Annual Report
For the year ended March 31, 2011

2011

We Are Pursuing ....

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Confidence in Motion
Confidence in Motion is a unified global brand statement that
encapsulates the aim of the Subaru brand. Confidence reflects our approach towards
reliable automobile manufacturing dating back to the Subaru 360 and the relationship of trust that
we have built with customers 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
and fulfillment enabled by Subaru’s uniquely satisfying driving experience.

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Contents
2 _ A Message to Our Stakeholders
4 _ Message from the CEO
10 _ Message from the COO
14 _ Special Feature: Subaru’s Production Structure
17 _ Special Feature: Subaru’s Safety Concept
20 _ Corporate Social Responsibility (CSR)
23 _ Management
24 _ Consolidated Ten-Year Financial Summary
25 _ Management’s Discussion and Analysis of Results ofOperations and Financial Position
34 _ Consolidated Subsidiaries and Affiliates
35 _ Investor 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 other statements, except for historicalfacts, 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 to develop and market advanced products, raw material prices, andcurrency exchange rates. FHI disclaims any obligation to update any forward-looking statements,
whether as a result of new information, future events, or otherwise.

1

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A MESSAGETO OUR STAKEHOLDERSIKUO MORI (L)
Representative
Director of the Board,
Chairman and CEOYASUYUKI YOSHINAGA (R)
Representative
Director of the Board,
President and COO

2subaru2011e̲0928.indd 2

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Subaru successfully concluded its four-year, mid-term management plan that commenced in 2007.
We achieved record-breaking consolidated unit sales, net sales and net income in fiscal 2011,
ended March 31, 2011. We were able to surpass the final-year targets of consolidated operating
income of ¥80.0 billion, an operating margin of 5% and ROA of 7%. During the course of the plan,
the value of the yen exceeded every forecast and the global economy slumped in the wake of theLehman Shock. Consequently, we were faced with a crisis, recording losses in fiscal 2009 for the firsttime in 15 years, which led to the decision not to pay dividends. Despite these extraordinary events,
performance was driven by higher sales in the United States, China and other overseas markets following the development of globally oriented model designs for Subaru’s mainstay Impreza, Foresterand Legacy from 2007 onward.
During the final stage of the plan, the environment in which Subaru operates changed dramatically following the Great East Japan Earthquake. Yet, the direction outlined by the previous midterm management plan was ultimately affirmed. FHI has decided that now is the right time topromote a new president. Simultaneously, FHI will introduce a new mid-term management plan, whichstarts from fiscal 2012, in line with the new Subaru and the guiding principle, Confidence in Motion.

Pursuing Greater

Integration
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MESSAGE FROM THE CEOIKUO MORI
Representative
Director of the Board,
Chairman and CEO

We met the final targets set
in the previous mid-term
management plan,with operating income
exceeding ¥80.0 billion
and an operating
margin of 5.3%.
4subaru2011e̲0928.indd 4

Achieving Our Targets in the Final Year of the MidTerm Management Plan
In fiscal 2011, sales volume stood at 657 thousand units,
net sales were ¥1,580.6 billion, operating income
amounted to ¥84.1 billion and net income totaled ¥50.3
billion. Although the Great East Japan Earthquake
caused us to fall one step short of full-year forecasts
made during the third quarter financial account settle-

ment, we recorded the highest ever unit sales, net sales
and net income. At the same time, we met the final targets set in the previous mid-term management plan,with operating income exceeding ¥80.0 billion and an
operating margin of 5.3%. Subaru automobile sales fell
year on year due to the major impact of the discontinuation of the eco-car subsidy system and the disaster.
However, overseas sales of Subaru’s mainstay Legacy,
Forester and Impreza remained favorable, leading to anincrease in performance in all overseas markets compared with the previous fiscal year. For the first time
ever, overseas net sales exceeded 70%.
The just-concluded mid-term management plan outlined five key initiatives. In spite of harsh operating conditions characterized by a major falloff in demand due tothe strong yen and the Lehman Shock, these initiatives
helped prove that the direction we took was ultimately
correct.
As a result of the Great East Japan Earthquake, FHI
recorded an extraordinary loss of ¥7.4 billion. This
amount includes roughly ¥5.0 billion for fixed costs related to suspended operations. Approximately ¥2.5 billion
was applied to the loss of inventories as well as the loss
and the restoration of fixed assets. Reduced operations
following the disaster had a major impact on operating
income in fiscal 2011.
Increased Sales in the United States, Subaru’s Most
Important Market, Spurs Performance
Sales in the United States are the key reason weachieved the targets of the mid-term management plan.
Sale volume in the United States increased from 217
thousand units in 2009 to 264 thousand units in 2010,
reaching a market share of 2.2%. Surmounting 200
thousand units and achieving a market share of 2% weretargets established when I became chief general

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manager of the Overseas Sales & Marketing Division in2005. I could not, however, have predicted that unit
sales would rise to this extent.
Looking back, our intention to increase overseas sales
by focusing on the United States, our most important
market, was outlined in the just concluded mid-term
management plan. In 2007 and 2008, Subaru introduced
the Impreza and Forester to the U.S. market with the aimof expanding global sales. Both became successive hits.
Consequently, Subaru actually experienced increased
sales despite the U.S. financial crisis that occurred half-

way through the plan. This garnered much interest andstood in contrast to the major year-on-year drops insales suffered by many competitors.
Taking advantage of this forward momentum, we
decided to release the Legacy in 2009, sparking a dramatic leap in showroom traffic. Subaru took steps toadjust its automobile sizes to global standards while
improving fuel economy. At the same time, the switch bycustomers from large-sized SUVs to Subaru automobiles
led to an upswing in sales. In fiscal 2009, Subaru sold 17
thousand units following the introduction of the “cashfor clunkers” incentive program, which encouraged thepurchase of new automobiles. In contrast, trade-ins ofSubaru vehicles under this program stood at only 173
units. This underscores my belief that the Subaru brandis increasing in popularity.
There are approximately 620 Subaru dealerships in
the United States. During the course of the mid-term
management plan, we increased quality in this area by
upgrading systems that allow for more precise follow up
with dealers while replacing nearly 40% of all dealers.
Consequently, we have significantly bolstered dealer

Performance Overview
Billions of yen(Forecast)

FY2006

Automobiles Sales Volume (thousand units)

FY2007

FY2008FY2009FY2010FY2011FY2012

571

578

597

555

563

657

632

1,476.4

1,494.8

1,572.3

1,445.8

1,428.7

1,580.6

1,480.0

Operating Income (Loss)

58.3

47.9

45.7

(5.8)

27.4

84.1

30.0

Ordinary Income (Loss)

46.8

42.2

45.4

(4.6)

22.4

82.2

25.0

Net Income (Loss)

15.6

31.9

18.5

(69.9)(16.5)

50.3

35.0

Capital Expenditures

56.2

59.6

56.3

58.0

56.1

43.1

60.0

Depreciation Expenses

57.5

58.9

65.5

65.1

57.1

49.8

55.0

R&D Expenses

46.9

50.7

52.0

42.8

37.2

42.9

48.0

Interest-Bearing Debt

Net Sales

374.1

343.9

304.5

381.7

367.6

330.6

370.0

Exchange Rate (¥/$, non-consolidated)

112

117

116

102

93

86

81

ROE

3.3

6.6

3.7

—

—

12.7

—

4.6

3.9

3.9

—

2.4

7.1

—

Total Assets

ROA*

1,348.4

1,316.0

1,296.4

1,165.4

1,231.4

1,188.3—

Net Assets**

467.8

495.7

494.4

394.7

381.9

414.0

—

* ROA was calculated as “(operating income + interest and dividend income)/(average of assets at the beginning and end of the term)”** Net Assets for the year ended March 2006 was the figure of total shareholders’ equity.

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Subaru’s Survival Hinges on Rejuvenating Operationsin Japanmorale and their management foundation. Amid a
recovery in overall demand in the United States, if
Subaru is able to maintain its current market share of
2%, it will attain its forecasted sales volume of 300 thousand units. At present, we face another crisis caused bya lack of inventory following the disaster in Japan. This
crisis is fundamentally different from what we confronted
following the Lehman collapse, but it is still unfortunatethat we are unable to meet the current level of demand
as a result of this event. For the foreseeable future, we aim
to achieve sales of 300 thousand units and prevent ourmarket share from falling. This is our number one goal.

We aim to achievesales of 300 thousand
units in the United Statesand prevent our market
share from falling.
This is ournumber one goal.

At the start of the mid-term management plan four years
ago, the domestic market was forecast to become
increasingly severe. To achieve the plan, we clearly needed to focus on overseas sales. As a result, we decided toundertake global product planning. However, we could
not forget about domestic profitability.
To survive and thrive amid harsh conditions characterized by shrinking domestic demand, Subaru promoted
the direct control of wholly owned distributors in Japan.

REVIEW OF THE PREVIOUS MID-TERM MANAGEMENT PLAN (FISCAL 2008—2011)
Targets VS Actual Results

Retail Sales in U.S.

Actual Results
FY2007

Targets of
FY2011

Actual Results
FY2011Units of Sales(non-consolidated)

584 thousand

683 thousand

657 thousand

Operating Income¥47.9 billion¥80.0 billion¥84.1 billion

Operating Income
Margin3.2%

5% or more

5.3%¥/$ rate

117

110

86

Achievements
Sharing the mind of “Customers come first” within group
Globalization of productsz World’s leading safety performancez Expanding the sales in U.S., as most important market
z Reform of profit structure by leaning cost

(Unit)(%)

300,000

3.0

200,000

2.0

100,000

1.0

z
z

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0 CY 2007

Retail Sales

2008

2009

2010

0

Market Share

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In addition, Subaru decided to withdraw from the development and production of minicars. This was an emotional decision since these operations had always beenat the core of the Company. Withdrawing from minicars
has been the catalyst to reduce fixed costs, shift towards
passenger cars and improve overall sales and services atour dealerships. All of these have improved profitability.
Half a year ahead of schedule, we established core
distributors by consolidating the 46 dealerships nationwide into 23. A virtuous circle emerged as visible
increases in income led to higher morale, which, in turn,translated to further improvements. In short, the domestic sales system has been completely overhauled, reducing the break-even-point from 300 thousand units toapproximately 165 thousand units.
Progress Continues through FHI’s Alliance with the
Toyota GroupThe alliance that we commenced with the Toyota Group
in 2005 has made steady progress based on a policy of
pursuing a win-win relationship for long-term competitive growth. During the mid-term management plan, thispartnership specifically led to Subaru of Indiana
Automotive, Inc. (SIA) commencing production of the
Toyota Camry in 2007. SIA’s manufacturing of 100 thousand units per year not only contributes to increased
profits through the reduction of fixed costs but also has
major benefits in terms of the exchange of production
technology. Beyond this, the supply of new compact
cars and minicars on an OEM basis is going almost
according to plan. In addition, we are steadily completing joint development of front-engine, rear-wheel drive
compact sports car with Toyota, which we aim to releasein spring 2012.

Looking ahead, Subaru will maintain its distinctivenesswhile continuing the win-win relationship with Toyota.
Strengthening Production Capacity Is an Urgent Issue
During the implementation of the mid-term management plan, insufficient production capacity became anissue. Even during the 2008 financial crisis, sales regularly outpaced production. We were making investments to
upgrade the production capacity of our existing facilities
to keep pace with sales when the Great East Japan
Earthquake struck. In light of damage sustained to certain production and R&D facilities, we were forced to
immediately suspend operations. As a result of exhaustive efforts, it only took three days to restore productionlines. However, we were unable to surpass record-breaking unit sales because of the significant impact that losing two thirds of our production had during March, aperiod when domestic demand is at its peak. For me,
this was a regrettable first. In my 41 years working at
Subaru I had never experienced a situation in which wewere unable to sell vehicles because of diminished manufacturing capacity.

CLOSE UP
MARKETING THAT SUPPORTS
ROBUST PERFORMANCE

Subaru’s award-winning movie The Car Parts

In May 2011, the One Show advertising awards
announced in New York that the Subaru brandmovie The Car Parts won the silver medals in
the Broadcast Design category in recognition ofits design excellence.
In addition, the Mediocrity advertising campaign
produced by Subaru of America, Inc. (SOA) wasawarded a Webby Award in the automobile category and a gold medal at the International Automotive Advertising Awards. These distinctions callattention to outstanding marketing efforts
that are increasing thevalue and recognitionof the Subaru brand.
The One Show “Pencil” trophyz The One Show award showcases excellence in advertising and ranks as one of the world’s top three advertising awards along with the Cannes Lions International Advertising Festival and the Clio Awards. Eachyear a variety of work is judged by an international
jury of advertising producers, making this a muchsought-after prize worldwide.
z Referred to as the Academy Awards of the Internet,
the Webby Awards is the leading international award
honoring excellence on the Internet. Awards are determined based on votes cast by both web specialists and regular members of the online community.
z The International Automotive Advertising Awards
was established in 1995 to showcase excellence inautomotive advertising and marketing.

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CLOSE UPHIGHER-THAN-EXPECTEDINSTALLATION RATES OFSUBARU’S “EyeSight” IN THE
DOMESTIC LEGACY
Expected Installation Rates

Actual Installation Rates

30%

80

%

Image of “EyeSight”

The “EyeSight” Mechanism
The EyeSight is equipped with two stereo cameras to maintain constant awareness of roadconditions in front of the vehicle. This system
functions in the same manner as the humaneye. Images received by the stereo cameras areprocessed at ultrahigh speed by the specialized
3D-image processing engine to determine thedistance, location and speed of objects. Whena potential collision hazard is detected basedon data sent mainly from sensors installed in theengine and Vehicle Dynamics Control (VDC), an
alarm sounds to warn the driver and the brakes
are activated. These functions help to avoid collisions as well as reduce collision damage.

Despite our desire to restore full operations as soon
as possible, we expect production in Japan to remain at
60% until the second quarter while SIA’s operations are
expected to be capped at 80%. We aim to return to fulloperations in October. Despite issues related to stable
power supply, if component supplies are restored tonormal levels, major automakers with high production
capacity will be able to rapidly regain their losses. Being
accustomed to operating at full capacity, Subaru must
now deal with the critical challenge of catching up after
operations are restored. To address this problem, we are
currently directing business resources to bolster production capacity.
In light of increasing sales volume in the UnitedStates and emerging markets, expanding local production overseas is an urgent issue. In particular, we areaccelerating initiatives in response to the Chinese market. Amid demand topping 18 million vehicles in China,
Subaru sold 62 thousand units in the previous year. We
believe China is a suitable market for Subaru automobiles, and we are investigating local production given
the unmistakable sales opportunities the country offers.
We aim to capture a 1% share of the Chinese market in
the medium term with sales of 180 thousand units.
Following China, the ASEAN region is another very
attractive market. We are examining methods to undertake local production in careful consideration of numerous factors. In addition, the shift to local production will
enable us to efficiently channel domestic production
capacity towards the development of other emerging
markets.

Unique Technology is the Essence of Subaru’s
Distinctive Driving Experience
We are not mass marketers. Through the provision of
distinctive Subaru technology, customers recognize thevalue of our vehicles. Based on this, we are employing astrategy of offering products with relatively higher pricepoints.
Our focus on safety is one aspect of manufacturing
distinctively Subaru automobiles. Subaru is increasing“Active Safety” features by refining driving stability
through our all-wheel drive and horizontally-opposedengines. Moreover, the superior features of Subaru’s“Passive Safety” have been recognized globally, thanks
to its excellent safety performance during collisions. We
have taken safety to a higher level through “collisionfree cars (pre-crash safety)” enabled by the use ofSubaru’s “EyeSight” Active Driving Assist System (version 2). At present, the installation rate of EyeSight(which is being optionally installed only in the domestic
Legacy & Outback models) has reached 80%, far
exceeding the initial projected rate of 30%. Customers
who experience the collision avoidance and driver burden reduction functions of EyeSight, even just one time,
view them as absolutely indispensable. EyeSight is gradually evolving as a unique technology that is playing amajor role in defining the Subaru brand.
Regarding the all new Impreza, we are tirelessly pursuing the development of an automobile that customers will
easily recognize in terms of value, attractiveness and safety.

External Recognitionz Received a prize at the Technology of the YearAwards (Sponsor: Automotive Researchers’ & Journalists’ Conference of Japan (RJC))z Received a prize at the Japan Automotive Hall of
Fame Association’s (JAHFA) Car Technology of theYear Awards (Sponsor: JAHFA)

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In Conclusion
In light of the series of achievements brought about by
our efforts to implement the mid-term management
plan as well as the commencement of the new mid-term
management plan, we have reached a critical stage. I
consider this to be the best time to change president inorder to further the major innovations being implemented under Subaru’s new management system. As such,the entire organization must undergo constant innovation. To date, Subaru has repeatedly experienced both
improvements and downturns in operations. Although
the direction Subaru must take has not changed, it is theduty of management to develop a growth trajectorythrough new ideas and strategies that focus on taking
advantage of favorable opportunities while refreshing
top management. FHI’s new president, Yasuyuki
Yoshinaga, possesses a broad strategic viewpoint andmost decidedly has the ability to realize the Company’s
goals. I have every confidence that he is the most suitable person to lead Subaru to further growth in the
future.

During my five-year term as president of FHI, I carriedout my duties with the goal of obtaining results.
Although there is much left to accomplish, the direction
we have taken has translated into tangible success.
Looking ahead, President Yoshinaga will be in charge ofthe execution of all automobile operations as COO. In
my capacity as CEO, I will oversee disaster countermeasures, develop guidelines for the internal Companies(excluding the Aerospace Company) and manage projects related to China.
I feel that Subaru is currently undergoing gradualchange. It is our aim to work toward future breakthroughs by improving Subaru’s dynamism under theguiding principle, Confidence in Motion. In the years
ahead, please stay tuned for even greater achievementsfrom Subaru.

Ikuo Mori
Representative Director of the Board,
Chairman and CEO

I consider this to be
the best time to changepresidents in order tofurther the majorinnovations being
implemented under
Subaru’s new
management system.

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MESSAGE FROM THE COO

YASUYUKI YOSHINAGA
Representative
Director of the Board,
President and COO

Subaru will increase
its corporate value andrealize further growththrough “Motion-V.”

10subaru2011e̲0928.indd 10

Building on the Success of the Previous Mid-Term
Management Plan to Achieve Sustainable Progress
Subaru’s previous mid-term management plan began in
fiscal 2008. Centered on the philosophy, customers
come first, two of the initiatives outlined in the plan
were: (1) provide a distinctive Subaru experience fordrivers and passengers, and (2) increase sales globally.
As a result, unit sales rose significantly in North America,

China and other markets. At the same time, we wereable to noticeably improve our profit structure by promoting the direct control of wholly owned distributors inJapan. These successes enabled Subaru to exceed its
target with operating income of ¥84.1 billion despite a
foreign currency exchange rate of ¥86 to the U.S. dollar,
which greatly surpassed the ¥110 forecasted during theplan’s formulation. In spite of major sales growth in the
United States and China, various issues remain. These
include unit sales that are still low compared with otherautomakers and the ongoing ineffectiveness of Subaru’s
initiatives in emerging markets. We recognize that thedirection established in the previous mid-term management plan proved to be correct. With the launching of
the new mid-term management plan “Motion-V,” we willcontinue the initiatives promoted in the previous plan
while pursuing sustainable progress in the years ahead.
To this end, we must focus our energy on tackling outstanding issues with a healthy sense of urgency.
As we consolidate our market foothold over the fiveyear period established by the new mid-term management plan, we aim to achieve annual unit sales of one
million units within the next 10 years. To this end, weestablished the new action guideline, Confidence in
Motion. Since the release of the Subaru 360 in 1958, theCompany has been building a relationship of trust with
its customers by providing unique products that makeuse of its original technologies, including the horizontallyopposed engine and Symmetrical All Wheel Drive(AWD). The new plan forces us to once again reexamine
this core aspect of Subaru in order to achieve greater
growth in the future. The reason all employees performtheir duties with a constant focus on providing products
and services trusted by customers is due to the Subaru
philosophy of customers come first. There is however aflipside: Taking on new challenges has never been oneof Subaru’s strengths. Amid constantly changing market

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conditions, we must accept new challenges to further
strengthen the customer relationship, inspiring confidence through our commitment to “Engineering excellence.”
Based on the Confidence in Motion action guideline,
Subaru will increase its corporate value and realize further growth through the following three initiatives outlined in “Motion-V.”
1. Provide a Distinctive Subaru Experience
The aim of “Motion-V” is to achieve Subaru’s management vision of being “a compelling company with astrong market presence.” Understanding the true meaning of this vision is more important now than when it wasformulated 15 years ago.
As a niche manufacturer that possesses a 1% share of
the global automobile market, the word “presence” isvery important for Subaru. In spite of low unit sales,

Subaru has remained in business for the past 60 years bymaintaining a constant market presence. We continue todisplay our presence through a variety of initiatives that I
will discuss below.
In order to create a unique market presence, we provide a distinctive Subaru experience for drivers andpassengers by offering original value focusing on“Enjoyment and peace of mind.” Subaru strives for drivability that incorporates not only sporty handling but
also safety. To this end, we are pursuing superior driving
performance and danger avoidance through our horizontally-opposed engine and Symmetrical AWD; maintaining top-level collision safety capabilities; gradually
expanding the “EyeSight” Driving Assist System tooverseas markets; and thoroughly improving all-aroundsafety. Regarding our environmental responsiveness, wewill gradually install the new horizontally-opposedengine and Lineartronic-CVT (Continuously Variable
Transmission) with the goal of improving the fuel economy

Pursuing Specificof all Subaru vehicles by approximately 30%. In 2013,
Subaru is scheduled to launch its first hybrid vehicle,
which will be equipped with a horizontally opposedengine. This release has been greatly anticipated by themarket.
Starting with the U.S. market, Subaru will introduce
the new model Impreza in 2011 as part of an effort toexpand its product portfolio. This release is in line with
our aim to provide a distinctive Subaru experience fordrivers and passengers. During the period of the new
mid-term management plan, one Subaru automobile
brand per year will undergo a full model change. At thesame time, we will proactively release new Subaru models. In 2011, Subaru will introduce the Subaru XV to thecrossover segment, an area in which the Company
excels. In 2012, we plan to launch the Subaru BRZ, a newfront-engine, rear-wheel drive sports car jointly developed with Toyota as well as a new model in 2014.
As part of our efforts to provide a distinctive Subaru

Goals
11

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experience for drivers and passengers, we will implement the market strategies and sales growth measures,
discussed below, to prevail over the competition. We
will also take steps to develop an appropriate level ofproduction. Through these measures, we aim to surpass
sales of one million units within a decade.

