Annual Report2019
For the year ended March 31, 2019

CONTENTS
03 SUBARU Business Style

21 Business Overview

05 History

29 Directors, Auditors, andExecutive Officers

07 Message from the CEO
13 Message from the CFO
17 Financial and
Non-Financial Highlights
19 Featured Topic:
Report on Improprieties
Relating to Final Vehicle
Inspections

31 Corporate Governance
41 The SUBARU Groupʼs CSR
59 Consolidated Ten-Year
Financial Summary
61 Five-Year Unit Sales
63 Financial Review
69 Corporate Information

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

01

Annual Report 2019

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

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

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

Annual Report 201902

SUBARU Business Style

Vision for 2025

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

03

Annual Report 2019

Strengthening of the
management foundation
We will strengthen the management foundation by
pursuing qualitative improvement in every aspectof the company, including products, services,
culture, human resources, organizations, finance,and operations.

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

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

Annual Report 201904

History

History of the SUBARU Group
SUBARU, which can trace some of its roots to Aircraft Research Laboratory,
has continuously nurtured highly creative technologies and increased corporate value
by pursuing business alliances to respond to major changes in the times.
Here we outline the history of the SUBARU Group to date.

1917

Establishment of Aircraft Research Laboratory

1968

Establishment of Subaru of America, Inc. (SOA)

1931

Establishment of Nakajima Aircraft Co., Ltd.

1968

Dissolution of the business alliance with Isuzu Motors Ltd.

1945

Change of company name from
Nakajima Aircraft to Fuji Sangyo

1968

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

1968

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

Start of operation of the Yajima Plant

1972

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

1978

Conclusion of a 767 business agreement with Boeing

1983

Start of full-scale operation of the Oizumi Plant

1987

Release of the Justy model equipped with the world’s
first electro-continuously variable transmission (ECVT)1987

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

1946 Production of thefirst Rabbit Scooter

1953

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

1960

Opening of the Gunma Main Plant

1960

Listing of shares on the Tokyo Stock Exchange

1966

Signing of a business alliance agreement with
Isuzu Motors Ltd.

SUBARU Models
through the Years

1966

SUBARU 1000
four-door sedan released
1958

1969

SUBARU 360 released
1961

1971

SUBARUSambar truck released05

R-2 released

Annual Report 2019

Leone coupe released1972

Rex released

1977

Brat released
1983

Domingo released

1984

Justy released

1985

Alcyone released
1989

Legacy series released

Origin of the SUBARU Name and Logo
“SUBARU” is Japanese for the Pleiades star cluster in theconstellation Taurus. These stars are also known as “sixstar group.” The name reflects the fact that Fuji Heavy
Industries was formed from capital contributions fromfive companies that sprang from Nakajima Aircraft.

1989

Establishment of Subaru Canada, Inc. (SCI)

1989

Completion of Subaru Research & Testing Center (SKC)

1990

Subaru of America (SOA) made a wholly owned subsidiary

1991

Participation in the Boeing 777 program

1993

Start of operation of the Handa Plant

1999

2005

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

2007

Start of production of Toyota cars (Camry) at SIA

2012

Start of knockdown production of the
SUBARU XV in Malaysia

Capital and business alliance with
General Motors Corporation (GM) (USA)2012

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

1999

Business alliance with Suzuki Motor Corporation

2014

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

2000

Dissolution of the business alliance with
Nissan Motor Co., Ltd.
Dissolution of the SIA joint venture with Isuzu Motors Ltd.
and formal signing of a contract production agreement

2016

2002

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

2003

The Legacy wins the 2003–2004
Car of the Year Japan award2016

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

2003

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

2017

Change of company name to SUBARU CORPORATION

2017

2005

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

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

2018

Introduction of the SUBARU BELL 412EPX helicopter

1992

Vivio released

1992

Impreza series released
1997

Forester released

1998

Pleo released

2003

Outback released
2005

B9 Tribeca released

2008

Exiga released

2012

SUBARU BRZ released
2012

SUBARU XV released

2014

Levorg released2014

WRX released
2018

Ascent released(Exclusively for North America)

Annual Report 201906

Message from the CEO

We must restore trust in quality,
the cornerstone of the SUBARU brand,
and rebuild a foundation forsustained growth.
Representative Director of the Board,
President and CEO

Tomomi Nakamura

07

Annual Report 2019

A Look Back at My First Year as President
During the fiscal year ended (FYE) March 2019, my first year as Representative Director, President and CEO,we swiftly moved ahead with various reforms under STEP, our new mid-term management vision, aimed atmaking SUBARU a company that is trusted by, and resonates with, customers. It was a very difficult year interms of financial performance because of having to operate some domestic production lines at reduced
speed as part of placing the highest priority on stable, high-quality production and inspections, as well as
dealing with the occurrence of new quality problems. Nevertheless, there are positive signs that thecorporate culture reforms, which we have made our top priority, have led to changes in our workplaces andto the mindsets of employees. FYE March 2019 was also a year in which latent issues at SUBARU came tolight, which enabled us to confirm that we are moving in the right direction with corporate culture reforms,
quality reforms, and the Make-a-Subaru project, the initiatives we have made the centerpiece of STEP. We
will now proceed with rebuilding the foundation on which to achieve sustained growth for SUBARU byfurther accelerating these activities.
SUBARU is a brand that has been and is nurtured by customers. Why have customers chosen SUBARU?
Why is the SUBARU brand loved? The basis for this affinity is trust in the SUBARU brand, and I believe thatthe source of that trust can be found in functional characteristics, such as drivability and safety, and highquality that includes vehicle durability. Nevertheless, recently the quality that is the cornerstone of thebrand has slipped, and I consider it my mission to implement fundamental reforms to right the situation.
I intend to heed the voice of customers, fully meet their expectations, and respond to their sentiments andwill strive to enable SUBARU to regain the trust of our customers, shareholders, and other stakeholders as
quickly as possible.

The Business Environment
Todayʼs mobility society is in a once-in-a-century period of transformation, and to respond to this change,
SUBARU is investing and pursuing development in the new technology fields known as CASE*. Nevertheless,as a relatively small player in the automotive industry, SUBARU cannot develop everything on its own. For
SUBARU to compete into the future by enhancing its strengths and distinctive attributes, we must selectsectors and domains on which to focus in-house development and allocate resources accordingly. In otherfields, we want to efficiently and effectively respond by utilizing business alliances and collaborative
initiatives with other companies. In the area of electrification, we have already introduced a plug-in hybrid in
the U.S. in cooperation with Toyota Motor Corporation. Moreover, in June 2019 we announced that we will
jointly develop with Toyota a platform dedicated to battery electric vehicles (BEVs) for the midsize and large
passenger vehicle category and jointly develop a C-segment-class BEV SUV model for sale under eachcompanyʼs own brand. In connection with this agreement with Toyota, we will shift its existing BEV
development resources to joint project and pursue greater efficiency in technology, development,
procurement, and other areas. Our approach to automated driving is to focus mainly on advanced driverassist technologies that substantially alleviate driver burden, rather than on driverless systems, and we arefurther evolving the driver assist system EyeSight, which already enjoys widespread popularity. In the area ofconnectedness, we have begun development of new technologies and services that utilize connected car
technologies and data, and will accelerate planning and development to meet expanding customer needs.
Although SUBARU is not involved in car sharing at this time because we think that most of our customers
prefer to own their own cars in order to enjoy active car lifestyles, I think that it will become necessary toconsider an approach to car sharing if customer needs for it increase. At the end of June 2019 we announced
a capital and business alliance with MONET Technologies as an initiative to realize and popularize mobility
services. We intend to pursue “Enjoyment and Peace of Mind” appropriate to a new era and want tocollaborate with other automakers to contribute to resolving social issues relating to mobility.
One change in the business environment we are carefully watching is the trend in trade negotiations
between Japan and the U.S., which is a key market that accounts for a high proportion of SUBARUʼs sales.
Although we have expanded local production in the U.S. in step with increases in unit sales in the market,
even in 2018 about half of the vehicles we sold in the U.S. were exported from Japan, and we also export
from Japan some parts used in locally assembled vehicles. SUBARUʼs business is expected to be affected
depending on the outcome of trade negotiations, and we are envisioning various scenarios and considering
responses.
* An acronym of the words: Connected, Autonomous, Shared & Services, and Electric

Annual Report 201908

Message from the CEO

STEP Initiatives
In July 2018, SUBARU announced STEP, a new mid-term management vision, with the aim of making
SUBARU a company that is trusted by, and resonates with, customers through the provision of “Enjoyment
and Peace of Mind.” A variety of initiatives are set forth in STEP, and in FYE March 2019 we focusedparticularly on implementing corporate culture reforms and quality reforms. An explanation of thesereforms follows.

Initiatives overview (9 Boxes + 1)0

“Change the Culture”
Corporate culture reforms

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

New mobility domain

1Enhance corporate quality

Quality reforms

Enhance quality at customer
contact points

Alliance enhancement2

Build a strong brandMore enjoyment,
more peace of mind

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

Generate new value throughconnected car technologies

3

Sustainable growth basedon focus strategy

Launch “Make-a-Subaru”
project– Target 5% share in the U.S. –Steady growth in each region

Initiatives to create newtechnologies and businesses* Please refer to the SUBARU corporate website for details on the STEP
mid-term management vision

WEB

STEP: the Mid-term Management Visionhttps://www.subaru.co.jp/en/ir/management/plan/

Corporate Culture Reforms
We are implementing corporate culture reforms, the foundation of STEP, with the strong determination tonever again cause problems such as the repeated improprieties in final vehicle inspections (see pages
19–20). I and other senior managers have visited plants and offices throughout the Group to directly
communicate managementʼs firm resolve and engaged in communication with employees by holding
discussion meetings to exchange views. We have also engaged in vigorous, constructive discussions inJapan with labor unions for the purpose of promoting corporate culture reforms and confirmed that laborand management will work together to accelerate reform initiatives. Workplace visits have given me many
opportunities to sense a restoration of self-confidence and an increase in motivation among our
employees, and I feel that a change of mindset has steadily progressed over the course of the year.
Of course, corporate culture cannot be changed overnight, and it is important to maintain a sense ofurgency while continuing efforts to change the mindset of employees. To enable all employees to feel that
SUBARU is an open and transparent company where people are free to speak their minds, I think that all
managers, from senior management to frontline managers, must change their own mindset and behavior.
I intend to actively solicit the views of individual employees and carry on with corporate culture reforms
until they become deeply rooted and irreversible.

09

Annual Report 2019

Quality Reforms
Quality reforms are the highest priority in STEP. SUBARU aims to be No. 1 in the kind of quality that makes
our products suitable for long-term use with peace of mind, and we will pursue quality improvement in every
business process, from product planning to production, sales, and service.
The number of recalls resulting from product defects occurring during design or manufacturing has
increased recently. SUBARU caused considerable concern and inconvenience to customers because ofnumerous recalls, including major ones, in FYE March 2019. These recalls also had a major impact onfinancial performance because of the large number of vehicles and considerable expense involved. As I
mentioned earlier, quality is the cornerstone of the SUBARU brand. I am keenly aware that fundamentally
improving quality is an urgent task, and in FYE March 2019 we focused on implementing quality reforms inengineering and product development and in manufacturing. Our engineering and product development
divisions have studied and begun implementing fundamental quality reforms starting from the development
planning and design stages. These reforms include a review of development schedules and supplierselection and collaboration to enable reliable confirmation of quality, sharing of parts across models,
updating of durability testing facilities, and increasing personnel. In manufacturing, we will achieve better
quality production by making investments in facilities necessary to ensure quality, including updating aging
facilities, reviewing and improving processes; making investments for the purpose of securing the necessary
number of employees and for employee upskilling; and reviewing the approach to line operation and labor
management.
Also, to instill a quality-first mindset in all employees, on April 1, 2019 we revised the Quality Policy (seepage 53), which articulates a vision of quality that SUBARU should aspire to realize. As SUBARU makes a newstart toward restoring trust, we conducted a top-to-bottom review to ensure that the revised policy can becontinuously used for a long time and that it will serve as a guidepost for quality that all employees canshare. Furthermore, we used language that is simpler and easier to understand than that of the previous
policy to ensure that all employees thoroughly understand the policy content and can apply the new policyin their own daily work behavior. I am convinced that the way to change the company is to change themindset and behavior of each employee.

Market Strategy
In STEP, we announced a target of unit sales of 1.3 million vehicles worldwide in 2025. Although traderelated concerns remain as an external factor to be considered, sales are strong in the U.S., the largest
growth driver for SUBARU, and we will continue to press ahead to achieve sales of 1.3 million vehicles.
Although some say that overall demand in the U.S. has peaked, we consider the U.S. a market that
continues to offer high potential. We forecast continued underlying strength in demand at a level of 17
million vehicles, supported by a robust economy. We are receiving highly positive feedback from themarket. Sales of the Ascent, introduced in the middle of last year, are strong, and SUBARU has been able toacquire new customer segments. Although we are planning for sales at the 700,000 unit level (up 3% year onyear) in calendar year 2019, we intend to ensure the success of the upcoming introduction of all-new
versions of two key models, the Outback and Legacy, in the second half of the year and link that success to

The all-new Outback (U.S. market specification) was announced on April 17, 2019 at the New York International Auto Show.
The vehicle will be manufactured at Subaru of Indiana Automotive and is scheduled for launch in the U.S. and Canada in fall 2019

Annual Report 201910

Message from the CEO

further sales expansion next year and beyond. Although we plan to expand the dealer network from thecurrent 631 to about 650 dealers in the future, we have no intention of increasing dealers merely on thebasis of numbers. Rather, we plan to develop our sales network by opening dealers to fill open points (areas
with no dealers), mainly in the Sunbelt. To encourage dealers to invest in the SUBARU business, it isnecessary to secure dealer income, and we consider it important to increase unit sales per dealer toaccomplish this. A cooperative framework with dealers is essential for achieving our growth strategy, and wewill grow together with our dealers and pursue U.S. market share of 5% in partnership with them.

Retail Unit Sales and Market Share in the U.S. Market(Units)800,000

3.8

700,000

3.1
600,000

3.3

3.9

3.5

3.5

3.0

2.7

500,000

2.1

2.3

2.1

(%)
4.0

2.5

2.3

Market Share

400,000

2.0

300,000

1.5

200,000

1.0

100,000

0.5

00

AscentTribeca
SUBARU BRZForester
WRX
Crosstrek
Impreza(Calender year)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Outback
LegacySource: MOTOR INTELLIGENCE “U.S. Market New Vehicle Deliveries” (2009–2018)

In the Japanese market, we are strengthening new proposals, using products such as all-new Forester
and SUBARU XV (known as Crosstrek in North America) models equipped with e-BOXER and special
edition vehicles as a hook, and stepping up communication with customers using media messaging andexhibitions. Also, by improving and supporting the dealer network, the actual point of contact withcustomers, as well as the work performed by dealer staff and the working environment, we aim to make
SUBARU a brand whose products, dealers, and dealer staff are loved by people. In so doing, we will restore
customer trust. Although total demand in Japan is contracting, we want to maintain annual passenger car
sales of approximately 120,000 vehicles.
Although extremely strict environmental regulations make China and Europe difficult markets for
SUBARU, which does business mainly in the U.S., we will aim to utilize all-new Forester and SUBARU XVmodels equipped with the e-BOXER system to support sales in these markets. These are the first SUBARU
hybrid models to be introduced in Europe, and I think their reputation in the market will represent a new
departure in our sales strategy.
With regard to production capacity, we believe we have a foundation in place to support sales of 1.3
million vehicles. Although future changes in the business environment may necessitate changes to our
production plans, there is no major change in our existing plans at this time.

Aerospace BusinessFYE March 2019 marked the start of a number of new projects in the aerospace business, including thecenter wing section of the Boeing 777X and complete products such as helicopters. We intend to carefully
nurture each of these projects and develop them into pillars that will support the growth of the Aerospace
Company. Aerospace is a growth industry, and the aerospace business requires leading-edge technologies
in all areas of development and manufacturing. The mutual utilization of strengths is progressing within the
SUBARU Group in ways such as the application of leading-edge technologies from the aerospace businessin automobile development and introduction in the aerospace business of expertise in cost-cutting andother areas cultivated in the automotive business. We will continue efforts to generate new synergies andaim to contribute to overall business growth by further utilizing the strengths of both business units.

11

Annual Report 2019

Initiatives to Enhance Corporate ValueSUBARU considers it necessary to promote and ensure the penetration of CSR initiatives on a group-wide,
global scale to contribute to solving social issues through our businesses and meet stakeholder
expectations and demands. We have defined Six Priority Areas for CSR in STEP and are implementing
initiatives aimed at achieving a balance between creating a sustainable society and achieving sustained
growth. By applying the Six Priority Areas for CSR in our business activities, we will contribute to diversifyingsocial needs and fulfill our social responsibilities as a corporation. In so doing, the SUBARU Group will
become a corporate group trusted by society as a truly global company and contribute to the creation of amore affluent and sustainable society.
The SUBARU Group has made the automotive and aerospace businesses the pillars of its business
operations. In the SUBARU Environmental Policies, revised in April 2017, we defined SUBARUʼs fields ofbusiness as the earth, the sky and nature and made protecting the Earthʼs environment a key priority inbusiness activities. The Group aims to reduce direct CO2 emissions* by 30% compared to FYE March 2017
levels by FYE March 2031 and is currently implementing reduction initiatives group-wide. In addition to
installing a captive-consumption solar power system and purchasing CO2 emissions-free hydropower, wehave initiated new CO2 emissions reduction measures. We forecast reduction of approximately 20,000
t-CO2 , equivalent to around 3% of annual emissions, by FYE March 2021.
In product-related environmental measures, in addition to focusing on improving the environmental
performance of existing models, we will shift to joint development of BEVs with Toyota Motor Corporationand expand our line of products with enhanced environmental performance.
SUBARU considers corporate governance one of the managementʼs top priorities. To strengthen
management oversight of business execution, we obtained approval at the 88th Ordinary General Meetingof Shareholders to increase the number of outside directors from two to three. As a result, outside directors
now make up one-third of the Board of Directors (three of nine members). In addition, we have appointed
SUBARUʼs first female officer (an outside corporate auditor) and are promoting diversity management. In
April 2019, we reorganized the departments responsible for oversight of business execution, established
the Risk Management Group under the direction of a Chief Risk Management Officer (CRMO), and clarified
reporting lines. This will enable us to increase the effectiveness of group-wide internal controls and risk
management.
* CO2 directly emitted from SUBARU Group plants and offices (Scope 1 and 2)

Annual Report 201912

Message from the CFO

Director of the Board,
Executive Vice President and CFO

Toshiaki Okada

We will identify and prioritize the necessary resourcesin the categories and markets in which SUBARU
can leverage its strengths and link them tothe improvement of medium- and long-term
corporate value and sustained growth.
Business Performance in FYE March 2019
Consolidated unit sales in FYE March 2019 decreased by some 67,000 units year on year to 1,000,000 units.
Unit sales in overseas markets decreased by 39,000 units to 865,000 units as a result of factors including adecrease in unit shipments of the Forester in the first half of the year ahead of a full model change. Thisdecrease was also despite strong retail sales boosted by the impact of the all-new Ascent, which wasintroduced in the summer of 2018 in the key U.S. market, and continued strong performance from the
Crosstrek (known as the SUBARU XV outside North America). Unit sales in the domestic market decreasedby 28,000 to 135,000 units as a result of factors including lower sales of the Impreza, SUBARU XV, and Levorg,
despite strong sales of the Forester, which underwent a full model change in July 2019.
Since fall 2018, the Gunma Plant has placed the highest priority on maintaining stable quality in bothproduction and inspections so that the plantʼs continuing operation at lower production line speeds, as well13

Annual Report 2019as halt in production in January 2019 following the occurrence of defects in purchased parts and otherissues, lead to a unit production decrease by 61,000 units year on year to 989,000 units. Consolidated unit
sales were consequently affected due to insufficient supply.
As a result, consolidated net sales decreased 1 by 2.2% to 3,160.5 billion yen. Operating income
decreased by 48.5% to 195.5 billion yen because of the unit sales decrease, cost increases in areas relating
to quality, caused chiefly by recalls, and a decline in profit per unit attributable to costs related toenvironmental response initiatives. Ordinary income decreased by 48.3% to 196.2 billion yen, and net
income attributable to owners of parent decreased by 32.9% to 147.8 billion yen.

Outlook for FYE March 2020
Since SUBARU is voluntarily applying the International Financial Reporting Standards (IFRS) from the
beginning of FYE March 2020, forecasts are calculated based on IFRS.
We forecast strong sales of the Ascent, Forester, and Crosstrek in the key market of North America anda new-model effect for the Forester in other markets and, as a result, have planned for consolidated unit
sales of 1,058,000 vehicles.
We have also planned for consolidated revenue 2 of 3,310.0 billion yen. Although we have factored into
the forecast improvement in sales volume and mixture due to a projected increase in unit sales, as well as aprojected decrease in quality-related costs, in light of increases in R&D expenses and SG&A expenses̶aswell as the impact of exchange rates and higher raw material prices̶we are planning for operating profit 3of 260.0 billion yen, profit before tax 4 of 270.0 billion yen, and profit for the period attributable to owners ofparent 5 of 210.0 billion yen. In the second half of the year, we are projected to start the restoration of
production line speed at the Gunma Plant. Consequently, we forecast higher consolidated unit sales,
revenue, and operating profit in the second half than in the first half and will aim for operating profit at anannualized level of 300.0 billion yen from the second half of the year.
We plan for incentives per vehicle in the U.S. of 2,200 U.S. dollars, an increase of 100 U.S. dollars year on
year. We plan to begin sales of all-new versions of the Legacy and Outback in the North American market in
the fall, and the main reason for the 100-U.S. dollar increase is a planned effort to boost sales before themodel change. Sales of the Ascent, Forester, and Crosstrek remain strong, and incentives for these threemodels are being controlled at low levels. However, while the interest rate environment is improving, we think
it will be necessary to boost incentives due to factors such as changes in the competitive environment. We
also intend to closely monitor the status of sales, supply, and inventory as well as carefully manage expenses.
1 An accounting policy change (deduction of sales incentives from net sales) was implemented beginning in FYE March 2019. Figures for comparison
years have been calculated by applying the revised policy
2 “Net sales” under Japanese Generally Accepted Accounting Principles (JGAAP)
3 “Operating income” under JGAAP
4 “Income before income taxes” under JGAAP
5 “Net income attributable to owners of parent” under JGAAPFYE March 2019: Analysis of Increase andDecrease in Operating Income Changes

FYE March 2020: Analysis of Increase andDecrease in Operating Profit Changes(Consolidated)(Consolidated)

R&D
expenses

379.4(Billions of yen)

R&D
expenses
SG&A expenses
andothers18.6
379.4

18.6

-98.7

Sales volume &mixture and others

SG&A expenses
and others

Sales volume &mixture and others

Sales volume &mixture and others

Cost reduction-5.7-87.4 -10.7

195.5
-5.7

’18/3

incomeResult’19/3

Operating-183.9billion yen
incomeResult

195.5
-13.8

’19/3
OperatingincomeResult’19/3
OperatingincomeResult(JGAAP)

3.6

25.7

181.7 195.5

Accounting
standard
difference

Cost reduction

Loss on currency exchangeLoss on currency exchange-183.9 Operating
billion yen

Sales volume &mixture and others
R&D
SG&A expenses expenses
and others

70.6

195.5

’18/3
OperatingincomeResultSG&A expenses
and others-98.7-87.4 -10.7(Billions of yen)

25.7
70.6
-14.8 -9.2

181.7

Loss oncurrency-13.8
exchange
Accounting
standard
difference

R&D
expensesOther

3.6
2.4 260.0

Other

2.4 260.0-14.8 -9.2

Loss oncurrency
exchange

Cost
reduction

’19/3
’19/3
’19/3
OperatingOperatingOperating +78.3
billion yen
profit income
profitResult Result
Result(IFRS) (JGAAP)(IFRS)

Cost
reduction

’20/3

’20/3
OperatingprofitPlanned(IFRS)

Operating+78.3 billion
yenprofitPlanned(IFRS)

Annual Report 201914

Message from the CFO

Progress with STEP
We have made quality reforms the highest priority in STEP, SUBARUʼs mid-term management vision, and areundertaking fundamental improvement of quality, which is the basis of customer trust. We have set a fiveyear investment framework of 150.0 billion yen for enhancement of total quality, from product planning andproduction to points of contact with customers. Quality enhancement initiatives at each department havebegun, such as augmentation of facilities and personnel in R&D and production as well as improvement of
the workplace environment and employee work styles.
With regard to the profit plan, we think it will be difficult to achieve the planned three-year (FYE March
2019 to FYE March 2021) operating profit of 950.0 billion yen (exchange rate assumption of ¥105 to US$1.00)
because of an increase in temporary quality-related costs due to the occurrence of a major recall and incosts related to complying with environmental regulations, changes in plant operation schedules, and otherfactors. Nevertheless, by steadily implementing the initiatives set out in STEP, we intend to first of all solidify
the profit foundation to enable us to achieve single-year operating profit of approximately 300.0 billion yen,
and in the future aim for an operating margin of 10%. Going forward, further cost increases will be
unavoidable due to the tightening of environmental regulations, and we recognize that we must now
consider how to carry out vehicle mono-zukuri (car-making) in order to secure profits, in addition to how to
evolve our current business model and enhance our brand power while communicating with the market.

Financial and Capital Strategies
The Company engages in business management with return on capital, financial soundness, and shareholder
returns as the three key indicators of capital policy. Specifically, the Company has declared a policy ofproviding appropriate shareholder returns while maintaining a high degree of balance between return on
equity (ROE) and the shareholdersʼ equity ratio over the medium and long term. We have set a minimum
shareholdersʼ equity ratio of 50% and want to secure cash reserves equivalent to two monthsʼ sales. We haveset a target of maintaining ROE of 10% and will aim for ROE of 15% or higher. Although we recognize that
we currently have ample cash reserves, we expect the level of reserves to decline somewhat due to factors
including expenditures accompanying performance of recall work that occurred up to FYE March 2019.
With regard to profit distribution, we ensure balanced distribution of profits to all stakeholders andprovide continuous, stable shareholder returns, with dividend payments as the primary component ofreturns. Although the level of profits declined sharply in FYE March 2019, since we judged that the main
reasons for the decline are temporary, we declared an annual dividend payment for FYE March 2019 ofCapital Expenditures Depreciation Expenses
Capital expenditures

Depreciation expenses

Capital expenditures(Billions of yen)

Depreciation expenses(Billions of yen)

200

150

158.5

150

120

141.4

135.7

64.8

65.0

77.0

114.2

140.0

89.8

102.4
90

113.5

110.7
100

88.8

100.0

50

121.1

120.0
102.7

83.5

60

30

0

0

’15/3

’16/3

’17/3

’18/3

’19/3 ’20/3(Planned)* FYE March 2020: IFRS figures
Capital expenditures, amortization expenses, and lease obligations
pertaining to lease transactions and intangible assets are notincluded

15

R&D Expenditures

Annual Report 2019’15/3 ’16/3 ’17/3 ’18/3 ’19/3 ’20/3(Planned)* The figures represent expenditures pertaining to R&D activities that
occurred during the reporting periods
Since under IFRS, the portion of such expenditures for which asset
value is recognized is recorded as intangible assets and amortizedbased on estimated useful life, the figure differs from “Research anddevelopment expenses” on the consolidated income statement(corresponding to “Research and development expenses” on the
consolidated statements of income under JGAAP)

144 yen per share (half-year dividend of 72 yen and year-end dividend of 72 yen), the same as for FYE March2018. We plan to maintain a dividend of 144 yen per share (half-year dividend of 72 yen and year-end
dividend of 72 yen) again in FYE March 2020. Although concerns about a global slowdown due to trade
friction are heightening, there is no change in our policy of making a dividend payment of 144 yen the basisof shareholder returns and conducting flexible share repurchases while taking into account cash flow.
The automotive industry is in a period of transition to a new era, and social demands for the newtechnologies called CASE* are increasing against a backdrop of tightening local environmental performance
regulations, tax systems, and safety performance assessments. At the same time, since the commercial
viability of these technologies is by no means high at this time, we recognize that the industry is entering adifficult business phase.
In this business environment, it is important for SUBARU, by no means a large automaker, to determine
the business sectors in which it can leverage its strengths and intensively invest in necessary resources with aview to the improvement of medium- and long-term corporate value and sustained growth. In my role as
CFO, I will work to meet the expectations of our shareholders and other stakeholders by supporting
improvement of medium- and long-term corporate value and sustained growth through an appropriate
response to financial risks and financial strategies, including utilization of the SUBARU Groupʼs funds throughcentralized management and both optimal allocation and timely investment in growth sectors. I request yourfurther understanding and support in the coming years.
* An acronym of the words: Connected, Autonomous, Shared & Services, and Electric

Capital Policy
Two monthsʼ worth of
net sales at minimum

Net cash
Ratio of shareholdersʼ
equity to total assets

50% at minimum
Minimum
TargetYearly dividend per share
Share repurchases

ROE
Shareholder returns

10%
15%
144 yen
To conduct flexibly

Free Cash Flow
Ratio of Shareholdersʼ Equity to Total Assets

Dividend per ShareDividend Payout Ratio

Free cash flow (Left)
Ratio of shareholders’ equity to total assets (Right)

Dividend per share (Left)
Dividend payout ratio (Right)(Billions of yen)
400

(%)

(Yen)

80

160

(%)

120

358.6
300

46.5

51.8

144
52.8

54.2

120

40

80

91.2

20

40

0

0

74.7

15.7

0

’15/3

’16/3

’17/3

’18/3

144
90

60

68

138.8
100

144

53.8
215.6

200

60

144

’19/3

50.1

30

39.4
20.3
’15/3

25.7
0

’16/3

’17/3

’18/3

’19/3

* Application of Partial Amendments to Accounting Standard for Tax
Effect Accounting, effective from FYE March 2019
Retroactively applied to the figures for FYE March 2018

Annual Report 201916

Financial and Non-Financial Highlights
Years ended March 31

Financial Highlights
SUBARU CORPORATION and its consolidated subsidiaries

Net Sales(Billions of yen)

Operating Income

Operating Margin

Operating income (Left)

Operating margin (Right)(Billions of yen)

(%)

600

4,000

3,000

2,877.9

3,232.3 3,326.0 3,232.7 3,160.5

30

565.6

25

500
400

2,000

300

423.0
17.5
14.7

410.8
12.4

20

379.4

15

11.7
195.5

200

10

1,000

6.2

100
0

0

’15/3

’16/3

’17/3

’18/3

’19/3

108

’16/3

’17/3

’18/3

’19/3

121

108

111

111

Exchange rate (Yen to the U.S. dollar)

Capital Expenditures Depreciation Expenses
Capital expenditures

0

’15/3

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

R&D Expenses

Depreciation expenses(Billions of yen)(Billions of yen)

150

200

158.5

150

120

141.4

135.7
110.7

100

77.0

65.0

64.8

89.8

114.2

102.4
90

113.5
88.8

50

121.1
102.7

83.5

60

30

0

0

’15/3

’16/3

’17/3

’18/3

’19/3

’15/3

’16/3

’17/3

’18/3

’19/3

* Accompanying a change in accounting policy effective from the FYE March
2019, change of depreciation method for certain tangible fixed assets of theCompany and its major domestic consolidated subsidiaries from the decliningbalance method to the straight-line method

Non-Financial Highlights
Direct CO2 Emissions (Scope 1 and Scope 2)
Overseas Group companies

Domestic Group companies

Waste Generation
SUBARU(Tons of CO2)

600,000

Overseas Group companies
200,000

612,044 623,786

668,667 687,468 678,839

162,893 166,856

170,589

190,924 185,736

150,000

400,000

100,000

200,000

50,000

0

0

’15/3

’16/3

’17/3

’18/3

’19/3

* Beginning in FYE March 2019, the reporting basis of SUBARUʼs CO2 emissions haschanged from “non-adjusted greenhouse gas emissions” to “adjusted greenhousegas emissions,” which are based on the Act on Promotion of Global WarmingCountermeasures. The change has been retroactively applied to emissions since
FYE March 2015. CO2 reduction initiatives are described on page 45

17

Domestic Group companies(Tons)

800,000

Annual Report 2019

5

’15/3
* Includes scrap metal sold

’16/3

’17/3

’18/3

’19/3

SUBARU

Interest-Bearing Debt

D/E Ratio

ROE

Interest-bearing debt (Left)

D/E ratio (Right)

ROE(Billions of yen)(Times)

(%)

0.5

40

250

211.2

200

0.4

30

170.0
148.3

150

0.3

0.21

100

0.13
50

86.2
0.10

100.4

0.06

’16/3

’17/3

’18/3

ROA

36.9
29.3
23.6

20.7

20.2

20

14.6

0.2

0.1

10

0

0

15.3

9.4

13.4

0.06

0

’15/3

ROA

’19/3

6.7
’15/3

’16/3

’17/3

’19/3

’18/3

* ROA = Operating income / Total assets(average at the beginning and end of the term)Free Cash Flow
Ratio of Shareholders’ Equity to Total Assets
Free cash flow (Left)

Consolidated Unit Sales

Ratio of shareholders’ equity to total assets (Right)(Billions of yen)

(%)

400

80.0

(Thousand units)
1,200

358.6
300

46.5

51.8

52.8

54.2

53.8

215.6

200

60.0

900

40.0

600

20.0

300

0

0

1,065

1,067

’17/3

’18/3

1,000

958

911

138.8
100

91.2
15.7

0

’15/3

’16/3

’17/3

’18/3

’19/3

’15/3

’16/3

’19/3

* Application of Partial Amendments to Accounting Standard for Tax EffectAccounting, effective from FYE March 2019
Retroactively applied to the figures for FYE March 2018

* Automobile unit sales of SUBARU CORPORATION and
its consolidated subsidiaries

Water Consumption

Number of Employees

Overseas Group companies
Domestic Group companies
Per unit of consolidated net sales (Right)(Thousand m3)
5,000

4,367

4,401

4,462

SUBARU(Thousand m3/100 million yen)

(Persons)

0.30

40,000

4,673

4,843

4,000

0.24

3,000

0.18

2,000

0.15
0.15

0.14

0.13

0.00

0

’17/3

’18/3

’19/3

Consolidated

29,774

31,151

32,59933,54434,20020,000
0.12

0.06

’16/3

30,000

0.14

1,000

’15/3

Non-consolidated

13,883

14,234

14,70814,87915,274

’15/3

’16/3

’17/3

’18/3

’19/3

10,0000* Excluding executive officers, advisors, and dispatches

Annual Report 201918

Featured Topic

Report on Improprieties Relating toFinal Vehicle Inspections
Here, we provide an overview of improper conduct during final
vehicle inspections and SUBARUʼs response to those instances,and report on specific measures to prevent any reoccurrence.

