Annual Report 2016 for the Year Ended March 31, 2016 Contents

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Annual Report 2016 for the Year Ended March 31, 2016 Contents Annual Report 2016 For the year ended March 31, 2016 Contents 02 Subaru Story 06 Business Highlights 08 To Our Shareholders 14 Message from our CFO 18 Special Feature Innovativeness of the Subaru Global Platform that will Serve as the Backbone of Next Generation Automobile Manufacturing 26 Corporate Governance 28 Board Directors / Executive Officers 30 Financial Information 30 Consolidated Ten-Year Financial Summary 31 Five-Year Automobile Sales 33 Management's Discussion and Analysis of Results of Operations and Financial Position 41 Corporate Data / Stock Information Disclaimer Regarding Forward-Looking Statements Statements herein concerning plans and strategies, expecta- tions or projections about the future, FHI’s efforts with regard to various management issues, and other statements, except for historical facts, are forward-looking statements. These forward-looking statements are subject to uncertainties that could cause actual results to differ materially from those anticipated. These uncertainties include, but are not limited to, general economic conditions, demand for and prices of FHI’s products, FHI’s ability to continue to develop and market advanced products, raw material prices, and currency exchange rates. FHI disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. FUJI HEAVY INDUSTRIES LTD. 01 ANNUAL REPORT 2016 Subaru Story Subaru Vehicle Manufacturing that Breathes Life into “Enjoyment and Peace of Mind” Enjoyment and peace of mind to everyone: The unchanging concept built into Subaru vehicles FUJI HEAVY INDUSTRIES LTD. 02 ANNUAL REPORT 2016 Subaru Story Subaru Story Subaru Vehicle Manufacturing that Breathes Life into “Enjoyment and Peace of Mind” Enjoyment and peace of mind to everyone: The unchanging concept built into Subaru vehicles One of the most important factors that have formed the identity of performance from four angles, “Primary Safety” that is incorporated Subaru that was founded as an airplane manufacturer is a high level in the basic design so that the driver is not easily fatigued and can of safety performance. For example, the Subaru 360 was the first concentrate on driving with peace of mind, “Active Safety” with to make it possible for four adults to fit comfortably in a mass low center of gravity design and AWD to be able to drive in a wide Peace of Mind production mini vehicles in 1958. The first ever monocoque body in variety of weather and road surface conditions, “Pre-Collision Japan built by airplane manufacturing know how made spacious Safety” represented by EyeSight that detects danger and avoids Subaru has continued to research safety space and high strength a reality. Furthermore, at a time when the the damage of a collision, and “Passive Safety” to protect people performance for over half a century since concept of crash safety was not common knowledge, since 1965, from the shocks in the event of a collision. about 30 years before safety standard for frontal collisions started Subaru’s Safety Concept the introduction of the “Subaru 360.” to be applied, we have run repeated tests and succeeded in developing a lightweight high-rigidity body. Also, in terms of the horizontally-opposed engine, based on data obtained in experiments, Preemptive accident Damage reduction avoidance during an accident structures that are less susceptible to engine intrusion into the cabin during frontal collision were realized and shock absorbing space was secured when a pedestrian hit the hood of the vehicle, etc. were some of the innovations that have been highly rated. Safe Dangerous Accident Collision Damage state state spreads And now, Subaru will continue to pursue advances in safety FUJI HEAVY INDUSTRIES LTD. 03 ANNUAL REPORT 2016 Subaru Story Enjoyment of the automobile. At the center of this is the All-Wheel Drive,” realizes a high level of maneuverability such as excellence of driving performance for the driver to be able to the superior stability that AWD is supposed to have, superior operate intuitively. The joy of that motion that is felt at the weight balance and run-through performance regardless of the Enjoyment moment you step on the accelerator pedal. A car for which road surface, etc. It will arouse the joy of driving. speed, sound, vibration and everything exists to satisfy the Subaru also does not stop with keeping the automobile as senses of the driver. At the core of this kind of ultimate packaging simply a means of transport and delivers to every single customer The driving performance of Subaru. It is is Subaru’s proprietary “Horizontally-opposed (boxer) engine.” a richer daily life as we believe