F UJ I HE AVY INDUS T R IE S LT D.
FUJ I HE AVY INDUS TR IE S LTD. Annual R eport 2001

ANNUAL R E P OR T 2 0 0 1

F o r th e y e a r e n d e d M a r c h 3 1 , 2 0 0 1

BRAND
Subaru : Adopted in March 1958, Subaru refers to a group of stars also known by its original Japanesename mutsura-boshi, or series of six stars. This group of stars—known in Western countries as the
Pleiades—belongs to the Taurus constellation and is the basis of the Subaru trademark. Subaru automobiles were the first to bear a name derived from the Japanese language.

CORPORATE PROFILE
Established 48 years ago, Fuji Heavy Industries Ltd. (FHI) is one of Japan’s leading industrial manufacturers, best known for distributing automobiles under the Subaru brand. The Company has along history of technological expertise dating back to its days as an aircraft manufacturer. FHI isrecognized internationally for its all-wheel drive (AWD) and horizontally-opposed engine technologies as well as its sophisticated, small-size continuously variable transmission (CVT).
FHI’s corporate philosophy is to achieve a perfect balance between society and its own individuality as a manufacturer. Throughout the fields of automotive engineering, aerospace, industrial
products, ecology and transport systems, and bus manufacturing and prefabricated housing, theCompany strives to promote full-scale global environmental preservation through the development
of distinctive products under stringent safety standards. FHI will continue with these endeavors in
the pursuit of its commitment to supply products that please the customer. In addition, theCompany focuses on contributing to the prosperity of society.
Disclaimer Regarding Forward-Looking Statements
Statements herein concerning plans and strategies, expectations or projections about the future, FHI’s efforts with regard tovarious management issues, and other statements, except for historical facts, are forward-looking statements. These forwardlooking statements are subject to uncertainties that could cause actual results to differ materially from those anticipated. These
uncertainties include, but are not limited to, general economic conditions, demand for and prices of FHI’s products, FHI’s ability to continue to develop and market advanced products, and currency exchange rates.
FHI disclaims any obligation to update any forward-looking statements, whether as a result of new information, future
events, or otherwise.

CONTENTS
Innovation to Creation 1
Consolidated Financial Highlights 2
To the Stakeholders of Fuji Heavy Industries 3
New TQF21 01 Rolling Plan 7
Special Section 10
Operational Review 12
Corporate Responsibilities 17
Management 18
Financial Section 19
Consolidated Subsidiaries and Affiliates 51
Investor Information 52

COVER:

Innovation to Creation“Our objective is to be a 21st century global
player with premium brands.”

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

1

Consolidated Financial Highlights
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2001, 2000 and 1999

Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars(Note)

2001

2000

1999

2001

For the Year:Net sales
Operating income
Net income¥1,311,887
81,673
22,628¥1,330,125
91,401
31,348¥1,352,520
89,93233,706$10,579,734
658,653
182,484

At Year-End:
Shareholders’ equity
Total assets¥ 357,455
1,168,501¥ 206,404
1,038,558¥ 200,220
981,256$ 2,882,702
9,423,395

Per Share (in yen and U.S. dollars):
Net income
Return on equity (ROE)¥

30.44 ¥
8.0%

51.90 ¥
15.4%

56.18
18.3%

$

0.25

68

’98

’99

’00

Net Sales (Billions of yen)

’01

’97

’98

’99

’00

’01

Net Income (Billions of yen)

905

’97

’98

’99

’00

’01

Net Income per Share (Yen)

20.4 19.9

’99

’00

759

30

23
’97

18.7

1,039

52

19.7

981

56
51

31

31

34

30.6

1,169

40

1,312

1,330

1,353

1,304

1,223

Note: U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥124.00 to US$1.00, the approximate rate of exchange at March 31, 2001.

’97

’98

’01

Composition of Total
Capital Employed(Billions of yen, %)Shareholders’ Equity
Interest-Bearing Debt
Other Liabilities (Other Sources)
Total Capital Employed
Equity Ratio

2 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

To the Stakeholders of Fuji Heavy Industries

We would like to preface this report by announcing

OVERVIEW OF OPERATIONAL RESULTS

changes to the upper management of Fuji Heavy

Against this backdrop, Subaru’s consolidated unit sales

Industries Ltd. (FHI) that took effect on June 27, 2001.

in the United States rose a strong 9.7% compared with

Former President and CEO Takeshi Tanaka has been

a 2.7% increase in total automobile demand. However,promoted to Chairman and CEO, and former Senior Vice

performance in European markets declined, largely as a

President Kyoji Takenaka has been promoted toresult of the depreciation of the euro, and the Company

President and COO. This selection reflects thewas not able to fully compensate for weakness in its

Company’s decision to appoint a young and aggressive

non-automobile operations. Consequently, consolidated

leader as president to help the Company prevail over

net sales for fiscal 2001 amounted to ¥1,311.9 billion

global competition and prosper in the radically changing(US$10,580 million), a 1.4% decline compared with theautomotive industry. The new management team will

previous fiscal year.

promote FHI’s vision of being “an appealing company

Operating income declined 10.6% from the previous

with strong market presence,” enhance customer trust

fiscal year, to ¥81.7 billion (US$659 million). This was

through unique Subaru and FHI products, and strengthen

due to the substantial influence of such factors as thethe Company’s operational foundations so it may fulfill

decline in sales in European markets and unfavorable

the expectations of its shareholders, customers, and all

foreign exchange rate movements, which canceled out

other stakeholders.

the beneficial effects of increased automobile unit sales

Business conditions surrounding FHI during fiscal
2001, ended March 31, 2001, remained severe. Although

in the United States and cost-cutting measures implemented by the Company.

the U.S. economy remained strong during the first half ofLargely as a result of a full amortization of net pension

the year, it entered a stage of deceleration during theand severance obligation at transition of ¥44.5 billion

second half of the year. Conditions were stable in the(US$359 million) and such other factors as taxes,

major EU economies, and further indications of recovery

net income for the term amounted to ¥22.6 billion

were observed in Asia. However, the Japanese economy(US$182 million).

continued to stagnate amid weak consumer spending
and subdued private-sector capital investment.

NEW TQF21 01 ROLLING PLAN

Moreover, despite a weaker yen during the first half

The Company has drawn up its New TQF21 (Totalof the year, the Japanese currency gained strength

Quality Fuji 21) 01 Rolling Plan for the five-year period

against the U.S. dollar and the euro in the second half offrom April 1, 2001, to March 31, 2006, based on a

the year, resulting in a less than favorable environment

reconsideration of its TQF21 Plan, the strategic five-year

for exports.

medium-term business plan announced in 2000. In consideration of such factors as continued weakness in

FUJI HEAVY INDUSTRIES LTD. Annual Report 20013

overall domestic demand, uncertainty in European

with a focus on working in harmony with society and themarkets due to exchange rate volatility, the achievement

environment, while establishing a solid position within theof fiscal 2001 goals in the U.S. market (where sales have

GM Group by providing unique and original products.

been consistently strong), and the realization of synergistic benefits from our alliance with General Motors

CONTINUING POTENTIAL FOR

Corporation (GM), the New TQF21 01 Rolling Plan sets

BRAND-DRIVEN GROWTH

the strategies and numerical goals to be met by the year

FHI consistently strives to establish distinctive brands.

ending March 31, 2006. Thus, we have extended theBased on products that have unique characteristics, FHI

original plan, which was intended for conclusion in thecontinues to be a pioneer by creating brands that bear

year ending March 31, 2005, by one year.

the stamp of individuality. We are able to maintain

Specifically, under the New TQF21 Challenge 30 ini-

growth by expanding the scope of this brand-driven

tiative, which targets a 30% increase in consolidated net

approach, an integral part of which are our technology

sales and a 30% improvement in productivity, theand product strategies. We have won customer support

Company will focus its resources on achieving ¥1,770

by applying our core technologies, especially the all-billion in consolidated net sales by the year ending

wheel drive (AWD) and the horizontally-opposed engine,

March 31, 2006. This represents a 35% improvement

to develop and introduce a series of individualistic auto-from fiscal 2001 results. Other targets include ¥134 bil-

mobiles that other car manufacturers cannot duplicate.

lion in operating income (a 64% increase), ¥128 billion in

Moreover, we adopted a philosophy of “Active Driving,recurring profit (a 79% increase), ¥71 billion in net

Active Safety” at an early date, combining aggressive

income (a 214% increase), and sales totaling 800,000

safety measures with high standards of drivability, anunits (a 38% increase). The plan also sets a total of 640

approach that also contributed significantly to gaining

quantifiable goals encompassing all departments as wellcustomer support and increasing customer satisfaction.

as action plans to achieve those goals.

Looking ahead, we will actively take up new challenges

The positive impact of FHI’s alliance with GM will be
an important factor in realizing the objectives of this plan,in technologies and products to develop automobiles
that meet newly emerging customer values.

and initiatives are under way in a wide range of areas. As

Another crucial element of our brand-driven approach

implementation proceeds, maximum emphasis is being

is our communications strategy. We believe a broadplaced on truly “win/win” items, ensuring management

range of factors contribute to building strong brands,

independence and the individuality of our brands.

including glimpses of Subaru cars driving through the

The plan encompasses FHI’s management vision ofstreets, vehicle design, our advertising and publicity, andbeing a “21st century global player with premium

participation in motor shows and motor sports activities.

brands” as well as the enhancement of corporate value,

As an automobile manufacturer aiming to be a global

4 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Takeshi Tanaka

Kyoji Takenaka

Chairman and CEO

President and COO

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

5

player, we believe we must create and project a strong

sales, and enable information sharing through the con-brand image throughout the world. Global branding is asolidation of internal data. Regarding environmental

next-stage challenge for international corporations, andresponsibility, we will further strengthen our efforts to

we are implementing strategic initiatives to reach thisreduce environmental impact in all our processes fromobjective. As it works to realize its vision of being a 21st

product development through production, distribution,

century global player with premium brands, FHI is enter-sales, after-sales service, and final disposal. We will also

ing a new and challenging era.

continue to take a comprehensive approach to safetyenhancement by further advancing the balance between

OUTLOOK

basic vehicle operation and safety through our horizontally-

The FHI Group will work to reap the synergistic benefits

opposed engine, AWD, and symmetrical layout tech-of its alliances with GM and Suzuki Motor Corporation

nologies, while simultaneously developing technologies

at the earliest possible stage and strive for greater

to ensure greater protection for pedestrians.

growth and development. Specifically, in the Automobile

Furthermore, to strengthen our operational founda-

Division, to further strengthen the Subaru brand andtions, we will reorganize the FHI Group, including affili-

cement our position within the GM Group, we will imple-

ates, consolidate underperforming segments, unify

ment a brand identity strategy at all our sales branchesintermediary operations, and strive to reduce costs.

throughout Japan and strive to maintain our image as a

We would like to thank all FHI stakeholders for theirpremium brand manufacturer. Also, regarding joint vehi-

encouragement up to now and look forward to theircle development with GM, we are working to promote

continued support in the future.

the AWD technology and perfect a jointly developed
automobile at the earliest possible opportunity. In thedomestic market, we will put into place an advanced
information technology (IT) infrastructure and establish acomprehensive nationwide customer service framework.
At the same time, in overseas markets, we will strive toexpand sales in North America, enhance Subaru’s pres-Takeshi Tanaka
Chairman and CEO

ence in Europe, and secure revenues despite the yen’s
appreciation.
Also, particularly in the Automobile Division, theCompany will make concerted efforts to stay abreast ofdevelopments in IT. We will establish a customer management system, implement a highly efficient, fully functional
system for the combined management of production and

6 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Kyoji Takenaka
President and COO

NEW TQF21 01
ROLLING PLAN
“To grow into a distinctive and attractive
corporation in the 21st century”

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

7

New TQF21 01 Rolling Planlightweight, highly fuel-efficient vehicles for European mar-

AUTOMOBILES

kets utilizing FHI’s CVT technology.
We will further develop Subaru DNA, with the elements ofhorizontally-opposed engine and AWD technologies at its

2. Engineeringcore, and establish a sound position as part of the GM

AWD-CoE (All-Wheel Drive-Center of Expertise) ■Group. At the same time, we will address strategic prepara-

FHI has already placed engineers at GM both in Europe andtions for the next generation of Subaru products throughthe United States and started collaborative engineering

cooperative research with GM on state-of-the-art technolo-

projects to develop AWD systems for GM’s next-generation

gies and establish a production capacity of 800,000 units invehicles. In Japan, FHI has opened an AWD-CoE Center at

our global manufacturing network.

its Tokyo R&D facility with 20 engineering staff to support

Progress of Alliances with GM and Suzuki: Items

the AWD programs at GM.

included in this plan are shown below. The status of items

CVT-CoE (Continuously Variable Transmission-varies from those in the planning stage to those alreadyCenter of Expertise) ■ FHI has been providing manufac-

under way.

turing support to Fiat-GM Powertrain in Hungary andstudying the possible Groupwide expansion of its CVT busi-

1. Products
Multipassenger Wagon for the Japanese Market ■In cooperation with GM, Subaru launched a new vehicle into
Japan’s rapidly growing multipassenger vehicle market inAugust 2001. The new vehicle was developed by a GM
subsidiary and will be assembled at GM’s Thailand plant forsale under the Subaru brand in Japan, with features uniqueto Subaru.
Joint Development Program in Taiwan ■ We are
studying a joint development program for the Taiwanesemarket based on the Impreza assembled at Ta Ching
Motors Co., Ltd., in Taiwan. The new product could be dis-nesses, including CVT local production by FHI.
Joint R&D for Environmental Issues ■ GM and FHI
have agreed to jointly work on medium-to-long-term
advanced-technology projects in exhaust-gas reduction andexchange technologies in this rapidly developing field.
Joint R&D for Advanced Technologies ■ FHI and GM
are cooperating in more than 30 technology areas, including
integrated vehicle control, such alternative propulsion methods as fuel cells and hybrid powertrain, lightweight structures,
safety, and manufacturing. This cooperation will result inongoing joint R&D activities, where each partner will utilize
its strengths to avoid the duplication of investment costs.

tributed under both the Subaru and GM brands.
Joint Minicar Program in China ■ We are studying a

3. Manufacturing

possible business collaboration with GM in China, including

Contributing to Quality Improvements in the AsianRegion ■ FHI has been supporting quality improvements

local production of minicars.
New-Concept

Multipassenger

SUV

Joint

at the GM Thailand plant in connection with the introduction

Development Project ■ FHI and GM are jointly develop-of a new multipassenger vehicle into the Japanese market.

ing a new-concept multipassenger SUV for possible launch

Subaru Vehicle CKD Assembly ■ We are studying

in 2005. The product will use a Subaru platform, and differ-

CKD assembly of Subaru vehicles at the GM Thailand plant

entiated versions will be manufactured and distributed

and the sale of vehicles under the Subaru brand in Thailand

under both the Subaru and GM brands. The Subaru version

and neighboring markets. CKD assembly in South America

will first be launched in North America, followed by expan-

is also under consideration.

sion into other international markets.
Introducing OnStar ■ In the U.S. market, Subaru is plan-

4. Salesning to introduce OnStar, a telematics service provided by

Sales Expansion of Subaru Vehicles in the Asian

GM’s OnStar subsidiary, starting with the 2003 Model Year

Region ■ As already announced, FHI is marketing the(03MY) service.

Forester in the Philippines through GM AutoWorld.

New Vehicle Development Initiative for European

As a follow-up to this initiative, FHI is considering theMarkets ■ In cooperation with the other members of theuse of the GM AutoWorld network to expand sales of

GM Group, FHI is considering the development of compact,

Subaru vehicles in Asian markets.

