Item 4. Information on the Company

A. History and Development of the Company

Honda Motor Co., Ltd. is a limited liability, joint stock corporation incorporated on September 24, 1948 under the Commercial Code of Japan as Honda Giken Kogyo Kabushiki Kaisha. It was formed to succeed to the business of an unincorporated enterprise established in 1946 by the late Soichiro Honda to manufacture motors for motorized bicycles.

5

Table of Contents

Honda develops, produces, and manufactures a variety of motor products, ranging from small general-purpose engines to specialty sports cars that incorporate Honda’s highly efficient internal combustion engine technology. Approximately 17.2 million Honda engines were sold worldwide during the fiscal year ended March 31, 2004.

Honda’s principal executive office is located at 1-1, 2-chome, Minami-Aoyama, Minato-ku, Tokyo, 107-8556, Japan. Its telephone number is 81-3-3423-1111.

Principal Capital Investments

In the fiscal years ended March 31, 2002, 2003 and 2004, Honda’s capital expenditures were ¥303.4 billion, ¥316.9 billion and ¥287.7 billion, respectively. For further details of Honda’s capital expenditures during fiscal 2004, see “Property, Plants and Equipment” included as “Item 4.D” of this Annual Report.

B. Business overview

Motorcycle Business

The following table sets out unit sales for Honda’s motorcycle business, including motorcycles, all-terrain vehicles (ATVs) and personal watercraft, and revenue from its motorcycle business during the fiscal years ended March 31, 2000, 2001, 2002, 2003 and 2004:

Honda produces a wide range of motorcycles, ranging from the 50cc class to the 1800cc class in cylinder displacement. Honda’s motorcycles use gasoline engines developed by Honda that are air- or water-cooled, two or four-cycle, and single, two, four or six cylinder. Honda’s motorcycle line consists of sports (including trial and moto-cross racing), business and commuter models. Honda is the largest manufacturer of motorcycles in the world in terms of annual units of production.

Honda’s motorcycles are produced at two sites in Japan: Hamamatsu and Kumamoto. In fiscal 2004, the annual production output of these sites was 634,077 units. Honda’s motorcycles are also produced by subsidiaries in the United States, Italy, Spain, Brazil, Thailand, Vietnam, Philippine and India. Annual output in those countries in fiscal 2004 was approximately 363,000, 117,000, 36,000, 821,000, 1,942,000, 491,000, 131,000 and 339,000 units, respectively. Certain motorcycle components are manufactured in Japan and shipped to foreign plants for assembly. Each plant also buys locally made parts or manufactures parts using Honda’s intellectual property and technical guidance.

6

Table of Contents

Honda’s principal automobile products includes the following vehicle models:

Passenger cars:

Accord , Civic , Acura TL , Acura TSX , Acura RSX

Multi-wagons, Minivans, Sport Utility Vehicle:

Odyssey , Fit , CR-V , Pilot , Element , Step Wagon , Acura MDX , Stream , Mobilio

Mini-vehicles:

Life , Acty , Vamos , That’s

Automobiles are produced by Honda at two sites in Japan: the Saitama factory and the Suzuka factory. Our major production sites overseas are located in Ohio (U.S.A.), Alabama (U.S.A.), Alliston (Canada), Swindon (U.K.) and Ayutthaya (Thailand).

The manufacture of the Acty-Truck , Acty-Van , Life , Vamos and Vamos-Hobio is undertaken by Yachiyo Industry Co., Ltd., one of our affiliates.

In our financial services business, Honda offer a variety of financial services to our customers and dealers through financial subsidiaries in Japan and abroad, with the aim of providing sales support for our products.

7

Table of Contents

Honda manufactures a variety of power products including power tillers, portable generators, general purpose engines, grass cutters, outboard engines, water pumps, snow throwers, power carriers, power sprayers, lawn mowers and lawn tractors (riding lawn mowers).

Effective fiscal 2000, Honda changed its business segment categorization to include the ATV business in the Motorcycle Business. The ATV business was previously included in Power Products and Other Businesses (formerly our Other Businesses segment). All prior fiscal years’ figures in this Annual Report have been restated to reflect this change.

