INTEGRATEDREPORT
2021

The Subaru Group, by no means a large automaker, is implementing a business model centered on

INTRODUCTION

Pursuing our Goal of“Delivering Happiness to All”

selection and concentration of limited management resources, creating added value, and pursuinguncompromising differentiation. That has led our customers and dealers to say that Subaru is a “different
kind of brand.” As we prioritize our customers, who have made Subaru a brand unlike any other, we aretasked with continuing to evolve the Subaru Difference, unwavering even as the eras and environmentschange. We are also tasked with offering our customers Enjoyment and Peace of Mind, and delivering
happiness. Our goal of becoming a company “delivering happiness to all” is something that we havelearned from the behavior of our customers. We will continue to pursue our goal of delivering happinessto people, society, and even Earth.

Integrated Report 2021 01

Contents
Value Creation Story

Mechanisms Supporting Value Creation

04 Subaru’s History of Value Creation

46 Environment

06 At a Glance

50 Safe, Quality Cars

08 Message from the CEO

53 CSR Procurement

Subaru’s Value Creation Story, Told by the President

55 Human Resources
60 Health and Safety

14 Value Creation Process

62 Compliance
Commentary on Strategy

64 Information Security

16	Our Evolving Mid-term Management Vision

65 Intellectual Property Protection Initiatives

18	Mid-term Management Vision “STEP”: Overview

66 Directors, Auditors, and Executive Officers

20	Mid-term Management Vision “STEP”:

68 Corporate GovernanceSix Priority Areas for CSR
22 Activities in the Six Priority Areas for CSR in
Relation to SDGs
24 The Subaru Difference80	Messages from the Independent Outside
Directors
Corporate Data
82 Consolidated Ten-year Financial Summary

26 Corporate Culture Reforms

84 Five-year Unit Sales

28 Quality Enhancement

86 Financial Review

30 Evolution of the Subaru Difference

88 Global Network

34	Feature – Carrying on Subaru’s Unique Valueand Total Innovation

89 History of the Subaru Group36	Message from the CFO–Financial and Capital Strategies–

91 Corporate Information

90 Subaru Models through the Years

38	Risk Management
40	Business Overview

On Publication
The Subaru Group is striving to realize a sustainable society by evolving our delivered value of Enjoyment and Peaceof Mind, in seeking to achieve our vision of becoming a company “delivering happiness to all.” In order for shareholders,investors, and other stakeholders to better understand our unchanging values, strengths, and business models that
underlie these initiatives, we are working to enhance our integrated disclosure of financial and non-financial information.
In FYE March 2021, we re-organized our traditional structure of an Annual Report and CSR Report to create a new

Information Disclosure System
Business and Financial Information

information disclosure system with the Integrated Report 2021 at its core, plus the Sustainability Report 2021 and theIntegrated Report

Sustainability website. In the Integrated Report 2021, we have summarized the progress and future direction of ourinitiatives, including our mid-term management vision “STEP” and the Six Priority Areas for CSR, with a focus on the value
creation diagram that visualizes the initiatives above. We will utilize this report as one of our tools for communicating withstakeholders, further enhancing our disclosure going forward.

Sustainability Information

To provide consolidated key information on the Subaru Group and share our value creation
story with a wide range of stakeholders, including shareholders and investors, we aim tocommunicate in an easy-to-understand manner for all of our stakeholders.
https://www.subaru.co.jp/en/ir/library/annual-reports.html

Disclaimer Regarding Forward-Looking Statements
Statements herein regarding plans, strategies, and other information that are not historical facts are assumptions, judgments and forecasts basedon information available at the time of creation, and are subject to various risks and uncertainties. Actual results may differ materially from thesestatements due to changes in economic conditions surrounding the Company and its Group companies, fluctuations in demand and exchange rates,and other factors. Final investment decisions shall be made by investors themselves based on their own judgment and responsibility in light of theabove factors. Please note that the parties providing the information in this document regarding the Company and its Group shall not be liable forany loss or damage incurred as a result of investment based on the information contained in this document.

Annual Securities Report (Japanese version only)
https://www.subaru.co.jp/en/ir/library/results.html

Corporate Governance Guidelines/
Corporate Governance Reports (Japanese version only)

Sustainability Report
This is a comprehensive report on sustainability
information from the aspects of the environment,
society, and governance.
https://www.subaru.co.jp/en/csr/report/

https://www.subaru.co.jp/en/outline/governance.html

Scope of Reporting

Reporting Period

SUBARU CORPORATION

April 1, 2020–March 31, 2021

* In this report, the “Subaru Group” and “the Group” refer* Some information provided may be from outside the reporting period.

to the Subaru Group; “Subaru” or “the Company” refers
to Subaru Corporation; “affiliated companies (affiliates)”* The departments, titles, etc. of the people introduced in this report are as of the time of writing.

refers to Subaru’s subsidiaries in Japan and overseas,

Guidelines Referenced

including dealerships in the Automotive Business; andGuidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative
Value Creation, Ministry of Economy, Trade and Industry
International Integrated Reporting Framework, The International Integrated Reporting Council (IIRC)“group companies” refers to Subaru’s subsidiaries in Japan,
excluding dealerships in the Automotive Business.

02 Integrated Report 2021

Investor Relations Information Website
Investor Relations Information

Sustainability･CSR Website
https://www.subaru.co.jp/en/csr/

https://www.subaru.co.jp/en/ir/

Integrated Report 2021 03

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Subaru’s History of Value Creation
We have always been ahead of the curve in using products exemplifying the Subaru Difference to respond to customer needs
based in the context of the times. This has created strong ties with our customers. In particular, we believe that the driver’s
universal value of safety is an unshakable strength felt by our customers in our continuous refinement of all kinds of technologies.

PeriodTo 1950

Customer needs
based in historicalcontext
Subaru’s value

1950s

1960s and 1970s

1980s

and 1990s

Since 2000

• Postwar
reconstruction• National Car
Concept• Rapid economic growth• Motorization• Leisure(skiing) boom

• Motorsports boom

• The 2008 ‘Lehman shock’ economic
downturn• Increasing safety awareness• Increasing environmental awareness• Desiring mobility• Desiring anaffordable car• Desiring a car ride withoutworrying about the weather• Desiring family fun with apersonal vehicle• Desiring leisuretime withfriends• Desiring to bond with cars
• Desiring to manifest uniquepersonality• Desiring car safety at all times• Desiring to do more for society and theenvironment

Mobility

provided throughSafety performancecar manufacturing

Family mobility for all
The Subaru community
An unpretentious, self-actualized style
Technology

Visibility design Primary Safety

embodying our1965 Began crash tests Passive Safety

safety concept

1966 Horizontally-opposed engine

Active Safety

1972 4WD/AWD Active Safety
1989 
Began stereo camera development
Preventive Safety

1999
ADA

(Active Driving Assist)

2008
EyeSight
2016 
Subaru Global Platform
Active Safety

Passive Safety

2020
Subaru STARLINK
Connected Safety

Products

1966
Subaru 1000

Pre-Subaru
Aircraft1958
Subaru 360
1972
Leone 4WD
Estate Van

Note: The information above is mainly about the Japanese market.

04 Integrated Report 2021

1989
Legacy1988
Established
Subaru Tecnica
International Inc.

1992
Impreza2012
SUBARU XV

1995
Grand Wagon

2012
SUBARU BRZ

1997Forester
1997
Three-time World
Rally Championship(WRC) winner

2014
LevorgFrom 2008
Participated in the
Nürburgring
24-hour race

Integrated Report 2021 05

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

At a Glance
Basic Corporate Data
FoundedBusiness Segments

Chikuhei Nakajima establishes
Aircraft Research Laboratory

2 Segments

The Subaru Group’s Unique Business Model

Selection and Concentration

Unit sales(Automotive and Aerospace)

Established

Production Sites

860

*3

Important Market

thousand units

Establishment of Fuji Heavy
Industries Ltd.​1953

Automotive

2
2

operating locations(Gunma (Japan), Indiana (U.S.))

Aerospace

operating locations(Tochigi, Aichi (Japan))Company Name Change

Number of Employees (consolidated)*1

Birth of Subaru Corporation

Capital Stock*1

153.8
billion yen

Revenue

Production anddevelopment of up to

Operating Profit

9
1

Industry Share*3

95

Automotive Industry Share1%

Automobile Sales Network

locations in Japan

Plus locations in more thancountries and regions

Our Target Direction
Solid Financial Base

Ratio of equity attributableto owners of parent

52.1%

06 Integrated Report 2021

A-

(Rating and Investment Information, Inc.)As of October 8, 2020

80%

Retail sales

98% AWD vehicles*4

20 million units

platform

Added Value
All-Around Safety

Core Technologies

Primary Safety
Active Safety
Preventive Safety
Passive Safety
Connected Safety

Subaru Global Platform
Symmetrical AWD
Horizontally-Opposed Engine
EyeSight Driver
Assist System* See Subaru’s All-Around Safety on P. 42 for details.

* See Subaru’s Core Technologies on P. 43 for details.

Market Evaluation of Subaru
Industry-leading Profit Margin

Issuer Rating

Approx.

Cumulative production:models frombillion yen

Approx.

SUV sales ratio

Differentiation

Affiliated Companies*1

442
90

10 ModelsAutomobile Category(Excluding OEM vehicles)

billion yen*2*1 Figures for FYE March 2021
*2 As of April 1, 2021
*3 For 2020 (calendar year)*4	Based on sales data from 2018 to 2020 (calendar
years). Excludes OEM vehicles from othercompanies.

4.2%

Operating margin

*1

3.6%

Achieve a goal of zero
fatal traffic accidents*5by 2030*3Models on Market

U.S. Market Share

2,830.2
102.5

36,0702017

Automotive Segment

Consolidated Performance*1

1917

Toward Realizing a Sustainable Society

2020–2021
Car of the Year Japan
Recipient

JNCAP
Maximum Five Star Vehicle
Safety Performance 2020
Award Recipient

LevorgLevorgMake at least 40%
of Subaru global sales
electric vehicles (EVs) or
hybrid electric vehicles(HEVs) by 2030
Applyelectrification
technologies to all Subaru
vehicles*6 produced and soldworldwide by the first halfof the 2030s
On awell-to-wheel*7 basis, wewill pursue our goal of reducing
the average CO2 emissions fromnew passenger cars by at least
90%*8 by 2050, comparedwith 2010
Reducedirect emissions of
CO2 by 30% from FYEMarch 2017 levels by FYEMarch 2031 (aggregate
amount basis)Target carbon neutrality
by FYE March 2051*9*5 Z ero fatal road accidents among occupants of Subaru vehicles and people who collided with Subaru vehicles including pedestrians and cyclists.
*6 Excluding models supplied by OEMs.
*7 W
 ell-to-Wheel: Approach to calculating CO2 emissions including the emissions produced by the generation of electricity to be used by EVs andother vehicles.
*8 R educe total CO2 emissions calculated based on the fuel efficiency (notified value) of all Subaru automobiles sold across the world by 90% ormore relative to the 2010 levels in 2050. Changes in the sales quantity due to changes in the market environment shall be taken into
consideration, while minor changes in running distance shall not.
*9 Direct CO2 emissions from Subaru Group plants and offices (Scopes 1 and 2).

Integrated Report 2021 07

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Message from the CEO

A Three-Year Review

We have made steady progress in the priority initiativesof corporate culture reforms, quality enhancement, andthe launch of the “Make-a-Subaru” initiative.
When I first assumed the position of President in 2018, my first tasks were to handle quality
issues such as final vehicle inspections and major recalls. The mid-term management vision“STEP” (FYE March 2019 to FYE March 2026) we decided to formulate then came at a time
when I was strongly aware of the issue that we lacked qualitative growth in our work practices,
organization, and, including in our human resources despite the rapid quantitative growthover the preceding 10 years–in sales and in vehicles sold. Considering the rectification of thisimbalance to be an urgent task, we then set corporate culture reforms, quality enhancement,
and the launch of “Make-a-Subaru” as our priority reform initiatives, and have been putting firm
efforts into these since.
After the announcement of “STEP,” I visited each plant and office and held dialogues with theemployees there. What stayed with me from those dialogues is that everyone was listening to mewith serious intent with eyes wide open and penetrating stares. After that, we launched steadyefforts toward our various reforms under the slogan of “change mindset, change behavior, change

Profilethe company.” For corporate culture reform, we broke free from top-down management andJoined Subaru in 1982. After working inJapan Sales & Marketing Division, Global
Marketing Division, and other units, heserved as Vice President, Senior General
Manager of Strategy Development
Division, and Chief General Manager ofCorporate Planning Division from 2011;
Senior Vice President, Chief General
Manager of Overseas Sales & Marketing
Division 1, and Chairman and CEO of
Subaru of America, Inc (SOA) from 2014;
as well as Executive Vice President, Chief
General Manager of Overseas Sales &Marketing Division 1, and Chairman and
CEO of SOA from 2016. He has served
as Representative Director of the Board,
President and CEO since June 2018.

dogged adherence to precedent, and improved compliance mindsets. For quality enhancement,
we pursued the thorough implementation of a “Quality-First” mindset and reinforcement oforganizational efforts and structure, as well as “Execution Quality” enhancement and “Innate
Quality” enhancement. In addition, we evolved the “Make-a-Subaru” initiative, reforming
development processes for improving quality from upstream development stages, thereby
evolving the Subaru Difference. Looking back over the past three years, I feel that employee
mindsets have changed and that we have been making steady progress.
Then, in May 2021, three years after the announcement of the mid-term management
vision “STEP” we presented a summary of our progress and reported on our future initiatives.
While there are no major changes to our basic policy, we believe that it is necessary to further
accelerate reforms in order for the Subaru Group to grow sustainably amid so-called “thegreatest change of the century” in the external environment.
For corporate culture reforms, we don’t just want to have an open culture; we also actively
invest in our future leadership talent so that each employee can experience growth and a sense

We will further evolve the Subaru Difference
toward the achievement of an enjoyable andsustainable society and the sustainable growthof the Subaru Group.

of reward in their work, building an environment where people who reach a little higher willgrow and succeed.
Our quality enhancement initiatives, which we‘ve positioned as our top priority in “STEP,” area critical foundation underpinning the Subaru brand. From hereon, we will continue our steadymove forward motion so that we can show concrete results from our quality enhancement,
including adapting to new technologies. This reformed quality serves as added value we candeliver to our customers.
For evolving the Subaru Difference, we will further evolve the technology that supports
Enjoyment and Peace of Mind, contributing to zero fatal traffic accidents*3 and a carbon-freesociety, and we will strengthen the Subaru Difference even in the era of electrification.

08 Integrated Report 2021

In addition, under the mid-term management vision “STEP,” I believe that our CSR initiatives

Tomomi Nakamura

focused on the Six Priority Areas for CSR*1 have seen the most advancement in these past three

Representative Director of the Board, President and CEO

years, in concert with our efforts to strengthen our organizational structure. In the U.S., where

Integrated Report 2021 09

Value Creation Story

Commentary on Strategy

I was assigned just before I became President, despite the cultural differences, the country

customers are particular in that they judge

enjoys deeply rooted diversity and volunteerism, and my ability to the fact that I was able tovehicles on other aspects, saying our

experience these has served me well here today.

Subaru offers “utility,” meaning they can do

Of the Six Priority Areas for CSR, we are particularly focusing on the areas of People-

Corporate Dataanything with just one car; “safety,” meaningoriented Car Culture, Resonance and Coexistence, and Peace of Mind, each of which is an area

they have fewer accidents and don’t create

where we can leverage Subaru’s unique strengths and where society faces issues that we canproblems for society; and “reliability,”

help resolve through our business activities. In FYE March 2021, we have made steady progress

meaning they are useful over long periods ofin these areas such as by clarifying links with the SDGs that each of the Six Priority Areas fortime and do not lead to wasted resources.

CSR contributes to. We will continue to improve the Subaru Difference as we continue to grow

Mechanisms Supporting Value Creation

In this way, through the value statement

together with society.

Enjoyment and Peace of Mind, we thoroughly*1 The six areas of People-oriented Car Culture, Resonance and Coexistence, Peace of Mind, Diversity, Environment, Compliance.

pursue product values embodying the Subaru Difference, such as safety and longevity. Also, by
enhancing the lifestyle, experience, and emotional connection that Subaru offers, we would liketo further strengthen and constantly deepen our relationships with the customers feeling these

Subaru’s Core Competencies

We will enhance brand value with a distinctly different
presence for our customers.

sensations.
*2 C alculated by Subaru based on ITARDA data. Among Subarus (excl. mini vehicles) newly registered as new cars in the preceding five
years (incl. reference year).
*3 Z ero fatal road accidents among occupants of Subaru vehicles and people who collided with Subaru vehicles including pedestrians
and cyclists.

Our mid-term management vision “STEP” includes a vision for 2025; to “Become a brand that

Toward Future Growthis ‘different’ from others by enhancing distinctiveness.” This “difference,” or “distinctiveness,”means that Subaru has an appeal distinct from other companies, and that is what we in fact
hear from our customers and dealerships.

Even amid accelerating CASE*4 trends, we will bring theSubaru Difference to even greater prominence.

If you consider the very root of Subaru’s strengths, it comes down to one word: “safety.”
This is the DNA we have inherited from our history in aircraft manufacturing. Since aircraft carry
the danger of crashes even from slight malfunctions, we have been rigorous in the pursuit of

The automobile industry is said to be in a once-in-a-century period of revolutionary change.

safety. We have been dogged in our vehicle crash tests even since before the days of passive

While we believe it is important to address CASE, such as through environmental consideration-

safety standards, and today we live and breathe the concept of “further enhancing driving

driven evolution in automobile electrification technology, I feel that the direction we should aim

performance brings greater safety.”for going forward is bringing the Subaru Difference to greater prominence in the hearts of our

Unfortunately, there are as many as 3,000 fatal accidents each year in Japan. However, thenumber of those involving EyeSight-equipped Subarus has been declining every year. In Japan,

customers.
Here, on a re-examination of the Subaru Difference, I feel that difference is our ability to

the number of traffic fatalities which involved Subarus of the latest 5 model years (excluding

brainstorm what our customers think is important and to create new value distinct from othersmini vehicles) was three*2 in 2019.

that has a deep relationship with our customer's lives. Even in changing eras, our aim to achieve

In the future, we plan to accelerate the fusion of sensing technology and AI, improving

human-oriented car-making remains unchanged. Subaru has an approximately 1% global

safety in all situations. With this steady evolution, we have set an ambitious goal of zero fatal

market share in the automobile industry, and is developing a business strategy centered on

traffic accidents caused by Subaru vehicles in 2030*3, and we are working sincerely toward this“selection and concentration” rather than the omnidirectional strategies of other automobile

goal.

manufacturers. Amid advances in CASE, we would like to promote joint development andIn this way, the safety, longevity, and capability that Subaru has pursued and evolved havefirmly reached the hearts of our customers as “Enjoyment and Peace of Mind.” I’ve often been

open innovation to create cars that show off our strengths, rather than developing all newtechnologies on our own.

told about our customer's experiences and lives: “my Subaru offers more peace of mind when

Regarding electrification and other actions to address the environment, in January 2020

driving around with friends and the people I love and care about” in terms of safety, and “I have

we announced a roadmap for achieving carbon neutrality by 2050. In this roadmap, we plan tobuilt a lot of treasured memories with my Subaru because of how many years it has lasted andincrease the share of electric and hybrid vehicles (EVs and HEVs) to at least 40% of total sales

how close I’ve become to my Subaru.” Even in social media posts, in the priority market of theby 2030, and to apply electric powertrain technology to all Subaru vehicles sold worldwide

U.S., we see a lot of posts featuring images and videos of Subaru vehicles with family members,by the first half of the 2030s. Though electrification will continue to progress, the importancefriends, and pets in front of gorgeous backdrops.

of safety performance will be unchanged. In fact, we believe that our all-wheel drive (AWD)

There is also data showing that Subaru customers in the U.S. generally maintain highcontrol technology can fully bring out performance in motors with higher responsiveness andawareness toward society and the environment. Generally, eco-friendly cars are judged on

demonstrate driving stability and enjoyment on a higher level. Our first step in this direction is

aspects like fuel efficiency, exhaust gas, and vehicle size. But, beyond these attributes Subaru

the SOLTERRA C-segment SUV, jointly developed with Toyota Motor Corporation, which will be

10 Integrated Report 2021

Integrated Report 2021 11

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

launched by the middle of 2022 in countries and regions including Japan, the U.S., Europe, andSubaru is further strengthening its efforts in this area by setting a new target to increase theChina. The joint development of the SOLTERRA represents an even stronger shared passion

number of female managers to at least double the 2021 level by 2025. Regarding respect forand belief for creating better cars between ourselves and Toyota Motor Corporation following ahuman rights, we formulated the Human Rights Policy in April 2020, and in FYE March 2021 weseries of strong achievements in our partnership.

carried out human rights due diligence in the areas of procurement and personnel.

In addition, in order to respond to drastic changes and maintain market competitivenessFor risk management, the Chief Risk Management Officer (CRMO) appointed by thein the future, we are reviewing our development system and evolving into an organizational

Board of Directors chairs the Risk Management and Compliance Committee, leading our risk

structure that can flexibly adapt to future technologies. Going forward, we will continue tomanagement efforts.

bring out the Subaru Difference by pursuing safety performance including accident avoidance

In FYE March 2021, in order to carry out more sound risk management, we drafted a Risk

and driver assistance, as well as AWD performance and handling stability that meet customer

Map summarizing priority issues for addressing issues from a Group-wide perspective, in

driving expectations.

consideration of the size of losses that could occur when such risks materialize. In addition, we*4 CASE: Connected, Autonomous, Shared & Services, Electric

had each department formulate its own Risk Management Code of Conduct, pressing themforward in Group-wide optimized risk management. Despite unexpected situations like theworldwide spread of COVID-19 and shortages of semiconductors, we believe that our daily risk

Corporate Governance Supporting Growth

We have strengthened our corporate governance andother ESG initiatives for sustainable growth.

management precautions, such as for business continuity plans (BCPs), have been functioning
well. Going forward, we will continue to promote strategic risk management as an importantmanagement priority.

Toward Our Vision

We recognize that ESG initiatives, such as enhancing corporate governance and strengthening
risk management, are important as a foundation to support value creation with the goals of

Pursuing our Goal of “Delivering Happiness to All”

achieving sustainable growth and increasing corporate value over the medium- to long-term.
So far, we have promoted stronger enforcement of our Group governance system and taken
steady steps forward in complying with the Corporate Governance Code. As a result of theseThrough our “STEP” efforts, we’ve come to realize more clearly what we have to protect andefforts, we have welcomed our first female independent outside director as of FYE March 2021,

keep developing further. While we have evolved the functional aspects of our vehicles, likeand are making appropriate management decisions and conducting appropriate supervisionsafety and longevity, with “Enjoyment and Peace of Mind” as our value statement, we alsowith sound advice from three independent outside directors.

believe that our customers are coming to recognize our emotional values in their hearts throughIn addition, since changes in top management and successor selection may have a criticalthe lifestyle, experience, and emotional connection that Subaru vehicles offer. This has led toinfluence on corporate value, we formulated the CEO Succession Plan in FYE March 2021,

the birth of a deep relationship between Subaru and our customers different from other brands,

creating a system enabling execution of top management change to the right successor at thea relationship that has exceeded our expectations. This is something I recognize as truly our

optimal timing. Furthermore, we have established two sets of criteria: “Abilities required ofgreatest asset, and something that we must strengthen further.

the Subaru Group’s CEO” and “Five key qualities required of the Subaru Group’s CEO.” These

Our vision is “delivering happiness to all.” Under our value statement “Enjoyment and Peace

criteria serve as a guide for evaluating candidates for CEO in light of quality, competency,of Mind,” we will continue our efforts to bring us closer to the lifestyles of our customers by

experience, track record, specialized expertise, personality and other factors, all of whichhaving Subaru’s functional value elevated to emotional value. Alongside our customers, wehave been discussed and decided on by the Board of Directors and the Executive Nomination

want to be a Subaru that delivers happiness to people, society, and even Earth by building an

Meeting. In the past, more than half of the members of the Executive Nomination Meeting andenjoyable, sustainable society.

Executive Compensation Meeting have been outside directors. However, in order to further
enhance fairness, transparency, and objectivity, we changed to a system whereby, as of FYE

We look forward to the continuing support of our stakeholders as we build the future of
Subaru.

March 2022, these organizations are chaired by a director without representative rights. Goingforward, we will continue to devote ample time and resources to strengthening governance,
taking into account changes in the business environment and the future direction of our Groupstrategy.
In addition, in order for Subaru to continue to create unique value, it is also importantto respect the human rights and individuality of each employee and promote diversity. We
are steadily working to build a workplace environment where Subaru employees, diverse inindividuality and values, can fully apply their unique talents. In particular, we were able toachieve our target ahead of schedule for increasing the number of female managers in 2019,the fruits of our efforts in the priority area of empowering female employees. With this success,12 Integrated Report 2021

Tomomi Nakamura
Representative Director of the Board, President and CEO

Integrated Report 2021 13

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Value Creation Process
With its DNA as an aircraft manufacturer, SUBARU continues to practice human-oriented manufacturing, which places
top priority on safety. By delivering Enjoyment and Peace of Mind, we seek to offer product value that embodies the
Subaru difference, such as in safety and longevity. Our deep relationship with customers who appreciate that value isour greatest asset, as well as a competitive strength. To achieve our vision of becoming a company delivering
happiness to all, every employee will be a growth driver as we further evolve Enjoyment and Peace of Mind to achieveboth a sustainable society and our own sustainable growth.

ular

ity

Sus

ta

in

ab

Enhancing relationships with customers

Product value

Customer
expectations

Financial
capital
Sus
ta

in
le

Ci

rcu

larityInvest in employee
development

Manufacturing
capitalDevelopmentwith a focus on
individuals

Support individuals whotake on challenges

Three Priorities
in STEP

Six Priority
Areas for CSR

Corporate Culture Reforms

People-oriented Car Culture
Resonance and Coexistence

Evolution of the Subaru Difference
Revamp “Subaru-making” and respond to changes
in the business environment

NaturalcapitalCompliance aim to be a compelling company with a strong market
Corporate Statement We
presence built upon our customer-first principle.
The Subaru Group’s Unique Business Model

Selection and concentration + Differentiation + Added value
Work stylechanges
14 Integrated Report 2021

Advancement ofinnovation in theauto industry

HumancapitalSocialcapitalPeace of Mind
Diversity
Environment

Quality Enhancement

Intellectual
capitalSustainable Growth of the
Subaru Group

Respond to
new work stylesab

Human resource
development Mid-Term Management Vision

Delivering Happiness to All

Management
Resources

le

rc
Ci

Achieving an Enjoyable
and Sustainable Society

Enjoyment and Peace of Mind

Social Issues

ClimatechangeResource
recycling

Traffic
accidents

Respect forhuman rights
Integrated Report 2021 15

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Our Evolving Mid-term Management Vision
We aim to be a compelling company with a strong market presence built upon our customer-first principle. Under thiscorporate statement, we have worked to enhance the appeal of the Subaru brand by offering customers “Enjoyment andPeace of Mind.” We will work to achieve our vision of “delivering happiness to all” by promoting our mid-term
management vision “STEP.”

2007–2010
Customer Satisfaction:
Our Customers Are Everything

2011–20132014–20172018–2025

Motion-Ⅴ

Prominence 2020

STEP

At the time of announcement: Representative Director of the Board, President and CEO Ikuo Mori

At the time of announcement: Representative Director of the Board, President and CEO Yasuyuki Yoshinaga

At the time of announcement: Representative Director of the Board, President and CEO Yasuyuki Yoshinaga

Representative Director of the Board, President and CEO Tomomi Nakamura

Essential features

Management philosophy

Management philosophy

With the philosophy of “customers come first” at
its core, focusing on improving profitability andinvesting in growth areas with management resources

Aiming to be a compelling company with a strong market
presence built upon its customer-first principle

Aiming to be a compelling company with a strong market
presence built upon its customer-first principle

Five themes

Reason for formulation

Major challenges

1 Guiding principle for all activities “Confidence in Motion”<Promote the brand strategy>

1 To provide a distinctive Subaru experience for drivers andpassengers“Provide value to customers and Enjoyment and Peace of Mind”
2 With the basic philosophy of “customers come first,”“Provide distinctive Subaru experience”

2 To increase sales globally (Most important market: U.S.)
3 To strengthen competitiveness in quality and cost

3 Strengthen sales force and the availability of automotive supply,“Accelerate sales expansion”

5 To grow the level of employee competence and soenhance the organization

4 Overhaul of cost structure and promote alliance with Toyota,“Solidify operational foundation”

Achievements

5 Back up concrete approaches for business,“Improvement in Management”
Achievements

XUV/SUV strategy succeeded
Boosted sales through U.S.-oriented product development
Highly rated collision safety and EyeSight
Cost reduction activities paid off
Achieved low-incentive sales
Achieved highly efficient production

IssuesLowering sensitivity to foreign currency fluctuations
Increasing sale in emerging countries including China
Developing environmental technology and products
Autonomy of three internal companies*
Flexibility to adapt to changes of business environment* Aerospace Company, Industrial Products Company, Eco Technologies Company

We aim to be a compelling company with a strong market
presence built upon our customer-first principle
STEP

Speed Trust Engagement Peace of mind & enjoyment

Pursue the goal of sustainable growth anddevelopment by boosting competitiveness andbuilding a solid business platform at a new stage

Restoring trust by speedily advancing initiatives andby engaging and providing “Enjoyment andPeace of Mind” to customers

Vision for 2020

4 To also grow through the business alliance with Toyota

Sharing the mindset of “customers come first” within theGroup
Globalization of products
World’s leading safety performance
Expanding sales in U.S. (the most important market)
Reform of profit structure by reducing costs

Corporate statement

IssuesCompliance with future environmental regulations
Production capacity shortages
Responding to the needs of new customers
Sensitivity to currency fluctuations* The Motion-V mid-term management plan, originally intended to run from 2011 to 2015,
was completed ahead of schedule in FYE March 2014. Prominence 2020, the new
mid-term management vision, was launched in FYE March 2015.

Corporate vision
Not big in size, but a high-quality company with distinctive
strengths

VisionDelivering happiness to allSpecific goals• No.1 for customer trust• Strong brand• Among the most profitable companies in the industry• Vehicle sales of 1.1 million-plus units

Vision for 2025

1 Become a brand that is “different” from others byenhancing distinctiveness.
2 Engage in business activities that resonate with customers
by putting them center-stage

Direction for mid-term management vision

3 Fulfill corporate social responsibilities by contributing todiversifying social needs.

Pursue added-value business
Enhancing the Subaru brand
Increase tolerance to changes in the business environment
Building a strong business structure

Major challenges

Corporate culture reforms
Quality enhancement
Evolution of the Subaru difference

Achievement

Among the most profitable companies in the industry

Revamp ”Subaru-making” and respond to changes in the businessenvironment

IssuesStrong brand
Vehicle sales of 1.2 million-plus units
No. 1 for customer trust* A progress report on “STEP” was made in May 2021, and content waspartially updated.

Consolidated Automobile Unit Sales and Operating Margin
Automobile sales(Thousand units)

U.S.

Japan

Overseas (Excl. the U.S.)

Operating margin

Operating margin (%)

17.5

1,100
1,000
825

800
700
600

724

657

597

563

555

500

860

14.7

12.4

13.6

640

12

11.7

5.8

6.3

400

5.3

300
200

2.9

6.3

6

2.9

1.9

100

18

1,034

1,001

958

911

900

1,067

1,065

3.6

–0.4

0

0
’08/3

16 Integrated Report 2021

’09/3

’10/3

’11/3

’12/3

’13/3

’14/3

’15/3

’16/3

’17/3

’18/3

’19/3

’20/3

’21/3

Integrated Report 2021 17

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Mid-term Management Vision “STEP”: Overview

Creating the Mid-Term Management VisionMarket Strategy

In July of 2018, we formulated our mid-term management vision “STEP,” with the goal of building trust and resonating

In 2020, our sales in each market declined due to the impact of the spread of COVID-19, but in the U.S., our key market,

with customers by providing “Enjoyment and Peace of Mind.” Then, in May 2021, we reported on our progress so far.

Subaru's market share reached a new record of 4.2%. We are making steady progress toward the “STEP” target of 5%

不変の経営理念

market share in the U.S.

お客様第一を基軸に「存在感と魅力ある企業」を目指す• Changes in the external environment

Background• Strains from the company’s rapid growth Once-in-a-century changes in a mobility society

ありたい姿

Nine straight years of market share growth in the U.S

Lacking fundamental corporate strength

Subaru market sharein the U.S.

モノをつくる会社から笑顔をつくる会社へ

4.20
%
4.20

5.00%

• Restore trust by cultivating fundamental corporate strength as soon as possible.
Intentions in developing
年ビジョン
2025
• Stay true to the brand principle of providing “Enjoyment and Peace of Mind” to our customers.
themid-term•お客様にとってMake Subaru morethan justa company that is trusted by, and resonates with, our customers.
management
visionな存在になる1. 個性を磨き上げ、
Different

4.00%

2. お客様一人一人が主役の、心に響く事業活動を展開する
3. 多様化する社会ニーズに貢献し、企業としての社会的責任を果たす

3.00%

Concept and Timeline

2.09%

2.00%
Significant business/social changes:
Continued steady growth in quality andfurther enhancement of the brand.

Preparations for business/social changes:
Qualitative growth catching up;
steady growth in quantity.

Rapid quantitative growth:
Qualitative growth not keeping pace.

1.00%
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020 (Year)

Quantitative
growthProfit Direction and Capital Policy
Qualitative
growthProminence 2020

Motion-V

Restore trust

2018

Provide “Peace ofEngage and resonate
Mind and Enjoyment”
with customers
to customers

We will pursue a 5% market share in our key U.S. market.

Vision for 2030 (Provisional)

Vision for 2025

2014

Speedily advanceinitiatives

	We aim to maintain and expand our market share by advancing our added-value business model.

2025

2030

“STEP” is an acronym formed from the initial letters of Speed, Trust,Engagement, and Peace of Mind and Enjoyment, which are four importantelements of the vision. The letter “T” is emphasized in the logo as Subaru
considers trust to be the most important element of all. The name also
expresses the Company’s determination to take “steady, strong steps”
before a future jump over social changes.

10“Change the Culture”
Corporate culture reforms

2

Engage in businessactivities that resonate withcustomers by putting them
center-stage.

3

Fulfill corporate social
responsibilities bycontributing to diversifyingsocial needs.

difference:
Next 3 years

Capital expenditures: 3.5%–4% of sales revenue (3.5%)*
R&D expenditures: 120 billion yen level/year (107.7 billion yen/year)** Figures in parentheses show the average of results for FYE March 2019–FYE March 2021

	We aim for a ROE of at least 10% while ensuring net cash of two months’ worth of revenue levels and a capital equity
ratio of 50%.
	Our stance on shareholder returns remains unchanged.

•C onducting share repurchases flexibly in line with our cash flow.

Capital Policy

Accelerate efforts to become “a company that does the right thing in the right way.”
Continuous efforts aimed at corporate culture reforms.

ROE

At least 10% (target)

Mono-zukuri (Car-making)Sales and service

New mobility domain

Capital equity ratio

50% (minimum)

Alliance enhancement

Net cash

Two months’ worth of revenue levels (minimum)

1

Enhance corporate quality

Quality reforms

Enhance quality at
customer contact points

2

Build a strong brandMore enjoyment,
more peace of mind

From “A car you can love” to “A car, abrand, and people you can love”

Generate new value throughconnected car technologies

3

Sustainable growth based on
focus strategy

Launch “Make-a-Subaru” initiative

Target 5% share in the U.S.
Steady growth in each region

Initiatives to create newtechnologies and businesses

18 Integrated Report 2021

	Capital expenditures and R&D expenditures will be steadily executed for initiatives aimed at enhancing the Subaru•P ositioning dividends as the main form of return to shareholders with emphasis on stable, continuous returns. Based on theperformance-linked approach, dividend payments will be determined considering the business performance of each fiscal year,
investment plans, and the business environment. (Consolidated payout ratio: 30%–50%)

Vision for 2025
Become a brand that is“different” from others byenhancing distinctiveness.

	We aim for an industry-leading operating margin (8%).

Shareholder returns

Consolidated payout ratio

30%–50%Share repurchases

Conduct flexibly

Integrated Report 2021 19

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Mid-term Management Vision “STEP”: Six Priority Areas for CSR
In mid-term management vision “STEP,” which was developed in 2018, we at Subaru envision becoming acompany “delivering happiness to all” To achieve this vision, we have adopted the “Six Priority Areas for CSR”

SUBARU Global Sustainability Policy

and will promote initiatives based on the Subaru Global Sustainability Policy and to fulfill our corporate social

Until recently, the Subaru Group promoted various initiatives in line with its CSR Policy, revised in June 2009. However, to cope withresponsibilities, thereby providing “Enjoyment and Peace of Mind” to our customers and other stakeholders.

changes in the social environment and in relationships with our stakeholders, we established the “SUBARU Global Sustainability

The Subaru Group aspires to be a truly global company with sustainable growth driven by each and every one

Policy” in April 2020 as a guideline to be shared by all Group employees on a global basis.
This Policy is applied to Subaru Corporation and all its subsidiaries.

of its employees, and to contribute to the realization of an enjoyable, sustainable society.

SUBARU Global Sustainability Policy
We, the Subaru Group, are committed to sustainable business practices designed to promote harmony between people, society andthe environment in the following ways:
1.	Through our business activities, we will contribute to the resolution of various social issues, including the protection of the global
environment, and to the creation of a sustainable society.

Subaru Group’s Six Priority Areas for CSR

2.	Respecting the quality and originality of our products, we will continue to provide Subaru’s unique value using advanced
technologies, and enrich the lives of all those involved with the Subaru Group.

In accordance with Subaru’s mid-term management vision “STEP,” the Subaru Group established the Six Priority Areas for CSR:
People-oriented Car Culture; Resonance and Coexistence; Peace of Mind; Diversity; Environment; and Compliance.
To select the priority areas, the Subaru Group first identified 41 CSR priority topics for which social needs were high and thenconducted a questionnaire among experts and investors in North America and Japan. The responses and opinions we received
were used in an assessment and exploration of these areas from two perspectives: areas in which we can engage the community
by leveraging our business strengths, and areas related to the demands of society. As a result, the Subaru Group selected People-

3.	As a good corporate citizen in the international community, we respect human rights, diverse values and individuality, and treat all
stakeholders with sincerity in every interaction.
4.	We strive to maintain and advance the workplace environment so that employees can work safely in peace, and with a sense ofsatisfaction.
5.	We respect international rules and the laws and regulations of each country and region, as well as local culture and customs, andpursue fair and transparent corporate governance.
6.	We make use of dialogue with stakeholders to make management decisions, and disclose corporate information in a timely andproper manner.

oriented Car Culture, Resonance and Coexistence, Peace of Mind, and Diversity as the four areas where Subaru could engage ourcommunities by leveraging our business strengths, and Peace of Mind, Diversity, Environment, and Compliance as the four areas
where the Subaru Group could work to meet the demands of society.
Peace of Mind and Diversity appear in both categories, because Peace of Mind is an area in which society’s needs and theActivities in the Six Priority Areas for CSR in Relation to SDGs

strengths of the Subaru Group’s business coincide, while Diversity refers not only to diversity in the community, but also to diversity

The Sustainable Development Goals (SDGs) for 2030 are development goals for achieving a sustainable future, and the Subaru

in a broad sense, including in the products that the SUBARU Group offers to customers.

Group recognizes the importance of responding to these goals.

In May 2021, Subaru announced its progress report for mid-term management vision “STEP.” Its priority areas in this vision are

By clarifying visions for 2025 regarding the Group’s Six Priority Areas for CSR, Subaru will reinforce its efforts in each priority

fundamentally unchanged. Based on the SUBARU Global Sustainability Policy, Subaru will promote initiatives in the Six Priority Areas

area and make positive contributions toward achieving the SDGs. Specifically, we acknowledge that the Subaru Group’s initiative tofor CSR on a group-wide, global basis with the goal of becoming a company “delivering happiness to all.”achieve a goal of zero fatal traffic accidents* by 2030 contributes to Target 3.6 of the SDGs: “By 2020, halve the number of global
deaths and injuries from road traffic accidents.”* Reducing to zero the number of fatal accidents occurring while a driver or passenger in a Subaru vehicle and the number of fatalities among pedestrians, cyclists, andthe like arising from collisions with a Subaru vehicle.

Reflecting Subaru Group’s Six Priority Areas for CSR in Management

Six Priority Areas for CSR Basic Concepts and Vision for 2025

SUBARU Group

SUBARU

Six Priority Areas for CSR
Priorities specific
to SUBARU

Resonance andCoexistence

Priority areas selected from thebusiness strategy perspective

Information disclosure
Board of Directors
and dialogue

Peace of Mind

Reflection
Board of Directors
in management
Society’s
expectations

Executive Management
Board Meeting

People-oriented
Car Culture

Areas in which the Company can
engage communities byleveraging its business strengths

Stakeholders

Diversity

Environment

Six Priority Areas for CSR

Basic Concepts

Visions for 2025

People-oriented
Car Culture

Subaru believes that a car is more than just a means of transport.
Subaru will foster a sustainable mobility culture by providing customers withadded value in the form of products and services which make the car apartner that enriches people’s lives and minds, while cherishing the humanemotions of “Enjoyment and Peace of Mind.”Become a company that enriches people’s lives and minds as
a partner.

Resonance andCoexistence

Subaru will become a company that is trusted by, and resonates and coexists
with both individual customers and society as a whole by engaging seriouslywith their voices through greater person-to-person communication.

Become a company that is widely trusted by, resonates andcoexists with society.

Peace of Mind

Subaru will become a company that provides all stakeholders with the utmost
peace of mind.

Become a company that provides the utmost peace of mind
to all stakeholders.

Diversity

The Subaru Group’s approach to promoting diversity has two key elements:
offering products that respect diverse forms of market value, and respecting
and reflecting the diverse values of all those who work for the Subaru Group.

Promote businesses that create diverse forms of market values
while respecting the diverse values of all people.

Environment

In order to pass on “The earth, the sky and nature,” Subaru’s fields ofbusiness, to future generations, we provide utmost care to the environment
with our company-wide activities.

Cherish and protect the global environment–The earth, thesky and nature–through Group-wide activities.

Compliance

Subaru will become a company that operates in accordance with laws,
regulations, and societal norms, ensuring that our focus on compliance as apriority permeates throughout and is practiced by all those who work for the
Subaru Group.

Act in good faith and become a company that is trusted byand resonates with society.

Areas related to the demandsof society
Priority areas selected from issues
regarded as critical by experts andinvestors in North America and Japan

Compliance

SUBARU Global Sustainability Policy

20 Integrated Report 2021

Integrated Report 2021 21

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Activities in the Six Priority Areas for CSR in Relation to SDGs
Six Priority
Areas

Relevant
stakeholders

ThemesEnjoyment ofdriving a car
Providingenjoyment ofcustomization

Peopleoriented
Car Culture

Initiatives
FYE March 2022–FYE March 2026

FYE March 2021

Enhancing
the brand image

Local
communities

Six Priority
Areas

Relevant
stakeholders

Expansion of the lineup of high-performance, value-added items

Promotion of marketing activities that match the characteristics of each market
Promotion of motorsports and continuation of awareness-raising activities

Proposing new forms of mobility andresearching technology unique to Subaru

KPIC ontinue satisfaction
surveys. (Improve customer
satisfaction.)

9.1

Employees

Customers

11.2
Promote diverse
work styles
Securing human resources
at group companies

Enhancement of customer loyalty

Business
partners
ResonanceandCoexistence

Coexistence andmutual prosperity withbusiness partners

Development of a maintenance system for marketing EVs
Building of relationships with business partners with CSR surveys, awarenessraising, and from CSR perspectives
Enhancing and strengthening the Group’s telecommuting environment
Reinforcement of efforts for occupational health and safety, improvement of plant
environments

Employees

Creating a safe
workingenvironment

Business
partners

Efforts incooperation withbusiness partners

Customers

Providing a wide
range of productsContinuation of customer interaction programs
Providing products and services contributing to prosperous lifestyles

Establishing a newmaintenance system

Creation of a safe and rewarding workplace environment, building of a brand thatis loved by employees
Continuation of production operations and maintenance of employment at each site
Utilization of athletic teams, boosting of employee morale

Become a company thatis widely trusted by,resonates and coexists
with society.
KPIs
C ontinue satisfaction
surveys. (Improve customer
satisfaction.)E nhance connection withcustomers through IoT.
(MySubaru, the nextgeneration system,
telematics)

Operation of the human resources system forsenior employees

Examination and promotion of a workplace environment that pays due consideration
to minorities in society
Compliance with the legally prescribed employment rate for persons with disabilities:
2.3% in and after FYE2021
Acquiring new knowledge through proactively recruiting external human resources

Dissemination of Subaru’s manufacturing practice and its endeavors for “Enjoyment
and Peace of Mind”

Diverse work styles: Support for labor management by introducing a new attendance
management system and expansion of teleworking
Maintenance and expansion of diverse forms of employment
Building of relationships with business partners with CSR surveys, awareness-raising,and from CSR perspectives
Enhancement of the understanding of employees, promotion of cooperation with the
National Association of Minority Automobile Dealers (NAMAD)

Customers

Development and marketing of electric vehicles (BEVs and SHEVs)

Environmental protection incooperation with customers

EV global rollout and sale
Implementation of activities to protect
outdoor fields on a continuous basis

Introduction of solar power generation for self-consumption
Introduction of TEPCO’s Aqua Premium

17.16

Environment

Reinforcement of community exchange and partnership activities

Governments

Business to help reduce
Energy conservation investment and effective utilization of facilities
environmental impact
Continuation of conservation efforts in cooperation with governments

Localcommunities

Revitalizing
relationships withlocal communities

Contribution and relationship-building through sporting activities

Promotion of lighter, electric, and biofuel aircraft

Contributing to local communities through stronger cooperation
with non-profit organizations

Establishment and maintenance of an environmental management system

Community support activities during disasters and pandemics

Selection of business partner while considering transportation for overseas sites

Business
partners

Advancement of Advanced Driver Assistance System (ADAS)
Adoption of Advanced Automatic Collision Notification (AACN) system andexpansion of its functions
Improving safetyfunctions

Optimization of logistics and CKD* costs

Expanding enhanced safety functions since FYEMarch 2021

Ensuring comprehensive
export control

Developing autonomous flight control systems (collision avoidance technology,
fault-tolerant system improvements)
Contributing tosafe driving

Customers

Establishing andstrengthening a
reliable productsupply system
Improving inspection andmaintenance quality

Implementation of safe driving seminars for senior citizens on a continuous basis
Establishment of a timely and efficient supply system of spare parts andaccessories
Strengthening product supply capacity (parts center capacity increase plans/parts
supply system improvements)
Promotion of accurate, high-quality inspection and maintenance
Promotion of initiatives to produce vehicles of choice in terms also of quality

Peace of
Mind

Securing andimproving quality

Improvement of the quality of operations in all processes, from product planning
to production, sales, and service
Placing of the highest priority on quality by implementing quality caravans andproviding education for fostering quality awareness
Optimization of the span of management in manufacturing departments
Continuation and reinforcement of activities of the health and safety committees

Employees

Creating a safe
workplace

Environment activities
al efforts in cooperation Efficient parts storage and transportation, and reduction of transportation volume
with business partners
Promotion of retailers’ continuous efforts for energy saving, water quality
conservation, and recycling

Continuous enhancement of crash safety

Maintenance and enhancement of workplace health and safety, and promote a
more comfortable workplace environment
Formulation and implementation ofplans for health promotion initiatives

Reinforcement of health promotion efforts

Reinforcement of security and export control initiatives
Continuation of compliance training and executive lectures

Governments

Become a company thatprovides the utmost
peace of mind to all
stakeholders.

