Annual Report2016

For the year ended March 31, 2016

Contents

02

Subaru Story

06

Business Highlights

08

To Our Shareholders

14

Message from our CFO

18

Special Feature
Innovativeness of the Subaru Global
Platform that will Serve as the
Backbone of Next Generation
Automobile Manufacturing

26

Corporate Governance

28

Board Directors / Executive Officers

30

Financial Information

30 Consolidated Ten-Year Financial
Summary

31 Five-Year Automobile Sales
33 Management's Discussion andAnalysis of Results of Operations
and Financial Position

41

Corporate Data / Stock Information

Disclaimer Regarding Forward-Looking Statements
Statements herein concerning plans and strategies, expectations or projections about the future, FHI’s efforts with regard
to various management issues, and other 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 thoseanticipated. These uncertainties include, but are not limited to,
general economic conditions, demand for and prices of FHI’s
products, FHI’s ability to continue to develop and market
advanced products, raw material prices, 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.

FUJI HEAVY INDUSTRIES LTD.

01 ANNUAL REPORT 2016

Subaru Story

Subaru Vehicle Manufacturing that Breathes
Life into “Enjoyment and Peace of Mind”
Enjoyment and peace of mind to everyone:
The unchanging concept built into Subaru vehicles

FUJI HEAVY INDUSTRIES LTD.

02 ANNUAL REPORT 2016

Subaru Story

Peace of Mind
Subaru has continued to research safety
performance for over half a century since
the introduction of the “Subaru 360.”

One of the most important factors that have formed the identity ofSubaru that was founded as an airplane manufacturer is a high levelof safety performance. For example, the Subaru 360 was the firstto make it possible for four adults to fit comfortably in a mass
production mini vehicles in 1958. The first ever monocoque body inJapan built by airplane manufacturing know how made spacious
space and high strength a reality. Furthermore, at a time when theconcept of crash safety was not common knowledge, since 1965,
about 30 years before safety standard for frontal collisions started
to be applied, we have run repeated tests and succeeded indeveloping a lightweight high-rigidity body. Also, in terms of thehorizontally-opposed engine, based on data obtained in experiments,
structures that are less susceptible to engine intrusion into the cabinduring frontal collision were realized and shock absorbing space wassecured when a pedestrian hit the hood of the vehicle, etc. weresome of the innovations that have been highly rated.
And now, Subaru will continue to pursue advances in safety

FUJI HEAVY INDUSTRIES LTD.

03 ANNUAL REPORT 2016

performance from four angles, “Primary Safety” that is incorporated
in the basic design so that the driver is not easily fatigued and canconcentrate on driving with peace of mind, “Active Safety” withlow center of gravity design and AWD to be able to drive in a wide
variety of weather and road surface conditions, “Pre-Collision
Safety” represented by EyeSight that detects danger and avoids
the damage of a collision, and “Passive Safety” to protect people
from the shocks in the event of a collision.
Subaru’s Safety Concept
Preemptive accident
avoidance

Safe
state

Dangerous
state

Damage reduction
during an accident

Accident

Collision

Damagespreads

Subaru Story

Enjoyment
The driving performance of Subaru. It isat this origin that we find “Human
Centered Automobile Manufacturing”

Enjoyment of the automobile. At the center of this is theexcellence of driving performance for the driver to be able tooperate intuitively. The joy of that motion that is felt at the
moment you step on the accelerator pedal. A car for which
speed, sound, vibration and everything exists to satisfy thesenses of the driver. At the core of this kind of ultimate packaging
is Subaru’s proprietary “Horizontally-opposed (boxer) engine.”
The advantages of superiority in rotational balance, having low
vibration, being lightweight, compact and having a low center ofgravity, it realizes superior handling performance with high driving
stability. In the same way, Subaru’s proprietary “Symmetrical

FUJI HEAVY INDUSTRIES LTD.

04 ANNUAL REPORT 2016

All-Wheel Drive,” realizes a high level of maneuverability such as
the superior stability that AWD is supposed to have, superiorweight balance and run-through performance regardless of theroad surface, etc. It will arouse the joy of driving.
Subaru also does not stop with keeping the automobile assimply a means of transport and delivers to every single customer
a richer daily life as we believe that we would like to be a partner
accompanying people through their lives. The enjoyment of life is
as unlimited as there are human beings. Subaru will continue tomeet and exceed the expectations of customers by “Human
Centered Automobile Manufacturing” going forward.

Subaru Story

Prominence 2020

Enhancing theSubaru Brand

In the aim of having a “prominent presence” in customers’ minds,
we pursue our corporate vision to become“a high-quality company that is not big in size but has distinctive
strength” by focusing on two initiatives — enhancing theSubaru brand and building a strong business structure.

FUJI HEAVY INDUSTRIES LTD.

Building a Strong
Business Structure

05 ANNUAL REPORT 2016

Vision for 2020
Corporate Vision
High-quality company that is not big in size but has
distinctive strength
Specific Goals• No.1 for customer trust• Brand strength• Industry-leading high profitability• Global sales of 1.2 million-plus vehicles

Business Highlights
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

Net Sales

Operating Income / Operating Margin

Capital expenses / R&D expenses(Billions of yen)

Operating Income(Billions of yen)

Capital expenses(Billions of yen)

4,000

Financial
Highlights

3,232.3
2,877.9

3,000

12.3%

Operating Margin

565.6

600

UP

423.0

450

300

20

17.5
13.6

1,000

Automobiles sales volume

ROE / ROA(Billions of yen)(Thousand units)

(%)

ROE

341.0

825

307.2
300

800

269.7

19.5%

211.2
200

170.0

5.2%

36.9

40

724

60

7.6pt

29.3

2012 2013 2014 2015 2016

UP

2012 2013 2014 2015 2016

Free Cash Flow
(Billions of yen)

Ratio of Shareholders’ Equity
to Total Assets (%)

400

358.6

279.1

300

10

18.8

20.7

2.9pt

200

37.7
33.3

8.9

0

06 ANNUAL REPORT 2016

40.5

95.3

100

2012 2013 2014 2015 2016

51.8
40

20

28.3
0

2012 2013 2014 2015 2016

5.3pt
UP

138.8

8.2

FUJI HEAVY INDUSTRIES LTD.

158.4 %

60

46.5

UP

2012 2013 2014 2015 2016

80

UP

23.6
20

0

22.6 %

Free Cash Flow /Ratio of Shareholders’ Equity to Total Assets

3.5
0

83.5
70.2 68.5
60.1
54.3
48.1 49.1

22.9

600

200

102.4

30.4
30

DOWN

UP

UP

UP

640

110.7

90

0

ROA

400
100

0

*ROA was calculated as operaing income / (average of assets at the beginning andend of the term)

958

22.6 %

135.7

30

6.3

Interest-Bearing Debt Balance911

2.8 pt100 2012 2013 2014 2015 20162012 2013 2014 2015 2016

1,000

150

120

UP

14.7

120.4

150

44.0
2.9

400

33.7%

30

326.5

1,913.0
1,517.1

040

R&D expenses

UP

2,408.1
2,000

(%)

0

Business Highlights

Non-Financial
Highlights

EyeSight Accident
Reduction Data

Comparison of rate of accidents
resulting in injury or death with andwithout EyeSight (Ver.2)

61% reductionin accident rate

No. per 10,000 vehicles (over 4 years)

Between vehicles*

Between people and vehicles* Placed top in frequency

61%

52%

51%

down

83%

down

down

down

34%

41%

36 %

48 %
down

58%

down

down

With
EyeSight

Without
EyeSight

Rear-end Intersection Turning
collisioncollision
left

down

down

Turning
right

Other

Rear/
front

While
Other
crossing road* Independent calculations from data on accidents that took place over the four years from 2011 – 2014 among vehicles sold between 2010 and 2013 in which installation of EyeSight (Ver. 2) is possible based on
Institute for Traffic Accident Research and Data Analysis (ITARDA) data. There were 2,234 accidents.
* Calculates the number of accidents resulting in injury or death per 10,000 vehicles with and without EyeSight (over four years). Of the target vehicles, there were 246,139 with EyeSight (Ver. 2) and 48,085 without it.

Global Rollout and Penetration of EyeSight

Nearly all Subaru models can be equipped with EyeSight.
Installation possible in approximately

90% of models.
(7 out of 8 models)RussiaEuropeNorth America

China
Japan

Middle East

* Of the Legacy, Levorg, WRX, Impreza, Subaru XV, Forester, Crossover 7, and Subaru BRZ models, installation is possible in all models except Subaru
BRZ.

ASEAN

Central andSouth America
Australia

Large numbers of customers are choosing EyeSight in models that offer it. *FHI research

Existing markets

RegionJapan

Australia

EuropeU.S.

EyeSight penetration,
Jan. to Dec. 2015

83%

62%

96%

31%

100% of Legacy, Levorg,
WRX, Crossover 7 models

100% of
Legacy models

96% ofOutback models

57% ofOutback models

Markets targeted
for release

EyeSight highest penetration(models)

FUJI HEAVY INDUSTRIES LTD.

07 ANNUAL REPORT 2016

To Our Shareholders

Enhancing the Subaru brand through ourvalue-adding and thorough differentiation
strategies as we aim for sustainable growth.
Yasuyuki Yoshinaga
Representative Director of the Board,
President and CEO

FUJI HEAVY INDUSTRIES LTD.

08 ANNUAL REPORT 2016

To Our Shareholders

FYE March 2016 Results and FYE March 2017 Outlook

Fuji Heavy Industries Ltd. Group’s consolidated net sales in FYEMarch 2016 came to 3,232.3 billion yen, a 12.3% year-on-yearincrease. As for consolidated performance, due to favorable
foreign exchange rates, the increase in the number of units sold,and cost reductions, we were able to offset the increase invarious overhead costs and R&D expenses. Operating profit was
565.6 billion yen (up 33.7% year on year), ordinary income cameto 577.0 billion yen (up 46.6% year on year), and the fiscal year
net income attributable to owners of parent was 436.7 billion yen(up 66.7% year on year). FHI recorded its highest historical levelsof net sales as well as all income categories for the fourthconsecutive fiscal year. Additionally, the operating margin was
17.5%. Although the number of passenger vehicles sold in Japan
neared the cyclical end of the new-model effect and trailed theprevious year, overseas sales (mainly in the North American
market) progressed smoothly. Our worldwide sales numbers
totaled 957,900 units (up 5.2% year on year), a historical high forthe fourth consecutive year. The result of this growth in units
sold, thanks to robust global support for the Subaru brand,
allowed us to achieve steady increases in income and profit in
actual figures excluding gains on foreign exchange, which iswhat pleases me most.
As for projections for FYE March 2017, we expect the Subaru
brand to show continued strength and an increase in units sold in
North America. We forecast global sales of 1,049.7 thousand units,

Bolstering our corporate strength,
regardless of currency impacts,
while maintaining an
industry-leading operating margin.

Net Sales

Operating Income / Operating Margin

Years ended March 31

Years ended March 31(Billions of yen)

Operating Income(Billions of yen)

3,600

3,232.3

Operating Margin

3,170.020

17.5

2,877.9

423.0
13.6

2,408.1
2,400

(%)

565.6

600

420.0

14.7

15

13.2

400

326.5
10

1,200

200
5

0

2014

2015

2016

2017 *(Planned)

0

2014

2015

FUJI HEAVY INDUSTRIES LTD.

20162017 *(Planned)

09 ANNUAL REPORT 2016

09.6% year-on-year growth and our first time exceeding one million
units. As for consolidated results, we foresee being able to offset
the increase in overhead costs and R&D expenses by increasing
the number of units sold and further cost reductions. Since the yen
is projected to strengthen from 121 yen/US$ in the fiscal year underreview to 105 yen/US$, we expect consolidated net sales to dip
1.9% to 3,170.0 billion yen, operating profit to fall 25.7% to 420.0
billion yen, ordinary income to fall 27.2% to 420.0 billion yen, thefiscal year net income attributable to owners of parent to fall 32.9%
to 293.0 billion yen, and an operating margin of 13.2%*. We will
steadily bolster the strength of our business regardless of currency
impacts, while maintaining an industry-leading profit margin.
*Figures in projections for FYE March 2017 were announced May 12,
2016, then revised August 3, 2016.
For details, please see the Company website(http://www.fhi.co.jp/english/ir/index.html).

To Our Shareholders

Update on the Mid-Term Management Vision

In working to be “a high-quality company that is not big in size but
has distinctive strength”—a stance we outlined in May 2014 in our
mid-term management vision, “Prominence 2020”—FHI has been
striving to increase corporate value, while focusing on the two
initiatives of “enhancing the Subaru brand” and “building a strong
business structure.”
This fundamental policy has not changed; however, weannounced updates of our 3-year consolidated profit plan,
consolidated sales units, production plans, etc. in May 2016 in
response to subsequent changes in the business environment andsales performance in each market.

With regard to consolidated global sales units in FY 2020, we
revised forecasts upward, to top 1,200.0 thousand units from theoriginal target north of 1,100.0 thousand units, given thaton-going sales strength is expected in the favorably performing
North American market. We also reassessed our plans forincreasing production capacity along the same lines. Existingplans had envisioned global production capacity (excluding CKD in
Malaysia) of 1,050.0 thousand units (under standard operations)in FY 2020. We raised this figure to 1,132.0 thousand units in FY
2018 (under standard operations; 1,276.0 thousand units at
maximum operation).
Furthermore, we announced a new Three-Year Business
Operation/Profit Plan for FYE March 2017-2019. Planned
three-year totals are 9,800 billion yen in net sales, 1,100 billion
yen in operating profit, 360.0 billion yen in R&D expenses, and470.0 billion yen in capital expenditures. While continuing to
expand investment in future growth, we will maintain our current

Consolidated unit sales

Production capacity expansion plans

2020 global sales units revised
upward in line with favorable sales
in the North American market.

North America(1,000 units)

Japan

China

Other

1,200

1,050
911
800

124
54
163

958

149

50

49

150

44

156

0

570

2014

(Actual)

630

836

2015

(Actual)

696

2016

(Planned)

800+α

2020

(Forecast)

SIA (USA)

Production capacity
at full operation:
1,276 thousand units
1,132
1,036

1,000

394

218

207

207

213

429

429

429

0 Sept. 2015

Spring 20162016 year end

500

(FY)

854

200

400

200

Main Plant (Japan)

1,500

200

138
145

Yajima Plant (Japan)(1,000 units)

1,200+α

FUJI HEAVY INDUSTRIES LTD.

(Planned)

10 ANNUAL REPORT 2016

436

213

483

FY 2019(Planned)business model of high profitability and an industry-leading
operating margin.
Because we are not comparatively large, our value-adding
and thorough differentiation strategies are indispensable forcompeting with the world’s major automobile manufacturers.
Consequently, it is vital that we avoid entering the volume-sales
zone in order to grow our sales units. That zone is the specialty ofmajor automakers and we would eventually be forced tocompete on price. We believe that it is beneficial to limit ourcategories and markets to those in which we can leverage ourstrengths, and to steadily grow our sales units by concentrating
our management resources in those areas.
FHI is ardently pursuing value-adding and differentiation
strategies that set us apart from other automakers, while further
accelerating our initiatives to “enhance the Subaru brand” and“build a strong business structure.”To Our Shareholders

Changing Our Company Name in April 2017

Rallying all of our employees toenhance the brand under a newcompany name: Subaru Corporation.
As one of our measures to accelerate our “enhancing the Subaru
brand” initiative, we will change our name from Fuji Heavy
Industries Ltd. to Subaru Corporation in April 2017, which is the100th anniversary of the founding of our predecessor, theNakajima Aircraft Company.
Of course, simply changing the company name and logo
does not immediately impart greater brand value. Brand value issomething that increases as a result of having customers actually
use our cars and approve of their features and quality. In thatsense, Subaru cars have garnered high evaluations in recent
years from customers and third-party agencies for their safety
features and drivability.
By using Subaru as a name for both the company and thebrand, the Group’s employees will rally together to make Subaru
the choice of even more customers and to dedicate effort tofurther boosting the value of the Subaru brand.

Adopting a Subaru Global Platform

Adopting a new platform that looks
ten years into the future and enhances“enjoyment and peace of mind,”which is one of Subaru’s strengths.
As initiatives to “enhance the Subaru brand,” FHI is dedicating effort
to further boost comprehensive performance and safety features,
pursue characteristic Subaru design, adopt environmentally consciousfeatures, improve quality and service, and strengthen communication
with customers.
The Subaru Global Platform, to be adopted starting with thenext Impreza model slated for launch this fall, is one of these
activities to “enhance the Subaru brand.” In recent years in theautomobile industry, companies are eagerly pursuing sharedplatforms that serve as the foundation for multiple vehicle
models, though most are primarily doing so in order to lower
costs through more efficient new model development, common
parts, etc. In contrast, FHI is adopting a new platform with thecentral intention of enhancing the Subaru brand strengths ofsafety features and drivability.
The Subaru Global Platform developed with the year 2025 inmind brings broad improvements to the rigidity of bodies andchassis compared to current models, while also pursuing a lower
center of gravity and evolution in the suspension system. This
will allow even further gains in the basic “run, turn and stop”
features that have earned Subaru an established reputation.
In addition, the new platform increases impact energy
absorption in the event of a collision by 40% compared to current
models. Currently, Subaru models have received top marks insafety tests by rating agencies inside and outside Japan,
including the Japan New Car Assessment Program (JNCAP), theInsurance Institute for Highway Safety (IIHS) in the U.S., and theEuropean New Car Assessment Programme (EuroNCAP), which
has resulted in our greatest competitive strength in themarketplace. These safety tests continue to apply ever more
stringent standards, including new types of collision tests. At
FHI, introduction of the new Subaru Global Platform is further
increasing our collision safety performance and will help us
maintain the world’s highest levels of safety going forward.

Product Strategy
Calender year

Fuji Heavy Industries Ltd.

2016

2017

2018

2019

2020~

FMC

FMC

FMC

FMC

Continuously introduce new models in our mainstay vehicle lineups

Model plans

Next-generation platform: the Subaru Global Platform*Starting with the new Impreza model, incorporate the platform in all full model change (FMC) vehicles from FY 2017
3-row crossoverfor North America
Expanded rollout of direct injection units

Environmental
initiatives

2019 Newly designed downsized-turbo
Plug-in hybrids*Comply with regulations in each region by combining electrification with significant
efficiency gains for internal combustion engines

FUJI HEAVY INDUSTRIES LTD.

11 ANNUAL REPORT 20162021 Electric vehicles

To Our Shareholders

Sales Strategy in the U.S.

Local dealers in the U.S., our most important market, havereported that they could increase sales and seize a 5% market
share if our supply were sufficient. In light of our current 3.4%
market share, 5% might be a bit over-optimistic, but I believe 4%
is entirely reasonable. If total vehicle demand in the U.S. is 17
million cars, that puts us at 680,000 units. If overall demand grows
slightly, that number could rise to 700,000, so I would first like toincrease our units sold to equal about a 4% market share in thenext few years. We are basically not planning to increase thenumber of dealers from the current 625 dealers, but rather toincrease the number of units sold at each dealer. Our sales plan for
the U.S. in calendar year 2016 is 615,000 cars, approximately 1,000
cars per dealer, though somewhere around 750,000 cars should bepossible by boosting the per-dealer number to approximately 1,200
units. In order to provide sales support for our local dealers, weplan to introduce a three-row crossover as a new model in North
America in 2018.
Meanwhile, our Subaru incentive program was the lowest in
the industry, approximately $900/vehicle for FYE March 2016,
which is far less expensive than the industry average of around$3,000/vehicle. Considering that incentives are on a growthtrajectory for the industry as a whole, we forecast a year-on-yearincrease, rising to $1,100 for the full year, for FYE March 2017.
However, we still do not intend to grow sales by competing on
price and will continue to sell vehicles with a low incentive
program going forward.
Additionally, we are expanding production capacity at our U.S.

Changes in the number of dealers

Changes in the number of retail sales units

Expanding production capacity andstrengthening our dealer service
framework to meet customer
expectations.

Units sold per dealer(Units)No. of dealers
984 (Dealers)

1,000

800

932

618

621

750

621

827
621

625

LEGACY(1,000 units)

IMPREZA

600

400

430

250

200

514 8
1
25

480

425 9
2

320

267

3

160

2013

2014

2015

2016

(Planned)

0
(CY)

0

5
34

175

160

124

336 4
2
76

129

156

131

89

41
147

2012

BRZ

615

625

684

2011

WRX

583

76

0

TRIBECA

640

542
500

FORESTER

2011

165

2012

160
2013

FUJI HEAVY INDUSTRIES LTD.

191

2014

213

2015

12 ANNUAL REPORT 2016

2016

(Planned) (CY)

production subsidiary Subaru of Indiana Automotive, Inc. (SIA), in
order to meet sales growth in North America. Production of the
Outback model will commence from July 2016, after SIA ends
consignment production of the Toyota Camry, and we will takeearly steps to relieve supply shortfalls. Also, production capacity
at SIA will be expanded nearly twofold—from 200,000 units toapproximately 400,000 units by the end of 2016.
In the U.S. market, all Subaru models equipped with
EyeSight have received top marks in safety evaluations by the
U.S. rating agency IIHS. This and other factors have solidified animage that “Subaru = safety and security,” which I think has led
to our current deep-rooted demand. Going forward, we intend ofcourse to provide high quality, safe vehicles, while also striving tostrengthen our service framework enabling us to deliver
after-sales service that will delight new Subaru customers.

