Annual Report2015

For the year ended March 31, 2015

Introduction

THE SUBARU “SAFETY” JOURNEY
Having roots in the aircraft industry, FHI considers safety to be the most important feature
underpinning automobiles. Since we launched the Subaru 360 over a half-century ago,
we have engaged in automotive manufacturing to this day with a philosophy of“All-Around Safety” and maximum emphasis on safety performance.

SI NC E 1917

Horizontally-opposed SUBARU BOXER engine

Ensuring safety for pilots
Our DNA of safety is inherited fromaircraft development.
At the core of Subaru’s safety development expertise lies traits acquired from developing aircrafts.
Given the lethal ramifications of a crash, aircraft
development requires designs that consider all
manner of possible emergency situations, hence
the implementation of ideas and countermeasures
within the aircraft’s basic structure to preventthe onset of danger. In addition, one of theindispensable safety features of smaller aircraft is
the ability for the pilot to be able to secure an
all-around unobstructed line of sight. This approachto safety has not diminished after we moved into
automobile manufacturing. Since we released
the Subaru 360, all of our vehicles have beendeveloped with an emphasis on safety features,
starting with unobstructed visibility.

Developing a vehicle body for collision safety
based on All-Around Safety that is ahead of the times.
The Subaru 360, launched in 1958, fulfilled a key role in helping the
spread of automobiles during Japan’s high growth period. Since that
period, Subaru has dedicated itself to developing vehicle bodies forcollision safety following our principle of All-Around Safety—effectively
absorbing shock from collisions in all directions and protecting passengers with a cabin structure of robust strength. Early on, safety was not
yet emphasized as part of the value of vehicles and there were no crashtest dummies in existence. Subaru’s development team, however,pushed forward independent research on car body structure and how it
affects human passengers. Through trial and error, we pursued superior
collision safety technologies ahead of their time.

SI N CE 1 9 6 0

Ensuring safe driving, turning, and braking
Developing proprietary technologies for enhanced driving safety,
such as the horizontally-opposed engine and AWD.
Fundamental automobile performance in terms of driving, turning, and braking differs
depending on the vehicle's structure. In particular, the location of the center of gravity
and the type of drive train have a significant effect. The lower the center of gravity,
the more stable the cornering, while a drive train that delivers power to all of thewheels gives constant stability when driving. This is the perspective that led Subaru,
in 1966, to launch the Subaru 1000—a FWD vehicle with a horizontally-opposedengine—and, in 1972, the 4WD Subaru Leone. Since that time, we havefurther honed our proprietary technologies and continued to pursue safe andstable driving performance.

Ensuring safety for drivers

Subaru 360

FUJI HEAVY INDUSTRIES LTD.

SINCE 1970

01 ANNUAL REPORT 2015

Leone 4WD

Subaru 1000

Commercializing EyeSight—Levorg with the latest
EyeSight (ver. 3) technology earns the highest ratingsin preventative safety tests.
In 2008, we commercialized our EyeSight technology with stereo cameras
constantly surveying the area forward of the vehicle, and warnings andpre-crash braking functions for preventing accidents or mitigating damage
from accidents. Furthermore, in 2014, we achieved a new level of highperformance and function with the launch of EyeSight Ver. 3. The Levorg
with this latest EyeSight technology has garnered the highest ratings in ahost of preventative safety performance tests.

Launching our flagship Legacy.
Embarking on development of driving support systems.
Our flagship Legacy model, launched in 1989, demonstrated both reliabledriving performance and mechanical endurance when it set a world
speed record in January of that same year for 100,000 km of continuous driving. Furthermore, around this period, we started development ofa driving support system using stereo cameras. In 1999, we commercialized ADA, Active Driving Assist, which was the predecessor of ourcurrent EyeSight technology.

IN THE 2000s & 2010s

Ensuring safety for everyone

IN T HE 1980s & 1 9 9 0 s

Ensuring safety for drivers andpassengers
INTO THE FUTURE

Working toward achievinga safer society
The future of safety according to Subaru.
Going forward, Subaru is working on development
themes, including heavy traffic autopilot and automated freeway driving, as we further evolve the EyeSight
technology. Under our philosophy of All-Around Safety,
we will continue to pursue safety from many diverse
perspectives and contribute to realizing a society with
automobiles that anyone can drive with peace of mind.

FUJI HEAVY INDUSTRIES LTD.

02 ANNUAL REPORT 2015

Contents

01 THE SUBARU “SAFETY” JOURNEY
04 At a Glance
05 Business Highlights
06 Consolidated Financial and
Non-Financial Highlights

07 A Message to Our Shareholders
14 A Message from CFO
17 Special Feature:

PROMINENCE BY LEGACY
18 Introduction
19 Project General Manager (PGM)Interview
23 Leveraging Production to Stand
Above the Crowd

Confidence in Motion

25 Leveraging Marketing to Stand
Above the Crowd

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

27 Corporate Governance
29 Board Directors / Executive Officers
31 Financial Information
31 Consolidated Ten-Year Financial
Summary
32 Five-Year Automobile Sales
34 Management’s Discussion andAnalysis of Results of Operations
and Financial Position

42 Corporate Data / Stock Information

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

FUJI HEAVY INDUSTRIES LTD.

03 ANNUAL REPORT 2015

At a GlanceYears ended March 31

Percentage
by businessFYE March 2015
Net Sales

2,877.9billion yen

SUBARU Automotive
Business

Aerospace Company

Industrial ProductsCompany

Net sales for this division stood at ¥2,699.0
billion, an increase of ¥452.4 billion, or
20.1%, year on year. Segment income also
increased ¥91.9 billion, or 29.7%, year on
year to ¥400.9 billion.
The number of units sold worldwide
increased by 86 thousand units, or 10.4%,
year on year to 911 thousand units, owing to
the strength in the North American market.
Vehicle unit sales posted a record for the third
consecutive year both globally and outside
Japan, and for the sixth consecutive year in
the North American market.

Net sales in this division increased ¥18.4 billion,or 14.8%, compared to the previous fiscal
year, to ¥142.8 billion. Segment income alsorose ¥4.8 billion, or 33.7%, year on year to¥18.9 billion. Sales of the C-2 transport aircraft
to the Ministry of Defense exceeded that ofthe previous fiscal year, while sales to thecommercial sector increased over the previous
fiscal year thanks to net sales-boosting factors
such as the exchange rate and a surge inproduction of the Boeing 787, among others.

Net sales in the Industrial Products divisionwere down ¥0.7 billion, or 2.5%, from theprevious fiscal year, to ¥29.0 billion. Segment
income increased ¥0.1 billion, or 23.3%, year
on year to ¥0.8 billion.
Sales were higher for leisure-related engines
in North America, and sales were markedly
higher for pressure washer engines for North
American big box hardware stores. Sales forgeneral purpose engines for Japan and otherproducts, however, were lower.

Net Sales

Net Sales (Billions of yen)

SUBARU Automotive Business

93.8%
5.0%

Net Sales(Billions of yen)

Operating Income

2,699.0 (Billions of yen)

2,246.6

309.0

Aerospace Company

Industrial Products Company

1.0%
0.2%
Other

+

20.1%

2014

400.9

2015

+

29.7%

2014

2015

Points• Sales were strong outside Japan for Legacy/Outback,and WRX, and following on from last year, for
Forester as well.
• Increase in costs, such as R&D expenses, was offset
by increase in units sold, improvement in exchange
rates, and progress in reducing prime costs.

FUJI HEAVY INDUSTRIES LTD.

(Billions of yen)

124.4

+

142.8

Point

(Billions of yen)

18.9

29.0

2015

+

33.7%

2014

Operating Income(Billions of yen)

0.8

0.6

2015

• Products for the commercial sector saw increased
sales as the exchange rate improved, and production
units of the Being 787 increased.

04 ANNUAL REPORT 2015

29.8

14.1

14.8%

2014

Operating Income

–

2.5 %

2014

Point

2015

+

23.3 %

2014

2015• Sales grew for leisure-related engines and general
purpose engines in North America.

Business Highlights

Subaru Posts Record Sales in the U.S.,
Canada, and Australia in 2014

Subaru Levorg Wins
“Good Design Award 2014”

Subaru’s 2014 calendar year retail sales have posted
all-time records in its key markets of the U.S.,
Canada, and Australia. Subaru’s U.S. sales in particular have exceeded a 500,000 unit milestone forthe first time in its history, while also achieving six
consecutive years of record sales and becoming theonly manufacturer in the U.S. to post seven consecutive years of sales growth.

The Subaru Levorg has won the “Good DesignAward 2014” from the Japan Institute of Design
Promotion (JDP). Following the 2013 award for theForester and 2012 award for the Impreza and Subaru
XV, this marks the 3rd consecutive year that Subaru
has been honored with the Good Design Award,
which reflects JDP’s high praise for the Subaru
design that fuses together style and functionality.

Subaru Debuts “EyeSight”
Driving Support System in Europe

FHI Subaru Visitor Center Sees
One Million Visitors
Visitors to the Subaru Visitor Center, located within the
Yajima Plant of the Gunma Manufacturing Division,
reached a cumulative total of 1 million people on
September 8, 2014. The Center was opened on July
15, 2003 to commemorate FHI's 50th anniversary
and hosts factory tours, mainly for elementary school
students visiting as part of their social studies classes.
During tours, visitors are given the opportunity to view
automobile manufacturing processes.

The all-new Outback launched in Europe during 2014
was the first Subaru model built to European specifications that featured our proprietary EyeSight driving
support system. EyeSight’s launch on the European
market, following on from its introduction to the Japanese, Australian, and North American markets, enables FHI to extend EyeSight’s deployment acrossmarkets globally.

Cumulative Production of HorizontallyOpposed SUBARU BOXER Engine Reaches
15 Million Units

The New Subaru WRX’s HorizontallyOpposed “DIT” Engine Named to2015 Ward’s “10 Best Engines”
The U.S. automotive industry trade journal Ward’s
has named Subaru’s “FA20” 2.0-liter 4-cylinder horizontally-opposed direct injection turbo “DIT” engine
in the U.S.-specification 2015 Subaru WRX a winnerof its 2015 Ward’s “10 Best Engines” award. This is
the fourth time, coming after a two-year hiatus, that
Subaru has won a prestigious Ward's “10 Best Engines” accolade.

5 Subaru Models Awarded 2015 TOP
SAFETY PICK+ (TSP+) by IIHS in the U.S.
The Insurance Institute for Highway Safety (IIHS) in the
U.S. has awarded the best possible ranking of TSP+ in2015 safety assessments of EyeSight-equipped 2015
models of Legacy, Outback, Forester, Impreza, andSubaru XV currently sold in the North American region.

FUJI HEAVY INDUSTRIES LTD.

05 ANNUAL REPORT 2015

The cumulative total of horizontally-opposed
SUBARU BOXER engines produced has reached 15
million units. The achievement has come in the 49th
year since our water-cooled 4-cylinder horizontally-opposed aluminum engine was developed in 1966
and installed for the first time in the compact passenger car Subaru 1000 in May of the same year.

Plant Constructed for Assembly ofCenter Wing Boxes for Boeing’s 777X
FHI has begun construction of its third assembly
facility for aircraft parts on the premises of its Handa
Plant located in Handa City, Aichi Prefecture, Japan.
At the new facility, FHI plans to assemble center
wing boxes for the U.S.’s Boeing Co.’s next-generation passenger jet, the Boeing 777X. The new facility is scheduled to be completed in 2016.

Consolidated Financial and Non-Financial Highlights
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31(Billions of yen)

2011

2012

2013

2014

2015

For the Year:

3,000

2,877.9

2,500¥ 1,580.6¥ 1,517.1¥ 1,913.0¥ 2,408.1¥ 2,877.9

Operating income

84.1

44.0

120.4

326.5

423.0

Net income (loss)

50.3

38.5

119.6

206.6

261.9

Capital expenditures

43.1

54.3

70.2

68.5

110.7

Depreciation expenses

49.8

53.7

55.9

54.9

64.8

R&D expenses

42.9

48.1

49.1

60.1

83.5

Automobiles sales volume (thousand units)

657

640

724

825

911

Exchange rate (¥/$, non-consolidated)

86

79

82

100

108

Net sales

Net Sales (Billions of yen)

2,408.1

2,000
1,500

1,913.0
1,580.6 1,517.1

1,000
500
0

2011

2014

2015

Net Income (Loss)

500

1,188.3

1,352.5

1,577.5

1,888.4

2,199.7

Net assets

414.0

451.6

596.8

770.1

1,030.7

Interest-bearing debt

330.6

341.0

307.2

269.7

211.2

Number of employees

27,29627,12327,50928,54529,774

Total assets

2013

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

At Year-End:

2012

423.0

400
326.5

300

261.9
206.6

200

Financial Ratios:
ROE (%)

12.7

8.9

22.9

30.4

29.3

ROA 1 (%)

7.0

3.5

8.2

18.8

20.7

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

06 ANNUAL REPORT 2015

120.4 119.6
100 84.1
50.3 44.0 38.5

0

2011

2012

2013

2014

2015

A Message to Our Shareholders

We pursue sustainable growth as a compelling company
with strong market presence and continued focus
on our differentiation strategy.
Yasuyuki Yoshinaga
Representative Director of the Board,
President and CEO

FUJI HEAVY INDUSTRIES LTD.

07 ANNUAL REPORT 2015

A Message to Our Shareholders

Q1 What is your evaluation of results for FYE March 2015?
A1 We posted record high results for a third straight year thanks totireless effort by all divisions and subsidiaries in our Group.

Consolidated results for FYE March 2015 were 910,700 vehicles sold(an increase of 10.4 percent compared with the previous fiscal year),net sales of 2,877.9 billion yen (up 19.5 percent), operating income of
423.0 billion yen (up 29.6 percent), and net income of 261.9 billion yen(up 26.7 percent), all of which were record numbers for the third year
in a row. Our operating margin also increased to 14.7% from
13.6% last year.
It is clear that continued weakness in the yen’s exchange rate
was a substantial factor in these improved results. However, I thinkthat behind this three-year achievement of record performance arecompounded efforts by all subsidiaries, affiliated companies, anddivisions in our Group who seized this tail wind and did not rest on
their laurels. Our Development units delivered new, extremelycompetitive models, such as Legacy/Outback, to market this fiscal
year. In addition, all manufacturing departments continuously
operated at near-maximum capacity in order to respond to robust
demand. Not only our Automotive Business, but also our Aerospace
Company and Industrial Products Company each steadily grew
their results.

Q2 What do you see as the reason for strong sales in the U.S.?
A2 Rapid growth continues as we garner high evaluations
for our safety performance.

Last year, in 2014, the approximately 510,000 new vehicles sold in
the U.S. market represented nearly a three-fold increase over the
180,000 or so recorded in 2008. This growth cannot be solely
explained by the strength of the U.S. business environment and the
expanding demand for new vehicles. During this period, there has
been increased demand in the U.S. market for SUVs, where Subaru
is strong. However, I believe that the greatest factor leading to ourincreased sales has been many Subaru models receiving top marks
in safety tests by U.S. rating agencies, solidifying an image in
American consumers' minds that Subaru is committed to safety.

FUJI HEAVY INDUSTRIES LTD.

08 ANNUAL REPORT 2015

Normally, this level of rapid growth would start to show signs oftapering off, but we have been seeing increasing momentum sincelaunching our new Legacy/Outback models last year. Minimal
weakness in sales of models that have not been recently revamped,
as well as our ability to hold sales incentives to the lowest level in theindustry, is proof that the Subaru brand is extensively supported in
the U.S. market.
We have set a target of 540,000 units in the U.S. market in 2015,
yet our local dealers have requested supply increases, reporting thatthey can aim for a higher target.

A Message to Our Shareholders

Q3 How do you plan to grow your business in the U.S. in the future?
A3 We will aim to build a solid customer base in the U.S. market

by expanding production capacity, introducing PHEV that meetenvironmental regulations, and strengthening our after-sales service.

Under Subaru of America, Inc. (SOA), our local subsidiary in the U.S.
market, we are continuing to enhance the quality of our sales
network, with a total of 625 dealers at present. Our growth strategy
is not to increase the number of dealers, but rather to increase thenumber of units sold at each dealer. The result has led to an established understanding that “becoming a Subaru franchise will
increase sales,” which fuels a positive cycle of competent dealers
gathering around us.
In order to further accelerate our business in the U.S., threepolicy measures are built into our mid-term management
vision, “Prominence 2020,” announced in May 2014. The first is
introducing a new multi passenger three-row model, which wecurrently have under development and is strongly requested
by local dealers. The second is expanding production capacity
at our subsidiary Subaru of Indiana Automotive, Inc. (SIA) to take ourcurrent 200,000-unit production to nearly 400,000 units by the endof 2016. And the third is support for the environment. In responseto the ZEV regulations in the U.S. that will be applied to new models
starting in the 2018MY, we have announced plans for a plug-in
hybrid electric vehicle (PHEV) featuring the compelling driving experience that is Subaru’s hallmark.
This year, SOA announced these policy measures at the gathering for our U.S. dealers held in Indianapolis and received a spiritedreaction from those in attendance. These measures are a message
to our U.S. dealers that “Subaru will pour its full support into the U.S.
market, so please feel no anxiety about investing in your dealership.” Of particular importance is strengthening our after-sales
service. Even in the continually robust U.S. market, there will be an
economic pullback at some point. Until that time, it is all the more
important to build a solid customer base, for which enhancing
after-sales service is indispensable. Therefore we plan to offer, alongside SOA, our full investment support for dealers’ service facilities
going forward.

FUJI HEAVY INDUSTRIES LTD.

09 ANNUAL REPORT 2015

A Message to Our Shareholders

Q4 Please share your outlook for FYE March 2016.
A4 We forecast consolidated net sales of 3,030 billion yen

and consolidated operating income of 503.0 billion yen
on the back of increasing sales in a consistently strong U.S. market.

In terms of consolidated results for FYE March 2016, we are planningfor 928,300 units for the number of vehicles sold, net sales of 3,030
billion yen, and operating income of 503.0 billion yen. These figures
were not created a priori, but rather were calculated from budgets
based on diligent analysis of conditions by each division. Our initialdecisions were made with calculations assuming an exchange rateof 115 yen/US$. Afterwards, however, as the yen moved further
downward relative to the dollar, we announced final forecast numbers
assuming 118 yen/US$.
Reassessing conditions in each region, we see stronger sales
in the U.S. than expected, and we may even be able to post results
exceeding forecasts. At the same time, conditions in Russia andother regions are more severe than they were when we set ourplans. In the Japan market, our plan was for decreased sales withthe prospect that the “new model effect” has run its course and theoutlook shows demand settling down, but April and May of this year
have continued to bring higher sales than expected, which may leadto results exceeding forecasts. Although there are these regional
differences, our largest market, the U.S., remains strong and I am
confident that we will be able to achieve our targets overall.

Q5 How are you putting effort into initiatives to maintain sustainable growth going forward?
A5 We are working on thorough differentiation of our products and businesses,
aiming for a “prominent” presence in the minds of our customers.

