Annual Report2014

For the year ended March 31, 2014

Vision for Fuji Heavy Industries

The Past and Future of Fuji Heavy Industries with the Goal of
Becoming “A Compelling Company with Strong Market Presence”

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

Sustainable growth2,720.0

Faster-than-expected
growthSix initiatives
to enhance theSubaru brand

2,408.1
13.6%

1,913.0
Net sales (billions of yen)

1,517.1

Eight initiatives
to build a strong
business structure

6.3%
Operating income ratio

2.9%

326.5

Operatingincome•Take customer
relationship to a new
dimension•No. 1 for customer
trust•Strong brand•Industry-leading
high profitability•Vehicle sales of 1.1
million-plus units•Focus resources on key
products and markets•Reduce total costs andincrease productivity

340.0

120.4

44.0 (billions of yen)
2012

•Increase productappealAs a small-sized automaker, FHI will focus on two
activities with the goal of becoming “a compellingcompany with strong market presence.”

12.5%

Vision for
2020

2013

2014

2015
(plan)

2016

2017

2018

2019

2020

2021

Years ended March 31

Motion-V

Prominence 2020

Targets achieved ahead of schedule in FYE March 2014

Pursue the goal of sustainable growth and development
by boosting competitiveness and building a solid business platform

Quantitative Targets
Targets for FYE March 2016
Sales volume 850,000 units

Actual results for FYE March 2014

(Shipment-based incl. OEM and CKD
products)

Sales volume 850,000 units

Consolidated operating income
120 billion yen

Consolidated operating income
326.5 billion yen

Consolidated operating margin
6% level

Consolidated operating margin
13.6%

Key Issues Remaining

Reasons for Developing•Compliance with futureenvironmental
regulations•Production capacity
shortages•Responding to theneeds of new
customers•Sensitivity to currency
fluctuations•Main goals of Motion-V achieved ahead ofschedule•Significant changes in business conditions
following faster-than-expected growth(stepping into a new stage)•Growing need for accelerated response tochanges in the business environment, suchas tighter environmental regulations•Resetting of management objectives with aview to further growth

FUJI HEAVY INDUSTRIES LTD.

01 ANNUAL REPORT 2014

Three-Year Business Operation / Profit Plan
(FYE March 2015－FYE March 2017)

Net sales
8 trillion yen
Operating income
1 trillion yen
Operating income ratio
12.5%
R&D expenses
250 billion yen (159%)
Capital expenditures
330 billion yen (171%)
Depreciation and amortization
200 billion yen (122%)( ): vs. previous 3-year period

Contents

Confidence in Motion

01 Vision for Fuji Heavy Industries
03 Consolidated Financial and
Non-Financial Highlights

04 Fuji Heavy Industries at a Glance

Confidence in Motion is a unified global brand statement that encapsulates the aim of the Subaru

05 A Message to Our Shareholders

brand. Confidence reflects our approach towards reliable automobile manufacturing dating back to the

11 A Message from CFO

Subaru 360 and the relationship of trust that we have built with customers by providing enjoyment and13 CSR at Subaru

peace of mind. In Motion expresses Subaru’s resolve to enhance customer trust by proactively staying

27 Corporate Governanceabreast of changing trends. Through Confidence in Motion, Subaru aims to meet customer expectations

29 Board of Directors / Executive Officers

for the freedom and fulfillment enabled by Subaru’s uniquely satisfying driving experience.

31 Financial Information
31 Consolidated Ten-Year Financial Summary
32 Five-Year Automobile Sales
34 Management’s Discussion and Analysis ofResults of Operations and Financial Position

42 Corporate Data / Stock Information

Disclaimer Regarding Forward-Looking Statements
Statements herein concerning plans and strategies, expectations or
projections about the future, FHI’s efforts with regard to various management
issues, and other statements, except for historical facts, are forward-looking
statements. These forward-looking statements are subject to uncertainties that
could cause actual results to differ materially from those anticipated. These
uncertainties include, but are not limited to, general economic conditions,demand for and prices of FHI’s products, FHI’s ability to continue to develop
and market advanced products, raw material prices, and currency exchange
rates. FHI disclaims any obligation to update any forward-looking statements,
whether as a result of new information, future events, or otherwise.
FUJI HEAVY INDUSTRIES LTD.

02 ANNUAL REPORT 2014

Consolidated Financial and Non-Financial Highlights
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

2010(Billions of yen)

2011

2013

2012

2014

Net Sales(Billions of yen)

2,500

2,408.1

For the Year:Net sales¥ 1,428.7¥ 1,580.6¥ 1,517.1¥ 1,913.0¥ 2,408.1

27.4

84.1

44.0

120.4

326.5

Operating income（16.5）

50.3

38.5

119.6

206.6

Capital expenditures

56.1

43.1

54.3

70.2

68.5

Depreciation expenses

57.1

49.8

53.7

55.9

54.9

R&D expenses

37.2

42.9

48.1

49.1

60.1

Automobiles sales volume (thousand units)

563

657

640

724

825

Exchange rate (¥/$, non-consolidated)

93

86

79

82

100

Net income (loss)

2,000

1,913.0

1,580.6
1,428.7

1,500

1,517.1

1,000

500

0

FY

2010

2011

2012

2013

Operating Income & Net Income (Loss)
Operating Income

At Year-End:(Billions of yen)

Net Income (Loss)

350

Total assets

1,231.4

1,188.3

1,352.5

1,577.5

2014

326.5

1,888.3300

Net assets

381.9

414.0

596.8

451.6

770.1
250

Interest-bearing debt

367.6

330.6

307.2

341.0

269.7

206.6
200

Number of employees

27,58627,29627,12327,50928,545150

120.4 119.6
100

84.1

Financial Ratios:

50.3

50

ROE (%)

—

12.7

8.9

22.9

30.4

ROA1 (%)

2.3

7.0

3.5

8.2

18.8

27.4

44.0 38.5

0

-16.5
-50

1. ROA was calculated as “operating income / (average of assets at the beginning and end of the term)”

FUJI HEAVY INDUSTRIES LTD.

03 ANNUAL REPORT 2014

FY

2010

2011

2012

2013

2014

Fuji Heavy Industries at a GlanceYears ended March 31

SUBARU Automotive Business
Percentage
by business

93.3%

Net Sales

2,408.1

Global sales volume of completed
automobiles stood at a record high825 thousand units, up 101 thousand
units, or 13.9%, year on year. Overall
net sales for the Automotive Businessstood at ¥2,246.6 billion, up ¥467.7
billion, or 26.3%, year on year, partly
affected by the correction of
appreciation in the value of the yen inforeign exchange. Segment income
increased to ¥309.0 billion, up ¥198.0
billion, or 178.4%, year on year.

Net Sales

Operating Income(Billions of yen)(Billions of yen)

Net sales overall rose to ¥124.4
billion, up ¥35.3 billion, or 39.6%, year
on year due to an increase in sales of
products to the Ministry of Defense
and growth in production volume of
Boeing 777 and Boeing 787 products
for the commercial sector. Segment
income increased to ¥14.1 billion, up¥7.3 billion, or 107.5%, year on year.

Net Sales

Operating Income(Billions of yen)(Billions of yen)

2,246.6

309.0

1,779.0

111.0

2013

2014

2013

2014

billionAerospace Company

5.2%

14.1
124.4
89.1
6.8

Points•Sales growth was mainly
due to increase in sales
volume, primarily inJapanese and U.S. markets,and improvement inexchange rates.
•Increase in costs, such as
miscellaneous expenses,
was offset by increase insales volume and progressin reducing prime costs.

POINT•Sales increased both for
defense and commercial
demand, and exchange
rate differences also
contributed.

© The Boeing Company
2013

Industrial Products Company

1.2%

Although sales of pumps and general
purpose engines for civil engineeringand construction in Japan and salesof general purpose engines in North
America and Asia expanded, net sales
fell to ¥29.8 billion, down ¥0.4 billion,
or 1.2% year on year, due to suchfactors as a decline in sales ofleisure-related engines in North
America. Segment income also
declined to ¥0.6 billion, down ¥10
million, or 1.3%, year on year.

FUJI HEAVY INDUSTRIES LTD.

04 ANNUAL REPORT 2014

2014

2013

2014

Net Sales

Operating Income(Billions of yen)(Billions of yen)

30.1

29.8

0.6

0.6

2013

2014

2013

2014

POINT
•Although sales of products
in Japan and Asia such asengines increased, sales ofleisure-related engines inNorth America declined.

A Message to Our Shareholders

Under our new mid-term management
vision “Prominence 2020,” we are striving torealize sustainable growth as a compellingcompany with strong market presence.
Yasuyuki Yoshinaga
Representative Director of the Board, President and CEO

Recording best full-year consolidated
results two years in a row
Creating a new mid-term management vision
with the aim of becoming “a prominentcompany” in the eyes of customers
Pursuit of further improvement for ourbrand value concentrating on six initiatives,
including overall performance of products,
safety, the environment and quality/service
Implement Subaru way to develop better
products by listening sincerely to the voicesof our customers and thinking thoroughly
Increase tolerance to changes in thebusiness environment and realize
sustainable growth while maintaining an
industry-leading profit margin
Focusing on strengthening humanresource development and management
to realize mid- to long-term growth
Building a growth foundation for the future
through proactive investments

FUJI HEAVY INDUSTRIES LTD.

05 ANNUAL REPORT 2014

Recording best full-year consolidated
results two years in a row
At Fuji Heavy Industries (FHI), we developed a“Motion-V” mid-term management plan for the
five-year period from FYE March 2012 to 2016 and had
been working to achieve growth. This was part of oureffort to implement our corporate philosophy of being
a compelling company with strong market presence.
This effort is centered on the idea of “Customers First.”
As a result of this effort, in FYE March 2014, FHI wasable to achieve the main numerical targets set forth in
Motion-V two years ahead of schedule.
In our FYE March 2014, consolidated results
reached a record high for two years in a row, thenumber of vehicles sold 825,000 units (an increase of
13.9 percent compared with the previous fiscal year),with net sales posted at 2,408.1 billion yen (up 25.9
percent), operating income at 326.5 billion yen (up171.1 percent) and net income at 206.6 billion yen (up72.8 percent). The operating margin also increased
from 6.3 percent to 13.6 percent.
Foreign exchange effects due to the correction of
the strong yen are most certainly behind thesesubstantial increases. It is true that exchange rate
differences account for approximately 170 billion yen in
the 206.1 billion yen year-on-year increase that pushed
operating income up. However, even excluding theforeign exchange factor, thanks to an improved sales
mix and progress in cost reduction, we were able toabsorb increases in SG&A expenses, R&D expenses,
and other outlays, achieving approximately 36 billion
yen more revenue, and thus demonstrating aremarkable enhancement in profitability in FHI’s corecompetencies as compared to the previous fiscal year.
It is our goal to achieve sustainable growth while
continuing to post some of the industry’s highest
operating margin levels by further improving ourcapability as a company.
For FYE March 2015, automobile unit sales andconsolidated net sales are projected to be 916,000 units(representing a year-on-year increase of 11 percent) and
2,720 billion yen (a 13 percent increase) respectively as
we plan to lift unit sales both in Japan and overseas,
mostly in North America. Regarding profit, as the vehicle
sales growth and cost reduction progress are expected
to cover increases in SG&A and R&D expenses, FHI
forecasts operating income of 340 billion yen (a 4.1
percent increase year on year) and net income of 215
billion yen (also a 4.1 percent increase). Global unit
sales, net sales and all profit figures are projected toreach all-time highs in FHI history. (Foreign exchange
rates: 100 yen per US dollar, 135 yen per euro.)

Regarding dividends for FYE March 2014, in lightof the full-year business results, FHI revised theyear-end dividend per share to 33 yen from theprevious forecast of 20 yen, an increase of 13 yen,which includes a commemorative dividend of 5 yen tocelebrate the 60th anniversary of the company’s
establishment. Combined with the interim dividend of
20 yen per share, the annual dividend for FYE 2014 willbe 53 yen per share, an increase of 38 yen from 15 yenof the previous year.

Creating a new mid-term management
vision with the aim of becoming “aprominent company” in the eyes ofcustomers
Although it was a great achievement to attain thetargets of Motion-V two years in advance, many issues
still remain. First of all, it is the most urgent issue toSummary
Financial results full year
for the FYE March 2014

(Billions of yen)

Net sales

Operating income

Net income

Consolidated
automobile units

Actual results

2,408.1

326.5

206.6

825,100¥53.00(YoY)(+495.2)(+206.1)(+87.0)(+100,600)(¥38.00)

Dividend

Dividend(Billions of yen)

Financial projections full year
for the FYE March 2015

Net sales

Operating income

Net income

Consolidated
automobile unitsPlan

2,720.0

340.0

215.0

916,000¥56.00(YoY)(+311.9)(+13.5)(+8.4)(+90,900)(¥3.00)

FUJI HEAVY INDUSTRIES LTD.

06 ANNUAL REPORT 2014

A Message to Our Shareholders

eliminate supply inefficiencies due to the increase inautomobile unit sales beyond expectations. Secondly, it
is also an issue to respond to increasingly environmental
regulations in more and more regions of the world. Also,
we believe it will be important going forward to
meticulously grasp, improve and enhance the level ofsatisfaction of these customers with respect to Subaru
because a massive quantity of new customers purchased
Subaru vehicles across the world during this period.
To address these issues appropriately, FHI
announced and launched the new mid-term
management vision “Prominence 2020” in May 2014
without waiting for the final fiscal year of Motion-V.
We are not big in size as an automobile
manufacturer, and to continue sustainable growth in the
future, it is, of course, important for us to concentrate
our resources on our core competencies and offer
automobiles with Subaru’s unique appeal. But it is also
important, after a customer has purchased a vehicle
and driven it, for the quality of the car, its performanceand the after-sales service to make her/him feel that
Subaru is really excellent and that she/he wants to drive
another Subaru for the next purchase. To achieve this,
we must never be content with mere “good” or “verygood” ratings from Subaru users, but rather work to
become “a prominent company” in their minds with anevaluation of “outstanding.”“Prominence 2020” takes its name from such a
concept. Of course, it is not to say that FHI willarbitrarily develop “prominent” automobiles without
consulting anyone else. We want to become “aprominent company” in the hearts and minds of ourcustomers by providing our products the way customers
really want them and by providing high-quality services
that will raise their level of satisfaction.

Pursuit of further improvement for ourbrand value concentrating on six
initiatives, including overall
performance of products, safety, theenvironment and quality/service
Based on this concept, our new mid-term management
vision targets “Not big in size, but a high-quality
company with distinctive strengths” as FHI want to be
in 2020 and more specifically, “No. 1 in customer
trust,” “Strong brand,” “Industry-leading highprofitability” and “Vehicle sales of 1.1 million–plus units
a year.” To achieve this, FHI will focus on enhancing theSubaru brand and building a strong business structure.
To enhance the Subaru brand, FHI will concentrateon six initiatives to further increase brand value: overall
performance of our products, safety, design,
environment, quality-service and communication. For
example, regarding overall performance, we will notcompromise on basic drivability and feel, and byincorporating our new “Subaru Global Platform”
designs, we will further enhance “Enjoyment and Peaceof Mind,” which make up the identity of Subaru
vehicles. For safety, while envisioning future automateddriving thanks to the evolution of the “EyeSight” drive
support system, FHI aims to become the No. 1 brandfor overall safety with “All-Around Safety” protecting all
passengers and pedestrians. For design, we will workto embody “Enjoyment and Peace of Mind” in our“Dynamic & Solid” concept for designs that are
instantly recognizable as Subaru’s.
With regard to the environment, FHI aims toachieve the highest level of environmental performancefor both internal combustion engines and all-electricengines in order to meet environmental regulations in
FUJI HEAVY INDUSTRIES LTD.

07 ANNUAL REPORT 2014

the United States and other major markets. For quality
and service, FHI seek to become a trusted brand that
continues to be chosen happily by customers. In
particular, in the United States, where our automobile
unit sales are increasing rapidly, it is an extremely
urgent issue to build service networks and facilities. To
achieve this, in November 2013, we introduced
programs that partially support dealership capital
investment for service garages and pits by Subaru of
Six Initiatives to Enhance the Subaru Brand
SafetyNo. 1 foroverall safety

Overall
performance
No. 1 for basic
performance andperformance
feel

Environmental
friendliness
Top-level
environmental
performance

Design
New Subaru
designCommunication
Elevating thebrand-customer
relationship toa new level

Product
qualityserviceTop-level quality
and service

No. 1 for “Enjoyment andPeace of Mind”
Motion-V

America, our U.S. sales subsidiary. As a result, we
received applications from many dealerships, and manyare in the process of being established.
And as for customer communications, we would liketo introduce a kind of new communication style that has
the concept of “Life is More Enjoyable with Subaru,”
which is based on a closer relationship to customers
only possible with a unique brand like Subaru’s.

Implement Subaru way to develop
better products by listening sincerely tothe voices of our customers andthinking thoroughly
The “Customers First” philosophy that carried on as a
tradition through the years is the strongest trigger torealize brand value enhancements. For example, FHI’s
manager in charge of development (project generalmanager – PGM) who leads all processes of developmentof a new vehicle, visits actual Subaru users in major

markets to listen to their opinions and desires firsthand in
the course of advancing ongoing projects and to convey
them to product planning and development staff.
In April 2014, when we announced the new
Outback in the U.S., a dealership executive praised it as“wonderful” and “remarkably reflecting the opinions ofactual users.” In fact, this model was planned anddeveloped based on what Outback customers in the
U.S. actually said to our PGM, who went onsite manytimes to listen to their voices about how they felt about
the pros and cons of previous models.
FHI is only able to develop and manufacture
automobiles in a limited segment of the market. (This is
in contrast to large manufacturers with a broad lineup
of models to offer.) But this is the very reason we listen
sincerely to the opinions of our customers for each andevery model to provide them with vehicles that takethose opinions into careful consideration. With each
employee keeping in mind and putting into practice
the “Customers First” principle, FHI is confident of its
ability to make “prominent” automobiles from theviewpoint of the customer.

Increase tolerance to changes in thebusiness environment and realize
sustainable growth while maintaining
an industry-leading profit margin
Building a strong business structure is anotherimportant activity in the new mid-term management
vision. In order for FHI to realize sustainable growth
while maintaining one of the highest profit margins in
the industry, we need to push forward more strongly
than ever our strategy. That strategy is “Focus resourceson key products and markets” and “Reduce total costs
FUJI HEAVY INDUSTRIES LTD.

08 ANNUAL REPORT 2014

and increase productivity” in order to increase tolerance
to changes in the business environment.
For example, our product strategy is to enhance
our product lineup focusing on the XUV/SUV segment,
where Subaru is strong, and full model change for key
models, while continually introducing new products.
FHI’s market strategy is to aim for automobile unit salesof 1.1 million–plus units globally with North America as
the top-priority market, followed by Japan and China
together as the secondary market. Our production
strategy entails successive increases in capacity whenneeded, assuming an expansion to 1.07 million units
annually. SIA, our manufacturing subsidiary in the U.S.,
is working to lift its production capacity from thecurrent 200,000 units to 310,000 units annually in 2016,
with the further objective of up to 400,000 units in 2020
depending on market conditions. FHI will maintaindomestic production capacity while increasing overseas
production to around 40 percent of total capacity to
reduce foreign exchange sensitivity.
In our total cost reduction initiative, we haveadopted a rational design structure. And we areworking to achieve a total cost reduction of 20 percent
through such efforts as using the Subaru Global
Platform for standardizing components and for
reducing the number of parts, carrying out productivity
improvement activities with suppliers and striving for
optimum unit costs in Japan and the United States. In
this way we are absorbing the costs of environmental
regulations needed to refine our brand and to improve
our product. Also, in addition to efforts aimed atbringing down direct material costs, FHI kick-started
companywide activities to improve overall
manufacturing productivity including development,
logistics, sales and indirect costs, as well as investment

A Message to Our Shareholders

Eight Initiatives to Build a Strong Business Structure

Businessstrategy

Strongerfoundations

Prioritize
allocation ofmanagement
resources to key
products andmarkets

Absorb increases
in fixed costs by
reducing total
costs andincreasing
productivity

1. Productstrategy
2. Market strategy
3. Production
strategy

4. Total cost
reduction
5. Alliance

Other Businesses

Consolidated Global Unit Sales Forecast

Production Capacity Expansion Plan

(Units in 10 thousands)
120

U.S. and Canada

Japan

China

100
90

83

FYE2021

12

Gunma Plants (Main Plant and Yajima Plant)

60

77%

63

66%

65

61%

22%

31

32%

40

37%

1%

2

2%

2

2%

13

60

8. Human resource development, organizational
structure, and corporate culture

FYE2017

Production Proportion Production Proportion Production Proportion
capacityof total
capacityof total
capacityof total

18-plus

95

US (SIA Plant)

20

4

6. Aerospace
7. Industrial
products

FYE2014110-plus

92

Businessstrategy(Unit: 10 thousand vehicles)

OthersOverseas

Subaru Business

The most important area of concentration is reforming
human resource development, our organizational
culture and corporate culture. For Subaru to be “aprominent company” in the eyes of customers, each
employee who has a key role in FHI’s business and theorganization that relies on them must advance to thenext level.
In this regard, FHI is promoting new internal
projects dealing with reforming human resource
development, our organizational culture and corporate
culture, as well as further strengthening humanresources. This includes advancing the leveraging ofyoung people and women. Specifically, we will move
forward with human resource development based on
the slogan “Every employee with tenacity.” We will
focus on the themes “Global human resource
development” to aim high and engage with a wide
range of work, “Development of specialists” who strive
to grasp essentials, and “Creativity enhancement” tostrive to offer greater value by taking up challenges in
new domains.
Also, FHI is focusing its energies on strengthening
its business management system to maximize humanresource capabilities and foster a corporate culture thatencourages individuality, creativity and taking onchallenges. In particular, our business management

Focusing on strengthening humanresource development and management
to realize mid- to long-term growthJapanefficiency, by 20 percent. FHI will reform operatingprocesses and build an IT infrastructure required toreach this goal.
Regarding our alliance strategy, FHI will further
develop our collaborative efforts with Toyota Motor
Corporation, which so far have resulted in successfulprojects such as contract production of the Camry inNorth America as well as engineer exchanges and joint
development of the BRZ/86. Aiming to boost our midto long-term competitiveness, cooperation in productand technology development will be conducted,
leveraging mutual strengths. Currently, discussions are
ongoing about examining specific forms of cooperationin environmental fields including vehicle electrification.

18

Malaysia CKD

0.5

60

30

17

48

Production capacity (standard operations)
0

78
2014

2015

2016

FUJI HEAVY INDUSTRIES LTD.

2017

2021

09 ANNUAL REPORT 2014

(FY)

96

107

system is regarded as an important issue to support
sustainable growth. We will strengthen our middle
management at all business locations both in Japanand overseas, foster the next generation of leaders
who will be charged with managing FHI in the futureand build strong managers who will drive mid- tolong-term growth.
Initiatives relating to human resource development
and organizational culture are important for the pursuitof safety, environmental initiatives and corporate
governance, as well as for our CSR management, andwe will proactively promote them, including thepromotion of diversity.