WEB

Please refer to the SUBARU corporatewebsite for details.

https://www.subaru.co.jp/en/jpfvi/top.html

Overview of Improprieties Relating to Final Vehicle Inspections
On December 19, 2017 and April 27, 2018, SUBARU reported to the Ministry of Land, Infrastructure, Transport and Tourism(MLIT) about improper conduct during final vehicle inspections discovered in October 2017. On June 5, 2018, SUBARU was
required by the MLIT to conduct a thorough investigation and develop measures to prevent any reoccurrence ofimproprieties in connection with vehicle fuel economy and emissions sampling procedures and other final vehicle
inspections. In response to this, SUBARU commissioned a team of external professionals, including an attorney, to conduct
a thorough investigation from an objective and neutral perspective. The investigation newly identified inappropriate
conduct in connection with final vehicle inspections and on September 28, 2018 SUBARU released the investigation report.
Furthermore, an internal investigation triggered by an on-site inspection conducted by the MLIT in October 2018 foundthat some inappropriate conduct had continued.
Since the end of 2017, SUBARU has reinforced education for final vehicle inspectors, reviewed personnel assignments,
and promptly implemented feasible facilities modifications, updating of inspection equipment software, and various othermeasures. Taking this all into account, executives and managers spent considerable time participating in inspections atfinal inspection sites, holding discussions with final vehicle inspectors, and verifying the effect of various measures already
implemented to prevent reoccurrence of improper conduct, and worked to ensure compliance. Subsequently, as a result of
halting production lines to verify the effect of preventive measures, on October 26, 2018 SUBARU found that the preventive
measures function effectively and that the soundness of the final vehicle inspection process had been ensured, and
SUBARU confirmed that the identified improper conduct had ended. No improper conduct similar to that identified in theinvestigations conducted to date has been discovered since the resumption of production.
Given the background to the above repeated improprieties, on November 14, 2018 SUBARU received from the Ministerof Land, Infrastructure, Transport and Tourism a recommendation of actions, such as a review and thorough implementationof prevention measures. Also, on December 19, 2018, MLIT notified the Tokyo District Court to apply a civil fine against
SUBARU pursuant to the Road Transport Vehicle Act, since part of the improper sampling tests constituted a case of partial
non-implementation of important final vehicle inspections. As a result, on March 8, 2019, the Tokyo District Court imposeda non-penal fine of 83.4 million yen.

Response to Improprieties Relating to Final Vehicle Inspections
The Company takes the current situation resulting from repeated improper conduct extremely seriously. We have resolved
to recover the trust of all stakeholders as quickly as possible by further accelerating activities to become “a company that
does the right thing in the right way.” We are boldly implementing corporate culture reforms and have implemented
various measures to prevent a reoccurrence of improper conduct, which can be divided into the following four categories.
Measures that strengthen managementʼs sense of ownership and clarify its responsibility for compliance andquality assurance
Measures to detect and prevent improper work
Development of a structure to promptly correct improper work when it occurs
Measures that are promptly implemented and continuously operated in the future
SUBARU has further subdivided the abovementioned preventive measures into 65 items and is currently implementing
the measures. Implementation of 57 items has been completed as of April 23, 2019, when the quarterly progress report
was submitted to the MLIT. SUBARU will continue to mount a group-wide effort to implement measures to prevent any
reoccurrence of improper conduct and to constantly improve and increase the reliability of those measures.

19

Annual Report 2019

Status of Implementation of Measures to Prevent any
Reoccurrence of Improprieties Related to Final Vehicle Inspections
Changing Our Mindset, Starting with Management
Senior management is taking the initiative in ascertaining the situation on the ground,ensuring that a change in employee mindset reaches every corner of the workplace, andengaging in activities to foster a corporate culture that places the highest priority on quality.
In addition to regular efforts to raise awareness of quality and compliance through an
in-house newsletter, SUBARU uses feature articles and extra issues of the in-housenewsletter to convey senior managementʼs commitment to corporate culture reform
throughout the Group. Also, SUBARU holds discussions between senior management andemployees for the purpose of invigorating communication with frontline workers.
Since November 2018, President Nakamura has visited plants and offices throughout
the Group, including the Gunma Plant and Aerospace Company Utsunomiya Plant, tocommunicate face to face with employees about managementʼs firm resolve to prevent
any reoccurrence of the repeated final vehicle inspection problems and to recover trust.
Also, SUBARU has implemented organizational changes in order to steadfastly and morerobustly implement measures to prevent any reoccurrence of the final inspection
problems, including establishment of the Vehicle Inspection Department within the Quality
Assurance Division effective December 1, 2018 and institution of a new organizational
structure with respect to the director in charge of manufacturing, effective January 1, 2019.

Improvement of Communication
At final inspection sites, team leaders and final vehicle inspectors review each dayʼs work
together and mutually confirm whether inspections have been carried out in accordancewith standard operations and whether the standard operations themselves are appropriate.
Also, to realize various improvements, senior personnel and inspectors periodically holdmeetings to discuss improvements to all aspects of work and consider improvement
measures. Furthermore, department general managers hold monthly regular meetings at
all workplaces, at which they directly confirm the status of improvement of inspection sites
and individual problems and concerns, introduce best practice examples from otherworksites, and discuss problems for which improvement has been delayed. In this way,following sharing of workplace problems at each level of management, workplace-levelmeasures for improvement are rapidly implemented. Furthermore, measures for
improvement that, according to their nature, must be implemented beyond the workplacelevel are realized through discussion with team leaders, assistant managers, section
managers, or department general managers. This daily communication is contributing toraising the awareness of final vehicle inspectors and to continuous improvement activities.

Improvement of Facilities
SUBARU has implemented various improvements in the final vehicle inspection process toensure reliable inspections and quality. One example of a facilities improvement is theconversion of a device used in speedometer tests. Whereas previously a monitor constantly
displayed the speed being measured, now only the speedometersʼ measurement results
are displayed, enabling inspectors to focus their attention on the speedometers. In
addition, final vehicle inspector trainees wear different colored caps and helmets to clearly
indicate that they are trainees. Work training is conducted at actual production lines on a
one-to-one basis by inspectors with trainer qualifications. Through these improvements,
SUBARU is developing a reliable inspection system and rigorously ensuring quality.
Note: This is an English translation of the original Japanese text. If there are any discrepancies between this text andthe original Japanese text, the original Japanese text prevails

Annual Report 201920

Business Overview

Automotive
Business Unit
SUBARU continues to develop cars that promise
total driving enjoyment and safety for all passengers.

Consolidated Net Sales Contribution
Ratio of the Automotive Business Unit

95.4%
Net Sales

The launch of the SUBARU 360 in 1958 marked SUBARUʼs start as an
automaker. Ever since, we have contributed to the development of Japanʼs
automotive industry by creating a succession of distinctive cars equippedwith creative technologies such as the horizontally opposed engine andSymmetrical All-Wheel Drive. We continue to take on new challenges inorder to provide all of our customers with “Enjoyment and Peace of Mind.”
For example, we continue to evolve the EyeSight driver assist system, have
improved safety performance and driving performance by adopting theSubaru Global Platform, our next-generation vehicle platform, and were thefirst Japanese automaker to use a pedestrian protection airbag.

(Billions of yen)

4,000
3,000

3,152.0 3,062.3
3,039.4
3,014.5
2,699.0■ Consolidated global unit sales decreased by 6.3% year on year to

2,000

1,000,000 units.

1,000■ Sales in Japan were 135,000 units. Overseas sales were 865,000 units.

0’15/3 ’16/3 ’17/3 ’18/3 ’19/3* Change of accounting policy effective from FYEMarch 2019 (deduction of sales incentives fromnet sales)
Retroactively applied to the figures for FYEMarch 2018

Operating Income
600

400

200

(Billions of yen)

543.6
400.9

397.7

361.5

184.9

0

’15/3 ’16/3 ’17/3 ’18/3 ’19/3

21

Overview of FYE March 2019

Annual Report 2019

* Vehicle volume figures are rounded off to the nearest thousand

Consolidated Automobile Sales
by Region (Thousand units)
Japan ............................... 135
United States ................... 660
Canada .............................. 57
Russia ................................... 8
Europe ................................ 32
Australia ............................. 42
China ................................. 23
Others ................................ 43
Total ................................. 1,000

Product Lineup
Legacy Series

Consolidated unit sales: 260,000 units
Sales regions: Japan, North America, Russia, Europe,
Australia, China, and other

Consolidated unit sales: 260,000 units
Sales regions: Japan, North America, Russia, Europe,
Australia, China, and other

Consolidated unit sales: 41,000 units
Sales regions: Japan, North America, Russia, Europe,
Australia, and other

Impreza Series
Consolidated unit sales: 15,000 units
Sales regions: Japan, Europe, Australia, and other(SEDAN)（5 Door）

Consolidated unit sales: 7,000 units
Sales regions: Japan, North America, Europe,
Australia, and other(North America: CROSSTREK)Consolidated unit sales: 322,000 units
Sales regions: Japan, North America, Russia, Europe,
Australia, China, and other(Exclusively for North America)

Consolidated unit sales: 67,000 units
Sales region: North America

OEM Models

Consolidated unit sales: 28,000 units
Sales region: Japan(OEM supply from Daihatsu Motor Co., Ltd.)* For the period from April 1, 2018 to March 31, 2019
* Automobile sales of SUBARU CORPORATION and its consolidated subsidiaries

Annual Report 201922

Business Overview

Automotive Business Unit

The SUBARU Concept of All-Around Safety

Primary
SafetyAiming for the highest level of peace of mind
and safety for all passengers

ActiveSafetySUBARU pursues automobile safety performance from every perspective and isrefining and perfecting core technologies on the basis of four safety criteria:
primary safety, active safety, preventive safety, and passive safety.

Preventive
SafetyPassive
SafetyBasic design features for avoiding accidents

Primary
SafetySafe situation

Hazardous
situation

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

Preemptive
accident
avoidance

Driving position

Interface

The ultimate in driving performance for greater safety

ActiveSafetyFacilitating hazard avoidance through performance improvementin the basic functions of a car: driving, turning, and stopping
Horizontally opposed engine

Symmetrical AWD

Accident

Advanced technology that supports safe driving

Preventive
SafetyCollision

EyeSight

Damagereduction
during an
accident

Spread ofdamageExtra precautions just in case

Passive
SafetySafety Performance
Recognized Worldwide
SUBARU has received the highest rating in the
NCAP1 conducted by the authorities in Japan,
the U.S., Australia, and other countries, as wellas in the safety performance assessment
conducted by the IIHS2 in the U.S.3
In the IIHS safety performance assessment,
all models equipped with EyeSight and specificheadlights received the 2019 Top Safety Pick
Plus (TSP+) rating. The 2019 TSP+ awards only
apply to the North America models.

1 NCAP: New Car Assessment Program
2 IIHS: Insurance Institute for Highway Safety
3 For ratings details, please refer to rating agency websites

23

Annual Report 2019

Supporting safe driving by helping avoid collisions and reduce
damageMinimizing damage when an accident occurs
Engine layout
Subaru Global Platform
Pedestrian protection airbag

Japan
U.S.A.
* The 2019 TSP+ awards
only apply to the North
America models.

EuropeJNCAPJNCAP シャドウ付き
JNCAPFIRST PRIZE 5★
ASV＋＋＋
Euro NCAP
5★

Australia

IIHS
TSP＋

U.S.A.

US-NCAP
5★

ANCAP
5★
JNCAP ASV+++ rated models:
Impreza/SUBARU XV and Forester (models equipped with EyeSight) in 2018
JNCAP 5-star rated and first prize models: Forester in 20182019 IIHS TSP+ rated models: 2019 Impreza, Crosstrek, Legacy, Outback, WRX, Ascent, andForester (models equipped with EyeSight and specific headlights)
UN-NCAP 5-star rated models:
2019 Impreza, Crosstrek, Legacy, Outback, Ascent, and Forester
Euro NCAP 5-star rated models: Impreza and SUBARU XV in 2017
ANCAP 5-star rated models: Forester in 2019

SUBARU Core Technologies
Horizontally-Opposed Engine (Boxer engine)

Compact, low center of gravity

SUBARU Boxer

Conventional In-Line Engine

The horizontally opposed engine has pistons arranged symmetrically to the left andright of the crankshaft. Since the opposed pistons mutually cancel out engine
vibrations, the engine can rotate smoothly, which reduces vibrations conveyed to thevehicle interior. The engineʼs low height and compact design contribute to low vehicle
center of gravity. The stable attitude provides a high sense of security during driving.

Symmetrical All-Wheel Drive (AWD)

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

Symmetrical All-Wheel Drive (AWD)

Subaru Global Platform

A next-generation vehicle platform designedwith the future in mind, looking ahead to 2025
SUBARU is sequentially introducing the Subaru Global Platform, starting with the allnew Impreza launched in October 2016. The new vehicle platform substantially
increases body and chassis rigidity and further lowers vehicle center of gravity, raising
the level of active safety and passive safety and delivering responsive handling
performance and a comfortable ride with reduced unpleasant vibration and noise.

Subaru Global Platform

EyeSight Driver Assist System

Stereo cameras for advanced object
recognition capabilities
The use of two cameras positioned to the left and right, like human eyes,
contributes to preventive safety by helping avoid accidents, reduce impact, andalleviate driver burden by enabling three-dimensional recognition of cars,pedestrians, and other objects in front of the vehicle and accurate recognition of
the distance, shape, and speed of movement of these objects. SUBARU began
development of a driver assist system using stereo cameras in 1989. Application ofresearch results and experience accumulated over many years since then has
culminated in EyeSight, a system that anyone can use with peace of mind. In 2017,
we introduced EyeSight Touring Assist, which dramatically reduces driver fatigue byautomatically assisting accelerator, brake, and steering operation at a wide rangeof speeds from 0 to approximately 120 km/h for expressway driving.
SUBARU pursues “protecting peopleʼs lives” and evolves preventive safety
technologies with the aim of eliminating fatal accidents involving SUBARU
vehicles* by 2030.

Stereo cameras* Elimination of accidents resulting in the death of drivers or passengers in SUBARU vehicles and accidents
resulting in the death of pedestrians, cyclists, or other persons due to collision with SUBARU vehicles

Annual Report 201924

Business Overview

Debut of the All-New

FORESTER
As a top-selling model in the SUBARU lineup, the all-new fifth-generation Forester is positioned as a key
part of the company’s global strategy. The new model offers packaging that balances excellent handlingwith a spacious interior as well as easy-to-use features, bringing comfort and enjoyment for all passengers.
Under SUBARU’s design philosophy “Dynamic x Solid,” we have created the new design for the Foresterthat imparts a feeling of the toughness of an SUV and easy-to-use functionality.

	Incorporates the Driver Monitoring System,1
SUBARU’s first-ever occupant recognition technology	Equipped with the e-BOXER 2 power unit system,
which makes even everyday driving enjoyable thanks
to smooth acceleration from a motor assist function	Incorporates the Subaru Global Platform, which
provides top-of-class comfort and safety
performance	Pedestrian protection airbags and EyeSight Touring
Assist, the latest advanced safety equipment, comestandard 3 in all models
1 A safety feature designed to alert an inattentive driver, not to prevent driver
inattention or accidents
2 A hybrid system that combines a horizontally-opposed engine and electric-drive
technology for eco-friendly performance in addition to SUBARUʼs signaturedriving enjoyment
3 The Forester specifications shown on this page are the specifications in Japan

25

Annual Report 20192018-2019

Car Assessment (JNCAP)

Received
the Grand Prix Awardfor collision safety
performance
The Forester won the Grand Prix Award in the collisionsafety performance assessment for earning the highest
score in the 2018–2019 Japan New Car Assessment
Program (JNCAP) collision safety performanceassessment. It also received Advanced Safety Vehicle
Triple Plus (ASV +++) rating, the highest rating in thepreventive safety performance assessment. The
Foresterʼs high safety performance in a wide range ofareas from accident risk reduction to collision damage
reduction has been demonstrated once again.

The Head of Developmentʼs Uncompromising
Attention to Detail that is Winning
the Forester Worldwide Acclaim

Concept of the All-New Forester
We defined the SUBARU value proposition that shaped development of theForester as “Trust in Forester̶Able to go anywhere, suitable for use in any
situation.” We created the product by following the core concept of the previous
model and adding new value concepts. We sought to add two new value
concepts. The first is the ability to share comfort and a dynamic space, for all
passengers alike̶the driver and loved ones. The second is that through owningor riding in the vehicle, drivers will feel able to embark on an exciting adventure
and that all passengers, regardless of generation, can feel a sense of adventure.
These two value concepts are the key development themes for the new Forester.

Comfort for Loved Ones
When I considered what makes a comfortable car, I thought of the Japanese
expression fukuyoka (meaning “well-rounded”). As an example, for the door trim,
we used soft-touch materials all the way up to the top of the window shoulder and,for areas that come into contact with the body, we devised a way of expressing
interior richness with a spacious seating area and plush interior surfaces. As aresult of thinking through how to provide comfort, we concentrated on creating
comfort with an emphasis on the back-seat area. For instance, we created
Project General Manager
spacious legroom by using nearly all of the added wheelbase length of the new
Product & Portfolio Planning Division
platform for the rear seats and also enhanced the comfort of the rear-seat
Tomoyuki Nunome
environment. Furthermore, although the Driver Monitoring System (DMS) was
initially conceived for the purpose enhancing safety and peace of mind, such as
through preventing the driver from dozing off, since a key objective was tocreate a comfortable car, we brainstormed ways of utilizing the DMS to enhance vehicle comfort. We came up with an idea
to increase the customer value of the DMS by utilizing the facial recognition software to automatically adjust the driverʼsseat position and mirror angles to preset individual preferences.

Stir of Adventure
The word “adventure” can mean many things: for instance, the sense of expectation when the driver straps into the driverʼsseat or the feeling of excitement about going on a new journey together with loved ones. First, we thought about how toembody the notion of adventure in a car and decided to do everything we could to achieve this. One example of this is the
cargo area, designed to contribute to a sense of excitement. The engineers and designers drew up plans and considered
together how to create a cargo area that looks spacious from the rear and has a large luggage area with room to stow
everything needed for a family picnic. The result is a cargo area with a 1,300-mm extra-wide rear gate opening, which is
exciting in its potential.
The e-BOXER power unit was first conceived with the idea of using an electric motor to enhance traditional SUBARU
strengths, not simply to improve fuel economy. However, following repeated discussion among the project team members,
we decided to use a motor to compensate for the weaknesses of gasoline engines. The advantage of a motor is that since
it runs on electricity, it can be simply switched off and on. Using an electric motor for functions for which a gasoline engine
is ill suited, resulted in much smoother driving performance. We also considered whether we could use the motor to further
improve driving performance on uneven road surfaces. Getting just the right amount of engine power using the accelerator
is most difficult at the slow speeds required for rough and bumpy terrain. Since (unlike a gasoline engine) motor operation
varies linearly with the accelerator pedal position, cars equipped with the e-BOXER power unit become a great deal easierto drive. By combining e-BOXER with X-MODE 4 and concentrating on using the motor to assist when the accelerator pedal
is pressed, we were able to evolve X-MODE to make it easier to drive even on bad roads. I think that the development ofe-BOXER has allowed us to create a car that really supports a sense of adventure.
4 X-MODE is an AWD control function. Appropriately controlling the driving force of the four wheels, braking, and other vehicle functions makes it possible to smoothly
escape from bad road conditions

Annual Report 201926

Business Overview

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

Consolidated Net Sales Contribution
Ratio of the Aerospace Company

4.2%
Net Sales(Billions of yen)

200
150

142.8

152.8

138.8 142.2 131.7

100
50
0

SUBARUʼs roots trace to 1917 and Aircraft Research Laboratory, later tobecome Nakajima Aircraft. The Aerospace Company, which has inherited
Nakajima Aircraftʼs manufacturing technologies and spirit, leads Japanʼs
aerospace industry and develops and produces a wide variety of aircraft.
In the defense program, we develop, manufacture, maintain, repair,and provide technical support for products such as the UH-1J utility
helicopter used by the Japan Ground Self-Defense Force for disaster relief
and other purposes, the T-5 Maritime Self-Defense Force trainer,
unmanned aerial vehicles (more than 15 models developed over a half
century), and flight simulators. In the commercial program, we participate
in many international joint development projects for Boeing. For the 777X,
Boeingʼs newest large passenger airliner, we are responsible for the Center
Wing and its integration with main landing gear (MLG) wheel well, as wellas MLG doors and Wing-to-Body Fairings (forward). In addition, taking
advantage of an alliance with Bell Textron, we jointly developed the
SUBARU BELL 412EPX and have started sales.
By further refining our technologies through involvement in a wide
variety of aircraft programs, we will continue to take on additional challenges
for growing into an aircraft manufacturer with a global presence.

’15/3 ’16/3 ’17/3 ’18/3 ’19/3* Change of accounting policy effective from FYEMarch 2019 (deduction of sales incentives fromnet sales)
Retroactively applied to the figures for FYEMarch 2018

Operating Income
20

18.9

(Billions of yen)

18.2

15

12.3
10

9.1
6.0

5
0

’15/3 ’16/3 ’17/3 ’18/3 ’19/3

27

Annual Report 2019

Boeing 777X

SUBARU BELL 412EPX

Overview of Center Wing Box and
SUBARUʼs Technology

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

A center wing box (Handa Plant)

Message from the Company President

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

President
Aerospace Company

Shoichiro Tozuka

We are a start-to-finish aircraft builder with a wide-range of integration capability
from aircraft development and manufacturing to flight testing. Flight safety is an
important factor for aircraft, and for many years we have fostered a culture in which
quality and safety are recognized as inextricably linked and uncompromisingly
pursued. This total safety concept is at the core of SUBARUʼs DNA.
In the commercial airplane business, the production rate of the Boeing 787,
which is our major product, has reached 14 shipsets per month. Meanwhile, for the
Boeing 777X, the latest derivative of the Boeing 777 series, we have completeddelivery of components for test airplanes and expect full-scale production to start.
In the defense program, we have successfully made the first flight and delivered
the prototype of a New Utility Helicopter for Japan Ground Self-Defense Forcein FYE March 2019. We have begun production of the SUBARU BELL 412EPX, which
is based on the New Utility Helicopter, and will engage in full-scale production andsales from FYE March 2020.
We will continue to hone and perfect every aspect of our business and pursue
further growth with the aim of expanding the SUBARU brand to the sky and space.

Annual Report 201928

Directors, Auditors, and Executive Officers(As of August 8, 2019)

Directors of the Board

Director of the Board

Representative
Director of the Board

Representative
Director of the Board

Tomomi Nakamura

Kazuo Hosoya

Director of the Board

Director of the Board

Director of the Board

Toshiaki Okada

Yoichi Kato

Tetsuo Onuki

Outside Director

Outside Director

Outside Director

Shigehiro Aoyama

Yasuyuki Abe

Natsunosuke Yago

Standing Corporate Auditor

Standing Corporate Auditor

Outside Corporate Auditor

Outside Corporate Auditor

Akira Mabuchi

Shuzo Haimoto

Shigeru Nosaka

Kyoko Okada

Yasuyuki Yoshinaga

Auditors

29

Annual Report 2019

Executive Officers
Chairman

Yasuyuki Yoshinaga

President

Tomomi Nakamura

CEO (Chief Executive Officer)

Deputy President

Kazuo Hosoya

Chief General Manager of Manufacturing Div. and Gunma Plant

Executive Vice President

Toshiaki Okada

CFO (Chief Financial Officer)

Executive Vice President

Yoichi Kato

CRMO (Chief Risk Management Officer)

Executive Vice President

Katsuyuki Mizuma

Chief General Manager of Overseas Sales & Marketing Div. 1 andOverseas Sales & Marketing Div. 2

Executive Vice President

Tetsuo Onuki

CTO (Chief Technology Officer)

Executive Vice President

Atsushi Osaki

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

Senior Vice President

Hideaki Matsuki

Chief General Manager of Parts & Accessories Div.

Senior Vice President

Hiromi Tsutsumi

General Manager of Human Resources Dept.

Senior Vice President

Shoichiro Tozuka

Company President of Aerospace Company

Senior Vice President

Takuji Dai

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

Senior Vice President

Fumiaki Hayata

Chief General Manager of Corporate Planning Div.

Senior Vice President

Tatsuro Kobayashi

Chief General Manager of Purchasing Div.

Senior Vice President

Eiji Ogino

President of SIA 1

Vice President

Katsuo Saito

General Manager of General Administration Dept. andInvestor Relations Dept.

Vice President

Yasushi Nagae

Chief General Manager of Customer Service Div.

Vice President

Jinya Shoji

Senior General Manager of Overseas Sales & Marketing Div. 1, EVP 2 of SOA 3

Vice President

Yoichi Sato

Chief General Manager of Japan Sales & Marketing Div.

Vice President

Takeshi Seiyama

SIA 1 Senior Vice President of SIA, Senior General Manager ofPurchasing Div.

Vice President

Osamu Eriguchi

Chief General Manager of Engineering Div. 2

Vice President

Tomoaki Emori

Senior General Manager of Corporate Planning Div.

Vice President

Tatsuya Okuno

Chief General Manager of Engineering Div. 1

Vice President

Tamotsu Inui

Chief General Manager of Cost Planning & Management Div.

Vice President

Tetsuo Fujinuki

Chief General Manager of Engineering Management Div.,
Senior General Manager of Engineering Div. 1, and Technical Research Center

Vice President

Hiroshi Wakai

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

Vice President

Kazuhiro Abe

Chief General Manager of Product Planning Div.

1 Subaru of Indiana Automotive, Inc.
2 Executive Vice President
3 Subaru of America, Inc.

Annual Report 201930

Corporate Governance
Basic Policy on Corporate GovernanceIn accordance with the corporate philosophy and management philosophy (see page 02), SUBARU has articulated thevision “From a company making things, to a company making people smile” and is working to enhance corporate
governance to gain the satisfaction and trust of all its stakeholders by achieving sustainable growth and improving its
corporate value in the medium to long term as a top management priority.
SUBARU clearly separates management decision-making and oversight from business execution and aims to realize
efficient management by expediting decision-making.
SUBARU ensures proper decision-making and oversight of corporate management and the execution of business
operations as well as enhancing compliance and its risk management systems through the monitoring of its
management and operations and advice provided by outside officers.
SUBARU provides proper and timely disclosure of information in order to improve transparency of management.

Management Organization
The Company has chosen a company with a board of corporate auditors as its corporate governance structure. The
Board of Directors decides and supervises important matters of business execution, and the Board of Corporate
Auditors audits the execution of duties by directors.
With regard to the business operation system, the Company has established the Executive Management Board
Meeting as a preliminary consultation body to conduct deliberations on company-wide management strategies and theexecution of important business before their presentation at the Board of Directorsʼ Meeting. In addition, the Company
has adopted a vice president system and established the Executive Board Meeting as the decision-making body of eachbusiness department, and converted the Aerospace division into an internal company in order to clarify responsibilities
and accelerate the execution of business operations.
The Board of Directors is composed of nine directors, and the Company has sought to strengthen governance byappointing three outside directors among them.
The outside directors provide sound advice about decisions on important matters of business execution and monitor
all aspects of management on the basis of a wealth of knowledge and experience concerning corporate management.
The Board of Corporate Auditors is composed of four corporate auditors, two of whom are outside corporate
auditors. The outside corporate auditors perform a management oversight function independent from senior
management, performing a role of auditing from the viewpoint of legality and appropriateness on the basis of broad
and advanced knowledge.
The Company appoints as outside directors and outside corporate auditors persons who meet the criteria
for independence established by the Tokyo Stock Exchange and the Companyʼs independently established criteria
for independence.