In order for FHI, which is a small automaker, to survive in thismarket, it is indispensable for us to focus our business resourceson specific markets and products, while clearly standing apart fromcompetitors. This strategy of ”differentiation” forms the core of ourbusiness strategy and is the principle behind our concept of “prominence,” which is the key word in the title of our mid-term management vision guiding us to stand above the crowd. The concept is not
simply prominence with respect to other companies; the simple
word encapsulates our aim for “Subaru to have a prominent
presence in the minds of our customers,” which makes it a very highhurdle indeed. This objective does not stop where the slogan ends.
Each and every member of all divisions is called upon to thoroughly
consider what it means to be “prominent in the minds of ourcustomers” and how to implement that in their work.

FUJI HEAVY INDUSTRIES LTD.

10 ANNUAL REPORT 2015

A specific approach to this is embodied in our efforts to focus on
the two key activities of “Enhancing the Subaru brand” and “Building
a strong business structure.” In order for the Subaru brand to beprominent in the hearts and minds of our customers, we must
continue to stay one step ahead of competitors with respect to ourgreatest strengths: safety features and drivability. Also, in order toimprove our market competitiveness and continue to meet the
expectations of our shareholders, it is absolutely necessary to takecost reductions to a new level, push operating efficiencies forward,
and strengthen our business platform.
Even though business results are as favorable as they are, now isthe very time for all FHI employees to redouble our efforts and continue
to have a positive sense of urgency and even anxiety as we work tofurther strengthen our brand and our business competitiveness.

A Message to Our Shareholders

Q6 What increased amounts are you targeting for your R&D expenses and capital expenditures?
A6 We will continue to pursue stronger R&D, increased production capacity,and improved workplace environments to respond to safety andenvironmental requirements.

In our consolidated three-year investment plan from FYE March
2015 to 2017, we initially allocated 250.0 billion yen to our R&D
expenses and 330.0 billion yen to capital expenditures. Subsequent
upward revisions, however, have taken into account the trend of
positive results since announcing the plan. Our new allocations arefor 280.0 billion yen and 400.0 billion yen in R&D expenses andcapital expenditures respectively.
In recent years, as each company launches vehicles with
automatic brake assist and other features, development competition
for safety technologies has reached a new, more challenging level.
Against this backdrop, Subaru’s EyeSight has garnered the highest
safety test approval ratings in the industry and we will continue toactively push our R&D forward so that we can maintain this superiority

FUJI HEAVY INDUSTRIES LTD.

11 ANNUAL REPORT 2015

in safety features into the future. In addition, as environmental
regulations strengthen in regions across the globe, we will dedicate
effort toward ever greater fuel efficiency for internal combustion
systems, as well as toward developing PHEV. And furthermore, we
are actively hiring new and experienced engineers in order to further
strengthen our R&D programs.
At the same time, with regard to investing in facilities, our focus
has centered on building out production facilities so that we canrelieve our backlog of undelivered vehicles, though we would also
like to invest in the as yet unaddressed need to gradually renovate
aged facilities and enhance the workplace environment at ourbusiness sites.

A Message to Our Shareholders

Q7 Please tell us about your initiatives for diversity and fostering leaders of the next generation.
A7 While working to cultivate human capital with diverse skills andbusiness acumen, we are also dedicating effort to creating workplaceenvironments that support the active contribution of female employees.

Needless to say, it is important to continually train employees whowill be potential candidates for next-generation leaders, and to also
ensure smooth transitions from one leadership generation to the next,
so that our business can realize sustainable growth. Consequently,
FHI will foster not just one or two employees, but a sizeable group,
whose members are candidates for next-generation leaders, while
we select exceptional employees from the ranks of middle managers
to assume executive roles so that the management can stay freshand nimble. One link in this approach is to actively implement job
rotation across divisions for mid-career employees and middle
managers, where they are moved from domestic positions tooverseas positions, or from technical positions to sales positions,and so on. We are striving to train a team of employees with a broad
range of work skills and business instincts.

Moreover, in order for our Company to maintain a robust levelof business going forward, diversity promotion, in addition to ourtraining of next-generation leaders, is indispensable. FHI establisheda Diversity Promotion Office in 2014 and is chiefly devoting effort toestablishing an environment supportive of female employees'
contribution to the company, while also providing training support for
female managers. Also, since April 2015, a career-long FHI female
executive has served as director of the Human Resources Department, which is in charge of the Diversity Promotion Office. As wecontinue into the future, we hope to actively promote excellent
human capital regardless of age, gender, or nationality, so that we will
be able to grow as an organization with an even higher level of active
employee involvement.

Q8 Please explain a bit about the Subaru Next Story Project started in April 2015.
A8 We are utilizing the Internet, social networking services, etc.

to roll out a diverse array of projects to support the active lifestyles
of Subaru drivers.

In our mid-term management vision, “Prominence 2020,” weindicated our goal to “elevate the brand-customer relationship to a
new level” as one of our initiatives toward focusing on “enhancing
the Subaru brand.” We started the Subaru Next Story Project, led byyoung and mid-career employees, in order to put this sentiment into
action. The project takes advantage of the Internet and social
networking services to encourage customers to enjoy their Subaru
even more and to have a fulfilling lifestyle thanks in part to their

FUJI HEAVY INDUSTRIES LTD.

12 ANNUAL REPORT 2015

Subaru vehicle. At the same time, the project is also an initiative todeepen our connection to customers and to introduce activities that
we can enjoy together with them.
In this project, we develop and implement a variety of ideas toencourage the active lifestyles of our customers. To be specific, we
use a website to provide information on driving lessons, sports andoutdoor events, and other activities organized by Subaru; and we use
social networking services to facilitate exchange between users.

A Message to Our Shareholders

Q9 Please provide some information on your initiatives to strengthen corporate governance.
A9 While incorporating outside counsel and listening to feedback from society,
we strive for suitable information disclosure practices andincreased business transparency.

FHI has followed a practice of appointing professionals and experts
with business experience as outside directors and auditors,
and accepting valuable advice and instruction from external
perspectives. Going forward, we will implement measures,
including increasing our number of outside directors and auditors, tostrive to more conscientiously reflect outside opinions andcommunity input in our business decisions. Additionally, we will
devote effort to prompt and appropriate information disclosure andfurther business transparency following the content of eachprovision of the Tokyo Stock Exchange’s Corporate Governance
Code taking effect from June 1, 2015.

At present, we are putting particular effort into more extreme
quality control as one of our thematic focuses regarding governanceand CSR management. Amid continuing robust sales, each of our
production sites has been operating at near-maximum capacity inrecent years. However, it is absolutely inexcusable for quality
control to suffer as production excels. Our Production units arebeing made thoroughly aware of their responsibility to stop the line
if they are not absolutely confident in the quality of products.

Q10 Do you have a closing message for shareholders?
A10 FHI is committed to thorough and reliable automobile development andmanufacturing, while striving for sustainable growth andpreservation of the highest profit margins in the industry.

Aiming to be “A Compelling Company with Strong Market
Presence”—that is the management philosophy of FHI. In orderto realize this goal, we will continue to follow our principle that
“Customers Come First,” while demonstrating thoroughand reliable automobile development and manufacturing, anddelivering enjoyment and peace of mind to customers. At thesame time, we will continue to earn the trust of our shareholders
by bringing about sustainable growth while securing ourindustry-leading high operating margin. Thank you for your support
and feedback going forward.

FUJI HEAVY INDUSTRIES LTD.

13 ANNUAL REPORT 2015

A Message from the CFO

We will keep high profit levels while making aggressive and proactive
investments for the future in order to realize sustainable growth
as well as stable and continuous return of profit to shareholders.
Mitsuru Takahashi
Director of the Board
Corporate Executive Vice President and CFO

Boosting R&D expenses and capital expenditures
to further improve our market competitivenessIn FYE March 2015, FHI posted an operating income of 423.0 billion
yen, a 96.6 billion yen increase year on year, and a record high profit
level for the third straight year. In addition, our operating margin of
14.7% maintained its place among the highest in our industry. The

main driver of our profit increase was 103.7 billion yen from foreignexchange gain, in addition to 70.3 billion yen from an improved sales
volume and mixture and 12.4 billion yen from cost reduction.
Although this fiscal year, excluding the boost from exchange
rates, showed a drop in profit of 7.1 billion yen, this result, incomparison to the previous fiscal year's 35.9 billion yen increase inprofit, also excluding the benefit from exchange rates, does not at

all indicate a decrease in profit generating capability year on year.
The special temporary factor this fiscal year was 10.5 billion yen
in logistics expenses for local production vehicle components that
had to be shipped by air on short notice in order to work around thecargo delays in U.S. ports. Furthermore, as weakness in the yen
exceeded expectations this fiscal year, we intentionally chose not
to book the increase as additional profit and instead funneled

Three-Year Changes in Operating Income

+70.3

+12.4

-66.6
-23.2

+103.7
+51.1

+19.7

-24.0

-10.9

423.0

326.5

+170.2

+81.7

+31.5

+29.3

-65.0
-1.0

120.4

44.0
Operating income Improvement of
Cost
FYE March 2012 sales volume & reduction
mixture and others

Gain oncurrency
exchange+76.4 billion yen

SG&A expenses
and others

R&D
Operating income Gain on Improvement of
Cost
expenses FYE March 2013 currency sales volume & reduction
exchange mixture and others

SG&A expenses
and others+206.1 billion yen

FUJI HEAVY INDUSTRIES LTD.

14 ANNUAL REPORT 2015

R&D
Operating income Gain on Improvement of
Cost
expenses FYE March 2014 currency sales volume & reduction
exchange mixture and others

SG&A expenses R&D
and others expenses+96.6 billion yen

Operating income
FYE March 2015

A Message from the CFO

Three-Year Business Operation / Profit Plan (Total of FYE2015–2017)
Net sales

8 trillion yen

Operating income

1 trillion yen

Currency rate assumption: 95 yen/US$

Revised Three-Year Investment Plan (Total of FYE2015–2017)

Original plan

Revised plan

R&D expenses

250 billion yen(+59%)

280 billion yen(+78%)

Capital expenditures

330 billion yen(+71%)

400 billion yen(+107%)

Depreciation & amortization

200 billion yen(+22%)

210 billion yen(+28%)( ): vs. previous 3 fiscal-year (FYE2012–FYE2014) period

it toward R&D expenses and capital expenditures as a way torealize sustainable growth through proactive investments forthe future.
At present, FHI is enjoying favorable sales centered on the
U.S. market. Going forward, however, we expect environmental
regulations in markets around the world to strengthen, including
ZEV regulations in California and other states, and we predict
more intense competition in the development of advanced
safety technology with the prospect of automated driving in the
future. At FHI, we plan to continue boosting R&D expenses andcapital expenditures, taking advantage of the current tail windfrom favorable financial results in order to survive this highly
competitive environment.
Under our new mid-term management vision, “Prominence
2020,” announced in May 2014, we outlined a consolidated profit
plan (see table on this page) targeting total net sales, total operating
income, total R&D expenses, and total capital expenditures over thethree years from FYE March 2015 to 2017. When preparing the plan,
we assumed an exchange rate of 95 yen/US$, targeting three-year
total net sales of 8,000 billion yen and total operating income of
1,000 billion yen. Current exchange rate expectations, however,show a large shift in the direction of a weaker yen and prospects
for significantly exceeding those targets. We have decided ona policy for taking surplus profits from favorable exchange rates
and proactively channeling them to R&D expenses and capital
expenditures, raising the three-year total of R&D expenses from theinitial 250.0 billion yen to 280.0 billion yen, and likewise the total of
capital expenditures from 330.0 billion yen to 400.0 billion yen.

FUJI HEAVY INDUSTRIES LTD.

15 ANNUAL REPORT 2015

A certain amount of free cash flows maintained
while expanding proactive investments for the future
Next, I will explain our finances. FHI’s free cash flows in FYEMarch 2015 amounted to 138.8 billion yen. Since we posted cash
flows of 279.1 billion yen in FYE March 2014, this appears to bea reduction by half, unless special temporary factors are taken
into account. As I also noted last year, the first special factor wasan almost 50 billion yen cash inflow in FYE March 2014 due tothe sale of Polaris stock, a U.S. company of which FHI was thelargest shareholder. Another factor was due to the timing of tax
payments. In FYE March 2014, we had an unrecorded expense of
approximately 90 billion yen cash-out for corporate tax, due to net
operating loss carryforwards from past terms. This affected FYEMarch 2015 with an inflated 190.0 billion yen cash-out, equivalent
to a year and half of corporate taxes, due to the previous fiscal
year’s corporate and other taxes on top of the interim payment ofhalf our annual corporate and other taxes, as required by thetaxation system that bases payments on previous fiscal year
performance.
Excluding these special factors, our actual free cash flows
were approximately 140.0 billion yen in FYE March 2014 andapproximately 200.0 billion yen in FYE March 2015, reflecting
steady improvement in cash flow generation accompanying
expansion in business. From FYE March 2016 and beyond,we plan to increase the previously mentioned R&D expenses
and boost capital expenditures as proactive investment for
the future. Since we also forecast increased levels of sales, I
believe that even with this investment policy we can maintain

A Message from the CFO

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

300

Free cash flows

Shareholders’ equity to total assets

(%)

50

279.1
46.5

240

180

34.7

37.7

40

40.5

33.3

30
138.8

120

20

95.3

87.1
60

10
28.3

0

2011

2012

2013

2014

free cash flows within a range of 150.0 billion to 200.0 billion
yen going forward.

2015 (FY)0Entering a new stage of shareholder returns while
striving to further enhance our financial position
Last, let me explain our policy of returning profits to shareholders.
FHI's basic dividend policy is to have stable and continuous
payouts while considering performance-linked benefits. We haveannounced that the consolidated payout ratio would be between
20 and 40 percent in order to link dividends to performance. Thisleeway in dividend payout ratio is to absorb a drop in dividends
within this 20-point range whereby a 20 percent level is set as thebasis for the income increase and a maximum of 40 percent is
set for the income decrease.
Compared to larger automakers, FHI's financial position has
not been especially airtight. Consequently, we have focusedon retained earnings up to this point and have tried to hold a
20% minimum payout ratio. At the same time, however, ourfinancial position has steadily improved in line with increased
business in the last several years. Shareholders’ equity to total
assets reached 46.5% in FYE March 2015 and it might very well
top 50% within FYE March 2016. So we see our operations as
having entered a new stage in FYE March 2016 and beyond
and we plan to return profits to shareholders without overly
emphasizing a 20% payout ratio, even though profits continue
to increase. However, we will carefully determine what ratio is
appropriate within the 20-40% range after closely judging our

FUJI HEAVY INDUSTRIES LTD.

16 ANNUAL REPORT 2015

operating environment and performance forecasts as close to
the payout date as possible. With this in mind, we have notdecided on our dividend plans for FYE March 2016 at this point.
Furthermore, we expect ROE (return on equity) to go downin the future as shareholders’ equity increases. FHI does notdirectly base dividend payout determinations on ROE. Goingforward, however, we want to both strengthen our financial
position and make continuous and stable returns of profit
to shareholders while keeping in mind the balance of ourshareholders’ equity ratio and ROE.
Although we are not large among automobile manufacturers,
we have built a position as a company with distinct individuality
in major markets inside and outside Japan by concentrating ourlimited resources on limited markets and products. With our
mid-term management vision “Prominence 2020,” FHI aims toachieve sustainable growth through proactive and future-oriented
investment and the securing of a fundamentally high level ofprofitability. Thank you for your understanding and ongoing support
for the future.

Special Feature

PROMINENCE BY LEGACY

Leveraging Safety to Stand Out in the World
Subaru pursues automotive safety through development, design, production,and sales, for which we have won praise throughout the world.
At Subaru, we design vehicles that reflect the voices of our customers;
we build production capabilities that deliver quality and meet demand;
and we constantly review and re-commit ourselves to the value that we offer.
FUJI HEAVY INDUSTRIES LTD.

17 ANNUAL REPORT 2015

Introduction

Subaru pushes the evolution of its safety performancefrom all directions and continues to devote effort
to reliable automobile manufacturing that delivers
enjoyment and peace of mind to our customers.

EyeSight®

Control & Braking Systems
Active Torque Vectoring

Symmetrical All-Wheel Drive
The new Legacy/Outback models garnered
the highest performance ratings in Japanese, U.S.,
and European safety tests
Under its brand statement of “Confidence in Motion,” FHI iscommitted to reliable automobile manufacturing that delivers
enjoyment and peace of mind to our customers. In order tospur the evolution of the vehicle safety features that support
this “enjoyment and peace of mind,” we follow a philosophyof “All-Around Safety” and strive for revolutionary safety
technology from all fronts: active safety, passive safety, andpre-crash safety.
Amongst these technologies, the state-of-the-art EyeSight on board new Legacy/Outback earned full marks inpreventative safety performance assessments conductedby NASVA1 and the Ministry of Land, Infrastructure, Transport and Tourism. Like Levorg, Forester, and Subaru XVHybrid, these new models were selected to receive the top
JNCAP ASV+ rating. In addition, new Outback outfittedwith EyeSight earned the highest marks in the 2014 European New Car Assessment Program. Furthermore, all fivemodels with EyeSight on board sold in the U.S. market
received 2015 Top Safety Pick+ awards, the highest evaluation possible by the IIHS.2 These industry-leading safety
features recognized and awarded by ratings agencies
throughout the world are what bring the Subaru brand thetrust and support of its customers.

SUBARU ALL AROUND SAFETY

Visibility & Child Safety

Protective Systems

SUBARU Rear Vehicle Detection

1 NASVA = National Agency for Automobile Safety and Victims' Aid
2 IIHS = Insurance Institute for Highway Safety
FUJI HEAVY INDUSTRIES LTD.

18 ANNUAL REPORT 2015

Special Feature: PROMINENCE BY LEGACY

Project General Manager (PGM) Interview

Development of the new Legacy/Outback started withcareful consideration of what kind of vehicle will bringmore fulfillment to our customers’ lifestyles.
Masayuki Uchida
Corporate Vice President,
Senior General Manager of the Subaru Engineering Division(Previously Senior Project General Managerof the Subaru Product & Portfolio Planning Division)

Professional Background
April 1981:
November 2003:
April 2005:
March 2008:
April 2010:
April 2011:
April 2015:

FUJI HEAVY INDUSTRIES LTD.

19 ANNUAL REPORT 2015

Joined Fuji Heavy Industries Ltd.
General Manager, Body Design Department, Subaru Engineering Division
General Manager, Exterior Design Department, Subaru Engineering Division
General Manager, Subaru Engineering Division
PGM, Subaru Product & Portfolio Planning Division
Senior PGM, Subaru Product & Portfolio Planning DivisionCorporate Vice President, Senior General Manager, Subaru Engineering Division

Special Feature: PROMINENCE BY LEGACY

Project General Manager (PGM) Interview

If our cars are not reassuring enough so that anyone can ridein them with peace of mind, they will not be able to act
as a partner for supporting customers' lifestyles.

