Annual Report2017
For the year ended March 31, 2017

From a company
making things,
to a company
making people smile.
Just a glance at our vehicles and you can imagine
days filled with excitement.
Just a glimpse of jet wings above andyou can envision worlds yet unseen.
But no matter the time or place, we are always byour customers’ sides.
What is important is not how many cars we make, but
how many smiles we can create.
More than a century has passed since the founding of
Aircraft Research Laboratory, the forerunner of SUBARU.
Now, Fuji Heavy Industries Ltd. has been reborn as
SUBARU CORPORATION.
From making things to delivering value that shines inpeople’s hearts, SUBARU aims to touch the hearts ofpeople and bring smiles to their faces.
We constantly challenge ourselves to ensure thatsatisfaction with SUBARU is reflected in the happy facesof our customers.

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ANNUAL REPORT 2017

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Vision for 2020

Not big in size, but a high-quality
with distinctive strengths
For SUBARU, by no means a large automaker, the two strategies of uncompromisingdifferentiation and added-value are essential for achieving sustained growth in a fierce
competitive environment. We will narrow our focus to categories and markets in which we canleverage our strengths, practice selection and concentration in allocation of limited management
resources, and further accelerate two initiatives: enhancing the SUBARU brand and building astrong business structure. And, we will seek to have a prominent presence in customers’ minds.

Scale expansion is nota primary objective

Focusing on categories andmarkets in which we canleverage our strengths

Rather than make sales volume expansion an objective,

Rather than doing business in all markets with a full

SUBARU aims to steadily increase unit sales as a resultmodel lineup, we will specialize in and focus our limitedof adhering to a highly profitable business model.

management resources on categories and markets inwhich we can leverage our strengths. As a result, inbusiness development, our product focus is mainly on
SUVs, and the market focus is on the U.S. and otherdeveloped countries in mature stages of motorization.

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Contents

company

03 Vision for 2020
05 Business Overview
10 Global Network
11 History
13 Financial and Non-Financial Highlights
15 Message from the CEO
Messages from the CQO, CTO,

22 and CIO

23 Message from the CFO
Special Feature: Raising the Curtain on

27 the Next Generation of SUBARU Cars
33 Corporate GovernanceAchieving an industry-leading
profit margin

41 CSR at SUBARU
Consolidated Ten-Year Financial

45 Summary
While sales and profits are important, SUBARU isgeared toward management that emphasizes a high47 Five-Year Automobile Sales

operating margin. We will seek to achieve an industry-

49 Financial Review

leading profit margin while continuing to invest in future

56 Corporate Data/Stock Information

sustained growth.

Disclaimer Regarding Forward-Looking Statements
Statements herein concerning plans and strategies,
expectations or projections about the future, SUBARU’s efforts
with regard to various management issues, and otherstatements, except for historical facts, are forward-looking
statements. These forward-looking statements are subject touncertainties that could cause actual results to differ materiallyfrom those anticipated. These uncertainties include, but are notlimited to, general economic conditions, demand for and prices
of SUBARU’s products, SUBARU’s ability to continue to develop
and market advanced products, raw material prices, andcurrency exchange rates. SUBARU disclaims any obligation to
update any forward-looking statements, whether as a result of
new information, future events, or otherwise.

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Business Overview

Automotive Business Unit

SUBARU continues todevelop cars that promise
total driving enjoyment andsafety for all passengers.
The launch of the SUBARU 360 in 1958 marked SUBARU’s start as an

Net Sales (Billions of yen)automaker. Ever since, we have contributed to the development ofJapan’s automotive industry by creating a succession of distinctive

2,699.0

cars equipped with creative technologies such as the horizontally
opposed engine and Symmetrical All-Wheel Drive. We continue to3,039.4 3,152.0

2,246.6
1,779.0

take on new challenges in order to provide all of our customers with
“Enjoyment and Peace of Mind.” For example, we continue to evolve
the EyeSight driver assist system, have improved safety performanceand driving performance by adopting the SUBARU Global Platform,

’13/3

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’16/3

’17/3

our next-generation vehicle platform, and were the first JapaneseOperating Income (Billions of yen)automaker to use a pedestrian protection airbag.

543.6
400.9

94.8%

397.7

309.0

Consolidated net sales contribution ratioof the Automotive Business Unit

111.0
’13/3

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’15/3

’16/3

’17/3

SUBARU Proprietary Technologies
Horizontally opposed engine (Boxer engine)

resembles the movement of a boxer’s fists, this engine isLightweight, compact, low center of gravity

renowned for its excellent rotation balance and contributes to

The horizontally opposed engine is an ideal power unit thatlow vehicle center of gravity because of its low height, lightweight, and compact design.

SUBARU has relied on for more than half a century. Called the“Boxer engine” because the horizontal movement of the pistons

Symmetrical All-Wheel Drive (AWD)

arranged symmetrically left and right along the crankshaft

Superior longitudinal-transverse weight balance

SUBARU Boxer

Conventional In-Line Engine

The low center of gravity provided by the horizontally opposedengine and superior longitudinal-transverse weight balanceachieved by placing the transmission near the center of thevehicle combine to maximize all-wheel drive capability anddeliver superb driving performance in various conditions.
SUBARU has long relied on Symmetrical AWD as a coretechnology that drivers can depend on in every situation fromday-to-day town use to high-speed highway driving.

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Product Lineup
Legacy Series

Consolidated unit sales: 297,000 units
Available markets: Japan, North America, Russia, Europe,
Australia, China, Other

Consolidated unit sales: 344,000 units
Available markets: Japan, North America, Russia, Europe,
Australia, China, Other

Consolidated unit sales: 54,000 units
Available markets: Japan, North America, Russia, Europe,
Australia, Other

Impreza Series

Consolidated unit sales: 31,000 units
Available markets: Japan, Europe, Australia, Other(SEDAN)(5 Door)

Consolidated unit sales: 9,000 units
Available markets: Japan, North America, Europe, Australia,
China, Other
Consolidated unit sales: 290,000 units
Available markets: Japan, North America, Russia, Europe,
Australia, China, Other

Consolidated unit sales: 4,000 units
Available markets: JapanOEM Models

Consolidated unit sales: 32,000 units
Available markets: Japan(OEM supply from Daihatsu Motor Co., Ltd.)*Period: April 1, 2016 to March 31, 2017

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Business Overview

Automotive Business Unit

Focusing on safety to deliver
the world’s highest level of peaceof mind and safety to customers.
Under the concept of all-around safety, meaning the pursuit of

SUBARU
All-Around
SafetyPrimary
SafetyActiveSafetyPreventive
Safetyautomobile safety performance from every perspective, SUBARU

Passive
Safetydefines safety in automobile manufacturing using four criteria: primary
safety, active safety, preventive safety, and passive safety.

Basic design features for avoiding accidents

Primary
SafetySafe situation

Hazardous
situation

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

Preemptive
accident
avoidancel Driving positionl Interface

The ultimate in driving performance for greater safety

ActiveSafetyFacilitating hazard avoidance through performance improvementin the basic functions of a car: driving, turning, and stoppingl Horizontally opposed enginel Symmetrical AWD

Accident

Advanced technology that supports safe driving

Preventive
SafetyCollision

Spread ofdamageSupporting safe driving by helping avoid collisions and reduce
damagel EyeSight

Damagereduction
duringan accident

Extra precautions just in case

Passive
SafetyMinimizing damage when an accident occurs
l Engine layoutl Next-generation platforml Pedestrian protection airbag

Safety Performance Recognized Worldwide
SUBARU undergoes safety performance testing and assessment conducted by the New Car Assessment Program (NCAP) in Japan,
the U.S., Europe, and Australia, the Insurance Institute for Highway Safety (IIHS) in the U.S., and other public agencies in Japan andoverseas and has received the highest ranking in many tests and assessments*.
In Japan, the Impreza and SUBARU XV received the 2016–2017 Grand Prix Award for earning the highest safety score ever in theJapan New Car Assessment Program (JNCAP) crash safety evaluation tests. In addition, all models equipped with EyeSight received
the top rating of Advanced Safety Vehicle ++ (ASV ++).
*Please refer to evaluation organization websites for assessment details.

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What is EyeSight?
EyeSight is a driver assist system that applies advanced technology. It controls
alerts, braking, and steering in accordance with the vehicle’s driving situation
to help avoid accidents, reduce damage, and alleviate driver burden. We
currently offer EyeSight mainly in Japan, North America, Europe, Australia,
and China and plan to offer it globally.

Pre-collision braking

Adaptivecruise control

Pre-collision throttle
management

Active lane keep

Lane sway warning

Why Use Stereo Cameras?
The use of two cameras positioned to the left and right, like human eyes,
enables simultaneous three-dimensional recognition of multiple cars,
motorcycles, bicycles, pedestrians, and other objects within the field of vision.
A key feature of EyeSight is that it is capable of accurately recognizing the
distance, shape, and speed of movement of objects. Although most

Stereo cameras

automakers use radar or a combination of radar and a camera as sensors todetect lead vehicles, pedestrians, and other potential hazards, EyeSight uses
only stereo cameras. The high recognition performance of stereo cameras,
continuously perfected over many years, is an advantage unavailable from

Stereo camera simulated image

other automakers.

History of Driver Assist System Development

1989

The development of stereo cameras, the core of the EyeSight system, began

World’s first Market introduction of Active

in 1989 based on a concept of safety technology that was bold and futuristic
at a time when the need for advanced safety technology wasn’t widely

1999

2008 SUBARU introduced EyeSight, which realized the world’s first pre-World’s first EyeSight released

2008

Commercialization of the world’s first pre-collision
braking control function using stereo cameras only

2010

Release of EyeSight (ver. 2)

2014

Release of EyeSight (ver. 3)

2017

Addition of the Touring Assist function

performance, which captures top-class ratings in safety performance testing
and assessments around the world and has won high acclaim from countlesscustomers, is underpinned by reliable technologies and a wealth of experiencecultivated over many years.

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Driving Assist (ADA), theforerunner of EyeSight
Installation of the world’s first driver assist systemusing stereo cameras on production cars

understood. Subsequently, as a result of persistent, dedicated research, incollision braking function using stereo cameras only. SUBARU’s safety

Start of system development

Business Overview

Aerospace Company

Leveraging tradition and innovativetechnologies to develop andproduce a wide variety of aircraft.
Boeing 787

SUBARU traces its roots back to Aircraft Research Laboratory,
established in 1917 and later to become Nakajima Aircraft. The
Aerospace

Company,

inheriting

Nakajima

Aircraft’s

Net Sales (Billions of yen)aircraft
142.8

manufacturing technologies and spirit, leads Japan’s aerospace

124.4

industry and has a strong track record in developing and producing awide variety of aircraft. We mainly develop and produce center wing

152.8

138.8

89.1

boxes, which require high precision and advanced assembly
technology to support the main wings and fuselage at the center ofaircraft. On the basis of unique and advanced technologies cultivatedover the years, we aim to develop into an aircraft manufacturer with a

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’17/3

global presence and will actively take on challenges in new fields.

Operating Income (Billions of yen)
18.9

18.2

14.1

4.2%

Consolidated net sales contribution ratioof the Aerospace Company

9.1
6.8

’13/3

’14/3

A center wing box (Handa Plant)

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Global Network

SUBARU Main Business Sites
Main Overseas Business Sites

4
10 9

2

5

11

6
1
7

1

8

3
12
7

SUBARU of America, Inc.

1

SUBARU Europe N.V./S.A.

8

North American SUBARU Inc.

2

SUBARU Italia S.p.A.

9

SUBARU Research & Development, Inc.

3

N.V. SUBARU Benelux

10

SUBARU of Indiana Automotive, Inc.

4

SUBARU Vehicle Distribution B.V.

5

SUBARU of China Ltd.

11

SUBARU Canada, Inc.

6

SUBARU Technology Beijing Co. Ltd.

12SUBARU Asia PTE. LTD.

Main Domestic Business Sites
1

Main production models: Legacy, Outback, Impreza

4

1

Head Office2

Gunma Manufacturing Division2

1

Gunma Manufacturing Division
Main Plant
Main production models: Levorg, Impreza, SUBARU XV, WRX,
SUBARU BRZ

3Yajima Plant
Main production models: Legacy, Outback, Impreza, SUBARU XV,Forester, Exiga
Aerospace Company

Oizumi Plant
Main production items: automobile engines and transmissions

3

5

Tokyo Office

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Utsunomiya Plant

5

Handa Plant

6

Handa West Plant

6

History

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

1917
1931

1968

Signing of a business alliance agreementwith Nissan Motor Co., Ltd.

1968

Start of exports of Robin engines for snowmobiles
to Polaris (USA)1969

Start of operation of the Yajima Plant

1972

Release of the Leone 4WD Estate Van

1978

Conclusion of a 767 business agreement with Boeing

1983

Start of full-scale operation of the Oizumi Plant

Establishment of Aircraft Research Laboratory
Establishment of Nakajima Aircraft Co., Ltd.

Change of company name1945 from Nakajima Aircraftto Fuji Sangyo
1946 Production of the first Rabbit Scooter

1953

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

1987

Release of a Justy model equipped with the world's firstelectro-continuously variable transmission (ECVT)

1960

Opening of the Gunma Main Plant

1987

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

1960

Listing of shares on the Tokyo Stock Exchange

1989

Establishment of SUBARU Canada, Inc. (SCI)

1966

Signing of a business alliance agreementwith Isuzu Motors Ltd.

1989

Completion of SUBARU Research & Testing Center (SKC)

1968

Establishment of SUBARU of America (SOA)1990

SUBARU of America (SOA) made a wholly owned
subsidiary

1968

Dissolution of the business alliance with Isuzu Motors Ltd.

1991

Participation in the Boeing 777 program

SUBARU Models
through the Years

1966

1972

SUBARU 1000
four-door sedan released

1958

1961

SUBARU Sambar truck released

Rex released

1977

1969

SUBARU 360 released

1984

R-2 released

1971

Justy released

1985

Brat released

1983

Leone coupe released

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Alcyone released

1989

Domingo released

Legacy series released

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

1993

Start of operation of the Handa Plant

2005

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

1998

SIA is first automobile assembly plant in the U.S.
to obtain ISO 14001 certification

2007

Start of production of Toyota cars (Camry) at SIA

1999

Capital and business alliancewith General Motors Corporation (GM) (USA)2010

Development of an EyeSight advanced driver assist
system with greatly expanded range of driver assistance

1999

Business alliance with Suzuki Motor Corporation

2012

2000

Dissolution of the business alliancewith Nissan Motor Co., Ltd.

Receipt of Boeing Supplier of the Year award(Pathfinder category)

2012

2001

Zero emissions achieved at the automobile manufacturing
division (Gunma Manufacturing Division)

Start of knockdown production of the SUBARU XVin Malaysia

2012

2001

Zero emissions achieved at the Utsunomiya Manufacturing
Division, Utsunomiya Plant, and Saitama Plant

SIA becomes the first automobile production plantin the U.S. to obtain ISO 50001 certification

2012

2002

Dissolution of the SIA joint venture with Isuzu andformal signing of a contract production agreement

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

2014

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

2003

Legacy wins the Car of the Year Japan award

2015

2003

Receipt of Boeing Supplier of the Year award(Major Structures category)

Cumulative production of 15 million horizontally opposedengines

2015

Formulation of the Corporate Governance Guidelines

2003

SUBARU of Indiana Automotive, Inc. (SIA) madea wholly owned subsidiary

2016

Cumulative production of 15 million AWD vehicles

2005

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

2016

Termination of contract production of the Toyota Camryat SIA

1992

1998

Vivio released

1992

2008

Pleo released

2003

Impreza series released

1997

Exiga released2012

Outback released

2005

Forester released

2014

2014

SUBARU BRZ released2012

B9 Tribeca released

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Levorg released

SUBARU XV released

WRX released

Financial and Non-Financial Highlights
Financial Highlights
SUBARU Corporation and its consolidated subsidiaries

Net Sales (Billions of yen)

Operating Income (Billions of yen)
Operating Margin (%)
3,232.3565.6

3,326.0

2.9%

2,877.9

27.4%

423.0

2,408.1

410.8

326.5

1,913.0
120.4

13.6

17.5

5.1pt

14.7
12.4

6.3

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’14/3

’15/3

’16/3

’17/3

’13/3

’14/3

’15/3

’16/3

’17/3

82

100

108

121

108

Exchange Rate (Yen to the US dollar)

Capital Expenditures (Billions of yen)

R&D Expenses (Billions of yen)

Depreciation Expenses (Billions of yen)
158.5

114.2
102.4

16.8%

135.7
110.7

70.2

68.5
55.9

’13/3

54.9

’14/3

’16/3

60.1

77.0

65.0

64.8

’15/3

11.5%

83.5

49.1

18.5%

’17/3

’13/3

’14/3

’15/3

’16/3

’17/3

Non-Financial Highlights

CO2 Emissions (Tons of CO )Waste Generation (Tons)n Overseas Group companies
n Domestic Group companies
n SUBARU

n Overseas Group companies
n Domestic Group companies
n SUBARU

2

491,498
397,580

406,635

’13/3

’14/3

500,648

428,097’15/3

162,893

166,856

170,589

’15/3

’16/3

’17/3

148,154
133,830

’16/3

’17/3

’13/3

’14/3

* Includes scrap metal sold

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Interest-Bearing Debt (Billions of yen)

ROE (%)

D/E Ratio (Times)

ROA (%)

307.2

36.9
269.7

30.4
211.2
170.0

29.3

22.9

12.8%

20.7

18.8

148.3

16.7pt

23.6

20.2

0.52
0.21

’13/3

’14/3

15.3

8.2

0.35

’15/3

0.13

0.10

’16/3

’17/3

8.3pt

0.03pt
’13/3

’14/3

’15/3

’16/3

’17/3

* ROA = Operating income / Total assets(average at the beginning and end of the term)Free Cash Flow (Billions of yen)

Consolidated Unit Sales (Thousand units)

Ratio of Shareholders’ Equity
to Total Assets (%)

1,065

358.6
279.1
46.5
37.7

911

40.5
138.8
91.2

’14/3

724

1.0pt

95.3

’13/3

11.1%

825

52.8

51.8

958

’15/3

’16/3

74.6%

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’15/3

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’17/3

Volume of Water Use

Number of Employees (Persons)(Thousand m3)

n Non-consolidatedn Consolidatedn Overseas Group companies
n Domestic Group companies
n SUBARU

4,072

4,256

4,367

4,401

4,462

27,50912,717

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’14/3

’15/3

’16/3

’17/3

’13/3

28,545

13,034’14/3

29,774

13,883’15/331,151

14,234’16/3*Excluding executive officers, advisors and dispatches

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Message from the CEO

Enhancing the SUBARU brand:“From a company making
things, to a company making
people smile.”
Yasuyuki Yoshinaga
Representative Director of the Board, President and CEO

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1. The Transformation to SUBARU CORPORATION
Although SUBARU’s consolidated automobile unit sales were in the 500,000 to 700,000 range until a few
years ago, thanks to the loyal support of customers around the world, they passed the one million milestone
for the first time in the FYE March 2017, reaching 1.065 million units. Although this is a highly gratifying
achievement, SUBARU’s global market share in the automotive industry is a mere 1%. Even if we wanted
to compete using the same management strategies as the major automakers, we would be no match forthem due to business scale. I believe that the only path to survival for SUBARU is to practice selection andconcentration of limited management resources, create added value that customers find appealing, andexhaustively pursue differentiation. We express these strategic imperatives using the phrase “Enhancing the
SUBARU brand.”In “Prominence 2020,” the mid-term management vision announced in 2014, we articulated the objectiveof doing everything possible to promote differentiation and enhance the SUBARU brand. The recent unificationof the company name and its brand name is one such initiative and a declaration of our resolve to showcase
SUBARU as a brand that truly stands out and shines. To achieve this, all employees of the SUBARU Groupwill constantly consider what constitutes value to our customers as they provide products and services. Whencustomers are satisfied, we know it from their smiling faces. All Group employees will work in unison totransform SUBARU from a company making things, to a company making people smile.

2. The Pursuit of “Enjoyment and Peace of Mind”
What is SUBARU? In the pursuit of differentiation from competitors, we asked ourselves this question while
reconsidering and discussing everything pertaining to SUBARU. The answer we finally arrived at is that
SUBARU has its roots as an aircraft manufacturer. The most important thing in aircraft development issafety. The safety performance and technology standards required to guard against possible aviation
accidents are extremely high, and safety is a given. This way of thinking has been handed down and imbues
automobile development at SUBARU. We realized that the carrying on of the spirit and technologies of theaircraft business and the consistent pursuit of superior safety, superb driving performance, and functional
packaging at all times is encoded in SUBARU’s DNA. Also, thinking that SUBARU can establish a prominent
presence in the minds of customers when they are able to experience SUBARU’s quintessential “Enjoyment
and Peace of Mind,” we defined “Enjoyment and Peace of Mind” as the core value SUBARU aspires todeliver to customers. We believe that peace of mind can exist only when there is trust in the SUBARU
brand, not just safety, which is a functional attribute. Also, by enjoyment we mean not only the enjoymentof driving, but also the enjoyment of traveling by car and the enjoyment of a car lifestyle.
Today, SUBARU receives top-class ratings in safety evaluations performed by third-party organizations
around the world. In the U.S., all SUBARU models equipped with EyeSight technology received the Top
Safety Pick award in the 2016 safety ratings of the Insurance Institute for Highway Safety (IIHS), a nonprofit
insurance industry organization.
Although in the past many people chose SUBARU cars because of our unique horizontally opposedengine and symmetrical AWD technologies, in recent years SUBARU has come to be strongly associatedwith safety, especially in the U.S. I think that for many customers, safety is a factor in SUBARU’s popularity.
To further increase our world-class safety performance, last year we adopted the SUBARU Global
Platform. By completely revamping the vehicle platform, which is the basic frame of an automobile, we haverealized significant evolutions in overall performance—including safety performance—that would not havebeen achievable through the simple extension of existing technologies.
We plan to introduce a plug-in hybrid vehicle (PHEV) in 2018 and an electric vehicle (EV) in 2021.
Although the power source may change from an engine to an electric motor, we will continue to provide
cars that are distinctively SUBARU through the pursuit of “Enjoyment and Peace of Mind.”

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Message from the CEO
3. Changes in the Business Environment
SUBARU has grown rapidly during the past few years. Consolidated sales volume has increased from some
600,000 vehicles to more than 1,000,000, and consolidated net sales have risen from 1.5 trillion yen to morethan 3 trillion yen. Income has increased as well. We have been able to achieve extraordinarily high operating
margins thanks to a confluence of positive factors: namely, substantial growth in sales volume, mainly in the
U.S. market, alleviation of the fixed cost burden, extraordinarily low sales incentives against a backdrop of
supply shortages, low depreciation and amortization expenses and R&D expenses, and the benefits of a
weak yen. However, changes in the market environment and the increase in company size have led totremendous changes in the business arena. To deal with a prolonged supply shortage, we substantially
increased production capacity at SIA, our production base in the U.S., from 218,000 to 394,000 units
under standard operations, and the burden of depreciation and other fixed costs is increasing. Also, we will
make appropriate R&D expenditures to cope with new technologies that I discuss in detail below.
Although the automotive industry was previously an industry that saw little change from technologicalinnovation, it has now entered a period of transformation. I consider the question of how to respond to awave of technological innovations that has suddenly rolled over the industry, such as electrification,
automated driving, connected car technology, and car sharing, to be a matter of urgent importance. Since
our management resources are limited, unlike the major automakers, we cannot deal with all of these
innovations simultaneously. We intend to address them in the following order of priority while taking
advantage of alliances with other companies.

Net Sales (Billions of yen)
3,232.3

3,326.0

’16/3

’17/3

3,420.0

2,877.9
2,408.1
1,913.0
1,517.1

’12/3

’13/3

’14/3

’15/3

’18/3

(Planned)

Operating Income (Billions of yen)/Operating Margin (%)
n Operating incomel Operating margin

565.6
423.0
17.5

326.5

410.8

14.7

13.6

410.0

12.4

12.0

6.3
120.4

2.9
44.0
’12/3

’13/3

’14/3

’15/3

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’16/3

’17/3

’18/3

(Planned)

1) Electrification
Since environmental regulations in various countries will be further tightened, we will move forward with
automobile electrification as our highest priority. In the U.S., a key market, the scope of the Zero Emission
Vehicle (ZEV) Regulations will be expanded to include medium-size automakers, including SUBARU, in2018. We plan to launch a plug-in hybrid electric vehicle (PHEV) to coincide with this regulatory change, andare developing the PHEV with technical assistance obtained under an alliance. We also plan to launch an
electric vehicle (EV) in 2021. In this new era of electrification, we will develop an EV that provides thedistinctive “Enjoyment and Peace of Mind” that people expect from SUBARU.

