Annual Report 2012 アニュアルレポート | SHOWA CORPORATION 株式会社ショーワ

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SHOWA CORPORATION

1 SHOWA Philosophy

2 Message from the President

3 Review of Operations

6 Consolidated Financial Statement

11 Topics

13 SHOWA’s Global Network

15 Showa’s Technology

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Our Fundamental Beliefs

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Respect for the individuals

Trust/Fairness/Independence

−

Our Corporate Principle

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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.

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Code of Conduct

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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

Our Fundamental Beliefs

Corporate Culture

Our Corporate Principle

Code of Conduct

SHOWA Philosophy

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We would like to express our gratitude for your continued support over the year.

We are pleased to present the summary of consolidated result of the 104th fiscal year (From 1st April 2011 to 31st March 2012).

The net sales for the current term decreased compare to previous term. The reason is that despite the fact that the sales of motorcycle components increased mostly in Asia, the sales of automotive components decreased due to our customer production adjustment caused by the impact of the Tohoku earth quake and the Thailand floods. Also for the profit, although there was an improvement effect by the enhancement of production setup as well as thorough cost-cut, there was fluctuation in sales, changes in structure and increase in labor cost. Therefore both operating and ordinary income decreased compared to the previous term. Compare to the previous term, the net income increased because of the extraordinary income such as a gain on sale of investment securities in addition to the decrease in

extraordinary loss caused by the disaster which was recorded for the previous term.

The basic concept of our policy regarding profit allocation is the return profit which takes business performance and achievement into consideration. In reference to the final dividend, we have taken the future business development and business performance on a consolidated basis into consideration comprehensively from the long-term perspective. And 10 yen per share is decided hoping that we respond to your support. As a result, current dividend per share is 10 yen.

Furthermore predicted dividends for next term (from 1st April 2012 to 31st March 2013) are 11 yen per share for both interim and year-end dividends, and the annual dividend per share will be 22 yen.

Our hope is that our shareholders will continue in their enduring support in the years to come.

July 2012

Yoichi Hojo

President

A N N U A L R E P O R T 2 0 1 2

Message from the President

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Review of Operations

SHOWA CORPORATION

Segment results (2012)

Prospect for the next term (2013)

In terms of business environment surrounding our group, the economic recovery remained weak worldwide. For motor vehicle industries, production and sales exceeded previous year despite the impact of the disaster and the Thailand floods. Under such circumstances, the sales for motorcycle components for our group increased compared to the previous term and achieved revenue growth, due to the fact that it was driven by strong market mostly in Asia. Another reason is that we acquired ownership of the joint venture company in Vietnam. However for automotive components, the sales and profit both decreased. It is because the our customers adjusted the production due to the impact of the disaster and the Thailand floods.

JPY 215,889 mil.

(Compared with the previous fiscal year : 7.5% decrease)

Resuts(Consolidated)

Prospects(Consolidated)

JPY 7,507 mil.

JPY 7,330 mil.

JPY 2,549 mil.

(Previous fiscal year : JPY 122mil.)

For business development of our group, we implemented “opereations organization” and newly organized four divisions; “Motorcycle and Hydraulic components Operations”, “Automotive components Operations”, “Steering Systems Operations” and “Gas Spring Operations”.

Net income per share

Current net income

Net asset per share

Net asset

(Unit：Million Yen) (Unit：Million Yen)

50,000 100,000 150,000 200,000 300,000

250,000

0

(Unit：Million Yen)

7,000 0 7,000

14,000

(Unit：Yen)

0

100

200 0 10,000

5,000

(Unit：Million Yen)

20,000 40,000 60,000 100,000

80,000

0

(Unit：Yen)

300 600 900 1,200

0 100

1.62 207,657

233,381 271,510

114,997 _107,165 215,889

104,972 135,421

8,593 11,609

11,195

4,883

1,283

2,549

8,544 113.11

152.82

64.28

16.89

33.57

112.47 147.37

2,370 4,058

428 833

8,895

2,409

7,507

5,001

59,605 87,228

54,359 81,010

784.61 984.38

685.27 929.52

664.36 892.75

715.56 884.61 50,469

82,753

52,058 85,054

122

March 2009 March 2010 March 2011 March 2012

March 2009 March 2010 March 2011 TMarch 2012

March 2009 March 2010 March 2011 March 2012 Non-consolidated Consolidated

Non-consolidated Consolidated

Non-consolidated Consolidated Non-consolidated Consolidated

Non-consolidated Consolidated

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Japan

JPY 472 mil.