System of Corporate Governance
General Meeting of Shareholders
Election anddismissal

Election anddismissal

Election anddismissal

ReportingDirectors: 6

Outside corporate auditors: 2

Executive Compensation Meeting*Outside directors: 3

ReportingAccounting Auditors

Election, dismissal,and oversight* The Executive Nomination Meeting andExecutive Compensation Meeting consist of
the two representative directors of the Board,the director in charge of the Secretarial Office,and the three outside directors.

Submission andreporting

Auditing

Chairman: President and CEO

Collaboration
ReportingTransfer of authority
and oversight

Reporting
Collaboration

Internal Audit Department

Annual Report 2019

Internal
auditing

Corporate operations departments at HQ
Vice Presidents

Auditing

Submission and reportingof important matters

Automotive Business Unit

Executive Meeting

Aerospace Company

Executive Meeting

Corporate Governance Meeting
Submission andreporting ofimportant matters

Policy instructions
Approval ofplans, etc.

CSR Committee

Social Contribution Committee

Environmental Committee

Group Companies

Plan proposal
reports, etc.

Compliance Committee

Business operations execution function

Executive Management Board Meeting

Reporting

Auditing

31

Executive Nomination Meeting*Board of Directors: 9
Auditing

Corporate auditors: 2

Decision making andoversight functions

Board of Corporate Auditors: 4
Collaboration

Proposal andreportingThe Company currently has one advisor, who is not a retired president or CEO. The principle role of the advisor is to
be available on a regular basis to provide business advice upon request. The advisor does not participate in meetingsand is not involved in management. In principle, the term of office of the advisor is one year.
SUBARU has abolished the Senior Advisor System.

Policy and Procedure for Nominating Candidates for Director and Corporate Auditor
For the purpose of realizing the Companyʼs corporate philosophy, effective corporate governance, and sustained growthand improvement of corporate value in the medium and long term, the Board of Directors nominates as candidates for
directors and corporate auditors persons with a wealth of experience, high levels of ability and insight, and advanced
expertise appropriate to a director or corporate auditor of the Company. The Board of Directors considers matters suchas diversity within the Board and appoints two or more independent outside directors in the interest of ensuring
monitoring and oversight of management from an independent perspective, improving management transparency, andenhancing shareholder value.
The Company has established the Executive Nomination Meeting as a voluntary committee. To ensure fairness andtransparency in decisions on executive appointments, the Executive Nomination Meeting, in accordance with inquiries
from the Board of Directors, submits to the Board of Directors proposals on the nomination, appointment, and dismissalof officers sufficiently deliberated on and approved by its members, who include the independent outside directors.
These personnel matters are decided by resolution of the Board of Directors. Explanations of matters such as thecandidateʼs background, the status of concurrent positions, insight, and expected roles at the Company are provided foreach nomination and appointment. Approval of the Board of Corporate Auditors is obtained for nominations ofcandidates for corporate auditor.
The Executive Nomination Meeting consists of the two representative directors, the director in charge of theSecretarial Office, and the three outside directors, and is chaired by Representative Director of the Board, Tomomi
Nakamura. The Executive Nomination Meeting was convened five times in FYE March 2019 and submitted reports
mainly on the executive structure and appointments, the division of duties of executives, and the appointment ofrepresentatives of major subsidiaries.

Promotion of Diversity Management
Despite a process of selecting officer candidates, in which the Company identifies and shortlists candidates without
regard to gender or nationality and considers the capabilities and other attributes of candidates, the Board of Directors
is currently composed entirely of men. For this reason, the Company is implementing initiatives to ensure gender
diversity on the Board of Directors. In particular, in order to encourage diversity among everyone who works in the
SUBARU Group, the Company has made promoting active roles for women a top priority and set a target of increasing
the number of female managers in 2020 by at least five times the number in 2014, the year the target was set, in
accordance with a policy of promotion through merit based on demonstrated ability. The rate of target achievement
was 90% as of March 31, 2019. Furthermore, we have set a new target for 2025 of at least 12 times the number in 2014.
Through these activities, we will expand the pool of female candidates for executive officer, vice president, department
general manager, and section manager and encourage diversity within the Board of Directors and throughout theCompany.
In addition, as part of the promotion of diversity management, a female outside corporate auditor was elected at the88th Ordinary General Meeting of Shareholders as SUBARUʼs first female officer.

Board of Directorsʼ Meeting Participation Rate
Category

Number of meetings held
Attendance rate

FYE March 2015

FYE March 2016

FYE March 2017

FYE March 2018

FYE March 201914 times

15 times

15 times

17 times

16 times

100%

96.3%

96.3%

99.0%

98.4%

* Attendance rates for newly elected directors are calculated based on the number of Board of Directorsʼ meetings held after they assumed office

So that the directors and corporate auditors fully discharge their duties, the Company holds study meetings to continuously
provide them with information and knowledge related to business activities necessary for management oversight. In addition,
to continuously provide the outside officers with information about SUBARUʼs management philosophy, corporate culture, andbusiness environment, etc., the Company provides business reports from the operating divisions and opportunities for plant
tours and has prepared an environment that encourages sharing of information and exchange of ideas among executives.

Annual Report 201932

Corporate GovernanceReasons for Appointing the Outside Officers
Outside Directors

Name

Shigehiro
AoyamaYasuyukiAbe

Natsunosuke
Yago

Meeting Attendance(FYE March 2019)

Independent
Officer Status 1

Reasons for Appointing○

Mr. Shigehiro Aoyama has served in significant posts at Suntory
Holdings Limited. He has abundant experience and broad
knowledge and expertise in business management, as well as
advanced knowledge in the field of marketing. He has served
three years as an independent outside director for the Company
as of the conclusion of the 88th Ordinary General Meeting of
Shareholders. During his tenure, Mr. Aoyama has provided
valuable advice on the management of the Company based on
his abundant experience and extensive knowledge as a business
manager as well as his deep insight into corporate social
responsibility. Therefore, the Company has appointed Mr. Aoyama
with the expectation that he will continue to provide sufficientadvice and oversight of all aspects of the Companyʼs managementfrom an independent perspective.

Attended
16 of 16
meetings

̶External Director,
Takamatsu Construction
Group Co., Ltd.
Outside Director,
Miraca Holdings Inc.
President, the Distribution
Economics Institute of
Japan

○

As representative director and senior executive operating
officer of Sumitomo Corporation, Mr. Yasuyuki Abe has been
involved in management in both a supervisory and executional
capacity, possesses extensive experience and knowledge inbusiness management, and has an advanced understanding of
the IT field. Mr. Abe has served three years as an independent
outside corporate auditor for the Company as of the conclusionof the 88th Ordinary General Meeting of Shareholders. During
his tenure, he has supervised the execution of duties conductedby directors, as well as understood the true nature of the
problems facing the Company and offered his frank opinions tosenior management in a timely and appropriate manner.
Therefore, the Company has appointed Mr. Abe with the
expectation that he will provide sufficient advice and oversightof all aspects of the Company ʼ s management from an
independent perspective when he assumes office as an outside
director of the Company.

Attended
14 of 16
meetings

Attended
12 of 13
meetings

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

○

Mr. Natsunosuke Yago served successively as president andrepresentative director and chairman of the Board at Ebara
Corporation, and has extensive experience and knowledge inbusiness management. Mr. Yago is especially knowledgeable in
the areas of internal control and governance, and the Company
has appointed him with the expectation that he will provide
sufficient advice and oversight of all aspects of the Companyʼs
management from an independent perspective when he assumes
office as an outside director of the Company.

̶̶

Board ofDirectors

Board ofCorporate
Auditors

Significant Concurrent
Positions 2

President, Ebara
Hatakeyama Memorial
Foundation

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

Outside Corporate Auditors
Name

ShigeruNosaka

Kyoko
Okada

Independent
Officer Status 1

Reasons for Appointing

Significant Concurrent
Positions 2○

Mr. Shigeru Nosaka has been involved in management in both a supervisory andexecutional capacity as a director and executive vice president and vice chairman of theBoard at Oracle Corporation Japan and possesses extensive experience and knowledge
in business management. Also, Mr. Nosaka has served as chief financial officer of Oracle
Corporation Japan for many years and has ample knowledge of finance and accounting.
The Company has appointed him with the expectation that he will appropriately performthe duties when he assumes office as of an outside corporate auditor of the Company.

Vice Chairman of the Board,
Oracle Corporation Japan(Planned retirement inAugust 2019)○

Ms. Kyoko Okada has accumulated extensive experience and knowledge in areas such as
CSR and corporate culture at Shiseido Co., Ltd. and has a career in management auditing
as a corporate auditor at Shiseido. Ms. Okada has worked at a company that offers
numerous products for women, and the Company has appointed her with the expectationthat she will appropriately perform the duties when she assumes office as an outside
corporate auditor of the Company, including providing advice concerning the Companyʼs
challenges from her unique viewpoint as a woman

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

1 Outside directors and outside corporate auditors unlikely to have conflicts of interest with general shareholders as stipulated by the Tokyo Stock Exchange
2 As of June 30, 201933

Annual Report 2019

Messages from the Outside Directors

Applying External Management Knowledge
as an Advocate for Stakeholders toContribute to the Evolution of
Risk Management at SUBARU
Shigehiro Aoyama
Outside Director
Appointed as outside director in June 2016

Initiatives in connection with reform of the Corporate Governance Code have greatly accelerated in recent
years. In particular, companies have been strongly urged to recognize the importance of outside officers. One
factor in this is that shareholders and other stakeholders sense the limitations of the theory that management
knows the industry and company better than anyone else and can run a company on that internal logic. The
kind of governance change that is being called for involves the incorporation of outside management
knowledge and corporate reform plans through the infusion of “outside blood.”
The most important prerequisite for outside directors is independence. Since outside directors have no
relationships of interest or connections to corporate officers with executive functions, they are in a position
to speak their minds without hesitation. Outside directors are expected to say things they consider
beneficial for the company without fear of conflict, even if their opinions differ from views within thecompany. In essence, there is a requirement for a governance structure in which officers who are nonexecutive directors devote themselves to oversight, and the result of that oversight can be reflected inresolutions of the Board of Directors.
Outside directors must have a certain level of insight based on previous experience and skills gained as
executives, and be able to offer incisive comments to management as both advocates for all stakeholders,and importantly, from the perspective of shareholders. For this reason, I consider it important for outside
directors to refine their ability to observe the status of management execution and ask questions to confirm
that it does not unknowingly include any conventional wisdom or risks specific to the company or industry.
Also, since all experience and skill becomes obsolete with the passage of time, insight that relies solely ononeʼs own experience and skills is dangerous. Outside directors must refine and update their insight byrecognizing that their skills must be dynamic rather than static.
However, even if outside directors maintain their independence and engage in activities to refine theirinsight on corporate value enhancement, it is meaningless if the company does not accept it. I think there
must be a relationship built on trust by which the outside directors express their views based on a sense of
loyalty to the company or, simply, a commitment to increasing corporate value by any means. In addition, theinside directors must accept those views with humility and endeavor to make changes. Although the mostimportant mission of outside directors is, of course, to provide oversight of the management of the insidedirectors, along with checks and balances, I think that a relationship built on trust between the inside officers
and outside directors is the starting point for corporate governance today.
From my perspective as an outside director, there is no doubt that SUBARU has a corporate culture ofearnestness and sincerity, but I feel that a couple of issues for SUBARU are how little it communicates withthe outside world and how late it has been in addressing certain business challenges that are pertinent to
the times.
SUBARUʼs entire industry faces todayʼs changes, such as those represented by CASE, and the changing
social needs for mobility. Impelled by a sense of urgency that comes with the shifting industry, it is importantto have a mentality that allows us to speedily embrace the challenge of technological development andinnovation. SUBARU must refine and perfect what it considers its greatest strengths.
SUBARU has evolved top-of-class safety technologies, such as EyeSight, and is enthusiastically committed
to the issue of safety. The aim of eliminating fatal traffic accidents involving SUBARU vehicles by 2030, set
forth in the mid-term management vision, concretely expresses SUBARUʼs responsibility as a manufacturer.

Annual Report 201934

Corporate GovernanceI think this is an example of what SUBARU can do to contribute to the creation of a sustainable society.
In closing, I consider risk management to be the single most important aspect of corporate management
today and express this view at every opportunity. Risk management involves recognizing risk factors that thecompany faces and always considering countermeasures. As a matter of fact, emphasizing and ensuring
compliance is the most critical requirement for risk management. Like a small leak that sinks a great ship, aseemingly insignificant compliance violation can bring down a company. Furthermore, a company should
realize that there is risk in simply continuing the conventional ways of thinking about and carrying out
business operations, work practices, and strategy, and that these need to be transformed. It is precisely thissort of transformation that is the greatest management challenge today, and a company will evolve if they
consider risk management to consist of the continuous probing of its current activities and internal logic.
Therefore, I think that it is more important than ever to bring in outside ideas and outside blood, and thatoutside directors have a major role to play.

Applying the Experience Gained through Networking
with a Variety of Industry Sectors for Deeper
company-wide Discussion to Promote the Sustained
Growth of SUBARU and Increase Corporate Added Value
Yasuyuki Abe
Outside Director
Served as outside corporate auditor from June 2016 to June 2019
Appointed as outside director in June 2019

One important role of outside directors is to maximize corporate value from the perspective of shareholders
and other stakeholders. I have been newly appointed as an outside director, but my three years of service asa SUBARU outside corporate auditor has enabled me to ascertain the companyʼs current strengths as well as
the challenges it faces. For this reason, I think I will be able to contribute more comprehensively to
discussions about future management challenges and other matters. My previous activities at a trading
company span many years, and I have worked particularly within the global information industry in the fieldsof finance, distribution, and in other new businesses. As a matter of course, I feel that I have a slightly
different point of view from SUBARUʼs inside corporate officers, who have mainly specialized in theautomotive business. In my capacity as an outside corporate auditor, I primarily focused on confirming
whether the company was functioning properly. My standpoint will now change, and as a director I will fulfill
the role of more actively obtaining information from outside sources and feeding it back to the Company.
One issue I have observed at SUBARU is that, although the company sincerely and earnestly deals withany issues it may have, I feel SUBARU has little contact with other companies in the automotive or otherindustries and is seldomly proactive in seeking information from outside sources. There are certainly business
opportunities to be found in the outside world, and it is also important to experience outside stimuli. Even if
the benefits of contact with external parties do not immediately appear, that contact may become thestarting point for diverse ideas. Also, as SUBARU continues its mono-zukuri (car-making) activities, seeing theworld from a broader perspective and thinking flexibly may lead to new businesses. I see no need for
SUBARU to limit and narrowly define its business domains when its business opportunities are limitless.
Since a company is like a living thing, it cannot live long without maintenance. A company that grows will
naturally change, and it must also undergo guided change. I strongly hope that SUBARU will shift its way of
thinking, take advantage of the strengths and potential afforded by its business scale, and continue to takeon challenges even if it means changing its business model. At the same time, I want SUBARU to continue tohonestly pursue the delivery of “Enjoyment and Peace of Mind” to customers, while accelerating its current
activities to become “a company that does the right thing in the right way.” Iʼm convinced that in so doing,
SUBARU will achieve further development at a new stage.

35

Annual Report 2019

My strength as an outside director is the connections I have obtained through networking and interactingwith various industry sectors. I want to share the information I can obtain from those connections to deepen
company-wide discussion in preparation for SUBARUʼs sustained growth, and contribute to increasing
corporate added value.

Considering Risks and Opportunities froman Objective, Third-party Perspective andContributing to SUBARUʼs Sustained Growth throughDiscussions at Meetings of the Board of Directors
Natsunosuke Yago
Outside Director
Appointed as outside director in June 2019

I consider it the primary role of outside directors to bring the objective eye of a third party to meetings ofthe Board of Directors. Our role is to contribute to correct management decisions by identifying
discussion points that inside directors tend to overlook and expanding the scope of discussion at Board
meetings. The integration of the automotive industry with the information and communication industry is
expected to advance at an accelerated rate due to the introduction of fifth-generation (5G) mobile
communication systems, as well as the development of artificial intelligence. These are expected to giverise to an unprecedented seismic shift within the automotive industry and I think the Board of Directors
will be required to discuss issues from a more long-term perspective. In such discussions, I want toconsider risks and opportunities from an objective perspective and help guide the Board of Directors toreasonable conclusions.
When I make decisions as a business executive, I like to emphasize the risks of not taking action. It is
the role of executives to make final decisions on whether or not to do something. Moreover, they are
required to make decisions one after another (and quickly). I consider the risks of not taking action(problems that will occur because of not taking action), and if I judge that there are no such risks, or thata problem can be solved using an existing method, I make the decision to not do something. Of course,
if I judge that a significant risk (including loss of opportunities) will occur if no action is taken, I make thedecision to go ahead. Compared to the decision-making approach of considering the benefits and risksof taking action, I think this makes it easier to narrow down what should really be done. In addition, I ʼdlike to share two proverbs I have followed in the past when I make business decisions: “First, start fromsmall things” when beginning a project, and “Fortune is unpredictable and changeable” when a project
has ended. The first saying reminds me to start with what I can do in order to accomplish the final
objective, and the second saying helps me moderate my emotions so that when I evaluate results I am
not carried away by success or excessively discouraged by failure.
I have high expectations that SUBARU will steadily grow as a company by protecting and achieving
wider penetration of its brand image. Rather than aiming for the expansion of scale (sales) or a simple
maximization of (short-term) profit, I think this can be achieved by prioritizing investment in R&D andhuman resources in order to increase customer satisfaction. Brand value is not something achieved
overnight, but something built up over a long period of time in the history of a company. SUBARUʼsbrand image in the market (including among the industry, consumers, and investors) is excellent, and thebrand itself increases corporate value. At a time when a major seismic shift is about to occur across theentire automotive industry, I am convinced that a highly valuable brand image will ensure SUBARUʼsexistence as a company.

Annual Report 201936

Corporate Governance

Policy and Procedure for Determining the Amount of Compensation for
Directors and the Calculation Method
Compensation, etc., of directors is determined in view of the following items.
Compensation, etc., is at a level commensurate with the roles and responsibilities of directors and is appropriate, fair,and balanced.
The compensation structure is determined by giving consideration to providing motivation for sustained improvement
in corporate performance and corporate value and securing talented personnel.
The specific composition of compensation, etc., is as described below. The total amount of compensation and levelof each compensation type are set according to job responsibilities and status as inside or outside director by utilizing
survey data from external specialist organizations and other sources.

Compensation System for Directors (Excluding Outside Directors)
1. Basic

compensation

2. Short-term

performance-linked
compensation

3. Long-term

incentives

A fixed portion with the specific amountdetermined based on job position, taking into
consideration elements such as the businessenvironment
A performance-linked portion with the specificamount determined based on consolidated
ordinary income for the current fiscal year, taking
into consideration personnel development andthe business environment, and adjusted
according to the matrix of combined ROE andimproved shareholdersʼ equity ratio, which areboth performance indicators aligned with theCompanyʼs capital policy

Fixed portion

Performance-linked portion

1.

2.

3.

Basic
compensation

Short-term
performance-linked
compensation

Long-term
incentives

Compensation to
grant restricted stock

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

In view of the role of outside directors in the monitoring and oversight of management from an independent standpoint,
the Company does not provide short-term performance-linked compensation or long-term incentives to outside directors.
By a resolution passed at the 85th Ordinary General Meeting of Shareholders, held on June 28, 2016, the maximum
total amount of annual compensation, etc., for directors is 1.2 billion yen (including 200 million yen for outside directors).
The maximum total amount of monetary compensation related to long-term incentives is 200 million yen per year, within
the abovementioned limitation. The maximum number of directors provided for in the Company ʼ s Articles ofIncorporation is 15.
The Company has established the Executive Compensation Meeting as a voluntary committee. To ensure fairness andtransparency in decisions on executive compensation, the Executive Compensation Meeting, on the basis of delegation by
the Board of Directors, determines specific compensation amounts, including the compensation system, following
sufficient deliberation by its members, who include the independent outside directors. With regard to revisions of thecompensation system and other matters pertaining to compensation overall, proposals approved by the Executive
Compensation Meeting are deliberated and decided on by the Board of Directors. The Executive Compensation Meeting
is composed of the two representative directors, the director in charge of the Secretarial Office, and the three outside
directors, and is chaired by Representative Director of the Board, Tomomi Nakamura.
In STEP, the mid-term management vision announced on July 10, 2018, the Company set forth a profit plan that
includes operating income of 950.0 billion yen for the three-year period from FYE March 2019 to FYE March 2021. The
Company aims to achieve a ratio of shareholdersʼ equity to total assets of 50% and to maintain a minimum ROE of 10%
while aiming for ROE of 15% or higher. For FYE March 2019, consolidated ordinary income was 196.2 billion yen, the ratioof shareholdersʼ equity to total assets was 53.8% (down 0.4% year on year), and ROE was 9.4%. On the basis of theseresults, the Executive Compensation Meeting, under the authority of the Board of Directors, determined the amount ofshort-term performance-linked compensation to pay to each director.
By a resolution passed at the 75th Ordinary General Meeting of Shareholders, held on June 27, 2006, the maximum
total amount of annual compensation, etc., for corporate auditors is 100 million yen. An amount determined throughdiscussion among the corporate auditors based on position, taking into consideration the business environment, is paid asbasic compensation for corporate auditors. The maximum number of corporate auditors provided for in the Companyʼs
Articles of Incorporation is five.

37

Annual Report 2019

Total Amount of Compensation by Officer Category,
Total Amount by Compensation Type, and Number of Eligible Officers
Total compensation (millions of yen)Classification

Directors (excluding outside directors)
Corporate auditors(excluding outside corporate auditors)
Outside executive officers
Total

Performance-linked compensation

NumberBasic compensation(paid in fixed monthly
installments)

Short-term performance-linked
compensation

Long-term
incentives

9

291

80

51

422

2

56

ー

ー

56

4
15

46
393

ー

ー

80

51

46
524

Note: The above table includes four directors who retired by the last day of FYE March 2019
At the end of FYE March 2019, there were seven directors (including two outside directors) and four corporate auditors (including two outside corporate auditors)

Development of Internal Control Systems
The Company has adopted, by resolution of the Board of Directors, a basic policy on development of a system to ensurethat execution of duties by directors complies with laws and regulations and the Articles of Incorporation, as well as on thedevelopment of other systems stipulated by ordinance of the Ministry of Justice as necessary to ensure the properness ofoperations of a stock company and a corporate group consisting of the stock company and its subsidiaries. The Company
plans, develops, and applies revisions to this basic policy as needed.

Status of Auditing by Corporate Auditors
SUBARUʼs corporate auditors attend meetings of the Board of Directors and other important meetings, inspect businesssites and subsidiaries, interview members of the Internal Audit Department, and audit the execution of duties by directors
and others in accordance with the audit policy and audit plan established by the Board of Corporate Auditors.
(Status of initiatives by the corporate auditors to ensure effectiveness of auditing)
The Companyʼs corporate auditors attend meetings of the Board of Directors, Executive Management Board Meeting,Compliance Committee, CSR Committee, and other important meetings, express their opinions as necessary, andensure the effectiveness of auditing. They also conduct executive interviews with directors and vice presidents, perform
on-site audits of important business sites and affiliated companies, and confirm the status of development and operationof internal control systems. The corporate auditors receive monthly reports from the Internal Audit Department andLegal Department and receive reports on the status of subsidiaries from the departments in charge as needed. In
addition, they hold conferences with the corporate auditors of major subsidiaries. The corporate auditors cooperate withthe accounting auditors through quarterly exchanges of information and opinions and discuss the appointments of theaccounting auditors.

Status of Internal Auditing
SUBARU has established the Internal Audit Department as an internal auditing organization and conducts internal audits ofbusiness execution at SUBARU and its domestic and overseas Group companies. At the beginning of the fiscal year, thedepartment prepares an internal audit plan for the fiscal year that takes into consideration the internal control status of theGroup as a whole and systematically implements the plan. The department prepares and distributes to the directors,
corporate auditors, and concerned parties audit reports on the results of internal audits and reports on a quarterly basis at
the Executive Management Board Meeting.
The Internal Audit Department and corporate auditors work to deepen collaboration and strengthen the auditing
function through monthly internal audit report meetings held by the department and quarterly dialogues about internal
control that include the director in charge of the department. The department and corporate auditors endeavor tostrengthen the auditing function through quarterly information sharing with the accounting auditors.

Policy on Cross-Shareholdings
Regarding major listed stocks held by the Company as cross-shareholdings, each year the Board of Directors examines each
instance of cross-shareholding to determine whether its purpose and the benefits derived from it justify the capital cost. If
the Board of Directors judges that cross-shareholding will contribute to management and business strategies in the medium
and long term, the Company continues to hold the shares. The Company has been steadily reducing cross-shareholdings oflisted shares since the Corporate Governance Code went into effect, and the number of issues was 10 as of March 31, 2019.

Annual Report 201938

Corporate Governance

Number of Issues of Cross-Shareholdings andTotal Amount Reported on the Balance SheetFYE March
2015

Category

Number ofissues(Issues)Amountreported on
the balance sheet(Millions of yen)FYE March
2016

Listed Cross-Shareholdings

FYE March
2017

FYE March
2018

FYE March
2019

Listed

60

32

30

18

10

Unlisted

31

31

32

31

31

Total

91

63

62

49

41

Listed38,503

28,238

12,795

8,836

3,138

Unlisted

552

526

544

535

535

Total

39,05528,764

13,339

9,371

3,673

Total amount reported on the balance sheet (left)
Number of issues (right)(Millions of yen)
60,000(Issues)
60

60

50,00040,00030,00020,00010,000050
40

38,50332

30

28,23830

18
12,795

8,836

20

10

10

3,138

0

(FYE) 2015 2016 2017 2018 2019

Evaluation Results of the Effectiveness of the Board of Directors
In accordance with the Corporate Governance Guidelines, the Companyʼs Board of Directors analyzes and evaluates theeffectiveness of the Board, then considers and implements measures to improve any issues identified. In FYE March 2019, theBoardʼs analysis and evaluation centered on confirmation of measures to address issues identified in previous evaluations inaddition to fixed-point observation from the FYE March 2018 evaluation. A report on the analysis results follows.

Evaluation and Analysis Methods
Timing of implementation: March 2019
Respondents:
All directors and corporate auditors (11 in total, including outside officers)
Implementation procedure: Self-evaluation using a questionnaire prepared by a third-party body1) A third-party body conducted a self-evaluation questionnaire survey of all directors andcorporate auditors using an anonymous questionnaire.
2) The third-party body aggregated and analyzed the questionnaire data.
3) A report received from the third-party body was verified and discussed by the Board of Directors.
Questionnaire items:
1) Board of Directorsʼ management structure 2) Board of Directorsʼ oversight function3) Shareholder dialogue 4) Addressing of issues identified in the FYE March 2018 evaluation
Each director performed a self-evaluation by answering questions using a four-point rating scale and provided their own
thoughts on points of excellence relating to SUBARUʼs Board of Directors and the necessary points to further increase theBoardʼs effectiveness, before submitting the completed questionnaire directly to the third-party body.

Evaluation Results
The Board of Directors received an evaluation report from the commissioned third-party body as described below.
As was the case with the evaluation results up to FYE March 2018, it was confirmed that free and open discussion isconducted from a company-wide perspective at meetings of the Board of Directors.
On the other hand, the results of this fiscal yearʼs evaluation were generally the same as the previous year or less positive thanthe previous year. (Please refer to the aggregated questionnaire responses.) The Board attributes this to increased recognitionof the need for further improvement amid a series of instances of inappropriate conduct and the Company has responded.
It was confirmed that there is strong awareness that successor training and information provision to outside officers are
areas in which further improvement and functional enhancement is expected.

Issues Identified in the Previous Fiscal Yearʼs Evaluation
The Company addressed in FYE March 2019 the following issues identified in the previous fiscal yearʼs evaluation.
1. Reinforcing risk identification and management systems
Efforts to review and reinforce the risk identification and management systems in response to the improprieties haveprogressed, and the need to continue such efforts and firmly establish the system was confirmed.
2. Enhancing discussion of medium- to long-term management strategy
There was consensus on the need to further increase opportunities to discuss the Companyʼs medium- to long-term
vision and business strategy.

39

Annual Report 2019

Effective April 1, 2019, the Company newly established the Corporate Planning Division for the purpose of accelerating
management strategy planning and implementation, and the Market Strategy Department and Logistics Management
Department under the Corporate Planning Division. The Company also established the position of Chief Risk Management
4.0
Officer (CRMO) for the purpose ofenhancing the effectiveness of internal controls and risk management, and the Risk
Management & Compliance Office3.0under the control of the CRMO.
2.0

Future Initiatives

1.0

In response to the evaluation report received from the third-party body, the Board of Directors verified and discussed
future initiatives. As a result, the Board confirmed that it will continue its efforts to reinforce risk identification, bolster
management systems, and establish a firm foundation for the corresponding practices and enhance discussion of mediumto long-term management strategy. It also confirmed that it will discuss policy for succession planning and successor
development.
The Board of Directors will improve Board functions, strengthen corporate governance, and promote continuous
enhancement of corporate value by continuing to evaluate its effectiveness.

Aggregated Questionnaire Responses
FYE March 2018
FYE March 2019

Board of Directorsʼ
Management Structure

Board of Directorsʼ Oversight Function andShareholder DialogueⅠ-1) Board of DirectorsʼⅡ-1) Board of Directorsʼ

composition

4.0

3.0

3.0

2.0

Ⅰ-5) Board of

Directorsʼ
contribution

supervisory function

4.0Ⅰ-2) Board of

Directorsʼ
management

1.0Ⅰ-4) Board of Directorsʼ

support structureⅠ-3) Decision-

making processⅢ) Shareholder

dialogueⅡ-2) Board of

2.0

Directorsʼ risk
management
systems

1.0Ⅱ-4) ExecutiveⅡ-3) Board of

Directorsʼ
discussion

nomination andcompensation

QuestionsCategory

Matters Examined

Ⅰ. Board of Directorsʼ management structure1) Board of Directorsʼ
composition

Board of Directorsʼ size

Board of Directorsʼ composition(proportion of inside and outside directors)

2) Board of Directorsʼ
management

Frequency, duration, and distribution of meetings

Appropriateness of agenda

Timing of document distribution

Pre-meeting explanation

3) Decision-making process

Chairʼs leadership

Adequate discussion4) Board of Directorsʼ
support structure

Environment and systems for providing information

Provision of information to outside directors

Training of inside directors5) Board of Directorsʼ
contribution

Stance toward initiatives

Company-wide perspective

Diverse values

Stakeholder perspective

Board of Directorsʼ composition(diversity and specialty)
Quality and quantity of documents
4.0

Content of explanations and reports

3.0

Training of outside directors
2.0
1.0

Mutual respect

Ⅱ. Board of Directorsʼ oversight function

1) Board of Directorsʼ
supervisory function2) Board of Directorsʼrisk management systems

Reporting systems

Supervision of management

Risk management systems

Subsidiary management systems

Systems for managing progress of
response measures

Thorough awareness of compliance issues

3) Board of Directorsʼ
discussion

Discussion of management strategy

Discussion of capital policy

Discussion on strengthening governance

Responses to social and environmental issues4) Executive nomination andcompensation

Composition of Executive Nomination Meeting andExecutive Compensation Meeting

Successor development

Sharing shareholder and investor views

Enhancement of shareholder andinvestor dialogue

Information-sharing on risks andrisk response

Discussion of cross-shareholdings

Incentive-based compensation

Ⅲ．Shareholder dialogue

Shareholder dialogue

Annual Report 201940

The SUBARU Groupʼs CSR
CSRThe SUBARU Group engages in CSR activities withthe aim of contributing to society through its
business and achieving a sustainable society.
Our Approach to CSR
The world faces a great many social issues and challenges, such as global warming, human rights issues, and an aging anddeclining population, and there are rising expectations that corporations will help resolve these issues. Initiatives toaddress a variety of social issues are required in the SUBARU Groupʼs business domains, such as efforts to reduce
environmental impact, prevent traffic accidents, and alleviate traffic congestion.
Therefore, as a corporate citizen we not only develop, manufacture, and sell products with outstanding safety andenvironmental performance and quality, but we also engage in CSR activities to meet the needs of society and addresssocial challenges. The automotive industry has entered a once-in-a-century transition period and the social environment isconstantly changing. We consider it necessary to promote and ensure the penetration of CSR initiatives on a Group-wide,
global scale to contribute to society through our businesses and meet stakeholder expectations and demands. To that
end, in FYE March 2019 we reviewed the Eight CSR Action Items and newly defined Six Priority Areas for CSR.
By applying the thought process behind the Six Priority Areas for CSR to how we conduct business, we will fulfill oursocial responsibilities as a corporation and continue to provide “Enjoyment and Peace of Mind” to our customers and otherstakeholders. In so doing, the SUBARU Group will become a corporate group trusted by society and contribute to thecreation of a more affluent, sustainable society as a truly global company.