2. Accelerate Sales Expansion
It must be recognized that today’s global automobile
industry is growing. According to surveys conducted byvarious market research firms, the total sales volume of
the automobile industry is expected to increase

between 90 million and 100 million units in 2015. The
ongoing need to display our presence in the growing
global automobile market is vital to retaining our 1%
share of the global market. As such, achieving the goalof one million units sold is not simply a matter ofincreasing sales volume but is also central to the promotion of sustainable progress, which reflects increases inoverall demand.
The United States and China are the key markets forrealizing this growth. For Subaru, it is critical to fully
retain its share of the key U.S. market and avoid delays
in its expansion into such emerging markets as China,
which is growing rapidly. In fiscal 2016, the final year of
the mid-term management plan, we aim to increase

sales by 70 thousand to 380 thousand units in North
America compared with fiscal 2011 and by 120 thousand
to 180 thousand units in China. Combined with unit
sales of 270 thousand in Japan, Europe and Australia as
well as 70 thousand in other regions, Subaru anticipatessales volume to grow by 230 thousand to 900 thousand.
We intend to maintain a 2% share in the key U.S. market. Taking advantage of Subaru’s strengths in the crossover segment (which it had a pioneering role indeveloping), we plan to increase unit sales of sedans, ahigh volume sales area. Consequently, much is expectedof the new model Impreza.
Subaru’s sales in China have grown remarkably.
However, major obstacles remain regarding Subaru’s

FIVE CHALLENGES OF MID-TERM MANAGEMENT PLAN “MOTION-V”

1.

Guiding principle for all activities “Confidence in Motion”
With the basic philosophy of “customers come first,”

2. “Provide distinctive Subaru experience”

Guiding principle for all activities:
Confidence in Motion

Provide distinctive Subaru experience
Brand, Technology and Products

Strengthen sales force and the availability of

3. automotive supply, “Accelerate sales expansion”
Overhaul of cost structure and promoting alliance with

4. Toyota, “Solidify operational foundation”

Accelerate sales
expansion

Solidify operationalfoundation

Sales and Production

Quality, Cost and Alliance

Back up concrete approaches for business,

5. “Improvement in Management”

Improvement in management
Human resources, Corporate governance etc.

Strategic Direction for Growth12subaru2011e̲0928.indd 12

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efforts to penetrate the world’s largest consumer market
due to its low sales volume compared with total
demand. To avoid getting submerged in the Chinese
market, we aim to build a network of 250 dealerships by
2015, approximately twice the current number, andincrease sales to 180 thousand units, triple the present
amount. We are currently exploring the possibility ofjoint production in China, which is essential for realizing
the aforementioned goals. By promoting local production in China, Subaru plans on increasing its overseas
production ratio from 26% to about 40%.
3. Solidify Our Operational Foundation
The key to solidifying Subaru’s operational foundation
lies in product quality and cost improvement. Subaru
addressed past difficulties related to its high cost structure in the previous mid-term management plan.
“Motion-V” aims to reduce costs related to the newdevelopment of existing models by 20% and overall
development investment by 30%. I believe that ourefforts to thoroughly improve product quality anddecrease costs will strengthen Subaru’s operational
capacity. In addition, Subaru will pursue greater mutualcompetitiveness over the long term through its businessalliance with Toyota. Examples of our successes to dateenabled by this alliance include Subaru of Indiana
Automotive, Inc.’s (SIA) contracted manufacturing of the
Toyota Camry and the supply of new compact cars andminicars from the Toyota Group on an OEM basis.
Subaru is scheduled to release a new front-engine, rearwheel drive sports car jointly developed with Toyota in
2012. Through these initiatives, Subaru is pursuing a
win-win relationship with Toyota that will foster the
future development of both companies.

The Outlook for Fiscal 2012
For fiscal 2012, Subaru projects decreases in net sales,
operating income and net income of ¥1,480 billion, ¥30
billion and ¥35 billion, respectively. Despite efforts torecover lost production volume in the second half of fiscal 2012, the annual sales volume is expected to decline
25 thousand units year on year to 632 thousand units.
This is attributable to the major impact of disaster-related production shortages in the first half that lowered
sales volume by 79 thousand units compared with theprevious fiscal year. To encourage future growth, weplan to invest in the production of new engines and
CVTs as well as increase experiment- and research-related spending on new products. In addition, Subaru willconcentrate its efforts on maintaining operating incomeof ¥30 billion in fiscal 2012 while steadily implementing
the various initiatives established by “Motion-V.”
Aiming to be “a compelling company with a strong
market presence,” all Subaru employees will work
together to implement the initiatives outlined in the newplan. I look forward to your continued understanding
and support in the years ahead.

According tosustainable progress,
which reflects increases
in overall demand,
we aim to surpass salesof one million units
within a decade.

Yasuyuki Yoshinaga
Representative Director of the Board,
President and COO

13subaru2011e̲0928.indd 13

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SPECIAL FEATURE: SUBARU’S PRODUCTION STRUCTURE

We will restore production volume to pre-disasterlevels and develop a stable production system byaugmenting production capacity.
Such actions will ensure the supplyof high-quality Subaru vehicles tocustomers worldwide.

Masahiro Kasai
Corporate Senior Vice President
Chief General Manager
Subaru Manufacturing Div.

14subaru2011e̲0928.indd 14

Achieving the Early Restoration of Operations
Following the Disaster
Striking on March 11, 2011 at 2:46 p.m., the Great East
Japan Earthquake began with a shudder and verticalshaking. Registering at a lower six on the seven-point
Japanese seismic intensity scale, the earthquake then violently rocked sideways to such a degree that people wereunable to stand. At the Gunma Plant, an evacuation

order is automatically broadcast in the event that an earthquake exceeds magnitude four. Following predetermined
procedures, all of the Gunma Plant’s approximately 9,000
employees safely evacuated in around 30 minutes.
I was deeply relieved that the emergency evacuation
drills we conduct on a daily basis proved to be effective.
Given the uncertainty of the situation, however, we were
fully focused on pressing issues, including the safety of
employee families as well as the extent of damage toplant facilities and the supply chain. Immediately following the earthquake, we established an emergency
response headquarters, cancelled the evacuation order
after trained employees verified the safety of the plant,
and made a concerted effort to determine the level ofdamage sustained.
In an effort to gain control of the situation, we decided
to resume operations on March 14 and took steps todetermine each department’s responsibilities. To this end,
we prepared a disaster response report. Fortunately, wewere able to confirm that no one was seriously injured. By
the end of the day, we verified the damage to the minicar
production plant, the Oizumi Plant (which manufactures
engine and transmissions), and other Subaru facilities.
The status of the Yajima Plant, which produces passenger
cars, was confirmed the following day. This delay wascaused by a power outage that made it impossible todetermine the safety of the painting station, which has noaccess to outside light.
At the same time, the purchasing division contacted
each of Subaru’s business partners to assess the status ofMarch 11

March 12

March 14Issued evacuation order
immediately after the Great East
Japan Earthquake and confirmed
zero employee injuries

Verified the safety ofeach plant and the extent ofdamage as well as undertook
repairs

Decided to suspend operations,despite repairs enabling plant test
runs, based on the status of our
suppliers and electric power supply

A car body shaken loose froman overhead clamp (Yajima Plant)

Fallen piping (Oizumi Plant)

FUJI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 201111/10/05 14:10

employee injuries, along with damage to facilities and supply systems. In addition, we quickly secured the external
resources needed for repairs and to restore operations.
All stations in the plant were visually checked by theevening of March 12. Thanks to the exhaustive efforts of
1,500 employees over March 12 and 13, we conducted test
runs on March 14 and resumed operations on March 15,
only a day later than planned.
New Challenges Posed by Scheduled Blackouts andParts Supply Difficulties
The issue we faced immediately following the disaster was
how to respond to planned blackouts implemented fromMarch 13 by the Tokyo Electric Power Company. There
were two major problems caused by these blackouts.

First, any power disruption would be disastrous for the
Oizumi Plant’s heat treatment furnace, a production process that operates 20-hours per day without interruption. Second, power outages of just two to three hours
require extra time to shut down and restart the plant’s
computers, greatly reducing production time. In
response, the Yajima and Oizumi plants began using inhouse power generation systems to supply electricity forthe heat treatment process. In addition, these plants
maintain electric generators to provide power to computer systems. Such measures have made it possible to
avoid being affected by planned blackouts. We also
shifted the operation of press and other energy-intensive processes to the evening.
Despite restoring operations faster than initiallyestimated, we were forced to subsequently suspend

Pursuing Stableproduction and deliveries in response to problems arising from planned blackouts and delays in parts supply.
Owing to tireless efforts to determine the status ofpartner business operations and secure parts, we
commenced production of minicars on March 31 andpassenger cars on April 6. However, the number ofSubaru automobiles (including minicars) produced
domestically in March plunged from 40,729 units in theprevious month to 16,530 units, one third of that recorded for March 2010.
U.S.-based Subaru of Indiana Automotive, Inc. (SIA)
had been maintaining full production capacity on theback of strong sales of the Legacy and Outback. In lightof the disaster, however, our ability to supply SIA withCKD* components became very uncertain. In order toavoid a suspension of production in the United States,

SupplyMarch 23

March 24

March 31

April 6

Resumed production of parts for
U.S.-based Subaru of Indiana
Automotive, Inc. (SIA) in stages
after securing supply

Resumed spare parts production
in stages after securing supply

Resumed production of minicars
in stages after securing supply

Resumed production ofpassenger cars in stages after
securing supply

15

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we placed the highest priority on supplying componentsthat had become difficult to procure. On March 23, theOizumi Plant resumed production of engine components and transmissions to be sent to SIA.
Amid these circumstances, SIA had two choices. The
first was to maintain production at the current level,
which requires a two-shift work system. The second was
to decrease production volume in order to prolong
operations. However, if SIA chose to reduce production
volume too drastically, it would be unable to return tonormal levels, even after component supplies resumed.
Given Subaru’s limited production capacity, sharp drops
in production volume are unsustainable. Consequently,
SIA limited production to 70% by suspending all overtime and holiday work until supply lines in Japan were
fully restored.
In response to parts supply issues within Subaru’s
supply chain, we have increased the number of supply
routes, secured replacement parts and changed productdesigns. Thanks to these efforts, along with the help we
provided suppliers to rapidly restore their operations,
we have completely solved our supply chain problems.
*Completely knocked down or unassembled components

Developing Systems to Regain Lost Production
Volume in the Second Half of Fiscal 2012
The mainstay Yajima Plant has a maximum production
capacity of 400 thousand vehicles per year. By operating
at full capacity, we were able to fill orders for 657 thousand finished units in fiscal 2011, the first time consolidated sales volume has ever exceeded 600 thousand units.
Following the Lehman collapse, however, we experienced difficulties caused by overstaffing. To avoid
repeating this situation, we maintain staffing levels
between upper and lower requirements based on
Subaru’s sales forecasts. As in the case of the previous

16

subaru2011e̲0928.indd 16

fiscal year, when we experienced an increase in orders,
we can maintain full production through overtime andholiday work. The staff at Subaru’s plants consists of regular employees, temporary workers and personnel fromother departments that assist in production when needed. We have made an effort to optimize human resources to address the rapidly changing circumstances
currently confronting us by transferring personnel backto their original departments when necessary.
We were able to increase the production capacity of
the Yajima Plant by approximately 5% to 420 thousand
units per year. This was due to undertaking the emergency measures mentioned above, using the holiday
periods in May and August to upgrade facilities andimproving production speed.
To comply with new regulations for reducing powerusage by 15% from July onward, we commenced weekend operations and implemented various electricity conservation measures. Moreover, we introduced additional
in-house power generators in August. In combination
with existing power generation equipment, we havebeen able to produce approximately 60% of the plant’s
power usage internally.
As a result of these initiatives, we expect the numberof automobiles produced in the second half of fiscal
2012 to increase 34.6% to 288 thousand units. This projected rise in production will more than offset a forecasted year-on-year decrease of 28.6% to 175 thousand units
in the first half and is a 0.9% rise compared with the previous full fiscal year. Continuing to enjoy the momentum
created by favorable sales, SIA plans to boost production 1.5% year on year to 167 thousand units by producing 99 thousand units in the second half.

Delivering High-Quality Subaru Automobiles as
Quickly as Possible
Issues still remain regarding our plans to rapidly shift tofull production after power conservation directives are
discontinued in late September. We are urgently securing the personnel needed to increase production. Since
the end of June, we have accelerated efforts to recruit
temporary workers, with plans to increase the staff from
1,100 to 1,500 employees.
In retrospect, I believe that our ability to rapidly
bounce back from the damage to factories caused by
the disaster underscores the success of the “multiple
capabilities” concept promoted by Subaru. For a small
automobile manufacturer like Subaru, being competitive
globally depends on the versatility of each employee.
For example, production line staff being able to repair
equipment or maintenance staff who can make qualityrelated judgments. Through programs intended to passalong skills from experienced employees to new ones, it
is a tradition at Subaru to cultivate personnel who possess a wide range of abilities. Owing to these initiatives,
we were able to restore operations at all Subaru plants
faster than expected. Quickly adapting to changing circumstances was a challenging but valuable experience.
Our inability to meet the Company’s supply obligations
was the most difficult ordeal of all. This meant that we
could not fill orders, forcing customers to wait before
receiving their purchases. Overcoming this situation andrestoring Subaru’s impressive production capability without a doubt increases employee motivation. Supplying
high-quality Subaru vehicles as soon as possible to car
lovers worldwide is my greatest aspiration.

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SPECIAL FEATURE: SUBARU’S SAFETY CONCEPT

meeting customer demand through superior technologies, encompassing product planning, design and development. Where we encounter shortcomings, we will
aggressively develop new technologies and incorporate
them into our products. We are confident that such diligence is appreciated by our customers.
In our chosen technological field, “good enough” isnever enough. The final product, namely automobiles,
will change greatly depending on which features areenhanced. Our planning, design and development divisions share the development philosophy of offering customers reliability and driving pleasure by integrating our
superior technologies. Subsequently, the manufacturing
division undertakes operations with the determination
to “realize whatever is necessary to bring enjoyment tocustomers.” We work to achieve a distinctive Subaru
experience by leveraging our organizational strengths.
This involves open dialog and cooperation among theplanning, design, development, manufacturing andsales divisions.
What Safety Means to Subaru

The Development of Superior Products Underpins
SubaruTaking on the challenge of
producing enjoyable and safe
automobiles is the source ofSubaru’s superior
safety performance.

Yoshio Hirakawa
Corporate Vice President
Senior General Manager
Subaru Engineering Div.

Automobiles and airplanes are unique products because
people physically get inside and operate them. This feature differentiates them from most products, which areoperated from the outside, including cameras and televisions. Responding accurately to the will of the driver, an
attractive feature of automobiles is their ability to magnify
individual desires and abilities. Improperly used or in theevent of an unexpected collision, automobiles can also
be dangerous. Our customers select Subaru over dozens
of automobile brands worldwide. We are committed to

The essential function of automobiles is to safely, inexpensively and quickly transport people and objects. In
addition to fulfilling this basic function, Subaru produces
vehicles that are attractive because they conform todriver sensibilities and provide ideal handling. We
believe the level of safety required for automobiles not
only involves collision protection, but is also achieved bytailoring vehicle maneuverability to human senses.
Maintaining comfortable driving conditions helps torealize optimal automobile safety. When a vehicle
responds exactly as expected, this leads to greater driver safety and comfort as well as an enjoyable ride forpassengers from start to finish. This is Subaru’s conceptof safety.

17

subaru2011e̲0928.indd 17

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The Evolution of Safety at Subaru
Subaru seeks to produce automobiles with the ability tosense and avoid danger. This involves preventing vehicles from spinning due to sudden driver action; enablingvehicles to avoid anything darting out in front; andmaintaining stable performance despite erratic driving.
This is our fundamental approach to safety.
Building and maintaining trust with customers is theforemost mission of Subaru’s engineering division.
Especially since we increased the size of our main models in 2007 to meet global market expectations, customers are gradually recognizing the attractive new featuresof Subaru automobiles. They appreciate the way a
Subaru effectively handles even in dangerous situations.

By enhancing such features, the popularity of Subaru
automobiles is taking a significant leap forward. At thesame time, it is vital that we focus on developing this
rapidly evolving technology. Beyond basic safety, these
efforts involve the concept of “making drivers and passengers feel secure.”
Safety That Reflects Actual Driving Conditions
The difference in driving conditions from one country to
the next is an important aspect of safety. In Japan, automobiles, motorcycles, bicycles and pedestrians all sharethe same narrow roads. They all play a role in maintaining safety. From a global standpoint, the type of mixed
traffic encountered in Japan, in which drivers must

THE SAFETY OF SUBARU VEHICLES IS RECOGNIZED WORLDWIDEThe United States
U.S. National Highway
Traffic Safety Administration(NHTSA)

EuropeThe European New Car
Assessment Programme(Euro NCAP)

Japan
Japan New Car
Assessment Program(JNCAP)

The Legacy garnered the highest ratingof five stars by the Euro NCAP,
which provides assessments of
the overall safety performance of
new vehicles sold in Europe.

Legacy, Exiga, Forester and Imprezareceived six stars from JNCAP for
the safety of their driver and passenger seats.
JNCAP is an organization that assesses
the safety of new automobiles in Japan.

* Test vehicles are evaluated using
European specifications.

Legacy was awarded five stars
in all performance testing areas(head-on and side collisions,roll-over resistance), the highest safety
rating given by the NHTSA.
* Test vehicles are evaluated using
U.S. specifications.

The United States
Insurance Institute forHighway Safety(IIHS)

Australia
Australasian New Car
Assessment Program(ANCAP)

Safety ratings are based on standards specific to individual countries

18

subaru2011e̲0928.indd 18

Legacy, Impreza and Forester were awarded
the highest safety rating of five stars by ANCAP,
an organization based in Australia and New Zealand.
* Test vehicles are evaluated using Australian specifications.

Subaru was the only automaker toreceive the Top Safety Pick rating
for all of its U.S. models from IIHS.
* Test vehicles consisted of the Legacy,
Outback, Forester, Tribeca and Imprezamodels currently being soldin the United States.

always pay attention to pedestrians, is unusual. In
Scandinavian countries, drivers have to avoid deer darting into the road or sliding because of icy road conditions. In the United States, accidents involving two-ton
trucks and passenger cars are common.
Subaru automobile bodies are built to avoid being
crushed even in collision with large trucks. In contrast,
we also apply our ingenuity to the development of car
frames that absorb the energy generated by a collisionin order avoid crushing smaller vehicles. North American
customers in particular increasingly emphasize the protective features of industrial products, especially since
the terrorist attacks of September 11, 2001. Subaru’s
brisk performance in North America reflects consumer
support for our tireless efforts to create automobiles
that are more secure.
In order to understand what customers seek in termsof driving pleasure and safety, we conduct case studies
prior to new product development. In addition, we
undertake product development activities that enhancesafety from the driver’s perspective. Our product development efforts involve authentic consumer researchusing local vehicles driven under actual conditions toaccurately determine consumer opinions.
Pursuing Unlimited Evolution
Subaru’s constant pursuit of safety is at the core of
Subaru’s distinctiveness. In order to maintain customer
safety through leading technologies, Subaru must continue evolving.
If driving pleasure and safety were incompatible, people would naturally focus on collision safety. Subaru has
spent nearly 20 years developing the “EyeSight” Active
Driving Assist System by focusing on the events leading
up to a traffic accident. EyeSight incorporates pre-collision braking control that uses automatic brakes to avoid

FUJI HEAVY INDUSTRIES LTD.