We have thoroughly pursued safety performance
more than anything else in order to support
fulfilling lifestyles for our customers
After taking charge of development for the new Legacy/Outback, I first dedicated effort to incorporating customer
feedback as completely as possible. Part of that process wasvisiting the homes of owners, mainly in the U.S. market,
which has shown the strongest demand for these models. I
also considered how to gain further support for Legacy/Outback and how to provide a reliable vehicle of course for the
U.S. market, but also globally. While lending an ear to avariety of opinions and requests, we thoroughly researched,and implemented the results, regarding what kind of vehicle
would bring the most enjoyment and fulfillment to ourcustomers’ lifestyles.
Of the stories that I learned from customers, I wasparticularly impressed by those regarding safety, includingcomments like, “Although the car was badly damaged in an
accident, I avoided serious harm thanks to the reliable
collision safety performance.” Every time that I came incontact with these examples of customer gratitude andappreciation, it reaffirmed my awareness of the importanceof safety performance and of our great social responsibility as
an automaker.
There are two pillars to Subaru’s safety performance
initiatives. The first is our policy for “achieving a high level ofsafety performance for all vehicle models.” In actual practice,

the driving force behind our growth has been trust in ourbrand, such that “Subaru = a vehicle with outstanding safety
performance,” which comes from Subaru safety features
being highly rated in safety assessments in countries
throughout the world. The second pillar is our pursuit ofadvanced safety technologies, as exemplified by EyeSight. At
present, automakers have brought vehicles to market withvarious kinds of driver support technologies, such as brakeassist. Despite the crowded field, EyeSight has garnered thehighest level of assessments in various safety tests.
Needless to say, we continued our pursuit of safety
performance from every angle in the development of the
new Legacy/Outback, including the adoption of the most up
to date EyeSight ver. 3. If our cars are not reassuring enoughso that anyone can ride in them with peace of mind, they will
not be able to act as a partner for supporting enjoyable andfulfilling lives for our customers.

Our development staff, to the person, haveendeavored to improve and refine designs andthe quality of drivability from our customers’
point of view
Development of the new Legacy/Outback strove for “emotional value” in the new design and driving experience, in
addition to Subaru’s already established competence infunctional value from safety performance, drivability, and

FUJI HEAVY INDUSTRIES LTD.

20 ANNUAL REPORT 2015user friendliness. The concept of “emphasizing function andperformance for a real-world tool, with the design representing the results of that emphasis” was dominant in the mindsof our development team. Our recent approach has gone one
step further by envisioning a design that positively presents
the vehicle’s achievement of high functionality and performance while keeping the importance of emphasizing functional aesthetics. As our flagship models, the new Legacy/Out-Special Feature: PROMINENCE BY LEGACY

Project General Manager (PGM) Interview

The entire team was committed to thoroughly
pursuing the performance customers demand,
which is the Subaru way that development is done.

back feature superior drivability, safety, and reliability expressedin the dynamic and powerful body, and emphasize qualitythat appeals to all five senses. We have thoroughly polishedevery small detail, from the feel of the interior and othertactile surfaces, to the sounds of the engine and the various
moving parts.
In terms of the driving experience, our work did not stop at
physical driving performance, but extended to "dynamic feel"that would stimulate drivers to notice the comfort and smoothness of the ride, hopefully reacting with the sentiment, “I would
like to keep driving this forever.” Hence, our work on both thedesign and the driving experience pursued a high level ofquality venturing into the domain of human sensibilities, or“emotional value” in other words. We strove for a vehicle thatwould heighten satisfaction for drivers and act as a partner forsupporting their fulfilling lifestyle.
Of course, aspects such as dynamic feel and inspirational
value differ from a vehicle's physical performance and cannot
be captured in numbers or figures. Our development process
had to use repeated road tests with prototypes to verify thefiner points of the driving feel, including steering and braking
response, as well as running noise and vibration, etc. There
were moments in the process when we were stuck andunable to attain our target results, but never once did members

FUJI HEAVY INDUSTRIES LTD.

21 ANNUAL REPORT 2015of the development team argue that “we can settle for thislevel.” The entire team was committed to thoroughly pursuing
the performance customers demand, which is the Subaru
way that development is done.

We strove toward the dual goals ofenvironmental performance and a comfortable
driving experience, and were able to achieve
high fuel efficiency in an AWD vehicle
Subaru’s commitment to automobile manufacturing fromthe customer's perspective is also present in our approach tofuel efficiency. To be sure, it is important to improve the advertised catalog value for fuel efficiency, but we also emphasize
the actual mileage that customers will attain in normal driving
circumstances.
Our way of thinking with regard to an environmentallyconscious driving experience is not to impose restrictions on thedriver, but rather to achieve both efficiency and comfortable drivability. Therefore, we have adopted an AWD system in order to deliversafety and comfort under a wide variety of road surfaces, eventhough it is disadvantageous for fuel efficiency due to increased
weight and mechanical loss compared with FWD vehicles. To
compensate, we improved engine and transmission efficiency,
boosted aerodynamic performance, and introduced “idling stop”
features to achieve best-in-class results for actual fuel efficiency
even compared to FWD vehicles. Indeed, customers of the
new Legacy/Outback have approved by remarking, “The fuelSpecial Feature: PROMINENCE BY LEGACY

Project General Manager (PGM) Interview

Imperatives to consider during design and development• Following the quality management cycle• Handling recalls• Pursuing safety features with our concept of“ALL-AROUND SAFETY”• Addressing fuel efficiency standards• Improving and proliferating certified low-emission vehicles• Recycling vehicles

We will continue our quest to
develop high quality vehicles
that exceed customers' expectations.

Please see our CSR website for details.
• Customers and Products (http://www.fhi.co.jp/english/envi/csr/csr/consumers/)• Environment (http://www.fhi.co.jp/english/envi/csr/csr/environment/environment.html)

We will continue to work as a team with our
subsidiaries, affiliated companies, and local
partners to deliver vehicles that exceed the
expectations of customers
When building our production facilities in the U.S., wedispatched a large number of engineers to our local production
subsidiary, Subaru of Indiana Automotive, Inc. (SIA), andcooperated across divisions, from development, to production
and quality control, in our efforts preparing for mass production. Local employees were also proactive in providing ideas,

which helped everyone work as a team to achieve high quality
and high value for our users. In addition, expectations werevery high from Subaru of America Inc. (SOA), our U.S. sales
subsidiary, and from local dealers. During development, key
persons from SOA and local dealers reviewed the design,
were actively involved in test drives, and helped us toward thefinal product with their candid input.
This demonstrates the comprehensive and collective effort
that went into developing the new Legacy/Outback, whichhave garnered very high praise for their safety and driving
performance, as well as their design and overall feel. Conse-

FUJI HEAVY INDUSTRIES LTD.

22 ANNUAL REPORT 2015

quently, since the models debuted, strong sales numbers haveoutstripped our expectations not only in the U.S. and Japan,
but in other parts of the world as well. To our delight, a considerable number of buyers have chosen the new Legacy/Outback over premium European brands.
In response to this trust, and in order to further solidify
Subaru’s brand strength in the global car market, we willcontinue our quest to develop high quality vehicles that exceed
customers’ expectations.

Special Feature: PROMINENCE BY LEGACY

Leveraging Production to Stand Above the Crowd

Gunma Manufacturing Division(Main Plant & Yajima Plant)

U.S. (SIA Plant)

Dedicating effort toward expanding capacityand ensuring efficient operations to meet
continually growing North American demand.
After the launch of new Legacy/Outback in 2014, sales of Subaru vehicles in the North American
market jumped to a new level. In order to meet this increased demand in North America,
we decided to move forward plans for expanding capacity at our local production subsidiary
Subaru of Indiana Automotive, Inc. (SIA), whose facilities will be built out to handle some 390,000
vehicles annually by the end of 2016.
Moving into the future, we will also efficiently run our production lines, a total of fivein the U.S. and Japan, to meet demand in the global marketplace.

829,000 vehicles

850,000 vehicles

960,000 vehicles

66,000 vehicle increase

1,026,000 vehicles

328,000 vehicles

394,000 vehicles

632,000 vehicles

632,000 vehicles

632,000 vehicles

Spring 2016

End of 2016 (initial plan)End of 2016 (revised plan)

Overseas

U.S. (SIA Plant)

200,000 vehicles

218,000 vehicles

Japan

Gunma
Manufacturing
Division(Main Plant &Yajima Plant)

629,000 vehicles

End of 2014

FUJI HEAVY INDUSTRIES LTD.

23 ANNUAL REPORT 2015

Special Feature: PROMINENCE BY LEGACY

Leveraging Production to Stand Above the Crowd

Imperatives to consider during production• Following the quality management cycle• Aiming for zero disasters and accidents (holding a Health and Safety Kickoff Meetingat each business site at the beginning of each fiscal year)• Risk assessment activities• 5th Voluntary Plan for the Environment (FY2012–16)• Primary environmental performance (amounts of CO2 emission, waste generation(including scrap metal sold for profit) and PRTR materials)• Communication with business partners (holding Purchasing Policy Briefings every
spring; collaborating with Cooperation Meetings composed of our business partners)
Please see our CSR website for details.
• Customers and Products (http://www.fhi.co.jp/english/envi/csr/csr/consumers/)• Environment (http://www.fhi.co.jp/english/envi/csr/csr/environment/environment.html)

In addition to popular new models, strong sales
continue for existing models
Subaru sales in the U.S. in 2014 posted a year-on-year gain of
21.0%, reaching approximately 510,000 vehicles. In addition
to seeing record high unit sales for six years running, Subaru is
the only automaker to beat previous-year U.S. results for sevenyears in a row. On top of this, sales in Canada, with approximately 42,000 vehicles (up 14.3% year on year), have seen record
highs for three years in a row. Proof that the Subaru brand ismaintaining high approval in the North American market lies
not only in the strong sales growth for Legacy/Outback—lastyear’s recipients of a full model change—but also in the steadysales of Impreza and Forester, which have not been revamped
as recently.

Bringing SIA expansion plans ahead by four years
and building capacity for some 390,000 vehicles
by the end of 2016
In FHI’s mid-term management vision, announced in May 2014,
we explained plans to expand capacity at our U.S. production
subsidiary Subaru of Indiana Automotive, Inc. (SIA), in order tomeet growing demand in North America. Originally, we hadtargeted staggered increases, starting from approximately
170,000 units initially and moving toward 310,000 in FY2017,
then 400,000 in FY2021. Increasingly robust North American
sales buoyed by the subsequent launch of new models,
however, led us to greatly expedite plans and announce a targetof 394,000 units by the end of 2016. Simultaneous with thiscapacity expansion will be the shift of production of Imprezavehicles for North America from Japan-based production to
production on a newly built line at SIA.
Our plans for boosting production
will give us, by the end of 2016, a totalof five production lines: three in Japanand two at SIA. Going forward, we willcontinue to dedicate effort to flexible
operations so that each plant will beable to promptly handle increased salesof any of our models, and so that we
can efficiently run these five productionlines at their maximum capacity.

FUJI HEAVY INDUSTRIES LTD.

24 ANNUAL REPORT 2015

Special Feature: PROMINENCE BY LEGACY

Leveraging Marketing to Stand Above the Crowd

Focusing on the inspirational and emotional valueof cars supported by exceptional utility and safety

Following a marketing strategy localized for Subaru of America,
and communicating the appeal of the Subaru brandfrom a thoroughly customer-centric standpoint
Sales of Subaru vehicles in the U.S. market have continued to grow well above the demand for
new vehicles and Subaru has continued to increase its brand presence since 2008. One of theapproaches that played a key role in enabling this rapid progress in the U.S. was the LOVE Campaign,
a marketing strategy started in 2007 by local subsidiary Subaru of America, Inc. (SOA).
FUJI HEAVY INDUSTRIES LTD.

25 ANNUAL REPORT 2015

Subaru is esteemed in the global automobile market as acompany with distinct individuality. Part of that is our use of
proprietary technologies such as the horizontally-opposedengine and Symmetrical All-Wheel Drive, which stem from our
pursuit of stability and control under a variety of road conditions.
Additionally, a significant Subaru characteristic is our thorougheffort to build cars that prioritize safety from every angle, fromprimary safety (such as visibility) to collision safety. This reliability
with regard to safety and basic driving performance had previously
won Subaru acclaim from U.S. customers who value cars aspractical driving machines.
Furthermore, results of SOA’s surveys of owner awarenessand behavior have shown strong trust and affection frommany owners toward the Subaru brand and cars. Survey
results indicated that Subaru vehicles are actively utilized not
only in daily life, but also as part of owners’ lifestyles, be it
through hobbies, sports, leisure, or other pursuits. Amidst thiscontext, SOA started, from 2007, the LOVE Campaign toshowcase owners‘ enjoyment of the inspirational and emotional
value, over and above the functions and performance, of ourcars. The campaign seeks to effectively convey Subaru’s
characteristic individuality to a wide range of customers.

Special Feature: PROMINENCE BY LEGACY

Leveraging Marketing to Stand Above the Crowd

SOA Initiatives• Strengthening customer service through telephone support
and through the website.
Please see our CSR website for details.
• Customers and Products (http://www.fhi.co.jp/english/envi/csr/csr/consumers/)

Marketing a fulfilling lifestyle achievedby driving a Subaru
Prior to 2007, Subaru advertising in the U.S. had been short-termin focus, targeting groups of prospective buyers by showing thespecific functions and performance of each model—such as
price or fuel economy. Consequently, the overall brand image
was vague and market awareness of Subaru idled at a low level.
To address this, the LOVE Campaign chose a unique marketingstrategy to express the brand value from an owner's standpoint,
including the owner‘s trust and love of their Subaru and thefulfilling lifestyle they are able to create with their family
because they drive a Subaru.
The campaign struck a chord with U.S. buyers and successfully
expanded the customer demographic of the Subaru brand.
Furthermore, the revolutionary EyeSight advanced driving support
system made its debut, while at the same time all Subaru
models garnered the highest approval ratings from U.S. safety
agencies. These awards allowed us to further prove the highlevel of safety that underscores owners’ “love for Subaru,”
boosting the campaign’s persuasiveness in the process.

Devoting effort to social contribution activities
while aiming to be the most loved company inlocal communities
As part of the LOVE Campaign, SOA inaugurated “Share theLove,” a program through which $250 is donated to a charitableorganization for each Subaru vehicle sold. The program was very

well received by customers, with many voicing opinions such as,“I am glad that I can support society by purchasing a Subaru.”
Furthermore, SOA is currently rolling out a project called“The Subaru Love Promise,” and is being run in collaboration
with dealers all across the U.S. Specifically, The Subaru Love
Promise is a variety of initiatives to contribute to local communities and societies through activities and charitable causes suchas environmental conservation, education, animal protection,and similar activities.

Through these types of activities, SOA and Subaru dealers
in each part of the U.S. hope to become objects of trust andlove in the eyes of owners and local communities, much thesame as the Subaru brand and cars. To that end, we are striving
to further increase the number of devotees to vehicles under
the Subaru brand, while also helping each dealer grow toward
being No. 1 in their region.

VOICE
Providing cars that precisely reflect market demands,
while continuing to build relationships of long-term trust with customers
Subaru has won trust from its customers by continuing to provide
vehicles to the U.S. market with superior quality and the industry’s
most advanced safety features. Additionally, by becoming a partner in
the active lifestyles of owners, including responding to diverse
customer demands such as “wanting to safely navigate snowy roads”
and “wanting to enjoy long-distance family road trips,” the Subaru
brand has come to enjoy devotion and love from its owners.
Of course, it is indispensable to introduce models that deftly
perceive the needs of the marketplace in order to keep customers
choosing Subaru. This is why the Subaru models in our current lineup
are all situated in growth segments of the U.S. marketplace and reflect
customer demands in terms of size, price point, etc. We are proud todeclare that our success today in the U.S. is the result of collaboration

FUJI HEAVY INDUSTRIES LTD.

26 ANNUAL REPORT 2015

utilizing Fuji Heavy Industries’ advanced technological development
plus SOA’s market analysis and marketing acumen.
Going forward, we will continue to build long-term relationships oftrust with owners by providing them with special experiences that arepart of what make a Subaru a Subaru.

Thomas J. Doll
President
Chief Operating Officer

Corporate GovernanceCorporate GovernanceCorporate Governance System
Since June 1999, FHI has employed an executive officer
system that clarifies the managerial responsibilities of executives in each division. In June 2003, we reduced the term of
directors and executive officers from two years to one. Moreover, since June 2004, based on a decision of the Board of
Directors, the Executive Nomination Meeting is responsible

for the selection of corporate officer candidates, and the Executive Compensation Meeting is responsible for evaluating theperformance and determining the compensation of executives.
Also, the execution of important business operations is
decided and supervised by the board of directors and auditedby the board of corporate auditors. The board of directors
consists of eight members with two of them invited from theoutside as independent members to enhance governance.
The board of corporate auditors consists of four memberswith three of them invited from the outside for higher objectivity to monitor business management. In addition, we will

System of Corporate Governance
General Meeting of Shareholders

Executive Nomination Meeting

Board of Corporate Auditors Meeting
4 Auditors(Incl. 3 Outside Corporate Auditors)

Executive Compensation Meeting
Board of Directors Meeting
8 Directors (Incl.2 Outside Directors)
Committees

Accounting Auditors

CSR Committee
President / Representative Directors

Environmental Committee

Internal Audit Department(Audit Department)

Compliance Committee
Executive Management Board Meeting

Recall Committee

Corporate Vice Presidents

Export Control Committee

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

FUJI HEAVY INDUSTRIES LTD.

27 ANNUAL REPORT 2015

take various measures to further strengthen internal control,
and will also disclose information fairly and in a timely mannerin order to increase management transparency.

Internal Controls System
Internal controls are an indispensable mechanism for achieving
corporate objectives, and management is responsible forestablishing them and maintaining their effectiveness andefficiency. At FHI, the Corporate Planning Department (whichplays a central role in the common functions of each business) and other company-wide departments maintain close
links with other departments and companies to enhance risk
management.
In addition, the Audit Department performs planned
audits of each department and Group company. To support
internal controls, FHI has created a system and organization toensure compliance, which is the foundation of risk management. Further, in compliance with the Standards for Management Assessment and Audit Concerning Internal Control
Over Financial Reporting issued by the Business Accounting
Deliberation Council of the Financial Services Agency on
February 15, 2007, we work to continuously strengthen theinternal controls system of the entire Group so as to achieve
the following:
1. Effective and efficient operations
2. Reliable financial reporting
3. Compliance with laws and regulations in all businessactivities
4. Safeguarding of assets

Corporate Governance

Executive Compensation

Risk Management

As approved by the Ordinary General Meeting of Shareholders in June 2006, the total amount of yearly compensation paid to directors and corporate auditors is limited to ¥600
million and ¥100 million, respectively. The compensation paid
to directors must be approved by the Board of Directors andis divided into a fixed amount (based on position, the business environment, and other factors) and a performancebased amount (based on consolidated ordinary income forthe fiscal year under review, the business environment, andother factors). In fiscal 2015, compensation for directors andcorporate auditors was as follows:
Total compensation (millions of yen)Classification

NumberLocation-Specific Business Continuity Plans (BCPs)

We define risk as uncertain elements with the potential for
negative impact on our business operations. While there aremany types of risk, we call those risks that are particularly
dangerous to our business operations and that we cannot
handle through regular decision-making channels “crisis-levelrisks” and categorize them as follows: natural disaster, accident, internal human factors, external human factors, social
factors (domestic, overseas), and compliance. We havecreated manuals for dealing with each type of emergency,
which delineate what communication channels are to be
used once a risk is recognized, how to form crisis management headquarters, and other methods to follow to respond
optimally to the situation.

Basic compensation
FixedamountPerformancebased amountWith the goal of minimizing any reduction of service tocustomers and preventing loss of market share and corporate value, we have created a BCP for each business unit tomaintain business operations or restore them as quickly as
possible in the event of an emergency. Should our resources(employees, physical assets, monetary assets) be affectedby an emergency, we will leverage our remaining resources
to minimize the shutdown of priority operations and restore
all operations to their original state as quickly as possible.
We have also established an Emergency Response Policy,
in accordance with which we strive to maintain operationsin the event of an emergency.
Emergency Response Policy
1 Give first priority to people’s survival and physical safety.