8 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Sales Expansion of Subaru Vehicles in North

Cooperation between FHI’s European Logistics

America ■ FHI is working to improve the Subaru sales

Subsidiary and GM European Logistics ■ To improve

network and accelerate Subaru vehicle sales in the U.S.

its logistics operations in Europe, FHI has established amarket with the collaboration of GM. FHI is strengthening

European-based logistics company together with Mitsui &sales to corporate customers through participation in theCo., Ltd., and a local distributor. FHI is planning to cooper-

GM commercial fleet sales programs.

ate with GM Group logistics divisions to improve logistics

Improving Financial Services Using GMAC ■operations in the European region.

In Taiwan, local Subaru dealerships have started to provide
sales financing through General Motors Acceptance
Corporation (GMAC). In Europe, Subaru Italy began using
GMAC in July 2001. FHI is considering the further utilizationof GMAC to improve financial services in other areas of
FHI’s business.

7. IT
Network Connection ■ FHI has connected its IT network
to that of GM through a dedicated line for digital dataexchange, thereby improving its communications infrastructure.
Promoting Systems Compatibility ■ In accordancewith the progress of each joint development project, sys-

5. Purchasingtems compatibility is being improved in various areas,

Cost Reductions through the WWP (GM Worldwide

including engineering, service technology, design, purchas-

Purchasing Process) ■ Since 2000, FHI’s Purchasing

ing, and manufacturing.

Division has assigned dedicated staff to work with GM

e-Business in Japan ■ FHI will work to develop e-businessGroup purchasing operations, undertaking joint price nego-synergies and leverage Internet-based technologies throughtiations with business partners. Actual costs have already“Buy Power Japan,” an on-line automobile buying service with

been reduced in 10 categories of purchased parts and

GM, Suzuki Motor Corporation, and Isuzu Motors Limited.

materials. It is expected that 10% of total annual purchases
during the current year will be through the WWP, and thefinal goal is to raise this proportion to 30%.
Parts Commonization with Suzuki Motor Corporation■ FHI and Suzuki are studying parts commonization following a study of the development schedules of each company.

8. Others
Motor Sports/Auto Shows ■ FHI is closely communicating with GM motor sports related groups with the goal of
improving racing competitiveness and developing otherbrand benefits. FHI is also working with GM’s global autoshow team to develop closer cooperation and greater brand

6. Logistics

impact at major auto shows worldwide.

Subaru Ota Parts Center to Provide Service Parts

Utilizing the GM Settlement Function ■ FHI is con-Support to GM Japan ■ Subaru Ota Parts Center is tosidering utilizing GM’s global settlement function to improve

provide handling services in Japan for GM service parts on

the hedging of foreign currency exchange risk, raise efficiency

behalf of GM AutoWorld from August 2001. FHI can utilize

within the FHI Group, and simplify international transactions.

available warehouse space, which was opened up by FHI’s
ongoing efforts to reduce inventory and transportation
costs. GM will therefore be able to avoid significant facility
investment.
FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

9

Special Section

Aiming to Share the Excitement—
Developing Cars with the Customer in Mind
Experienced in all aspects of new car development,
especially body design. Based on his experience at
Subaru, Takashi Tachimori aims to design cars “fromthe driver’s perspective.” Today, as the person in overall charge of the Total Vehicle Performance Integration
Department, he spends each day working to create “newdimensions in driving experience” in Subaru vehicles.
Takashi Tachimori has been involved in the development of Subaru automobiles for more than 20 years. His
approach is to create cars that show close attention todetail, reflect the mind of the engineer, but that are also
without the slightest extravagance. This is because heregards himself as a member of the “automobile community,” which consists of a broad range of interested

Takashi Tachimori
General Manager,
Total Vehicle Performance Integration Department,
Subaru Engineering Divisionparties, including customers, FHI engineers, designers,
and other colleagues. The most important influenceon his automobile development philosophy was his

The Engineers Who Create Subaru’s
Driving Performance
Smoothness is the key to comfort and requires knowledge, curiosity, and sense to be obtained: The engineer
who put together the horizontally-opposed engine forthe new Outback

Repeating Driving Tests
Noriaki Sekine, who developed the 3-liter horizontallyopposed 6-cylinder engine, determined the fundamental concept for the engine.
The primary objective was to build an engine thatwas compact, had a low center of gravity, and was assilent as possible during operation. Other objectives
included lightness, evenly distributed torque with each

Noriaki Sekine
Manager,
Power Unit Research & Experiment Department,
Subaru Engineering Division

revolution, smooth acceleration, and such specificquantitative targets as satisfactory fuel economy.
In developing technologies for the prevention of

the new engine, and tests were conducted with peopleof all generations riding as passengers.

vibration and noise—Mr. Sekine’s specialty—he used

The engine and chassis development departments

the impressions of ordinary users as an important stan-

are separate, but the objectives of the engineers are thedard of judgment.

same. Engineers working with automobile manufactur-

An important yardstick in this area is not only theers are members of the “automobile community,” andfeelings of the driver but also the impressions of passen-

their philosophy is to create products that are as close

gers. This judgment standard was applied in developing

10 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

experience in FHI’s service division in the United

performance, including the feeling of power, ease ofStates. Prior to this, when he was involved in designing

handling, and quietness, he looks for strong evidencecar bodies and other products for the U.S. market, hethat Subaru automobiles are creating new dimensions

was unable to escape from his engineer mind-set. But

in the driving experience that broaden human sensibili-

when he saw how Subaru automobiles were actuallyties and the drivers’ view of the world. After all theseused in the United States, he became convinced for thetests, when new models are placed on the market, Mr.

first time that “our products are finally completed when

Tachimori’s other important mission is to deliver thethey are driven by customers.” For example, the Outback,new driving concept to the market, which he does bybuilt for the U.S. market, was the first AWD station wagon

talking with dealers and automotive journalists. Being inwith off-road capabilities. It was a precursor of today’s

this key position within the automobile community is apassenger car based SUVs and is a good example ofsource of pride and joy for him.

what he calls “a car brought up by the market.”

The motto of Mr. Tachimori and the car development

Today, Mr. Tachimori is in overall charge of vehicle

staff who work with him is “How much of the excite-

performance integration and testing. In contrast to thement can we share with our customers?” In other

Planning Department, which is responsible for develop-

words, the most important factor is not statistical data

ing new product concepts based on ideas about auto-

but how well and how deeply FHI can respond to themobiles, the job of the Total Vehicle Performance

expectations of its customers. Mr. Tachimori goes

Integration Department is to arrive at a final “perfor-

about his development work every day with the thoughtmance concept.” Mr. Tachimori is the first person tothat “Without some fervent supporters cheering us on,

drive each new Subaru car. By concentrating on overall

we would never be able to gain a broad base of fans.”

to perfect as they can be with the aim of enhancing theto turn the idea into a reality. At many other manufac-

driving experience.

turers, the engineer who thinks of an idea and theAfter all this was done, the 3-liter horizontally-

engineers who research, test, and analyze it work sepa-

opposed 6-cylinder engine was complete. All the per-rately from each other. At Subaru, an engineer can see

formance figures that had been set as development

his own idea through to the end. Incorporating thetargets were realized. Making the engine sufficiently

ideas and results of numerous engineers into a single

compact proved difficult, but this was also achieved.

car really boosts the energy of the entire development

Compared with existing 4-cylinder engines, the new 6-

project. Of course, engineers can be in charge of many

cylinder engine is approximately the same height andprojects at the same time and, naturally, they are busy.

only about two centimeters (0.9 inches) longer. For the

But they know how glad they will feel to see their ideas

cylinder block, designers had to make repeated design

through to fruition, so they work diligently in develop-changes. The result was bold technical innovations,ment. This is Subaru’s development style.”such as using a chain drive instead of a belt drive forthe valve timing and a single belt to drive auxiliary systems, such as the generator, the power steering pump,and the A/C compressor.

Keeping a Broad Perspective
Mr. Sekine says that this illustrates how Subaru engineers work in a totally different way to their counterparts at other manufacturers.
“Each engineer presents his own ideas, researches
them carefully, and pursues them with passion. If theidea is good, then the engineer who thought of it canSubaru engineers, whose passion and devotion led to the developmentof the 3-liter horizontally-opposed 6-cylinder engine

put together the teams for design, research, and testing

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

11

SPECIAL MENTION

In fiscal 2001, total automobile sales

New Impreza Wins the Japan Car

amounted to 560,000 units, 0.2%of the Year Special Award

below the previous fiscal year.

Recognition of Subaru’s

In the domestic market, sales of themainstay Legacy series fell below the

Attention to Safety
The new Impreza won the 2000–2001very strong level of fiscal 2000—

Japan Car of the Year Special Award,

achieved with the launch of the Legacy

one of two prestigious awards given by

B4 sports sedan. But sales of thethe respected Japan Car of the Year

Forester were firm as a result of modelCommittee. The Impreza has also been

upgrades in January 2000. Unit sales ofrecognized as one of the year’s “10the Impreza climbed 15% following a

Best Cars.”

highly anticipated full model change in

The Japan Car of the Year Special

August 2000. Total unit sales of theAward is determined by the votes of aabove two models rose 1.3% com-selection committee of 54 people,

pared with the previous term, toincluding automotive experts, critics,

123,000 units. In minicars, despite firm

and journalists. Eligible vehicles were all

sales of the Sambar series throughout

passenger cars produced and launched

the term, a decline in sales of the Pleoin Japan between November 1, 1999,

in the first half of the year resulted in a

and October 31, 2000.

decline in overall sales, which fell to

The Japan Car of the Year Special

168,000 units. This was in spite of theAward recognizes such characteristics

introduction of the Nicot in the second

as outstanding product concept andhalf of the year. Consequently, totalmechanical features.

domestic sales by the Automobile
Division fell 1.1%, to 290,000 units.

In choosing the Impreza for thecommented, “It’s a sports sedan with

between markets with robust sales andthe greatest attention to driving plea-

those with difficulties became promi-

sure we’ve seen in recent years, andnent. Total sales reached 187,000 units

we were impressed by the safety

in North America and 28,000 units inoffered by its highly rigid body.”■ Share of Net Sales

’00

’01

■ Sales(Billions of yen)

and constructed the Impreza range,
and it shows.”
This prestigious award was announced in a spectacular ceremony atColonial Stadium, Melbourne, giving
Subaru three Car of the Year titles in
the last seven years. The new Impreza
was launched in mid-October 2000 in
Australia and is already greatly sought
after at Subaru dealerships.
Wheels was especially impressedwith the Impreza’s level of innovation,“Refine, reinvent, redefine. The Imprezahas done all three. Its incredible competence and consistency through thesuccessful application of worthwhile
technologies made it an irresistible (andin the end, overwhelming) choice as our2000 Car of the Year. There have beenstronger fields for Car of the Year, butrarely has there been a tougher contender than the Impreza.”
Alliance with GM
In April 2001, a ceremony was held in
Manila, the Philippines, to commemorate the commencement of Forester
sales by GM’s Philippines AutoWorld
sales network. During the ceremony,

Australia. Conditions varied in other
Impreza Named Car of the Yearthe euro inevitably resulted in increases

by Major Motor Magazine

in local selling prices in Europe, and the

The Impreza was named 2000 Car ofCompany faced severe competition in

the Year by an Australian leading motor

several other markets. As a result, over-magazine, Wheels. The magazineseas shipments in fiscal 2001 amounted

strongly praised the Impreza, saying,

to 270,000 units, down 2.1%, or 6,000“Subaru’s sweetly symmetrical Impreza

units, from the previous fiscal year.

doesn’t make the mistakes of inferior

Sales by the Automobile Divisioncars, and that’s why it is the 2000

edged down 0.8%, to ¥1,170.3 billion

Wheels Car of the Year. The Impreza is(US$9,438 million), while operating

a great all-rounder, developed with all

income fell 10.9%, to ¥82.2 billion

the devotion you expect of people who(US$663 million).

build cars, not products. A bunch of passionate Japanese designed, engineered,

12 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

’99

88.97%

Special Award, the selection committee

In overseas markets, the contrast

overseas markets. The depreciation of

1,170

BUSINESS RESULTS

1,180

Automobile
Division

1,198

Operational Review

the Forester was unveiled to the public,
and sales targets and prices were officially announced. Sales of the Forester
and Impreza WRX commenced in July
2001 in Indonesia. These accomplishments are part of our strategy to maximize the benefits of our alliance with
GM, which is progressing steadily, particularly in the United States and Asia.
Eco-World 2001
(Low Emission Vehicle Fair)
Eco-World, held in June each year, is thelargest low emission vehicle fair in Japan.

Impreza WRX NB

At the 2001 event, FHI displayed theSubaruRelationship

In Europe, along with the commence-

Sambar EV, the Pleo Nesta Hybrid, theUpgrade Management (SCRUM), a

ment in September 2001 of operations

Sambar CNG Bi-fuel, and the Legacy

project aimed at further empoweringof Subaru Vehicle Distribution B.V., a

Lancaster 6. The Pleo Nesta, which

the Subaru team in its basic branchregional logistics company, FHI will

was displayed for the first time at theoperations. We will implement thework to improve the efficiency of its

fair, attracted a great deal of attention

Subaru Standard for quality and highactivities throughout the region and isfrom visiting technicians for its highlevels of service on a nationwide basis,

joining forces with local dealers to pro-degree of technological development.

through which we will enhance our cus-

mote a recovery in performance.

tomer management operations.

Moreover, at the Frankfurt Auto Show

Customers

OUTLOOKThe Company will strive to further

in September 2001, FHI will announce

FHI has positioned fiscal 2002 as the

expand sales by the planned introduc-

the addition of the high-performancestart of its latest five-year plan. Undertion of PARTNER 21, a nationwide

Impreza STi version to its lineup. Also

this plan, we have streamlined our sales

computer network, unifying branchoverseas, FHI is cooperating withand marketing organization by merging

signboards under a uniform brand iden-

Subaru distributors in various countries

the Domestic Sales Division and thetity, and meeting market needs withto implement measures appropriate toOverseas Sales Division into a single

appealing products that are available

each region to increase customer satis-

global sales and marketing team.

only from Subaru.

faction. For example, in the United

Domestically, FHI upgraded theOverseas, in the United States, inStates, based on its Owner Loyalty

Legacy, its principal product, in May

March 2001, FHI made the first full

Program, Subaru of America, Inc.

2001. Improvements to the Legacy

model change of its Impreza in eight(SOA), conducted its own customer

included upgrades in the suspension

years, introducing the turbocharged

satisfaction survey, analyzed weak-system and engine aimed at enhancing

WRX model. Pre-launch activities includ-

nesses, and is now implementing spe-

driving performance and, at the sameed active promotion over the Internet,

cific measures for improvement.

time, reducing the car’s environmental

which was successful in encouraging

Furthermore, we will introduce high-impact. Also, in August 2001, FHI start-customers to place advance orders

quality products, enhance develop-

ed sales of the Traviq, a multipassenger

and generating interest in the market.

ment, production, sales, and after-sales

wagon manufactured by GM and sup-Also, in the United States and Canada,

service operations both domesticallyplied to FHI on an OEM basis. Thus,

Subaru’s rally team continued to be

and overseas, strive to further raise the

FHI has entered the multipassenger

active, and rally fans who learned of the

profile of the Subaru brand, and work

wagon market, where demand is

success of the WRC in Europe became

to achieve annual sales of 800,000 units.

expanding, and strengthened its sales

interested in the introduction of theposition in the domestic market. This is

Impreza WRX model in North America.

the first concrete result of the synergies

The new Impreza was very well received

realized in Japan between FHI and GM.

amid these strong market expectations,

In addition, FHI is continuing to work toand events conducted by Impreza fanenhance customer satisfaction throughclubs also had a positive impact.
FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

13

BUSINESS RESULTS
In the Japanese market, although salesof small pump engines were strong during the first half of the year, the faltering
economy resulted in suppressed salesof small engines for construction
machinery. Overseas, sales of engines
and power generators declined substantially in the United States as concern over the Y2K problem abated.
Although the Company made strenuous
efforts to maintain sales of theseengines in Europe and Asia as well as ofleisure vehicle engines in the UnitedStates, business conditions weresevere. Consequently, sales by theIndustrial Products Division declined
14.7% from the previous fiscal year, to¥44.4 billion (US$358 million), and operating income fell 38.9%, to ¥0.8 billion(US$6 million).

