Year Ended March 31, 2012 Ended March Year Honda Motor Co., Ltd. Annual Report 2012 Honda Motor Co., Ltd Annual Report 2012 Corporate Profile Honda Motor Co., Ltd., operates under the basic principles of “Respect for the Individual” and “The Three Joys”—expressed as “The Joy of Buying,” “The Joy of Selling” and “The Joy of Creating.” “Respect for the Individual” reflects our desire to respect the unique character and ability of each individual person, trusting each other as equal partners in order to do our best in every situation. Based on this, “The Three Joys” express our belief and desire that each person working in or coming into contact with our company, directly or through our products, should share a sense of joy through that experience. In line with these basic principles, since its establishment in 1948, Honda has remained on the leading edge by creating new value and providing products of the highest quality at a reasonable price, for worldwide customer satisfaction. In addition, the Company has conducted its activities with a commitment to protecting the environment and enhancing safety in a mobile society. The Company has grown to become the world’s largest motorcycle manu- facturer and one of the leading automakers. With a global network of 378* subsidiaries and 88* affiliates accounted for under the equity method, Honda develops, manufactures and markets a wide variety of products to earn the Company an outstanding reputation from customers worldwide. * As of March 31, 2012 NSX Concept Contents 02 The Power of Dreams 04 Financial Highlights 05 To Our Shareholders We would like to express our heartfelt thanks to all of our share holders for your continued interest and ongoing support for Honda’s business activities. We would also like to extend our sincere gratitude to all of our customers, suppliers and those who live in the local communities where Honda sites are situated. Your support has been vital to our growth and development. 12 Summary of Operating Results by Business 14 Review of Operations 14 18 22 23 Motorcycle Business Automobile Business Power Product and Financial Services Other Businesses Business 24 Risk Factors 29 Corporate Governance 30 Board of Directors, Corporate Auditors and Operating Officers 32 Financial Section 65 Investor Relations Information Introducing Honda’s Activities and Publications CSR Report Philanthropy Available on the Internet at the following URL: Available on the Internet at the following URL: http://world.honda.com/CSR/ http://world.honda.com/ community/ Website Website Environmental Report Available at the following URL: http://world.honda.com/ environment/report/ Website Caution with Respect to Forward-Looking Statements On the Cover: This annual report contains “forward-looking statements” as defined in Section 27A of the Securities Act of Honda CR-V 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements (North American model) are based on management’s assumptions and beliefs, taking into account information currently available to it. The all-new, fourth-generation Therefore, please be advised that Honda’s actual results could differ materially from those described in these Honda CR-V went on sale in forward-looking statements as a result of numerous factors, including general economic conditions in Honda’s December 2011. This new CR-V principal markets; foreign exchange rates between the Japanese yen and the U.S. dollar, the Euro and other introduces an upscale styling major currencies; and extensive environmental and other governmental regulations, as well as other factors direction, greater fuel efficiency, and detailed from time to time. added features and functionality. Honda Motor Co., Ltd. 01 Dreams inspire us to create innovative products that enhance mobility and benefit society. To meet the particular needs of customers in different regions around the world, we base our sales networks, research and development centers, and manufacturing facilities in each region. Furthermore, as a socially responsible corporate citizen, we strive to address important environmental and safety issues. THE POWE R OF DREAMS A C 02 Annual Report 2012 THE POWE R OF PHOTOS A: Acura RDX B: Gold Wing C: Acura ILX D: NC700S E: Acura RLX Concept DREAMS B D E Honda Motor Co., Ltd. 03 Financial Highlights Years ended March 31 U.S. dollars Yen (millions except (millions except per share data) per share data) 2010 2011 2012 2012 Net sales and other operating revenue ¥ 8,579,174 ¥ 8,936,867 ¥ 7,948,095 $ 96,704 Operating income 363,775 569,775 231,364 2,815 Operating margin (%) 4.2 6.4 2.9 Income before income taxes and equity in income of affiliates 336,198 630,548 257,403 3,132 Equity in income of affiliates 93,282 139,756 