Annual Report 2009
For the year ended March 31, 2009

Challenge for Winning the Place

“Challenge for
Winning the Place”
Challenge:

The New Legacy for Our Customers
Symbolizing the culmination of its medium-term management plan’s pivotal “customers come first” philosophy,
FHI has made Legacy a full model change car as its flagship to meet customer expectations.

Challenge:

The Survival
In addition to pushing ahead with the medium-term management plan with greater speed and flexibility,
FHI is working on rigorous cost reductions to survive the current severe business environment.

Challenge:

The Next 50 Years
Last year marked the 50th anniversary of the Subaru 360’s launch. Ongoing structural reforms involvingorganizational streamlining are under way in order for Subaru to remain a company much loved by its
customers for the next 50 years.

2 | A Message to Our Stakeholders
10 | Showcasing the New Legacy
14 | Technology and Driving Performance
16 | An Overview of Global Sales
18 | Corporate Social Responsibility (CSR)
21 | Management
22 | Consolidated Ten-Year Financial Summary
23 | Management’s Discussion and Analysis ofResults of Operations and Financial Position
32 | Consolidated Subsidiaries and Affiliates
33 | Investor Information
Disclaimer Regarding Forward-Looking Statements
Statements herein concerning plans and strategies, expectations or projections
about the future, FHI’s efforts with regard to various management issues, andother statements, except for historical facts, are forward-looking statements.
These forward-looking statements are subject to uncertainties that could
cause actual results to differ materially from those anticipated. These uncertainties include, but are not limited to, general economic conditions, demand
for and prices of FHI’s products, FHI’s ability to continue to develop andmarket advanced products, raw material prices, and currency exchange rates.
FHI disclaims any obligation to update any forward-looking statements,
whether as a result of new information, future events, or otherwise.

D R I V I N GF E E L I N G

S T E E R I N GContents

A Message to Our Stakeholders

In our quest to deliver globally“a distinctive Subaru experience,”
we are determined to survive the current
adversities in any way we can.
Based on the medium-term management plan that commenced in 2007, we delivered
to the market the Impreza and Forester, which competed well in a severe sales environment. As the culmination of our aim to “integrate the pleasure of driving with environmental responsibility, safety, comfort and reliability,” the new-generation Legacy
provides us the drive to turn this adversity into advantage.

2

IKUO MORI
Representative
Director of the Board,
President and CEO

D R I V I N GF E E L I N G

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“ In a turbulent
business
environment,
FHI recorded
its first loss in
15 years.”

that of fiscal 2008, having assumed an exchange rate of ¥100 to the
U.S. dollar, ¥16 stronger than the previous fiscal year, and anticipated such factors as skyrocketing prices for raw materials.
In the first half of the period under review, full production wasmaintained of the Forester, for which there was robust demand, following on from the Impreza, which had been launched in the previous year. We produced 268 thousand vehicles, an improvement of
31 thousand vehicles compared with the same period of the previous fiscal year, with consolidated sales volume totaling 282 thousand, an increase of 11 thousand units. Operating income remained
essentially on par with the same period of the previous fiscal year at¥18.3 billion. Early in 2009, however, the outlook for the year was
revised downward when we had to acknowledge sales of 555 thousand vehicles and, furthermore, an operating loss of ¥9.0 billion due

Fiscal 2009 in Review

In fiscal 2009, ended March 31, 2009, the business environment
surrounding the automobile industry experienced a period of dramatic change. In terms of business performance, a gulf divided thefirst and second halves of the fiscal year. At the beginning of the fiscal year under review, we planned consolidated sales volume of 636
thousand units, an increase of 39 thousand units compared with fiscal 2008. This figure was in keeping with the medium-term management plan, the key themes of which are to “provide a distinctive
Subaru experience” and “increase sales globally,” factoring in theeffect of new Impreza and Forester models. In contrast, with regard
to profit, we had forecast operating income of ¥23.0 billion, half

Performance Overview
Billions of yen(Forecast)

FY2004

FY2005

FY2006

FY2008FY2009FY2010

551

582

571

578

597

555

508

1,439.5

1,446.5

1,476.4

1,494.8

1,572.3

1,445.8

1,320.0

Operating Income (Loss)

50.3

42.0

58.3

47.9

45.7

(5.8)

(35.0)

Ordinary Income (Loss)

56.6

43.6

46.8

42.2

45.4

(4.6)

(40.0)Net Income (Loss)

38.6

18.2

15.6

31.9

18.5

(69.9)(55.0)

Automobiles Sales Volume (thousand units)
Net Sales

Capital Expenditures

74.6

85.3

56.2

59.6

56.3

58.0

59.0

Depreciation Expenses

53.2

51.1

57.5

58.9

65.5

65.1

59.0

R&D Expenses

57.5

53.0

46.9

50.7

52.0

42.8

43.0

Interest-Bearing Debt

379.0

412.2

374.1

343.9

304.5

381.7

400.0

Exchange Rate (¥/$, non-consolidated)

116

108

112

117

116

102

95

ROE

8.9

3.9

3.3

6.6

3.7

—

—

3.9

3.3

4.6

3.9

3.9

—

—

Total Assets

1,349.7

1,357.5

1,348.4

1,316.0

1,296.4

1,165.4—

Net Assets**

457.0

474.6

467.8

495.7

494.4

394.7

—

ROA*

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

4

FY2007

Implement emergency measures to counter rapid changes inthe business environment

In addition to making inventory and production adjustments, fromearly 2009 we have been implementing a raft of measures to counterthe effects of the sudden changes in the situation. These measures
have included the cancellation of directors’ bonuses, 10% cuts indirector and executive officer compensation as well as cuts in manager compensation. To reduce costs across the entire FHI Group, wemade the transition from a sales distributor structure to a regional
company structure ahead of schedule and made progress with the
integration of operational and management affairs as well as streamlining. In addition, zero-base reviews are being undertaken, targeting across-the-board costs and efforts to make significant cutbacks.
With the exception of those projects designed to lead the way tofuture growth, thorough verification of the urgency and effectiveness of investment planning was conducted with a view to reducing
the existing plan by more than 20%.
In the current fiscal year, ending March 31, 2010, we will workon the simultaneous launch of the new Legacy onto the Japanese andU.S. markets, emphasizing the United States as the most important
market. Although this will be our first attempt at a simultaneous
launch, we are planning capital expenditure of ¥59.0 billion, only
¥10.0 billion more than in the previous fiscal year. The ¥59.0 billion
represents approximately 30% less than the ¥90.0 billion allowed forin the medium-term management plan. Besides reducing deprecia-“ Comprehensively
reducing costs

and saving all
expenses”

5

D R I V I N G

to the rapid deterioration in economic conditions from the fall of2008 onward and a slowdown in overall demand.
For fiscal 2009, with the yen slightly weaker against the U.S. dollar than had been expected, FHI reported consolidated net sales of¥1,445.8 billion, a level that was slightly above forecast. Buoyed bysuccessful efforts to further curtail costs, the Company reduced thedepth of its earnings decline for an operating loss of ¥5.8 billion.
Losses of ¥88.4 billion turned the net income of ¥18.5 billion
recorded in fiscal 2008 into a net loss of ¥69.9 billion. This waslargely attributable to the reversal of deferred tax assets amounting
to ¥39.4 billion, the uncollectible or delayed collection receivables
and damage to the assets of the ¥8.9 billion to FHI’s Aerospace
Company business partner, Eclipse Aviation Corporation, and theextraordinary loss of ¥3.0 billion incurred due to withdrawal fromthe FIA World Rally Championship (WRC).
As this, our first net loss in 15 years, had brought about a reduction
in retained earnings, it was with some regret that we had to inform
shareholders that we would be suspending the year-end dividend.
Sales of 555 thousand vehicles were 41 thousand fewer than in
fiscal 2008 but were in line with our revised forecast. Although wesold 26 thousand vehicles in China, 14 thousand more than in theprevious fiscal year, overseas sales as a whole were down 11 thousand, to 377 thousand vehicles. Likewise in the Japanese domestic
market, where unit sales of both passenger cars and minicars werefewer than in fiscal 2008, sales decreased by 30 thousand, to 179
thousand vehicles.

F E E L I N G

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Subaru takes pride in the new Legacy
that will excel on the global stage.

D R I V I N GF E E L I N G

S T E E R I N GF U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

“ We will continue
to provide carsthat stand out for
their superior
Subaru driving
performance.”tion and amortization by roughly 10% as part of the medium-term
management plan, we will keep research and development expenses
on par with those of the fiscal year under review. Without undermining future investment, we will plan a streamlining process that clarifies priorities and continue cost reductions.
However, as a rapid recovery in demand is not foreseen, amid currency exchange fluctuations and a business situation that remains
shrouded in uncertainties, it would appear that there will be no end to
the gloomy outlook in the current fiscal year. Thus for fiscal 2010 weare forecasting sales volume of 508 thousand units, consolidated net
sales of ¥1,320.0 billion, an operating loss of ¥35.0 billion and a net
loss of ¥55.0 billion. Therefore, we will be suspending the interim
dividend payment and have yet to not decide the year-end dividend.

The prospects

Some light in the darkness has been provided by the robust Forester
and Impreza sales in North America; in the calendar year 2008, we

8were the only full lineup automaker to achieve higher year-on-yearsales. In the period January to June 2009, we maintained the number of sales units at the previous year’s level. This is because underthe medium-term management plan, in addition to a series of successful full model changes aimed at global market sales, we arestrengthening dealerships in a step-by-step manner and have been
particular successful in our efforts to expand our sales network in
the Sunbelt area of the United States.
The launch of the new Legacy marks the culmination of threeaims in the medium-term management plan: “provide a distinctive
Subaru experience,” “increase sales globally” and “strengthen competitiveness in quality and cost.” While accomplishing the evolutionof a car with driving performance, by such means as a newly
designed engine cradle mount system and the newly developed“Lineartronic”, CVT (Continuously Variable Transmission), we
have made heartfelt efforts to find ways to seamlessly integrate features to allay global environmental concerns.
As shown by the robust sales in the United States, we definitely
have to place importance on the types of cars that we are manufacturing, even more than on worldwide overall demand trends. The
new Legacy, which had its world premiere at the New YorkInternational Auto Show, has earned plaudits from both the media
and dealers alike. It is thought that the Legacy will be a worthy successor in the mainstay North American market, enabling the car toboost expectations that have been lifted from the gloom by our successes there with the Forester and Impreza.
In Europe, where orders have plummeted, we are planning ourrecovery around the eagerly anticipated launch of the Legacy. On
the other hand, there are those emerging markets, such as China
and Russia, where we can take advantage of Subaru’s characteristics.
Forester sales are robust in China so we can further expand Subaru
sales by introducing the new Legacy. In Russia, where we are currently struggling, we believe that we can expect a recovery indemand within two or three years. For the next step we are intending to monitor developments in India and Brazil, should progress be
made with infrastructure upgrades and motorization.
For the time being, we are working to return to global annualManufacturing cars that provide a distinctive Subaru experience

Subaru has targeted “the integration of new driving comfort andreliability with global environment” as its future direction. The challenge in this is the pursuit of the automobile’s qualitative transformation for environmental correspondence. The focus of thattransformation is the power unit, away from conventional gasoline
engines, with the wide choice that is being launched onto the market: diesel and hybrid engines, the electric vehicle (EV) and fuelcells. There is no doubt that this change of direction is coming, andthat featuring each of these automobile power unit applications will
give rise to a best match combination.
The role that we play in this situation is nothing other thandeveloping the best-choice cars that accurately address these changes
for customers. For a car to have good attributes is not simply a matter of its power unit; a large part involves the maturity of the whole
package, including the pleasure of driving with a superior suspension system. This is where Subaru utilizes technologies that it hascontinuously honed. Advancing the development of leading power
units, we introduced our diesel engine into the European market in
March 2008 and the EV in Japan in July 2009.
To make Subaru’s strengths even more prominent, we make fulluse of our complementary relationships through an alliance with
Toyota Motor Corporation. We also have a deepening relationshipwith Daihatsu Motor Co., Ltd., which will supply us with minicars.

Ways of selling a car

Besides environmental responsiveness, we consider another criticalissue to be the pursuit of genuine customer satisfaction. In accordance with our brand strategy, we send out information about thedevelopment of Subaru cars. Customers who would like to thencome to our showrooms and take a car for a test drive to gain a better understanding of aspects that are impossible to grasp merely bychecking what is on the Internet.
There is no particular magic involved in this strategy. It is important to establish the way of thinking and to structure how we candeliver customer satisfaction simply and honestly.

“ It is vital for us

to know our customers throughthe cars.”

In conclusion

That the Impreza and Forester are performing well even under thesesevere operating conditions provides proof positive that up to now
we have been faultless. We are confident of the medium-term management plan’s direction and will press forward with an added senseof urgency. As the condition of the road ahead is extremely uncertain, we will put our medium-term management plan targets on
hold. We will firstly give added momentum to the new Legacy,
place ourselves on course for a recovery in the second half of thecurrent fiscal year and put all our efforts into achieving the targets
for the fiscal period ending March 31, 2010. In fiscal 2011, we will
ensure stable growth and be certain to affect a recovery in businessperformance. In this context, we consider the real answer to the initiatives that we have taken through the medium-term management
plan to be the launch of Legacy.
As we are riding out the current adversity in any way we can, we
would very much welcome your support in the years ahead.

IKUO MORI
Representative Director of the Board,
President and CEO

9

D R I V I N G

sales of 550-600 thousand vehicles and will be aiming for 700 thousand vehicles.

F E E L I N G

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Showcasing the New Legacy

Delivering True Customer Valueon the World Stage— The new Legacy provides an “enriching experience” to all drivers and passengers —Q: Could you please tell us about the positioning of the Legacy
within FHI’s medium-term management plan?

The Legacy accounts for a quarter of Subaru’s total unit sales (560
thousand vehicles in FY2009); the ratio is even higher in terms ofrevenues and profits. Benefiting from the launch of a new model in
2009, Legacy sales are projected to make an increasingly important
contribution to FHI’s overall sales volume and mix over the next 12
to 18 months. On a geographic basis, North America—where themodel is manufactured locally by Subaru of Indiana Automotive,
Inc. (SIA)—accounts for approximately half of all Legacy sales, withthe remainder spread throughout Japan and other markets. As identified in our medium-term management plan, wider market acceptance of the Legacy in the world has a significant impact on Subaru’s
ongoing growth.
Q: What effect did the adoption of this global perspective have on
the development process?

The Legacy was historically built as a vehicle of the Japanese, by theJapanese, for the Japanese. However, in the coming months andyears, it is imperative that the new-generation Legacy not only competes but also excels on the world stage. We have thus taken comprehensive steps to extend our design, product planning anddevelopment processes beyond the limitations of the domestic market. In addition to identifying the product features of competingvehicles in the U.S. market, we have endeavored to ascertain the

expectations, requirements and causes of dissatisfaction among current Legacy owners. Once putting aside our idea just focusing solely
on the manufacture of quality— in other words, on engineer oriented vehicles should satisfy our customers—we took into consideration how our products are viewed and worked diligently to addresseach aspect of the high function and performance levels required bycustomers including the customer’s future requirement of the car.
Q: A key theme of the medium-term management plan is to“increase sales globally.” How do you plan to put this into practice? Can you also elaborate on FHI’s activities in each of its major
markets?

In Japan, the two-liter sedan and station wagon classes, mainstay
markets for Subaru’s Legacy series, are both showing signs of steadycontraction and persistent decline. Despite efforts to clarify theLegacy’s target users demographically, this downturn in its customer
base is making it increasingly difficult to ensure continuous sales.
Naturally, the Legacy’s ideal target base consists of those customers who feel an overall sympathy with its features and concept.
Therefore, it is problematic to convey the appropriate appeal of theLegacy when catering solely to the needs of the typical two-litersedan and station wagon users. Put another way, this particular seriescontinues to attract wide acclaim from current and previous owners
as well as generating interest from those who have yet to enjoy theLegacy experience. Over and above a conceptual image, we have thus
placed considerable emphasis on identifying the needs of this latentmarket while at the same time delivering to the future lifestylerequirements of Legacy fans from wide-ranging perspectives, including ride comfort and convenience in the real world.

Project General Manager of New Legacy

Takeshi Tachimori
2.5-liter Boxer Engine (Left)
Eco Gauge (Right)

Corporate Vice President,
Chief General Manager,
Subaru Product & Portfolio Planning Division“ Delivering to the
future lifestylerequirements ofcustomers.”

D R I V I N G

An Interview with the Project General Manager for the NewGeneration Legacy

F E E L I N GF U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

Lineartronic: a new developed
CVT(Continuously Variable Transmission)

Interior: increasing both vehicle height andwidth to satisfy customers

As a pioneer in the U.S. crossover vehicle category, our principal
focus is on staging a recovery with the Outback, sales of whichpeaked at between 7 thousand and 8 thousand units per month.
Stimulated by Subaru’s robust crossover performance, our competitors launched successive series of models exclusive to the U.S. market. A combination of factors—our inability to afford an exclusive
body approach and the influx of rival models—meant that our
Outback could not keep up with customers’ changing needs. To rectify this situation, we took comprehensive steps to identify customers’ selection criteria. In uncovering how the Outback is currently
perceived—those features in our existing lineup that are consideredattractive and those that tend to detract from a potential purchase—
we redesigned our criteria, increasing both vehicle height and width.
Turning to the U.S. sedan market, where unlike the Outback ourmonthly sales have only reached 1 thousand units, we have to deliverproducts that can compete on an equal footing with other North
American models. To position the Legacy as the vehicle users will
choose next, we upgraded its capacity, driving comfort as well as fuelefficiency. In addition to delivering superior handling and ride comfort, we have made the Subaru brand image and character stand out
from the crowd and reinforced the Legacy’s market presence throughthe use of distinctive styling and design.
In this context, we looked closely at vehicle dimensions. The
comparative overall widths of the domestically marketed Legacy
sedan/station wagon and the Outback are 1,780mm and 1,820mm,
respectively. To have enough size appearance in the United States, westandardized the width of both the Outback and Legacy sedan at
1,820mm. In order to better satisfy the plenty of room requirementsof drivers and passengers, we increased their overall height.

Europe and such emerging markets as Southeast Asia, the Middle
East and South America. In contrast, in Japan, we are focusing solely
on the optimally balanced 2.5-liter class.
Ordinarily, the two-liter class outperforms the 2.5-liter in termsof fuel efficiency. Under actual driving conditions, however, thanks
to the newly developed CVT (Continuously Variable Transmission),“Lineartronic”, which lowers the overall engine speed, the torquehandling capability of the 2.5-liter Legacy dramatically, improves
fuel efficiency. Focusing on the actual level of customer satisfaction,
we have therefore selected the 2.5-liter class. Based on practical market research and with little or no discrepancy in fuel efficiency
between the 2.5- and two-liter classes, customers have shown a clear
preference for the former.
Q: What steps have you taken to address the cost reduction issues?

