P r o f i l e. C o n t e n t s

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2 P r o f i l e The Company was established in December 1956 as Keihin Seiki Manufacturing Co., Ltd. In 1997, through a merger with two other automotive product makers affiliated with Honda Motor Co., Ltd., the Company became Keihin Corporation, a comprehensive automotive systems manufacturer. Keihin has grown to become a truly global company, expanding its network beyond the borders of Japan to include operating units in China, Thailand, India and other parts of Asia; North America, Brazil in South America and, in Europe, the United Kingdom. Keihin boasts the top global market share in motorcycle carburetors, and its automobile fuel injection systems are highly regarded by customers the world over. To help meet new environmental standards, the Company has developed and now manufactures fuel injection systems for motorcycles, which it supplies to numerous manufacturers in Japan and overseas. Keihin has expanded its product range beyond fuel supply systems and now manufactures and supplies customers worldwide with a broad range of automotive components, including air-conditioning systems and electronic control units of all types. With a strong concern for the natural environment, Keihin manufactures such environment-friendly products as components for compressed natural gas and liquefied petroleum gas vehicles, and is currently developing components for fuel-cell vehicles and other products offering significant potential. Keihin will contribute to the success and development of the automotive industry by continuing to supply products at the cutting edge of motorization. C o n t e n t s Financial Highlights President s Message Tenth Medium-Term Business Plan Summary of Operating Results Review by Business Segment Review by Region Five-Year Summary of Selected Financial Data Financial Review Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Net Assets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Auditors Board of Directors Network Corporate Data Forward-Looking Statements This annual report contains predictions and forecasts concerning Keihin's future plans, strategies and results. These predictions and forecasts are not historical facts but represent judgments formed by management based on the information available at the time they were formed. As such, actual results may differ significantly due to factors including, but not limited to, economic trends, changes in the automobile and automobile component industries, market demand, foreign exchange rates and tax systems.

3 Financial Highlights Years ended March 31, 28, 27 and 26 (except per share amounts) Thousands of U.S. dollars (except per share amounts) 28 For the year: Net sales 339,321 33,612 3,96 Operating income 24,9 22,113 24,846 Income before income taxes and minority interests 2,781 23,554 31,141 Net income 11,21 12,846 17,51 $ 3,386, ,631 27,42 111,799 At year-end: Total net assets 148, , ,94 Total assets 213,52 21, ,126 $ 1,479,18 2,13,976 Per share of common stock (yen and U.S. dollars): Net income: Basic Cash dividends $, Notes: 1. The above amounts were prepared under accounting principles generally accepted in Japan. 2. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of 1.19=US$1. (See Note 3 to the Consolidated Financial Statements.) 3. Effective for the year ended March 31, 27, Accounting Standard for Presentation of Net Assets in the Balance Sheet ( Accounting Standard No. 5 issued by the Accounting Standard Board of Japan on December 9, 25), and Guidance on the Accounting Standard for Presentation of Net Assets in the Balance Sheet ( Accounting Implementation Guidance No. 8 issued by the Accounting Standard Board of Japan on December 9, 25) have been adopted. Net assets for the years ended March 31, 26, have been reclassified to conform to the 28 presentation. Net Sales and Operating Income Net sales (left scale) Operating income (right scale) Net Income and Net Income per Share Net income (left scale) Net income per share (basic; right scale) Total Assets and Total Net Assets Total Assets Total Net Assets () () (Yen) () 4, 4, 2, 4 24, 3, 3, 15, 3 18, 2, 2, 1, 2 12, 1, 1, 5, 1 6,

4 President s Message Motorcycles, Recreational Vehicles and Power Products Governments around the world have set lower limits on exhaust emissions, a situation that has accelerated the shift away from the use of carburetors in favor of electronic fuel injection systems. Keihin s electronic fuel injection systems were employed in several new model motorcycles during fiscal 28, including Honda s Super CUB and Today. This is my first opportunity to address our stakeholders, since I have just been appointed as President & CEO of Keihin Corporation this year. So I am confident that I will be able to meet your expectations for the further development of the Company. Business Performance Kunimichi Odagaki President & CEO On a consolidated basis, fiscal 28, ended March 31, 28, marked another corporate milestone for Keihin, as net sales reached an all-time high of 339,321 million, an increase of 2.6% from fiscal 27. This achievement is attributed mainly to favorable demand for the Company s fuel supply systems for use in motorcycles. The increase in sales and efforts to reduce costs affected income positively, resulting in an operating income of 24,9 million, up 8.6%. Net income, however, fell 12.8% to 11,21 million. In fiscal 26, the Keihin Group embarked on its Ninth Medium-Term Business Plan. This plan, which ended with the closing of accounts for fiscal 28, emphasized four overriding themes: 1) creating a development organization driven by the proposal of innovative solutions; 2) achieving unparalleled levels of quality in operations worldwide ; 3) implementing Productivity Improvement Activities (PIA) in all business areas of the Keihin Group around the world; and 4) enacting policies that benefit all stakeholders and society as a whole. Automobile Products Notable additions to our line of automobile products included a new model of injector designed for the further reduction of emissions and an intake manifold made with magnesium, which dramatically reduces the total weight. These products, as well as fuel supply systems, electronic control units and air-conditioning systems, were installed in new Honda models, including the Accord and the Fit. In fiscal 28, we opened new test facilities and began technical support for customers at Keihin Sales and Development Europe GmbH, which was established in January 27 to reinforce our product development structure. We have also expanded our air-conditioning system testing facilities at the Tochigi Research and Development Center. Achieving Unparalleled Levels of Quality in Operations Worldwide Our efforts to enhance quality were further substantiated in fiscal 28 with ISO 91: 2 certification secured by three domestic subsidiaries Nasu Seiki Mfg. Co., Ltd., Kanazu Mfg. Co., Ltd. and Keihin Sogyo Co., Ltd. in August 27. These were the last three domestic production subsidiaries to meet international quality standards. As a result our entire production network in Japan is now ISO-certified. Overseas, P.T. Keihin Indonesia obtained ISO 91: 2 certification in September 27.

