Fuji Heavy Industries Ltd. (FHI) is proceeding with corporate governance as a means to mea- sur up to the trust placed in the Company by its shareholders, customers, and all stakehold- ers. The Board of Directors conducts decision-making regarding vital operational issues and the Boar of Auditors supervises and monitors this process. The Board of Directors is com- posed of eight directors who carry out prompt decision-making regarding business opera- tions. The Boar of Auditors comprises four auditors who obtain reports on vital monitoring issues and deliberate accordingly. Preliminary to the Board of Directors is the Executive Management Board, which deliberates on company-wide management strategies and the execution of priority business operations. Basic Policy on Corporate Governance ting Corporate Reforms accomplish this, without having any specific area of opera- tional management of their own, Directors are responsible for supervising the operational management duties of the Executive Officers.  In June 1999, FHI introduced an executive officer system as a means to clarify administrative and executive responsibility for each business. In June 2002, FHI took further steps to distin- guish the separate functions of business administration and exe- cution as well as further accelerate its management by adopting an internal company system, structured around its core automo- tive business. On June 25, 2003, the Company enhanced the functions of its Board of Directors’ system to support implementation of its medium-term management plan, Fuji Dynamic Revolution-1 (FDR-1), and to increase the speed of decision-making. • The responsibility of operational management will be delegated to Executive Officers who are not members of the Board of Directors. The purpose of this is to accelerate the speed of the operational management in each operating unit and to clarify operational management responsibility. • Executive Vice Presidents who are not on the Board of Directors will be responsible for a specific operational area, will assist the President from a company-wide point of view, pro- vide support to management, and serve as a regular member of the Executive Management Board. • To respond promptly and flexibly to the changes in a challeng- ing business environment, and to enhance the corporate gov- ernance structure, the length of terms for Directors and operating officers will be shortened from two years to one year. • To meet the objectives of the group-wide management system as a whole, suitably qualified individuals will be flexibly assigned to the appropriate positions. • Keeping in mind that the corporate governance structure sep- arates managerial supervision from management of opera- tions, Directors will devote themselves to company-wide decision-making and decide company policy and other mat- ters while supervising overall management of the Company in amanner consistent with actual management conditions. To 1. Roles of Board of Director Members and Executive Officers  Accelerating Decision-Making, Implementing Corporate Reforms Progress of Corporate Governance Initiatives 2. Length of Terms for Directors Annual Report 2003 17