Building a growth foundation for the
future through proactive investments
In our new mid-term management vision, FHI aims toultimately achieve, through these important activities,
global automobile unit sales of 1.1 million-plus
vehicles and net sales of 3 trillion-plus yen in FYEMarch 2021. Under our mid-term three-year
consolidated profit plan for FYE March 2015 to FYEMarch 2017, we forecast total net sales of 8 trillion
yen, operating income of 1 trillion yen and operating
margin of 12.5 percent. These three years are set to
be a period of proactively expanding research anddevelopment budgets and investing in facilities tobuild a foundation for future growth, and we expect
fixed costs will increase as we expand proactive
investments. However, we plan to absorb these costs
and maintain our level of profits by adding value to
products and reducing total costs. Please note that forthis three-year consolidated revenue plan, theassumed foreign exchange rate is 95 yen per US
dollar, which makes these targets very challenging.
FHI will steadily execute this new mid-term
management vision and, as “a compelling company
with strong market presence,” bring about sustainablegrowth while securing our industry-leading highoperating margin.
Thank you for your ongoing support and feedback
going forward.

Human Resource Development
Subaru management
philosophy“A compellingcompany withstrong market
presence”•Enhancing the Subaru
brand•Building a strong
business structure

Personnel Required•Every employee who demonstrates integrity in their work recognizing that they are
creating products that people entrust their lives in our hands•Every employee who can make the most of its individual strength and who has its
own expertise•Every employee with tenacity

Aim high and engage
with a wide range of work

Strive tograsp essentials

Strive to offer greater
value by taking up
challenges in new domains

Global human resource
development

Specialist
development

Creativity
enhancement

FUJI HEAVY INDUSTRIES LTD.

10 ANNUAL REPORT 2014

Yasuyuki Yoshinaga
Representative Director of the Board, President and CEO

A Message from the CFO

We will promote proactive investments while strengthening our financial position
to realize sustainable growth.

Mitsuru Takahashi
Director of the Board
Corporate Executive Vice President and CFO

The first is our product strategy. FHI targeted theUnited States and other advanced countries for
product development focused on the XUV/SUV
segments, in which Subaru can deliver high added
value. This “selection and concentration” strategy paidoff, resulting in great increases in unit sales mostly in
the North American market in FYE March 2014.
The second category is cost reduction. As strong
sales continue, FHI has managed to secure a profit per
vehicle sold, as planned, by controlling selling costs
and through continual initiatives to reduce the costprice and enhance productivity.
The third category is our high factory operatingrate. We have been working to efficiently increase andstrengthen production capacity to meet the growth insales, and we succeeded in maintaining an operating

rate slightly above 100 percent. This brought thebenefit of reducing fixed cost burdens at each factory.
We think the virtuous cycle created by these threefactors described above resulted in a 13.6 percent
operating margin for FYE March 2014, one of thehighest in the industry.

A certain amount of cash flows
maintained even during periods ofproactive investments for the future
Next, I will explain our finances. FHI’s cash flows in
FYE March 2014 amounted to 279.1 billion yen, but
this includes special temporary factors. One of theseis an almost 50 billion yen cash inflow due to the saleof Polaris stock, a U.S. company of which FHI was theFYE March 2014: Analysis of Increase and Decrease in Operating Income Changes (consolidated)

Three virtuous cycles support
improvement in profitability
In FYE March 2014, FHI posted a record high operating
profit of 326.5 billion yen. A main cause of this increaseof 206.1 billion over the previous year was a correctionof the strong yen. However, we are happy from amanagement point of view that we were able toachieve a 36 billion yen increase in profits through ourcore business of manufacturing, such as by increasing
unit sales and reducing costs. The main causes of thisremarkable improvement can be placed into three
categories as follows:US$: +156.7EURO: +4.9CA$: +7.4CNY: +0.6
Currency exchange
adjustment : +0.6

Gain oncurrency
exchange+170.2

Improvement ofsales volume &mixture and others+51.1

Cost reduction

+19.7
326.5

FHI : +15.6
SIA : +4.1
Domestic : Increase ofsales volume anddeterioration of mixture
Overseas : Improvement ofsales volume and mixture

120.4

Actual results
Operating income
FYE March 2013
FUJI HEAVY INDUSTRIES LTD.

+206.1 billion

11 ANNUAL REPORT 2014

(Billions of yen)

Increase of
SG&A expenses
and others–24.0

Increase of
R&D expenses–10.9

Increase of fixed cost
Increase of SG&A expenses
Decrease of warranty claims
expenses

Actual results
Operating income
FYE March 2014

largest shareholder. Another factor is an unrecorded
expense of approximately 90 billion yen cash-out forcorporate tax due to net operating loss
carryforwards from the previous term. Our actual“free cash flow” excluding these special factors isabout 140 billion yen.
In FYE March 2015, the cash-out amount will greatly
inflate because of the interim payment of about half theannual corporate and other taxes for the previous fiscal
year. In addition, FHI slated the three year period
starting from FYE March 2015 as the time for advanceinvestments to build a new foundation for growth basedon the new mid-term management vision. We expect
R&D expenses to increase by 60 percent during thisthree-year period compared to the previous three years,
with capital investment hiked by 70 percent. In all, it is avery aggressive investment expansion.
For this reason, a huge constriction in free cash
flows will be inevitable compared to FYE March 2014.
However, a certain amount of free cash flows can be
maintained even during times of outflows forinvestment because proactive investments will likely
bring about an expansion in sales.

A certain latitude is allowed for thedividend payout ratio to avoid drops individend amount per share
FHI’s basic dividend policy was always to provide
stable and continuous payouts while considering
performance-linked benefits. We have allocated alarge proportion of profits to retained earnings

Free Cash Flows & Shareholders’ Equity to Total Assets(Billions of yen)
300

Free cash flows

Shareholders’ equity to total assets (%)
45

279.1

37.7
34.7

40.5

33.3

30.9
200

30

Financial policy•Prioritize allocation of cash flows to investment forsustainable growth.
•Implement a well-balanced strategy with attention toinvestment efficiency, financial health, and shareholder
returns.

Shareholder returns
114.1
100

95.3

87.1

15

28.3
0

2010

2011

2012

2013

2014

(FY)

0

•Profits are returned to shareholders basically in the formof dividends with business results for each term,
investment plans, and the business environment taken
into account.
•Basic policy is to provide continuous dividend payments
which are linked to business performance of the company.
•Decide dividends for each fiscal year in view ofcircumstances, based on a consolidated dividend payout
ratio of 20–40%.

FUJI HEAVY INDUSTRIES LTD.

12 ANNUAL REPORT 2014

because of insufficient retained earnings in our
financial position until now. We did not vary from ourbasic dividend policy thanks to our attainment of ashareholders’ equity ratio in the 40 percent level in
FYE March 2014. However, we announced that thepayout ratio would be between 20 and 40 percent tomore solidly link dividends to performance. Thisleeway in dividend payout ratio is to absorb a drop in
dividends within this 20-point range whereby a 20
percent level is set as the basis for the income increase
and a maximum of 40 percent is set for the income
decrease. So if results suffered because of a temporary
factor, the dividend amount initially indicated would
be maintained to the extent possible and, while thiswould keep dividends from falling, if profits increased,
so would dividends.
Moreover, we expect ROE (Return On Equity) to
go down in the future because these increases inresults and other factors will likely push shareholders’equity further up. FHI does not directly base dividend
payout determinations on ROE. However, we want toreturn profits to shareholders while always keeping in
mind ROE and retained earnings levels.
Although we are not large among automobile
manufacturers, we concentrate our limited resources onlimited markets and products. We can expect great
returns as demonstrated by our current highprofitability level of 13.6 percent if our management
team can conduct operations in the right direction.
With our new mid-term management vision“Prominence 2020,” FHI aims to achieve sustainablegrowth through steadfast, proactive andfuture-oriented investment and the securing of afundamentally high level of profitability. Thank you foryour understanding and ongoing support for the future.

Towards a Sustainable Society
Business
Partners

Employees
Investors
andShareholders

Local
Communities

Customers

FHI’s Eight CSR Action Items
Common Values

Enjoyment and Peace of Mind

Provide society useful and optimally safe products and services that earncustomers’ satisfaction and confidence.

•Employees

From Our Stakeholders

Respect the diversity, individuality, and personality of employees andensure that work environments are as safe and comfortable as possible.

CSR
8 Action Items

CSR at Subaru•Customers and ProductsManagement Strategy
Management Philosophy
Aiming to become a compelling company with strong market
presence based on the “Customers Come First” principle•Environment
Address environmental issues proactively in recognition of theirimportance for all mankind.

•Compliance
Respect laws and moral standards; engage in fair, transparent, and freecompetition; and conduct business equitably. Honor confidentiality,
carefully protecting and managing data, particularly personal information.

•Information Disclosure
Communicate transparently with stockholders and other stakeholders,
disclosing corporate information proactively and fairly.

•Social Contribution
Maintain proactive social action programs as a good corporate citizen.

We practice CSR activities that are based on our management
strategy under our business philosophy of aiming to become “acompelling company with strong market presence” to deliver
the shared values of “Enjoyment and Peace of Mind” to all of
our stakeholders, including our customers. We also seek therealization of a sustainable society by reflecting opinions from allof our stakeholders in our management strategy.

Subject and Period of CSR Report
The report covers performance of Fuji Heavy Industries, Ltd.,
together with its Group member companies both domestic andoverseas for the period of FY2014 (from April 2013 to March2014) and a number of undertakings before and up to the releaseof the report. The departments and titles etc. of the people
introduced in this report are correct as of the time of writing.

FUJI HEAVY INDUSTRIES LTD.

13 ANNUAL REPORT 2014

•Procurement
Conduct procurement appropriately and work with suppliers to promote
corporate social responsibility.

•Corporate Governance
Make it a key responsibility of management to ensure that appropriate
CSR policies are adopted throughout the corporate group, and undertake
appropriate initiatives to address any emergencies that may arise.

Customers and Products

CSR at Subaru

Efforts to Raise Customer
Satisfaction Levels

SUBARU Declaration so that they continue to choose

Growth (SPRING) in FY2014, SUBARU won the No.1 rating

SUBARU over the long-term. We conduct the SUBARU

for customer satisfaction among the 13 automotive

Questionnaire directed at customers who bought a vehicle

companies and brands included in the Automobile

Putting Customers First with the SUBARU
Declaration

at one of our dealers. At SUBARU, we take the comments

Dealership Division of the survey.

In October 2011, SUBARU issued the SUBARU Declaration,

the survey seriously, and we have continued to makewhich specified the goal of being chosen by customers for

improvements at each of our dealers.

and requests of customers that we learn from the results ofCustomer Satisfaction (CS) Activities
Focusing on Dealers“Enjoyment and Peace of Mind” and summarized the

FY2014 saw continuous improvements in customer

We are offering support and promotional services toattitude and actions needed for sales divisions in Japan tosatisfaction levels. These improvements included specific

SUBARU dealerships, which form our point of contact withachieve this goal. Sharing the same goal, our dealers inachievements in the “Overall rating of the dealer you used”

customers, to continuously raise the level of customer

Japan have also posted their own SUBARU Declaration andcategory in which the positive response rate consisting ofsatisfaction, which underpins our brand image.

are engaging in initiatives to implement them.

“Extremely satisfied” and “Satisfied” accounted for 84.7%(82.2% in FY2013).

Subaru Declaration• We aim to be No. 1 by being the automobile brandthat offers customers “Enjoyment and Peace of Mind.”• All Subaru employees will present “Enjoyment andPeace of Mind” as brand values to customers andoffer them the highest level of service.

We provide feedback on customer opinions andrequests obtained from SUBARU Questionnaires to SUBARU

By supporting mobility that is fun and safe for ourcustomers, and realizing the tenets of the SUBARU

dealers and related departments, and work to improve
products, quality, sales and after-sales service.

Declaration going forward, we aim to build up relationships
whereby customers continue to choose SUBARU over thelong term.

Training Human Resources at Dealerships
to Deliver “Enjoyment and Peace of Mind”
We work to develop human resources through a range of

Number of valid response to the
SUBARU Questionnaire

training programs so that all staff at SUBARU dealerships in•FY2014: 80,362 responses/year•FY2013: 67,383 responses/year

perform in a way that gives satisfaction to customers.

Evaluation through External Surveyof in-country training, training in Japan and online learning.

In the second Japanese Customer Service Index (JCSI)
survey conducted by Service Productivity & Innovation forJapan put the SUBARU Declaration into practice and can
We also work to train staff outside of Japan, making use

Number of Trainees Enrolled in Dealer Education
Program in Japan

Customer Satisfaction Survey

2013(first half)

2013(last half)

Total

1,073

2,218

Evaluation through In-house Survey: SUBARU Customer
Questionnaire

Manager, sales

1,145Technical staff, other

1,285

953

2,238

Our goal is to build up relationships with our customers by

Total

2,430

2,026

4,456

offering the “Enjoyment and Peace of Mind” stated in the*Includes business trip training, etc.

FUJI HEAVY INDUSTRIES LTD.

14 ANNUAL REPORT 2014

Customers and Products

CSR at Subaru

International CS Initiatives

Quality Management

to analyze after-sales quality defects and customer requests

With the goal of achieving uniformly high after-sales service

Creating a System Aimed at Improving
Qualitycustomers’ opinions from around the world and identify

peace of mind, the SUBARU Customer Center works withAt SUBARU, we have established a quality improvement

quality issues, we frame countermeasures, which we deploy

importers around the world to help them and their dealerssystem centered on the Quality Assurance Division in orderto the relevant in-house department and/or supplier.

enhance their educational systems and overall structures.
We are building a corporate structure that can deliver

quality issues. In addition to investigating the cause of the

Quality Improvement System

customers service that meets their needs while ensuring

Response•Educational

ReportFeedback

We offer STEP (Subaru Technician Education Program),
which provides technical education to our overseas service

InsideJapan
Service Advisor Education Program
material (extract)

Response

Sales
inside Japan

Customers

Request forassistance

ReportFeedback

A scene from Service Advisor
Education

Request for assistance•Structural

Response

We hold the regional meetings in addition to twice-yearly
conferences for leading overseas dealerships held in Japan.

Feedback

Servicedepartments
inside Japan

Reporttechnicians.

Quality Assurance Division
Investigation into cause ofquality issues/
analysis/framing anddeployment ofcountermeasures

SUBARU
Customer Center

Fiscal 2014 Initiatives

Request forassistance

Servicedepartments
outside Japan

Outside
Japan

Sales
outside Japan

worthy of SUBARU’s “Confidence in Motion.”

Customers

SUBARU

that our importers and dealers worldwide offer service

Production
units

FUJI HEAVY INDUSTRIES LTD.

15 ANNUAL REPORT 2014

Development
units

Suppliers

around the world and helping SUBARU customers drive withto develop and produce even higher quality. We collectCustomers and Products

Efforts at the Aerospace Company

CSR at Subaru

level and above, the company president and suppliers. The
Aerospace Company has also established an Improvement

PICK+,3 the highest overall award.
Also, ANCAP4 gave WRX the highest rank of Five Stars.

Quality Management System Based on Aerospace
Industry Standards

Suggestion System that aims to foster a year-round climatethat allows employees to demonstrate their creativity

FY2013 Commendations

FHI’s Aerospace Company has built a quality management

independently and quality to be improved.

IIHS

Making Safe Vehicles•IMPREZA, XV Crosstrek and
WRX are named 2014TSP

Pursuing Safety Based on the Concept of
ALL-AROUND SAFETY•EyeSight equipped LEGACY,OUTBACK and FORESTER are
named 2014TSP+

system that conforms to the JIS Q9100 quality management
system standard for the aerospace industry. The
International Aerospace Quality Group (IAQG), to which theworld’s aircraft manufacturers belong, formulated thismanagement standard.
FHI is one of the Council members of the JapanSUBARU has worked to build cars with the concept that

Aerospace Quality Group (JAQG) under which Japan’s

everyone should enjoy comfortable mobility with peace ofaerospace companies take part in IAQG activities, and wemind all the time. The pursuit of safety is one important

have contributed to the creation of management standards

theme in achieving this.

and the establishment of operating regulations for the
management system certification program.

this, means that we aim for safety under all environments.

Efforts Aimed at Improving Quality

safety under a variety of conditions, including Active Safety

FHI’s Aerospace Company engages in a range of activities

that assumes accidents may occur and prevents them, Pre-

aimed at improving quality and preventing errors.

crash Safety that supports the driver's driving operations

In addition to examining customer satisfaction andand includes hazard avoidance by the vehicle itself if needed

product quality from diverse angles at “Quality Meetings”

to avoid a collision with the aim of helping reduce damage

held four times a year, the Aerospace Company has

in the event of a collision, and Passive Safety to minimize

designated November as the “Quality Month” for eachdamage in the event of an accident.

year, engaging in activities that include lectures andlecture for FY2014 was entitled The Fundamentals and

WRX receives Five Stars

SUBARU ALL-AROUND SAFETY, the basic concept for
SUBARU people are working to improve all aspects of

distribution of educational leaflets to all employees. The

ANCAP

FY2014 Car Assessment Results

Principles of Countermeasures to Human Error and was

The U.S.’ IIHS1 named the IMPREZA and XV Crosstrek as thepresented by Ryutaro Kawano, Professor of Medical Safety

2014 TOP SAFETY PICK,2 with the “EyeSight” equipped

and Director of the Medical Simulation Center, School of

LEGACY, OUTBACK and FORESTER receiving the highest

Medicine, Jichi Medical University. More than 500 people

score of “Superior” in the Front Crash Prevention Test,

were involved including employees from assistant manager

which began in 2013, and becoming the 2014 TOP SAFETY

FUJI HEAVY INDUSTRIES LTD.

16 ANNUAL REPORT 2014

1. Insurance Institute for Highway Safety
2. The IIHS, in vehicle safety information publications, designates a vehicle as TOP
SAFETY PICK if it received the score of “Good” in four of its five tests, namely theOffset Frontal Test, Rear Crash Test, Side Crash Test, Roof Strength Test and Small
Overlap Front Test, and the score of “Acceptable” or higher in one of the tests.
3. In addition to satisfying the TOP SAFETY PICK requirements, if a vehicle receives thescore of “Basic” or higher in the Front Crash Prevention Test, it is named TOP SAFETY
PICK+.
4. ANCAP is an independent organization composed of the transportation authority ofAustralia and New Zealand that has been providing safety assessments since 1993.

Employees

CSR at Subaru

Occupational Health and Safety

safety, and health management. With the ultimate goal of

Philosophy of Occupational Health and
Safetyof each site talks to workplace leaders about the health andzero industrial accidents for the year, the general manager
safety policies and initiatives for the fiscal year.

Work-Life Balance Initiatives
Promoting Work-Life Balance(Work-Life Balance Approach)

In line with the Corporate Philosophy, we consider

In addition, each site establishes activity targets and

FHI aims to create a group of highly engaged, autonomous

occupational health and safety to be a critical responsibility

plans and promotes initiatives to achieve them so thathuman resources, and we believe that it is important toof management. Our Health and Safety Philosophy is, “We

employees constantly maintain awareness about preventing

establish an environment that allows each individual among

make health and safety the first priority in all of our work.”

accidents while going about their day-to-day work.

our diverse employees to fully express their unique abilities.

Based on this philosophy, all managers and employees work

In FY2014, there were 22 incidents of industrial

We work on promoting diversity in work styles as wellto ensure health and safety in their workplaces while

accidents. The lost-worktime injury rate, which indicatesas enhancing our schemes in order to respect the diversity

continuously striving to make a working environment more

the severity of accidents, was 0.07, equal to the averageof our employees and achieve work-life balance.

pleasant and comfortable for all.

for the automobile manufacturing industry as a whole. In
FY2015, we are aiming for zero industrial accidents with a

Health and Safety Philosophy“We make health and safety the firstpriority in all of our work.”
Basic Policy of Health and Safety
Aiming for zero incidents of occupational accidents, traffic
accidents, diseases, and fire disasters, all employees
recognize the importance of health and safety and strive
to improve equipment, environments, and work methods,
while raising the level of management and awareness inorder to create safe and comfortable workplaces.

focus on “Compliance with rules on standard working
hours” and “Implementing hazard prediction for nonroutine work.”

50

0.99

0.98

30

At the start of each fiscal year, each FHI business site

20

conducts a Health and Safety Kickoff Meeting that aims to10raise awareness about preventing industrial accidents, road

0

29

0.43

29

0.43

23

1.04

2010

2011

2012

FUJI HEAVY INDUSTRIES LTD.

0.94

2013

0.8
0.6

0.07
0.07

0.12
0.05

0

gender, nationality, culture, and lifestyles of employees and

1.0

22

0.19

unique values. For this reason, FHI values differences in
(%)
1.2

1.00
0.63
29

40

Aiming for Zero Industrial Accidents

found in competing products, each FHI employee needs tobe able express his or her abilities as an individual with

Number of occupational accidents
Rate of lost-worktime injuries (Average of automobile industry)
Rate of lost-worktime injuries (Average in the manufacturing industry)
Rate of lost-worktime injuries (SUBARU automobile business unit)

1.05

Promoting Diversity
For our company to continue offering customers value not

Occurrence of Industrial Accidents andRate of Lost-Worktime Injuries(Numbers)
60

Diversity Initiatives

2014

17 ANNUAL REPORT 2014

0.4
0.2
(FY)

0

strives to create workplace environments in which everyone
finds it easy to work.

Employees

Supporting Employees with Disabilities

CSR at Subaru

Senior Partner Program: Reemployment for
Employees over 60-year-old

Global Human Resources Initiatives

At FHI, we strive to create workplace environments in which

We introduced the “Senior Partner Program” in 2003 to

FHI recruits both new graduates and mid-career employees

people with disabilities can truly shine. To achieve this goal,

rehire employees after the 60-year-old retirement age. This

regardless of their nationality, and we employ non-Japanese

we leverage the ideas and opinions of our employees withreemploys the aged and better strengthens our humannationals as permanent and temporary employees.

disabilities and their family members.

resources. In addition to meeting the demands of theAt our Gunma Manufacturing Division, we welcome

In FY2014, we established SUBARU Bloom Co., Ltd. as“Revised Law Concerning Stabilization of Employment of

employees from Brazil, Peru, China, and many otheran initiative to increase employment of people with

Older Persons” since April 2013, we have revised the existing

countries. Even people whose conversational Japanese isdisabilities. The company plans to be accredited as a special

system so that retired workers can put their experience andadvanced may have difficulty with complex instructions

subsidiary under the Act on Employment Promotion etc., ofskills to further use, and have devised a system whereby

about manufacturing processes or specialized vocabulary.

Persons with Disabilities.

those who wish to work beyond retirement age can do so at

For this reason, we produce manuals in a wide variety of

FHI and at our associated group companies.

languages and offer interpretation services as needed.

As of March 31, 2014, FHI employed 168 persons withdisabilities, mainly in manufacturing work. The percentage

We have been improving the work environment so that

We also provide employees opportunities to receiveof employees with disabilities for FY2014 was 1.57%, which

the reemployed will be able to work more comfortably. We

language training and engage in extended training programs

was below the legally mandated rate of 2.0%. Going

will promote re-hiring senior people after their retirement atoverseas, helping them enhance their communication withforward, FHI and SUBARU Bloom will work to hire more

60 to use their experience and abilities for fostering a newpeople from other countries and understand cultures

people with disabilities and make our workplace

generation of workers.

different from their own.

environments even more conducive to their employment
with the aim of meeting the legally mandated rate.

In FY2014 the Gunma Manufacturing Division accepted

Number or Workers Over the Age of 60(Number of people)
400
300

269

295

352

321

Chinese interns under theForeign Trainee Internship

386

Program. A t the end of
FY2014, 183 interns were200

actively involved, bringing

100

The height of automatic door switches and work stations is set at a level thatis convenient for those using wheelchairs.

0energy to workplaces and
2010

2011

2012

FUJI HEAVY INDUSTRIES LTD.

2013

2014

18 ANNUAL REPORT 2014

(FY)

Manual written in Portuguese

helping in production activities.

