Number of Shares Issued		1,811,428,430 shares
(2) Number of Stockholders		215,555
(3) Principal Stockholders

 

Name		Number of Shares Held (thousands)		Percentage as against  Total Shares Issued (%)
Japan Trustee Services Bank, Ltd. (Trust Account)		117,059		6.5
The Master Trust Bank of Japan, Ltd. (Trust Account)		85,359		4.7
Moxley & Co. LLC		55,964		3.1
Meiji Yasuda Life Insurance Company		51,199		2.8
Tokio Marine & Nichido Fire Insurance Co., Ltd.		42,553		2.4
State Street Bank and Trust Company 505223		40,472		2.2
JPMorgan Chase Bank 380072		37,288		2.1
The Bank of Tokyo-Mitsubishi UFJ, Ltd.		36,686		2.0
Nippon Life Insurance Company		30,883		1.7
Mitsui Sumitomo Insurance Company, Limited		25,739		1.4

 

Notes:		1.		The number of shares described above rounds off figures of less than 1,000 shares.
		2.		Ownership percentages are calculated using the total number of shares issued minus treasury stock (9,137 thousand shares).
		3.		Moxley & Co. LLC is an official holder of stock of JPMorgan Chase Bank, which is a depositary institution for American Depositary Receipts (ADRs).

3. STOCK WARRANTS

No relevant information

 

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4. CORPORATE OFFICERS

(1) Directors and Corporate Auditors

 

Title		Name		Area of Responsibility or Principal Occupations
Chairman and Representative Director		Fumihiko Ike
President, Chief Executive Officer and Representative Director		Takanobu Ito
Executive Vice President, Executive Officer and Representative Director		Tetsuo Iwamura		Chief Operating Officer for Automobile Operations Chief Operating Officer for Regional Operations (North America) Risk Management Officer President and Director of Honda North America, Inc. President and Director of American Honda Motor Co., Inc.
Senior Managing Officer and Director		Takashi Yamamoto		Chief Production Officer Head of Automobile Production for Automobile Operations
Senior Managing Officer and Director		Yoshiharu Yamamoto		Chief Operating Officer for IT Operations President, Chief Executive Officer and Director of Honda R&D Co., Ltd.
Managing Officer and Director		Masahiro Yoshida		Chief Operating Officer for Business Support Operations Compliance Officer
Director (Outside Director)		Kensaku Hogen
Director (Outside Director)		Nobuo Kuroyanagi		Senior Advisor of The Bank of Tokyo-Mitsubishi UFJ, Ltd. Outside Director of Isetan Mitsukoshi Holdings Ltd. Outside Director of Mitsubishi Research Institute, Inc. Outside Director of Tokio Marine & Nichido Fire Insurance Co., Ltd. Outside Corporate Auditor of Mitsubishi Heavy Industries, Ltd. Outside Corporate Auditor of Tokyo Kaikan Co., Ltd.
Director and Advisor		Takeo Fukui
Operating Officer and Director		Yuji Shiga		Chief Operating Officer for Power Product Operations
Operating Officer and Director		Kohei Takeuchi		Chief Operating Officer for Business Management Operations
Operating Officer and Director		Shinji Aoyama		Chief Operating Officer for Motorcycle Operations
Operating Officer and Director		Noriya Kaihara		Chief Quality Officer
Corporate Auditor (Full-time)		Masaya Yamashita
Corporate Auditor (Full-time)		Kunio Endo
Corporate Auditor (Outside Corporate Auditor)		Hirotake Abe		Certified Public Accountant Outside Corporate Auditor of CONEXIO Corporation Outside Corporate Auditor of NIPPON STEEL & SUMITOMO METAL CORPORATION
Corporate Auditor (Outside Corporate Auditor)		Tomochika Iwashita		Outside Corporate Auditor of DCM Holdings Co., Ltd.

 

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Title		Name		Area of Responsibility or Principal Occupations
Corporate Auditor (Outside Corporate Auditor)		Toshiaki Hiwatari		Lawyer Outside Director of Nomura Securities Co., Ltd. Outside Corporate Auditor of TOYO KANETSU K.K. Advisor of TMI Associates

 

Notes:		1.		Directors Kensaku Hogen and Nobuo Kuroyanagi are Outside Directors in accordance with Article 2-15 of the Company Law.
		2.		Corporate Auditors Hirotake Abe, Tomochika Iwashita and Toshiaki Hiwatari are Outside Corporate Auditors in accordance with Article 2-16 of the Company Law.
		3.		Corporate Auditor Kunio Endo has considerable operating experience regarding financial and accounting departments in the Company and its subsidiaries. In addition, Corporate Auditor Hirotake Abe has extensive knowledge and experience as a certified public accountant. Mr. Endo and Mr. Abe have abundant knowledge related to finance and accounting.
		4.		The Company has appointed Kensaku Hogen as an independent (outside) director and Hirotake Abe and Toshiaki Hiwatari as independent (outside) corporate auditors as provided for by the rules of the Tokyo Stock Exchange and reported their appointment to the Tokyo Stock Exchange.
		5.		The Bank of Tokyo-Mitsubishi UFJ, Ltd., is one of the Company’s principal shareholders, and the Company has transactions relationships with the Bank of Tokyo-Mitsubishi UFJ, including deposits and foreign exchange. In addition, the Tokio Marine & Nichido Fire Insurance Co., Ltd., is one of the Company’s principal shareholders, and the Company has transactions relationships with Tokio Marine & Nichido Fire Insurance, including insurance contracts. The Company has transactions relationships with NIPPON STEEL & SUMITOMO METAL CORPORATION and purchases steel and related products from that company. The Company also has transaction relationships with Mitsubishi Heavy Industries, Ltd., and purchases automobile parts from the company. The Company has no other special capital or transactions relationships with other companies.
		6.		The Company has introduced the Operating Officer System to strengthen operations in regions and local workplaces and implement quick and appropriate decisions. The Operating Officers of the Company (excluding Operating Officers who also hold the position of Director) are as follows: (As of March 31, 2014)

 

 

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		7.		As of April 1, 2014, the following changes in Representative Director and Operating Officers were announced by the Company.

 

 

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(2) Remuneration of Directors and Corporate Auditors, Etc.

 

		Yen (millions)
Item		Directors (Outside Directors)								Corporate Auditors (Outside Corporate Auditors)								Total (Outside Directors  and Corporate Auditors)
		Number of persons				Value of payments				Number of persons				Value of payments				Number of persons				Value of payments
Remuneration			14 (2	)			570 (23	)			6 (3	)			181 (47	)			20 (5	)			751 (71	)
Bonuses			13 (2	)			283 (8	)			—   (—	)			—   (—	)			13 (2	)			283 (8	)
Total							853 (31	)							181 (47	)							1,034 (79	)

 

Notes:		1.		Remuneration is limited to ¥1,300 million per month for Directors and ¥270 million per month for Corporate Auditors.
		2.		“Remuneration” shown in the table above is the amount of remuneration that the Company paid to its Directors, Corporate Auditors as well as its Outside Directors and Corporate Auditor during the fiscal year under review. This amount includes remuneration paid to two Directors and one Corporate Auditor who resigned as of the closing of the 89th Ordinary General Meeting of Shareholders that was held on June 19, 2013.
		3.		Bonuses to directors are included in the previously mentioned maximum amount for compensation to Directors, and the amount shown was decided by the meeting of the Board of Directors held on April 25, 2014.

(3) Principal Activities of Outside Directors and Outside Corporate Auditors during the Fiscal Year under Review

(a) Principal Activities during the Fiscal Year under Review

 

Post		Name		Attendance Record		Principal Activities during the Fiscal Year under Review
Director		Kensaku Hogen		Attended all 9 meetings of the Board of Directors		Based on abundant experience and considerable knowledge regarding international diplomacy, he provides advice regarding the Company’s operations from an objective and highly sophisticated perspective.
Director		Nobuo Kuroyanagi		Attended all 9 meetings of the Board of Directors		Based on abundant experience and considerable knowledge regarding corporate management, he provides advice regarding the Company’s operations from an objective and highly sophisticated perspective.
Corporate Auditor		Hirotake Abe		Attended 7 of 9 meetings of the Board of Directors Attended 8 of 9 meetings of the Board of Auditors		Based on abundant experience and considerable knowledge as a certified public accountant, he conducts auditing activities from a broad and sophisticated perspective.
Corporate Auditor		Tomochika Iwashita		Attended all 9 meetings of the Board of Directors Attended all 9 meetings of the Board of Auditors		Based on abundant experience and considerable knowledge regarding corporate management, he conducts auditing activities from a broad and sophisticated perspective.
Corporate Auditor		Toshiaki Hiwatari		Attended all 9 meetings of the Board of Directors Attended all 9 meetings of the Board of Auditors		Based on abundant experience and considerable knowledge as a legal affairs specialist, he conducts auditing activities from a broad and sophisticated perspective.

All Outside Directors and Outside Corporate Auditors have been selected based on their abundant experience and considerable knowledge, and they provide necessary comments during the deliberation of proposals.

 

Note:

The attendance rate of all Internal Directors and Internal Corporate Auditors was 100% at meetings of the Board of Directors and meetings of the Board of Auditors, respectively.