SPECIAL MENTION
Global Development
In March 2001, FHI concluded a marketing cooperation agreement with
Farymann Diesel GmbH of Germany.

Strategic Development
Sales Expansion: As it further

44

52

3.37%
’99

■ Share of Net Sales

’00

’01

■ Sales(Billions of yen)strengthens its mechanisms for ascertaining market and industry trends andQuality and Costs: FHI continues to

OEM needs, promotes greater sales

implement measures for achieving qual-

activities at dealerships, enhances tech-

ity and competitiveness, including thenical support, and strengthens service

thorough implementation of assessment

networks, FHI is steadily gaining newtechnologies, cost reductions throughcustomers. Beginning in fiscal 2002, weSimultaneous Cost Innovation (SCI) andwill enhance our sales operations by

Minimum Cost Innovation (MCI) activi-

focusing on the Robin Challenge Big 3

ties, the thorough implementation of(RCB3) Project and strive to further

manufacturing QCD (Quality, Cost,

expand sales through dynamic sales

Delivery) in total productive mainte-

development efforts.

nance (TPM) activities, and quality
improvement on parts per million (ppm)

Product Development Tailored tolevels. Starting in fiscal 2002, we will

Market Needs: Fiscal 2002 will be acomprehensively implement these

crucial year in the development of theefforts by consolidating these initiatives

new EX series of overhead cam (OHC)

in manufacturing segments under thegasoline engines. FHI will strive to

RCx3-30 Project*.

achieve its product, quality, and cost
objectives and put into mass production* RCx3-30 Project: Robin Challenge, Robin
Change, Robin Cost Reduction

products that will delight its customers.
We will also work to achieve prompt

OUTLOOK

market penetration for the upgraded

Although severe conditions are expect-

EY15 and EY20 SV (side valve) series

ed to persist due to weakness in theearly in the first half of fiscal 2002.

Japanese economy and uncertainty in
the U.S. economy, FHI will work to

We plan to reap the synergistic benefits

ensure growth for its engine productsof this partnership by supplementing

as a truly global player with the premi-

our own series of diesel engines—

um Robin brand. We will strive to pro-approximately 20,000 units of which arevide even more distinct products by

manufactured annually—with engines

upgrading existing and introducing newfrom Farymann. Through the agree-

engine models.

ment, we will expand sales by leverag-Furthermore, we will complete ouring both companies’ worldwide

global Robin plan with the launch of

networks and mechanisms for support-

joint venture operations in China anding machinery manufacturers. Furthermore, in May 2001 FHI commenced the44

Industrial
Products Division

EY20

strive to become the world’s number

mass production of gasoline engines inthree manufacturer of small general-

China and predicts sales of 5,000 units

purpose industrial engines.

in fiscal 2002.

14 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Sales to the Japan Defense Agency(JDA) fell below the level achieved in theprevious term, due to the decline insales of the Fire-Bee unmanned target

enhancement of the country’s defense

increase in sales of the UH-1J utility
helicopter and the F-2 support jet fighter.

Sales of commercial sector exceeded those in the previous term, due tothe increase in sales on the space programs, although this was partially offset
by the decline in sales for Boeing programs, reflecting the worldwide weak
demand in the commercial jet transport market.
As a result, sales by the Aerospace
Division were ¥65.5 billion (US$528 million), approximately the same level asin the previous term, while operating
income grew 21.3%, to ¥2.5 billion(US$20 million).
SPECIAL MENTION
Defense Sector: In October 2000,
FHI’s T-3 Kai (a derivative of the T-3)
was selected as the primary trainer by

’00

’01

4.99%
’99

■ Share of Net Sales■ Sales(Billions of yen)capabilities by utilizing its engineeringand technical capabilities in the
UAV field.

drone and the T-4 intermediate jet
trainer. This was partially offset by an

66

FHI strives to contribute to the66

BUSINESS RESULTS

78

Aerospace
Division

Commercial Sector: In May 2000,
FHI entered into a contract with Bell
Helicopter Textron, Inc., of the UnitedStates, for the manufacture of the fuselage of the BA609 tilt-rotor aircraft,which is capable of vertical takeoff andlanding as well as high-speed cruising.
In December 2000, FHI was appointed

OUTLOOK
In line with the New TQF21 01 Rolling
Plan, the Aerospace Division has
decided on a policy of aiming for independence and growth. This policy
includes the following: in the defense
sector, securing a firm position under
the next series of defense enhancement
plan established by the JDA, and, in thecommercial sector, expanding sales in

the primary contractor for the Scaled

scale with Boeing programs as well as

Supersonic Experimental Airplaneother programs also evolving new(the SST jet-powered experimental air-businesses, such as the Subaru Wind

plane) by the National Aerospace

Turbine Generator System, the RPH2,

Laboratory of Japan. In November

and the Commercial Simulator System.

2000, FHI celebrated the unveiling of

The Aerospace Division is striving to

the Subaru Wind Turbine Generator

accomplish these goals under the

System (prototype) and plans to start

New TQF21 01 Rolling Plan.

marketing this system in fiscal 2002.

In these efforts, the Aerospace

FHI continues to aggressively devel-

Division is working to strengthen its

op new businesses, such as theoperational foundations and raise

Subaru Wind Turbine Generator

sales to ¥100 billion, set as a medium-

System, the Commercial Simulator

term objective. This will be accom-

System, and the RPH2 large unmannedplished by aggressively acquiring

helicopter.

primary contracts and pursuing interna-

the Japan Air Self Defense Force. In

tional collaboration through the promo-

December 2000, FHI successfullytion of positive business development

accomplished its delivery of the very

and cooperative activities between thelast shipset of the AH-1S anti-tankmarketing and sales department andhelicopter to the Japan Ground Self

the engineering department and by

Defense Force. Also, in the field of

reducing its assets, along with improv-

unmanned aerial vehicles (UAVs), FHI

ing its productivity.

has been actively engaged in the development of a multi-purpose small UAV
and is making every effort to support
such development, including providing
engineering support for government
evaluation and testing.

RPH2

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

15

39

38

’00

’01

34

Others
2.67%
BUSINESS RESULTS
Demand for buses continued to be
weak amid severe market conditions
during fiscal 2001. Although the addition of a new model of tour bus to FHI’s
sales lineup in July 2000 bolsteredsales in the second half of the year,
poor results in the first half of the year
resulted in a decline in sales for the

FHI Achieves Sales of 50,000
Units of the Fujimighty Series of’99■ Share of Net Sales■ Sales(Billions of yen)

Refuse Collection Vehicles: In
November 2000, FHI gave its revolving
compactor refuse collection vehicles acomplete face-lift and started sales of
the redesigned Fujimighty LP0 series.
The new series features substantiallyreduced operating noise through theterm as a whole. Sales of prefabricatedapplication of a new hydraulic system

houses also decreased due to stagna-

as well as improved environment-tion in the construction industry.

friendliness achieved through a higher

Although brisk sales of the Fujimighty

rate of recyclability of the payload section.

series of refuse collection vehicles con-OUTLOOKIn buses, FHI expects continued sales
expansion of its new, completely
redesigned tour buses, which havewon praise from customers and generated strong sales. We are also raising
the efficiency of our bus productionlines and enhancing plant productivity
by transferring the production ofSubaru replacement components fromthe Gunma Manufacturing Division to

tributed to strong sales of environmen-

Development and Marketing oftal products, a delay until fiscal 2002 of

the Convenience Store Recycler

Although there is little chance fora major order for 20 railway passenger(CVSR), a Vehicle for Use in therecovery in the demand for prefabricat-

cars by Japan Rail Hokkaido Company

Separation and Collection of

ed houses in the near future and severe

drove down sales of railway passenger

Organic Waste: The Food Productmarket conditions are expected to per-cars. Consequently, the Others seg-

Recycling Law, which obliges disposers

sist, we will strive to revive sales byment recorded sales for fiscal 2001 ofof organic refuse to recycle such waste,

introducing new products and develop-¥37.5 billion (US$302 million), a decline

came into effect in May 2001. In

ing new markets.

of 3.4%, or ¥1.3 billion, from the previ-

response, FHI has developed a special-

In environmental products, FHI has

ous term, and an operating loss of ¥4.1

ized vehicle that separates food productplaced top priority on profitability andbillion (US$33 million).

cartons and organic waste for recycling.

will strive to substantially increase net

the Isesaki Manufacturing Division.

sales and achieve greater indepen-

SPECIAL MENTIONFHI Develops Method of Eliminat-

dence. In particular, the launch of the

Ceremony to Celebrate Signing of

ing Unnecessary Engine Idling of

CVSR has attracted a great deal of

Bus Body Technology Provision

Diesel Cars: In cooperation with theattention from environmentalists.

Contract with China’s Dong Feng

East Japan Railway Company, FHI has

Finding solutions to global environmen-

Hangzhou Motor: In May 2001, FHI

developed a method to eliminate

tal issues will assume even greater

reached an agreement to provide bus

unnecessary engine idling for diesel

importance as we progress into thebody technologies to Dong Fengcars and has confirmed its effective-

21st century, and FHI will strive to pro-

Hangzhou Motor Co., Ltd., of China.

ness in reducing engine emissions.

vide comprehensive solutions in such

Leveraging FHI’s technologies, Dong

areas as recycling.

Feng Hangzhou Motor will develop new
buses for the Chinese market based on
the design of tour buses used in Japan.

Fujimighty LP400

16 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Corporate Responsibilities■ Environment● Production

At FHI, we believe that it is important to work to reduce the

The level of various kinds of waste generated by FHI’s produc-

environmental impact of our activities at all stages—fromtion activities during fiscal 2001 was 85% below the level gen-design to manufacturing, use, and final disposal as well as

erated during fiscal 1991. At the Gumma Manufacturing

recycling—and to publicize these activities widely.

Division, where automobiles are produced, we ceased opera-● Environmental Managementtion of our incinerating facility in December 2000 and

To improve our environmental management activities, weachieved our objective of zero emissions1. In addition, ourhave upgraded our environmental accounting system and,usage of substances subject to PRTR 2 reporting for fiscal

beginning in fiscal 2001, began to calculate the effect of our2001 was 17% lower than for fiscal 2000.

activities on profitability. During the fiscal year under review,Notes: 1. “Zero emissions” implies that waste that must be disposed of in landfill areas has been reduced to the zero level.
2. PRTR stands for Pollutant Release & Transfer Register.

FHI invested ¥1.8 billion to reduce environmental impact by
its production activities and ¥18.4 billion on R&D to improve● Recycling

the environmental performance of its products, contributing

Initiatives to facilitate recycling at the design, production, andto a total of ¥21.7 billion in environment-related expenditures.

final disposal stages include making Subaru automobiles eas-

This represented an increase of ¥2.4 billion from the ¥19.3 bil-ier to disassemble and employing more materials that can belion spent during fiscal 2000. The principal factor accounting

recycled. The new Impreza model, for example, is easier tofor this rise was an additional ¥2.1 billion in R&D expenditures.

take apart at the end of its useful lifetime and incorporates a

The economic effect of these expenditures, which we began

higher percentage of materials that can be recycled.

to calculate during the fiscal year under review, was ¥1.2 bil-

Measures to reduce environmental impact incorporated in thelion, and ¥3.6 billion was invested in equipment to conserve

new Impreza include a reduction in lead usage to less thanthe environment. Please note that these amounts for invest-

one-third of the 1996 industry average and a 23% reduction

ment and the effect on profitability were calculated according

in the use of air conditioner refrigerant.

to its own standards.

● Subaru-Isuzu Automotive, Inc. (SIA)● Products

SIA, the Subaru production base in the United States,

We are taking advantage of each full model change andacquired ISO 14001 certification in November 1998. At thisannual improvements to introduce automobiles into the mar-company, a target for the reduction of electric power con-ket that meet the 2010 Fuel Economy Standards1 and certi-

sumption at plants was set, and a results-oriented manage-fied as Excellent Low Emission Vehicles 2 and Good Low

ment system was put into place. SIA also carefully controls theEmission Vehicles3. In fiscal 2001, more than 45% of Subaru

volume of waste generated and its disposal methods.

automobiles met the 2010 Fuel Economy Standards. In addition, the new Impreza compact model became the first auto-■ Social Contribution Activity

mobile in Japan with a turbocharged engine to receive

SOA supports the nonprofit organization Leave No Trace

certification as a Good Low Emission Vehicle.

(LNT). LNT’s objective is the promotion of responsible out-

Moreover, the Impreza turbo model and all other Subaru auto-

door recreation. SOA provides support for its “Travelingmobiles sold in the U.S. market meet the National Low Emission

Trainers” program for good land stewardship. In 2000, two

Vehicle (NLEV)4 Standards, the latest set of auto emission criteria.

such teams participated in more than 600 events, delivering

Notes: 1. The 2010 Fuel Economy Standards establish objectives for energy
conservation and measures to prevent global warming in gasolinepowered automobiles. These include an average 22.8% improvementin fuel economy compared with the average results for the Japanese
automobile industry in 1995.
2. An Excellent Low Emission Vehicle is defined as an automobile that
achieves a 50% reduction in exhaust emissions compared with 2000
regulations.
3. A Good Low Emission Vehicle must show a 25% reduction in exhaustemissions compared with 2000 regulations.
4. NLEV is a federal government program similar to the LEV Standards in
California, which is in the process of being applied throughout theUnited States. As NLEV Standards are more stringent than the federal
standards currently in effect, participation in the program is voluntary.

to many outdoors enthusiasts the message of environmental
protection based on the spirit of Leave No Trace.
■ Providing Disassembly Information
on ELVs (End-of-Life Vehicles)
As its response to European Union (EU) recycling laws, FHI
provides disassembly information to enable the more efficientdismantling of ELVs. In 1999, 20 EU, U.S., Japanese, andKorean automakers got together and kicked off theInternational Dismantling Information System (IDIS), a joint
effort to provide the necessary information. Subaru is, ofcourse, a participant.

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

17

Management (As of June 27, 2001)

Seated from left: Kyoji Takenaka, Takeshi Tanaka, Teruo Hanada
Standing from left: Hideshige Gomi, Koichi Arasawa, Hiroshi Suzuki, Hideo Wada, Rudolph A. Schlais, Jr.

