Annual Report
2020
For the year ended March 31, 2020

Corporate Philosophy
1. We strive to create advanced technology on an ongoingbasis and provide consumers with distinctive products withthe highest level of quality and customer satisfaction.
2. W e aim to continuously promote harmony between
people, society, and the environment while contributing to
the prosperity of society.
3. We look to the future with a global perspective and aim tofoster a vibrant, progressive company.

Corporate Code of Conduct
SUBARU CORPORATION sets down the Corporate Code of Conduct tocomply with laws and regulations and to fulfill its social responsibilities
based on its corporate philosophy. We will continue to strive to become acompany loved by all and contribute to making society more affluent by
respecting individuals and the Corporate Code of Conduct and acting on
the same sense of values.
1. We develop and provide creative products and services while paying
sufficient attention to the environment and safety.
2. We respect the rights and characteristics of individuals.
3. We promote harmony with society and contribute to the prosperityof society.
4. We meet social norms and act honestly and fairly.
5. W e maintain global perspective and aim to be in harmony withinternational society.

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

01

Annual Report 2020

CONTENTS
03 SUBARU Business Style
05	Overview of the 2020 Annual
ReportValue Creation
07 Message from the CEO
13 Message from the CFO
Growth Strategy
17 Mid-term Management Vision
25	SUBARU’s Future Technology
Strategy
29 Business Overview

Business Foundation
Supporting Value Creation
37	Directors, Auditors, andExecutive Officers
39 Corporate Governance49	Messages from theOutside Directors
51 The SUBARU Group’s CSR
Value Creation Outcomes
77 Financial and Non-Financial Data
Corporate Data
85 History of the SUBARU Group87 Corporate Information

Disclaimer Regarding Forward-Looking
Statements
Statements herein concerning plans andstrategies, expectations or projections
about the future, SUBARU’s efforts withregard to various management issues, andother statements, except for historicalfacts, are forward-looking statements.
These forward-looking statements are
subject to uncertainties that could cause
actual results to differ materially fromthose anticipated. These uncertainties
include, but are not limited to, general
economic conditions, demand for andprices of SUBARU’s products, SUBARU’sability to continue to develop and market
advanced products, raw material prices,and currency exchange rates. SUBARU
disclaims any obligation to update any
forward-looking statements, whether as aresult of new information, future events, orotherwise.

Annual Report 202002

SUBARU Business Style

Vision for 2025

From a company making things,
to a company making people smile.
SUBARU, by no means a large automaker, is implementing a business model centeredon selection and concentration of limited management resources, creating added value,and pursuing uncompromising differentiation.
Under the STEP mid-term management vision, we will swiftly, steadily, and powerfully,
move forward and solidify our foundation for the sustained growth of both theautomotive and aerospace businesses.

03

Annual Report 2020

Strengthening of the
management foundation
We will strengthen the management foundation by
pursuing qualitative improvement in every aspect of thecompany, including products, services, culture, humanresources, organizations, finance, and operations.

Focus business strategy toenhance strengths
Rather than pursue an omnidirectional business strategy,
we have chosen to optimally focus our limited
management resources on categories and markets inwhich we can leverage our strengths. In businessdevelopment, our product focus is mainly on SUVs andsports models, and our market focus is on the UnitedStates and other developed countries in mature stages ofmotorization.

Achieve an industry-leading
profit margin
While continuously making strategic investments for
future sustained growth, we will pursue a management
approach that emphasizes a high operating margin,
focusing on differentiation and value-added strategies.
On that basis, we will aim for steady volume growth.

Annual Report 202004Overview of the 2020 Annual Report
Our bond with SUBARU customers was built on our commitment to excellence in mono-zukuri, combinedwith a sense of trust and resonance. By strengthening this bond, we will further enhance the SUBARU brandand provide all stakeholders, including customers, with “Enjoyment and Peace of Mind.”

The Origins of
SUBARU P.8

Management
Philosophy

Growth Strategy
Business Style

Mid-Term Management Vision
P.17–24

Mid-Term Management Plan

Strengthening of the
management foundation

Our DNA as an aircraft manufacturer

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

Human-oriented mono-zukuri
05

P.4

Annual Report 2020

We will strengthen the managementfoundation by pursuing qualitative
improvement in every aspect of thecompany, including products, services,
culture, human resources, organizations,finance, and operations.

Management philosophy
Aim to be a compelling company with astrong market presence built upon its customer-first principle.

VisionFrom a company making things, to a company making people smile

Focus business strategy toenhance strengths
Rather than pursue an omnidirectional
business strategy, we have chosen to
optimally focus our limited management
resources on categories and markets inwhich we can leverage our strengths. In
business development, our product focus
is mainly on SUVs and sports models, andour market focus is on the United Statesand other developed countries in mature
stages of motorization.

Vision for 2025
1. Become a brand that is “different” fromothers by enhancing distinctiveness.
2. Engage in business activities that resonate with customers by putting them
center-stage.
3. Fulfill corporate social responsibilities
by contributing to diversifying social
needs.

Main Business Risks

Achieve an industry-leading
profit margin
While continuously making strategic
investments for future sustained growth,
we will pursue a management approachthat emphasizes a high operating margin,
focusing on differentiation and valueadded strategies. On that basis, we will
aim for steady volume growth.

Business Foundation
Supporting Value Creation

P.58–60

Risks relating to fluctuations in theeconomic and financial environment
Economic trends, currency andfinancial markets
Risks relating to industry andbusiness activities
Competitive environment,
information networks, and supply chains
Risks arising from national regulations andother events affecting business activities
Climate change, natural disasters,
and diseases, etc.

Quality
P.55–57

Value Provided to Stakeholders
Six Priority Areas for CSR

P.51–54

The SUBARU GroupSix Priority Areas for CSR

Goal

Providing “Enjoyment and Peace of Mind”
Business
Partners

Customers

Employees

Shareholders,investors

Communities,
societySociety’s expectations

Diversity

Contribution to the creation of a low-carbon society
P.61–64• Reduction of CO2 emissions from factories, offices, and other facilities(Scope 1 and 2) and products

Resonance andCoexistenceContribution to the creation of a recycling-based society
P.61–64• Promotion of automobile recycling, 3R initiatives in factories and otherfacilities

Peace of Mind

Harmonious coexistence with communities
P.75–76• Environmental and social contribution activities in communities thathave close links to the SUBARU Group

Value Creation through Product Supply• Distinctive and attractive products• Zero traffic fatalities by 2030

Products
P.25–28• Reduction of average well-to-wheel CO2 emissions from new vehicles(in operation) by at least 90% compared to 2010 levels by 2050
• Make at least 40% of global sales of electric vehicles (EVs) and hybrid
electric vehicles (HEVs) by 2030

Environment

Markets
P.19–20• 5% share of the U.S. market• Sales of 1.3 million units in 2025

Compliance

Profit Plan/Capital Policy

P.19–20(¥105/USD)

Profit Plan for FYE 2019-2021 (3 years)

Main Social Issues

Net sales

10 trillion yen

Operating income

950 billion yen

Operating margin

9.5%

R&D expenses

Human rights issues
Aging society

400 billion yen (+18%)

Capital expenditures

450 billion yen (+3%)

Depreciation and amortization

300 billion yen (+29%)*( ) : Percent change from previous 3-year period (FYE2016–2018)

Increasing traffic accidents

Capital Policy

Increasing CO2 emissions

Two months’ worth of
net sales at minimum

Net cashEquity ratio

Resource recycling

ROE

Responding to COVID-19

50% at minimum
Minimum

10%

TargetShareholder
returns

15%

Yearly dividend per share
Share repurchases

144 yenFrom a company making things, to a company making people smile

Priorities specific to SUBARU

Value Created through Our Business Activities
People-oriented
Car Culture

To conduct flexibly

Corporate governanceRisk management

Compliance

Human resources

Human rights

P.37–50

P.58–60

P.65–67

P.68–73

P.74

Annual Report 202006

Message from the CEO

SUBARU’s human-oriented mono-zukuri enriches the
lives of our customers and contributes tosociety by providing “Enjoyment and Peace of Mind”
to our stakeholders.
Tomomi Nakamura
Representative Director of the Board
President and CEO
ProfileJoined SUBARU in 1982. After working in Japan Sales & Marketing Division, Global
Marketing Division, and other units, he served as Vice President, Senior General
Manager of Strategy Development Division, and Chief General Manager of Corporate
Planning Division from 2011; Senior Vice President, Chief General Manager of Overseas
Sales & Marketing Division 1, and Chairman and CEO of SUBARU of America, Inc (SOA)from 2014; as well as Executive Vice President, Chief General Manager of Overseas
Sales & Marketing Division 1, and Chairman and CEO of SOA from 2016. He has served
as Representative Director of the Board, President and CEO since June 2018.
Under the principle of “Think independently and enjoy your work,” he has led
SUBARU towards the companie’s vision “From a company making things, to a company
making people smile.”

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Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

The Origins of SUBARU

Q. What are the values that SUBARU has consistently maintained?
y using the technological capabilities inherited from aircraft manufacturers, we have given top
A. Bpriority
to safety since our founding, and have been thoroughly pursuing human-oriented monozukuri to respond to the wishes of the customers who use our products.

The SUBARU Group’s roots as a manufacturer are in aircraft manufacturing. Our engineers have always been inspired witha strong determination to ensure the safety of pilots and have worked with pilots to achieve the best possible combinationof safety and performance. The starting point for everything that SUBARU does is human-oriented manufacturing, which
we define as a consideration for the physical and mental wellbeing of everyone who operates our products. Thisphilosophy lives on in our mono-zukuri (car-making) activities. Our relentless efforts in every era to perfect the mostessential functions of a car—driving, turning, and stopping—are reflected in our unique engineering know-how, including
their all-around safety performance.
When I first joined SUBARU in 1982, the company was more technology-oriented than it is today. We worked to
improve our technologies, including Horizontally-Opposed Engine and Symmetrical All-Wheel Drive (AWD). Our
philosophy back then was that if we produced good cars, customers would buy them, and we worked hard to promote thefunctional value of our products. For many years, we were unable to expand our sales volume and we were just a brandthat was supported by a limited number of SUBARU fans who shared our philosophy.
We began to adopt a clearer focus on customer perspectives after Ikuo Mori became CEO in 2007. We were also trying
to make North America our key market, and in order to strengthen our sales system, we needed to know our customers
better and pay closer attention to customer input. Under the mid-term management plan for the period from fiscal year
ended (FYE) March 2008 to FYE March 2011, we changed the concept to “Everything for the customer” with the customerfirst principle as a core strategic focus. We also made a decisive course change toward the prioritization of selection andconcentration, added value, and differentiation. This basic philosophy has remained unchanged in our mid-term
management plans for the past 10 years.
To broaden our customer base and achieve growth as a global brand, we clarified both our business strategies andthe SUBARU brand. People within the company already had tacit knowledge of the qualities that made SUBARU unique,and this knowledge would sometimes be reflected in people’s comments, when they suggested, for example, that acertain feature was inappropriate for SUBARU vehicles. We initiated an intensive debate about SUBARU’s corecharacteristics, leading in 2010 to the identification of “Enjoyment and Peace of Mind” as the values that the SUBARU
brand delivers to customers.
During that time, there was a growing tendency for customer’s preference in cars with superior safety performance.
Customers gradually began to understand the values of “Enjoyment and Peace of Mind,” and to resonate with SUBARU
qualities, such as smooth driving, safety, and ease of driving.
At the SUBARU Technology Briefing in January 2020, I said that safety is beyond mere safety and encompasses
compassion for beloved families and friends; longevity is beyond mere durability and long service life but also refers to adriver’s attachment after long years of usage and SUBARU as a medium of connection to past memories; adventure andversatility relate not only to ease of use, but also refers to the enrichment of life and leisure time. A notable feature onsocial media is the prevalence of photographs showing SUBARU owners with their families, and their pets and their cars.
Customers come to feel life-enriching benefit, not just functional values in a Subaru. I believe that SUBARU is unique
because our products become part of people’s lifestyles and provide values that other brands cannot. This view is notbased on solely my perspectives as CEO. It is also shared by our employees. The fact that our employees have the same
perceptions of the uniqueness of SUBARU is both an asset and a source of strength for us. The continuing mission of every
SUBARU employee is to take action to meet the customers expectations.

Link

SUBARU technology briefing news release
SUBARU technology briefing presentation materials

Annual Report 202008

Message from the CEO

Growth Strategy—the STEP Mid-term Management Vision

Q. What growth initiatives will you implement under STEP, the mid-term management vision?
e have identified corporate culture reform, quality reform, and launching the “Make-a-Subaru”
A. Wproject
as the key priorities to ensure the sustainable growth of the SUBARU Group. Over the
past two years we have focused on corporate culture reform and quality reform in particular.
Going forward, we will make further progress toward ensuring our survival amid a major shift toelectric vehicles by launching the “Make-a-Subaru” project and enhancing alliances to achieve
high quality and high added value while reducing costs.

I was stationed in the United States from 2014 at a time when the SUBARU Group was achieving rapid growth in net sales
and the number of vehicles sold. I was constantly thinking about the factors that could halt our record-breaking growth insales in the U.S. market. From around 2016, we began to see signs that this rapid growth trend was starting to deteriorate.
We also started to encounter defects of types that we had never seen before, and in 2017 we experienced quality issues
that included problems with completion inspections, and major recalls.
After taking office as CEO in 2018, I announced the STEP, the mid-term management vision, covering the period fromFYE March 2019 to FYE March 2026. Our focus as we put together this vision were the issues that had been on my mind
constantly during my time in the United States as obstacles to our achievement of sustainable growth. Rapid growth had
highlighted problems with quality and our organizational culture and we decided to prioritize reforms in these areas,
together with launching the “Make-a-Subaru” project, with the aim of improving both quality and added value while
reducing costs, in anticipation of an era in which a significant percentage of vehicles will be electrically powered. We
adopted a vision for 2025 calling for SUBARU’s evolution “From a company making things, to a company making people
smile.”
Quality reform is our most important and urgent issue as we work to restore the trust of customers who love the
SUBARU brand. The reform of our organizational culture is also a priority because of the need to foster a quality-focused
culture. We have made steady progress on these reforms over the past two years, and I believe that our employees arealso beginning to experience real changes. SUBARU is supported by both loyal fans and many customers, and I am
confident that these reforms will enable us strengthen our reputation with these customers.
As the automobile industry goes through a major transition, another vital part of our efforts to enhance SUBARU’s key
characteristics for a sustainable growth is to enhance our alliances. In September 2019, we reached to an agreement on a
new capital alliance built on the relationship that we have developed with Toyota Motor Corporation over the past 15
years. In order to meet the needs in new areas, such as CASE1 technologies, we should work to create ever better cars bycollaborating with people who share the same high aspirations rather than trying to do everything ourselves. Since
concluding an agreement on business collaboration with Toyota in 2005, we have built a relationship of trust whileachieving significant benefits in many areas, including the joint development of vehicles. We have decided to take thisrelationship to a new level by strengthening the bonds between SUBARU and Toyota through reciprocal shareholdings.
Going forward we will work closely together toward a number of goals, such as the joint development of battery electricvehicles model (BEV) and a platform dedicated to BEVs.
1 An acronym of the words: Connected, Autonomous, Shared & Services, and Electric09

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Value Creation Infrastructure
are your views on the role of corporate governance and risk management in supporting
Q. Whatsustainable growth?

A. We run meetings of the Board of Directors in ways that facilitate open discussion, especially byContinual efforts to build a strong management infrastructure are essential to sustainable growth.
outside directors. In addition, we have formulated a succession plan that emphasizes thecontinual training of future management personnel. We also recognize risk management as a vital
part of our preparations for future uncertainties in the business environment.

To achieve continuous growth while meeting the expectations of customers and other stakeholders in a rapidly changing
environment, the SUBARU Group must work continuously to build a strong management infrastructure with the emphasison diversity. Our basic policy on the selection of outside directors is to appoint people with practical business experience,
especially in manufacturing industries. As a result, our outside directors have specialist knowledge spanning a wide rangeof fields. My experience of our Board meetings has been that members are able to engage in extremely open debate,especially on matters relating to corporate governance and medium- to long-term strategies. Outside directors put
forward a variety of views on future strategic directions in relation to matters discussed at executive meetings and in otherforums. In June 2020, we appointed Miwako Doi as our first female outside director and she brings specialist knowledge to
our Board meetings, as well as gender diversity. We will continue to prioritize free and open exchanges of views at
meetings of the Board of Directors.
We also place considerable importance on the continuous training of future management personnel. When selecting
officers from within the company, we always consider their performance each year and their career paths over the next
three years. In FYE March 2020, we spent considerable time discussing the succession process for the CEO. We decided todeepen the discussion, while formulating and implementing a CEO succession plan, including a definition of the ideal
profile for the CEO of the SUBARU Group.
We have also prepared for future uncertainties by establishing strategic risk management systems designed to minimize
the impairment of corporate value. In the FYE March 2020, we established the position of the Chief Risk Management
Officer (CRMO). Under the leadership of the CRMO, the Risk Management & Compliance Office monitors the emergence ofrisks that could affect the SUBARU Group as a whole, takes action to prevent the widespread effect of such risks, andenhances the effectiveness of countermeasures. This work has focused in particular on measures relating to the COVID-19
pandemic. In early February 2020, when the disease was just beginning to spread, we established a COVID-19
Countermeasures Task Force and created systems to minimize the impact by preventing new cases and taking immediate
action to minimize the spread when infections occurred. We are continuing to gather information and implement preventive
measures, while giving first priority to the health and safety of our employees, customers, and suppliers.
In FYE March 2021, we will continue to review our systems with the aim of ensuring that each department can respondto risks independently, by further enhancing the effectiveness of our risk management measures, by identifying risks,
ascertaining the level of impact, and by implementing countermeasures.

COVID-19 countermeasures at SIA (U.S.)

Preventive measures against the spread of COVID-19 at a
dealership in Japan

Annual Report 202010

Message from the CEO

Outlook for FYE March 2021
has increased as a result of the COVID-19 pandemic, but what is your outlook on the
Q. Uncertainty
financial results and dividends for FYE March 2021?

A. there will be a significant recovery in automobile sales in the second half of the fiscal year, especiallyWe aim to achieve operating profit of 80.0 billion yen (at 105 yen/U.S. dollar). This assumes thatin our key market of the United States. The situation remains uncertain, but management isdetermined to overcome the present challenges and achieve a recovery in FYE March 2022.

Our full-year forecast for FYE March 2021 is revenue of 2,900.0 billion yen and operating profit of 80.0 billion yen, basedon consolidated automobile sales of 900,000 units and an exchange rate of 105 yen to the U.S. dollar. It remains difficult
to predict future trends, including the timing for a lessening of the COVID-19 pandemic, and the impact of the pandemic
on economic and social activities and consumer confidence. However, we have set these targets on the assumption that
automobile demand will recover to a certain level toward the second half of the fiscal year, especially in the U.S., itslargest market. These targets will not be easy to reach amid the present uncertainty, but management is determined toattain them as a step toward a turnaround in FYE March 2022.
We have adopted a performance-linked dividend policy. We aim to provide stable, sustainable dividends whilereflecting the business performance of each fiscal year, investment plans, and the business environment. Based on acomprehensive assessment of our performance forecasts for the current fiscal year, the uncertain outlook for the businessenvironment because of the global COVID-19 pandemic, our future funding requirements, and other factors, we plan to
pay a dividend of 56 yen per share, consisting of interim and final dividends of 28 yen each. In the spirit of sharing theburden of stakeholders affected by the continuing reduction of dividends since last year, officers are voluntarily returningcompensation for last year and this year. The SUBARU organization will continue to work toward the successful
implementation of group-wide reforms needed to reach our targets for FYE March 2021.
Link

Latest Results and Forecast

Fiscal-year Plan
Consolidated Automobile Unit Sales and Complate Car Production/
Consolidated Profit Plan(Thousands units)
Result for FYE March 2020

Plan for FYE March 2021

Variance

Consolidated unit sales Total

1,033.9900.0–133.9Complete cars production Total

1,030.9880.0–150.9*Production figures include Toyota 86.
(Billions of yen)
Result for FYE March 2020

Variance

3,344.1

2,900.0–444.1

Operating profit

210.3

80.0

–130.3

Profit before tax

207.7

87.0

–120.7

Profit for the period attributable toowners of parent

152.6

60.0

–92.6

Exchange rate (Yen/US$)

¥109

¥105

–¥4

Annual dividend per share (Yen)

¥100

¥56

–¥44

Dividend payout ratio

50.3%

71.6%

21.3%

Revenue

11

Plan for FYE March 2021

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Our Path to Further Growth

Q. To conclude, what message do you have for the stakeholders?
taking new changes as opportunities to further refine the SUBARU brand and provide
A. By“Enjoyment and Peace of Mind” to customers and other stakeholders, we aim to shift “From acompany making things, to a company making people smile.”

SUBARU is a brand that has been fostered and supported by customers. While fulfilling the most essential need ofprotecting people’s lives, our cars also incorporate the essential functions—driving, turning, and stopping—with uniquevalues that only SUBARU can offer. These values turn every trip somewhere into a wonderful and memorable experience,and these values will always remain.
As a result of the COVID-19 crisis, our customers became keenly aware of the importance of enjoying the day-to-day
living and enjoyment of everyday life. I see this as a perfect chance to demonstrate the presence of the SUBARU brand,
and I am constantly telling our employees to face the challenging COVID-19 situation and enhance the value of ourbrand.
To strengthen our brand and pull through the uncertain times ahead, we must also have the courage to makechanges, while continuing to preserve the qualities that make SUBARU unique. Major transformations in the automobile
industry, such as CASE technologies and mobility as a service (MaaS), and the continuing evolution of business processes
and workstyles that we are experiencing are positive changes that enables us to accelerate reforms under STEP, and to
take up the challenge of decisive self-transformation.
One thing that will never change in this new era is our commitment to the human-oriented manufacturing. We willcontinue to strengthen the SUBARU brand by matching our products to the lifestyles of our customers. As we move
forward with our evolution “From a company making things, to a company making people smile,” we will continue tocontribute to the society by providing “Enjoyment and Peace of Mind” to our customers and our stakeholders.
We look forward to the continuing support of our stakeholders.

Tomomi Nakamura at the 46th Tokyo Motor Show 2019

Annual Report 202012

Message from the CFO

Toshiaki Okada
Director of the Board,
Executive Vice President and CFO

We will focus on improving our corporate value by overcoming thecurrent difficult business environment, by implementing quality
reforms, and by advancing the Make-a-Subaru project.

Business Performance in FYE March 2020
Continuing trade problems and other factors caused the world economy to slow in the year ended March 2020 (FYE March 2020). However,
we maintained firm performance trends thanks to a strong trend in personal consumption expenditure driven by a positive employment
and income environment in the U.S., which is a key market for the SUBARU Group. In Japan, falling exports, natural disasters, and otherfactors caused declines in capital investment and domestic demand, resulting in a continuing weak trend in personal consumption
expenditure. The global economic outlook became increasingly uncertain amid the global slump triggered by the spread of COVID-19 thatbegan in January 2020.
In these circumstances, consolidated unit sales in FYE March 2020 increased by 33,000, or 3.3%, to 1.034 million units. Sales in overseas
markets increased by 43,000 units, or 5.0%, to 908,000 units, in part because of continuing strong sales of the Forester, which underwent a
full model change in the second half of 2018, and the new Ascent in the key U.S. market. Sales in the Japanese market decreased by 10,000
units, or 7.7%, to 126,000 units, in part because of reduced sales of the Impreza.

13

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Global production increased by 42,000 units, or 4.2%, to 1.031million units. Overseas production1 decreased by 5,000 units, or 1.3%
to 367,000 units, due partly to temporary suspension of plant operations started in March 2020 in response to the spread of COVID-19.
Production in Japan rose 7.6% to 664,000 units led by strong demand for the Forester.
These factors were reflected in consolidated revenue of 3,344.1 billion yen, an increase of 188 billion yen, or 6.0%, over the previous
year’s result. Consolidated earnings were negatively impacted by a year-on-year rise in the value of the yen, but this was offset by growthin the number of units sold overseas, especially in the U.S., and an improvement in the sales mix, in part because of the reduction ofsales incentives. Other positive factors included the reduction of R&D expenditure thanks to an increase in the portion that could betreated as assets under the IFRS. As a result, operating profit increased by 28.6 billion yen, or 15.7%, to 210.3 billion yen. Profit before
tax increased by 21.6 billion yen (11.6%) to 207.7 billion yen, and profit for the period attributable to owners of parent by 11.2 billion yen(7.9%) to 152.6 billion yen.
For details, please refer to the Financial Review on Page 81.
1 Production in the U.S. at Subaru of Indiana Automotive, Inc.

FYE March 2021
Situation in the First Quarter
Our results for the first quarter of FYE March 2021 were significantly impacted by the effect of the COVID-19 global pandemic on the
SUBARU Group’s production and sales activities. Consolidated global vehicle sales decreased 49.3% to 133,000 units. Sales in overseas
markets decreased by 115,000 units (50.1%) to 115,000 units, and domestic sales by 15,000 units (44.3%) to 19,000 units. Global
production fell by 17,000 units (64.8%) to 92,000 units. Our U.S. plant operated by SIA temporarily halted production on March 23, 2020,
followed by the Gunma Plant on April 9. Both plants resumed operations on May 11, but the continuing impact of COVID-19 on supply
chains and marketing activities resulted in necessary production adjustments.2 Overseas production fell 64.3% to 36,000 units, while
production in Japan declined 65.0% to 56,000 units.
Due to the significant decline in vehicle sales, consolidated revenue fell 45.2% to 457.0 billion yen. Operating profit decreased by
107.9 billion yen to −15.7 billion yen, profit before tax decreased by 100.1 billion yen to −10.7 billion yen, and profit for the period
attributable to owners of parent decreased by 74.2 billion yen to result in −7.7 billion yen.
2 Production suspension and adjustments during the March–June period:- Japan (Gunma Manufacturing Plant) Plant suspension: April 9–May 1; Production volume adjustments: May 11–June 19- U.S. (Subaru of Indiana Automotive, Inc.) Plant suspension: March 23–May 8; Production volume adjustments: May 11–May 31

Outlook for FYE March 2021
Our forecasts for the whole of FYE March 2021 assume a moderate recovery in automobile sales in the second half of year, especially inthe key U.S. market. On that basis, we have planned for consolidated sales of 900,000 units and production of 880,000 units, resulting inconsolidated revenue of 2,900 billion yen. Despite a reduction in warranty expenses, including expenses related to recalls, service
campaigns and so on, consolidated earnings will be impacted by a deterioration of the sales volume and mixture, mainly because of the
spread of COVID-19, as well as exchange rate differences, an increase in R&D costs, and other factors. We are planning for operating

FYE March 2020: Analysis of Variance in Operating
Profit Changes (Consolidated)
(Billions of yen)
R&D expenses
Sales volume & mixture
and others

39.2

195.5

SG&A expenses
and others

16.1

9.6

181.7
-13.8

Accounting
standard
difference’19/3
OperatingincomeResult(JGAAP)’19/3
OperatingprofitResult(IFRS)FYE March 2021: Analysis of Variance in Operating
Profit Changes (Consolidated)
(Billions of yen)

Loss oncurrency exchange

Warranty
expenses

45.0

Other

-29.0 -11.5

4.2 210.3

210.3

Cost
reduction
andothers+28.6 billion yen

Other-130.0

Sales
-35.0
-15.0
volume & Loss on
mixtureR&D
currency
and others exchange expenses’20/3
OperatingprofitResult(IFRS)’20/3
OperatingprofitResult-130.3 billion yen

80.0

4.7

’21/3
OperatingprofitPlannedAnnual Report 202014

Message from the CFO

profit of 80 billion yen and profit for the period attributable to owners of parent of 60 billion yen. These estimates assume exchange
rates of 105 yen to the U.S. dollar and 120 yen to the Euro. Our plans call for capital expenditure of 100 billion yen, depreciation of 100
billion yen, and R&D expenditure of 100 billion yen. We will maintain investment and R&D activities as required, but we will control
capital expenditure by screening projects and modifying schedules.
Uncertainty in the outlook for the COVID-19 situation is likely to continue. However, we are determined to reduce the extent of
reduced profit and achieve our targets for FYE March 2021 by steadily linking demand recoveries in our markets to sales, and by
managing our expenditures efficiently.
Link

Latest Results and Forecast

Financial and Capital Strategies
The SUBARU Group will pursue a policy of selection and concentration guided by our commitment to the customer-first principle. We will
improve our medium- to long-term corporate value by optimally using our management resources to develop high-return business models
while maintaining a robust financial structure and achieving a high level of capital efficiency. Under the STEP mid-term management vision,
we have identified return on capital, financial soundness, and shareholder returns as the three key indicators for our capital policy.
Our basic policy is to provide appropriate shareholder returns while maintaining a high degree of balance between return on equity(ROE) and the shareholders’ equity ratio over the medium- to long-term future. Specifically, our goal for the foreseeable future will be to
combine a shareholders’ equity ratio of at least 50% with ROE of 10% or higher. We will also take steps to overcome the impact of COVID19 and strengthen our income structures, so that we can restore a net cash position equivalent to two months of net sales as quickly as
possible. We also aim to allocate appropriate amounts of cash and other resources to strategic investment and R&D investment targeted
toward sustainable growth, while maintaining cash reserves at a suitable level based on trends in the business environment.
We believe that our current position in terms of the procurement of funds and liquidity is appropriate. We are maintaining therequired level of liquidity by entering into loan and commitment line agreements with our main banks, and by issuing bonds. Since April
2020, we have been procuring operating funds from financial institutions to meet funding needs generated by the COVID-19 situation.
We are working to build a structure that will allow us to respond flexibly to unforeseen funding needs and ensure business continuity at
all levels from supply chains to value chains, in the event that the impact of the pandemic continues in the longer-term future. For
example, we have established commitment lines worth approximately 200 billion yen, including existing loans and set up the issue ofbonds and commercial paper.

Operating Profit/Operating Margin

Operating profit (Left)

ROE/ROA

ROE

Operating margin (Right)(Billions of yen)
600

565.6

(%)

30

40

ROA
36.9

25

500
400

(%)

17.5

300

410.8
12.4

30
20

379.4

15

11.7

200

210.3

181.7

23.6
20

14.6
10

15.3

10

6.2

100

20.2

5

13.4

5.7
0

0

’16/3

’17/3
JGAAP

’18/3

’20/3

’19/3
IFRS

0

’16/3

’17/3
JGAAP

’18/3

9.0

8.5
6.7*

6.5

’19/3

’20/3
IFRS

*ROA is calculated by dividing operating profit by total assets (average at the
beginning and end of the period)*For FYE March 2019 only, ROA has been calculated on a JGAAP basis

15

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Shareholder Returns
Our basic policy on shareholder returns emphasizes the continuous provision of reliable returns, primarily through dividends. We have also
introduced a performance-linked policy of reflecting our financial performance and investment plans, as well as the business environment,
in dividends.
Under the STEP mid-term management vision, which we announced in July 2018, we have prioritized the continuous provision ofreliable shareholder returns. In the three years from FYE March 2019 to FYE March 2021, we planned to provide shareholder returns
consisting mainly of yearly dividends of 144 yen, combined with flexible share buyback programs based on our cash flow position. However,
the COVID-19 pandemic had a major impact on the SUBARU Group’s business activities, including production and sales, in FYE March
2020. After a comprehensive assessment of the situation, including our funding requirements going forward, we set the yearly dividend at
100 yen, which represents a consolidated payout ratio of 50.3%.
Our dividend forecasts for FYE March 2021 are based on a comprehensive assessment, including our future funding needs in a businessenvironment that remains unpredictable due to the continuing impact of COVID-19. On this basis, we expect to pay a yearly dividend of 56
yen, consisting of interim and final dividends of 28 yen each. This is equivalent to a consolidated payout ratio of 71.6%.

Improving Corporate Value
Our most urgent priority at present is to adapt to the business environment damaged by the COVID-19 pandemic. From a medium- tolong-term perspective, the automobile industry faces the greatest change of the century. Both society and our markets are demanding
action including compliance with environmental regulations, and the development of products based on the Connected, Autonomous,
Shared & Services, and Electric (CASE) concept. We expect this situation to result in upward trends in R&D and manufacturing costs overthe medium- to long-term future.
The SUBARU Group has worked to strengthen its income base by building a brand image of “Enjoyment and Peace of Mind” andpursuing policies of selection and concentration and differentiation. To overcome the current difficult business environment and achieve
profit and sustainable growth, we need to supply the market with attractive automobiles that will give users a strong sense of value, while
enhancing quality and efficiency and curbing cost increases. To achieve this, we must fundamentally change and reform our approach tocar manufacturing and focus our total energies toward quality reforms and the Make-a-Subaru project, which are key priorities under the
STEP mid-term management vision.
As CFO, my task is to prepare the SUBARU Group against the continuing risk of COVID-19 impacts by securing cash reserves andreducing financial risk. I will also contribute to medium- to long-term improvement in our corporate value by ensuring the efficientutilization of funds through centralized management of the Group’s financial resources and the prioritized allocation of funds to importantand strategic areas. We look forward to your continuing understanding and support as we work to meet the expectations of ourshareholders and other stakeholders.

Total Asset/Total Equity/Ratio of Equity Attributable to
Owners of Parent to Total Assets
Total asset
Total equity
Ratio of equity attributable to owners of parent to total assets (Right)(Billions of yen)
3,500

3,180.6
2,800

2,100

2,592.4

2,762.3

51.8

2,866.5

52.8

1,400

1,349.4

3,293.9

1,464.9

54.2
1,561.0

Dividend per share (Left)

1,689.9

(Yen)

(%)

100

160

120

144

1,720.1

JGAAP

’20/3

’19/3

144
90

74.7

100

80

60

50.3

50.1

0

0

’18/3

144

40

20

’17/3

144

120

60

52.0

700

’16/3

Dividend payout ratio (Right)

(%)

80

52.9

Dividend Per Share/Dividend Payout Ratio

39.4

40

30

25.7
0

0

’16/3

’17/3

’18/3

’19/3

’20/3

IFRS

Annual Report 202016

Mid-Term Management Vision
Our Evolving Mid-Term Management Vision
Our management philosophy envisions a future for SUBARU as “A Compelling Company with a Strong Market Presence”
built upon its customer-first principle. We will continue to work under this philosophy to enhance the appeal of the
SUBARU brand by offering customers “Enjoyment and Peace of Mind.”2007–20102011–2015*

Customer Satisfaction:
Our Customers Are Everything

Motion-At the time of announcement: President & CEO Ikuo Mori

At the time of announcement: President & CEO Yasuyuki Yoshinaga

Essential features

Management philosophy

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

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

Major challenges

1 Guiding principle for all activities “Confidence in Motion”

1 To provide a distinctive SUBARU experience for drivers

and passengers
2 To increase sales globally (Most important market: U.S.)
3 To strengthen competitiveness in quality and cost
4 To also grow through the business alliance with Toyota
5 To grow the level of employee competence and soenhance the organization
Achievements haring the mind ofS“customers come first” within the Group
Globalization of products
World’s leading safety performance
Expanding the sales in U.S. (the most important market)
Reform of profit structure by leaning cost
IssuesLowering the sensitivity of foreign currencies
Increasing sale in emerging countries including China
Developing environmental technology and products
Autonomy of three internal companies
Flexibility to adopt the changes of business environment<Promote the brand strategy>	SUBARU provide the value to customers “Enjoyment andPeace of Mind”
2 W ith the basic philosophy of “customers come first,”“Provide distinctive SUBARU experience”
3 Strengthen sales force and the availability of automotive
supply, “Accelerate sales expansion”
4 Overhaul of cost structure and promoting alliance with
Toyota, “Solidify operational foundation”
5 Back up concrete approaches for business, “Improvementin Management”
Achievements

XUV/SUV strategy succeeded
Boosted sales through U.S.-oriented product development
Highly rated collision safety and EyeSight
Cost reduction activities paid off
Achieved low-incentive sales
Achieved highly efficient production
IssuesCompliance with future environmental regulations
Production capacity shortages
Responding to the needs of new customers
Sensitivity to currency fluctuations*The Motion-V mid-term management plan, originally intended to run from 2011
to 2015, was completed ahead of schedule in FYE March 2014. Prominence
2020, the new mid-term management vision, was launched in FYE March 2015.

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

United States

Overseas (Excl. the U.S.)Japan

Operating margin

1,200
900
600
300
0

’08/3

17

Annual Report 2020

’09/3

’10/3

’11/3

’12/3

’13/3

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

We have succeeded in strengthening the appeal of the SUBARU brand by providing products that offer value unique to SUBARU, as well as
by expanding our markets. We will continue to provide “Enjoyment and Peace of Mind” by building a company that is trusted by, andresonates with, all customers and stakeholders in order to achieve sustainable growth under STEP, our mid-term management vision.

2014–20172018–2025

Prominence 2020

STEP

At the time of announcement: President & CEO Yasuyuki Yoshinaga

President & CEO Tomomi Nakamura

Management philosophy

Management philosophy

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

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

Reason for formulation

STEP Speed Trust Engagement Peace of mind & enjoyment

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

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

Vision for 2020

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

From a company making things, to a company making
people smile
Vision for 2025

Specific goals
No.1 for customer trust
Strong brandAmong the most profitable companies in the industry
Vehicle sales of 1.1 million-plus units

1 Become a brand that is “different” from others byenhancing distinctiveness.
2 Engage in business activities that resonate withcustomers by putting them center-stage.
3 Fulfill corporate social responsibilities by contributing todiversifying social needs.

Direction for mid-term management vision

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

Among the most profitable companies in the industry
IssuesPriority issues

Corporate culture reforms
Accelerate efforts to become “a company that does theright thing in the right way.”
Continuous efforts aimed at corporate culture reforms.
Quality reforms
Strive to be No.1 for “the quality that enables customers
to enjoy long-term ownership with peace of mind.”
Launch Make-a-Subaru project
Realizing improvement of customer value with “high quality,” “high added value,” and “low costs.”

Strong brand
Vehicle sales of 1.2 million-plus units
No.1 for customer trust

Operating margin (%)
20
15
10
5
0

’14/3

’15/3

’16/3

’17/3

’18/3

’19/3

’20/3

Annual Report 202018

Overview of the STEP Mid-Term Management Vision
Creating the Mid-Term Management Vision
In July of 2018, we formulated STEP, our mid-term management vision, with the goal of building trust and resonating with customers byproviding “Enjoyment and Peace of Mind.”

Background• Changes in the external environment: Once-in-a-century changes in a mobility society• Strains from the company’s rapid growth: Lacking fundamental corporate strength

Intentions in developing the mid-term management vision• Restore trust by cultivating fundamental corporate strength as soon as possible.
• Stay true to the brand principle of providing “Enjoyment and Peace of Mind” to our customers.
• Make SUBARU more than just a company that is trusted by, and resonates with, our customers.

Principles
Management philosophy
Aiming to be a compelling company with a strong market presence built upon its customer-first principle
VisionFrom a company making things, to a company making people smile
Vision for 2025
1. Become a brand that is “different” from others by enhancing distinctiveness.
2. Engage in business activities that resonate with customers by putting them center-stage.
3. Fulfill corporate social responsibilities by contributing to diversifying social needs.

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

Rapid quantitative growth:
Qualitative growth not keeping pace.

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

Quantitative Growth

Qualitative Growth

Motion-V

Prominence 2020
2014

Vision for 2025
2018

Vision for 2030 (Provisional)
2025

2030

STEP is an acronym formed from the initial letters of “Speed,” “Trust,”“Engagement,” and “Peace of Mind and Enjoyment,” which are four
important elements of the vision. The letter “T” is emphasized in the logo as
SUBARU considers trust as the most important element of all. The name also
Speed

Trust

Speedily advanceinitiatives

Restore trust

19

Engagement

Peace of mind
& enjoyment

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

Annual Report 2020

expresses the company’s determination to take “steady, strong steps” before
a future jump over social changes.

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Initiatives Overview (9 Boxes + 1)
“Change the Culture”
Corporate culture reforms

0

Accelerate efforts to become “a company that does the right thing in the right way.”
Continuous efforts aimed at corporate culture reforms.
Mono-zukuri (Car-making)Sales and service

New mobility domain

1Enhance corporate quality

Quality reforms

Enhance quality at
customer contact points

Alliance enhancement2

Build a strong brandMore enjoyment,
more peace of mind

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

Generate new value throughconnected car technologies

3

Sustainable growth based on
focus strategy

Launch “Make-a-Subaru” project

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

Initiatives to create newtechnologies and businesses

The core themes of STEP are the corporate culture reforms, quality reforms, and the launch of the Make-a-Subaru project. The following
pages provide details of each theme and information about progress on related activities in FYE March 2020.

Market Strategy
Sustainable growth based on focus strategy

Maintain growth in the U.S., aim for sustainable growth in the approach suited to each market.
RegionApproach

North America

Target 5% share in the U.S. Strengthen retailer networks in low-share states centered on the Sunbelt.

Japan

Home market to be retained. Maintain current monthly sales level of 10,000 units*, while overall industry demand is expected
to gradually diminish. (*Passenger vehicles excl. mini vehicles.)Asia, Oceania,
Russia, Latin America

Accelerate efforts in each market with a view to growth, including expanding sales networks.
Aim for substantial growth in Asian markets, with the Forester production launch (2019) in the CKD assembly plant in Thailand.

China, Europe

Maintain the current sales volume level. Speed up responses to market and policy changes and constantly update strategy on
a rolling basis.

Sales plans (FYE 2019 vs. FYE 2026)

Production capacity (FYE 2021)(10 thousand units)

Japan

North
AmericaOther(10 thousand units)

Japan

Total
110

Overseas

Gunma

SIA

FYE 2019 (plan)

15

77

18

FYE 2026 (plan)

15

92

23

130

Standard operations

69.6

43.6

Change

±0%

+20%

+27%

+18%

At full capacity

77.9

49.7

Global
total

Asia
CKD

115

1.4

129

Profit Plan/Capital Policy• Increase strategic investment and R&D spending.
• Ensure industry-leading profitability while implementing the above. (Target operating margin of 10% or higher)• Ensure equity ratio of 50% or higher. Ensure ROE of 10% while aiming for 15% or higher.
• Manage net cash in light of business conditions, with a minimum level set at two months’ worth of net sales.
• Deliver well-balanced return of profits to all stakeholders. Position dividends as the main form of return to shareholders, with an emphasis
on stable, continuous returns.
• Yearly dividend for the next three years at 144 yen per share. Conduct share repurchases flexibly depending on cash flow.

Profit plan for FYE 2019–2021 (3 years)

Capital policy(¥105/USD)

Net sales

10 trillion yen

Net cash

Two months’ worth of net sales at minimum

Operating income

950 billion yen

Equity ratio

50% at minimum

Operating margin

9.5%

R&D expenses

400 billion yen (+18%)

Capital expenditures

450 billion yen (+3%)

Depreciation and amortization

300 billion yen (+29%)

ROE
Shareholder
returns

Minimum

10%

Target15%

Yearly dividend per share
Share repurchases

144 yen
To conduct flexibly*( ) : Percent change from previous 3-year period (FYE 2016–2018)

Annual Report 202020

Priority Issues of the Mid-Term Management Vision STEP
Corporate Culture Reforms“Change the Culture”
Become a company that can respond swiftly and flexibly to change
by being more sensitive to the times and the outside world while preserving SUBARU’s DNA.

Accelerate efforts to become a company that does the right thing in the right way• Conduct comprehensive checks of compliance with all internal rules and the workof all employees. Strengthen compliance education.

Governance• Reinforce group governance systems and ensure a high degree of transparency in
information disclosure.

Management• Strive harder to stay close to the “genba” (the actual worksite). Learn more fromthe outside.

Corporate culture and human resources/organization

Review CSR activities• Six priority areas redefined to step up activities.

Society’s
expectations• In order to develop an energetic, open-minded corporate culture, implement efforts to change,
starting with the senior management and progressively moving downward.
• Strengthen the critical thinking abilities of individual employees. Reform systems, mechanisms, andthe organization to support the effort.

Six Priority Areas for CSR
Priorities specific
to SUBARU

Compliance

IT adoption to overall business activities

People-oriented
Car Culture
Resonance andCoexistence
Peace of Mind
Diversity
Environment
Compliance

Quality Reforms
Strive to be No.1 for “the quality that enables customers to enjoy long-term ownership with peace of mind.”

Review all processes, from product planning to production, to ensure quality
Step up the level of manufacturing plants• Simultaneously step up quality, productivity, efficiency, and flexibility through IT adoption.
• Maximize strengths of our Japan/U.S.-centered manufacturing footprint.

Reinforce quality management systems• Strengthen the CQO’s authority. Enhance quality assurance functions (concentrate functions on Quality Assurance Division andreinforce the organization).

Improve quality at customer contact points• Improve service operations to address rapid growth in customers.

Invest in facilities for quality enhancement

Investment framework of 150 billion yen (over five years) in enhancing overall quality

Make-a-Subaru Project
Launch a new initiative aimed at raising customer value with “high quality,” “high added value,” and “low costs.”

Make-a-Subaru Project
The aim of the Make-a-Subaru project is to enhance the value that SUBARU provides to customers, not only through mono-zukuri (carmaking), but also through all aspects of our products and services. Our goal is to make our focus the creation of cars that combine “high21

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

quality” and “high added value” with “low costs” at all stages from initial concepts and development through to production and aftersales service. We will achieve these things by reforming our development processes to place even greater emphasis on quality at the
upstream development stage, resulting in built-in quality.

QUALITY
High added value

Engineering strategy

Key points in the project• Involves initiatives from all directions withquality at the core.
• Coherent activity, with every area of
initiatives linked to one another.
• To be conducted with a long-term perspective.

Low costs andefficient investment

Product strategy

Mono-zukuri strategy

Raising customer value

FYE March 2020 Initiatives
Corporate Culture Reforms

Compliance Committee Chair’s Dialogue with Staff
As part of compliance activity rooted in workplaces on the ground, our Compliance Committee Chair, served by the Chief Risk Management
Officer, visits each department to have discussions with managers and associate managers on an ongoing basis (14 such sessions held with 5
departments by the end of March 2020). In these sessions, the Compliance Committee Chair talks about his view on compliance in his own
words, and compliance-related issues at each department are discussed and views are exchanged. Discussion outcomes are reported to
officers in charge of respective departments so that they can be used to improve compliance at each department.

Officer Speech Relay
Seventeen of the executive officers communicated their thoughts on the theme of “what I think is a company that is more open to new
ideas and where people can say what they want to,” and had discussions with assistant managers and chiefs (job grades of associatemanager and group chief) in back-office divisions that are outside the scope of their responsibility. The Speech Relay, which was held 19
times at all operational locations, were attended by some 3,500 employees. We received positive feedback in questionnaires conducted
after the sessions, with many expressing their appreciation of the opportunity to be exposed to views of executive officers in charge ofother divisions, which they rarely had opportunities to, and hear their frank views.

Goals and Features of the Speech Relay• Provides an opportunity for officers to directly convey their feelings, thoughts and seriousness
to employees• Serves as one of the channels of communication between the management and employees• Provides an opportunity for employees to be exposed to views of the management members
in charge of department other than their own to be aware of situations “outside,” with afurther aim of revitalizing the entire company
Officer speech relay

Employee Attitudes Survey
We have conducted an annual survey of employee attitudes since FYE March 2018. The survey for FYE March 2020 showed that, while thegoal of a workplace with thriving communication and employees open to new ideas is still some distance away, the overall rating has
improved. We held for the first time a seminar on ways to utilize findings of the employee attitudes survey for all senior managers. In theseminar, participants used data to learn about trends and changes in employee attitudes seen across the company, and exchanged views
on identifying issues and finding solutions.

Annual Report 202022

Priority Issues of the Mid-Term Management Vision STEP

Quality Reforms
Make-a-Subaru Project

Quality Policy Revision
SUBARU’s quality policy, which had been in force since its formulation in November 1994, was revised in April 2019 to reflect changes in
the internal and external environments. The aim of the changes is to encourage employees to modify their perceptions and behavior andmake quality their first priority. The new policy has been shared with all employees and is being steadily implemented via day-to-day
operations.

Quality Policy

At SUBARU, quality is our highest priority as we earn the trust of our customers.
1. We will deliver long lasting products that our customers can use with peace of mind.
2. We will continually improve our products and services by always listening closely to our customers’ voice.
3. We will be a good corporate citizen in all markets where we do business by ensuring compliance with all internal rules, local
laws, regulations and social norms.
Revised in April 2019

Organizational Reforms
We set up on April 1, 2020 a Quality Assurance Management Office tasked to ensure quality assurance of the entire Group, including thedomestic and overseas operations, as an entity directly under the Chief Quality Officer (CQO). We are working to create the Group
organizational structure needed to implement quality assurance, and to manage, maintain and continuously improve that organization.
On the same day, the CQO was appointed Director of Subaru of Indiana Automotive, Inc. (SIA), our U.S. production operation. We will
accelerate quality reforms in an effort coordinated between our Japanese and U.S. operations.