 

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(b) Summary of Content of Liability Limitation Contracts

The Company has entered into liability limitation contracts with all Outside Directors and Outside Corporate Auditors based on the provisions of Article 427, Paragraph 1 of the Company Law and of the Company’s Articles of Incorporation, to the effect of limiting the liability for damages provided for in Article 423, Paragraph 1 of the Company Law to the minimum liability amount provided for in Article 425, Paragraph 1 of the Company Law.

5. FINANCIAL AUDIT COMPANY

(1) Name of Financial Audit Company

KPMG AZSA LLC

(2) Financial Audit Company Remuneration, Etc., for the Fiscal Year under Review

 

(a)		Remuneration, etc.		¥	465 million
(b)		Total profit on monetary and other assets to be paid by the Company and its subsidiaries		¥	786 million

 

Notes:		1.		The audit contract between the Company and its financial audit company does not itemize remuneration for auditing work based on the Company Law of Japan, auditing work based on the Financial Instruments and Exchange Law of Japan and auditing work based on the Securities Exchange Law of the United States. Because of this and because it is impractical to itemize these categories of remuneration, the figure shown in line item (a) above is a total figure.
		2.		In addition to the services specified in Article 2, Paragraph 1 of the Japanese Certified Public Accountants Law, the Company paid the independent accounting firm for advisory and other services related to the application of the International Financial Reporting Standards.
		3.		Of the Company’s principal subsidiaries, overseas subsidiaries are audited by financial audit companies other than the financial audit company employed by the Company.

(3) Policy Regarding Dismissal or Non-Re-Employment of Financial Audit Company

In the case that the Company’s financial audit company was recognized to have committed a serious legal infraction, sharply lowered the quality of its audit services or otherwise shown grounds for determining it was inappropriate for employment as a financial audit company, the Company has the policy of, in accordance with procedures stipulated in the Company Law, dismissing its financial audit company or submitting resolutions proposing the financial audit company’s dismissal or non-re-employment to the general meeting of shareholders.

 

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6. THE COMPANY’S SYSTEMS AND POLICIES

Systems to Ensure Directors’ Execution of Duties Complies with Laws and Regulations and the Articles of Incorporation and Other Systems to Ensure the Appropriateness of the Company’s Operations

The Company’s Board of Directors made the following decisions regarding enhancements in the Company’s Internal Control Systems.

 

1.	Systems for ensuring that the execution of duties by directors and employees complies with the law and the Company’s Articles of Incorporation

The Company has prepared the Honda Conduct Guidelines which provide for conformity with applicable laws and internal rules and regulations as guidelines for conduct which should be shared by the Company’s management and employees and implements measures to ensure that all management personnel and employees are made aware of and follow these guidelines. The Company establishes its compliance system such as by appointing a Compliance Officer, who is a director in charge of compliance-related initiatives and by establishing the Business Ethics Committee and the Business Ethics Improvement Proposal Line.

 

2.	Systems related to retention and management of information on execution of duties by directors

Information related to the execution of duties by directors, including minutes of Board of Directors meetings and other important meetings, is retained and stored appropriately in accordance with the Company’s document management policy.

 

3.	Regulations and other systems related to risk management

Important management issues are taken up by the Board of Directors, Executive Council and/or Regional Operating Boards, which discuss them in accordance with established rules of procedure, assess associated risks and make decisions after due consideration.

A Risk Management Officer is appointed as a director in charge of promoting risk management initiatives. The Risk Management Officer playing the main role, risk information is collected and evaluated (of these risks, significant risk is promptly reported to the division in charge along with instructions on the countermeasures, and its progress is then monitored). For large-scale disasters requiring Company-level crisis management, the Company organizes the system, such as by establishing the Corporate Crisis Management Policy and Honda Crisis Response Rules.

 

4.	Systems for ensuring that the execution of duties by directors is being conducted efficiently

The Company has established a system for operating its organizational units that reflects its fundamental corporate philosophy. For example, separate headquarters have been set up for each region, business and function, and an operating officer has been assigned to each headquarters and main division. In addition, we have implemented a system that enables prompt and appropriate decision making by having the Executive Council and Regional Operating Boards deliberate on important management issues. To conduct management efficiently and effectively, business plans are prepared on an annual basis and for the medium term, and measures are taken to share these plans.

 

5.	Systems for ensuring that the corporate group, comprised of the Company and its subsidiaries, conducts business activities appropriately

The Company and its subsidiaries share the Honda Conduct Guidelines and basic policies regarding corporate governance. In addition, each subsidiary works to promote activities that are in compliance with the laws of countries in which they operate and practices observed in their respective industries as they endeavor to enhance corporate governance.

As for the business execution of its subsidiaries, the Company helps with the establishment of account settlement rules. When it comes to important management issues, the Company requests the subsidiary to obtain prior approval from the Company or to report to the Company according to its internal rules. The business control division of the Company regularly receives reports on the subsidiary’s business plans to confirm the appropriateness of the operation.

The Business Ethics Improvement Proposal Line of the Company establishes an internal whistle-blowing and response system for the Company and subsidiaries and major subsidiaries have such internal reporting functions etc. These systems enable the Honda Group to discover and respond to issues that may arise at an early date.

The Audit Office, which directly reports to the president and CEO, is working to strengthen internal auditing functions within the Honda Group, internal auditing of all units, supervising and providing guidance to internal auditing units in major subsidiaries, conducting audits of subsidiaries directly when necessary.

In the case of a company accounted for by the equity method, the Company works to improve corporate governance throughout the Group by seeking the understanding and cooperation of such companies with Honda’s basic corporate governance policies.

 

6.	Provision of employees when assistance is requested by corporate auditors and independence of such employees from directors The Corporate Auditors’ Office has been established as a supportive staff organization directly under the Board of Corporate Auditors to provide support to corporate auditors.

 

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7.	Systems for ensuring directors and employees report to corporate auditors and other systems related to the reporting to corporate auditors

In addition to regularly reporting the state of operations at the Company and its subsidiaries and the state of implementation and operation of internal control systems, including those related to compliance and risk management, any information that may have a significant impact on the Company’s operations is also reported to the corporate auditors.

 

8.	Other systems for ensuring the effectiveness of audits by corporate auditors

Corporate auditors work closely with the Audit Office, which serves as the Company’s internal audit department, to conduct business audits of the Company and its subsidiaries. Additionally, corporate auditors attend the Executive Council and other important meetings.

7. POLICY REGARDING DECISIONS FOR DISTRIBUTION OF DIVIDENDS, ETC.

The Company strives to carry out its operations worldwide 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, the Company’s basic policy for dividends is to make distributions after taking into account its long-term consolidated earnings performance.

The Company will also acquire its own shares at the optimal timing with the goal of improving efficiency of the Company’s capital structure and implementing a flexible capital policy. The present goal is to maintain a shareholders’ return ratio (i.e., the ratio of the total of the dividend payment and the repurchase of the Company’s own shares to consolidated net income attributable to Honda Motor Co., Ltd.) of approximately 30%. Retained earnings will be allocated toward financing R&D activities that are essential for the future growth of the Company and capital expenditures and investment programs that will expand its operations for the purpose of improving business results and strengthening the Company’s financial condition.

The Company plans to distribute year-end cash dividends of ¥22 per share for the year ended March 31, 2014. As a result, total cash dividends for the year ended March 31, 2014, together with the first quarter cash dividends of ¥20, the second quarter cash dividends of ¥20 and the third quarter cash dividends of ¥20, are planned to be ¥82 per share, an increase of ¥6 per share from the annual dividends paid for the year ended March 31, 2013.

Also, please note that the year-end cash dividends for the year ended March 31, 2014 is a matter to be resolved at the general meeting of shareholders.

• Trends in Dividends (reference)

 

 

Yen

FY2011

FY2012

FY2013

FY2014

Classification

First quarter

Second quarter

Third quarter

Year- end

Total

First quarter

Second quarter

Third quarter

Year- end

Total

First quarter

Second quarter

Third quarter

Year- end

Total

First quarter

Second quarter

Third quarter

Year- end

Total

Dividends

12

12

15

15

54

15

15

15

15

60

19

19

19

19

76

20

20

20

22 (planned)

82 (planned)

 

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Consolidated Balance Sheets

 

		Yen (millions)
As of March 31, 2013 and 2014		2013				2014
ASSETS
Current assets:
Cash and cash equivalents		¥	1,206,128			¥	1,168,914
Trade accounts and notes receivable, net			1,005,981				1,158,671
Finance subsidiaries–receivables, net			1,243,002				1,464,215
Inventories			1,215,421				1,302,895
Deferred income taxes			234,075				202,123
Other current assets			418,446				474,448
Total current assets			5,323,053				5,771,266
Finance subsidiaries–receivables, net			2,788,135				3,317,553
Investments and advances:
Investments in and advances to affiliates			459,110				564,266
Other, including marketable equity securities			209,680				253,661
Total investments and advances			668,790				817,927
Property on operating leases:
Vehicles			2,243,424				2,718,131
Less accumulated depreciation			400,292				481,410
Net property on operating leases			1,843,132				2,236,721
Property, plant and equipment, at cost:
Land			515,661				521,806
Buildings			1,686,638				1,895,140
Machinery and equipment			3,832,090				4,384,255
Construction in progress			288,073				339,093
			6,322,462				7,140,294
Less accumulated depreciation and amortization			3,922,932				4,321,862
Net property, plant and equipment			2,399,530				2,818,432
Other assets, net			612,717				660,132
Total assets		¥	13,635,357			¥	15,622,031

 

