ANNUAL REPORT 2014

SHOWA CORPORATION

ANNUAL REPORT

2014

Table of Contents 01

SHOWA Philosophy

02

Message from the President

03

Review of Operations

04

Financial Performance Highlights

05

Segment Results

06

Consolidated Financial Statement

08

Highlights

11

SHOWA’ s Global Network

13

Showa’ s Technology

15

Outlook of Consolidated Business Performance

SHOWA ANNUAL REPORT

2014

SH OWA P hilo s o p hy

Corporate Culture

Our Corporate Principle Code of Conduct

Our Fundamental Beliefs − Our Fundamental Beliefs −

Respect for the individuals Trust/Fairness/Independence

− Our Corporate Principle −

 With the aim of becoming a global company trusted by customers worldwide, we are committed to making continuous innovations to provide superior products of the best technology and the highest quality to meet users’ needs.

− Code of Conduct −

1.Let actions be driven by ideals and visions 2.Value time and ideas, and approach problems based on fundamentals and principles 3.Place value on communications and understand the situation of others 4.Maintain operational transparency and soundness 5.Always be aware of environmental preservation, and make contributions to the community and society

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SHOWA ANNUAL REPORT

2014

M e s s a g e f ro m the P re s i d e n t

Dear shareholders,  Please allow me to begin by extending my heartfelt gratitude for your continued

support. We are pleased to present this summary of our results of the 106th term (from April 1, 2013 to March, 31 2014) as follows.    The effect of exchange rates and an increase in sales of motorcycle products and

automotive products resulted in an overall increase in sales compared to the previous term. This term’ s operating and ordinary profits were also higher than previous term’ s due to changes in configuration of variable sales and the positive effect of cost reductions. However, our net income profits decreased this term due to expenses for our early retirement support system, etc., caused by the closing of our Nagoya plant, and because of the estimated financial burden of faulty parts manufactured by our Chinese joint-venture subsidiary (provision of reserve for product warranties) as well as extraordinary losses based on antitrust law violations. SHOWA CORPORATION (SHOWA) entered into a plea agreement with the U.S. Department of Justice (DOJ), agreeing to pay based on charges that it violated the U.S. antitrust law in connection with a part of sales of certain automotive products (pinion assist type electrical power steering assemblies). SHOWA takes the antitrust law violation charges solemnly and in order to restore the trust and confidence of our stakeholders as well of the public, SHOWA has implemented functional organization changes, enhanced the business auditing system for our corporate group, re-organized executive management line-up, and ensured prevention of recurrence of the violation by adopting more stringent and comprehensive compliance training for antitrust laws, as well as other applicable laws and regulations, to our associates. We deeply apologize for great concern this notice has caused to our shareholders, business partners and everyone else concerned.  Our basic policy is to distribute profits in accordance with performance and

achievement of dividends. Taking business performance, together with a long-term perspective in future business developments and consolidated results into comprehensive consideration, as well as responding to the support of our stockholders, we have decided to set the year-end dividend at ¥ 14 per share. As a result, the dividend for the fiscal year totaled ¥28 per share including the interim dividend of ¥14.  For the next term (from April 1, 2014 to March 31, 2015) we expect to set ¥18 for both

the interim dividend and the year-end divided, and as a result the dividend for the fiscal year is to total ¥36 per share. We hope that we can continue to count on our shareholders for their understanding and support.

Yoichi Hojo President

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SHOWA ANNUAL REPORT

2014

Re view o f O p e ra tio n s

Status of current term (2014)  In addition to the impact of exchange rates, our group sales increased over last year mainly due to sales increase of motorcycle products in Indonesia, automotive products in the United States and due to customer growth in China. Our operating and ordinary income increased over last year. However, since we recorded extraordinary losses (3,800 million yen expenses for our early retirement support system, etc., 2,900 million yen for the provision of reserve for product warranties, and 2,000 million yen for antitrust law-related losses) on our current net income, our profits decreased over last year.