Marketing and Distribution

Most of Honda’s products are distributed under registered Honda trademarks in Japan and/or in overseas markets. Major trademarks include HONDA , ACURA , ACCORD , CIVIC , FIT , ODYSSEY , CR-V , PILOT , MOBILIO , ELEMENT , STEP WGN , MDX , STREAM , LIFE , ACTY , VAMOS , THAT’S , CUB , WAVE and GOLD WING .

Sales in Japan

Sales of Honda motorcycles, automobiles, and power products in Japan are made through different distribution networks. Honda’s products are sold to consumers primarily by independent retail dealers throughout Japan.

Motorcycles are distributed through approximately 10,300 outlets, including approximately 1,250 PROS authorized dealerships. PROS dealerships sell substantially all of Honda’s Japanese motorcycle models.

Honda’s distribution channel for automobiles in Japan consists of three dealer networks: PRIMO Shops , CLIO Shops and VERNO Shops , which sell different models of Honda automobiles. At present, 876 retail dealers operate 1,507 PRIMO Shops and sell the Saber , Civic , Life , Acty , Vamos and That’s . Honda’s 83 retail dealers operate 512 CLIO Shops and sell the Accord series, and Legend , Lagreat and Avancier . 77 retail dealers operate 400 VERNO Shops and sell the NSX , Integra , CR-V , HR-V , Honda S2000 and Element . In addition, the Odyssey , Step WGN , Partner , Insight , Stream , Fit , Fit Aria , Mobilio , Mobilio Spike and Inspire are sold through all three dealer networks.

Power products are distributed in Japan primarily through Honda’s nine sales offices to approximately 1,580 retail dealers throughout Japan, including affiliates of Honda. A number of small engines are also sold to other manufacturers for use in their products.

The independent retail dealers who sell Honda’s products in Japan receive payment from customers by one of four payment methods: cash, bank loans, installment payments or financing by credit companies.

8

Table of Contents

Service and parts related operations in Japan

Sales of spare parts and after sales services are mainly provided through retail dealers. Lectures on service technology are provided for dealers regularly by Honda’s Automobile Sales Operations (Japan).

Overseas sales

Approximately 96% of Honda’s overseas sales are made through its principal foreign sales subsidiaries, which distribute Honda’s products to local wholesalers and retail dealers.

In the United States, which is the largest market for Honda automobiles, Honda markets its products through a sales network of approximately 1,270 independent local dealers for automobiles, approximately 1,250 for motorcycles and approximately 5,400 for power products. Many of the motorcycle dealers and some of the automobile dealers also sell Honda’s power products. In 1986, Honda opened the first Acura automobile dealerships in the United States. The Acura network totaled 262 dealerships at the end of fiscal 2004. The Acura network offers the RSX , TL , CL , TSX , RL , NSX MDX and EL (Canada only) models.

With regard to the export of U.S.-built cars from North America, Honda is currently exporting such North American-built models as the Accord , Odyssey , Civic , MDX and Element to overseas markets. In fiscal 2004, Honda exported approximately 25,063 units from North America to 50 countries throughout the world.

In Europe, Honda’s operations in the United Kingdom, Germany, France, Belgium, the Netherlands, Spain, Switzerland, Austria, Italy and other European countries distribute Honda’s products through approximately 1,700 independent local dealers for automobiles, approximately 1,800 for motorcycles and approximately 4,300 for power products.

Honda exports motorcycle components to 20 countries, including India, Thailand, Indonesia, the People’s Republic of China and Brazil, where motorcycles are manufactured by its subsidiaries, joint venture firms and licensees. Some of the components used in the production of these vehicles are supplied locally.

Honda exports automobile components to 13 countries, including the United States, Canada, the People’s Republic of China, Thailand and Brazil, where automobiles are manufactured by itself, joint venture firms and licensees. Some of the components used in the production of these vehicles are supplied locally.