Executive Officers

Senior Vice Presidents

Vice Presidents

Corporate Auditors

Board of Directors

Masayoshi Nagano

Kisaburo Wani

Takayoshi Yoshihashi

Takeo Tsumuji

Masatoshi Iwasaki(standing)

Takao Tsuchiya

Edward Pasternak

Kunitake Nomura

Hiroyuki Nakatsubo

William Madigan

Hiroshi Takaku

Kunitaka Nakahara

Yoji Ishimaru

Akira Furuya

President and Chief
Operating Officer

Kiyoshi Inoh

Minoru Tamura

Masaru Katsurada

Kazushige Okuhara

Kyoji Takenaka*

Takao Saito

Norihisa Matsuo

Hiroshi Komatsu

Noboru Daikuhara

Shunsuke Takagi

Toshifumi Terao

Yuichi Masuda

Shoichi Washizu

Yutaka Tsukahara

Hiroyuki Oikawa

Chairman and Chief
Executive Officer
Takeshi Tanaka*

Senior Executive Vice
President
Teruo Hanada*
Executive Vice Presidents

Kunio Ishigami

Hiroshi Suzuki

Ichiro Kudo

Koichi Arasawa
Hideo Wada
Hideshige Gomi
Director
Rudolph A. Schlais, Jr.
President & CEO, GM Asia Pacific* Representative Director

18 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Financial Section
Consolidated Five-Year Financial Summary 20
Management’s Discussion and Analysis ofResults of Operations and Financial Position 21
Consolidated Balance Sheets 26
Consolidated Statements of Income 28
Consolidated Statements of Shareholders’ Equity 29
Consolidated Statements of Cash Flows 30
Notes to Consolidated Financial Statements 31
Report of Independent Certified Public Accountants 50

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

19

Consolidated Five-Year Financial Summary
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

For the Year:Net sales
Cost of sales
Gross profit
Selling, general andadministrative expenses
Operating income
Income before income taxes
and minority interest
Net income
At Year-End:
Shareholders’ equity
Total assets
Equity ratio (%)
Per Share (in yen and U.S. dollars):
Net income:
Basic
DilutedShareholders’ equity
Other Information:
Depreciation and amortization
Capital expenditures(additions to fixed assets)
R&D expenses
Number of shares issued at year-end(thousands of shares)
Number of shareholders *Number of employees*:
Parent only
Consolidated

Millionsof yenMillionsof yenMillionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

1998

1997

2001

¥1,311,887
978,841
333,046¥1,330,125
995,131334,994¥1,352,520
1,067,868
284,652¥1,303,989
1,027,782
276,207¥1,223,015
994,032
228,983$10,579,734
7,893,879
2,685,855

251,373
81,673

243,593
91,401

194,720
89,932

195,770
80,437

171,41057,5732,027,202
658,653

21,291
22,62864,83931,34868,42333,70656,60930,70847,622
39,596

171,702
182,484¥ 357,455 ¥ 206,404¥ 200,220 ¥ 168,833 ¥ 149,748
1,168,501
1,038,558
981,256
904,571759,030
30.6%
19.9%
20.4%
18.7%
19.7%

$ 2,882,702
9,423,395

¥

30.44
29.06
480.86

¥

51.90
48.53
338.75

¥

56.18
51.79
332.41

¥

51.33
47.18
282.09

¥

67.63
66.28
251.05

$

0.25
0.23
3.88

¥

64,070¥60,190¥38,708¥32,574¥—$

516,694

102,301
46,622103,922
40,12357,56638,51256,41938,231——

746,502
32,996

614,553
49,381

602,333
55,044

598,507
72,107596,484
80,587

13,60326,502

13,66826,914

13,41919,882

13,435
19,113

13,413
18,475

Note: U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥124.00 to US$1.00, the approximate rate of exchange at March 31, 2001.
* As of March 31

20 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

825,008
375,984

Management’s Discussion and Analysis of Resultsof Operations and Financial Position

OVERVIEW

but, for the year as a whole, the average yen rate against theDuring fiscal 2001, ended March 31, 2001, trends in the world

dollar was stronger.

economy, the automobile industry, foreign currency rates, andmarket conditions were as previously discussed in the “To the

SEGMENT INFORMATION AND CONSOLIDATION

Stakeholders of Fuji Heavy Industries” and “Operational Review”

The FHI Group conducts its business operations in four seg-

sections of this annual report.

ments: Automobiles, Industrial Products, Aerospace, and Others.

Taking into account these developments in the operating

The Group manufactures a wide range of products. The

environment, the FHI Group worked actively to expand its oper-

Automobiles segment accounted for 89.0% of consolidated net

ations, with automobile manufacturing as the core. Based on its

sales in fiscal 2001, while the remaining three segments

strategic five-year medium-term business plan, entitled “Newaccounted for 11.0%.

TQF21” announced in fiscal 2000, which includes strengthening

The FHI Group comprised 126 subsidiaries, 11 affiliated com-

its ties in Japan and overseas with General Motors Corporation

panies, and 2 other related companies at the end of fiscal 2001.

and Suzuki Motor Corporation, the FHI Group worked to attain

Of these companies, 68 were consolidated and 2 were account-its goal of becoming a “21st century global player with premium

ed for by the equity method. The remaining unconsolidated sub-brands.”sidiaries do not have a material impact on the consolidated

For fiscal 2001, consolidated net sales declined 1.4%, tofinancial statements as a whole and have therefore been exclud-¥1,311.9 billion, and operating income fell 10.6%, to ¥81.7 bil-ed from the scope of consolidation. Please note that four com-lion. Net income declined 27.8%, to ¥22.6 billion. Factors

panies consolidated in the previous year were excluded fromaccounting for the decline in net income included a one-time

consolidation for fiscal 2001: two ceased to exist as they

provision to accrue unfunded pension and severance obligations

merged with other consolidated subsidiaries and the remaining

as computed under new rules based on a revised accounting

two were liquidated. No subsidiaries were newly consolidated instandard. Free cash flow amounted to a ¥9.3 billion cash out-

fiscal 2001.

flow, owing to the decline in net cash provided by operating
activities accompanying the fall in net income and the invest-

NET SALES

ment of available cash to prepare for future capital expenditures.

As mentioned previously in the “Operational Review” section of

The cash dividend of the parent company for fiscal 2001,

this annual report, under the operating conditions prevailing dur-

including the dividend paid for the interim period, was set at

ing fiscal 2001 in Japan and overseas, the Company’s domestic¥9.00 per common share, the same level as for fiscal 2000. The

and overseas sales volume rose slightly, boosted by higher sales

dividend for fiscal 2000 included a commemorative dividend ofof passenger cars. Overseas, sales performance was relatively¥1.00; however, in view of the strong performance of the parent

favorable in the North American market, but a substantial drop incompany and the enhancement of shareholders’ equity, thesales in the European market owing to the weakening of theCompany decided to maintain the fiscal 2001 dividend at theeuro and other developments resulted in an overall decline in net

same level as for the previous fiscal year.

sales. As a result, consolidated net sales fell 1.4%, or ¥18.2 billion,

Important developments during fiscal 2001 included theto ¥1,311.9 billion. The principal causes of this decline included

receipt of ¥112.5 billion from a third-party placement of thea ¥6.0 billion loss in the value of overseas sales accompanying

Company’s shares with General Motors of Canada Limited

the increase in the average value of the yen over the year and a(GMCL), which is a wholly owned subsidiary of GM, in April 2000.

drop of ¥8.0 billion because of price cuts in the European mar-

This has enhanced the Company’s financial position by increas-

ket and elsewhere. Thus, overseas sales were down 3.1%, or

ing its shareholders’ equity and making it possible to reduce¥20.0 billion, to ¥623.7 billion. Sales in Japan, however, roseinterest-bearing debt. In addition, the FHI Group’s three operat-

0.3%, or ¥1.7 billion, to ¥688.2 billion. As a result of theseing companies in North America, namely Subaru-Isuzu

trends, the percentage of net sales accounted for by overseas

Automotive Inc. (SIA), Subaru of America, Inc. (SOA), andsales declined 0.9 percentage point from 48.4% to 47.5%.

Subaru Canada, Inc. (SCI), reported strong performances andSales for each of the Company’s four segments mentioned

paid dividends. SIA paid dividends for the first time in fiscal

previously, including the Automobiles segment, registered2000. In addition, at the end of fiscal 2001 the yen had depreci-

declines. Further details on performance by segment are dis-

ated against the U.S. dollar compared with the end of fiscal 2000,

cussed in the “Operational Review” section.
FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

21

Non-Consolidated Operational Statistics (Number of vehicles)
2001

2000

1999

1998

1997

67,42432,362
28,994297

67,97225,65425,985308

63,49933,531
24,4891,438

55,00137,04940,032
2,184

90,98041,918
7,494
4,512

Subtotal
Minicars

129,077
173,754

119,919
177,842

122,957
156,186

134,266
144,366

144,904
201,640

Total

Domestic Units:
LegacyImpreza
ForesterOthers

302,831

297,761

279,143

278,632

346,544

Export Units:
LegacyImpreza
ForesterOthers26,25454,72185,453034,30458,53083,928029,53054,861
81,385439

27,85752,25158,005819

23,816
52,66032
2,085

Subtotal
Minicars

166,428108

176,762760

166,2152,152

138,932
3,337

78,593
4,719

Total

166,536

177,522

168,367

142,269

83,312

111,783
107,842

103,001
98,861

100,440
98,464

110,689
105,237

107,386
104,586

96,391
19,22056,605—87,267
19,35650,183—

88,66019,04140,132—

92,91324,242
15,988640

94,95024,687—
1,111

172,216

156,806

147,833

133,783

120,748

107,955

93,070104,229

102,180

98,747

Parts Production for Use Overseas(SIA Portion)
U.S. Unit Sales:
LegacyImpreza
ForesterOthersTotal
U.S. Production Units:
Legacy* U.S. Unit Sales and U.S. Production Units are the aggregate figures for the calendar year from January 2000 through December 2000.

COSTS, EXPENSES, AND OPERATING INCOME

Selling, general and administrative (SG&A) expenses rose

Cost of sales declined 1.6%, or ¥16.3 billion, to ¥978.8 billion.

3.2%, or ¥7.8 billion, to ¥251.4 billion. Although recurring

This rate of decline exceeded the 1.4% decline in net sales. As a

expenses as a whole were reduced, increases in strategic andresult, the cost of sales ratio declined 0.2 percentage point, frommanagement policy related expenses resulted in an overall rise.

74.8% to 74.6%, thus putting a brake on the slippage in the

As a result, the ratio of SG&A expenses to net sales rose 0.9

Company’s gross profit. For fiscal 2001, gross profit showed

percentage point, from 18.3% to 19.2%.

only a slight decline of 0.6%, or ¥1.9 billion, to ¥333.0 billion.

R&D expenses included in cost of sales and SG&A expenses

Negative factors having an impact on gross profit were: (1) thein total rose 16.2%, or ¥6.5 billion, to ¥46.6 billion; the largest

appreciation in the average value of the yen for the fiscal year ascomponent of this, or ¥43.0 billion, was R&D related to thea whole, (2) a relative rise in the cost of sales ratio owing toAutomobiles segment. The ratio of R&D expenses to net sales

declining prices for the Company’s products in Europe androse 0.53 percentage point, from 3.02% to 3.55%.

other areas, (3) a decline in the number of automobile units sold,

As a result of the aforementioned, operating income declinedand (4) higher costs associated with specification improvements

10.6%, or ¥9.7 billion, to ¥81.7 billion, and the ratio of operatingin safety and other areas. On the other hand, intensive efforts byincome to net sales fell 0.7 percentage point, from 6.9% to 6.2%.

FHI Group companies to reduce costs and implement other

Further details on performance by segment are discussed inmeasures to improve performance largely offset the effect ofthese negative factors.

22 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

the “Operational Review” section.

OTHER INCOME (EXPENSES)
Other expenses, net, increased a marked ¥33.8 billion, to ¥60.4 bil-(Billions of yen)(Billions of yen)

(%)

1,500

50

5

1,200

40

4

900

30

3

600

20

2

300

10

1

lion. The principal factors, negative and positive, accounting forthis increase are summarized below.
The principal negative factors were: The Company made a lump-sum amortization of ¥44.5 billion to accrue unfunded pension and severance
obligations not previously provided for, as required bya revised accounting standard.
 Gain on sale of marketable securities declined ¥9.3 bil-0

The principal positive factors were: Interest expenses declined ¥5.8 billion, to ¥4.6 billion, as

0’99

lion, to ¥2.8 billion.

Net Sales■■ Japan■■ Outside Japana result of the repayment of interest-bearing debt and

’00

’01

0
’99

’00

’01

R&D Expenses/R&D Expenses
as a Percentage of Net Sales■■ R&D Expenses■■ R&D Expenses as a Percentage
of Net Sales

lower market interest rates on outstanding borrowings
and refinancing.
 The absence of a loss on write-down of land, whichamounted to ¥9.9 billion in the previous period.

review of the purposes of holding marketable securities, theCompany reclassified certain securities held under marketablesecurities to investments and other assets, thus leading to a

 The absence of a provision for revaluation of investment

decline of ¥21.9 billion in marketable securities; however, ¥26.6 bil-securities, which amounted to ¥4.7 billion in the previous

lion in securities were newly purchased to make use of available

period.

funds. Inventories rose ¥15.1 billion because of the increased

As a result, income before income taxes and minority interest

production of the new Impreza model in preparation for its intro-

declined 67.2%, or ¥43.5 billion, to ¥21.3 billion. Net income

duction into the North American market and the impact of thewas down 27.8%, or ¥8.7 billion, to ¥22.6 billion. The difference

decline in the value of the yen, which pushed up the translated

between these percentage declines was caused by a decreasevalue of overseas inventories. Other current assets rose ¥15.8 bil-in the effective income tax rate from 51.7% in the previous

lion, mainly because of an increase in deferred income taxes.

period to 0.9% in the current period due mainly to the reversal

Net property, plant and equipment rose ¥39.9 billion, toof valuation allowances for subsidiaries’ operating loss carry-¥456.6 billion. Of this total, the value of land rose ¥20.1 billion.

forwards in fiscal 2001.

The largest part of this increase, ¥13.3 billion, was due to a gain

Net income per share (basic) fell ¥21.46, from ¥51.90 toon revaluation of land based on the fair market value in connec-¥30.44. Information on the cash dividend paid by the parenttion with the merger of subsidiaries. The remainder of thecompany is discussed on page 21.

increase, or ¥6.7 billion, was due mostly to transfers to thisaccount from the intangible asset account of rights for the use of

FINANCIAL POSITION

land. The remainder of the increase in property, plant and equip-

Assetsment was due to new investments in production assets, which

In view of the challenging operating environment, the FHI Groupamounted to ¥43.6 billion for all segments and ¥37.9 billion for theworked to make efficient use of total capital employed, principal-

Automobiles segment alone. Due to the increase in depreciation,ly through the allocation of corporate resources to priority busi-

however, the total for property, plant and equipment, net

ness areas and a reduction in interest-bearing debt. Theseof accumulated depreciation (and excluding land), rose only

efforts, together with the proceeds from the previously men-

¥19.8 billion, to ¥436.5 billion. (For further information on capitaltioned third-party placement of shares with GMCL, resulted ininvestments, please see the “Capital Expenditures” section on

an increase in total assets of 12.5%, or ¥129.9 billion, to ¥1,168.5

page 24.)

billion. By type of asset, current assets increased ¥52.7 billion, toInvestments and other assets rose ¥37.3 billion, to ¥138.5 bil-

¥573.4 billion. Of this total, cash and time deposits fell ¥15.9 billion

lion. This was mainly because of the aforementioned transfer of

as a result of increased investments in securities. Based on a

¥21.9 billion in securities (including investments in unconsolidated

FUJI HEAVY INDUSTRIES LTD. Annual Report 200123

subsidiaries) from marketable securities to investment securities(Billions of yen)(Billions of yen)

and an increase in deferred income taxes of ¥16.4 billion.