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		Yen (millions)
		2013				2014
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt		¥	1,238,297			¥	1,319,344
Current portion of long-term debt			945,046				1,303,464
Trade payables:
Notes			31,354				28,501
Accounts			956,660				1,071,179
Accrued expenses			593,570				626,503
Income taxes payable			48,454				43,085
Other current liabilities			275,623				319,253
Total current liabilities			4,089,004				4,711,329
Long-term debt, excluding current portion			2,710,845				3,234,066
Other liabilities			1,630,085				1,563,238
Total liabilities			8,429,934				9,508,633
Equity:
Honda Motor Co., Ltd. stockholders’ equity:
Common stock, authorized 7,086,000,000 shares; issued 1,811,428,430 shares on March 31, 2013 and 2014			86,067				86,067
Capital surplus			171,117				171,117
Legal reserves			47,583				49,276
Retained earnings			6,001,649				6,431,682
Accumulated other comprehensive income (loss), net			(1,236,792	)			(793,014	)
Treasury stock, at cost 9,131,140 shares on March 31, 2013 and 9,137,234 shares on March 31, 2014			(26,124	)			(26,149	)
Total Honda Motor Co., Ltd. stockholders’ equity			5,043,500				5,918,979
Noncontrolling interests			161,923				194,419
Total equity			5,205,423				6,113,398
Commitments and contingent liabilities
Total liabilities and equity		¥	13,635,357			¥	15,622,031

 

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Consolidated Statements of Income

 

		Yen (millions)
Years ended March 31, 2013 and 2014		2013				2014
Net sales and other operating revenue		¥	9,877,947			¥	11,842,451
Operating costs and expenses:
Cost of sales			7,345,162				8,761,083
Selling, general and administrative			1,427,705				1,696,957
Research and development			560,270				634,130
Total operating costs and expenses			9,333,137				11,092,170
Operating income			544,810				750,281
Other income (expenses):
Interest income			25,742				24,026
Interest expense			(12,157	)			(12,703	)
Other, net			(69,504	)			(32,664	)
Total other income (expenses)			(55,919	)			(21,341	)
Income before income taxes and equity in income of affiliates			488,891				728,940
Income tax expense:
Current			125,724				207,236
Deferred			53,252				45,426
Total income tax expense			178,976				252,662
Income before equity in income of affiliates			309,915				476,278
Equity in income of affiliates			82,723				132,471
Net income			392,638				608,749
Less: Net income attributable to noncontrolling interests			25,489				34,642
Net income attributable to Honda Motor Co., Ltd.		¥	367,149			¥	574,107
		Yen
Basic net income attributable to Honda Motor Co., Ltd. per common share		¥	203.71			¥	318.54

 

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Consolidated Statements of Changes in Equity

 

		Yen (millions)
		Common stock				Capital surplus				Legal reserves				Retained earnings				Accumulated other comprehensive income (loss), net				Treasury stock				Honda Motor Co., Ltd. stockholders’ equity				Non- controlling interests				Total equity
Balance at March 31, 2012		¥	86,067			¥	172,529			¥	47,184			¥	5,758,641			¥	(1,646,078	)		¥	(26,117	)		¥	4,392,226			¥	125,676			¥	4,517,902
Adjustment resulting from change in fiscal year-end of a subsidiary, net of tax			—				—				—				6,023				—				—				6,023				1,658				7,681
Adjusted balances as of March 31, 2012			86,067				172,529				47,184				5,764,664				(1,646,078	)			(26,117	)			4,398,249				127,334				4,525,583
Transfer to legal reserves											399				(399	)											—								—
Dividends paid to Honda Motor Co., Ltd. shareholders															(129,765	)											(129,765	)							(129,765	)
Dividends paid to noncontrolling interests																															(6,250	)			(6,250	)
Capital transactions and others							(1,412	)																			(1,412	)			1,189				(223	)
Comprehensive income (loss):
Net income															367,149												367,149				25,489				392,638
Other comprehensive income (loss), net of tax
Adjustments from foreign currency translation																			415,462								415,462				15,350				430,812
Unrealized gains (losses) on available-for-sale securities, net																			7,933								7,933				51				7,984
Unrealized gains (losses) on derivative instruments, net																			(52	)							(52	)							(52	)
Pension and other postretirement benefits adjustments																			(14,057	)							(14,057	)			(1,240	)			(15,297	)
Total comprehensive income (loss)																											776,435				39,650				816,085
Purchase of treasury stock																							(8	)			(8	)							(8	)
Reissuance of treasury stock																							1				1								1
Balance at March 31, 2013			86,067				171,117				47,583				6,001,649				(1,236,792	)			(26,124	)			5,043,500				161,923				5,205,423
Transfer to legal reserves											1,693				(1,693	)											—								—
Dividends paid to Honda Motor Co., Ltd. shareholders															(142,381	)											(142,381	)							(142,381	)
Dividends paid to noncontrolling interests																															(9,677	)			(9,677	)
Capital transactions and others																															(5,557	)			(5,557	)
Comprehensive income (loss):
Net income															574,107												574,107				34,642				608,749
Other comprehensive income (loss), net of tax
Adjustments from foreign currency translation																			320,424								320,424				13,235				333,659
Unrealized gains (losses) on available-for-sale securities, net																			15,219								15,219				33				15,252
Unrealized gains (losses) on derivative instruments, net																			237								237								237
Pension and other postretirement benefits adjustments																			107,898								107,898				(180	)			107,718
Total comprehensive income (loss)																											1,017,885				47,730				1,065,615
Purchase of treasury stock																							(26	)			(26	)							(26	)
Reissuance of treasury stock																							1				1								1
Balance at March 31, 2014		¥	86,067			¥	171,117			¥	49,276			¥	6,431,682			¥	(793,014	)		¥	(26,149	)		¥	5,918,979			¥	194,419			¥	6,113,398

 

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Consolidated Statements of Cash Flows

 

		Yen (millions)
Years ended March 31, 2013 and 2014		2013				2014
Cash flows from operating activities:
Net income		¥	392,638			¥	608,749
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation excluding property on operating leases			335,536				442,318
Depreciation of property on operating leases			254,933				352,402
Deferred income taxes			53,252				45,426
Equity in income of affiliates			(82,723	)			(132,471	)
Dividends from affiliates			84,705				98,955
Provision for credit and lease residual losses on finance subsidiaries–receivables			10,059				18,904
Impairment loss on property on operating leases			4,773				3,301
Loss (gain) on derivative instruments, net			35,027				(39,376	)
Decrease (increase) in assets:
Trade accounts and notes receivable			(90,495	)			(92,638	)
Inventories			(74,662	)			(2,901	)
Other current assets			2,019				(7,363	)
Other assets			(27,243	)			(59,816	)
Increase (decrease) in liabilities:
Trade accounts and notes payable			(95,192	)			70,988
Accrued expenses			52,021				49,718
Income taxes payable			21,764				(8,688	)
Other current liabilities			(4,489	)			31,404
Other liabilities			(4,384	)			(53,815	)
Other, net			(66,795	)			(95,906	)
Net cash provided by operating activities			800,744				1,229,191
Cash flows from investing activities:
Increase in investments and advances			(34,426	)			(45,617	)
Decrease in investments and advances			19,850				58,243
Payments for purchases of available-for-sale securities			(5,642	)			(44,459	)
Proceeds from sales of available-for-sale securities			1,347				14,501
Payments for purchases of held-to-maturity securities			(5,186	)			(20,771	)
Proceeds from redemptions of held-to-maturity securities			17,005				3,358
Proceeds from sales of subsidiaries, net of cash and cash equivalents disposed			—				9,129
Proceeds from sales of investments in affiliates			—				5,363
Capital expenditures			(626,879	)			(774,006	)
Proceeds from sales of property, plant and equipment			44,182				34,069
Proceeds from insurance recoveries for damaged property, plant and equipment			9,600				6,800
Acquisitions of finance subsidiaries–receivables			(1,951,802	)			(2,792,774	)
Collections of finance subsidiaries–receivables			1,833,669				2,354,029
Purchases of operating lease assets			(793,118	)			(1,127,840	)
Proceeds from sales of operating lease assets			418,086				611,317
Other, net			3,558				(86	)
Net cash used in investing activities			(1,069,756	)			(1,708,744	)
Cash flows from financing activities:
Proceeds from short-term debt			6,775,636				8,559,288
Repayments of short-term debt			(6,621,897	)			(8,563,616	)
Proceeds from long-term debt			1,101,469				1,588,826
Repayments of long-term debt			(970,702	)			(1,039,595	)
Dividends paid			(129,765	)			(142,381	)
Dividends paid to noncontrolling interests			(6,250	)			(9,677	)
Sales (purchases) of treasury stock, net			(7	)			(25	)
Other, net			(28,917	)			(22,265	)
Net cash provided by (used in) financing activities			119,567				370,555
Effect of exchange rate changes on cash and cash equivalents			108,460				71,784
Net change in cash and cash equivalents			(40,985	)			(37,214	)
Cash and cash equivalents at beginning of year			1,247,113				1,206,128
Cash and cash equivalents at end of year		¥	1,206,128			¥	1,168,914

 

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The Notes to the Consolidated Statutory Report

Significant Accounting Policies:

 

1.	Consolidated subsidiaries

Number of consolidated subsidiaries: 365

Corporate names of principal consolidated subsidiaries:

American Honda Motor Co., Inc., Honda of America Mfg., Inc., Honda Canada Inc., Honda R&D Co., Ltd., American Honda

Finance Corporation

 

2.	Affiliated companies

Number of affiliated companies: 83

Corporate names of major affiliated companies accounted for under the equity method:

Guangqi Honda Automobile Co., Ltd., Dongfeng Honda Automobile Co., Ltd., P.T. Astra Honda Motor

 

3.	Changes of consolidated subsidiaries and affiliated companies

Consolidated subsidiaries:

Newly formed consolidated subsidiaries: 15; Honda Motor Technology (China) Co., Ltd.

