Fiscal 2008 Performance

In a business environment characterized by rapid technical innovation and dynamic shifts in the structure of industries on a global scale, the mission of the Business Innovation Group is to create future earnings streams in promising industrial fields by developing, nurturing and expanding competitive businesses. Importantly, these businesses will contribute positively to society and the environment. Many of our businesses represent long-term investments for the future, where time will be required to generate significant earnings contributions. That said, some of our businesses are already on a growth trajectory, including businesses in the healthcare and information and communication technology (ICT) fields. We are also working to establish MC as a leading global force in the emerging field of emissions reduction business.

This group posted consolidated net income of ¥1.1 billion in fiscal 2008. The drop in earnings from the previous year's figure of ¥1.9 billion was mainly due to the gains on the sale of shares that we recorded in fiscal 2007.

In fiscal 2008, we made several investments in new energy fields, including a bioethanol project in Hokkaido, and a bio-pellet project in Kyushu. In the medical healthcare arena, we invested in Emergent Medical Ventures, a venture fund based in Silicon Valley, California, that is promoting the development of innovative medical devices based on cutting-edge technology. We also made a full-scale entry into Japan's dispensing pharmacy business with investments in chains Qol Co., Ltd. and Yakuju Corporation.

Group Strategy and Fiscal 2009 Outlook

"New energies & the environment" and "medical healthcare" are two of the growth sectors that MC has designated as Next-Generation Core Businesses. The Business Innovation Group is playing a central role in developing these businesses. Through stronger cooperation with other business groups within MC, we plan to expand our business base in these sectors so that MC can make a more significant social and environmental contribution overall.

In the medical healthcare sector, we plan to continue investing in advanced medical technology venture funds and to actively develop hospital management support and dispensing pharmacy businesses. In the new energies sector, we are focusing on developing businesses in three areas: biofuels made from wood chips or wheat that is not used as a food source; solar power generation; and lithium-ion batteries.

In environmental and water-related services, we plan to continue reinforcing our value chain. MC subsidiary Japan Water Corporation is playing a central role in developing our business in this field, having already secured several local government contracts to operate water treatment facilities. In the emissioneduction business sector, we are the market leader in Japan, with UN-approved Clean Development Mechanism (CDM) projects now generating emissions reductions of approximately 13.7 million tons per year (in CO2 equivalents). We have already adopted a comprehensive stance toward addressing the issue of global warming, well ahead of the revision of the global emissions framework for 2013 and beyond.

In fiscal 2009, we expect to incur a significant increase in expenses due to ongoing upfront investments to expand the business and energize business development activities. As a result, we expect consolidated net income to dip to ¥0.3 billion in fiscal 2009.