2) Automated driving (See page 32)
SUBARU’s approach to automated driving is to provide advanced driver assist technology that reduces the burdenof driving, not driverless vehicles. We will press ahead with further evolution of EyeSight, our highly popular driverassist system, with the aim of achieving the ultimate in safety: the complete elimination of automobile accidents.

3) Connected car technology
To accelerate our initiatives in the field of connected car technology and meet customer needs, which will
only continue to grow, we established the position of Chief Information Officer (CIO) and the IT Strategy
Division in April 2017 and will accelerate planning and development.

4) Car Sharing
In light of factors such as SUBARU’s sales volume, company size, and the preferences of our customers,
we consider this a social innovation that will have little impact on our business. Accordingly, we will prioritize
the initiatives described in 1) to 3) above.

Consolidated Unit Sales (Thousand units)n North America

n Japann Chinan Other

825

724

640

478

390

309
’12/3

121
45
182

121
50
163

111
48
172

’13/3

958

911

’14/3

’15/3

124
54
163

138
44
145

570

630

’16/3

’17/3

1,200 +

1,106

1,065
141
44
159

149
42
172

721

742

’18/3

200
50
150

800

’21/3

(Planned)(Forecast)

Production Capacity Expansion Plan (Thousand units)
n Yajima plant (Japan)n Main plant (Japan)

Production capacity at full operation:
1,276 thousand unitsn SIA (USA)

1,132

1,038
854

836

2015/9

436

394

200

218

207

207

213

213

429

429

431

483

2016/Spring*Production capacity under standard operations

CORPORATION
18 SUBARU
ANNUAL REPORT 20172016/12FY2019/3(Planned)

Message from the CEO
4. Sales Trends in the U.S.
Although the U.S. auto sales market is said to have peaked, so long as total demand of about 17 million
units does not markedly deteriorate, I think that SUBARU’s current strong sales can be maintained into the
future. We launched the all-new Impreza at the end of 2016 following a full model change. We plan tolaunch an all-new Crosstrek (called the SUBARU XV outside North America) in the summer of 2017,
introduce the Ascent, a 3-row SUV for North America, in 2018, and implement full model changes ofexisting models. The Ascent, a vehicle that will complement the current model lineup, is being developed
at the strong request of our U.S. dealers. By continuously introducing products that appeal to customers inthis way, we will maintain sales momentum.
Automakers are taking measures in response to a slowdown in the U.S. market, such as increasing
incentives, and sales competition has intensified. SUBARU forecasts, for accounting purposes, incentivesof U.S. $1,850 per vehicle, up $400 year on year, for FYE March 2018. The reasons for the projected
increase are strengthening of a portion of the sales financing program, a higher rate of program use, andcost increases accompanying a policy interest rate increase in the U.S. Although an increase in incentives
puts downward pressure on profits, we will carefully watch the industry trend in order to maintain relativecompetitiveness.
We believe that opportunity awaits in the sunbelt (the southern U.S.). A breakdown of SUBARU’s 3.5%
total share of the U.S. market in calendar year 2016 indicates that our share was 5.0% in the snowbelt and1.8% in the sunbelt. For this reason, we see room for sales growth in the southern part of the country. To
achieve growth, we will not increase the number of dealers, but rather increase unit sales per dealer throughservice improvement and model lineup expansion (introduction of the Ascent).

U.S. Retail Unit Sales (Thousand units)(CY)

n Legacyn Forestern Tribecan Imprezan WRXn SUBARU BRZ

4
336 2

425 9
2
124

8
514 1
25

2012

U.S. Market Share (%)

5.0

4.9

4.6
4.0

3.5

2012

160
2013

151

156

129

248

213

191
2014

2015

2016

2017

(Planned)(CY)

n Snowbelt
n Sunbeltl Nationwide

0.9

165

179

175

Number of Dealers in the U.S. (Dealers)
Unit Sales per Dealer (Units)

(CY)

2.4

131

670

615 4
33

160

76
89

583 5
34

2.8

3.2

3.4

n Unit sales per dealerl Number of dealers

1,064

976

932

827

3.5

684

621

621

630

625

621

630

542
1.2

2013

1.4

2014

1.6

2015

1.8

2016

2012

CORPORATION
19 SUBARU
ANNUAL REPORT 2017

2013

2014

2015

2016

2017

(Planned)

5. Sales Trends Outside the U.S.
Although we planned for sales growth in China and Russia in “Prominence 2020,” the mid-term
management vision, we are currently facing difficulties in these markets.
In China, oversupply in the market continues, and sales competition is intensifying. Since SUBARU
doesn’t have a local production base, we’re not forced to sell cars to keep a plant operating. We intend
to distance ourselves from price competition and carefully maintain our sales network by engaging in
meticulous sales activities targeting customers who appreciate SUBARU’s added value.
Russia is a market where people have a natural affinity for SUBARU’s product characteristics, and we
expect sales growth there in the future. However, since the current economic environment is unfavorable,
including a weak ruble, we intend to wait for a recovery.
In Southeast Asia, in addition to knockdown production (local assembly) of the SUBARU XV andForrester in Malaysia, we plan to start knockdown production in Thailand beginning in 2019.
Although this look at individual markets shows that our sales plan for China and Russia is behindschedule, we have not changed the FY 2020 consolidated unit sales forecast of upward of 1.2 million
units announced in “Prominence 2020,” the mid-term management vision. Although, of course, it isimportant to achieve our sales and profit and loss plans, we will carefully adhere to our current businessmodel and intensively focus on enhancing the SUBARU brand, placing the highest priority on paving theway to future success.

Product Strategy
CY

2016

2017

All-new Impreza

2018

2019

2020

FMC

FMC

FMC

All-new SUBARU XVThe SUBARU Global Platform
Model plans

Sequentially introduced in all full model change (FMC)
vehicles starting with the all-new Impreza in late 2016

3-row SUV for
North America*
2019

Expanded rollout of direct injection units Newly designed

downsized turbo engine

Environmental
initiatives

Plug-in hybrids

Compliance with regulations in each region by combining significant
efficiency gains for internal combustion engines with electrification

2021

Electric
vehicles*The photo shows the SUBARU Ascent SUV Concept

CORPORATION
20 SUBARU
ANNUAL REPORT 2017

Message from the CEO
6. Strengthening Corporate Governance
Effective April 1, 2017, SUBARU established the Corporate Administration Division to strengthen thebusiness management system and business supervision function and established the positions of Chief
Quality Officer (CQO), Chief Technology Officer (CTO), and Chief Information Officer (CIO). The CQO position
was established for the purpose of promptly resolving quality-related issues and further increasing productquality and customer-service quality. The purpose of the CTO position is to respond to new technologies in
the automotive industry, which is now in a period of transformation, and the purpose of the CIO position isto accelerate business process innovation and improvement as well as digital-related planning anddevelopment in the automotive business utilizing IT.
Following approval at the Ordinary General Meeting of Shareholders of June 23, 2017, the Company
changed the Board of Directors structure and revised the compensation structure for directors. The purposeof the change in the Board structure was to strengthen the oversight function and increase the speed ofbusiness execution by separating corporate management and business execution. Following a review of
executive remuneration, we introduced a share-based compensation plan with transfer restrictions. The
purpose of the revision of the compensation structure for directors was to provide an incentive to eligible
directors to achieve sustained improvement in corporate value and to promote sharing of value between
eligible directors and the shareholders.

7. Strengthening of CSR Initiatives
At SUBARU, we believe that actively working toward and contributing to the sustainability of society in the
pursuit of sustained growth is our corporate social responsibility (CSR). To more clearly express theaspirations of the SUBARU Group and our efforts to contribute to the environment and communities, on
April 1, 2017, we established the CSR & Environment Department and revised the SUBARU Environmental
Policies. In the Environmental Policies, we define the business fields of SUBARU, a company whose corebusinesses are automobiles and aerospace, as “The earth, the sky and nature.” We consider protecting
the environment of the Earth a matter of the utmost importance for ensuring a sustainable future forsociety and SUBARU and strive to protect the environment in all business activities. As president, I intend
to further promote SUBARU’s CSR activities and work to protect the global environment and contribute to
local communities.

CORPORATION
21 SUBARU
ANNUAL REPORT 2017

Messages from the CQO, CTO, and CIO
CQO (Chief Quality Officer)

Jun Kondo
Director of the Board
ChairmanFor SUBARU, a company that provides “Enjoyment and Peace of Mind” to customers, quality
is intrinsic to brand value. I think that boosting not only product quality, but also customer
service quality and the quality of corporate activities themselves is important for making
SUBARU a brand that delivers genuine value to customers. First of all, we will review every
aspect of our manufacturing processes, right down to the current state of quality assurance
for each individual part. In new car development, we will reinforce measures to prevent
reoccurrence of past defects and strengthen the development step verification process. In
this way, we will work to further improve product quality and, in particular, eliminate defects
that lead to recalls and service campaigns. We will also strive to increase customer satisfaction
by undertaking call center expansion, smooth provision of replacement parts, and efficiency
improvement in service operations at sales agents/dealers. We will aim for world-classquality, and all Group employees will improve the business structure until passion for quality
becomes a hallmark of SUBARU’s DNA.

CTO (Chief Technology Officer)

Takeshi Tachimori
Representative Director of the Board
Corporate Executive Vice President

After spending more than twenty years in engineering divisions, I have worked in the Product& Portfolio Planning Division for eight years and a Sales and Marketing Division for six years.
I want to be constantly attuned to the mood of customers and provide greater joy andsatisfaction through new ideas and advanced technologies. In recent years, the automotive
industry has been required to respond to increasingly serious environmental problems andtraffic issues, and countermeasures have been devised through new technologies. It isnecessary to actively adopt these solutions and provide them to customers in practical ways,
and SUBARU will make appropriate investments and resource allocations to achieve this.
The only path to survival for SUBARU is to continuously strengthen the brand while never
betraying the trust of customers. We will constantly reexamine and continuously strengthen
the brand position so that not only the products and services we provide, but also the
SUBARU philosophy, resonate with customers.

CIO (Chief Information Officer)

Masaki Okawara
Corporate Executive Vice President

Information (and IT) connects division to division and person to person, and I want to support
management quality improvement from an IT perspective by activating those connections. To
that end, all Group employees must consider what we have been able to accomplish andunable to accomplish in the past and what we should do in the future, and my task is to leadthe way. First of all, we will build an IT-conscious culture and prepare an environment where
all employees can work dynamically in a safe and secure work environment with robust IT
infrastructure. Then, we will develop an IT infrastructure built on a foundation of information
security enhancement, promote true IT utilization based on the total optimization concept
and the streamlining of objects and information, and explore IoT, AI, and connected
technologies in preparation for business transformation and new value creation. In this way, I
intend to play a part in enhancing value arising from deeper connections with customers,
creating new value, and enhancing the SUBARU brand.

CORPORATION
22 SUBARU
ANNUAL REPORT 2017

Message from the CFO

We will move ahead withselection and concentration,differentiation, and a value-added
strategy while maintaining ourindustry-leading profit margin
and aiming for sustained growth.
Toshiaki Okada
Director of the Board, Corporate Executive Vice President and CFO

Aspirations on Becoming CFO
I became Chief Financial Officer (CFO) of SUBARU on April 1, 2017. I consider it my role as CFO to diligently
apply myself to financial and business management to ensure that SUBARU, which is by no means a large
automaker, is able to achieve sustained growth and high profits even in an adverse business environment.
Although in my former post in the Corporate Planning Department I was involved in the formulation of“Prominence 2020,” the mid-term management vision, since becoming CFO I have been able to more
directly keep my finger on the pulse of investor sentiment. I will work to enhance SUBARU’s corporate valueby actively arranging opportunities for dialogue with our shareholders and other stakeholders, correctly
communicating the situation at SUBARU, and listening to their thoughts and opinions.

CORPORATION
23 SUBARU
ANNUAL REPORT 2017

Business Performance in FYE March 2017
Consolidated unit sales in FYE March 2017 increased by 107,000 units to 1,065,000 units as a result of thecontribution from production capacity expansion at SUBARU of Indiana Automotive, Inc. (SIA), ourproduction base in the U.S., and continued strong sales, mainly in North America. Consolidated net sales
increased by 93.7 billion yen year on year to 3,326.0 billion yen. Consolidated operating income decreased
by 154.8 billion yen to 410.8 billion yen, ordinary income was 394.3 billion yen, and net income attributableto owners of parent was 282.4 billion yen as a result of increases in SG&A expenses, mainly quality-related
expenses stemming from airbag inflators, and R&D expenses and the impact of exchange rate differences,
despite an increase in unit sales and progress with cost reduction.

Outlook for FYE March 2018 and Future Business Direction
We forecast continued strong sales in North America and other markets and have planned for consolidated
unit sales of 1.106 million units in FYE March 2018. We forecast consolidated net sales of 3,420.0 billion
yen, operating income of 410.0 billion yen, ordinary income of 410.0 billion yen, and net income attributableto owners of parent of 285.0 billion yen, to result from increases in SG&A expenses and R&D expenses
coupled with lower cost reductions due to the impact of raw materials prices, despite the projected impactof an increase in unit sales and a weak yen.
In the short term, we forecast a slowdown in the U.S. market, a key market for SUBARU, andaccompanying intensification of competition. In these circumstances, although SUBARU sales remainstrong, the all-new Impreza, which was introduced at the end of last year, will be the main sales driver in FYEMarch 2018. Since the Impreza is a comparatively low-profit model in the SUBARU lineup, it will be difficult
to link sales volume growth to profit growth in FYE March 2018. Also, although SUBARU is maintaining asubstantially lower level of sales incentives than the industry as whole, we plan no major change to the sales
incentive program itself, such as leases or loans. However, there have been increases in market interest rates
and the rate of program use, and we forecast a $400 increase year on year in incentives to $1,850. In
addition to this model cycle impact and increase in selling expenses, we forecast sharply higher raw material
prices and an increase in R&D expenses and are planning for profits to be nearly flat.

FYE March 2017: Analysis of
Increase and Decrease in Operating
Income Changes (Consolidated) (Billions of yen)FYE March 2018: Analysis of
Increase and Decrease in Operating
Income Changes (Consolidated) (Billions of yen)

Improvementof salesvolumeCost& mixture
reductionand others

137.7

Improvementof salesvolume Gain on& mixture currency
and others exchange

32.2

565.6
-169.1
SG&A
expenses -143.8 -11.8
and others Loss on
R&D
currency expenses
exchange’16/3
Operatingincome-154.8 billion yen

410.8

410.8

32.8

21.1

-27.8

410.0
-19.8

-7.1

SG&A
R&D
Cost
expenses expenses reduction
and others’17/3
Operatingincome’17/3
Operatingincome-0.8 billion yen’18/3
Operatingincome(Planned)

CORPORATION
24 SUBARU
ANNUAL REPORT 2017

Message from the CFO

During the past few years, sales volume has grown substantially, mainly in North America, and an
extremely high capacity utilization rate has been maintained at our production facilities, which have been
kept lean. Moreover, a confluence of conditions favorable to the Company, namely low inventory levels at atime of supply shortages, low sales incentives, and favorable exchange rates, has led to rapid profit growth.
In these circumstances, we substantially expanded production capacity at SIA last year to respond to a
supply shortage that was becoming excessive, and the burden of depreciation and other fixed costs isincreasing. Also, it is necessary to review and increase R&D expenses to respond to increasingly strict
environmental regulations and advanced safety technologies, a subject of growing interest. In this way, thechanges in the fixed cost structure are lagging slightly behind volume growth.
Because of these developments, although there is also a cycle of profitability associated with modelchanges, we must continue our initiatives to develop new technology while addressing the issue ofmaintaining a high profit margin, given a higher level of fixed costs. Our strategic direction for achieving thisis unchanged from “Not big in size, but a high-quality company with distinctive strengths,” our vision for2020 set out in “Prominence 2020,” the mid-term management vision.
We will move ahead with selection and concentration and differentiation and create added value inquality that customers will recognize and appreciate. Furthermore, we will promptly identify changes in theexternal environment and act to ensure that SUBARU can withstand an increasingly adverse businessenvironment without departing from our current business model based on this way of thinking.

Financial and Capital Strategies
The Company engages in day-to-day business management with return on capital, financial soundness,and shareholder returns as the three key indicators of capital policy. Specifically, the Company has declareda policy of providing appropriate shareholder returns while maintaining a high degree of balance between
return on equity (ROE) and the equity ratio over the medium and long term, and skillfully balancing theseobjectives is the cornerstone of our capital policy.
SUBARU has a history of extraordinarily high profits compared to the industry average, and in FYE

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

R&D Expenses (Billions of yen)n Capital expendituresn Depreciation and amortization expenses
158.5

134.0

150.0

135.7

114.2
102.4

110.7
83.5

92.0
70.2

77.0

68.5
55.9

’13/3

64.8

60.1

65.0

49.1

54.9

’14/3

’15/3

’16/3

’17/3

’18/3

(Planned)’13/3

CORPORATION
25 SUBARU
ANNUAL REPORT 2017

’14/3

’15/3

’16/3

’17/3

’18/3

(Planned)

March 2017 ROE was an extremely high 20.2%. However, this figure is partly attributable to positive
conditions such as the time difference between profit growth and cost increases, and we expect it to
decline somewhat from the current level. We see strategic capital costs at approximately 8% and would liketo maintain ROE of about twice that level for as long as possible.
SUBARU’s management approach is to concentrate on developed countries, mainly the U.S., with asmall model lineup. We recognize that this approach entails aggressively taking on more risk thancompetitors in terms of being subject to the impact of exchange rates and business fluctuations in themarket. For this reason, we will continue to pay attention to increasing shareholders’ equity and building astable financial base so that SUBARU can withstand any sudden changes in the business environment.
At the same time, we intend to boost returns to our shareholders. The Company makes dividends thebasis of shareholder returns and has a policy of paying continuous, performance-linked dividends. The annual
dividend payment for FYE March 2017 was 144 yen per share (half-year dividend of 72 yen and year-end
dividend of 72 yen), the same as for FYE March 2016. We plan to maintain a dividend of 144 yen per share(half-year dividend of 72 yen and year-end dividend of 72 yen) again in FYE March 2018. For FYE March 2018
and beyond, we have raised the consolidated dividend payout ratio range from the previous 20–40% to 30–
50%. The purpose of setting a dividend payout ratio range is to absorb fluctuations in business performanceby adjusting the payout ratio and keep dividends as stable as possible. Of course, this does not mean that
we will fix the amount of dividend per share. Rather, we will consider the amount of dividend payments while
comprehensively taking into consideration business performance in each fiscal year, investment plans, andthe business environment. In addition, we consider the buyback and retirement of shares an effectivemeans of returning profit to shareholders and will consider buybacks as the situation warrants.
SUBARU will accelerate two initiatives with the aim of achieving “Not big in size, but a high-quality
company with distinctive strengths,” our vision for 2020 set out in “Prominence 2020,” the mid-term
management vision: namely, enhancement of the SUBARU brand aimed at further promoting value-added
management and building a strong business structure that increases resilience to changes in the businessenvironment. We intend to further enhance corporate value and meet the expectations of our shareholders
and other stakeholders by achieving sustained growth while maintaining our industry-leading profit margin.
I request your further understanding and support in the coming years.

Free Cash Flow (Billions of yen)
Ratio of Shareholders’ Equity
to Total Assets (%)

Dividend per Share (Yen)Dividend Payout Ratio (%)
n Dividend per sharel Dividend payout ration Free cash flowl Ratio of shareholders’ equity to total assets

144

358.6

279.1

51.8

144

52.8

39.4

46.5
37.7

40.5
138.8

20.3

53

95.3

91.2

25.7

68

20.0

9.8
15

’13/3

’14/3

’15/3

’16/3

’17/3

CORPORATION
26 SUBARU
ANNUAL REPORT 2017

’13/3

’14/3

’15/3

’16/3

’17/3

Special Feature: Raising the Curtain on the Next Generation of SUBARU Cars

Debut ofthe all-new Impreza!
The all-new Impreza is a strategically important vehicle positioned in“Prominence 2020,” the mid-term management vision as the first model in
SUBARU’s next-generation product lineup. As the first model to use thenew platform and the first to feature a new-concept design, the Impreza is
the result of successfully overcoming various challenges and further
evolution of the “Enjoyment and Peace of Mind” SUBARU value proposition.
With the release of the all-new Impreza, SUBARU has raised the curtain
on the next generation of SUBARU cars with a model that promises to set
a new standard for excellence.

CORPORATION
27 SUBARU
ANNUAL REPORT 2017

All-around safety performancein pursuit of the world’s highest level of safety

Primary Safety
Basic design features for avoiding accidents• Wide field of vision, comfortable driving environment, etc.

Active Safety• SUBARU Global Platform for excellent handling performance• Active Torque Vectoring for enhanced hazard avoidance performance*

Preventive Safety• Newly evolved EyeSight (ver. 3) featured as standard equipment on all grades*• Equipped with Steering Responsive Headlights and High Beam Assist*

Passive Safety• SUBARU Global Platform for outstanding shock absorption performance*• Pedestrian protection airbag featured as standard equipment**Specifications may vary depending on the market.

Quality feelthat goes beyond its class

Outstanding dynamic quality feel
• The first model to use the SUBARU Global Platform, achieves both high performanceand comfort through analysis techniques that strive to quantify emotions

Static quality feel that goes beyond its class• A Dynamic x Solid design that embodies SUBARU’s “Enjoyment and Peace ofMind” value proposition fused with greatly enhanced interior and exterior finish

Winner of the 2016–2017 Car of the Year Japan Award
The Impreza was recognized for delivering higher quality driving
performance through innovations such as the newly developed SUBARU
Global Platform, for achieving the world’s highest level of safety with awide array of standard safety equipment, including the first pedestrian
protection airbag on a Japanese car and the EyeSight driver assist
system, and for its affordable price.

CORPORATION
28 SUBARU
ANNUAL REPORT 2017

Special Feature: Raising the Curtain on the Next Generation of SUBARU Cars

The Development Chief Discusses
the Appeal of the All-New Impreza
Our objective was to deliver
the ultimate in “Enjoyment andPeace of Mind” to all drivers
and passengers.
Senior General Manager
Product & Portfolio Planning Division

Kazuhiro Abe
Innovative evolution of the “Enjoyment andPeace of Mind” value proposition to meetcustomer expectations

to search for the answer to the question, “What sort of car
should we create to fulfill that desire?” My answer as
development chief was the development concept “Deliver theultimate in “Enjoyment and Peace of Mind” to all drivers andFrom the start of the new Impreza’s development until today,

passengers.” We would not merely make incremental

the project team has been filled with a strong desire to more

improvements for “Enjoyment and Peace of Mind,” SUBARU’s

fully meet the expectations of customers and enable as many

value proposition to customers, but rather undertake innovative

people as possible to experience the day-to-day enjoyment of

evolution. We would create a product with value that everyone

owning and driving the Impreza. Our first development task was

could clearly sense and recognize as appealing.