Reduced through reorganization: 19; Honda Elesys Co., Ltd.

Affiliated companies:

Newly formed affiliated companies: 2

Reduced through reorganization: 5

 

4.

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America in accordance with Article 120-2 (1) of the Ordinance of Companies Accounting. The Company omits some disclosure items and notes in accordance with the second sentence of Article 120-2 (1) of the Ordinance of Companies Accounting.

 

5.	Inventories are stated at the lower of cost, determined principally by the first-in, first-out method, or market.

 

6.

Honda classifies its debt and equity securities in the following categories: available-for-sale, trading or held-to-maturity. Debt securities that are classified as “held-to-maturity” securities are reported at amortized cost. Debt and equity securities classified as “trading” securities are reported at fair value, with unrealized gains and losses included in earnings. Other marketable debt and equity securities are classified as “available-for-sale” securities and are reported at fair value, with unrealized gains or losses, net of deferred taxes, included in accumulated other comprehensive income (loss) in the stockholders’ equity section of the consolidated balance sheets.

 

7.	Goodwill, all of which is allocated to Honda’s reporting units, is not amortized but instead is tested for impairment at least annually.

 

8.	Depreciation of property, plant and equipment is calculated principally by the straight-line method based on estimated useful lives and salvage values of the respective assets.

 

9.	Honda applies hedge accounting for certain foreign currency forward contracts related to forecasted foreign currency transactions between the Company and its subsidiaries.

 

10.

The allowance for credit losses on finance subsidiaries–receivables is maintained at an amount management deems adequate to cover estimated losses on finance receivables. The allowance is based on management’s evaluation of many factors, including current economic trends, industry experience, inherent risks in the portfolio and the borrower’s ability to pay.

 

11.

The allowance for losses on lease residual values is maintained at an amount management deems adequate to cover estimated losses on the uninsured portion of the vehicles’ lease residual values. The allowance is also based on management’s evaluation of many factors, including current economic conditions, industry experience and the finance subsidiaries’ historical experience with residual value losses.

 

12.

Provisions for retirement benefits and other postretirement benefits are provided based on the fair value of both projected benefit obligations and plan assets at the end of the fiscal year to cover for employees’ retirement benefits. The Company recognizes its overfunded or underfunded status for the defined benefit postretirement plan as an asset or liability in its consolidated balance sheets and recognizes changes in the funded status in accumulated comprehensive income (loss), net of taxes. Prior service cost (benefit) is amortized by using the straight-line method and the estimated average remaining service years of employees. Actuarial loss is amortized if unrecognized net gain or loss exceeds ten percent of the greater of the projected benefit obligation or the market-related value of plan assets by using the straight-line method and the estimated average remaining service years of employees.

 

13.

Estimated warranty expenses are provided based on historical warranty claim experience with consideration given to the expected level of future warranty costs as well as current information on repair costs. Included in warranty expense accruals are costs for general warranties on vehicles Honda sells and product recalls.

 

14.	Honda’s common stock-to-ADS exchange ratio is one share of common stock to one ADS.

 

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Changes in Accounting Policies:

 

1.	Adoption of New Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. This amendment requires reporting entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component, and to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income.

Honda adopted ASU 2013-02, effective April 1, 2013. This adoption has no impact on the Honda’s financial position or results of operations.

 

2.	Changing in Fiscal Year-end of a Subsidiary

Effective April 1, 2013, a subsidiary of the Company changed its fiscal year-end from December 31 to March 31. As a result, the Company eliminated the previously existing three month differences between the reporting periods of the Company and the subsidiary in the consolidated financial statements. The elimination of the lag period represents a change in accounting principle and has been reported by retrospective application. The impacts on the retained earnings and noncontrolling interests as of April 1, 2012 are ¥6,023 million and ¥1,658 million, respectively. Honda believes the effect of the retrospective application is not material to the Company’s consolidated financial statements as of and for the year ended March 31, 2013, and therefore the Company’s consolidated financial statements have not been retrospectively adjusted, except for the adjustment to retained earnings and noncontrolling interests as of April 1, 2012.

Notes to Consolidated Balance Sheets:

 

1.	The allowance for assets are as follows: Yen (millions)

 

		Mar. 31, 2013				Mar. 31, 2014
The allowance for doubtful trade accounts and notes receivables			7,885				9,677
The allowance for credit losses for finance subsidiaries–receivables			17,828				21,559
The allowance for losses on lease residual values for finance subsidiaries–receivables			3,354				2,131
The allowance for doubtful accounts for other assets			22,754				22,100

 

2.	Net book value of property, plant and equipment that were subject to specific collateral securing indebtedness and debt-related mortgages are as follows: Yen (millions)

 

		Mar. 31, 2013				Mar. 31, 2014
Mortgaged assets:
Trade accounts and notes receivables			25,528				31,318
Inventories			11,154				12,908
Property, plant and equipment			26,169				58,504
Finance subsidiaries–receivables			724,399				883,776
Mortgage-related debts:
Short-term debt			410,403				504,675
Long-term debt			351,591				423,251

 

3.	Honda has entered into various guarantee and indemnification agreements which are primarily for employee bank loans to cover their housing costs as follows: Yen (millions)

 

		Mar. 31, 2013				Mar. 31, 2014
Bank loans of employees for their housing costs			26,475				25,368

If an employee defaults on his/her loan payments, Honda is required to perform under the guarantee. The undiscounted maximum amount of Honda’s obligation to make future payments in the event of defaults is shown above. As of March 31, 2014, no amount has been accrued for any estimated losses under these obligations, as it is probable that the employees will be able to make all scheduled payments.

 

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Notes to Consolidated Statements of Stockholders’ Equity:

 

		Mar. 31, 2013				Mar. 31, 2014
1. The number of shares outstanding			1,811,428,430				1,811,428,430
		Mar. 31, 2013				Mar. 31, 2014
2. The number of treasury shares			9,131,140				9,137,234

3. The total amount of dividends for the fiscal year ended March 31, 2014, was ¥142,381 million. The Company intends to distribute year-end cash dividends of ¥39,650 million to the stockholders of record on March 31, 2014.

Note on Financial Instruments:

Current Status of Financial Instruments

 

1.	Policy Regarding Financial Instruments

The policy of Honda is to support its business activities by maintaining sufficient capital resources, a sufficient level of liquidity and a sound balance sheet. In its cash management activities, the Company invests principally in highly safe, short-term financial instruments. Honda meets its operating capital requirements primarily through cash generated by operations, bank loans and the issuance of commercial paper. In addition, the Company’s finance subsidiaries fund those financial programs for customers and dealers primarily from medium-term notes, bank loans, securitization of finance receivables, commercial paper, corporate bonds and intercompany loans.

 

2.	Risk Associated with Financial Instruments and Related Risk Management System

The Company reduces the credit risk arising from trade accounts and notes receivables and finance subsidiaries–receivables by requiring compliance with its internal credit management regulations. To minimize the foreign currency fluctuation risk of the

foreign currency denominated receivables, the Company enters into foreign currency forward exchange contracts and foreign currency purchased option contracts. Regarding the lease receivables held by the Company’s finance subsidiaries, losses may be incurred when proceeds from the sale of the returned vehicles are less than the contractual residual value. The Company’s finance subsidiaries periodically review the estimated residual value of the leased vehicles to monitor the residual value risk.

Available-for-sale securities mainly consist of equity securities. Held-to-maturity securities mainly consist of corporate bonds and local bonds. In order to manage the price fluctuation risk, the Company periodically estimates the fair value of these securities.

To manage the liquidity risk associated with short-term and long-term debt, the Company diversifies its sources of funds. To reduce the interest rate fluctuation risk, the Company enters into interest rate swap contracts. To minimize the foreign currency fluctuation risk of the foreign currency denominated payables, the Company enters into currency swap contracts.

The Company enters into derivative contracts within the actual demand of its business activities in accordance with the risk management policy. The derivative instruments contain an element of risk in the event the counterparties are unable to meet the terms of the agreement. However, Honda minimizes the risk exposure by limiting the counterparties to major international banks and financial institutions meeting established credit guidelines.

The Company applies hedge accounting for certain foreign currency forward exchange contracts related to forecasted foreign currency transactions between the Company and its subsidiaries.

 

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Fair Value of Financial Instruments

The carrying amount, estimated fair value and difference of financial instruments at March 31, 2014 are as follows: Yen (millions)

 

		Carrying Amount				Estimate Fair Value				Difference
Finance subsidiaries–receivables			5,140,064				5,175,564				35,500
Available-for-sale securities			185,960				185,960				—
Held-to-maturity securities			34,650				34,667				17
Short-term and long-term debt			(5,856,874	)			(5,917,087	)			(60,213	)
Derivative instruments			5,111				5,111				—

 

Note:

The book value of the previously mentioned finance subsidiaries–receivables excludes direct finance leases (net) from the amount of finance subsidiaries–receivables appearing on the balance sheets. The amount of direct finance leases (net) at the end of the fiscal year under review was ¥393,933 million. Also, the previously mentioned finance subsidiaries–receivables include the amount of finance subsidiaries–receivables, which is presented in the balance sheet items trade accounts and notes receivable and other assets. The amount of such finance subsidiaries–receivables at the end of the fiscal year under review was ¥752,229 million.

