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HINO MOTORS, LTD.

Annual Report 2004For the Year Ended March 31, 2004

Hino Motors, Ltd., was founded in 1942 and has a history of more than 60 years in manufacturing commercial vehicles. At

present, the Hino Group produces trucks, buses, various types of engines, and spare parts. The Group also undertakes

the commissioned production of compact commercial vehicles and passenger cars for Toyota Motor Corporation.

In its long-term vision for fiscal 2010, Hino Motors has set an objective of establishing a presence for the Hino

brand in markets worldwide, which will enable it to sell 150,000 vehicles annually and gain the fifth-leading position

in the global market. To attain this objective, Hino is implementing a medium-term management plan that has the

goals of “structural earnings reform,” “production reform,” “structural reform for Toyota business operations,” and

“further fixed cost reform.”

Cautionary Statement with Respect to Forward-Looking StatementsStatements contained in this annual report that are not historical facts are forward-looking statements that reflect our plans and expectations. These forward-looking statementsinvolve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to differ materially from those anticipated inthese statements. These factors include (i) changes in economic conditions, currency exchange rates, laws, regulations, and government policies or political instability in ourmajor markets, (ii) circumstances relating to our ability to develop, in a timely manner, and achieve market acceptance of new products, and (iii) shortages of fuel or interrup-tions in transportation systems, labor strikes, work stoppages, or other interruptions or difficulties in the employment of labor in the major markets where we purchase materi-als, components, and supplies for the production of our products or where our products are produced, distributed, or sold.

K A I Z E NKaizen—continuous improvement—acceleratingHino’s future progress

Past Present FutureDomestic Mainly new Focus on Strengthening Business vehicle value chain proposal-based

sales branding marketing, services

Overseas Mainly Asia Aggressive strategies Establishing globalBusiness for North American, brand

Chinese markets

Commission Mainly Global supplier of Expanding unit Business for Japan chassis and auto component Toyota Motor frames orders worldwideCorporation

Power Mainly Vehicle-mounted Expanding vehicle-Engineering general- equipment for mounting and Business purpose other companies general-purpose

products businesses

Contents

2 Message from the Management

10 Directors, Auditors, and Executive Officers

11 Corporate Social Responsibility

13 Five-Year Summary

14 Financial Review

18 Consolidated Financial Statements

23 Notes to Consolidated Financial Statements

35 Report of Independent Auditors

36 Stock Information

37 Consolidated Subsidiaries and Affiliates

The Sundial Production Method has been adopted for the manufacture of specified vehicles for the North American market.The method entails attaching the frame, engine, and seats to the vehicle from stations located around the outer edge of aturntable that rotates a full circle over the course of an hour. The method is symbolic of Hino’s unprecedented Kaizenapproach for consistently honing and improving production.

{At the Forefront of

Innovation

HINO MOTORS, LTD. 1

2 HINO MOTORS, LTD.

In fiscal 2003, ended March 31, 2004, Hino Motors, Ltd.’s

net sales rose 23.7% year on year, to ¥1,051,587 million

(US$9,950 million), breaching ¥1 trillion for the first time

on the back of sharply higher sales volumes in all three

business segments: domestic business, overseas busi-

ness, and Toyota businesses (commission business

for Toyota Motor Corporation (TMC)). Earnings reached

historically high levels, as operating profit increased

2.3 times, to ¥44,567 million (US$422 million), and net

income expanded 6.9 times, to ¥34,023 million (US$322

million).

Record sales and earnings were attributable to stricter

standards for diesel vehicles in the Tokyo metropolitan

area and the Automobile NOx/PM Law* in Japan, which

spurred replacement buying and sharply boosted sales

volume. Hino’s earnings soared thanks to the rewards

steadily yielded by structural reforms and overall cost-

cutting measures as well as initiatives to change the corporate

culture that have been implemented over the past three

years.

* The Law Concerning Special Measures for Total Emission Reductions toNitrogen Oxides and Particulate Matter

The Company enacted managerial changes to accelerate

its reform initiatives, appointing Tadaaki Jagawa (formerly

President) as the new Chairman of the Board and Shoji

Kondo (formerly Executive Vice-President) as President.

Hino is stepping up the pace of reform at all levels. Our

long-term vision for fiscal 2010 is to establish the Hino

brand in markets worldwide, with annual sales of 150,000

vehicles and the fifth-leading position in the global market.

Medium-Term Management Plan 2004

To make its long-term vision a reality, Hino formulated a

medium-term management plan covering the three years

beginning in fiscal 2004. The plan has four principal objec-

tives: (1) structural earnings reform aimed at shifting the

Medium-Term Management Plan 2004 Targets (Years ended March 31)

0

15

30

45

60

0

300

600

900

1,200

0

3

6

9

12

15

18

0

30

60

90

120

0

60

120

180

240

’07’06(Planned)

’05’04’03’02 ’07’06(Planned)

’05’04’03’02

’07’06(Planned)

’05’04’03’02 ’07’06(Planned)

’05’04’03’02

Key Ratios(%)

� ROE

� Operating profit/net sales

EarningsTargets(Billions of yen)

� Net sales (leftscale)

� Operating profit(right scale)

Unit Sales ofToyota-BrandVehicles(Thousand units)

Unit Sales ofHino-BrandVehicles(Thousand units)

� Overseas

� Domestic

Message from the Management

HINO MOTORS, LTD. 3

earnings structure from Japan-centered operations to

overseas businesses, (2) production reform focused on

bolstering product capabilities and increasing price

competitiveness, (3) structural reform for Toyota business-

es to expand unit operations in overseas markets, and (4)

further fixed cost reform through a revamping of these

costs worldwide. In addit ion, from fiscal 2002 the

Company adopted a rolling method for revising its three-

year medium-term plans each year.

Our management plan covers two distinct areas: the

Hino brand business and the Toyota businesses.

Hino Brand Business

In the Hino Brand business, the Company aims to build a

formidable presence in global markets through separate

endeavors in domestic, overseas, and power engineering

(PE: diesel engines) fields.

In domestic business, the emphasis is on proposing and

delivering products and services that reduce costs for cus-

tomers over the long term while increasing benefits for cus-

tomers. In overseas business, the focus is on lowering costs

by boosting production in Asia, launching and starting the pro-

duction of trucks especially for the North American market,

quickly building a network capable of selling 10,000 vehicles a

year in North America through the renovation of the sales and

services network, and forging full-fledged expansion in China.

In the PE business, we are expanding unit sales of engines for

vehicle installation and construction machinery that incorporate

industry-leading technologies for eliminating exhaust fumes.

Toyota Businesses

In Toyota businesses, the Company aims to make further

contributions to the global production of the Toyota Group,

overseeing activities from product development to the

manufacture of the frames used in Toyota vehicles while

building a global supply network for its chassis.

Domestic Truck Market and a Full Lineup in the

Four-Star Truck Series

Conforming with strengthened regulations on exhaust

emissions for diesel trucks is one way that the truck manu-

facturing industry and the logistics industry are responding

Tadaaki JagawaChairman

“ ”

We aim to build the Hino brand worldwide asconfident and highly dependable without everstraying from the lessons we have learnedfrom our customers as we renew and revampthe foundations of our Company.

Shoji Kondo President

“ ”

I think we have to boldly adopt a fresh newapproach that reflects in the wishes of ourcustomers rather than continuing to act basedon our past perspectives and experiences.

4 HINO MOTORS, LTD.

Truck Market in Japan

to environmental needs. Measures for curtailing harmful

diesel exhaust emissions are targeted separately at truck

manufacturers and truck users.

New regulations for manufacturers concerning nitrogen

oxides (NOx) and particulate matter (PM) in exhaust emis-

sions are applicable to newly registered models under the

New Short-Term Emissions Regulations enacted in

October 2003, as illustrated below left. In addition, New

Long-Term Emissions Regulations slated to take effect in

October 2005 aim to curtail NOx emissions another 41% to

50% and PM emissions another 75% to 85%. A new set of

long-term regulations is already under discussion.

In advance of the enforcement of new rules, the Ministry

of Land, Infrastructure and Transport launched the Ultra-

Low PM Emissions Diesel Vehicle Certification System in

2002. This system stipulates that PM content be reduced

75%, to 0.05 gram per kilowatt hour (g/kWh), for Three

Star vehicles, and 85%, to 0.027g/kWh, for Four Star

vehicles. This is intended to compel diesel manufacturers

to produce more environmentally efficient vehicles.

New regulations for users include the Automobile NOx/PM

Law and restrictions inaugurated in October 2003 covering

diesel-powered vehicles in the Tokyo metropolitan area. The

regulations, covering Tokyo and three surrounding prefectures,

prohibit the operation of diesel vehicles with PM levels above

the permissible count. The tighter rules triggered sharply higher

demand in the domestic truck market in fiscal 2003.

As a socially responsible manufacturer of diesel-

powered vehicles, Hino is diligently promoting its Four Star

Project aimed at curtailing PM emissions to the maximum

level under the new regulations. In August 2003, the

Company launched a light-duty two-ton truck that not only

satisfied the New Short-Term Emissions Regulations but

was also the first vehicle in Japan to clear Four Star certifi-

cation requirements. We followed with a medium-duty

truck in October, the world’s first light-duty hybrid truck in

Truck Market in Japan and Hino’s Superior Lineup (Years ended March 31)

0

60

120

180

240

300

’04’03’02’01’00

NOx (g/kWh)

PM (g/kWh)

0.25

4.5

0.18

3.38

0.14

2.54

0.09

1.69

0.05

0.027

0.0850 2

Good ★

Excellent ★★

Ultra ★★★

Target

Long-term EmissionsRegulations (from 1988)

New Short-Term EmissionsRegulations (from Oct. 2003)

New Long-Term EmissionsRegulations (from 2005)

75% Reduction ★★★

★★★★85% Reduction

Low PM EmissionsDiesel Vehicle CertificationSystem (from Apr. 2001)

Ultra-Low PM EmissionsDiesel Vehicle CertificationSystem (from Sept. 2002)

Regulationsfor DieselEngineEmissionsand Hino’sFour StarTruck Series

Truck Marketin Japan(Thousand units)

� Heavy-DutyTrucks

� Medium-DutyTrucks

� Light-DutyTrucks

� Diesel Particulate activeReduction (DPR) with thediesel hybrid engine

HINO DUTRO Hybrid

HINO RANGER Hybrid

HINO DUTRO

HINO RANGER

HINO PROFIA

� DPR system

Note: Sales of trucks are based on figures for newly registered vehicles.Source: Japan Automobile Dealers Association and Hino Motors

HINO MOTORS, LTD. 5

November, and a heavy-duty truck in November, offering a

full lineup of vehicles meeting the strictest Four Star regula-

tions and pioneering the drive to meet PM standards under

the upcoming long-term regulations.