I mprove impact energy
absorption ability to 1.4
times.

Promotion of compliance from the perspective of the Subaru Group
Establishment and dissemination of internal
rules and manuals on laws and regulations

Compliance

KPIs
Achieve a goal of zero fatal
traffic accidents* by 2030.
*R educing to zero thenumber of fatal accidents
occurring while a driver orpassenger in a Subaru
vehicle and the number offatalities among
pedestrians, cyclists, andthe like arising fromcollisions with a Subaru
vehicle.

In-house educationand dissemination

Prevention of harassment

Employees

Protecting humanrights of workers

Maintenance and improvement of the workplace environment by promoting work
style reform and complying with the Labor Standards Act
Establishment and dissemination of our Human
Rights Policy, implementation of due diligence

3.6

Business
partners

Promoting initiatives to respect human rights

CSR surveys, awareness-raising, and stronger CSR initiatives in the supply chain
with business partners
Maintaining fairrelationships

KPIs
I ncrease female
managers. (at least two
times 2021 levels by2025)
T he number ofparticipants in careerdevelopment trainingA chieve the legallyprescribed employmentrate.
1
 00% of those applying
for reemployment

5.5
5.5.2

8.5

Design parts that can be used in multiple vehicle models

EV development

11.2

Promote businesses
that create diverse
forms of market
values while
respecting the diverse
values of all people.

Incorporation of feedback on diverse market needs

Expansion of the sale of electric vehicles (HEVs and PHEVs)
Popularizing vehicles
that reduce
environmental impact

Relevant SDGs

Expanding the number of female managers (at least two times 2021 levels by 2025)

Promotion of active roles for non-Japanese human resources
Utilizing diverse
human resources

Visions/KPIs(FYE March 2026–FYE March 2031)

Childcare support for female employees in direct departments

Review of the human resources system forsenior employees

Diversity

Technology development toward realization

Initiatives
FYE March 2022–FYE March 2026

FYE March 2021

Respecting human rights and diversity for all

Become a company thatenriches people’s lives
and minds as a partner.

Enhancement of new ways of connecting with customers through IoTStrengthening
relationship withcustomers

ThemesPromoting activeroles for female
employees

Development of high-quality accessories matched with new models

Advancement of Subaru’s “Dynamic x Solid” design identity to “bolder” expression
Proposing new
forms of mobility
Disseminating
car culture

Relevant SDGs

Evolution of Subaru Global Platform and Integration with Intelligent Technology(Achieving a safe and enjoyable driving with peace of mind like a skilled driver)

Promotion of the brand strategy (Subaru, the Beloved Brand: More than a Car
Company)

Customers

Visions/KPIs(FYE March 2026–FYE March 2031)

Promotion of fair trade on a continuous basis
Appropriate management of software licenses

Cherish and protect
the global
environment–theearth, the sky andnature–throughGroup-wide activities.
KPIs
R educe direct emissionsof CO2 by 30% from FYEMarch 2017 levels by FYEMarch 2031 (aggregate
amount basis).
M ake at least 40% of
Subaru global sales
electric vehicles (EVs) or
hybrid electric vehicles(HEVs) by 2030.
A pply electrification
technologies to all Subaru
vehicles produced andsold worldwide by the
first half of the 2030s.
F ormulate a resource
circulation strategy
including secondary
batteries.
E nhance recycling rates.

13.1
13.2

12.2
12.5

Act in good faith andbecome a company
that is trusted by andresonates withsociety.
KPIs
 romote initiatives toPrespect human rights
based on the Human
Rights Policy;
Communicate the policy
throughout the entire
supply chain.
Strengthen CSR
procurement
management.
Provide compliance andlegal trainings.

8.7
8.8

16.5
16.5.2*CKD (complete knockdown) production is a production method in which individual parts are delivered for assembly at the destination.
Development of products (vehicles) is based on a premise that they are equipped with the latest technologies yet affordably priced at the same time.

Secure and create employment

Local
communities

Contributing tosafety of local
communities

Promotion of plant
environment improvement

Promotion of a sense of trust regarding stable
operations

Protecting vulnerable groups in local transportation (town watcher activities)
Reduction of environmental impact and prevention of pollution

Governments

22 Integrated Report 2021

Contributing tosafe lives of people

Contribution to the creation of a society in which people’s lives and property areprotected and people can enjoy peace of mind

Integrated Report 2021 23

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

The Subaru Difference

All our work is for Enjoyment and Peace of Mind. Subaru
continues to carry forward its DNA of making humanoriented cars, born of its history in aircraft manufacturing.

Subaru will further evolve its relationship with its customers through the pursuitof “Enjoyment and Peace of Mind.”
In our value statement of “Enjoyment and Peace of Mind,” which is the unchanging value we offer our customers, wehave made unique refinements to functional value, like safety, longevity, and rough-road capability. However, thanks to
Subaru’s resonance with our customers and through the lifestyles and experiences they’ve gained with us, customers
have come to express appreciation for their Subaru cars, showing that our cars are closely-bonded with their lives. For

Since the birth of the Subaru 360, the first car to come out of the National Car Concept, Subaru has

example, some have said that “Subaru cars offer more peace of mind when driving around the people I love and care

continued to pass on the philosophy of giving top priority to safety, because customers entrust their lives

about,” while others have said things like “I’ve built a lot of treasured memories with my Subaru; their cars have goodto their cars. With that concept in mind, we have conducted our own crash safety tests since the 1960s,
taking action well ahead of national standards.

longevity, making them useful over long periods of time and avoiding resource waste.”
At Subaru, we believe that strong emotional praises like these that we have received from our customers show that
our functional value has been sublimated into emotional value. Also, in order to further deepen the relationships we have

In addition, in order to respond to the customer desire to drive further and longer, we have takenwith our customers, we believe it is important to thoroughly understand what they expect from and how they think ofrigorous action to pursue a pleasant driving experience, high visibility, and ease of use in a way that

Subaru vehicles, while also taking into account their emotional value, and to reflect this in our vehicle manufacturing.

values people’s senses. We believe that it is important for the driver to have easy, unhindered control in

Enjoyment and Peace of Mind

any environment, and for us to provide Enjoyment and Peace of Mind to passengers as well.
In addition, we are striving to create automobiles that can be a partner to the rich lives of ourFunctional
valuescustomers by pursuing essential vehicle functions that will extend people’s freedoms, like a comfortable
space making mobility fun, and a spacious luggage compartment.

and longevity, with “Enjoyment and Peace of Mind” as the unchanging value we offer our customers. Many of ourcustomers have expressed praise for this style of car manufacturing. In particular, customers in our major U.S. market areoften more expressive about their affection for Subaru, saying they “love” it rather than simply “liking” it, and saying thatit’s a “different kind of brand.”The value of the Subaru brand is rooted in the trust of our customers and their attachment to Subaru vehicles. We willcontinue to maintain that difference versus other automotive manufacturers, earning the love and the guidance of ourcustomers.

Capability

Elevated

Elevated

Elevated

Caring for beloved
family and friends…

Building precious
memories…

Enriching life and addingcolor to leisure time…

We will further enhance this “deep relationship between Subaru and our customers
that makes us different from other brands.”

Customer attachment to and trust in our cars has built a Subaru brand that is‘different’ from others.
enhancing distinctiveness.” in our mid-term management vision “STEP.” We have evolved functionalities such as safety

Longevity

Strengths of Subaru vehicles have come to be expressed more intimately
in terms of the customer’s life.
Emotional
valuesAt Subaru, we have identified one element of our 2025 Vision as “Become a brand that is ‘different’ from others by

SafetyWe will work closely with our customers to become part of their lifestyles andto realize an enjoyable and sustainable society.
In the U.S., our key market for Subaru, we have found that along with interest in the safety and reliability of our vehicles
there is a generally high level of environmental awareness and a large number of customers who actively participate
in local engagement activities conducted by dealerships. This desire to go beyond just being good enough for theindividual and be highly conscious of the global environment and society is another major characteristic of Subaru’s
customers.
We recognize that our customers’ awareness of the environment and society creates another ‘difference,’ and wewould like to work closely alongside them to realize an enjoyable and sustainable society.
Extended scope of
Subaru customers’ environmental values
Environmental values
in general
FueleconomyEmissions

Adventure - Protect nature

Socialcontribution
activities

EcofriendlyplantsUtility,
AWD- Do everything with
one vehicle

Safety- Avoid accidents- Reduce burden to society

Reliability, - Long lasting vehicles
Longevity - Reduce waste of resources

Subaru customers do not believe in “looking out only for their own needs and interests.”
They are characterized by their high social and environmental awareness,
which makes the Subaru brand “different” as well.

24 Integrated Report 2021

Integrated Report 2021 25

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Corporate Culture Reforms
We have been taking action toward corporate culture reforms as a priority initiative in our mid-term management vision

We will promote a number of specific measures in line with our personnel initiative policy for encouraging autonomy,“STEP.” As a result of pressing forward with a range of activities under the slogan of “change mindset, change behavior,enhancing individuality, and creating empathy, a policy formulated at the same time as our new personnel system andchange the company,” we have closed the gap between management and the front lines, and the gaps between levels ofdesigned to achieve our desired outcomes in personnel, organization, and corporate culture.

our organization, steadily evolving the environment into one that is more open.

For example, we will update our education systems to support on-demand content, implement open recruitment job

Now that it is a widespread phenomenon that each employee think and act on their own, our next initiative will berotation, use human resources data visualization for strategic talent development, and develop a program for corporate

to focus on the growth of the individual, moving into a phase of increasing engagement and jointly eradicating old

philosophy education. In addition, we will further accelerate our efforts by creating collaborative connections between

authoritarian and top-down institutions.

each measure.

“Change mindset, change behavior, change the company”

Past Initiatives

Efforts have been made to
develop a culture ofopen communication in theworkplace by closing the
distance between ranks suchas management and the“genba” (actual worksite)

The rapid adoption of digital
tools prompted by the
pandemic has spontaneously
led to active communication
between different
departments

We will accelerate our efforts toward
revitalizing our human resources throughintroduction of a new personnel system
aimed at growth for Subaru.

Resulted in improvements in employee survey

Corporate culture reforms in our new phase will involve active
investment in talent with a focus on growth of the individual
Future Initiatives

More focus on growth and development of individual employees

Tatsuro Kobayashi
Senior Vice President, General
Manager of Human Resources
Department

Respond to
new work styles

Invest in human resource
development

Help the growth of those
who take on challenges

Shifting to the phase of elevating employee engagement
As a result of our efforts in corporate culture reforms, our scores for workplace communication and workplace atmospherehave improved for two consecutive years in the Employee Survey.
Future efforts toward corporate culture reforms will focus on the growth of the individual, and we will actively promote
investment in talent, in areas such as digital technology, upskilling, and relearning with the aim of developing the

Personnel Initiative
Policy• Encouraging autonomy• Enhancing individuality• Creating empathy

Amid a rapidly changing environment faced by the automobile industry, inorder for Subaru, a relatively small-scale player in the industry, to survive andcontinue to demonstrate its individuality, we believe it is important to cultivate
human resources who think and act of their own accord in response to various
changes. Therefore, in April 2021, we launched a new personnel system
supporting employees who reach a little higher and take on greater challenges.
The organization we are trying to create under this new personnel system canbe characterized broadly by the following three points. We will work to realize
this organization and culture and to change the mindsets and behaviors of ouremployees.
1. Employees who take on greater challenges can grow and succeed
2. Evaluations and treatment are fair and commensurate with work
3. Human resources with a diverse set of abilities can succeed
In addition, along with the introduction of this new personnel system, we
have set up a personnel initiative policy to achieve our desired outcomes inpersonnel, organization, and corporate culture. We have started new efforts
to encourage autonomy, enhance individuality, and create empathy. In orderto survive these turbulent times, it is important for each individual to carefully
consider their situation and to act swiftly. We will harness this new personnel
system as an opportunity to further promote the fostering of human resources
who will lead Subaru in the future.

individual, as we flexibly respond to new work styles even under the pandemic-driven new normal.

A Variety of Initiatives for Growth of the Organization, Workplace, and Individual
Subaru has been promoting various activities Group-wide under the slogan“Change mindset, change behavior, change the company.” We have held the
Officer Speech Relay since FYE March 2020 and the General Manager Dialogue
Relay since FYE March 2022. As an initiative to broaden our horizons, we also holdmonthly “Cake Time” sessions to provide information on the latest automotive
market trends and social conditions from a management perspective.
In April 2021, we launched the Subaru Communication Park on our intranet,
providing a forum for free participation by employees as part of our efforts to
expand circles of communication throughout the company. The Park offers the
President’s Posts, Small Talk Plaza, and Idea Lab channels.

26 Integrated Report 2021

Main Initiatives in the New Personnel System
We are promoting the following five main initiatives in our new personnel system.
(1) Introduction of a personnel system that enables faster promotions and singles out talented personnel based on theirperformance in challenging situations, without regard to age or experience(2) R evision of wage system to one that limits purely seniority-based considerations, and strengthening pay grade jumps andperformance-based bonuses(3) Introduction of a specialist system to strengthen technical capabilities and increase engineer motivation(4) Introduction of new re-employment programs to help diverse talent succeed, including senior citizens(5) A bolishment of the mandatory retirement age for managers and introduction of a system for performance and abilitybased appointments

Integrated Report 2021 27

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Quality Enhancement
In our quality enhancement initiatives, we are striving toward 1) thorough implementation of a “Quality-First” mindset
and reinforcement of organizational efforts and structure, 2) “Execution Quality” enhancement, and 3) “Innate Quality”
enhancement.
(1) Within thorough implementation of a “Quality-First” mindset and reinforcement of organizational efforts andstructure, we have revised our quality policy, completely revamped our quality manual, and are encouraging eachand every one of our employees to alter their quality mindset through review activities such as the “Quality Caravan”
and activities to maintain alertness. In addition, we have greatly increased the number of personnel involved in quality
assurance over the past three years.
(2) Within “Execution Quality” enhancement, we will be launching operations at our new final vehicle inspection wingin a gradual rollout beginning in FYE March 2023. Here, our aim is to prevent defects reaching the public in domains
after the production preparation stage. In addition, we are working to investigate defect trends and strengthen parts
traceability using telematics and AI.
(3) Within “Innate Quality” enhancement, we have made changes to our development process itself, including
comprehensive checks of past defects, strengthening the gate management of quality targets from initial development
stages, and advancing development stages only when defects are cleared.

Accelerating Quality Enhancement in Three Areas, with Quality Enhancement as the Top Priority

3“Innate Quality” Enhancement• Ensure quality all the way from the very start ofdevelopment down through component logistics andproduction.
∙F ully check past issues in development, production, and suppliers∙G rasp changes in new parts and systems and prevent issues before
they occur.

• Clarify the quality responsibilities of the Project
General Managers in charge of product development
and enhance their authority.
• Stricter development process where meeting criteria ofeach quality gate (checkpoint) is given top priority.

1

2“Execution Quality” Enhancement• New “final vehicle inspection” facility Start ofoperation scheduled for FYE March 2023
• Swift response to quality issues∙ North American quality team “FAST” Fast Action & SolutionTeam)∙ Early detection of defect trends based on analysis using AI.
∙ Direct gathering of quality data via telematics systems.
∙ Early determination of the scope of affected parts withtraceability systems.
∙ New “QAlab” facility for enhancing capability to investigate
defects.

Thorough Implementation of a “Quality-First” Mindset and Reinforcement of Organizational
Efforts and Structure• Redefine goals.

• Quality awareness, look-back activities• Increase in personnel∙Q uality Policy revised for the first∙ “Quality Caravan” events∙ Increase in Quality Assurance Div.

time in 25 years.

∙ Company-wide efforts aimed at “not letting past

personnel by 50% over 3 years∙T he quality manual fully revised.

incidents fade away”

Our goal is to make Subaru preferred for
its quality through implementation of a
“Quality-First” mindset and steady quality
improvement activities.

Osamu Eriguchi
Senior Vice President,
Chief Quality Officer

Over the last three years, we have taken great strides in our quality
enhancement, one of the most important management issues in our midterm management vision “STEP.” Although we are making steady progress,
we recognize that there are still issues to be solved, and I feel that we havenot been able to show concrete evidence of our quality enhancement toour customers and dealerships. Currently, we are striving toward quality
enhancement under three activity pillars: (1) thorough implementation ofa “Quality-First” mindset and reinforcement of organizational efforts andstructure, (2) “Execution Quality” enhancement, and (3) “Innate Quality”
enhancement. But, I am aware that we are only midway through theseprocesses, and I would like for us to achieve more results in the coming year.
As control systems in today’s automobiles become larger and more
complex, there is now a need for never-before-seen levels of advanced
support even in the software domain. Here, it is important for the relevant
divisions, including development, procurement, manufacturing, supplies,
and after-sales, to cooperate closely with one another more than ever before
to tackle issues taking the perspective of the customer. Going forward, we
will be resolute in tackling these issues as an All Subaru team.
We also recognize the importance of speeding up our quality
enhancement initiatives. In addition to launching FAST in January 2021 withthe aim of strengthening our frameworks in the North American region,
which is a core market for us, the Manufacturing Division is strengthening its
practice of in-process quality assurance while upholding set rules. Above all,the foundation of our quality enhancement is fostering a thorough “QualityFirst” mindset. We will continue to align the vectors of all employees andfurther deepen quality enhancement. Even during this revolutionary, oncein-a-century moment, we will seek to be a Subaru preferred for its quality.

FAST: An “All Subaru” Team Improving Quality in the North American Market

Ongoing Activities to Maintain Alertness, Altering the Awareness of Each Employee

In January 2021, Subaru launched a new quality improvement team, FAST, in
the U.S. to strengthen its quality assurance system in its major market of North
America. FAST is a team spanning countries and organizations, consisting ofmembers from the U.S., Canada, and Subaru North America affiliates. In North
America, an enormous market in terms of both sales volume and vehicle ownership,
the most important task is to swiftly and correctly obtain accurate information andimprove quality improvement response speed.

As a concrete measure to ensure awareness of the need to place the highest
priority on quality and to strengthen the system, we are implementing activities
to maintain alertness. These activities are for all employees to reflect on past
improprieties relating to final vehicle inspections and for helping instill a sensethat we will never betray our customers’ expectations again. Held once a year on
October 26, the day the final vehicle inspections were finally resolved this programis designed to ensure that employees remain alert regarding the relevant issues
by learning from past events and comparing them to present situations, and tohelp Subaru become a company “delivering happiness to all.”

28 Integrated Report 2021

Integrated Report 2021 29

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Evolution of the Subaru Difference
Direction announced at the Subaru Technology Briefing in January 2020

Aim forzero fatal road accidents
by 2030

Contribute to achieving
a carbon-free society
with Subaru strengths andtechnological innovation.

We will continue to contribute to the realization of a carbon-free society by
evolving the Subaru Difference.
As the electrification of automobiles continues, Subaru will contribute to this carbon-free society by demonstrating theSubaru Difference through distinctiveness and technological innovation. Specifically, our plan is to make at least 40%
of Subaru global sales be battery electric vehicles (BEVs) and hybrid electric vehicles (HEVs) by 2030. In addition, by theearly 2030s, we aim to apply electric powertrain technology to all Subaru vehicles sold worldwide, and by 2050, we aim to
reduce well-to-wheel*1 CO2 emissions by 90% or more*2 compared to 2010 levels.
It is expected that traditional motors will be replaced by electric motors, but the importance of safety performancerequired for automobiles will not change even as electrification progresses. In addition to acceleration performance, weFurther advance our technologies to deliver “Enjoyment and Peace of Mind.”will utilize Subaru’s AWD control knowledge more effectively in motors with higher precision and responsiveness, leading

Maintain the Subaru Difference even in the age of vehicle electriﬁcation.

to an even stronger Subaru Difference of driving stability, dynamics, and enjoyment.
In light of the changing environment, Subaru will accelerate these efforts more than ever before.

We aim to achieve zero fatal traffic accidents by improving safety in all situations.
In the mid-term management vision “STEP” announced in 2018, we declared our goal of working toward zero fatal traffic
accidents* by 2030, attaching particular importance to protecting lives. Up to now, Subaru has evolved its passive safety

Environmental efforts with commitment to enhancing the Subaru Difference

CO2 reduction roadmap
By 2030Make at least 40% of Subaru global sales BEVs* or HEVs.

performance by adopting the Subaru Global Platform and the preventive safety performance of the EyeSight advanced
driver assist system, strengths of the Subaru brand. However, we will make efforts to integrate intelligent technologies
and pursue greater levels of Enjoyment and Peace of Mind.
The next-generation EyeSight X system is an advanced
driver assist system for highways. We are also promoting theenhancement of connected safety, facilitating emergency
rescue in the event of a serious accident through integration

Number of road accident fatalities involving Subaru passenger
vehicles (excl. mini vehicles) newly registered as new cars in thepreceding ﬁve years (incl. reference year) in Japan
8

with Subaru STARLINK’s connected services. Subaru willpress forward with the combination of advanced sensing

7

technologies and the judgment capability of AI, improving
accidents.
* Reducing to zero the number of fatal accidents occurring while a driver orpassenger in a Subaru vehicle and the number of fatalities among pedestrians,
cyclists, and the like arising from collisions with a Subaru vehicle.

1
2017*
Pedestrian/cyclist

By 2050

Apply electrification technologies*3 to all Subaru vehicles*4 sold worldwide.

Reduce average well-to-wheel*1 CO2 emissions from new vehicles sold worldwide byat least 90%*2 compared to 2010 levels.

Contribute toward achieving carbon neutrality

7
4
3
1
1
1

1

safety in all situations and thereby aiming for zero fatal

By the 1st half of the 2030s

2
2018*Single-vehicle

2019*

With highly responsive electric motors, Subaru’s AWD capability anddriving dynamics will be further enhanced.
We will continue to enhance the Subaru Difference in the age of electrification andaccelerate the roadmap toward 2050.

Vehicle-to-vehicle

Calculated by Subaru based on ITARDA data
Numbers are road accident fatalities (excl. those from secondary accidents)
among occupants of Subaru vehicles and people who collided with Subaru vehicles
including pedestrians and cyclists
2017: Subaru vehicles newly registered between 2013 and 20172018: Subaru vehicles newly registered between 2014 and 20182019: Subaru vehicles newly registered between 2015 and 2019

* Battery electric vehicle*1 Well-to-Wheel: Approach to calculating CO2 emissions including the emissions produced by the generation of electricity to be used by EVs and other vehicles.
*2 Reduce total CO2 emissions calculated based on the fuel efficiency (notified value) of all Subaru automobiles sold across the world by 90% or more relative to the 2010
levels in 2050. Changes in the sales quantity due to changes in the market environment shall be taken into consideration, while minor changes in running distanceshall not.
*3 Refers to the technology used to foster the use of electricity for HEVs, HVs, and others.
*4 Excluding models supplied by OEMs.

Established Subaru Lab, an AI Development Hub

Global rollout of the SOLTERRA EV by Mid-2022

Subaru is conducting research and development to combine
the judgment capability of AI with its EyeSight advanced driverassist system, further improving safety with the goal of zero fatal
traffic accidents by 2030.
We have opened Subaru Lab in Tokyo’s Shibuya area, a place
where many IT companies have congregated due to the recent
redevelopment of the area. Here, we will work to develop AI
more rapidly than ever before through seamless, well-targeted
recruitment of human resources necessary for AI development,
as well as collaboration with IT-related companies.

At Subaru, we plan to launch the SOLTERRA, our

30 Integrated Report 2021

first global EV, by mid-2022 in markets like Japan,
the U.S., Europe, and China. This is a C-segmentclass SUV model developed jointly with Toyota Motor
Corporation, utilizing our new, jointly developed
e-Subaru GLOBAL PLATFORM for EVs. With the aimof creating ever-better cars, this SUV model represents
the culmination of the unique appeal of EVs, utilizing
the respective strengths of both companies.

Integrated Report 2021 31

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Evolution of the Subaru Difference

Our Unified, Fundamental Reforms
in Development Systems Will Build
Subaru’s Future.

Tetsuo Fujinuki
Senior Vice President,
Chief Technology Officer

In this revolutionary era for the automotive industry, seen in areas such as
CASE, evolution is accelerating toward new technologies like electrification and
ADAS*1.
Under these circumstances, it is important that we continue to maintain ourmarket competitiveness and to cultivate, enhance, and accumulate technologies
that will create the future of Subaru. Therefore, we have decided to shift ourEngineering Division toward a future-oriented development model that canaddress changes in the development domain. This dramatic organizational
system change will help us efficiently utilize shared advanced technologies,
such as ADAS and electrification.
Specifically, in April 2021, we created a unified Engineering Headquarters,
evolving our structure so that it can flexibly address both technology
management and organization management, and enable total development
optimization. Furthermore, since July we have been transitioned away fromour conventional development system where organizations are separated
by function, such as the vehicle body and power unit, creating collaborative
relationships within each vehicle model for development. This new systemapplies a fusion of two axes: “value,” such as the environment, enjoyment, andpeace of mind; and “function,” such as our drivetrain-related technologies,
our EyeSight system, and connected car technologies. This fusion allows us to
deploy technologies generated in this process into our various models.
Prior to this, the CTO*’s Office was set up in January 2021 to discuss anddecide the future direction of technical development to ensure that our new
development system functions properly. The office is striving to speed up
decision-making and strengthen our technology management capabilities.
As the organization evolves, we will focus our efforts for information
gathering for incorporating cutting-edge technologies, organization-building
for commercialization, and review of our human resources management. I would
like the engineers who are responsible for our future technologies to honetheir skills beyond the scope of the work they have been doing so far, become
more attuned to the world’s technology trends, and as a result bring growth toSubaru through their own personal growth.
Going forward, we will deepen cooperation with not only our development
teams, but also with procurement, manufacturing, and after-sales service, topromote a Company-wide unified manufacturing system, and build the futureof Subaru.

We cultivate, enhance, and accumulate future-generation core technologies that will
underpin Subaru’s future products and maintain our competitiveness.
Previous

Going forward
Value axis

We used to pursue optimal solutions bymodel, body type, and power unit.

Environment

Vehicle A

SafetyEnjoyment

Powertrain / Drivetrain
Vehicle B

Featureaxis

EyeSight
Connected technologies

Vehicle C

Vehicle A

In the past, we had engaged in development
per model in an organization separated byfunction. This organizational structure
made it difficult to create a development
system for new functions such as EVs
and software, and to promote horizontal
collaboration across departments.

Vehicle B

Vehicle C

Going forward, we are proceeding with development on theaxes of function and Subaru vehicle value. The technologies
created from this structure will be applied to each model.

*1 Advanced Driver Assistance System*2 CTO: Chief Technology Officer

Established the CTO’s Office

Subaru Driving Academy: Cultivating Talent Who Drive, Feel, Quantify, and Consider

In January 2021, Subaru newly established the CTO’s Office, an organization within the Engineering Management Division
discussing and deciding the future direction of technical development. The automotive industry’s environment is changing
dramatically, with increasing diversification in the domains where automotive technology must be developed, such as
electrification, software, and communications. The office will conduct technology strategy planning for product and service
offerings embodying the Subaru Difference even amid these changes, set out the optimal allocation of management
resources and the direction of technical development with a view to the medium- to long-term, and solve manufacturing
challenges in a cross-divisional manner, in areas such as technical development and procurement.

Subaru puts great effort into developing human resources supporting “Enjoyment andPeace of Mind.” There are no dedicated test drivers for evaluation on Subaru’s payroll.
Instead, engineers are tasked with work across the entire process, from data analysis, tomechanism analysis, to test driving and performance assessments. This system lends us
greater strength in car manufacturing. In 2015, we established the Subaru Driving Academy
to build even greater strengths and to lead to development of human resources capable ofadvancing systematic and consistent development. Team members come together from thevarious domains in our development-related departments to acquire top-class driving skills at the academy. This acquisition
helps improve their assessment and management capabilities and creates a cohesive, single team transcending organizational
barriers as we work to make cars offering customers a sense of “Enjoyment and Peace of Mind.”

32 Integrated Report 2021

Integrated Report 2021 33

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

ADVANCED
Advanced Safety That Enables Total Comfort and Enjoyment SAFETY
Subaru’s EyeSight driving support system uses two cameras (one each on the left and right sides), just likethe two human eyes, to three-dimensionally recognize cars, pedestrians and other objects in front of thevehicle, and accurately determine the distance, shape, and movement speed of those objects. The result
is preventive safety that encompasses accident avoidance, damage reduction and driving load reduction.
Levorg’s next-generation EyeSight enables 360-degree sensing that supports driving by constantly
refreshing the wide-angle stereo cameras in combination with four front and rear radar devices, making it
safer in a wider range of scenarios such as intersections. In addition, the advanced driving support system

FeatureEyeSight X combines 3D high-precision map data with location information using GPS and the QuasiZenith Satellite System known as Michibiki to support lane changes, speed control going into curves, andhands-off driving in traffic jams. Subaru delivers leading-edge, cost-effective functions that enable safer,more comfortable driving. In addition, we are offering the Subaru STARLINK connected service for the

Carrying on Subaru’s Unique Value and Total Innovation

first time for Subaru models in the Japanese market. Equipped with GPS, in-vehicle communicationequipment, and connected to a call center 24 hours a day, 365 days a year, it provides access to support
in the event of a traffic accident or other issue.

The new Levorg epitomizes the evolution of car manufacturing at Subaru.
The Inspiration to Drive Anywhere and Everywhere

SPORTYThe newly developed 1.8L direct-injection turbo engine emphasizes performance in day-to-day driving

The new Levorg is based on the Grand Touring Philosophy passed down at Subaru. Subaru embraced this philosophy inand generates powerful torque from the low rpm range. It also features excellent environmental

combining its latest technologies to develop a truly innovative performance wagon.

performance through the use of cutting-edge technology such as lean combustion.

The new Levorg won the 2020-2021 Car of the Year Japan award in December 2020. The car uses 3D high-precision map data

The drive mode select function available in the STI SPORT trim level lets the driver transform theand is equipped with EyeSight X. This sophisticated driving support system features outstanding cost performance and uses

character of the car with a single button, providing an experience that ranges from the thrill of driving a

information such as GPS and the Quasi-Zenith Satellite System known as Michibiki. The Levorg employs the Subaru Global

sports car to the feel of riding in the comfort of a luxury car. This transformation is made possible byPlatform with full inner frame construction to achieve a high level of both maneuverability and comfort. Levorg’s newly

precision control of the power unit and various devices such as the AWD system, electronically controlled

developed engine has received rave reviews for its performance in day-to-day driving. The Japan New Car Assessment Program

damper, power steering, EyeSight tracking acceleration and air conditioning.
In addition, the use of the Subaru Global Platform with full inner frame construction that enhances body

(JNCAP),* which compares and evaluates the safety performance of automobiles, also

rigidity and structural adhesives that suppress minute deformation delivers higher rigidity with less weight.

highly rated the car. Levorg earned the Automobile Safety Performance 2020 Five Star

The result is greater overall safety, handling faithful to the driver’s intentions, and a comfortable ride thatAward after receiving JNCAP’s highest score in the comprehensive evaluation ofeliminates unpleasant vibration and noise.

collision safety and preventive safety performance in 2020.

Levorg is the first mass-produced Subaru to use the new BOLDER design concept. The front view has a*Conducted by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) and the National Agency for Automotive
Safety and Victim’s Aid (NASVA)

distinctively Subaru appearance with a wide, three-dimensional hexagonal grille and sharply shaped
headlamps. The design boldly gives Levorg a sporty emphasis, expressing the enjoyment of controllingthe vehicle at will as well as the passion that inspires people to try something that has never been tried
before.

Development Concept
We wanted to develop the new Levorg as a product that epitomizes the concept of a flagship vehicle in the Japanesemarket. The ideas of “carrying on Subaru’s unique value” and “total innovation” formed the core concept. Levorg carries
on the Subaru legacy of people-centered car manufacturing and the Grand Touring Philosophy of farther, faster, more
comfortable, and safer. Its total innovation is on a much higher
level, a level that far exceeds customer expectations. The three

We have refined the wagon functions and interior for exceptionally comfortable touring and incorporated

core values that we want to deliver to our customers area practical cargo bay. The comfortable front sport seats make one feel a part of the vehicle. They help

Advanced
Safety“advanced safety,” “sporty,” and “wagon value.”
The first value is advanced safety. The next- generation

prevent fatigue even on long drives and keep passengers and the driver in place during sport-styledriving. The cargo bay features a hands-free power rear gate. The rear gate opens automatically when a

EyeSight and the ultra-advanced driving support system EyeSight

person with the key fob gets a part of the body, such as elbow, close to the rear six-star logo, which

X put the focus on safety and security with innovation. Sporty ismeans outstanding convenience when hands are full of luggage or covered in mud in the great outdoors.
Three values
we want to deliver toour customers

the second value. Levorg is an appealing choice because it
satisfies customers who prefer the performance and superb
steering stability unique to Subaru, as well as customers who wanta high-quality ride. The third value is wagon value. Levorg
features a luggage compartment with utility comparable to an
SUV and a sophisticated, comfortable interior.

34 Integrated Report 2021

WAGON
Wagon Value That Makes Time with Family and Friends Special VALUESportyComplementing the conventional large cargo bay, a large-capacity sub-trunk adds significant functionality
to the luggage compartment.

Wagon
Value

Subaru has also enhanced the human-machine interface by installing a large central information
display, and an advanced digital cockpit with full LCD instrumentation at the EyeSight X trim level. Thesefeatures support drivers by providing them with access to the information they need, and the operability
required to respond to the situation.

Integrated Report 2021 35

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Message from the CFO

We will build a financial base realizing“selection and concentration” and strive
to increase corporate value.
Katsuyuki Mizuma
Director of the Board, Executive Vice President,
CFO (Chief Financial Officer) and CRMO (Chief Risk Management Officer)
ProfileJoined The Industrial Bank of Japan Ltd. in 1984. Became Managing Executive Officerof Mizuho Bank, Ltd. in 2014. Joined Subaru in 2016 as Senior Vice President and Senior
General Manager of Subaru Overseas Sales & Marketing Division 2. In 2018, he became
Executive Vice President and Chief General Manager of Overseas Sales & Marketing
Division 1 and Chief General Manager of Overseas Sales & Marketing Division 2. He hasserved as Executive Vice President, CFO and CRMO since June 2021.

As Subaru CFO
In April 2021, I was appointed to the positions of Subaru’s CFO (Chief Financial Officer) and CRMO (Chief Risk Management
Officer).
Originally, my career was at financial institutions, but since joining the Company in 2016, I have gained experience inall aspects of overseas sales in the automotive sector. Since we are not a particularly large company within the automobile
industry, we have adopted thorough differentiation and added-value strategies so that we can achieve sustainable growth
in a highly competitive environment. Instead of developing business across all markets with full product lineups, we arepushing a strategy of selection and concentration, focused on allocating limited management resources to markets andcategories where we can demonstrate our strengths. Specifically, our product focus is in SUVs and primarily in the U.S.
market and other developed countries where motorization has reached a mature state and where consumers see highsafety and driving performance as added value. On the other hand, we face higher business risk, and therefore we haveestablished a solid financial strategy that can withstand unforeseen circumstances. As CFO, I feel that it is important forme to communicate proactively so that stakeholders can have an accurate understanding of these issues. I wish to use theexperience and insights I have gained in my career so far to contribute to enhancing corporate value at the Subaru Group.

Subaru’s Financial and Capital Strategies
In order for the Group to continue to achieve sustainable growth as we press forward with selection and concentration, wemust build and maintain a financial base that can withstand unforeseen events such as the COVID-19 pandemic.
We have identified return on capital, financial soundness, and shareholder returns as the three key indicators for our
financial and capital policy. Our basic policy is to provide appropriate shareholder returns while maintaining a balance
between ROE and the shareholders’ equity ratio over the medium- to long-term. In the May 2021 progress report on our
mid-term management vision “STEP,” we set KPIs of achieving an industry-leading operating margin of 8%, and ROE of 10%
or higher. The prerequisites for achieving these targets are a net cash position equivalent to two months of sales revenue
and a capital equity ratio of 50％.
Operating Profit / Operating Margin(Billions of yen)
500
400
300

JGAAP

IFRS

15

12.4

10

6.3

5.8

200

181.7

100

210.3

3.6
102.5

0
Operating Profit (Left)

36 Integrated Report 2021

18/3

In FYE March 2021, the first quarter forced production stoppages and adjustments at plants due to the significant impact
from the global spread of COVID-19. Then, from the second quarter onward, sales in the key market of the U.S. began torecover, and although sales in the third quarter were higher year-on-year, production declined in the fourth quarter due tosemiconductor shortages. Overseas vehicle sales were around 758,000 units, down 16.5% year-on-year, and vehicle salesin Japan were around 102,000 units, down 19.1% year-on-year, resulting in global vehicle sales of around 860,000 units,
down 16.8% year-on-year. As a result, we posted consolidated financial results for FYE March 2021 as follows. Revenue
was 2,830.2 billion yen, down 15.4% year on year. Operating profit was 102.5 billion yen, down 51.3%. Profit for the period
attributable to owners of parent was 76.5 billion yen, down 49.9%. For FYE March 2022, although overall demand is trending
toward recovery, mainly in the U.S., semiconductor supply is still very uncertain as of announcing the first quarter results,
and market prices continue to soar, especially for precious metals, resulting in a harsh business environment. However, it
is precisely under these circumstances that we need to increase the added value that we can offer to our customers andbuild up our core earning power. The operating profit of 200 billion yen in our plan takes into account our work to make
improvements toward this end, and we will take on the challenge of achieving this goal by reviewing costs, mainly fixed
costs, and making other efforts to improve profitability.

On Shareholder Returns
Our basic policy on returns to Subaru shareholders is to provide consistent, stable returns, primarily through dividends,
while taking into consideration each fiscal year’s performance, investment plan, and management environment under aperformance-linked policy, with a target consolidated payout ratio range of 30%-50%. Note that we will conduct share
repurchases flexibly in line with our cash flow.
In FYE March 2021, the global spread of COVID-19 and shortages of semiconductors had a major impact on our businessactivities, including production and sales. After a comprehensive assessment of the situation, including our funding
requirements going forward, we set the yearly dividend at 56 yen (consolidated payout ratio: 56%). In FYE March 2022, we
expect to pay a yearly dividend of 56 yen (consolidated payout ratio: 31%) based on a comprehensive assessment, including
our future funding needs given a business environment that remains unpredictable.
We look forward to your continued understanding and support as we work to meet the expectations of our shareholders
and other stakeholders.

Dividend Per Share / Dividend Payout Ratio(%)

Targeting 10% or more

19/3

20/3

Operating Margin (Right)

21/3

Equity ratio

50% at minimum

Net cash

Equivalent to two monthsof net sales (minimum)

50

Shareholder
returns

JGAAP

(Yen)

IFRS

25
20

410.8 379.4

17/3

ROE

11.7

Review of FYE March 2021 and Outlook for FYE March 2022

ROE

Capital Policy(%)

In the five-year period through FYE March 2021, we secured the financial soundness needed to ensure our business
continuity, including a capital equity ratio above 50%, a D/E ratio of 0.2 times or lower, and a credit rating of A– from Rating
and Investment Information, Inc. (R&I).
We will steadily and effectively implement a program of capital and R&D expenditures aimed at further strengthening
the Subaru brand. Specifically, we will commit capital expenditures of 3.5%–4% of sales revenue and R&D expenditures ofaround 120 billion yen/year, through which we will accelerate initiatives for achieving zero fatal traffic accidents, contributing
to a carbon-free society and evolving the Subaru Difference.
Furthermore, the 150-billion-yen investment framework (over FYE March 2019–FYE March 2023) for quality enhancement
under the mid-term management vision “STEP” has been fully earmarked for specific projects. We are steadily making
capital expenditures to enhance quality at our plants in Japan and the U.S, establish R&D facilities, and allocate personnel
and other resources. We have made quality enhancement initiatives our top priority, and we expect them to bear fruit in thenear future.

150

20.2

8.5

10

Dividend payout ratio

30-50%

5

Share repurchases

Conduct flexibly

0

144

100

14.6

15

JGAAP

39.4

9.0
4.4

(%)

IFRS

144

100

144
78.1

75

100

50.1

50

56.1

50.3

56

20/3

21/3

25

0

17/3

18/3

19/3

20/3

21/3

50

0

17/3
Dividend Per Share (Left)

18/3

19/3

Dividend Payout Ratio (Right)

Integrated Report 2021 37

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Risk Management

Our Approach

Risks Associated with Business Activities

Subaru is undertaking risk management as one of its key priority management issues, not only to address emergency situations
when they arise but also to deal with various risks that have a serious impact on daily corporate activities, as well as to minimize
damage when risks emerge.
The automotive industry is ushering in a major transformation, which only occurs once in a hundred years. The Subaru
Group, which operates businesses globally, is aiming to enhance the resilience of its management infrastructure by ensuring
the sustainability of its businesses by quickly tackling changes in world affairs. At the same time, the Group must boost its
measures to minimize its human, social and economic losses. Amid this environment, it is essential to strategically conduct
risk management throughout the group to conduct business activities. We therefore believe it is important to create a Subaru
Group that has an infrastructure that is resilient to risk to enhance our corporate value.

At the Subaru Group, we extract and identify key risks associated with our business activities and consider measures tocombat them.
The major business risks are listed below.
Please note that this is not an exhaustive list of all risks relating to the Subaru Group.
17 Risks Affecting Business Activities
Risks relating to fluctuations in the economic and financial environment

Risks arising from national regulations and other events affecting business activities

Economic trends in major markets

Financial markets fluctuations

Political, regulatory and legal procedures in various countries that impact business activities

Exchange rate fluctuations

Change in raw material costs

Management System

Risks relating to industry and business activities

To prevent the emergence and expansion of risks to the Subaru Group, the CRMO (Chief Risk Management Officer) appointed
by the Board of Directors leads risk management and compliance activities, reporting their status to the Board of Directors.
As a system to promote risk management, Subaru has appointed risk management officers (job grade of Chief General
Managers) for each department and established the Risk Management & Compliance Committee. This committee is chairedby the Chief Risk Management Officer (CRMO), and its vicechairperson is the Vice President in charge of the duties of the Risk
Management Group, comprised of the Risk Management & Compliance Office and the Legal Department. At this committee,
members deliberate, discuss, make decisions, and exchange/communicate information on important matters.
The CRMO leads corporate group-wide efforts to enhance risk management with professional support from experts incompany-wide shared corporate operations departments, such as the Risk Management & Compliance Office and the Legal
Department. In this leadership role, the CRMO works closely with the Corporate Planning Department, which performs divisionencompassing functions, as well as different divisions and companies. Audit Department audits execution of tasks by eachdivision and subsidiary in a planned manner.
Risk Management System

Normal situation

Impact of disasters, war, terrorism, infections, etc.

Focus on specific businesses and markets

Intellectual property infringement

Respect for human rights

Changes in the demand and competitive environment in the market

Information network security

Secure and train human resources

Responsibility related to products, sales and services

Compliance

Climate change

Supply chain disruptions

Stakeholder communication

Impact on business performance or financial standing

Message from the CRMO
President and CEO

Emergency situation

We will accelerate our work to permeate ownership in conceptualizing
risk management and compliance.
*Please refer to pages 14–18 of the Securities Report for further details on risks to SUBARU business activities

Board of Directors

Risk Management &Compliance Committee• Formulate company-wide
policies

CRMO• Supervise risk
management situations• Address company-wideissues• Formulate action
guidelines

Risk management• Understand and reportofﬁcers
the implementation

Chief Risk Management Ofﬁcer(CRMO)
Risk Management &Compliance Ofﬁce

Information sharing/
reporting

Determine which response
headquarters should be set up
according to the situation

Departmental risk managementofﬁcers
General managers, company presidents,
officers in charge of common departments,
etc.

Special Emergency Response Headquarters:
for immediate response to the most critical situations

President and CEO, CRMO,
Risk Management & Compliance Office,risk management officer and other officers
in the relevant department

Emergency Response Headquarters:
for response to critical situations

CRMO, Risk Management &Compliance Office,related officers
Cooperation

situation

Departmental Response Headquarters:

Risk Management • Operate committee
meetings&
Compliance Ofﬁce • Support activities atindividual departments(secretariat)

for independent response to incidents by the related department

Each department
Risk management officer

Dealers, afﬁliated companies, customers
Normalsituation

Emergency
situation

For Subaru, an organization seeking sustainable growth and promoting “selection andconcentration,” it is important that risk management and compliance activities are autonomous
as we aim to increase corporate value. Therefore, starting two years ago, we have been working
to build systems and mechanisms to instill autonomous thinking about risk management andcompliance.
My evaluation is that, in the FYE March 2021, we have been successful in our activities hereso far, and we were able to take swift and appropriate measures against the spread of COVID-19,
minimizing its impact. In addition, our Compliance Hotline has enjoyed active use thanks to
growing awareness, leading to improvements at an early stage.
In addition, we drafted a Risk Map in consideration of the size and impact of losses that could occur when risks materialize.
This map summarizes priority issues to be addressed from a Group-wide perspective. We have identified disasters andpandemics as the most impactful risks, and have established and operate a business continuity plan (BCP) system accordingly.
We would like to take steady action toward daily risk management so that we can proactively deal with the various risks related
to reputation, including quality, compliance, and information network security. Climate change and the supply chain are
also important challenges, and we are taking action in cooperation with the relevant business divisions, like the Engineering
Division and the Purchasing Division.
Taking advantage of my dual role as CFO, I also focus on close coordination with corporate risk and finance. We believethat it is important to tackle risks that have a high priority in the risk map from a Group-wide perspective while maintainingalignment with financial treatment and management strategies. Going forward, we will further accelerate our work to permeaterisk management and compliance where PDCA cycles can be run with autonomy.