The methodologies and assumptions used to estimate the fair values of financial instruments are as follows:

 

1.	Cash and cash equivalents, trade receivables and trade payables

The carrying amounts approximate fair values because of the short maturity of these instruments.

 

2.	Finance subsidiaries–receivables

The fair values of retail receivables and commercial loans are estimated by discounting future cash flows using the current rates for these instruments of similar remaining maturities. Given the short maturities of wholesale flooring receivables, the carrying amount of those receivables approximates fair value.

 

3.	Available-for-sale securities

The fair value of marketable equity securities is estimated by using quoted market prices. To estimate fair value of auction rate securities, Honda uses third-party developed valuation model which obtains a wide array of market observable inputs, as well as unobservable inputs, including probability of passing or failing auction at each auction. Debt securities consist mainly of corporate bonds and local bonds and the fair values are estimated based on proprietary pricing models provided by specialists and/or market makers and the models obtain a wide array of market observable inputs such as credit ratings and discount rates.

 

4.	Held-to-maturity securities

The fair value of Government bonds is estimated by using quoted market prices. The fair values of corporate bonds and local bonds are estimated based on proprietary pricing models provided by specialists and/or market makers and the models obtain a wide array of market observable inputs such as credit ratings and discount rates.

 

5.

Debt

The fair values of bonds are estimated by using quoted market prices. The fair values of short-term loans and long-term loans are estimated by discounting future cash flows using interest rates currently available for loans of similar terms and remaining maturities.

 

6.	Derivative instruments

The Company holds foreign currency and interest rate derivative instruments. The fair values of foreign currency forward exchange contracts and foreign currency option contracts are estimated using market observable inputs such as spot exchange rates, discount rates and implied volatility. The fair values of currency swap agreements and interest rate swap agreements are estimated by discounting future cash flows using market observable inputs such as LIBOR rates, swap rates, and foreign exchange rates. The credit risk of Honda and its counterparties are considered on the valuation of foreign exchange and interest rate instruments.

Non-marketable securities are excluded from the above table as it is not possible to estimate the future cash flow and it is deemed to be extremely difficult to measure the fair value. The carrying amount of non-marketable securities is ¥11,285 million at March 31, 2014.

Notes to Information about Per Common Share:

Honda Motor Co., Ltd. shareholders’ equity per common share and basic net income attributable to Honda Motor Co., Ltd. per common share are as follows: Yen

 

		Mar. 31, 2013				Mar. 31, 2014
Honda Motor Co., Ltd. shareholders’ equity per common share			2,798.37				3,284.14
Basic net income attributable to Honda Motor Co., Ltd. per common share			203.71				318.54

 

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Honda Motor Co., Ltd. shareholders’ equity per common share has been computed by dividing Honda Motor Co., Ltd. shareholders’ equity by the number of shares outstanding at the end of each period. The numbers of common shares, at the end of the years ended March 31, 2013 and 2014 were 1,802,297,290 and 1,802,291,196, respectively. Basic net income attributable to Honda Motor Co., Ltd. per common share has been computed by dividing net income attributable to Honda Motor Co., Ltd. by the weighted average number of shares outstanding during each period. The weighted average numbers of shares outstanding for the years ended March 31, 2013 and 2014 were 1,802,298,819 and 1,802,294,383, respectively. There were no potentially dilutive shares issued during the years ended March 31, 2013 or 2014.

 

Note:

Honda corrected Honda Motor Co., Ltd. shareholders’ equity for the year ended March 31, 2013. Honda Motor Co., Ltd. shareholders’ equity per common share is also adjusted. For detailed information, please refer to Consolidated Financial Summary “Changes in Accounting Policies 2: Changing in Fiscal Year-end of a Subsidiary”.

Other

 

1.	Impairment loss on investments in affiliates

For the fiscal year ended March 31, 2013, Honda recognized an impairment loss of ¥12,757 million, net of tax, on certain investments in affiliates which have quoted market values because of an other-than-temporary decline in fair value below their carrying values. The fair values of the investments were based on quoted market price. The impairment losses are included in equity in income of affiliates in the accompanying consolidated statement of income. For the year ended March 31, 2014, Honda did not recognize any significant impairment losses.

 

2.	Impact of the plan amendment and curtailment in consolidated subsidiaries on the Company’s consolidated financial position and results of operations

In September 2013, certain consolidated subsidiaries in North America amended their existing defined benefit pension plans, effective January 1, 2014, to reduce the benefits in future periods for their employees on or after January 1, 2014.

This plan amendment resulted in a reduction of the projected benefit obligation and recognition of the prior service benefit at the date of the plan amendment which is amortized over the average remaining service period from the date of the plan amendment. The consolidated subsidiaries also remeasured their projected benefit obligation and the fair value of related plan assets at the date of the plan amendment. The effects of the plan amendment and the remeasurement were recorded in other comprehensive income (loss), net of tax during the fiscal year ended March 31, 2014.

Following this plan amendment, employees of these consolidated subsidiaries could elect to move from the existing defined benefit pension plans to a defined contribution pension plan on January 1, 2014. Consequently, certain employees elected to move to the defined contribution pension plan in October 2013, resulting in a curtailment in the existing defined benefit pension plans. As a result, Honda recognized ¥21,368 million of the prior service benefit included in accumulated other comprehensive income (loss) as a curtailment gain, of which ¥15,407 million is included in cost of sales and ¥5,961 million is included in selling, general and administrative expense in the accompanying consolidated statements of income for the fiscal year ended March 31, 2014. The consolidated subsidiaries also remeasured their projected benefit obligation and the fair value of plan assets in the existing defined benefit pension plans at the date of the curtailment. The effect of the remeasurement was recorded in other comprehensive income (loss), net of tax during the fiscal year ended March 31, 2014.

 

3.	Income taxes

On March 20, 2014, the National Diet of Japan approved amendments to existing income tax laws and the Special Reconstruction Corporation Tax imposed on companies will be abolished for fiscal years beginning on or after April 1, 2014. Upon the change in the laws, the statutory income tax rate in Japan for fiscal years beginning on or after April 1, 2014 will be changed to approximately 35%. Thus, the Company and its Japanese subsidiaries re-measured deferred tax assets and liabilities as of the enactment date based on the new tax rates to be applied in the fiscal years in which temporary differences are expected to be recovered or settled. As a result, net of deferred tax assets decreased by ¥7,321 million, and income tax expenses increased by ¥7,321 million, as of the enactment date of the laws.

Regarding the Notes for the Previous Fiscal Year

The notes for the previous fiscal year contain additional information for reference.

 

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¡ Segment Information (reference)

(a) Business Segment Information

For the year ended March 31, 2013

 

		Yen (millions)
		Motorcycle Business				Automobile Business				Financial Services Business				Power Product & Other Businesses				Segment Total				Reconciling Items				Consolidated
Net sales and other operating revenue:
External customers			1,339,549				7,709,216				548,506				280,676				9,877,947				—				9,877,947
Intersegment			—				14,374				11,750				10,994				37,118				(37,118	)			—
Total			1,339,549				7,723,590				560,256				291,670				9,915,065				(37,118	)			9,877,947
Cost of sales, SG&A and R&D expenses			1,229,316				7,437,599				402,098				301,242				9,370,255				(37,118	)			9,333,137
Segment income (loss)			110,233				285,991				158,158				(9,572	)			544,810				—				544,810
Assets			1,095,357				5,759,126				6,765,322				309,149				13,928,954				(293,597	)			13,635,357
Depreciation and amortization			34,665				290,522				256,166				9,116				590,469				—				590,469
Capital expenditures			73,513				540,625				794,869				14,519				1,423,526				—				1,423,526
For the year ended March 31, 2014
		Yen (millions)
		Motorcycle Business				Automobile Business				Financial Services Business				Power Product & Other Businesses				Segment Total				Reconciling Items				Consolidated
Net sales and other operating revenue:
External customers			1,663,631				9,176,360				698,185				304,275				11,842,451				—				11,842,451
Intersegment			—				18,569				10,403				13,900				42,872				(42,872	)			—
Total			1,663,631				9,194,929				708,588				318,175				11,885,323				(42,872	)			11,842,451
Cost of sales, SG&A and R&D expenses			1,498,026				8,791,228				525,832				319,956				11,135,042				(42,872	)			11,092,170
Segment income (loss)			165,605				403,701				182,756				(1,781	)			750,281				—				750,281
Assets			1,264,903				6,398,580				7,980,989				346,177				15,990,649				(368,618	)			15,622,031
Depreciation and amortization			46,038				383,325				354,704				10,653				794,720				—				794,720
Capital expenditures			57,702				705,696				1,131,761				14,708				1,909,867				—				1,909,867

Notes:

 

1.	Intersegment sales and revenues are generally made at values that approximate arm’s-length prices.

 

2.

Unallocated corporate assets, included in reconciling items, amounted to ¥293,583 million as of March 31, 2013 and ¥294,819 million as of March 31, 2014, respectively, which consist primarily of cash and cash equivalents, available-for-sale securities and held-to-maturity securities held by the Company. Reconciling items also include elimination of intersegment transactions.