Employees

Human Resource Development

CSR at Subaru

technical expertise and work methods that are tailored to all

Fair Evaluations and Support forDevelopment of Skills

future leaders. By transmitting to the next generation

Human Resource Development (HRD)
Philosophy

skill levels and reflect the highest standards of safety andMechanisms for the upgrading of skills aimed at growth

excellence, STS is helping to ensure the high quality ofbased on fair personnel evaluations are essential to develop

We offer a variety of training programs aimed at developing

SUBARU products going forward.

the autonomous human resources that FHI is aiming for.

highly engaged, autonomous human resources, which is theWe provide training that matches the skill levels of

To this end, FHI positions and utilizes its personnel system

human resources ideal based on our HRD Philosophy.

trainees, who consist of employees ranging from newwhich is made up of occupational skill certification programs,

Among our level-based training programs, the Startup

graduates to those in their mid-twenties. In FY2014, 421

performance assessment system, goal management system,

Program helps all employees who have risen to a higher

students took and completed courses, bringing thepersonnel rotations, and the education and training systems

level adapt to their new responsibilities and focuses on

cumulative number of successful trainees to 2,087.

as a tool for the development of human resources. In

logical problem solving.

addition to objectively evaluating job outcomes andWith the goal of helping employees obtain andperformance levels for skills through the operation of theenhance business skills, we also offer training programs for

personnel system, supervisors and their subordinates shareeach type of position within the company. We offer support

the challenges necessary for growth. Under the goalfor employees to attend business school. With a view tomanagement system, all FHI employees have an interview

accelerating our global HRD, we have also establishedprograms to facilitate foreign language acquisition andwith their supervisors three times a year (goal setting,
Basic Skills Training at STS

interim confirmation, outcome confirmation).

training in companies overseas.
Comment from a Trainee

HRD Philosophy
We seek to realize the SUBARU human resources idealof highly engaged and autonomous employees byhelping employees develop the ability to identify andsolve problems themselves.

Initiatives to Transmit Skills
We opened the SUBARU Technical School (STS) in 2006

Training in Skills that Cannot be Learnt from
Textbooks Alone
I learnt so much knowledge of immediate use on the job
and skills that cannot be learnt from textbooks alone fromveteran instructors. In training sessions, I tested my skills
against fellow students who were both friends and rivals
and was able to feel that every day was fulfilling.
I want to utilize the knowledge, skills and valuable
experience I gained at the SUBARU Technical School in
my workplace.
Koji Watanabe
No. 1 Trim Section, No. 1 Manufacturing Department,
SUBARU Manufacturing Division

with the goal of training young technicians to become

FUJI HEAVY INDUSTRIES LTD.

19 ANNUAL REPORT 2014

Environment

CSR at Subaru

Environmental Management
Organization

Summary of 5th Voluntary Plan for theEnvironment (FY2013 to FY2017)

offices and delivering them to customers via green logistics

FHI has established the 5th Voluntary Plan for theand green dealers.

to produce even greener products at green plants andEnvironment for the period FY2013 to FY2017. Based on our

Our entire Group shares this plan and works together

Established to implement the Environmental Policy andEnvironmental Policy, we have set even higher environmental

to ameliorate and eliminate environmental problems on a

Voluntary Plan for the Environment, FHI’s environmental

protection targets while adding new environmental

continuous basis. Our environmental initiatives introduced

management organization comprises two main entities thatmeasures to ensure compliance with laws and regulations

here are categorized into four groups: global warming

cross corporate divisions: the Company-wide Environmental

and to foster cooperation on environmental issues withincountermeasures, resource recycling, pollution prevention

Management System (EMS) and the Environmental Committee.

the automobile industry. Based on this plan, we will

and reduction of hazardous chemical usage, andServing as the head of the Company-wide EMS andcontribute to society through our products, striving always

environmental management.

the chairperson of the Environmental Committee, thedirector responsible for environmental issues conducts
environmental reviews twice a year. We proactively
implement environmental pro t ec tion ac tivities,
comprehensively managing our progress and continuously

The 5th Voluntary Plan for the Environment
Global Warming Countermeasures
Launched hybrid cars in the market in2013

revising the direction of future efforts.

Introduces horizontally-opposed
direct injection turbo engines

Environmental Management Organization

Made horizontally-opposed diesel
engines compliant with Euro 6

Domestic AffiliatedCompanies Division
Sales, Service, and Logistics Division
Logistics Division
Sales and Service Division

Fully conformed fuel economy andgreenhouse gas standards worldwide

Head Office

Utsunomiya
Manufacturing
Division

Pollution Prevention Division

SaitamaManufacturing
Division

Global Warming Prevention DivisionTokyo Office

FHI Environmental Committee

Zero-Emissions Division

FHI Company-wide EMS
Gunma
Manufacturing
Division

Production Environment Committee

Resource Recycling

Improved fuel economy by
30% compared to previous
modelsPromoted Eco Driving Assist
Devices
Implemented CO2 emissions
reduction initiatives indomestic and overseas plants

Continued collection of used bumpers
Maintained zero emission from production sites in Japan andoverseas
Designed new vehicles to be highly recyclable, aiming for 95%
recycling rate by 2015

Pollution Prevention and Reduction of Hazardous Chemical Usage
Added models achieving emission levels 75% lower than 2005 gasoline standards
Reduced VOCs and substances on the PRTR

5 Subsidiaries in Japan
Yusoki Kogyo Co., Ltd.
Fuji Machinery Co., Ltd.
Ichitan Co., Ltd.
Kiryu Industrial Co., Ltd.
SUBARU Logistics Co., Ltd.

Developed technologies to enhance fuel economy, improved and reduce emissions,and reduce noise

Subaru of Indiana
Automotive, Inc. (SIA)
Subaru of America, Inc. (SOA)
Subaru Canada, Inc. (SCI)
Subaru Research &Development, Inc. (SRD)

Continued initiatives to reduce to zeroenvironmental accidents or claims that exceed
legal standards in each country

Environmental Management

44 Subaru Authorized Dealers in Japan
4 North American Subsidiaries

Complied with laws and regulations in eachregion (e.g. EU directives)

Developed EyeSight (Ver. 3), with significant
evolution in advanced safety functions

Promoted Group-wide ISO
14001 certification, including
affiliates

Expanded implementation of Supplier CSR
Guidelines to business partners of the Aerospaceand Industrial Products Companies

Publicly disclosed wide range ofenvironmental information

FUJI HEAVY INDUSTRIES LTD.

20 ANNUAL REPORT 2014

Supported maintenance of Eco Action 21
certification by domestic dealers
Publicly disclosed Life Cycle Assessment (LCA) data
Implemented greening initiatives that respectedbiodiversity

Environment

CSR at Subaru

Environmental Data Highlights
Fuel Economy Standards•Japan: Meeting the FY2016 fuel economy standards in 5 of
the 9 weight categories•U.S.: Meeting the 2013 Model Year Corporate Average
Fuel Economy (CAFE) Standards and Greenhouse Gas(GHG) Standards
Status of Achievements for the FY2016
Fuel Economy Standards(km/l)
40
30
20

28.41

21.8

24.63

21.0

20.8

20.5

18.31 15.90

13.67

18.7

15.82 15.45

17.2

10
0

FY2014 Environmental Performance•CO2 emissions and waste generation increased from theprevious fiscal year due to higher production volumes.

•Monthly record on zero landfill, achieved in May 2011,
maintained*Sites covered: Gunma Manufacturing Division, Tokyo Office, Saitama Manufacturing
Division and Utsunomiya Manufacturing Division•Airbag recycling rate of 94.0% achieved (compared withlegal standard of 85%)

CO2 Emissions•Entire amount of recovered CFCs suitably treated(ton-CO2)
400,000

100

300,000

273,889

Statutory Rate and Recycling Rate of ASR and Airbags, etc.

FY2016 fuel economy standards

32.18

Automobile Recycling•Automotive Shredder Residue (ASR) recycling rate was
97.1% (compared with the FY2015 legal standard of 70%)

15.8

13.06

14.4

ASR
(%)
100

80

13.2

Airbags, etc.

94.1

82.1

94.1

93.7

95.9

97.1

200,000

93.6

93.5

94.0

100,000

Statutory rate of
airbags, etc.

84.0

60

800

910

40

Increases in the Number of Models Certified to be LowEmission Vehicles•Cars with 75% reduction from the 2005 emissions standards
increased to account for 98% of car production quantity

20•All vehicles certified as low-emission vehicles (certified tohave achieved at least a 50% reduction from the 2005
emissions standards)

Statutory rate of ASR

80

7

60
40

89

98

7
91

100
6
94

100
3
97

2010

2011

2012

2013

1991

Amount of waste generation(ton)
120,000

2011

2012

2013

Legally mandated recycling rates
ASR: 30% (FY2006‒FY2010) Airbags: 85%
50% (FY2011‒FY2015)
70% (FY2016‒)

50

2011

2012

2013

2014 (FY)0

6.9

40,000

0

Amount of waste generation per unit
(ton/100 million yen)
15
109,997

2000

2010

71,45579,284
7.7

10

7.2

6.6

6.7

2011

2012

2013

5

2014 (FY)0

PRTR Chemical Substances
Amount of PRTR chemical substances handled
Amount of PRTR chemical substances emitted
(ton)
100

4,000 3,745

100
2

2,000

0

(FY)

FUJI HEAVY INDUSTRIES LTD.

21 ANNUAL REPORT 2014

Emissions index (FY2000=100)
（%）

3,241

3,137

3,000

98

2014

75

224,274

95,49564,936

2,082

1,000
2010

2010

2014 (FY)

20
0

74.0

25

89,897

Certified to have achieved a 75% reduction from 2005 regulatory values
Certified to have achieved a 50% reduction from 2005 regulatory values

96

72.6

(%)
100

86.8

81.9

205,148 196,536 198,870 202,721

80,000
0

71.8

12.9

Percentage of Low-Emission Gasoline-Powered
Passenger Cars

（%）
100

0

Index (FY1991=100)

Waste Generation (includes scrap metal sold)1,020 1,130 1,250 1,360 1,470 1,590 1,700
Weight categories (kg)Amount of CO2 emissions

2000

1,931
31.9

32.6

665

679

2010

2011

1,918
33.1

65.8

1,370

689
2012

100

2,993

2013

49.5

1,031

2014 (FY)

75
50
25
0

Compliance

CSR at Subaru

Compliance System / Organization and
Administration
A company-wide committee established to promote

Basic Compliance Policy

corporate compliance, the Compliance Committee

FHI views compliance to be a key responsibility ofmanagement and firmly believes that only throughcompany-wide implementation of compliance can ourbusiness have a strong foundation. FHI strives toengage in fair and just corporate activities that comply
with laws and regulations, our own internal rules, andthe standards of society.

conducts deliberations and discussions, renders

Consultation
ReportOutsidecompany Anonymous

Consultation Specialized
industrial
counselorprovidesReportservices

determinations, and encourages the exchange ofreportReport ofinvestigation
and actions

Investigation
and actions

Alleged wrongdoer

Compliance Philosophy

Compliance Hotline (Flow from consultation to solution)
Compliance Hotline Desk
(FHI Legal Dept.)

Compliance System and
Administration

Hotline user

Thorough Implementation ofCompliance Activities

information on key compliance issues. Every year, eachdepartment plans its own compliance program, continuously
and autonomously implementing compliance initiatives.

Personal Information Protection Initiatives
To comply with the Personal Information Protection Act, FHI

Compliance Hotline

Corporate Code of Conduct and Conduct
Guidelines

In addition to discussing with their supervisors any compliance

FHI has established a Corporate Code of Conduct andissues they encounter, FHI Group employees have the option

Since Subaru dealers in Japan handle a wide range ofConduct Guidelines as standards to help ensureof using the Compliance Hotline and reporting issues directly

customer information, we have reviewed the compliance ofcompliance with laws and regulations. They are explained into the Hotline Desk located within FHI.

each of the 44 dealers, including affiliated companies, withhas reviewed its internal systems and rules and publicly
disclosed its privacy policy.

detail in the Compliance Manual, which is given to all FHI

After receiving information via mail, telephone, or

our rules and created a Personal Information Protection

executives and employees to help them maintainemail, employees assigned to the Hotline Desk research

Handbook for Subaru Dealers. In this way, we are working tocompliance in their daily actions.

situations and take appropriate actions based on FHI's

ensure that all employees understand the importance ofinternal rules. The names and departments of those making

protecting personal information.

reports are kept strictly confidential to prevent reprisals.
Since April 2008, a company external to the FHI Group has
provided services to the Hotline Desk, allowing theCompliance Hotline to extend its hours and helping toensure the confidentiality of the names and departments of
those making reports. The result has been greater ease ofuse for all employees making use of the hotline. In FY2014,
Compliance Manual

there were 53 consultations with the Compliance Hotline.

FUJI HEAVY INDUSTRIES LTD.

22 ANNUAL REPORT 2014

Handbook for SUBARU Dealer Staff

Information Disclosure

CSR at Subaru

Information Disclosure

Plant Tours for Shareholders
We hold plant tours for shareholders to allow them toInformation Disclosure Philosophy

experience our actual production workplaces and gain a

By disclosing information about our corporate strategy anddeeper understanding of our production policies andactivities in a fair, proper, and timely manner, FHI seeks toactivities.

increase the transparency of management and increases theWe also hold Q&A sessions after the tours to facilitate

understanding of FHI on the part of our stakeholders,

communication between our executives and shareholders

thereby building with them a relationship of trust.

and to receive our shareholders’ valuable opinions andinsights, which we feed back into our continuous
improvement efforts.

Information Disclosure on Our Website
Our website includes an Investor Relations section thatFor fiscal 2013, 49 groups with 87 individuals

Webpage “Investor Relations”

participated at the Yajima Plant on the grounds of ourprovides up-to-date IR information. We also distribute theGunma Manufacturing Division in March 2014. Some of thelatest financial reports and other IR-related information bycomments we received from participating investors include

email to those who register. Currently more than 900 people“I got to know a lot more about SUBARU and feel moretake advantage of this free email service. We also provide

affinity to the company” and “it was very interesting to seean Investor Relations site designed specifically formore things that can’t ordinarily be seen.”smartphone access.
Also, our IR site was ranked 1st in the industry in the“Fiscal 2013 Listed Company Website Quality Ranking”
hosted by Nikko Investor Relations Co., Ltd. for seven years
in a row (about 3,600 companies evaluated), and also
positioned 1st in the industry in the “Investor Relations Site
Ranking in 2014” by Gomez Consulting Co., Ltd. for eight
consecutive years.

“FINANCIAL REPORT” for all our shareholders

FUJI HEAVY INDUSTRIES LTD.

23 ANNUAL REPORT 2014

Plant tour for shareholders in FY2014

Procurement

Procurement
Our Approach to Procurement

CSR at Subaru

Subcontractors, and other laws and regulations related to

From FY2014, FHI began to investigate partners withprocurement. We are also engaged in fair trade programs inregard to conflict minerals. We will continue to conduct CSR

support of the Fair Trade Guidelines for the Automotive

procurement going forward.

Industry issued by the Ministry of Economy, Trade and Industry

In keeping with our Corporate Philosophy, FHI strives toin June 2007. As part of these efforts, we offer a hotline for

procure parts, materials, and equipment that offer excellent

business partners in our supply chain to call in should they have

Promotional System for Appropriate
Business Practices and CSR Procurement

quality, environmental performance, and cost performance. To

any questions or concerns about FHI's fair trade practices.

In the past, the procurement departments of the Subaru

realize this goal, it is necessary for us to establish relationships

Even for employees, FHI provides legal and regulatory

Automobile Business, Aerospace Company, and Industrial

with our business partners based on equality, trust, mutual

training for those in charge of procurement and transmits

Products Company participated in the Procurement

benefit, and dedication to continuous improvement.

notices and alerts on our intranet to ensure that business is

Environmental Committee, which strived to solve

conducted properly.

environmental issues that arose in the area of procurement.
In FY2012, the committee changed its name to theFundamental Procurement Policy

Purchasing Committee and expanded its mission to include

FHI has been promoting procurement activities under
the following basic policy.

Revision of CSR Guidelines for Suppliers•Compliance & Green Procurement
We engage in procurement activities in a way toharmonize man, society and the environment andconduct transactions paying due care to observe legal
and societal rules and to protect the environment.

Based on the CSR Guidelines for Suppliers issued by

The policy of the Purchasing Committee is to facilitate

Japan Automobile Manufacturers Association, Inc. (JAMA),

fair procurement practices and encourage CSR at suppliers,

we have created the SUBARU Supplier CSR Guidelines by

thereby helping to ensure fair trade with business partners

incorporating our CSR policy for the business partners ofand cooperative CSR-based procurement throughout the•Establish Best Partnership
We establish “WIN-WIN” relationships with suppliers
through transactions based on mutual trust under thedoctrine of good faith.

SUBARU Automotive Business. We expect these

FHI supply chain.

•Fair and Open Way of Selecting Suppliers
In selecting suppliers, the door is wide-open to all
firms, domestic and overseas, for fair and equitablebusiness to procure goods and services most excellent
from six perspectives: quality, cost, delivery, technicaldevelopment, management and environment.

guidelines will help our partners to conduct further CSR
activities and expand such activities jointly with their own
business partners.

Delay in Payment of Subcontract Proceeds, Etc., toCommunication with Partners

Until now, FHI implemented the Supplier CSR Guidelines

In an effort to communalize with partners our mid- to long-in the SUBARU Automotive Businessterm management strategies and our sales, production andPromoting Fair Trade
FHI strictly observes the Antimonopoly Act, the Act against

both environmental and CSR issues.

SUBARU Supplier
CSR Guidelines

and Industrial Products Company,

procurement policies, FHI has been hosting “Purchasing

however, in FY2014, we revised their

Policy Briefings” every spring. We also periodically exchange

content creating a standardized

information by participating in “Cooperation Meetings”

version for all partners companywide,

comprised of our partners.

including the Aerospace Company. We

Once a year, FHI hosts “General Cooperation Meetings”

have always expected our partners to

as a venue to speak directly to partners. Those meetings are

implement and promote CSR activities

followed by awards bestowed to those partners that havethat include their suppliers.

particularly contributed to technology and quality.

FUJI HEAVY INDUSTRIES LTD.

24 ANNUAL REPORT 2014

Social Contribution

CSR at Subaru

Efforts in Japan

TOPICS

Traffic Safety Campaign

President & CEO Yasuyuki Yoshinaga Gives
Visiting Lecture on “Let’s Live through our
Individuality” at University Campus

Each of our business sites cooperates with the police andthe Safe Driving Supervisor Association and hosts driving
training sessions, such as a safe motorbike driving
demonstration by police motorcyclists. We raise awarenessof traffic safety and road accident prevention throughactivities that include sticking reflective materials that help

“SUBARU Kids” site for children
http://www.fhi.co.jp/kids/ (Available only in Japanese)prevent nighttime traffic accidents to utility poles and events
such as offering traffic safety guidance services in the schoolzones around the business sites.

Facility Tours at the SUBARU Visitor CenterFirst open to the public on July 15, 2003, the Subaru Visitor
Center welcomes people who visit the Yajima Plant for toursof the facility and other reasons. Inside, visitors can viewhistoric SUBARU models and cars that set world records, aswell as learn more about SUBARU's unique technologies

In October 2013, a lecture meeting was held at theTama campus of Chuo University aimed at getting
students to study with a broad global perspective,
and Yasuyuki Yoshinaga, FHI President & CEO took
the rostrum. Mr. Yoshinaga gave a presentation about
the “individuality” of SUBARU reached throughpersonal experience and business strategy. All in allabout 1,100 people listened to his speech, and alively Q&A session was also held.
In addition, with SUBARU cars on display
outdoors, as well as the offer of EyeSight
experiences, many students stopped and listened to
explanations from FHI staff.

and environmental initiatives. In FY2014, 95,963 people
Left: Activity to stick reflective materials that help prevent nighttime traffic
accidents to utility poles
Right: Traffic safety support near schools

came to see the facilities.

Traffic Safety Awareness Campaign

The 600-person capacity classroom was full and live video was also
provided in the classroom next door

FHI has begun operating our “SUBARU Kids” to promoteawareness of traffic safety among young people.
As a member of the traffic society we actively promoteawareness among employees at each of our offices andplants by providing accident prevention meetings before
long holiday seasons and other occasions.

SUBARU Visitor Center

For a Plant Tour application (10 to 200 people) and detailed
information on the Visitor Center, please refer to the link below.
http://www.subaru.co.jp/about/showroom/vc/(Available only in Japanese)
Outdoor displays and EyeSight experiences were also on offer

FUJI HEAVY INDUSTRIES LTD.

25 ANNUAL REPORT 2014

Social Contribution

CSR at Subaru

Efforts outside of Japan
Efforts by Subaru of America Inc. (SOA)

innovative program which

parents, mainly the fathers, were very interested in the tour!

addresses specific key

There was a presentation about SRD, a vehicle demonstration

environmental, health or

and also an Eyesight demonstration.

safety topics. The 2013

Water Blues Green Solutions—Call to Action for a
Sustainable Water Future

Challenge focused on zeroWith national partner Penn State University Broadcasting,public/private partnership.

w as t e and o f f - the- job

Subaru is helping to promote awareness of the role thatgreen infrastructure can play in creating a sustainable water
future. The interactive documentary, Water Blues Green

Efforts by Subaru Canada, Inc. (SCI)

Solutions is to drive development of strategies addressing

Ronald McDonald House Toronto

issues of flooding, drought, and pollution by adopting new

SCI was presented with a lovely gift to recognize ourways of thinking

ongoing efforts in supporting the House. This special gift ofabout how to

art was created by children staying at the House using

protect, restore

syringes as a means of therapeutic and artistic expression.

and preserve ourEfforts by Subaru of China, Ltd.
Donating Vehicles for Earthquake Relief in Ya’an, Sichuan
Province, China

rivers and sourcesof drinking water.

After a severe earthquake struck Sichuan Province on April
20, 2013, Subaru of China, Ltd. donated five Forester
automobiles to five government entities in Ya’an, a city hit
especially hard by the disaster: the Bifengxia Panda Base,

Efforts by Subaru of Indiana Automotive,
Inc. (SIA)

the Lushan County Forestry Bureau, the Lushan County
Education Bureau, the Tianquan County Sanitation Bureau,
and the Tianquan County Agriculture Bureau. These entities

SIA received the 2013 Innovation Challenge Award for Zero

Efforts by Subaru Research & Development,
Inc. (SRD)

Waste. The Campbell Institute/Stewardship Action Council

2013 SRD-CA Site Tour

repairing and constructing housing, fortifying the structures

Innovation Challenge honors organizations for their

The site tour was held on Saturday, May 18, 2013. It involvedof schools and other buildings, transporting victims, andachievement in the planning and/or implementation of ansix-year old children and their parents. It was noted that thedelivering medicine and other relief supplies.

Innovation Challenge Award

FUJI HEAVY INDUSTRIES LTD.