Honda also exports power product components to 8 countries, including the United States, Thailand, United Kingdom, France, India, Indonesia and Australia, where power products are manufactured by itself, joint venture firms and licensees. Some of the components used in the production of these products are supplied locally.

Service and parts related operations overseas

Honda provides its overseas operations, joint venture firms, independent distributors and licensees with spare parts and necessary technical information, which they in turn supply to wholesale or retail dealers, either directly or through one or more spare parts distributors.

Net Sales by Product Group and Region

Breakdown of Net Sales and Other Operating Revenue by Category of Activity

9

Table of Contents

Components and Parts, Raw Materials and Sources of Supply

Honda manufactures the major components and parts used in its products, including engines, frames and transmissions. Other components and parts, such as shock absorbers, electrical equipment and tires, are purchased from numerous suppliers. The principal raw materials used by Honda are steel plate, aluminum, special steels, steel tubes, paints, plastics and zinc, which are purchased from several suppliers. The most important raw material purchased is steel plate, accounting for approximately 45% of Honda’s total purchases of raw materials.

No single supplier accounted for more than 5% of the Company’s purchases of major components and parts and principal raw materials during the fiscal year ended March 31, 2004.

Honda does not have and does not anticipate having any difficulty in obtaining its required materials from suppliers and considers its contracts and business relations with suppliers to be satisfactory. The Company does not believe any of its domestic suppliers are substantially more dependent on foreign suppliers than are Japanese suppliers generally. However, it should be noted that Japanese industry in general is heavily dependent on foreign suppliers for substantially all of its raw materials.

Seasonality

Honda’s motorcycle and power product businesses have historically experienced some seasonality, however, this seasonality has generally not been material to our financial results.

Environmental and Safety Regulation

Outline of Environmental and Safety Regulation for Automobiles

1. Emissions

Japan

In 2002, The Central Environment Council in the Ministry of Environment created new long-term targets and comprehensive requirements for gasoline vehicles effective from 2005. Emissions limits have been lowered by more than 50% from the current level. Detailed requirements and test methods are discussed below.

10

Table of Contents

In October 2003, a new system for designation of low emission vehicles (“LEV”) was established based on these new emission limits. Under this new system vehicles are classified as three star if they produce emissions of less than 50% of the limit or four star if they produce emissions of less than 75% of the limit.

Additionally the Air Pollution Law was enacted in 2000 to strengthen emissions regulations in place in Japan. Under this Act, a low emissions vehicle designation system was created whereby preferential tax treatment is available for vehicles whose emissions levels are below those designated in the Act. In 2001, the Automobile NOx Law, targeting large city areas, was revised to include specified particulate materials.

The United States

Increasingly stringent emission regulations under the Clean Air Act have been enacted since the 1990s by the U.S. federal government. Under the Act, the Environmental Protection Agency in February 2000 adopted further more stringent vehicle emissions regulations applicable to passenger cars and light-duty trucks produced from model year 2004. Moreover, the new standard provides for gradual decreases in sulfur levels contained in fuel in the U.S. market.

Under the Clean Air Act, the State of California is permitted to establish its own emission control standards to the extent they are more stringent than federal standards. Pursuant to this authority, the California Air Resources Board (CARB) adopted the “California Low Emission Vehicle Program” in 1990, aiming at establishing the strictest emission regulations in the world. In late 1998, CARB strengthened its regulatory standards through the introduction of new standards, known as the “California Low Emission Vehicle Program II” (“LEV II”). These new standards treat most light trucks the same as passenger cars and require both types of vehicles to meet the new emissions standards of LEV II. In January 2001, CARB approved modifications to the “Zero-Emission Vehicles”(“ZEV”) requirement under LEV II, permitting gasoline SULEVs (Super Ultra Low Emission Vehicle), hybrid vehicles (powered by gasoline engine and/or electric motor) and compressed natural gas (“CNG”) vehicles to partially meet zero-emission requirements by satisfying certain additional requirements. The modified requirements also provide incentives for continued technology development.