Looking ahead, as government authorities apply even

stricter exhaust regulations, Hino will strive to further

extend the life cycles of its products and alleviate the envi-

ronmental impact of its trucks as an innovator in the devel-

opment of environmentally sound vehicles.

Strengthening the Domestic Truck Sales Network,

Developing Superior Services

In the domestic truck market in fiscal 2003, stricter environ-

mental standards in the Tokyo metropolitan area and the

tightening of other environmental regulations temporarily

boosted demand. Overall demand surged 49.1%, to 117,362

vehicles, in the heavy-duty and medium-duty truck market

and 54.3%, to 146,886 vehicles, in the light-duty truck mar-

ket. A reactionary decline in demand is anticipated, and the

market faces uncertainty ahead in light of sluggishness in the

domestic cargo market and reforms to logistic practices.

In this environment, strengthening the sales foundations of

the Hino Group is essential and will be achieved especially by

reconstructing the sales company network. Hino is focusing on

creating a sales network capable of generating profits even

during downturns in new truck demand, such as that anticipat-

ed from 2007. To this end, the Company is working to improve

service quality at sales dealers. For example, it is proposing

marketing activities that first and foremost offer benefits for

Hino customers and providing DANTOTSU (“Much Superior”)

Services to strengthen its underlying earnings platform.

With regard to domestic sales, although Hino has held

the top position in the heavy-duty and medium-duty truck

market for 31 years since 1973, cultivating new customers

and boosting its share of the light-duty truck market remain

important priorities. Consequently, the Company focuses

on offering total logistics support as the linchpin of a

new business model for trucks. That is, in addition to relying

on revenues from new vehicle and parts sales and repair

services for earnings, we aim to increase value to our

customers through a plethora of services, including used

truck sales, insurance and lease financing, the supply of

Notes: 1. In the domestic market, sales of trucks and buses are calculated using figures for new registrations and may differ marginally from the actual number of units sold.2. Heavy-duty trucks: Payload 5t and over, gross vehicle weight (GVW) 8t and over; Medium-duty trucks: Payload more than 3.5t and less than 5t, GVW less than 8t;

Light-duty trucks: Payload more than 2t and less than 3.5t, GVW less than 8t

Hino’s Domestic Unit Sales and Market Share (Years ended March 31)

0

8

16

24

32

0

8

16

24

32

0

4

8

12

0

8

16

24

0

4,000

8,000

12,000

16,000

0

5,000

10,000

15,000

20,000

0

5,000

10,000

15,000

0

1,000

2,000

3,000

’04’03’02’01’00 ’04’03’02’01’00

’04’03’02’01’00 ’04’03’02’01’00

Medium-DutyTrucks(Units, %)

� Domestic unitsales (left scale)

� Market share(right scale)

Heavy-DutyTrucks(Units, %)



Buses(Units, %)



Light-DutyTrucks(Units, %)



6 HINO MOTORS, LTD.

mounting superstructures, and the provision of consultation

on ways to improve transportation businesses. To bolster

these new services, the Company has been focusing on

expanding the lineup of precautionary services it offers cus-

tomers. For example, it provides convenient vehicle checks,

quick insurance inspection and certification, around-the-

clock maintenance services, and maintenance leases.

Toyota Businesses: Future Expansion and Alliances

In Toyota businesses, Hino produces such Toyota models as

HILUX SURF and DYNA on commission in Japan and sup-

plies unit parts overseas to the automaker. To date, product

development and consignment production have mostly been

confined to Japan; however, the Company plans to shift to

the supply of chassis developed and produced globally. The

intention is to expand the Hino brand business by helping

TMC advance its global strategy and thereby further

strengthen the Company’s own business foundations.

Specifically, Hino is supplying unit parts for multipurpose

vehicles in Thailand starting in summer 2004 as part of

TMC’s IMV Project and for the new TACOMA pickup truck

introduced in the North American market.

Additionally, Hino is working to forge alliances with man-

ufacturers in Japan and abroad.

As a first step, the Company signed a cooperative

agreement with Scania AB, the Swedish manufacturer of

trucks and buses. The two companies have developed

HINO SCANIA, a heavy-duty tractor, which has been on

the market since September 2003. In bus manufacturing

operations, Hino and Isuzu Motors Limited established the

holding company J-Bus Ltd. through a transfer of their

equity in bus manufacturing subsidiaries. In its OEM agree-

ment to supply mid-range diesel engines to Nissan Diesel

Motor Co., Ltd., Hino began supplying the Hino J series

engine for medium-duty trucks to its partner in 2004.

The strategy of selectively consolidating resources

through tie-ups with other companies is crucial for Hino as

it focuses on rationalizing business operations and

expanding on a global scale.

The Big Bang Project

Hino is enhancing cost-competitiveness by reducing thenumber of categories as well as the volume of partsused in its vehicles in an effort to improve its underlyingearnings structure in the truck business. Vehicle partshad previously been separated into classifications forheavy-, medium-, and light-duty trucks. Moreover, theCompany was producing 492 types of basic vehiclescombining different chassis, frame lengths, and numbersand dispositions of axles according to the requirementsof individual customers. Resolving to take a newapproach, we have integrated the categories andreduced the number of parts. For example, light-dutytrucks now have more parts in common, which, in turn,has cut the number of frames from 16 to two. Lookingahead, the Company plans to further cut the categoriesand number of parts for heavy-, medium-, and light-dutytrucks to one-tenth of the current levels by eliminatingbarriers between categories and using the same partsfor different types of trucks. The number of vehicle partshas already been reduced from 3 million to 2.3 million.

Hino’s variable, quick production process (SundialProduction Method) has improved the efficiency oftruck manufacturing. To enable small-lot, multiplevehicle production, the Company switched from pressmolding to roll molding and from punch-hole process-ing to laser processing in frame production and from

painting to powder coating for parts production. Invehicle assembly, we now combine a number of partsinto modules that can be installed using revolvingturntables. The Big Bang Project has been crucial toour efforts to further enhance production efficiency.

The ult imate goal of the Big Bang Project,unprecedented in scope, is to switch to a productionsystem for assembling the maximum number of vehi-cles using the minimum number of modules. It entailsthe following changes:

� Switching to vehicle classifications based ongross vehicle weight (GVW) instead of theheavy-, medium-, and light-duty categories

� Focusing on customized truck productionrather than production based on fixed classifi-cations and sizes

� Designing truck series based on unit modulesrather than parts separated into heavy-, medi-um-, and light-duty categories

� Designing fully assembled vehicles instead oflayouts for rear body part installation

The Big Bang Project encompasses major innova-tions not only in product development, but in produc-tion and sales as well. The final objective is to providemaximum support to customers so they can choosethe best possible vehicles for their particular needs.

Mounted RearBody

Front-HalfModule with a

Cabin

Front-HalfModule

Big Bang Module Development

Rear-HalfModule (freely

adjustable size)

Cabin Module

HINO MOTORS, LTD. 7

Overseas Business Development

United States

One goal of the new medium-term management plan is to

discard the previous earnings structure that relied almost

solely on Japan and replace it with a structure with multiple

earnings sources from overseas businesses.

In fiscal 2003, sales of Hino brand trucks totaled 51,242

units in Japan and 35,776 units overseas. The management

plan targets full-fledged expansion in North America and

China, with the overseas sales volume exceeding the domes-

tic sales volume in fiscal 2005 at the earliest. The Company

expects overseas sales to rise sharply to 67,000 units in fiscal

2006 even as domestic sales stay flat at 51,000.

Hino has significantly altered its strategy for North

America, which is likely to become its next core market.

First, in product strategies, Hino has revised specifications

for trucks developed in Japan for the niche cab-over-engine

truck market and launched them in North America, creating

trucks specifically for the region and expanding in earnest in

the mainstay Class 4-7 categories of conventional (bonnet-

type) trucks. The Company aims to sharply boost North

American sales from 2,000 trucks annually to 10,000 units in

2006 and 30,000 units in 2010. In line with the expansion

plans, we will stop supplying specialty trucks through the

export of complete built-up vehicles and shift output to TABC,

Inc., a U.S.-based Toyota Group company, in October 2004.

The Company has already reorganized sales companies for

auxiliary parts under Hino Motors Manufacturing USA, Inc.,

providing the means for local parts supply to TABC and for

the production of unit parts for Toyota vehicles.

Hino Motors Sales USA, Inc., has greatly enhanced

its sales capabilities through its alliance with Penske

Corporation. Sales in the United States had been concen-

trated in the East Coast and West Coast regions, which

Truck Market Overseas

The North American Project, which aimed to develop a truck espe-

cially for the North American market, began as a Companywide

effort in 2000. In creating this vehicle, the Project aimed for

improvements in “reliability,” “economy,” and “driving comfort.” The

Project also aimed to realize a superior vehicle and superior service

by combining the No. 1 technologies and the No. 1 units of both

Hino and its North American suppliers. In addition, in test trials, the

Project actively took advantage of its alliance with the Penske

Group by providing, for example, an advanced test vehicle as a

demonstration model to Penske Truck Leasing Co., L.P., and

received feedback on points to improve.

Development of a Conventional Truck Especially for the North American Market

8 HINO MOTORS, LTD.

account for 30% of the country’s total demand. However,

we plan to tap into dealership networks in the middle of the

country through the tie-up. Thus far, sales have been

robust—1,800 trucks were sold in the United States and

500 in Canada at gatherings for launching new products

held in the United States and Canada in October 2003.

In addition, Hino has signed a sponsorship contract with

Penske Racing, Inc., for the Indianapolis 500 auto race in

an effort to boost its name recognition in the United States.

Asia and China

In Asia, Hino’s most important market after Japan, we are

striving to quickly turn profitable. The focus is on enhancing

the price competitiveness of medium- and light-duty trucks

and increasing sales. To these ends, the Company has

revamped its operating bases in Thailand and Indonesia,

separating production from sales activities. Production affili-

ates are working to increase local parts procurement ratios

and lower costs while aiming to launch new models at the

same time they are introduced in Japan. In the unit supplier

business, one objective is to expand operations through

unit production for TMC. Hino is also redoubling initiatives

to increase sales capabilities by improving management at

sales agencies and dealerships.