26 ANNUAL REPORT 2014

are using the vehicles in a variety of relief projects, such asCorporate Governance

CSR at Subaru

Corporate GovernanceCompensation Meeting is responsible for evaluating thefurther strengthen internal control, and will also disclose

performance and determining the compensation of executives.

information fairly and in a timely manner in order to increase

Also, the execution of important business operations is

Corporate Governance Systemmanagement transparency.

decided and supervised by the board of directors andSince June 1999, FHI has employed an executive officer system

audited by the board of corporate auditors. The board ofthat clarifies the managerial responsibilities of executives in

directors consists of seven members with one of themInternal Controls Systemeach division. In June 2003, we reduced the term of directors

invited from the outside as an independent member toInternal controls are an indispensable mechanism forand executive officers from two years to one. Moreover, sinceenhance governance. The board of corporate auditors

achieving corporate objectives, and management isJune 2004, based on a decision of the Board of Directors, theconsists of four members with two of them invited from theresponsible for establishing them and maintaining their

Executive Nomination Meeting is responsible for the selection

outside for higher objectivity to monitor business

effectiveness and efficiency. At FHI, the Corporate Planningof corporate officer candidates, and the Executive

management. In addition, we will take various measures to

Department (which plays a central role in the common
functions of each business) and other company-wide

System of Corporate Governancedepartments maintain close links with other departments
and companies to enhance risk management.

General Meeting of Shareholders

In addition, the Audit Department performs planned
Executive Nomination Meeting

Board of Corporate
Auditors Meeting
4 Auditors (Incl. 2 Outside
Corporate Auditors)

Executive Compensation Meeting
Board of Directors Meeting
7 Directors(Incl.1 Outside Director)

Accounting Auditors

audits of each department and Group company. To support
internal controls, FHI has created a system and organization
to ensure compliance, which is the foundation of risk
management. Further, in compliance with the Standards forCommittees

Management Assessment and Audit Concerning Internal
Control Over Financial Reporting issued by the Business

CSR Committee

Accounting Deliberation Council of the Financial Services

Environmental Committee

strengthen the internal controls system of the entire Group

Compliance Committee

1. Effective and efficient operations

Agency on February 15, 2007, we work to continuously
President / Representative Directors
Internal Audit Department(Audit Department)so as to achieve the following:

Executive Management Board Meeting

Recall Committee

Corporate Vice Presidents

Export Control Committee

2. Reliable financial reporting
3. Compliance with laws and regulations in all businessactivities
4. Safeguarding of assets

Corporate Operations at HQ, Automotive BU, Each Company and Affiliate of the Group

FUJI HEAVY INDUSTRIES LTD.

27 ANNUAL REPORT 2014

Corporate Governance

CSR at Subaru

Executive Compensation

Location-Specific Business Continuity Plans(BCPs)

Risk Management

As approved by the Ordinary General Meeting of

We define risk as uncertain elements with the potential forWith the goal of minimizing any reduction of service toShareholders in June 2006, the total amount of yearly

negative impact on our business operations. While there arecustomers and preventing loss of market share andcompensation paid to directors and corporate auditors ismany types of risk, we call those risks that are particularly

corporate value, we have created a BCP for each businesslimited to ¥600 million and ¥100 million, respectively. The

dangerous to our business operations and that we cannot

unit to maintain business operations or restore them ascompensation paid to directors must be approved by thehandle through regular decision-making channels “crisis-level

quickly as possible in the event of an emergency. Should ourBoard of Directors and is divided into a fixed amount (basedrisks” and categorize them as follows: natural disaster,

resources (employees, physical assets, monetary assets) beon position, the business environment, and other factors)

accident, internal human factors, external human factors,

affected by an emergency, we will leverage our remaining

and a performance-based amount (based on consolidatedsocial factors (domestic, overseas), and compliance.

resources to minimize the shutdown of priority operations

ordinary income for the fiscal year under review, the businessWe have created manuals for dealing with each type ofand restore all operations to their original state as quickly as

environment, and other factors). In fiscal 2013, compensation

emergency, which delineate what communication channels

possible. We have also established an Emergency Response

for directors and corporate auditors was as follows:

are to be used once a risk is recognized, how to form crisis

Policy, in accordance with which we strive to maintainmanagement headquarters, and other methods to follow to

operations in the event of an emergency.

Total compensation(millions of yen)Classification

Numberrespond optimally to the situation.
Emergency Response Policy

Basic compensation
FixedamountPerformancebased amount

Directors(excluding outside
directors)

7

241

221

462

Corporate auditors(excluding outside
corporate auditors)

4

35

−

35

Outsideexecutive officers

3

44

−

44

Total

14

320

221

541

1 Give first priority to people’s survival andphysical safety.
2 Minimize loss of stakeholder interests andcorporate value.
3 Act always with honesty, fairness, andtransparency, even in an emergency.

FHI emergency response procedure manual andcrisis management (disaster prevention) guidelines

Note: This table includes two corporate auditors who retired by the end of the fiscal
year. As of March 31, 2013, the Company maintains eight directors (including
one outside director) and four corporate auditors (including two outside
corporate auditors).

FUJI HEAVY INDUSTRIES LTD.

28 ANNUAL REPORT 2014

Board Directors / Executive Officers (as of June 24, 2014)

Director of the Board

FUJI HEAVY INDUSTRIES LTD.

29 ANNUAL REPORT 2014

Board Directors / Executive Officers (as of June 24, 2014)

Director of the Board

Executive Officers
Naoto Muto 4

Corporate Executive Vice President
Shuzo Haimoto
Hisashi Nagano

Director of the Board
Corporate Executive Vice President
5

6

3

1

7

2

4

Yasuyuki Yoshinaga 1
Representative Director of the Board
President & CEO
April 1977 Joined the Company
April 2005 Corporate Vice President, Senior General Manager of Strategy Development
Division, and General Manager of Corporate Planning Department
June 2006 Corporate Vice President and Chief General Manager of Strategy Development Division
April 2007 Corporate Vice President, Chief General Manager of Subaru Japan Sales &Marketing Division, and General Manager of Sales Promotion Department
June 2007 Corporate Senior Vice President and Chief General Manager of Subaru Japan
Sales & Marketing Division
June 2009 Director of the Board and Corporate Executive Vice President
June 2011 Representative Director of the Board, President & CEO

Jun Kondo 2
Representative Director of the Board
Deputy President
April 1976 Joined the Company
June 2003 Corporate Vice President, Chief General Manager of Subaru Manufacturing
Division, and Chief General Manager of Gunma Plant
May 2004 Corporate Vice President, Chief General Manager of Subaru Cost Planning &Management Division, and General Manager of Cost Planning Department
June 2004 Corporate Senior Vice President and Chief General Manager of Subaru Cost
Planning & Management Division
June 2006 Corporate Senior Vice President, Chief General Manager of Subaru Cost Planning &Management Division, and Senior General Manager of Subaru Purchasing Division
April 2007 Corporate Senior Vice President, Chief General Manager of Strategy
Development Division, and Chief General Manager of Subaru Cost Planning &Management Division
June 2008 Director of the Board and Corporate Executive Vice President
June 2011 Representative Director of the Board and Deputy President

Akira Mabuchi 3
Director of the Board
Corporate Executive Vice President
April 1979 Joined the Company
April 2005 Corporate Vice President, Senior General Manager of Subaru Engineering
Division, and General Manager of Engineering Administration Department
June 2007 Corporate Senior Vice President and Chief General Manager of Subaru
Engineering Division
April 2009 Corporate Senior Vice President and Chief General Manager of Strategy
Development Division
June 2010 Director of the Board and Corporate Executive Vice President

April 1977 Joined the Company
April 2005 Corporate Vice President, Senior General Manager of Subaru Product &Portfolio Planning Division, and General Manager of Subaru Product & Portfolio
Planning Division
June 2006 Corporate Vice President and Chief General Manager of Subaru Product &Portfolio Planning Division
June 2007 Corporate Senior Vice President and Chief General Manager of Subaru Product &Portfolio Planning Division
April 2009 Corporate Senior Vice President and Chief General Manager of Subaru Purchasing
Division
June 2010 Corporate Executive Vice President and Chief General Manager of Subaru
Purchasing Division
June 2011 Director of the Board and Corporate Executive Vice President

Mitsuru Takahashi 5

Corporate Senior Vice President
Hidetoshi Kobayashi Yasuo Kosakai
Kazuo Hosoya
Masaki Okawara

Tomomi Nakamura

Corporate Vice President
Yasunobu Nogai
Masashi Takahashi
Toshio Masuda
Satoshi Maeda
Shoichiro Tozuka
Toshiaki Okada
Hiroki Kurihara
Tetsuo Onuki

Masami Iida
Hiromi Tsutsumi
Toshiaki Tamegai

Director of the Board
Corporate Executive Vice President

Auditors

April 1978 Joined the Company
June 2006 Corporate Vice President and General Manager of Finance & Accounting
Department
April 2009 Corporate Senior Vice President, CFO, and General Manager of Finance &Accounting Department
April 2010 Corporate Senior Vice President, CFO, General Manager of Finance & Accounting
Department, and President of Eco Technologies Company
June 2010 Corporate Executive Vice President, CFO, General Manager of Finance &Accounting Department, and. President of Eco Technologies Company
April 2011 Corporate Executive Vice President, CFO, and President of Eco Technologies Company
June 2012 Director of the Board, Corporate Executive Vice President, CFO, and President

Standing Corporate Auditor
Nobushige Imai
Masakazu Kimura

Takeshi Tachimori 6
Director of the Board
Corporate Executive Vice President
April 1977 Joined the Company
June 2006 Corporate Vice President and Senior General Manager of Subaru Product &Portfolio Planning Division
April 2009 Corporate Vice President, Chief General Manager of Subaru Product & Portfolio
Planning Division, and President of Subaru Tecnica International Inc.
April 2010 Corporate Senior Vice President and Chief General Manager of Subaru Product &Portfolio Planning Division
April 2011 Corporate Senior Vice President and Chairman, President & CEO of Subaru ofAmerica, Inc.
June 2011 Corporate Senior Vice President; Chairman, President & CEO of Subaru of America,
Inc.; and Chief General Manager of Subaru Overseas Sales & Marketing Division 1
April 2013 Corporate Executive Vice President, Chairman & CEO of Subaru of America, Inc.,and Chief General Manager of Subaru Overseas Sales & Marketing Division 1
June 2013 Director of the Board and Corporate Executive Vice President

Toshio Arima 7
Outside Director
June 2011 Outside Director

FUJI HEAVY INDUSTRIES LTD.

30 ANNUAL REPORT 2014

Masahiro Kasai

Norio Saito

Corporate Auditor
Takatoshi Yamamoto

Outside Directors
The Company has appointed Toshio Arima to the position of outside
director. Possessing considerable experience as an executive and a highdegree of expertise in the area of CSR, Mr. Arima offers sound advice toand ensures the independent monitoring of the Board of Directors andother bodies. The Company has appointed Nobushige Imai to the positionof outside auditor. Mr. Imai is fully qualified for this position owing to thewealth of management experience and knowledge he acquired as an
executive in the financial industry, and he has the character and ability
needed to undertake audits in an objective manner. In addition, theCompany has appointed Takatoshi Yamamoto to the position of outside
auditor. Mr. Yamamoto is fully qualified for this position owing to the wealthof knowledge of corporate activities he gained as a securities analyst andthe corporate management experience he gained as an executive in the
manufacturing industry. Further, since they possess exemplary
backgrounds and no conflict with the interests of ordinary shareholders canbe foreseen, the Company has appointed Mr. Arima and Mr. Yamamoto as
independent directors under Tokyo Stock Exchange (TSE) regulations.

Consolidated Ten-Year Financial Summary FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES Years ended March 31(Millions of yen) (Thousands of U.S. dollars1)

2014

2014

¥ 1,446,491 ¥ 1,476,368 ¥ 1,494,817 ¥ 1,572,346 ¥ 1,445,790 ¥ 1,428,690 ¥ 1,580,563 ¥ 1,517,105 ¥ 1,912,968 ¥ 2,408,129
1,241,427
1,728,271
1,222,419
1,152,763
1,164,564
1,125,293
1,142,674
1,107,718
1,217,662
1,501,809
339,136
679,858
294,686
275,927
281,226
351,075
352,143
338,773354,684
411,159$ 23,398,066

2005

2006

2007

2010

2009

2008

2011

2012

2013

For the year:
Net sales
Cost of sales
Gross profit
Selling, general andadministrative expenses
Operating income (loss)
Income (loss) before income taxes
and minority interests
Net income (loss)
Comprehensive income

16,792,372
6,605,694

287,029

248,577

255,001

250,727

290,748353,369

3,433,434（5,803）27,35084,13543,959120,411

326,489

3,172,260（443）

63,21452,87993,082

328,865

3,195,346

50,32638,453

119,588

206,616

2,007,540

34,90044,474

152,009210,757

2,047,775

381,893 ¥413,963 ¥451,607 ¥412,661

450,302596,813 ¥ 770,071
765,544595,365$ 7,482,229

380,587

1,165,431

1,231,367

1,188,324

1,352,532

1,577,454

1,888,363

18,347,873

33.8%

30.9%

34.7%

33.3%

37.7%

40.5%

264.76

296,756

292,736304,237

309,004

42,01758,33947,90645,68021,066

28,67445,58931,906

18,23815,611

31,89918,481———（69,933）—（16,450）—（13,416）

474,616 ¥467,786 ¥495,703 ¥494,423 ¥394,719 ¥471,149

465,522494,004

493,397

393,946

1,357,459

1,348,400

1,316,041

1,296,388

34.7%

34.5%

37.5%

38.1%

（21,517）

At year-end:
Net assets2¥

Shareholders’ equity
Total assets
Ratio of shareholders’ equity
to total assets (%)

7,438,243

Per share: (in yen and U.S. dollars)
Net income (loss):

23.27 ¥

20.66 ¥

44.46 ¥

25.73 ¥

153.23 ¥

20.66

44.44

25.73

（21.11）¥—49.27 ¥

23.27

（91.97）¥—64.56 ¥

Diluted

—

—

—

—

—

Net assets

604.51649.41687.81687.02505.59488.58528.88576.97762.87980.98

9.53

Basic

¥

$

2.57

Other information:
Depreciation/amortization¥
Capital expenditures(addition to fixed assets)
Research and development expenses
Number of shares issued(thousands of shares)3
Number of shareholders3$

71,010 ¥80,073 ¥81,454 ¥87,164 ¥74,036 ¥

65,785 ¥56,062 ¥58,611 ¥61,544 ¥61,486

147,759

119,289

126,329

118,869

95,15389,077

67,37867,03594,986

98,537

957,414

48,11549,14160,092583,871

52,962

46,89350,70952,02042,831

37,17542,907

782,865

782,865

782,865

782,865

782,865

782,865

782,865

782,865

782,865

782,865

34,55846,36742,92044,48440,83939,22334,24033,13928,89051,386

Parent only

12,703

11,99811,752

11,90912,137

12,483

12,42912,35912,717

13,034

Consolidated

26,98926,11525,59826,40427,65927,58627,29627,12327,50928,545

Number of employees3:

1. U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥102.92 to US$1.00, the approximate rate of exchange at March 31, 2014.
2. Prior year amounts have been reclassified to conform to the current year presentation.
3. As of March 31

FUJI HEAVY INDUSTRIES LTD.

31 ANNUAL REPORT 2014

597,415Five-Year Automobile Sales Years ended March 31
Consolidated Automobile Sales by Region (Number of units)
Japan

United States

China

OthersCanadaRussiaEuropeConsolidated Automobile Sales (Number of units)
Australia

825,098
724,466

750,000

656,964

639,862

562,837

300,000

150,000

2013

2014

Legacy28,862

22,673

22,812

24,207

18,961

Impreza

21,721

20,184

29,12253,25061,071

Forester

11,87912,68513,80318,04436,572

Exiga

10,789

7,859

8,020

7,392

3,853

—

—

249

6,711

3,380

OEM

1,523

4,430

5,844

2,778

1,857

Others

323

303

303

368

453

Passenger cars

75,097

68,13480,153112,750

126,147

Minicars

96,17589,971

92,18950,37255,454

Domestic total

171,272

158,105

172,342

163,122

181,601

U.S.

227,028

278,959

280,356

357,569

441,799

Canada22,82828,05928,23932,64436,013

Russia1,563

11,32015,86014,71915,314

Europe37,34048,24439,07546,38231,756Australia

34,992

41,15036,92838,12039,515

China

48,93862,412

48,32350,18544,807

Overseas units by region:
FY 2010

2011

2012

2013

2014

Consolidated Automobile Sales by Model (Number of units)
LegacyImpreza

ForesterTribeca

SUBARU BRZOEMOthersMinicars

Exiga

900,000

825,098
750,000

Others

18,87628,71518,73921,72534,293

Overseas total

391,565

498,859

467,520561,344643,497

Legacy146,099

225,388

210,194

207,460

182,712

Impreza

74,99887,06690,149190,864

210,828

Forester

156,288

176,453

157,833

147,679

231,173

Tribeca

7,564

5,643

5,702

4,243

2,561

724,466
656,964

600,000

2012

SUBARU BRZ

450,000

0

2011

Domestic units:

900,000

600,000

2010

639,862

Overseas units by model:

562,837450,000

300,000

SUBARU BRZ
OEM

150,000

0

2011

2012

2013

2014

—

38

10,10015,822

3,865

3,372

591

256

622

444

232

407

145

Overseas total

391,565

498,859

467,520561,344643,497

Grand total

562,837

656,964

639,862

724,466

825,098

Others

FY 2010—
5,994

FUJI HEAVY INDUSTRIES LTD.

32 ANNUAL REPORT 2014

Non-consolidated Automobile Sales (Number of units)2010

Non-consolidated Domestic Automobile Sales by Model(Number of units)

2011

2012

2013

2014

LegacyImpreza

SUBARU BRZ

Domestic units:
LegacyImpreza
Forester
Exiga
SUBARU BRZ
OEM
Passenger cars
Minicars
Domestic total

30,92723,316
12,542
11,893—
1,575
80,253
97,230177,483

23,212
20,85913,160
8,150
—
5,313
70,69492,752
163,446

23,96830,56613,990
8,477
585
5,993
83,57996,457
180,036

25,42454,306
18,951
7,845
6,850
2,953
116,329
50,381
166,710

19,27262,51937,124
3,869
3,334
1,944
128,062
57,779185,841

200,000

Export units:
LegacyImpreza
ForesterTribeca
Exiga
SUBARU BRZOEMOthersExport total

43,937
69,386
159,463
318
526
—
5,994
96
279,720

67,926
83,921
174,541
—
374
—
3,865
70
330,697

48,304
100,350
162,199
331
232
211
3,372
—
314,999

30,559198,232
142,745222
407
11,542316—
384,023

22,817
213,666
247,362—
145
15,11886—
499,194

50,00086,33046,61177,781
5,930—
216,652

131,873
44,39585,0802,472—
263,820

146,806
41,19676,196
2,791—
266,989

164,680
89,19576,3472,075
4,144
336,441

160,340
130,567
123,591
1,598
8,587
424,683

CKD2 overseas(SIA protion)

113,605
113,605

163,469
163,469

175,256
175,256

185,757
183,729

165,554
159,266

SIA production units3
LegacyTribeca

159,215
5,558

164,968
5,661

177,4713,713

161,204
2,307

1. U.S. Retail Sales are the aggregate figures for the calendar year from January through December.
2. Completely Knocked Down
3. SIA Production Units are the aggregate figures for the calendar year from January through December until 2009.
FUJI HEAVY INDUSTRIES LTD.

166,710

163,446
150,000

100,000

0

FY 2010

2011

2012

2013

2014

Non-consolidated Automobile Export Units by Model(Number of units)

LegacyImpreza

ForesterOEM

Tribeca

Others499,194

400,000

384,023
330,697

300,000Exiga

CKD Overseas

500,000

314,999

279,720200,000

100,000

0

33 ANNUAL REPORT 2014

185,841

180,036

163,469

100,149
4,197

Exiga

Minicars

177,483

SUBARU BRZ

U.S. retail sales1
LegacyImpreza
ForesterTribeca
SUBARU BRZ
U.S. total

ForesterOEM

175,256

185,757

165,554

113,605

FY 2010

2011

2012

2013

2014

Management’s Discussion and Analysis of Results of Operations and Financial Position
The Fuji Heavy Industries Ltd. GroupIn this environment, the FHI Group continued to work

The Fuji Heavy Industries Ltd. (“FHI”) Group is engaged in

to realize its growth strategy as outlined in its mid-term

production and sales activities across a wide range ofmanagement plan “Motion-V (Five)” (fiscal 2012–fiscal 2016).

business sectors. These activities are conducted under four

This year, efforts to improve products, marketing andbusiness divisions: Automobiles (the Group’s core operating

dealership quality bore fruit enabling an expansion in sales

domain, which accounts for over 90% of consolidated netof the Forester and other Subaru brand vehicles mostly insales), Aerospace, Industrial Products and Other.

Japan and North America. Moreover, we launched the first

On a consolidated settlement of accounts basis, FHI

Subaru brand hybrid vehicle “SUBARU XV HYBRID” which

and 77 subsidiaries (a year-on-year increase of four) as well

was a big hit with customers as a fun to drive hybrid, amongas 2 equity-method affiliated companies (a year-on-year

other positive results also achieved.

Net Sales (Billions of yen)
Years ended March 31

2,408.1

2,500

1,913.0

2,000

1,580.6
1,428.7

1,500

1,517.1

1,000

decrease of four) were included in the scope of the FHIGroup’s consolidation as of March 31, 2014, the end of fiscal

Performance Review

2014 (“the fiscal year under review”).

In light of the above factors, the FHI Group recorded500

historically high levels of net sales as well as all income0

Overview

categories for the second consecutive fiscal year.

Business Environment

Consolidated results were affected by such factors as ourDuring fiscal 2014, the economic circumstances surrounding

introduction of characteristically “Subaru” products; thethe FHI Group displayed signs of a modest recovery due toexpansion of unit sales, centered on the Japanese and U.S.

strong capital investment in Japan as well as an improved

market; high levels of operation at manufacturing plants;

export environment from a correction of the strong yen andprogress on efforts to reduce cost of sales; and correction

Operating Income (Loss)an increase in individual consumption and production led byof the strong yen. This allowed us to achieve the main400

last-minute demand prior to the increase in the consumption

numerical targets of the mid-term management plantax rate. In the global economy, despite a loss of growth“Motion-V” t wo fiscal years ahead of schedule.

momentum in emerging markets, a steady recovery was

Consolidated performance during the fiscal year under

demonstrated mainly driven by advanced countries.

review was as follows.

In the automotive industry, annual unit sales in JapanNet sales amounted to ¥2,408.1 billion, up ¥495.2

reached the 5,690,000 level, exceeding the previous year,

billion year on year, or 25.9%, owing to such factors as athanks to effects from the introduction of new models

correction in the strong yen and as higher automobile unit

and last-minute demand prior to the increase in thesales in Japan and overseas.

consumption tax rate despite a reversal of the effects

Operating income came to ¥326.5 billion, an increase

from the eco-car subsidy system implemented last year,of ¥206.1 billion, or 171.1%, compared with the previous

among other factors. Overseas unit sales benefited fromfiscal year, reflecting an improved sales mix and progress

an expansion in demand in the United States, the moston reducing cost of sales in addition to foreign exchange

important market for the FHI Group.

rate differences.
FUJI HEAVY INDUSTRIES LTD.