Taking on the challenge of going beyond a fullmodel change to build a foundation for a newgeneration of SUBARU cars

For some fifteen years since the release of the fourthgeneration Legacy, for which the current platform wasdeveloped, SUBARU engineers have accumulated a variety oftechnologies and expertise that contribute to improvement in

Innovative evolution in safety performance and enjoyable driving

safety performance and enjoyable driving performance. Our

performance, which are overall strengths of SUBARU, weretask in developing the new Impreza was to infuse theseabsolute requirements for making the development concept aadvances into a newly developed platform completely and all at

reality. This meant going beyond a complete redesign and fullonce. We also aimed to establish a new foundation formodel change of the Impreza to conduct a complete review

continuing to provide, on a global scale, the highest level offrom the ground up, starting with the vehicle platform. In other“Enjoyment and Peace of Mind.” With this in mind, we named

words, we would take on the daunting challenge of developing

the newly developed platform the SUBARU Global Platform.

a next-generation SUBARU platform. We thought that we could

Development of this platform has not only resulted increate a platform for the next generation of SUBARU cars only

substantially enhancing the dynamic quality feel and all-around

if we accomplished significant evolution in two areas: “All-safety performance of the SUBARU vehicle lineup overall, it has

around safety performance in pursuit of the world’s highest levelalso brought greater efficiency in development and flexibility inof safety” and “Quality feel that goes beyond its class.” The

production processes as a design that takes into consideration

entire project team approached development with an enormous

not only gasoline engine cars, but also hybrids, plug-in hybrids,

sense of responsibility and pressure, knowing that if we did not

and electric vehicles.

succeed with the first model of a new generation of SUBARU
cars, we could not possibly succeed with subsequent models.

CORPORATION
29 SUBARU
ANNUAL REPORT 2017

All-around safety performance in pursuit of
the world’s highest level of safety
Safety performance is the most important consideration forachieving the highest level of “Enjoyment and Peace of Mind.”
In keeping with SUBARU’s safety concept, we uncompromisingly
increased safety performance to unparalleled levels in the areasof primary safety, active safety, preventive safety, and passive
safety.
In the area of primary safety, we further enhanced driverand passenger sense of security by realizing excellent visibility
with few blind spots and a driving environment that reduces
driver fatigue. Our efforts in the area of active safety led to topof-classhazardavoidance

performance

resultingfromoutstanding handling performance made possible by the
SUBARU Global Platform. In the area of preventive safety, we
provide a sense of security supported by the top rating inpreventive safety assessment earned through safety measures
such as offering the EyeSight (ver. 3) driver assist system asstandard equipment on all grades.*1 Achievements in the area

Collision tests of the first vehicle in Japan equipped with a pedestrian protection airbag

of passive safety include the excellent shock absorption
performance provided by the SUBARU Global Platform and thereceived the Grand Prix Award in collision safety performancefirst use of pedestrian protection airbags in a Japanese car*1,

assessment. In the U.S. market, the Impreza received the 2017

which mitigate pedestrian injuries.

Top Safety Pick+ award, the Insurance Institute for Highway

The all-new Impreza, which has further enhanced safety for

Safety’s highest award. I think these achievements are thedriver, passengers, and pedestrians alike in this way, received

result of the project team’s intense efforts to realize all-aroundthe highest score ever in the FY 2016 new car assessment

safety performance in pursuit of the world’s highest level ofcrash safety evaluation tests conducted by the Ministry of Land,safety.

Infrastructure, Transport and Tourism (MLIT) and the National
Agency for Automotive Safety and Victim’s Aid (NASVA) and*1 Specifications may vary depending on the market.

Receipt of the 2016–2017
Japan New Car Assessment Program(JNCAP) Grand Prix Award

Receipt of the 2017 Top Safety Pick+ Award,
the Highest Award of the Insurance Institutefor Highway Safety

The Grand Prix is awarded to models receiving the JNCAP FiveThe Impreza was the only vehicle in the small car class toStar Award for collision safety performance that have exceeded

achieve top ratings for all Insurance Institute for Highway Safety

a previous record-high score for collision safety performance.

(IIHS)*2 safety evaluation criteria. It received ratings of Good in

The Impreza received the highest scores ever in evaluation of

all required crashworthiness tests, a rating of Superior in thepassenger protection performance, pedestrian protection

front crash prevention test, a rating of Good in the newly

performance, and seatbelt reminder system.

introduced headlight performance test, and a rating of Good+in the child seat anchors (latch) performance test.
*2 The IIHS is a nonprofit organization supported by auto insurers in the U.S.

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Special Feature: Raising the Curtain on the Next Generation of SUBARU Cars
Moving people’s hearts with a quality feel that
goes beyond its classof Mind” value proposition. It infuses a high-quality look and feelthat goes beyond its class. In this way, we achieved an interior
and exterior that is attractive and deeply satisfying. The dynamic

A second consideration in developing the all-new Impreza was

quality feel and static quality feel of the new Impreza, as

to create a quality feel that goes beyond its class, as defined byelements of a quality feel that goes beyond its class, realize

size and other attributes, and elevate the sense of quality

ownership appeal equal in importance to safety performance.

people feel when viewing, touching, driving, and riding in the

In addition to the new Impreza’s comprehensive pursuit ofcar to an emotional experience. With regard to dynamic quality

the world’s highest level of safety and a quality feel that goes

feel, the sensation of driving and riding in the car, we pursued

beyond its class, other key product features are practicality, todriving performance that all drivers and passengers find safe

further enhance the day-to-day ownership and driving experience,and secure, enjoyable, and comfortable. We elevated thethe latest infotainment system, a high-grade interior, a comfortable

dynamic quality feel imparted by the SUBARU Global Platform,

passenger cabin, and fuel economy that owners can actuallywhich has increased body and suspension rigidity by as muchappreciate in everyday use.

as 100% compared to previous models, to the level of

The dream of every member of the development project

excitement. With regard to static quality feel, the sensation ofteam is that the new Impreza becomes like a life partner to ourviewing and touching a car, the Impreza is the first production

customers as they experience a happier, more rewarding way

model to adopt SUBARU’s Dynamic x Solid design philosophy,of life.

which concretely expresses SUBARU’s “Enjoyment and Peace

SUBARU Technologies for the Future

The SUBARU Global Platform—Developed with Future Safety in Mind
World-class hazard avoidance performanceachieved by dramatically increasing vehicle
driving stability.

Leading the way in further evolution of collisionsafety performance with a 40% increase incollision energy absorption efficiency.

One major objective in completely renewing the vehicle platform,

The new platform has dramatically increased body strength andwhich is the basic foundation of a car, was to further evolve thehas boosted collision energy absorption efficiency by about

world-class level of safety performance that is one of the key

40% compared with current SUBARU models through meansfeatures of the SUBARU brand. With the new platform, wesuch as increasing the rigidity of the body and chassis,

undertook evolution of the undercarriage through significant

optimizing the frame construction, multiplying load transmission

increases in body and chassis rigidity, further lowering of theroutes, and expanding the use of high-strength materials.

center of gravity, and a suspension design review. Internal

In addition, looking ahead ten years, we are engaging intesting shows that as a result, we have achieved hazard

design that can be expected to further improve performance by

avoidance performance (the speed at which a hazard can bemeans such as adopting even stronger materials to enablesafely avoided by swerving in an emergency) of 92.5 km/h,

SUBARU vehicles to more effectively respond to more severe

compared to 84.5 km/h for current models, a level ofcollisions expected in the future.

performance that rivals high-end sports cars.

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SUBARU’s Concept of Environmental Technologies
SUBARU will comply with local environmental
regulations by combining significant
efficiency gains for internal combustion
engines with electrification.

size automakers, including SUBARU, in 2018. We plan to

To improve gas mileage and reduce CO2 emissions, SUBARU is

models, but rather to introduce PHEV and EV powertrains tomaking further improvements to the current direct-injection

existing SUBARU models to take advantage of their individuality

engine and engaging in development in preparation forand driving characteristics. In this way, we will deliver SUBARU’s

introducing a newly designed turbo engine.

quintessential “Enjoyment and Peace of Mind” even in the era of

introduce plug-in hybrids (PHEV) in 2018 to coincide with thisregulatory change and also plan to introduce electric vehicles(EV) in 2021.
Our basic policy is not to introduce dedicated PHEV and EV

In the key U.S. market, the scope of the Zero Emission

eco-friendly cars.

Vehicle (ZEV) Regulations will be expanded to include medium-

SUBARU’s Concept of Automated Driving Technology
SUBARU aims not to replace human drivers
with cars that drive themselves, but topursue the complete elimination of traffic
accidents by further evolving the EyeSight
driver assist system.

by automatically controlling acceleration, braking, and steering.
The combined use of information on lane markings andpreceding vehicles captured using SUBARU’s proprietarystereo camera technology realizes consistent operation in awide range of real-world settings. Furthermore, in 2020 we plan
to implement advanced driving assistance by adding radar,

In 2017, SUBARU will introduce a version of the EyeSight

digital maps, and other features to EyeSight to expand thedriving assist system equipped with the new Touring Assist

scope of driving situations subject to automatic control tofunction. Touring Assist extends the range of speeds at which

include lane changing and rounding curves.

Lane Tracing Control can operate to the entire speed range

At SUBARU, we will further enhance the accident avoidance(previously 60 km/h and above), adds automated steering that

performance of SUBARU cars by prioritizing development offollows the preceding vehicle in the same lane, and, by

driver assist functions that target such situations in which

combining this new feature with Adaptive Cruise Control,

accidents are likely to occur.

substantially reduces the driver burden on expressways driving

2017: Addition of the Touring Assist function

2020: Further evolutionl Extension of the operating range of speeds of Lane
Tracing Control(From a minimum of 60 km/h to any speed)l Further reduction in driver burden through expansion of
the scope of driving situations subject to automatic
control to include lane changes and rounding curves(Realized with minimum addition of devices)l Substantial reduction in the burden of driving throughautomatic control of handling, acceleration, and braking
over the entire vehicle speed range
EyeSight
Stereo cameras

EyeSight
Stereo cameras

MaplocatorRadar

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Digital maps
GPS

Radar

Corporate Governance

Front row, from the left: Takeshi Tachimori, Jun Kondo, Yasuyuki Yoshinaga, Masahiro Kasai
Back row, from the left: Yoshinori Komamura, Toshiaki Okada, Yoichi Kato, Shigehiro Aoyama

Directors of the Board
Jun Kondo

Yasuyuki Yoshinaga

Takeshi Tachimori

Director of the Board
ChairmanCQO (Chief Quality Officer)
Apr. 1976 Joined the Company
Apr. 1999 General Manager of 2nd Production Department,
Gunma Plant
Jun. 2003 Corporate Vice President, Chief General Manager of
SUBARU Manufacturing Division and Chief General Manager ofGunma Plant
May 2004 Corporate Vice President, Chief General Manager of
SUBARU Cost Planning & Management Division andGeneral Manager of Cost Planning Department
Jun. 2004 Corporate Senior Vice President, Chief General Manager of
SUBARU Cost Planning & Management DivisionJun. 2006 Corporate Senior Vice President, Chief General Manager of
SUBARU Cost Planning & Management Division andSenior General Manager of SUBARU Purchasing Division
Apr. 2007 Corporate Senior Vice President, Chief General Manager ofStrategy Development Division and Chief General Manager of
SUBARU Cost Planning & Management DivisionJun. 2008 Director of the Board and Corporate Executive Vice President,
Chief General Manager of Strategy Development Division
Apr. 2009 Director of the Board and Corporate Executive Vice President
Jun. 2011 Representative Director of the Board and Deputy President
Jun. 2017 Director of the Board and Chairman(to the present)

Representative Director of the Board
President
CEO (Chief Executive Officer)
Apr. 1977 Joined the Company
Oct. 1999 General Manager of Sales Planning Department,
Domestic Sales Division
Apr. 2005 Corporate Vice President, Senior General Manager ofStrategy Development Division and General Manager ofCorporate Planning Department
Jun. 2006 Corporate Vice President, Chief General Manager ofStrategy Development Division
Apr. 2007 Corporate Vice President, Chief General Manager of
SUBARU Japan Sales & Marketing Division and General
Manager of Sales Promotion Department
Jun. 2007 Corporate Senior Vice President, Chief General Manager of
SUBARU Japan Sales & Marketing DivisionJun. 2009 Director of the Board and Corporate Executive Vice President,
Chief General Manager of SUBARU Japan Sales & Marketing
Division
Jun. 2011 Representative Director of the Board, President and COO
Jun. 2012 Representative Director of the Board, President and CEO(to the present)

Representative Director of the Board
Corporate Executive Vice President
CTO (Chief Technology Officer)
Apr. 1977 Joined the Company
Jul. 2000 General Manager of Total Vehicle Performance Integration
Department, SUBARU Engineering DivisionJun. 2006 Corporate Vice President, Senior Project General Manager of
SUBARU Product & Portfolio Planning Division
Apr. 2009 Corporate Vice President, Chief General Manager andSenior Project General Manager of SUBARU Product &Portfolio Planning Division, President, SUBARU Tecnica
International Inc.
Apr. 2010 Corporate Senior Vice President, Chief General Manager of
SUBARU Product & Portfolio Planning Division
Apr. 2011 Corporate Senior Vice President, Chairman, President & CEO of
SUBARU of America, Inc. (SOA)
Jun. 2011 Corporate Senior Vice President, Chief General Manager of
SUBARU Overseas Sales & Marketing Division 1,
Chairman, President & CEO of SUBARU of America, Inc. (SOA)
Apr. 2013 Corporate Executive Vice President, Chief General Manager of
SUBARU Overseas Sales & Marketing Division 1,
Chairman & CEO of SUBARU of America, Inc. (SOA)
Jun. 2013 Director of the Board and Corporate Executive Vice President,
Chief General Manager of SUBARU Overseas Sales & Marketing
Division 1, Chairman & CEO of SUBARU of America, Inc. (SOA)
Apr. 2014 Director of the Board and Corporate Executive Vice President,
Chief General Manager of SUBARU Global Marketing Division
Apr. 2017 Director of the Board and Corporate Executive Vice President
Jun. 2017 Representative Director of the Board and Corporate Executive
Vice President(to the present)

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Masahiro Kasai
Director of the Board
Corporate Executive Vice President
Apr. 1978 Joined the Company
Apr. 2000 Staff General Manager of Production Management Department,
Corporate Planning DivisionJun. 2007 Corporate Vice President, President, SUBARU of
Indiana Automotive, Inc. (SIA)
Apr. 2009 Corporate Vice President, Chief General Manager of
SUBARU Manufacturing Division and Chief General Manager ofGunma Plant
Apr. 2010 Corporate Senior Vice President, Chief General Manager of
SUBARU Manufacturing Division and Chief General Manager ofGunma Plant
Apr. 2014 Corporate Executive Vice President, Chief General Manager of
SUBARU Purchasing DivisionJun. 2015 Director of the Board and Corporate Executive Vice President,
Chief General Manager of SUBARU Purchasing Division
Apr. 2016 Director of the Board and Corporate Executive Vice President,
President of Industrial Products Company
Oct. 2016 Director of the Board and Corporate Executive Vice President,
Chief General Manager of Industrial Products Division(to the present)

Toshiaki Okada
Director of the Board
Corporate Executive Vice President
CFO (Chief Financial Officer)
Apr. 1984 Joined the Company
Oct. 2004 General Manager in charge of Sales Planning Department andManager of 1st Planning Section, SUBARU Marketing Division
Apr. 2013 Corporate Vice President, General Manager ofCorporate Planning Department
Apr. 2015 Corporate Senior Vice President, General Manager ofCorporate Planning Department
Apr. 2017 Corporate Executive Vice President
Jun. 2017 Director of the Board and Corporate Executive Vice President(to the present)

Auditors

Akira Mabuchi

Shuzo Haimoto

Standing Corporate Auditor
Apr. 1979 Joined the Company
Apr. 2005 Corporate Vice President, Senior General Manager of
SUBARU Engineering Division and General Manager ofEngineering Administration Department
Jun. 2007 Corporate Senior Vice President, Chief General Manager
of SUBARU Engineering Division
Apr. 2009 Corporate Senior Vice President, Chief General Manager
of Strategy Development DivisionJun. 2010 Director of the Board and Corporate Executive Vice
President, Chief General Manager of Strategy
Development DivisionJun. 2011 Director of the Board and Corporate Executive Vice
President
Oct. 2011 Director of the Board and Corporate Executive Vice
President, General Manager of China Project Office
Apr. 2015 Director of the Board and Corporate Executive Vice
President
Jun. 2015 Standing Corporate Auditor of the Company (to the present)

Standing Corporate Auditor
Apr. 1978 Joined The Industrial Bank of Japan, Ltd.
Mar. 2006 Executive Officer, General Manager of Human Resources,
Mizuho Financial Group, Inc.
Apr. 2007 Executive Managing Director, Mizuho Bank, Ltd.
Jun. 2010 Corporate Auditor (full-time), Mizuho Financial Group, Inc.
Jun. 2011 Corporate Executive Vice President of the Company
Apr. 2012 Corporate Executive Vice President, General Manager ofBusiness Planning Department of the Company
Apr. 2013 Corporate Executive Vice President, General Manager ofBusiness Planning Department, President of Industrial
Products Company of the Company
Apr. 2014 Corporate Executive Vice President, President of Industrial
Products Company of the Company
Apr. 2016 Corporate Executive Vice President
Jun. 2016 Standing Corporate Auditor of the Company (to the present)

Shinichi Mita

Yasuyuki Abe

Outside Corporate Auditor
Apr. 1974 Joined Kao Soap Co., Ltd. (current Kao Corporation)
Jun. 2004 Executive Officer, Global Accounting and Finance, Kao
Corporation
Jun. 2006 Executive Officer, Kao Corporation
Jun. 2015 Corporate Auditor of the Company (to the present)

Outside Corporate Auditor
Apr. 1977 Joined Sumitomo Corporation
Jun. 2002 President & CEO, Sumisho Electronics Co., Ltd.
Apr. 2005 President & CEO, Sumisho Computer Systems
Corporation (currently SCSK Corporation)
Jun. 2009 Managing Executive Officer, Member of the Board,
General Manager, Financial & Logistics Business Unit,
Sumitomo Corporation
Apr. 2010 Managing Executive Officer, Member of the Board,
General Manager of New Industry Development &Cross-function Business Unit, Sumitomo Corporation
Apr. 2011 Senior Managing Executive Officer, Member of the Board,
General Manager, New Industry Development &Cross-function Business Unit, General Manager ofFinancial Services Division, Sumitomo Corporation
Apr. 2013 Senior Managing Executive Officer, Member of the Board,
General Manager, Corporate Planning & Coordination
Group, Sumitomo Corporation
Jun. 2015 Advisor, Sumitomo Corporation (to the present)
Jun. 2016 Corporate Auditor of the Company (to the present)

Yoichi Kato
Director of the Board
Corporate Senior Vice President
Apr. 1983 Joined the Ministry of International Trade and Industry,
Japanese government (present Ministry of Economy,
Trade and Industry)
Jul. 2010 Director-General, Chubu Bureau of Economy, Trade and Industry,
Ministry of Economy, Trade and Industry
Aug. 2011 Director-General, Business Environment Department, Small andMedium Enterprise Agency, Ministry of Economy, Trade and Industry
Sep. 2012 Councilor, Cabinet Secretariat
Dec. 2012 Deputy Director-General for Policy Evaluation, Minister’s
Secretariat, Ministry of Economy, Trade and Industry
Jun. 2013 Director-General for Regional Economic and Industrial Policy,
Ministry of Economy, Trade and Industry
Oct. 2014 Corporate Vice President of the Company
Apr. 2015 Corporate Vice President, General Manager ofExternal Relations Department
Apr. 2016 Corporate Senior Vice President, General Manager ofExternal Relations Department
Apr. 2017 Corporate Senior Vice President, General Manager ofExternal Relations Department and Chief General Manager ofCorporate Administration DivisionJun. 2017 Director of the Board and Corporate Senior Vice President(to the present)

Yoshinori Komamura
Outside Director
Apr. 1970 Joined Komatsu Ltd.
Jun. 1999 Group CEO & Managing Director, Komatsu Europe International N.V.
Jun. 2005 Director and Senior Executive Officer, President, Construction
and Mining Equipment Marketing Division, Komatsu Ltd.
Apr. 2007 Director and Senior Executive Officer, President, Construction
and Mining Equipment Marketing Division, Komatsu Ltd.
Jun. 2010 Representative Director and Executive Vice President,
Komatsu Ltd.
Jun. 2013 Senior Adviser, Komatsu Ltd.
Jun. 2015 Outside Director of the Company (to the present)
Jun. 2016 Adviser, Komatsu Ltd.
(to the present)

Shigehiro Aoyama
Outside Director
Apr. 1969 Joined Suntory Limited
Mar. 1994 Director, Manager of the Board, Spirits Division, Suntory Limited
Mar. 1999 Managing Director, Member of the Board, Sales Development &Marketing Promotion Division, Suntory Limited
Mar. 2001 Managing Director, Member of the Board,
Corporate Planning Division, Suntory Limited
Mar. 2003 Senior Managing Director, Member of the Board,
Corporate Planning Division, Suntory Limited
Sep. 2005 Senior Managing Director, Member of the Board,
President of Spirits, Wine & Beer Company, Suntory Limited
Mar. 2006 Executive Vice President, Member of the Board,
President of Spirits, Wine & Beer Company, Suntory Limited
Feb. 2009 Executive Vice President, COO, Member of the Board,
Suntory Holdings Limited
Mar. 2010 Executive Vice President, COO, Member of the Board,
Representative Director, Suntory Holdings Limited
Oct. 2014 Vice Chairman of the Board, Representative Director,
Suntory Holdings Limited
Apr. 2015 Supreme Advisor, Suntory Holdings Limited (to the present)
Jun. 2016 Outside Director of the Company(to the present)

Executive Officers
Corporate Executive Vice Presidents

Corporate Senior Vice Presidents

Corporate Vice Presidents

Tomomi Nakamura
Kazuo Hosoya
Masaki Okawara

Yasunobu Nogai
Satoshi Maeda
Tetsuo Onuki
Katsuyuki Mizuma
Hideaki Matsuki
Hiromi Tsutsumi
Shoichiro Tozuka
Toshiaki Tamegai
Takuji Dai
Fumiaki Hayata

Hiroki Kurihara
Masayuki Uchida
Atsushi Osaki
Tatsuro Kobayashi
Katsuo Saito
Yasuhiro Hamanaka
Eiji Ogino
Yasushi Nagae
Jinya Shoji

CIO (Chief Information Officer)

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Corporate Governance
Our Basic Approach to Corporate Governance
SUBARU works on the enhancement of corporate governance as one of the top priorities of management in order to gain thesatisfaction and trust of all of our stakeholders by achieving sustainable growth and improving our corporate value in the medium andlong term aiming to be “A Compelling Company with Strong Market Presence” based on the “Customers Come First” principle under
the corporate philosophy outlined below.
We aim to achieve efficient management by clearly separating management decision-making and oversight from business execution
and increasing the speed of decision-making. Furthermore, through monitoring of business operations and advice provided by outside
officers, we ensure appropriate management decision-making, oversight and business execution, and work to improve compliance andthe risk management system. To increase management transparency, we provide timely and appropriate disclosure of information.
Corporate Philosophy
1. We strive to create advanced technology on an ongoing basis and provide consumers with distinctive products with the highest levelof quality and customer satisfaction.
2. We aim to continuously promote harmony between people, society, and the environment while contributing to the prosperity of society.
3. We look to the future with a global perspective and aim to foster a vibrant, progressive company.

Company Organizational Bodies
SUBARU has adopted a Board of Corporate Auditors system, and the Board of Directors and the Board of Corporate Auditors perform
decision making, and oversight and auditing for the execution of important business operations. The Board of Directors is composed ofeight directors, two of whom are highly independent outside directors to further strengthen governance. The Board of Corporate Auditors
is composed of four corporate auditors, two of whom are outside corporate auditors to provide objective oversight of management.
With regard to the system for the execution of business operations, important issues that require consultation with the Board of
Directors are thoroughly discussed at the Executive Management Board Meeting, which deliberates on company-wide management
strategy and the execution of key business operations. To clearly define responsibilities and increase the speed of business execution,
we have adopted an executive officer system and established an Executive Meeting as a decision-making body for each businessdivision and introduced an in-house company system for the Aerospace Company.

System of Corporate Governance
General Meeting of Shareholders

Board of Corporate Auditors: 4
Corporate auditors: 2

Accounting Auditors

Collaboration

Outside corporate auditors: 2

Informationexchangewith outside
officers

Executive Nomination Meeting

Directors: 6

Executive Compensation Meeting

Outside directors: 2

Decision making

Reporting
Collaboration
Collaboration

Board of Directors: 8

Internal Audit
Department
Auditing

Auditing

Corporate
Vice
Presidents

Reporting
ReportingExecutive Nomination Meeting and Executive
Compensation Meeting composition
Representative director, director in charge of
Secretarial Office, outside directors

Submission
and reporting

President

Chairperson of
CSR committee
ReportingExecutive Management Board Meeting

Instructions and oversight

ReportingElection anddismissal

Shared Corporate Operations Departments at HQ
SUBARU Automobiles Division

Executive Meeting

Aerospace Company

Executive MeetingGroup companies

Submission andreporting of importantmatters
Policy instructions
Approval of plans, etc.
Plan proposal reports,
etc.

