Annual Report
For the year ended March 31, 2012

2012

What is Distinctive about Subaru?

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Distinctive
Sales Record
Subaru achieved record-high sales for the third year
in a row and became the only automobile manufacturer to surpass year-on-year sales for the fourth consecutive year in the U.S. market. Subaru is taking on
the challenge of selling 320 thousand vehicles in2012 with the aim of growing even further.
U.S. Retail Sales(Units)350,000

280,000

210,000

140,000

70,000

0

CY

2008

2009

2010

2011

2012
(Plan)■ Legacy/Outback ■ Impreza ■ Forester ■ Tribeca

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Distinctive
Marketing
Subaru provides the values of “enjoyment and peaceof mind” to customers. In line with our brand statement Confidence in Motion, we aim to increase thenumber of Subaru fans through marketing that showcases the appeal of our automobiles not in terms ofprice, but in the authentic values they offer.
U.S. Dealer Monthly Inventory Levels/Visits YOY■ Monthly Inventory Levels

YOY Dealership Visitation Ratio(Months)

(%)

2.0

150

1.6

120
100

1.2

90

0.8

60

0.4

30

0

Apr.
2011

Jul.

Oct.

Jan.
2012

Apr.

0

Incentives Per Vehicle(U.S. dollars)

2,000

1,500

1,000

500

0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010/3
2011/3
2012/3
2009/3

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Distinctive Progress
Subaru focuses on the concepts of “trust” and “innovation.” We meetcustomer expectations by evolving with the times. To this end, we placeparticular emphasis on maintaining Subaru’s consistent philosophy“Engineering Excellence” as well as improving environmental friendlinessthrough such innovations as the new horizontally-opposed engines andthe new Lineartronic-CVT (Continuously Variable Transmission).

2

New Horizontally-Opposed Engine+ New Lineartronic-CVT

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Distinctive Cooperation
Subaru and Toyota Motor Corporation have jointly developed a new front-engine,
rear-wheel drive compact sports car. This new automobile was created with the intentionof both companies to introduce an even greater number of customers to the pleasure ofdriving. We will continue pursuing a win-win relationship with Toyota to boost thelong-term competitiveness and development of both companies.

Horizontally-Opposed Engine+ Front-Engine, Rear-Wheel Drive
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Confidence in Motion
Confidence in Motion is a unified global brand statement that encapsulates the aim of
the Subaru brand. Confidence reflects our approach towards reliable automobile manufacturing
dating back to the Subaru 360 and the relationship of trust that we have built with customers byproviding enjoyment and peace of mind. In Motion expresses Subaru’s resolve to enhancecustomer trust by proactively staying abreast of changing trends.
Through Confidence in Motion, Subaru aims to meet customer expectations for the freedom
and fulfillment enabled by Subaru’s uniquely satisfying driving experience.

4

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CONSOLIDATED FINANCIAL HIGHLIGHTS
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

Billions of yen

2008

2009

Contents

2012

2011

2010

6 A Message to Our Stakeholders

For the Year:Net sales

16 Special Feature:¥1,572.3¥1,445.8¥1,428.7¥1,580.6¥1,517.1

Operating income (loss)

45.7

(5.8)

27.4

84.1

44.0

Corporate Vice President Interview

Net income (loss)

18.5(69.9)(16.5)

50.3

38.5-Providing a Distinctive Subaru Experience-

Capital expenditures

56.3

58.0

56.1

43.1

54.3

Depreciation expenses

65.5

65.1

57.1

49.8

53.7

R&D expenses

52.0

42.8

37.2

42.9

48.1

Automobiles sales volume (thousand units)

597

555

563

657

640

25 Consolidated Ten-Year Financial Summary

Exchange rate (¥/$, non-consolidated)

116

102

93

86

79

26 Five-Year Automobile Sales

21 Corporate Social Responsibility (CSR)
24 Management

28 Management’s Discussion and Analysis of

At Year-End:Total assets

1,296.4

1,165.4

1,231.4

1,188.3

1,352.5

Net assets

494.4

394.7

381.9

414.0

451.6

Interest-bearing debt

304.5

381.7

367.6

330.6

341.0

3.7

—

—

12.7

8.9

3.9

—

2.4

7.1

3.6

Results of Operations and Financial Position
35 Corporate Data/Investor Information

Financial Ratios (%):
ROE
ROA 1

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

Net Sales

Operating Income (Loss) & Net Income (Loss)(Billions of yen)(Billions of yen)

90

1,600

60
1,200
30

Disclaimer Regarding Forward-Looking Statements
0

800

-30
400
-60
0

-90
FY

2008

2009

2010

2011

2012

FY

2008

2009

■ Operating Income (Loss)

2010

2011

2012

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

■ Net Income (Loss)

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A MESSAGE TO OUR STAKEHOLDERSYASUYUKI YOSHINAGA
Representative
Director of the Board,
President and CEO

6

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Pursuing further growth with distinctive,
high value-added Subaru products andstronger focus on core competencies in theever changing business environment.
In July 2011, Subaru commenced the “Motion-V” mid-term management plan. In fiscal 2012, thefirst year of the plan, consolidated net sales totaled ¥1,517.1 billion (down 4.0% year on year),consolidated operating income amounted to ¥44.0 billion (down 47.8%) and consolidated net income
was ¥38.5 billion (down 23.6%). Despite these decreases in revenue and earnings in the aftermath of
the Great East Japan Earthquake, we achieved results that exceeded initial projections with teamefforts among the manufacturer, dealers and suppliers to resume production and maintain sales.
Amid these major changes in the business environment, Subaru continues to provide unique,high-value-added automobiles to maintain favorable sales momentum while uniting Companywide
to achieve “Motion-V” in line with the guiding principle, Confidence in Motion.

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After much contemplation,
I believe that a distinctive
Subaru experience is characterized by a sense of individuality, high added value and ahigh degree of differentiation.
8

Having completed your first year as the presidentof FHI, please share with us your honest impressionof the past year.
If I could summarize the past year in a single expression,
it would be “thank you” to convey the strong sense of
appreciation I have for the hard work of all of our employees and everyone else that put forth such effort. To begin, the Great East Japan Earthquake struck immediately
after I become president. I had no idea when we could

restore production. Some people went as far as sayingthat resuming operations by the end of the year would be
impossible. Despite these circumstances, we were able
to resume plant operations in an exceedingly short time
period thanks to the extraordinary efforts of those employed at our manufacturing facilities as well as suppliers.
I believe that these efforts showcased Japan’s fundamental power, which values the concept of monozukuri(“manufacturing products”). In particular, this monozukuri
power was seen in the support the entire automobile
industry lent to components manufacturers. Subaru completely restored production in October 2011, commencing
full-scale production soon after. By the end of fiscal 2012,
we were able to reach operating income of ¥44.0 billionin spite of these severe conditions and this exceeded our
initial target of ¥30.0 billion.
Looking back on the past year, sales momentum particularly in Japan and the United States remained steady.
This is in fact quite meaningful. Once sales drop off, it
takes a lot of effort to regain momentum. Nevertheless,we were able to sustain sales momentum despite production stoppages and the gradual depletion of inventory. Dealerships in the United States are owned independently, yet they mutually supported sales by flexibly
accommodating each other’s dwindling vehicle stocks.
Consequently, Subaru surpassed year-on-year sales in the
United States for four consecutive years in 2011 and was
the only brand to maintain record-breaking sales for the
past three years. With newspapers and other media
sources reporting on this achievement, a greater numberof people have been visiting Subaru dealerships and, inturn, creating a virtuous circle.
I honestly did not believe in late November that wewould break sales records for four straight years. However, the representatives from three U.S. dealerships who
visited the Tokyo Motors Show at the end of November
all wore wristbands with “Plus 1” written on them. This

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signified their determination to sell more units than theprevious year and their pledge not to give up on surpassing last year’s performance, despite the need to mutuallyaccommodate each other’s dwindling stocks. In responseto this resolve, we continued to produce and supply vehicles to the best of our ability. As a result, we achieved
this sales record. We are currently seeing ongoing sales
momentum in the United States, which is a testament tothe considerable ability of the entire Subaru team. Onceagain, I would like to express my sincere gratitude to everyone whose hard work made this achievement possible.

Why do you think new Subaru models continue tobe hits?
It is not easy to narrow down the popularity of Subaru
vehicles to just one reason. Subaru’s strength lies in its
distinctive technological capabilities. Subaru employs
engineers who love all aspects of cars and focus exclusively on automobile development. We have always built
automobiles based on our own preferences and convictions. That said, a single-minded focus on technology is
not healthy. By making every effort to listen to opinions
gained from the market and dealerships, we are able tonurture the positive aspects of this technological focus.
This is the reason why Subaru automobiles are hits.
In spite of changing times, Subaru strives to develop
vehicles by being technologically oriented. In other words,
we must pursue a distinctive Subaru experience. If we are
guided solely by market feedback, our cars will be thesame as everyone else’s. As such, we are not too unique
or individualistic, but we do avoid the trap of being overly
commercial. The bottom line for a company the size ofSubaru is to find ways to maintain a balance between thetwo extremes. Regarding vehicle development, we stay
focused on the market by listening to the opinions ofcustomers and dealers while searching for ways to realizea distinctive Subaru experience. I feel that we currently
have the right balance.
Subaru got its start in the development and manufacture of aircraft. Indeed, Subaru’s DNA extends from FHI’s
forerunner, Nakajima Aircraft Company. This has fostered a
corporate culture based on the creation of automobiles
that are not only reliable but safe. More succinctly, we havezero-tolerance for unsafe cars. Even though we are a company that makes automobiles, our background in aircraft
production separates us from other automakers. “Safety
and reliability” are among our most important strengths,
underscored with numerous awards recognizing Subaru’s
advanced safety capabilities. Another strength centers on
the concept of “enjoyment.” Subaru has been highly
evaluated (or rated) by customers for providing enjoyment in various forms: pleasure of owing Subaru vehicles;
having an active lifestyle with Subaru vehicles; fun-todrive experience; and an unsurpassed level of drivability.

Subaru has set the target of reaching an annual sales
volume of one million vehicles within the next 10
years while pursuing a distinctive Subaru experience.
What steps is Subaru taking to realize this aim?
In July 2011 when we announced our mid-term management plan “Motion-V,” we set the following targets forfiscal 2016: global sales of 900 thousand units (revised to
850 thousand units in May 2012), operating income of¥120 billion and an annual sales volume of one million
units within the next 10 years. Employees throughout theCompany reacted exactly as I predicted. Subaru’s sales
division has responded strongly to the one million unit figure. This sparked a debate over the necessity of making
smaller cars to reach the one million vehicle target. Starting my career in sales, I very much understand that point

Our ongoing
technological orientation
makes Subaru unique.

MID-TERM MANAGEMENT PLAN
“MOTION-V” (FY2012-2016)
VisionAchieving an annual automotive
sales volume more than one million
units within the next 10 years
In the mid-term management plan

1

Phase to solidify the foundation of the strategic
direction for growthEstablishing the global brand position

2

Favorable advancement

Make structural reform in the remained
area and strengthen the successful
points further

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Major Points of Mid-Term Management Plan “Motion-V”
Business Targets

Overhaul of Cost Structure

FY2016FY2012-2016

Measures

Consolidated
Operating Income

Total Consolidated
R&D Expense¥120 billion¥250 billion• Further cost reduction efforts in new vehicle
development• Additional cost reduction for production models• Additional cost reduction for new engines andtransmissions(¥80/$, ¥105/ )Consolidated
Operating Margin

6% or more

Total Consolidated
Capital Expenditure

Increase Sales Globally
Unit sales (non-consolidated basis, including OEM and CKD)
(Thousand units)

FY2011(Result)¥310 billion

60

+100
FY2016(Plan)¥330 billion
Total Consolidated
Depreciation

310

Target: Additional ¥30 billion cost
reduction by FY2016

40 660

260

+40

+10
100

410

0

200

400

■ North America■ China

+30
270

600

■ Japan, Europe and Australia

70

850

800

1,000

■ Others

Product Portfolio Plan
CY2011CY2012

CY2013

CY2014

CY2015

Impreza

FMC

FMC

FMC

FMC

Subaru XVSUBARU BRZ

Main Models

New Models

Minicars

Terminate own production

Compact Cars

New concept

All lineups on an OEM basis from Daihatsu

OEM

New boxer engine + CVT equipped on all models

Environmental
Friendliness

Turbo charged direct injection boxer engine
Hybrid introduce in Japan at first

Active Driving
Assist System

10

EyeSight equipped on all models in global markets with upgrade of performance

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of view. Focusing solely on unit sales figures, the sales department places the highest priority on achieving this target. In response, however, I often say that “reaching thetarget of one million vehicles is not the highest priority.”
My focus is inherently on Subaru’s profitability. Rather
than reaching one million vehicles sold annually yet failingto attain operating income targets, I would prefer toachieve operating income objectives but sell only 800
thousand units. In the case of the latter, if profit increases
lead to higher added value, brand image and positive
recognition, this situation is acceptable. The reverse isunforgiveable. In terms of our priorities, we give preference to individuality, distinctiveness and market presence.
If one million customers rate us highly on those characteristics, we will reach our target of one million vehicles.
If customers recognize Subaru’s high-added value, I am
not concerned if we fall short of our target and only sell
800 thousand units.
Some believe that we need to make smaller models
to increase unit sales as well as compact cars in emerging
markets to reach the annual sales volume of one million.
Such actions will cause cost competition with other automakers and ultimately lead to price wars. Compared with
automobile companies with an annual production capacityof six to seven million units, the cost of manufacturing inemerging countries has no competitive advantages for
Subaru. I have carefully explained this point repeatedly inan effort to gain the full understanding of employees
companywide.

Targets for “Motion-V” were reset in May 2012.
When did it become clear that Subaru’s mid-term
management plan needed revising?

formulates mid-term management plans for a year following the inauguration of a new president. However,I felt it necessary to reveal a new policy as soon as possible.
Between the announcement of “Motion-V” and the endof 2011, sales in the United States exceeded expectations.
On the other hand, the assumption that the exchange ratewould stay at ¥90 to the U.S. dollar is no longer correct.
In addition, we have yet to receive a clear answer on thefeasibility of engaging in local production in China. Typically, Subaru revises its five-year, mid-term management
plans two to three years in. This time, however, it became
necessary to reset targets earlier.
I want to emphasize that we have reaffirmed the major
goals of “Motion-V,” even though we reset some of thetargets. The core of the plan, annual sales volume of one
million units within 10 years, remains the same. To bolster
our production system, we have decided to make theUnited States our priority market based on favorable
sales there. Carefully monitoring the progress of ourefforts to introduce local production in China, I do not
project a significant amount of profit being generated in
the near future as was initially forecasted. As such, higher
unit production in the United States is compensating for
decreases in China.
The operating income target of ¥120 billion has been
maintained. In terms of revising this figure, we can no longer say that the circumstances underpinning this fundamental target are unchangeable. Despite the ¥10 appreciation in the exchange rate with the dollar, we will
maintain the operating income target, and this announcement has been positively received by investors. As part ofthe most recent revision to the plan, we have added suchgoals as cost reductions of ¥30 billion, enabling us to takeon the challenge of achieving the original ¥120 billion
target, even at an exchange rate of ¥80 to the U.S. dollar.

Aim to achieve operating
income of ¥120 billion,
even at an exchange rateof ¥80 to the U.S. dollar.

“Motion-V” was announced on July 6, 2011, immediately
after I became president on June 24. Typically, Subaru

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Are cost reductions the most promising measure
to counter yen appreciation?

Subaru’s number one
measure to counter yen
appreciation is to continue
producing relatively
high-priced automobiles
while minimizing incentives.

12

As a result of the combined efforts of the engineeringand production divisions, we have been able to steadily
reduce costs. I believe that this is very important. Given
the Company’s size, however, prevailing against the competition based solely on cost reductions is not a simple
matter. Since every other automaker is desperately working
to cut costs, attaining a comparative advantage is not easy.
To answer this question, the deciding factor in thecase of Subaru was adding value. For example, in the
United States, other companies offer per-vehicle incentives totaling around $2,000. In contrast, Subaru has kept
this to less than half the cost at $800 to $900. This is important: Subaru’s number one measure to counter yen
appreciation is to continue producing relatively highpriced automobiles while minimizing incentives. Against
this backdrop, Subaru has positioned itself as an automaker that offers differentiated, individual and valueadded products. Accordingly, we are currently receiving
high praise for this strategic approach both in the UnitedStates and Japan.
For instance, Subaru’s “EyeSight” Active Driving Assist System has been rated very highly for furthering theconcept of “collision-free cars.” To be completely honest,
other automakers cannot compete with Subaru as longas we are being very competitive in this area. We are
introducing “EyeSight” to Subaru models sold in the
United States. Although Subaru advertising does not focus
on price, Legacy, Outback and Impreza have received
very positive customer evaluations in the United States.
Avoiding any mention of cash incentives, Subaru’s value
and the pleasure that is enabled from driving a Subaru
have made it the No. 1 brand based on residual price. For
customers, Subaru vehicles offer the highest resale value
at trade-in following several years of driving enjoyment.

For Subaru, the challenge lies in finding ways to maintainthese areas of competitive advantage over the long term.

Some say the focus on maintaining strong sales poses risks for Subaru’s production system. Please sharewith us your thoughts on enhancing Subaru’s production system and what direction should be taken.
To be certain, insufficient vehicle inventory is a pressing
issue. A point of contention remains over what form production enhancements will take and in what order of precedence. We have already announced production capacity increases at the Gunma Main Plant and Subaru ofIndiana Automotive, Inc. (SIA). We are committed to capacity enhancements. Without a doubt the most pressing
issue we face is how best to quickly realize them.
Nevertheless, although we are confronted with supply
capacity-related problems, I would like to see supply
remain tight, slightly below demand. The gap between
supply and demand is currently too wide. Yet, despite
favorable sales, we have no intention of overcompensating by greatly boosting capacity with a sudden, significant investment.

In light of the lack of progress of Subaru’s initiatives
to establish local production in China, what measures are you promoting in response to emerging
markets?
At the present moment, establishing local production in
China within the period of the current mid-term management plan seems difficult. As a result, we will extend theexport of completed automobiles from Japan. I do not see
this as a negative because the Subaru brand image is extremely high in China. When we will ultimately begin local

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REINFORCING VALUE CHAIN AND ENHANCING SALES FORCE (CHINA)

REINFORCING VALUE CHAIN AND ENHANCING SALES FORCE (U.S.A.)

Enhancement of
Product Appeal• Introducing and developing products for China market• Enhancing SUV lineup

Enhancement of
Product Appeal• Increasing passenger car sales• Enhancing SUV lineup

Production
Scheme• Difficulty in establishing local production in China
during the mid-term period

Production
Scheme• Increasing production capacity at SIA• Starting consideration of production expansion in North America
for the future

Sales Scheme• Priority placed on car export scheme• Reinforcing value chain management

Sales Scheme• Upward revision of sales target corresponding to positive
sales momentum• Increasing dealership quality

China Retail Sales

U.S.A.