5 Implementing PIA in All Business Areas of the Keihin Group around the World Measures to strengthen operations hinge on Group-wide participation in the PIA initiative. A key element of this initiative is the Keihin Academy, a four-lecture program covering quality, production efficiency, production control and management. We have complemented this program with an instruction course known as On-Site Leader Training which is fine-tuned to each facility and presents strategies to enhance the execution of operations, such as on-site supervision, operational reforms and the completion of daily production procedures. We also recently formed task groups to focus on specific technologies, such as die-casting, machining and assembly, and launched activities to improve manufacturing technologies. Strengthening Global Supply and the R&D Structure In fiscal 28, we continued to reinforce our global supply structure by expanding production capacity overseas. In the United States, we established Keihin Michigan Manufacturing, LLC. in April 27 and welcomed the start of mass production of fuel supply devices and systems for automobiles in March 28. In China, Dongguan Keihin Engine Management System Co., Ltd. started mass production of components for air-conditioning systems in February 28. In August 27, P.T. Keihin Indonesia embarked on the integrated production of aluminum carburetors, taking responsibility locally for all production stages from casting to assembly. Keihin Auto Parts (Thailand) Co., Ltd. completed a new plant for the production of fuel supply systems products for automobiles and started mass production in March 28. Dividends Keihin considers returning profits to its shareholders to be one of its most important management objectives. Our policy on dividends is to take into overall consideration the Company s future development, with attention to consolidated operating performance over the long term. The annual dividend for fiscal 28 was 36 per share, a 4 increase over fiscal 27. This comprises interim and year-end dividends of 18 per share, up 3 and 1, respectively. We expect to maintain dividends at the same level in fiscal 29, with both interim and year-end dividends of 18 per share, for a total dividend of 36 per share. Outlook for Fiscal 29 Given current trends, the operating environment in fiscal 29 will prove challenging, and our results will undoubtedly reflect the difficulties we face. On a consolidated basis, we expect net sales to decrease 3.%, to billion, operating income to drop 18.4%, to 19.6 billion, and net income to probably settle around 1 billion, down 1.7%. In determining these estimates, we assumed an average exchange rate of 1 to the U.S. dollar for fiscal 29. In Conclusion Keihin s corporate principle is We shall contribute to the future of mankind by the continuous creation of new value. To realize this objective, we must maintain our current momentum and forge ahead in our business pursuits. The support and encouragement of our stakeholders will be instrumental to our success. July 28 Kunimichi Odagaki President & CEO

6 Tenth Medium-Term Business Plan Tenth Medium-Term Business Plan Ultimate Goal of the Tenth Medium-Term Business Plan Fiscal Target of the Tenth Medium-Term Business Plan Acquire the corporate capabilities and spirit to overcome the challenges of today s market environment Consolidated recurring profi t ratio higher than 8% Be ready for anything and draw on our combined expertise to overcome difficulties Concept for Tenth Medium-Term Business Plan The current operating environment is considerably different from the one that prevailed when Keihin embarked on the Ninth Medium-Term Business Plan. Indeed, it is markedly more challenging, exemplifi ed by the skyrocketing cost of raw materials, as well as the sudden appreciation of the yen, and the subprime mortgage problem that began in the United States and spread to fi nancial markets around the world. Keihin is not immune to the effects of this diffi cult operating environment. The Company has incurred higher depreciation costs, paralleling increased capital spending aimed at developing a wider global presence, and higher costs associated with high-level R&D to create trailblazing technologies. Given this business situation, the Tenth Medium- Term Business Plan will enable the Company to develop expertise to overcome the challenges of today s market environment and strengthen the Company s ability to provide original system solutions. Improve Overall Efficiency and Revitalize Our Ability to Engineer New Products Keihin will approach product development from an overall perspective, striving to anticipate the needs of clients and the market in general and drawing on the capabilities of the entire Company from the earliest stages of product development. All divisions will be united in the goal to generate high-performance, good-quality products that are easily manufactured and attractively priced. Our ability to engineer new products will be enhanced by overall effi ciency, accomplished by front-loaded activity and meticulous efforts to eliminate waste. Structure that Demonstrates Enhanced Overall Capabilities The Tenth Medium-Term Business Plan lays out a new blueprint for business operations. We have combined the four original business headquarters into two, which function together in a supervisory capacity to enhance the Company s ability to pinpoint client needs. This structure will also reinforce communication within the Company and promote administrative effi ciency. Specifi cally, the production and distribution divisions will be integrated to facilitate better management of 4