Net sales

272,794 million yen

(17.1% increase over previous term)

Operating income

20,207 million yen

(58.4% increase over previous term)

Ordinary income

21,521 million yen

(54.6% increase over previous term)

Net income

6,860 million yen

(14.1% decrease over previous term)

Outlook for next term (2015)  Next term we expect that the weak global recovery will continue. The demand will fall in the Japanese automobile market after the spending rush ahead of the consumption tax hike and fall of the consumer confidence while the demand will increase in North America, Asia, and Europe leading to an increase in the global demand over last year.  As for our performance in the next term, we expect that the sales of motorcycle products will increase, but the sales of automotive products will decrease resulting in a decrease of sales. We also expect that net sales will decrease, and that profits will decrease due to the increase of costs for labor and R&D.  We assume exchange rates of 1 USD = 102 yen and 1 RMB = 16.5 yen, based on the full-year average.

Net sales

268,000 million yen

(1.8% decrease over previous term)

Operating income

17,800 million yen

(11.9% decrease over previous term)

Ordinary income

19,000 million yen

(11.7% decrease over previous term)

Net income

9,300 million yen

(35.6% increase over previous term)

03

2014

SHOWA ANNUAL REPORT

F in an c ia l P e rf o rm a n c e Hi g h l i g h t s

Sales

Operating profit Non-consolidated

(Unit：Million Yen)

300,000

272,794

250,000

233,381

200,000 150,000 100,000

Consolidated

114,997

215,889

111,123

5,000

March 2014

Current net income 10,000

Consolidated

6,860 5,257

4,883 2,549

March 2011

March 2012

March 2013

Non-consolidated

120,000

March 2014

82,753 50,469

81,010 54,359

92,280 61,782

Consolidated

103,006

65,388

Non-consolidated

(Unit：Yen)

Consolidated

111.83 105.10

100

69.32

64.28

90.32

33.57 1.62

50

March 2011

March 2012

March 2013

March 2014

Non-consolidated

(Unit：Yen)

Consolidated

1,500

1,000

892.75 664.36

715.56

884.61

1,026.54 813.28

1,176.28 860.76

500

30,000 0

March 2014

Net asset per share

(Unit：Million Yen)

60,000

March 2012

16.89

Net asset

90,000

March 2011

0

1,283 5,000

March 2013

428

833

50

122

0

3,341

150

8,495 7,984

5,000

2,690

Net income per share Non-consolidated

(Unit：Million Yen)

7,507

5,000 0

March 2013

12,756 8,895

10,000

0

March 2012

20,207

15,000

50,000 March 2011

Consolidated

25,000 20,000

232,962

110,240

107,165

Non-consolidated

(Unit：Million Yen)

March 2011

March 2012

March 2013

March 2014

0

March 2011

March 2012

March 2013

March 2014

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SHOWA ANNUAL REPORT

2014

Se gm e nt Re s ults

(Numerical unit of bar graph: 1 million yen)

* The sales amount includes internal sales or transfers between segments.

Gas springs segment/Others  6.0%

Motorcycle and Hydraulic components segment 

Sales

Sales

95,256 million

Operating Profit

8,959 million

19,698 million

(9.3% increase from the previous fiscal year)

Operating Profit

1,035 million

Sales

Operating Profit

(0.9% increase from the previous fiscal year)

28.8%

(23.2% increase from the previous fiscal year)

(25.6% increase from the previous fiscal year)

Sales

Operating Profit 95,256

18,020

2013

19,698

8,959

77,329

1,027

1,035

2013

2014

2014

2013

7,134

2014

2013

2014

Sales by Operational Segment Steering systems components segment  30.5% Sales

100,937 million

(15.8% increase from the previous fiscal year)

Operating Profit

5,029 million

Sales

Operating Profit

(193.5% increase from the previous fiscal year)

Total 330,647 million

Automotive components segment  34.7% Sales

114,754 million

(19.5% increase from the previous fiscal year)

Operating Profit

5,109 million

(52.6% increase from the previous fiscal year)

Sales

Operating Profit 114,754

100,937

96,036

87,197

5,109

5,029 3,349 1,713

2013

2014

2013

2014

2013

2014

2013

2014

Segment results Segment

Main cause

Motorcycle and Hydraulic components segment

Our overall sales of motorcycle products increased mainly due to customer growth in Indonesia.