100,406 1,222 Net income attributable to Honda Motor Co., Ltd. 268,400 534,088 211,482 2,573 Cash dividends paid during the period 61,696 92,170 108,138 1,316 Research and development 463,354 487,591 519,818 6,325 Total equity 4,456,430 4,582,912 4,528,290 55,094 Total assets 11,629,115 11,570,874 11,780,759 143,336 Total Honda Motor Co., Ltd. shareholders’ equity 4,328,640 4,449,975 4,402,614 53,565 Capital expenditures (excluding purchase of operating lease assets) 348,981 326,620 424,413 5,164 Depreciation (excluding property on operating leases) 401,743 351,496 320,996 3,906 Per share data (Yen / U.S. dollar) Net income attributable to Honda Motor Co., Ltd. ¥ 147.91 ¥ 295.67 ¥ 117.34 $ 1.43 Dividends paid 34 51 60 0.73 Total Honda Motor Co., Ltd. stockholders’ equity 2,385.45 2,469.05 2,442.78 29.72 Cash dividends paid during the period (%) 37.2 38.5 37.4 Return on equity (%) 6.4 12.2 4.8 Return on assets (%) 2.3 4.6 1.8 Cash flows from operating activities ¥ 1,544,212 ¥ 1,070,837 ¥ 737,429 $ 8,972 Cash flows from investing activities (595,751) (731,390) (673,069) (8,189) Cash flows from financing activities (559,244) (100,416) (44,121) (537) Cash and cash equivalents at end of year 1,119,902 1,279,024 1,247,113 15,174 * United States dollar amounts have been translated from yen solely for the convenience of the reader at the rate of ¥82.19=U.S.$1, the mean of the telegraphic transfer selling exchange rate and the telegraphic transfer buying exchange rate prevailing on the Tokyo foreign exchange market on March 31, 2012. No representation is made that yen amounts could have been, or could be, converted into U.S. dollars at that rate or any other rate on this or any other date or at all. Net Sales and Operating Income / Operating Margin Net Income Attributable to Honda Other Operating Revenue Motor Co., Ltd. / Return on Equity Yen (billions) Yen (billions) (%) Yen (billions) (%) 12,000 1,000 10.0 600 15.0 750 7.5 8,000 400 10.0 500 5.0 4,000 200 5.0 250 2.5 0 08 09 10 11 12 0 08 09 10 11 12 0 0 08 09 10 11 12 0 Operating income (left) Net income attributable to Operating margin (%) (right) Honda Motor Co., Ltd. (left) Return on equity (%) (right) 04 Annual Report 2012 To Our Shareholders Takanobu Ito President & Chief Executive Officer We would like to express our heartfelt thanks to all of our shareholders for your continued interest and ongoing support for Honda’s business activities. We would also like to extend our sincere gratitude to all of our customers, suppliers and those who live in the local communities where Honda sites are situated. Your support has been vital to our growth and development. Honda Motor Co., Ltd. 05 During the past year, we faced a challenging economic environment. In Europe, the sovereign debt crisis, rising oil prices and other factors led to stagnation, which slowed the economy to a crawl. In the United States, although the overall economy continued to show signs of a gradual recovery, a high unemployment rate, sluggish sales of homes and fiscal austerity could result in the economy slipping into recession. Meanwhile, the pace of growth slackened in Asian countries such as China and India, although a general recovery is underway in other countries in the region. In Japan, economic conditions remained challenging amid a mild recovery. Under these conditions, Honda’s consolidated net sales and other operating rev- enue declined 11.1% to ¥7,948.0 billion, despite a second-half recovery in production and higher sales in our motorcycle business operations. The overall decline mainly reflected sharply lower automobile production worldwide due to the impact of the Great East Japan Earthquake and flooding in Thailand. Net income declined year on year to ¥211.4 billion, resulting in earnings per share falling to ¥117.34. From a business segment standpoint, the floods in Thailand had a negative impact on motorcycle sales. However, sales in India and Vietnam increased in line with greater production capacity. We also realized solid sales growth in Brazil. In our automobile business operations, our worldwide automobile sales were signifi- cantly lower than the previous year. This was the result of supply chain disruptions caused by the Great East Japan Earthquake and the floods in Thailand, and produc- tion shutdowns caused by flood damage to Thailand manufacturing facilities. In our power products business operations, sales of assembled machinery such as trimmers were strong in North America, while sales of pumps were strong in Asia on the back of market expansion. Future Initiatives Straight back onto a growth trajectory Fiscal 2012 was a year of trials and tribulations for Honda due to the extraordinary damage caused by the two natural disasters.