In China, high-speed transportation needs are surging as

a new highway network spreads across the country, and

the market is growing rapidly for large, high-performance

trucks with superior horsepower, speed, durability, and

environmental compatibility. To meet these needs, Hino

announced the formation of an engine production and

sales company in conjunction with Shanghai Diesel Engine

Co. in September 2003. Shanghai Hino Engine Co., the

50-50 joint venture thus created, is building a plant with

the capacity to produce 15,000 engines annually and is

slated to begin full-scale production and sales of large

engines mainly for Chinese truck makers in November

2004. The joint venture will be Hino’s first major base for

engine production and sales in China. Looking ahead, we

plan to expand operations with an eye on launching Hino

brand trucks in the Chinese market.

Overseas UnitSales of Hino-Brand Vehicles(Thousands)

Overseas Business Performance (Years ended March 31)

Overseas UnitSales(Units)

Fiscal 2003Overseas UnitSales byCountry(%)

� Thailand

� Indonesia

� U.S.A.

� Australia

� Malaysia

� Others

0

10,000

20,000

30,000

40,000

’04’03’02’01’00

0

10

20

30

40

50

60

70

Thailand

23.5%

Indonesia

13.0%

Australia

10.0%

Others

38.3%

U.S.A.

6.9%

Pakistan

8.3%

35,776units

’07’06(Planned)

’05’04

HINO MOTORS, LTD. 9

CorporateGovernance

In Conclusion

The Hino Motors Group has consistently worked to enhance

convenience and efficiency in transportation and the shipping

of merchandise—two areas vital to everyday life. Our goal is to

work together with those around us in a partnership that will

improve efficiency and create a more rewarding community life.

Our fundamental goal is to increase enterprise value for the

benefit of all our stakeholders, including shareholders, cus-

tomers, employees, and business partners, in harmony with

the surrounding environment and in co-existence with nature.

To this end, Hino has fully separated functions for policy

formation and execution and is further improving trans-

parency through the close monitoring of management

practices by general shareholders’ meetings, board of

directors’ meetings, and other means, and through the

executive board system. In addition, the Company has

devised the Hino Code to clarify appropriate conduct for

management and employees. A committee has been

established to ensure that personnel strictly observe the

code as we endeavor to further enhance compliance.

Looking ahead, we anticipate challenging business condi-

tions. However, the Hino Group will work concertedly on

building the solid earnings foundations that will afford the Hino

brand a stronger presence in all truck markets worldwide.

June 2004

Tadaaki Jagawa

Chairman

Shoji Kondo

President

Past Present FutureModel Changes Once every 12 years Flexibly introducing new New models fully attuned to

models customer needs

Technological In line with other Pioneer in environmental Front-runner in environmental Development companies technologies and safety areas

Manufacturing Mainly Japan Promoting production Globalizing productionworldwide

Parts Procurement Mainly Japan Local supply bases in Choosing the best possible North America suppliers worldwide

Earnings Structure Parent company in Global consolidation Turning profits from all vehicles Japan worldwide

Establishing the Hino Brand Worldwide

Chairman of the Board

Tadaaki Jagawa

President, Member of the Board

Shoji Kondo

Executive Vice-President, Member of the Board

Takayuki Suzuki, Hideaki Tobita

Senior Managing Director, Member of the Board

Takeshi Iida, Shinichiro Sugisaki, Narai Sugasawa,

Bunji Hagiwara, Kunihiko Susuki, Takahiko Yamamoto,

Michiaki Mori, Masakazu Ichikawa, Toshiki Inoue

Statutory Auditors

Hisaaki Uga, Kiyoshi Takada, Takatoshi Ishigami,

Fujio Cho, Akio Tsujii

Senior Executive Officers

Manabu Kasai, Seiei Okazaki, Noboru Kaikawa,

Hideki Ueda, Yoshihide Maeda, Ryoichi Shimizu,

Takehiko Nakano

Executive Officers

Shinji Fujimoto, Kenji Wagu, Shin Endo, Susumu Mita,

Makoto Shimonari, Akira Senuma, Kimio Hamano,

Yoshinori Noguchi, Takuo Kawasaki

10 HINO MOTORS, LTD.

Directors, Auditors, and Executive Officers(As of August 29, 2004)

Chairman of the Board

Tadaaki Jagawa

President, Member of theBoard

Shoji Kondo

Executive Vice-President,Member of the Board

Takayuki Suzuki

Executive Vice-President,Member of the Board

Hideaki Tobita

Senior Managing Director,Member of the Board

Takeshi Iida


Shinichiro Sugisaki


Narai Sugasawa


Bunji Hagiwara


Kunihiko Susuki


Takahiko Yamamoto


Michiaki Mori


Masakazu Ichikawa


Toshiki Inoue

Corporate Social Responsibility

HINO MOTORS, LTD. 11

Basic Management Policy

Hino Group companies operate in business domains that are

essential for transporting people and goods and indispensable

for daily life. Group companies provide equipment and services

that are linchpins of the transport and transportation fields. All

members of the Group share a common focus on working to

make life more comfortable and rewarding for their customers,

associates, and the community at large.

Our corporate activities are geared toward enhancing value

for all our stakeholders, including shareholders, customers,

employees, and business associates. We work to ensure that

our business practices are in harmony with the environment.

Corporate Governance and Compliance Initiatives

Basic Corporate Governance Policies

In addition to the regular legal oversight of business exercised

by the general shareholders’ meeting, the board of directors,

and other established institutions, Hino is subject to the over-

sight of an executive board created to guarantee the separa-

tion of policymaking and policy execution and further improve

transparency. Moreover, the Company has devised the Hino

General Ethical Code of Conduct to clarify appropriate busi-

ness practices for managers and employees. The Ethics

Committee, chaired by the Company president, was created to

ensure that all employees practice sound ethical behavior.

Corporate Governance Practices

(1) Corporate Institutions

The Auditing Committee is composed of three standing audi-

tors and two outside auditors. In addition, the Company has

created management committees to report vital information on

key Companywide policies, policy debates, business manage-

ment, and other issues. These committees complement the

regular legal institutions overseeing corporate governance,

including the general shareholders’ meeting, the board of

directors, and the board of auditors.

(2) Internal Control and Risk Management Systems

Hino has operated an auditing office in the Accounting Division

for some time for inspecting the Company’s internal control

systems. The Hino General Ethical Code of Conduct specifi-

cally outlines proper ethical practices for the management

team and employees, and the Ethics Committee ensures that

ethical behavior is strictly obeyed as part of the Company’s

built-in compliance system. The Company plans to develop

ethical codes for its subsidiaries in order to strengthen the risk

management capabilities of the entire Hino Group.

Environmental Protection

In March 1993, the Company established the Hino Global

Environmental Charter to promote environmental protection

throughout its operations as well as the Hino Motor Voluntary

Plan for the Environment, which clarifies specific goals related

to environmental preservation. Also in 1993, the Hino

Environmental Committee was founded, with the Company

president as its chairman, to gather members from across

broad divisional lines and promote environmental protection.

The Product Environmental Committee and the Production

Environmental Committee, both working underneath the Hino

Environmental Committee, were formed to promote concrete

environmental policies based on the Voluntary Plan.

In March 2002, the Recycling Committee and the Sales

Company Environmental Committee were formed. The

Recycling Committee builds internal mechanisms in different

business areas for meeting new standards established under

the Auto Recycling Law. The Sales Company Environmental

Committee works to build and strengthen environmental man-

agement systems at sales companies.

Moreover, Hino aims to gain certification under the ISO

14001 environmental management system in additional cate-

gories and expand its use of the system. The Company is pro-

moting environmental protection not just internally, but


throughout the Hino Group, including among its affiliates in

Japan and abroad and sales companies.

In fiscal 2003, expenditures for environmental protection

amounted to ¥20.6 billion, equivalent to 2.4% of total sales.

From an economic perspective, the resulting reductions in

energy consumption pushed down energy costs by ¥31 mil-

lion.

Hino’s Low-Emission Technologies

Hino develops products in line with the basic concept that the

performance features of its vehicles should help improve the

environment. The Company inaugurated the Four Star Project

in line with this concept. The project is aimed at acquiring Four

Star ratings for its vehicles. This is the highest possible rating

under the Ministry of Land, Infrastructure and Transport’s certi-

fication system targeting minimum particulate matter (PM)

emissions from diesel fueled trucks and cars. In November

2003, the Company launched the large Hino FRONTIER truck

under the Four Star Project, creating a full truck lineup. The

Diesel Particulate active Reduction (DPR) system is Hino’s

leading low-emission technology. The system combines low-

emission diesel engines with the Company’s DPR Cleaner,

which boasts a 95% collection rate for emissions, to incinerate

and dispose of collected PM. Another important technology is

the Hybrid Inverter-controlled Motor & Retarder (HIMR) system,

the first commercialized hybrid diesel and electronic power

train, which was introduced in 1991. DUTRO light-duty trucks

combine a new diesel hybrid engine incorporating a high-per-

formance DPR system with the HIMR system. This greatly

reduces NOx emissions while cutting fuel costs 1.3 times in

comparison with currently marketed standard diesel trucks.

Diligent Focus on Customer Needs

Hino is making concerted efforts to boost product safety in all

aspects of its business operations, from product development

to after-sales services.

Rigorous Pursuit of Safety Technologies

The Company is striving to enhance the total safety of its vehi-

cles through both active and preventive measures. R&D

themes for safety are divided into four distinct categories:

� Preventing accidents before they happen by eliminating

driver fatigue

� Enhancing the operating, turning, and stopping perform-

ance of vehicles in order to prevent collisions, skidding, and

other accidents

� Protecting drivers and passengers during accidents

� Stopping injuries to pedestrians, motorcycle riders, and

other third parties during accidents

One aim of R&D is to enhance overall product safety. For

example, Hino is developing a safe driving support system for

preventing accidents before they can occur. The system mea-

sures the distance from the vehicle in which it is installed to

that directly in front of it. When the system-equipped vehicle

draws close to a slower vehicle travelling ahead of it, a scanner

cruise device automatically slows it, matching its speed to that

of the lead vehicle and thus preventing a collision. Also, the

Company is developing an alarm device that detects the lines

painted on the road. It is intended to warn distracted or

fatigued drivers when their vehicles veer across the centerline

of the road or when they begin to unintentionally change lanes.

After-Sales Service Program

Hino works diligently to provide customers with exhaustive

after-sales services, taking responsibility for products even

after they are out of its hands. The Company has created after-

sales service programs offering vehicle inspections, repair, and

other amenities that appeal to customers. We are offering

maintenance leases and annual maintenance contracts to

expand preventive maintenance services.

Answering Customer Inquiries

Hino is setting up consultation booths and building better

mechanisms for responding to customer inquiries, complaints,

and questions.

Recalls and Other Issues

Hino gathers market information from its dealerships worldwide.