Automotive components segment

Our overall sales of automotive products increased mainly due to customer growth in the United States and Thailand and the recovery of customers in China.

Steering components segment

Same as with the automotive business, our sales of steering products increased mainly due to customer growth in the United States and Thailand and the recovery of customers in China.

Gas springs segment / Others

Our overall sales of gas springs products decreased mainly due to customer loss in Japan.

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SHOWA ANNUAL REPORT

2014

C on soli d a te d Fina nci a l St a t e m e n t s

Millions of yen

Millions of yen

Thousands of U.S. dollars

2013

2014

2014

Current assets＊1

83,408

96,039

933,142

Noncurrent assets＊2

74,450

83,377

810,115

Property, plant and equipment

57,667

64,831

629,916

Consolidated Balance Sheet (Summary) Assets

Intangible assets

2,275

2,819

27,390

14,508

15,727

152,808

157,858

179,417

1,743,267

Current liabilities＊3

46,950

61,168

594,326

Noncurrent liabilities＊4

18,627

15,242

148,096

Total liabilities

65,577

76,410

742,421

Shareholders' equity

84,911

89,499

869,598

Capital stock

12,698

12,698

123,377

Capital surplus

13,455

13,455

130,733

Retained earnings

58,810

63,399

616,003

(53)

(54)

-525

Valuation and translation adjustments

(6,928)

(141)

-1,370

Minority interests

14,297

13,648

132,608

Total net assets＊5

92,280

103,006

1,000,836

157,858

179,417

1,743,267

Investments and other assets Total assets Liabilities

Net assets

Treasury stock

Total liabilities and net assets

Status of assets, liabilities, and net assets Total assets for this year-end term were 179,417 million yen, a 21,559 million yen increase year-on-year, mainly due to the acquisition of properties, plants and equipment and foreign currency translation effects. ＊1 Current assets

Mainly due to increases in notes receivable and accounts receivable caused due to increases in net sales, current assets increased by 12,631 million yen year-on-year.

＊2 Noncurrent assets

Mainly due to increases in properties, plants and equipment due to starting business overseas, noncurrent assets increased by 8,927 million yen year-on-year.

＊3 Current liabilities

Mainly due to increases in trade notes and accounts payable as well as arrears and accrued expenses for our early retirement program, current liabilities increased by 14,217 million yen year-on-year.

＊4 Noncurrent liabilities

Mainly due to a decrease in long-term loans, noncurrent liabilities decreased by 3,384 million yen year-on-year.

＊5 Total net assets

Mainly due to increases in currency exchange rate adjustments, net assets increased by 10,726 million yen year-on-year.

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SHOWA ANNUAL REPORT

2014

C on soli d a te d Fina nci a l St a t e m e n t s

Consolidated Income Statement (Summary) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income＊1 Non-operating income Non-operating expenses Ordinary income Extraordinary income Extraordinary loss Income before income taxes Income taxes-current Refund of income taxes Income taxes-deferred Total income taxes Income before minority interests Minority interests in income Net income＊2

Millions of yen

Millions of yen

Thousands of U.S. dollars

2013

2014

2014

232,962 197,095 35,866 23,110 12,756 1,750 590 13,916 681 1,056 13,541 3,750 (1,051) 64 2,763 10,777 2,793 7,984

272,794 224,600 48,194 27,986 20,207 1,916 602 21,521 871 9,839 12,553 4,841 ー (2,157) 2,684 9,869 3,008 6,860

2,650,544 2,182,277 468,267 271,920 196,337 18,616 5,849 209,104 8,463 95,599 121,969 47,037 ― (20,958) 26,079 95,890 29,227 66,654

＊1

Operating income TThe operating income increased by 7,451 million yen from previous fiscal year due to the influence of foreign exchange rates and improvement effects such as sales variable configuration changes, cost reduction, etc. ＊2 Net income Net income decreased by 1,123 million yen from previous fiscal year because we recorded expenses for our early retirement support system, the provision of reserve for product warranties, and antitrust law-related losses as extraordinary losses. Millions of yen