Katsuyuki Mizuma CFO, CRMO

38 Integrated Report 2021

Integrated Report 2021 39

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Business Overview
Automotive Business Unit

Automobile Sales by Region

Other regions 30,000
Australia 32,000Europe 20,000

Japan 106,000

Russia 6,000

RetailAutomobile
Sales

China 22,000(Jan-Dec 2020)

North America 664,000

Product Lineup(Exclusively for North America)

Our history as an automaker began with the launch of the Subaru 360 in 1958. Since then we have worked
continually to provide new value in automobiles by developing new categories based on our core technologies,
such as the horizontally-opposed engine and symmetrical all-wheel drive (AWD), and by creating newtechnological value, including EyeSight*, the world’s first driver assist system. These actions have deepened
our ties with customers. In recent years, we have positioned the U.S. as an important market, with a strategy
of concentrating limited resources in fields in which we should extend our strengths and advantages, including
product lineups focused on SUVs and sports models. We provide Enjoyment and Peace of Mind through highvalue-added products. In addition, we are working to create ever-better cars in our alliance with Toyota Motor
Corporation, bringing together our mutual strengths.

SUVSports / Wagon

Unit sales : 71,000

Unit sales : 14,000

Sales region : North America

Sales regions : Japan, Europe, Australia, and other

SUV
Unit sales : 180,000

Photo: North American model

Sales regions : Japan, North America, Russia, Europe, Australia,
China, and otherSports / Sedan
Unit sales : 32,000
Sales regions : Japan, North America, Russia,
Australia, and other* EyeSight is the first driver assist system to provide all functionality solely through the use of stereo cameras
SUV

Consolidated Revenue
Contribution Ratio

Revenue

Operating Profit(Billions of yen)(Billions of yen)

3,152.0 3,062.3

3,007.6

3,193.9

397.7

Unit sales : 266,000
Sales regions : Japan, North America, Russia, Europe, Australia,
China, and otherSports / Coupe
Unit sales : 5,000

Photo: Prototype

Sales regions : Japan, North America, Europe, Australia,
China, and other361.5

2,737.5(North America: CROSSTREK)

Automotive
Business

172.1

Unit sales : 186,000

109.1(FYE March 2021)

96.7%

SUV

200.3

’17/3

’18/3

JGAAP

’19/3

’20/3 ’21/3
IFRS

’17/3

’18/3

JGAAP

’19/3

Sales regions : Japan, North America, Russia, Europe, Australia,
China, and other

Wagon· Sedan’20/3 ’21/3
IFRS

Sedan
Unit sales : 32,000

Our Future Goals
In pursuit of Subaru’s goal of zero fatal traffic accidents by 2030*, we will not only further evolve preventive,
passive, and other safety performance areas, but also strengthen connected safety, building greater safety in all
situations.
To contribute to a carbon-free society, we will promote the development of core technologies in areas suchas electric and hybrid vehicles, while leveraging alliances to accelerate our roadmap toward achieving carbon
neutrality by 2050.
Subaru will continue to evolve its unique existing core technologies, cultivate and enhance future technology,
adapting to changes in the times, and continue to refine the Subaru Difference to provide Enjoyment and Peaceof Mind to customers around the world.
* Reducing to zero the number of fatal accidents occurring while a driver or passenger in a Subaru vehicle and the number of fatalities among pedestrians,
cyclists, and the like arising from collisions with a Subaru vehicle.

Photo: North American model

Sales regions : Japan, North America, Russia, Europe, Australia,
China, and other

Unit sales : 71,000
Sales regions : Japan, North America, Russia, Europe,
Australia, and other

OEM models

Unit sales : 23,000
Sales region : Japan (OEM supply from Daihatsu Motor Co., Ltd.)* Retail unit sales in each region in the period from January 1, 2020 to December 31, 2020.

40 Integrated Report 2021

Integrated Report 2021 41

Value Creation Story

Business Overview

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Automotive Business Unit

We aim toward zero fatal accidents*1 in 2030

Subaru’s All-Around Safety

Subaru pursues automobile safety performance from every perspective. We aim to eliminate fatal accidents involving

Subaru Core Technologies
Subaru Global Platform

Subaru vehicles by 2030 by combining our existing four safety criteria of Primary Safety, Active Safety, Preventive
Safety, and Passive Safety with the new concept of Connected Safety.
*1 R educing to zero the number of fatal accidents occurring while a driver or passenger in a Subaru and the number of fatalities among pedestrians, cyclists, and the likearising from collisions with a Subaru vehicle.

Basic design features for avoiding accidents

Primary
SafetySafe situation

Increasing driving safety through basic design
features such as car shape and controls• Visibility design • Driving position • Interface

Hazardous situation

Preemptive
accident
avoidance

ActiveSafetySymmetrical All-Wheel Drive (AWD)

Facilitating hazard avoidance through performance
improvement in the basic functions of a car:driving, turning, and stopping

Superior overall weight distribution• Horizontally-opposed engine • Symmetrical AWD• Subaru Global Platform

Preventive Supporting safe driving by helping avoid collisions andreduce damage
Safety• EyeSight
Extra precautions just in case

Passive
SafetyCollision

Damagereduction
during an
accident
Spread of damage

Protecting both passengers and pedestrians• Engine layout • Subaru Global Platform• Pedestrian protection airbag
To save lives more

Connected
SafetySubaru is sequentially introducing the Subaru Global Platform, starting with the
Impreza launched in October 2016. The vehicle platform substantially increases
body and chassis rigidity and further lowers vehicle center of gravity, raising thelevel of Active Safety and Passive Safety and delivering responsive handling
performance and a comfortable ride with reduced unpleasant vibration and noise.

The ultimate in driving performance for greater safety

Advanced technology that supports safe driving

Accident

Balancing a high degree of both drive quality andpassive safety performance

24-hour/365-day access to rapid emergency assistance• Advanced Automatic Collision Notification (AACN)

The combination of the low center of gravity provided by the horizontally-opposedengine and superior longitudinal-transverse weight balance achieved by placing
the transmission near the center of the vehicle maximizes all-wheel drive capability
and delivers superb driving performance in various conditions. Subaru has beencommitted to Symmetrical AWD as a core technology that drivers can depend onin every situation from day-to-day town use to high-speed highway driving.

Subaru Global Platform

Symmetrical All-Wheel Drive

Horizontally-Opposed Engine (Boxer engine)

Compact, low center of gravity
The horizontally-opposed engine has pistons arranged symmetrically to the left andright of the crankshaft. The opposed pistons mutually cancel out engine vibrations,which reduces vibrations conveyed to the vehicle interior. The engine’s low heightand compact design contribute to a low vehicle center of gravity. The stable
attitude provides a high sense of security during driving.

Subaru Boxer

Conventional
In-Line Engine

EyeSight Driver Assist System

Stereo cameras for advanced object recognition
capabilities
Passive
SafetySafety Performance Recognized Worldwide

Starting from the development of the
Subaru 360 more than 60 years ago, Subaru
has continued to inherit and pass on thephilosophy of giving top priority to safety,
because customers entrust their lives totheir cars. Even since the 1960s, when theworld had not yet come to consider safety a
major concern, we have been conducting
our own collision safety tests, and today ourcars are consistently rated among the bestin safety evaluations in Japan and overseas.

42 Integrated Report 2021

* See page 51 for more about the assessment program.

By using two cameras positioned on the left and right like human eyes, the EyeSight
driver assist system is able to detect vehicles and pedestrians ahead of the vehicle
in three dimensions and to accurately determine the distance, shape, and velocityof each object. This preventive safety technology helps avoid accidents, minimizes
damage, and reduces the burden on the driver. The next-generation EyeSight
system installed in the 2020 Subaru Levorg features redesigned stereo cameras thatallow for expanded visibility, as well as 360-degree sensor capabilities from the fourradar units located at the front and rear of the vehicle. This system contributes tosafe driving in an even wider range of situations, including intersections. In addition,
EyeSight X advanced driver assist system adopted in the new Levorg in Japancombines information from sources such as the GPS and QZSS “Michibiki” satellite
systems with high-precision 3D map data, which extends driving support functions
including lane change assist, slowing the vehicle before going into a curb, andhands-off driving assist in traffic congestion.

Stereo cameras

Integrated Report 2021 43

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Business Overview
Aerospace Company
Overview of Center Wing Box andSubaru’s Technology

Subaru’s roots trace to 1917 and Aircraft Research Laboratory, later to become Nakajima Aircraft. In the defense
program, we develop, manufacture, maintain, repair, and provide technical support for products such as the UH1J and UH-2 utility helicopters used by the Japan Ground Self-Defense Force (JGSDF) for disaster relief and otherpurposes, the T-5 and T-7 for supporting pilot training at the Japan Maritime Self-Defense Force and the JapanAir Self-Defense Force, more than 15 models of unmanned aerial vehicles, and flight simulators. In the commercial
program, we participate in many international joint development projects for Boeing. For the 777X, Boeing’s large
passenger airliner, we are responsible for the Center Wing and its integration with the main landing gear (MLG)

Since first participating in the Boeing passenger program in
1973, we have been involved in development and production asa key partner of Boeing for more than 40 years.
We manufacture the center wing box, the critical aircraft section
where the right and left wings are attached to the forward
and aft fuselage sections. Since the center wing box contains
the fuel, it must have high mechanical strength and high fluid
tightness. For these reasons, great accuracy and advanced
assembly technologies are required for its manufacture, andSubaru is one of the few companies capable of making it.
The Handa Plant, where center wing boxes are manufactured,is a global-level production center that produces these parts forthe new Boeing 777X as
well as for the Boeing 777
large airliner, the Boeing
787 mid-size airliner, theMinistry of Defense’s P-1
maritime patrol aircraft,
and the C-2 transport
aircraft.
A center wing box (Handa Plant)

wheel well, as well as MLG doors, Wing-to-Body Fairings (forward), and side-of-body sections.

Consolidated Revenue
Contribution Ratio

3.1%

Revenue

Operating Profit(Billions of yen)(Billions of yen)

138.8

142.2

134.1

142.1

The Aerospace Company will contribute to
the enhancement of the Subaru brand.

12.3
9.1
6.0

87.7

We are integrating many aerospace systems for commercial
5.1

transport components, military aircrafts, helicopter systems andAerospace
Company

UAV’s, from R&D to manufacturing through operational support.
Flight safety is critical factor for aircraft, and for many years we have

(FYE March 2021)

fostered a culture in which quality and safety are recognized as
–9.8

’17/3

’18/3

JGAAP

’19/3

’20/3 ’21/3
IFRS

’17/3

’18/3

JGAAP

’19/3

’20/3 ’21/3
IFRS

Primary Products and Services ∙ SUBARU BELL 412EPX ∙ UH-2 utility helicopter ∙ AH-64D attack helicopter ∙ T-5 and T-7 trainers∙ Flying Forward Reconnaissance System ∙ The Center Wing Section of Boeing 787 ∙ The Center Wing Section of Boeing 777 & 777X

inextricably linked and uncompromisingly pursued. This total safety

Shoichiro Tozuka

concept is at the core of the Subaru Difference.

Senior Vice President, Company
President of Aerospace Companyof the JGSDF UH-2 helicopter and are proceeding with mass

In the defense program, we have completed the development
production. Also, we have begun delivery of the SUBARU BELL
412EPX, the commercial version of the new utility helicopter.
The commercial transport programs have been facing difficulties

Our Future Goals
We will continue to refine our original, cutting-edge technologies cultivated over our corporate history byengaging in development and production of a wide variety of aircraft. Our latest helicopter, the SUBARU BELL
412EPX (the base model for the JGSDF UH-2), was jointly developed through our alliance with U.S.-based Bell
Textron. Production and sales are already underway. In addition, toward the development of a mobility society,we will continue to take on greater challenges to develop into an aircraft manufacturer with a global presence, suchas by participating in the New Energy and Industrial Technology Development Organization (NEDO)’s Drones andRobots for Ecologically Sustainable Societies project (DRESS project).

44 Integrated Report 2021

for some time due to expanding impact from COVID-19, but webelieve that the fundamental human desire to go faster and fly willlead the aircraft passenger demand to recovery. In preparation forthis upcoming leap in growth, we are taking firm action to advanceour defense and helicopter programs while working with our partnercompanies to strengthen our business resilience.

Integrated Report 2021 45

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Environment

Society’s Expectations

Subaru Initiatives• Address climate change• Develop and provide environmentally• Efforts to achieve carbon neutrality by 2050
• Popularizing vehicles that reduce

responsible cars
• Promote throughout the supply chain

environmental impact• Environmental protection in cooperation withcustomers• Business activities to help reduce
environmental impact

Approach to Climate Change
Subaru recognizes that climate change is one of the most pressing global issues, and respects the goal of the Paris Agreement tohold the increase in the global average temperature to well below 2°C above pre-industrial levels. Subaru will contribute to thisgoal by reducing CO2 emissions from its products, factories and offices to help decarbonize society. Subaru has set long-term andmedium-term goals as milestones for its target of carbon neutrality in 2050.

Risks and Opportunities Identified
Approach to Environmental Management
In its Environmental Policies, Subaru states that our fields of business are “the earth, the sky and nature” and focuses on
efforts aimed at coexistence with nature. In mid-term management vision “STEP,” we are committed to making environmental
contributions by enhancing the environmental performance of our products. We include “Environment” in the Six Priority Areas for
CSR and deem it important to conduct environmental activities as a precondition to continue our business activities.
In order to foster environmental activities across the Subaru Group, we have our Environment Committee as well as a crosscompany integrated environmental management system, which covers all Group sites, domestic and overseas consolidated
production companies and Subaru Corporation dealers in Japan and abroad.
Based on this system, we are fostering environmental management activities through an all-Subaru approach, including
formulating medium- to long-term environmental targets, implementing measures to achieve the targets, complying withenvironmental laws and regulations, managing chemical substances, and compiling environmental performance data.

Subaru Environmental Policies“The earth, the sky and nature” are Subaru’s fields of business.
SubaruSustainability
Principles

With the automotive and aerospace businesses as the pillars of Subaru’s operations, our fields of business are
the earth, the sky and nature. Preservation of the ecosystem of our planet, the earth, the sky and nature, is ofutmost importance to ensure the future sustainability of both society and our organization. We align our businessSubaru defines and identifies risks and opportunities associated with climate change to achieve sustainable business activities.
We have identified a number of risks associated with climate change. Initiatives to address climate change may be inadequate
or abnormal weather may cause delays in procurement, production and distribution. In addition, transition risks and physical risks
may have impacts and outcomes that are currently extremely difficult to predict. Increased R&D expenses, lost sales opportunities
due to reduced customer satisfaction and brand image, and delays in procurement, production and distribution due to abnormal
weather are among the potential impacts of these risks. These risks could have a material impact on the operating results andfinancial position of the Subaru Group.
On the other hand, effective initiatives to address climate change could lead to opportunities to create new markets andemployment and also use capital and energy more efficiently.
Main Risks Identified
Business Management in General(1) If Subaru fails to implement adequate initiatives to achieve low-carbon/zero-carbon outcomes, its brand value could be harmed,
which could affect the company’s sales and recruiting ability. Capital costs could also rise, due to increased difficulty in obtaining
financing from medium- and long-term investors.
(2) There is an argument that NDCs need to be expanded to be able to achieve the Paris Agreement’s “well below 2°C” target, andthus countries may revise their NDCs to set more stringent targets. Such revisions could have a significant impact on Subaru’s
business activities.
(3) As an impact of climate change, extreme torrential rain will frequently cause floods in various locations, which could pose risks ofSubaru’s operations being affected by disrupted supply of raw materials and submerged factories.

strategy to enhance these global goals in all of our operations.

1. We develop and deliver products to meet societal needs and contribute to the environment through advanced technologies.
By striving to create advanced technologies that put the environment and safety first, we will develop and deliver products that cancontribute to protecting the earth’s environment.
2. We focus on efforts aimed at coexistence with nature.
Together with efforts to reduce carbon-dioxide emissions in all of our operations, we will promote active engagement with nature by
stressing forest conservation.
3. We take on challenges as one through an all-Subaru approach.
Utilizing our unique organizational character that allows us to oversee the entire supply chain, all of us together will take on thechallenges of environmental protection of our planet through an all-Subaru approach.

Products(1) If Subaru fails to meet fuel economy regulations imposed in Japan, the U.S., Europe, and China, the company could incur
additional costs or losses related to negative incentives, such as fines or non-penal fines for legal violation, and credit purchasefor unmet standards. Also, some of our products could fail to satisfy certain fuel economy standards, resulting in restrained sales
opportunities.
(2) At present, it is difficult to predict technological progress and price optimization for electrification, which will likely cause asubstantial gap with the real state of market needs. In such a situation, Subaru could incur unnecessary and excessive R&D
costs while facing a decline in customer satisfaction, resulting in unexpected losses and reduced sales opportunities as well as
hampered advancement of the company’s electrification efforts.
(3) To promote electrification, it is crucial to ensure profitability for the entire product cycle ranging from procurement and use todisposal. Thus, it is essential to involve Subaru’s upstream and downstream partners in exerting efforts toward this end. Failure to

Environmental
Principles

Subaru’s fields of business are the earth, the sky and nature. Subaru understands that the health and preservationof biodiversity and controlling climate change are critical to ensuring a sustainable future for our planet earth,nature, communities, and businesses.

Products: We develop our products and conduct R&D in light of the lifecycle environmental impacts of our products.
Purchasing: Our purchasing activities reflect consideration for biodiversity and other aspects of environmental protection.
Production: We strive to minimize our environmental impact through improving energy efficiency and waste management.
Logistics: We strive to minimize our environmental impact through enhancing energy efficiency and promoting pollution prevention.
Sales: We endeavor to recycle resources efficiently and reduce waste.
Management: W
 e will strive to improve our sustainability program through contributions that meet societal needs and by publicizing
our activities as Team Subaru.

do this could render the company unable to meet the profitability goal for the entire product life cycle.
(4) Subaru views electrification as a steady medium-to-long-term trend, and also anticipates the possibility of its swift and sweeping
penetration of the market at some stage. Subaru could be unprepared for such prospect in terms of technology and timely
product lineups, and thus suffer from a resultant loss of product sales opportunities.
(5) There is a possibility that Subaru might suffer from shortages of natural resources used for tires and metal resources forelectrification technologies.
Production Phase(1) If Subaru continues to use energy derived from fossil fuels, it could incur rising costs, due not only to geopolitical factors
associated with petroleum and the like, but also to carbon taxes, emission quotas, and other government policies andregulations.
(2) If use of renewable energy does not grow as expected, Subaru could face slower progress in achieving its Scope 1 and 2
emissions reduction goals.

46 Integrated Report 2021

Integrated Report 2021 47

Value Creation Story

Main Opportunities Identified

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Reducing CO2 emissions with electrification technologies while further accentuating “Subaru-ness” in the environmental era(1) If Subaru advances its efforts to make products more environmentally friendly as planned and global climate change mitigation/
adaptation efforts progress adequately, the company will be able to maintain its key markets, This scenario also implies a

2020

2025

EV

2035

2022

possibility of the company creating new markets through receiving support for its safe and reliable products, a source of its
strength, even in the face of intensifying extreme weather conditions that are to some extent unavoidable in certain parts of the2030

Launch Compact SUV model first

Hybrid Vehicle

world.

2018 Plug-in Hybrid(2) Through contributing to addressing climate change issues, Subaru could increase its brand value, thereby enhancing its sales and

202X Strong Hybrid

recruiting ability. This could make it easier for the company to obtain financing from investors, thereby lowering capital costs.
(3) Regarding energy use during the production phase, by transitioning to renewable energy while at the same time giving due

Adding SHEVs
203X All are xEVs*

Engine Vehicle

consideration to cost-effectiveness, Subaru could overcome the risk of being exposed to price fluctuations involved in energy

2020

Apply electrification technologies to all Subaru

Newly designed 1.8L lean-burn turbo engines

vehicles sold worldwide by the first half of the
2030s

derived from fossil fuels, thereby preventing future cost increases.
* The risks and opportunities described above are based on past facts and currently available information, and may change significantly due to such factors as future
economic trends and the business environment facing Subaru. The opportunities described represent those for Subaru’s products to contribute to climate change
adaptation and do not anticipate climate change-related deterioration.

Contribution to the Creation of a Decarbonized Society through Products
from Subaru’s Point of View

* Vehicles with electrification technology.

Environment Action Plan 2030 and Other Key Environmental Initiatives

Even in the electric vehicle era, we will strengthen Subaru Difference and manufacture environmentally responsible automobiles inline with our medium- to long-term goals for 2030 and 2050.

Subaru initiated its new medium-term environmental plan in FYE March 2022. This plan is formulated around two timelines that are

We have also set the new target of proceeding with research and development with the goal of using recycled materials*1 foraligned with environmental issues.

more than 25% of the plastics used in new models*2 released worldwide by 2030 to help address the global waste plastic problem.

Environment Action Plan 2030:*1 Including material, chemical and plastic recycling.
*2 Excluding models supplied by OEMs.

This is a group-wide plan with a medium-to-long-term perspective and initiatives that spiral upward to address future expectations.
Other key environmental initiatives:

Global Environment Preservation
Companies are required to contribute to the achievement of a decarbonized society

These granular initiatives are from a short-to-medium-term perspective and are designed to meet current expectations.
The two main features of Environment Action Plan 2030 are milestone goals to achieve by 2050 and moving targets that change

2050

2030

On the well-to-wheel basis, we will pursue our goalof reducing the average CO2 emissions from newpassenger cars by at least 90% by 2050, comparedwith 2010.

By 2030, we will pursue our goal of increasing the ratioof electric vehicles (EV) and hybrid cars to at least 40%of the gross number of vehicles sold globally.
In the early 2030s, all commercial Subaru cars will beequipped with electric powertrain technology.

Subaru will accelerate the development of fundamental technologies for EVs and hybrid cars with support from alliance partners and continue offering
products accentuating Subaru’s distinctions even in the emerging electric age.

Subaru will contribute to building a decarbonized society through our distinctive and technological innovations.

according to the expectations of society.
Through initiatives based on the new environmental plan, Subaru will sincerely address the expectations of current and future
generations and further contribute to the realization of a sustainable society.

Key Initiatives of Environment Action Plan 2030 (FYE March 2022)
Climate Change
Field

Long-Term
VisionEnvironment Action Plan 2030
Subcategory

Primary Category

Bases

Goals by Base	Reduce CO2 emissions from Subaru plants*1
by 30% in FYE March 2031 compared withFYE March 2017 (total volume basis).

	Upgrade cogeneration equipment.
	Switch to LED lighting.
	Expand solar power generation facilities.
	Upgrade equipment.
	Consolidate production lines.
	Improve the energy efficiency of existing
facilities.
	Reduce standby power.
	Purchase carbon-free electricity.

	Reduce CO2 emissions from Group plants
in Japan*2 in FYE March 2031 by 10%
compared with FYE March 2017 (total
volume basis).

	Continue energy-saving activities.
	Share best practices.
	Initiate reduction strategy studies.

Reduce CO2
emissions fromplants overseas.

	Reduce CO2 emissions from overseas Group
plants*3 in FYE March 2031 by 30%
compared with FYE March 2017 (total
volume basis).

	Switch to LED lighting.
	Expand solar power generation facilities.
	Improve the energy efficiency of existing
facilities.
	Initiate additional reduction strategy studies.

Reduce CO2 emissions
from the head officebuilding.*4

	Reduce CO2 emissions to zero.

	Continue energy-saving activities.
	Purchase carbon-free electricity.
	Use Green Heat Certificate and GreenPower Certificate.

	Aggregate information and upgrade
systems to reduce CO2 emissions.

	Continue energy-saving activities.
	Share best practices.
	Initiate reduction strategy studies.

Initiatives for Environmentally Friendly Automobiles“The earth, the sky and nature” are Subaru’s fields of business, and we truly do value the benefits nature provides. The Subaru
Group is committed to increasing the environmental performance of its products and also to protecting the global environment

Reduce CO2
emissions fromplants in Japan.

throughout the life cycle of its products, from the procurement of raw materials through to the manufacturing, transportation, use,and disposal of its products.
PlantsCreating Better Cars Through Subaru’s First Global EV
The SOLTERRA C-segment SUV, jointly developed with Toyota Motor Corporation, will become Subaru’s first electric vehicle
launched globally on its release in mid-2022.
Subaru’s customers, in the U.S. and beyond, expect not only safety performance, but AWD driving stability in poor weather, andScope 1and 2
(Plants
andoffices)Target carbon
neutrality by FYEMarch 2051.

	Reduce CO2 emissions
by 30% in FYE March
2031 compared withFYE March 2017 (total
volume basis).

an enjoyable drive, among others. In developing Subaru’s first EV, Subaru utilized its proprietary driving force distribution, adaptable
to changing road conditions and founded in Subaru’s deep insights in AWD, and its highly responsive motor control to strengthen
its handling stability even further, resulting in enjoyment and peace of mind commensurate with the Subaru Difference. By using thejointly developed e-Subaru Global Platform dedicated to electricvehicles, Subaru created a polished driving experience only foundin its vehicles. The SOLTERRA will launch in the Japanese market,
as well as in the U.S., Canada, Europe, China, and elsewhere.
Going forward, Subaru will continue to strive to create better cars
through the development of EVs combining the enjoyment ofdriving and environmental performance.

48 Integrated Report 2021

Head
OfficeComponents ofPrimary Initiatives

Reduce CO2 emissions
Dealership from dealerships inJapan.

*1 Gunma Plant, Tokyo Office, Utsunomiya Plant*2 Yusoki Kogyo K.K., Fuji Machinery Co., Ltd., Ichitan Co., Ltd., Kiryu Industrial Co., Ltd., Subaru Logistics Co., Ltd.
*3 Subaru of Indiana Automotive, Inc.
*4 Head office floors of the Ebisu Subaru Building (Shibuya-ku, Tokyo)

Integrated Report 2021 49

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Safe, Quality Cars
Achieving a Low Rate of Fatal Traffic Accidents in the U.S. and Japan

Society’s Expectations

Subaru Initiatives

From FYE March 2009 to FYE March 2020, we carried out an investigation on the number of fatal traffic accidents involving Subaru• Improve car safety technology• Provide high-quality products and services• Initiatives to achieve the goal of zero fatal

lower than the average for major selling brands in the U.S. for 12 consecutive years.*2 Domestically in Japan, Subaru vehicles also show a

traffic accidents by 2030
• Improve inspection and maintenance quality• Secure and improve quality

rate of fatal traffic accidents that is lower than the average for domestic auto manufacturers for 12 consecutive years.

vehicles sold in the U.S. and domestically in Japan. In the U.S., Subaru vehicles have maintained a rate of fatal traffic accidents that is*2 These calculations were made independently based on data from the Fatality Analysis Reporting System (FARS) of the U.S. and the Institute for Traffic Accident
Research and Data Analysis (ITARDA) of Japan.

Please visit the Subaru website for details about EyeSight for 2030. (Japanese version only)
https://www.subaru.jp/safety/eyesight/

Approach for Safe Subaru Cars

Facts about fatal traffic accidents in the U.S.

Facts about fatal traffic accidents in Japan(Number of accidents)(Number of accidents)

250

Subaru Group believes that a car is more than just a means of transport, but rather a partner that enriches people’s lives by
understanding and meeting their expectations.
Subaru’s DNA comes from our origin as an aircraft manufacturer, and has a focus on human. We think about what is importantto people who use cars, and develop products with the necessary functions and performance.
“Focus on human. Think about what is important to people who use cars. And create new value with cars.” We believe that thisis what Subaru Difference means.

200
150

and every one of our customers experiences “Enjoyment and Peace of Mind”. In our pursuit of vehicle safety performance from allperspectives, we are honing our unique safety technologies in the four areas of Primary Safety, Active Safety, Preventive Safety, andPassive Safety, plus Connected Safety, based on Subaru’s overall safety philosophy, which focuses on delivering the world’s highest

400

139

122 113

100
50

75
‘10/3

SUBARU72

339 332300

101 9894

104 108 108 105 105

93

200

110

0

Having roots in the aircraft industry, we have, for more than half a century, consistently engaged in automotive manufacturingwith maximum emphasis on safety performance, attaching particular importance to protecting lives in order to ensure that each

500

65

68

‘12/3

52
‘14/3

69

53

‘16/3

100

59

58

58

‘18/3

58
‘20/3

122
‘10/3

SUBARUCalculated by Subaru based on FARS data
Fatal accident numbers per one million vehicles in last five years.
Average of 13 major brands sold in U.S., including Subaru (excluding trucks
and large SUVs)

294

215 221 194 212

0

Average of major brands sold in U.S.

standard of safety and peace of mind for all passengers. In the future, we will further evolve this intelligence and combine advanced

316 295‘12/3

252 241242 228 218

162 169 149 141

‘14/3

‘16/3

198

118 105

‘18/3

‘20/3

Average of Japanese car manufacturers

Calculated by Subaru based on ITARDA data (including severe injuries)
Fatal accident and severe injuries* per one million vehicles in last five years.
Average of 8 Japanese car manufacturers, including Subaru (including lightvehicles but not trucks)*F atal accidents: Incidences where the victim died within 24 hours of the initial event.
Severe injuries: Includes general cases of severe injury.

sensing technologies with the judgment capability of AI, improving safety in all situations.
Our mid-term management vision “STEP” describes our efforts to enhance safety and peace of mind by setting a target ofachieving zero fatal traffic accidents by 2030.*1 As such, we are engaged in the development of vehicles that will enable us toeliminate traffic accident deaths.
*1 Reducing to zero the number of fatal accidents occurring while a driver or passenger in a Subaru vehicle and the number of fatalities among pedestrians, cyclists, andthe like arising from collisions with a Subaru vehicle.

Car Assessments
Subaru undergoes safety performance testing and assessment of public organizations in and out of Japan including JNCAP in
Japan, IIHS*1 in the U.S., Euro NCAP*2 in Europe, and ANCAP*3 in Australia, and has gained the highest rank of assessment in mostof them.

Management System

In FYE March 2021, the new Levorg won the JNCAP Five Star Vehicle Safety Performance 2020 Award, the highest rating in theJapan New Car Assessment Program (JNCAP).

We need to effectively invest resources in the development of strategic technologies and link technology and management morecomprehensively. This will enable us to address new technologies, as symbolized by the electric vehicles that will be key to resolving
environmental issues, autonomous driving and connected car services, which in turn will enable us to deliver appealing products.
Subaru has therefore transitioned to a development system that organically combines value and function from a development
system based on functional units such as vehicle bodies and power units in order to accelerate the development of new*1 IIHS: The Insurance Institute for Highway Safety*2 Euro NCAP: European New Car Assessment Programme, a safety information disclosure program for automobiles in Europe*3 ANCAP: The Australasian New Car Assessment Program, a safety performance assessment program conducted since 1993 by an independent organization createdby Australian and New Zealand transit authorities

FYE2021 Commendations

technologies such as environmentally responsible electric vehicles. We have also created the CTO Office within the Engineering

Assessed Automobiles

Assessment Organization

Assessment

Division as an organization to discuss and decide the future direction of technology development, along with a system toincorporate its outcomes into group-wide strategies including procurement and manufacturing.

Aiming for Zero Fatal Traffic Accidents by 2030

LevorgJNCAP, Japan

2021 models of the Crosstrek Hybrid, Forester, Legacy,
Outback, and Ascent

IIHS, U.S.

driving after avoiding it. Preventive Safety refers to pre-crash breaking, as represented by EyeSight. And Passive Safety involves
damage mitigation to protect the driver and passengers in the event that an accident does occur. By polishing these four safetyareas, we intend to achieve a low rate of fatal traffic accidents in the real world.
Subaru is aiming to achieve zero fatal traffic accidents by 2030 by applying our intelligence technologies in the fields of Primary
Safety, Active Safety, Preventive Safety, and Passive Safety, plus Connected Safety.

50 Integrated Report 2021

2021 TSP+ award*(U.S. models only)

Subaru has four safety areas. Primary Safety involves design that allows for a good field of vision and does not make the driver orpassengers feel tired. Active Safety is controllability that allows a driver to avoid an obstacle that is in front of them, and to continue

JNCAP Best Award 2020JNCAP Five Star Award 20202021 models of the Impreza (sedan and 5-door), Crosstrek, andWRX (all with optional EyeSight and specific headlights)

2021 TSP award*

IIHS, U.S.
(U.S. models only)* In the IIHS’s publication of vehicle safety information, TOP SAFETY PICK (TSP) award is given to vehicles that earned the rating of “Good” in all test results including
the Offset Frontal Test, the Driver-side Small Overlap Front Test, the Passenger-side Small Overlap Front Test, the Side Crash Test, the Rear Impact Test and the
Rollover Test and the rating of “Acceptable” or higher in the Headlight Evaluation, as well as the rating of “Advanced” or higher in the vehicle-to-vehicle andvehicle-to-pedestrian tests. In addition to these ratings, vehicles which have been installed the headlights which earned the rating of “Acceptable” or higher in the
Headlight Evaluation as a standard equipment are awarded the TOP SAFETY PICK+ (TSP+).

Integrated Report 2021 51

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

CSR Procurement

Approach to Quality

Society’s Expectations

Subaru Initiatives

Quality is the foundation of “Enjoyment and Peace of Mind,” Subaru’s core value, and delivering quality is one of our most

• E stablish a supply chain that takes environmental

fundamental responsibilities to our customers. Quality enhancement are the most important theme in mid-term management visionand social issues into consideration• E ffectively use resources and promote recycling• Address social issues such as human rights
and trade• Promoting fair trade• Responsible procurement initiatives• Collaboration with our business partners“STEP,” and we are reviewing all business processes, from product planning and parts procurement by suppliers to production andshipping at our plants, and implementing reforms.
To ensure that we become a company that resonates with and inspires trust in our customers, under the banner of our new
quality policy, all employees are making “quality-first” their slogan as they work hard to provide high-quality products and services
that will impress customers. Subaru has also established quality policies at affiliated companies in Japan and overseas in accordancewith the business content of each company and regional characteristics, and affiliated companies practice quality control based onthese policies.

Our Approach

In FYE March 2021, we established the Quality Assurance Management Office to supervise quality assurance across the entire
Subaru Group, including the Aerospace Company. The roles of this office will include developing and managing the Subaru Group’s
organizational structure and systems required to assure quality, maintaining their effectiveness, and continually improving them
Please see page 83 of SUSTAINABILITY REPORT 2021 for details about our quality policies.

Quality Management System
1. Establish Quality Management System (QMS) based on the Quality Policy and ISO9001 Standard and put it into practice fororderly and effective operations.
2. Aim to improve customer satisfaction by assuring that products will comply with both customer requirements and applicablestatutory and regulatory requirements.
‌3. Strive to continually improve the QMS through operational improvements.

The modern global society faces a variety of environmental
and social issues, including global warming and humanrights violations. In order for companies to tackle issues
like these, they must not only take action within their own
organizations but also press for action in the entire supply
chain, including their business partners.
To contribute to building a sustainable society,
the Subaru Group strives to procure high quality,
environmentally friendly parts, materials, and equipmentthat offer excellent cost performance. To realize this goal,
it is necessary for us to establish relationships with ourbusiness partners based on equality, trust, mutual benefit,
and dedication to continuous improvement.

Fundamental Procurement Policy
Subaru group has been promoting activities for sustainable procurement under
the following basic policy.

1. CSR Procurement
We engage in procurement activities in a way to harmonize people, society andthe environment, and carry out our corporate social responsibility in such ways
as conducting transactions paying due care to observe legal and societal rules
and to protect human rights and the environment.
2. Establish Best Partnership
We establish “WIN-WIN” relationships with suppliers through transactions
based on mutual trust under the doctrine of good faith.
3. Fair and Open Way of Selecting Suppliers
In selecting suppliers, the door is wide-open to all firms, domestic and overseas,
for fair and equitable business to procure goods and services most excellent
from seven perspectives: quality, cost, delivery, technical development,
management, environment and society (QCDDMES).

With its QMS, Subaru works to assure quality in each process from design and development to sales as well as creating a cycle
to create even higher quality products. In addition, Subaru strives to work through this cycle swiftly in order to meet customer needs
without any delay.

Quality Management Cycle
Design and development

Production (mass production)

Distribution and sales

Consideration given to preventing
variability and standardization oftasks from the blueprint creation
stage through to production
processes

Establishment of process management
aimed at preventing quality defects andvariability as well as implementation ofstrict quality inspections and testing

Establishment of quality management
system after shipment from production
plant as well as system for dealerships,
and inspections of dealerships

Collection and analysis of after-sales information and quality improvementsCollection and analysis of information on quality defects and requests received by dealerships
and Subaru Customer Center and prompt implementation of quality improvements

Management System
Subaru has established a quality improvement system with the Quality Assurance Division at the heart of efforts in order to analyze
after-sales quality defects and customer requests to realize higher-quality development and production. Based on customer’s
opinions collected from around the world, Subaru works with the relevant in-house departments and suppliers in identifying quality
issues, investigating their cause, and planning countermeasures.
In January 2021, we established FAST*, a North American quality improvement team where quality assurance and development
units at local affiliated companies in the U.S. work together with service units at dealerships in the U.S. and Canada. By cutting

Management System



Revised in April 2020

At Subaru the Procurement Departments of the Automotive Business and Aerospace Company participate in the Purchasing
Committee, which promotes Subaru’s CSR procurement initiatives.
The action policy of the Purchasing Committee is to facilitate fair procurement practices and encourage CSR at suppliers,
thereby helping to ensure fair trade between Subaru and its business partners and cooperative CSR-based procurement throughout
the supply chain.

Initiatives
SUBARU Supplier CSR Guidelines
To promote Subaru CSR procurement and help our suppliers conduct CSR activities, we created, and in FYEMarch 2012 began application of, the SUBARU Supplier CSR Guidelines. They are based on the CSR Guidelines
for Suppliers of the Japan Automobile Manufacturers Association, Inc. (JAMA), and incorporate our CSR policy.
In FYE March 2014, these guidelines were made company-wide, including all suppliers of the Aerospace
Company, and in FYE March 2016, Subaru revised the content to incorporate the non-use of raw materials
that engender social problems, such as conflict minerals.* In the same year in FYE March 2016, Subaru revised
the guidelines in the form of a joint edition with Subaru of Indiana Automotive, Inc. (SIA), our local production
plant in the U.S., confirming the integration of the procurement policy. We incorporated the SUBARU Global
Sustainability Policy that was enacted in April 2020 as well as our Human Rights Policy.
At Subaru, compliance to these Guidelines is one of the criteria of our supplier selection. Subaru asks not
only our suppliers but also their suppliers as well to develop and promote CSR.

SUBARU Supplier CSR
Guidelines* Conflict minerals: Minerals for which there is concern regarding participation in unjust acts, such as support for non-governmental armed groups, human rights
violations, or illegal acts. In Dodd-Frank Act of the U.S., tin, tantalum, tungsten, and gold are specified as minerals for which there is concern that they may be a sourceof funding for armed groups in the Democratic Republic of the Congo and surrounding countries.

across divisional borders and strengthening collaboration, we have been able to more rapidly and accurately obtain market
information, launching activities to use these in resolving issues.

Please visit the Subaru website for details about SUBARU Supplier CSR Guidelines.

* Fast Action & Solution Teamhttps://www.subaru.co.jp/en/csr/pdf/sup2.pdf

52 Integrated Report 2021

Integrated Report 2021 53

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Human Resources
Business Partner CSR Briefing and CSR Survey
At the Business Partner CSR Briefing, we present corporate policies such as our SUBARU Supplier CSR Guidelines in keeping with
OECD Due Diligence Guidance for Responsible Business Conduct. In our annual Business Partner CSR Survey, we assess negative
impact on our business partners and work with them to correct any issues discovered.
In FYE March 2021, we took the following actions with a scope of approximately 550 automobile-related business partnercompanies (including approximately 360 in parts and raw materials, and approximately 190 in equipment and jig tools).
Responsible Mineral Procurement
The Subaru Group has no intention of colluding in the infringement of human rights and environmental destruction by procuring
and using conflict minerals. In FYE March 2021, upon request from our customers, Subaru continued to conduct a conflict mineralsurvey targeting about 210 suppliers of parts and materials.
In this survey, we referenced the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from ConflictAffected and High-Risk Areas, using the Conflict Minerals Reporting Template (CMRT), a questionnaire provided by the Responsible
Minerals Initiative (RMI). We used this to trace through the supply chain and identify smelters, checking whether or not we arecolluding in the infringement of human rights or contributing to sources of funding for armed groups.
In FYE March 2022, we will expand the scope of our conflict mineral survey to all suppliers of automotive components and raw materials.
We will also work to roll out surveys regarding minerals other than conflict minerals (tin, tantalum, tungsten and gold) such as cobalt.
Going forward, Subaru’s policy is to work toward “No use of materials engendering social problems” in partnership with ourcustomers and suppliers as our social responsibility in procurement activities.
Green Procurement Guidelines
The Subaru environmental policies state that “Our purchasing activities reflect consideration for biodiversity and other aspectsof environmental protection.” We promote the procurement
Requirements for Suppliersof parts, materials, and services from business partners who
Requirements concerning Suppliers’ Environmental Management
implement business activities that consider the environment.
1. Compliance with environmental laws and regulations
2. Establishment of Environmental Management System (EMS)
In addition, Subaru has expressed in the “SUBARU Green
3. Submission of Environment Manager registration forms
Procurement Guidelines” its expectations for business partners
4. Improved environmental performance
regarding environmental initiatives. The guidelines primarily
Requirements for Activities Considering the Entire Lifecycle
5. Reduction of greenhouse gases
request cooperation in the ten areas presented on the right.
6. Utilization of recycled resource materials
Compliance to these guidelines is considered a necessary
7. Appropriate management of water resources
criterion for selecting business partners, and we recommend new
8. Addressing biodiversity
business partners to formulate an environmental management
Requirements for Parts, Materials, and Services Supplied to Subaru
9. Management of substances of concern
system with the acquisition of ISO14001*1 third-party certification
10. Reduction of CO2 emissions and packaging and wrappingat its base. Currently, all of our Tier 1*2 business partners havematerials in logistics
already acquired ISO14001 certification. In case our new business
partners have difficulty acquiring ISO14001, we review their compliance status by having them submit voluntary assessment reports
based on our environmental management system, while supporting them with the acquisition of Eco Action 21.*3
To those business partners who have passed our voluntary examination, Subaru makes inquiries or performs audits as necessary
and requests them to continue efforts toward early acquisition of third-party certification for environmental management.
*1 International standard for environmental management systems (EMS) established by the International Organization for Standardization (ISO). It is a management
system standard to certify that an organization considers the environment and has built a system for continuously reducing environmental impact.
*2 Companies that directly supply parts to car manufacturers. They are primary business partners. Tier 2 business partners are companies that supply Tier 1 with thoseparts that make up the Tier 1 company parts.
*3 E
 nvironmental conservation activity promotion program for small- and medium-size enterprises formulated by the Ministry of the Environment, Japan. It is an environmental
management system that addresses three areas: environmental management systems, environmental efforts, and environmental reporting, based on the guidelines.

Society’s Expectations

Subaru Initiatives• Promote diversity• Reform work styles• Enhance employee engagement• Address human rights issues• Mid-term Management Vision “STEP”:

Six Priority Areas for CSR• Promote active roles for female employees• Utilize diverse human resources and promote
diverse work styles• Implement health management• Protect the human rights of workers

Our Approach to Human Resource Development
The people of the Subaru Group are a core resource for achieving our ideal of being a company “delivering happiness to all.”Corporate culture reform is therefore a priority of our mid-term management vision “STEP.” We encourage all employees toindependently develop their own careers and take on challenges under their own initiative to create a culture that is open andrewarding. We will accelerate our initiatives by introducing a new personnel system in FYE March 2022. Focusing on individual
growth, we develop our people by offering more opportunities for them to independently develop their own careers, opportunities
to learn, and job rotation through a system of open recruiting. This enhances our competitiveness as a company and the appeal of
the SUBARU brand, which contributes to sustainable growth in the Group’s corporate value.

Training and Education
Our Approach
In order to achieve its mid-term management vision “STEP,” Subaru focuses on the growth of the individual, utilizing the talentdevelopment tools of challenge-oriented personnel systems, personnel rotation, and educational programs.
In addition, Subaru’s affiliated companies in Japan and overseas promote initiatives in accordance with the business domain ofeach company and regional characteristics.
Regular Reviews and Career Development
Through the operation of the personnel system, each employee’s job outcomes and performance levels for skills are objectively
evaluated. In addition, under the goal management system, all Subaru employees have an interview four times a year (for goal
setting, interim confirmation, outcome confirmation, and evaluation sharing) and the supervisors and subordinates agree on thechallenges necessary for growth.
Both men and women are treated appropriately and there is no gender gap in the basic salary.
Training Programs

Please visit the Subaru website for details about SUBARU Green Procurement Guidelines*4.

Subaru offers a wide range of learning opportunities so that all employees can develop their skills in accordance with their career

https://www.subaru.co.jp/en/csr/pdf/gre2.pdf

plans and levels. In order to support employee career development, we are introducing new programs in FYE March 2022,

Please visit the Subaru website for details about Green Procurement Guidelines Aerospace Company Edition*4.
https://www.subaru.co.jp/en/csr/pdf/gre4.pdf

establishing a system and environment so that we, as a company, support the growth of the individual.

Structure of Training Programs
Sharing
Philosophy**4 The Subaru Green Procurement Guidelines and the Green Procurement Guidelines Aerospace Company Edition are concrete forms of the item “(3) Environment” in the
SUBARU Supplier CSR Guidelines.

Communication with Suppliers
In our Automotive Business Unit, we had been hosting Policy Briefings every spring to share policies on development, quality,
procurement, and production with our business partners. The Policy Briefing to be held in the spring of FYE March 2021 was
postponed due to the spread of COVID-19; in early autumn, when the situation had stabilized, this was integrated with and held
alongside the Cooperation Meeting and business partner award events with thorough infection control measures in place. Goingforward, we will bring new forms of information exchange in collaboration with the Cooperation Meeting, reconstructing forms ofcommunication with our business partners with the premise of adapting to such environmental changes.
The Aerospace Company held the Subaru Status Report Meeting with business partners in November 2020 followed by the 77
Business Partner and Company President Web Dialogue in January 2021.

54 Integrated Report 2021

Manager Class

Mid-level/
Regular Employee

New hires

Philosophy
sharing program

Career Training*
Business Skill
Globally Focused Managerial Talent
Career Support* Development Support* Talent Development
Development

Careermanagement
training
Age-specificcareer training

Business skill
development
support programs

Mindset/Communication/
Language skills

Programs forselected staff

Rank-specific
Programs

Self-development
SupportTraining at each
Newly appointed
business site/
personnel
Ofﬁcial certiﬁcation
training
supportNew employee training (after starting ofﬁcial employment)
New employee training (before starting ofﬁcial employment)* New

Integrated Report 2021 55

Value Creation Story

Philosophy Sharing ProgramThis program helps individual employees gain a deeper understanding of Subaru’s vision and the value it offers, helping themCommentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Japanese workers” as priority themes. Among them, Subaru has placed particular emphasis on efforts to support and empower
female employees.

share a sense of togetherness with Subaru through mutual dialogue between employees. It is designed to enable employees toindependently be mindful of and act toward achievement of Subaru’s vision.