(The previous fiscal year profit: JPY 28 mil.)

South America

China

North America

Other

Asia

125,258

Previous tems This tem Previous tems This tem Previous tems This tem Previous tems This tem

Previous tems This tem Previous tems This tem

Previous tems This tem Previous tems This tem 117,165 (Unit：Million Yen) (Unit：Million Yen)

(Unit：Million Yen) (Unit：Million Yen)

(Unit：Million Yen) (Unit：Million Yen) 28

472

52,627 41,110

△101

△845

24,370 _22,382

2,173

1,295

7,717

3,885

△371

△347 21,229 20,883

1,123 875

41,359 45,256

6,173 6,297 JPY 117,165 mil.

The sales and profits of our automotive components decreased mainly to reduction of production by our customers due to impact of the Tohoku earthquake. Operation profit increased due to reduction of production reconstruction costs and improvement in costs.

Sales

Operating Profit

JPY 875 mil .

Operating deficit Operating deficit

Japan

JPY 86,669 mil.40.1%

North America JPY 40,570 mil.18.8%

South America

JPY 20,883 mil.9.7%

Asia

JPY 44,799 mil.20.8%

China

JPY 19,080 mil.8.8%

Other

JPY 3,885 mil. 1.8%

Total Sales JPY 215,889 mil.

Segment results

Review of Operations

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Current assets Assets

Cash and deposits

Notes and accounts receivable-trade Marketable securities

Merchandise and finished goods Work in process

Raw materials and supplies Deferred tax assets Other

Allowance for doubtful accounts

Total current assets

17,289 32,382 3,800 5,697 3,202 15,725 387 6,245 (172) Noncurrent assets

Property, plant and equipment

Buildings, net

Machinery, equipment and vehicles, net Tools, furniture and fixtures, net Land

Lease assets, net Construction in progress

Total property, plant and equipment

Total assets 155,540

Current liabilities Liabilities

Notes and accounts payable-trade Short-term loans payable

Accounts payable-other and accrued expenses Lease obligations

Income taxes payable Provision for product warranties Provision for bonuses

Provision for loss on liquidation of subsidiaries and affiliates Other

Total current liabilities

26,952 11,105 6,562 114 1,265 1,538 2,665 − 2,931 Noncurrent liabilities

Long-term loans payable Lease obligations Deferred tax liabilities Provision for product warranties Provision for retirement benefits Provision for directors' retirement benefits Other

Total noncurrent liabilities

10,812 719 2,075 1,124 5,985 339 338

Total liabilities 74,529

Shareholders' equity Net assets Capital stock Capital surplus Retained earnings Treasury stock

Total shareholders' equity

12,698 13,455 52,440 (53)

Valuation and translation adjustments

Valuation difference on available-for-sale securities Deferred gains or losses on hedges

Foreign currency translation adjustment

Valuation and translation adjustments

3,174

−

(14,515)

...

Minority interests Total net assets

Total liabilities and net assets

Following consolidated financical statements have been compiled from the consolidated financial statements prepared by the Company as required under the Financial Instruments and Exchange Law of Japan 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 translation of yen amounts into U.S. dollar amounts is included solely for the convenience and has been made, as a matter of arithmetic computation only, at the rate of ¥82.19 = U.S.$1.00, the exchange rate prevailing at 31st March, 2012.The translation should not be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

84,559 1,028,823 210,354 393,990 46,234 69,315 38,959 191,325 4,709 75,982 (2,093) ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... 11,805 70,981 13,508 78,140 1,892,444 53,136 646,502 327,923 135,114 79,839 1,387 15,391 18,713 32,425 − 35,661 21,393 260,287 131,549 8,748 25,246 13,676 72,819 4,125 4,112 906,789 78,542 955,615 154,496 163,706 638,034 (645) (137,973) 168,001 985,643 1,892,444 38,618 − (176,603) ... 2012 20,402 28,026 − 4,638 3,416 14,759 485 8,568 (97) 17,386 30,421 1,653 10,466 958 3,013 63,899 158,340 25,077 16,158 7,130 124 1,001 1,244 2,701 28 2,602 8,851 866 2,943 1,034 5,261 354 206 75,586 12,698 13,455 49,906 (53) 4,176 − (12,364) 80,200 56,069 19,517 76,008 (8,187) 14,933 82,753 158,340 2011 2012

Millions of yen Thousands of U.S. dollars

... ... ... ... ... ... ... ... ... ... ...