40

120

Liabilities and Shareholders’ Equity

30

90

20

60

10

30

Total liabilities, on the other hand, declined ¥19.5 billion, to¥805.3 billion. Of this total, short- and long-term interest-bearing
debt fell ¥83.9 billion, to ¥365.1 billion, as repayments of loans
and amortization of bonds exceeded new debt. From a cash
flow perspective, cash and cash equivalents declined a net¥89.1 billion, indicating that ¥5.5 billion was offset mainly by the00increase in the translated value of foreign currency liabilities of’99

overseas subsidiaries. On the other hand, operating liabilities

Net Income

’00

’01

and other liabilities were up ¥64.5 billion, to ¥440.2 billion. This

’99

’00

’01

Capital Expenditures andDepreciation and Amortization■■ Capital Expenditures■■ Depreciation and Amortization

was due to an increase in accrued pension and severance liability of ¥40.5 billion, accompanying changes in the accounting

Capital Expenditures

standard for employees’ pension and retirement plans, a rise of

Total capital expenditures of the FHI Group in fiscal 2001

¥13.0 billion in notes and accounts payable, and a net increaseamounted to ¥43.6 billion, down ¥13.7 billion from the previousof ¥10.9 billion in other liabilities.

fiscal year. These expenditures were primarily for equipment

Shareholders’ equity rose ¥151.1 billion, to ¥357.5 billion,

related to production, R&D, and sales in the Automobile seg-thus substantially strengthening the FHI Group’s financial posi-ment. Most of these investments were financed from the FHItion as the shareholders’ equity ratio increased 10.7 percentage

Group’s internal funds. Capital expenditures by segment werepoints, from 19.9% to 30.6%. This was due primarily to the pre-as follows:

viously mentioned issuance of shares to GMCL, which netted● Total capital expenditures in the Automobile segment¥112.5 billion in proceeds and resulted in increases of ¥56.3 bil-

were ¥37.9 billion. Expenditures were made in (1)lion and ¥56.2 billion, respectively, in common stock and addi-

process improvements, reduction in labor inputs,

tional paid-in capital. In addition, consolidated retained earnings

improvements in quality, increases in capacity, and torose ¥30.6 billion, owing to net income for the period and ameet other objectives at the Company’s Gumma Plant,¥14.5 billion rise principally from the previously mentioned gain

the facilities of SIA, and other plants; (2) R&D facilities foron revaluation of land due to the merger of subsidiaries that was

the development of new products and technologies; andpartially offset by the decrease in foreign currency translation(3) upgrading and expanding the domestic sales network.

adjustments due to exchange rate changes, which were a nega-● Total capital expenditures in the Industrial Products,

tive ¥7.3 billion for fiscal 2001.

Aerospace, and Others segments amounted to ¥5.7 bil-

In addition to the aforementioned items, beginning with fiscal

lion. Capital expenditures by segment were as follows:

2001, valuation gains and losses of securities are directly includ-¥2.0 billion, principally used for process improvements ofed in shareholders’ equity. For fiscal 2001, this item amounted

the production lines in the Industrial Products segment;

to a net gain of ¥1.7 billion.

¥1.3 billion, mainly for maintaining and renewing equip-

As part of its stock option plan, the Company purchased anment in the Aerospace segment; and ¥2.4 billion for

additional ¥2.2 billion of its own shares, which was deducted frommaintaining and renewing industrial vehicle production

shareholders’ equity. As a result of the various factors discussed

facilities as well as investments in Group welfare facilities inabove, shareholders’ equity per share rose ¥142.11, from ¥338.75

the Others segment.

at the end of fiscal 2000 to ¥480.86 at fiscal 2001 year-end.

● In addition to the aforementioned capital investments, theAutomobile segment reported ¥53.3 billion in investments related to the acquisition of assets for business
use, including vehicles for leasing.

24 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Cash FlowsNet cash provided by financing activities amounted to ¥18.4 bil-Cash and cash equivalents (hereinafter, “cash”) at the end of thelion compared with a net cash outflow of ¥74.8 billion in the pre-fiscal year under review amounted to ¥120.4 billion, an increase

vious fiscal year. The major factor on the financial cash inflowof ¥11.7 billion compared with the previous fiscal year-end.

side was a ¥112.2 billion inflow in connection with the issuance

Although free cash flow declined because of the use of availableof new shares to GMCL. On the financial cash outflow side, thefunds for the purchase of securities, the Group was able to

FHI Group reported a net reduction in short- and long-term

repay a larger portion of its interest-bearing debt than in theinterest-bearing debt of ¥89.1 billion in fiscal 2001, up from theprevious fiscal year with the proceeds from the issuance of¥69.7 billion in the previous fiscal year. Of this total, short- andnew shares to GMLC, resulting in a substantial improvement inlong-term debt declined ¥49.1 billion on a net basis, commercial

cash flow from financing activities. The amount of cash at fiscal

paper outstanding on a net basis was down ¥30.0 billion, and theyear-end represented approximately 1.1 months of averagebalance of bonds outstanding on a net basis decreased ¥10.0 bil-monthly sales of ¥109.3 billion. In addition, the Company haslion. The value of the yen against the dollar at the end of fiscal

commitment lines with banks, which are available to raise funds

2001 was lower than at fiscal 2000 year-end, but this had only aefficiently and flexibly. With the exception of expenditures forminor impact, ¥2.5 billion, on the value of foreign currency funds.

special projects, management believes the Company’s cash
position provides sufficient liquidity for the normal conduct of

OUTLOOK

business operations.

In fiscal 2002, the FHI Group expects that, although the number

Net cash provided by operating activities declined ¥16.0 bil-of automobiles sold domestically by the Group will remain

lion, to ¥79.1 billion. This was because increased cash require-approximately the same as for the previous fiscal year due toments owing to changes in operating assets and liabilities andintense competition, sales in overseas markets are expected toother assets and liabilities rose ¥31.9 billion, to ¥17.0 billion, as

rise, particularly in the United States, where new models were

the reduction in the cash requirement by increased accounts

introduced in March 2001. Therefore, as a result of higher over-and notes payable was more than offset by the increase in cash

seas sales and efforts to make further reductions in various

required for financing accounts receivable and inventories.

types of expenses, currency rate movements, and a lower bur-On the other hand, net cash used in investing activities roseden for pension and severance liability, the FHI Group expects¥10.5 billion, to ¥88.4 billion. Of this total, capital expenditures

increases in both net sales and net income. Given current infor-

amounted to ¥91.7 billion (including capital expenditures for pur-mation, the Group is targeting net sales of ¥1,400 billion and net

chasing operating assets, such as leased vehicles), slightly

income of ¥40 billion for fiscal 2002*.

below the level for the previous fiscal year. After taking into
account the purchase and sale and disposal of property, plant andequipment, the net cash outlay for the fiscal year was ¥70.3 billion,¥6.4 billion lower than in the previous fiscal year. Net cash

* These figures are goals for performance, and the FHI Group makes noguarantee that these will be achieved. In addition, actual sales and income
figures are subject to the uncertainties stated in the “Disclaimer Regarding
Forward-Looking Statements” on the inside front cover.

movements related to purchase and sale of securities, taking
into account available funds invested in securities with maturitiesof three months or more, amounted to a net cash outflow of¥21.8 billion, which was ¥33.0 billion higher than in the previous
year. Since new purchases of investment securities were small incomparison with the previous fiscal year, cash flow from purchases and sales of investment securities was a net inflow of ¥4.6 billion, an increase of ¥15.7 billion from the previous fiscal year.
As a result of these movements in operating and investing
cash flows, free cash flow for the fiscal year under review
amounted to a cash outflow of ¥9.3 billion compared with acash inflow of ¥17.2 billion in the previous fiscal year.

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

25

Consolidated Balance Sheets
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2001 and 2000

Millionsof yenMillionsof yenThousands of
U.S. dollars(Note 3)

2001

2000

2001

74,50963,006
119,448(2,159)154,839
70,55917,377
23,145$ 472,661
722,363
1,053,169(6,952)
1,370,452
536,444
241,056
235,274

573,434

520,724

4,624,468

1,005,331(548,750)

943,934(527,296)

8,107,508(4,425,403)

Net property, plant and equipment

456,581416,638

3,682,105

Investments and other assets:
Investment securities (Notes 5 and 8)
Investments in non-consolidated subsidiaries and affiliates
Long-term loans receivable
Goodwill
Intangibles, net
Deferred income taxes (Note 10)
Other assets (Note 8)
Allowance for doubtful accounts

48,185
7,930
7,910
20,143
11,97826,763
20,478(4,901)

27,302
6,304
7,560
18,712
10,978
10,40823,006(3,074)

388,589
63,952
63,790
162,444
96,597
215,831
165,145(39,524)

138,486

101,196

1,116,823¥1,168,501¥1,038,558$9,423,395

ASSETS
Current assets:
Cash and time deposits (Notes 4 and 8)
Marketable securities (Notes 4, 5 and 8)
Notes and accounts receivable, trade
Allowance for doubtful accounts
Inventories (Notes 6 and 8)
Short-term loans receivable (Notes 4 and 8)
Deferred income taxes (Note 10)
Other current assets (Note 8)
Total current assets

Property, plant and equipment (Notes 7 and 8)
Less accumulated depreciation

Total assets
The accompanying notes are an integral part of these statements.

26 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001¥

58,61089,573
130,593(862)
169,936
66,51929,891
29,174¥

Millionsof yenMillionsof yenThousands of
U.S. dollars(Note 3)

2001

2000

2001

¥ 180,227
37,943
207,477
91,574
6,625
34,737¥ 240,331
54,221
194,469
84,055
17,87225,013$1,453,444
305,992
1,673,202
738,500
53,427280,137

558,583

615,961

4,504,702

146,93165,674
34,114

154,49325,12829,1701,184,927
529,629
275,113

246,719

208,791

1,989,669

Minority interest in consolidated subsidiaries

5,744

7,402

46,323

Shareholders’ equity (Note 11):
Common stock, ¥50 par value
Authorized—1,500,000,000 shares
Issued 2000—614,552,540 shares
2001—746,502,402 shares
Additional paid-in capital
Retained earnings
Net unrealized gains on investment securities
Less treasury stock, at cost
Translation adjustments—
144,449
150,761
83,6801,701(2,215)(20,921)88,115—94,55953,129—(1,145)(28,254)—
1,164,911
1,215,815
674,839
13,718(17,863)(168,718)

357,455

206,404

2,882,702¥1,168,501¥1,038,558$9,423,395

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:
Short-term borrowings (Note 8)
Current portion of long-term debt (Note 8)
Notes and accounts payable
Accrued expenses
Accrued income taxes (Note 10)
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 8)
Accrued pension and severance liability (Note 9)
OtherContingent liabilities (Note 14)
Total liabilities and shareholders’ equity

FUJI HEAVY INDUSTRIES LTD. Annual Report 200127

Consolidated Statements of Income
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2001, 2000 and 1999

Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars(Note 3)

2001

2000

1999

2001

¥1,311,887
978,841¥1,330,125
995,131¥1,352,520
1,067,868$10,579,734
7,893,879

333,046
251,373

334,994
243,593284,652
194,720

2,685,855
2,027,202

81,67391,40189,932

658,653

3,663(4,623)2,815(3,027)(487)(2,551)

2,569(10,422)
12,092(5,356)(6,569)(2,440)4,641(11,981)8(2,032)(4,019)(4,317)29,540(37,282)
22,702(24,411)(3,927)(20,573)(44,520)——(11,652)—(9,855)—(6,581)——383(4,192)(359,032)——(93,968)(60,382)(26,562)(21,509)(486,952)

Income before income taxes and minority interest

21,291

64,83968,423

171,702

Income taxes (Note 10):
Current
Deferred

25,814(25,631)

36,151(2,621)

33,772(4,207)208,177(206,702)

183

33,53029,565

1,476

21,1081,520

31,30939

38,858(5,152)

170,226
12,258Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 12)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Gain on sale of marketable securities
Foreign exchange losses
Loss on devaluation of securities
Loss on disposal of property, plant and equipment, net
Full amortization of net pension andseverance obligation at transition
Write-down of land
Equity gains of affiliates
Other, net

Income before minority interest
Minority interest in consolidated subsidiaries
Net income

Per share data (Note 2):
Net income—Basic—Diluted
Cash dividends
The accompanying notes are an integral part of these statements.

28 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001¥

22,628¥31,348¥33,706$

182,484

Yen

Yen

Yen

U.S. dollars(Note 3)¥30.44
29.06
9.00¥51.9048.53
9.00¥56.18
51.79
8.00

$0.25
0.23
0.07

Consolidated Statements of Shareholders’ Equity
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2001, 2000 and 1999

Thousands

Balance at March 31, 1998
Cash dividends
Payment of bonuses to directors and statutory auditors
Shares issued upon conversion of convertible bonds
Retained earnings of subsidiaries
newly included in consolidation
Net increase of treasury stock
Net income
Balance at March 31, 1999
Accumulated foreign currency transaction
adjustment transferred from assets
Foreign currency translation adjustment
Cumulative effect of changes in accounting for income taxes
Stock class change of Subaru-Isuzu Automotive Inc.
Merger of a consolidated subsidiary
Cash dividends
Payment of bonuses to directors and statutory auditors
Shares issued upon conversion of convertible bonds
Accumulated deficit of subsidiaries
newly included in consolidation
Treasury stock held by subsidiaries
newly included in consolidation
Net income
Balance at March 31, 2000
Accumulated foreign currency transaction
adjustment transferred from assets
Foreign currency translation adjustment
Retained earnings of merger of a consolidated subsidiary
Cash dividends
Payment of bonuses to directors and statutory auditors
Shares issued to GM
Shares issued upon conversion of convertible bonds
Treasury stock held by subsidiaries
newly included in consolidation
Adoption of new accounting standard
for financial instruments
Net income
Balance at March 31, 2001

Millions of yen

Number ofsharesissuedCommonstock

598,507¥ 84,138

Retained
Net
Additional
earnings unrealizedpaid-in (accumulated gains on
capitaldeficit) securities

Treasurystock,
at cost¥ 90,588¥¥ (5,891)

¥

—

(2)

Accumulatedtranslation
adjustment¥—(4,201)
(212)
3,826

983

979

133
(1)
33,706(1)
33,706¥ 85,121¥ 91,567

740

37

46

11,480

2,957

2,946

¥23,535

¥

—

¥

(3)

¥

—

¥200,220(26,194)(2,060)(26,194)(2,060)
6,582
3,495
2,282
(5,122)
(209)
5,903

6,582
3,495
2,199
(5,122)(209)(8,699)(8,699)(1,142)(1,142)
31,34831,348614,553¥ 88,115¥ 94,559¥53,129¥—¥(1,145)¥(28,254)¥206,404

7,333

7,333
14,484(6,394)(167)
112,50828

14,484(6,394)(167)
131,89654

56,31914

56,18814(1,070)(1,070)

1,701

1,701
22,62822,628746,502¥144,449¥150,761¥83,680¥168,833(4,201)
(212)
1,962

133

602,333

Total
shareholders’equity¥1,701¥(2,215)¥(20,921)¥357,455

Thousands of U.S. dollars (Note 3)

Balance at March 31, 2000
Accumulated foreign currency transaction
adjustment transferred from assets
Foreign currency translation adjustment
Retained earnings of merger of a consolidated subsidiary
Cash dividends
Payment of bonuses to directors and statutory auditors
Shares issued to GM
Shares issued upon conversion of convertible bonds
Treasury stock held by subsidiaries
newly included in consolidation
Adoption of new accounting standard
for financial instruments
Net income
Balance at March 31, 2001