Number of Dealerships in U.S./Unit Sales Per Dealership

China(Unit)■ Unit Sales Per Dealership

70,000

Number of Dealerships(Unit)(Dealership)

500

750

400

600

300

450

200

300

100

150

60,00050,00040,00030,00020,00010,000
0

CY

2008

2009

2010

2011

0

2012

CY

2007

2008

2009

2010

2011

0

(Plan)PRODUCTION PLAN
• “Bridge manufacturing” of Impreza models at Gunma Main Plant will
start from August 2012
• Local assembly production in Malaysia will start from January 2013

FY2011FY2016Japan

460 thousand units

580 thousand units

Overseas

160 thousand units

210 thousand units

Total

620 thousand units

790 thousand units

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PURSUIT OF ALLIANCE SYNERGY WITH TOYOTA MOTOR CORPORATION
Development
Joint development

Introducing jointly developed model SUBARU BRZ/Toyota 86 and studying future improvement of the product

Technology
development

Pursue synergies by participating in development work on next-generation environmental technologies

OEM
Minicar

Supplied all lineups of minicars on an OEM basis by Daihatsu in the spring of 2012

Compact car

Supplied on an OEM basis by Toyota in Japan and Europe; Study ways to enhance its product competitivenessProduction
North America

Consignment production of Camry in SIA

Japan

Manufacture of jointly developed model SUBARU BRZ/Toyota 86

However, Subaru does not have the business resources tospare to expand investment to a level required to growthese businesses.
The same holds true not only for aircraft and industrial
products, but automobiles as well. How to make automobiles more responsive to this environmentally conscious
age has been called into question. Although it has been
said that Subaru’s strong point is technology, the Company does not have sufficient resources to develop fuelcells and hybrid vehicles from scratch. For this reason, we
need to take full advantage of various business alliances.
Jointly developing automobiles has merit for both Subaru
and Toyota. As such, we intend to utilize joint development in such areas as environmental technologies. No
matter what business we undertake, I believe that wemust fully clarify the reasons for Subaru’s involvement.

Please share your thoughts on what needs to bedone to maintain favorable sales in the years ahead.
production in China remains to be seen, but we are continuing our efforts to achieve this. Outside of the United States,
potential locations for a company the size of Subaru to
engage in full-scale local production are strictly limited andcenter on China. Therefore, we have no intention of removing China as an area for undertaking local production.
On the other hand, we are investigating the smallscale feasibility of undertaking local completely knocked
down (CKD) production in Malaysia within the current
fiscal year. Although we have been extremely cautious
about such activities to date, we decided that pursuing
CKD production was worth a try since there are no majorrisks associated with it. Despite the lack of significant
profit potential due to the small scope of this investment,
I feel that we need to experiment with this type of production. However, if this initiative spreads beyond Malaysia,
the manufacturing division may be stretched in terms of

14

personnel. As such, we will first give this venture in Malaysia
a try, and when our local production efforts begin to takeshape in China, we will redeploy employees to that country.

Please describe the future direction of Subaru’s
businesses.
On March 30, 2012, we announced our decision to transfer FHI’s wind-power generation and sanitation truck
businesses. This decision was the result of deliberations
over what was best for both businesses as well as whatneeds to be done to expand them in the years ahead.
The efforts made by the Company in both the wind-power
generation and sanitation truck businesses are meaningful.
In particular, wind-power generation offers technologies
indispensable to the current environmental-oriented age.

To begin, when it comes to considering what areas tospecialize in, rather than try to be competent in all technological areas like large automakers, it is important for
Subaru to concentrate on its own areas of technologicalexpertise while looking for ways to hone and maintain its
competitiveness. In other words, we work to determine
which models will realize “enjoyment and peace of mind”
values that Subaru offers customers through its brandstatement, as well as how to continue offering this kind ofvalue. We base this on the reliable drivability unique toSubaru, which is symbolized by the horizontally-opposedengine and Symmetrical All Wheel Drive (AWD). In addition, while advancing vehicle functionality, we are committed to creating and providing the customer with emotional values such as safety and peace of mind realized
by “EyeSight”; and the new level of driving pleasure

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provided by the SUBARU BRZ. Providing such values will
enable us to enjoy sustainable growth.
It is also important to develop a corporate organizationthat provides a foundation for favorable growth. With thisin mind, I believe that a leader is someone who inspires
others. Although a top-down approach to motivate people to improve is necessary, it is more important to continuously bring one’s own abilities fully to bear to foster
employee self-motivation. Accordingly, I have great expectations for Subaru’s organizational development aswell as its leaders. Fostering the ability to think for one’s
self will enable a level of individuality that will lead togreat results. This, along with pooling our collective
strengths, will allow Subaru to reach an even higher stageof growth. This is something I believe from the bottom of
my heart. Creating an organization that aims for the same
goals while possessing a variety of strengths is ideal.

In conclusion, what message would you like to give
to shareholders and investors?
Subaru places the utmost priority on returning profits toshareholders and investors. With this in mind, we seriously
engage in business management to create a level of success that provides investors with confidence that theirinvestment in the Company was worthwhile. I look forward to your continued understanding and support in theyears ahead.

Yasuyuki Yoshinaga
Representative Director of the Board,
President and CEO

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SPECIAL FEATURE: CORPORATE VICE PRESIDENT INTERVIEW — PROVIDING A DISTINCTIVE SUBARU EXPERIENCE —16

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Why do you think such new models as the Imprezaand the Subaru XV are enjoying strong sales?
This is thanks to our customers. The new Impreza continues to enjoy strong sales mainly on the back of orders
received for 24,000 units in the four months since announcing its release in November 2011. This exceeds oursales target by 2.8 times. In the United States, Impreza has
been breaking sales records every month since its releaseseven months ago (as of June 2012). The product conceptof the fourth-generation Impreza is “Redefining value,
Redefining class.” The reason why Impreza perfectly fits
today’s global market is because of a distinctively Subaru
styling and packaging that fully embody the “Redefining
value, Redefining class” concept. This impressive sales
record is also due to its enhanced product appeal, whichreflects a level of quality that exceeds other vehicles in its
class. These features are also rooted in Subaru’s consistent philosophy of “Engineering Excellence.”
Subaru is currently promoting its brand statement
Confidence in Motion. In line with this, we aim to build
relationships of trust with customers and thereby provide
them with “enjoyment and peace of mind,” value that
resonates deeply with customers on an emotional level.
We will realize this aim by offering distinctive Subaru
products, which are created on the basis of our “Engineering Excellence” philosophy. “Enjoyment and peaceof mind” can be seen in such tangible areas as Subaru’s
superior safety performance, vehicle stability, handlingand packaging. “Enjoyment and peace of mind” is also
expressed on an emotional level through the driving
pleasure experienced in Subaru automobiles. I believethat owing a Subaru automobile enhances the enjoyment
experienced in every aspect of one’s life. To realize thistype of value, we are ensuring that the product planning,
R&D, manufacturing, sales and service divisions all sharethe same vision. Owing to our efforts to communicate
with customers in a manner that is open, honest and reflects this shared vision, we have laid the foundation offavorable sales.
In Japan, although post-disaster reconstruction demand and eco-car tax rebates have driven sales, the key
factor in Impreza’s strong sales is its size and packaging,which is a perfect fit for the automobile market. In addition, sales benefitted from increased cyclic demand as
customers replaced automobiles purchased between
2004 and 2005. Yet another factor is the realization ofsporty and highly enjoyable drivability enabled by our
new technologies along with superior environmental
friendliness made possible by the adoption of new environmentally friendly Boxer engines, new Continuously
Variable Transmissions (CVTs) and Auto Start Stop functions. Beyond this, I believe that the advanced and timely“EyeSight” Active Driving Assist System, developed from
Subaru’s unique technologies, has given our automobiles
emotional appeal. This type of value comes from the feeling of safety Subaru automobiles provide, which is very
appealing to customers. The Impreza is receiving favorable evaluations as a product that offers new value. Morespecifically, while being in the current trend of downsizing,
the Impreza doesn’t offer downsized product features. In
other words, it continues to provide a feeling of qualitythat exceeds other vehicles in its class.

Illuminating Subaru’s
Future Direction by
Creating Products Desiredby Customers.

Toshio Masuda
Corporate Vice President
Chief General Manager
Subaru Product & Portfolio Planning Div.

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In the United States, Impreza’s refreshed styling has
been highly appreciated. Moreover, Impreza has received
the highest ratings in its class for safety performance,
which is symbolic of Subaru’s uniform automobile engineering. Impreza also received the highest possible evaluations in overall product categories by various consumer
publications, contributing to higher sales. These evaluations are proof of the safety and reliability characteristicof all Subaru models, which are responsive to customer
demands while being distinctively Subaru. In addition, all
Subaru brand automobiles have gained wider recognition
as reliable products. This is reflected in the high ratingsreceived for used car resale value. This, in turn, has led toincreased customer satisfaction. As a result, the increasing
sales momentum has maintained a virtuous circle that isbenefiting all Subaru models.
From a different perspective, the first- and secondgeneration Impreza display a sports-oriented conceptthat began with the development of Subaru’s first puresports sedan. Cultivating a high-performance image bolstered by successes in top categories of the World Rally
Championship showcases yet another aspect of Subaru’s
brand value. At the same time, we have a strong desire asa manufacturer to expand customer categories for the

Subaru XV18

new model Impreza and increase sales in global markets.
As a result of our considerable research, we made a major decision to equip the new Impreza with a naturallyaspirated engine only. From a marketing perspective, we
decided to move away from a strictly sport-oriented performance image featuring a turbo engine, for which weare known in the market. In terms of manufacturing, wechose not to incorporate turbo engines or other highperformance design concepts from the very earliest stages of development. Rather, we were able to utilize ourresources as well as investment more efficiently and successfully develop the new Impreza by focusing on thenaturally-aspirated engine as a key characteristic of thismodel. Without a doubt, nothing is more important at thedevelopment phase than determining customer needs.
As such, we realize that providing environment-friendly
automobiles best meets customer needs and has been an
important factor in the strong sales we have enjoyed.
The Subaru XV is a crossover model that was designed
based on a passenger vehicle, an area in which Subaru
excels. Staying abreast of the growing popularity of compact SUVs, especially in Europe, we emphasized a designthat reflects the stylishness of SUVs from the earliest
development stages. As a result, we created a vehicle
that features a very stylish interior and exterior design.
The Subaru XV has enjoyed strong sales precisely because it perfectly suits customer desires for smaller, more
efficient vehicles that feature superior environmental
friendliness.

In line with the phrase “fulfilling a diverse array ofneeds,” Subaru is able to accurately anticipatechanges in consumer preferences. How is Subaru
able to accomplish this given the tendency of other companies to simply increase product lineups or
produce vehicles that meet short term needs?
Subaru’s corporate culture focuses on cultivating an extremely high level of technological excellence that isfound nowhere else. At the same time, we are able to use
limited business resources to stay ahead of the competition. As a result, we devote our energy to accurately
understanding how to deliver quality to customers overthe long term within a single package and design.
For example, we work to address changes in the automobile society, including trends towards smaller sizes,
new power sources and environment friendly products.
Rather than trying to change every feature, Subaru thinks
deeply about what types of new automobiles and classes
should be released to satisfy demand in particular markets. To this end, we work to accurately determine thedirection of Subaru products in each market. Without adoubt, we will not be able to increase sales volumeunless we offer products that meet customer needs.
Accordingly, we prepare detailed, rational analysis todetermine whether committing business resources to aparticular new car model is worthwhile or not, as well as
what type of return we can expect from our investment.
The key of our success as an automaker with a limited
selection of vehicle models is by maximizing the merits
found in being open to customers. Subaru is unique inthat it emphasizes improvements to its products on a
yearly basis. As such, we take advantage of numerous opportunities to communicate with customers. As a result,
we gain a considerable amount of information by examining one model at a time. In addition to accurately conveying our engineering perspective to customers, we are

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constantly examining what changes are necessary as wellas what is required to increase our market share based ona gradual understanding of market conditions gained
from customers.
Product planning plays a role in precisely translating
the direction Subaru must take into products that customers desire. We believe we have been closely communicating with customers in our consistent automobile
engineering process. Accordingly, we are very careful tomaintain the fundamental aspects of our production
planning as we continue to increase product value. We
continually and unreservedly ask “why,” fully aware of theimportance this question holds. With this in mind, we arealways thinking about strategies to improve models
throughout their lifespan. Therefore, we are constantly
asking questions.... What do customers appreciate? Whatis lacking? What do we need to add in future models?
Communication with customers by conveying a strong
message strengthens our relationship of trust with themand allows us to engage in precise product development.
For instance, we have received top ratings for overall
product quality, safety performance and residual value
from the media and independent organizations in UnitedStates, a very important market for Subaru. This is supported by Subaru’s culture of constantly improving products to maintain cutting-edge features and optimal quality by taking advantage of model year adjustments andperiodically giving minor facelifts. By achieving successive improvements in standard models over each generation, we are able to come ever closer to meeting customer needs. As a result, we satisfy customers in areas
including high residual value. This makes it possible tosell cars with minimal incentives and thereby create avirtuous circle in Subaru’s business environment.
Most Subaru models undergo what we refer to as“big minor model changes” around the halfway point of
their lifespan. It is important to stress that these “bigGunma Main Plant

minor model changes” are indispensable from the standpoint of accurately determining changes in the market
and customer needs. We improve our automobiles to reflect the needs of each market as well as customers.
In 2012, for example, Subaru equipped the Japanesemodel Legacy with a first ever 2.0 liter direct-injection
turbo engine. We adopted this engine design to meet customer expectations for higher performance as well as tofulfill our desire to introduce Subaru’s unique technologies
to rapidly address market trends favoring direct-injectionengines and downsizing. This engine was developed bymaking full use of Subaru’s direct-injection and turboengine technologies cultivated from the Boxer diesel
engines. Teamed with the new CVT, we will further refine
this new power unit that features Subaru’s distinctive
qualities and addresses current environmental needs.
In China, we are currently focusing on the SUV models,

Outback and Forester. At the same time, we increased
the height of the Legacy and changed partially its exterior
design to meet localized demand for higher quality sedan
models and boost the Legacy’s presence in the highly
competitive Chinese market.
These are some examples of how Subaru’s productplanning works to meet customer needs and respond tochanging markets. On this premise, we take steps toeffectively bolster communication with customers.

What are your thoughts on the SUBARU BRZ, which
was developed jointly with Toyota Motor Corporation?
In light of the difficulties posed by joint development, webegan developing the SUBARU BRZ based on the premise that it should distinctively offer Subaru uniqueness. As

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an experienced Subaru engineer, I believed the project
would be achieved by utilizing Subaru’s authentic engineering expertise that developed the Legacy and Impreza.
Thanks to our efforts, we are very satisfied with SUBARU
BRZ, which is the first two-door sporty model to be released since the “Subaru SVX” 20 years ago. Being incharge of development, I feel a great sense of accomplishment from the SUBARU BRZ, too. Developing the SUBARU
BRZ helped to deepen our partnership with Toyota.
Beyond this, the project had a great significance in furthering our business strategies since we were able to retool
our main plant, which had been primarily used to produce
minicars over the past 50 years. In addition to this shift tohighly profitable passenger cars, the project was beneficial in terms of ensuring local employment and bolstering
supplier business operations. In particular, we were able
to achieve a complete switchover of manufacturing lines
in just four days. This is proof positive of the manufacturing division’s high degree of adaptability. After commencing production, we received far more orders than expected. As a result of our efforts, the pace of the factory floor
has become very brisk, resulting in changes from one shiftthat produced minicars in the past to two shifts that accommodate both the SUBARU BRZ and Toyota 86.
Through joint development, we wanted to leverage
this project to dramatically push forward our own abilities. As a manufacturer that specializes in Symmetrical
All-Wheel Drive (AWD), we took on the challenge of extending our own technical standards during the development of the font-engine, rear-drive car. Throughout thedevelopment of SUBARU BRZ, we sometimes dropped
our preconceptions. Consequently, the cooperative effortsof Subaru and Toyota to create a quality product were amajor factor in the success of the project. As a Subaru
engineer, I believe that these actions made it possible toovercome yet another obstacle in the development of aquality and enticing car.

20

Please share your thoughts on the future directionof product planning in terms of maintaining a “distinctive Subaru experience.”
In our pursuit of rational and straightforward car engineering and manufacturing, we engage in product planning inwhich we offer best yet cutting-edge products in terms of
performance, cost, quality, quantity, sales and service.
Against this backdrop, a “distinctive Subaru experience” iscreated by making full use of Subaru’s unique technologies
and distinctive features such as the horizontally-opposedboxer engine, our car body engineering and other expertise. Specifically, we will develop technology-oriented
products that feature unique engines and hybrid electric
products that combine in an unique vehicle package. In
addition to incorporating functions intrinsic to automobiles,
our product planning focuses on creating features thatstrike a chord with customers. In other words, we develop“delightful” products that also offer emotional values suchas safety and peace of mind.
The horizontally-opposed engine will remain a coreexpertise for Subaru. Its uniqueness enables a significant
boost in power within a single engine design. For turbocharging technology, we have accumulated a level oftechnology and expertise that has made us a global
trendsetter in this technology. In recent years, European
automakers have also been promoting products that are
responsive to the trend towards environment-friendly
engines by developing smaller-size engines as well as theuse of direct-injection technology. In line with this trend,
Subaru is making vehicles that combine such features as
smaller-displacement turbo engines and direct-injectionengines with high-efficiency CVT. This design concept isbeing pursued with the aim of taking maximum advantage of Subaru’s unique asset, the horizontally-opposedengine. Featuring an unparalleled design, this compact,
low-vibration engine is being installed in our new car body

platforms. Combined with the use of direct-injection technology, we are leveraging our technological capabilities
to offer vehicles that are more attractive to customers.
Looking ahead, the key focus of product planning will
be to expand sales by creating vehicles that meet theneeds of major markets; offer lineups that are highly responsive in mature markets; determine how to develop
high-volume vehicles; and improve the flexibility of product planning of those models in each market.
We expect the U.S. market will fully recover from thesetbacks caused by the 2008 financial collapse as well as
remarkable gains of South Korean automakers. Under
these circumstances, we take the feedback we receivefrom this major market very seriously. By monitoring
consumer trends in this market and maintaining sales
momentum, we will identify key issues related to enhancing production capability and product lineups in line withthe sales volume of our mainstay U.S. products from 2014
onward. In Japan, we will expand sales of strategic products in anticipation of increased post-disaster recovery
demand and additional demand generated during eco
car rebate periods.
In terms of specific future products, we will upgrade
product appeals of performance models to enhance
Subaru’s brand image. At the same time, we will work todevelop distinctive automobiles that showcase Subaru’s
unique advantages in the areas of “intelligent” safety
and reliability. EyeSight is one example of this. Looking
ahead, while taking steps to differentiate Subaru from thecompetition, we will enhance easy-to-understand functions to respond to the challenges posed by an aging
society, create value that delights customers and optimize
features on every Subaru model. We will also examine
how to develop products in light of the increasing popularity of hybrid and electric vehicles. Looking beyond“Motion-V,” I expect these measures to take shape in thenext mid-term management plan.

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CORPORATE SOCIALRESPONSIBILITY (CSR)
CSR Policy
As a corporate entity that carries out monozukuri (“manufacturing products”) to bring enjoyment to its customers,
the FHI Group has revised its CSR policy. The purpose of
the revision to the CSR Policy in 2009, which has received
the approval of the CSR-related committees, was to clarify
the requirements for approaches at the corporate organizational level: (1) CSR centered on upholding the Corporate Code of Conduct and respect of critical items, and (2)aggressive CSR centered on contributing to social issues
through business activities as a good corporate citizen.
1. Based on FHI’s Corporate Code of Conduct, we shallrespect the law, human rights, international codes ofconduct and stakeholder rights as well as upholdstandards of moral behavior.
2. As a good corporate citizen, the FHI Group shallwork toward rectifying the global social problems
facing modern society.
In addition to focusing on relationships with various
stakeholders, our CSR activities emphasize the FHI Group’s
mission, which is to contribute to society’s ongoing development through our global business activities.