Millions of yen

16,392 26,807 1,429 10,208 781 1,793 57,411 (11,340) 13,808 81,010 155,540 199,440 326,159 17,387 124,200 9,502 21,815 698,516 143,631 863,621 99,063 2,433 3,601 38,727 (207) 8,142 200 296 3,183 (17) 10,581 200 261 2,480 (16) Intangible assets Goodwill Other

Total Intagible assets

633 98 732 1,660 102 1,763 20,197 1,241 21,450

Investments and other assets

Investment securities Long-term loans receivable Deferred tax assets Other

Allowance for doubtful accounts Total investments and other assets

Total noncurrent assets

Consolidated Balance Sheet (Unaudited)

31st March 2011 and 2012

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Net cash provided by (used in) operating activities

Income (loss) before income taxes Depreciation and amortization Impairment loss

Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for product warranties Increase (decrease) in provision for retirement benefits Increase (decrease) in provision for loss on liquidation of subsidiaries and affiliates Interest and dividends income

Interest expenses

Foreign exchange losses (gains) Equity in (earnings) losses of affiliates Subsidy Income

Loss (gain) on sales and retirement of property, plant and equipment Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories

Increase (decrease) in notes and accounts payable-trade Loss (gain) on sales of investment securities

Loss on adjustment for changes of accounting standard for asset retirement obligations Loss on disaster

Other, net

Subtotal

Interest and dividends income received Interest expenses paid

Proceeds from subsidy Income taxes paid Income taxes refund

Net cash provided by (used in) operating activities

... 8,996 9,777 409 8 289 734 (3) (942) 725 (71) (437) (417) 15 (4,451) (2,422) 2,537 (1,963) − − (296) 12,490 1,012 (760) 300 (3,786) 462 ...

Net cash provided by (used in) investing activities

(717) (1,632) 3,241 (5,341) 119 (5) 2,223 8 (1,000) 3,392 (1,605) (117)

Net cash provided by (used in) financing activities

(1,870) 639 7,772 12,846 20,618

Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable

Payments from long-term loans payable Proceeds from sade and leaseback Cash dividends paid

Cash dividends paid to minority shade holders Other, net

Net cash provided by (used in) financing activities

... 307 6,698 (5,083) − (0) (3,669) (123) ...

Cash and Cash Equivalents at End of Year

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

109,454 118,956 4,976 97 3,516 8,931 (37) (11,461) 8,821 (864) (5,317) (5,074) 183 (54,155) (29,468) 30,868 (23,884) − − (3,601) 151,965 12,313 (9,247) 3,650 (46,064) 5,621 ... ... ... ... (8,724) (19,856) 39,433 (64,984) 1,448 (61) 27,047 97 (12,167) 41,270 (19,528) (1,424) (22,752) 7,775 94,561 156,296 250,858 3,735 81,494 (61,845) − (0) (44,640) (1,497) ... 2012 2012

6,866 10,120 111 (43) 212 632 (2,748) (879) 769 194 (281) (426) 582 3,758 1,033 (1,887) − 68 354 (342) 18,097 851 (777) 432 (3,424) 1,377 ... (10,340) (2,208) 2,407 (7,634) 174 (109) − − (8,920) 6,140 − (190) (6,572) 752 396 12,449 12,846 (2,855) 3,234 (6,167) 1,006 (1) (1,693) (96) ... ... 2011

Millions of yen

9,720 118,263

16,557

Payments into time deposits

Proceeds from withdrawal of time deposits Purchase of property, plant and equipment

Proceeds from sales of property, plant and equipment Purchase of investment securities