In April 2004, CARB finalized its “Zero-Emission Vehicles” requirements. Under these requirements, from the 2005 model year 6% of vehicles sold in California by a car manufacture must be Partial Zero Emission Vehicles (“PZEV”), which includes SULEVs with warranties covering through at least the sooner to occur of 15 years or 150,000 miles driven, 2% must be advanced technology PZEVs and 2% must be ZEVs. Required percentages will be gradually increased under the “Zero-Emission Vehicle” standards from the 2008 model year.

Europe

In 1999, the European Union adopted EURO3 and EURO4 as comprehensive emissions regulations for passenger vehicles and heavy and light commercial vehicles. EURO3 was implemented in 2000 and EURO4 is to be implemented in 2005. In each EU country, standards, such as those providing for preferential automobile tax treatment, have been established in respect of automobiles that comply with requirements prescribed in EURO4 and are offered for sale before its implementation. Honda has already introduced a considerable number of EURO4 models in advance of this implementation.

2. Fuel Economy / CO2

Japan

In 1998, amendment was made to the Law Concerning Rationalization of Energy Usage that established in Japan a fuel efficiency standard based on weight class. This standard will be tightened in 2005 for diesel-fueled automobiles. For gasoline automobiles, tighter standards, to be implemented in 2010, have also been established.

In light of the CO2 reduction targets promulgated in the Kyoto protocol, the Japanese government issued a fuel regulation for an interim ethanol blending limit (less than 5%) which became effective in 2003. The Japanese government intends to further increase this limit until the final target of 10% is achieved within a decade.

11

Table of Contents

Ethanol blended fuel is a “Biomass fuel”. Biomass fuel is regarded as an effective countermeasure for CO2 reduction. CO2 emissions after burning any ethanol fuel produced with biomass resources (such as plants or wood) are not counted toward CO2 emissions under the Kyoto protocol.

The United States

The Federal Motor Vehicle Information and Cost Savings Act requires automobile manufacturers to comply with the Corporate Average Fuel Economy (“CAFE”) standards. Under the CAFE standards, manufacturers are subject to substantial penalties if automobiles produced by them in any model year do not meet the average standards for each category. The CAFE standard for passenger cars has been 27.5 miles per gallon since 1990, and for light trucks it has been 20.7 miles per gallon since 1996. Passenger cars are divided into the following two categories: “Domestic” and “Import”, and credits earned in one category may not be applied to another.

Taking into consideration that the National Academy of Science (“NAS”) encouraged improving fuel economy in its Study Report issued in July 2001 and that both the U.S. Senate and the House of Representatives have had heated discussions on raising the CAFE standards, it appears that regulations requiring even greater fuel economy in the United States are likely.

In 2003, the National Highway Traffic Safety Administration (“NHTSA”) issued a new standard for model year 2005-2007 light trucks. The new rule will raise the current standard of 20.7 miles per gallon by 1.5 miles per gallon over the next three years, as follows: 21.0 miles per gallon for model year 2005, 21.6 miles per gallon for model year 2006, and 22.2 miles per gallon for model year 2007. In December 2003, NHTSA proposed to amend the structure of application of the CAFE standards and requested comments from the public.

Europe

In early 1999, the European Union reached a voluntary agreement with the European Automotive Manufacturers Association for the establishment of an average emissions target of 140 grams of carbon dioxide per kilometer for new cars offered for sale in the EU in 2008. The Japan Automobile Manufacturers Association (“JAMA”) and the Korean Automobile Manufacturers Association also reached a similar voluntary agreement with the European Union targeting implementation in 2009. In 2003, in an interim review, the emissions reduction efforts made by these associations were reviewed and the possibility of setting a more stringent target of above 140 grams is now being discussed.

The EU also recommends use of biomass fuel blends.