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collisions; adaptive cruise control with all-speed range
tracking functions to help maintain safe distance
between vehicles; and a creep suspension and control
system to guard against sudden acceleration due todriver error.
Subaru’s development of the EyeSight system for
mass-produced automobiles drew the attention of automotive organizations worldwide. Subaru began providing a diverse array of information to relevant overseasorganizations over a decade ago, back when enhancing
collision safety was one of its main goals. Through the
EyeSight system, we will make every possible effort tocommunicate our thoughts on how to improve automobile safety. As part of such initiatives, we are providing
vehicles for use in research conducted by the InsuranceInstitute for Highway Safety (IIHS) in the United States
and the Thatcham Motor Insurance Repair ResearchCentre in the United Kingdom.
In the year since the launch of EyeSight, we havegained a great deal of insight regarding the changes incustomer awareness of everyday safety. Subaru is investigating to what extent the EyeSight system meets themost pressing needs of customers.
Subaru ceaselessly works to perfect its safety technology. During the next development cycle, nearly 40% ofconventional technology can be upgraded using computer-aided design. This minimizes the amount ofinvestment as well as the number of employees andengineers required for such tasks. In turn, the savings
can be invested to further the development of EyeSight
and create new concepts for safe and secure products.
We will strive to develop EyeSight danger avoidance
functions that are tailored to each customer. We will alsoenhance system intelligence through new input sensors
that have the potential of surpassing the driver’s fivesenses. We strongly believe that the number of loyal
Subaru owners will increase with our efforts to further
hone the secure features of Subaru vehicles while
increasing comfort and pleasure for both drivers andpassengers.

THE DIRECTION OF SUBARU’S
SAFETY SYSTEM EVOLUTION(P CONSTRUCTION)

Comfortable driving
Preventive safety
Avoidance safety

DangerCrash
Collision safety

Occupant protection

Damage minimization

Comfortable driving
Preventive safety

Avoidance safety Future focus:
Potential Danger
Recognition
DamageDangerreduction

Pursuing

SecureAutonomous/
automatic driving

Pre
Crash

Crash
Collision safety
Damage minimization

Avoidance

Automatic
avoidance

From reducing collision
damage to automatic
avoidance andautonomous driving
Pedestrian
protection

Automobiles
19

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

20

subaru2011e̲0928.indd 20

CSR Management
One aspect of our long-term vision is the aim to be: “A
compelling company with a strong market presence.”
As such, the new mid-term management plan establishes the CSR-related themes: “Being a company that contributes to the resolution of social issues through theprovision of products and services” and “Being a company that values its relationship with various stakeholders.” FHI aims to retain the trust of stakeholders and to
improve FHI’s corporate value.
CSR Activities

operation. Owing to the optimal handling it provides invarious circumstances, Symmetrical AWD creates leeway
that allows drivers to make composed decisions just intime. Such capabilities allow the driver to avoid hazards.
Passive Safety: Collision Safety Capabilities
In the event of a collision, Subaru is continuing to pursue
next-generation collision safety performance that will
reduce injuries not only to drivers and passengers in
Subaru automobiles, but to those in other vehicles andpedestrians as well. Consequently, Subaru automobiles
have achieved the world’s highest ratings in collision safety performance. (For more details, please refer to p. 18).

Eight themes underpin FHI’s CSR activities: customers
and products, employees, the environment, compliance,
information disclosure, social contributions, procurement and corporate governance. Based on these
themes, we undertake initiatives to help solve a variety
of social issues.
ALL-AROUND SAFETY
As well as naturally striving to ensure that the driver andpassengers in a Subaru vehicle enjoy a safe and comfortable ride from a variety of driving scenarios, Subaru
aims to improve the overall safety of today’s mobility
society from such perspectives as the surrounding environments and people’s safety.
Active Safety: Safe Driving Capabilities
Subaru is improving the drive, turn and stop functions
fundamental to automobiles, which in turn leads to the
avoidance of hazards. Featuring superior weight balanceby lowering the center of gravity of Subaru automobiles,
Symmetrical AWD is the Company’s core technologythat increases pleasurable drivability while enabling safe

Pre-Crash Safety: Working to Realize a Society without Automobile Accidents
The “EyeSight” Active Driving Assist System was developed with the aim of providing the ultimate level ofsafety, referred to as “collision-free cars.” Subaru’s
EyeSight (version 2) has been achieving high installation
rates in Japan since release on the Legacy in May
2010. EyeSight (version 2) features such functions as

FUJI HEAVY INDUSTRIES LTD.

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pre-collision braking control that uses automatic brakes
to avoid collisions; adaptive cruise control with allspeed-range tracking functions that helps to maintain asafe distance between vehicles; and a creep suspension
and control system that guards against sudden acceleration due to driver error.
The Environment
Environmental Initiatives
FHI regards global environmental matters as one of its
most pressing management issues. On that basis, FHI
established in 1998 its “Environmental Policy” and formulated the “Operating Criteria for Environmental
Conservation” as specific action guidelines. FHI is promoting activities in this area based on a detailed revisionof the “Environmental Policy” in 2010.
Environmental Policy
In recognition of the close relationship between the
global environment and business activities, we will deliver “Green Products” from “Clean Plants and Offices”
through “Green Logistics” and “Clean Dealers” to customers for the sustainable development of society. Also,
to say nothing of strictly observing laws and regulations,
local agreements and industries’ codes, we will get ourselves committed to contribution to the society andlocal communities, voluntary ongoing improvements
and prevention of pollution.
Corporate Activities and Environmental Impacts
Subaru is a transportation manufacturer focusing on
automobiles. Automobiles, which are a convenient andcomfortable form of transportation, are now indispensable for living in a modern society. On the other hand,automobiles require limited global resources as materials and fuels. Consequently, they emit carbon dioxide(CO2), which causes global warming, as well as other air
pollutants. Profoundly aware of these two aspects of theautomobile, Subaru is dedicated to developing nextgeneration environmental technologies to realize a beneficial coexistence between the global environment andautomobiles that enable comfort, reliance and fun
through Subaru’s Distinctive Driving Experience. Suchactions will contribute to the realization of an abundant
automobile-based society.
Product Development Activities
Subaru aims to achieve compatibility between an automobile-based society and an abundant global environment.
z Subaru released Legacy, Outback, Impreza andForester equipped with the world’s first Boxer Diesel
Engine in Europe beginning in 2008. Approximately
half of Subaru automobiles sold in Europe now feature diesel engines.
z Subaru has been installing the new horizontallyopposed engine (which improves fuel economy byapproximately 10%) in the Forester since 2010 and will
gradually introduce this technology to other models.
z Eco Technologies Company is developing wind-power generation that makes full use of this renewable
natural energy source.

Corporate Governance
Basic Approach to Corporate GovernanceIn line with its Corporate Philosophy, FHI views thestrengthening of corporate governance as one of management’s highest priorities, so that it can measure up
to the trust and confidence placed in the Company by
all of its shareholders, customers and other stakeholders. In the pursuit of more efficient management, FHI isworking to clarify management and execution functions
to enhance decision-making speed. To this end, theExecutive Management Board was established to undertake deliberations regarding Companywide strategies
and matters important to business execution. The
results of these deliberations are reported to the Boardof Directors. In addition to adopting the executive officer system, the Company has positioned theAutomobile division as its core business and has introduced an internal company system—composed of the
Aerospace, Industrial Products and Eco Technology divisions—to clarify management responsibilities and accelerate business execution.
Directors and Corporate Auditors
FHI’s Board of Directors and Board of Corporate
Auditors make decisions, monitor and conduct audits
regarding matters that are important to business execution. The Board of Directors is comprised of seven directors. This includes an independent outside director
who has been appointed to further augment theCompany’s corporate governance. The Board of
Corporate Auditors is comprised of four corporate auditors, including two outside corporate auditors, who participate in Board of Directors’ and Board of Corporate
Auditors’ meetings as well as attend other importantcompany meetings. At the same time, corporate

21

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auditors provide appropriate advice and direction froma wide-ranging perspective.
The Company has appointed the outside director,
Toshio Arima, who possesses considerable experience as
an executive and has a high degree of expertise in thearea of CSR. The Company has appointed the outside
corporate auditor, Giichi Miyakawa, who is fully qualified
for this position owing to his management experienceand wealth of knowledge as an executive in the manufacturing industry, and his credentials and abilities to undertake audits in an objective manner. In light of theirbackgrounds and with no possibility of a conflict of interest arising with regular shareholders, Mr. Arima and Mr.
Miyakawa have been appointed as independent directors
under the Tokyo Stock Exchange (TSE) guidelines.

Corporate Governance System

Overview of Compensation for Directors andCorporate Auditors
Regarding executive compensation, the total amount ofcompensation paid to directors and corporate auditors
in one year is limited to ¥600 million and ¥100 million,
respectively. These amounts were approved at theOrdinary General Meeting of Shareholders in June 2006.
Approved by the Board of Directors, this compensation,
which is the basic amount paid to directors, is divided
into a fixed amount (the specific amount is decided
upon in consideration of the business environment andother factors based on position) and a performancebased amount (the specific amount decided upon inconsideration of the business environment and otherfactors based on consolidated ordinary income for the
fiscal year under review).
In fiscal 2011, compensation for directors and corporate auditors was as follows:

Risk Management
FHI takes steps to maintain business operations during
emergencies by fully comprehending and taking optimalmeasures to deal with risk. Based on its compliance systems, FHI strengthens its risk management through thecoordination of each division and company.
Many types of risk can seriously affect FHI’s management. In addition, such risks may lead to emergency situations that cannot be addressed through regulardecision-making channels. Such risks are categorized
into natural disasters, accidents, internal and external
human factors, social factors, and compliance. The
Company has prepared a manual for responding thesetypes of emergencies. FHI works to address risks
through measures that include establishing optimalcommunication channels to provide information afterrisks are detected as well as an emergency response
headquarters.

Millions of yen

Fundamental Emergency Response Policies(1) Life and physical safety are of the utmost importance(2) Minimize losses related to stakeholders and corporate value(3) Consistently take actions that are honest, fair andtransparent, especially during emergencies

General Meeting of Shareholders
Appoint/
Dismiss

Appoint/
Dismiss

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

Appoint/
Dismiss

Board of Directors
Meeting

ReportReportEnvironmental
Committee

President/
Representative
Director

Compliance Committee
Recall Committee

Executive
Management
Board Meeting
Assign/Supervise

Audit

ReportExport Control
Committee(20)

Implement

Number

Appoint/Dismiss
Make proposal forand report on plans

FixedamountPerformancebased
amountTotal

Directors

8

244

101

345

Corporate auditors

5

81

—

81

Outside corporate
auditors(Included above)

2

32

—

32

Total

13

325

101

426

Note: This chart includes directors and corporate auditors who retired at the conclusionof the Ordinary General Meeting of Shareholders, held in June 2010.

Deliberate and report onimportant matters

Corporate Vice
Presidents

Classification

CSR Committee

Appoint/
Dismiss/
Supervise

Cooperate

Internal Audit
Department

Committees

Report(7 directors)

ReportAccounting
Auditors

Basic compensation

Approval ofpolicypresentations
and plans

Corporate Operations at HQ, Automotive BU, Each Company and Affiliate of the Group22

subaru2011e̲0928.indd 22

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MANAGEMENT (As of June 24, 2011)

Representative Director of the Board,
Chairman and CEO

Directors of the Board,
Executive Vice Presidents

Executive Vice Presidents

Vice Presidents

Standing Corporate Auditors

MITSURU TAKAHASHI (CFO)MOTOKIYO NOMURASHUNSUKE TAKAGI

1. IKUO MORI

4. AKIRA MABUCHISHUZO HAIMOTOYASUO UENOHIROYUKI OIKAWA

5. NAOTO MUTO

MITSURU TAKADAHIDETOSHI KOBAYASHINOBUSHIGE IMAI 2

Senior Vice Presidents

YOSHIO HIRAKAWA

Corporate Auditor

TAMAKI KAMOGAWA

RYOICHI SHIMOKAWA

GIICHI MIYAKAWA 3

HISASHI NAGANOTATSUHIKO MUKAWA

MOTOHISA MIYAWAKIYASUO KOSAKAI

TAKESHI TACHIMORITSUYOSHI NAKAIMASAHIRO KASAIYASUNOBU NOGAI

Representative Director of the Board,
President and COO

6. TOMOHIKO IKEDA

2. YASUYUKI YOSHINAGA

Outside Director of the Board

Representative Director of the Board,
Deputy President

7. TOSHIO ARIMA 1

3. JUN KONDO

1
6

4

2

MASASHI TAKAHASHI

537MASAMI IIDATOMOMI NAKAMURA

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

23

subaru2011e̲0928.indd 23

11/09/28 17:59

CONSOLIDATED TEN-YEAR FINANCIAL SUMMARY
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES, Years ended March 31

For the Year:Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (loss)
Income (loss) before income taxes and	  minority interests
Net income (loss)
Comprehensive income
At Year-End:
Net assets**
Shareholders’ equity
Total assets
Ratio of shareholder’s	  equity to total assets (%)
Per Share (in yen and U.S. dollars):
Net income or net loss:
		Basic
		Diluted
Net assets
Other Information:
Automobile inventory (thousand units):
		Japan		United States
Depreciation/amortization expenses
Capital expenditures	  (addition to fixed assets)
R&D expenses
Number of shares issued	  (thousands of shares)***Number of shareholders***
Number of employees***:		Parent only		Consolidated

2002

2003

2004

2005

2006

2007

2008

2009

Millions of yen
2010
2011

¥1,362,493
992,950
369,543
281,063
88,480¥1,372,337
1,011,582
360,755
293,234
67,521¥1,439,451
1,085,716
353,735
303,41150,324¥1,446,491
1,107,718
338,773296,756
42,017¥1,476,368
1,125,293
351,075
292,736
58,339¥1,494,817
1,142,674
352,143304,237
47,906¥1,572,346
1,217,662
354,684
309,004
45,680¥1,445,790
1,164,564
281,226
287,029(5,803)¥1,428,690 ¥1,580,563
1,152,763
1,241,427
275,927
339,136
248,577
255,001
27,35084,13556,13630,283—

46,97033,484—56,266
38,649—21,066
18,238—28,674
15,611—45,58931,899—31,90618,481—(21,517)(69,933)—¥0,399,598
396,112
1,269,558¥0,414,614
411,252
1,344,072¥0,457,027
453,708
1,349,727¥0,474,616
471,149
1,357,459¥0,467,786
465,522
1,348,400¥0,495,703
494,004
1,316,041¥0,494,423
493,397
1,296,388¥0,394,719
393,946
1,165,431

31.2%

30.6%

33.6%

34.7%

34.5%

37.5%

38.1%

33.8%

30.9%

34.7%

¥40.7438.83
532.88¥44.8442.91
553.90¥50.6249.66
582.60¥23.2723.27
604.51¥20.6620.66
649.41¥44.4644.44
687.81¥25.7325.73
687.02¥(91.97)—505.59¥(21.11)—488.58¥64.56—528.8833.5
41.2¥00,63,964

22.9
44.7
¥00,67,896

28.4
48.1
¥00,71,112

24.5
51.2
¥00,71,010

18.5
55.6
¥00,80,073

16.5
46.3
¥00,81,454

12.4
49.5
¥00,87,164

13.5
54.2
¥00,74,036

10.5
41.8
¥0,065,785 ¥

6.4
47.1
56,062

118,376
54,903

119,423
60,110128,026
57,541

147,759
52,962

119,289
46,893

126,32950,709118,869
52,02095,15342,831

89,077
37,17567,37842,907

746,506
33,094

746,52135,584

782,865
34,704

782,865
34,558782,865
46,367

782,865
42,920782,865
44,484

782,865
40,839782,865
39,223782,865
34,24013,374
26,48313,06427,47812,92827,296

12,703
26,98911,998
26,115

11,752
25,598

11,90926,404

12,13727,65912,48327,586

12,42927,296(443)(16,450)(13,416)

Thousands of
U.S. dollars*
2011$19,008,575
14,929,970
4,078,605
3,066,759
1,011,846

63,21450,32634,900760,241605,244419,723¥0,381,893 ¥ 413,963
380,587
412,661
1,231,367
1,188,324$ 4,978,509
4,962,850
14,291,329

$0.78
—
6.36

$

674,227
810,319
516,019*** U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥83.15 to US$1.00, the approximate rate of exchange at March 31, 2011.
*** Prior year amounts have been reclassified to conform to the current year presentation.
*** As of March 31

24

FUJI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 2011

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION
The Fuji Heavy Industries Ltd. GroupThe Fuji Heavy Industries Ltd. (“FHI”) Group is engaged
in production and sales activities across a wide rangeof business sec tors. These ac tivities are conduc ted
under four business divisions: Automobiles (the Group’s
core operating domain, which accounts for over 90% ofconsolidated net sales), Aerospace, Industrial Products
and Other.
On a consolidated settlement of accounts basis, FHI and
71 subsidiaries (no change year on year) as well as 9 equitymethod affiliated companies (no change year-on-year)
were included in the scope of the FHI Group’s consolidation as of March 31, 2011, the end of fiscal 2011 (“the fiscal
year under review”).
Overview
Business Environment
During fiscal 2011, ended March 31, 2011, the global economy began to gradually recover primarily owing to increased
exports on the back of improved economic conditions in
the North America and economic growth in China. This
was also due to the impact of a series of economic countermeasures implemented by individual countries.
Under these circumstances, the FHI Group took steps
to achieve the targets established in its four-year,
medium-term management plan, which concluded in fiscal
2011. To this end, the Group aggressively increased
domestic and overseas sales activities focusing on automobiles as it promoted struc tural improvement s.
However, the environment in which the Group operates
experienced a major setback as a result of the Great East
Japan Earthquake, which occurred on March 11, 2011.
The damage incurred to Group production and otherfacilities during the disaster was relatively minor. Despite
this, production and sales for March were severely impacted by the halting of component supplies from affectedbusiness partners and power shortages caused mainly by
the accident at the Fukushima Daiichi Nuclear Power Plant.

Performance Review
The above factors reflect the unforeseen changes thattook place during the final month of the fiscal year underreview. Nevertheless, the Group successfully achieved
operating income of ¥80.0 billion, an operating income
ratio of 5% and ROA of 7%, all of which were targets set for
the final year of FHI’s mid-term management plan. In
addition, consolidated automobile unit sales, net sales andnet income reached record high levels. Enabled by our
focus on sales from a global perspective and our pursuit of
a “Distinct Subaru Experience”—which is centered on theconcept of “customers come first”—these results reaffirm
that we have been moving in the right direc tion.
Consolidated performance during the fiscal year underreview was as follows.
Sales increased in the Automobiles division, which
recorded strong sales focusing on the North American
and Chinese markets, and the Industrial Products division,
which experienced a rise in sales of engines thanks to arecovery in demand. As a result, net sales in fiscal 2011were ¥1,580.6 billion, up ¥151.9 billion, or 10.6%, comparedwith in the fiscal year ended March 31, 2010. This result
occurred despite the negative impact of yen appreciation
on foreign currency exchange rates. On a geographic
basis, net sales in Japan decreased 10.3% to ¥467.3 billion
compared with the previous fiscal year because of suchfactors as a fall in automobile sales following the conclusion of eco-car subsidies as well as the recent disaster.
Overseas sales, however, rose 22.6% to ¥1,113.2 billion year
on year owing to increased unit sales in every market,
most notably North America and China. For the first time,overseas sales accounted for 70% of net sales.
From a profit perspective, the FHI Group reported an
operating income of ¥84.1 billion, representing a gain of¥56.8 billion, or 207.6%, compared with the previous fiscal
year. Despite the impact of strong yen and a rise in R&D
expenses, the increase was the result of favorable overseas
sales and efforts to reduce costs, including SG&A andother expenses. Net income totaled ¥50.3 billion, a positive
turnaround of ¥66.8 billion from a net loss of ¥16.5 billion in

Net Sales(Billions of yen)

1,600

1,200

800

400

0 FY

2007

2008

2009

2010

2011

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

90
60
30
0
-30
-60
-90

FY

2007

2008

2009

2010

2011

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

25

Consolidated Automobile Sales

Consolidated Automobile Sales by Region

Number of units
2007

2008

2009

2010

2011

Legacy43,951

31,07920,41528,862

22,673

Impreza

24,13529,67819,733

21,721

20,184

Forester

11,807

16,863

16,424

11,87912,685——

11,126

10,7897,859(Number of units)

Domestic Units:
800,000

Exiga

600,000

400,000

200,000

OEM

—

—

2,034

1,523

4,430

Others

1,308

435

363

323

303
68,134

		Subtotal

81,20178,05570,09575,097

Minicars

145,610130,635

108,694

96,17589,971

226,811

208,690

178,789

171,272

158,105

United States

190,276

192,760

188,240

227,028

278,959

Canada16,247

17,587

18,873

22,82828,059Europe58,47563,37356,76437,34048,244

Russia12,92922,622

20,711

1,563

11,320Australia

38,136

40,21036,71634,992

41,150

China

7,454

12,621

26,184

48,93862,412Others27,61038,802

29,056

18,87628,715

		Subtotal

351,127

387,975

376,544391,565

498,859

133,720

137,829

102,106

146,099

225,388

Impreza

90,927

113,777

97,472

74,99887,066

Forester

102,969

96,839153,289

156,288

176,453

Tribeca

18,26827,327

17,658

7,564

5,643

OEM

4,848

11,624

5,580

5,994

3,865

Others

395

579

439

622

444

351,127

387,975

376,544391,565

498,859

577,938

596,665

555,333

562,837

656,964

		Domestic Total
Overseas Units by Region:

0

FY

2007

2008

2009

2010

2011

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

Consolidated Automobile Sales by Model(Number of units)

800,000

Overseas Units by Model:
Legacy600,000

400,000

200,000

		Subtotal
Total

0

FY

2007

2008

2009

2010

2011

■ Legacy ■ Impreza ■ Forester ■ Tribeca■ Exiga ■ OEM ■ Others ■ Minicars

26

FUJI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 2011

Non-Consolidated Automobile Sales

Number of units
2007

2008

2009

2010

2011

Legacy47,176

34,63422,05930,927

23,212

Impreza

26,15932,873

21,93523,316

20,859Forester

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

Domestic Units:

12,946

18,74016,954

12,542

13,160

Exiga

—

—

12,787

11,893

8,150

OEM

—

—

2,651

1,575

5,313

Others

—

—

—

—

—

		Subtotal

86,281

86,24776,38680,25370,694

Minicars

157,453

132,872

110,043

97,23092,752

243,734

219,119

186,429

177,483

163,446

Legacy46,41048,56828,78743,93767,926

Impreza

92,782

119,000

99,68869,386

83,921

Forester

99,63798,602

164,960

159,463

174,541

Others

894

7,533

6,978

6,934

4,309

239,723

273,703

300,413279,720

330,697

		Domestic Total

300,000

200,000

100,000

Export Units:		Export total

0

FY

2007

2008

2009

2010

2011

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

Non-Consolidated Automobile Export Units by Model

U.S. Retail Sales*:(Number of units)

Legacy84,44278,42866,87886,330131,873

Impreza

41,14846,32949,09846,611

44,395

Forester

51,25844,53460,74877,78185,080

Baja

5,241

1,127

—

—

—

Tribeca

18,614

16,79010,975

5,930

2,472

		Total200,703

187,208

187,699

216,652

263,820

CKD** Overseas

100,972

110,363

77,871

113,605

163,469(SIA Portion)

100,972

110,363

77,871

113,605

163,469

Legacy89,351

84,96073,473

100,149

159,215

Tribeca

21,022

24,218

18,108

4,197

5,558

400,000

300,000

200,000

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

100,000

0

FY

2007

2008

2009

2010

2011

■ Legacy ■ Impreza ■ Forester ■ Others

CKD Overseas

27the fiscal year ended March 31, 2010. This improvement
occurred in spite of an extraordinary loss of ¥7.4 billion due
to the disaster. (Please refer to “Cost of Sales, Expenses
and Operating Income” [next page] for more details.)
Segment Information
Automobiles Division
In the fiscal year under review, sales volume for completed
automobiles stood at the record high level of 657 thousand
units, up 94 thousand units, or 16.7%, year on year in spiteof the conclusion of eco-car subsidies in Japan and theimpact of the Great East Japan Earthquake during thesecond half of fiscal 2011. This increase was attributable toongoing strong sales of the Legacy, mainly in North
America and China.
In Japan, sales volume during the first half of fiscal 2011
was favorable, exceeding that of the previous fiscal year.
Factors contributing to this result include strengthening
product capabilities by releasing Legacy models equippedwith “EyeSight” Active Driving Assist System (version 2)
and the minicar models Lucra and Pleo, as well as the positive contribution made by eco-car subsidies. During thesecond half, however, circumstances turned severe. Sales
volume fell year on year despite ongoing efforts toimprove products that included the release of Forester
models equipped with the New-Generation Subaru Boxer
Engine and the new compact car Trezia. This negative
result was caused by the cessation of eco-car subsidies
and the impact of the Great East Japan Earthquake.
As a result, the full-year sales volume of Subaru passenger cars in Japan fell 7 thousand units, or 9.3%, year on
year to 68 thousand units, while the sales volume of minicars declined 6 units, or 6.5%, to 90 thousand units.
Accordingly, domestic sales volume decreased 13 thousand units, or 7.7%, to 158 thousand units compared withthe previous fiscal year.
Overseas, sales volume in the first half increased significantly compared with the corresponding period of theprevious fiscal year owing to shipment adjustments

28

undertaken within the market and favorable sales of suchmodels as the Legacy and Forester in all regions, beginning with North America and China. Despite the impact ofthe disaster, the year-on-year rise in sales volume during
the second half was spurred on by ongoing sales of theLegacy, particularly in North America. As a result, overseas
sales volume jumped 107 thousand units, or 27.4%, to 499
thousand units compared with the previous fiscal year,
reflecting record sales in the United States, Canada, China
and Australia.
By region, units sold in the United States were up 52
thousand units, or 22.9%, to 279 thousand units, while unit
sales in Canada increased 5 thousand units, or 22.9%, to
28 thousand units, thanks to continual robust sales of theLegacy and Forester. In China, sales volume grew 13 thousand units, or 27.5%, to 62 thousand units year on year
owing to favorable sales of the Legacy. In Europe andRussia, sales volume improved 21 thousand units, or 53.1%,
year on year to 60 thousand units. Year-on-year unit salesin Australia increased 6 thousand units, or 17.6%, to 41
thousand units, while sales volume in other regions wereup 10 thousand units, or 52.1%, to 29 thousand units.
Consequently, net sales in the Automobile division rose¥157.8 billion, or 12.2%, to ¥1,452.2 billion compared withthe previous fiscal year despite the impact of the yen’s
appreciation in foreign currency exchange markets. This
result was driven by strong sales in the overseas market.
Segment income in the fiscal year ended March 31, 2011
jumped ¥58.7 billion, or 270.2%, year on year to ¥80.4
billion. This rise was primarily attributable to improved
overseas unit sales as well as efforts to reduce costs,
including SG&A and other expenses.
Aerospace Division
Net sales fell year on year due to decreased sales of suchproducts as unmanned aircraft research systems produced
for Japan’s Ministry of Defense. In the commercial sector,
however, net sales rose compared with the previous fiscal
year thanks to an improvement in sales of the Boeing 787.
The rise in commercial sales occurred in spite ofdecreased sales of the Boeing 777, caused by the impactof the strong yen on foreign currency exchange rates.
Based on these factors, net sales in the Aerospace division decreased ¥10.4 billion, or 11.2%, compared with theprevious fiscal year, to ¥82.8 billion. Segment income
declined ¥2.6 billion, or 53.1%, to ¥2.3 billion.
Industrial Products Division
In Japan, sales of engines primarily used in constructionand electrical equipment increased thanks to an ongoing

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

1,600

1,200

800

400

0 FY

2007

2008

2009

2010

2011

■ Automobiles ■ Aerospace ■ Industrial Products ■ OtherNet Sales by Division (Excluding intersegment sales)Billions of yen
2007

2008

2009

¥1,339.3¥1,421.2¥1,316.3

Aerospace

94.0

99.7

80.9

93.2

82.8

Industrial
Products

49.7

40.7

34.9

23.9

30.1

17.1

15.5

Automobiles

Other

11.8

10.8

13.7

Total

¥1,494.8¥1,572.3¥1,445.8

FUJI HEAVY INDUSTRIES LTD.

2010

2011

¥1,294.5 ¥1,452.2¥1,428.7 ¥1,580.6

ANNUAL REPORT 2011

40
20
0
-20 FY

2007

2008

2009

2011

2010

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

Segment Income (Loss) by Division
Automobiles

Billions of yen

2007

2008

2009

2010

2011

¥37.8

¥37.1

¥(9.2)

¥21.7

¥80.4

Aerospace

5.7

4.4

1.6

4.8

2.3

Industrial Products

1.5

0.7

(1.6)

(2.4)

(0.1)

Other

2.3

2.5

3.1

2.6

1.5

Corporate andElimination

0.6

0.9

0.3

0.7

0.1

¥47.9

¥45.7

¥(5.8)

¥27.4

¥84.1

Total

5.7

Income before Income Taxes and Minority Interests, andNet Income
Non-operating and extraordinary expenses totaled ¥20.9
billion, a ¥6.9 billion decrease, year on year. This was mainly
attributable to the FHI Group’s financial revenue andexpenditure (interest earned and dividends minus interestpaid) and an increase in equity in earnings of affiliates.
This result occurred despite the recording of such losses

8.7
23.2
27.4
26.0

(30.4)■FY OpeE
M ratinarc g
h 2 los
00 s
■
9
Re
du
cti
on
in
■
co
ex Decstpe rens aseesoan f S
d G&
ot
■
he A
Im
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m sa prov
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he
rs
■
R& De
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■
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on
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■
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O
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FY ratiE ng
M
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01 e
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(5.8)

83.1

8.9

6.1

(35.6)

84.1
(5.7)

27.4

O
pe
FY ratiE ng
M
arc inco
h2 m
■
01 e
Im
0
p
m sa rov
ixt le eur s v mee a ol nu
nd m t oot e & f
■
he
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Re
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in
■
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FY ratiE ng
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1

60

Operating Income
Operating income, as mentioned previously, rose ¥56.8
billion year on year to ¥84.1 billion, despite decreases inincome of ¥35.6 billion and ¥5.7 billion caused, respectively,by the appreciation of the yen in foreign currency exchange
markets and R&D expenses for new model development
and environment-friendly applications. This increase wasprimarily attributable to improved sales volume and mix
contributing ¥83.1 billion, on the back of increased unit
sales in all overseas markets, including the United States
and China; a reduction in costs of ¥8.9 billion that offset anincrease in raw material prices; and a ¥6.1 billion decline in
SG&A and other expenses thanks to a fall in fixed manufacturing costs and expenses used to address customer
complaints. Consequently, the operating margin increased
1.9% year on year to 5.3%.

(Billions of yen)■

80

(Consolidated, Three-Year YoY Comparison)

Other Division
The number of large-scale wind turbine generator systemdeliveries fell primarily due to a slump in overall demand.
At the same time, unit sales of sanitation trucks decreased.
As a result of these and other factors, net sales in the
Other division dropped ¥1.6 billion, or 9.5%, comparedwith the previous fiscal year, to ¥15.5 billion, and segment
income decreased ¥1.1 billion, or 42.9%, year on year, to¥1.5 billion.
Cost of Sales, Expenses and Operating Income

100

Analysis of Increases and Decreases in Operating Income

84.1

3.7

(22.0)(18.8)(11.9)

30.0
(5.1)

O
pe
FY ratiE ng
M
arc inco
h2 m
■
01 e
D
1
ex ec
pe re
ns aseesoan f S
G
d
ot &A
■
he
Lo
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ss
on
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ch rei
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■
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s
De
m sa terio
ixt le raur s v tio
e a ol n
nd um ofot e &
he
■
rs
Re
du
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on
in
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■
R& In
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ex as
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■
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FY O
es
E pe
M ra
arc tin
h2 g
01 inco
2( m
pl e
an
)

Segment Income (Loss) by Division(Billions of yen)segment loss of ¥0.1 billion due to the impact of foreign
currency exchange rates.

■

recovery in demand starting in the beginning of 2011 as
well as a bottoming out of market inventories. Overseas,engine sales volume grew considerably in all markets, particularly in North America, Europe (which includes Russia)
and Middle Eastern countries.
As a result, net sales in the Industrial Products division
increased ¥6.1 billion, or 25.7%, compared with the previous
fiscal year, to ¥30.1 billion. Despite a ¥2.4 billion year-on-year
improvement in segment income, the division reported an29

as disaster-related expenses (including for repairs andfixed costs incurred during suspended operations
following the Great East Japan Earthquake); loss on priorperiods adjustment that includes provision for productwarranties; and costs associated with the retirement anddismantling of facilities following the FHI’s withdrawal
from minicar production.
Taking into account the aforementioned factors, theFHI Group recorded income before income taxes andminority interests of ¥63.2 billion, a positive turnaround of¥63.7 billion from a loss of ¥0.4 billion in fiscal 2010.
Net income for the fiscal period under review amounted to ¥50.3 billion. This was a ¥66.8 billion improvementcompared with a loss of ¥16.5 billion recorded during theprevious fiscal year.
Liquidity and Financing
Securing Liquidity
FHI believes that it has secured liquidity at a level sufficient to satisfy its current needs through the use of commitment lines contracted with major banks, combined withcash and cash equivalents.
Interest-bearing debt as of the end of fiscal 2011
totaled ¥330.6 billion, ¥37.0 billion lower than the end of
the previous fiscal year. As a result, the debt/equity ratio
improved 0.17 of a point since March 31, 2010 to 0.80.
Financial Position
Total assets as of March 31, 2011 stood at ¥1,188.3 billion, adecline of ¥43.0 billion compared with the previous fiscal
year-end.
Of this total, current assets stood at ¥610.3 billion,
down ¥28.6 billion compared with March 31, 2010 despitea ¥43.1 billion increase in cash and deposits owing to higher
sales. This result was primarily due to declines in inventoriesof ¥30.2 billion and notes and accounts receivable—tradeof ¥26.7 billion, reflecting drops in production and sales
following the disaster in March.
Total property, plant and equipment fell ¥14.5 billion

30year on year to ¥578.0 billion. This result was mainly attributable to the impact of high yen rates on foreign currency
exchange rates.
Total liabilities were down ¥75.1 billion year on year, to¥774.4 billion. The main factors for this were a ¥40.2 billion
decline in notes and accounts payable—trade due to fallingpurchases in March following the disaster, and a ¥20.0
billion redemption of bonds.
Interest-bearing debt amounted to ¥330.6 billion as ofMarch 31, 2011, down ¥37.0 billion compared with the endof the previous fiscal year. This reflected the shift fromshort-term borrowings to long-term debt as well as theredemption of bonds.
Net assets totaled ¥414.0 billion, up ¥32.1 billion compared with the end of the previous fiscal year. This was primarily due to the rise in retained earnings of ¥46.8 billion
due to posted net income. As a result, net assets per share
as of the end of the fiscal year under review totaled¥528.88, up ¥40.3 from ¥488.58 as of the year prior.

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

500

1.00

400

0.80

300

0.60

200

0.40

100

0.20

0

FY

2007

2008

2009

2010

2011

0

■ Interest-Bearing Debt Balance

D/E Ratio

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

1,500

75.0

1,200

60.0

900

45.0

600

30.0

300

15.0

0 FY 2007

2008

2009

2010

2011

0

■ Total Assets ■ Shareholders’ Equity

Ratio of Shareholders’ Equity to Total Assets

FUJI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 2011

Cash Flows
In the fiscal year under review, net cash provided by operating activities was ¥138.2 billion compared with ¥176.7
billion provided during the previous fiscal year. This mainlyreflects decreases in depreciation and working capitalthat offset the rise in income before income taxes andminority interests.
Net cash used in investing activities was ¥51.1 billion in
fiscal 2011 compared with ¥62.7 billion used in the previous
fiscal year. This decline was primarily due to reductions incash outflows related to the acquisition of property, plantand equipment and increased income from the sale ofinvestment securities.
As a result, free cash flow amounted to ¥87.1 billion, adecrease of ¥27.0 billion from ¥114.1 billion provided in theprevious fiscal year.
Net cash used in financing activities totaled ¥39.4 billion
in the fiscal year ended March 31, 2011 compared with net
cash used in financing activities of ¥18.6 billion in fiscal
2010. This result was largely attributable to cash outflows
related to the redemption of bonds.
Accounting for the aforementioned activities andthe effect of translation adjustments, cash and cash
equivalents as of the end of the fiscal year under review
stood at ¥227.7 billion, up ¥36.2 billion year on year.

Research and Development Expenses
Cash Flows from Operating Activities &Cash Flows from Investing Activities

150

FHI invested in the development of the new Impreza andenvironment-friendly applications as temporary lull in newmodel development occurred in the previous fiscal year.
Mainly as a result of these factors, R&D expenses increased¥5.7 billion, or 15.4%, year on year, to ¥42.9 billion.

100

Capital Expenditures and Depreciation(Billions of yen)

200

50
0
-50
-100

FY

2007

2008

2009

2010

2011

Capital expenditures declined ¥13.1 billion, or 23.3%, compared with the previous fiscal year, to ¥43.1 billion despite
such factors as an increase in production capacity at the
Oizumi Plant in response to the introduction of new engine
models. This decrease was primarily due to delays incertain areas in the aftermath of the disaster. Depreciation
fell ¥7.3 billion, or 12.7%, year on year, to ¥49.8 billion.

■ Cash Flows from Operating Activities■ Cash Flows from Investing ActivitiesFree Cash Flow

R&D
Expenses(Billions of yen)

120
80

Billions of yen
2007

2008

2009

2010

2011

¥ 50.7¥ 52.0¥ 42.8¥ 37.2¥ 42.9

CapitalExpenditures		59.6 		56.3 		58.0 		56.1 		43.1

Depreciation
Expenses		58.9 		65.5 		65.1 		57.1 		49.8

40
0
-40
-80
-120

FY

2007

2008

2009

2010

2011

31

Basic Policy Regarding the Distribution of Profits
Research & Development Expenses(Billions of yen)

60

45

30

15

0 FY

2007

2008

2009

2010

2011

Capital Expenditure & Depreciation Expenses

Outlook(Billions of yen)

80

60

40

20

0 FY

2007

2008

2009

2010

■ Capital Expenditure ■ Depreciation Expenses

32

FHI views the return of profits to shareholders as a key
management priority, while taking into account yearly
performance, investment plans, and operating conditions.
FHI links profit distribution to performance, with a basic
policy of maintaining ongoing distribution payments inconjunction with improvements in ROE. In order to ensure
continual growth, we actively channel cash flow towards
such essential areas as the development of products andenvironmentally friendly technologies, production capacity
expansion and overseas business creation. At the sametime, FHI works to achieve balanced financial strategies thatprioritize investment efficiency and financial soundness.
In line with initial projec tions, interim and fiscal
year-end dividends were each ¥4.50 per share, providing a
total annual dividend of ¥9.00. In fiscal 2012, interim andfiscal year-end dividends are each scheduled to continueat ¥4.50 per share, for an annual dividend of ¥9.00.

2011

Despite indications of a recovery owing to expanding
automobile demand in such emerging markets as China,
economic conditions are forecast to remain uncertain due
primarily to exchange rate fluctuations and high raw
materials prices. In addition, power and component
supply shortages, resulting from the Great East Japan
Earthquake, are expected to affect FHI’s production into
early autumn.
Against this backdrop, the FHI Group is forecasting(as of July 2011) net sales of ¥1,480.0 billion in the fiscal
year ending March 31, 2012. This represents a year-on-year
decrease of 6.4%. On the earnings front, the Group’s
consolidated operating income is projected to drop
64.3%, compared with the fiscal year under review,to ¥30.0 billion. Net income is expected to decrease 30.4%
to ¥35.0 billion. Based on forecasts for the next fiscal year,
automobile production in the first half of fiscal 2012is projected to decrease by over 25% year on year, while

global unit sales are expected to fall 3.8% to 632 thousand
units. Despite efforts to accelerate operations in thesecond half, we do not expected to offset these forecasted
drops in production and sales, the cause of which is a
decline in the number of automobiles produced following
the disaster. Earnings are forecast to feel the impact of
yen appreciation, higher raw materials prices and increases
in future investment that includes capital expenditures
and R&D expenses. These forecasts are based on averageannual exchange rates of ¥81 to U.S. $1.00 and ¥115 to A1.
Note: Performance forecasts and mid- to long-term management strategies are based on information available to management as of thedate of this report. Accordingly, actual results may differ materially
due to a variety of factors.

Mid- to Long-Term Management Strategies
FHI is undertaking its new mid-term management plan
“Motion-V” between April 1, 2011 and March 31, 2016. The
plan positions these five years to solidify the foundation of
FHI’s core Subaru automobile business in order to ensure
further growth by achieving an annual sales volume of one
million vehicles within the next ten years. Continuing on
from our previous management plan, we have established
the brand statement Confidence in Motion as a guiding
principle based on our basic philosophy that customers
come first. Following this guiding principle, we will realize
the growth of the Subaru brand through the following
three themes: 1. Provide distinctive Subaru experience;
2. Accelerate sales expansion; and 3. Solidify our operational foundation.