Directors(excluding outside directors)

7

241

229

470

Corporate auditors(excluding outside corporate auditors)

2

30

−

30

Outside executive officers

3

44

−

44

Total

12

315

229

544

2 Minimize loss of stakeholder interests and corporate
value.
3 Act always with honesty, fairness, and transparency,
even in an emergency.

Note: This table includes one corporate auditor who retired by the end of the fiscal year.
As of March 31, 2015, the Company maintains seven directors (including one outside
director) and four corporate auditors (including two outside corporate auditors).

FHI emergency response procedure manual and crisis
management (disaster prevention) guidelines

FUJI HEAVY INDUSTRIES LTD.

28 ANNUAL REPORT 2015

Board Directors / Executive Officers

FUJI HEAVY INDUSTRIES LTD.

29 ANNUAL REPORT 2015

Board Directors / Executive Officers

Directors of the Board

Executive Officers

Outside Directors
The Company has appointed Toshio
Arima to the position of outside director.
Possessing considerable experience as an
executive and a high degree of expertisein the area of CSR, Mr. Arima offers soundadvice to and ensures the independent
monitoring of the Board of Directors andother bodies. The Company has appointed
Nobushige Imai to the position of outside
auditor. Mr. Imai is fully qualified for this position owing to the wealth of management
experience and knowledge he acquired as
an executive in the financial industry, andhe has the character and ability needed toundertake audits in an objective manner.
In addition, the Company has appointed
Takatoshi Yamamoto to the position ofoutside auditor. Mr. Yamamoto is fully qualified for this position owing to the wealth ofknowledge of corporate activities he gained
as a securities analyst and the corporate
management experience he gained as an
executive in the manufacturing industry.
Further, since they possess exemplary
backgrounds and no conflict with theinterests of ordinary shareholders can beforeseen, the Company has appointed Mr.
Arima and Mr. Yamamoto as independent
directors under Tokyo Stock Exchange(TSE) regulations.

Yasuyuki Yoshinaga 1

Takeshi Tachimori 5

Corporate Executive Vice President

Representative Director of the Board
President & CEO

Director of the Board
Corporate Executive Vice President

April 1977
April 2005

April 1977
June 2006

Shuzo Haimoto
Hisashi Nagano
Nobuhiko Murakami

June 2006
April 2007
June 2007
June 2009
June 2011

Joined the Company
Corporate Vice President, Senior General Manager of Strategy Development
Division, and General Manager of Corporate Planning Department
Corporate Vice President and Chief General Manager of Strategy Development DivisionCorporate Vice President, Chief General Manager of Subaru Japan Sales &Marketing Division, and General Manager of Sales Promotion Department
Corporate Senior Vice President and Chief General Manager of Subaru Japan
Sales & Marketing Division
Director of the Board and Corporate Executive Vice President
Representative Director of the Board, President & CEO

Jun Kondo 2
Representative Director of the Board
Deputy President
April 1976
June 2003
May 2004
June 2004
June 2006
April 2007
June 2008
June 2011

Joined the Company
Corporate Vice President, Chief General Manager of Subaru Manufacturing
Division, and Chief General Manager of Gunma Plant
Corporate Vice President, Chief General Manager of Subaru Cost Planning &Management Division, and General Manager of Cost Planning Department
Corporate Senior Vice President and Chief General Manager of Subaru Cost
Planning & Management DivisionCorporate Senior Vice President, Chief General Manager of Subaru Cost Planning &Management Division, and Senior General Manager of Subaru Purchasing DivisionCorporate Senior Vice President, Chief General Manager of Strategy Development
Division, and Chief General Manager of Subaru Cost Planning & Management Division
Director of the Board and Corporate Executive Vice President
Representative Director of the Board and Deputy President

Naoto Muto 3
Director of the Board
Corporate Executive Vice President
April 1977
April 2005
June 2006
June 2007
April 2009
June 2010
June 2011

Joined the Company
Corporate Vice President, Senior General Manager of Subaru Product & Portfolio
Planning Division, and General Manager of Subaru Product & Portfolio Planning DivisionCorporate Vice President and Chief General Manager of Subaru Product & Portfolio
Planning DivisionCorporate Senior Vice President and Chief General Manager of Subaru Product &Portfolio Planning DivisionCorporate Senior Vice President and Chief General Manager of Subaru Purchasing DivisionCorporate Executive Vice President and Chief General Manager of Subaru Purchasing
Division
Director of the Board and Corporate Executive Vice President

April 2009
April 2010
April 2011
June 2011
April 2013
June 2013

Joined the Company
Corporate Vice President and Senior General Manager of Subaru Product &Portfolio Planning DivisionCorporate Vice President, Chief General Manager of Subaru Product &Portfolio Planning Division, and President of Subaru Tecnica International Inc.
Corporate Senior Vice President and Chief General Manager of Subaru
Product & Portfolio Planning DivisionCorporate Senior Vice President and Chairman, President & CEO of Subaru ofAmerica, Inc.
Corporate Senior Vice President; Chairman, President & CEO of Subaru ofAmerica, Inc.; and Chief General Manager of Subaru Overseas Sales &Marketing Division 1
Corporate Executive Vice President, Chairman & CEO of Subaru of America,
Inc., and Chief General Manager of Subaru Overseas Sales & Marketing
Division 1
Director of the Board and Corporate Executive Vice President

April 1978
June 2007
April 2009
April 2010
April 2014
June 2015

Corporate Vice President

Joined the Company
Corporate Vice President and President & CEO of Subaru of Indiana
Automotive, Inc.
Corporate Vice President, Chief General Manager of Subaru
Manufacturing Division, and Chief General Manager of Gunma Plant
Corporate Senior Vice President, Chief General Manager of Subaru
Manufacturing Division, and Chief General Manager of Gunma Plant
Corporate Executive Vice President and Chief General Manager ofSubaru Purchasing Division
Director of the Board and Corporate Executive Vice President

Toshio Arima 7
Outside Director
June 2011

Outside Director

April 2010
June 2010
April 2011
June 2012

Masashi Takahashi
Masami Iida
Hiromi Tsutsumi
Shoichiro Tozuka
Toshiaki Tamegai
Hiroki Kurihara
Tetsuo Onuki
Yoichi Katou
Masayuki Uchida
Takuji Dai
Fumiaki Hayata

Yoshinori Komamura 8
Outside Director
June 2015

Auditors

Outside Director

Standing Corporate Auditor
Akira Mabuchi
Nobushige Imai

Director of the Board
Corporate Executive Vice President
Joined the Company
Corporate Vice President and General Manager of Finance & Accounting Department
Corporate Senior Vice President, CFO, and General Manager of Finance & Accounting
Department
Corporate Senior Vice President, CFO, General Manager of Finance & Accounting
Department, and President of Eco Technologies Company
Corporate Executive Vice President, CFO, General Manager of Finance & Accounting
Department, and. President of Eco Technologies Company
Corporate Executive Vice President, CFO, and President of Eco Technologies Company
Director of the Board, Corporate Executive Vice President, CFO, and President

Yasuo Kosakai
Tomomi Nakamura
Kazuo Hosoya
Masaki Okawara
Yasunobu Nogai
Satoshi Maeda
Toshiaki Okada

Masahiro Kasai 6
Director of the Board
Corporate Executive Vice President

Mitsuru Takahashi 4
April 1978
June 2006
April 2009

Corporate Senior Vice President

7

3

5

6

1

FUJI HEAVY INDUSTRIES LTD.

2

8

Corporate Auditor
430 ANNUAL REPORT 2015

Takatoshi Yamamoto
Shinichi Mita

Consolidated Ten-Year Financial Summary

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES Years ended March 31(Millions of yen)(Thousands of U.S. dollars1)

2011

2012

2013

2014

2015

2015

¥ 1,572,346
1,217,662
354,684
309,004
45,68031,90618,481—¥ 1,445,790 ¥ 1,428,690 ¥ 1,580,563
1,241,427
1,164,564
1,152,763
339,136
281,226
275,927
255,001
287,029
248,577
84,13527,350（5,803）63,214（21,517）（443）
50,326（69,933） （16,450）
34,900—（13,416）¥ 1,517,105
1,222,419
294,686
250,727
43,95952,87938,45344,474¥ 1,912,968
1,501,809
411,159
290,748
120,41193,082
119,588
152,009¥ 2,408,129
1,728,271
679,858
353,369
326,489
328,865
206,616
210,757¥ 2,877,913
2,017,490
860,423437,378
423,045392,206
261,873309,271$ 23,928,769
16,774,674
7,154,095
3,636,634
3,517,461
3,261,046
2,177,376
2,571,473¥ 494,423
493,397
1,296,388
38.1%¥ 394,719
393,946
1,165,431
33.8%¥ 413,963
412,661
1,188,324
34.7%¥ 451,607
450,302
1,352,532
33.3%¥ 596,813
595,365
1,577,454
37.7%¥ 770,071
765,5441,888,363
40.5%¥ 1,030,719
1,022,417
2,199,714
46.5%$ 8,570,042
8,501,104
18,289,798

2006

2007

2008

¥ 1,476,368
1,125,293
Cost of sales
351,075
Gross profit
292,736
Selling, general and administrative expenses
58,339Operating income (loss)
28,674
Income (loss) before income taxes and minority interests
15,611
Net income (loss)—
Comprehensive income¥ 1,494,817
1,142,674
352,143304,237
47,90645,58931,899—¥ 495,703
494,004
1,316,041
37.5%

2009

2010

For the year:
Net sales

At year-end:
Net assets2
Shareholders’ equity
Total assets
Ratio of shareholders’ equity to total assets (%)¥ 467,786
465,522
1,348,400
34.5%¥ 381,893
380,587
1,231,367
30.9%

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

¥

20.66
20.66
649.41

¥

44.46
44.44
687.81

¥

25.73
25.73
687.02¥ （91.97） ¥ （21.11） ¥——505.59488.58¥80,073
119,289
46,893782,865
46,367¥81,454
126,32950,709782,865
42,920¥87,164
118,869
52,020782,865
44,484¥

DilutedNet assets

64.56—
528.88¥49.27—
576.97¥153.23—762.87¥264.76—980.98¥335.57—
1,310.15

$

2.79
—
10.89

56,062
67,37842,907
782,865
34,240¥58,611
67,035
48,115
782,865
33,139¥61,544
94,98649,141
782,865
28,890¥61,486
98,53760,092782,865
51,386¥

71,821
135,346
83,535
782,865
70,942$

597,165
1,125,351
694,562

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

74,036
95,15342,831
782,865
40,839¥65,78589,077
37,175
782,865
39,223¥

Number of employees3
Parent only
Consolidated

11,998
26,115

11,752
25,598

11,90926,404

12,13727,65912,48327,586

12,42927,296

1. U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥120.27 to US$1.00, the approximate rate of exchange at March 31, 2015.
2. Prior year amounts have been reclassified to conform to the current year presentation.
3. As of March 31
FUJI HEAVY INDUSTRIES LTD.

31 ANNUAL REPORT 2015

12,35927,123

12,71727,50913,03428,545

13,88329,774

Five-Year Automobile Sales Years ended March 31

Consolidated Automobile Sales by Region (Number of units)
Japan
China

United States
OthersCanadaRussiaEuropeConsolidated Automobile Sales (Number of units)

Australia

1,000,000

910,695
825,098

800,000

724,466
656,964 639,862

600,000

400,000

200,000

0

2011

2013

2012

2014

2015

Consolidated Automobile Sales by Model (Number of units)
LegacyWRX
OEM

Impreza
Tribeca
OthersForester
Exiga
Minicars

LevorgSUBARU BRZ

1,000,000

910,695
825,098

800,000

724,466
656,964 639,862

600,000

400,000

200,000

0

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

Domestic units:
LegacyImpreza
ForesterLevorgWRX
ExigaSUBARU BRZOEMOthers
Passenger cars
Minicars
Domestic total

22,673
20,184
12,685
0
0
7,859
0
4,430
303
68,134
89,971
158,105

22,812
29,12213,803
0
0
8,020
249
5,844
303
80,15392,189172,342

24,20753,25018,044
0
0
7,392
6,711
2,778
368
112,750
50,372
163,122

18,961
61,071
36,572
0
0
3,853
3,380
1,857
453
126,147
55,454
181,601

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

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

278,959
28,05911,32048,244
41,15062,412
28,715498,859

280,356
28,23915,86039,07536,92848,323
18,739467,520

357,569
32,644
14,71946,382
38,12050,18521,725561,344441,799
36,013
15,31431,756
39,51544,80734,293
643,497

527,630
42,43911,55935,73038,88953,82137,875
747,943

Overseas units by model:
LegacyImpreza
Forester
WRX
Tribeca
SUBARU BRZOEMOthersOverseas total
Grand total

225,388
87,066
176,453
0
5,643
0
3,865
444
498,859
656,964

210,194
90,149157,833
0
5,702
38
3,372
232
467,520
639,862

207,460
190,864
147,679
04,243
10,100591
407
561,344724,466

182,712
210,828
231,173
0
2,561
15,822
256145
643,497825,098

235,791
196,403269,649
37,982
64
7,914
135
5
747,943
910,695

FUJI HEAVY INDUSTRIES LTD.

32 ANNUAL REPORT 2015

Non-consolidated Automobile Sales (Number of units)

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

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

2011

2012

2013

2014

2015

23,212
20,85913,160
0
0
8,150
0
5,313
70,69492,752
163,446

23,96830,56613,990
0
0
8,477
585
5,993
83,57996,457
180,036

25,42454,306
18,951
0
0
7,845
6,850
2,953
116,329
50,381
166,710

19,27262,51937,124
0
0
3,869
3,334
1,944
128,062
57,779185,841

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

Impreza
SUBARU BRZForesterOEM

LevorgMinicars

200,000

185,841

180,036
166,710

163,446

WRX

167,147

150,000

100,000

50,000

Export units:
LegacyImpreza
Forester
WRX
Tribeca
Exiga
SUBARU BRZOEMOthersExport total

67,926
83,921
174,541
0
0
374
0
3,865
70
330,697

48,304
100,350
162,199
0
331
232
211
3,372
0
314,999

30,559198,232
142,7450
222
407
11,542316
0384,023

22,817206,022
247,3627,644
0
145
15,11886
0499,194

34,344
199,770
265,072
37,865
0
5
8,418
135
0
545,609

U.S. retail sales 1
LegacyImpreza
Forester
WRX
Tribeca
SUBARU BRZ
U.S. total

131,873
44,39585,08002,472
0263,820

146,806
41,19676,196
02,791
0266,989

164,680
89,19576,347
0
2,075
4,144
336,441

160,340
130,567
123,591
0
1,598
8,587
424,683

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

CKD 2 overseas(SIA portion)

163,469
163,469

175,256
175,256

185,757
183,729

165,554
159,266

222,513
218,565

SIA production units
LegacyTribeca

Legacy
Exiga

0

2011

2012

2013

2014

2015

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

Impreza
SUBARU BRZForesterOEM

WRX
OthersTribecaCKD Overseas

600,000

545,609499,194
450,000

384,023
330,697 314,999
300,000

222,513150,000

3

159,215
5,558

164,968
5,661

177,4713,713

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

161,204
2,307

206,68100

33 ANNUAL REPORT 2015

163,469

2011

175,256

2012

185,757

2013

165,554

2014

2015

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

The Fuji Heavy Industries Ltd. GroupThe Fuji Heavy Industries Ltd. Group ("the Group") isengaged in activities conducted under four business divisions: Automobiles (the Group’s core operating domain,which accounts for over 90% of consolidated net sales),Aerospace, Industrial Products, and Other.
On a consolidated settlement of accounts basis, FHI("the Company") and 77 subsidiaries, as well as 2 equitymethod affiliated companies, were included in the scopeof the FHI Group’s consolidation as of March 31, 2015, theend of the fiscal year under review.
Overview

Business Environment
During the fiscal year under review, the economy in Japan
displayed signs of a modest recovery mainly shownin improved corporate profits, despite the effects ofan increase in the consumption tax rate. In the global
economy, although there was evidence of a loss of growth
momentum in Europe, China, and in emerging markets,
there was a moderate but steady recovery driven by thefavorable U.S. economy.
The Group formulated its mid-term management
vision in May of last year. The FY2015-FY2021 vision,“Prominence 2020,” has a growth strategy that places
our Subaru Automobiles Division at the core as we move
forward with initiatives specifically focused on enhancing
the Subaru brand and building a strong business structure.
In the fiscal year under review, annual unit sales ofSubaru vehicles reached a new record, with the UnitedStates, our most important market, continuing to lead
global sales. In addition, Group efforts steadily bore
fruit as Forester sales remained strong and new models
were launched for Legacy, Outback, Levorg, and WRX.

Vehicles with version 3 of EyeSight garnered approval—
a further step in the evolution of our preventative safetyand driving assistance features. We also worked to expand
and enhance capacity at complete vehicle assembly plants
inside and outside Japan in order to relieve the backlog ofcustomers waiting for a vehicle.

Net Sales (Billions of yen)
Years ended March 31

3,000

2,877.9
2,408.1

2,500

1,913.0

2,000

Performance Review

1,580.6

In light of the above factors, the FHI Group recorded
historically high levels of consolidated net sales as well as
all income categories for the third consecutive fiscal year.
Major consolidated performance figures were as follows.
Net sales amounted to ¥2,877.9 billion, up ¥469.8
billion, or 19.5%, year on year, owing to such factors as higher
unit sales in our core Automobiles Division and increased
net sales accompanying exchange rate fluctuations.
In terms of profitability, operating income followed
increased net sales, coming to ¥423.0 billion, an increase of¥96.6 billion, or 29.6%, compared with the previous fiscal
year, while net income was up ¥55.3 billion, or 26.7%,
from the previous fiscal year, to ¥261.9 billion.

1,500

1,517.1

1,000

500

0

2011

2012

2013

2014

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

500

423.0

Cost of Sales, Expenses and Operating Income

Operating Income
Operating income, as mentioned above, came to ¥423.0
billion, an increase of ¥96.6 billion, or 29.6%.
Revenue decreasing factors, namely a ¥66.6 billion
increase in SG&A expenses and a ¥23.2 billion increasein R&D expenses, were greatly outweighed by revenue
increasing factors, mostly ¥103.7 billion in exchange rate
differences, a ¥70.3 billion improvement in sales mix,and ¥12.4 billion in progress on cost reduction. Consequently, operating margin was able to achieve a highlevel at 14.7%.
FUJI HEAVY INDUSTRIES LTD.

34 ANNUAL REPORT 2015

2015

400

326.5
300

261.9
206.6

200

120.4 119.6
100

84.1
50.3 44.0 38.5

0

2011

2012

2013

2014

2015

Automobiles Division
Net sales for this division stood at ¥2,699.0 billion,
an increase of ¥452.4 billion, or 20.1%, year on year.
Segment income also increased ¥91.9 billion, or 29.7%,
year on year to ¥400.9 billion.
The number of units sold worldwide increased by
86,000 units, or 10.4%, year on year to 911,000 units, owing
to the strength in the North American market. Vehicle
unit sales posted a record for the third consecutive year
both globally and outside Japan, and for the sixth consecutive year in the North American market.