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CSR Committee
Quality Improvement Committee
Central Safety and Health Committee
Environmental Committee
Compliance Committee
Social Contribution Committee
Corporate Governance Planning
Committee
etc.

Decision making andoversight functions

Election and dismissal

Business operations execution function

Election and dismissal
Auditing

Election anddismissal

Development of Internal Control System
SUBARU resolved its basic policy on the development of a system to ensure that the execution of the duties of the directors complies
with laws and regulations and the Articles of Incorporation as well as the other systems stipulated by ordinance of Japan’s Ministry ofJustice as necessary to ensure the proper operation of a stock company at a meeting of the Board of Directors in April 2015.

Status of Development of Risk Management System
At SUBARU, the Corporate Planning Department, which plays a central role in the common functions of each business, and othercompany-wide shared corporate operations departments maintain close links with each department and company to enhance risk
management. In addition, the Audit Department performs planned audits of each department and Group company. SUBARU has also
created and operates a system and organization to ensure compliance, which is the foundation of risk management, in order to assist
with the development of the internal control system.
First, we have established the Compliance Committee, which deliberates, discusses, determines, exchanges information, andliaises on important compliance issues to promote the implementation of company-wide compliance. In addition, we have assigned acompliance officer and compliance staff for each department and company to organize a system that meticulously implementscompliance at each workplace. We also systematically provide education and training for officers and employees on a routine basis
as well as raising awareness about compliance through such means as in-house publications as necessary.
Furthermore, in order to promote the implementation of compliance in the SUBARU Group, we conduct education and training
and provide information through in-house publications for Group companies in addition to raising the effectiveness of these activities
through the participation of Group companies in the SUBARU internal reporting system (Compliance Hotline).

Status of Internal Audits and Auditing by Corporate Auditors
SUBARU’s standing corporate auditors (including the standing outside corporate auditors), attend meetings of the Board of Directors
and other important meetings, visit work sites, investigate subsidiaries, hear opinions from the internal audit department, and audit theexecution of duties by the directors and others based on the audit policy and audit plan established by the Board of Corporate
Auditors. The non-standing outside corporate auditors attend meetings of the Board of Directors and other important meetings, hear
opinions from the internal audit department and the standing corporate auditors, and audit the execution of duties by the directors
and others based on the audit policy and audit plan established by the Board of Corporate Auditors.
SUBARU has established the Audit Department as an internal auditing organization to implement planned audits of the executionof business operations in each in-house department as well as Group companies inside and outside Japan. At the beginning of the
fiscal year, the department coordinates its internal audit plan for the fiscal year with the Board of Corporate Auditors’ policy in advance.
The Audit Department reports the results of all internal audits to the corporate auditors and reports on the status of internal audit
activities and exchanges opinions with them on a monthly basis to achieve collaboration. The Audit Department also endeavors tostrengthen the auditing function in conjunction with audits by the Accounting Auditor.

Evaluation of Internal Control System for Financial ReportingAn evaluation of the internal control system related to financial reporting in connection with the internal control reporting system basedon Japan’s Financial Instruments and Exchange Act is conducted using the final date of the fiscal year of the consolidated financial
statements as the reference date. The evaluation conforms to the standards for evaluation of internal control related to financial
reporting that are generally accepted to be fair and reasonable.
The President & Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) evaluated the status of the development of theinternal control system related to financial reporting as of March 31, 2017 and affirmed that it has been established properly andfunctions effectively and issued an internal control report audited by the Accounting Auditors to that effect.

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Corporate Governance
Executive Compensation
Total compensation (millions of yen)Classification

Directors

Corporate auditors(excluding outside directors)(excluding outside corporate auditors)

NumberBasic compensation
Fixed amountPerformance based amount

6

283

240

523

2

49

0

49

Outside executive officers

7

52

0

52

Total

15

383

240

624

* The above table includes one director and two auditors who resigned before the last day of the fiscal year under review. At the end of the fiscal year under review,
there were 8 directors (including 2 outside directors) and 4 auditors (including 2 outside auditors).

By a resolution passed at the 85th Ordinary General Meeting of Shareholders, held on June 28, 2016, the maximum total amount ofannual compensation for directors is 1.2 billion yen (including 200 million yen for outside directors). By resolution of the Board of
Directors following discussion at the Executive Compensation Meeting, compensation for directors consists of 1) basic compensation(a fixed portion, with the specific amount determined based on position, taking into consideration the business environment and otherfactors), 2) short-term performance-linked compensation (a performance-linked portion, with the specific amount determined basedon consolidated ordinary profit for the current business year, taking into consideration improvement in ROE and the shareholders’equity ratio, personnel development, and the business environment), and 3) long-term incentives (compensation to grant restricted
stock for the purpose of providing an incentive for sustained improvement of the Company’s corporate value and further value sharing
with the shareholders).* The level of each compensation type is set according to official responsibilities and status as inside or outside
director utilizing survey data from external specialists. The maximum amount of long-term incentives is 200 million yen per year.
Outside directors are not eligible for short-term performance linked compensation or long-term incentives.
By a resolution passed at the 75th Ordinary General Meeting of Shareholders, held on June 27, 2006, the maximum total amountof annual compensation for corporate auditors is 100 million yen. An amount determined through discussion among the corporate
auditors based on position, taking into consideration the business environment and other factors, is paid as basic compensation forcorporate auditors.
* The Board of Directors resolved at a meeting held on April 28, 2017 to introduce a restricted stock compensation plan, and a resolution to pay compensation to
grant restricted stock to directors was passed at the 86th Ordinary General Meeting of Shareholders, held on June 23, 2017.

Analysis and Evaluation of the Effectiveness of the Board of Directors
In accordance with the Corporate Governance Guidelines, the Company’s Board of Directors analyzes and evaluates the effectivenessof the Board and considers measures to improve any issues identified. In FY2016, the Board performed analysis and evaluation focusedon confirmation of measures to address issues recognized in the previous year’s evaluation. A report on the analysis results follows.
Evaluation and Analysis Methods• Timing of implementation: March 2017
• Respondents: Directors and corporate auditors (12 in total, including outside directors)• Evaluation format: Self-evaluation using a questionnaire prepared by a third-party organization (same as last year)• Question format: Four-stage self-evaluation using questions concerning operation of the Board of Directors and questions concerning
Board of Directors relationships and open answers about matters necessary for further improving the Board’s strong
points and effectiveness in a questionnaire submitted directly to a third-party organization• Question content: Basically the same as last year to enable comparison with the prior-year results, with a question for inside directors
concerning successor development added• Evaluation and analysis: Feedback of results compiled by the third party to all directors and corporate auditors for discussion andverification by the Board of Directors

An overview of the analysis results is as follows.
l The Board of Directors has an appropriate size and sufficient diversity for debate. The number, content, and amount of deliberation
on proposals brought forth based on the Board of Directors’ Proposal Criteria are appropriate and the Board’s debate is open
and unencumbered.

CORPORATION
37 SUBARU
ANNUAL REPORT 2017l Board of Directors members understand the specialized expertise of each member, respect fellow members, and strive tounderstand, rather than exclude, opinions and values that do not agree with their own.
In light of the above findings, the Company’s Board of Directors concluded that the Board was effective in FY2016, confirming that theBoard is fulfilling the roles and responsibilities set out in the Corporate Governance Code in terms of both its decision-making andoversight and that improvement has been made with respect to the issues identified in last year’s results: enhancement of information
provision and explanations to the outside officers, information sharing in IR activities, and activation of strategic debate. The Board of
Directors will continue to perform effectiveness assessments to improve Board functions and continuously enhance corporate value.

Reasons for Appointing the Outside Officers and Status of Principal Activities
Name

Yoshinori
Komamura

Independent
Officer
Status1

Reasons for Appointing and Status of Principal Activities
in the Year under Reviewp

Mr. Yoshinori Komamura had served two years as an independent outside
director of the Company at the conclusion of the 86th Ordinary General
Meeting of Shareholders. During his tenure, he has drawn on his career inmanagement as a representative director of Komatsu Ltd. to provide
valuable advice on the management of the Company based on his
abundant experience and extensive knowledge as a business manager
and his deep insight into corporate social responsibility. The Company
has appointed Mr. Komamura with the expectation that he will contributeto maintaining and improving management transparency and soundness
and strengthening corporate governance by continuing to provide advice
on all aspects of the Company’s management from an independent
perspective as an outside director.
Mr. Komamura attended all fifteen meetings of the Board of Directors
held during FY2016 and fulfilled his role as a sound advisor on the
Company’s management. He also served as a member of the Executive
Nomination Meeting and Executive Compensation Meeting.

p

Mr. Shigehiro Aoyama had served one year as an independent outside
director of the Company at the conclusion of the 86th Ordinary General
Meeting of Shareholders. During his tenure, he has drawn on his career inmanagement as a representative director of Suntory Holdings Limited toprovide valuable advice on the management of the Company based on
his abundant experience and extensive knowledge as a business
manager and his deep insight into corporate social responsibility. The
Company has appointed Mr. Aoyama with the expectation that he willcontribute to maintaining and improving management transparency andsoundness and strengthening corporate governance by continuing toprovide advice on all aspects of the Company’s management from an
independent perspective as an outside director.
Mr. Aoyama attended eleven of twelve meetings of the Board of
Directors held from the time he assumed office on June 28, 2016 until theend of FY2016 and fulfilled his role as a sound advisor on the Company’s
management. He also served as a member of the Executive Nomination
Meeting and Executive Compensation Meeting.

Outsidedirectors

Shigehiro
AoyamaShinichiMitapMr. Shinichi Mita had served two years as an independent outside
corporate auditor of the Company at the conclusion of the 86th Ordinary
General Meeting of Shareholders. The Company has appointed him in the
belief that he is well qualified as an outside corporate auditor since he has
management experience and knowledge in both oversight and businessexecution, and particularly extensive experience and insight into
accounting and finance in corporate activities, gained as a director andexecutive officer of Kao Corporation.
Mr. Mita attended all fifteen meetings of the Board of Directors and all
twelve meetings of the Board of Corporate Auditors held during FY2016
and fully performed his auditing function.

p

Mr. Yasuyuki Abe had served one year as an independent outside
corporate auditor of the Company at the conclusion of the 86th Ordinary
General Meeting of Shareholders. The Company has appointed him in the
belief that he is well qualified as an outside corporate auditor since he hasa management career in both oversight and business execution andabundant experience and extensive knowledge as a business manager
gained as a senior managing executive officer and member of the boardof Sumitomo Corporation.
Mr. Abe attended twelve meetings of the Board of Directors and ten
meetings of the Board of Corporate Auditors held from the time heassumed office on June 28, 2016 until the end of FY2016 and fully
performed his auditing function.

Outsidecorporate
auditors
YasuyukiAbe

Significant Concurrent Positions2Adviser, Komatsu Ltd.
Member of the Board, Institute for Strategic
Leadership (ISL)

Supreme Advisor, Suntory Holdings Limited
External Director, Takamatsu Construction
Group Co., Ltd.
President, The Distribution Economics
Institute of Japan
Director, Japan Marketing Association

Adviser, Mizuho Capital Partners Co., Ltd.
Member of the Board, Japan Association for
Chief Financial Officers (JACFO)

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

1 Outside directors and outside corporate auditors unlikely to have conflicts of interest with general shareholders as stipulated by the Tokyo Stock Exchange
2 As of March 31, 2017
* For the Corporate Governance Guidelines and the Corporate Governance Report, please visit the Corporate Governance page of the SUBARU website.
(https://www.subaru.co.jp/en/outline/governance.html)

CORPORATION
38 SUBARU
ANNUAL REPORT 2017

Corporate Governance
Messages from the Outside Directors

Yoshinori Komamura

My role as an outside director

Outside Director

As I see it, my role as an outside director can be broadly divided into two parts.
1. With the objective of purely maximizing corporate value from the standpoint of an outside
director unconstrained by internal conventional wisdom or human relationships, take partin meetings of the Board of Directors with the aim of ensuring execution of balanced
management that is fair to all stakeholders. I believe that this leads to strengthening andenhancement of SUBARU’s corporate governance.
2. Contribute to SUBARU’s sustained growth by offering required advice from time to time
based on global business experience and human assets.

How does discussion take place at Board of Directors meetings?
At meetings of the Board of Directors, deliberation and resolution and highly serious
discussion and rapid decision-making concerning reports on important matters take place inaccordance with the Board of Directors Agenda Criteria. For SUBARU to remain a highquality company, it must continue to achieve high quality as well as high levels in the areas ofsafety, the environment, and compliance. From my standpoint as an outside director, I wantto actively speak out and contribute as much as possible to SUBARU’s growth. I respect thefact that SUBARU’s Board of Directors has the flexibility to forthrightly accept the comments
and opinions of outside directors and the tenacity to seriously discuss each and every one.

The support system for outside directors and sufficiency of support
Outside directors are provided sufficiently detailed Board of Directors’ materials equivalent tothose available to inside directors. We are also provided with sufficient opportunities tounderstand company operations, such as participation in important internal meetings, newproduct and technology presentations, and test-ride events and visits to plants, dealers, andother sites. The support system for outside directors is excellent.

Business challenges SUBARU is likely to face in the future
I think that the greatest challenge will be to maintain and develop high-value-added
management even if demand decreases in Japan, the U.S., and other key markets. To
achieve this, even if profitability deteriorates temporarily, SUBARU must have the determination
to make high quality the top priority and continue with high-quality, concentrated investment
in R&D, production capacity, human resource development, and quality assurance. I am
convinced that high-quality concentrated investment is certain to result in outcomes that willcontribute to SUBARU’s future business. Some of these may be new outcomes in businessfields beyond SUBARU’s current business domains and portfolio. I want to see SUBARU
flexibly adopt these investment outcomes and continue to practice high-value-added
management.
I think that the phrase “Nothing is impossible” is well suited to SUBARU.

CORPORATION
39 SUBARU
ANNUAL REPORT 2017

Shigehiro Aoyama

My role as an outside director

Outside Director

Outside directors are expected to engage in management oversight, provide multifaceted
advice on improving business performance, and offer advice on scandal prevention and risk
avoidance. We must also make judgments from the perspective of customers, shareholders,and other external stakeholders and perform the role of reforming company logic that has
become entrenched in internal logic.
I will utilize my experience in business planning, financial accounting, and marketing tooffer advice at meetings of the Board of Directors and fulfill my role of overseeing andmentoring the management team.

How does discussion take place at Board of Directors meetings?
Frank discussion takes place. The outside directors are provided many opportunities to
speak, and the meeting management of the chairman of the Board of Directors is excellent.
Above all, discussions about production and technology, the most important corecompetences of SUBARU, take place in great detail.
The most important point in corporate governance today is careful communication
between inside and outside officers, and this is another area in which SUBARU’s Board of
Directors excels. To further enhance discussion by the Board of Directors, I would likedeliberation to extend to discussion of total optimization of business, not begin and end withdiscussion of individual optimization.

The support system for outside directors and sufficiency of support
Information provision from the Company to the outside directors is carried out in a timely
manner. The system for providing support from internal organizations is also sufficient.
Balanced information about the status of business execution is always available (joint
meetings, etc.), and information sharing is sufficient to enable the outside directors toparticipate in discussion at Board of Directors meetings.

Business challenges SUBARU is likely to face in the future
SUBARU has achieved rapid growth and produced excellent business results in recent years.
The Company currently faces an historic transition in automotive industry technologies and isconfronted with the major challenge of how to respond. Considering SUBARU’s management
resources, it is necessary to enhance the SUBARU Brand with surgical precision by means
such as practicing selection and concentration, pursuing differentiation, and enhancing
added value, not attempt an omnidirectional response. The most important thing is corporate
brand building in preparation for a new era.
To accomplish this, it is important to approach corporate management with a sense ofurgency and alacrity, and further innovation in the management structure to enable SUBARU
to undertake sustained growth will likely be necessary.

CORPORATION
40 SUBARU
ANNUAL REPORT 2017

CSR at SUBARU

Achieving a Sustainable Society
The SUBARU Group engages in CSR activities aimed at contributing to the creation of abetter society and environment through our core business to achieve a sustainable society.

Our Approach to CSR
Challenges for society abound in Japan and overseas, such as global warming, human rights issues, and an aging and declining
population, and there are rising expectations that corporations will help resolve them. The SUBARU Group’s business domain
also requires initiatives on diverse themes such as reducing environmental impact, preventing traffic accidents, and alleviating
traffic congestion.
Therefore, naturally we develop, manufacture, and sell products with outstanding safety and environmental performance andquality, but as a corporate citizen we also work on CSR activities to meet the needs of society and address social challenges in goodfaith. We reviewed how we can contribute to society through our business and how to meet the expectations and needs of our
stakeholders amid a constantly changing social environment. As a result, we have reaffirmed that the Eight Action Items we haveestablished as the categories for our CSR activities to date form the basis for all of our business activities.
Going forward, we will deliver “Enjoyment and Peace of Mind” to all of our stakeholders, including our customers, as a compellingcompany with strong market presence in addition to enhancing the corporate value of the SUBARU Group and contributing to thecreation of a more affluent and sustainable society by ensuring that our business activities are based on the Eight CSR Action Items.

Corporate Code of Conduct
SUBARU CORPORATION sets down a corporate code of
conduct to comply with laws and regulations and to fulfill its
social responsibilities based on its corporate philosophy (SeeCorporate Code of Conduct
1. We develop and provide creative products and services while
paying sufficient attention to the environment and safety.

page 35). We will continue to strive to become a company

2. We respect the rights and characteristics of individuals.

loved by all and contribute to making society more affluent by

3. We promote harmony with society and contribute to therespecting individuals and the corporate code of conduct andacting on the same sense of values.

prosperity of society.
4. We meet social norms and act honestly and fairly.
5. We maintain global perspective and aim to be in harmony
with international society.

CSR Policy
The CSR Policy was revised with the approval of committees
related to CSR to clearly indicate 1) the fundamental aspect of
CSR focused on observance of the Corporate Code of Conductand other vital rules, and 2) the strategic aspect of CSR focusedon contribution to solving social issues as a corporate citizen
through business activities, which requires the involvement of
the whole corporate organization for a company which makes

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

goods favored by customers.
Our CSR activities are the mission of the SUBARU Group tocontribute to the sustainable development of society throughglobal business activities with the focus on the relationships
with our various stakeholders.

CORPORATION
41 SUBARU
ANNUAL REPORT 2017

The Eight CSR Action Items
SUBARU has set eight CSR action items to encourage individual employees to conduct CSR activities in an organizational manner aspart of their business operations. For each of the eight categories, we have defined the specific CSR activities to be conducted by
employees to meet requests from society.

Customers
and Products

ComplianceCorporate Governance

Provide society useful and optimally safe
products and services that earn customers’satisfaction and confidence.

Respect laws and moral standards; engage in
fair, transparent, and free competition; andconduct business equitably. Honor
confidentiality, carefully protecting and managing
data, particularly personal information.

Make it a key responsibility of management toensure that appropriate CSR policies are
adopted throughout the corporate group, andundertake appropriate initiatives to address any
emergencies that may arise.

Environment

Social Contribution

Address environmental issues proactively inrecognition of their importance for all mankind.

Maintain proactive social action programs
as a good corporate citizen.

Information Disclosure

Procurement

Employees

Communicate transparently with stockholders
and other stakeholders, disclosing corporate
information proactively and fairly.

Conduct procurement appropriately andwork with suppliers to promote corporatesocial responsibility.

Respect the diversity, individuality, andpersonality of employees and ensure thatwork environments are as safe andcomfortable as possible.

CSR Promotion System

Organization Chart

Previously, we had promoted CSR activities under the

The Eight
CSR Action Items

supervision of a CSR and Environmental Committee. In
FY2010, the CSR Committee was newly establishedand headed by top management to more clearly
identify and promote more systematically CSR-related

Customers
and Products

Quality Improvement Committee
All Departments

Compliance

Compliance Committee
Export Control Committee

Corporate GovernanceCorporate Governance Planning Committee
Corporate Planning Department
General Administration Department
Secretarial OfficeEnvironment

Environmental Committee

Social Contribution

Social Contribution Committee

Information Disclosure

Corporate Communications Department
General Administration Department

Procurement

Procurement Committee

Employees

Central Health and Safety Committee
Human Resources Department

activities in eight categories. Furthermore, in FY2017
we established the CSR & Environment Department
because of increasing societal expectations andSince FY2016, the CSR Committee has consistedof specialized committees and existing organizational
units, each of which is closely linked to any one of theeight

CSR-related

categories.

Furthermore,

CSR Committee

demands with respect to CSR and its increasing
importance in management.

allorganizational units engage in these activities acting on

Domestic

their own initiative under company-wide control. The
CSR Committee also has the North American CSR
Committee, which helps to carry out global promotion

Overseasof CSR activities.

North American CSR Committee

CORPORATION
42 SUBARU
ANNUAL REPORT 2017

CSR at SUBARU
Promotion of CSR Activities
Promoting Diversity
For our company to continue offering customers value not found in competing products, each SUBARU
employee needs to be able express his or her abilities as an individual with unique values. For this reason,
SUBARU values differences in gender, nationality, culture, and lifestyles of employees and strives to create
workplace environments in which everyone finds it easy to work. We also promote initiatives related todiversity at affiliated companies in Japan and overseas in accordance with regional characteristics and thebusiness content of each company.
Establishment of Diversity Promotion Office
We established the Diversity Promotion Office in January 2015 in order to promote diversity at SUBARU even more proactively.
Under the Diversity Promotion Office, we have designated “promoting active roles for female employees,” “employing people
with disabilities,” “planning and promoting employment of non-Japanese,” and “promoting employment of the elderly” aspriority themes. Among these themes, we have placed particular emphasis on efforts to promote active roles for female
employees. For our efforts in FY 2016, we introduced our mentor system for female managers and manager candidates tocreate training plans that support career development for female employees, and began career advancement training forfemale team leaders to systematically cultivate the next generation of female manager candidates.
SUBARU has formulated an employer action plan aimed at promoting active roles for women in accordance with the Act
on Promotion of Women’s Participation and Advancement in the Workplace. In our action plan, which is based on the
SUBARU policy of promotion through merit, based on demonstrated ability, we set a goal of increasing the number of female
managers in 2020 by at least five times the number in 2014 (from 4 to 20). In FY 2017, we will continue to implement initiatives
to achieve this target and undertake further qualitative improvement.

Promoting Work-Life Balance
SUBARU aims to create a group of highly engaged, autonomous employees, and webelieve that it is important to establish an environment that allows individuals to fully
express their unique abilities. We work on promoting diversity in work styles as wellas enhancing our programs in order to respect the diversity of our employees andhelp them to achieve work-life balance. We promote initiatives to support work-lifebalance at affiliated companies in Japan and overseas in accordance with theirregional characteristics and the business content of each company.
The Kurumin Mark

Supporting Each Employee’s Work and HouseholdTo support employees both at work and at home, SUBARU has established programs that exceed legal requirements toassist employees in balancing childcare or nursing care and work, including a childcare leave system that can be extended to
the first April after a child becomes two years old, a short work-time system available until a child commences 4th grade, anda leave or short-work time system to allow for elderly care. We promote employee awareness and utilization of these programsby conducting lectures on program details in grade-specific training and posting a Maternity Leave and Child-Rearing
Handbook on the company intranet.
In addition, in accordance with the Next Generation Education and Support Promotion Act, we have formulated andimplemented our own action plan. As a result of achieving the targets in previous action plans, we acquired Certification by
the Minister of Health, Labor and Welfare (the Kurumin Mark) three times. We will implement the fifth phase of the action plan
(April 2017 through March 2019) with the aim of receiving Platinum Kurumin certification. We will step up our support to enable
employees to pursue career advancement while balancing childcare and work.