Three Pillars of Quality Reforms
We will step up effort and aim for achievements that can make our stakeholders say, “SUBARU has changed.” For that, we listen seriously
to customer views. Regarding customers as the starting point of everything, we set the following three pillars for our effort.

1. “Urgent Measures” to Recover Trust
We strive to “perfect product quality” to ensure that our customers can use our products with peace of mind. Under a policy of “Improve
quickly and accurately” if any quality issue is found, we are working on such reform initiatives as review of the process of quality checks inthe development phase, quality improvement through joint effort with suppliers, “in-process quality assurance,” in which defects areprevented from being sent on to the next production process, and “milestone management,” in which these are judged strictly. Impact of
the effort to “perfect product quality” has started to be felt unmistakably and quality of the new Legacy and Outback models that started
to be manufactured in the Subaru of Indiana Automotive, Inc. (SIA), our production base in the U.S., in August 2019 has been consistently
good. In Japan, we are paying utmost attention to quality in the preparation for the start of manufacturing the new Levorg model in FYEMarch 2021. A key issue for the “Improve quickly and accurately” policy is to strengthen the quality assurance structure to support a rapid
sales increase in our priority market of North America. In the current fiscal year, we aim to expand the local operations so that we candirectly learn customer voices and address them quickly. In the U.S. production operation, we plan to improve SIA’s quality assurance,
using the superior manufacturing technology in Japan.

New Levorg

GT EX

23

Annual Report 2020

STI Sport EX

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

2. “Make-a-Subaru” Project to Turn Quality into Value
There are three activities underway for our next-generation products that are in a planning stage, aiming for the “SUBARU that are chosen
for quality.”• Efficiently improve quality levels through a batch planning framework in which common specifications are used for multiple models• Reform development processes to raise degrees of perfection for blueprints and eliminate unnecessary trial and error due to lack ofsufficient planning• Incorporate investment to improve quality, allocation of costs and value offered to customers in business feasibility indicators
We thus aim to establish a solid structure for continuously creating high-quality products by adopting the quality-centric policy
starting from the uppermost stream of development.
Facing a drastic change in the automobile business, where new functionalities such as environment measures, advanced driver assist
systems, and the connected car technology are called for, we must adapt to quality, quantity and speed that goes beyond the existingboundary of quality assurance. We will promote the quality-centric “Make-a-Subaru” project in taking measures to introduce nextgeneration technologies.
We have already started a service of providing software updates through telematics and internet connection mainly in North America.
Going forward, we will link a variety of quality-related information, including design information, manufacturing history (traceability), final
inspection data and service history to help create new customer value.

3. “Formation of Solid Foundation” for Raising Quality AwarenessIn quality reforms, the foundation for everything is the awareness of each and every employee. We will steadily continue trying to raise
quality awareness to firmly establish the quality-centric attitude in each employee. The program in FYE March 2021 will feature newcontent and be used in overseas operations, including SIA.

Quality caravan

The quality caravan event is implemented as part of Quality Month activities in November. Lecturers
discuss defects and recall cases in the past and what we learned from them, using actual objects involved,
and panels to all employees and people at suppliers. We also create opportunities to listen to harsh
criticisms from customers and frank opinions of staff at dealers.

Education throughinternal newsletter

The newsletter includes contents such as top messages from the president, and articles related to productquality every two months.

Activity tomaintain alertness

All employees watched an educational video that reviews improprieties relating to final vehicle inspections
that was discovered in October 2017. We will conduct a similar program in October every year.

2018

2019

2020

New Legacy (U.S.)

New Levorg

Urgent measures (recovery of trust)· Quality improvement of U.S. production· In-process quality assurance· Checks on linkage between key points

New model A

New model B· Strengthen linkage between management and development· Strengthen linkage with suppliers and partners· Digitalization and use of IT: Reinforce traceability· Development of all factors, consistent from planning toafter sales phases

Make-a-Subaru project (Turn quality into value)

Formation of solid foundation: Continued, down-to-earth effort to raise quality awarenessQuality caravan

Education to raise customer-first awareness
Revision to Quality Policy
Revision to Quality Manual

Annual Report 2020

24

SUBARU’s Future Technology Strategy
SUBARU has created a proprietary horizontally opposed engine (Boxer engine) and all-wheel drive (AWD), as well as systems to ensure
excellent driving and safety performance, the EyeSight advanced driver assist system, and environmental protection technologies. We willcontinue to enhance these wide-ranging core technologies to accentuate “SUBARU-ness” as a unique brand that provides customers with
“Enjoyment and Peace of Mind.”
Outlined below is the SUBARU Technology Briefing held in January 2020.

1. Enjoyment and Peace of Mind
Technology toward “Zero Fatal Accidents” in 2030
SUBARU aims toward “zero fatal accidents”1 in 2030. In order to achieve this goal, it is important to further develop advanced driverassistance systems, including the EyeSight and the Driver Monitoring System, introduce new technologies and services, including
automatic accident reporting system, and take technologies that support intrinsic functions of cars, as represented by the Subaru Global
Platform (SGP) and the AWD technology, to the next level. Fast and accurate vehicle response, straight-driving performance, vehicle
stability during cornering and turning performance, which together comprise what we call “dynamic quality,” create value that allows
the driver have fun driving and makes them want to continue driving. These qualities also have a significant impact on the car’s ability to
avoid accidents. Even when the age of self-driving vehicles arrives, the importance of basic performance of elements, including
platforms, will remain the same. We believe our effort to eliminate fatal traffic accidents will also realize fun of driving, and lead toeverything that makes SUBARU unique.
1 Fatal traffic accidents of SUBARU drivers/passengers and pedestrians/cyclists SUBARU cars collide with

A Scenario toward Zero Fatal Traffic Accidents
Fatal traffic accidents of SUBARU cars (estimated from U.S. FARS data)
Today

Evolution of ADAS
Accidents
causedby othervehiclesAdvanced DriverAssistance Systems

65%
reducedAccidents
causedby ownvehicleAccidents
causedby othervehiclesToward “zerofatal accidents”
in 2030

35%
reducedAdoption of AACN
Advanced Automatic
Collision Notification

Continuous
enhancement ofpassive safety

Accidents causedby own vehicle

Advancing EyeSight and coordinating it with connected safety and passive safety

Next-generation EyeSight
With a stereo camera as EyeSight’s core, we aim to strengthen the system’s capacity toaddress a variety of accident situations by improving its object recognition/situation
judgment and extending cooperative control with other devices. We are evolving toward
linkage with the connected-car service and introduction of auto-parking systems.

25

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Driver monitoring system
Monitors expressions and the direction of the face to detect driver sleepiness or lapse of
attention and warns with an alert sound and display. We plan to consider further
deepening its linkage with EyeSight.

SUBARU STARLINK
A connected car service introduced in the United States. We plan to introduce it in Japan.
In Japan, we plan to introduce AACN, which automatically notify a call center of accidents
that have happened to raise percentage of surviving accident victims.

To Improve the Performance of the Subaru Global Platform“Enjoyment and Peace of Mind” is supported by the Subaru Global Platform, our core technology.
We will use AI technologies to develop this technology further.

Reduce friction in steering system
Deformation in contacting parts between cogs in a steering system can lead to slow vehicle response.
We are working to optimize friction levels by examining how individual cogs contact each other.

Stiffness analysis of bolted sections
Rigidity of bolt joints can be affected by the shapes of not just bolts and nuts but also the surfaces that are fastened together.
We are seeking optimum structures by examining levels and directions of force that is applied.

Body hysteresis analysis
Slight deformation occurs in joints between hundreds of parts that comprise a vehicle body.
We are introducing the technology to enhance continuity of joints using structural adhesives, etc. to minimize deformation.

Annual Report 2020

26

SUBARU’s Future Technology Strategy

2. Environment
Toward the Realization of a Carbon-free Society
SUBARU is aware that climate change is one of our most important issues. We support the Paris Agreement, which is aimed at achieving
decarbonization at an early stage in the second half of the 21st century. We have set mid-term targets related to Scope 1 and 2 emissions(CO2 emitted at offices and plants), as well as Scope 3 (CO2 emitted when using our products), and the Group is working together toachieve them.

Global Environment Preservation
Companies are required to contribute to the achievement of a decarbonized society
FYE 2051

Scope 1 and 2

FYE 2031

Reduce CO2 emissions by 30% compared withFYE 2017 (total volume basis)

Achieve carbon neutrality

Scope 3 (CO2 emitted
when using our products)

2050

2030
By 2030, we will pursue our goal of increasing the ratio ofelectric vehicles (EV) and hybrid cars to at least up to 40%of the gross number of vehicles sold globally.
In the early 2030’s, all commercial SUBARU cars3 will beequipped with electric powertrain technology4.

On the well-to-wheel1 basis, we will pursue our goal of
reducing the average CO2 emissions
from new passenger cars by at least 90%2
by 2050, compared with 2010.

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

SUBARU will contribute to building a carbon-free society
through our distinctive and technological innovations.
1 Well-to-wheel: Approach to calculate CO2 emissions including the emissions produced by the generation of electricity to be used by EVs and other vehicles.
2 Reduce total CO2 emissions calculated based on the fuel efficiency (notified value) of all SUBARU automobiles sold across the world by 90% or more relative to the 2010 levels in 2050.
Changes in the sales quantity due to changes in the market environment shall be taken into consideration, while minor changes in running distance shall not.
3 Excluding the models supplied by OEMs.
4 Refers to the technology used to foster the use of electricity for EVs, HVs, and others.

Combining Environmental Performance and SUBARU Style
We are actively working to reduce CO2 emissions from new SUBARU vehicles in anticipation of further tightening of fuel efficiency
regulations in many countries. We are achieving this not only by improving the fuel efficiency of conventional gasoline engine vehicles,
but also by expanding our range of electric vehicles (EVs) and developing new EVs. As we move forward into a new era of environmental
awareness, we will remain faithful to SUBARU’s vehicle mono-zukuri (car-making) DNA, and to our commitment to providing customers
with “Enjoyment and Peace of Mind.” While working to reduce CO2 emissions, we will also continue to enhance the safety features, theAWD performance, and the dynamic quality, emphasizing SUBARU-ness.
Technology Roadmap for Reduction in CO2 Emissions
2020

Battery EV

2025

2030

2035

202X
Launch Compact SUV model first2012 Mild Hybrid (e-BOXER)

Hybridvehicles2018 Plug-in Hybrid
202X Strong Hybrid
Addition of SHEV
203X Make all models xEV*
2020

EnginevehiclesNewly designed 1.8 L lean-burn turbo engines

Apply electrification technologies toall SUBARU vehicles sold worldwide
by the first half of the 2030s*vehicle equipped with any electric powertrain technology

27

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Battery EVs
In June 2019, we disclosed that we reached agreement with Toyota Motor Corporation on
the joint development of a BEV dedicated platform for midsize and large passenger
vehicles, and a C-segment-class BEV SUV model. By combining their respective strengths,
such as the all-wheel-drive technologies that SUBARU has cultivated over many years, andthe vehicle electrification technologies that Toyota is employing to bring together othercompanies that share its aspirations, both companies intend to take up the challenge ofcreating attractive products with appeal that only BEVs can offer, and bring them toStudy model of exterior design for
BEV being jointly developed with Toyota

market in the early 2020s.

Hybrid vehicles1
We are combining our three core technologies—symmetrical AWD, the horizontally opposed engine, and the Subaru Global Platform—
with hybrid technology to develop a hybrid vehicle that brings together the enjoyment of driving while providing excellent
environmental performance. In addition to the e-BOXER2, a mild hybrid that is already on the market, we also aim to introduce a strong
hybrid that integrates the Toyota Hybrid System (THS). In the first half of the 2030s, all vehicles manufactured and sold by SUBARU will
have electric technology.
1 Mild hybrids, plug-in hybrids, strong hybrids, xEVs are all vehicles equipped with any electric powertrain technology
2 Generic term used for “horizontally opposed engine + electrification technology,” which offers the unique driving pleasure of SUBARU while being environmentally friendly

SUBARU Hybrid System

SubaruGlobal Platform

Symmetrical AWD

Horizontally opposedengineThese proprietary SUBARU technologies
are integrated with hybrid technologies

Direct-connecting(coupling mechanism)

Three approaches

Hybrid system• Mild hybrid (e-BOXER)• Strong hybrid with
THS technology• xEV (an automobile
incorporating EV
technology)

Enhance environmental performance
while offering driving enjoyment

Enhance safety, AWD performance,and dynamic quality besides reducing
CO2 emissions

Engine vehicles
The new Levorg, which we plan to launch onto the market in FYE March 2021, is equipped with a newly developed 1.8 L direct injection
turbo engine. Designed to provide optimal combustion, its lean burn technology will produce more energy with less fuel. The result will
be an engine that will meet the previously incompatible performance goals of superior thermal efficiency and excellent torque. SUBARU’soriginal horizontally opposed engine is evolving into an engine that will provide superlative environmental performance.

Link

SUBARU technology briefing presentation materials
SUBARU technology briefing presentation video

Annual Report 202028

Business Overview

Automotive
Business Unit
SUBARU aims to provide “Enjoyment and Peace of Mind” toall its customers through people-oriented vehicle manufacturing.

Our history as an automaker began with the launch of the SUBARU 360 in 1958. Since thenConsolidated Revenue
Contribution Ratio of theAutomotive Business Unit

we have worked continually to add new value to automobiles by developing new
categories based on our core technologies, such as the horizontally opposed engine andSymmetrical All-Wheel Drive (AWD), and by creating new technological value, including
EyeSight, the world’s first1 driver assist system. SUBARU will continue to take on new
challenges, including the development of electric vehicles and other environment-friendly
technologies, while providing users with “Enjoyment and Peace of Mind” by enhancing

95.5%

vehicle performance through the Subaru Global Platform.
1 EyeSight is the first driver assist system to provide all functionality solely through the use of stereo cameras

Consolidated Revenue (Billions of yen)
4,000
3,000

3,152.0
3,062.3 3,007.6 3,193.9
3,039.4

Overview of FYE March 2020
Consolidated global unit sales increased by 3.3% year on year to 1,034,000 units.

2,000

Sales in Japan totaled 126,000 units, and overseas sales 908,000 units.

1,000
0

’16/3 ’17/3 ’18/3 ’19/3 ’20/3
JGAAP

IFRS

*
SUBARU voluntarily adopted the International Financial Reporting Standards (IFRS) in
the first quarter of FYE March 2020. The figures for the previous fiscal years have beenrecalculated on an IFRS basis

Consolidated Automobile Sales
by Region (Thousand units)

Operating Profit (Billions of yen)
600

400

543.6
397.7

200

361.5

172.1

200.3

0

’16/3 ’17/3 ’18/3 ’19/3 ’20/3
JGAAP

29

IFRS

Annual Report 2020

Japan........................................126
United States............................702
Canada........................................60
Russia............................................9Europe........................................37
Australia......................................43
China...........................................21
Others.........................................37
Total...........................................1,034

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Product Lineup

LEGACY Series*North American model*North American model

Consolidated unit sales: 238,000 units
Sales regions: J apan, North America, Russia, Europe,
Australia, China, and other

Consolidated unit sales: 314,000 units
Sales regions: J apan, North America, Russia, Europe,
Australia, China, and other

Consolidated unit sales: 34,000 units
Sales regions: J apan, North America, Russia, Europe,
Australia, and other

IMPREZA Series*Prototype

Consolidated unit sales: 15,000 units
Sales regions: J apan, Europe, Australia, and other(SEDAN)(5 Door)(North America: CROSSTREK)Consolidated unit sales: 312,000 units
Sales regions: J apan, North America, Russia, Europe,
Australia, China, and other

Consolidated unit sales: 5,000 units
Sales regions: J apan, North America, Europe, Australia,
China, and other(Exclusively for North America)

Consolidated unit sales: 89,000 units
Sales region: N orth America

OEM Models

Consolidated unit sales: 27,000 units
Sales region: J apan
(OEM supply from Daihatsu Motor Co., Ltd.)*Consolidated total unit sales in each region in
the period from April 1, 2019 to March 31, 2020
*Automobile sales by SUBARU CORPORATION
and its consolidated subsidiaries

Annual Report 202030

Business Overview

Automotive Business Unit

SUBARU’s All-Around Safety

We aim toward “zero fatal accidents1” in 2030
SUBARU pursues automobile safety performance from every perspective. We aim to eliminate fatal accidents involving SUBARU vehicles
by 2030 by combining our existing four safety criteria of primary safety, active safety, preventive safety, and passive safety with the newconcept of connected safety.
1 Fatal traffic accidents of SUBARU drivers/passengers and pedestrians/cyclists SUBARU cars collide with

Basic design features for avoiding accidents

Primary
SafetySafe situation

Increasing driving safety through basic design features such as car
shape and controls
Visibility design

Hazardous
situation

Preemptive
accident
avoidance

Driving position

Interface

The ultimate in driving performance for greater safety

ActiveSafetyFacilitating hazard avoidance through performance improvement in
the basic functions of a car: driving, turning, and stopping
Horizontally opposed engine
Subaru Global Platform

Symmetrical AWD

Advanced technology that supports safe driving
Accident

Preventive
SafetySupporting safe driving by helping avoid collisions and reduce
damageEyeSight

Extra precautions just in caseCollision

Spread ofdamageDamagereduction
during an
accident

Passive
SafetyProtecting both passengers and pedestrians
Engine layout
Subaru Global Platform
Pedestrian protection airbag

To save lives more

Connected
Safety24-hour/365-day access to rapid emergency assistance
Advanced Automatic Collision Notification (AACN)

Safety Performance
Recognized Worldwide

Japan
U.S.A.
EuropeSUBARU has received the highest rating in the
NCAP1 conducted by the authorities in Japan, theU.S., Australia, and other countries, as well as in thesafety performance assessment conducted by theEuro NCAP
5JNCAPFIRST PRIZEJNCAP シャドウ付き
JNCAP
ASV+++
5
Australia

IIHS2 in the U.S.3

IIHS
TSP+

IIHS
TSP

*The 2020 TSP and TSP+
awards only apply to theNorth American models

U.S.A.

In the IIHS safety performance assessment, fourmodels received the 2020 Top Safety Pick Plus
(TSP+) rating and five models received the 2020

Euro NCAP
Best in Class Cars of 2019

ANCAP
5

US-NCAP
5Top Safety Pick (TSP) rating.4

1 NCAP: New Car Assessment Program
2 IIHS: Insurance Institute for Highway Safety
3 For ratings details, please refer to rating agency websites
4 The 2020 TSP+ awards and the 2020 TSP awards only apply to
the North American models

31

Annual Report 2020JNCAP ASV+++: Forester (tested in FY2019)
JNCAP 5-star Award and First Prize: Forester (tested in FY2018)2020 IIHS TSP+: 2020 Outback (built after October 2019), Legacy, Forester and Crosstrek Hybrid
2020 IIHS TSP: 2020 Ascent (with specific headlights), Crosstrek, Impreza Sedan,
Impreza Wagon and WRX (all with optional EyeSight and specific headlights)
US-NCAP 5-star: 2020 Impreza, Crosstrek, Legacy, Outback, Ascent, Forester, and WRXEuro NCAP 5-star and “Best in Class Cars of 2019” in the Small Off-Road/MPV class:
Forester (tested in 2019)
ANCAP 5-star: Forester (tested in 2019)

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

SUBARU Core Technologies
Horizontally-Opposed Engine (Boxer engine)

Compact, low center of gravity

SUBARU Boxer

Conventional In-Line Engine

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

Symmetrical All-Wheel Drive (AWD)

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

Symmetrical All-Wheel Drive

Subaru Global Platform

Balancing a high degree of both drive quality andpassive safety performance
SUBARU is sequentially introducing the Subaru Global Platform, starting with the Impreza
launched in October 2016. The vehicle platform substantially increases body and chassis
rigidity and further lowers vehicle center of gravity, raising the level of active safety andpassive safety and delivering responsive handling performance and a comfortable ridewith reduced unpleasant vibration and noise.

Subaru Global Platform

EyeSight Driver Assist System

Stereo cameras foradvanced object recognition capabilities
By using two cameras positioned on the left and right like human eyes, the EyeSight driverassist system is able to detect vehicles and pedestrians ahead of the vehicle in three
dimensions and to accurately determine the distance, shape, and velocity of each object.
This preventive safety technology helps avoid accidents, minimizes damage, and reduces
the burden on the driver. The next-generation EyeSight system installed in the 2020
SUBARU Levorg features redesigned stereo cameras that allow for expanded visibility, as

Stereo cameras

well as 360-degree sensor capabilities from the four radar units located at the front andrear of the vehicle. This system contributes to safe driving in an even wider range ofsituations, including intersections. In addition, “EyeSight X” advanced driver assist system
adopted in the new Levorg in Japan combines information from sources such as the GPS
and QZSS “Michibiki” satellite systems with high-precision 3D map data, which extends
driving support functions including lane change assist, slowing the vehicle before going
into a curb, and hands-off driving assist in traffic congestion.

Annual Report 202032

Business Overview

DEBUT OF ALL-NEW

SUBARU OUTBACK
Since its debut in 1995, the Outback has built a history as a crossover SUV integrating the attributes of bothpassenger cars and SUVs. And now, the flagship model that supported the growth of SUBARU in the North
American market enters its sixth-generation with a complete makeover. Throughout its history, the Outback has
consistently improved essential car values such as peace of mind, comfort to go long distances, high quality
interiors with ample room for both passengers and luggage and the versatility to drive smoothly on or off-road. In
this way, it has built a reputation as a reliable partner that enriches its owners’ lifestyles and also established aunique character as SUBARU’s flagship crossover SUV. Developed under the concept of “a crossover vehicle thatinspires and encourages new discoveries,” the new Outback has evolved once again by adding the latest
technologies on top of the traditional Outback attributes with the recent complete makeover.

	2.4-liter four-cylinder direct injection turbocharged
boxer engine and Subaru Global Platform
adopted for even greater driving dynamics.
	Superior safety achieved based on SUBARU’s allaround safety philosophy.
	Driver Monitoring System1 that supports safe
driving adopted to give additional peace of mind.
	
Refined and innovative interior features new
tablet-style 11.6-inch screen.
	Tough and rugged exterior design inspires driverand passengers’ active mind.
1 “DriverFocus” for U.S. models

33

Annual Report 2020

The 2020 SUBARU Outback
earns 2020 Top Safety
Pick+, the highest award
from the Insurance Institutefor Highway Safety (IIHS)**The 2020 TSP and TSP+ awards
only apply to the North America
models.

The 2020 Outback (built after October 2019) earned 2020 Top
Safety Pick+ (TSP+), the highest rating in the IIHS award. For
2020, IIHS has incorporated pedestrian crash prevention ratings
into its TSP/TSP+ awards for the first time and the Outback
received “Superior,” the highest possible rating in this testing.
We view the IIHS awards as validation for our efforts tocontinually innovate safety features for our customers.

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Creating a “Car that Fits Customers’ Lifestyles”

What Do Customers See as the Ideal Form?
Customers in the U.S., where the Outback has seen sales of more than 200,000 units ayear, already have an image of what the SUBARU Outback is. We could have chosen to
keep making it under an already-established key concept in line with that image, but thisproject started by thinking of “what is the Outback?” in order for it to be a car that betterfits customers’ lifestyles. I was a team member of the Outback development team starting
two generations ago, and I was always asked by past project general managers what is theideal form for the Outback?
And as a result of repeated discussions within the development team, we reconfirmedthat customer expectations for the Outback are based on its “tool-like practicality” that
includes ability to hold lots of luggage and vehicle height and running performance to go
anywhere, so we decided to further advance that.

Yoichi Hori
Project General Manager,
Product Planning Division (2019)

Pursuit of Ease of Use in Daily LifeWe focused on customer feedback that they want us to “further advance the Outback’s
ease of use as a tool.” As advancements for the luggage compartment, we focused on
adopting a hands-free power rear gate and advancing the roof rails. And to advance thebasic performance of the vehicle, we needed an easy-to-handle 2.5-liter NA engine and ahigh-power engine as engine options. The team adapted the 2.4-liter direct injection turbocharged engine from the North American
market’s Ascent large SUV, but the “flavoring” was revised for the Outback. For example, air becomes thinner and engine power naturally
declines at higher elevations, and customers living at higher elevations told us their concerns that without turbo, they lack power and are
unable to accelerate sufficiently going uphill. To serve the needs of such customers, a high-power system setting was needed. Even
though it is high-power, the engine uses regular gasoline to make it economical for day-to-day use. Many customers want to go straightfrom their home to their destination without stopping for gas on weekends and other long trips. So, with the 2.5-liter engine, we took into
consideration a cruising range of 1,000 km on a single tank of gas.
We were also particular about running performance other than for the engine, improving rigidity by means such as adopting the inner
frame construction in order to further advance the Subaru Global Platform, thereby improving handling stability and ride comfort andreducing vibration noise. In this way, we advanced through many new technologies the given attribute of cars that they “carry people
important to us and our belongings and run with unwavering safely.”
Meanwhile, for the interior, we adopted a new vertical 11.6-inch screen and enabled the navigation system to work with the verticalscreen in order to enhance connected services that will be indispensable in the future. With the vertical screen, information such as thenext intersection can be seen, making it easier to view the route to the destination. Horizontal screens can be viewed more naturally withan ordinary instrument panel design, but people nowadays are used to viewing maps on smartphones vertically, and we received many
opinions that vertical display would be good for the navigation system as well. We were unsure about this at first, but we consulted withdesigners and had them consider vertical placement from the start of development, and they came up something that fits the instrument
panel just right. We hope you will take close notice of this. We adopted nappa leather with the interior for the first time for SUBARU
vehicles. This uses only the best part of the skin, so the leather itself must be carefully selected, making it cost more. However, it has abuttery soft feel to it. And the smell as well lets you know it is real leather.
SUBARU’s original EyeSight driver assist system too has evolved, employing a Lane Centering function for the first time in North
America. In North America where customers drive long distances, cruise control that enables following at safe distances between vehicles
has already been introduced and well received. And by adding a Lane Centering function, holding the steering wheel becomes less tiring,making one want to drive even farther. We have also added a Driver Monitoring System, a safety function to warn when the driver isdistracted or drowsy.
By focusing on the Outback’s tool-like practicality, improving its versatility and advancing its safety systems, we have engineered a carthat fits customers’ lifestyles and expectations.

Annual Report 202034

Business Overview

Aerospace Company
Leveraging tradition and innovative technologies todevelop and produce a wide variety of aircraft.

SUBARU’s roots trace to 1917 and Aircraft Research Laboratory, later to become Nakajima

Consolidated Revenue
Contribution Ratio of the
Aerospace Company

Aircraft. The Aerospace Company, which has inherited Nakajima Aircraft’s manufacturing
technologies and spirit, leads Japan’s aerospace industry and develops and produces awide variety of aircraft.
In the defense program, we develop, manufacture, maintain, repair, and provide
technical support for products such as the UH-1J utility helicopter used by the Japan
Ground Self-Defense Force for disaster relief and other purposes, the new utility

4.2%

helicopter, the T-5 Maritime Self-Defense Force trainer, unmanned aerial vehicles (morethan 15 models developed over a half century), and flight simulators. In the commercial
program, we participate in many international joint development projects for Boeing. For
the 777X, Boeing’s newest large passenger airliner, we are responsible for the Center

Consolidated Revenue (Billions of yen)
200
150

Wing and its integration with main landing gear (MLG) wheel well, as well as MLG doors
and Wing-to-Body Fairings (forward). In addition, taking advantage of an alliance with Bell

152.8

138.8 142.2 134.1 142.1

Textron, we jointly developed the SUBARU BELL 412EPX and have started sales.
By further refining our technologies through involvement in a wide variety of aircraft
programs, we will continue to take on additional challenges for growing into an aircraft

100

manufacturer with a global presence.

50
0’16/3 ’17/3 ’18/3 ’19/3 ’20/3
JGAAP

IFRS

*
SUBARU voluntarily adopted the International Financial Reporting Standards (IFRS) in
the first quarter of FYE March 2020. The figures for the previous fiscal years have beenrecalculated on an IFRS basis

Operating Profit (Billions of yen)
20

18.2

15

12.3
10

9.1
6.0

5

5.1

0

’16/3 ’17/3 ’18/3 ’19/3 ’20/3
JGAAP

35

IFRS

Annual Report 2020

Boeing 777X

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Overview of Center Wing Box and
SUBARU’s Technology

SUBARU’s advanced technological capabilities
continue to support the development andproduction of wings that have proven theirworth in the world’s skies for more than 40 years.
Since first participating in the Boeing passenger program in 1973, we havebeen involved in development and production as a key partner of Boeing for
more than 40 years. We manufacture the center wing box, the critical aircraft
section where the right and left wings are attached to the forward and aftfuselage sections. Since the center wing box contains the fuel, they must havehigh mechanical strength and high fluid tightness. For these reasons, great
accuracy and advanced assembly technologies are required for its manufacture,and SUBARU is one of the few companies capable of making them. The Handa
Plant, where center wing boxes are manufactured, is a global-level production
center that produces these parts for the new Boeing 777X as well as for the
Boeing 777 large airliner, the Boeing 787 mid-size airliner, the Ministry of
Defense’s P-1 maritime patrol aircraft, and the C-2 transport aircraft.
SUBARU’s advanced technological capabilities are recognized worldwide.
For example, we engage in development on the “Drop test for Simplified

A center wing box (Handa Plant)

Evaluation of Non-symmetrically Distributed sonic boom” Project (D-SEND)
together with Japan Aerospace Exploration Agency (JAXA).

Message from the Company President

The Aerospace Company will contribute to theenhancement of the SUBARU brand.
We are a start-to-finish aircraft builder with a wide-range of integration capability fromaircraft development and manufacturing to flight testing. Flight safety is an importantfactor for aircraft, and for many years we have fostered a culture in which quality andsafety are recognized as inextricably linked and uncompromisingly pursued. This total
safety concept is at the core of SUBARU’s DNA.
In the commercial business, in addition to the Boeing 787, our new project, theBoeing 777X completed its first flight in January 2020 and we expect to transition to

Shoichiro Tozuka
President
Aerospace Company

fullscale production.
In the defense program, we have signed a contract with Japanese Ministry of
Defense for the production and delivery of the new utility helicopters to the Japan
Ground Self-Defense Force. Also, we have received orders for the SUBARU BELL
412EPX, which is the base model of the aforementioned new utility helicopter, and wewill soon transition to fullscale production.
We are determined to take the SUBARU’s aerospace brand to meet the
expectations of our customers while pursuing further growth by continuously improving
every aspect of our business.

Annual Report 202036

Directors, Auditors, and Executive Officers (As of June 24, 2020)
Directors of the Board
Term of office of directors/Number of stocks held

Yasuyuki Yoshinaga

Tomomi Nakamura

Kazuo Hosoya

Director of the Board
Chairman

Representative Director of the Board
President, CEO

Representative Director of the Board
Deputy President

11 years / 63,715 stocks

2 years / 19,077 stocks

1 year / 13,840 stocks

Toshiaki Okada

Yoichi Kato

Tetsuo Onuki

Director of the Board
Executive Vice President, CFO

Director of the Board
Executive Vice President, CRMO

Director of the Board
Executive Vice President

3 years / 13,472 stocks

3 years / 7,699 stocks

2 years / 12,641 stocks

Yasuyuki Abe

Natsunosuke Yago

Miwako Doi

Outside Director

Outside Director

Outside Director

1 year / 2,600 stocks

1 year / 800 stocks

Newly appointed / 0 stock

Auditors
Term of office of auditors/Number of stocks held

Akira Mabuchi

Hiromi Tsutsumi

Shigeru Nosaka

Standing Corporate Auditor

Standing Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

5 years / 44,300 stocks

Newly appointed / 18,956 stocks

1 year / 200 stocks

1 year / 200 stocks

37

Annual Report 2020

Kyoko Okada

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Executive Officers*Concurrently serve as a Director

Chairman

Yasuyuki Yoshinaga*

President

Tomomi Nakamura*

CEO (Chief Executive Officer)
Aerospace Company, Quality

Deputy President

Kazuo Hosoya*

Chief General Manager of Manufacturing Div.
China Project Office

Executive Vice President

Toshiaki Okada*

CFO (Chief Financial Officer)
Secretarial Office, Finance & Accounting Dept., and Human Resources Dept.

Executive Vice President

Yoichi Kato*

CRMO (Chief Risk Management Officer)
Risk Management Group, External Relations Dept., and Intellectual Property Dept.

Executive Vice President

Katsuyuki Mizuma

Chief General Manager of Overseas Sales & Marketing Div. 2

Executive Vice President

Tetsuo Onuki*

Chief General Manager of Purchasing Div., Product Planning Div.

Executive Vice President

Atsushi Osaki

CQO (Chief Quality Officer)
Chief General Manager of Quality Assurance Div.,
General Manager of Quality Assurance Management Office

Executive Vice President

Fumiaki Hayata

Chief General Manager of Overseas Sales & Marketing Div.1, Chairman and CEO of SIA1

Senior Vice President

Shoichiro Tozuka

Company President of Aerospace Company

Senior Vice President

Takuji Dai

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

Senior Vice President

Tatsuro Kobayashi

General Manager of Human Resources Dept.

Senior Vice President

Eiji Ogino

Senior General Manager of Manufacturing Div., Chief General Manager of Gunma Plant

Senior Vice President

Jinya Shoji

Senior General Manager of Overseas Sales & Marketing Div. 1,
Executive Vice President of SOA2
SCI3, NASI4

Senior Vice President

Yoichi Sato

Chief General Manager of Japan Sales & Marketing Div.

Vice President

Yasushi Nagae

General Manager of Investor Relations Dept. and General Administration Dept.,
Corporate Communications Dept.

Vice President

Takeshi Seiyama

Chief General Manager of Parts & Accessories Div.

Vice President

Osamu Eriguchi

Chief General Manager of Engineering Div. 2,
Senior General Manager of Engineering Management Div.

Vice President

Tomoaki Emori

Chief General Manager of Corporate Planning Div.

Vice President

Tatsuya Okuno

Chief General Manager of Engineering Div. 1,
Senior General Manager of Engineering Management Div.

Vice President

Tamotsu Inui

Chief General Manager of Cost Planning & Management Div.,
Senior General Manager of Corporate Planning Div.

Vice President

Tetsuo Fujinuki

CTO (Chief Technology Officer)
Chief General Manager of Engineering Management Div. and Technical Research Center

Vice President

Hiroshi Wakai

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

Vice President

Kazuhiro Abe

Chief General Manager of Product Planning Div.

Vice President

Hiroshi Watahiki

Senior General Manager of Engineering Management Div.

Vice President

Tadashi Yoshida

Chief General Manager of Customer Service Div.

Vice President

Ryota Fukumizu

President and COO of SIA1

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

Annual Report 202038

Corporate Governance
Basic Policy of the Corporate GovernanceAspiring to the goal of transitioning “From a company making things, to a company making people smile,” SUBARU works on theenhancement of corporate governance as one of the top priorities of management in order to gain the satisfaction and trust of all its
stakeholders by achieving sustainable growth and improving its corporate value in the medium and long term based on the corporate
philosophy and management philosophy.
SUBARU clearly separates the function of decision-making and the oversight of corporate management from that of the execution ofbusiness operations and aims to realize effective corporate management by expediting decision-making.
SUBARU ensures proper decision-making and the oversight of corporate management and the execution of business operations aswell as enhances its risk management system and compliance system through the monitoring of its management and operations andadvice provided by outside officers.
SUBARU implements proper and timely disclosure of information in order to improve the transparency of management.

History of Initiatives to Strengthen Governance
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

1999 Adopted a corporate vice president system
2003 Reduced length of director terms from two to one year as stipulated in the Articles of Incorporation
Increasingtransparency ofmanagement

2007 Abolished executive officer retirement bonus system
Established Corporate Governance Guidelines
Abolished senior advisor system
Independent outside director: 12

3
 atio of outsideR
directors:
one third or more

Strengtheningof oversightfunctions irstFfemaledirector
Independent outside corporate auditor: 12
 irst female
F
corporate auditor

2004 Established Executive Nomination Meeting
2004 Established Executive Compensation Meeting
Objective andtransparent
procedures

Outside directors participating: 2

3R atio of
outsidederectors:
one half or
more

Introduced restricted stock compensation plan

Initiatives toenhance corporate
value over the
medium to long term

Reduction of cross-shareholdings

Appropriate function of
the Board of Directors

Start of evaluation of the effectiveness of the Board of Directors

60 issues

32 issues

30 issues

18 issues

10 issues

4 issues

Corporate Governance System
The Company has chosen a company with a board of corporate auditors as its corporate governance structure. The Board of Directors
decides and supervises the execution of important business, and the Board of Corporate Auditors audits the execution of duties bydirectors. The structure enables us to achieve sounder, more efficient business operations through increased effectiveness ofmanagement monitoring by involving independent outside directors and outside corporate auditors. In addition, in order to enhance
the practical governance structure based on the ongoing organizational design, we have established two voluntary meetings: theExecutive Nomination Meeting and Executive Compensation Meeting.
With regard to the business operation system, the Company has established the Executive Management Board Meeting as apreliminary consultation body to conduct deliberations on company-wide management strategies and the execution of importantbusiness before their presentation at the Board of Directors Meeting. In addition, the Company has adopted a vice president systemand established the Executive Board Meeting as the decision-making body of each business department, and converted the Aerospace
division into an internal company in order to clarify responsibilities and accelerate the execution of business operations.

39

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

System of Corporate Governance
General Meeting of Shareholders
Election anddismissal

Election anddismissal

ReportingBoard of Corporate Auditors: 4

Executive Nomination Meeting*Board of Directors: 9
Auditing

Corporate auditors: 2

Proposal andreportingDirectors: 6

Outside corporate auditors: 2

Executive Compensation Meeting*Outside directors: 3*The Executive Nomination Meeting and Executive
Compensation Meeting consist of the two
representative directors of the Board and thethree outside directors.

Reporting
ReportingAccounting Auditors

Election, dismissal,and oversightDecision making andoversight functions

Collaboration

Election anddismissal

Submission andreporting

Auditing

ReportingTransfer of authority
and oversight

Auditing

ReportingInternal Audit Department

Vice Presidents

Auditing
Collaboration

Corporate Governance Meeting

Chairman: President and CEO

Collaboration

Submission and reportingof important matters

Corporate operations departments at HQ
Automotive Business Unit

Executive Meeting

Aerospace Company

Executive Meeting

Internal
auditing

Submission andreporting ofimportant matters

Policy instructions
Approval ofplans, etc.

Plan proposal
reports, etc.

Group Companies

CSR Committee
Social Contribution Committee
Environmental Committee
Risk Management andCompliance Committee

Business operations execution function

Executive Management Board Meeting

ReportingBoard of Directors and Board of Corporate Auditors
Organization

ChairmanComposition

Role/responsibility

Meetings held in
FYE March 2020

Board of Directors

Board of Corporate Auditors

Chairman of Board of Directors

Standing Corporate Auditor

Directors: 6
Outside directors: 3

Standing Corporate Auditors: 2
Outside Corporate Auditors: 2

The Board of Directors ensures fairness and transparency by performing
the oversight function for overall management and makes the best
decisions possible for the Company through appointment, evaluation
and resolution regarding the compensation of its CEO and othermanagement team members, the assessment of material risks faced by
the Company and the development of measures to deal with such risks,and decisions on the execution of important business of the Company.

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

13 times1

12 times

1 In addition to the number of Board of Directors’ meetings shown in the above table, there were two written resolutions passed that have been deemed equivalent to a Board of
Directors’ meeting, pursuant to Article 370 of the Companies Act and the Articles of Incorporation

Executive Nomination and Executive Compensation Meetings
Organization

Chairman

Executive Nomination Meeting

Executive Compensation Meeting

Representative Director of the Board and President

Representative Director of the Board and President

Representative Directors: 2
Outside Directors: 3

Representative Directors: 2
Outside Directors: 3

Role/responsibility

To ensure the fairness and transparency of decisions on executive
appointment, the Executive Nomination Meeting submits to the Boardof Directors proposals of nomination of candidates for directors andcorporate auditors and the appointment/dismissal of the CEO or
corporate vice presidents approved following full deliberation bycommittee members. The Board of Directors Meeting then deliberates
and resolves these proposals. Approval of the Board of Corporate
Auditors is obtained for nominations of candidates for corporate
auditors.

To ensure fairness and transparency in decisions on compensation for
directors, the Executive Compensation Meeting, on the basis ofdelegation by the Board of Directors, determines specificcompensation amounts, including the compensation system, following
sufficient deliberation by its members. With regard to revisions of thecompensation system and other matters pertaining to compensation
overall, proposals approved by the Executive Compensation Meetingare deliberated and decided on by the Board of Directors.

Meetings held in
FYE March 2020

4 times

4 times

The Executive Nomination Meeting submitted reports mainly on theexecutive structure and appointments, the division of duties ofexecutives, and the appointment of representatives of major subsidiaries,
and discussed matters concerning the CEO succession plan.

The Executive Compensation Meeting discussed the compensation
structure, decided performance-linked compensation for directors(except for outside directors) and corporate vice presidents, anddetermined individual compensation amounts for restricted stockcompensation.

Composition

Items deliberated in
FYE March 2020

Annual Report 202040

Corporate GovernanceDirectors/Auditors
Name

Directors

Corporate
Auditors

Position

FemaleTotal yearsof service

Term

Yasuyuki Yoshinaga

Director, Chairman

11 years

Tomomi Nakamura

Representative Director, President and CEO

2 years

Kazuo Hosoya

Representative Director, Deputy President

1 yearToshiaki Okada

Director, Executive Vice President and CFO

3 years

Yoichi Kato

Director, Executive Vice President and CRMO

Tetsuo Onuki

Director, Executive Vice President

2 years

Yasuyuki Abe

Independent Outside Director

1 yearNatsunosuke Yago

Independent Outside Director

1 yearMiwako Doi Newly appointed

Independent Outside Director

Newly appointed

Akira Mabuchi

Standing Corporate Auditor

5 years

Hiromi Tsutsumi Newly appointed

Standing Corporate Auditor

Shigeru Nosaka

Independent Outside Corporate Auditor

Kyoko Okada

Independent Outside Corporate Auditor

Board ofCorporate
Auditors1

3 years

1 year

4 years

Board ofDirectors1

Newly appointed
1 year
1 yearComposition of Directors/Auditors
Ratio of Outside Directors/Auditors

Ratio of Female Directors/Auditors
FemaleOutsideOutside3

Inside

2

2

1

Male

Female

11%

2

2

33%
Directors

Corporate
監査役
auditors

50%

9

50%

4名
4

67% Inside

Directors

9

6
InsideOutsideOutsideMale

Corporate
auditors

50%

4

89%
Inside

50%

Male

8

FemaleMale

FemaleBoard of Directors’ Meeting Participation Rate
CategoryFYE March 2016

FYE March 2017

FYE March 2018

FYE March 2019

FYE March 2020

Number of meetings held

15 times

15 times

17 times

16 times

13 times

96.3%

96.3%

99.0%

98.4%

100.0%

Attendance rate

*In addition to the number of Board of Directors’ meetings shown in the above table, there was one written resolution passed in FYE March 2019 and two in FYE March 2020 that havebeen deemed equivalent to a Board of Directors’ meeting, pursuant to Article 370 of the Companies Act and the Articles of Incorporation*Attendance rates for newly elected directors are calculated based on the number of Board of Directors’ meetings held after they assumed office

CEO Succession Plan
Approach
The Company recognizes that decision-making regarding top management changes and successor selection may have a criticalinfluence on corporate value. Therefore, in order to ensure a successful succession at the right timing, we invest substantial time andresources to carefully develop and implement succession plans.

41

Annual Report 2020

Value Creation

1

andGrowth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

indicate attendance of the chairman and other members, respectively(As of June 24, 2020)

Main areas of expertise
The Executive
Nomination
Meeting1

The Executive
Compensation
Meeting1

Management(executive
experience)

Technology/
development

Manufacturing/procurement

Sales/
marketingGlobalFinance (CFO
experience)

Corporate
ESGITIn order to hand over the business to the right person, the Board of Directors, as part of its essential duties, develops succession plansthat can convince all stakeholder groups. To ensure objectivity and transparency in the process for deciding on the replacement andselection of the CEO, the Board of Directors appropriately supervises the preparation of proposals by the current CEO throughdiscussions at the Executive Nomination Meeting.
To be able to implement succession plans appropriately, the CEO begins to prepare for selection and development of his/her successor
candidates independently upon assuming office. Key processes for this purpose include providing information on candidates to outside
directors on an ongoing basis, particularly by enabling the directors to monitor the candidates in person continuously in day-to-day
business settings, as a measure to ensure appropriate and timely evaluation and selection down the road.
The Board of Directors and Executive Nomination Meeting meet on a regular basis to review the list of essential qualities and skills
required of the CEO, which may include removing and adding items, in consideration of perception of current trends, changes in thebusiness environment surrounding the company, and the future direction of the group’s business strategies.
To ensure the objectivity of the successor selection process and increase the effectiveness of its supervision by the Board of Directors andExecutive Nomination Meeting, it is important to have effective selection criteria in place, particularly for use by outside directors. Basedon this view, the Company has established two sets of criteria: “Abilities required of the SUBARU Group’s CEO” and “Five key qualities
required of the SUBARU Group’s CEO.” These criteria serve as a guide for evaluating candidates in light of quality, competency,
experience, track record, specialized expertise, personality and other factors, which have been discussed and decided on by the Board of
Directors and Executive Nomination Meeting.

Abilities required of the SUBARU Group’s CEO
The SUBARU Group’s CEO must be able to properly understand the business environment surrounding SUBARU, its corporate culture
and philosophy, business growth stages, and medium- to long-term management strategies and challenges; facilitate collaboration
appropriately with various stakeholders; and lead all executives and employees to work together to maximize corporate value.

Five key qualities required of the SUBARU Group’s CEO
1. Integrity

4. Tireless spirit or revolutionary leadership skills

2. Broad perspective

5. Person of action

3. Character

Annual Report 202042

Corporate GovernanceOutside Directors/Outside Corporate Auditors
Nomination Criteria
The outside directors are expected to perform a monitoring function independent from the management team and provide appropriate
advice on the management of the Company on the basis of wide range of sophisticated knowledge.
The outside corporate auditors are expected to perform a management oversight function independent from the management teamand undertake their role of auditing from the viewpoint of legality and appropriateness on the basis of broad and advanced knowledge.
The Company has established criteria for independence of outside officers in addition to the criteria for independence established by
the Tokyo Stock Exchange, and appoints outside directors and outside corporate auditors who meet those criteria.

Reasons for Appointing Each Outside Officer

Name

FYE March 2020

Independent
Officer
Status1

Outside Director

Yasuyuki Abe

Outside Director

Natsunosuke
Yago

Outside Director

Miwako Doi
Newly appointed

OutsideCorporate Auditor

Shigeru Nosaka

OutsideCorporate Auditor

Kyoko Okada

BD Board of Directors

Reasons for Appointing

As representative director and senior managing executive officer of Sumitomo
Corporation, Mr. Yasuyuki Abe has been involved in management in both a supervisory and executional capacity, possesses extensive experience and knowledge in business management, and has an advanced understanding of the IT
field. Mr. Abe has served three years as an independent outside corporate auditor for the Company since June 2016. During his tenure, he has supervised
the execution of duties conducted by directors, as well as understood the true
nature of the problems facing the Company and offered his frank opinions tosenior management in a timely and appropriate manner. In June 2019, Mr. Abe
was appointed to the position of independent outside director and has been
providing beneficial advice to the Company’s management. In light of this, theCompany has once again appointed Mr. Abe with the expectation that he will
provide sufficient advice and oversight of all aspects of the Company’s management from an independent perspective when he assumes office as an outside director of the Company.
Mr. Natsunosuke Yago served successively as president and representative executive officer and chairman at Ebara Corporation, and has extensive experience and knowledge in business management. Mr. Yago is especially knowledgeable in the areas of internal control and governance. In June 2019, theCompany appointed him to the position of independent outside director.
Given that he has been providing beneficial advice to the Company’s management based on his rich experience and wide range of knowledge, and highlevel of insight into the Company’s social responsibilities, we appointed Mr.
Yago once again with the expectation that he will provide sufficient advice andoversight of all aspects of the Company’s management from an independent
perspective when he assumes office as an outside director of the Company.
As a researcher and supervisor in the field of information technology at
Toshiba Corporation, Ms. Miwako Doi has accumulated vast experience andmade many achievements in this field over many years. In addition, she has
held successive positions, mainly in government committees, owing to herhigh level of expertise and extensive experience and knowledge. In June 2020,
we appointed Ms. Doi to the position of outside director with the expectationthat she will provide sufficient advice and oversight of all aspects of theCompany’s management from an independent perspective when she assumes
office, given her experience and high level of insight as an expert cultivatedfrom her vast experience.
Mr. Shigeru Nosaka has been involved in management in both a supervisoryand executional capacity as a director, executive deputy president and deputy
chairman and CFO at Oracle Corporation Japan and possesses extensive experience and knowledge in business management. In June 2019, Mr. Nosaka
was appointed to the position of independent outside corporate auditor andhas been providing beneficial advice to the Company’s management based on
his wide range of insights into finance and accounting in corporate activities. In
light of this, the Company has once again appointed Mr. Nosaka with the expectation that he will appropriately perform the duties when he assumes office
as an outside corporate auditor of the Company.
Ms. Kyoko Okada has accumulated extensive experience and knowledge inareas such as CSR and corporate culture at Shiseido Co., Ltd. and has a careerin management auditing as a corporate auditor at Shiseido. In June 2019, Ms.
Okada was appointed to the position of independent outside corporate auditor and has been providing beneficial advice to the Company’s management
based on her wide range of insights into CSR and corporate culture in corporate activities. In light of this, the Company has once again appointed Ms.
Okada with the expectation that she will appropriately perform the duties
when she assumes office as an outside corporate auditor of the Company.