 

3.	Depreciation and amortization of Financial Services Business include ¥254,933 million for the year ended March 31, 2013 and ¥352,402 million for the year ended March 31, 2014, respectively, of depreciation of property on operating leases.

 

4.	Capital expenditures of Financial Services Business include ¥793,118 million for the year ended March 31, 2013 and ¥1,127,840 million for the year ended March 31, 2014, respectively, of purchase of operating lease assets.

 

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(b) Geographic Segment Information

For the year ended March 31, 2013

 

		Yen (millions)
		Japan				North America				Europe				Asia				Other Regions				Total				Reconciling Items				Consolidated
Net sales and other operating revenue:
External customers			1,925,333				4,612,361				536,856				1,926,434				876,963				9,877,947				—				9,877,947
Transfers between geographic areas			1,968,179				244,741				105,254				379,213				19,504				2,716,891				(2,716,891	)			—
Total			3,893,512				4,857,102				642,110				2,305,647				896,467				12,594,838				(2,716,891	)			9,877,947
Cost of sales, SG&A and R&D expenses			3,715,084				4,648,184				641,650				2,158,889				860,773				12,024,580				(2,691,443	)			9,333,137
Operating income			178,428				208,918				460				146,758				35,694				570,258				(25,448	)			544,810
Assets			3,264,383				7,645,540				673,667				1,523,192				660,856				13,767,638				(132,281	)			13,635,357
Long-lived assets			1,167,236				2,481,097				124,088				434,827				143,570				4,350,818				—				4,350,818
For the year ended March 31, 2014
		Yen (millions)
		Japan				North America				Europe				Asia				Other Regions				Total				Reconciling Items				Consolidated
Net sales and other operating revenue:
External customers			2,216,735				5,595,981				676,502				2,340,100				1,013,133				11,842,451				—				11,842,451
Transfers between geographic areas			1,975,544				374,018				98,766				486,823				12,368				2,947,519				(2,947,519	)			—
Total			4,192,279				5,969,999				775,268				2,826,923				1,025,501				14,789,970				(2,947,519	)			11,842,451
Cost of sales, SG&A and R&D expenses			3,978,185				5,679,094				792,393				2,609,023				980,600				14,039,295				(2,947,125	)			11,092,170
Operating income (loss)			214,094				290,905				(17,125	)			217,900				44,901				750,675				(394	)			750,281
Assets			3,442,746				8,825,278				709,469				1,996,929				767,225				15,741,647				(119,616	)			15,622,031
Long-lived assets			1,280,071				3,025,095				133,061				588,413				171,429				5,198,069				—				5,198,069

Notes:

 

1.	Major countries or regions in each geographic area:

 

North America		United States, Canada, Mexico
Europe		United Kingdom, Germany, France, Belgium, Russia
Asia		Thailand, Indonesia, China, India, Vietnam
Other Regions		Brazil, Australia

 

2.	Sales and revenues between geographic areas are generally made at values that approximate arm’s-length prices.

 

3.

Unallocated corporate assets, included in reconciling items, amounted to ¥293,583 million as of March 31, 2013 and ¥294,819 million as of March 31, 2014, respectively, which consist primarily of cash and cash equivalents, available-for-sale securities and held-to-maturity securities held by the Company. Reconciling items also include elimination of transactions between geographic areas.

 

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Independent Auditors’ Report

Independent Auditors’ Report

 

The Board of Directors		May 8, 2014
Honda Motor Co., Ltd.

 

		KPMG AZSA LLC
		Takuji Kanai (Seal)		Designated Limited Liability Partner, Engagement Partner and Certified Public Accountant
		Hiroyuki Yamada (Seal)		Designated Limited Liability Partner, Engagement Partner and Certified Public Accountant
		Tsutomu Ogawa (Seal)		Designated Limited Liability Partner, Engagement Partner and Certified Public Accountant

We have audited the consolidated financial statements, comprising the consolidated balance sheet, the consolidated statement of income, the consolidated statement of changes in equity and the related notes of Honda Motor Co., Ltd. as at March 31, 2014 and for the year from April 1, 2013 to March 31, 2014 in accordance with Article 444-(4) of the Companies Act.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the second sentence of Article 120-2 (1) of the Ordinance of Companies Accounting that prescribes some omissions of disclosure items required under accounting principles generally accepted in the United States of America, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit as independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above, which were prepared in accordance with the second sentence of Article 120-2 (1) of the Ordinance of Companies Accounting that prescribes some omissions of disclosure items required under accounting principles generally accepted in the United States of America, present fairly, in all material respects, the financial position and the results of operations of Honda Motor Co., Ltd. and its consolidated subsidiaries for the period, for which the consolidated financial statements were prepared.

Other Matter

Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of the Certified Public Accountants Law of Japan.

Notes to the Reader of Independent Auditor’s Report:

The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Reports as required by the Companies Act.

 

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Audit Report of the Board of Corporate Auditors

Audit Report

The Board of Corporate Auditors has prepared this Audit Report regarding the performance of duties by the Directors for the 90th fiscal year from April 1, 2013 to March 31, 2014, upon deliberation based on the audit reports prepared by each Corporate Auditor, and hereby reports as follows:

1. Auditing Methods Employed by the Corporate Auditors and the Board of Corporate Auditors and Details of Such Methods

The Board of Corporate Auditors established auditing policies, assignment of duties, etc., and received reports from each Corporate Auditor regarding their execution of audits and results thereof, and received reports from the Directors, etc. and the Accounting Auditor regarding performance of their duties, and sought explanations as necessary.

Each Corporate Auditor, in accordance with the auditing standards of Corporate Auditors established by the Board of Corporate Auditors, following the auditing policies, assignment of duties and other relevant matters, communicated with the Directors, the Audit Office and other employees, etc., made efforts to collect information and establish the environment for auditing, and participated in the meetings of the Board of Directors and other important meetings, received reports from the Directors and employees regarding performance of their duties, sought explanations as necessary, examined important documents on business decisions, etc., and surveyed the status of operations and assets at the head office and principal business offices. In addition, each Corporate Auditor monitored and verified the content of the resolution of the Board of Directors regarding the establishment of the system for ensuring that the performance of duties by the Directors as recorded in the Business Report conforms to the laws and regulations and Articles of Incorporation and other systems stipulated in Paragraphs 1 and 3 of Article 100 of the Enforcement Regulations of the Corporation Law as being necessary for ensuring appropriateness of the Company’s operations, and the status of the systems established based on such resolution (Internal Control Systems) by receiving periodic reports from the Directors and employees on the structuring and operation of these systems, and, as necessary, requesting explanations and asking for expression of opinions. With respect to subsidiaries, Corporate Auditors communicated and exchanged information with Directors and Corporate Auditors of subsidiaries, and received business reports from subsidiaries as necessary. Based on the above methods, Corporate Auditors examined the business report and the accompanying detailed statements for this fiscal year.

Furthermore, Corporate Auditors monitored and verified whether the Accounting Auditor maintained its independence and implemented appropriate audits, and received reports from the Accounting Auditor regarding the performance of its duties and sought explanations as necessary. In addition, Corporate Auditors received notice from the Accounting Auditor that “System for ensuring that duties are performed properly” (matters set forth in each item of Article 131 of the Company Accounting Regulations) is established in accordance with the “Quality Control Standards Regarding Audits” (Business Accounting Council, October 28, 2005), etc., and sought explanations as necessary. Based on the above methods, Corporate Auditors examined the unconsolidated financial statements (unconsolidated balance sheets, unconsolidated statements of operations, unconsolidated statements of stockholders’ equity and notes to the unconsolidated financial statements) and the supplementary schedules thereto, and the consolidated financial statements (the consolidated balance sheet, the consolidated statement of income, the consolidated statements of change in equity and notes to consolidated financial statements) for this fiscal year.

2. Results of Audit

 

(1)	Results of Audit of Business Report, etc.

 

1.

The business report and the supplementary schedules thereto fairly represent the status of the Company in accordance with the applicable laws and regulations and Articles of Incorporation.

 

2.

No misconduct or material violation of laws, regulations or the Articles of Incorporation was found with regard to the performance of duties by the Directors.

 

3.

The content of the resolution of the Board of Directors regarding the Internal Control Systems is appropriate. In addition, no matters were found for comment with regard to the content of the business report as it is related to Internal Control Systems or with regard to the performance of duties by the Directors.

 

(2)	Results of Audit of unconsolidated financial statements and the supplementary schedules thereto.

The methods and results of the audit performed by the Accounting Auditor, KPMG AZSA LLC, are appropriate.

 

(3)	Results of Audit of consolidated financial statements.

The methods and results of the audit performed by the Accounting Auditor, KPMG AZSA LLC, are appropriate.

May 12, 2014

Board of Corporate Auditors

Honda Motor Co., Ltd.

 

				Corporate Auditor (Full-time)		Masaya Yamashita (Seal)
				Corporate Auditor (Full-time)		Kunio Endo (Seal)
				Corporate Auditor (Outside)		Hirotake Abe (Seal)
				Corporate Auditor (Outside)		Tomochika Iwashita (Seal)
				Corporate Auditor (Outside)		Toshiaki Hiwatari (Seal)

 

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REFERENCE

• Forecasts for the Fiscal Year Ending March 31, 2015

In regard to the forecasts of the financial results for the fiscal year ending March 31, 2015, Honda projects consolidated results to be as shown below:

These forecasts are based on the assumption that the average exchange rates for the Japanese yen to the U.S. dollar and the euro will be ¥100 and ¥135, respectively, for the full year ending March 31, 2015.