CSR Policy (Revised in June 2009)
1. We respect the laws and regulations, human rights, international standards of behavior and the rights and morals of
stakeholders under our Corporate Code of Conduct.
2. We become involved as a corporate citizen in addressing social issues facing society today.

41

Annual Report 2019

The Process of Formulating the Six Priority Areas for CSR
In conjunction with STEP, the mid-term management vision, the SUBARU Group has reviewed the previous Eight CSR
Action Items and newly selected Six Priority Areas for CSR: people-oriented car culture, resonance and coexistence, peaceof mind, diversity, environment, and compliance.
In selecting the priority areas, we first identified 41 CSR priority topics for which social needs were high and thenconducted a questionnaire survey of experts and investors in North America and Japan. Finally, we considered CSR fromtwo perspectives: areas for contributing to society by taking advantage of business strengths, and areas for meeting the
expectations of society. As a result, we selected people-oriented car culture, resonance and coexistence, peace of mind,
and diversity as areas for contributing to society by taking advantage of business strengths. We selected peace of mind,
diversity, environment, and compliance as areas for meeting the expectations of society. Although peace of mind anddiversity overlap, we selected peace of mind because it is an area in which the needs of society and the SUBARU Groupʼsbusiness strengths coincide and selected diversity because we broadly define it as including not only the diversity requiredby society but also diversity in the products we provide to our customers.
Since information disclosure and dialogue with stakeholders and reflection of stakeholder feedback in management are
essential for restoring trust, we will implement what we call “6M+1E” initiatives: the Six Priority Areas (“6M,” with “M”
standing for materiality) plus information disclosure and dialogue with stakeholders and reflection of feedback inmanagement (“1E,” with “E” standing for engagement).

Application of the Six Priority Areas for CSR in Management
SUBARUThe SUBARU Group

Board of Directors
Executive
Management
Board Meeting

Application in
management

Priorities specific to
SUBARU

6 Priority Areas for CSR
People-oriented
Car Culture
Resonance andCoexistence

Information
disclosure anddialogues

Stakeholders

Peace of Mind

Societyʼs
expectations

Diversity
Environment
Compliance

Our Six Priority Areas for CSR and Basic Approach
People-oriented
Car Culture

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

Resonance andCoexistence

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

Peace of Mind

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

Diversity

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

Environment

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

Compliance

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

Annual Report 201942

The SUBARU Groupʼs CSR

CSR Promotion System
The CSR Committee (secretariat office: Sustainability Promotion Department) meets twice a year as a forum for discussing CSR
initiatives, and confirms the status of the PDCA cycle of each specialized committee and department. The CSR Committee,
which is chaired by SUBARUʼs representative director of the Board and president and includes all executive officers as
members, considers and discusses the social aspects of SUBARUʼs businesses and works to strengthen CSR initiatives.

Board of Directors
Submission andreportingCommittees

Instructions andapproval

Executive Management Board
Meeting

Instructions andapproval

CSR Committee Secretariat Office:Sustainability Promotion Department

Submission andreporting ofimportant matters

Review

Environmental Committee

ReportingSocial Contribution Committee
Corporate Governance Meeting
Compliance Committee
etc.

Relationship to Stakeholders
The SUBARU Group believes that its CSR initiatives must place importance on the relationship with stakeholders and that
disclosing information to stakeholders, engaging in dialogue with them, and reflecting this in the management of thebusiness are all essential. In order to realize our vision of becoming “A Compelling Company with a Strong Market Presence”
as stated in our management philosophy, the SUBARU Group will continue to make efforts to gain trust from ourstakeholders, and to make useful social contributions while at the same time increasing our corporate value.

Initiatives for the Sustainable Development Goals
The SUBARU Group recognizes the importance of responding to the Sustainable Development Goals (SDGs), which provide aroadmap for achieving a sustainable future by 2030. To respond to climate change, we aim to reduce the SUBARU Groupʼs direct
CO2 emissions (Scope 1 and 2) to 30% below FYE March 2017 levels (based on a total emissions volume basis) by FYE March
2031, and we expect to reduce CO2 emissions by an amount equivalent to 3% of annual emissions by FYE March 2021. To reduce
traffic accident fatalities and injuries, we continue to implement initiatives to achieve our target of eliminating fatal accidents
involving SUBARU vehicles* by 2030. Through these initiatives, we are contributing to the creation of a sustainable society.
* Elimination of accidents resulting in the death of drivers or passengers in SUBARU vehicles and accidents resulting in the death of pedestrians, cyclists, or other persons
due to collision with SUBARU vehicles

43

Annual Report 2019

Environment

SUBARU Environmental Policies
SUBARU Sustainability Principles“The earth, the sky and nature” are SUBARUʼs fields of business.
With the automotive and aerospace businesses as the pillars of SUBARUʼs operations, our fields of business are
the earth, the sky and nature. Preservation of the ecosystem of our planet, the earth, the sky and nature, is ofutmost importance to ensure the future sustainability of both society and our organization. We align ourbusiness strategy to enhance these global goals in all of our operations.

1. We develop and deliver products to meet societal needs andcontribute to the environment through advanced technologies.
By striving to create advanced technologies that put the environment and safety first, we willdevelop and deliver products that can contribute to protecting the earthʼs environment.

2. We focus on efforts aimed at coexistence with nature.
Together with efforts to reduce carbon-dioxide emissions in all of our operations, we will promote
active engagement with nature by stressing forest conservation.

3. We take on challenges as one through an all-SUBARU approach.
Utilizing our unique organizational character that allows us to oversee the entire supply chain, all of
us together will take on the challenges of environmental protection of our planet through an allSUBARU approach.

Environmental Principles
SUBARUʼs fields of business are the earth, the sky and nature. SUBARU understands that the health andpreservation of biodiversity and controlling climate change are critical to ensuring a sustainable future for ourplanet earth, nature, communities, and businesses.

Products

Purchasing

Production

We develop our products andconduct R&D in light of thelifecycle environmental impactsof our products.

Our purchasing activities reflect
consideration for biodiversity
and other aspects ofenvironmental protection.

We strive to minimize ourenvironmental impact throughimproving energy efficiency
and waste management.

Logistics

Sales

Management

We strive to minimize ourenvironmental impact throughenhancing energy efficiency
and promoting pollution
prevention.

We endeavor to recycle
resources efficiently and reduce
waste.

We will strive to improve oursustainability program throughcontributions that meet societal
needs and by publicizing ouractivities as Team SUBARU.

[Established: April 1998, Revised: April 2017]

Annual Report 201944

The SUBARU Groupʼs CSR

Basic Approach to Climate Change and Specific Initiatives
Basic Approach to Climate Change
SUBARU has declared that “The earth, the sky and nature” are our fields of business, and the gifts of nature are essential forour businesses and products. Recently, the problem of climate change, as exemplified by increasingly frequent anddamaging abnormal weather, is a common threat to humanity. We consider the reduction of greenhouse gases emitted byhuman activities (hereafter expressed as CO2 equivalents in the interest of convenience), which have been identified as acause of climate change, an essential activity for realizing sustainable growth for both society and SUBARU.
In accordance with this belief, to help achieve the goal adopted in the Paris Agreement of 2015 of limiting global
warming to less than 2ºC above pre-Industrial levels, we will not only work to improve the environmental performance ofour products, but also strive to protect the global environment throughout product lifecycles, from mining raw materials forautomobiles to manufacturing, transport, use, and disposal.

Product Initiatives
SUBARU believes that the question of how to improve fuel economy, a measure of product environmental performance, is
important for reducing CO2 emissions, which are said to be a cause of global warming. Even as we pursue improving fueleconomy in existing gasoline engine vehicles, we will actively work to reduce CO2 emissions by expanding our lineup ofelectrified vehicle models and, furthermore, by pursuing EV development with an eye on the increasingly stringent fueleconomy regulations in various countries.
SUBARU will also utilize the alliance with Toyota Motor Corporation as a strategic move to prepare for the coming eraof full-scale electrification. In June 2019, we announced that we have agreed to jointly develop with Toyota a platform
dedicated to battery electric vehicles (BEVs) for midsize and large passenger vehicles and a C-segment-class BEV SUV
model. By combining the technological strengths of both companies̶for instance, the electrification technologies that
Toyota is employing to bring together other companies that share its aspirations, and the all-wheel drive (AWD)
technologies that Subaru has cultivated for many years̶we will seek to create products that feature the unique appeal of
BEVs and aim to launch them in the first half of the 2020s.

Partnership with Communities: SUBARU Forest Project
To conserve the natural capital of local communities, SUBARU is focusing on activities to conserve forests, a key source of
CO2 absorption. Specifically, we have undertaken the SUBARU Forest Project, in which we are working to conserve local
forests under agreements with Gunma Prefecture, Utsunomiya City in Tochigi Prefecture, and Bifuka Town in Hokkaido,
localities closely connected with our business.

Initiatives at the Production StageThe SUBARU Groupʼs direct CO2 emissions (Scope 1 and 2) are quite low in comparison with total emissions, including
Scope 3 emissions. However, we have set forth an environmental policy of global environmental protection throughout theentire value chain and believe that taking the initiative in efforts to reduce direct CO2 emissions will lead to further
enhancement of the all-SUBARU approach to environmental protection.
Therefore, in the Environmental Action Plan for FYE March 2022 and beyond, we have set a target of reducing the
SUBARU Groupʼs direct CO2 emissions to 30% below FYE March 2017 levels (based on a total emissions volume basis) by
FYE March 2031. Furthermore, in Phase I: Preparation of the action plan, we intend to implement CO2 reductions ahead ofschedule. Through measures such as the introduction of renewable energy, we will aim for CO2 emissions reduction of
approximately 20,000 t-CO2, which is an amount equivalent to approximately 3% of annual emissions, by FYE March 2021.

Direct CO2 Emissions
Reduction Targets

Roadmap for 30% Reduction
in CO2 Emissions by FYE March 2031
Phase II: Approach

Targetachievementyear

FYE March
2021

FYE March
2031

45

TargetReduction of
approx. 20,000 t-CO2
Equivalent to approx. 3% ofannual emissions
30% reduction
from FYE March 2017 levels
based on a total emissions
volume basis

Annual Report 2019

2019
(FYE)

2021

In anticipation of a CO2 increase accompanying an
increase in production activities, active introductionof renewable energy and CO2-free power sourcesin addition to advancing energy conservation

2026
2031

TargetPhase I: Preparation

Phase III: Challenge

Formulation of the next Environmental
Action Plan
Implementation of voluntary CO2 reductions
ahead of schedule while continuing thecurrent plan (The Sixth Voluntary Plan)

Consideration and implementation of all available
means of reducing CO2 from a Group-wide
perspective, taking into consideration external
factors such as technological innovation, markets,and regulations

30%
reductionin direct CO2
emissions(Scope 1 and 2)

SUBARUʼs Principal Initiatives for a Reduction of 20,000 t-CO2 by FYE March 2021
Installation of captive-consumption
solar power system

Purchase of electricity fromhydroelectric power generation

4

5
Renewableenergy systeminstallation

Gunma Oizumi Plant(projected reduction: 2,600 t-CO2)

Renewableenergy electricity
purchase

Utsunomiya South Plant and2nd South Plant(projected reduction: 5,400 t-CO2)

3
1

2

2

Tokyo Office in Mitaka(projected reduction: 4,000 t-CO2)

Gunma Main Plant(projected reduction: 6,200 t-CO2)

Green Power
Certification
utilization
Facilities in Oizumi including
Subaru Accessory Center, etc.
(projected reduction: 330 t-CO2)

Head office andtraining center in Tokyo(projected reduction: 1,000 t-CO2)

New Initiatives

1

Installation of a Solar Power System at SUBARU
Facilities in Oizumi, Gunma Prefecture(Projected reduction: 330 t-CO2)

We will install a captive-consumption solar power system at SUBARU
facilities in Oizumi, Gunma Prefecture. We aim to complete thesystem, with expected power output of 1 MW (generating 1,145 MWhof electricity annually), in FYE March 2020. We plan to use the power
generated by the system at the Subaru Accessory Center and the
Kanto PDI Center, which is projected to reduce emissions by 330
t-CO2, approximately 40% of the CO2 emitted from these facilities.

2

CO2 Emissions-Free Hydropower Introduction of
Aqua Premium(Projected reduction: 10,200 t-CO2)

We will introduce Aqua Premium, an electricity rate plan under which
only CO2 emissions-free hydropower is sold, to purchase a portion of
the electric power used at the Main Plant in Gunma and Tokyo Officein Mitaka. This is projected to reduce emissions by approximately
10,200 t-CO2 (annual output: 21 GWh equivalent).

3

Utilization of Green Power Certification(Projected reduction: 1,000 t-CO2)

At the Head Office in Ebisu and the Subaru Training Center in
Hachioji, we aim to realize CO2 emissions-free offices by utilizing theGreen Power Certification and Green Heat Certification systems.

Existing initiatives

4

Installation of One of Japanʼs Largest
Captive-Consumption Solar Power Systems(Projected reduction: 2,600 t-CO2)

We are installing a solar power system that will be among the largest
captive-consumption solar power systems in Japan1 at the Gunma
Oizumi Plant (Gunma Prefecture).
The facility, which will have expected power output of approximately
5.6 MW (generating 6,100 MWh of electricity annually), is scheduled
to be completed and start operation by FYE March 2020. This is
projected to reduce emissions by approximately 2,600 t-CO 2 ,equivalent to some 2% of the plantʼs annual CO2 emissions.

5“Tochigi Furusato Denki” Program for Local Production

and Local Consumption of Electricity(Projected reduction: 5,400 t-CO2)In April 2018, we introduced the Tochigi Furusato Denki program2,
Japanʼs first program for local electricity production and consumption,
which uses a hydropower plant owned by Tochigi Prefecture as a
power source, at the Aerospace Company Utsunomiya South Plant
and 2nd South Plant (Tochigi Prefecture).
Participation in the program is projected to reduce emissions byapproximately 5,400 t-CO2, equivalent to some 15% of the SUBARU
Aerospace Company ʼ s total annual CO 2 emissions. Under the
program, part of the electricity charges paid by SUBARU will be used
for environmental protection initiatives in Tochigi Prefecture.

1 Based on a study by Japan Facility Solutions, Inc.
2 A program offered by the Tochigi Prefecture Public Enterprise Bureau and TEPCO Energy Partner, Inc. to provide electric power generated by eight hydroelectric
power plants owned by Tochigi Prefecture that emit no CO2 during power generation. Participating companies are able to eliminate CO2 emissions associated with
their electricity usage.
For further information, please see the program website (in Japanese): http://www.pref.tochigi.lg.jp/j03/furusato/furusatodenki_top.html

Principal Risks and Opportunities Relating to Climate Change
Approach to Risks and Opportunities
Failure to take climate change countermeasures would seriously affect SUBARUʼs markets in Japan, North America, andelsewhere, and SUBARU would be unable to continue business operations. SUBARU has set a level well below 2ºC, in linewith the purpose of the Paris Agreement, as a long-term temperature increase goal and is analyzing short-term andmedium-term scenarios for achieving the goal, taking into account various factors.

Annual Report 201946

The SUBARU Groupʼs CSR

We are considering various product scenarios, keeping in mind the fuel efficiency regulations determined by national
governments in the countries where we do business and comprehensively taking into consideration factors such as theelectrification scenarios of the International Energy Agency (IEA) and related governments, progress with electrificationin the automotive markets, the status of social infrastructure development, technologies capable of withstanding
actual use by customers, securing of reasonable profits, and progress with decarbonization in upstream anddownstream product processes.
We have prepared FYE March 2031 targets related to production, taking into consideration factors including Japanʼs
Nationally Determined Contribution (NDC), stability of supply and procurement prices of low-carbon energy in Japan andthe U.S., progress with the energy mix promoted by the Japanese government, and carbon pricing. We are currently
formulating initiatives (an Environmental Action Plan) based on energy conservation activities, which takes into
consideration the installation of energy-saving equipment and the introduction of renewable energy.
Principal Identified Risk*
Product-Related Risks
1) Failure to comply with fuel efficiency regulations in Japan, the U.S., Europe, or China could result in negative incentives,
such as penal or administrative fines for violation of laws and regulations or carbon credit purchases, and SUBARU
could incur additional costs or losses. Also, failure to reach a certain level of fuel economy could limit product sales
opportunities.
2) Rapid electrification of vehicles that does not meet customer needs could cause SUBARU to incur unnecessary
development costs not aligned with needs or cause a decrease in customer satisfaction, which could lead to not only
unforeseen losses and loss of sales opportunities, but also delays in product electrification.
3) In the transition to electrified vehicles, it is important to low-carbonize/zero-carbonize in all processes from procurement
through to use and disposal while securing profitability. If overall decarbonization initiatives involving SUBARU products
upstream and downstream processes do not progress, SUBARU may be unable to achieve the targets throughout
product lifecycles.
4) From a medium- to long-term perspective, SUBARU believes that electrification will steadily advance and sudden
market penetration might happen at a certain stage. Failure to have appropriate technologies and products in place atthat point in time could have a significant impact on product sales opportunities.
Risks at the Production Stage1) If SUBARU vehicles continue to use energy derived from fossil fuels, SUBARU will be subject to geopolitical factors, suchas oil availability, as well as government-imposed carbon taxes or emissions reduction regulations, and costs could rise.
2) From a medium- to long-term perspective, SUBARU believes that renewable energy will become mainstream. However,at this time there are issues with respect to cost and stability of supply, and it is necessary to consider cost effectiveness.
Risks Related to Overall Business Operation
1) Insufficient efforts to achieve low-carbon/zero-carbon operations could damage SUBARUʼs brand value and have an
adverse effect on employee recruitment and sales. This could also make it difficult to procure funds from investors overthe medium to long term and lead to an increase in the cost of capital.
2) Some say that achieving the Paris Agreementʼs current national emissions targets of below 2ºC will not be enough, so
if countries adopt more stringent targets, SUBARUʼs business could be severely affected.
Principal Identified Opportunities*
1) If SUBARUʼs efforts to make products more environmentally friendly and climate change adaptation and mitigation
progress on a global scale all appropriately proceed, SUBARU may be able not only to maintain its key markets, butalso to gain further support for the safe products that provide peace of mind at which SUBARU excels, and sales
opportunities could also increase through the creation of new markets, even in the face of the extreme weather
conditions that can not, to some extent, be avoided in certain parts of the world.
2) Meeting expectations with respect to climate change could lead to an increase in SUBARUʼs brand value and have apositive impact on employee recruitment and sales. This could facilitate procurement of funds from investors over the
medium to long term and lead to a decrease in the cost of capital.
3) Transitioning to renewable energy while taking cost effectiveness into consideration could free SUBARU from the pricefluctuation risk inherent in energy derived from fossil fuels and prevent future cost increases.
* The above risks and opportunities are based on historical facts and currently available information and may change significantly due to factors such as future economic
trends and the business environment surrounding SUBARU

47

Annual Report 2019

Risk Management

Status of Development of the Risk Management System
The SUBARU Corporate Planning Department, which is responsible for functions common to each business, plays a central
role in efforts by the corporate departments to strengthen risk management in close collaboration with each business unit.
Furthermore, the Internal Audit Department periodically audits business execution at each business unit and affiliatedcompany. In addition, to contribute to development of the internal control system, SUBARU has set up and operates asystem and organization to ensure compliance, which is considered the most fundamental aspect of risk management.
To promote the practice of compliance Group-wide, SUBARU has established the Compliance Committee to conduct
deliberations and discussions, make decisions on important compliance matters, engage in information exchange andcommunication, and endeavor to implement compliance fairly and effectively. SUBARU has assigned compliance officers
and compliance staff to each business unit and organized a system for meticulously practicing compliance at the workplacelevel. SUBARU systematically and routinely provides education and training for officers and employees and promotes
compliance awareness through in-house publications and other means as necessary. To promote the practice ofcompliance in the SUBARU Group, SUBARU provides education and training and compliance information through thosein-house publications to affiliated companies and increases the effectiveness of compliance by promoting participation in
the SUBARU internal reporting system (Compliance Hotline).
Effective April 1, 2019, SUBARU newly established the Risk Management & Compliance Office for the purpose ofstrengthening initiatives to address legal compliance and corporate culture reform issues facing SUBARU. The Risk
Management & Compliance Office, General Administration Department, Group Company Management Department,
Sustainability Promotion Department, Legal Department, and Internal Audit Department together constitute the Risk
Management Group, which is overseen by the Chief Risk Management Officer (CRMO).

Message from the CRMO

Director of the Board
Executive Vice President
and CRMO

Yoichi Kato

In an organizational change effective April 1, 2019, SUBARU newly established the
Risk Management Group and the position of Chief Risk Management Officer (CRMO),
who oversees this Group. Although this reorganization is part of efforts to strengtheninternal control, which has been strongly required of companies in Japan and abroad
since the 2000s, I consider this a matter of particular importance for SUBARU, which
was shaken by final vehicle inspection problems. Although to date SUBARU has taken
several measures to strengthen internal control, such as establishment of the
Corporate Administration Division, by once again clarifying reporting lines concerning
risk management and internal control and clearly defining the communication route
between workplaces and management, SUBARU is attempting to reduce the senseof distance between them and enhance and strengthen management involvement ininternal control, in both form and substance. Since there were serious concerns about
the risk management response level under the previous organizational structure,
SUBARU newly established the Risk Management & Compliance Office to put inplace a system for systematically engaging in Group-wide risk management. SUBARU
combined the Risk Management & Compliance Office with the Legal Department,
the Sustainability Promotion Department (the former CSR & Environment
Department), and other departments closely involved with risk management and with
the General Administration Department, which serves as the secretariat office of theEmergency Response Headquarters, to form an organization overseen by the CRMO.
The automotive industry is said to be facing a once-in-a-century transition period.
Managing a business in such turbulent circumstances is like navigating a ship in a fog
that limits visibility. I believe that at such a time risk management fulfills the role of asea captain who helps keep the ship on a steady and sure course. I will devote myself
each day to ensuring that the Risk Management Group provides guidance to enable
maintenance of sustainable management.

Annual Report 201948

The SUBARU Groupʼs CSR

Compliance

Basic Approach and Policy
In the Corporate Governance Guidelines, SUBARU has designated the practice of compliance as one of the mostimportant management priorities. We are keenly aware that rigorous Group-wide compliance forms the foundation for theGroupʼs management, and we will instill in each employee not only compliance with all laws, ordinances, and internal
regulations required in business activities, but also rigorous pursuit of open and fair business activities that conform to the
ethical principles, common practices, and norms of society at large. To link the Corporate Governance Guidelines to action,
SUBARU has set up and operates a compliance system and organization and engages in compliance activities, such as
various types of training.

Corporate Code of Conduct and Conduct Guidelines
SUBARU has established the Corporate Code of Conduct (see page 02) and Conduct Guidelines as compliance standards
for the practice of compliance-oriented corporate activities. In FYE March 2018, we revised the content of the Conduct
Guidelines to further promote Group compliance. We explain the Code and Guidelines in detail in the Compliance
Manual, which is distributed to all employees of the SUBARU Group, and concisely explain the main points in the
Compliance Manual: Compliance Essentials, and strive to ensure compliance in our employeesʼ day-to-day actions.

Compliance Regulations
In 2001, with the approval of the Board of Directors, SUBARU instituted the Compliance Regulations as basic regulations
that stipulate the system, organization, and methods of operation related to compliance. In FYE March 2019, following
deliberation by the Compliance Committee and with the approval of the Board of Directors, we revised the regulations inorder to reflect the content of revisions to the Corporate Governance Guidelines and realize flexible operation of theCompliance Committee to ensure more rigorous compliance practice.

Compliance System,
Organization, and Operation
SUBARU established the Compliance
Committee as a Group-wide committee topromote compliance. The Committee
deliberates, discusses, decides, andexchanges information on importantcompliance matters. Each department
institutes its own compliance action plan(compliance program) each year topromote compliance and engages incontinuous and systematic autonomous
activities. Following the discovery of
improprieties relating to final vehicle
inspections at SUBARU, in FYE March 2019
the director of the board and chairman
became the chairman of the Compliance
Committee, and since the start of FYEMarch 2020 a director of the board andexecutive vice president who serves as
Chief Risk Management Officer (CRMO), a
newly established position, has chaired
the committee, which is fundamentally
reviewing and implementing compliancerelated initiatives.

49

Annual Report 2019

Compliance System
Auditors
Internal auditing
results reporting

Board of Directors
Establishment

Reporting of very critical/
urgent compliance issues

Reporting of deliberation/decision

Compliance Committee
Compliance Committee chair
Compliance Committee member
Secretarial work

Reporting of important items

Secretariat Office:Internal Audit
Department in charge of complianceDepartment
Consultation/(internal audit) cooperation Risk Management & Compliance OfficeConsultation/
cooperation

Deliberation/reporting of scandals
Compliance status reporting

Manager in charge of compliance
Compliance Planning Subcommittee
Personnel in charge of complianceInternal auditing

Office/department/company
Group companies

Consultation/
cooperation

Establishment of the Risk Management & Compliance Office
After deep reflection on the improprieties relating to final vehicle inspections at SUBARU discovered in FYE March 2018,with the aim of preventing any repetition of similar mistakes, in FYE March 2019 SUBARU established the Compliance
Office as an independent organization to strengthen company-wide compliance-oriented initiatives. Furthermore, in FYEMarch 2020 we reorganized the Compliance Office as the Risk Management & Compliance Office, expanding its role tothat of a hands-on organization that plans and implements Group-wide internal control and risk management. The Risk
Management & Compliance Office principally engages in the following work.
Planning and implementation of internal control and risk management for the entire SUBARU Group
Planning and operation relating to compliance promotion for the entire SUBARU Group (including matters relating to theCompliance Committeeʼs secretariat office), planning and operation of compliance training, education, and internal
awareness activities, and operation of the SUBARU Groupʼs internal reporting system (Compliance Hotline)

Improvement of the Compliance Hotline System
In addition to seeking solutions through their superiors, regular and temporary employees who work in the SUBARU Group
have the option of using the Compliance Hotline to seek consultation about any compliance-related problems they havediscovered within the Group.
The Hotline Desk has been set up within the Company, and employees assigned to the Hotline Desk in accordancewith internal rules directly accept reports by post, telephone, and e-mail, conduct fact-finding investigations, and respondto reports. The names and departments of persons making reports are kept strictly confidential and are not disclosed
without their consent, and consideration is given to ensuring that they suffer no disadvantage due to the consultation.
Since April 2008, we have added an external specialist organization as a point of contact and worked to make the systemeasier to use by extending its hours and reinforcing the mechanisms that ensure the confidentiality of the names anddepartments of persons seeking consultation. To publicize the Compliance Hotline System, we have distributed cards thatprovide information on how the hotline system works and contact details to employees of SUBARU and Group companies
and put up posters in workplaces. We have included an explanation of the service provided by the external specialist in theposters and also posted information on the Company intranet.

Compliance Hotline (from Consultation to Solution)

Compliance Hotline card

The Compliance Hotline received 199 consultation requests in FYE March 2019, and the general manager of theCompliance Office (or, since FYE March 2020, the general manager of the Risk Management & Compliance Office due to achange of organization name) played a central role in efforts to expeditiously solve problems following fact-finding
investigations. Matters reported to the Compliance Hotline are reported to management or the Compliance Committee asnecessary, and measures are taken to prevent any reoccurrence of problems.
In FYE March 2019, we redesigned the awareness card and posters to include the message that SUBARU wants
employees to use the Compliance Hotline system to report even minor matters if they feel that something is wrong. We
also provided various types of compliance training and prepared and distributed compliance-related tools. Thanks to these
initiatives, operation of the system improved, with efforts to increase employee compliance awareness, including
encouraging a mindset of actively using the system, leading to increases in the number of consultation requests from
employees and in the number of reports that lead to an appropriate response and solution.

Annual Report 201950

The SUBARU Groupʼs CSR

Compliance Activity Achievements
Compliance Training
In the belief that the entire SUBARU Group must work in harmony to achieve rigorous compliance, we provide compliancetraining and practical legal training to employees of all Group companies. This training is organized by the Legal
Department, Risk Management & Compliance Office, and human resource and education departments. Each department
and affiliated company incorporates its own education program into its action program (compliance program) andcomplements this education by holding study meetings on important work-related laws and ordinances and providing
compliance awareness training conducted by Legal Department and Risk Management & Compliance Office personnel
and others. In FYE March 2019, some 7,700 persons participated in these training programs organized or supported by the
Legal Department and Compliance Office (reorganized as the Risk Management & Compliance Office in April 2019).
SUBARU prepares and provides various support tools to promote the day-to-day practice of compliance, including tools
specifically intended for affiliated companies such as SUBARU distributors in Japan. In addition, we distribute urgent
information on a timely basis in the form of Compliance Information and work to raise compliance awareness Group-wide. In
FYE March 2019, we provided Compliance Awareness Training for SUBARU Group managers, shared information on thecauses and background of the occurrence of improprieties relating to final vehicle inspections at SUBARU, and promoted
measures in each department to prevent the occurrence of similar improprieties. We also expanded the scope of companywide compliance education provided to managers every year in October, which is designated as Compliance Month, tosection heads and other employees and implemented initiatives to broaden the base of compliance. Furthermore, in FYEMarch 2019 we newly prepared the Compliance Manual: Compliance Essentials as a tool to contribute to the practice ofcompliance-oriented corporate activities and distributed it to all employees of the SUBARU Group.
H4

H1

10
SUB AR U

KE

コンプライアンス・ホットライン

YW ORDS

情報漏洩、不正取引、データ偽装、個人情報流出、著作権侵害、ハラスメント…こんな行為以外にも「なにか変かも？」と感じることがあれば、コンプライアンス・ホットラインまで気軽にご相談を。SUBARUグループで働く方なら、どなたでも相談いただけます。

外部窓口

コンプライアンス従 業 員 相 談 窓 口

0120-061-065

受付時間（月〜土）14:0 0 〜21:0 0 ※「職場のヘルプラインです」と応答します。
メール：subaru-helpline@e-cuore.com

株式会社 SUBARU

Compliance training (Tokyo Office)51

Annual Report 2019

コンプライアンス室

内部窓口 ホットライン・デスク（本 社 -コンプライアンス室）「お客様の笑顔をつくる会社」
10 の心得03-3473-7107
受付時間（平日）9:0 0〜18:00 メール：cpl-hotline@subaru.co.jp
郵送：〒150-8554 東京都渋谷区恵比寿 1-20-8 エビススバルビル
株式会社SUBARU「コンプライアンス・ホットライン・デスク」『コンプライアンス マニュアル』エッセンシャル版
2018.10Compliance Manual: Compliance Essentials

Quality

Approach to Quality
To make SUBARU a company that is trusted by, and resonates with, customers through the provision of “Enjoyment andPeace of Mind,” under the banner of a new quality policy and with Quality First as our watchword, all SUBARU employees
actively promote the provision of high-quality products and services that inspire customers. In addition, SUBARUʼs affiliatedcompanies in Japan and overseas establish quality policies in accordance with the business content of each company andregional characteristics and carry out quality control based on these policies.