3. Recycling / End-of-Life Vehicles (“ELV”)

Japan

Japan enacted the Automobile Recycling Law in July 2002, which requires manufacturers to take back air bags, fluorocarbon and shredder residue derived from end-of-life vehicles (“ELV”), effective from January 1, 2005. ELV processing costs are collected from owners of cars currently in use and purchasers of new cars. Detailed regulations relating to actual implementation were issued in July 2003. With respect to the recycling of fluorocarbons, regulations took effect under the Fluorocarbons Recovery and Destruction Law in October 2002. Under these regulations, the fluorocarbons derived from ELVs must be collected by the manufacturer for destruction. The last owners of vehicles must purchase tickets toward the fluorocarbon processing costs.

Europe

In September 2000, the European Union approved a directive that requires its member states to promulgate regulations implementing the following by April 21, 2002:

12

Table of Contents

4. Safety

Japan

Japanese safety regulations currently require manufacturers to equip their vehicles with safety features sufficient to assure passenger safety for both head-on collisions (based on the “full wrap” test) and side impact collisions (based on the European test of passenger protection) occurring at speeds of up to 50 kilometers per hour. The introduction of European offset tests and laws based on the International Harmonization Research Activity (“IHRA”) testing method are currently being considered.

The Ministry of Land, Infrastructure and Transport issued driving vision and pedestrian head protection standards. The driving visibility standards were issued in July 2003. In April in 2004, the world’s first pedestrian head protection standard was issued.

The United States

The Transportation Recall Enhancement, Accountability and Documentation Act (“TREAD Act”) was enacted in the United States on November 1, 2000. The TREAD Act required the NHTSA to upgrade federal motor vehicle safety standards relating to tires based on a vehicle test that takes into account the rollover propensity of vehicles. The TREAD Act also required the NHTSA to reinforce the existing recall system and current safety standards. Items to be reinforced in the recall system included reporting obligations to the NHTSA in respect of recalls in foreign countries (overseas recall reporting requirements), for which regulations took effect in November 2002, and regulatory reporting of various manufacturers’ information to specify defects at earlier stages (early warning reporting requirements), for which regulations took effect in July 2003. Safety standards, under the TREAD Act included the imposition of tire pressure monitoring system installation obligations, regulations for which were finalized in June 2002 but vacated in November, 2003 by a court decision. These regulations are now being reviewed by NHTSA. Safety standards under the TREAD Act also included an assessment method for active rollover (finalized in October 2003), a testing method for child restraining equipment (finalized in October 2003) and tire standards (finalized in June 2003). The Act also substantially increased the NHTSA’s authority to impose civil penalties for noncompliance with regulatory requirements and specified possible criminal penalties for violations of the federal Fraud and False Statements Act.

In 2000, the National Highway Traffic Safety Administration issued various motor vehicle safety standards, including a final rule specifying performance requirements for advanced airbag systems. The rule imposed a new test method with stringent new injury criteria and set forth a phase-in compliance schedule mandating that 20% of all vehicles produced by a manufacturer meet the new safety standard by 2003, 65% by 2004, and 100% by 2005.

In 2003, NHTSA also issued various motor vehicle safety standards, including a final rule specifying enhanced fuel system integrity requirements. For example, the rule changes the test method for rear crash impact from a full-lap 50km/h test to an offset 80km/h test, and sets forth a phase-in compliance schedule mandating that 40% of all vehicles produced by a manufacturer meet the new safety standard by 2006, 70% by 2007, and 100% by 2008.

In December 2003, vehicle manufacturers, including us, presented to public a statement on crash vehicle compatibility, “ENHANCING VEHICLE—TO—VEHICLE CRASH COMPATIBILITY: A Set of Commitments for Progress by Automobile Manufacturers.” This report describes the recommended performance

13

Table of Contents

criteria and research plans developed by an international group of safety experts for enhancing vehicle-to-vehicle crash compatibility in front-to-front and front-to-side crashes. By September 1, 2007, at least 50% of all vehicles offered in the U.S. by participating manufacturers will meet the front-to-side performance criteria, and by September 2009, 100% of the vehicles of participating manufacturers will meet the criteria. For the front-to-front criteria, 100% of the vehicles of participating manufacturers will meet the criteria by September 2009, with no interim goals set. We are a participating manufacturer and intend to meet these voluntary standards.