To Our Shareholders

Responding to Environmental Regulations and Initiatives
for Automated Driving

Expanding the R&D framework of
the Automotive Business in order toaccelerate our environmental
response and our development ofdriving support technology.
In addition to the above, the Subaru Global Platform has been
designed while keeping in mind developments in current gasoline
engines and hybrid vehicles (HV), as well as plug-in hybrids(PHEV) and electric vehicles (EV). In the strong U.S. market, thescope of California’s ZEV (Zero Emission Vehicle) regulations will
be expanded to include mid-sized automakers (including FHI) in
2018. To coincide with this timeline, we are proceeding withresearch and development to launch PHEVs, followed by thesubsequent launch of EVs in 2021. In essence, we are notdeveloping dedicated PHEV and EV models. Our policy is to add
PHEV and EV grades to our existing cars in the Subaru brand,
leveraging their characteristic individuality and driving
performance. This approach, I think, will ensure that Subaru’s

quintessential “enjoyment and peace of mind” will be imbued ina new generation of eco-cars.
At the same time, we are also making steady inroads with
our automated driving R&D. FHI’s view of automated driving is
not “cars that drive in place of people,” but rather, “cars thatprovide driving support with the driver in the central role.” From
this fundamental perspective, we are pushing the evolution of
the highly praised EyeSight, our current driving support productthat includes pre-collision safety technology. We are following
this approach to develop automated driving technology that is
distinctly Subaru technology.
We plan to actively invest in R&D expenses going forward, inorder to accelerate development of these types of environmental
features and advanced safety technologies. Furthermore, in orderto optimize management resource allocation throughout theGroup, and to expand development resources in our Automotive
Business, we decided to integrate our Industrial ProductsCompany into our Automobiles Division in October 2016. Existingproduction, sales, and service in our Industrial Products Company
will continue for the duration, though development projects will be
idled and management resources such as development personnel
will be shifted to the Automobiles Division.

Company name change / business integration
Fuji Heavy Industries Ltd.
Automobiles
DivisionAerospace
Company

Industrial ProductsCompany

Subaru Corporation

Automobiles Division
Industrial Products Division

Aerospace Company

FUJI HEAVY INDUSTRIES LTD.

13 ANNUAL REPORT 2016

A Word about CSR Management

Aiming to be a company that iscontinually trusted by society as weboost the quality of our management.
For FHI to achieve sustainable growth into the future, we must
fulfill our corporate role of social responsibility and continue to be
a company that constantly earns the trust and support of a broadgroup of stakeholders. To that end, it is vital to boost the overall
quality of our corporate management to yet another level.
In the automotive business, we cannot deliver “enjoyment
and peace of mind” to customers unless we provide sufficientquality, even if our cars are equipped with safety features at theworld’s highest standards. Amid continuing robust sales,
primarily in North America, maximum capacity operations havebecome standard operations for each of our production sites inrecent years. However, it is absolutely inexcusable for quality
control to suffer as production accelerates. Our production units
are thoroughly aware of their responsibility to stop the line if they
are not absolutely confident in the quality of products.
Additionally, as society directs increased attention tocorporate governance, FHI has been incorporating outside
directors and auditors. Their participation has helped reflect
stakeholder opinions to a greater extent in our business
management. When putting together the Corporate Governance
Guidelines we formulated last year, outside directors andauditors also took an active role in providing advice. Their
participation greatly contributes to further establishing ourcorporate governance framework and increasing corporate value.
Under our new name of Subaru Corporation, management
and Group employees alike will ensure thorough compliance withlaws and regulations, conduct themselves responsibly every day,and continue to strive for even greater brand and corporate value.
Thank you for your support and feedback going forward.

Message from our CFO

We will keep our industry-leading profit margin
while aiming for sustainable growth andcontinuous return of profit to shareholders.
Mitsuru Takahashi
Director of the Board
Corporate Executive Vice President and CFO

FUJI HEAVY INDUSTRIES LTD.

14 ANNUAL REPORT 2016

Message from our CFO

We will strive to strengthen real profitability, excluding
gains on foreign exchange, while aiming for 1,100 billion
yen in operating income over the next three years.
In FYE March 2016, FHI (on a consolidated basis) posted record
high levels for the fourth straight year in net sales and all income
categories. Operating profit came to 565.6 billion yen, an increaseof 142.5 billion yen year on year. 108.4 billion yen of that amount
was from advantageous exchange rates; however, I see the result
as extremely favorable, given that the actual figure excluding gains
on foreign exchange was a 34.1 billion yen increase.
In the Company’s “Prominence 2020” mid-term management
vision, we are targeting 3-year total net sales of 8,000 billion yen andoperating profit of 1,000 billion yen (assuming an exchange rate of

FYE March 2016: Analysis of Increase and Decreasein Operating Income Changes (consolidated)(Billions of yen)+108.4Three-Year Business Operation / Profit PlanFYE March 2017 Consolidated Operating Plan

*Figures in projections for FYE March 2017 were announced May 12,
2016, then revised August 3, 2016.
For details, please see the Company website(http://www.fhi.co.jp/english/ir/index.html).

(¥100/US$)

+58.8

–39.0

SG&A expenses
and others+142.5 billion yen

Original plan

Revised plan(announced
May 12, 2016)(announced
August 3, 2016)

Net sales

3,170 billion yen

3,190 billion yen

11.2%

Operating Income

420 billion yen

400 billion yen

R&D expenses

360 billion yen (+29%)

Ordinary Income

420 billion yen

410 billion yen

Capital expenses

470 billion yen (+18%)

Net income attributableto owners of parent

293 billion yen

285 billion yen

Depreciation expenses

290 billion yen (+38%)

Exchange rate

¥105/US$¥106/US$Net sales

9.8 trillion yen

Operating Income

1.1 trillion yen

Operating Margin

565.6
–18.8

R&D
expenses

423.0

Operating income
FYE March 2015

been consistently strengthened according to our plans.
This year, we formulated a new 3-year forecast for consolidated
results (FYE March 2017-2019). We are planning for net sales of
9,800 billion yen, operating profit of 1,100 billion yen, and an 11.2%
operating margin (assuming an exchange rate of 100 yen/US$), in
addition to increased investment in R&D and capital expenditures.
The new plan demonstrates our management’s resolve toimplement the investment necessary to achieve sustainablegrowth, while also maintaining our industry-leading operating profit
margin going forward.

(Total of FYE March 2017-2019)

Cost
Improvement ofsales volume & reduction
mixture and others +33.1

Gain on currency
exchange

95 yen/US$) in our 3-year forecast for consolidated results (FYE
March 2015-2017).
Current exchange rate fluctuations, however, show a shift in
the direction of a weaker yen; operating profit for FYE March 2015
was 423.0 billion yen (at an exchange rate of 108 yen/US$) and
565.6 billion yen for FYE March 2016 (121 yen/US$). Assumptions ofan exchange rate of 105 yen/US$ for FYE March 2017 have us
expecting operating profit of 420.0 billion yen for that period,
producing a projected 3-year total of 1,400 billion yen*. Recalculating
using the initially projected exchange rate of 95 yen/US$ yields
870.0 billion yen, which underperforms the target of 1,000 billion
yen. However, this amount includes systematically increased
investments in future growth through greater R&D and capital
expenditures, and we are confident that our real profitability has

Operating income
FYE March 2016

( ): vs. previous 3 fiscal-year (FYE March 2017-2019) period

FUJI HEAVY INDUSTRIES LTD.

15 ANNUAL REPORT 2016

Message from our CFO

Expanding investment in future growth, while
maintaining our industry-leading operating profit margin.

Balancing shareholders’ equity and ROE at high levels,
while maintaining an optimal cash position.

Given that exchange rate gains led the Company to expect significant
over-performance in FYE March 2015-2016, we boosted investment
in R&D expenses above our initial plan. Background factors
prompting this decision included the intensifying R&D competition
surrounding environmental features and automated driving.
Heading into 2020, major global markets appear set to further
strengthen their exhaust and fuel efficiency regulations, as seenby the expanded scope of ZEV (Zero Emission Vehicle) regulationsfor 2018 in the U.S. (primarily in California). At the same time,readers are no doubt aware that development and demonstrationof automated driving technologies is being actively implemented
by the world’s major automobile manufacturers and IT companies.
FHI is proud of our industry-leading EyeSight technology forpreventing accidents before they occur. We aim to preserve thatleading position by evolving our EyeSight technology further aswell as achieve automated driving in quintessentially Subaru
fashion. At the same time, we are aware that we still have gains to
be made in order to catch up with industry frontrunners in terms ofenvironmental features such as electrification.
FHI has efficiently produced results with what was acomparatively low level of R&D investment. Going forward,
however, I think it is no surprise that much more robust investment
will be needed to clear the two significant technological hurdles ofenvironmental features and automated driving.
Furthermore, considering the continued vehicle supply
shortfalls, primarily in North America, larger capital expenditures
are also indispensable for expanding production capacity. We
project production capacity of 400,000 vehicles (which is nearly a
two-fold increase) in the U.S. by the end of 2016, and plan forfurther capital expenditures beyond that in order to meet demand.

In tandem with our performance growth, FHI’s capacity for cash flow
generation is steadily increasing. Free cash flows for FYE March 2016
were 358.6 billion yen. This was a marked increase over FYE March
2015 (138.8 billion yen), which had special temporary factors including
a cash-out equivalent to a year and half of corporate taxes, and FYEMarch 2014 (279.1 billion yen), which saw an almost 50 billion yen
cash inflow from the sale of Polaris (U.S.) stock and an unrecorded
expense of approximately 90 billion yen cash-out for corporate tax,
due to net operating loss carryforwards from past terms.

Free Cash Flow / Ratio of Shareholders' Equity to Total Assets
Years ended March 31
Free Cash Flow
(Billions of yen)

Ratio of Shareholders' Equity to Total Assets

400

Current free cash flows are judged to be at a level sufficientfor maintaining the Company’s sustained growth, though wewould like to adjust our cash position going forward so that we
maintain a healthy financial standing, while keeping the balancewith ROE in mind.
FHI’s fundamental capital policy is to keep a high balance
between shareholders’ equity and ROE. ROE for FYE March 2016reached the very high level of 36.9%, though this was due touncommon circumstances and is forecast to decline with time.
We see strategic capital costs at approximately 8% and we would
like to maintain ROE at roughly twice that for as long as possible.

ROE

Years ended March 31

(%)

(%)

80

40

60

30

36.9

358.6
30.4
300

279.1

29.3

51.8

46.5

22.9
200

37.7

40.5

33.3

40

20

20

10

0

0

138.8
95.3

100

8.9

28.3
0

2012

2013

FUJI HEAVY INDUSTRIES LTD.

2014

2015

2016

16 ANNUAL REPORT 2016

2012

2013

2014

2015

2016

Message from our CFO

Achieving continuous dividend payments within a
20-40% consolidated payout ratio range linked withperformance results.
The shareholder returns aspect of FHI’s capital policy is to pay acontinuous dividend while considering performance-linked
benefits. The dividend each fiscal year is determined based on a
20-40% consolidated payout ratio and takes a variety of conditions
into consideration. Based on our policy of paying a continuous
dividend, we decided to use nearly the same amount as the
one-time profit (48.2 billion yen) gained from the Ministry of
Defense helicopter lawsuit for a share buyback, as opposed to a

dividend. We plan to retire all of the shares bought back. Our
fundamental stance of delivering returns of profit to shareholders
through a dividend is unchanged; however, we would also like toconsider the approach like the share buyback carried out this year
as an additional means for handling one-time profits that occur.
The annual dividend payment for FYE March 2016 was 144
yen per share (72-yen half-year and 72-yen year-end dividends), a
76-yen increase year on year. We forecast a dip in profit for FYEMarch 2017 due to foreign exchange impacts, though we plan tomaintain the 144-yen (72-yen half-year and 72-yen year-end)
dividend per share by raising the payout ratio. While we link ourdividend with performance results, we aim to avoid, as much as

Dividend per share / Dividend Payout Ratio
Years ended March 31
Dividend per share(yen)

Dividend Payout Ratio

144

150

(%)

30

25.7
120

20.0

20.3
20

18.3
90

68
60

53
10

9.8
30

9
0

2012

15

2013

2014

2015

2016

0

FUJI HEAVY INDUSTRIES LTD.

17 ANNUAL REPORT 2016

possible, dividends cuts from profit fluctuations, and that is thereason why we utilize a range for our consolidated payout ratio.
In working to be “a high-quality company that is not big in size
but has distinctive strength”—a stance we outlined in our
mid-term management vision “Prominence 2020”—FHI aims toachieve sustainable growth, maintain our industry-leading level ofprofitability, increase corporate value, and meet the expectationsof shareholders.
Thank you for your understanding and ongoing support for
the future.

Special Feature

Innovativeness of the Subaru Global Platformthat will Serve as the Backbone of
Next Generation Automobile Manufacturing
Subaru has provided “enjoyment and peace of mind” to customers around the world through“Human Centered Automobile Manufacturing.” The core technology that will greatly evolve
Subaru’s next generation automobile manufacturing is the “Subaru Global Platform.”

SUBARUGLOBALPLATFORM
FUJI HEAVY INDUSTRIES LTD.

18 ANNUAL REPORT 2016

Special Feature

Innovativeness of the Subaru Global Platform that will Serveas the Backbone of Next Generation Automobile Manufacturing

The DNA of Subaru that Underlies the Subaru Global Platform
Facilitates “Enjoyment and Peace of Mind”
Naoto Muto
Director of the Board
Corporate Executive Vice President

The roots of Fuji Heavy Industries lie in the Nakajima Aircraft
Company as an aircraft manufacturer. Founded in 1917 makes next
year our 100th year anniversary. A great number of airplanes weredeveloped and produced in the days of the Nakajima Aircraft
Company. The uncompromising pursuit of safety performance andrational design that had developed because of the fact that wewere an airplane manufacturer has been passed down overgenerations as the car making DNA of Subaru.
The “Subaru 360” is a mini vehicle that was released in 1958
but, regardless of being a mini vehicle, it was the first time anyone
had adopted a monocoque body in Japan to realize a revolutionary
package that fit four adult passengers comfortably while keeping
the vehicle compact and lightweight. The “Subaru 1000,” that was
released in 1966, adopted an all-aluminum horizontally-opposedfour-cylinder engine and a front-engine front-wheel-drive system,
The Roots of Fuji Heavy Industries:
The DNA of an Airplane Manufacturer

Pursuit ofultimate
performance

Condensed
vehicle package
without waste

Uncompromising
pursuit of safety
in anyenvironment

FUJI HEAVY INDUSTRIES LTD.

19 ANNUAL REPORT 2016

putting it at the forefront of a global trend to switch to front-wheeldrive on compact vehicles.
In Japan, frontal crash safety standards started to be applied in
April, 1994 but if we take a look back 29 years prior to this, Subaru
had already been working on frontal crash safety testing voluntarilyon the “Subaru 360” since 1965. Following this, based on a safetyconcept to protect not only the driver but also the passengers aswell as pedestrians, crash safety data in various forms such as
rollovers and rear end collisions has been accumulated as we havecontinued with development of unique safety technologies towhere we stand now.
In this way, here at Subaru, where we have worked on safety
for over half a century, we currently view safety for car making
from four angles: “Primary Safety,” “Active Safety,” “Pre-Collision
Safety,” and “Passive Safety.” “Primary Safety,” “Active Safety,” and“Pre-Collision Safety” are technologies that have the purpose of
avoiding an accident before it happens and “Passive Safety” istechnologies that have the purpose of minimizing damage in theevent of an accident.
In “Primary Safety,” we develop vehicles with evaluation
criteria in designing such as excellent visibility, driving positions thatmake driving easy, intuitive interfaces, etc. so that driver fatigue isreduced, allowing the driver to concentrate on driving with peaceof mind.
“Active Safety” features the low center of gravity design of the
body that takes advantage of the horizontally-opposed engine andsymmetrical AWD that makes sure-footed driving possible in awide variety of road surface conditions. Having a low center ofgravity makes it easy for anyone to drive straight with peace ofmind and corner smoothly.
In terms of “Pre-Collision Safety,” the core technology isSafety Philosophy and Four Focus Areas
Primary Safety

Safe
state
Hazardous
state

Hazardavoidance- Peace-of-mind visibility design- Easy-to-drive position- Easy-to-operate interface

Active Safety- Symmetrical All-Wheel Drive- Low center of gravity- Reassuring chassis

Accident
Pre-Collision Safety

Collision

Spread ofdamageReduction ofdamage inan accident- EyeSight(Significant developmentwith an eye on automated driving)

Passive Safety- Protection of vehicle passengers- Protection of pedestrians“EyeSight.” It is a system that recognizes what is in front of thevehicle with two cameras that function similarly to human eyes
to provide safe protection with the car in front, pedestrians, andbicycles. Last year, actual market results were released showing
a 61% reduction in accidents resulting in human injury or deathfor vehicles equipped with EyeSight. Subaru will continue to
evolve “EyeSight” greatly going forward and focus our efforts onprotecting the lives of Subaru customers around the world.
In terms of “Passive Safety,” even if a crash was to take place,with the key concept of protecting the integrity of the cabin bysmoothly crushing the front zone of the vehicle in an extremely
short amount of time in mind, we develop a collision system that
can adeptly cope with the actual market. Subaru has continued toresearch crash safety performance independently since the daysof the “Subaru 360” and has garnered the highest level of rating inall safety performance tests performed by third parties in countries
around the world.
Synchronized with the making of cars built with a safetyconcept as reliable technologies as the fundamentals of thevehicle, we follow the “Human Centered Automobile
Manufacturing” concept so that the customers that use ourvehicles feel the enjoyment, we have placed importance on the“feelings” of customers in the developments. We have improved“enhanced dynamic feel” of the vehicle so the enjoyment and how
great it feels to drive straight and take turns intuitively could be felt
with the senses.
To have the user feel a sense of security the moment he/she
steps into the vehicle, sits downs, and closes the door. To have theuser feel a solid rumble when turning the engine on and feel thatsmoothness as he/she steps on the accelerator pedal and starts to pullaway from a stop. The vehicle runs so straight that the customer
forgets about the existence of the steering wheel and when cornering,
the vehicle turns exactly in line with the image that the customer has
in mind when a turning maneuver is made on the steering wheel. To
have the car move linearly interlocked to what the customer has inmind. This kind of relationship with the vehicle is what we have
prepared in our vehicles so that the enjoyment can be truly felt.
Moreover, to expand extend the enjoyment of customers
further from the perspective of making “living life” for ourcustomers richer, we eliminate or avoid unnecessary packaging,
pursue and utility, and have developed a vehicle that will be able towork in various situations with customers.
In addition to the development of new small displacement turbo
engines that realizes significant fuel economy efficiency and hybrids(HV) that many of our current customers still use, we are also
developing Plug-In Hybrid Electric Vehicles (PHEV) that can also be
charged at home that is now under development for the US market
and Electric Vehicles (EV) that aiming for a market launch in 2021.

The EyeSight that has been well received by customers forsafety will also continue to improve safety levels going forward.
The EyeSight will also react to and stop for bicycles that areencountered in intersections, and provide automated driving that
can also cover lane changes on expressways on a mass production
vehicle. Of course, automated driving for Subaru does not mean
unmanned driving; it is automated driving that is centered on thecustomer. It will also be fun and safe automated driving.
All of the functions described above have been incorporated
on vehicles with the Subaru Global Platform.
It is a platform that polishes up on the world’s highest level ofsafety performance, realizes safety performance that anticipates
2025 that not only will have high performance but have a
performance feel of movement that fits the human senses thatcan be understood by users the moment they step into the vehicle
and that point in time that the car takes off. This platform will also
be able to accommodate electrification as well as electric vehicles
that will be key for future environment requirement complianceand furthermore will also be incorporated into automated driving.
The Subaru Global Platform will be equipped on the next
generation Impreza that will be released for sale this fall, then it will
be adopted on all independently developed vehicles by Subaru.
Designs of cars that express these functionalities are designs
that exude the “enjoyment and peace of mind” of Subaru. Integrated
under a concept called DYNAMIC×SOLID that comes with a lively
and solid feel that has the Subaru touch, all Subaru vehicles will havethe unified design to be brought to our customers everywhere.

Activities to facilitate enjoyment and peace of mind
Platform

Driver Assist Technology<Ultimate Goal that Subaru is Aiming Toward>

Next Generation Subaru Design

SUBARU GLOBAL PLATFORM

To achieve Zero Traffic Accidents<DYNAMIC×SOLID>

Subaru best ever levels of overall performance evolutions tofacilitate Subaru’s vehicle manufacturing with enjoyment andpeace of mind.

Uncompromising pursuit of accident avoidance
performance with the “EyeSight” as the base.
Realize an automated driving function that iscentered on the human as a part of this evolution.

Shapes that are meaningful thatincorporate Subaru characteristic
functionality along with a high levelof dynamism and solid feel.

FUJI HEAVY INDUSTRIES LTD.

20 ANNUAL REPORT 2016

DesignSpecial Feature

Innovativeness of the Subaru Global Platform that will Serveas the Backbone of Next Generation Automobile Manufacturing

A New Platform that Anticipates the Year 2025 that will Realize
Subaru’s Best Ever Overall Performance Evolutions
Tetsuo Onuki
Corporate Senior Vice President
Chief General Manager of Subaru Engineering Division 1

Do not stop with just raising performance and specs
and pursue “enhanced dynamic feel” that resonateswith human senses.
The “Subaru Global Platform,” that was developed as a far-sighted
technology in the year 2025, is a new platform that will be adopted
on all forthcoming Subaru vehicles that we independently
developed starting off with the next generation Impreza. A major
aim of introducing the Subaru Global Platform is to realize
significant evolutions in overall performance, that would have beendifficult as just an extension of conventional technologies, byexecuting a complete overhaul of the platform, which is the basic
structure of an automobile, and to facilitate “enjoyment and peaceof mind” which is the greatest appeal of Subaru vehicles. To
accomplish this, the element that the development team poured allof their efforts into was simply the pursuit of “enhanced dynamic
feel” that resonates with human senses beyond high performanceand “safety performance” at the highest levels in the world.
So what is “enhanced dynamic feel?” It is the performancefeel that a person driving or riding a car feels, such as operation feeland drive feel while driving, as well as ride comfort. At Subaru, this“enhanced dynamic feel” is captured as a combination of threefactors [1] performance feel that is felt when operating the steering
wheel and pedals, [2] performance feel that is felt audibly, [3]performance feel that is felt from the movement of the vehicle andas has been done in the past we have pursued a high level ofquality that delves into the realm of human sensations such as“smoothness” or “how great it feels.” Furthermore, in thedevelopment of the Subaru Global Platform we have attempted tovisualize “enhanced dynamic feel” that had been difficult tocapture as physical values till now.

