MC's corporate philosophy is enshrined in the Three CorporatePrinciples-Corporate Responsibility to Society, Integrity andFairness,and International Understanding through Trade. Throughcorporate activities rooted in the principles of fairness and integrity,MC strives to continuously raise corporate value. The Companybelieves that by helping to enrich society, both materially and spiritually,it will also meet the expectations of shareholders, customersand all other stakeholders.

A key management theme in achieving these goals is tostrengthen corporate management on an ongoing basis, as thefoundation for ensuring sound, transparent and efficient management.MC is thus working to build a corporate governance system,based on the Corporate Auditor System, that is even more effective.To this end, the Company has strengthened supervision by appointingmore outside directors, and also separated management andexecution further by introducing the executive officer system.

Specifically, MC has established selection criteria for outsidedirectors and outside corporate auditors to clarify the roles andselection policy for these directors and corporate auditors. Outsidedirectors selected in accordance with these standards presentlyrepresent one-third of all directors.

MC also has a Governance Committee and an InternationalAdvisory Committee as advisory bodies to the Board of Directors.These committees are made up mostly of outside directors andcorporate auditors as well as other experts from outside theCompany.The Governance Committee discusses a wide range ofissues relating to corporate governance, including how the Board ofDirectors functions, and the appropriateness of director and corporateauditor remuneration levels. The International Advisory Committeeadvises Company management from a global perspective.

Based on the discussions of these advisory committees andother considerations, in June 2008, MC limited the number ofin-house directors to corporate officers with Company-wideresponsibilities in order to strengthen Company-wide managementfunctions and promote faster and more efficient business execution.In the same vein, more discretional authority was handed to GroupCEOs responsible for business execution.

MC's Board of Directors has 15 members, 5 of whom are outsidedirectors. As a rule, the Board convenes once a month and isresponsible for making decisions concerning important managementissues and overseeing business execution.

The president, as the Company's Chief Executive Officer, managesthe Company's business through the Executive Committee, adecision-making body of executive officers. Important managementissues are first determined by the Executive Committee, whichmeets around twice a month, and then referred to the Board ofDirectors for deliberation and final determination.

The Governance Committee meets twice a year to discussissues relating to corporate governance. In the fiscal year endedMarch 31, 2009, the Governance Committee discussed the runningof the Ordinary General Meeting of Shareholders and theBoard of Directors, as well as the remuneration systems for directorsand corporate auditors, among other topics. The InternationalAdvisory Committee discusses issues related to globalization of theCompany's operations. This committee meets around once a year.

The five corporate auditors, including three outside corporateauditors, utilize staff members of the Corporate Auditors' Office,which is under their direct control, in conducting their audits. At thesame time, the corporate auditors attend meetings of the Board ofDirectors and other important meetings and hold discussions withinternal departments, including important offices in Japan andoverseas, as well as visit main subsidiaries that are important fromthe perspective of Group management to conduct audits.

Regarding internal audits, the Internal Audit Dept. conductsaudits of the Company, overseas subsidiaries and affiliatedcompanies from a Company-wide perspective. The Internal AuditDept.'s audits are based on annual audit plans and conductedafter selecting audit targets. The results of audits are reportedeach time to the president, corporate auditors and other concernedparties. They are also reported regularly to the Board of Directorsand the Executive Committee.

In addition, each business group has established its own internalaudit organization and, based on objectives that have been setto suit, as necessary, the specific group characteristics, theseorganizations audit the operations that fall under their respectivegroup's organization.

Corporate Governance Report (Translation of report filed with the Tokyo Stock Exchange) (PDF:160KB)

1. Outside directors are elected from among those individuals who have an eye for practicality founded on a wealth of experience as corporate managers, as well as an objective and specialist viewpoint based on extensive insight regarding global conditions and social and economic trends. Through their diverse perspectives, outside directors help ensure levels of decision-making and management oversight appropriate to the Board of Directors.
2. To enable outside directors to fulfill their appointed task, attention is given to maintaining their independent stance; individuals incapable of preserving this stance will not be selected to serve as outside directors.
3. MC operations span a broad range of business domains; hence there may be cases of conflict of interest stemming from business relationships with firms home to the corporate managers appointed as outsider directors. MC copes with this potential issue through the procedural exclusion of the director in question from matters related to the conflict of interest, and by preserving a variety of viewpoints through the selection of numerous outside directors.

1. Outside corporate auditors are selected from among individuals possessing a wealth of knowledge and experience across various fields that is helpful in performing audits. Neutral and objective auditing, in turn, will ensure sound management.
2. To enable outside corporate auditors to fulfill their appointed task, attention is given to maintaining their independent stance; individuals incapable of preserving this stance will not be selected to serve as outside corporate auditors.

Selection Criteria for Outside Directors (PDF:28KB)

MC is building and operating an internal control system, as discussed below, so as to ensure that business activities are conducted properly and in conformity with laws and its Articles of Incorporation.
Efforts are ongoing to reform and improve this system.