CORPORATION
43 SUBARU
ANNUAL REPORT 2017

Message from the Environmental Committee Chair

Aiming for a Sustainable Society
On April 1, 2017, we changed our company name to Subaru Corporation. In addition,
the environmental policy was revised to become the “Subaru Environmental Policy” at thesame time as the corporate name change. The new Subaru Environmental Policy is basedon the concept that “‘the earth, the sky and nature’ are Subaru’s fields of business” andconsiders preservation of the ecosystems of our planet, in which Subaru’s automotive andaerospace industrial fields, or “the earth, the sky and nature,” are of utmost importance toensure the future sustainability of both society and our organization. We align our business

Yoichi Kato
Director of the Board

strategies to enhance these global goals in all our operations. We will strive in all of ourcorporate activities with this in mind.
Specific activities include acquisition of ISO14001 and Eco Action 21 Value Chain

Corporate Senior Vice President

certification, and also by evolving our efforts throughout the entire Subaru Group, a highly

Environmental Committee Chair

efficient environmental management adapted to the industry will be achieved throughout theentire supply chain. At the same time, the Subaru Environmental Policy focuses on initiatives
aimed at co-existence with nature. The “Subaru Forest Project” activity that we started as
one of those initiatives takes place in Subaru owned forests where forest maintenance andconservation activities are to be carried out with cooperation from local communities.
The 2017 Environmental Report focused on our efforts to address environmental issues
related to the entire corporate supply chain and product life cycles from the procurement of
raw materials to the manufacturing, distribution, marketing and selling, recycling, and disposalof products. Please read through this information and feel free to share with us your frankopinions and impressions.
We will continue to aim for a sustainable society through continuously improving corporate
values and contributing to creating a better society and environment based on our management
philosophy of aiming to be “a compelling company with a strong market presence.”* For details on CSR activities and Environmental Report 2017, please visit the CSR/Environment page of the
SUBARU website.
(https://www.subaru.co.jp/en/csr/report/)

SUBARU Environmental Policies [Established: April 1998, Revised: April 2017](SUBARU Sustainability Principles)“The earth, the sky and nature” are SUBARU’s fields of business.
With the automotive and aerospace businesses as the pillars of SUBARU’s operations, our fields of business are the earth,
the sky and nature. Preservation of the ecosystem of our planet, the earth, the sky and nature, is of utmost importance toensure the future sustainability of both society and our organization. We align our business strategy to enhance these global
goals in all of our operations.
1. We develop and deliver products to meet societal needs and contribute to the environment through advanced technologies.
By striving to create advanced technologies that put the environment and safety first, we will develop and deliver products that cancontribute to protecting the earth’s environment.
2. We focus on efforts aimed at coexistence with nature.
Together with efforts to reduce carbon-dioxide emissions in all of our operations, we will promote active engagement with nature by
stressing forest conservation.
3. We take on challenges as one through an all-SUBARU approach.
Utilizing our unique organizational character that allows us to oversee the entire supply chain, all of us together will take on thechallenges of environmental protection of our planet through an all-SUBARU approach.
* For the full text of SUBARU Environmental Policies, please visit the CSR/Environment page of the SUBARU website.
(https://www.subaru.co.jp/en/outline/Environmental_Policies.pdf)

CORPORATION
44 SUBARU
ANNUAL REPORT 2017

Consolidated Ten-Year Financial Summary
SUBARU Corporation and its consolidated subsidiaries

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) attributable to owners of parent
Comprehensive income
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Free cash flow
Net cash provided by (used in) financing activities
At year-end:
Net assets
Shareholders’ equity
Total assets
Ratio of shareholders’ equity to total assets (%)
Per share: (in yen and U.S. dollars)
Net income (loss):
Basic
DilutedNet assets
Other information:
Depreciation/amortization
Capital expenditures (addition to fixed assets)
Research and development expenses
Number of shares issued (thousands of shares)2
Number of shareholders2
Number of employees2
Parent only
Consolidated
Non-consolidated exchange rate(yen to the US dollar)
Unit sales:
Consolidated automobile unit sales(thousand units)
SUBARU vehicle unit production:
Consolidated unit production (thousand units)
Domestic
SIA

’08/3

’09/3

’10/3

’11/3

¥1,572,346
1,217,662
354,684
309,004
45,680¥1,445,790
1,164,564
281,226
287,029(5,803)¥1,428,690
1,152,763
275,927
248,577
27,350¥1,580,563
1,241,427
339,136
255,001
84,13531,906(21,517)(443)

63,214

18,481—
107,387(44,920)
62,467(45,110)(69,933)—(26,892)(72,385)(99,277)
80,449(16,450)(13,416)
176,734(62,656)
114,078(18,560)

50,32634,900138,208(51,109)
87,099(39,408)¥ 494,423
493,397
1,296,388
38.1%¥ 394,719
393,946
1,165,431
33.8%¥ 381,893
380,587
1,231,367
30.9%¥ 413,963
412,661
1,188,324
34.7%

¥

25.73
25.73
687.02¥(91.97)—505.59¥(21.11)—488.58¥64.56—
528.88¥87,164
118,869
52,020782,865
44,484¥74,036
95,15342,831
782,865
40,839¥65,78589,077
37,175
782,865
39,223¥56,062
67,37842,907
782,865
34,24011,90926,404

12,13727,65912,48327,586

12,42927,296

116

102

93

86

597

555

563

657

490
109

474
92

453
104

459
165

CORPORATION
45 SUBARU
ANNUAL REPORT 2017

(Millions of yen)(Thousands of U.S. dollars1)

’12/3

’13/3

’14/3

’15/3

’16/3

’17/3

’17/3

¥1,517,105
1,222,419
294,686
250,727
43,959¥1,912,968
1,501,809
411,159
290,748
120,411¥2,408,129
1,728,271
679,858
353,369
326,489¥2,877,913
2,017,490
860,423437,378
423,045¥3,232,258
2,187,136
1,045,122
479,533
565,589¥3,325,992
2,386,266
939,726
528,916
410,810$29,643,422
21,267,967
8,375,455
4,714,047
3,661,408

52,87993,082

328,865

392,206

619,003394,695

3,517,781

38,45344,47454,865(26,602)28,263
2,586

119,588
152,009
166,715(71,370)
95,345(60,766)

206,616
210,757
313,024(33,903)279,121(63,011)

261,873309,271
311,543(172,780)
138,763(110,546)

436,654405,703614,256(255,676)
358,580(126,190)

282,354279,352
345,442(254,252)
91,190(189,044)

2,516,524
2,489,768
3,078,806(2,266,061)
812,745(1,684,884)¥ 451,607
450,302
1,352,532
33.3%¥ 596,813
595,365
1,577,454
37.7%¥ 770,071
765,5441,888,363
40.5%¥1,030,719
1,022,417
2,199,714
46.5%¥1,349,411
1,343,732
2,592,410
51.8%¥1,464,888
1,458,664
2,762,321
52.8%$13,056,044
13,000,572
24,619,617

¥

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

559.54—
1,721.90¥

365.77—
1,902.56

$

3.26
—
16.96

¥

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

71,821
135,346
83,535
782,865
70,942¥

72,938168,338
102,373782,865
79,594¥85,653
196,616
114,215
769,175
76,471$

763,396
1,752,371
1,017,959

12,35927,123

12,71727,50913,03428,545

13,88329,774

14,234
31,151

14,70832,599

79

82

100

108

121

108

640

724

825

911

958

1,065

465
171

511
181

609
164

681
207

693
236

698
335

1. U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥112.20 to US$1.00, the approximate rate of exchange at March 31, 2017.
2. As of March 31

CORPORATION
46 SUBARU
ANNUAL REPORT 2017

Five-Year Automobile Sales
Consolidated Automobile Sales(Number of units)

’13/3

’14/3

’15/3

’16/3

’17/3

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

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

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

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

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

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

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

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

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

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

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

207,460
190,864
147,679004,243
10,100591
407
561,344724,466

182,712
210,828
231,173
002,561
15,822
256145
643,497825,098

235,791
196,403269,649
037,982
64
7,914
135
5
747,943
910,695

286,979
217,272
250,072
7,713
43,120347,387
00812,577
957,865

333,339
238,858
272,768
6,823
47,18576,627
0
0905,607
1,064,542

Consolidated Automobile Sales by Region

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

n Japan n United Statesn Europe n Australian Canadan Chinan Russian Others

n Legacy
n WRX
n OEM

n Imprezan Tribecan Others

n Forestern Exigan Minicars

n Levorgn SUBARU BRZ

1,064,542

1,064,542
910,695

957,865

910,695
825,098

825,098
724,466

724,466’13/3

957,865

’14/3

’15/3

’16/3

’17/3

CORPORATION
47 SUBARU
ANNUAL REPORT 2017

’13/3

’14/3

’15/3

’16/3

’17/3

Non-Consolidated Automobile Sales(Number of units)

’13/3

’14/3

’15/3

’16/3

’17/3

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

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

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

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

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

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

Export units:
LegacyImpreza
ForesterLevorg
WRX
Tribeca
Exiga
SUBARU BRZ
OEMExport total

30,559198,232
142,74500222
407
11,542316
384,023

22,817206,022
247,362
0
7,644
0
145
15,11886
499,194

34,344
199,770
265,072
037,865
0
5
8,418
135
545,60950,353
218,866
249,2027,880
43,17700
7,005
0576,483

39,719191,873
278,963
6,805
46,7300
06,653
0570,743

U.S. retail sales1
LegacyImpreza
Forester
WRX
Tribeca
SUBARU BRZ
U.S. total

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

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

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

212,741
155,712
175,192
33,734
0
5,296
582,675

248,204
150,915
178,593
33,27904,141615,132

CKD overseas(SIA portion)

185,757
183,729

165,554
159,266

222,513
218,565

242,424
237,060

353,770
344,518

1. U.S. Retail Sales are the aggregate figures for the calendar year from January through December.

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

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

n Legacyn WRXn Minicars

n Legacy
n WRX
n OEM

n Imprezan Exigan Forestern SUBARU BRZ

n Levorgn OEM

n Imprezan Forestern Tribecan Exigal CKD Overseas

185,841
167,147

166,710150,041545,609

163,695

n Levorgn SUBARU BRZ

576,483

499,194
384,023

’13/3

’14/3

’15/3

’16/3

570,743

353,770

222,513

185,757

165,554

’13/3

’14/3

’17/3

CORPORATION
48 SUBARU
ANNUAL REPORT 2017

’15/3

242,424

’16/3

’17/3

Financial Review
Business Segments and Scopeof Consolidation

Division in order to more effectively utilize management resources

The SUBARU Group (“the Group”) consists of three businessbusiness. Also, on April 1, 2017, the Company changed its namesegments: the core Automotive Business Unit, which accounts

from Fuji Heavy Industries Ltd. to SUBARU Corporation.

to further strengthen the competitiveness of the core automotive

for more than 90% of consolidated net sales, the Aerospace

In the fiscal year under review, the Company was able toCompany, and Other Businesses, consisting of businesses that

produce steady results from these initiatives. The North

do not belong to either of the other two segments. In the fiscal

American market, a key market for SUBARU, continued to driveyear ended March 31, 2017 (April 1, 2016 to March 31, 2017;global sales, and automobile unit sales exceeded one million

the “fiscal year under review”), SUBARU Corporation (“thevehicles for the first time.

Company”), 77 subsidiaries, and 2 equity-method affiliatedcompanies were included in the scope of consolidation.

Summary of Business Performance
As a result of the above factors, the Group absorbed a dip insales revenue due to currency fluctuations, thanks in part to the

Overview of Business Performanceincrease in automobile unit sales, and recorded record-highBusiness Environment

consolidated net sales of 3,326.0 billion yen, up 93.7 billion yen

During the fiscal year under review, although business conditions(2.9%) compared with the previous fiscal year.

in Japan continued to recover gradually, uncertainty surrounding

Consolidated operating income decreased 27.4% year on

the global political and economic situation heightened due toyear, and net income attributable to owners of parent decreased

factors including the U.K.’s Brexit declaration and the

35.3%.

inauguration of a new administration in the U.S. Against thisbackdrop, the yen appreciated sharply against the U.S. dollar in

Profit and Lossforeign exchange markets.

Operating Income

In “Prominence 2020,” mid-term management vision, theConsolidated operating income was 410.8 billion yen, downGroup has articulated “Not big in size, but a high-quality company

154.8 billion yen (27.4%) year on year. The operating margin waswith distinctive strengths” as its vision for 2020. To achieve this

12.4%, down 5.1 points, reflecting the sales increase andbusiness vision, the Group will implement measures centered on

operating income decrease. The impact of factors that negatively

two initiatives: first, enhancement of the SUBARU brand aimed ataffected profits—including increases in SG&A expenses, mainly

further promoting value-added management, and second,

quality-related expenses stemming from airbag inflators andbuilding a strong business structure that increases resilience toselling expenses following interest rate increases in the U.S.,changes in the business environment. As part of this effort, as aexchange rate differences, and higher R&D expenses—

result of comprehensive consideration of the business portfolio,

exceeded the impact of factors contributing to higher profits,

the Company decided to terminate the Industrial Products

namely sales mix improvement and cost reduction.

Net Sales (Billions of yen)

Operating Income (Billions of yen)
Net Income Attributable to Ownersof Parent (Billions of yen)n Operating income
n Net income attributable to owners of parent

3,232.3

3,326.0

565.6

2,877.9423.0

2,408.1
1,913.0

436.7

326.5

410.8
282.4

261.9
206.6
120.4 119.6

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CORPORATION
49 SUBARU
ANNUAL REPORT 2017

’13/3

’14/3

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Year-on-Year Analysis of Factors Affecting Operating Income (Consolidated) (Billions of yen)
Improvementof salesvolumeCost& mixture reduction
and others

Improvementof salesvolumeCost& mixture reduction
Gain oncurrency and others
33.1
exchange
58.8

108.4

137.7

-39.0
SG&A
expensesand others

423.0

32.2

565.6
-18.8

-169.1

R&D
expenses

SG&A
expensesand others

410.8-143.8Loss oncurrency
exchange’15/3
Operatingincome’16/3
Operatingincome+142.5 billion yen

Income before Income Taxes and Net Income Attributable

-11.8
R&D
expenses-154.8 billion yen’17/3
OperatingincomeNet income attributable to owners of parent, which is income

to Owners of Parent

after deducting income taxes and net income attributable to non-

Income before income taxes was 394.7 billion yen, down 224.3

controlling interests from income before income taxes, wasbillion yen (36.2%) compared with the previous fiscal year.

282.4 billion yen, down 154.3 billion yen (35.3%).

Segment Information

33,000 units. Although the Chiffon, a new model, contributed toAutomotive Business Unitsales, sales of other minicar models declined.

Net sales from the Automotive Business Unit were 3,152.0 billion
yen, up 112.5 billion yen (3.7%) compared with the previous

Overseas Markets

fiscal year, and segment income was 397.7 billion yen, downOverseas unit sales increased by 93,000 units (11.4%) year on

146.0 billion yen (26.8%).

year to 906,000 units. At a time of sustained strong sales of theConsolidated global unit sales reached a record high for the

Outback in North America, an increase in production capacity at

fifth consecutive year, increasing 107,000 vehicles (11.1%) year

the production base in the U.S., SUBARU of Indiana Automotive,on year to 1,065,000 units.

Inc. (SIA), contributed to the substantial increase in sales volume.
In addition, sales of the Crosstrek (called the SUBARU XV outside

Domestic Market

North America) and the Forester remained strong throughout the

Total automobile demand in Japan in the fiscal year under review

fiscal year.

increased 2.8% year on year to 5.078 million vehicles, with

By region, sales volume increased by 90,000 units (14.3%)

ordinary passenger car sales increasing 8.1% due to factors

year on year to 721,000 units in North America, decreased byincluding the impact of new model introductions by automakers

1,000 units (2.6%) to 46,000 units in Europe and Russia,

and mini car sales decreasing 5.1% due to the impact of anincreased by 4,000 units (10.1%) to 49,000 units in Australia, andincrease in the minicar tax, among other factors.

was mostly unchanged at 44,000 units in China and 46,000 units

In this business environment, the Group’s unit sales in Japan
increased by 14,000 units (9.4%) year on year to 159,000 units.

in other regions. Sales in North America reached a record high forthe eighth consecutive year.

As a result of strong sales of the Impreza, which was given a fullmodel change, the Levorg, and the Forester, ordinary passenger
car unit sales rose by 15,000 units (13.3%) year on year to
126,000 units. Sales of minicars fell by 1,000 units (3.4%) to

CORPORATION
50 SUBARU
ANNUAL REPORT 2017

Financial Review

Aerospace Company

Other Businesses

Net sales from the Aerospace Company were 138.8 billion yen,

Net sales from Other Businesses were 35.3 billion yen, down 4.8

down 14.0 billion yen (9.2%) compared with the previous fiscalbillion yen (11.9%) compared with the previous fiscal year, andyear, and segment income was 9.1 billion yen, down 9.1 billion

segment income was 3.5 billion yen, up 0.5 billion yen (17.1%).

yen (50.0%).

Following a decision to terminate the industrial products

Sales of products for the Ministry of Defense increased year

business at a Board of Directors meeting held on November 2,

on year due to factors including the start of full-scale

2016, that business has been included in the Other Businesses

development under the new UH-X multipurpose helicopter

segment beginning in the fiscal year under review.

contract. Sales of products for the commercial sector declined
because of a dip in sales revenue due to currency fluctuations
and due to a decrease in production of the Boeing 777.

Net Sales by Segment (Billions of yen)

Operating Income by Segment (Billions of yen)n Automotiven Industrial productsn Automotiven Othern Aerospacen Other

3,232.3

n Aerospacen Industrial products
n Corporate and elimination

565.6

3,326.0

2,877.9423.0

2,408.1

410.8

326.5

1,913.0

120.4

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’15/3

’16/3

’17/3

’13/3

’14/3

’15/3

’16/3

(Billions of yen)

’13/3
Automotive

’14/3

’15/3

’16/3

Aerospace

89.1

124.4

142.8

152.8

138.8

Industrial products

30.1

29.8

29.0

—

—

14.7

7.3

7.1

40.0

35.3

Other
Total

(Billions of yen)

’17/3

1,779.0 2,246.6 2,699.0 3,039.4 3,152.0

1,913.0 2,408.1 2,877.9 3,232.3 3,326.0’17/3

Automotive
AerospaceIndustrial products
Other
Corporate andelimination
Total

’13/3
111.0
6.8
0.6
1.6

’14/3
309.0
14.1
0.6
2.1

’15/3
400.9
18.9
0.8
1.9

’16/3
543.6
18.2
—
3.0

’17/3
397.7
9.1
—
3.5

0.4

0.6

0.6

0.8

0.5

120.4

326.5

423.0

565.6

410.8

* Accompanying the decision in November 2016 to terminate the Industrial Products business, the former Industrial Products reportable segment has been
included in Other Businesses beginning in FYE March 2017. Figures for FYE March 2016 have been restated on the basis of the revised segments.

Liquidity and Source of Funds

from the previous fiscal year-end. Trade payables (the sum ofFinancial Position

notes and accounts payable-trade and electronically recorded

Total assets as of March 31, 2017 were 2,762.3 billion yen, an

obligations-operating) and accrued expenses increased byincrease of 169.9 billion yen compared with the previous fiscal

23.7 billion yen and 88.6 billion yen, respectively, while income

year-end.

taxes payable decreased by 86.4 billion yen.

Current assets were 1,845.3 billion yen, up 61.2 billion yen

The fiscal year-end balance of interest-bearing debt

from the previous fiscal year-end, and noncurrent assets weredecreased by 21.7 billion yen from the previous fiscal year-end

917.1 billion yen, up 108.8 billion yen. Under current assets, funds

to 148.3 billion yen. The debt/equity ratio (interest-bearing debt

in hand (the sum of cash and deposits and short-term investment

over shareholders’ equity) was 0.10, remaining at a safe level.

securities) decreased by 28.7 billion yen, while merchandise andNet assets were 1,464.9 billion yen, an increase of 115.5

finished goods increased by 13.3 billion yen, and short-term loans

billion yen compared with the previous fiscal year-end. Retained

receivable increased by 24.5 billion yen. Under noncurrent assets,

earnings increased by 124.3 billion yen due to factors including

property, plant and equipment increased by 84.6 billion yen.

the recording of net income. The shareholders’ equity ratio

Total liabilities were 1,297.4 billion yen, up 54.4 billion yen

increased by 1.0 point year on year to 52.8%.

CORPORATION
51 SUBARU
ANNUAL REPORT 2017

Total Assets (Billions of yen)/Net Assets (Billions of yen)/
Ratio of Shareholders’ Equity
to Total Assets (%)
n Total assets
n Net assets
l Ratio of shareholders’ equity to total assets

2,592.4

2,762.3

Interest-Bearing Debt (Billions of yen)
D/E Ratio (Times)
n Interest-bearing debt
l D/E ratio

307.2
269.7

2,199.7
1,888.4
1,577.5
37.7

40.5

0.52

51.8

46.5

1,349.4

211.2

52.8
1,464.9

170.0
0.35

148.3

1,030.7
596.8

770.1

0.21
0.13
0.10

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’16/3

’17/3

’13/3

’14/3

’15/3

’16/3

’17/3

Cash Flowsyen, and payments of loans receivable (net of collection) were

In the fiscal year under review, net cash provided by operating

19.3 billion yen.

activities was 345.4 billion yen, compared with 614.3 billion yen
provided in the previous fiscal year. Income before income

As a result, free cash flow was 91.2 billion yen, comparedwith 358.6 billion yen in the previous fiscal year.

taxes and minority interests was 394.7 billion yen, accrued

Net cash used in financing activities totaled 189.0 billion

expenses increased 88.2 billion yen, and income taxes paidyen, compared with 126.2 billion yen in the previous fiscal year.

were 208.2 billion yen.

Repayments of long-term loans payable (net of proceeds) wereNet cash used in investing activities was 254.3 billion yen in
the fiscal year under review, compared with 255.7 billion yen

21.7 billion yen, purchase of treasury stock was 52.7 billion yen,
and cash dividends paid were 111.4 billion yen.

used in the previous fiscal year. Purchase of short-term

As a result of the above cash flows, including the effect ofinvestment securities (net of proceeds from sales of short-termtranslation adjustments, cash and cash equivalents at the end

investment securities) was 36.9 billion yen, purchase ofof the fiscal year under review were 728.6 billion yen.

noncurrent assets (net of proceeds from sales) was 162.4 billion

Cash Flows from Operating Activities
and Investing Activities (Billions of yen)Free Cash Flow (Billions of yen)n Cash flows from operating activitiesn Cash flows from investing activities

614.3

313.0

358.6
279.1

345.4

311.5

166.7

-71.4

138.8

-33.9
95.3

-172.8
’13/3

’14/3

’15/3

-255.7-254.3

’16/3

’17/3

CORPORATION
52 SUBARU
ANNUAL REPORT 2017

’13/3

91.2
’14/3

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’16/3

’17/3

Financial Review
Research and Development Expenses

Capital Expenditures and Depreciation

In the fiscal year under review, R&D expenses increased by

In the fiscal year under review the Group made capital

11.8 billion yen (11.5%) compared with the previous fiscal year

expenditures of 158.5 billion yen, an increase of 22.8 billion yen

to 114.2 billion yen. Of that amount, 111.2 billion yen was(16.8%) compared with the previous fiscal year. The main

related to the automotive business.

expenditures were related to production, R&D, and sales

Automotive R&D was for the purpose of developing

facilities in the automotive business.

products that exceed customer expectations for enjoyment and

The Company made investments of 65.1 billion yen in thepeace of mind, and focused on six initiatives to enhance theautomotive business, primarily for augmenting production

SUBARU brand. In addition, the Group sought to strengthen thecapacity accompanying an increase in unit sales and forfoundation for product development capabilities through costdeveloping and expanding production facilities for new products,

reduction, human resource development, and other measures

R&D facilities, and sales networks. SUBARU of Indiana

as part of eight initiatives for building a strong business structure.

