Aiming for Proactive Growth in All Internal Companies Strengthening Our Alliance with GM To the Stakeholders of Fuji Heavy Industries Ltd. and Accelerating Pr ogress... Looking to Future Growth 6 FUJI HEAVY INDUSTRIES LTD. to enable us to reach our initial target of 160,000 in vehicle production in this region by fiscal 2007. One objective of the ongoing development of our alliance with General Motors Corporation (GM), which is expected to add a further contribution under our FDR-1 plan, is to increase Subaru’s presence within the GM Group. Currently, we are making progress through exchange of technology, personnel, and information, and we have achieved reductions in cost through joint procurement. In addition, as we have worked to establish our high-performance strategy in the United States, GM has contributed greatly in terms of advice regarding environ- mental issues. We believe the alliance with GM has resulted in important benefits for both partners. Since the beginning of 2003, in addition to supplying Forester to GM in India, we have worked with Saab on the joint develop- ment of its new Saab 9-2 for the North American market, which makes use of the Subaru symmetrical all-wheel-drive (AWD) system. We also have reached agreement to sell Saab vehicles through Subaru dealers in Japan.  At FHI’s annual general meeting of shareholders held on June 25, 2003, Takeshi Tanaka retired as chairman and CEO to become Senior Corporate Adviser. I, Kyoji Takenaka, assumed the office of CEO and will continue as President. Moreover, to ensure the efficient functioning of the executive officer system, we have delegated authority wherever possible to executive officers and shortened the term of directors from two years to one year. Both of these measures are intended to speed up managerial decision-making. Under this new system, in fiscal 2004, we intend to move forward with the implementation of FDR-1, building on the new Legacy lineup. Looking further ahead, we aim for reaching our targets for 2010 of 10% ROA, a 10% ratio of operating income to net sales, and annual R&D expenditures of ¥100 billion.  In May 2003, with the timely introduction of the new Legacy models, we felt the important meaning that our accumulated vehicle production rose to 2.6 million units. In brief, the goal for the Legacy brand is to create a new sense of excitement. Our mission is to continue to build brand equity based on the appeal of Subaru automobiles, while stepping up our initiatives to boost return on investment and reduce cost so as to continue to enhance corporate value.  As part of its structural management reforms, in June 2002, FHI introduced an internal company system for its non-automotive operations and phased out its bus and rail car manufacturing activities. In the Eco Technologies Company, in addition to sup- plying small wind turbine generator systems, we have begun R&D for applying our aerospace technology to developing  large-scale, wind turbine generator systems.  In the Aerospace Company, a number of projects are coming on stream, including the next generation aircraft development of the PX/CX for the Japan Defense Agency. Under FDR-1, the Aerospace Company’s initiatives aimed at becoming “an aircraft company with an international presence” within 10 years are beginning to pick up speed.  Our Industrial Products Company is working to become prof- itable in fiscal 2004 by strengthening its marketing capabilities as well as reviewing and restructuring its product portfolio.  Our intention is to move forward in implementing our strategy of selection and concentration and promote proactive growth and development in our internal companies. 