The president delineates basic management policies and sets specific management goals. At the same time, the president formulates management plans and oversees progress in achieving targets efficiently. The organization is realigned and resources deployed as necessary so as to achieve management targets in the most efficient manner possible. Furthermore, the organizational chain of command is clearly laid out and authority is delegated to managers and staff of organizational bodies to the extent necessary to accomplish targets. These people are required to submit reports regularly.

The fiscal year ended March 31, 2009 was the first year of the Company's INNOVATION 2009 medium-term management plan. However, the Company partially revamped this plan, given the major changes that have taken place in the macroeconomic environment due to the worldwide economic crisis that began as a financial crisis in the U.S. in September 2008.

Compliance, which is defined as acting in compliance with laws and regulations and in conformity with social norms, is regarded as a matter of the highest priority in conducting business activities. MC has formulated a Code of Conduct for all officers and employees, which specifies basic matters in relation to compliance. Efforts are made to ensure that all officers and employees are familiar with the Code of Conduct and that the Company's corporate philosophy is understood and practiced.

To promote compliance, MC has established a cross- organizational framework headed by the Chief Compliance Officer. MC is also taking preventive and corrective measures such as offering training regarding various laws and regulations and has established a dedicated compliance organization.

Regarding the status of compliance, in addition to a framework for receiving reports from all organizations throughout the Company, MC has established an internal whistleblower system. Through these structures and systems, MC identifies problems and shares information. Regular reports are also made to the Board of Directors on the status of compliance.

Regarding risks associated with business activities, MC has designated categories of risk-such as credit, market, business investment, country, compliance, legal, information management, environmental, and natural disaster-related risks-and has established departments responsible for each category. MC also has in place policies, systems and procedures for managing risk. Furthermore, MC responds to new risks by immediately designating a responsible department to manage such risks.

With respect to individual projects, the person responsible for the applicable department makes decisions within the scope of their prescribed authority after analyzing and assessing the risk-return profile of each project in accordance with Company-wide policies and procedures. Projects are executed and managed on an individual basis in accordance with this approach.

In addition to managing risk on an individual project basis, MC assesses risk for the Company as a whole with respect to risks that are capable of being monitored quantitatively and manages these risks properly, making reassessments as necessary.

Regarding information related to business activities, personnel responsible for managing business activities classify information individually in accordance with its degree of importance. These individuals also instruct users on the handling of this information. The aim is to ensure information security while promoting efficient administrative processing and the sharing of information.

Responsible personnel store for a predetermined period documents that must be stored by law and information that the Company specifies as important in terms of internal management. For all other information, responsible personnel determine the necessity and period for storage of information and store such information accordingly.

MC specifies a responsible department for the oversight of each subsidiary and affiliate and quantitatively monitors business performance, management efficiency and other operational aspects of each company every year. Efforts are also made to monitor qualitative issues such as compliance and risk management.

MC strives to ensure proper business conduct by subsidiaries and affiliates by sending directors to sit on their boards, executing joint venture agreements, exercising its voting rights and in other ways. In this way, and through various initiatives designed to sustain growth at each company, MC aims to raise corporate value on a consolidated basis.

In April 2009, MC established a dedicated internal organization to coordinate the formulation of basic policy concerning consolidated management and to discuss specific measures.

Each organization takes responsibility for reviewing and improving its business activities on a regular basis. In addition, to more objectively review and evaluate the business activities of each organization, MC conducts regular audits through an internal audit organization.

Corporate auditors attend and express opinions at meetings of the Board of Directors and other important management meetings. In addition, corporate auditors gather information and conduct surveys, keeping channels of communication open with directors, employees and others who cooperate with these efforts.

If there is a risk of a certain level of financial loss or a major problem, the person responsible for the department concerned is required to immediately report to corporate auditors in accordance with predetermined standards and procedures.

To raise the effectiveness of audits conducted by corporate auditors, personnel are appointed to assist corporate auditors in carrying out their duties. Mindful of the need for independence, the opinions of corporate auditors are respected and other factors taken into consideration when evaluating and selecting people to assist them.

To ensure the proper and timely reporting of financial statements, MC has appointed personnel responsible for financial reporting and prepares financial statements in conformity with legal requirements and accounting standards. These financial statements are released after being discussed and confirmed by the committee responsible for financial reporting.

Regarding the internal controls over financial reporting, MC has a dedicated internal organization, which documents, evaluates and improves Company-wide internal controls and administrative processes at important business locations in accordance with the internal control reporting system based on the Financial Instruments and Exchange Act of Japan. The goal is to further increase the reliability of financial reporting on a consolidated basis.

The fiscal year ended March 31, 2009 was the first year for introduction of the internal control reporting system based on the Financial Instruments and Exchange Act. The Company developed activities on a Group-wide basis to ensure the effectiveness of internal controls over financial reporting. It conducted internal control activities and monitored internal controls, with efforts led by a dedicated internal organization. As a result, MC concluded that its internal control system over financial reporting was functioning properly and was effective, and this was stated in the management internal control report.

This management internal control report is subject to an external audit by the independent auditors. MC received an Independent Auditors' Report filed under the Financial Instruments and Exchange Act of Japan and this report was included in MC's securities report.