Proceeds from sales of investment securities Collection of loans receivable

Payments for short term investment Proceeds from short term investment

Purchase of investments in capital of subsidiaries Other, net

Net cash provided by (used in) investing activities

Consolidated Statements of Cash Flows (Unaudited)

Year ended 31st March 2011 and 2012

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Consolidated Statement of Changes in Net Assets (Unaudited)

A N N U A L R E P O R T 2 0 1 2

Consolidated Financial Statement

Capital stock

Balance at the end of previous period Changes of items during the period Total changes of items during the period Balance at the end of current period

Capital surplus

Retained earnings

Balance at the end of previous period Changes of items during the period Net income

Change of scope consolidation Total changes of items during the period Balance at the end of current period

Treasury stock

Balance at the end of previous period Changes of items during the period Purchase of treasury stock

Total changes of items during the period Balance at the end of previous period

Total shareholders' equity

12,698 − 12,698 49,906 2,549 (15) 2,534 52,440 (53) (0) (0) (53) 76,008 2,549 (0) (15) 2,534 78,542 ... ... ... ... ... ... ... ... ... ... Shareholders' equity 154,496 − 154,496 607,203 31,014 (183) 30,831 638,034 (645) (0) (0) (645) 924,784 31,014 (0) (183) 30,831 955,615 ... ... ... ... ... 2012 2012

Millions of yen

12,698 − 12,698 49,784 122 − 122 49,906 (52) (0) (0) (53) 75,885 122 (0) − 122 76,008 ... ... ... ... ... 2011

Balance at the end of previous period Changes of items during the period Total changes of items during the period Balance at the end of current period

13,455

−

13,455

Balance at the end of current period Changes of items during the period Net income

Purchase of treasury stock Change of scope consolidation Total changes of items during the period Balance at the end of current period

13,455 − 13,455 163,706 163,706

Overview of Cash Flow

The balance of cash and cash equivalents at the end of the fiscal year totaled ¥20,618 million, up ¥7,772 million year on year.

(Net cash provided by (used in) operating activities)

Cash earned from operation decreased ¥6,836 million year on year, mainly due to an increase in trade receivables and inventories, though there was an increase in income before income taxes.

(Net cash provided by (used in) investing activities)

Cash used for investment activities decreased ¥9,623 million year on year, mainly due to a decrease in fund management due to short-term investments, proceeds from sales of investment securities and a decrease in purchase of property, plant and equipment.

(Net cash provided by (used in) financial activities)

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Consolidated Statement of Changes in Net Assets (Unaudited)

Consolidated Financial Statement

Valuation difference on available-for-sale securities

Balance at the end of previous period Changes of items during the period

Net changes of items other than shareholders' equity Total changes of items during the period

Balance at the end of current period

Deferred gains or losses on hedges

Balance at the end of current period 4,176 (1,001) (1,001) 3,174 − − − − (12,364) (2,150) (2,150) (14,515) (8,187) (3,152) (3,152) (11,340) 14,933 (1,124) (1,124) 13,808 82,753 2,549 (0) (15) (4,277) (1,743) 81,010 ... ... ... ...

Foreign currency translation adjustment

... ...

Valuation and translation adjustments 2012

Total valuation and translation adjustments

Minority interests

... ...

Total net assets

Balance at the end of previous period Changes of items during the period Net income

Purchase of treasury stock Change of scope consolidation

Balance at the end of current period ... ... 50,809 (12,179) (12,179) 38,618 − − − − (150,432) (26,159) (26,159) (176,603) (99,611) (38,350) (38,350) (137,973) 181,689 (13,676) (13,676) 168,001 1,006,850 31,014 (0) (183) (52,038) (21,207) 985,643 ... ... ... 2012 ... ... ...

Millions of yen

4,494 (318) (318) 4,176 (16) 16 16 − (9,750) (2,614) (2,614) (12,364) (5,272) (2,915) (2,915) (8,187) 14,440 492 492 14,933 85,054 122 (0) − (2,423) (2,300) 82,753 ... ... ... 2011 ... ... ...

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Net sales

Overview of Assets, Liabilities and Net Assets

215,889 186,587 29,301 21,794 7,507 Non-operating income

Total non-operating income 2,107

Interest income Dividend income

Equity in earnings of affiliates Subsidy Income Other ... 789 153 437 417 310 ...