7 essential activities on a global basis. This is particularly important in our drive to respond more quickly to client needs. Meanwhile, operational headquarters will be grouped together, reinforcing organizational capabilities. The resulting structure will enable Keihin to demonstrate enhanced overall capabilities. Providing Creative Solutions We can sharpen our competitive edge by enhancing our ability to present systems with features brimming with creativity and originality, based on our own perceptions about how individual components should be engineered to ensure optimum balance when incorporated into a fi nished automobile. By embracing an internal structure that raises effi ciency on a Company-wide basis, revitalizes product engineering and underpins overall capabilities, we will be able to provide solutions that have accurately anticipated customers needs and give internal processes a higher added value. Improved Quality Assurance Capabilities Quality is the foundation on which customers trust is built. It is therefore imperative to fi ne-tune efforts and establish a level of quality that sets Keihin far ahead of its rivals. To this end, we will use the results achieved during the Ninth Medium-Term Business Plan as benchmarks and as we develop a presence in more markets worldwide we will cement our reputation for quality on the global stage. We will apply a front-loading perspective to eliminate the possibility of quality problems, looking at all aspects of operations, from early-stage development through to mass production. Structure Demonstrating Better Overall Capabilities Ninth Medium-Term Business Plan Motorcycles & Power Product Business Headquarters Automobile Engine System Business Headquarters Air-Conditioning System Business Headquarters Tenth Medium-Term Business Plan Business Headquarters Motorcycles & Power Product Business Headquarters Business Planning, R&D,Sales Electronics Business Headquarters Automobile Product Business Headquarters Sales Headquarters Business Planning, R&D,Sales Board of Directors Production Headquarters Purchasing Headquarters Board of Directors Operational Headquarters Purchasing Headquarters Production Headquarters Production Engineering Headquarters Quality Assurance Headquarters Production & Distribution Headquarters Quality Assurance Headquarters Administration Headquarters Administration Headquarters 5

8 Summary of Operating Results Review by Business Segment Fuel Supply Systems for Motorcycles, Recreational Vehicles and Power Products Robust demand, paralleling market expansion in Asian markets excluding Japan, contributed to a 1.% improvement i n s e g m e nt s a l e s, to 81,63 million. 1, Net Sales () 75, 5, 25, Mechanical Products for Automobiles Sluggish demand domestically and in North America offset steady demand from markets in other parts of Asia, leading to a 2.7% dec r e a s e i n s e g m e n t sales, to 117,55 million. 16, 12, Net Sales () 8, 4, , % 74,72 22.% Fiscal 28 Net Sales To t a l 339,321 Million 117, % 65, % Electronic Control Units Air-Conditioning Systems A shift toward overseas production eroded demand for our electronic control units in Japan, but solid demand in other Asian markets, especially China, lifted segment sales 2.3% over fiscal () Net Sales 8, 27, to 74,72 million. 6, 4, 2, Lackluster conditions in the domestic automobile market caused a drop in demand for air-conditioning systems in Japan. However, favorable conditions in the rest Net Sales of Asia and an increase in () 8, orders in North America 6, compensated for sluggish domestic demand and led 4, to a 4.6% rise in segment 2, sales, to 65,943 million

9 Review by Region Japan Sales in Japan slipped 3.1%, to 137,262 million, largely because of a decline in demand for automobiles, as well as a shift toward overseas production among users of our electronic control units. Americas Sales from operations in the Americas amounted to 17,491 million, down 3.4%, reflecting the impact of a falling U.S. dollar against the yen, as well as a drop in demand for automobiles due to the recent economic slowdown. 16, Net Sales () 12, Net Sales () 12, 9, 8, 6, 4, 3, , % 83, % Fiscal 28 Net Sales To t a l 339,321 Million 17, % 1, % Asia Sales from operations in Asia, jumped 21.%, to 83,727 million. This dramatic increase is the result of steady sales of our products for both motocycles and automobiles in Thailand and China. Europe Sales in Europe surged 27.4%, to 1,841 million, as operations in this region benefited from steady sales of automobile products. 1, Net Sales () 12, Net Sales () 75, 9, 5, 6, 25, 3,

10 Five-Year Summary of Selected Financial Data Years ended March 31, 28, 27, 26, 25 and 24 For the year: (except per share amounts) Thousands of U.S. dollars (except per share amounts) 28 Net sales 339,321 33,612 3,96 271, ,51 Fuel supply systems for motorcycles, recreational vehicles, and power products 81,63 74,181 67,14 57,27 5,398 Mechanical products for automobiles 117,55 12,31 111,95 99,16 91,989 Electronic control units 74,72 73,51 65,777 57,262 52,712 Air-conditioning systems 65,943 63,7 56,129 58,1 57,952 Cost of sales 289, , , , ,913 Selling, general and administrative expenses 25,974 23,33 2,537 2,713 17,12 Operating income 24,9 22,113 24,846 2,872 17,126 Income before income taxes and minority interests 2,781 23,554 31,141 2,191 16,317 Net income 11,21 12,846 17,51 1,856 8,38 Depreciation and amortization 16,345 14,297 13,5 12,428 11,744 Research and development expenses 14,983 15,946 14,217 12,154 11,66 Capital expenditures 19,129 22,538 16,86 14,19 16,75 $3,386, ,484 1,168, , ,173 2,887,89 259, ,631 27,42 111, , ,551 19,928 At year-end: Total net assets 148, , ,94 12,99 9,476 Total assets 213,52 21, ,126 17,365 15,772 $1,479,18 2,13,976 Per share of common stock (yen and U.S. dollars): Net income: Basic Cash dividends Net assets 1, , , , ,79.67 $ Notes: 1. The above amounts, except for research and development expenses and capital expenditures, were prepared under accounting principles generally accepted in Japan. 2. U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of 1.19=US$1. (See Note 3 to the Consolidated Financial Statements.) 3. Effective for the year ended March 31, 27, Accounting Standard for Presentation of Net Assets in the Balance Sheet ( Accounting Standard No. 5 issued by the Accounting Standard Board of Japan on December 9, 25), and Guidance on the Accounting Standard for Presentation of Net Assets in the Balance Sheet ( Accounting Implementation Guidance No. 8 issued by the Accounting Standard Board of Japan on December 9, 25) have been adopted. Net assets for the years ended March 31, 26, 25 and 24 have been reclassified to conform to the 28 presentation.