In the case of the fourth-generation Legacy, two factors served toplace considerable downward pressure on profits: our inability to
fully offset emission and collision safety compliance costs throughproduct price mark ups and the extensive use of aluminum parts
designed to improve fuel efficiency.
Learning from past experience, we carried out examinations on
an individual market basis to validate that the incurred costs would
be recognized by customers as product value. At the same time, we
undertook comprehensive comparisons of the equipment and specifications of competing vehicles in the United States to clearly identify distinguishing characteristics as well as essential items. In order toensure a cost structure commensurate with product value, we
worked diligently to reduce costs from the design and purchasingstages and to eliminate all factors that could cause a profit decline.

Q: Are you selling a two-liter class Legacy in emerging markets?

Cradle structure: newly designed as a
powertrain mounting system

12

Historically, Legacy sales in the United States have been based on the
2.5-liter class, while the two-liter class made up the vast majority ofsales in Japan, Europe and other export markets. Taking into consideration the product prices and related tax imposts, we have identified
the two-liter class as critical to our ongoing marketing efforts in

Q: In the past, production and sales in North America have lagged
behind Japan by around a year. What measures were adopted in
the lead up to concurrent production?

Following its launch in 2003, the fourth-generation Legacy was
acclaimed “Car Of The Year Japan.” At the beginning of the follow-

ing year, I was appointed to the position of Project General Manager(PGM) responsible for the development and launch of the next-generation Legacy. In taking on this PGM role, the usual first stepwould have been to assemble a project team made up of engineering
division members and to then consider and determine the contentsof vehicle to be developed. In my case, however, I spent the first year
evaluating wide-ranging aspects of the U.S. and domestic markets toascertain those requirements critical to ensuring overall sales success.
Before considering the contents of vehicle to develop, I held indepth preliminary discussions with both manufacturing and sales
divisions. With the United States recognized as the best sales area for
the Legacy, local sales and marketing divisions insisted that we eliminate the historic one year lag that existed with Japan. Having previously been posted to Subaru’s U.S. operations, I could only agreewith these sentiments and vowed to make the necessary changes.
A key component of my initial duties was therefore to consider
and determine the development and manufacturing process thatwould most efficiently lead to concurrent production in the UnitedStates and Japan. From a cost perspective, a review of the production
process was naturally essential to securing further cost reduction. In
this regard, we drew from the ideas culled from such wide-ranging
fields as procurement and production, fine-tuning overall schedules
as delays arose. As a matter of fact, the idea to increase and align thedimensions of the Legacy sedan with those of the Outback in the
United States came from a member of our purchasing division.
Q: What was the turning point in the development of the newgeneration Legacy?

Even at the conceptual level, the issue was never “What should we
improve and how?” but “How should we work with customers?” and“Fundamentally, how should we approach them?” How to approachcustomers is a critical concept that must be understood from thevery beginning of the car development process, be it in productplanning or in the engineering division.
My role has therefore been to bring the relevant issues into sharp
focus. I have had to think about how to persuade others and to move

forward. In intending to respond to every issue, I have studied eachone and asked myself “Is this really impossible? Would doing thismake it possible?” While I placed all the project team members in adifficult situation when I commented “Look, we are successful,” I
invariably received the reply “Yes, indeed we are!”
In fact, if I had to pick the most difficult aspect, I would have tosay it was overcoming what we considered to be obstacles, and thenthinking about how we could overcome them. I’m not referring here
to a naive mentality. It was more the difficulty in transferring thisthought cycle and process into action logically, or in other words,
applying our minds to accomplish each task.
In order to release products as a truly professional manufacturer,
Subaru has therefore changed its conventional ways of thinking,approach its customers and the methods used to develop its products
through the project of new-generation Legacy.

“ Encompass pushingboundaries andexploration.”

Q: Finally, how would you define the “enriching experience” thatyou sought to deliver with the Legacy?

If I were to explain my interpretation of an “enriching experience,” I
think that it would definitely involve “grand touring innovation.” In
the past, grand touring was associated with travel, the idea of “taking
a journey on the road of life.” Each journey brings with it new discoveries and experiences, which serve as a wellspring for human
growth and development. The “enriching experience” that we sought
to deliver with the Legacy encompasses pushing boundaries andexploration, to visit new places, make new discoveries and enjoy all
those things that are part of life’s rich tapestry. The Legacy’s “enriching experience” could therefore be regarded as the pinnacle of life’s
pleasures and rewards.

13

D R I V I N GF E E L I N GF U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

Technology and Driving Performance

Further Pursuing the Ideas of Outstanding Driving
Performance to Provide the “Distinctive Subaru Experience”

Rd.9 Finland Rally in the 2008 WRC“ We remain unwaveringin our commitment toSubaru automobiles.”14

The fifth-generation Legacy marks a memorable milestone: the 20th
anniversary of the model’s launch. The first-generation Legacy blazed
the trail and the “Grand Touring” concept has brought us to where
we are today. The distinctive value of the Legacy rests in its ability toencapsulate the enjoyment of driving along your own chosen road,
derived from an expansive sense of the freedom to drive anywhere
you please that is intrinsic to cars. Underpinning this quintessential
driving experience is Symmetrical AWD (combining a Boxer Engine
with symmetrical all-wheel drive), Subaru’s core technology. Byarranging the main heavy components of the car in a straight line,
including its horizontally opposed engine, the proprietary symmetrically positioned AWD layout enables our automobiles to deliver outstanding performance whatever the speed range and regardless of theroad surface.
The new Legacy epitomizes “Grand Touring Innovation,” which
provides all drivers and passengers with an enriching experience,
while delivering eco performance and passenger enjoyment in addition to traditional driver fun. To embody this new value in the new
Legacy, we incorporated the new Subaru DC3 (Subaru Dynamic
Chassis Control Concept) Intelligent-Chassis and revamped theengine mount structure, switching from that of the Subaru 1000 and
subsequent models to cradle-type mounts. Changing to a structure
where the engine and transmission are attached directly to the body,
we mounted the engine and transmission by means of a cradleshaped frame, thereby reducing vibration and noise and also improving ride comfort and collision safety. In addition, the new Legacy
features the newly developed CV T (Continuously Variable
Transmission), “Lineartronic”, to provide an enriching experience.
Furthermore, we paid particular attention to environmental considerations, including actual fuel efficiency and lower gas emissions.

Based on the premise that taking driving to the limit would serve to
make its cars safer, Subaru competitively participated in the top category of the FIA World Rally Championship (WRC) over a periodthat spanned 19 years. The principal reasons for this participation
were that we wanted to hone our technological expertise throughcompetition against the world’s leading teams, raise brand awarenessand reinforce our image globally. We entered our first-generation
Legacy in the 1990 WRC. The Legacy became the first Group N car
ever to complete the Safari Rally, thereby taking the class championship. Between 1991 and 1997, Subaru continued its winning streakin the Safari Rally, claiming four consecutive Group N championships. At the Rally of New Zealand in 1993, Subaru clinched theoverall championship. Even after the Legacy was superseded by the
Impreza, Subaru won three year consecutive Manufacturers’Champion, from 1995 to 1997, and captured the Drivers’ Champion
in 1995, 2001 and 2003. This stellar performance greatly enhanced
Subaru’s brand value, the know-how gained from the WRC being
fed back and utilized in the development of our volume-production
road vehicles. Due to two factors—the achievement of the three principal reasons behind entering the WRC, and the drastically changing
business environment brought about by rapidly changing global
economic conditions—Subaru ended its WRC involvement at theend of the 2008 season to make more efficient use of its businessresources and to protect and strengthen the Subaru brand.
Nevertheless, we remain unwavering in our commitment to Subaru
automobiles. Subaru will achieve an optimal blend between a comfortable and reliable new driving style and environmental responsibility by creating automobiles with appeal that allow drivers andpassengers to savor the pleasures of driving with a heightened senseof security.

D R I V I N GF U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

An Overview of Global Sales

United States

Subaru’sWorldwide Presence(Thousand Units)250

193 188 194

200

With the overarching goal being to “increase sales globally,” one of five major challenges ofour medium-term management plan, we are promoting a marketing strategy that views
overseas markets as pivotal to our earnings base. In addition to strong contributions fromsuch new models as the Impreza and Forester, the launch of the Legacy diesel in Europe
played a particularly vital role in supporting brisk sales. Despite a downturn in overseas
sales, we experienced a substantial upswing in unit sales in China, which continues to enjoy
remarkable economic growth.

In fiscal 2009, global sales (the combined sales volume for Japan and overseas markets) amounted to
555 thousand units, a decrease of 41 thousand
units compared with the previous fiscal year. This
was largely attributable to the weak economic environment and slump in demand. While global sales
are projected to fall approximately 9% year on year
to 508 thousand units in the fiscal year ending
March 31, 2010, we will endeavor to expand overseas sales through the launch of the new Legacy
and by bolstering marketing efforts, focusing mainly on North America.

Note:
Sales volume for the United States through to fiscal 2009 was based on
the calendar year ( January to December). For fiscal 2010, data is for the
12-month period from April 1, 2009 to March 31, 2010.

100

08

20

20

FY

FY

0
FY 9
(P 201
la 0
n)50

Global(Thousand Units)
700

597
555

600

508
500

400

LegacyImpreza
Forester
Exiga
Tribeca
Dex
Justy
Minicars
Others

300

200

FY

FY

20

08

0

20
09
FY
(P 201
la 0
n)

100

16

Sales volume in the United States was 188 thousand
units in fiscal 2009, five thousand units down fromthe previous fiscal year. Despite firm sales of the new
Impreza and Forester, this downturn was mainly due
to weak results in other models. Fueled by the projected benefits from launching the next-generation
Legacy, our target for fiscal 2010 is to raise sales volume by roughly 3% to 194 thousand units.

150

0GlobalUnited States

LEGACYD R I V I N GF U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

RussiaEurope(Thousand Units)

25(Thousand Units)

70
60

23
21

63

China

20

57

China

(Thousand Units)

47
50

15

30

26

40

8

10

30

25

22

20
5

20

13

15
10

Sales volume in China for fiscal 2009 was 26 thousand units, a significant year-on-year increase of 14
thousand units, with growth largely reflecting
robust Forester sales. Our advantages with respect
to safety and driving performance are attracting
wide acclaim in this market. With the benefits of
the launch of the new Forester showing signs of
having run their course, we estimate an approximate 15% decline to 22 thousand units in fiscal
2010. Despite this contraction, we will continue totarget sales volume growth.

FY
20
0
FY 8
20
0
FY 9
(P 201
la 0
n)

0

10

FY
20
0
FY 8
20
0
FY 9
(P 201
la 0
n)

0

5

20
0
FY 9
(P 201
la 0
n)

FY

FY

20
08

Australia
0(Thousand Units)

45

40
37

40

34

35
30
25
20
15
10

FY
(P 201
la 0
n)

8

20

20
0

0

09

5

FY

FORESTERFYIMPREZA

17

Corporate Social Responsibility (CSR)

CSR Policy
As a corporate entity that carries out monozukuri (“manufacturing
products”) to bring enjoyment to its customers, the FHI Grouphas revised its CSR policy. The purpose of the revision, which hasreceived the approval of the CSR and Environmental Committee,
was to clarify the requirements for approaches at the corporate
organizational level: (1) CSR centered on upholding the Corporate
Code of Conduct and respect of critical items, and (2) aggressive
CSR centered on contributing to social issues through businessactivities as a good corporate citizen.
1. Based on FHI’s Corporate Code of Conduct, we shall respect
the law, human rights, international codes of conduct and stakeholder rights as well as uphold standards of moral behavior.
2. As a good corporate citizen, the FHI Group shall work towardrectifying the global social problems facing modern society.
In addition to focusing on relationships with various stakeholders, our CSR activities emphasize the FHI Group’s mission, whichis to contribute to society’s ongoing development through ourglobal business activities.
CSR Management
One aspect of our management vision in the medium-term management plan is stated as: “A corporation that fulfills its social
responsibility.” In conjunction with the basic “customers comefirst” philosophy that represents our indispensable policy in realizing our long-term vision of becoming “a compelling company witha strong market presence,” this plan aims for FHI to retain thetrust of each and every stakeholder, to contribute to the development of a sustainable society and to improve FHI’s corporate value.

18

Environmental Initiatives
FHI regards global environmental matters as one of its most pressing management issues. On that basis, FHI has established an“Environmental Policy,” formulated “Operating Criteria forEnvironmental Conservation” for specific actions to achieve thatpolicy and encourages environmental activities.
Environmental Policy
Subaru recognizes the integral relationship between the environment and its business activities and strives to provide products thatare friendly to the earth, society, and people. Subaru is protecting
the environment to ensure our future.
Corporate Activities and Environmental Impacts
Subaru is a transportation manufacturer focusing on automobiles.
Automobiles, which are a convenient and comfortable form oftransportation, are now indispensable for living in a modern society. On the other hand, however, automobiles require limited global resources as materials and fuels. Consequently, they emit carbon
dioxide (CO2), which causes global warming, as well as other air
pollutants. Profoundly aware of these two sides to the automobile,
Subaru accepts the task to aim for fusion of the global environment
response (drastically improving fuel economy and reducing gas
emissions) and the benefits of automobiles (pleasant driving, comfort and reliance).
Improving Fuel Economy
While utilizing the advantages of AWD and high-power engines,
Subaru has been working to first achieve fuel economy improvements in gasoline-engine vehicles and then to bring those vehicles
to market. Subaru will make those advances in technological development by such means as fuel efficiency gains through engine

improvements, reducing transfer loss in the drivetrain and reducing
vehicle weight and running resistance. The new Legacy, which wason the global market in 2009, is equipped with the world’s firstchain-type CVT developed for AWD vehicles, “Lineartronic”; thisfeature will enhance the superior power output characteristics andenvironmental performance of Subaru’s proprietary horizontally
opposed engine.
Clean Energy Vehicles
Clean energy vehicles have such features as emitting fewer global
warming substances (CO2) and air pollutants (carbon monoxides,
hydrocarbons, nitrogen oxides, etc.) and have less environmental
impact than gasoline-engine vehicles.
Subaru launched its Subaru Plug-in STELLA electric vehicle(EV) in July 2009. Equipped with highly efficient lithium-ion batteries that provide sufficient power for a city commuter car, thevehicle achieves a range of 90km (Subaru figure) when driven in
10-15 mode, the standard emission certification and fuel economy
test for a vehicle in its class. The EV can be recharged up to 80%
of its capacity in 15 minutes using a quick-charging system and isfully rechargeable in eight hours with an AC100V household
power outlet or five hours with AC200V.
FHI positions the EV as one of the viable solutions and key
technologies for environmental preservation and will conduct further R&D to address pricing issues and technical problems withrespect to per-charge driving distance.
Safety Performance
As well as naturally striving to ensure that the driver and passengers
in a Subaru vehicle enjoy a safe and comfortable ride from a varietyof driving scenarios, Subaru aims to improve the overall safety ofthe mobility society from such perspectives as the surrounding

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

environments and people’s safety. Therefore, Subaru is working on
the development of vehicle safety technologies such as “Active
Safety,” which prevents accidents, and “Passive Safety,” which minimizes damage if an accident should occur. Furthermore, Subaru is
actively participating in such projects as an Intelligent Traffic
System (ITS, for use on highways) and the Advanced Safety
Vehicle (ASV), which are being promoted by collaboration between
industry, government and academia.
Active Safety
The Legacy announced in May 2008 is equipped with the“Eyesight” Active Driving Assist system. By means of a stereo camera and a newly developed 3-D graphic processing engine, theEyesight driving assist system brings to fruition superior pre-crashsafety for pedestrians and cyclists too. The Eyesight system, which
supports such functions as “lane departure warning,” “shaking
alarms” and “cruise control for all speed ranges,” was the first in theworld to include a “low-speed range (below 15km/h) pre-crash system for when in traffic” and a “creep suppression and control system for automatic vehicles.”Passive Safety
Subaru cars possess superior ability with respect to “safety from any
direction” thanks to their safety body, a new, proprietary, ring-shaped
reinforcement frame structure. To ensure the compatible co-existencethat will reduce damage to other vehicles and pedestrians, Subaru isalso addressing comprehensive collision safety performance.
The Forester and Exiga, which were selected by the Japan New
Car Assessment Program (JNCAP) in fiscal 2008, were given thehighest assessments in both collision safety performance test (fullwrap frontal, offset frontal and side collision tests) and pedestrianhead protection performance tests, winning the “JAPANEXCELLENT CAR 2008/9.”
The new Legacy represents a quantum leap not only in terms of
comfort and driving qualities, but also in its collision safety performance. In the event of a head-on collision, the cradle mount structure adopted to support its horizontally opposed engine is designed
to fold, forcing the power unit obliquely downward and thereby
protecting the cabin.
Advanced Safety Vehicle (ASV)
In addition to functions that are designed to enable drivers to avoid
vehicle collisions by exchanging location and direction information
when on the move by vehicle-to-vehicle communications, Subaru
has developed the Subaru ASV-4 (the fourth-generation Advanced
Safety Vehicle). The ASV-4 is equipped with a system that is fed
traffic data via links to traffic infrastructure, for example, sensors
built on the road.
This vehicle participated in evaluation trials on public roads in
the Tochigi area in September 2008 and in the Tokyo waterfront
subcenter area in January 2009. In addition to being geared toward
assessing its commercial feasibility, these trials made progress inevaluating its effectiveness in reducing accidents.