FUJI HEAVY INDUSTRIES LTD.

21 ANNUAL REPORT 2016

For example, when a driver is driving a vehicle, following theoperation of the steering wheel, the forces trying to turn thevehicle is transmitted from the front wheels to the body and there
is normally about a one tenth of a second delay that occurs until thevehicle actually starts to change its orientation. Reducing this slightdelay is what leads to smooth and stable vehicle behavior andimprovements in steering feel. Here at Subaru, we have developed
our own original sensors, measured suspension inputs in 1/1000
second unit intervals and measured strain in 200 locations on thevehicle body to quantify the movements of each part of the vehicle.
Furthermore, bench testing equipment that reproduces the
movement of the suspension on actual roads was developed anddevelopment of vehicle elements has also progressed.
Taking this kind of fundamental research and elemental
developments into consideration, Subaru has established threefactors to pursue “enhanced dynamic feel” which are (1) being able
to drive straight (straight line stability), (2) having no unpleasantvibration or noise, and (3) pleasant ride comfort. In order to realize
these factors in the Subaru Global Platform development, the work
Factors that make up enhanced dynamic feel

The Enhanced Dynamic Feelthat Subaru strives for

SubaruGlobal Platform(1) Superior straight-line stability(2) Having no unpleasant vibrations
or noises(3) Pleasant ride comfort•Major improvement of bodyand chassis rigidity;•Pursuit of an even lower
center of gravity•Evolution of the suspension
70 to 100% rigidity increase
versus current vehicles

vehicle by 50% compared to present models.
Through these activities, next generation Subaru vehicles
equipped with the Subaru Global Platform will provide enhanced
dynamic feel that will surely dominate not only Japanese vehicles
but also top grade European vehicles as well.

Pursuing Far-sighted Safety Technology that
Anticipates Ten Years in the Future Based On Subaru’s
Unique Safety Concept.
Another major objective of introducing the Subaru Global Platform isthe further evolution and enhancement of the world’s highest levelof safety performance. Among the four focus areas based on the
Subaru safety concept, the new platform brings major benefits
especially in “Active Safety” and “Passive Safety.”
In terms of “Active Safety,” significant improvements to bodyand chassis rigidity and even lower center of gravity has improved
steering stability on Subaru cars that had already been rated
highly and had taken it up to the next level. In internal tests, thenext generation Impreza danger avoidance speed has exceeded
the 84.5 km/h on the existing vehicle considerably at 92.5 km/h
which achieves levels comparable to European sports cars.
At the same time, in terms of “Passive Safety,” body strength
was raised by optimization of the frame structure, multiplexing of

Active Safety
Realized even lower center of gravity and further improved steering stability
On the Subaru global platform, the center of gravity height is 5 mm reduced
than current levels

SUV

Other brand average
Hip
-10mm

Passenger cars

Subaru vehicle
average

Sport cars

Current vehicles
Vehiclesin development

Power unit
-10mm

Heel
-20mm

Hip
-10mm
Propeller shaft/rear differential-10mm

Center of gravity height (mm)A center of gravity 50 mm lower than other OEM models
in the same classCenter of gravity height (mm)5mm reduction

Average ofCurrent Vehicles inother C segment vehicles development
brandsMinimum ground clearance (mm)Passive safety
Major awards all over the world

Body strength improvement for passive safety

IIHS

(USA)

JNCAP
EuroNCAP(Japan)USNCAP
(USA)

(EU)

ANCAP

(Australia)

FUJI HEAVY INDUSTRIES LTD.

Collision energy absorption (KJ)

was focused on “significant increases of body and chassis rigidity,”“pursuit of an even lower center of gravity,” and “evolution of thesuspension system.”For example, comparing the Subaru Global Platform to current
vehicles, improvements have been made to the front body lateralrigidity, body torsional rigidity, front suspension rigidity, and rear
sub-frame rigidity, by 90%, 70%, 70%, and 100%, respectively.
Moreover, Subaru cars have traditionally had the characteristic “lowcenter of gravity design” but on the Subaru Global Platform, aneven lower center of gravity was achieved that is 5mm lower thancurrent vehicles. The suspension has also advanced significantly byrevising the suspension geometry and improving the rigidity ofmounting points.
As a result of all of these advances, next generation vehicles
that adopted the Subaru Global Platform have realized astoundingstraight line stability as if gliding solidly anchored to rails. As thesteering responsive is extremely high, this astounding straight line
stability was made possible by the driver being able to rectify
turbulence of the trajectory path due to factors such as slightbumpiness to the road surface, side winds, etc.
At the same time in terms of countermeasures for noise andvibration, conventionally there were certain areas of the body andsuspension that resonated to amplify vibrations but on the "Subaru
Global Platform", the natural frequency of the body is raised by
improving body rigidity, preventing resonance with thesuspension. In addition, as concentration of localized strain was
averted on the subframe mounting points, known to be the portion
that is the weak point for stiffness, and the body’s overall torsional
characteristics were evened out for uniformity, then by optimizing
the body frame structure and utilizing structural adhesive, we haverationally improved the body rigidity without adding weight.
Furthermore, the amount of mass offset on the strut suspension,
which is a source of vibration input, was also reduced 15% versus
conventional levels which also contributed to reduction in noiseand vibration.
In terms of providing a smooth and comfortable drive,increasing the rigidity of the body frame brought out the intrinsic
shock damping performance capabilities of the suspension thatenabled quick convergence of vibrations generated by factors suchas bumps in the road, etc. By mounting the rear stabilizer directly
onto the body, the new platform reduces the body roll of the

Body strength comparedto current vehicles
40% increase2015

22 ANNUAL REPORT 2016

Anticipate to cover out
to the year 2025 byfurther increasing
strength, expanding
adoption of non-ferrous
materials, etc.

2025

the load transmission paths, adoption of high strength material, as
well as improving collision energy absorption by 40% versus
existing vehicles. These improvements further evolved crashsafety performance that had already achieved the highest level ofratings in the world. In the future, compliance to various anddiverse forms of crashes will be required, and we believe thatcollision energy absorption will have to be improved further bymore than 30% at around 2025. The Subaru Global Platform isdesigned to have the potential to be able to comply with these
improvements by further increasing strength to higher levels,
expanding adoption of non-ferrous materials, etc.
If the rigidity and strength of the vehicle is improved
significantly in this way, it would normally increase weight but
the Subaru Global Platform effectively utilizes the amount ofweight saved due to the rational design, on performance
improvements and safety improvements, as a lightweight bodythat is on par with conventional Subaru vehicles has been made a
reality. Moreover, in anticipation of the evolution of vehicles up till
2025, starting with gasoline engine vehicles, hybrid vehicles(HEV/PHEV) to electric vehicles (EV), it is designed as a platformthat can accommodate various types of power units. The Subaru
Global Platform that makes overall vehicle performance evolution
possible such as outstanding straight line stability, high level
danger avoidance performance, and the world’s highest level ofcrash safety performance, will be an important core technology
even in terms of realizing automated driving in the future.
Platform that anticipates out to 2025

Pursuing Human Centered Automated Driving
Functions Toward Making “Zero Traffic Accidents”
a Reality.
For Subaru that has “Human Centered Automobile Manufacturing”
at its essence, the ultimate goal for automated driving is not “tohave the car drive itself in place of the human” but it is “to aim forzero traffic accidents” that threaten human life and assets. Basedon technical concepts such as these, Subaru will evolve driverassist and automated driving toward the realization of “Zero Traffic
Accidents” by the introduction of the Subaru Global Platform andfurther advances to high performance and high functionality for thedriver assist system “EyeSight.”
Surveys in Japan have revealed a 61% fewer accidents
resulting in injury or death for vehicles equipped with the“EyeSight Ver. 2” compared to those without it. If the conditionsof the accidents are broken down further, car-to-car accidents
dropped 80%, broadside collisions dropped 50% to demonstrate
the benefits the system provides. The latest “EyeSight Ver. 3” thatis currently launched in the market has improved performance inareas such as capabilities to detect obstacles, speed range thatthe brakes actuate, etc. thus we should be able to expect evenfurther reductions in accident occurrences.
In terms of activities toward driver assist and automateddriving, automated follow-up system in congested express ways
will be added in 2017. This is a function that drives the car at 0 km/h
to 65 km/h on the same lane while recognizing the movements ofthe vehicle driving ahead and the conditions of curves in the
roadway with the “EyeSight” in traffic jam on expressways.
Furthermore, in 2020, we plan to add a radar and digital map to the“EyeSight” that uses only stereo camera technology to realize
automated driving on expressway roads including lane changes.
In this way, by practical implementation placing a priority on driverassist functions targeting situations with a high risk of becoming an
accident, such as during heavy traffic when drivers are susceptible tolosing their concentration, lane changes that demand careful checks
in the rearward direction, etc. through this the capability of Subaru
vehicles to avoid accidents will be improved exponentially. As a resultof this pursuit of safety performance, we hope to make automateddriving with distinctive Subaru value and provide “enjoyment andpeace of mind” that is one step above to users.

FUJI HEAVY INDUSTRIES LTD.

23 ANNUAL REPORT 2016

Evolution of the EyeSight
2017
Automated follow-up on
congested expressways

2020
Automated driving including
lane changes on expressways

EyeSight Accident Reduction Data*1

61% reduction in accident rate
Comparison of rate of accidents
resulting in injury or death withand without EyeSight (Ver.2)

Between people and vehicles

No. per 10,000 vehicles (over 4 years)

200
154.1

61%

10

52%

down

58%

60.7

down

36%
down

down

0

Without
EyeSight

With
EyeSight

0 Rear/
front

While
Other
crossing road

Between vehicles*2
60

83%

51%
down

down

0

Rear-end
collision

34%
down

Intersection
collision

Turning
left

41%

48%
down

down

Turning
right

Other

*1 Independent calculations from data on accidents that took place over the four years from2011 – 2014 among vehicles sold between 2010 and 2013 in which installation of EyeSight(Ver. 2) is possible based on Institute for Traffic Accident Research and Data Analysis(ITARDA) data. There were 2,234 accidents.
Calculates the number of accidents resulting in injury or death per 10,000 vehicles with andwithout EyeSight (over four years). Of the target vehicles, there were 246,139 with EyeSight(Ver. 2) and 48,085 without it.
*2 Placed top in frequency

Special Feature

Innovativeness of the Subaru Global Platform that will Serveas the Backbone of Next Generation Automobile Manufacturing

New Subaru Design that Puts “Enjoyment and Peace of Mind”
Into the Physical Form of a Vehicle
Mamoru Ishii
General Manager, Subaru Design Department

Pursuing “Lifestyle Design” to make life richer, and“Long Life Design” that people will want to use for along time.

genuine beauty of the vehicle that came about naturally. Reflecting
the mentality of this kind of Subaru car making is what we believe
will lead to “Long life design”.

At Subaru, for the mid-term management vision “Prominence
2020,” six activities have been established to polish up the brand.
One of the major items of these activities is positioned in the realmof design. In order for Subaru to be a prominent presence forcustomers, we have reconfirmed goals that design should be
aiming for and developed a renewed Subaru design strategy. The
new Subaru design will aim for “lifestyle design” to make the livesof customers richer and “long life design” that customers will want
to use for a long time.
At Subaru, cars will obviously be designed to comfortably fit
the customer’s lifestyle but on top of that, to take that next step,and actively promote the design a new lifestyle that will make thelife of customers richer. This is “Lifestyle design.”
Of course, the car will become a partner in the rich life of thecustomer, thus it must be equipped with functional performancethat can be used daily without stress but at the same time be
designed in a way that customers will feel an affinity to want to
use the car for a long time. For example, at Subaru, in order toachieve superior visibility performance, sure, effective field of view
angle was secured but an interior design was executed that went
as far as taking into account controlling light glare and reflections in
the glass. On top of this, instead of following the latest trends
haphazardly, the priority was placed on design that pursued

Design Philosophy of DYNAMIC×SOLID that Expresses“Enjoyment and Peace of Mind” from the Perspectiveof Design.

FUJI HEAVY INDUSTRIES LTD.

24 ANNUAL REPORT 2016

In pursuing our new design direction, we have also worked tointerpret from a design perspective the value of “Enjoyment andPeace of Mind” that Subaru offers to customers and put it into theform of vehicles. As a result of analyzing “Enjoyment and Peace ofMind” based on this concept, we reacknowledged threemeanings that should be expressed as a common theme
throughout the new Subaru design and decided to evolve eacharea accordingly.
The first meaning is “functional value” in terms of “finevisibility,” “comfortable interior space,” “load capacity” and “runthrough capability,” that had been a priority since the founding of
Subaru. In addition to these factors, in recent years “Aerodynamic
performance,” have also become important factors. The second
meaning is “manufacturing spirit” in terms of “rational designconcepts” and a “Challenging spirit” that have been passed downover generations since the founding of Subaru as our DNA to wantto create new value. Then the third meaning is “emotional value” interms of communicating the sophisticated “shape” borne out ofnecessity represented by the distinct front face that is identified as

a Subaru car in a single glance.
The latest design philosophy that embodies this new Subaru
design is DYNAMIC×SOLID. The “solidness full of sense of
security” and “sturdiness to protect passengers,” that had been
carefully developed into designs conventionally by Subaru isexpressed by SOLID and throbbing Dynamic for next generation
and active lifestyle, etc. is expressed by the keyword DYNAMIC.
At Subaru, this design philosophy of DYNAMIC×SOLID isincorporated into specific three-dimensional forms from thefollowing three factors. The first and most important is the“stance.” This could also be called the proportions of the vehicle

and is the structure of framework that determines the profile of thevehicle. The second factor is “solid mass.” This could also bereferred to as volume or volume feel, and develops the way themuscles are built to give an impression of trust and toughness thatthe vehicle possesses. The third factor is “surface structure.”
Starting with Subaru’s unique hexagon grille through thisthree-dimensional expression, this is what gives the impression ofcar’s individual facial expression and character.
The next generation Impreza will be the first mass production
vehicle to fully adopt this DYNAMIC×SOLID design. Please lookforward with high expectations for future Subaru designs.

FUJI HEAVY INDUSTRIES LTD.

25 ANNUAL REPORT 2016

Corporate Governance

Our Basic Approach to Corporate Governance

Company Organizational Bodies

FHI works on the enhancement of corporate governance as one of
the top priorities of management in order to gain the satisfaction andtrust of all of our stakeholders by achieving sustainable growth andimproving our corporate value in the medium and long term aiming
to be “A Compelling Company with Strong Market Presence” basedon the “Customers Come First” principle under the corporate
philosophy outlined on the right.

FHI has adopted a Board of Corporate Auditors system, and theBoard of Directors and the Board of Corporate Auditors perform
decision making, and oversight and auditing for the execution ofimportant business operations. The Board of Directors is
composed of eight directors, two of whom are highly independent
outside directors to further strengthen governance. The Board of
Corporate Auditors is composed of four corporate auditors, two ofwhom are outside corporate auditors to provide objective
oversight of management.
With regard to the system for the execution of business
operations, important issues that require consultation with theBoard of Directors are thoroughly discussed at the Executive
Management Board Meeting, which deliberates on company-wide
management strategy and the execution of key business
operations. In addition to employing an executive officer system,
FHI has introduced an in-house company system for the Aerospace

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

(Established in November 1994)

System of Corporate GovernanceElection and dismissal
Auditing

Election and dismissal

Board of Corporate Auditors: 4
ReportingCorporate auditors: 2

Board of Directors: 8

Informationexchange withoutside officers

Outside corporate
auditors: 2
ReportingDirectors: 6

Executive Compensation Meeting

Outside directors: 2
Submission
and reporting

Decision making

Executive Nomination Meeting

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

Decision making andoversight functions

General Meeting of Shareholders
Election anddismissal

ReportingInternal Audit Department
Reporting(Audit Department)
Auditing

Auditing

President
Executive Management
Board Meeting

Instructions and oversight

CSR Committee

Reporting

Quality Improvement Committee

ReportingCentral Safety and Health Committee

Election and dismissal

Environmental Committee

Shared Corporate Operations
Departments at HQ
Subaru Automobiles Division

Executive Meeting

Aerospace Company

Executive Meeting

Industrial Products Company

Executive MeetingGroup companies

CSR Committee

Submission and reporting ofimportant matters

Compliance Committee

Policy instructions
Approval of plans, etc.

Social Contribution Committee
Corporate Governance Planning Committee
etc.

Plan proposal reports, etc.

FUJI HEAVY INDUSTRIES LTD.

26 ANNUAL REPORT 2016

Business operations execution function

Collaboration

Corporate Vice Presidents

Accounting Auditors

Collaboration

and Industrial Products business divisions with the Automotive
Business at its core with the aim of clarifying responsibility andspeeding up execution of business operations.

Development of Internal Control System
FHI resolved its basic policy on the development of a system toensure that the execution of the duties of the directors complies
with laws and regulations and the Articles of Incorporation as wellas the other systems stipulated by ordinance of Japan’s Ministry ofJustice as necessary to ensure the proper operation of a stockcompany at a meeting of the Board of Directors in May 2006.

Status of Development of Risk Management System
At FHI, the Corporate Planning Department, which plays a central rolein the common functions of each business, and other company-wide
shared corporate operations departments maintain close links witheach department and company to enhance risk management.
In addition, the Audit Department performs planned audits ofeach department and Group company.
FHI has also created and operates a system and organization toensure compliance, which is the foundation of risk management, inorder to assist with the development of the internal control system.
First, we have established the Compliance Committee which
deliberates, discusses, determines, exchanges information, andliaises on important compliance issues to promote theimplementation of company-wide compliance. In addition, we
have assigned a compliance officer and compliance staff for eachdepartment and company to organize a system that meticulously
implements compliance at each workplace. We also systematicallyprovide education and training for officers and employees on aroutine basis as well as raising awareness about compliancethrough such means as in-house publications as necessary.
Furthermore, in order to promote the implementation ofcompliance in the FHI Group, we conduct education and training
and provide information through in-house publications for Group
companies in addition to raising the effectiveness of these
activities through the participation of Group companies in the FHI
internal reporting system (Compliance Hotline.)Corporate GovernanceStatus of Internal Audits and Auditing by Corporate Auditors
FHI’s standing corporate auditors (including the standing outside
corporate auditors), attend meetings of the Board of Directors andother important meetings, visit work sites, investigate subsidiaries,
hear opinions from the internal audit department, and audit theexecution of duties by the directors and others based on the audit
policy and audit plan established by the Board of Corporate
Auditors. The non-standing outside corporate auditors attend
meetings of the Board of Directors and other important meetings,
hear opinions from the internal audit department and the standing
corporate auditors, and audit the execution of duties by the
directors and others based on the audit policy and audit planestablished by the Board of Corporate Auditors.
FHI has established the Audit Department as an internal auditingorganization to implement planned audits of the execution of business
operations in each in-house department as well as Group companies
inside and outside Japan. At the beginning of the fiscal year, thedepartment coordinates its internal audit plan for the fiscal year with
the Board of Corporate Auditors’ policy in advance. The Audit
Department reports the results of all internal audits to the corporate
auditors and reports on the status of internal audit activities andexchanges opinions with them on a monthly basis to achieve
collaboration. The Audit Department also endeavors to strengthen theauditing function in conjunction with audits by the Accounting Auditor.

Evaluation of Internal Control System for Financial ReportingAn evaluation of the internal control system related to financial
reporting in connection with the internal control reporting system
based on Japan’s Financial Instruments and Exchange Act is
conducted using the final date of the fiscal year of the consolidated
financial statements as the reference date. The evaluation conforms
to the standards for evaluation of internal control related to financial
reporting that are generally accepted to be fair and reasonable.
The President & Chief Executive Officer (CEO) and the Chief
Financial Officer (CFO) evaluated the status of the development of
the internal control system related to financial reporting as ofMarch 31, 2016 and affirmed that it has been established properly
and functions effectively and issued an internal control report
audited by the Accounting Auditors to that effect.

Executive Compensation
By a resolution passed at the June 2016 General Meeting of
Shareholders, the total amount of annual compensation for directors
was set within 1.2 billion yen (including 200 million yen for outside
directors), while the total amount for corporate auditors was set
within 100 million yen by a resolution passed at the June 2006
General Meeting of Shareholders. Furthermore, by decision of theBoard of Directors, the basic compensation for directors is to include
a fixed amount (determined based on the director’s rank, withadditional considerations including the business environment, etc.)
and a performance-based amount (determined based on the fiscal
year’s consolidated ordinary profit, with additional considerations
including contribution to personnel development, the businessenvironment, etc.). Compensation amounts for the fiscal year underreview are shown below. Outside directors do not receive
performance-based compensation.
Total compensation (millions of yen)Classification

NumberBasic compensation
Fixed amountPerformancebased amount

Directors(excluding outside directors)

7

234

282

516

Corporate auditors (excluding
outside corporate auditors)

3

27

−

27

Outside executive officers

5

62

−

62

Total

15

322

282

604

*The above table includes one director and two auditors who resigned before the last day of the fiscal year
under review. At the end of the fiscal year under review, there were 8 directors (including 2 outside
directors) and 4 auditors (including 3 outside auditors).

Complying with the Corporate Governance Code
FHI’s policies call for compliance with the provisions of the Tokyo
Stock Exchange’s Corporate Governance Code. Cognizant of theseprovisions, FHI formulated Corporate Governance Guidelines on
November 5, 2015. These Guidelines, disclosed on our website, areintended to clarify our fundamental approach to corporate
governance, in addition to our framework and management policies.
FHI’s corporate governance pages:
https://fhi.co.jp/english/csr/mecenat/governance.html
https://fhi.co.jp/english/envi/csr/csr/governance/governance.html

FUJI HEAVY INDUSTRIES LTD.