If problems arise, data is compiled and forwarded to the Quality

Assurance Department for analysis. Local surveys are conduct-

ed when necessary and defective parts recalled and thoroughly

inspected. Afterward, relevant divisions develop strategies for

effectively correcting faulty parts and products. When the

Quality Assurance Department acknowledges problems and

understands the need to devise solutions, consumers are noti-

fied and reports issued, products are recalled, and damage

compensation or other forms of redress are provided.


Five-Year SummaryHino Motors, Ltd. and consolidated subsidiariesYears ended March 31

Millions of Yen

2000 2001 2002 2003 2004

For the year:

Net sales ¥653,288 ¥703,998 ¥758,640 ¥850,318 ¥1,051,587

Domestic 587,782 624,384 662,506 736,132 901,245

Overseas 65,506 79,614 96,134 114,186 150,342

Cost of sales 576,020 593,328 638,567 721,227 883,135

Selling, general and administrative expenses 104,727 105,020 111,082 109,905 123,885

Operating profit (loss) (27,459) 5,650 8,991 19,186 44,567

Income (loss) before income taxes and minority interests (34,818) (9,919) 17,371 12,436 44,614

Net income (loss) (21,837) (13,302) 8,370 4,960 34,023

Capital expenditures 23,577 20,017 25,690 27,783 51,364

Depreciation and amortization 44,536 38,188 31,780 31,480 31,742

R&D expenses 22,996 23,589 27,055 28,754 30,106

At year-end:

Total assets ¥832,555 ¥765,310 ¥763,320 ¥719,754 ¥0,783,264

Shareholders’ equity 107,658 84,101 180,267 179,572 219,700

Interest-bearing debt 530,292 455,373 331,677 276,006 260,261

Shares of common stock issued and outstanding

(thousands of shares) 447,300 452,281 574,581 574,581 574,581

Number of employees 22,615 21,901 21,556 20,764 20,560

Net overseas sales by region:

Asia ¥030,748 ¥038,179 ¥052,578 ¥065,065 ¥0,093,982

North America 13,648 15,619 12,979 15,210 17,003

Oceania 11,519 10,903 12,514 15,699 20,476

Europe — 7,765 3,053 4,606 4,562

Other areas 9,591 7,148 15,010 13,606 14,319

Yen

Per share data:

Net income (loss) per share (basic) ¥0,(59.65) ¥0,(29.54) ¥0015.99 ¥0008.38 ¥0,0058.86

Shareholders’ equity per share 241.01 186.02 313.85 312.54 382.30

Dividends per share 0.00 0.00 3.00 5.00 6.00

Number of Vehicles

Sales by type of vehicle:

Japan 30,002 33,136 34,011 34,742 51,242

Medium- and heavy-duty trucks 20,948 22,194 21,953 22,641 33,722

Light-duty trucks 6,788 8,918 10,033 10,032 14,604

Buses 2,266 2,024 2,025 2,069 2,916

Overseas 14,965 19,380 21,448 25,743 35,776

Note: “—” indicates that figures have not been disclosed.


Financial Review

The Hino Group comprises Hino Motors, Ltd., 76 consolidat-

ed subsidiaries, and 17 equity-method affiliates. The Group’s

primary businesses are the manufacture and sale of trucks

and buses and the production of vehicles on commission for

Toyota Motor Corporation (TMC). In August 2001, Hino

became a consolidated subsidiary of TMC following the issue

of new shares through a private placement. Hino plays an

important role in commercial vehicle production for the

Toyota Group.

The exchange rate at the end of fiscal 2003, ended March

31, 2004, was ¥105.69 to the U.S. dollar, ¥14.51 higher than

at the end of the previous term.

BUSINESS OVERVIEW

Domestic Business

In the domestic truck market, demand for heavy-, medium-,

and light-duty trucks increased substantially in fiscal 2003.

Growth was attributable to the Automobile NOx/PM Law

enacted in October 2003 and to new regulations governing

diesel-powered vehicles in the Tokyo metropolitan area,

which spurred replacement buying.

In Japan, Hino’s core market, overall demand in the heavy-

and medium-duty truck market surged 49.1%, to 117,362

vehicles. Hino sold 33,640 vehicles, up 48.3%, maintaining

its leading market share for the 31st straight year. The

Japanese market for light-duty trucks increased 54.3%, to

146,886 vehicles. In Tokyo and the three surrounding

prefectures, where new environmental regulations for diesel

emissions are especially rigorous, demand more than dou-

bled to about 78,000 vehicles, from 35,000 in the previous

fiscal year.

Against this backdrop, Hino’s domestic sales volume of

trucks and buses increased 47.5%, to 51,242 units. Sales

rose 46.2%, to ¥325,585 million (US$3,081 million).

Sales of heavy-duty trucks increased 45.1%, to 15,456

vehicles, rising well above the 10,000 to 11,000 level seen

during the previous five fiscal years. Market share edged

down 0.2 percentage point, to 28.0%. For medium-duty

trucks, sales increased 51.1%, to 18,184 units, significantly

above the 11,000 to 12,000 level seen during the previous

five fiscal years. Hino’s market share in this category declined

0.1 percentage point, to 29.2%. Sales of light-duty trucks

came to 14,704 units, up 45.3%. The Company entered this

segment in earnest in 1999, and market share during the

year under review slipped, to 10.0%, maintaining the original

goal of a 10% share for the third year running.

Domestic sales of buses increased 38.8%, to 2,846 units,

and market share rose 1.8 percentage points, to 20.1%.

8.0

12.0 6.0

6.3

0.13.3 1.4 2.1

45.4

14.4 21.4

24.2

3.7 1.2

10.2 1.5

8.9

19.1

44.5

Profit increase due higher unit sales

Increase due to rationalization of production

Profit increase due higher unit sales

Increase due to rationalization of production

Decrease due to price changes

Decrease due to price changes

Decrease due to increase in costs, etc.

Decrease due to increase in costs, etc.

Contributions from payments to suppliers

Contributions from payments to suppliers

Contributions from overseas operations

Contributions from overseas operations

Eliminations due to consolidationEliminations due to consolidationContributions from domestic sales companies

Contributions from domestic sales companies

’04

Operatingprofit forthe year

’03



’02


Components of Operating Profit(Billions of yen)

(Years ended March 31)


Overseas Business

The volume of Hino trucks and buses sold overseas rose

39.0%, to 35,776 units, and sales increased 38.1%, to

¥121,656 million. Sales growth stemmed from growth in

mainstay Southeast Asian markets and, particularly, to the

launch of DUTRO, a light-duty truck in the Thai and Malaysian

markets.

Commission Business

Total production volume on commission for TMC increased

16.1%, to 222,676 vehicles, reflecting increased orders for

the DYNA and HYLUX SURF models. Sales, including parts

for overseas plants, rose 15.4%, to ¥354,181 mill ion

(US$3,351 million).

OPERATING RESULTS

Net Sales

Sales increased 23.7%, or ¥201,269 million, to ¥1,051,587 mil-

lion (US$9,950 million), as sales volumes increased steeply in

the domestic, overseas, and commission businesses.

Operating Profit

During the year the overall sales volume surged, while Hino

made additional rationalization efforts aimed at enhancing

profits. As a result, operating profit reached a record high of

¥44,567 million (US$422 million), soaring 2.3 times. The oper-

ating profit margin was 4.2%, jumping from 2.3% in the previ-

ous year. In addition, the cost of sales ratio was 84.0%, a 0.8

percentage point improvement, and the SG&A expenses to net

sales ratio was 11.8%, a 1.1 percentage point improvement.

Segment Data by Geographical Region

Sales and operating profit by geographical region are noted

below. As this is the first time Hino is disclosing regional seg-

ment data, year-on-year comparisons are not provided.

Japan

Sales totaled ¥1,021,412 million (US$9,664 million) and oper-

ating profit was ¥43,872 million (US$415 million).

Asia

In Asia, excluding Japan, sales amounted to ¥68,018 million

(US$644 million) and operating profit came to ¥1,571 million

(US$15 million).

Other Regions

Sales were ¥37,456 million (US$354 million) and operating

profit was ¥556 million (US$5 million).

Net Income

Other income (expenses) improved considerably, thanks to a

gain on sales of investment securities of ¥6,221 million

(US$59 million) that improved the financial balance and the

0

200

400

600

800

1,000

-30

-20

-10

0

10

20

30

40

50

’04’03’02’01’00 ’04’03’02’01’00

0.0

1.2

2.4

3.6

4.8

’04’03’02’01’00

Others 1.4Europe 0.4

Oceania 2.0North America

1.6

Japan 85.7Asia 8.9

Net Sales(Billions of yen)

Sales by GeographicSegment(%)

Inventory Turnover, Notes andAccounts Receivable Turnover(Months)

� Inventory turnover

� Notes and accounts receivable turnover

Operating Profit (Loss)(Billions of yen)



considerable reduction in the loss on write-down of invest-

ment securities. Interest expense fell 38.7%, to ¥2,276 million

(US$22 million), on the back of a reduction in interest-bearing

debt and other factors. As a result, income before income taxes

and minority interests increased 3.6 times, to ¥44,614 million

(US$422 million).

Net income rose 6.9 times, to ¥34,023 million (US$322 mil-

lion), a record high. Consequently, net income per share rose

to ¥58.86 (US$0.56), from ¥8.38 in the previous fiscal year.

Hino paid cash dividends for the year of ¥6.00 (US$0.06) per

share, including an interim dividend of ¥3.00.

R&D Costs

Hino puts priority on R&D aimed at the development of envi-

ronmental and safety technologies, including methods for

reducing exhaust emissions, improving fuel consumption,

enhancing safety, and reducing pollution. The Company

redoubled its commitment to value creation attuned to the

changing times in order to sustain its competitive edge.

R&D costs increased ¥1,352 million, to ¥30,106 million

(US$285 million). This was equivalent to 2.9% of net sales,

down 0.5 percentage point from 3.4% in the previous fiscal

year.

Capital Expenditures

Capital expenditures during the year under review totaled

¥51,364 million (US$486 million) and were mainly related to

the development of new products, new plant construction,

and equipment renewal aimed at improving efficiencies.

Depreciation and amortization of property, plant and

equipment and other assets came to ¥31,742 mill ion

(US$300 million) in the fiscal year.

Cash Flows

Cash and cash equivalents stood at ¥47,280 mil l ion

(US$447 million) at the end of the fiscal year, an increase of

¥3,838 million, or 8.8%.

Net cash provided by operating activities was ¥53,247 mil-

lion (US$504 million), a decrease from ¥83,985 million a

year earlier. Although income before income taxes and minor-

ity interests grew steeply to ¥44,614 million (US$422 million),

a large increase in notes and accounts receivable of

¥27,568 million (US$261 million), compared with a decrease

of ¥16,628 million in the previous fiscal year, drove up out-

flows during the year under review.