CSR Activities
We have established eight categories to raise awarenessof our CSR activities among all employees as well as help
promote CSR in our business operations. In order tosteadily meet social demands, we have defined in detail
CSR activities undertaken in each category. This allows us
to promote CSR with greater clarity.

The 8 CSR Categories of FHI
Customer/Product

Employee

Provide socially useful and safe
products and services to earncustomers’ satisfaction andconfidence.

While respecting the diversity,
individuality and personality of
employees, realize comfort andaffluence by securing a safe andpleasant working environment.

Environment

Compliance

Since the approach to environmental problems is an issuecommon to humanity, getourselves proactively involved
as an indispensable need forcorporate existence andactivities.

Observing laws and keeping
morality, be fair, transparent andfree in competition and conduct
right deals. Also, honor confidentiality by strictly protecting andmanaging information, including
data on individuals and customers.

Information Disclosure

Social Contribution

Communicate widely withstockholders and others anddisclose positively and fairly
corporate information.

Get positively involved in social
action programs as a “goodcorporate citizen.”

Procurement

Corporate GovernanceConduct appropriate procurements and work on suppliers for
CSR promotion.

The top management works tomake CSR rooted deep companywide and at the group companies,
and take initiatives to solve issues
in case of emergency.

ALL-AROUND SAFETY
As well as naturally striving to ensure that the driver andpassengers in a Subaru vehicle enjoy a safe and comfortable ride from a variety of driving scenarios, Subaru aims
to improve the overall safety of the mobility society fromsuch perspectives as the surrounding environments andpeople’s safety.
Active Safety: Safe Driving Capabilities
Subaru is improving the drive, turn and stop functions
fundamental to automobiles, which in turn leads to the
avoidance of hazards. Featuring superior weight balanceby lowering the center of gravity of Subaru automobiles,
Symmetrical AWD is the Company’s core technology that
increases pleasurable drivability while enabling safe operation. Owing to the optimal handling it provides in various

circumstances, Symmetrical AWD creates leeway thatallows drivers to make composed decisions just in time.
Such capabilities allow the driver to avoid hazards.
Passive Safety: Collision Safety Capabilities
In the event of a collision, Subaru is continuing to pursue
next-generation collision safety performance that will reduce injuries not only to drivers and passengers in Subaru
automobiles, but to those in other vehicles and pedestrians
as well. Consequently, Subaru automobiles have achieved
the world’s highest ratings in collision safety performance.
Pre-Crash Safety: Working to Realize a Society without
Automobile Accidents
The “Eyesight” Active Driving Assist System was developed with the aim of providing the ultimate level of safety,
referred to as “collision-free cars.” “Eyesight” (version 2)
features such functions as pre-collision braking control
that uses automatic brakes to avoid collisions; adaptive
cruise control with all-speed-range tracking functions
that helps to maintain a safe distance between vehicles;
and a creep suspension and control system that guards
against sudden acceleration due to driver error. Subaru’s“EyeSight” (version 2) has received high ratings and is

An image of EyeSight identifying obstacles in the street

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now featured on the Legacy, Impreza and Exiga in Japanand the Legacy and Outback in Australia. Subaru isscheduled to release models featuring “EyeSight” (version 2) in North America in the summer of 2012.
The Environment
Environmental Initiatives
FHI regards global environmental matters as one of its
most pressing management issues. On that basis, FHI established in 1998 its “Environmental Policy” and formulated the “Operating Criteria for Environmental Conservation” as specific action guidelines. FHI is promoting
activities in this area based on a detailed revision of the“Environmental Policy” in 2010.
Environmental Policy
In recognition of the close relationship between the global
environment and business activities, we will deliver “Green
Products” from “Clean Plants and Offices” through “Green
Logistics” and “Clean Dealers” to customers for the sustainable development of society. Also, to say nothing ofstrictly observing laws and regulations, local agreements
and industries’ codes, we will get ourselves committed tocontribution to society and local communities, voluntary
ongoing improvements and prevention of pollution.
The 5th Voluntary Plan for the Environment
FHI has formulated its 5th Voluntary Plan for the Environment (fiscal 2013–fiscal 2017). The plan involves the following areas: (1) Undertake initiatives to counter global
warming; (2) Conserve natural resources; (3) Prevent pollution and reduce the use of harmful chemicals; and (4) Engage in environmental management. Through this plan,
we set environmental conservation goals that exceed
normal standards in accordance with our environmental
policy. In addition, the Company establishes targets tomake contributions to society through its products. Accordingly, we offer customers greener products based on

22

a system of environmentally clean plants, offices, logistics
networks and dealers while engaging in appropriate environmental activities. Such activities include complying
with laws, regulations and agreements along with cooperating with the automotive industry. Sharing the Plan as
the guidelines of not only FHI, but also the other Group
companies, we will positively address environmental issues
for their continuous solution.
Main Initiatives(1) Undertake initiatives • Steadily meet fuel economy and greenhouseto counter global
gas standards in every overseas region
warming• Promote activities that reduce CO2 emissions
from overseas manufacturing plants• Improve fuel economy performance by 30%(2) Conserve natural
resources• Continue efforts to ensure zero emissions
from manufacturing plants• Take recyclability into account in new model
designs(3) Prevent pollution
and reduce theuse of harmful
chemicals• Comply with laws, regulations and agreements, including EU directives• Promote the development of low-noisetechnologies that offer both improved fueleconomy and reduce emissions(4) Engage inenvironmental
management• Develop and expand advanced safe driving
systems• Expand the use of EyeSight (ver. 2)• Promote integrated ISO 14001 certification,
including all affiliated companies• Encourage greening activities that consider
biodiversity

Corporate Governance
Basic Approach to Corporate GovernanceIn line with its Corporate Philosophy, FHI views the strengthening of corporate governance as one of management’s
highest priorities, so that it can measure up to the trustand confidence placed in the Company by all of its shareholders, customers and other stakeholders. FHI is working to clarify the decision making, monitoring and execution functions of the Board of Directors to enhance
decision-making speed and improve management efficiency. To that end, the Executive Management Board
was established to undertake deliberations regarding

Companywide strategies and matters important to business execution. The results of these deliberations are reported to the Board of Directors. In addition to adopting
the executive officer system, the Company has positioned the Automobiles division as its core business andhas introduced an internal company system—composedof the Aerospace, Industrial Products and Eco Technology divisions—to clarify management responsibilities andaccelerate business execution. Management oversight isundertaken based on the monitoring functions of theBoard of Directors and audits performed by corporate
auditors and the Board of Corporate Auditors. In addition, the Company appoints an outside director and outside corporate auditors in an effort to maintain management objectivity and transparency.
Directors, Corporate Auditors and Outside Executive
Officers
FHI has established the Board of Corporate Auditors. The
Board of Directors’ makes decisions and monitors mattersrelated to important policies, strategies and business execution. Corporate auditors and the Board of Corporate
Auditors conduct audits pertaining to how directors perform their duties. Currently, the Board of Directors is comprised of seven directors. This includes a highly independent outside director who has been appointed to further
augment the Company’s corporate governance. The
Board of Corporate Auditors is comprised of four corporate auditors, including two outside corporate auditors,
who participate in Board of Directors’, Board of Corporate
Auditors’ and Executive Management Board meetings aswell as attend other important company meetings. At thesame time, corporate auditors provide appropriate advice and direction from a wide-ranging perspective while
conducting audits through hearings held by businesssites, subsidiaries and the Internal Audit Department.
The Company has appointed the outside director,
Toshio Arima, who possesses considerable experience as

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an executive and has a high degree of expertise in thearea of CSR. Mr. Arima offers sound advice to and ensures
independent monitoring of the Board of Directors andother bodies. The Company has appointed the outside
corporate auditor, Nobushige Imai, who is fully qualified
for this position owing to his management experienceand wealth of knowledge as an executive in the financial
industry, and his credentials and abilities to undertake
audits in an objective manner. In addition, FHI appointed
outside corporate auditor, Takatoshi Yamamoto, who isfully qualified for this position owing to his wealth of knowledge of corporate activities as a securities analyst and his
corporate management experience as an executive in the
manufacturing industry. In light of their backgrounds andwith no possibility of a conflict of interest arising with regular shareholders, Mr. Arima and Mr. Yamamoto have been
appointed as independent directors under Tokyo Stock
Exchange (TSE) regulations.

Overview of Compensation for Directors and Corporate
Auditors
Regarding executive compensation, the total amount ofcompensation paid to directors and corporate auditors in
one year is limited to ¥600 million and ¥100 million, respectively. These amounts were approved at the Ordinary
General Meeting of Shareholders in June 2006. Approvedby the Board of Directors, this compensation, which is thebasic amount paid to directors, is divided into a fixedamount (the specific amount is decided upon in consideration of the business environment and other factors basedon position) and a performance-based amount (the specific amount decided upon in consideration of the business environment and other factors based on consolidated ordinary income for the fiscal year under review).
In fiscal 2012, compensation for directors and corporate auditors was as follows:
Millions of yen

Basic compensation

Corporate Governance System

Classification

NumberFixedamountPerformancebased amount

Total

Directors (Excluding
outside directors)

8

255

73

328

2

51

—

51

CSR Committee

Corporate auditors(Excluding outside
corporate auditors)

Environmental
Committee

Outside executive
officers

3

42

—

42

Total

13

348

73

421

General Meeting of Shareholders
Appoint/
Dismiss

Appoint/
Dismiss

Board ofCorporate
Auditors Meeting(4 corporate auditors, Audit
including 2 outside
corporate auditors)

Appoint/
Dismiss

Board of Directors
Meeting(7 directors)

Appoint/
Dismiss/
Supervise

ReportAccounting
Auditors

ReportReportPresident/
Representative
Director

Compliance Committee
Recall Committee

Cooperate

Internal Audit
Department

Executive
Management
Board Meeting
Assign/Supervise

Audit

Committees

ReportReportExport Control
Committee

Deliberate and report onimportant matters

Corporate Vice
Presidents(20)

Implement

Appoint/Dismiss
Make proposal forand report on plans

Approval ofpolicypresentations
and plans

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

Note: This table includes directors who retired at the conclusion of the Ordinary General
Meeting of Shareholders, held in June 2011. As of March 31, 2012, the Company
maintains seven directors (including one outside director) and four corporate
auditors (including two outside corporate auditors).

Risk Management
FHI takes steps to maintain business operations during
emergencies by fully comprehending and taking optimalmeasures to deal with risk. Based on its compliance systems, FHI strengthens its risk management by formulating regulations and guidelines as well as through the coordination of each division and company.

FHI’s headquarters cooperates with each FHI divisionand company to manage Companywide business risk. These
actions are carried out under the supervision of the Management Planning Department, which is responsible for maintaining management functions across business operations.
Many types of risk can seriously affect FHI’s management. In addition, such risks may lead to emergency situations that cannot be addressed through regular decision-making channels. Such risks are categorized into
natural disasters, accidents, internal and external humanfactors, social factors, and compliance. The Company has
prepared a manual for responding to these types of
emergencies. FHI works to address risks through measures that include establishing optimal communication
channels to provide information after risks are detected
as well as an emergency response headquarters.
Moreover, the Company formulates a Business Continuity Plan (BCP) to maintain or restore business operations as
rapidly and completely as possible. In emergency situations,
FHI makes concerted efforts to minimize the negative impact on its services, market share and corporate value. In theevent that business resources are affected during an emergency, the Company works to minimize disruptions to priority businesses by making maximum use of available resources in order to restore operations as quickly as possible.
Compliance
A Compliance Committee has been established in accordance with compliance regulations to promote corporate
compliance Companywide. The Compliance Committee
conducts deliberations and discussions, makes decisions
and exchanges information regarding key compliance issues. In addition, each department devises a yearly compliance implementation plan to enhance corporate compliance while independently promoting continuous andsystematic implementation activities. FHI takes steps to prevent illegal activity by implementing Groupwide compliancetraining and establishing a Compliance Hotline system.

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MANAGEMENT (As of June 22, 2012)

Representative Director of
the Board,
President and CEO

1. YASUYUKI YOSHINAGA
Representative Director of
the Board,
Deputy President

2. JUN KONDO
Directors of the Board,
Executive Vice Presidents

Vice Presidents

YASUO UENOTATSUHIKO MUKAWAYASUO KOSAKAITSUYOSHI NAKAIYASUNOBU NOGAI
MASASHI TAKAHASHIMASAMI IIDATOMOMI NAKAMURA

3. AKIRA MABUCHITOSHIO MASUDA

4. NAOTO MUTO

KAZUO HOSOYA

5. TOMOHIKO IKEDA

MASAKI OKAWARA

6. MITSURU TAKAHASHI(CFO)SATOSHI MAEDA

Outside Director of the Board

SHUNSUKE TAKAGI

7. TOSHIO ARIMA 1

HIROYUKI OIKAWA

Executive Vice Presidents

NOBUSHIGE IMAI 2

SHUZO HAIMOTO

Corporate Auditor

MITSURU TAKADATAKATOSHI YAMAMOTO 3

Standing Corporate Auditors

HISASHI NAGANO
Senior Vice Presidents

TAMAKI KAMOGAWA
TAKESHI TACHIMORI

5

7

6

3

2

4
1

MASAHIRO KASAIHIDETOSHI KOBAYASHIYOSHIO HIRAKAWA

1. Toshio Arima has been appointed as an outside director in accordance with Japanese Corporate Law (the “Law”) and an independent director under Tokyo Stock Exchange(TSE) regulations.
2. Nobushige Imai has been appointed as an outside corporate auditor in accordance with the Law.
3. Takatoshi Yamamoto has been appointed as an outside corporate auditor in accordance with the Law and an independent director under TSE regulations.

24

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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CONSOLIDATED TEN-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 and administrative expenses
Operating income (loss)
Income (loss) before income taxes andminority interests
Net income (loss)
Comprehensive income
At Year-End:
Net assets 2
Shareholders’ equity
Total assets
Ratio of shareholder’sequity to total assets (%)

Thousands of
U.S. dollars 1

2012

2012

¥1,580,563 ¥1,517,105
1,241,427
1,222,419
339,136
294,686
255,001
250,727
84,13543,959$18,469,747
14,882,140
3,587,607
3,052,435
535,172

2003

2004

2005

2006

2007

2008

2009

2010

¥1,372,337
1,011,582
360,755
293,234
67,521¥1,439,451
1,085,716
353,735
303,41150,324¥1,446,491
1,107,718
338,773296,756
42,017¥1,476,368
1,125,293
351,075
292,736
58,339¥1,494,817
1,142,674
352,143304,237
47,906¥1,572,346
1,217,662
354,684
309,004
45,680¥1,445,790
1,164,564
281,226
287,029(5,803)¥1,428,690
1,152,763
275,927
248,577
27,35046,97056,266

21,066

28,67445,58931,906(21,517)(443)

63,21452,879643,767

33,484—38,649—18,238—15,611—

31,899—18,481—(69,933)—(16,450)(13,416)

50,32634,90038,45344,474

468,140
541,441¥ 414,614
411,252
1,344,072¥ 457,027
453,708
1,349,727¥ 474,616
471,149
1,357,459¥ 467,786
465,522
1,348,400¥ 495,703
494,004
1,316,041¥ 494,423
493,397
1,296,388¥ 394,719
393,946
1,165,431¥ 381,893
380,587
1,231,367¥ 413,963 ¥ 451,607
412,661
450,302
1,188,324
1,352,532$ 5,498,016
5,482,128
16,466,180

30.6%

33.6%

34.7%

34.5%

37.5%

38.1%

33.8%

30.9%

34.7%

33.3%

¥44.8442.91
553.90¥50.6249.66
582.60¥23.2723.27
604.51¥20.6620.66
649.41¥44.4644.44
687.81¥25.7325.73
687.02¥(91.97)—505.59¥(21.11)—488.58¥64.56—528.88¥49.27—576.9756,062 ¥58,611Per Share (in yen and U.S. dollars):
Net income or net loss:
Basic
DilutedNet assets
Other Information:
Depreciation/amortization expenses
Capital expenditures(addition to fixed assets)
R&D expenses
Number of shares issued(thousands of shares) 3
Number of shareholders 3
Number of employees 3:
Parent only
Consolidated

Millions of yen¥

67,896¥

71,112¥

71,010¥80,073¥81,454¥87,164¥74,036¥65,785

2011

¥

$0.60
—
7.02

$

713,550

119,423

128,026

147,759

119,289

126,329

118,869

95,15389,077

67,37867,035816,10760,11057,541

52,962

46,89350,70952,02042,831

37,17542,907

48,115585,768

746,521782,865

782,865

782,865

782,865

782,865

782,865

782,865

782,865

782,865

35,58434,70434,55846,36742,92044,48440,83939,22334,24033,13913,06427,47812,92827,296

12,703
26,98911,998
26,115

11,752
25,598

11,90926,404

12,13727,65912,48327,586

12,42927,296

12,35927,123

1. U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥82.14 to US$1.00, the approximate rate of exchange at March 31, 2012.
2. Prior year amounts have been reclassified to conform to the current year presentation.
3. As of March 31

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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FIVE-YEAR AUTOMOBILE SALES
Years ended March 31

Consolidated Automobile Sales
Consolidated Automobile Sales by Region

Number of units
2008

2009

2010

2011

2012

Legacy31,07920,41528,862

22,673

22,812

Impreza

29,67819,733

21,721

20,184

29,122

Forester(Number of units)

Domestic Units:
800,000

600,000

400,000

16,863

16,424

11,87912,68513,803

Exiga—

11,126

10,789

7,859

8,020

BRZ

—

—

—

—

249

OEM

—

2,034

1,523

4,430

5,844

Others

435

363

323

303

303

78,05570,09575,097

68,13480,153

130,635

108,694

96,17589,971

92,189208,690

178,789

171,272

158,105

172,342

United States

192,760

188,240

227,028

278,959

280,356

Canada17,587

18,873

22,82828,05928,239Europe63,37356,76437,34048,24439,075

Russia22,622

20,711

1,563

11,32015,860Australia

40,21036,71634,992

41,15036,928Subtotal
200,000

Minicars
Domestic Total

0

FY 2008

2009

2010

2011

2012

■ Japan ■ United States ■ Canada ■ Europe■ Russia ■ Australia ■ China ■ Others

Consolidated Automobile Sales by Model(Number of units)

800,000

Overseas Units by Region:

China

12,621

26,184

48,93862,412

48,323

Others38,802

29,056

18,87628,71518,739387,975

376,544391,565

498,859

467,520

Legacy137,829

102,106

146,099

225,388

210,194

Impreza

113,777

97,472

74,99887,06690,149Forester

96,839153,289

156,288

176,453

157,833

Tribeca

27,327

17,658

7,564

5,643

5,702

Subtotal
Overseas Units by Model:

600,000

400,000

200,000

0

FY

2008

2009

2010

2011

■ Legacy ■ Impreza ■ Forester ■ Tribeca

2012

BRZ

—

—

—

—

38

OEM

11,624

5,580

5,994

3,865

3,372

Others

579

439

622

444

232

Subtotal
Total

387,975

376,544391,565

498,859

467,520

596,665

555,333

562,837

656,964

639,862■ Exiga ■ BRZ ■ OEM ■ Others ■ Minicars

26

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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Non-Consolidated Automobile Sales

Number of units
2008

2009

2010

2011

2012

Legacy34,63422,05930,927

23,212

23,968

Impreza

32,873

21,93523,316

20,85930,566

Forester

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

Domestic Units:

18,74016,954

12,542

13,16013,990Exiga—

12,787

11,893

8,150

8,477

BRZ

—

—

—

—

585

OEM

—

2,651

1,575

5,313

5,993

86,24776,38680,25370,694

83,579132,872

110,043

97,23092,75296,457219,119

186,429

177,483

163,446

180,036

Legacy48,56828,78743,93767,92648,304

Impreza

119,000

99,68869,386

83,921

100,350

Forester

98,602

164,960

159,463

174,541

162,199

—

—

—

—

211

Subtotal
Minicars
Domestic Total

300,000

200,000

100,000

Export Units:

BRZ
Others

7,533

6,978

6,934

4,309

3,935

273,703

300,413279,720

330,697

314,999

Legacy78,42866,87886,330131,873

146,806

Impreza

46,32949,09846,611

44,39541,196

Forester

44,53460,74877,78185,08076,196

Tribeca

16,79010,975

5,930

2,472

2,791

Export total

0

FY 2008

2009

2010

2011

2012

■ Legacy ■ Impreza ■ Forester■ Exiga ■ BRZ ■ OEM ■ Minicars

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

U.S. Retail Sales :
1

Baja

1,127

—

—

—

—

187,208

187,699

216,652

263,820

266,989

CKD 2 Overseas

110,363

77,871

113,605

163,469

175,256(SIA Portion)

110,363

77,871

113,605

163,469

175,256

Total

400,000

300,000

200,000

100,000

SIA Production Units 3
Legacy84,96073,473

100,149

159,215

164,968

Tribeca

24,218

18,108

4,197

5,558

5,661

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

0

FY 2008

2009

2010

2011

2012

■ Legacy ■ Impreza ■ Forester ■ BRZ ■ Others

CKD Overseas

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION

The Fuji Heavy Industries Ltd. GroupThe Fuji Heavy Industries Ltd. (“FHI”) Group is engaged in
production and sales activities across a wide range of business sectors. These activities are conducted under fourbusiness divisions: Automobiles (the Group’s core operating domain, which accounts for over 90% of consolidated
net sales), Aerospace, Industrial Products and Other.
On a consolidated settlement of accounts basis, FHI
and 70 subsidiaries (a year-on-year decrease of one) as
well as 9 equity-method affiliated companies (no change
year-on-year) were included in the scope of the FHIGroup’s consolidation as of March 31, 2012, the end of
fiscal 2012 (“the fiscal year under review”).