Meeting
Attendance

Significant Concurrent Positions(As of June 30, 2020)

BD

10 of
10 meetings
BCA

2 of
2 meetings

BD

10 of
10 meetings

BD—

Director of the Board (External),
JVC KENWOOD Corporation
Advisor, ORANGE AND
PARTNERS CO., LTD.

President, Ebara Hatakeyama
Memorial Foundation
Outside Director,
J. FRONT RETAILING Co., Ltd.

Auditor, National Institute ofInformation and Communications
Technology (NICT)
Executive Director, Nara Instituteof Science and Technology
Executive Vice President,
Tohoku University
Outside Director,
Isetan Mitsukoshi Holdings Ltd.
Outside Director,
NGK Spark Plug Co., Ltd.

BD

10 of
10 meetings
BCA

10 of
10 meetings

BD

10 of
10 meetings
BCA

10 of
10 meetings

Japan Cancer Society, Director
Outside Audit &Supervisory Board Member,
NS Solutions Corporation
Outside Audit &Supervisory Board Member,
Daio Paper Corporation

BCA Board of Corporate Auditors

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

43

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Executive Officer Training
Category

Training Policy/ Major Ongoing Programs
Policy UBARU provides its directors and corporate auditors on an ongoing basis with information and knowledge regarding its business activities
S
that is necessary for them to fulfill their responsibilities to oversee and audit the management.

Directors• Refresher courses focusing on information regarding the Companies Act and other laws and regulations related to corporate governanceCorporate auditors• Participation in seminars and programs hosted by government agencies, Japan Federation of Economic Organizations, Japan Association of
Corporate Directors, Japan Audit & Supervisory Board Members Association, etc.
Policy UBARU provides its outside officers on an ongoing basis with information relating to the company’s management philosophy, corporateS
culture, business environment and other matters, mainly through arranging appropriate opportunities, such as operations briefings frombusiness divisions and factory tours, as well as creating an environment for officers to share information and exchange opinions more easily.

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

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

• Participation in external programs aimed at fostering the mindset required for executive management and motivating self-improvement actions• Lectures by invited experts in specified topics to share and increase literacy in the related field (legal affairs, compliance, IT, the SDGs, etc.)• Strategy building camps for all vice presidents• Recommendation and support for participation in appropriate external seminars and programs*Expenses to be incurred for offering the above training to directors and corporate auditors, including outside officers and vice presidents are borne by the company.

Category

Programs Provided in FYE March 2020

• External seminars: each of the total four newly appointed directors and vice presidents participated in different three-day programs
All executives(including outside
officers)• Classroom lectures by invited experts: two sessions were held for all executives to discuss management issues• Individual lectures by invited experts: a total of three sessions were held for two directors to listen to specialists in specified topics, including
about the Companies Act• In-house presentations and exhibits: held to present information to all executives about future technologies and quality solutions• In-vehicle lessons offered to all executives, aimed to improve their driving skills, and teach them about new technologies (three sessions)• Operations briefings offered by vice presidents and related discussions: three newly appointed outside directors/corporate auditors attended
18 sessions in total• Inspection tours at manufacturing sites in Japan: three newly appointed outside directors/corporate auditors visited three different locations(plants, offices)

Outside directors • Inspection tours at Group companies in Japan: two outside corporate auditors visited five companies in total
Outside corporate• Inspection tours at manufacturing and distribution sites outside Japan: two outside corporate auditors visited manufacturing and distribution
auditorssites in two countries• Management discussions and social gatherings with directors and corporate auditors: the entire Board membership (13 directors and corporate
auditors) attended two semi-annual events• External exhibitions: outside directors and corporate auditors participated in external exhibitions

Cross-Shareholdings
Regarding major listed stocks held by the Company as cross-shareholdings, each year the Board of Directors examines each crossshareholding to determine primarily its purpose and the benefits derived from it justify the associated capital cost. If the Board of Directors
judges that cross-shareholding will contribute to management and business strategies in the medium and long term, the Company
continues to hold the shares. The Company has been steadily reducing crossshareholdings of listed shares—as detailed below—since the Corporate Governance
Code went into effect, and the number of issues was four as of March 31, 2020.

Listed Cross-Shareholdings
Total amount reported on the balance sheet (left)
Number of issues (right)(Millions of yen)
40,000

Number of Issues of Cross-Shareholdings andTotal Amount Reported on the Balance SheetFYE March
2016

FYE March
2017

FYE March
2018

FYE March
2019

FYE March
2020

Listed

32

30

18

10

4

Unlisted

31

32

31

31

32

Category

Number of issues(Issues)Amount reported on
the balance sheet(Millions of yen)

Total

63

62

49

41

36

Listed28,238

12,795

8,836

3,138

1,922

Unlisted

526

544

535

535

581

Total

28,764

13,339

9,371

3,673

2,503

32
30,000(Issues)
40

30

30

28,23818

20,00012,795
10,000

8,836

20

10
3,138

0
(FYE)

10

4
1,922

0

2016 2017 2018 2019 2020

Annual Report 202044

Corporate Governance

Effectiveness Evaluation of the Board of Directors
In accordance with our Corporate Governance Guidelines, the Board of Directors analyzes and evaluates the effectiveness of the Boardand examines and implements improvement measures to tackle the issues identified. In FYE March 2020, as well as conducting fixedpoint observation based on the FYE March 2019 evaluation, the Board of Directors undertook analysis and evaluation focused primarilyon checks of initiatives to address issues identified in the FYE March 2019 evaluation. The results are reported below.
Evaluation and Analysis Methods
Timing of implementation: February 2020
Respondents: All directors and all corporate auditors (13, including outside directors)
Method: Self-evaluation using a questionnaire drawn up by a third-party body(1) The third-party body conducts an anonymous self-evaluation questionnaire for all directors and all corporate auditors.
(2) The third-party body collates and analyzes results.
(3) The Board of Directors reviews and discusses the report received from the third-party body.
Focus of Questions
1) Board of Directors’ management structure2) Board of Directors’ oversight function3) Shareholder dialogue
4) Addressing of issues identified in the FYE March 2019 evaluation
As well as the self-evaluation section in which each person rates themselves on a four-rank scale, the questionnaire has a free-response
section in which respondents can describe their views on the areas in which SUBARU’s Board of Directors is achieving excellence andareas where it needs to increase its effectiveness.
Results of Evaluation
The Company has received the following report on the results from the third-party body commissioned to conduct the evaluation.
• As with the evaluations conducted through to FYE March 2019, with respect to the operation of the Board of Directors, the evaluation
found that healthy, frank discussion from a company-wide perspective took place at meetings of the Board of Directors.
• The areas identified as strengths in the previous year’s evaluation (“leadership by the Chair,” “discussion of cross-shareholdings forpolicy purposes,” and “size of the Board of Directors”) continued to be rated highly, which confirms that the strengths of SUBARU’s
Board of Directors have been sustained.
• In particular, there were improvements in the following areas: operation of the Board of Directors, support system for the Board of
Directors, and supervisory functions of the Board of Directors and risk management system of the Board of Directors.
• On the other hand, as in the previous year, the need to further enhance the discussion on medium- to long-term management strategies
was confirmed. The evaluation also showed that there was a strong awareness of issues in such areas as information security system andsustainability, so further improvements and functional enhancements are expected in these areas.
• Regarding this evaluation, five of the 13 officers were new to the Board. It has been noted that simple comparisons to the previous year’s
evaluation should be made with caution, as the evaluation criteria may differ for each officer.
Issues Recognized in the FYE March 2019 Evaluation
In FYE March 2020, directors and corporate auditors addressed the following issues recognized in the FYE March 2019 evaluation.
(1) Strengthening the system for identifying and managing risk
	We have strengthened our risk identification and management system by establishing the position of Chief Risk Management Officer(CRMO) to oversee the Risk Management Group and by providing more opportunities for discussion at Board of Directors meetings
than before.
(2) Enhancing discussions on medium- to long-term management strategies
	We strove to invigorate discussions on medium- to long-term management strategies by providing more opportunities for reportingand discussion at Board of Directors meetings, including sharing and discussing the progress of our medium-term management vision.
(3) Succession planning and development policies
	The Executive Nomination Meeting and the Board of Directors held discussions on the CEO succession plan, and made resolutions on
the CEO succession plan and the ideal image of the SUBARU Group’s CEO, which will be implemented through ongoing discussions.

45

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Future Initiatives
After receiving the evaluation report from the third-party body, the Board of Directors examines and discusses the CEO’s succession planand the members of the Board of Directors, Executive Nomination Meeting and Executive Compensation Meeting for implementing
relevant measures. Furthermore, the Board of Directors continues to deepen discussions on medium- to long-term management
strategies and has begun active discussions on information security systems and sustainability, with the aim of enhancing corporate value
and achieving sustainable growth in the medium to long term. We will continue to strive to maintain and improve the effectiveness of theBoard of Directors.

Results of the Questionnaire
Evaluation scale
4.0: High 1.0: Low
FYE March 2019
FYE March 2020

Board of Directors’Management Structure

Board of Directors’ Oversight Function andShareholder Dialogue

Board of Directors’ composition( .-1)

Board of Directors’ supervisory function( .-1)

4.0

4.0

3.0

3.0

2.0

Board of Directors’
contribution( .-5)

1.0

Board of Directors’
support structure( .-4)

2.0

Board of Directors’
management( .-2)

Shareholder
dialogue( .)Decision-making
process( .-3)

Executive nominationand compensation( .-4)

Board of Directors’ risk
management systems( .-2)

1.0

Board of Directors’
discussion( .-3)

Evaluation Items
Category

Matters Examined. Board of Directors’ management structure1) Board of
Directors’ composition2)	Board of Directors’
management
3) Decision-making process4)	Board of Directors’
support structure5)	Board of
Directors’ contribution

Board of Directors’ size

Board of Directors’ composition(proportion of inside and outside
directors)

Board of Directors’ composition(diversity and specialty)

Frequency, duration, anddistribution of meetings

Appropriateness of agenda

Quality and quantity of documents

Timing of document distribution

Pre-meeting explanation

Content of explanations and reports

Chair’s leadership

Adequate discussion—

Environment and systems forproviding information

Provision of information to outside
directors

Training of outside directors

Training of inside directors——

Stance toward initiatives

Company-wide perspective

Mutual respect

Diverse values

Stakeholder perspective—

Reporting systems

Supervision of management—

Risk management systems

Subsidiary management systems

Information-sharing on risks andrisk response

Systems for managing progress of
response measures

Thorough awareness of complianceissues—. Board of Directors’ oversight function1)	Board of Directors’supervisory function2)	Board of Directors’risk management systems

3)	Board of
Directors’ discussion

Discussion of management strategy

Discussion of capital policy

Discussion of cross-shareholdings

Discussion on strengthening governance

Responses to social andenvironmental issues—4)	Executive nominationand compensation

Composition of Executive Nomination Meetingand Executive Compensation Meeting

Successor development

Incentive-based compensation

Sharing shareholder and investor views

Enhancement of shareholder andinvestor dialogue—. Shareholder dialogue
Shareholder dialogue

Annual Report 202046

Corporate GovernanceCompensation
Policy on the Method of Determining the Amount of Compensation for Directors
Compensation, etc., of directors is determined in view of the following items.
• Compensation, etc., is at a level commensurate with the roles and responsibilities of directors and is appropriate, fair, and balanced.
• The compensation structure is determined by giving consideration to providing motivation for sustained improvement in corporate
performance and corporate value and securing excellent human resources.
The speciﬁc composition of compensation, etc., is as described below. The total amount of compensation and level of each compensation
type are set according to job responsibilities and status as inside or outside director by utilizing the research data compiled by outside
specialized agencies, etc.
1. Basic Compensation

A ﬁxed portion with the speciﬁc amount determined based on job position, taking into consideration elements suchas the business environment

2. Short-term performance-linked
compensation

A performance-linked portion with the speciﬁc amount determined based on consolidated ordinary income1 for thecurrent ﬁscal year, taking into consideration personnel development and the business environment, and adjusted
according to the matrix of combined ROE and improved shareholders’ equity ratio, which are both performanceindicators aligned with the Company’s capital policy.

3. Restricted stock compensation

Compensation to grant restricted stock for the purpose of providing an incentive for sustained improvement of thecorporate value and further value sharing with the shareholders

In view of the role of outside directors in the monitoring and oversight of management from an independent standpoint, the Company does not provide short-term performance-linked
compensation or restricted stock compensation to outside directors.

Compensation System for Directors (Excluding outside directors)
Fixed portion

Performance-linked portion

1. Basic compensation

2. Short-term performance-linked
compensation

Long-term
incentives
3. Restricted
stock compensation

By a resolution passed at the 85th Ordinary General Meeting of Shareholders, held in June 2016, the maximum total amount of annualcompensation, etc., for directors is 1.2 billion yen (including a maximum 200 million yen for outside directors). The maximum total amountof monetary compensation related to long-term incentives is 200 million yen per year, within the abovementioned limitation. The
maximum number of directors provided for in the Company’s Articles of Incorporation is 15. As for decisions on director compensation,
the Executive Compensation Meeting, on the basis of delegation by the Board of Directors, determines specific compensation amounts,
including the compensation system, following sufficient deliberation by its members, who include the independent outside directors. By a
resolution passed at the 75th Ordinary General Meeting of Shareholders, held in June 2006, the maximum total amount of annualcompensation, etc., for corporate auditors is 100 million yen. An amount determined through discussion among the corporate auditors
based on position, taking into consideration the business environment, is paid as basic compensation for corporate auditors. The
maximum number of corporate auditors provided for in the Company’s Articles of Incorporation is five.

Compensation for Directors and Auditors in FYE March 2020
In STEP, the mid-term management vision announced in July 2018, the Company set forth a profit plan that includes operating income of
950.0 billion yen for the three-year period from FYE March 2019 to FYE March 2021. The Company announced it aims to achieve a ratio ofshareholders’ equity to total assets of 50% and to maintain a minimum ROE of 10% while aiming for ROE of 15% or higher. In accordancewith these goals, the Executive Compensation Meeting, upon authorization by the Board of Directors, determined the amount of shortterm performance-linked compensation to pay to each Director, using the consolidated ordinary income1 for FYE March 2020 as the basis,making adjustment using the matrix of ROE and degrees of improvement in shareholders’ equity ratio, and taking into consideration
personnel development and the business environment.
1 Since the SUBARU Group started to voluntarily apply the IFRS to the accounts from FYE March 2020, this figure was converted to consolidated ordinary income under the Japanesestandards
Total compensation (millions of yen)Classification

Directors (excluding outside directors)

Number6

Basic compensation(paid in fixed monthly installments)

Short-term Performance-linked
compensation

298

91

Restricted stockcompensation

53

442

Corporate auditors(excluding outside corporate auditors)

2

56

—

—

56

Outside directors and outside corporate auditors

7

56

—

—

56

Total

15

410

91

53

554

Note: The above table includes two directors who retired by the last day of FYE March 2020
At the end of FYE March 2020, there were nine directors (including three outside directors) and four corporate auditors (including two outside corporate auditors)

47

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Internal Control
Management System
With the aim of increasing the effectiveness of internal controls and risk management, the Internal Audit Department was madeindependent of the Risk Management Group (overseen by the Chief Risk Management Officer (CRMO)) to ensure a higher level of
independence of internal audit departments in the organization and to enhance the effectiveness of internal controls.

Internal Control System
In accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act, SUBARU’s Board of Directors has
adopted a basic policy on putting in place systems that ensure that the performance of duties by directors is in conformity with laws andregulations and with the Articles of Incorporation, and other systems prescribed in the ordinance of the Ministry of Justice as being
necessary to ensure the appropriate operations of the company and the corporate group consisting of the company and its subsidiaries.
The Board of Directors maintains and operates this basic policy, reviewing it as needed.

Internal Control Related to Financial Reporting
The evaluation of internal control related to financial reporting under the Internal Control Reporting System of the Financial Instruments
and Exchange Act is implemented with the last day of the consolidated accounting period as the record date. The evaluation is
implemented according to generally accepted standards for evaluations of internal control related to financial reporting. The status ofdevelopment of a system of internal control related to financial reporting as of March 31, 2020 is progressing appropriately and isfunctioning effectively, and the internal control report to this effect has been evaluated and confirmed by the CEO (Chief Executive
Officer) and CFO (Chief Financial Officer), and has been audited by the accounting auditors before publication.
Link

The 89th Securities Report and Internal Control Report (Japanese only)

Audit
Auditing by Corporate Auditors
The Company has four corporate auditors (including two outside corporate auditors), who attend important meetings including those of
the Board of Directors, inspect business sites and subsidiaries, interview members of the Internal Audit Department, and audit theexecution of duties by directors and others in accordance with the audit policy and audit plan established by the Board of Corporate
Auditors. The Company has a system in place whereby corporate auditors can gather information when necessary from directors orother employees when a situation arises that may cause significant damage to the Company, a significant violation of laws, regulationsor the Articles of Incorporation, or another serious matter related to compliance. Moreover, the Company assigns employees to assist
corporate auditors in their duties to ensure they can smoothly accomplish their work.

Internal Audit
The Company has established the Internal Audit Department—with 13 members—as an internal auditing organization under the directsupervision of the President and conducts internal audits of business execution at SUBARU and its domestic and overseas Group
companies from an independent and objective standpoint. At the beginning of the fiscal year, the department prepares an internal audit
plan for the fiscal year that takes into consideration the internal control status and risks to the Group as a whole and systematically
implements the plan. The department prepares and distributes to the directors, corporate auditors, and concerned parties audit reportson the results of internal audits and reports on a half-yearly basis at the Board of Directors’ Meeting and on a quarterly basis at the
Executive Management Board Meeting. The Internal Audit Department and corporate auditors work to deepen collaboration andstrengthen the auditing function through monthly internal audit report meetings held by the department and quarterly dialogues about
internal control. The department and corporate auditors endeavor to strengthen the auditing function through quarterly information
sharing with the accounting auditors. Moreover, the department is evaluated regularly by third-party experts to confirm internal auditing
is being undertaken appropriately.
The Company has established Corporate Governance Guidelines to clarify its basic policy, framework, and operational policies related
to Corporate Governance.
Link

The Corporate Governance Guidelines
The Corporate Governance Report (Japanese only)

Annual Report 2020

48

Corporate Governance

Messages from the Outside Directors
Contributing to SUBARU’s Greater Corporate
Value through Sound Discussions with theBoard of Directors and Other Company Officers
I believe the Board of Directors has long excelled in areas suchas the numerous opportunities given to outside directors to
speak their minds, and most importantly, that those opinions arereceived and discussed sincerely and seriously. SUBARU outside
directors have diverse backgrounds and experience, and theiropinions based on this knowledge contribute to a variety ofYasuyuki Abe
Outside Director
Served as outside corporate auditor from
June 2016 to June 2019
Appointed as outside director in June 2019

meaningful discussions. On the other hand, there is an area I feelis changing. In order for meetings to progress efficiently, things
such as pre-meeting explanations and distributing referencematerials are being prepared more carefully. Moreover, I feel thequality of discussions is increasing, with previous discussions

being reflected where necessary in the proceedings of subsequent meetings of the Board of Directors. Also, I feelthere is growing trust and stronger relationships among officers because opportunities outside the meetings ofthe Board of Directors for building mutual understanding among officers. While terms come to an end andmembers change, I believe our mission as outside directors is to maintain the current positive atmosphere andcontinue sound discussions to increase SUBARU corporate value.
In this era of significant change brought on by CASE 1 technologies, it is generally considered difficult for acompany of SUBARU’s size to survive. I believe it is our size, however, that enables greater agility and conversely
makes it highly possible for us to gain an advantage. It is, however, difficult for SUBARU to respond simultaneously
to various situations around the world on its own. It is important to take a balanced approach to focus further onpriority strengths and utilize outside help in areas where this is possible. COVID-19 has the potential to completelychange people’s values and lifestyles. In such times, it is vital we keep protecting our brand value, not least for ourloyal customers who continue to love SUBARU. I believe SUBARU must continue contributing to society throughour business activities to help the world—that some consider irrecoverably damaged—toward greater prosperity.
1 An acronym of the words: Connected, Autonomous, Shared & Services, and Electric

Giving Unique Advice as an Outside Director
Based on a Vision for SUBARU’s Future andContinual Reference to Societal Perspectives
Over the past year, I have gained an understanding of SUBARU’s
corporate culture. Put simply, SUBARU’s corporate culture is the
pride all employees take in making wonderful SUBARU products.
Behind this pride is SUBARU’s history of not deviating from its
business of making vehicles. Many manufacturing companies
with diverse product lines lack the sense of unity borne of making

Natsunosuke Yago
Outside Director
Appointed as outside director in June 2019the same product. Automotive companies, on the other hand,
generally specialize in manufacturing vehicles, so theseenvironments are good for fostering a sense of unity. In
SUBARU’s case this is a particularly strong characteristic and a

49

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

key strength on which its growth is based. This kind of uniformity sometimes has the risk of not accepting differing
perspectives and the company could collectively progress in a unified direction without question. The role of an
outside director is to continually give insight from a societal point of view, without becoming ingrained in thecorporate culture. To this end, I have, and will continue to, give advice based on a vision of SUBARU’s future.
It will take the global economy two to three years to recover from the impact of the COVID-19 pandemic. Whilethe impact on SUBARU, as an automobile manufacturer, can be expected to be limited to decreased demand,
there is always a risk of supply chain interruptions. With respect to the supply chains necessary to manufacture an
automobile, there is concern of severe impacts including maintaining funds and sufficient human resources atparts manufacturers. Maintaining a supply chain is vital for continuing to supply automobiles. Supply chain
management skills will be vital in determining whether sales can be recovered during the COVID-19 recovery
period. While this will be a period that will truly test our resolve, I hope we can continue to believe that the keys tosurvival and growth remain in our own hands. Meanwhile, information and communications technology, including
mobile devices, with be a growth industry in the social and lifestyle transformations post COVID-19. I also believe,
however, there will be an increased desire for automobiles as a means of transport instead of public transportation.
As another example, demand for automobiles—a necessity of suburban life—may increase as people desire more
spacious suburban living that is suited to remote working. Of course, this demand will be for vehicles that areenvironmental friendly, safe, secure, and enjoyable to drive.

SUBARU’s First Female Outside Director—
Delivering New Innovation through a
Positive Attitude that Sets New Precedents
In June 2020, I was appointed as SUBARU’s first female director,
and I have experience working in human interface (userf r i e n d l i n e s s ) re s e a rc h a n d d e v e l o p m e n t a t T O S H I B A
CORPORATION for more than 35 years. My goal in developing
human interfaces was that they would be easy, fun, and safe touse. These goals match with SUBARU’s mid-term management

Miwako Doi
Outside Director
Appointed as outside director in June 2020

vision, STEP (Speed, Trust, Engagement, Peace of mind andenjoyment). I believe I can contribute from a user’s perspective
to a cost-balanced realization of the STEP vision.

Also, as a woman in my career path researching human interface, I was always told what I was doing was
unprecedented, but I took this with the positive attitude of setting new precedents. I will use this same positive
attitude to contribute to finding ways SUBARU can innovate in this COVID-19 era of socially distanced lifestyles
and lockdown-impacted economic conditions.

Annual Report 2020

50

The SUBARU Group’s CSR
In STEP, the mid-term management vision developed in 2018, SUBARU envisions achieving a transition, by 2025, from a company making
things, to a company making people smile, guided by our unwavering Management Philosophy of aiming to be a compelling company
with a strong market presence built upon its customer-first principle. To achieve this vision, we have adopted the “Six Priority Areas for
CSR” approach and will continue to promote initiatives based on the SUBARU Global Sustainability Policy and to fulfill our corporatesocial responsibilities, thereby providing Enjoyment and Peace of Mind to our customers and other stakeholders. The SUBARU Groupaspires to be a truly global company trusted by society and to contribute to the development of a more affluent, sustainable society.

Process of Identifying Six Priority Areas for CSR
In accordance with STEP, our mid-term management vision, we reviewed the SUBARU Group’s Eight CSR Action Items for CSR initiatives
and established the Six Priority Areas for CSR.
To select the priority areas, the SUBARU Group first identified 41 CSR priority topics for which social needs were high and thenconducted a questionnaire among experts and investors in North America and Japan. Finally, we examined the areas from two
perspectives: areas in which we can contribute to society by leveraging our business strengths, and areas related to the demands ofsociety. As a result, the SUBARU Group selected People-oriented Car Culture, Resonance and Coexistence, Peace of Mind, and Diversity
as the four areas where SUBARU could contribute to society by leveraging our business strengths, and Peace of Mind, Diversity,
Environment, and Compliance as the four areas where the SUBARU Group could work to meet the demands of society. Peace of Mindand Diversity appear in both categories, because Peace of Mind is an area in which society’s needs and the strengths of the SUBARUGroup’s business coincide, while Diversity refers not only to diversity in the community, but also to diversity in a broad sense, including in
the products that the SUBARU Group offers to customers.
Based on the SUBARU Global Sustainability Policy revised in April 2020, we will promote initiatives in the six priority areas on agroupwide, global basis.
Reflecting SUBARU Group’s Six Priority Areas for CSR in Management

SUBARUSUBARU GroupSix Priority Areas for CSR

Reflection in
management

Society’s
expectations

Executive
Management
Board Meeting

Priorities specific
to SUBARU

Board of Directors

People-oriented
Car Culture
Resonance andCoexistence
Peace of Mind
Diversity
Environment
Compliance

Areas in which thecompany cancontribute to thesociety levelaging
its businessstrength
 riority areas selected
Pfrom the businessstrategy perspective

Information
disclosure anddialogue

Stakeholders

Areas in which thecompany meets
society’s
expectations
 riority areas selected
Pfrom issues regarded
as critical by experts
and investors in North
America and JapanSUBARU Global Sustainability Policy

Establishment of SUBARU Global Sustainability Policy
Until recently, the SUBARU Group promoted various initiatives in line with its CSR Policy, revised in June 2009. However, to cope withchanges in the social environment and in relationships with our stakeholders, we established the “SUBARU Global Sustainability Policy” in
April 2020 as a guideline to be shared by all Group employees on a global basis. This Policy is applied to SUBARU Corporation and all its
subsidiaries.

51

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

SUBARU Global Sustainability Policy
We, SUBARU Group, are committed to sustainable business practices designed to promote harmony between people, society
and the environment in the following ways:
1. Through our business activities, we will contribute to the resolution of various social issues, including the protection of the
global environment, and to the creation of a sustainable society.
2. Respecting the quality and originality of our products, we will continue to provide SUBARU’s unique value using advanced
technologies, and enrich the lives of all those involved with the SUBARU Group.
3. As a good corporate citizen in the international community, we respect human rights, diverse values and individuality, andtreat all stakeholders with sincerity in every interaction.
4. We strive to maintain and advance the workplace environment so that employees can work safely in peace, and with a senseof satisfaction.
5. We respect international rules and the laws and regulations of each country and region, as well as local culture and customs,
and pursue fair and transparent corporate governance.
6. We make use of dialogue with stakeholders to make management decisions, and disclose corporate information in a timely
and proper manner.

Establishment of Human Rights Policy
The SUBARU Group thinks of people first and places them at the heart of its manufacturing. It considers respect for individual humanrights and individuality as a key management issue in realizing its corporate philosophy of continuously promoting harmony between
people, society, and the environment while contributing to the prosperity of society. It has established the Human Rights Policy to guideits efforts in this regard. This policy complies with the UN Guiding Principles on Business and Human Rights and applies to SUBARU
Corporation and all its subsidiaries. The SUBARU Group will also extend its human rights initiatives by urging its business partners andother parties involved in its operations, including its supply chain, to respect human rights based on this policy.
Link

For further details: Human Rights Policy

Activities in the Six Priority Areas for CSR in Relation to SDGs
The Sustainable Development Goals (SDGs) for 2030 are development goals for achieving a sustainable future, and the SUBARU Group
recognizes the importance of responding to these goals. By clarifying visions for 2025 regarding the Group’s Six Priority Areas for CSR,
SUBARU will reinforce its efforts in each priority area and make positive contributions toward achieving the SDGs.

Six Priority Areas for CSR Basic Concepts and Vision for 2025
Six Priority Areas
for CSR

Basic Concepts

Visions for 2025

People-oriented
Car Culture

SUBARU believes that a car is more than just a means of transport. SUBARU will fostera sustainable mobility culture by providing customers with added value in the form of
products and services which make the car a partner that enriches people’s lives andminds, while cherishing the human emotions of enjoyment and peace of mind.

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

Resonance andCoexistence

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

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

Peace of Mind

SUBARU will become a company that provides all stakeholders with the utmost peaceof mind.

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

Diversity

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

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

Environment

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

Cherish and protect the global environment–
The earth, the sky and nature–throughGroup-wide activities.

Compliance

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

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

Annual Report 2020

52

The SUBARU Group’s CSR

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

Relevant
Stakeholders

ThemesEnjoyment ofdriving a car
People-oriented Car Culture

Providing enjoymentof customization

Initiatives
FYE 2020

FYE 2021

FYE 2022–FYE 2026

Enhancing thebrand image

Development of high-quality accessories matched with new models
Expansion of the lineup of high-performance, value-added items
Promotion of marketing activities that match the characteristics of each market
Promotion of motorsports and continuation of awareness-raising activities
Advancement of SUBARU’s “Dynamic x Solid” design identity to “bolder” expression

Proposing new
forms of mobility

Development of technologies in cooperation with
relevant ministries and agencies

Local
communities

Disseminating
car culture

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

Customers

Strengthening
relationshipwith customers

Investment in dealers’
stores (in Japan)

9.1

11.2

Enhancement of customer loyalty
Continuation of customer interaction programs

Resonance and Coexistence

Establishing a newmaintenance system

Development of a maintenance system for marketing BEVs

Coexistence andmutual prosperity withbusiness partners

CSR surveys andawareness programs
at business partners

Creating a safe working
environment

KPI• Continue satisfaction
surveys. (Improve customer
satisfaction.)

Enhancement of new ways of connecting withcustomers through IoT

Building of relationships withbusiness partners from the perspective of CSR

Reinforcement of efforts for occupational health andsafety, improvement of plant environments
Employees

Become a company thatenriches people’s lives andminds as a partner.

Investigation of future mobility

Provision of products that benefit people’s lives

Business
partners

Relevant
SDGs

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

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

Customers

Visions/KPIs(FYE 2026–FYE 2031)

Creation of a safe and rewarding workplace environment, building of abrand that is loved by employees

Become a company that is
widely trusted by, resonatesand coexists with society.
KPIs• Continue satisfaction
surveys. (Improve customer
satisfaction.)• Enhance connection withcustomers through IoT(MySubaru, the nextgeneration system,
telematics)

Continuation of production operations and maintenance of employment at each site

11.2

17.16

Utilization of athletic teams, boosting of employee morale
Local
communities

Revitalizing relationships
with local communities

Reinforcement of community exchange and partnership activities
Contribution and relationship-building through sporting activities

Advancement of Advanced Driver Assistance System (ADAS)
Adoption of Advanced Automatic Collision Notification (AACN) system andImproving safety functions expansion of its functions
Continuous enhancement of crash safety
Development of autonomous flight control systems (collision avoidance technology)
Contributing to safe driving Implementation of safe driving seminars for senior citizens on a continuous basis

Customers

Establishing andstrengthening a reliable
product supply system
Improving inspection andmaintenance quality

Establishment of a timely and efficient supply system of spare parts and accessories
Enhancement of product supply capacity
Promotion of accurate, high-quality inspection and maintenance

Peace of Mind

Revision of thequality policy
Securing andimproving quality

Promotion of initiatives to produce vehicles ofchoice in terms also of quality

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

Employees

Creating asafe workplace

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

Reinforcement ofhealth promotion efforts

Secure and create employment
Local
communities

Contributing to safety of
local communities

Governments

Contributing tosafe lives of people

Promotion ofplant environment improvement

Promotion of a sense oftrust regarding stable operations

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

1 Fatal traffic accidents of SUBARU drivers/passengers and pedestrians/cyclists SUBARU cars collide with

53

Annual Report 2020

Become a company thatprovides the utmost peaceof mind to all stakeholders.
KPIs• Achieve a goal of zero fatal
traffic accidents* by 2030
• Improve impact energy
absorption ability to 1.4
times

3.6

Value Creation

Six
Priority
Areas

Relevant
Stakeholders

Business Foundation
Supporting Value Creation

Growth Strategy

ThemesPromoting active roles
for female employees

Initiatives
FYE 2020

FYE 2021

FYE 2022–FYE 2026

Utilizing diverse
human resources

Operation of the human resources
system for senior employees

Promotion of active roles for non-Japanese human resources
Examination and promotion of a workplace environment that pays due consideration tominorities in society

Diversity

Diverse work styles: Support for labor management by introducing a new
attendance management system and expansion of teleworking

Securing human resources
Maintenance and expansion of diverse forms of employment
at group companies

Business
partners

Customers

Customers

CSR surveys andawareness programs
Reinforcement of efforts for CSR throughout the supply chain
Efforts in cooperation with at business partners
business partners
Enhancement of the understanding of employees, promotion of cooperation with
the National Association of Minority Automobile Dealers (NAMAD)
Providing a wide rangeof products

Popularizing vehicles
that reduce
environmental impact
Environmental protection
in cooperation
with customers

Environment

Business activities tohelp reduce
environmental impact

Expansion of the sale of electric vehicles (HEVs and PHEVs)
Development and marketing of electric vehicles (BEVs and SHEVs)
Planning ofactivities to protect
outdoor fields

Implementation of activities to protect outdoor fields on a continuous
basis

Introduction of TEPCO’s Aqua Premium
Renewable Energy
Certificate, etc.

Energy conservation investment and effective utilization of facilities

Establishment and maintenance of an environmental management system
Selection of business partner while considering transportation foroverseas sites
Environmental efforts incooperation withbusiness partners

Efficient parts storage and transportation, and reduction oftransportation volume
Promotion of retailers’ continuous efforts for energy saving, water
quality conservation, and recycling
Optimization of logistics and CKD costs

Ensuring comprehensive
export control
Governments

Promotion of compliance from the perspective of the SUBARU Group
Establishment and dissemination of internal rules andmanuals on laws and regulations

CompliancePrevention of harassment
Employees

Business
partners

Protecting humanrights of workers

Maintaining fairrelationships

KPIs• Increase female
managers.(To five times
the number in 2014 by
2020, to over 12 times by2025)• The number ofparticipants in careerdevelopment training• Achieve the legallyprescribed employmentrate.
• 100% of those applying
for reemployment

5.5
5.5.2

8.5

Cherish and protect the
global environment–The
earth, the sky and nature–through Group-wide
activities.
KPIs• Reduce direct emissions
by 30% from FYE 2017
levels by 2030 (aggregate
amount basis).
• Make at least 40% of
SUBARU global sales
electric vehicles (EVs) or
hybrid electric vehicles(HEVs) by 2030.
• Apply electrification
technologies to all SUBARU
vehicles produced andsold worldwide by the
first half of the 2030s.
• Formulate a resource
circulation strategy
including secondary
batteries.
• Enhance recycling rates.

13.1
13.2

12.2
12.5

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

In-house educationand dissemination

Promote businesses thatcreate diverse forms ofmarket values while
respecting the diverse
values of all people.

Design parts that can be used in
multiple vehicle models

Continuation of conservation efforts in cooperation with governments

Business
partners

Relevant
SDGs

Incorporation of feedback on diverse market needs

Introduction of solar power generation for self-consumption
Governments

Visions/KPIs(FYE 2026–FYE 2031)

Childcare support for female employees in direct departments

Compliance with the legally prescribed employment rate for persons withdisabilities: 2.3% in and after FYE 2021
Promote diverse
work styles

Corporate Data

Appointment of more female managers: FYE 2021 (to five times the number in 2014),
FYE 2026 (to over 12 times the number in 2014)

Review of the human resources system forsenior employees

Employees

Value Creation Outcomes

Maintenance and improvement of the workplace environment by promoting work stylereform and complying with the Labor Standards Act
Formulation of the
Human Rights Policy

Establishment anddissemination of the
Human Rights Policy

CSR surveys andawareness programs
at business partners

Reinforcement of efforts for CSR throughout the supply chain

Promotion of initiatives torespect human rights of workers

Act in good faith andbecome a company that istrusted by and resonateswith society.
KPIs• Promote initiatives torespect human rights
based on the Human
Rights Policy;
Communicate the policy
throughout the entire
supply chain.
• Strengthen CSR
procurement
management.
• Provide compliance andlegal trainings.

8.7
8.8

16.5
16.5.2

Promotion of fair trade on a continuous basis

Annual Report 2020

54

Quality Initiatives
Approach to Quality
Quality is the foundation of “Enjoyment and Peace of Mind,” SUBARU’s core value, and delivering quality is one of our most fundamental
responsibilities to our customers. Quality reforms are a top priority in STEP, SUBARU’s mid-term management vision, and we are reviewing
all business processes, from product planning and parts procurement by suppliers to production and shipping at our plants, andimplementing reforms.
To ensure that we become a company that resonates with and inspires trust in our customers, we revised our quality policy in April
2019 and are actively promoting the provision of high-quality products and services that impress our customers. SUBARU has alsoestablished quality policies at affiliated companies in Japan and overseas in accordance with the business content of each company andregional characteristics, and affiliated companies practice quality control based on these policies. In FYE March 2021, we established the
Quality Assurance Management Office to supervise quality assurance across the entire SUBARU Group, including the Aerospace
Company. The roles of this office will include developing and managing the SUBARU Group’s organizational structure and systems
required to assure quality, maintaining their effectiveness, and continually improving them.

Quality Policy

At SUBARU, quality is our highest priority as we earn the trust of our customers.
1. We will deliver long lasting products that our customers can use with peace of mind.
2. We will continually improve our products and services by always listening closely to our customers’ voice.
3. We will be a good corporate citizen in all markets where we do business by ensuring compliance with all internal rules, local
laws, regulations and social norms.

Revised in April 2019

Quality Management System
1. Establish Quality Management System (QMS) based on the Quality Policy and ISO 9001 Standard and put it into practice for orderlyand effective operations.
2. Aim to improve customer satisfaction by assuring that products will comply with both customer requirements and applicable statutory
and regulatory requirements.
3. Strive to continually improve the QMS through operational improvements.

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

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Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Operation of a System for Improving Quality
SUBARU has established a quality improvement system with Quality Assurance Division at the heart of efforts in order to analyze aftersales quality defects and customer requests to realize higher-quality development and production. Based on customers’ feedback
collected from around the world, SUBARU works with the relevant in-house departments and suppliers in identifying quality issues,
investigating their cause, and planning countermeasures.
We are promoting measures to prevent recurrence of the Final Vehicle Inspection Issue, with the COP1 Supervision Section taking the lead.
In FYE March 2019, we transferred responsibility for final vehicle inspections from the Manufacturing Division to the Quality Assurance
Division. This ensures the independence of final vehicle inspections from manufacturing departments. As well as placing quality first on asolid footing by raising awareness among final vehicle inspectors and improving the workplace environment, we have been conducting
radical revisions of the final vehicle inspection system with an eye to the future.
Furthermore, we will ensure that all external stakeholders understand SUBARU’s initiatives, by such means as holding tours of our car
manufacturing plants for shareholders and investors.
1 Conformity of Production

Quality Improvement System

SUBARU
Sales outside
Japan

Customer

OutsideJapan

Request forassistance
Response

ReportFeedback

ReportCustomerFeedback

ReportFeedback

Request for assistance
Response

Investigation
into cause ofquality issues /analysis / framing anddeployment ofcountermeasures

SUBARU
Customer Center

InsideJapan

Response

ReportQuality Assurance
Division

Suppliers

Sales insideJapan

Request forassistance

Service function

Feedback

Productionunits

Development
units

Efforts for Improving Quality
Quality Control Training
We provide quality training as part of our employee training program to enable employees to learn basic QC 2 and problem-solving
techniques tailored to their year of entry into the company and their qualification requirements.
2 QC: Quality control

Main curriculum for quality• Quality control training (Introduction/Intermediate/Advanced)• Lectures to foster quality awarenessAnnual Report 2020

56

Quality Initiatives

Global Quality Meeting
Aiming to ensure that the customer-first mindset runs through our quality management, SUBARU attaches great importance to dialogue
with dealers, as they are responsible for dealing with customers across the globe. We participate in technical liaison meetings held twice ayear for the Japanese market, while in overseas markets, we take part in twice-yearly main dealerships (G8) service meetings and block
conferences held in six regions1. We take in the views of dealers expressed at these meetings to make decisions on the optimum meansof addressing product issues that inconvenience our customers.
1B
 lock conferences are held in a country in each of the six regions—the CIS, Central Europe, Northern Europe, Southern Europe, Oceania, and Central and South America
Their participants include representatives from dealerships and expatriates working in the region

Quality Caravan
Since FYE March 2019 we have been holding an event called the Quality Caravan at all our business sites to inform participants ofcustomer feedback and the quality status of SUBARU products. Our aim in doing so is to provide each and every employee with anaccurate understanding of the current state of SUBARU and create an environment in which they are conscious of putting quality first at all
times and approach their work in that mindset. In addition to employees, we also receive a large number of participants from suppliers.
In FYE March 2021, Subaru of Indiana Automotive, Inc., SUBARU’s production base in the U.S., is organizing the event to raise global
awareness of quality. Going forward, we will continue to engage in awareness activities, while enhancing the program and extending theduration, among other improvements.

At the Global Quality Meeting

At the Quality Caravan

Response to Recalls
SUBARU is taking measures to cope with recalls in order to prevent accidents and to protect customers.
In the event of product defects that can infringe safety and laws and regulations, SUBARU promptly establishes a committee structureof staff from departments involved in quality to investigate, and determines the specific details of our response based on the laws andregulations of each country. Moreover, SUBARU sends direct mails from our dealerships to affected customers to inform them that they
can have their cars repaired free of charge.
As of April 2020, SUBARU had no cases of violating laws and in-house regulations in regard to information provision on quality
and safety.

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Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Risk Management
Approach to Risk Management
SUBARU promotes strategic risk management—in addition to emergency response measures— as one of the most importantmanagement priorities to minimize damage in the event of a risk eventuating for various risks that would seriously impact our business
operations. We will work to increase corporate value by rapidly responding to changes in global conditions; working to strengthen ourmanagement foundation to ensure sustainability of our business; investing greater resources into minimizing human, social and economic
losses; and becoming more resilient to risk.

Risk Management System
President and CEO
Normal situation
3. Board of Directors

Emergency situation
1. Chief Risk Management Officer (CRMO)
2. Risk Management &Compliance OfficeInformation sharing/
reporting

4. Risk Management &Compliance Committee
CRMO• Formulate company-wide policies• Supervise risk management situations• Address company-wide issues
Risk management officers• Formulate action guidelines• Understand and report theimplementation situation

Determine which
response
headquarters
should be set up
according to thesituation

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

Risk Management & Compliance Office(secretariat)• Operate committee meetings• Support activities at individual
departments

Special Emergency Response Headquarters: for immediate response to
the most critical situations
President and CEO, CRMO,
Risk Management &Compliance Office,risk management officers and other officers
in the relevant department

Emergency Response Headquarters:
for response to critical situations
CRMO,
Risk Management & Compliance Office,related officers
Cooperation

Departmental Response Headquarters:
for independent response to incidents
by the related department

Each department
Dealers, affiliated companies,
customers

Risk management officer

Normal situation

Emergency situation

1. Chief Risk Management Officer (CRMO)The Chief Risk Management Officer (CRMO) supports the President in leading Group risk management and compliance activities for the
purpose of enhancing the effectiveness of group-wide internal controls and risk management.

2. Risk Management & Compliance Office
The Risk Management & Compliance Office, under the control of the CRMO, is working to clearly identify emerging risks and prevent
expansion of risks impacting the entire Group by collaborating closely with Group companies and departments, including company-wide
shared corporate operations departments.

3. Board of Directors
The Board of Directors works to strengthen and firmly establish the risk identification and management framework by ensuring ample
opportunities for discussions on topics such as establishing a framework for risk management, ensuring independence of the Internal
Audit Department (Audit Department), and clarifying the basic approach to internal control for subsidiaries.

4. Risk Management & Compliance Committee
The Risk Management & Compliance Committee, launched in FYE March 2021, is the successor to the Compliance Committee, and leads
risk management activities during normal times and deliberates and reports on matters related to risk management and compliance.

Annual Report 2020

58

Risk Management

Risk Associated with Business Activities
The business activities of SUBARU Group are affected by various environmental changes and uncertainties. Uncertainties that will cause asignificant impact on Group business continuity, business performance and financial standing are identified as risks and are classified into
three major categories according to their characteristics. The impact of risk events when they occur is minimized through risk management
such as daily monitoring of risks and mitigation measures when a risk emerges.
The following are the major business risks that have the potential to have a major impact—in terms of promoting the STEP mid-term
management vision, and business activities—on business performance, financial position and cash flow to the extent of several tens ofbillions of yen or more and have a potential significant impact on investor decisions. Note, however, this is not an exhaustive list of risks.

Main Business Risks
Risks relating to fluctuations in the economic andfinancial environment

Uncertainties impacted by trends in external environments such as
economic and financial markets

Risks relating to industry and business activities

Uncertainties involved in internal and external environments directly impacting
daily business activities and changes in the operating environment ofstrategic areas targeted by the Group

Risks arising from national regulations andother events affecting business activities

Risks related to political or regulatory procedures, climate change, or
events such as disasters, war or terrorism

15 Risks Affecting Business Activities
Risks relating to fluctuations in the economic andfinancial environment
Economic trends in major markets

Financial markets fluctuations

Exchange rate fluctuations

Change in raw material costs

Risks arising from national regulations andother events affecting business activities
Political, regulatory and legal procedures invarious countries that impact business activities
Climate change

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

Risks relating to industry and business activities
Focus on specific businesses and markets

Intellectual property infringement

Changes in the demand and competitive environment in the market

Information network security

Responsibility related to products, sales and services

Compliance

Supply chain disruptions

Secure and train human resources

Impact on business performance or financial standing*Please refer to pages 13–17 of the Securities Report for further details on risks to SUBARU business activities

Crisis-level Risks
Among the various types of risk, SUBARU calls those risks that are particularly dangerous to its business operations and that SUBARU
cannot handle through regular decision-making channels “crisis-level risks,” and categorizes them as follows: natural disaster, accident,
internal human factors, external human factors, social factors (domestic, overseas), and compliance. SUBARU is creating various manuals
for dealing with each of these types of emergencies.

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Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate DataBCP
At SUBARU, the Risk Management & Compliance Office plays a pivotal role in establishing regulations related to BCPs. During
emergencies, the Office centrally grasps group-wide information, establishing a system to manage company-wide response. In addition,
during normal times we work to enhance the speed and accuracy of risk recognition and identification to the best of our ability byclarifying the roles of each department and the domain of management responsibilities. In conjunction with this, we are regularly
preparing and updating manuals and are implementing training. Furthermore, each business site develops its own BCP, including
specifying key operations, establishing an emergency contact system, and developing a telework system. While closely collaborating withcompany-wide shared corporate operations departments, we are implementing measures to accurately and speedily carry out business
continuity and early restoration of operations.

Emergency Response Policy
1. Give first priority to people’s survival and physical safety.
2. Minimize loss of stakeholder interests and corporate value.
3. Act always with honesty, fairness, and transparency, even in an emergency.

