Unit sales of Honda motorcycles, all-terrain vehicles (ATVs) and personal watercraft (PWCs) in fiscal 2005 posted a solid 13.9% increase, to 10,482,000 units. This was due to an outstanding performance in Asia, where we reported a significant jump in sales of finished products by Honda and its subsidiaries, as well as in motorcycle component parts sets supplied for mass production to affiliates accounted for under the equity method. Sales of 100% locally procured Honda motorcycles produced and sold by affiliates in India and China increased significantly, to around 1 million units. As a result, net sales grew 10.2%, to ¥1,097 billion, despite the negative impact of yen appreciation against the U.S. dollar. Operating income rose 63.4%, to ¥69.3 billion, and the operating margin was 6.3%. Our operating income figure does not include earnings from our affiliates accounted for under the equity method in Indonesia, India and China. However, their earnings are included in Honda’s consolidated net income results.

In Japan, where the market remained sluggish, unit sales were down 6.2%, to 378,000 units. Sales of mini-sized motorcycles (126cc–250cc) were up, supported by strong sales of scooters, as were sales of small-sized motorcycles (over 250cc), which benefited from healthy sales of sports bikes. However, sales of 50cc and smaller models and second-class motor-driven cycles (51cc–125cc) declined.

With respect to mini- and small-sized motorcycles, in July 2004 we unveiled our fourth Chinese-made model, the Dio Cesta, following the success of the Today, Spacy 100 and Dio scooters. We also commenced sales of two entry-level sports bikes, the XR50 Motard and XR100 Motard.

Also in the mini-sized category, we enjoyed strong sales of the Forza, which underwent a full model change in April 2004, and other models. In June 2004, we launched the PS250, a comfortable scooter with a fresh individualized style. This was followed in March 2005 by the release of the Forza Z ABS, equipped with Hydraulic Combined Braking System with ABS*1. In the same month, we also introduced the XR230 onto the Japanese market. The XR230 is a dual-purpose bike offering superb ease of handling that is suited for both on-road and off-road use.

In the small-sized motorcycles category, sales were strong for the CBR1000RR. This model, introduced in April 2004, features advanced technology inherited from Honda’s racing bikes. In March 2005, we launched the XR400 Motard, modeled on the Super Motard*2 sports bike.

In these ways, we worked to expand our lineup of attractive sports bikes and scooters that continue to perform strongly on the domestic market.

In Europe, unit sales rose 13.0%, to 338,000 units.

In that region, we recorded robust sales of core products, including the CBR1000RR, CBF600 and the CBR125R. We also launched the Zoomer scooter, the first model in the 50cc market to be equipped with Honda’s original PGM-FI*3, which delivers superior environmental performance. In February 2005, we released SH125 and SH150 models equipped with PGM-FI, and these models have carved out a solid following among our customers. In the following month, we launched the FMX650, a stylish sports bike. Overall, support from our wide customer base for our upgraded model lineup contributed to Honda’s healthy sales record.

In the fiscal year ending in March 2006, we project that unit sales of motorcycles, ATVs and PWCs will post a slight decline, edging down 1.8%, to 10,295,000 units.

By contrast, we forecast an increase in the number of 100% locally procured motorcycles made and sold by our equity-method affiliates in India and China, which are not included in Honda’s unit sales. Based on local sales projections, we estimate that unit sales of such motorcycles will surge more than three-fold, to around 3.4 million units. In effect, therefore, we anticipate continued expansion of our motorcycle business in fiscal 2006, with the inclusion of 100% locally procured Honda motorcycles.

In Japan, we look forward to strong sales of popular 50cc and smaller scooters, including the Today and Dio Chester, and our CB series, to which we added the CB400 Super Bol D’or, featuring enhanced driving safety. We also expect solid demand for sports bikes upgraded in early 2005, including the XR series. We estimate that domestic unit sales in fiscal 2006 will reach 370,000 units.

On the production side, we plan to transfer part of our North American ATV manufacturing capacity to our Kumamoto Plant. The purpose of this initiative is to strengthen our advanced domestic production technologies, which play a key role in the growth of our overseas motorcycle business. To this end, we will strengthen the technological capabilities of Honda in Japan required for the creation of new models, while bolstering efforts to train the future generation of Honda engineers. The overall effect will be to create new technologies that will support the growth of Honda’s global operations.

In North America, we expect an increase in sales of motorcycles, due mainly to healthy sales of sports bikes, including the CRF450X, which was launched in February 2005, and other core products. We are also working hard to boost sales of ATVs, especially the FourTrax Recon and the TRX450R. Concentrating ATV production at our South Carolina Plant will bring further efficiencies to our motorcycle operations in North America. For fiscal 2006, we are targeting regional sales of 690,000 units for motorcycles, ATVs and PWCs, up 7.3%.

In Europe, we launched the Forza-X and the Forza-EX, equipped with Hydraulic Combined Braking System with ABS, in April 2005. We expect to see an increase in sales of the FMX650, which we added to our lineup in fiscal 2005, and in the upgraded SH125and SH150. Based on these healthy sales projections, we are targeting unit sales in Europe of 350,000 units, up 3.6%.

In Asia, we project overall unit sales will dip 3.4%, to 7,915,000 units. Sales of 100% locally procured motorcycles, which are not included in this figure, are forecast to increase more than three-fold, to approximately 3,400,000 units, based on local sales projections.

In India, we expect strong sales of the Super Splendor, made by our affiliate, HHML, and which underwent a full model change in March 2005. In addition, HHML and HMSI will more effectively utilize local R&D facilities in order to introduce new models that meet customer needs and thus target higher motorcycle sales in the Indian market.

In Indonesia, we will pursue a number of activities to boost sales of the popular Supra and Karisma series, made by AHJ, an equity-method affiliate. To meet this increase in demand, AHJ plans to expand its production capacity from 2,000,000 units to 3,000,000 units by October 2005.

In Thailand, we boosted our price-competitiveness by launching the new Wave125i, equipped with PGM-FI, in April 2005. Strengthening our research and development facility in that nation will enable us to offer an appealing product lineup and permit a swifter response to the diversifying needs of customers.

With respect to the Chinese market, an equity method affiliate, Sundiro Honda, is actively promoting sales of its models, including the Storm, which was unveiled in March 2005. On the production side, in January 2005 we began production at a new plant in Tianjin, featuring an innovative layout designed to improve production and distribution efficiency. In April 2005, Wuyang Honda, another equity method affiliate, released the 125cc Freeway, a new model featuring superior environmental performance and low noise. It also plans to start operations at a new plant in the spring of 2006 that will further boost production efficiency and raise capacity to 700,000 units. These and other initiatives are aimed at increasing sales by enhancing our product appeal in the highly competitive Chinese market.

Unit sales in other regions are expected to increase 4.2%, to 970,000 units. In Brazil, where the market continues to expand, we increased the annual production capacity of our plants at the end of 2004 from 750,000 to 1,000,000 units in order to meet growing demand. We are also continuing a range of activities targeting higher sales of the core CG150 model. In the Middle & Near East and Africa, we plan to increase sales of highly competitive products, centering on the Chinese-made CGL125 and the Thai-made Wave.