INPEX recognizes the importance of improving the efficiency and soundness of its management and enforcing compliance in order to continue increasing corporate value and maintain the trust of its stakeholders including shareholders and society at large, and will continue to reinforce corporate governance.

Directors and Board of Directors’ Meeting

The Board of Directors of INPEX (the “Company”) is composed of 16 members, four of whom are outside directors. The Board of Directors meets once a month and when necessary to discuss and make decisions regarding important operational matters and oversees the execution of directors’ operations.

The four outside directors (“interlocking directors”) have many years of management know-how and experience in the Company’s business and are able to offer objective, professional advice regarding operations. For this reason, they were asked to join the Board of Directors to contribute to the development of the Company’s business. The four interlocking directors concurrently serve as directors or advisors of Japan Petroleum Exploration Co., Ltd., Mitsubishi Corporation, Mitsui Oil Exploration Co., Ltd. and Nippon Oil Corporation (“shareholder corporations”), respectively.

At the same time, however, the shareholder corporations are involved in businesses that overlap with those of the Company. The Company therefore recognizes that it must pay particular attention to corporate governance to avoid conflicts of interest in connection with competition and other matters. To this end, all Company directors, including the interlocking directors, are required to sign a written undertaking to carry out their duties as officers of the Company appropriately and with the highest regard for the importance of such matters as their obligations in connection with non-competitive practices under the Japanese Companies Act, the proper manner for dealing with conflict of interest, and confidentiality.

Executive Committee, Executive Officer

The Executive Committee has been established to speed up decision-making and resolve matters that do not require a decision by the Board of Directors, and to conduct discussions that facilitate the Board’s decisions by conducting meetings on a weekly and an as-needed basis.

In addition, we introduced a Corporate Officer System into the management environment that changed rapidly and the expansion of business affairs and corresponding to the precise swiftness, from October 1, 2008. So we secured an even more efficient and flexible management structure.

Statutory Auditors and Board of Statutory Auditors

The Company employs a statutory auditor system. The Board of Auditors is composed of five members, including three from outside the Company.

The statutory auditors attend meetings of the Board of Directors and the Executive Committee, conduct interviews with departments as necessary and audit the business execution of directors with regard to overall operations and individual projects based on reports from relevant departments and other information. The statutory auditors also receive reports related to regular and special audits from the independent auditors and regular reports from the Internal Audit Unit on the status of internal audits.

Two of the three outside auditors concurrently serve as directors of Japan Petroleum Exploration Co., Ltd. and Marubeni Corporation and are involved in businesses that overlap with those of the Company.

Internal Audit

The Internal Audit Unit was established as an internal audit division independent from business departments and directly responsible to the president, to ensure the appropriateness and efficiency of business activities. The Internal Audit Unit examines and evaluates the status of management bodies, the efficiency of business operations and other matters, pinpointing problem areas, making necessary reports and conducting follow-up audits to confirm the status of improvements. The Internal Audit Unit also contributes to proper operational management by exchanging opinions with independent and statutory auditors as necessary.

Accounting Audit

The Company receives accounting audits from Ernst & Young ShinNihon in accordance with the Companies Act and the Financial Instruments and Exchange Law. Certified Public Accountants (CPAs) and assistants for audits during the fiscal year under review are described as follows.

• Names of CPAs: Kenji Endo, Yusuke Kosugi, Takeshi Nakano
• Accounting audit members: Six CPAs, 19 assistant CPAs and four others

System to Ensure that Directors and Employees Conduct Business in Compliance with Laws and Regulations as well as with the Company’s Articles of Incorporation

In order to ensure that directors and employees conduct business in compliance with laws and regulations as well as with the Company’s Articles of Incorporation, the Company has formulated a corporate social responsibility policy and is building a structure to make sure that all concerned thoroughly abide by its contents.

To this end, the Company has appointed a representative director with compliance responsibilities. Simultaneously, the Company established a Compliance Committee chaired by the officer responsible to ensure that directors and employees remain in compliance with laws and regulations as well as the Company’s Articles of Incorporation in the execution of their business duties. Furthermore, the Company set up an internal notification system with the responsible in-house departments and an outside specialist (lawyer) as points of contact.

In order to maintain an effective compliance system and related in-house rules, the Company also makes timely improvements by implementing inspections and evaluations of these systems through audits carried out by the Internal Audit Unit, which reports directly to the president.

Furthermore, we established the necessary system ready to secure accuracy and the reliability of the financial report and manage it adequately and evaluate the effectiveness.

System for Administration and Storage of Information Regarding Execution of Directors’ Business Duties

In accordance with laws and regulations, the Company’s Articles of Incorporation and in-house rules, directors administer and store documents as well as information regarding the execution of their business duties.

Management System for Losses and Other Risks

To deal with all risks relating to the Group’s business activities, the Company has designated a division to support risk management conducted by directors and formulated a basic risk management policy. In concert with these initiatives, the Company has established a group-wide risk management system, which is handled in liaison with other Group companies based on the Group Management Regulations.

With regard to the management of risks relating to everyday business operations, the Company makes timely improvements by implementing inspections and evaluations of these systems through audits carried out by the Internal Audit Unit.