Message from the CQO

Executive Vice President
and CQO

Atsushi Osaki

Quality is the foundation of “Enjoyment and Peace of Mind,” SUBARUʼs core value,and delivering quality is one of our most fundamental responsibilities to ourcustomers. Quality can be broadly defined to include everything from product quality
to customer service quality, the quality of the day-to-day work of individual
employees, and the quality of corporate activities, and it is important to steadily
improve these dimensions of quality. To ensure that SUBARU moves forward with thecreation of high-quality products that are attuned to customer lifestyles and further
enriches peopleʼs lives and with improvement of service quality, I intend to play aleading role in instilling a standard so that SUBARU Group employees make quality
the highest priority above all else.
Airbag defects and other problems that lead to recalls and service campaigns
have continued to occur, and I deeply regret that we have caused concern andinconvenience to our shareholders, customers, and many other stakeholders.
Although we have seen steady improvement in the results of third-party quality
assessments for the U.S. market, our relative quality ratings in comparison with otherautomakers are regrettably declining, and I consider this a critical issue.
In response to these problems and issues, in new vehicle development we aim toeliminate recalls and service campaigns by further reinforcing milestone management
at each stage of development and systematically working to prevent any reoccurrenceof past defects. We will make high-quality products that are easy for customers tounderstand and use, taking into account customer usage conditions, andsimultaneously work to minimize vehicle downtime and increase customer satisfaction
by undertaking call center expansion, building a system for the smooth provision of
replacement parts and repair parts, and improving efficiency in service operations.
Quality reforms are a top priority in STEP, SUBARUʼs mid-term management
vision. For this reason, we are reviewing all business processes, from product planningand parts procurement by supplier to production and shipping at our plants, andimplementing reforms. To ensure that the departments involved in these processes
do not waver in the philosophy that quality is key, we will also strengthen the authorityof the CQO and rigorously reinforce quality management systems across all productdevelopment and manufacturing functions.
In addition, we will invest in facilities for quality-related technology development, in
simulators and other control-related evaluation facilities, and in facilities with modifiabletemperature and atmospheric pressure control for environmental and durability
evaluation. In manufacturing, whereas until now we have made capital expenditures
mainly for the purpose of increasing capacity, from now on we will invest heavily in the
renewal of aging facilities and the enhancement of traceability to raise the level ofquality, while also utilizing IoT. We will actively invest in areas that contribute to quality
improvement, including human resources investment, and aim to be No. 1 in the kindof quality that makes our products suitable for long-term use with peace of mind.

Annual Report 201952

The SUBARU Groupʼs CSR

Initiatives to Instill the Mindset that Quality is the Top Priority
SUBARU is continuing various initiatives to promote a change of mindset and behavior on the part of each individual
employee for the purpose of making quality the highest priority. A prime example of these initiatives is the Quality Policy
revision implemented in April 2019.

Quality Policy

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

Points of Emphasis in Revising the Quality Policy
Communicate thepowerful message that
“Quality is important
above all else”

Align the direction andfocus of all activities
toward customers

Promote a change ofmindset and behavior
by engaging withindividuals in an easy tounderstand way

Clearly express theimportance ofcompliance

Under the leadership of top management, all employees will apply this policy in their day-to-day work.
In addition to this revision to the Quality Policy, SUBARU will continue the following activities that support quality reforms.
1. Education activities involving periodic posting of quality reform-related articles in Shuho, SUBARUʼs in-house magazine
2. Holding of a “Quality Caravan” event in November (designated as Quality Month) to directly convey SUBARUʼs quality
situation and customer feedback to employees at all business sites and to suppliers, beginning in FYE March 2019
3. Addition of a quality awareness course to the employee level-specific education curriculum, beginning in FYEMarch 2020
Through these activities, we are working to foster among employees the mindset that quality is the highest priority.
Although we believe that employeesʼ quality awareness has steadily increased due to these initiatives, we will thoroughly
inculcate this quality-first mindset and ensure that it is not transitory.

Quality Management System
1. Establish Quality Management System (QMS) based on the Quality Policy and ISO9001 Standard and put it into practicefor orderly and effective operations.
2. Aim to increase customer satisfaction by ensuring conformity with customer requirements and legal and regulatory
requirements.
3. Undertake continuous improvement of the QMS through business process improvement.

53

Annual Report 2019

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

Quality Management Cycle

Development of a System for Improving Quality
SUBARU has established a quality improvement system centered on the Quality Assurance Division in order to analyze aftersales quality defects and customer requests to realize higher-quality development and production. On the basis of customer
feedback collected from around the world, SUBARU is identifying quality-related issues, investigating causes, andformulating countermeasures together with relevant departments and suppliers.

Quality Improvement System

ReportReportFeedback

Response

Feedback
ReportFeedback

Request for assistance
Response

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

SUBARU
Customer Center

InsideJapan

Customer

Request forassistanceSales insideJapan

ReportSuppliers

Response

Feedback

Service function

Request forassistanceSales outsideJapan

OutsideJapan

Customer

SUBARU

Productionunits

Development
units

Annual Report 201954

The SUBARU Groupʼs CSR

Human Resources

Approach to Human Resources Development
In STEP, the mid-term management vision, SUBARU set forth the vision “From a company making things, to a company
making people smile.” As part of realizing this vision, we consider human resources development a critically importantpriority. We assist highly motivated employees in pursuing individual growth by utilizing a personnel system that consists ofoccupational skill certification programs, a performance assessment system, a goal management system, personnel
rotation, and an education and training system as a tool for the development of human resources. In addition, SUBARUʼsaffiliated companies in Japan and overseas promote initiatives in accordance with the business content of each company
and regional characteristics.

Approach to Diversity
For SUBARU Group to continue offering customers its unique value, each SUBARU employee needs to be able to express
his or her unique abilities as an individual with various values and characteristics. This is why the SUBARU Group values
diversity in gender, nationality, culture, lifestyle, and other attributes and strives to create workplace environments where
everyone finds it comfortable to work. In addition, SUBARU ʼs affiliated companies in Japan and overseas promote
initiatives in accordance with the business content of each company and regional characteristics. We established theDiversity Promotion Office in January 2015 to promote diversity at SUBARU even more proactively. The office has
designated “promoting active roles of female employees,” “employing people with disabilities,” “planning and promoting
employment of non-Japanese,” and “promoting employment of the elderly” as priority themes. Among them, SUBARU has
placed particular emphasis on efforts to promote active roles of female employees.

Approach to Work-Life Balance
The SUBARU Group believes that it is important to create an environment that increases employee job satisfaction andenables individuals to fully demonstrate their abilities so that our employees can bring smiles to the faces of customers.
SUBARU respects employee diversity, promotes diversity in work styles to achieve work-life balance, and is enhancing
programs that support a healthy work-life balance. In addition, SUBARUʼs affiliated companies in Japan and overseas
promote initiatives to support work-life balance in accordance with the business content of each company and regional
characteristics.

Approach to Ensuring Respect for Human Rights
SUBARU states “We respect the rights and characteristics of individuals” in the Corporate Code of Conduct (see page 02),
and we respect the human rights of all stakeholders involved in our business activities. To enable employees to fully
demonstrate their individual abilities, we pursue diversity in gender, sexual orientation (LGBT status), age, nationality,
culture, and lifestyle. Our basic approach to ensuring respect for human rights is to strive to create safe and comfortableworkplace environments within the SUBARU Group and our supply chains, which includes zero tolerance of forced laborand child labor.

55

Annual Report 2019

Diversity
Promoting Active Roles for Female Employees
SUBARU set a 2020 target of increasing the number of female managers by at least five times the number in 2014, and we
expect to achieve this target by April 2020. (The number of female managers at SUBARU Corporation was four in 2014 andis 18 as of April 2019.) We have now set a new 2025 target of increasing the number of female managers by at least 12
times the number in 2014, and we are further strengthening initiatives to develop female managers.

Support for Womenʼs Career Development
In addition to a mentoring program for female managers and manager candidates, SUBARU has provided career advancement
training for female team leaders since FYE March 2017 for the purpose of systematically developing the next generation of
female manager candidates. In FYE March 2019, 46 female employees received the training. We plan to further step up
personnel rotation, which expands the scope of employeesʼ work and contributes to personal growth.
We have also instituted a rehiring assistance program for employees who left the company for unavoidable reasons,such as the job transfer of a spouse. We began candidate registration in FYE March 2010, and to date 10 employees have
utilized this program to return to work.

Initiatives at Special Subsidiary SUBARU Bloom Co., Ltd.
SUBARU Bloom Co., Ltd., which obtained accreditation as a special subsidiary in FYEMarch 2015, continued to actively engage in the employment of persons withdisabilities in FYE March 2019. As of April 2019, 67 employees and 17 instructors
engage in cleaning work at SUBARUʼs employee dormitories and plants.
In addition to employing persons with disabilities, in FYE March 2019 SUBARU
Bloom once again actively welcomed people from nearby areas for visits and tours
and, at the request of the Gunma Prefecture Board of Education, introduced its
initiatives to persons involved in local special needs education. Since FYE March 2017,
SUBARU Bloom has been registered as a Supporter Company for Employment ofPeople with Disabilities, which is a program for cooperating companies that actively
promote employment of persons with disabilities that is sponsored by the
Department of Employment Support for People with Disabilities of Gunma Prefecture.
Going forward, SUBARU Bloom will continue efforts to improve the management
stability and work quality of special subsidiaries while expanding its network withother companies involved in employment of persons with disabilities. True to its
name, SUBARU Bloom will aspire to be a company that helps the individuality of
every employee to bloom and strive for increased employment, retention, andcommunity contributions.

Certificate for Supporter
Company for Employment ofPeople with Disabilities(sponsored by Gunma Prefecture)

Initiatives for Non-Japanese Employees
SUBARU recruits both new graduates and mid-career employees regardless ofnationality, and employs foreign nationals as regular employees and temporary
workers. We translate safety and quality policies, work procedure manuals, and otherdocuments into multiple languages to promote understanding by non-Japaneseemployees. In particular, the Gunma Plant, which employs many foreign nationals,
retains interpreters for English, Portuguese, Tagalog, Spanish, and Chinese tofacilitate communication with non-Japanese employees.
SUBARU provides language training and overseas training for Japaneseemployees and engages in initiatives to enhance employeesʼ ability to communicate
with people from other countries and understand cultures different from their own.
International personnel exchanges also help energize SUBARUʼs corporate culture
and contribute to securing human resources.
SUBARU appropriately manages the Technical Intern Training Program for foreigntechnical interns. We engage in safety- and quality-based initiatives that contribute to
the success of technical interns after they return to their home countries. Overseas
business sites and affiliated companies independently recruit human resources andstrive to secure personnel suited to their specific policies and businesses.

Manual translated into five languages

Annual Report 2019

56

The SUBARU Groupʼs CSR

Work-Life Balance
Initiatives for Work-Style Reform
SUBARUʼs Status of Compliance with the Work-Style Reform Act*
Category

Details

Accurate monitoring ofworking hours

Introduction in July 2018 of a company-wide attendance system with centrally managed
electronic records (PC log-in and time-card recording of entry and exit times) to enable accuratemonitoring of working hours

Promotion of utilization of
5 days of annual paid leave

Start of an initiative covering all employees in FYE March 2019. Goal of achieving utilization of atleast 5 days of leave within 7 months of granting of leave by employees newly granted 10 days ormore of leave. Institution of an operating rule to ensure utilization of 5 days by all employees

Maximum limit on overtime work

Establishment and operation of a more rigorous standard than required by law (maximum of 590
hours per year and 79 hours per month)

Increase in the pay rate for overtime work
exceeding 60 hours per month

In compliance since FYE March 2011

* The Work-Style Reform Act is a law passed in June 2018 to amend labor-related laws for the purpose of promoting work-style reforms

Initiatives to Reduce Long Working Hours
SUBARU has created an environment to reduce long working hours through measures such as the introduction of aflextime work system and designation of regular-hour business days (no-overtime days). In addition to the previous
designation of no-overtime days, in FYE March 2016 we began to designate at all business sites an “ultra no-overtime day”
on which all employees, including managers, leave work at a set time. In FYE March 2018, we began the practice of locking
the doors to the work floors at 10 pm to ensure that employees leave work, mainly at the Gunma Plant and for the Tokyo
Office development departments. In FYE March 2019, we expanded the scope of this initiative to include all back-office
departments at the Gunma Plant. Clearly indicating the maximum overtime hours permitted has increased employee
awareness of work hours.

Assistance with Balancing Work and Childcare
SUBARU believes that it is important to create an environment that enables employees to continue their careers with asense of security, without having to leave employment because of childcare, and has instituted support systems that meetor exceed statutory requirements to achieve a balance between work and childcare. SUBARU has stipulated that thechildcare leave system can be extended to the end of the first April after a child turns two years old, and has also made theshort work-time system for childcare available until the start of a childʼs fourth grade of elementary school, while making it
possible to use the system together with flextime (core time of two hours). This policy has had a tremendous effect in backoffice departments, where now nearly no one leaves employment due to childcare. We are currently stepping up initiatives
to assist employees in pursuing career advancement while balancing childcare and work.
SUBARU believes that it is necessary for the Gunma Plant to create a workplace environment that enables shift workers
in production who return to their jobs after childcare leave to work with peace of mind. In FYE March 2019, on a trial basis,
we opened an on-site conference room for use by a qualified childcare worker to provide early morning daycare until the
daycare center opens. We introduced this system on a full-scale basis in FYE March 2020.
We explain the content of these support systems in level-specific employee training and are publicizing the existenceof various systems and promoting their use through the Maternity Leave and Childcare Handbook on the intranet.

Number of Employees Taking Childcare Leave (SUBARU non-consolidated)
MeasureOverview

Childcare leave(persons)
Leave system available
to employees caring
for children

Rate of returning towork after childcare leave (%)
Retention rate one year after
returning to work (%)

57

Annual Report 2019

FYE March 2015 FYE March 2016 FYE March 2017 FYE March 2018 FYE March 2019

Male

2

6

8

10

21

Female

91

101

88

88

80

Total

93

107

96

98

101

100

100

Male
Female

100

100
98

100
97.5

Male

100

100

87.5

83.3

100

Female

98.9

95

100

97.2

90

Respect for Human Rights
Activities to Raise Awareness of Human Rights
SUBARUʼs Conduct Guidelines (see page 49) clearly state, “We do not unfairly discriminate on grounds of gender, LGBTstatus, age, place of birth, nationality, race, ethnicity, beliefs, religion, social status, physical disability, disease, or any otherpretext.” In order to raise awareness regarding respect for human rights, since FYE March 2016 we have deepened
understanding of the need for diversity and SUBARUʼs diversity initiatives through new employee training and manager
training. In FYE March 2019, we held 10 training sessions attended by 435 employees.

Preventing Harassment
To prevent all forms of harassment, SUBARU has prohibited harassment in the Rules of Employment and instituted
guidelines. To prevent workplace harassment, we have prepared the Explanatory Booklet on Workplace Harassment andinformed all SUBARU employees of it. In addition, we have distributed to all managers and supervisors the Workplace
Harassment Prevention Handbook, which contains precautions and suggestions for creating workplaces free fromharassment.
SUBARU has prepared an environment for all employees, including employees of Group companies, to seek
consultation and advice by establishing the Compliance Hotline and Harassment Hotline, which provide internal andexternal points of contact for consultation about harassment. By creating easily accessible systems, we encourage
employees to feel free to seek consultation and strive for the early detection and resolution of problems.

Annual Report 201958

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

ʼ10/3

ʼ11/3

ʼ12/3

ʼ13/3

Millions of yen¥1,428,690
1,152,763
275,927¥1,580,563
1,241,427
339,136¥1,517,105
1,222,419
294,686¥1,912,968
1,501,809
411,159

Millions of yen

248,577

255,001

250,727

290,748

Millions of yen

27,350（443）

84,13563,214

43,95952,879120,41193,082Millions of yen（16,450）

50,32638,453

119,588

Millions of yen

65,78589,077
37,17556,062
67,37842,90758,611
67,035
48,11561,544
94,98649,141

381,893
380,587
1,231,367

413,963
412,661
1,188,324

451,607450,302
1,352,532

596,813595,365
1,577,454

30.9

34.7

33.3

37.7

Millions of yen

176,734

138,208

54,865

166,715

Millions of yen（62,656）（51,109）（26,602）（71,370）

Millions of yen

114,078

87,09928,263

95,345

Millions of yen（18,560）（39,408）

2,586（60,766）

Yen（21.11）

Yen

488.58064.56
528.889

49.27
576.979

153.23762.8715

Persons

93
782,865
39,223
12,483

86782,865
34,24012,42979782,865
33,13912,35982
782,865
28,89012,717

Persons

27,58627,29627,12327,509

563
557
453
104

657
624
459
165

640
635
465
171

724
692
511
181

Operating results (for the year)
Net sales 1
Cost of sales
Gross profit
Selling, general andadministrative expenses 1
Operating income (loss)
Income (loss) before income taxes
Net income (loss) attributable toowners of parent
Depreciation/amortization 2
Capital expenditures 3
R&D expenses

Millions of yen
Millions of yen

Millions of yen

Millions of yen
Millions of yen

Financial position (at year-end)
Net assets
Shareholdersʼ equity
Total assets 4
Ratio of shareholdersʼ equity tototal assets 4

Millions of yen
Millions of yen
Millions of yen%

Cash flows
Net cash provided by (used in)operating activities
Net cash provided by (used in)investing activities
Free cash flow
Net cash provided by (used in)financing activities
Per share
Net income (loss) (EPS)
Net assets (BPS)
Dividends

Yen

Other information
Non-consolidated exchange rate
Number of shares issued
Number of shareholders 5
Number of employees (parent only)
Number of employees(consolidated)

Yen to the U.S. dollar
Thousands of shares
Persons

Number of units
Consolidated automobile unit sales 6
SUBARU vehicle unit production
Domestic
U.S. (SIA) 7

Thousand units
Thousand units
Thousand units
Thousand units

1 Change of accounting policy effective from FYE March 2019 (deduction of sales incentives from net sales); Retroactively applied to the figures for FYE March 2018
2 Accompanying a change in accounting policy effective from the FYE March 2019, change of depreciation method for certain tangible fixed assets of the Company
and its major domestic consolidated subsidiaries from the declining-balance method to the straight-line method
3 Increase in property, plant and equipment and intangible assets
4 Application of Partial Amendments to Accounting Standard for Tax Effect Accounting, effective from FYE March 2019; Retroactively applied to the figures for FYEMarch 201859

Annual Report 2019

8
（Thousands of U.S. dollars）

ʼ14/3

ʼ15/3

ʼ16/3

ʼ17/3

ʼ18/3

ʼ19/3

ʼ19/3

¥2,408,129
1,728,271
679,858¥2,877,913
2,017,490
860,423¥3,232,258
2,187,136
1,045,122¥3,325,992
2,386,266
939,726¥3,232,695
2,442,706
789,989¥3,160,514
2,561,753
598,761$28,470,534
23,076,777
5,393,757

353,369

437,378479,533

528,916

410,542403,232

3,632,393

326,489
328,865

423,045392,206

565,589
619,003410,810394,695

379,447
297,340

195,529
195,838

1,761,364
1,764,146

206,616

261,873436,654282,354

220,354

147,8121,331,518

61,486
98,53760,092

71,821
135,346
83,53572,938168,338
102,373

85,653
196,616
114,215

102,102
193,789
121,084

102,749
169,960
102,719925,583
1,531,033
925,313770,071765,5441,888,363

1,030,719
1,022,417
2,199,714

1,349,411
1,343,732
2,592,410

1,464,888
1,458,664
2,762,321

1,561,023
1,552,844
2,866,474

1,612,825
1,605,291
2,982,725

14,528,645
14,460,778
26,868,976

40.5

46.5

51.8

52.8

54.2

53.8

̶

313,024

311,543614,256

345,442366,298

174,006

1,567,480（33,903）（172,780）（255,676）（254,252）（150,711）（158,327）（1,426,241）

279,121

138,763358,580

91,190215,587

15,679141,239（63,011）（110,546）（126,190）（189,044）（170,937）（96,617）（870,345）（U.S. dollars）

5
6
7
8

264.76980.9853

335.57
1,310.15
68

559.54
1,721.90
144

365.77
1,902.56
144

287.402,025.31
144

192.782,093.60
144

1.74
18.86
1.30

100
782,865
51,386
13,034

108782,865
70,942
13,883

121
782,865
79,594
14,234

108769,175
76,471
14,708111769,175
132,570
14,879111
769,175
133,879
15,274

̶

28,54529,774

31,151

32,59933,54434,200

̶

825
772
609
164

911
887
681
207

958
929
693
236

1,065
1,033
698
335

1,067
1,036
687
349

1,000
977
605
372

̶

̶
̶
̶

̶
̶
̶

Number of shares per trading unit: 100 shares
Automobile unit sales of SUBARU CORPORATION and its consolidated subsidiaries
U.S. production base Subaru of Indiana Automotive, Inc.
U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥111.01 to US$1.00, the approximate rate of exchange at March 31, 2019

Annual Report 201960

Five-Year Unit Sales
Years ended March 31

Consolidated Automobile Sales（Number of units）

ʼ15/3

ʼ16/3

ʼ17/3

ʼ18/3

ʼ19/3

Domestic units
LegacyImpreza
ForesterLevorgWRX
ExigaSUBARU BRZOEMOthers
Passenger cars
Minicars
Domestic total

13,84539,462
21,10340,559
7,514
1,937
1,890
1,127
439
127,876
34,876
162,752

11,35839,79422,04423,555
6,956
4,498
1,995
884
502
111,586
33,702
145,288

11,06551,592
24,23923,775
6,552
4,284
2,253
2,066
567
126,393
32,542
158,935

9,328
66,74818,13921,342
8,252
3,498
1,879
2,889
480
132,555
30,889163,4445,864
46,83832,941
12,878
7,060
23
1,241
2,712
147
109,704
25,615
135,319

Overseas units by region
U.S.
CanadaRussiaEuropeAustralia
China
OthersOverseas total

527,630
42,43911,55935,73038,88953,82137,875
747,943582,674
47,5795,723
41,77844,611
44,38845,824
812,577

667,61353,061
5,338
40,915
49,10644,00045,574
905,607

670,931
56,8207,729
40,22855,674
26,872
45,231
903,485

659,70256,826
8,120
32,133
41,731
22,77643,287864,575

Overseas units by model
LegacyImpreza
ForesterLevorgWRX
AscentTribeca
SUBARU BRZOEMOthersOverseas total

235,791
196,403269,649
037,982
0
64
7,914
135
5
747,943

286,979
217,272
250,072
7,713
43,120
0
34
7,387
0
0
812,577

333,339
238,858
272,768
6,823
47,185
0
7
6,627
0
0
905,607281,846
306,673
260,853
3,913
42,739
0
1
7,460
0
0
903,485

253,860
275,089
226,756
2,160
33,861
67,17705,672
00864,575

Grand total

910,695

957,865

1,064,542

1,066,929

999,894*Automobile sales of SUBARU CORPORATION and its consolidated subsidiaries

Consolidated Automobile Sales by Region
Japan
EuropeU.S.
Australia

CanadaChina

RussiaOthersConsolidated Automobile Sales by Model
LegacyExiga
OEM(Thousand units)

ForesterTribeca
Minicars

LevorgSUBARU BRZ

WRX(Thousand units)

1,200

1,200

1,065

1,000

911

1,067

958

1,000

1,000

911

800

800

600

600

400

400

200

200

0

1,065

1,067

’17/3

’18/3

958

1,000

0

’15/3

’16/3

’17/3

’18/3

’19/3

*Automobile sales of SUBARU CORPORATION and its consolidated subsidiaries

61

Impreza
AscentOthersAnnual Report 2019

’15/3

’16/3

’19/3

*Automobile sales of SUBARU CORPORATION and its consolidated subsidiaries

Non-Consolidated Automobile Sales（Number of units）

ʼ15/3

ʼ16/3

ʼ17/3

ʼ18/3

ʼ19/3

Domestic units
LegacyImpreza
ForesterLevorgWRX
ExigaSUBARU BRZ
OEM
Passenger cars
Minicars
Domestic total

14,73440,277
21,56941,832
7,991
2,016
1,941
1,224
131,584
35,563
167,147

11,665
41,137
22,631
24,014
7,181
4,797
2,070
904
114,399
35,642150,041

11,52953,13624,231
24,626
6,724
4,356
2,394
2,575
129,571
34,124
163,695

9,753
68,93719,00022,525
8,284
3,833
1,999
2,862
137,193
31,717
168,910

6,091
49,11734,553
13,328
7,206
7
1,256
2,843
114,401
26,344
140,745

Export units
LegacyImpreza
ForesterLevorgWRX
ExigaSUBARU BRZ
OEMExport total

34,344
199,770
265,072
037,865
58,418
135545,60950,353
218,866
249,2027,880
43,1770
7,005
0576,483

39,719191,873
278,963
6,805
46,73006,653
0570,743

32,122
214,631254,397
3,813
44,05307,451
0556,467

26,073
197,657
230,136
2,060
30,59004,980
0491,496

Complete knockdown (CKD) overseas
Total

222,513242,424

353,770

348,144

402,985

Grand total

935,269

968,948

1,088,208

1,073,521

1,035,226

ʼ14

ʼ15

ʼ16

ʼ17

191,060
128,952
159,953
25,492
0
732
7,504
513,693

212,741
155,712
175,192
33,7340
0
5,296
582,675

248,204
150,915
178,593
33,2790
04,141615,132

238,723
196,181
177,563
31,3580
04,131647,956

U.S. Retail Sales (Calendar Year: January to December)
LegacyImpreza
Forester
WRX
AscentTribeca
SUBARU BRZ
U.S. total

Non-Consolidated Domestic Automobile Sales by Model
LegacyExiga

Impreza
SUBARU BRZForesterOEM

LevorgMinicars

WRX（Number of units）

Non-Consolidated Automobile Export Units by Model
LegacyWRX(Thousand units)(Thousand units)

200

600

167

164
150

150

Impreza
Exiga

546

169

ʼ18
218,963
220,784
171,613
28,73036,2110
3,834
680,135

Forester
SUBARU BRZ

576

571

Levorg
OEM

556
491

500

141

100

400
300
200

50
100
0

0

’15/3

’16/3

’17/3

’18/3

’19/3

’15/3

’16/3

’17/3

’18/3

’19/3

Annual Report 201962

Financial Review
Business Segments and Scope of Consolidation
The SUBARU Group (“the Group”) consists of three business segments: the core Automotive Business Unit, which accounts
for approximately 95% of consolidated net sales; the Aerospace Company; and Other Businesses, consisting of businesses
that do not belong to either of the other two segments. In the fiscal year ended March 31, 2019 (April 1, 2018 to March 31,
2019; the “fiscal year under review”), SUBARU CORPORATION (“the Company”), 78 subsidiaries, and 10 equity-method
affiliated companies were included in the scope of consolidation.

Overview of Business Performance
The global economy remained stable during the fiscal year under review, while uncertainties due to trends in trade issues
caused some slowdown in the second half of the year. The Japanese economy also continued on a gradual recovery path,as the employment and income environment improved and consumer spending recovered, although concerns over the
impact of the uncertainty over the world economy persisted. Meanwhile, the exchange rate was mostly stable.
Consolidated net sales for the fiscal year under review decreased by 72.2 billion yen (2.2%) from the previous fiscal year
to 3,160.5 billion yen mainly due to the fall in automobile unit sales. The increase in quality-related expenses triggered by
the recall of engine parts in November 2018 and the decrease in automobile unit sales affected consolidated operating
income, which dropped by 183.9 billion yen (48.5%) to 195.5 billion yen compared with the previous fiscal year. Net income
attributable to owners of parent also fell by 72.5 billion yen (32.9%) from the previous fiscal year to 147.8 billion yen.

Net Sales

Operating Income／Net Income Attributable to Owners of Parent(Billions of yen)(Billions of yen)

Operating income
4,000

Net income attributable to owners of parent

600

3,000

2,877.9

3,232.3 3,326.0 3,232.7 3,160.5

565.6

500
400

2,000

300

436.7

423.0

410.8

379.4

282.4

261.9

220.4

200
1,000

195.5
147.8

100
0

0

’15/3

’16/3

’17/3

’19/3

’18/3

’15/3

’16/3

’17/3

– 87.4– 10.7

’19/3

’18/3

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

Analysis of Increase and Decrease in Operating Income Changes (Consolidated)(Billions of yen)

Gain oncurrency
exchange

410.8

R&D
expenses

32.7– 44.2

– 7.7

SG&A
Cost
expenses reduction
and others’17/3
Operating income

63

379.4
– 6.9

– 5.3

R&D
expensesSales
volume &mixture andothers–31.4 billion yen

Annual Report 2019

’18/3
Operating income

18.6– 98.7
SG&A
expensesand others

195.5

Sales
Cost
volume & reduction
mixture andothers–183.9 billion yen– 5.7
Loss oncurrency
exchange’19/3
Operating income

Segment Information
Automotive Business Unit
Net sales from the Automotive Business Unit were 3,014.5 billion yen, down by 47.9 billion yen (1.6%), and segment income
was 184.9 billion yen, down by 176.5 billion yen (48.8%), compared with the previous fiscal year. Consolidated global unit
sales decreased by 67,000 vehicles (6.3%) year on year to 1,000,000 units.

<Domestic Market>
Total automobile demand in Japan in the fiscal year under review increased by 1.2% year on year to 5,260,000 units due tofactors including continued steady sales of passenger cars and increased minicar sales compared with the previous fiscal
year. The Groupʼs unit sales in Japan decreased by 28,000 units (17.2%) year on year to 135,000 units, comprising 110,000
passenger cars (down by 23,000 or 17.2% year on year) and 26,000 minicars (down by 5,000 or 17.1% year on year). While thesales of Forester, which was fully remodeled in July 2018, grew steadily, those of Impreza, SUBARU XV, and Levorg declined.