Initiatives
Empowerment of Female Employees

Career Training and Career Support

Subaru is promoting initiatives for the empowerment of female employees, mainly by supporting employees in their efforts toCareer training is offered to employees as an opportunity for them to come face-to-face with their potential career paths sobalance work and childcare and in their pursuit of career development. Subaru set itself the target of increasing the number ofthat they can develop their own careers independently. We also offer career management training and career consultations forfemale managers by five times the 2014 level in 2020, and achieved thismanagers so that employees’ workplaces and superiors can support their career development.

goal in 2019, a year ahead of schedule. Subaru is further strengthening its

Status of Female Employees(Non-consolidated)efforts aimed at developing female managers by setting a new target toBusiness Skill Development Support Programs
All employees, from managers to general staff, are offered a choice of various business skills development support programs inaccordance with their level and goals. In skills development, we encourage employee independence and their voluntary selectionFYE March 2021

increase the number of female managers to 2 times or more the 2021 level

Proportion of female employees

7.2%

Proportion of female managers

1.9%

General managers and(Breakdown)equivalent positions

1.3%

Managers andequivalent positions

2.1%

by 2025.
To support career development, Subaru has conducted a wide rangeof programs in accordance with their career plans and their own strengths and weaknesses. In addition, by actively utilizing publicof initiatives, including the mentor system and the career development

courses held at external institutions, employees gain more contact points outside the company and gain new awareness, providing

training for female team leaders. We believe that sharing development

opportunities to learn more about the outside.

plans with supervisors of female employees is indispensable for the careerdevelopment of female employees, and we provide opportunities for the supervisors to discuss such plans with human resources
Globally Focused Talent Development

personnel. Recently in FYE March 2020, sessions to share development plans were held for general managers in all development-

In addition to improving language skills, we encourage employees to develop a wide range of capabilities with the goal of acquiring

related departments, where the participants confirmed the promotion of a training-based development policy. In FYE March 2021,

cross-cultural collaboration and leadership skills with a view to playing an active role on the global stage.

we introduced a new career vision training program for female employees in their 20s to foster career awareness among women at
an early stage of their careers. Going forward, we will continue to further strengthen our efforts to create a workplace environment

Managerial Talent Developmentin which they can plan their own career paths and make a meaningful contribution on a level playing field.

Subaru offers training for selected mid-level and manager class employees with the aim of continually fostering the next generationof managerial talent.

Employment of People with Disabilities
Subaru strives to create workplace environments in which people with disabilities can truly shine. To achieve this goal, Subaru

Initiatives to Transfer Skills
The purpose of transferring skills at Subaru is to create talent who have comprehensive abilities to adapt to change, standardize
and sustain that standardization, and envision continuous improvement, and who can create high-quality products with safety andefficiency.
At the Gunma Plant, we are systematically cultivating technicians based on a program of skills education. In April 2021, we
introduced a new basic training program that condenses the vocational training school and STS education* programs previously

leverages the ideas and opinions of our employees with disabilities and their family members.
As of April 2021, Subaru has 306 employees with disabilities, mainly engaged in manufacturing work, and the percentage of
employees with disabilities is 2.36%.*1
In FYE March 2021, we also held training programs for supervisors in departments where people with disabilities are employed,
and for personnel in charge of hiring people with disabilities at our affiliates in Japan. These programs helped instill a better
understanding of the importance of hiring people with disabilities and their particular characteristics, as well as key points on labor

available to employees. 294 employees attended courses in this program.

management and other information.

* At Subaru Technical School, employees engage in specialized practical training and courses according to their occupation.

*1 Including the number of employees with disabilities at Subaru’s specified subsidiary company.

National Skills Competition

Employment of People with Disabilities

The National Skills Competition is designed to cultivate talent with advanced technical skills and who can lead in the workplace.

April 2017

April 2018

April 2019

April 2020

April 2021

Number of employees with disabilities (person)*

261

269

280

291

306

Employment rate of people with disabilities (%)

2.17

2.28

2.30

2.30

2.36

Each year, Subaru employees compete to be the best in Japan in three categories—lathes, plastic molding, and automobile
sheet metal. For about three years from when they join the company, competitors strive to hone their skills, concentration, andendurance in daily training so that they can do their best at this national competition.

Diversity*A ccording to the method of calculation specified in Act on Employment Promotion etc. of Persons with Disabilities, one person with severe disabilities is counted as two
persons with disabilities.

Reemployment of Retirees
Our Approach

Subaru has implemented its Subaru Business Staff Program and Subaru Partner Program after revising its re-employment programs

For the Subaru Group to continue offering customers the unique value of the Subaru brand, Subaru employees need to be able

for employees after retiring at the mandatory age of 60. This revision and these programs are designed to not only help energize

to exert their unique talents informed by their own personal values and characteristics. This is why Subaru values the differences in

employees and senior citizens with valuable skills, but to also be tailored to individuals with a variety of capabilities and support

gender, nationality, culture, and lifestyle among its employees and strives to create workplace environments where everyone cantheir active participation. We operate our programs so that all those who want to be reemployed can work for Subaru and othermake a meaningful contribution.

Group companies.

In addition, Subaru’s affiliated companies in Japan and overseas promote initiatives in accordance with the business domain of

The number of rehired employees (aged 60 or older) in FYE March 2021 was 447.

each company and regional characteristics.
Employment of Non-Japanese Employees
Management System
The Diversity Promotion Office of Subaru’s Human Resources Department leads the efforts of the Subaru Group in relation to

Subaru employs non-Japanese new graduates and mid-career workers as regular and temporary employees regardless of their nationality.
In order to help non-Japanese employees to deepen their understanding of their work, we prepare our safety and quality policy-

diversity. The office has designated “supporting female employees to take on more active roles,” “promoting the employment ofrelated documents, work manuals, and other documents in multiple languages. At the Gunma Plant, where we employ a particularly

people with disabilities,” “promoting the reemployment of post-retirement age workers,” and “promoting the recruitment of non-large number of non-Japanese employees, we have stationed interpreters in English, Portuguese, Tagalog, Spanish, Chinese and

56 Integrated Report 2021

Integrated Report 2021 57

Value Creation Storyother languages at each of the facilities to foster communication between Japanese and non-Japanese employees.

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

∙ Childcare leave system

Moreover, we provide Japanese employees with opportunities to receive language training and engage in overseas training,
thereby helping them to enhance their ability to communicate with people from other countries and understand cultural differences.
These initiatives contribute to revitalizing the company and securing human resources in a stable manner.

Subaru’s employees can extend the period of childcare leave to the end of the first April after the child becomes two years old.

Number of Employees who Took Childcare Leave (Non-consolidated)
2018

2019

2020

2021

Male

8

10

21

42

65

Female

88

88

80

80

93

Total

96

98

101

122

158

Male

100

100

100

100

100

Female

100

100

97.5

95

100

Male
Rate of employees who
remained at the company one
year after returning to work (%) Female

87.5

83.3

100

85

97

100

97.2

90

95

93

Training Program and also implement other measures to develop them into human resources who can utilize their abilities for theirown countries after returning home.
Number of employees who
took leave

Our overseas subsidiaries and affiliated companies independently employ human resources and work to secure humanresources in line with their own policies and business details.

System for employees to take leave
for childcare

Work-Life Balance

Rate of employees who
returned to work (%)

Our Approach
As a precondition to making our customers happy, the Subaru Group believes it is vital to provide employees with workplaces
where they can work with vigor and peace of mind and demonstrate their abilities to the fullest. In order to help diverse employees
to maintain their work-life balance, we are diversifying work style options and expanding the relevant systems.
Moreover, our affiliated companies in Japan and overseas are fostering initiatives suitable for local business conditions and(FYE March)2017

As for foreign trainee workers, we basically provide them with education on safety and quality under the Technical Internregional characteristics.
Employee Attitudes Survey

Initiatives
Work Style Reforms

Subaru conducts the Employee Attitudes Survey with aneye to increasing employees’ motivation and revitalizing theSubaru’s response to the Act on the Arrangement of Related Acts to Promote Work Style Reform*
Item
Accurate calculation of employees’
working hours
Encouraging employees to take at least
five paid days off per year

organization. The survey results are reported to the management

Results of the Employee Attitudes Survey
Rate of respondents who gave positive answers (%)
to the questions(FYE March)
Question

2020

2021

Communication and openness

56

59

Work-life balance

5964

Sympathy with the corporate philosophy

70

73

Work satisfaction

56

58

Pride in the company

63

67

team and are also utilized to identify problems and formulate the

Details
In July 2018, introduced a company-wide attendance management system for the central management of all electromagnetic
records (computer logs and clock-in and clock-out records) for the accurate calculation of employees’ working hours.
In FYE March 2020, began implementing measures for all employees, including an initiative to encourage employees
who are newly entitled to take 10 or more paid days off to take at least five days off within seven months after theentitlement. Also established operational rules to ensure that all employees can take at least five paid days off per year.
Has been limiting the number of overtime work hours to 590 hours and below annually and to 79 hours andbelow monthly, setting the criteria stricter than those stipulated by law.

Imposing an upper limit on overtime
working hours
Raising the premium pay rate for overtime
Has been implementing necessary measures since FYE March 2011.
work exceeding 60 hours per month
Equal pay for equal work
Began reviewing the amount of allowances granted to non-regular employees in FYE March 2021.
Work-from-home system

Conducted a test implementation starting in FYE March 2021, with full rollout to all sites beginning in FYE March 2022.

Abolishing mandatory core hours in theflex-time system

Full rollout to all sites beginning in FYE March 2022.

countermeasures at each of our workplaces.
In the FYE March 2021 survey, 15,853 employees or about
93% of the total number of regular employees replied to thequestionnaire, and 67% of the respondents answered, “Feelingproud of being a Subaru employee.”

Labor-Management Communication* This law was enacted in June 2018 to revise the labor-related laws to foster work style reforms

Our Approach
Support for the Maintenance of Balance between Work and Elderly CareAt Subaru, we believe that for employees to continue working with peace of mind, it is important to help mitigate the concerns
and burdens of employees and their families concerning the care of the elderly family members. Based on this belief, Subaru has
distributed the copies of the Elderly Care Support Handbook to all employees of Subaru to inform them of the related systems
available internally and externally and of the contacts through which they can ask for advice. We have also established a specificrecognizes that the company has the right to manage the business, and the two parties respect the legitimate use of their mutual
rights.
Specifically, participants exchange opinions regarding the management policies, outline of the business results, and production andNumber of employees who took long-term care leave (Non-consolidated)
Number of employees who tooklong-term care leave (persons)acknowledges that the union has the right to unite and engage in collective bargaining and other collective actions, while the union

The Labor and Management Council regularly holds meetings for smooth corporate management and mutual communication.

long-term care support system to help reduce the burdens imposed on employees.

System for employees to take leave to take care of
the family member in need of long-term care

Subaru and its labor union have been on good terms with each other based on mutual understanding and trust. The company(FYE March)

2017

2018

2019

2020

2021

4

5

9

30

3

sales, and also discuss issues such as labor conditions, challenges concerning work styles, and the occupational health and safety
policies. In the labor-management negotiations on the revision of wages (salaries and bonuses) and other labor conditions, the twoparties work to reach an agreement for revision or the establishment of new rules. For issues that might have a significant impact on
employees, the parties discuss them fully before informing employees of the results.

Support for the Maintenance of Balance between Work and Childcare
It is also important to provide employees with an environment that allows them to continue developing their

Number of Employees Belonging to the Labor Union (as of October 1, 2020)

careers while raising their children. Accordingly, we formulated a voluntary action plan in line with the Act on

The following shows the data for FYE March 2021.

Advancement of Measures to Support Raising Next-Generation Children.* At present, Subaru has received• Members of the Subaru Labor Union: 15,610 persons

three stars in the “Kurumin” certification from the Japanese Minister of Health, Labour and Welfare, and istaking action based on our 7th Action Plan.

(Total number of employees: 16,853 persons, excluding managers)“Kurumin” mark* This law was enacted for the provision of an environment where people can have and raise children, who are the next generation of leaders, in a sound manner.

58 Integrated Report 2021

• Confederation of Subaru Affiliated Labor Unions Number of members: 28,056 persons

Integrated Report 2021 59

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Health and Safety

Occupational Health and Safety

Health Management

Our Approach

Our Approach

Subaru regards occupational health and safety as a critical management issue, and our Health and Safety Philosophy is “Subaru

Subaru is fostering health management measures along withmakes health and safety the first priority in all our work.” Further, in addition to our Basic Health and Safety Policy, each of theoccupational health and safety activities so that all employees

Subaru Group companies in Japan and overseas establishes their own occupational health and safety policies in line with theircan work healthily, soundly and vigorously, take on challenges

business details, regional characteristics, and local laws and regulations, and implements initiatives based on the policies.

and achieve growth. Subaru takes these actions in the belief
that the health of employees and their families is essential

Management System

for all its business operations. Subaru works with the relevant

Subaru established the Central Health and Safety Committee, which is composed of members from management (executive officer inunits within the Human Resources Department to support the

charge of health and safety and the manager in charge of onsite health and safety) and from the labor union, with a view to protecting

physical and mental health of its employees as well as to build

employees (including non-regular employees) and our affiliates from industrial accidents and illness and improving the working

a healthy organization and promote flexible working styles,

environment. The committee, which meets for deliberations three times a year, is chaired by an executive officer, and its vice-chairperson

and more. By doing this, it creates the underpinnings of ais elected from the Company’s labor union’s membership. Its deliberations primarily include occupational safety, occupational health,more comfortable working environment necessary for greater

traffic safety, and fire and disaster prevention.

employee engagement.

As for affiliated companies under the control of the

Health and Safety Organization Chart

Site Health and Safety Committee, we provide them withoccupational health and safety activities.

Minoru Yamagishi
Executive Chairman, Subaru Labor Union
Tatsuro Kobayashi
President, Subaru Health Insurance Association

PurposeEstablished October 2020

In pursuit of becoming a company “delivering happiness to all” and based on our Global Sustainability Policy of “striving to

Executive Management
Board Meeting

Established April 2002

Tomomi Nakamura
Representative Director of the Board,
President and CEO, Subaru Corporation

Subaru Health Declaration

Representative Director
and President

related information, as necessary for the promotion of their

Basic Health and Safety Policy
With the aim of reducing industrial accidents, traffic accidents,
diseases, and fires and other disasters to zero, every individual
will strive to create a safe, comfortable workplace throughefforts to improve facilities, environments, and work methods,
and to enhance management and awareness, based on ashared recognition of the importance of health and safety.
Central Health and Safety Committee

Health Declaration
To build happiness for our employees and their families,
we need a foundation of mental and physical health.
Subaru works with its employees to promote healthand preventive care, taking on the challenge of building
workplaces full of smiles and enabling growth.

maintain and advance the workplace environment so that employees can work safely in peace, and with a sense of satisfaction,”
Subaru Corporation, the Subaru Labor Union, and the Subaru Health Insurance Association jointly released the Health Declaration

Central Health and
Safety Committeein October 2020 with the intent that the three parties work in unison toward health.

Cross-Company Healthand Safety Committee

Management System
Subaru considers health promotion activities to be a management issue, and as of FYE March 2021, Subaru has discussed

Head Office
Tokyo OfficeGunma Plant
Aerospace Company
Health and Safety Health and Safety Health and Safety Health and Safety
Committee
Committee
Committee
Committee

and operated a PDCA cycle regarding its health management issues and measures at the Executive Meeting. Subaru has alsoestablished the Health Steering Committee to serve as a promotion framework, advancing collaborative health with partnershipfrom Subaru, its labor union, and its health association. On the operational side, the Health Promotion Group has served as a

Initiatives

core driver of our company-wide, unified health promotion measures since 2021. This dedicated organization within the HumanAt the start of every fiscal year, each of our sites holds the Health and Safety Kickoff Meeting, where the head of the site

Resources Department coordinates weekly regular meetings with stakeholders such as health promotion managers at our sites,

communicates the health and safety policies for the fiscal year to workplace leaders so that all employees can share the health andindustrial physicians, and other staff in charge of industrial health.

safety activity targets and plans as a unified team and raise their awareness about the prevention of industrial accidents, road safety
and health management.

Initiatives
Subaru is engaged in activities to visualize and improve health issues, divided into the two categories of physical health and mental

Industrial Accidents

health.

As for industrial accidents and close calls that happened at our sites and affiliated companies, we comply with the following rule forthe prevention of similar incidents at the sites: the department that has faced the incident shall disclose related information to otherdepartments on the premises and affiliated companies via the department in charge of health and safety at the site.

Physical Health
By encouraging employees to undergo regular health checkups, we are striving to promote early detection of lifestyle-related

For FYE March 2021, we had 37 industrial accidents, of which four were lost time accidents and none were fatal accidents. The

diseases among employees and help those suffering from the diseases to recover. We also collect data about employees with some

accident frequency rate was 1.11. These figures were significantly greater than those from FYE March 2020, and given this, we aresigns of these diseases, including numerical data, to help them improve their lifestyles and prevent the outset of the diseases.

taking action toward stronger daily prevention. Our policy here is to use analyses of accidents per site to enforce more rigorous rule
compliance to standardized work across the Group, have workers wear appropriate protective gear, ensure appropriate signaling

Mental Health (Prevention of Mental Illness)and callouts, and other “rigorous compliance to basic matters (back to basics).”

We are implementing “self-care ” and “line care” measures for the prevention and early detection of mental illness among

Reporting Line for Industrial Accidents

employees. We have also set up a consultation service so that employees can receive follow-ups from industrial health staff.

Occurrence of Work-Related Accidents and Accident
Frequency Rate (Non-consolidated)

Occurrence ofan accident(Numbers)

Department in charge of health andsafety at the site
Departmentson the premises

Affiliated (partner) companies
Site/Central Health and Safety(according to the internal reporting criteria)
Committee members
Departments on thepremises

60 Integrated Report 2021

(Rate of lost-worktime injuries)

40

First report of the accident(to be made by the department suffering it)

Affiliated (partner) companies(according to the internal reporting criteria)

1.11

30
20

For employees who took leave due to mental illness, we proactively support them when they return to their workplaces.

0.58

10

14

0

4
4
‘17/3
Lost time

0.37
6
7
1
‘18/3

Not lost time I

‘19/3

21

0.60

0.65
21

19

2
2

2
3
‘20/3

Not lost time II

1.2
0.8

Subaru has been recognized as a Certified Health & Productivity Management Outstanding
Organization for 2021 (large enterprise category) by the Ministry of Economy, Trade andIndustry and the Nippon Kenko Kaigi (Japan Health Council).

0.4

Going forward, we will continue to accelerate a variety of health promotion activities withthe purpose of improving the health of our employees—the people who bring happiness to

12
4
‘21/3

Certified as a Health & Productivity Management Outstanding Organization for 2021

0

our customers—and their families.

2021 Certified Health & Productivity
Management Outstanding Organization(large enterprise category)

Rate of lost-worktime injuries

Integrated Report 2021 61

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Compliance
Breakdown of Compliance Hotline Consultations and Trend Over Time

Our Approach
At Subaru, compliance is positioned as one of our most important management issues in our Corporate Governance Guidelines. We(FYE March)

2017

2018

2019

2020

2021

Workplace environment

2

10

13

14

7

Labor related

14

49

78

68

65

Interpersonal relationships, harassment

26

58

75

84

107

executed in manner that is fair and just and in conformance with general social ethics, common sense and standards, and that these

Other compliance-related issues (Work violations, suspicion of wrongdoing, etc.)

18

46

33

50

57

principles should be reflected in their actions, create and operate a compliance system/organization, and carry out activities such as

Total

60

163

199

216

236

instill in each employee a strong awareness that thorough group-wide compliance forms the foundation of Subaru’s management,that we must observe all laws and internal regulations relevant to our business activities, that our corporate activities must be

providing all kinds of training for these purposes.

Management System

Training

Subaru has established the Risk Management and Compliance Committee, a company-wide organization designed to promotecompliance. This committee deliberates, discusses, decides, and exchanges information on important matters related to risk

In enforcing thorough compliance, we believe that initiatives in which the entire Subaru Group acts in concert are necessary. We

management. Also, each department formulates their own implementation plan (compliance program) to promote complianceconduct compliance training, training for legal affairs in practical business, and other programs for all Group employees organized

every fiscal year, and moves forward with continuous, systematic independent activities.

by our Legal Department, Risk Management and Compliance Office, and human resource and education departments.

In FYE March 2021, the Chief Risk Management Officer (CRMO), Director, and Executive Vice President served as chair of thiscommittee, with the Risk Management and Compliance Office serving as its secretariat. Under the chair’s direction, the committee
executed global and group-wide compliance initiatives, with these activities regularly reported to the Board of Directors.

Also, each department and affiliated company creates their own unique education plan based on their compliance program,supplemented with study groups on important laws related to their work and compliance enlightenment training.
In FYE March 2021, Subaru explored and promoted the introduction of new training content and methods, such as moving toonline-based compliance training, in light of work environment changes due to COVID-19. In FYE March 2022, it will continue toCompliance System

AuditorCEO

Establish
Internal audit
results report

Report extremely important,highly urgent compliance issues

Board ofDirectors

Report important matters(e.g., deliberations/decisions)strive toward building more effective training content and methods.

Bribery Prevention

Risk Management and Compliance Committee
Risk Management and Compliance Committee Chair (CRMO)

Subaru considers the prevention of bribery related to its businesses to be an important issue, and has established the Company-

Risk Management and Compliance Committee members
Administrative work

Audit
Department/Internal Audit

wide Bribery Prevention rules, as well as rolled out the Bribery Prevention Guidelines (Japanese and English) to the entire Subaru

Report important matters

Group. The guidelines clarify the conduct required of employees and executives by explaining prohibited and non-prohibited acts

Secretariat
Risk Management and Compliance Ofﬁce

particularly when coming in contact with government workers. In China, taking into consideration unique social conditions, we(Risk Management and Compliance Oversight Department)
Discussion/cooperation

Discussion/reporting concerning scandals
Report compliance situation

created the Bribery Prevention Guidelines (with a Chinese translation included). It is distributed throughout our Chinese subsidiaries
and forms the official rules of the relevant companies.
Under the monitoring system for bribery prevention, Subaru collects information to ascertain the presence of cases that may

Chief Risk Management Ofﬁcer

constitute compliance violations through company-wide compliance activities, its whistleblowing system, and other channels. It also
Meeting of persons in charge of risk management
Persons in charge of risk management
Conduct internal audit

Discussion/cooperation

Each division, department, and in-house company

strives to use actions like internal audit departments’ business audits to detect cases early. Furthermore, Subaru has established asystem to report high-risk cases to the Risk Management and Compliance Committee and the Board of Directors, in an effort tostrengthen oversight.

Afﬁliated companies

Tax Policy
Compliance Hotline
When regular and temporary employees of the Subaru Group detect a problem related to compliance in the group, they canconsult with the Hotline Desk by using the Compliance Hotline.
There were 236 consultations in FYE March 2021, the details of which are outlined in table to the right. Through initiatives toraise awareness of this system, Subaru has worked to foster mindsets for its proactive use and to improve awareness of compliance.
This has led to more openness to consulting even about trivial matters, and more transparency about the system’s operation,
leading to an increase in the number of consultations.

62 Integrated Report 2021

The Subaru Group is able to conduct its business operations thanks to support from society, and it strongly recognizes theimportance of returning profits to society. The Subaru Group considers fulfilling its tax obligations to be an essential element of this.
The Subaru Group strives to ensure compliance with the tax laws and regulations of each country and jurisdiction, pursuant
to the international rules and standards set out by international organizations, thereby fulfilling its societal obligations throughappropriate tax payment, while aiming for sustainable growth through sound business activities.
Please refer to our website for details about Corporate Governance Guidelines.
https://www.subaru.co.jp/en/outline/governance.html

Integrated Report 2021 63

Value Creation Story

Information Security

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate DataIntellectual Property Protection Initiatives

Our Approach

Our Approach

The use of digital data is essential for Subaru in the course of its business activities. The use of digital data is not limited to

Subaru, after identifying its strengths and weaknesses, has put together a vision for Subaru’s intellectual property activities with aims

traditional information systems but covers diverse realms, including facilities, products, and a whole range of services offered byto achieve the brand management outlined in its mid-term management vision “STEP.” Following is the three-point basic policy

Subaru. Being aware of our social responsibility to handle

being carried out.

digital data in these realms safely, we have established the

Scope of Information Security for the Subaru Group

Basic Cybersecurity Policy, undertaking information security
protection activities group-wide.

Business Partners

Social Infrastructure

Supports WP29
cybersecurity

Products

Cloud Services
Connected car

Please see page 147 of SUSTAINABILITY REPORT 2021
for details about our basic policies for cybersecurity.

Full-scaleutilization

IT Infrastructure/Apps

MaaS
Remote WorkGroup Companies

Basic Intellectual Property Policy
1. Function as a compass for business and R&D strategies using the IP landscape*2. Throughout Subaru, Subaru will dedicate ourselves to creating intellectual properties that originate from the market andappropriately manage its intellectual property portfolio to protect and enhance its brandLifestyle IoT

3. Subaru will respect the intellectual property rights of others and work thoroughly for patent clearance in product development* In combination with market information on intellectual properties, analyzes the business environment and support strategic plans

In addition, to aid in minimizing intellectual property risk through business activities that respect the Group’s intellectual
property, protecting, expanding and securing an advantage in business, and protecting the Subaru brand and maximizing its value,
we have established the Subaru Group Intellectual Property Policy to set guidelines for the following activities.

Initiatives

1. Business activities that respect intellectual property
2. Management and effective utilization of intellectual property

In FYE March 2021, Subaru conducted e-learning and video training programs based on cybersecurity management system

3. Handling lawsuits

documents drafted in the previous fiscal year in the three domains of In-Car (interior systems), Out-Car (exterior systems) and4. The Subaru corporate brand logo

information systems.
Objective: Promote understanding of cybersecurity and mitigate practical security risks
Program Details: Education on internal rules requiring compliance in each of three domains

Management System

Course Participants: F
 or In-Car system developers: Approx. 700
For general employees related to information systems: Approx. 3,100
Subaru also conducted targeted attack email drills and security incident scenario training for incident response teams.

Seniorexecutive
management
Intellectual Property
Strategy CommitteeIntellectual property
strategy agreement

Internal audits based on this management system are now regularly carried out and will continue to be in the future.

Patent Promotion Committee(Research, development, manufacturing)

Personal Information Protection Initiatives

Inventionunearthing,application
submission,and rights
acquisition

Negotiation andcontract support

Intellectual Property
Department
Dealing withpatents held byothersPlanning andadministration

Subaru, in conjunction with the enactment of the Act on the Protection of Personal Information, undertook various initiatives,
including establishing internal systems and rules, and publicly disclosing its privacy policy. Moreover, Group companies in Japanand overseas have begun to build a management system to properly use personal information.
In FYE March 2021, Subaru implemented the following key initiatives in response to the Act on the Protection of Personal Information.
• Training for all departmental and office managers concerning the Act on the Protection of Personal Information (138
employees took part via e-learning)• Identification of management issues by taking stock of personal information held by all departments• Confirmation of a check sheet on the status of compliance with related internal rules at all departments and theimplementation of a continuous PDCA cycle• Revision of relevant internal rules with the aim of improving company-wide governance• Formulation of privacy policy for telematics services for the Japanese market• Cookie policy revisions based on the 2020 revisions of the Act on the Protection of Personal Information
In addition, we are working to ensure compliance with laws and regulations by having Subaru dealerships in Japan that handle
large amounts of customer personal information take similar initiatives and report cases on an ad-hoc basis to Subaru.
Furthermore, in compliance with Japan’s Act on the Protection of Personal Information, the Subaru Group has built a system toconform with the EU’s General Data Protection Regulation (GDPR).

64 Integrated Report 2021

Initiatives
At Subaru, the Intellectual Property Department manages, protects, and utilizes intellectual property rights belonging to Subaru andalso implements internal activities that aim to avoid infringing on the intellectual property rights of others. The following are specificactivities being undertaken.
1. Support the proposal of strategies using the IP landscape
2. Acquire rights for intellectual properties, including technologies, trademarks, naming and design, and adequately manage
the IP portfolio
3. Conduct a comprehensive survey on the existence of intellectual property rights which may hinder business operations andtake measures to prevent and resolve such issues
4. Crack down on counterfeit goods globally, including protection measures at borders for oversight and taxation of online
sales, toward achievement of the SDGs
5. Secure intellectual properties, ownership of data and user rights in technology and business contracts
6. Support the management, protection and utilization of intellectual property by each Subaru Group company based on the
Subaru Group’s Basic Intellectual Property Policy

Integrated Report 2021 65

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Directors, Auditors, and Executive Officers (As of June 23, 2021)
Directors of the Board(Number of years in office as a director/number of shares owned)

Tomomi Nakamura

Kazuo Hosoya

Katsuyuki Mizuma

Representative Director,
President and CEO

Director, Chairman

Director, Executive Vice President,
CFO and CRMO

2 years / 17,699 shares

3 years / 27,093 shares

Newly appointed

Atsushi Osaki

Fumiaki Hayata

Director, Executive Vice President

Director, Executive Vice President

Director, Executive Vice President

3 years / 16,371 shares

Newly appointed

Newly appointed* Concurrently serve as a Director

ChairmanKazuo Hosoya*

Secretarial Office, Human Resources Department

President

Tomomi Nakamura*

CEO (Chief Executive Officer)
Aerospace Company, Quality

Executive Vice President

Katsuyuki Mizuma*

CFO (Chief Financial Officer), CRMO (Chief Risk Management Officer)
Finance & Accounting Department

Executive Vice President

Tetsuo Onuki*

Chief General Manager of Purchasing Division,
Product & Portfolio Planning Division

Executive Vice President

Atsushi Osaki*

Chief General Manager of Manufacturing Division,
China Project Office

Executive Vice President

Fumiaki Hayata*

Chief General Manager of Overseas Sales & Marketing Division 1,
Chairman and CEO of SIA*1

Executive Vice President

Takuji Dai

CIO (Chief Information Officer), Chief General Manager of IT Strategy
Division, Senior General Manager of Corporate Planning Division

Senior Vice President

Shoichiro Tozuka

Company President of Aerospace Company

Senior Vice President

Tatsuro Kobayashi

General Manager of Human Resources Department

Senior Vice President

Eiji Ogino

Senior General Manager of Manufacturing Division, Chief General
Manager of Gunma Plant

Senior Vice President

Jinya Shoji

Chief General Manager of Overseas Sales & Marketing Division 2

Senior Vice President

Yoichi Sato

Chief General Manager of Japan Sales & Marketing Division

Senior Vice President

Osamu Eriguchi

CQO (Chief Quality Officer)
Chief General Manager of Quality Assurance Division, General
Manager of Quality Assurance Management OfficeSenior Vice President

Tomoaki Emori

Chief General Manager of Corporate Planning Division

Senior Vice President

Tetsuo Fujinuki

CTO (Chief Technology Officer)
Chief General Manager of Engineering Management Division andTechnical Research Center

Vice President

Yasushi Nagae

General Manager of Investor Relations Department and General
Administration Department, Corporate Communications Department
and Sustainability Promotion Department

Vice President

Takeshi Seiyama

Chief General Manager of Parts & Accessories Division

Vice President

Tatsuya Okuno

Chief General Manager of Customer Service Division

Vice President

Tamotsu Inui

Chief General Manager of Cost Planning & Management Division,
Senior General Manager of Corporate Planning Division

Vice President

Hiroshi Wakai

Company Vice President of Aerospace Company, Senior General
Manager of Engineering & Development Center

Vice President

Kazuhiro Abe

Chief General Manager of Product & Portfolio Planning Division

Vice President

Hiroshi Watahiki

Senior General Manager of Engineering Division

Vice President

Tadashi Yoshida

Senior General Manager of Overseas Sales & Marketing Division 1,
Executive Vice President of SOA,*2 SCI,*3 NASI*4

Vice President

Ryota Fukumizu

President and COO of SIA*1

Vice President

Shinichi Murata

General Manager of External Relations Department,
Risk Management Group and Intellectual Property Department

Vice President

Kazuki Uejima

Senior General Manager of Engineering Division and General
Manager of CTO’s Office/ 8,533 shares

Tetsuo Onuki/ 16,161 shares

Executive Officers/ 9,156 shares

Yasuyuki Abe

Natsunosuke Yago

Miwako Doi

Independent Outside Director

Independent Outside Director

Independent Outside Director

2 years / 3,700 shares

2 years / 2,500 shares

1 year / 100 shares

Corporate Auditors(Number of years in office as an auditor/number of shares owned)

Yoichi Kato

Hiromi Tsutsumi

Shigeru Nosaka

Kyoko Okada

Standing Corporate Auditor

Standing Corporate Auditor

Independent
Outside Corporate Auditor

Independent
Outside Corporate Auditor

2 years / 700 shares

2 years / 800 shares

Newly appointed/ 11,129 shares

1 year / 19,056 shares

Please visit the Subaru website for details on profiles.
https://www.subaru.co.jp/en/outline/profile.html

66 Integrated Report 2021

*1 Subaru of Indiana Automotive, Inc.
*2 Subaru of America, Inc.
*3 Subaru Canada, Inc.
*4 North American Subaru, Inc.

Integrated Report 2021 67

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Corporate Governance

Basic Policy
Subaru has articulated the vision “Delivering happiness to all” and works on the enhancement of corporate governance as one of
the top priorities of management in order to gain the satisfaction and trust of all its stakeholders by achieving sustainable growthand improving its corporate value in the medium and long term based on the Corporate Statement outlined below.

With regard to the business operation system, Subaru has established the Executive Management Board Meeting as apreliminary consultation body to conduct deliberations on company-wide management strategies and the execution of importantbusiness before their presentation at the Board of Directors Meeting. In addition, Subaru has adopted a vice president system andestablished the Executive Board Meeting as the decision-making body of each business department, and converted the Aerospace
division into an internal company in order to clarify responsibilities and accelerate the execution of business operations.
General Meeting of Shareholders
Electionand dismissal

2015

2016

2017

2018

2019

2020

Reporting2021

Abolished senior advisor system

2

ReportingFemale director

ReportingInternal Audit Department

Internal
auditing

Submission and reportingof important matters

Submission andreporting ofimportant matters

Corporate
Governance Meeting
Sustainability Committee
Social Contribution Committee

Corporate operations
departments at HQ
Automotive Business Unit

Executive Meeting

Aerospace Company

Executive Meeting

Policy instruction
and approvalof plans, etc.
Plan proposal andreporting, etc.

Group Companies

Environmental Committee
Risk Management andCompliance Committee

Organization

Board of Directors

Board of Corporate Auditors

Chair

Chairman of Board of Directors

Standing Corporate Auditor

Composition

Directors: 6 Outside directors: 3

Standing Corporate Auditors: 2 Outside Corporate Auditors: 2

Role/responsibility

The Board of Directors ensures fairness and transparency by
performing the oversight function for overall management andmakes the best decisions possible for the Company throughappointment, evaluation and resolution regarding thecompensation of its CEO and other management teammembers, the assessment of material risks faced by theCompany and the development of measures to deal with suchrisks, and decisions on the execution of important business of
the Company.

The Board of Corporate Auditors, as an independent organization
entrusted by shareholders, is responsible for ensuring the sound andsustainable growth of the Company and establishing a high-quality
corporate governance system that can be trusted by society by performing
audits of the execution of duties by directors, passing resolutions on thecontents of proposal items regarding the appointment and dismissal, or
non-reappointment, of accounting auditors that are to be submitted to theGeneral Meeting of Shareholders, and performing business audits,accounting audits and other matters prescribed by laws and regulations.

Meetings held in FYE March 2021

12 times

12 times

Female corporate auditor* In addition to the number of Board of Directors’ meetings shown in the above table, there was one written resolution passed that has been deemed equivalent to a
Board of Directors’ meeting, pursuant to Article 370 of the Companies Act and the Articles of Incorporation.

2004 Established Executive Compensation Meeting

Outside directors
participating: 2

3
Ratio of outside
directors:
one half or more

Introduced restricted stock compensation plan

Executive Nomination and Executive Compensation Meetings
Organization

Executive Nomination Meeting

Executive Compensation Meeting

Chair

Chairman of Board of Directors

Chairman of Board of Directors

Composition

Independent Outside Directors: 3 Directors: 2

Independent Outside Directors: 3 Directors: 2

Role/responsibility

To ensure the fairness and transparency of decisions on executive
appointment, the Executive Nomination Meeting submits to theBoard of Directors proposals of nomination of candidates for
directors and corporate auditors and the appointment/dismissal of
the CEO or corporate vice presidents approved following fulldeliberation by committee members. The Board of Directors thendeliberates and resolves these proposals. Approval of the Board of
Corporate Auditors is obtained for nominations of candidates forcorporate auditors.

To ensure fairness and transparency in decisions on compensation
for directors, the Executive Compensation Meeting, on the basis ofdelegation by the Board of Directors, determines compensation
amounts, etc. for individual directors. With regard to revisions of thecompensation system and other matters pertaining to compensation
overall, proposals approved by the Executive Compensation
Meeting are deliberated and decided on by the Board of Directors.

Meetings held in FYE March 2021

1 time5 times

Items deliberated in
FYE March 2021

The Executive Nomination Meeting discussed matters concerning thesubmission of reports on the executive structure and appointments,
the division of duties of executives, and the appointment ofrepresentatives of major subsidiaries.

The Executive Compensation Meeting discussed the compensation
structure, formulated a methodology for deciding the content ofcompensation, etc. for individual directors, decided performancelinked compensation for directors (except for outside directors) andcorporate vice presidents, and determined individual compensation
amounts for restricted stock compensation.

Reduction of cross-shareholdings

60 issues 32 issues 30 issues 18 issues 10 issues 4 issues

2 issues

Start of evaluation of the effectiveness of the Board of Directors

Corporate Governance Structure
Subaru has chosen a company with a board of corporate auditors as its corporate governance structure. The Board of Directors
decides and supervises the execution of important business, and the Board of Corporate Auditors audits the execution of duties
by directors. The structure enables us to achieve sounder, more efficient business operations through increased effectivenessof management monitoring by involving independent outside directors and outside corporate auditors. In addition, in orderto enhance the practical governance structure based on the ongoing organizational design, we have established two voluntary
meetings: the Executive Nomination Meeting and Executive Compensation Meeting.

68 Integrated Report 2021

Accounting auditing

2

2004 Established Executive Nomination Meeting

Appropriate
function of the Boardof Directors

Transfer of authority and oversight

Auditing

Ratio of outside directors:
one third or more

Independent outside
corporate auditor: 1

Initiatives toenhance
corporate value
over the medium
to long term

Executive Management Board Meeting
Chairman: President and CEO

Reporting3

Strengtheningof oversightfunctionsObjective andtransparent
procedures

Submission and reporting

Board of Directors and Board of Corporate Auditors

Established Corporate Governance Guidelines

Independent outside
director: 1

Appointment,
dismissal and oversight

Collaboration

1999 Adopted a corporate vice president system
2003 Reduced length of director terms from two years to one year
Increasingtransparency
2007 Abolished executive officer retirement bonus system
of management* The Executive Nomination Meeting and Executive
Compensation Meeting each consist of threeoutside directors and two internal directors.

Business operations execution functions

2014

Executive Compensation Meeting*Outside directors: 3

Decision making
and oversight functions

2013

Directors: 6

Vice Presidents

2012

Executive Nomination Meeting*Board of Directors: 9
Auditing

Corporate auditors: 2

Auditing

Collaboration

2011

Board of Corporate Auditors: 4

Proposal and reporting

ReportingHistory of Initiatives to Strengthen Governance2010

Election and dismissal

ReportingOutside corporate auditors: 2

Accounting auditors

Subaru clearly separates the function of decision making and the oversight of corporate management from that of the executionof business operations, and aims to realize effective corporate management by expediting decision making. In addition, Subaru
seeks to ensure proper decision making and the oversight of corporate management and the execution of business operations aswell as enhance its risk management system and compliance system through the monitoring of its management and operations
and advice provided by outside officers. We also implement proper and timely disclosure of information in order to improve thetransparency of management.

Collaboration

Delivering happiness to all<Vision>“Enjoyment and Peace of Mind”<Value statement><Corporate statement> We aim to be a compelling company with a strong market presence built upon our customer-first principle.

Electionand dismissal

Integrated Report 2021 69

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Directors/Auditors(As of June 23, 2021)

Name

Female

Term

3
years

Kazuo Hosoya

Director, Chairman

2
years

Tetsuo Onuki
Atsushi Osaki
Newly appointed

Fumiaki Hayata
Newly appointed

1
year

Director, Executive Vice President

Natsunosuke Yago

Independent Outside Director

2
years

Miwako Doi

Independent Outside Director

1yearStanding Corporate Auditor

Newly
appointed

Shigeru Nosaka

Independent Outside Corporate Auditor

Kyoko Okada

Independent Outside Corporate Auditor

Sales/marketing

GlobalFinance (CFO
experience)

Corporate ESG

IT

Newly
appointed

2
years

Standing Corporate Auditor

Main areas

Newly
appointed

Director, Executive Vice President

Hiromi Tsutsumi

Executive
Compensation Management Technology Manufacturing
Meeting1(executive experience) development procurement

3
years

Director, Executive Vice President

Independent Outside Director

Newly appointed

Executive
Nomination
Meeting1

Newly
appointed

Director, Executive Vice President, CFO and CRMO

Yasuyuki Abe

Yoichi Kato

Board ofCorporate
Auditors*1

Total Years Board ofof Service Directors*1

Representative Director, President and CEO

Newly appointed

Corporate
Auditors

Position

Tomomi Nakamura

Katsuyuki Mizuma

Directors

Corporate Data

4
years

1
year
2
years
2
years

*1 andindicate attendance of the chairman and other members, respectively
Note: The list above does not cover the entire scope of knowledge held by the Directors and Corporate Auditors.

Ratio of Outside Directors/Auditors
Outside3 (33%)

Directors

9
Inside6 (67%)

OutsideRatio of Female Directors/Auditors

2 (50%)

FemaleCorporate
auditors

Female92 (50%)Male

2 (50%)

Corporate
auditors

Directors

4
Inside1 (11%)

4

8 (89%)

Male

Board of Directors’ Meeting Participation Rate

2 (50%)(FYE March)

Category

2017

2018

2019

2020

2021

Number of meetings held

15 times

17 times

16 times

13 times

12 times

96.3%

99.0%

98.4%

100.0%

100.0%

Attendance rate

*In addition to the number of Board of Directors’ meetings shown in the above table, there was one written resolution passed in FYE March 2019, two in FYE March
2020 and one in FYE March 2021 that have been deemed equivalent to a Board of Directors’ meeting, pursuant to Article 370 of the Companies Act and the Articles ofIncorporation. Attendance rates for newly appointed directors are calculated based on the number of Board of Directors’ meetings held after their appointment.

Approach to the CEO Succession Plan
Subaru recognizes that decision making regarding top management changes and successor selection may have a critical influence
on corporate value. Therefore, in order to ensure a successful succession at the right timing, we invest substantial time and

70 Integrated Report 2021

resources to carefully develop and implement succession plans.
In order to hand over the business to the right person, the Board of Directors, as part of its essential duties, develops
succession plans that can convince all stakeholder groups. To ensure objectivity and transparency in the process for deciding on
the replacement and selection of the CEO, the Board of Directors appropriately supervises the preparation of proposals by thecurrent CEO through discussions at the Executive Nomination Meeting. To be able to implement succession plans appropriately,
the CEO begins to prepare for selection and development of his/her successor candidates independently, upon assuming office.
Key processes for this purpose include providing information on candidates to outside directors on an ongoing basis, particularly
by enabling the directors to monitor the candidates in person continuously in day-to-day business settings, as a measure to ensure
appropriate and timely evaluation and selection down the road. The Board of Directors and Executive Nomination Meeting meet ona regular basis to review the list of essential qualities and skills required of the CEO, which may include removing and adding items,
in consideration of perception of current trends, changes in the business environment surrounding the company, and the future
direction of the Group’s business strategies.
To ensure the objectivity of the successor selection process and increase the effectiveness of its supervision by the Board of
Directors and Executive Nomination Meeting, it is important to have effective selection criteria in place, particularly for use byoutside directors. Based on this view, Subaru has established two sets of criteria: “Abilities required of the Subaru Group’s CEO”
and “Five key qualities required of the Subaru Group’s CEO.” These criteria serve as a guide for evaluating candidates in light ofquality, competency, experience, track record, specialized expertise, personality and other factors, which have been discussed anddecided on by the Board of Directors and Executive Nomination Meeting.
Abilities required of the CEO
The Subaru Group’s CEO must be able to: properly understand the business environment surrounding Subaru, its corporate
culture and philosophy, business growth stages, and medium to long-term management strategies and challenges; facilitate
collaboration appropriately with various stakeholders; and lead all executives and employees to work together to maximize
corporate value.
Five key qualities required of the CEO
1. Integrity 2. Broad perspective 3. Character 4. Tireless spirit or revolutionary leadership skills 5. Person of action

Integrated Report 2021 71

Value Creation Story

Category• The outside directors are expected to perform a monitoring function independent from the management team and provide
appropriate advice on the management of Subaru on the basis of wide range of sophisticated knowledge.

Directors
Corporate
auditors• The outside corporate auditors are expected to perform a management oversight function independent from the management
team and undertake their role of auditing from the viewpoint of legality and appropriateness on the basis of broad and advanced• Participation in seminars and programs hosted by government agencies, Japan Federation of Economic Organizations, Japan Associationof Corporate Directors, Japan Audit & Supervisory Board Members Association, etc.
Policy• Subaru has established criteria for independence of outside officers in addition to the criteria for independence established by the
Tokyo Stock Exchange, and appoints outside directors and outside corporate auditors who meet those criteria.