Cost of sales Gross profit

Selling, general and administrative expenses Operating income

Income before income taxes 8,996 3,695 32 3,728 5,268 2,718 2,549 Income taxes-current Income taxes-deferred Total income taxes

Minority interests in income Net income

Extraordinary loss

Loss on sales of noncurrent assets Loss on abandonment of noncurrent assets Impairment loss

Provision for product warranties Loss on disaster

Loss on adjustment for changes of accounting standard for asset retirement obligations Total extraordinary loss

... 6 75 409 − − − ... Extraordinary income ... 66 128 1,963 − ...

Ordinary income 7,330

Non-operating expenses

Interest expense Foreign exchange losses Others

Total non-operating expenses

... 725 1,378 180 ... 2,626,706 2,270,191 356,503 265,166 91,337 25,636 9,600 1,862 5,317 5,074 3,772 ... 109,454 44,957 389 45,358 64,095 33,070 31,014 491 5,974 73 913 4,976 − − − ... 2,157 26,244 803 1,557 23,884 − ... 89,184 2,284 27,789 8,821 16,766 2,190 ...

Consolidated total assets at the end of the fiscal year totaled ¥15,540 million, down ¥2,799 million year on year.

(Current assets)

Current assets at the end of the fiscal year increased ¥4,359 million year on year, mainly due to an increase in notes and accounts receivable-trade.

(Noncurrent assets)

Noncurrent assets at the end of the fiscal year decreased ¥7,158 million year on year, mainly due to a decrease in Property, Plant and Equipment and investment securities.

(Current liabilities)

Current liabilities at the end of the fiscal year decreased ¥2,932 million year on year, mainly due to a decrease in short-term loans payable.

(Noncurrent liabilities)

Noncurrent liabilities at the end of the fiscal year increased ¥1,875 million, mainly due to an increase in long-term loans payable.

(Net assets)

Net assets at the end of the fiscal year decreased ¥1,743 million year on year, mainly due to a decrease in valuation difference on available-for-sale securities, foreign currency translation adjustment, and minority interests.

2012 2012

Millions of yen

... 233,381 202,655 30,726 21,831 8,895 2,051 530 349 281 426 464 6,866 3,505 118 3,624 3,242 3,119 122 112 530 111 148 354 68 59 − − 70 8,062 769 1,733 380 1,325 130 2,884 2011

Income before minority interests

... ... ...

Gain on sales of noncurrent assets Gain on step acquisitions

Gain on sales of investment securities

Reversal of provision for loss on liquidation of subsidiaries and affiliates Total extraordinary income

Consolidated Statements of Income (Unaudited)

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Our shock absorbers (Damper Comps*) was adopted for the newly released mini vehicle “Mira e;S” by Daihatsu Motor Co., Ltd. in September 2011.

This product is produced in CHENGDU NINGJIANG SHOWA AUTOPARTS CO., LTD. (china) and is supplied directly to Daihatsu Motor Kyushu Co., Ltd.

This became the first global procurement for Damper Comp, supplying the products produced in overseas base directly to the final vehicle assembles.

*Damper COMP is shock absorber that does not include exterior parts such as Spring, etc.

Our subsidiary company in Vietnam, MACHINO AUTO-PARTS CO., LTD. has changed its company name to SHOWA AUTO-PARTS VIETNAM CO., LTD. In the future, we aim toward further development in the growing motorcycle market in Asia.

With regards to automotive components , shock absorbers (SA hereafter), propeller shaft and differential gear were adopted to “N BOX” by Honda Motor Co., Ltd. (Honda hereafter). Moreover Damper Comps* for “SUBARU BRZ” and ”TOYOTA 86” that were jointly developed by Fuji Heavy Industries Ltd. and Toyota Motor Corporation, front Damper Comps* and Gas Spring for the global strategic vehicle “CX-5” by Mazda Motor Corporation were adopted respectively.

*Damper Comp is SA which does not include exterior parts such as Spring, etc.

With regards to motorcycle components , front fork (Big Piston Front Fork) and rear cushion (Balance Free Rear Cushion) for “CBR1000RR” by Honda, front fork and rear cushion for the New Mid Concept Series (NC700X, NC700S, INTEGRA) were adopted respectively.