Consolidated Statement of Cash Flows (Summary) Net cash provided by (used in) operating activities＊3 Net cash provided by (used in) investing activities＊4 Net cash provided by (used in) financing activities＊5 Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at Beginning of Year Increase in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation Decrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation Cash and cash equivalents at End of Year

Millions of yen

Thousands of U.S. dollars

2013

2014

2014

21,066 (7,418) (13,157)

26,966 (11,258) (12,615)

262,009 (109,386) (122,571)

(235)

(36)

(350)

192 20,618

3,055 20,691

29,683 201,040

ー

1,046

10,163

(119)

ー

―

20,691

24,794

240,906

Overview of Cash Flow The balance of cash and cash equivalents (hereinafter called “funds”) at the end of the fiscal year totaled 24,794 million yen, up 4,120 million yen year-on-year. ＊3

Net cash provided by (used in) operating activities Funds earned from operating activities increased by 5,899 million yen year-on-year, mainly due to an increase in antitrust law-related losses and losses from the provision of reserve for product warranties. ＊4 Net cash provided by (used in) investing activities Funds used for investment activities increased by 3,776 million yen year-on-year, mainly due to an increase in spending for purchase of investment securities and for purchase of properties, plants and equipment. ＊5 Net cash provided by (used in) financial activities Funds used for financial activities increased by 542 million yen year-on-year, mainly due to a decrease in repayment of long-term loans payable.

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SHOWA ANNUAL REPORT

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H igh lights

Automotive Products   Regarding automotive products, Honda Motor Co., Ltd. has adopted our shock absorber S-SEES*, propeller shaft, differential gear, gas springs, and steering manual gearbox for use in their new “Fit” providing both higher ride quality and steering stability. Additionally, Mazda Motor Corporation has adopted our front shock absorber for use in their “Axela”. Fit

Axela

Motorcycles Products

899 Panigale

 Regarding motorcycle products, Ducati Motor Holding S.p.A has adopted our front fork BPF (* Big Piston Front Fork) for use in their “899 Panigale”. BPF provides high riding performance and stability, and has been adopted for the first time in Europe. We will continue bringing high-performance products to market. Ducati is an Italian manufacturer of motorcycles founded in 1926, but currently part of the German automotive manufacturer Audi. Besides the production and sales of commercial vehicles, Ducati also participated in motorcycle road races, the first one being MotoGP.

Groundbreaking ceremony for the Mexico subsidiary SAM   On October 16, 2013, we prayed for the construction workers' safety and the successful completion of our new factory, and held the groundbreaking ceremony for our Mexican subsidiary Showa Autoparts Mexico S.A. de C.V. (SAM) . President Hojo attended together with other members of our company. Among the special guests were local government officials of Guanajuato State and the mayor of Silao. Some of our customers and business partners attended as well.  We will continue to prepare to start the production of electric power steering in July 2015.

Scenes of the Groundbreaking Ceremony

Opening ceremony

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SHOWA ANNUAL REPORT

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H igh lights

Overseas development of motorcycle operations  Regarding motorcycle shock absorber, we started the manufacturing and sales of front forks at the Showa India Private Ltd. (SIP) in March 2012. We plan to be responsive to the Indian market which is expected to grow and to increase our production capacity to manage new orders. In April 2013 a Showa Autoparts (Thailand) Co., Ltd. (SAT) we started the local production of fork pipes, major components of the front fork, and production and sales of front forks in October 2013. In addition, we plan on improving the level of cost competitiveness in the ASEAN region, for example by starting the local production of bottom cases, also major components of the front fork, at the Showa Autoparts Vietnam Co., Ltd. (SAV).

SIP, Assembly Production Line of Shock Absorber For Motorcycles

SAT, Assembly Production Line of Shock Absorber For Motorcycles

Fork Pipe

Bottom Case

Products for motorcycles and automobiles  Regarding motorcycle products, Honda Motor Co., Ltd has adopted our front forks and rear cushion for use in their new concept model "NM4−01". Additionally, regarding automotive products, Guangzhou Honda Automobile Co., Ltd has adopted our shock absorber (front/rear) for use in their China exclusive model CRIDER . NM4-01