Reasons for Appointing the Outside Officers and Major Activities

Yasuyuki Abe

OutsideDirectors

Natsunosuke Yago

Miwako Doi

Shigeru Nosaka

OutsideCorporate
Auditors

Kyoko Okada

Meeting Attendance(FYE2021)
Board of Board of Corporate
Directors
Auditors

As representative director and senior managing executive officer of Sumitomo
Corporation, Mr. Yasuyuki Abe has been involved in management in both asupervisory and executional capacity, possesses extensive experience andknowledge in business management, and has an advanced understanding of the IT
field. Mr. Abe has served three years as an independent outside corporate auditor
for the Company since June 2016. During his tenure, he has supervised the execution
Attendedof duties conducted by directors, as well as understood the true nature of the
12 of 12problems facing the Company and offered his frank opinions to senior management
meetings
in a timely and appropriate manner. In June 2019, Mr. Abe was appointed to theposition of independent outside director and has been providing beneficial advice
to the Company’s management. In light of this, the Company has appointed Mr. Abewith the expectation that he will provide sufficient advice and oversight of all aspectsof the Company’s management from an independent perspective when he assumes
office as an outside director of the Company.
Mr. Natsunosuke Yago served successively as president and representative
executive officer and chairman at Ebara Corporation, and has extensive experienceand knowledge in business management. Mr. Yago is especially knowledgeable
in the areas of internal control and governance. In June 2019, the Company has
appointed him to the position of independent outside director. Given that he has
been providing beneficial advice to the Company’s management based on his
rich experience and wide range of knowledge, and high level of insight into theCompany’s social responsibilities, we appointed Mr. Yago with the expectationthat he will provide sufficient advice and oversight of all aspects of the Company’s
management from an independent perspective when he assumes office as an
outside director of the Company.
As a researcher and supervisor in the field of information technology at Toshiba
Corporation, Ms. Miwako Doi has accumulated vast experience and made many
achievements in this field over many years. In addition, she has held successive
positions, mainly in government committees, owing to her high level of expertiseand extensive experience and knowledge. In June 2020, the Company appointed
her to the position of independent outside director. Given that she has been
providing beneficial advice to the Company’s management for the generation of
new innovation, we appointed Ms. Doi with the expectation that she will provide
sufficient advice and oversight of all aspects of the Company’s management froman independent perspective when she assumes office as an outside director of theCompany.

Attended
12 of 12
meetings

Attended
10 of 10meetings

Mr. Shigeru Nosaka has been involved in management in both a supervisory andexecutional capacity as a director, executive deputy president and deputy chairman
and CFO at Oracle Corporation Japan and possesses extensive experience andAttendedknowledge in business management. In June 2019, Mr. Nosaka was appointed tothe position of independent outside corporate auditor and has been providing
12 of 12beneficial advice to the Company’s management based on his wide range of insights meetings
into finance and accounting in corporate activities. In light of this, the Company has
appointed Mr. Nosaka with the expectation that he will appropriately perform theduties when he assumes office as of an outside corporate auditor of the Company.
Ms. Kyoko Okada has accumulated extensive experience and knowledge inareas such as CSR and corporate culture at Shiseido Co., Ltd. and has a career inmanagement auditing as a corporate auditor at Shiseido. In June 2019, Ms. Okada
was appointed to the position of independent outside corporate auditor and has
been providing beneficial advice to the Company’s management based on her wide
range of insights into CSR and corporate culture in corporate activities. In light of
this, the Company has once again appointed Ms. Okada with the expectation that
she will appropriately perform the duties when she assumes office as an outside
corporate auditor of the Company.

Significant Concurrent
Positions(As of June 30, 2021)

Outsidedirectors
Outsidecorporate
auditors

 ubaru provides its directors and corporate auditors on an ongoing basis with information and knowledge regarding its businessS
activities that is necessary for them to fulfill their responsibilities to oversee and audit the management.

• Refresher courses focusing on information regarding the Companies Act and other laws and regulations related to corporate governanceknowledge.

Reasons for Appointing

Corporate Data

Training Policy/ Major Ongoing Programs
PolicyNomination Criteria

Independent
Officer Status1

Mechanisms Supporting Value Creation

Executive Officer Training

Outside Directors/Outside Corporate Auditors

Name

Commentary on Strategy

 ubaru provides its outside officers on an ongoing basis with information relating to the company’s corporate statement, corporateS
culture, business environment and other matters, mainly through arranging appropriate opportunities, such as operations briefings
from business divisions and factory tours, as well as creating an environment for officers to share information and exchange opinions
more easily.

• The following programs are provided to outside Board members at the time of appointment and subsequently to keep them updated.
- Opportunities for discussions with and briefings from responsible vice presidents about the corporate statement, corporate culture,business environment, and the performance, situation and issues of each business division/department- Inspection tours at manufacturing/R&D/distribution sites- Discussions with directors and corporate auditors on management issues- Social gatherings with directors and corporate auditors- Participation in company-wide business events, such as improvement activity debriefing sessions
Policy—Advisor, ORANGE AND
PARTNERS CO., LTD.
Outside Director, HOYA
Corporation

 ubaru gives vice presidents similar opportunities as those given to directors and auditors, for the purpose of developing humanS
resources to lead its management in the future.

• Participation in external programs aimed at fostering the mindset required for executive management and motivating self-improvement
actionsVicepresidents• Lectures by invited experts in specified topics to share and increase literacy in the related field (legal affairs, compliance, IT, the SDGs,
media response, etc.)• Strategy building camps for all vice presidents• Recommendation and support for participation in appropriate external seminars and programs

President, Ebara Hatakeyama
Memorial Foundation—

Outside Director, J. FRONTRETAILING Co., Ltd.

* Expenses to be incurred for offering the above training to directors and corporate auditors, including outside officers and vice presidents are borne by the company.

Category

Outside Director, PARCO
CO., LTD.

—

Auditor, National Institute ofInformation andCommunications Technology (NICT)(part-time)
Executive Vice President, Tohoku
University (part-time)
Executive Director, Nara Institute of
Science and Technology (part-time)
Visiting Professor, Osaka Universityof Arts
Outside Director, Isetan Mitsukoshi
Holdings Ltd.
Outside Director, NGK Spark PlugCo., Ltd.

Corporate Auditor, dotD,
Attended Inc.

12 of 12
meetings Advisor, AI Dynamics Inc.

Programs Provided in FYE March 2021
• Newly appointed vice presidents participated in different three-day external seminar programs

All executives(including
outsideofficers)• Classroom lectures by invited experts were held for all executives to discuss management issues• Seminars by invited experts in specified topics, including about the Companies Act, were offered via on-demand streaming• In-house presentations and exhibits were held to present information to all executives about future technologies and quality solutions• e-Learning programs about the SDGs were held in lesson and test formats using our website• Operations briefings offered by vice presidents and others, and related discussions were held 21 sessions in total, with participation fromnewly appointed outside directors

Outsidedirectors
Outsidecorporate
auditors• Newly appointed outside directors visited three different manufacturing sites (plants, offices) for inspection tours• Two outside corporate auditors visited five Group companies in Japan for inspection tours• The entire Board membership (nine directors and four corporate auditors) attended two semi-annual management discussion and social
gathering events• Outside directors and corporate auditors participated in external exhibitions

Japan

Outside Audit & Supervisory

Attended
12 of 12
meetings

Attended Board Member, Daio Paper
12 of 12 Corporation
meetings Outside Director, JACCS
Co., Ltd.

1 Outside directors and outside corporate auditors with no risk of a conflict of interest with general shareholders as stipulated by the stock exchange

72 Integrated Report 2021

Integrated Report 2021 73

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Datalong-term strategy, including production strategy, IT strategy, and Aerospace Company initiatives, and through reporting on

Effectiveness Evaluation of the Board of Directors

progress towards mid-term management plan goals. With regard to upcoming rapid changes in the operating environment

In order to achieve sustainable growth and enhance the medium- to long-term corporate value of the Subaru Group, Subaru
has determined and published Corporate Governance Guidelines (“Guidelines”) for the purpose of communicating to all its
stakeholders Subaru’s fundamental ideas, frameworks, and management policies relating to corporate governance.
Subaru Board of Directors (“BoD”) periodically analyzes and evaluates BoD effectiveness in accordance with Article 23 of these
Guidelines and considers and implements improvements to address any issues identified.
In FYE March 2021, the BoD confirmed efforts to address issues recognized in the previous year, based on monitoring of points
raised in the previous year’s evaluation. It also gathered, analyzed, and evaluated views on issues for investigation based on changes
in the business environment due to the COVID-19 pandemic. The results of this process are reported below.

for the automotive business, last year’s evaluation pointed out that continuing efforts to bridge the information gap between
outside directors and internal directors were required to improve the quality of discussion, and ongoing efforts are being madeto address this issue.
(2) Enhancing discussion of information security systems and sustainability
With regard to IT strategy including information security systems, the BoD created opportunities for reporting, shared views
on issues faced, and conducted ongoing discussion. Last year’s evaluation expressed the view that the BoD should exercise
leadership and stimulate discussion aimed at utilization of IT and advancement of digital transformation, and the BoD willcontinue to create opportunities for such discussion in its meetings.
The report recognized steady progress on sustainability, including the establishment and announcement of policies such as
the Subaru Global Sustainability Policy and Human Rights Policy, as well as timely reporting of the efforts of the CSR Committee,

Methods of evaluation and analysis

which meets twice a year.

(1) Timing: January 2021

(2) Respondents: Directors and auditors (13 in total)(3) Process: S elf-evaluation using a questionnaire(4) Questions: I. BoD management structure

prepared by a third-party body

Future Initiatives

II. BoD oversight function

The Subaru BoD will continue to deepen discussion of medium- to long-term management strategy and make efforts to improveIII. Shareholder dialogue

the quality of such discussion. It will also create opportunities for discussion of executive compensation system design, including

IV. Views on key efforts undertaken this year(b) T hird-party body aggregates and analyzes responses

incentive-based compensation, and enhancement of group governance. In doing so, it will strive to maintain and improve BoD

V. Issues for next year onward(c) B oD verifies and discusses report received from

effectiveness in the aim of continuing to enhance medium- to long-term corporate value and achieving sustainable growth.

VI. Views on other matters(a) T hird-party body conducts anonymous
self-evaluation survey of directors and auditors

third-party body
Respondents evaluated themselves on a four-point scale. They were also free to add their own thoughts on points of excellence
relating to the BoD and points requiring enhanced BoD effectiveness, before submitting the questionnaire directly to the third-party
body.

Results of the Questionnaire
Operational Structure of the Board of Directors
4.0

FYE March 2021
FYE March 2020
Involvement in
the Board
4.0: Excellent
of Directors
Evaluation scale

Evaluation Results
Based on the report received from the third-party body aggregating and analyzing results, the Subaru BoD discussed and confirmed

3.0

Composition of the Boardof Directors

1.0: PoorFYE March 2021
FYE March 2020

2.0
1.0

Supervisory Function of the Board of Directors andDialogue with Shareholders

Operation of
the Board of
Directors

Evaluation scale
4.0: Excellent
1.0: Poor

Dialoguewithshareholders

4.0
3.0

Supervisory functions of theBoard of Directors

2.0

Risk management
system of theBoard of Directors

1.0

the following points:• As in previous fiscal years, the results confirmed that BoD management entails the conduct of free, open, and sound discussion.

Support system
for the Board of Directors•P oints confirmed as strengths in previous evaluations (chairman’s leadership, responses to cross-shareholding, and size of BoD)
continued to be evaluated highly, confirming that BoD strengths are ongoing.

Category

dialogue, and decision-making processes and shareholder dialogue were evaluated especially highly across the board.
executive compensation system design, including incentive-based compensation, as well as discussion of ways to improve group
governance and enhancement of report content. While acknowledging certain improvements in the evaluation of discussion
1. O perational
structure of
the Board of
Directors

Areas previously recognized as problematic where significant progress was acknowledged this year:• Reinforcing risk identification/management systems

Issues recognized in the previous fiscal year’s evaluation:

2. S upervisory
functions of
the Board of
Directors(1) Enhancing discussion of medium- to long-term management strategy
The BoD added depth to its discussion of medium- to long-term management strategy by setting agendas for medium- to

74 Integrated Report 2021

(3) Decision-making process(4) S upport system for the
Board of Directors(1) Supervisory functions of
the Board of Directors

Developed and announced abilities required of the Subaru Group’s CEO and five key qualities required of the CEO.

codes of conduct, etc., and shared information with the BoD in a timely and appropriate manner.

Diagnostic Item
Composition of the Board of
Directors (diversity and expertise)

Relevance of agenda items

Quality and quantity of documents

Prior explanation

Content of explanations and reports

Leadership by the Chair

Adequate discussion—

Environment and systems for theprovision of information

Provision of information tooutside directors

Training of outside directors

Training of inside directors——

Attitude to initiatives

Company-wide perspective

Mutual respect

Diverse values

Stakeholder perspectives—

Reporting system

Supervision of corporate
management—

Risk management system

Subsidiary management system

Provision of information andmeasures to combat risk

System for managing progress of
response measures

Penetration of complianceawareness—

Discussion of management strategy

Discussion of capital policy

Discussion of cross-shareholding forpolicy purpose

Frequency, length, and time(2) Operation of the Board of allocation of meetings
Directors
Timing of document distribution(5) Involvement in the Boardof Directors• CEO succession plan

Established mechanisms ensuring effectiveness by preparing risk maps, identifying risks in each business department, developing

Status of discussions
by the Board of
Directors

Composition of the Board of
Directors (ratio of inside tooutside directors)(1) C omposition of the Board
Size of the Board of Directorsof Directors•H owever, the report also confirmed expectations that BoD functions could be further improved through deeper discussion of

future.

Nomination andcompensation of executives

Evaluation Items• Improvements were apparent in overall evaluation of BoD management structure, BoD oversight function, and shareholder

relating to medium- to long-term management strategy, the report also confirmed the need for qualitative improvements in theDecision-making
process

3. D ialogue withshareholders(2) R isk management systemof the Board of Directors(3) S tatus of discussions by
the Board of Directors

Discussion of strengthening
Response to social andgovernanceenvironmental problems
Composition of the Executive(4) Nomination andAppointment Committee andCultivating successors
compensation of executives
Executive Compensation Committee
Sharing the views of shareholders and Enhancing dialogue with
Dialogue with shareholders
investors
shareholders and investors—
Incentive compensation—

Integrated Report 2021 75

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Dataoutside directors. Its authorities include the determination of specific amounts of basic compensation, short-term performance-

Executive Compensation

linked compensation, and restricted stock compensation as well as their payment schedule. For restricted stock compensation,
the number of shares allotted to individual directors is determined by the resolution of the Board of Directors based on decisions

Matters Concerning the Policy for Determining Details of Compensation for Individual Directorsof the Executive Compensation Meeting. With regard to revisions of the compensation system and other matters pertaining to

Subaru deliberated and decided on the proposal of the Policy for Determining Details of Compensation for Individual Directors

compensation overall, proposals approved by the Executive Compensation Meeting are deliberated and decided on by the Board

approved by the Executive Compensation Meeting at the Board of Directors meeting held on May 17, 2021. Below is the summaryof Directors.
The Executive Compensation Meeting in FYE March 2021 was comprised of two representative directors and three outsideof the policy.

directors. Its chairman was Representative Director and President. To ensure transparency and effectiveness of the executive
compensation determination process, the Executive Compensation Meeting shall, by a resolution of the Board of Directors, be
The Policy for Determining Details of Compensation for Individual Directors
1. Basic policy
As a basic policy, compensation for directors of the Company is determined in viewof the following items:(1) C ompensation is at a level commensurate with the roles and responsibilities of
directors and is appropriate, fair, and balanced.
(2) T he compensation structure is determined by giving consideration to providing
motivation for sustained improvement in corporate performance and corporate
value and securing excellent human resources.
Specifically, compensation for directors is composed of basic compensation, shortterm performance-linked compensation, and restricted stock compensation (fornon-resident officers, phantom stock, instead of restricted stock). For outside
directors, the Company pays only basic compensation in view of their roles offulfilling monitoring and oversight functions of corporate management from an
independent position. The total amount of compensation for individual directors
and the levels of each compensation item are set for every position depending
on difference in responsibility by utilizing the research data compiled by outside
specialized agencies.
2. Policy for determining the amount of monetary compensation excluding
performance-linked compensation (hereinafter, the “Fixed Monetary
Compensation”), performance-linked compensation, and non-monetarycompensation (including the policy for determining the timing or conditions for
granting such compensation)(1) Policy for the Fixed Monetary Compensation
Directors receive the Fixed Monetary Compensation monthly as basic
compensation. The amount for individual directors is determined based on theirpositions, taking into consideration elements such as the business environment.
(2) Policy for performance-linked compensation
Directors receive short-term performance-linked compensation by cash at a certain
time of the year. The specific amount is determined according to a compensationtable by position prepared based on the consolidated ordinary income for thecurrent fiscal year* as a key performance indicator (KPI), adjusted according to thematrix of combined ROE and improved shareholders’ equity ratio, which are both
performance indicators aligned with the Company’s capital policy, and fornon-director executive officers, taking into consideration personnel development
and the business environment. The Company will review the KPI as needed basedon changes in the environment and reports from the Executive Compensation
Meeting.
(3) Policy for non-monetary compensation
The Company grants restricted stock compensation to directors for the purpose ofproviding them an incentive for sustained improvement of the Company’s corporate
value and further value sharing with the shareholders. Specifically, the Company
grants monetary compensation claims to directors in consideration of theCompany’s business performance, responsibilities of each director, and otherfactors, and directors make in-kind contributions of such monetary compensation
claims to receive shares of the Company’s common stock. The maximum number ofshares of the Company’s common stock to be granted as restricted stockcompensation is 100,000 per year (including those issued to executive officers). In
addition, the Company and eligible officers shall enter into a restricted stock
allotment agreement that includes an overview and provisions that state (1) eligible
directors shall not, for a set period of time, transfer, create a security interest on, orotherwise dispose of the shares of the Company’s common stock that have beenallotted to them, and (2) the Company may acquire the said shares of its common
stock without compensation if certain events occur.
For non-resident officers, the Company grants, instead of issuing restricted stockcompensation phantom stock equivalent to such units, and the stock shall also betreated in accordance with the restricted stock allotment agreement.
3. Policy for determining the proportion of the Fixed Monetary Compensation,
performance-linked compensation, and non-monetary compensation to the total
amount of compensation, etc. for individual directors
The Company shall appropriately determine the proportion of compensation bytype of directors excluding outside directors in reference to the compensation levels
and compensation mix of companies of a similar scale to the Company or industry
peers obtained through an external research company, and in consideration offactors such as the Company’s overall salary level and social situations. The
Company shall also prepare compensation tables for short-term performance-linked
compensation and restricted stock compensation by officer position. With regard torevisions of the compensation table, proposals approved by the Executive
Compensation Meeting are deliberated and decided on by the Board of Directors.
4. Matters concerning the determination of details of compensation, etc. forindividual directors
The Executive Compensation Meeting, by a resolution of and upon delegation by
the Board of Directors, determines specific amounts of compensation, etc. of
individual directors, following sufficient deliberation by its members including
outside directors.
Its authorities include the determination of specific amounts of basic
compensation, short-term performance-linked compensation, and restricted stockcompensation (for non-resident officers, phantom stock, instead of restricted stock)and their payment schedule. For restricted stock compensation, the number ofshares allotted to individual directors is determined by the resolution of the Boardof Directors based on decisions of the Executive Compensation Meeting.
With regard to revisions of the compensation system and other matterspertaining to compensation overall, proposals approved by the Executive
Compensation Meeting are deliberated and decided on by the Board of Directors.
To ensure transparency and effectiveness of the executive compensation
determination process, the Executive Compensation Meeting shall, by a resolutionof the Board of Directors, be structured so that the majority of its members areoutside directors, and its chairman shall be appointed by a resolution of the Boardof Directors.

* As the Group started to voluntarily apply the IFRS, this is a figure converted to consolidated ordinary income under the Japanese standards.

structured so that the majority of its members are outside directors. Executive Compensation Meetings were held five times in FYEMarch 2021. The body debated the compensation structure and established a policy for determining details of compensation, etc.
for individual directors. It also decided on matters such as performance-linked compensation levels for directors (except for outside
directors) and executive officers based on performance evaluation, and the amount of monetary compensation claims for individuals
regarding restricted stock compensation.
Matters concerning performance-linked compensation, etc.
In addition to the “Profit Plan for FYE March 2019-FYE March 2021 (3 years),” Subaru announced it aims to achieve a ratio ofshareholders’ equity to total assets of 50% and to maintain a minimum ROE of 10% while aiming for ROE of 15% or higher inthe mid-term management vision “STEP” announced in July 2018. In accordance with these goals, the Executive Compensation
Meeting, upon authorization by the Board of Directors, decided short-term performance-linked compensation levels for directors,
using the consolidated ordinary income* for FYE March 2021 as the basis, making adjustment using the matrix of ROE and degrees
of improvement in shareholders’ equity ratio. Short-term performance-linked compensation is not given to outside directors in viewof their roles of fulfilling monitoring and oversight functions of corporate management from an independent position.
* Since the Subaru Group started to voluntarily apply the IFRS to the accounts from FYE March 2020, this figure was converted to consolidated ordinary income under
the Japanese standards

Performance indicators used to calculate the amount of performance-linked compensation, etc. for the fiscal period underreview are as follows.
Performance Indicators

Results

Consolidated ordinary income

116.5 billion yen

ROE

4.4%

Equity ratio

52.1% (up 0.1% from the previous period)

Details of non-monetary compensation
Subaru grants restricted stock compensation to directors for the purpose of providing them with an incentive for sustained
improvement of the Company’s corporate value and promoting further value sharing with the shareholders, and pays monetarycompensation for the acquisition of these. Directors shall wholly contribute the monetary compensation claim paid as above in theform of properties contributed in kind, and shall, in return, receive shares of Subaru’s common stock through issuance or disposal.

Matters concerning the resolutions of the General Meetings of Shareholders on compensation, etc. for directors and corporate auditors
By a resolution passed at the 85th Ordinary General Meeting of Shareholders, held in June 2016, the maximum total amount ofannual compensation, etc., for directors is 1.2 billion yen (including a maximum 200 million yen for outside directors). The maximum
total amount of monetary compensation related to long-term incentives is 200 million yen per year, within the abovementioned
limitation, by a resolution passed at the 86th Ordinary General Meeting of Shareholders, held in June 2017.

In addition, for the issuance or disposal of shares of the Subaru’s common stock, Subaru and eligible directors shall enter into a
restricted stock allotment agreement that includes provisions such as the one to restrict the transfer of the shares for three years
after the date of allotment.
Restricted stock compensation is not given to outside directors in view of their roles of fulfilling monitoring and oversightfunctions of corporate management from an independent position.

By a resolution passed at the 75th Ordinary General Meeting of Shareholders, held in June 2006, the maximum total amount ofannual compensation, etc., for corporate auditors is 100 million yen.
Matters concerning the delegation relating to the details of compensation, etc. for individual directors
Subaru has voluntarily set up an Executive Compensation Meeting in order to enhance the effective governance structure based

Compensation System for Directors (excluding outside directors)
Fixed portion

Performance-linked portionLong-term
incentives

Basic compensation

Short-term performance-linked
compensation

Restricted stockcompensationon the existing organizational design. By the delegation resolution of the Board of Directors, the Executive Compensation Meeting
determines specific compensation amounts, etc. of individual directors, following sufficient deliberation by its members including

76 Integrated Report 2021

Integrated Report 2021 77

Value Creation Story

Total Compensation for Directors and Corporate Auditors for FYE March 2021
NumberMechanisms Supporting Value Creation

Corporate Data

Auditing

Total Compensation (Millions of yen)Classification

Commentary on Strategy

Basic Compensation(Paid in fixed monthly installments)

Short-term
Performance-linked
Compensation

Restricted Stock
Compensation

Auditing by Corporate Auditors
Subaru has formulated internal rules to ensure the effectiveness of corporate auditors’ audits (e.g., Standards for Corporate

Directors(excluding outside directors)

6

312

40

53

405

Corporate auditors(excluding outside corporate auditors)

3

56

—

—

56

corporate auditors can gather information from directors and employees as needed in case of matters that may cause

Outside directors and outside
corporate auditors

6

59

—

—

59

significant damages to the Company, significant violation of laws/Articles of Incorporation, or other significant compliance

Total

15

427

40

53

520

Auditor’s Audit) and developed a whistle blowing system. In this way, the Company established a framework where thematters. In addition, the framework ensures smooth performance of corporate auditors’ duties by assigning employees
independent from directors to support duties of corporate auditors and making them known to all employees.
The Company’s corporate auditors attend important meetings including the Board of Directors Meeting, Executive

Notes: Figures in the above table include an outside director and an internal corporate auditor who resigned before the last day of the fiscal year under review. At theend of the year, there were nine directors, including three outside directors, and four corporate auditors, including two outside corporate auditors.

Management Board Meeting, and Risk Management and Compliance Committee meetings, state their opinions as necessary
to secure effectiveness of the audit, and take the following measures.

Policies for Cross-Shareholding• Check the state of the development and operation of internal control systems by holding regular meetings with the directors andexecutive officers, and making site visits to major business establishments and affiliated companies.

Regarding listed stocks held by Subaru as cross-shareholdings, each year Subaru shall have the Board of Directors examine eachcross-shareholding to determine whether the purpose of holding contributes to management and business strategies in the medium
and long term, and whether the benefits derived from it justify the associated capital cost to decide on whether to continue thecross-shareholding. Based on the above policy, Subaru has steadily reduced the number of listed stocks held as cross-shareholding.
As a result, 60 issues held at the end of March 2015 decreased to 2 issues at the end of March 2021. Subaru will continue thefrom departments in charge of managing subsidiaries concerning the state of those subsidiaries.
• Hold meetings with the corporate auditors of major group subsidiaries.
and hold discussions concerning the appointment of accounting auditors.

for Subaru, we concluded that the holding of the two issues is indispensable at this point and will continue the shareholding inprinciple.

The Company has also established a framework that can smoothly process invoices from the Corporate Auditors for expenses

Number of Issues of Cross-Shareholdings andTotal Amount Reported on the Balance Sheet
Category

Value Listedon BalanceSheet(million yen)departments on the state of operation of the whistle blowing system and other matters, as well as receiving reports as needed• Meet the accounting auditors quarterly to exchange information and opinions, thereby facilitating their efforts to work together,evaluation and examination of cross-shareholdings by the Board of Directors, but in consideration of the business environment

Numberof issues(Issues)• Receive monthly reports from the internal audit departments, the legal departments, and the risk management and compliance

’17/3

’18/3

’19/3

’20/3

(Millions of yen)

’21/3

Listed

30

18

10

4

2

Unlisted

32

31

31

32

31

Total

62

49

41

36

33

Listed12,795

8,836

3,138

arising from performance of their duties.

Number of Listed Stocks and Total Amount Reported
on the Balance Sheet

1,922

1,727

Unlisted

544

535

535

581

569

Total

13,339

9,371

3,673

2,503

2,296

(Issues)

15,00040
12,79530

10,000

30

3,138
10

0
‘17/3

‘18/3

Subaru has established the Internal Audit Department (13 members) that reports directly to the President as an internal auditingorganization and conducts internal audits of business execution at Subaru and its group companies in and outside Japan from an
independent and objective standpoint. At the beginning of the fiscal year, the Internal Audit Department prepares an internal audit

8,836
18

5,000

Internal Auditing‘19/3

Total amount reported on the balance sheet (left)

1,922
4
‘20/3

20

plan for the fiscal year that takes into consideration the risks and internal control status of the Group as a whole and systematically

10

implements the plan. The department prepares and distributes to the directors, corporate auditors, and concerned parties audit

1,727
2

0

‘21/3

Number of issues (right)

reports on the results of internal audits. It also reports the results semi-annually at a Board of Directors meeting and quarterly at thejoint meeting.
The Internal Audit Department and corporate auditors work to deepen collaboration through monthly internal audit reportmeetings held by the department and dialogues about internal control. They also share information on a quarterly basis with theaccounting auditors. Through this, they endeavor to strengthen the auditing function. In addition, the Internal Audit Department

Internal Control

periodically undergoes an evaluation by external experts to confirm that the audit operations are being performed appropriately.

Management System
With the aim of increasing the effectiveness of internal controls and risk management, the Internal Audit Department was madeindependent of the Risk Management Group (overseen by the Chief Risk Management Officer (CRMO)) to ensure a higher level of
independence of internal audit departments in the organization and to enhance the effectiveness of internal controls.

Internal Control System Related to Financial Reporting
Regarding internal control reporting systems pursuant to the Financial Instruments and Exchange Act, the evaluation of the internal
control system related to financial reporting is dated the final day of the consolidated accounting period and is conducted inInternal Control System

accordance with generally accepted assessment standards for internal control over financial reporting.

In accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act, Subaru’s Board of Directors has

The President & Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) evaluated the status of the development of

adopted a basic policy on putting in place systems that ensure that the performance of duties by directors is in conformity with laws

the internal control system related to financial reporting as of March 31, 2021 and affirmed that it has been established properly andand regulations and with the Articles of Incorporation, and other systems prescribed in the ordinance of the Ministry of Justice asfunctions effectively, and issued an internal control report audited by the accounting auditors to that effect.

being necessary to ensure the appropriate operations of the company and the corporate group consisting of the company and its
subsidiaries. The Board of Directors maintains and operates this basic policy, reviewing it as needed.

78 Integrated Report 2021

Integrated Report 2021 79

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Messages from the Independent Outside Directors

meeting methods, and telecommuting is now widely in use outside of the Manufacturing
Division; even Board of Directors meetings now offer online attendance. Amid post-COVID
new normal lifestyles, working from home has become commonplace. There should therefore
be company-wide efforts made in this area, such as efficient meeting operation and updating
communication methods to realize this.
In the progress report for the mid-term management vision “STEP,” Subaru defines its
vision for itself as a company “delivering happiness to all,” declaring the goal of becoming acompelling company with a strong market presence for customers by providing “Enjoyment
and Peace of Mind.” Analyses show that customers’ feelings about Subaru are not limited to
the functional value offered by its vehicles but are also sublimated into the emotional value
bringing it closer to the lifestyles of its customers. Based on these things we have assessedthat an easy-to-define, simple vision for Subaru is its ability to effectively market a Subaru
unlike others to all stakeholders, including shareholders. In addition, I believe that Subaru has
been able to clearly express its approach and goals as a company regarding safety and theenvironment, and that this has earned stakeholder empathy. While there is the perspectivethat Subaru’s view on its future earnings may be a bit conservative, I believe that sharing thisvision will lead to results greater than expectations. I have hope for Subaru thanks to its many
examples of great growth in corporate value stemming from a simple definition of its raisond’etre, earning the empathy of stakeholders and all its employees, and sublimating this into its
corporate culture.

It is important that each individual understands the Six Priority
Areas for CSR and takes action in order to achieve sustainability
management aimed at realizing a sustainable society.

Yasuyuki Abe
Independent Outside Director
Served as Independent Outside
Corporate Auditor from June 2016
to June 2019
Appointed as outside director in
June 2019

As an independent outside director, I believe it is important to be able to efficiently
understand the internal situation within a limited amount of time. I do my best to find daily
opportunities to communicate with our team members within Subaru in a variety of fields
and gain a stronger understanding of the situation. My sense is that I have gained greater
sensitivity to internal conditions as a result. There have been lively back-and-forth discussions
for some time at the Board of Directors and other meetings, communication and syncing up
has been well-facilitated, and reporting content has been appropriate. I feel the overall levelof discussions has been improving.
As the state of the world changes rapidly, we should remain cautious that the optimal
solution for today may not be the optimal solution for tomorrow. From a risk management
perspective, it is important to carry forward a mindset of constantly re-examining whether weshould be continuing our business activities as-is, and to make revisions as necessary.
In the May 2021 progress report on the mid-term management vision “STEP,” we checked
on what was actually happening over the last three years. What is important here is to correctly
ascertain progress toward achieving targets and to review plans flexibly on an ad hoc basis inaccordance with major changes in the world during that time. In particular, I engaged in deep
discussions on the status of quality-related expense cuts, an area that has not been generating
sufficient results, and the future outlook thereof. While quality enhancement initiatives may
not see immediate results, we did reaffirm that there are in fact a variety of efforts underway.
These quality issues are an unavoidable obstacle that must be handled in order for Subaru to
become “a company delivering happiness to all.” I hope to see results of these activities very
promptly. So, in order to meet the expectations of stakeholders who have supported Subaru
for many years, we will regularly check the status of the priority initiatives of corporate
culture reforms, quality enhancement, and evolving the Subaru Difference, with greaterawareness of the mid-term management vision “STEP.”In recent years, companies have come into question about their attitudes toward tacklingsocial issues, like global warming and human rights, and there are strong demands onsustainability management aimed at realizing a sustainable society. I think it is important foreveryone within the Subaru Group to understand the Six Priority Areas for CSR set forth in its
plans, and for each individual to take action.

I evaluated Subaru’s commitment to organizational culture
reform focusing on the growth of the individual, with an emphasison the five perspectives of management, employees, shareholders,customers, and the environment.

Miwako Doi
Independent Outside Director
Appointed as outside director in
June 2020

My hope is that Subaru will earn the empathy of its
stakeholders and all its employees in particular for its raisond’etre, and to sublimate this into the corporate culture, leading
to greater corporate value.

Natsunosuke Yago
Independent Outside Director
Appointed as outside director in
June 2019

80 Integrated Report 2021

In this past year amid the COVID-19 pandemic, some of the most significant changes havebeen the changing values and styles about working, as illustrated by the widespread adoptionof telecommuting. Taking the method of attending a meeting as an example, while it has been
a foregone conclusion in Japan for everyone to get together for a meeting, team members at
locations around the U.S. have been joining phone conferences for more than 30 years. These
delayed environmental improvements took a great leap forward with the strange fortune of
COVID-19.
As part of work style reforms at Subaru, there have been a variety of ideas applied to

It has been a year since I became an outside director. In 2020, I was able to learn about thebreadth and depth of Subaru’s technology through tours and meetings at almost all of its
production and development locations in its automotive and aerospace businesses, located in
the prefectures of Gunma, Tochigi, and Aichi.
With the knowledge gained in these tours as context, I consider whether or not there are
any unaddressed issues from the five perspectives of management, employees, shareholders,customers, and the environment, making statements regarding these at Board of Directors
meetings. I realize that the automobile industry is unique compared to other industries inthat it is governed by many laws, regulations, and safety standards requiring compliance,
and that it requires efficient tracking of the revisions to each of these, and that ensuring
recall parts based on cost performance is a challenge. I also use my position as a technicallyminded person to ask some detailed questions, particularly in the areas of DX progress andprocurement problems originating from the shortage of semiconductors.
I feel that the progress report of the mid-term management vision “STEP” clearly conveys
thoughts regarding organizational culture reform focusing on the growth of the individual,
an area of focus for President Nakamura. In the decision-making process, I have participatedin discussions not only via meetings of the Board of Directors, but also through the separate
presentations I have received. What I have remained aware of is the question of whether or
not Subaru’s vision is a convincing one if observed from another viewpoint–one that is notfull of love for Subaru. I have had sincere exchanges of opinion regarding areas that are notconvincing, going so far as to correct Subaru’s expressions. It is difficult to practice carbon
neutrality while maintaining the Subaru Difference, and I think I may have been able to help
even slightly here, molding Subaru’s language into more straightforward expression.
One special thing about Subaru is that its employees are full of friendliness when looking
at pictures in our in-house magazines. I feel that this 3 trillion yen company has a sense of
togetherness with its valued field sites.

Integrated Report 2021 81

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Corporate Data

Consolidated Ten-year Financial Summary
Subaru Corporation and its consolidated subsidiaries
Years ended March 31IFRS

J-GAAP
’11/3

’12/3

’13/3

’14/3

’15/3

’16/3

’17/3

’18/3

’19/3

Operating results (for the year)

’19/3

’20/3

’21/3

Operating results (for the year)*1

Net sales

Millions of yen¥1,580,563¥1,517,105¥1,912,968¥2,408,129¥2,877,913¥3,232,258¥3,325,992¥3,232,695¥3,160,514

Revenue

Millions of yen¥3,156,150¥3,344,109¥2,830,210

Cost of sales

Millions of yen

1,241,427

1,222,419

1,501,809

1,728,271

2,017,490

2,187,136

2,386,266

2,442,706

2,561,753

Cost of sales

Millions of yen

2,558,262

2,728,605

2,337,614

Gross profit

Millions of yen

339,136

294,686

411,159

679,858

860,423

1,045,122

939,726

789,989598,761

Gross profit

Millions of yen

597,888615,504

492,596

Selling, general and administrative expenses*1 Millions of yen

255,001

250,727

290,748353,369

437,378479,533

528,916

410,542403,232

Selling, general and administrative expenses Millions of yen

298,875

308,227

279,867

Operating income

Millions of yen

84,13543,959120,411

326,489

423,045565,589

410,810379,447

195,529

Operating profit

Millions of yen

181,724

210,319

102,468

Income before income taxes

Millions of yen

63,21452,87993,082

328,865

392,206

619,003394,695

297,340

195,838

Profit before tax

Millions of yen

186,026

207,656

113,954

Net income attributable to owners of parent Millions of yen

50,32638,453

119,588

206,616

261,873436,654282,354

220,354

147,812

Profit for the period attributable to owners of parent Millions of yen

141,418

152,587

76,510Depreciation/amortization*2, *3

Millions of yen

56,06258,61161,544

61,486

71,821

72,93885,653102,102102,749

Depreciation/amortization3

Millions of yen

187,077

192,742

206,317

Capital expenditures*3

Millions of yen

67,37867,03594,986

98,537

135,346

168,338

196,616

193,789

169,960

Capital expenditures3

Millions of yen

274,281284,669

258,229

R&D expenses

Millions of yen

42,907

48,11549,14160,092

83,535102,373

114,215

121,084

102,719

R&D expenditures

Millions of yen

102,719

118,735

101,626

Millions of yen

413,963451,607596,813770,071

1,030,719

1,349,411

1,464,888

1,561,023

1,612,825

Total equity

Millions of yen

1,689,899

1,720,123

1,786,383

Millions of yen

412,661

450,302595,365

765,544

1,022,417

1,343,732

1,458,664

1,552,844

1,605,291

Equity attributable to owners of parent Millions of yen

1,682,248

1,712,881

1,777,735

Millions of yen

1,188,324

1,352,532

1,577,454

1,888,363

2,199,714

2,592,410

2,762,321

2,866,474

2,982,725

Total assets

3,180,597

3,293,908

3,411,712

34.7

33.3

37.7

40.5

46.5

51.8

52.8

54.2

53.8

52.9

52.0

52.1

210,134

289,376

Financial position (at year-end)

Financial position (at year-end)

Net assets
Shareholders’ equity*4

Total assets

Ratio of shareholders’ equity to total assets*4%

Cash flows

Ratio of equity attributable to owners of parent to total assets

Millions of yen%

Cash flows

Net cash provided by (used in) operating activities Millions of yen

138,208

54,865

166,715

313,024

311,543614,256

345,442366,298

174,006

Net cash provided by (used in) operating activities Millions of yen

250,732

Net cash provided by (used in) investing activities

Millions of yen(51,109)(26,602)(71,370)(33,903)(172,780)(255,676)(254,252)(150,711)(158,327)

Net cash provided by (used in) investing activities

Millions of yen(190,119)(25,844)(272,174)

Free cash flow

Millions of yen

87,09928,263

95,345279,121

138,763358,580

91,190215,587

15,679

Free cash flows

Millions of yen

60,613

184,290

17,202

Net cash provided by (used in) financing activities

Millions of yen(39,408)

2,586(60,766)(63,011)(110,546)(126,190)(189,044)(170,937)(96,617)

Net cash provided by (used in) financing activities

Millions of yen(141,551)(15,818)

13,966Per share

Per share

Net income (EPS)

Yen

64.56

49.27

153.23264.76335.57559.54365.77287.40192.78

Profit for the period attributable to owners of parent (EPS)

Yen

184.44198.9999.77

Net assets (BPS)

Yen

528.88576.97762.87980.981,310.15

1,721.90

1,902.56

2,025.31

2,093.60

Equity attributable to owners of parent (BPS)

Yen

2,193.97

2,233.76

2,318.17

Dividends

Yen

9

9

15

53

68

144

144

144

144

Dividends

Yen

144

100

56

Other information

Other information

Non-consolidated exchange rate

Yen to the U.S. dollar

86

79

82

100

108

121

108

111

111

111

109

106

Number of shares issued

Thousands of shares

782,865

782,865

782,865

782,865

782,865

782,865

769,175

769,175

769,175

Number of shares issued

Thousands of shares

769,175

769,175

769,175

Number of shareholders*5

Persons

34,24033,13928,89051,38670,942

79,59476,471

132,570

133,879

Number of shareholders5

Persons

133,879

145,289

142,890

Number of employees (parent only) Persons

12,42912,35912,717

13,034

13,883

14,234

14,70814,87915,274

Number of employees (parent only)

Persons

15,27415,806

16,478

Number of employees (consolidated) Persons

27,29627,12327,50928,54529,774

31,151

32,59933,54434,200

Number of employees (consolidated)

Persons

34,20035,03436,070

Number of units

Non-consolidated exchange rate Yen to the U.S. dollar

Number of units*6

Consolidated automobile unit sales

Thousand units

657

640

724

825

911

958

1,065

1,067

1,000

Subaru vehicle unit production

Thousand units

624

635

692

772

887

929

1,033

1,036

977

DomesticThousand units

459

465

511

609

681

693

698

687

605

Overseas*7

Thousand units

165

171

181

164

207

236

335

349

372

Consolidated automobile unit sales6 Thousand units

1,001

1,034

860

Thousand units

977

1,022

803

DomesticThousand units

605

654

518

Overseas7

Thousand units

372

367

285

Subaru vehicle unit production* The Subaru Group has voluntarily applied International Financial Reporting Standards (IFRS) since the first quarter of FYE March 2020
*1 Change of accounting policy effective from FYE March 2019 (deduction of sales incentives from net sales); retroactively applied to the figures for FYE March 2018
*2 Accompanying a change in accounting policy effective from the FYE March 2019, change of depreciation method for certain tangible fixed assets of the Company
and its major domestic consolidated subsidiaries from the declining-balance method to the straight-line method*3 Total amount of property, plant and equipment and intangible assets*4 Partial Amendments to Accounting Standard for Tax Effect Accounting have been applied from FYE March 2019, and retrospectively applied to the figures for FYEMarch 2018.
*5 Number of shares per trading unit: 100 shares*6 Automobile unit sales of Subaru Corporation and its consolidated subsidiaries*7 U.S. production base Subaru of Indiana Automotive, Inc.

82 Integrated Report 2021

Integrated Report 2021 83

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Corporate Data

Five-year Unit Sales
Years ended March 31

Consolidated Automobile Sales by Region(Thousand units)
’17/3

Japan
LegacyImpreza
ForesterLevorgWRX
ExigaSUBARU BRZOEMOthers
Passenger cars
Minicars
Japan total

’18/3

’19/3

’20/3

’17/3

11.1
51.6
24.2
23.8
6.6
4.3
2.3
2.1
0.6
126.4
32.5
158.9

9.3
66.7
18.1
21.3
8.3
3.5
1.9
2.9
0.5
132.6
30.9
163.4

6.1
47.4
32.1
13.2
7.1
0.2
1.3
2.7
0.1
110.2
26.0
136.2

4.7
42.9
30.1
11.8
8.5
—
1.2
2.7
—
101.9
23.9
125.8

2.6
30.7
22.9
20.1
2.8
—
0.8
1.9
—
81.9
19.9
101.8

275.3
168.6
182.6
37.0
—
0.0
4.0
667.6

234.4
213.7
186.2
32.5
—
0.0
4.2
670.9

213.9
197.0
155.6
26.5
63.1
—
3.7
659.7

197.2
196.5
200.5
21.0
84.6
—
1.8
701.6

186.3
173.6
176.2
18.7
54.9
—
2.0
611.6

U.S.
LegacyImpreza
Forester
WRX
AscentTribeca
SUBARU BRZ
U.S. total

15.2
18.0
14.2
4.9
—
0.7
53.1

14.2
23.1
14.3
4.5
—
0.7
56.8

13.3
22.1
12.5
4.1
4.1
0.7
56.8

13.0
25.7
14.8
2.5
4.0
0.4
60.4

9.7
24.0
10.4
2.6
2.7
0.3
49.7

EuropeLegacyImpreza
ForesterLevorgWRX
SUBARU BRZEurope total

8.1
12.6
15.2
3.6
0.9
0.6
40.9

6.9
16.6
13.2
1.9
1.2
0.4
40.2

6.5
14.9
9.1
0.8
0.3
0.5
32.1

8.8
13.2
12.7
1.9
—
0.4
37.0

3.2
5.9
4.3
0.1
0.0
0.2
13.7

RussiaLegacyImpreza
Forester
WRX
SUBARU BRZ
Russia total

1.0
0.2
4.2
0.0
—
5.3

1.5
1.6
4.6
0.1
—
7.7

1.4
1.4
5.3
0.0
—
8.1

0.8
1.0
6.8
0.0
—
8.7

0.3
0.3
3.9
0.0
—
4.5

’19/3

’20/3

’21/3

China
LegacyImpreza
Forester
SUBARU BRZ
China total

11.3
5.6
26.6
0.6
44.0

5.5
4.6
15.7
1.0
26.9

3.8
3.8
15.2
—
22.8

2.7
1.6
15.6
0.8
20.6

4.9
2.2
17.4
0.0
24.5

Other regions
LegacyImpreza
ForesterLevorgWRX
AscentSUBARU BRZ
Other regions total

7.0
18.7
16.9
1.1
1.6
—
0.3
45.6

6.0
22.0
14.5
0.9
1.6
—
0.2
45.2

4.3
19.2
16.9
1.1
1.4
—
0.3
43.3

2.6
15.0
16.7
0.9
1.1
0.0
0.3
36.7

1.9
9.6
10.1
0.2
0.4
0.7
0.1
22.9

Overseas total

905.6

903.5

864.6

908.0

758.4

Global total

1,064.5

1,066.9

1,000.8

1,033.9

860.2

Consolidated Automobile Sales by Model

15.4
15.2
13.1
2.1
2.8
0.4
49.1

13.3
25.1
12.4
1.1
2.8
0.9
55.7

10.6
16.7
12.2
0.3
1.5
0.4
41.7

8.0
16.1
16.9
0.3
1.3
0.5
43.1

7.2
9.8
12.3
0.2
1.5
0.4
31.4

’17/3

LegacyImpreza
ForesterLevorgWRX
Exiga
AscentTribeca
SUBARU BRZOEMMinicars
OthersGlobal total

’18/3

344.4
290.5
297.0
30.6
53.7
4.3
—
0.0
8.9
2.1
32.5
0.6
1,064.5

’19/3

291.2
373.4
279.0
25.3
51.0
3.5
—
0.0
9.3
2.9
30.9
0.5
1,066.9

’20/3

259.9
322.5
258.8
15.4
41.0
0.2
67.2
—
6.9
2.7
26.0
0.1
1,000.8

’21/3

237.8
312.0
314.1
15.0
34.4
—
88.6
—
5.4
2.7
23.9
—
1,033.9

Consolidated Automobile Sales by Region

Consolidated Automobile Sales by Model(Thousand units)(Thousand units)

1,200
1,065

1,067

1,065

1,034

900

1,067

1,001

1,034
860

900

860

600

600

300

300

0

0
’17/3

Japan

216.1
256.1
257.5
20.5
26.1
—
58.3
—
3.9
1.9
19.9
—
860.2

1,200
1,001

U.S.