Subaru Plug-in STELLA

Subaru Plug-in STELLA Major Specifications
Length × Width × Height : 3,395mm×1,475mm×1,660mm
Curb weight :1,010kg

Passenger seating :4

Maximum speed :100km/hPer-charge driving distance : 90km (10-15 mode)
Electric motor :Permanent magnet synchronous system

Maximum power output :47kWMaximum torque :170N/mDrive train :Front-wheel drive

Battery type :Lithium-ion batteries

Total voltage :346V

Total energy :

9kWh

19

Corporate Governance
Basic Approach to Corporate GovernanceIn line with its Corporate Philosophy, FHI views the strengtheningof corporate governance as one of management’s highest priorities,
so that it can measure up to the trust and confidence placed in the
Company by all of its shareholders, customers and other stakeholders. In the pursuit of more efficient management, FHI is working
to clarify management and execution functions to enhance decision-making speed. Ensuring proper management and businessexecution through a well developed auditing system, the Company
works to augment both its compliance and risk management
frameworks. Fair and timely information disclosure is also leading
to more transparent management.
An Overview of Internal Organizations and Status of Internal
Control System Development
FHI adopts an audit system, which encompasses the decision-making process as well as the audit of matters of importance to businessexecution made by the Board of Directors and Board of Corporate
Auditors. Comprising seven members, the Board of Directors
works to make decisions related to business affairs speedier andmore streamlined. The Board of Corporate Auditors is currently
made up of four auditors. Objectivity in the oversight of management is enhanced by the appointment of two outside corporate
auditors.
With regard to the business execution system, an Executive
Management Board was established to serve as an entity engaged
in preliminary deliberations, performing initial reviews of issues
before they are presented to the Board of Directors and deliberating on companywide management strategies and the execution ofimportant business operations. In addition to utilizing an executive
officer system, an internal company system was introduced— centered around the core Automobile, Aerospace, Industrial Products
and Eco technology divisions—as a means of making clearer the20

responsibility of each division and accelerating business execution.
With a view to ensuring that executive officers comply with thelaw and with the Company’s Articles of Incorporation in the execution of their duties, the Board of Directors decided on a basic policy concerning upgrades to the system necessary to ensure theadequacy of business operations of other companies in May 2006.
Internal Audits and Status of Audits Performed by Corporate
Auditors
In keeping with auditing policies and plans formulated by the
Board of Corporate Auditors, corporate auditors attend Board of
Directors’ meetings. In addition to attending the important meetings of other bodies, performing on-site audits at Company business premises, conducting oversight of subsidiaries and Internal
Audit Department hearings, they audit directors’ business execution. Furthermore, the Internal Audit Department, comprising
seven members, is established as an internal audit organization to be
in charge with the responsibility of auditing the business operationsof each department as well as domestic and overseas Group companies on a systematic basis. At the beginning of each financial period
the Internal Audit Department coordinates the internal audit planfor the full fiscal year as well as Board of Corporate Auditors’ meeting policies and works toward further collaboration, while communicating with corporate auditors regarding all information such as
the results of internal audits, monthly reports on the status of internal audit activities and engaging in exchanges of opinions.
Moreover, FHI goes to great lengths to strengthen its audit functions in accordance with audits performed by its independent auditors.
Status of Heightened Risk Management System
Spearheaded by its Strategy Development Division, which maintains a cross-function over each business, the FHI Group isstrengthening risk management through close cooperation acrossall relevant departments and Group companies. In addition, theInternal Audit Department conducts regular audits of the businessexecution of each department and Group company.
To facilitate the establishment of internal control systems, theCompany is setting up and operating compliance systems andinfrastructure, positioning compliance as the most fundamental
element of proper risk management. To promote compliance-oriented practices across the entire Group, we established theCompliance Committee, which discusses and makes decisions onimportant compliance issues and exchanges and communicates relevant information. We have also assigned compliance managers
and compliance officers in each department and Group company,
providing a system in which compliance is practiced rigorously ineach workplace. In addition, for some time we have conducted regular educational and training programs for executives and employees, and we promote compliance-related awareness through internalmagazines and other means.
Internal Control System Upgraded
Having formulated a basic policy for the maintenance of an internal control system, which has since been launched and fully implemented, FHI has made further headway in setting up a project
team. This team is tasked with maintaining an internal control
information system for financial reporting in accordance with theJapanese Financial Instruments and Exchange Law, which has been
in force since April 2008. As a result, following recent upgrade of
the internal control system at the end of March 2009, the Chief
Executive Officer (CEO) and Chief Finance Officer (CFO) assessand confirm proper system maintenance and effective functioning,obtaining internal control audit reports and audits to that effectfrom the independent auditor. These audits and reports were published as the Securities Report and Internal Control System Reportfor the fiscal year ended March 31, 2009.

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

Management(As of June 24, 2009)

IKUO MORIHIROSHI KOMATSU

HIROYUKI OIKAWA

Representative Director of the Board,
President and CEO

Representative Director of the Board,
Senior Executive Vice President

Director of the Board,
Executive Vice President

KAZUSHIGE OKUHARA

MASATSUGU NAGATO

JUN KONDOYASUYUKI YOSHINAGA

Director of the Board,
Executive Vice President

Director of the Board,
Executive Vice President

Director of the Board,
Executive Vice President

Director of the Board,
Executive Vice President

Representative Director of the Board,
President and CEO

Directors of the Board,
Executive Vice Presidents

Senior Vice Presidents

Vice Presidents

Standing Corporate Auditors

YOSHIO HASUNUMAMASAKAZU KIMURASHUNSUKE TAKAGIIKUO MORI

HIROYUKI OIKAWA

NAOTO MUTO

TAKESHI TACHIMORI

YOJI ISHIMARU

KAZUSHIGE OKUHARAAKIRA MABUCHI

MOTOKIYO NOMURANOBUSHIGE IMAI

Representative Director of the Board,
Senior Executive Vice President

MASATSUGU NAGATOTAMAKI KAMOGAWA

MASAHIRO KASAIJUN KONDOTOMOHIKO IKEDA

NAOTO ARAI

Corporate Auditor

HIROSHI KOMATSUYASUYUKI YOSHINAGAHISASHI NAGANOYASUO UENO

GIICHI MIYAKAWA

MITSURU TAKAHASHI (CFO)HIDETOSHI KOBAYASHI

MOTOHISA MIYAWAKIYOSHIO HIRAKAWA
RYOICHI SHIMOKAWATATSUHIKO MUKAWAYASUO KOSAKAI

21

Consolidated Ten-Year Financial Summary
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

For the Year:Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (loss)
Income (loss) before income taxes andminority interests
Net income (loss)
At Year-End:
Net assets*
Shareholders’ equity
Total assets
Ratio of net assets to total assets (%)
Per Share (in yen and U.S. dollars):
Net income or net loss:
Basic
DilutedNet assets
Other Information:
Automobile inventory (1,000 units):
Japan
United States
Depreciation/amortization expenses
Capital expenditures(addition to fixed assets)
R&D expenses
Number of shares issued(thousands of shares)**Number of shareholders**
Number of employees**:
Parent only
Consolidated

Thousands of
U.S. dollars

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2009

¥ 1,330,125
995,131334,994
243,593
91,401¥ 1,311,887
978,841
333,046
251,373
81,673¥ 1,362,493
992,950
369,543
281,063
88,480¥ 1,372,337
1,011,582
360,755
293,234
67,521¥ 1,439,451
1,085,716
353,735
303,41150,324¥ 1,446,491
1,107,718
338,773296,756
42,017¥ 1,476,368
1,125,293
351,075
292,736
58,339¥ 1,494,817
1,142,674
352,143304,237
47,906¥ 1,572,346
1,217,662
354,684
309,004
45,680¥ 1,445,790
1,164,564
281,226
287,029(5,803)$ 14,713,922
11,851,862
2,862,060
2,921,117(59,057)

64,83931,34821,291
22,62856,13630,283

46,97033,48456,266
38,64921,066
18,23828,674
15,61145,58931,89931,90618,481(21,517)(69,933)(218,980)(711,714)¥ 213,806
206,404
1,038,558
19.9%¥ 363,199
357,455
1,168,501
30.6%¥ 399,598
396,112
1,269,558
31.2%¥ 414,614
411,252
1,344,072
30.6%¥ 457,027
453,708
1,349,727
33.6%¥ 474,616
471,149
1,357,459
34.7%¥ 467,786
465,522
1,348,400
34.5%¥ 495,703
494,004
1,316,041
37.5%¥ 494,423
493,397
1,296,388
38.1%¥ 394,719
393,946
1,165,431
33.8%$ 4,017,087
4,009,220
11,860,686

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

$

(0.94)—
5.15$

753,470

¥

51.90
48.53
338.7526.1
29.2
60,190

¥

30.44
29.06
480.8629.7
40.0
64,070

¥

40.74
38.83
532.8833.5
41.2
63,964

¥

44.84
42.91
553.9022.9
44.7
67,896

¥

50.62
49.66
582.6028.4
48.1
71,112

¥

23.27
23.27
604.51

24.5
51.2
71,010

¥

20.66
20.66
649.4118.5
55.6
80,073

¥

44.46
44.44
687.81

16.5
46.3
81,454

¥

25.73
25.73
687.02

12.4
49.5
87,164¥(91.97)—505.5913.5
54.2
74,036

103,922
40,123102,301
46,622

118,376
54,903

119,423
60,110128,026
57,541

147,759
52,962

119,289
46,893

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

614,553
49,381

746,502
32,996

746,506
33,094

746,52135,584

782,865
34,704

782,865
34,558782,865
46,367

782,865
42,920782,865
44,484

782,865
40,83913,66826,914

13,60326,502

13,374
26,48313,06427,47812,92827,296

12,703
26,98911,998
26,115

11,752
25,598

11,90926,404

12,13727,659Note: U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥98.26 to US$1.00, the approximate rate of exchange at March 31, 2009.
* Prior year amounts have been reclassified to conform to the current year presentation.
** As of March 31

22

Millions of Yen

968,380
435,895

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

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

The Fuji Heavy Industries Ltd. GroupThe Fuji Heavy Industries Ltd. (“FHI”) Group is engaged in production and sales activities across a wide range of business sectors.
These activities are conducted under four business divisions:
Automobiles, the Group’s core operating domain, Aerospace,Industrial Products and Other.
On a consolidated financial accounts settlement basis, FHI and
68 subsidiaries (a year-on-year increase of six) as well as 15 equitymethod affiliated companies (a year-on-year decrease of six) were
included in the scope of the FHI Group’s consolidation as ofMarch 31, 2009, the end of fiscal 2009 (“the fiscal year underreview”). During fiscal 2009, seven of FHI’s equity-method
subsidiaries were reclassified as consolidated subsidiaries due totheir growing importance.
Overview

Triggered by subprime loan issues in the United States, the effectsof the ensuing global financial crisis spilled over rapidly into thereal economy. This was particularly evident from the second half ofthe fiscal year under review. Conditions were extremely difficult in
the industries in which FHI operates. In addition to sluggish
demand for such products as automobiles, continued appreciationin the value of the yen exacerbated the overall negative trend.
Guided by its medium-term management plan, which waslaunched in April 2007, as well as the underlying key words“customers come first,” the FHI Group worked diligently to overcome these conditions by bringing to market a succession of new
products that pinpoint customer needs. In specific terms, FHI
introduced to the domestic market the “Exiga,” a new type ofmulti-passenger vehicle, in June 2008 and the new compact car“Dex” in November 2008 supplied on an OEM basis by Daihatsu
Motor Co., Ltd.
Confronted by a volatile economic environment, FHI also
implemented emergency measures aimed at reducing costs acrossthe board. Endeavoring to establish a stable profit stream immune
to fluctuations in operating conditions, FHI introduced a numberof structural improvements while focusing on internal reform.

Despite these initiatives, the Group was unable to offset the
impact of the harsh operating environment. Consolidated net sales
in fiscal 2009 were ¥1,445.8 billion, down ¥126.6 billion, or
8.0%, from ¥1,572.3 billion in the fiscal year ended March 31,
2008. This was primarily attributable to a weak performance by
the mainstay Automobiles division, reflecting lower sales volume
on the back of sluggish demand for automobiles and appreciationin the value of the yen, as well as revenue downturns in both the
Aerospace and Industrial Products divisions. On a geographic
basis, sales in Japan declined 6.7% compared with the previous
fiscal year to ¥507.5 billion, due mainly to stagnant consumer
demand. Despite higher sales in China, overseas sales decreased
8.8% year on year to ¥938.3 billion, owing to lower sales in North
America, Europe and other regions.
From a profit perspective, the FHI Group reported an operating
loss of ¥5.8 billion. This represented a negative turnaround of ¥51.5
billion from the operating income of ¥45.7 billion recorded in theprevious fiscal year. In addition to the drop in sales and the impact
from the stronger yen, this downturn was attributable to theincrease in fixed costs associated with the launch of new car models.
In the fiscal year under review, FHI incurred an extraordinary loss,
namely the write-off of uncollectible business partner receivables
while reversing a portion of its deferred tax assets. Accounting forthe aforementioned factors, the FHI Group reported a net loss of¥69.9 billion, down ¥88.4 billion from net income of ¥18.5 billion
in the fiscal year ended March 31, 2008.
Segment Information

Automobiles Division

In the fiscal year under review, most overseas economies weakened,
impacted by a slump in demand and Japan’s economy was no exception. As a result, global sales volume was 555 thousand units, down
41 thousand units, or 6.9%, compared with the previous fiscal year.
On the domestic front, passenger car sales benefitted from therelease of such new models as the Exiga and Dex. The number ofpassenger cars sold, however, decreased eight thousand units, or
10.2%, year on year to 70 thousand units. The reason for thisdecrease can be attributed to a combination of two main factors:

diminishing new car effects of Impreza and Forester, and declining
sales volume of the existing Legacy, which had effectively reached
the end of its lifecycle. Similarly, minicar sales declined 22 thousand
units, or 16.8%, to 109 thousand units, reflecting the absence ofany new model release and the prolonged life of existing models.
Accounting for each of the aforementioned factors, total sales
volume in Japan contracted 30 thousand units, or 14.3%, comparedwith the previous fiscal year, to 179 thousand units.
Overseas sales were firm during the first half of the fiscal year
under review. Reeling from the effects of the broadening economic
downturn as well as the abrupt and sharp appreciation in the valueof the yen in the second half, the FHI Group was forced to implement inventory adjustments. As a result, overseas sales volume
decreased 11 thousand units, or 3.0%, to 377 thousand units. By
region, sales in North America were down three thousand units, or
1.5%, to 207 thousand units. Although the Impreza, which was
released in 2007, and the recently launched new Forester madestrong contributions, these were insufficient to compensate fordeclining sales of the Legacy, ahead of its full model change, andthe Tribeca. The new Forester and the Legacy diesel launched inEurope in 2008 boosted sales volume particularly in the first halfof the fiscal year. Taking into account the drop in other model sales
and inventory adjustments implemented in the fourth quarter,
however, sales volume in Europe decreased nine thousand units, or
9.9%, year on year to 77 thousand units. In China, where Forester
sales were robust, sales volume surged 14 thousand units, or
107.5%, to 26 thousand units. Buffeted by the drop in sales of theLegacy and Impreza in the Middle East, sales volume in otherregions declined 10 thousand units, or 25.1%, to 29 thousand units.
Consequently, net sales in the Automobiles division decreased¥104.9 billion, or 7.4%, compared with the previous fiscal year, to¥1,316.3 billion. From operating income in the fiscal year ended
March 31, 2008, earnings declined ¥46.3 billion. As a result, theAutomobiles division reported an operating loss of ¥9.2 billion due
mainly to lower sales, the impact of foreign currency exchange
rates and particularly appreciation in the value of the yen and anincrease in fixed costs.

23

Consolidated Automobile Sales by Region**(Number of Units)

Consolidated Automobile Sales

Number of Units
2005

2006

2007

2008

2009

Domestic Units:

600,000

400,000

200,000

Legacy56,97750,61943,951

31,07920,415

Impreza

25,194

26,911

24,13529,67819,733

Forester

17,70917,405

11,807

16,863

16,424

Exiga

—

—

—

—

11,126

Dex

—

—

—

—

2,034

Others

4,138

2,747

1,308

435

363

Subtotal

104,018

97,682

81,20178,05570,095

Minicars

150,021

132,483

145,610130,635

108,694

254,039

230,165

226,811

208,690

178,789

United States

193,917

193,562

190,276

192,760

188,240

Canada16,506

16,384

16,247

17,587

18,873

Europe60,51764,72458,47563,37356,764

Russia——12,92922,622

20,711

Domestic Total
Overseas Units by Region:
0

FY 20052006■ Japan■ United States■ Russia■ Australia

2007

2008

■ Canada2009■ Europe■ China ■ Others** Excluding CKD Overseas

35,41436,50638,136

40,21036,716

Consolidated Automobile Sales by Model**

China

—

—

7,454

12,621

26,184(Number of Units)

Others

21,24130,034

27,61038,802

29,056

327,595

341,210351,127

387,975

376,544

Legacy150,987

132,236

133,720

137,829

102,106

Impreza

66,67072,79090,927

113,777

97,472

Forester

95,173104,059

102,969

96,839153,289

Tribeca—

24,187

18,26827,327

17,658Others

14,765

7,938

5,243

12,203

6,019

327,595

341,210351,127

387,975

376,544581,634

571,375

577,938

596,665

555,333

Australia

Subtotal
Overseas Units by Model:

600,000

400,000

Subtotal

200,000

Total

FY 20052006■ Legacy■ Impreza■ Forester■ Exiga■ Dex

0■ Others** Excluding CKD Overseas

24

2007

2008

2009

■ Tribeca■ Minicars

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

Non-Consolidated Automobile Sales

Number of Units
2005

2006

2007

2008

2009

Domestic Units:
Legacy59,84357,01347,176

34,63422,059Impreza

27,43730,063

26,15932,873

21,935

Forester

19,457

19,256

12,946

18,74016,954

Exiga

—

—

—

—

12,787

Dex

—

—

—

—

2,651

Others

1,397

—

—

—

—

Subtotal

108,134

106,332

86,281

86,24776,386

Minicars

164,624

138,398

157,453

132,872

110,043

272,758

244,730

243,734

219,119

186,429

Legacy44,10142,80946,41048,56828,787

Impreza

69,94675,93592,782

119,000

99,688Forester

90,131

104,425

99,63798,602

164,960

Others

8,324

1,554

894

7,533

6,978

212,502

224,723

239,723

273,703

300,413

Legacy89,45387,78884,44278,42866,878

Impreza

32,20933,637

41,14846,32949,098Forester

58,42453,541

51,25844,53460,748

Baja

7,316

6,239

5,241

1,127

—

Domestic Total

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

300,000

200,000

100,000

Export Units:

Export total
U.S. Retail Sales*:FY 20052006■ Legacy■ Impreza■ Forester■ Exiga■ Dex

0■ Others

2007

2008

2009

■ Minicars

Non-Consolidated Automobile Export Units by Model

Tribeca—

14,797

18,614

16,79010,975

Total

187,402

196,002200,703

187,208

187,699

CKD** Overseas

115,317

119,784

100,972

110,363

77,871(SIA Portion)

115,317

119,784

100,972

110,363

77,871

Legacy105,550

91,51089,351

84,96073,473

Tribeca—

27,481

21,022

24,218

18,108SIA Production Units** U.S. Retail Sales and SIA Production Units are the aggregate figures for the calender year from January through December.
** CKD: Complete Knocked Down

(Number of Units)

300,000

200,000

100,000

0

FY 2005

2006

2007

■ Legacy■ Impreza■ Forester

2008

2009

■ Others

CKD Overseas

25

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

1,600

1,200

800

400

0

FY 2005■ Automobiles

2006

2007

■ Aerospace

2008

2009

■ Industrial Products■ Other

Aerospace Division

Other Division

On an individual product basis, steady progress was made with thedelivery of unmanned aircraft research systems to the Japan
Ministry of Defense. On the other hand, sales decreased in the caseof the “XP-1/CX” next-generation fixed-wing Maritime Patrol
Aircraft and Cargo Transport Aircraft and the AH-64D combat
helicopter. As a result, sales were lower than the previous fiscal year.
In the commercial sector, deliveries of center wing sections for
the Boeing 787 and main wings for the H4000 mid-sized businessjet increased. Year-on-year sales decreased, however, due to a strikeat Boeing that led to decreased aircraft production, the cessation of
Eclipse 500 light business jet production and foreign exchange
losses caused by the strong yen.
Based on these factors, sales in the Aerospace division contracted¥18.8 billion, or 18.9%, compared with the previous fiscal year, to¥80.9 billion. Operating income was down ¥2.9 billion, or 64.5%,
to ¥1.6 billion.

In addition to deliveries of large-scale wind turbine generator
systems, the inclusion of two wholly owned subsidiaries within theGroup’s scope of consolidation contributed to the increase in sales.
As a result, sales in the Other division climbed ¥2.9 billion, or
26.7% compared with the previous fiscal year, to ¥13.7 billion.
Operating income also rose ¥0.6 billion, or 23.5%, year on year, to¥3.1 billion.