Automotive, Inc. (SIA) made investments of 48.4 billion yen,

In October 2016 the Group began sales in Japan of the all-mainly for production facilities to boost production capacity.

new Impreza, featuring the SUBARU Global Platform, Japan’s

Depreciation expenses in the fiscal year under review

first pedestrian protection airbags, and EyeSight (ver. 3) on all

increased by 12.0 billion yen (18.5%) year on year to 77.0 billion

models. Subsequently, the Group has begun sequentiallyyen.

introducing the new Impreza in other countries around theCapital expenditures in FYE March 2018 are projected toworld. The SUBARU Global Platform, a core technology that

decrease by 8.5 billion yen (5.4%) year on year to 150.0 billion

will underpin the next generation of SUBARU automobiles, will

yen, and depreciation expenses are projected to increase by

be incorporated in all new models brought to market.

15.0 billion yen (19.5%) to 92.0 billion yen.

In the area of safety, the Group is evolving driver assist
systems, focusing on EyeSight, with the aim of providing theultimate in advanced safe driving assistance to completely
eliminate traffic accidents.
In terms of environmental initiatives, the Group is developing
products including a new downsized turbo engine and plug-in

Capital Expenditures (Billions of yen)
Depreciation Expenses (Billions of yen)n Capital expendituresn Depreciation expenses

158.5
135.7

hybrid (PHEV) and electric vehicles (EV) to comply with the Zero

110.7

Emission Vehicle* (ZEV) Regulations* in California.
In addition, the Group plans to introduce the Ascent, a

70.2

55.9

3-row crossover SUV for the North American market.

68.5

54.9

64.8

65.0

77.0

To further accelerate development of future products, in
FYE March 2018 the Group plans to boost R&D spending 19.8

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’14/3

’15/3

’16/3

’17/3

billion yen (17.3%) year on year to 134.0 billion yen.
* Regulations requiring that a certain proportion of the vehicles sold by an automaker emit no greenhouse gases

Research and Development Expenses(Billions of yen)

Basic Policy on Profit Distribution
and Dividends for FYE 2017 and FYE 2018
The Company regards shareholder interests as an importantmanagement priority and applies a performance-linked
approach to shareholder returns of maintaining a basic policy of

114.2
102.4

paying continuous dividends while considering businessperformance, investment plans, and the business environment.
The Company determines dividend payments for each fiscal

83.5

year based on a consolidated dividend payout ratio range of
60.1

20–40%, taking a variety of conditions into consideration.

49.1

In light of these considerations, the Company paid anannual dividend of 144 yen per share for the fiscal year underreview, the same as the previous fiscal year. Internal reserves
are allocated to investments for future growth, such as

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’14/3

’15/3

’16/3

’17/3

strengthening of R&D and production and sales systems for the

CORPORATION
53 SUBARU
ANNUAL REPORT 2017

purpose of offering appealing products, while bolstering theand achieve record-high automobile unit sales, forecasting

financial position.

consolidated net sales of 3,420.0 billion yen. With regard to

For FYE March 2018, the Company plans to pay a dividend

consolidated profit and loss, the Company forecasts operatingof 144 yen per share (half-year and year-end dividends of 72

income of 410.0 billion yen, ordinary income of 410.0 billionyen), the same as for the year under review. The Company will

yen, and net income attributable to owners of parent of 285.0

determine dividends for FYE 2018 and subsequent years based

billion yen to result from increases in SGA expenses, R&D

on a consolidated dividend payout ratio range of 30–50% after

expenses, and other costs, despite the positive impact from theconsidering various circumstances.

projected increase in automobile sales volume. The exchange
rate assumptions used for the full-year forecast of consolidated
business performance are 110 yen/US$1 (actual rate of 108

Business Performance in FYE March 2018

yen in FYE 2017) and 120 yen/€1 (119 yen in FYE 2017).

The Company plans to increase consolidated sales volume inthe domestic and overseas markets, mainly in North America,

Future Outlook
To achieve sustained growth in preparation for realizing thecorporate vision for 2020 articulated in “Prominence 2020,” theForecast of Consolidated
Business Performance

mid-term management vision announced in 2014, the SUBARUGroup will implement measures centered on two initiatives:(Billions of yen)enhancement of the SUBARU brand and building a strong’17/3’18/3 (plan)

ChangeNet sales

3,326.0

3,420.0

94.0

Japan

650.3

668.0

17.6

Overseas

2,675.6

2,752.0

76.4

Operating income

410.8

410.0

-0.8

while achieving consolidated global automobile sales of upward

Ordinary income

394.3

410.0

15.7

of 1.2 million vehicles in 2020 and continuing investments for

394.7

403.0

8.3

282.4

285.0

2.6

Income before
income taxes
Net income attributableto owners of parent
Exchange rates (in yen)
¥/$

108

110

2

¥/€

119

120

1

business structure.
The Group aims to establish a highly profitable businessmodel capable of sustaining its industry-leading profit margin

sustained growth in areas such as R&D expenses and capital
expenditures.

Factors Affecting Operating Income in
FYE March 2018 (Consolidated) (Billions of yen)
Improvementof sales Gain on
volume currency& mixture exchange
and others

Forecast of Consolidated
Automobile Sales

32.8(Thousand units)’17/3’18/3 (plan)

Passenger cars

126.4

134.2

7.8

Minicars

32.5

37.8

5.3

158.9

172.1

13.1

20.1

410.8

-27.8

410.0
-19.8

-7.1

SG&A
R&D
Cost
expensesand others expenses reduction

ChangeDomestic

Subtotal

21.1

Overseas
United States

667.6

687.7

Canada

53.1

54.6

1.5

Russia

5.3

6.6

1.3

Europe

40.9

39.2

-1.7

Australia

49.1

52.6

3.5

China

44.0

42.3

-1.7

Other

45.6

50.5

4.9

Subtotal

905.6

933.4

27.8

1,064.5

1,105.5

41.0

Total

’17/3
OperatingincomeCORPORATION
54 SUBARU
ANNUAL REPORT 2017-0.8 billion yen’18/3
Operatingincome(Planned)

Financial Review
Business Risks
Operational and other risks that could significantly influence thedecisions of investors and impact the Company’s financial status(5) Dependence on Specific Suppliers, Raw Materials, andComponents
The Group procures raw materials, components and other items

are set out below.
Based on information available to the Group as of the end of

from numerous suppliers. However, there are cases in which thethe consolidated fiscal year under review, the enumerated risksGroup relies on certain items and/or a limited number of suppliers.

include forward-looking statements, but do not encompass every

Due to tightening supply and demand or other factors, the inability

possible risk posed to the Group. As such, there are other risk

to procure supplies in a manner that ensures stable costs, delivery

factors which could influence investors and their decisions.

dates and quality could seriously impact the Group’s business(1) Economic Trends

performance and financial position.

Economic trends in countries and regions that comprise important(6) Protection of intellectual property

markets for the Group could potentially impact the Group’s

The Group is strongly committed to protecting its intellectual

business performance. In Japan and North America, key markets

property in areas, such as technologies and expertise, that ensure

for the Group, economic recession, decreasing demand or

product differentiation. However, in cases where a third party

increasing price competition could undermine the sales andmakes unauthorized use of the Group’s intellectual property to

profitability of the Group’s products and services.

manufacture similar products and in cases where a dispute(2) Currency Exchange Rate Fluctuations

relating

The Group’s ratio of overseas net sales stood at 80.4%. The

disadvantageous to the Company is made, the Group’s businessGroup’s consolidated financial statements, which are presented inresults and financial condition may be significantly affected.

Japanese yen, are affected by translation of overseas net sales,(7) Product Defects

operating income and assets from local currencies, particularly

The Group places the highest priority on the safety of the products

U.S. dollars, into yen. Accordingly, in the event that discrepancies

it develops, manufactures and sells. However, completely avoiding

arise between projected exchange rates in full-year forecasts anddefects and recalls, etc. regarding all products and services is

actual rates at the time of account settlement, the Group’s

impossible. The substantial cost, damage to our brand image,business performance and financial position may be adversely

etc. associated with a major recall could significantly affect theaffected when the yen appreciates or positively affected when theGroup’s business performance and financial position.

yen depreciates.

(8) Retirement Benefits and Retirement Benefit Obligations

tointellectual

propertyarisesandadecision

The Company uses forward exchange rate contracts and

The Group’s employee retirement benefit costs and obligations

other circumstance-appropriate risk hedges to minimize theare calculated based on the following assumptions: retirement

Group’s sensitivity to such currency exchange risks. However, thebenefit obligation discount rates and the expected long-term

effect of severe fluctuations in currency exchange rates at the end

rate of return on pension assets, both of which are establishedof the fiscal year could result in a loss on valuation of derivatives

based on mathematical calculations. However, in the event thatand have a major impact on non-operating expenses.

actual performance differs from the assumptions, the Group’s(3) Dependence on Certain Businesses

business performance and financial position could be affected

The Group is mainly comprised of the Automobiles and Aerospaceover the long term.

business segments. However, the Automobiles business segment(9) Environmental and Other Legal Regulations

accounts for the overwhelming majority of the Group’s business

The Group is subject to various domestic and overseas legal

operations. Accordingly, in the event that automobile-related

regulations in relation to such areas as exhaust emissions, energy

demand, market conditions, price competition with otherconservation, noise, recycling, the level of pollutants emitted fromautomakers, or other factors exceed projected levels, the entire

manufacturing facilities, and safety of automobiles and otherGroup’s overall business performance and financial position could

products. The Group’s business performance and financial

be significantly affected.

position could be affected by an increase in costs due to future(4) Changes in Market Appraisal

regulatory changes.

The Group develops, manufactures and releases new products(10) The Impact of Natural Disasters, War, Terror, Strikes andbased on appropriate timing and pricing in line with product

Other Eventsplanning that reflects market demand and customer needs. Such

The occurrence of natural disasters such as major earthquakes,

actions are the most important factors in maintaining stable

typhoons, etc., and diseases, wars, terrorist attacks or otherincreases in Group business performance. In the event thatevents, could impede the Group’s business activities as well as

market appraisals of new model vehicles and other new products

delay or suspend raw material/component purchases, production,

do not meet sales plan expectations or that the obsolescence rate

product sales/transport, and the provision of services. The Group’sof current products exceeds forecasts, the Group’s businessbusiness performance and financial position could be affected inperformance and financial position could be significantly affected.

the event that such delays or suspensions are prolonged.

CORPORATION
55 SUBARU
ANNUAL REPORT 2017

Corporate Data/Stock Information
Corporate Data (as of March 31, 2017)
Company Name

Main Businesses

SUBARU CORPORATION

Automotive: The manufacture, sale, and repair of passenger cars and their components
Aerospace: The manufacture, sale, and repair of airplanes, aerospace-related

Establishedmachinery and their components

July 15, 1953

Number of Affiliates
Paid-In Capital

77 consolidated subsidiaries and 2 equity-method affiliated companies¥153,795 million

Number of Employees (excluding executive officers, advisors and dispatches)
Fiscal Year-End

14,708 (consolidated: 32,599)

March 31

Website Addresses
Accounting Auditors

Corporate website: https://www.subaru.co.jp/en/

KPMG AZSA LLC

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

Stock Information (as of March 31, 2017)
Common Stock Authorized
1,500,000,000 shares

Breakdown of Shareholders
Securities companies

Treasury stock

31,611,000 shares

Common Stock Issued

4.1%

769,175,873 shares

Individuals and others

2,090,000 shares

0.3%
Foreign institutions
and others

63,272,000 shares

Number of Shareholders
82,017

261,315,000 shares

8.2%

34.0%

Japanese corporations
and others

Financial institutions

157,382,000 shares

Number of Shares per Trading Unit

253,502,000 shares

20.5%

33.0%

100 shares

Major Shareholders
Stock Exchange Listing
Tokyo Stock Exchange

Name

Number of
Shares Held(in thousands)

Percentage
of Total
Shares Held

129,000
50,011
43,621
11,406
10,078
9,902
9,726
9,635
9,511
9,265

16.82
6.52
5.69
1.49
1.31
1.29
1.27
1.26
1.24
1.21

Tokyo 103-8670, Japan

Toyota Motor Corporation
The Master Trust Bank of Japan, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account)
Japan Trustee Services Bank, Ltd. (Trust account 5)
Mizuho Bank, Ltd.
MIZUHO SECURITIES ASIA LIMITED-CLIENT A/C 69250601
Sompo Japan Nipponkoa Insurance Inc.
FHI’s Client Stock Ownership
Nippon Life Insurance Company
Tokio Marine & Nichido Fire Insurance Co., Ltd.

Telephone: 0120-288-324 (toll-free)*The Percentage of Total Shares Held are calculated based on the number of shares excluding treasury stock.

Securities Code
7270

Transfer Agent
Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku,

Contact for inquiries:
Investor Relations,
Corporate Communications Dept., SUBARU Corporation
Address: Ebisu Subaru Bldg., 1-20-8, Ebisu, Shibuya-ku, Tokyo 150-8554
Telephone: +81-3-6447-8000 (switchboard)

CORPORATION
56 SUBARU
ANNUAL REPORT 2017

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

Consolidated Balance Sheets

112.2

SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2017 and 2016

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

2017

2016

Thousands of
U.S. dollars(Note 1)
2017¥658,822
158,454
18,538
320,579
205,991
51,754
43,586109,600
176,433
102,045(551)
1,845,251¥507,553
140,319
21,532500,572
192,705
50,66634,99690,893
151,973
93,509(625)
1,784,093$5,871,854
1,412,246
165,2232,857,210
1,835,927
461,266
388,467
976,827
1,572,487
909,492(4,912)
16,446,087

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

1,622,363(937,015)(28,083)
657,265

1,485,530(886,905)(25,992)
572,633

14,459,563(8,351,292)(250,294)
5,857,977

24,905104,278
4,006
931
20,922
108,074(3,311)

20,989106,987
5,415
1,774
16,33987,607(3,427)

221,970929,394
35,704
8,298
186,471963,226(29,510)259,805

235,684

2,315,553¥2,762,321¥2,592,410$24,619,617

Millions of yen

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

2017

2016

Thousands of
U.S. dollars(Note 1)
2017¥349,737
92,09843,20544,443
221,328
23,67859,25913,858
3,317
162,815
1,013,738¥326,625
91,47633,252
43,692
132,759
23,554
51,251
100,272
156,614
959,495$3,117,086
820,838
385,071
396,105
1,972,620
211,034
528,155
123,51229,563
1,451,113
9,035,097

60,612
18,61529,802
174,666

93,03018,586
18,769153,119

540,214
165,909265,615
1,556,738

283,695

283,504

2,528,476

153,795
160,178

153,795
160,071

1,370,722
1,427,612

1,173,277

1,049,016

10,457,015(7,173)(1,402)(63,931)1,480,077

1,361,480

13,191,418

8,099(16,631)(10,996)(1,885)(21,413)6,224
1,464,888

11,344(13,415)(12,808)(2,869)(17,748)
5,679
1,349,411

72,183(148,226)(98,003)(16,800)(190,846)
55,472
13,056,044¥2,762,321¥2,592,410$24,619,617

Millions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable-trade (Note 5)
Electronically recorded obligations-operating (Note 5)
Short-term loans payable (Note 5 and 7)
Current portion of long-term debts (Note 5 and 7)
Accrued expenses (Note 5)
Provision for bonuses
Provision for product warranties
Accrued income taxes (Note 5 and 12)
Provision for loss on business liquidation
Other current liabilities (Note 5, 7 and 12)
Total current liabilities
Long-term liabilities:
Long-term debts (Note 5 and 7)
Net defined benefit liability(Note 11)
Deferred tax liabilities (Note 12)
Other long-term liabilities (Note 7)
Total long-term liabilities
Contingent liabilities (Note 20)
Net assets: (Note 13)
Shareholders' equity:
Capital stock
Authorized—
1,500,000,000 shares
Issued —769,175,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2017—
2,490,224 shares
2016—
2,487,843 shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Remeasurements of other postretirement benefits of foreign consolidated subsidiaries
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

Consolidated Statements of Income

112.2

SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2017 and 2016

2017

2016

Thousands of
U.S. dollars(Note 1)
2017

Net sales (Note 2)¥3,325,992¥3,232,258$29,643,422

Cost of sales (Note 14)
Gross profit
Selling, general and administrative expenses (Note 2 and 15)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets
Gain (loss) on sales of investment securities (Note 6)
Reversal of allowance for doubtful accounts
Depreciation
Cost of Settlement
Impairment loss (Note 9)
Loss on business liquidation
Other, net

2,386,266
939,726
528,916
410,810

2,187,136
1,045,122
479,533
565,589

21,267,967
8,375,455
4,714,047
3,661,408

4,616(1,846)292(4,800)(4,248)(3,270)10,144(956)(7,659)(1,188)(5,122)(2,078)(16,115)394,695

5,190(2,499)739(2,056)
9,883(4,530)2,430
30,152(981)(11)
15,09753,414
619,003

41,142(16,453)
2,602(42,781)(37,861)(29,144)
90,410(8,520)(68,262)(10,588)(45,651)(18,521)(143,627)
3,517,781

Current

123,591

191,168

1,101,523

Deferred(12,448)(8,524)(110,943)

111,143

182,644990,580

283,552

436,359

2,527,201

Millions of yen

Income before income taxes
Income taxes (Note 12):Net income
Net income (loss) attributable to non-controlling Interests
Net income attributable to owners of the parent

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

1,198

(295)

10,677¥282,354¥436,654$2,516,524

Yen

U.S. dollars(Note 1)¥559.54
1,721.90¥144.00

$3.26
16.96
$1.28

2017
¥283,552

Millions of yen
2016¥436,359

Thousands of
U.S. dollars(Note 1)2017
$2,527,201(3,245)(2,968)
1,812
984
(783)
(4,200)(6,642)(23,777)(1,192)
1,007(52)(30,656)(28,922)(26,453)
16,1508,770(6,978)(37,433)¥279,352¥405,703$2,489,768

278,689¥663

406,387(¥684)

2,483,859$5,909¥365.77
1,902.56¥144.00*For the year ended March 31, 2017 and 2016 diluted information is not presented because potentially dilutive securities do not exist.

Consolidated Statements of Comprehensive Income(loss)
SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2017 and 2016

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

Consolidated Statements of Changes in Net Assets

112.2

SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2017 and 2016

Shareholders' equity
Capital stock
Balance at the beginning of current period
Balance at the end of current period
Capital surplus
Balance at the beginning of current period
Changes of items during the period
Disposal of treasury stock
Retirement of treasury shares
Transfer to capital surplus from retained earnings
Other
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income attributable to owners of the parent
Disposal of treasury stock
Change of scope of equity method
Transfer to capital surplus from retained earnings
Other
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the beginning of current period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury shares
Other
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the beginning of current period
Changes of items during the period
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Disposal of treasury stock
Change of scope of equity method
Other
Total changes of items during the period
Balance at the end of current period

Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥153,795
153,795¥153,795
153,795$1,370,722
1,370,722

160,071160,071

1,426,658

1(46,973)
46,972
107
107
160,17800160,0719(418,654)
418,645954
954
1,427,612

1,049,016

697,414

9,349,519(111,446)
282,354(1)
325(46,972)1
124,261
1,173,277(85,105)
436,654(1)
54351,602
1,049,016(993,280)
2,516,524(9)2,897(418,645)
9
1,107,496
10,457,015(1,402)(1,382)(12,496)(52,744)046,973(5,771)(7,173)

(20)
0
(20)
(1,402)(470,089)
0418,654(51,435)(63,931)

1,361,480

1,009,898

12,134,403(111,446)
282,354(52,744)0
325
108
118,597¥1,480,077(85,105)
436,654(20)(1)
54351,582¥1,361,480(993,280)
2,516,524(470,089)
0
2,897
963
1,057,015$13,191,418

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

Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥11,344¥17,986$101,105(3,245)(3,245)
8,099(6,642)(6,642)
11,344(28,922)(28,922)
72,183(13,415)

10,025(119,563)(3,216)(3,216)(16,631)(23,440)(23,440)(13,415)(28,663)(28,663)(148,226)(12,808)(11,616)(114,153)

1,812
1,812
(10,996)(1,192)(1,192)(12,808)

16,15016,150(98,003)(2,869)(3,876)(25,570)984
984(1,885)

1,007
1,007
(2,869)

8,770
8,770
(16,800)(17,748)

12,519(158,181)(3,665)(3,665)(21,413)(30,267)(30,267)(17,748)(32,665)(32,665)(190,846)

5,679

8,302

50,615

545
545
6,224

(2,623)(2,623)
5,679

4,857
4,857
55,472

1,349,411

1,030,719

12,026,837(111,446)
282,354(52,744)0325
108(3,120)115,477¥1,464,888(85,105)
436,654(20)(1)
54(32,890)318,692¥1,349,411(993,280)
2,516,524(470,089)
0
2,897
963
(27,808)
1,029,207$13,056,044

Consolidated Statements of Cash Flows

112.2

SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2017 and 2016
Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥394,695
85,653(189)(4,616)
1,846¥619,003
72,938(30,260)(5,190)2,499$3,517,781
763,396(1,684)(41,141)
16,453

3,317
3,270

4,530

29,56329,144Sub-totalInterest and dividends income received
Interest expenses paid
Proceeds from compensation for damage
Income taxes paid
Net cash provided by (used in) operating activities(9,322)(3,898)(19,684)(32,444)
24,45888,15919,003550,248
5,236(1,852)(208,190)
345,442

2,957(6,540)22,791(1,342)30,082(11,792)
7,674
707,350
5,668(2,528)48,184(144,418)
614,256(83,084)(34,742)(175,437)(289,162)
217,986785,731
169,367
4,904,171
46,667(16,506)(1,855,526)
3,078,806

Net cash provided by (used in) investing activities
Net decrease (increase) in time deposits
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities(25,809)(135,061)
98,133(163,774)
1,327(48,705)
46,585(137,006)
117,687(7,629)(254,252)(101,631)(48,845)
47,032(126,732)
975(47,005)
25,240(106,117)
108,636(7,229)(255,676)(230,027)(1,203,752)
874,626(1,459,661)
11,827(434,091)
415,196(1,221,087)
1,048,904(67,996)(2,266,061)

9,939
12,930(34,605)(10,000)(7,822)
11,760(44,797)－

115,241(308,422)(89,127)(52,744)(111,435)(1,944)(1,185)(189,044)(2,991)(100,845)(20)(84,938)－(373)(126,190)(14,887)
217,503(470,089)(993,182)(17,326)(10,562)(1,684,884)(26,658)(898,797)

829,461

612,085

7,392,701¥728,616(127)¥829,461$6,493,904

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

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
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
Cash and cash equivalents at beginning of the period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of the period
The accompanying notes are an integral part of these statements.