27 ANNUAL REPORT 2016

Analysis and Evaluation of theBoard of Directors’ Effectiveness
Following the Corporate Governance Guidelines, we implemented
analysis and evaluation of our Board of Directors’ effectiveness in
FY 2016.
Analysis and Evaluation Method• Implementation period: March 2016
• Respondents: Directors and corporate auditors(12 in total, including outside directors)• Overview: We carried out self-evaluations using a questionnaire thatutilized expertise from a third-party organization.

An overview of the analysis results is as follows.
- The Board of Directors has an appropriate size and sufficient
diversity for debate. The number, content, and amount ofdeliberation on proposals brought forth based on the Board of
Directors’ Proposal Criteria are appropriate and the Board’s
debate is open and unencumbered.
- Board of Directors members understand the specialized
expertise of each member, respect fellow members, and strive tounderstand, rather than exclude, opinions and values that do notagree with their own.
- The support framework for outside executive officers as well as
external communication may need further improvement.
From the above, the effectiveness of FHI’s Board of Directors wasevaluated positively for FY 2016. In terms of both its decision-making
and oversight of business execution, the Board as a whole fulfills theroles and responsibilities set out in the Corporate Governance Code.
On the other hand, there were also constructive opinions
expressing expectations for enhanced provision of information andexplanations from the Company to outside executive officers, inaddition to improved IR activity reports and more active strategic
debate. Consequently, we have decided to digest the results of thissurvey and strive to continually improve corporate value, whileboosting our support of outside executive officers to a new level. This
will include more promptly distributing material used for proposals
taken up by the Board of Directors, enhancing pre-briefings foroutside executive officers, working to share information and provide
feedback on IR activities to a greater extent than we have to date,and increasing opportunities for Board members (including outside
executive officers) to exchange opinions and information on FHI’s
business strategies and management challenges.

Board Directors / Executive Officers

FUJI HEAVY INDUSTRIES LTD.

28 ANNUAL REPORT 2016

Board Directors / Executive Officers

Directors of the Board
Yasuyuki Yoshinaga 1

Takeshi Tachimori 5

April 1977 Joined the Company
April 2005 Corporate Vice President, Senior General Manager of Strategy Development Division,and General Manager of Corporate Planning Department
June 2006 Corporate Vice President and Chief General Manager of Strategy Development Division
April 2007 Corporate Vice President, Chief General Manager of Subaru Japan Sales & Marketing
Division, and General Manager of Sales Promotion Department
June 2007 Corporate Senior Vice President and Chief General Manager of Subaru Japan Sales &Marketing Division
June 2009 Director of the Board and Corporate Executive Vice President
June 2011 Representative Director of the Board, President and CEO

April 1977 Joined the Company
June 2006 Corporate Vice President and Senior General Manager of Subaru Product & Portfolio
Planning Division
April 2009 Corporate Vice President, Chief General Manager of Subaru Product & Portfolio
Planning Division, and President of Subaru Tecnica International Inc.
April 2010 Corporate Senior Vice President and Chief General Manager of Subaru Product &Portfolio Planning Division
April 2011 Corporate Senior Vice President and Chairman, President & CEO of Subaru of America, Inc.
June 2011 Corporate Senior Vice President; Chairman, President & CEO of Subaru of America,
Inc.; and Chief General Manager of Subaru Overseas Sales & Marketing Division 1
April 2013 Corporate Executive Vice President, Chairman & CEO of Subaru of America, Inc., andChief General Manager of Subaru Overseas Sales & Marketing Division 1
June 2013 Director of the Board and Corporate Executive Vice President

Representative Director of the Board
President & CEO

Jun Kondo 2

Representative Director of the Board
Deputy President
April 1976 Joined the Company
June 2003 Corporate Vice President, Chief General Manager of Subaru Manufacturing Division,and Chief General Manager of Gunma Plant
May 2004 Corporate Vice President, Chief General Manager of Subaru Cost Planning &Management Division, and General Manager of Cost Planning Department
June 2004 Corporate Senior Vice President and Chief General Manager of Subaru Cost Planning &Management Division
June 2006 Corporate Senior Vice President, Chief General Manager of Subaru Cost Planning &Management Division, and Senior General Manager of Subaru Purchasing Division
April 2007 Corporate Senior Vice President, Chief General Manager of Strategy Development
Division, and Chief General Manager of Subaru Cost Planning & Management Division
June 2008 Director of the Board and Corporate Executive Vice President
June 2011 Representative Director of the Board and Deputy President

Naoto Muto 3

Director of the Board
Corporate Executive Vice President
April 1977 Joined the Company
April 2005 Corporate Vice President, Senior General Manager of Subaru Product & Portfolio Planning
Division, and General Manager of Subaru Product & Portfolio Planning Division
June 2006 Corporate Vice President and Chief General Manager of Subaru Product & Portfolio
Planning Division
June 2007 Corporate Senior Vice President and Chief General Manager of Subaru Product &Portfolio Planning Division
April 2009 Corporate Senior Vice President and Chief General Manager of Subaru Purchasing Division
June 2010 Corporate Executive Vice President and Chief General Manager of Subaru
Purchasing Division
June 2011 Director of the Board and Corporate Executive Vice President

Director of the Board
Corporate Executive Vice President

Masahiro Kasai 6

Director of the Board
Corporate Executive Vice President

April 1978 Joined the Company
June 2007 Corporate Vice President and President & CEO of Subaru of Indiana Automotive, Inc.
April 2009 Corporate Vice President, Chief General Manager of Subaru Manufacturing Division,and Chief General Manager of Gunma Plant
April 2010 Corporate Senior Vice President, Chief General Manager of Subaru Manufacturing
Division, and Chief General Manager of Gunma Plant
April 2014 Corporate Executive Vice President and Chief General Manager of Subaru
Purchasing Division
June 2015 Director of the Board and Corporate Executive Vice President

Yoshinori Komamura 7
Outside Director

June 2015 Outside Director

Shigehiro Aoyama 8
Outside Director

June 2016 Outside Director

Outside Executive Officers

Corporate Executive Vice President
Hisashi Nagano
Nobuhiko Murakami
Tomomi Nakamura
Kazuo Hosoya
Masaki Okawara

The Company has appointed Yoshinori
Komamura and Shigehiro Aoyama to theposition of outside director. Possessing
considerable experience as executives anda high degree of expertise in the area of
CSR, we are confident that Mr. Komamura
and Mr. Aoyama will offer sound advice tothe Board of Directors and other bodies
and ensure the independent monitoring of
the Company’s management.
Outside corporate auditors are deemed
to have sufficient ability to appropriately
carry out their professional duties. Shinichi
Mita possesses experience and knowledge
related to management from being an
executive in the manufacturing industry. In
particular, he has broad knowledge ofcorporate accounting and finance. Yasuyuki
Abe possesses experience and knowledge
related to management from being an
executive of a general trading company andhas a wealth of experience and broad
knowledge as a corporate manager.
FHI appoints outside directors andoutside corporate auditors based on
criteria for the independence of its
outside executive officers.

Corporate Senior Vice President
Yasuo Kosakai
Yasunobu Nogai
Satoshi Maeda
Toshiaki Okada
Tetsuo Onuki
Yoichi Katou
Katsuyuki Mizuma
Corporate Vice President
Masami Iida
Hiromi Tsutsumi
Shoichiro Tozuka
Toshiaki Tamegai
Hiroki Kurihara
Masayuki Uchida
Takuji Dai
Fumiaki Hayata
Atsushi Osaki
Tatsuro Kobayashi

Auditors

Mitsuru Takahashi 4

Director of the Board
Corporate Executive Vice President
April 1978 Joined the Company
June 2006 Corporate Vice President and General Manager of Finance & Accounting Department
April 2009 Corporate Senior Vice President, CFO, and General Manager of Finance & Accounting
Department
April 2010 Corporate Senior Vice President, CFO, General Manager of Finance & Accounting
Department, and President of Eco Technologies Company
June 2010 Corporate Executive Vice President, CFO, General Manager of Finance & Accounting
Department, and. President of Eco Technologies Company
April 2011 Corporate Executive Vice President, CFO, and President of Eco Technologies Company
June 2012 Director of the Board, Corporate Executive Vice President, CFO, and President

Executive Officers

5

7

3

6

1

FUJI HEAVY INDUSTRIES LTD.

2Standing Corporate Auditor
Akira Mabuchi
Shuzo Haimoto

8

4

29 ANNUAL REPORT 2016

Corporate Auditor
Shinichi Mita
Yasuyuki AbeConsolidated Ten-Year Financial Summary

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

2016

2016

¥ 2,408,129
1,728,271
679,858
353,369
326,489
328,865
206,616
210,757¥ 2,877,913 ¥ 3,232,258
2,187,136
2,017,490
1,045,122
860,423
479,533
437,378565,589
423,045
619,003392,206
436,654261,873405,703309,271$ 28,682,740
19,408,430
9,274,310
4,255,329
5,018,981
5,492,972
3,874,825
3,600,169¥ 596,813
595,365
1,577,454
37.7%¥ 770,071
765,5441,888,363
40.5%¥ 1,030,719 ¥ 1,349,411
1,343,732
1,022,417
2,592,410
2,199,714
51.8%
46.5%

$11,974,541
11,924,146
23,004,792

2011

2012

2013

2014

¥ 1,572,346
1,217,662
354,684
309,004
45,68031,90618,481—¥ 1,445,790 ¥ 1,428,690 ¥ 1,580,563
1,164,564
1,152,763
1,241,427
281,226
275,927
339,136
287,029
248,577
255,001(5,803)27,35084,135(21,517)(443)
63,214(69,933)(16,450)
50,326—(13,416)
34,900¥ 1,517,105
1,222,419
294,686
250,727
43,95952,87938,45344,474¥ 1,912,968
1,501,809
411,159
290,748
120,41193,082
119,588
152,009¥ 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%¥ 451,607
450,302
1,352,532
33.3%

¥

44.46
44.44
687.81

¥

25.73
25.73
687.02¥(91.97) ¥—505.59¥81,454
126,32950,709782,865
42,920¥87,164
118,869
52,020782,865
44,484¥74,036
95,15342,831
782,865
40,8392007

2008¥ 1,494,817
1,142,674
352,143
Gross profit
304,237
Selling, general and administrative expenses
47,906
Operating income (loss)
45,589
Income (loss) before income taxes and minority interests
31,899Net income (loss) attributable to owners of parent—
Comprehensive income

2009

2010

2015

For the year:
Net sales

Cost of sales

At year-end:
Net assets
Shareholders’ equity
Total assets
Ratio of shareholders’ equity to total assets (%)¥ 381,893
380,587
1,231,367
30.9%¥ 413,963
412,661
1,188,324
34.7%

Per share: (in yen and U.S. dollars)
Net income (loss):
Basic
DilutedNet assets(21.11) ¥—488.5864.56—
528.88¥49.27—
576.97¥153.23—762.87¥264.76—980.98¥335.57 ¥ 559.54——
1,721.90
1,310.15

$

4.97
—
15.28

¥

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

71,821 ¥ 72,938
168,338
135,346
102,373
83,535
782,865
782,865
79,59470,942$647,245
1,493,815
908,448

Other information:
Depreciation/amortization
Capital expenditures (addition to fixed assets)
Research and development expenses
Number of shares issued (thousands of shares)2
Number of shareholders2¥

65,78589,077
37,175
782,865
39,223

Number of employees2
Parent only
Consolidated

11,752
25,598

11,90926,404

12,13727,65912,48327,586

12,42927,296

1. U.S. dollar figures have been translated from yen, for convenience only, at the rate of ¥112.69 to US$1.00, the approximate rate of exchange at March 31, 2016.
2. As of March 31
FUJI HEAVY INDUSTRIES LTD.

12,35927,12330 ANNUAL REPORT 2016

12,71727,50913,03428,545

13,88329,774

14,234
31,151Five-Year Automobile Sales Years ended March 31

Consolidated Automobile Sales (Number of units)

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

United States
OthersCanadaRussia1,000,000

EuropeAustralia

910,695

957,865

825,098
800,000

724,466
639,862

600,000

400,000

200,000

0

2012

2013

2014

2015

2016

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

Impreza
Tribeca
OthersForester
Exiga
Minicars

1,000,000

LevorgSUBARU BRZ

910,695

957,865

825,098
800,000

724,466
639,862

600,000

400,000

200,000

0

2012

2013

2014

2015

2012

2013

2014

2015

2016

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2016
FUJI HEAVY INDUSTRIES LTD.

31 ANNUAL REPORT 2016

Five-Year Automobile Sales Years ended March 31

Non-consolidated Automobile Sales (Number of units)

Non-consolidated Domestic Automobile Sales by Model (Number of units)
Years ended March 31

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

2013

2014

2015

2016

LegacyExiga

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

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

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

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

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

200,000

Impreza
SUBARU BRZForesterOEM

LevorgMinicars

WRX

185,841

180,036

167,147

166,710150,041

150,000

100,000

50,000

Export units:
LegacyImpreza
ForesterLevorg
WRX
Tribeca
Exiga
SUBARU BRZ
OEMExport total
U.S. retail sales
LegacyImpreza
Forester
WRX
Tribeca
SUBARU BRZ
U.S. total

2012

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

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

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

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

0

2012

2013

2014

Non-consolidated Automobile Export Units by Model (Number of units)
Years ended March 31

LegacyWRX
OEM

Impreza
TribecaCKD Overseas

ForesterExiga

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

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

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

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

CKD overseas(SIA portion)

175,256
175,256

185,757
183,729

165,554
159,266

222,513
218,565

242,424
237,060

SIA production units
LegacyTribeca

164,968
5,661

177,4713,713

161,204
2,307

206,6810235,979
0

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

32 ANNUAL REPORT 2016

LevorgSUBARU BRZ

600,000

545,6091

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

2016

2015

576,483

499,194
450,000

384,023
314,999
300,000

222,513150,0000

175,256

2012

185,7572013

242,424

165,554

2014

2015

2016

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

The Fuji Heavy Industries Ltd. GroupThe Fuji Heavy Industries Ltd. Group (“the Group”) is
engaged in activities conducted under four businessdivisions: Automobiles (which accounts for over 90%
of consolidated net sales), Aerospace, Industrial
Products, and Other.
On a consolidated settlement of accounts basis,
FHI (“the Company”) and 77 subsidiaries, as well as
2 equity-method affiliated companies, were includedin the scope of the Group’s consolidation as of March
31, 2016, the end of the fiscal year under review (April
1, 2015 – March 31, 2016 (“the fiscal year”)).
Overview
Business Environment
During the period, the domestic economy in Japan
continued to slowly recover, and, although weakness
was seen in the growth of emerging markets, there
was evidence of slight recovery in the global economy
as a whole, focused mainly on developed nations.
At the same time, the trend of economic conditions
has become more opaque from the impact of theyen continuing to strengthen—while the dollar has
weakened—from January of this year, and fromfluctuations in capital markets.
In our mid-term management vision, “Prominence
2020,” the Group has announced its goal to be “ahigh-quality company that is not big in size but has
distinctive strength” in 2020. In working to achieve
this goal, we have been focusing on two initiatives:“enhancing the Subaru brand” with the aim of valueadded management, and “building a strong businessstructure” that increases our resilience to changes

in the business environment and helps to ensuresustained growth. In the fiscal year under review,despite not introducing any new models, strong sales
continued in many markets, especially in the U.S., ourmost important market. We were able to generate
steady results, including posting historic highs for
Subaru unit sales.

Net Sales (Billions of yen)

Performance Review
In light of the above factors, the Group recorded
increases in income and profit, as well as our highest
historical levels of consolidated net sales and all income
categories for the fourth consecutive fiscal year.
Net sales amounted to 3,232.3 billion yen, up
354.3 billion yen (12.3%) year on year, owing tosuch factors as higher unit sales for automobiles andimpacts from favorable exchange rates.
Accompanying the increase in net sales wasstrong income, with operating income 33.7% higher
year on year and fiscal year net income attributable toowners of parent up 66.7% year on year.

2,000

Cost of Sales, Expenses and Operating Income
Operating Income
Operating income came to 565.6 billion yen, an
increase of 142.5 billion yen, or 33.7%, year on year.
Our operating margin, at 17.5% (up 2.8 points year
on year), stands at a high level within the automotive
industry.
Foreign exchange gains of 108.4 billion yen due
to exchange rates moving in the direction of a weaker
yen were a strong supporting factor. However, wewere able to cover a 57.8 billion yen increase in
FUJI HEAVY INDUSTRIES LTD.

33 ANNUAL REPORT 2016

Years ended March 31

4,000

3,232.3
2,877.9

3,000

2,408.1
1,913.0
1,517.1

1,000

0

2012

2013

2014

2015

2016

Operating Income (Loss) &Net income (loss) attributable to owners of parent(Billions of yen)

Years ended March 31
Operating Income (Loss)

Net income (loss) attributable to owners of parent

565.6

600

423.0

450

436.7

326.5
300

261.9
206.6
120.4 119.6

150

44.0 38.5
0

2012

2013

2014

2015

2016

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

FUJI HEAVY INDUSTRIES LTD.

34 ANNUAL REPORT 2016

(Consolidated, Three-Year YoY Comparison) (Billions of yen)

12.4

103.7

-66.6

108.4

Im
s pr
mi ales ovem
xtu vo e
re lum nt oan e f
do &
the
rs
Co
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red
uc
tio
n
SG
an &A
do e
the xpers nsesG
ex ain och nan cu
ge rrencyO
FY peraE M tinarc g inh 2 com
01 e
4

326.5

58.8

33.1

-39.0

423.0
-23.2

R&
De
xp
en
se
s
Op
FY eraE M tingarc inh 2 com
01 e
5

70.3

565.6
-18.8

99.9

R&
De
xp
en
se
s
Op
FY eraE M tingarc inh 2 com
01 e
6

Im
s pr
mi ales ovem
xtu vo e
re lum nt oan e f
do &
the
rs
Co
st
red
uc
tio
n
SG
an &A
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the xpers nsesG
ex ain och nan cu
ge rre
nc
y

423.0

32.0

565.6
-168.6

420.0

O
F pe
(pl YE Mratin
an ar g i)* ch nc
20 ome17-17.6

S
an G&Ado e
the xpers nse
s
R&
De
xp
en
se
s

-91.3

Im
s pr
mi ales ovem
xtu vo e
re lum nt oan e f
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rs
Co
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red
uc
tio
n
Ga
ex in och n
an cu
ge rrencySegment Information
Automobiles Division
Net sales for this division stood at 3,039.4 billion yen,
an increase of 340.5 billion yen, or 12.6%, year on
year. Segment income also increased 142.7 billion
yen, or 35.6%, year on year to 543.6 billion yen.
Consolidated global unit sales inside and outside
Japan reached a new high for the fourth year in arow, growing 47,000 units (5.2%) year on year to958,000 units.

Analysis of Increases and Decreases in Operating Income

O
FY peraE M tinarc g inh 2 com
01 e
5Income before Income Taxes and Minority
Interests, and Net Income
Income before income taxes and minority interests
rose 226.8 billion yen, or 57.8%, compared with theprevious fiscal year, to 619.0 billion yen. This included
a one-time profit of 48.2 billion yen gained from thelawsuit to recover initial investments related to theAH-64D helicopter for the Ministry of Defense.
Fiscal year net income attributable to owners ofparent after total income taxes, plus net gain (loss)
for the fiscal year attributable to non-controllingshareholders, rose 174.8 billion yen, or 66.7%,
compared with the previous fiscal year, to 436.7
billion yen.

Domestic Market
Automobile demand lagged in the domestic market.
Passenger vehicle unit sales for the fiscal year underreview were on a par with the previous fiscal year,
while mini car unit sales decreased 16.6% year on year.
In this environment, the Group’s unit sales inJapan dipped 17,000 units year on year (10.7%) to
145,000 units. Despite strong unit sales of somemodels, including the Impreza, Forester, and Crossover
7, there were lower unit sales for the one-year postlaunch Levorg and Legacy. Passenger vehicle unit sales
fell by 16,000 units, or 12.7%, year on year, to 112,000
units. Additionally, mini car unit sales, with the Stellashowing sluggish sales a year after its launch date, fell
1,000 units (3.4%) year on year to 34,000 units.
Overseas Market
Overseas unit sales amounted to 813,000 units,
an increase of 65,000 units, or 8.6%, year on year.
Outback maintained strong results throughout the
fiscal year, while Crosstrek (called Subaru XV outside
North America) continued to sell well in North America.
Furthermore, increased unit sales were contributed
by Levorg, which started shipping in Europe from thesecond half of the fiscal year.
By region, units sold in North America increased
60,000 units, or 10.6%, year on year to 630,000 units.
In Europe and Russia, sales volume was relatively
unchanged at 48,000 units. China saw a decrease of
9,000 units, or 17.5%, to 44,000 units, while unit salesin Australia increased 6.000 units, or 14.7%, to 45,000
units, with other regions up 8,000 units, or 21.0%, to46,000 units. Sales in North America posted a record
high for the seventh fiscal year in a row.

O
FY peraE M tinarc g inh 2 com
01 e
6various overhead costs and R&D expenses with profit
excluding the boost from exchange rates, including
an improved sales mix that added 58.8 billion yen andcost reductions that added 33.1 billion yen. As a result,
we were able to grow income.

*Figures in projections for FYE March 2017 were announced May 12, 2016, then revised August 3, 2016.
For details, please see the Company website (http://www.fhi.co.jp/english/ir/index.html).