<Overseas Market>
Total automobile demand in the U.S., which is our key market, was 17.16 million units, down by 0.9% year on year, with adecrease in passenger cars and an increase in light trucks including SUVs compared with the previous fiscal year.
The Groupʼs overseas unit sales marked a decrease of 39,000 units (4.3%) to 865,000 units. By region, sales volume
decreased by 11,000 units (1.5%) year on year to 717,000 units in North America, decreased by 8,000 units (16.1%) to 40,000
units in Europe and Russia, decreased by 14,000 units (25.0%) to 42,000 units in Australia, decreased by 4,000 units (15.2%)
to 23,000 units in China, and decreased by 2,000 units (4.3%) to 43,000 units in other regions. In North America, retail sales
remained stable, contributed to by the strong sales of the Ascent, a new model vehicle recently launched, although
shipments declined for the Forester, which had not been fully remodeled for the first half of the fiscal year under review.

Aerospace Company
Net sales from the Aerospace Company were 131.7 billion yen, down by 10.5 billion yen (7.4%), and segment income was 6.0
billion yen, down by 6.2 billion yen (50.7%), compared with the previous fiscal year. Sales of products for the Japan Ministryof Defense declined from the previous fiscal year, mainly due to the fulfillment of the contract for the test production of a
new multi-purpose helicopter for the Ground Self-Defense Force. Sales of products for the commercial sector also
decreased year on year, affected by the decrease in the production of the Boeing 777.

Other Businesses
Net sales from Other Businesses were 14.4 billion yen, down by 13.8 billion yen (49.0%), and segment income was 3.8
billion yen, down by 1.2 billion yen (24.1%), compared with the previous fiscal year.

Net Sales by Segment(Billions of yen)

ʼ15/3

ʼ16/3

ʼ17/3

Automotive

2,699.0

3,039.4

3,152.0

Aerospace

142.8

152.8

138.8

Industrial
products

29.0

̶

Other

7.1

40.0

35.3

Total

2,877.9

3,232.3

3,326.0

̶

ʼ18/3

ʼ19/3

3,062.3 3,014.5
142.2
̶

28.2

Operating Income by Segment

131.7
̶

14.4

3,232.7 3,160.5(Billions of yen)

ʼ15/3

ʼ16/3

ʼ17/3

ʼ18/3

ʼ19/3

Automotive

400.9

543.6

397.7

361.5

184.9

Aerospace

18.9

18.2

9.1

12.3

6.0

Industrial
products

0.8

̶

̶

̶

̶

Other

1.9

3.0

3.5

5.1

3.8

Corporate andelimination

0.6

0.8

0.5

0.7

0.7

423.0

565.6

410.8

379.4

195.5

Total

* Change of accounting policy effective from FYE March 2019 (deduction of sales incentives from net sales); Retroactively applied to the figures for FYE March 2018
* Following the decision in November 2016 to terminate the Industrial Products business, the said business has been included in the Other Businesses segment
since FYE March 2017. Figures for FYE March 2016 in the tables above have been restated to comply with the new segment classification

R&D Expenses
In the fiscal year under review, R&D expenses decreased by 18.4 billion yen (15.2%) compared with the previous fiscal year
to 102.7 billion yen. Of that amount, 101.1 billion yen was related to the Automotive Business Unit. In FYE March 2020, theGroup plans to raise its R&D expenditures spending by 17.3 billion yen (16.8%) year on year to 120.0 billion yen.

Annual Report 201964

Financial Review

Capital Expenditures and Depreciation Expenses
In the fiscal year under review, the Group made capital expenditures of 113.5 billion yen, a decrease of 27.9 billion yen (19.7%)
compared with the previous fiscal year. Among the total capital expenditures, 106.4 billion yen has been spent in relation to
the Automotive Business Unit. The Company made investments of 37.7 billion yen mainly for the improvement andmaintenance of production and inspection lines, production facilities for new products, R&D facilities, and sales networks.
Subaru of Indiana Automotive, Inc. (SIA), our production base in the U.S., also made investments of 36.8 billion yen, mainly
for the production facilities to handle new products and for production capacity expansion. Depreciation expenses in thefiscal year under review declined by 1.0 billion yen (1.1%) year on year to 88.8 billion yen. Capital expenditures in FYE March
2020 are projected to increase by 26.5 billion yen (23.4%) year on year to 140.0 billion yen, and depreciation expenses toincrease by 11.2 billion yen (12.6%) to 100.0 billion yen. The actual and planned figures in this section do not include, as
before, the capital expenditures and depreciation expenses related to lease transactions and intangible assets.

R&D Expenses

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

Capital expenditures
150

Depreciation expenses

200

120

121.1

114.2

90

158.5

150

102.7

102.4
83.5

141.4

135.7

113.5

110.7
100

60

89.8

77.0

65.0

64.8

88.8

50

30

0

0

’15/3

’16/3

’17/3

’19/3

’18/3

’15/3

’16/3

’17/3

’19/3

’18/3

* Accompanying a change in accounting policy effective from the FYEMarch 2019, change of depreciation method for certain tangible fixed
assets of the Company and its major domestic consolidated subsidiaries
from the declining-balance method to the straight-line method

Liquidity and Source of Funds
Financial Position
Total assets as of March 31, 2019 were 2,982.7 billion yen, an increase of 116.3 billion yen compared with the previous fiscal
year-end. While funds in hand (the sum of cash and deposits and short-term investment securities) saw a decrease of 56.3
billion yen, there were increases in non-current assets of 60.5 billion yen, merchandise and finished goods of 47.1 billion
yen, raw materials and supplies of 24.0 billion yen, work in process of 22.4 billion yen, and short-term loans receivable of
13.4 billion yen. Total liabilities amounted to 1,369.9 billion yen, up by 64.4 billion yen from the previous fiscal year-end.
Although accrued income taxes and short-term loans payable declined by 40.0 billion yen and 17.7 billion yen, respectively,Interest-Bearing Debt／D/E Ratio

Total Assets／Net Assets／
Ratio of Shareholders’ Equity to Total Assets
Net assets (Left)
Total assets (Left)
Ratio of shareholders’ equity to total assets (Right)

Interest-bearing debt (Left)(Billions of yen)

(%)

3,200

2,592.4
2,400

2,199.7
46.5

2,762.3

51.8

1,600

1,349.4

2,866.5

52.8

2,982.7

54.2

1,464.9 1,561.0

80

60

53.8
1,612.8(Billions of yen)(Times)
0.5

250

200

211.2

0.4

170.0
148.3

150

0.3

40

0.21

100

86.2

1,030.7
800

D/E ratio (Right)

20

0.13

100.4

0.10

50

0.1

0.06
0

0

’15/3

65

’16/3

Annual Report 2019

’17/3

’18/3

’19/3

0.2

0.06

0

0

’15/3

’16/3

’17/3

’18/3

’19/3

such decreases were surpassed by increases including: provision for product warranties of 58.5 billion yen, long-term debts
including current portion of 31.9 billion yen, long-term unearned revenue of 25.2 billion yen, and accrued expenses of 12.7
billion yen. The fiscal year-end balance of interest-bearing debt increased by 14.2 billion yen from the previous fiscal yearend to 100.4 billion yen. The debt/equity ratio (interest-bearing debt over shareholdersʼ equity) was 0.06, remaining at asafe level. Net assets stood at 1,612.8 billion yen, an increase of 51.8 billion yen compared with the previous fiscal year-end,
mainly due to an increase in retained earnings of 36.6 billion yen. The shareholdersʼ equity ratio resulted in 53.8%.

Cash Flows
In the fiscal year under review, net cash provided by operating activities was 174.0 billion yen. Major cash in-flow items were income
before income taxes of 195.8 billion yen, depreciation and amortization of 102.7 billion yen, increase in provision for productwarranties of 57.6 billion yen, income taxes paid of 100.3 billion yen and increase in inventories of 90.4 billion yen. Net cash used ininvesting activities was 158.3 billion yen. Major cash out-flow items included purchase of non-current assets (net of proceeds fromsales) of 138.7 billion yen. As a result, free cash flow for the fiscal year under review resulted in a cash in-flow of 15.7 billion yen. Net
cash used in financing activities totaled 96.6 billion yen. Major cash out-flow items were cash dividends paid of 110.4 billion yen
and net decrease in short-term loans payable of 17.5 billion yen. On the other hand, major cash in-flow items included proceedsfrom long-term loans payable (net of repayments) of 31.9 billion yen. As a result of the above cash flows, including the effect oftranslation adjustments, cash and cash equivalents at the end of the fiscal year under review amounted to 702.3 billion yen.

Cash Flows from Operating Activities andInvesting Activities
Cash flows from operating activities

Free Cash Flow

Cash flows from investing activities(Billions of yen)(Billions of yen)

800

400

358.6

614.3

600

300
400

345.4

311.5

366.3

200

174.0

215.6

200

138.8

0

100
-200

–172.8

-400

’15/3

–150.7–255.7–254.3

’16/3

’17/3

91.2

–158.3

15.7

0

’18/3

’19/3

’15/3

’16/3

’17/3

’18/3

’19/3

Basic Policy on Profit Distribution and Dividends
The Company regards shareholder interests as an important management priority. Our basic measure of shareholder returns
is dividend payment, and the Company applies a performance-linked approach with an emphasis on continuity, by
considering the business performance of each fiscal year, investment plans, and the business environment. In our mid-term
management vision STEP announced in July 2018, the Company has set its capital policy for three years to pay annual
dividend payment of 144 yen per share as a basis of shareholder returns, adding agile buyback (of its own stock) when cash
flow status allows. Accordingly, the Company paid an annual dividend of 144 yen per share (including an interim dividend of
72 yen per share) for the fiscal year under review, the same as the previous fiscal year. Internal reserves are allocated toinvestments for future growth, such as strengthening production and sales systems as well as research and development
activities for the purpose of offering appealing products, while bolstering the financial position.

Outlook for FYE March 2020
The consolidated performance forecast of the Group is calculated according to the International Financial ReportingStandards (IFRS), which the Company applies voluntarily from FYE March 2020. Consolidated global unit sales areprojected to be 1,058,000 vehicles in prospect of growth mainly in North America, our key market. As an aggregate
decrease in expenses and an increase in the number of unit sales are expected, the Company forecasts revenue of 3,310.0
billion yen, operating profit of 260.0 billion yen, profit before tax of 270.0 billion yen, and profit for the period attributableto owners of parent of 210.0 billion, for FYE March 2020. The exchange rate assumptions used for the full-year forecast of
consolidated business performance are ¥110 to US$1.00 and ¥120 to 1.00.

Annual Report 201966

Financial Review

Business Risks
Operational and other risks that could significantly influence the decisions of investors are set out below.
Based on information available to the Group as of the end of the consolidated fiscal year under review, the enumerated
risks include forward-looking statements, but do not encompass every possible risk posed to the Group.

(1) Economic Trends
Economic trends in countries and regions that comprise important markets for the Group could potentially impact theGroupʼs business performance. In Japan and North America, key markets for the Group, economic recession, decreasing
demand, or increasing price competition could undermine the sales and profitability of the Groupʼs products and services.

(2) Currency Exchange Rate Fluctuations

The Groupʼs ratio of overseas net sales stood at 81.1%. The Groupʼs 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 account settlement, the Groupʼs 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 circumstance-appropriate risk hedges to minimize theGroupʼs sensitivity to such currency exchange risks. However, the effect of severe fluctuations in currency exchange rates atthe end of the fiscal year could result in a loss on valuation of derivatives and have a major impact on non-operating
expenses.

(3) Dependence on Certain Businesses
The Group is mainly comprised of the Automotive Business Unit and Aerospace Company. However, the Automotive
Business Unit accounts for the overwhelming majority of the Groupʼs business operations. Accordingly, in the event that
automobile-related demand, market conditions, price competition with other automakers, or other factors exceed
projected levels, the entire Groupʼs overall business performance and financial position could be significantly affected.

(4) Changes in Market Appraisal
The Group develops, manufactures, and releases new products based on appropriate timing and pricing in line withproduct planning that reflects market demand and customer needs. Such actions are the most important factors inmaintaining stable increases in Group business performance. In the event that market appraisals of new model vehicles
and other new products do not meet sales plan expectations, or that the obsolescence rate of current products exceeds
forecasts, the Groupʼs business performance and financial position could be significantly affected.

(5) Dependence on Specific Suppliers, Raw Materials, and Components
The Group procures raw materials, components, and other items from numerous suppliers. However, there are cases inwhich the Group relies on certain items and/or a limited number of suppliers. Due to tightening supply and demand orother factors, the inability to procure supplies in a manner that ensures stable costs, delivery dates and quality could
seriously impact the Groupʼs business performance and financial position.

(6) Protection of Intellectual Property
The Group is strongly committed to protecting its intellectual property in areas, such as technologies and expertise, that
ensure product differentiation. However, in cases where a third party makes unauthorized use of the Groupʼs intellectual
property to manufacture similar products and in cases where a dispute relating to intellectual property arises and a decision
disadvantageous to the Company is made, the Groupʼs business results and financial condition may be significantly
affected.

(7) Product Defects
The Group places the highest priority on the safety of the products it develops, manufactures, and sells. However,completely avoiding defects and recalls, etc. regarding all products and services is impossible. The substantial cost,damage to our brand image, etc. associated with a major recall could significantly affect the Groupʼs business performanceand financial position.

67

Annual Report 2019

(8) Retirement Benefit Obligations

The Groupʼs employee retirement benefit costs and obligations are calculated based on the following assumptions:retirement benefit obligation discount rates and the expected long-term rate of return on pension assets, both of which
are established based on mathematical calculations. However, in the event that actual performance differs from theassumptions, the Groupʼs business performance and financial position could be affected over the long term.

(9) Environmental and Other Legal Regulations
The Group is subject to various domestic and overseas legal regulations in relation to automobile fuel efficiency, exhaustemissions, energy conservation, noise, recycling, the level of pollutants emitted from manufacturing facilities, and thesafety of automobiles and other products. The Groupʼs business performance and financial position could be affected bycost increases due to future tightening of such regulations.

(10) Impact of Natural Disasters, War, Terror, Strikes, and Other Events
The occurrence of natural disasters such as major earthquakes, typhoons, etc., and diseases, wars, terrorist attacks, or otherevents, could impede the Groupʼs business activities as well as delay or suspend raw material/component purchases,
production, product sales/transport, and the provision of services. The Groupʼs business performance and financial position
could be affected in the event that such delays or suspensions are prolonged.

(11) International Business Activities
Though the Group focuses on the U.S., it does business in countries around the world. Business activities in overseas
markets entail the following types of risk. If any of these risks materializes, the Groupʼs business performance and financial
position could be adversely affected.
• Unfavorable political or economic factors• Difficulties arising from changes in laws or regulations• Revisions to taxes, tariffs, or other taxation systems• Difficulties in hiring and retaining personnel(12) Impact of Information Security
The Group uses various kinds of information technology, networks, and systems in product development, production,
sales, and other business activities. Although safety measures have been implemented with respect to information
technology, networks, and systems, interruption of important work or services, data corruption or loss, leaks of confidential
information, or other problems could occur due to cyberattacks, hacking, computer virus attacks, or the like. This could
damage the brand image or adversely affect the Groupʼs business performance and financial position.

(13) Compliance and Reputation
The Group considers rigorous compliance one of the most important management priorities and strives to avoid or
minimize compliance risks through compliance with all laws, ordinances, and internal regulations required in corporate
activities and the execution of fair and equitable corporate activities in conformity with social norms. Nevertheless, theoccurrence of a material legal violation could have a significant impact on the Group and adversely affect the Groupʼsbusiness performance and financial position due to loss of customer confidence and trust, or damage to the Groupʼsreputation in society.

Annual Report 201968

Corporate Information
Domestic Facilities
Name

Location

Land Area(Thousand m2)

Building Area
(Thousand m2)

Number of
Employees(Persons)

Main Products

Head Office (Ebisu)

Tokyo

4

14

656

̶

SUBARU Training Facility(SUBARU Academy)

Tokyo

10

13

33

̶

173

150

̶

79

1,664

̶

332

4,521

LEVORG, IMPREZA,
SUBARU XV, WRX, and
SUBARU BRZHead Office
Other

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

Tokyo Office

Automotive
Business Unit

Aerospace
Company

Gunma
Plant

Gunma

Tokyo

158
635

Gunma Main Plant

Gunma

Gunma Yajima Plant

Gunma

550

327

3,136

LEGACY, OUTBACK,IMPREZA, SUBARU XV, and
FORESTER

Gunma Oizumi Plant

Gunma

304

238

2,797

Automobile engines andtransmissions［14］

Gunma Ota North Plant

Gunma

44

25

0

̶

SUBARU
R&E Center (Sano)

Tochigi

1,081

25

171

̶

SUBARU
R&E Center (Bifuka)

Hokkaido

3,614

0

0

̶

Utsunomiya Plant

Tochigi

572

228

1,822

Aircraft

Handa Plant

Aichi

59

31

282

Aircraft

Handa West Plant

Aichi

51

13

42

Aircraft

7,653

1,498

15,274626

0Subtotal (1)The site of airport

Gunma

Utsunomiya airstrip

Tochigi

105

0

̶

220

98

Welfare facility
Other

571

［12］

Lease to affiliates

Aichi

37

8

Isesaki business office

Gunma

184

66

Eco Utsunomiya factory

Tochigi

61

Saitama Plant

Saitama

143

72

Subtotal (2)

1,321

245

Total (1)+(2)

8,974

1,743

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

69

Annual Report 2019

Main Subsidiaries (Domestic)(As of April 1, 2019)(Number of employees: as of March 31, 2019)

Established

Location

CapitalEquityRepresenta(Millions of Interest*
tive
yen)
(%)

Number of
Employees(Persons)

FYE March 2019
Net sales(Millions of yen)

Fuji Machinery Co., Ltd.

1950. 7. 18

Gunma

Tamaki
Kamogawa

480

100.0

455

40,401

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

Ichitan Co., Ltd.

1951. 2. 2

Gunma

Satoshi
Maeda

480

100.0

231

18,330

Manufacture and sales of forging parts ofautomobile and industrial machinery

KIRYU INDUSTRY Co., Ltd.

1960.12. 23

Gunma

ToshiakiTamegai

400

97.7

276

10,993

Manufacture of specially-equipped SUBARU
automobiles, engines, sheet metal repair partsand remanufacture of transmissions

Subaru Tecnica International
Inc.

1988. 4. 2

Tokyo

Yasuo
Hiraoka

250

100.0

100

5,203

Management of motor sports activities, sales ofmotor sports parts and merchandise, technicaldevelopment, R&D support, and automobile
maintenance

Subaru Used cars Sales &Marketing Co., Ltd.

1988. 4. 2 Kanagawa

Masahiro
Maeda

100

100.0

20

3,045

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

Subaru Auto Accessories Ltd.

1987. 3. 9

SaitamaToshioMasuda

70

100.0

72

13,058

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

Subaru Logistics Co., Ltd.

1986. 3. 27

Gunma

MasakiOkawara

96

100.0

365

23,204

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

H. B. C. Co., Ltd.

1983. 8. 29 Kanagawa

Kei
Ono

490

68.0

9

781

Subaru Finance Co., Ltd.

1988. 7. 1

Tokyo

Mitsuru
Takahashi

2,000

100.0

221

23,080

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

SUBARU TECHNO
CORPORATION

1985. 3. 2

Tokyo

Tatsuhiko
Mukawa

70

100.0

904

8,600

Design, plan, research, experiment, examinationand compile technical material of automobile,
aircraft, general-purpose engine andenvironmental tool

Subaru Intelligent Service Ltd.

2005. 3. 1

Tokyo

Yoshinori
Saito

40

75.0

57

2,775

Development of technical service documents
including service manuals and owners manuals

Yusoki Kogyo K. K.

1950. 7. 15

Aichi

Eiji
Tanikawa

100

100.0

132

1,977

Manufacture and sales of aircraft parts

Fuji Aircraft MaintenanceCo., Ltd.

1988.10. 31

Tokyo

Takayuki
Kobayashi

30

100.0

179

1,427

Inspection, service and maintenance of
aircraft and onboard equipment

Fuji Aerospace Corporation

1991. 6. 14

Tochigi

Yasuhiro
Hamanaka

30

100.0

142

1,527

Processing and assembly of aircraft parts

Fuji Aerospace Technology
Co., Ltd.

1994. 4. 1

Tochigi

TBD

20

100.0

103

2,583

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

Fuji Heavy Industries House
Co., Ltd.

1999. 9. 1

Gunma

Kazuo
Terauchi

200

87.2

39

2,455

Rental/lease/sales of temporary houses,
transport and set up of temporary houses,
deal of used houses

Subaru Kohsan Co., Ltd.

1977. 2. 2

Tokyo

Yasuo
Kosakai

675

100.0

76

6,828

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

SUBARU IT CREATIONSCORPORATION

1993. 4. 1

SaitamaNozomu
Oyama

100

100.0

279

17,537Development, maintenance and operation of
information systems and related consulting
services; sales and leasing of informationequipment

Subaru Living Service
Co., Ltd.

1988. 4. 2

Tokyo

Masami
Iida

20

100.0

365

17,780

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

Name

Operations

Storing and shipping of automobiles forinternational sales*Shareholdings of SUBARU Corporation

Annual Report 201970

Corporate Information

Main Subsidiaries (Overseas)
Region(As of April 1, 2019)(Number of employees: as of March 31, 2019)

Representative

EquityInterest (%)

Number of
Employees(Persons)

Thomas J.
Doll

100

1,365

Sales of SUBARU vehicles andsupplies

5500 State Road 38 East, Lafayette,
IN 47905, U.S.A.

Eiji
Ogino

100

6,015

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

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

MakotoIkemura100

73

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

Tetsuo
Onuki

100

83

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

Name

Established

Address

Subaru of America, Inc.

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

Subaru of Indiana
Automotive, Inc.

1987.3

North American Subaru,
Inc.

1985.9Operations

3995 Research Park Drive, Ann Arbor,
MI 48108, U.S.A.

North
America6431 Global Drive Cypress,
CA 90630, U.S.A.
Subaru Research &Development, Inc.

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

EuropeSubaru Canada, Inc.

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

Yasushi
Enami

100

152

Sales of SUBARU vehicles andsupplies

Subaru Europe N.V./S.A.

2002.3

Leuvensesteenweg 555 B/8,
1930 Zaventem, Belgium

Takeshi
Kubota100

45

Sales of SUBARU vehicles andsupplies

Subaru Italia S.p.A.

1985.7

Via Montefeltro, 6/A,
20156 Milano, Italy

Kunichika
Koshimizu

100

52

Sales of SUBARU vehicles andsupplies

N.V. Subaru Benelux

1974.3

Leuvensesteenweg 555 B/1,
1930 Zaventem, Belgium

Shunsuke
Sawada100

35

Sales of SUBARU vehicles andsupplies

Subaru Vehicle
Distribution B.V.

2001.5Merseyweg 40, 3197 KG Botlek,
Netherlands

Shunsuke
Sawada50

1

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

Subaru of China Ltd.

2006.3Beijing Landmark Towers Office
Building 2-1501, 8 North Dongsanhuan
Road, Chaoyang District, Beijing
100004, China

HiroakiTakahashi

60

197

Sales of SUBARU vehicles
and supplies

Subaru Technology
Beijing. Co., Ltd.

2013.6

Beijing Landmark Towers Office
Building 1-802, 8 North Dongsanhuan
Road, Chaoyang District, Beijing
100004, China

HisatoImamura100

42

Authentication, research anddevelopment of SUBARU vehicles in
Chinese market

Asia

71

Annual Report 2019

Sales Agents (Domestic)
Area

Group

(As of April 1, 2019)
Head○

Hokkaido
Tohoku area (9)Tohoku region○

Hoku Shinetsu
regionKanto
Hokushinetsu area (12)Agent

Subsidiary

Tokai region

Chubu
Kinki area (11)○Kinki region○

Chugoku/
Shikoku region

Chugoku Shikoku
Kyushu area (12)○Kyushu region

Total

6

New Car Base1

Hokkaido

Hiroshi Uehara

Obihiro Subaru Inc.

Hokkaido

Takashi Ishihara

1

Hokkaido

Tomoo Takenaka

20
11

Hokkaido Subaru Inc.

○

Miyagi Subaru Inc.

○

Miyagi

Makoto Hada

Aomori Subaru Inc.

○

Aomori

Kenichi Kobayashi

6

Iwate Subaru Inc.

○

Iwate

Yasuo Watanabe

9

Akita Subaru Inc.

○

Akita

Takaharu Mitsui

6

Yamagata Subaru Inc.

○

Yamagata

Toshiki Sugihara

5

Fukushima Subaru Inc.

○

Fukushima

Ryoichi Uchida

11

Niigata Subaru Inc.

○

Niigata

Tatsuya Yamano

11

Subaru Shinshu Inc.

○

NaganoKinya Abe10

Hokuriku Subaru Inc.

○

Ishikawa

Shiro Ohta

12

Nanshin Subaru Inc.

NaganoHirotada Shibata

1

Fuji Subaru Inc.

Gunma

Wataru Miyata

17

Tochigi Subaru Inc.

Tochigi

Kazumasa Kodaira

12

Ibaraki Subaru Inc.

IbarakiNaoki Otsuki

10

Saitama

Hiroshi Yoshizawa

16

Kanagawa Subaru Inc.

○

Kanagawa

Katsuhisa Iiyama

26

Chiba Subaru Inc.

○

Chiba

Tsuguto Nakamura

20

Tokyo Subaru Inc.

○

Tokyo

Hiroki Kurihara

32

Yamanashi Subaru Inc.

○

Yamanashi

Hirohiko Kumada

3

Shizuoka Subaru Inc.
○

President

Kushiro Subaru Inc.

Saitama Subaru Inc.

Tokyo/Yamanashi

Location

Shizuoka

Shinichi Ishida

12

Nagoya Subaru Inc.

○

Aichi

Takumi Ogasawara

21

Gifu Subaru Inc.

○

Gifu

Koichi Numa

9

Mie Subaru Inc.

○

Mie

Masato Yachida

7

Subaru Higashi Aichi Inc.

Aichi

Yasuo Nishikawa

3

Fukui Minami Subaru Inc.

Fukui

Satoshi Okada

1

Nara Subaru Inc.

Nara

Shinichi Takagi

5Osaka Subaru Inc.

○

Osaka

Motoya Yamamoto

26

Kyoto Subaru Inc.

○

Kyoto

Tetsuo Inoue

8

Shiga Subaru Inc.

○

Shiga

Tomio Sogou

7
18

Hyogo Subaru Inc.

○

Hyogo

Masamichi Kudo

Hiroshima Subaru Inc.

○

Hiroshima

Ken Fukuda

9

Sanin Subaru Inc.

○

TottoriNobuhiro Mori

7

Okayama Subaru Inc.

○

Okayama

Sadayuki Hata

7

Yamaguchi Subaru Inc.

○

Yamaguchi

Wataru Ishihara

7

Higashi Shikoku Subaru Inc.

○

KagawaHiromi Fujita

8

Shikoku Subaru Inc.

○

Ehime

Tsukasa Morita

7

Fukuoka Subaru Inc.

○

Fukuoka

Kazuto Sakamoto

16

Nishi Kyushu Subaru Inc.

○

Nagasaki

Makoto Kimura

7

Kumamoto Subaru Inc.

○

Kumamoto

Tetsuya Matsumoto

8

Oita Subaru Inc.

○

Oita

Eiji Akamine

5

Minami Kyushu Subaru Inc.

○

Kagoshima

Kenichi Hasegawa

10Okinawa Subaru Inc.

○

Okinawa

Koichi Okazaki

3

33

̶

̶

451

44

Annual Report 201972

Corporate Information

Distributors (Overseas)
RegionMarketCompany

Location

Number of
Dealers

SUBARU
Ownership

North
America

U.S.

Subaru of America, Inc.

Camden, NJ, U.S.A.

632

100%

CanadaSubaru Canada, Inc.

Mississauga, Ontario, Canada

93

100%

Total

2 countries̶̶

EuropeGermany

SUBARU DEUTSCHLAND GMBH

Friedberg, Germany

163

29%

Switzerland

SUBARU SCHWEIZ AG

Safenwil, Switzerland

141

0%

Subaru Nordic AB

Arlöv, Sweden

130

0%

̶

̶

SwedenTotal

32 countries

IsraelCIS, the Middle
East, and Africa

Total

Oceania
Total

Japanauto-Israel Auto Corporation Ltd.

Petah Tikva, Israel

130%

RussiaSUBARU MOTOR (RUSSIA) LLC

Moscow, Russia

49

33%

Egypt

ABOU GHALY MOTORSCairo, Arab Republic of Egypt

31

0%

̶

̶

16 countries

Australia

Subaru (Aust) Pty Ltd.

Sydney, Australia

119

8%

New Zealand

Subaru of New Zealand

Auckland, New Zealand

16

0%

̶

̶

8 countries

Chile
Latin
America

Inchcape Automtriz Chile S.A.

Santiago, Chile

29

0%

Peru

Inchcape Latam Perù S.A.

Lima, Peru

110%

Mexico

SGM Automotoriz de México S.A. de C.V.

Mexico, D.F., Mexico

13

0%

̶

̶

Total

24 countries

TaiwanSubaru of Taiwan Co.,Ltd.

Taoyuan City, Taiwan

24

35%

Asia

Philippines

Motor Image Philipinas, Inc.

Pasig City, Metro Manila, Philippines

18

0%Singapore

Motor Image Enterprises Pte Ltd

Singapore

2

0%

̶

̶

170

60%

̶

̶

Total

10 countries

Total

1 country

China

73

(As of April 1 2019)(Dealer numbers: as of December 31, 2018)

Annual Report 2019

Subaru of China Ltd.

Beijing, China

Global Network
Main Overseas Business Sites

4
2
5 6
1 3

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

9 11
10

1

7 8

7

Subaru of America, Inc.

2

Subaru Italia S.p.A.

8North American Subaru, Inc.

3

N.V. Subaru Benelux

9

Subaru Research & Development, Inc.

4

Subaru Vehicle Distribution B.V.

10 Subaru of Indiana Automotive, Inc.

5

Subaru of China Ltd.

6

Subaru Technology Beijing. Co., Ltd.

Production Models:

Legacy, Outback, Impreza, and Ascent
11 Subaru Canada, Inc.