China

CHENGDU NINGJIANG SHOWA AUTOPARTS CO.,LTD.

Daihatsu Motor Kyushu Co., Ltd.

Showaʼs product adopted for“Mira e;S”

Topics

SHOWA AUTO-PARTS VIETNAM CO.,LTD.

Sales Expansion and Newly Adapted Product

N BOX

CBR1000RR NC700X NC700S INTEGRA

(13)

In March 2012, SHOWA INDIA PVT. LTD. started sales and production of motorcycle components, aiming to expand in sales to the clients of inside and outside of the Indian motorcycle market which is expected to expand in the future. Furthermore, SHOWA AUTOPARTS VIETNAM CO., LTD. established a new factory (schedule to start operation in December 2012) with its purpose to expand the clients of outside and inside of ASEAN. SHOWA AUTOPARTS (THAILAND) CO., LTD. started production and sales of motorcycle components (schedule to start April 2013).

We started discussing with TRW Automotive Inc. regarding strategic alliance about electric steering technology which does not include capital alliance.

We are analyzing and discussing on the possibility of strategic alliance in order to make maximum use of our advantage, the world class level of technology which can be conductive to provide better services to Japanese clients.

【TRW Automotive Inc.】

Michigan, USA Approx. 60,000

Approx JPY 1279.8 billion (2011 fiscal year) "Sfaety system (seat belt and airbag), steering system, brake system, etc. Location

# of payrolls Sale

Main products

We returned to MotoGP, one of the best two-wheel races by participating as a technical partner with TEAM SAN CARLO HONDA GRESINI. We provide shock absorbers (front folk, rear cushion) to all the class, Moto GP, Moto2 and Moto3. Our purpose is to reflect the technology and reliability cultivated at one of the best race to mass-produced product and we will be aiming to obtain the championship.

Overseas expansion for motorcycle components business

A N N U A L R E P O R T 2 0 1 2

Topics

Discussion started on strategic technology alliances with TRW Automotive

Returning in MotoGP

【Team】

TEAM SAN CARLO HONDA GRESNI FAUSTO GRESINI

ALVARO BAUTISTA, MICHELE PIRRO

HONDA RC213V *same as Honda Workds Team's Team Name

(14)

SHOWA KYUSHU CORPORATION

Honda Cars SAITAMAKITA

Automotive Parts R&D Center (Saitama)

Nagoya Plant

Asaba Plant

Corporate Head Office Manufacturing Plants Domestic Subsidiaries

& Affiliates

R&D Facilities Hadano Plant

Gotemba Plants (No.1 / No.2)

Motorcycle Parts R&D Center (Asaba)

Automotive Parts R&D Center (Tochigi)

Corporate Head Office / Saitama Plant SHOWA SEIKO CO., LTD.

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 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

SHOWAʼs Global Network

As of 31st March 2012

Overview of Business

(15)

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.

Overseas

A N N U A L R E P O R T 2 0 1 2

SHOWAʼ s Global Network

Overview of Subsidiaries and Affiliates

North America

China Europe

Japan

Southeast Asia

South America

SHOWA CANADA INC.

SHANGHAI SHOWA AUTO PARTS CO.,LTD. GUANGZHOU SHOWA AUTOPARTS CO.,LTD. WUHAN PLANT

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

AMERICAN SHOWA, INC. Los Angeles Office

SHOWA DO BRAZIL LTDA.

SHOWA INDUSTRIA E COMERCIO LTDA. NISSIN SHOWA UK LTD.

SHOWA INDIA PVT. LTD.

SUMMIT SHOWA MANUFACTURING CO.,LTD. SHOWA AUTOPARTS (THAILAND) CO., LTD.

P.T. SHOWA INDONESIA MANUFACTURING SHOWA REGIONAL CENTER CO.,LTD.

KAIFA INDUSTRY CO.,LTD. GUANGZHOU SHOWA AUTOPARTS CO.,LTD. SHOWA AUTO-PARTS VIETNAM CO., LTD.