Industrial Products Division
Net Sales by Division (Excluding intersegment sales)
2005

Automobiles

2007

2008

2009

¥ 1,319.6 ¥ 1,329.2 ¥ 1,339.3 ¥ 1,421.2 ¥ 1,316.3

Aerospace

59.4

81.8

94.0

99.7

80.9

Industrial
Products

46.8

52.4

49.7

40.7

34,9

Other

20.6

13.0

11.8

10.8

13.7

Total

26

2006

Billions of Yen¥ 1,446.5 ¥ 1,476.4 ¥ 1,494.8 ¥ 1,572.3 ¥ 1,445.8

In the domestic market, sales of finished power generators
increased in the fiscal year ended March 31, 2009. This was morethan offset, however, by a slump in sales of engines for construction machinery. As a result, overall industrial product sales in Japandecreased year on year. Overseas, the FHI Group recorded thehighest number of engines sold to the European market on theback of robust orders through to the end of the first half. In similar
fashion to results in Japan, however, an overall year-on-year
decrease in overseas sales was recorded due to the strong impact oflackluster economic activity in the North American market.
As a result, sales in the Industrial Products division declined¥5.8 billion, or 14.2%, compared with the previous fiscal year, to¥34.9 billion. In the fiscal year under review, the division reported
an operating loss of ¥1.6 billion. This represented a negative turnaround of ¥2.3 billion from the operating income reported in theprevious fiscal year.

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

75
50
25
0
-25
-50
-75

FY 20052006■ Operating Income (Loss)

2007

2008

2009

■ Net Income (Loss)

Billions of Yen
2005

2006

2007

2008

2009

Operating Income(Loss)¥ 42.0¥ 58.3¥ 47.9¥ 45.7¥ (5.8)Net Income (Loss)

18.2

15.6

31.9

18.5

(69.9)

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

Cost of Sales, Expenses and Operating Income

Compared with the previous fiscal year, the cost of sales decreased
4.4%, to ¥1,164.6 billion. On the other hand, the cost of sales
ratio increased 3.1 percentage points, to 80.5%. This was mainly
attributable to the combined impact of the strong yen, which
served to drive down sales, the increase in fixed cost and theGroup’s inability to fully offset sharp hikes in raw material prices.
From an operating income in fiscal 2008, the FHI Group posted
an operating loss of ¥5.8 billion in the fiscal year under review.
This represented a negative year-on-year turnaround of ¥51.5
billion. Despite research and development expenses declining to¥9.2 billion, reflecting the periodic lull in new model development,
and a positive contribution of ¥0.3 billion owing to improvementsin the sales volume and mix, this significant deterioration in earnings
was mainly attributable to foreign exchange losses totaling ¥43.5
billion, the increase in SG&A and other expenses of ¥14.3 billion
and the aforementioned sharp increase in raw material prices,which exceeded cost reduction efforts by ¥3.2 billion.
Turning to other income and expenses, net expenses recorded
in fiscal 2008 increased ¥1.9 billion to ¥15.7 billion in the fiscal
year under review. Despite a reduction in the impairment loss on
manufacturing property, plant and equipment, this year-on-yearincrease in net expenses reflects the loss on valuation of investment
securities and increase in provision of allowance for doubtful
accounts following the collapse of Eclipse Aviation Corporation,
which was an Aerospace division business partner, loss on valuationof inventories and expenses incurred due to withdrawal from the
FIA World Rally Championship (WRC). Taking into account the
aforementioned factors, the FHI Group recorded a loss before
income taxes and minority interests of ¥21.5 billion, down ¥53.4
billion from income before income taxes and minority interests of¥31.9 billion in the previous fiscal year. Impacted by the ¥39.4
billion reversal of deferred tax assets, net loss for the periodamounted to ¥69.9 billion. This was a ¥88.4 billion turnaroundfrom net income of ¥18.5 billion in fiscal 2008.

Operating Income (Loss) by Division

Operating Income (Loss) by Region(Billions of Yen)

(Billions of Yen)

60

60

45

40

30
20
15
0

0
-15

FY 2005■ Automobiles■ Other

2006■ Aerospace

2007

2008

2009

■ Industrial Products-20

FY 20052006■ Japan■ North America

2007

2009

■ Other■ Corporate and Elimination■ Corporate and Elimination

Operating Income (Loss) by Division

Billions of Yen

Operating Income (Loss) by Region

2005

2006

2007

2008

2009

Automobiles¥ 40.9¥ 51.6¥ 37.8¥ 37.1¥(9.2)

Aerospace

0.2

2.8

5.7

4.4

1.6

North America

(6.7)

2.0

Industrial Products

0.8

2.0

1.5

0.7

(1.6)

Other

0.4

0.3

Other

(0.6)

1.2

2.3

2.5

3.1

Corporate andElimination

Corporate andElimination

0.6

0.7

0.6

0.9

0.3

Total

¥ 42.0¥ 58.3¥ 47.9¥ 45.7¥(5.8)

Total

2008

Japan

Billions of Yen

2005

2006

2007

2008

2009

¥ 40.5¥ 57.0¥ 40.6¥ 34.2¥ (15.8)

5.2

6.6

(2.0)

0.8

1.4

1.9

7.8

(0.9)

1.3

3.5

10.1

¥ 42.0¥ 58.3¥ 47.9¥ 45.7¥ (5.8)27

Analysis of Increases and Decreases in Operating Income (Consolidated, Three-Year YoY Comparison)(Billions of Yen)
7.0

1.0

9.2

47.9
(8.1)

45.7
(1.3)

0.3

45.7

(0.8)

17.4
21.8
(43.5)(14.3)

(3.2)

(5.8)

(5.8)

(41.1)

Liquidity and Financing

Securing Liquidity

FHI believes that it has secured liquidity at a level sufficient to satisfy
its current needs through the use of commitment lines contractedwith major banks, combined with cash and cash equivalents.
Taking into account increases in short-term borrowings andlong-term debt, interest-bearing debt as of the end of fiscal 2009
totaled ¥381.7 billion, ¥77.1 billion higher than the end of theprevious fiscal year. As a result, the debt/equity ratio deteriorated
0.35 of a point, to 0.97.
Financial Position

Total assets as of March 31, 2009 stood at ¥1,165.4 billion, adecrease of ¥131.0 billion compared with the previous fiscal yearend. This was mainly due to foreign exchange losses arising fromthe conversion of overseas subsidiary assets and reversals of both
short- and long-term deferred tax assets.
28

Of this total, current assets stood at ¥586.0 billion, down ¥36.8
billion compared with March 31, 2008. This change largely
reflected decreases in notes and accounts receivable-trade andshort-term loans receivable as well as a reversal of short-termdeferred tax assets.
Total property, plant and equipment decreased ¥43.6 billion
year on year to ¥468.1 billion, a downturn primarily attributable toa transfer of a portion of lease assets, net to current assets following
the application of accounting standards as they relate to lease transactions. While there was no material year-on-year movement in the
Company’s buildings, land and facilities held, FHI undertook
capital expenditure of ¥58.0 billion in the fiscal year under review,
an increase of ¥1.7 billion compared with the fiscal year ended
March 31, 2008.
Investment and other assets totaled ¥111.3 billion, a drop of¥50.5 billion compared with the previous fiscal year-end. This waslargely attributable to the decrease in long-term deferred tax assets
and investment securities, in addition to the decline of goodwill(0.2)(35.0)■

FY Op
E er aM tin
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FY
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M I
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8
■
R& D
D ecreaesx■pe e ons f
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Lo hersss
on
ex fore
ch ig
■
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ex Incr
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■
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Re
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d
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raw ucti
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m n inate c
ria ostlp ,nric ete r of
■
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FY Op
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M tin
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M I
Re
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7
m
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er o
■
ais f
Ga
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in
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f
ex ore
ch ig
■
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ex Incrpe ea
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es of
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R&■ In
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m sa eteri
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FY erat ers
E ing
M I
arc nch 2 om00 e
8(27.1)

because of amortization owing to the change of accounting
treatment for overseas subsidiaries.
Total liabilities were down ¥31.3 billion year on year, to ¥770.7
billion. Current liabilities declined ¥36.8 billion to ¥561.2 billion
mostly as a result of decreases in notes and accounts payable, trade
and accrued expenses. Total long-term liabilities stood at ¥209.5
billion, ¥5.5 billion higher than the end of the previous fiscal year.
This was mainly attributable to an upswing in long-term debt.
As of March 31, 2009, interest-bearing debt amounted to¥381.7 billion, up ¥77.1 billion compared with March 31, 2008.
This reflected increases in short-term borrowings, commercial
paper and long-term debts.
Net assets totaled ¥394.7 billion, down ¥99.7 billion comparedwith the end of the previous fiscal year. This was mainly due to thedecrease in retained earnings of ¥101.2 billion to ¥126.6 billion,
the drop in valuation difference on available-for-sale securities andthe foreign currency translation adjustment of ¥10.7 billion and¥26.0 billion, respectively. Accounting for the aforementioned

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

factors, net assets per share as of the end of the fiscal year underreview was ¥505.59, down ¥181.43 from ¥687.02 as of the end of
the previous fiscal year.

(Billions of Yen)

Cash Flows

500

1.00

400

0.80

300

0.60

200

0.40

100

0.20

In the fiscal year under review, net cash used in operating activitieswas ¥26.9 billion. In comparison, net cash provided by operating
activities of ¥107.4 billion had been recorded in the previous fiscal
year. This came largely as the result of a decrease in working capitaland the loss before income taxes and minority interests of ¥21.5
billion posted in the fiscal year ended March 31, 2009.
Net cash used in investing activities rose from ¥44.9 billion in
fiscal 2008 to ¥72.4 billion in the fiscal year under review, mainlyreflecting net increases in property, plant and equipment as well as
investment securities (after deducting proceeds from property,
plant and equipment and investment security sales).
As a result, free cash flow amounted to negative ¥99.3 billion.
This was a turnaround of ¥161.8 billion from ¥62.5 billion in theprevious fiscal year.
Net cash provided by financing activities totaled ¥80.4 billion,
compared with net cash used in financing activities of ¥45.1 billion
in the fiscal year ended March 31, 2008. While FHI redeemedbonds to the tune of ¥30.0 billion, this result was largely attributable
to the net increase in short-term loans-payable, upswings inproceeds from long-term loans payable and commercial paper aswell as proceeds from sales of treasury stock (net of cash outflows
for the purchase of treasury stock).
Accounting for the aforementioned activities and the effect of
exchange rate changes, the net decrease in cash and cash equivalents
amounted to ¥34.4 billion. After taking into consideration theincreases or decreases in cash and cash equivalents resulting fromthe change in the scope of consolidation and in the accounting
period of consolidated subsidiaries, cash and cash equivalents as ofthe end of the fiscal year under review stood at ¥96.5 billion, down
¥18.1 billion year on year.

Interest-Bearing Debt Balance & D/E Ratio

Cash Flows from Operating Activities &Cash Flows from Investing Activities(Billions of Yen)
150
100
50
0

FY 2005

0

2006

2007

2008

2009

0

■ Interest-Bearing Debt Balance

-50
-100
-150

FY 2005

2006

2007

2008

2009

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

D/E Ratio

Free Cash Flow

Total Assets, Shareholders’ Capital & Ratio of
Shareholders’ Capital to Total Assets(Billions of Yen)

(Billions of Yen, %)
1,500

75.0

80

1,200

60.0

40

900

45.0

0

600

30.0

-40

300

15.0

-80

0

-120

0

FY 2005■ Total Assets

2006

2007

2008

2009

FY 2005

2006

2007

2008

2009

■ Shareholders’ Capital

Ratio of Shareholders’ Capital to Total Assets

29Research and Development Expenses

Research & Development Expenses

Capital Expenditures(Billions of Yen)

(Billions of Yen)

60

100

45

75

30

50

Having completed a round of R&D activity with respect toForester and Legacy new model changes, FHI concentrated on
improving efficiencies in its advanced development organization.
As a result, R&D expenses declined ¥9.2 billion, or 17.7%, year
on year, to ¥42.8 billion.
Capital Expenditures and Depreciation

25

15

0

FY 2005

2006

2007

2008

2009

0

Billions of Yen
2005

2006

2007

2008

2009

R&D
Expenses¥ 53.0¥ 46.9¥ 50.7¥ 52.0¥42.8

CapitalExpenditures

85.3

56.2

59.6

56.3

58.0

Depreciation
Expenses

51.1

57.5

58.9

65.5

65.1

FY 2005

2006

2007

2008

2009

Depreciation Expenses(Billions of Yen)

Basic Policy Regarding the Distribution of Profits

80

60

40

20

0

30

Capital expenditures edged up ¥1.7 billion compared with theprevious fiscal year, to ¥58.0 billion. In addition to expenditure aimed
at boosting production capacity at FHI’s Gunma manufacturing
plant prompted by robust Forester sales in the first half of the fiscal
year, funds were utilized to acquire land for domestic dealers andfor the Subaru of America, Inc. (SOA)-related site control project.
Despite an increase in FHI non-consolidated depreciation expense,
total depreciation edged down ¥0.4 billion year on year, to ¥65.1
billion. This was mainly attributable to a decline in mold costdepreciation at Subaru of Indiana Automotive, Inc. (SIA).

FY 2005

2006

2007

2008

2009

FHI views the return of profits to shareholders as a critical task for
management, and follows a basic policy of maintaining stablelong-term dividends while taking into consideration a wide range
of factors, including its earnings performance and dividend payout
ratio. Based on this policy, FHI declared an interim dividend of¥4.50 per share, unchanged from the corresponding period of theprevious fiscal year. Impacted by the sudden and sharp deteriorationin its operating environment from the second half of the fiscal year
under review, which resulted in a downturn in the Group’s overall
performance, and in the likelihood that difficult operating conditions
will continue for the foreseeable future, it is with deep regret that
FHI has decided to suspend payment of a fiscal year-end dividend
and the interim dividend for the following term. While a decision
regarding the period-end dividend for fiscal 2010 has not been
made, FHI will work diligently to secure improved performanceand a return to a stable growth trajectory.

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N UA L R E P O RT

OutlookJapan’s automobile market is expected to confront increasingly
bleak conditions. Buffeted by a further downturn in the real global
economy, demand for automobiles is anticipated to remain weak.
With trends in foreign currency exchange rates shrouded in
uncertainty, FHI envisages little room for complacency withregard to its future operating environment.
Against this backdrop, the FHI Group is forecasting (as of May
2009) net sales of ¥1,320.0 billion in the fiscal year ending March
31, 2010. This represents a year-on-year downturn of ¥125.8 billion,
or 8.7%, and is mainly attributable to the decline in automobile
sales volume. On the earnings front, the Group’s consolidated
operating loss is projected to increase ¥29.2 billion compared withthe fiscal year under review, to ¥35.0 billion. With expectations
that contributions from the launch of the new Legacy will emerge
from the second half of the fiscal year, and despite concerted efforts
to reduce cost as well as SG&A and other expenses, this downturn
in FHI’s consolidated business performance is largely due to projected foreign exchange losses on the back of a strong yen anddeterioration in the Group’s sales volume and mix reflecting lower
automobile sales volume. Buoyed by the absence of reversals ofdeferred tax assets implemented in the fiscal year under review, net
loss in the fiscal year ending March 31, 2010 is expected to total¥55.0 billion, a year-on-year improvement of ¥14.9 billion.
These forecasts are based on average annual exchange rates of¥95 to U.S.$1 and ¥125 to A1.
Note: Performance forecasts and medium- to long-term management strategies are based on information available to management as of thedate of this report. Accordingly, actual results may differ materially
due to a variety of factors.
Medium- to Long-Term Management Strategies

FHI continues to engage in business activities underpinned by its
four-year, medium-term management plan covering the period
from April 2007 to March 2011. Centered on the philosophy that
“Customers come first,” this plan seeks to (1) provide a distinctive
Subaru experience for drivers and passengers, (2) increase sales

globally, (3) strengthen competitiveness in quality and cost, (4)grow through the business alliance with Toyota, and (5) grow thelevel of employee competence and so enhance the organization.
Looking back at the Group’s progress over the first two years of theplan, FHI is convinced of the validity of its current direction.
Taking into consideration the rapid downturn in the economy anddifficulties in realizing a performance recovery over the short term,
FHI has decided to temporarily defer the sales volume, operating
income, management indicator and shareholder return targets
identified in its medium-term management plan. Instead, the FHIGroup is implementing the following specific emergency measures.
Implementation of Emergency Measures

1. Review of and reductions in existing capital expenditure plansby more than 20%, placing the utmost priority on urgency andinvestment efficacy
2. Zero-based review of all expenses with a view to cutbacks
3. Response to rapid changes in automobile demand, prompt
inventory correction and production adjustment
New Product Launch and Experimental R&D

1. Systematic global release of the new Legacy, essentially the
culmination of the medium-term management plan
2. Supply the Plug-In STELLA electric vehicle to the corporate
and public sectors from July 2009
3. Accelerated development of safety technologies as well as environmental technologies for a wide range of products, including
electric vehicle

Domestic Sales Structure Reform

1. Transition toward an integrated network of distributors in Japan(structural rationalization, from 46 to 22 distributors)
2. Accelerated efforts to implement community-centric marketing
activities
3. Establishment of an optimal and effective management structure
In conjunction with its medium-term management plan, the FHIGroup will promote each of the aforementioned emergency
measures with a heightened sense of confidence and speed.
Endeavoring to overcome a harsh operating environment, theGroup is committed to realizing performance recovery by the fiscal
year ending March 31, 2011.
Forecast for Global Automobile Sales
2009

2010

Passenger cars

70.1

73.4

3.3

Minicars

108.7

87.0

(21.7)

178.8

160.3

(18.5)

United States

188.2

194.4

6.2

Canada

18.9

20.5

1.6

Europe

56.8

47.3

(9.5)

Russia20.7

8.4(12.4)

Australia

36.7

34.4

(2.4)

China

26.2

22.1

(4.1)

1. OEM supply for minicars from Daihatsu Motor Co., Ltd. to FHI
2. OEM supply for a compact car from Toyota Motor Corporation
to FHI
3. Joint development of a compact FR (front engine rear drive)
sporty car
4. Renewal of the existing plant for the production of the jointly
developed car

ChangeJapan:

Subtotal
Overseas:

Other

Alliance with the Toyota Group

1,000 Units

Subtotal
Total

29.1

20.5

(8.5)

376.5

347.6

(29.0)

555.3

507.9

(47.4)

Principal Risks

Business risks faced by FHI with the potential to have a significant impact on investor decisions are listed on FHI’s website at
http://www.fhi.co.jp/english/ir/

31

Consolidated Subsidiaries and Affiliates(As of July 1, 2009)

Japan

Overseas

Fuji Machinery Co., Ltd. (100.0%)

Subaru Kosan Co., Ltd. (100.0%)

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

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

Ichitan Co., Ltd. (51.0%)

Subaru Finance Co., Ltd. (100.0%)

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

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

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

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

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

TOKYO SUBARU INC. (100.0%)
and 33 other dealerships
Distribution, sales and services of Subaru automobiles
http://www.tokyo-subaru.co.jp/

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

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

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

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

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

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

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

32

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

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

F U J I H E AV Y I N D U S T R I E S LT D . 2 0 0 9 | A N N U A L R E P O R T

Investor Information(As of March 31, 2009)

Head Office

Major Shareholders

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

1. Toyota Motor Corporation
2. The Master Trust Bank of Japan, Ltd. (Trust account)
3. Japan Trustee Services Bank, Ltd. (Trust Account 4G)
4. Japan Trustee Services Bank, Ltd. (Trust account)
5. The Bank of New York Mellon as
Depositary Bank for DR Holders
6. Nippon Life Insurance Company
7. Suzuki Motor Corporation
8. Mizuho Corporate Bank, Ltd.
9. Mizuho Bank, Ltd.
10. Sompo Japan Insurance Inc.