CRIDER

Exhibited at the Automotive Engineering Exhibition 2014 In May 2014 we had an exhibition at the Automotive Engineering Exhibition 2014 that was held at Pacifico in Yokohama from May 21 to 23, 2014. Our display included product technology shown for the first time ever or for the first time on an exhibition for the general public and were fed back to race technology. We also introduced technologies we have generated through our global driving environment surveys and tests. ・Automotive experience simulator (feel analysis, noise control) ・Motorcycle MotoGP simulation

Simulation

・SFF (Separate Function Fork Front) Air ・BFR (Balance Free Rear shock) Lite Shock Absorber For ・Sensorless control dampers Automobiles ・SFRD (Sensitive Frequency Response Damper) ・DPA-EPS (Dual-Pinion Assist Electric Power Steering) Power Steering ・BRA-EPS (Belt Rack Assist Electric Power Steering) Shock Absorber for Motorcycles

Product exhibition

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SHOWA ANNUAL REPORT

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H igh lights

Establishment of European and Chinese development base  In April 2014 we decided to establish the SHOWA UK LTD. Denmark

EUROPE R&D OFFICE near Frankfurt, Germany as a sales and England

development base in Europe for SHOWA UK LTD. In August of that year, we also established the research &

Berlin Holland

Belgium

development facility of SHOWA Autoparts (Guangzhou) Co., Ltd. near Guangzhou, China as a development base in China. By this we hope to strengthen our development capabilities to

France

★

Germany

Poland

Frankfurt

Switzerland

Australia

Italy

build a foundation for the expansion of our European business and improve our global product capability, as well as to strengthen the development, sales promotion, procurement, and quality control of new models in China. We also want to

Beijing China

continue to expand our quick and timely development Guangzhou

activities close to our customers.

Test Track Expansion and Construction  In December 2013, we expanded the existing test track at the Asaba plant site and now use it for vehicle tests including tests to verify the handling stability of our motorcycle products. We strive to continue to further improve the evaluation of completed vehicles and our response to the shortening development period and accelerating development of new models according to the diversifying market and customer needs.  In addition, we decided to acquire land in Shioya, Tochigi Prefecture to build a dedicated test track. We strive to enhance the sensory evaluation ability as well as improve the tuning ability and actual vehicle analysis for our automotive and motorcycle products; and we hope to continue to further accelerate the system development. (Scheduled to be completed in June 2015)

Motorcycle test track (Asaba)

Dedicated test track (Tochigi) *See image

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SHOWA ANNUAL REPORT

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SH OWA’ s Glo b a l N et w o r k As of 31st March 2014

Overview of Business The SHOWA Group consists of our company, 15 subsidiaries and three affiliates, and our main businesses are the manufacture and sale of automotive parts.

Corporate Head Office, Plants and R&D Facilities Corporate Head Office

1-14-1, Fujiwara-cho, Gyoda, Saitama

Plants

Saitama Plant (Gyoda, Saitama), Hadano Plant (Hadano, Kanagawa), Gotemba Plant (Gotemba, Shizuoka), Asaba Plant (Fukuroi, Shizuoka), Nagoya Plant (Kasugai, Aichi)

R&D Facilities

Automotive Parts R&D Centers (Haga, Tochigi / Gyoda, Saitama) Motorcycle Parts R&D Center (Fukuroi, Shizuoka)

Japan

Honda Cars SAITAMAKITA Automotive Parts R&D Center (Saitama)

Automotive Parts R&D Center (Tochigi) Corporate Head Office / Saitama Plant

Nagoya Plant

SHOWA KYUSHU CORPORATION

SHOWA SEIKO CO., LTD.