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

Aerospace Division
Net sales for this division stood at 152.8 billion yen,
an increase of 10.0 billion yen, or 7.0%, year on year.
Segment income decreased 0.7 billion yen, or 3.8%,
year on year to 18.2 billion yen.
Lower sales of the T-5 training aircraft and aerial
simulation targets to the Ministry of Defense led net
sales to trail that of the previous fiscal year, while sales
to the commercial sector increased over the previous
fiscal year thanks to net sales-boosting factors suchas the exchange rate and a surge in production of the
Boeing 777, among others.

with the previous fiscal year-end.
Of this total, current assets stood at 1,784.1
billion yen, up 310.8 billion yen, while total property,
plant and equipment rose 81.9 billion yen to 808.3

billion yen, both compared to the previous fiscal
year-end. Current assets rose due to increases infunds in hand plus securities by 334.6 billion yen,which includes cash and deposits, while property,

Net Sales by Segment (Billions of yen)

Operating Income by Segment (Billions of yen)

Years ended March 31
Automobiles

Years ended March 31
AerospaceIndustrial Products

Other

Automobiles

AerospaceIndustrial Products

Other

Corporate and Elimination

565.6

600

4,000

3,232.3

Industrial Products Division
Net sales for this division came to 32.6 billion yen,
an increase of 3.5 billion yen, or 12.2%, year on year.
Segment income decreased 0.7 billion yen, or 89.5%,
year on year to 0.1 billion yen.
Although sales grew for leisure-related engines
in North America, an expense of 0.9 billion to handle
functional issues with these products weighed
income down.
Other Division
Net sales for this division stood at 7.5 billion yen,
an increase of 0.4 billion yen, or 5.2%, year on year.
Segment income also increased 1.0 billion yen, or
53.6%, year on year to 2.9 billion yen.
Liquidity and Financing
Financial Position
Total assets as of March 31, 2016 stood at 2,592.4
billion yen, an increase of 392.7 billion yen compared

2,877.9

3,000

423.0

450

2,408.1
326.5
1,913.0

2,000

300

1,517.1

120.4

150

1,000

44.0
0

2012

2013

2014

0

2016

2015

Net Sales by Segment (Billions of yen)

2012

2013

2014

2016

2015

Operating Income by Segment (Billions of yen)

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

Automobiles

1,389.1

1,779.0

2,246.6

2,699.0

3,039.4

Aerospace

80.3

89.1

124.4

142.8

152.8

Industrial Products

33.6

30.1

29.8

29.0

32.6

39.4
2.9
0.5
Industrial Products
1.0
Other
Corporate and Elimination 0.2
44.0
Total

111.0
6.8
0.6
1.6
0.4
120.4

309.0
14.1
0.6
2.1
0.6
326.5

400.9
18.9
0.8
1.9
0.6
423.0

543.6
18.2
0.1
2.9
0.8
565.6

Other
Total

14.2

14.7

7.3

7.1

7.5

1,517.1

1,913.0

2,408.1

2,877.9

3,232.3

FUJI HEAVY INDUSTRIES LTD.

35 ANNUAL REPORT 2016

Automobiles
Aerospace

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

plant and equipment rose due to an increase of 57.9
billion yen in noncurrent assets.
Total liabilities were up 74.0 billion yen year on
year, to 1,243.0 billion yen. The main factors behind
this increase were a 25.9 billion yen rise in accounts
payable with accounts payable-trade and electronicallyrecorded monetary obligations, and a rise in income
taxes payable of 45.3 billion yen.
Note that the fiscal year-end balance of interestbearing debt decreased 41.2 billion yen to 170.0
billion yen. The debt/equity ratio (interest-bearing
debt over shareholders’ equity) remained at a safe
level of 0.13.
Net assets totaled 1,349.4 billion yen, up 318.7
billion yen compared with the end of the previous
fiscal year. This was primarily due to an increase
in retained earnings of 351.6 billion yen, reflecting
the recording of net income in the fiscal year underreview. The increase in retained earnings boosted
the shareholders’ equity ratio to 51.8%, a 5.3-point
increase year on year.
Cash Flows
In the fiscal year under review, net cash provided byoperating activities was 614.3 billion yen, comparedwith 311.5 billion yen in the previous fiscal year. Income
before income taxes and minority interests stood at
619.0 billion yen, received liability compensation at
48.2 billion yen, and total income taxes paid at 144.4
billion yen.
Net cash used in investing activities was 255.7
billion yen in the fiscal year under review comparedwith 172.8 billion yen used in the previous fiscal year.

Expenditures (net) due to acquisition of noncurrent
assets were 125.8 billion yen, while expenditures(net) due to acquisition of investment securities were
21.8 billion yen.
As a result, free cash flow amounted to 358.6
billion yen, compared to 138.8 billion yen provided in
the previous fiscal year.
Net cash used in financing activities totaled 126.2
billion yen in FYE March 2016, compared with 110.5
billion yen in the preceding fiscal year. Expenditures(net) for the repayment of long-term borrowings were33.0 billion yen and 84.9 billion yen was spent for
dividend payments.
Accounting for the aforementioned activities
and the effect of translation adjustments, cash andcash equivalents as of the end of the fiscal year underreview stood at 829.5 billion yen.
Research and Development Expenses
During the fiscal year under review, R&D expenses
increased 18.9 billion yen, or 22.6%, year on year to102.4 billion yen. Of that amount, 99.3 billion yen was
related to the Automobiles Division.
Our vehicle R&D was dedicated to advancing
product development to exceed customer expectations
for “enjoyment and peace of mind” through our "sixinitiatives to enhance the Subaru brand." Additionally,in our “eight initiatives for building a strong businessstructure,” we strived to reduce costs and train ourhuman resources in order to strengthen our capacity
for innovation.
Our next-generation platform, called the “Subaru
Global Platform,” which we unveiled in March
FUJI HEAVY INDUSTRIES LTD.

36 ANNUAL REPORT 2016

Total Assets, Shareholders’ Equity & Ratio of Shareholders’ Equity
to Total Assets
Years ended March 31
Total Assets
Shareholders’ Equity

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

(%)

3,000

75.0

2,592.4
2,199.7
2,000

1,352.5

1,577.5
37.7%

50.0

46.5%
40.5%

33.3%

1,349.4
1,030.7

1,000

25.0

770.1
451.6

0

51.8%

1,888.4

2012

596.8

2013

2014

0

2016

2015

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

Interest-Bearing Debt Balance(Billions of yen)(Times)

400

1.00

341.0
0.76

307.2

300

0.75

269.7
211.2

0.52
200

170.0

0.50

0.35
0.21

100

0.25
0.13

0

2012

2013

2014

2015

2016

0

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

2016, is fundamental Subaru technology for unifying
development of all of our models under a single
platform design. Starting with the new Impreza model
launching in 2016, we will gradually incorporate theplatform in all new models that we bring to market.
With regard to safety, we are pushing the evolutionof driving support systems, including EyeSight,
striving to create Automated follow-up on congrested
expressways in 2017 and Automated driving included
lane changes on expressways in 2020.
In terms of environmental initiatives, our productdevelopment includes a new downsizing turbo engine,
as well as plug-in hybrid and electric vehicles tocomply with ZEV (Zero Emission Vehicle) regulations*in California, U.S.A.
Furthermore, we are proceeding with thedevelopment of a three row crossover planned forlaunch in North America in 2018.
In order to further accelerate this development of
future products, we plan to boost R&D spending by
17.6 billion yen, or 17.2%, over the fiscal year underreview, to 120.0 billion yen in FYE March 2017.
*Regulations requiring automobile makers to have zero emission vehicles comprise acertain proportion of their number of vehicles sold.

Capital Expenditures and Depreciation
Capital expenditures rose 25.0 billion yen, or 22.6%,
compared with the previous fiscal year, to 135.7
billion yen. The main expenditure was investing infacilities related to production, R&D, and sales in the
Automobiles Division.
In this Division, 48.5 billion yen was spent primarily
on building out production capacity accompanying theincrease in vehicle sales, building production facilities
for new models, building R&D facilities, and expanding
and enhancing our sales network. In addition, 51.7
billion yen was spent at Subaru of Indiana Automotive,
Inc. (SIA), our production base in the U.S., primarily on
production facilities for production capacity expansion.
Depreciation increased 0.2 billion yen, or 0.3%,
year on year, to 65.0 billion yen.
For FYE March 2017, capital expenditures areprojected to increase by 24.3 billion yen, or 17.9%,
year on year, to 160 billion yen and depreciation isscheduled to rise 15 billion yen, or 23.1%, year on
year, to 80 billion yen.

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

Cash Flows from Investing Activities

700

614.3

313.0

350

311.5

166.7
54.9
0

-26.6

-71.4

-33.9
-172.8

Basic Policy Regarding the Distribution of Profits
FHI views the interest of shareholders as a criticaltask for management. Based on maintaining continual
dividend payments, we apply a results-linked approachthat takes into consideration such factors as earnings,
investment plans, and operating conditions. The
dividend each fiscal year is determined based on a
20-40% consolidated dividend payout ratio and takes
a variety of conditions into consideration.
In light of these conditions, FHI distributed a total
dividend of 144 yen per share in the fiscal year underreview, a 76-yen increase over the previous fiscal year.
Retained earnings are allocated toward bolstering ourfinancial position and investing in future growth andprogress, including strengthening our production andsales frameworks and funding R&D so that we cancontinue to create compelling products. In FYE March
2017, we plan to follow our current trend and pay a
dividend of 144 yen per share (72-yen half-year and
FUJI HEAVY INDUSTRIES LTD.

37 ANNUAL REPORT 2016

-255.7
-350

2012

2013

2014

2015

2016

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

400

358.6

279.1

300

200

138.8
100

0

95.3
28.3
2012

2013

2014

2015

2016

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

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

120

102.4
83.5

90

year-end dividends).
Additionally, the Board of Directors approveda 15-million share (or 48.0 billion yen) maximum
common share buyback aimed at boosting capitalefficiency and value for shareholders. We plan toretire all of the shares bought back. The buyback
period lasts until September 30, 2016.

60.1
60

48.1

49.1

2012

2013

30

0

2014

2015

2016

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

Depreciation Expenses

150

135.7

120

110.7

90

70.2
60

54.3 53.7

55.9

68.5

64.8

65.0

54.9

30

0

2012

2013

2014

2015

2016

Outlook
Outlook for Our Mid-term Management Vision
The Group has been striving to become, by the year
2020, the type of company outlined in our mid-term
management vision “Prominence 2020,” which
we announced in 2014. This ideal that we hope toachieve, and the direction of initiatives towards it,remain unchanged.
Now two years after formulating this vision,
however, our progress and our operating environment
have exceeded our initial estimates and continue tochange. Accordingly, we have revised and updated
our unit sales and production plans in order to further
accelerate our initiatives for “enhancing the Subaru
brand.”First, with regard to unit sales, we made an
upward revision to our 2020 consolidated global sales
unit forecast. After our review of markets, including
the on-going sales strength in the North American
market and the continued challenges of the Japanesemarket, we now expect unit sales to top 1,200
thousand units, as opposed to the original target northof 1,100 thousand units.
Along with revising unit sales upward, we
re-assessed production plans and raised output targets
FUJI HEAVY INDUSTRIES LTD.

38 ANNUAL REPORT 2016

from “1,050 thousand units in FY 2021” to “1,040
thousand units at the end of 2016 and 1,130 thousand
units in FY 2019.”* This will facilitate early steps torelieve continuing supply shortfalls in the U.S.
At the same time, we formulated a new ThreeYear Profit Plan for FYE March 2017–FYE March
2019. We assumed an exchange rate of 100 yen/US$,targeting 3-year total net sales of 9,800 billion yen,operating income of 1,100 billion yen, R&D expenses
of 360.0 billion yen, and capital expenditures of 470.0
billion yen. While expanding investment for growth,
we aim to establish a highly profitable business modelthat maintains a profit margin at the 11% level, evenwith an exchange rate of 100 yen/US$.
*Production capacity at normal operation levels. Output at full operation, including overtime and weekend production, would be 1,276 thousand units.

Results for FYE March 2017
As for consolidated unit sales for FYE March 2017,
we forecast an increase in units sold in the continuallyfavorable North American market, adding 92,000 units(9.6%) year on year, to reach 1,050 thousand units
and exceed for the first time one million Subarus sold.
For consolidated performance, we forecast lower
income and profit based on an expected stronger yen
at average annual exchange rates of 105 yen/US$(previously 121 yen/US$) and 120 yen/€1 (previously
133 yen/€1).
For net sales, we forecast a decline to 3,170.0
billion yen, down 62.3 billion yen (1.9%) from thefiscal year under review, representing a decrease of
338.1 billion yen on currency exchange, despite a270.1 billion yen improvement in sales mix resultingManagement’s Discussion and Analysis of Results of Operations and Financial Position

from increasing unit sales and other factors.
For operating income, despite income gains
from improved sales mix and cost reductions, we
expect a decrease of 145.6 billion yen, or 25.7%, year
on year to 420.0 billion yen, due to 168.6 billion yen
from currency fluctuations and 108.9 billion yen fromexpected increases in R&D and SG&A expenses.
We also forecast 293.0 billion yen, down 143.7 billion
yen (32.9%) year on year, in fiscal year net income
attributable to owners of parent.

Forecast for Consolidated Results (Billions of yen)
Years ended March 31

2016 2017 (plan) Change
3,232.3

Net sales

3,170.0

-62.3

Japan

605.4

610.3

4.9

Overseas2,626.9

2,559.7-67.2

Operating income

565.6

420.0

-145.6

Ordinary Income

577.0

420.0

-157.0

Income before income taxes and minority interest 619.0

413.0-206.0Net income attributable to owners of parent

436.7

293.0

-143.7

¥/$

121

105

-16

¥/€

133

120

-13

Exchange rate (in yen)

*Figures in projections for FYE March 2017 were announced May 12, 2016, then revised August 3, 2016.
For details, please see the Company website (http://www.fhi.co.jp/english/ir/index.html).

Forecast for Global Automobile Sales (Thousand units)
Years ended March 31

2016 2017 (plan) Change
Japan:
Passenger cars

111.6

119.0

7.5

Minicars

33.7

37.3

3.6

145.3

156.3

11.0

United States

582.7

643.1

60.4

Canada

47.6

52.6

5.0

Russia

5.7

9.6

3.9

Europe

41.8

40.1

-1.7

Australia

44.6

48.2

3.6

China

44.4

48.5

4.1

Other

45.8

51.2

5.4

Subtotal

812.6

893.4

80.8

Total

957.9

1,049.70

91.8

Subtotal
Overseas:

FUJI HEAVY INDUSTRIES LTD.

39 ANNUAL REPORT 2016

Business Risks
Operational and other risks that could significantly
influence the decisions of investors and impact theCompany’s financial status are set out below.
Based on information available to the Group as ofthe end of the consolidated fiscal year under review, theenumerated risks include forward-looking statements,
but do not encompass every possible risk posed to
the Group. As such, there are other risk factors which
could influence investors and their decisions.
(1) Economic Trends
Economic trends in countries and regions that comprise
important markets for the Group could potentially
impact the Group’s business performance. In Japan andNorth America, key markets for the Group, economic
recession, decreasing demand or increasing pricecompetition could undermine the sales and profitabilityof the Group’s products and services.
(2) Currency Exchange Rate Fluctuations
The Group’s ratio of overseas net sales stoodat 81.3%. The Group’s consolidated financial
statements, which are presented in Japanese yen,
are affected by translation of overseas net sales,
operating income and assets from local currencies,
particularly U.S. dollars, into yen. Accordingly, in theevent that discrepancies arise between projectedexchange rates in full-year forecasts and actual
rates at the time of account settlement, the Group’sbusiness performance and financial position may
be adversely affected when the yen appreciates orpositively affected when the yen depreciates.

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

The Company uses forward exchange rate
contracts and other circumstance-appropriate riskhedges to minimize the Group’s sensitivity to suchcurrency exchange risks. However, the effect ofsevere fluctuations in currency exchange rates atthe end of the fiscal year could result in a loss on
valuation of derivatives and have a major impact on
non-operating expenses.
(3) Dependence on Certain Businesses
The Group is mainly comprised of the Automobiles,
Industrial Products and Aerospace businesssegments. However, the Automobiles businesssegment accounts for the overwhelming majorityof the Group’s business operations. Accordingly, inthe event that automobile-related demand, market
conditions, price competition with other automakers,or other factors exceed projected levels, the entire
Group’s overall business performance and financial
position could be significantly affected.
(4) Changes in Market Appraisal
The Group develops, manufactures and releases new
products based on appropriate timing and pricing
in line with product planning that reflects market
demand and customer needs. Such actions are themost important factors in maintaining stable increases
in Group business performance. In the event thatmarket appraisals of new model vehicles and othernew products do not meet sales plan expectationsor that the obsolescence rate of current products
exceeds forecasts, the Group’s business performanceand financial position could be significantly affected.

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

(8) Retirement Benefits and Retirement Benefit
Obligations
The Group’s employee retirement benefit costs andobligations are calculated based on the following
assumptions: retirement benefit obligation discountrates and the expected long-term rate of return on
pension assets, both of which are established basedon mathematical calculations. However, in the eventthat actual performance differs from the assumptions,
the Group’s business performance and financial
position could be affected over the long term.

(6) Protection of Intellectual Property
The Group works to protect its intellectual property
through the use of patents, designs, and trademarks
in such areas as technologies and expertise that
ensure product differentiation. However, the Group
could experience a decrease in sales or the needfor litigation procedures in cases where a third party
makes unauthorized use of the Group’s intellectual
property to manufacture similar products, as well asin specific regions where intellectual property rightprotection is limited. Such factors could impact theGroup’s profitability.

(9) Environmental and Other Legal Regulations
The Group is subject to various domestic and overseas
legal regulations in relation to such areas as exhaustemissions, energy conservation, noise, recycling,
the level of pollutants emitted from manufacturing
facilities, and safety of automobiles and otherproducts. The Group’s business performance andfinancial position could be affected by an increase incosts due to future regulatory changes.

(7) Product Defects
The Group places the highest priority on the safety of the
products it develops, manufactures and sells. However,completely avoiding defects and recalls, etc. regarding
all products and services is impossible. The substantial
cost, damage to our brand image, etc. associated witha major recall could significantly affect the Group’sbusiness performance and financial position.
FUJI HEAVY INDUSTRIES LTD.

40 ANNUAL REPORT 2016(10) The Impact of Natural Disasters, War, Terror,
Strikes and Other Events
The occurrence of natural disasters such as major
earthquakes, typhoons, etc., and diseases, wars,
terrorist attacks or other events, could impede
the Group’s business activities as well as delayor suspend raw material/component purchases,
production, product sales/transport, and the provisionof services. The Group’s business performance andfinancial position could be affected in the event thatsuch delays or suspensions are prolonged.

Corporate Data (as of March 31, 2016)

Stock Information (as of March 31, 2016)

Company Name

Head Office

Common Stock AuthorizedFuji Heavy Industries Ltd.

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

1,500,000,000 shares

Established

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

Name

Common Stock Issued
782,865,873 shares

Toyota Motor Corporation

129,000

16.48

Number of Shareholders

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

44,889

5.73

Japan Trustee Services Bank, Ltd.
(Trust account)

42,809

5.47

Tokyo Stock Exchange

Mizuho Bank, Ltd.

16,0782.05

Website Address

Transfer Agent

Suzuki Motor Corporation

13,6901.75

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

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

Sompo Japan Nipponkoa Insurance Inc.

12,157

1.55

Tokio Marine & Nichido Fire Insurance Co., Ltd.

10,295

1.32

FHI's Client Stock Ownership

10,0691.29

MIZUHO SECURITIES ASIA
LIMITED-CLIENT A/C 69250601

9,902

1.26

Nippon Life Insurance Company

9,513

1.22

2Q 3Q
2016

4Q

July 15, 1953

Investor Relations OfficePaid-in Capital

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

85,200

Domestic Manufacturing Divisions

Number of Employees

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

14,234 (consolidated: 31,151)

Principal Consolidated Subsidiaries and Affiliates
Company Name

Percentage
ofVoting Rights

Stock Exchange Listing

Quarterly Common Stock Price Range (Tokyo Stock Exchange) (Yen)
6,000

Main Business Activities

Japan

5,000

Fuji Machinery Co., Ltd.

100.0%

Manufacture and sales of automobile parts and industrial product parts

Ichitan Co., Ltd.

100.0%

Manufacture and sales of forged automobile / industrial product parts

Kiryu Industrial Co., Ltd.

100.0%

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

Subaru Tecnica International Inc.

100.0%

Management of SUBARU Motorsport Activities, Development and manufacture of competition
parts, tuning parts and accessories for SUBARU cars

Subaru Kohsan Co., Ltd.

100.0%

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

Subaru Finance Co., Ltd.

100.0%

Lease & credit facilities provider for Subaru automobiles, financing for FHI subsidized companies,
lease for various facility equipment, rolling stock & FHI made garbage trucks and sales of insurance

Yusoki Kogyo K.K.

100.0%

Manufacture and sales for aircraft parts

TOKYO SUBARU INC.

100.0%

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

Subaru of America, Inc.

100.0%

Distribution and sales of Subaru automobiles and parts

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

100.0%Engineering research of Subaru automobiles in North America Market

Subaru of Indiana Automotive, Inc.

100.0%

Manufacture of Subaru automobiles and contracted manufacture of Toyota automobiles

Subaru Canada, Inc.

100.0%

Distribution and sales of Subaru automobiles and parts

Subaru Europe N.V./S.A.

100.0%

Distribution, sales and marketing of Subaru automobiles and parts

4,000

3,000

2,000

1,000

Overseas

0

High
Low

FUJI HEAVY INDUSTRIES LTD.