Overview
Business Environment
During the first half of fiscal 2012, the economic circumstances surrounding the FHI Group deteriorated due tothe impact of the Great East Japan Earthquake and thepersistently strong yen. However, corporate production
activities rebounded in the second half thanks to the resolution of post-disaster electric power and parts supply
shortages. In addition, such factors as an upswing in consumer spending led to a gradual economic recovery.
Under these conditions, the FHI Group establishedthe target of selling over one million units per year within
the next decade for the Group’s core automobile division “Subaru.” In addition, the Group announced its new
five-year mid-term management plan “Motion-V (Five)”(fiscal 2012–fiscal 2016) in July 2011. Currently underway,“Motion-V” serves as the basis for achieving this sales
target.

28

In fiscal 2012 (the first year of “Motion-V”), the Grouplaunched the new model Impreza and the new model
sports car SUBARU BRZ. The SUBARU BRZ was developed
jointly with Toyota Motor Corporation. Both of these strategic brands have received extremely high customer ratings and reflect the Group’s ability to produce results.
Moreover, despite a significant drop in unit productionin the first half of fiscal 2012 due to post-disaster parts
supply shortages, the Group made a unified effort to increase production in order to achieve higher sales after
fully restoring automobile production in October 2011.
Performance Review
Turning to Group performance in fiscal 2012, in light of
the above factors, the post-disaster decrease in production and continual yen appreciation during the first half
led to lower year-on-year net sales and income. Nevertheless, the Group noticeably surpassed full-year targets
set at the beginning of the period under review. This wasdue mainly to the restoration of production and higher
sales volume in the second half as well as efforts to reduce SG&A and other expenses. Underpinned by the“Motion-V” mid-term management plan, these successes
reflected concerted efforts to “provide distinctive Subaru
experience,” “accelerate sales expansion” and “solidify
operational foundation.” Consolidated performance during the fiscal year under review was as follows.
Net sales amounted to ¥1,517.1 billion, down ¥63.5
billion, or 4.0%, compared with the fiscal year ended
March 31, 2011. This result was largely attributable to amajor post-disaster decrease in sales in the Automobiles
division during the first half of fiscal 2012 and the ongoingstrength of the yen.

Net Sales(Billions of yen)

1,600

1,200

800

400

0
FY

2008

2009

2010

2011

2012

Operating Income (Loss) & Net Income (Loss)(Billions of yen)

90
60
30
0
-30
-60
-90
FY

2008

2009

2010

2011

2012

■ Operating Income (Loss) ■ Net Income (Loss)

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

subaru12arE̲FS0905.indd 28

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(Consolidated, Three-Year YoY Comparison)
83.1

8.9

(Billions of yen)

6.1

84.1

(35.6)

(5.7)

■

O
pe
FY ratE ing
M
ar Inc
ch om
20 e
■
10
Im
m sa pro
ixt le ve
ur s v meeoan lu nt
d me of
ot
he &
■
rs
Re
du
ct
i
on
■
in
ex Dec
co
pe re
st
ns as
e
es
an of S
d G
ot &A
■
he
Lo
rs
ss
on
cu
ex rr
ch en
an cy
ge
■
R& In
c
D re
ex as
■
pe e
ns of
O
pe
es
FY rat
E ing
M
I
ar nc
ch om
20 e
11

27.4

8.0

1.2

84.1

44.0
(5.2)

(2.2)

O
pe
FY ratE ing
M
ar Inc
ch om
■
20 e
D
11
ex ec
pe re
ns as
es e oan f S
d G
ot &A
■
he
Im
rs
m sa pro
ixt le ve
ur s v mean olu ent
d me of
ot
he &
■
rs
Lo
ss
on
cu
ex rr
ch en
an cy
ge
■
R& In
D cre
ex as
pe e
■
ns of
es
Re
du
ct
io
n
■
in
O
co
pe
st
FY rat
E ing
M
I
n
ar
ch com20 e
12(42.0)

■

21.1

3.1

51.4

67.0
(47.7)

(4.9)

O

pe

■

R& In
D cre
ex as
pe e o
ra
ns f
t
es
M ing
ar In
ch co
20 m
13 e F
(P YE
lan
)

44.0

■

Segment Information
Automobiles Division
In the fiscal year under review, sales volume for completed
vehicles stood at 640 thousand units, down 17 thousand
units, or 2.6%, year on year due mainly to a drop in unit
production following the Great East Japan Earthquake.
This decrease occurred despite favorable sales of the
new model Impreza following its release in Japan andNorth America.
In Japan, production and sales volume during the firsthalf of fiscal 2012 fell drastically in the aftermath of lastyear’s disaster. During the second half, however, FHI recorded favorable sales of the new model Impreza—

Analysis of Increases and Decreases in Operating IncomeOpe
FY ratE ing
M
ar Inc
ch om
20 e
■
12
Im
m sa pro
ixt le ve
ur s v meeoan lu nt
d me of
ot
he &
■
rs
Re
du
ct
io
n
in
■
co
G
st
ain
on
cu
ex rr
ch en
■
an cy
ge
ex Incpe re
ns as
es e oan f S
d G
ot &A
he
rs

Cost of Sales, Expenses and Operating Income
Operating Income
Operating income, as mentioned above, fell ¥40.2 billion
year on year to ¥44.0 billion in spite of such positive factors
as sales volume and mix totaling ¥1.2 billion (mainly on theback of increased unit sales in Japan and North America)
and an ¥8.0 billion reduction in SG&A and other expenses.
This decrease was primarily due to a ¥42.0 billion loss
from foreign currency exchange rate differences causedby the strong yen and a ¥5.2 billion yen increase in R&D
expenses related to new model vehicle development andenvironment-friendly technologies. Consequently, the operating margin decreased from 5.3% year on year to 2.9%.

Income before Income Taxes and Minority Interests, andNet Income
Income before income taxes and minority interests declined ¥10.3 billion, or 16.3%, compared with the previous
fiscal year to ¥52.9 billion, despite the above-mentioned
extraordinary income recorded mainly from the sale of
FHI’s head office building. In addition to a fall in operating
income, this decrease was largely caused by the recordingof a loss on valuation of derivatives (reflecting the influence of currency exchange rates), loss on disaster (including fixed costs incurred when operations were suspended
in the aftermath of the Great East Japan Earthquake) andprovision for loss on transfer of business following thetransfer of FHI’s sanitation truck and wind-power generation businesses.
Net income for the fiscal period under review, amounted to ¥38.5 billion, a ¥11.9 billion, or 23.6%, decrease
compared with the previous fiscal year.

■

From a profit perspective, the FHI Group reported an
operating income of ¥44.0 billion, representing a declineof ¥40.2 billion, or 47.8%, compared with the previous
fiscal year. Despite the positive impact of lower SG&A
and other expenses, this decrease mainly reflected higher
yen rates and R&D expenses.
Net income totaled ¥38.5 billion, a decrease of ¥11.9
billion, or 23.6%, compared with the fiscal year ended
March 31, 2011, despite gaining ¥26.1 billion in extraordinary income from the sale of FHI’s head office building.
This decline was due to the recording of a ¥7.3 billion loss
on disaster following the Great East Japan Earthquakeand ¥4.2 billion in losses from the transfer of certain business operations.

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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equipped with the New Generation Boxer Engine and a
new Lineartronic-CVT (Continuously Variable Transmission)—exceeding sales from the previous fiscal year. We
also recorded higher year-on-year sales of the Sambar,
which were driven by last-minute demand ahead of the
discontinuation of this model in February 2012. In addition
to these positive factors, unit sales in the second half were
buoyed by the government’s eco-car subsidy program.
As a result, full-year sales volume for Subaru passenger cars in Japan rose 12 thousand units, or 17.6%, year
on year to 80 thousand units, while minicar sales volume
increased 2 thousand units, or 2.5%, to 92 thousand units.
Accordingly, domestic sales volume improved 14 thousand units, or 9.0%, to 172 thousand units compared withthe previous fiscal year.
Overseas, unit sales of the new model Impreza increased, particularly in North America, following a restoration of production in the second half of fiscal 2012. However, year-on-year sales volume fell in Europe, Australia
and China due primarily to a major disaster-related decline in the number of automobiles produced in the first
half. As a result, overseas sales volume decreased 31
thousand units, or 6.3%, to 468 thousand units comparedwith the previous fiscal year.
By region, units sold in North America increased 2
thousand units, or 0.5%, for a record high 309 thousand
units. This is owing to continued strong sales of the newmodel Impreza as well as the Legacy and Outback. In
China, sales volume fell 14 thousand units, or 22.6%, to 48
thousand units year on year due to a decline in the number of automobiles produced. In Europe and Russia, sales
volume decreased 5 thousand units, or 7.8%, year on year
to 55 thousand units. Year-on-year unit sales in Australia
fell 4 thousand units, or 10.3%, to 37 thousand units, whilesales volume in other regions were down 10 thousand
units, or 34.7%, to 19 thousand units.

Consequently, net sales in the Automobiles division
decreased ¥63.1 billion, or 4.3%, to ¥1,389.1 billion compared with the previous fiscal year, despite the positive
impact of higher year-on-year sales in Japan and North
America. This result is attributable to lower worldwide
sales, reflecting the delayed restoration of production following the disaster and the yen’s appreciation in foreign
currency exchange markets. Segment income in the fiscal
year ended March 31, 2012 declined ¥41.0 billion, or 51.0%,
year on year to ¥39.4 billion primarily due to the strong yen.

Aerospace Division
Net sales of products to the Ministry of Defense—centered on Unmanned Reconnaissance Systems, the multipurpose helicopter UH-1J, and the fighter plane F-2—
declined compared with the previous fiscal year.
On the other hand, net sales in the commercial sectorrose over the previous fiscal year thanks to an upswing insales of the Boeing 777. This increase occurred despite
higher year-on-year yen exchange rates.
Based on these factors, net sales in the Aerospace

Net Sales by Division (Excluding intersegment sales)

Segment Income (Loss) by Division(Billions of yen)(Billions of yen)

100

1,600

80
1,200
60
800

40
20

400
0
0

FY 2008

2009

2010

2011

2012

-20

2009

2010

2011

2012

■ Automobiles ■ Aerospace ■ Industrial Products■ Automobiles ■ Aerospace ■ Industrial Products ■ Other■ Other ■ Corporate and Elimination

Net Sales by Division (Excluding intersegment sales) Billions of yen
Automobiles
Aerospace

2008

2009

2010

¥1,421.2¥1,316.3¥1,294.5

99.7

80.9

93.2

2011

¥1,452.2 ¥1,389.1
82.8

Segment Income (Loss) by Division

2012

2012

¥(9.2)

¥21.7

¥80.4

¥39.4

4.4

1.6

4.8

2.3

2.9

0.7

(1.6)

(2.4)

(0.1)

0.5

2.5

3.1

2.6

1.5

1.0

34.9

23.9

30.1

33.6

Other

10.8

13.7

17.1

15.5

14.2

Other

¥1,428.7

2011

¥37.1

40.7

¥1,445.8

2010

AerospaceIndustrial Products¥1,572.3

2009

Automobiles

Industrial
Products

Total

Billions of yen

2008

80.3

¥1,580.6 ¥1,517.1

Corporate andElimination
Total

30

FY 2008

0.9

0.3

0.7

0.1

0.2

¥45.7

¥(5.8)

¥27.4

¥84.1

¥44.0

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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division decreased ¥2.6 billion, or 3.1%, compared withthe previous fiscal year to ¥80.3 billion. In contrast, segment income increased ¥0.6 billion, or 27.7%, year on
year to ¥2.9 billion.
Industrial Products Division
Despite stagnant engine sales in North America and thestronger yen, sales in Japan surged, particularly for power
generators used in disaster-related reconstruction. In addition, engine sales in Southeast Asia were favorable.
As a result, net sales in the Industrial Products division
increased ¥3.6 billion, or 11.8%, compared with the previous fiscal year to ¥33.6 billion. Segment income rose ¥0.6
billion year on year to ¥0.5 billion.
Other Division
A rise in unit sales of the sanitation truck Fuji Mighty wasoffset by a decline in deliveries of large-scale wind-power
generation systems. As a result, net sales fell ¥1.3 billion,
or 8.5%, compared with the previous fiscal year to ¥14.2
billion, and segment income decreased ¥0.4 billion, or
29.7%, year on year to ¥1.0 billion.

Liquidity and Financing
Financial Position
Total assets as of March 31, 2012 stood at ¥1,352.5 billion,
an increase of ¥164.2 billion compared with the previous
fiscal year-end.
Of this total, current assets stood at ¥762.5 billion, up¥152.2 billion compared with March 31, 2011. This result
was primarily due to a rise in cash and cash equivalents(reflecting assistance received from subsidiaries after thedisaster and the sale of FHI’s head office building) and increases in inventories and notes and accounts receivable—
trade, both of which are consistent with higher unit production in the second half of fiscal 2012.

Total property, plant and equipment rose ¥12.0 billion
year on year to ¥590.0 billion. This result was mainly
attributable to an increase in investment securities andother items.
Total liabilities were up ¥126.6 billion year on year, to¥900.9 billion, despite the partial redemption of corporate
bonds. The main factors for this was a rise in notes andaccounts payable—trade, consistent with the growth inunit production, and higher long term debt.
Interest-bearing debt amounted to ¥341.0 billion asof March 31, 2012, up ¥10.4 billion compared with theend of the previous fiscal year. This reflected an increasein loans that exceeded the amount of bonds redeemed
during fiscal 2012. The debt/equity ratio improved 0.04 of
a point since March 31, 2011 to 0.76 due primarily to a risein shareholders’ equity.
Net assets totaled ¥451.6 billion, up ¥37.6 billion compared with the end of the previous fiscal year. This wasprimarily due to an increase in retained earnings of ¥31.6
billion, reflecting the recording of net income in fiscal
2012. As a result, net assets per share as of the end of the
fiscal year under review totaled ¥576.97, up ¥48.09 from¥528.88 as of the year prior.
Cash Flows
In the fiscal year under review, net cash provided by operating activities was ¥54.9 billion compared with ¥138.2
billion in the previous fiscal year. This result was mainly due
to rises in inventories and notes and accounts receivable—
trade following a rebound in production and sales in thesecond half of fiscal 2012 coupled with a decrease in operating income level.
Net cash used in investing activities was ¥26.6 billion
in fiscal 2012 compared with ¥51.1 billion used in the previous fiscal year. This decline was primarily due to the saleof the FHI’s head office building.

Interest-Bearing Debt Balance & D/E Ratio(Billions of yen)

500

1.00

400

0.80

300

0.60

200

0.40

100

0.20

0

FY 2008

2009

2010

2011

2012

0

■ Interest-Bearing Debt Balance

D/E Ratio

Total Assets, Shareholders’ Equity & Ratio of
Shareholders’ Equity to Total Assets(Billions of yen, %)

1,500

75.0

1,200

60.0

900

45.0

600

30.0

300

15.0

0

FY 2008

2009

2010

2011

2012

0

■ Total Assets ■ Shareholders’ Equity

Ratio of Shareholders’ Equity to Total Assets

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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As a result, free cash flow amounted to ¥28.3 billion, adecrease of ¥58.8 billion from ¥87.1 billion provided in
the previous fiscal year.
Net cash provided by financing activities totaled ¥2.6
billion in the fiscal year ended March 31, 2012, a turnaround from net cash used in financing activities of ¥39.4
billion in fiscal 2011. This result was largely attributable toan increase in long-term debt.
Accounting for the aforementioned activities and theeffect of translation adjustments, cash and cash equivalents as of the end of the fiscal year under review stood at¥258.1 billion, up ¥30.4 billion year on year.

Cash Flows from Operating Activities &Cash Flows from Investing Activities(Billions of yen)

200
150
100
50
0
-50
-100

FY

2008

2009

2010

2011

2012

■ Cash Flows from Operating Activities■ Cash Flows from Investing Activities

Securing Liquidity
FHI believes that it has secured liquidity at a level sufficient to satisfy its current needs through the use of commitment lines contracted with major banks, combinedwith cash and cash equivalents.

Research & Development Expenses(Billions of yen)

60

45

30

15

0

FY 2008

2009

2010

2011

2012

Capital Expenditure & Depreciation Expenses(Billions of yen)Free Cash Flow
(Billions of yen)

Research and Development Expenses
FHI invested in the development expenses toward thelaunch of such new car models as the Impreza and SUBARU
BRZ as well as environment-friendly technologies, including the horizontally-opposed direct injection turbo engine.
Mainly as a result of these factors, R&D expenses increased¥5.2 billion, or 12.1%, year on year, to ¥48.1 billion.

120
80
40
0

80

60

40

20

-40
-80
-120

32

FY

2008

2009

2010

2011

2012

Capital Expenditures and Depreciation
Capital expenditures increased ¥11.2 billion, or 26.1%,
compared with the previous fiscal year, to ¥54.3 billion
due to such factors as a rise in production capacity at the
Oizumi Plant in response to the introduction of new engine models and a switch from minicar production lines
to those that produce passenger cars at the Oizumi Plant.
Depreciation increased ¥3.9 billion, or 7.7%, year on year,
to ¥53.7 billion.