34 ANNUAL REPORT 2014

FY 2010

2011

2012

2013

2014

Operating Income (Loss)/Net Income (Loss) (Billions of yen)
Years ended March 31
Net Income (Loss)

326.5
300

206.6

200

120.4 119.6
84.1

100

50.3 44.0 38.5

27.4
0

-16.5
-100

FY

2010

2011

2012

2013

2014

Industries Inc. (USA), which was the recipient of engines inposting of an extraordinary loss as allowance for doubtful

our Industrial Products business segment in the third quarter.

accounts despite having recorded extraordinary income

However, in the fourth quarter, we posted an extraordinary

from the sale of stock.

loss of ¥29.6 billion as an allowance for doubtful accounts

29.3
31.5
81.7

120.4
-65.0

stemming from the dismissal of our lawsuit filed at thethe AH-64D attack helicopter for the Ministry of Defense.

or 171.1%, year on year to ¥326.5 billion. This fiscal year,

The FHI Group rejects the Court’s decision and filed anrevenue decreasing factors, namely a ¥24.0 billion increase

appeal at the Tokyo High Court on March 13, 2014, however,in overhead costs and a ¥10.9 billion increase inin the likelihood that the original judgment stands, anexperimentation and research expenses, were greatly

allowance for doubtful accounts was recorded.

outweighed by revenue increasing factors mostly ¥170.2

Net income after total income taxes and minority

billion in exchange rate differences, a ¥51.1 billion

interests rose ¥87.0 billion, or 72.8%, compared with the

improvement in sales mix associated with the rise inprevious fiscal year, to ¥206.6 billion.

automobile unit sales and ¥19.7 billion in progress on the*Initial expenses: A fixed amount irrespective of the number of units to
be manufactured for design costs, special tool and implement costs,
technology partnership costs and other outlays mainly at the initial
phases of manufacturing expended only for the making of specified
military devices and components. Specifically, this amount also
includes the amount spent by the FHI Group for conversions toJapanese specifications.

increased from 6.3% in the previous year to 13.6%.
Compared with the previous fiscal year, operating
income this year increased as much as ¥35.9 billion owing tofactors other than exchange rate including improved sales
mix associated with the rise in automobile unit sales and theprogress on the cost reduction despite a significant

Segment Information

contribution from the effects of exchange rate differences.

Automobiles Division

Our strengths as a manufacturer were fortified.

Net sales for this division stood at ¥2,246.6 billion, an

Income before Income Taxes and Minority Interests, andincome also increased ¥198.0 billion, or 178.4%, year on year

Net Income

to ¥309.0 billion. The number of units sold worldwide

Income before income taxes and minority interests roseincreased by 101 thousand units, or 13.9%, year on year to¥235.8 billion, or 253.3%, compared with the previous fiscal

825 thousand units, a historical high for the second

year, to ¥328.9 billion.
This fiscal year, the FHI Group recorded extraordinaryconsecutive fiscal year, and the correction of the strong yen
resulted in higher income and profits.

income of ¥47.1 billion as gain from sales of investment
FUJI HEAVY INDUSTRIES LTD.

35 ANNUAL REPORT 2014

-24.0

326.5
-10.9

120.4

92.0

increase of ¥467.7 billion, or 26.3%, year on year. Segment

19.7

170.2

7.0

326.5

O
FY peraE M tinarc g Inh 2 com
01 e
4Im
sal promi es v vem
xtu olu en
re m t oan e & f
do
the
Re
rs
d
in uc
co tiost ncost reduction. Consequently, the operating margin51.1

D
SG ecreoth &A ase
ers exp ofensesOperating income, as mentioned above, rose ¥206.1 billion,

44.0

Lo
ex ss och n c
an ur
ge re
nc
y
De
SG creoth &A ase
ers exp of
en
ses
an
d
Inc
ex reape sense ofs R&
DOp
FY eraE M tinarc g Inh 2 com
01 e
3which consisted of a claim for initial expenses* relating to

-67.9

340.0
-13.9

D
SG ecreoth &A ase
ers exp of
en
ses
an
Inc
d
ex reape sense ofs R&
D

Operating Income

O
FY peraE M tinarc g Inh 2 com
01 e
2Imp
sal rove
mi s v em
xtu olu en
re m t oan e & f
do
the
rs
Re
in ducco tiost nTokyo District Court against the Japanese governmentO
FY peraE M tinarc g Inh 2 com
01 e
3
Loex ss och n c
an ur
ge re
nc
y
Im
sal promi es v vem
xtu olu en
re m t oan e & f
do
the
rs
Re
d
in uc
co tiost n

Cost of Sales, Expenses and Operating Income

-1.0

-3.7

cy
Op
FY eraE M tinarc g Inh 2 com
01 e
5(
Pla
n)

previous fiscal year, to ¥206.6 billion, mainly due to theAnalysis of Increases and Decreases in Operating Income(Consolidated, Three-Year YoY Comparison) (Billions of yen)andIn
ex creape sense ofs R&
DOp
FY eraE M tinarc g Inh 2 com
01 e
4

securities resulting from the sale of shares of PolarisLo
ex ss och n c
an ur
ge re
n

Net income was up ¥87.0 billion, or 72.8%, from theDomestic Market

year to ¥14.1 billion.

strong yen and a surge in production of the Boeing 777 andUnit sales of passenger and mini vehicles increased by 18

Sales of products to the Ministry of Defense exceeded

thousand units, or 11.3%, year on year, to 182 thousand units.

that of the previous fiscal year due to an increase in sales of

Boeing 787, among others.

Unit sales of passenger vehicles rose by 13 thousand

the transport aircraft C-2 and the attack helicopter AH-64D.

Industrial Products Divisionunits, or 11.9%, year on year to 126 thousand units. In

On the other hand, sales to the commercial sector increased

Net sales in the Industrial Products division were down ¥0.4

addition to strong sales of the Impreza mostly with theover the previous fiscal year thanks to the correction of thebillion, or 1.2%, from the previous fiscal year, to 29.8 billion.

Net Sales by Segment (Billions of yen)

Operating Income by Segment (Billions of yen)onboard “EyeSight (ver.2)” advanced drive support system,
the positive performance of the Forester, launched the year
before last, also contributed to unit sales outweighing thedrop in Legacy unit sales due to the outdated model.
Unit sales of mini vehicles were up 5 thousand units, or
10.1%, year on year to 55 thousand units. The passenger car
model Stella performed well and the Pleo+ (plus), launched
the year before last, contributed to unit sales.

Years ended March 31
Automobiles

Years ended March 31

AerospaceIndustrial Products

Automobiles

Other

AerospaceIndustrial Products

Other

Corporate and Elimination

2,408.1

2,500

350

326.5

300

Overseas Market

1,913.0

2,000

Overseas unit sales amounted to 643 thousand units, anincrease of 82 thousand units, or 14.6%, year on year. In all

1,580.6
1,500

1,428.7250

1,517.1

200

regions, the Forester surpassed last year’s results posting150

favorable sales, and the Impreza and SUBARU XVdemonstrated sales growth in the U.S. and other markets.

1,000

100

By region, units sold in North America increased 88
thousand units, or 22.4%, to 478 thousand units. In Europe

50

44.0

27.4

0

47 thousand. China saw a decrease of 5 thousand units, or

0

10.7%, to 45 thousand units, while year-on-year unit sales inunits, with other regions up 13 thousand units, or 57.9%, to

84.1

500

and Russia, sales volume fell 14 thousand units, or 23.0%, toAustralia climbed 1 thousand units, or 3.7%, to 40 thousand

120.4

FY 2010

2011

2012

2013

-500

2014

Net Sales by Segment (Billions of yen)

34 thousand units.

2010
Automobile

2011

2010

2011

2012

2014

2013

Operating Income by Segment (Billions of yen)

2012

2013

2014

¥1,294.5 ¥1,452.2 ¥1,389.1 ¥1,779.0 ¥2,246.6

Aerospace Division

Aerospace

93.2

82.8

80.3

89.1

124.4

Net sales in this division increased ¥35.3 billion, or 39.6%,

Industrial Products

23.9

30.1

33.6

30.1

29.8

compared to the previous fiscal year to ¥124.4 billion.

Other

17.1

15.5

14.2

14.7

7.3

Segment income also rose ¥7.3 billion, or 107.5%, year on

Total¥1,428.7 ¥1,580.6 ¥1,517.1 ¥1,913.0 ¥2,408.1
FUJI HEAVY INDUSTRIES LTD.

FY

36 ANNUAL REPORT 2014

2012

2013

2014

¥39.4
Aerospace
2.9
Industrial Products（2.4） （0.1）
0.5
Other
2.6
1.0
1.5
Elimination
0.7
0.2
0.1
and Corporate
Total
¥27.4
¥44.0
¥84.1

¥111.0
6.8
0.6
1.6
0.4
¥120.4¥309.0
14.1
0.6
2.1
0.6
¥326.5

Automobile

2010

2011

¥21.7
4.8

¥80.4
2.3

Segment income also decreased ¥0.01 billion, or 1.3%, year
on year to ¥0.6 billion.
This result was mainly due to lower sales of leisure-fiscal year-end balance of interest-bearing debt decreased¥37.5 billion to ¥269.7 billion. The debt/equity ratio
improved 0.16 of a point from March 31, 2013, to 0.35 from

related engines in North America, despite gains in sales of

0.52 at the end of the previous fiscal year, due to an increase

pumps and general purpose engines for civil engineering

in retained earnings and efforts to reduce interest-bearing

and construction in Japan and sales of general purpose

debt, among other factors.

engines in North America and Asia.

Total Assets, Shareholders’ Equity & Ratio of
Shareholders’ Equity to Total Assets (Billions of yen)
Years ended March 31
Total Assets
Shareholders’ Equity
Ratio of Shareholders’ Equity to Total Assets

2,000

1,888.4

Net assets totaled ¥770.1 billion, up ¥173.3 billion
compared with the end of the previous fiscal year. This was

Other Division

primarily due to an increase in retained earnings of ¥182.6

Net sales in this division were down ¥7.4 billion, or 50.4%, tobillion, reflecting the recording of net income in fiscal 2014.

¥7.3 billion due partly to the conclusion of the Eco

As a result, net assets per share as of the end of the fiscal

Technologies included in this division at the end of March ofyear under review totaled ¥980.98, up ¥218.11 from ¥762.87

last year. Segment income, meanwhile, was up ¥0.5 billion,

as of the year prior.

60.0

1,577.5
1,500

45.0

1,352.5
1,231.4

1,188.3
34.7%

1,000

30.9%

37.7%

40.5%

33.3%

30.0

770.1
596.8
500

or 29.7%, from the previous fiscal year, to ¥2.1 billion.

381.9

414.0

451.6

15.0

Cash Flows
Liquidity and Financing

In the fiscal year under review, net cash provided by

Financial Position

operating activities was ¥313.0 billion compared with ¥166.7

Total assets as of March 31, 2014 stood at ¥1,888.4 billion, an

billion in the previous fiscal year. This result was mainly due

increase of ¥310.9 billion compared with the previous fiscal

to a ¥235.8 billion increase year on year to ¥328.9 billion in

year-end.

income before income taxes and minority interests due toOf this total, current assets stood at ¥1,273.8 billion, up

an expansion in business.

FY

2010

2011

¥329.7 billion compared with March 31, 2013. This is primarily

Net cash used in investing activities was ¥33.9 billion in
fiscal 2014 compared with ¥71.4 billion used in the previousthat include cash and deposits to manage short-term funds,

fiscal year. This figure primarily reflects production capacity

as well as notes and accounts receivable by ¥57.4 billion.

increases and expenditures (net) due to acquisition of

Total property, plant and equipment fell ¥18.8 billion year on

noncurrent assets up ¥6.9 billion year on year to ¥65.8

year to ¥614.6 billion. This was mainly attributable to abillion, with a ¥36.7 billion gain (net) on sales of investment

decrease in investment securities of ¥16.3 billion and an

securities (compared to a ¥2.5 billion net expenditure

increase in allowance for doubtful accounts of ¥29.6 billion.

resulting from an acquisition in the previous fiscal year).

Total liabilities were up ¥137.7 billion year on year, toAs a result, free cash flow amounted to ¥279.1 billion,¥1,118.3 billion. The main factors behind this increase werean increase of ¥183.8 billion from ¥95.3 billion provided inrises in income taxes payable of ¥102.6 billion and in

the previous fiscal year.

accounts payable with accounts payable-trade andNet cash used in financing activities totaled ¥63.0

electronically recorded monetary obligations. Note that thebillion in the fiscal year ended March 31, 2014, compared

37 ANNUAL REPORT 2014

2012

2013

0

2014

Interest-Bearing Debt Balance & D/E Ratio (Billions of yen, Times)
Years ended March 31
Interest-Bearing Debt Balance

due to rises in funds in hand plus securities by ¥233.4 billion

FUJI HEAVY INDUSTRIES LTD.

0

400

367.6

D/E Ratio

0.97

1.00

330.6
0.80

300

341.0
0.76

307.2
269.7

0.75

0.52

200

0.50

0.35

100

0

0.25

FY 2010

2011

2012

2013

2014

0

with ¥60.8 billion in the preceding fiscal year. This is mainly

Basic Policy Regarding the Distribution of Profits

attributable to increases of ¥23.2 billion year on year to

FHI views the interest of shareholders as a critical task for¥36.9 billion in expenditures (net) for the repayment ofmanagement. Regarding the return of profits tolong-term borrowings and of ¥15.9 billion to ¥23.4 billion inshareholders, based on maintaining continual dividend

dividend payments.

payments, we apply a results-linked approach that takes into

Accounting for the aforementioned activities and theeffect of translation adjustments, cash and cash equivalents

Cash Flows from Operating Activities &Cash Flows from Investing Activities (Billions of yen)
Years ended March 31
Cash Flows from Operating Activities

Cash Flows from Investing Activities

400

consideration such factors as earnings, investment plans,
and operating conditions of each fiscal year.

as of the end of the fiscal year under review stood at ¥557.9

At fiscal year end, FHI distributed a total dividend ofbillion, up ¥228.9 billion year on year from the ¥328.9 billion¥33.00 per share, which includes a regular dividend ofrecorded at the end of the previous fiscal year.

¥28.00 per share plus a 60th anniversary commemorative
dividend of ¥5.00 per share. This is the result of an annual

Research and Development Expenses

dividend of ¥53.00 per share including the interim dividend

During the year, R&D expenses increased ¥11.0 billion, orof ¥20.00 per share, which is an increase of ¥38.00 per share

22.3%, year on year, to ¥60.1 billion.

from the ¥15.00 per share paid out in the previous fiscal

Our vehicle R&D development, a core activity of theyear. We plan to increase this level for the upcoming fiscal

FHI Group, produced new models such as the Levorg andyear, to an annual dividend of ¥56.00 per share (comprising

WRX, expanded and globally promoted products equippedinterim and year-end dividends of ¥28.00 per share).

313.0
300

200

176.7

166.7
138.2

100

54.9
0

-100

-62.7
FY 2010

-51.1
2011

-26.6

-33.9
-71.4

2012

2013

2014

with the advanced prevention and safety technology“EyeSight” and propelled the evolution of next-generation

Outlookversions. The EyeSight ver. 3, with more advanced

FHI established its new mid-term management visionperformance than the original, will be installed in the Levorg,

entitled “Prominence 2020,” a fresh start for the corporate

slated for launch in the next fiscal year, and the new Legacy.

group. For its initial fiscal year, ending March 31, 2015, theFree Cash Flow (Billions of yen)
Years ended March 31

300

279.1

plan calls for the introduction of the new Levorg in addition
Capital Expenditures and Depreciation

to the complete model changes made to the Legacy,

Capital expenditures fell ¥1.7 billion, or 2.4%, compared with

Outback and WRX, as well as a new all-time-highthe previous fiscal year, to ¥68.5 billion mainly for the

consolidated unit sales figure of 916 thousand units, anformulation and expansion of production and R&D facilities

increase of 91 thousand units, or 11.0%, compared with theand the sales network in the Automobiles Division.

previous fiscal year. Along with the unit sales target, we are

Depreciation decreased ¥1.0 billion, or 1.7%, year on year, toalso aiming to post new historical records for net sales and¥54.9 billion.

all income categories.

200

114.1

100

87.1
95.3

At present (July 2014), targets for the consolidated
financial results of the fiscal year ending March 31, 2015 are
as follows. For net sales, FHI plans to achieve ¥2,720.0 billion,
representing an increase of ¥311.9 billion, or 13.0%,
FUJI HEAVY INDUSTRIES LTD.

38 ANNUAL REPORT 2014

28.3

0

FY

2010

2011

2012

2013

2014

compared with the previous fiscal year from increasing unit

Research and Development Expenses (Billions of yen)
Years ended March 31

sales in Japan and overseas. Moreover, for operating

80

income, despite increases in R&D expenses and SG&A
expenses, we anticipate posting ¥340.0 billion, an increase
60.1

60

48.1

49.1

42.9

0

2015

2,408.1
672.1
1,736.1
326.5

2,720.0703.2
2,016.8
340.0

311.9
31.2
280.7
13.5

Net salesJapan

ChangeOverseas

improvement in sales mix resulting from an increase in

Operating income

automobile unit sales, a decrease in cost of sales and other

Income before income
taxes and minority interest

328.9

324.0

（4.9）

Net income

206.6

215.0

8.4

10.0
13.3

10.0
13.5

0
0.2

billion, or 4.1%, to ¥215.0 billion. These forecasts are based

202014 (Results)of ¥13.5 billion, or 4.1%, year on year thanks to an

cost reduction effects. Net income is slated to climb ¥8.4

37.2

40

Forecast for Consolidated Results (Billions of yen)Exchange rate (in yen)

on average annual exchange rates of ¥100 to U.S. $1¥/$(previously ¥100 to U.S. $1) and ¥135 to €1 (previously ¥133¥/€

to €1).

FY

2010

2011

2012

2013

2014

Note: Performance forecasts and medium- to long-term management
strategies are based on information available to management asof the date of this report. Accordingly, actual results may differ
materially due to a variety of factors.

Forecast for Global Automobile Sales (Thousand units)2014 (Results)

2015

Change

126.1
55.5
181.6

143.7
51.2
194.9

（4.3）
13.3

441.8
36.0
15.3
31.8
39.5
44.8
34.3
643.5
825.1

490.2
40.4
19.3
40.3
40.1
57.3
33.5
721.1
916.0

Japan:
Passenger cars
Minicars

Capital Expenditures, Depreciation Expenses (Billions of yen)

SubtotalYears ended March 31
Capital Expenditures

Depreciation Expenses

Overseas:

80

United States

70.2
56.1 57.1

60

49.8

54.3 53.7

55.9

Canada68.5

RussiaEurope54.9

Australia
China

43.1

Other
Subtotal

40

Total

20

0

FY

2010

2011

2012

17.6

2013

2014

FUJI HEAVY INDUSTRIES LTD.

39 ANNUAL REPORT 2014

48.4
4.4
4.0
8.5
0.6
12.5
（0.8）
77.6
90.9

Business Risks

settlement, the Group’s business performance and financial

Operational and other risks that could significantly influence

position may be adversely affected when the yenthat the obsolescence rate of current products exceeds

the decisions of investors and impact the Company’s

appreciates or positively affected when the yen depreciates.

forecasts, the Group’s business performance and financial

and other products do not meet sales plan expectations or

financial status are set out below. Based on information

The Company uses forward exchange rate contracts

available to the FHI Group as of June 24, 2014, theand other risk hedges to minimize the Group’s sensitivity toenumerated risks include forward-looking statements, butsuch currency exchange risks. However, the effect of severe(5) Dependence on Suppliers for Raw Materials anddo not encompass every possible risk posed to the FHI

fluctuations in currency exchange rates at the end of the fiscal

Components

position could be significantly affected.

Group. As such, there are other risk factors which could

year could result in a loss (gain) on valuation of derivatives

The FHI Group procures raw materials, components andinfluence investors and their decisions.

and have a major impact on non-operating expenses.

other items from numerous suppliers. However, there arecases in which the Group relies on certain items and/or a(1) Economic Trends(3) Dependence on Certain Businesses

limited number of suppliers. Due to tightening supply andEconomic trends in countries and regions that comprise

The FHI Group is mainly comprised of the Automobiles,

demand or other factors, the inability to procure supplies inimportant markets for the FHI Group could potentially

Aerospace and Industrial Products business segments.

a manner that ensures stable costs, delivery dates andimpact the Group’s business performance. In Japan andHowever, the Automobiles business segment accounts for

quality could seriously impact the Group’s businessNorth America, key markets for the Group, economic

the overwhelming majority of the Group’s businessperformance and financial position.

recession, decreasing demand or increasing priceoperations. Accordingly, in the event that automobile-competition could undermine the sales and profitability ofrelated demand, market conditions, price competition with

(6) Protection of Intellectual Property

the Group’s products and services.

other automakers, or other factors exceed projected levels,

The FHI Group works to protect its intellectual property

the entire Group’s overall business performance andthrough the use of patents and trademarks in such areas as(2) Currency Exchange Rate Fluctuations

financial position could be significantly affected.

technologies and expertise that ensure product

The FHI Group’s ratio of overseas net sales stood at 72.1%

differentiation. However, the Group could experience ain the fiscal year ended March 31, 2014. The Group’s(4) Changes in Market Appraisal

decrease in sales or the need for litigation procedures in

consolidated financial statements, which are presented in

The FHI Group develops, manufactures and releases newcases where a third party makes unauthorized use of theJapanese yen, are affected by translation of overseas net

products based on appropriate timing and pricing in line withGroup’s intellectual property to manufacture similar

sales, operating income and assets from local currencies,

product planning that reflects market demand and customer

products, as well as in specific regions where intellectual

particularly U.S. dollars, into yen. Accordingly, in the event

needs. Such actions are the most important factors inproperty protection is limited. Such factors could impact thethat discrepancies arise between projected exchange rates

maintaining stable increases in Group business performance.

Group’s profitability.

in full-year forecasts and actual rates at the time of accountIn the event that market appraisals of new model vehicles

FUJI HEAVY INDUSTRIES LTD.

40 ANNUAL REPORT 2014

(7) Product Defects(9) Environmental and Other Legal Regulations

The FHI Group places the highest priority on the safety

The FHI Group is subject to various domestic and overseasof the products it develops, manufactures and sells.

legal regulations in relation to such areas as exhaust

However, completely avoiding defects and recalls regarding

emissions, energy conservation, noise, recycling, the level ofall products and services is impossible. The substantial costs

pollutants emitted from manufacturing facilities andassociated with a major recall could significantly affect the

automobile safety. The Group’s business performance andGroup’s business performance and financial position. In

financial position could be affected by an increase in costs

addition, although the Group purchases product liability

due to future regulatory changes.

insurance, the risk of incomplete coverage exists.
(10) The Impact of Natural Disasters, War, Terror, Strikes(8) Retirement Benefit Obligations

and Other Events

The FHI Group’s employee retirement benefit costs

The occurrence of major earthquakes, typhoons or otherand obligations are calculated based on the following

natural disasters, diseases, wars, terrorist attacks or otherassumptions: retirement benefit obligation discount rates

events could impede the FHI Group’s business activities as

and the expected rate of return on pension assets, both ofwell as delay or suspend raw material/component

which are established based on mathematical calculations.

purchases, production, product sales/transport, and the

However, in the event that actual performance differs fromprovision of services. The Group’s business performancethe assumptions, the Group’s business performance andand financial position could be affected in the event that

financial position could be affected over the long term.

such delays or suspensions are prolonged.

FUJI HEAVY INDUSTRIES LTD.

41 ANNUAL REPORT 2014

Corporate Data (as of March 31, 2014)

Stock Information (as of March 31, 2014)

Company Name

Head Office

Common Stock AuthorizedFuji Heavy Industries Ltd.

Subaru Building, 7-2, Nishi-Shinjuku 1-chome, Shinjuku-ku,
Tokyo 160-8316, Japan
Phone: +81-3-3347-2111 Fax: +81-3-3347-2338

1,500,000,000 shares

Established
July 15, 1953

¥153,795 million

Number of Employees
13,034 (consolidated: 28,545)

Website Address
http://www.fhi.co.jp/english/ir/

Name

Common Stock Issued

Investor Relations OfficePaid-in Capital

Major Shareholders

Subaru Building, 7-2, Nishi-Shinjuku 1-chome, Shinjuku-ku,
Tokyo 160-8316, Japan
Phone: +81-3-3347-2655 Fax: +81-3-3347-2295

Toyota Motor Corporation

129,000

16.48

Number of Shareholders

The Master Trust Bank of Japan, Ltd.
(Trust account)

40,712

5.20

Japan Trustee Services Bank, Ltd.
(Trust account)

34,833

4.45

Mizuho Bank, Ltd.