1Q

2Q 3Q
2012

697
402

41 ANNUAL REPORT 2016

4Q

1Q

2Q 3Q
2013

1,609
545

4Q

1Q

2Q 3Q
2014

3,015
1,330

4Q

1Q

2Q 3Q
2015

4,617
2,380

4Q

1Q

5,223
3,411

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

Consolidated Balance Sheets

112.69

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2016 and 2015

Thousands of
U.S. dollars(Note 1)
2015
2016

Millions of yen
ASSETS
Current assets:
Cash and deposits (Note 4 and 5)
Notes and accounts receivable-trade (Note 5)
Lease investment assets (Note 5 and 17)
Short-term investment securities (Notes 4, 5 and 6)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 12)
Short-term loans receivable (Note 5)
Other current assets
Allowance for doubtful accounts
Total assets¥507,553
140,319
21,532500,572
192,705
50,66634,99690,893
151,973
93,509(625)
1,784,093¥228,821
164,540
24,098444,737
203,347
52,73439,56978,789157,070
80,796(1,233)
1,473,268$4,503,976
1,245,177
191,073
4,442,027
1,710,045
449,605
310,551806,576
1,348,593
829,790(5,546)
15,831,866

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

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

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

13,182,447(7,870,308)(230,650)
5,081,489

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

20,989106,987
5,415
1,774
16,33987,607(3,427)
235,684¥2,592,410

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

186,254949,392
48,052
15,742
144,991
777,416(30,411)
2,091,437$23,004,792

2016

Thousands of
U.S. dollars(Note 1)
2015
2016

Millions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable-trade (Note 5)
Electronically recorded obligations-operating (Note 5)
Short-term loans payable (Note 5 and 7)
Current portion of long-term debts (Note 5 and 7)
Accrued expenses (Note 5)
Provision for bonuses
Provision for product warranties
Accrued income taxes (Note 5 and 12)
Other current liabilities (Note 5, 7 and 12)
Total current liabilities¥326,625
91,47633,252
43,692
132,759
23,554
51,251
100,272
156,614
959,495¥317,801
74,42041,44344,329126,007
21,66849,70854,987
142,693873,056$2,898,438
811,749
295,075
387,719
1,178,090
209,016454,796
889,804
1,389,777
8,514,464

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

93,03018,586
18,769153,119
283,504

125,420
17,963
13,996
138,560
295,939825,539
164,930
166,554
1,358,763
2,515,787

153,795
160,071
1,049,016(1,402)

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

1,364,762
1,420,454
9,308,865(12,441)

1,361,480

1,009,898

12,081,640

11,344(13,415)(12,808)(2,869)17,986
10,025(11,616)(3,876)100,666(119,043)(113,657)(25,459)

Total accumulated other comprehensive income
Non-controlling interests
Total net assets(17,748)
5,679
1,349,411

12,5198,302
1,030,719(157,494)
50,395
11,974,541

Total liabilities and net assets
The accompanying notes are an integral part of these balance sheets.

¥2,592,410¥2,199,714$23,004,792

Contingent liabilities (Note 19)
Net assets: (Note 13)
Shareholders' equity:
Capital stock
Authorized— 1,500,000,000 shares
Issued —782,865,873 shares
Capital surplus
Retained earnings
Less－treasury stock, at cost,
2016—
2,487,843 shares
2015—
2,483,395 shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Remeasurements of other postretirement benefits

2016Consolidated Statements of Income

112.69

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2016 and 20152016
¥3,232,258
2,187,136
1,045,122
479,533
565,5892015¥2,877,913
2,017,490
860,423437,378
423,045

Thousands of
U.S. dollars(Note 1)
2016
$28,682,740
19,408,430
9,274,310
4,255,329
5,018,981

5,190(2,499)739(2,056)
9,883(4,530)2,430(5,387)(1,660)30,152
(981)
(11)
2,999
19,14553,414
619,003

4,127(2,903)
499(24,277)(2,003)(3,305)
953
(985)
(38)
(2,907)(30,839)392,206

46,056(22,176)
6,558(18,245)
87,701(40,199)
21,564(8,705)(98)
26,613
169,891
473,991
5,492,972

191,168(8,524)
182,644436,359(295)¥436,654

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

1,696,406(75,641)
1,620,765
3,872,207(2,618)$3,874,825

Yen

U.S. dollars¥335.57
1,310.15
68.00

$4.97
15.28
1.28

Millions of yen

Net sales (Note 2)
Cost of sales (Note 14)
Gross profit
Selling, general and administrative expenses (Note 2 and 15)
Operating income (loss)
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in earnings of affiliates
Foreign exchange gains (losses)
Gain (loss) on valuation of derivatives
Gain (loss) on sales and retirement of noncurrent assets
Gain (loss) on sales of investment securities (Note 6)
Loss on valuation of investment securities (Note 6)
Loss on reduction of non-current assets
Reversal of allowance for doubtful accounts
Depreciation
Impairment loss (Note 9)
State subsidy
Other, net
Income before income taxes
Income taxes (Note 12):Current
Deferred
Net income
Net income (loss) attributable to non-controlling Interests
Net income attributable to owners of the parent

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

¥559.54
1,721.90
144.00*For the year ended March 31, 2016 and 2015 diluted information is not presented because potentially dilutive securities do not exist.

Consolidated Statements of Comprehensive Income
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2016 and 2015

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

2016¥436,359

Millions of yen
2015¥265,149

Thousands of
U.S. dollars(Note 1)
2016
$3,872,207(6,642)(23,777)(1,192)
1,007(52)(30,656)

7,357
37,321
2,270(2,957)
13144,122(58,940)(210,995)(10,578)
8,936
(461)
(272,038)

405,703309,271

3,600,169

406,387(684)

305,229
4,042

3,606,238(6,070)Consolidated Statements of Changes in Net Assets

112.69

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2016 and 2015

Shareholders' equity
Capital stock
Balance at the beginning of current period
Balance at the end of current period
Capital surplus
Balance at the beginning of current period
Changes of items during the period
Disposal of treasury stock
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the beginning of current period
Cumulative effects of changes in accounting policies
Restated balance
Changes of items during the period
Dividends from surplus
Net income attributable to owners of the parent
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the beginning of current period
Changes of items during the period
Purchase of treasury stock
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the beginning of current period
Cumulative effects of changes in accounting policies
Restated balance
Changes of items during the period
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Disposal of treasury stock
Other
Total changes of items during the period
Balance at the end of current period

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2015

2016

¥153,795
153,795¥153,795
153,795$1,364,762
1,364,762

160,071160,071

1,420,45400160,07100
160,071001,420,454

697,414
697,414483,910
1,385
485,295

6,188,783
6,188,783(85,105)
436,654(1)
54351,602
1,049,016(49,970)
261,873
216
212,119
697,414(755,213)
3,874,825
479
3,120,082
9,308,865(1,382)(1,395)(12,264)

(20)
0
(20)
(1,402)(22)
35
13(1,382)

(177)
0
(177)
(12,441)

1,009,898
1,009,898

796,381
1,385
797,766

8,961,736
8,961,736(85,105)
436,654(20)(1)
54351,582¥1,361,480(49,970)
261,873(22)
251
212,132¥1,009,898(755,213)
3,874,825
(177)
(9)
479
3,119,904$12,081,640

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Remeasurements of defined benefit plans
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Remeasurements of other postretirement benefitsof foreign consolidated subsidiaries
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total accumulated other comprehensive income
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Non-controlling interests
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the beginning of current period
Cumulative effects of changes in accounting policies
Restated balance
Changes of items during the period
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Disposal of treasury stock
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)

2016

2015

2016

¥17,986¥10,629$159,606(6,642)(6,642)
11,344

7,357
7,357
17,986(58,940)(58,940)
100,666

10,025(26,661)

88,961(23,440)(23,440)(13,415)

36,686
36,686
10,025(208,004)(208,004)(119,043)(11,616)(13,886)(103,079)(1,192)(1,192)(12,808)

2,270
2,270
(11,616)(10,578)(10,578)(113,657)(3,876)(919)(34,395)

1,007
1,007
(2,869)(2,957)(2,957)(3,876)

8,936
8,936
(25,459)

12,519(30,837)

111,092(30,267)(30,267)(17,748)

43,35643,356
12,519(268,586)(268,586)(157,494)

8,302

4,527

73,671(2,623)(2,623)
5,679

3,775
3,775
8,302

(23,276)(23,276)
50,3951,030,719
1,030,719

770,071
1,385
771,456

9,146,499
9,146,499(85,105)
436,654(20)(1)
54(32,890)318,692¥1,349,411(49,970)
261,873(22)
251
47,131
259,263¥1,030,719(755,213)
3,874,825
(177)
(9)
479
(291,863)
2,828,042$11,974,541

Consolidated Statements of Cash Flows

112.69

FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2016 and 2015

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2015

2016

Sub total¥619,003
72,938(30,260)(5,190)
2,499
4,530
2,957
(6,540)22,791(1,342)30,082(19,656)
15,538707,350¥392,206
71,821(146)(4,127)
2,903
3,305
(953)
(23,112)
19,283(27,180)
38,223(833)
31,753503,143$5,492,972
647,245(268,524)(46,056)
22,17640,19926,240(58,035)
202,245(11,909)
266,945(174,425)
137,883
6,276,954

Interest and dividends income received
Interest expenses paid
Proceeds from compensation for damage
Income taxes paid
Net cash provided by (used in) operating activities

5,668(2,528)48,184(144,418)
614,256

4,361(2,839)0(193,122)
311,543

50,297(22,433)
427,580(1,281,551)
5,450,847

Net cash provided by (used in) investing activities
Net decrease (increase) in time deposits
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities(101,631)(48,845)
47,032(126,732)
975(47,005)
25,240(106,117)
108,636(7,229)(255,676)(11,944)(43,424)
17,905(115,173)
1,540(47,031)
26,364(104,891)
108,065(4,191)(172,780)(901,864)(433,446)
417,357(1,124,607)
8,652(417,118)
223,977(941,672)
964,025(64,149)(2,268,844)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Cash dividends paid
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(7,822)
11,760(44,797)(84,938)(393)(126,190)(14,887)
217,503(18,811)
6,190(42,858)(4,060)(49,887)(1,120)(110,546)
25,99854,215(69,412)104,357(397,524)(753,731)(3,487)(1,119,798)(132,106)
1,930,100

612,085

557,870

5,431,582(127)¥829,461¥612,085

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

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

-(1,127)$7,360,556

Notes to Consolidated Financial Statements
FUJI HEAVY INDUSTRIES LTD. AND CONSOLIDATED SUBSIDIARIES
1. Basis of Presentation of the Financial Statements
The accompanying consolidated financial statements of Fuji Heavy Industries Ltd. (the "Company") havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law
and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan ("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English
from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP
and filed with the appropriate Local Finance Bureau of the Ministry of Finance, as required by the Financial
Instruments and Exchange Law. Certain supplementary information included in the statutory
Japanese-language consolidated financial statements, but not considered necessary for fair presentation, is
not presented in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars in the accompanying consolidated financial
statements are included solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2016, which was ¥112.69 to U.S.$1. The convenience translation should not be construed
as a representation that the Japanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Summary of Significant Accounting Policies[1] The Scope of Consolidation and Application of the Equity Method
The accompanying consolidated financial statements include the accounts of the Company and its majority
owned subsidiaries. All significant intercompany transactions and balances have been eliminated inconsolidation. The fiscal year-end of consolidated subsidiaries is the same as that of the parent company,
except for 4 consolidated foreign subsidiaries in fiscal year 2016 and 5 consolidated foreign subsidiaries infiscal year 2015, respectively, the fiscal year-end of those subsidiaries is December 31. The operating
results of those subsidiaries that have different fiscal year-end are consolidated by using the financial
statements as of each subsidiary’s respective fiscal year-end, the necessary adjustments being madein consolidation if there are any significant transactions between January 1 and March 31.
The consolidated financial statements include the accounts of the Company and 77 subsidiaries in fiscal
year 2016 and 77 subsidiaries in fiscal year 2015, respectively.
In addition, 1 non-consolidated subsidiary and 1 affiliated company were accounted for by the equity
method in fiscal 2016; 1 non-consolidated subsidiary and 1 affiliated company were accounted for by theequity method in fiscal 2015, respectively.
Investments in insignificant non-consolidated subsidiary and affiliated companies not accounted for by theequity method are carried at cost.
The difference between the cost and the underlying net equity of investments in subsidiaries and affiliatedcompanies is allocated to identifiable assets based on their fair value at the date of acquisition. The
unallocated residual value of the excess of the cost over the fair value of the underlying net assets is
recognized as goodwill and amortized over a period of five years on a straight-line basis.
All assets and liabilities of subsidiaries, which include not only the Company’s interest in the subsidiaries but
also the non-controlling interest portion, are valued based on their fair value at the time the Company first
consolidates the subsidiary.
[2] Short-Term Investment Securities and Investment Securities
Under the Japanese accounting standards for financial instruments, available-for-sale securities for which fair1

values are available are stated at their fair value as of the balance sheet dates with unrealized holding gains
and losses included as a separate component of net assets until realized, while securities for which fair values
are not readily available are stated at cost, as determined by the moving-average method, after taking into
consideration devaluation, if any, for permanent impairment. Held-to-maturity debt securities are stated using
the amortized cost method.
[3] Inventories
Inventories for regular sales are stated at cost, determined mainly by the moving-average cost method. (Bookvalue on the balance sheet is measured based on the lower of cost or market value.)[4] Property, Plant and Equipment (Excluding Leased Assets)
Property, plant and equipment are stated at cost. Significant renewals and additions are capitalized; ordinary
maintenance, ordinary repairs, minor renewals and minor improvements are charged to the consolidated
statements of income as incurred.
Depreciation of the property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally calculated by the declining-balance method, except for those buildings (excluding
building improvements) acquired on or after April 1, 1998, for which the straight-line method is applied.
Depreciation of the property, plant and equipment of consolidated foreign subsidiaries is calculated by thestraight-line method over the estimated useful lives of the assets.
Estimated useful lives for depreciable assets are as follows:
Buildings and structures: 7–50 years
Machinery, equipment and vehicles: 2–20years[5] Intangible Assets (Excluding Leased Assets)
Computer software used internally by the Company and its consolidated subsidiaries is amortized by thestraight-line method over the relevant economic useful lives of 3 or 5 years.
[6] Leased Assets
For leased assets under finance lease transactions in which the ownership is transferred to the lessee:
The leased assets are depreciated by the same method as used for other property, plant and equipment.
For leased assets under finance lease transactions in which the ownership is not transferred to the lessee:
The leased assets are depreciated by the straight-line method over the leased period and the residual value iszero.
[7] Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on the amount calculated from the historical ratio of bad
debt for ordinary receivables, and estimated amounts of uncollectible accounts for specific overdue
receivables.
[8] Provision for Bonuses
Employees' bonuses are recognized as expenses for the period in which those are incurred.
[9] Provision for Product Warranties
The Company and its consolidated subsidiaries provide for accrued warranty claims on products sold basedon their past experiences of warranty services and estimated future warranty costs, which are included in"Accrued expenses" in the accompanying consolidated balance sheets.
[10] Provision for Loss on Construction Contracts
2

The provision for losses on uncompleted construction of contracts in the Aerospace segment is provided
when substantial losses on the contracts are anticipated at the fiscal year-end for the next fiscal year andbeyond and such losses can be reasonably estimated.
[11] Accounting method for Retirement Benefits
Net defined benefit liability (assets) for employees is provided based on the estimated amounts of projectedpension and severance obligation and the fair value of plan assets at the end of the fiscal year. In determining
retirement benefit obligations, the straight-line basis is used for attributing expected benefit to periods.
Unrecognized prior service cost is being amortized on the straight-line method over a period (10-19 years)
that is shorter than the average remaining service period of the eligible employees. Unrecognized net
actuarial gain or loss is amortized from the following fiscal year on the straight-line method over a period(primarily 16 years for fiscal years 2016 and 2015) that is shorter than the average remaining service period of
the eligible employees.
Directors and statutory auditors of the Company and its consolidated domestic subsidiaries are entitled toreceive a lump-sum payment at the time of severance or retirement, subject to shareholder approval. The
liabilities for such benefits, which are determined based on the Company’s and its consolidated subsidiaries’internal rules, are included in "Other long-term liabilities" in the accompanying consolidated balance sheets.
[12] Translation of Foreign Currency-Denominated Accounts
Under the Japanese accounting standards for foreign currency translation, monetary assets and liabilities
denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at eachbalance sheet date with the resulting gain or loss included currently in the statement of income.
The assets and liabilities of foreign subsidiaries and affiliated companies are translated into Japanese yen at
the exchange rates in effect at the balance sheet dates of the foreign subsidiaries and affiliated companies,
except for common stock and capital surplus, which are translated at historical rates. Revenue and expense
accounts are translated at the average exchange rates during the respective years. The resulting foreign
currency translation adjustments are included in "Foreign currency translation adjustments" and"Non-controlling interest" in the net assets section of the accompanying consolidated balance sheets.
[13] Revenue Recognition
The percentage-of-completion method is applied to revenue from construction contracts of Aerospace
division productions where certain elements are determinable with certainty at the end of fiscal year. (Thepercentage of completion is estimated using the proportion-of-cost method). The completed-contract method
is applied to other works.
[14] Accounting for Lease Transactions
Sales and corresponding cost of sales under finance lease transactions conducted by certain domestic
consolidated subsidiaries are recognized on the effective date of each lease contract.
[15] Derivative Financial Instruments and Hedge Accounting
The Japanese accounting standards for financial instruments require that the Company and its consolidated
domestic subsidiaries state derivative financial instruments at their fair value and recognize changes in the fairvalue as a gain or loss, unless such derivative financial instruments are used for hedging purposes.
For interest rate swap contracts used as a hedge that meet certain hedging criteria, the net amount to be
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:3

Financial Instrument
Interest swaps

Transactions, assets and liabilities
Borrowings

The risk exposures to movements in interest rates are hedged according to the Company’s and its
consolidated subsidiaries’ risk management policy. An evaluation of hedge effectiveness is not considerednecessary as the terms and notional amounts of these hedging instruments are the same as those of theunderlying transactions, assets and liabilities, and therefore they are presumed to be highly effective inoffsetting the effect of movements in interest rates at their inception as well as during their terms.
[16] Goodwill
Goodwill is principally amortized by the straight-line method over 5 years.
[17] Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with original maturities of three months or lessthat are readily convertible to known amounts of cash and have negligible risk of changes in value due to theirshort maturities.
[18] Income Taxes
The provision for income taxes is computed based on the pretax income for financial reporting purposes.
Deferred tax assets and liabilities are recognized for expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
[19] Research and Development Expenses
Research and development costs are expensed as incurred and amounted to ¥102,373 million (US$ 908,448
thousand) and ¥83,535 million for fiscal years 2016 and 2015, respectively.
[20] Net Income per Share
Basic net income per share (EPS) is computed based on the average number of shares of common stock
outstanding during each year. Diluted EPS assumes the potential dilution that occurs if all the convertible
securities are converted or other contracts to issue common stock are exercised to the extent that they are
not anti-dilutive.
[21] Reclassification
Certain reclassifications have been made in the consolidated financial statements for the year ended March
31, 2015 to conform to the presentation for the year ended March 31, 2016.”[22] Changes in Accounting Policy
The Accounting Standard for Business Combinations (ASBJ Statement No.21, September 13, 2013) andConsolidated Financial Statements (ASBJ Statement No.22, September 13, 2013) and Business Divestitures(ASBJ Statement No.7, September 13, 2013) were applied from the period of the first quarter of fiscal year
2016.
The presentation method of net income was changed and the reference to "minority interests" was changed
to "non-controlling interests". To conform to these changes in presentation, the quarterly consolidated
financial statements and consolidated financial statements in the previous fiscal year have been reclassified.
[23] Changes in Presentation(Consolidated Statements of Income)4

Consolidated Statements of Income for the fiscal year ended March 31,2016 include the following
reclassification.
"Real estate rent" which was presented as a separate account in the prior fiscal year, has been included in“Other” in the current fiscal year due to its decreased financial materiality. To reflect this change, ¥532 millionof “real estate rent” separately stated under “Other income(expense)” in the prior fiscal year has been
reclassified into “Other” in the consolidated statements of income for the prior fiscal year provided herein.

