Financial Section. Annual Report 2011 ISUZU MOTORS LIMITED. Consolidated Five-Year Summary 16 MD&A 17. Consolidated Balance Sheets 20

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1 Financial Section ISUZU MOTORS LIMITED Annual Report Consolidated Five-Year Summary 16 MD&A 17 Consolidated Balance Sheets 20 Consolidated Statements of Income 22 Consolidated Statements of Comprehensive Income 22 Consolidated Statements of Change in Net Assets 23 Consolidated Statements of Cash Flows 24 Notes to Consolidated Financial Statements 25 Report of Independent Auditors 32

2 Financial Section Consolidated Five-Year Summary For the Year: Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Income before extraordinary items Income before income taxes Net income (loss) ,415,544 1,213, , ,328 88,220 91,258 76,700 51,599 1,080, , , ,862 11,010 11,393 9,139 8,401 1,424,708 1,271, , ,989 21,651 15,236 11,475 (26,858) 1,924,833 1,666, , , , , ,604 76,021 1,662,925 1,413, , , , , ,483 92,394 17,023,991 14,600,073 2,423,918 1,362,943 1,060,974 1,097, , ,554 At Year-End: assets 1,112,459 1,110,383 1,026,786 1,245,947 1,232,181 13,378,948 Net assets 387, , , , ,061 4,654,943 Non-Consolidated Five-Year Summary For the Year: Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income (loss) Income (loss) before extraordinary items Income (loss) before income taxes Net income (loss) , , ,623 80,201 47,422 55,258 43,937 39, , ,685 78,847 72,658 6,188 5,151 3,221 14, , ,810 79,628 93,670 (14,041) (3,268) (11,617) (35,220) 1,027, , , ,035 48,190 50,168 46,856 43, , , ,654 99,163 61,491 68,273 69,111 68,325 10,469,942 8,935,081 1,534, , , , , ,472 At Year-End: assets 781, , , , ,783 9,392,683 Net assets 275, , , , ,807 3,315,481 Note: U.S. dollar amounts are translated from yen, for convenience only, at the rate of = US1; the approximate exchange rate prevailing on the Foreign Exchange Market on March 31,. 16

3 Isuzu Motors Limited Annual Report Management s Discussion and Analysis of Financial Condition and Results of Operation The following provides an analysis of the financial condition and results of operation in fiscal. The following information contains forward-looking statements that reflect the judgment of management as of June 29,. (1) Significant accounting policies and estimates The consolidated financial statements of the Isuzu Group are prepared in accordance with generally accepted accounting principles of Japan. In the preparation of these statements, the amounts recorded for items including allowance for doubtful accounts, inventory, investments, income taxes, retirement benefits, and provision for product warranties are estimates that reflect the judgment of management. Due to the uncertain nature of estimates, in some cases actual results may vary from initial estimates, and this may have a negative impact on business results. (2) Results of operations 1. Overview of fiscal Increased overseas sales, particularly in the ASEAN region, and continuing improvements in the Group s cost structure offset increases in raw material costs and significant strength of the yen to yield the following results of operation in fiscal : sales of 1,415.5 billion (up 31.0% from the previous year), operating income of 88.2 billion (up 701.3% from the previous year), ordinary income of 91.2 billion (up 701.0% from the previous year), and net income of 51.5 billion (up 514.2% from the previous year). 2. Sales In fiscal, Isuzu s consolidated-basis sales rose 31.0% from the previous year to 1,415.5 billion. In the domestic commercial vehicle market, Isuzu maintained its high market share through the introduction of products with superior fuel efficiency and economy, capturing 32.8% of the medium-duty and heavy-duty trucks market (down 0.1% from the previous year) and 40.2% of the light-duty (2-3 ton) truck market (up 0.2% from the pervious year). Demand for mediumand heavy-duty trucks rose to 51,412 (up 23.5% from the previous year) and demand for light-duty trucks rose to 54,469 (up 11.5% from the previous year) due to the stimulating effects of tax breaks and subsidies for environmentally friendly vehicles. As a result, domestic sales rose to billion (up 15.1% from the previous year). Sales in Asia rose 39.8% to billion. Key factors included growth in demand in the Thai market, allowing the Group to maintain a high market share of 38% despite intense competition from other manufacturers. North American sales rose 19.0% to 62.7 billion, reflecting growth in demand due to a tendency toward recovery in the U.S. economy. Sales to other regions rose 49.0% to billion, reflecting increased sales, particularly in South and Central America and Europe. 3. Operating income Operating income in fiscal was 88.2 billion, up 701.3% from a year earlier. Sales and model mix fluctuations contributed 70.5 billion, while material cost reductions and fixed cost reduction efforts added 17.7 billion and 1.2 billion, respectively. Offsetting these were 9.8 billion in cost fluctuations (steel, oil prices, etc.) and 2.4 billion in exchange rate fluctuations caused by the strength of the yen. As a result, Isuzu s operating margin increased to 6.2%, compared to 1.0% for the previous year. 4. Non-operating gains/losses In fiscal, Isuzu posted a non-operating gain of 3.0 billion, an improvement of 2.6 billion from the previous year. Equity-method investment income rose 4.3 billion to 8.5 billion, primarily as a result of improved profitability at Japanese parts manufacturers to which equity-method accounting is applied. The reduction of interest-bearing debt resulted in a net interest (interest and dividends income minus interest expenses) loss of 3.1 billion, an improvement of 1.4 billion compared to the previous year. This was offset by a foreign exchange gain of 0.3 billion, a deterioration of 1.4 billion from the previous year. Compensation expenses totaled 1.3 billion. 5. Extraordinary gains/losses In fiscal 2010, Isuzu posted an extraordinary loss of 2.2 billion due to such contributing factors as loss on disposal of noncurrent assets, impairment loss, and environmental expenses. In fiscal, the extraordinary loss deteriorated 12.3 billion to 14.5 billion, reflecting extraordinary losses including loss on disposal of noncurrent assets, impairment loss, environmental expenses, and loss due to disaster, and extraordinary income of gain from the sale of fixed assets, gain on negative goodwill, and gain on reversal of allowances for doubtful accounts. 6. Taxes Isuzu s net tax income in fiscal 2010 including current income taxes and deferred income taxes was 4.1 billion. In fiscal, the net tax loss was 17.2 billion due to the effect of higher current income taxes resulting from increased profits. 7. Minority interests Minority interests consist primarily of profits returned to the minority shareholders of Isuzu s locally incorporated subsidiaries in the ASEAN region and North America and its Japanese parts manufacturers. Minority interests in fiscal increased to 7.8 billion, compared to 4.9 billion in fiscal Net income The Group posted a net profit of 51.5 billion in fiscal, an improvement of 43.1 billion from the previous year. Net income per share came to

