On January 24, 2011, Honda Motor Co., Ltd. (the "Company") announced the discovery of inappropriate trading activity by the Seafood Section of the Foodstuff Division of Honda Trading Corporation ("HT") and the resulting financial impact.

Today, the Company received a report by its investigation committee on the facts, causes, responsible persons and existence of any similar incidents at HT, and the Company wishes to announce such results together with the measures it is taking to prevent a recurrence of such incident.

The Company deeply regrets any concern or difficulty that this matter may have caused its shareholders, business partners or other stakeholders.

With its inventory management trading partners, typically (1) HT imposes a requirement that counterparties repurchase inventory within one year, (2) counterparties repurchase inventory at a price which includes commission and interest, and (3) during the time that the inventory is held by HT, the risk of spoilage and market risk of the counterparties is born by the counterparties, by agreement.

In the investigation, there was nothing found with respect to the motivation and background conditions of the Responsible Individual's involvement which suggested that he received kickbacks or other personal gain from counterparties.

The Responsible Individual made statements to the effect that the significant factors constituting his motivation and background conditions were the pressure he was under for revenues, and the fact that he also wished to avoid scrutiny of the Seafood Section's losses, so he transferred the losses of the Seafood Section to inventory trading management counterparties and agreed to inflate the purchase prices. While this type of relationship continued, the Responsible Individual and the counterparties gradually developed "give-and-take" relationships, and inventory management trading with inflated purchase prices continued over a long period. Thereafter, as the inventory total rapidly expanded through inflated purchase prices and circular trading, the counterparties' cash flow problems became severe, and since then, trying to evade discovery of a string of problems that could arise from the counterparties' failure, the Responsible Individual continued inventory management trading in a "hand-to-mouth" state.

The investigation uncovered no evidence of organizational involvement on the part of supervisors and management of HT.

However, the main reasons for why the inappropriate trading activity was allowed to occur and why it was not discovered over a prolonged period, include long term ossification of personnel which gave the Responsible Individual exclusive responsibility for inventory management trading for close to 10 years, and in light of that, management and supervisors did not have sufficient experience and understanding of the seafood industry. Additional factors which led to the delayed discovery may have included problems in risk management, such as HT's credit exposure management system which did not fit with the reality of HT's inventory management trading and functional defects in IT systems, infrequent use of internal whistle-blowing systems, insufficient compliance awareness and a diluted sense of ownership on the part of executives and employees which led to an organization in which managing problematic trading was left entirely to the individual in charge.

The investigation did not confirm the existence of any significant problems in the Company's group internal controls that would constitute a breach of legal obligations, with respect to the inappropriate trading activities in connection with HT's inventory management trading. However, as discussed below, with respect to measures to prevent recurrence, the Company thinks it important to further strengthen internal control over group subsidiaries and not use the Company's prior corporate governance principle toward subsidiaries based on "independent governance" (jishu jiritsu) as an excuse.

With respect to HT and for each of the Company's subsidiaries, the Company will establish a mechanism to monitor operations and the condition of internal controls at group companies by requiring organization and department heads to confirm adherence to legal and company regulations and the operation of risk management systems, and to regularly report the results to supervisors and the parent company.

The Company will verify the operation and condition of internal controls at subsidiaries, and strengthen cooperation with each subsidiary's "compliance officer" who implements a mechanism for compliance, to support the most appropriate system maintenance.

The Company will establish a system for monitoring the supervision and governance conducted by seconded employees who serve as outside directors and external auditors of the subsidiaries.

The Company will support and confirm, across the board and on a day-to-day basis, holistic maintenance of internal control systems at its subsidiaries.

With respect to the Company's operational audit of subsidiaries, the Company will enhance the operations and procedures for preliminary audits and while strengthening operational audits, clearly articulate audit standards so that audits can be conducted more effectively from a compliance standpoint.

The Company's operational audit office will cooperate with the audit departments of subsidiaries and construct a mechanism for internal audit of subsidiaries to be strengthened and for continued improvement of audit functions.

The Company will strengthen awareness of legal obligations and responsibilities among the directors and auditors of its subsidiaries.

The Company will conduct a review of Honda group's code of conduct, "Our Course of Action", from the standpoint of increased awareness of legal compliance and fair trading, as well as address common awareness of these matters.

Among the group companies, the Company will strengthen communication of new developments in regulation and industry and the risk concerns they raise.

The Company will, through the Company's "Corporate Ethics Improvement Proposal Window" which accepts proposals relating to corporate ethics as the principal conduit, strengthen support for group companies to swiftly grasp and solve group company risks.

The Company will strengthen awareness of the role of the "Compliance Officer" among group companies and increase compliance responsibilities.

HT will thoroughly oversee, on a regular and consistent basis, the formulation and maintenance of HT's company rules regarding credit limits, internal approval and inventory management and implementation of the rules from the board of directors.

The Company will strengthen oversight of the financial situation of HT by improving HT's IT system for managing revenues and inventory, with increased capability for internal controls.

HT has halted inventory management trading in its Seafood Division and will withdraw from the seafood business, concentrating its management resources in fields in which it can demonstrate Honda group's strength and capability.

The Company will establish and clarify the guidelines and discussion items of the important management meetings of HT and Honda's group subsidiaries.

The Company will strengthen the risk analysis undertaken at the time of entry by a group subsidiary into a new business.

Since one of the causes of this incident is the fact that one employee held the same responsibilities over a long period, HT is revising its long term ossification of personnel and instituting a policy of timely and appropriate personnel rotations. The Company will conduct fundamental reviews on the sustainability of a specific business or department in such case where there is a likely risk from long term ossification of personnel.

The Company made adjustments in the third quarter (October 1 to December 31, 2010) of the consolidated 2010 reporting period for overstated net sales and other operating revenue of ¥9.888 billion and related operating costs and expenses which were recognized in the first half (April 1 to September 30, 2010) of the consolidated 2010 reporting period.

In addition, in recognition of past losses as a result of this incident as of the beginning of the third quarter of the consolidated 2010 reporting period (October 1 to December 31, 2010), the Company recorded one-time charge in this quarter of ¥14.403 billion as Selling, General and Administrative Expense. As a result, operating income was reduced by the same amount in that reporting period.

The Company does not consider the above to have a material impact on the consolidated financial position or operation results with respect to the first three quarters of the consolidated 2010 reporting period taken cumulatively and individually or prior reporting periods (on and before March 31, 2010).

In order to illustrate the responsibilities of the related persons, as of February 14, 2011 the following disciplinary measures and personnel actions were conducted.

At an extraordinary general meeting of shareholders of HT held on February 14, 2011, the following individuals were elected officers and auditors and appointed President & CEO of HT.