Response to COVID-19
In early February 2020, the Coronavirus Countermeasure Headquarters was established under the control of the President. The
Headquarters, which functions on a practical level under the overall leadership of the Chief Risk Management Officer (CRMO), gathers
information from domestic and overseas Group companies and implements measures to ensure business continuity and, in accordancewith the changing situation, prevent the spread of COVID-19 with the health of customers, suppliers and employees as the first priority.

Coronavirus Countermeasure Headquarters

Specific Countermeasures

Employees

Since the beginning of the COVID-19 pandemic, wehave prioritized the health of employees and theirfamilies and have been promoting a flexible approach toensuring business continuity.
• Halted business travel to all areas of China and othercountries and domestic travel• Voluntarily refrained from holding or participating indomestic and overseas events• Promoted varying work start times with the flextime
system• Encouraged employees working in offices to takelunch breaks at varied times• While gradually strengthening our IT response, awork-from-home system has been fully implemented
since April mainly in the Tokyo area (promoting flexible
working styles, with an ongoing maximum 50%
office-based work rate in the Tokyo area)

Production/
Sales Sites

United States: Production at Subaru of Indiana Automotive, Inc. (SIA) was temporarily halted from March 23 to
May 11, 2020, and has it since been operating at
adjusted production volumes
Japan: Production at Gunma Plant was temporarily
halted from April 9 to May 11, 2020, and was operating
at adjusted production volumes until June 19

Business
Continuity• Since April 2020, operational funds have been acquired
from financial institutions• As contingency preparation should the impact of
COVID-19 becomes long term, we are ensuring we canrespond flexibly in case of unforeseen increases incapital demands, while taking into consideration
business continuity from supply chains to value chains.
We have taken measures such as setting corporatebond and commercial paper issuance quotas, inaddition to commitment line for the amount ofapproximately 200 billion yen.

President and CEO
Overall supervision: CRMO
(Chief Risk Management Officer)

Overall supervision coordination:
Risk Management & Compliance
Office (secretariat)

Offices/plants supervision
Companies supervision
Financing related
Responsible persons in individual departments

IT systems relatedGroup companies related
Legal services
Cooperation between offices/plants
Management decision support
Safety/health/personnel protection
Executives support
Stakeholder communication
Market related
Supply chain management
Technical conformity support
Quality assessment support
Decision as to whether or not to suspend production lines

Annual Report 2020

60

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

SUBARU Environmental Policies
SUBARU Sustainability Principles“The earth, the sky and nature” are SUBARU’s fields of business.
With the automotive and aerospace businesses as the pillars of SUBARU’s operations, our fields of business are the earth, the sky
and nature. Preservation of the ecosystem of our planet, the earth, the sky and nature, is of utmost importance to ensure the futuresustainability of both society and our organization. We align our business strategy to enhance these global goals in all of ouroperations.
1.	We develop and deliver products to meet societal needs and contribute to the environment through advanced
technologies.
	By striving to create advanced technologies that put the environment and safety first, we will develop and deliver productsthat can contribute to protecting the earth’s environment.
2.	We focus on efforts aimed at coexistence with nature.
	Together with efforts to reduce carbon-dioxide emissions in all of our operations, we will promote active engagement withnature by stressing forest conservation.
3.	We take on challenges as one through an all-SUBARU approach.
	Utilizing our unique organizational character that allows us to oversee the entire supply chain, all of us together will take on
the challenges of environmental protection of our planet through an all-SUBARU approach.

Environmental Principles
SUBARU’s fields of business are the earth, the sky and nature. SUBARU understands that the health and preservation of biodiversity
and controlling climate change are critical to ensuring a sustainable future for our planet earth, nature, communities, andbusinesses.

Products

Purchasing

Production

We develop our products and conduct R&D in light of the lifecycle environmental impacts of our products.

Our purchasing activities reflect consideration for biodiversity and otheraspects of environmental protection.

We strive to minimize our environmental impact through improving energy
efficiency and waste management.

Logistics

Sales

Management

We strive to minimize our environmental impact through enhancing energy
efficiency and promoting pollution
prevention.

We endeavor to recycle resources efficiently and reduce waste.

We will strive to improve our sustainability program through contributions
that meet societal needs and by publicizing our activities as Team SUBARU.

[Established: April 1998, Revised: April 2017]61

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Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Environmental Management System
SUBARU comprehensively manages the entire progress and direction of its environmental management measures through theEnvironment Committee and based on the cross-company integrated environmental management system (EMS). The director in chargeof environmental issues oversees the integrated EMS and chairs the Environment Committee. In principle, the related issues are reviewed
regularly, at least once a year, and details of discussions held by the Environment Committee are reported to the CSR Committee.
Moreover, important issues are discussed and reported at the Executive Management Board Meeting and Board of Directors meetings.

SUBARU Group’s Environmental Management Organization
Production & Environment
Subcommittee

Board of Directors

SUBARU
Cross-Company Integrated EMS

Executive Management Board Meeting

Pollution prevention
working group

Environment Committee

Domestic affiliated companies’
environment subcommittee

Six domestic consolidated production
and logistics companies

Operation support(Chaired by the Director in charge of the
Sustainability Promotion Department)

Integrated operation(Chaired by President and Representative Director)

Head Office

Global warming prevention
working group

Utsunomiya Plant

CSR Committee

Tokyo Office

Zero emissions working group

Gunma Plant(Presided over by the chairperson:
President and Representative Director)

Fuji Machinery Co., Ltd.*
Kiryu Industrial Co., Ltd.*
Yusoki Kyogyo K.K.*
Subaru Logistics Co., Ltd.*FAS Corporation*
Ichitan Co., Ltd.

Sales and Service/
Logistics Environment Subcommittee
Logistics working group
Collaboration

Sales and service
working group

44 SUBARU dealers in Japan
Four overseas consolidated companies• Subaru of Indiana Automotive, Inc. (SIA)• Subaru of America, Inc. (SOA)• Subaru Canada, Inc. (SCI)• Subaru Research & Development, Inc. (SRD)

Companies comprising the domestic affiliated companies’ working group*Group certification

Environment Action PlanAmong various environmental problems, climate change in particular has significant impacts on societies and economies. Accordingly,
measures must be implemented to deal with climate change as a pressing issue from a long-term perspective. SUBARU regards climatechange countermeasures as a priority and has set a target of reducing the total amount of CO2 emitted directly by the SUBARU Group(Scope 1 and 2 emissions) by 30% relative to FYE March 2017 levels by FYE March 2031.
Although it will not be easy for SUBARU to meet this reduction target while it continues to grow, we believe it is important to sharethe same goal with society and work to “keep the increase in global average temperature to well below 2°C above pre-industrial levels,”
as upheld in the Paris Agreement.
Accordingly, we have drawn up forEnvironment Action Plan 2030 (Scope 1 and 2 emissions)the period up to FYE March 2031 andPhase II: Execution

are examining specific measures tobe taken based on that roadmap.
Presently, we are in Phase I of the

2019
(FYE)

2021

roadmap and working to reduce our

Proactively introduce renewable energy and CO2-free
power sources in addition to comprehensively savingenergy, anticipating increased CO2 emissions causedby expanded production activities

2026

CO2 emissions by 20,000 tons, which

FYE M

arch 20

Targrtconstitutes around 3% of the SUBARUGroup’s annual direct CO2 emissions,Phase I: Preparation

Phase III: Finishingearlier than planned by the end of• Formulate the next Environment ActionPlan• Substantially reduce CO2 emissions
ahead of schedule while continuing to
implement the current 6th Voluntary Plan

Examine and implement all possible CO2
reduction measures from a group-wide
perspective, taking into consideration external
factors such as technological innovation,markets, and regulations

FYE March 2021.

31

Direct emissions(Scope 1 and 2
emissions)
Reduction of CO2
emissions by 30%

Annual Report 2020

62

Environmental Initiatives

Climate Change
Recognizing that climate change is one of the most pressing global issues, SUBARU is committed to contributing to the establishment ofa decarbonized society in support of the purpose of the Paris Agreement to decarbonize the world at the earliest possible time in thesecond half of the 21st century.

Risks and Opportunities Identified
In order to ensure sustainable business activities, SUBARU works to understand risks and opportunities associated with climate change.
Risks identified at present are as follows: climate change initiatives may not progress as planned, or transition risks and physical risks which
are almost unforeseeable at this time may develop into actual issues wielding a serious impact on the SUBARU Group’s businessperformance and financial standing; and these scenarios involve a number of possible difficult situations, such as an increase in R&D andother expenses, a decline in customer satisfaction and damaged brand images resulting in lost sales opportunities, and extreme weather
disrupting procurement/production/logistics activities. On the other hand, adequate progress of efforts against climate change could
provide opportunities for creating new markets and employment as well as reducing capital and energy costs.

Main Risks Identified
Relating to Business Management in General(1)	If SUBARU fails to implement adequate initiatives to achieve low-carbon/zero-carbon outcomes, its brand value could be harmed, which could
affect the company’s sales and recruiting ability. Capital costs could also rise, due to increased difficulty in obtaining financing from mediumand long-term investors.
(2)	There is an argument that nationally determined contributions (NDCs) need to be expanded to be able to achieve the Paris Agreement’s “wellbelow 2°C” target, and thus countries may revise their NDCs to set more stringent targets. Such revisions could have a significant impact on
SUBARU’s business activities.
(3)	As an impact of climate change, extreme torrential rain will frequently cause floods in various locations, which could pose risks of SUBARU’soperations being affected by disrupted supply of raw materials and submerged factories.

Relating to Products(1)	If SUBARU fails to meet fuel economy regulations imposed in Japan, the U.S., Europe, and China, the company could incur additional costs orlosses related to negative incentives, such as fines or non-penal fines for legal violation, and credit purchase for unmet standards. Also, someof our products could fail to satisfy certain fuel economy standards, resulting in restrained sales opportunities.
(2)	At present, it is difficult to predict technological progress and price optimization for electrification, which will likely cause a substantial gap withthe real state of market needs.
		

In such a situation, SUBARU could incur unnecessary and excessive R&D costs while facing a decline in customer satisfaction, resulting in

unexpected losses and reduced sales opportunities as well as hampered advancement of the company’s electrification efforts.
(3)	To promote electrification, it is crucial to ensure profitability for the entire product cycle ranging from procurement and use to disposal. Thus, it
is essential to involve SUBARU’s upstream and downstream partners in exerting efforts toward this end. Failure to do this could render thecompany unable to meet the profitability goal for the entire product life cycle.
(4)	SUBARU views electrification as a medium- to long-term steady trend, and also anticipates the possibility of its swift and sweeping penetrationof the market at some stage. SUBARU could be unprepared for such prospect in terms of technology and timely product lineups, and thus
suffer from a resultant loss of product sales opportunities.
(5)	There is a possibility that SUBARU might suffer from shortages of natural resources used for tires and metal resources for electrification
technologies.

Related to Production Phase(1)	If SUBARU continues to use energy derived from fossil fuels, it could incur rising costs, due not only to geopolitical factors associated withpetroleum and the like, but also to carbon taxes, emission quotas, and other government policies and regulations.
(2)	If use of renewable energy does not grow as expected, SUBARU could face a slower progress in achieving its Scope 1 and 2 emissions
reduction goals.

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Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Main Opportunities Identified(1)	If SUBARU advances its efforts to make products more environmentally friendly as planned and global climate change mitigation/adaptation
efforts progress adequately, the company will be able to maintain its key markets, and this scenario also implies a possibility of the company
creating new markets through receiving support for its safe and reliable products, a source of its strength, even in the face of intensifying
extreme weather conditions that are to some extent unavoidable in certain parts of the world.
(2)	Through contributing to addressing climate change issues, SUBARU could increase its brand value, thereby enhancing its sales and recruiting
ability. This could make it easier for the company to obtain financing from investors, thereby lowering capital costs.
(3)	Regarding energy use during the production phase, by transitioning to renewable energy while at the same time giving due consideration tocost-effectiveness, SUBARU could overcome the risk of being exposed to price fluctuations involved in energy derived from fossil fuels, thereby
preventing future cost increases.

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

Medium- to Long-term Goals (Long-term Visions and Milestones)
In order to contribute to a decarbonized society, SUBARU has set long-term goals (long-term visions) for 2050 and medium-term goals(milestones) for around 2030, regarding the product and production phases (Scopes 1 and 2).
Category

Products(Scope 3)

Plants and offices(Scope 1 and 2)

Target year

Goal

2050

Reduce average well-to-wheel CO 2 emissions from new vehicles (in operation) by 90% or more compared to2010 levels

Early 2030s

Apply electrification technologies to all SUBARU vehicles produced and sold worldwide

Up to 2030

Make at least 40% of SUBARU global sales electric vehicles (EVs) or hybrid electric vehicles (HEVs)

FYE March 2051

Achieve carbon neutrality

FYE March 2031

Reduce CO 2 emissions by 30% compared with FYE March 2017 (total volume basis)

Aiming at a 20,000 t-CO2 Reduction from Plants and Offices
The SUBARU Group has set up a target of reducing CO2 generated from its plants and offices by 30% (total volume basis) by FYE March
2031 from FYE March 2017, as stipulated in the SUBARU Environmental Action Plan 2030. As a step toward accomplishing this target, weare promoting group-wide efforts to eliminate 20,000 t-CO2 by FYE March 2021.
In FYE March 2020, our efforts resulted in a reduction of 18,000 t-CO2. In FYE March 2021, we will seek to achieve a 23,000 t-CO2
reduction, exceeding the target for the milestone year.

Efforts to Achieve the Target of Reducing 20,000 t-CO2 Emissions
Captive-consumption solar power system

Gunma Oizumi Plant

Purchase of hydroelectricity

Renewable energy
system installation

Renewable energy
electricity purchase

Utsunomiya South Plant/
2nd South Plant

Renewable energy
certificates utilization

SUBARU Accessory Center,
etc.

Head Office and
SUBARU Training CenterTokyo OfficeGunma Main Plant

Annual Report 202064

Compliance Initiatives
Approach to Compliance
At SUBARU, compliance is positioned as one of our most important management issues in our Corporate Governance Guidelines. We
instill in each employee a strong awareness that thorough group-wide compliance forms the foundation of SUBARU’s management, that wemust observe all laws and internal regulations relevant to our business activities, that our corporate activities must be executed in mannerthat is fair and just and in conformance with general social ethics, common sense and standards, and that these principles should bereflected in their actions, create and operate a compliance system/organization, and carry out activities such as providing all kinds oftraining for these purposes.

Corporate Code of Conduct and Conduct Guidelines
At SUBARU, we have set forth the Corporate Code of Conduct (P.01) and Conduct Guidelines as compliance criteria for the purpose of
putting our view of compliance as important into practice in our corporate activities. Its contents are detailed in the Compliance Manualthat every Subaru Group employee owns, while the Compliance Manual: Essential Version provides a concise summary, promoting
thorough enforcement in every day action.
Corporate Code of Conduct
Based on SUBARU’s Corporate Philosophy, the Corporate Code of Conduct sets forth the basic policy that all executives and employees mustobserve for customers, business partners, shareholders, regional communities, and all stakeholders.
Conduct Guidelines
These guidelines specifically set forth standards for actions in order to put the basic policy as exemplified by the Corporate Code of Conduct into
practice in the daily business activities of all executives and workers.

Rules for Compliance
SUBARU has Compliance Regulations which set forth the systems, organization and management processes related to compliance. In FYEMarch 2020, for the purpose of promoting better understanding of the systems, organization and management processes related tocompliance and striving for thorough implementation of efforts, we performed a systematic review of the Compliance Regulations, after
which the Compliance Committee deliberated and approved the establishment and revision of several rules related to compliance.
Starting in FYE March 2021, we are further enhancing efforts on compliance based on these rules.

Management System of Compliance
SUBARU has established the Compliance Committee as a groupwide organization to promote compliance and to deliberate, discuss,
make decisions, and exchange information related to important matters. Also, each department formulates their own implementation
plan (compliance program) to promote compliance every fiscal year, and moves forward with continuous, systematic independent
activities. In FYE March 2020, the Directorand Executive Vice President was newly
appointed Chief Risk Management
Officer (CRMO) in April, and appointed
Chair of the Committee. Also in April,Compliance System
AuditorCEOInternal audit
results report

the newly established Risk Management

efforts were carried out for the purpose

Administrative work

Audit
Department/Internal Audit

the direction of the Committee Chair.
Committee’s name was changed to the<Meeting of persons in charge of risk
management>
Persons in charge of risk management

Committee, and it will deliberate,

to risk management, in addition to thoserelated to compliance.

65

Annual Report 2020

Discussion/reporting concerning scandals
Report compliance situation

Chief Risk Management Officer

Risk Management and Complianceinformation on important matters related

Report important matters<Secretariat>
Risk Management and Compliance Office(Risk Management and Compliance
Oversight Department)
Discussion/cooperation

Also, starting in FYE March 2021, thediscuss, make decisions, and exchange<Risk Management and Compliance Committee>

Risk Management andCompliance Committee members

secretariat for the Committee. These

initiatives related to compliance under

Report on matters to deliberate/decide

Risk Management andCompliance Committee Chair (CRMO)

and Compliance Office was appointedof accelerating global, groupwide

Board of Directors
Establish

Conduct internal audit

Each division, department, andin-house company
Affiliated companies

Discussion/cooperation

Report extremely
important, highly urgent
compliance issues

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Compliance Hotline
When regular and temporary employees of the SUBARU Group detect a problem related to compliance in the group, they can consult
with the Hotline Desk by using the Compliance Hotline. Based on the relevant regulations, the Hotline Desk is where employees affiliatedwith the appointed Risk Management and Compliance Office directly receive mail, telephone calls, and e-mail, investigate facts, andprovide response. We have also established a desk outside the company staffed by external specialists to increase the hours in which
service is available and to increase the confidentiality of those contacting the desk. The Desk works to quickly resolve consultation matters
upon conducting a fact-finding investigation headed by the Risk Management and Compliance Office Manager. Also, it reports to theproper management members and the Risk Management and Compliance Committee, working toward preventive measures.
We strive to instill a mindset of being assertive regarding use of the system and to improve compliance awareness through efforts tomake the existence of the system common knowledge. This has increased the number of consultations, and we have seen improvementsin the management of the system, such as an increase in the number of events that lead to improvements in the corporate culture in
addition to proper response and issue resolution.

FYE March 2020, Itemization of the Contents of Consultations with the Compliance Hotline
Itemization of the contents of consultations

NumberWorkplace environment

14

Labor related

68

Personal relationships, suspicion of harassment

84

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

50

Total

216

Compliance Hotline (Consultation and resolution procedure)Compliance Activities
Implementation of Training
In enforcing thorough compliance, we believe that initiatives in which theentire SUBARU Group acts in concert are necessary. We conduct
compliance training and training for legal affairs in practical business for all
Group employees organized by our Legal Department, Risk Management
and Compliance Office, and human resource and education departments.
Also, each department and affiliated company creates their own uniqueeducation plan based on their compliance program, supplemented withstudy groups on important laws related to their work and complianceenlightenment training.

At the Compliance training

Annual Report 2020

66

Compliance Initiatives

In FYE March 2020, we started offering the compliance training we have been providing for employees of a designated rank to all
regular and non-regular employees in an effort to further expand the range of compliance. Also, in addition to a training course with Risk
Management and Compliance Office members serving as the instructors, we also established a course in which executives from various
departments speak from their own experience, promoting further understanding of compliance on the part of our employees andencouraging communication with executives. In FYE March 2020, approximately 7,700 people participated in trainings conducted by or
involving the Legal Department and the Risk Management and Compliance Office.

Compliance Implementation Support Tools
In order to promote compliance in everyday work, we create and provide various
implementation support tools other than the Compliance Manual, such as inareas of specialization at affiliated companies.
To make knowledge of the Compliance Hotline common, we distribute cards
containing information on the framework of the system and the contact addressfor consulting services, and also put up posters in all workplaces. In FYE March
2019, we updated the design of the information cards and posters to deliver amessage that encourages employees to proactively use the system even forthings that feel only slightly suspicious. In addition, we are making efforts for thetimely report of highly urgent information and to call the entire group’s attention

Compliance Hotline card

to such matters.

Enactment of the Tax Policy
SUBARU enacted its Tax Policy in June 2020. This basic policy sets forth our posture and way of thinking toward the tax laws we should
comply with when paying the appropriate amount of tax.

Tax Policy
The SUBARU Group is able to conduct its business operations thanks to support from society, and the company strongly recognizes
the importance of returning profits to society. The SUBARU Group considers fulfilling its tax obligations to be an essential elementof this. The SUBARU Group strives to ensure compliance with the tax laws and regulations of each country and jurisdiction,
pursuant to the international rules and standards set out by international organizations, thereby fulfilling its societal obligations
through appropriate tax payment, while aiming for sustainable growth through sound business activities.
1. Compliance with tax laws and tax-related regulations
	The SUBARU Group undertakes applicable tax return filing and tax payment procedures in compliance with the tax laws and taxrelated regulations of each country, and relevant tax treaties.
2. Tax corporate governance	The SUBARU Group establishes and implements a structure to appropriately identify, manage and report tax risk. In order to
respond to changes in its businesses, and in light of complex tax operations, the SUBARU Group enhances this structure by
assigning to it employees with tax expertise. Furthermore, the SUBARU Group raises awareness and provides guidance andconsultation regarding tax compliance to SUBARU Group companies, making use of external professionals, and properly fulfills
its tax payment obligations.
3. Appropriate intercompany transaction prices (Transfer Pricing)	The SUBARU Group conducts inter-group transactions and transactions with unrelated parties applying economically rational(arm’s length) prices, and does not inappropriately set prices through arbitrary manipulation.
4. Compliance with Anti-Tax Haven Rules
	The SUBARU Group does not establish entities that are unnecessary for its business with the aim of tax avoidance, and the
SUBARU Group pays taxes pursuant to the substance of its businesses in accordance with the tax laws and regulations.
5. Relationship with tax authorities
	The SUBARU Group strives to maintain trust with tax authorities by dealing with the authorities in a good faith manner; forexample, by providing fact-based information in an appropriate and timely manner in response to requests.

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Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Human Resources Initiatives
Human Resources Development

Approach to Human Resources Development
The SUBARU Group aspires to grow “from a company making things, to a company making people smile,” as upheld as the goal of the
STEP mid-term management vision, and to become a company that is trusted by customers and other stakeholders. We believe that thekey to realizing this is the entire workforce of the SUBARU Group. To achieve STEP, the SUBARU Group will work to provide an environmentthat enables all employees to both grow and feel pride in their work, and will reform the corporate culture to create a company that isopen to new ideas so that each and every employee can readily contribute their thoughts and opinions. By empowering employees toexert their full potential toward enhancing the appeal of the SUBARU brand, we will continue to boost the Group’s corporate value.

Training and Education
SUBARU has positioned human resource development as an extremely important element of our efforts to achieve STEP. To help
employees remain motivated to achieve their own professional development, SUBARU utilizes the personnel system, which consists ofoccupational skill certification programs, a performance appraisal system, a goal management system, and personnel rotations, as well as
the education and training systems, as a tool for the development of human resources.
In addition, SUBARU’s affiliated companies in Japan and overseas promote initiatives in accordance with the business domain of eachcompany and regional characteristics.

Regular Reviews and Career Development
Through the operation of the personnel system, each employee’s job outcomes and performance levels for skills are objectively
evaluated. In addition, under the goal management system, all SUBARU employees have an interview four times a year (for goal setting,interim confirmation, outcome confirmation, and evaluation sharing) and the supervisors and subordinates agree on the challenges
necessary for growth. Both men and women are treated appropriately and there is no gender gap in the basic salary.

Programs for Upgrading Skills
SUBARU has put in place a wide-ranging training system to enable all employees to fulfill the roles required of them at eachqualification level.

Rank-specific Education
Rank-specific education takes the form of newly appointed personnel training, which is provided to all employees at the time ofpromotion and tailored to their qualifications. SUBARU has established programs that facilitate growth through practice andreflection to enable employees to assuredly demonstrate the abilities required for each qualification. For regular employees, thesemainly focus on problem-solving, while for mid-level and manager class employees, they include human resource development
and leadership. In FYE March 2020, about 2,000 employees took and completed these programs.

Managerial Talent Development
SUBARU offers training for selected mid-level and manager class employees with the aim of continually fostering the next
generation of managerial talent.

Education by Job Skill
SUBARU has established an in-house training program called the “professional program,” which employees are encouraged toapply to in order to improve their business skills and acquire new ones. SUBARU also offers support, mainly for mid-level
employees, to attend business school.

Globally Focused Talent Development
SUBARU has developed programs focused primarily on improving foreign language skills and encourages wide-ranging skills
development tailored to the challenges and operational needs of individual employees.

Annual Report 202068

Human Resources Initiatives

Diversity

Approach to Diversity
For the SUBARU Group to continue offering customers the unique value of the SUBARU brand, SUBARU employees need to be able toexert their unique talents informed by their own personal values and characteristics. This is why SUBARU values the differences in gender,
nationality, culture, and lifestyle among its employees and strives to create workplace environments where everyone can make ameaningful contribution. In addition, SUBARU’s affiliated companies in Japan and overseas promote initiatives in accordance with thebusiness domain of each company and regional characteristics.

Diversity System
The Diversity Promotion Office leads the efforts of the SUBARU Group in relation to diversity. The Office has designated “supporting
female employees to take on more active roles,” “promoting the employment of people with disabilities,” “promoting the reemploymentof post-retirement age workers,” and “promoting the recruitment of non-Japanese workers” as priority themes. Among them, SUBARU
has placed particular emphasis on efforts to support and empower female employees.

Initiatives for Diversity Promotion
Empowerment of Female Employees
SUBARU is promoting initiatives for the empowerment of female employees, mainly by supporting employees in their efforts to balance
work and childcare and in their pursuit of career development.
SUBARU set itself the target of increasing the number of female managers by five times the 2014 level in 2020, and achieved this goalin 2019, a year ahead of schedule. SUBARU is further strengthening its efforts aimed at developing female managers by setting a newtarget to increase the number of female managers to 12 times or more the 2014 level by 2025.
To support career development, SUBARU has conducted a wide range of initiatives, including the mentor system and the careerdevelopment training for female team leaders. We believe that sharing development plans with supervisors of female employees is
indispensable for the career development of female employees, and each year we provide opportunities for the supervisors to discusssuch plans with the Human Resources Department.
In FYE March 2020, sessions to share development plans were held for general managers in all development-related departments,
where the participants confirmed the promotion of a training-based development policy. In FYE March 2021, we will introduce a new
career vision training program for female employees in their 20s with the aim of fostering career awareness among women at an earlystage of their careers. We will further strengthen our efforts to create a workplace environment in which they can plan their own career
paths and make a meaningful contribution on a level playing field. In addition, we conduct interviews with employees returning to work
after childcare leave to support the early resumption of their full roster of duties. Our aim is to ease their anxiety about building a career
while balancing work and family responsibilities and to foster their career awareness.
In the future, SUBARU will further strengthen job rotation, which helps female employees to expand their work horizon and develop
themselves to a greater degree.
Status of Female Employees (SUBARU non-consolidated)FYE March 2020

Proportion of female employees

7.1%

Proportion of female managers

1.9%

Breakdown

69

General managers and equivalent positions

1.3%

Managers and equivalent positions

2.0%

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Employment of People with Disabilities
SUBARU strives to create workplace environments in which people with disabilities can truly shine. To achieve this goal, SUBARU
leverages the ideas and opinions of our employees with disabilities and their family members.
In FYE March 2020, SUBARU held study group sessions for personnel in charge of hiring people with disabilities at our affiliates inJapan to share awareness toward achieving the legally prescribed rate of employment of people with disabilities on a groupwide basis.
As of April 2020, SUBARU has 291 employees with disabilities, mainly engaged in manufacturing work, and the percentage of employeeswith disabilities is 2.3%.

Specified Subsidiary Company SUBARU Bloom Co., Ltd.
SUBARU Bloom Co., Ltd. (SBC) proactively employs people with disabilities. As of
April 2020, 69 employees and 18 instructors engage in the cleaning service provided
by SBC to SUBARU’s dormitories and plants. As a company proactively employing
people with disabilities, SBC has registered with the “Supporter Company for
Employment of People with Disabilities” program implemented by Gunma
Prefecture’s Department of Employment Support for People with Disabilities.
In FYE March 2020, SBC widely accepted study visits by local people and also
introduced its initiatives to those in charge of the employment of students bycompanies at two neighboring special education schools.
SBC will continue to expand its network for the employment of people withdisabilities while working to stabilize the management of the company and improve
its operational quality. As a company that helps individual employees to “bloom likeflowers,” SBC will strive for the stability of management, foster employment, andCertificate of Supporter Company for
Employment of People with Disabilities
issued by Gunma Prefecture

make local contributions.

Reemployment of Retirees
SUBARU introduced the Senior Partner Program and the Senior Staff Program with an eye to helping solve employment problems facedby employees after retiring at the age of 60 and to make more effective use of human resources. We have reviewed the programs toproactively utilize the experience and abilities of retired employees for the education of younger employees and to pass down the skills
possessed by the retirees to future generations. As a result, all those who want to be reemployed can now work for SUBARU and otherGroup companies. (In FYE March 2020, the number of employees aged 60 and older totaled 461)

Employment of Non-Japanese Employees
SUBARU employs non-Japanese new graduates and mid-career workers as regular and temporary employees regardless of theirnationality. In order to help non-Japanese employees to deepen their understanding of their work, we prepare our safety and quality
policy-related documents, work manuals, and other documents in multiple languages. At the Gunma Plant with lots of non-Japaneseemployees, we have stationed interpreters in English, Portuguese, Tagalog, Spanish, Chinese and other languages at each of the facilities
to foster communication between Japanese and non-Japanese employees. Moreover, we provide Japanese employees with opportunities
to receive language training and engage in overseas training, thereby helping them to enhance their ability to communicate with people
from other countries and understand cultural differences. These initiatives contribute to revitalizing the company and securing humanresources in a stable manner.

Annual Report 202070

Human Resources Initiatives

Employee
Diversity
at SOAAt Subaru of America, Inc. (SOA), a group of employees with diverse experiences, points ofview and values learn from each other to grow, leading to the creation of the next generation ofbusiness and makes the company stronger. The principles of diversity, equity, and inclusion are
woven into the corporate organization of SUBARU. Five employee groups have been active,
born from employee activities.

Women’s Network

BLENDSThis group was established based on
the idea that supporting female
coworkers leads to an advancement of
workplace policies for all employees. In
addition to creating opportunities forcareer advancement for all employees
regardless of their gender, it is also aplace to for female employees to build
their networks.

This group offers support for workers
with African or Latinx backgrounds
as a place that aims to implement
the opinions of employees.
It supports cultural events andactivities rooted in regions topromote a corporate culture ofdiversity, contributing to creating abroad, open community.

Out + Ally
The first employee group funded at
SOA, it is an alliance group between
LGBTQ+ and heterosexual/cisgender member. Their activities
include support for education,
examination, and counseling for
those living with HIV/AIDS,
assistance with meal provision,and more.

SARGE
This group is for former servicepersons as well as their families andsupporters. Once military service is completed, it can bechallenging to return to civilian life. Employees created this groupto share useful information, create a network, and provide a place
for communication.

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Annual Report 2020

EVOLVE
This group was founded to improve physical and mental
health of employees while enjoying various meetings andget-togethers for encouragement. Staring with providing
useful health information, the group supports andencourages employee self-improvement.

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Work-Life BalanceApproach to Work-Life Balance
As a precondition to increase customer satisfaction, the SUBARU Group believes it is vital to provide employees with workplaces where
they can work with vigor and peace of mind and demonstrate their abilities to the fullest. In order to help diverse employees to maintaintheir work-life balance, we are diversifying work style options and expanding the relevant systems. Moreover, our affiliated companies inJapan and abroad are fostering initiatives suitable for local business conditions and regional characteristics.

Initiatives for Work-Life Balance
Work Style Reforms
SUBARU’s response to the Act on the Arrangement of Related Acts to Promote Work Style Reform1
Item

Details

Accurate calculation of employees’ working hours

In July 2018, introduced a company-wide attendance management system for the central
management of all electromagnetic records (computer logs and clock-in and clock-out records)
for the accurate calculation of employees’ working hours.

Encouraging employees to take atleast five paid days off per year

In FYE March 2020, began implementing measures for all employees, including an initiative toencourage employees who are newly entitled to take 10 or more paid days off to take at least
five days off within seven months after the entitlement. Also established operational rules toensure that all employees can take at least five paid days off per year.

Imposing an upper limit on overtime working hours

Has been limiting the number of overtime work hours to 590 hours and below annually and to79 hours and below monthly, setting the criteria stricter than those stipulated by law.

Raising the premium pay rate forovertime work exceeding 60 hours per monthHas been implementing necessary measures since FYE March 2011.

Equal pay for equal work

Began reviewing the amount of allowances granted to non-regular employees in FYE March
2021.

1 This law was enacted in June 2018 to revise the labor-related laws to foster work style reforms

Appropriate Management of Working Hours
When introducing a new attendance management system in FYE March 2019 to manage employees’ working hours in the unit of one
minute, we recalculated employees’ past working hours in reference to electromagnetic records such as computer logs. As a result, it was
revealed that not all employees’ working hours had been appropriately managed. We therefore conducted a survey targeting all
employees and made appropriate payments in a retrospective manner to employees who were confirmed to have been unpaid for part oftheir working hours.

Reduction of Long Working Hours
In addition to “no-overtime days,” SUBARU also established in FYE March 2016 “ultra no-overtime day,” on which all managers andgeneral employees leave work on time across its sites. Moreover, mainly targeting the staff of the development and administrative
departments of the Gunma Plant and the development department of the Tokyo Office, we make it a rule to lock the doors on the officefloor at 10:00 p.m., thereby making all those working on the floor leave before the doors are locked. By clearly imposing limits on overtime
work, we are helping employees to be more conscious about their working hours.

Flex-time System
SUBARU introduced the flex-time system in FYE March 1999. Subsequently in FYE March 2017, we reduced the number of the core
working hours for the system from four to two hours, thereby enabling employees to work in styles more suitable for their job details andjob schedules. They can now control their working hours more flexibly. For example, they can leave work earlier during the low-peakperiod for their work. The flex-time system thus contributes to reducing employees’ working hours and improving their private life.

Annual Report 202072

Non-Financial Information
Number of Employees
SUBARU consolidated number of employees
Total number of employees (persons)FYE March 2016 FYE March 2017 FYE March 2018 FYE March 2019 FYE March 2020
31,151SUBARU non-consolidated number of employees

32,59933,54434,20035,034FYE March 2016 FYE March 2017 FYE March 2018 FYE March 2019 FYE March 2020
14,787

15,217

15,53015,885

16,318Male

13,85814,22914,477

14,774

14,823

Female2

929

988

1,053

1,111

1,139

Total number of employees (persons)

1

2

356

Part-time3
Average age (ages)

38.5

38.5

38.6

38.5

37.4

Average length of employment (years)

16.0

15.8

15.9

15.8

15.8

Male

1,032

1,028

1,020

1,030

1,051

Female

7

11

13

14

20

Male

483

479

494

473

498

Female

36

69

80

74

68

Male

267

397

221

317

161

Number of managers (persons)

Number of new graduate hires (persons)

Number of mid-career hires (persons)Female

23

23

15

15

24

Total number of people who quit the company (persons)

189

258

249

339

329

1 Number of employees excludes executive officers, advisors, and dispatch employees
2 Regular employees
3 Disclosed from FYE March 2020

Number of Employees who Took Childcare Leave (SUBARU non-consolidated)
System for employees to take leave for childcare
Total number of employees who took childcare leave(persons)

FYE March 2016 FYE March 2017 FYE March 2018 FYE March 2019 FYE March 2020
107

96

98

101

122

Male

6

8

10

21

42

Female

101

88

88

80

80

Male

100

100

100

100

100

Female

98

100

100

97.5

95

Male

100

87.5

83.3

100

85

Female

95

100

97.2

90

95

Rate of employee who returned to work (%)

Rate of employees who remained at thecompany one year after returning to work (%)

Number of Employees who Took Long-term Care Leave (SUBARU non-consolidated)
System for employees to take leave to take care of thefamily member in need of long-term care
Number of employees who took long-term care leave(persons)

FYE March 2016 FYE March 2017 FYE March 2018 FYE March 2019 FYE March 2020
9

4

5

9

30

April 2016

April 2017

April 2018

April 2019

April 2020

Number of employees with disabilities (persons)

247

261

269

280

291

Employment rate of people with disabilities (%)

2.13

2.17

2.28

2.30

2.30

Employment of People with Disabilities

45

4 According to the method of calculation specified in the Act on Employment Promotion etc., of Persons with Disabilities, one person with severe disabilities is counted as two persons
with disabilities
5 Including the number of employees with disabilities at SUBARU’s specified subsidiary company

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Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Human Rights Initiatives
Approach to Human Rights
The SUBARU Group puts people first and engages in people-oriented manufacturing. Based on the belief that respect for the rights andcharacteristics of individuals is an important management issue for realizing SUBARU’s corporate philosophy of promoting harmony
between people, society, and the environment while contributing to the prosperity of society, the SUBARU Group clarified its
responsibilities to respect human rights by establishing its “Human Rights Policy” in April 2020.
Human Rights Policy was formulated in full considerations of stakeholders’ views and expectations, incorporating outside experts’
insights and discussion contents with overseas business sites. This policy is run globally and appropriately, being ready to address futureenvironmental changes.
Link

For further details: Human Rights Policy

Management System
We have appointed Representative Director, President and CEO as a director who is responsible for leading the process of developing
the Policy and assigning resources as needed for its implementation and continued improvement.
The Representative Director, President and CEO also serves as head of the CSR Committee, where we hold discussions on humanrights issues and initiatives.

Initiatives to Promote Respect for Human Rights
Based on the belief that respect for the rights and characteristics of individuals is an important management issue for realizing SUBARU’s
corporate philosophy, the CSR Committee decided to form the Human Rights Task Team in March 2019, which was materialized in April
2019 and is comprised of the Human Resources Department, IR Department, Sustainability Promotion Department, and Procurement
Planning Department. As a result of multiple discussions with outside experts and specialists, the Task Team formulated the Human Rights
Policy in April 2020. It sets forth that the SUBARU Group’s universal sense of purpose in acting for the good of people not only applies toour customers and employees, but also extends across the entire value chain. Going forward, the SUBARU Group will continue managing
its operations in line with respect for human rights.

Activities to Raise Awareness of Human Rights
The SUBARU Group’s Human Rights Policy states that it “expects and encourages our business partners and other stakeholders
associated with our operations, including those in the supply chain, to respect human rights in accordance with this policy.” We have been
conducting SUBARU’s new employee training and manager training on the theme of diversity, and going forward, we will analyze andconduct awareness raising activities in order to further increase employees’ respect for human rights.

Preventing Harassment
The SUBARU Group regards the prevention of discrimination and harassment as important issues, and this is expressed in the Human
Rights Policy. Seeking to prevent all forms of harassment, we prohibit such behavior in our work regulations, and it is also mentioned in
the Conduct Guidelines. We have prepared the Power Harassment Explanatory Booklet, and ensure that all SUBARU employees areaware of its contents.
Also, we distribute the Power Harassment Prevention Handbook to all managers and supervisors, and make efforts to prevent
harassment.
We have set up a Compliance Hotline (P.66) and a Harassment Advice Line internally and externally to accept requests for
consultations regarding harassment, creating an environment in which all employees, including those at group companies, can receive
advice. By creating a management system in which it is easy to seek advice, we encourage carefree consultations, and attempt to detect
and resolve problems at an early stage.

Annual Report 202074

Social Contribution Initiatives
Approach to Social Contribution

The Four Fields of Social Contribution Initiatives

The SUBARU Group has developed its social contribution policy in the hopeof ingraining the practice of social contribution into corporate culture and tofoster sincere commitment to such practice. In accordance with the policy, weSports andculturepromote social contribution activities in the four fields—activity in thecommunity, environment, road traffic safety, and sports and culture—which
we have selected as befitting a socially responsible transportation equipment
manufacturer.

Activity in thecommunity

In FYE March 2020, we established a social contribution vision for 2025, in
addition to a set of 2025 visions for the Group’s Six Priority Areas for CSR.
Aiming at this vision, we will pursue social contribution initiatives based on thedecision to shift “From being a company making things, to a company making

Road traffic
safetypeople smile,” as described in STEP, our mid-term management vision.

Environment

Social Contribution Policy
1. We contribute to the development of science and technology andautomobile culture and to the promotion of road safety.
2. We contribute to the fostering of human resources who under-

Fields with close connections to the
SUBARU Group’s business activities

stand the pleasure, importance and preciousness of creative
manufacturing.
3. We contribute to the development of the communities in which
we operate.

Fields where we engage in activities that
only the SUBARU Group can undertake

4. We support each other in contributing to society as good citizens.

Social Contribution Management System
SUBARU has established the Social Contribution Committee to actively promote and continue social contribution activities that make useof our technology and expertise. The Committee was reorganized in April 2019 during corporate restructuring. The newly appointed chairis also the director in charge of the Sustainability Promotion Department, which was assigned to serve as secretariat. Under theCommittee, the cross-organizational Planning Subcommittee has been created to discuss issues related to companywide activities,
ranging from planning and preparation to implementation, evaluation and review. The Committee meets every six months to compile
reported activity results and issues, and discuss improvement plans to invigorate efforts.

Social Contribution Committee:
Organization Chart

CSR Committee
Chair: Representative Director and President
ReportReview

Social Contribution Committee
Chair: Director in charge of
Sustainability Promotion Department

Secretariat: Sustainability Promotion Department

Head Officemember75

Annual Report 2020Tokyo
memberGunma
memberUtsunomiya
memberPlanning
Subcommittee

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Promoting initiatives under fivepromises to embody Resonanceand Coexistence throughout
the United States
Subaru Loves the Earth
There are many SUBARU customers wholove nature. The Subaru Love Promise that
SOA is promoting includes many activities
to protect the natural environment, one ofwhich is providing support for one ofwhich is National Park Partnership. They
have offered donations continuously since2013, and the funds have been used for awide range of purposes, from thereduction and recycle of trash at nationalparks to enlightenment activities forattendees. Also, in partnership withcompany TerraCycle, they have been
conducting the collection of waste matterthat is hard to recycle.

Value Creation Outcomes

Corporate Data

Aiming to become more than just an automobile
company, Subaru of America, Inc. (SOA) runs the
Subaru Love Promise program. Committed tomaking the world a better place, we, together with
our retailers, encourage many community partners
to join our activities to spread the Love Promise infive categories.

Subaru Loves to Care
SOA supports the activities ofmany non-profit organizations inorder to contribute to the healthof a diverse range of people
including patients who sufferfrom incurable diseases andpeople with disabilities. They
also support scientific societies
for leukemia and lymphoma, andalso cooperate with our U.S.
dealerships to donate blankets toabout 150,000 patients withblood cancer.

Subaru Loves to Help
SOA offers a wide range of assistancethrough charitable organizations that
support those facing hardships, such as theelderly and children, poor families, anddisaster victims, such as provide meals andthe cars to transport them, offering sheltersand nursing during disasters, andmaintaining disaster vehicles. They also
cooperate on various initiatives with our U.S.
dealerships, such as provide 50 million
meals, through U.S. food bank Feeding
America, to people who have become
unemployed due to the spread of the novel
coronavirus and are facing difficulties inhaving meals.

Subaru Loves Learning

Subaru Loves Pets

There are many children, even in the United States, who
do not have the opportunity to receive an education.
SOA is providing various kinds of support fororganizations that work to support learning and increase
opportunities for education for such children. Since
2015, they have partnered with the American Association
for the Advancement of Science to donate over 270,000
science books to U.S. schools.

The Subaru Love Promise not
only applies to people, but thesafety and peace of mind ofpets and wild animals is also an
important subject. SOA is
involved in support activities forregional organizations engaged
in the care and adoption ofprotected pets, including theAmerican Society for thePrevention of Cruelty to
Animals. Also, to further protect
the safety of animals, SOA is
supporting crash-test foranimals which are conducted by
the Center for Pet Safety.

Annual Report 202076

Consolidated Ten-Year Financial Summary
SUBARU Corporation and its consolidated subsidiaries
Years ended March 31

J-GAAP
’11/3

’12/3

’13/3

’14/3

’15/3

’16/3

Operating results (for the year)
Net sales1

Millions of yen¥1,580,563¥1,517,105¥1,912,968¥2,408,129¥2,877,913¥3,232,258

Cost of sales

Millions of yen

1,241,427

1,222,419

1,501,809

1,728,271

2,017,490

2,187,136

Gross profit

Millions of yen

339,136

294,686

411,159

679,858

860,423

1,045,122

Selling, general andadministrative expenses1

Millions of yen

255,001

250,727

290,748353,369

437,378479,533

Operating income

Millions of yen

84,13543,959120,411

326,489

423,045565,589

Income before income taxes

Millions of yen

63,21452,87993,082

328,865

392,206

619,003

Net income attributable toowners of parent

Millions of yen

50,32638,453

119,588

206,616

261,873436,654

Depreciation/amortization

Millions of yen

56,06258,61161,544

61,486

71,821

72,938

Capital expenditures3

Millions of yen

67,37867,03594,986

98,537

135,346

168,338

R&D expenses

Millions of yen

42,907

48,11549,14160,092

83,535102,373

Net assets

Millions of yen

413,963451,607596,813770,071

1,030,719

1,349,411

Shareholders’ equity

Millions of yen

412,661

450,302595,365

765,544

1,022,417

1,343,732

Total assets4

Millions of yen

1,188,324

1,352,532

1,577,454

1,888,363

2,199,714

2,592,410

34.7

33.3

37.7

40.5

46.5

51.8

2, 3

Financial position (at year-end)

Ratio of shareholders’ equity tototal assets4%

Cash flows
Net cash provided by (used in)operating activities

Millions of yen

138,208

54,865

166,715

313,024

311,543614,256

Net cash provided by (used in)investing activities

Millions of yen(51,109)(26,602)(71,370)(33,903)(172,780)(255,676)

Free cash flow

Millions of yen

87,09928,263

95,345279,121

138,763358,580

Net cash provided by (used in)financing activities

Millions of yen(39,408)

2,586(60,766)(63,011)(110,546)(126,190)

Net income (EPS)

Yen

64.56

49.27

153.23264.76335.57559.54

Net assets (BPS)

Yen

528.88576.97762.87980.981,310.15

1,721.90

Dividends

Yen

9

9

15

53

68

144

Per share

Other information
Non-consolidated exchange rate

Yen to the U.S. dollar

86

79

82

100

108

121

Number of shares issued

Thousands of shares

782,865

782,865

782,865

782,865

782,865

782,865

Number of shareholders5

Persons

34,24033,13928,89051,38670,942

79,594

Number of employees (parent only)

Persons

12,42912,35912,717

13,034

13,883

14,234

Number of employees (consolidated)

Persons

27,29627,12327,50928,54529,774

31,151

Number of units
Consolidated automobile unit sales6

Thousand units

657

640

724

825

911

958

SUBARU vehicle unit production

Thousand units

624

635

692

772

887

929

DomesticThousand units

459

465

511

609

681

693

Overseas7

Thousand units

165

171

181

164

207

236

*The SUBARU Group has voluntarily applied the International Financial Reporting Standards (IFRS) since the first quarter of FYE March 2020
1 Change of accounting policy effective from FYE March 2019 (deduction of sales incentives from net sales); Retroactively applied to the figures for FYE March 2018
2 Accompanying a change in accounting policy effective from the FYE March 2019, change of depreciation method for certain tangible fixed assets of the Company and its majordomestic consolidated subsidiaries from the declining-balance method to the straight-line method
3 Total amount of property, plant and equipment and intangible assets

77

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

IFRS
’17/3

’18/3

’19/3

’19/3

’20/3

¥3,325,992¥3,232,695¥3,160,514

Revenue

2,386,266

2,442,706

2,561,753

Cost of sales

Millions of yen¥3,156,150¥3,344,109

Millions of yen

2,558,262

2,728,605

Gross profit

Millions of yen

939,726

789,989598,761

597,888615,504

Millions of yen

298,875

308,227

Operating results (for the year)

528,916

410,542403,232

Selling, general andadministrative expenses

410,810379,447

195,529

Operating profit

Millions of yen

181,724

210,319394,695

297,340

195,838

Profit before tax

Millions of yen

186,026

207,656

Millions of yen

141,418

152,587

282,354

220,354

147,812

Profit for the period attributable toowners of parent

85,653102,102102,749

Depreciation/amortization

Millions of yen

187,077

192,742

196,616

193,789

169,960

Capital expenditures3

Millions of yen

274,281284,669

114,215

121,084

102,719

R&D expenditures

Millions of yen

102,719

118,735

1,464,888

1,561,023

1,612,825

Total equity

Millions of yen

1,689,899

1,720,123

1,458,664

1,552,844

1,605,291

Equity attributable to owners of parent

Millions of yen

1,682,248

1,712,881

2,762,321

2,866,474

2,982,725

Total assets

Millions of yen

3,180,597

3,293,908

52.8

54.2

53.8

52.9

52.0

3

Financial position (at year-end)

Ratio of equity attributable toowners of parent to total assets%

Cash flows
345,442366,298

174,006

Net cash providedby (used in) operating activities

Millions of yen

250,732

210,134(254,252)(150,711)(158,327)

Net cash providedby (used in) investing activities

Millions of yen(190,119)(25,844)

91,190215,587

15,679

Free cash flows

Millions of yen

60,613

184,290(189,044)(170,937)(96,617)

Net cash providedby (used in) financing activities

Millions of yen(141,551)(15,818)

Profit for the period attributable toowners of parent (EPS)

Yen

184.44198.99Equity attributable to owners of parent (BPS)

Yen

2,193.97

2,233.76

Dividends

Yen

144

100

Per share
365.77287.40192.78

1,902.56

2,025.31

2,093.60

144

144

144

108

111

111

Non-consolidated exchange rate

Yen to the U.S. dollar

111

109

769,175

769,175

769,175

Number of shares issued

Thousands of shares

769,175

769,175

76,471

132,570

133,879

Number of shareholders5

Persons

133,879

145,289

14,70814,87915,274

Number of employees (parent only)

Persons

15,27415,80632,59933,54434,200

Number of employees (consolidated)

Persons

34,20035,034

Consolidated automobile unit sales6

Thousand units

1,001

1,034

SUBARU vehicle unit production

Thousand units

977

1,022

Other information

Number of units
1,065

1,067

1,000

1,033

1,036

977

698

687

605

DomesticThousand units

605

654

335

349

372

Overseas7

Thousand units

372

367

4 Application of Partial Amendments to Accounting Standard for Tax Effect Accounting, effective from FYE March 2019; Retroactively applied to the figures for FYE March 2018
5 Number of shares per trading unit: 100 shares
6 Automobile unit sales of SUBARU CORPORATION and its consolidated subsidiaries
7 U.S. production base Subaru of Indiana Automotive, Inc.