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

Established
July 15, 1953

Paid-in Capital¥153,795 million

Number of Shareholders
51,524

Number of Common Stock Issued

Quarterly Common Stock Price Range (Tokyo Stock Exchange)
(Yen)

800

600

400

Stock Exchange Listing
Tokyo Stock Exchange
200

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

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

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

0

High
Low

FY2005

FY2006

FY2007

FY2008FY2009

627
462

704
437

747
577

641
376

635
223

782,865,873

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

FORESTER
Designed around the “Best Balance for Active Life” concept, the new Forester blends and integrates three key elements—packaging, drivability, and the environment—at an advanced level. With enhanced environmental performance, the new Forester is a crossover SUV that is capable of eliciting real feelings of “simple operation, a sense ofreassurance as well as of a pleasant drive in comfort” from the wide-ranging lifestyle perspectives of all drivers and passengers. This concept has resonated with many customers all over the world, recording strong sales.

The entire Annual Report including the financial statements, please visit FHI’s website:
http://www.fhi.co.jp/english/ir/report/ar.html

33

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

Printed in Japan

Consolidated Ten-Years Financial Summary
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

For the Year:Net sales
Cost of sales
Gross profit
Selling, general andadministrative expenses
Operating income (loss)
Income(loss) before income taxes
and minority interests
Net income(loss)
At Year-End:
Net assets *Shareholders' equity
Total assets
Ratio of net assets
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) **Number of shareholders **Number of employees*:
Parent only
Consolidated

2000

2001

2002

2003

¥1,330,125
995,131334,994¥1,311,887
978,841
333,046¥1,362,493
992,950
369,543¥1,372,337
1,011,582
360,755

243,593
91,401

251,373
81,673

281,063
88,480293,234
67,521

64,83931,34821,291
22,62856,13630,283

46,97033,484¥213,806
206,404
1,038,558¥363,199
357,455
1,168,501¥399,598
396,112
1,269,558¥414,614
411,252
1,344,072

19.9%

30.6%

31.2%

30.6%

¥51.9048.53
338.75¥30.4429.06
480.86¥40.7438.83
532.88¥44.8442.91
553.90¥60,190¥64,070¥63,964¥67,896

103,922
40,123102,301
46,622

118,376
54,903

119,423
60,110614,553
49,381

746,502
32,996

746,506
33,094

746,52135,584

13,66826,914

13,60326,502

13,374
26,48313,06427,478

Note: U.S. dollar figures have been translated from yen, for convenience only, at the rateof ￥98.26 to US$1.00, the approximate rate of exchange at March 31, 2009.
*
Prior year amounts have been reclassified to conform to the current year presentation.
** As of March 31

1

Millions of yen

Thousands of
U.S. dollars

2004

2005

2006

2007

2008

2009

2009

¥1,439,451
1,085,716
353,735¥1,446,491
1,107,718
338,773¥1,476,368
1,125,293
351,075¥1,494,817
1,142,674
352,143¥1,572,346
1,217,662
354,684¥1,445,790
1,164,564
281,226$14,713,922
11,851,862
2,862,060

303,41150,324

296,756
42,017292,736
58,339304,237
47,906

309,004
45,680287,029(5,803)2,921,117(59,057)

56,266
38,64921,066
18,23828,674
15,61145,58931,89931,90618,481(21,517)(69,933)(218,980)(711,714)¥457,027
453,708
1,349,727¥474,616
471,149
1,357,459¥467,786
465,522
1,348,400¥495,703
494,004
1,316,041¥494,423
493,397
1,296,388¥394,719
393,946
1,165,431$4,017,087
4,009,220
11,860,686

33.6%

34.7%

34.5%

37.5%

38.1%

33.8%

¥50.6249.66
582.60¥23.2723.27
604.51¥20.6620.66
649.41¥44.4644.44
687.81¥25.7325.73
687.02(¥91.97)505.59($0.94)
5.15¥71,112¥71,010¥80,073¥81,454¥87,164¥74,036$753,470

128,026
57,541

147,759
52,962

119,289
46,893

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

968,380
435,895

782,865
34,704

782,865
34,558782,865
46,367

782,865
42,920782,865
44,484

782,865
40,83912,92827,296

12,703
26,98911,998
26,115

11,752
25,598

11,90926,404

12,13727,659Note: U.S. dollar figures have been translated from yen, for convenience only, at the rateof ￥98.26 to US$1.00, the approximate rate of exchange at March 31, 2009.
*
Prior year amounts have been reclassified to conform to the current year presentation.
** As of March 31

2

Consolidated Balance Sheets

98.26

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2009 and 2008
Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

¥78,151
82,352
27,074
11,439128,645
96,42534,24915,91859,43453,845(1,509)586,023¥67,053
96,017
32,775133,175
100,133
27,701
26,48678,32962,504(1,346)
622,827$795,349$838,103$275,534$116,416$1,309,231$981,325$348,555$161,999$604,865$547,984($15,357)
5,964,004

Property, plant and equipment (Notes 5, Note 6 and Note 12)
Accumulated depreciation
Accumulated impairment loss
Total property, plant and equipment

1,223,798(739,586)(16,153)
468,059

1,280,060(752,311)(16,041)
511,708

12,454,692(7,526,828)(164,390)
4,763,474

Investments and other assets:
Intangible assets
Investment securities (Note 4)
Investments in non-consolidated subsidiaries and affiliated companies
Long-term loans receivable
Deferred tax assets (Note 9)
Other assets
Allowance for doubtful accounts
Total investments and other assets
Total assets

13,97245,792
10,5893,334
10,70232,885(5,925)111,349¥1,165,431

12,972
57,958
14,974
3,736
27,25648,044(3,087)
161,853¥1,296,388

142,194
466,029
107,765
33,930108,915334,674(60,299)
1,133,208$11,860,686

Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

¥148,015
249,149
21,956
83,3592,062
56,707561,248¥229,780
150,625
51,261
100,024
8,091
58,261
598,042$1,506,361
2,535,610
223,448
848,351
20,985577,111
5,711,866

110,583
36,997
7,448
54,436
209,464

102,661
40,993432
59,837
203,923

1,125,412
376,52175,799554,000
2,131,732

153,795
160,071
126,593(2,086)

153,795
160,098
227,789(40,538)

1,565,184
1,629,056
1,288,347(21,229)438,373

501,1444,461,358

3,002(47,429)(44,427)773

13,716(21,463)(7,747)
1,026

30,552(482,689)(452,137)
7,866

394,719494,423

4,017,087¥1,165,431¥1,296,388$11,860,686

ASSETS
Current assets:
Cash and deposits (Note 3)
Notes and accounts receivable-trade (Note 6)
Lease investment assets (Note 18)
Short-term investment securities (Notes 3 and 4)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 9)
Short-term loans receivable (Note 3)
Other current assets
Allowance for doubtful accounts
Total assets

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable, trade
Short-term borrowings (Note 6)
Current portion of long-term debts (Note 6)
Accrued expenses
Accrued income taxes (Note 9)
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debts (Note 6)
Accrued pension and severance liability (Note 8)
Deferred tax liabilities (Note 9)
Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Note 20)
Net assets: (Note 1 and 10)
Shareholders' equity:
Capital stock
Authorized— 1,500,000,000 shares
Issued —782,865,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2009—
3,682,316 shares
2008—
64,698,395 shares
Total shareholders’ equity
Total valuation and translation adjustments:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

3

Consolidated Statements of Operations

98.26

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2009 and 2008

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 11)
Operating income (loss)
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Real estate rent
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets
Gain (loss) on sales of investment securities
Loss on valuation of investment securities (Note 14)
Impairment loss (Note 12)
Gain on revision of retirement benefit plan (Note 8)
Provision of allowance for doubtful accounts (Note 14)
Provision for loss on construction contracts (Note 2)
Gain on sales of loans receivable
Gain on prior period adjustment (Note 13)
Other, net (Note 14 and 15)
Income (loss) before income taxes and minority interests
Income taxes (Note 9):
Current
DeferredIncome (loss) before minority interests
Minority interests in income (loss)
Net income (loss)

Per share data (Note 2) :Net income (loss)—Basic—Diluted *Net assets
Cash dividends (Note 10)
The accompanying notes are an integral part of these statements.

Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

¥1,445,790
1,164,564
281,226
287,029(5,803)¥1,572,346
1,217,662
354,684
309,004
45,680$14,713,922
11,851,862
2,862,060
2,921,117(59,057)

3,743(3,315)
926
586
7,769
(5,296)(3,452)205(1,072)(1,045)845(2,640)(2,901)
837(10,904)(15,714)(21,517)

5,503(4,063)501
919(4,740)
4,811(4,009)1,502(18)(13,174)548
1,539(3,093)(13,774)
31,90638,093(33,737)
9,424
5,964
79,066(53,898)(35,131)
2,086(10,910)(10,635)
8,600(26,867)(29,524)
8,518(110,972)(159,923)(218,980)

6,637
41,961
48,598(70,115)(182)(¥69,933)

14,536(1,148)13,38818,51837¥18,481

67,545427,041
494,586(713,566)(1,852)($711,714)

Yen

U.S. dollars¥25.7325.73
687.029.00($0.94)5.15
0.05(¥91.97)505.594.50* For the year ended March 31, 2009, diluted information is not presented although potentially dilutive securities exist
and net loss is recorded.

4

Consolidated Statements of Changes in Net Assets

98.26

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2009 and 2008

Shareholders' equity
Capital stock
Balance at the end of previous period
Balance at the end of current period
Capital surplus
Balance at the end of previous period
Changes of items during the period
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the end of previous period
Effect of changes in accounting policies applied to foreign subsidiaries
Changes of items during the period
Dividends from surplus
Net income (loss)
Disposal of treasury stock
Change of scope of consolidation
Change of scope of equity method
Other
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the end of previous period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the end of previous period
Effect of changes in accounting policies applied to foreign subsidiaries
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Change of scope of equity method
Other
Total changes of items during the period
Balance at the end of current period

5Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

153,795
153,795

153,795
153,795

1,565,184
1,565,184

160,098

160,104

1,629,331

(27)
(27)
160,071(6)(6)
160,098

(275)
(275)
1,629,056

227,789(12,115)

214,831-2,318,227(123,295)(6,742)(69,933)(7,309)(43)
72(5,126)(89,081)
126,593(6,468)18,481
402
543
12,958
227,789(68,614)(711,714)(74,384)(438)
733(52,168)(906,585)
1,288,347(40,538)(40,511)(412,558)(50)
38,50238,452(2,086)

(60)
33
(27)
(40,538)(509)
391,838
391,329(21,229)

501,144(12,115)

488,219-

5,100,183(123,295)(6,742)(69,933)(50)
31,166(43)
72(5,126)(50,656)
438,373(6,468)18,481
(60)
27
402
543
12,925501,144(68,614)(711,714)(509)
317,179(438)
733(52,167)(515,530)
4,461,358

Consolidated Statements of Changes in Net Assets
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2009 and 2008

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Revaluation reserve for land
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the end of previous period
Changes of items during the period
Change of scope of equity method
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total valuation and translation adjustments
Balance at the end of previous period
Changes of items during the period
Change of scope of equity method
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Minority interests
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the end of previous period
Effect of changes in accounting policies applied to foreign subsidiaries*
Changes of items during the period
Dividends from surplus
Net income (loss)
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
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)

2009

2008

2009

13,71622,182

139,589(10,714)(10,714)3,002(8,466)(8,466)
13,716(109,037)(109,037)
30,552

-

290

-

0
0

(290)
(290)
0

0
0

(21,463)(16,687)(218,431)(25,966)(25,966)(47,429)(4,776)(4,776)(21,463)(264,258)(264,258)(482,689)(7,747)

5,785(78,842)(36,680)(36,680)(44,427)(13,532)(13,532)(7,747)(373,295)(373,295)(452,137)

1,026

1,699

10,442

(253)
(253)
773

(673)
(673)
1,026

(2,575)(2,575)
7,867

494,423(12,115)495,703-5,031,782(123,295)(6,742)(69,933)(50)
31,166(43)
72(5,126)(36,933)(87,589)394,719(6,468)18,481
(60)
27
402
543
(14,205)(1,280)494,423(68,614)(711,714)(509)
317,179(438)
733(52,167)(375,870)(891,400)
4,017,087* “Effect of changes in accounting policies applied to foreign subsidiaries” was related to amortization of goodwillthat had not amortized up to the prior financial year.
The breakdown of “Other” in “ Retained earnings” was as follows.
(Unit: Million of yen)
FY2008FY2009Comprehensive income of foreign subsidiaries
543
52
Impact of fiscal closing date changes of foreign subsidiaries(5,178)6

Consolidated Statements of Cash Flows

98.26

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2009 and 2008

Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

Net cash provided by (used in) operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for product warranties
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in provision for retirement benefits
Interest and dividends income
Interest expenses
Loss (gain) on valuation of derivatives
Equity in (earnings) losses of affiliates
Loss (gain) on sales and retirement of noncurrent assets
Loss (gain) on sales and valuation of investment securities
Gain on sales of loans receivable
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Decrease (increase) in lease investment assets
Decrease (increase) in operating loans receivable
Decrease (increase) in leased assets
Increase (decrease) in deposits received
Other
Sub total(¥21,517)
74,036
1,045
2,956(2,037)(533)
760(5,053)(3,743)
3,315
5,296
(926)
3,452
867
5,938
(18,717)(73,159)(1,539)9,127(417)(4,757)
12,819(12,787)¥31,906
87,164
13,174(500)
137(1,236)(4,136)(5,503)
4,063(4,811)(501)
4,009(1,502)(548)
460(45,633)
44,205(11,111)
7,496
117,133($218,980)
753,470
10,63530,083(20,731)(5,424)
7,735(51,425)(38,093)
33,73753,898(9,424)35,131
8,824
60,432(190,484)(744,545)(15,663)
92,886(4,244)(48,412)130,460(130,134)

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

3,738(3,062)(14,781)(26,892)

5,864(4,135)(11,475)
107,387

38,042(31,162)(150,427)(273,681)

Net cash provided by (used in) investing activities
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of property for lease
Proceeds from sale of leased assets
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments for investments in capital
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities(2,265)
5,326(58,415)830(2,713)(20,433)
11,848(1,548)(64,188)
60,155(982)(72,385)(4,700)6,020(59,430)
2,384(60,048)
57,734(2,782)(18,032)
15,911(108,620)
128,476(1,833)(44,920)(23,051)
54,203(594,494)
8,447(27,610)(207,948)
120,578(15,754)(653,246)
612,202(9,995)(736,668)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Increase (decrease) in commercial papers
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Purchase of treasury stock
Proceeds from sales of treasury stock
Cash dividends paid
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

51,51718,00037,063(20,500)(30,000)(50)
31,166(6,744)(3)
80,449(15,614)(34,442)(15,972)(5,000)
3,100(10,735)(10,000)(60)
27(6,470)(45,110)(1,968)15,389524,293
183,187
377,193(208,630)(305,312)(509)
317,179(68,634)(31)
818,736(158,905)(350,519)

114,649

99,0601,166,792

2,045
14,263¥96,515200¥114,649

20,812
145,156$982,241

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

7

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of Fuji Heavy Industries Ltd. (the “Company”) havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records maintained inconformity with generally accepted accounting principles prevailing in the respective countries of their
domicile. The accompanying consolidated financial statements have been restructured and translated into
English from the consolidated financial statements of the Company prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the
Financial Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience ofreaders outside Japan, using the prevailing exchange rate at March 31, 2009, which was ¥98.26 to U.S.$1.
The convenience translation should not be construed as a representation that the Japanese yen amounts
have been, could have been, or could in the future be converted into U.S. dollars at this or any other rate ofexchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its significant
subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
The fiscal year-end of consolidated domestic subsidiaries and main foreign subsidiaries is the same as that ofthe parent company, while the fiscal year-end of the seven consolidated foreign subsidiaries is December
31.The operating results of those subsidiaries that have fiscal year-ends different from that of theparent company are consolidated by using the financial statements as of each subsidiary’s respective
fiscal year-end, the necessary adjustments being made in consolidation if there are any significant
transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 68 subsidiaries in fiscal
2009 (62 subsidiaries in fiscal 2008).
In addition, 13 non-consolidated subsidiaries and two affiliated companies were accounted for by the equity
method in fiscal 2009; 19 non-consolidated subsidiaries and two affiliated companies had been accounted forby the equity method in fiscal 2008.
Investments in insignificant non-consolidated subsidiaries and affiliated companies not accounted for by theequity method are carried at cost. The difference between the cost and the underlying net equity ofinvestments in subsidiaries and affiliated companies is allocated to identifiable assets based on their fair value
at the date of acquisition. The unallocated residual value of the excess of the cost over the fair value of theunderlying net assets is recognized as goodwill and amortized over a period of five years on a straight-line
basis.
All assets and liabilities of subsidiaries, which include not only the Company’s interest in the subsidiaries but
also the minority interest portion, are valued based on their fair value at the time the Company first
consolidates the subsidiary in question.
8

(Fiscal 2009)
Until the fiscal year ended March 31, 2008, since the difference between the fiscal year-end of the parent
company and that of 19 consolidated subsidiaries was within three months, the operating results of thosesubsidiaries were consolidated by using the financial statements as of each subsidiary’s respective fiscal
year-end, and the necessary adjustments made in consolidation to reflect any significant transactions
between January 1 and March 31.
The accounting date for the fiscal year-end of 12 consolidated subsidiaries was changed to March 31 inorder to make the disclosures of the consolidated financial statements more meaningful by unifying the
fiscal year.
Consolidated subsidiaries whose fiscal closing date has been changed･Subaru of America, Inc. and nine consolidated subsidiaries･Subaru of Indiana Automotive, Inc. and one consolidated subsidiary[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fairvalue is available are stated at their fair value as of the balance sheet dates with unrealized holding gains andlosses included as a separate component of net assets until realized, while securities for which fair value is
not readily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the consolidated balance sheet is measured based on the lower of cost or market value.)(Change in accounting policy)(Fiscal 2009)
Up to and including fiscal 2008, inventories for regular sales were stated at cost, determined mainly by themoving-average cost method. In fiscal 2009, the Company and its domestic consolidated subsidiaries
adopted the “Accounting Standard for Measurement of Inventories” (Accounting Standards Board of Japan[ASBJ] Statement No. 9). Inventories for regular sales are now stated at cost, determined mainly by themoving-average cost method. (Book value on the consolidated balance sheet is measured based on thelower of cost or market value.)
This change resulted in an increase in operating loss, ordinary loss and loss before income taxes andminority interests of ¥3,220 million (US$ 32,770 thousand).
The impact of this change on segment information is explained in the relevant portion of these
documents.
[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally computed by the declining-balance method, except for those buildings (excluding
building improvements) acquired on or after April 1, 1998, for which the straight-line method is applied.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is computed by thestraight-line method at rates based on the estimated useful lives of the assets according to their general class,type of construction, and use.
9