FUJI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 2011

1. Provide distinctive Subaru experience
We aim to expand our base of Subaru fans by offering
increased brand value. This will be achieved throughdistinct automobile manufacturing methods that are
defined by the concepts of “Enjoyment and peace ofmind.” In particular, we are promoting product and technological development focusing on increased safety andenvironmental friendliness. We will:• Pursue drivability and the avoidance of hazards• Keep the highest ratings in collision safety performance• Introduce the “EyeSight” Active Driving Assist System  to all models in global markets• Develop a new and light platform with high versatility• Introduce hybrid cars to the Japanese market in 2013
• Introduce a turbocharged direct injection boxer engine
compatible with high performance and environmental
friendliness
2. Accelerate sales expansion
We intend to increase unit sales approximately 40% over a
5-year period by focusing on the key U.S. and Chinese
markets. In addition, we will build a flexible production
structure to accommodate unit sales and protect against
currency exchange fluctuations. We will:• F ocus management resources on the U.S and China
markets as key markets and substantially expand sales• Begin production in China in order to expand production
capacity and mitigate the sensitivity of foreign currencies

3. Solidify our operational foundation
We will strive to overcome various risks and environmental
changes in such areas as investment in environmental
technological development, rising costs and currency rate
fluctuations by integrating the effects of our cost reduction
efforts and business alliances. We will:

Forecast for Global Automobile Sales

Passenger cars

68.1

70.7

2.5

Minicars

90.0

93.2

3.2

• Achieve 20% cost reduction in new models, and continue
30 % reduction in development cost		Subtotal

158.1

163.8

5.7

United States

279.0

274.3

(4.6)

Canada

28.1

27.2

(0.9)

• Promote procurement reform mainly by expanding LCC
purchase• Pursue a win-win relationship to boost the long-termcompetitiveness and development of FHI and Toyota,
for example:–	Sporty, compact RWD (front engine, rear-wheel drive)
cars, jointly developed with Toyota, are scheduled forlaunch in spring 2012–	A ll Subaru minicar lineups will be supplied by
Daihatsu under an OEM agreement by spring 2012–	S ubaru of Indiana Automotive, Inc. will continue
production of the Toyota Camry
Through the above initiatives, FHI aims to achieve by fiscal
2016, the final year of “Motion-V,” consolidated operating
income of ¥120.0 billion and a consolidated operating
income ratio of 6% or more. The entire staff of FHI will
work together to achieve the targets set by “Motion-V”
and, in turn, realize further growth.

2011(Results)

Thousand units
2012

ChangeJapan:

Overseas:

Europe48.2

37.8(10.5)

Russia

11.3

13.6

2.2

Australia

41.2

36.4

(4.7)

China

62.4

54.9

(7.5)

Other

28.7

23.8

(4.9)

		Subtotal

498.9

468.0

(30.8)

Total

657.0

631.8

(25.1)

Principal Risks
Business risks faced by FHI with the potential to havesignificant impact on investor decisions are listed on FHI’s
website at http://www.fhi.co.jp/english/ir/• Refurbish the Gunma Main Plant to produce passenger
cars instead of minicars• E xpand the Oizumi Plant’s production of the newgeneration boxer engines that excel in environmental
friendliness• Begin assembly of KD units in Malaysia, thereby making
inroads to the growing markets within the ASEAN Free
Trade Area

33

Consolidated Subsidiaries and Affiliates (As of March 31, 2011)
Japan

Overseas

Fuji Machinery Co., Ltd. (100.0%)

Subaru Kohsan Co., Ltd. (100.0%)

Manufacture and sales of automobile parts andindustrial product parts
http://www.fuji-machinery.co.jp/

Leasing of real estate, shopping mall management andtravel agency operations
http://www.subaru-kohsan.co.jp/

Ichitan Co., Ltd. (100.0%)

Subaru Finance Co., Ltd. (100.0%)

Manufacture and sales of forged automobile/industrial product parts
http://www.ichitan.co.jp/

Lease & credit facilities provider for Subaru automobiles,
financing for FHI subsidized companies, lease forvarious facility equipment, rolling stock &FHI made garbage trucks and sales of insurance
http://www.subaru-finance.co.jp/

Kiryu Industrial Co., Ltd. (97.5%)
Manufacture of Subaru specially equipped automobiles
and distribution of Subaru automobile parts
http://www.kiryu-kougyo.co.jp/

Subaru Tecnica International Inc. (100.0%)
Management of SUBARU Motorsport Activities,
Development and manufacture of competition parts,
tuning parts and accessories for SUBARU cars
http://www.sti.co.jp/

Yusoki Kogyo K.K. (100.0%)
Manufacture and sales for aircraft parts
http://www.yusoki.co.jp/

TOKYO SUBARU INC. (100.0%)
and 32 other dealerships
Distribution, sales and services of Subaru automobiles
http://www.tokyo-subaru.co.jp/

Subaru of America, Inc. (100.0%)
and 10 subsidiaries

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

Subaru Plaza, 2235 Route 70 West, Cherry Hill,
NJ 08002, U.S.A.
Phone: +1-856-488-8500
Fax: +1-856-488-0485
Distribution and sales of Subaru automobiles and parts
http://www.subaru.com

560 Suffolk Court Mississauga, Ontario L5R 4J7, Canada
Phone: +1-905-568-4959
Fax: +1-905-568-8087
Distribution and sales of Subaru automobiles and parts
http://www.subaru.ca/

Fuji Heavy Industries U.S.A., Inc. (100.0%)
and one subsidiaryc/o Subaru of America, Inc.
Subaru Plaza, 2235 Route 70 West, Cherry Hill,
NJ 08002, U.S.A.
Phone: +1-856-488-8743
Fax: +1-856-488-8517
Engineering research of Subaru automobiles in North
America Market

Subaru Research & Development, Inc.
3995 Research Park Drive, Ann Arbor, MI 48108, U.S.A.
Phone: +1-734-623-0075
Fax: +1-734-623-0076
Research and development of automobiles

Subaru Europe N.V./S.A. (100.0%)
Leuvensesteenweg 555 B/8, 1930 Zaventem, Belgium
Phone: +32-2-714-0300
Fax: +32-2-725-7792
Distribution, sales and marketing of Subaru automobiles
and parts

Subaru of China, Ltd. (100.0%)
Beijing Landmark Towers Office Building 2-1501,
8 North Dongsanhuan Road, Chaoyang District,
Beijing 100004, China
Phone: +86-10-6590-0725
Fax: +86-10-6590-0729
Distribution, sales and marketing of Subaru automobiles
and parts
http://www.subaru-china.cn/

Subaru of Indiana Automotive, Inc.
(100.0%)and one subsidiary
5500 State Road 38 East, Lafayette, IN 47905, U.S.A.
Phone: +1-765-449-1111
Fax: +1-765-449-6952
Manufacture of Subaru automobiles andcontracted manufacture of Toyota automobiles
http://www.subaru-sia.com/

34

subaru2011e̲0928.indd 34

FUJI HEAVY INDUSTRIES LTD.

ANNUAL REPORT 2011

11/09/28 17:22

INVESTOR INFORMATION (As of March 31, 2011)
Head Office

Major Shareholders

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

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

1. Toyota Motor Corporation
2. The Master Trust Bank of Japan, Ltd. (Trust account)
3. Japan Trustee Services Bank, Ltd. (Trust account)
4. Suzuki Motor Corporation
5. FHI’s Client Stock Ownership
6. Mizuho Corporate Bank, Ltd.
7. Mizuho Bank, Ltd.
8. Sompo Japan Insurance Inc.
9. Nippon Life Insurance Company
10. Tokio Marine & Nichido Fire Insurance Co., Ltd.

Established

Stock Exchange Listing

July 15, 1953

Tokyo Stock Exchange

Paid-in Capital

Transfer Agent¥153,795 million

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

Investor Relations Office

(Yen)

800

600

400

200

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

0Number of Shareholders
43,968

Quarterly Common Stock Price Range ( Tokyo Stock Exchange)

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

Number of Common Stock Issued

High
Low

FY2007

FY2008FY2009FY2010FY2011

747
577

641
376

635
223

487
317

758
435

782,865,873

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

IMPREZA
Developed under the concept of “Redefining Value, Redefining Class,” the new Impreza pursues a uniquely agile andenjoyable driving experience. At the same time, the new Impreza features a more spacious and comfortable interior
without increasing overall size. Subaru has also improved the environmental performance of the new Impreza throughsuch innovations as the installation of the third generation Boxer engine and the new Lineartronic-CVT (Continuously
Variable Transmission). As a result, the new Impreza has achieved leading fuel efficiency among AWD vehicles in the
United States. Subaru plans to release the new Impreza in the United States in autumn 2011.

For the entire Annual Report including the financial statements, please visit FHI’s website:

http://www.fhi.co.jp/english/ir/report/ar.html

35subaru2011e̲0928.indd 35

11/09/28 17:22

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

subaru2011e̲0928.indd a2

11/09/28 15:45

Consolidated Balance Sheets

83.15

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2011 and 2010
Millions of yen

Thousands of
U.S. dollars(Note 1)ASSETS
Current assets:
Cash and deposits (Note 3 and 4)
Notes and accounts receivable-trade (Note 4 and 6)
Lease investment assets (Note 4 and 23)
Short-term investment securities (Notes 3, 4 and 5)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 11)
Short-term loans receivable (Note 3 and 4)
Other current assets
Allowance for doubtful accounts
Total assets

2011

2010

2011

¥211,700
76,81023,05021,06372,87156,56736,974
13,75459,98639,396(1,851)
610,320¥168,643
103,521
27,78812,458101,351
59,59635,672
15,54975,78040,216(1,686)
638,888$2,546,001$923,752$277,210$253,313$876,380$680,301$444,666$165,412$721,419$473,795($22,261)
7,339,988

Property, plant and equipment (Notes 6, 8 and 15)
Accumulated depreciation
Accumulated impairment loss
Total property, plant and equipment

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

1,241,606(759,073)(33,006)
449,527

14,795,129(9,202,778)(410,848)
5,181,503

Investments and other assets:
Intangible assets
Investment securities (Note 4 and 5)
Investments in non-consolidated subsidiaries and affiliated companies
Deferred tax assets (Note 11)
Other assets (Note 32)
Allowance for doubtful accounts
Total investments and other assets
Total assets

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

11,99961,616
6,167
5,742
62,577(5,149)142,952¥1,231,367

144,799752,796
155,069
21,792
743,620(48,238)
1,769,838$14,291,329

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2011

¥176,895
99,07240,91260,876
16,322
27,172
2,089
57,365
480,703¥217,051
142,12133,922
56,244
15,34819,9992,873
67,503555,061$2,127,420
1,191,485
492,026
732,123
196,296326,783
25,123689,898
5,781,154

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

191,569
34,867
13,54154,436294,413

2,292,748
405,376
168,394
665,148
3,531,666

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

153,795
160,071
110,172(2,173)

1,849,609
1,925,087
1,887,529(16,609)469,433

421,865

5,645,616

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

10,309(51,587)(41,278)
1,306

139,110(821,876)(682,766)
15,659413,963

381,8934,978,509¥1,188,324¥1,231,367$14,291,329

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable-trade (Note 4)
Short-term loans payable (Note 4 and 6)
Current portion of long-term debts (Note 4 and 6)
Accrued expenses (Note 4)
Provision for bonuses
Provision for product warranties
Accrued income taxes (Note 4 and 11)
Other current liabilities (Note 4, 6 and 11)
Total current liabilities
Long-term liabilities:
Long-term debts (Note 4 and 6)
Accrued pension and severance liability (Note 10)
Deferred tax liabilities (Note 11)
Other long-term liabilities (Note 6)
Total long-term liabilities
Contingent liabilities (Note 25)
Net assets: (Note 1 and 12)
Shareholders' equity:
Capital stock
Authorized— 1,500,000,000 shares
Issued —782,865,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2011—
2,605,141 shares
2010—
3,901,219 shares
Total shareholders’ equity
Accumulated other comprehensive income: *Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

*From the fiscal 2011, the Company has adopted "Accounting Standard for Presentation of Comprehensive Income" (ASBJ Statement No.25,
June 30, 2010). The amounts of "Accumulated other comprehensive income" and "Total accumulated other comprehensive income" of theprevious fiscal year states in the amounts of "Valuation and translation adjustments" and "Total valuation and translation adjustments".

1

Consolidated Statements of Income

83.15

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2011 and 2010

Millions of yen

N t saleslNet
Cost of sales (Note 13)
Gross profit
Selling, general and administrative expenses (Note 2 and 14)
Operating income (loss)
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Real estate rent
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets (Note 20)
Gain (loss) on sales of investment securities (Note 5)
Loss on valuation of investment securities (Note 5)
Reversal of allowance for doubtful accounts
Depreciation
Impairment loss (Note 8, 15 and 20)
Gain on sales of loans receivable
Loss on disaster (Note 16)
Loss on prior periods adjustment (Note 17)
Loss on adjustment for changes of accounting standard for asset retirement obligations (Note 2)
Loss on reconstruction of office building (Note 18)
Loss on abandonment of inventories (Note 19)
Other, net (Note 20 and 21)
Income (loss) before income taxes and minority interests
Income taxes (Note 11):
C rrent
Current
DeferredIncome (loss) before minority interests
Minority interests in income (loss)
Net income (loss)

Per share data (Note 2) :Net income (loss)—Basic—Diluted *Net assets
Cash dividends (Note 12)
The accompanying notes are an integral part of these statements.

2011¥1 580 563¥1,580,563
1,241,427
339,136
255,001
84,135

Thousands of
U.S. dollars(Note 1)2010
2011
¥1 428 690 $19¥1,428,690$19,008,575
008 575
1,152,763
14,929,970
275,927
4,078,605
248,577
3,066,759
27,3501,011,846

1,945(4,522)
2,619
558(1,010)
573
(662)
460
(415)
412
(1,162)(1,457)881(7 352)(7,352)(6,110)(372)(657)(4,650)(20,921)
63,214

1,719(4,947)
1,070
573
98
(165)
(3,000)
20
(520)
283
(1,289)(17,906)294(1,191)(2,832)(27,793)(443)

23,391(54,384)
31,497,
6,711(12,147)
6,891(7,962)
5,532(4,991)
4,955(13,975)(17,523)
10,595(88 419)(88,419)(73,482)(4,474)(7,901)(55,919)(251,605)
760,241

8 735
8,735
4,064
12,79950,415
89¥50,326

10,50410
504
5,629
16,133(16,576)(126)(¥16,450)

105,051105
051
48,876
153,927
606,3141,070$605,244

Yen

U.S. dollars(¥21.11)488.580.00$0.78¥64.56528.88
9.00

6.36
0.11

*For the year ended March 31, 2011 diluted information is not presented because potentially dilutive securities do not exist.
For the year ended March 31, 2010 diluted information is not presented because potentially dilutive securities existed, but net loss is recorded.

Thousands of
U.S. dollars(Note 1)
2010
2011(¥16,576)$606,314

Millions of yen

Income (loss) before minority interests
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income
Comprehensive income(Comprehensive income attributable to)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests2

2011¥50,415
1,254(16,397)(372)(15,515)

7,314(4,163)9
3,160

15,081(197,198)(4 474)(4,474)(186,591)

34,900(13,416)

419,723

34,832¥68(13,301)(¥115)

418,906$817

Consolidated Statements of Changes in Net Assets

83.15

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2011 and 2010

Shareholders' equity
Capital stock
Balance at the end of previous period
Balance at the end of current period
Capital surplus
Balance at the end of previous period
Balance at the end of current period
Retained earnings
Balance at the end of previous period
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 end of previous period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the end of previous period
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

3Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2011

153,795
153,795

153,795
153,795

1,849,609
1,849,609

160,071160,071160,071160,071

1,925,087
1,925,087

110,172

126,593

1,324,979(3,510)50,326(109)
69
46,776
156,948(16,450)(3)
32(16,421)110,172(42,213)605,244(1,311)
830
562,550
1,887,529(2,173)(2,086)(26,134)

(30)
822
792
(1,381)

(93)
6
(87)
(2,173)

(361)
9,886
9,525
(16,609)421,865

438,373

5,073,541(3,510)50,326(30)713
6947,568469,433(16,450)(93)
3
32(16,508)
421,865(42,213)605,244
(361)
8,575
830
572,075
5,645,616

Consolidated Statements of Changes in Net Assets
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2011 and 2010

Accumulated other comprehensive income *Valuation difference on available-for-sale securities
Balance at the end of previous 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 end of previous 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 end of previous 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 end of previous 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 end of previous period
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.

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2011

10,3093,002

123,981

1,258
1,258
11,567

7,307
7,307
10,30915,12915,129139,110(51,587)(47,429)(620,409)(16,752)(16,752)(68,339)(4,158)(4,158)(51,587)(201,467)(201,467)(821,876)(41,278)(44,427)(496,428)(15,494)(15,494)(56,772)

3,149
3,149
(41,278)(186,338)(186,338)(682,766)

1,306

773

15,707

(4)
(4)
1,302

533
533
1,306

(48)
(48)
15,659381,893394,719

4,592,820(3,510)50,326(30)713
69(15,498)
32,070413,963(16,450)
(93)
3
32
3,682
(12,826)
381,893(42,213)605,244
(361)
8,575
830
(186,386)
385,689
4,978,509*From the fiscal 2011, the Company has adopted "Accounting Standard for Presentation of Comprehensive Income" (ASBJ Statement
No.25, June 30, 2010). The amounts of "Aaccumulated other comprehensive income" and "Total accumulated other comprehensive
income" of the previous fiscal year states in the amounts of "Valuation and translation adjustments" and "Total valuation and translation
adjustments".

4

Consolidated Statements of Cash Flows

83.15

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2011 and 2010

Millions of yen

Thousands of
U.S. dollars(Note 1)

2011

2010

2011

Net cash provided by (used in) operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in provision for retirement benefits
Interest and dividends income
Interest expenses
Loss (gain) on valuation of derivatives
Equity in (earnings) losses of affiliates
Loss (gain) on sales and retirement of noncurrent assets
Loss (gain) on sales and valuation of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Decrease (increase) in lease investment assets
Decrease (increase) in operating loans receivable
Decrease (increase) in vehicles and equipment on operating leases
Increase (decrease) in deposits received
Other
Sub total¥63,21456,062
1,457
(972)
974
8,618
3,282
(1,284)(1,945)
4,522(573)(2,619)662(45)
25,20818,677(37,633)
4,447
1,465
2,750
(7,906)
12,544150,905(¥443)
65,785
17,906
(630)
1,168
1,708
639
(2,292)(1,719)4,947
165(1,070)3,000
500(18,305)
56,491
67,557(575)(12,154)(2,867)3,293
3,155
186,259$760,241
674,227
17,523(11,690)
11,714
103,644
39,471(15,442)(23,391)
54,384(6,891)(31,497)
7,962
(541)
303,163
224,618(452,592)
53,482
17,61933,073(95,081)
150,857
1,814,853

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

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

1,722(5,203)(6,044)
176,734

23,656(55,225)(121,131)
1,662,153

Net cash provided by (used in) investing activities
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities(4,237)4,460(44,729)1,880(3,078)(20,719)
16,722(84,517)84,848(1,739)(51,109)

(703)
1,055
(53,087)
2,390(2,894)(15,050)
6,386(59,057)
58,721(417)(62,656)(50,956)
53,638(537,931)
22,610(37,017)(249,176)
201,106(1,016,440)
1,020,421(20,915)(614,660)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Increase (decrease) in commercial papers
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from sales of treasury stock
Repayment of lease obligations
Other,net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents(43,034)
68,828(40,721)(20,010)(3,498)(1,302)329(39,408)(11,453)
36,238(81,922)(24,000)
110,472(26,118)
4,100
(960)
(132)
(18,560)(816)
94,702(517,547)
827,757(489,729)(240,649)(42,069)(15,658)
3,956(473,939)(137,739)
435,815

191,466

96,5152,302,658

249¥191,466$2,738,473

Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of period (Note 3)
The accompanying notes are an integral part of these statements.
5¥227,704-

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of Fuji Heavy Industries Ltd. (the “Company”) havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records maintained inconformity with generally accepted accounting principles prevailing in the respective countries of their
domicile. The accompanying consolidated financial statements have been restructured and translated into
English from the consolidated financial statements of the Company prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the
Financial Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience ofreaders outside Japan, using the prevailing exchange rate at March 31, 2011, which was ¥83.15 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 be converted into U.S. dollars at this or any other rate ofexchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its significant
subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
The fiscal year-end of consolidated domestic subsidiaries and main foreign subsidiaries is the same as that ofthe parent company, while the fiscal year-end of the nine consolidated foreign subsidiaries is December
31.The operating results of those subsidiaries that have fiscal year-ends different from that of theparent company are consolidated by using the financial statements as of each subsidiary’s respective
fiscal year-end, the necessary adjustments being made in consolidation if there are any significant
transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 71 subsidiaries in fiscal
2011 (71 subsidiaries in fiscal 2010).
In addition, 8 non-consolidated subsidiaries and one affiliated companies were accounted for by the equity
method in fiscal 2011 and 2010.
Investments in insignificant non-consolidated subsidiaries and affiliated companies not accounted for by theequity method are carried at cost. The difference between the cost and the underlying net equity ofinvestments in subsidiaries and affiliated companies is allocated to identifiable assets based on their fair value
at the date of acquisition. The unallocated residual value of the excess of the cost over the fair value of theunderlying net assets is recognized as goodwill and amortized over a period of five years on a straight-line
basis.
All assets and liabilities of subsidiaries, which include not only the Company’s interest in the subsidiaries but
also the minority interest portion, are valued based on their fair value at the time the Company first
consolidates the subsidiary in question.