0

FY 2008

2009

2010

2011

2012

■ Capital Expenditure ■ Depreciation Expenses

Billions of yen
2008

2009

2010

2011

2012

¥ 52.0¥ 42.8¥ 37.2¥ 42.9¥ 48.1

Capital Expenditures

56.3

58.0

56.1

43.1

54.3

Depreciation Expenses

65.5

65.1

57.1

49.8

53.7

R&D Expenses

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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Basic Policy Regarding the Distribution of Profits
FHI views the return of profits to shareholders as a criticaltask for management. With a view to improving ROE andbased on maintaining continual dividend payments, weapply a results-linked approach that takes into consideration such factors as earnings, investment plans, operating
conditions and dividend payout ratio of each fiscal year.
Taking into account business results for the fiscal year
under review as well as future business developments,
operating environments and other factors, FHI distributed
interim and year-end dividends of ¥4.50 per share, for anannual dividend of ¥9.00 per share. These per-shareamounts were in line with initial projections.
For fiscal 2013, dividends are forecasted to be thesame amounts as the fiscal year under review, for an annual dividend of ¥9.00 per share (comprised of an interim
dividend and a year-end dividend of ¥4.50 each).
Outlook
Regarding consolidated results forecasts for the fiscal
year ending March 2013, Subaru unit sales are anticipatedto increase 81 thousand units, or 12.7%, to reach a record
high of 721 thousand units thanks to growth in passenger
car sales in such overseas markets as North America as
well as Japan. These sales increases are expected in spiteof concern over the strong yen and other factors.
As a result, consolidated net sales for fiscal 2013 areprojected (as May 2012) to reach the unprecedented levelof ¥1,860.0 billion, an upswing of ¥342.9 billion, or 22.6%,
year on year. Turning to profits, operating income is expected to jump ¥23.0 billion, or 52.4%, year on year to¥67.0 billion, while net income is forecasted to rise ¥9.5
billion, or 24.8%, to ¥48.0 billion. These income forecasts
are based on improvements in sales volume mixture on
the back of higher unit sales and cost reduction measures.

These forecasts are based on average annual exchange
rates of ¥80 to U.S. $1 (previously ¥79 to U.S. $1) and ¥105
to 1 (previously ¥108 to 1).
Note: Performance forecasts and medium- to long-term management
strategies are based on information available to management asof the date of this report. Accordingly, actual results may differ
materially due to a variety of factors.

Forecast for Consolidated Results

Billions of yen

2012(Results)

2013

ChangeNet sales

1,517.1

1,860.0

342.9

Japan

498.5

627.8

129.3

1,018.6

1,232.2

213.6

Operating income

44.0

67.0

23.0

Income before income
taxes and minority interest

52.9

60.0

7.1

Net income

38.5

48.0

9.5

Overseas

Exchange rate (in yen)
¥/$

79

80

1

¥/

108

105

(3)

Forecast for Global Automobile Sales

Thousand units

2012(Results)

2013

Passenger cars

80.2

94.9

14.7

Minicars

92.2

50.5

(41.6)

172.3

145.4

(26.9)

43.7

ChangeJapan:

Subtotal
Overseas:
United States

280.4

324.0

Canada

28.2

31.7

3.5

Europe

39.1

59.2

20.1

Russia

15.9

23.3

7.5

Australia

36.9

43.9

7.0

China

48.3

62.0

13.7

Other

18.7

31.2

12.5

467.5

575.4

107.9

639.9

720.8

81.0

Subtotal
Total

Business Risks
Operational and other risks that could significantly influence the decisions of investors and impact the Company’s financial status are set out below. Based on information available to the FHI Group as of June 28, 2012, theenumerated risks include forward-looking statements,
but do not encompass every possible risk posed to the
FHI Group. As such, there are other risk factors which
could influence investors and their decisions.
(1) Economic Trends
Economic trends in countries and regions that comprise
important markets for the FHI Group could potentially
impact the Group’s business performance. In Japan andNorth America, key markets for the Group, economic recession, decreasing demand or increasing price competition could undermine the sales and profitability of theGroup’s products and services.
(2) Currency Exchange Rate Fluctuations
The FHI Group’s ratio of overseas net sales stood at 67.1%
in the fiscal year ended March 31, 2012. The Group’s consolidated financial statements, which are presented in Japanese yen, are affected by translation of overseas net sales,
operating income and assets from local currencies, particularly U.S. dollars, into yen. Accordingly, in the event that
discrepancies arise between projected exchange rates infull-year forecasts and actual rates at the time of accountsettlement, the Group’s business performance and financial position may be adversely affected when the yen appreciates or positively affected when the yen depreciates.
The Company uses forward exchange rate contracts
and other risk hedges to minimize the Group’s sensitivity tosuch currency exchange risks. However, the effect of severe
fluctuations in currency exchange rates at the end of the
fiscal year could result in a loss (gain) on valuation of derivatives and have a major impact on non-operating expenses.

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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(3) Dependence on Certain Businesses
The FHI Group is mainly comprised of the Automobiles,
Aerospace and Industrial Products business segments.
However, the Automobiles business segment accounts
for the overwhelming majority of the Group’s business
operations. Accordingly, in the event that automobilerelated demand, market conditions, price competition
with other automakers, or other factors exceed projectedlevels, the entire Group’s overall business performanceand financial position could be significantly affected.

(6) Protection of Intellectual Property
The FHI Group works to protect its intellectual property
through the use of patents and trademarks in such areas
as technologies and expertise that ensure product differentiation. However, the Group could experience a decreasein sales or an increase in litigation costs in cases where athird party makes unauthorized use of the Group’s intellectual property to manufacture similar products, as well asin specific regions where intellectual property protection islimited. Such factors could impact the Group’s profitability.

(4) Changes in Market Appraisal
The FHI Group develops, manufactures and releases new
products based on appropriate timing and pricing in linewith product planning that reflects market demand andcustomer needs. Such actions are the most important factors in maintaining stable increases in Group businessperformance. In the event that market appraisals of newmodel vehicles and other products do not meet sales plan
expectations or that the obsolescence rate of current products exceeds forecasts, the Group’s business performanceand financial position could be significantly affected.

(7) Product Defects
The FHI Group places the highest priority on the safety ofthe products it develops, manufactures and sells. However, completely avoiding defects and recalls regarding
all products and services is impossible. The substantial
costs associated with a major recall could significantly affect the Group’s business performance and financial position. In addition, although the Group purchases productliability insurance, the risk of incomplete coverage exists.

(5) Dependence on Suppliers for Raw Materials andComponents
The FHI Group procures raw materials, components andother items from numerous suppliers. However, there arecases in which the Group relies on certain items and/or alimited number of suppliers. Due to tightening supply
and demand or other factors, the inability to procure supplies in a manner that ensures stable costs, delivery dates
and quality could seriously impact the Group’s businessperformance and financial position.

34(9) Environmental and Other Legal Regulations
The FHI Group is subject to various domestic and overseas legal regulations in relation to such areas as exhaustemissions, energy conservation, noise, recycling, the levelof pollutants emitted from manufacturing facilities andautomobile safety. The Group’s business performanceand financial position could be affected by an increase incosts due to future regulatory changes.
(10) The Impact of Natural Disasters, War, Terror, Strikes
and Other Events
The occurrence of major earthquakes, typhoons or othernatural disasters, diseases, wars, terrorist attacks or otherevents could impede the FHI Group’s business activities
as well as delay or suspend raw material/component purchases, production, product sales/transport, and the provision of services. The Group’s business performance andfinancial position could be affected in the event that suchdelays or suspensions are prolonged.

(8) Retirement Benefit Obligations
The FHI Group’s employee retirement benefit costs andobligations are calculated based on the following assumptions: retirement benefit obligation discount rates
and the expected rate of return on pension assets, bothof which are established based on mathematical calculations. However, in the event that actual performance differs from the assumptions, the Group’s business performance and financial position could be affected over thelong term.

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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CORPORATE DATA (As of March 31, 2012)

INVESTOR INFORMATION (As of March 31, 2012)

Company Name

Head Office

Common Stock AuthorizedFuji Heavy Industries Ltd.

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

1,500,000,000 shares

Established
July 15, 1953

Major Shareholders
Number ofPercentage ofShares Held
Total Shares(in thousands)

Name

Common Stock Issued
782,865,873 shares

Toyota Motor Corporation

129,000

16.48

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

42,948

5.49

Japan Trustee Services Bank, Ltd.
(Trust account)

33,176

4.24

Suzuki Motor Corporation

13,6901.75

National Mutual Insurance Federation ofAgricultural Cooperatives

13,534

1.73

Paid-in Capital

Investor Relations Office

Number of Shareholders¥153,795 million

42,782

12,359 (consolidated: 27,123)

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

FHI’s Client Stock Ownership

12,866

1.64

Website Address

Domestic Manufacturing Divisions

Transfer Agent

Mizuho Corporate Bank, Ltd.

12,361

1.58

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku, Tokyo
103-8670, Japan

Mizuho Bank, Ltd.

12,017

1.54

BBH 493025 BlackRock Global Allocation
Fund, Inc.

12,006

1.53

Sompo Japan Insurance Inc.

11,716

1.50

Number of Employees

Gunma Manufacturing Division (Automobiles Division)
Utsunomiya Manufacturing Division(Aerospace Division and Eco Technologies Division)
Saitama Manufacturing Division(Industrial Products Division)

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

Stock Exchange Listing
Tokyo Stock Exchange

Principal Consolidated Subsidiaries and Affiliates
Company Name

Percentage of
Voting Rights

Main Business Activities

Japan

Quarterly Common Stock Price Range (Tokyo Stock Exchange)

Fuji Machinery Co., Ltd.

100.0%

Manufacture and sales of automobile parts and industrial product parts

Ichitan Co., Ltd.

100.0%

Manufacture and sales of forged automobile/industrial product parts

Kiryu Industrial Co., Ltd.

97.7%

Manufacture of Subaru specially equipped automobiles anddistribution of Subaru automobile parts

Subaru Tecnica International Inc.

100.0%

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

Subaru Kohsan Co., Ltd.

100.0%

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

600

Subaru Finance Co., Ltd.

100.0%

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

400

Yusoki Kogyo K.K.

100.0%

Manufacture and sales for aircraft parts

TOKYO SUBARU INC.

100.0%

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

Overseas

Subaru of America, Inc.

100.0%

Distribution and sales of Subaru automobiles and parts

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

100.0%Engineering research of Subaru automobiles in North America Market

Subaru Research & Development, Inc.
Subaru of Indiana Automotive, Inc.

Research and development of automobiles
100.0%

Manufacture of Subaru automobiles and contracted manufacture of
Toyota automobiles

Subaru Canada, Inc.

100.0%

Distribution and sales of Subaru automobiles and parts

Subaru Europe N.V./S.A.

100.0%

Distribution, sales and marketing of Subaru automobiles and parts

Subaru of China, Ltd.

100.0%

Distribution, sales and marketing of Subaru automobiles and parts

(yen)

800

200

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

0
High
Low

FY2008FY2009FY2010FY2011FY2012

641
376

635
223

487
317

758
435

697
402

FUJI HEAVY INDUSTRIES LTD. ANNUAL REPORT 2012

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Fuji Heavy Industries Ltd.
Subaru Building, 7-2, Nishi-Shinjuku 1-chome,
Shinjuku-ku, Tokyo 160-8316, Japan
Phone:+81-3-3347-2111
Fax:+81-3-3347-2338
http://www.fhi.co.jp/english/ir/

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Consolidated Balance Sheets

82.14

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2012 and 2011
Millions of yen

Thousands of
U.S. dollars(Note 1)ASSETS
Current assets:
Cash and deposits (Note 4 and 5)
Notes and accounts receivable-trade (Note 5 and 7)
Lease investment assets (Note 5 and 23)
Short-term investment securities (Notes 4, 5 and 6)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 12)
Short-term loans receivable (Note 4 and 5)
Other current assets
Allowance for doubtful accounts
Total current assets

2012

2011

2012

¥237,614
117,062
21,86531,635
121,686
56,14333,715
17,39978,78848,019(1,395)762,531¥211,700
76,81023,05021,06372,87156,56736,974
13,75459,98639,396(1,851)
610,320$2,892,793
1,425,152
266,192
385,135
1,481,446
683,504
410,458
211,821959,192
584,599(16,983)
9,283,309

Property, plant and equipment (Notes 7, 9 and 16)
Accumulated depreciation
Accumulated impairment loss
Total property, plant and equipment

1,225,559(769,274)(30,194)
426,091

1,230,215(765,211)(34,162)
430,842

14,920,368(9,365,401)(367,592)
5,187,375

Investments and other assets:
Intangible assets
Investment securities (Note 5 and 6)
Investments in non-consolidated subsidiaries and affiliated companies
Deferred tax assets (Note 12)
Other assets (Note 31)
Allowance for doubtful accounts
Total investments and other assets
Total assets

11,81872,794
12,8301,873
68,179(3,584)
163,910¥1,352,532

12,04062,595
12,894
1,812
61,832(4,011)
147,162¥1,188,324

143,876
886,219
156,197
22,803830,034(43,633)
1,995,496$16,466,180

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

¥251,043
71,04043,79669,437
16,47828,861
4,600
76,380561,635¥176,895
99,07240,91260,876
16,322
27,172
2,089
57,365
480,703$3,056,282
864,865
533,187
845,349
200,609351,364
56,002929,876
6,837,534

226,144
33,95022,74056,456339,290

190,642
33,707
14,00255,307
293,658

2,753,153
413,319
276,844687,314
4,130,630

153,795
160,071
188,538(1,259)

153,795
160,071
156,948(1,381)

1,872,352
1,948,758
2,295,325(15,327)

501,145

469,433

6,101,108

18,966(69,809)(50,843)
1,305

11,567(68,339)(56,772)
1,302

230,898(849,878)(618,980)
15,888451,607413,9635,498,016¥1,352,532¥1,188,324$16,466,180

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable-trade (Note 5)
Short-term loans payable (Note 5 and 7)
Current portion of long-term debts (Note 5 and 7)
Accrued expenses (Note 5)
Provision for bonuses
Provision for product warranties
Accrued income taxes (Note 5 and 12)
Other current liabilities (Note 5, 7 and 12)
Total current liabilities
Long-term liabilities:
Long-term debts (Note 5 and 7)
Accrued pension and severance liability (Note 11)
Deferred tax liabilities (Note 12)
Other long-term liabilities (Note 7)
Total long-term liabilities
Contingent liabilities (Note 25)
Net assets: (Note 13)
Shareholders' equity:
Capital stock
Authorized— 1,500,000,000 shares
Issued —782,865,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2012—
2,406,736 shares
2011—
2,605,141 shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

1Consolidated Statements of Income

82.14

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2012 and 2011

Millions of yen

Net sales (Note 2)
Cost of sales (Note 14)
Gross profit
Selling, general and administrative expenses (Note 2 and 15)
Operating income (loss)
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Real estate rent
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets (Note 19)
Gain (loss) on sales of investment securities (Note 6)
Loss on valuation of investment securities (Note 6)
Reversal of allowance for doubtful accounts
Depreciation
Impairment loss (Note 9, and 16)
Gain on sales of loans receivable
Loss on disaster (Note 17)
Loss on prior periods adjustment (Note 18)
Loss on adjustment for changes of accounting standard for asset retirement obligations (Note 2)
Provision for loss on transfer of business (Note 20)
Loss on reconstruction of office building (Note 19)
Other, net (Note 21)
Income (loss) before income taxes and minority interests
Income taxes (Note 12):Current
DeferredIncome (loss) before minority interests
Minority interests in income (loss)
Net income (loss)

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

¥1,517,105
1,222,419
294,686
250,727
43,959¥1,580,563
1,241,427
339,136
255,001
84,135$18,469,747
14,882,140
3,587,607
3,052,435
535,172

2,092(3,780)
817
530
2,290
(5,116)26,807687(403)(1,171)(63)(7,257)(4,177)(2,336)8,920
52,8791,945(4,522)
2,619
558(1,010)
573
(662)
460
(415)
412
(1,162)(1,457)881(7,352)(6,110)(372)(657)(4,650)(20,921)
63,21425,469(46,019)
9,946
6,452
27,879(62,284)
326,357
8,364(4,906)(14,256)(767)(88,349)(50,852)(28,439)
108,595
643,767

12,0782,251
14,32938,55097¥38,453

8,735
4,064
12,79950,415
89¥50,326

147,042
27,404
174,446469,3211,181$468,140

U.S. dollars
Per share data (Note 2) :Net income (loss)—Basic—Diluted *Net assets
Cash dividends (Note 13)
The accompanying notes are an integral part of these statements.

¥49.27¥64.56-$0.60-

576.979.00

528.88
9.00

7.02
0.11

*For the year ended March 31, 2012 and 2011 diluted information is not presented because potentially dilutive securities do not exist.

Consolidated Statements of Comprehensive Income

82.14

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2012 and 2011

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

Income (loss) before minority interests
Other comprehensive income (Note 3)
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income¥38,550¥50,415$469,321

7,399(1,464)
(11)
5,924

1,254
(16,397)(372)(15,515)

90,078(17,823)(134)
72,121

Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

44,47434,900541,441

44,382¥92

34,832¥68

540,321$1,1202

Consolidated Statements of Changes in Net Assets

82.14

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2012 and 2011

Shareholders' equity
Capital stock
Balance at the beginning of current period
Balance at the end of current period
Capital surplus
Balance at the beginning of current period
Balance at the end of current period
Retained earnings
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income (loss)
Disposal of treasury stock
Change of scope of consolidation
Other
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the beginning of current period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Other
Total changes of items during the period
Balance at the end of current period

3Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

¥153,795
153,795¥153,795
153,795$1,872,352
1,872,352

160,071160,071160,071160,071

1,948,758
1,948,758

156,948

110,172

1,910,738(7,027)38,453(4)171(3)
31,590188,538(3,510)50,326(109)
69
46,776
156,948(85,549)
468,140
(49)
2,082
(37)
384,587
2,295,325(1,381)(2,173)(16,813)

(7)
129
122
(1,259)

(30)
822
792
(1,381)

(85)
1,570
1,485
(15,328)

469,433

421,865

5,715,035(7,027)38,453
(7)
125
171
(3)
31,712¥501,145(3,510)50,326(30)713
6947,568¥469,433(85,549)
468,140
(85)
1,522
2,082
(37)
386,073$6,101,108

Consolidated Statements of Changes in Net Assets
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2012 and 2011

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total accumulated other comprehensive income
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Minority interests
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation

4

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

¥11,567¥10,309$140,821

7,399
7,399
18,966

1,258
1,258
11,567

90,07890,078230,899(68,339)(51,587)(831,982)(1,470)(1,470)(69,809)(16,752)(16,752)(68,339)(17,896)(17,896)(849,878)(56,772)(41,278)(691,161)

5,929
5,929
(50,843)(15,494)(15,494)(56,772)

72,181
72,181(618,980)

1,302

1,306

15,851

3
3
1,305

(4)
(4)
1,302

37
37
15,888413,963

381,8935,039,725(7,027)38,453(7)
125
171(3,510)50,326(30)713-(85,549)
468,140
(85)
1,522
2,082

Consolidated Statements of Cash Flows

82.14

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2012 and 2011

Millions of yen

Thousands of
U.S. dollars(Note 1)

2012

2011

2012

Net cash provided by (used in) operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in provision for retirement benefits
Interest and dividends income
Interest expenses
Loss (gain) on valuation of derivatives
Equity in (earnings) losses of affiliates
Loss (gain) on sales and retirement of noncurrent assets
Loss (gain) on sales and valuation of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Decrease (increase) in lease investment assets
Decrease (increase) in operating loans receivable
Decrease (increase) in vehicles and equipment on operating leases
Increase (decrease) in deposits received
Other
Sub total¥52,879
58,611
63
(883)
150
1,658
(1,840)147(2,092)
3,780
5,116
(817)
(26,807)(284)(40,602)(49,033)
74,1971,185(16,077)(1,842)
4,258
5,685
67,452¥63,21456,062
1,457
(972)
974
8,618
3,282
(1,284)(1,945)
4,522(573)(2,619)662(45)
25,20818,677(37,633)
4,447
1,465
2,750
(7,906)
12,544150,905$643,767
713,550767(10,750)
1,826
20,185(22,401)
1,790(25,469)
46,01962,284(9,946)(326,357)(3,458)(494,302)(596,944)
903,299
14,427(195,727)(22,425)
51,83869,211
821,184