24,378

3.11

THE BANK OF NEW YORK MELLON
SA/NV 10

21,296

2.72

Mizuho Trust & Banking Co., Ltd.

Suzuki Motor Corporation

13,6901.75

2-1, Yaesu 1-chome, Chuo-ku, TokyoSSBT OD05 OMNIBUS ACCOUNT –TREATY CLIENTS

13,457

1.72

FHI’s Client Stock Ownership

11,585

1.48

BBH BOSTON CUSTODIAN FOR
BLACKROCK GLOBAL ALLOCATIONFUND, INC. 620313

10,528

1.34

Nippon Life Insurance Company

10,352

1.32

Stock Exchange Listing
Tokyo Stock Exchange

Transfer Agent

103-0028, Japan

Domestic Manufacturing Divisions
Gunma Manufacturing Division (Automobiles Division)
Utsunomiya Manufacturing Division (Aerospace Division)
Saitama Manufacturing Division (Industrial Products Division)

Principal Consolidated Subsidiaries and Affiliates
Company Name

Percentage of
Voting Rights

Percentage ofTotal Shares

782,865,873 shares

56,899Relocated to the address below from August 17, 2014
Head OfficeEbisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku, Tokyo
150-8554
Phone: +81-3-6447-8000 Fax: +81-3-6447-8184
Investor Relations Office
Phone: +81-3-6447-8878 Fax: +81-3-6447-8107

Number of Shares Held(in thousands)

Quarterly Common Stock Price Range (Tokyo Stock Exchange)
Main Business Activities

(yen)
3,500

Japan
Ichitan Co., Ltd.

100.0%
100.0%

Kiryu Industrial Co., Ltd.

97.7%

Manufacture of Subaru specially equipped automobiles anddistribution of Subaru automobile parts

Subaru Tecnica International Inc.

100.0%

Management of SUBARU Motorsport Activities, Development andmanufacture of competition parts, tuning parts and accessories for
SUBARU cars

Subaru Kohsan Co., Ltd.

100.0%

Leasing of real estate, shopping mall management and travel agency
operations

Subaru Finance Co., Ltd.

100.0%

Lease & credit facilities provider for Subaru automobiles, financing
for FHI subsidized companies, lease for various facility equipment,rolling stock & FHI made garbage trucks and sales of insurance

Yusoki Kogyo K.K.

100.0%

Manufacture and sales for aircraft parts

TOKYO SUBARU INC.

100.0%

Distribution, sales and services of Subaru automobiles (including 32
other dealerships)

Subaru of America, Inc.

100.0%

Distribution and sales of Subaru automobiles and parts

Fuji Heavy Industries U.S.A., Inc.

100.0%Engineering research of Subaru automobiles in North America
MarketFuji Machinery Co., Ltd.

Manufacture and sales of automobile parts and industrial product parts
Manufacture and sales of forged automobile / industrial product parts

3,000

2,500

2,000

1,500

1,000

Overseas

Subaru Research & Development, Inc.

Research and development of automobiles

Subaru of Indiana Automotive, Inc.

100.0%

Manufacture of Subaru automobiles and contracted manufacture of
Toyota automobiles

Subaru Canada, Inc.

100.0%
100.0%

Distribution and sales of Subaru automobiles and parts

Subaru Europe N.V./S.A.

Distribution, sales and marketing of Subaru automobiles and parts

FUJI HEAVY INDUSTRIES LTD.

500

0

High
Low

1Q

2Q

3Q

2010
493
311

42 ANNUAL REPORT 2014

4Q

1Q

2Q

3Q

2011
758
435

4Q

1Q

2Q

3Q

2012
697
402

4Q

1Q

2Q

3Q

2013
1,609
545

4Q

1Q

2Q

3Q

2014
3,015
1,330

4Q

Fuji Heavy Industries Ltd.
Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku, Tokyo 150-8554
Phone: +81-3-6447-8000
Fax: +81-3-6447-8184
http://www.fhi.co.jp/english/ir/

Consolidated Balance Sheets

102.92

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2014 and 2013
Millions of yen

Thousands of
U.S. dollars(Note 1)ASSETS
Current assets:
Cash and deposits (Note 4 and 5)
Notes and accounts receivable-trade (Note 5)
Lease investment assets (Note 5 and 19)
Short-term investment securities (Notes 4, 5 and 6)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 12)
Short-term loans receivable (Note 5)
Other current assets
Allowance for doubtful accounts
Total current assets

2014

2013

2014

¥351,125
181,646
23,633
233,766
159,536
51,65933,00864,214
122,681
53,375(862)
1,273,781¥285,152
124,234
22,14566,370163,852
50,49835,217
52,94796,99047,579(951)
944,033$3,411,630
1,764,924
229,625
2,271,337
1,550,097
501,934
320,715
623,921
1,192,003
518,608(8,375)
12,376,419

Property, plant and equipment (Notes 7 and 9)
Accumulated depreciation
Accumulated impairment loss
Total property, plant and equipment

1,305,951(817,421)(27,717)
460,8131,260,592(786,734)(28,903)444,955

12,688,991(7,942,295)(269,306)
4,477,390

Investments and other assets:
Intangible assets
Investment securities (Note 5 and 6)
Investments in non-consolidated subsidiaries and affiliated companies
Net defined benefit assets(Note 11)
Deferred tax assets (Note 12)
Other assets (Note 27)
Allowance for doubtful accounts (Note 27)
Total investments and other assets
Total assets

14,71275,647
4,479
1,222
18,332
72,974(33,597)
153,769¥1,888,363

12,751
91,271
4,552
6,227
77,656(3,991)
188,466¥1,577,454

142,946
735,008
43,51911,873
178,119709,037(326,438)
1,494,064$18,347,873

Millions of yen

Thousands of
U.S. dollars

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable-trade (Note 5)
Electronically recorded obligations-operating (Note 5)
Short-term loans payable (Note 5 and 7)
Current portion of long-term debts (Note 5 and 7)
Accrued expenses (Note 5)
Provision for bonuses
Provision for product warranties
Accrued income taxes (Note 5 and 12)
Other current liabilities (Note 5, 7 and 12)
Total current liabilities

2014

2013

(Note 1)
2014

¥279,926¥67,637
59,193
46,61791,921
20,44639,494110,426
117,248
832,908¥242,743¥61,595
60,86745,20783,032
17,86534,740
7,828
103,154
657,031$2,719,841$657,180
575,136452,944
893,131
198,659
383,735
1,072,930
1,139,215
8,092,771

Long-term liabilities:
Long-term debts (Note 5 and 7)
Accrued pension and severance liability (Note 11)
Net defined benefit liability(Note 11)
Deferred tax liabilities (Note 12)
Other long-term liabilities (Note 7)
Total long-term liabilities

163,844
22,852
9,827
88,861
285,384

201,083
34,917
19,13968,471
323,610

1,591,955
222,037
95,482
863,399
2,772,873

153,795
160,071483,910(1,395)

153,795
160,071
301,357(1,292)

1,494,316
1,555,295
4,701,807(13,554)796,381

613,9317,737,864

10,629(26,661)(13,886)(919)(30,837)
4,527

27,882(46,448)(18,566)
1,448

103,274(259,046)(134,920)(8,929)(299,621)
43,986770,071596,813

7,482,229¥1,888,363¥1,577,454$18,347,873

Contingent liabilities (Note 21)
Net assets: (Note 13)
Shareholders' equity:
Capital stock
Authorized— 1,500,000,000 shares
Issued —782,865,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2014—
2,477,430 shares
2013—
2,435,448 shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Remeasurements of other postretirement benefits
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets

Consolidated Statements of Income

102.92

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013

Millions of yen

Net sales (Note 2)
Cost of sales (Note 14)
Gross profit
Selling, general and administrative expenses (Note 2 and 15)
Operating income (loss)
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Real estate rent
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets
Gain (loss) on sales of investment securities (Note 6 and 16)
Loss on valuation of investment securities (Note 6)
Depreciation
Impairment loss (Note 9)
Gain on sales of loans receivable
Provision of allowance for doubtful accounts(Note 17)
Provision for loss on transfer of business (Note 17)
Other, net (Note 18)
Income (loss) before income taxes and minority interests
Income taxes (Note 12):Current
DeferredIncome (loss) before minority interests
Minority interests in income (loss)
Net income (loss)

Thousands of
U.S. dollars(Note 1)

2014

2013

2014

¥2,408,129
1,728,271
679,858
353,369
326,489¥1,912,968
1,501,809
411,159
290,748
120,411$23,398,066
16,792,372
6,605,694
3,433,434
3,172,260

2,914(2,804)320
541(16,924)
7,414(2,696)47,155(6)(1,024)(35)(29,624)(2,855)
2,376
328,865

2,669(3,336)43592(15,527)(1,714)(1,911)
409
(61)
(977)
(145)
325
(967)
(6,729)(27,329)93,082

28,313(27,244)
3,109
5,257
(164,438)
72,037(26,195)
458,171(58)(9,949)(340)(287,835)(27,742)
23,086
3,195,346

134,315(13,435)
120,880
207,985
1,369¥206,616

17,566(44,216)(26,650)
119,732
144¥119,588

1,305,043(130,538)
1,174,505
2,020,841
13,301$2,007,540

U.S. dollars
Per share data (Note 2) :¥153.23
Net income (loss)—Basic¥264.98—Diluted *Net assets
980.98762.87
Cash dividends (Note 13)
53.00
15.00
The accompanying notes are an integral part of these statements.
*For the year ended March 31, 2014 and 2013 diluted information is not presented because potentially dilutive securities do not exist.

Consolidated Statements of Comprehensive Income

$2.57
9.53
0.51

102.92

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013

Millions of yen

Thousands of
U.S. dollars(Note 1)

2014

2013

2014

Income (loss) before minority interests
Other comprehensive income (Note 3)
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income¥207,985¥119,732$2,020,841(17,253)
19,855
170
2,772

8,916
23,28477
32,277(167,635)
192,918
1,652
26,934Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

210,757

152,0092,047,775

209,150
1,607

151,865144

2,032,161
15,614

Consolidated Statements of Changes in Net Assets

102.92

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013

Shareholders' equity
Capital stock
Balance at the beginning of current period
Balance at the end of current period
Capital surplus
Balance at the beginning of current period
Changes of items during the period
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the beginning of current period
Effect of changes in accounting policies applied to foreign subsidiaries
Changes of items during the period
Dividends from surplus
Net income (loss)
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the beginning of current period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period

Millions of yen

Thousands of
U.S. dollars(Note 1)

2014

2013

2014

153,795
153,795

153,795
153,795

1,494,316
1,494,316

160,071160,071

1,555,29500160,071160,071

1,555,295

301,357-

188,538-

2,928,070-(23,424)
206,616(639)
182,553
483,910(7,418)
119,5881
648
112,819
301,357(227,594)
2,007,540(6,209)1,773,737
4,701,807(1,292)(1,259)(12,553)

(103)
0
(103)
(1,395)

(35)
2
(33)
(1,292)(1,001)0(1,001)(13,554)

613,931501,145

5,965,128(23,424)
206,616
(103)
0
(639)
182,450
796,381(7,418)
119,588(35)
3
648
112,786
613,931(227,594)
2,007,540(1,001)
0(6,209)1,772,736
7,737,864

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Remeasurements of defined benefit plans
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Remeasurements of other postretirement benefitsof foreign consolidated subsidiaries
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total accumulated other comprehensive income
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Minority interests
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Other
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
The accompanying notes are an integral part of these statements.

Millions of yen

Thousands of
U.S. dollars(Note 1)

2014

2013

2014

27,882

18,966

270,910(17,253)(17,253)
10,6298,916
8,916
27,882(167,635)(167,635)
103,275(46,448)(69,809)(451,302)

19,787
19,787(26,661)

23,361
23,361(46,448)

192,256
192,256(259,046)---(13,886)(13,886)(13,886)-(134,920)(134,920)(134,920)

-

-

-

(919)
(919)
(919)

-

(8,929)(8,929)(8,929)(18,566)(50,843)(180,392)(12,271)(12,271)(30,837)

32,27732,277(18,566)(119,229)(119,229)(299,621)

1,448

1,305

14,070

3,079
3,079
4,527

143
143
1,448

29,91629,91643,986596,813451,6075,798,805(23,424)
206,616
(103)
0
(639)
(9,192)
173,258770,071(7,418)
119,588(35)
3648
32,420145,206
596,813(227,594)
2,007,540(1,001)
0(6,209)(89,312)
1,683,424
7,482,229

Consolidated Statements of Cash Flows

102.92

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2014 and 2013

Millions of yen

Thousands of
U.S. dollars(Note 1)

2014

2013

2014

Net cash provided by (used in) operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in accrued pension and severance liability
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for loss on litigation
Interest and dividends income
Interest expenses
Loss (gain) on valuation of derivatives
Equity in (earnings) losses of affiliates
Loss (gain) on sales and retirement of noncurrent assets
Loss (gain) on sales and valuation of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Decrease (increase) in lease investment assets
Decrease (increase) in operating loans receivable
Decrease (increase) in vehicles and equipment on operating leases
Increase (decrease) in deposits received
Other, net
Sub total¥328,865
61,48635
29,512
2,391
3,116
114
(17,692)(369)(2,914)2,804(7,414)(320)
2,696(47,149)(49,129)
16,09539,814(1,488)(25,478)(400)(2,240)13,963346,298¥93,082
61,544
145
(55)
1,344
2,765
(1,923)910
369(2,669)
3,336
1,714
(43)
1,911
(348)
1,264
(21,194)
48,679(280)(14,701)(2,528)299
8,728
182,349$3,195,346
597,415340
286,747
23,23230,276
1,108(171,901)(3,585)(28,313)
27,244(72,037)(3,109)26,195(458,113)(477,351)
156,384
386,844(14,458)(247,551)(3,887)(21,764)
135,668
3,364,730

Interest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

2,936(2,742)(33,468)
313,024

2,694(3,417)(14,911)
166,715

28,527(26,642)(325,185)
3,041,430

Net cash provided by (used in) investing activities
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities(12,408)
19,237(67,409)
1,643(5,446)(28,687)
65,344(95,589)
97,409(7,997)(33,903)(9,760)5,166(60,852)
1,965(4,377)(14,503)
11,954(94,273)
93,376(66)(71,370)(120,560)
186,912(654,965)
15,964(52,915)(278,731)
634,901(928,770)
946,454(77,701)(329,411)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Cash dividends paid
Repayment of lease obligations
Proceeds from stock issuance to minority shareholders
Other,net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents(2,893)
8,995(45,893)(10)(23,350)(1,036)
1,280(104)(63,011)
12,691
228,801(28,655)
10,218(23,937)
10,000(20,010)(7,392)(955)(35)(60,766)
14,96449,543(28,109)
87,398(445,909)(97)(226,875)(10,066)
12,437(1,010)(612,233)
123,3092,223,096

328,947

258,084

3,196,143

122¥557,870

21,320¥328,947

1,185$5,420,424

Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of period
The accompanying notes are an integral part of these statements.

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of Fuji Heavy Industries Ltd. (the "Company") havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan ("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English
from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP
and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the Financial
Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars in the accompanying consolidated financial
statements are included solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2014, which was ¥102.92 to U.S.$1. The convenience translation should not be construed
as a representation that the Japanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its majority
owned subsidiaries. All significant intercompany transactions and balances have been eliminated inconsolidation. The fiscal year-end of consolidated subsidiaries is the same as that of the parent company,
except for five consolidated foreign subsidiaries in fiscal year 2014 and eight consolidated foreign subsidiaries
in fiscal year 2013, respectively, the fiscal year-end of those subsidiaries is December 31. The operating
results of those subsidiaries that have different fiscal year-end are consolidated by using the financial
statements as of each subsidiary’s respective fiscal year-end, the necessary adjustments being madein consolidation if there are any significant transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 77 subsidiaries in fiscal
year 2014 and 73 subsidiaries in fiscal year 2013, respectively.
In addition, one non-consolidated subsidiary and one affiliated company were accounted for by the equity
method in fiscal 2014; five non-consolidated subsidiaries and one affiliated company were accounted for by
the equity method in fiscal 2013, respectively.
Investments in insignificant non-consolidated subsidiaries and affiliated companies not accounted for by theequity method are carried at cost.
The difference between the cost and the underlying net equity of investments in subsidiaries and affiliatedcompanies is allocated to identifiable assets based on their fair value at the date of acquisition. The
unallocated residual value of the excess of the cost over the fair value of the underlying net assets is
recognized as goodwill and amortized over a period of five years on a straight-line basis.
All assets and liabilities of subsidiaries, which include not only the Company’s interest in the subsidiaries but
also the minority interest portion, are valued based on their fair value at the time the Company first
consolidates the subsidiary.
[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fair1

values are available are stated at their fair value as of the balance sheet dates with unrealized holding gains
and losses included as a separate component of net assets until realized, while securities for which fair values
are not readily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the balance sheet is measured based on the lower of cost or market value.)[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally calculated by the declining-balance method, except for those buildings (excluding
building improvements) acquired on or after April 1, 1998, for which the straight-line method is applied.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is calculated by thestraight-line method over the estimated useful lives of the assets.
Estimated useful lives for depreciable assets are as follows:
Buildings and structures: 7–50 years
Machinery, equipment and vehicles: 2–11years[5] Intangible Assets (Excluding Leased Assets)
Computer software used internally by the Company and its consolidated subsidiaries is amortized by thestraight-line method over the relevant economic useful lives of three or five years.
[6] Leased Assets
For leased assets under finance lease transactions in which the ownership is transferred to the lessee:
The leased assets are depreciated by the same method as used for other property, plant and equipment.
For leased assets under finance lease transactions in which the ownership is not transferred to the lessee:
The leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
In addition, finance lease transactions in which the ownership is not transferred to the lessee on or before
March 31, 2008 are recorded as regular rental transactions.
[7] Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on the amount calculated from the historical ratio of bad
debt for ordinary receivables, and estimated amounts of uncollectible accounts for specific overdue
receivables.
[8] Provision for Bonuses
Employees' bonuses are recognized as expenses for the period in which those are incurred.
[9] Provision for Product Warranties
The Company and its consolidated subsidiaries provide for accrued warranty claims on products sold basedon their past experiences of warranty services and estimated future warranty costs, which are included in2

"Accrued expenses" in the accompanying consolidated balance sheets.
[10] Provision for Loss on Construction Contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is provided
when substantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year andbeyond and such losses can be reasonably estimated.
[11] Accounting method for Retirement Benefits
Net defined benefit liability (assets) for employees is provided based on the estimated amounts of projectedpension and severance obligation and the fair value of plan assets at the end of the fiscal year. In determining
retirement benefit obligations, the straight-line basis is used for attributing expected benefit to periods.
Unrecognized prior service cost is being amortized on the straight-line method over a period (10-19 years)
that is shorter than the average remaining service period of the eligible employees. Unrecognized net
actuarial gain or loss is amortized from the following fiscal year on the straight-line method over a period(primarily 16 years for fiscal years 2014 and 2013) that is shorter than the average remaining service period of
the eligible employees.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined based on the Company’s and its consolidated subsidiaries’internal rules, are included in "Other long-term liabilities" in the accompanying consolidated balance sheets.
[12] Translation of Foreign Currency-Denominated Accounts
Under the Japanese accounting standards for foreign currency translation, monetary assets and liabilities
denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at eachbalance sheet date with the resulting gain or loss included currently in the statement of income.
The assets and liabilities of foreign subsidiaries and affiliated companies are translated into Japanese yen at
the exchange rates in effect at the balance sheet dates of the foreign subsidiaries and affiliated companies,
except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the respective years. The resulting foreign
currency translation adjustments are included in "Foreign currency translation adjustments" and "Minority
interest" in the net assets section of the accompanying consolidated balance sheets.
[13] Revenue Recognition
The percentage-of-completion method is applied to revenue from construction contracts of Aerospace
division productions where certain elements are determinable with certainty at the end of fiscal year. (Thepercentage of completion is estimated using the proportion-of-cost method). The completed-contract method
is applied to other works.
[14] Accounting for Lease Transactions
Sales and corresponding cost of sales under finance lease transactions conducted by certain domestic
consolidated subsidiaries are recognized on the effective date of each lease contract.
[15] Derivative Financial Instruments and Hedge Accounting
The Japanese accounting standards for financial instruments require that the Company and its consolidated
domestic subsidiaries state derivative financial instruments at their fair value and recognize changes in the fairvalue as a gain or loss, unless such derivative financial instruments are used for hedging purposes.
For interest rate swap contracts used as a hedge that meet certain hedging criteria, the net amount to be
paid or received under the interest rate swap contract is added to or deducted from the interest on the assets
or liabilities for which the swap contract is executed.
3

Derivative financial instruments qualifying as a hedge, along with the underlying transactions, assets andliabilities are as follows:
Financial Instrument
Interest swaps

Transactions, assets and liabilities
Borrowings

The risk exposures to movements in interest rates are hedged according to the Company’s and its
consolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of theunderlying transactions, assets and liabilities, and therefore they are presumed to be highly effective inoffsetting the effect of movements in interest rates at their inception as well as during their terms.
[16] Goodwill
Goodwill is principally amortized by the straight-line method over five years.
[17] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or lessthat are readily convertible to known amounts of cash and have negligible risk of changes in value due to theirshort maturities.
[18] Income Taxes
The provision for income taxes is computed based on the pretax income for financial reporting purposes.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
[19] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to ¥60,092 million (US$ 583,871
thousand) and ¥49,141 million for fiscal years 2014 and 2013, respectively.
[20] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that occurs if all the convertible
securities are converted or other contracts to issue common stock are exercised to the extent that they are
not anti-dilutive.
[21] Reclassification
Certain reclassifications have been made in the consolidated financial statements for the year ended March
31, 2013 to conform to the presentation for the year ended March 31, 2014.”[22] Other Changes in Accounting Policy(Application of the "Accounting standard for Retirement Benefits")
Effective from the fiscal year ended March 31, 2014, the Company and its consolidated domestic subsidiaries
have applied the Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012
(hereinafter, the “Statement No.26”)) and Guidance on Accounting Standard for Retirement Benefits (ASBJ
Guidance No. 25, May 17, 2012 (hereinafter, the “Guidance No.25”)) except the article 35 of the Statement
No.26 and the article 67 of the Guidance No.25 and actuarial gains and losses and past service costs that are
yet to be recognized have been recognized and the difference between retirement benefit obligations and4plan assets has been recognized as a net defined benefit liability or a net defined benefit asset.
In accordance with the article 37 of the Statement No.26, the effect of the change in accounting policies
arising from initial application has been recognized in remeasurements of defined benefit plans inaccumulated other comprehensive income.
As a result of the application, a net defined benefit asset in the amount of ¥1,222 million (US$ 11,873
thousand) and a net defined benefit liability in the amount of ¥22,852 million yen (US$ 222,037 thousand)have been recognized, accumulated other comprehensive income has decreased by ¥13,886 million(US$ 134,920 thousand), at the end of the current fiscal year.
Net assets per share at the end of the current fiscal year has decreased by ¥17.79 (US$ 0.17) effected by thischange.