Estimated useful lives for depreciable assets are as follows:(Fiscal 2008)
Buildings and structures: 7–50 years
Machinery, equipment and vehicles: 3–12 years(Fiscal 2009)
Buildings and structures: 8–50 years
Machinery, equipment and vehicles: 2–12 years(Changes in accounting policy)(Fiscal 2008)
In fiscal 2008, the Company and its domestic consolidated subsidiaries changed their depreciation method
for fixed assets acquired on or after April 1, 2007 to conform to the enacted revisions to the tax depreciation
schedules under the Corporate Tax Law and related tax regulations. The effects of this change were to
decrease operating income by ¥2,308 million, and to decrease both ordinary income and income before
income taxes and minority interest by ¥2,319 million compared with the respective amounts that would
have been reported under the previous method. Please refer to “22. Segment Information” regarding theeffect on the business and geographical segments.
(Additional Information)
In addition, during fiscal 2008, the Company and its domestic consolidated subsidiaries started todepreciate the residual book value of fixed assets acquired on or before March 31, 2007 on a straight-line
basis over a five-year period commencing in the year following that in which those assets reached theirdepreciation limit under the previous depreciation method. Please refer to “22. Segment Information”
regarding the effect on the business and geographical segments.
This change resulted in a decrease in operating income of ¥2,298 million, and decreases in both ordinary
income and income before income taxes and minority interest of ¥2,345 million, as compared with therespective amounts that would have been reported had the change not been implemented.
(Fiscal 2009)(Additional Information)
In fiscal 2009, the Company and its domestic consolidated subsidiaries revised the estimated useful lives of
fixed assets (machinery) in accordance with the enacted revisions to the tax depreciation schedules under
the Corporate Tax Law and related tax regulations.
This change resulted in an increase in operating loss of ¥1,595 million (US$16,232 thousand) and anincrease in ordinary loss and loss before income taxes and minority interest of ¥1,609 million (US$16,375
thousand).
The impact of this change on segment information is explained in the relevant portion of these
documents.
[5] Intangible Assets (Excluding Leased Assets)
Computer software used internally by the Company and consolidated subsidiaries is amortized by thestraight-line method over the relevant economic useful lives of three or five years.
[6] Leased Assets
For leased assets under finance lease transactions in which the ownership is transferred to the lessee:Theleased assets are depreciated by the same method as used for other property, plant and equipment.
For leased assets under finance lease transactions in which the ownership is not transferred to the lessee:
The leased assets are depreciated by the straight-line method over the leased period and the residual value is
zero.
10

In addition, finance lease transactions in which the ownership is not transferred to the lessee on or before
March 31, 2008 are recorded as regular rental transactions.
[7] Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on the amount calculated from the historical ratio of bad
debt for ordinary receivables, and an estimated amount of uncollectible accounts for specific overdue
receivables.
[8] Provision for Product Warranties
The Company and its consolidated subsidiaries provide for accrued warranty claims on products sold basedon their past experience of warranty services and estimated future warranty costs, which are included in“Accrued expenses” in the accompanying consolidated balance sheets.
[9] Provision for Loss on Construction Contracts
The provision for losses on uncompleted construction of contracts in the Aerospace segment is made whensubstantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year and beyond
and such losses can be reasonably estimated.
(Change in accounting policy)(Fiscal 2009)
In fiscal 2009, the Company started accounting for the provision for losses on uncompleted construction ofcontracts in the Aerospace segment when substantial losses on the contracts were anticipated at the fiscal
year-end for the next fiscal year and beyond and such losses could be reasonably estimated. The reason
for this accounting change is that its estimated loss has became more significant, so the Company reflected
it properly in the financial statements and disclosed it in a timely manner.
This change resulted in a decrease in operating loss and ordinary loss of ¥433 million (US$4,407
thousand), and an increase in loss before income taxes and minority interest of ¥2,468 million (US$25,117
thousand).
The impact of this change on segment information is explained in the relevant portion of these
documents.
[10] Accrued Pension and Severance Liability
Upon termination of employment, employees of the Company and consolidated subsidiaries in Japan areentitled, under most circumstances, to lump-sum indemnities or pensions as described below, based on
current rates of pay, length of service, and conditions under which the termination occurs. The minimum
payment is an amount based on voluntary retirement. In addition to the minimum payment based on voluntary
retirement, employees receive additional benefits for retirement due to age limit, death or other definedreasons.
Certain consolidated subsidiaries in Japan have contributory funded defined benefit employees’ welfare
pension funds, which are pursuant to the Japanese Welfare Pension Insurance Law. The contributory
pension funds consist of a portion of the governmental welfare pension program, under which thecontributions are made by the companies and their employees, and an additional portion representing thecorporate noncontributory pension plans.
Under the Japanese accounting standards for pension and severance benefits, accrued pension andseverance liability for employees is provided based on the estimated amounts of projected pension andseverance obligation and the fair value of plan assets at the end of the fiscal year. Prior service cost is being
amortized by the straight-line method over a period (11-18 years and 12-18 years for fiscal years 2009 and2008, respectively) that is shorter than the average remaining service period of the eligible employees.
Actuarial gains and losses are amortized from the following fiscal year by the straight-line method over a11

period (primarily 18 years) that is shorter than the average remaining service period of the eligible employees.
Accrued pension contribution for defined benefit pension plans is included in accrued pension andseverance liability.
Directors and statutory auditors of the Company and 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 consolidated subsidiaries’internal rules, are included in “Other long-tem liabilities” in the accompanying consolidated balance sheets.
(Additional Information)(Fiscal 2008)
In order to pay the directors’ and statutory auditors’ retirement benefits, the Company had provided for theamount of required payments based on the Company’s internal rules. However, at the annual general
meeting held in June 2007, the shareholders resolved to abolish this retirement benefits system, subject toa “grandfather” provision under which those incumbent directors and statutory auditors who werereappointed at the meeting shall be eligible for such retirement benefits when they retire based on theirservices through the date of that shareholders’ meeting. As of March 31, 2008, ¥271 million of theestimated benefits for the payment is included in “Other long-tem liabilities”.
[11] 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 yenat the exchange rates in effect at the balance sheet dates of the foreign subsidiaries and affiliated companies,
except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the respective years. The resulting foreign
currency translation adjustments are included in “Foreign currency translation adjustments” and “Minority
interest” in the net assets section of the accompanying consolidated balance sheets.
[12] Revenue Recognition
Revenue from sales of finished products is generally recognized when the products are shipped to dealers or
customers. Revenue from operating leases is recognized on a straight-line basis over the lease term. In
addition, revenue from Aerospace division production contracts with a production term exceeding one year
and of an amount exceeding ¥5,000 million is recognized by the percentage-of-completion method.
[13] Accounting for Lease Transactions
The Company recognizes revenue for financial lease transactions on the effective date of the lease contract.
(Change in accounting policy)(Fiscal 2009)
Up to and including fiscal 2008, the Company and its domestic consolidated subsidiaries applied theaccounting treatment for operating lease transactions to finance lease transactions in which the ownershipwas not transferred to the lessee.
In fiscal 2009, the Company and its domestic consolidated subsidiaries adopted “Accounting Standard
for Lease Transactions” (ASBJ Statement No. 13), and “Guidance on Accounting Standard for Lease
Transactions” (ASBJ Guidance No. 16).
However, those finance lease transactions in which the ownership had not been transferred to the lessee
and that occurred before the application of the revised “Accounting Standard for Lease Transactions” weretreated as regular rental transactions.
12This change resulted in a decrease in operating loss, ordinary loss and loss before income taxes andminority interests of ¥2,513 million (US$25,575 thousand).
The impact of this change on segment information is explained in the relevant portion of these
documents.
For the reasons above, this change resulted in an increase in “lease investment assets” of “Current
assets” of ¥27,074 million (US$275,534 thousand) and a decrease in “lease assets, net” of “Property, plantand equipment” of ¥27,074 million (US$275,534 thousand), on the consolidated balance sheets.
The Company applies the disclosure model that the Japan Leasing Association created for leasing
companies, and cash flow from finance lease transactions of captive finance companies and sales on
credit were reclassified from “Net cash provided by (used in) investing activities” to “Net cash provided by(used in) operating activities.”
Net cash provided by (used in) operating activities

Millions of yen(¥1,539)
9,127
(417)
¥7,171

Decrease (increase) in lease investment assets
Decrease (increase) in operating loans receivable
Decrease (increase) in leased assets
Total

Thousands of
U.S. dollars($15,663)
92,886(4,244)$72,979[14] Derivative Financial Instruments and Hedge Accounting
The Japanese accounting standards for financial instruments require that the Company and its consolidated
domestic subsidiaries state derivative financial instruments at their fair value and recognize changes in the fairvalue as a gain or loss, unless such derivative financial instruments are used for hedging purposes.
For interest rate swap contracts used as a hedge that meet certain hedging criteria, the net amount to be
paid or received under the interest rate swap contract is added to or deducted from the interest on the assets
or liabilities for which the swap contract is executed.
Derivative financial instruments qualifying as a hedge, along with the underlying transactions, assets andliabilities are as follows:
Financial Instrument
Interest swaps

Transactions, assets and liabilities
Borrowings

The risk exposures to movements in interest rates are hedged according to the Company’s andconsolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of theunderlying transactions, assets and liabilities, and therefore they are presumed to be highly effective inoffsetting the effect of movements in interest rates at their inception as well as during their terms.
[15] Goodwill and Negative Goodwill
Goodwill and negative goodwill are principally amortized by the straight-line method of five years inaccordance with accounting principles generally accepted in the countries where such goodwill is recorded.
[16] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments—generally with original maturities of threemonths or less—that are readily convertible to known amounts of cash and have negligible risk of changes invalue due to their short maturities.

1317] 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.
[18] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to ¥42,831 million (US$435,895
thousand) and ¥52,020 million for fiscal years 2009 and 2008, respectively.
[19] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that could occur if all the convertible
securities were converted or other contracts to issue common stock were exercised to the extent that they are
not anti-dilutive.
[20] Reclassification and Restatement
Financial statements in fiscal 2008 have been reclassified to conform to the current year presentation.
These reclassifications had no impact on previously reported results of operations or retained earnings.
[21] Other Changes in Accounting Policy(Fiscal 2009)
Change in Recognition of Sales or Interest Revenue on Credit
In fiscal 2009, the Company’s financial subsidiary changed the recognition of sales or interest revenue on
credit from the equal installment method to the seven-eight allocation method. The reason for this change
was to make it possible for the Company to closely manage the interest revenue by improving its credit
system and reflecting the results more accurately.
The impact of this change on net sales, operating loss and ordinary loss in the year ended March 31, 2009
was immaterial, whereas the impact on loss before income taxes and minority interest was a ¥1,043 million(US$10,615 thousand) decrease.
Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements
In fiscal 2009, the Company adopted “Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial statements” (the Practical Issues Task Force No.18) andmade necessary adjustments to the consolidated accounts.
The impact of this change on profit and loss was immaterial.
The impact of this change on shareholders' equity is described in “Consolidated statement of changes in
net assets.”14

3. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2009, and 2008, consisted of the following:
Millions of yen
2009¥78,151
11,43959,434
149,024(52,509)¥96,515

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

2008¥67,053
32,77578,329178,157(63,508)¥114,649

Thousands of
U.S. dollars
2009$795,349
116,416
604,865
1,516,630(534,389)$982,241

4. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2009
and 2008 was as follows:(1) Other securities (available-for-sale securities) for which fair market value was available:(a) As of March 31, 2009:
Acquisition cost
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

15

Book value

Millions of yen
Difference¥15,077¥20,579¥5,502

7,510
4,055
1,567
28,209

7,717
4,162
1,592
34,050

207
107
25
5,841

4,937

4,190

(747)

521
2,398
841
8,697
¥36,906

465
2,196
781
7,632
¥41,682

(56)
(202)
(60)
(1,065)¥4,776

Acquisition cost
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
Book value
Difference$153,440$209,434$55,994

76,43041,26815,947
287,085

78,53742,357
16,202
346,530

2,107
1,089
255
59,44550,24442,642(7,602)

5,302
24,4058,559
88,510$375,595

4,732
22,3497,948
77,671$424,201(570)(2,056)(611)(10,839)$48,606(b) As of March 31, 2008:
Acquisition cost
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
Corporate bonds
Other
Sub-total
Total

Book value

Millions of yen
Difference¥20,552¥43,269¥22,717

10,1113,044
36
33,743

10,362
3,083
131
56,84525139
95
23,102

425

333

(92)

565
1,446
2,436
¥36,179

565
1,445
2,343
¥59,188

(0)
(1)
(93)
¥23,009(2) Other securities (available-for-sale securities) sold during fiscal years 2009 and 2008:(a) For the year ended March 31, 2009:
Sales amount
Total gains
Total losses¥32,312 million¥673 million¥468 million
US$328,842 thousand
US$6,849 thousand
US$4,763 thousand
The above sales amount included sales of short-term investments in commercial paper and other amounting
to ¥15,138 million (US$154,061 thousand).

16

For the year ended March 31, 2008:
Sales amount
Total gains
Total losses¥681,548 million¥1,889 million¥260 million
The above sales amount included sales of short-term investments in commercial paper and other amounting
to ¥659,617 million.
(3) Book value of major securities without available fair market value as of March 31, 2009 and 2008:
Thousands of
Other securities (available-for-sale securities)
Millions of yen
U.S. dollars
2008
2009
2009
Money management fund¥24,629¥10,953$111,470
Floating rate note
5,077
Unlisted stocks (excluding over-the-counter stocks)
1,832
4,596
46,774
Note: The Company and consolidated subsidiaries recognized ¥1,072 million (US$10,910 thousand) and ¥18
million in loss on devaluation of securities for fiscal years 2009 and 2008, respectively.
For the purpose of recording a loss on devaluation of securities, the Company and its consolidated
subsidiaries consider all the securities whose fair market value has fallen below 50% of the acquisition
cost to be permanently impaired, and record the relevant loss on devaluation. For securities whose fairmarket value has declined by between 30% and 50% in relation to their acquisition costs, theCompany and its consolidated subsidiaries specifically consider the probability of recovery of the fairvalue and record a loss on devaluation to the amount deemed permanently impaired.
(4) Scheduled redemption of other securities (available-for-sale securities) with maturity and held-to-maturity
debt securities as of March 31, 2009 and 2008:(a) As of March 31, 2009:
Millions of yen
Thousands of U.S. dollars
Within 1
1 to 55 to 10 Over 10 Within 1
1 to 55 to 10
Over 10
Year
Years
Years
years
Year
Years
Years
years
Debt securities
Government
and municipal¥19 ¥4,913 ¥1,455 ¥1,795$193$50,000 $14,808 $18,268
bonds
Corporate bonds
349
4,609
1,216
184
3,552
46,906
12,375
1,873
Other
118
437
75
1,742
1,201
4,448
763
17,728
Total¥486 ¥9,959 ¥2,746 ¥3,721 $4,946 $101,354 $27,946 $37,869(b) As of March 31, 2008:

Debt securities
Government andmunicipal bonds
Corporate bonds
Other
Total

Within 1Year

1 to 5Years

5 to 10Years

Millions of yen
Over 10Years¥2,479565
23¥3,067¥4,505
2,520
715¥7,740¥1,531433
26¥1,990¥1,846130682¥2,65817

5. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2009 and 2008, are summarized as follows:

Buildings and structures
Machinery, equipment and vehicles
Leased assets
Other
Subtotal
Accumulated depreciation
Accumulated impairment loss
Land
Construction in progress
Total

2009
¥304,620
456,832
31,954
231,313
1,024,719(739,586)(16,153)
186,792
12,287¥468,059

Millions of yen
2008¥302,268
460,450
85,263
237,572
1,085,553(752,311)(16,041)
184,346
10,161¥511,708

Thousands of
U.S. dollars
2009$3,100,142
4,649,216
325,198
2,354,092
10,428,648(7,526,828)(164,390)
1,900,998
125,046$4,763,474

6. Short-Term Borrowings and Long-Term Debts
Short-term borrowings as of March 31, 2009 and 2008, consisted of the following:

Bank loans with average interest rate of 0.81% and 1.06%
per annum as of March 31, 2009 and 2008, respectively
Commercial paper with average interest rate of 1.50% and0.90% per annum as of March 31, 2009 and 2008,
respectively
Total

Millions of yen
2008
2009

Thousands of
U.S. dollars
2009¥225,149¥144,625$2,291,360

24,000¥249,149

6,000¥150,625

244,250$2,535,610

Long-term debts as of March 31, 2009 and 2008 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Loans principally from banks and insurance companies due
through 2025 with average interest rate of 2.35% and2.16% per annum as of March 31, 2009 and 2008,
respectively
Unsecured 1.22% bonds due September 30, 2008
Unsecured 0.68% bonds due June 18, 2010
Unsecured 1.31% bonds due April 28, 2011
Unsecured 2.01% bonds due May 31, 2012
Subtotal
Less—Portion due within one year
Total

18

¥72,539¥63,922$738,234

20,00020,00020,000132,539(21,956)¥110,583

30,00020,00020,00020,000
153,922(51,261)¥102,661

203,542
203,542
203,542
1,348,860(223,448)$1,125,412

Annual maturities of long-term loans payable and bonds payable as of March 31, 2009 were as follows:
Thousands ofMillions of yen
U.S. dollars
2010¥21,956$223,448
2011
26,972
274,4962012
33,489340,820
2013
34,215348,2092014
11,994122,0642015 and thereafter
3,913
39,823
Total¥132,539$1,348,860
Lease obligations as of March 31, 2009 and 2008, consisted of the following:

Lease obligations due within one year as of March 31, 2009
Lease obligations due after one year as of March 31, 2009
Total

Millions of yen
2008
2009
¥87
288
375

Thousands of
U.S. dollars
2009
$885
2,931
3,816

Annual maturities of lease obligations as of March 31, 2009 were as follows:
Millions of yen
¥87
80
79
52
16
61
¥375

2010
2011
2012
2013
2014
2015 and thereafter
Total

Thousands of
U.S. dollars
885
814
804
529
163
621
$3,816

The following assets as of March 31, 2009 and 2008, were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Notes and accounts receivable-trade
¥78
¥79
$804
Property, plant and equipment
54,05751,277
521,850
Total¥54,135¥51,356$522,654
The unused balance of commitments for borrowings by the Company and consolidated subsidiaries (Subaru
of America, Inc. and Subaru Europe N.V./S.A.) as of March 31, 2009 and 2008, was as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Total commitments¥84,691¥68,739$699,562
Less amounts currently borrowed
Unused balance¥84,691¥68,739$699,562