Canada’18/3
Europe

’19/3

’20/3

RussiaAustralia

’21/3
China

’17/3
Others*Automobile sales of Subaru Corporation and its consolidated subsidiaries

84 Integrated Report 2021

’18/3

(Thousand units)

CanadaLegacyImpreza
Forester
WRX
AscentSUBARU BRZ
Canada total

Australia
LegacyImpreza
ForesterLevorgWRX
SUBARU BRZAustralia total(Thousand units)’21/3

LegacyWRXSUBARU BRZ’18/3
Impreza
Exiga
OEM

’19/3
ForesterAscentMinicars

’20/3

’21/3
LevorgTribeca
Others*Automobile sales of Subaru Corporation and its consolidated subsidiaries

Integrated Report 2021 85

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Value Creation Outcomes

Financial Review(Amounts in billions of yen, ratios in %)Revenue

Business Segments and Scope of Consolidation
The Subaru Group (“the Group”) consists of three business segments: the core Automotive Business Unit, the Aerospace Company; andOther Businesses, which consists of businesses that do not belong to either of the other two segments. In the fiscal year ended March 31,
2021 (April 1, 2020 to March 31, 2021; the “fiscal year under review”), Subaru Corporation (“the Company”), 73 subsidiaries, and 10
equity-method affiliated companies were included in the scope of consolidation.

FYE March 2020

FYE March 2021

ChangePercentage change

FYE March 2020

FYE March 2021

ChangePercentage change

Automotive

3,193.9

2,737.5(456.4)(14.3)

200.3

109.1

(91.2)(45.5)

Aerospace

142.1

87.7

(54.4)(38.3)

5.1(9.8)(14.9)―

Others

8.0

5.0

(3.0)

(37.5)

3.6

3.1

(0.5)

(14.2)

Adjustment

―

―

―

―

1.4

0.1

(1.3)

(90.0)

3,344.1

2,830.2(513.9)(15.4)

210.3

102.5

(107.9)(51.3)

Total

Overview of Business Performance

R&D Expenditures, Capital Expenditures, and Depreciation Expenses

Revenue for the fiscal year under review decreased 513.9 billion yen, or 15.4%, year on year to 2,830.2 billion yen. Results were higher year
on year through the third quarter primarily because sales in the key North American market began recovering from the effects of
COVID-19 from the second quarter onward. However, unit sales decreased in the fourth quarter due to production cutbacks resulting
from a shortage of semiconductors.
The decline in unit sales more than offset lower SG&A and warranty expenses. Consequently, operating profit decreased 107.9 billion
yen, or 51.3%, year on year to 102.5 billion yen, profit before tax decreased 93.7 billion yen, or 45.1%, to 114.0 billion yen, and profit forthe period attributable to owners of parent decreased 76.1 billion yen, or 49.9%, to 76.5 billion yen.
(Amounts in billions of yen, ratios in %)Revenue

Operating profit

Operating Profit[Ratio to revenue]

Profit before Tax[Ratio to revenue]

Profit for the Period
Attributable to Owners of
Parent [Ratio to revenue]

Foreign Exchange Rates

FYE March 2021

2,830.2

102.5
(3.6)

114.0
(4.0)

76.5
(2.7)

¥106/USD¥123/EURFYE March 2020

3,344.1

210.3
(6.3)

207.7
(6.2)

152.6
(4.6)

¥109/USD¥121/EUR

Change△513.8△107.9

△93.7

△76.1

Percentage change

△15.4

△51.3

△45.1

△49.9

Segment Information
Automotive Business Unit
The pandemic had a significant negative impact on performance in the first quarter, but overseas retail sales remained strong. This was mainly
attributable to the brisk sales of Crosstrek (Japanese name: “SUBARU XV”) in the mainstay North American market. In the domestic market, theall-new Subaru Levorg, which was named 2020-2021 Car of the Year Japan, contributed to sales.
Consequently, overseas sales decreased by 150,000 units, or 16.5%, year on year to 758,000 units and domestic unit sales decreased
24,000 units, or 19.1%, to 102,000 units, resulting in an overall decrease of 174,000 units, or 16.8%, to 860,000 units. Revenue decreased by
456.4 billion yen, or 14.3%, to 2,737.5 billion yen. Segment profit decreased by 91.2 billion yen, or 45.5%, to 109.1 billion yen.
Aerospace Company
Revenue fell by 54.4 billion yen, or 38.3%, to 87.7 billion yen, because of reduced deliveries of Boeing 787 and 777 components in the
midst of the COVID-19 pandemic. Segment loss was 9.8 billion yen, compared with segment profit of 5.1 billion yen for the previous fiscal
year.
Other Businesses
Revenue from Other Businesses decreased 3.0 billion yen, or 37.5%, year on year to 5.0 billion yen, and segment profit decreased 0.5
billion yen, or 14.2%, to 3.1 billion yen.

R&D expenditures in the fiscal year under review decreased 17.1 billion yen, or 14.4%, year on year to 101.6 billion yen. Of that amount,
100.3 billion yen was related to the Automotive Business Unit. Since IFRS requires a certain portion of R&D expenditures that meets theset criteria to be capitalized as an intangible asset and depreciated over its estimated useful life, the amount of R&D expenditures does
not match the amount of R&D expenses on the consolidated statement of income.
In the fiscal year under review, Group capital expenditures decreased 39.8 billion yen, or 31.6%, year on year to 86.2 billion yen. Of thetotal, 80.2 billion yen was related to the Automotive Business Unit. The Company invested 47.8 billion yen, mainly for the improvement
and maintenance of production and inspection lines, production facilities for new products, R&D facilities, and improvement of quality
and the working environment. Subaru of Indiana Automotive, Inc. (SIA), our production base in the U.S., also invested 14.2 billion yen, for
production facilities to handle new products and expand capacity.
Depreciation expenses in the fiscal year under review decreased 1.1 billion yen, or 1.1%, year on year to 95.0 billion yen.
The figures in this section do not include leases, capital expenditures and amortization for intangible assets.

Liquidity and Source of Funds
Financial Position
Total assets as of March 31, 2021 stood at 3,411.7 billion yen, an increase of 117.8 billion yen. The key factors include: 1) an increase of
81.7 billion yen in non-current assets as a result of the acquisition of other financial assets; 2) an increase of 48.4 billion yen in cash andcash equivalents; and 3) a decrease of 40.9 billion yen in inventories due to production adjustments resulting from the semiconductor
shortage, which occurred in parallel with the recovery of automobile sales.
Total liabilities increased 51.5 billion yen to 1,625.3 billion yen. The key factors include: 1) an increase of 94.7 billion yen in financing
liabilities under current and non-current liabilities due to the issuance of corporate bonds and an increase in long-term borrowings; and 2)
a decrease of 68.4 billion yen in trade and other payables as a result of production adjustments caused by the semiconductor shortage.
Total equity increased 66.3 billion yen to 1,786.4 billion yen. The key factors include: 1) an increase of 38.1 billion yen in retained
earnings; and 2) an increase of 26.6 billion yen in other components of equity due to exchange rate effects and the like.
Cash Flows
Cash and cash equivalents (hereinafter “cash”) at the end of March 2021 totaled 907.3 billion yen.
In the fiscal year under review, net cash provided by operating activities was 289.4 billion yen, up from 210.1 billion yen in the previous
fiscal year. Major sources of cash included profit before tax of 114.0 billion yen and a decrease in inventories of 39.6 billion yen.
Depreciation and amortization totaled 206.3 billion yen. Major uses of cash included a decrease in trade and other payables of 62.0 billion
yen and a decrease of 39.6 billion yen in inventories. Net cash used in investing activities was 272.2 billion yen, up from 25.8 billion yen in
the previous fiscal year. Uses of cash included purchase of other financial assets totaling 328.7 billion yen and purchase of property, plantand equipment totaling 124.7 billion yen. Sources of cash included proceeds from sale and collection of other financial assets totaling
247.5 billion yen. Net cash provided by financing activities was 14.0 billion yen, compared with net cash used in financing activities of 15.8
billion yen in the previous fiscal year. Major sources of cash included net proceeds from long-term borrowings totaling 65.5 billion yen.
Major uses of cash included dividends paid to owners of parent of 42.9 billion yen.

Other Financial Information
The summary of consolidated financial results and presentation materials for results briefings are published in the Investor Relations section of theCompany’s website.

https://www.subaru.co.jp/en/ir/

86 Integrated Report 2021

Integrated Report 2021 87

Value Creation Story

Commentary on Strategy

Mechanisms Supporting Value Creation

Corporate Data

Global Network

History of the Subaru Group

Global Network

The Subaru group which can trace some of its roots to Aircraft Research Laboratory, has continuously
nurtured highly creative technologies and increased corporate value by enhancing the Subaru brand toMain Overseas Business Sites

respond to major changes in the times.

Head Ofﬁce

1917

Establishment of Aircraft Research Laboratory

1931

Establishment of Nakajima Aircraft Co., Ltd.

1945

Change of company
name from Nakajima
Aircraft to Fuji Sangyo

1946 Production of the first Rabbit

1993

Start of operation of the Handa Plant

1999

Capital and business alliance with General Motors
Corporation (GM) (U.S.)

1999

Business alliance with Suzuki Motor Corporation

2000

Dissolution of the business alliance with Nissan Motor Co.,
Ltd.

2002

Dissolution of the SIA joint venture with Isuzu Motors Ltd.
and formal signing of a contract production agreement

2003

The Legacy wins the 2003–2004 Car of the Year Japan award

2003

Subaru of Indiana Automotive, Inc. (SIA) made a wholly
owned subsidiary

2005

Participation in the Boeing 787 program Delivery of mainwings for next-generation transport aircraft and nextgeneration fixed-wing patrol aircraft

2005

Dissolution of the alliance with GM, agreement to enter intoa business alliance with Toyota Motor Corporation

2007

Start of production of Toyota cars (Camry) at SIA

2012

Start of knockdown production of the SUBARU XV in Malaysia

2012

Termination of production of mini-vehicles and shift tomarketing on an OEM basis

2014

Signing of an agreement to participate in a project todevelop and mass produce the Boeing 777X

2016

Termination of contract production of the Toyota Camry at
SIA
Transfer of production of Impreza vehicles for North America
to SIA2016

All-new Impreza Sport/G4 wins the 2016–2017 Car of the Year
Japan award

2017

Change of company name to Subaru Corporation2017

Termination of production and sales of Subaru generalpurpose engines and generators

2018

Introduction of the SUBARU BELL 412EPX helicopter

2019

Agreement on the further developing and strengthening of
Subaru’s long-term partnership with Toyota Motor Corporation
under a new business and capital alliance

2020

The new Levorg wins the 2020–2021 Car of the Year
Japan award

Scooter	Subaru Europe N.V./S.A.

	Subaru of America, Inc.

	Subaru Italia S.p.A.

	North American Subaru, Inc.

	N.V. Subaru Benelux	Subaru Research & Development, Inc.

1960

Opening of the Gunma Main Plant	Subaru Vehicle Distribution B.V.

	Subaru of Indiana Automotive, Inc.

1960

Listing of shares on the Tokyo Stock Exchange

1966

Signing of a business alliance agreement with Isuzu Motors
Ltd.

	Subaru of China Ltd.

Subaru Technology Beijing. Co., Ltd.

1953

Production Models: Legacy, Outback, Impreza, and Ascent	Subaru Canada, Inc.

Subaru R&E Center (Bifuka)

Main Domestic Business Sites
Automotive Business Unit
Gunma Plant
Plant

Production Models and Parts

Main Plant

Levorg, Impreza, SUBARU XV, WRX,
and SUBARU BRZ

Yajima Plant

Legacy, Outback, Impreza,
SUBARU XV, and Forester

Oizumi Plant

Automobile engines andtransmissions

1968

Establishment of Subaru of America, Inc. (SOA)

1968

Dissolution of the business alliance with Isuzu Motors Ltd.

1968

Signing of a business alliance agreement with Nissan MotorCo., Ltd.

1968

Subaru R&E Center (Sano)

Aerospace Company

Aerospace Company

Start of exports of Robin engines for snowmobiles to Polaris(U.S.)

1969

Start of operation of the Yajima Plant

1972

Release of the Leone 4WD Estate Van, the world’s first massproduction 4WD passenger vehicle

1978

Conclusion of a 767 business agreement with Boeing

1983

Start of full-scale operation of the Oizumi Plant

1987

Release of the Justy model equipped with the world’s firstelectro-continuously variable transmission (ECVT)

Utsunomiya Plant

Handa Plant
Handa West Plant

Head Ofﬁce

Tokyo Ofﬁce

1987

Establishment of Subaru-Isuzu Automotive, Inc. (SIA) in the U.S.
in a joint venture with Isuzu Motors Ltd.

1989

Establishment of Subaru Canada, Inc. (SCI)

1989

Completion of Subaru Research & Testing Center (SKC)

1990

Subaru of America (SOA) made a wholly owned subsidiary

1991

88 Integrated Report 2021

Establishment of Fuji Heavy Industries Ltd.
Start of aircraft production and automobile development

Participation in the Boeing 777 program

Integrated Report 2021 89

Value Creation Story

Subaru Models through the Years

1997

2014

1958

Subaru 360 released

1961

Subaru Sambar truck released

1966

1983

Domingo released

1984

Justy released

1985

Forester released

1998

Pleo released

2003

Outback released

2005

Levorg released2014

WRX released

2018

Ascent released (Exclusively for
North America)

Established

July 15, 1953

Paid-In Capital¥153,795 million

Fiscal Year-End

March 31

Accounting
Auditors

KPMG AZSA LLC

Main
Businesses

Automotive:
The manufacture, sale, and repair of passenger cars
and their components
Aerospace:
The manufacture, sale, and repair of airplanes,
aerospace-related machinery, and their components

1969

1989

B9 Tribeca released

Ebisu Subaru Bldg. 1-20-8,
Ebisu, Shibuya-ku, Tokyo 150-8554

Number of
Affiliates

95 (87 subsidiaries, 7 affiliated companies,
and 1 other affiliated company)

Number of
Employees

16,478 (consolidated: 36,070)(excluding executive officers, advisors anddispatches)

WebsiteAddresses

Corporate website:
https://www.subaru.co.jp/en/
Investor information website:
https://www.subaru.co.jp/en/ir/

Common Stock Authorized

1,500,000,000 shares

Breakdown of Shareholders

Common Stock Issued

769,175,873 shares

Number of Shareholders

151,367

Securities companies
46,172,000 shares
6.00%

Number of Shares per
Trading Unit

100 shares

Stock Exchange Listing

Tokyo Stock Exchange (1st Section)

Securities Code

7270

Transfer Agent and Account Mizuho Trust & Banking Co., Ltd.
Management Institution of 2–1, Yaesu 1-chome, Chuo–ku, Tokyo
Special Accounts
103–8670, Japan
Tel: 0120-288-324 (toll free)
3-3, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-0005, Japan

Alcyone released

Head Office

Stock Information (As of March 31, 2021)

Scheduled to move to the following address afterNovember 22, 2021

Subaru 1000 four-door sedan
released

Individuals andothers104,280,000 shares
13.56%

Japanese corporations
and others
173,028 ,000 shares
22.50%

1971

Leone coupe released1972

Rex released

90 Integrated Report 2021

Legacy series released

1992

Vivio released

1992

Impreza series released

2012

SUBARU BRZ released

2012

SUBARU XV released

Financial
institutions
232,689,000 shares
30.25%
Foreign institutions
and others
211,098 ,000 shares
27.44%

Major Shareholders

2008

Exiga released

Treasury stock
1,905,000 shares
0.25%* Number of shares held are rounded down to the nearest thousand shares

Number ofPercentage
Shares Heldof Total(in thousands) Shares HeldName

R-2 released

Corporate Data

Corporate Data (As of March 31, 2021)
Company Name SUBARU CORPORATION

Brat released

Mechanisms Supporting Value Creation

Corporate Information

Note: our production models

1977

Commentary on Strategy

Toyota Motor Corporation

1 Toyota-Cho, Toyota City, Aichi Prefecture 471-8571,
Japan

The Master Trust Bank of Japan, Ltd. (Trust account)
Custody Bank of Japan, Ltd. (trust account)

153,600

20.02

2-11-3 Hamamatsucho, Minato-ku, Tokyo 105-8579, Japan

70,9789.25

1-8-12 Harumi, Chuo-ku, Tokyo 104-6228, Japan

37,175

4.85

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

1-9-2 Otemachi, Chiyoda-ku, Tokyo 100-8127, Japan

13,9591.82

BNYM TREATY DTT 15(Standing Proxy: Mitsubishi UFJ Bank, Ltd.)240 GREENWICH STREET, NEW YORK, NEW YORK 10286 U.S.A.
(Transaction Services Division: 2-7-1 Marunouchi, Chiyoda-ku,
Tokyo)

11,2001.46

MIZUHO SECURITIES ASIA LIMITED-CLIENT A/C(Standing proxy: Settlement & Clearing Services
Department, Mizuho Bank, Ltd.)

12TH FLOOR, CHATER HOUSE, 8 CONNAUGHT ROAD,
CENTRAL, HONG KONG
(Shinagawa Intercity Tower A, 2-15-1 Konan, Minato-ku,
Tokyo)

10,1651.32

Mizuho Bank, Ltd.

1-5-5 Otemachi, Chiyoda-ku, Tokyo

10,078

1.31

Nippon Life Insurance Company

1-6-6 Otemachi, Chiyoda-ku, Tokyo
Securities Management Department, Nippon Life Insurance
Company

9,511

1.24

STATE STREET BANK WEST CLIENT - TREATY
505234(Standing proxy: Settlement & Clearing Services
Department, Mizuho Bank, Ltd.)

1776 HERITAGE DRIVE, NORTH QUINCY, MA 02171, U.S.A.
(Shinagawa Intercity Tower A, 2-15-1 Konan, Minato-ku,
Tokyo)

9,174

1.20

Subaru Business Partners Shareholding Association

1-20-8 Ebisu, Shibuya-ku, Tokyo

9,010

1.17

*1 Number of shares held are rounded down to the nearest thousand shares*2 The percentage of total shares held is calculated based on the number of shares excluding treasury stock of 1,905,130 shares

Integrated Report 2021 91

Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku,
Tokyo 150-8554, Japan
Phone & Fax: +81-3-6447-8000
https://www.subaru.co.jp/en/ir/

1【Consolidated Financial Statements and Notes】【Consolidated Financial Statements】(1) Consolidated Statement of Financial Position

Note
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income taxes receivable
Other financial assets
Other current assets
Subtotal
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Investment property
Investments accounted for using equity
methodOther financial assets
Other non-current assets
Deferred tax assets
Total non-current assets
Total assets

FYE 2020(as of March 31, 2020)

7
8,21
9

(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

10

858,966
364,839459,940
15,648204,373
74,748
1,978,514
251
1,978,765

907,326
341,907419,053
19,820228,279
66,378
1,982,763
69
1,982,832

11
12
13

820,491
209,775
23,986

839,648
216,652
24,282

14

9,831

10,177

10

19,730112,843
118,487
1,315,143
3,293,908

101,389
127,826
108,906
1,428,880
3,411,712

25

1

Note
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables
Financing liabilities
Other financial liabilities
Income taxes payable
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Financing liabilities
Other financial liabilities
Employee benefits
Provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total Liabilities
EquityEquity attributable to owners of parent
Capital stock
Capital surplus
Treasury shares
Retained earnings
Other components of equity
Total equity attributable to ownersof parent
Non-controlling interests
Total equity
Total liabilities and equity

FYE 2020(as of March 31, 2020)

15
16,28
17,28

(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

336,223
12,17344,126
2,642
261,312
326,820983,296

267,824
26,334
61,282
2,908
194,497322,295
875,140

16,28
17,28
19
18
21
25

227,037
67,85556,52547,509179,849
11,714590,489
1,573,785

307,549
78,52855,817
89,954
210,491
7,850
750,189
1,625,329

20
20
20
20
20

153,795
160,178(6,722)
1,397,239
8,391

153,795
160,178(6,524)
1,435,291
34,995

1,712,881

1,777,735

7,242
1,720,123
3,293,908

8,648
1,786,383
3,411,712

18
21

2

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

FYE 2020(April 1, 2019 toMarch 31, 2020)
3,344,109(2,728,605)
615,504(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
2,830,210(2,337,614)
492,596

Selling, general and administrative expenses 22
Research and development expenses
Other income
23
Other expenses
23
Share of profit (loss) of investments accounted
14
for using equity method
Operating profit(308,227)(92,460)
7,751(12,026)(279,867)(104,157)
5,073(11,057)

(223)

(120)

210,319

102,468

Finance income
Finance costs
Profit before tax

24
24

15,844(18,507)
207,656

21,003(9,517)
113,954

Income tax expense
Profit for the period

25(55,065)
152,591(36,634)
77,320152,5874
152,591

76,510810
77,320198.9999.77

Note
Revenue
Cost of sales
Gross profit

6,21Profit for the period attributable to
Owners of parent
Non-controlling interests
Profit for the period
Profit for the period per share attributable toowners of parent
Basic (yen)263Consolidated Statement of Comprehensive Income

Note
Profit for the period
Other comprehensive income (after deduction oftax)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans
Net changes in revaluation of capital financial
assets measured
30
at fair value through other comprehensive
incomeItems that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Share of other comprehensive income ofinvestments
14
accounted for using equity method
Net changes in revaluation of liability financial
assets measured
30
at fair value through other comprehensive
incomeOther comprehensive income (after deduction of
20tax) total
Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income

4

FYE 2020(April 1, 2019 toMarch 31, 2020)
152,591(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
77,320

(475)

4,467

(763)

6,527

(12,581)

20,031

(182)

6

1,966

745

(12,035)

31,776

140,556

109,096

140,965(409)
140,556

107,690
1,406
109,096(3) Consolidated Statement of Changes in Equity
FYE 2020 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)

Equity attributable to owners of parent
Note

Balance at the
beginningof the year
Comprehensive
incomeProfit for the period
Other
comprehensive
income (after
deduction of tax)
Comprehensive
income total
Transfer to retained
earnings
Transactions withownersDividends paid
Purchase oftreasury shares
Disposal oftreasury shares
Transfer fromretained earnings
to capital surplus
Total transactions
with owners
Balance at the endof the year

Capitalstock

Capital Treasury
surplus shares

153,795 160,192

Other
Retainedcomponents
earnings
of equity(6,910) 1,350,639

Total

24,532 1,682,248

Noncontrollinginterests

Total
capital7,651 1,689,899

－

－

－

152,587－

152,5874

152,591

－

－

－

－

(11,622)(11,622)(413)(12,035)－－－

152,587(11,622)

140,965(409)

140,556

20

－

－

－

4,519

(4,519)

－

－

－

27

－

－

－

(110,475)

－

－

(7)

－

－

(7)

－

(7)

－

(45)

195

－

－

150

－

150

－

31

－

(31)

－

－

－

－

－

(14)

188

(110,506)－ (110,332)－ (110,332)(6,722) 1,397,239

8,391 1,712,881

7,242 1,720,123

20

153,795 160,178

5－ (110,475)－ (110,475)

FYE 2021 (April 1, 2020 to March 31, 2021)(Unit: Millions of yen)

Equity attributable to owners of parent

Noncontrollinginterests

Total
capitalCapitalsurplusTreasuryshares153,795

160,178(6,722) 1,397,239

－

－

－

76,510－76,510810

77,320－－－－31,18031,180596

31,776－－－76,51031,180107,690

1,406

109,096

20

－

－

－

4,576

(4,576)

－

－

－

27

－

－

－

(42,966)－(42,966)－(42,966)

－

－

(14)

－

－

(14)

－

(14)

－

(68)

212

－

－

144

－

144

－

68

－

(68)

－

－

－

－

－

－

198

(43,034)－(42,836)－(42,836)

153,795

160,178

Note

Balance at the
beginningof the year
Comprehensive
incomeProfit for the period
Other
comprehensive
income(after deduction oftax)
Comprehensive
income total
Transfer to retained
earnings
Transactions withownersDividends paid
Purchase oftreasury shares
Disposal oftreasury shares
Transfer fromretained earnings
to capital surplus
Total transactions
with owners
Balance at the endof the year

Other
Retainedcomponents
earnings
of equity

Capitalstock

20(6,524) 1,435,291

6

Total

8,391 1,712,881

34,995 1,777,735

7,242 1,720,123

8,648 1,786,383

(4) Consolidated Statement of Cash FlowsNote

Net cash provided by (used in) operating activities
Profit before tax
Depreciation and amortization
Share of loss (profit) of investments accounted for using
equity method
Finance income
Finance costs
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in provisions and employee benefits
OthersSubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets and expenditure on internallygenerated intangible assets
Purchase of other financial assets
Proceeds from sale and collection of other financial assets
OthersNet cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Proceeds from long-term borrowings
Proceeds from issuance of bonds
Repayments of lease liabilities
Dividends paid to owners of parent
OthersNet cash provided by (used in) financing activities
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 period
Cash and cash equivalents at end of period

7

28
28
28
28
28

7

FYE 2020(April 1, 2019 toMarch 31, 2020)(Unit: Millions of yen)
FYE 2020(April 1, 2020 toMarch 31, 2021)

207,656
192,742

113,954
206,317223

120(15,844)
18,507(23,916)(70,173)(67,939)(23,832)
27,900245,324
12,8381,258(1,800)(47,486)
210,134(21,003)
9,517
24,45939,564(62,046)(22,404)
35,553324,0314,229
896(2,013)(37,767)
289,376

127,404(131,690)
5,387

3,039
(124,725)
568(82,379)(67,798)(259,956)
319,652(4,262)(25,844)(328,675)
247,496(2,079)(272,174)(2,400)(7,592)106,000
40,000(41,230)(110,375)(221)(15,818)(540)(7,421)65,50040,000(40,425)(42,947)(201)
13,966(11,834)

17,192

156,638
702,328
858,966

48,360858,966
907,326

【Notes to Consolidated Financial Statements】
SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
1. Reporting Entity
SUBARU CORPORATION (“the Company”) is a public company domiciled in Japan.
The Company’s consolidated financial statements comprise the Company and its consolidated subsidiaries (“theGroup”) and the Group’s interests in affiliates.
Principal manufacturing facilities are located in Japan and the United States of America.
In automobile business, the group manufactures, sells, and repairs passenger cars and related products.
In aerospace business, the group manufactures, sells, and repairs aircrafts, space-related devices, and the parts.
2. Basis of Preparation(1) Compliance of consolidated financial statements with International Financial Reporting Standards (“IFRS”)
The Group’s consolidated financial statements have been prepared in accordance with IFRS as prescribed in
Article 93 of Ordinance on Consolidated Financial Statements as they satisfy the requirement of a “Specified
Company” set forth in Article 1-2 of Ordinance on Consolidated Financial Statements."
The public announcement of the consolidated financial statements for the consolidated fiscal year ended March
31, 2021 have been approved by Tomomi Nakamura, the Representative Director of the Board, President andChief Executive Officer, and Katsuyuki Mizuma, Chief Financial Officer, on June 24, 2021.
(2) Functional currency and presentation currency
The Group’s consolidated financial statements are presented in Japanese yen, which is the Company’s functional
currency. Amounts presented in Japanese yen are rounded to the nearest million yen, except when otherwise
indicated.
(3) Basis of measurement
The Group’s consolidated financial statements have been prepared on the historical cost basis, except for certain
assets and liabilities separately stated in "3. Significant Accounting Policies".
(4) Change in presentation
Consolidated Statements of Financial Position“Provision for environmental measures” was included in “Other current liabilities” under “Current liabilities” in theprevious fiscal year. It is included in “Provisions” under current and non-current liabilities from the current fiscal
year in order to enhance the clarity.
Among the 1,261 million yen included in "Other current liabilities” in the previous fiscal year, 150 million yen wasreclassified into "Provisions" under “Current liabilities”, and 1,111 million yen was reclassified into "Provisions"
under “Non-current liabilities”.
Consolidated Statement of Cash Flows“Increase (decrease) in Provision for environmental measures”, which was included in “Other“ under “Net cash
provided by (used in) operating activities” in the previous fiscal year, is included in “Increase (decrease) in
provisions and employee benefits” in the current fiscal year in order to enhance the clarity.
(24,797) million yen of “Increase (decrease) in provisions and employee benefits”, 28,865 million yen of “Other”
under “Net cash provided by (used in) operating activities” in the previous fiscal year, has been reclassified into
(23,832) million yen of “Increase (decrease) in provisions and employee benefits”, 27,900 million yen of “Other”.

8

3. Significant Accounting Policies
The following accounting policies applied in the preparation of the consolidated financial statements have been
consistently applied to all the reporting periods presented.
(1) Basis of consolidation
1. Subsidiaries
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity.
Financial statements of subsidiaries are included in the consolidated financial statements from the date when thecontrol is obtained until the date when the control is lost.
The financial statements of subsidiaries have been adjusted in order to ensure consistency with the accounting
policies adopted by the Company as necessary. Intragroup balances and transactions, and any unrealized gainor loss arising from intragroup transactions are eliminated in preparation of the consolidated financial statements.
Changes in the Company’s ownership interests in subsidiaries that do not result in a loss of control are accounted
for as equity transactions. The difference between adjustment of non-controlling interests and fair value of any
consideration paid is recognized directly in equity as the interest attributed to the owners of the parent.
Non-controlling interests of consolidated subsidiaries are recognized separately from the interests of the Group.
Comprehensive income of a subsidiary is attributed to the owners of the parent and non-controlling interests even
if this results in the non-controlling interests having a deficit balance.
When control over a subsidiary is lost, any gain or loss on disposal of the interest sold is recognized in profit orloss.
2. Affiliates
Affiliates are entities over which the Group has a significant influence over the decisions on financial and operating
policies, but does not have control.
Investment in an affiliate is initially recognized at cost and then is accounted for using the equity method of
accounting.
The financial statements of affiliates have been adjusted, if necessary, when their accounting policies differ fromthose of the Group.
(2) Foreign currency translation
1. Foreign currency transactions
Each company in the Group specifies its own functional currency, the currency of the primary economic
environment in which the entity operates, and measures transactions based on the functional currency.
When the entity prepares non-consolidated financial statements, the foreign currency transactions are translated
into the functional currency at the exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailingat the fiscal year end date.
Exchange differences arising from the translation and settlement are usually recognized in profit or loss. However,exchange differences arising from the translation of equity financial instruments specified as measuring fair value
through other comprehensive income are recognized in other comprehensive income.

92. Financial statements of foreign operations
All the assets and liabilities of foreign operations are translated at the exchange rates at the end of the reporting
period. Revenue and expenses of foreign operations are translated into Japanese yen at the average exchange
rates for the period, unless exchange rates significantly fluctuate during the period. If the exchange rates
significantly fluctuate, revenue and expenses of foreign operations are translated at the foreign exchange rates atthe date of the transaction.
Exchange differences arising from translation of foreign operations’ financial statements are recognized in othercomprehensive income. When a foreign operations are disposed of, the cumulative amount of exchange
differences relating to the foreign operations are recognized in profit or loss.
(3) Financial instruments
1. Financial assets(i) Initial recognition and measurement
The Group classifies financial assets as financial assets measured at fair value through profit or loss, financial
assets measured at fair value through other comprehensive income, or financial assets subsequently measured
at amortized cost.
The Group initially recognizes trade receivables on the date when they arise. All other financial instruments are
initially recognized when the Group becomes a party to the contractual provision of a financial instrument.
Financial assets are initially measured at their fair value plus transaction costs that are directly attributable to theacquisition of the financial asset, unless they are classified as measured at fair value through profit or loss. Trade
receivables that do not contain a significant financing component are initially measured at the transaction price.
Financial assets are classified as financial assets measured at amortized cost if both of the following conditions
are met:・A financial asset is held within a business model whose objective is to hold the asset in order to collect thecontractual cash flows; and・The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Investments in debt instrument are classified as financial assets measured at fair value through othercomprehensive income if both of the following conditions are met:
・The financial asset is held within the Group’s business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and・The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
When any of the above-mentioned conditions is not met for financial assets except for equity instruments, thefinancial assets are classified as financial assets measured at fair value through profit or loss.
Equity instruments may be designated as financial assets measured at fair value through other comprehensive
income on an individual basis, except for equity instruments held for trading purposes. The designation has been
applied continuously. Equity instruments that are not designated as such are classified as measured at fair value
through profit or loss.
(ii) Subsequent measurement
Financial assets are subsequently measured based on the classification of the asset as follows.
Financial assets measured at amortized cost are measured at amortized cost using the effective interest method.
Changes in the fair value of financial assets measured at fair value through profit or loss are recognized in profit
or loss.
Changes in the fair value of debt instruments measured at fair value through other comprehensive income arerecognized in other comprehensive income, except for interest income, exchange gain and loss, and impairment
loss recognized in net profit and loss. Profit or loss is recognized at derecognition.

10

Meanwhile, changes in the fair value of equity instruments measured at fair value through other comprehensive
income are recognized in other comprehensive income. The dividends from relevant financial assets arerecognized in profit or loss as part of the financial income. The cumulative amount recognized in othercomprehensive income is reclassified not to profit or loss but to retained earnings when the financial asset isderecognized or the fair value of the asset declines significantly.
(iii) Impairment of financial assets
For impairment of financial assets measured at amortized cost, debt instruments measured at fair value throughother comprehensive income, lease receivables, and contract assets, expected credit losses are recognized as aloss allowance.
The Group determines, at the end of each reporting period, whether credit risk on the asset has increased
significantly since initial recognition. When the credit risk has not increased significantly since initial recognition, anamount equal to 12-month expected credit losses is measured as the loss allowance. When the credit risk has
increased significantly since initial recognition, an amount equal to lifetime expected credit losses is measured as
the loss allowance.
However, for trade receivables, lease receivables and contract assets, the loss allowance is measured at an
amount equal to the lifetime expected credit losses.
Expected credit losses of financial instruments are estimated using the following methods:
・An unbiased and probability-weighted amount determined by evaluating a range of possible outcomes;
・The time value of money; and・Reasonable and supportable information about past events, current conditions and forecasts of future economic
conditions that is available without undue cost or effort at the reporting date.
The amounts of these measurements are recognized in profit or loss.
If the amount measured as expected credit losses decreases after recognition of impairment loss, the decreased
amount is reversed and recognized in profit or loss.
(iv) Derecognition of financial assets
The Group derecognizes its financial assets only if the contractual rights to receive the cash flows from the financial
assets expire, or if the Group transfers substantially all the risks and rewards of ownership of the financial asset.
2. Financial liabilities(i) Initial recognition and measurement
The Group classifies financial liabilities as financial assets measured at fair value through profit or loss, or financial
assets measured at amortized cost. The Group determines the classification at initial recognition. The Group
recognizes financial liabilities when the Group becomes a party to the contractual provisions of the instruments.
All the financial liabilities are initially measured at fair value. However, financial liabilities measured at amortizedcost are measured at their fair value less transaction costs that are directly attributable to the acquisition.

11

(ii) Subsequent measurement
Financial liabilities are subsequently measured according to the classification as follows.
Financial liabilities held for trading and derivatives are included in financial liabilities measured at fair value throughprofit or loss. They are subsequently measured at fair value, and changes in the fair value are recognized in profit
or loss for the period.
Financial liabilities measured at amortized cost are subsequently measured at amortized cost using the effective
interest method.
Amortization using the effective interest method and gains and losses on derecognition are recognized in profit orloss for the period as part of the financial income or costs.
(iii) Derecognition of financial liabilities
The Group derecognizes financial liabilities when they are extinguished, i.e. when the obligation specified in thecontract is discharged or canceled, or expires.
3. Presentation of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial
position only when the Group currently has a legal right to set off the recognized amounts and intends either tosettle on a net basis, or to realize the asset and settle the liability simultaneously.
4. Derivatives and hedge accounting
The Group enters into forward exchange contracts in order to fix cash flows related to the recognized financial
assets and liabilities and future transaction. Interest rate swaps are used in order to fix cash flows of interest paid
related to the borrowings.
There are no derivatives stated above to which hedge accounting is applied.
(4) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with maturitiesof three months or less that is readily convertible to cash and subject to insignificant risk of change in value.
(5) Inventories
Inventories are measured at the lower of acquisition cost and net realizable value. Net realizable value is theestimated selling price in the ordinary course of business, less estimated cost of completion and estimated selling
expenses. The acquisition cost is generally calculated using the cost method based on the moving averagemethod and comprises all the costs of purchase, costs of conversion and other costs incurred in bringing theinventories to their present location and condition.
(6) Property, plant and equipment
Property, plant, and equipment is measured based on the cost model and stated at acquisition cost lessaccumulated depreciation and impairment losses.
The acquisition cost includes costs directly attributable to the acquisition of the asset, costs related to disassembly,
retirement and site restoration, as well as borrowing costs to be capitalized.
Depreciation of assets other than land and construction in progress is calculated on the straight-line method overthe estimated useful lives of the assets. The estimated useful lives of major assets are as follows;12・Buildings and structures: 2 to 60 years
・Machinery and vehicles: 2 to 20 years
・Tools, furniture and fixtures: 2 to 20 years
The estimated useful lives, residual value, and amortization methods are reviewed at the end of each fiscal year,
and if there are any changes made, those changes are applied prospectively as a change in an accounting
estimate.
(7) Intangible assets and goodwill
1. Goodwill
The Group measures goodwill as the fair value of consideration transferred including the recognized amount of
any non-controlling interests in the acquiree at the acquisition date, less the net recognized amount (usually fairvalue) of the identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill is not amortized.
Instead, it is tested for impairment annually and if any indication of potential impairment exists. Any impairment
loss for goodwill is recognized in profit or loss and is not reversed in subsequent periods. Goodwill is recorded atacquisition cost less any accumulated impairment losses.
2. Capitalized development costs
Expenditures related to research activities in order to gain new scientific and technical knowledge are recognized
as expenses as incurred. Development expenditure is capitalized as intangible assets only when the cost can bemeasured reliably, there is a technical and commercial feasibility of completing the development, it is probablethat the outcome will generate a future economic benefit, and the Group has intention, ability and sufficient
resources to use or sell the outcome of the development and to complete the development.
The estimated useful lives of capitalized development costs that are amortized using the straight-line method are
as follows.
・Capitalized development costs: 2 to 5 years
3. Other intangible assets
The Group applies the cost method in measuring separately acquired intangible assets, which are recorded atacquisition cost at initial recognition. After initial recognition, intangible assets excluding goodwill are amortizedusing the straight-line method over their estimated useful lives, and are recorded at acquisition cost lessaccumulated amortization and impairment losses. Estimated useful lives of major intangible assets are as follows.
The Group has no intangible assets with indefinite useful lives.
・Software: 2 to 10 years
The estimated useful lives and amortization methods are reviewed at the end of each fiscal year, and if there are
any changes made, those changes are applied prospectively as a change in an accounting estimate.
(8) Lease
At the inception of the lease contract, the Group assesses whether an arrangement is a lease or contains a lease.
When the right to control the use of specific assets transfers in exchange for consideration for a certain period due
to a contract, it means lease or includes lease. When the Group determines if the right to control the use of specificassets transfers or not, the Group uses the definition of lease in IFRS 16.

13

＜Lease as a lessee＞
The Group recognizes right-of-use assets and lease liabilities at the inception of the lease.
Right-of-use assets are measured at acquisition cost at the inception of the lease. After the commencement date,right-of-use assets are measured by using the cost model at acquisition cost less accumulated depreciation andimpairment losses. Right-of-use assets are amortized from the date of inception to the end of estimated useful lifeof the underlying leased asset if the right to use is transferred to lessee until the end of the lease term or if
acquisition cost of right-of-use assets reflects the exercise of a purchase option. Otherwise right-of-use assets areamortized from the date of inception to the earlier of the end of the estimated useful life of the right-of-use assets
or the end of the lease term.
Lease liabilities are measured at the present value of the lease payments that are not paid at the date of inception.
After the commencement date, the carrying amount of the lease liabilities are increased to reflect interest on thelease liabilities and decreased the lease payments made. Lease liabilities are re-measured and carrying amountsof right-of-use assets are revised or the change is recognized in profit or loss if the Group reviews lease liabilities
or if the modification is not accounted for as a separate lease.
As for short-term leases or leases for which the underlying asset is of low value, the Group applies IFRS 16.5, 6,
and recognizes lease payments as an expense using the straight-line method over the lease term.
＜Lease as a lessor＞
Lease transactions are classified as finance leases if all the risks and rewards incidental to ownership of underlying
assets are substantially transferred, and all other leases are classified as operating leases.
A receivable from customer held under a finance lease is initially recognized at the amount of the gross investmentin the lease discounted at the interest rate implicit in the lease and included in Trade and other receivables in the
consolidated statements of financial position.
An underlying asset subject to an operating lease is recognized in the consolidated statements of financial position,and lease payments from operating leases are recognized as revenue over the lease term.
(9) Investment property
Investment property is held to earn rentals or for capital appreciation or both. Investment property is measured byusing the cost model and is recorded at acquisition cost less accumulated depreciation and impairment losses.
Depreciation of an investment property other than land and construction in progress is recognized on a straightline basis over the estimated useful lives of the asset. The estimated useful lives of major assets are as follows:
・Buildings and structures: 2 to 50 years

14(10) Impairment
At the end of each fiscal year, the Group assesses the carrying amounts of non-financial assets other thaninventory and deferred tax assets to determine whether there is any indication of impairment. If any such indication
exists, the recoverable amount of the asset is estimated. Recoverable amounts of goodwill and intangible assetsthat are not yet ready for use are estimated at the same time every year.
The recoverable amount of an individual asset or cash-generating units is the higher of value in use or fair valueless costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pretax discount rate that reflects the time value of money and the risks specific to the asset. Assets
not assessed individually in test of impairment are integrated into the smallest cash-generating unit that generates
cash inflows which are largely independent of cash inflows from other assets or a group of assets. Cashgenerating units of goodwill are determined on the basis of the units managed for the purpose of internal reporting
and are within the scope of business segments before aggregation. The goodwill acquired in a businesscombination is allocated to each of the cash-generating units that are expected to benefit from the synergies of
the combination.
Corporate assets in the Group do not generate cash inflows independently. If there is any indication that corporate
assets may be impaired, the Group determines the recoverable amount of the cash-generating unit to which
corporate asset belongs.
When the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount, an impairment
loss is recognized in profit or loss. An impairment loss for a cash-generating unit is recognized by first reducing
the carrying amount of any goodwill allocated to the cash-generating unit, and then reducing proportionally the
carrying amount of other assets in the unit.
An impairment loss for goodwill is not reversed. The Group assesses whether there is any indication that an
impairment loss recognized in prior years for an asset other than goodwill may no longer exist or may havedecreased at the end of each fiscal year. An impairment loss is reversed when there has been a change in theestimates used to determine an asset’s recoverable amount. Impairment losses are reversed up to the amountnot exceeding the carrying amount (net of depreciation) that would have been determined if no impairment losses
had been recognized in prior years.
(11) Employee benefits
1. Short-term employee benefits
For short-term employee benefits including salaries, bonuses and paid annual leave, when the employees render
related services, the amounts expected to be paid in exchange for those services are recognized as expenses.
2. Retirement benefit plans
The Group sponsors a defined benefit plan and a defined contribution plan as retirement benefit plans for
employees.
(a) Defined contribution plans
For defined contribution plans, when the employees render related services, the contribution payables to thedefined contribution plan are recognized as expenses.

15

(b) Defined benefit plans
The Group has adopted lump-sum payment on retirement and defined benefit pension plans as defined benefit
plans.
The present value of defined benefit obligations, related current service costs and past service costs are
determined using the projected unit credit method.
The discount rates are determined by reference to market yields at the end of the reporting period on high-quality
corporate bonds which have maturities corresponding to the future settlements of benefits in each year.
The net defined benefit liability (asset) is determined as the present value of the defined benefit obligation less thefair value of the plan assets. Net interest on the net defined benefit liability (asset) is recognized in profit or loss asfinancial expenses.
The Group recognizes the difference arising from remeasurement of present value of the defined benefit obligationand the fair value of the plan asset in other comprehensive income when it is incurred, and reclassifies it
immediately to retained earnings from other components of equity.
The Group recognizes any past service cost as an expense at the earlier of the following dates.
(i) when the plan amendment or curtailment occurs; and(ii) when related restructuring costs are recognized(12) Provisions
Provisions are recognized when the Group has present legal or constructive obligations as a result of past events,
it is probable that outflows of resources embodying economic benefits will be required to settle the obligations,and reliable estimates can be made of the amount of the obligations. Where the effect of the time value of money
is material, the amount of a provision is measured at the discounted present value of the estimated future cash
flow using a pre-tax rate that reflects the time value of money and the risks specific to the liability. The unwindingof the discount due to the passage of time is recognized as finance costs.
1. Asset retirement obligations
Provisions for asset retirement obligations are recognized mainly for the estimated cost of restoring the leased siteat the end of the lease term.
2. Provision for product warranties
The Group provides product warranties based on the terms and conditions of warranties granted at the time of
product sales, as well as free repair services on an individual basis in accordance with the notification to thecompetent authority. The coverage of product warranties based on the terms and conditions of warranties isdetermined by the duration, mileage, cause of defects, and other factors in accordance with the terms andconditions of warranties in each country.
The Group recognizes estimated warranty costs for the product warranties when products are sold to customers
based on the terms and conditions of warranties. The estimated warranty costs are recorded based on the best
estimates of future occurrences, which are based on the past repair experience and past sales volume for the
total cost of repairing or replacing parts due to defects occurring within the warranty period.
The estimated expenses related to the warranty items in accordance with notifications to the competent authority
are recognized as provision for product warranties when it is probable that outflows of resources embodying
economic benefits will be required, and reliable estimates can be made of the amount of the obligations. The
estimated expenses are recorded based on the best estimate of the warranty expenses that will be incurred in the
future per vehicle and the number of units subject to repair, which is calculated based on historical experience of
warranty services provided in the past.

16

3. Provision for loss on construction contracts
The provision for losses on uncompleted construction contracts in the Aerospace segment is provided whensubstantial losses on the contracts are anticipated at the fiscal year end and such losses can be reasonably
estimated.
4. Provision for environmental measures
The provision for environmental measures is recorded for the amount of the estimated expenses for complying
with environmental regulations at the end of the fiscal year.
(13) Revenue
1. Revenue from contracts with customer
The Group identifies a performance obligation in a contract with a customer, and recognizes as revenue theamount of consideration to which the Group expects to be entitled in exchange for transferring promised goods orservices to the customer. Amounts collected on behalf of taxation authorities such as consumption taxes andvalue added taxes are not included into the amount. If variable consideration is included in the consideration
promised in a contract with a customer, some or all of an amount of variable consideration is included in thetransaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently
resolved.
Revenue is recognized at a point in time or over a certain period of time in accordance with satisfaction of aperformance obligation in a contract with a customer.
With regard to revenue from the sale of cars, performance obligations are principally considered to be fulfilled at
the time of delivery of the cars, at which point customers obtain control of the cars and revenue is recognized.
In automobile business, fare-paying extended warranty service is provided for the products as an option in addition
to normal warranty. The revenue from the extended warranty service is recognized over a certain period of timein accordance with the progress of the performance obligation.
2. Revenue from financial lease
When the Group is lessor as the manufacturer or dealer, cost of sales and selling profit or loss corresponding torevenue for a portion identified as sale of products are recognized in profit or loss at the inception of the leases.
Finance income from financial leases is recognized based on a pattern reflecting a constant rate of return on the
net investment in the lease of the Group.
3. Revenue from operating leases
Revenue from operating leases is recognized on a straight-line basis over the lease term.
4. Interest income
Interest income is recognized using the effective interest method.
5. Dividend income
Dividend income is recognized when the right to receive the payment is established.