$ 710,610 $ 762,573$428,460 $— $ (9,234)$(227,855) $1,664,548

59,137
116,806(51,565)(1,347)454,186
113

453,129
113(8,629)13,718
182,484$1,164,911 $1,215,815$674,839 $13,718 $(17,863)

59,137
116,806(51,565)(1,347)907,323226(8,629)13,718
182,484$(168,718) $2,882,702

The accompanying notes are an integral part of these statements.
FUJI HEAVY INDUSTRIES LTD. Annual Report 200129

Consolidated Statements of Cash Flows
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2001 and 2000

Cash flows from operating activities:
Income before income taxes and minority interest
Adjustments to reconcile income before income tax andminority interest to net cash provided by operating activities:
Depreciation and amortization
Loss on sale and disposal of property, plant and equipment, net
Provision for pension and severance liability
Write-down of land
Gain on sale of marketable securities
Loss on devaluation of securities(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Income taxes paid
Other, net

Millionsof yenMillionsof yenThousands of
U.S. dollars(Note 3)

2001

2000

2001

¥ 21,291¥ 64,839$171,702

64,0702,551
40,546—(2,815)487(10,231)(15,053)
8,243(37,165)
7,175

60,190
2,440
—
9,855
(12,092)
6,569
12,7193,572(1,440)(37,774)(13,745)516,694
20,573326,984—(22,702)3,548(82,508)(121,395)
66,476(299,718)
58,242

79,09995,133637,895(91,734)
21,439(2,714)(50,274)
7,355
28,423(5,992)(52,216)
54,815
2,520(98,429)
21,734(11,064)(1,171)—
12,343(3,018)(56,109)62,647(4,854)(739,790)
172,895(21,887)(405,435)
59,315229,218(48,323)(421,097)
442,056
20,323(88,378)(77,921)(712,726)

46,443(63,677)—(10,000)(30,000)(31,831)112,224(2,249)3,901(6,394)

31,670(33,816)
10,300(42,474)
30,000(65,340)———(5,122)

374,540(513,524)—(80,645)(241,935)(256,702)
905,032(18,137)
31,460(51,565)

18,417(74,782)

148,524

Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from sale and disposal of property, plant and equipment
Payment for investment securities
Payment for purchase of marketable securities
Proceeds from sales of investments in securities
Proceeds from sale of marketable securities
Purchase of intangible assets
Addition to loans receivableCollection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of bonds
Redemption of bonds(Proceeds from) repayment of commercial paper
Decrease in short-term borrowings
Proceeds from issuance of stock
Payment for treasury stock
Proceeds from sale of treasury stock
Payment of cash dividends
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

2,529(2,218)20,395

Net increase (decrease) in cash and cash equivalents

11,667(59,788)

94,089108,769

145,907877,169——(10,635)
33,285——

Balance at end of year

¥120,436¥108,769$971,258

Supplemental information on cash flows:
Cash paid during the period for interest
Conversion of convertible bonds¥¥ 11,067
5,903$ 36,879
226

Cash and cash equivalents:
Balance at beginning of year
Decrease from exclusion of a division of a subsidiary
due to conversion of the subsidiary’s stock
Amount applicable to subsidiaries newly included in consolidation

The accompanying notes are an integral part of these statements.

30 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

4,573
28

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES

1. Basis of Presentation of the Financial Statements
Fuji Heavy Industries Ltd. (the “Company”) and its subsidiaries in Japan maintain their books of accountand prepare their financial statements in accordance with accounting principles and practices generally
accepted in Japan, while its foreign subsidiaries maintain their books of account and prepare their financial statements in conformity with those of the countries of their domicile.
The accompanying consolidated financial statements are basically an English-translated version of
those which were prepared in accordance with accounting principles and practices generally accepted inJapan, which are different in certain respects from the application and disclosure requirements ofInternational Accounting Standards (IAS), and filed with the Japanese Ministry of Finance and the Tokyo
Stock Exchange as required by the Securities and Exchange Law of Japan. Certain reclassifications ofaccounts and modifications have been made in the accompanying financial statements to facilitate
understanding by readers outside Japan. Such reclassifications and modifications had no effect on consolidated net income. In addition, the statements of shareholders’ equity and certain information in thenotes to the consolidated financial statements, which are not required under accounting principles andpractices generally accepted in Japan, are presented herein as additional information.

2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
The fiscal year-end of consolidated domestic subsidiaries is the same as that of the parent company,
while the fiscal year-end of consolidated foreign subsidiaries is December 31. Although these foreignsubsidiaries are included based on their fiscal year ended December 31, significant transactions between
December 31 and March 31 are reflected in the consolidated financial statements.
Until the fiscal year ended March 31, 1999, investments in non-consolidated subsidiaries and significant affiliates had been accounted for under the equity method. Consolidated net income included theCompany’s equity in the current net income of such companies after elimination of unrealized intercompany profits. From the fiscal year ended March 31, 2000, however, the new accounting standard for consolidation in Japan became effective and the number of consolidated subsidiaries rose to 72, of which 46
subsidiaries previously accounted for under the equity method were newly included in consolidation. The
number of consolidated subsidiaries decreased to 68 at March 31, 2001 due to liquidations of and amerger between subsidiaries.
Until the fiscal year ended March 31, 1999, Subaru-Isuzu Automotive Inc. (SIA), a subsidiary in the
United States of which 51% was owned by the Company and the other 49% by Isuzu Motors Ltd., hadbeen included in the Company’s consolidated financial statements on a fully consolidated basis with its
profit/loss allocated to the Company based on its share of common stock (51%). From the fiscal year
ended March 31, 2000, however, due to the conversion of its common stock into two classes to represent the Subaru Product Division and the Isuzu Product Division, effective January 1, 1999, only the
Subaru Product Division of SIA has been consolidated by the Company. Accordingly, the Isuzu Product
Division of SIA and Isuzu Transport Inc., a subsidiary of SIA, have been excluded from the Company’s
consolidated financial statements. As a result of this change, consolidated sales for the year ended
March 31, 2000 decreased by ¥191,965 million, although consolidated retained earnings at March 31,
2000 increased by ¥3,495 million.
Investments in insignificant non-consolidated subsidiaries and affiliates not accounted for under theequity method are carried at cost.
The difference between the cost and underlying net equity of investments in subsidiaries and affiliatedcompanies is allocated to identifiable assets based on fair value at the date of acquisition. The unallocated residual value of the excess of the cost over the underlying net equity is recognized as goodwill and isamortized over a period of five years on a straight-line basis.

FUJI HEAVY INDUSTRIES LTD. Annual Report 200131

All assets and liabilities of subsidiaries acquired on or after April 1, 1999, which include not only theCompany’s interest in the subsidiary but also the minority interest portion, are valued based on fair value atthe date the Company acquires control over the subsidiary. The investment cost of the Company is allocated to the identifiable assets and liabilities of the subsidiary; the unallocated cost is recorded as goodwill.
Cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities ofthree months or less, that are readily convertible to known amounts of cash and have negligible risk ofchanges in value due to their short maturities.
Translation of foreign currency accounts
Until the fiscal year ended March 31, 1999, current and non-current accounts denominated in foreign
currencies held by the Company and its subsidiaries in Japan were principally translated into yen at historical exchange rates. Revenues and expenses denominated in foreign currencies were translated at
the exchange rates prevailing during the year. The resulting translation gains and losses were taken into
income currently. From the fiscal year ended March 31, 2000, however, current monetary assets and liabilities denominated in foreign currencies held by the Company and its subsidiaries in Japan are translated into yen at appropriate year-end current rates. The effect of this change was minor.
All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at
the exchange rates in effect at the balance sheet date of the foreign subsidiaries, except for common
stock and capital surplus, which are translated at historical rates. Revenue and expense accounts arealso translated at the exchange rates prevailing during the year. The resulting translation adjustments
were reflected in the consolidated balance sheet as “Translation adjustments” in the assets category
until March 31, 1999. From the fiscal year ended March 31, 2000, however, these translation adjustments have been reclassified to a component of shareholders’ equity to conform with the new Japanese
accounting requirements.
Revenue recognition
Revenue from sales of vehicles and parts is generally recognized when such products are shipped to dealers or customers. Provisions for sales allowances and incentives are recognized at the time of the sale.
Revenue from operating leases is recognized on a straight-line basis over the lease term.
Other costs
The Company provides for accrued warranty claims on its products sold based on past experience of
warranty services performed on actual claims and estimated warranty costs to be incurred in the future
at the time of sale.
Research and development costs are expensed as incurred and amounted to ¥38,512 million,¥40,123 million and ¥46,622 million (US$375,984 thousand) for the years ended March 31, 1999, 2000
and 2001, respectively.
Marketable securities and investment securities
Prior to April 1, 2000, securities listed on stock exchanges were stated at the lower of cost or market
value, cost being determined by the moving average method. Securities not listed on stock exchanges
were stated at cost, as determined by the moving average method, after devaluation for any permanent
impairment.
The Company adopted new Japanese accounting standards for financial instruments from the fiscal
year ended March 31, 2001. In accordance with the new standards, securities for which fair value isavailable are stated at fair value as of the balance sheet date with unrealized holding gains and losses
included as a component of shareholders’ equity until realized, while securities for which fair value is notavailable are stated at cost as determined by the moving average method. Bonds and debentures heldto-maturity are stated using the amortized interest cost method.

32 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

As a result of such adoption, income before income taxes and minority interest increased by ¥1,759
million (US$14,185 thousand) for the year ended March 31, 2001, as compared with the amounts under
the previous accounting standards. Based on the review of the purposes of holding securities at April 1,
2000, securities held-to-maturity and other securities with maturities of one year or less have been classified as marketable securities in current assets and all other securities as investment securities. As aresult, marketable securities in current assets decreased by ¥21,894 million (US$176,565 thousand) andinvestment securities increased by the same amount as of April 1, 2000. Also, from the year ended March 31,
2001, impairment losses of ¥5,226 million (US$42,145 thousand) for investment securities previously recorded in a separate allowance account have been directly offset against the investment securities balance.
Derivative financial instruments and hedge accounting
In the normal course of business, the Company and its consolidated subsidiaries employ derivative financial instruments, including foreign exchange forward contracts, foreign currency options and interest rate
swaps, to manage their exposure to fluctuations in foreign currency exchange rates and interest rates.
The Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes.
Principally, the deferred hedge accounting method is applied to these derivative financial instruments
qualifying as a hedge, and the gains and losses related to the derivatives are allocated to and offset
against recognized gains and losses on the items hedged. Interest rate swaps which meet certain criteria
are excluded from the application of hedge accounting. Derivative financial instruments qualifying as ahedge, along with the related transactions, assets and liabilities, are summarized as follows:
Financial Instrument

Transaction, Assets and Liabilities

Forward exchange contracts
Currency swaps
Interest swaps

Future foreign exchange transactions
Foreign currency borrowings
Borrowings

The risk exposures to movements in exchange rates and interest rates are hedged according to theCompany’s risk management policy. Evaluation of hedge effectiveness is not considered necessary as
the terms and notional amounts of these hedge instruments are the same as those of the related transactions, assets and liabilities, and therefore they are assumed to be highly effective in offsetting movementsin the exchange rates and interest rates at their inception as well as during their terms.
Inventories
Finished products are stated principally at cost determined by the moving average method. Raw materials,
work in process and supplies are stated principally at cost determined by the first-in, first-out method.
Property, plant and equipment
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary maintenance and repairs, minor renewals and improvements are charged to income as incurred.
Depreciation of property, plant and equipment is principally computed by the declining-balancemethod for the Company and subsidiaries in Japan, and by the straight-line method for foreign subsidiaries at rates based on the estimated useful lives of the assets according to general class, type of
construction and use.
Accrued pension and severance liability
On terminating employment, employees of the Company and subsidiaries in Japan are entitled, under mostcircumstances, to lump-sum indemnities or pensions based on current rates of pay, length of service andconditions under which the termination occurs. The minimum payment is an amount based on voluntary
retirement. In addition to the minimum payment based on voluntary retirement, employees receive additional benefits for retirement due to age limit, death or other defined reasons.

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

33

The Company and certain subsidiaries in Japan have non-contributory funded defined benefit pension
plans. The plans of the Company cover 80% of retirement and severance benefits for employees who
terminate employment at age fifty or over. The contributions to the pension plan include current service
costs and amortization of prior service costs over a period of eight years. Foreign subsidiaries primarily
have defined contribution plans.
Certain subsidiaries in Japan have contributory funded defined benefit pension plans, which are pursuant
to the Japanese Welfare Pension Insurance Law. The contributory pension plans cover a portion of thegovernmental welfare pension program, under which the contributions are made by the companies andtheir employees, and an additional portion representing the substituted non-contributory pension plan.
Retirement benefits to directors and statutory auditors are subject to approval at a meeting of shareholders and are charged to income when paid.
Prior to April 1, 2000, the Company and subsidiaries in Japan recorded the accrued severance indemnities for employees which represented 40% of the liability which would be payable if all employees voluntarily terminated their services at the balance sheet date.
Effective April 1, 2000, new Japanese accounting standards for pension and severance benefits havebeen adopted. In accordance with the new accounting standards, accrued pension and severance liability for employees has been provided based on the estimated amounts of projected benefit obligation andfair value of plan assets at the end of the fiscal year. The amount of ¥44,520 million (US$359,032 thousand) of net pension obligation at transition has entirely been expensed in the fiscal year ended March
31, 2001. Actuarial gains and losses will be amortized from the next fiscal year by the straight-line
method over periods (5–18 years) which are less than the estimated remaining service periods of employees. As a result of such adoption, pension costs increased by ¥3,301 million (US$26,621 thousand), andincome before income taxes and minority interest decreased by ¥40,934 million (US$331,113 thousand) for
the year ended March 31, 2001, as compared with the amounts under the previous accounting standards.
Accrued pension contribution for defined benefit pension plans is included in accrued pension andseverance liability.
Accounting for leases
Under Japanese accounting standards for leases, finance leases are, in principle, accounted for on asimilar basis to sales by lessors or purchases by lessees. However, finance leases which do not transfer
ownership of leased assets to lessees as stipulated in lease contracts can be accounted for as an operating lease if certain “as-if-capitalized” information is disclosed in the notes to the financial statements.
Therefore, as a lessee, the Company has accounted for those leases as an operating lease and has
charged periodic lease payments to expenses when paid.
Income taxes
Up to March 31, 1999, deferred income taxes pertaining to temporary differences were recognized only
insofar as they related to the elimination of unrealized intercompany profit and the adjustment ofallowances for doubtful accounts for consolidation purposes.
Deferred tax accounting, similar to IAS 12, has been newly adopted from the beginning of the fiscal
year ended March 31, 2000 in accordance with new Japanese accounting standards. The provision forincome taxes is computed based on the pretax income for financial reporting purposes. Deferred tax
assets and liabilities are recognized for expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax bases of assets and liabilities. Valuation
allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized. The cumulative effect, as of April 1, 1999, of the accounting change resulting fromthe adoption of deferred tax accounting was directly credited to retained earnings in the amount of¥6,582 million.

34 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Net income per share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that could occur if all convertible securities were converted or other contracts to issue common stock were exercised to the extent
that it is not antidilutive.
Reclassifications
Certain reclassifications within the financial statements for the years ended March 31, 1999 and 2000
have been made to conform to the presentation for the year ended March 31, 2001.