4 Financial Section (3) Financial conditions 1. Cash flow Isuzu generated cash and cash equivalents ( net cash ) of billion in fiscal, up 46.1 billion from the previous year. Net cash of billion provided by operating activities offset net cash of 27.0 billion used in investing activities, principally capital expenditure, and net cash of 57.7 billion used in financing activities, principally repayment of interest-bearing debt. Free cash flow, calculated by subtracting cash flow provided by investing activities from cash flow provided by operating activities, resulted in a net cash inflow of billion (up 102.6% from the previous year). Cash flow from operating activities Net cash provided by operating activities increased 50.7% to billion. The change reflects net cash inflows of 16.7 billion from collection of accounts receivable combined with 76.7 billion from an increase in income before income taxes and majority interests and 36.3 billion in depreciation and amortization. Cash flow from investing activities Net cash used in investing activities decreased 25.6% to 27.0 billion. The change was due primarily to reduced expenditures due to acquisition of fixed assets. Cash flow from financing activities Net cash used in financing activities increased 241.7% to 57.7 billion. The change was due primarily to the Group s repayment of interest-bearing debt. 2. Assets As of March 31,, combined consolidated assets totaled 1,112.4 billion, an increase of 2.0 billion from the previous year. An increase of 44.0 billion in cash and time deposits due to improvements in the funding environment at Group companies was offset by decreases of 12.9 billion in property, plant and equipment due to restrained capital expenditures, 19.1 billion in notes and accounts receivable, and 12.6 billion in products. 3. Liabilities liabilities at March 31,, decreased 30.4 billion from the previous year to billion. Interest-bearing liabilities fell 41.3 billion compared to the previous year due to steady repayment of loans. 4. Net assets Net assets increased 32.5 billion in fiscal to billion. The primary causes of this increase were net income of 51.5 billion and an increase of 2.0 billion in minority interests due to an increase in net assets held by subsidiaries, offset by decreases of 8.4 billion in retained earnings due to dividend payments and 12.3 billion in the foreign currency translation adjustments account. As a result, Isuzu s equity ratio improved 2.7 percentage points from a year earlier to 29.5%. 18 Risks There are certain risks that could have a significant impact on our earnings results, financial condition, and other information contained in the annual securities report, or share prices, and these risks are outlined below. (The following information includes forward-looking statements that reflect the judgment of management as of June 29,.) 1. Economic situation/supply and demand trends in Isuzu s major markets Vehicles account for an important portion of the Isuzu Group s worldwide operating revenue, and demand for these vehicles is affected by the economic situation in the various countries and regions where Isuzu sells vehicles. Therefore, economic recession and an ensuing decline in demand in the Group s major markets Japan, North America, and other Asian countriescould have a negative impact on the Group s performance and financial position. Price competition also entails the risk of price fluctuation for Isuzu products. 2. Interest rate fluctuations The Isuzu Group is working to tighten its cash flow management and shrink interest-bearing debt. During the fiscal year under review, efforts to reduce the outstanding balance of interestbearing debt using profits and other funds despite a focus on assuring cash in hand to deal with the opaque financial environment, helped drive down the interest-bearing debt balance at the end of fiscal to billion, a decrease of 41.3 billion from the previous year. Concerning the cost of financing, the Group remains vulnerable to the risk of higher interest payments having a negative impact on its performance and financial position should market rates rise sharply. 3. Foreign exchange fluctuations The business of the Isuzu Group includes the manufacture and sale of products in several regions around the world. Local currency amounts for sales, expenses, assets, and other items are therefore converted into Japanese yen in the preparation of Isuzu s consolidated financial statements. Depending on the exchange rate in effect at the time of conversion, the yen amount for these items may change even if the underlying currency value has not changed. Moreover, because foreign exchange fluctuations influence the prices paid by the Group for raw materials denominated in foreign currencies as well as the pricing of the products the Group sells, they may have a negative impact on the Group s performance and financial position. Generally, a strengthening of the yen relative to other currencies has a negative impact on the Group s business, and a weakening of the yen has a positive impact. 4. Dependence on General Motors Corporation and other major customers The Isuzu Group supplies vehicle components to General Motors Corporation (Detroit, MI) and its affiliates as well as to other vehicle manufacturers. Sales to these customers are affected by fluctuations in production and sales at these customer companies and other factors over which the Isuzu Group has no control, and therefore they could have a negative impact on the Group s performance and financial position.

