Mamoru Takebayashi, Chairman, and James E. Miller, President and CEO (seated)

Fiscal 1999, ended March 31, 1999, marked "a year of positive change" for Mazda Motor Corporation (the "Company") and its consolidated subsidiaries (collectively with the Company, "Mazda"). Positive change is best illustrated by the improvement in our consolidated financial results. Net sales for the year totaled 2,057.1 billion yen, up 0.8% from the previous year. Net income increased by 45.5 billion yen to 38.7 billion yen, the first consolidated profit since 1993 and only 0.8 billion yen short of Mazda's all-time record in 1985. An annual dividend of 4.00 yen per share was declared. This is the first dividend in six years. These financial results clearly show that we are on the way to a successful recovery.

Operationally, Mazda has achieved significant strides in Japan, Europe and North America. Despite a continuing decline in total industry sales in Japan, Mazda increased market share from 5.1% to 5.4%. Contributing factors included the introduction of new models such as the Capella wagon, Familia and ever - popular Roadster as well as the continued popularity of the Demio. Innovative sales and marketing programs and improved dealer performance also contributed to the share growth.

In Europe, Mazda enjoyed the third consecutive year of double-digit sales growth, boosted by the introduction of new Capella (626) wagon, Familia (323) and Roadster (MX-5) models. Capella and Familia models equipped with direct-injection diesel engines performed particularly well in the region. The newly launched Demio, which is a perfectly suited model for big cities in Europe, also registered strong sales.

In North America, Mazda also attained year-on-year retail sales growth for the second consecutive fiscal period. This growth was attained with positive sales of B-Series pickup trucks, Roadster (MX-5 Miata) and Familia (Protege) models, combined with the effect of increased efficiency of our distributors and dealers organization. The reorganization of Mazda's North American operations, which was completed during fiscal 1998, was another contributing factor to improved profitability.

In the Asian region, retail sales dropped due to continued instability of currencies and economic turmoil. Mazda carefully monitored the economic situation in respective markets and responded with appropriate actions.

Overall, Mazda achieved positive success with regards to both domestic and overseas markets. For the first time since 1987, our operations in North America and Europe were both profitable. Although much remains to be done, from both a sales and share perspective, Mazda's progress can be described as "directionally correct."

Directing Strategies Based on a Clear Vision

With regard to strategic direction, the management team has a very clear vision of where to take Mazda over the long term and required measures in the short to medium term. Whereas our primary objective is to continue to rebuild the financial strength of the Company, we are focused on profitable growth of our business in the three major markets-Japan, North America and Europe-while capitalizing on growth opportunities in other markets where business risks are reasonable. An important element of this strategy is to leverage our relationship with Ford Motor Company to the greatest possible degree. In support of our growth strategy, distribution synergies have been initiated or planned in a number of markets to achieve greater economies of scale and efficiency, at the same time leveraging the global strengths of Ford's marketing and sales organization.

To attain these objectives, we must continue to enhance efficiency in all aspects of our operations, and to promote a strong and distinctive brand image supported by our drive to achieve product quality and customer-satisfaction leadership around the world. We have reinforced our overall capabilities by reorganizing our operations in Japan and restructuring our North American operations in fiscal 1998.