11 Financial Review The scope of consolidation includes 24 of the Company s consolidated subsidiaries. Principal companies among these are Keihin Indiana Precision Technology, Inc., Keihin Carolina System Technology, Inc., Keihin Aircon North America, Inc., Dongguan Keihin Engine Management System Co., Ltd., and Keihin Auto Parts (Thailand) Co., Ltd. The equity method has not been applied to Keihin s one non-consolidated subsidiary or its one affiliate. The depreciation of the yen during the term resulted in a yen dollar exchange rate at the fiscal year-end of 1.19 to US$1, compared with to US$1 at the previous fiscal yearend. The average yen dollar exchange rate was for fiscal 28 and for the previous fiscal year. Results of Operations Net Sales In fiscal 28, consolidated net sales were positively affected by a strong demand for fuel supply systems for motorcycles, recreational vehicles and power products, as well as products for automobiles. As a result, consolidated net sales grew 2.6%, compared to the previous fiscal year, to 339,321 million (US$3,387 million). By geographic segment, sales in Japan declined 3.1%, to 137,262 million (US$1,37 million), owing to the decrease in domestic sales of mechanical products for automobiles. Sales in the Americas decreased 3.4%, to 17,491 million (US$1,73 million), owing to the impact of a business recession and a decline in sales of mechanical products for automobiles. Sales in Asia surged 21.%, to 83,727 million (US$836 million), reflecting strong sales in Thailand and China. Sales in Europe rose 27.4%, to 1,841 million (US$18 million), as a result of robust sales of automobile parts. Overall, overseas sales which include export sales of the Company and sales (other than exports to Japan) of its foreign consolidated subsidiaries increased 6.1%, to 28,13 million (US$2,77 million). Net Sales by Business Segment () 4, 3, 2, 1, Fuel supply systems for motorcycles, recreational vehicles, and power products Mechanical products for automobiles Electronic control units Air-conditioning systems Net Sales by Geographic Area () 4, 3, 2, 1, Japan Americas Asia Europe Income and Expenses The growth in cost of sales was 1.4%, and cost of sales amounted to 289,338 million (US$2,888 million). Selling, general and administrative expenses rose 12.8%, to 25,974 million (US$259 million). An increase in net sales and efforts to hold down the cost of sales, and sharply higher raw materials prices, depreciation and amortization, and R&D costs related to next-generation models resulted in a rise in operating income of 8.6% to 24,9 million (US$24 million).

12 Financial Review By geographic segment (before the elimination of intersegment transactions), operating income in Japan fell 14.3%, to 5,694 million (US$57 million), reflecting the absence of gain on the settlement of the substitutional portion of the employees welfare pension plan which was present in the previous year. Operating income in the Americas fell 8.4%,to 7,659 million (US$76 million). In Asia, operating income climbed 13.1%, to 1,37 million (US$13 million), while operating income in Europe rose 146.1%, to 952 million (US$1 million). Interest and dividend income, net of interest expense, amounted to 867 million (US$9 million), compared with 711 million in the previous fiscal year, and a foreign exchange loss of 823 million (US$8 million) was recorded in fiscal 28, whereas the foreign exchange gain logged in the previous year was 195 million. Income before income taxes and minority interests amounted to 2,781 million (US$27 million), compared with 23,554 million in the previous fiscal year, and net income worked out to 11,21 million (US$112 million), compared with 12,846 million in the previous year. Net income per share, basic, amounted to (US$1.51), compared with in the previous year. R&D Expenses The basic policy for the R&D activities of the Keihin Group is to support the core needs of automobile manufacturing. The primary goal of our programs is to promote the advancement of environmental concern, safety and comfort through the systematization and modularization of these commodities, as well as the development of intelligent features undertakings that are being conducted by the development departments of Keihin. Production on a global scale, adaptation to alternative energy sources and environmental businesses are also proactively incorporated into the Company s R&D activities. Total R&D expenses for the year under review amounted to 14,983 million (US$15 million). Capital Expenditures Capital expenditures for the year under review were down 15.1%, to 19,129 million (US$191 million). Of this, 4,92 million (US$49 million) was invested in production facilities for fuel supply systems for motorcycles, recreational vehicles, and power products, 3,778 million (US$38 million) in production facilities for mechanical products for automobiles, 3,74 million (US$37 million) in electronic control unit production facilities, 1,961 million (US$2 million) in air-conditioning unit production facilities, 1,516 million (US$15 million) in R&D investments, and 3,232 million (US$32 million) in buildings and structures and others. Depreciation and amortization increased 14.3%, to 16,345 million (US$163 million). Operating Income and Net Income () 3, 22,5 15, 7, Operating income Net income R&D Expenses () 2, 15, 1, 5, Capital Expenditures () 24, 18, 12, 6,