5 Isuzu Motors Limited Annual Report 5. Suppliers and other providers of parts, materials, etc. The Isuzu Group sources the raw materials, components, and products required for production from outside suppliers. Should supply-demand conditions significantly exceed suppliers capacity, or should that capacity be dramatically reduced due to an accident or other unforeseen contingency affecting supplier facilities, it is possible that Isuzu may be unable to source these items in sufficient volume. Shortages or delays in the supply of parts and other materials could have a negative impact on the Group s performance and financial position. It is also possible that a tight supply-demand situation would result in price increases for raw materials and other supplies, which could also have a negative impact on the Group s performance and financial position by triggering rising costs if the increases cannot be absorbed internally, for example through improved productivity, or passed on to sales prices. 6. Product defects At its plants both inside and outside Japan, the Isuzu Group manufacturers products according to the strictest globally accepted quality control standards. However, in the unusual event of a large-scale recall or product liability award (the Group is covered by product liability insurance, but in the case of costs exceeding insurance coverage), there could be a negative impact on the Group s performance and financial position. 7. Joint ventures The Isuzu Group engages in business in some countries in the form of joint ventures due to legal and other requirements in those countries. Changes in the management policy, operating environment, etc., of these joint ventures could affect their performance, which could in turn produce a negative impact on the Group s performance and financial position. 8. Disasters, power outages, and other interruptions Although the Isuzu Group regularly conducts disaster prevention inspections and facilities examinations at all sites in order to minimize the potential of a negative impact due to an interruption in the manufacturing process, it may not be possible to completely eliminate or minimize the impact that would arise from a disaster, power outage, or other interruption. Additionally, a new H1N1 virus or other infectious disease pandemic could pose significant obstacles to the Group s production and sales activities. 9. Securities investments The Isuzu Group invests in securities to produce, sell, and distribute its products as well as to build and maintain good relationships with its business partners. For marketable securities, a downturn in share prices could have a negative impact on the Group s performance and financial position. Isuzu provides management guidance and advice to companiesincluding those in which it has invested through non-marketable securitiesthat can have a strong influence on its own business results. However, if the financial condition of the companies in which Isuzu has invested were to deteriorate due to factors such as a worsening business environment, this could have a negative impact on the Group s performance and financial position. 10. Retirement obligations and deferred tax assets The figures recorded for retirement obligations and deferred tax assets are estimates that reflect the judgment of management. Due to the uncertain nature of estimates, in some cases actual results may vary from initial estimates, and this could have a negative impact on the Group s performance and financial position. 11. Potential risks associated with international activities and foreign ventures The Isuzu Group conducts some of its manufacturing and marketing activities outside of Japan, in the U.S. and in developing and emerging markets in Asia. The following risks are inherent in such overseas business development and could have a negative impact on the Group s performance and financial position: Unfavorable changes in the political or business climate Difficulties in recruiting and retaining personnel Inadequate technological infrastructure could have a negative impact on the Group s manufacturing activities or its customers support of its products and services Potential negative tax consequences Social unrest stemming from terrorism, war, or other factors 12. Limits on intellectual property protection The Isuzu Group has accumulated technology and expertise that differentiate it from its rivals; however, in certain regions due to legal restrictions the Group is unable to fully protect, or can only partly protect, its proprietary technology and expertise through intellectual property rights. As a result, the Group may be unable to effectively prevent third parties from using its intellectual property to make similar products. 13. Legal requirements The Isuzu Group is subject to various government regulations in the countries in which it does business, such as business and investment approvals, statutes related to national security, tariffs, and other import and export regulations. The Group is also subject to legal requirements concerning areas such as commerce, antitrust, patents, consumer rights, taxation, foreign exchange, environment conservation, recycling, and safety. Unexpected changes in these regulations could have a negative impact on the Group s performance and financial position. Exhaust emissions regulations are generally being tightened amid growing environmental awareness. Since substantial investment is required to comply with these regulations, failure to generate sufficient sales to recover this investment could have a negative impact on the Group s performance and financial position. 14. Impact of the Great East Japan Earthquake The earthquake and tsunami that struck Japan s Tohoku region on March 11,, has had a significant economic impact in Japan, making it difficult to foresee the future direction of the economy. Should recovery from the disaster take an extended period of time, the status of parts supply from business partners and of power, distribution, and other infrastructure could have a negative impact on the Group s production and sales activities. 19

6 Financial Section Consolidated Balance Sheets (As of March 31,, 2010 and 2009) Assets Current Assets: Cash and time deposits (Note 2) Receivables : Notes and accounts Less : allowance for doubtful receivables Inventories Deferred tax assets (Note 6) Other current assets Current Assets 199, ,951 (1,414) 101,018 18,696 23, , , ,108 (1,166) 106,437 18,285 20, , , ,781 (1,570) 119,826 9,492 27, ,638 2,403,264 2,031,886 (17,005) 1,214, , ,727 6,136,613 Investments and Advances: Investments (Note 3) Unconsolidated subsidiaries and affiliated companies 61,534 66,339 64, ,045 Others 20,116 21,046 17, ,930 Long-term loans 3,858 4,149 4,107 46,398 Deferred tax assets (Note 6) 9,551 9,637 7, ,875 Other investments and advances 19,736 23,434 21, ,357 Less : allowance for doubtful accounts (5,202) (8,198) (9,640) (62,568) Investments and Advances 109, , ,769 1,318,038 Property, Plant and Equipment: (Note 4) Land (Note 8) 268, , ,289 3,223,802 Buildings and structures 259, , ,454 3,123,900 Machinery and equipment 564, , ,182 6,793,787 Lease assets 13,608 9,526 4, ,664 Construction in progress 17,108 15,268 31, ,759 Less : accumulated depreciation (638,659) (620,835) (608,781) (7,680,808) Net Property, Plant and Equipment 484, , ,408 5,830,106 Other Assets: 7,831 8,532 8,970 94,190 Assets 1,112,459 1,110,383 1,026,786 13,378,948 See accompanying notes to consolidated financial statements. 20