17

(14) Government grants
Government grants are recognized at fair value when there is a reasonable assurance that the Group complies
with the conditions attached to them and the grants will be received. Government grants are recognized in profit
or loss over the periods in which the related costs for which the grants are intended to compensate are recognized
as expenses. With regard to government grants that are compensation for acquisition of assets, the amount of the
grants is deducted from the acquisition cost of the assets.
(15) Income taxes
Income taxes are composed of current and deferred taxes. Income taxes are recognized in profit or loss, except
for items that are recognized in other comprehensive income or directly in equity and those arising from businesscombinations.
Current income taxes are measured at the amount that is expected to be paid to or refunded from the taxation
authorities. The amount of these taxes is calculated based on tax rates and tax laws that are enacted or
substantively enacted by the end of the consolidated reporting period in the countries where the Group conducts
business activities and gains net taxable profit or loss.
Deferred income taxes are recognized based on the temporary differences between the tax base for assets andliabilities and the carrying amounts at the end of the consolidated reporting period, and the carryforward of unused
tax losses and unused tax credits.
Deferred tax assets are recognized for all the deductible temporary differences etc. to the extent that it is probablethat taxable profit will be available against which the deductible temporary differences etc. can be utilized. Deferred
tax liabilities are recognized for all the taxable temporary differences in principle.
However, no deferred tax assets and liabilities are recognized on following temporary differences:
・Taxable temporary differences arising from the initial recognition of goodwill;・Temporary differences arising from the initial recognition of an asset or liability in a transaction which is not abusiness combination and, at the transaction, affects neither accounting profit nor taxable profit; and・Taxable temporary differences associated with investments in subsidiaries and affiliates, where the Group isable to control the timing of the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to utilize all or part of the benefit of thedeferred tax assets. Unrecognized deferred tax assets are reassessed at the end of each reporting period andrecognized only to the extent that it is probable that the deferred tax assets can be recovered by future taxable
profits.
Deferred tax assets and liabilities are measured at the tax rates and tax laws that are expected to apply to thefiscal year when the assets are realized or the liabilities are settled, based on tax rates and tax laws that areenacted or substantively enacted at the end of the consolidated reporting period.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to offset current
tax liabilities against current tax assets, and income taxes are levied by the same taxation authority on the same
taxable entity.
(16) Earnings per share
Basic earnings per share is calculated by dividing profit for the year attributable to owners of the parent by theweighted average number of common stocks outstanding during the reporting period, adjusted for the number oftreasury stocks acquired.

18

(17) Operating segment
An operating segment is a component of the Group that engages in business activities where revenues are earned
and expenses are incurred, including inter-segment transactions. The Board of Directors regularly reviews theoperating results of all the operating segments for which discrete financial information is available, in order to makedecisions about resources to be allocated to the segments and assess their performance.
(18) Non-current assets held for sale
An asset or asset group of which the carrying amount is expected to be recovered through a sale transaction
rather than through continuous use is classified as non-current assets held for sale or disposal group if the following
conditions are met: it is highly probable that the asset or asset group will be sold within one year; the asset or asset
group is available for immediate sale in its present condition; and the Group management is committed to a saleplan. In such cases, the non-current asset is not depreciated or amortized and is measured at the lower of its
carrying amount and fair value less costs to sell.
(19) Equity
1. Common stock and capital surplus
The common shares issued by the Company are classified as equity, and the proceeds from issuance of commonshares are included in common stock and capital surplus.
2. Treasury stock
Treasury stock is measured at acquisition cost, and deducted from equity. No gain or loss is recognized on thepurchase, sale or retirement of the Group's treasury stock. Any difference between the carrying amount andconsideration received on the sale of treasury stocks is recognized directly in capital surplus.
(20) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset,
which necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalized aspart of the cost of that asset, until the asset is substantially ready for its intended use or sale.
All other borrowing costs are recognized in profit or loss in the consolidated reporting period in which they are
incurred.

19

4. Significant accounting estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to makejudgments, estimates and assumptions that affect the application of accounting policies and the reported amountsof assets, liabilities, revenue and expenses. Actual results may differ from these estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis. The effect of a change in an
accounting estimate is recognized in the period of the change and future periods.
Judgments made by management that have significant effects on the amounts reported in the consolidated
financial statements are as follows:
・Recognition of intangible assets arising from development (note “3. Significant Accounting Policies, (7)Intangible assets and goodwill”); and・Accounting for contracts including lease (note “3. Significant Accounting Policies, (8) Lease”).
Significant accounting estimates made by management are as follows. Please refer each note for recorded
amount, the method of calculation, major assumptions, and uncertainty of estimation.
・Accounting treatments of provisions for product warranties.(note “3. Significant Accounting Policies, (12)Provisions”, note “18. Provisions”); and・Recoverability of deferred tax assets (note “3. Significant Accounting Policies, (15) Income taxes”, note “25.
Notes on Income Taxes”)
5. New accounting standards not yet adopted by the Group
None of the new or revised major standards and interpretations that have been issued by the date of approval of
the public announcement of the consolidated financial statement but are not yet adopted early by the Groupsignificantly affects the Group's consolidated financial statements.

20

6. Segment information
The operating segments are the components of the Company for which separate financial information is available
that is evaluated regularly by the Board of Directors in deciding allocation of management resources and inassessing performance.
The Company recognizes Automobile as its main business, and introduces an internal company system in
Aerospace division. This framework makes clearer the responsibility of each division and accelerates businessexecution. The Company manages the subsidiaries on the basis of this classification. Therefore, the businesssegments consist of “Automobile”, “Aerospace”, and “Others” which neither belongs to Automobile nor Aerospace.
The reporting segments are “Automobile” and “Aerospace” segments.
Accounting method for business segment reported is almost the same as the description in "3. Significant
Accounting Policies".
Reported segment profit or loss is based on the operating profit.
Intersegment sales and transfers are based on the current market prices.
Principal products and services of each segment are as follows:
Segment
Principal products and services
Automobile
Automobiles and relevant products
Aerospace
Aircrafts, parts of space-related devices, and relevant products
OthersReal estate lease, etc.
(1) Information about the amount of revenue, profit or loss and other material items for each segment
Business segment information of the Group as of and for the consolidated fiscal years ended March 31, 2020 and
2021 is as follows:
FYE 2020 (April 1, 2019 to March 31, 2020)
Automobile

Aerospace

Subtotal

Others(Unit: Millions of yen)
Eliminations
Consolidated
or Corporate

Revenue(1) External customers
3,193,949
142,141 3,336,090
8,019－ 3,344,109(2) Intersegment
2,985
－
2,985
27,461(30,446)－
Total revenue
3,196,934
142,141 3,339,075
35,480(30,446) 3,344,109
Operating profit
200,263
5,065
205,328
3,577
1,414
210,319
Finance Income
15,844
Finance Costs(18,507)
Profit before tax
207,656
Segment assets
2,977,628
273,378 3,251,006
67,710(24,808) 3,293,908
Other items
Depreciation and
186,254
4,991
191,245
1,497－
192,742
amortization
Share of profit (loss) ofinvestments accounted for
329
－
329
(552)
－
(223)
using the equity method
Investments accounted for
7,264
－
7,264
2,567
－
9,831
using the equity method
Additional non-current
276,003
5,407
281,4103,259
284,669－
assetsNote: 1. The method to calculate the operating profit of each segment is correspondent to the method to
calculate the operating profit in the consolidated statements of income, and Finance income, Financecosts, and Income tax expense are not included. Operating costs which are not allocated to eachsegment directly are allocated on the basis of the most reasonable standard to allocate.

21

2. Total amount of each segment and Eliminations or Corporate is correspondent to the amount of total
assets in the consolidated statements of financial position, and Investments accounted for using theequity method, derivative assets, and deferred tax assets are included. Assets which are not allocatedto each segment directly less the amount included in Eliminations or Corporate are allocated into eachsegment on the basis of the most reasonable standard to allocate.
3. Eliminations or Corporate includes elimination of intersegment transactions and corporate assets.
Corporate assets primarily consist of cash and cash equivalents and financial assets measured at fairvalue through other comprehensive income.
FYE 2021 (April 1, 2020 to March 31, 2021)

Revenue(1) External customers(2) Intersegment
Total revenue
Operating profit
Finance Income
Finance Costs
Profit before tax
Segment assets
Other items
Depreciation andamortization
Share of profit (loss) ofinvestments accounted forusing the equity method
Investments accounted forusing the equity method
Additional non-current
assetsSubtotal

Others(Unit: Millions of yen)
Eliminations
Consolidated
or Corporate

Automobile

Aerospace

2,737,503
2,277
2,739,780
109,067

87,693
3
87,696(9,811)

2,825,196
2,280
2,827,476
99,256

5,014
29,49734,511
3,070－(31,777)(31,777)
142

3,103,212

265,857

3,369,069

67,329(24,686)

2,830,210－
2,830,210
102,468
21,003(9,517)
113,954
3,411,712

200,003

4,771

204,774

1,543－

206,317

329

－

329

(449)

－

(120)

7,605

－

7,605

2,572

－

10,177249,715

7,671

257,386843－

258,229

Note: 1. The method to calculate the operating profit (loss) of each segment is correspondent to the method to
calculate the operating profit (loss) in the consolidated statements of income, and Finance income,Finance costs, and Income tax expense are not included. Operating costs which are not allocated toeach segment directly are allocated on the basis of the most reasonable standard to allocate.
2. Total amount of each segment and Eliminations or Corporate is correspondent to the amount of total
assets in the consolidated statements of financial position, and Investments accounted for using theequity method, derivative assets, and deferred tax assets are included. Assets which are not allocatedto each segment directly less the amount included in Eliminations or Corporate are allocated into eachsegment on the basis of the most reasonable standard to allocate.

223. Eliminations or Corporate includes elimination of intersegment transactions and corporate assets.
Corporate assets primarily consist of cash and cash equivalents and financial assets measured at fairvalue through other comprehensive income.
(2) Information about products and services
Information about products and services is omitted since the classifications of products and services are the sameas reporting segments.
(3) Information about geographic areas
The revenue and carrying amounts of non-current assets other than financial instruments and deferred tax assets
based on the location of the Group as of and for the consolidated fiscal years ended March 31, 2020 and 2021
are as follows:
FYE 2020 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)

Revenue
Non-current assets(other than financial instruments
and deferred tax assets)

North America
Japan
(US)
572,668 2,413,127 2,267,912

838,263

327,851

323,887

EuropeAsia

OthersTotal

116,242

106,365

135,707 3,344,109

538

443

－ 1,167,095

Note: Revenue is based on the location of customers and classified by countries or areas.
FYE 2021 (April 1, 2020 to March 31, 2021)(Unit: Millions of yen)
North America(US)498,336 2,083,039 1,962,964

Japan

Revenue
Non-current assets(other than financial instruments
and deferred tax assets)

890,893

316,677

312,082

EuropeAsia

OthersTotal

53,586

94,024

101,225 2,830,210

501

337

－ 1,208,408

Note: Revenue is based on the location of customers and classified by countries or areas.
(4) Information about major customers
Information about major customers is omitted because there was no specific customer whose revenue is equal toor more than 10% of the revenue on the consolidated statements of income.

23

7. Cash and cash equivalents
Cash and cash equivalents consist of the following:

Cash and deposits

FYE 2020(as of March 31, 2020)
853,244(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)
901,141

5,722

6,185

858,966

907,326

Short-term investments
Total

Cash and cash equivalents are classified as financial assets measured at amortized cost.
Short-term investments held by the Group are mainly money market funds.
There are no cash and cash equivalents which is subject to the limitation of use as of March 31.2021.
8. Trade and other receivables
Trade and other receivables consist of the following:Notes receivable and Accounts
receivable-trade
Accounts receivable-otherFYE 2020(as of March 31, 2020)(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

105,522

107,756

38,38136,548Trade loans

178,492

177,039

Others42,444

20,564

Total

364,839

341,907

202,761

187,797

162,078

154,110364,839

341,907

Receivables expected to becollected within 12 months
Receivables expected to becollected beyond 12 months
Total

Trade and other receivables other than lease receivables and contract assets are classified as financial assets
measured at amortized cost.
9. Inventories
Inventories consist of the following:

Finished goods andmerchandiseWork in process

FYE 2020(as of March 31, 2020)(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

294,148237,31275,35082,197

Raw materials and supplies

90,442

99,544

Total

459,940

419,053

The amounts of write-down of inventories recognized as an expense for the consolidated fiscal years ended
March 31, 2020 and 2021 were 1,461 million yen and 5,772 million yen respectively.

2410. Other financial assets
Other financial assets consist of the following:

Financial assets measured atamortized cost
Debt instruments
Financial assets measured
at fair value through profit or loss
Derivatives(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

FYE 2020(as of March 31, 2020)

Debt securities
Financial assets measured at fairvalue through othercomprehensive income
Equity securities
Debt securities
Total
Financial assets expected to becollected within 12 months
Financial assets expected to becollected beyond 12 months
Total

59,73657,356

1,131－

21,48530,701

8,922

97,510132,829

144,101

224,103329,668

204,373

228,279

19,730101,389

224,103329,668

Equity securities including stocks held to maintain or strengthen the business relationship with investees are, at
initial recognition, designated as financial assets measured at fair value through other comprehensive income.
Major securities included in the equity securities designated as financial assets measured at fair value throughother comprehensive income for the consolidated fiscal years ended March 31, 2020 and 2021 consist of thefollowing:
FYE 2020 (as of March 31, 2020)(Unit: Millions of yen)
Fair value
995
935
847
709
625
460
439
330
294

TOKYO LIGHT ALLOY CO., LTD.
The Gunma Bank,Ltd.
The Kyoritsu Co., Ltd.
Sakamoto Research & Development Holdings Ltd.
Shigeru Co., Ltd.
Mizuho Financial Group, Inc.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
OSHIMA ELECTRIC WORKS CO., LTD.
Mitsui O.S.K. Lines, Ltd.

25

FYE 2021 (as of March 31, 2021)(Unit: Millions of yen)
Fair value
77,317
1,132
1,028
1,012
713
650
595
483
349

TOYOTA MOTOR CORPORATIONThe Gunma Bank,Ltd.
The Kyoritsu Co., Ltd.
TOKYO LIGHT ALLOY CO., LTD.
Sakamoto Research & Development Holdings Ltd.
Shigeru Co., Ltd.
Mizuho Financial Group, Inc.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
OSHIMA ELECTRIC WORKS CO., LTD.

(Derecognition of equity securities designated as financial assets measured at fair value through othercomprehensive income)A part of the financial assets measured at fair value through other comprehensive income are sold based on theassessment of business relationship, etc. The fair value of equity securities designated as financial assets
measured at fair value through other comprehensive income that are derecognized upon sale and cumulative
gains and losses that have been previously recognized in equity as other comprehensive income for the
consolidated fiscal years ended March 31, 2020 and 2021 consist of the following:(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)

FYE 2020(April 1, 2019 toMarch 31, 2020)
Fair value

27,924

811

Cumulative gains (losses)

8,306

171

There are no equity securities designated as financial assets measured at fair value through other comprehensive
income for which cumulative gain or loss is transferred to retained earnings due to significant decrease of fairvalue.
Most of dividend received from equity securities designated as financial assets measured at fair value throughother comprehensive income arise from the investment held as of the end of reporting period.

2611. Property, plant and equipment(1) The movement of carrying amount, acquisition cost, accumulated depreciation and accumulated impairment
losses of "Property, plant and equipment" are the follows:
FYE 2020 (April 1, 2019 to March 31, 2020)
Carrying amount(Unit: Millions of yen)
VehiclesBuildings Machinery,used forandequipment
operatingstructures and vehicles
lease*1Land

Tools,
Construction Right-offurniture
in progressuse
Othersand*2assetsfixtures

Total

Beginningbalance

218,188

209,433

15,809 171,844 64,889

31,334 112,592

430

808,710

Acquisition

22,30382,24443,516

1,333 53,107

74,083 32,767－

265,837

Depreciation*3(13,684)(50,146)(4,991)－ (36,221)－ (44,764)

Disposals(890)(7,653)(2,242)

(676)

(272)

(389)

(24)

－

(9,904)

(33)

(11)

－

(207)

－

－

－

－

(251)

(957)

(1,235)

(282)

(120)

(999)

(370)

(168)

－

(3,849)(262)(30,183)(32,797)256

14(64,047)(585)－(94,807)

Ending balance 224,665

202,449

19,013 172,430 80,518

40,611 99,818－

820,491

Reclassification
to assets held
for sale
Foreignexchangedifferences
Others*4(430) (145,245)

Note: 1. Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
2. Construction in progress includes the expenditures related to the property, plant and equipment underconstruction.
3. Depreciation is included in "Cost of sales" and "Selling, general and administrative expenses" in the
consolidated statements of income.
4. Others include transfers from vehicles to inventory, construction in progress to each item, amount ofgovernment grants reduced, etc.

27

FYE 2021 (April 1, 2020 to March 31, 2021)
Carrying amount(Unit: Millions of yen)
Machinery, Vehicles
Buildings
equipment used forandandoperatingstructures
vehicleslease*1Land

Tools,
furniture Construction Right-ofOthers
and in progress *2 use assets
fixtures

Total

Beginningbalance

224,665

202,449

19,013 172,430 80,518

40,611

99,818－820,491

Acquisition

31,16950,221

11,3602,190 18,430

72,981

94,438－269,429

Depreciation*3(14,635)(47,009)(2,035)－ (34,849)－(56,808)－ (153,301)

Disposals(1,310)(3,959)(2,283)(544) (1,127)

(56)

(3)

－

(6,999)

(33)

(2)

－

(34)

－

－

－

－

(69)

958

604

127

147

250

143

775

－

2,877

(144)

(7,161)(11,789)(648)

5(78,183)(6,649)－(92,780)

Ending balance 240,670

195,143

14,393 173,541 63,227

35,496

131,571－

839,648

Reclassification
to assets held
for sale
Foreignexchangedifferences
Others*4

Note: 1. Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
2. Construction in progress includes the expenditures related to the property, plant and equipment underconstruction.
3. Depreciation is included in "Cost of sales" and "Selling, general and administrative expenses" in the
consolidated statements of income.
4. Others include transfers from vehicles to inventory, construction in progress to each item, etc.

28

Acquisition costs(Unit: Millions of yen)
Machinery, Vehicles
Buildings
equipment used forandandoperatingstructures
vehicles lease*1
FYE 2020(as of April 1,
2019)
FYE 2020(as of March 31,
2020)
FYE 2021(as of March 31,
2021)

Tools,
Construction Right-offurniture
in progress use Others
andassets*2
fixtures

Land

Total

451,964

662,176

19,282 183,981

374,897

31,334 172,683 1,038 1,878,073

466,314

673,572

22,605 184,281

405,041

40,611 184,697 1,036 1,955,552

493,061

695,669

17,192 185,347

407,100

35,496 209,873

155 2,026,701

Note: 1. Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
2. Construction in progress includes the expenditures related to the property, plant and equipment underconstruction.
Accumulated depreciation and accumulated impairment loss
(Unit: Millions of yen)
Machinery, Vehicles
Buildings
equipment used forandandoperatingstructures
vehicleslease*1
FYE 2020(as of April 1,
2019)
FYE 2020(as of March 31,
2020)
FYE 2021(as of March 31,
2021)

Land

Tools,
Right-ofOthers
furniture
use assets
and fixtures

Total

233,776452,7433,473

12,137

310,008

60,091

608 1,069,363

241,649

471,123

3,592

11,851

324,523

84,8791,036 1,135,061

252,391

500,526

2,799

11,806

343,87378,302155 1,187,053

Note: Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
(2) The carrying amount of property, plant and equipment pledged as collateral for liabilities
For the amount of property, plant and equipment pledged as collateral for liabilities, please refer to "16. Financing
liabilities".
(3) Commitment
For a discussion of our commitments to acquire property, plant and equipment, please refer to "33.
Commitments".

29

12. Intangible assets and goodwill
The movement of carrying amount, acquisition cost, accumulated amortization and accumulated impairment
losses of Intangible assets and goodwill are as follows:
FYE 2020 (April 1, 2019 to March 31, 2020)
Carrying amount(Unit: Millions of yen)
Software
Beginning balance
Separate acquisitions
Internally generated
Amortization *2
Disposals
Foreign exchange differences
OthersEnding balance

30,226
12,544－(12,419)
(6)
(97)
352
30,600Capitalized
development
costs
114,918－
61,187(33,842)－－(499)
141,764

Others*1

Total

10,366
18,772
－
(795)
(9)
(106)
9,183
37,411

155,51031,316
61,187(47,056)
(15)
(203)
9,036
209,775

Note: 1. Others include Goodwill.
2. Amortization of "Intangible assets and goodwill" is included in "Cost of sales" and "Selling, general andadministrative expenses" in the consolidated statements of income.
FYE 2021 (April 1, 2020 to March 31, 2021)
Carrying amount(Unit: Millions of yen)
Software
Beginning balance
Separate acquisitions
Internally generated
Amortization *1
Disposals
Foreign exchange differences
OthersEnding balance

30,60015,994－(10,834)
(681)
132
(93)
35,118

Capitalized
development
costs
141,764－
44,347(40,502)－－(7,307)
138,302

Others37,411
19,376－(1,284)－143(12,414)43,232

Total
209,775
35,37044,347(52,620)(681)
275(19,814)
216,652

Note: 1. Amortization of "Intangible assets" is included in "Cost of sales" and "Selling, general and administrative
expenses" in the consolidated statements of income.

30

Acquisition costs
SoftwareFYE 2020(as of April 1, 2019)
FYE 2020(as of March 31, 2020)
FYE 2021(as of March 31, 2021)

Capitalized
development costs(Unit: Millions of yen)
OthersTotal

94,949203,729

18,088316,766

104,143

229,585

45,694379,422103,629

241,532

44,690389,851

Accumulated depreciation and Accumulated impairment losses(Unit: Millions of yen)
SoftwareFYE 2020(as of April 1, 2019)
FYE 2020(as of March 31, 2020)
FYE 2021(as of March 31, 2021)

Capitalized
development costs

OthersTotal

64,72388,811

7,722

161,256

73,54387,821

8,283

169,647

68,510103,230

1,459

173,19931

13. Investment property
The movement of carrying amount, acquisition cost, accumulated depreciation and accumulated impairment
losses of Investment property are as follows:(1) The movement of carrying amount of Investment property
Carrying amountFYE 2020(April 1, 2019 toMarch 31, 2020)
25,414
56
(441)
(291)
(752)
23,986

Beginning balance
Acquisition
Depreciation
Disposals
OthersEnding balance(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
23,986
77
(396)
(21)
636
24,282(2) Acquisition costs, accumulated depreciation, accumulated impairment losses, and fair value

Acquisition costs
Accumulated depreciation
Accumulated impairment losses
Carrying amount
Fair value

FYE 2020(as of March 31, 2020)
35,636(10,927)(723)
23,98640,949(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)
36,256(11,251)(723)
24,282
39,191

The fair value of major investment property is based on the assessment by the independent appraiser certified
as adequate professional in the area in which the property is located.
The assessment is based on the appraised value by discounted cash flow method or transaction prices inmarket of observable similar assets, etc.
The level of the fair value hierarchy of investment property is level 3.
For fair value hierarchy, please refer to "30. Fair Value".

32

(3) Profit and loss from investment property(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)

FYE 2020(April 1, 2019 toMarch 31, 2020)
Rental income

3,729

3,489

Rental expenses(1,940)(1,821)

Profit

1,789

1,668

Rental income is mainly stated in "Revenue" in the consolidated statements of income.
Rental expenses are the expenses corresponding to rental income (costs related to depreciation, repairs,
insurance and taxes, etc.), and stated in "Cost of sales" and "Selling, general and administrative expenses", and"Other expenses" in the consolidated statements of income.
14. Investments accounted for using the equity method
The carrying amounts of investments accounted for using the equity method are as follows:(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

FYE 2020(as of March 31, 2020)
Investments accounted for using theequity method

9,831

10,177

The Group's share of profit (loss) and other comprehensive income (loss) of investments accounted for using theequity method are as follows:(Unit: Millions of yen)
FYE 2020
FYE 2021(April 1, 2019 to(April 1, 2020 toMarch 31, 2020)
March 31, 2021)
Share of profit (loss) of investments accounted
(223)
(120)
for using the equity method
Share of other comprehensive income (loss)(182)
6
of investments accounted for using the equity
method
Total
(405)
(114)
For the consolidated fiscal years ended March 31, 2020 and 2021, there are no individually significant affiliates orjoint ventures in investments accounted for using the equity method.

33

15. Trade and other payables
Trade and other payables consist of the following:(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

FYE 2020(as of March 31, 2020)

Notes payable and Accounts
payable-trade
Electronically recorded
obligations-operating

267,657

218,516

33,37622,484

Accounts payable-other33,47025,887

Others

1,720

937

Total

336,223

267,824

336,223

267,824－－

336,223

267,824

Payables expected to be paid
within 12 months
Payables expected to be paidbeyond 12 months
Total

Trade and other payables are classified as financial liabilities measured at amortized cost.
16. Financing liabilities(1) Financing liabilities consist of the following:
Financial covenants are attached to a part of borrowings as of March 31, 2021.
The Company observes the covenants for the consolidated fiscal year ended March 31, 2021. The covenants
are monitored to maintain the required level.
(Unit: Millions of yen)
FYE 2020
FYE 2021
Average
Payment due
date(as of March 31, 2020) (as of March 31, 2021) interest rate*1
Short-term borrowings
4,753
1,343
0.24%
Current portion of
7,420
24,9910.18%
long-term borrowings
Long-term borrowings
187,037
227,5490.18%
2022-2030
Bonds
40,00080,000*2*2
Total
239,210
333,883
Note: 1. Average interest rate represents the weighted-average interest rates on outstanding balances offinancing liabilities as of March 31, 2021.
2. For Average interest rate and Payment due date of Bonds, please refer to (2) below.

34

(2) Bonds consist of the following

Company
Name

Brand

1st Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
2nd Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
3rd Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
4th Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
5th Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
6th Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause(Unit: Millions of yen)

FYE 2020

FYE 2021(as of March
31, 2020)(as of March
31, 2021)

December17, 2019

10,000December17, 2019

Date ofissuanceof bonds

Interest
rate

Repayment
Date

10,0000.12%

December17, 2024

15,00015,0000.21%

December17, 2026

December17, 2019

15,00015,0000.28%

December17, 2029

September
10, 2020－

10,0000.01%

September
8, 2023

September
10, 2020－

10,0000.17%

September
10, 2025

September
10, 2020－

20,0000.42%

September
10, 2030(3) Assets pledged as collateral
1. Assets pledged as collateral consist of the following:(Unit: Millions of yen)

FYE 2020(as of March 31, 2020)
Assets pledged ascollateral
Buildings andstructures
Machinery andvehicles
Land
Total

35

FYE 2021(as of March 31, 2021)

9,370

6,481

48

－

16,276
25,694

6,615
13,096

2. Secured liabilities
Secured liabilities consist of the following:(Unit: Millions of yen)

FYE 2020(as of March 31, 2020)
Short-term borrowings
Current portion of longterm borrowings
Long-term borrowings
OthersTotal

FYE 2021(as of March 31, 2021)
540

－

446

389

10,155
1,321
12,462

9,768
908
11,065

As is customary in Japan, bank loans are extended under general agreements which provide that security andguarantees for present and future indebtedness will be given upon request from the bank. And in the event of
delay in payment or default by the Group, the bank shall have the right to offset cash deposits about all theliabilities and to foreclose depending on the content of agreement.
17. Other financial liabilities
Other financial liabilities consist of the following:(Unit: Millions of yen)

FYE 2020(as of March 31, 2020)
Financial liabilities measured at amortized cost
Liabilities related to chargeable subcontracting
Long-term accounts payable-other
Guarantee deposits received
Financial liabilities measured at fair value throughprofit or loss
Derivatives
Lease liabilities
Lease liabilities (Current)
Lease liabilities (Non-current)
Total
Liabilities expected to be paid within 12 months
Liabilities expected to be paid beyond 12 months
Total

36

FYE 2021(as of March 31, 2021)

18,2342,805
6,464

23,467
277
6,779

2,028

7,644

23,86458,586111,98130,171
71,472
139,810

44,12667,855111,981

61,28278,528139,810

18. Provisions
FYE 2021 (April 1, 2020 to March 31, 2021)(Unit: Millions of yen)

Beginning of the period*2
Increase during the year
Decrease during the year
(utilized)
Decrease during the year
(reversal)
OthersEnding of the period
Current liabilities
Non-current liabilities
Total

Provision for
product
warranties
270,974
179,691

Provision for loss
on construction
contracts
3,112
4,479

(213,441)

Others*1

Total

34,735
37,108308,821
221,278(558)(33,330)(247,329)

(973)

－

(128)

(1,101)

2,649
238,900

－
7,033

133
38,5182,782
284,451

151,660
87,240238,900

7,033
－
7,033

35,8042,714
38,518

194,497
89,954284,451

Note: 1. Others include asset retirement obligations, etc.
2. “Beginning of the period” of “Others” reflects the content stated in note “2. Basis of Preparation, (4)Change in presentation”.
(Provision for product warranties)
Provision for product warranties is recognized at the total amount of the following estimations to cover warranty
costs for products sold.
1. Estimated amount based on past experiences with consideration given to the expected level of future
warranty costs in accordance with the terms and conditions of the warranties
2. Estimated amount calculated as the expenses related to product recall in accordance with the notifications tothe competent authorities
Provision for product warranties is used for expenditures based on the demand from customers and dealers. We
believe that we have made sufficient provisions for the warranty costs that we expect to be incurred based on
currently available information. However, since the calculation of the provision for product warranties involves theestimate of the warranty costs that would be incurred over multiple years in the future, the actual warranty costs
may deviate from the estimates. This could cause the necessity of recording additional provisions for productwarranties, and a significant impact on the consolidated financial statements.
(Provision for loss on construction contracts)
To cover loss on contracts in the Aerospace segment, a provision for loss on construction contracts is
recognized for uncompleted construction of contracts at the consolidated fiscal year - end for which substantial
losses are anticipated and such losses can be reasonably estimated. The timing of expenditure depends on the
progress of construction contracts in the future.
19. Employee benefits(1)Outline of employee benefits
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans, defined
benefit pension plans, and the Company and certain domestic subsidiaries have defined contribution pension
plans. In addition, in certain occasions, additional retirement payments are made to employees for theirretirement.

37

Consolidated foreign subsidiaries primarily have defined contribution plans.
As of March 31, 2021, 51 companies including the Company and its consolidated domestic subsidiaries havelump-sum retirement payment plans, and there are 6 defined benefits pension plans, and also 26 defined
contribution plans. In addition, there are 2 multi-employer defined benefits pension plans.
In contract-type corporate pension plan, the Company is obliged to comply with laws and regulations,
appointments made by Minister of Ministry of Health, as well as to faithfully accomplish their duties for theparticipants, etc. It is prohibited that the Company signs asset management agreement for the purpose of a third
party interest other than self or participants and orders specific method about the management of contribution.
In domestic corporate pension plan, the Company makes actuarial review on the basis of corporate financial
position and review of asset management every five years, and raises premium when funding standard is notsatisfied.
In the management of plan assets, the Company builds most appropriate portfolio for the purpose of the
securement of stable income under the acceptable risks to secure employees’ future benefit, and makes aneffort to keep the allocation of assets based on the portfolio, and reviews the portfolio regularly in response to thechange of market environment and status of funding.
Major plans of the Group are exposed to the interest rate risk, etc.
(2)Reconciliation
FYE 2020 (April 1, 2019 to March 31, 2020)
The present value ofthe defined benefit
obligations

Plan assets
Plans in
Japan

Plans
outsideJapan

Plans in
Japan

Plans
outsideJapan(Unit: Millions of yen)
Net defined benefit
liabilities(assets)
Plans in
Japan

Plans
outsideJapan

Beginning balance
109,419
5,881
133,887
32,16924,46826,288－－Current service cost
8,161
1,862
8,161
1,862
Interest income or expense
596
－
595
1,204
(1)
1,204
Remeasurements of net
defined benefit liabilities(assets)(i) Return on plan assets(excluding amounts included in
223
110
－
－
(223)
(110)
interest)(ii) Actuarial gains and losses－－(1,260)1,722(1,260)
1,722
Actuarial gains and losses
arising from changes in
－
－
－
(749)
－
(749)
demographic assumptions
Actuarial gains and losses－－(1,260)2,471(1,260)2,471
arising from changes infinancial assumptions
Effect of changes on foreign
－
－
－
(116)
(631)
(515)
exchange rates
Contributions to the plan
Contributions by the
3,644
190
－
－
(3,644)(190)
employer
Payments from the plan
(3,280)(304)(5,902)(826)(2,622)(522)
Others
(74)
114
(22)
161
52
47
Ending balance
110,528
5,875
135,459
35,661
24,931
29,786This reconciliation does not include other employee benefits about welfare program, etc., 1,862 million yen of
beginning balance, 1,808 million yen of ending balance.

38

FYE 2021 (April 1, 2020 to March 31, 2021)
The present value ofthe defined benefit
obligations

Plan assets
Plans in
Japan

Plans
outsideJapan

Plans in
Japan

Plans
outsideJapan(Unit: Millions of yen)
Net defined benefit
liabilities(assets)
Plans in
Japan

Plans
outsideJapan

Beginning balance
110,528
5,875
135,459
35,661
24,931
29,786－－
Current service cost
8,197
2,090
8,197
2,090
－
Interest income or expense
771
676
1,138
(95)
1,138
Remeasurements of net
defined benefit liabilities(assets)(i) Return on plan assets(excluding amounts included
3,280
983
－
－
(3,280)(983)
in interest)(ii) Actuarial gains and losses
－
－
(894)
40
(894)
40
Actuarial gains and losses－－
48(1,501)48(1,501)arising from changes indemographic assumptions
Actuarial gains and losses
arising from changes in
－
－
(942)
1,541
(942)
1,541
financial assumptions
Effect of changes on foreign
－
144
－
739
－
595
exchange rates
Contributions to the plan
Contributions by the
－
－
4,731
221
(4,731)(221)
employer
Payments from the plan
(2,424)(345)(4,489)(907)(2,065)(562)－
Others
125
28
183
28
58
Ending balance
116,886
7,003
138,977
38,94422,091
31,941This reconciliation does not include other employee benefits about welfare program, etc., 1,808 million yen of
beginning balance, 1,785 million yen of ending balance.

39

(3) Components of plan assets(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

FYE 2020(as of March 31, 2020)
Quoted market prices in active markets
With

Cash and cash
equivalents
Shares issued by
Japanesecompanies
Shares issued byforeign companies
Subtotal
Bonds issued by
Japanesecompanies
Bonds issued byforeign companies
Subtotal
Life insurance General accounts
OthersSubtotal
Total

Without

Quoted market prices in active markets

Total

With

Without

Total

3,673

－

3,673

4,226

－

4,226

9,375

－

9,375

12,349－12,349

5,890

－

5,890

7,841

－

7,841

15,265－

15,26520,190－20,19075,476－75,47675,385－75,385

3,692

－

3,692

4,263

－

4,263

79,168－79,16879,648－79,648

－

3,791

3,791

－

3,861

3,861

－
－

14,506
18,297

14,506
18,297－－

15,964
19,825

15,964
19,825

98,106

18,297

116,403

104,064

19,825

123,889(4) Significant actuarial assumptions used to determine the present value of defined benefit obligations at theend of each consolidated fiscal year are as follows:
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Plans in Japan
Discount rate

Plans outside
Japan

0.5％

3.3％

40

Plans in Japan
0.6％

Plans outside
Japan
3.2％

Sensitivity analysis about effects on defined benefit obligations due to any change in actuarial assumptions
mentioned above are as follows:(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)

Discount rate
1.0％ increase
1.0％ decrease

Plans in Japan

Plans outside
Japan

Plans in Japan

Plans outsideJapan(12,070)(4,053)(12,089)(4,335)

14,6333,821

14,654

4,029

Sensitivity analysis about effects of each actuarial assumption is calculated on the basis that there are nochanges in other actuarial assumptions.
Therefore, if these assumptions change in combination, the effects may be different from the amounts statedabove.
In addition, approximate amounts are stated above because the projected cash flow is not taken into account for
all benefit payments of the plans.
The Group expects to contribute 4,952 million yen from April 1, 2021 to March 31, 2022.
The Group's weighted-average durations of the defined benefit obligations for the consolidated fiscal years
ended March 31, 2020 and 2021 were 12 years in Japan and 6 years outside Japan , and 12 years in Japanand 6 years outside Japan, respectively.
(5)Multi-employer plan
Some domestic subsidiaries participate in a pension fund, which is a multi-employer plan.
The fund is a defined benefits pension plan. However, the amount of pension assets corresponding tocontributions cannot be calculated reasonably. Therefore, the method where contribution payable to the pension
fund is recognized as retirement benefit expenses is adopted.
If a plan is liquidated and settled, shortfalls are collected or residual assets are distributed on the basis of theminimum base amount calculated by laws. If an employer withdraws from the multi-employer plan, liabilities andshortfalls expected due to withdrawal are collected.

41

Information about the multi-employer plan is as follows:
Funding status of the multi-employer plan as a wholeFYE 2020(as of March 31, 2020)

Plan assets
9,064
Total amount of actuarial liabilities
and minimum actuarial reserve
10,150for the purpose of pension
financing calculation
Difference(1,086)
Note: The latest figures for each consolidated fiscal year end are mainly disclosed.

(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)
9,422
10,108(686)

Ratio of contributions by the Group to the fund in the overall plan
FYE 2020 5% (Principally, April 1, 2019 to March 31, 2020)
FYE 2021 5% (Principally, April 1, 2020 to March 31, 2021)(Contributions to the multi-employer plans in the next financial year)
The Group estimates the contributions to the multi-employer plans for the consolidated fiscal year ending March
31, 2022 to be 24 million yen.
(6) Personnel expenses
Personnel expenses included in the consolidated statements of income are as follows:
FYE 2020(April 1, 2019 toMarch 31, 2020)
Personnel expenses
Contributions to defined contribution pension plans(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)

314,156

299,979

5,693

5,306

Personnel expenses include salaries, bonuses, social security expenses and retirement benefit expenses, etc.

4220. Equity and Other components of equity(1) Management of Capital
The Group makes investments in capital and research and development to improve corporate value throughgrowth on a global basis.
In order to meet these funding needs, the Group makes capital management through consideration of the balance
between financing liabilities and equity.
Equity Ratios as of March 31, 2020 and 2021 are as follows:
Equity means "equity attributable to owners of the parent", and Equity Ratio is obtained by dividing equity by total
liabilities and equity.
(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Equity1,712,881
1,777,735
Total Liabilities and Equity
3,293,908
3,411,712
Equity Ratio
52.0%
52.1%
(2) Capital Surplus and Retained Earnings
The Companies Act of Japan provides that no less than 50% of the paid-in amount or proceeds of issuance ofshares shall be incorporated in common stock, and that the remaining shall be incorporated in capital reserves.
Capital reserves may be incorporated in common stock upon approval of the General Meeting of Shareholders.
Number of authorized shares as of March 31, 2020 and 2021 is 1,500,000,000. The changes in the number of thepaid-in outstanding shares for the consolidated fiscal years ended March 31, 2020 and 2021 are as follows:
Number of Shares
FYE 2020 (as of April 1, 2019)
ChangeFYE 2020 (as of March 31, 2020)
ChangeFYE 2021 (as of March 31, 2021)

769,175,873－
769,175,873－
769,175,873

All shares issued by the Company are no-par-value stock with no restriction on rights.
(3) Retained Earnings
The Companies Act of Japan provides that earnings in an amount equal to 10% of the cash dividends fromretained earnings shall be appropriated as capital reserves or legal retained earnings on the date of distribution ofretained earnings until an aggregated amount of capital reserve and legal reserve equals 25% of the common
stock. The amount of legal retained earnings can be used to compensate for deficits. Legal reserves may be used
upon approval of the General Meeting of Shareholders.

43(4) Treasury Stock
Under the Companies Act of Japan, the number of shares and total value of treasury stock acquisition may be
determined, upon approval of the General Meeting of Shareholders, within the amount available for distribution.
Furthermore, treasury stock may be acquired through market transactions or tender offers in accordance with thearticles of incorporation within the conditions set forth in the Companies Act, upon approval of the Board of
Directors.
The changes in the treasury stock as of April 1, 2019 and March 31, 2020 and 2021 are as follows:
Number of Shares
2,414,841
2,436(56,909)2,360,368
6,589(61,827)
2,305,130

FYE 2020 (as of April 1, 2019)
Increase
Decrease
FYE 2020 (as of March 31, 2020)
Increase
Decrease
FYE 2021 (as of March 31, 2021)

The increase of 2,436 treasury stock in the consolidated fiscal year ended March 31, 2020 is due to purchase ofshares less than one unit. The decrease of 56,909 treasury stock in the consolidated fiscal year ended March 31,
2020 is due to disposal on July 31, 2019 as compensation to grant restricted stock that was passed as a resolution
in the Board of Directors Meeting on April 28, 2017.
The increase of 6,589 treasury stock in the consolidated fiscal year ended March 31, 2021 is due to purchase ofshares less than one unit. The decrease of 61,827 treasury stock in the consolidated fiscal year ended March 31,
2021 is due to disposal on August 7, 2020 as compensation to grant restricted stock that was passed as a
resolution in the Board of Directors Meeting on April 28, 2017.
(5) Other Components of Equity
1. Remeasurements of defined benefit plans
The amount of remeasurements of defined benefit plans is comprised of the amounts of the difference between
the actuarial assumptions and actual results at the beginning of the consolidated fiscal year, changes in actuarial
assumptions and revenue from plan assets excluding amount included in interest. This amount is recognized asother comprehensive income and immediately transferred from other components of equity to retained earnings.
2. Net changes in revaluation of equity instruments designated as measured at fair value through othercomprehensive income and net changes in revaluation of debt instruments measured at fair value through othercomprehensive income.
Cumulative gain or loss on revaluation of financial assets measured at fair value through other comprehensive
income.
3. Exchange differences on translating foreign operations
Exchange differences arising from translation of the financial statement of consolidated foreign operations fromthe respective functional currencies to Japanese yen, which is the presentation currency of the Group.

44

The changes in the components of accumulated other components of equity as of March 31, 2020 and 2021 are
as follows:(Unit: Millions of yen)
Net changes
in revaluationof equity
Remeasurem

instruments

ents ofdesignated as

definedmeasured at

benefit plans

fair value
through othercomprehensiv
e income

FYE 2020 (as ofApril 1, 2019)
Adjustment
during the year
Reclassification toretained earnings
FYE 2020 (as ofMarch 31, 2020)
Adjustment during
the year
Reclassification toretained earnings
FYE 2021 (as ofMarch 31, 2021)

Net changes
in revaluationof debt

Exchange

Other

instruments

differences oncomprehensive

measured attranslating

income underfair value

foreignthe equity

through otheroperations

methodTotal

comprehensiv
e income

－

8,839

187

15,691(186)

24,532

(475)

(763)

1,966

(12,168)(182)(11,622)475(4,994)－－－(4,519)

－

3,082

2,153

3,523

(368)

8,391

4,467

6,527

745

19,436

6

31,180(4,467)

(109)

－

－

－

(4,576)

－

9,500

2,898

22,959(362)

34,99545

(6) Other Comprehensive Income
Each component of other comprehensive income and related tax effect including non-controlling interests for the
consolidated fiscal years ended March 31, 2020 and 2021 are as follows:(Unit: Millions of yen)
FYE 2021
FYE 2020(April 1, 2020 to(April 1, 2019 toMarch 31, 2020)
March 31, 2021)
Tax
Tax
BeforeNet of
BeforeNet ofbenefitbenefit
tax
tax
tax
tax
(expense)(expense)
Items that will not be reclassified to
profit or loss:
Remeasurements of defined benefit
plans:
Amount incurred during the year
(402)
(73)
(475)
4,934
(467)
4,467
Net changes
(402)
(73)
(475)
4,934
(467)
4,467
Net changes in revaluation of equity
instruments designated as measured
at fair value through othercomprehensive income:Amount incurred during the year
(1,048)
285
(763)
9,293
(2,766)
6,527
Net changes(1,048)
285
(763)
9,293
(2,766)
6,527
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations:
Amount incurred during the year
Reclassification to profit or loss
Net changes
Share of other comprehensive incomeof investments accounted for using
the equity method:Amount incurred during the year
Reclassification to profit or loss
Net changes
Net changes in revaluation of debt
instruments measured at fair value
through other comprehensive income
Share of other comprehensive
incomeAmount incurred during the year
Reclassification to profit or loss
Net changes
Total other comprehensive income(12,581)－(12,581)－－－(12,581)－(12,581)

20,031－
20,031－－－

20,031－
20,031

(182)
－
(182)

－
－
－

(182)
－
(182)

6
－
6

－
－
－

6
－
6

2,484
－
2,484
(11,729)

(518)
－
(518)
(306)

1,966
－
1,966
(12,035)

944－
944
35,208

(199)
－
(199)
(3,432)745－
745
31,776

46

The components of other comprehensive income included in non-controlling interests for the consolidated fiscal
years ended March 31, 2020 and 2021 are as follows:(Unit: Millions of yen)
FYE 2020
FYE 2021(April 1, 2019 to(April 1, 2020 toMarch 31, 2020)
March 31, 2021)
Exchange differences on translating foreign operations
(413)
596
21. Revenue(1) Breakdown of revenue
The Group has adopted “IFRS 15 Revenue from Contracts with Customers” and recognizes revenue based on
the following five－step approach.
Step 1: Identify the contracts with a customer
Step 2: Identify the performance obligations in the contracts
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when performance obligations are satisfied
The automotive segment is mainly engaged in manufacturing and sales of automobiles as well as providing
services such as maintenance.
For sale of vehicles, revenue is recognized primarily at the time of delivery of the product as we consider that upondelivery the customer obtains control of the product and the performance obligation is satisfied. Maintenance andother service revenue are recognized over a certain period of time. Payment for the sale of a product is generally
made within 30 days of the transfer of control of the product to the customer.
The contract with the customer for the sale of the product includes a clause that guarantees that the productcomplies with the agreed specifications and the Group recognizes the provision for product warranty for the costs
related to that warranty. For details of the provision for product warranty, please refer to "3. Significant Accounting
Policies (12) Provisions 2. Provision for product warranty".
The aerospace segment has contracts with customers. Revenue from contract construction is recognized basedon the progress of performance obligations. The progress is measured by an input method based on the costs
incurred. Payments for contracts are generally made in stages based on the contracts with customers.