Europe

The European Commission and automobile industry associations have reached a negotiated agreement on pedestrian protection requirements. As a first step toward implementation of new requirements pursuant to this agreement, work has been done toward a prohibition on automobile manufacturers supplying rigid bull bars and improvement of the rate of anti-lock brake systems installed since the end of last year.

The European Commission issued the regulation and technical prescription for pedestrian protection. The regulation required M1 (Passenger vehicles up to 9 passengers) and N1 (Light commercial vehicles with gross vehicle weight up to 3.5t) vehicles to meet standards for the protection of pedestrians in the event of a collision with the front of a motor vehicle.

The regulation consists of Phase 1, to be effective October 1, 2005 for new types of vehicles and December 31, 2012 for all vehicles, and Phase 2, to be effective September 1, 2010 for new types of vehicles and September 1, 2015 for all vehicles.

In early 2004, The European Commission issued a revised regulation relating to indirect vision to reduce “blind spots” on motor vehicles, which are side and rear areas not visable to the driver via side or rear-view mirrors. The regulation is effective January 29, 2006 for new types of vehicles and January 29, 2010 for all vehicles.

Additionally, the European Commission has established a project called “eSafety” aiming at cutting road fatalities in half by 2010. The project focuses on road accident prevention. To achieve this target, such issues as the introduction of new features on automobiles are being discussed.

5. New Car Assessment Program (NCAP)

Programs that provide customers with assessments of car safety functions and promote the development of car safety by automobile manufacturers are conducted in countries such as the United States, Japan, Australia and the EU. The principal items assessed in these programs are passenger protection and braking power, which are typically assessed with stricter standards or criteria than those required by statute. Introduction of a pedestrian protection safety assessment NCAP was decided in Japan, implemented from mid 2003. The assessment results were released in April 2004.

In the United States, NHTSA issued a final protocol for new rollover resistance assessments, using combined static and dynamic assessment methods. This protocol was issued in October 2003 under the TREAD Act, and the results of the assessments were released in January 2004.

A passive safety performance evaluation NCAP has been implemented worldwide. However, in Europe, an environmental NCAP (ECO-TEST) featuring performance for emission and CO2, commissioned by FIA (the International Automobile Federation), has also been implemented, effective in April 2003.

14

Table of Contents

Outline of Environmental and Safety Regulation for Motorcycles

Emissions

Japan

Japan has emissions regulations for motorcycles applicable to all classes of engine displacement. Some aspects of these requirements, such as standards for hydro-carbon levels and durability, are stricter than the current European regulations, namely the EURO1 regulations. The Central Environment Council in the Ministry of Environment is expected to soon issue a final report on targets for fiscal year 2006. The target level is expected to be similar to those under the EURO3 standards.

The United States

Emissions regulations regarding off-road motorcycles and ATV’s will be introduced in 2006. In addition, the EPA adopted the current California emissions standards regarding on-road motorcycles on a national basis two years behind the schedule of California. The new regulations include fuel permeation requirements rather than traditional evaporative emission standards.

Europe

The EU maintains emissions regulations (EURO1) for motorcycles, as well as the “Motor Cycle (& Moped)-Whole Vehicle Type Approval”, a uniform certification system for two or three-wheeled motor vehicles.

The EURO2 regulations, which regulate emissions by engine displacement class, will be introduced in 2003, and EURO3, which will be most stringent standard for motorcycles, will be implemented in 2006.

Other Regions

Other countries, mainly in Asia, have advanced the implementation of tighter emissions regulations based on European regulations.

In Thailand, a forth stage of emissions control which is stricter than EURO1 has been implemented. A fifth stage of emissions control, which is generally equivalent to or stricter than EURO-2, will be implemented from July of this year.

In China, EURO1-equivalent regulations were introduced in 2003 and EURO2-equivalent regulations will be introduced in 2004. In India, regulations based on Indian authorities’ own test method are in effect and further regulations are to be enacted in 2005.