7 Isuzu Motors Limited Annual Report Liabilities and Net Assets Current Liabilities : Bank loans Current portion of bonds 83,467 67,355 84,287 1,003,818 3,000 20,000 10,000 36, , , ,516 2,833,608 Lease obligations 3,457 2,494 1,351 41,579 Accrued expenses Notes and accounts payable 51,804 45,484 43, ,021 Accrued income taxes (Note 6) 7,373 6,406 3,187 88,679 Deposits received 3,195 4,288 3,674 38,434 Other current liabilities Current Liabilities Long-term Debt (Note 4) Accrued Retirement and Severance Benefits (Note 5) Deferred Tax Liabilities (Note 6) Deferred Tax Liabilities Related to Land Revaluation (Note 8) Other Long-term Liabilities 19,955 18,523 30, , , , ,833 4,905, , , ,225 2,209,208 64,207 61,367 57, ,186 4,059 3,337 4,366 48,822 56,157 55,818 55, ,378 9,412 8,247 9, ,196 40,644 40,644 40, ,813 50,427 50,427 50, , , , ,407 2,367,003 (632) (599) (570) (7,601) 287, , ,908 3,454,679 3,002 3,327 1,340 36,106 Contingent Liabilities (Note 9) Net Assets : Shareholders Equity (Note 7) Common stock Common stock : Authorized 3,369,000,000 shares in, 2010 and 2009 Issued 1,696,845,339 shares in, 2010 and 2009 Capital surplus Retained earnings Less: treasury stock, at cost 2,454,660 common shares in Shareholders Equity Accumulated other comprehensive income Unrealized holding gain on securities Unrealized gain from hedging instruments Variance of land revaluation (Note 8) Foreign currency translation adjustments accumulated other comprehensive income Minority interests Net Assets Liabilities and Net Assets (78) (151) (45) (941) 73,311 73,340 73, ,678 (35,424) (23,059) (29,762) (426,035) 40,810 53,456 44, ,807 58,991 56,941 51, , , , ,773 4,654,943 1,112,459 1,110,383 1,026,786 13,378,948 See accompanying notes to consolidated financial statements. 21

8 Financial Section Consolidated Statements of Income (For the years ended March 31,, 2010 and 2009) Net Sales Cost of Sales Gross Profit ,415,544 1,213, ,548 1,080, , ,872 1,424,708 1,271, ,640 17,023,991 14,600,073 2,423,918 Selling, General and Administrative Expenses Operating Income 113,328 88, ,862 11, ,989 21,651 1,362,943 1,060,974 Other Income (Expenses): Interest and dividend income Interest expense Equity in earnings of unconsolidated subsidiaries and affiliates Others, net Income before Extraordinary Items 1,779 (4,933) 8,576 (2,383) 91,258 1,745 (6,303) 4, ,393 4,410 (6,802) 5,049 (9,072) 15,236 21,405 (59,333) 103,139 (28,669) 1,097,516 Extraordinary Items: Gain on sales of investments Gain (loss) on reversal (provision) of allowance for doubtful accounts Gain (loss) on sales or disposal of property, plant and equipment, net Gain on negative goodwill Impairment loss on fixed assets (Note 13) Environmental expenses Loss on disaster (Note 14) Others, net Income before Income Taxes and Minority Interests ,039 (2,142) (3,413) (9,031) (2,463) 76, (1,278) (893) (404) 256 9,139 2 (1,092) (992) (21) (1,657) 11, ,027 10,383 12,503 (25,768) (41,057) (108,614) (29,625) 922,430 Income Taxes (Note 6): Current Deferred Income Before Minority Interests Minority Interests in Income of Consolidated Subsidiaries Net Income (loss) 17,723 (457) 59,434 7,834 51,599 8,202 (12,384) 4,920 8,401 8,437 24,511 5,384 (26,858) 213,146 (5,496) 714,780 94, ,554 Yen Per Share of Common Stock Net Income (loss) Basic (15.85) 0.36 See accompanying notes to consolidated financial statements. Consolidated Statements of Comprehensive Income (For the years ended March 31, and 2010) Income before minority interests Other comprehensive income 22 Unrealized holding gain on securities Unrealized gain from hedging instruments Foreign currency translation adjustments Share of other comprehensive income of associates accounted for using the equity method other comprehensive income (Note 15) Comprehensive income (Note 15) Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to minority interests ,434 Note: Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement NO. 25, June 30, 2010) was adopted for the fiscal year ended March 31,. See accompanying notes to consolidated financial statements. (335) 72 (8,469) (5,303) (14,035) 45,398 38,981 6, ,780 (4,036) 876 (101,860) (63,778) (168,799) 545, ,810 77,171