47

As described in “6. Segment Information” in the notes to the consolidated financial statements, the Group'sbusiness segment is classified into three categories: automotive, aerospace, and others. Revenue is broken down
by region based on the location of the customer. The relationship between these disaggregated revenues and therevenue of each reportable segment is as follows:
FYE 2020 (April 1, 2019 to March 31, 2020)
Automotive

Aerospace(Unit: Millions of yen)
Others*3
Total

Aerospace(Unit: Millions of yen)
OthersTotal

Revenue from contracts with customers
Japan
506,405
46,761
4,481
557,647
North America
2,313,306
95,29755
2,408,658
Europe116,14383
16116,242
106,3605－
Asia
106,365
135,67433
135,707－
OthersTotal
3,177,888
142,141
4,590
3,324,619
16,061
3,429
19,490－
Revenue arising from other sources *2
3,193,949
142,141
8,019
3,344,109
Total
Note: 1. The amounts mentioned above reflect elimination of internal transactions.
2. Revenue recognized from other sources includes lease revenue of products that are accounted for inaccordance with "IFRS 16 Leases", etc.
3. Other segment includes real estate leasing business, etc.
FYE 2021 (April 1, 2020 to March 31, 2021)
Automotive
Revenue from contracts with customers
Japan
North America
EuropeAsia
OthersTotal
Revenue arising from other sources *2
Total

441,705
2,034,229
53,55594,012
101,180
2,724,681
12,8222,737,503

40,70046,986
7－－
87,693－87,693

1,908
171
24
12
45
2,160
2,854
5,014

484,3132,081,386
53,586
94,024
101,225
2,814,534
15,6762,830,210

Note: 1. The amounts mentioned above reflect elimination of internal transactions.
2. Revenue recognized from other sources includes lease revenue of products that are accounted for inaccordance with "IFRS 16 Leases", etc.
3. Other segment includes real estate leasing business, etc.

48

(2) Contract balances
The balances of receivables, contract assets and contract liabilities arising from contracts with customers as ofMarch 31, 2020 and 2021:(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Receivables included in Trade and other receivables

105,522

107,756

Contract assets included in Trade and other receivables

27,415

6,521

Contract liabilities included in other current liabilities

111,900

119,043

Contract liabilities included in other non-current liabilities

175,321202,419

The contract assets mainly relate to the Group's right to the consideration for the work of contracts for aircraft
production and periodic repairs in the aerospace business that have been recognized based on measurement ofprogress. Contract assets are transferred to receivables when all deliveries of such construction are completed.
The contract liability mainly relates to contracts with defense industries in the aerospace business for whichrevenue is recognized upon completion of aircraft production and periodic repairs, as well as advanceconsideration received from customer for contracts.
Of the revenues recognized in the consolidated fiscal year ended March 31, 2021, the amount included in thecontract liability balance at the beginning of the consolidated fiscal year was 78,298 million yen, and the amountin the consolidated fiscal year ended March 31, 2020 was 70,441 million yen.
The amount of revenue recognized in the consolidated fiscal year ended March 31, 2021 from performanceobligations satisfied (or partially satisfied) in past periods is immaterial.
(3) Transaction price allocated to the remaining performance obligations
Breakdown of the aggregate amount of the transaction price allocated to the performance obligations that are
unsatisfied (or partially unsatisfied) and revenue expected to be recognized for each period are as follows:
There are no significant amounts that are not included in the transaction price among the consideration arisingfrom contracts with customers. In addition, as a practical expedient, transactions whose expected contract periods
are equal to or less than one year on an individual basis are not included in the following breakdown calculation.
(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Within 1 year
175,357
140,814Over 1 year
339,110348,352
Total
514,467
489,16649

(4) Costs to fulfill a contract with a customer or costs of obtaining a contract recognized as assets
The Group has no material incremental costs of obtaining a contract or costs to fulfill a contract that should berecognized as assets.
22. Selling, general and administrative expenses
The breakdown of selling, general and administrative expenses is as follows:
FYE 2020(April 1, 2019 toMarch 31, 2020)
73,24583,807
26,424
20,911
103,840
308,227

Salary and bonus
Advertising expenses
Depreciation and amortization expenses
Transportation and warehousing expenses
Others
Total(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
71,71069,72427,452
14,42396,558279,867

23. Other income and other expenses(1) Other income
Breakdown of other income is as follows:

Government grants
Gain on settlement of factory shutdown related costs
Gain on sales of property, plant and equipment
Revenue from investment property
Others
Total

－
2,534
2,141
392
2,684
7,751

(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
2,748
－
458
410
1,457
5,073

FYE 2020(April 1, 2019 toMarch 31, 2020)
5,376
6,650
12,026(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
5,119
5,938
11,057FYE 2020(April 1, 2019 toMarch 31, 2020)(2) Other expenses
Breakdown of other expenses is as follows:

Loss on sales of property, plant and equipment
OthersTotal

50

24. Finance Income and Finance Costs(1) Finance income
Finance income for the consolidated fiscal years ended March 31, 2020 and 2021 consist of the following:

Interest income:Financial assets measured at amortized cost
Debt instruments measured at fair value throughother comprehensive income
Gains (losses) on derivatives:
Financial assets and financial liabilities measured atfair value through profit or loss
Dividends received:
Equity instruments measured at fair value throughother comprehensive income
Gains (losses) on investment trust:
Debt instruments measured at fair value throughprofit or loss
Gains (losses) on foreign exchange
Others
Total(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)

FYE 2020(April 1, 2019 toMarch 31, 2020)
9,976

1,659

2,457

2,365

919

－

918

793

－

10,245－
1,574
15,844

3,489
2,452
21,003(2) Finance cost
Finance costs for the consolidated fiscal years ended March 31, 2020 and 2021 consist of the following:

Interest expense:
Financial liabilities measured at amortized cost
Lease liabilities
Gains (losses) on derivatives:
Financial assets and financial liabilities measured atfair value through profit or loss
Gains (losses) on investment trust:
Debt instruments measured at fair value throughprofit or loss
Gains (losses) on foreign exchange
Others
Total

51(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)

FYE 2020(April 1, 2019 toMarch 31, 2020)
786
1,019

874
1,072

－

6,748

3,412

68

12,901
389
18,507

－
755
9,517

25. Notes on Income Taxes(1) Income Taxes
1. Income tax expense recognized in profit or loss
FYE 2020(April 1, 2019 toMarch 31, 2020)

Current income tax expense
Current year
Prior year adjustment
Total current income tax expense
Deferred income tax expense
Recognition and reversal of temporary differences
Write-down of deferred tax asset
Total deferred income tax
Total(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)

38,707
1,064
39,77135,662(1,500)34,162

14,563731
15,29455,065

2,423
49
2,472
36,634

2. Reconciliation between the statutory income tax rate and the average effective tax rate
The statutory income tax rate in Japan for the consolidated fiscal years ended March 31, 2020 and 2021 is 30.5%.
The tax rates for the foreign subsidiaries are calculated based on the general tax rate in each tax jurisdiction.

Statutory income tax rate
Permanently non-deductible items
Tax credits for testing and research expenses
Modification and refund of income taxes for priorperiods
Difference in statutory income tax rates of foreignsubsidiaries
Changes in unrecognized deferred tax assets
Undistributed profits
OthersAverage effective tax rate after applying tax effectaccounting

52

FYE 2020(April 1, 2019 toMarch 31, 2020)
30.5 %
0.6 %(1.7) %

(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
30.5 %
3.5 %
－ %

0.5 %

(1.3) %

(2.6) %

(7.2) %

0.4 %－ %(1.2) %

0.0 %
5.4 %
1.2 %

26.5 %

32.1 %

(2) Deferred Tax Assets and Deferred Tax Liabilities
1. The components by major factor in deferred tax assets and deferred tax liabilities
FYE 2020 (April 1, 2019 to March 31, 2020)

Deferred tax assets
Unrealized profit on inventories
Retirement benefit liabilities
Depreciation of fixed assets
Provisions
Inventories
Accrued business tax
Carryforward of unused tax losses
OthersTotal deferred tax assets
Deferred tax liabilities
Depreciation of fixed assets
Deferred income of overseas
subsidiaries
Financial assets measured at fair value
through other comprehensive income
Reserve for advanced depreciation
Net defined benefit assets
Intangible assets
OthersTotal deferred tax liabilities
Net deferred tax assets (liabilities)(Unit: Millions of yen)

Recognized
Othersin other(translation
comprehen gains andsive income losses, etc.)

Beginningbalance

Recognizedin profit orloss

15,48523,606
8,672
104,703
2,127
407
911
51,884
207,795

1,835
2,074
1,111
(7,909)
(63)
(173)
(21)
(2,137)(5,283)

－
(73)
－
－
－
－
－
－
(73)

－
(127)
－
(268)
(11)
－
(22)
(2,217)(2,645)

17,32025,4809,783
96,526
2,053
234
868
47,530199,794

23,221

3,248

－

(385)

26,08419,998(1,730)－(394)

17,874

2,943

－

233

(1,304)

1,872

1,618
180
36,200700
84,860122,935

87
(180)
7,801
785
10,011(15,294)

－
－
－
－
233
(306)

－
－
－
－
(2,083)
(562)

1,705
－
44,001
1,485
93,021
106,773

53

Endingbalance

FYE 2021 (April 1, 2020 to March 31, 2021)

Deferred tax assets
Unrealized profit on inventories
Retirement benefit liabilities
Depreciation of fixed assets
Provisions
Inventories
Accrued business tax
Carryforward of unused tax losses
OthersTotal deferred tax assets
Deferred tax liabilities
Depreciation of fixed assets
Deferred income of overseas
subsidiaries
Financial assets measured at fair value
through other comprehensive income
Reserve for advanced depreciation
Intangible assets
Undistributed profits
OthersTotal deferred tax liabilities
Net deferred tax assets (liabilities)(Unit: Millions of yen)
Beginningbalance

Recognizedin profit orloss

Recognizedin othercomprehensive income

Others(translation
gains andlosses, etc.)

17,32025,4809,783
96,526
2,053
234
868
47,530199,794(9,029)(825)
102(9,940)930(183)
20,176(4,907)(3,676)

－
(467)
－
－
－
－
－
－
(467)

－
100
－
253
49
－
18
(416)
4

8,291
24,288
9,885
86,8393,032
51
21,062
42,207
195,655

26,084(6,485)－(82)

19,517

17,874(3,147)－(158)

14,569

1,872

－

2,965

68

4,905

1,705
44,001－
1,485
93,021
106,773

(63)
(628)
6,140
2,979
(1,204)(2,472)

－
－
－
－
2,965
(3,432)

－
(11)
－
－
(183)
187

1,642
43,362
6,140
4,464
94,599101,056

Endingbalance

Note: “Carryforward of unused tax losses” which was included in "Others" under "Deferred tax assets" in theprevious fiscal year, is presented as a separate item from the current fiscal year due to its increasedmateriality. 911 million yen of Beginning balance and 868 million yen of Ending balance in “Carryforward ofunused tax losses” included in "Others" of “Deferred tax assets” in the previous fiscal year is reclassified.
Deferred tax assets and liabilities recognized in the consolidated statement of financial position are as follows:(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Deferred tax assets
118,487
108,906
Deferred tax liabilities
11,7147,850
Net deferred tax assets (liabilities)
106,773
101,056

54

2. Deductible temporary differences and carryforward of unused tax losses for which deferred tax assets are notrecognized are as follows. Deductible temporary differences and carryforward of unused tax losses are presented
on a tax amount basis.
(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Deductible temporary differences
3,017
3,392
Carryforward of unused tax losses
218
445
Total
3,235
3,837
3. The components by expiry of the carryforward of unused tax losses for which deferred tax assets are notrecognized are as follows. The following amounts are presented on a tax amount basis.

Within 1 year－

(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)－

Within 2 years

10－

Within 3 years

48－

Within 4 years－－

Over 5 years

160

445

Total

218

445

FYE 2020(as of March 31, 2020)

4. Effective from the consolidated fiscal year ended March 31, 2021, the Group has recognized deferred tax
liabilities for the taxable temporary differences related to investments in subsidiaries, which relate to undistributed
earnings that are expected to be distributed at the end of the reporting period.
For the consolidated fiscal years ended March 31, 2020 and 2021, the Group does not recognize deferred tax
liabilities for future taxable temporary differences related to the investment in subsidiaries, expect for the futuretaxable temporary differences mentioned above. This is because the Group can control the timing of the reversalof the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable
future. The temporary differences related to the investment in subsidiaries for which deferred tax liabilities are notrecognized as of March 31, 2020 and 2021 are 650,257 million yen and 460,966 million yen, respectively.
5. Deferred tax assets are recognized to the extent that it is probable that taxable income will be earned against
which the future deductible temporary differences etc. can be utilized. Deferred tax liabilities are recognized inprinciple for all taxable temporary differences.
The calculation of deferred tax assets may be affected by changes in uncertain economic conditions and otherfactors, and the timing and amount of actual taxable income may differ from the estimates. This could cause asignificant impact on the amount of deferred tax assets in the annual securities report for the following fiscal year.

55

26. Earnings per Share
Basis for calculation of Earnings Per Share
Earnings per share attributable to owners of the parent for the consolidated fiscal years ended March 31, 2020
and 2021 are calculated based on the following information. There were no potentially dilutive common shares
outstanding for the consolidated fiscal years ended March 31, 2020 and 2021.
FYE 2020
FYE 2021(April 1, 2019 to(April 1, 2020 toMarch 31, 2020)
March 31, 2021)
Profit for the year attributable to owners of the152,587
76,510parent (million yen)
Weighted average number of common shares
766,799
766,856
outstanding, basic (thousands of shares)
Basic earnings per share attributable to owners of
198.9999.77
the parent (yen)5627. Dividends
1. Dividend payout
The amounts of dividends paid are as follows:
FYE 2020 (April 1, 2019 to March 31, 2020)
Resolution

Type ofsharesTotalamount ofdividends(yen)

Dividend
per share(yen)

Recorddate

Effective
date

Source fordividend

The 88th Ordinary General
Meeting of Shareholders on June21, 2019

Commonshares55,236

72.0

March 31,2019

June 24,2019

Retainedearning

The Board of Directors Meeting on
November 6, 2019

Commonshares55,24072.0

September
30, 2019

December
3, 2019

Retainedearning

Resolution

Type ofsharesTotalamount ofdividends(yen)

Dividend
per share(yen)

Recorddate

Effective
date

Source fordividend

The 89th Ordinary General
Meeting of Shareholders on June23, 2020

Commonshares

21,482

28.00

March 31,2020

June 24,2020

Retainedearning'The Board of Directors Meeting on
November 4, 2020

Commonshares

21,48428.00

September
30, 2020

December
1, 2020

Retainedearning

FYE 2021 (April 1, 2020 to March 31, 2021)

2. Dividends payable for the case when resolution made on or after April 1, 2021
Dividends payable for the case when the record date is in the consolidated fiscal year ended March 31, 2021,
effective on or after April 1, 2021 is as follows:
Total
Dividend
Type ofamount of
Effective Source for
Resolution
per share Record datesharesdividends
date
dividend
(yen)
(yen)
The 90th Ordinary General
CommonMarch 31,
June 24,
Retained
Meeting of Shareholders on June
21,48428.00
shares2021
2021
earning23, 20215728. Cash Flow Information(1) Reconciliation of liabilities arising from financing activities
FYE 2020 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)
Non-cash changes

Acquisitions

Changes inforeigncurrency
exchange
rates

Others(2,400)

－

(147)

(382)

4,753

96,044

98,408－－

5

194,457－

40,000－－－40,000

Lease liabilities

100,218(41,230)

23,636(174)－

82,450Total

203,944

94,77823,636

(321)

(377)

321,660

Beginningbalance

Cash flow

Short-term borrowings

7,682

Long-term borrowings
Bonds

Ending balance

FYE 2021 (April 1, 2020 to March 31, 2021)(Unit: Millions of yen)
Non-cash changes

Acquisitions

Changes inforeigncurrency
exchange
rates

(540)

－

78

(2,948)

1,343

194,457

58,079－－4

252,540

Bonds

40,00040,000－－－80,000

Lease liabilities

82,450(40,425)

63,732848(4,962)

101,643

Total

321,660

57,11463,732926(7,906)435,526

Beginningbalance

Cash flow

Short-term borrowings

4,753

Long-term borrowings

58

Ending balance

Others29. Financial Risk Management(1) Risk Management
The Group's business activities are affected by the business environment and the financial market environment.
Financial instruments held or assumed during the course of the business activities are subject to inherent risks.
The risks include (1) credit risk, (2) liquidity risk and (3) market risk.
The Group establishes an internal management system and implements crisis management to minimize theimpact on the Group's financial condition and business performance using financial instruments.
Specifically, the Group manages those risks according to the following methods.
(2) Credit Risk(a) Credit risk of financial assets held by the Group
Credit risk is the risk that a party to a financial instrument defaults on its contractual obligations and causes afinancial loss for the Group. Specifically, the Group is exposed to the following credit risks:
1. The Group's trade receivables, lease receivables, contract assets and other receivables are exposed to thecredit risk of customers and counterparties.
2. Bonds and other securities held to manage surplus funds are exposed to the credit risk of the issuers.
3. Derivative transactions conducted by the Group for the purpose of hedging foreign exchange and interest raterisks as well as banking transactions are exposed to the credit risk of the financial institutions that arecounterparties to the transactions."(b)The Group's response to the risks
Regarding credit risk of customers, the Group has a system where the due date and balances of each customer
are managed and the credit status is monitored in accordance with the credit management standards of eachcompany.
For receivables except for trade receivables, lease receivables and contract assets, the Group determines thatthe credit risk of a financial asset has increased significantly since initial recognition if the financial asset is 30 daysor more past the contractual due date (including a request for a grace period) after the transaction date.
However, the Group does not determine that the credit risk has increased significantly if it is due to temporary
demand for funds and the risk of default is low and it is obvious that the customer has the ability to meet contractual
cash flow obligations in the near future based on objective data such as external ratings even if there is a delay inpayment and a request for a grace period.
For debt instruments recorded as securities, the Group determines that the credit risk has increased significantly
from initial recognition if the credit risk is not assessed to be low based on the rating information provided by the
major rating agencies.
Expected credit losses are measured and recognized based on financial information available during thetransaction and credit risk management processes, taking into account macroeconomic conditions such as thenumber of bankruptcies and material changes in the actual or expected performance of the debtor.
If the debtor does not pay within 90 days after the due date or the debtor commences legal liquidation proceedings
due to bankruptcy, etc., it is determined as a default.
If there is a default, or if there is evidence of impairment of the issuer or debtor, such as significant financial
difficulties, it is determined that the credit is impaired. The Group directly reduces the gross carrying amount of afinancial asset when the Group has no reasonable expectations of recovering the financial asset in its entirety ora portion thereof and determines that write-off is appropriate based on a credit check.
Even if a financial asset is written down, the collection activities are continued for fulfillment and the amounts
collected are recorded in profit or loss.
The Group's receivables do not have a significant concentration of credit risk on a particular business partner orgroup of business partners.
59Since the Group conducts derivative transactions and banking transactions only with financial institutions with highcreditworthiness, there is little credit risk due to the default of the counterparties. In addition, the Group conducts
surplus investment and derivative transactions only with highly rated financial institutions in order to reduce theoccurrence of credit risk beforehand. The finance and accounting department obtains the approval by theapplicable person set forth in the authority rules for each case based on each company's internal rules and related
policies that define the details.
There are few past due receivables.
Aggregation of the net carrying value of financial assets and the amount of guarantee obligation recognized in the
consolidated statement of financial position without taking into account the value of the collateral received as credit
enhancement is the maximum exposure to credit risk.
The Group generally holds on products that have been sold as collateral for operating loans to customers.
(Measurement of expected credit losses on other receivables and debt instruments)
If the credit risk on other receivables and debt securities is not found to have increased significantly since initialrecognition as of the closing date, the Group calculates the loss allowance for the financial instruments by
estimating the 12-month expected credit losses using grouping by similar credit risk characteristics and based on
historical credit loss experience and forecast information.
On the other hand, if the credit risk is found to have increased significantly since initial recognition as of the closing
date, the Group calculates the loss allowance by estimating the lifetime expected credit losses for the collection of
the financial instrument based on historical credit loss experience and forecast information.
(Measurement of expected credit losses on trade receivables, lease receivables, and contract assets)
For all trade receivables, lease receivables and contract assets, the loss allowance is calculated based on the
lifetime expected credit losses until the trade receivables, lease receivables or contract assets, as applicable, arecollected using a simplified approach and grouping by similar credit risk characteristics.
For trade receivables, the loss allowance is calculated by estimating the lifetime expected credit losses based on
historical bad debt experience and forecast information on the age of receivables for each trade receivable.

60

FYE 2020 (Balance as ofApril 1, 2019)
Increase during theperiod (provision)
Decrease during theperiod (intended use)

Others*1
FYE 2020 (Balance as ofMarch 31, 2020)
Increase during theperiod (provision)
Decrease during theperiod (intended use)
Others*1

Loss allowancefor expectedcredit loss
measured at an
amount equal
to 12-month
expected credit
losses(Unit: Millions of yen)
Loss allowance for expected credit loss measured at
an amount equal to the lifetime expected credit losses
OperatingAssets that arereceivables, leasenot creditCredit-impaired
receivables,
impairedfinancial assets
contract assets,financial assets
etc.

Total

33

264

3,158

138

3,593

7

88

53

21

169

(21)

(57)

(2,670)－(2,748)

(3)

－

(51)

－

(54)

16

295

490

159

960

28

27

56

17

128

(6)

(71)

(16)

－

(93)

62

－

(8)

－

54

FYE 2021 (Balance as of
100
251
522
176
1,049
March 31, 2021)
Note: 1. Others mainly include the reversal of loss allowance due to collection.
2. All debt instruments measured at fair value through other comprehensive income have high credit ratingsand no material provisions are recognized for them.
Guarantee contract
The Group mainly provides guarantees to subsidiaries' business partners, but credit risk is not included in theabove table because it is limited and immaterial.
The amount of the guarantees is described in “35. Contingencies”.
(3) Market risk
1) Foreign currency exchange risk
(Foreign currency exchange risk management)
The Company hedges foreign currency fluctuation risks of trade receivables and payables denominated in foreign
currencies that are identified by currency and by month by using, in principle, forward exchange contracts andcurrency options. Depending on the exchange rate situation, forward exchange contracts and other transactions
are used against the net position of trade receivables and trade payables denominated in foreign currencies for a
maximum of six months.

61

(Currency sensitivity analysis)
Sensitivity analysis of the foreign currency exchange risk associated with financial instruments held at the end of
the consolidated fiscal years ended March 31, 2020 and 2021 is as follows. The following scenario demonstrates
the impact of a 1% appreciation (increase) of the Japanese yen against the US dollar on profit after tax, holding
all variables other than the foreign currency exchange rate as constant, for foreign exchange risk exposure arisingfrom deposits, trade receivables and payables denominated in foreign currencies of which foreign exchange
differences are recognized at the end of the consolidated fiscal year in profit or loss.
(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Impact on profit after income taxes
(888)
(219)
(4) Liquidity Risk
Liquidity Risk Management"The Group raises funds by borrowings from financial institutions and corporate bonds. The Group is exposed toa risk that the Group would not be able to repay liabilities by the due date in the event of disruptions of financial
system and financial markets or a significant reduction of credit rating by rating agencies. (Hereinafter referred toas "Liquidity risk".)In order to ensure liquidity and stability, the Company has sufficient cash and cash equivalents as well as maintains
liquidity that satisfies the level of cash required by entering into commitment line agreements, etc. with major
financial institutions.
The unused portions of the committed lines are as follows:(Unit: Millions of yen)
FYE 2020
FYE 2021(as of March 31, 2020)(as of March 31, 2021)
Specified commitment line contract
213,825
197,500

62

(Maturity analysis of financial liabilities)
1) Non-derivative financial liabilities
Non-derivative financial liabilities by maturity as of March 31, 2020 and 2021 are as follows:
FYE 2020 (as of March 31, 2020)

Trade and otherpayablesFinancingliabilities
Other financial
liabilities
Total

2 to 3years

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows

Carrying
amountWithin 1
year

1 to 2
years

336,223

336,223

－

－

－

－

－

336,223

239,210

12,538 15,353

51,502

45,66656,20859,854

241,121109,953

42,098 13,175

5,617

5,401

6,522

43,617

116,430

685,386

390,859 28,528

57,11951,06762,730103,471

693,774

FYE 2021 (as of March 31, 2021)

Trade and otherpayablesFinancingliabilities
Other financial
liabilities
Total

2 to 3years

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows

Carrying
amountWithin 1
year

1 to 2years

267,824

267,824

－

－

－

－

－

267,824

333,883

26,957 51,758

55,92669,44831,353

101,809337,251

132,166

61,282 18,048

7,001

6,035

7,265

46,890146,521733,873

356,063 69,806

62,92775,48338,618

148,699

751,596

Financial guarantee contracts cause payment obligation on the basis of demand for performance. Guarantees tothe clients are described in “35. Contingencies”.

632) Derivative financial liabilities
Derivative financial liabilities by maturity as of March 31, 2020 and 2021 are as follows:
FYE 2020 (as of March 31, 2020)
Carrying
amountWithin 1
year

1 to 2
years

Revenue－

149,702

－

－

－

－

－

149,702

Expenditure－(151,702)

(9)

(9)

(6)

(2)

－

(151,728)(2,028)(2,000)

(9)

(9)

(6)

(2)

－

(2,026)

Derivative
financial liabilities

2 to 3years

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows

FYE 2021 (as of March 31, 2021)
Carrying
amountWithin 1
year

1 to 2
years

Revenue－

169,825

－

－

－

－

－

169,825

Expenditure－(177,408)

(29)

(20)

(12)

－

－

(177,469)

7,644(7,583)

(29)

(20)

(12)

－

－

(7,644)

Derivative
financial liabilities

2 to 3years

64

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows

30. Fair Value(1) Definition of Fair Value Hierarchy
The Group uses a three-level hierarchy system when measuring fair value. The following is a description of thethree levels of hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities that the Group has the ability to accessas of the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities,
either directly or indirectly
Level 3: Unobservable inputs for the assets or liabilities(2) Method of Fair Value Measurement
The fair values of assets and liabilities are determined based on relevant market information and through the useof an appropriate valuation method.
The measurement methods and assumptions used in the measurement of assets and liabilities are as follows:(Cash and cash equivalents, Trade and other receivables, Trade and other payables)
Cash and cash equivalents, Trade and other receivables, and Trade and other payables are measured atamortized cost. Lease receivables are measured in accordance with IFRS 16.
The fair value of operating loans and lease receivables is calculated based on the present value of the receivables
discounted by the interest rate, taking into account the maturity period and credit risk, for each receivable classified
by a certain period. Therefore, fair value measurements are classified as Level 3 because credit risks are notobservable.
The fair values of financial assets other than lease receivables and operating loans approximate their carrying
amounts of those financial assets due to their short-term maturities.
(Other debt instruments)
Debt instruments (instruments measured at fair value) consist mainly of government bonds, corporate bonds, andinvestment trust.
The fair value of government bonds and investment trust with an active market is measured by using quoted
market prices. Fair value measurement for government bonds is classified as Level 1.
The fair value of other debt instruments except for the instruments mentioned above is measured based on the
proprietary pricing models provided by financial institutions using observable inputs in the market such as credit
ratings and discount rates. Fair value measurements for other debt instruments are classified as Level 2.
Other debt instruments are reported as other financial assets (current).
(Equity instruments)
Equity instruments consist mainly of stocks.
The fair value of equity instruments with an active market is measured by using quoted market prices.
Fair value measurement for equity instruments with an active market is classified as Level 1.
As a general rule, the fair value of equity instruments with no active market is measured mainly by using thecomparable company valuation method and other appropriate valuation methods. Fair value measurement for
equity instruments with no active market is classified as Level 3.
Equity instruments are reported as other financial assets (non-current).
Such fair value measurements are conducted in accordance with the Group accounting policy approved by theappropriate person of authority and based upon valuation methods determined by an accountant of the Group.

65

(Financing liabilities)
Financing liabilities are measured at amortized cost. However, borrowings recognized in securitizationtransactions of accounts receivable using trusts are measured in accordance with IFRS 9. The fair value offinancing liabilities is measured by discounting future cash flows using interest rates currently available for liabilities
of similar terms and remaining maturities. Fair value measurement for financing liabilities is mainly classified as
Level 2.
(Derivatives)
Derivatives consist mainly of foreign currency forward exchange contracts, and interest rate swap agreements.
The fair values of derivatives are measured based on observable inputs such as foreign exchange rates andquoted prices obtained from the financial institutions. Fair value measurements for these derivatives are classified
as Level 2.
Derivatives are reported as other financial assets (current) or other financial liabilities (current).
(Other financial liabilities)
Other financial liabilities other than derivatives mainly include liabilities related to chargeable subcontracting.
Liabilities related to chargeable subcontracting are measured at amortized cost.
Lease liabilities are measured in accordance with IFRS 16.
(3) Assets and Liabilities Measured at Fair Value on a recurring basis
FYE 2020 (as of March 31, 2020)
Level 1

Level 2

Level 3

(Unit: Millions of yen)
Total

Other financial assets
Financial assets measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments

－

1,131

－

1,131

21,134351－

21,485

21,134

1,482－

22,616

4,104

－

4,818

8,922

64,68868,141－

132,829

Total

68,792

68,141

4,818

141,751

Total

89,926

69,623

4,818

164,367

－

2,028

－

2,028

－

2,028

－

2,028

Debt instruments
Total
Financial assets measured at fairvalue through other comprehensive
income:Equity instruments
Debt instruments

Other financial liabilities:
Financial liabilities measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Total

66

FYE2021 (as of March 31, 2021)(Unit: Millions of yen)
Level 1

Level 2

Level 3

Total

Other financial assets
Financial assets measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments

－

－

－

－

30,390311－

30,70130,390311－

30,701

92,347－

5,163

97,51059,44084,661－

144,101

Total

151,787

84,661

5,163

241,611

Total

182,177

84,972

5,163

272,312

－

7,644

－

7,644

－

7,644

－

7,644

Debt instruments
Total
Financial assets measured at fairvalue through other comprehensive
income:Equity instruments
Debt instruments

Other financial liabilities:
Financial liabilities measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Total

The Group recognizes the transfers between the levels of the fair value hierarchy at the end of the day on whichan event or change in conditions that causes the transfer has occurred.
There were no material transfers between the levels.

67

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the consolidated fiscal
years ended March 31, 2020 and 2021 are as follows:(Unit: Millions of yen)
FYE 2020
FYE 2021(April 1, 2019 to(April 1, 2020 toMarch 31, 2020)
March 31, 2021)
Equity instruments
Equity instruments
Beginning balance
4,703
4,818
Total gains or losses:－－
Profit or loss
Other comprehensive income
115
345
Purchases
－
－
Sales
－
－
－
－
Exchange differences on translating foreign operations
Ending Balance
4,818
5,163
Unrealized gains or losses included in profit or loss on－－
assets held at March 31. 2020 and 2021
Note: 1. Gains or losses included in profit or loss for the consolidated fiscal years ended March 31, 2020 and 2021
are included in finance income and finance costs in the consolidated statements of income.
2. Gains or losses included in other comprehensive income for the consolidated fiscal years ended March
31, 2020 and 2021 are included in net changes in revaluation of equity instruments designated asmeasured at fair value through other comprehensive income in the consolidated statements ofcomprehensive income.
(4) Financial Assets and Financial Liabilities that are not measured at fair value
The carrying amounts and fair values of financial assets and financial liabilities that are not measured at fair value
as of March 31, 2020 and 2021 are as follows:

Trade and other receivables
Operating loans
Lease receivables
Account receivables and other receivables*1
Other financial asset*1&2
Financing liabilities
Borrowings
Bonds payables
Trade and other payables*1
Other financial liabilities*1&3

FYE 2020(as of March 31, 2020)
Carrying
Fair value
amount(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)
Carrying
Fair value
amount178,492
12,928173,419
59,736

186,162
14,239－－177,039
11,915
152,954
57,356

184,792
13,160－－199,21040,000336,223
27,503

199,185
39,704－－

253,883
80,000267,824
30,523

252,789
79,550－－Note: 1. Disclosure of fair value is omitted because the fair values approximate their carrying amounts due to theirshort-term maturities.
2. Items disclosed in “(3) Assets and Liabilities Measured at Fair Value on a recurring basis” are not included.

68

3. Other financial liabilities do not include derivatives of 2,028 million yen (March 31, 2020) and 7,644 million
yen (March 31, 2021) and lease liabilities of 82,450 million yen (March 31, 2020) and 101,643 million
yen (March 31, 2021).
4. The table does not include cash and cash equivalents, commercial paper and negotiable certificates ofdeposit measured at amortized cost whose fair values approximate their respective carrying amounts.
(5) Assets and Liabilities Measured at Fair Value on a non-recurring basis
There are no assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2020 and 2021.
31. Transfers of financial assets that do not meet the requirement for derecognition
The Group securitizes a part of its financial assets.
The Group's aerospace company securitizes account receivables through trusts. The Group transfers a part ofbeneficiary rights, but transferees have recourse to the transferor (the Group). Therefore, we have determinedthat the Group retains substantially all the risks and rewards of ownership, and the transfer of beneficiary rights is
accounted for as a financing transaction.
Transferred assets and liabilities for which transferees have recourse are as follows:(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

FYE 2020(as of March 31, 2020)
Carrying amount
Trade and other receivables
Borrowings

Fair value

2,948
2,948

2,948
2,948

69

Carrying amount－－

Fair value－－32. Offsetting of Financial Assets and Financial Liabilities
Information about offsetting of financial assets and financial liabilities as of March 31, 2020 and 2021 is as follows:
FYE 2020 (as of March 31, 2020)

Other financial assets
Derivatives
Other financial
liabilities
Derivatives

Grossamounts ofrecognizedfinancialassets andfinancialliabilities

Amounts offset
in theconsolidated
statements offinancial
position

Net amounts
presented intheconsolidated
statements offinancial
position

1,131

－

1,131

(1,131)

－

2,028

－

2,028

(1,131)897

Amounts offset
in theconsolidated
statements offinancial
position

Net amounts
presented intheconsolidated
statements offinancial
position

Amounts subject tomaster netting
agreements orsimilar agreementsthat do meet
offsetting criteriaNetamounts

－

－

－

－

－

7,644

－

7,644

－

7,644

FYE 2021 (as of March 31, 2021)

Other financial assets
Derivatives
Other financial
liabilities
Derivatives(Unit: Millions of yen)Amounts subject
to master netting
agreements orNetsimilaramounts
agreements that
do meet offsetting
criteriaGrossamounts ofrecognizedfinancialassets andfinancialliabilities(Unit: Millions of yen)Amounts that do not meet offsetting criteria are financial assets and financial liabilities subject to enforceable
master netting agreements that the Group does not intend to settle on a net basis.

7033. Commitment
The following table shows commitments for the purchase of assets after the reporting period:(Unit: Millions of yen)

Purchase of property, plant and equipment

FYE 2020(as of March 31, 2020)
34,481FYE 2021(as of March 31, 2021)
36,548FYE 2020(April 1, 2019 toMarch 31, 2020)
6,778
1,447
11
36,52844,764
1,019(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
7,926
1,560
11
47,31156,808
1,072

1,855

1,411

1,040

1,089

48,67845,14460,38043,997

34. Leases
1. Information as Lessee(1) Information as Lessee

Real estate
Machinery
Vehicles
Tools
Total depreciation charge for right-of-use assets
Interest expense on lease liabilities
Lease expenses with the exemption of short-termlease*1
Lease expenses with the exemption of leases of lowvalue assets*2
Total lease expense (net)Total cash outflow for leases

There is no material income from sub-leasing of right-of-use assets.
Note: 1. The Group applies IFRS 16.6 to short-term leases.
2. The Group applies IFRS 16.6 to leases of low-value assets.
3. For increase in right-of-use assets, please refer to “11. Property, plant and equipment”.
FYE 2020(as of March 31, 2020)
45,123
14,57738
40,08099,818

Real estate
Machinery
Vehicles
Tools
Total carrying amount of right-of-use assets

71(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)
49,606
16,13532
65,798
131,571(2) Maturity analysis of lease liabilities(Unit: Millions of yen)

FYE 2020(as of March 31, 2020)
FYE 2021(as of March 31, 2021)

Total

Within 1
year

1 to 2years

2 to 3years

3 to 4years

4 to 5years

After 5years

89,897

24,834

9,367

5,598

5,313

4,845

39,940109,418

31,231

17,162

6,486

6,035

5,503

43,001

Management policy for Liquidity Risk
Exposure to liquidity risk is managed by maintaining sufficient capital resources, a sufficient level of liquidity and asound balance sheet.
(3) The nature of the lessee's leasing activities
The Group is the lessee under several operating leases, primarily for production tools such as molds, and network
equipment and devices, as well as for real estate such as stores, company-owned houses and warehouses forthe automotive business.
(4) Future cash outflows to which the lessee is potentially exposed and which are not reflected in themeasurement of lease liabilities
There are no material future cash outflows to which the lessee is potentially exposed and which are not reflectedin the measurement of lease liabilities.
(5) Restrictions or covenants imposed by leases
There are no restrictions or covenants imposed by leases (e.g. restrictions on dividends, additional borrowings
and additional leases).
(6) Variable lease payments
For some lease agreements, the amount of lease payment varies based on the transactions with thecounterparties. The amounts of variable lease payments recognized as expenses in the consolidated fiscal years
ended March 31, 2020 and 2021 are not material.
2. Information as Lessor(1) Finance Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownershipof the underlying asset. All other leases are classified as operating leases.
A lease receivable under a finance lease is recognized at an amount equal to the net investment in the lease at
the commencement date.
The Group purchases insurance to cover physical damages to vehicles.
(i) Lease income
FYE 2020(April 1, 2019 toMarch 31, 2020)
1,974
1,780

Selling profit or loss
Finance income on the net investment in the lease(ii)The nature of the lessor's leasing activities (finance lease)
The Group mainly leases out vehicles under finance leases.

(iii) Significant changes in the carrying amount of the net investment in the leaseNot applicable

72(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
943
1,449

(iv) Maturity analysis of the lease payments receivable

Within 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
After 5 years
Total

6,404
4,000
2,489
1,499
970
4
15,366(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)
5,710
3,557
2,245
1,522
1,073
6
14,113

Unearned financial income
Present value of unguaranteed residual value
The net investment in the lease

2,814
376
12,9282,523
325
11,915FYE 2020(as of March 31, 2020)(2) Operating Lease(i) Lease income(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
5,373

FYE 2020(April 1, 2019 toMarch 31, 2020)
8,493

Lease income(ii) The nature of the lessor's leasing activities (operating lease)
The Group leases out vehicles and real estates such as office buildings under operating leases.
(iii) Maturity analysis of lease payments

Total
FYE 2020(as of March 31, 2020)
FYE 2021(as of March 31, 2021)

Within 1
year

1 to 2years

2 to 3years(Unit: Millions of yen)
4 to 5After 5
years
years

3 to 4
years

457

305

125

20

5

2

－

1,200

964

194

30

11

1

－

The Group purchases insurance to cover physical damages to vehicles.
Most of the amounts disclosed in (i) lease revenues are vehicle rental fees at overseas subsidiaries and realestate rental income from office buildings, etc. Vehicle rental fees are paid in full at the time the contract starts,and the possibility that lessee’s option of cancellation is not exercised by lessee is not secure reasonably as forreal estate rental income. Therefore, (iii) the maturity analysis of lease payments does not include the amounts
related to those transactions.

73

35. Contingencies(1) Guarantees
Guarantees provided by the Group to the clients are as follows:

Customers of
SUBARU Canada Inc.
Employees:
OthersTotal

FYE 2020(as of March 31, 2020)(Unit: Millions of yen)
FYE 2021(as of March 31, 2021)

29,03023,3415,304
1,203
35,5374,439
255
28,035(2) Other Contingencies
Based on the modified agreement between the U.S. subsidiary of Takata Co., Ltd.(Current, TKJP Corporation)and the National Highway Traffic Safety Administration (NHTSA) of the United States dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” released by
the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) of Japan dated May 27, 2016, and recall
policies in other regions including China and Australia in consideration of the request by the U.S. and Japanese
authorities, expenses for extension of recall for airbag inflators manufactured by Takata are accrued to the extent
that the amount can be reasonably estimated. There is a possibility that additional accrual may be required due
to events in the future.

7436. Significant subsidiaries
Significant subsidiaries as of March 31, 2021

Location

Share capital

Percentage
of Voting
Rights ofThe
CompanyGunma

480 Million yen

100.0%

Manufacture and sales of automotive parts

Gunma

480 Million yen

100.0%Gunma

400 Million yen

100.0%Gunma

96 Million yen

100.0%

Kanagawa
Hokkaido
Miyagi
Niigata

490 Million yen
98 Million yen
80 Million yen
100 Million yen

68.0%
100.0%
100.0%
100.0%

Manufacture and sales of automotive parts
Manufacturing of repair parts for Subaru
cars, Subaru vehicle rust prevention works,
Manufacture of custom-build car, etc.
Shipping, land freight and warehousing of
Subaru vehicles, etc.
Storing and shipping of Subaru vehicles
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components

Kanagawa

100 Million yen

100.0%

Sales of Subaru vehicles and components

Chiba
Tokyo
Aichi
Osaka

100 Million yen
100 Million yen
100 Million yen
100 Million yen

100.0%
100.0%
100.0%
100.0%

Sales of Subaru vehicles and components
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components

Hiroshima

92 Million yen

100.0%

Sales of Subaru vehicles and components

Fukuoka

50 Million yen

100.0%

Subaru Finance Co.,
Ltd.

Tokyo

2,000 Million
yen

100.0%

Subaru of Indiana
Automotive, Inc.
(SIA)

US

USD
794,045,000

100.0%

Subaru of America,
Inc.
(SOA)

US

USD 241,000

100.0%

Subaru Canada, Inc.
(SCI)

CanadaCND
30,000,000

100.0%

Sales of Subaru vehicles and components
Leasing and rental of Subaru vehicles;
credit and financing related to Subaru
vehiclesPurchasing of production parts for
Subaru vehicles, sales of completed
vehicles to Subaru of America Inc.
(SOA) and others
Sales of Subaru manufactured vehicles,
Subaru of Indiana Automotive, Inc. (SIA)
manufactured vehicles and parts
Sales of Subaru manufactured vehicles,
Subaru of Indiana Automotive, Inc. (SIA)
manufactured vehicles and parts

Belgium

EUR
87,504,000

100.0%

Sales of Subaru vehicles and components

Belgium

CNY
187,354,000

60.0%

Sales of Subaru vehicles and components

Name of Subsidiary

Fuji Machinery Co.,Ltd.
Ichitan Co., Ltd.
KIRYU INDUSTRY
Co., Ltd.
Subaru Logistics Co.,
Ltd.
H.B.C. Co., Ltd.
Hokkaido Subaru Inc.
Miyagi Subaru Inc.
Niigata Subaru Inc.
Kanagawa Subaru
Inc.
Chiba Subaru Inc.
Tokyo Subaru Inc.
Nagoya Subaru Inc.
Osaka Subaru Inc.
Hiroshima Subaru
Inc.
Fukuoka Subaru Inc.

Subaru Europe
N.V./S.A.
(SE)
Subaru of China Ltd.
(SOC)

75

Main Businesses

Name of Subsidiary

Location

Share capital

Percentage
of Voting
Rights ofThe
Company

Main Businesses

Technical investigation for Subaru
manufactured vehicles, Subaru of Indiana
Automotive, Inc. (SIA) manufactured
vehicles in North America market,
automobile related regulatory compliancein the US
Manufacture and sales of aircraft parts to
SubaruNorth American
Subaru Inc.
(NASI)US

USD 5,000

100.0%

Yusoki Kogyo K.K.

Aichi

100 Million yen

100.0%

Tokyo

30 Million yen

100.0%

Inspection, service and maintenance of
aircrafts

Tokyo

675 Million yen

100.0%

Rental and management of real estate

Saitama

100 Million yen

100.0%

IT system development and operation for
Subaru Group

Fuji Aircraft
Maintenance Co.,Ltd.
Subaru Kohsan Co.,Ltd.
SUBARU IT
CREATIONSCORPORATIONS

37. Related Parties
Compensation to Key Management
Compensation paid to the directors of the Company is as follows:
FYE 2020(April 1, 2019 toMarch 31, 2020)
Short-term employee benefits
Stock compensation

501
53

76

(Unit: Millions of yen)
FYE 2021(April 1, 2020 toMarch 31, 2021)
467
53

38. Significant Subsequent Event
Due to various factors including interruptions in the supply of certain parts using semiconductors, we partiallysuspended production of vehicles at our Gunma Manufacturing Plant (Yajima Plant) from April 10, 2021 to April
27, 2021. In addition, we suspended production of vehicles at Gunma Manufacturing Plant (Main Plant and Yajima
Plant) on April 27, 2021 due to the maintenance of some equipment.
Gunma Manufacturing Plant (Main Plant and Yajima Plant) has resumed its operation since May 10, 2021, as theplant was closed for long consecutive holidays from April 28, 2021 to May 9, 2021.
We also suspended production of vehicles at Subaru of Indiana Automotive, Inc. (SIA), the Group's U.S.
manufacturing base, due to interruptions in the supply of certain parts using semiconductors from April 19, 2021
to April 30, 2021. The production lines have resumed operations since May 3, 2021.
We expect shortages in the supply of semiconductors and certain parts to continue and the effects of the
production suspension and production adjustments may have a significant impact on the financial position,business performance, and cash flow of the Group for the fiscal year ending March 2022 and beyond.
At this point, it is difficult to reasonably calculate the amount of the impact.

77

2【Others】
Quarterly information for the current consolidated fiscal year,
Cumulative period

Unit

1st quarter2nd quarter3rd quarter

FYE 2021

Revenue(million yen)

456,998

1,218,392

2,074,829

2,830,210

Profit (loss) before tax(million yen)

(10,735)

36,100105,686

113,954(million yen)

(7,700)23,706

74,20576,510(yen)(10.04)

30.91

96.77

99.77

Accounting period

Unit

1st quarter2nd quarter3rd quarter

4th quarter

Profit (loss) per share, basic(yen)(10.04)

40.95

65.85

3.01

Profit (loss) for the period
attributable to owners ofparentProfit (loss) for the period pershare, basic

78