• Consolidated

 

		Yen (billions)/Changes  from the previous fiscal period
		Fiscal year ending March  31, 2015
Net sales and other operating revenue			12,750				(+7.7	%)
Operating income			760				(+1.3	%)
Income before income taxes and equity in income of affiliates			745				(+2,2	%)
Net income attributable to Honda Motor Co., Ltd.			595				(+3.6	%)

This announcement contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on management’s assumptions and beliefs taking into account information currently available to it. Therefore, please be advised that Honda’s actual results could differ materially from those described in these forward-looking statements as a result of numerous factors, including general economic conditions in Honda’s principal markets and foreign exchange rates between the Japanese yen and the U.S. dollar, the euro and other major currencies, as well as other factors detailed from time to time.

• Shareholders

 

Categories		FY2011 Year-End (As of March 31, 2012)								FY2012 Year-End (As of March 31, 2013)								FY2013 Year-End (As of March 31, 2014)
		Thousand shares				Number of shareholders				Thousand shares				Number of shareholders				Thousand shares				Number of shareholders
Individuals			180,246				215,138				181,719				218,121				170,653				212,550
National and Local Public Entities			3				1				—				—				—				—
Financial Institutions			769,527				260				736,115				260				705,390				281
Securities Companies			30,558				65				22,254				76				31,902				79
Other Domestic Corporations			176,507				1,538				158,924				1,562				152,678				1,541
Foreigners			645,456				964				703,282				1,008				741,667				1,103
Treasury Stock			9,128				1				9,131				1				9,137				1
Total			1,811,428				217,967				1,811,428				221,028				1,811,428				215,555

Note:   The numbers of shares above disregard and round off amounts of less than one thousand.

 

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Honda Motor Co., Ltd.

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Table of Contents

Unconsolidated Balance Sheets

 

		Yen (million)
As of March 31, 2013 and 2014		2013				2014
Assets
Current assets
Cash and bank deposits			51,242				118,083
Accounts receivable			417,528				443,469
Securities			149,550				68,558
Finished goods			70,107				82,503
Work in process			29,620				41,930
Raw materials and supplies			27,320				33,155
Advance payments			13,974				17,377
Prepaid expenses			6,799				10,964
Deferred income taxes			108,832				89,329
Others			132,199				109,716
Allowance for doubtful accounts			(2,875	)			(1,638	)
Total current assets			1,004,300				1,013,451
Fixed assets
Tangible fixed assets
Buildings			669,584				693,738
Accumulated depreciation			(408,953	)			(417,801	)
Buildings, net			260,631				275,936
Structures			130,512				134,471
Accumulated depreciation			(95,388	)			(96,568	)
Structures, net			35,123				37,903
Machinery and equipment			601,639				652,215
Accumulated depreciation			(525,372	)			(520,457	)
Machinery and equipment, net			76,267				131,758
Vehicles			15,921				17,921
Accumulated depreciation			(12,523	)			(12,117	)
Vehicles, net			3,397				5,803
Tools, furniture and fixtures			212,038				213,022
Accumulated depreciation			(191,319	)			(188,267	)
Tools, furniture and fixtures, net			20,719				24,755
Land			335,703				344,998
Lease assets			3,671				3,802
Accumulated depreciation			(1,250	)			(1,462	)
Lease assets, net			2,421				2,339
Construction in progress			55,047				15,820
Total tangible fixed assets			789,312				839,315
Intangible assets
Patents			26				31
Leaseholds			2,101				1,983
Trademarks			17				15
Software			32,131				56,527
Lease assets			8				15
Others			543				510
Total intangible assets			34,829				59,084
Investments and other assets
Investment securities			92,752				108,060
Investment securities–subsidiaries and affiliates			432,242				418,757
Investments and other assets			24				24
Investments–subsidiaries and affiliates			93,065				93,065
Long-term loans receivable–employees			139				109
Long-term loans receivable–subsidiaries and affiliates			3,928				3,142
Receivables in bankruptcy			6,462				10,990
Long-term prepaid expenses			551				538
Deferred income taxes			89,570				66,747
Others			23,587				17,297
Allowance for doubtful accounts			(7,442	)			(9,133	)
Total investments and other assets			734,882				709,601
Total fixed assets			1,559,023				1,608,002
Total assets			2,563,324				2,621,454

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Table of Contents

		Yen (million)
		2013				2014
Liabilities
Current liabilities
Notes payable–trade			1,854				2,460
Accounts payable			237,888				306,496
Short-term bonds payable			39,998				—
Short-term loans payable			24,033				19,741
Current portion of long-term loans payable			28				25
Lease debt			733				822
Other payables			98,530				71,239
Accrued expenses			99,669				79,328
Income taxes payable			936				3,887
Advances received			4,413				4,292
Deposits received			3,850				3,509
Deferred revenue			142				128
Current portion of accrued product warranty			30,011				32,341
Accrued employees’ bonuses			29,651				29,232
Accrued directors’ bonuses			272				221
Accrued operating officers’ bonuses			449				492
Provision for loss on disaster			1,145				—
Others			52,819				2,486
Total current liabilities			626,429				556,707
Non-current liabilities
Long-term loans payable			131				102
Lease debt			1,853				1,680
Accrued product warranty			36,141				32,813
Accrued employees’ retirement benefits			124,048				124,542
Asset retirement obligation			662				676
Others			10,575				9,723
Total non-current liabilities			173,413				169,538
Total liabilities			799,843				726,245
Total net assets
Stockholders’ equity
Common stock			86,067				86,067
Capital surplus
Capital reserve			170,313				170,313
Other capital surplus			—				0
Total capital surplus			170,313				170,314
Retained earnings
Legal reserves			21,516				21,516
Other retained earnings
General reserve			1,243,300				1,256,300
Reserve for special depreciation			1,199				985
Reserve for reduction of acquisition cost of fixed assets			16,276				16,025
Earnings to be carried forward			217,288				325,301
Total retained earnings			1,499,582				1,620,128
Treasury stock			(26,222	)			(26,247	)
Total stockholders’ equity			1,729,740				1,850,263
Difference of appreciation and conversion
Net unrealized gains on securities			33,977				44,945
Deferred loss (gain) on hedges			(237	)			—
Total difference of appreciation and conversion			33,740				44,945
Total net assets			1,763,480				1,895,208
Total liabilities and net assets			2,563,324				2,621,454

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Table of Contents

Unconsolidated Statements of Income

 

		Yen (million)
Year ended March 31, 2013 and 2014		2013				2014
Net sales			3,244,070				3,488,369
Cost of sales
Finished goods and parts for sale at beginning of year			100,718				70,107
Production cost			1,697,268				1,796,555
Others			520,331				604,334
Total			2,318,318				2,470,997
Transfer to other accounts			2,566				2,862
Finished goods and parts for sale at end of year			70,107				82,503
Cost of finished goods sold			2,245,643				2,385,631
Gross profit			998,426				1,102,738
Selling, general and administrative expenses			894,494				977,133
Operating income			103,932				125,604
Non-operating income
Dividend income			156,492				233,168
Others			30,953				31,487
Total non-operating income			187,446				264,655
Non-operating expenses
Contributions			570				1,613
Depreciation			9,086				10,012
Provision of allownace for doubtful accounts			1,286				—
Expenses for rental assets			6,069				5,109
Foreign exchange loss			78,884				24,814
Others			1,656				2,789
Total non-operating expenses			97,553				44,339
Ordinary income			193,825				345,920
Extraordinary income
Gain on sale of investment securities–subsidiaries and affiliates			—				14,728
Others			4,564				2,422
Total extraordinary income			4,564				17,150
Extraordinary losses
Loss on disposal of fixed assets			3,354				3,939
Loss on devaluation of investment securities–subsidiaries and affiliates			—				18,572
Others			285				2,374
Total extraordinary losses			3,640				24,887
Income before income taxes			194,750				338,183
Income taxes - current			21,055				39,006
Income taxes - deferred			18,980				36,249
Total income tax			40,036				75,255
Net income			154,714				262,928

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Unconsolidated Statement of Changes in Net Assets

 

		Yen (million)
		Stockholders’ equity
						Capital surplus												Retained earnings
																						Other retained earnings
		Common stock				Legal capital surplus				Other capital surplus				Total capital surplus				Legal reserves				General reserve				Reserve for special depreciation				Reserve for reduction entry
Balance at March 31, 2013			86,067				170,313				—				170,313				21,516				1,243,300				1,199				16,276
Changes of items during the period
Provision of general reserve																							13,000
Reversal of general reserve
Provision of reserve for special depreciation																											361
Reversal of reserve for special depreciation																											(576	)
Provision of reserve for reduction entry																															126
Reversal of reserve for reduction entry																															(377	)
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock											0				0
Net changes of items other than shareholder’s equity
Total changes of items during the period			—				—				0				0				—				13,000				(214	)			(251	)
Balance at March 31, 2014			86,067				170,313				0				170,314				21,516				1,256,300				985				16,025

 

		Stockholders’ equity																Valuation and translation adjustments
		Retained earnings
		Other retained earnings																Valuation
		Retained earnings brought forward				Total retained earnings				Treasury stock				Total stockholders’ equity				difference on available-for- sale security				Deferred gains or losses on hedges				Total valuation and translation adjustments				Total net assets
Balance at March 31, 2013			217,288				1,499,582				(26,222	)			1,729,740				33,977				(237	)			33,740				1,763,480
Changes of items during the period
Provision of general reserve			(13,000	)			—								—																—
Reversal of general reserve							—								—																—
Provision of reserve for special depreciation			(361	)			—								—																—
Reversal of reserve for special depreciation			576				—								—																—
Provision of reserve for reduction entry			(126	)			—								—																—
Reversal of reserve for reduction entry			377				—								—																—
Dividends from surplus			(142,381	)			(142,381	)							(142,381	)															(142,381	)
Net income			262,928				262,928								262,928																262,928
Purchase of treasury stock											(26	)			(26	)															(26	)
Disposal of treasury stock											1				2																2
Net changes of items other than shareholder’s equity																			10,967				237				11,204				11,204
Total changes of items during the period			108,012				120,546				(24	)			120,522				10,967				237				11,204				131,727
Balance at March 31, 2014			325,301				1,620,128				(26,247	)			1,850,263				44,945				—				44,945				1,895,208

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[Translation]

REPORT OF INDEPENDENT DIRECTORS/AUDITORS

1. Basic Information

Company Name: Honda Motor Co., Ltd.

