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## 3. Acquisition of Isuzu’s Share of Subaru of Indiana Automotive, Inc. 

Subaru of Indiana Automotive, Inc. (SIA, formerly Subaru-Isuzu Automotive Inc.), a consolidated sub- sidiary in the United States, had been a joint venture company of Isuzu Motors Ltd. and the Company (the Company had held a 51 % of SIA share). On January 1, 2003, as a result of dissolution of the joint venture relationship with Isuzu Motors Ltd. and execution of an agreement for the consignment of production, the Company acquired Isuzu’s share of SIA to make SIA a wholly owned subsidiary of the Company, and SIA was assigned to produce certain Isuzu vehicles as well as Subaru vehicles. 

Due to the use of a class stock system at SIA, the Company had previously consolidated only the Subaru Division of SIA which had been governed by the Company through ownership of class F common stock, while the Isuzu Division of SIA, which had been governed by Isuzu Motors Ltd. through ownership of class I common stock, was excluded from the consolidated financial statements of the Company. However, as a result of the acquisition of Isuzu’s share of SIA, the Company consolidates SIA as a whole including the Consignment Division (formerly the Isuzu Division). 

Assets and liabilities of the Consignment Division of SIA at the beginning of its consolidation were as follows: 

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Prior to the Company’s acquisition of Isuzu’s share of SIA, Isuzu Motors Ltd. made a capital injection into SIA in connection with the forecasted future losses related to the former Isuzu Division. In relation to the consignment of production agreement with Isuzu, the Company will operate the former Isuzu Division as the Consignment Division. As the consigned production activities are completed, SIA is expected to incur certain losses on the disposal of fixed assets, losses on cancellation of capital leases, and losses related to personnel reduction. 

Consequently, the consolidation adjustments (credit side) arose. 

The portion of the consolidation adjustments that clearly corresponds to the forecasted future losses will be amortized according to the generation of those losses, and the remaining portion will be amortized by the straight-line method over 5 years. 

Since Isuzu’s share was acquired at end of the fiscal year, the straight-line amortization portion will start from the following fiscal year. The annual amortization based on currently forecasted losses was as follows: 

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