19

7. 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, 2009 and 2008, was as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Total overdraft facilities and lending commitments¥8,340¥6,020$61,266
Less amounts currently executed
1,859
1,166
11,866Unexecuted balance¥ 6,481¥4,854$49,400
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.
8. Pension and Severance Plans
The Company and consolidated domestic subsidiaries have lump-sum retirement payment plans, qualified
retirement pension plans, contributory defined benefit employees’ welfare pension funds, defined benefit
pension plan, and certain domestic subsidiaries have defined contribution pension plans. In addition, in
certain occasions, additional retirement payments are made to employees for their retirement. Consolidated
foreign subsidiaries primarily have defined contribution plans.
In fiscal 2009, the Company transferred 80% of prescribed retirement benefits from qualified retirement
pension plans to defined benefits pension plans and transferred 20% of prescribed retirement benefits from
qualified retirement pension plans to defined contribution plans. Some of the Company’s consolidated
domestic subsidiaries transferred from qualified retirement pension plans to lump-sum retirement payment
plans. Due to these changes, the Company adopted Corporate Accounting Implementation Guidelines No. 1,“Accounting for Transfers Between Retirement Benefit Plans” (ASBJ, issued on January 31, 2002), theCompany and those consolidated domestic subsidiaries recognizing "Gain on revision of retirement benefit
plan" of ¥653 million (US$6,646 thousand) and ¥192 million (US$1,954 thousand) (total ¥845 million[US$8,600 thousand]), respectively.
As of March 31, 2009, the Company and 47 of its consolidated domestic subsidiaries, which add up to a
total of 48 companies, have lump-sum retirement payment plans. Within the group, there are also 17 qualified
retirement pension plans, five defined contribution plans, and four defined benefits pension plans. In addition,
there are 13 single-employer employees’ welfare pension funds subject to the provisions of Article 33 of“Practice Guidelines of Accounting for Retirement Benefits.”
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and severance liability is provided at the amount that would
have been payable had all the employees voluntarily retired at the end of the fiscal year, less an amount to becovered from the plan assets, while the Company and significant subsidiaries provide an accrued pension
and severance liability based on the estimated amount of pension and severance obligation (projected benefit
obligations), less the fair value of plan assets at the end of the fiscal year under the actuarial method.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, is as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2008)
Thousands ofMillions of yen
U.S. dollars
2009
2009
Plan assets¥201,278$2,048,423
Projected benefit obligation
251,572
2,560,269
Funded status(¥50,294)($511,846)

20

(2) Contributions by the Company and consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan (mainly from April 1, 2007 to March 31, 2008): 9%(Additional information)(Fiscal 2008)
Multi-employer pension plan
Effective in fiscal 2008, the Company and its consolidated domestic subsidiaries adopted the provision of
the partial revisions (Part 2) to “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 14,
issued May 19, 2007)”.
A reconciliation between the projected pension and severance obligation and accrued pension andseverance liability as of March 31, 2009 and 2008, was as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
a. Projected pension and severance obligation¥114,783¥103,456$1,052,880
b. Plan assets(61,134)(42,201)(429,483)
c. Unfunded pension and severance obligations
53,64961,255623,397
d. Unamortized actuarial loss
(13,199)(23,821)(242,428)
e. Unamortized prior service cost
476
(492)
(5,007)f. Net amount recorded in balance sheet
40,92636,942375,962
g. Prepaid pension cost
(67)
(55)
(559)
h. Accrued pension and severance liability¥40,993¥36,997$376,521
Notes: 1. The above amounts include the substitutional portion of the government pension plan funded bysocial security taxes paid by employees and employers.
2. Certain insignificant consolidated subsidiaries calculated the liability using the simplified method.
Periodic pension and severance costs for the fiscal years 2009, and 2008, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
a. Service cost
¥8,715¥7,677$78,130
b. Interest cost
2,117
1,929
19,632c. Expected return on plan assets(2,863)(2,228)(22,675)
d. Amortization of actuarial gain/loss
526
948
9,648
e. Amortization of prior service cost
(11)
35
356
f. Pension and severance cost
8,484
8,361
85,091
g. Gain on transfer of the substitutional portion of theemployee’s pension fund(845)
(8,600)h. Total¥8,484¥7,516$76,491
Notes:1. The above amounts do not include the social security taxes paid by employees.
2. The service cost of consolidated subsidiaries using the simplified method is included in the service
cost above.
3. The service cost above includes required funding for the multi-employer pension plan amounting to¥742 million (US$7,551 thousand) and ¥797 million for fiscal years 2009 and 2008, respectively, forwhich plan assets could not be allocated to each participating employer.
4. The service cost above includes contributions for the defined contribution plans of the Company andcertain consolidated subsidiaries amounting to ¥2,415 million (US$24,578 thousand) and ¥1,751
21

million for fiscal years 2009 and 2008, respectively.
5. In addition to the pension and severance cost above, additional retirement payments amounting to¥216 million (US$2,198 thousand) and ¥258 million were made for fiscal years 2009 and 2008,
respectively. For fiscal years 2009 and 2008, the entire ¥216 million (US$2,198 thousand) ofadditional retirement payments and ¥258 million of additional retirement payments is included in costof sales and selling, general and administrative expenses, respectively.
Actuarial assumptions used in computation of pension and severance liability were as follows:a. Attribution of expected benefit obligation
The straight-line method
b. Discount rate
2.0%–2.5%
c. Expected rate of return on plan assets
0.8%–4.5%
d. Amortization of actuarial gain/loss
Primarily 18 years (amortized by the straight-line
method starting from the following fiscal year, over a
period shorter than the average remaining service
periods of the eligible employees)e. Amortization of prior service cost
11 to 18 years (fiscal 2009)
12 to 18 years (fiscal 2008)
9. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in
the aggregate resulted in a normal statutory income tax rate of approximately 40.5% for fiscal years 2009 and2008.
For fiscal 2009, such reconciliation is not presented herein because the consolidated financial results
recorded a net loss.
For fiscal 2008, such reconciliation is not presented herein because the difference between the statutory
income tax rate and the effective income tax rate was less than 5%.

22Significant components of the deferred tax assets and liabilities as of March 31, 2009 and 2008, were as
follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Deferred tax assets:
Accrued pension and severance liabilities
Accrued expenses
Loss on devaluation of inventories
Depreciation and amortization expenses
Accrued warranty claims
Accrued bonus
Long-term accounts payable, other
Allowance for doubtful accounts
Net operating loss carryforwards
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation and amortization expenses
Net unrealized holding gains on investment securities
Advanced depreciation reserve
Other
Total deferred tax liabilities
Net deferred tax assets¥14,710
8,667
8,552
7,545
6,566
5,782
3,865
2,774
49,036
13,385
120,882(87,638)
33,244¥16,373
7,299
6,374
7,347
7,305
6,325
4,228
3,224
16,276
18,79593,546(18,412)75,134$149,705
88,20587,03476,786
66,82358,84439,33428,231
499,043
136,2211,230,226(891,899)
338,327(4,310)(2,105)(510)(7,147)(14,072)¥19,172(6,648)(9,045)(510)(5,621)(21,824)¥53,310(43,863)(21,423)(5,190)(72,736)(143,212)$195,115

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
2008
2009
2009
Current assets—Deferred tax assets¥26,486¥15,918$161,999
Investments and other assets—Deferred tax assets
27,256
10,702
108,915
Long-term liabilities—Deferred tax liabilities(432)(7,448)(75,799)
Total net deferred tax assets¥53,310¥19,172$195,115(Fiscal 2009)
Income taxes-deferredA reversal of deferred tax assets of ¥39,408 million (US$401,058 thousand) was made, as a result ofcareful evaluation of realizability.

2310. Net Assets
The Japanese Corporate Law (the “Law”) became effective on May 1, 2006, replacing the JapaneseCommercial Code (the “Code”). The Law is generally applicable to events and transactions occurring after
April 30, 2006, and for fiscal years ending after that date.
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designatedas common stock. However, a company may, by a resolution of its Board of Directors, designate an amountnot exceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to
10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capitaland legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legalearnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate
amount of cash dividends and other cash appropriations as legal earnings reserve until the total of legal
earnings reserve and additional paid-in capital equaled 25% of common stock.
Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reducea deficit by a resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of
Directors. Under the Law, both of these appropriations generally require a resolution of the shareholders’meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code,however, on condition that the total amount of legal earnings reserve and additional paid-in capital remained
equal to or exceeded 25% of common stock, they were available for distribution by resolution of theshareholders’ meeting. Under the Law, all additional paid-in capital and all legal earnings reserve may betransferred to other capital surplus and retained earnings, respectively, which are potentially available fordividends.
The Company transferred treasury stock to Toyota Motor Corporation on July 14, 2008.
(Number of shares: 61 million shares; sales value: ¥31,110 million)
As a result, there was a ¥38,424 million decrease in the treasury stock, and the loss on the sale of treasury
stocks were divided into a ¥25 million decrease in capital surplus and ¥7,289 million decrease in retained
earnings.

2411. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2009 and 2008 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Freightage and packing expenses¥18,645¥17,489$177,987
Advertising expenses
51,90745,765465,754
Sales incentives
47,57742,658434,134
Salaries and bonuses
47,40946,798476,267
Research and development expenses
51,05542,416431,671
Other
92,411
91,903935,304
Total¥309,004
287,029$2,921,117
12. Impairment Loss on Property, Plant and Equipment
In the fiscal year ended March 31, 2009, the Company recorded an impairment loss with regard to thefollowing asset groups:
Use
Location
Category
Assets for dealership
Nagano Prefecture and Shimane Prefecture Buildings, land and otherbusiness
Idle assets
Hokkaido Prefecture and three other
Buildings and structures, andlocationsland
The assets on which impairment loss was recognized are grouped as follows: The assets for dealershipbusiness are grouped by each dealership, and the idle assets are grouped on a property-by-property basis.
At the Company and its subsidiaries, certain assets were written down to their recoverable amounts due toa recent decline in the real estate market and their decreased profitability.
As a result, the Company and its consolidated subsidiaries recognized a total of ¥1,045 million ($10,635
thousand) in impairment loss.
The impairment loss by each category of property, plant and equipment was as follows:
Thousands ofMillions of yen
U.S. dollars
2009
2009
Buildings and structures¥288$2,931
Land
706
7,185
Other
51
519
Total
¥1,045$10,635
A recoverable amount is the higher of net realizable value or value in use. A net realizable value isdetermined based on the government-published land valuation index prices or values used for real estate tax
purposes, less cost of disposal. A value in use is calculated based on projected future cash flows discounted
principally at 6.3%.

25

In the fiscal year ended March 31, 2008, the Company recorded an impairment loss with regard to thefollowing asset groups:
Use
Location
Category
Production facility
Gunma Prefecture
Buildings, machinery and other
Assets for dealership
Yamagata Prefecture and two other locations Buildings and structures,
businessmachinery, land and other
Idle assets

Hokkaido Prefecture and three otherMachinery, land and otherlocations
The assets on which impairment was recognized are grouped as follows: Production facilities are groupedby product line, the assets for dealership business are grouped by each company and the idle assets aregrouped on a property-by-property basis.
In light of an agreement entered into by the Company and Daihatsu Motor Co., Ltd. (Daihatsu) under which
Daihatsu will provide sub-compact vehicles to the Company on an original equipment manufacturer (OEM)basis, the Company has revised certain assets groupings within its Automobiles segment. Accordingly, theCompany wrote down the carrying amounts of its sub-compact vehicle manufacturing equipment to arecoverable amount. In addition, a certain idle manufacturing facility was classified as held for sale and its
carrying amount reduced to a recoverable amount.
At the subsidiaries, certain assets were written down to their recoverable amounts due to a recent decline in
the real estate market and their decreased profitability.
As a result, the Company and consolidated subsidiaries recognized a total of ¥13,174 million in impairment
loss.
The impairment loss by each category of property, plant and equipment was as follows;
Millions of yen
2008
Buildings and structures¥3,092
Machinery and equipment
8,619
Land
789
Other
674
Total

¥13,174

13. Gain on Prior-Period Adjustment(Fiscal 2008)
Prior-period adjustment recorded in the fiscal year 2008 represented a gain on reversal of certain expenses
due to a revision to the estimated expense related to a change in the medical insurance system of a foreignsubsidiary and the settlement of a tariff rate issue on imported parts.
14. Loss on Valuation of Investment Securities
On November 25, 2008, Eclipse Aviation Corporation (“Eclipse”), a trading partner of FHI, filed an application
under Chapter 11 of the United States Bankruptcy Code. However, Eclipse’s creditors submitted a motion for
an order converting the Chapter 11 Bankruptcy cases to cases under Chapter 7 on February 24, 2009, andthis was granted with the selection of a trustee on March 5, 2009. Therefore, the Company recorded an
extraordinary loss (as detailed below) because the Company would incur uncollectible receivables or thedelayed collection of receivables and damage to assets that the Company holds for or in Eclipse.

26

Millions of yen
2009
¥521
¥2,640¥5,737

Loss on valuation of investment securities
Provision of allowance for doubtful accounts
Other (Loss on valuation of inventories)

Thousands of
U.S. dollars
2009$5,302$26,867$58,386

15.Other Extraordinary Income (Loss)¥1,001 million (US$10,187 thousand) among “Other, net," representing the impact of the “Change inrecognition of sales or interest revenue on credit” from the equal installment method to the seven-eight
allocation method.
¥3,030 million (US$30,837 thousand) among “Other, net," representing the impact of loss on the withdrawal
from the FIA World Rally Championship (WRC).
16. Business Combinations(Fiscal 2009)
The Company has integrated certain Subaru dealer subsidiaries to enhance their sales forces and improvetheir profitability.
These integrated companies are consolidated subsidiaries included in the Automobiles segment, and theintegration has been accounted for as a reorganization of entities under common control.
October 1, 2008, merger by surviving companies
Area
Integrated companies

New company

Shin Nagano Subaru, Inc. ※Nagano Prefecture

Subaru Shinsyu, Inc.
Matsumoto Subaru Motors Co.

※ Surviving company

27

17. Stock Option Plans(Fiscal 2008)
1. Descriptions, volume, and movement of stock options(1) Descriptions of stock option plans
Fiscal 2002
Stock option plan
Position and number of
Directors, Executive Officers,
grantees
Corporate Auditors and employees:
303
Class and number ofstock (shares)
Common Stock 1,029,000
Date of grant
September 9, 2002

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

Directors, Executive Officers,
Directors, Executive Officers,
Corporate Auditors and employees
Corporate Auditors and employees
who are enrolled at the date thewho are enrolled at the date thesubscription rights are granted.
subscription rights are granted.
Should an employee under 50 years
Should an employee under 50 yearsof age retire by voluntary termination,of age retire by voluntary termination,
the employee’s right to exercise
the employee’s right to exercise
his/her claim will expire.
his/her claim will expire.
Required service period
From September 9, 2002,
From September 6, 2004,
to July 31, 2004
to July 31, 2006
Exercise period
From August 1, 2004,
From August 1, 2006,
to July 31, 2009
to July 31, 2011
Note: The number of stock options is converted to the equivalent number of common stock.
Vesting conditions(2) Volume and movement of stock options
The stock options outstanding in the fiscal year 2008 are summarized as follows:[1] The number of stock options (shown as the equivalent number of common stock)
Fiscal 2002
Stock option plan
Nonexercisable stock options (shares):Fiscal 2004
Stock option plan

At the end of the fiscal year 2007--

Stock options granted--

Forfeitures--

Conversion to exercisable stock options--

Stock options outstanding--

842,000

1,870,000--

29,000

7,000

-

-

813,000

1,863,000

Exercisable stock options (shares):At the end of the fiscal year 2007
Conversion from nonexercisable stock options
Stock options exercised
Forfeitures
Stock options outstanding28

[2] Price information of stock options

Exercise price (Yen)
Average market price of the stock at the time of exercise (Yen)Fair value (date of grant) (Yen)(Fiscal 2009)
1. Descriptions, volume, and movement of stock options(1) Descriptions of stock option plans
Fiscal 2002
Stock option plan
Position and number of
Directors, Executive Officers,
granteeCorporate Auditors and employees:
303
Class and number ofstock (shares)
Common Stock 1,029,000
Date of grant
September 9, 2002

Fiscal 2002
Stock option

Fiscal 2004
Stock option¥498,000
585¥594,000
579--

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

Directors, Executive Officers,
Directors, Executive Officers,
Corporate Auditors and employees
Corporate Auditors and employees
who are enrolled at the date thewho are enrolled at the date thesubscription rights are granted.
subscription rights are granted.
Should an employee under 50 years
Should an employee under 50 yearsof age retire by voluntary termination, of age retire by voluntary termination,
the employee’s right to exercise
the employee’s right to exercise
his/her claim will expire.
his/her claim will expire.
Required service period
From September 9, 2002,
From September 6, 2004,
to July 31, 2004
to July 31, 2006
Exercise period
From August 1, 2004,
From August 1, 2006,
to July 31, 2009
to July 31, 2011
Note: The number of stock options is converted to the equivalent number of common stock.
Vesting conditions29

(2) Volume and movement of stock options
The stock options outstanding in fiscal 2009 are summarized as follows:[1] The number of stock options (shown as the equivalent number of common stock)
Fiscal 2002
Stock option plan
Nonexercisable stock options (shares):Fiscal 2004
Stock option plan

At the end of the fiscal year 2008--

Stock options granted--

Forfeitures--

Conversion to exercisable stock options--

Stock options outstanding--

813,000

1,863,000--

79,000---734,000

1,863,000

Fiscal 2002
Stock option¥498,000

Fiscal 2004
Stock option¥594,000

569

-

-

-

Exercisable stock options (shares):At the end of the fiscal year 2008
Conversion from nonexercisable stock options
Stock options exercised
Forfeitures
Stock options outstanding[2] Price information of stock options

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

18. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessee(1) Transfer of title through finance lease transaction[1] Leased assets
Mainly implements of production in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the same method as used for other property, plant and equipment.
(2) Finance leases which do not transfer ownership title[1] Leased assets
Mainly network equipment and terminal units (Other tangible assets) in the automotive business[2] Depreciation method for leased assets
Leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
(3) Those finance lease transactions that had not had their ownership transferred on or before March 31,
2008, are recorded based on the same method as used for regular rental transactions.
30[1] Pro forma information of such leases as of March 31, 2009 and 2008, was as follows:
Millions of yen
2008
2009
¥703
¥729
2,662
2,078
164
146
3,529
2,953
(1,870)(1,740)¥1,659¥1,213

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

Thousands of
U.S. dollars
2009$7,41921,1481,486
30,053(17,708)$12,345[2] The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2009
and 2008, were as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Finance leases:
Due within one year
¥623
¥513
$5,221
Due after one year
1,120
797
8,111
Total
¥1,743¥1,310$13,332[3] Pro forma information related to finance leases for fiscal years 2009 and 2008 was as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Lease payment
¥679
¥711
$7,236
Depreciation and amortization expenses
633
645
6,564
Interest expense portion
44
37
377
Information as Lessor(1) The details of lease investment assets as of March 31, 2009 were as follows:
Millions of yen
2009¥32,957327(6,210)¥27,074