53. Other comprehensive income
Amounts reclassified to net income (loss) in fiscal 2014 and 2013, which were recognized in othercomprehensive income in the current or previous periods and tax effects for each component of othercomprehensive income were as follows:
Millions of yen
Thousands of
U.S. dollars
2014
2013
2014
Valuation difference on available-for-salesecurities
Increase(decrease) during the year(¥90,720)¥13,203($881,461)
Reclassification adjustments
47,266392
459,250
Sub-total, before tax(43,454)
13,595(422,211)Tax (expense) or benefit
26,201(4,679)254,576
Sub-total, net of tax(17,253)
8,916(167,635)
Foreign currency translation adjustment
Increase during the year
19,691
23,284
191,324
Reclassification adjustments
164
1,593
Sub-total, before tax
19,85523,384
192,917
Tax (expense) or benefit
Sub-total, net of tax
19,85523,284
192,917
Share of other comprehensive income ofassociates accounted for using equity
methodIncrease during the year
170
77
1,652
Total other comprehensive income¥2,772¥32,277$26,934
4. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2014 and 2013, consisted of the following:
Millions of yen
2014¥351,125
233,766
584,891(27,021)¥557,870

Cash and deposits
Short-term investment securities
Sub-total
Less maturity over three months
Cash and cash equivalents

6

2013¥285,152
66,370351,522(22,575)¥328,947

Thousands of
U.S. dollars
2014$3,411,630
2,271,337
5,682,967(262,543)$5,420,424

5. Financial Instruments(1) Summary of Financial Instruments Status[1] Action Policy with Regard to Financial Instruments
With regard to planned capital expenditure to support Fuji Heavy Industries Ltd., its consolidated subsidiaries
and affiliated companies (the "FHI Group") in their main operations of automobile manufacturing and sales,
the FHI Group finances mainly from bank loans and the issue of corporate bonds. Temporary surpluses areinvested in highly secure financial assets. Bank loans and liquidation of accounts receivable are utilized toprovide short-term working capital. It is the FHI Group's policy to use derivatives as a way to avoid the risks
stated below and not to conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Notes and accounts receivable-trade and Lease investment assets are subject to customer credit risks. In
addition, operating receivables denominated in foreign currencies due to globalized business of the FHIGroup are subject to the risk of changes in foreign exchange rates. As a general rule, however, forward
foreign exchange contracts are utilized to hedge the foreign exchange rate risk, considering the net amount ofoperating receivables denominated in foreign currencies that exceed foreign currency denominated operating
liabilities. Available-for-sale securities and investment securities are mainly stocks associated with businessand capital alliances with principal business partners, and are subject to risk of market price fluctuation.
Majority of payables included in Notes and accounts payable-trade and Electronically recorded
obligations-operating are due within one year. A certain portion of such liabilities involve foreign currency
denominated transactions associated with the import of raw materials and is subject to exchange rate
fluctuation risk, although it is consistently less than accounts receivable balance denominated in the same
foreign currency. Funds financed by bank loans and corporate bonds are primarily used for capital
expenditure, whose repayment or redemption dates will come within 10 years after March 31, 2014 at thelatest. A certain portion of those liabilities may have variable interest rates and are subject to the risk ofchanges in interest rates, although such risk is mitigated using derivative transactions (interest rate swap
transactions).
Derivative transactions include foreign exchange forward contracts to hedge against exchange rate
fluctuations associated with trade accounts receivables and liabilities denominated in foreign currencies, andinterest rate swap contracts to hedge against the risk of change in interest rates on bank loans. With regard to
hedging instruments and hedged items, hedge policy, the method of evaluation of hedge effectiveness andother related items, please refer to "2-[16] Derivative Financial Instruments and Hedge Activities".
[3] Risk Management System with Regard to Financial Instruments(a) Credit Risk management (Risks Associated with Business Partner’s Breach of Contract)
The Company and its consolidated subsidiaries have credit control function and regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets. In
addition to keeping track of payment due dates and balances of each customer, such credit control
function identifies and mitigates the potential risk of uncollectibility due to deterioration in financial status
or other factors of customers.
(b) Market Risk Management (Risks Associated with Fluctuations in Foreign Exchange and Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts with no longer than six months term are used to hedge against the risk of exchange
rate fluctuation to the extent that net position of accounts receivable and accounts payable dominated inforeign currency is exposed. In addition, the Company and certain consolidated subsidiaries use interest
rate swap transactions to mitigate the risk of fluctuation in interest rates on bank loans and corporate
bonds.
7

The Company also regularly monitors the market values of investments included in Short-term
investment securities and Investment securities as well as the financial conditions of issuers (business
partner companies), and continuously reviews its investment portfolio taking into consideration its
relationships with respective business partner companies.
Basic policies with regard to derivative transactions are approved by the Executive Management Board.
Finance & Accounting Department engages in derivative transactions in line with the applicable theCompany’s rule. The results of these transactions are reported to the Finance Officer every time thetransactions are conducted.
(c) Liquidity Risk Management (Risk of Becoming Unable to Make Payments by the Due Date)
The Company secures liquidity at a level sufficient to satisfy its current needs with commitment lines
contracted with major banks in combination with keeping cash and cash equivalents balance at a certain
level.
[4] Supplemental Explanation of Items with Regard to Fair Value of Financial Instruments
Fair value of financial instruments includes quoted prices of financial instruments in the market and, in theevent market prices are not available, prices that are calculated based on the underlying assumptions under
the appropriate valuation model. Because the factors incorporated into the valuation model are subject tochange, calculated fair value may differ. The values of derivative transactions contracts stated in "(2) Items
with Regard to Fair Value of Financial Instruments" do not by themselves indicate the market risk associatedwith the respective derivative transactions.

8(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet amounts, the fair value and difference as of March 31, 2014 and 2013 wereas follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer
to Note [2] ).
As of March 31, 2014
Millions of yen
Consolidatedbalance sheet
Fair Value
Difference
amounts
Cash and deposits¥351,125¥351,125¥Notes and accounts receivable-trade181,646
Allowance for doubtful accounts (*1)(275)
181,371
181,371
Lease investment assets
23,633
Allowance for doubtful accounts (*1)(44)
23,58927,792
4,203
Short-term loans receivable
122,681
Allowance for doubtful accounts (*1)
(397)
122,284
123,209925
Short-term investment securities, Investment securities
and Other securities
84,077
84,077
Total Assets
762,446
767,574
5,128
Notes and accounts payable-trade279,926
279,926
Electronically recorded obligations-operating
67,637
67,637
Short-term loans payable
59,19359,193Current portion of long-term loans payable
42,55742,753(196)
Current portion of bonds
4,060
4,085
(25)
Accrued income taxes
110,426
110,426
Accrued expenses
91,921
91,921
Bonds payable
10,00010,091(91)
Long-term loans payable
153,844
154,823(979)
Total Liabilities
819,564
820,855(1,291)
Derivative transactions (*2)
hedge accounting is not applied
(722)
(722)
hedge accounting is applied¥¥¥-9As of March 31, 2014
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$3,411,630
1,764,924(2,672)
1,762,252
229,625(428)
229,197
1,192,003(3,857)
1,188,146

Cash and deposits
Notes and accounts receivable-trade
Allowance for doubtful accounts (*1)
Lease investment assets
Allowance for doubtful accounts (*1)
Short-term loans receivable
Allowance for doubtful accounts (*1)

Fair Value

Difference$3,411,630$-

1,762,252-

270,035

40,838

1,197,134

8,988

Short-term investment securities, Investment securities
816,916
816,916and Other securities
Total Assets
7,408,141
7,457,967
49,826
Notes and accounts payable-trade
2,719,841
2,719,841
Electronically recorded obligations-operating
657,180
657,180
Short-term loans payable575,136
575,136
Current portion of long-term loans payable
413,496
415,400(1,904)Current portion of bonds
39,44839,691(243)
Accrued income taxes
1,072,930
1,072,930
Accrued expenses
893,131
893,131
Bonds payable
97,163
98,047(884)
Long-term loans payable
1,494,792
1,504,304(9,512)
Total Liabilities
7,963,117
7,975,660(12,543)
Derivative transactions (*2)
hedge accounting is not applied(7,015)(7,015)
hedge accounting is applied$$$*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).

10As of March 31, 2013
Millions of yen
Consolidatedbalance sheet
amounts¥285,152
124,234(165)
124,069
22,145(26)
22,11996,990(586)
96,404

Cash and deposits
Notes and accounts receivable-trade
Allowance for doubtful accounts (*1)
Lease investment assets
Allowance for doubtful accounts (*1)
Short-term loans receivable
Allowance for doubtful accounts (*1)

Fair Value

Difference¥285,152¥-

124,069-

25,3403,221

97,614

1,210

Short-term investment securities, Investment securities
102,796
102,796
and Other securities
Total Assets
630,540
634,971
4,431
Notes and accounts payable-trade242,743
242,743
Electronically recorded obligations-operating
61,59561,595
Short-term loans payable
60,86760,867
Current portion of long-term loans payable
45,19745,424(227)
Current portion of bonds
10
10
Accrued income taxes
7,828
7,828
Accrued expenses
83,032
83,032
Bonds payable
14,06014,165(105)
Long-term loans payable
187,023
188,393(1,370)Total Liabilities
702,355
704,057(1,702)Derivative transactions (*2)
hedge accounting is not applied(8,136)(8,136)
hedge accounting is applied¥¥¥*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).
[1] The calculation methods of financial instrument fair value together with securities and derivativetransactions
AssetsCash and deposits and Notes and accounts receivable-trade
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Lease investment assets and Short-term loans receivable
Fair value is the present value calculated by discounting relevant cash flows by each category of theassets and timing of cash flow, where discount rates were adopted taking into consideration the
period until maturity and credit risks. In addition, the estimated residual value is included in the11balance of Lease investment assets.
Short-term investment securities and investment securities
Fair value is determined by the stock exchange price, while bonds are determined by the stock
exchange price or by quotations received from financial institutions. Please refer to the note entitled"5.Short-term investment securities and investment securities" regarding to respective objectives forholding securities.
Liabilities
Notes and accounts payable-trade, Short-term loans payable, Accrued income taxes and Accrued
expenses
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Current portion of long-term loans payable and Long-term loans payable
Fair value is measured based on the present value that is calculated as discounted cash flow of thetotal amount of principal and interest, where the interest would be set, if the Company concluded abrand new loan agreement with the same condition at the date of measurement.
Current portion of bonds and Bonds payable
The fair value of bonds issued by the Company is based on market prices if available. For bonds
with no available market price, fair value is calculated using the present value that is calculated as
discounted cash flow of the total amount of principal and interest by, where discount rates are
adopted taking into consideration the remaining redemption period and credit risks.
Derivative transactions
Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2014 and 2013:
Millions of yen
Other securities (available-for-sale securities)

Thousands of
U.S. dollars
2014
2013
2014
Certificate of deposit¥90,000¥$874,466
Commercial paper
79,98734,995
777,176
Money management fund
50,515
15,432490,818
Unlisted stocks (excluding over-the-counter stocks)
4,832
4,088
46,949
Other
¥3
¥329
$29
These have no available market prices and are expected to entail excessive costs in the estimation of
future cash flows. Consequently, estimating their fair value is recognized as extremely difficult and they
are not included in "Short-term investment securities, Investment securities and Other securities".

12[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2014:

Cash and deposits
Notes and accounts receivable-trade
Lease investment assets
Short-term investment securities, Investment
securities and Other securities
Government and municipal bonds
Corporate bonds
Other
Short-term loans receivable

Within 1Year

1 to 5
Years¥351,125
174,668
7,097¥6,97816,303

Millions of yen
5 to 10
Over 10
Years
years
¥¥233
-

11,2402,024
169,987¥42,364

8,418
11,977384¥77,592

1,774
1,329
454
¥2,725

3,290
732
2,625
¥-

As of March 31, 2014:$3,411,630
1,697,124
68,956

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$$$67,800
158,405
2,264-

109,211
19,666
1,651,642$411,620

81,792
116,372
3,731$753,906

Within 1
Year

Cash and deposits
Notes and accounts receivable-trade
Lease investment assets
Short-term investment securities, Investment
securities and Other securities
Government and municipal bonds
Corporate bonds
Other
Short-term loans receivable

17,237
12,913
4,411$26,477

31,967
7,112
25,505$-

As of March 31, 2013:

Cash and deposits
Notes and accounts receivable-trade
Lease investment assets
Short-term investment securities, Investment
securities and Other securities
Government and municipal bonds
Corporate bonds
Other
Short-term loans receivable

13

Within 1Year

1 to 5
Years¥285,152
118,173
7,052¥6,061
14,959Millions of yen
5 to 10
Over 10
Years
years
¥¥134
-

12,6882,692
35,559¥35,605

5,585
7,127
37
¥59,510

1,138
1,675
179
¥1,875

3,204
187
2,260
¥-

[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2014:

Short-term loans payable
Bonds payable
Long-term loans payable

Within 1Year

1 to 5
Years¥59,193
4,060¥42,557¥10,000¥150,028

Millions of yen
5 to 10
Over 10Years
years¥¥¥3,816¥-

As of March 31, 2014:
Within 1
Year$575,136
39,448$413,496

Short-term loans payable
Bonds payable
Long-term loans payable

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$$$97,163$1,457,715$37,077$-

As of March 31, 2013:

Short-term loans payable
Bonds payable
Long-term loans payable

Within 1Year

1 to 5
Years¥60,86710¥45,197¥14,060¥158,656

Millions of yen
5 to 10
Over 10Years
years¥¥¥28,123¥244

6. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2014
and 2013 was as follows:(1) Other securities (available-for-sale securities):
As of March 31, 2014:
Acquisition cost

Millions of yen
Difference¥37,854¥21,503¥16,351

6,894
10,014
2,353
57,115

6,798
9,806
2,297
40,40496
208
56
16,711

1,615

1,616

(1)

17,829
6,361
49
1,108
26,962¥84,077

17,990
6,404
50
1,126
27,186¥67,590

(161)
(43)
(1)
(18)
(224)
¥16,487

Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Sub-total
Total
14As of March 31, 2014:
Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Sub-total
Total

Thousands of U.S. dollars
Acquisition cost
Difference$367,800$208,929$158,871

66,98497,29922,862554,945

66,051
95,27822,318392,576

933
2,021
544
162,369

15,692

15,702(10)

173,232
61,805476
10,766
261,971$816,916

174,796
62,223486
10,942
264,149$656,725(1,564)
(418)
(10)
(176)
(2,178)$160,191

Acquisition cost

Millions of yen
Difference¥64,760¥22,206¥42,554

17,478
9,886
1,992
94,116

17,1319,565
1,918
50,820347
321
74
43,296

607

669

(62)

4,812
2,210
1,051
8,680
¥102,796

4,864
2,226
1,054
8,813
¥59,633

(52)
(16)
(3)
(133)
¥43,163

As of March 31, 2013:
Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Total

15

(2) Other securities (available-for-sale securities) sold during fiscal years 2014 and 2013:
For the year ended March 31, 2014:

Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Total

Sales amount¥49,172

Total gains¥47,148

Millions of yen
Total losses¥2

23,566
9,902
1,972¥84,61212750
8¥47,333

133
21
14
¥170

For the year ended March 31, 2014:

Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Total

Sales amount$477,769
228,974
96,211
19,161$822,115

Thousands of U.S. dollars
Total gains
Total losses$458,103
$19
1,234
486
78
$459,901

1,292
204
136
$1,651

Sales amount¥3,615

Total gains¥363

Millions of yen
Total losses
¥100

8,998
3,251
1,249
7
¥17,120

123
58
2
8
¥554

22
6
13
1
¥142

For the year ended March 31, 2013:

Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

(3)The Company and its consolidated subsidiaries recognized ¥61 million in loss on devaluation of securities
for fiscal year 2013.
For the purpose of recording a loss on devaluation of securities, the Company and its consolidated
subsidiaries consider all the securities whose fair market values have fallen below 50% of the acquisition costto be permanently impaired, and record relevant losses on devaluation. For securities whose fair market
values have declined by between 30% and 50% in relation to their acquisition costs, the Company and its
consolidated subsidiaries specifically consider the probability of recovery of fair market values and record
losses on devaluation to the amount deemed permanently impaired.

16

7. Short-Term Loans Payable and Long-Term Debts
Short-term loans payable as of March 31, 2014 and 2013, consisted of the following:
Millions of yen
2014
2013
Bank loans with average interest rate of 0.43% and 0.47%
per annum as of March 31, 2014 and 2013, respectively¥59,193¥60,867

Thousands of
U.S. dollars
2014$575,136

Long-term debts as of March 31, 2014 and 2013 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Loans principally from banks and insurance companies due
through 2024 with average interest rate of 0.93% and1.05% per annum as of March 31, 2014 and 2013,
respectively
Unsecured 0.93% bonds due March 31, 2014
Unsecured 1.62% bonds due July 10, 2014
Unsecured 0.93% bonds due March 31, 2015
Unsecured 0.71% bonds due June 13, 2016
SubtotalLess-Portion due within one year
Total

¥196,401¥232,220$1,908,288

4,000
60
10,000210,461(46,617)¥163,844

10
4,000
60
10,000246,290(45,207)¥201,083

38,865583
97,163
2,044,899(452,944)$1,591,955

Annual maturities of long-term debts as of March 31, 2014 were as follows:
Millions of yen¥46,61744,25543,02842,21330,532
3,816¥210,461

2015
2016
2017
2018
2019
2020 and thereafter
Total

17

Thousands of
U.S. dollars$452,944
429,994
418,072
410,154
296,658
37,077$2,044,899

Lease obligations as of March 31, 2014 and 2013 consisted of the following:

Lease obligations due within one year as of March 31,2014
and 2013
Lease obligations due after one year as of March 31,2014
and 2013
Total

Millions of yen
2014
2013
¥882
¥905

Thousands of
U.S. dollars
2014$8,570

1,099

1,019

10,678¥1,981¥1,924$19,248

Annual maturities of lease obligations as of March 31, 2014 were as follows:
Millions of yen
¥882
697
252
110
35
5
¥1,981

2015
2016
2017
2018
2019
2020 and thereafter
Total

Thousands of
U.S. dollars$8,569
6,772
2,449
1,069
340
49
$19,248

The following assets as of March 31, 2014 and 2013 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Property, plant and equipment¥41,358¥55,185$401,846
Total¥41,358¥55,185$401,846
To raise working capital efficiently, the FHI Group has entered into the commitment-line contracts. The
maximum amount that can be made available under these contracts is ¥124,438 million (US$1,209,075
thousand) as of March 31, 2014. At the end of the fiscal year under review, there were no borrowings under
the commitment line.

18

8. Derivative transactions
In the normal course of business, the Company and its consolidated subsidiaries employ derivative financial
instruments, including foreign exchange forward contracts, foreign currency options and interest rate swaps,
to manage their exposures to fluctuations in foreign currency exchange rates and interest rates. The
Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes.
The fair value information of derivative financial instruments as of March 31, 2014 and 2013 was as follows:
Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2014
Millions of yen
Thousands of U.S. dollars
Notional
Valuation
Notional
Valuation
AmountFair value gain (loss)
AmountFair value gain (loss)
Foreign exchange
forward contracts:
SellU.S. dollar¥218,776(¥686)(¥686) $2,125,690($6,665)($6,665)
Euro
6,134
(36)
(36)
59,600(350)(350)
Canadian dollar
20,78200201,924
00
As of March 31, 2013

Foreign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar

Notional
AmountMillions of yen
Valuation
Fair value
gain (loss)¥166,010
15,48017,977(¥7,083)
(448)
(605)

(¥7,083)
(448)
(605)

Note: The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative transactions to which hedge accounting is applied(1) Interest rate contracts:
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
As of March 31, 2014

Interest rate swap
contracts:
Receive floating rate
pay fixed rate

Notional
AmountMillions of yen
Over
1 yearFair value

Thousands of U.S. dollars
Notional
Over
Amount1 yearFair value¥23,395¥10,105$227,312

19(*)$98,183(*)

As of March 31, 2013
Millions of yen
Notional
AmountOver
1 yearFair value¥26,610¥22,395(*)

Interest rate swap contracts:
Receive floating rate pay fixed rate
Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
9. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2014 and 2013 are summarized as follows:

2014¥327,549
485,990
14,666
265,699
1,093,904(817,421)(27,717)
187,931
24,116¥460,813

Buildings and structures
Machinery, equipment and vehicles
Vehicles and equipment on operating leases, net
Other
Subtotal
Accumulated depreciation
Accumulated impairment loss
Land
Construction in progress
Total

Millions of yen
2013¥320,042
479,312
17,140244,580
1,061,074(786,734)(28,903)
185,286
14,232¥444,955

Thousands of
U.S. dollars
2014$3,182,559
4,722,017
142,499
2,581,607
10,628,682(7,942,295)(269,306)
1,825,991
234,318$4,477,390

10. Unexecuted Balance of Overdraft Facilities and Lending Commitments
The unexecuted balance of overdraft facilities and lending commitments at a consolidated subsidiary (Subaru
Finance Co., Ltd.) as of March 31, 2014 and 2013 was as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Total overdraft facilities and lending commitments¥4,150¥4,730$40,323
Less amounts currently executed
569
694
5,529
Unexecuted balance¥3,581¥4,036$34,794
A portion of the overdraft facilities and lending commitments above is subject to credit considerations as
documented in the customer contracts. Therefore, the total balance above is not always available.

2011. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans,
contributory defined benefit employees’ welfare pension funds, defined benefit pension plan, and certain
domestic subsidiaries have defined contribution pension plans. In addition, in certain occasions, additional
retirement payments are made to employees for their retirement. Consolidated foreign subsidiaries primarily
have defined contribution plans.
As of March 31, 2014, the Company and 53 of its consolidated domestic subsidiaries, which add up to a
total of 54 companies, have lump-sum retirement payment plans. Within the FHI Group, there are also 20
defined contribution plans, and five defined benefits pension plans. In addition, there are sevensingle-employer employees’ welfare pension funds subject to the provisions of Article 33 of "AccountingStandard for Retirement Benefits."
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and net defined benefit liability is provided at the amountthat would have been payable had all the employees voluntarily retired at the end of the fiscal year, less anamount to be covered from the plan assets, while the Company and significant subsidiaries provide an
accrued pension and net defined benefit liability based on the estimated amount of pension and severance
obligation (projected benefit obligations), less the fair value of plan assets at the end of the fiscal year under
the actuarial method.
(Fiscal 2013)
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, was as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2013)
Millions of yen
2013
Plan assets¥154,421
Projected benefit obligation
182,882
Funded status(¥28,461)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan (mainly from April 1, 2012 to March 31, 2013): 17%
A reconciliation between the projected pension and severance obligation and accrued pension andseverance liability was as follows:
Millions of yen
2013
a. Projected pension and severance obligation¥107,266
b. Plan assets(66,879)c. Unfunded pension and severance obligations
40,387d. Unamortized actuarial loss
(22,867)
e. Unamortized prior service cost
(445)
f. Net amount recorded in balance sheet
17,075g. Prepaid pension cost
(17,842)h. Accrued pension and severance liability¥34,917
Notes: 1. The above amounts include the substitutional portion of the government pension plan funded bysocial security taxes paid by employees and employers.
2. Certain insignificant consolidated subsidiaries calculated the liability using the simplified method.