that we would like to be a partner at this origin that we find “Human The advantages of superiority in rotational balance, having low accompanying people through their lives. The enjoyment of life is vibration, being lightweight, compact and having a low center of as unlimited as there are human beings. Subaru will continue to Centered Automobile Manufacturing” gravity, it realizes superior handling performance with high driving meet and exceed the expectations of customers by “Human stability. In the same way, Subaru’s proprietary “Symmetrical Centered Automobile Manufacturing” going forward. FUJI HEAVY INDUSTRIES LTD. 04 ANNUAL REPORT 2016 Subaru Story Subaru Story Enjoyment of the automobile. At the center of this is the All-Wheel Drive,” realizes a high level of maneuverability such as excellence of driving performance for the driver to be able to the superior stability that AWD is supposed to have, superior operate intuitively. The joy of that motion that is felt at the weight balance and run-through performance regardless of the Vision for 2020 Enjoyment moment you step on the accelerator pedal. A car for which road surface, etc. It will arouse the joy of driving. Enhancing the speed, sound, vibration and everything exists to satisfy the Subaru also does not stop with keeping the automobile as Prominence 2020 Subaru Brand Corporate Vision senses of the driver. At the core of this kind of ultimate packaging simply a means of transport and delivers to every single customer High-quality company that is not big in size but has The driving performance of Subaru. It is is Subaru’s proprietary “Horizontally-opposed (boxer) engine.” a richer daily life as we believe that we would like to be a partner distinctive strength at this origin that we find “Human The advantages of superiority in rotational balance, having low accompanying people through their lives. The enjoyment of life is In the aim of having a “prominent presence” in customers’ minds, Centered Automobile Manufacturing” vibration, being lightweight, compact and having a low center of as unlimited as there are human beings. Subaru will continue to we pursue our corporate vision to become Specific Goals gravity, it realizes superior handling performance with high driving meet and exceed the expectations of customers by “Human • No.1 for customer trust stability. In the same way, Subaru’s proprietary “Symmetrical Centered Automobile Manufacturing” going forward. “a high-quality company that is not big in size but has distinctive Building a Strong • Brand strength strength” by focusing on two initiatives — enhancing the Business Structure • Industry-leading high profitability • Global sales of 1.2 million-plus vehicles Subaru brand and building a strong business structure. FUJI HEAVY INDUSTRIES LTD. 05 ANNUAL REPORT 2016 Business Highlights FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES Years ended March 31 Net Sales Operating Income / Operating Margin Capital expenses / R&D expenses Operating Income Operating Margin Capital expenses R&D expenses (Billions of yen) (Billions of yen) (%) (Billions of yen) 4,000 600 565.6 40 150 33.7% 135.7 22.6% Financial UP 3,232.3 12.3% UP UP Highlights 120 2,877.9 110.7 3,000 450 423.0 30 102.4 2,408.1 326.5 90 83.5 1,913.0 2,000 300 20 70.2 68.5 17.5 2.8pt 60.1 1,517.1 UP 54.3 14.7 60 48.1 49.1 13.6 1,000 150 120.4 10 22.6% 30 UP 44.0 6.3 2.9 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 0 2012 2013 2014 2015 2016 Interest-Bearing Debt Balance Automobiles sales volume ROE / ROA Free Cash Flow / *ROA was calculated as operaing income / (average of assets at the beginning and end of the term) Ratio of Shareholders’ Equity to Total Assets ROE ROA Free Cash Flow Ratio of Shareholders’ Equity (Billions of yen) (Thousand units) (%) (Billions of yen) to Total Assets (%) 400 1,000 958 40 36.9 400 80 911 pt 358.6 % 341.0 7.6 158.4 825 5.2% UP UP 307.2 UP 30.4 800 724 300 269.7 30 29.3 300 279.1 60 640 51.8 22.9 46.5 600 211.2 19.5% 23.6 DOWN 37.7 40.5 200 20 20.7 200 40 170.0 18.8 33.3 5.3pt 400 2.9pt 138.8 UP UP 8.9 95.3 100 10 100 20 200 8.2 28.3 3.5 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 FUJI HEAVY INDUSTRIES LTD. 06 ANNUAL REPORT 2016 Business Highlights Business Highlights FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES Years ended March 31 Net Sales Operating Income / Operating Margin Capital expenses / R&D expenses EyeSight Accident Comparison of rate of accidents Between vehicles* Between people and vehicles Reduction Data resulting in injury or death with and * Placed top in frequency Operating Income Operating Margin Capital expenses R&D expenses without EyeSight (Ver.2) (Billions of yen) (Billions of yen) (%) (Billions of yen) No.
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