6[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fairvalue is available are stated at their fair value as of the balance sheet dates with unrealized holding gains andlosses included as a separate component of net assets until realized, while securities for which fair value is
not readily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the consolidated balance sheet is measured based on the lower of cost or market value.)[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally computed by the declining-balance method, except for those buildings (excluding
building improvements) acquired on or after April 1, 1998, for which the straight-line method is applied.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is computed by thestraight-line method at rates based on the estimated useful lives of the assets according to their general class,type of construction, and use.
Estimated useful lives for depreciable assets are as follows:(Fiscal 2011 and 2010)
Buildings and structures: 6–50 years
Machinery, equipment and vehicles: 2–15 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 three or five years.
[6] Leased Assets
For leased assets under finance lease transactions in which the ownership is transferred to the lessee:Theleased 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 an estimated amount of uncollectible accounts for specific overdue
receivables.
[8] Provision for Bonuses
Employee's bonus is recognized as expenses for the period in which it is incurred.

7[9] Provision for Product Warranties
The Company and its consolidated subsidiaries provide for accrued warranty claims on products sold basedon their past experience of warranty services and estimated future warranty costs, which are included in“Accrued expenses” in the accompanying consolidated balance sheets.
[10] Provision for Loss on Construction Contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is made whensubstantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year and beyond
and such losses can be reasonably estimated.
[11] Accrued Pension and Severance Liability
Upon termination of employment, employees of the Company and its consolidated subsidiaries in Japan areentitled, under most circumstances, to lump-sum indemnities or pensions as described below, based on
current rates of pay, length of service, and conditions under which the termination occurs. The minimum
payment is an amount based on voluntary retirement. In addition to the minimum payment based on voluntary
retirement, employees receive additional benefits for retirement due to age limit, death or other definedreasons.
Certain consolidated subsidiaries in Japan have contributory funded defined benefit employees’ welfare
pension funds, which are pursuant to the Japanese Welfare Pension Insurance Law. The contributory
pension funds consist of a portion of the governmental welfare pension program, under which thecontributions are made by the companies and their employees, and an additional portion representing thecorporate noncontributory pension plans.
Under the Japanese accounting standards for pension and severance benefits, accrued pension andseverance liability for employees is provided based on the estimated amounts of projected pension andseverance obligation and the fair value of plan assets at the end of the fiscal year. Prior service cost is being
amortized by the straight-line method over a period (11-18 years) that is shorter than the average remaining
service period of the eligible employees. Actuarial gains and losses are amortized from the following fiscal
year by the straight-line method over a period (primarily 16 years for fiscal years 2011 and 2010) that isshorter than the average remaining service period of the eligible employees.
Accrued pension contribution for defined benefit pension plans is included in accrued pension andseverance liability.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined based on the Company’s and its consolidated subsidiaries’internal rules, are included in “Other long-term liabilities” in the accompanying consolidated balance sheets.
(Change in accounting policy)(Fiscal 2010)
The Company has applied Partial Amendments to Accounting Standard for Retirement Benefits (Part3)(ASBJ Statement No.19, July 31, 2008) since the beginning of fiscal 2010.
Since accumulated actuarial loss is amortized from next fiscal year, this change resulted in no effect on
operating income and loss before income taxes and minority interests.
Also, the amount of retirement benefit obligation which is accrued with this change is ¥1,447 million.
[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.

8

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 of revenue from Aerospace division production has been applied toconstruction contracts for which certain elements were determinable with certainty at the end of fiscal year.
(The percentage of completion is estimated with the proportion-of-cost method). The completed-contract
method was applied to other works.
(Change in accounting policy)(Fiscal 2010)
The Company previously used the percentage-of-completion method for accounting revenues associatedwith construction contracts with a contract amount of ¥5,000 million or more and a construction period ofover one year, and other construction work was accounted for using the completed-contract method. Since
the beginning of fiscal year 2010, in conjunction with adoption of the Accounting Standard for Construction
Contracts (ASBJ Statement No.15, December 27, 2007) and its accompanying Guidance on AccountingStandard for Construction Contracts (ASBJ Guidance No.18, December 27, 2007), thepercentage-of-completion method has been applied to construction contracts that were started during the
fiscal year 2010, for which certain elements were determinable with certainty at the end of fiscal year 2010.
(The percentage of completion is estimated with the proportion-of-cost method). The completed-contract
method was applied to other works.
This change resulted in an increase in net sales of ¥2,361 million, an increase in operating income of¥215 million and a decrease in loss before income taxes and minority interests of ¥215 million in the year
ended March 31, 2010.
[14] Accounting for Lease Transactions
A part of domestic consolidated subsidiaries recognizes revenue for financial lease transactions on theeffective 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
paid or received under the interest rate swap contract is added to or deducted from the interest on the assets
or liabilities for which the swap contract is executed.
Derivative financial instruments qualifying as a hedge, along with the underlying transactions, assets andliabilities are as follows:
Financial Instrument
Interest swaps

Transactions, assets and liabilities
Borrowings

The risk exposures to movements in interest rates are hedged according to the Company’s andconsolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of the9underlying 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 and Negative Goodwill
Goodwill and negative goodwill are principally amortized by the straight-line method over five years inaccordance with accounting principles generally accepted in the countries where such goodwill is recorded.
[17] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments—generally with original maturities of threemonths or less—that are readily convertible to known amounts of cash and have negligible risk of changes invalue due to their short maturities.
[18] Income Taxes
The provision for income taxes is computed based on the pretax income for financial reporting purposes.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
[19] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to ¥42,907 million (US$ 516,019
thousand) and ¥37,175 million for fiscal years 2011 and 2010, 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 could occur if all the convertible
securities were converted or other contracts to issue common stock were exercised to the extent that they are
not anti-dilutive.
[21] Reclassification and Restatement
Financial statements in fiscal 2010 have been reclassified to conform to the current year presentation.
These reclassifications had no impact on previously reported results of operations or retained earnings.
[22] Other Changes in Accounting Policy(Fiscal 2011)
Application of Accounting Standard for Asset Retirement Obligations
From the fiscal year 2011, the Company has adopted Accounting Standard for Asset Retirement
Obligations (ASBJ Statement No.18, March 31, 2008) and Guidance on Accounting Standard for
Asset Retirement Obligations (ASBJ Guidance No.21, March 31, 2008).
This impact of this adoption on profit and loss was insignificant.
Application of Accounting Standard for Business Combinations and others
From the fiscal year 2011, the Company has adopted Accounting Standard for Business Combinations(ASBJ Statement No.21, December 26, 2008), Accounting Standard for Consolidated Financial
Statements (ASBJ Statement No.22, December 26, 2008), Partial amendments to AccountingStandard for Research and Development Costs (ASBJ Statement No.23, December 26, 2008), theRevised Accounting Standard for Business Divestitures (ASBJ Statement No.7, December 26, 2008),
the Revised Accounting Standard for Equity Method of Accounting for Investments (ASBJ Statement
No.16, December 26, 2008), and the Revised Guidance on Accounting Standard for Business

10

Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No.10, December
26, 2008).
3. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2011 and 2010, consisted of the following:
Millions of yen
2011¥211,700
21,06359,986
292,749(65,045)¥227,704

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

2010¥168,643
12,45875,780256,881(65,415)¥191,466

Thousands of
U.S. dollars
2011$2,546,001
253,313
721,419
3,520,733(782,260)$2,738,473(Fiscal 2011)
Non Cash transaction
The Company carried out a share exchange (the "Share Exchange") on August 1, 2010, and Ichitan Co., Ltd.
becomes a wholly owned subsidiary of the Company.
This share exchange resulted in recognition of "Goodwill" of ¥280 million (US$ 3,367 thousand), and adecrease in "treasury stock" of ¥450 million (US$ 5,412 thousand).
4. Financial Instruments
The Company has applied "Accounting Standard for Financial Instruments and its Implementation Guidance(ASBJ Statement No.10, March 10, 2008)" and "Guidance on Disclosures about Fair Value of Financial
Instruments (ASBJ Guidance No.19, March 10, 2008)" since the beginning of fiscal 2010.
(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 Company finances mainly from bank loans and the issue of corporate bonds. Temporary surpluses areinvested in highly secure financial assets, and bank loans and liquidation of accounts receivable provide
short-term working capital. It is the Company's policy to use derivatives as a way to avoid the below-statedrisks and to not conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Operating receivables such as notes and accounts receivable-trade and lease investment assets are subject
to customer credit risks. Moreover, because the Company works to expand its business globally, operatingreceivables denominated in foreign currencies are subject to the risk of changes in foreign exchange rates. As
a general rule, however, forward foreign exchange contracts are used to hedge the foreign exchange raterisk, considering the net amount of operating receivables denominated in foreign currencies that exceed
foreign currency denominated operating liabilities. Available-for-sale securities and investment securities aremainly stocks associated with business and capital alliances with principal business partners, and are subject
to risk of market price fluctuation.
Notes and accounts payable-trade that are included in operating liabilities usually have a payment date ofwithin one year. Furthermore, a certain portion of such liabilities involves foreign currency denominatedtransactions associated with the import of raw materials and is thus subject to exchange rate fluctuation risk,
11although it is consistently less than accounts receivable balance of the same foreign currency. The FHIGroup’s liabilities associated with debt and bonds are set specifically for the acquisition of essential funds,
mainly for capital expenditure, whose redemption dates come within 13 years after March 31, 2011 at thelatest. A certain portion of said liabilities may have adjustable rates and are therefore subject to the risk ofchanges in interest rates, although in such cases derivative transactions (interest rate swap transactions) areused.
Derivative transactions are foreign exchange forward contracts to hedge against exchange rate fluctuations
associated with accounts receivables and liabilities denominated in foreign currencies, and interest rate swap
contracts with the objective of hedging against the risk of change in interest rates to be paid on loans. With
regard to hedging instruments and hedged items, hedge policy, the method of evaluation of hedge
effectiveness and other related items, please refer to “2-[15] Derivative Financial Instruments and Hedge
Accounting”.
[3] Risk Management System with Regard to Financial Instruments(a) Management of Credit Risk (Risk Associated with Business Partner’s Breach of Contract)
Credit control departments at each FHI division and its consolidated subsidiaries regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets.
Together with keeping an eye on deadlines and balances of each customer, these departments identify
and mitigate the risk of potential problem in collection due to deterioration in financial status or otherfactors.
(b) Management of Market Risk (Risk Associated with Fluctuations in Exchange or Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts, that is no longer than six months, are used to hedge against the risk of exchange rate
fluctuation to which net position of accounts receivable and accounts payable dominated in foreign
currency is exposed. Moreover, the Company and certain consolidated subsidiaries use interest rate
swap transactions to limit exposure to the risk of fluctuation in interest rates payable on loans or corporate
bonds. The Company also regularly check the market values of securities and investment securities aswell as the financial conditions of issuers (business partner companies), and constantly reviews its
investment position taking into consideration its relationships with respective business partnercompanies. Basic policies with regard to derivative transactions are approved by the Executive
Management Board. Derivative transactions are handled in line with regulations and are conducted by
the Finance & Accounting Department. The results of these transactions are without exception reported
to officers concerned.
(c) Management of Liquidity Risk (Risk of Becoming Unable to Make Payments by the Due Date)
Associated with Funds Procurement
The Company secures liquidity at a level sufficient to satisfy its current needs through the use ofcommitment lines contracted with major banks in combination with cash and cash equivalents.
[4] Supplemental Explanation of Items with Regard to Fair Value of Financial Instruments
Fair value includes the fair market value of financial instruments and, in the event market-based prices are notavailable, prices that are calculated on a rational basis. Because the factors incorporated into the calculationof these prices are subject to change, differing assumptions may result in differing fair values. In addition, thevalues of contracts with regard to derivative transactions as stated in “(2) Items with Regard to Fair Value of
Financial Instruments” do not by themselves indicate the market risk associated with the respective derivativetransaction.

12

(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet, the fair value and difference as of March 31, 2011 and 2010 were as follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer
to Note 2).
(Fiscal 2011)
As of March 31, 2011
Millions of yen
Consolidatedbalance sheet
Fair Value
Difference
amounts
Cash and deposits¥211,700¥211,700
Notes and accounts receivable-trade
76,810Allowance for doubtful accounts (*1)(350)
76,46076,460
Lease investment assets
23,050Allowance for doubtful accounts (*1)
(156)
22,89424,560
1,666
Short-term loans receivable
59,986
Allowance for doubtful accounts (*1)(852)
59,134
60,123989
Short-term investment securities, Investment securities
and Other securities
62,71362,713
Total Assets
432,901
435,556
2,655
Notes and accounts payable-trade176,895
176,895
Short-term loans payable
99,072
99,072Current portion of long-term loans payable
20,902
21,081(179)
Current portion of bonds
20,01020,060(50)
Accrued income taxes
2,089
2,089
Accrued expenses
60,87660,876
Bonds payable
24,08024,502(422)
Long-term loans payable
166,562
167,628(1,066)
Total Liabilities
570,486
572,203(1,717)
Derivative transactions (*2)
hedge accounting is not applied(¥1,306)(¥1,306)
hedge accounting is applied-13

As of March 31, 2011
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$2,546,001
923,752(4,209)919,543
277,210(1,876)
275,334
721,419(10,246)
711,173

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

754,215
5,206,266
2,127,420
1,191,485
251,377
240,649
25,123732,123
289,597
2,003,151
6,860,925

Fair Value

Difference$2,546,001-

919,543-

295,370

20,036

723,067

11,894754,2155,238,196
2,127,420
1,191,485
253,530
241,251
25,123732,123
294,672
2,015,971
6,881,575

31,930(2,153)(602)(5,075)(12,820)(20,650)($15,707)($15,707)*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).
[1] The calculation methods of financial instrument fair value together with securities and derivativetransactions
AssetsCash and deposits and Notes and accounts receivable-trade
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Lease investment assets and Short-term loans receivable
Fair value is the present value calculated by discounting relevant cash flows by each category of theassets and timing of cash flow, where discount rates were adopted taking into consideration the
period until maturity and credit risks. In addition, the estimated residual value is included in thebalance of Lease investment assets.

14

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

Thousands of
U.S. dollars
Money management fund
¥17,802$214,095
Unlisted stocks (excluding over-the-counter stocks)¥3,143$37,799
These have no available market price 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".

15[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2011:

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

Within 1Year

1 to 5
Years¥211,700
74,059
9,911

2,751
13,075

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

1,152
2,109
¥22,814

2,854
6,365
6
¥36,245

1,106
1,269
217
¥927

Within 1
Year

Cash and deposits
Notes and accounts receivable-trade
Lease investment assets
Short-term investment securities, Investment
securities and Other securities
Government and municipal bonds
Corporate bonds
Other
Short-term loans receivable$2,546,001
890,667
119,194

13,85425,364$274,372

2,069
430
2,687
-

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
33,085
157,246
770-

34,32476,54872$435,899

13,301
15,262
2,610$11,148

24,883
5,171
32,315-4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2011:

Bonds payable
Long-term loans payable

Within 1Year

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

Within 1
Year

Bonds payable
Long-term loans payable$240,649
251,377

16

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

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$289,597
1,750,740
242,177
10,234

(Fiscal 2010)
As of March 31, 2010
Millions of yen

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

Consolidatedbalance sheet
amounts (*1)
¥168,643
103,521
27,78875,780Fair Value(*1)¥168,643
103,52126,04075,844

Difference

58,132(217,051)(142,121)(13,912)(20,010)(2,873)(56,244)(44,090)(147,479)

58,132(217,051)(142,121)(13,912)(20,010)(2,873)(56,244)(44,447)(146,994)

(357)
485

(¥1,879)-(¥1,879)--(1,748)64*1. Liabilities are indicated in ( ).
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).
[1] The calculation methods of financial instrument fair value together with securities and derivativetransactions
AssetsCash and deposits and Notes and accounts receivable-trade
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Lease investment assets and Short-term loans receivable
Fair value is the present value calculated by discounting relevant cash flows by each category of theassets and timing of cash flow, where discount rates were adopted taking into consideration the
period until maturity and credit risks. In addition, the estimated residual value is included in thebalance of Lease investment assets.
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.

17

Liabilities
Notes and accounts payable-trade, Short-term loans payable, Current portion of long-term loans
payable, Current portion of bonds, 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.
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.
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.
Derivative transactions
Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item, because they are treated as a unit.
[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2010:
Other securities (available-for-sale securities)
Millions of yen
Money management fund
¥11,498
Unlisted stocks (excluding over-the-counter stocks)¥4,444
These have no available market price 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".
[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2010:

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

18

Within 1Year

1 to 5
Years¥168,643
99,867
8,756

3,654
18,777

Millions of yen
5 to 10
Over 10
Years
years
255
-

610
324
26
¥36,713

6,121
6,413
217
¥39,001

1,333
1,810
92
¥66

1,693
195
1,476
-

[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2010:

Bonds payable
Long-term loans payable

Within 1Year

1 to 5Years¥20,010
13,912¥44,090
136,349

Millions of yen
5 to 10
Over 10Years
years
10,265865

5. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2011
and 2010 was as follows:(Fiscal 2011)(1) Other securities (available-for-sale securities):
As of March 31, 2011:
Acquisition cost

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

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

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

3,583

4,233

(650)

2,526
1,326
872
8,307
¥62,713

2,575
1,334
888
9,030
¥43,354

(49)
(8)
(16)
(723)
¥19,359

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

19

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

Thousands of U.S. dollars
Acquisition cost
Difference$467,408$230,800$236,608

55,971
106,386
24,546654,31154,756103,187
24,053412,796

1,215
3,199
493
241,515

43,09150,908(7,817)30,37915,947
10,48799,904$754,215

30,96816,043
10,680108,599$521,395

(589)
(96)
(193)
(8,695)$232,820(2) Other securities (available-for-sale securities) sold during fiscal years 2011:
For the year ended March 31, 2011:

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

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

Sales amount¥6,566

Total gains¥351

Millions of yen
Total losses¥112

11,0772,697
525
39,862¥60,727

223
76
1
¥651

53
2
8
16
¥191

Sales amount$78,966
133,217
32,4356,314
479,399$730,331

Thousands of U.S. dollars
Total gains
Total losses$4,221$1,3472,682
914
12$7,829

637
24
96
193
$2,297(3)The Company and its consolidated subsidiaries recognized ¥415 million (US$4,991 thousand) in loss ondevaluation of securities for fiscal years 2011.
For the purpose of recording a loss on devaluation of securities, the Company and its consolidated
subsidiaries consider all the securities whose fair market value has fallen below 50% of the acquisition cost to
be permanently impaired, and record the relevant loss on devaluation. For securities whose fair market value
has declined by between 30% and 50% in relation to their acquisition costs, the Company and its
consolidated subsidiaries specifically consider the probability of recovery of the fair value and record a loss ondevaluation to the amount deemed permanently impaired.

20

(Fiscal 2010)(1) Other securities (available-for-sale securities):
As of March 31, 2010:
Acquisition cost

Millions of yen
Difference¥35,028¥17,936¥17,092

6,350
7,960
1,115
50,453

6,223
7,618
1,082
32,859127342
33
17,594

2,791

3,087

(296)

3,407
782
699
7,679
¥58,132

3,437
785
710
8,019
¥40,878

(30)
(3)
(11)
(340)
¥17,254

Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Total(2) Other securities (available-for-sale securities) sold during fiscal years 2010:
For the year ended March 31, 2010:

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

Sales amount¥1,320Total gains¥106

Millions of yen
Total losses
¥106

4,144
1,699
195
63,287¥70,645

50
41
5
¥202

43
6
27
¥182

(3)The Company and its consolidated subsidiaries recognized ¥520 million in loss on devaluation of securities
for fiscal years 2010.
For the purpose of recording a loss on devaluation of securities, the Company and its consolidated
subsidiaries consider all the securities whose fair market value has fallen below 50% of the acquisition cost to
be permanently impaired, and record the relevant loss on devaluation. For securities whose fair market value
has declined by between 30% and 50% in relation to their acquisition costs, the Company and its
consolidated subsidiaries specifically consider the probability of recovery of the fair value and record a loss ondevaluation to the amount deemed permanently impaired.