9 Isuzu Motors Limited Annual Report Consolidated Statements of Change in Net Assets (Note 7) (For the years ended March 31,, 2010 and 2009) Common stock Balance at March 31, ,644 Capital surplus Treasury stock, at cost Retained earnings 50, ,601 Unrealized holding gain on securities (463) 7,415 Unrealized holding gain on land revaluation 73,956 Unrealized gain from hedging instruments 245 Foreign currency translation adjustments 2,428 Minority interests 55,021 Changes in accounting policies applied to overseas subsidiaries 328 Cash dividends (13,563) Reversal of unrealized holding gain and loss on land revaluation (100) Net income (loss) (26,858) Acquisition of treasury stock (106) Net changes on items other than shareholders equity Balance at March 31, ,644 50, ,407 (570) (6,075) (761) (291) (32,191) (3,884) 1,340 73,195 (45) (29,762) 51,137 1, (105) 6,702 5,804 3,327 73,340 (151) (23,059) 56,941 Reversal of unrealized holding gain and loss on land revaluation (145) Net income 8,401 Acquisition of treasury stock (28) Net changes on items other than shareholders equity Balance at March 31, ,644 50,427 Cash dividends 153,663 (599) (8,474) Reversal of unrealized holding gain and loss on land revaluation 28 Net income 51,599 Acquisition of treasury stock (32) Net changes on items other than shareholders equity Balance at March 31, (324) 40,644 50, ,816 (632) 3,002 (28) 73, (12,365) (78) (35,424) 2,049 58,991 Balance at March 31, 2010 Common stock Capital surplus Retained earnings 488, ,464 1,848,024 Cash dividends Treasury stock, at cost (7,206) Unrealized holding gain on securities Unrealized holding gain on land revaluation Unrealized gain from hedging instruments Foreign currency translation adjustments Minority interests 40, ,023 (1,818) (277,320) 684,805 (3,906) (345) 876 (148,715) 24,650 36, ,678 (941) (426,035) 709,455 (101,921) Reversal of unrealized holding gain and loss on land revaluation 345 Net income 620,554 Acquisition of treasury stock (395) Net changes on items other than shareholders equity Balance at March 31, 488, ,464 2,367,003 (7,601) See accompanying notes to consolidated financial statements. 23

10 Financial Section Consolidated Statements of Cash Flows (For the years ended March 31,, 2010 and 2009) Cash Flows from Operating Activities Net income before income taxes and minority interests Depreciation and amortization Equity in earnings of unconsolidated subsidiaries and affiliates Provision for retirement benefits, less payments Provision for allowance for product warranty Provision for bonus accounts Provision for allowance for doubtful accounts Interest and dividend income Interest expenses Gain on disposal of property assets Loss on disposal of property assets Gain (loss) on sales of securities, net Loss on impairment of fixed assets Other extraordinary loss Decrease (Increase) in receivable Decrease (Increase) in inventories Decrease (Increase) in other current assets Increase (Decrease) in notes and accounts payable Increase (Decrease) in accrued expenses and taxes Increase (Decrease) in deposit received Increase (Decrease) in other current liabilities Others Cash received from interest and dividend Cash paid for interest Cash paid for income taxes Net Cash Provided by (Used in) Operating Activities ,700 36,301 (8,576) 1,381 (233) 1,217 (507) (1,779) 4,933 (863) 1,766 (3) 2,142 4,270 16,733 3,243 1,757 1,087 3,230 (1,038) 3, ,820 (5,058) (15,638) 135,208 9,139 39,434 (4,270) 3,539 (1,356) 940 (745) (1,745) 6,303 (230) 1,509 (58) (51,706) 18,694 2,793 71, (824) 382 5,427 (6,334) (4,972) 89,702 11,475 39,320 (5,049) 1,069 (639) (2,176) 228 (4,410) 6,802 (391) 1, , ,974 16,740 (728) (148,600) (17,679) 193 (6,945) (106) 11,399 (6,728) (18,270) (9,065) 922, ,583 (103,139) 16,618 (2,811) 14,639 (6,105) (21,405) 59,333 (10,383) 21,241 (36) 25,768 51, ,248 39,003 21,131 13,083 38,848 (12,489) 41,330 10, ,106 (60,837) (188,071) 1,626,085 Cash Flows from Investing Activities Payment on purchase of securities Proceeds from sales of securities Payment on purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Payment on long-term loans receivable Collection of long-term loans receivable Increase (Decrease) in short-term loans receivable Increase (Decrease) in fixed deposits Others Net Cash Provided by (Used in) Investing Activities (1,453) 72 (25,408) 1,862 (47) 232 (260) (2,719) 701 (27,021) (735) 117 (36,693) 2,914 (149) 95 (40) (8) (1,809) (36,309) (1,482) 19 (60,371) 1,035 (958) (1,423) (62,495) (17,484) 867 (305,575) 22,402 (575) 2,799 (3,134) (32,703) 8,430 (324,973) Cash Flows from Financing Activities Increase (Decrease) in short-term debt Proceeds from long-term debt Payment on long-term debt Proceeds from issuance of bonds Payment on bonds Proceeds from minority shareholders Repayment of lease obligations Payment on acquisition of treasury stock Payment on dividends made by parent company Payment on dividends to minority shareholders Net Cash Provided by (Used in) Financing Activities (462) 40,670 (65,217) (20,000) 58 (2,005) (26) (8,455) (2,312) (57,751) (19,420) 81,440 (66,713) (10,000) (1,594) (10) (24) (575) (16,899) 3, ,268 (51,453) 3,000 (60) (427) (99) (13,536) (4,141) 47,864 (5,562) 489,116 (784,335) (240,529) 705 (24,114) (314) (101,695) (27,816) (694,546) Effect of Exchange Rate Changes on Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of the Year Increase (Decrease) in Cash and Cash Equivalents due to change in scope of consolidation Cash and Cash Equivalents at End of the Year (Note 2) (4,278) 46, , ,356 3,506 40, , ,198 (10,727) (34,424) 149, ,198 (51,450) 555,114 1,878,520 2,433,635 See accompanying notes to consolidated financial statements. 24