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

2,277(3,671)(11,193)
54,865

1,967(4,592)(10,072)
138,208

27,721(44,692)(136,267)
667,946

Net cash provided by (used in) investing activities
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities(5,202)
3,315(49,059)
36,370(3,204)(16,370)
13,854(92,710)88,361(1,957)(26,602)(4,237)4,460(44,729)1,880(3,078)(20,719)
16,722(84,517)84,848(1,739)(51,109)(63,331)
40,358(597,261)
442,781(39,007)(199,294)
168,663(1,128,683)
1,075,737(23,825)(323,862)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Cash dividends paid
Repayment of lease obligations
Other,net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents(28,033)
79,585(21,268)(20,010)(7,027)
(774)
113
2,586
(332)
30,517(43,034)
68,828(40,721)(20,010)(3,498)(1,302)329(39,408)(11,453)
36,238(341,283)
968,895(258,924)(243,608)(85,549)(9,423)
1,376
31,484(4,042)
371,524

227,704

191,466

2,772,145(137)¥258,084¥227,704

Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of period (Note 4)
The accompanying notes are an integral part of these statements.
5-(1,668)$3,142,001

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of Fuji Heavy Industries Ltd. (the "Company") havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan ("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records maintained inconformity with generally accepted accounting principles prevailing in the respective countries of their
domicile. The accompanying consolidated financial statements have been restructured and translated into
English from the consolidated financial statements of the Company prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the
Financial Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars in the accompanying consolidated financial
statements are included solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2012, which was ¥82.14 to U.S.$1. The convenience translation should not be construed asa representation that the Japanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its significant
subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
The fiscal year-end of consolidated domestic subsidiaries and main foreign subsidiaries is the same as that ofthe parent company, while the fiscal year-end of the seven consolidated foreign subsidiaries is December 31.
The operating results of those subsidiaries that have fiscal year-ends different from that of the parent
company are consolidated by using the financial statements as of each subsidiary’s respective fiscal
year-end, the necessary adjustments being made in consolidation if there are any significant
transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 70 subsidiaries in fiscal
2012 (71 subsidiaries in fiscal 2011).
In addition, 8 non-consolidated subsidiaries and one affiliated company were accounted for by the equity
method in fiscal 2012 and 2011.
Investments in insignificant non-consolidated subsidiaries and affiliated companies not accounted for by theequity method are carried at cost. The difference between the cost and the underlying net equity ofinvestments in subsidiaries and affiliated companies is allocated to identifiable assets based on their fair value
at the date of acquisition. The unallocated residual value of the excess of the cost over the fair value of theunderlying net assets is recognized as goodwill and amortized over a period of five years on a straight-line
basis.
All assets and liabilities of subsidiaries, which include not only the Company’s interest in the subsidiaries but
also the minority interest portion, are valued based on their fair value at the time the Company first
consolidates the subsidiary in question.

6

(Fiscal Year Change of Consolidated Subsidiaries)
From the fiscal year 2012, the balance sheet dates of Subaru Canada Inc. and its subsidiary was changed
from December 31 to March 31.
Because of this change, the fiscal term of Subaru Canada Inc. and its subsidiary was 15 months period
from January 1, 2011 to March 31, 2012.
[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fairvalues are available are stated at their fair value as of the balance sheet dates with unrealized holding gains
and losses included as a separate component of net assets until realized, while securities for which fair values
are not readily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the consolidated balance sheet is measured based on the lower of cost or market value.)[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally computed by the declining-balance method, except for those buildings (excluding
building improvements) acquired on or after April 1, 1998, for which the straight-line method is applied.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is computed by thestraight-line method at rates based on the estimated useful lives of the assets according to their general class,type of construction, and use.
Estimated useful lives for depreciable assets are as follows:
Buildings and structures: 7–50 years
Machinery, equipment and vehicles: 2–12years[5] Intangible Assets (Excluding Leased Assets)
Computer software used internally by the Company and its consolidated subsidiaries is amortized by thestraight-line method over the relevant economic useful lives of three or five years.
[6] Leased Assets
For leased assets under finance lease transactions in which the ownership is transferred to the lessee:
The leased assets are depreciated by the same method as used for other property, plant and equipment.
For leased assets under finance lease transactions in which the ownership is not transferred to the lessee:
The leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
In addition, finance lease transactions in which the ownership is not transferred to the lessee on or before
March 31, 2008 are recorded as regular rental transactions.

7[7] Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on the amount calculated from the historical ratio of bad
debt for ordinary receivables, and estimated amounts of uncollectible accounts for specific overdue
receivables.
[8] Provision for Bonuses
Employee's bonuses are recognized as expenses for the period in which those are incurred.
[9] Provision for Product Warranties
The Company and its consolidated subsidiaries provide for accrued warranty claims on products sold basedon their past experiences of warranty services and estimated future warranty costs, which are included in"Accrued expenses" in the accompanying consolidated balance sheets.
[10] Provision for Loss on Construction Contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is made whensubstantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year and beyond
and such losses can be reasonably estimated.
[11] Provision for Loss on Transfer of Business
The Company provides for losses on transfer of an important business and these losses are reasonably
estimated at the end of the fiscal year.
[12] Accrued Pension and Severance Liability
Upon termination of employment, employees of the Company and its consolidated subsidiaries in Japan areentitled, under most circumstances, to lump-sum indemnities or pensions as described below, based on
current rates of pay, length of service, and conditions 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 definedreasons.
Certain consolidated subsidiaries in Japan have contributory funded defined benefit employees’ welfare
pension funds, which are pursuant to the Japanese Welfare Pension Insurance Law. The contributory
pension funds consist of a portion of the governmental welfare pension program, under which thecontributions are made by the companies and their employees, and an additional portion representing thecorporate noncontributory pension plans.
Under the Japanese accounting standards for pension and severance benefits, accrued pension andseverance liability for employees is provided based on the estimated amounts of projected pension andseverance obligation and the fair value of plan assets at the end of the fiscal year. Prior service cost is being
amortized by the straight-line method over a period (11-18 years) that is shorter than the average remaining
service period of the eligible employees. Actuarial gains and losses are amortized from the following fiscal
year by the straight-line method over a period (primarily 16 years for fiscal years 2012 and 2011) that isshorter than the average remaining service period of the eligible employees.
Accrued pension contribution for defined benefit pension plans is included in accrued pension andseverance liability.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined based on the Company’s and its consolidated subsidiaries’internal rules, are included in "Other long-term liabilities" in the accompanying consolidated balance sheets.

8[13] Translation of Foreign Currency-Denominated Accounts
Under the Japanese accounting standards for foreign currency translation, monetary assets and liabilities
denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at eachbalance sheet date with the resulting gain or loss included currently in the statement of income.
The assets and liabilities of foreign subsidiaries and affiliated companies are translated into Japanese yen at
the exchange rates in effect at the balance sheet dates of the foreign subsidiaries and affiliated companies,
except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the respective years. The resulting foreign
currency translation adjustments are included in "Foreign currency translation adjustments" and "Minority
interest" in the net assets section of the accompanying consolidated balance sheets.
[14] Revenue Recognition
The percentage-of-completion method of revenue from Aerospace division production is applied toconstruction contracts for which certain elements are determinable with certainty at the end of fiscal year.
(The percentage of completion is estimated with the proportion-of-cost method). The completed-contract
method is applied to other works.
[15] Accounting for Lease Transactions
A part of domestic consolidated subsidiaries recognizes revenue for financial lease transactions on theeffective date of each lease contract.
[16] Derivative Financial Instruments and Hedge Accounting
The Japanese accounting standards for financial instruments require that the Company and its consolidated
domestic subsidiaries state derivative financial instruments at their fair value and recognize changes in the fairvalue as a gain or loss, unless such derivative financial instruments are used for hedging purposes.
For interest rate swap contracts used as a hedge that meet certain hedging criteria, the net amount to be
paid or received under the interest rate swap contract is added to or deducted from the interest on the assets
or liabilities for which the swap contract is executed.
Derivative financial instruments qualifying as a hedge, along with the underlying transactions, assets andliabilities are as follows:
Financial Instrument
Interest swaps

Transactions, assets and liabilities
Borrowings

The risk exposures to movements in interest rates are hedged according to the Company’s andconsolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of theunderlying transactions, assets and liabilities, and therefore they are presumed to be highly effective inoffsetting the effect of movements in interest rates at their inception as well as during their terms.
[17] Goodwill
Goodwill is principally amortized by the straight-line method over five years in accordance with accounting
principles generally accepted in the countries where such goodwill is recorded.
[18] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments—generally with original maturities of threemonths or less—that are readily convertible to known amounts of cash and have negligible risk of changes invalue due to their short maturities.
9[19] Income Taxes
The provision for income taxes is computed based on the pretax income for financial reporting purposes.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
(Application of Consolidated Taxation System)(Fiscal 2012)
From the fiscal year 2012, the Company and its wholly owned domestic subsidiaries applied Consolidated
taxation system.
[20] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to ¥48,115 million (US$ 585,768
thousand) and ¥42,907 million for fiscal years 2012 and 2011, respectively.
[21] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that occurs if all the convertible
securities are converted or other contracts to issue common stock are exercised to the extent that they are
not anti-dilutive.
[22] Reclassification and Restatement
Financial statements in fiscal 2011 have been reclassified to conform to the current year presentation.
These reclassifications had no impact on previously reported results of operations or retained earnings.
[23] Other Changes in Accounting Policy(Application of Accounting Standard for Accounting Changes and Error Corrections)
The Company and its consolidated domestic subsidiaries adopted "Accounting Standard for
Accounting Changes and Error Corrections" (Accounting Standards Board of Japan ("ASBJ")
Statement No.24 issued on December 4, 2009) and "Guidance on Accounting Standard for
Accounting Changes and Error Corrections" (ASBJ Guidance No. 24, issued on December 4, 2009)
for accounting changes and corrections of prior period errors which are made from the fiscal year
beginning on April 1, 2011.

10

3. Reclassification adjustments and income tax in other comprehensive income
Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive
income in the current or previous periods and tax effects for each component of other comprehensive income
were as follows:
Millions of yen
Thousands of
U.S. dollars
2012
2012
Valuation difference on available-for-sale securities
Increase(decrease) during the year
¥9,580$116,630
Reclassification adjustments
321
3,908
Sub-total, before tax
9,901
120,538
Tax (expense) or benefit(2,502)(30,460)
Sub-total, net of tax
7,399
90,078Foreign currency translation adjustment
Increase(decrease) during the year
(1,381)(16,813)
Reclassification adjustments(83)(1,010)Sub-total, before tax(1,464)(17,823)
Tax (expense) or benefit
Sub-total, net of tax(1,464)(17,823)
Share of other comprehensive income of associates accounted
for using equity method
Increase(decrease) during the year
(11)
(134)
Total other comprehensive income¥5,924$72,1214. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2012 and 2011, consisted of the following:
Millions of yen
2012¥237,614
31,635269,249(11,165)¥258,084

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

2011¥211,700
21,063
232,763(5,059)¥227,704

Thousands of
U.S. dollars
2012$2,892,793
385,135
3,277,928(135,927)$3,142,001(Fiscal 2011)
Non Cash transaction
The Company carried out a share exchange (the "Share Exchange") on August 1, 2010, and Ichitan Co., Ltd.
becomes a wholly owned subsidiary of the Company.
This share exchange resulted in recognition of "Goodwill" of ¥280 million, and a decrease in "treasury
stock" of ¥450 million.

11

5. Financial Instruments(1) Summary of Financial Instruments Status[1] Action Policy with Regard to Financial Instruments
With regard to planned capital expenditure to support Fuji Heavy Industries Ltd., its consolidated subsidiaries
and affiliated companies (the "FHI Group") in their main operations of automobile manufacturing and sales,
the FHI Group finances mainly from bank loans and the issue of corporate bonds. Temporary surpluses areinvested in highly secure financial assets, and bank loans and liquidation of accounts receivable provide
short-term working capital. It is the FHI Group's policy to use derivatives as a way to avoid the below-statedrisks and to not conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Operating receivables such as notes and accounts receivable-trade and lease investment assets are subject
to customer credit risks. Moreover, because the FHI Group works to expand its business globally, operatingreceivables denominated in foreign currencies are subject to the risk of changes in foreign exchange rates. As
a general rule, however, forward foreign exchange contracts are used to hedge the foreign exchange raterisk, considering the net amount of operating receivables denominated in foreign currencies that exceed
foreign currency denominated operating liabilities. Available-for-sale securities and investment securities aremainly stocks associated with business and capital alliances with principal business partners, and are subject
to risk of market price fluctuation.
Notes and accounts payable-trade that are included in operating liabilities usually have a payment date ofwithin one year. Furthermore, a certain portion of such liabilities involves foreign currency denominatedtransactions associated with the import of raw materials and is thus subject to exchange rate fluctuation risk,
although it is consistently less than accounts receivable balance of the same foreign currency. The FHIGroup’s liabilities associated with debt and bonds are set specifically for the acquisition of essential funds,
mainly for capital expenditure, whose redemption dates come within 12 years after March 31, 2012 at thelatest. A certain portion of said liabilities may have adjustable rates and are therefore subject to the risk ofchanges in interest rates, although in such cases derivative transactions (interest rate swap transactions) areused.
Derivative transactions are foreign exchange forward contracts to hedge against exchange rate fluctuations
associated with accounts receivables and liabilities denominated in foreign currencies, and interest rate swap
contracts with the objective of hedging against the risk of change in interest rates to be paid on loans. With
regard to hedging instruments and hedged items, hedge policy, the method of evaluation of hedge
effectiveness and other related items, please refer to "2-[16] Derivative Financial Instruments and Hedge
Accounting".
[3] Risk Management System with Regard to Financial Instruments(a) Management of Credit Risk (Risk Associated with Business Partner’s Breach of Contract)
Credit control departments at each FHI division and its consolidated subsidiaries regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets.
Together with keeping an eye on deadlines and balances of each customer, these departments identify
and mitigate the risk of potential problem in collection due to deterioration in financial status or otherfactors.
(b) Management of Market Risk (Risk Associated with Fluctuations in Exchange or Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts, that is no longer than six months, are used to hedge against the risk of exchange rate
fluctuation to which net position of accounts receivable and accounts payable dominated in foreign
currency is exposed. Moreover, the Company and certain consolidated subsidiaries use interest rate
12

swap transactions to limit exposure to the risk of fluctuation in interest rates payable on loans or corporate
bonds. The Company also regularly check the market values of securities and investment securities aswell as the financial conditions of issuers (business partner companies), and constantly reviews its
investment position taking into consideration its relationships with respective business partnercompanies. Basic policies with regard to derivative transactions are approved by the Executive
Management Board. Derivative transactions are handled in line with regulations and are conducted by
the Finance & Accounting Department. The results of these transactions are without exception reported
to officers concerned.
(c) Management of Liquidity Risk (Risk of Becoming Unable to Make Payments by the Due Date)
Associated with Funds Procurement
The Company secures liquidity at a level sufficient to satisfy its current needs through the use ofcommitment lines contracted with major banks in combination with cash and cash equivalents.
[4] Supplemental Explanation of Items with Regard to Fair Value of Financial Instruments
Fair value includes the fair market value of financial instruments and, in the event market-based prices are notavailable, prices that are calculated on a rational basis. Because the factors incorporated into the calculationof these prices are subject to change, differing assumptions may result in differing fair values. In addition, thevalues of contracts with regard to derivative transactions as stated in "(2) Items with Regard to Fair Value of
Financial Instruments" do not by themselves indicate the market risk associated with the respective derivativetransaction.

13

(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet, the fair value and difference as of March 31, 2012 and 2011 were as follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer
to Note 2).
As of March 31, 2012
Millions of yen
Consolidated
Fair Value
Difference
balance sheet
amounts
Cash and deposits¥237,614¥237,614¥Notes and accounts receivable-trade
117,062
Allowance for doubtful accounts (*1)(417)
116,645
116,645
Lease investment assets
21,865
Allowance for doubtful accounts (*1)(34)
21,831
23,103
1,272
Short-term loans receivable
78,788
Allowance for doubtful accounts (*1)(733)
78,05579,295
1,240
Short-term investment securities, Investment securities
and Other securities
76,73076,730Total Assets
530,875
533,387
2,512
Notes and accounts payable-trade
251,043
251,043
Short-term loans payable
71,04071,040Current portion of long-term loans payable
23,78624,043(257)
Current portion of bonds
20,01020,069(59)
Accrued income taxes
4,600
4,600
Accrued expenses
69,437
69,437
Bonds payable
4,070
4,153
(83)
Long-term loans payable
222,074
223,009(935)
Total Liabilities
666,060
667,394(1,334)
Derivative transactions (*2)
hedge accounting is not applied(6,422)(6,422)
hedge accounting is applied
¥¥¥-

14

As of March 31, 2012
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$2,892,793
1,425,152(5,077)1,420,075
266,192(414)
265,778
959,192(8,924)
950,268

Cash and deposits
Notes and accounts receivable-trade
Allowance for doubtful accounts (*1)
Lease investment assets
Allowance for doubtful accounts (*1)
Short-term loans receivable
Allowance for doubtful accounts (*1)
Short-term investment securities, Investment securities
and Other securities
Total Assets
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Current portion of bonds
Accrued income taxes
Accrued expenses
Bonds payable
Long-term loans payable
Total Liabilities
Derivative transactions (*2)
hedge accounting is not applied
hedge accounting is applied

934,137
6,463,051
3,056,282
864,865
289,579
243,608
56,002
845,349
49,5502,703,603
8,108,838

Fair Value

Difference$2,892,793$-

1,420,075-

281,264

15,486965,364

15,096934,137
6,493,633
3,056,282
864,865
292,708
244,326
56,002
845,349
50,5602,714,987
8,125,079

30,582(3,129)(718)(1,010)(11,384)(16,241)(78,184)(78,184)$$$*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).