Main Domestic Business Sites
Automotive Business Unit
Gunma Plant
Plant

Production Models

Main Plant

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

Aerospace Company

Yajima Plant

Legacy, Outback, Impreza,
SUBARU XV, and Forester

Utsunomiya Plant

Oizumi Plant

Automobile engines andtransmissions

Aerospace Company
Handa Plant
Handa West Plant

1

Head Office

Tokyo Office

Annual Report 201974

Corporate Information

Corporate Data (As of March 31, 2019)
Company Name

SUBARU CORPORATION

Established

July 15, 1953

The manufacture, sale, and repair ofpassenger cars and their components

Paid-In Capital¥153,795 million

Aerospace:

Fiscal Year-End

March 31

Accounting Auditors

KPMG AZSA LLC

Main Businesses

Automotive:

The manufacture, sale, and repair of
airplanes, aerospace-related machinery,
and their components
Number of Affiliates

78 consolidated subsidiaries and
10 equity-method affiliated companies

Number of Employees

15,274 (consolidated: 34,200)(excluding executive officers, advisors and dispatches)

Website Addresses

Corporate website:

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

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

Stock Information (As of March 31, 2019)
Common Stock Authorized

1,500,000,000 shares

Breakdown of Shareholders

Common Stock Issued

769,175,873 shares

Securities companies

Number of Shareholders

140,393

Number of Shares per
Trading Unit

100 shares

Stock Exchange Listing

Tokyo Stock Exchange

12.1%

Securities Code

7270

Transfer Agent

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

38,657,000 shares

5.0%

Treasury stock

Individuals and others

0.3%

2,014,000 shares

93,384,000 shares

Financial institutions
248,327,000 shares

32.3%

155,422,000 shares

Foreign institutions
and others

20.2%

231,368,000 shares

30.1%

Major Shareholders
Name

Toyota Motor Corporation
The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
BNYM TREATY DTT 15
Japan Trustee Services Bank, Ltd. (Trust account 5)
Japan Trustee Services Bank, Ltd. (Trust account 4)
Mizuho Bank, Ltd.
MIZUHO SECURITIES ASIA LIMITED-CLIENT A/C
Sompo Japan Nipponkoa Insurance Inc.
STATE STREET BANK WEST CLIENT-TREATY 505234

Number of Shares Held(in thousands)

Percentage of Total
Shares Held

129,000
58,09040,85524,933
12,183
10,974
10,07810,062
9,726
9,535

16.82%
7.57%
5.33%
3.25%
1.59%
1.43%
1.31%
1.31%
1.27%
1.24%

*Number of shares held are rounded down to the nearest thousand shares*The percentage of total shares held is calculated based on the number of shares excluding treasury stock of 2,014,841 sharesContact for Inquiries:
Investor Relations Dept., SUBARU CORPORATION
Address: Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku,
Tokyo 150-8554, Japan
Telephone: +81-3-6447-8000 (switchboard)

75

Annual Report 2019

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

Consolidated Balance Sheets

111.01SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2019 and 2018ASSETS
Current assets:
Cash and deposits (Note 4 and 5)
Notes and accounts receivable-trade (Note 5)
Lease investment assets (Note 5 and 18)
Short-term investment securities (Notes 4, 5 and 6)
Merchandise and finished goods
Work in process
Raw materials and supplies
Short-term loans receivable (Note 5)
Other current assets
Allowance for doubtful accounts
Total current assets

2019

2018

Thousands of
U.S. dollars(Note 1)
2019

¥831,700
148,832
14,731
119,963249,558
74,711
66,431
198,737
121,903(347)
1,826,219¥765,397
155,247
17,120242,573
202,435
52,30742,448185,364
107,893(340)
1,770,444$7,492,118
1,340,708
132,700
1,080,650
2,248,068
673,011598,424
1,790,262
1,098,126(3,126)
16,450,941

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

1,740,853(998,902)(24,557)
717,394

1,698,491(968,876)(26,507)703,108

15,681,948(8,998,306)(221,215)
6,462,427

33,754
115,811
10,971
151,019
130,803(3,246)28,293106,964
9,817
82
139,171
111,957(3,362)304,063
1,043,248
98,8291,360,409
1,178,300(29,241)

Millions of yen

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

439,112392,922

3,955,608¥2,982,725¥2,866,474$26,868,976

Thousands ofMillions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable-trade (Note 5)
Electronically recorded obligations-operating (Note 5)
Short-term loans payable (Note 5 and 7)
Current portion of long-term debts (Note 5 and 7)
Accrued income taxes (Note 5 and 12)
Accrued expenses (Note 5)
Provision for bonuses
Provision for product warranties
Provision for loss on business liquidation
Other current liabilities (Note 5, 7 and 12)
Total current liabilities
Long-term liabilities:
Long-term debts (Note 5 and 7)
Net defined benefit liability(Note 11)
Deferred tax liabilities (Note 12)
Provision for product warranties
Long-term unearned revenue
Other long-term liabilities (Note 7)
Total long-term liabilities
Contingent liabilities (Note 20)
Net assets: (Note 13)
Shareholders' equity:
Capital stock
Authorized—
1,500,000,000 shares
Issued —769,175,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2019—
2,414,841 shares
2018—
2,455,039 shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Remeasurements of other postretirement benefits of foreign consolidated subsidiaries
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

2019

2018

U.S. dollars(Note 1)
2019

¥315,026
63,772
4,352
7,592
5,367
161,661
22,650256,814
1,575
173,362
1,012,171¥320,137
64,86322,082
42,98245,372
148,945
24,131
206,423
3,098
172,973
1,051,006$2,837,816
574,471
39,204
68,39048,347
1,456,274
204,036
2,313,431
14,188
1,561,679
9,117,836

88,452
22,9005,040
43,934
157,446
39,957357,729

21,13819,3372,466
35,801
132,270
43,433
254,445796,793
206,288
45,401
395,766
1,418,305
359,942
3,222,495

153,795
160,192
1,320,177(6,910)153,795
160,197
1,283,539(7,054)

1,385,416
1,443,041
11,892,415(62,247)

1,627,254

1,590,477

14,658,625

6,131(20,687)(10,631)3,224(21,963)7,534
1,612,825

7,038(36,193)(10,136)
1,658(37,633)
8,179
1,561,023

55,229(186,353) 純資(95,766) ←29,042(197,848)
67,868
14,528,645¥2,982,725¥2,866,474$26,868,976

Consolidated Statements of Income

111.01SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 20182019
¥3,160,514
2,561,753
598,761
403,232
195,5292018¥3,232,695
2,442,706
789,989
410,542
379,447

Thousands of
U.S. dollars(Note 1)
2019
$28,470,534
23,076,777
5,393,757
3,632,393
1,761,364

13,594(732)
377(2,532)(199)(6,993)(4,336)
3,659(1,287)1,294(2,536)309
195,838

8,186(1,379)778(7,395)
2,266(4,837)4,618(1,025)(81,261)(2,058)(82,107)297,340

122,457(6,594)
3,396(22,809)(1,793)(62,994)(39,060)
32,961(11,594)
11,657(22,845)
2,782
1,764,146

56,942(8,443)48,499147,339

113,155(37,554)
75,601
221,739

512,945(76,056)
436,889
1,327,257

(473)

1,385

(4,261)¥147,812¥220,354$1,331,518

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
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Plant shutsdown related costs
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets
Gain on sales of investment securities (Note 6)
Depreciation
Gain on sales of business
Loss on related to airbags
Other, net
Income before income taxes
Income taxes (Note 12):Current
Deferred
Net income
Net income (loss) attributable to non-controlling Interests
Net income attributable to owners of the parent

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

Yen

U.S. dollars(Note 1)¥287.40
2,025.31¥144.00

$1.74
18.86
$1.30

2019
¥147,339

Millions of yen
2018¥221,739

Thousands of
U.S. dollars(Note 1)2019
$1,327,259(907)
15,520
(495)
1,566
(186)
15,498(1,061)(18,985)
860
3,543
(54)
(15,697)(8,170)139,807(4,459)14,107(1,676)
139,609¥162,837¥206,042$1,466,868

163,482(¥645)

204,449¥1,593

1,472,678($5,810)¥192.78
2,093.60¥144.00*For the year ended March 31, 2019 and 2018 diluted information is not presented because potentially dilutive securities do not exist.

Consolidated Statements of Comprehensive Income(loss)
SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 2018

Net Income
Other comprehensive income(loss) (Note 3)
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Remeasurements of other postretirement benefits of foreign consolidated subsidiaries
Share of other comprehensive income (loss) of associates accounted for using equity method
Total other comprehensive income(loss)
Comprehensive income(loss)
Comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests

Consolidated Statements of Changes in Net Assets

111.01SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2019 and 2018

Shareholders' equity
Capital stock
Balance at the beginning of current period
Balance at the end of current period
Capital surplus
Balance at the beginning of current period
Changes of items during the period
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income attributable to owners of the parent
Adjustments due to change in fiscal year end of consolidated subsidiaries
Change of the scope of consolidation
Change of scope of equity method
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 attributable to owners of the parent
Purchase of treasury stock
Disposal of treasury stock
Adjustments due to change in fiscal year end of consolidated subsidiaries
Change of the scope of consolidation
Change of scope of equity method
Other
Total changes of items during the period
Balance at the end of current period

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

¥153,795
153,795¥153,795
153,795$1,385,416
1,385,416

160,197

160,178

1,443,086(5)(5)
160,19219
19
160,197(45)(45)
1,443,041

1,283,539

1,173,277

11,562,373(110,468)
147,812158(864)
36,638
1,320,177(110,463)
220,354
828
(355)
922
(1,024)110,262
1,283,539(995,118)
1,331,520
1,423(7,783)330,042
11,892,415(7,054)(7,173)(63,544)

(5)
149
144
(6,910)

(11)
130
119
(7,054)

(45)
1,342
1,297
(62,247)

1,590,477

1,480,077

14,327,331(110,468)
147,812
(5)
144
158
(864)
36,777¥1,627,254(110,463)
220,354
(11)
149
828
(355)
922
(1,024)110,400¥1,590,477(995,118)
1,331,520
(45)
1,297
1,423
(7,783)331,294$14,658,625

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Remeasurements of defined benefit plans
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Remeasurements of other postretirement benefitsof foreign consolidated subsidiaries
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total accumulated other comprehensive income
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Non-controlling 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 attributable to owners of the parent
Purchase of treasury stock
Disposal of treasury stock
Adjustments due to change in fiscal year end of consolidated subsidiaries
Change of scope of consolidation
Change of scope of equity method
Other
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
The accompanying notes are an integral part of these statements.

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

¥7,038¥8,099$63,400

(907)
(907)
6,131

(1,061)(1,061)
7,038(8,171)(8,171)
55,229(36,193)(16,631)(326,034)

15,506
15,506(20,687)(19,562)(19,562)(36,193)

139,681
139,681(186,353)(10,136)(10,996)(91,307)

(495)
(495)
(10,631)860
860(10,136)(4,459)(4,459)(95,765)

1,658(1,885)

14,936

1,566
1,566
3,224

3,543
3,543
1,658

14,106
14,106
29,042(37,633)(21,413)(339,004)

15,67015,670(21,963)(16,220)(16,220)(37,633)

141,157
141,157(197,848)

8,179

6,224

73,677

(645)
(645)
7,534

1,955
1,955
8,179

(5,809)(5,809)67,868

1,561,023

1,464,888

14,062,004(110,468)
147,812
(5)
144
158
(864)
15,02551,802¥1,612,825(110,463)
220,354
(11)
149
828
(355)
922
(1,024)(14,265)
96,135¥1,561,023(995,118)
1,331,520
(45)
1,297
1,423
(7,783)
135,348466,642$14,528,645

Consolidated Statements of Cash Flows

111.01SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019 and 2018

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

Sub-totalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities¥195,838
102,749(109)
57,585(13,594)732
4,336(3,152)(8,179)6,048(90,354)(8,825)8,506
9,801
261,382
13,717(798)(100,295)
174,006¥297,340
102,102(149)
103,651(8,186)
1,379
4,837(4,096)(7,799)40(15,922)(54,159)
13,894
7,660
440,592
8,397(1,446)(81,245)366,298$1,764,147
925,583(982)
518,737(122,457)
6,594
39,060(28,394)(73,678)
54,482(813,927)(79,497)
76,62488,2892,354,581
123,565(7,189)(903,477)
1,567,480

Net cash provided by (used in) investing activities
Net decrease (increase) in time deposits
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of non-current assets
Proceeds from sales of non-current 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

14,028(131,019)
120,940(144,164)
5,469(54,531)
36,549(129,286)
126,753(3,066)(158,327)(7,219)(143,418)
168,525(149,897)
3,413(52,645)
34,272(123,552)
120,383(573)(150,711)

126,367(1,180,245)
1,089,451(1,298,658)
49,266(491,226)
329,241(1,164,634)
1,141,816(27,619)(1,426,241)(17,482)
75,300(43,382)(5)(110,384)(664)(96,617)
17,675(63,263)(18,393)3,500(44,443)(11)(110,326)(1,264)(170,937)(10,831)
33,819(157,481)
678,317(390,794)(45)(994,361)(5,981)(870,345)
159,220(569,886)

765,591

728,616

6,896,595

-

(534)

-

¥702,328

3,690¥765,591$6,326,709

Net cash provided by (used in) operating activities
Income (loss) before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for product warranties
Interest and dividends income
Interest expenses
Loss (gain) on sales and retirement of noncurrent assets
Loss (gain) on sales and valuation of investment securities
Decrease (increase) in operating loans receivable
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in accrued expenses
Other, net

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchase of treasury shares
Cash dividends paid
Other, net
Other,net
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Increase (decrease) in cash and cash equivalents resulting
from change in fiscal period of consolidated subsidiaries
Cash and cash equivalents at end of the period
The accompanying notes are an integral part of these statements.

Notes to Consolidated Financial Statements
SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of SUBARU CORPORATION (the "Company") havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan ("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English
from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP
and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the Financial
Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars in the accompanying consolidated financial
statements are included solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2019, which was ¥111.01 to U.S. $1. The convenience translation should not be construed
as a representation that the Japanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
We are planning to voluntarily adopt International Financial Reporting Standards (IFRS) to the Group's
consolidated financial statements from the fiscal year ending March 31, 2020, instead of the Japanese GAAP
currently adopted.

2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its majority
owned subsidiaries. All significant intercompany transactions and balances have been eliminated inconsolidation. The fiscal year-end of consolidated subsidiaries is the same as that of the parent company.
The consolidated financial statements include the accounts of the Company and 78 and 75subsidiaries infiscal years ended March 31, 2019 and 2018, respectively.
In addition, 10 and 8 affiliated companies were accounted for by the equity method in fiscal year ended
March 31, 2019, and 2018, respectively.
Investments in insignificant non-consolidated subsidiaries and affiliated companies not accounted for by theequity method are carried at cost.
[2] Short-Term Investment Securities and Investment Securities
Under the Japanese GAAP for financial instruments, available-for-sale securities for which fair values areavailable 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 notreadily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the balance sheet is measured based on the lower of cost or market value.)1[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally calculated by the straight-line method.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is calculated by thestraight-line method over the estimated useful lives of the assets.
Estimated useful lives for depreciable assets are as follows:
Buildings and structures: 7–50 years
Machinery, equipment and vehicles: 2–20 years[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 3 or 5 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 is zero.
[7] Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on the amount calculated from the historical ratio of bad
debt for ordinary receivables, and estimated amounts of uncollectible accounts for specific overdue
receivables.
[8] Provision for Bonuses
Employees' bonuses are recognized as expenses for the period in which those are incurred.
[9] Provision for Product Warranties
The Company recognizes provisions for product warranties to cover future claim costs for products sold at the
total amount of the following;
1. Estimated cost calculated based on historical warranty claim experience with consideration given to the
expected level of future warranty costs, according to the terms and conditions of the warranties.
2. Estimated recall related costs in accordance with notifications to the competent authority.
[10] Provision for Loss on business liquidation
The provision for losses on business liquidation is provided due to important business liquidation.
[11] Accounting method for Retirement Benefits
Net defined benefit liability (assets) for employees is provided based on the estimated amounts of projectedpension and severance obligation and the fair value of plan assets at the end of the fiscal year. In determining
retirement benefit obligations, the straight-line basis is used for attributing expected benefit to periods.
Unrecognized prior service cost is being amortized on the straight-line method over a period (10-18 years)
that is shorter than the average remaining service period of the eligible employees. Unrecognized net
2

actuarial gain or loss is amortized from the following fiscal year on the straight-line method over a period(primarily 16 years) that is shorter than the average remaining service period of the eligible employees.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined, based on the Company’s and its consolidated subsidiaries’internal rules are included in "Other long-term liabilities" in the accompanying consolidated balance sheets.
[12] Translation of Foreign Currency-Denominated Accounts
Under the Japanese GAAP for foreign currency translation, monetary assets and liabilities denominated inforeign currencies are translated into Japanese yen at the exchange rates prevailing at each balance 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"Non-controlling interests" in the net assets section of the accompanying consolidated balance sheets.
[13] Revenue Recognition
The percentage-of-completion method is applied to revenue from construction contracts of Aerospace
division productions where certain elements are determinable with certainty at the end of fiscal year. (Thepercentage of completion is estimated using the proportion-of-cost method). The completed-contract method
is applied to other works.
[14] Accounting for Lease Transactions
Sales and corresponding cost of sales under finance lease transactions conducted by certain domestic
consolidated subsidiaries are recognized on the effective date of each lease contract.
[15] Derivative Financial Instruments
The Japanese GAAP 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 fair value asa gain or loss.
[16] Goodwill
Goodwill is principally amortized by the straight-line method over 5 years.
[17] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or lessthat are readily convertible to known amounts of cash and have negligible risk of changes in value due to theirshort maturities.
[18] Income Taxes
The provision for income taxes is computed based on the pretax income for financial reporting purposes.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
[19] Research and Development Expenses
3

Research and development costs are expensed as incurred and amounted to 102,719 million yen(US$ 925,313 thousand) and 121,804 million yen for fiscal years ended March 31, 2019 and 2018,
respectively.
[20] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that occurs if all the convertible
securities are converted or other contracts to issue common stock are exercised to the extent that they are
not anti-dilutive.
[21] Changes in Accounting Policy(Changes in accounting method for sales)
The Group previously recorded sales incentives as selling, general and administrative expenses. From
the fiscal year ended March 31, 2019, the group has changed the method to deduct from sales.
In the business environment surrounding the Group, as sales incentives tend to increase constantly,
we reexamined the actual circumstances of the transactions. Sales incentives are taken into
consideration when the terms of the transactions are decided and are considered as a part of selling
price practically. In addition, the Group has improved business management system such as businessprocess and system structure. It is so judged that the method of deducting sales incentives from sales ismore appropriate under the circumstances.
The Group applied the changes in the accounting policy retrospectively, and reclassified in the
consolidated financial statements of the previous fiscal year to reflect the changes. As a result, net sales
and selling, general and administrative expenses in the consolidated statement of income for the
consolidated previous fiscal year decreased by 172,526 million yen (US$ 1,554,148 thousand),
respectively, compared to the amounts before the retroactive application. There is no effect on operating
income, ordinary income and income before income taxes by the changes.
(Changes in accounting policies that are difficult to distinguish from changes in accounting estimates)(Changes in depreciation method for tangible fixed assets)
The Company and its major domestic consolidated subsidiaries changed depreciation method of
certain tangible fixed assets from the declining-balance method to the straight-line method from the fiscal
year ended March 31, 2019.
In recent years, with the expansion of the product lineup, shorter intervals of full model changes andacceleration of new products to the market, there is a tendency of less fluctuation in the number of units
sold after the launch. In addition, it is expected that sharing production facilities among different models
makes utilization stable over the useful life in the future. It is so judged that the equalized allocation ofdepreciation expenses of the tangible fixed assets over the useful life reflects the actual usage of tangible
fixed assets.
As a result, compared with the previous method, operating income increased by 12,898 million(US$ 116,188 thousand) yen, and ordinary income and income before income taxes increased
respectively by 13,049 million yen (US$ 117,548 thousand) in the fiscal year ended March 31, 2019.
[22] Changes in Presentation(Consolidated Balance sheets)(Provision for product warranties)
In the fiscal year ended March 31, 2018, recall expenses in the future were included in “Accrued
expenses” and “Provision for loss related to airbags”, and warranty expenses in the future were included
in "Provision for product warranties". From the fiscal year ended March 31, 2019, in order to improve theperspicuity and clarity of provision for claims expenses, all of them are collectively shown as "Provision4

for product warranties". To reflect this change in presentation, the consolidated financial statements forthe fiscal year ended March 31, 2018 have been reclassified.
As a result, the “Accrued expenses” of “Current liabilities” 106,969 million yen out of 255,914 million
yen, “Provision for loss related to airbags” 64,711 million yen and “Provision for product warranties”
34,743 million yen in the Consolidated Balance Sheets of the fiscal year ended March 31, 2018 areaggregated and presented as “Provision for product warranties” 206,423 million yen.
(Long-term unearned revenue)
In the fiscal year ended March 31, 2018, “Long-term unearned revenue” was included in “Others” of“Noncurrent liabilities”. From the fiscal year ended March 31, 2019, it is presented as a separate balance
sheet caption due to the increase in monetary significance. To reflect this change in presentation, theconsolidated financial statements for the fiscal year ended March 31, 2018 have been reclassified.
As a result, the “Others” of “Noncurrent liabilities” 175,256 million yen in the Consolidated Balance
Sheets of the fiscal year ended March 31, 2018 have been split to “Long-term unearned revenue”
132,270 million yen and “Others” 42,986 million yen.
(Changes according to application of Guidance on Accounting Standard for Tax Effect Accounting)“Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, revised on
February 16, 2018) has been applied from the first quarter of the fiscal year ended March 31, 2019.
Deferred tax assets are presented in the “Investment and other assets”, and Deferred tax liabilities arepresented in the “Non-current liabilities” on the consolidated balance sheets.
As a result, the “Deferred tax assets” of “Current liabilities” 124,766 million yen, “Deferred tax assets” of“Investments and other assets” 32,244 million yen and “Deferred tax liabilities” of “Noncurrent liabilities”
17,839 million yen out of 20,305 million yen in the Consolidated Balance Sheet of the fiscal year ended
March 31, 2018 are presented as “Deferred tax assets” of “Investments and other assets” 139,171 million
yen and “Deferred tax liabilities” of “Noncurrent liabilities” 2,466 million yen.
(Consolidated Statements of Cash Flows)“Increase (decrease) in provision for loss related to airbags” 64,711 million yen, “Increase (decrease) in
accrued expenses” 26,264 million yen out of 40,158 million yen and “Other, net” 12,676 million yen of
20,336 million yen "Net cash provided by(used in) operating activities" section in the Consolidated
Statements of Cash Flows of the fiscal year ended March 31, 2018 are aggregated and presented as“Increase (decrease) in Provision for product warranties” 103,651 million yen.

5

3. Other comprehensive income
Amounts reclassified to net income (loss) for the fiscal years ended March 31, 2019 and 2018, which wererecognized in other comprehensive income for the current or previous periods and tax effects for eachcomponent of other comprehensive income were as follows:
Millions of yen
Thousands of
U.S. dollars
2019
2018
2019
Valuation difference on available-for-salesecurities
Increase(decrease) during the year
¥1,601¥1,815$14,423
Reclassification adjustments(3,281)(4,243)(29,556)
Before tax effect(1,680)(2,428)(15,133)
Tax effect
773
1,367
6,963
Balance at the end of the period(907)(1,061)(8,170)Foreign currency translation adjustments
Increase(decrease) during the year
15,520(18,985)
139,807
Reclassification adjustments
Before tax effect
15,520(18,985)
139,807
Tax effectBalance at the end of the period
15,520(18,985)
139,807
Remeasurements of defined benefit plans
Increase(decrease) during the year
(2,257)(933)(20,332)
Reclassification adjustments
1,670
2,135
15,044
Before tax effect
(587)
1,202
(5,288)Tax effect
92
(342)
829
Balance at the end of the period
(495)
860
(4,459)Remeasurements of other postretirement
benefits of foreign consolidated
subsidiaries
Increase(decrease) during the year
2,074
4,932
18,683
Reclassification adjustments
Before tax effect
2,074
4,932
18,683Tax effect(508)(1,389)(4,576)
Balance at the end of the period
1,566
3,543
14,107
Share of other comprehensive incomeof affiliated companies accounted for using
equity method
Increase(decrease) during the year
(186)
(54)
(1,676)
Reclassification adjustments
Before tax effect
(186)
(54)
(1,676)
Tax effectBalance at the end of the period
(186)
(54)
(1,676)
Total other comprehensive¥15,498(¥15,697)
139,609
income(loss)

6

4. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2019 and 2018, consisted of the following:
Millions of yen

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

2019¥831,700
119,963951,663(139,572)(109,763)

2018¥765,397
242,573
1,007,970(158,576)(83,803)

Thousands of
U.S. dollars
2019$7,492,118
1,080,650
8,572,768(1,257,292)(988,767)¥702,328¥765,591$6,326,709

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 SUBARU CORPORATION, its consolidated
subsidiaries and affiliated companies (the "SUBARU Group") in their main operations of automobile
manufacturing and sales, the SUBARU Group finances mainly from bank loans. Temporary surpluses areinvested in highly secure financial assets. Bank loans and liquidation of accounts receivable are utilized toprovide short-term working capital. It is the SUBARU Group's policy to use derivatives as a way to avoid therisks stated below and not to conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Notes and accounts receivable-trade and Lease investment assets are subject to customer credit risks. In
addition, operating receivables denominated in foreign currencies due to globalized business of the SUBARUGroup are subject to the risk of changes in foreign exchange rates. As a general rule, however, forward
foreign exchange contracts are utilized to hedge the foreign exchange rate risk, considering the net amount ofoperating receivables denominated in foreign currencies that exceed foreign currency denominated operating
liabilities. Short-term investment securities mainly consist of investments in short-term financial instruments,
and investment securities mainly consist of investments in stocks of the companies with business or capitalalliances, and are subject to risk of market price fluctuation.
Payables included in Notes and accounts payable-trade and electronically recorded obligations-operating
are due within one year. A certain portion of such liabilities involve foreign currency denominated transactions
associated with the import of raw materials and is subject to exchange rate fluctuation risk, although it isconsistently less than accounts receivable balance denominated in the same foreign currency. Funds
financed by bank loans are primarily used for operating funds and capital expenditure, whose repayment orredemption dates will come within 6 years after March 31, 2019 at the latest. A certain portion of thoseliabilities may have variable interest rates and are subject to the risk of changes in interest rates, althoughsuch risk is mitigated using derivative transactions (interest rate swap transactions).
Derivative transactions include foreign exchange forward contracts etc. to hedge against exchange rate
fluctuations associated with trade accounts receivables and liabilities denominated in foreign currencies, andinterest rate swap contracts to hedge against the risk of change in interest rates on bank loans.
[3] Risk Management System with Regard to Financial Instruments(a) Credit Risk management (Risks Associated with Business Partner’s Breach of Contract)
The Company and its consolidated subsidiaries have credit control function and regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets. In
7addition to keeping track of payment due dates and balances of each customer, such credit control
function identifies and mitigates the potential risk of uncollectibility due to deterioration in financial status
or other factors of customers.
(b) Market Risk Management (Risks Associated with Fluctuations in Foreign Exchange and Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts with no longer than six months term are used to hedge against the risk of exchange
rate fluctuation to the extent that net position of accounts receivable and accounts payable dominated inforeign currency is exposed. In addition, the Company and certain consolidated subsidiaries use interest
rate swap transactions to mitigate the risk of fluctuation in interest rates on bank loans.
The Company also regularly monitors the market values of investments included in Short-term
investment securities and Investment securities as well as the financial conditions of issuers (business
partner companies), and continuously reviews its investment portfolio taking into consideration its
relationships with respective business partner companies.
Basic policies with regard to derivative transactions are approved by the Executive Management Board.
Finance & Accounting Department engages in derivative transactions in line with the applicable theCompany’s rule. The results of these transactions are reported to the Finance Officer every time thetransactions are conducted.
(c) Liquidity Risk Management (Risk of Becoming Unable to Make Payments by the Due Date)
The Company secures liquidity at a level sufficient to satisfy its current needs with commitment lines
contracted with major financial institutions in combination with keeping cash and cash equivalentsbalance at a certain level.
[4] Supplemental Explanation of Items with Regard to Fair Value of Financial Instruments
Fair value of financial instruments includes quoted prices of financial instruments in the market and, in theevent market prices are not available, prices that are calculated based on the underlying assumptions under
the appropriate valuation model. Because the factors incorporated into the valuation model are subject tochange, calculated fair value may differ. The values of derivative transactions contracts stated in "(2) Items
with Regard to Fair Value of Financial Instruments" do not by themselves indicate the market risk associatedwith the respective derivative transactions.

8(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet amounts, the fair value and difference as of March 31, 2019 and 2018 wereas follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer
to Note [2]).
As of March 31, 2019
Millions of yen
Consolidated
Fair Value
Difference
balance sheet
amounts
Cash and deposits¥831,700¥831,700¥Notes and accounts receivable-trade148,832
Allowance for doubtful accounts (*1)(29)
148,803148,803
Lease investment assets
14,731
Allowance for doubtful accounts (*1)(2)
14,72916,395
1,666
Short-term loans receivable
198,737
Allowance for doubtful accounts (*1)
(305)
198,432
205,938
7,506
Short-term investment securities, Investment securities
and Other securities
149,843
149,843
Total Assets
1,343,507
1,352,679
9,172
Notes and accounts payable-trade
315,026
315,026
Electronically recorded obligations-operating
63,772
63,772
Short-term loans payable
4,352
4,352
Current portion of long-term loans payable
7,592
7,596
4
Accrued income taxes
5,367
5,367
Accrued expenses
161,661
161,661Long-term loans payable
88,45288,51866
Total Liabilities
646,222646,292
70
Derivative transactions (*2)
hedge accounting is not applied(1,816)(1,816)
hedge accounting is applied¥¥¥-9As of March 31, 2019
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$7,492,118
1,340,708(261)
1,340,447
132,700(18)
132,682
1,790,262(2,748)
1,787,514

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
Electronically recorded obligations-operating
Short-term loans payable
Current portion of long-term loans payable
Accrued income taxes
Accrued expenses
Long-term loans payable
Total Liabilities
Derivative transactions (*2)
hedge accounting is not applied
hedge accounting is applied

Fair Value

Difference$7,492,118$-

1,340,447-

147,689

15,007

1,855,131

67,617

1,349,814
12,102,575
2,837,816
574,471
39,204
68,39048,347
1,456,274
796,793
5,821,295

1,349,814
12,185,199
2,837,816
574,471
39,20468,426
48,347
1,456,274
797,3885,821,926

82,62436
595
631(16,359)$-(16,359)$-$-*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).

10As of March 31, 2018
Millions of yen
Consolidatedbalance sheet
amounts¥765,397
155,247(60)
155,187
17,120(3)
17,117
185,364(274)
185,090

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
Electronically recorded obligations-operating
Short-term loans payable
Current portion of long-term loans payable
Accrued income taxes
Accrued expenses(*2)
Long-term loans payable
Total Liabilities
Derivative transactions (*3)
hedge accounting is not applied
hedge accounting is applied

Fair Value

Difference¥765,397¥-

155,187-

18,766

1,649

192,3937,303

129,886
1,252,677
320,137
64,86322,082
42,98245,372
148,945
21,138665,519

129,886
1,261,629
320,137
64,86322,08243,04245,372
148,945
21,208665,649

8,952
60
70
130

5,177
¥-

5,177
¥-

¥-

*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. This numerical value reflects the content described in Changes in Presentation.
*3. 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
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.
Short-term investment securities and investment securities
11

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"6.Short-term investment securities and investment securities" regarding to respective objectives forholding securities.
Liabilities
Notes and accounts payable-trade, Electronically recorded obligations-operating, 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.