11 Notes to Consolidated Financial Statements Isuzu Motors Limited Annual Report 1. Basis of Presenting the Financial Statements The accompanying consolidated financial statements of Isuzu Motors Limited ( the Company ) and consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirement of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. In addition, the notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but is presented herein as additional information. In order to facilitate the understanding of readers outside Japan, certain reclassifications have been made to the consolidated financial statements prepared for domestic purposes and relevant notes have been added. The yen amounts are rounded down in millions. Therefore, total or subtotal amounts do not correspond with the aggregation of such account balances. U.S. dollar amounts have been translated from Japanese yen for convenience only at the rate of 83.15= US1, the approximate exchange rate prevailing on the Foreign Exchange Market on March 31,. The translations should not be construed as a representation that Japanese yen have been or could be converted into at that rate. The U.S. dollar amounts are then rounded down in thousands. Certain reclassifications have been made in the 2010 and 2009 financial statements to conform to the presentation for. 2. Summary of Significant Accounting Policies a) Consolidation The consolidated financial statements include the accounts of the Company and significant subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The excess of cost of investments in the subsidiaries and affiliates over the fair value of the net assets of the acquired subsidiary at the dates of acquisition, consolidation goodwill, is being amortized over an estimated period not exceeding 20 years. b) Foreign Currency Translation Receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rate of the balance sheet date, and differences arising from the translation are included in the financial statements of income as a gain or loss. The Company translates the balance sheet accounts of foreign consolidated subsidiaries into Japanese yen at the exchange rate of the balance sheet date of each of those subsidiaries. Financial statements of income accounts of consolidated overseas subsidiaries are translated using the average exchange rate of the statements of income s period. Foreign currency translation adjustments are included in the foreign currency translation adjustments account and minority interests account in the balance sheet. c) Investments The accounting standard for financial instruments requires that securities be classified into three categories: marketable, held-to-maturity or other securities. Marketable securities classified as other securities are carried at fair value with changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified as other securities are carried at cost determined by the moving average method. d) Inventories Inventories of the Company are valued at cost using the weighted average method. (Balance sheet values are measured by the method of devaluing book value to reflect decreases in profitability.) Inventories of consolidated subsidiaries are principally valued at cost using the specific identification method. (Balance sheet values are measured by the method of devaluing book value to reflect decreases in profitability.) e) Property, Plant and Equipment (excluding lease assets) Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated subsidiaries is calculated principally by the straight-line method based on the estimated useful lives. Depreciation of property, plant and equipment of few consolidated subsidiaries is calculated by declining balance method. f) Software (excluding lease assets) Software used by the Company and its consolidated subsidiaries is amortized using the straight-line method, based on the estimated useful lives as determined by the Company and its consolidated subsidiaries (generally 5 years). g) Leases Lease assets relating to finance lease transactions without transfer of ownership are depreciated over the lease period by the straight-line method, assuming the residual value is zero. In addition, lease transactions whose commencement dates were on or prior to March 31, 2008 are accounted for on a basis similar to that for ordinary rental transactions. h) Employees Retirement Benefits Employees' retirement benefits covering all employees are provided through an unfunded lump-sum benefit plan and a funded pension plan. Under the plans, eligible employees are entitled, under most circumstances, to severance payments based on compensation at the time of severance and years of service. The Company and its domestic consolidated companies have adopted the Financial Accounting Standard for retirement benefits in Japan. In accordance with this standard, accrued employees retirement benefits are provided mainly at an amount of projected benefit obligation and the fair value of the pension plan assets at the end of the balance sheet date. Prior service costs are being amortized as incurred by straight-line method over periods, which are shorter than the average remaining years of service of the eligible employees. Actuarial gains or losses are amortized in the year following the year using the straight-lined method over the average of the remaining service lives of mainly 10 years commencing with the following periods, which are shorter than the average remaining years of service of the eligible employees. 25

12 Financial Section i) Income Taxes Income taxes are accounted for on an accrual basis. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their 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. The effect of deferred tax assets and liabilities of a change in tax rate are recognized in income in the period that includes the enacted date. j) Net Income per Share Net income per share of common stock is calculated based upon the weighted average number of shares of common stock outstanding during each year. Basis for the calculation of net income per share at the year ended March 31, is as follows: Net Income 51, ,554 Net income pertaining to common stock 51, ,554 Average outstanding shares: Common stock (share): 1,694,447,742 k) Appropriation of Retained Earnings The appropriation of retained earnings is recorded in the fiscal year in which such appropriation is approved by the Board of Directors or Shareholders. l) Cash and Cash Equivalents For the purpose of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Reconciliation for cash and cash equivalents at end of the year on the consolidated statements of cash flows for the year ended March 31, is as follows: Cash and time deposits on the consolidated balance sheets 199,831 2,403,264 Time deposits with maturities exceeding three months (2,764) (33,248) Bonds with maturities within three months 5,289 63,619 Cash and cash equivalents on the statements of cash flows 202,356 2,433,635 m) Accounting Changes 1. Adoption of Accounting Standards for Asset Retirement Obligations Effective from the current consolidated fiscal year, Accounting Standard for Asset Retirement Obligations (ASBJ Statement No. 18, March 31, 2008) and Guidance on Accounting Standard for Asset Retirement Obligations (ASBJ Guidance No. 21, March 31, 2008) are applied. Consequently, the amount of income before income taxes and minority interest decreased by 544 million yen. This adoption has immaterial effect on either operating income or ordinary income. 2. Adoption of Accounting Standard for Equity Method of Accounting for Investments and Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method Effective from the current consolidated fiscal year, Accounting Standard for Equity Method of Accounting for Investments (ASBJ Statement No. 16, March 10, 2008) and Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method (PITF No. 24, March 10, 2008) are applied. This adoption has no effect on operating income and ordinary income, income before taxes. 3. Adoption of Accounting Standards for Corporate Combination, etc. Effective from the current consolidated fiscal year, Accounting Standard for Business Combinations (ASBJ Statement No. 21, December 26, 2008), Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, December 26, 2008), Partial Amendments to Accounting Standard for Research and Development Cost (ASBJ Statement No. 23, December 26, 2008), Accounting Standard for Business Divestitures (ASBJ Statement No. 7, December 26, 2008), Accounting Standard for Equity Method of Accounting for Investments (ASBJ Statement No. 16, December 26, 2008), and Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, December 26, 2008) are applied. 3. Securities Fair value of securities of other securities as of March 31, and 2010 are as follows: (as of March 31, ) Unrealized gain: Stocks: Acquisition Carrying Unrealized Acquisition Carrying Unrealized costs value gain (loss) costs value gain (loss) 6,871 6,871 13,236 13,236 6,364 6,364 82,641 82, , ,182 76,540 76,540 Unrealized loss: Stocks: 6,262 6,262 5,084 5,084 (1,177) (1,177) 75,312 75,312 61,149 61,149 (14,163) (14,163) 26