Hadano Plant

Gotemba Plants (No.1 / No.2) Asaba Plant Motorcycle Parts R&D Center (Asaba)

Corporate Head Office

Manufacturing Plants

Domestic Subsidiaries & Affiliates

R&D Facilities

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SHOWA ANNUAL REPORT

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SH OWA’ s Glo b a l N et w o r k As of 31st March 2014

Overview of Subsidiaries and Affiliates Consolidated Subsidiaries

P.T. SHOWA INDONESIA MANUFACTURING AMERICAN SHOWA, INC. SHOWA DO BRAZIL LTDA. SHOWA KYUSHU CORPORATION SUMMIT SHOWA MANUFACTURING CO., LTD. SHOWA CANADA INC. SHOWA INDUSTRIA E COMERICO LTDA. SHOWA SEIKO CO., LTD. GUANGZHOU SHOWA AUTOPARTS CO., LTD. NISSIN SHOWA UK LTD SHANGHAI SHOWA AUTO PARTS CO., LTD. SHOWA INDIA PVT. LTD. SHOWA AUTOPARTS (THAILAND) CO., LTD. SHOWA AUTO-PARTS VIETNAM CO., LTD. Honda Cars SAITAMAKITA

Equity Method Affiliates

KAIFA INDUSTRY CO., LTD MUNJAL SHOWA LTD. CHENGDU NINGJIANG SHOWA AUTOPARTS CO.,LTD

Non-consolidated subsidiary

SHOWA REGIONAL CENTER (THAILAND) CO., LTD. PT. SHOWA AUTOPARTS INDONESIA

Overseas

NISSIN SHOWA UK LTD. SHOWA AUTOPARTS WUHAN CO., LTD.

SHOWA CANADA INC. North America

Europe

CHENGDU NINGJIANG SHOWA AUTOPARTS CO.,LTD.

China

Japan

MUNJAL SHOWA LTD. SHOWA INDIA PVT. LTD.

AMERICAN SHOWA, INC. Los Angeles Office

SHANGHAI SHOWA AUTO PARTS CO.,LTD. KAIFA INDUSTRY CO.,LTD.

SUMMIT SHOWA MANUFACTURING CO.,LTD.

GUANGZHOU SHOWA AUTOPARTS CO.,LTD.

SHOWA AUTOPARTS (THAILAND) CO., LTD.

SHOWA AUTO-PARTS VIETNAM CO., LTD.

SHOWA REGIONAL CENTER CO.,LTD.

P.T. SHOWA AUTOPARTS INDONESIA

P.T. SHOWA INDONESIA MANUFACTURING

AMERICAN SHOWA, INC. Head Office and Sunbury Plant AMERICAN SHOWA, INC. Blanchester Plant

SHOWA DO BRAZIL LTDA.

South America SHOWA INDUSTRIA E COMERCIO LTDA.

Southeast Asia

Corporate Head Office Non-consolidated Subsidiary

Consolidated Subsidiary Equity Method Affiliate

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SHOWA ANNUAL REPORT

2014

SH OWA’ s Te c hno lo g y

Automotive Components Shock Absorbers

Propeller Shafts

Shock absorbers are critical to an automobile’s character

The propeller shaft’s function is to transmit the driving force of

because they make the auto comfortable to ride and affect the

the engine to the wheel axis. The long cylindrical shaft rotates

attitude and stability of the automobile body. With their superior

at high speed. It must limit vibration and noise while ensuring

performance and quality, Showa brand shock absorbers have

high durability. Showa supplies leading-edge technologies, and

created satisfied customers around the world. Showa has years

our structural analysis enables a smaller number of

of experience with strut modules and is also working on

components and lighter weight. Further, we have implemented

suspension modules combined with peripheral components.

friction welding to achieve high precision, dynamic balance and ultra–strong parts connections. Propeller Shafts

Shock Absorbers

Gas Springs

Differential Gears

Steering Systems

Gas Springs Gas springs help to open and close front hoods and rear gates

Steering Systems Of all automobile components, steering systems must provide performance and reliability. The steering system is the man/machine interface that transmits the driver’s steering motion to the automobile and conveys information on running conditions from the automobile to the driver. The term “power steering system” refers to a component that assists steering and provides drivers with comfortable maneuverability. Power steering systems are classified into hydraulic power

by using gas reaction force. They come with speed-adjustment devices that enable operators to open and close the hood and trunk at optimal speed. Showa develops a variety of products to meet customers’ diverse needs.

Differential Gears The role of a differential mechanism is to absorb the difference in rotation between the right and left wheels when an automobile is cornering. These products must offer durability,

steering systems (HPS), which use the engine’s power as a drive

transmission efficiency and quiet operation. Showa’s differential

source, and electric power steering systems (EPS), utilizing the

gears are light in weight while exhibiting high performance in

vehicle’s battery. Showa has a full line of power steering models.

automobiles from subcompacts to SUVs.