13 Cash Flows Cash and cash equivalents at the end of the year totaled 34,369 million (US$343 million). Although cash was used to purchase tangible and intangible assets, as well as investment securities, the impact of a high level of income before income taxes and minority interests compensated for these effects and drove up cash and cash equivalents. Net cash provided by operating activities rose 6,45 million, or 21.8% compared with the previous fiscal year, to 33,734 million (US$337 million). The amount of net cash provided was higher because of the real rise in income before income taxes. Net cash used in investing activities declined 2,71 million, or 8.2%, to 23,38 million (US$23 million), mainly because of decreases in the acquisition of property, plant and equipment. Net cash used in financing activities was up 65.8%, or 2,428 million, to 6,119 million (US$61 million), primarily as a result of the payment of cash dividends. Financial Position Total Asset and Total Net Asset () 22, Total assets at fiscal 28 year-end increased 1.3%, to 213,52 million (US$2,131 million), compared with the previous fiscal year-end, and current 165, assets increased 1.1%, to 115,834 million (US$1,156 million). Cash decreased 5,692 million, to 26,55 million (US$26 million), and property, plant and 11, equipment rose 1,726 million, to 81,57 million (US$89 million), mainly because of increased capital investment in these 55, assets. Investments and other assets decreased 212 million, to 16,611 million (US$166 million). Current liabilities decreased 1.5%, to 58,632 million (US$585 million). Long-term liabilities fell 14.%, to 6,687 million (US$67 million) Total Asset Net assets increased 3.3%, to 148,183 million (US$1,479 million). Net Total Net Asset assets per share climbed from 1, in the previous year to 1, (US$17.13). The equity ratio rose.9 percentage points, to 59.5%. Cash Provided by Operating Activities () 4, 3, 2, 1, Total Assets and Total Net Assets () 24, 18, 12, 6, Total Assets Total Net Assets 11

14 Consolidated Balance Sheets Keihin Corporation and Consolidated Subsidiaries As of March 31, 28 and 27 Thousands of U.S. dollars ASSETS Current assets: Cash 26,55 26,247 $ 26,6 Trade accounts and notes receivable 44,26 47, ,764 Securities 9,633 5,5 96,144 Inventories 26,737 28, ,859 Deferred tax assets 3,844 3,71 38,366 Other current assets 5,35 3,639 52,955 Total current assets 115, ,64 1,156,148 Property, plant and equipment: Land 7,473 7,164 74,585 Buildings and structures 38,859 37, ,852 Machinery, vehicles and equipment 119,42 112,13 1,191,934 Furniture and tools 32,333 29, ,72 Construction in progress 9,44 11,673 94,222 27, ,48 2,71,313 Less: Accumulated depreciation (126,468) (119,77) (1,262,284) 81,57 79,331 89,29 Investments and other assets: Investments in securities 8,453 9,449 84,368 Investments in unconsolidated subsidiaries and affiliates ,14 Long-term loans 279 1,5 2,789 Intangible assets 3,14 3,257 3,979 Deferred tax assets 1, ,57 Other assets 2,632 2,41 26,272 16,643 16, ,118 Less: Allowance for doubtful accounts (32) (34) (319) 16,611 16, ,799 Total assets 213,52 21,758 $ 2,13,976 See accompanying notes to consolidated financial statements

15 Thousands of U.S. dollars LIABILITIES AND NET ASSETS Current liabilities: Short-term bank loans 2,468 3,373 $ 24,633 Current portion of long-term debt Trade accounts and notes payable 35,383 36, ,163 Accrued expenses 1,63 9,745 15,826 Warranty reserve 2, ,1 Income taxes payable 1,596 1,479 15,935 Other current liabilities 5,845 6,99 58,334 Total current liabilities 58,632 59, ,211 Long-term liabilities: Long-term debt Accrued retirement benefits: Directors and statutory auditors ,889 Employees 2,812 3,8 28,64 Deferred tax liabilities 1,34 1,789 13,19 Other long-term liabilities 2,48 2,178 2,445 Total long-term liabilities 6,687 7,772 66,747 Total liabilities 65,319 67,34 651,958 Net assets: Shareholders equity: Common stock, no par value: Authorized: 24,, shares Issued: 73,985,246 shares in 28 and 27 6,932 6,932 69,192 Capital surplus 7,941 7,941 79,257 Retained earnings 112,81 14,198 1,125,965 Less: Treasury stock, at cost; 2,174 shares in 28 and 19,62 shares in 27 (29) (27) (291) Total shareholders equity 127, ,44 1,274,123 Valuation and translation adjustments: Net unrealized gains on securities 2,228 3,449 22,242 Foreign currency translation adjustments, net (2,946) 1,29 (29,417) Total valuation and translation adjustments (718) 4,478 (7,175) Minority interests 21,247 19, ,7 Total net assets 148, ,454 1,479,18 Contingent liabilities Total liabilities and net assets 213,52 21,758 $ 2,13,976 See accompanying notes to consolidated financial statements