Net cash used in investing activities totaled ¥37,630 million

(US$356 million), up from ¥24,012 million in the previous year.

The increase was primarily attributable to ¥44,177 million

-30

-20

-10

0

10

20

30

40

0

100

200

300

400

500

600

-5

0

5

10

15

20

25

0

8

16

24

32

0

1

2

3

4

5

6

0

1

2

3

4

’04’03’02’01’00 ’04’03’02’01’00’04’03’02’01’00 ’04’03’02’01’00

Net Income (Loss)(Billions of yen)

Interest Coverage Ratio*(Times)

Interest-Bearing Debt*, Debt-Equity Ratio**(Billions of yen, Times)

� Interest-bearing debt (left scale)

� Debt-equity ratio (right scale)

Research and DevelopmentExpenditures, Ratio to Net Sales(Billions of yen, %)

� Research and development expendi-tures (left scale)

� Ratio to net sales (right scale)

* Interest coverage ratio = (Operating profit(loss) + Interest and dividendincome)/Interest expenses

* Interest-bearing debt = Short-term bankloans + Commercial paper + Current por-tion of long-term debt + Long-term debt

** Debt-equity ratio = Interest-bearingdebt/Shareholders’ equity



(US$418 million) used for the purchase of property, plant and

equipment, compared with ¥29,946 million in the previous

fiscal year.

Net cash used in financing activities was ¥10,648 million

(US$101 million), compared with ¥53,864 million a year

earlier. Of this, a net decrease in short-term borrowings of

¥7,909 million (US$75 million), compared with a net increase

of ¥6,178 million in the previous fiscal year, was recorded.

Financial Position

Total assets at the end of the fiscal year stood at ¥783,264 mil-

lion (US$7,411 million), up ¥63,510 million, or 8.8%. Current

assets rose ¥39,288 million, or 11.4%, to ¥383,423 million

(US$3,628 million). The increase was mainly attributable to

higher sales at overseas subsidiaries, a rise in trade receiv-

ables of ¥24,546 million from higher sales to TMC, and a gain

in inventories of ¥10,231 million due to higher vehicle invento-

ries in Japan from robust orders following the enactment of

new regulations on exhaust emissions.

Investments and other assets were up ¥27,282 million, or

44.3%, from the previous fiscal year-end. The gain largely

reflected a rise of ¥15,499 million in investment securities on

the back of the higher market value of securities holdings and

an increase of ¥8,493 million in long-term loans.

Property, plant and equipment edged down ¥3,060 million,

or 1.0%, to ¥310,987 million (US$2,942 million). The decline

was mainly attributable to a ¥10,730 million fall in land and a

¥12,543 million drop in machinery and equipment.

On the liabilities side of the ledger, current liabilities rose

¥8,316 million, or 1.8%, to ¥466,212 million (US$4,411 mil-

lion). Short-term borrowings declined ¥11,173 million, due to

the repayment of debt and other factors, but trade payables

rose ¥16,871 million owing to rising material costs as pro-

duction volume increased.

Long-term liabilities were up ¥10,704 million, or 14.3%, to

¥85,374 million (US$808 million), reflecting a ¥10,396 million

gain in long-term debt largely due to a ¥20,000 million infu-

sion in new financing from TMC.

Shareholders’ equity increased ¥40,128 million, or 22.3%,

to ¥219,700 million (US$2,079 million), largely due to net

income of ¥34,023 million (US$322 million) and an ¥11,078

million rise in net unrealized gain on securities. As a result, the

equity ratio increased 3.1 percentage points, to 28.0%. Net

asset value per share was ¥382.30 (US$3.62).

0

10

20

30

40

50

60

0

80

160

240

-90

-60

-30

0

30

60

90

0

140

280

420

560

700

840

0

10

20

30

’04’03’02’01’00 ’04’03’02’01’00 ’04’03’02’01’00’04’03’02’01’00

Capital Expenditures,Depreciation and Amortization(Billions of yen)

� Capital expenditures

� Depreciation and amortization

Cash Flows(Billions of yen)

� Cash flows from operating activities

� Cash flows from investing activities

� Cash flows from financing activities

Shareholders’ Equity,Shareholders’ Equity Ratio(Billions of yen, %)

� Shareholders’ equity

� Shareholders’ equity ratio

Total Assets(Billions of yen)

* Shareholders’ equity ratio =Shareholders’ equity/Total assets x 100



Consolidated Balance SheetsHino Motors, Ltd. and its consolidated subsidiariesMarch 31, 2003 and 2004

Thousands of Millions of Yen U.S. Dollars (Note 1)

Assets 2003 2004 2004

Current assets:

Cash and cash equivalents ¥043,442 ¥047,280 $0,447,351

Short-term investments (Note 3) 2,450 1,785 16,888

Trade receivables:

Notes (Note 7) 91,527 87,228 825,319

Accounts (Notes 7 and 15) 122,011 150,856 1,427,349

Inventories (Notes 4 and 7) 65,446 75,677 716,031

Deferred income taxes (Note 11) 8,377 13,167 124,578

Prepaid expenses and other current assets 16,333 13,447 127,229

Allowance for doubtful accounts (5,451) (6,017) (56,935)

Total current assets 344,135 383,423 3,627,810

Investments and other assets:

Investment securities (Notes 3 and 7) 36,239 51,738 489,525

Investments in and advances to affiliated companies 5,809 7,649 72,373

Long-term loans 854 9,347 88,436


Other assets 24,118 27,217 257,519

Allowance for doubtful accounts (7,496) (9,063) (85,755)

Total investments and other assets 61,572 88,854 840,701

Property, plant and equipment (Note 7):

Land 116,264 105,534 998,524

Buildings and structures 247,120 243,138 2,300,482

Machinery and equipment 360,778 348,235 3,294,874

Tools 87,456 86,959 822,777

Construction in progress 6,399 24,829 234,919

818,017 808,695 7,651,576

Less—Accumulated depreciation (503,970) (497,708) (4,709,131)

Net property, plant and equipment 314,047 310,987 2,942,445

Total assets ¥719,754 ¥783,264 $7,410,956

The accompanying notes are an integral part of these statements.



Liabilities, Minority Interests and Shareholders’ Equity 2003 2004 2004

Current liabilities:

Short-term borrowings (Note 6) ¥230,649 ¥219,476 $2,076,604

Current portion of long-term debt (Note 6) 23,254 8,286 78,397

Trade payables:

Notes 35,992 39,979 378,263

Accounts (Note 15) 112,342 125,226 1,184,839

Accrued income taxes 7,376 13,603 128,704

Accrued expenses 24,213 26,336 249,180

Other current liabilities 24,070 33,306 315,140

Total current liabilities 457,896 466,212 4,411,127

Long-term liabilities:

Long-term debt (Note 6) 22,103 32,499 307,492

Accrued employees’ retirement benefits (Note 8) 41,041 37,582 355,592


Deferred income taxes related to unrealized gains on land revaluation (Note 11) 7,683 5,434 51,418

Other 229 602 5,682

Total long-term liabilities 74,670 85,374 807,771

Minority interests in consolidated subsidiaries 7,616 11,978 113,333

Shareholders’ equity:

Common stock, no par value:

Authorized—1,400,000,000 shares

Issued and outstanding—574,580,850 shares in 2003 and 2004 72,717 72,717 688,024

Additional paid-in capital 64,307 64,307 608,451

Retained earnings (Note 12) 30,044 63,338 599,279

Net unrealized gain on land revaluation 11,165 7,460 70,584

Net unrealized gain on available-for-sale securities 7,406 18,484 174,893

Less: Treasury common stock, at cost (483,883 shares in 2003

and 504,327 shares in 2004) (138) (175) (1,654)

Cumulative translation adjustments (5,929) (6,431) (60,852)

Total shareholders’ equity 179,572 219,700 2,078,725

Commitments and contingent liabilities (Note 13)

Total liabilities, minority interests and shareholders’ equity ¥719,754 ¥783,264 $7,410,956


Consolidated Statements of IncomeHino Motors, Ltd. and consolidated subsidiariesYears ended March 31, 2003 and 2004


2003 2004 2004

Net sales (Notes 14 and 15) ¥850,318 ¥1,051,587 $9,949,728

Cost of sales (Notes 10 and 15) 721,227 883,135 8,355,892

Gross profit 129,091 168,452 1,593,836

Selling, general and administrative expenses (Notes 9 and 10) 109,905 123,885 1,172,159

Operating profit 19,186 44,567 421,677

Other income (expenses):

Interest and dividend income 1,744 1,664 15,747

Interest expense (3,716) (2,276) (21,538)

Exchange gain (loss), net (305) (266) (2,514)

Equity in earnings (losses) of affiliated companies (857) 646 6,108

Gain on sales of parent company’s common stock 6,038 — —

Gain on sales of investment securities 347 6,221 58,862

Loss on write-down of investment securities (7,790) (73) (691)

Loss on sales and disposal of property, plant and equipment (2,930) (5,516) (52,190)

Other, net 719 (353) (3,344)

(6,750) 47 440

Net income before income taxes and minority interests 12,436 44,614 422,117

Income taxes (Note 11):

Current 8,179 18,056 170,841

Deferred (1,246) (8,612) (81,487)

6,933 9,444 89,354

Income before minority interests 5,503 35,170 332,763

Minority interests in income (loss) of consolidated subsidiaries (543) 1,147 10,849

Net income ¥004,960 ¥0,034,023 $0,321,914

Yen U.S. Dollars (Note 1)

Per share amounts:

Net income:

Basic ¥0008.38 ¥0,0058.86 $0,0000.56

Diluted — — —

Cash dividends 5.00 6.00 0.06


Consolidated Statements of Shareholders’ EquityHino Motors, Ltd. and consolidated subsidiariesYears ended March 31, 2003 and 2004


Millions of Yen

Number of Net shares of Net unrealized common Additional unrealized gain on Cumulative Treasury

stock Common paid-in gain on land available-for- translation Retained common(Thousands) stock capital revaluation sale securities adjustments earnings stock

Balance at March 31, 2002 574,581 ¥72,717 ¥64,307 ¥10,990 ¥09,937 ¥(5,789) ¥28,144 ¥0(38)Net income — — — — — — 4,960 —Cash dividends — — — — — — (2,873) —Bonuses to directors and statutory auditors — — — — — — (56) —

Changes in net unrealized gain on land revaluation — — — 175 — — 28 —

Changes in net unrealized gain on available-for-sale securities — — — — (2,531) — — —

Translation adjustments — — — — — (140) — —Increase in treasury common stock — — — — — — — (100)