3. U.S. Dollar Amounts
The U.S. dollar amounts included in the accompanying consolidated financial statements and the related
notes represent a translation using the exchange rate of ¥124 to US$1, the approximate exchange rate at
March 31, 2001. The U.S. dollar amounts are included solely for the convenience of the reader, and thesetranslations should not be construed as a representation that the yen amounts actually represent, or havebeen or could be converted into U.S. dollars at the above or any other rate.

4. Cash and Cash Equivalents
Cash and cash equivalents as of March 31, 2001 and 2000 consisted of the following:
Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

Cash and time deposits
Marketable securities
Short-term loans receivable¥ 58,610
89,57366,519¥ 74,509
63,00670,559$ 472,661
722,363
536,444

Less maturity over three months

214,702(94,266)

208,074(99,305)

1,731,468(760,210)

Cash and cash equivalents¥120,436¥108,769$ 971,258

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

35

5. Marketable Securities and Investment Securities
Information as to the value of marketable securities and investment securities at March 31, 2000 and2001 is presented below according to the disclosure requirements applicable to the respective year:(1) As of March 31, 2000 (presented according to the fiscal 2000 disclosure requirements):
Millions of yen
Carrying
value

Unrealized
gains (losses)¥22,255—257¥2,829—(47)

22,512

2,782

14,442
166
282

2,556
4
(4)

Subtotal

14,890

2,556

Total

¥37,402¥5,338Current—
Marketable equity securities
Debt securities
Other securities
Subtotal
Non-current—
Marketable equity securities
Debt securities
Other securities(2) As of March 31, 2001 (presented according to the fiscal 2001 disclosure requirements):(a) Held-to-maturity securities for which fair value is available:
Millions of yen
Consolidatedbalance sheet
amountFair value exceeds balance sheet amount:
Government bonds¥¥

Difference

5

¥ 1

4

5

1

5,000

4,930

(70)

Subtotal

5,000

4,930

(70)

Total

¥5,004¥4,935¥(69)

Subtotal
Fair value does not exceed balance sheet amount:
Corporate bonds

4

Fair value

Thousands of U.S. dollars
Consolidatedbalance sheet
amountFair value exceeds balance sheet amount:
Government bonds
Subtotal
Fair value does not exceed balance sheet amount:
Corporate bonds$

32

Fair value$

40

Difference

$

8

32

40

8

40,32339,758(565)

Subtotal

40,32339,758

(565)

Total

$40,355$39,798$(556)

36 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

(b) Other investment securities (available-for-sale securities):
Millions of yen

Cost

Consolidatedbalance sheet
amountDifference¥ 8,558¥15,595¥7,037

1,847
11,1604,874

1,849
11,166
4,930

2
6
56

26,43933,540

7,101

23,91619,804(4,112)

1
10,0982,551

010,097
2,542

(1)
(1)
(9)

Subtotal

36,56632,443(4,123)

Total¥63,005¥65,983¥2,978

Cost

Consolidatedbalance sheet
amountDifference$ 69,016$125,766$56,750

14,89590,00039,306

14,911
90,04839,7581648452

213,218

270,484

57,266

192,871

159,710(33,161)

8
81,435
20,573081,427
20,500

(8)
(8)
(73)

Subtotal

294,887

261,637(33,250)Total$508,105$532,121$24,016

Balance sheet amount exceeds cost:
Stock
Bonds:
Discount bank debenture
Other
Other
Subtotal
Balance sheet amount does not exceed cost:
Stock
Bonds:
Discount bank debenture
Other
Other

Thousands of U.S. dollars

Balance sheet amount exceeds cost:
Stock
Bonds:
Discount bank debenture
Other
Other
Subtotal
Balance sheet amount does not exceed cost:
Stock
Bonds:
Discount bank debenture
Other
Other

FUJI HEAVY INDUSTRIES LTD. Annual Report 200137

(c) Other investment securities sold during the year ended March 31, 2001:
Sales amount

Total gains

Total losses¥35,773 million
US$288,492 thousand¥2,815 million
US$22,702 thousand¥14 million
US$113 thousand(d) Major marketable securities without available fair value included in the balance sheet amounts as ofMarch 31, 2001:

Money management fundCommercial paper
Unlisted stocks (excluding over-the-counter stocks)

Millionsof yenThousands of
U.S. dollars¥31,272
21,8196,622$252,194
175,960
53,403(e) Marketable securities with maturities as of March 31, 2001:
Millions of yen

1) Debt securities:
Government and municipal bonds
Corporate bonds
Other2) Other
Total

Within 1 year

1 to 5 years¥ 1,099
1,499
41,5704,100¥48,268

Thousands of U.S. dollars
Within 1 year

1 to 5 years

¥ 753
5,001
10
202

$

8,863
12,089335,242
33,065$ 6,072
40,33181
1,629¥5,966$389,258$48,113Millionsof yenMillionsof yen6. Inventories
Inventories at March 31, 2001 and 2000 consisted of the following:

Finished products
Work in process
Raw materials
Supplies

Thousands of
U.S. dollars

2001

2000

2001

¥106,061
53,244
8,672
1,958¥ 85,689
55,523
11,6801,947$ 855,331
429,387
69,935
15,790¥169,936¥154,839$1,370,452

7. Property, Plant and Equipment
Property, plant and equipment at March 31, 2001 and 2000 are summarized as follows:
Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

Buildings and structures
Machinery and vehicles
Other¥227,437
457,931
168,521¥219,818
431,062
166,115$1,834,169
3,692,992
1,359,040

Less accumulated depreciation
Land
Construction in progress

853,889(548,750)
140,810
10,632816,995(527,296)
120,757
6,182

6,886,202(4,425,403)
1,135,565
85,742

Total¥456,581¥416,638$3,682,105

38 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

8. Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 2001 and 2000 consisted of the following:

Bank loans, with an average interest rate of 1.3% per annum
Commercial paper, with an average interest rate of 0.01%
per annum

Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

¥180,226¥210,331$1,453,435—

30,000—¥180,226¥240,331$1,453,435

Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

¥127,573$ 917,435

2,042

16,411

18,79920,00010,00010,00010,00010,000300

151,427
161,290—
80,64580,64580,645
2,419

184,874
37,943208,71454,221

1,490,919
305,992¥146,931¥154,493$1,184,927

Long-term debt at March 21, 2001 and 2000 consisted of the following:

Loans principally from banks and insurance companies, due
through 2026 with an average interest rate of 3.4% per annum¥113,762
Unsecured 1.8% convertible bonds due 2003, convertible
currently at ¥633.30 ($5.10) for one common share,
redeemable before due date
2,035
Unsecured 0.9% convertible bonds due 2003, convertible
currently at ¥513.00 ($4.14) for one common share,
redeemable before due date
18,777
Unsecured 2.25% bonds due July 31, 2002
20,000Unsecured 2.10% bonds due January 31, 2001—
Unsecured 2.10% bonds due August 29, 2003
10,000Unsecured 2.3% bonds due September 30, 2005
10,000Unsecured 1.76% bonds, due April 30, 2004
10,000
Secured 1.8% bonds of a consolidated subsidiary, due July 7, 2005
300
Less—Portion due within one year

Annual maturities of long-term bank loans at March 31, 2001 were as follows:

2002
2003
2004
2005
2006
2007 and thereafter

Millionsof yenThousands of
U.S. dollars¥ 37,943
42,841
51,36028,59721,9992,134$ 305,992
345,492
414,194
230,621
177,411
17,210¥184,874$1,490,919

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

39

The following assets as of March 31, 2001 and 2000 were pledged as collateral for certain loans:

Cash and time deposits
Notes and accounts receivable
Marketable securities
Inventories
Short-term loans receivable
Other current assets
Property, plant and equipment
Investment securities
Other assets

Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

¥

—
2,746
—
—
—
1,690
135,247
234
—

¥

300
—
542
2,470
52,5092,316
141,300
3,146
1,911

$

—
22,145———
13,6291,090,702
1,887—¥139,917¥204,494$1,128,363

9. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have defined benefit plans. Foreign subsidiaries primarily have defined contribution plans.
Reconciliation between the projected pension and severance obligation and allowance for pension andseverance liability as of March 31, 2001 is as follows:
Millionsof yenThousands of
U.S. dollars

Projected pension and severance obligation
Plan assets¥122,929(50,333)$991,363(405,911)

Unfunded pension and severance obligations
Unamortized transition liability
Unamortized actuarial gain/loss
Unamortized prior service cost

72,596—(6,933)—

585,452—(55,911)—

Net amount recorded in balance sheet
Prepaid pension cost

65,664(10)

529,548(81)¥ 65,674$529,629

Allowance for pension and severance liability

Notes: 1. The above amounts include the government pension plan funded by social security taxes paid by employees and employer.
2. Certain subsidiaries calculate the liability using a simplified method.
3. In addition to the above plan assets, there are plan assets of ¥18,213 million (US$146,879 thousand) for the multi-employer pension plan, which
could not be allocated to each specific participating employer, which are allocated based on the number of participants.

40 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Periodic pension and severance costs for the year ended March 31, 2001 consist of the following:
Millionsof yenThousands of
U.S. dollars

Service cost
Interest cost
Expected return on plan assets
Amortization of transition liability
Amortization of actuarial gain/loss
Amortization of prior service cost

¥ 8,405
3,187(1,886)44,520——$ 59,347
25,702(15,210)359,032——

Pension end severance cost

¥54,225$428,863

Notes: 1. The above amounts do not include the social security taxes paid by employees.
2. Service costs of subsidiaries using the simplified method are included in Service cost above.
3. The above amounts include ¥704 million (US$5,677 thousand) for the multi-employer pension plan, for which plan assets could not be allocatedto each specific participating employer, in Service cost.
4. There are contributions of ¥1,046 million (US$8,435 thousand) for the defined contribution plans of foreign subsidiaries which are included inService cost.

Actuarial assumptions used in computation of pension and severance liability are as follows:a. Attribution of expected benefit obligation
Straight-line method
b. Discount rate
Primarily 3.0%
c. Expected rate of return on plan assets
Primarily 4.0%
d. Amortization of actuarial gain/loss
Primarily 18 years (will be amortized by the straightline method starting from the next fiscal year basedon periods less than the estimated average remaining service period of employees)e. Amortization of transition liability
One year

10. Income Taxes
The Company is subject to a number of taxes based on income which, in aggregate, resulted in normal
statutory tax rates of approximately 47.4% for the year ended March 31, 1999 and 41.8% for the years
ended March 31, 2000 and 2001.
A reconciliation of the differences between the statutory tax rate and the effective income tax rate forthe year ended March 31, 2001 was as follows:
Statutory tax rate
Increase (reduction) in taxes resulting from:
Valuation allowance provided
Non-deductible expenses
Lower tax rates applicable to foreign subsidiaries
Tax credit
Other
Effective income tax rate

41.8%
(35.3)
2.1
(2.3)
(4.0)
(1.4)
0.9%

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

41

Significant components of the deferred tax assets and liabilities at March 31, 2001 and 2000 wereas follows:

Deferred tax assets:
Operating loss carryforwards for tax purposes
Inter-company profit included in inventories
Accrued pension and severance costs
Accrued expenses
Accrued enterprise tax
Accrued bonuses
Warranty reserve
Devaluation of land
Valuation reserve for equity investment
Inter-company profit included in property, plant and equipment
Inventory valuation losses
Allowance for doubtful accounts
Unearned revenue
Foreign tax credit
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation
Net unrealized gains on investment securities
Other

Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

¥ 4,308
7,489
20,419
6,556
697
4,093
6,392
—
2,006
5,683
1,774
1,838
2,294
1,343
5,991

¥ 5,221
5,255
2,211
2,787
2,693
2,453
5,563
4,119
2,002
5,657
—
—
—
—
2,932

$ 34,742
60,395
164,669
52,871
5,620
33,00851,548—16,17745,831
14,306
14,82318,50010,831
48,31570,883(7,464)40,893(12,373)

571,637(60,194)

63,41928,520511,444(10,027)(1,462)(351)(1,094)—(225)(80,863)(11,790)(2,831)

Total deferred tax liabilities(11,840)(1,319)(95,484)

Net deferred tax assets¥51,579¥27,201$415,960

Note: Net deferred tax assets are included in the following accounts in the accompanying consolidatedbalance sheets.

Current assets—Deferred income taxes
Investments and other assets—Deferred income taxes
Long-term liabilities—Other
Net deferred tax assets

Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

¥29,891
26,763(5,075)¥17,378
10,408(585)$241,056
215,831(40,927)¥51,579¥27,201$415,960

11. Shareholders’ Equity
The Japanese Commercial Code provides that an amount equal to at least 10% of cash dividends andother distributions from retained earnings paid by the parent company and its subsidiaries in Japan
appropriated as a legal reserve. No further appropriation is required when the legal reserve equals 25%of stated capital. Legal reserves included in retained earnings as of March 31, 2000 and 2001 were
¥6,902 million and ¥7,555 million (US$60,927 thousand) and are restricted to be used as dividends.
In accordance with customary practice in Japan, the appropriations are not accrued in the financial
statements for the period to which they relate, but are recorded in the subsequent accounting period

42 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

after shareholders’ approval has been obtained. Retained earnings at March 31, 2000 includes amounts
representing final cash dividends of ¥3,346 million (US$26,984 thousand), ¥4.5 (US$0.04) per share, anddirector’s bonuses of ¥110 million (US$887 thousand), which were approved at the shareholders’ meeting held on June 27, 2001.

12. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2001, 2000 and 1999 consisted of the following:Transportation and packing expenses
Advertising expenses
Sales incentives
Salaries and bonuses
Research and development expenses
OthersMillionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

¥ 14,578
42,633
15,24854,02645,78079,108¥ 13,495
41,265
16,69655,84040,12376,174¥ 17,701
36,37044,295
20,77038,512
37,072$ 117,565
343,815
122,968
435,694
369,194
637,968¥251,373¥243,593¥194,720$2,027,202

13. Leases(1) Information as lessee
As allowed under Japanese accounting standards, the Company and subsidiaries in Japan account for
finance leases that do not transfer ownership of leased assets to lessees as stipulated in lease contracts
as operating leases. The “as-if-capitalized” information of such leased assets is as follows:(a) Details of the leased assets:
Millionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

2001

Machinery and vehicles
Tools and other
Intangibles assets¥1,702
6,116
797¥1,165
6,046
824$13,726
49,323
6,427

Accumulated depreciation

8,616(5,480)8,035(4,578)69,484(44,194)

Net¥3,136¥3,457$25,290(b) Depreciation of the leased assets is computed by the straight-line method over the lease term.
Depreciation expenses for the years ended March 31, 2000 and 2001 would have been ¥1,757 millionand ¥1,725 million (US$13,911 thousand), respectively.
Actual periodic lease expenses for these finance leases, as accounted for as operating leases, were as
follows:

Lease expenses

Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

¥1,879¥2,017¥5,086$15,153

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

43

Future minimum lease payments, excluding the portion of interest thereon, as of March 31, 2001 wereas follows:
Millionsof yenThousands of
U.S. dollars¥ 1,325
1,977$ 10,685
15,944¥ 3,302$ 26,629¥ 2,558
34,215$ 20,629
275,927¥36,773$296,556

Millionsof yenThousands of
U.S. dollars

Machinery and vehicles
Tools and other
Intangible assets¥13,0615,515
214$105,331
44,476
1,726

Accumulated depreciation

18,792(6,818)151,548(54,984)¥11,973$ 96,556

Finance leases:
One year or lessMore than one year
Operating leases:
One year or lessMore than one year(2) Information as lessor
Capitalized lease assets for finance leases at March 31, 2001 were as follows:

Information related to finance leases for the year ended March 31, 2001 is as follows:

Lease income
Depreciation expense
Interest income portion

Millionsof yenThousands of
U.S. dollars¥5,086
3,901
1,286$41,016
31,46010,371

Future minimum lease income, excluding the portion of interest thereon, as of March 31, 2001 was
as follows:

Finance leases:
One year or lessMore than one year
Operating leases:
One year or lessMore than one year

44 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Millionsof yenThousands of
U.S. dollars¥ 4,159
7,949$ 33,540
64,105¥12,108$ 97,645¥ 8,490
7,263$ 68,468
58,573¥15,754$127,048

14. Contingent Liabilities
Contingent liabilities at March 31, 2001 were as follows:

Trade notes discounted with banks
As guarantor of indebtedness of non-consolidated
subsidiaries, affiliates and others

Millionsof yenThousands of
U.S. dollars¥ 1,326$ 10,694

37,584

303,097

15. Derivative Financial Instruments
Fair value information of the off-balance-sheet derivative financial instruments at March 31, 2000 and2001 is summarized below according to the disclosure requirements applicable to the respective year:(1) As of March 31, 2000 (presented according to the fiscal 2000 disclosure requirements):
Millions of yen

Forward exchange contracts:
Sell—
U.S. dollar
Foreign currency options contracts:
Sell—
Put U.S. dollar
Call U.S. dollar
Buy—
Put U.S. dollar

Contract
amountFair value

Unrealized
gains (losses)¥21,877¥21,623

¥254

1,031
[6]
8,310
[104]

7
—
17
—

(1)
—
87
—

7,907
[110]

147
—

37
—

Note: The amounts in square brackets are the carrying amounts of the premium on the option recorded as other current assets or liabilities.