16 Consolidated Statements of Income Keihin Corporation and Consolidated Subsidiaries For the years ended March 31, 28 and 27 Thousands of U.S. dollars Net sales 339,321 33,612 $ 3,386,774 Cost of sales 289, ,466 2,887,89 Gross profit 49,983 45, ,884 Selling, general and administrative expenses 25,974 23,33 259,253 Operating income 24,9 22, ,631 Other income (expenses): Interest and dividend income 1, ,585 Interest expense (193) (233) (1,927) Foreign currency exchange (loss) gain, net (823) 195 (8,218) Loss on disposal of property, plant and equipment (27) (317) (2,694) Provision for warranty reserve (3,639) (36,317) Impairment loss on property, plant and equipment (37) (57) (368) Loss on disposal/write-down of inventories (271) (175) (2,71) Gain on sale of investments in securities 383 Loss on sale of land (148) Other, net ,438 Income before income taxes and minority interests 2,781 23,554 27,42 Income taxes: Current 7,273 7,924 72,59 Deferred (1,178) (752) (11,757) Income before minority interests 14,686 16, ,587 Minority interests (3,485) (3,536) (34,788) Net income 11,21 12,846 $ 111,799 Per share of common stock: Net income: Yen U.S. dollars Basic $ 1.51 Cash dividends See accompanying notes to consolidated financial statements

17 Consolidated Statements of Changes in Net Assets Keihin Corporation and Consolidated Subsidiaries For the years ended March 31, 28 and 27 Number of shares issued Common stock Shareholders equity Capital surplus Retained earnings Valuation and translation adjustments Foreign Net currency Treasury unrealized translation stock, gains on adjustments, at cost securities net Minority interests Total net Assets Balance at March 31, 26 73,985,246 6,932 7,941 93,371 (24) 3,498 (1,226) 16,62 127,94 Net income 12,846 12,846 Cash dividends paid (1,997) (1,997) Bonuses to directors and statutory auditors (22) (22) Purchase of treasury stock (3) (3) Net changes in unrealized gains on securities (49) (49) Net changes in foreign currency translation adjustments 2,255 2,255 Net changes in minority interests 3,33 3,33 Balance at March 31, 27 73,985,246 6,932 7,941 14,198 (27) 3,449 1,29 19, ,454 Net income 11,21 11,21 Cash dividends paid (2,589) (2,589) Purchase of treasury stock (2) (2) Net changes in unrealized gains on securities (1,221) (1,221) Net changes in foreign currency translation adjustments (3,975) (3,975) Net changes in minority interests 1,315 1,315 Balance at March 31, 28 73,985,246 6,932 7, ,81 (29) 2,228 (2,946) 21, ,183 Common stock Shareholders equity Capital surplus Retained earnings Thousands of U.S. dollars Valuation and translation adjustments Foreign Net currency Treasury unrealized translation stock, gains on adjustments, at cost securities net Minority interests Total net Assets Balance at March 31, 27 $ 69,192 $ 79,257 $1,4,5 $ (265) $ 34,422 $ 1,268 $198,941 $1,431,82 Net income 111, ,799 Cash dividends paid (25,839) (25,839) Purchase of treasury stock (26) (26) Net changes in unrealized gains on securities (12,18) (12,18) Net changes in foreign currency translation adjustments (39,685) (39,685) Net changes in minority interests 13,129 13,129 Balance at March 31, 28 $ 69,192 $ 79,257 $1,125,965 $ (291) $ 22,242 $ (29,417) $ 212,7 $1,479,18 See accompanying notes to consolidated financial statements

18 Consolidated Statements of Cash Flows Keihin Corporation and Consolidated Subsidiaries For the years ended March 31, 28 and 27 Thousands of U.S. dollars Cash flows from operating activities: Income before income taxes and minority interests 2,781 23,554 $ 27,42 Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities: Depreciation and amortization 16,345 14, ,137 Impairment loss on property, plant and equipment Gain on sale of investments in securities (383) Net loss on disposal and sale of property, plant and equipment ,694 Increase (decrease) in warranty reserve 1,723 (366) 17,198 Decrease in accrued retirement benefits of employees (242) (81) (2,412) Increase (decrease) in accrued retirement benefits of directors and statutory auditors 82 (44) 822 Interest and dividend income (1,6) (944) (1,585) Interest expense ,927 Decrease (increase) in trade accounts and notes receivable 1,93 (848) 1,95 Increase in inventories (182) (1,68) (1,813) Increase in trade accounts and notes payable Payment of directors bonuses (43) Other, net 878 1,595 8,76 Subtotal 39,981 36, ,46 Interest and dividend received 1, ,585 Interest paid (193) (232) (1,927) Income taxes paid (7,114) (9,9) (71,8) Net cash provided by operating activities 33,734 27, ,696 Cash flows from investing activities: Purchase of property, plant and equipment and intangible assets (22,774) (24,612) (227,31) Proceeds from sale of property, plant and equipment 628 1,778 6,27 Purchase of investment securities (3,359) (3,92) (33,522) Proceeds from sale of investment securities 1,188 2,55 11,855 Payments for principal of long-term loans (63) (62) (63) Collection of loans ,863 Other, net 554 (345) 5,529 Net cash used in investing activities (23,38) (25,19) (229,945) Cash flows from financing activities: Decrease in short-term bank loans, net (971) (863) (9,687) Proceeds from long-term debt 618 Repayment of long-term debt (588) (116) (5,87) Purchase of treasury stock (2) (3) (26) Payments for dividends (2,589) (1,997) (25,839) Payments for dividends to minority shareholders (1,969) (1,33) (19,648) Net cash used in financing activities (6,119) (3,691) (61,7) Effect of exchange rate changes on cash and cash equivalents (1,333) 1,214 (13,32) Net increase in cash and cash equivalents 3, ,379 Cash and cash equivalents at beginning of year 31,125 31,22 31,656 Cash and cash equivalents at end of year 34,369 31,125 $ 343,35 See accompanying notes to consolidated financial statements