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

31

Thousands of
U.S. dollars
2009$335,406
3,328(63,200)$275,534

(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31,2009, were as follows;
Thousands ofMillions of yen
U.S. dollars
2009
2009
Within 1 year
¥12,491$127,122
1 to 2 years
8,045
81,8752 to 3 years
6,215
63,2513 to 4 years
4,712
47,9544 to 5 years
1,269
12,915
Over 5 years
225$2,289(Fiscal 2008)
Leased assets obtained by finance leases which do not transfer ownership title[1] The carrying amounts of leased assets under finance leases as of March 31, 2008, were as follows:
Millions of yen
2008
Machinery, equipment and vehicles¥22,574
Other tangible assets
4,612
Intangible assets
1,682
28,868
Accumulated depreciation and amortization(15,972)Net¥12,896[2] The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March
31, 2008, were as follows:
Millions of yen
2008
Finance leases:
Due within one year
¥5,709Due after one year
8,714
Total
¥14,423[3] Information related to finance leases for fiscal 2008 was as follows:
Millions of yen
2008¥7,727
5,773
779

Lease receivable
Depreciation and amortization expenses
Interest income portion32

19. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2009 and2008, were as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Operating leases:
Due within one year¥925
¥1,001$10,187
Due after one year
3,263
3,385
34,450Total¥4,188¥4,386$44,637
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2009 and 2008, were as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Operating leases:
Due within one year
¥5,117¥2,229$22,685
Due after one year
4,523
510
5,190
Total
¥9,640¥2,739$27,875
20. Contingent Liabilities
Contingent liabilities as of March 31, 2009 and 2008, were as follows:
Thousands ofMillions of yen U.S. dollars
2008
2009
2009
As guarantor of third-party indebtedness from financial
institutions

33¥33,668¥41,705$342,642

21. Derivative Financial Instruments
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 consolidated subsidiaries do not use derivatives for speculative or trading purposes.
The fair value information of derivative financial instruments as of March 31, 2009 and 2008, was asfollows:(1) Foreign currency contracts:(a) As of March 31, 2009:
Millions of yen
Thousands of U.S. dollars
Notional
Valuation
Notional
Valuation
AmountFair value gain (loss)
AmountFair value gain (loss)
Foreign exchange
forward contracts:
Sell—
U.S. dollar¥33,928¥35,379(¥1,451)$345,288$360,055($14,767)
Euro
4,923
5,138
(215)
50,102
52,290(2,188)Canadian dollar
2,300
2,338
(38)
23,407
23,794(387)
Buy—
U.S. dollar

59

59

0

600

600

0

(b) As of March 31, 2008:

Foreign exchange forward contracts:
Sell—
U.S. dollar
Euro
Canadian dollar
Buy—
U.S. dollar
British pound
Foreign currency options contracts:
Sell—
Call U.S. dollar
Buy—
Put U.S. dollar

Notional
AmountMillions of yen
Valuation
Fair value
gain (loss)¥51,510
11,658
8,374¥48,200
11,774
7,955¥3,310
(116)
419

2,454
407

2,400
399

(54)
(8)

11,088
[282]

303

(21)

11,088
[282]

326

44

Note: The amounts in brackets [ ] are the carrying amounts of the premium on the option contracts recorded
as other current assets or liabilities.

34

(2) Interest rate contracts:(a) As of March 31, 2009:
Notional
AmountInterest rate swap
contracts:
Receive floating rate
pay fixed rate

¥498

Millions of yen
Valuation
Fair value gain (loss)

(¥12)

(¥12)

Thousands of U.S. dollars
Notional
Valuation
AmountFair value gain (loss)$5,068($122)($122)(b) As of March 31, 2008:
Notional
AmountMillions of yen
Valuation
Fair value
gain (loss)

Interest rate swap contracts:
Receive floating rate pay fixed rate
¥5,424(¥8)(¥8)
The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative financial instruments that qualify as a hedge and are accounted for using the deferred hedge
accounting method are excluded from the above table according to the disclosure requirements.
22. Segment Information
Information by business segment
The Company and consolidated subsidiaries operate principally in four business segments: automobiles,
industrial products, aerospace and other business fields (including eco-related equipment).
A summary of net sales, operating income, assets, depreciation and amortization expenses and capital
expenditures by business segment for fiscal years 2009 and 2008, is shown below:

35

Net Sales:
Automobiles—
Outside customers
Inter-segment
Sub-total
Industrial products—
Outside customers
Inter-segment
Sub-total
Aerospace—
Outside customers
Inter-segment
Sub-total
Other—
Outside customers
Inter-segment
Sub-total
Total
Corporate and elimination
Consolidated total

Operating Income or Loss:
Operating income:Automobiles
Industrial products
Aerospace
Other
Total
Corporate and elimination
Consolidated total

Assets:Total assets:
Automobiles
Industrial products
Aerospace
Other
Total
Corporate and elimination
Consolidated total
36

2009

Millions of yen
2008

Thousands of
U.S. dollars
2009¥1,316,305
2,641
1,318,946¥1,421,179
2,849
1,424,028$13,396,143
26,87813,423,021

34,912
18
34,93040,67813
40,691

355,302183
355,485

80,872
1
80,87399,673
1
99,674

823,04110
823,051

13,701
12,42026,121
1,460,870(15,080)¥1,445,790

10,816
6,778
17,594
1,581,987(9,641)¥1,572,346

139,436
126,400
265,836
14,867,393(153,471)$14,713,922

2009

Millions of yen
2008

Thousands of
U.S. dollars
2009(¥9,201)(1,643)
1,575
3,118(6,151)348(¥5,803)¥37,141
659
4,442
2,525
44,767913¥45,680($93,639)(16,721)
16,02931,732(62,599)3,542($59,057)

2009

Millions of yen
2008

Thousands of
U.S. dollars
2009¥910,250
39,856
174,062
70,0891,194,257(28,826)¥1,165,431¥1,041,057
45,528172,41064,8691,323,864(27,476)¥1,296,388$9,263,688
405,618
1,771,443
713,301
12,154,050(293,364)$11,860,686

Thousands of
U.S. dollars
2009

Other Significant Items:
Depreciation and amortization expenses:
Automobiles
Industrial products
Aerospace
Other
Total
Corporate and elimination
Consolidated total

2009

Millions of yen
2008¥66,395
1,421
4,479
1,741
74,036¥74,036¥79,575
1,527
4,250
1,812
87,164¥87,164$675,707
14,46245,583
17,718753,470$753,470

Impairment loss on property, plant and equipment:
Automobiles
Industrial products
Aerospace
Other
Total
Corporate and elimination
Consolidated total¥1,0451,045¥1,045¥13,174
13,174¥13,174$10,635
10,635$10,635

Capital expenditures for segment assets:
Automobiles
Industrial products
Aerospace
Other
Total
Corporate and elimination
Consolidated total¥90,723
1,187
1,787
1,480
95,177(24)¥95,153¥114,245
858
3,142
624
118,869¥118,869$923,295
12,08018,186
15,063
968,624(244)$968,380

Notes:1. Definition of business segments
Business segments are defined based on their product line and market.
2. Main products by each business segment
Business segments’ main products:
Automobiles: Legacy, Impreza, Forester, Exiga,Tribeca, Stella, R1, R2, Pleo, Samber
Industrial products; Robin engines, power generators, pumps
Aerospace: Aircraft, parts of space-related devices
Other: Garbage collection vehicles, specialized vehicles, real estate lease
3. All operating costs and expenses are allocated to each business segment.
4. All figures in corporate and elimination represent elimination.
5. Changes in accounting policies:(Fiscal 2008)
Depreciation method of fixed assets
The Company and its domestic consolidated subsidiaries changed their depreciation method in fiscal
2008, as mentioned in “2. Summary of Significant Accounting Policies.” The effect of this change wasto decrease operating income of “Automobiles” by ¥2,158 million. In addition, the change in the
depreciation method for the residual book value during the fiscal year 2008 resulted in a decrease inoperating income of “Automobiles” of ¥1,897 million. The effects of these changes on other businesssegments were insignificant.
37

(Fiscal 2009)[1] Accounting Standard for Measurement of Inventories
As described in “2-[3] Inventories,” in fiscal 2009 the Company and its domestic consolidated
subsidiaries applied the “Accounting Standard for Measurement of Inventories” (ASBJ Statement No.
9).
This change resulted in an increase in operating loss of ¥3,061 million (US$31,152 thousand) in“Automobiles” and an increase in operating loss of ¥146 million (US$1,486 thousand) in “Industrial
products.”
The effects of those changes on other business segments were immaterial.
[2] Provision for loss on construction contracts
As described in “2-[9] Provision for Loss on Construction Contracts,” in fiscal 2009 the Company
started accounting for the provision for losses on uncompleted construction of contracts in the
Aerospace segment when substantial losses on the contracts were anticipated at the fiscal year-end
for the next fiscal year and beyond and such losses can be reasonably estimated.
The Company recorded ¥2,901 million (US$29,524 thousand) of “Provision for loss on construction
contracts” in the first quarter of fiscal 2009 as “Extraordinary loss,” and a part of the provision
corresponding to recognized sales related to construction were reclassified in cost of sales along withadditional cost for construction since the second quarter of fiscal year 2009.
This change resulted in an increase in operating income of ¥433 million (US$4,407 thousand) in“Aerospace.”[3] Change in recognition of sales or interest revenue on credit
As described in “2-[21] Other Changes in Accounting Policy,” in fiscal 2009 the Company’s financial
subsidiary changed the recognition of sales or interest revenue on credit from the equal installment
method to the seven-eight allocation method.
The impact of this change on net sales and operating loss was immaterial.
[4] Accounting for lease transactions
As described in “2-[13] Accounting for Lease Transactions,” in fiscal 2009 the Company and its
domestic consolidated subsidiaries adopted “Accounting Standard for Lease Transactions” (ASBJ
Statement No. 13), and “Guidance on Accounting Standard for Lease Transactions” (ASBJ GuidanceNo. 16).
This change resulted in a decrease in operating loss of ¥2,513 million (US$25,575 thousand) in“Automobiles.”[5] Practical solution on unification of accounting policies applied to foreign subsidiaries forconsolidated financial statements
As described in “2-[21] Other Changes in Accounting Policy,” in fiscal 2009 the Company adopted“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial statements” (Practical Issues Task Force No.18) .
The impact of this change on profit and loss was immaterial.
[6] Alteration of estimated useful lives of fixed assets
As described in “2-[4] Property, Plant and Equipment (Excluding Leased Assets),” in fiscal 2009 theCompany and domestic consolidated subsidiaries revised the estimated useful lives of fixed assets(machinery) in accordance with the enacted revisions to the tax depreciation schedules under the
Corporate Tax and Law and related tax regulations.
This change resulted in an increase in operating loss of ¥1,469 million (US$14,950 thousand) in38

“Automobiles” and a decrease in operating income of ¥128 million (US$1,302 thousand) in“Aerospace.”
The impact of this change on other business segments is immaterial.
Information by Geographic Area
A summary of net sales, operating income and assets by geographic area for fiscal years 2009 and 2008 isshown below:

Net Sales:
Japan—
Outside customers
Inter-segment
Sub-total
North America—
Outside customers
Inter-segment
Sub-total
Other—
Outside customers
Inter-segment
Sub-total
Total
Corporate and elimination
Consolidated total

Operating Income or Loss:
Operating income:Japan
North America
Other
Total
Corporate and elimination
Consolidated total

39

2009

Millions of yen
2008

Thousands of
U.S. dollars
2009¥856,188
280,623
1,136,811¥901,091
270,514
1,171,605$8,713,495
2,855,923
11,569,418

546,859
15,380562,239

617,718
20,860638,578

5,565,428
156,524
5,721,952

42,743622
43,365
1,742,415(296,625)¥1,445,790

53,537
501
54,0381,864,221(291,875)¥1,572,346

434,9996,330
441,329
17,732,699(3,018,777)$14,713,922

2009

Millions of yen
2008

Thousands of
U.S. dollars
2009(¥15,840)(1,964)
1,933(15,871)
10,068(¥5,803)¥34,1886,575
1,402
42,165
3,515¥45,680($161,205)(19,988)
19,673(161,520)
102,463($59,057)

Assets:
Assets:Japan
North America
Other
Total
Corporate and elimination
Consolidated total

2009¥872,342
297,801
13,116
1,183,259(17,828)¥1,165,431
Notes:1. Geographic areas are based on geographical proximity.
2. Principal countries or districts in each geographic area:
North America: United States and Canada
Other: Europe
3. All operating costs and expenses are allocated to each segment.
4. All figures in corporate and elimination represent elimination.
5. Changes in accounting policies:

Millions of yen
2008

Thousands of
U.S. dollars
2009¥962,886
347,205
12,221
1,322,312(25,924)¥1,296,388$8,877,895
3,030,745
133,483
12,042,123(181,437)$11,860,686(Fiscal 2008)
Depreciation method of fixed assets
The Company and its domestic consolidated subsidiaries changed their depreciation method in fiscal
2008, as mentioned in ”2. Summary of Significant Accounting Policies.” The effect of this change wasto decrease operating income of “Japan” by ¥2,308 million. In addition, the change in the depreciation
method for the residual book value during the fiscal year 2008 resulted in a decrease in operating
income of “Japan” of ¥2,298 million.
(Fiscal 2009)[1] Accounting standard for measurement of inventories
As described in “2-[3] Inventories,” in fiscal 2009, the Company and its domestic consolidated
subsidiaries applied the “Accounting Standard for Measurement of Inventories” (ASBJ Statement No.
9).
This change resulted in an increase in operating loss of ¥3,220 million (US$32,770 thousand) in“Japan.”[2] Provision for loss on construction contracts
As described in “2-[9] Provision for Loss on Construction Contracts,” in fiscal 2009 the Company
started accounting for the provision for losses on uncompleted construction of contracts in the
Aerospace segment when substantial losses on the contracts were anticipated at the fiscal year-end
for the next fiscal year and beyond and such losses could be reasonably estimated.
The Company recorded ¥2,901 million (US$29,524 thousand) in “Provision for loss on construction
contracts” in the first quarter of fiscal 2009 as “Extraordinary loss” and a part of the provision
corresponding to recognized sales related to the construction has been reclassified in cost of sales
along with additional cost for construction since the second quarter of fiscal 2009.
This change resulted in a decrease in operating loss of ¥433 million (US$4,407 thousand) in‘’Japan.’’[3] Change in recognition of sales or interest revenue on credit
As described in “2-[21] Other Changes in Accounting Policy,” in fiscal 2009, the Company’s financial
subsidiary changed the recognition of sales or interest revenue on credit from the equal installment
40

method to the seven-eight allocation method.
The impact of this change on net sales and operating loss was immaterial.
[4] Accounting for lease transactions
As described in “2-[13] Accounting for Lease Transactions,‘’ in fiscal 2009 the Company and its
domestic consolidated subsidiaries adopted “Accounting Standard for Lease Transactions” (ASBJ
Statement No. 13) and “Guidance on Accounting Standard for Lease Transactions” (ASBJ GuidanceNo. 16).
This change resulted in a decrease in operating loss of ¥2,513 million (US$25,575 thousand) in“Japan.”[5] Practical solution on unification of accounting policies applied to foreign subsidiaries forconsolidated financial statements
As described in “2-[21] Other Changes in Accounting Policy,” in fiscal 2009 the Company adopted“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (Practical Issues Task Force No.18).
The impact of this change on profit and loss was immaterial.
[6] Alteration of service life of fixed assets
As described in “2-[4] Property, Plant and Equipment (Excluding Leased Assets)”, in fiscal 2009 theCompany and its domestic consolidated subsidiaries revised the estimated useful lives of fixed assets(machinery) to the enacted revisions to the tax depreciation schedules.
This change resulted in an increase in operating loss of ¥1,595 million (US$16,232 thousand) in‘’Japan.’’Overseas Sales
Overseas sales for the fiscal years ended March 31, 2009 and 2008, are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2008
2009
2009
Overseas sales:
North America¥667,310
42.5%¥582,979
40.3%$5,933,025
Europe181,333
11.5%
168,520
11.7%
1,715,042
Other
179,716
11.4%
186,77712.9%
1,900,844
Total¥1,028,359
65.4%¥938,276
64.9%$9,548,911
Consolidated net sales¥1,572,346
100.0% $14,713,922¥1,445,790
100%
Notes:1. Geographic areas are based on geographical proximity.
2. Principal countries or districts in each geographic area:
North America: United States and Canada
Europe: Germany, Switzerland, the United Kingdom and Russia
Other: Australia
3. Overseas sales are sales outside of Japan by the Company and its consolidated subsidiaries.

41

23. Subsequent Events(Fiscal 2008)
Development of a Business Alliance
At its Board of Directors’ meeting on April 10, 2008, the Company passed resolutions on the entry into analliance in the development and production of cars, on the disposition of its own shares in treasury stock, andon the construction of a new assembly plant to give effect to such a business alliance.
1. Alliance partners: Toyota Motor Corporation (TMC) and Daihatsu Motor Co., Ltd. (Daihatsu)
2. Alliance contents:(1) TMC and FHI jointly develop a compact, rear-wheel-drive sports car, and market the new model throughthe sales channels of both companies.
(2) TMC supplies a sub-compact car to FHI under an OEM arrangement.
(3) Daihatsu supplies a mini car and the “COO” sub-compact car to FHI under an OEM arrangement.
3. Disposition of treasury stock
The Company sells its treasury stock to TMC in order to further strengthen its relationship with TMC.
(1) Class of stocks(2) Method of sale of treasury stock(3) Total number of shares(4) Sale price(5) The basis for calculation of the sale
price(6) Placement period

Common stock
Private placement to a designated third party
61,000,000 shares¥510 per share (Total: ¥31,110 million)
The sale price of ¥510 was determined in reference tothe average closing price of FHI shares of ¥462 at the Tokyo
Stock Exchange from December 11, 2007 to March 10, 2008.
(Plus 10% premium, rounded up to the nearest whole yen)
From May 2, 2008 to May 1, 2009

4. Construction of a new assembly plant
The Company plans to build a new vehicle assembly plant in Oizumimachi, Ora-gun, Gunma Prefecture, inconnection with the development of the business alliance with TMC and Daihatsu. Details of the plan, such as
the amount of investment, are yet to be determined through discussions with TMC.
Change of the Retirement Benefit Scheme
Effective April 1, 2008, the Company restructured part of its retirement benefit scheme and has introduced adefined benefit plan and a defined contribution pension, in order to contribute to the wellbeing of its retired
employees as well as to improve the Company’s financial position by reducing the retirement benefit liabilities.
Contents of change:(1) Introduction of a point system(2) Transfer of its qualified pension plan to a defined benefit plan and a defined contribution pension
The Company is to account for this change in accordance with Corporate Accounting Implementation
Guidelines No. 1, “Accounting for Transfers Between Retirement Benefit Plans” (ASBJ, January 31, 2002)
and recognizes a gain of ¥653 million as a result of a reduction in retirement benefit liabilities.
(Fiscal 2009)None42