At March 31, 2000, the aggregate notional principal amount of interest rate swap contracts was ¥900
million. The estimated fair value of these contracts was a loss of ¥4 million.
(2) As of March 31, 2001 (presented according to the fiscal 2001 disclosure requirements):
Millions of yen
Contract
amountForeign currency options contracts:
Sell—
Call U.S. dollar¥29,172[442]
Buy—
Put U.S. dollar
27,931[433]

Thousands of U.S. dollars

Fair value

Unrealized
gains (losses)

Contract
amountFair value

Unrealized
gains (losses)¥926¥(484)$235,258(3,565)$7,468$(3,903)

240

(193)

225,250(3,492)

1,935(1,557)

Note: The amounts in square brackets are the carrying amounts of the premium on the option recorded as other current assets or liabilities.

Derivative financial instruments, principally forward exchange contracts and currency and interest
swaps, that qualify as a hedge and are accounted for using the deferred hedge accounting method, areexcluded from the above table according to the disclosure requirements in 2001.

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

45

16. Segment Information
Information by industry segment
The Company and its consolidated subsidiaries operate principally in four industry segments: automobiles, industrial products, aerospace, and others (including transportation equipment).
A summary of net sales, operating income, assets, depreciation and capital expenditures by industry
segment for the years ended March 31, 2001, 2000 and 1999 are shown below:
Net sales:
Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

¥1,167,209
3,131¥1,175,471
4,474¥1,197,429
744$ 9,412,976
25,250

Total
Industrial products—
Outside customers
Inter-segment

1,170,340

1,179,945

1,198,173

9,438,226

44,224140

51,847150

43,257
270

356,645
1,129

Total
Aerospace—
Outside customers
Inter-segment

44,36551,99743,527357,782

65,504
118

66,144
185

78,268148

528,258
952

Total
Others—
Outside customers
Inter-segment

65,622

66,32978,416529,210

34,951
2,555

36,663
2,172

33,566
117

281,863
20,605

Total
Elimination

37,505(5,944)

38,835(6,981)33,683(1,279)302,460(47,935)¥1,311,887¥1,330,125¥1,352,520$10,579,734

Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

Net sales:
Automobiles—
Outside customers
Inter-segment

Consolidated total
Segment profit or loss:

2001

2000

1999

2001

Operating income (loss):
Automobiles
Industrial products
Aerospace
Others¥82,211
784
2,467(4,100)¥92,314
1,283
2,034(4,411)¥85,4101,442
6,650(3,602)$662,992
6,323
19,895(33,065)

Total
Corporate and elimination

81,362
312

91,220181

89,90032

656,145
2,516¥81,673¥91,401¥89,932$658,653

Consolidated operating income

46 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Assets:
Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

Total assets:
Automobiles
Industrial products
Aerospace
Others¥ 956,131
57,372
106,955
74,851¥ 849,046
49,47898,06447,993¥749,383
48,330117,224
67,467$7,710,734
462,677
862,540
603,637

Total
Corporate and elimination

1,195,309(26,808)

1,044,581(6,023)

982,404(1,148)9,639,589(216,194)

Consolidated total¥1,168,501¥1,038,558¥981,256$9,423,395

Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

¥ 57,225
1,943
2,392
2,510

¥ 53,651
2,024
2,739
1,821

¥33,408
2,044
2,258
998

$461,492
15,66919,29020,242

Total
Corporate and elimination

64,070—60,235(45)

38,708—516,694—

Consolidated total

Other significant items:

Depreciation and amortization:
Automobiles
Industrial products
Aerospace
Others¥ 64,070¥ 60,190¥38,708$516,694

Capital expenditures for segment assets:
Automobiles
Industrial products
Aerospace
Others¥ 95,255
2,155
1,535
3,356

¥ 98,428
2,296
1,671
3,489

¥54,997
1,134
3,176
800

$768,185
17,37912,37927,065

Total
Corporate and elimination

102,301—

105,884(1,962)60,107(2,541)

825,008—

Consolidated total¥102,301¥103,922¥57,566$825,008

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

47

Information by geographic area
A summary of net sales, operating income and assets by geographic areas for the years ended March 31,
2001, 2000 and 1999 is shown below:
Net sales:
Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

¥ 866,161
218,288¥ 903,697
188,984¥ 738,945
213,582$ 6,985,169
1,760,387

Total
North America—
Outside customers
Inter-segment

1,084,448

1,092,681

952,527

8,745,548

441,566
1,645

420,457
1,799

605,637
1,638

3,561,016
13,266

Total
Other—
Outside customers
Inter-segment443,211422,256

607,275

3,574,282

4,161
69

5,971
72

7,938
55

33,556556

4,230(220,002)

6,043(190,855)

7,993(215,275)

34,113(1,774,210)¥1,311,887¥1,330,125¥1,352,520$10,579,734

Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

Operating income:Japan
North America
Other¥62,818
21,84862¥61,800
27,154
181¥65,761
27,509191$506,597
176,194500

Total
Corporate and elimination

84,728(3,055)

89,1352,266

93,461(3,529)683,290(24,637)

Consolidated total¥81,673¥91,401¥89,932$658,653

Net sales:
Japan—
Outside customers
Inter-segment

Total
Elimination
Consolidated total
Segment profit or loss:

48 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Assets:
Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

Assets:Japan
North America
Other¥ 963,528
244,201
1,281¥ 856,235
212,958
1,918¥ 721,643
280,016
2,191$7,770,387
1,969,363
10,331

Total
Corporate and elimination

1,209,010(40,509)

1,071,111(32,553)

1,003,850(22,594)

9,750,081(326,685)

Consolidated total¥1,168,501¥1,038,558¥ 981,256$9,423,395

Overseas sales
Overseas sales for the years ended March 31, 2001, 2000 and 1999 are summarized as follows:
Millionsof yenMillionsof yenMillionsof yenThousands of
U.S. dollars

2001

2000

1999

2001

Overseas sales:
North America
EuropeOther¥ 491,068
66,463
66,16037.4% ¥ 480,588
5.1
99,192
5.0
63,87636.1% ¥ 637,780
7.5
104,628
4.8
66,842

47.2% $ 3,960,226
7.7
535,992
4.9
533,548

Total¥ 623,691

47.5% ¥ 643,656

48.4% ¥ 809,250

59.8% $ 5,029,766

Consolidated net sales ¥1,311,887 100.0% ¥1,330,125 100.0% ¥1,352,520 100.0% $10,579,734

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

49

Report of Independent Certified Public Accountants

To the Board of Directors of
FUJI HEAVY INDUSTRIES LTD.
We have audited the accompanying consolidated balance sheets of FUJI HEAVY INDUSTRIES LTD. and its consolidated subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of income and shareholders’ equity for eachof the three years in the period ended March 31, 2001, expressed in Japanese yen. We have also audited the consolidated
statements of cash flows for each of the two years in the period ended March 31, 2001. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements basedon our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, effective April 1, 2000, the consolidated financial statements
have been prepared in accordance with new accounting standards for accrued pension and severance liability and for financial instruments and a revised accounting standard for foreign currency transactions.
In our opinion, the consolidated financial statements audited by us present fairly, in all material respects, the financial positionof FUJI HEAVY INDUSTRIES LTD. and its consolidated subsidiaries as of March 31, 2001 and 2000, and the consolidated
results of their operations for each of the three years in the period ended March 31, 2001, and their cash flows for each of thetwo years in the period ended March 31, 2001, in conformity with accounting principles generally accepted in Japan.
The United States dollar amounts in the consolidated financial statements have been translated, for convenience only, on thebasis described in Note 3 to the consolidated financial statements.
Tokyo Japan
June 27, 2001

MEIJI AUDIT CORPORATION

50 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Consolidated Subsidiaries and Affiliates (As of March 31, 2001)

JAPAN
Fuji Robin Industries Ltd. (58.1%)
Manufacture, service, and sales of agricultural/forestry equipment,
engines, fire pumps, and related parts
http://www5.mediagalaxy.co.jp/fujirobin/

Fuji Machinery Co., Ltd. (56.7%)
Manufacture and sales of automobile parts and industrial product parts
http://www.fuji-machinery.co.jp/

Ichitan Co., Ltd. (51.0%)
Manufacture and sales of forged automobile/industrial product parts
http://www.ichitan.co.jp/

Kiryu Industrial Co., Ltd. (100.0%)
Manufacture of Subaru specially equipped automobiles and management of Subaru automobile parts distribution
http://www.sunfield.ne.jp/~kiryu/

Subaru Kosan Co., Ltd. (100.0%)
Sales and leasing of real estate and travel agency operations

OVERSEAS
Subaru of America, Inc. (100.0%)
and nine subsidiaries
Subaru Plaza, 2235 Route 70 West, Cherry Hill, NJ 08002, U.S.A.
Tel: (856) 488-8500
Fax: (856) 665-3346
Distribution and sales of Subaru automobiles
http://www.subaru.com/

Fuji Heavy Industries U.S.A. Inc. (100.0%)
and one subsidiaryc/o Subaru of America, Inc.
Subaru Plaza, 2235 Route 70 West, Cherry Hill, NJ 08002, U.S.A.
Tel: (856) 488-8532
Fax: (856) 488-9279
Distribution and sales of Subaru automobiles
Subaru Research & Development, Inc.
3995 Research Park Drive, Ann Arbor, MI 48108, U.S.A.
Tel: (734) 623-0075
Fax: (734) 623-9579
Research and development of automobiles

Subaru Used Car Sales Co., Ltd. (100.0%)
Refurbishment, distribution, and sales of used Subaru cars

Subaru-Isuzu Automotive Inc. (51.0%)
and one subsidiary

FICS Corporation (100.0%)5500 State Road 38 East, Lafayette, IN 47903, U.S.A.
Tel: (765) 449-1111
Fax: (765) 449-6952
Manufacture of Subaru and Isuzu automobiles
http://www.subaru-isuzu.com/

Distribution and service of Volvo automobiles

Subaru Finance Co., Ltd. (100.0%)
Leasing and rental of Subaru automobiles and industrial products
and credit, financing, and sales of auto insurance
http://www.subaru-finance.co.jp/

Ta Ching Motors Co., Ltd.* (45.0%)

Manufacture and sales of parts for car trailers, crane trucks,
construction machinery, and automobiles
http://www.yusoki.co.jp/

337 Ta Hsi Road, Ching Hsi Lii, Piang Tung, Taiwan
Tel: (08) 753-8001
Fax: (08) 753-8021
Manufacture and sales of Subaru automobiles
http://www.subaruzone.com.tw/

TOKYO SUBARU INC. (100.0%)
and 40 other dealerships

Subaru Canada, Inc. (100.0%)
and one subsidiary

Distribution, sales, and service of Subaru automobiles
http://www.sss.ne.jp/tokyo-subaru/

5990 Falbourne Street, Mississauga, Ontario, Canada L5R 3S7
Tel: (905) 568-4959
Fax: (905) 568-8087
Distribution and sales of Subaru automobiles
http://www.subaru.ca/

Yusoki Kogyo K.K. (45.6%)

NIIGATA SUBARU, Inc.* (46.7%)
Distribution, sales, and service of Subaru automobiles
http://www.niigata-subaru.co.jp/

Subaru Parts Europe N.V./S.A. (100.0%)
c/o Hermesstraat 6C, 1930 Nossegem-Zaventem, Belgium
Tel: (02) 714-0400
Fax: (02) 725-7792
Distribution and sales of automobiles, parts, and accessories

Robin Manufacturing U.S.A., Inc. (60.0%)1201 Industrial Road, Hudson, WI 54016, U.S.A.
Tel: (715) 381-5902
Fax: (715) 381-5901
Manufacture and sales of general-purpose, four-wheel buggy
and golf cart engines* Affiliates accounted for by the equity method

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

51

Investor Information (As of March 31, 2001)

Head Office

Major Shareholders

Subaru Building, 7-2, Nishi-Shinjuku 1-chome, Shinjuku-ku,
Tokyo 160-8316, Japan
Tel: (03) 3347-2111
Fax (03) 3347-2338

Subaru Building, 7-2, Nishi-Shinjuku 1-chome, Shinjuku-ku,
Tokyo 160-8316, Japan
Tel: (03) 3347-2655
Fax: (03) 3347-2295

General Motors of Canada Limited
Japan Trustee Services Bank, Ltd.
The Industrial Bank of Japan, Ltd.
The Mitsubishi Trust and Banking Corporation
The Nippon Life Insurance Company
The Toyo Trust and Banking Co., Ltd.
Suzuki Motor Corporation
The Chuo Mitsui Trust and Banking Co., Ltd.
The Asahi Bank, Ltd.
Chase Manhattan Bank (London)

Established

Stock Listings

July 15, 1953

Tokyo Stock Exchange, Osaka Securities Exchange,
Nagoya Stock Exchange

Investor Relations OfficePaid-in Capital¥144,449 million

Transfer Agent

Number of Shareholders

The Chuo Mitsui Trust and Banking Co., Ltd.
7-1, Kyobashi 1-chome, Chuo-ku, Tokyo 104-8345, Japan

32,996Web Site Address
Number of Common Stock Issued and Outstanding

http://www.fhi.co.jp/english/

746,502,402

Domestic Manufacturing Divisions
Gunma Manufacturing Division (Automobile Division)
Utsunomiya Manufacturing Division (Aerospace Division andTransportation & Ecology Systems Division)
Isesaki Manufacturing Division (Bus Manufacturing & House
Prefabricating Division)
Saitama Manufacturing Division (Industrial Products Division)

Quarterly Common Stock Price Range (Tokyo Stock Exchange)
(Yen)
1,200
1,000
800
600
400
200
0

FY

1997

1998

1999

2000

2001

High

¥618

¥649

¥871

¥1,189

¥925

Low

432

305

469

647

608

52 FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

FUJI HEAVY INDUSTRIES LTD. Annual Report 2001

Subaru Building, 7-2, Nishi-Shinjuku 1-chome, Shinjuku-ku, Tokyo 160-8316, Japan

http://www.fhi.co.jp/english/

Printed on recycled paper in Japan