Securities Code Number: 7267

Submission Date: May 20, 2014

Date of Change of Position (scheduled date): June 13, 2014

Reason for Submission of Report of Independent Directors/Auditors: The election of a new outside director will be included in the Matters to be resolved at an Ordinary General Meeting of Shareholders.

The Company has selected all persons who are qualified to be independent directors/auditors as independent directors/auditors. (*1): No

2. Matters related to Independence of Independent Directors/Auditors and Outside Directors/Outside Corporate Auditors

No: 1

Name: Nobuo Kuroyanagi

Outside Director/ Outside Corporate Auditor: Outside Director

Independent Director/Auditor: No

 

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The Status of Satisfaction of the Standards of Independence and Requirements for the Assumption of Disclosure Obligations (*2, 3)

Himself/Herself

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1: –––

e2: –––

Family and Close Relatives

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1:No

e2:No

Not Applicable :Yes

 

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Information on Characteristics (*4)

a:p

b:No

c:No

Details of Change of Position: –––

Consent of the Said Person: No

No: 2

Name: Hideko Kunii

Outside Director/ Outside Corporate Auditor: Outside Director

Independent Director/Auditor: Yes

The Status of Satisfaction of the Standards of Independence and Requirements for the Assumption of Disclosure Obligations (*2, 3)

Himself/Herself

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1: –––

e2: –––

 

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Family and Close Relatives

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1:No

e2:No

Not Applicable :Yes

Information on Characteristics (*4)

a:No

b:No

c:No

Details of Change of Position: Newly Elected

Consent of the Said Person: Yes

 

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No.3

Name: Hirotake Abe

Outside Director/ Outside Corporate Auditor: Outside Corporate Auditor

Independent Director/Auditor: Yes

The Status of Satisfaction of the Standards of Independence and Requirements for the Assumption of Disclosure Obligations (*2, 3)

Himself/Herself

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1: –––

e2: –––

Family and Close Relatives

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1:No

e2:No

Not Applicable :Yes

 

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Information on Characteristics (*4)

a:No

b:No

c:No

Details of Change of Position: –––

Consent of the Said Person: Yes

No.4

Name: Tomochika Iwashita

Outside Director/ Outside Corporate Auditor: Outside Corporate Auditor

Independent Director/Auditor: No

The Status of Satisfaction of the Standards of Independence and Requirements for the Assumption of Disclosure Obligations (*2, 3)

Himself/Herself

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1: –––

e2: –––

 

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Family and Close Relatives

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1:No

e2:No

Not Applicable :Yes

Information on Characteristics (*4)

a:p

b:No

c:No

Details of Change of Position: –––

Consent of the Said Person: No

 

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No.5

Name: Toshiaki Hiwatari

Outside Director/ Outside Corporate Auditor: Outside Corporate Auditor

Independent Director/Auditor: Yes

The Status of Satisfaction of the Standards of Independence and Requirements for the Assumption of Disclosure Obligations (*2, 3)

Himself/Herself

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1: –––

e2: –––

Family and Close Relatives

a1:No

a2:No

b1:No

b2:No

c:No

d:No

e1:No

e2:No

Not Applicable :Yes

 

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Information on Characteristics (*4)

a:No

b:No

c:No

Details of Change of Position: –––

Consent of the Said Person: Yes

3. Explanation of the Characteristics of the Independent Directors/Auditors and the Reasons, Etc. for their Selection

No: 1

Explanation of the Status of Satisfaction (*5):

Outside director Nobuo Kuroyanagi held the position of director and chairman of The Bank of Tokyo-Mitsubishi UFJ, Ltd. until March 2012. The Company has transactions with The Bank of Tokyo-Mitsubishi UFJ, including deposits, foreign exchange transactions, etc.

 

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Reasons for the Selection of the Independent Director/Auditor Etc. (*6):

Based on his abundant experience and considerable knowledge regarding corporate management, the Company wishes to receive his advice regarding the Company’s operations from an objective and highly sophisticated perspective.

There are no special conflicts of interest between the Company and Nobuo Kuroyanagi, and the Company’s judgment is that no conflicts of interest will arise with the Company’s shareholders in general.

No:2

Explanation of the Status of Satisfaction (*5): –––

Reasons for the Selection of the Independent Director/Auditor Etc. (*6):

Based on her abundant experience and considerable knowledge regarding corporate activities and the software field in Japan as well as overseas and her active involvement in the area of gender equality, the Company wishes to receive her advice regarding the Company’s operations from an objective and highly sophisticated perspective.

There are no special conflicts of interest between the Company and Hideko Kunii, and the Company’s judgment is that no conflicts of interest will arise with the Company’s shareholders in general.

No:3

Explanation of the Status of Satisfaction (*5): –––

 

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Reasons for the Selection of the Independent Director/Auditor Etc. (*6):

Based on his abundant experience and considerable knowledge as a certified public accountant, the Company would like him to conduct auditing activities from a broad and sophisticated perspective.

There are no conflicts of interest between the Company and Hirotake Abe, and the Company’s judgment is that no conflicts of interest will arise with the Company’s shareholders in general.

No:4

Explanation of the Status of Satisfaction (*5):

Outside Auditor Tomochika Iwashita held the position of director and deputy president of Tokio Marine & Nichido Fire Insurance Co., Ltd., until June 2006. The Company has transactions with Tokio Marine & Nichido Fire Insurance, including insurance contracts etc.

Reasons for the Selection of the Independent Director/Auditor Etc. (*6) :

Based on his abundant experience and considerable knowledge regarding corporate management, the Company would like him to conduct auditing activities from a broad and sophisticated perspective.

There are no conflicts of interest between the Company and Tomochika Iwashita, and the Company’s judgment is that no conflicts of interest will arise with the Company’s shareholders in general.

 

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No:5

Explanation of the Status of Satisfaction (*5): –––

Reasons for the Selection of the Independent Director/Auditor Etc. (*6):

Based on his abundant experience and considerable knowledge as a legal affairs specialist, the Company would like him to conduct auditing activities from a broad and sophisticated perspective.

There are no conflicts of interest between the Company and Toshiaki Hiwatari, and the Company’s judgment is that no conflicts of interest will arise with the Company’s shareholders in general.

4. Supplemental Explanation: –––

*1 Among the outside directors/outside corporate auditors, with respect to any of them who satisfies the qualifications of an independent director/auditor, if a notification is made as an independent director/auditor, please check the box.

*2 Matters to check regarding the status of satisfaction of standards of independence and requirements for assumption of disclosure obligations:

a1. person who executes business of a parent company of the listed company;

a2. person who executes business of a fellow subsidiary of the listed company;

b1. party for which the listed company is a major client or a person who executes its business;

 

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b2. listed company’s major client or a person who executes its business;

c. consultant, accounting professional, or legal professional who receives a large amount of money or other financial asset other than remuneration for directorship/auditorship from listed company;

d. listed company’s major shareholder (where the said major shareholder is a company, a person who executed its business);

e1. person who executes business of the listed company or its subsidiary; and

e2. directors who are not executive personnel or accounting advisors of the listed company or its subsidiary (where outside corporate auditors are selected as independent directors/auditors).

Please note that expressions used in each of items a1 to e2 above are abbreviations of words used in items which are stipulated in the rules of the stock exchange.

*3 If any of the items apply “now or recently” please mark with a “—” and those which applied in the “past”, please mark with a “p”.

*4 Matters to check regarding information on characteristics (for himself/herself only):

a. person who executes the business of a client of the listed company;

b. person who executes the business of an entity whose outside director/outside corporate auditor is also a person who executes the business of the listed company; and

c. person who executes the business of an entity to whom the listed company makes donations.

Please note that expressions used in each of items a to c above are abbreviations of words used in items which are stipulated in the rules of the stock exchange.

 

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*5 If any of the standards of independence or the requirements for the assumption of disclosure obligations set forth in items a1 to e2 is satisfied, please write down the details specifically. If any of the information on the characteristics set forth in items a to c are satisfied, please write down the details specifically.

*6 Please write down the reasons for selecting the independent director/auditor (if any of items a1 to e2 are satisfied, including reasons for selecting that person as an independent director/auditor, taking into account the satisfaction of such item(s)).

 

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