15As of March 31, 2011
Millions of yen
Consolidatedbalance sheet
amounts¥211,700
76,810(350)
76,46023,050(156)
22,89459,986(852)
59,134

Cash and deposits
Notes and accounts receivable-trade
Allowance for doubtful accounts (*1)
Lease investment assets
Allowance for doubtful accounts (*1)
Short-term loans receivable
Allowance for doubtful accounts (*1)
Short-term investment securities, Investment securities
and Other securities
Total Assets
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Current portion of bonds
Accrued income taxes
Accrued expenses
Bonds payable
Long-term loans payable
Total Liabilities
Derivative transactions (*2)
hedge accounting is not applied
hedge accounting is applied

Fair Value

Difference¥211,700¥-

76,460-24,5601,666

60,123989

62,713432,901
176,895
99,072
20,90220,0102,089
60,87624,080166,562
570,486

62,713435,556
176,895
99,072
21,081
20,0602,089
60,876
24,502
167,628572,203

2,655
(179)
(50)
(422)
(1,066)(1,717)(1,306)¥-(1,306)¥-¥-*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).
[1] The calculation methods of financial instrument fair value together with securities and derivativetransactions
AssetsCash and deposits and Notes and accounts receivable-trade
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Lease investment assets and Short-term loans receivable
Fair value is the present value calculated by discounting relevant cash flows by each category of theassets and timing of cash flow, where discount rates were adopted taking into consideration the
period until maturity and credit risks. In addition, the estimated residual value is included in thebalance of Lease investment assets.
16

Short-term investment securities and investment securities
Fair value is determined by the stock exchange price, while bonds are determined by the stock
exchange price or by quotations received from financial institutions. Please refer to the note entitled"5.Short-term investment securities and investment securities" regarding to respective objectives forholding securities.
Liabilities
Notes and accounts payable-trade, Short-term loans payable, Accrued income taxes and Accrued
expenses
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Current portion of long-term loans payable and Long-term loans payable
Fair value is measured based on the present value that is calculated as discounted cash flow of thetotal amount of principal and interest, where the interest would be set, if the Company concluded abrand new loan agreement with the same condition at the date of measurement.
Current portion of bonds and Bonds payable
The fair value of bonds issued by the Company is based on market prices if available. For bonds
with no available market price, fair value is calculated using the present value that is calculated as
discounted cash flow of the total amount of principal and interest by, where discount rates are
adopted taking into consideration the remaining redemption period and credit risks.
Derivative transactions
Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item, because they are treated as a unit.
[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2012 and 2011:
Millions of yen
Other securities (available-for-sale securities)

Thousands of
U.S. dollars
2011
2012
2012
Money management fund
¥17,802¥23,940$291,454
Unlisted stocks (excluding over-the-counter stocks)¥3,143¥3,759$45,763
These have no available market prices and are expected to entail excessive costs in the estimation of
future cash flows. Consequently, estimating their fair value is recognized as extremely difficult and they
are not included in "Short-term investment securities, Investment securities and Other securities".

17[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2012:

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

Within 1Year

1 to 5
Years¥237,614
115,797
6,524¥1,265
15,287

Millions of yen
5 to 10
Over 10
Years
years
¥¥54
-

5,535
2,154
253
¥29,984

4,572
5,198
25
¥47,557

1,303
988
187
¥1,247

2,753
372
2,456
¥-

As of March 31, 2012:
Within 1
Year

Cash and deposits
Notes and accounts receivable-trade
Lease investment assets
Short-term investment securities, Investment
securities and Other securities
Government and municipal bonds
Corporate bonds
Other
Short-term loans receivable$2,892,793
1,409,752
79,42567,38526,224
3,080$365,035

Thousands of U.S. dollars
5 to 10
Over 10Years
years$$$15,400
186,109658
1 to 5
Years

55,661
63,282304$578,975

15,863
12,0282,277$15,182

33,516
4,529
29,900$-

As of March 31, 2011:

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

18

Within 1
Year¥211,700
74,0599,911

1 to 5Years¥2,751
13,075

Millions of yen
5 to 10
Over 10
Years
years
¥¥64
-

1,152
2,109
¥22,814

2,854
6,365
6
¥36,245

1,106
1,269
217
¥927

2,069
430
2,687
¥-

[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2012:

Bonds payable
Long-term loans payable

Within 1Year

1 to 5Years¥20,010
23,786¥4,070154,378

Millions of yen
5 to 10
Over 10Years
years¥¥67,149
547

As of March 31, 2012:
Within 1
Year

Bonds payable
Long-term loans payable$243,608
289,579

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$49,550$$1,879,450
817,495
6,658

As of March 31, 2011:

Bonds payable
Long-term loans payable

Within 1Year

1 to 5Years¥20,010
20,902¥24,080
145,574

Millions of yen
5 to 10
Over 10Years
years¥¥20,137851

6. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2012
and 2011 was as follows:(1) Other securities (available-for-sale securities):
As of March 31, 2012:
Acquisition cost

Millions of yen
Difference¥47,315¥18,181¥29,134

11,1498,043
2,602
69,10910,8587,751
2,519
39,309291
292
83
29,800

3,613

4,021

(408)

3,014
669
325
7,621
¥76,730

3,031
674
326
8,052
¥47,361

(17)
(5)
(1)
(431)
¥29,369

Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Total

19

As of March 31, 2012:
Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Total

Thousands of U.S. dollars
Acquisition cost
Difference$576,029$221,342$354,687

135,732
97,91831,678841,357

132,189
94,36330,667478,561

3,543
3,555
1,011
362,796

43,986

48,953(4,967)

36,6938,145
3,956
92,780$934,137

36,9008,206
3,969
98,028$576,589

(207)
(61)
(13)
(5,248)$357,548

Acquisition cost

Millions of yen
Difference¥38,865¥19,191¥19,674

4,654
8,846
2,041
54,406

4,553
8,580
2,000
34,324101266
41
20,082

3,583

4,233

(650)

2,526
1,326
872
8,307
¥62,713

2,575
1,334
888
9,030
¥43,354

(49)
(8)
(16)
(723)
¥19,359

As of March 31, 2011:
Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Total

20

(2) Other securities (available-for-sale securities) sold during fiscal years 2012 and 2011:
For the year ended March 31, 2012:

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

Sales amount¥3,686

Total gains¥591

Millions of yen
Total losses
¥180

8,278
3,790
1,416
21,293¥38,463

232
61
11
¥895

17
11
¥208

For the year ended March 31, 2012:

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

Sales amount$44,875
100,779
46,141
17,239259,228$468,262

Thousands of U.S. dollars
Total gains
Total losses$7,195$2,191
2,824
743
134
$10,896207
134$2,532

Sales amount¥6,566

Total gains¥351

Millions of yen
Total losses¥112

11,0772,697
525
39,862¥60,727

223
76
1
¥651

53
2
8
16
¥191

For the year ended March 31, 2011:

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

(3)The Company and its consolidated subsidiaries recognized ¥403 million (US$4,906 thousand) and ¥415
million in loss on devaluation of securities for fiscal years 2012 and 2011, respectively.
For the purpose of recording a loss on devaluation of securities, the Company and its consolidated
subsidiaries consider all the securities whose fair market values have fallen below 50% of the acquisition costto be permanently impaired, and record relevant losses on devaluation. For securities whose fair market
values have declined by between 30% and 50% in relation to their acquisition costs, the Company and its
consolidated subsidiaries specifically consider the probability of recovery of fair market values and record
losses on devaluation to the amount deemed permanently impaired.

21

7. Short-Term Loans Payable and Long-Term Debts
Short-term loans payable as of March 31, 2012 and 2011, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Bank loans with average interest rate of 0.55 % and 0.66%
per annum as of March 31, 2012 and 2011, respectively¥99,072$864,865

Millions of yen
2011
2012

Thousands of
U.S. dollars
2012¥245,860¥187,464$2,993,182

20,000
10
10
4,000
60
269,940(43,796)¥226,144

20,00010
20,000
10
10
4,000
60
231,554(40,912)¥190,642

243,487
122
122
48,697730
3,286,340(533,187)$2,753,153¥71,040

Long-term debts as of March 31, 2012 and 2011 consisted of the following:

Loans principally from banks and insurance companies due
through 2024 with average interest rate of 1.08% and1.39% per annum as of March 31, 2012 and 2011,
respectively
Unsecured 1.31% bonds due April 28, 2011
Unsecured 0.93% bonds due March 30, 2012
Unsecured 2.01% bonds due May 31, 2012
Unsecured 0.93% bonds due March 29, 2013
Unsecured 0.93% bonds due March 31, 2014
Unsecured 1.62 % bonds due July 10, 2014
Unsecured 0.93% bonds due March 31, 2015
SubtotalLess-Portion due within one year
Total

Annual maturities of long-term debts as of March 31, 2012 were as follows:
Millions of yen¥43,796
43,61043,46042,19929,17967,696¥269,940

2013
2014
2015
2016
2017
2018 and thereafter
Total

22

Thousands of
U.S. dollars$533,187
530,923
529,097
513,745355,235
824,153$3,286,340

Lease obligations as of March 31, 2012 and 2011 consisted of the following:

Lease obligations due within one year as of March 31,
2012and 2011
Lease obligations due after one year as of March 31,
2012and 2011
Total

Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
¥674
¥751
$9,143962

1,184

11,712¥1,713¥1,858$20,855

Annual maturities of lease obligations as of March 31, 2012 were as follows:
Millions of yen
¥751
507
272
133
43
7
¥1,713

2013
2014
2015
2016
2017
2018and thereafter
Total

Thousands of
U.S. dollars$9,143
6,172
3,311
1,619
523
87
$20,855

The following assets as of March 31, 2012 and 2011 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Notes and accounts receivable-trade¥110¥$Property, plant and equipment
64,33960,025
730,765
Total¥64,449¥60,025$730,765
To raise working capital efficiently, the FHI Group has concluded the commitment-line contracts. The
maximum amount that can be made available under these contracts is ¥101,121 million (US$1,231,081
thousand) as of March 31, 2012. At the end of the fiscal year under review, there were no borrowings under
the commitment line.

23

8. Derivative transactions
In the normal course of business, the Company and its consolidated subsidiaries employ derivative financial
instruments, including foreign exchange forward contracts, foreign currency options and interest rate swaps,
to manage their exposures to fluctuations in foreign currency exchange rates and interest rates. The
Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes.
The fair value information of derivative financial instruments as of March 31, 2012 and 2011 was as follows:
Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2012
Millions of yen
Thousands of U.S. dollars
Notional
Valuation
Notional
Valuation
AmountFair value gain (loss)
AmountFair value gain (loss)
Foreign exchange
forward contracts:
SellU.S. dollar¥146,534(¥5,400)(¥5,400) $1,783,954($65,741)($65,741)
Euro
7,809
(382)
(382)
95,069(4,651)(4,651)
Canadian dollar
15,651(640)(640)
190,541(7,792)(7,792)As of March 31, 2011
Notional
AmountForeign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar¥83,265
8,913
11,921Millions of yen
Valuation
Fair value
gain (loss)(¥625)(359)(322)(¥625)(359)(322)

Note: The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative transactions to which hedge accounting is applied(1) Interest rate contracts:
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
As of March 31, 2012

Interest rate swap
contracts:
Receive floating rate
pay fixed rate

Notional
AmountMillions of yen
Over
1 yearFair value

Thousands of U.S. dollars
Notional
Over
Amount1 yearFair value¥34,735¥24,610$422,876(*)

24$299,610(*)

As of March 31, 2011
Millions of yen
Notional
AmountOver
1 yearFair value

Interest rate swap contracts:
Receive floating rate pay fixed rate
¥36,060¥34,735(*)
Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item, because they are treated as a unit.
9. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2012 and 2011 are summarized as follows:2012¥315,725
468,70218,209226,624
1,029,260(769,274)(30,194)
184,276
12,023¥426,091

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

Millions of yen
2011¥317,448
454,663
18,783226,816
1,017,710(765,211)(34,162)
191,111
21,394¥430,842

Thousands of
U.S. dollars
2012$3,843,742
5,706,136
221,6822,758,998
12,530,558(9,365,401)(367,592)
2,243,438
146,372$5,187,375

10. Unexecuted Balance of Overdraft Facilities and Lending Commitments
The unexecuted balance of overdraft facilities and lending commitments at a consolidated subsidiary (Subaru
Finance Co., Ltd.) as of March 31, 2012 and 2011 was as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Total overdraft facilities and lending commitments¥4,800¥4,430$53,932
Less amounts currently executed
666
512
6,233
Unexecuted balance¥4,134¥3,918$47,699
A portion of the overdraft facilities and lending commitments above is subject to credit considerations as
documented in the customer contracts. Therefore, the total balance above is not always available.

2511. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans, qualified
retirement pension plans, contributory defined benefit employees’ welfare pension funds, defined benefit
pension plan, and certain domestic subsidiaries have defined contribution pension plans. In addition, in
certain occasions, additional retirement payments are made to employees for their retirement. Consolidated
foreign subsidiaries primarily have defined contribution plans.
As of March 31, 2012, the Company and 50 of its consolidated domestic subsidiaries, which add up to a
total of 51 companies, have lump-sum retirement payment plans. Within the FHI Group, there are also 20
defined contribution plans, and five defined benefits pension plans. In addition, there are 11 single-employer
employees’ welfare pension funds subject to the provisions of Article 33 of "Practice Guidelines of Accounting
for Retirement Benefits."
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and severance liability is provided at the amount that would
have been payable had all the employees voluntarily retired at the end of the fiscal year, less an amount to becovered from the plan assets, while the Company and significant subsidiaries provide an accrued pension
and severance liability based on the estimated amount of pension and severance obligation (projected benefit
obligations), less the fair value of plan assets at the end of the fiscal year under the actuarial method.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, is as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of February 29, 2012)
Thousands ofMillions of yen
U.S. dollars
2012
2012
Plan assets¥150,396$1,830,972
Projected benefit obligation
173,101
2,107,390
Funded status(¥22,705)($276,418)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan (mainly from April 1, 2011 to March 31, 2012): 14%
A reconciliation between the projected pension and severance obligation and accrued pension andseverance liability as of March 31, 2012 and 2011, was as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
a. Projected pension and severance obligation¥100,917¥102,523$1,248,149
b. Plan assets(50,676)(57,166)(695,958)
c. Unfunded pension and severance obligations
50,24145,357552,191
d. Unamortized actuarial loss
(21,971)(23,213)(282,602)
e. Unamortized prior service cost
(345)
(302)
(3,677)f. Net amount recorded in balance sheet
27,925
21,842
265,912g. Prepaid pension cost
(5,782)(12,108)(147,407)
h. Accrued pension and severance liability¥33,707¥33,950$413,319
Notes: 1. The above amounts include the substitutional portion of the government pension plan funded bysocial security taxes paid by employees and employers.
2. Certain insignificant consolidated subsidiaries calculated the liability using the simplified method.

26

Periodic pension and severance costs for the fiscal years 2012, and 2011, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
a. Service cost
¥8,599¥9,116$110,981
b. Interest cost
1,791
1,577
19,199c. Expected return on plan assets(1,609)(1,718)(20,916)d. Amortization of actuarial gain/loss
1,941
2,115
25,749e. Amortization of prior service cost
51
60
730
f. Pension and severance cost
10,773
11,150135,743
g. Gain on transfer of the substitutional portion of theemployee’s pension fund
(236)
(327)
(3,981)h. Total¥10,537¥10,823$131,762
Notes:1. The above amounts do not include the welfare pension funds paid by employees.
2. The service cost of consolidated subsidiaries using the simplified method is included in the service
cost above.
3. The service cost above includes required funding for the multi-employer pension plan amounting to¥506 million (US$6,160 thousand) and ¥628 million for fiscal years 2012 and 2011, respectively, forwhich plan assets could not be allocated to each participating employer.
4. The service cost above includes contributions for the defined contribution plans of the Company andcertain consolidated subsidiaries amounting to ¥2,604 million (US$31,702 thousand) and ¥2,473
million for fiscal years 2012 and 2011, respectively.
5. In addition to the pension and severance cost above, additional retirement payments amounting to¥189 million (US$2,301 thousand) and ¥220 million were made for fiscal years 2012 and 2011,
respectively. For fiscal years 2012 and 2011, the entire ¥189 million (US$2,301 thousand) ofadditional retirement payments and ¥220 million of additional retirement payments are included incost of sales and selling, general and administrative expenses, respectively.
Actuarial assumptions used in computation of pension and severance liability were as follows:
2012
2011
a. Attribution of expected benefit obligation The straight-line method
The straight-line method
b. Discount rate
1.0%–1.8%
1.4%–2.0%
c. Expected rate of return on plan assets
1.4%–3.5%
1.4%–3.5%
d. Amortization of actuarial gain/loss
Primarily 16 years (amortized Primarily 16 years (amortizedby the straight-line methodby the straight-line method
starting from the following
starting from the following
fiscal year, over a period
fiscal year, over a period
shorter than the average
shorter than the averageremaining service periods of remaining service periods ofthe eligible employees)
the eligible employees)e. Amortization of prior service cost
11 to 18 years
11 to 18 years

2712. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in
the aggregate resulted in a normal statutory income tax rate of approximately 40.5% for fiscal years 2012 and2011.
A reconciliation of the statutory income tax rates in Japan to the Company’s effective income tax rates forthe fiscal years 2012 and 2011 are as follows:
2011
2012
Statutory income tax rate in Japan
40.5% 40.5%
Increase (reduction) in taxes resulting from:
Changes in valuation allowance and tax benefits realized from loss carry forwards(11.0) (17.1)
Adjustment to past corporate income taxes payable and corporate income taxes refundable
(0.2)
(0.2)
Equity in earnings of affiliates
(1.7)
(0.6)
Difference of applicable tax rate in subsidiaries
(1.5)
(1.1)
Adjustment of deferred tax assets in the end of fiscal year 2012 by change of the tax amount
(1.4)
Other
0.2
0.9
Effective income tax rate
27.1% 20.2%
Significant components of the deferred tax assets and liabilities as of March 31, 2012 and 2011, were as
follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Deferred tax assets:
Accrued expenses
Accrued pension and severance liabilities
Depreciation and amortization expenses
Provision for product warranties
Provision for bonuses
Long-term accounts payable-other
Loss on valuation of inventories
Net operating loss carryforwards
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Depreciation and amortization expenses
Reserve for reduction entry
Prepaid pension cost
Other
Total deferred tax liabilities
Net deferred tax assets

28¥12,452
11,942
11,143
10,341
6,281
5,681
4,750
26,906
10,919100,415(73,539)
26,876¥11,687
11,02813,568
10,129
6,561
4,472
9,148
33,663
12,373112,629(89,542)
23,087$151,595
145,386
135,659
125,895
76,467
69,162
57,828327,563
132,931
1,222,486(895,289)
327,197(10,472)(7,317)(2,396)(4,260)(5,981)(30,426)(¥3,550)(7,437)(7,266)(510)(6,436)(21,649)¥1,438(127,490)(89,080)(29,170)(51,863)(72,812)(370,415)($43,218)

The net deferred tax assets are included in the following line items in the accompanying consolidated balance
sheets.
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Current assets—Deferred tax assets¥13,754¥17,399$211,821
Investments and other assets—Deferred tax assets
1,812
1,873
22,803Current liabilities—Deferred tax liabilities(Other current liabilities)
(126)
(82)
(998)
Long-term liabilities—Deferred tax liabilities(14,002)(22,740)(276,844)
Total net deferred tax assets¥1,438(¥3,550)($43,218)(Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates)
On December 2, 2011, amendments to the Japanese tax regulations were enacted into law, and the statutory
income tax rate for years beginning on or after April 1, 2012 will be changed. As a result of these amendments,
the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities expected to besettled or realized has been changed as follows:
From April 1, 2012 to March 31, 2015
on or after April 1, 2015

37.8%
35.4%

Due to these changes in statutory income tax rates, net deferred tax assets increased by ¥2,160 million(US$26,297 thousand) as of March 31, 2012 and deferred income tax expense recognized for the year ended
March 31, 2012 decreased by ¥720 million (US$8,766 thousand).
13. Net Assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of its Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to
10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capitaland legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legalearnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate
amount of cash dividends and other cash appropriations as legal earnings reserve until the total of legal
earnings reserve and additional paid-in capital equaled 25% of common stock.
Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reducea deficit by a resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of
Directors. Under the Law, both of these appropriations generally require a resolution of the shareholders’meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code,however, on condition that the total amount of legal earnings reserve and additional paid-in capital remained
equal to or exceeded 25% of common stock, they were available for distribution by resolution of theshareholders’ meeting. Under the Law, all additional paid-in capital and all legal earnings reserve may betransferred to other capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with Japanese laws and regulations.
29

At the annual shareholders’ meeting held on June 22, 2012, the shareholders approved cash dividends
amounting to ¥3,514 million (US$42,781 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2011. Such appropriations are recognized in the period inwhich they are approved by the shareholders.
14. Ending Inventories
Book value of ending inventories is measured based on the lower of cost or market value.
¥459 million (US$5,588 thousand) and minus ¥627 million as "Loss on valuation of inventories" is included in"Cost of sales" for fiscal years 2012 and 2011, respectively. And minus ¥1,840 million (US$22,401 thousand)and ¥2,820 million as "Provision for loss on construction contracts" is included in "Cost of sales" for fiscal year
2012 and 2011, respectively.
15. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2012 and 2011 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Freightage and packing expenses¥21,034¥20,302$247,163
Advertising expenses
37,49136,452443,779
Sales incentives
35,34530,882375,968
Salaries and bonuses
42,62742,851
521,682
Research and development expenses
42,77848,014
584,539
Other
75,72672,226879,304
Total¥255,001¥250,727$3,052,435
16. Impairment Loss on Property, Plant and Equipment(Fiscal 2011)
In the fiscal year ended March 31, 2011, the Company recorded an impairment loss with regard to thefollowing asset groups:
Use
Location
Category
Tokyo, Aichi Prefecture and 14 other
Buildings and structures, land
Idle assets
locationsand other
The idle assets are grouped on a property-by-property basis.
At the Company and its subsidiaries, assets were written down to their recoverable amounts due to a recent
decline in the real estate market price and their decreased profitability.
As a result, the Company and its consolidated subsidiaries recognized a total of ¥1,457million in impairment
loss.
The impairment loss by each category of property, plant and equipment was as follows:
Millions of yen
2011
¥215
1,209
33

Buildings and structures
Land
Other
Total

¥1,457

A net realizable value is determined based on the government-published land valuation index prices or values
used for real estate tax purposes less disposal cost.