FUJI HEAVY INDUSTRIES LTD.

35 ANNUAL REPORT 2015

Analysis of Increases and Decreases in Operating Income(Consolidated, Three-Year YoY Comparison) (Billions of yen)

51.1

19.7

170.2

-24.0

326.5
-10.9

O
FY peraE M tinarc g inh 2 com
01 e
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ex ain och nan cu
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sa promi les vem
xtu vo en
re lum t oan e f
do &
the
rs
Co
st
red
uc
tio
S
n
an G&Ado ex
the pers nse
s
R&
De
xp
en
se
Op
s
FY eraE M tinarc g inh 2 com
01 e
4

120.4

70.3

12.4

103.7

-66.6

326.5

423.0
-23.2

O
FY peraE M tinarc g inh 2 com
01 e
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5Segment Information

Domestic Market
In Japan, individual consumption fell in reaction to thelast-minute demand prior to the increase in the consumption tax rate, which dampened demand for vehicles. Unitsales of passenger and mini vehicles decreased year on
year by 8.9% and 3.9% respectively, for a combined 6.9%
dip, with overall unit sales of 5,297,000 units nationwide.
Amidst these market conditions, FHI's unit sales ofvehicles decreased by 19,000 units, or 10.4%, year on
year to 163,000 units. Unit sales of passenger vehicles
rose by 2,000 units, or 1.4%, year on year to 128,000
units, thanks primarily to the favorable launch of the newmodel Levorg, among other new models. At the sametime, unit sales of mini vehicles were down 21,000 units,
or 37.1% year on year, to 35,000 units, impacted by
reduced demand after the rush ahead of the consumption tax increase, as well as bearing the brunt of intensifying competition due to the launch of new models by
our competitors.
Overseas Market
Overseas unit sales amounted to 748,000 units, anincrease of 104,000 units, or 16.2%, year on year. In
our key market of North America, sales were strong
for Forester, Legacy, and Outback, while the new WRX
model offered an added boost to results.
By region, units sold in North America increased
92,000 units, or 19.3%, year on year to 570,000 units. In
Europe and Russia, sales volume was relatively unchanged
at 47,000 units. China saw an increase of 9,000 units, or
20.1%, to 54,000 units, while unit sales in Australia dipped
1,000 units, or 1.6%, to 39,000 units, with other regions up
4,000 units, or 10.4%, to 38,000 units.

82.7
423.0

30.6

13.3
-33.1

503.0
-13.5

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FY era(pl E M tingan ar in) ch co
20 me
16Income before Income Taxes and Minority
Interests, and Net Income
Income before income taxes and minority interests rose
¥63.3 billion, or 19.3%, compared with the previous fiscal
year, to ¥392.2 billion.
Net income after total income taxes and minority
interests rose ¥55.3 billion, or 26.7%, compared withthe previous fiscal year, to ¥261.9 billion. Total income
taxes this fiscal year rose ¥6.2 billion year on year (5.1%)
to ¥127.1 billion yen, due to the increase in net income
before total income taxes and minority interests.

Aerospace Division
Net sales in this division increased ¥18.4 billion, or 14.8%,
compared to the previous fiscal year to ¥142.8 billion.
Segment income also rose ¥4.8 billion, or 33.7%, year on
year to ¥18.9 billion.
Sales of the C-2 transport aircraft to the Japanese
Ministry of Defense exceeded that of the previous fiscal
year, while sales to the commercial sector increased
over the previous fiscal year thanks to net sales-boosting
factors such as the exchange rate and a surge in production of the Boeing 787, among others.

Of this total, current assets stood at ¥1,473.3 billion,up ¥199.5 billion compared with March 31, 2014. This is
primarily due to rises in funds in hand plus securities by¥88.7 billion that include cash and deposits, as well as
products and goods by ¥43.8 billion. Meanwhile, total
property, plant and equipment rose ¥111.9 billion to ¥726.4

billion compared to the previous fiscal year-end. This was
mainly attributable to an increase in noncurrent assets of¥53.9 billion and investment securities of ¥34.8 billion.
Total liabilities were up ¥50.7 billion year on year,to ¥1,169.0 billion. The main factors behind this increase
were a ¥44.7 billion rise in accounts payable with accounts

Net Sales by Segment (Billions of yen)

Operating Income by Segment (Billions of yen)

Years ended March 31
Automobiles

Years ended March 31

AerospaceIndustrial Products

Other

Automobiles

3,000

Industrial Products Division
Net sales in the Industrial Products division were down
¥0.7 billion, or 2.5%, from the previous fiscal year to ¥29.0
billion. Segment income increased ¥0.1 billion, or 23.3%
year on year, to ¥0.8 billion.
Sales were higher for leisure-related engines inNorth America, and sales were markedly higher for pressure washer engines for North American big box hardware stores. Sales for general purpose engines for Japanand other products, however, were lower.
Other Division
Net sales in this division were down ¥0.2 billion, or
2.5%, year on year to ¥7.1 billion. Segment income wasalso down, posting a ¥0.2 billion dip, or 10.2%, fromthe previous fiscal year to ¥1.9 billion.
Liquidity and Financing

Financial Position
Total assets as of March 31, 2015 stood at ¥2,199.7 billion,
an increase of ¥311.4 billion compared with the previous
fiscal year-end.

AerospaceIndustrial Products

Other

Corporate and Elimination

450

2,877.9423.0

2,408.1

2,500

326.5
1,913.0

2,000

1,580.6
1,500

300

1,517.1

1,000

150

120.4
84.1

500

44.0

0

2011

2012

2013

2014

0

2015

Net Sales by Segment (Billions of yen)

2011
Automobiles

2012

2013

¥1,452.2 ¥1,389.1 ¥1,779.0

2014

2015

¥2,246.6 ¥2,699.0

82.8

80.3

89.1

124.4

142.8

Industrial Products

30.1

33.6

30.1

29.8

29.0

15.5

14.2

14.7

7.3

7.1

Other

¥1,580.6 ¥15,17.1 ¥1,913.0

FUJI HEAVY INDUSTRIES LTD.

2013

2012

2014

2015

Operating Income by Segment (Billions of yen)

Aerospace

Total

2011

¥24,08.1 ¥2,877.9

36 ANNUAL REPORT 2015

2011
¥80.4
Aerospace
2.3
Industrial Products
(0.1)
Other
1.5
Corporate and Elimination 0.1
Total
¥84.1
Automobiles

2012
¥39.4
2.9
0.5
1.0
2.0
¥44.0

2013
¥111.0
6.8
0.6
1.6
0.4
¥120.42014¥309.0
14.1
0.6
2.1
0.6
¥326.52015¥400.9
18.9
0.8
1.9
0.6
¥423.0payable-trade and electronically recorded monetary obligations, and a rise in accrued expenses of ¥34.1 billion, despitea decrease in long-term borrowings of ¥38.4 billion.
Note that the fiscal year-end balance of interestbearing debt decreased ¥58.5 billion to ¥211.2 billion. The
debt/equity ratio (interest-bearing debt over shareholders'equity) remained at a safe level of 0.21.
Net assets totaled ¥1,030.7 billion, up ¥260.6 billion
compared with the end of the previous fiscal year. This wasprimarily due to an increase in retained earnings of ¥213.5
billion, reflecting the recording of net income in the fiscal
year under review. The increase in net assets boosted theshareholders' equity ratio to 46.5%, a 6-point increase
year on year.
Cash Flows
In the fiscal year under review, net cash provided by operating activities was ¥311.5 billion compared with ¥313.0
billion in the previous fiscal year. Income before income
taxes and minority interests stood at ¥392.2 billion, andtotal income taxes at ¥193.1 billion.
Net cash used in investing activities was ¥172.8
billion in the fiscal year under review compared with ¥33.9
billion used in the previous fiscal year. This figure primarilyreflects ¥25.5 billion in expenditures (net) due to acquisitionof investment securities and ¥113.6 billion in expenditures(net) due to acquisition of noncurrent assets. As a result,free cash flow amounted to ¥138.8 billion, compared to¥279.1 billion provided in the previous fiscal year.
Net cash used in financing activities totaled ¥110.5
billion in the fiscal year ended March 31, 2015, comparedwith ¥63.0 billion in the preceding fiscal year. This is mainly
attributable to ¥36.7 billion in expenditures (net) for the
repayment of long-term borrowings and ¥49.9 billion in

dividend payments.
Accounting for the aforementioned activities and theeffect of translation adjustments, cash and cash equivalents as of the end of the fiscal year under review stood at¥612.1 billion.

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

Shareholders’ Equity

Ratio of Shareholders’ Equity to Total Assets

60.0

2,500

2,199.7
2,000

1,888.4

Research and Development Expenses

During the fiscal year under review, R&D expenses
increased ¥23.4 billion, or 38.9%, year on year to ¥83.5
billion. Of that amount, ¥82.4 billion was related to the
Automobiles Division.
Our vehicle R&D is dedicated to comprehensive
performance, safety, design, environmentally consciousfeatures, and quality improvement as part of the "Sixinitiatives to enhance the Subaru brand" announced in our
mid-term management vision, Prominence 2020. In thesame vein, we are advancing product development toexceed customer expectations for safety and comfort.
The next generation Subaru Global Platform (SGP) is
compliant with the most recent collision safety standards
worldwide and has entered the final development stage
before commercialization. We will use this platform to
manufacture new Subaru products from 2016 onward.
In addition, our EyeSight advanced driving support
system continues to undergo research and development,with automated highway driving, including lane changefeatures, targeted for 2020.

1,500

34.7%

1,577.5
1,352.5

37.7%

48.0
46.5%

40.5%

36.0

33.3%

1,188.3

1,030.7

1,000

24.0

770.1
596.8
500

0

451.6

414.0

2011

2012

12.0

2013

2014

0

2015

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

Interest-Bearing Debt Balance

1.00

400

330.6
0.80

300

341.0
0.76 307.2

0.75

269.7
211.2

0.52

0.50

200
0.35

0.25

100
0.21

0
FUJI HEAVY INDUSTRIES LTD.

37 ANNUAL REPORT 2015

2011

2012

2013

2014

2015

0

Capital Expenditures and Depreciation

Capital expenditures rose ¥42.2 billion, or 61.6%,
compared with the previous fiscal year, to ¥110.7 billion.
The main expenditure was investing in facilities related to
production, R&D, and sales in the Automobiles Division.
In this Division, ¥42.5 billion was spent primarily
on building out production capacity accompanying theincrease in vehicle sales, building production facilities
for new models, building R&D facilities, and expanding
and enhancing our sales network. In addition, ¥39.6 billion
was spent at Subaru of Indiana Automotive, Inc. (SIA), ourproduction base in the U.S., primarily on production facilities and production capacity expansion.
Depreciation increased ¥9.9 billion, or 18.0%, year
on year, to ¥64.8 billion.
Basic Policy Regarding the Distribution of Profits

FHI views the interest of shareholders as a critical task
for management. Regarding the return of profits toshareholders, based on maintaining continual dividend
payments, we apply a results-linked approach that takes
into consideration such factors as earnings, investment
plans, and operating conditions of each fiscal year. The dividend each fiscal year is determined based on a 20-40%
consolidated dividend payout ratio and takes a variety ofconditions into consideration.
During the fiscal year under review, FHI distributed a
total dividend of ¥68 per share, a ¥15 increase over theprevious fiscal year. Retained earnings are allocated toward
bolstering our financial position and investing in future
growth and progress, including strengthening R&D and
our production and sales frameworks.
The dividend for the next fiscal year is undeterminedat present. We are aware that FHI is entering a new stage

now that our financial standing has improved, but our policy
is to comprehensively consider and review future operating
conditions, external factors, changes in ROE, etc.

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

Cash Flows from Investing Activities

400

Outlook

313.0

Results for FYE March 2016
For the fiscal year ending March 31, 2016, we are forecasting a new all-time-high consolidated unit sales figure,for the fourth year in a row, of 928,000 units, an increase of
18,000 units, or 1.9%, compared with the fiscal year underreview. Along with the unit sales target, we are also aiming
to post new historical records for net sales and all income
categories for a fourth year running.
At present (July 2015), targets for the consolidated
financial results of the fiscal year ending March 31, 2016
are as follows.
For net sales, FHI plans to achieve ¥3,030.0 billion,
representing an increase of ¥152.1 billion, or 5.3%,
compared with the previous fiscal year, thanks to a ¥19.0
billion improvement in sales mix resulting from increasing
unit sales outside Japan, and a ¥131.1 billion gain on
currency exchange.
For operating income, despite increases in R&D
expenses and SG&A expenses, we anticipate posting¥503.0 billion, an increase of ¥80.0 billion, or 18.9%, year
on year thanks to the positive effects of ¥82.7 billion fromcurrency fluctuations and ¥30.6 billion from improved sales
mix, among other gains. Net income* is slated to climb¥75.1 billion, or 28.7%, year on year to ¥337.0 billion.
These forecasts are based on average annual
exchange rates of ¥118/US$ (previously ¥108/US$) and¥125/€ (previously ¥140/€).
*Expected net income for the consolidated fiscal year ending March 31, 2016 is the fiscal
year net income attributable to shareholders of the parent company.

FUJI HEAVY INDUSTRIES LTD.

38 ANNUAL REPORT 2015

311.5

300

200

166.7

138.2
100

54.9

0

-100

-200

-51.1

-26.6

-33.9
-71.4
-172.8

2011

2012

2013

2014

2015

Free Cash Flow (Billions of yen)
Years ended March 31

300

279.1

200

138.8

100

87.1
95.3

28.3

0

2011

2012

2013

2014

2015

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

100

83.5
80

60.1

60

42.9

48.1

49.1

40

20

0

2011

2012

2013

2014

2015

Capital Expenditures, Depreciation Expenses (Billions of yen)
Years ended March 31
Capital Expenditures

Depreciation Expenses

120

110.7

90

70.2
60

49.8
43.1

54.3 53.7

55.9

68.5

64.8

54.9

Business Risks

30

0

Reassessing the Three-Year Investment Plan
We have decided to reassess our consolidated threeyear investment plan (FYE March 2015 to 2017), which
was announced last year, as automobiles sales, mainly
in North America, continue their strength. This investment will help considerably to relieve supply shortfalls
and further bolster our environmental and safety technologies. We increased the initially allocated amount of
capital expenditures by ¥70.0 billion, to ¥400.0 billion,
and the initial amount of R&D expenses by ¥30.0 billion,to ¥280.0 billion.
These investment plan revisions will allow us tobring Subaru of Indiana Automotive, Inc. (SIA) expansion
plans ahead by four years and build out global production capacity to 1,026,000 vehicles by the end of 2016. In
addition, we are renovating our painting facility in Japan,
slated to be operational in 2018, as we strive for the dual
objectives of improved quality and stronger environmental responsiveness.
Scheduled FYE March 2016 increases over the fiscal
year under review are: capital expenditures up ¥19.3 billion,to ¥130.0 billion; R&D expenses up ¥13.5 billion, to ¥97.0
billion; and depreciation up ¥2.2 billion, to ¥67.0 billion.
Performance forecasts and medium- to long-term
management strategies are based on information available
to management as of the date of this report. Accordingly, actual results may differ materially due to avariety of factors.

2011

2012

2013

2014

2015

Operational and other risks that could significantly influence the decisions of investors and impact the Company’s financial status are set out below.
Based on information available to the FHI Group as
FUJI HEAVY INDUSTRIES LTD.

39 ANNUAL REPORT 2015

Forecast for Consolidated Results (Billions of yen)2015 2016 (plan) Change
Net sales
2,877.9
152.1
3,030.0
Japan
652.9(87.4)
565.5
Overseas
2,225.0
239.5
2,464.5
Operating income
423.0
80.0
503.0
Income before income taxes and minority interest 392.2
92.8
485.0
Net income
261.9
75.1
337.0
Exchange rate (in yen)
¥/$
¥/€

10.8
14.0

11.8
12.5

1.0
(1.5)

Forecast for Global Automobile Sales (Thousand units)

2015 2016 (plan) Change
Japan:
Passenger cars
Minicars
Subtotal

127.9
34.9
162.8

106.7
37.6
144.2

(21.2)
2.7(18.5)

527.6
42.4
11.6
35.7
38.9
53.8
37.9
747.9
910.7

554
46.2
12.8
37.7
42.3
49.7
41.4
784.1
928.3

26.4
3.8
1.2
2.0
3.4
(4.1)
3.5
36.2
17.6

Overseas:
United States
CanadaRussiaEuropeAustralia
China
Other
Subtotal
Total

of the submission date of our financial report (June 24,2015), the enumerated risks include forward-looking statements, but do not encompass every possible risk posedto the FHI Group. As such, there are other risk factors
which could influence investors and their decisions.
(1) Economic Trends
Economic trends in countries and regions that comprise
important markets for the FHI Group could potentially
impact the Group’s business performance. In Japan andNorth America, key markets for the Group, economic
recession, decreasing demand or increasing price competition could undermine the sales and profitability of theGroup’s products and services.
(2) Currency Exchange Rate Fluctuations
The FHI Group’s ratio of overseas net sales stood at 77.3%.
The Group’s consolidated financial statements, which arepresented in Japanese yen, are affected by translation ofoverseas net sales, operating income and assets from local
currencies, particularly U.S. dollars, into yen. Accordingly,
in the event that discrepancies arise between projectedexchange rates in full-year forecasts and actual rates at thetime of account settlement, the Group’s business performance and financial position may be adversely affected
when the yen appreciates or positively affected when theyen depreciates.
The Company uses forward exchange rate contracts
and other risk hedges to minimize the Group’s sensitivity
to such currency exchange risks. However, the effectof severe fluctuations in currency exchange rates at theend of the fiscal year could result in a loss on valuationof derivatives and have a major impact on non-operating
expenses.
(3) Dependence on Certain Businesses
The FHI Group is mainly comprised of the Automobiles,
Industrial Products and Aerospace business segments.
However, the Automobiles business segment accounts
for the overwhelming majority of the Group’s business
operations. Accordingly, in the event that automobilerelated demand, market conditions, price competition
with other automakers, or other factors exceed projectedlevels, the entire Group’s overall business performanceand financial position could be significantly affected.
(4) Changes in Market Appraisal
The FHI Group develops, manufactures and releases new
products based on appropriate timing and pricing in linewith product planning that reflects market demand andcustomer needs. Such actions are the most importantfactors in maintaining stable increases in Group business performance. In the event that market appraisalsof new model vehicles and other products do not meetsales plan expectations or that the obsolescence rate ofcurrent products exceeds forecasts, the Group’s business performance and financial position could be significantly affected.
(5) Dependence on Suppliers for Raw Materials andComponents
The FHI Group procures raw materials, components andother items from numerous suppliers. However, there
are cases in which the Group relies on certain items and/

FUJI HEAVY INDUSTRIES LTD.

40 ANNUAL REPORT 2015

or a limited number of suppliers. Due to tightening supply
and demand or other factors, the inability to procure
supplies in a manner that ensures stable costs, delivery
dates and quality could seriously impact the Group’s business performance and financial position.
(6) Protection of Intellectual Property
The FHI Group works to protect its intellectual property
through the use of patents, designs, and trademarks insuch areas as technologies and expertise that ensure
product differentiation. However, the Group could experience a decrease in sales or the need for litigation procedures in cases where a third party makes unauthorized
use of the Group’s intellectual property to manufacture
similar products, as well as in specific regions where intellectual property right protection is limited. Such factors
could impact the Group’s profitability.