Other — — — — — — (159) —

Balance at March 31, 2003 574,581 72,717 64,307 11,165 7,406 (5,929) 30,044 (138)Net income — — — — — — 34,023 —Cash dividends — — — — — — (3,446) —Bonuses to directors and statutory auditors — — — — — — (165) —

Changes in net unrealized gain on land revaluation — — — (3,705) — — 2,847 —

Changes in net unrealized gain on available-for-sale securities — — — — 11,078 — — —

Translation adjustments — — — — — (502) — —Increase in treasury common stock — — — — — — — (37)

Other — — — — — — 35 —

Balance at March 31, 2004 574,581 ¥72,717 ¥64,307 ¥07,460 ¥18,484 ¥(6,431) ¥63,338 ¥(175)

Thousands of U.S. Dollars

Net Net unrealized

Additional unrealized gain on Cumulative Treasury Common paid-in gain on land available-for- translation Retained common

stock capital revaluation sale securities adjustments earnings stock

Balance at March 31, 2003 $688,024 $608,451 $105,635 $070,072 $(56,102) $284,271 $(1,307)Net income — — — — — 321,914 —Cash dividends — — — — — (32,607) —Bonuses to directors and statutory auditors — — — — — (1,561) —

Changes in net unrealized gain on land revaluation — — (35,051) — — 26,940 —

Changes in net unrealized gain on available-for-sale securities — — — 104,821 — — —

Translation adjustments — — — — (4,750) — —Increase in treasury common stock — — — — — — (347)Other — — — — — 322 —

Balance at March 31, 2004 $688,024 $608,451 $070,584 $174,893 $(60,852) $599,279 $ (1,654)



Consolidated Statements of Cash FlowsHino Motors, Ltd. and consolidated subsidiariesYears ended March 31, 2003 and 2004


2003 2004 2004

Operating activities:

Net income before income taxes and minority interests ¥12,436 ¥44,614 $422,117

Depreciation and amortization 31,480 31,742 300,333

Accrued employees’ retirement benefits, less payments (932) (1,329) (12,577)

Allowance for doubtful accounts 1,618 2,227 21,073

Provision to the reserve for product warranties 323 3,327 31,484

Interest and dividend income (1,744) (1,664) (15,747)

Interest expense 3,716 2,276 21,538

Gain on sales of investment securities (347) (6,221) (58,862)

Gain on sales of parent company’s common stock (6,038) — —

Loss on write-down of investment securities 7,790 73 691

Loss on sales and disposal of property, plant and equipment 2,930 5,516 52,190

(Increase) decrease in notes and accounts receivable 16,628 (27,568) (260,839)

(Increase) decrease in inventories 6,018 (15,890) (150,348)

Increase in notes and accounts payable 16,973 21,830 206,544

Other, net (3,649) 6,048 57,229

Subtotal 87,202 64,981 614,826

Interest and dividends received 1,744 1,664 15,747

Interest paid (3,682) (2,323) (21,981)

Income taxes paid (1,279) (11,075) (104,787)

Net cash provided by operating activities 83,985 53,247 503,805

Investing activities:

Proceeds from sales of property, plant and equipment 625 5,651 53,469

Purchase of property, plant and equipment (29,946) (44,177) (417,989)

Purchase of intangible fixed assets (4,581) (5,950) (56,297)

Proceeds from sales of parent company’s common stock 6,841 — —

Net decrease in investment securities 725 6,515 61,646

Other, net 2,324 331 3,128

Net cash used in investing activities (24,012) (37,630) (356,043)

Financing activities:

Net increase (decrease) in short-term borrowings 6,178 (7,909) (74,830)

Proceeds from issuance of long-term debt 6,970 22,188 209,935

Repayments of long-term debt (64,085) (25,599) (242,210)

Proceeds from payments by minority interests — 4,168 39,433

Dividends paid (2,873) (3,446) (32,607)

Other, net (54) (50) (472)

Net cash used in financing activities (53,864) (10,648) (100,751)

Effect of exchange rate changes on cash and cash equivalents (47) (1,131) (10,691)

Net increase in cash and cash equivalents 6,062 3,838 36,320

Cash and cash equivalents at beginning of year 37,380 43,442 411,031

Cash and cash equivalents at end of year ¥43,442 ¥47,280 $447,351


Notes to Consolidated Financial StatementsHino Motors, Ltd. and its consolidated subsidiariesYears ended March 31, 2003 and 2004


B a s i s o f C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s ’ P r e s e n t a t i o n

The accompanying consolidated financial statements of Hino Motors, Ltd. (the “Company”) and its subsidiaries are prepared on the

basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure

requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared

by the Company as required by the Securities and Exchange Law of Japan. In addition, certain modifications have been incorporat-

ed into the accompanying consolidated financial statements, and the notes to the consolidated financial statements include certain

financial information which is not required under accounting principles generally accepted in Japan, but is presented herein as addi-

tional information to enhance readers’ understanding. However, such modifications and additional information have no effect on

results of operations or shareholders’ equity.

U.S. dollar amounts are included solely for convenience. These translations should not be construed as representations that the

yen amounts actually represent, or have been or could be converted into U.S. dollars. As the amounts shown in U.S. dollars are for

convenience only, the rate of ¥105.69=U.S.$1, the approximate spot rate at March 31, 2004, has been used for the purpose of

presentation of the U.S. dollar amounts in the accompanying consolidated financial statements.

Certain reclassifications of the consolidated financial statements for the fiscal year ended March 31, 2003 have been made to

conform to the presentation for the fiscal year ended March 31, 2004.

S u m m a r y o f S i g n i f i c a n t A c c o u n t i n g P o l i c i e s

(1) Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries controlled directly

or indirectly by the Company. Unconsolidated subsidiaries and affiliated companies over which the Company exercises significant

influence in terms of their operating and financial policies have been included in the consolidated financial statements on an equity

method basis. All significant intercompany balances and transactions are eliminated in consolidation.

(2) Foreign Currency Translation

All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at the exchange rates prevailing

at the year-end. Shareholders’ equity accounts of foreign subsidiaries and affiliates are translated at historical rates. All income and

expense accounts are translated at rates prevailing at year-end. The resulting translation differences are debited or credited to the

cumulative translation adjustments account in shareholders’ equity, or to the minority interest account in the consolidated financial

statements.

Monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates prevail-

ing at year-end and the resulting gains and losses are included in net income or loss for the year.

(3) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash on deposit with banks and all highly liquid investments, with original maturi-

ties of three months or less, that are readily convertible to known amounts of cash and are so near maturity that they present

insignificant risk of changes in value because of changes in interest rates.

(4) Marketable Securities and Investment Securities

Held-to-maturity debt securities are stated at amortized cost. Investment securities in affiliated companies are stated at moving-

average cost. Other available-for-sale securities for which market values are readily determinable are stated at fair market value at the

balance sheet date, with net unrealized gains or losses reported as a separate component of shareholders’ equity at a net-of-tax

amount. Other available-for-sale securities for which market values are not readily determinable are stated at moving-average cost.

2

1


(5) Inventories

The Company:

Finished products are stated at cost, which is determined by the specific identification basis. Work in process, raw materials and

supplies are stated at cost, which is determined by the moving-average-cost method.

Subsidiaries:

Inventories are principally stated at cost, which is determined by the moving-average-cost method or at the latest purchase price.

(6) Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost. Depreciation is mainly computed using the declining-balance method, except for

buildings acquired after April 1998, which are depreciated using the straight-line method, at rates based on the estimated useful

lives of the respective assets.

The range of useful lives is as follows:

Buildings and structures ............................. 2 to 75 years

Machinery, equipment and vehicles ............ 2 to 20 years

Tools .......................................................... 2 to 20 years

Leases ........................................................ 3 to 10 years

Significant renewals and betterments are capitalized at cost, while minor maintenance and repairs are charged to expenses

as incurred.

(7) Employees’ Retirement Benefits

Accrued employees’ retirement benefits under the defined benefit plans of the Company and its consolidated subsidiaries are

determined based on the present value of the actuarial projected benefits attributable to employee service rendered, and the fair

value of plan assets at the year-end, as adjusted for unrecognized actuarial gains or losses, and unrecognized prior service costs.

Prior service costs are amortized by the straight-line method over the estimated average remaining service years of the employ-

ees. Actuarial gains or losses are amortized by the straight-line method over the estimated average remaining service years of the

employees.

(8) Derivative Instruments and Hedge Accounting

In the normal course of business, the Company and its consolidated subsidiaries employ forward exchange contracts to manage

their exposure to fluctuations in foreign currency exchange rates with respect to their monetary assets or liabilities denominated in

foreign currencies. Gains or losses arising from changes in fair value of forward exchange contracts, which meet certain hedging

criteria under “the Accounting Standard for Financial Instruments,” are offset with or added to the hedged monetary assets or liabili-

ties. The Company and its consolidated subsidiaries do not employ derivative financial instruments for speculative or trading pur-

poses.

The Company and its consolidated subsidiaries are exposed to credit related losses in the event of non-performance by counter-

parties to financial instruments and derivative financial instruments, but it is not expected that any counterparties will fail to meet

their obligations, because most of the counterparties are authentic financial institutions.

(9) Land Revaluation

In accordance with the Land Revaluation Law enacted on March 31, 2001, land used for businesses owned by certain domestic

consolidated subsidiaries was revalued, and the unrealized gain on the land revaluation, net of deferred tax, was reported as “Net

unrealized gain on land revaluation” as a separate component of shareholders’ equity, and the relevant tax effect was included in

“Deferred income taxes related to unrealized gain on land revaluation.”

(10) Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the financial

statement carrying amount of existing assets and liabilities and respective tax bases. Deferred tax assets and liabilities are

measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are

expected to be recovered or settled.


(11) Net Income per Share

Net income per share is computed based on the average number of common shares outstanding during each period. From the fis-

cal year ended March 31, 2003, in accordance with the newly issued accounting standard for per share information, the amount of

proposed appropriation of retained earnings for bonuses to directors and statutory auditors is deducted from net income for the

computation of net income per share.

Information about diluted net income per share is not disclosed because no potential common shares exist.

(12) Leases

Periodic lease payments under financing lease contracts are charged to income as incurred. Under Japanese accounting princi-

ples, a financing lease that meets certain designated criteria can be either capitalized or accounted for as on operating lease with

appropriate footnote disclosure.

(13) Recent Pronouncements

Accounting standard for impairment of fixed assets

On August 9, 2002, the Business Accounting Council in Japan issued “Accounting Standard for Impairment of Fixed Assets.” The

standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the car-

rying amount of an asset may not be recoverable. An impairment loss shall be recognized in the income statement by reducing the

carrying amount of impaired assets or a group of assets to the recoverable amount to be measured as the higher of net selling

price and value in use.