88,583

Notes to Consolidated Financial Statements
SUBARU CORPORATION AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of SUBARU CORPORATION (the "Company") havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan ("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English
from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP
and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the Financial
Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars in the accompanying consolidated financial
statements are included solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2017, which was ¥112.20 to U.S. $1. The convenience translation should not be construed
as a representation that the Japanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its majority
owned subsidiaries. All significant intercompany transactions and balances have been eliminated inconsolidation. The fiscal year-end of consolidated subsidiaries is the same as that of the parent company,
except for 4 consolidated foreign subsidiaries in fiscal year 2017 and 4 consolidated foreign subsidiaries infiscal year 2016, respectively, the fiscal year-end of those subsidiaries is December 31. The operating
results of those subsidiaries that have different fiscal year-end are consolidated by using the financial
statements as of each subsidiary’s respective fiscal year-end, the necessary adjustments being madein consolidation if there are any significant transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 77 subsidiaries in fiscal
year 2017 and 77 subsidiaries in fiscal year 2016, respectively.
In addition, 2 affiliated companies were accounted for by the equity method in fiscal 2017, 1
non-consolidated subsidiary and 1 affiliated companies were accounted for by the equity method in fiscal
2016, respectively.
Investments in insignificant non-consolidated subsidiary and affiliated companies not accounted for by theequity method are carried at cost.
[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fairvalues are available are stated at their fair value as of the balance sheet dates with unrealized holding gains
and losses included as a separate component of net assets until realized, while securities for which fair values
are not readily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
1Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the balance sheet is measured based on the lower of cost or market value.)[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally calculated by the declining-balance method, except for those buildings (excluding
facilities attached to buildings) acquired on or after April 1,1998, and facilities attached to buildings andstructures acquired on or after April 1, 2016 for which the straight-line method is applied.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is calculated by thestraight-line method over the estimated useful lives of the assets.
Estimated useful lives for depreciable assets are as follows:
Buildings and structures: 7–50 years
Machinery, equipment and vehicles: 2–20 years[5] Intangible Assets (Excluding Leased Assets)
Computer software used internally by the Company and its consolidated subsidiaries is amortized by thestraight-line method over the relevant economic useful lives of 3 or 5 years.
[6] Leased Assets
For leased assets under finance lease transactions in which the ownership is transferred to the lessee:
The leased assets are depreciated by the same method as used for other property, plant and equipment.
For leased assets under finance lease transactions in which the ownership is not transferred to the lessee:
The leased assets are depreciated by the straight-line method over the leased period and the residual value
is zero.
[7] Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on the amount calculated from the historical ratio of bad
debt for ordinary receivables, and estimated amounts of uncollectible accounts for specific overdue
receivables.
[8] Provision for Bonuses
Employees' bonuses are recognized as expenses for the period in which those are incurred.
[9] Provision for Product Warranties
The Company and its consolidated subsidiaries provide for accrued warranty claims on products sold basedon their past experiences of warranty services and estimated future warranty costs, which are included in"Accrued expenses" in the accompanying consolidated balance sheets.
[10] Provision for Loss on Construction Contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is provided
when substantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year andbeyond and such losses can be reasonably estimated.
[11] Provision for Loss on business liquidation
The provision for losses on business liquidation is provided due to important business liquidation.
2

[12] Accounting method for Retirement Benefits
Net defined benefit liability (assets) for employees is provided based on the estimated amounts of projectedpension and severance obligation and the fair value of plan assets at the end of the fiscal year. In determining
retirement benefit obligations, the straight-line basis is used for attributing expected benefit to periods.
Unrecognized prior service cost is being amortized on the straight-line method over a period (13-18 years)
that is shorter than the average remaining service period of the eligible employees. Unrecognized net
actuarial gain or loss is amortized from the following fiscal year on the straight-line method over a period(primarily 16 years for fiscal years 2017 and 2016) that is shorter than the average remaining service period of
the eligible employees.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined based on the Company’s and its consolidated subsidiaries’internal rules, are included in "Other long-term liabilities" in the accompanying consolidated balance sheets.
[13] Translation of Foreign Currency-Denominated Accounts
Under the Japanese accounting standards for foreign currency translation, monetary assets and liabilities
denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at eachbalance sheet date with the resulting gain or loss included currently in the statement of income.
The assets and liabilities of foreign subsidiaries and affiliated companies are translated into Japanese yen at
the exchange rates in effect at the balance sheet dates of the foreign subsidiaries and affiliated companies,
except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the respective years. The resulting foreign
currency translation adjustments are included in "Foreign currency translation adjustments" and"Non-controlling interests" in the net assets section of the accompanying consolidated balance sheets.
[14] Revenue Recognition
The percentage-of-completion method is applied to revenue from construction contracts of Aerospace
division productions where certain elements are determinable with certainty at the end of fiscal year. (Thepercentage of completion is estimated using the proportion-of-cost method). The completed-contract method
is applied to other works.
[15] Accounting for Lease Transactions
Sales and corresponding cost of sales under finance lease transactions conducted by certain domestic
consolidated subsidiaries are recognized on the effective date of each lease contract.
[16] Derivative Financial Instruments and Hedge Accounting
The Japanese accounting standards for financial instruments require that the Company and its consolidated
domestic subsidiaries state derivative financial instruments at their fair value and recognize changes in the fairvalue as a gain or loss, unless such derivative financial instruments are used for hedging purposes.
For interest rate swap contracts used as a hedge that meet certain hedging criteria, the net amount to be
paid or received under the interest rate swap contract is added to or deducted from the interest on the assets
or liabilities for which the swap contract is executed.
Derivative financial instruments qualifying as a hedge, along with the underlying transactions, assets andliabilities are as follows:
Financial Instrument
Interest swaps

Transactions, assets and liabilities
Borrowings
3The risk exposures to movements in interest rates are hedged according to the Company’s and its
consolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of theunderlying transactions, assets and liabilities, and therefore they are presumed to be highly effective inoffsetting the effect of movements in interest rates at their inception as well as during their terms.
[17] Goodwill
Goodwill is principally amortized by the straight-line method over 5 years.
[18] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or lessthat are readily convertible to known amounts of cash and have negligible risk of changes in value due to theirshort maturities.
[19] Income Taxes
The provision for income taxes is computed based on the pretax income for financial reporting purposes.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
[20] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to 114,215 million yen(US$ 1,017,959 thousand) and 102,373 million yen for fiscal years 2017 and 2016, respectively.
[21] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that occurs if all the convertible
securities are converted or other contracts to issue common stock are exercised to the extent that they are
not anti-dilutive.
[22] Reclassification
Certain reclassifications have been made in the consolidated financial statements for the year ended March
31, 2016 to conform to the presentation for the year ended March 31, 2017.
[23] Changes in Accounting Policy
Based on amendments in the CORPORATION Tax Act, "Practical Solution on a change in depreciation
method due to Tax Reform 2016"(PITF No.32 issued on June 17, 2016) issued by Accounting Standards
Board of Japan (ASBJ) was applied from the fiscal year ended on March 2017.
The company changed depreciation method for facilities attached to buildings and for structures acquired on
or after April 1, 2016 from the declining-balance method to the straight-line method. Since the impact of thechange is immaterial, notes for the change was omitted.
[24] Changes in Presentation(Consolidated Statements of Income)Consolidated Statements of Income for the fiscal year ended March 31, 2017 include the following
reclassification.
"State subsidy", which was presented as a separate account in the prior fiscal year, is included in “Other, net”
in the current fiscal year due to its decreased financial materiality. To reflect this change, 2,999 million yen of4

“State subsidy” separately stated under “Other income(expense)” in the prior fiscal year has been reclassified
into “Other, net” in the consolidated statements of income for the prior fiscal year provided herein.
"Loss on reduction of non-current assets” and “Loss on valuation of investment securities”, which were
presented as separate accounts in “Other income(expense)” in the prior fiscal year, are included in “Other, net”
in the current fiscal year due to its decreased financial materiality.
To reflect these changes, 1,660 million yen of "Loss on reduction of non-current assets" and 5,387 million yenof “Loss on valuation of investment securities" have been reclassified into "Other, net".
As a result, the account "Other, net" in “Other income (expense)” in the prior fiscal year has been 15,097
million yen.
(Consolidated Statements of Cash Flows)
Consolidated Statements of Cash Flows for the fiscal year ended March 31, 2017 include the following
reclassifications.
“Increase (decrease) in accrued expenses”, which was included in “Other, net” under “Net cash provided by(used in) operating activities” in the prior fiscal year, is presented as a separate item in the current fiscal year
due to its increased financial materiality.
In addition, “Other extraordinary income”, which was presented as a separate item in “Net cash provided by(used in) operating activities”, is included in “Other, net” in “Net cash provided by (used in) operating activities”
in the current fiscal year due to its decreased financial materiality.
To reflect these changes, 15,538 million yen of “Other, net” under “Net cash provided by (used in) operating
activities” in Consolidated Statements of Cash Flows in the prior fiscal year has been split into 11,792 million
yen of “Increase (decrease) in accrued expenses” and 27,330 million yen of “Other, net”.
19,656 million yen of “Other extraordinary income” has been reclassified into “Other, net”.
As a result, “Other, net” in “Net cash provided by (used in) operating activities” is 7,674 million yen.
“Purchase of treasury shares”, which was included in “Other, net“ under “Net cash provided by (used in)financing activities” in the prior fiscal year, is presented as a separate item in the current fiscal year due to its
increased financial materiality.
To reflect this change, 393 million yen of “Other, net” under “Net cash provided by (used in) financing
activities” in the Consolidated Statements of Cash Flows” in the prior fiscal year, has been split into 20 million
yen of ” Purchase of treasury shares” and 373 million yen of “Other, net”.
[25] Additional Information
The Company applied "Revised Implementation Guidance on Recoverability of Deferred Tax Assets" issued
by ASBJ from the fiscal year ended March 2017.

5

3. Other comprehensive income
Amounts reclassified to net income (loss) in fiscal 2017 and 2016, which were recognized in othercomprehensive income in the current or previous periods and tax effects for each component of othercomprehensive income were as follows:
Millions of yen
Thousands of
U.S. dollars
2017
2016
2017
Valuation difference on available-for-salesecurities
Increase(decrease) during the year
¥5,003(¥8,513)$44,590
Reclassification adjustments(9,572)(2,288)(85,312)
Before tax effect(4,569)(10,801)(40,722)
Tax effect
1,324
4,159
11,800
Balance at the end of the period(3,245)(6,642)(28,922)
Foreign currency translation adjustments
Increase(decrease) during the year
(2,968)(23,670)(26,453)
Reclassification adjustments(107)
Before tax effect(2,968)(23,777)(26,453)
Tax effectBalance at the end of the period(2,968)(23,777)(26,453)
Remeasurements of defined benefit plans
Increase(decrease) during the year
(109)
(3,648)(971)
Reclassification adjustments
2,553
2,406
22,754
Before tax effect
2,444(1,242)
21,783Tax effect(632)
50(5,633)
Balance at the end of the period
1,812(1,192)
16,150Remeasurements of other postretirement
benefits of foreign consolidated
subsidiaries
Increase(decrease) during the year
1,595
1,548
14,216
Reclassification adjustments
Before tax effect
1,595
1,548
14,216
Tax effect
(611)
(541)
(5,446)
Balance at the end of the period
984
1,007
8,770
Share of other comprehensive incomeof affiliated companies accounted for using
equity method
Increase(decrease) during the year
(639)
(52)
(5,695)
Reclassification adjustments(144)(1,283)
Before tax effect
(783)
(52)
(6,978)Tax effectBalance at the end of the period
(783)
(52)
(6,978)
Total other comprehensive(¥4,200)(¥30,656)($37,433)
income(loss)

6

4. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2017 and 2016, consisted of the following:
Millions of yen

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

7

2017¥658,822
320,579
979,401(151,924)(98,861)2016¥507,553
500,572
1,008,125(126,107)(52,557)

Thousands of
U.S. dollars
2017$5,871,854
2,857,210
8,729,064(1,354,046)(881,114)¥728,616¥829,461$6,493,904

5. Financial Instruments(1) Summary of Financial Instruments Status[1] Action Policy with Regard to Financial Instruments
With regard to planned capital expenditure to support SUBARU CORPORATION, its consolidated
subsidiaries and affiliated companies (the "SUBARU Group") in their main operations of automobile
manufacturing and sales, the SUBARU Group finances mainly from bank loans. Temporary surpluses areinvested in highly secure financial assets. Bank loans and liquidation of accounts receivable are utilized toprovide short-term working capital. It is the SUBARU Group's policy to use derivatives as a way to avoid therisks stated below and not to conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Notes and accounts receivable-trade and Lease investment assets are subject to customer credit risks. In
addition, operating receivables denominated in foreign currencies due to globalized business of the SUBARUGroup are subject to the risk of changes in foreign exchange rates. As a general rule, however, forward
foreign exchange contracts are utilized to hedge the foreign exchange rate risk, considering the net amount ofoperating receivables denominated in foreign currencies that exceed foreign currency denominated operating
liabilities. Available-for-sale securities and investment securities are mainly stocks associated with businessand capital alliances with principal business partners, and are subject to risk of market price fluctuation.
Majority of payables included in Notes and accounts payable-trade and Electronically recorded
obligations-operating are due within one year. A certain portion of such liabilities involve foreign currency
denominated transactions associated with the import of raw materials and is subject to exchange rate
fluctuation risk, although it is consistently less than accounts receivable balance denominated in the same
foreign currency. Funds financed by bank loans and corporate bonds are primarily used for capital
expenditure, whose repayment or redemption dates will come within 7 years after March 31, 2017 at thelatest. A certain portion of those liabilities may have variable interest rates and are subject to the risk ofchanges in interest rates, although such risk is mitigated using derivative transactions (interest rate swap
transactions).
Derivative transactions include foreign exchange forward contracts to hedge against exchange rate
fluctuations associated with trade accounts receivables and liabilities denominated in foreign currencies, andinterest rate swap contracts to hedge against the risk of change in interest rates on bank loans. With regard to
hedging instruments and hedged items, hedge policy, the method of evaluation of hedge effectiveness andother related items, please refer to "2-[15] Derivative Financial Instruments and Hedge Activities".
[3] Risk Management System with Regard to Financial Instruments(a) Credit Risk management (Risks Associated with Business Partner’s Breach of Contract)
The Company and its consolidated subsidiaries have credit control function and regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets. In
addition to keeping track of payment due dates and balances of each customer, such credit control
function identifies and mitigates the potential risk of uncollectibility due to deterioration in financial status
or other factors of customers.
(b) Market Risk Management (Risks Associated with Fluctuations in Foreign Exchange and Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts with no longer than six months term are used to hedge against the risk of exchange
rate fluctuation to the extent that net position of accounts receivable and accounts payable dominated inforeign currency is exposed. In addition, the Company and certain consolidated subsidiaries use interest
rate swap transactions to mitigate the risk of fluctuation in interest rates on bank loans and corporate
bonds.
8

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

9(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet amounts, the fair value and difference as of March 31, 2017 and 2016 wereas follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer
to Note [2]).
As of March 31, 2017
Millions of yen
Consolidatedbalance sheet
Fair Value
Difference
amounts
Cash and deposits¥658,822¥658,822¥Notes and accounts receivable-trade158,454
Allowance for doubtful accounts (*1)(88)
158,366
158,366
Lease investment assets
18,538
Allowance for doubtful accounts (*1)
(21)
18,517
20,065
1,548
Short-term loans receivable
176,433
Allowance for doubtful accounts (*1)
(250)
176,183
181,938
5,755
Short-term investment securities, Investment securities
and Other securities
122,272
122,272
Total Assets
1,134,160
1,141,463
7,303
Notes and accounts payable-trade349,737
349,737
Electronically recorded obligations-operating
92,09892,098
Short-term loans payable
43,205
43,205Current portion of long-term loans payable
44,44344,442
1
Current portion of bonds
Accrued income taxes
13,85813,858
Accrued expenses
221,328
221,328
Long-term loans payable
60,612
60,913(301)
Total Liabilities
825,281825,581(300)
Derivative transactions (*2)
hedge accounting is not applied
2,911
2,911
hedge accounting is applied
¥¥¥-

10

As of March 31, 2017
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$5,871,854
1,412,246(784)
1,411,462
165,223(188)
165,035
1,572,487(2,228)
1,570,259

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

Fair Value

Difference$5,871,854$-

1,411,462-

178,832

13,797

1,621,551

51,292

1,089,768
10,108,378
3,117,086
820,838
385,071
396,105
123,512
1,972,620
540,214
7,355,446

1,089,768
10,173,467
3,117,086
820,838
385,071
396,096
123,512
1,972,620
542,897
7,358,120

65,0899(2,683)(2,674)25,945$-25,945$-$-*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).

11As of March 31, 2016
Millions of yen
Consolidatedbalance sheet
amounts¥507,553
140,319(105)
140,214
21,532(53)
21,479151,973(294)
151,679

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

Fair Value

Difference¥507,553¥-

140,214-

23,095

1,616

155,038

3,359

118,565
939,490326,625
91,47633,252
33,692
10,000100,272
132,759
93,030821,106

118,565
944,465
326,625
91,47633,25233,807
10,011
100,272
132,759
93,673821,875

4,975
(115)
(11)
(643)
(769)

7,159
¥-

7,159
¥-

¥-

*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.
12

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"6.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
The fair value of bonds issued by the Company is based on market prices if available. For bonds
with no available market price, fair value is calculated using the present value that is calculated as
discounted cash flow of the total amount of principal and interest by, where discount rates are
adopted taking into consideration the remaining redemption period and credit risks.
Derivative transactions
Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2017 and 2016:2017¥1,232Millions of yen
2016¥2,817

Thousands of
U.S. dollars
2017$10,980

135,000
42,499104,218866
20,0003

149,900
172,996
135,119976
30,0003

1,203,209
378,779
928,859
7,718
178,25327¥1,661¥768$14,804

Other securities (available-for-sale securities)
Stocks of non-consolidated subsidiary and affiliatedcompanies
Certificate of deposit
Commercial paper
Money management fund
Unlisted stocks (excluding over-the-counter stocks)
Medium Term Note
Other
Investments and other assets
Investments in equity of affiliated companies andothers

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

13[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2017:
Millions of yen

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

Within 1Year

1 to 5Years

5 to 10
Years

Over 10years¥658,822
145,641
6,136
73,229¥12,813
12,393101,058

¥9
2,146

¥-

10,574
8,270¥197,517

17,95925,433¥1,175

5,080
4,939
¥917

3,594
4,265
¥5,595

As of March 31, 2017:$5,871,854
1,298,048
54,688652,665

Thousands of U.S. dollars
5 to 10
Over 10Years
years$$$114,198
110,45580
900,695
19,127-

94,24273,708$1,760,401

160,062
226,676$10,472

Within 1
Year

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

1 to 5
Years

45,27644,020$8,17332,03238,012$49,866

As of March 31, 2016:

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

14

Within 1Year

1 to 5
Years¥507,553
130,484
6,555
48,205¥8,142
14,896
101,691

Millions of yen
5 to 10
Over 10Years
years¥¥1,693
81
2,077
-

8,595
3,440
¥353,419

19,447
19,623¥1,006

2,585
3,317¥1,056

4,106
4,299¥4,189[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2017:

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

Within 1Year

1 to 5
Years¥43,205¥44,443¥¥58,774

Millions of yen
5 to 10
Over 10Years
years¥¥¥1,838¥-

As of March 31, 2017:
Within 1
Year

Short-term loans payable
Bonds payable
Long-term loans payable$385,071$396,105

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
Years
$$$$523,832$16,382$-

As of March 31, 2016:

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

Within 1Year

1 to 5
Years¥33,252
10,000¥33,692¥¥90,918

Millions of yen
5 to 10
Over 10Years
years¥¥¥2,112¥-

6. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2017and 2016 was as follows:(1) Other securities (available-for-sale securities):
As of March 31, 2017:
Acquisition cost

Millions of yen
Difference¥33,393¥21,153¥12,240

17,36921,851
3,370
75,983

17,25921,694
3,329
63,435110
157
41
12,548

1,062

3,566

(2,504)

19,837
21,056
4,334
46,289¥122,272

20,077
21,301
4,403
49,347¥112,782

(240)
(245)
(69)
(3,058)¥9,490Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bondsother
Sub-total
Total
As of March 31, 2017:15

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$297,620$188,529$109,091

154,804
194,750
30,036677,210

153,824
193,351
29,670565,374

980
1,399
366
111,836

9,465

31,783(22,318)

176,800
187,665
38,627
412,557$1,089,767

178,939
189,848
39,242439,812$1,005,186(2,139)(2,183)(615)(27,255)$84,581

Acquisition cost

Millions of yen
Difference¥39,363¥22,386¥16,977

28,45021,151
5,307
94,27128,01920,835
5,229
76,469431
316
78
17,802

7,020

8,100

(1,080)

6,282
9,527
1,465
24,294¥118,565

6,336
9,670
1,504
25,610¥102,079

(54)
(143)
(39)
(1,316)¥16,486

As of March 31, 2016:
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

16

(2) Other securities (available-for-sale securities) sold during fiscal years 2017 and 2016:
For the year ended March 31, 2017:

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

Sales amount¥23,650

Total gains¥9,968Millions of yen
Total losses¥419

28,576
9,586
82,906¥144,718128
45
3¥10,144

219
45
46
¥729

For the year ended March 31, 2017:

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

Sales amount$210,784$254,688$85,437$738,913$1,289,822

Thousands of U.S. dollars
Total gains
Total losses$88,841$3,734$1,141$401$27$90,410$1,952$401$410$6,497

Sales amount¥4,190Total gains¥2,571Millions of yen
Total losses¥99

27,456
38,5752,051¥72,272

115
43
3¥2,732

143
43
17
¥302

For the year ended March 31, 2016:

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

17

7. Short-Term Loans Payable and Long-Term Debts
Short-term loans payable as of March 31, 2017 and 2016, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Bank loans with average interest rate of 1.40% and 1.48%
per annum as of March 31, 2017 and 2016, respectively
Unsecured 0.71% bonds due June 13, 2016

¥43,205¥-¥33,252¥10,000$385,071$-

Millions of yen
2017
2016

Thousands of
U.S. dollars
2017Long-term debts as of March 31, 2017 and 2016 consisted of the following:

Loans principally from banks and insurance companies
due through 2024 with average interest rate of 0.51% and0.7% per annum as of March 31, 2017 and 2016,
respectively
SubtotalLess-Portion due within one year
Total

¥105,055¥126,722$936,319

105,055(44,443)¥60,612

126,722(33,692)¥93,030

936,319(396,105)$540,214Annual maturities of long-term loans payable and bonds payable as of March 31, 2017 were as follows:
Thousands ofMillions of yen
U.S. dollars
2018¥44,443$396,1052019
43,312
386,025
2020
7,473
66,6042021
7,268
64,777
2022
721
6,426
2023 and thereafter
1,838
16,382
Total¥105,055$936,319

18

Lease obligations as of March 31, 2017 and 2016 consisted of the following:

Lease obligations due within one year as of March 31, 2017
Lease obligations due after one year as of March 31, 2017
Total

Millions of yen
2017
2016
¥1,189
¥861
1,765
1,254
¥2,954¥2,115

Thousandsof
U.S.dollars
2017$10,597
15,731$26,328

Annual maturities of lease obligations as of March 31, 2017 were as follows:
Millions of yen¥1,189
1,462
139
89
55
20
¥2,954

2018
2019
2020
2021
2022
2023 and thereafter
Total

Thousands of
U.S. dollars$10,597
13,030
1,239
793
490
179
$26,328

The following assets as of March 31, 2017 and 2016 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Property, plant and equipment¥32,520¥36,799$289,840
Total¥32,520¥36,799$289,840
To raise working capital efficiently, the SUBARU Group has entered into the commitment-line contracts. The
maximum amount that can be made available under these contracts is 210,330 million yen (US$1,874,599
thousand) as of March 31, 2017. At the end of the fiscal year, there were no borrowings under thecommitment line.

19

8. Derivative transactions
In the normal course of business, the Company and its consolidated subsidiaries employ derivative financial
instruments, including foreign exchange forward contracts, foreign currency options and interest rate swaps,
to manage their exposures to fluctuations in foreign currency exchange rates and interest rates. The
Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes.
The fair value information of derivative financial instruments as of March 31, 2017 and 2016 was as follows:
Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2017
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¥262,186¥2,585¥2,585 $2,336,774$23,039$23,039
Euro
3,421
11
11
30,49098
98
Canadian dollar
21,521315
315
191,809
2,808
2,808
Total
¥287,128¥2,911¥2,911 $2,559,073$25,945$25,945
As of March 31, 2016
Notional
AmountForeign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar
Total¥287,156
3,254
22,516¥312,926

Millions of yen
Valuation
Fair value
gain (loss)¥7,975(44)(772)¥7,159¥7,975(44)(772)¥7,159Note: The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative transactions to which hedge accounting is applied(1) Interest rate contracts:
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
As of March 31, 2017
Notional
AmountInterest rate swap
contracts:
Receive floating rate
pay fixed rate

¥1,000Millions of yen
Over
1 yearFair value

¥-

20

(*)

Thousands of U.S. dollars
Notional
Over
Amount1 yearFair value$8,913$-(*)

As of March 31, 2016
Millions of yen

Interest rate swap contracts:
Receive floating rate pay fixed rate

Notional
AmountOver
1 yearFair value¥3,000¥1,000(*)

Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
9. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2017 and 2016 are summarized as follows:

2017¥407,758
603,416
15,391
354,599
1,381,164
195,783
45,416(937,015)(28,083)¥657,265

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

Millions of yen
2016¥381,255
540,376
11,221
312,029
1,244,881
193,698
46,951(886,905)(25,992)¥572,633

Thousands of
U.S. dollars
2017$3,634,207
5,378,039
137,175
3,160,419
12,309,840
1,744,947
404,777(8,351,292)(250,294)$5,857,977

10. Unexecuted Balance of Overdraft Facilities and Lending Commitments
The unexecuted balance of overdraft facilities and lending commitments at a consolidated subsidiary (Subaru
Finance Co., Ltd.) as of March 31, 2017 and 2016 was as follows:
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Total overdraft facilities and lending commitments¥4,800¥4,800$42,781Less amounts currently executed
1,263
801
11,257
Unexecuted balance¥3,537¥3,999$31,524
A portion of the overdraft facilities and lending commitments above is subject to credit considerations as
documented in the customer contracts. Therefore, the total balance above is not always available.