(7) Product Defects
The FHI Group places the highest priority on the safety ofthe products it develops, manufactures and sells. However,completely avoiding defects and recalls regarding all products and services is impossible. The substantial costs
associated with a major recall could significantly affect
the Group’s business performance and financial position.
In addition, although the Group purchases product liability
insurance, the risk of incomplete coverage exists.
(8) Retirement Benefit Obligations
The FHI Group’s employee retirement benefit costs
and obligations are calculated based on the following
assumptions: retirement benefit obligation discountrates and the expected rate of return on pension assets,
both of which are established based on mathematical
calculations. However, in the event that actual performance differs from the assumptions, the Group’s business performance and financial position could be affected
over the long term.

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

FUJI HEAVY INDUSTRIES LTD.

41 ANNUAL REPORT 2015

Corporate Data (as of March 31, 2015)

Stock Information (as of March 31, 2015)

Company Name

Head Office

Common Stock AuthorizedFuji Heavy Industries Ltd.

Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku, Tokyo 150-8554, Japan
Phone: +81-3-6447-8000 Fax: +81-3-6447-8184

1,500,000,000 shares

Established

Major Shareholders
Number of Shares Held Percentage of(in thousands)
Total Shares

Name

Common Stock Issued
782,865,873 shares

Toyota Motor Corporation

129,000

16.48

Number of Shareholders

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

42,266

5.40

Stock Exchange Listing

Japan Trustee Services Bank, Ltd.
(Trust account)

34,282

4.38

Tokyo Stock Exchange

Mizuho Bank, Ltd.

16,0782.05

Website Address

Transfer Agent

Suzuki Motor Corporation

13,6901.75

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

Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku, Tokyo
103-0028, Japan

Sompo Japan Nipponkoa Insurance Inc.

12,157

1.55

FHI's Client Stock Ownership

10,9621.40

Tokio Marine & Nichido Fire Insurance Co., Ltd.

10,295

1.32

THE BANK OF NEW YORK MELLON
SA/NV 10

10,251

1.31

MIZUHO SECURITIES ASIA
LIMITED-CLIENT A/C 69250601

9,905

1.27

July 15, 1953

Investor Relations OfficePaid-in Capital

Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku, Tokyo 150-8554, Japan
Phone: +81-3-6447-8878 Fax: +81-3-6447-8107¥153,795 million

76,446

Domestic Manufacturing Divisions

Number of Employees

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

13,883 (consolidated: 29,774)

Principal Consolidated Subsidiaries and Affiliates
Company Name

Percentage of
Voting Rights

Quarterly Common Stock Price Range (Tokyo Stock Exchange) (Yen)
5,000

Main Business Activities

Japan
Fuji Machinery Co., Ltd.

100.0% Manufacture and sales of automobile parts and industrial product parts

Ichitan Co., Ltd.

100.0% Manufacture and sales of forged automobile / industrial product parts

Kiryu Industrial Co., Ltd.

97.7% Manufacture of Subaru specially equipped automobiles and distribution of Subaru automobile parts

Subaru Tecnica International Inc.

100.0% parts, tuning parts and accessories for SUBARU cars

Subaru Kohsan Co., Ltd.

100.0% Leasing of real estate, shopping mall management and travel agency operations

Subaru Finance Co., Ltd.

100.0% lease for various facility equipment, rolling stock & FHI made garbage trucks and sales of insurance

Yusoki Kogyo K.K.

100.0% Manufacture and sales for aircraft parts

TOKYO SUBARU INC.

100.0% Distribution, sales and services of Subaru automobiles (including 32 other dealerships)

4,000Management of SUBARU Motorsport Activities, Development and manufacture of competition

3,000

Lease & credit facilities provider for Subaru automobiles, financing for FHI subsidized companies,

Overseas

2,000

1,000

Subaru of America, Inc.

100.0% Distribution and sales of Subaru automobiles and parts

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

100.0% Engineering research of Subaru automobiles in North America Market

Subaru Research & Development, Inc. 100.0%

Research and development of automobiles

Subaru of Indiana Automotive, Inc.

100.0%

Subaru Canada, Inc.

100.0% Distribution and sales of Subaru automobiles and parts

Subaru Europe N.V./S.A.

100.0% Distribution, sales and marketing of Subaru automobiles and parts0

Manufacture of Subaru automobiles and contracted manufacture of Toyota automobiles

High
Low
FUJI HEAVY INDUSTRIES LTD.

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

2011

2012

2013

2014

2015

758
435

697
402

1,609
545

3,015
1,330

4,617
2,380

42 ANNUAL REPORT 2015

4Q

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

Consolidated Balance Sheets

120.27

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2015 and 2014
Millions of yen

Thousands of
U.S. dollars(Note 1)ASSETS
Current assets:
Cash and deposits (Note 4 and 5)
Notes and accounts receivable-trade (Note 5)
Lease investment assets (Note 5 and 18)
Short-term investment securities (Notes 4, 5 and 6)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 12)
Short-term loans receivable (Note 5, 23)
Other current assets
Allowance for doubtful accounts
Total current assets

2015

2014

2015

¥228,821
164,540
24,098444,737
203,347
52,73439,56978,789157,070
80,796(1,233)
1,473,268¥351,125
181,646
23,633
233,766
159,536
51,65933,00864,214
122,681
53,375(862)
1,273,781$1,902,561
1,368,088
200,366
3,697,822
1,690,754
438,463
329,001
655,101
1,305,978671,788(10,252)
12,249,672

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

1,423,977(882,752)(26,528)
514,697

1,305,951(817,421)(27,717)
460,813

11,839,835(7,339,752)(220,570)
4,279,513

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

16,850104,157
10,678
3,659
13,11396,371(33,079)
211,749¥2,199,714

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

140,101
866,026
88,78430,423109,030
801,289(275,039)
1,760,614$18,289,798

Millions of yen

Thousands of
U.S. dollars

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

2015

2014

(Note 1)
2015

¥317,801
74,42041,44344,329126,007
21,66849,70854,987
142,693873,056¥279,926
67,63759,193
46,61791,921
20,44639,494110,426
117,248
832,908$2,642,396
618,774
344,583
368,579
1,047,701
180,161
413,303457,196
1,186,439
7,259,134

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

125,420
17,963
13,996
138,560
295,939

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

1,042,820
149,356
116,371
1,152,074
2,460,622

153,795
160,071
697,414(1,382)

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

1,278,748
1,330,930
5,798,736(11,491)

1,009,898

796,381

8,396,924

17,986
10,025(11,616)(3,876)
12,5198,302

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

149,547
83,354(96,583)(32,227)
104,091
69,0281,030,719

770,071

8,570,042¥2,199,714¥1,888,363$18,289,798

Contingent liabilities (Note 20)
Net assets: (Note 13)
Shareholders' equity:
Capital stock
Authorized— 1,500,000,000 shares
Issued —782,865,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,2015—
2,483,395 shares
2014—
2,477,430 shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Remeasurements of other postretirement benefits
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

Consolidated Statements of Income

120.27

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2015 and 2014

Millions of yen

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

Thousands of
U.S. dollars(Note 1)

2015

2014

2015

¥2,877,913
2,017,490
860,423437,378
423,045¥2,408,129
1,728,271
679,858
353,369
326,489$23,928,769
16,774,674
7,154,095
3,636,634
3,517,461

4,127(2,903)499
532(24,277)(2,003)(3,305)
953
(985)
(38)
(3,439)(30,839)392,206

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

34,314(24,137)
4,149
4,423
(201,854)(16,654)(27,480)
7,924(8,190)(316)(28,594)(256,415)
3,261,046

133,256(6,199)127,057
265,149
3,276¥261,873

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

1,107,974(51,542)
1,056,432
2,204,615
27,239$2,177,376

U.S. dollars
Per share data (Note 2) :Net income (loss)—Basic¥335.57¥264.98—Diluted *Net assets
1,310.15
980.98Cash dividends (Note 13)
68.00
53.00
The accompanying notes are an integral part of these statements.
*For the year ended March 31, 2015 and 2014 diluted information is not presented because potentially dilutive securities do not exist.

Consolidated Statements of Comprehensive Income

$2.79
10.89
0.57

120.27

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2015 and 2014

Millions of yen

Thousands of
U.S. dollars(Note 1)

2015

2014

2015

Income (loss) before minority interests
Other comprehensive income (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 of associates accounted for using equity method
Total other comprehensive income¥265,149¥207,985$2,204,615

7,357
37,321
2,270(2,957)
13144,122(17,253)
19,855
－
－
170
2,772

61,171
310,310
18,874(24,586)
1,089
366,858

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

309,271

210,757

2,571,473

305,229
4,042

209,150
1,607

2,537,865
33,608

Consolidated Statements of Changes in Net Assets
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2015 and 2014

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
Cumulative effects ofchanges in accounting policies
Restated balance
Changes of items during the period
Dividends from surplus
Net income (loss)
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the beginning of current period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the beginning of current period
Cumulative effects ofchanges in accounting policies
Restated balance
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period

Millions of yen

Thousands of
U.S. dollars(Note 1)

2015

2014

2015

¥153,795
153,795¥153,795
153,795$1,278,748
1,278,748

160,071160,071

1,330,93000160,07100
160,071001,330,930

483,910
1,385
485,295

301,357-

4,023,530
11,516
4,035,046(49,970)
261,873
216
212,119
697,414(23,424)
206,616(639)
182,553
483,910(415,482)
2,177,376
1,796
1,763,690
5,798,736(1,395)(1,292)(11,599)

(22)
35
13
(1,382)

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

(183)
291
108
(11,491)

796,381
1,385
797,766

613,931-6,621,610
11,516
6,633,125(49,970)
261,873(22)
251
212,132¥1,009,898(23,424)
206,616
(103)
0
(639)
182,450¥796,381(415,482)
2,177,376
(183)
2,087
1,763,799$8,396,924

2015

2014

Thousands of
U.S. dollars(Note 1)
2015

¥10,629¥27,882$88,376

7,357
7,357
17,986(17,253)(17,253)
10,62961,171
61,171
149,547(26,661)(46,448)(221,676)

36,686
36,686
10,025

19,787
19,787(26,661)

305,030305,030
83,354(13,886)-(115,457)

2,270
2,270
(11,616)(13,886)(13,886)(13,886)

18,874
18,874(96,583)(919)-(7,641)(2,957)(2,957)(3,876)

(919)
(919)
(919)

(24,586)(24,586)(32,227)(30,837)(18,566)(256,398)

43,35643,356
12,519(12,271)(12,271)(30,837)

360,489
360,489
104,091

4,527

1,448

37,640

3,775
3,775
8,302

3,079
3,079
4,527

31,38831,38869,028770,071
1,385
771,456

596,813596,813

6,402,852
11,516
6,414,368(49,970)
261,873(22)
251
47,131
259,263¥1,030,719(23,424)
206,616
(103)
0
(639)
(9,192)
173,258¥770,071(415,482)
2,177,376
(183)
2,087
391,877
2,155,675$8,570,042

Millions of yen

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

Consolidated Statements of Cash Flows
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2015 and 2014

Millions of yen

Thousands of
U.S. dollars(Note 1)

2015

2014

2015

Sub total¥392,206
71,821(146)(4,127)
2,903
3,305
(953)
(23,112)
19,283(27,180)
38,22330,920503,143¥328,865
61,486
29,512(2,914)2,804
2,696(47,149)(25,478)(49,129)
16,09539,814(10,304)
346,298$3,261,046
597,165(1,214)(34,314)
24,13727,480(7,924)(192,168)
160,331(225,992)
317,810257,088
4,183,446

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

4,361(2,839)(193,122)
311,543

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

36,260(23,605)(1,605,737)
2,590,363

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(11,944)(43,424)
17,905(115,173)
1,540(47,031)
26,364(104,891)
108,065(4,191)(172,780)(7,215)(12,408)
19,237(72,855)
1,643(28,687)
65,344(95,589)
97,409(782)(33,903)(99,310)(361,054)
148,873(957,620)
12,805(391,045)
219,207(872,129)
898,520(34,847)(1,436,601)

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
Redemption of bonds
Cash dividends paid
Proceeds from stock issuance to minority shareholders
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents(18,811)
6,190(42,858)(4,060)(49,887)－(1,120)(110,546)
25,99854,215(2,893)
8,995(45,893)(10)(23,350)
1,280(1,140)(63,011)
12,691
228,801(156,406)
51,468(356,348)(33,757)(414,792)－(9,312)(919,149)
216,164
450,777

557,870

328,947

4,638,480¥612,085

122¥557,870－$5,089,258

Net cash provided by (used in) operating activities
Income (loss) before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
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
Other, net

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

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of Fuji Heavy Industries Ltd. (the "Company") havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan ("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English fromthe consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filedwith 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 theaccompanying 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, 2015, which was ¥120.27 to U.S.$1. The convenience translation should not be construed
as a representation that the Japanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its majority
owned subsidiaries. All significant intercompany transactions and balances have been eliminated inconsolidation. The fiscal year-end of consolidated subsidiaries is the same as that of the parent company,
except for 5 consolidated foreign subsidiaries in fiscal year 2015 and 5 consolidated foreign subsidiaries infiscal year 2014, respectively, the fiscal year-end of those subsidiaries is December 31. The operating
results of those subsidiaries that have different fiscal year-end are consolidated by using the financial
statements as of each subsidiary’s respective fiscal year-end, the necessary adjustments being madein consolidation if there are any significant transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 77 subsidiaries in fiscal year
2015 and 77 subsidiaries in fiscal year 2014, respectively.
In addition, 1 non-consolidated subsidiary and 1 affiliated company were accounted for by the equity method
in fiscal 2015; 1 non-consolidated subsidiary and 1 affiliated company were accounted for by the equity
method in fiscal 2014, respectively.
Investments in insignificant non-consolidated subsidiaries and affiliated companies not accounted for by theequity method are carried at cost.
The difference between the cost and the underlying net equity of investments in subsidiaries and affiliatedcompanies is allocated to identifiable assets based on their fair value at the date of acquisition. The
unallocated residual value of the excess of the cost over the fair value of the underlying net assets is
recognized as goodwill and amortized over a period of five years on a straight-line basis.
All assets and liabilities of subsidiaries, which include not only the Company’s interest in the subsidiaries but
also the minority interest portion, are valued based on their fair value at the time the Company first
consolidates the subsidiary.
[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fair1

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

"Accrued expenses" in the accompanying consolidated balance sheets.
[10] Provision for Loss on Construction Contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is provided
when substantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year andbeyond and such losses can be reasonably estimated.
[11] Accounting method for Retirement Benefits
Net defined benefit liability (assets) for employees is provided based on the estimated amounts of projectedpension and severance obligation and the fair value of plan assets at the end of the fiscal year. In determining
retirement benefit obligations, the straight-line basis is used for attributing expected benefit to periods.
Unrecognized prior service cost is being amortized on the straight-line method over a period (10-19 years)
that is shorter than the average remaining service period of the eligible employees. Unrecognized net
actuarial gain or loss is amortized from the following fiscal year on the straight-line method over a period(primarily 16 years for fiscal years 2015 and 2014) that is shorter than the average remaining service period of
the eligible employees.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined based on the Company’s and its consolidated subsidiaries’internal rules, are included in "Other long-term liabilities" in the accompanying consolidated balance sheets.
[12] Translation of Foreign Currency-Denominated Accounts
Under the Japanese accounting standards for foreign currency translation, monetary assets and liabilities
denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at eachbalance sheet date with the resulting gain or loss included currently in the statement of income.
The assets and liabilities of foreign subsidiaries and affiliated companies are translated into Japanese yen at
the exchange rates in effect at the balance sheet dates of the foreign subsidiaries and affiliated companies,
except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the respective years. The resulting foreign
currency translation adjustments are included in "Foreign currency translation adjustments" and "Minority
interest" in the net assets section of the accompanying consolidated balance sheets.
[13] Revenue Recognition
The percentage-of-completion method is applied to revenue from construction contracts of Aerospace
division productions where certain elements are determinable with certainty at the end of fiscal year. (Thepercentage of completion is estimated using the proportion-of-cost method). The completed-contract method
is applied to other works.
[14] Accounting for Lease Transactions
Sales and corresponding cost of sales under finance lease transactions conducted by certain domestic
consolidated subsidiaries are recognized on the effective date of each lease contract.
[15] Derivative Financial Instruments and Hedge Accounting
The Japanese accounting standards for financial instruments require that the Company and its consolidated
domestic subsidiaries state derivative financial instruments at their fair value and recognize changes in the fairvalue as a gain or loss, unless such derivative financial instruments are used for hedging purposes.
For interest rate swap contracts used as a hedge that meet certain hedging criteria, the net amount to be paidor received under the interest rate swap contract is added to or deducted from the interest on the assets or
liabilities for which the swap contract is executed.
3

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

Transactions, assets and liabilities
Borrowings

The risk exposures to movements in interest rates are hedged according to the Company’s and its
consolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of theunderlying transactions, assets and liabilities, and therefore they are presumed to be highly effective inoffsetting the effect of movements in interest rates at their inception as well as during their terms.
[16] Goodwill
Goodwill is principally amortized by the straight-line method over 5 years.
[17] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of 3 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
Income taxes are comprised of corporation, enterprise, and inhabitants 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 toreduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
[19] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to ¥83,535million (US$ 694,562
thousand) and ¥60,092 million for fiscal years 2015 and 2014, respectively.
[20] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that occurs if all the convertible
securities are converted or other contracts to issue common stock are exercised to the extent that they are
not anti-dilutive.
[21] Reclassification
Certain reclassifications have been made in the consolidated financial statements for the year ended March
31, 2014 to conform to the presentation for the year ended March 31, 2015.”[22] Changes in Accounting Policy
The Company has applied Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17,
2012 (hereinafter, the “Statement No.26”)) and Guidance on Accounting Standard for Retirement Benefits(ASBJ Guidance No. 25, May 17, 2012 (hereinafter, the “Guidance No.25”)) from the first quarter of fiscal year
2015 in accordance with the article 35 of the Statement No.26 and the article 67 of the Guidance No.25.
The Company has reviewed the method of calculating retirement benefit obligations and current service costs
and has changed the method of attributing expected benefits to periods from a straight-line basis to a benefit
formula basis, and the method of determination of discount rate from the method using discount rate based4

on the average remaining service period for employees to the method using a single weighted average
discount rate reflecting the expected payment periods and the amounts for each expected payment period.
In accordance with the article 37 of the Statement No.26, the effect of changes in the calculation method ofretirement benefit obligations and current service costs has been recognized in retained earnings at the
beginning of the first quarter of fiscal year 2015.
The effect of application of the Statement No.26 and the Guidance No.25 is not material.
In addition, the influence to Per share information refers to the concerned note.
[23] Changes in Presentation Method(Consolidated Statements of Cash Flows)
In the fiscal year ended March 31, 2015, the presentation method in the Consolidated Statements of Cash
Flows was changed to raise the clarity as follows.
In the fiscal year ended March 31, 2014, “Impairment loss,” “Increase (decrease) in provision for bonuses,”“Increase (decrease) in provision for product warranties,” “Increase (decrease) in provision for loss on
construction contracts,” “Increase (decrease) in net defined benefit liability,” “Increase (decrease) in provision
for loss on litigation,” “Loss (gain) on valuation of derivatives,” “Equity in (earnings) losses of affiliates,”“Decrease (increase) in lease investment assets" “Decrease (increase) in vehicles and equipment on
operating leases" "Increase (decrease) in deposits received" which had been listed in separately under “Net
cash provided by (used in) operating activities,” was included in "Other," in the fiscal year ended March 31,
2015 .
In the fiscal year ended March 31, 2014, “Purchase of property, plant and equipment,” “Purchase of intangible
assets,” which had been listed in separately under “Net cash provided by (used in) investing activities,” wasincluded in "Purchase of non-current assets" and "Net decrease (increase) in time deposits" which had been
included in "Other" was listed in separately in the fiscal year ended March 31, 2015.
In the fiscal year ended March 31, 2014, “Repayment of lease obligations,” which had been listed inseparately under “Net cash provided by (used in) financing activities,” was included in "Other" in the fiscal year
ended March 31, 2015.
As a result, in Consolidated Statements of cash Flows for the fiscal year ended March 31, 2014, the following
items that had been shown separately under “ Net cash provided by (used in) operating activities,” werereclassified as "Other,".
“Impairment loss,” ¥35 million“Increase (decrease) in provision for bonuses,” ¥2,391 million“Increase (decrease) in provision for product warranties,” ¥3,116 million“Increase (decrease) in provision for loss on construction contracts,” ¥114 million“Increase (decrease) in net defined benefit liability,”( ¥17,692 million)“Increase (decrease) in provision for loss on litigation,”(¥369 million)“Loss (gain) on valuation of derivatives,” (¥7,414 million)“Equity in (earnings) losses of affiliates,” (¥320 million)“Decrease (increase) in lease investment assets" (¥1,488 million)“Decrease (increase) in vehicles and equipment on operating leases" (¥400 million)"Increase (decrease) in deposits received" (¥2,240 million)
In the fiscal year ended March 31, 2014, “Purchase of property, plant and equipment,”(¥67,409 million)“Purchase of intangible assets,”(¥5,446 million) which had been listed in separately under “Net cash providedby (used in) investing activities,” was included in "Purchase of non-current assets"(¥72,855 million) in thefiscal year ended March 31, 2015."Other"(¥7,997 million) was reclassified as "Net decrease (increase) in time
deposits"(¥7,215 million) and "Other"(¥782 million).
In the fiscal year ended March 31, 2014, “Repayments of lease obligations,”(¥1,036million) which had been
listed in separately under “Net cash provided by (used in) financing activities,” was reclassified as "Other" in
the fiscal year ended March 31, 2015.
5