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SHOWAʼs

Technology

Automotive Components

Shock Absorbers

Steering Systems

Gas Springs

Differential Gears

Shock absorbers are critical to an automobile’s character because they make the auto comfortable to ride and affect the attitude and stability of the automobile body. With their superior performance and quality, Showa brand shock absorbers have created satisfied customers around the world. Showa has years of experience with strut modules and is also working on suspension modules combined with peripheral components.

The propeller shaft’s function is to transmit the driving force of the engine to the wheel axis. The long cylindrical shaft rotates at high speed. It must limit vibration and noise while ensuring high durability. Showa supplies leading-edge technologies, and our structural analysis enables a smaller number of components and lighter weight. Further, we have implemented friction welding to achieve high precision, dynamic balance and ultra–strong parts connections.

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, transmission efficiency and quiet operation. Showa’s differential gears are light in weight while exhibiting high performance in automobiles from subcompacts to SUVs. Gas springs help to open and close front hoods and rear gates 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.

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 steering systems (HPS), which use the engine’s power as a drive source, and electric power steering systems (EPS), utilizing the vehicle’s battery. Showa has a full line of power steering models.

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A N N U A L R E P O R T 2 0 1 2

SHOWAʼs

Technology

Motorcycle Components

Outboard Marine Engine Components

Shock Absorbers

Drive Unit Products

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 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.

For motorcycle and ATV drive unit products, Showa has achieved lighter weights through analysis of functions, shapes, and materials, while maintaining excellent durability, transmission efficiency and quiet operation.

Showa motorcycle shock absorbers are used extensively in motorcycle races around the world. From racing machines to scooters, we use our technology and experience to meet a 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 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.

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12.86%

(6,727)

Individuals / others

27.32%

(43)

Financial institutions

0.45%

(28)

Securities Traders

37.83%

(116)

Other corporations

21.54%

(139)

Foreign Investors

Status of Shares

Total Number of Authorized Shares

180,000,000 shares

Total Number of Issued Shares

76,020,019 shares

Number of shareholders

7,053

Shareholder Name

Honda Motor Co., Ltd.

Japan Trustee Service Bank Ltd. (Trust Account)

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

THE BANK OF NEW YORK, TREATY JASDEC ACCOUNT Japan Trustee Service Bank Ltd. (Trust 9G Account)

Showa Holdings

The Bank of Tokyo-Mitsubishi UFJ, Ltd. SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS RBC Dexia Investor Services Bank Account Luxembourg Non-Resident Domestic Rate CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

Major shareholders

Showaʼs Stock Price (06ʼ/4=100)

Showa’s Stock Price Nikkei Average

Shares held

(shares) Investment ratio (%)

25,447,856

7,057,000

2,554,500

2,181,000

1,774,800

1,740,560 1,291,480 1,221,800

1,189,230

1,185,400

33.48

9.28

3.36

2.87

2.33

2.29 1.70 1.61

1.56

Board of Directors and Corporate Auditors

As of 28rd June 2012

Directors

Representative Director and President Yoichi Hojo

Representative Director, Executive _{Kenshi Hirai} Vice President and Executive Officer

Representative Director and Senior _{Akira Kadoya}

Managing Officer

Directors and Managing Officers Hajime Hirata

_{Mitsutaka Sugino}

Directors and Operating Officers Tetsuo Nishikiori

_{Nobuyuki Sugiyama}

_{Masaharu Sobue}

Share Distribution by Shareholders

Exective Officers

Managing Officers Atsushi Izumina

_{Takeshi Nagao}

Operating Officers Teru Oda

Akira Wada

Kenichi Ono

Masami Matsuo

Yutaka Ueno

Shuichi Kawahara

* Serving consecutively as both Director and Executive Director. Corporate Auditors

Statutory Auditors Tetsurou Aoyama

_{Yuetsu Sato}

Auditors Tsuneo Mizusawa

_{Hikoyuki Miwa}

* Tsuneo Mizusawa and Hikoyuki Miwa are outside company auditors.

Outlook of Consolidated Business Performance

‘06/4 7 10 ‘07/1 4 7 10 ‘08/1 4 7 10 ‘09/1 4 7 10 ‘10/1 4 7 10 ‘11/1 4 7 10 ‘12/1 4 7 0