In Brazil, EURO1-equivalent regulations have been in effect from the beginning of this year. EURO2-equivalent regulations will be implemented from the beginning of 2005.

Outline of Environmental and Safety Regulation for Power Products

Emissions

The United States

The U.S. federal government enacted new engine emissions regulations applicable to model year 1997 small non-road engines. These regulations are also applicable to engines in use from model year 2001. With respect to marine engines, emissions regulations for outboard engines and personal watercraft were implemented for model year 1998 products and will continue to be gradually strengthened every year until model year 2006, under current plans.

15

Table of Contents

In 1995 the State of California enacted new engine emissions regulations for small non-road engines. The State is now gradually shifting its focus on emissions regulations for engines in use manufactured in model year 2000 and beyond. The State is planning to introduce tighter tail-pipe emissions standards and to add requirements for evaporative emissions from small non-road engines from model year 2005. With respect to marine engines, the State enacted emissions regulations for model year 2001 outboard engines and personal watercraft that are equivalent to the U.S. federal government’s model year 2006 regulations, and strengthened these regulations in model year 2004. The State plans to further strengthen the regulations for these products in model year 2008.

Canada

The Canadian federal government will introduce emissions regulations generally equivalent to U.S. EPA regulations for small non-road engines from model year 2005, with some exceptions, such as the EPA production line testing requirements and quarterly reporting requirements which will not be enacted in Canada.

Europe

Emissions regulations regarding diesel non-road mobile machinery have been in place in the European Union. The EU has introduced regulations controlling gasoline engines from 2004 based on the contents of the current EPA regulations in the United States and will introduce emissions regulations targeting outboard engines and personal watercraft from 2005. In addition, with respect to marine engines, emissions regulations have been implemented since 1993 in Bodensee, which is located between Switzerland, Germany and Austria.

C. Organizational Structure

As of March 31, 2004, the Company had 132 Japanese subsidiaries and 185 overseas subsidiaries. The following table sets out for each of the Company’s principal subsidiaries the country of incorporation, function and percentage ownership and voting interest held by Honda.

16

Table of Contents

17

Table of Contents

D. Property, Plants and Equipment

Honda’s manufacturing operations are principally conducted in 31 separate factories, five of which are located in Japan. The following table sets out information, as of March 31, 2004, with respect to Honda’s principal manufacturing facilities, all of which are owned by the Company:

In addition to its manufacturing facilities, the Company’s properties in Japan include sales offices and other sales facilities in major cities, repair service facilities, and research and development facilities.

We believe our production facilities and other properties, including the principal manufacturing facilities above, are suitable and adequate for the development, manufacture and sales of Honda’s products and parts.

As of March 31, 2004, the Company’s property, with a net book value of approximately ¥11.4 billion, was subject to specific mortgages securing indebtedness.

18

Table of Contents

Capital Expenditures

Manufacturing-related expenditures in fiscal 2004 were applied to the expansion of manufacturing facilities, streamlining efforts, and the replacement of older equipment. Other expenditures included funds used to augment sales and R&D facilities.

Total capital expenditures for the year amounted to ¥287.7 billion, down ¥29.2 billion from the previous year. Spending by business segment is shown below.

In the motorcycle business, we invested ¥35.0 billion to upgrade, modernize and rationalize various facilities in the fiscal year ended March 31, 2004. This included investments in reforming our production organization.

In the automobile business, we made capital investments associated with introducing new models and reforming our production organization. We also constructed a second production line at Honda Manufacturing of Alabama, LLC, where we manufacture finished vehicles and engines. Capital investments in this segment totaled ¥240.4 billion in the fiscal year ended March 31, 2004.

In the financial services segment, capital expenditures amounted to ¥0.4 billion in the fiscal year ended March 31, 2004. Capital investments in power products and other businesses, totaling ¥11.8 billion in the fiscal year ended March 31, 2004 were deployed to upgrade and modernize manufacturing facilities for power products and renovate facilities related to motor sports.

The Company did not sell or dispose of any major facilities in the fiscal year ended March 31, 2004.