21

Periodic pension and severance costs, consisted of the following:
Millions of yen
2013
a. Service cost
¥9,592b. Interest cost
1,504
c. Expected return on plan assets(1,446)d. Amortization of actuarial gain/loss
2,291
e. Amortization of prior service cost
43
f. Pension and severance cost
11,984
g. Gain/loss on transfer of the substitutional portion
81of the employee’s pension fundh. Total¥12,065
Notes:1. The above amounts do not include the welfare pension funds paid by employees.
2. The service cost of consolidated subsidiaries using the simplified method is included in the service
cost above.
3. The service cost above includes required funding for the multi-employer pension plan amounting to¥573 million, for which plan assets could not be allocated to each participating employer.
4. The service cost above includes contributions for the defined contribution plans of the Company andcertain consolidated subsidiaries amounting to ¥3,086 million.
5. In addition to the pension and severance cost above, additional retirement payments amounting to¥156 million were made. The entire ¥156 million of additional retirement payments are included incost of sales and selling, general and administrative expenses. Also, other loss includes ¥366 million,
which is paid as additional contribution when some consolidated domestic subsidiaries withdraw
from the multi-employer pension plan.
Actuarial assumptions used in computation of pension and severance liability were as follows:
2013
a. Attribution of expected benefit obligation The straight-line method
b. Discount rate
0.5%–1.3%
c. Expected rate of return on plan assets
1.4%–3.5%
d. Amortization of actuarial gain/loss
Primarily 16 years (amortizedby the straight-line method
starting from the following
fiscal year, over a period
shorter than the averageremaining service periods ofthe eligible employees)e. Amortization of prior service cost
10 to 18 years

22

(Fiscal 2014)
Defined benefit pension plans (including the multi-employer pension plan of contributory defined benefit
employees’ welfare pension funds settled as defined benefit pension plan.)
Movement in retirement benefit obligation, except plans applied simplified method

Balance at April 1, 2013
a. Service costb. Interest costc. Actuarial loss (gain)d. Benefits paide. Other
Balance at March 31, 2014

Millions of yen
2014¥101,700
5,565
1,173
(1,569)(4,049)(1)¥102,819

Thousands of
U.S. dollars
2014$988,147
54,071
11,397(15,245)(39,341)(10)$999,019

Millions of yen
2014¥66,714
1,697(1,628)23,029(2,743)¥87,069

Thousands of
U.S. dollars
2014$648,212
16,489(15,818)
223,756(26,652)$845,987

Movements in plan assets, except plans applied simplified method

Balance at April 1, 2013
a. Expected return on plan assetsb. Actuarial loss (gain)c. Contributions paid by the employer
d. Benefits paid
Balance at March 31, 2014

Movement in net defined benefit liability in the plans applying the simplified method

Balance at April 1, 2013
a. Increase due to the change of scope of
consolidation
b. Retirement benefit costc. Benefits paidd. Contributions paid by the employer
Balance at March 31, 2014

Millions of yen
2014¥5,399203

Thousands of
U.S. dollars
2014$52,458
1,972

720
(417)
(25)
¥5,880

6,996(4,052)(242)$57,132

Reconciliation from retirement benefit obligations and plan assets to net defined benefit liability (asset),
include plans applied simplified method
23

a. Funded retirement benefit obligations
b. Plan assets
Sub totalc. Unfunded retirement benefit obligations
a+b+c. Total Net liability (asset) for retirement
benefits at March 31, 2014
d. Net defined benefit liability
e. Net defined benefit asset
d+e. Total Net liability (asset) for retirement benefits
at March 31, 2014

Millions of yen
2014¥93,446(87,248)
6,198
15,432
21,630Thousands of
U.S. dollars
2014$907,948(847,726)
60,222
149,942
210,164

22,852(1,222)¥21,630

222,037(11,873)$210,164

Millions of yen
2014¥5,565
1,173(1,697)
2,429
42
311
720

Thousands of
U.S. dollars
2014$54,071
11,397(16,489)
23,601
408
3,022
6,996

¥8,543$83,006

Millions of yen
2014
¥403

Thousands of
U.S. dollars
2014$3,916

20,845¥21,248

202,536$206,452

Retirement benefit costs

a. Service costb. Interest costc. Expected return on plan assets
d. Net actuarial loss amortizatione. Past service costs amortization
f. Additional retirement payments
g. Retirement benefit cost of the plan applying thesimplified method
Total retirement benefit costs for the fiscal year
ended March 31, 2014
Accumulated adjustments for retirement benefita. Actuarial gains and losses that are yet to berecognizedb. Past service costs that are yet to be recognized
Total balance at March 31, 2014
Plan assets
Plan assets comprise:

Percentage
54%
13%
23%
10%
100%

a.Bondsb.Equity securities
c.Cash and deposit
d.Other
Total
24

Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets havebeen considered in determining the long-term expected rate of return.
Actuarial assumptions
The principal actuarial assumptions at March 31, 2014 follow:
2014
a. Attribution of expected benefit obligation The straight-line method
b. Discount rate
0.6%–1.5%
c. Long-term expected rate of return
1.4%–3.5%
d. Amortization of actuarial gain/loss
Primarily 16 years (amortizedby the straight-line method
starting from the following
fiscal year, over a period
shorter than the averageremaining service periods ofthe eligible employees)e. Amortization of past service cost
10 to 19 years
Defined contribution pension plan
The amount required to contribute to defined contribution plans was 4,127 million (US$40,099 thousand),
which included the multi-employer pension plan of contributory defined benefit employees’ welfare pension
funds settled as defined contribution plans.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, was as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2014)
Thousands ofMillions of yen
U.S. dollars
2014
2014
Plan assets¥91,753$891,498
Projected benefit obligation
100,556
977,031
Funded status(¥8,803)($85,533)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan (mainly from April 1, 2013 to March 31, 2014): 5%
Other than the above, ¥17,403 million (US$169,092 thousand) of postretirement benefit plan obligation is
included in "Other" of accrued expense and long-term liabilities in some American subsidiaries.

12. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in25

the aggregate resulted in a normal statutory income tax rate of approximately 37.8% for fiscal years 2013.
A reconciliation of the statutory income tax rates in Japan to the Company’s effective income tax rates forfiscal years 2014 and 2013 were as follows:
2014
2013
Statutory income tax rate in Japan- 37.8%
Increase (reduction) in taxes resulting from:
Deduction of research and development expense(2.1)
Entertainment expenses not qualifying for deduction
1.3
Changes in valuation allowance and tax benefits realized from loss carry forwards- (62.6)
Adjustment to past corporate income taxes payable and corporate income taxes refundable(0.2)
Equity in earnings of affiliates(0.0)
Difference of applicable tax rate in subsidiaries
(0.2)
Other
(2.6)
Effective income tax rate
- (28.6%)
Note:The note for fiscal year 2014 is omitted because the difference between the statutory income tax
rates in Japan and the Company’s effective income tax is 5% or less of the statutory income
tax rates.
Significant components of the deferred tax assets and liabilities as of March 31, 2014 and 2013, were as
follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Deferred tax assets:
Accrued expenses
Provision for product warranties
Accrued pension and severance liabilities
Net defined benefit liability
Depreciation and amortization expenses
Long-term accounts payable-other
Provision for bonuses
Unrealized profit on inventories
Loss on valuation of inventories
Net operating loss carryforwards
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Depreciation and amortization expenses
Reserve for reduction entry
Prepaid pension cost
Net defined benefit asset
Other
Total deferred tax liabilities
Net deferred tax assets
26¥15,40913,804
15,077
10,5597,069
7,265
15,8942,011
1,274
32,574
120,936(23,669)
97,267¥15,734
12,47012,222
10,557
6,908
6,797
5,915
3,669
4,943
14,03993,254(15,654)
77,600$149,719
134,124
146,492
102,594
68,68470,589154,431
19,53912,379316,498
1,175,049(229,975)
945,074(5,822)(4,821)(2,389)(441)(11,075)(24,548)¥72,719(14,779)(6,274)(2,382)(6,289)(7,841)(37,565)¥40,035(56,569)(46,842)(23,212)(4,285)(107,608)(238,516)$706,558

The net deferred tax assets are included in the following line items in the accompanying consolidated balance
sheets.
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Current assets—Deferred tax assets¥64,214¥52,947$623,921
Investments and other assets—Deferred tax assets
18,332
6,227
178,119
Current liabilities—Deferred tax liabilities(Other current liabilities)
Long-term liabilities—Deferred tax liabilities(9,827)(19,139)(95,482)
Total net deferred tax assets¥72,719¥40,035$706,558(Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates)
On March 31, 2014, amendments to the Japanese tax regulations were enacted into law, and the statutory
income tax rate for years beginning on or after April 1, 2014 will be changed. As a result of these amendments,
the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities expected to besettled for years beginning on April 1, 2014 has been changed from 37.8% to 35.4%.
Due to these changes in statutory income tax rates, net deferred tax assets as of March 31, 2014
decreased by ¥1,861million (US$18,082 thousand) and deferred income tax expense recognized for the year
ended March 31, 2014 increased by the same amount.
13. Net Assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of its Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Japanese Companies Act (“the Act”), in cases where a dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or
legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, both legal earnings reserve and additional paid-in capital used to eliminate or reduce a
deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Act, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Act.
At the annual shareholders’ meeting held on June 24, 2014, the shareholders approved cash dividends
amounting to ¥25,766 million (US$250,350 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2014. Such appropriations are recognized in the period inwhich they are approved by the shareholders.
14. Presentation of inventories and provision for loss on construction contracts¥70 million (US$680 thousand) and minus ¥478 million as "Provision for loss on construction contracts" isincluded in "Cost of sales" for fiscal years 2014 and 2013, respectively.

2715. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2014 and 2013 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Freightage and packing expenses¥26,523¥22,033$257,705
Advertising expenses
64,332
48,862625,068
Sales incentives
65,42544,147
635,688
Salaries and bonuses
50,27444,719488,476
Research and development expenses
59,89649,018581,967
Other
86,91981,969844,530
Total¥353,369¥290,748$3,433,434
16. Gain on sales of investment securities(Fiscal 2014)
Gain on sales of investment securities includes ¥47,118 million (US$457,812 thousand), the profit related tothe sales of stock of Polaris Industries Inc. owned by FHI.
17. Allowances for doubtful accounts(Fiscal 2014)
Allowances for doubtful accounts, the loss is associated with initial investment fees related to the AH-64D
combat helicopter for the Japan Ministry of Defense as a precaution for the case that the ruling is upheld.
18. Other Income and Loss
(Fiscal 2013)
Other income includes ¥775 million that is mainly the reversal of extraordinary loss (loss on valuation of
inventories) recorded in the prior period relating to the sale of inventories in the Aerospace division. In addition,¥436 million is mainly the exemption from debts relating to the development resulting from the dissolution ofcontract about a specific project in the Aerospace division.
Other loss includes ¥2,463 million that is miscellaneous expenses related to the restructuring of Chinese
sales network in the Automobile business, ¥2,099 million for disposal expenses of inventories related to thediscontinuance of a specific project in Aerospace division and ¥1,054 million for the return of funds received
for commissioned research and subsidies to the clean robot business in the prior period.

28

19. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessee(1) Transfer of title through finance lease transaction[1] Leased assets
Mainly implements of production in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the same method as used for other property, plant and equipment.
(2) Finance leases which do not transfer ownership title[1] Leased assets
Mainly network equipment and terminal units (Other tangible assets) in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
(3) Those finance lease transactions that had not had their ownership transferred on or before March 31,
2008, are recorded based on the same method as used for regular rental transactions.
[1] Pro forma information of such leases as of March 31, 2014 and 2013, was as follows:
Millions of yen
2014
2013
¥6
¥231
95
136
6
101
373
(86)
(336)
¥15
¥37

Machinery, equipment and vehicles
Other tangible assets
Intangible assets
Total
Accumulated depreciation/amortization
Net

29

Thousands of
U.S. dollars
2014
$58
923
981
(836)
$145

[2] The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2014
and 2013, were as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Finance leases:
Due within one year
¥15
¥28
$146
Due after one year
2
17
19
Total
¥17
¥45
$165
[3] Pro forma information related to finance leases for fiscal years 2014 and 2013 was as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Lease payment
¥30
¥79
$291
Depreciation and amortization expenses
23
71
223
Interest expense portion¥0¥1$0
Information as Lessor(1) The details of lease investment assets as of March 31, 2014 and 2013 were as follows:
Millions of yen
2014
2013
¥28,363¥26,712322
290(4,857)(5,052)¥23,633¥22,145

Obligation of lease fee receivable
Estimated residual value
Interest expense portion
Lease investment assets

Thousands of
U.S. dollars
2014$275,583
3,129(49,087)$229,625(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2014 and 2013, were as
follows;
Thousands of
U.S. dollars
Millions of yen
2014
2013
2014
Within 1 year
¥8,510¥8,461$82,686
1 to 2 years
6,924
6,801
67,2762 to 3 years
5,510
5,127
53,5373 to 4 years
4,276
3,576
41,5474 to 5 years
2,840
2,570
27,594
Over 5 years
¥303
¥177
$2,94430

20. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2014 and2013, were as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Operating leases:
Due within one year
¥2,130¥1,267$20,696
Due after one year
12,241
5,409
118,937
Total¥14,371¥6,676$139,633
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2014 and 2013, were as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Operating leases:
Due within one year
¥212
¥285
$2,060Due after one year
101
136
981
Total
¥313
¥421
$3,041
21. Contingent Liabilities
Contingent liabilities as of March 31, 2014 and 2013, were as follows:
Thousands ofMillions of yen U.S. dollars
2014
2013
2014
As guarantor of third-party indebtedness from financial
institutions¥40,284¥44,543$391,411

22. The Amount of Discount of Export Bill
The amount of discount of export bill as of March 31, 2014 and 2013, were as follows:
Thousands ofMillions of yen U.S. dollars
2014
2013
2014
The amount of discount of export bill¥812

¥1,714$7,89023. Transfer of Financial Assets to Special Purpose Company
The balance of financial assets transferred to special purpose company as of March 31, 2014 and 2013, wereas follows:
Thousands ofMillions of yen U.S. dollars
2014
2013
2014
Balance of financial assets transferred to special purpose
company(loan receivable of Automobiles and accounts¥7,073¥13,344$68,723
receivable-trade of Aerospace)31

24. Segment Information(1)General information about reportable segments
The business segments the Company reports are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic investigation todetermine distribution of management resources and evaluate their business result.
The Company places Automobile at the center of the whole businesses, and introduces an internal company
system into Aerospace and Industrial products divisions. This framework makes clearer the responsibility of eachdivision and accelerates business execution. The Company manages the subsidiaries on the basis of thisclassification. Therefore, the business segments consist of Automobile, Aerospace, Industrial products, and Other
which does not belong to any division.
Automobile segment manufactures and sells vehicles and related products. Aerospace segment manufacturesaircrafts, parts of space-related devices. Industrial products segment manufactures and sells Robin engines andrelated products.
(2)Calculation method of sales, profit or loss, assets, liabilities and other items by reportable segments
Accounting method for reportable segments is almost the same as "2. Summary of Significant
Accounting Policies".
Segment income are calculated based on operating income.
Net sales - Inter-segment are calculated based on current market prices.

32

(3)Information on sales, income, assets and other items by reportable segments for the fiscal years ended
March 31, 2014 and 2013 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
Net Sales:
2014
2013
2014
Automobiles
Outside customers¥2,246,624¥1,778,966$21,828,838
Inter-segment
3,261
3,168
31,685Sub-total
2,249,885
1,782,134
21,860,523
Aerospace
89,1481,209,056
Outside customers
124,436
Inter-segment
Sub-total
124,436
89,1481,209,056
Industrial products
30,148289,312
Outside customers
29,776
Inter-segment
567
22
5,509
Sub-total
30,34330,170294,821
Other (*1)
14,70670,861
Outside customers
7,293Inter-segment
14,642
13,941
142,266
Sub-total
21,93528,647
213,127
Total
2,426,599
1,930,099
23,577,526
Adjustment (*2)
(17,131)(179,460)(18,470)
Consolidated total (*3)
¥2,408,129¥1,912,968$23,398,066

Segment income:Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)

33

2014

Millions of yen
2013

Thousands of
U.S. dollars
2014¥308,973
14,148632
2,099
325,852
637¥326,489¥110,974
6,819
640
1,618
120,051360¥120,411$3,002,069
137,465
6,141
20,394
3,166,069
6,189$3,172,258

Segment assets:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)

Other Items:
Depreciation and amortization:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)
Investment to equity-method affiliates:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)
Increase of property, plant and equipment andintangible fixed assets:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)

2014Millions of yen
2013

Thousands of
U.S. dollars
2014¥1,639,760
182,123
29,69253,533
1,905,108(16,745)¥1,888,363¥1,292,856
179,755
67,951
56,7281,597,290(19,836)¥1,577,454$15,932,374
1,769,558
288,495
520,142
18,510,569(162,699)$18,347,870

2014

Millions of yen
2013

Thousands of
U.S. dollars
2014¥56,265
3,758
411
1,052
61,486¥61,486¥56,430
3,398
415
1,301
61,544¥61,544$546,686
36,514
3,993
10,222597,415$597,415

¥6
520
526
¥526

¥242
361
912
1,515
¥1,515

$59
5,052
5,111
$5,111¥90,782
4,074
533
3,148
98,537¥98,537¥88,517
3,897
377
2,195
94,986¥94,986$882,064
39,584
5,179
30,587
957,414$957,414

Note: *1. "Other" means the category which is not included into any reportable segments. It consists ofgarbage collection vehicles, specialized vehicles, real estate lease, etc.
*2. Adjustment of segment income refers to elimination of intersegment transaction.
*3.Segment income is adjusted on operating income on the consolidated statements of income.

34

Related Information(1)Products and services information
Products and services information is not shown since the same information is in the segment information.
(2)Information about geographic areas[1]Sales for the fiscal years ended March 31, 2014 and 2013 was summarized as follows:

2014

Millions of yen
2013

Sales: (*1)
Japan
¥672,060¥671,819
North America
1,322,760
895,986[United States] (*2)
[1,220,961][815,801]
Europe134,680
127,188
Asia
154,392
113,235
Other
124,237
104,740
Consolidated total¥2,408,129¥1,912,968
Note: *1 Sales is categorized by country or area which is based on customer location.
*2 Sales of the United States is included in North America area.

Thousands of
U.S. dollars
2014$6,529,926
12,852,312[11,863,204]
1,308,589
1,500,117
1,207,122$23,398,066[2]Property, plant and equipment for the fiscal years ended March 31, 2014 and 2013 was summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Property, plant and equipment: (*1)
Japan
¥394,163¥390,135$3,829,801
North America
65,98754,216641,148[United States] (*2)[65,233][53,479][633,822]
Europe
486
476
4,722
Asia
Other
177
128
1,720
Consolidated total¥460,813¥444,955$4,477,391
Note: *1 Property, plant and equipment is categorized by country or area according to geographic adjacentlevel.
*2 Property, plant and equipment of the United States is included in North America area.
[3]Major customers Information
Information about major customers is not shown because outside sales for major customers accounted forless 10% of operating revenue on the consolidated statements of income for the fiscal years ended March 31,
2014 and 2013.

35

Information on Impairment Loss in Fixed Assets by Reportable segments
Impairment loss in fixed assets by reportable segments for the fiscal years ended March 31, 2014 and 2013
was summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Impairment loss in fixed assets:
Automobiles
¥35
¥145
$340
AerospaceIndustrial products
Other
Total
35
145
340
Adjustment
Total
¥35
¥145
$340
Information on Amortization of Goodwill and Unamortized Balance by Reportable segments
Information on amortization of goodwill and unamortized balance by reportable segments for the fiscal years
ended March 31, 2014 and 2013 was summarized as follows:
GoodwillThousands ofMillions of yen
U.S. dollars
2014
2013
2014
Amount written off of current period:
Automobiles
¥258
¥294
$2,507
AerospaceIndustrial products
Other
Total
258
294
2,507
Corporate and elimination
Total
¥258
¥294
¥2,507
Balance at the end of current period:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Total¥2,3692,369¥2,369

Information on Negative Goodwill by Reportable segments
No items to be reported.

36¥2,4152,415¥2,415$23,018
23,018$23,018

25. Fair Value of Investment and Rental Property
The Company and certain consolidated subsidiaries own rental office buildings and rental commercial
facilities with the objective of generating rental income in Saitama prefecture and other locations. Certain
domestic rental office buildings in Japan are classified as properties that include portions used as investment
and rental property, because part of them are used by the Company and certain consolidated subsidiaries.
The consolidated balance sheet amounts, principal changes during fiscal 2014 and 2013, fair value at theend of fiscal 2014 and 2013 were as follows:
As of March 31, 2014
Millions of yen
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the yearInvestment and rental property¥30,410(¥67)¥30,343¥36,779
Properties that include portions used as¥2,376¥9,206¥13,569
investment and rental property¥6,830
As of March 31, 2014

Investment and rental property
Properties that include portions used as
investment and rental property

Thousands of U.S. dollars
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year$295,472($651)$294,821$357,355$66,362$23,086$89,448$131,840

As of March 31, 2013
Millions of yen

Investment and rental property
Properties that include portions used as
investment and rental property

Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year¥31,884(¥1,474)¥30,410¥38,923¥6,573¥257¥6,830¥10,074

Note 1. The amounts of consolidated balance sheet excludes accumulated depreciation and accumulated
impairment loss from acquisition costs.
2. Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2014, principal increases were properties
acquisitions etc, which amounted to ¥3,370 million (US$32,744 thousand), and principal decreases
were depreciation, which amounted to ¥612 million (US$5,946 thousand), loss on sales and retirement,
which amounted to ¥450 million (US$4,372 thousand).
Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2013, principal increases were properties
acquisitions etc, which amounted to ¥64 million, and principal decreases were loss on sales andretirement, which amounted to ¥1,667 million.
37

3. Fair value of a part of main investment and rental property is the amount estimated by based value ofreal-estate appraiser, and fair value of a part of other investment and rental property is the amountestimated by the Company based principally on land assessment value.
Profit and loss in fiscal 2014 and 2013 concerning investment and rental property and properties that include
portions used as investment and rental property were as follows:
As of March 31, 2014
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,476¥2,074¥1,402¥44
Properties that include portions used as
¥221
¥171
¥investment and rental property¥392
As of March 31, 2014

Investment and rental property
Properties that include portions used as
investment and rental property

Thousands of U.S. dollars
RentalRentalChangeOther profit
incomeexpensesand loss$33,774$20,152$13,622$428$3,809$2,147$1,662$-As of March 31, 2013

Investment and rental property
Properties that include portions used as
investment and rental property

Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss¥3,401¥1,989¥1,412
¥399
¥517

¥241

¥276

¥-

Note:1. Rental income (from the properties that include portions used as investment and rental property) does
not include the portion that the Company or certain subsidiaries use as the provision of services andbusiness administration purposes. Rental expenses, however, include all portions of the expenses(costs related to depreciation, repairs, insurance and taxes).
2. Other profit and loss include in gain on sale and impairment loss.
26.Subsequent Event
None identified.
27.Other
On January 15, 2010, the Company filed a lawsuit with the Tokyo District Court against the Government ofJapan for the payment totaling ¥35,124 million (US$ 341,275 thousand) of uncollected initial investment fees(amount paid for customization to the Japanese specifications) for the manufacture of the AH-64D combat
helicopters for the Japan Ministry of Defense. On February 28, 2014, the Tokyo District Court rejected thecase. On March 13, 2014, the Company appealed against the Tokyo District Court’s decision to the Tokyo
High Court.
The payment totaling ¥29,624 million (US$ 287,835 thousand) of uncollected initial investment fees theCompany and its suppliers paid is included in "Other assets" of "Investments and other assets". The claim of38

the lawsuit includes the uncollected initial investment fees, consumption tax and other amounts paid.
In case that the Tokyo High Court upholds the Tokyo District Court’s decision, ¥29,624 million (US$ 287,835
thousand) of allowance for doubtful accounts was recorded.

39