21

6. Short-Term Borrowings and Long-Term Debts
Short-term borrowings as of March 31, 2011 and 2010, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Bank loans with average interest rate of 0.66 % and 0.97%
per annum as of March 31, 2011 and 2010, respectively¥142,121$1,191,485

Millions of yen
2010
2011

Thousands of
U.S. dollars
2011¥187,464¥161,391$2,254,528

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

20,00010
20,00010
20,000
10
10
4,000
60
225,491(33,922)¥191,569

240,529120
240,529
120
120
48,106722
2,784,774(492,026)$2,292,748¥99,072

Long-term debts as of March 31, 2011 and 2010 consisted of the following:

Loans principally from banks and insurance companies due
through 2024 with average interest rate of 1.39% and1.44% per annum as of March 31, 2011 and 2010,
respectively
Unsecured 0.68% bonds due June 18, 2010
Unsecured 0.93% bonds due March 31, 2011
Unsecured 1.31% bonds due April 28, 2011
Unsecured 0.93% bonds due March 30, 2012
Unsecured 2.01% bonds due May 31, 2012
Unsecured 0.93% bonds due March 29, 2013
Unsecured 0.93% bonds due March 31, 2014
Unsecured 1.62 % bonds due July 10, 2014
Unsecured 0.93% bonds due March 31, 2015
SubtotalLess-Portion due within one year
Total

Annual maturities of long-term loans payable and bonds payable as of March 31, 2011 were as follows:
Thousands ofMillions of yen
U.S. dollars
2012¥40,912$492,0262013
41,450498,4972014
45,144542,9222015
41,683501,299
2016
41,377497,6192017and thereafter
20,988
252,411
Total¥231,554$2,784,774

22

Lease obligations as of March 31, 2011 and 2010 consisted of the following:

Lease obligations due within one year as of March 31,
2011and 2010
Lease obligations due after one year as of March 31,
2011and 2010
Total

Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
¥1,123¥674$8,106
1,184

720

14,239¥1,858¥1,843$22,345

Annual maturities of lease obligations as of March 31, 2011 were as follows:
Millions of yen
¥674
580
316
199
73
16
¥1,858

2012
2013
2014
2015
2016
2017and thereafter
Total

Thousands of
U.S. dollars$8,106
6,975
3,800
2,393
878
193
$22,345

The following assets as of March 31, 2011 and 2010 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Notes and accounts receivable-trade¥69¥110$1,323
Property, plant and equipment
65,58464,339773,770
Total¥65,653¥64,449$775,093
For efficient procurement of operating fund, the group concludes the commitment-line contracts as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Total commitments¥74,956¥105,273$1,266,061
Unused balance
7. 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, 2011and 2010 was as follows:23

Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2011
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¥83,265(¥625)(¥625) $1,001,383($7,517)($7,517)
Euro
8,913
(359)
(359)
107,192(4,317)(4,317)
Canadian dollar
11,921(322)(322)
143,367(3,873)(3,873)
Note: The method to determine the fair value is based on quotations obtained from financial institutions.
As of March 31, 2010
Notional
AmountMillions of yen
Valuation
Fair value
gain (loss)

Foreign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar
Australian dollar¥61,590(¥1,361)(¥1,361)
8,899
58
58
13,184
(576)
(576)
¥25
0
0
Note: The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative transactions to which hedge accounting is applied(1) Interest rate contracts:
As of March 31, 2011
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
Millions of yen
Thousands of U.S. dollars
Notional
Over
Notional
Over
Amount1 yearFair value
Amount1 yearFair value
Interest rate swap
contracts:
Receive floating rate
pay fixed rate
¥36,060¥34,735(*)$433,674$417,739(*)
Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item, because they are treated as a unit.

24As of March 31, 2010
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
Millions of yen
Notional
AmountOver
1 yearFair value

Interest rate swap contracts:
Receive floating rate pay fixed rate
¥36,945¥36,115(*)
Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item, because they are treated as a unit.
8. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2011and 2010 are summarized as follows:2011¥317,448
454,663
18,783226,816
1,017,710(765,211)(34,162)
191,111
21,394¥430,842

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
2010¥318,236
452,122
27,207
239,985
1,037,550(759,073)(33,006)
191,384
12,672¥449,527

Thousands of
U.S. dollars
2011$3,817,775
5,467,986
225,8932,727,793
12,239,447(9,202,778)(410,848)
2,298,388
257,294$5,181,503

9. 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, 2011 and 2010 was as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Total overdraft facilities and lending commitments¥5,010¥4,800$57,727
Less amounts currently executed
808
666
8,010
Unexecuted balance¥4,202¥4,134$49,717
A portion of the overdraft facilities and lending commitments above is subject to credit considerations as
documented in the customer contracts. Therefore, the total balance above is not always available.

2510. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans, qualified
retirement pension plans, contributory defined benefit employees’ welfare pension funds, defined benefit
pension plan, and certain domestic subsidiaries have defined contribution pension plans. In addition, in
certain occasions, additional retirement payments are made to employees for their retirement. Consolidated
foreign subsidiaries primarily have defined contribution plans.
As of March 31, 2011, the Company and 49 of its consolidated domestic subsidiaries, which add up to a
total of 50 companies, have lump-sum retirement payment plans. Within the group, there are also six qualified
retirement pension plans, 12 defined contribution plans, and six defined benefits pension plans. In addition,
there are 12 single-employer employees’ welfare pension funds subject to the provisions of Article 33 of“Practice Guidelines of Accounting for Retirement Benefits.”
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and severance liability is provided at the amount that would
have been payable had all the employees voluntarily retired at the end of the fiscal year, less an amount to becovered from the plan assets, while the Company and significant subsidiaries provide an accrued pension
and severance liability based on the estimated amount of pension and severance obligation (projected benefit
obligations), less the fair value of plan assets at the end of the fiscal year under the actuarial method.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, is as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2011)
Thousands ofMillions of yen
U.S. dollars
2011
2011
Plan assets¥175,538$2,111,100
Projected benefit obligation
211,358
2,541,888
Funded status(¥35,820)($430,788)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan (mainly from April 1, 2010 to March 31, 2011): 10%
A reconciliation between the projected pension and severance obligation and accrued pension andseverance liability as of March 31, 2011 and 2010, was as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
a. Projected pension and severance obligation¥103,286¥100,917$1,213,674
b. Plan assets(47,129)(50,676)(609,453)
c. Unfunded pension and severance obligations
56,15750,241
604,221d. Unamortized actuarial loss
(21,073)(21,971)(264,233)
e. Unamortized prior service cost
(269)
(345)
(4,149)f. Net amount recorded in balance sheet
34,81527,925335,839
g. Prepaid pension cost
(52)
(5,782)(69,537)h. Accrued pension and severance liability¥34,867¥33,707$405,376
Notes: 1. The above amounts include the substitutional portion of the government pension plan funded bysocial security taxes paid by employees and employers.
2. Certain insignificant consolidated subsidiaries calculated the liability using the simplified method.

26

Periodic pension and severance costs for the fiscal years 2011, and 2010, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
a. Service cost
¥8,541¥8,599$103,416
b. Interest cost
1,920
1,791
21,539c. Expected return on plan assets(1,440)(1,609)(19,351)
d. Amortization of actuarial gain/loss
1,976
1,941
23,343e. Amortization of prior service cost
35
51
614
f. Pension and severance cost
11,032
10,773
129,561
g. Gain on transfer of the substitutional portion of theemployee’s pension fund(236)
(2,838)h. Total¥11,032¥10,537$126,723
Notes:1. The above amounts do not include the social security taxes paid by employees.
2. The service cost of consolidated subsidiaries using the simplified method is included in the service
cost above.
3. The service cost above includes required funding for the multi-employer pension plan amounting to¥628 million (US$7,553 thousand) and ¥726 million for fiscal years 2011 and 2010, respectively, forwhich plan assets could not be allocated to each participating employer.
4. The service cost above includes contributions for the defined contribution plans of the Company andcertain consolidated subsidiaries amounting to ¥2,473 million (US$29,741 thousand) and ¥2,184
million for fiscal years 2011 and 2010, respectively.
5. In addition to the pension and severance cost above, additional retirement payments amounting to¥220 million (US$2,646 thousand) and ¥174 million were made for fiscal years 2011 and 2010,
respectively. For fiscal years 2011 and 2010, the entire ¥220 million (US$2,646 thousand) ofadditional retirement payments and ¥174 million of additional retirement payments is included in costof sales and selling, general and administrative expenses, respectively.
Actuarial assumptions used in computation of pension and severance liability were as follows:
2011
2010
a. Attribution of expected benefit obligation The straight-line method
The straight-line method
b. Discount rate
1.4%–2.0%
1.4%–2.0%
c. Expected rate of return on plan assets
1.4%–3.5%
1.4%–4.0%
d. Amortization of actuarial gain/loss
Primarily 16 years (amortized Primarily 16 years (amortizedby the straight-line methodby the straight-line method
starting from the following
starting from the following
fiscal year, over a period
fiscal year, over a period
shorter than the average
shorter than the averageremaining service periods of remaining service periods ofthe eligible employees)
the eligible employees)e. Amortization of prior service cost
11 to 18 years
11 to 18 years

2711. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in
the aggregate resulted in a normal statutory income tax rate of approximately 40.5% for fiscal years 2011 and2010.
A reconciliation of the statutory income tax rates in Japan to the Company’s effective income tax rates forthe fiscal years 2011 is as follows:
2011
Statutory income tax rate in Japan
40.5%
Increase (reduction) in taxes resulting from:
Changes in valuation allowance and tax benefits realized from loss carry forwards(17.1)
Adjustment to past corporate income taxes payable and corporate income taxes refundable(0.2)
Equity in earnings of affiliates(1.7)
Difference of applicable tax rate in subsidiaries
(1.5)
Other
0.2
Effective income tax rate
20.2%
For fiscal 2010, such reconciliation is not presented herein because the consolidated financial results
recorded a net loss.
Significant components of the deferred tax assets and liabilities as of March 31, 2011 and 2010, were as
follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Deferred tax assets:
Depreciation and amortization expenses
Accrued expenses
Accrued pension and severance liabilities
Accrued warranty claims
Loss on devaluation of inventories
Accrued bonus
Long-term accounts payable, other
Allowance for doubtful accounts
Net operating loss carryforwards
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Net unrealized holding gains on investment securities
Depreciation and amortization expenses
Advanced depreciation reserve
Other
Total deferred tax liabilities
Net deferred tax assets¥13,568
11,687
11,028
10,129
9,148
6,561
4,472
2,349
33,663
10,024112,629(89,542)
23,087¥13,191
8,836
13,847
7,324
8,340
6,255
4,681
2,882
53,878
11,818131,052(101,750)
29,302$163,175
140,553
132,628
121,816
110,018
78,90653,782
28,250404,847
120,553
1,354,528(1,076,873)
277,655(7,437)(7,266)(510)(6,436)(21,649)¥1,438(6,648)(7,780)(510)(6,614)(21,552)¥7,750(89,441)(87,384)(6,133)(77,403)(260,361)$17,294

The net deferred tax assets are included in the following line items in the accompanying consolidated balance28

sheets.

Current assets—Deferred tax assets
Investments and other assets—Deferred tax assets
Current liabilities—Deferred tax liabilities(Other current liabilities)
Long-term liabilities—Deferred tax liabilities
Total net deferred tax assets

Millions of yen
2010
2011
¥15,549¥13,754
5,742
1,812

Thousands of
U.S. dollars
2011$165,412
21,792(-)(13,541)¥7,750(1,516)(168,394)$17,294(126)(14,002)¥1,438

12. Net Assets
The Japanese Corporate Law (the “Law”) became effective on May 1, 2006, replacing the JapaneseCommercial Code (the “Code”). The Law is generally applicable to events and transactions occurring after
April 30, 2006, and for fiscal years ending after that date.
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designatedas common stock. However, a company may, by a resolution of its Board of Directors, designate an amountnot exceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to
10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capitaland legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legalearnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate
amount of cash dividends and other cash appropriations as legal earnings reserve until the total of legal
earnings reserve and additional paid-in capital equaled 25% of common stock.
Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reducea deficit by a resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of
Directors. Under the Law, both of these appropriations generally require a resolution of the shareholders’meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code,however, on condition that the total amount of legal earnings reserve and additional paid-in capital remained
equal to or exceeded 25% of common stock, they were available for distribution by resolution of theshareholders’ meeting. Under the Law, all additional paid-in capital and all legal earnings reserve may betransferred to other capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with Japanese laws and regulations.
At the annual shareholders’ meeting held on June 24, 2011, the shareholders approved cash dividends
amounting to ¥3,513 million (US$42,249 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2011. Such appropriations are recognized in the period inwhich they are approved by the shareholders.

2913. Ending Inventories
Book value of ending inventories is measured based on the lower of cost or market value.
Minus ¥627 million (US$7,541 thousand) and minus ¥836 million as "Loss on valuation of inventories" isincluded in "Cost of sales" for fiscal years 2011 and 2010, respectively. And ¥2,820 million (US$33,915
thousand) and minus ¥494 million as "Provision for loss on construction contracts" is included in "Cost of
sales" for fiscal year 2011 and 2010, respectively.
14. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2011 and 2010 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Freightage and packing expenses¥17,439¥21,034$252,965
Advertising expenses
41,08237,491450,884
Sales incentives
32,99535,345425,075
Salaries and bonuses
44,72342,627
512,652
Research and development expenses
37,04142,778514,468
Other
75,29775,726
910,715
Total¥248,577¥255,001$3,066,759
15. Impairment Loss on Property, Plant and Equipment
In the fiscal year ended March 31, 2011, the Company recorded an impairment loss with regard to thefollowing asset groups:
Use
Location
Category
Tokyo, Aichi Prefecture and 14 other
Buildings and structures, land andIdle assets
otherlocations
The idle assets are grouped on a property-by-property basis.
At the Company and its subsidiaries, assets were written down to their recoverable amounts due to a recent
decline in the real estate market price and their decreased profitability.
As a result, the Company and its consolidated subsidiaries recognized a total of ¥1,457million (US$17,523
thousand) in impairment loss.
The impairment loss by each category of property, plant and equipment was as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2011
Buildings and structures¥215$2,586
Land
1,209
14,540
Other
33
397
Total
¥1,457$17,523
A net realizable value is determined based on the government-published land valuation index prices or values
used for real estate tax purposes, loss on disposal cost.

30

In the fiscal year ended March 31, 2010, the Company recorded an impairment loss with regard to thefollowing asset groups:
Use
Location
Category
Buildings and structures,
Saitama
Machinery, equipment andProduction facility
Prefecture and Gunma Prefecture
vehicles, land and otherTokyo, Gifu Prefecture and 7 other
Buildings and structures, land andAssets for dealership businessotherlocations
Osaka Prefecture, Chiba Prefecture and Buildings and structures, land andIdle assets
other11 other locations
The assets on which impairment loss was recognized are grouped as follows: The production facilities aregrouped by each business line ,the assets for dealership business are grouped by each dealership, and theidle assets are grouped on a property-by-property basis.
In automobiles businesses, the supply business of CVT (gearless transmission) unit for minicar significantly
dropped after July, 2010,and the change that remarkably decreases recoverable amounts that can becollected is expected to take place. As a result, at the Company and its subsidiaries, production facilities were
written down to their recoverable amounts.
Because industrial products company has continuously experienced profit loss on operating activities andit is predicted that future cash flow falls below book value of related facilities, the book value of those assets
was written down to the their recoverable amounts.
A recoverable amount is determined by a value in use. A value in use is calculated based on future cash
flows discounted principally at 7.58%.
As a part of the rationalization, the company is performing restructuring of dealership network in Japan
gradually. At the Company and its subsidiaries, assets for dealership business were written down to theirrecoverable amounts.
As a result, the Company and its consolidated subsidiaries recognized a total of ¥17,906 million in
impairment loss.
The impairment loss by each category of property, plant and equipment was as follows:
Millions of yen
2010¥4,700
3,694
9,435
77

Buildings and structures
Machinery, equipment and vehicles
Land
Other
Total

$17,906

A recoverable amount is the higher of net realizable value or value in use. A net realizable value is determinedbased on the government-published land valuation index prices or values used for real estate tax purposes,
less cost of disposal. A value in use is calculated based on future cash flows discounted principally at 7.58%.

31

16. Loss on disaster
The loss was caused by Great East Japan Earthquake.
The main contents were as follows;

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

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

Thousands of
U.S. dollars
2011$56,152
11,618
10,6193,764
6,266¥7,352$88,419

17. Loss on prior periods adjustment
The main contents were as follows.
The adjustment of provision for product warranties in prior years was recognised as a result of review of
product warranty cost.
Thousands ofMillions of yen
U.S. dollars
2011
2011
The adjustment of provision for product warranties in prior years¥4,763$57,282
The adjustment of cost of sales in prior years
1,347
16,200Total¥6,110$73,482
18. Loss on reconstruction of office building
In relation to the reconstruction of Ebisu Subaru Building, the following losses were recognized.
Thousands ofMillions of yen
U.S. dollars
2011
2011
Estimation of demolition costs¥334$4,017
Non-recurring depreciation
323
3,884
Total
¥657
$7,901
19. Loss on Abandonment of Inventories(Fiscal 2010)
The Company conducted a business field review in the industrial products segment in fiscal 2010. As a result,
the Company abandoned obsolete inventories and recorded a loss of ¥1,191 million in fiscal 2010.

32

20. Loss on Sales and Retirement of Noncurrent Assets and Other(Fiscal 2010)
After assessing the severe business environment for domestic distributors, such as the sluggish automobile
market caused by a business slowdown, and the response to sophisticated and diversified customer needs,
the Company has determined that it was necessary to quickly implement regional business activities while
simultaneously establishing a rational management system. Therefore, the transition from Subaru distributors
to the integrated system was performed sequentially from October, 2008. As a part of the rationalization,theCompany is performing a gradual restructuring of the dealership network in Japan.
Furthermore, regarding dealerships that the Company had closed (or, had decided to close) by the end of
fiscal 2010, it recorded loss in the fiscal year under review as follows:
Millions of yen
2010
¥902
3,639
815

Loss on sales and retirement of noncurrent assets
Impairment loss
Other
Total

¥5,356

21.Other Loss
The Company is going to terminate the production of minicar in FY2012. Other loss includes ¥2,422 million(US$29,128 thousand), the cost of retirement and demolition, etc of facilities related to the termination.
22. Stock Option Plans(Fiscal 2011)
1. Descriptions, volume, and movement of stock options(1) Descriptions of stock option plans
Fiscal 2004
Stock option plan
Directors, Executive Officers,
Position and number ofgrantees
Corporate Auditors and employees:
320
Class and number ofstock (shares)
Common Stock 1,917,000
Date of grant
September 6, 2004
Directors, Executive Officers,
Corporate Auditors and employees
who are enrolled at the date thesubscription rights are granted.
Should an employee under 50 yearsof age retire by voluntary termination,
the employee’s right to exercise
his/her claim will expire.
Required service period
From September 6, 2004,
to July 31, 2006
Exercise period
From August 1, 2006,
to July 31, 2011
Note: The number of stock options is converted to the equivalent number of common stock.
(2) Volume and movement of stock options
Vesting conditions

33

The stock options outstanding in the fiscal year 2011 are summarized as follows:[1] The number of stock options (shown as the equivalent number of common stock)
Fiscal 2004
Stock option plan
Nonexercisable stock options (shares):At the end of the fiscal year 2010-

Stock options granted-

Forfeitures-

Conversion to exercisable stock options-

Stock options outstanding-

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

1,863,000

Conversion from nonexercisable stock options-

Stock options exercised

609,000

Forfeitures-

Stock options outstanding

1,254,000[2] Price information of stock options
Fiscal 2004
Stock option
Exercise price (Yen)
Average market price of the stock at the time of exercise (Yen)Fair value (date of grant) (Yen)¥594,000675-

34

(Fiscal 2010)
1. Descriptions, volume, and movement of stock options(1) Descriptions of stock option plans
Fiscal 2002
Stock option plan
Position and number of
Directors, Executive Officers,
grantees
Corporate Auditors and employees:
303
Class and number ofstock (shares)
Common Stock 1,029,000
Date of grant
September 9, 2002

Fiscal 2004
Stock option plan
Directors, Executive Officers,
Corporate Auditors and employees:
320
Common Stock 1,917,000
September 6, 2004

Directors, Executive Officers,
Directors, Executive Officers,
Corporate Auditors and employees
Corporate Auditors and employees
who are enrolled at the date thewho are enrolled at the date thesubscription rights are granted.
subscription rights are granted.
Should an employee under 50 years
Should an employee under 50 yearsof age retire by voluntary termination,of age retire by voluntary termination,
the employee’s right to exercise
the employee’s right to exercise
his/her claim will expire.
his/her claim will expire.
Required service period
From September 9, 2002,
From September 6, 2004,
to July 31, 2004
to July 31, 2006
Exercise period
From August 1, 2004,
From August 1, 2006,
to July 31, 2009
to July 31, 2011
Note: The number of stock options is converted to the equivalent number of common stock.
Vesting conditions(2) Volume and movement of stock options
The stock options outstanding in the fiscal year 2010 are summarized as follows:[1] The number of stock options (shown as the equivalent number of common stock)
Fiscal 2002
Stock option plan
Nonexercisable stock options (shares):Fiscal 2004
Stock option plan

At the end of the fiscal year 2009--

Stock options granted--

Forfeitures--

Conversion to exercisable stock options--

Stock options outstanding--

734,000

1,863,000

Conversion from nonexercisable stock options--

Stock options exercised--

734,000--

1,863,000

Exercisable stock options (shares):At the end of the fiscal year 2009

Forfeitures
Stock options outstanding35

[2] Price information of stock options
Fiscal 2002
Stock option

Fiscal 2004
Stock option¥498,000-¥594,000---

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

23. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessee(1) Transfer of title through finance lease transaction[1] Leased assets
Mainly implements of production in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the same method as used for other property, plant and equipment.
(2) Finance leases which do not transfer ownership title[1] Leased assets
Mainly network equipment and terminal units (Other tangible assets) in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
(3) Those finance lease transactions that had not had their ownership transferred on or before March 31,
2008, are recorded based on the same method as used for regular rental transactions.
[1] Pro forma information of such leases as of March 31, 2011 and 2010, was as follows:

2011
¥284
760
31
1,075
(810)
¥265

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

36

Millions of yen
2010
¥334
1,426
141
1,901
(1,261)¥640

Thousands of
U.S. dollars
2011$3,416
9,139
373
12,928(9,741)$3,187

[2] The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2011
and 2010, were as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Finance leases:
Due within one year
¥345
¥168
$2,020Due after one year
322
114
1,371
Total
¥667
¥282
$3,391[3] Pro forma information related to finance leases for fiscal years 2011 and 2010 was as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Lease payment
¥456
¥347
$4,173
Depreciation and amortization expenses
420
328
3,945
Interest expense portion
¥20
¥10
$120
Information as Lessor(1) The details of lease investment assets as of March 31, 2011 and 2010 were as follows:
Millions of yen
2010
2011
¥29,568¥28,028303
280(2,083)(5,258)¥27,788¥23,050

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

Thousands of
U.S. dollars
2011$337,078
3,367(63,235)$277,210(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2011 and 2010, were as
follows;
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Within 1 year
¥9,650¥9,120$109,681
1 to 2 years
7,290
7,438
89,4532 to 3 years
5,913
5,588
67,2043 to 4 years
4,100
3,742
45,0034 to 5 years
2,370
1,972
23,716
Over 5 years
¥245
¥168
$2,02137

24. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2011 and2010, were as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Operating leases:
Due within one year
¥1,233¥1,135$13,650
Due after one year
4,839
5,346
64,293
Total¥6,072¥6,481$77,943
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2011 and 2010, were as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Operating leases:
Due within one year
¥1,682¥1,122$13,494
Due after one year
276
300
3,608
Total
¥1,958¥1,422$17,102
25. Contingent Liabilities
Contingent liabilities as of March 31, 2011 and 2010, were as follows:
Thousands ofMillions of yen U.S. dollars
2010
2011
2011
As guarantor of third-party indebtedness from financial
institutions¥31,943¥32,330$384,161

26. The Amount of Discount of Export Bill
The amount of discount of export bill as of March 31, 2011 and 2010, were as follows:
Thousands ofMillions of yen U.S. dollars
2010
2011
2011
The amount of discount of export bill
¥9,102¥19,637$109,465

27. Property for Transfer Balance to Special Purpose Company
Property for transfer balance to special purpose company as of March 31, 2011 and 2010, were as follows:
Thousands ofMillions of yen U.S. dollars
2010
2011
2011
Property for transfer balance to special purpose company(loan claims of Automobiles and account receivable-trade¥43,788¥51,512$619,507
of Aerospace)38

28. Segment Information(Additional Information)
From the fiscal 2011, the Company has adopted "Revised Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information" (ASBJ Statement No.17, March 27, 2009) and
Implementation Guidance on Accounting Standard for Disclosures about Segments of an Enterpriseand Related Information" (ASBJ Guidance No.20, March 21, 2008).
(1)General information about reportable segments
The reportable segments the Company reports are the business units for which the Company is able
to obtain respective financial information separately in order for the Board of Directors to conductperiodic investigation to determine distribution of management resources and evaluate their businessresult.
The Company has placed Automobile at the center of the whole businesses, and has implemented
internal company system into Aerospace, Industrial Products and Eco technology divisions. This framework
makes clearer the responsibility of each division and accelerates business execution. The Company
manages the subsidiaries on the basis of this classification. Therefore the reportable segments consist ofAutomobile, Aerospace, Industrial products, Eco technology, and Other which does not belong to any
division.
As for Eco technology division, the Company includes it into "Other" because it does not satisfy thequantitative criteria for the reportable segments. As a result, reportable segments are Automobile, Aerospace,and Industrial products.
Automobile segment manufactures and sells vehicles and related products. Aerospace segment
manufactures aircrafts, parts of space-related devices. Industrial products segment manufactures and sells
Robin engines and related products.
(2)Calculation method of sales, profit or loss, assets, liabilities and other items by reportable segments
Accounting method for reportable segments is almost the same as "2. Summary of Significant
Accounting Policies".
The segment profit or loss are calculated based on operating income or loss.
Net sales - Inter-segment are calculated based on current market prices.

39

(3)Information on sales, profit or loss, assets and other items by reportable segments for the fiscal years
ended March 31, 2011 and 2010 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
2010
Net Sales:
2011
2011
Automobiles
Outside customers¥1,294,451¥1,452,207$17,464,907
Inter-segment
2,304
2,520
30,307
Sub-total
1,296,755
1,454,727
17,495,214
Aerospace
Outside customers
93,21682,817995,995
Inter-segment
Sub-total
93,21682,817995,995
Industrial products
Outside customers
23,91330,061
361,527
Inter-segment
63
39
469
Sub-total
23,97630,100361,996
Other (*1)
Outside customers
17,11015,478186,146
Inter-segment
12,678
13,207
158,833
Sub-total
29,78828,685344,979
Total
1,443,735
1,596,329
19,198,184
Adjustment (*2)
(15,045)(15,766)(189,609)
Consolidated total (*3)
¥1,428,690¥1,580,563$19,008,575
Thousands of
U.S. dollars
2011

Segment profit or Loss:

2011

Millions of yen
2010

Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)¥80,387
2,256
(52)
1,463
84,054
81¥84,135¥21,716
4,812(2,437)2,560
26,651
699¥27,350$966,771
27,132(625)
17,595
1,010,873
973$1,011,846

2011

Millions of yen
2010

Thousands of
U.S. dollars
2011¥944,046
162,704
41,51571,562
1,219,827(31,503)¥1,188,324¥989,462
166,492
31,591
77,8951,265,440(34,073)¥1,231,367$11,353,530
1,956,753
499,278860,637
14,670,198(378,869)$14,291,329

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

40

Thousands of
U.S. dollars
2011

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

2011Millions of yen
2010¥51,004
2,380
660
2,018
56,062¥56,062¥59,155
3,709
1,228
1,693
65,785¥65,785$613,397
28,623
7,937
24,270674,227$674,227

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

¥4,849
230
890
394
6,363
¥6,363¥2,641
231
875
388
4,135
¥4,135$58,316
2,766
10,704
4,738
76,524$76,524

Increase of property, plant and equipment andintangible fixed assets:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)¥84,085¥64,591$776,801
1,347
1,918
23,067
433
215
2,586
3,212
654
7,865
89,077
67,378810,319¥89,077¥67,378$810,319
Note: *1. "Other" means the category which is not included into any reportable segments. It consists ofgarbage collection vehicles, specialized vehicles, real estate lease, etc.
*2. Adjustment of segment profit of loss refers to elimination of intersegment transaction.
*3 Segment profit or loss is adjusted on operating income on the consolidated statements of income.

41

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, 2011 and 2010 was summarized as follows:

2011

Millions of yen
2010

Sales: (*1)
Japan
¥520,836¥467,323
North America
622,126
725,775[United States] (*2)[565,545][654,402]
Europe84,474
126,321
Asia
101,470
138,854
Other
99,784
122,290
Consolidated total¥1,428,690¥1,580,563
Note: *1 Sales is categorized by country or area which is based on customer location.
*2 Sales of the United States is included in North America area.

Thousands of
U.S. dollars
2011$5,620,241
8,728,503[7,870,138]
1,519,194
1,669,922
1,470,715$19,008,575[2]Property, plant and equipment for the fiscal years ended March 31, 2011 and 2010 was summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Property, plant and equipment: (*1)
Japan
¥381,987¥379,717$4,566,651
North America
67,41450,990613,229[United States] (*2)
[66,553][50,234][604,137]
Europe
126
135
1,623
Asia
Other
Consolidated total¥449,527¥430,842$5,181,503
Note: *1 Property, plant and equipment is categorized by country or area according to geographic adjacentlevel.
*2 Property, plant and equipment of the United States is included in North America area.
[3]Major customers Information
Information about major customers is not shown because outside sales for major customers accounted forless 10% of operating revenue on the consolidated statements of income for the fiscal years ended March 31,
2011 and 2010.

42

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, 2011 and 2010
was summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Impairment loss in fixed assets:
Automobiles¥7,389¥1,431$17,210
AerospaceIndustrial products
10,517
26
313
Other
Total
17,906
1,457
17,523Adjustment
Total¥17,906¥1,457$17,523
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, 2011 and 2010 was summarized as follows:(1)Goodwill
Thousands ofMillions of yen
U.S. dollars
2010
2011
2011
Amount written off of current period:
Automobiles
¥322
¥350
$4,209AerospaceIndustrial products
Other (*1)
4
3
36
Total
326
353
4,245
Corporate and elimination
Total
¥326
¥353
$4,245
Balance at the end of current period:
Automobiles¥3,134¥2,773$33,349
AerospaceIndustrial products
Other (*1)
4
1
12
Total
3,138
2,774
33,361
Corporate and elimination
Total¥3,138¥2,774$33,361
Note: *1 "Other" is related to Eco technology division.

43

(2)Negative Goodwill

2011

Millions of yen
2010

Thousands of
U.S. dollars
2011

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

¥206
206
¥206

¥205
205
¥205

$2,4772,477$2,477

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

-

¥206
206
¥206

-

Note: *1 "Other" is related to Eco technology division.
Information on Negative Goodwill by Reportable segments
Information on negative goodwill by reportable segments for the fiscal years ended March 31, 2011 and 2010
was no significant items to be reported.

44

(Fiscal 2010)
Information by business segment
The Company and its consolidated subsidiaries operate principally in four business segments: automobiles,
aerospace, industrial products and other business fields (including eco-related equipment).
A summary of net sales, operating income, assets, depreciation and amortization expenses and capital
expenditures by business segment for fiscal years 2010 was shown below:
Millions of yen
2010

Net Sales:
Automobiles
Outside customers
Inter-segment
Sub-total
Aerospace
Outside customers
Inter-segment
Sub-total
Industrial products
Outside customers
Inter-segment
Sub-total
Other
Outside customers
Inter-segment
Sub-total
Total
Corporate and elimination
Consolidated total¥1,294,451
2,304
1,296,755
93,216
93,21623,913
63
23,976
17,11012,67829,7881,443,735(15,045)¥1,428,690

Millions of yen
2010

Operating Income or Loss:
Operating income:Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Consolidated total¥21,716
4,812(2,437)2,560
26,651
699¥27,350

45

Millions of yen
2010

Assets:Total assets:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Consolidated total¥989,462
166,492
31,591
77,8951,265,440(34,073)¥1,231,367

Millions of yen
2010

Other Significant Items:
Depreciation and amortization expenses:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Consolidated total¥59,155
3,709
1,228
1,693
65,785¥65,785

Impairment loss on property, plant and equipment:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Consolidated total¥7,38910,517
17,906¥17,906

Capital expenditures for segment assets:
Automobiles
AerospaceIndustrial products
Other
Total
Corporate and elimination
Consolidated total¥84,085
1,347
433
3,212
89,077¥89,077

Notes:1. Definition of business segments
Business segments are defined based on their product line and market.
2. Main products by each business segment
Business segments’ main products:
Automobiles: Legacy, Impreza, Forester, Exiga,Tribeca, Stella, R1, R2, Pleo, Samber
Industrial products; Robin engines, power generators, pumps
Aerospace: Aircraft, parts of space-related devices
Other: Garbage collection vehicles, specialized vehicles, real estate lease46

3. All operating costs and expenses are allocated to each business segment.
4. All figures in corporate and elimination represent elimination.
5. Changes in accounting policies:(Fiscal 2010)
Change in accounting standard for construction revenue and cost
As described in “2-[13] Revenue Recognition”, since fiscal 2010, the Company and its domestic
consolidated subsidiaries have applied “the Accounting Standard for Construction Contracts(ASBJ Statement No.15, December 27, 2007) ” and its accompanying “Guidance on AccountingStandard for Construction Contracts (ASBJ Guidance No.18, December 27, 2007) ”, thepercentage-of-completion method was applied to construction contracts that were started during
the fiscal 2010, for which certain elements were determinable with certainty at the end of fiscal
2010. (The percentage of completion is estimated with the proportion-of-cost method). The
completed-contract method was applied to other works.
This change resulted in an increase in sales of ¥2,361 million and increase in operating income of¥215 million in "Aerospace", compared with corresponding amounts calculated under method used inprevious year.
Information by Geographic Area
A summary of net sales, operating income and assets by geographic area for fiscal years 2010 was shown
below:
Millions of yen
2010

Net Sales:
Japan—
Outside customers
Inter-segment
Sub-total
North America—
Outside customers
Inter-segment
Sub-total
Other—
Outside customers
Inter-segment
Sub-total
Total
Corporate and elimination
Consolidated total¥815,812
293,948
1,109,760
577,409
2,232
579,641
35,469557
36,026
1,725,427(296,737)¥1,428,690

47

Millions of yen
2010

Operating Income or Loss:
Operating income:Japan
North America
Other
Total
Corporate and elimination
Consolidated total¥1,84432,05795
33,996(6,646)27,350Millions of yen
2010

Assets:Assets:Japan
North America
Other
Total
Corporate and elimination
Consolidated total¥910,841
338,721
18,5181,268,080(36,713)¥1,231,367

Notes:1. Geographic areas are based on geographical proximity.
2. Principal countries or districts in each geographic area:
North America: United States and Canada
Other: Europe
3. All operating costs and expenses are allocated to each segment.
4. All figures in corporate and elimination represent elimination.
5. Changes in accounting policies:(Fiscal 2010)
Change in accounting standard for construction revenue and cost
As described in “2-[13] Revenue Recognition”, since fiscal 2010, the Company and its domestic
consolidated subsidiaries have applied the “Accounting Standard for Construction Contracts(ASBJ Statement No.15, December 27, 2007)” and its accompanying “Guidance on AccountingStandard for Construction Contracts (ASBJ Guidance No.18, December 27, 2007)” therefore,
the percentage-of-completion method was applied to construction contracts that were started
during the fiscal 2010, for which certain elements were determinable with certainty at the end of
fiscal 2010. (The percentage of completion is estimated with the proportion-of-cost method). The
completed-contract method was applied to other work.
This change resulted in an increase in sales of ¥2,361 million and increase in operating income of¥215 million in "Japan", compared with corresponding amounts calculated under method used inprevious year.

48

Overseas Sales
Overseas sales for the fiscal years ended March 31, 2010 was summarized as follows:
Millions of yen
2010
Overseas sales:
North America¥622,126
43.5%
Europe84,474
5.9%
Asia
101,470
7.1%
Other
99,784
7.0%
Total
907,854
63.5%
Consolidated net sales¥1,428,690
100%
Notes:1. Geographic areas are based on geographical proximity.
2. Principal countries or districts in each geographic area:
North America: United States and Canada
Europe: Germany, Switzerland, the United Kingdom and Russia
Asia: China
Other: Australia
3. Overseas sales are sales outside of Japan by the Company and its consolidated subsidiaries.
29. Fair Value of Investment and Rental Property(Fiscal 2011)[1] Summary 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 ones partly used as
investment and rental property, because part of them are used by the Company and certain consolidated
subsidiaries.
[2] Investment and rental property consolidated balance sheet amounts, principal changes during fiscal 2011,
fair value at the end of fiscal 2011 and calculation method of applicable fair value
As of March 31, 2011
Millions of yen
Consolidated balance sheet amounts
Fair value as
As of March
Changes in
As of Marchof March 31,
31, 2010
the fiscal
31, 2011
2011
year 2011
Investment and rental property¥29,838¥4,310¥34,148¥47,877
Properties that include ones used as
investment and rental property¥13,534¥1,177¥14,711¥40,41649

As of March 31, 2011

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

Thousands of U.S. dollars
Consolidated balance sheet amounts
Fair value as
As of March
Changes in
As of Marchof March 31,
31, 2010
the fiscal
31, 2011
2011
year 2011$358,845$51,834$410,679$575,791$162,766$14,155$176,921$486,061
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 includes ones partly
used as investment and rental property during the fiscal 2011, principal increases were properties
acquisitions etc, which amounted to ¥9,113 million (US$109,597 thousand), and principal decreases
were depreciation and impairment loss, which amounted to ¥1,321 million (US$15,887 thousand) and¥846 million (US$10,174 thousand), respectively.
3. Fair value at the end of the fiscal year of Shinjuku Subaru building is the amount estimated by based
sale value. Fair value of a part of main investment and rental property is the amount estimated bybased value of real-estate appraiser, and fair value of a part of other investment and rental property is
the amount estimated by the Company based principally on land assessment value.
[3] Profit and loss concerning investment and rental property
Profit and loss in fiscal 2011 concerning investment and rental property and properties that include ones
used as investment and rental property were as follows:
As of March 31, 2011
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,055¥2,199¥856(¥338)
Properties that include ones used as
investment and rental property¥1,790¥1,099¥691(¥669)
As of March 31, 2011

Investment and rental property
Properties that include ones properties
used as investment and rental property

Thousands of U.S. dollars
RentalRentalChangeOther profit
incomeexpensesand loss$36,741$26,446$10,295($4,065)$21,527$13,217$8,310($8,046)
Note:1. Rental income (from the properties that include ones partly used as investment and rental property)
does not include the portion that the Company or certain subsidiaries use as the provision of services
and business 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.

50

(Fiscal 2010)(Additional Information)
From fiscal 2010, the Company has applied “Accounting Standard for Disclosures about Fair Value ofInvestment and Rental Property” (The Accounting Standards Board of Japan (ASBJ) No. 20, November 28,2008) and “Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental
Property” (The Accounting Standards Board of Japan (ASBJ Guidance) No. 23, November 28, 2008).
[1] Summary 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 ones partly used as
investment and rental property, because part of them are used by the Company and certain consolidated
subsidiaries.
[2] Investment and rental property consolidated balance sheet amounts, principal changes during fiscal 2010,
fair value at the end of fiscal 2010 and calculation method of applicable fair value
As of March 31, 2010
Millions of yen
Consolidated balance sheet amounts
Fair value as
As of March
Changes in
As of Marchof March 31,
31, 2009
the fiscal
31, 2010
2010
year 2010
Investment and rental property¥30,982(¥1,144)¥29,838¥30,834
Properties that include ones used as
investment and rental property¥13,707(¥173)¥13,534¥33,561
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 includes ones partly
used as investment and rental property during the fiscal 2010, principal increases were properties
acquisitions, which amounted to ¥653 million, and principal decreases were depreciation andimpairment loss, which amounted to ¥966 million and ¥526 million, respectively.
3. Fair value at the end of the fiscal year is the amount estimated by the Company based principally onland assessment value.
[3] Profit and loss concerning investment and rental property
Profit and loss in fiscal 2010 concerning investment and rental property and properties that include ones
used as investment and rental property were as follows:
As of March 31, 2010
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,297¥2,275¥1,022(¥474)
Properties that include ones used as
investment and rental property¥1,685¥978¥707¥0
Note:1. Rental income (from the properties that include ones partly used as investment and rental property)
does not include the portion that the Company or certain subsidiaries use as the provision of services
and business 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 impairment loss.
51

30. Additional information(Fiscal 2010)
Notification with Respect to the Execution of an Agreement Regarding a Share Exchange throughwhich Ichitan Co., Ltd. will become a Wholly Owned Subsidiary of the Company
The Company and Ichitan Co., Ltd. (“Ichitan”) resolved, at their respective meetings of the Board of Directors
held on March 31, 2010, to conduct a share exchange (the “Share Exchange”) through which Ichitan will
become a wholly owned subsidiary of the Company and entered into an agreement concerning the Share
Exchange (the “Share Exchange Agreement”).
The effective date of the Share Exchange(the “Effective Date”) was August 1, 2010, after Ichitan obtains
approval for the Share Exchange Agreement at the ordinary general meeting of its shareholders scheduled tobe held on June 29, 2010. The Company implemented the Share Exchange without obtaining approval for
the Share Exchange Agreement at a general meeting of its shareholders in accordance with “simplified shareexchange” (kan-i kabushiki kokan) procedures pursuant to Article 796, Paragraph 3 of the Companies Act ofJapan. In addition, prior to August 1, 2010, the scheduled Effective Date of the Share Exchange, the shares ofcommon stock of Ichitan were delisted from Osaka Securities Exchange Co., Ltd. on July 28, 2010 (the final
day on which the shares of common stock of Ichitan were traded on Osaka Securities Exchange Co., Ltd.
was July.
31.Subsequent Event(fiscal 2011)
Sellout of noncurrent asset
The Company resolved, at the Board of Directors held on August 30, 2010, to sell Shinjuku Subaru
Building(building and land) co-owned by the Company and Subaru Kosan Co., Ltd., wholly owned subsidiaryof the Company, to Odakyu Electric Railway Co., Ltd. and entered into the sales agreement for the purposesof reorganizing and enhancing its function of headquarter and utilizing its assets effectively.
The transfer of ownership of Shinjuku Subaru Building was completed on April 28, 2011.
The Company will recognise ¥25,000 million (US$300,661 thousand) of gain on sales of noncurrent assets
as other income in FY2012.
32.Other
On January 15, 2010, the Company filed a lawsuit with the Tokyo District Court against the Government ofJapan for the payment [totaling ¥35,124 million (US$ 422,417 thousand)] of uncollected initial investment fees(amount paid for customization to the Japanese specifications) for the manufacture of the AH-64D combat
helicopters for the Japan Ministry of Defense.
The payment [totaling ¥23,954 million (US$ 288,082 thousand)] of uncollected initial investment fees theCompany paid was included in “Other assets” of “Inventments and other assets”.
In addition, the amount of lawsuit includes the uncollected initial investment fees, consumption tax and otherpaid by subcontractors.

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