Annual Report 202078

Five-Year Unit Sales
Years ended March 31

Consolidated Automobile Sales by Region(Number of thousand units)

’16/3

’17/3

’18/3

’19/3

’20/3

Japan
LegacyImpreza
ForesterLevorgWRX
ExigaSUBARU BRZOEMOthers
Passenger cars
Minicars
Japan total

11.4
39.8
22.0
23.6
7.0
4.5
2.0
0.9
0.5
111.6
33.7
145.3

11.1
51.6
24.2
23.8
6.6
4.3
2.3
2.1
0.6
126.4
32.5
158.9

9.3
66.7
18.1
21.3
8.3
3.5
1.9
2.9
0.5
132.6
30.9
163.4

6.1
47.4
32.1
13.2
7.1
0.2
1.3
2.7
0.1
110.2
26.0
136.2

4.7
42.9
30.1
11.8
8.5
—
1.2
2.7
—
101.9
23.9
125.8

U.S.
LegacyImpreza
Forester
WRX
AscentTribeca
SUBARU BRZ
U.S. total

221.5
150.9
171.9
33.5
—
0.0
4.7
582.7

275.3
168.6
182.6
37.0
—
0.0
4.0
667.6

234.4
213.7
186.2
32.5
—
0.0
4.2
670.9

213.9
197.0
155.6
26.5
63.1
—
3.7
659.7

197.2
196.5
200.5
21.0
84.6
—
1.8
701.6

CanadaLegacyImpreza
Forester
WRX
AscentSUBARU BRZ
Canada total

13.4
17.1
13.1
3.2
—
0.8
47.6

15.2
18.0
14.2
4.9
—
0.7
53.1

14.2
23.1
14.3
4.5
—
0.7
56.8

13.3
22.1
12.5
4.1
4.1
0.7
56.8

13.0
25.7
14.8
2.5
4.0
0.4
60.4

EuropeLegacyImpreza
ForesterLevorgWRX
SUBARU BRZEurope total

10.4
10.0
13.2
6.6
1.2
0.4
41.8

8.1
12.6
15.2
3.6
0.9
0.6
40.9

6.9
16.6
13.2
1.9
1.2
0.4
40.2

6.5
14.9
9.1
0.8
0.3
0.5
32.1

8.8
13.2
12.7
1.9
—
0.4
37.0

RussiaLegacyImpreza
Forester
WRX
BRZ
Russia total

1.4
0.4
3.9
0.0
0.0
5.7

1.0
0.2
4.2
0.0
—
5.3

1.5
1.6
4.6
0.1
—
7.7

1.4
1.4
5.3
0.0
—
8.1

0.8
1.0
6.8
0.0
—
8.7

Australia
LegacyImpreza
ForesterLevorgWRX
BRZAustralia total

15.7
13.2
12.1
0.0
3.2
0.5
44.6

15.4
15.2
13.1
2.1
2.8
0.4
49.1

13.3
25.1
12.4
1.1
2.8
0.9
55.7

10.6
16.7
12.2
0.3
1.5
0.4
41.7

8.0
16.1
16.9
0.3
1.3
0.5
43.1

79

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

(Number of thousand units)

’16/3

’17/3

’18/3

’19/3

’20/3

China
LegacyImpreza
Forester
BRZ
China total

16.0
6.6
21.3
0.5
44.4

11.3
5.6
26.6
0.6
44.0

5.5
4.6
15.7
1.0
26.9

3.8
3.8
15.2
—
22.8

2.7
1.6
15.6
0.8
20.6

Other regions
LegacyImpreza
ForesterLevorgWRX
AscentBRZ
Other regions total

8.6
19.0
14.5
1.1
2.1
—
0.4
45.8

7.0
18.7
16.9
1.1
1.6
—
0.3
45.6

6.0
22.0
14.5
0.9
1.6
—
0.2
45.2

4.3
19.2
16.9
1.1
1.4
—
0.3
43.3

2.6
15.0
16.7
0.9
1.1
0.0
0.3
36.7

Overseas total

812.6

905.6

903.5

864.6

908.0

Global total

957.9

1,064.5

1,066.9

1,000.8

1,033.9

’16/3
298.3
257.1
272.1
31.3
50.1
4.5
—
0.0
9.4
0.9
33.7
0.5
957.9

’17/3
344.4
290.5
297.0
30.6
53.7
4.3
—
0.0
8.9
2.1
32.5
0.6
1,064.5

’18/3
291.2
373.4
279.0
25.3
51.0
3.5
—
0.0
9.3
2.9
30.9
0.5
1,066.9

’19/3
259.9
322.5
258.8
15.4
41.0
0.2
67.2
—
6.9
2.7
26.0
0.1
1,000.8

Consolidated Automobile Sales by Model
LegacyImpreza
ForesterLevorgWRX
Exiga
AscentTribeca
SUBARU BRZOEMMinicars
OthersGlobal total(Number of thousand units)

Consolidated Automobile Sales by Region
Japan
EuropeU.S.
Australia

CanadaChina

Consolidated Automobile Sales by Model

RussiaOthersLegacyExiga
OEM(Thousand units)
1,200
1,000

’20/3
237.8
312.0
314.1
15.0
34.4
—
88.6
—
5.4
2.7
23.9
—
1,033.9

Impreza
AscentMinicars

ForesterTribeca
OthersLevorgSUBARU BRZ

WRX(Thousand units)
1,200

1,065

1,067

958

1,001

1,034

1,000

800

800

600

600

400

400

200

200

0

1,065

1,067

’17/3

’18/3

958

1,001

1,034

’19/3

’20/3

0

’16/3

’17/3

’18/3

’19/3

’20/3

*Automobile sales of SUBARU CORPORATION and its consolidated subsidiaries’16/3*Automobile sales of SUBARU CORPORATION and its consolidated subsidiaries

Annual Report 2020

80

Financial Review
The SUBARU Group has voluntarily applied the International Financial Reporting Standards (IFRS) since the first quarter of FYE March 2020.
The figures for previous fiscal years have also been recalculated on an IFRS basis.

Business Segments and Scope of Consolidation
The SUBARU Group (“the Group”) consists of three business segments: the core Automotive Business Unit, which accounts forapproximately 95% of consolidated revenue; the Aerospace Company; and Other Businesses, consisting of businesses that do not belong
to either of the other two segments. In the fiscal year ended March 31, 2020 (April 1, 2019 to March 31, 2020; the “fiscal year underreview”), SUBARU CORPORATION (“the Company”), 73 subsidiaries, and 10 equity-method affiliated companies were included in thescope of consolidation.

Overview of Business Performance
Consolidated revenue of the Group for the fiscal year under review resulted in 3,344.1 billion yen, up by 188.0 billion yen (6.0%) comparedwith the previous fiscal year. Key fluctuation factors included 244.6 billion yen increase from the sales volume and mixture as a result of
increased overseas automobile unit sales and 59.4 billion yen decrease due to a currency exchange loss. Operating profit was 210.3 billion
yen, up by 28.6 billion yen (15.7%). Major positive contributions included 39.2 billion yen increase brought by the sales volume andmixture which was a result of automobile unit sales growth in overseas as well as sales incentive control, and 16.1 billion yen decrease inresearch and development (“R&D”) expenses due to the increase in its capitalized portion in conjunction with the adoption of IFRS. Major
negative impact, on the other hand, was 29.0 billion yen loss on currency exchange caused by the yen's appreciation against the U.S.
dollar by 2 yen. Profit before tax resulted in 207.7 billion yen, up by 21.6 billion yen (11.6%) compared with the previous fiscal year. Profit
for the period attributable to owners of parent stood at 152.6 billion yen, up year on year by 11.2 billion yen (7.9%).
The impact of the spread of COVID-19 on the results for the fiscal year under review was minor.
(Amounts in billions of yen, ratios in %)Revenue

Operating profit(Ratio to revenue)

Profit before tax(Ratio to revenue)

Profit for the period
attributable to ownersof parent(Ratio to revenue)

Foreignexchange rates

FYE March 2020

3,344.1

210.3
(6.3)

207.7
(6.2)

152.6
(4.6)

¥109/USD¥121/EURFYE March 2019

3,156.2

181.7
(5.8)

186.0
(5.9)

141.4
(4.5)

¥111/USD¥129/EUR

188.0

28.6

21.6

11.2

6.0

15.7

11.6

7.9

ChangePercentage change

Segment Information
Automotive Business Unit
Revenue from the Automotive Business Unit for the fiscal year under review was 3,193.9 billion yen, up by 186.3 billion yen (6.2%)
compared with the previous fiscal year, and operating profit of the segment resulted in 200.3 billion yen, also up by 28.2 billion yen (16.4%).
Overseas sales rose by 43,000 units (5.0%) to 908,000 units, led by the strong demand for the Forester and Ascent in the U.S. In thedomestic market, unit sales declined by 10,000 units (7.7%) to 126,000 units, as sales of the Impreza and other models decreased. As aresult, combined overseas and domestic unit sales increased by 33,000 units (3.3%) to 1.034 million units.

Aerospace Company
Revenue from the Aerospace Company was 142.1 billion yen, up by 8.0 billion yen (6.0%) compared with the previous fiscal year, as the
production of the Boeing 787 and Boeing 777X increased. In contrast, operating profit of the segment resulted in 5.1 billion yen, downby 1.0 billion yen (15.9%).

Other Businesses
Revenue from Other Businesses was 8.0 billion yen, down by 6.4 billion yen (44.2%), and operating profit was 3.6 billion yen, up by 0.3
billion yen (8.8%), compared with the previous fiscal year.

81

Annual Report 2020

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

(Amounts in billions of yen, ratios in %)RevenueFYE March 2019 FYE March 2020

Operating profit
ChangePercentagechangeFYE March 2019 FYE March 2020

ChangePercentagechangeAutomotive

3,007.6

3,193.9

186.3

6.2

172.1

200.3

28.2

16.4

Aerospace

134.1

142.1

8.0

6.0

6.0

5.1

(1.0)

(15.9)

Others

14.4

8.0

(6.4)

(44.2)

3.3

3.6

0.3

8.8

—

—

—

—

0.3

1.4

1.1

329.8

3,156.2

3,344.1

188.0

6.0

181.7

210.3

28.6

15.7

Adjustment
Total

R&D Expenditures, Capital Expenditures, and Depreciation Expenses
R&D expenditures in the fiscal year under review amounted to 118.7 billion yen, up by 16.0 billion yen (15.6%) compared with the previous
fiscal year. Of that amount, 116.1 billion yen was related to the Automotive Business Unit. Since the IFRS requires a certain portion of R&D
expenditures that meets the set criteria to be capitalized as an intangible asset and depreciated over its estimated useful life, the amountof R&D expenditures does not match the amount of R&D expenses on the consolidated statement of income.
In the fiscal year under review, the Group made capital expenditures of 126.0 billion yen, up by 12.0 billion yen (10.5%) compared withthe previous fiscal year. Among the total capital expenditures, 119.3 billion yen has been spent in relation to the Automotive Business
Unit. The Company made investments of 51.0 billion yen mainly for the improvement and maintenance of production and inspectionlines, production facilities for new products, R&D facilities, improvement of quality and working environment, and sales networks. Subaru
of Indiana Automotive, Inc. (SIA), our production base in the U.S., also made investments of 46.3 billion yen, mainly for the production
facilities to handle new products and for production capacity expansion. Depreciation expenses in the fiscal year under review were 96.1
billion yen, up by 7.0 billion yen (7.9%) year on year. These figures in this section do not include leases, capital expenditures andamortization for intangible assets.

Liquidity and Source of Funds
Financial Position
Total assets as of March 31, 2020 stood at 3,293.9 billion yen, up by 113.3 billion yen compared with the previous fiscal year-end. Major
increasing factors were cash and cash equivalent by 156.6 billion yen, inventories by 56.5 billion yen, and intangible assets and goodwillby 54.3 billion yen; while major decreasing factors included other financial assets in current assets by 190.0 billion yen. Total liabilities
amounted to 1,573.8 billion yen, up by 83.1 billion yen year on year. Major increasing factors were current and non-current financing
liabilities by 135.5 billion yen, and other current and non-current liabilities by 47.8 billion yen; on the other hand, major decreasing factors
were trade and other payables by 68.2 billion yen, and current and non-current provisions by 27.9 billion yen. Total equity resulted in 1,720.1
billion yen, up by 30.2 billion yen compared with the previous fiscal year. While retained earnings increased by 46.6 billion yen, othercomponents of equity decreased by 16.1 billion yen.
The fiscal year-end balance of interest-bearing debt (excluding lease liabilities) amounted to 239.2 billion yen, up by 135.5 billion yen
year on year. The debt/ equity ratio was 0.14, remaining at a safe level.

Cash Flows
In the fiscal year under review, net cash provided by operating activities was 210.1 billion yen, down from 250.7 billion yen provided in theprevious fiscal year. Major cash in-flow items were profit before tax of 207.7 billion yen, and depreciation and amortization of 192.7 billion
yen; while major cash out-flow items were increase in inventories of 70.2 billion yen, and decrease in trade and other payables of 67.9 billion
yen. Net cash used in investing activities was 25.8 billion yen, down from 190.1 billion yen used in the previous fiscal year. Cash in-flow factors
such as proceeds from sale and collection of other financial assets of 319.7 billion yen were surpassed by cash out-flow factors including
purchase of other financial assets of 260.0 billion yen. Net cash used in financing activities totaled 15.8 billion yen, down from 141.6 billion
yen used in the previous fiscal year. Major cash out-flow items included dividends paid to owners of parent of 110.4 billion yen, which werepartially offset by proceeds from long-term borrowings (net basis against repayment of long-term borrowings payable) of 98.4 billion yen.

Other Financial Information
The summary of consolidated financial results and presentation materials for results briefings are published in the Investor Relations
section of the Company’s website.
Link

The Investor Relations section of SUBARU website

Annual Report 202082

Financial Highlights
The SUBARU Group has voluntarily applied the International Financial Reporting Standards (IFRS) since the first quarter of FYE March 2020.
The figures for previous fiscal years have also been recalculated on an IFRS basis.

Revenue

Operating Profit/
Profit for the Period Attributable to Owners of Parent
Operating profit(Billions of yen)
4,000(Billions of yen)
600

3,232.3 3,326.0 3,232.7 3,156.2 3,344.1

3,000

Profit for the period attributable to owners of parent

565.6

500

436.7
410.8

400
2,000

300

379.4

282.4
220.4

200
1,000
100
0

210.3
181.7
152.6
141.4

0

’16/3

’17/3

’20/3

’19/3

’18/3

JGAAP

’16/3

’17/3

IFRS

’18/3

’20/3

’19/3

JGAAP

IFRS

*Change of accounting policy effective from FYE March 2019 (deduction of sales
incentives from net sales) Retroactively applied to the figures for FYE March 2018

R&D Expenditures

Capital Expenditures/Depreciation Expenses
Capital expenditures(Billions of yen)
150

Depreciation expenses(Billions of yen)
200

120

121.1

114.2

102.4

118.7

150

102.7

158.5
141.4

135.7

90

126.0

114.0
100

60

89.8

77.0

65.0

96.1

89.1

50

30

0

0

’16/3

’17/3

’18/3

’20/3

’19/3

JGAAP

’16/3

’17/3

IFRS

’18/3

’20/3

’19/3

JGAAP

IFRS

*Amount of expenditures for R&D activities incurred during the reporting period.
Since the IFRS requires a certain portion of R&D expenditures that meets the set
criteria to be capitalized as an intangible asset and depreciated over its estimateduseful life, the amount of R&D expenditures does not match the amount of R&D
expenses on the consolidated statement of income*Change in accounting policy effective from the FYE March 2019 (change of thedepreciation method for certain tangible fixed assets of the Company and its
domestic consolidated subsidiaries from the declining-balance method to thestraight-line method)*Figures above do not include leases, capital expenditures and amortization for
intangible assets

Assets/Equity/Ratio of Equity Attributable to Owners of
Parent to Total Assets

Interest-Bearing Debt/D/E Ratio

Assets (Left)

Interest-bearing debt (Left)

Equity (Left)

D/E ratio (Right)

Ratio of equity attributable to owners of parent to total assets (Right)(Billions of yen)
3,500

3,180.6
2,800

2,100

2,592.4

2,762.3

51.8

2,866.5

700

(%)
100

80

52.8

54.2

1,464.9

1,561.0

52.9

239.2

0.4

200

1,689.960

150

1,720.1

40

100

20

50

0

’17/3
JGAAP

’18/3

’20/3

’19/3
IFRS

148.3

0.3

103.7

86.2
0.13

0.10

Annual Report 2020

0.2

0.14
0.06

0.1

0.06

0

0

’16/3

’17/3

’18/3

JGAAP

*The above figures do no include lease liabilities

83(Times)
0.5

52.0

0

’16/3

(Billions of yen)
250

170.0

1,400

1,349.4

3,293.9

’19/3

’20/3
IFRS

Value Creation

Business Foundation
Supporting Value Creation

Growth Strategy

Value Creation Outcomes

Corporate Data

Non-Financial Highlights

CO2 Emissions (Scope 1, Scope 2)

Chemical Substances Regulated by Pollutant Release andTransfer Register (PRTR) Law of Japan
(t)
4,000

(t-CO2)800,000

600,000

618,8223,457

682,377 675,682 678,570 671,892

400,000

2,000

200,000

1,000

0

’17/3

’18/3

Domestic group companies

’19/3

1,920
950

Overseas group companies’16/3
SUBARU’17/3

Waste Generation(t)
200,000

273,393

310,468’18/3

166,856 170,589

313,897 327,481 329,723

814

’20/3

’19/3

190,924 185,736 186,382

150,000

200,000

100,000

100,000

50,000

0

0

’16/3

’17/3

’18/3

Domestic group companies

’19/3

’20/3

’16/3

Overseas group companies*Data for Subaru Corporation is calculated based on the notification required by the
Act on the Rational Use of Energy.
CO2 Emissions (Scopes 1, 2, 3) / Energy Consumption
Scope of target
SUBARU
Domestic group companies:
Yusoki Kogyo K.K., Fuji Machinery Co., Ltd., Ichitan Co., Ltd., Kiryu Industrial Co., Ltd.,
Subaru Logistics Co., Ltd., SUBARU dealerships
Overseas group companies:
Subaru of Indiana Automotive, Inc., Subaru of America, Inc., Subaru of Canada, Inc.,
Subaru Research & Development, Inc.

Water Consumption (Total Amount Used)(1,000 m3)
5,000

4,401

4,462

4,673

4,843

SUBARU

’17/3

0.13

0.14

4,803

0.14

0.10

1,000

0.05

0

0.00

’16/3

’17/3

’18/3

’19/3

’20/3

Overseas group companies*The waste generation amount includes metal scrap that is sold.
*We do not export or import waste deemed hazardous under the terms of Annex I, II,
III, and IV of the Basel Convention 2.

Raw materials used in
automobiles in FYE 2020

Recycling method

Iron664,330 t

Delivered to dealers in the form ofiron scrap for reuse

Aluminum

30,468 t

Re-melted at plants andreused almost entirely

Plastics

23,314 t

Crushed again at plants andreused partially

0.15

0.14

’19/3

Scope
SUBARU: Gunma Plant, Tokyo Office, Utsunomiya Plant
Group companies in Japan:
Yusoki Kogyo K.K., Fuji Machinery Co., Ltd., Ichitan Co., Ltd., Kiryu Industrial Co., Ltd.,
Subaru Logistics Co., Ltd.
Overseas group companies:
Subaru of Indiana Automotive, Inc., Subaru of America, Inc., Subaru Canada, Inc.,
Subaru Research & Development, Inc.

0.20

0.15

’18/3

Domestic group companies

Raw Materials(1,000 m3/100 M yen)
0.25

3,000
2,000

813

Scope
SUBARU: Gunma Plant, Tokyo Office, Utsunomiya Plant, Handa Plant
Group companies in Japan:
Yusoki Kogyo K.K., Fuji Machinery Co., Ltd., Ichitan Co., Ltd., Kiryu Industrial Co., Ltd.,
Subaru Logistics Co., Ltd.

(Crude oil equivalent [kL])
400,000

4,000

931

Domestic group companies

Energy Consumption

SUBARU

961

Amount Amount Amount Amount Amount Amount Amount Amount Amount Amounthandled released handled released handled released handled released handled released’20/3

Change in emissions factor:
This year, SUBARU has changed the basis for CO2 emissions calculations from “nonadjusted greenhouse gas emissions” to “adjusted greenhouse gas emissions,” basedon the Act on Promotion of Global Warming Countermeasures. In accordance with thischange, we recalculated and revised the figures to as far back to as FYE 2016.

300,000

2,986

2,968

0

’16/3
SUBARU

3,377

3,000

’20/3

SUBARU
Domestic group companies
Overseas group companies
Amount per unit of sales
Scope
SUBARU:
Gunma Plant, Tokyo Office, Utsunomiya Plant, Handa Plant, Handa West Plant
Group companies in Japan:
Yusoki Kogyo K.K., Fuji Machinery Co., Ltd., Ichitan Co., Ltd., Kiryu Industrial Co., Ltd.,
Subaru Logistics Co., Ltd.
Overseas group companies:
Subaru of Indiana Automotive, Inc., Subaru of America, Inc., Subaru Canada, Inc.,
Subaru Research & Development, Inc.

Annual Report 202084

History of the SUBARU Group
SUBARU, which can trace some of its roots to Aircraft Research Laboratory,
has continuously nurtured highly creative technologies and increased corporate value
by enhancing the SUBARU brand to respond to major changes in the times.

1917

Establishment of Aircraft Research Laboratory

1991

Participation in the Boeing 777 program

1931

Establishment of Nakajima Aircraft Co., Ltd.

1993

Start of operation of the Handa Plant

1945

Change of company name from
Nakajima Aircraft to Fuji Sangyo

1999

Capital and business alliance with
General Motors Corporation (GM) (USA)1999

Business alliance with Suzuki Motor Corporation

2000

Dissolution of the business alliance with
Nissan Motor Co., Ltd.

2002

Dissolution of the SIA joint venture with Isuzu Motors Ltd.
and formal signing of a contract production agreement

2003

The Legacy wins the 2003–2004
Car of the Year Japan award

1946 Production of thefirst Rabbit Scooter

1953

Establishment of Fuji Heavy Industries Ltd.
Start of aircraft production and automobile development

2003

Subaru of Indiana Automotive, Inc. (SIA)
made a wholly owned subsidiary

1960

Opening of the Gunma Main Plant

2005

1960

Listing of shares on the Tokyo Stock Exchange

Participation in the Boeing 787 program
Delivery of main wings for next-generation transport
aircraft and next-generation fixed-wing patrol aircraft

2005

1966

Signing of a business alliance agreement with
Isuzu Motors Ltd.

Dissolution of the alliance with GM, agreement to enter
into a business alliance with Toyota Motor Corporation

2007

Start of production of Toyota cars (Camry) at SIA

1968

Establishment of Subaru of America, Inc. (SOA)2012

Start of knockdown production of the
SUBARU XV in Malaysia

2012

Termination of production of mini-vehicles andshift to marketing on an OEM basis

2014

Signing of an agreement to participate in a project todevelop and mass produce the Boeing 777X

1968

Dissolution of the business alliance with Isuzu Motors Ltd.

1968

Signing of a business alliance agreement with
Nissan Motor Co., Ltd.

1968

Start of exports of Robin engines forsnowmobiles to Polaris (USA)1969

Start of operation of the Yajima Plant

2016

Termination of contract production of the
Toyota Camry at SIA
Transfer of production of Impreza vehicles forNorth America to SIA

1972

Release of the Leone 4WD Estate Van,
the world’s first mass-production 4WD passenger vehicle

2016

All-new Impreza Sport/GR wins the 2016–2017
Car of the Year Japan award

1978

Conclusion of a 767 business agreement with Boeing

2017

Change of company name to SUBARU CORPORATION

1983

Start of full-scale operation of the Oizumi Plant

2017

Termination of production and sales of
SUBARU general-purpose engines and generators

1987

Release of the Justy model equipped with the world’s
first electro-continuously variable transmission (ECVT)

2018

Introduction of the SUBARU BELL 412EPX helicopter

1987

Establishment of Subaru-Isuzu Automotive, Inc. (SIA)
in the U.S. in a joint venture with Isuzu Motors Ltd.

2019

1989

Establishment of Subaru Canada, Inc. (SCI)

Agreement on the further developing andstrengthening of SUBARU’s long-term partnership with
Toyota Motor Corporation under a new business andcapital alliance

1989

Completion of Subaru Research & Testing Center (SKC)

1990

Subaru of America (SOA) made a wholly owned subsidiary85

Annual Report 2020

Value Creation

SUBARU Models
through the Years

Growth Strategy

Business Foundation
Supporting Value Creation

1977

Brat released

1958

SUBARU 360 released

1961

SUBARUSambar truck released

1966

SUBARU 1000
four-door sedan released

1969

R-2 released

1971

Leone coupe released1972

Rex released

1983

Domingo released

1984

Justy released

1985

Alcyone released

1989

Legacy series released

1992

Vivio released

1992

Impreza series released

Value Creation Outcomes

1997

Forester released

1998

Pleo released

2003

Outback released

Corporate Data

2014

Levorg released2014

WRX released

2018

Ascent released(Exclusively for North
America)

2005

B9 Tribeca released

2008

Exiga released

2012

SUBARU BRZ released

2012

SUBARU XV released

Annual Report 202086Corporate Information
Domestic Facilities
Location

Land Area(Thousand m2)

Building Area
(Thousand m2)

Number of
Employees(Persons)

Main Products

Head Office (Ebisu)

Tokyo

4

14

681

—

SUBARU Training Facility(SUBARU Academy)

Tokyo

10

13

42

—

Gunma

573
[12]

247

171

—

Tokyo

158

79

1,688

—

Gunma Main Plant

Gunma

585
[14]

330

4,735

LEVORG, IMPREZA, SUBARU XV,WRX, and SUBARU BRZ

Gunma Yajima Plant

Gunma

550

319

3,271

LEGACY, OUTBACK, IMPREZA,
SUBARU XV, and FORESTER

Gunma Oizumi Plant

Gunma

304

238

2,872

Automobile engines andtransmissions

Gunma Ota North Plant

Gunma

44

25

0

—

SUBARU
R&E Center (Sano)

Tochigi

1,081

25

162

—

SUBARU
R&E Center (Bifuka)

Hokkaido

3,614

0

0

—

Utsunomiya Plant

Tochigi

572

228

1,847

Aircraft

Handa Plant

Aichi

59

31

293

Aircraft

Handa West Plant

Aichi

51

13

44

Aircraft

7,605

1,562

15,8060

Name

Head Office
Other

Parts Distribution Center,
Pre Delivery Inspection Center,parking lot,
Vicinity of Oizumi Plant, etc.

Tokyo Office

Automotive
Business Unit

Aerospace
Company

Gunma
Plant

Subtotal (1)The site of airport

Gunma

622

Utsunomiya airstrip

Tochigi

105

0

Welfare facility

—

215

96

Lease to affiliates

Aichi

37

8

Isesaki business office

Gunma

157

60

Eco Utsunomiya factory

Tochigi

61

Saitama Plant

Saitama

143

74

Subtotal (2)

1,285

239

Total (1)+(2)

8,890

1,801

Other

1. [ ]: area of tenancy
2. Welfare facility includes 37 sites of dormitories and company houses
3. Number of employees excludes executive officers, advisors, and dispatches

87

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Main Subsidiaries (Domestic)

Corporate Data

(As of April 1, 2020)(Number of employees: as of March 31, 2020)

Established

Location

Capital
Number of FYE March 2020
Investment
Representative (Millions of
Employees
Net Sales
Ratio* (%)yen)(Persons) (Millions of yen)

Fuji Machinery Co., Ltd.

1950. 7. 18

Gunma

Tamaki
Kamogawa

480

100.0

483

44,077

Manufacture and sales of automobile parts,
industrial product parts and agriculturaltransmissions

Ichitan Co., Ltd.

1951. 2. 2

Gunma

Satoshi
Maeda

480

100.0

231

20,060

Manufacture and sales of forging parts ofautomobile and industrial machinery

KIRYU INDUSTRY Co., Ltd.

1960.12. 23

Gunma

ToshiakiTamegai

400

100.0

309

11,705

Manufacture of specially-equipped SUBARU
automobiles, engines, and sheet metal repair
parts, remanufacture of transmissions, andafter-sales service for industrial products

Subaru Tecnica International
Inc.

1988. 4. 2

Tokyo

Yasuo
Hiraoka

250

100.0

112

4,828

Management of motor sports activities, salesof motor sports parts and merchandise,technical development, R&D support, andautomobile maintenance

Subaru Used cars Sales &Marketing Co., Ltd.

1988. 4. 2

Kanagawa

Masahiro
Maeda

100

100.0

20

2,659

Tack-related operation of used cars,head office of SUAA Kanto, sales of supplies

Subaru Auto Accessories Ltd.

1987. 3. 9

SaitamaToshioMasuda

70

100.0

74

14,011

Sales, research & development, licensing oftechnology and import-export business of
automobile accessories, parts and service
materials

Subaru Logistics Co., Ltd.

1986. 3. 27

Gunma

MasakiOkawara

96

100.0

360

23,515

Shipping, land freight, warehousing,maintenance and insurance for automobiles
and their components

H. B. C. Co., Ltd.

1983. 8. 29

Kanagawa

Junichi
Tsukamoto

490

68.0

8

817

Subaru Finance Co., Ltd.

1988. 7. 1

Tokyo

Mitsuru
Takahashi

2,000

100.0

222

24,856

Leasing and rental of SUBARU automobiles,
credit, financing and sales of auto insurance

SUBARU TECHNO CORPORATION

1985. 3. 2

Tokyo

Hiromi
Tamou

70

100.0

970

9,164

Design, plan, research, experiment,
examination and compile technical materialof automobile, aircraft, general-purpose
engine and environmental tool

Subaru Intelligent Service Ltd.

2005. 3. 1

Tokyo

Yoshinori
Saito

40

75.0

58

2,555

Development of technical service documents
including service manuals and owners
manuals

Yusoki Kogyo K. K.

1950. 7. 15

Aichi

Eiji
Tanikawa

100

100.0

135

2,142

Manufacture and sales of aircraft parts

Fuji Aircraft MaintenanceCo., Ltd.

1988.10. 31

Tokyo

Takayuki
Kobayashi

30

100.0

190

1,450

Inspection, service and maintenance of
aircraft and onboard equipment

Fuji Aerospace Corporation

1991. 6. 14

Tochigi

Yasuhiro
Hamanaka

30

100.0

175

1,645

Processing and assembly of aircraft parts

Fuji Aerospace Technology
Co., Ltd.

1994. 4. 1

Tochigi

TBD

20

100.0

94

2,732

Contract design, drafting, translation,
calculation, analytical testing and softwaredevelopment for aircraft

Subaru Kohsan Co., Ltd.

1977. 2. 2Tokyo

Masami
Iida

675

100.0

85

7,058

Deal/rental of real estate, administrative
operation of rental hall and conference room,administrative operation/rental of parking
ground, travel agency

SUBARU IT CREATIONSCORPORATION

1993. 4. 1

SaitamaNozomu
Oyama

100

100.0

294

21,983Development, maintenance and operation of
information systems and related consulting
services; sales and leasing of informationequipment

Subaru Living Service
Co., Ltd.

1988. 4. 2

Tokyo

Masami
Iida

20

100.0

307

19,033

Sales of office supplies and daily
commodities, real estate services, andpersonal import services

Name

Operations

Storing and shipping of automobiles forinternational sales*On a consolidated basis

Annual Report 202088Corporate Information

Main Subsidiaries (Overseas)
RegionName

Established(As of April 1, 2020)(Number of employees: as of March 31, 2020)

Address

Representative

Number ofInvestment
Employees
Ratio* (%)(Persons)

Operations

Subaru of America, Inc.

1968.2One Subaru Drive, Camden,
NJ 08103, U.S.A.

Thomas J.
Doll

100

1,286

Sales of SUBARU vehicles andsupplies

Subaru of Indiana Automotive, Inc.

1987.35500 State Road 38 East, Lafayette,
IN 47905, U.S.A.

FumiakiHayata100

6,322

Manufacture of SUBARU vehicles,
purchasing of parts, sales for Subaru
of America, Inc.

North American Subaru, Inc.

1985.9C/O Subaru of America, Inc.
One Subaru Drive, Camden,
NJ 08103, U.S.A.

MakotoIkemura100

84

Technical research on SUBARU
vehicles in North American market,
government relations

TetsuoFujinuki

100

76

Compiling of technical information
about automobile market of North
America, research and developmentof SUBARU vehicles

50255 Michigan Avenue,
Van Buren Township, MI48111, U.S.A.
North
America6431 Global Drive Cypress,
CA 90630, U.S.A.
Subaru Research &Development, Inc.

1986.614382 Chambers Road, Tustin,
CA 92780, U.S.A.
46718 Fremont Blvd, Fremont,
CA 94538, U.S.A.
C/O Subaru of Indiana Automotive,
Inc.
5500 State Road 38 East, Lafayette,
IN 47905, U.S.A.

Subaru Canada, Inc.

1989.1560 Suffolk Court Mississauga,
Ontario, L5R 4J7, Canada

Yasushi
Enami

100

169

Sales of SUBARU vehicles andsupplies

Subaru Europe N.V./S.A.

2002.3

Leuvensesteenweg 555 B/8,
1930 Zaventem, Belgium

Takeshi
Kubota100

41

Sales of SUBARU vehicles andsupplies

Subaru Italia S.p.A.

1985.7

Via Montefeltro, 6/A,
20156 Milano, Italy

Kunichika
Koshimizu

100

53

Sales of SUBARU vehicles andsupplies

N.V. Subaru Benelux

1974.3

Leuvensesteenweg 555 B/1,
1930 Zaventem, Belgium

Shunsuke
Sawada100

35

Sales of SUBARU vehicles andsupplies

Subaru Vehicle Distribution B.V.

2001.5Merseyweg 40, 3197 KG Botlek,
Netherlands

Shunsuke
Sawada50

0Contract of discharging andtransporting inland for dealers in
Middle Europe, PDI operation

Subaru of China Ltd.

2006.3

Room405, Building D2, Liangmaqiao
Diplomatic Office Building No.19
Dongfangdonglu Chaoyang District,
Beijing 100600, China

HiroakiTakahashi

60

181

Sales of SUBARU vehicles
and supplies

Subaru Technology Beijing. Co., Ltd.

2013.6

Room401A, Building D2, Liangmaqiao
Diplomatic Office Building No.19
Dongfangdonglu Chaoyang District,
Beijing 100600, China

HisatoImamura100

42

Authentication, research anddevelopment of SUBARU vehicles in
Chinese market

EuropeAsia*On a consolidated basis

89

Annual Report 2020

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Sales Agents (Domestic)
Area

Group

(As of April 1, 2020)
Head

Hokkaido
Tohoku area (9)Tohoku region

Hoku Shinetsu
regionKanto
Hokushinetsu area (12)Tokyo/Yamanashi

Tokai region

Chubu
Kinki area (11)Kinki region

Agent

Subsidiary

Kyushu region

Total

1

Hokkaido

Hiroshi Uehara

Hokkaido

Takashi Ishihara

1

Hokkaido Subaru Inc.

Hokkaido

Tomoo Takenaka

19

Miyagi Subaru Inc.

MiyagiKazuto Sakamoto

11

Aomori Subaru Inc.

AomoriNobuhiro Mori

6

Iwate Subaru Inc.

Iwate

Yasuo Watanabe

9

Akita Subaru Inc.

Akita

Takaharu Mitsui

6

Yamagata Subaru Inc.

Yamagata

Shinsuke Ito

5

Fukushima Subaru Inc.

Fukushima

Ryoichi Uchida

11

Niigata Subaru Inc.

Niigata

Shiro Ohta

11

Subaru Shinshu Inc.

Nagano

Masao Kawada

10

Hokuriku Subaru Inc.

Ishikawa

Osamu Ueno

12

Nanshin Subaru Inc.

NaganoHirotada Shibata

1

Fuji Subaru Inc.

Gunma

Wataru Miyata

17

Tochigi Subaru Inc.

Tochigi

Kazumasa Kodaira

12

Ibaraki Subaru Inc.

IbarakiNaoki Otsuki

10

Saitama Subaru Inc.

Saitama

Hiroshi Yoshizawa

16

Kanagawa Subaru Inc.

Kanagawa

Taisuke Suzuki

26

Chiba Subaru Inc.

Chiba

Tsuguto Nakamura

20

Tokyo Subaru Inc.

Tokyo

Hiroki Kurihara

32

Yamanashi Subaru Inc.

Yamanashi

Hirohiko Kumada

3

Shizuoka Subaru Inc.

Shizuoka

Shinichi Ishida

12

Nagoya Subaru Inc.

Aichi

Takumi Ogasawara

21

Gifu Subaru Inc.

Gifu

Koichi Numa

8

Mie Subaru Inc.

Mie

Masato Yachida

7

Subaru Higashi Aichi Inc.

Aichi

Yasuo Nishikawa

3

Fukui Minami Subaru Inc.

Fukui

Satoshi Okada

1

Nara Subaru Inc.

Nara

Shinichi Takagi

5Osaka Subaru Inc.

Osaka

Motoya Yamamoto

25

Kyoto Subaru Inc.

Kyoto

Kinya Abe7

Shiga Subaru Inc.

Shiga

Tetsuo Inoue

7

Hyogo

Masamichi Kudo

18

Hiroshima

Atsushi Ishikawa

9Sanin Subaru Inc.

Tottori

Wataru Ishihara

6

Okayama Subaru Inc.

Okayama

Sadayuki Hata

7

Yamaguchi Subaru Inc.

Yamaguchi

Kenichi Kobayashi

6

Higashi Shikoku Subaru Inc.

KagawaHiromi Fujita

7

Shikoku Subaru Inc.

Ehime

Tsukasa Morita

7

Fukuoka Subaru Inc.

Fukuoka

Tatsuya Yamano

16

Nishi Kyushu Subaru Inc.

Nagasaki

Kenichi Fujii

6

Kumamoto Subaru Inc.

Kumamoto

Tetsuya Matsumoto

8

Oita

Toshiki Sugihara

5

Minami Kyushu Subaru Inc.

Kagoshima

Kenichi Hasegawa

10Okinawa Subaru Inc.

Okinawa

Koichi Okazaki

3

—

—

443

Oita Subaru Inc.

6

New Car Base

Kushiro Subaru Inc.

Hyogo Subaru Inc.

Chugoku Shikoku
Kyushu area (12)President

Obihiro Subaru Inc.

Hiroshima Subaru Inc.

Chugoku/
Shikoku region

Location

44

33

Annual Report 202090Corporate Information

Distributors (Overseas)
RegionNorth
America
Total

EuropeMarket

CIS, the Middle
East, and Africa
Total

Company

Location

Number of
Dealers

Investment
Ratio* (%)

U.S.

Subaru of America, Inc.

Camden, NJ, U.S.A.

633

100%

CanadaSubaru Canada, Inc.

Mississauga, Ontario, Canada

94

100%

—

—

2 countries

Germany

SUBARU DEUTSCHLAND GMBH

Friedberg, Germany

150

29%

Switzerland

SUBARU SCHWEIZ AG

Safenwil, Switzerland

137

0%

Subaru Nordic AB

Arlöv, Sweden

126

0%

—

—

SwedenTotal(As of April 1 2020)(Dealer numbers: as of December 31, 2019)30 countries

IsraelJapanauto-Israel Auto Corporation Ltd.

Petah tikva, Israel

120%

RussiaSUBARU MOTOR (RUSSIA) LLC

Moscow, Russia

48

33%

—

—

16 countries

Australia

Subaru (Aust) Pty Ltd.

Sydney, Australia

123

8%

New Zealand

Subaru of New Zealand

Auckland, New Zealand

16

0%

—

—

Oceania
Total

Latin
America

8 countries

Chile

Inchcape Automotriz Chile S.A.

Santiago, Chile

31

0%

Peru

Inchcape Latam Perù S.A.

Lima, Peru

11

0%

—

—

Total

22 countries

TaiwanSubaru of Taiwan Co., Ltd.

Taoyuan City, Taiwan

22

35%

Asia

ThailandTC Subaru (Thailand) Co., Ltd.

Bangkok, Thailand

33

0%

Malaysia

TC Subaru Sdn Bhd

Selangor, Malaysia

31

0%

Total

10 countries

—

—

160

60%

Total

1 country

—

—

China

*On a consolidated basis

91

Annual Report 2020

Subaru of China Ltd.

Beijing, China

Value Creation

Growth Strategy

Business Foundation
Supporting Value Creation

Value Creation Outcomes

Corporate Data

Global Network
Main Overseas Business Sites

4
2
5 6
1 3

9 11
10

1

7 8

1 Subaru Europe N.V./S.A.

7 Subaru of America, Inc.

2 Subaru Italia S.p.A.

8 North American Subaru, Inc.

3 N.V. Subaru Benelux

9 Subaru Research & Development, Inc.

4 Subaru Vehicle Distribution B.V.

10 Subaru of Indiana Automotive, Inc.

5 Subaru of China Ltd.
6 Subaru Technology Beijing. Co., Ltd.

Production Models:
Legacy, Outback, Impreza, and Ascent
11 Subaru Canada, Inc.

Main Domestic Business Sites

Automotive Business Unit
Gunma Plant
Plant

Production Models

Main Plant

Levorg, Impreza, SUBARU XV,WRX, and SUBARU BRZ

Aerospace Company

Yajima Plant

Legacy, Outback, Impreza,
SUBARU XV, and Forester

Utsunomiya Plant

Oizumi Plant

Automobile engines and transmissions

Aerospace Company
Handa Plant
Handa West Plant

1

Head Office

Tokyo Office

Annual Report 202092Corporate Information

Corporate Data (As of March 31, 2020)
Company Name

SUBARU CORPORATION

Established

July 15, 1953

Paid-In Capital¥153,795 million

Fiscal Year-End

March 31

Accounting Auditors

KPMG AZSA LLC

Main Businesses

Automotive:
The manufacture, sale, and repair of passenger
cars and their components
Aerospace:
The manufacture, sale, and repair of airplanes,
aerospace-related machinery, and theircomponents

Number of Affiliates

73 consolidated subsidiaries and
10 equity-method affiliated companies

Number of Employees

15,806 (consolidated: 35,034)(excluding executive officers, advisors and dispatches)

Website Addresses

Corporate website:
https://www.subaru.co.jp/en/
Investor information website:
https://www.subaru.co.jp/en/ir/

Stock Information (As of March 31, 2020)
Common Stock Authorized

1,500,000,000 shares

Breakdown of Shareholders

Common Stock Issued

769,175,873 shares

Securities companies

Number of Shareholders

152,889

31,243,000 shares

Number of Shares per
Trading Unit

100 shares

Stock Exchange Listing

Tokyo Stock Exchange

Securities Code

7270

Transfer Agent

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,
Tokyo 103-8670, Japan
Telephone: 0120-288-324 (toll-free)

Treasury stock

4.06%

1,960,000 shares

0.25%

Individuals
and others
105,762,000 shares

13.75%

Financial institutions
253,143,000 shares

32.91%

Japanese
corporations
and others
171,810,000 shares

Foreign institutions
and others

22.34%

205,256,000 shares

26.69%

Major Shareholders
Number of Shares Held(in thousands)

Percentage of Total
Shares Held

Toyota Motor Corporation

153,600

20.02

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

68,332

8.91

Japan Trustee Services Bank, Ltd. (Trust account)

42,671

5.56

BNYM TREATY DTT 15

18,7292.44

GIC PRIVATE LIMTED-C

13,917

1.81

Japan Trustee Services Bank, Ltd. (Trust account 9)12,924

1.68

Japan Trustee Services Bank, Ltd. (Trust account 5)

12,646

1.65

JP MORGAN CHASE BANK 385151

10,721

1.40

MIZUHO SECURITIES ASIA LIMITED-CLIENT A/C

10,112

1.32

Mizuho Bank, Ltd.