53. Other comprehensive income
Amounts reclassified to net income (loss) in fiscal 2016 and 2015, which were recognized in othercomprehensive income in the current or previous periods and tax effects for each component of othercomprehensive income were as follows:
Millions of yen
Thousands of
U.S. dollars
2015
2016
2016
Valuation difference on available-for-salesecurities
Increase(decrease) during the year
¥10,660(¥8,513)($75,544)
Reclassification adjustments(953)(2,288)(20,303)
Sub-total, before tax
9,707(10,801)(95,847)
Tax (expense) or benefit(2,350)4,159
36,907
Sub-total, net of tax
7,357(6,642)(58,940)
Foreign currency translation adjustment
Increase during the year
37,321(23,670)(210,045)
Reclassification adjustments
(107)
(950)
Sub-total, before tax
37,321(23,777)(210,995)
Tax (expense) or benefit
Balance at end of year, net of tax
37,321(23,777)(210,995)
Remeasurements of defined benefit plans
Increase(decrease) during the year
1,246
(3,648)(32,372)
Reclassification adjustments
3,035
2,406
21,351
Sub-total, before tax
4,281(1,242)(11,021)Tax (expense) or benefit(2,011)50444
Balance at end of year, net of tax
2,270(1,192)(10,578)
Remeasurements of other postretirement
benefits of foreign consolidated
subsidiaries
Increase(decrease) during the year
(4,642)
1,548
13,737
Reclassification adjustments
Sub-total, before tax(4,642)
1,548
13,737Tax (expense) or benefit
1,685
(541)
(4,801)
Balance at end of year, net of tax(2,957)
1,007
8,936
Share of other comprehensive incomeof associates accounted for using
equity method
Increase during the year
131
(52)
(461)
Total other comprehensive income¥44,122(¥30,656)($270,396)

6

4. Additional Cash Flow Information
Cash and cash equivalents as of March 31, 2016 and 2015, consisted of the following:
Millions of yen

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

2016¥507,553
500,572
151,973
1,160,098(126,107)(52,557)

2015¥228,821
444,737
157,070
830,628(25,911)(45,562)

Thousands of
U.S. dollars
2016$4,503,976
4,442,027
1,348,593
10,294,596(1,119,061)(466,386)(151,973)(147,070)(1,348,593)¥829,461¥612,085$7,360,556

7

5. Financial Instruments(1) Summary of Financial Instruments Status[1] Action Policy with Regard to Financial Instruments
With regard to planned capital expenditure to support Fuji Heavy Industries Ltd., its consolidated subsidiaries
and affiliated companies (the "FHI Group") in their main operations of automobile manufacturing and sales,
the FHI Group finances mainly from bank loans and the issue of corporate bonds. Temporary surpluses areinvested in highly secure financial assets. Bank loans and liquidation of accounts receivable are utilized toprovide short-term working capital. It is the FHI Group's policy to use derivatives as a way to avoid the risks
stated below and not to conduct speculative transactions.
[2] Details of Financial Instruments and Respective Risks
Notes and accounts receivable-trade and Lease investment assets are subject to customer credit risks. In
addition, operating receivables denominated in foreign currencies due to globalized business of the FHIGroup are subject to the risk of changes in foreign exchange rates. As a general rule, however, forward
foreign exchange contracts are utilized to hedge the foreign exchange rate risk, considering the net amount ofoperating receivables denominated in foreign currencies that exceed foreign currency denominated operating
liabilities. Available-for-sale securities and investment securities are mainly stocks associated with businessand capital alliances with principal business partners, and are subject to risk of market price fluctuation.
Majority of payables included in Notes and accounts payable-trade and Electronically recorded
obligations-operating are due within one year. A certain portion of such liabilities involve foreign currency
denominated transactions associated with the import of raw materials and is subject to exchange rate
fluctuation risk, although it is consistently less than accounts receivable balance denominated in the same
foreign currency. Funds financed by bank loans and corporate bonds are primarily used for capital
expenditure, whose repayment or redemption dates will come within 7 years after March 31, 2016 at thelatest. A certain portion of those liabilities may have variable interest rates and are subject to the risk ofchanges in interest rates, although such risk is mitigated using derivative transactions (interest rate swap
transactions).
Derivative transactions include foreign exchange forward contracts to hedge against exchange rate
fluctuations associated with trade accounts receivables and liabilities denominated in foreign currencies, andinterest rate swap contracts to hedge against the risk of change in interest rates on bank loans. With regard to
hedging instruments and hedged items, hedge policy, the method of evaluation of hedge effectiveness andother related items, please refer to "2-[15] Derivative Financial Instruments and Hedge Activities".
[3] Risk Management System with Regard to Financial Instruments(a) Credit Risk management (Risks Associated with Business Partner’s Breach of Contract)
The Company and its consolidated subsidiaries have credit control function and regularly monitor thefinancial status of key customers with regard to accounts receivables and lease investment assets. In
addition to keeping track of payment due dates and balances of each customer, such credit control
function identifies and mitigates the potential risk of uncollectibility due to deterioration in financial status
or other factors of customers.
(b) Market Risk Management (Risks Associated with Fluctuations in Foreign Exchange and Interest Rates)
With regard to operating assets and liabilities denominated in foreign currencies, as a general rule, theCompany uses foreign exchange forward contracts to hedge against risks of exchange rate fluctuation
on a monthly basis by each currency. Depending on the status of exchange rates, foreign exchange
forward contracts with no longer than six months term are used to hedge against the risk of exchange
rate fluctuation to the extent that net position of accounts receivable and accounts payable dominated inforeign currency is exposed. In addition, the Company and certain consolidated subsidiaries use interest
rate swap transactions to mitigate the risk of fluctuation in interest rates on bank loans and corporate
bonds.
8

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

9(2) Items with Regard to Fair Value of Financial Instruments
The consolidated balance sheet amounts, the fair value and difference as of March 31, 2016 and 2015 wereas follows:
The items whose fair values were extremely difficult to measure were not included in the table below (refer
to Note [2] ).
As of March 31, 2016
Millions of yen
Consolidatedbalance sheet
Fair Value
Difference
amounts
Cash and deposits¥507,553¥507,553¥Notes and accounts receivable-trade140,319
Allowance for doubtful accounts (*1)
(105)
140,214140,214
Lease investment assets
21,532
Allowance for doubtful accounts (*1)(53)
21,47923,095
1,616
Short-term loans receivable
151,973
Allowance for doubtful accounts (*1)(294)
151,679
155,038
3,359
Short-term investment securities, Investment securities
and Other securities
118,565
118,565
Total Assets
939,490
944,465
4,975
Notes and accounts payable-trade326,625
326,625
Electronically recorded obligations-operating
91,476
91,476
Short-term loans payable
33,25233,252Current portion of long-term loans payable
33,69233,807(115)
Current portion of bonds
10,00010,011(11)
Accrued income taxes
100,272
100,272
Accrued expenses
132,759
132,759
Bonds payable
Long-term loans payable
93,03093,673(643)
Total Liabilities
821,106
821,875(769)
Derivative transactions (*2)
hedge accounting is not applied
7,159
7,159
hedge accounting is applied
¥¥¥-

10

As of March 31, 2016
Thousands of U.S. dollars
Consolidatedbalance sheet
amounts$4,503,976
1,245,177(932)
1,244,245
191,073(470)
190,603
1,375,792(2,609)1,345,985

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

1,052,134
8,336,942
2,898,438
811,749
295,075
298,980
88,739889,804
1,178,090
825,539
7,286,414

Fair Value

Difference$4,503,976$-

1,244,245-

204,943

14,3401,375,792

29,807

1,052,134
8,381,090
2,898,438
811,749
295,075
300,000
88,837889,804
1,178,090
831,245
7,293,238

44,147(1,020)(98)(5,706)(6,824)63,52863,528$$$*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).

11As of March 31, 2015
Millions of yen
Consolidatedbalance sheet
amounts¥228,821
164,540(640)
163,900
24,098(66)
24,032
157,070(341)
156,729

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

Fair Value

Difference¥228,821¥-

163,900-

28,794

4,762

158,313

1,584

118,702692,184
317,801
74,42041,44344,32954,987126,007
10,000115,420
784,407

118,702698,530
317,801
74,42041,44344,441
54,987126,007
10,059116,074785,232

6,346
(112)
(59)
(654)
(825)

(2,725)¥-(2,725)¥-¥-*1. Allowance for doubtful accounts corresponding to Notes and accounts receivable-trade, Lease
investment assets and Short-term loans receivable is deducted.
*2. Indicated are the net amounts of assets and liabilities results from derivative transactions, with thetotal net liabilities indicated in ( ).
[1] The calculation methods of financial instrument fair value together with securities and derivativetransactions
AssetsCash and deposits and Notes and accounts receivable-trade
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Lease investment assets and Short-term loans receivable
Fair value is the present value calculated by discounting relevant cash flows by each category of theassets and timing of cash flow, where discount rates were adopted taking into consideration the
period until maturity and credit risks. In addition, the estimated residual value is included in the12balance of Lease investment assets.
Short-term investment securities and investment securities
Fair value is determined by the stock exchange price, while bonds are determined by the stock
exchange price or by quotations received from financial institutions. Please refer to the note entitled"5.Short-term investment securities and investment securities" regarding to respective objectives forholding securities.
Liabilities
Notes and accounts payable-trade, Short-term loans payable, Accrued income taxes and Accrued
expenses
Because these are settled in the short-term, the fair value is mostly the same as the book value andas such the book value is deemed as fair value.
Current portion of long-term loans payable and Long-term loans payable
Fair value is measured based on the present value that is calculated as discounted cash flow of thetotal amount of principal and interest, where the interest would be set, if the Company concluded abrand new loan agreement with the same condition at the date of measurement.
Current portion of bonds and Bonds payable
The fair value of bonds issued by the Company is based on market prices if available. For bonds
with no available market price, fair value is calculated using the present value that is calculated as
discounted cash flow of the total amount of principal and interest by, where discount rates are
adopted taking into consideration the remaining redemption period and credit risks.
Derivative transactions
Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
[2] Financial instruments which fair value is extremely difficult to measure
Consolidated balance sheet amount as of March 31, 2016 and 2015:
Other securities (available-for-sale securities)
2016¥2,817

Stocks of non-consolidated subsidiary and affiliatedcompanies
Certificate of deposit
Commercial paper
Money management fund
Unlisted stocks (excluding over-the-counter stocks)
Medium Term Note
Other

Millions of yen
2015¥7,401Thousands of
U.S. dollars
2016$24,998

140,000
149,900
1,330,198
144,982
172,996
1,535,150
114,192
135,119
1,199,033
1,015
976
8,661
30,00030,000266,217¥3¥3$27
These have no available market prices and are expected to entail excessive costs in the estimation of
future cash flows. Consequently, estimating their fair value is recognized as extremely difficult and they
are not included in "Short-term investment securities, Investment securities and Other securities".

13[3] Scheduled redemption of monetary assets and securities with maturity
As of March 31, 2016:
Millions of yen

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

Within 1Year

1 to 5Years

5 to 10
Years

Over 10years¥507,553
130,484
6,555
48,205¥8,142
14,896
101,691¥1,693
81
2,077

¥-

8,595
3,440
¥353,419

19,447
19,623¥1,006

2,585
3,317¥1,056

4,106
4,299¥4,189As of March 31, 2016:$4,503,976
1,157,902
58,168427,766

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$$$72,251
15,024132,186719
902,396
18,431-

76,271
30,526$3,136,206

172,571
174,133$8,92722,93929,435$9,371

Within 1
Year¥228,821
158,147
7,002
58,335

1 to 5Years¥6,393
16,864
96,412Millions of yen
5 to 10
Over 10
Years
years
¥¥232
2,323
-

11,1863,930¥345,429

14,96317,001¥1,571

2,226
2,762
¥829

Within 1
Year

Cash and deposits
Notes and accounts receivable-trade
Lease investment assets
Short-term loans receivable
Short-term investment securities, Investment
securities and Other securities
Government and municipal bonds
Corporate bonds
Other36,43638,149$37,173

As of March 31, 2015:

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

14

3,838
2,392
¥4,437

[4] Amount of repayment for long-term debt and other interest-bearing debt
As of March 31, 2016:

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

Within 1Year

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

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

As of March 31, 2016:$295,075
88,739$298,980

Thousands of U.S. dollars
1 to 55 to 10
Over 10
Years
Years
years
$$$$806,797$18,742$-

Within 1
Year¥41,443¥44,329

1 to 5Years¥10,000¥113,022

Within 1
Year

Short-term loans payable
Bonds payable
Long-term loans payable
As of March 31, 2015:

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

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

6. Short-Term Investment Securities and Investment Securities
Information on the value of short-term investment securities and investment securities as of March 31, 2016
and 2015 was as follows:(1) Other securities (available-for-sale securities):
As of March 31, 2016:
Acquisition cost

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

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

7,020

8,100

(1,080)

6,282
9,527
1,465
24,294¥118,565

6,336
9,670
1,504
25,610¥102,079

(54)
(143)
(39)
(1,316)¥16,486

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

15

As of March 31, 2016:
Book value
Book value exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Sub-total
Book value not exceeding acquisition cost:
Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Sub-total
Total

Thousands of U.S. dollars
Acquisition cost
Difference$349,303$198,651$150,652

252,463
187,692
47,094
836,552

248,638
184,888
46,402
678,578

3,825
2,804
692
157,973

62,29571,879(9,584)55,74684,542
13,000215,583$1,052,134

56,22585,811
13,346227,261$905,839(479)(1,269)(346)(11,678)$146,295

Acquisition cost

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

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

331299
126
26,927

2,778

2,918

(140)

11,4114,719
1,146
20,054¥118,702

11,4794,768
1,165
20,330¥92,051

(68)
(49)
(19)
(276)
¥26,651

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

16

(2) Other securities (available-for-sale securities) sold during fiscal years 2016 and 2015:
For the year ended March 31, 2016:

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

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

27,456
38,5752,051¥72,272

115
43
3¥2,732

143
43
17
¥302

For the year ended March 31, 2016:

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

Sales amount$37,182
243,642
342,311
18,200$641,335

Thousands of U.S. dollars
Total gains
Total losses$22,815
$879
1,020
382
27
$24,243

1,269
382
151
$2,680

Sales amount¥3,300Total gains¥741

Millions of yen
Total losses¥12

32,673
6,626
1,529
119
¥44,247

190
116
5¥1,052

50
17
20
¥99

For the year ended March 31, 2015:

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

17

7. Short-Term Loans Payable and Long-Term Debts
Short-term loans payable as of March 31, 2016 and 2015, consisted of the following:Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Bank loans with average interest rate of 1.48% and 1.49%
per annum as of March 31, 2016 and 2015, respectively¥33,252¥41,443$295,075

Unsecured 0.71% bonds due June 13, 2016

¥10,000-$88,739

Long-term debts as of March 31, 2016 and 2015 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Loans principally from banks and insurance companies due
through 2025 with average interest rate of 0.7% and 0.82%
per annum as of March 31, 2016 and 2015, respectively¥126,722¥159,749$1,124,519

Unsecured 0.71% bonds due June 13, 2016
SubtotalLess-Portion due within one year

126,722(33,692)

10,000169,749(44,329)

1,124,519(298,979)¥93,030¥125,420$825,539

Total

Annual maturities of long-term loans payable and bonds payable as of March 31, 2016 were as follows:
Thousands ofMillions of yen
U.S. dollars
2017¥33,692$298,980
2018
42,856
380,300
2019
41,228365,853
2020
6,312
56,012
2021
522
4,632
2022 and thereafter
2,112
18,742
Total¥126,722$1,124,519

18

Lease obligations as of March 31, 2016 and 2015 consisted of the following:

Lease obligations due within one year as of March 31, 2016
Lease obligations due after one year as of March 31, 2016
Total

Millions of yen
2015
2016
¥1,016
¥861
1,065
1,254
¥2,081¥2,115

Thousandsof
U.S.dollars
2016$7,64011,128$18,768

Annual maturities of lease obligations as of March 31, 2016 were as follows:
Millions of yen
¥861
1077
85
48
31
13
¥2,115

2017
2018
2019
2020
2021
2022 and thereafter
Total

Thousands of
U.S. dollars$7,640
9,557
754
426
275
115
$18,768

The following assets as of March 31, 2016 and 2015 were pledged as collateral for certain loans:Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Property, plant and equipment¥35,435¥36,799$326,551
Total¥35,435¥36,799$326,551
To raise working capital efficiently, the FHI Group has entered into the commitment-line contracts. The
maximum amount that can be made available under these contracts is ¥125,904 million (US$1,117,260
thousand) as of March 31, 2016. At the end of the fiscal year under review, there were no borrowings under
the commitment line.

19

8. Derivative transactions
In the normal course of business, the Company and its consolidated subsidiaries employ derivative financial
instruments, including foreign exchange forward contracts, foreign currency options and interest rate swaps,
to manage their exposures to fluctuations in foreign currency exchange rates and interest rates. The
Company and its consolidated subsidiaries do not use derivatives for speculative or trading purposes.
The fair value information of derivative financial instruments as of March 31, 2016 and 2015 was as follows:
Derivative transactions to which hedge accounting is not applied(1) Foreign currency contracts:
As of March 31, 2016
Millions of yen
Thousands of U.S. dollars
Notional
Valuation
Notional
Valuation
AmountFair value gain (loss)
AmountFair value gain (loss)
Foreign exchange
forward contracts:
SellU.S. dollar¥287,156¥7,975¥7,975 $2,548,194$70,769$70,769
Euro
3,254
(44)
(44)
28,876(390)(390)
Canadian dollar
22,516(772)(772)
199,805(6,851)(6,851)
As of March 31, 2015

Foreign exchange forward contracts:
SellU.S. dollar
Euro
Canadian dollar

Notional
AmountMillions of yen
Valuation
Fair value
gain (loss)¥313,502
4,488
23,102(¥2,955)
55
175(¥2,955)
55
175

Note: The method to determine the fair value is based on quotations obtained from financial institutions.
Derivative transactions to which hedge accounting is applied(1) Interest rate contracts:
Accounting treatment: Exception processing of interest rate swap
Hedge item: Long-term loans payable
As of March 31, 2016

Interest rate swap
contracts:
Receive floating rate
pay fixed rate

Notional
AmountMillions of yen
Over
1 yearFair value

Thousands of U.S. dollars
Notional
Over
Amount1 yearFair value¥3,000¥1,000$26,62220¥-$8,874$-

As of March 31, 2015
Millions of yen

Interest rate swap contracts:
Receive floating rate pay fixed rate

Notional
AmountOver
1 yearFair value¥10,105¥3,000(*)

Note *Fair value of interest rate swap that meets certain hedging criteria is included in the fair value of
long-term debt as a hedged item.
9. Property, Plant and Equipment
Property, plant and equipment as of March 31, 2016 and 2015 are summarized as follows:

2016¥381,255
540,376
11,221
312,028
1,244,880(886,905)(25,992)
193,698
46,951¥572,632

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

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

Thousands of
U.S. dollars
2016$3,383,219
4,795,244
99,574
2,768,906
11,046,943(7,870,308)(230,650)
1,718,857
416,639$5,081,480

10. Unexecuted Balance of Overdraft Facilities and Lending Commitments
The unexecuted balance of overdraft facilities and lending commitments at a consolidated subsidiary (Subaru
Finance Co., Ltd.) as of March 31, 2016 and 2015 was as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Total overdraft facilities and lending commitments¥4,800¥4,800$42,595
Less amounts currently executed
497
801
7,108
Unexecuted balance¥4,303¥3,999$35,487
A portion of the overdraft facilities and lending commitments above is subject to credit considerations as
documented in the customer contracts. Therefore, the total balance above is not always available.

2111. Pension and Severance Plans
The Company and its consolidated domestic subsidiaries have lump-sum retirement payment plans,
contributory defined benefit employees’ welfare pension funds, defined benefit pension plan, and certain
domestic subsidiaries have defined contribution pension plans. In addition, in certain occasions, additional
retirement payments are made to employees for their retirement. Consolidated foreign subsidiaries primarily
have defined contribution plans.
As of March 31, 2016, the Company and 53 of its consolidated domestic subsidiaries, which add up to a
total of 54 companies, have lump-sum retirement payment plans. Within the FHI Group, there are also 24
defined contribution plans, and 5 defined benefits pension plans. In addition, there are 5 single-employer
employees’ welfare pension funds subject to the provisions of Article 33 of "Accounting Standard for
Retirement Benefits."
Certain insignificant consolidated subsidiaries calculated their pension liability using the simplified method.
Under the simplified method, an accrued pension and net defined benefit liability is provided at the amountthat would have been payable had all the employees voluntarily retired at the end of the fiscal year, less anamount to be covered from the plan assets, while the Company and significant subsidiaries provide an
accrued pension and net defined benefit liability based on the estimated amount of pension and severance
obligation (projected benefit obligations), less the fair value of plan assets at the end of the fiscal year under
the actuarial method.
Defined benefit pension plans (including the multi-employer pension plan of contributory defined benefit
employees’ welfare pension funds settled as defined benefit pension plan.)
Movement in retirement benefit obligation, except plans applied simplified method

Balance at the beginning of the period
Cumulative effects ofchanges in accounting policies
Restated balancea. Service costb. Interest costc. Actuarial loss (gain)d. Benefits paide. Amortization of prior service cost
f. Other
Balance at the end of the period

2016¥107,397-

Millions of yen
2015¥102,819(2,481)Thousands of
U.S. dollars
2016$953,030-

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

100,338
5,508
1,397
4,520
(4,366)-

953,030
54,264
10,303
68,941(51,389)(1,349)(472)¥116,331¥107,397

4,188$1,032,310

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

Thousands of
U.S. dollars
2016$879,759
16,29237,75038,051(31,955)$939,897

Movements in plan assets, except plans applied simplified method

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

2016¥99,140
1,836
4,254
4,288
(3,601)¥105,917
22

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

Balance at the beginning of the perioda. Increase due to the change of scope of
consolidation
b. Retirement benefit costc. Benefits paidd. Contributions paid by the employer
Balance at the end of the period

2016¥6,072-Millions of yen
2015¥5,880-Thousands of
U.S. dollars
2016$53,882
-

722
(357)
(39)
¥6,398

730
(482)
(29)
¥6,072

6,407(3,168)(346)$56,775

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

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

2016¥106,762(106,162)600
16,212Millions of yen
2015¥97,944(99,346)(1,402)
15,706

Thousands of
U.S. dollars
2016$947,396(942,071)
5,324
143,864

16,812

14,304

149,188

18,586(1,774)¥16,812

17,963(3,659)¥14,304

164,930(15,742)$149,1882016¥6,115
1,161(1,836)
2,346
60
215
722

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

Thousands of
U.S. dollars
2016¥54,264
10,303(16,292)
20,818
532
1,908
6,407

22
¥8,805¥8,509195$78,135

Retirement benefit costs

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

Adjustments for retirement benefit (before tax effect)
Millions of yen
2015
¥249
4,032
¥4,281Thousands of
U.S. dollars
2016
$816
(10,205)(¥11,021)

2016
¥246

Millions of yen
2015
¥154

Thousands of
U.S. dollars
2016$2,183

17,963

16,813

159,402¥18,209¥16,967$161,585

2016
(¥92)
(1,150)(¥1,242)

a. Past service costsb. Actuarial gains and losses
Total

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

2016
49%
13%
28%
10%
100%

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

Percentage
2015
51%
14%
25%
10%
100%

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

e. Amortization of past service cost2016
Benefit formula method
Primarily 0.6%
Primarily 2.1%
Primarily 16 years (amortizedby the straight-line method
starting from the following
fiscal year, over a period
shorter than the averageremaining service periods ofthe eligible employees)
10 to 19 years
24