13 Isuzu Motors Limited Annual Report 5. Retirement Benefit Obligation and Pension Plan 2010 (as of March 31, 2010) Acquisition costs Carrying value Unrealized gain (loss) The Company has defined benefit plans, i.e., corporate pension fund and lump-sum payment plans. The consolidated subsidiaries have defined benefit plans, i.e., corporate pension fund, welfare pension fund plans, tax-qualified pension funds and lump-sum payment plans. Several of the domestic consolidated subsidiaries have defined contribution pension plans for parts of the unfunded lump-sum benefit plans. Unrealized gain: Stocks: 6,939 13,358 6,419 6,939 13,358 6,419 6,891 5,875 (1,015) 6,891 5,875 (1,015) Unrealized loss: Stocks: Proceeds from sales of securities classified as other securities amounted to 128 millions (1,542 thousands) with an aggregate gain on sales of 5 millions (64 thousands) and an aggregate loss on sales of 2 millions (27 thousands) for the year ended March 31,. Non-marketable securities classified as other securities at March 31, amounted to 1,795 millions (21,598 thousands). (1) Retirement benefit obligation as of March 31, and 2010 are as follows: at end of the year (131,040) (129,948) (1,575,952) Fair value of plan assets Prepaid pension cost Long-term debt at March 31, and 2010 are as follows: Net 1.24% straight bonds due , % straight bonds due ,000 10, , % straight bonds due ,000 10, , % straight bonds due ,000 3,000 36,079 Loans 236,324 7,520 9,606 Lease obligations Less: current portion 261,486 2,842,147 85, ,537 40, ,554 64,207 61, ,186 (1,637) (508) (19,693) (22,692) (28,216) (272,904) (Details on net amount) Unrecognized actuarial net loss (23,304) (28,949) (280,275) Unrecognized prior service cost Net (22,692) (28,216) (272,904) ,371 The substitutional portion of the benefits under the welfare pension fund plans has been included in the amounts shown in the above table. (2) Retirement benefit cost for the year ended March 31, and 2010 are as follows: 86,841 1,025, , ,164 2,209,208 45,778 Accrued retirement benefits 4. Long-Term Debt Retirement benefit obligation obligation on balance sheets 2010 Service cost 7, ,164 85,369 Interest cost on projected The annual maturities of long-term debt at March 31, are summarized as follows: Planned maturity date Over 1 year within 2 years Over 2 years within 3 years 60,831 49, , ,700 benefit obligation Expected return on plan assets actuarial net loss (gain) 311,417 Net retirement benefit cost Thereafter 47, ,505 Other 183,695 2,209,208 The assets pledged as collateral for certain loans and other liabilities at March 31, and 2010 are as follows: Building and structures Machinery and equipment Land Others ,781 54, ,805 56, , , , ,619 1,922, ,766 35,520 (1,128) (931) (13,570) 5,958 6,411 71,665 (116) Amortization of prior service cost 25,894 2,992 Amortization of Over 3 years within 4 years 2,953 14,766 (120) 15, ,918 (1,396) , ,588 1, ,425 (3) Actuarial assumptions used to determine costs and obligations for retirement Discount rate % % Expected rate of return on plan assets % % Amortization period of prior service cost 1 10 years 1 10 years Amortization period of actuarial net loss (gain) years years Amortization period of net obligation arising from accounting changes 1 year 1 year 27