10,0781.31

Name*Number of shares held are rounded down to the nearest thousand shares*The percentage of total shares held is calculated based on the number of shares excluding treasury stock of 1,960,368 sharesContact for Inquiries:
Investor Relations Dept., SUBARU CORPORATION
Address: Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku,
Tokyo 150-8554, Japan
Telephone: +81-3-6447-8000 (switchboard)

93

Annual Report 2020

Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku,
Tokyo 150-8554, Japan
Phone & Fax: +81-3-6447-8000
https://www.subaru.co.jp/en/ir/

Consolidated Financial Statements(1) Consolidated Statement of Financial Position(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020
Note(as of April 1, 2018) (as of March 31, 2019)(as of March 31, 2020)
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income taxes receivable
Other financial assets
Other current assets
Subtotal
Assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Investment property
Investments accounted for using equity
methodOther financial assets
Other non-current assets
Deferred tax assets
Total non-current assets
Total assets

7
8,21
9
10

765,591
343,463
328,941
4,316
372,531
54,126
1,868,968
761
1,869,729

702,328
344,237
403,473
9,704
394,406
59,582
1,913,730
4
1,913,734

858,966
364,839459,940
15,648204,373
74,748
1,978,514
251
1,978,765

11
12
13

770,698
153,175
27,278808,710
155,510
25,414820,491
209,775
23,986

14

7,502

8,821

9,831

10

41,65485,876
114,625
1,200,808
3,070,537

40,121
100,764
127,523
1,266,863
3,180,597

19,730112,843
118,487
1,315,143
3,293,908

25

1

(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020
Note(as of April 1, 2018) (as of March 31, 2019) (as of March 31, 2020)
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables
Financing liabilities
Other financial liabilities
Income taxes payable
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Financing liabilities
Other financial liabilities
Employee benefits
Provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total Liabilities
EquityEquity attributable to owners of parent
Capital stock
Capital surplus
Treasury shares
Retained earnings
Other components of equity
Total equity attributable to ownersof parent
Non-controlling interests
Total equity
Total liabilities and equity

15
16,28
17,28

435,929
69,31540,07742,408
241,773
278,766
1,108,268

404,395
15,274
51,621
4,331
289,912297,917
1,063,450

336,223
12,17344,1262,642
261,162
328,081984,407

16,28
17,28
19
18
21
25

21,13867,80347,32037,379143,1312,727
319,498
1,427,766

88,45273,856
52,61845,537
162,197
4,588
427,248
1,490,698

227,037
67,85556,52546,398179,849
11,714589,378
1,573,785

20
20
20
20
20

153,795
160,197(7,054)
1,317,639
9,742

153,795
160,192(6,910)1,350,639
24,532

153,795
160,178(6,722)
1,397,239
8,391

1,634,319

1,682,248

1,712,881

8,452
1,642,771
3,070,537

7,651
1,689,899
3,180,597

7,242
1,720,123
3,293,908

18
21

2

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

FYE 2019(April 1, 2018 toMarch 31, 2019)
3,156,150(2,558,262)
597,888(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
3,344,109(2,728,605)
615,504

Selling, general and administrative expenses 22
Research and development expenses
Other income
23
Other expenses
23
Share of profit (loss) of investments accounted
14
for using equity method
Operating profit(298,875)(108,558)
6,731(15,839)(308,227)(92,460)
7,751(12,026)

377

(223)

181,724

210,319

Finance income
Finance costs
Profit before tax

24
24

13,701(9,399)186,026

15,844(18,507)
207,656

Income tax expense
Profit for the period

25(45,237)
140,789(55,065)
152,591

141,418(629)
140,789

152,5874
152,591

184.44198.99

Note
Revenue
Cost of sales
Gross profit

6,21Profit for the period attributable to
Owners of parent
Non-controlling interests
Profit for the period
Profit for the period per share attributable toowners of parent
Basic (yen)263Consolidated Statement of Comprehensive Income

Note
Profit for the period
Other comprehensive income (after deduction oftax)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans
Net changes in revaluation of capital financial
assets measured
30
at fair value through other comprehensive
incomeItems that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Share of other comprehensive income ofinvestments
14
accounted for using equity method
Net changes in revaluation of liability financial
assets measured
30
at fair value through other comprehensive
incomeOther comprehensive income (after deduction of
20tax) total
Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income

4

FYE 2019(April 1, 2018 toMarch 31, 2019)
140,789(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
152,591

(610)

(475)

535

(763)

15,519(12,581)

(186)

(182)

1,251

1,966

16,509(12,035)

157,298

140,556

158,099(801)
157,298

140,965(409)
140,556

(3) Consolidated Statement of Changes in Equity
FYE 2019 (April 1, 2018 to March 31, 2019)(Unit: Millions of yen)
Equity attributable to owners of parent

Note

Balance at the
beginningof the year
Comprehensive
incomeProfit for the period
Other
comprehensive
income (after
deduction of tax)
Comprehensive
income total
Transfer to retained
earnings
Transactions withownersDividends paid
Purchase oftreasury shares
Disposal oftreasury shares
Transfer fromretained earnings
to capital surplus
Capitaltransactions andothersTotal transactions
with owners
Balance at the endof the year

Capitalstock

Capital Treasury
surplus shares

153,795 160,197

Other
Retainedcomponents
earnings
of equity(7,054) 1,317,639

Total

9,742 1,634,319

Noncontrollinginterests

Total
capital8,452 1,642,771

－

－

－

141,418－

141,418(629)

140,789

－

－

－

－

16,681

16,681(172)

16,509－－－141,418

16,681

158,099(801)

157,298

20

－

－

－

1,892

(1,892)

－

－

－

27

－

－

－

(110,468)

－

－

(5)

－

－

(5)

－

(5)

－

(5)

149

－

－

144

－

144

－

－

－

－

－

－

－

－

－

－

－

158

－

158

－

158

－

(5)

144

(110,310)－ (110,171)－ (110,171)(6,910) 1,350,639

24,532 1,682,248

7,651 1,689,899

20

153,795 160,192

5－ (110,468)－ (110,468)

FYE 2020 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)
Equity attributable to owners of parent
Noncontrollinginterests

Total
capitalCapitalstock

CapitalsurplusTreasuryshares153,795

160,192(6,910) 1,350,639

－

－

－

152,587－

152,5874

152,591

－

－

－

－

(11,622)(11,622)(413)(12,035)－－－

152,587(11,622)

140,965(409)

140,556

20

－

－

－

4,519

(4,519)

－

－

－

27

－

－

－

(110,475)－(110,475)

－

－

(7)

－

－

(7)

－

(7)

－

(45)

195

－

－

150

－

150

－

31

－

(31)

－

－

－

－

－

－

－

－

－

－

－

－

－

(14)

188

(110,506)－(110,332)－ (110,332)

8,391 1,712,881

7,242 1,720,123

Note

Balance at the
beginningof the year
Comprehensive
incomeProfit for the period
Other
comprehensive
income(after deduction oftax)
Comprehensive
income total
Transfer to retained
earnings
Transactions withownersDividends paid
Purchase oftreasury shares
Disposal oftreasury shares
Transfer fromretained earnings
to capital surplus
Capitaltransactions andothersTotal transactions
with owners
Balance at the endof the year

Other
Retainedcomponents
earnings
of equity20

153,795 160,178(6,722) 1,397,239

6

Total

24,532 1,682,248

7,651 1,689,899－ (110,475)

(4) Consolidated Statement of Cash FlowsNote

Net cash provided by (used in) operating activities
Profit before tax
Depreciation and amortization
Share of loss (profit) of investments accounted for using
equity method
Finance income
Finance costs
Decrease (increase) in trade and other receivables
Decrease (increase) in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in provisions and employee benefits
OthersSubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets and expenditure on internallygenerated intangible assets
Purchase of other financial assets
Proceeds from sale and collection of other financial assets
OthersNet cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Proceeds from long-term borrowings
Proceeds from issuance of bonds
Repayments of lease liabilities
Dividends paid to owners of parent
OthersNet cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

7

28
28
28
28
28

7

FYE 2019(April 1, 2018 toMarch 31, 2019)(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

186,026
187,077

207,656
192,742

(377)

223

(13,701)
9,399
(268)
(71,373)(11,197)
58,435(4,837)339,184
11,9871,730(1,874)(100,295)
250,732(15,844)
18,507(23,916)(70,173)(67,939)(24,797)
28,865245,324
12,8381,258(1,800)(47,486)
210,134

14,028(130,621)
4,261

127,404(131,690)
5,387(45,331)(82,379)(314,836)
284,241(1,861)(190,119)(259,956)
319,652(4,262)(25,844)(17,482)(43,382)
75,300－(45,741)(110,384)
138(141,551)(2,400)(7,592)106,000
40,000(41,230)(110,375)(221)(15,818)

17,675(11,834)(63,263)765,591
702,328

156,638
702,328
858,966

Notes to Consolidated Financial Statements
SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
1. Reporting Entity
SUBARU CORPORATION (“the Company”) is a public company domiciled in Japan.
The Company’s consolidated financial statements comprise the Company and its consolidated subsidiaries (“theGroup”) and the Group’s interests in affiliates.
Principal manufacturing facilities are located in Japan and the United States of America.
In automobile business, the group manufactures, sells, and repairs passenger cars and related products.
In aerospace business, the group manufactures, sells, and repairs aircrafts, space-related devices, and the parts.
2. Basis of Preparation(1) Compliance of consolidated financial statements with International Financial Reporting Standards (“IFRS”)
The Group’s consolidated financial statements have been prepared in accordance with IFRS as prescribed in
Article 93 of Ordinance on Consolidated Financial Statements as they satisfy the requirement of a “Specified
Company” set forth in Article 1-2 of Ordinance on Consolidated Financial Statements."
The Group has applied IFRS from the consolidated fiscal year started April 1, 2019, and the annual consolidated
financial statements for the consolidated fiscal year ended March 31, 2020 are the first consolidated financial
statements prepared in accordance with IFRS. Date of transition to IFRSs was April 1, 2018.
The Group applied IFRS 1 “First-time Adoption of International Financial Reporting Standards” (“IFRS 1”).
The effect of the transition to IFRS on the Group’s financial position, result of operations, and cash flows is provided
in “39. First-time adoption of IFRS.”
The public announcement of the consolidated financial statements for the consolidated fiscal year ended March
31, 2020 have been approved by Tomomi Nakamura, the Representative Director of the Board, President andChief Executive Officer, and Toshiaki Okada, Chief Financial Officer, on June 24, 2020.
(2) Functional currency and presentation currency
The Group’s consolidated financial statements are presented in Japanese yen, which is the Company’s functional
currency. Amounts presented in Japanese yen are rounded to the nearest million yen, except when otherwise
indicated.
(3) Basis of measurement
The Group’s consolidated financial statements have been prepared on the historical cost basis, except for certain
assets and liabilities separately stated in "3. Significant Accounting Policies".

8

3. Significant Accounting Policies
The following accounting policies applied in the preparation of the consolidated financial statements, including thestatement of financial position as of the date of transition to IFRSs, have been consistently applied to all thereporting periods presented.
(1) Basis of consolidation
1. Subsidiaries
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity.
Financial statements of subsidiaries are included in the consolidated financial statements from the date when thecontrol is obtained until the date when the control is lost.
The financial statements of subsidiaries have been adjusted in order to ensure consistency with the accounting
policies adopted by the Company as necessary. Intragroup balances and transactions, and any unrealized gainor loss arising from intragroup transactions are eliminated in preparation of the consolidated financial statements.
Changes in the Company’s ownership interests in subsidiaries that do not result in a loss of control are accounted
for as equity transactions. The difference between adjustment of non-controlling interests and fair value of any
consideration paid is recognized directly in equity as the interest attributed to the owners of the parent.
Non-controlling interests of consolidated subsidiaries are recognized separately from the interests of the Group.
Comprehensive income of a subsidiary is attributed to the owners of the parent and non-controlling interests even
if this results in the non-controlling interests having a deficit balance.
When control over a subsidiary is lost, any gain or loss on disposal of the interest sold is recognized in profit orloss.
2. Affiliates
Affiliates are entities over which the Group has a significant influence over the decisions on financial and operating
policies, but does not have control.
Investment in an affiliate is initially recognized at cost and then is accounted for using the equity method of
accounting.
The financial statements of affiliates have been adjusted, if necessary, when their accounting policies differ fromthose of the Group.
(2) Foreign currency translation
1. Foreign currency transactions
Each company in the Group specifies its own functional currency, the currency of the primary economic
environment in which the entity operates, and measures transactions based on the functional currency.
When the entity prepares non-consolidated financial statements, the foreign currency transactions are translated
into the functional currency at the exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailingat the fiscal year end date.
Exchange differences arising from the translation and settlement are usually recognized in profit or loss. However,exchange differences arising from the translation of equity financial instruments specified as measuring fair value
through other comprehensive income are recognized in other comprehensive income.

92. Financial statements of foreign operations
All the assets and liabilities of foreign operations are translated at the exchange rates at the end of the reporting
period. Revenue and expenses of foreign operations are translated into Japanese yen at the average exchange
rates for the period, unless exchange rates significantly fluctuate during the period. If the exchange rates
significantly fluctuate, revenue and expenses of foreign operations are translated at the foreign exchange rates atthe date of the transaction.
Exchange differences arising from translation of foreign operations’ financial statements are recognized in othercomprehensive income. When a foreign operations are disposed of, the cumulative amount of exchange
differences relating to the foreign operations are recognized in profit or loss.
(3) Financial instruments
1. Financial assets(i) Initial recognition and measurement
The Group classifies financial assets as financial assets measured at fair value through profit or loss, financial
assets measured at fair value through other comprehensive income, or financial assets subsequently measured
at amortized cost.
The Group initially recognizes trade receivables on the date when they arise. All other financial instruments are
initially recognized when the Group becomes a party to the contractual provision of a financial instrument.
Financial assets are initially measured at their fair value plus transaction costs that are directly attributable to theacquisition of the financial asset, unless they are classified as measured at fair value through profit or loss. Trade
receivables that do not contain a significant financing component are initially measured at the transaction price.
Financial assets are classified as financial assets measured at amortized cost if both of the following conditions
are met:・A financial asset is held within a business model whose objective is to hold the asset in order to collect thecontractual cash flows; and・The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Investments in debt instrument are classified as financial assets measured at fair value through othercomprehensive income if both of the following conditions are met:
・The financial asset is held within the Group’s business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and・The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
When any of the above-mentioned conditions is not met for financial assets except for equity instruments, thefinancial assets are classified as financial assets measured at fair value through profit or loss.
Equity instruments may be designated as financial assets measured at fair value through other comprehensive
income on an individual basis, except for equity instruments held for trading purposes. The designation has been
applied continuously. Equity instruments that are not designated as such are classified as measured at fair value
through profit or loss.
(ii) Subsequent measurement
Financial assets are subsequently measured based on the classification of the asset as follows.
Financial assets measured at amortized cost are measured at amortized cost using the effective interest method.
Changes in the fair value of financial assets measured at fair value through profit or loss are recognized in profit
or loss.

10

Changes in the fair value of debt instruments measured at fair value through other comprehensive income arerecognized in other comprehensive income, except for interest income, exchange gain and loss, and impairment
loss recognized in net profit and loss. Profit or loss is recognized at derecognition.
Meanwhile, changes in the fair value of equity instruments measured at fair value through other comprehensive
income are recognized in other comprehensive income. The dividends from relevant financial assets arerecognized in profit or loss as part of the financial income. The cumulative amount recognized in othercomprehensive income is reclassified not to profit or loss but to retained earnings when the financial asset isderecognized or the fair value of the asset declines significantly.
(iii) Impairment of financial assets
For impairment of financial assets measured at amortized cost, debt instruments measured at fair value throughother comprehensive income, lease receivables, and contract assets, expected credit losses are recognized as aloss allowance.
The Group determines, at the end of each reporting period, whether credit risk on the asset has increased
significantly since initial recognition. When the credit risk has not increased significantly since initial recognition, anamount equal to 12-month expected credit losses is measured as the loss allowance. When the credit risk has
increased significantly since initial recognition, an amount equal to lifetime expected credit losses is measured as
the loss allowance.
However, for trade receivables, lease receivables and contract assets, the loss allowance is measured at an
amount equal to the lifetime expected credit losses.
Expected credit losses of financial instruments are estimated using the following methods:
・An unbiased and probability-weighted amount determined by evaluating a range of possible outcomes;
・The time value of money; and・Reasonable and supportable information about past events, current conditions and forecasts of future economic
conditions that is available without undue cost or effort at the reporting date.
The amounts of these measurements are recognized in profit or loss.
If the amount measured as expected credit losses decreases after recognition of impairment loss, the decreased
amount is reversed and recognized in profit or loss.
(iv) Derecognition of financial assets
The Group derecognizes its financial assets only if the contractual rights to receive the cash flows from the financial
assets expire, or if the Group transfers substantially all the risks and rewards of ownership of the financial asset.
2. Financial liabilities(i) Initial recognition and measurement
The Group classifies financial liabilities as financial assets measured at fair value through profit or loss, or financial
assets measured at amortized cost. The Group determines the classification at initial recognition. The Group
recognizes financial liabilities when the Group becomes a party to the contractual provisions of the instruments.
All the financial liabilities are initially measured at fair value. However, financial liabilities measured at amortizedcost are measured at their fair value less transaction costs that are directly attributable to the acquisition.

11

(ii) Subsequent measurement
Financial liabilities are subsequently measured according to the classification as follows.
Financial liabilities held for trading and derivatives are included in financial liabilities measured at fair value throughprofit or loss. They are subsequently measured at fair value, and changes in the fair value are recognized in profit
or loss for the period.
Financial liabilities measured at amortized cost are subsequently measured at amortized cost using the effective
interest method.
Amortization using the effective interest method and gains and losses on derecognition are recognized in profit orloss for the period as part of the financial income or costs.
(iii) Derecognition of financial liabilities
The Group derecognizes financial liabilities when they are extinguished, i.e. when the obligation specified in thecontract is discharged or canceled, or expires.
3. Presentation of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial
position only when the Group currently has a legal right to set off the recognized amounts and intends either tosettle on a net basis, or to realize the asset and settle the liability simultaneously.
4. Derivatives and hedge accounting
The Group enters into forward exchange contracts in order to fix cash flows related to the recognized financial
assets and liabilities and future transaction. Interest rate swaps are used in order to fix cash flows of interest paid
related to the borrowings.
There are no derivatives stated above to which hedge accounting is applied.
(4) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with maturitiesof three months or less that is readily convertible to cash and subject to insignificant risk of change in value.
(5) Inventories
Inventories are measured at the lower of acquisition cost and net realizable value. Net realizable value is theestimated selling price in the ordinary course of business, less estimated cost of completion and estimated selling
expenses. The acquisition cost is generally calculated using the cost method based on the moving averagemethod and comprises all the costs of purchase, costs of conversion and other costs incurred in bringing theinventories to their present location and condition.
(6) Property, plant and equipment
Property, plant, and equipment is measured based on the cost model and stated at acquisition cost lessaccumulated depreciation and impairment losses.
The acquisition cost includes costs directly attributable to the acquisition of the asset, costs related to disassembly,
retirement and site restoration, as well as borrowing costs to be capitalized.
Depreciation of assets other than land and construction in progress is calculated on the straight-line method overthe estimated useful lives of the assets. The estimated useful lives of major assets are as follows;12・Buildings and structures: 2 to 60 years
・Machinery and vehicles: 2 to 20 years
・Tools, furniture and fixtures: 2 to 20 years
The estimated useful lives, residual value, and amortization methods are reviewed at the end of each fiscal year,
and if there are any changes made, those changes are applied prospectively as a change in an accounting
estimate.
(7) Intangible assets and goodwill
1. Goodwill
The Group measures goodwill as the fair value of consideration transferred including the recognized amount of
any non-controlling interests in the acquiree at the acquisition date, less the net recognized amount (usually fairvalue) of the identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill is not amortized.
Instead, it is tested for impairment annually and if any indication of potential impairment exists. Any impairment
loss for goodwill is recognized in profit or loss and is not reversed in subsequent periods. Goodwill is recorded atacquisition cost less any accumulated impairment losses.
2. Capitalized development costs
Expenditures related to research activities in order to gain new scientific and technical knowledge are recognized
as expenses as incurred. Development expenditure is capitalized as intangible assets only when the cost can bemeasured reliably, there is a technical and commercial feasibility of completing the development, it is probablethat the outcome will generate a future economic benefit, and the Group has intention, ability and sufficient
resources to use or sell the outcome of the development and to complete the development.
The estimated useful lives of capitalized development costs that are amortized using the straight-line method are
as follows.
・Capitalized development costs: 2 to 5 years
3. Other intangible assets
The Group applies the cost method in measuring separately acquired intangible assets, which are recorded atacquisition cost at initial recognition. After initial recognition, intangible assets excluding goodwill are amortizedusing the straight-line method over their estimated useful lives, and are recorded at acquisition cost lessaccumulated amortization and impairment losses. Estimated useful lives of major intangible assets are as follows.
The Group has no intangible assets with indefinite useful lives.
・Software: 2 to 10 years
The estimated useful lives and amortization methods are reviewed at the end of each fiscal year, and if there are
any changes made, those changes are applied prospectively as a change in an accounting estimate.
(8) Lease
At the inception of the lease contract, the Group assesses whether an arrangement is a lease or contains a lease.
When the right to control the use of specific assets transfers in exchange for consideration for a certain period due
to a contract, it means lease or includes lease. When the Group determines if the right to control the use of specificassets transfers or not, the Group uses the definition of lease in IFRS 16.

13

＜Lease as a lessee＞
The Group recognizes right-of-use assets and lease liabilities at the inception of the lease.
Right-of-use assets are measured at acquisition cost at the inception of the lease. After the commencement date,right-of-use assets are measured by using the cost model at acquisition cost less accumulated depreciation andimpairment losses. Right-of-use assets are amortized from the date of inception to the end of estimated useful lifeof the underlying leased asset if the right to use is transferred to lessee until the end of the lease term or if
acquisition cost of right-of-use assets reflects the exercise of a purchase option. Otherwise right-of-use assets areamortized from the date of inception to the earlier of the end of the estimated useful life of the right-of-use assets
or the end of the lease term.
Lease liabilities are measured at the present value of the lease payments that are not paid at the date of inception.
After the commencement date, the carrying amount of the lease liabilities are increased to reflect interest on thelease liabilities and decreased the lease payments made. Lease liabilities are re-measured and carrying amountsof right-of-use assets are revised or the change is recognized in profit or loss if the Group reviews lease liabilities
or if the modification is not accounted for as a separate lease.
As for short-term leases or leases for which the underlying asset is of low value, the Group applies IFRS 16.5, 6,
and recognizes lease payments as an expense using the straight-line method over the lease term.
＜Lease as a lessor＞
Lease transactions are classified as finance leases if all the risks and rewards incidental to ownership of underlying
assets are substantially transferred, and all other leases are classified as operating leases.
A receivable from customer held under a finance lease is initially recognized at the amount of the gross investmentin the lease discounted at the interest rate implicit in the lease and included in Trade and other receivables in the
consolidated statements of financial position.
An underlying asset subject to an operating lease is recognized in the consolidated statements of financial position,and lease payments from operating leases are recognized as revenue over the lease term.
(9) Investment property
Investment property is held to earn rentals or for capital appreciation or both. Investment property is measured byusing the cost model and is recorded at acquisition cost less accumulated depreciation and impairment losses.
Depreciation of an investment property other than land and construction in progress is recognized on a straightline basis over the estimated useful lives of the asset. The estimated useful lives of major assets are as follows:
・Buildings and structures: 3 to 41 years

14(10) Impairment
At the end of each fiscal year, the Group assesses the carrying amounts of non-financial assets other thaninventory and deferred tax assets to determine whether there is any indication of impairment. If any such indication
exists, the recoverable amount of the asset is estimated. Recoverable amounts of goodwill and intangible assetsthat are not yet ready for use are estimated at the same time every year.
The recoverable amount of an individual asset or cash-generating units is the higher of value in use or fair valueless costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pretax discount rate that reflects the time value of money and the risks specific to the asset. Assets
not assessed individually in test of impairment are integrated into the smallest cash-generating unit that generates
cash inflows which are largely independent of cash inflows from other assets or a group of assets. Cashgenerating units of goodwill are determined on the basis of the units managed for the purpose of internal reporting
and are within the scope of business segments before aggregation. The goodwill acquired in a businesscombination is allocated to each of the cash-generating units that are expected to benefit from the synergies of
the combination.
Corporate assets in the Group do not generate cash inflows independently. If there is any indication that corporate
assets may be impaired, the Group determines the recoverable amount of the cash-generating unit to which
corporate asset belongs.
When the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount, an impairment
loss is recognized in profit or loss. An impairment loss for a cash-generating unit is recognized by first reducing
the carrying amount of any goodwill allocated to the cash-generating unit, and then reducing proportionally the
carrying amount of other assets in the unit.
An impairment loss for goodwill is not reversed. The Group assesses whether there is any indication that an
impairment loss recognized in prior years for an asset other than goodwill may no longer exist or may havedecreased at the end of each fiscal year. An impairment loss is reversed when there has been a change in theestimates used to determine an asset’s recoverable amount. Impairment losses are reversed up to the amountnot exceeding the carrying amount (net of depreciation) that would have been determined if no impairment losses
had been recognized in prior years.
(11) Employee benefits
1. Short-term employee benefits
For short-term employee benefits including salaries, bonuses and paid annual leave, when the employees render
related services, the amounts expected to be paid in exchange for those services are recognized as expenses.
2. Retirement benefit plans
The Group sponsors a defined benefit plan and a defined contribution plan as retirement benefit plans for
employees.
(a) Defined contribution plans
For defined contribution plans, when the employees render related services, the contribution payables to thedefined contribution plan are recognized as expenses.

15

(b) Defined benefit plans
The Group has adopted lump-sum payment on retirement and defined benefit pension plans as defined benefit
plans.
The present value of defined benefit obligations, related current service costs and past service costs are
determined using the projected unit credit method.
The discount rates are determined by reference to market yields at the end of the reporting period on high-quality
corporate bonds which have maturities corresponding to the future settlements of benefits in each year.
The net defined benefit liability (asset) is determined as the present value of the defined benefit obligation less thefair value of the plan assets. Net interest on the net defined benefit liability (asset) is recognized in profit or loss asfinancial expenses.
The Group recognizes the difference arising from remeasurement of present value of the defined benefit obligationand the fair value of the plan asset in other comprehensive income when it is incurred, and reclassifies it
immediately to retained earnings from other components of equity.
The Group recognizes any past service cost as an expense at the earlier of the following dates.
(i) when the plan amendment or curtailment occurs; and(ii) when related restructuring costs are recognized(12) Provisions
Provisions are recognized when the Group has present legal or constructive obligations as a result of past events,
it is probable that outflows of resources embodying economic benefits will be required to settle the obligations,and reliable estimates can be made of the amount of the obligations. Where the effect of the time value of money
is material, the amount of a provision is measured at the discounted present value of the estimated future cash
flow using a pre-tax rate that reflects the time value of money and the risks specific to the liability. The unwindingof the discount due to the passage of time is recognized as finance costs.
1. Asset retirement obligations
Provisions for asset retirement obligations are recognized mainly for the estimated cost of restoring the leased siteat the end of the lease term.
2. Provision for product warranties
For the payment of after-sales service expenses incurred, provision for product warranties is recognized basedon past experiences and the estimated future warranty costs, principally in accordance with terms and conditionsof warranty.
The expenses related to the warranty items in accordance with notifications to the competent authority arerecognized as provision for product warranties when it is probable that outflows of resources embodying economic
benefits will be required, and reliable estimates can be made of the amount of the obligations.
3. Provision for loss on construction contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is provided whensubstantial losses on the contracts are anticipated at the fiscal year end for the next fiscal year and beyond andsuch losses can be reasonably estimated.

16

(13) Revenue
1. Revenue from contracts with customer
The Group identifies a performance obligation in a contract with a customer, and recognizes as revenue theamount of consideration to which the Group expects to be entitled in exchange for transferring promised goods orservices to the customer. Amounts collected on behalf of taxation authorities such as consumption taxes andvalue added taxes are not included into the amount. If variable consideration is included in the consideration
promised in a contract with a customer, some or all of an amount of variable consideration is included in thetransaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently
resolved.
Revenue is recognized at a point in time or over a certain period of time in accordance with satisfaction of aperformance obligation in a contract with a customer.
With regard to revenue from the sale of cars, performance obligations are principally considered to be fulfilled at
the time of delivery of the cars, at which point customers obtain control of the cars and revenue is recognized.
In automobile business, fare-paying extended warranty service is provided for the products as an option in addition
to normal warranty. The revenue from the extended warranty service is recognized over a certain period of timein accordance with the progress of the performance obligation.
2. Revenue from financial lease
When the Group is lessor as the manufacturer or dealer, cost of sales and selling profit or loss corresponding torevenue for a portion identified as sale of products are recognized in profit or loss at the inception of the leases.
Finance income from financial leases is recognized based on a pattern reflecting a constant rate of return on the
net investment in the lease of the Group.
3. Revenue from operating leases
Revenue from operating leases is recognized on a straight-line basis over the lease term.
4. Interest income
Interest income is recognized using the effective interest method
5. Dividend income
Dividend income is recognized when the right to receive the payment is established.
(14) Government grants
Government grants are recognized at fair value when there is a reasonable assurance that the Group complies
with the conditions attached to them and the grants will be received. Government grants are recognized in profit
or loss over the periods in which the related costs for which the grants are intended to compensate are recognized
as expenses. With regard to government grants that are compensation for acquisition of assets, the amount of the
grants is deducted from the acquisition cost of the assets.

17

(15) Income taxes
Income taxes are composed of current and deferred taxes. Income taxes are recognized in profit or loss, except
for items that are recognized in other comprehensive income or directly in equity and those arising from businesscombinations.
Current income taxes are measured at the amount that is expected to be paid to or refunded from the taxation
authorities. The amount of these taxes is calculated based on tax rates and tax laws that are enacted or
substantively enacted by the end of the consolidated reporting period in the countries where the Group conducts
business activities and gains net taxable profit or loss.
Deferred income taxes are recognized based on the temporary differences between the tax base for assets andliabilities and the carrying amounts at the end of the consolidated reporting period, and the carryforward of unused
tax losses and unused tax credits.
Deferred tax assets are recognized for all the deductible temporary differences etc. to the extent that it is probablethat taxable profit will be available against which the deductible temporary differences etc. can be utilized. Deferred
tax liabilities are recognized for all the taxable temporary differences in principle.
However, no deferred tax assets and liabilities are recognized on following temporary differences:
・Taxable temporary differences arising from the initial recognition of goodwill;・Temporary differences arising from the initial recognition of an asset or liability in a transaction which is not abusiness combination and, at the transaction, affects neither accounting profit nor taxable profit; and・Taxable temporary differences associated with investments in subsidiaries and affiliates, where the Group isable to control the timing of the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to utilize all or part of the benefit of thedeferred tax assets. Unrecognized deferred tax assets are reassessed at the end of each reporting period andrecognized only to the extent that it is probable that the deferred tax assets can be recovered by future taxable
profits.
Deferred tax assets and liabilities are measured at the tax rates and tax laws that are expected to apply to thefiscal year when the assets are realized or the liabilities are settled, based on tax rates and tax laws that areenacted or substantively enacted at the end of the consolidated reporting period.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to offset current
tax liabilities against current tax assets, and income taxes are levied by the same taxation authority on the same
taxable entity.
(16) Earnings per share
Basic earnings per share is calculated by dividing profit for the year attributable to owners of the parent by theweighted average number of common stocks outstanding during the reporting period, adjusted for the number oftreasury stocks acquired.
(17) Operating segment
An operating segment is a component of the Group that engages in business activities where revenues are earned
and expenses are incurred, including inter-segment transactions. The Board of Directors regularly reviews theoperating results of all the operating segments for which discrete financial information is available, in order to makedecisions about resources to be allocated to the segments and assess their performance.

18(18) Non-current assets held for sale
An asset or asset group of which the carrying amount is expected to be recovered through a sale transaction
rather than through continuous use is classified as non-current assets held for sale or disposal group if the following
conditions are met: it is highly probable that the asset or asset group will be sold within one year; the asset or asset
group is available for immediate sale in its present condition; and the Group management is committed to a saleplan. In such cases, the non-current asset is not depreciated or amortized and is measured at the lower of its
carrying amount and fair value less costs to sell.
(19) Equity
1. Common stock and capital surplus
The common shares issued by the Company are classified as equity, and the proceeds from issuance of commonshares are included in common stock and capital surplus.
2. Treasury stock
Treasury stock is measured at acquisition cost, and deducted from equity. No gain or loss is recognized on thepurchase, sale or retirement of the Group's treasury stock. Any difference between the carrying amount andconsideration received on the sale of treasury stocks is recognized directly in capital surplus.
(20) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset,
which necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalized aspart of the cost of that asset, until the asset is substantially ready for its intended use or sale.
All other borrowing costs are recognized in profit or loss in the consolidated reporting period in which they are
incurred.

19

4. Significant accounting estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to makejudgments, estimates and assumptions that affect the application of accounting policies and the reported amountsof assets, liabilities, revenue and expenses. Actual results may differ from these estimates.
The estimates and the underlying assumptions are reviewed on an ongoing basis. The effect of a change in an
accounting estimate is recognized in the period of the change and future periods.
Judgments made by management that have significant effects on the amounts reported in the consolidated
financial statements are as follows:
・Recognition of intangible assets arising from development (note “3. Significant Accounting Policies, (7)Intangible assets and goodwill”); and・Accounting for contracts including lease (note “3. Significant Accounting Policies, (8) Lease”).
Significant accounting estimates made by management are as follows:
・Recoverability of deferred tax assets (note “3. Significant Accounting Policies, (15) Income taxes”); and・Accounting treatments and evaluation of provisions (note “3. Significant Accounting Policies, (12) Provisions”)
The impact of the spread of COVID-19 on the Group's business activities is described in “38.Significant
Subsequent Event”.
The Group has made accounting estimates, including the recoverability of deferred tax assets, based on theassumption that the impact of the spread of COVID-19 on business activities will continue for a certain period oftime in next consolidated fiscal year, but not for a long period of time.
The impact on the Group’s financial results for the consolidated fiscal year ended March 31, 2020 is minimal.
5. New accounting standards not yet adopted by the Group
None of the new or revised major standards and interpretations that have been issued by the date of approval of
the public announcement of the consolidated financial statement but are not yet adopted early by the Groupsignificantly affects the Group's consolidated financial statements.

20

6. Segment information
The operating segments are the components of the Company for which separate financial information is available
that is evaluated regularly by the Board of Directors in deciding allocation of management resources and inassessing performance.
The Company recognizes Automobile as its main business, and introduces an internal company system in
Aerospace division. This framework makes clearer the responsibility of each division and accelerates businessexecution. The Company manages the subsidiaries on the basis of this classification. Therefore, the businesssegments consist of “Automobile”, “Aerospace”, and “Others” which neither belongs to Automobile nor Aerospace.
The reporting segments are “Automobile” and “Aerospace” segments.
Accounting method for business segment reported is almost the same as the description in "3. Significant
Accounting Policies".
Reported segment profit or loss is based on the operating profit.
Intersegment sales and transfers are based on the current market prices.
Principal products and services of each segment are as follows:
Segment
Principal products and services
Automobile
Automobiles and relevant products
Aerospace
Aircrafts, parts of space-related devices, and relevant products
OthersReal estate lease, etc.
(1) Information about the amount of revenue, profit or loss and other material items for each segment
Business segment information of the Group as of transition date and as of and for the consolidated fiscal years
ended March 31, 2019 and 2020 is as follows:
Transition date (April 1, 2018)(Unit: Millions of yen)
Eliminations
Automobiles Aerospace
Subtotal
OthersConsolidated
or Corporate
Segment assets
2,782,582
235,099 3,017,681
78,763(25,907) 3,070,537
Investments accounted for
7,448
7,448
54
7,502
－
－
using the equity method
FYE 2019 (April 1, 2018 to March 31, 2019)

Revenue(1) External customers(2) Intersegment
Total revenue
Operating profit
Finance Income
Finance Costs
Profit before tax
Segment assets
Other items
Depreciation andamortization
Share of profit (loss) ofinvestments accounted forusing the equity method
Investments accounted forusing the equity method
Additional non-current
assetsAutomobiles Aerospace

Subtotal

3,007,637
3,133
3,010,770
172,083

134,144804
134,948
6,025

3,141,781
3,937
3,145,718
178,108

14,36926,84841,217
3,278－(30,785)(30,785)329

2,878,374

250,961

3,129,335

76,572(25,310)

3,156,150－
3,156,150
181,724
13,701(9,399)186,026
3,180,597

180,648

4,748

185,396

1,681－

187,077

563

－

563

(186)

－

377

7,500

－

7,500

1,321

－

8,821

265,978

6,210

272,188

2,093－

274,281

21

Others(Unit: Millions of yen)
Eliminations
Consolidated
or Corporate

Note: 1. The method to calculate the operating profit of each segment is correspondent to the method to
calculate the operating profit in the consolidated statements of income, and Finance income, Financecosts, and Income tax expense are not included. Operating costs which are not allocated to eachsegment directly are allocated on the basis of the most reasonable standard to allocate.
2. Total amount of each segment and Eliminations or Corporate is correspondent to the amount of total
assets in the consolidated statements of financial position, and Investments accounted for using theequity method, derivative assets, and deferred tax assets are included. Assets which are not allocatedto each segment directly less the amount included in Eliminations or Corporate are allocated into eachsegment on the basis of the most reasonable standard to allocate.
3. Eliminations or Corporate includes elimination of intersegment transactions and corporate assets.
Corporate assets primarily consist of cash and cash equivalents and financial assets measured at fairvalue through other comprehensive income.
FYE 2020 (April 1, 2019 to March 31, 2020)

Revenue(1) External customers(2) Intersegment
Total revenue
Operating profit
Finance Income
Finance Costs
Profit before tax
Segment assets
Other items
Depreciation andamortization
Share of profit (loss) ofinvestments accounted forusing the equity method
Investments accounted forusing the equity method
Additional non-current
assetsOthers(Unit: Millions of yen)
Eliminations
Consolidated
or Corporate

Automobiles Aerospace

Subtotal

3,193,949
2,985
3,196,934
200,263

142,141－
142,141
5,065

3,336,090
2,985
3,339,075
205,328

8,019
27,46135,4803,577－(30,446)(30,446)
1,414

2,977,628

273,378

3,251,006

67,710(24,808)

3,344,109－
3,344,109
210,319
15,844(18,507)
207,656
3,293,908

186,254

4,991

191,245

1,497－

192,742

329

－

329

(552)

－

(223)

7,264

－

7,264

2,567

－

9,831

295,638

5,407

301,0453,259－

304,304

Note: 1. The method to calculate the operating profit of each segment is correspondent to the method to
calculate the operating profit in the consolidated statements of income, and Finance income, Financecosts, and Income tax expense are not included. Operating costs which are not allocated to eachsegment directly are allocated on the basis of the most reasonable standard to allocate.
2. Total amount of each segment and Eliminations or Corporate is correspondent to the amount of total
assets in the consolidated statements of financial position, and Investments accounted for using theequity method, derivative assets, and deferred tax assets are included. Assets which are not allocatedto each segment directly less the amount included in Eliminations or Corporate are allocated into eachsegment on the basis of the most reasonable standard to allocate.

223. Eliminations or Corporate includes elimination of intersegment transactions and corporate assets.
Corporate assets primarily consist of cash and cash equivalents and financial assets measured at fairvalue through other comprehensive income.
(2) Information about products and services
Information about products and services is omitted since the classifications of products and services are the sameas reporting segments.
(3) Information about geographic areas
The revenue and carrying amounts of non-current assets other than financial instruments and deferred tax assets
based on the location of the Group as of transition date and as of and for the consolidated fiscal years ended
March 31, 2019 and 2020 are as follows:
Transition date (April 1, 2018)(Unit: Millions of yen)Japan
Non-current assets(other than financial instruments
and deferred tax assets)

751,887

North America(US)283,358

281,412Europe
692

Asia
1,090

OthersTotal－ 1,037,027

FYE 2019 (April 1, 2018 to March 31, 2019)(Unit: Millions of yen)
North America(US)594,108 2,199,928 2,060,699

Japan

Revenue
Non-current assets(other than financial instruments
and deferred tax assets)

783,209305,933

304,129

EuropeAsia

OthersTotal

100,584

116,310145,220 3,156,150

464

792

－ 1,090,398

Note: Revenue is based on the location of customers and classified by countries or areas.
FYE 2020 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)
North America(US)572,668 2,413,127 2,267,912

Japan

EuropeAsia

OthersTotal

Revenue
116,242 106,365 135,707 3,344,109
Non-current assets(other than financial instruments 838,263 327,851 323,887
538
443－ 1,167,095
and deferred tax assets)
Note: Revenue is based on the location of customers and classified by countries or areas.
(4) Information about major customers
Information about major customers is omitted because there was no specific customer whose revenue is equal toor more than 10% of the revenue on the consolidated statements of income.

23

7. Cash and cash equivalents
Cash and cash equivalents consist of the following:Transition date
(April 1, 2018)
606,821FYE 2019(as of March 31, 2019)
692,128(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
853,244

Short-term investments

158,770

10,200

5,722

Total

765,591

702,328

858,966

Cash and deposits

Cash and cash equivalents are classified as financial assets measured at amortized cost.
Short-term investments held by the Group are mainly money market funds.
There are no significant cash and cash equivalents which is subject to the limitation of use as of March 31.2020.
8. Trade and other receivables
Trade and other receivables consist of the following:Transition date
(April 1, 2018)
Notes receivable and Accounts
receivable-trade
Accounts receivable-other(Unit: Millions of yen)
FYE 2019
FYE 2020(as of March 31, 2019) (as of March 31, 2020)

89,887

108,708

105,522

46,95930,71738,381

Trade loans

156,955

165,040

178,492

Others49,662

39,77242,444

Total

343,463344,237

364,839

208,066

199,651

202,761

135,397

144,586

162,078

343,463344,237

364,839

Receivables expected to becollected within 12 months
Receivables expected to becollected beyond 12 months
Total

Trade and other receivables other than lease receivables and contract assets are classified as financial assets
measured at amortized cost.
9. Inventories
Inventories consist of the following:Transition date
(April 1, 2018)
Finished goods andmerchandiseWork in process(Unit: Millions of yen)
FYE 2019
FYE 2020(as of March 31, 2019) (as of March 31, 2020)

219,012265,492

294,148

67,99969,40775,350Raw materials and supplies

41,93068,57490,442

Total

328,941

403,473

459,940

The amounts of write-down of inventories recognized as an expense for the consolidated fiscal years ended
March 31, 2019 and 2020 were 1,061 million yen and 1,461 million yen respectively.

2410. Other financial assets
Other financial assets consist of the following:Transition date
(April 1, 2018)
Financial assets measured atamortized cost
Debt instruments
Financial assets measured
at fair value through profit or loss
Derivatives
Debt securities
Financial assets measured at fairvalue through othercomprehensive income
Equity securities
Debt securities
Total
Financial assets expected to becollected within 12 months
Financial assets expected to becollected beyond 12 months
Total(Unit: Millions of yen)
FYE 2019
FYE 2020(as of March 31, 2019) (as of March 31, 2020)

270,975

276,800

59,736

5,339

246

1,131

791

490

21,48538,201

36,181

8,922

98,879120,810

132,829

414,185434,527

224,103372,531394,406

204,373

41,654

40,121

19,730414,185434,527

224,103

Equity securities including stocks held to maintain or strengthen the business relationship with investees are, at
initial recognition, designated as financial assets measured at fair value through other comprehensive income.
Major securities included in the equity securities designated as financial assets measured at fair value throughother comprehensive income at the transition date and for the consolidated fiscal years ended March 31, 2019and 2020 consist of the following:Transition date (April 1, 2018)(Unit: Millions of yen)
Fair value
IBJ Leasing Company, Limited(Current, Mizuho Leasing company, Limited)
The Gunma Bank,Ltd.
TOKYO LIGHT ALLOY CO., LTD.
The Kyoritsu Co., Ltd.
Sakamoto Research & Development Holdings Ltd.
NIPPON STEEL & SUMITOMO METAL CORPORATION(Current; NIPPON STEEL CORPORATION)
Mizuho Financial Group, Inc.
Central Glass Co., Ltd.
Shigeru Co., Ltd.
Mitsui O.S.K. Lines, Ltd.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
OSHIMA ELECTRIC WORKS CO., LTD.

25

2,160
1,722
806
805
775
713
712
694
564
515
352
282

FYE 2019 (as of March 31, 2019)(Unit: Millions of yen)
Fair value
1,194
878
868
729
637
606
421
401
313
294

The Gunma Bank,Ltd.
TOKYO LIGHT ALLOY CO., LTD.
The Kyoritsu Co., Ltd.
Sakamoto Research & Development Holdings Ltd.
Mizuho Financial Group, Inc.
Shigeru Co., Ltd.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
Mitsui O.S.K. Lines, Ltd.
OSHIMA ELECTRIC WORKS CO., LTD.
Nippon Yusen Kabushiki Kaisha
FYE 2020 (as of March 31, 2020)(Unit: Millions of yen)
Fair value
995
935
847
709
625
460
439
330
294

TOKYO LIGHT ALLOY CO., LTD.
The Gunma Bank,Ltd.
The Kyoritsu Co., Ltd.
Sakamoto Research & Development Holdings Ltd.
Shigeru Co., Ltd.
Mizuho Financial Group, Inc.
NIPPON STEEL KOWA REAL ESTATE CO.,LTD.
OSHIMA ELECTRIC WORKS CO., LTD.
Mitsui O.S.K. Lines, Ltd.

(Derecognition of equity securities designated as financial assets measured at fair value through othercomprehensive income)A part of the financial assets measured at fair value through other comprehensive income are sold based on theassessment of business relationship, etc. The fair value of equity securities designated as financial assets
measured at fair value through other comprehensive income that are derecognized upon sale and cumulative
gains and losses that have been previously recognized in equity as other comprehensive income for the
consolidated fiscal years ended March 31, 2019 and 2020 consist of the following:(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

FYE 2019(April 1, 2018 toMarch 31, 2019)
Fair value

5,637

27,924

Cumulative gains (losses)

3,549

8,306

There are no equity securities designated as financial assets measured at fair value through other comprehensive
income for which cumulative gain or loss is transferred to retained earnings due to significant decrease of fairvalue.
Most of dividend received from equity securities designated as financial assets measured at fair value throughother comprehensive income arise from the investment held as of the end of reporting period.

2611. Property, plant and equipment(1) The movement of carrying amount, acquisition cost, accumulated depreciation and accumulated impairment
losses of "Property, plant and equipment" are the follows:
FYE 2019 (April 1, 2018 to March 31, 2019)
Carrying amount(Unit: Millions of yen)
VehiclesBuildings Machinery,used forandequipment
operatingstructures and vehicles
lease*1Land

Tools,
Construction Right-offurniture
in progressuse
Othersand*2assetsfixtures

Total

Beginningbalance

205,924

188,450

18,638 167,225 64,777

55,908 88,414－

770,698

Acquisition

25,596

106,023

42,333

5,946 34,613

68,139 73,300

881

314,498

Depreciation*3(13,143)(47,995)(5,580)－ (32,203)－ (46,731)

Disposals(1,896)(5,588)(1,807) (2,602)

(319)

(29)

(36)

－

－

－

(4)

－

－

－

－

(4)

1,871

3,016

865

173

2,132

702

(21)

－

7,873

(164)

(34,473)(38,640)

1,106(4,111)(93,386) (2,334)－ (133,362)

Ending balance 218,188

209,433

15,809 171,844 64,889

31,334 112,592

430

Reclassification
to assets held
for sale
Foreignexchangedifferences
Others*4(451) (140,523)－ (10,470)

808,710

Note: 1. Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
2. Construction in progress includes the expenditures related to the property, plant and equipment underconstruction.
3. Depreciation is included in "Cost of sales" and "Selling, general and administrative expenses" in the
consolidated statements of income.
4. Others include transfers from vehicles to inventory, construction in progress to each item, amount ofgovernment grants reduced, etc.

27

FYE 2020(April 1, 2019 to March 31, 2020)
Carrying amount(Unit: Millions of yen)
Machinery, Vehicles
Buildings
equipment used forandandoperatingstructures
vehicleslease*1Land

Tools,
furniture Construction Right-ofOthers
and in progress *2 use assets
fixtures

Total

Beginningbalance

218,188

209,433

15,809 171,844 64,889

31,334

112,592430

808,710

Acquisition

22,30382,24443,516

1,333 53,107

74,08332,767－

265,837

Depreciation*3(13,684)(50,146)(4,991)－ (36,221)

Disposals(890)(7,653)(2,242)

(676)

(272)

(389)

(24)

－

(9,904)

(33)

(11)

－

(207)

－

－

－

－

(251)

(957)

(1,235)

(282)

(120)

(999)

(370)

(168)

－

(3,849)(262)(30,183)(32,797)256

14(64,047)(585)－ (94,807)

Ending balance 224,665

202,449

19,013 172,430 80,518

40,611

99,818－

Reclassification
to assets held
for sale
Foreignexchangedifferences
Others*4－ (44,764)(430) (145,245)

820,491

Note: 1. Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
2. Construction in progress includes the expenditures related to the property, plant and equipment underconstruction.
3. Depreciation is included in "Cost of sales" and "Selling, general and administrative expenses" in the
consolidated statements of income.
4. Others include transfers from vehicles to inventory, construction in progress to each item, etc.