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

Defined contribution pension plan
The amount required to contibute to defined contribution plans was 4,844 million (US$42,953 thousand) and
4,414milllion for fiscal years 2016 and 2015 respectively which included the multi-employer pension plan ofcontributory defined benefit employees’ welfare pension funds settled as defined contribution plans.
Certain information concerning the multi-employer pension plan, which requires contributions that are
expensed as they become due as pension and severance costs, was as follows:(1) Overall funded status of the multi-employer pension plan (mainly as of March 31, 2016 and 2015)
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Plan assets¥83,089¥49,530$439,524
Projected benefit obligation
94,20758,015514,819
Funded status(¥11,118)(¥8,485)($75,295)(2) Contributions by the Company and its consolidated domestic subsidiaries as a percentage of total
contributions to the multi-employer pension plan for fiscal years 2016 and 2015 respectively: 6%
Other than the above, ¥26,943 million (US$239,090 thousand) and ¥27,203 million of postretirement benefit
plan obligation for fiscal years 2016 and 2015 respectively is included in "Other" of accrued expense andlong-term liabilities in some American subsidiaries.
12. Income Taxes
The Company and its consolidated subsidiaries were subject to a number of taxes based on income, which in
the aggregate resulted in a normal statutory income tax rate of approximately 32.9% and 35.4% for fiscal
years 2016 and 2015, respectively.
A reconciliation of the statutory income tax rates in Japan to the Company’s effective income tax rates forfiscal years 2016 and 2015 were as follows:
2015
2016
Statutory income tax rate in Japan
32.9%
35.4%
Increase (reduction) in taxes resulting from:
Adjustment of deferred tax assets in the end of fiscal year 2016 by change of the tax rate
Deduction of research and development expense
Entertainment expenses not qualifying for deduction
Changes in valuation allowance and tax benefits realized from loss carry forwards
Adjustment to past corporate income taxes payable and corporate income taxes refundable
Equity in earnings of affiliates
Difference of applicable tax rate in subsidiaries
Other
Effective income tax rate

25

0.5%
(3.1)%
0.1%(1.7)%
0.0%
0.0%
0.6%
0.2%
29.5%

0.7%
(3.6)%
0.1%(0.5)%
0.2%
0.1%(0.3)%
0.3%
32.4%

Significant components of the deferred tax assets and liabilities as of March 31, 2016 and 2015, were as
follows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Deferred tax assets:
Accrued expenses¥18,569¥28,427$252,258
Provision for product warranties
17,54917,324
153,731
Net defined benefit liability
13,534
14,173
125,770
Depreciation and amortization expenses
10,93810,55493,655Long-term accounts payable-other
10,91910,59394,001
Provision for bonuses
7,241
7,456
66,164
Unrealized profit on inventories
25,95424,451
216,976
Loss on valuation of inventories
2,079
3,230
28,663
Net operating loss carryforwards
860
Other
31,25325,089222,637
Total deferred tax assets
138,896
141,297
1,253,856
Valuation allowance(20,018)(8,714)(77,327)
Total deferred tax assets, net of valuation allowance
118,878
132,583
1,176,529
Deferred tax liabilities:
Valuation difference on available-for-sale securities(8,668)(4,280)(37,980)
Depreciation and amortization expenses(11,246)(14,167)(125,717)
Reserve for reduction entry(2,072)(1,862)(16,523)
Net defined benefit asset(1,006)(966)(8,572)Other(17,980)(22,845)(202,724)
Total deferred tax liabilities(40,972)(44,120)(391,517)
Net deferred tax assets¥77,906¥88,463$785,012
The net deferred tax assets are included in the following line items in the accompanying consolidated balance
sheets.
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Current assets—Deferred tax assets¥78,789¥90,893$806,576
Investments and other assets—Deferred tax assets
13,113
16,339144,991
Current liabilities—Deferred tax liabilities(Other current liabilities)
Long-term liabilities—Deferred tax liabilities(13,996)(18,769)(166,554)
Total net deferred tax assets¥77,906¥88,463$785,012

26

(Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates)(Fiscal 2015)
On March 31, 2015, amendments to the Japanese tax regulations were enacted into law. Based on theamendments, the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities
expected to be settled or realized from April 1, 2015 to March 31, 2016 and on or after April 1, 2016 arechanged from 35.4% for the fiscal year ended March 31, 2015 to 32.9% and 32.1%, respectively, as of March
31, 2015.
Due to these changes in statutory income tax rates, net deferred tax assets (after deducting the deferred tax
liabilities) decreased by ¥2,375 million (US$19,747 thousand) as of March 31, 2015, deferred income tax
expense recognized for the fiscal year ended March 31, 2015 increased by ¥2,826 million (US$23,497
thousand), evaluation differences of other securities increased by ¥765 million (US$6,361 thousand) andaccumulated adjustments for employee retirement benefits increased by ¥529 million (US$4,398 thousand).
(Fiscal 2016)
On March 29 2016, amendments to the Japanese tax regulations were enacted into law. Based on theamendments, the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities
expected to be settled or realized from April 1, 2016 to March 31, 2017 and on or after April 1, 2017 arechanged from 32.1% for the fiscal year ended March 31, 2016 to 30.7% and 30.5%, respectively, as of March
31, 2016.
Due to these changes in statutory income tax rates, net deferred tax assets (after deducting the deferred tax
liabilities) decreased by ¥2,983 million (US$26,471 thousand) as of March 31, 2016, deferred income tax
expense recognized for the fiscal year ended March 31, 2016 increased by ¥2,916 million (US$25,876
thousand), evaluation differences of other securities increased by ¥224 million (US$1,988 thousand) andaccumulated adjustments for employee retirement benefits increased by ¥291 million (US$2,582 thousand)
13. Net Assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of its Board of Directors, designate an amount notexceeding one half of the price of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Japanese Companies Act (“the Act”), in cases where a dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or
legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying
consolidated balance sheets.
Under the Act, both legal earnings reserve and additional paid-in capital used to eliminate or reduce a
deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Act, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Act.
At the annual shareholders’ meeting held on June 28, 2016, the shareholders approved cash dividends
amounting to ¥56,216 million (US$498,855 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2016. Such appropriations are recognized in the period inwhich they are approved by the shareholders.
2714. Presentation of inventories and provision for loss on construction contracts¥Minus 644 million (US$ Minus 5,715 thousand) and ¥ 988million as "Provision for loss on construction
contracts" is included in "Cost of sales" for fiscal years 2016 and 2015, respectively.

15. Selling, General and Administrative Expenses
Selling, general and administrative expenses for fiscal years 2016 and 2015 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Freightage and packing expenses¥34,856¥27,023$239,799
Advertising expenses
81,53887,666
777,939
Sales incentives
82,59798,505874,124
Salaries and bonuses
49,89454,008479,262
Research and development expenses
83,104
101,499
900,692
Other
105,389
110,832
983,512
Total¥437,378¥479,533$4,255,329

16. Extraordinary income(Fiscal 2016)
Reversal of allowance for doubtful accounts
Reversal of allowance for doubtful account includes ¥29,624 million (US$262,880 thousands) of theallowance for receivables of the initial investment fees associated with the AH-64D combat
helicopter for the Japan Ministry of Defense was released because the lawsuit against theGovernment of Japan over the claims of the initial investment fees was concluded.
Other extraordinary income
Other extraordinary income includes 18,561 million yen (US$164,708 thousand) of interest
receivable recognized due to the conclusion of the lawsuit against the Government of Japanover the claims of the initial investment fees associated with the AH-64D combat helicopter
for the Japan Ministry of Defense.
17. Finance Leases
As allowed under the Japanese accounting standards, the Company and its consolidated subsidiaries inJapan account for finance leases.
Information as Lessor(1) The details of lease investment assets as of March 31, 2016 and 2015 were as follows:
Millions of yen
2015
2016
¥28,762¥25,716342
363(5,006)(4,547)¥24,098¥21,532

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

Thousands of
U.S. dollars
2016$228,201
3,221(40,350)$191,073(2) Lease revenue related to lease investment assets
Amounts of collections on lease receivable after the fiscal year ended March 31, 2016 and 2015, were as28

follows:
Millions of yen
2015
2016
¥8,399¥7,878
7,065
6,804
5,949
5,374
4,273
3,705
2,793
1,851
¥283
¥104

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

29

Thousands of
U.S. dollars
2016$69,90960,37847,68832,87816,426$923

18. Operating Lease
Information as Lessee
The future minimum lease/rent payments, excluding the portion of interest thereon, as of March 31, 2016 and2015, were as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Operating leases:
Due within one year
¥2,439¥2,937$26,063
Due after one year
14,03020,570
182,536
Total¥16,469¥23,507$208,599
Information as Lessor
The future minimum lease/rent payments receivable, excluding the portion of interest thereon, as of March 31,
2016 and 2015, were as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Operating leases:
Due within one year
¥190
¥158
$1,402
Due after one year
92
74
657
Total
¥282
¥232
$2,05919. Contingent Liabilities
Contingent liabilities as of March 31, 2016 and 2015, were as follows:
Thousands ofMillions of yen U.S. dollars
2015
2016
2016
As guarantor of third-party indebtedness from financial
institutions¥44,059¥45,214$390,975

Expenses with regard to the modified agreement contents between the U.S. subsidiary of Takata Co., Ltd.
and NHTSA (The National Highway Traffic and Safety Administration of the United States) dated May 4, 2016,
Notification “Extended schedule of the recalls of airbag inflators manufactured by Takata Co., Ltd.” releasedby MLIT (The Ministry of Land, Infrastructure, Transport and Tourism of Japan) dated May 27, 2016, andrecalls in the other regions including China and Australia required by the U.S. and Japanese authorities are
not accrued in the consolidated financial statements for the fiscal year ended March 31, 2016, since theamounts of these expenses can not be estimated reasonably at present.
Expenses with regard to recall of airbag inflators manufactured by Takata Co., Ltd. which can be reasonably
estimated were accrued in the consolidated financial statements for the fiscal year ended March 31, 2016.
FHI group notified the regulators to take corresponding actions in North American Market on May 25, 2016
and decided to do it in Japan and the other regions including China and Australia by the end of June 2016,that cover a part of contingent liabilities mentioned above. See Note24 “Subsequent events” for more detail.

20. The Amount of Discount of Export Bill
30

The amount of discount of export bill as of March 31, 2016 and 2015, were as follows:
Thousands ofMillions of yen U.S. dollars
2015
2016
2016
The amount of discount of export bill
¥1,718¥2,928$15,245

21. Transfer of Financial Assets to Special Purpose Company
The balance of financial assets transferred to special purpose company as of March 31, 2016 and 2015, wereas follows:
Thousands ofMillions of yen U.S. dollars
2015
2016
2016
Balance of financial assets transferred to special purpose
company(loan receivable of Automobiles and accounts¥5,037¥4,508$40,004
receivable-trade of Aerospace)
22. Segment Information(1)General information about reportable segments
The business segments the Company reports are the business units for which the Company is able to obtainrespective financial information separately in order for the Board of Directors to conduct periodic investigation todetermine distribution of management resources and evaluate their business result.
The Company places Automobile at the center of the whole businesses, and introduces an internal company
system into Aerospace and Industrial products divisions. This framework makes clearer the responsibility of eachdivision and accelerates business execution. The Company manages the subsidiaries on the basis of thisclassification. Therefore, the business segments consist of Automobile, Aerospace, Industrial products, and Other
which does not belong to any division.
Automobile segment manufactures and sells vehicles and related products. Aerospace segment manufacturesaircrafts, parts of space-related devices. Industrial products segment manufactures and sells Robin engines andrelated products.
(2)Calculation method of sales, profit or loss, assets, liabilities and other items by reportable segments
Accounting method for reportable segments is almost the same as "2. Summary of Significant
Accounting Policies".
Segment income are calculated based on operating income.
Net sales - Inter-segment are calculated based on current market prices.

31

(3)Information on sales, income, assets and other items by reportable segments for the fiscal years ended
March 31, 2016 and 2015 was summarized as follows
Thousands ofMillions of yen
U.S. dollars
2015
Net Sales:
2016
2016
Automobiles
Outside customers¥2,698,974¥3,039,424$26,971,550
Inter-segment
4,236
4,752
42,169Sub-total
2,703,210
3,044,176
27,013,719
Aerospace
Outside customers
142,801
152,786
1,355,808
Inter-segment
Sub-total
142,801
152,786
1,355,808
Industrial products
Outside customers
29,02932,570289,023
Inter-segment
207
185
1642
Sub-total
29,23632,755
290,665
Other (*1)
Outside customers
7,109
7,478
66,359Inter-segment
15,744
17,889158,745
Sub-total
22,85325,367225,104
Total
2,898,100
3,255,084
28,885,296
Adjustment (*2)
(20,187)(22,826)(202,556)
Consolidated total (*3)
¥2,877,913¥3,232,258$28,682,740

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

32

2016

Millions of yen
2015

Thousands of
U.S. dollars
2016¥543,609
18,20182
2,894
564,786803¥565,589¥400,874
18,912
779
1,884
422,449596¥423,045$4,823,933
161,514728
25,681
5,011,856
7,126$5,018,981

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

2016

Millions of yen
2015

Thousands of
U.S. dollars
2016¥2,298,942
220,786
35,961
61,4452,617,134(24,724)¥2,592,410¥1,944,178
186,292
32,92659,7352,223,131(23,417)¥2,199,714$20,400,586
1,959,233
319,114545,257
23,224,190(219,398)$23,004,792
Thousands of
U.S. dollars
2016

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

2016

Millions of yen
2015¥67,229
3,668
507
1,534
72,938¥72,938¥65,342
4,583
429
1,467
71,821¥71,821$596,584
32,5494,499
13,613647,245$647,245

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

¥711
768
1,479
¥1,479

¥589
775
1,364
¥1,364$6,3096,815
13,125$13,125

Increase of property, plant and equipment andintangible fixed assets:
Automobiles
AerospaceIndustrial products
Other (*1)
Total
Adjustment (*2)
Consolidated total (*3)¥122,689¥160,048$1,420,250
4,509
6,902
61,248
985
726
6,442
7,163
662
5,875
135,346
168,338
1,493,815¥135,346¥168,338$1,493,815
Note: *1. "Other" means the category which is not included into any reportable segments. It consists ofgarbage collection vehicles, specialized vehicles, real estate lease, etc.
*2. Adjustment of segment income refers to elimination of intersegment transaction.
*3.Segment income is adjusted on operating income on the consolidated statements of income.

33

Related Information(1)Products and services information
Products and services information is not shown since the same information is in the segment information.
(2)Information about geographic areas[1]Sales for the fiscal years ended March 31, 2016 and 2015 was summarized as follows:

2016
Sales: (*1)
Japan
North America[United States] (*2)
EuropeAsia
OtherConsolidated total

Millions of yen
2015¥652,894¥605,401
1,730,947
2,104,498[1,607,897][1,972,797]
123,250
126,201
238,749
237,297132,073
158,861¥2,877,913¥3,232,258
Note: *1 Sales is categorized by country or area which is based on customer location.
*2 Sales of the United States is included in North America area.

Thousands of
U.S. dollars
2016$5,372,269
18,675,109[17,506,407]
1,119,895
2,105,750
1,409,717$28,682,740[2]Property, plant and equipment for the fiscal years ended March 31, 2016 and 2015 was summarized asfollows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Property, plant and equipment: (*1)
Japan
¥412,623¥440,019$3,904,685
North America
101,042
131,654
1,168,285[United States] (*2)[100,274][130,978][1,162,286]
Europe
481
462
4,100
Asia
Other
551
498
4,419
Consolidated total¥514,697¥572,633$5,081,489
Note: *1 Property, plant and equipment is categorized by country or area according to geographic adjacentlevel.
*2 Property, plant and equipment of the United States is included in North America area.
[3]Major customers Information
Information about major customers is not shown because outside sales for major customers accounted forless 10% of operating revenue on the consolidated statements of income for the fiscal years ended March 31,
2016 and 2015.

34

Information on Impairment Loss in Fixed Assets by Reportable segments
Impairment loss in fixed assets by reportable segments for the fiscal years ended March 31, 2016 and 2015
was summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2016
2016
Impairment loss in fixed assets:
Automobiles
¥38
¥11
$98
AerospaceIndustrial products
Other
11
98
Total
38
Adjustment
Total
¥38
¥11
$98
Information on Amortization of Goodwill and Unamortized Balance by Reportable segments
Information on amortization of goodwill and unamortized balance by reportable segments for the fiscal years
ended March 31, 2016 and 2015 was summarized as follows:
GoodwillThousands ofMillions of yen
U.S. dollars
2015
2016
2016
Amount written off of current period:
Automobiles
¥266
¥241
$2,139AerospaceIndustrial products
Other
241
2,139
Total
266
Corporate and elimination
Total
¥266
¥241
$2,139Balance at the end of current period:
Automobiles¥2,472¥2,090$18,546
AerospaceIndustrial products
Other
2,090
18,546
Total
2,472
Corporate and elimination
Total¥2,472¥2,090$18,546

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

35

23. Fair Value of Investment and Rental Property
The Company and certain consolidated subsidiaries own rental office buildings and rental commercial
facilities with the objective of generating rental income in Saitama prefecture and other locations. Certain
domestic rental office buildings in Japan are classified as properties that include portions used as investment
and rental property, because part of them are used by the Company and certain consolidated subsidiaries.
The consolidated balance sheet amounts, principal changes during fiscal 2016 and 2015, fair value at theend of fiscal 2016 and 2015 were as follows:
As of March 31, 2016
Millions of yen
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the yearInvestment and rental property¥29,248(¥5)¥29,243¥40,173
Properties that include portions used as
investment and rental property¥15,228(¥733)¥14,495¥22,775
As of March 31, 2016

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

Thousands of U.S. dollars
Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year$259,544($44)$259,500$356,491$135,132($6,505)$128,627$202,103

As of March 31, 2015
Millions of yen

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

Consolidated balance sheet amounts
Fair value as
beginning
Increase(dec ending
the end of thebalancerease) during balancefiscal year
the year¥30,343(¥1,095)¥29,248¥37,704¥9,206¥6,022¥15,228¥19,537

Note 1. The amounts of consolidated balance sheet excludes accumulated depreciation and accumulated
impairment loss from acquisition costs.
2. Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2016, principal increases were properties
acquisitions etc, which amounted to ¥622 million (US$5,520 thousand), and principal decreases weredepreciation, which amounted to ¥1,264 million (US$11,217 thousand), loss on sales and retirement,
which amounted to ¥265 million (US$2,352 thousand).
Among changes in the amount of investment, rental property and properties that include portions
used as investment and rental property during the fiscal 2015, principal increases were properties
acquisitions etc, which amounted to ¥7,263 million, and principal decreases were depreciation, whichamounted to ¥1,009 million, loss on sales and retirement, which amounted to ¥1,408 million.
36

3. Fair value of a part of main investment and rental property is the amount estimated by based value ofreal-estate appraiser, and fair value of a part of other investment and rental property is the amountestimated by the Company based principally on land assessment value.
Profit and loss in fiscal 2016 and 2015 concerning investment and rental property and properties that include
portions used as investment and rental property were as follows:
As of March 31, 2016
Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss
Investment and rental property¥3,862¥2,344¥1,518(¥262)
Properties that include portions used as
investment and rental property¥855¥1,077(¥222)¥As of March 31, 2016

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

Thousands of U.S. dollars
RentalRentalChangeOther profit
incomeexpensesand loss$34,271$20,800$13,471($2,325)$7,587$9,557($1,970)$-

As of March 31, 2015

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

Millions of yen
RentalRentalChangeOther profit
incomeexpensesand loss¥3,868¥2,167¥1,701(¥418)¥394¥1,265(¥871)¥-

Note:1. Rental income (from the properties that include portions used as investment and rental property) does
not include the portion that the Company or certain subsidiaries use as the provision of services andbusiness administration purposes. Rental expenses, however, include all portions of the expenses(costs related to depreciation, repairs, insurance and taxes).
2. Other profit and loss include in gain on sale and impairment loss.
24.Subsequent Events(Quality-related expense (recalls))
On May 25, 2016, FHI group applied for a recall in North American Market in accordance with the modified
agreement contents with the U.S. subsidiary of Takata Co., Ltd. and NHTSA (The National Highway Trafficand Safety Administration of the United States) dated May 4, 2016. The estimated amount of expenses
related to the recall is ¥18,700 million, and will be booked in the consolidated financial statements for the fiscal
year ending March 31, 2017.
In addition, FHI group decided to take actions by the end of June in Japanese Market to respond theNotification “Extended schedule of the recall of airbag inflators manufactured by Takata Co., Ltd.” released by
MLIT (Ministry of Land, Infrastructure, Transport and Tourism of Japan) dated May 27, 2016 and in other37

regions including China and Australia in light of actions taken in North American Market and Japanese Market.
The estimated amount of expenses related to the recall is ¥11,800 million, and will be booked in the
consolidated financial statements for the fiscal ending March 31, 2017.
.

(The acquisition of the treasury stock)
Fuji Heavy Industries Ltd. (FHI) resolved at its Board of Directors meeting held on May 12, 2016 torepurchase of its own shares pursuant to the provisions of Article 156 of the Companies Act that are
applied by the reading of terms under the provisions of Article 165, Paragraph 3 of that Act.
1 Reason for the repurchase of its own shares
FHI will repurchase its own shares to improve shareholder value and capital efficiency.
2 Details of the repurchase(1) Class of shares to be repurchased: Common stock issued by FHI(2) Total number of shares to be repurchased: Up to 15,000,000 shares
Proportion of the total number of shares issued and outstanding, excluding treasury stock: 1.92%(3) Total value of shares to be repurchased: Up to 48.0 billion yen(4) Period of repurchase: From May 13 to September 30, 2016(5) Other: Shares repurchased are planned to be cancelled

25.Other
No items to be reported.

38