19 Notes to Consolidated Financial Statements 1. Basis of Presentation of Consolidated Financial Statements Keihin Corporation (the Company ) and its domestic subsidiaries maintain their accounting records in accordance with accounting principles generally accepted in Japan, and foreign subsidiaries of the Company maintain their books of account in conformity with those of their countries of domicile. The accompanying consolidated financial statements have been compiled from the consolidated financial statements prepared by the Company as required under the Financial Instruments and Exchange Law and, therefore, have been prepared in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. The notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan, but is presented herein as additional information solely for the convenience of readers outside Japan. In the accompanying consolidated financial statements, amounts of less than one million yen have been rounded, while amounts of less than one million yen have been omitted in the financial statements as required under the Financial Instruments and Exchange Law. Certain amounts in the prior year s consolidated financial statements have been reclassified to conform to the current year s presentation. 2. Summary of Significant Accounting Policies (1) Consolidation and Investments in Affiliates The consolidated financial statements include the accounts of the Company s 24 domestic and foreign subsidiaries which the Company has the ability to control effectively. All significant inter-company balances and transactions have been eliminated in consolidation. Keihin Canada Service, Incorporated, has been excluded from the scope of consolidation, as a result of its liquidation in fiscal 28. The Company does not consolidate nor apply the equity method with respect to the Company s one subsidiary and one affiliate, as the Company determined those companies to be insignificant, individually and in the aggregate, to total assets, sales, net income and retained earnings of the accompanying consolidated financial statements. (2) Translation of Foreign Currency Transactions and Accounts Foreign currency transactions are recorded using the foreign exchange rates prevailing at the transaction dates. Receivables and payables in foreign currencies are valued at year-end using the current exchange rates. All the asset and liability accounts of foreign subsidiaries are translated at appropriate year-end current rates, and income and expense accounts are translated using average rates in the respective years. The resulting translation adjustments are accumulated as a component of valuation and translation adjustments. (3) Valuation of Securities Securities are classified as (a) securities held for trading purposes, (b) debt securities intended to be held to maturity (hereafter, held-tomaturity debt securities ), (c) equity securities issued by subsidiaries and affiliated companies, or (d) all other securities that are not classified in any of the above categories (hereafter, available-for-sale securities ). The Company did not have any securities defined as (a) above for fiscal 28 and 27. Held-to-maturity debt securities are stated at amortized cost. Available-for-sale securities with fair market value are stated at fair market value as of the balance sheet dates. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of valuation and translation adjustments. Realized gains and losses on sale of such securities are computed using the moving-average method. Available-for-sale securities without fair market value are stated at the moving-average cost. If the fair market value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries and affiliated companies, and available-for-sale securities declines significantly, such securities are stated at fair market value and the difference between fair market value and the carrying amount is recognized as a loss in the period of the decline. Such cases are excepted when the fair market value is recognized as being capable of restoration. If securities do not have fair market value and the fair market value of equity securities issued by unconsolidated subsidiaries and affiliated companies not on the equity method is not readily available, such securities should be written down to net asset value with a corresponding charge in the statements of income. The difference between net asset value and the carrying amount is recognized as a loss in the period of the decline in the event net asset value declines significantly. In these cases, such net asset value will be the carrying amount of the securities at the beginning of the next year. (4) Derivative Financial Instruments Derivative financial instruments, which include foreign currency forward exchange contracts and currency option contracts, are used in the Company s risk management of foreign currency risk exposures of its financial assets and liabilities based on an internal policy that stipulates that at least 6% of the foreign currency receivables balance is to be hedged. The Company evaluates the effectiveness of its hedging activities by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from their inception. The Company enters into foreign currency forward exchange contracts and currency option contracts to limit exposure to changes in foreign currency exchange rates on accounts receivable and cash flows generated from anticipated transactions denominated in foreign currencies. With regard to foreign currency forward exchange contracts, which are designated and effective as hedges of such currency exchange rate risks on existing assets and liabilities, the Company adopted the accounting method whereby foreign currency-denominated assets and liabilities are measured at the contract rate of the respective foreign currency forward exchange contract. With respect to foreign currency forward exchange contracts and currency options on anticipated transactions, the contracts are marked to market and unrealized gains/losses are deferred as a separate component of net assets to be recorded in operations when exchange gains/ losses on the hedged items or transactions are recognized