28

Acquisition costs(Unit: Millions of yen)
Machinery, Vehicles
Buildings
equipment used forandandoperatingstructures
vehicles lease*1
Transition date
(April 1, 2018)
FYE 2019(as of March 31,
2019)
FYE 2020(as of March 31,
2020)

Land

Tools,
Construction Right-offurniture
in progress use Others
and*2assetsfixturesTotal

432,687

632,376

22,648 179,464

363,80955,908 147,714

157 1,812,115

451,964

662,176

19,282 183,981

374,897

31,334 172,683 1,038 1,878,073

466,314

673,572

22,605 184,281

405,041

40,611 184,697 1,036 1,955,552

Note: 1. Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
2. Construction in progress includes the expenditures related to the property, plant and equipment underconstruction.
Accumulated depreciation and accumulated impairment loss
(Unit: Millions of yen)
Machinery, Vehicles
Buildings
equipment used forandandoperatingstructures
vehicleslease*1Land

Tools,
Right-offurniture
Othersuse assets
and fixtures

Total

Transition date
226,763443,926
4,010
12,239299,032
59,300157 1,041,417(April 1, 2018)
FYE 2019(as of March 31,
233,776452,7433,473
12,137
310,008
60,091
608 1,069,363
2019)
FYE 2020(as of March 31,
241,649
471,123
3,592
11,851
324,523
84,8791,036 1,135,061
2020)
Note: Amounts of “Vehicles used for operating lease” are included in “Machinery, equipment and vehicles”.
(2) The carrying amount of property, plant and equipment pledged as collateral for liabilities
For the amount of property, plant and equipment pledged as collateral for liabilities, please refer to "16. Financing
liabilities".
(3) Commitment.
For a discussion of our commitments to acquire property, plant and equipment, please refer to "33.
Commitments"2912. Intangible assets and goodwill
The movement of carrying amount, acquisition cost, accumulated amortization and accumulated impairment
losses of Intangible assets and goodwill are as follows:
FYE 2019(April 1, 2018 to March 31, 2019)
Carrying amount(Unit: Millions of yen)
Capitalized
development
costs
120,188－
31,041(35,763)
－
(150)
－
(398)
114,918

Software

Others*1

Total

Beginning balance
25,614
7,373
153,175
Separate acquisitions
11,16314,00325,166
Internally generated
31,041－－
Amortization *2(9,985)(297)(46,045)
Impairment losses
(1)
(10)
(11)
Disposals
(144)
(30)
(324)
Foreign exchange differences
62
70
132
Others
3,517(10,743)(7,624)Ending balance
30,226
10,366
155,510
Note: 1. Others include Goodwill.
2. Amortization of "Intangible assets and goodwill" is included in "Cost of sales" and "Selling, general andadministrative expenses" in the consolidated statements of income.
FYE 2020(April 1, 2019 to March 31, 2020)
Carrying amount(Unit: Millions of yen)
Capitalized
development
costs
114,918－
61,187(33,842)－－(499)
141,764

Software

Others*1

Total

Beginning balance
30,226
10,366
155,510
Separate acquisitions
12,544
18,77231,316
Internally generated
61,187－－
Amortization *2(12,419)(795)(47,056)
Disposals
(6)
(9)
(15)
Foreign exchange differences
(97)
(106)
(203)
Others
352
9,183
9,036
Ending balance
30,60037,411
209,775
Note: 1. Others include Goodwill.
2. Amortization of "Intangible assets and goodwill" is included in "Cost of sales" and "Selling, general andadministrative expenses" in the consolidated statements of income.

30

Acquisition costs(Unit: Millions of yen)
SoftwareTransition date
(April 1, 2018)
FYE 2019(as of March 31, 2019)
FYE 2020(as of March 31, 2020)

Capitalized
development costs

OthersTotal

72,171

173,417

14,204

259,793

94,949203,729

18,088316,766

104,143

229,585

45,694379,422

Accumulated depreciation and Accumulated impairment losses(Unit: Millions of yen)
SoftwareTransition date
(April 1, 2018)
FYE 2019(as of March 31, 2019)
FYE 2020(as of March 31, 2020)

Capitalized
development costs

OthersTotal

46,55753,2296,831

106,618

64,72388,811

7,722

161,256

73,54387,821

8,283

169,64731

13. Investment property
The movement of carrying amount, acquisition cost, accumulated depreciation and accumulated impairment
losses of Investment property are as follows:(1) The movement of carrying amount of Investment property
Carrying amountFYE 2019(April 1, 2018 toMarch 31, 2019)
Beginning balance
Acquisition
Depreciation
Disposals
OthersEnding balance

27,278198(509)(1,245)(308)
25,414(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
25,414
56
(441)
(291)
(752)
23,986(2) Acquisition costs, accumulated depreciation, accumulated impairment losses, and fair value

Acquisition costs
Accumulated depreciation
Accumulated impairment losses
Carrying amount
Fair value(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
38,59236,88535,636(10,788)(10,699)(10,927)
(526)
(772)
(723)
27,27825,41423,986
40,13640,20740,949The fair value of major investment property is based on the assessment by the independent appraiser certified
as adequate professional in the area in which the property is located.
The assessment is based on the appraised value by discounted cash flow method or transaction prices inmarket of observable similar assets, etc.
The level of the fair value hierarchy of investment property is level 3.
For fair value hierarchy, please refer to "30. Fair Value".

32

(3) Profit and loss from investment property(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

FYE 2019(April 1, 2018 toMarch 31, 2019)
Rental income

3,830

3,729

Rental expenses(2,110)(1,940)

Profit

1,720

1,789

Rental income is mainly stated in "Revenue" in the consolidated statements of income.
Rental expenses are the expenses corresponding to rental income (costs related to depreciation, repairs,
insurance and taxes, etc.), and stated in "Cost of sales" and "Selling, general and administrative expenses", and"Other expenses" in the consolidated statements of income.
14. Investments accounted for using the equity method
The carrying amounts of investments accounted for using the equity method are as follows:
Transition date
(April 1, 2018)
Investments accounted for using theequity method

7,502(Unit: Millions of yen)
FYE 2019
FYE 2020(as of March 31, 2019) (as of March 31, 2020)
8,821

9,831

The Group's share of profit (loss) and other comprehensive income (loss) of investments accounted for using theequity method are as follows:(Unit: Millions of yen)
FYE 2019
FYE 2020(April 1, 2018 to(April 1, 2019 toMarch 31, 2019)
March 31, 2020)
Share of profit (loss) of investments accounted
377
(223)
for using the equity method
Share of other comprehensive income (loss)of investments accounted for using the equity
(186)
(182)
method
Total
191
(405)
For the consolidated fiscal years ended March 31, 2019 and 2020, there are no individually significant affiliates orjoint ventures in investments accounted for using the equity method.

33

15. Trade and other payables
Trade and other payables consist of the following:
FYE 2019(as of March 31, 2019)(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)

314,377

306,970

267,657

64,863

63,77233,376

Accounts payable-other45,951

31,37533,470

Others

10,738

2,278

1,720

Total

435,929404,395

336,223435,929404,395

336,223－－－435,929404,395

336,223

Transition date
(April 1, 2018)

Notes payable and Accounts
payable-trade
Electronically recorded
obligations-operating

Payables expected to be paid
within 12 months
Payables expected to be paidbeyond 12 months
Total

Trade and other payables are classified as financial liabilities measured at amortized cost.
16. Financing liabilities(1) Financing liabilities consist of the following:
Financial covenants are attached to a part of borrowings as of March 31, 2020.
The Company observes the covenants for the consolidated fiscal year ended March 31, 2020. The covenants
are monitored to maintain the required level.
(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020
Average
Payment due(as of March(as of Marchinterest rate*1
date(April 1, 2018)31, 2019)
31, 2020)
Short-term borrowings
26,333
7,682
4,753
1.60%
Current portion of
42,982
7,592
7,420
0.17%
long-term borrowings
Long-term borrowings
21,13888,452
187,0370.17%
2022-2027
Bonds

－

－

40,000Total

90,453

103,726

239,210*2*2

Note: 1. Average interest rate represents the weighted-average interest rates on outstanding balances offinancing liabilities as of March 31, 2020.
2. For Average interest rate and Payment due date of Bonds, please refer to (2) below.

34

(2) Bonds consist of the following(Unit: Millions of yen)Company
Name

Date ofissuanceof bonds

Brand

1st Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
2nd Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clause
3rd Unsecured bond
The
Limited to inter-bondCompany transactions with a paripassu clauseTransition
date(April 1,
2018)

FYE
2019

FYE
2020

(as of(as ofMarch
March
31, 2019) 31, 2020)

Interest
rate

Repayment
Date

December17, 2019－－

10,0000.12%

December17, 2024

December17, 2019－－

15,0000.21%

December17, 2026

December17, 2019－－

15,0000.28%

December17, 2029(3) Assets pledged as collateral
1. Assets pledged as collateral consist of the following:
FYE 2019(as of March 31, 2019)(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)

10,369

9,593

9,370

118

85

48

18,26528,752

16,77926,457

16,276
25,694

Transition date
(April 1, 2018)
8,728

FYE 2019(as of March 31, 2019)
1,280(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
540

1,388

864

446

11,454
1,752
23,322

10,596
1,733
14,473

10,155
1,321
12,462

Transition date
(April 1, 2018)
Assets pledged ascollateral
Buildings andstructures
Machinery andvehiclesLand
Total
2. Secured liabilities
Secured liabilities consist of the following:

Short-term borrowings
Current portion of longterm borrowings
Long-term borrowings
OthersTotal

35

As is customary in Japan, bank loans are extended under general agreements which provide that security andguarantees for present and future indebtedness will be given upon request from the bank. And in the event of
delay in payment or default by the Group, the bank shall have the right to offset cash deposits about all theliabilities and to foreclose depending on the content of agreement.
17. Other financial liabilities
Other financial liabilities consist of the following:Transition date
(April 1, 2018)
Financial liabilities measured at amortized cost
Liabilities related to chargeable subcontracting
Long-term accounts payable-other
Guarantee deposits received
Financial liabilities measured at fair value throughprofit or loss
Derivatives
Lease liabilities
Lease liabilities (Current)
Lease liabilities (Non-current)
Total
Liabilities expected to be paid within 12 months
Liabilities expected to be paid beyond 12 months
Total

36

(Unit: Millions of yen)
FYE 2019
FYE 2020(as of March 31,(as of March 31,
2019)
2020)

14,3863,642
6,777

13,177
3,355
6,665

18,234
2,805
6,464

162

2,062

2,028

25,52957,384
107,880

36,382
63,836
125,477

23,86458,586111,981

40,07767,803
107,880

51,62173,856
125,477

44,12667,855111,98118. Provisions
FYE 2019 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)

Beginning of the period
Increase during the year
Decrease during the year
(utilized)
Decrease during the year
(reversal)
OthersEnding of the period
Current liabilities
Non-current liabilities
Total

Provision for
product
warranties
300,897
186,061

Provision for loss
on construction
contracts
666
3,112

(210,689)

Others*1

Total

33,88630,347335,449
219,520(666)(29,009)(240,364)

(423)

－

(313)

(736)

(4,872)
270,974
224,768
46,206
270,974

－
3,112
3,112
－
3,112

(1,437)33,47433,282
192
33,474(6,309)307,560
261,162
46,398
307,560

Note: Others include asset retirement obligations, etc.
(Provision for product warranties)
Provision for product warranties is recognized at the total amount of the following estimations to cover future
claim expenses for products sold.
1. Estimated amount based on past experiences with consideration given to the expected level of future
warranty costs in accordance with the terms and conditions of the warranties
2. Estimated amount calculated as the expenses related to product recall in accordance with the notifications tothe competent authorities
Provision for product warranties is used for expenditures based on the demand from customers and dealers.
(Provision for loss on construction contracts)
To cover loss on contracts in the Aerospace segment, a provision for loss on construction contracts is
recognized for uncompleted construction of contracts at the consolidated fiscal year -end for which substantial
losses are anticipated and such losses can be reasonably estimated. The timing of expenditure depends on the
progress of construction contracts in the future.
19. Employee benefits(1)Outline of employee benefits
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans, defined
benefit pension plans, and the Company and certain domestic subsidiaries have defined contribution pension
plans. In addition, in certain occasions, additional retirement payments are made to employees for theirretirement.
Consolidated foreign subsidiaries primarily have defined contribution plans.
As of March 31, 2020, 51 companies including the Company and its consolidated domestic subsidiaries havelump-sum retirement payment plans, and there are 6 defined benefits pension plans, and also 25 defined
contribution plans. In addition, there are 2 multi-employer defined benefits pension plans.
In contract-type corporate pension plan, the Company is obliged to comply with laws and regulations,
appointments made by Minister of Ministry of Health, as well as to faithfully accomplish their duties for the37

participants, etc. It is prohibited that the Company signs asset management agreement for the purpose of a third
party interest other than self or participants and orders specific method about the management of contribution.
In domestic corporate pension plan, the Company makes actuarial review on the basis of corporate financial
position and review of asset management every five years, and raises premium when funding standard is notsatisfied.
In the management of plan assets, the Company builds most appropriate portfolio for the purpose of the
securement of stable income under the acceptable risks to secure employees’ future benefit, and makes aneffort to keep the allocation of assets based on the portfolio, and reviews the portfolio regularly in response to thechange of market environment and status of funding.
Major plans of the Group are exposed to the interest rate risk, etc.
(2)Reconciliation
FYE 2019(April 1, 2018 to March 31, 2019)(Unit: Millions of yen)
The present value ofthe defined benefit
obligations

Plan assets
Plans inJapan
Beginning balance
Current service costPlans
outsideJapan

108,110

5,385

－

－

Plans inJapan
128,798
8,681

Plans
outsideJapan
30,160
1,962

Net defined benefit
liabilities(assets)
Plans inJapan
20,6888,681

Plans
outsideJapan
24,775
1,962Interest income or expense
241
709
1,229
468
1,229
－
Remeasurements of net
defined benefit liabilities(assets)(i) Return on plan assets(excluding amounts included in
(507)
255
507
(255)
－
－
interest)(ii) Actuarial gains and losses
1,749(1,973)
1,749(1,973)－－
Actuarial gains and losses
arising from changes in
153
105
153
105
－
－
demographic assumptions
Actuarial gains and losses
arising from changes in
1,596(2,078)1,596(2,078)－－financial assumptions
Effect of changes on foreign
241
1,331
1,090
－
－
－
exchange rates
Contributions to the plan
Contributions by the
4,564
183
(4,564)(183)－－
employer
Payments from the plan
(2,977)(289)(5,906)(707)(2,929)(418)
Others
(12)
106
(144)
167
(132)
61
Ending balance
109,419
5,881
133,887
32,16924,46826,288This reconciliation does not include other employee benefits about welfare program, etc., 1,857 million yen of
beginning balance, 1,862 million yen of ending balance.

38

FYE 2020(April 1, 2019 to March 31, 2020)(Unit: Millions of yen)
The present value ofthe defined benefit
obligations

Plan assets
Plans inJapan
Beginning balance
Current service cost
Interest income or expense
Remeasurements of net
defined benefit
liabilities(assets)(i) Return on plan assets(excluding amounts
included in interest)(ii) Actuarial gains andlossesActuarial gains and losses
arising from changes indemographic
assumptions
Actuarial gains and losses
arising from changes infinancial assumptions
Effect of changes on foreignexchange rates
Contributions to the plan
Contributions by theemployer
Payments from the plan
OthersEnding balancePlans
outsideJapan

Plans in
Japan

Plans
outsideJapan

Net defined benefit
liabilities(assets)
Plans in
Japan

Plans
outsideJapan

109,419－

5,881－

133,887
8,161

32,1691,862

24,4688,161

26,288
1,862

596

－

595

1,204

(1)

1,204

223

110

－

－

(223)

(110)

－

－

(1,260)1,722(1,260)

1,722

－

－

－

(749)

－

(749)

－

－

(1,260)2,471(1,260)

2,471

－

(116)

－

(631)

－

(515)

3,644

190

－

－

(3,644)(190)(3,280)(74)
110,528

(304)
114
5,875

(5,902)(22)
135,459(826)
161
35,661(2,622)
52
24,931(522)
47
29,786This reconciliation does not include other employee benefits about welfare program, etc., 1,862 million yen of
beginning balance, 1,808 million yen of ending balance.

39

(3)Components of plan assets

Cash and cash
equivalents
Shares issued by
Japanesecompanies
Shares issued byforeign companies
Subtotal
Bonds issued by
Japanesecompanies
Bonds issued byforeign companies
Subtotal
Life insurance General accounts
OthersSubtotal
Total

Transition date
(April 1, 2018)
Quoted market prices in
active markets

FYE 2019(as of March 31, 2019)
Quoted market prices in
active markets(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
Quoted market prices in
active markets

With

Total

With

Without

Total

With

Without

Without

Total

5,588

－

5,588

3,488

－

3,488

3,673

－

3,673

11,588－

11,588

10,787－

10,787

9,375

－

9,375

8,619

－

8,619

4,406

－

4,406

5,890

－

5,890

20,207－

20,207

15,193－

15,193

15,265－

15,26571,095－71,09573,306－73,30675,476－75,476

5,330

－

5,330

5,927

－

5,927

3,692

－

3,692

76,425－76,425

79,233－

79,233

79,168－79,168

－

3,610

3,610

－

3,679

3,679

－

3,791

3,791

－

7,665

7,665

－

13,707

13,707－

14,506

14,506－

11,275

11,275－

17,386

17,386－

18,297

18,297102,220

11,275

113,495

97,914

17,386

115,300

98,106

18,297

116,403(4)Significant actuarial assumptions used to determine the present value of defined benefit obligations at the endof each consolidated fiscal year are as follows:
Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019)(as of March 31, 2020)
Plans
Plans
Plans
Plans inPlans inPlans inoutsideoutsideoutside
Japan
Japan
Japan
Japan
Japan
Japan
Discount rate

0.6％

4.2％

40

0.5％

4.1％

0.5％

3.3％

Sensitivity analysis about effects on defined benefit obligations due to any change in actuarial assumptions
mentioned above are as follows:(Unit: Millions of yen)Transition date
FYE 2019(April 1, 2018)(as of March 31, 2019)
Plans in Japan

Plans outside
Japan

Plans in Japan

Plans outsideJapan

1.0％ increase(12,132)(3,738)(12,070)(4,053)

1.0％ decrease

14,722

2,988

14,633

3,821

Discount rate

Sensitivity analysis about effects of each actuarial assumption is calculated on the basis that there are nochanges in other actuarial assumptions.
Therefore, if these assumptions change in combination, the effects may be different from the amounts statedabove.
In addition, approximate amounts are stated above because the projected cash flow is not taken into account for
all benefit payments of the plans.
The Group expects to contribute 4,319 million yen from April 1, 2020 to March 31, 2021.
The Group's weighted-average durations of the defined benefit obligations for the consolidated fiscal years
ended March 31, 2019 and 2020 were 13 years in Japan and 6 years outside Japan , and 12 years in Japanand 6 years outside Japan, respectively.
(5)Multi-employer plan
Some domestic subsidiaries participate in a pension fund, which is a multi-employer plan.
The fund is a defined benefits pension plan. However, the amount of pension assets corresponding tocontributions cannot be calculated reasonably. Therefore, the method where contribution payable to the pension
fund is recognized as retirement benefit expenses is adopted.
If a plan is liquidated and settled, shortfalls are collected or residual assets are distributed on the basis of theminimum base amount calculated by laws. If an employer withdraws from the multi-employer plan, liabilities andshortfalls expected due to withdrawal are collected.
Information about the multi-employer plan is as follows:
Funding status of the multi-employer plan as a whole(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
9,130
9,070
9,064

Plan assets
Total amount of actuarial liabilities
and minimum actuarial reserve
11,18010,215for the purpose of pension
financing calculation
Difference(2,050)(1,145)
Note: The latest figures for each consolidated fiscal year end are mainly disclosed.

41

10,150(1,086)

Ratio of contributions by the Group to the fund in the overall plan
FYE 2019 5% (Principally, April 1, 2018 to March 31, 2019)
FYE 2020 5% (Principally, April 1, 2019 to March 31, 2020)(Contributions to the multi-employer plans in the next financial year)
The Group estimates the contributions to the multi-employer plans for the consolidated fiscal year ending March
31, 2021 to be 23 million yen.
(6) Personnel expenses
Personnel expenses included in the consolidated statements of income are as follows:
FYE 2019(April 1, 2018 toMarch 31, 2019)
Personnel expenses
Contributions to defined contribution pension plans(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

302,836

314,156

5,496

5,693

Personnel expenses include salaries, bonuses, social security expenses and retirement benefit expenses, etc.

4220. Equity and Other components of equity(1) Management of Capital
The Group makes investments in capital and research and development to improve corporate value throughgrowth on a global basis.
In order to meet these funding needs, the Group makes capital management through consideration of the balance
between financing liabilities and equity.
Equity Ratios as of April 1, 2018, and March 31, 2019 and 2020 are as follows:
Equity means "equity attributable to owners of the parent", and Equity Ratio is obtained by dividing equity by total
liabilities and equity.
(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019)(as of March 31, 2020)
Equity1,634,319
1,682,248
1,712,881
Total Liabilities and Equity
3,070,537
3,180,597
3,293,908
Equity Ratio
53.2%
52.9%
52.0%
(2) Capital Surplus and Retained Earnings
The Companies Act of Japan provides that no less than 50% of the paid-in amount or proceeds of issuance ofshares shall be incorporated in common stock, and that the remaining shall be incorporated in capital reserves.
Capital reserves may be incorporated in common stock upon approval of the General Meeting of Shareholders.
Number of authorized shares as of April 1, 2018, and March 31, 2019 and 2020 is 1,500,000,000. The changes
in the number of the paid-in outstanding shares for the consolidated fiscal years ended March 31, 2018, 2019 and2020 are as follows:
Number of Shares
Transition date (April 1, 2018)
ChangeFYE 2019 (as of March 31, 2019)
ChangeFYE 2020 (as of March 31, 2020)

769,175,873－
769,175,873－
769,175,873

All shares issued by the Company are no-par-value stock with no restriction on rights.
(3) Retained Earnings
The Companies Act of Japan provides that earnings in an amount equal to 10% of the cash dividends fromretained earnings shall be appropriated as a capital reserve or a legal retained earnings on the date of distributionof retained earnings until an aggregated amount of capital reserve and legal reserve equals 25% of the common
stock. The amount of legal retained earnings can be used to compensate for deficits. Legal reserves may be used
upon approval of the General Meeting of Shareholders.

43(4) Treasury Stock
Under the Companies Act of Japan, the number of shares and total value of treasury stock acquisition may be
determined, upon approval of the General Meeting of Shareholders, within the amount available for distribution.
Furthermore, treasury stock may be acquired through market transactions or tender offers in accordance with thearticles of incorporation within the conditions set forth in the Companies Act, upon approval of the Board of
Directors.
The changes in the treasury stock as of April 1, 2018, and March 31, 2019 and 2020 are as follows:
Number of Shares
Transition date (April 1, 2018)
2,455,039
Increase
3,078
Decrease(43,276)
FYE 2019 (as of March 31, 2019)
2,414,841
Increase
2,436
Decrease(56,909)
FYE 2020 (as of March 31, 2020)
2,360,368
The increase of 3,078 treasury stock in the consolidated fiscal year ended March 31, 2019 is due to purchase ofshares less than one unit. The decrease of 43,276 treasury stock in the consolidated fiscal year ended March 31,
2019 is due to disposal on July 20, 2018 as compensation to grant restricted stock that was passed as a resolution
in the Board of Directors Meeting on April 28, 2017.
The increase of 2,436 treasury stock in the consolidated fiscal year ended March 31, 2020 is due to purchase ofshares less than one unit. The decrease of 56,909 treasury stock in the consolidated fiscal year ended March 31,
2020 is due to disposal on July 31, 2019 as compensation to grant restricted stock that was passed as a resolution
in the Board of Directors Meeting on April 28, 2017.
(5) Other Components of Equity
1. Remeasurements of defined benefit plans
The amount of remeasurements of defined benefit plans is comprised of the amounts of the difference between
the actuarial assumptions and actual results at the beginning of the consolidated fiscal year, changes in actuarial
assumptions and revenue from plan assets excluding amount included in interest. This amount is recognized asother comprehensive income and immediately transferred from other components of equity to retained earnings.
2. Net changes in revaluation of equity instruments designated as measured at fair value through othercomprehensive income and net changes in revaluation of debt instruments measured at fair value through othercomprehensive income
Cumulative gain or loss on revaluation of financial assets measured at fair value through other comprehensive
income
3. Exchange differences on translating foreign operations
Exchange differences arising from translation of the financial statement of consolidated foreign operations fromthe respective functional currencies to Japanese yen, which is the presentation currency of the Group.

44

The changes in the components of accumulated other components of equity as of April 1, 2018, and March 31,
2019 and 2020 are as follows:(Unit: Millions of yen)Transition date (April
1, 2018)
Adjustment during
the year
Reclassification toretained earnings
FYE 2019 (as ofMarch 31, 2019)
Adjustment during
the year
Reclassification toretained earnings
FYE 2020 (as ofMarch 31, 2020)

Remeasurements ofdefinedbenefitplans

Net changes inrevaluation ofequityinstruments
designated asmeasured atfair value
through othercomprehensive
incomeNet changes
in revaluationof debt
instruments
measured atfair value
through othercomprehensiv
e income

Exchangedifferencesontranslating
foreign
operations

Other
comprehensiveincomeunder theequitymethod－10,806(1,064)

－

－

9,742

(610)

535

1,251

15,691(186)

16,681610(2,502)－－－(1,892)

－

8,839

187

15,691(186)

24,532

(475)

(763)

1,966

(12,168)(182)(11,622)475(4,994)－－－(4,519)

－

3,082

2,153

3,523

(368)

8,391

45

Total

(6) Other Comprehensive Income
Each component of other comprehensive income and related tax effect including non-controlling interests for the
consolidated fiscal years ended March 31, 2019 and 2020 are as follows:(Unit: Millions of yen)
FYE 2019
FYE 2020(April 1, 2018 to(April 1, 2019 toMarch 31, 2019)
March 31, 2020)
Tax
Tax
BeforeNet of
BeforeNet ofbenefitbenefit
tax
tax
tax
tax
(expense)(expense)
Items that will not be reclassified to
profit or loss:
Remeasurements of defined benefit
plans:
Amount incurred during the year
(1,057)
447
(610)
(402)
(73)
(475)
Net changes(1,057)
447
(610)
(402)
(73)
(475)
Net changes in revaluation of equity
instruments designated as measured
at fair value through othercomprehensive income:Amount incurred during the year
597
(62)
535
(1,048)285(763)
Net changes
597
(62)
535
(1,048)285(763)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations:
Amount incurred during the year
Reclassification to profit or loss
Net changes
Share of other comprehensive incomeof investments accounted for using
the equity method:Amount incurred during the year
Reclassification to profit or loss
Net changes
Net changes in revaluation of debt
instruments measured at fair value
through other comprehensive income
Share of other comprehensive
incomeAmount incurred during the year
Reclassification to profit or loss
Net changes
Total other comprehensive income

15,519－15,519－－－15,519－15,519(12,581)－(12,581)

(186)
－
(186)

－
－
－

(186)
－
(186)

(182)
－
(182)

1,589
－
1,589
16,462

(338)
－
(338)
47

1,251
－
1,251
16,509

2,484
－
2,484
(11,729)46－ (12,581)－－－ (12,581)

－
－
－

(182)
－
(182)

(518)
1,966
－
－
(518)
1,966
(306) (12,035)

The components of other comprehensive income included in non-controlling interests for the consolidated fiscal
years ended March 31, 2019 and 2020 are as follows:(Unit: Millions of yen)
FYE 2019
FYE 2020(April 1, 2018 to(April 1, 2019 toMarch 31, 2019)
March 31, 2020)
Exchange differences on translating foreign operations
(172)
(413)
21. Revenue(1) Breakdown of revenue
The Group has adopted “IFRS 15 Revenue from Contracts with Customers” and recognizes revenue based on
the following five－step approach.
Step 1: Identify the contracts with a customer
Step 2: Identify the performance obligations in the contracts
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue when performance obligations are satisfied
The automotive segment is mainly engaged in manufacturing and sales of automobiles as well as providing
services such as maintenance.
For sale of vehicles, revenue is recognized primarily at the time of delivery of the product as we consider that upondelivery the customer obtains control of the product and the performance obligation is satisfied. Maintenance andother service revenue are recognized over a certain period of time. Payment for the sale of a product is generally
made within 30 days of the transfer of control of the product to the customer.
The contract with the customer for the sale of the product includes a clause that guarantees that the productcomplies with the agreed specifications and the Group recognizes the provision for product warranty for the costs
related to that warranty. For details of the provision for product warranty, please refer to "3. Significant Accounting
Policies (12) Provisions 2. Provision for product warranty".
The aerospace segment has contracts with customers. Revenue from contract construction is recognized basedon the progress of performance obligations. The progress is measured by an input method based on the costs
incurred. Payments for contracts are generally made in stages based on the contracts with customers.

47

As described in “6. Segment Information” in the notes to the consolidated financial statements, the Group'sbusiness segment is classified into three categories: automotive, aerospace, and others. Revenue is broken down
by region based on the location of the customer. The relationship between these disaggregated revenues and therevenue of each reportable segment is as follows:
FYE 2019 (April 1, 2018 to March 31, 2019)
Automotive

Aerospace(Unit: Millions of yen)
Others*3
Total

Revenue from contracts with customers
Japan
527,606
45,638
5,402
578,646
North America
2,101,390
88,261
5,248
2,194,899
Europe100,289243
52
100,584
Asia
116,2672
41
116,310145,094126
145,220
Others－Total
2,990,646
134,144
10,8693,135,659
16,991
3,500
20,491
Revenue arising from other sources *2－
3,007,637
134,144
14,3693,156,150
Total
Note: 1. The amounts mentioned above reflect elimination of internal transactions.
2. Revenue recognized from other sources includes lease revenue of products that are accounted for inaccordance with "IFRS 16 Leases", etc.
3. Other segment includes real estate leasing business, etc.
FYE 2020 (April 1, 2019 to March 31, 2020)
Automotive

Aerospace(Unit: Millions of yen)
OthersTotal

Revenue from contracts with customers
Japan
506,405
46,761
4,481
557,647
North America
2,313,306
95,29755
2,408,658
Europe116,14383
16116,242
Asia
106,360－5
106,365
Others135,674－33
135,707
Total
3,177,888
142,141
4,590
3,324,619
Revenue arising from other sources *2
16,061
3,429
19,490Total
3,193,949
142,141
8,019
3,344,109
Note: 1. The amounts mentioned above reflect elimination of internal transactions.
2. Revenue recognized from other sources includes lease revenue of products that are accounted for inaccordance with "IFRS 16 Leases", etc.
3. Other segment includes real estate leasing business, etc.

48

(2) Contract balances
The balances of receivables, contract assets and contract liabilities arising from contracts with customers as ofApril 1, 2018 and March 31, 2019 and 2020:(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019)(as of March 31, 2020)
Receivables included in Trade
89,887
108,708
105,522and other receivables
Contract assets included in
Trade and other receivables

30,471

22,46927,415Contract liabilities included inother current liabilities

88,706

102,059

111,900

Contract liabilities included inother non-current liabilities

136,480

159,233

175,321

The contract assets mainly relate to the Group's right to the consideration for the work of contracts for aircraft
production and periodic repairs in the aerospace business that have been recognized based on measurement ofprogress. Contract assets are transferred to receivables when all deliveries of such construction are completed.
The contract liability mainly relates to contracts with defense industries in the aerospace business for whichrevenue is recognized upon completion of aircraft production and periodic repairs, as well as advanceconsideration received from customer for contracts.
Of the revenues recognized in the consolidated fiscal year ended March 31, 2020, the amount included in thecontract liability balance at the beginning of the consolidated fiscal year was 70,441 million yen, and the amountin the consolidated fiscal year ended March 31, 2019 was 57,460 million yen.
The amount of revenue recognized in the consolidated fiscal year ended March 31, 2020 from performanceobligations satisfied (or partially satisfied) in past periods is immaterial.
(3) Transaction price allocated to the remaining performance obligations
Breakdown of the aggregate amount of the transaction price allocated to the performance obligations that are
unsatisfied (or partially unsatisfied) and revenue expected to be recognized for each period are as follows:
There are no significant amounts that are not included in the transaction price among the consideration arisingfrom contracts with customers. In addition, as a practical expedient, transactions whose expected contract periods
are equal to or less than one year on an individual basis are not included in the following breakdown calculation.
(Unit: Millions of yen)
FYE 2019
FYE 2020(as of March 31, 2019)(as of March 31, 2020)
Within 1 year
203,471
175,357
Over 1 year
330,559
339,110
Total
534,030
514,46749

(4) Costs to fulfill a contract with a customer or costs of obtaining a contract recognized as assets
The Group has no material incremental costs of obtaining a contract or costs to fulfill a contract that should berecognized as assets.
22. Selling, general and administrative expenses
The breakdown of selling, general and administrative expenses is as follows:
FYE 2019(April 1, 2018 toMarch 31, 2019)84,38571,792
24,873
22,236
95,589298,875

Advertising expenses
Salary and bonus
Depreciation and amortization expenses
Transportation and warehousing expenses
Others
Total(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
83,80773,24526,424
20,911
103,840
308,227

23. Other income and other expenses(1) Other income
Breakdown of other income is as follows:

－
1,294
1,151
493
370
3,423
6,731

(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
2,534
－
2,141
392
－
2,684
7,751

5,610
2,532
7,697
15,839(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
5,376
－
6,650
12,026FYE 2019(April 1, 2018 toMarch 31, 2019)
Gain on settlement of factory shutdown related costs
Gain on transfer of business
Gain on sales of property, plant and equipment
Revenue from investment property
Government grants
OthersTotal(2) Other expenses
Breakdown of other expenses is as follows:
FYE 2019(April 1, 2018 toMarch 31, 2019)
Loss on sales of property, plant and equipment
Expenses related to factory shut down
OthersTotal

50

24. Finance Income and Finance Costs(1) Finance income
Finance income for the consolidated fiscal years ended March 31, 2019 and 2020 consist of the following:(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

FYE 2019(April 1, 2018 toMarch 31, 2019)
Interest income:Financial assets measured at amortized cost
Debt instruments measured at fair value throughother comprehensive income
Gains (losses) on derivatives:
Financial assets and financial liabilities measured atfair value through profit or loss
Dividends received:
Equity instruments measured at fair value throughother comprehensive income
Others
Total

9,251

9,976

3,043

2,457

－

919

1,244

918

163
13,701

1,574
15,844(2) Finance cost
Finance costs for the consolidated fiscal years ended March 31, 2019 and 2020 consist of the following:(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

FYE 2019(April 1, 2018 toMarch 31, 2019)
Interest expense:
Financial liabilities measured at amortized cost
Lease liabilities
Gains (losses) on derivatives:
Financial assets and financial liabilities measured atfair value through profit or loss
Gains (losses) on foreign exchange
Gains (losses) on investment trust
Debt instruments measured at fair value throughprofit or loss
Others
Total

51

732
1,076

786
1,019

6,993

－

221

12,901

－

3,412

377
9,399

389
18,507

25. Notes on Income Taxes(1) Income Taxes
1. Income tax expense recognized in profit or loss
(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)

FYE 2019(April 1, 2018 toMarch 31, 2019)
Current income tax expense
Current year
Prior year adjustment
Total current income tax expense
Deferred income tax expense
Recognition and reversal of temporary
differences
Write-down of deferred tax asset
Total deferred income tax
Total

54,214
1,748
55,962

38,707
1,064
39,771(12,180)

14,563

1,455(10,725)
45,237731
15,29455,065

2. Reconciliation between the statutory income tax rate and the average effective tax rate
The statutory income tax rate in Japan for the consolidated fiscal years ended March 31, 2019 and 2020 is 30.5%.
The tax rates for the foreign subsidiaries are calculated based on the general tax rate in each tax jurisdiction.

Statutory income tax rate
Permanently non-deductible items
Tax credits for testing and research expenses
Modification and refund of income taxes forprior periods
Difference in statutory income tax rates offoreign subsidiaries
Changes in unrecognized deferred tax assets
OthersAverage effective tax rate after applying tax
effect accounting

52

FYE 2019(April 1, 2018 toMarch 31, 2019)
30.5%
0.3%
(4.9)%(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
30.5%
0.6%
(1.7)%

0.9%

0.5%(1.8)%(2.6)%

0.6%(1.3)%

0.4%(1.2)%

24.3%

26.5%

(2) Deferred Tax Assets and Deferred Tax Liabilities
1. The components by major factor in deferred tax assets and deferred tax liabilities
FYE 2019 (April 1, 2018 to March 31, 2019)

Deferred tax assets
Unrealized profit on inventories
Retirement benefit liabilities
Depreciation of fixed assets
Provisions
Inventories
Accrued business tax
OthersTotal deferred tax assets
Deferred tax liabilities
Depreciation of fixed assets
Deferred income of overseas
subsidiaries
Financial assets measured at fair value
through other comprehensive income
Reserve for advanced depreciation
Net defined benefit assets
Intangible assets
OthersTotal deferred tax liabilities
Net deferred tax assets (liabilities)(Unit: Millions of yen)
Others(translation
Endinggains andbalancelosses, etc.)

Beginningbalance

Recognizedin profit orloss

Recognizedin othercomprehensive income

18,862
21,764
8,585
82,581
2,737
2,843
53,017
190,389(3,377)1,108
87
21,247(650)(2,436)392
16,371

－
444
－
－
－
－
－
444

－
290
－
875
40
－
(614)
591

15,48523,606
8,672
104,703
2,127
407
52,795
207,795

17,206

5,373

－

642

23,221

16,441

2,821

－

736

19,998

3,595

－

400

(1,052)

2,943

1,690
527
38,288744
78,491
111,898(72)(344)(2,088)(44)
5,646
10,725

(3)
－
－
397
47

－
－
－
－
326
265

1,618
180
36,200700
84,860122,93553

FYE 2020 (April 1, 2019 to March 31, 2020)

Deferred tax assets
Unrealized profit on inventories
Retirement benefit liabilities
Depreciation of fixed assets
Provisions
Inventories
Accrued business tax
OthersTotal deferred tax assets
Deferred tax liabilities
Depreciation of fixed assets
Deferred income of overseas
subsidiaries
Financial assets measured at fairvalue through other comprehensive
incomeReserve for advanced depreciation
Net defined benefit assets
Intangible assets
OthersTotal deferred tax liabilities
Net deferred tax assets (liabilities)(Unit: Millions of yen)
Others(translation
Endinggains andbalancelosses, etc.)

Beginningbalance

Recognizedin profit orloss

Recognizedin othercomprehensive income

15,48523,606
8,672
104,703
2,127
407
52,795
207,795

1,835
2,074
1,111
(7,909)(63)(173)(2,158)(5,283)

－
(73)
－
－
－
－
－
(73)

－
(127)
－
(268)
(11)
－
(2,239)(2,645)

17,32025,4809,783
96,5262,053
234
48,398
199,794

23,221

3,248

－

(385)

26,08419,998(1,730)－(394)

17,874

2,943

－

233

(1,304)

1,872

1,618
180
36,200700
84,860122,935

87
(180)
7,801
785
10,011(15,294)

－
－
－
－
233
(306)

－
－
－
－
(2,083)
(562)

1,705
－
44,001
1,485
93,021
106,773

Deferred tax assets and liabilities recognized in the consolidated statement of financial position are as follows:(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
Deferred tax assets
114,625
127,523
118,487
Deferred tax liabilities
2,727
4,588
11,714
Net deferred tax assets (liabilities)
111,898
122,935
106,773
2. Deductible temporary differences and carryforward of unused tax losses for which deferred tax assets are notrecognized are as follows. Deductible temporary differences and carryforward of unused tax losses are presented
on a tax amount basis.
(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
Deductible temporary differences
856
1,737
3,017
Carryforward of unused tax losses
211
458
218
Total
1,067
2,195
3,235

54

3. The components by expiry of the carryforward of unused tax losses for which deferred tax assets are notrecognized are as follows. The following amounts are presented on a tax amount basis.

Transition date
(April 1, 2018)

Within 1 year
Within 2 years
Within 3 years
Within 4 years
Over 5 years
Total

1
0
－
11
199
211

FYE 2019(as of March 31, 2019)
0
－
10
238
210
458

(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
－
10
48
－
160
218

4. For the consolidated fiscal years ended March 31, 2019 and 2020, the Group does not recognize deferred tax
liabilities for future taxable temporary differences related to the investment in subsidiaries. This is because theGroup can control the timing of the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. The temporary differences related to the investment in
subsidiaries for which deferred tax liabilities are not recognized as of April 1, 2018 and March 31, 2019 and 2020are 488,029 million yen, 554,110 million yen and 650,257 million yen, respectively.
26. Earnings per Share
Basis for calculation of Earnings Per Share
Earnings per share attributable to owners of the parent for the consolidated fiscal years ended March 31, 2019and 2020 are calculated based on the following information. There were no potentially dilutive common shares
outstanding for the consolidated fiscal years ended March 31, 2019 and 2020.
FYE 2019
FYE 2020(April 1, 2018 to(April 1, 2019 toMarch 31, 2019)
March 31, 2020)
Profit for the year attributable to owners of the141,418
152,587
parent (million yen)
Weighted average number of common shares
766,749
766,799
outstanding, basic (thousands of shares)
Basic earnings per share attributable to owners of
184.44198.99the parent (yen)5527. Dividends
1. Dividend payout
The amounts of dividends paid are as follows:
FYE 2019 (April 1, 2018 to March 31, 2019)
Total
Dividend
amount ofper share
dividends
(yen)
(yen)

Resolution

Type ofsharesThe 87th Ordinary General
Meeting of Shareholders on June22, 2018

Commonshares55,233

The Board of Directors Meetingon November 5, 2018

Commonshares55,236

Recorddate

Effective
date

Source fordividend

72.0

March 31,2018

June 25,
2018

Retainedearning

72.0

September December
30, 2018
5, 2018

Retainedearning

FYE 2020 (April 1, 2019 to March 31, 2020)
Total
Dividend
amount ofper share
dividends
(yen)
(yen)

Resolution

Type ofsharesThe 88th Ordinary General
Meeting of Shareholders on June21, 2019

Commonshares55,236The Board of Directors Meetingon November 6, 2019

Commonshares55,240Recorddate

Effective
date

Source fordividend

72.0

March 31,2019

June 24,2019

Retainedearning

72.0

September December
30, 2019
3, 2019

Retainedearning

2. Dividends payable for the case when resolution made on or after April 1, 2020
Dividends payable for the case when the record date is in the consolidated fiscal year ended March 31, 2020,
effective on or after April 1, 2020 is as follows:
Total
Dividend
Type of amount ofRecordEffective Source for
Resolution
per sharesharesdividends
date
date
dividend
(yen)
(yen)
The 89th Ordinary General
CommonMarch 31,
June 24, Retained
Meeting of Shareholders on June
21,48228.0
shares2020
2020
earning23, 2020

56

28. Cash Flow Information(1) Reconciliation of liabilities arising from financing activities
FYE 2019 (April 1, 2018 to March 31, 2019)(Unit: Millions of yen)
Non-cash changes

Short-termborrowings
Long-term
borrowings
Lease liabilities
Total

Acquisitions

Changes inforeigncurrency
exchange
rates

Others(17,482)

－

(248)

(921)

7,682

64,12031,918－－

6

96,044

82,913
173,366(45,741)(31,305)

63,071
63,071

(25)
(273)

－
(915)

100,218
203,944

Beginningbalance

Cash flow

26,333Ending balance

FYE 2020 (April 1, 2019 to March 31, 2020)(Unit: Millions of yen)
Non-cash changes

Short-termborrowings
Long-term
borrowings
Bonds
Lease liabilities
Total

Acquisitions

Changes inforeigncurrency
exchange
rates(2,400)

－

(147)

(382)

4,753

96,044

98,408－－

5

194,457－
100,218
203,944

40,000(41,230)
94,778－23,636
23,636

－
(174)
(321)

－
－
(377)

40,00082,450321,660

Beginningbalance

Cash flow

7,682

57

Ending balance

Others29. Financial Risk Management(1) Risk Management
The Group's business activities are affected by the business environment and the financial market environment.
Financial instruments held or assumed during the course of the business activities are subject to inherent risks.
The risks include (1) credit risk, (2) liquidity risk and (3) market risk.
The Group establishes an internal management system and implements crisis management to minimize theimpact on the Group's financial condition and business performance using financial instruments.
Specifically, the Group manages those risks according to the following methods.
(2) Credit Risk(a) Credit risk of financial assets held by the Group
Credit risk is the risk that a party to a financial instrument defaults on its contractual obligations and causes afinancial loss for the Group. Specifically, the Group is exposed to the following credit risks:
1. The Group's trade receivables, lease receivables, contract assets and other receivables are exposed to thecredit risk of customers and counterparties.
2. Bonds and other securities held to manage surplus funds are exposed to the credit risk of the issuers.
3. Derivative transactions conducted by the Group for the purpose of hedging foreign exchange and interest raterisks as well as banking transactions are exposed to the credit risk of the financial institutions that arecounterparties to the transactions."(b)The Group's response to the risks
Regarding credit risk of customers, the Group has a system where the due date and balances of each customer
are managed and the credit status is monitored in accordance with the credit management standards of eachcompany.
For receivables except for trade receivables, lease receivables and contract assets, the Group determines thatthe credit risk of a financial asset has increased significantly since initial recognition if the financial asset is 30 daysor more past the contractual due date (including a request for a grace period) after the transaction date.
However, the Group does not determine that the credit risk has increased significantly if it is due to temporary
demand for funds and the risk of default is low and it is obvious that the customer has the ability to meet contractual
cash flow obligations in the near future based on objective data such as external ratings even if there is a delay inpayment and a request for a grace period.
For debt instruments recorded as securities, the Group determines that the credit risk has increased significantly
from initial recognition if the credit risk is not assessed to be low based on the rating information provided by the
major rating agencies.
Expected credit losses are measured and recognized based on financial information available during thetransaction and credit risk management processes, taking into account macroeconomic conditions such as thenumber of bankruptcies and material changes in the actual or expected performance of the debtor.
If the debtor does not pay within 90 days after the due date or the debtor commences legal liquidation proceedings
due to bankruptcy, etc., it is determined as a default
If there is a default, or if there is evidence of impairment of the issuer or debtor, such as significant financial
difficulties, it is determined that the credit is impaired. The Group directly reduces the gross carrying amount of afinancial asset when the Group has no reasonable expectations of recovering the financial asset in its entirety ora portion thereof and determines that write-off is appropriate based on a credit check.
Even if a financial asset is written down, the collection activities are continued for fulfillment and the amounts
collected are recorded in profit or loss.
The Group's receivables do not have a significant concentration of credit risk on a particular business partner orgroup of business partners.
58

Since the Group conducts derivative transactions and banking transactions only with financial institutions with highcreditworthiness, there is little credit risk due to the default of the counterparties. In addition, the Group conducts
surplus investment and derivative transactions only with highly rated financial institutions in order to reduce theoccurrence of credit risk beforehand. The finance and accounting department obtains the approval by theapplicable person set forth in the authority rules for each case based on each company's internal rules and related
policies that define the details.
There are few past due receivables.
Aggregation of the net carrying value of financial assets and the amount of guarantee obligation recognized in the
consolidated statement of financial position without taking into account the value of the collateral received as credit
enhancement is the maximum exposure to credit risk.
The Group generally holds on products that have been sold as collateral for operating loans to customers.
(Measurement of expected credit losses on other receivables and debt instruments)
If the credit risk on other receivables and debt securities is not found to have increased significantly since initialrecognition as of the closing date, the Group calculates the loss allowance for the financial instruments by
estimating the 12-month expected credit losses using grouping by similar credit risk characteristics and based on
historical credit loss experience and forecast information.
On the other hand, if the credit risk is found to have increased significantly since initial recognition as of the closing
date, the Group calculates the loss allowance by estimating the lifetime expected credit losses for the collection of
the financial instrument based on historical credit loss experience and forecast information.
(Measurement of expected credit losses on trade receivables, lease receivables, and contract assets)
For all trade receivables, lease receivables and contract assets, the loss allowance is calculated based on the
lifetime expected credit losses until the trade receivables, lease receivables or contract assets, as applicable, arecollected using a simplified approach and grouping by similar credit risk characteristics.
For trade receivables, the loss allowance is calculated by estimating the lifetime expected credit losses based on
historical bad debt experience and forecast information on the age of receivables for each trade receivable.

59

(Unit: Millions of yen)
Loss allowancefor expectedcredit loss
measured at an
amount equal
to 12-month
expected credit
lossesLoss allowance for expected credit loss measured at
an amount equal to the lifetime expected credit losses
OperatingAssets that arereceivables, leasenot creditCredit-impaired
receivables,
impairedfinancial assets
contract assets,financial assets
etc.

Total

Transition date (April 1,
12
252
3,249
189
3,702
2018)
Increase during the
21
50
22
25
118
period (provision)
Decrease during the
－
(38)
(13)
(59)
(110)
period (intended use)
Others*1
－
－
(100)
(17)
(117)
FYE 2019 (Balance as of
33
264
3,158
138
3,593
March 31, 2019)
Increase during the
7
88
53
21
169
period (provision)
Decrease during the
(21)
(57)
(2,670)－(2,748)
period (intended use)
Others*1
(3)
－
(51)
－
(54)
FYE 2020 (Balance as of
16
295
490
159
960
March 31, 2020)
Note: 1. Others mainly include the reversal of loss allowance due to collection.
2. All debt instruments measured at fair value through other comprehensive income have high credit ratingsand no material provisions are recognized for them.
Guarantee contract
The Group mainly provides guarantees to subsidiaries' business partners, but credit risk is not included in theabove table because it is limited and immaterial.
The amount of the guarantees is described in “35. Contingencies”.
(3) Market risk
1) Foreign currency exchange risk
(Foreign currency exchange risk management)
The Group hedges foreign currency fluctuation risks of trade receivables and payables denominated in foreign
currencies that are identified by currency and by month by using, in principle, forward exchange contracts andcurrency options. Depending on the exchange rate situation, forward exchange contracts and other transactions
are used against the net position of trade receivables and trade payables denominated in foreign currencies for a
maximum of six months.

