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

JCN Newswires, August 28, 2006

Returning Profits to Shareholders

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

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

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

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

In Closing

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

To download the Honda 2006 Annual Report for Shareholders, please visit the Honda website at

http://world.honda.com/investors/annualreport/2006/

or visit the Japan Corporate News (JCN) Annual Report gallery at

http://www.japancorp.net/reports.asp

About Honda Motor Co., Ltd.

Honda Motor Co., Ltd. (TSE:7267/NYSE:HMC/LSE:HNDA.L) is one of the leading manufacturers of automobiles and power products and the largest manufacture of motorcycles in the world. Honda has always sought to provide genuine satisfaction to people worldwide. The result is more than 120 manufacturing facilities in 30 countries worldwide, producing a wide range of products, including motorcycles, ATVs, generators, marine engines, lawn and garden equipment and automobiles that bring the company into contact with over 19 million customers annually. For more information, please visit http://world.honda.com.