2111. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans,
contributory defined benefit employees’ welfare pension funds, defined benefit pension plan, and certain
domestic subsidiaries have defined contribution pension plans. In addition, in certain occasions, additional
retirement payments are made to employees for their retirement. Consolidated foreign subsidiaries primarily
have defined contribution plans.
As of March 31, 2017, the Company and 54 of its consolidated domestic subsidiaries, which add up to a
total of 55 companies, have lump-sum retirement payment plans. Within the SUBARU Group, there are also
25 defined contribution plans, and 6 defined benefits pension plans. In addition, there are 3 single-employer
employees’ welfare pension funds subject to the provisions of Article 33 of "Accounting Standard for
Retirement Benefits."
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and net defined benefit liability is provided at the amountthat would have been payable had all the employees voluntarily retired at the end of the fiscal year, less anamount to be covered from the plan assets, while the Company and significant subsidiaries provide an
accrued pension and net defined benefit liability based on the estimated amount of pension and severance
obligation (projected benefit obligations), less the fair value of plan assets at the end of the fiscal year under
the actuarial method.
Defined benefit pension plans (including the multi-employer pension plan of contributory defined benefit
employees’ welfare pension funds settled as defined benefit pension plan.)
Movement in retirement benefit obligation, except plans applied simplified method
Millions of yen

Thousands of
U.S. dollars

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

2017
¥116,331
6,752
679(3,149)(4,373)(15)

2016¥107,397
6,115
1,161
7,769
(5,791)152

2017$1,036,818
60,178
6,052(28,066)(38,975)(134)

f. Other
Balance at the end of the period(526)¥115,699(472)¥116,331(4,688)$1,031,185

Balance at the beginning of the perioda. Expected return on plan assetsb. Actuarial loss (gain)c. Contributions paid by the employer
d. Payment for retirement benefits
e. Other2017¥105,917
1,953(3,258)3,290(2,886)(188)

Millions of yen
2016¥99,140
1,836
4,254
4,288
(3,601)-Thousands of
U.S. dollars
2017$944,002
17,406(29,037)
29,323(25,722)(1,676)

Balance at the end of the period¥104,828¥105,917$934,296

Movements in plan assets, except plans applied simplified method

22

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

2017¥6,398
841
(383)
(43)
¥6,813

Balance at the beginning of the period
a. Retirement benefit costb. Benefits paidc. Contributions paid by the employer
Balance at the end of the period

Millions of yen
2016¥6,072
722
(357)
(39)
¥6,398

Thousands of
U.S. dollars
2017$57,023
7,496(3,414)(383)$60,722

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

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

Millions of yen

Thousands of
U.S. dollars

2017¥105,901(105,157)
744
16,9402016¥106,762(106,162)600
16,212

2017$943,859(937,228)
6,631
150,980

17,684

16,812

157,611

18,615(931)¥17,684

18,586(1,774)¥16,812

165,909(8,298)$157,611

2017¥6,752679(1,953)
2,560
(6)
225
841

Millions of yen
2016¥6,115
1,161(1,836)
2,346
60
215
722

Thousands of
U.S. dollars
2017$60,178
6,052(17,406)
22,816
(53)
2,005
7,496

(149)
¥8,94922¥8,805(1,329)$79,759

Retirement benefit costs

a. Service costb. Interest costc. Expected return on plan assets
d. Net actuarial loss amortizatione. Past service costs amortization
f. Additional retirement payments
g. Retirement benefit cost of the plan
applying the simplified method
h. Other
Total retirement benefit costs for the fiscal
year ended23

Adjustments for retirement benefit (before tax effect)
Millions of yen
2016
(¥92)
(1,150)(¥1,242)

Thousands of
U.S. dollars
2017
$187
(21,970)($21,783)

2017
¥267

Millions of yen
2016
¥246

Thousands of
U.S. dollars
2017$2,38015,49817,963

138,128¥15,765¥18,209$140,5082017¥21(2,465)(¥2,444)

a. Past service costsb. Actuarial gains and losses
Total

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

2017
47%
16%
28%
9%
100%

a. Bonds
b. Equity securitiesc. Cash and depositd. Other
Total

Percentage
2016
49%
13%
28%
10%
100%

Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets havebeen considered in determining the long-term expected rate of return.
Actuarial assumptions
The principal actuarial assumptions
a. Attribution of expected benefit obligationb. Discount ratec. Long-term expected rate of returnd. Amortization of actuarial gain/loss

e. Amortization of past service cost2017
Benefit formula method
Primarily 0.7%
Primarily 2.1%
Primarily 16 years (amortizedby the straight-line method
starting from the following
fiscal year, over a period
shorter than the averageremaining service periods ofthe eligible employees)
13 to 18 years

24

2016
Benefit formula method
Primarily 0.6%
Primarily 2.1%
Primarily 16 years (amortizedby the straight-line method
starting from the following
fiscal year, over a period
shorter than the averageremaining service periods ofthe eligible employees)
10 to 19 years

Defined contribution pension plan
The amount required to contribute to defined contribution plans was 4,698 million yen (US$41,872 thousand)and 4,844 million yen for the fiscal years 2017 and 2016, respectively, which included the multi-employer
pension plan of contributory defined benefit employees’ welfare pension funds settled as defined contributionplans.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, was as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2017 and 2016)
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Plan assets¥10,660¥49,530$95,009
Projected benefit obligation
11,32058,015
100,891
Funded status(¥660)(¥8,485)($5,882)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan for fiscal years 2017 and 2016 were 4% and 6%
respectively.
Other than the above, 27,795 million yen (US$247,727 thousand) and 26,943 million yen of postretirement
benefit plan obligation for fiscal years 2017 and 2016 respectively is included in "Other" of accrued expenseand long-term liabilities in some U.S. subsidiaries.
12. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in
the aggregate resulted in a normal statutory income tax rate of approximately 30.7% and 32.9% for fiscal
years 2017 and 2016, respectively.
A reconciliation of the statutory income tax rates in Japan to the Company’s effective income tax rates forfiscal years 2017 and 2016 were as follows:
2017
2016
Statutory income tax rate in Japan
30.7%
32.9%
Increase (reduction) in taxes resulting from:Difference of applicable tax rate in subsidiaries
Adjustment of deferred tax assets in the end of fiscal year 2016 by change of the tax rate
Entertainment expenses not qualifying for deduction
Changes in valuation allowance and tax benefits realized from loss carry forwards
Deduction of research and development expense
Other
Effective income tax rate

2.4%
0.1%
0.0%
(4.7)%(0.3)%
28.2%

0.6%
0.5%
0.1%
(1.9)%(3.1)%
0.4%
29.5%

Significant components of the deferred tax assets and liabilities as of March 31, 2017 and 2016 , were as
follows:
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
25

Deferred tax assets:
Accrued expenses
Unrealized profit on inventories
Provision for product warranties
Net defined benefit liability
Depreciation and amortization expenses
Long-term accounts payable-other
Provision for bonuses
Loss on valuation of inventories
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Deferred revenue of foreign consolidated subsidiaries
Depreciation and amortization expenses
Valuation difference on available-for-sale securities
Reserve for reduction entry
Net defined benefit asset
Other
Total deferred tax liabilities
Net deferred tax assets¥53,348
22,74819,87515,082
11,307
10,8587,493
2,247
21,300164,258(8,778)155,480¥28,427
24,451
17,324
14,173
10,554
10,5937,456
3,230
25,089141,297(8,714)
132,583$475,472
202,745
177,139
134,421
100,775
96,774
66,78320,027
189,839
1,463,975(78,235)
1,385,740(26,494)(22,466)(2,354)(1,770)(932)(744)(54,760)¥100,720(22,045)(14,167)(4,280)(1,862)(966)(800)(44,120)¥88,463(236,132)(200,232)(20,980)(15,775)(8,307)(6,631)(488,057)$897,683

The net deferred tax assets are included in the following line items in the accompanying consolidated balance
sheets.
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Current assets—Deferred tax assets¥109,600¥90,893$976,827
Investments and other assets—Deferred tax assets
20,922
16,339186,471
Current liabilities—Deferred tax liabilities(Other current liabilities)
Long-term liabilities—Deferred tax liabilities(29,802)(18,769)(265,615)
Total net deferred tax assets¥100,720¥88,463$897,683

13. Net Assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of its Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Japanese Companies Act (“the Act”), in cases where a dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or
legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, both legal earnings reserve and additional paid-in capital used to eliminate or reduce a26

deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Act, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Act.
At the annual shareholders’ meeting held on June 23, 2017, the shareholders approved cash dividends
amounting to 55,230 million yen (US$492,246 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2017. Such appropriations are recognized in the period inwhich they are approved by the shareholders.
14. Presentation of inventories and provision for loss on construction contracts"Provision for loss on construction contracts" included in "Cost of sales" for the fiscal years 2017 and 2016 isreversal of 579 million yen (US$ 5,160 thousand) and provision of 644 million yen, respectively.
15. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2017 and 2016 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Freightage and packing expenses¥27,813¥27,023$247,888
Advertising expenses
80,78087,666
719,964
Sales incentives
137,20998,505
1,222,897
Salaries and bonuses
55,12354,008491,292
Research and development expenses
113,490
101,499
1,011,497
Other114,501
110,832
1,020,509
Total
528,916¥479,533$4,714,047

16. Extraordinary income(Fiscal 2016)
Reversal of allowance for doubtful accounts
Reversal of allowance for doubtful account includes 29,624 million yen of the allowance for receivables of
the initial investment fees associated with the AH-64D combat helicopter for the Japan Ministry of Defense
was released because the lawsuit against the Government of Japan over the claims of the initial investment
fees was concluded.
Other extraordinary income
Other extraordinary income includes 18,561 million yen of interest receivable recognized due to theconclusion of the lawsuit against the Government of Japan over the claims of the initial investment fees
associated with the AH-64D combat helicopter for the Japan Ministry of Defense.
17. Extraordinary loss
(Fiscal 2017)
Loss on business liquidation
The loss was recognized due to the decision to liquidate the Industrial Products business on November 2,
2016.The loss consists of 2,524 million yen (US$22,496 thousand) of loss on fixed assets, 2,127 million yen(US$18,957 thousand) on inventory valuation, and 471 million yen (US$4,198 thousand) on others. The
loss on fixed assets above includes impairment losses on the following assets.
27

Use

Location

Category

Impairment loss
(millions of yen)

Kitamoto City Saitama
Machinery, equipment
Prefecture and other
1,201
and vehicles
locations
Production facilities that impairment losses are recognized on are grouped together with assets owned
mainly by the Industrial Products business for impairment recognition and measurement purposes.
Due to the decision to discontinue properties were recognized as follows the Industrial Products business, it
is expected that future cash flows would fall below book values of related facilities, the book values of thoseassets were written down to the recoverable amounts accordingly.
As a result, 1,201 million yen (US$10,704 thousand) of impairment losses were recognized and presented in
Loss on business liquidation in the quarterly consolidated statements of income.
The recoverable amounts are measured at value in use, calculated based on future cash flows discounted
principally at 10.30%.
Production
facilities

Impairment loss
In addition to the impairment loss on production facilities referred to above, impairment losses on rental
properties were recognized as follows:
Impairment loss
Use
Location
Category(millions of yen)
Rental properties

Konan City Shiga
Prefecture

Land

1,175

Other

10

Grouping unit for recognition and measurement of impairment loss is defined by each property for lease.
Due to the declining profitability and significant decline in market value, it is expected that future cash flows
would fall below book values of those properties, the book values of those properties were written down to
the recoverable amounts accordingly.
As a result, 1,185 million yen (US$10,561 thousand)of impairment losses were recognized.
The recoverable amounts are measured at net realizable value, calculated based on real estate appraisal
value.

18. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessor(1) The details of lease investment assets as of March 31, 2017 and 2016 were as follows:
Millions of yen
2017
2016
¥22,210¥25,716386
363(4,058)(4,547)¥18,538¥21,532

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

Thousands of
U.S. dollars
2017$197,950
3,440(36,167)$165,223(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2017 and 2016 , were as
follows:
28

Millions of yen
2017
2016
¥7,355¥7,878
6,022
6,804
4,590
5,374
2,638
3,705
1,594
1,851
¥11
¥104

Within 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years

29

Thousands of
U.S. dollars
2017$65,553
53,67240,90923,512
14,207$98

19. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2017 and2016, were as follows:
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Operating leases:
Due within one year
¥3,490¥2,937$31,105
Due after one year
17,101
20,570152,415
Total¥20,591¥23,507$183,520
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,2017 and 2016, were as follows:
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Operating leases:
Due within one year
¥137
¥158
$1,221
Due after one year
72
74
642
Total
¥209
¥232
$1,863
20. Contingent Liabilities
Contingent liabilities as of March 31, 2017 and 2016, were as follows:
Thousands ofMillions of yen U.S. dollars
2017
2016
2017
As guarantor of third-party indebtedness from financial
institutions¥28,555¥44,059$254,501(Fiscal 2016)
Expenses with regard to the modified agreement contents between the U.S. subsidiary of Takata Co., Ltd.
and NHTSA (The National Highway Traffic and Safety Administration of the United States) dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” releasedby MLIT (The Ministry of Land, Infrastructure, Transport and Tourism of Japan) dated May 27, 2016, andrecalls in the other regions including China and Australia required by the U.S. and Japanese authorities are
not accrued in the consolidated financial statements for the fiscal year ended March 31, 2016, since theamounts of these expenses can not be estimated reasonably at present.
Expenses with regard to recall of airbag inflators manufactured by Takata Co., Ltd. which can be reasonably
estimated were accrued in the consolidated financial statements for the fiscal year ended March 31, 2016.
SUBARU group notified the regulators to take corresponding actions in North American Market on May 25,
2016 and decided to do it in Japan and the other regions including China and Australia by the end of June
2016, that cover a part of contingent liabilities mentioned above.
(Fiscal 2017)30

Expenses with regard to the modified agreement contents between the U.S. subsidiary of Takata Co., Ltd.
and NHTSA (The National Highway Traffic and Safety Administration of the United States) dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” releasedby MLIT (The Ministry of Land, Infrastructure, Transport and Tourism of Japan) dated May 27, 2016, andrecalls in the other regions including China and Australia required by the U.S. and Japanese authorities are
accrued to the extent that the amount can be reasonably estimated in the consolidated financial statements
for the fiscal year ended March 31, 2017.
There is a possibility that additional expense may be accrued required due to events in the future.
21. The Amount of Discount of Export Bill
The amount of discount of export bill as of March 31, 2017 and 2016, were as follows:
Millions of yen
2017
2016

Thousands of
U.S. dollars
2017

The amount of discount of export bill
¥1,210¥1,718$10,784

22. Transfer of Financial Assets to Special Purpose Company
The balance of financial assets transferred to special purpose company as of March 31, 2017 and 2016, wereas follows:
Thousands ofMillions of yen U.S. dollars
2017
2016
2017
Balance of financial assets transferred to special purpose
company(loan receivable of Automobiles and accounts¥4,488¥4,508$40,000
receivable-trade of Aerospace)
23. Segment Information(1)Outline of business segment
The business segments the Company reports are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic investigation
to determine distribution of management resources and evaluate their business result.
The Company recognizes Automobile as its main business, and introduces an internal company system andrecognizes Aerospace, and Other divisions. This framework makes clearer the responsibility of each division
and accelerates business execution. The Company manages the subsidiaries on the basis of thisclassification. Therefore, the business segments consist of Automobile, Aerospace, and Other which does notbelong to Automobile nor Aerospace.
Automobile segment manufactures and sells vehicles and related products. Aerospace segment
manufactures aircrafts, parts of space-related devices.
(Changes in reporting segments)"Industrial Products", which had been formerly reported as a single segment, is included in "Other" segmentfrom the fiscal year ended March 2017 due to the decision to liquidate the Industrial Products business at theBoard of Directors meeting held on November 2, 2016.
Segment information for the twelve months period ended March 31, 2016 is presented in conformity withthe change.
(2)Calculation method of sales, profit or loss, assets, liabilities and other items by reportable segments
31

Accounting method for reportable segments is almost the same as "2. Summary of Significant
Accounting Policies".
Segment incomes are calculated based on operating income.
Net sales - Inter-segment are calculated based on current market prices.
(3)Information on sales, income, assets and other items by reportable segments for the fiscal years ended
March 31, 2017 and 2016 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
Net Sales:
2017
2016
2017
Automobiles
Outside customers¥3,151,961¥3,039,424$28,092,344
Inter-segment
4,720
4,752
42,068Sub-total
3,156,681
3,044,176
28,134,412
Aerospace
Outside customers
138,759
152,786
1,236,711
Inter-segment
Sub-total
138,759
152,786
1,236,711
Other (*1)
Outside customers
35,27240,048314,367Inter-segment
23,785
17,850211,988
Sub-total
59,05757,898526,355
Total
3,354,497
3,254,860
29,897,478
Adjustment (*2)
(28,505)(22,602)(254,056)
Consolidated total¥3,325,992¥3,232,258$29,643,422

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

32

2017

Millions of yen
2016

Thousands of
U.S. dollars
2017¥397,657
9,102
3,512
410,271539¥410,810¥543,609
18,201
2,998
564,808
781¥565,589$3,544,180
81,12331,301
3,656,604
4,804$3,661,408

Thousands of
U.S. dollars
2017

Segment assets:

2017

Millions of yen
2016

Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)
Consolidated total¥2,477,309
223,148
87,484
2,787,941(25,620)¥2,762,321¥2,298,942
220,786
97,376
2,617,104(24,694)¥2,592,410$22,079,403
1,988,841
779,715
24,847,959(228,342)$24,619,617
Thousands of
U.S. dollars
2017

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

2017Millions of yen
2016¥80,058
3,663
1,932
85,653-¥67,229
3,668
2,041
72,938-$713,529
32,647
17,220763,396-

Consolidated total

85,65372,938763,396

1,467
1,467
1,467

711
768
1,479
1,479

13,075
13,075
13,075

180,469
14,6991,448
196,616¥196,616

160,048
6,902
1,388
168,338¥168,338

1,608,458
131,007
12,906
1,752,371$1,752,371

Investment to equity-method affiliates:
Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)
Consolidated total
Increase of property, plant and equipment andintangible assets:
Automobiles
Aerospace
Other (*1)
Total
Adjustment (*2)
Consolidated total

Note: *1. Other means the category which is not included into any business segment reported. It consists ofIndustrial product, real estate lease, etc.
*2. Adjustment of segment income refers to elimination of intersegment transaction.
*3. Segment income is adjusted on operating income on the consolidated statements of income.

33

Related Information(1)Products and services information
Products and services information is omitted since the same information is in the segment information(2)Information about geographic areas[1]Sales for the fiscal years ended March 31, 2017 and 2016 was summarized as follows:

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

2017

Millions of yen
2016

Thousands of
U.S. dollars
2017¥650,343
2,192,260[2,056,176]
112,602211,325
159,462¥3,325,992¥605,401
2,104,498[1,972,797]
126,201
237,297
158,861¥3,232,258$5,796,283
19,538,859[18,325,989]
1,003,583
1,883,467
1,421,230$29,643,422

Note: *1 Sales is categorized by country or area which is based on customer location.
*2 Sales of the United States is included in North America area.
[2]Property, plant and equipment for the fiscal years ended March 31, 2017 and 2016 was summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Property, plant and equipment: (*1)
Japan
¥489,383¥440,019$4,361,702
North America
166,665
131,654
1,485,428[United States] (*2)[165,877][130,978][1,478,405]
Europe
425
462
3,788
Other
792
498
7,059
Consolidated total¥657,265¥572,633$5,857,977
Note: *1 Property, plant and equipment is categorized by country or area according to geographic adjacentlevel.
*2 Property, plant and equipment of the United States is included in North America area.
[3]Major customers Information
Information about major customers is omitted because there were no outside sales to single customer withequal to or more than 10% of Net sales on the consolidated statements of income for the fiscal years ended
March 31, 2017 and 201634

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, 2017 and 2016
was summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Impairment loss in fixed assets:
Automobiles
¥3
¥11
$27
Aerospace
Other
2,386
21,265
Total
2,389
11
21,292Adjustment
Total¥2,389¥11$21,292“Other” represents the business segments which are not included in any reportable business segments. It
ncludes, Industrial products and Real estate lease, and other.
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, 2017 and 2016 was summarized as follows:
GoodwillThousands ofMillions of yen
U.S. dollars
2017
2016
2017
Amount written off of current period:
Automobiles
¥206
¥241
$1,836
Aerospace
Other
Total
206
241
1,836
Corporate and elimination
Total
206
241
1,836
Balance at the end of current period:
Automobiles
Aerospace
Other
Total
Corporate and elimination
Total

1,867
1,867
¥1,867

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

35

2,090
2,090
¥2,09016,64016,640$16,640

24. Fair Value of Investment and Rental Property
The Company and certain consolidated subsidiaries own rental office buildings and rental commercial
facilities with the objective of generating rental income in Saitama prefecture and other locations. Certain
domestic rental office buildings in Japan are classified as properties that include portions used as investment
and rental property, because part of them are used by the Company and certain consolidated subsidiaries.
The consolidated balance sheet amounts, principal changes during fiscal 2017 and 2016, and fair value atthe end of fiscal 2017 and 2016 were as follows:
As of March 31, 2017
Millions of yen
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the yearInvestment and rental property¥29,243(¥2,207)¥27,036¥40,819
Properties that include portions used as
investment and rental property¥14,495(¥783)¥13,712¥21,490
As of March 31, 2017

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

Thousands of U.S. dollars
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year$260,633($19,670)$240,963$363,806$129,189($6,979)$122,210$191,533

As of March 31, 2016

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

Millions of yen
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year¥29,248(¥5)¥29,243¥40,173¥15,228(¥733)¥14,495¥22,775

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 and rental property and properties that include portions
used as investment and rental property during the fiscal 2017, principal increases were 1,337 million
yen (US$11,916 thousand) of properties acquisitions, and principal decreases were 1,071 million yen(US$9,545 thousand) of depreciation, 1,203 million yen (US$10,722 thousand) of impairment losses,
568 million yen (US$5,062 thousand) of loss on sales and retirement, 928 million yen (US$8,271
thousand) of end of contracts, and 543 million yen (US$4,840 thousand) of other decreases.
Among changes in the amount of investment and rental property and properties that include portions
used as investment and rental property during the fiscal 2016, principal increases were 622 million yen
36

(US$5,520 thousand) of properties acquisitions, and principal decreases were 1,264 million yen(US$11,217 thousand) of depreciation, and 265 million yen (US$2,352 thousand) of loss on sale andretirement.

3. Fair value of a part of main investment and rental property is the amount estimated by based value ofreal-estate appraiser, and fair value of a part of other investment and rental property is the amountestimated by the Company based principally on land assessment value.
Profit and loss in fiscal 2017 and 2016 from investment and rental property and properties that include
portions used as investment and rental property were as follows:
As of March 31, 2017
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,909¥2,059¥1,850(¥1,133)
Properties that include portions used as
investment and rental property¥775¥1,224(¥449)¥-

As of March 31, 2017

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

Thousands of U.S. dollars
RentalRentalChangeOther profit
incomeexpensesand loss$34,840$18,351$16,489($10,098)$6,907$10,909($4,002)$-

As of March 31, 2016

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

Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss¥3,862¥2,344¥1,518(¥262)¥855¥1,077(¥222)¥-

Note:1. Rental income (from the properties that include portions used as investment and rental property) does
not include the portion that the Company or certain subsidiaries use as the provision of services andbusiness administration purposes. Rental expenses, however, include all portions of the expenses(costs related to depreciation, repairs, insurance and taxes).
2. Other profit and loss include in gain on sale and impairment loss.
25. Subsequent Events
No items to be reported.
26. Other
No items to be reported.

37