3. Other comprehensive income
Amounts reclassified to net income (loss) in fiscal 2015 and 2014, which were recognized in othercomprehensive income in the current or previous periods and tax effects for each component of othercomprehensive income were as follows:
Millions of yen
Thousands of
U.S. dollars
2015
2014
2015
Valuation difference on available-for-salesecurities
Increase(decrease) during the year
¥10,660(¥90,720)$88,634
Reclassification adjustments(953)
47,266(7,924)Sub-total, before tax
9,707(43,454)
80,710Tax (expense) or benefit(2,350)26,201(19,539)
Sub-total, net of tax
7,357(17,253)
61,171
Foreign currency translation adjustment
Increase during the year
37,321
19,691
310,310
Reclassification adjustments
164
Sub-total, before tax
37,321
19,855
310,310Tax (expense) or benefit
Balance at end of year, net of tax
37,321
19,855
310,310
Remeasurements of defined benefit plans
Increase(decrease) during the year
1,246
10,360Reclassification adjustments
3,035
25,235Sub-total, before tax
4,281
35,595Tax (expense) or benefit(2,011)(16,721)
Balance at end of year, net of tax
2,270
18,874Remeasurements of other postretirement
benefits of foreign consolidated
subsidiaries
Increase(decrease) during the year
(4,642)(38,596)
Reclassification adjustments
Sub-total, before tax(4,642)(38,596)Tax (expense) or benefit
1,685
14,010
Balance at end of year, net of tax(2,957)(24,586)
Share of other comprehensive incomeof associates accounted for using
equity method
Increase during the year
131
170
1,089
Total other comprehensive income¥44,122¥2,772$366,858

6

4. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2015 and 2014, consisted of the following:
Millions of yen

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

2015¥228,821
444,737
157,070
830,628(25,911)(45,562)2014¥351,125
233,766
122,681
707,572(13,756)(13,265)

Thousands of
U.S. dollars
2015$1,902,561
3,697,822
1,305,9786,906,361(215,440)(378,831)(147,070)(122,681)(1,222,832)¥612,085¥557,870$5,089,258

7

5. Financial Instruments(1) Summary of Financial Instruments Status[1] Action Policy with Regard to Financial Instruments
With regard to planned capital expenditure to support Fuji Heavy Industries Ltd., its consolidated subsidiaries
and affiliated companies (the "FHI Group") in their main operations of automobile manufacturing and sales,
the FHI Group finances mainly from bank loans and the issue of corporate bonds. Temporary surpluses areinvested in highly secure financial assets. Bank loans and liquidation of accounts receivable are utilized toprovide short-term working capital. It is the FHI Group's policy to use derivatives as a way to avoid the risks
stated below and not to conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Notes and accounts receivable-trade and Lease investment assets are subject to customer credit risks. In
addition, operating receivables denominated in foreign currencies due to globalized business of the FHIGroup are subject to the risk of changes in foreign exchange rates. As a general rule, however, forward
foreign exchange contracts are utilized to hedge the foreign exchange rate risk, considering the net amount ofoperating receivables denominated in foreign currencies that exceed foreign currency denominated operating
liabilities. Available-for-sale securities and investment securities are mainly stocks associated with businessand capital alliances with principal business partners, and are subject to risk of market price fluctuation.
Majority of payables included in Notes and accounts payable-trade and Electronically recorded
obligations-operating are due within one year. A certain portion of such liabilities involve foreign currency
denominated transactions associated with the import of raw materials and is subject to exchange rate
fluctuation risk, although it is consistently less than accounts receivable balance denominated in the same
foreign currency. Funds financed by bank loans and corporate bonds are primarily used for capital
expenditure, whose repayment or redemption dates will come within 9 years after March 31, 2015 at thelatest. A certain portion of those liabilities may have variable interest rates and are subject to the risk ofchanges in interest rates, although such risk is mitigated using derivative transactions (interest rate swap
transactions).
Derivative transactions include foreign exchange forward contracts to hedge against exchange rate
fluctuations associated with trade accounts receivables and liabilities denominated in foreign currencies, andinterest rate swap contracts to hedge against the risk of change in interest rates on bank loans. With regard to
hedging instruments and hedged items, hedge policy, the method of evaluation of hedge effectiveness andother related items, please refer to "2-[15] Derivative Financial Instruments and Hedge Activities".
[3] Risk Management System with Regard to Financial Instruments(a) Credit Risk management (Risks Associated with Business Partner’s Breach of Contract)
The Company and its consolidated subsidiaries have credit control function and regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets. In
addition to keeping track of payment due dates and balances of each customer, such credit control
function identifies and mitigates the potential risk of uncollectibility due to deterioration in financial status
or other factors of customers.
(b) Market Risk Management (Risks Associated with Fluctuations in Foreign Exchange and Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts with no longer than six months term are used to hedge against the risk of exchange
rate fluctuation to the extent that net position of accounts receivable and accounts payable dominated inforeign currency is exposed. In addition, the Company and certain consolidated subsidiaries use interest
rate swap transactions to mitigate the risk of fluctuation in interest rates on bank loans and corporate
bonds.
8

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

9(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet amounts, the fair value and difference as of March 31, 2015 and 2014 wereas follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer toNote [2] ).
As of March 31, 2015
Millions of yen
Consolidatedbalance sheet
Fair Value
Difference
amounts
Cash and deposits¥228,821¥228,821
Notes and accounts receivable-trade
164,540
Allowance for doubtful accounts (*1)
(640)
163,900
163,900
Lease investment assets
24,098
Allowance for doubtful accounts (*1)
(66)
24,032
28,794
4,762
Short-term loans receivable
157,070
Allowance for doubtful accounts (*1)
(341)
156,729
158,313
1,584
Short-term investment securities, Investment securities
and Other securities
118,702
118,702
Total Assets
692,184
698,530
6,346
Notes and accounts payable-trade317,801
317,801
Electronically recorded obligations-operating
74,42074,420
Short-term loans payable
41,44341,443Current portion of long-term loans payable
44,32944,441(112)
Current portion of bonds
Accrued income taxes
54,98754,987
Accrued expenses
126,007126,007
Bonds payable
10,00010,059(59)
Long-term loans payable
115,420
116,074(654)
Total Liabilities
784,407785,232(825)
Derivative transactions (*2)
hedge accounting is not applied(2,725)(2,725)
hedge accounting is applied
¥¥¥-

10

As of March 31, 2015
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$1,902,561
1,368,088(5,321)
1,362,767
200,366(549)
199,8171,305,978(2,835)
1,303,143

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

Fair Value

Difference$1,902,561$-

1,362,767-

239,41139,594

1,316,313

13,170

Short-term investment securities, Investment securities
986,963986,963
and Other securities
Total Assets
5,755,251
5,808,015
52,764
Notes and accounts payable-trade
2,642,396
2,642,396
Electronically recorded obligations-operating
618,774
618,774
Short-term loans payable
344,583
344,583
Current portion of long-term loans payable
368,579
369,510(931)
Current portion of bonds
Accrued income taxes
457,196
457,196
Accrued expenses
1,047,701
1,047,701
Bonds payable
83,146
83,637(491)
Long-term loans payable
959,674
965,112(5,438)
Total Liabilities
6,522,049
6,528,909(6,860)Derivative transactions (*2)
hedge accounting is not applied(22,657)(22,657)
hedge accounting is applied$$$*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).

11As of March 31, 2014
Millions of yen
Consolidatedbalance sheet
amounts¥351,125
181,646(275)
181,371
23,633(44)
23,589122,681(397)
122,284

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

Fair Value

Difference¥351,125¥-

181,371-

27,792

4,203

123,209925

Short-term investment securities, Investment securities
84,077
84,077and Other securities
Total Assets
762,446
767,574
5,128
Notes and accounts payable-trade279,926
279,926
Electronically recorded obligations-operating
67,637
67,637
Short-term loans payable
59,19359,193Current portion of long-term loans payable
42,55742,753(196)
Current portion of bonds
4,060
4,085
(25)
Accrued income taxes
110,426
110,426
Accrued expenses
91,921
91,921
Bonds payable
10,00010,091(91)
Long-term loans payable
153,844
154,823(979)
Total Liabilities
819,564
820,855(1,291)
Derivative transactions (*2)
hedge accounting is not applied
(722)
(722)
hedge accounting is applied¥¥¥*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).
[1] The calculation methods of financial instrument fair value together with securities and derivativetransactions
AssetsCash and deposits and Notes and accounts receivable-trade
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Lease investment assets and Short-term loans receivable
Fair value is the present value calculated by discounting relevant cash flows by each category of theassets and timing of cash flow, where discount rates were adopted taking into consideration the
period until maturity and credit risks. In addition, the estimated residual value is included in the12balance of Lease investment assets.
Short-term investment securities and investment securities
Fair value is determined by the stock exchange price, while bonds are determined by the stock
exchange price or by quotations received from financial institutions. Please refer to the note entitled"5.Short-term investment securities and investment securities" regarding to respective objectives forholding securities.
Liabilities
Notes and accounts payable-trade, Short-term loans payable, Accrued income taxes and Accrued
expenses
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Current portion of long-term loans payable and Long-term loans payable
Fair value is measured based on the present value that is calculated as discounted cash flow of thetotal amount of principal and interest, where the interest would be set, if the Company concluded abrand new loan agreement with the same condition at the date of measurement.
Current portion of bonds and Bonds payable
The fair value of bonds issued by the Company is based on market prices if available. For bonds
with no available market price, fair value is calculated using the present value that is calculated as
discounted cash flow of the total amount of principal and interest by, where discount rates are
adopted taking into consideration the remaining redemption period and credit risks.
Derivative transactions
Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2015 and 2014:
Millions of yen
Other securities (available-for-sale securities)
2015¥140,000
144,982
114,192
1,015
30,000¥3

Certificate of deposit
Commercial paper
Money management fund
Unlisted stocks (excluding over-the-counter stocks)
Medium Term Note
Other

2014
¥90,000
79,98750,515
4,832¥3

Thousands of
U.S. dollars
2015$1,164,048
1,205,471
949,464
8,439
249,439$25

These have no available market prices and are expected to entail excessive costs in the estimation of
future cash flows. Consequently, estimating their fair value is recognized as extremely difficult and they
are not included in "Short-term investment securities, Investment securities and Other securities".

13[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2015:

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

Within 1Year

1 to 5Years¥228,821
158,147
7,002¥6,393
16,864

Millions of yen
5 to 10
Over 10
Years
years
¥¥232
-

11,186
3,930
345,429¥58,335

14,96317,001
1,571¥96,412

2,226
2,762
829
¥2,323

3,838
2,392
4,437
¥-

As of March 31, 2015:$1,902,561
1,314,933
58,219Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$$$53,155
140,218
1,929-

93,00732,6762,872,113$485,034

124,412141,357
13,062$801,630

Within 1
Year

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

18,50822,965
6,893$19,315

31,912
19,88936,892$-As of March 31, 2014:

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

14

Within 1Year

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

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

11,2402,024
169,987¥42,364

8,418
11,977384¥77,592

1,774
1,329
454
¥2,725

3,290
732
2,625
¥-

[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2015:

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

Within 1Year

1 to 5
Years¥41,443¥44,329¥10,000¥113,022

Millions of yen
5 to 10
Over 10Years
years¥¥¥2,398¥-

As of March 31, 2015:
Within 1
Year$344,583$368,579

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

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$$$83,146$939,736$19,938$-

As of March 31, 2014:

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

Within 1Year

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

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

6. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2015
and 2014 was as follows:(1) Other securities (available-for-sale securities):
As of March 31, 2015:
Acquisition cost

Millions of yen
Difference¥50,341¥24,170¥26,171

20,802
21,366
6,139
98,64820,47121,067
6,013
71,721

331299
126
26,927

2,778

2,918

(140)

11,4114,719
1,146
20,054¥118,702

11,4794,768
1,165
20,330¥92,051

(68)
(49)
(19)
(276)
¥26,651

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

15

As of March 31, 2015:
Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Sub-total
Total

Thousands of U.S. dollars
Acquisition cost
Difference$418,567$200,964$217,603

172,961
177,650
51,043820,221

170,209
175,164
49,996596,333

2,752
2,486
1,047
223,888

23,09824,262(1,164)

94,87839,237
9,529
166,742$986,963

95,444
39,644
9,687
169,038$765,371

(566)
(407)
(158)
(2,296)$221,592

Acquisition cost

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

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

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

1,615

1,616

(1)

17,829
6,361
49
1,108
26,962¥84,077

17,990
6,404
50
1,126
27,186¥67,590

(161)
(43)
(1)
(18)
(224)
¥16,487

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

16

(2) Other securities (available-for-sale securities) sold during fiscal years 2015 and 2014:
For the year ended March 31, 2015:

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

Sales amount¥3,300Total gains¥741

Millions of yen
Total losses¥12

32,673
6,626
1,529
119
¥44,247

190
116
5¥1,052

50
17
20
¥99

For the year ended March 31, 2015:

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

Sales amount$27,438
271,664
55,093
12,713989$367,897

Thousands of U.S. dollars
Total gains
Total losses$6,161
$100
1,580
964
42
$8,747

416
141
166
$823

Sales amount¥49,172

Total gains¥47,148

Millions of yen
Total losses¥2

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

133
21
14
¥170

For the year ended March 31, 2014:

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

17

7. Short-Term Loans Payable and Long-Term Debts
Short-term loans payable as of March 31, 2015 and 2014, consisted of the following:
Millions of yen
2015
2014
Bank loans with average interest rate of 1.49% and 0.43%
per annum as of March 31, 2015 and 2014, respectively¥41,443¥59,193

Thousands of
U.S. dollars
2015$344,583

Long-term debts as of March 31, 2015 and 2014 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Loans principally from banks and insurance companies due
through 2025 with average interest rate of 0.82% and0.93% per annum as of March 31, 2015 and 2014,
respectively
Unsecured 0.71% bonds due June 13, 2016
SubtotalLess-Portion due within one year
Total

¥159,749¥196,401$1,328,253

10,000169,749(44,329)¥125,420

10,000210,461(46,617)¥163,844

83,146
1,411,399(368,579)$1,042,820

Annual maturities of long-term loans payable and bonds payable as of March 31, 2015 were as follows:
Thousands ofMillions of yen
U.S. dollars
2016¥44,329$368,579
2017
41,496
345,0242018
43,798364,1642019
36,038299,6422020
1,690
14,0522021 and thereafter
2,398
19,938
Total¥169,749$1,411,399

18

Lease obligations as of March 31, 2015 and 2014 consisted of the following:

Lease obligations due within one year as of March 31,2015
and 2014
Lease obligations due after one year as of March 31,2015
and 2014
Total

Millions of yen
2015
2014
¥1,016¥882

Thousands of
U.S. dollars
2015$8,448

1,065

1,099

8,855

¥2,081¥1,981$17,303

Annual maturities of lease obligations as of March 31, 2015 were as follows:
Millions of yen¥1,016903
114
39
9¥2,081

2016
2017
2018
2019
2020
2021 and thereafter
Total

Thousands of
U.S. dollars$8,448
7,508
948
324
75
$17,303

The following assets as of March 31, 2015 and 2014 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Property, plant and equipment¥35,435¥41,358$294,629
Total¥35,435¥41,358$294,629
To raise working capital efficiently, the FHI Group has entered into the commitment-line contracts. The
maximum amount that can be made available under these contracts is ¥127,041 million (US$1,056,298
thousand) as of March 31, 2015. At the end of the fiscal year under review, there were no borrowings under
the commitment line.

19

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, 2015 and 2014 was as follows:
Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2015
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¥313,502(¥2,955)(¥2,955) $2,606,652($24,570)($24,570)
Euro
4,488
55
55
37,316457
457
Canadian dollar
23,102
175
175
192,084
1,455
1,455
As of March 31, 2014
Notional
AmountForeign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar¥218,776
6,134
20,782Millions of yen
Valuation
Fair value
gain (loss)(¥686)(36)
0(¥686)(36)0Note: The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative transactions to which hedge accounting is applied(1) Interest rate contracts:
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
As of March 31, 2015

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¥10,105¥3,000$84,019

20(*)$24,944(*)

As of March 31, 2014
Millions of yen
Notional
AmountOver
1 yearFair value¥23,395¥10,105(*)

Interest rate swap contracts:
Receive floating rate pay fixed rate
Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
9. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2015 and 2014 are summarized as follows:

2015¥348,685
526,302
13,181
318,806
1,206,974(882,752)(26,528)
188,392
28,611¥514,697

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

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

Thousands of
U.S. dollars
2015$2,899,185
4,376,004
109,595
2,650,752
10,035,536(7,339,752)(220,570)
1,566,409
237,890$4,279,513

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, 2015 and 2014 was as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Total overdraft facilities and lending commitments¥4,800¥4,150$39,910Less amounts currently executed
497
569
4,132
Unexecuted balance¥4,303¥3,581$35,778
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.