60

(Currency sensitivity analysis)
Sensitivity analysis of the foreign currency exchange risk associated with financial instruments held by the Groupand its subsidiaries at the end of the consolidated fiscal years ended March 31, 2019 and 2020 is as follows. The
following scenario demonstrates the impact of a 1% appreciation (increase) of the Japanese yen against the US
dollar on profit after tax, holding all variables other than the foreign currency exchange rate as constant, for foreignexchange risk exposure arising from deposits, trade receivables and payables denominated in foreign currenciesof which foreign exchange differences are recognized at the end of the consolidated fiscal year in profit or loss.
(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
Impact on profit after income taxes(1,557)(1,112)(888)(4) Liquidity Risk
Liquidity Risk Management"The Group raises funds by borrowings from financial institutions and corporate bonds. The Group is exposed toa risk that the Group would not be able to repay liabilities by the due date in the event of disruptions of financial
system and financial markets or a significant reduction of credit rating by rating agencies. (Hereinafter referred toas "Liquidity risk".)In order to ensure liquidity and stability, the Group has sufficient cash and cash equivalents as well as maintains
liquidity that satisfies the level of cash required by entering into commitment line agreements, etc. with major
financial institutions.
The unused portions of the committed lines are as follows:(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
Specified commitment line contract
237,441
229,652
213,82561

(Maturity analysis of financial liabilities)
1) Non-derivative financial liabilities
Non-derivative financial liabilities by maturity as of April 1, 2018 and March 31, 2019 and 2020 are as follows:
Transition date (April 1, 2018)(Unit: Millions of yen)
Total
Carrying
Within 1
1 to 2
2 to 33 to 44 to 5
Over 5
contractual
amount
year
years
years
years
years
years
cash flows
Trade and other435,929435,929－－－－－435,929
payablesFinancing
90,45369,445 7,900
7,312
4,130
1,390
463
90,641
liabilities
Other financial
107,718
39,915 12,556
6,551
6,362
4,713
45,877
115,974
liabilities
Total
634,100
545,289 20,455
13,863
10,492
6,103
46,340642,544
FYE 2019 (as of March 31, 2019)

Trade and otherpayablesFinancingliabilities
Other financial
liabilities
Total

2 to 3years

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows

Carrying
amountWithin 1
year

1 to 2
years

404,395

404,395

－

－

－

－

－

404,395

103,726

15,3897,460

15,10351,326

9,915

5,013

104,206

123,415

49,964 17,090

6,387

4,244

4,174

42,673

124,532

631,536

469,748 24,550

21,49055,57014,08947,686633,133

FYE 2020 (as of March 31, 2020)
Carrying
amountWithin 1
year

1 to 2years

2 to 3years

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows

Trade and other336,223
336,223－－－－－
336,223
payablesFinancing
239,210
12,538 15,353
51,502
45,666 56,208
59,854
241,121
liabilities
Other financial
109,953
42,098 13,175
5,617
5,401
6,522
43,617
116,430
liabilities
Total
685,386
390,859 28,528
57,11951,067 62,730 103,471
693,774
Financial guarantee contracts cause payment obligation on the basis of demand for performance. Guarantees tothe clients are described in “35. Contingencies”.

622) Derivative financial liabilities
Derivative financial liabilities by maturity as of April 1, 2018 and March 31, 2019 and 2020 are as follows:
Transition date (April 1, 2018)(Unit: Millions of yen)
Total
Carrying
Within 1
1 to 2
2 to 33 to 44 to 5
Over 5
contractual
amount
year
years
years
years
years
years
cash flows
Revenue－
42,022－－－－－42,022
Expenditure－(42,183)－－－－－(42,183)
Derivative
(162)
(161)
－
－
－
－
－
(161)
financial liabilities
FYE 2019 (as of March 31, 2019)

Revenue
Expenditure
Derivative
financial liabilities

Carrying
amountWithin 1
year

1 to 2years

2 to 3years

3 to 4years

4 to 5
years－－

103,152(105,199)

－
(5)

－
(5)

－
(5)

－
－

(2,062)( 2,047)

(5)

(5)

(5)

－

(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows－
103,152－(105,214)－(2,062)FYE 2020 (as of March 31, 2020)

Revenue
Expenditure
Derivative
financial liabilities

Carrying
amountWithin 1
year

1 to 2years

2 to 3years－－

149,702(151,702)

－
(9)

－
(9)

－
(6)

－
(2)

(2,028)(2,000)

(9)

(9)

(6)

(2)

63

3 to 4years

4 to 5years(Unit: Millions of yen)
Total
Over 5
contractual
years
cash flows－
149,702－(151,728)－(2,026)

30. Fair Value(1) Definition of Fair Value Hierarchy
The Group uses a three-level hierarchy system when measuring fair value. The following is a description of thethree levels of hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities that the Group has the ability to accessas of the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities,
either directly or indirectly
Level 3: Unobservable inputs for the assets or liabilities(2) Method of Fair Value Measurement
The fair values of assets and liabilities are determined based on relevant market information and through the useof an appropriate valuation method.
The measurement methods and assumptions used in the measurement of assets and liabilities are as follows:(Cash and cash equivalents, Trade and other receivables, Trade and other payables)
Cash and cash equivalents, Trade and other receivables, and Trade and other payables are measured atamortized cost. Lease receivables are measured in accordance with IFRS 16.
The fair value of operating loans and lease receivables is calculated based on the present value of the receivables
discounted by the interest rate, taking into account the maturity period and credit risk, for each receivable classified
by a certain period. Therefore, fair value measurements are classified as Level 3 because credit risks are notobservable.
The fair values of financial assets other than lease receivables and operating loans approximate their carrying
amounts of those financial assets due to their short-term maturities.
(Other debt instruments)
Debt instruments (instruments measured at amortized cost) consist mainly of Commercial paper and negotiablecertificates of deposit. Debt securities (instruments measured at fair value) consist mainly of government bonds,
corporate bonds, medium-term notes, and investment trust.
The fair value of government bonds and investment trust with an active market is measured by using quoted
market prices. Fair value measurement for government bonds is classified as Level 1.
The fair value of other debt instruments except for the instruments mentioned above is measured based on the
proprietary pricing models provided by financial institutions using observable inputs in the market such as credit
ratings and discount rates. Fair value measurements for other debt instruments are classified as Level 2.
Other debt instruments are reported as other financial assets (current).
(Equity instruments)
Equity instruments consist mainly of stocks.
The fair value of equity instruments with an active market is measured by using quoted market prices.
Fair value measurement for equity instruments with an active market is classified as Level 1.
As a general rule, the fair value of equity instruments with no active market is measured mainly by using thecomparable company valuation method and other appropriate valuation methods. Fair value measurement for
equity instruments with no active market is classified as Level 3.
Equity instruments are reported as other financial assets (non-current).
Such fair value measurements are conducted in accordance with the Group accounting policy approved by theappropriate person of authority and based upon valuation methods determined by an accountant of the Group.

64

(Financing liabilities)
Financing liabilities are measured at amortized cost. However, borrowings recognized in securitizationtransactions of accounts receivable using trusts are measured in accordance with IFRS 9.The fair value offinancing liabilities is measured by discounting future cash flows using interest rates currently available for liabilities
of similar terms and remaining maturities. Fair value measurement for financing liabilities is mainly classified as
Level 2.
(Derivatives)
Derivatives consist mainly of foreign currency forward exchange contracts, foreign currency option contracts andinterest rate swap agreements.
The fair values of derivatives are measured based on observable inputs such as foreign exchange rates andquoted prices obtained from the financial institutions. Fair value measurements for these derivatives are classified
as Level 2.
Derivatives are reported as other financial assets (current) or other financial liabilities (current).
(Other financial liabilities)
Other financial liabilities other than derivatives mainly include liabilities related to chargeable subcontracting.
Liabilities related to chargeable subcontracting are measured at amortized cost.
Lease liabilities are measured in accordance with IFRS 16.
(3) Assets and Liabilities Measured at Fair Value on a recurring basis
Transition date (April 1, 2018)
Level 1Other financial assets
Financial assets measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Debt instruments
Total
Financial assets measured at fairvalue through other comprehensive
income:Equity instruments
Debt instruments
Total
Total
Other financial liabilities:
Financial liabilities measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Total

Level 2

Level 3

(Unit: Millions of yen)
Total

－
－
－

5,339
791
6,130

－
－
－

5,339
791
6,130

33,773
46,96580,73880,738－51,91451,91458,044

4,428
－
4,428
4,428

38,201
98,879137,080
143,210

－
－

162
162

－
－

162
162

65

FYE 2019 (as of March 31, 2019)
Level 1Other financial assets
Financial assets measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Debt instruments
Total
Financial assets measured at fairvalue through other comprehensive
income:Equity instruments
Debt instruments
Total
Total
Other financial liabilities:
Financial liabilities measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Total

Level 2

Level 3

(Unit: Millions of yen)
Total

－
－
－

246
490
736

－
－
－

246
490
736

31,47864,28995,767
95,767－56,521
56,521
57,257

4,703
－
4,703
4,703

36,181
120,810
156,991
157,727

－
－

2,062
2,062

－
－

2,062
2,062

FYE2020 (as of March 31, 2020)
Level 1Other financial assets
Financial assets measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Debt instruments
Total
Financial assets measured at fairvalue through other comprehensive
income:Equity instruments
Debt instruments
Total
Total
Other financial liabilities:
Financial liabilities measured at fairvalue through profit or loss:
Derivatives
Foreign exchange instruments
Total

Level 2

(Unit: Millions of yen)
Level 3
Total－
21,134
21,134

1,131
351
1,482

－
－
－

1,131
21,48522,616

4,104
64,68868,792
89,926－
68,141
68,141
69,623

4,818
－
4,818
4,818

8,922
132,829
141,751
164,367

－
－

2,028
2,028

－
－

2,028
2,028

The Group recognizes the transfers between the levels of the fair value hierarchy at the end of the day on whichan event or change in conditions that causes the transfer has occurred.
There were no material transfers between the levels.

66

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the consolidated fiscal
years ended March 31, 2019 and 2020 are as follows:(Unit: Millions of yen)
FYE 2019
FYE 2020(April 1, 2018 to(April 1, 2019 toMarch 31, 2019)
March 31, 2020)
Capital financial assets
Capital financial assets
Beginning balance
4,428
4,703
Total gains or losses:
Profit or loss－－
Other comprehensive income
275
115
Purchases
－
－
Sales
－
－
Exchange differences on translating foreign－－
operations
Ending Balance
4,703
4,818
Unrealized gains or losses included in profit or loss－－
on assets held at March 31. 2020
Note: 1. Gains or losses included in profit or loss for the consolidated fiscal years ended March 31, 2019 and 2020are included in finance income and finance costs in the consolidated statements of income.
2. Gains or losses included in other comprehensive income for the consolidated fiscal years ended March
31, 2019 and 2020 are included in net changes in revaluation of equity instruments designated asmeasured at fair value through other comprehensive income in the consolidated statements ofcomprehensive income.
(4) Financial Assets and Financial Liabilities that are not measured at fair value
The carrying amounts and fair values of financial assets and financial liabilities that are not measured at fair value
as of April 1, 2018 and March 31, 2019 and 2020 are as follows:
Transition date
(April 1, 2018)
Carrying
Fair value
amountTrade and other receivables
Operating loans
Lease receivables
Account receivables andother receivables*1
Other financial asset*1&2
Financing liabilities
Borrowings
Bonds payables
Trade and other payables*1
Other financial liabilities*1&3

FYE 2019(as of March 31, 2019)
Carrying
Fair value
amount(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
Carrying
Fair value
amount156,955
17,202

164,248
18,848165,040
14,792

172,539
16,456

178,492
12,928186,162
14,239169,306－

164,405－

173,419－

270,975－

276,800－

59,736－90,453－435,929
24,80590,527－－－103,726－
404,395
23,197103,754－－－

199,21040,000336,223
27,503

199,185
39,704－－

Note: 1. Disclosure of fair value is omitted because the fair values approximate their carrying amounts due to theirshort-term maturities
2. Items disclosed in “(3) Assets and Liabilities Measured at Fair Value on a recurring basis” are not included.

67

3. Other financial liabilities do not include derivatives of 162 million yen (April 1, 2018), 2,062 million yen(March 31, 2019) and 2,028 million yen (March 31, 2020) and lease liabilities of 82,913 million yen (April
1, 2018), 100,218 million yen (March 31, 2019) and 82,450 million yen (March 31, 2020).
4. The table does not include cash and cash equivalents, commercial paper and negotiable certificates ofdeposit measured at amortized cost whose fair values approximate their respective carrying amounts.
(5) Assets and Liabilities Measured at Fair Value on a non-recurring basis
There are no assets and liabilities measured at fair value on a non-recurring basis as of April 1, 2018, and March
31, 2019 and 2020.
31. Transfers of financial assets that do not meet the requirement for derecognition
The Group securitizes a part of its financial assets.
The Group's aerospace company securitizes account receivables through trusts. The Group transfers a part ofbeneficiary rights, but transferees have recourse to the transferor (the Group).Therefore, we have determined that
the Group retains substantially all the risks and rewards of ownership, and the transfer of beneficiary rights is
accounted for as a financing transaction.
Transferred assets and liabilities for which transferees have recourse are as follows:

Trade and other receivables
Borrowings

Transition date
(April 1, 2018)
Carrying
Fair value
amount
4,251
4,251
4,251
4,251

68

FYE 2019(as of March 31, 2019)
Carrying
Fair value
amount
3,330
3,330
3,330
3,330

(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
Carrying
Fair value
amount
2,948
2,948
2,948
2,948

32. Offsetting of Financial Assets and Financial Liabilities
Information about offsetting of financial assets and financial liabilities as of April 1, 2018 and March 31, 2019 and2020 is as follows:
Transition date (April 1, 2018)

Grossamounts ofrecognizedfinancialassets andfinancialliabilities
Other financial assets
Derivatives
Other financial
liabilities
Derivatives(Unit: Millions of yen)Amounts subject
to master netting
agreements orNetsimilaramounts
agreements that
do meet offsetting
criteria

Amounts offset
in theconsolidated
statements offinancial
position

Net amounts
presented intheconsolidated
statements offinancial
position

5,339

－

5,339

(162)

5,177

162

－

162

(162)

－

FYE 2019 (as of March 31, 2019)Grossamounts ofrecognizedfinancialassets andfinancialliabilities
Other financial assets
Derivatives
Other financial
liabilities
Derivatives(Unit: Millions of yen)Amounts subject
to master netting
agreements orNetsimilaramounts
agreements that
do meet offsetting
criteria

Amounts offset
in theconsolidated
statements offinancial
position

Net amounts
presented intheconsolidated
statements offinancial
position

246

－

246

(246)

－

2,062

－

2,062

(246)

1,816

Amounts offset
in theconsolidated
statements offinancial
position

Net amounts
presented intheconsolidated
statements offinancial
position

Amounts subject tomaster netting
agreements orsimilar agreementsthat do meet
offsetting criteriaNetamounts

1,131

－

1,131

(1,131)

－

2,028

－

2,028

(1,131)

897

FYE 2020 (as of March 31, 2020)(Unit: Millions of yen)Grossamounts ofrecognizedfinancialassets andfinancialliabilities
Other financial assets
Derivatives
Other financial
liabilities
Derivatives

Amounts that do not meet offsetting criteria are financial assets and financial liabilities subject to enforceable
master netting agreements that the Group does not intend to settle on a net basis.

6933. Commitment
The following table shows commitments for the purchase of assets after the transition date and at the end of thereporting period:(Unit: Millions of yen)Transition date
(April 1, 2018)
Purchase of property, plant andequipment

21,028FYE 2019(as of March 31, 2019)

FYE 2020(as of March 31, 2020)

30,073

34,481

34. Leases
1. Information as Lessee(1) Information as Lessee

Real estate
Machinery
Vehicles
Tools
Total depreciation charge for right-of-use assets
Interest expense on lease liabilities
Lease expenses with the exemption of short-termlease*1
Lease expenses with the exemption of leases of lowvalue assets*2
Total lease expense (net)Total cash outflow for leases

FYE 2019(as of March 31, 2019)
7,376
1,390
10
37,95546,731
1,076(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
6,778
1,447
11
36,52844,764
1,019

1,658

1,855

1,385

1,040

50,85049,86048,67845,144

There is no material income from sub-leasing of right-of-use assets.
Note: 1. The Group applies IFRS 16.6 to short-term leases.
2. The Group applies IFRS 16.6 to leases of low-value assets.
3. For increase in right-of-use assets, please refer to “11.Property, plant and equipment”.

Real estate
Machinery
Vehicles
Tools
Total carrying amount of right-ofuse assets(Unit: Millions of yen)Transition date
FYE 2019
FYE 2020(April 1, 2018)(as of March 31, 2019) (as of March 31, 2020)
42,436
43,12145,123
15,11516,094
14,5773849
3830,82553,32840,08088,414

70

112,592

99,818

(2) Maturity analysis of lease liabilities(Unit: Millions of yen)Transition date
(April 1, 2018)
FYE 2019(as of March 31, 2019)
FYE 2020(as of March 31, 2020)

Total

Within 1
year

1 to 2years

2 to 3years

3 to 4years

4 to 5years

After 5years

92,34826,55910,364

5,511

4,977

4,703

40,234

109,692

37,396

15,892

5,565

5,061

4,812

40,96689,897

24,834

9,367

5,598

5,313

4,845

39,940Management policy for Liquidity Risk
Exposure to liquidity risk is managed by maintaining sufficient capital resources, a sufficient level of liquidity and asound balance sheet.
(3) The nature of the lessee's leasing activities
The Group is the lessee under several operating leases, primarily for production tools such as molds, and network
equipment and devices, as well as for real estate such as stores, company-owned houses and warehouses forthe automotive business.
(4) Future cash outflows to which the lessee is potentially exposed and which are not reflected in themeasurement of lease liabilities
There are no material future cash outflows to which the lessee is potentially exposed and which are not reflectedin the measurement of lease liabilities.
(5) Restrictions or covenants imposed by leases
There are no restrictions or covenants imposed by leases (e.g. restrictions on dividends, additional borrowings
and additional leases).
(6) Variable lease payments
For some lease agreements, the amount of lease payment varies based on the transactions with thecounterparties. The amounts of variable lease payments recognized as expenses in the consolidated fiscal years
ended March 31, 2019 and 2020 are not material.
2. Information as Lessor(1) Finance Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownershipof the underlying asset. All other leases are classified as operating leases.
A lease receivable under a finance lease is recognized at an amount equal to the net investment in the lease at
the commencement date.
The Group purchases insurance to cover physical damages to vehicles.
(i) Lease income
FYE 2019(April 1, 2018 toMarch 31, 2019)
2,646
2,039

Selling profit or loss
Finance income on the net investment in the lease(ii)The nature of the lessor's leasing activities (finance lease)
The Group mainly leases out vehicles under finance leases.

(iii) Significant changes in the carrying amount of the net investment in the leaseNot applicable

71(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
1,974
1,780

(iv) Maturity analysis of the lease payments receivable

Within 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
After 5 years
Total
Unearned financial income
Present value of unguaranteed
residual value
The net investment in the lease

Transition date
(April 1, 2018)
7,964
5,456
3,494
2,322
1,347
33
20,616FYE 2019(as of March 31, 2019)
7,626
4,175
2,955
1,864
972
16
17,608

3,809

3,208

(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)
6,404
4,000
2,489
1,499
970
4
15,366
2,814

395

392

376

17,202

14,792

12,928(2) Operating Lease(i) Lease income(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
8,493

FYE 2019(April 1, 2018 toMarch 31, 2019)
9,333

Lease income(ii) The nature of the lessor's leasing activities (operating lease)
The Group leases out vehicles and real estates such as office buildings under operating leases.
(iii) Maturity analysis of lease payments

Total
Transition date
(April 1, 2018)
FYE 2019(as of March 31, 2019)
FYE 2020(as of March 31, 2020)

Within 1
year

1 to 2years

2 to 3years(Unit: Millions of yen)
4 to 5After 5
years
years

3 to 4
years

196

125

48

16

6

1

－

179

120

43

12

3

1

－

457

305

125

20

5

2

－

The Group purchases insurance to cover physical damages to vehicles.
Most of the amounts disclosed in (i) lease revenues are vehicle rental fees at overseas subsidiaries and realestate rental income from office buildings, etc. Vehicle rental fees are paid in full at the time the contract starts,and the possibility that lessee’s option of cancellation is not exercised by lessee is not secure reasonably as forreal estate rental income. Therefore, (iii) the maturity analysis of lease payments does not include the amounts
related to those transactions.

72

35. Contingencies(1)Guarantees
Guarantees provided by the Group to the clients are as follows:
FYE 2019(as of March 31, 2019)(Unit: Millions of yen)
FYE 2020(as of March 31, 2020)

22,207

20,901

29,030

7,407

6,308

5,304

－

－

1,086

181
29,795100
27,309117
35,537

Transition date
(April 1, 2018)
Customers of
SUBARU Canada Inc.
Employees:
Tan Chong Subaru Automotive(Thailand) Co., Ltd.
OthersTotal(2) Other Contingencies
Based on the modified agreement between the U.S. subsidiary of Takata Co., Ltd.(Current, TKJP Corporation)and the National Highway Traffic Safety Administration (NHTSA) of the United States dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” released by
the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) of Japan dated May 27, 2016, and recall
policies in other regions including China and Australia in consideration of the request by the U.S. and Japanese
authorities, expenses for extension of recall for airbag inflators manufactured by Takata are accrued to the extent
that the amount can be reasonably estimated. There is a possibility that additional accrual may be required due
to events in the future.

7336. Significant subsidiaries
Significant subsidiaries as of March 31, 2020
Address

CapitalEquityInterest

Gunma

480 Million yen

100.0%

Manufacture and sales of automotive parts

Gunma

480 Million yen

100.0%Gunma

400 Million yen

100.0%Gunma

96 Million yen

100.0%

Kanagawa
Hokkaido
Miyagi
Niigata

490 Million yen
98 Million yen
80 Million yen
100 Million yen

68.0%
100.0%
100.0%
100.0%

Manufacture and sales of automotive parts
Manufacturing of repair parts for Subaru
cars, Subaru vehicle rust prevention works,
Manufacture of custom-build car, etc.
Shipping, land freight and warehousing of
Subaru vehicles, etc.
Storing and shipping of Subaru vehicles
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components

Kanagawa

100 Million yen

100.0%

Sales of Subaru vehicles and components

Chiba
Tokyo
Aichi
Osaka

100 Million yen
100 Million yen
100 Million yen
100 Million yen

100.0%
100.0%
100.0%
100.0%

Sales of Subaru vehicles and components
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components
Sales of Subaru vehicles and components

Hiroshima

92 Million yen

100.0%

Sales of Subaru vehicles and components

Fukuoka

50 Million yen

100.0%

Subaru Finance Co.,
Ltd.

Tokyo

2,000 Million
yen

100.0%

Subaru of Indiana
Automotive, Inc.
(SIA)

US

USD
794,045,000

100.0%

Subaru of America,
Inc.
(SOA)

US

USD 241,000

100.0%

Subaru Canada, Inc.
(SCI)

CanadaCND
30,000,000

100.0%

Sales of Subaru vehicles and components
Leasing and rental of Subaru vehicles;
credit and financing related to Subaru
vehiclesPurchasing of production parts for
Subaru vehicles, sales of completed vehicles
to Subaru of America Inc.
(SOA) and others
Sales of Subaru manufactured vehicles,
Subaru of Indiana Automotive, Inc. (SIA)
manufactured vehicles and parts
Sales of Subaru manufactured vehicles,
Subaru of Indiana Automotive, Inc. (SIA)
manufactured vehicles and parts

Belgium

EUR
87,504,000

100.0%

Sales of Subaru vehicles and components

Belgium

CNY
187,354,000

60.0%

Sales of Subaru vehicles and components

Name
Fuji Machinery Co.,Ltd.
Ichitan Co., Ltd.
KIRYU INDUSTRY
Co., Ltd.
Subaru Logistics Co.,
Ltd.
H.B.C. Co., Ltd.
Hokkaido Subaru Inc.
Miyagi Subaru Inc.
Niigata Subaru Inc.
Kanagawa Subaru
Inc.
Chiba Subaru Inc.
Tokyo Subaru Inc.
Nagoya Subaru Inc.
Osaka Subaru Inc.
Hiroshima Subaru
Inc.
Fukuoka Subaru Inc.

Subaru Europe
N.V./S.A.
(SE)
Subaru of China Ltd.
(SOC)

74

Main BusinessesName

Address

CapitalEquityInterest

North American
Subaru Inc.
(NASI)US

USD 5,000

100.0%

Yusoki Kogyo K.K.

Aichi

100 Million yen

100.0%

Main Businesses
Technical investigation for Subaru
manufactured vehicles, Subaru of Indiana
Automotive, Inc. (SIA) manufactured
vehicles in North America market,
automobile related regulatory compliancein the US
Manufacture and sales of aircraft parts to
SubaruFuji AircraftInspection, service and maintenance ofMaintenance Co.,Tokyo
30 Million yen
100.0%
aircrafts
Ltd.
Subaru Kohsan Co.,Tokyo
675 Million yen
100.0%
Rental and management of real estate
Ltd.
SUBARU IT
IT system development and operation for
CREATIONS
Saitama
100 Million yen
100.0%
Subaru GroupCORPORATIONS
Note: 1. In the “Main Businesses “column, the name of the segment information is stated.
2. The Company is a specified subsidiary.
3. There are no companies that have filed a Securities Registration Statement or Annual Report.
4. With respect to Subaru of America Inc., the percentage of net sales (excluding intercompany sales
between consolidated companies) in the consolidated net sales exceeds 10%.
Key profit and loss information(Unit: Millions of yen)
(1) Net sales
2,164,192(2) Ordinary income
100,813(3) Net income
74,015(4) Net assets
335,611(5) Total assets
848,39175

37. Related Parties
Compensation to Key Management
Compensation paid to the directors of the Company is as follows:
FYE 2019(April 1, 2018 toMarch 31, 2019)
Short-term employee benefits
Stock compensation

473
51(Unit: Millions of yen)
FYE 2020(April 1, 2019 toMarch 31, 2020)
501
53

38. Significant Subsequent Event
Impact of the global pandemic of COVID-19
Operations had been suspended due to the spread of COVID-19. SIA, the Group's U.S. manufacturing base hadsuspended its operations since March 23, 2020 and Gunma Plant had suspended its operations since April 9
respectively. But SIA and all plants in Japan has already resumed operations on May 11, 2020.
Production volume at SIA and the Gunma Plant has been reduced because of the continued impact on the supply
chain and sales activities due to the continued anti-infection measures, such as stay-at-home orders around theworld.
The impact on the results for the consolidated fiscal year ending March 2021 and beyond is currently underinvestigation.
Large amount of borrowings
In order to prepare for liquidity risk due to the global decline in demand caused by the spread of COVID-19, theGroup borrowed a total of 211,500 million yen from financial institutions from April 21, 2020 to May 29, 2020 as
described below in accordance with the resolution of the Board of Directors' meeting held on March 31, 2020.
(1) Use of funds: Working capital(2) Lender: Mizuho Bank, Ltd. and others(3) Amount and terms of borrowings: The Group borrowed 211,500 million yen based on the commitment line
agreement and the deed loan agreement. The interest rate was determined considering market interest rates.
(4) Borrowing date: April 21, 2020, April 27, 2020, April 30, 2020, May 15, 2020, May 20, 2020, and May 29, 2020.
(5) Final repayment date: July 21, 2020 - May 20, 2030
(6) Pledged assets: Unsecured and unguaranteed7639. First-time adoption
The Group has been disclosing consolidated financial statements in accordance with IFRS from the consolidated
fiscal year ended March 31, 2020. The most recent consolidated financial statements prepared in accordancewith Japanese GAAP are for the consolidated fiscal year ended on March 31, 2019. The transition date to IFRS
was April 1, 2018. The reclassification column in the reconciliation table includes items that do not have an effecton retained earnings and comprehensive income, while the recognition/measurement difference column includes
items that have an effect on retained earnings and comprehensive income. Amounts in the reconciliation table arerounded to the nearest million in yen.
1．Exemption under IFRS 1IFRS 1 requires full retrospective application of IFRS for the first-time adopters. However, it provides somevoluntary and mandatory exemptions from full retrospective applications. Adjustments as a result of the first-time
adoption of IFRS and these exemptions are recognized through retained earnings or other components of equity
at the date of transition. Exemptions adopted by the Group in transitioning to IFRS from Japanese GAAP are as
follows:
・Business combinations
Under IFRS 1, a first-time adopter may elect not to apply IFRS 3 “Business Combinations” retrospectively tobusiness combinations that occurred before the date of transition to IFRS. The Group has elected to apply IFRS
3 prospectively from the date of transition. Accordingly, business combinations completed prior to the transition
date have not been restated, thus any goodwill arising from business combinations that took place before the dateof transition is recognized at the carrying amount based on Japanese GAAP at the date of transition to IFRS. The
Group performed impairment testing of the goodwill on the date of transition to IFRS to determine whether there
was any indication that the goodwill may be impaired or not.
・Exchange differences arising from translating foreign operations
A first-time adopter may elect to deem the cumulative translation adjustments for foreign operations to be zero on
the date of transition. The Group has deemed the cumulative amount of exchange differences arising fromtranslating foreign operations on the date of transition to be zero.
・LeaseA first-time adopter may evaluate whether an arrangement contains a lease or not on the date of transition to IFRS.
The Group adopts this exemption and evaluates it based on facts and circumstances existing on that date.

77

2．Mandatory exemptions of IFRS 1IFRS 1 prohibits full retrospective application for estimates and non-controlling interest. The Group prospectively
applies IFRS to these items.
3. Reconciliation table
The disclosure of reconciliation required upon transition to IFRS is as follows:
1. Reconciliation of equity as of the transition date (April 1, 2018)(Unit: Millions of yen)
Presentation underJapanese GAAP

Japanese
GAAP

Reclassification

Recognition
andmeasurement
differences

Cash and deposits

765,397

194－

765,5911

154,907

212,590(24,034)

343,4635

185,364(185,364)－

17,120(17,120)－

202,435

94,75531,751

328,941

5

Inventories

52,307(52,307)－42,448(42,448)－242,573

129,796

162

372,531

1

Other financial assets

107,893(47,662)(6,105)54,126

4,316

－

4,316

1,770,444

761
97,511

－
1,774

761
1,869,729

703,108(28,176)

95,766

770,698

3,6,7

27,278－27,2783

Notes and accounts
receivable-trade
Short-term loans
receivable
Lease investment
assetsMerchandise andfinished goods
Work in process
Raw materials andsupplies
Short-term investment
securities
OthersTotal current assets
Property, plant andequipment

IFRS

Note

Intangible assets

28,293

137

124,745

153,175

6Investment securities

113,465(75,702)

3,891

41,654

2,9

7,502

－

7,502

2
10

Deferred tax assets

139,171(41,601)

17,055

114,625

Others

115,355(31,912)2,433

85,876

Allowance for doubtful
accounts(3,362)

3,362－

Total fixed assets

1,096,030(139,112)

243,890

1,200,808

Total assets

2,866,474(41,601)

245,6643,070,537

78

Presentation under
IFRS

Cash and cash
equivalents
Trade and otherreceivables

Other current assets
Income taxes
receivable
Assets held for sale
Total current assets
Property, plant andequipment
Investment property
Intangible assets andgoodwill
Other financial assets
Investments
accounted for using
the equity method
Deferred tax assets
Other non-current
assetsTotal non-current
assetsTotal assets

(Unit: Millions of yen)Japanese
GAAP

Reclassificati
on

Recognition
andmeasurement
differences320,137

121,552(5,760)435,929

Trade and otherpayables

22,082

42,982

4,251

69,315

Financing liabilities

42,982(42,982)－

Accrued income taxes

45,372(2,964)－42,408Provision

233,812－

7,961

241,773

8

Others237,676

28,705

12,385

278,766

5

Accrued expenses

148,945(148,945)

－

1,157

38,92040,077

7

57,757 1,108,268

Presentation underJapanese GAAP

Notes and accounts
payable-trade
Short-term loans
payableCurrent portion of longterm debts

IFRS

Note

Total current liabilities

1,051,006(495)

Long-term debts
Net defined benefit
liability
Provisions

21,138－－21,13819,33725,0532,930

47,32036,248

(298)

1,429

37,379Others

175,256(36,341)

4,216

143,1315

12,081

55,72267,803

7

2,466(41,601)

41,8622,727

10

319,498

Deferred tax liabilities

8

Presentation under
IFRS

Income taxes
payableProvisions
Other current
liabilities
Other financial
liabilities
Total current
liabilities
Financing liabilities
Employee benefits
Provisions
Other non-current
liabilities
Other financial
liabilities
Deferred tax
liabilities
Total non-current
liabilities
Total liabilities
Capital stock
Capital surplus
Treasury shares

Total long-term
liabilities
Total liabilities
Capital stock
Capital surplus
Treasury stock

254,445(41,106)

106,159

1,305,451
153,795
160,197(7,054)(41,601)－－－

163,916 1,427,766－
153,795
160,197－－(7,054)Retained earnings

1,283,539－

34,100 1,317,639

4,5,6,8
Retained earnings,10,11(37,633)－

47,375

9,742

4,9,11

8,179

－

273

8,452

1,561,023－

81,748 1,642,771

2,866,474(41,601)

245,664 3,070,537

Accumulated othercomprehensive
incomeNon-controllinginterests
Total net assets
Total liabilities and net
assets79

Other componentsof equity
Non-controllinginterests
Total equity
Total liabilities andequity2. Reconciliation of equity as of March 31, 2019
(Unit: Millions of yen)
Presentation underJapanese GAAP

Cash and deposits
Notes and accounts
receivable-trade
Short-term loans
receivable
Lease investment
assetsMerchandise andfinished goods
Work in process
Raw materials andsupplies
Short-term investment
securities
OthersJapanese
GAAP

Reclassifica
tion

Recognition
andmeasurement
differences

831,700(129,372)

148,485

IFRS

Note

－

702,3281

219,404(23,652)

344,237

5

198,737(198,737)－

14,731(14,731)－249,558

141,142

12,773

403,4735

74,711(74,711)－

66,431(66,431)－

119,963

274,197246

394,406

121,903(48,978)(13,343)

59,582

9,704

－

9,704

4

－

4

Total current assets

1,826,219

111,491(23,976) 1,913,734

Property, plant andequipment

717,394(29,274)

120,590808,710

25,414－25,414

Intangible assets

33,754

3,856

117,900

155,510Investment securities

122,453(86,498)

4,166

40,121

8,821

－

8,821

Deferred tax assets

151,019(47,890)

24,394

127,523

Others135,132(37,056)

2,688

100,764

Allowance for doubtful
accounts(3,246)

3,246－

Total fixed assets

1,156,506(159,381)

269,738 1,266,863

Total assets

2,982,725(47,890)245,762 3,180,597

80

Presentation under
IFRS

Cash and cash
equivalents
Trade and otherreceivables

Inventories

Other financial
assetsOther current
assetsIncome taxes
receivable
Assets held forsale
Total current
assetsProperty, plant and3,6,7
equipment
Investment
3
property
Intangible assets
6
and goodwill
Other financial
2,9assetsInvestments
accounted for2
using the equity
method10 Deferred tax assets
Other non-current
assets1

Total non-current
assetsTotal assets

(Unit: Millions of yen)Japanese
GAAP

Reclassifica
tion

Recognition
andmeasurement
differences

315,026

97,425(8,056)404,395

Trade and otherpayables

4,352

7,592

3,330

15,274

Financing liabilities

7,592(7,592)－

5,367(1,036)－

4,331

Provisions

281,705

95

8,112

289,912

8

Others236,468

61,826(377)

297,9175

Accrued expenses

161,661(161,661)

－

2,792

48,82951,621

7

51,838 1,063,450

Presentation underJapanese GAAP

Notes and accounts
payable-trade
Short-term loans
payableCurrent portion of longterm debts
Accrued income taxes

IFRS

Note

Total current liabilities

1,012,171(559)

Long-term debts
Net defined benefit
liability
Provisions

88,452－－88,452

22,90026,623

3,095

52,61844,422

(314)

1,429

45,537

Others196,915(36,547)

1,829

162,197

5

10,79763,05973,8567

5,040(47,890)

47,4384,588

10427,248

Deferred tax liabilities

8

Presentation under
IFRS

Income taxes
payableProvisions
Other current
liabilities
Other financial
liabilities
Total current
liabilities
Financing liabilities
Employee benefits
Provisions
Other non-current
liabilities
Other financial
liabilities
Deferred tax
liabilities
Total non-current
liabilities
Total liabilities
Capital stock
Capital surplus
Treasury shares

Total long-term
liabilities
Total liabilities
Capital stock
Capital surplus
Treasury stock

357,729(47,331)

116,850

1,369,900
153,795
160,192(6,910)(47,890)－－－

168,688 1,490,698－
153,795－
160,192－(6,910)Retained earnings

1,320,177－

30,462 1,350,639

4,5,6,8
Retained earnings,10,11(21,963)－

46,49524,532

4,9,11

7,534

－

117

7,651

1,612,825－

77,074 1,689,899

2,982,725(47,890)245,762 3,180,597

Accumulated othercomprehensive
incomeNon-controllinginterests
Total net assets
Total liabilities and net
assets81

Other componentsof equity
Non-controllinginterests
Total equity
Total liabilities andequity3. Reconciliation of comprehensive income for the consolidated fiscal year ended March 31, 2019 (April 1, 2018
to March 31, 2019)(Unit: Millions of yen)
Recognition
Presentation underJapanese Reclassifica
andPresentation under
IFRS
Note
Japanese GAAP
GAAP
tion
measurement
IFRS
differences
Net sales
3,160,514－(4,364) 3,156,150
2
Revenue
Cost of sales
2,561,753－(3,491) 2,558,262
2,5
Cost of sales
Gross profit
598,761－(873)
597,888
Gross profit
Selling, general andSelling, generaladministrative403,232(101,711)(2,646)
298,875 1,3,5 and administrative
expenses
expenses
Research and101,711
6,847
108,558
1,3
development
expenses
6,901
(170)
6,731
1
Other income
15,923(84)
15,839
1
Other expenses
Share of profit(loss) ofinvestments
377
－
377
1
accounted forusing the equity
methodOperating income
195,529(8,645)(5,160)181,724
Operating profit
Non-operating
17,580(17,580)
incomeNon-operating
16,870(16,870)
expenses
Ordinary income
196,239(196,239)
Extraordinary
6,953(6,953)incomeExtraordinary loss
7,354
(7,354)
17,255(3,554)
13,701
1,4
Finance income
8,301
1,098
9,399
1,4
Finance costs
Income before
195,838－(9,812)
186,026
Profit before tax
income taxes
Income tax
Total income taxes
48,499－(3,262)
45,237
expenseNet income
147,339－(6,550)140,789
Profit for the period
Attribution of profitof the period
Net income
Profit for the period
attributable to147,812－(6,394)141,418
attributable toowners of parent
owner of parent
Profit (loss) for the
Net income (loss)
period attributable
attributable to non(473)
－
(156)
(629)
to non-controlling
controlling interests
interests82

(Unit: Millions of yen)
Presentation underJapanese GAAPNet income
Other comprehensive
incomeMeasurements of defined
benefit plans
Remeasurements ofother postretirement
benefits of foreign
consolidated subsidiaries

Recognit
ion andJapanes Reclassif measuree GAAP
icationment
differences
147,339－(6,550)

(495)

1,566

1,566

(1,566)(1,681)

IFRS

Note

140,789(610)

5Valuation difference on
available-for-salesecurities

(907)

－

1,442

535

4

Foreign currencytranslation adjustments

15,520－(1)

15,519

6

Share of othercomprehensive income ofaffiliates accounted forusing the equity method

(186)

－

－

(186)

Presentation under IFRSProfit for the period
Other comprehensive income(after deduction of tax)
Items that will not bereclassified to profit or loss
Remeasurements ofdefined benefit plans

Net changes in revaluationof capital financial assets
measured at fair value
through othercomprehensive income
Items that will be reclassified
to profit or loss
Exchange differences ontranslation of foreign
operations
Share of othercomprehensive income ofinvestments accounted forusing equity method
Net changes in revaluationof liability financial assets
measured at fair value
through othercomprehensive income

1,251

1,251

Other comprehensive
income (after deduction oftax)

Total othercomprehensive income

15,498－1,011

16,509Other comprehensive income(after deduction of tax) total

Comprehensive income

162,837－(5,539)157,298

Comprehensive income

Comprehensive income
attributable to owners ofparentComprehensive income
attributable to noncontrolling interests

163,482－(5,383)

158,099

(645)

－

(156)

(801)

83

Attribution of comprehensive
incomeComprehensive income
attributable to owners ofparentComprehensive income
attributable to non-controllinginterests

4. Notes to reconciliation of equity
1. Reclassification
Reclassification mainly includes the following:(1) Transfer of cash and deposits
Term deposits with maturities exceeding three months included in “Cash and deposits” under Japanese GAAP
are presented as “Other financial assets (current)” under IFRS. In addition, investments with original maturities ofthree months or less from the date of acquisition included in “Short-term investment securities” under Japanese
GAAP are presented as “Cash and cash equivalents” under IFRS.
(2) Investments accounted for using the equity method“Investments accounted for using the equity method” included in “Investment securities” under Japanese GAAP
are separately presented under IFRS.
(3)Investment property
Based on IFRS presentation requirements, “Investment property” is reclassified from “Property, plant andequipment”.
2. Adjustments of recognition and measurement
The major adjustments of recognition and measurement are as follows:(4) Transfer of cumulative foreign currency translation adjustments related to foreign operations
Upon the first-time adoption of IFRS, we adopted the exemptions in IFRS 1 and transferred all cumulative
foreign currency translation adjustments as of the transition date to retained earnings.
(5) Revenue recognition
While revenue is recognized for sales of new cars at the time of the registration of vehicles under Japanese
GAAP, it is recognized at the time of the delivery to customers under IFRS.
In accordance with this, the account receivables related to registered undelivered vehicles are derecognized,
and inventory is recognized accordingly.
In addition, while the portion of provided services related to free maintenance and telematics in the US is notrecognized as revenue because no consideration is received for it under Japanese GAAP, under IFRS,
rendered services are treated as individual performance obligations and revenue is recognized over a certain
period by allocating the transaction price among performance obligations.
(6) Adjustment of tangible fixed assets and intangible assets
Fixed asset acquisition tax is expensed under Japanese GAAP. Under IFRS, it is included in the acquisition costof the asset. In addition, research and development costs, all of which are expensed under Japanese GAAP,
are recognized as intangible assets if they meet certain requirements under IFRS.
(7)Adjustment of the right-of-use assets
Transactions that include a lease in a contract based on practical judgment are not capitalized under Japanese
GAAP. However, they are recognized as tangible fixed assets under IFRS. In addition, the liabilities associatedwith the capitalization of the lease transactions are recognized as “Other financial liabilities” under IFRS.

84

(8) Unused paid leave and other long-term employee benefits
IFRS recognizes liabilities for unused paid leaves and other long-term employee benefits that were not required
to be accounted for under Japanese GAAP.
(9)Fair value measurement of unlisted stocks
Under Japanese GAAP, unlisted stocks were initially recognized based on the acquisition cost and were subject
to impairment as necessary in case of deterioration in financial position. Under IFRS, unlisted stocks aremeasured at fair value, resulting in recognition of the difference as other components of equity.
(10)Deferred tax assets and deferred tax liabilities
Under Japanese GAAP, the tax effect of elimination of unrealized gains and losses were calculated using the
tax rate of the seller, and recoverability was also considered by the seller. Under IFRS, deferred taxes arecalculated using the effective tax rate of the buyer and the recoverability of deferred tax assets is also
determined by the buyer. As for other tax effects, balances of “Deferred tax assets” have been changed as aresult of the review of the recoverability of deferred tax assets along with the adoption of IFRS.
(11) Retirement benefits
Under Japanese GAAP, actuarial gains or losses and past service costs in retirement benefits are recognized inother comprehensive income when incurred and amortized through profit or loss over a certain number of years
within the average remaining years of service of employees at the time of occurrence.
Under IFRS, remeasurements of defined benefit plans are recognized in other comprehensive income whenincurred, and past service costs are recognized in profit or loss when incurred. Remeasurements of defined
benefit plans recognized in other comprehensive income are immediately transferred to retained earnings
without going through profit or loss.
5. Notes to reconciliation of comprehensive income(1) Presentation reclassification
Items that were presented as “Non-operating income”, “Non-operating expenses”, “Extraordinary income” or“Extraordinary loss” under Japanese GAAP are presented as “Finance income” or “Finance expenses” forfinancing-related gains and losses under IFRS.
Other items are classified based on functions and are presented as “Other income”, “Other expenses” or “Equity
in earnings of affiliates”.
“Research and development expenses” that were included in selling, general and administrative expenses
under Japanese GAAP are separately presented under IFRS.
(2) Adjustment for revenue
Under Japanese GAAP, sales of new cars are recognized as revenue at the time of the registration of vehicles.
Under IFRS, revenue is recognized at the time of the delivery to customers.
In accordance with this, the account receivables related to registered undelivered vehicles are derecognized,
and inventory is recognized accordingly.
In addition, the portion of provided services related to free maintenance and telematics in the U.S. is notrecognized as revenue because no consideration is received for it under Japanese GAAP. Under IFRS,
rendered services are treated as individual performance obligations and revenue is recognized over a certain
period by allocating the transaction price among performance obligations.
(3) Adjustment for selling, general and administrative expenses
Under Japanese GAAP, all Research and development expenses were expensed. Under IFRS, Research anddevelopment expenses that meet certain requirements are recognized as “Intangible assets”.
85

(4) Adjustment for finance income and expenses
Under Japanese GAAP, gains and losses on sales and impairment losses on equity instruments wererecognized in profit or loss. Under IFRS, the change in fair value is recognized in other comprehensive income
and is transferred to “Retained earnings” when it is derecognized or the fair value significantly deteriorates forequity instruments designated as measured at fair value through other comprehensive income.
(5) Adjustment for remeasurements of defined benefit plans
Under Japanese GAAP, actuarial gains or losses are recognized in other comprehensive income when incurred,
and the amount prorated by the straight-line method over a certain number of years within the averageremaining years of service of employees is recognized in profit or loss from the following fiscal year. Under IFRS,
remeasurements of defined benefit plans are recognized as other comprehensive income when incurred andare immediately reclassified to retained earnings. Under Japanese GAAP, past service costs are recognized inother comprehensive income when incurred, and the amount prorated by the straight-line method over a certain
number of years within the average remaining service period of employees is recognized in profit or loss fromthe year in which they occur. Under IFRS, past service cost is recognized in profit or loss as incurred.
(6) Adjustment for exchange differences arising from translating foreign operations
Along with adjustment due to transition from Japanese GAAP to IFRS, exchange differences arising fromtranslating foreign operations have changed.
6．Adjustment for retained earnings, net of tax
Transition date
(April 1, 2018)(4) Transfer of cumulative foreign currencytranslation adjustments related to foreign
operations(5) Revenue recognition(6) Adjustment of tangible fixed assets and intangible
assets(8) Unused paid leave and other long-term employee
benefits(10) Deferred tax assets and deferred tax liabilities(11) Retirement benefits
Others
Total(Unit: Millions of yen)
FYE 2019(as of March 31, 2019)(36,193)(36,193)(10,951)(10,622)

92,10187,734(7,416)(7,481)

11,207(9,645)(5,003)
34,10010,757(8,816)(4,917)30,462

7．Adjustment to Cash flows
Under Japanese GAAP, Research and development expenses are presented as “Net cash provided by (usedin) operating activities” while under IFRS, capitalized expenses related to R&D are presented as “Net cash
provided (used in) investing activities”.
Under Japanese GAAP, expenditures on right-of-use assets are presented as “Net cash provided (used in)operating activities”, while under IFRS, lease liabilities are recognized and the repayments are presented as “Net
cash provided (used in) financing activities”.

8640. Others
Quarterly information for the current consolidated fiscal year,
Cumulative period

Unit

1st quarter2nd quarter3rd quarter

FYE 2020

Revenue(million yen)

833,423

1,605,673

2,484,564

3,344,109

Profit before tax(million yen)

89,34993,104

153,225

207,656(million yen)

66,456

68,285

111,699

152,587

(yen)

86.67

89.05

145.67198.99Unit

1st quarter2nd quarter3rd quarter

4th quarter

(yen)

86.67

2.39

56.62

53.32

Profit for the period
attributable to owners ofparentProfit for the period pershare, basic
Accounting period
Profit per share, basic

87