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SHOWA ANNUAL REPORT

2014

SH OWA’ s Te c hno lo g y

Motorcycle Components Shock Absorbers Showa motorcycle shock absorbers are used extensively in

Rear Cushions

motorcycle races around the world. From racing machines to scooters, we use our technology and experience to meet a

Front Forks

wide variety of performance needs.

Front Forks

T h e f ro n t f o r k i s a k e y s t r u c t u r a l component of a motorcycle, holding the front wheel securely and providing the steering function. This vital part

Drive Unit Products

must be able to closely follow road contours through smooth operation a n d s t e a d y d a m p i n g f o rc e , w h i l e retaining high rigidity.

Rear Cushions

The rear cushion is attached to the rear fork directly or through a link. By controlling the attitude and energy absorption of the motorcycle body, the rear cushion helps the rear wheel to follow road contours.

Outboard Marine Engine Components Power Tilt and Trim Units Power trim and tilt units change the angle of outboard engines and provide the following three functions. The trim function provides good screw efficiency and steady cruising by adjusting the angle of the outboard engine while running. The tilt function enables owners to prevent outboard engine damage from clinging shellfish by raising the engine above the water’s surface

Drive Unit Products For motorcycle and ATV drive unit products, Showa has

when moored. When driftwood or other objects strike the outboard engine while under way, shocks are absorbed, helping to prevent damage to the outboard engine and boat.

achieved lighter weights through analysis of functions, shapes, a n d m a t e r i a l s , w h i l e m a i n t a i n i n g e x c e l l e n t d u r a b i l i t y, transmission efficiency and quiet operation.

Drive Unit Products

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SHOWA ANNUAL REPORT

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Ou tlook o f C o ns o lid a t e d Bu s i n e s s Pe r fo r m a nce As of 31st March 2014

Status of Shares Total Number of Authorized Shares

180,000,000 shares

Total Number of Issued Share

76,020,019 shares

Number of Shareholders

5,923

Share Distribution by Shareholders

Major shareholders Shares held (shares)

Shareholder Name Honda Motor Co., Ltd.

Investment ratio (%)

25,447,856

33.48

Japan Trustee Services Bank, Ltd. (Trust Account)

4,831,600

4.84

The Master Trust Bank of Japan, Ltd. (Trust Account)

3,985,200

3.92

Showa Holdings

1,593,160

2.63

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1,291,480

2.47

THE BANK OF NEW YORK, TREATY JASDEC ACCOUNT

1,193,900

2.22

Japan Trustee Services Bank, Ltd. (Trust Account 2)

1,172,700

1.70

Japan Trustee Services Bank, Ltd. (Trust Account 6)

1,165,700

1.63

Mellon Bank, N.A. as Agent for its Client MellonOmnibus US Pension

1,122,200

1.31

Japan Trustee Services Bank, Ltd. (Trust Account 1)

1,121,700

1.15

Individuals / others

8.97% (5,564)

Financial institutions

29.22% (45)

Foreign Investors

24.66% (181)

Other corporations

36.10% (98)

Securities Traders

1.05% (35)

Board of Directors and Corporate Auditors As of 27th June 2014

Audit&Supervisory Board Members

Directors Representative Director President

Yoichi Hojo

Statutory Audit&Supervisory Board Members

Representative Director Executive Vice President and Executive Officer

Akira Kadoya

Audit&Supervisory Board Members

Representative Director Senior Managing Officer

Hajime Hirata

Director Managing Officers

Takeshi Nagao Nobuyuki Sugiyama

Director Operating Officers

Kenichi Ono Masaharu Sobue Tetsuya Matsumura

Atsushi Izumina Yuetsu Sato Tsuneo Mizusawa Hikoyuki Miwa

* Tsuneo Mizusawa and Hikoyuki Miwa are outside company auditors.

Exective Officers Operating Officers

Masami Matsuo Yutaka Ueno Shuichi Kawahara Hidehiko Koyano * Serving solely as Executive Officers and not concurrently as Director

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