21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, 2015, the Company and 53 of its consolidated domestic subsidiaries, which add up to a totalof 54 companies, have lump-sum retirement payment plans. Within the FHI Group, there are also 20 defined
contribution plans, and 5 defined benefits pension plans. In addition, there are 7 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 period
Cumulative effects ofchanges in accounting policies
Restated balancea. Service costb. Interest costc. Actuarial loss (gain)d. Benefits paide. Other
Balance at the end of the period

2015¥102,819(2,481)Millions of yen
2014¥101,700-

Thousands of
U.S. dollars
2015$854,901(20,629)

100,338
5,508
1,397
4,520

101,700
5,565
1,173(1,569)834,273
45,797
11,61637,582(4,366)¥107,397(4,049)(1)¥102,819(36,302)$892,996

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

Thousands of
U.S. dollars
2015$723,946
15,906
41,24969,261(26,050)$824,312

Movements in plan assets, except plans applied simplified method

2015¥87,069
1,913
4,961
8,330
(3,133)¥99,140

Balance at the beginning of the perioda. Expected return on plan assetsb. Actuarial loss (gain)c. Contributions paid by the employer
d. Benefits paid
Balance at the end of the period

Movement in net defined benefit liability in the plans applying the simplified method
22Balance at the beginning of the perioda. Increase due to the change of scope of
consolidation
b. Retirement benefit costc. Benefits paidd. Contributions paid by the employer
Balance at the end of the period

2015¥5,880-Millions of yen
2014¥5,399203

Thousands of
U.S. dollars
2015¥48,890
-

703
(482)
(29)
¥6,072

720
(417)
(25)
¥5,880

5,845(4,008)(241)$50,486

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

2015¥97,944(99,346)(1,402)
15,706

Millions of yen
2014¥93,446(87,248)
6,198
15,432Thousands of
U.S. dollars
2015$814,368(826,025)(11,657)
130,590

14,304

21,630118,932

17,963(3,659)¥14,304

22,852(1,222)¥21,630

149,356(30,423)$118,932

2015¥5,508
1,397(1,913)
2,377
58
379
703

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

Thousands of
U.S. dollars
2015¥45,797
11,616(15,906)
19,764
482
3,151
5,845

¥8,509¥8,543¥70,749

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 ended23

Adjustments for retirement benefit (before tax effect)
Millions of yen
2014
¥¥-

Thousands of
U.S. dollars
2015$2,07033,525$35,595

2015¥154

Millions of yen
2014
¥403

Thousands of
U.S. dollars
2015$1,28016,813

20,845

139,794¥16,967¥21,248$141,074

2015
¥249
4,032
¥4,281

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:

2015
51%
14%
25%
10%
100%

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

Percentage
2014
54%
13%
23%
10%
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 cost

2015
2014
Benefit formula method
The straight-line method
0.8%–1.4%
0.6%–1.5%
1.4%–3.5%
1.4%–3.5%
Primarily 16 years (amortized Primarily 16 years (amortizedby the straight-line methodby the straight-line method
starting from the following
starting from the following
fiscal year, over a period
fiscal year, over a period
shorter than the average
shorter than the averageremaining service periods of remaining service periods ofthe eligible employees)
the eligible employees)
10 to 19 years
10 to 19 years

24Defined contribution pension plan
The amount required to contribute to defined contribution plans was 4,414 million (US$36,701 thousand) and
4,127 million for fiscal years 2015 and 2014 respectively which included the multi-employer pension plan ofcontributory 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, 2015 and 2014)
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Plan assets¥83,089¥91,753$690,854
Projected benefit obligation
94,207
100,556
783,296
Funded status(¥11,118)(¥8,803)($92,442)(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 2015 and 2014 respectively: 5%
Other than the above, ¥27,203 million (US$226,183 thousand) and ¥17,403 million of postretirement benefit
plan obligation for fiscal years 2015 and 2014 respectively is included in "Other" of accrued expense andlong-term liabilities in some American subsidiaries.
12. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in
the aggregate resulted in a normal statutory income tax rate of approximately 35.4% and 37.8% for fiscal
years 2015 and 2014, respectively.
A reconciliation of the statutory income tax rates in Japan to the Company’s effective income tax rates forfiscal years 2015 and 2014 were as follows:
2015
2014
Statutory income tax rate in Japan
35.4%
Increase (reduction) in taxes resulting from:
Adjustment of deferred tax assets in the end of fiscal year 2015 by change of the tax rate
0.7%
Deduction of research and development expense(3.6)%
Entertainment expenses not qualifying for deduction
0.1%
Changes in valuation allowance and tax benefits realized from loss carry forwards(0.5)%
Adjustment to past corporate income taxes payable and corporate income taxes refundable
0.2%
Equity in earnings of affiliates
0.1%
Difference of applicable tax rate in subsidiaries
35.4%
Other
0.3%
Effective income tax rate
32.4%
Note:The note for fiscal year 2014 is omitted because the difference between the statutory income tax
rates in Japan and the Company’s effective income tax is 5% or less of the statutory income tax rates.

25

Significant components of the deferred tax assets and liabilities as of March 31, 2015 and 2014, were as
follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Deferred tax assets:
Accrued expenses¥18,569¥15,409$154,394
Provision for product warranties
17,54913,804145,913Net defined benefit liability
13,534
15,077
112,530
Depreciation and amortization expenses
10,93810,55990,945Long-term accounts payable-other
10,9197,069
90,787
Provision for bonuses
7,241
7,265
60,206
Unrealized profit on inventories
25,954
15,894
215,798
Loss on valuation of inventories
2,079
2,011
17,286
Net operating loss carryforwards
860
1,274
7,151
Other
31,25332,574
259,857
Total deferred tax assets
138,896
120,936
1,154,868
Valuation allowance(20,018)(23,669)(166,442)
Total deferred tax assets, net of valuation allowance
118,878
97,267
988,426
Deferred tax liabilities:
Valuation difference on available-for-sale securities(8,668)(5,822)(72,071)
Depreciation and amortization expenses(11,246)(4,821)(93,506)
Reserve for reduction entry(2,072)(2,389)(17,228)
Net defined benefit asset(1,006)(441)(8,365)
Other(17,980)(11,075)(149,497)
Total deferred tax liabilities(40,972)(24,548)(340,667)
Net deferred tax assets¥77,906¥72,719$647,759
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
2015
2014
2015
Current assets—Deferred tax assets¥78,789¥64,214$655,101
Investments and other assets—Deferred tax assets
13,113
18,332109,030
Current liabilities—Deferred tax liabilities(Other current liabilities)
Long-term liabilities—Deferred tax liabilities(13,996)(9,827)(116,371)
Total net deferred tax assets¥77,906¥72,719$647,759

26

(Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates)(Fiscal 2014)
On March 31, 2014, amendments to the Japanese tax regulations were enacted into law, and the statutory
income tax rate for years beginning on or after April 1, 2014 will be changed. As a result of these amendments,
the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities expected to besettled for years beginning on April 1, 2014 has been changed from 37.8% to 35.4%.
Due to these changes in statutory income tax rates, net deferred tax assets as of March 31, 2014 decreasedby ¥1,861million and deferred income tax expense recognized for the year ended March 31, 2014 increasedby the same amount.
(Fiscal 2015)
On March 31, 2015, amendments to the Japanese tax regulations were enacted into law. Based on theamendments, the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities
expected to be settled or realized from April 1, 2015 to March 31, 2016 and on or after April 1, 2016 arechanged from 35.4% for the fiscal year ended March 31, 2015 to 32.9% and 32.1%, respectively, as of March
31, 2015.
Due to these changes in statutory income tax rates, net deferred tax assets (after deducting the deferred tax
liabilities) decreased by ¥2,375 million (US$19,747 thousand) as of March 31, 2015, deferred income tax
expense recognized for the fiscal year ended March 31, 2015 increased by ¥2,826 million (US$23,497
thousand), evaluation differences of other securities increased by ¥765 million (US$6,361 thousand) andaccumulated adjustments for employee retirement benefits increased by minous ¥529 million (minous
US$4,398 thousand).
13. Net Assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of its Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Japanese Companies Act (“the Act”), in cases where a dividend distribution of surplus is made, thesmaller 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 23, 2015, the shareholders approved cash dividends
amounting to ¥28,889 million (US$240,201 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2015. Such appropriations are recognized in the period inwhich they are approved by the shareholders.
14. Presentation of inventories and provision for loss on construction contracts¥Minus 988 million (US$ Minus 8,215 thousand) and ¥70 million as "Provision for loss on construction
contracts" is included in "Cost of sales" for fiscal years 2015 and 2014, respectively.

2715. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2015 and 2014 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Freightage and packing expenses¥34,856¥26,523$289,815
Advertising expenses
81,53864,332
677,958
Sales incentives
82,59765,425686,763
Salaries and bonuses
49,89450,274
414,850
Research and development expenses
83,10459,896690,979
Other
105,389
86,919876,270
Total¥437,378¥353,369$3,636,634
16. Gain on sales of investment securities(Fiscal 2014)
Gain on sales of investment securities includes ¥47,118 million, the profit related to the sales of stock of
Polaris Industries Inc. owned by FHI.
17. Allowances for doubtful accounts(Fiscal 2014)
Allowances for doubtful accounts, the loss is associated with initial investment fees related to the AH-64D
combat helicopter for the Japan Ministry of Defense as a precaution for the case that the ruling is upheld.
18. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessee(1) Transfer of title through finance lease transaction[1] Leased assets
Mainly implements of production in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the same method as used for other property, plant and equipment.
(2) Finance leases which do not transfer ownership title[1] Leased assets
Mainly network equipment and terminal units (Other tangible assets) in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the straight-line method over the leased period and the residual value is
zero.

28

Information as Lessor(1) The details of lease investment assets as of March 31, 2015 and 2014 were as follows:
Millions of yen
2015
2014
¥28,762¥28,363342
322(5,052)(5,006)¥24,098¥23,633

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

Thousands of
U.S. dollars
2015$239,145
2,844(41,623)$200,366(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2015 and 2014, were as
follows;
Thousands of
U.S. dollars
Millions of yen
2015
2014
2015
Within 1 year
¥8,399¥8,510$69,835
1 to 2 years
7,065
6,924
58,7432 to 3 years
5,949
5,510
49,4643 to 4 years
4,273
4,276
35,5284 to 5 years
2,793
2,840
23,223
Over 5 years
¥283
¥303
$2,35329

19. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2015 and2014, were as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Operating leases:
Due within one year
¥2,439¥2,130$20,279
Due after one year
14,03012,241
116,654
Total¥16,469¥14,371$136,934
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2015 and 2014, were as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Operating leases:
Due within one year
¥190
¥212
$1,580Due after one year
92
101
765
Total
¥282
¥313
$2,345
20. Contingent Liabilities
Contingent liabilities as of March 31, 2015 and 2014, were as follows:
Thousands ofMillions of yen U.S. dollars
2015
2014
2015
As guarantor of third-party indebtedness from financial
institutions¥45,214¥40,284$375,937

21. The Amount of Discount of Export Bill
The amount of discount of export bill as of March 31, 2015 and 2014, were as follows:
Thousands ofMillions of yen U.S. dollars
2015
2014
2015
¥2,928¥812$24,345

The amount of discount of export bill

22. Transfer of Financial Assets to Special Purpose Company
The balance of financial assets transferred to special purpose company as of March 31, 2015 and 2014, wereas follows:
Thousands ofMillions of yen U.S. dollars
2015
2014
2015
Balance of financial assets transferred to special purpose
company(loan receivable of Automobiles and accounts¥5,037¥7,073$41,881
receivable-trade of Aerospace)30

23. Fair value of collateral financial assets with free disposal rightThousands ofMillions of yen U.S. dollars
2015
2014
2015
¥10,000$83,146

Collateral investment securities

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

31

(3)Information on sales, income, assets and other items by reportable segments for the fiscal years ended
March 31, 2015 and 2014 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
Net Sales:
2015
2014
2015
Automobiles
Outside customers¥2,698,974¥2,246,624$22,440,958
Inter-segment
4,236
3,261
35,221
Sub-total
2,703,210
2,249,885
22,476,179
Aerospace
124,436
1,187,337
Outside customers
142,801
Inter-segment
Sub-total
142,801
124,436
1,187,337
Industrial products
29,776
241,365
Outside customers
29,029Inter-segment
207
567
1,721
Sub-total
29,23630,343
243,086
Other (*1)
7,293
59,109Outside customers
7,109Inter-segment
15,744
14,642130,905
Sub-total
22,853
21,935
190,014
Total
2,898,100
2,426,599
24,096,616
Adjustment (*2)
(18,470)(167,847)(20,187)
Consolidated total (*3)
¥2,877,913¥2,408,129$23,928,769

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

32

2015

Millions of yen
2014

Thousands of
U.S. dollars
2015¥400,874
18,912
779
1,884
422,449596¥423,045¥308,973
14,148632
2,099
325,852
637¥326,489$3,333,117
157,246
6,477
15,6653,512,505
4,956$3,517,461

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

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

2015Millions of yen
2014

Thousands of
U.S. dollars
2015¥1,944,178
186,292
32,92659,7352,223,131(23,417)¥2,199,714¥1,639,760
182,123
29,69253,533
1,905,108(16,745)¥1,888,363$16,165,112
1,548,948
273,767
496,674
18,484,502(194,703)$18,289,798

2015

Millions of yen
2014

Thousands of
U.S. dollars
2015¥65,342
4,583
429
1,467
71,821¥71,821¥56,265
3,758
411
1,052
61,486¥61,486$543,294
38,106
3,567
12,198597,165$597,165

¥589
775
1,364
¥1,364

¥6
520
526
¥526

$4,897
6,444
11,341$11,341¥122,689
4,509
985
7,163
135,346¥135,346¥90,782
4,074
533
3,148
98,537¥98,537$1,020,113
37,491
8,190
59,5581,125,351$1,125,351

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

33

Related Information(1)Products and services information
Products and services information is not shown since the same information is in the segment information.
(2)Information about geographic areas[1]Sales for the fiscal years ended March 31, 2015 and 2014 was summarized as follows:

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

2015

Millions of yen
2014

Thousands of
U.S. dollars
2015¥652,894
1,730,947[1,607,897]
123,250
238,749
132,073¥2,877,913¥672,060
1,322,760[1,220,961]
134,680
154,392
124,237¥2,408,129$5,428,569
14,392,176[13,369,061]
1,024,778
1,985,109
1,098,138$23,928,769

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 for the fiscal years ended March 31, 2015 and 2014 was summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Property, plant and equipment: (*1)
Japan
¥412,623¥394,163$3,430,806
North America
101,042
65,987840,126[United States] (*2)[100,274][65,233][833,741]
Europe
481
486
3,999
Asia
Other
551
177
4,581
Consolidated total¥514,697¥460,813$4,279,513
Note: *1 Property, plant and equipment is categorized by country or area according to geographic adjacentlevel.
*2 Property, plant and equipment of the United States is included in North America area.
[3]Major customers Information
Information about major customers is not shown because outside sales for major customers accounted forless 10% of operating revenue on the consolidated statements of income for the fiscal years ended March 31,
2015 and 2014.

34

Information on Impairment Loss in Fixed Assets by Reportable segments
Impairment loss in fixed assets by reportable segments for the fiscal years ended March 31, 2015 and 2014
was summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Impairment loss in fixed assets:
Automobiles
¥38
¥35
$316
AerospaceIndustrial products
Other
Total
38
35
316
Adjustment
Total
¥38
¥35
$316
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, 2015 and 2014 was summarized as follows:
GoodwillThousands ofMillions of yen
U.S. dollars
2015
2014
2015
Amount written off of current period:
Automobiles
¥266
¥258
$2,212
AerospaceIndustrial products
Other
Total
266
258
2,212
Corporate and elimination
Total
¥266
¥258
¥2,212
Balance at the end of current period:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Total¥2,4722,472¥2,472

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

35¥2,3692,369¥2,369$20,554
20,554$20,55425. Fair Value of Investment and Rental Property
The Company and certain consolidated subsidiaries own rental office buildings and rental commercial
facilities with the objective of generating rental income in Saitama prefecture and other locations. Certain
domestic rental office buildings in Japan are classified as properties that include portions used as investment
and rental property, because part of them are used by the Company and certain consolidated subsidiaries.
The consolidated balance sheet amounts, principal changes during fiscal 2015 and 2014, fair value at theend of fiscal 2015 and 2014 were as follows:
As of March 31, 2015
Millions of yen
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the yearInvestment and rental property¥30,343(¥1,095)¥29,248¥37,704
Properties that include portions used as¥6,022¥15,228¥19,537
investment and rental property¥9,206
As of March 31, 2015

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$252,291($9,105)$243,186$313,495$76,544$50,071$126,615$162,443

As of March 31, 2014
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¥30,410(¥67)¥30,343¥36,779¥6,830¥2,376¥9,206¥13,569

Note 1. The amounts of consolidated balance sheet excludes accumulated depreciation and accumulated
impairment loss from acquisition costs.
2. Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2015, principal increases were properties
acquisitions etc, which amounted to ¥7,263 million (US$60,389 thousand), and principal decreases
were depreciation, which amounted to ¥1,009 million (US$8,389 thousand), loss on sales andretirement, which amounted to ¥1,408 million (US$11,707 thousand).
Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2014, principal increases were properties
acquisitions etc, which amounted to ¥3,370 million, and principal decreases were depreciation, whichamounted to ¥612 million, loss on sales and retirement, which amounted to ¥450 million.
36

3. Fair value of a part of main investment and rental property is the amount estimated by based value ofreal-estate appraiser, and fair value of a part of other investment and rental property is the amountestimated by the Company based principally on land assessment value.
Profit and loss in fiscal 2015 and 2014 concerning investment and rental property and properties that include
portions used as investment and rental property were as follows:
As of March 31, 2015
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,868¥2,167¥1,701(¥418)
Properties that include portions used as¥1,265(¥871)¥investment and rental property¥394
As of March 31, 2015

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

Thousands of U.S. dollars
RentalRentalChangeOther profit
incomeexpensesand loss$32,161$18,018$14,143($3,476)$3,276$10,518($7,242)$-

As of March 31, 2014

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

Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss¥3,476¥2,074¥1,402
¥44
¥392

¥221

¥171

¥-

Note:1. Rental income (from the properties that include portions used as investment and rental property) does
not include the portion that the Company or certain subsidiaries use as the provision of services andbusiness administration purposes. Rental expenses, however, include all portions of the expenses(costs related to depreciation, repairs, insurance and taxes).
2. Other profit and loss include in gain on sale and impairment loss.
26.Subsequent Event
None identified.
27.Other
On January 15, 2010, the Company filed a lawsuit with the Tokyo District Court against the Government ofJapan for the payment totaling ¥35,124 million (US$ 292,043 thousand) of uncollected initial investment fees(amount paid for customization to the Japanese specifications) for the manufacture of the AH-64D combat
helicopters for the Japan Ministry of Defense. On February 28, 2014, the Tokyo District Court rejected thecase. On March 13, 2014, the Company appealed against the Tokyo District Court’s decision to the Tokyo
High Court.
On January 29, 2015, the Tokyo High Court upheld the Company’s claims in almost all respects. However,the Government of Japan filed a petition of objection to the Supreme Court of Japan on February 10, 2015.
37

On April 6, 2015, the Company made an additional appeal to the Supreme Court of Japan in order to have theCompany’s claims rejected at the Tokyo High Court upheld.

38