The standard shall be effective from the fiscal year beginning April 1, 2005 and an earlier adoption is permitted from the fiscal

year beginning April 1, 2003. The Company decided to adopt early the standard from the fiscal year beginning April 1, 2004. If the

Company had adopted the standard for the fiscal year ended March 31, 2004, the Company would have recognized a loss on

impairment of fixed assets of ¥4,035 million ($38,181 thousand) for the fiscal year.

M a r k e t a b l e S e c u r i t i e s a n d I n v e s t m e n t S e c u r i t i e s

At March 31, 2003 and 2004, book value, market value, and net unrealized gains (losses) of marketable securities and investment

securities of the Company and its subsidiaries were as follows:

Millions of Yen

Amortized cost Year ended March 31, 2003 (Carrying amount) Fair value Difference

Short-term investmentsMarketable held-to-maturity securities:

Government bonds and municipal bonds ¥1,222 ¥1,220 ¥(2)

Millions of yen

Fair valueYear ended March 31, 2003 Cost (Carrying amount) Difference

Investment securitiesMarketable available-for-sale securities:

Equity securities ¥23,461 ¥33,332 ¥9,871Debt securities 29 28 (1)Other 131 128 (3)

Total ¥23,621 ¥33,488 ¥9,867

Millions of Yen



Government bonds and municipal bonds ¥1,201 ¥1,200 ¥(1)

3


Millions of yen



Equity securities ¥20,737 ¥48,325 ¥27,588Debt securities 22 21 (1)Other 131 187 56

Total ¥20,890 ¥48,533 ¥27,643




Government bonds and municipal bonds $11,361 $11,353 $(8)




Equity securities $196,205 $457,232 $261,027Debt securities 204 196 (8)Other 1,236 1,773 537

Total $197,645 $459,201 $261,556

The carrying amount of investment securities in nonpublic companies as at March 31, 2003 and 2004 was ¥2,861 million and

¥3,205 million ($30,324 thousand), respectively. The corresponding fair value at these dates was not computed as such estimation

was not readily determinable.

I n v e n t o r i e s

Inventories at March 31, 2003 and 2004 consisted of the following:

Thousands ofMillions of Yen U.S. Dollars

2003 2004 2004

Finished products ¥39,227 ¥44,581 $421,814Work in process 17,069 19,086 180,582Raw materials and supplies 9,150 12,010 113,635

Total ¥65,446 ¥75,677 $716,031

4


L e a s e s

Lease expenses and lease income in respect of finance leases, other than those lease agreements which stipulate the transfer of

ownership of the leased property at March 31, 2003 and 2004, were as follows:

(1) Lessee


2003 2004 2004

Class of property: Machinery, equipment and vehicles ¥04,949 ¥03,964 $037,502Tools 9,243 7,617 72,070Other 98 25 242

14,290 11,606 109,814Less-accumulated depreciation (7,868) (6,607) (62,515)

Net ¥06,422 ¥04,999 $047,299

Future minimum payments:Due within one year ¥02,410 ¥02,006 $018,975Due after one year 4,198 3,111 29,439

¥06,608 ¥05,117 $048,414

Lease expense for the year: Depreciation ¥02,185 ¥02,211 $020,922Interest 207 143 1,354

¥02,404 ¥02,383 $022,546

(2) Lessor


2003 2004 2004

Class of property: Machinery, equipment and vehicles ¥7,206 ¥5,301 $50,153Less-accumulated depreciation (4,592) (3,591) (33,971)

Net ¥2,614 ¥1,710 $16,182

Future minimum income: Due within one year ¥1,085 ¥0,745 $07,046Due after one year 1,729 1,613 15,260

¥2,814 ¥2,358 $22,306

Lease income for the year: Depreciation ¥1,360 ¥0,983 $09,301Interest 284 129 1,218

¥1,686 ¥1,242 $11,755

5


S h o r t - T e r m B o r r o w i n g s a n d L o n g - T e r m D e b t

Short-term borrowings at March 31, 2003 and 2004 consisted of the following:


2003 2004 2004

Bank loans with weighted-average interest rates of 0.90% for the year ended March 31, 2003 and 0.80% for the year ended March 31, 2004:

Secured ¥120,983 ¥113,847 $1,077,179Unsecured 77,666 60,629 573,651

Sub-total 198,649 174,476 1,650,830

Commercial paper with interest of 0.11% for the year ended March 31, 2003 and 0.03% for the year ended March 31, 2004 32,000 45,000 425,774

Total ¥230,649 ¥219,476 $2,076,604

Long-term debt at March 31, 2003 and 2004 consisted of the following:


2003 2004 2004

Loans, principally from banks, insurance companies, and other institutions, due 2005 to 2025 with weighted-average interest rates of 2.17% for the year ended March 31, 2003 and 1.03% for the year ended March 31, 2004:

Secured ¥30,525 ¥18,977 $179,549Unsecured 14,832 21,808 206,340

Less-amount due within one year (23,254) (8,286) (78,397)

Total ¥22,103 ¥32,499 $307,492

The aggregate annual maturities of long-term debt outstanding at March 31, 2004, were as follows:

Thousands ofYears ending March 31 Millions of Yen U.S. Dollars

2005 ¥08,286 $078,3972006 8,594 81,314 2007 2,338 22,1222008 and thereafter 21,567 204,056

Total ¥40,785 $385,889

As is customary in Japan, short-term and long-term bank loans are made under general agreements which provide that collateral

and guarantees for present and future indebtedness will be given upon request of the bank with reasonable and probable cause, and

that the bank shall have the right to offset cash deposited with it against any obligation that has become due or, in the event of default,

against all obligations due to the bank. The Company has never been requested to give any additional collateral or guarantee.

A s s e t s P l e d g e d

At March 31, 2003 and 2004, assets pledged as collateral for short-term borrowings and long-term debt were as follows:


2003 2004 2004

Trade notes receivable ¥073,384 ¥067,352 $0,637,256Trade accounts receivable 54,568 57,773 546,631Land 65,319 52,227 494,156Buildings and structures 27,768 25,831 244,402Machinery, equipment, vehicles and tools 6,176 4,127 39,049Investment securities 2,381 — —Other 4,017 3,380 31,982

Total ¥233,613 ¥210,690 $1,993,476

7

6


E m p l o y e e s ’ R e t i r e m e n t B e n e f i t P l a n s

Under the terms of the employees’ retirement benefit plans of the Company and its subsidiaries in Japan, all employees whose

service with the Company and its subsidiaries are terminated are usually entitled to lump-sum retirement benefits determined by

reference to their current basic rate of pay, length of service and conditions under which the termination occurs.

The obligation for the retirement benefits is provided for through accruals and funding of tax-qualified non-contributory pension

plans.

The Company and certain subsidiaries in Japan have tax-qualified non-contributory pension plans which cover a part of the

retirement benefits payable to qualified employees at the time of termination. The funding policy for the plans is to contribute

amounts required to maintain sufficient plan assets to provide for accrued benefits, subject to the limitation on deductibility imposed

by Japanese income tax laws.

Information regarding the defined employees’ retirement benefit plans for the Company and its consolidated subsidiaries for the

years ended March 31, 2003 and 2004 is as follows:

Projected Benefit Obligation


2003 2004 2004

Projected benefit obligation ¥(86,311) ¥(86,119) $(814,833)Plan assets at fair value 34,758 37,449 354,328

Projected benefit obligation in excess of plan assets (51,553) (48,670) (460,505)Unrecognized actuarial loss 10,601 11,036 104,417Unrecognized prior service obligation (89) 52 496

Accrued employees’ retirement benefits ¥(41,041) ¥(37,582) $(355,592)

Net Periodic Benefit Costs


2003 2004 2004

Service costs ¥4,931 ¥4,110 $38,892Interest costs on projected benefit obligation 1,992 1,708 16,161Expected return on plan assets (941) (719) (6,799)Recognized actuarial loss 285 695 6,574Amortization of prior service obligation (87) (60) (570)

Net periodic benefit cost ¥6,180 ¥5,734 $54,258

The assumptions as of March 31, 2003 and 2004, which were used in determining periodic benefit costs and accrued employ-

ees’ retirement benefits shown above were as follows:

2003 2004

Allocation of retirement benefit cost Flat allocation Flat allocationDiscount rate 2.5% 2.0%–2.5%Expected rate of return on plan assets Principally 3.0% Principally 2.5%Years of amortization of prior service obligation 4–15 years 4–13 yearsYears of amortization of actuarial loss 4–18 years 4–18 years

8


S e l l i n g , G e n e r a l a n d A d m i n i s t r a t i v e E x p e n s e s

Selling, general and administrative expenses for the years ended March 31, 2003 and 2004 consisted of the following:


2003 2004 2004

Sales commissions ¥005,136 ¥006,492 $0,061,424Distribution costs 5,811 8,823 83,485Product warranties 5,353 8,681 82,136Advertising expenses 2,497 3,850 36,424Labor costs 41,706 41,995 397,343Rent and lease expenses 5,061 5,816 55,030Allowance for bad debt 2,017 3,859 36,514Other 42,324 44,369 419,803

Total ¥109,905 ¥123,885 $1,172,159

R e s e a r c h a n d D e v e l o p m e n t E x p e n s e s

Research and development expenses for the years ended March 31, 2003 and 2004 were as follows:


2003 2004 2004

Research and development expenses ¥28,754 ¥30,106 $284,853

I n c o m e T a x e s

The Company and its domestic subsidiaries are subject to corporate income tax, enterprise tax, and prefectural and municipal

inhabitants’ taxes based on income, which in the aggregate result in statutory tax rates of approximately 42.1% for both 2003 and

2004. The foreign subsidiaries are subject to taxes based on income at rates ranging from 25.0% to 42.3%. However, the effective

tax rates in the accompanying statements of operations differ from the above-mentioned income tax rates.