20 (5) Inventories The Company mostly applies the cost method, based on the weighted average cost method, and its consolidated subsidiaries mostly apply the cost method or the lower of cost or market method, based on the first-in, first-out method. Change in Accounting Policy Prior to fiscal 27, the Company had determined the costs of finished goods, raw materials and work-in-process using the first-in, first-out method. Effective April 1, 26, the Company changed its accounting policy to determine costs of finished goods, raw materials and work-in-process to the average method. The new accounting policy was triggered by the implementation of a new backbone system including a cost accounting system, and adopted in order to improve the efficiency of operating procedures, allowing more prompt monthly closing and period end closing. The effect of the change is immaterial to segment information in the corresponding section as well as the accompanying consolidated financial statements. (6) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed at rates based on the estimated useful lives of assets principally using the declining-balance method, except for depreciation of buildings placed in service on or after April 1, 1998 and dies included in furniture and tools of the Company and its domestic consolidated subsidiaries, for which the straight-line method is applied. Depreciable assets of more than 1, and less than 2, are depreciated by the straight-line method over three years in accordance with the Corporate Income Tax Law in Japan. When assets are sold or otherwise disposed of, the profits or losses thereon, computed on the basis of the difference between depreciated cost and proceeds, are credited or charged to operations in the year of disposal, and cost and accumulated depreciation are removed from the respective accounts. The ranges of estimated useful lives are as follows: Buildings and structures 2 5 years Machinery, vehicles and equipment 2 12 years Changes in Accounting Policy In accordance with the amendment of the Corporate Tax Law of Japan, effective April 1, 27, the Company and its domestic consolidated subsidiaries have changed their method of depreciation for property, plant and equipment acquired on or after April 1, 27, excluding dies which are included under furniture and tools, to a method consistent with the provisions of the amended Corporate Tax Law of Japan. The impact of this change is immaterial. In fiscal 27 and prior, the Company and its domestic consolidated subsidiaries applied the declining-balance method for depreciation of dies which are included under furniture and tools, based on the provisions of the pre-amended Corporate Tax Law of Japan. Effective April 1, 27, they adopted the straight-line method in accordance with the amended Corporate Tax Law of Japan. Comparing the annual depreciation amount calculated under the declining-balance method in accordance with the provisions of the pre-amended Corporate Tax Law of Japan, with those that are calculated under the straight-line method in accordance with the provisions of the amended Corporate Tax Law of Japan, the Company reassessed expense allocation because dies are used on a regular basis over the entire duration of their useful lives, and therefore, the straight-line method, in accordance with the provisions of the amended Corporate Tax Law of Japan, generates more appropriate annual depreciation costs. In addition, the straight-line method addresses the increasing trends in recent years that customers reimburse the Company for the cost of dies in equal installments. Given these two factors, the Company decided to adopt the straight-line method for die depreciation, resulting in a better cost-to-income matching. The impact of this change is immaterial. Additional Information In accordance with the amended Corporate Tax Law of Japan, the Company and its domestic consolidated subsidiaries depreciate the residual values of assets acquired on or before March 31, 27, which were determined at an amount equivalent to 5% of the acquisition cost in accordance with the pre-amended Corporate Tax Law of Japan, over five years on a straight line basis. Depreciation of such residual values begins in the year following the fiscal year in which assets are fully depreciated down to the residual values. The impacts on segment information are described in Note 12 Segment Information. (7) Amortization of Intangible Assets The amortization of intangible assets is computed using the straight-line method. Cost incurred for computer software for internal use is amortized over the estimated useful life of five years on a straight-line basis. (8) Research and Development Research and development expenses are charged to income when incurred. (9) Income Taxes The asset-and-liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse. (1) Warranty Reserve Warranty reserve is provided based on an estimate of warranty expense to be incurred under the warranty agreements with customers. Included in warranty reserve are the following: an estimate of warranty expenses to be incurred during the remaining warranty periods based on historical warranty claim experiences and an estimate of the probability of future warranty expenses; and. an estimate of specifically identified warranty claim

21 (11) Retirement Benefits and Pension Plans Accrued retirement benefits for employees of the Company and its several consolidated subsidiaries are provided principally at an amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of the balance sheet date, as adjusted for the unrecognized net retirement benefit obligation at transition, unrecognized actuarial gain or loss and unrecognized prior service cost. The retirement benefit obligation has been attributed to each period by the straight-line method over the estimated years of service of the eligible employees. Prior service cost is amortized by the straight-line method principally over a period of 3 years, which is shorter than the average remaining years of service of the employees. Actuarial gain or loss is amortized by the declining-balance method over a period of 17 years, which is shorter than the average remaining years of service of the employees. Amortization of actuarial gain or loss begins in the year following the year actuarial gain or loss occurs. Accrued retirement benefits for directors and statutory auditors are provided for the payment of retirement benefits to directors and statuary auditors at an amount that would be payable in accordance with its internal rules and regulations if all eligible directors and statutory auditors were to resign at the fiscal year end. certificates of deposit as of March 31, 27 has been reclassified to conform to the current year s presentation. (12) Amounts per share Net income per share of common stock is based upon the weighted average number of shares of common stock outstanding during each year. Cash dividends per share shown for each year in the consolidated statements of income represent dividends declared as applicable to the respective period. The disclosure of diluted net income per share for fiscal 28 and 27 was omitted because there were no dilutive instruments. (13) Accounting for Leases Finance leases, except those where the legal title of the underlying property is transferred from the lessor to the lessee by the end of the lease term, are accounted for as operating leases. (14) Cash and Cash Equivalents For the purposes of consolidated statements of cash flows, the Company considers all highly liquid investments with insignificant risk of changes in value, with maturities of generally three months or less when purchased, to be cash equivalents. (15) New Accounting Standards (a) Presentation of Net Assets in the Balance Sheet Effective for fiscal 27, Accounting Standard for Presentation of Net Assets in the Balance Sheet ( Accounting Standard No. 5 issued by the Accounting Standards Board of Japan on December 9, 25), and Guidance on the Accounting Standard for Presentation of Net Assets in the Balance Sheet ( Accounting Implementation Guidance No. 8 issued by the Accounting Standards Board of Japan on December 9, 25), have been adopted. (b) Presentation of Negotiable Certificate of Deposit Negotiable certificates of deposit are now presented as investment securities in accordance with revisions to guidelines concerning regulations for the preparation of consolidated financial statements, announced on October 2, 27. The balance of negotiable 19 19