14 Financial Section 6. Income Taxes Accrued income taxes in the balance sheets include corporation tax, inhabitant tax and enterprise tax. Income taxes in the consolidated statements of income include corporation tax and inhabitant tax and enterprise tax. The significant components of the Company and its consolidated subsidiaries deferred tax assets and liabilities as of March 31, and 2010 are as follows: Deferred tax assets: Accrued retirement benefits Loss from revaluation of investments and Allowance for doubtful accounts Accrued expenses Accrued bonus cost Loss from inventory write down Loss carried forward Unrealized profit eliminated in consolidation etc. Others gross deferred tax assets Valuation allowance deferred tax assets Deferred tax liabilities: Reserve for deferred income tax of fixed assets Unrealized holding gain on securities Others deferred tax liabilities Net deferred tax assets Deferred tax liabilities: Reserve for deferred income tax of fixed assets Unrealized holding gain on securities Others Net deferred tax liabilities A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statements of income for the years ended March 31, and 2010 are as follows: Normal effective statutory tax rate Net valuation allowance Different tax rates applied to foreign subsidiaries Loss for this fiscal year by consolidated subsidiaries Equity in earnings of unconsolidated subsidiaries Foreign withholding tax Per capital levy of inhabitant tax Others Effective tax rate after adoption of tax-effect accounting % (8.8) (11.0) 0.6 (4.1) ,313 12,980 9,678 5,304 1,625 40,968 4,436 19, ,204 (86,506) 31,697 (1,102) (1,431) (914) (3,449) 28, ,580 4,059 23,189 12,726 8,800 4,846 1,779 61,187 4,718 22, ,183 (110,910) 29,272 (1,098) (16) (235) (1,350) 27, ,769 3, , , ,402 63,797 19, ,701 53, ,296 1,421,578 (1,040,369) 381,209 (13,263) (17,218) (10,999) (41,482) 339,726 5, ,061 48, % (58.2) (47.3) 24.9 (14.4) (45.7) 7. Shareholders Equity Changes in the numbers of shares issued and outstanding during the years ended March 31, and 2010 are as follows: Common stock outstanding 2010 Balance at the beginning of the year 1,696,845,339 1,696,845,339 Increase due to convertible stocks converted Balance at the end of the year 1,696,845,339 1,696,845,339 Treasury stock outstanding 2010 Balance at the beginning of the year 2,235,667 2,234,999 Increase due to purchase of odd stocks 98, ,668 Balance at the end of the year 2,450,660 2,355, Land Revaluation In accordance with the Law concerning Revaluation of Land enacted on March 31, 1999, the land used for business owned by the Company and its domestic consolidated subsidiaries and domestic affiliates was revalued, and the unrealized gain on the revaluation of land, net of deferred tax, was reported as Variance of Land Revaluation within Net Assets, and the relevant deferred tax was reported as Deferred Tax Liabilities related to Land Revaluation in Liabilities for the fiscal year ended March 31,. Revalued Date: March 31, 2000 In accordance with the Law concerning Revaluation of Land enacted on March 31, 1998, the land used for business owned by some of the Company s non-consolidated subsidiaries and affiliates accounted for by the equity method were revalued. Revalued Date: March 31, 2001 The method of revaluation is as follows: Under article 2-4 of the Enforcement Ordinance on Law concerning Revaluation of Land, the land price for the revaluation is determined based on the official notice prices assessed and published by the Commissioner of National Tax Agency of Japan as basis for calculation of Landholding Tax as stipulated in article 16 of the Landholding Tax Law. Appropriate adjustments for the shape of land and the timing of the assessment has been made. The land price for the revaluation for some of the land is based on land appraisal. The difference of the total fair value, revalued based on the article 10 of the Enforcement Ordinance on Law concerning Revaluation of Land, of business land for the end of this fiscal year and the total book value for the business land revalued was 62,577 millions (752,580 thousands). 9. Contingent Liabilities Contingent liabilities at March 31, and 2010 are as follows: 2010 Guarantees of bank loans 1, ,428 28

15 Isuzu Motors Limited Annual Report 10. Lease Transactions (1) Finance lease transactions, except for those which meet the conditions that the ownership of the leased assets is substantially transferred to the lessee, are as follows. a) As a lessee iamounts equivalent to acquisition costs, accumulated depreciation and net balance as of March 31, and 2010 concerning the finance lease assets: 2010 ii) Future payment obligations of finance lease expenses as of March 31, and 2010 are as follows: Portion due within 1 year Thereafter Amounts equivalent to interest expenses are calculated by the interest method based on an excess of the aggregate sum of lease payments over amounts equivalent to acquisition costs ,141 3,684 1,308 4,992 7,419 6,309 13,728 Acquisition Costs Accumulated Depreciation Net Balance 4,868 3,822 1,046 19,106 14,572 4,534 58,553 45,972 12,580 (2) Operating lease is as follows. a) As a lessee Future payment obligations of operating lease expenses as of March 31, and 2010 are as follows: 2010 Portion due within 1 year ,228 Thereafter 1,264 1,258 15, Derivatives Derivatives recognized in the consolidated financial statements for the fiscal year ended March 31, is as follows: 1. Derivative transactions for which hedge accounting is not applied (1) Foreign exchange-related Classification Non-market transaction Type of derivative transactions Forward foreign exchange contracts Buy Japanese yen Contract amount 3,023 3,023 Over 1 year Fair value (54) (54) Unrealized gain (loss) (54) (54) Contract amount 36,365 36,365 Over 1 year Fair value (659) (659) Unrealized gain (loss) (659) (659) 2. Derivative transactions for which hedge accounting is applied (1) Foreign exchange-related Hedge accounting Type of derivative Main hedge items method transactions Principal accounting method Forward foreign exchange contracts under designated hedge accounting method Forward foreign exchange contracts Buy Japanese yen Sell U.S. dollar Australian dollar Forward foreign exchange contracts Sell U.S. dollar Australian dollar accounts payable accounts receivable accounts receivable Contract amount 3,028 3,646 2,972 1,291 4,084 15,023 Over 1 year Fair value (15) 12 (51) (54) Contract amount 36,422 43,856 35,746 15,534 49, ,681 Over 1 year Fair value (189) 145 (613) (657) Forward foreign exchange contracts under designated hedge accounting method are accounted for as an integral part of accounts receivable, the hedge item, their fair values are included in the fair value of their underlying accounts receivable. 29