30

17. Loss on Disaster
The loss was caused by Great East Japan Earthquake.
(Fiscal 2012)
The main content was the fixed overhead costs corresponding to lower production.
(Fiscal 2011)
The main contents were as follows;

Fixed costs by temporary suspension of production, etc
Cost to restore damaged facilities
Loss on the damage on inventory and fixed assets
Loss on doubtful accounts for suppliers, etc.
Other
Total

Millions of yen
2011¥4,669
966
883
313
521
¥7,352

18. Loss on Prior Periods Adjustment(Fiscal 2011)
The main contents were as follows.
The adjustment of provision for product warranties in prior years was recognized as a result of review of
product warranty cost.

The adjustment of provision for product warranties in prior years
The adjustment of cost of sales in prior years
Total

Millions of yen
2011¥4,763
1,347¥6,11019. Loss on Reconstruction of Office Building(Fiscal 2011)
In relation to the reconstruction of Ebisu Subaru Building, the following losses were recognized.
Millions of yen
2011
¥334
323
¥657

Estimation of demolition costs
Non-recurring depreciation
Total

20. Provision for Loss on Transfer of Business(Fiscal 2012)
The Company is going to assign the businesses of Eco Technologies division and records the estimatedamount of loss related to these assignments.

3121. Other Income and Loss
(Fiscal 2012)
Other income includes ¥1,611 million (US$19,613 thousand) which is the forgiveness of debt relating to thedevelopment resulting from the dissolution of contract about a specific project in the Aerospace division.
Other loss includes ¥3,028 million (US$36,864 thousand) which consists of the provision of allowance for
doubtful accounts about the receivables from a customer whose credit risk had increased, loss on valuation ofwork in process and others.
(Fiscal 2011)
The Company is going to terminate the production of minicar in fiscal year 2012. Other loss includes ¥2,422
million, the cost of retirement and demolition, etc of facilities related to the termination.
22. Stock Option Plans(Fiscal 2012)
1. Descriptions, volume, and movement of stock options(1) Descriptions of stock option plans
Fiscal 2004
Stock option plan
Position and number of
Directors, Executive Officers,
grantees
Corporate Auditors and employees:
320
Class and number ofstock (shares)
Common Stock 1,917,000
Date of grant
September 6, 2004
Directors, Executive Officers,
Corporate Auditors and employees
who are enrolled at the date thesubscription rights are granted.
Should an employee under 50 yearsof age retire by voluntary termination,
the employee’s right to exercise
his/her claim will expire.
Required service period
From September 6, 2004,
to July 31, 2006
Exercise period
From August 1, 2006,
to July 31, 2011
Note: The number of stock options is converted to the equivalent number of common stock.
Vesting conditions32

(2) Volume and movement of stock options
The stock options outstanding in the fiscal year 2012 are summarized as follows:[1] The number of stock options (shown as the equivalent number of common stock)
Fiscal 2004
Stock option plan
Nonexercisable stock options (shares):At the end of the fiscal year 2011-

Stock options granted-

Forfeitures-

Conversion to exercisable stock options-

Stock options outstanding-

Exercisable stock options (shares):At the end of the fiscal year 2011

1,254,000

Conversion from nonexercisable stock options-

Stock options exercised

205,000

Forfeitures

1,049,000

Stock options outstanding-[2] Price information of stock options
Fiscal 2004
Stock option¥594,000

Exercise price (Yen)
Average market price of the stock at the time of exercise (Yen)Fair value (date of grant) (Yen)

620
-

33

(Fiscal 2011)
1. Descriptions, volume, and movement of stock options(1) Descriptions of stock option plans
Fiscal 2004
Stock option plan
Position and number of
Directors, Executive Officers,
grantees
Corporate Auditors and employees:
320
Class and number ofstock (shares)
Common Stock 1,917,000
Date of grant
September 6, 2004
Directors, Executive Officers,
Corporate Auditors and employees
who are enrolled at the date thesubscription rights are granted.
Should an employee under 50 yearsof age retire by voluntary termination,
the employee’s right to exercise
his/her claim will expire.
Required service period
From September 6, 2004,
to July 31, 2006
Exercise period
From August 1, 2006,
to July 31, 2011
Note: The number of stock options is converted to the equivalent number of common stock.
Vesting conditions(2) Volume and movement of stock options
The stock options outstanding in the fiscal year 2011 are summarized as follows:[1] The number of stock options (shown as the equivalent number of common stock)
Fiscal 2004
Stock option plan
Nonexercisable stock options (shares):At the end of the fiscal year 2010-

Stock options granted-

Forfeitures-

Conversion to exercisable stock options-

Stock options outstanding-

Exercisable stock options (shares):At the end of the fiscal year 2010

1,863,000

Conversion from nonexercisable stock options-

Stock options exercised

609,000

Forfeitures-

Stock options outstanding

1,254,00034

[2] Price information of stock options
Fiscal 2004
Stock option
Exercise price (Yen)
Average market price of the stock at the time of exercise (Yen)¥594,000
675

Fair value (date of grant) (Yen)-

23. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessee(1) Transfer of title through finance lease transaction[1] Leased assets
Mainly implements of production in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the same method as used for other property, plant and equipment.
(2) Finance leases which do not transfer ownership title[1] Leased assets
Mainly network equipment and terminal units (Other tangible assets) in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
(3) Those finance lease transactions that had not had their ownership transferred on or before March 31,
2008, are recorded based on the same method as used for regular rental transactions.
[1] Pro forma information of such leases as of March 31, 2012 and 2011, was as follows:

2012
¥231
306
9
546
(443)
¥103

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

35

Millions of yen
2011
¥284
760
31
1,075
(810)
¥265

Thousands of
U.S. dollars
2012$2,812
3,725
110
6,647
(5,393)$1,254

[2] The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2012
and 2011, were as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Finance leases:
Due within one year
¥168
¥74
$901
Due after one year
114
42
511
Total
¥282
¥116
$1,412[3] Pro forma information related to finance leases for fiscal years 2012 and 2011 was as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Lease payment
¥347
¥171
$2,082
Depreciation and amortization expenses
328
159
1,936
Interest expense portion
¥10
¥4
$49
Information as Lessor(1) The details of lease investment assets as of March 31, 2012 and 2011 were as follows:
Millions of yen
2011
2012
¥28,028¥26,374280
272(5,258)(4,781)¥23,050¥21,865

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

Thousands of
U.S. dollars
2012$321,086
3,311(58,205)$266,192(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2012 and 2011, were as
follows;
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Within 1 year
¥9,120¥8,786$106,964
1 to 2 years
7,438
7,004
85,2692 to 3 years
5,588
5,226
63,6233 to 4 years
3,742
3,267
39,7744 to 5 years
1,972
2,013
24,507
Over 5 years
¥168
¥78
$949

36

24. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2012 and2011, were as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Operating leases:
Due within one year
¥1,135¥1,179$14,354
Due after one year
5,346
4,813
58,595
Total¥6,481¥5,992$72,949
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2012 and 2011, were as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Operating leases:
Due within one year
¥1,122¥545$6,635Due after one year
300
206
2,508
Total
¥1,422¥751$9,14325. Contingent Liabilities
Contingent liabilities as of March 31, 2012 and 2011, were as follows:
Thousands ofMillions of yen U.S. dollars
2011
2012
2012
As guarantor of third-party indebtedness from financial
institutions¥38,600¥31,943$469,929

26. The Amount of Discount of Export Bill
The amount of discount of export bill as of March 31, 2012 and 2011, were as follows:
Thousands ofMillions of yen U.S. dollars
2011
2012
2012
The amount of discount of export bill
¥905

¥9,102$11,018

27. Property for Transfer Balance to Special Purpose Company
Property for transfer balance to special purpose company as of March 31, 2012 and 2011, were as follows:
Thousands ofMillions of yen U.S. dollars
2011
2012
2012
Property for transfer balance to special purpose company(loan claims of Automobiles and account receivable-trade¥51,512¥23,416$285,074
of Aerospace)37

28. Segment Information(1)General information about reportable segments
The reportable segments the Company reports are the business units for which the Company is able
to obtain respective financial information separately in order for the Board of Directors to conductperiodic investigation to determine distribution of management resources and evaluate their businessresult.
The Company has placed Automobile at the center of the whole businesses, and has implemented
internal company system into Aerospace, Industrial Products and Eco technology divisions. This framework
makes clearer the responsibility of each division and accelerates business execution. The Company
manages the subsidiaries on the basis of this classification. Therefore the reportable segments consist ofAutomobile, Aerospace, Industrial products, Eco technology, and Other which does not belong to any
division.
As for Eco technology division, the Company includes it into "Other" because it does not satisfy thequantitative criteria for the reportable segments. As a result, reportable segments are Automobile, Aerospace,and Industrial products.
Automobile segment manufactures and sells vehicles and related products. Aerospace segment
manufactures aircrafts, parts of space-related devices. Industrial products segment manufactures and sells
Robin engines and related products.
(2)Calculation method of sales, profit or loss, assets, liabilities and other items by reportable segments
Accounting method for reportable segments is almost the same as "2. Summary of Significant
Accounting Policies".
The segment profit or loss are calculated based on operating income or loss.
Net sales - Inter-segment are calculated based on current market prices.

38

(3)Information on sales, profit or loss, assets and other items by reportable segments for the fiscal years
ended March 31, 2012 and 2011 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
2011
Net Sales:
2012
2012
Automobiles
Outside customers¥1,452,207¥1,389,070$16,911,006
Inter-segment
2,520
2,947
35,877
Sub-total
1,454,727
1,392,017
16,946,883
Aerospace
Outside customers
82,81780,251
977,003
Inter-segment
Sub-total
82,81780,251
977,003
Industrial products
Outside customers
30,061
33,617409,265Inter-segment
39
111
1,351
Sub-total
30,10033,728410,616
Other (*1)
Outside customers
15,478
14,167
172,474
Inter-segment
13,207
13,208160,799
Sub-total
28,68527,375333,273
Total
1,596,329
1,533,371
18,667,775
Adjustment (*2)
(15,766)(16,266)(198,028)
Consolidated total (*3)
¥1,580,563¥1,517,105$18,469,747

Segment profit or Loss:

2012

Millions of yen
2011

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

¥39,389
2,882
503
1,029
43,803
156¥43,959¥80,387
2,256
(52)
1,463
84,054
81¥84,135

39

Thousands of
U.S. dollars
2012$479,535
35,086
6,124
12,527533,272
1,900$535,172Segment assets:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)

Thousands of
U.S. dollars
2012

2012

Millions of yen
2011¥1,097,729
153,960
53,86375,916
1,381,468(28,936)¥1,352,532¥944,046
162,704
41,51571,562
1,219,827(31,503)¥1,188,324$13,364,122
1,874,361
655,746924,227
16,818,456(352,276)$16,466,180
Thousands of
U.S. dollars
2012

Other Items:
Depreciation and amortization:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)

2012Millions of yen
2011¥53,043
3,534
522
1,512
58,611¥58,611¥51,004
2,380
660
2,018
56,062¥56,062$645,763
43,024
6,355
18,408713,550$713,550

Investment to equity-method affiliates:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)

¥5,285
270
886
266
6,707
¥6,707¥4,849
230
890
394
6,363
¥6,363$64,341
3,287
10,786
3,239
81,653$81,653

Increase of property, plant and equipment andintangible fixed assets:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)¥64,591¥63,544$773,606
1,918
2,772
33,747
215
262
3,190
654
457
5,564
67,37867,035816,107¥67,378¥67,035$816,107
Note: *1. "Other" means the category which is not included into any reportable segments. It consists ofgarbage collection vehicles, specialized vehicles, real estate lease, etc.
*2. Adjustment of segment profit of loss refers to elimination of intersegment transaction.
*3 Segment profit or loss is adjusted on operating income on the consolidated statements of income.

40

Related Information(1)Products and services information
Products and services information is not shown since the same information is in the segment information.
(2)Information about geographic areas[1]Sales for the fiscal years ended March 31, 2012 and 2011 was summarized as follows:

2012

Millions of yen
2011

Sales: (*1)
Japan
¥467,323¥498,472
North America
725,775
710,432[United States] (*2)[654,402][620,675]
Europe126,321112,826
Asia
138,854
96,729Other
122,290
98,646
Consolidated total¥1,580,563¥1,517,105
Note: *1 Sales is categorized by country or area which is based on customer location.
*2 Sales of the United States is included in North America area.

Thousands of
U.S. dollars
2012$6,068,566
8,649,038[7,556,306]
1,373,582
1,177,611
1,200,950$18,469,747[2]Property, plant and equipment for the fiscal years ended March 31, 2012 and 2011 was summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Property, plant and equipment: (*1)
Japan
¥379,717¥376,569$4,584,478
North America
50,99049,417
601,619[United States] (*2)[50,234][48,732][593,280]
Europe
135
98
1,193
Asia
Other
7
85
Consolidated total¥430,842¥426,091$5,181,503
Note: *1 Property, plant and equipment is categorized by country or area according to geographic adjacentlevel.
*2 Property, plant and equipment of the United States is included in North America area.
[3]Major customers Information
Information about major customers is not shown because outside sales for major customers accounted forless 10% of operating revenue on the consolidated statements of income for the fiscal years ended March 31,
2012 and 2011.

41

Information on Impairment Loss in Fixed Assets by Reportable segments
Impairment loss in fixed assets by reportable segments for the fiscal years ended March 31, 2012 and 2011
was summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Impairment loss in fixed assets:
Automobiles¥1,431¥63$767
AerospaceIndustrial products
26
Other
Total
1,457
63
767
Adjustment
Total¥1,457¥63$767
Information on Amortization of Goodwill and Unamortized Balance by Reportable segments
Information on amortization of goodwill and unamortized balance by reportable segments for the fiscal years
ended March 31, 2012 and 2011 was summarized as follows:(1)Goodwill
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Amount written off of current period:
Automobiles
¥350
¥318
$3,871
AerospaceIndustrial products
Other (*1)
3
1
12
Total
353
319
3,883
Corporate and elimination
Total
¥353
¥319
$3,883
Balance at the end of current period:
Automobiles¥2,773¥2,420$29,462
AerospaceIndustrial products
Other (*1)
1
Total
2,774
2,420
29,462
Corporate and elimination
Total¥2,774¥2,420$29,462
Note: *1 "Other" is related to Eco technology division.

42

(2)Negative Goodwill

2012

Millions of yen
2011

Thousands of
U.S. dollars
2012

Amount written off of current period:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Total

¥¥-

¥206
206
¥206

$$-

Balance at the end of current period:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Total

¥¥-

¥¥-

$$-

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

4329. Fair Value of Investment and Rental Property
The Company and certain consolidated subsidiaries own rental office buildings and rental commercial
facilities with the objective of generating rental income in Saitama prefecture and other locations. Certain
domestic rental office buildings in Japan are classified as properties that include portions used as investment
and rental property, because part of them are used by the Company and certain consolidated subsidiaries.
Investment and rental property consolidated balance sheet amounts, principal changes during fiscal 2012
and 2011, fair value at the end of fiscal 2012 and 2011 were as follows:
As of March 31, 2012
Millions of yen
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the yearInvestment and rental property¥34,148(¥2,264)¥31,884¥40,854
Properties that include portions used as
investment and rental property¥14,711(¥8,138)¥6,573¥9,555
As of March 31, 2012

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

Thousands of U.S. dollars
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year$415,729($27,563)$388,166$497,370$179,097($99,075)$80,022$116,326

As of March 31, 2011
Millions of yen

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

Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year¥29,838¥4,310¥34,148¥47,877¥13,534¥1,177¥14,711¥40,416

Note 1. The amounts of consolidated balance sheet excludes accumulated depreciation and accumulated
impairment loss from acquisition costs.
2. Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2012, principal increases were properties
acquisitions etc, which amounted to ¥1,628 million (US$19,820 thousand), and principal decreases
were loss on sales and retirement, which amounted to ¥8,968 million (US$109,179 thousand) .
Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2011, principal increases were properties
acquisitions etc, which amounted to ¥9,113 million, and principal decreases were depreciation andimpairment loss, which amounted to ¥1,321 million and ¥846 million, respectively.
3. Fair value of a part of main investment and rental property is the amount estimated by based value ofreal-estate appraiser, and fair value of a part of other investment and rental property is the amount44estimated by the Company based principally on land assessment value. Also, fair value at the end of
the fiscal year 2011 of Shinjuku Subaru building is the amount estimated by based on sale value.
Profit and loss in fiscal 2012 and 2011 concerning investment and rental property and properties that include
portions used as investment and rental property were as follows:
As of March 31, 2012
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,309¥2,062¥1,247¥111
Properties that include portions used as
investment and rental property¥1,144¥537¥607¥26,134
As of March 31, 2012

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

Thousands of U.S. dollars
RentalRentalChangeOther profit
incomeexpensesand loss$40,285$25,103$15,182$1,351$13,927$6,538$7,389$318,164

As of March 31, 2011

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

Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss¥3,055¥2,199¥856(¥338)¥1,790¥1,099¥691(¥669)

Note:1. Rental income (from the properties that include portions used as investment and rental property) does
not include the portion that the Company or certain subsidiaries use as the provision of services andbusiness administration purposes. Rental expenses, however, include all portions of the expenses(costs related to depreciation, repairs, insurance and taxes).
2. Other profit and loss include in gain on sale and impairment loss.
30.Subsequent Event
No items to be reported.
31.Other
On January 15, 2010, the Company filed a lawsuit with the Tokyo District Court against the Government ofJapan for the payment [totaling ¥35,124 million (US$ 427,611 thousand)] of uncollected initial investment fees(amount paid for customization to the Japanese specifications) for the manufacture of the AH-64D combat
helicopters for the Japan Ministry of Defense.
The payment [totaling ¥23,954 million (US$ 291,624 thousand)] of uncollected initial investment fees theCompany paid was included in "Other assets" of "Investments and other assets".
In addition, the amount of lawsuit includes the uncollected initial investment fees, consumption tax andother paid by subcontractors.

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