[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2019 and 2018:
Millions of yen
2018¥6,501Thousands of
U.S. dollars
2019$59,832

2019
Stocks of non-consolidated subsidiary and affiliated¥6,642companies
Other securities (available-for-sale securities)
Certificate of deposit
15,00055,000135,123
Commercial paper
30,997
17,499279,227
Money management fund
4,200
116,270
37,834
Unlisted stocks (excluding over-the-counter stocks)
730
874
6,576
Medium Term Note
30,00020,000270,246
Trust beneficiary right
5,000
10,00045,041Other
3
3
27
Investments and other assets
Investments in equity of affiliated companies and
2,262
1,090
20,377others
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” and “Investment securities".

12[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2019:
Millions of yen

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

Within 1Year

1 to 5Years

5 to 10
Years

Over 10years¥831,700
133,376
6,353
78,046¥15,456
8,365
119,460

¥13
1,231

¥-

25,477
9,177
81,10928,12326,650
3,147

5,221
4,182
1,609

5,781
5,728
5,601

Within 1
Year$7,492,118
1,201,477
57,229703,054

1 to 5Years$139,231
75,354
1,076,119

229,50282,668730,646

253,338
240,068
28,34947,032
37,672
14,494

Within 1
Year¥765,397
144,170
6,626
71,620

1 to 5Years¥11,077
10,471
112,068

Millions of yen
5 to 10
Over 10
Years
years
¥¥23
1,676
-

17,013
6,632
102,658

18,33726,315
1,732

7,018
4,160
923

As of March 31, 2019:

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

Thousands of U.S. dollars
5 to 10
Over 10
Years
years
$$117
11,089-52,076
51,59950,455

As of March 31, 2018:

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

13

4,793
5,271
6,526

[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2019:

Short-term loans payable
Long-term loans payable

Within 1
Year¥4,352¥7,592

1 to 5
Years¥¥83,452

Millions of yen
5 to 10
Over 10Years
years¥¥¥5,000¥-

1 to 5
Years$$751,752

Thousands of U.S. dollars
5 to 10
Over 10Years
Years$$$45,041$-

1 to 5
Years¥¥20,675

Millions of yen
5 to 10
Over 10Years
years¥¥¥463¥-As of March 31, 2019:

Short-term loans payable
Long-term loans payable

Within 1
Year$39,204$68,390

As of March 31, 2018:

Short-term loans payable
Long-term loans payable

Within 1
Year¥22,082¥42,982

6. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2019and 2018 was as follows:(1) Other securities (available-for-sale securities):
As of March 31, 2019:
Acquisition cost

Millions of yen
Difference¥28,730¥20,916¥7,814

48,831
19,196
4,980
101,737

48,43718,921
4,932
93,206

394
275
48
8,531

304

485

(181)

15,771
26,541
5,490
48,106¥149,843

15,916
26,795
5,572
48,768¥141,974

(145)
(254)
(82)
(662)
¥7,869Book 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

14

As of March 31, 2019:
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$258,806$188,415$70,391

439,879
172,92144,861
916,467

436,330
170,444
44,429839,618

3,549
2,477
432
76,849

2,738

4,369

(1,631)

142,068
239,087
49,455433,348$1,349,815

143,374
241,375
50,194439,312$1,278,930(1,306)(2,288)(739)(5,964)$70,885

Acquisition cost

Millions of yen
Difference¥30,619¥19,748¥10,871

4,356
3,068
1,027
39,070

4,326
3,032
1,016
28,12230
36
11
10,948

389

471

(82)

42,80539,3098,313
90,816¥129,886

43,34540,023
8,488
92,327¥120,449

(540)
(714)
(175)
(1,511)¥9,437

As of March 31, 2018:
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 bondsother
Sub-total
Total

15

(2) Other securities (available-for-sale securities) sold during fiscal years ended March 31, 2019 and 2018:
For the year ended March 31, 2019:
Millions of yen
Sales amount
Total gains
Total losses
Equity securities¥5,644¥3,560¥10
Debt securities
Government and municipal bonds
52,59778
211
Corporate bonds
14,30215
112
Other84,946
6
44
Total¥157,489¥3,659¥377
For the year ended March 31, 2019:

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

Sales amount$50,842473,804
128,835
765,211$1,418,692

Thousands of U.S. dollars
Total gains
Total losses$32,069
$90
$703
$135
$54
$32,961$1,901$1,009$396$3,396

Sales amount¥7,022

Total gains¥4,399Millions of yen
Total losses¥149

32,982
19,794142,999¥202,797

97
119
3¥4,618

254
84
35
¥522

For the year ended March 31, 2018:

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

16

7. Short-Term Loans Payable and Long-Term Debts
Short-term loans payable as of March 31, 2019 and 2018, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Bank loans with average interest rate of 1.84% and 2.03%
per annum as of March 31, 2019 and 2018, respectively¥4,352¥22,082$39,204

Millions of yen
2019
2018

Thousands of
U.S. dollars
2019Long-term debts as of March 31, 2019 and 2018 consisted of the following:

Loans principally from banks and insurance companies
due through 2025 with average interest rate of 0.30% and0.48% per annum as of March 31, 2019 and 2018,
respectively
SubtotalLess-Portion due within one year
Total

¥96,044
96,044(7,592)¥88,452¥64,120
64,120(42,982)¥21,138$865,183
865,183(68,390)$796,793

Annual maturities of long-term loans payable as of March 31, 2019 were as follows:
Millions of yen¥7,592
7,345
14,991
51,2279,889
5,000¥96,044

2020
2021
2022
2023
2024
2025 and thereafter
Total

17

Thousands of
U.S. dollars
68,39066,165135,042
461,463
89,08245,041$865,183

Lease obligations as of March 31, 2019 and 2018 consisted of the following:

Millions of yen
2019
2018
¥976
¥1,157925
1,810¥1,901¥2,967

Lease obligations due within one year
Lease obligations due after one year
Total

Thousandsof
U.S.dollars
2019$8,792
8,333$17,125

Annual maturities of lease obligations as of March 31, 2019 were as follows:
Millions of yen
¥976
564
207
111
42
1
¥1,901

2020
2021
2022
2023
2024
2025 and thereafter
Total

Thousands of
U.S. dollars$8,792
5,081
1,865
1,000
378
9
$17,125

The following assets as of March 31, 2019 and 2018 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Property, plant and equipment¥26,457¥28,752$238,330
Total¥26,457¥28,752$238,330
To raise working capital efficiently, the SUBARU Group has entered into the commitment-line contracts. The
maximum amount that can be made available under these contracts is 229,652 million yen (US$2,068,751
thousand) as of March 31, 2019. At the end of the fiscal year, there were no borrowings under thecommitment line.

18

8. Derivative transactions
In the normal course of business, the Company and its consolidated subsidiaries employ derivative financial
instruments, including foreign exchange forward contracts, foreign currency options and interest rate swaps,
to manage their exposures to fluctuations in foreign currency exchange rates and interest rates. The
Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes.
The fair value information of derivative financial instruments as of March 31, 2019 and 2018 was as follows:
Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2019
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¥184,016(¥1,780)(¥1,780) $1,657,652($16,035)($16,035)
Foreign currency options
contracts:
Sell/BuyU.S. dollar
2,196
(17)
(17)
19,782
(153)
(153)
Total
¥186,212(¥1,797)(¥1,797) $1,677,434($16,188)($16,188)
As of March 31, 2018
Notional
AmountForeign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar
Total¥254,467
5,997
25,349¥285,813

Millions of yen
Valuation
Fair value
gain (loss)¥4,163132882¥5,177¥4,163132882¥5,177

Note: 1.The method to determine the fair value is based on quotations obtained from financial institutions.
2. Foreign currency option contracts are zero cost options and option premiums are not paid or
received.
In addition, call options and put options are presented collectively because they are integrated
contracts.
As of March 31, 2019

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¥7,300¥7,300$65,760(¥19)$65,760($171)

Note: The method to determine the fair value is based on quotations obtained from financial institutions.
19As of March 31, 2018
Not applicable.
Derivative transactions to which hedge accounting is applied
Not applicable.
9. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2019 and 2018 are summarized as follows:

2019¥459,603
642,894
19,282
388,386
1,510,165
199,354
31,334(998,902)(24,557)¥717,394

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

Millions of yen
2018¥441,879
609,736
22,648371,661
1,445,924
196,659
55,908(968,876)(26,507)¥703,108

Thousands of
U.S. dollars
2019$4,140,195
5,791,316
173,696
3,498,658
13,603,865
1,795,820
282,263(8,998,306)(221,214)$6,462,427

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, 2019 and 2018 was as follows:
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Total overdraft facilities and lending commitments¥5,600¥4,800$50,446
Less amounts currently executed
2,256
1,637
20,322Unexecuted balance¥3,344¥3,163$30,124
A portion of the overdraft facilities and lending commitments above is subject to credit considerations as
documented in the customer contracts. Therefore, the total balance above is not always available.

2011. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans,
contributory defined benefit employees’ welfare pension funds, defined benefit pension plan, and certain
domestic subsidiaries have defined contribution pension plans. In addition, in certain occasions, additional
retirement payments are made to employees for their retirement. Consolidated foreign subsidiaries primarily
have defined contribution plans.
As of March 31, 2019, 52 companies including the Company and its consolidated domestic subsidiaries
have lump-sum retirement payment plans. Within the SUBARU Group, there are also 25 defined contributionplans, and 6 defined benefits pension plans. In addition, there are 2 single-employer employees’ welfare
pension funds subject to the provisions of Article 33 of "Accounting Standard for Retirement Benefits."
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and net defined benefit liability is provided at the amountthat would have been payable had all the employees voluntarily retired at the end of the fiscal year, less anamount to be covered from the plan assets, while the Company and significant subsidiaries provide an
accrued pension and net defined benefit liability based on the estimated amount of pension and severance
obligation (projected benefit obligations), less the fair value of plan assets at the end of the fiscal year under
the actuarial method.
Defined benefit pension plans (including the multi-employer pension plan of contributory defined benefit
employees’ welfare pension funds settled as defined benefit pension plan.)
Movement in retirement benefit obligation, except plans applied simplified method

Balance at the beginning of the perioda. Service costb. Interest costc. Actuarial loss (gain)d. Benefits paide. Amortization of prior service cost
f. Other
Balance at the end of the period

2019¥119,837¥6,815709
1,749(4,830)(48)¥124,232

Millions of yen
2018¥115,699
6,563
796
1,446
(4,620)(47)¥119,837

Thousands of
U.S. dollars
2019
1,079,515
61,391
6,387
15,755(43,510)(432)
1,119,106

Millions of yen
2018¥104,828
1,917
513
3,441
(2,929)¥107,770

Thousands of
U.S. dollars
2019970,813
17,674(4,567)
40,834(26,709)(18)$998,027

Movements in plan assets, except plans applied simplified method

Balance at the beginning of the perioda. Expected return on plan assetsb. Actuarial loss (gain)c. Contributions paid by the employer
d. Payment for retirement benefits
e. Other
Balance at the end of the period

2019¥107,770¥1,962(507)
4,533(2,965)(2)¥110,791

Movement in net defined benefit liability in the plans applying the simplified method
21

2019
¥7,1883,386(1,084)(31)¥9,459Balance at the beginning of the period
a. Retirement benefit costb. Benefits paidc. Contributions paid by the employer
Balance at the end of the period

Millions of yen
2018¥6,813
820
(417)
(28)
¥7,188

Thousands of
U.S. dollars
2019$64,751
30,502(9,765)(279)$85,209

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

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

2019¥114,160(111,140)
3,020
19,880Millions of yen
2018
109,766(108,110)
1,656
17,599Thousands of
U.S. dollars
2019$1,028,376(1,001,171)
27,205
179,083

22,90019,255206,288

22,900¥22,900

19,337(82)¥19,255

206,288$206,288

2019¥6,815709(1,962)
1,655
15
273

Millions of yen
2018¥6,563796(1,917)
2,142
(6)
342

Thousands of
U.S. dollars
2019$61,390
6,387(17,674)
14,909
135
2,459

3,386
10,891820¥8,74030,502$98,108

Retirement benefit costs

a. Service costb. Interest costc. Expected return on plan assets
d. Net actuarial loss amortizatione. Past service costs amortization
f. Additional retirement payments
g. Retirement benefit cost of the plan
applying the simplified method
Total retirement benefit costs for the fiscal
year ended22

Adjustments for retirement benefit (before tax effect)
Millions of yen
2018
(¥6)
1,208
¥1,202Thousands of
U.S. dollars
2019
135(5,423)(5,288)2019¥259

Millions of yen
2018
¥274

Thousands of
U.S. dollars
2019$2,333

14,892

14,290134,150¥15,151¥14,564$136,483

2019
¥15
(602)
(587)

a. Past service costsb. Actuarial gains and losses
Total

Accumulated adjustments for retirement benefit (before tax effect)a. Past service costs that are yet to berecognizedb. Actuarial gains and losses that are yet
to be recognized
Total
Plan assets
Plan assets comprise:

2019
70%
12%
18%
100%

a. Bonds
b. Equity securities
c. Other
Total

Percentage
2018
68%
16%
16%
100%

Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets havebeen considered in determining the long-term expected rate of return.
Actuarial assumptions
The principal actuarial assumptions
a. Attribution of expected benefit obligationb. Discount ratec. Long-term expected rate of returnd. Amortization of actuarial gain/loss(*)
e. Amortization of past service cost2019
Benefit formula method
Primarily 0.5%
Primarily 2.1%
Primarily 16 years
10 to 18 years

2018
Benefit formula method
Primarily 0.6%
Primarily 2.1%
Primarily 16 years
13 to 18 years(*) Amortized by the straight-line method starting from the following fiscal year, over a period shorter than the
average remaining service periods of the eligible employees.

23Defined contribution pension plan
The amount required to contribute to defined contribution plans was 5,496 million yen (US$49,509 thousand)and 5,161 million yen for the fiscal years ended March 31,2019 and March 31,2018, respectively, which
included the multi-employer pension plan of contributory defined benefit employees’ welfare pension funds
settled as defined contribution plans.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, was as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2019 and 2018)
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Plan assets¥9,070¥9,130$81,704
Projected benefit obligation
10,215
11,18092,018Funded status(¥1,145)(¥2,050)($10,314)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan for fiscal years ended March 31, 2019 and 2018 were 5%
and 4% respectively.
Other than the above, “Accrued expenses” and “Other long-term liabilities” include 26,315 million yen(US$235,429 thousand) and 24,606 million yen of postretirement medical insurance plan obligations ofcertain U.S. subsidiaries as of March 31, 2019 and 2018, respectively.
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 30.5% and 30.7% for fiscal
years ended March 31, 2019 and 2018, respectively.
A reconciliation of the statutory income tax rate in Japan to the Company’s effective income tax rates forfiscal years ended March 31, 2019 and 2018 were as follows:
2019
2018
Statutory income tax rate in Japan
30.5%
30.7%
Increase (reduction) in taxes resulting from:Difference of applicable tax rate in subsidiaries
Adjustment of deferred tax assets by change of the tax rate
Entertainment expenses not qualifying for deduction
Correction for income tax in previous years
Changes in valuation allowance and tax benefits realized from loss carry forwards
Deduction of research and development expense
Other
Effective income tax rate

24(2.7%)
0.1%
0.9%
0.5%
(4.6)%
0.1%
24.8%

0.5%
0.1%
0.1%
0.6%
(0.4)%(6.3)%
0.1%
25.4%

Significant components of the deferred tax assets and liabilities as of March 31, 2019 and 2018 , were as
follows:
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Deferred tax assets:
Provision for product warranties¥94,559¥72,015$851,806
Accrued expenses
18,54924,726167,093
Unrealized profit on inventories
16,645
20,130149,941
Net defined benefit liability
16,53814,763
148,978
Depreciation and amortization expenses
8,672
8,585
78,119Provision for bonuses
7,150
7,605
64,409Long-term accounts payable, other
6,926
6,216
62,391
Loss on devaluation of inventories
1,982
2,578
17,854
Accrued enterprise tax
407
2,843
3,666
Other
27,323
20,689246,131
Total deferred tax assets
198,751
180,150
1,790,388
Valuation allowance(8,501)(7,405)(76,578)
Total deferred tax assets, net of valuation allowance
190,250
172,745
1,713,810
Deferred tax liabilities:
Depreciation and amortization expenses(20,103)(14,230)(181,092)
Deferred revenue of foreign consolidated subsidiaries(19,998)(16,441)(180,146)
Valuation difference on available-for-sale securities(1,672)(2,408)(15,062)
Reserve for reduction entry(1,618)(1,690)(14,575)
Net defined benefit asset
(180)
(527)
(1,621)
Other
(700)
(744)
(6,306)
Total deferred tax liabilities(44,271)(36,040)(398,802)
Net deferred tax assets¥145,979¥136,705$1,315,008
As written in “Change in Presentation”, the consolidated financial statements for the fiscal year ended
March 31, 2018 have been reclassified.
As a result, the “Accrued expenses” 52,362 million yen (US$ 471,687 thousand) out of 77,088 million yen(US$ 694,424 thousand) are aggregated and presented as “Provision for product warranties” 72,015 million
yen (US$ 648,725 thousand).
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
2019
2018
2019
Deferred tax assets¥151,019¥139,171$1,360,409
Deferred tax liabilities(5,040)(2,466)(45,401)
Total net deferred tax assets¥145,979¥136,705$1,315,008
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.
25

Under the Japanese Companies Act (“the Act”), in cases where a dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or
legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, both legal earnings reserve and additional paid-in capital used to eliminate or reduce a
deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Act, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Act.
At the annual shareholders’ meeting held on June 21, 2019, the shareholders approved cash dividends
amounting to 55,236 million yen (US$497,577 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2019. Such appropriations are recognized in the period inwhich they are approved by the shareholders.
14. Presentation of inventories and provision for loss on construction contracts"Provision for loss on construction contracts" included in "Cost of sales" for the fiscal years ended March 31,
2019 and March 31, 2018 is provision of 506 million yen (US$ 4,558 thousand) and provision of 95 million yen,respectively.
15. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal year ended March 31, 2019 and 2018 consisted of thefollowing:Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Freightage and packing expenses¥31,303¥28,438$281,984
Advertising expenses
84,89082,801
764,706
Salaries and bonuses
59,12658,002532,619
Research and development expenses
101,711
120,330
916,233
Other
126,202120,971
1,136,851
Total¥403,232¥410,542$3,632,393
16. Extraordinary Gain /loss(Fiscal year ended March 31, 2019)
Gain on sales on business
The gain is recognized due to the sale of retail business of other brand vehicles.
(Fiscal year ended March 31, 2018)
Loss on related to airbags
The loss was recognized due to the market measures concerning Takata airbag inflator not containing
desiccant (hereinafter referred to as "the airbag"). It is quality-assurance expenses which further market
measures relating to the airbags to be taken in the current fiscal year and beyond.
17. Finance Leases
As allowed under the Japanese GAAP, the Company and its consolidated subsidiaries in Japan account for26

finance leases.
Information as Lessor(1) The details of lease investment assets as of March 31, 2019 and 2018 were as follows:2019¥17,547392(3,208)¥14,731

Lease revenue receivable
Estimated residual value
Interest income portion
Lease investment assets

Millions of yen
2018¥20,534395(3,809)¥17,120

Thousands
ofU.S. dollars
2019$158,067
3,531(28,898)$132,700(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2019 and 2018 , were as
follows:
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Within 1 year
¥7,565¥7,882$68,148
1 to 2 years
4,175
5,456
37,6092 to 3 years
2,955
3,494
26,6193 to 4 years
1,864
2,322
16,7914 to 5 years
972
1,347
8,756
Over 5 years
¥16
¥33
$144
18. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2019 and2018, were as follows:
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Operating leases:
Due within one year
¥3,396¥3,372$30,592
Due after one year
13,244
14,048
119,305
Total¥16,640¥17,420$149,896
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2019 and 2018, were as follows:
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Operating leases:
Due within one year
¥120
¥125
$1,081
Due after one year
59
71
531
Total
¥179
¥196
$1,61227

19. Contingent Liabilities
Contingent liabilities as of March 31, 2019 and 2018, were as follows:
Thousands ofMillions of yen U.S. dollars
2019
2018
2019
As guarantor of third-party indebtedness from financial
institutions¥27,309¥29,795$246,005(Fiscal year ended 2018)
Expenses with regard to the modified agreement contents between the U.S. subsidiary of Takata Co., Ltd.
and NHTSA (The National Highway Traffic and Safety Administration of the United States) dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” releasedby MLIT (The Ministry of Land, Infrastructure, Transport and Tourism of Japan) dated May 27, 2016, andrecalls in the other regions including China and Australia required by the U.S. and Japanese authorities are
accrued to the extent that the amount can be reasonably estimated in the consolidated financial statements
for the fiscal year ended March 31, 2018.
There is a possibility that additional expense may be accrued required due to events in the future.
(Fiscal year ended March 31, 2019)
Expenses with regard to the modified agreement contents between the U.S. subsidiary of Takata Co., Ltd.
and NHTSA (The National Highway Traffic and Safety Administration of the United States) dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” releasedby MLIT (The Ministry of Land, Infrastructure, Transport and Tourism of Japan) dated May 27, 2016, andrecalls in the other regions including China and Australia required by the U.S. and Japanese authorities are
accrued to the extent that the amount can be reasonably estimated in the consolidated financial statements
for the fiscal year ended March 31, 2019.
There is a possibility that additional expense may be accrued required due to events in the future.
20. The Amount of Discount of Export Bill
The amount of discount of export bill as of March 31, 2019 and 2018, were as follows:
Thousands ofMillions of yen U.S. dollars
2019
2018
2019
¥1,174¥1,891$10,576

The amount of discount of export bill

21. Transfer of Financial Assets to Special Purpose Company
The balance of financial assets transferred to special purpose company as of March 31, 2019 and 2018, wereas follows:
Thousands ofMillions of yen U.S. dollars
2019
2018
2019
Balance of financial assets transferred to special purpose
company(loan receivable of Automobiles and accounts¥3,330¥4,251$29,997
receivable-trade of Aerospace)
22. Segment Information(1)Outline of business segment
28

The business segments the Company reports are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic investigation
to determine distribution of management resources and evaluate their business result.
The Company recognizes Automobile as its main business, and introduces an internal company system andrecognizes Aerospace, and Other divisions. This framework makes clearer the responsibility of each division
and accelerates business execution. The Company manages the subsidiaries on the basis of thisclassification. Therefore, the business segments consist of Automobile, Aerospace, and Other which does notbelong to Automobile nor Aerospace.
Automobile segment manufactures and sells vehicles and related products. Aerospace segment
manufactures aircrafts, parts of space-related devices.
(2)Calculation method of sales, profit or loss, assets, liabilities and other items by reportable segments
Accounting method for reportable segments is almost the same as "2. Summary of Significant
Accounting Policies".
Segment incomes are calculated based on operating income.
Net sales - Inter-segment are calculated based on current market prices.
(3)Information on sales, income, assets and other items by reportable segments for the fiscal years ended
March 31, 2019 and 2018 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
Net Sales:
2019
2018
2019
Automobiles
Outside customers¥3,014,476¥3,062,340
27,154,995
Inter-segment
3,134
2,918
28,232Sub-total
3,017,610
3,065,258
27,183,227
Aerospace
Outside customers
131,669
142,163
1,186,100
Inter-segment
804
5
7,243
Sub-total
132,473
142,168
1,193,343
Other (*1)
Outside customers
14,36928,192
129,439
Inter-segment
26,822
23,852
241,618
Sub-total
41,19152,044
371,057
Total
3,191,274
3,259,470
28,747,627
Adjustment (*2)(30,760)(26,775)(277,092)
Consolidated total¥3,160,514¥3,232,695
28,470,535

Segment income:Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)
29

2019

Millions of yen
2018

Thousands of
U.S. dollars
2019¥184,947
6,047
3,846
194,840
689¥195,529¥361,454
12,2595,066
378,779
668¥379,447$1,666,039
54,47334,646
1,755,157
6,207$1,761,364

Thousands of
U.S. dollars
2019

Segment assets:

2019

Millions of yen
2018

Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)
Consolidated total¥2,656,560
275,866
76,8183,009,244(26,519)¥2,982,725¥2,580,353
234,619
77,5832,892,555(26,081)¥2,866,474$23,930,817
2,485,055
691,992
27,107,864(238,888)$26,868,976
Thousands of
U.S. dollars
2019

Other Items:
Depreciation and amortization:
Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)

2019Millions of yen
2018¥96,867
4,487
1,395
102,749-¥95,193
5,298
1,611
102,102-$872,597
40,42012,566925,583-

Consolidated total

102,749

102,102925,583

3,362
1,321
4,683
4,683

3,461
54
3,515
3,515

30,286
11,90042,18542,185Investment to equity-method affiliates:
Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)
Consolidated total

Increase of property, plant and equipment andintangible assets:
Automobiles
162,132
185,056
1,460,517
Aerospace
6,058
8,316
54,572Other (*1)
1,770
417
15,945
Total
169,960
193,789
1,531,033
Adjustment (*2)
Consolidated total¥169,960¥193,789$1,531,033
Note: *1. Other means the category which is not included into any business segment reported. It consists ofIndustrial product, real estate lease, etc.
*2. Adjustment of segment income refers to elimination of intersegment transaction.
*3. Segment income is adjusted on operating income on the consolidated statements of income.
(4) Changes in Segment reported(Changes in accounting method for sales)
As described in "(Changes in Accounting policies)", changes in accounting method for sales are
retrospectively applied. As a result, sales of "Automobiles" decreased by 172,526 million yen in the FYE 2018.
(Changes in depreciation method for tangible fixed assets)30

As described in "(Changes in Accounting policies)", the Company and its major consolidated subsidiaries
changed the depreciation method for tangible fixed assets. Segment income of "Automobiles" increased by
11,731 million yen, "Aerospace" increased by 1,055 million yen and "Other" increased by 112 million yen
respectively in the FYE 2019.
(Changes in classification of Deferred tax assets)
As described in "(Changes in presentation methods)", the Company changed classification of Deferred tax
assets. As a result, identifiable assets by business segment of "Automobile" decreased by 17,839 million yen
in the FYE 2018.
Related Information(1)Products and services information
Products and services information is omitted since the same information is in the segment information(2)Information about geographic areas[1]Sales for the fiscal years ended March 31, 2019 and 2018 was summarized as follows:

Sales: (*1)
Japan
North America[United States] (*2)
EuropeAsia
OtherConsolidated total

2019

Millions of yen
2018

Thousands of
U.S. dollars
2019¥596,591
2,201,655[2,062,424]
100,535
116,394
145,339¥3,160,514¥667,991
2,140,593[2,004,390]
118,105
135,058
170,948¥3,232,695$5,374,210
19,832,943[18,578,723]
905,639
1,048,500
1,309,242$28,470,534

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.
[2]Property, plant and equipment as of March 31, 2019 and 2018 was summarized as follows:

Property, plant and equipment: (*1)
Japan
North America[United States] (*2)
EuropeOther
Consolidated total

2019

Millions of yen
2018

Thousands of
U.S. dollars
2019¥533,687
182,978[182,384]
387
342¥717,394¥527,698
174,290[173,557]
519
601¥703,108

4,807,558
1,648,302[1,642,951]
3,486
3,081
6,462,427

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 omitted because there were no outside sales to single customer withequal to or more than 10% of Net sales on the consolidated statements of income for the fiscal years ended31March 31, 2019 and 2018
Information on Impairment Loss in Fixed Assets by Reportable segments
It has been omitted for March 31, 2019 and 2018 because the amount is immaterial.
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, 2019 and 2018 was summarized as follows:
GoodwillThousands ofMillions of yen
U.S. dollars
2019
2018
2019
Amount written off of current period:
Automobiles
¥211
¥211
$1,901
Aerospace
Other
Total
211
211
1,901
Corporate and elimination
Total
211
211
1,901
Balance at the end of current period:
Automobiles
1,425
1,566
12,837
Aerospace
Other
Total
1,425
1,566
12,837
Corporate and elimination
Total¥1,425¥1,566$12,837
Information on Negative Goodwill by Reportable segments
No items to be reported.
23. Fair Value of Investment and Rental Property
The Company and certain consolidated subsidiaries own rental office buildings and rental commercial
facilities with the objective of generating rental income in Saitama prefecture and other locations. Certain
domestic rental office buildings in Japan are classified as properties that include portions used as investment
and rental property, because part of them are used by the Company and certain consolidated subsidiaries.
The consolidated balance sheet amounts, principal changes during the fiscal years ended March 31, 2019and 2018, and fair value as of March 31, 2019 and 2018 were as follows:
As of March 31, 2019
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¥27,278(¥2,971)¥24,307¥40,207¥13,45932¥272¥13,731¥27,743

As of March 31, 2019

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$245,726($26,763)$218,963$362,193$121,241$2,450$123,691$249,914

As of March 31, 2018
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¥27,036¥242¥27,278¥40,136¥13,712(¥253)¥13,459¥22,804

Note 1. The amounts of consolidated balance sheet exclude accumulated depreciation and accumulated
impairment loss from acquisition costs.
2. Among changes in the amount of investment and rental property and properties that include portions
used as investment and rental property during the fiscal year ended March 31, 2019, principal
increases were 948 million yen (US$8,540 thousand) of new rental properties, and principal decreases
were 1,016 million yen (US$9,152 thousand) of depreciation, 2,001 million yen (US$18,025 thousand)of loss on sales and retirement.
Among changes in the amount of investment and rental property and properties that include portions
used as investment and rental property during the fiscal year ended 2018, principal increases were1,539 million yen of properties acquisitions and 720 million yen of others, and principal decreases were1,001 million yen of depreciation, 1,469 million yen of loss on sales and retirement.
3. Fair values of main properties are calculated based on the appraised value of the external real-estateappraiser. Some of them are adjusted by the Company using relevant indicators etc. Fair values of theremaining properties are estimated by the Company mainly using the assessed land values that areused to calculate property taxes.

33

Profit and loss in fiscal year ended March 31, 2019 and March 31, 2018 from investment and rental property
and properties that include portions used as investment and rental property were as follows:
As of March 31, 2019
Millions of yen
RentalRentalDifference
Other profit
incomeexpensesand loss
Investment and rental property¥3,830¥2,110¥1,720¥52
Properties that include portions used as
investment and rental property¥842¥1,178(¥336)¥As of March 31, 2019

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

Thousands of U.S. dollars
RentalRentalDifference
Other profit
incomeexpensesand loss$34,501$19,007$15,494$468$7,585$10,612($3,027)$-

As of March 31, 2018

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

Millions of yen
RentalRentalDifference
Other profit
incomeexpensesand loss¥3,825¥2,043¥1,782¥15¥780¥1,198(¥418)¥-

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 others.
25. Subsequent Events
No items to be reported.
26. Other
No items to be reported.

34�

Independent Anditor's Report
To the Board of Directors of SUBARU CORPORATION

We have audited the accompanying consolidated financial statements of SUBARU CORPORATION and
its consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2019 and2018, and the consolidated statements of income, consolidated statements of comprehensive income,consolidated statements of changes in net assets and consolidated statements of cash flows for the years
then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, we consider internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the financial statement audit is not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of SUBARU CORPORATION and its consolidated subsidiaries as at March 31, 2019 and 2018,
and their financial performance and cash flows for the years then ended in accordance with accounting
principles generally accepted in Japan.
Convenience Translation

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2019 are presented solely for convenience. Our audit also included the translation of yen
amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note I to the consolidated financial statements.

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