The following table summarizes the significant differences between the statutory tax rate and effective tax rate for consolidated

financial statement purposes for the years ended March 31, 2003 and 2004:

2003 2004

Statutory tax rate 42.1% 42.1%Non-deductible expenses 4.4 1.2Non-taxable dividend income (1.0) (0.3)Per capital inhabitants’ taxes 0.9 0.3Equity in (earnings) losses of affiliated companies 2.9 (1.5)Income tax credits 0— (6.8)Change in valuation allowances and other 6.4 (13.8)

Effective tax rate 55.7% 21.2%

11

10

9


Significant components of the Company’s and its subsidiaries’ deferred tax assets and liabilities as of March 31, 2003 and 2004

were as follows:


2003 2004 2004

Deferred tax assets:Net operating loss carryforwards ¥11,657 ¥06,934 $065,611Accrued employees’ bonus 3,620 4,904 46,399Accrued employees’ retirement benefits 10,356 11,359 107,471Other 13,133 15,527 146,914

38,766 38,724 366,395Valuation allowance (23,277) (18,059) (170,875)

Total deferred tax assets 15,489 20,665 195,520Deferred tax liabilities:

Retained earnings appropriated for allowable tax reserves (3,285) (3,237) (30,628)Unrealized gain on securities (4,073) (11,349) (107,381)Unrealized gain on land revaluation (7,683) (5,434) (51,418)Other (1,320) (203) (1,917)

Total deferred tax liabilities (16,361) (20,223) (191,344)

Net deferred tax assets ¥00(872) ¥00,442 $004,176

R e t a i n e d E a r n i n g s a n d D i v i d e n d s

The amount of retained earnings available for dividends under the Commercial Code of Japan is based on the amount stated in the

statutory financial statements of the Company.

C o n t i n g e n t L i a b i l i t i e s

Contingent liabilities at March 31, 2003 and 2004 were as follows:


2003 2004 2004

Export bills discounted with banks ¥00,332 ¥00,209 $001,978Guarantees in respect of employees’ housing loans and loans to affiliated companies, etc. 15,436 15,957 150,975

S e g m e n t I n f o r m a t i o n

Business Segment Information

Business segment information is not required to be disclosed as the Company and its consolidated subsidiaries are primarily

engaged in the manufacture and sale of automobiles, particularly diesel trucks and buses.

14

13

12


Geographical Segment Information

Geographical segment information was not required to be disclosed as both sales and assets in Japan exceed 90% of total sales

and of total assets of all segments for the year ended March 31, 2003. Geographical segment information for the year ended March

31, 2004, is as follows:

I. Sales and operating profit Thousands ofMillions of Yen U.S. Dollars

SalesJapan:

External customers ¥0,949,042 $08,979,484Intercompany 72,370 684,740

Total 1,021,412 9,664,224

Asia:External customers 67,605 639,651Intercompany 413 3,906

Total 68,018 643,557

Other:External customers 34,940 330,593Intercompany 2,516 23,806

Total 37,456 354,399

Total:External customers 1,051,587 9,949,728Intercompany 75,299 712,452

Total 1,126,886 10,662,180

Corporate and eliminations:External customers — —Intercompany (75,299) (712,452)

Total (75,299) (712,452)

Consolidated total:External customers 1,051,587 9,949,728Intercompany — —

Total ¥1,051,587 $09,949,728

Operating profitJapan ¥0,043,872 $00,415,104Asia 1,571 14,863Other 556 5,261

Total 45,999 435,228Corporate and eliminations (1,432) (13,551)

Consolidated total ¥0,044,567 $00,421,677

II. Segment assets Thousands ofMillions of Yen U.S. Dollars

Japan ¥710,642 $6,723,832Asia 64,493 610,210Other 23,381 221,226

Total 798,516 7,555,268Corporate and eliminations (15,252) (144,312)

Consolidated total ¥783,264 $7,410,956


Overseas Sales

Overseas sales, which represent total export sales of the Company and its consolidated subsidiaries in Japan and net sales of con-

solidated subsidiaries outside Japan, for the years ended March 31, 2003 and 2004 were as follows:


2003 2004 2004

Overseas sales (A) ¥114,186 ¥0,150,342 $1,422,478Consolidated sales (B) 850,318 1,051,587 9,949,728(A)/(B) 13.4% 14.3%

Overseas Sales by Geographic Area

Percentage ofYear ended March 31, 2003 consolidated sales Millions of Yen

Asia 7.7% ¥065,065North America 1.8 15,210Oceania 1.8 15,699Europe 0.5 4,606Other areas 1.6 13,606

Total 13.4% ¥114,186

Percentage of Thousands ofYear ended March 31, 2004 consolidated sales Millions of Yen U.S. Dollars

Asia 8.9% ¥093,982 $0,889,222North America 1.6 17,003 160,872Oceania 2.0 20,476 193,735Europe 0.4 4,562 43,164Other areas 1.4 14,319 135,485

Total 14.3% ¥150,342 $1,422,478

Note: Asia: Thailand, Indonesia, China and others; North America: the United States, Canada and others; Oceania: Australia, New Zealand and others; Europe: Ireland andothers; Other areas: South America, Central America and others


T r a n s a c t i o n s w i t h R e l a t e d P a r t i e s

Material transactions and resulting account balances with related parties for the years ended March 31, 2003 and 2004 were as follows:

DirectMillions of Yen

equityTransactions for Resulting account balances

ownership the years ended March 31 at March 31

Name of Paid-in percentage related capital Principal by the Description of

company (Millions of yen) business Company (%) transactions 2003 2004 Account 2003 2004

Toyota Motor ¥397,049 Vehicle 50.4 Product ¥341,675 ¥387,711 Trade accounts ¥14,578 ¥22,082Corporation manufacturing retailing receivable

Component 202,761 217,801 Trade accounts 18,482 22,000purchasing payable

Proceeds from — 20,000 Long-term ,— 20,000increase in debtlong-term debt


Transactions for the year ended March 31 Resulting account balances at March 31

Description of transactions 2004 Account 2004

Product retailing $3,668,379 Trade accounts receivable $208,935

Component purchasing 2,060,752 Trade accounts payable 208,155

Proceeds from increase 189,233 Long-term debt 189,233in long-term debt

Millions of Yen

Name of Paid-inTransactions for the years ended March 31 Resulting account balances at March 31

related capital Principal Description of company (Millions of yen) business transactions 2003 2004 Account 2003 2004

Hino Auto Body, Ltd. ¥1,650 Mounting bus bodies Loan lending ¥— ¥120 Long-term loans ¥— ¥8,558


Transactions for the year ended March 31 Resulting account balances at March 31

Descriptionof transactions 2004 Account 2004

Loan lending $1,135 Long-term loans $80,973

15

Report of Independent Auditors


0

100

200

300

400

500

600

700

800

900

Securities Companies

0.6%

Other Domestic Corporations

59.4%

Private Individuals and Others

5.3%

Banks and Other Financial Institutions

27.8%

Foreigners

6.9%

32’04/112111098765’03/4


Stock Information(As of March 31, 2004)

Number of Shares

Authorized: 1,400,000,000 shares

Outstanding: 574,580,850 shares

Paid-in Capital

¥72,717 million

Number of Shareholders

13,808

Major Shareholders(Thousand shares, %)

Number Percentage Name of shares of ownership

Toyota Motor Corporation 287,897 50.1Japan Trustee Services Bank, Ltd. (Trust Account) 34,567 6.0The Master Trust Bank of Japan, Ltd. (Trust Account) 33,591 5.8Nippon Life Insurance Company 12,608 2.2Japan Trustee Service Bank, Ltd. (Holder of Retirement Benefit Trust for The Chuo Mitsui Trust and Banking Company, Limited ) 10,031 1.7

Independently Operated Designated Money Trust Fiduciary: Mitsui Asset Trust and Banking Company, Limited Account 1 6,643 1.2

The Tokio Marine and Fire Insurance Co., Ltd. 6,104 1.1Trust & Custody Services Bank, Ltd. (Trust Account B) 6,071 1.1Takenaka Corporation 5,562 1.0Sumitomo Mitsui Banking Corporation 5,117 0.9

Total 408,193 71.0

Stock Price Range on theTokyo Stock Exchange (Yen)

Breakdown of Shareholders by Category(%)

� High�� Low High

Consolidated Subsidiaries and Affiliates(As of March 31, 2004)


DOMESTIC

Offices and Plant

Head Office & Hino Plant

1-1, Hinodai 3-chome, Hino-shi, Tokyo 191-8660

Tamachi Office (Including Overseas Operations)

11-3, Shiba 4-chome, Minato-ku, Tokyo 108-0014

Hamura Plant

1-1, Midorigaoka 3-chome, Hamura-shi, Tokyo 205-8660

Nitta Plant

10-1, Hayakawa, Nitta-machi, Nitta-gun, Gunma 370-0344

Dealers

Subsidiaries

TOKYO HINO MOTOR LTD.

OSAKA HINO MOTOR LTD.

YOKOHAMA HINO MOTOR LTD.

CHIBA HINO MOTOR LTD.

SAITAMA HINO MOTOR LTD.

KYUSYU HINO MOTOR LTD.

HOKKAIDO HINO MOTOR LTD.

SHIZUOKA HINO MOTOR LTD.

KOBE HINO MOTOR LTD.

IBARAKI HINO MOTOR LTD.

17 others

Affiliates

HIROSHIMA HINO MOTOR LTD.

MIE HINO MOTOR LTD.

5 others

Assemblers, Suppliers, and Others

Subsidiaries

TAKEBE TEKKOSHO CO., LTD.

SOHSHIN CO., LTD.

TRANTECHS, LTD.

FUKUSHIMA STEEL WORKS CO., LTD.

NISSHO SANGYO CO., LTD.

HINO TSUSHO CO., LTD.

RIKEN FORGE CO., LTD.

HINO LIFE STAFF CO., LTD.

HINO U-TRUCK, LTD.

HINO LOGISTICS & PACKING, LTD.

25 others

Affiliates

SAWAFUJI ELECTRIC CO., LTD.

SANKYO RADIATOR CO., LTD.

20 others

OVERSEAS

Subsidiaries

HINO MOTORS SALES (THAILAND) LTD.

HINO MOTORS MANUFACTURING (THAILAND) LTD.

HINO MOTOR SALES AUSTRALIA PTY. LTD.

PT. HINO MOTORS MANUFACTURING INDONESIA

PT. HINO MOTORS SALES INDONESIA

HINO MOTORS SALES U.S.A., INC.

HINOPAK MOTORS LTD.

HINO MOTORS (MALAYSIA) SDN. BHD.

HINO MOTORS MANUFACTURING U.S.A., INC.

HINO MOTORS SALES CANADA, LTD.

4 others

Affiliate

SHENYANG SHENFEI HINO AUTOMOBILE

MANUFACTURING CO., LTD.

For further information, please contact

the Corporate Communications

Department at:

11-3, Shiba 4-chome, Minato-ku,

Tokyo 108-0014, Japan

Telephone: +81-3-5419-9320

Facsimile: +81-3-5419-9363

1-1, Hinodai 3-chome, Hino-shi, Tokyo 191-8660, Japanhttp//:www.hino.co.jp/

Printed in Japan

This annual report is printed on recycled paper using soy-based ink.

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