System to Ensure the Efficient Execution of Directors’ Business Duties

To ensure efficient business execution, directors engage in business operations with particular attention to the following:

1. Holding executive committee composed of full-time directors on a weekly and an as-needed basis in a timely manner, and to perform their duties promptly and appropriately.
2. For everyday business duties, responsibility is delegated in accordance with rules governing job demarcation and administrative authority, those responsible at each level performing their duties in a prompt manner.

System to Ensure Appropriate Business Conduct in a Business Group Composed of the Company and Its Subsidiaries

In accordance with the Group Management Regulations and Contracts, important matters concerning the Company’s two subsidiaries are reported on and approved at the Company’s Board of Directors’ meetings as well as at management committees.

The Company and its Group companies coordinate risk management, compliance control measures and internal audits under the Group Management Regulations.

Matters Concerning Auditor-Approved Employees Appointed to Assist Auditors’ Duties

A Company employee concurrently serves as an auditor’s assistant. The assistant concerned is engaged in business in accordance with auditors’ instructions.

Matters Concerning the Impartiality of the Employee Mentioned in Preceding Clause

Any changes in personnel involving the auditors’ assistant are discussed with auditors.

System for Directors and Employees to Report to Auditors, Other Systems for Reporting to Auditors

Directors and employees report and provide information to auditors for matters stipulated in law, matters that may cause significant impact on the Company and its Group companies, and other matters that are judged as necessary to be reported in relation to the execution of auditors’ business duties.

Auditors shall always obtain job-related information by attending the Board of Directors’ meetings and other important in-house meetings as well as receiving in-house approval documents.

System to Ensure Efficient Audit Implementation

Upon the implementation of audits, the Company ensures close coordination with outside specialists including lawyers, CPAs and certified tax accountants.

In addition, the Company is in close liaison with the internal audit system to enhance audit efficiency by receiving reports as required.

The Company’s Articles of Incorporation stipulate that certain major corporate decisions require a resolution by the holder of a special class share in addition to the approval of the shareholders’ meeting or Board of Directors. The Special class share is issued to the Minister of Economy, Trade and Industry.

Major corporate decisions include the appointment and removal of directors, the disposition of material assets, amendments to the Articles of Incorporation, mergers, share exchanges or share transfers, capital reductions and dissolutions. Director appointments or removals, mergers, share exchanges or share transfers require a resolution by the holder of special class share, provided 20 percent or more of the voting rights attached to shares of common stock are held by a single non-public entity or a single non-public entity and its joint shareholders.

The Minister of Economy, Trade and Industry announced the establishment of guidelines for the exercise of special class shareholders’ veto rights (with respect to decisions not approved by a resolution of the special class shareholder). The Minister of Economy, Trade and Industry may veto any one of the aforementioned major corporate decisions only to the extent that it determines a proposed action or transaction (1) will likely result in INPEX being managed in a manner inconsistent with its goal of securing a stable energy supply for Japan as a national flag company; (2) will likely adversely affect the goal of efficiently securing a stable energy supply for Japan as a national flag company; or (3) may affect the exercise of voting rights of special class shareholders.

The exercise of veto rights by special class shareholders is, therefore, restricted. With the existence of this class of share, however, the Company can minimize the risk of losing management control to foreign-owned concerns and an unsolicited takeover for speculative reasons. Moreover, because the scope of the veto is limited and guidelines have been set for the exercise of veto rights, the special class share is an absolute minimum necessary measure that is highly transparent and does not unjustly impinge on the Company’s ability to operate with flexibility and efficiency.

The Company recognizes that two factors are vital to increase corporate value amid drastic changes in its operating environment: forestalling and mitigating losses by properly managing risk inherent in its business operations; and maintaining and strengthening trust with customers, investors and other parties. As such, the Company will strive on an ongoing basis to enhance its risk management.

Compliance is also a vital element of continuous corporate development. The Company will methodically develop its compliance system to ensure strict observance of laws, regulations and corporate ethics.

The Company seeks to improve management transparency and accountability by disclosing information in a timely fashion through IR activities directed at shareholders and investors, the shareholders’ meeting, its Web site, public relations activities and in other ways, and will constantly strive to enhance these efforts.

In the fiscal year ended March 31, 2008, the Company’s compensation to directors and auditors was as follows:

In fiscal 2007, INPEX’ compensation to Ernst & Young ShinNihon was as follows:

The Company’s Articles of Incorporation stipulate that the number of directors shall be up to 16.

The Company’s Articles of Incorporation stipulate that the appointment of directors shall be approved by a majority of the voting rights with the presence of shareholders representing at least one third of all shareholders. The Articles of Incorporation also stipulate that the appointment of directors shall not be determined by a cumulative vote.

The Articles of Incorporation also stipulate that the appointment and removal of directors requires approval from a General Meeting of Special Class Shareholders in addition to that from an ordinary General Meeting of Shareholders. For details, please refer to the preceding clause, “Special Class Share.”

In accordance with Article 165, Paragraph 2 of the Companies Act, the Company may acquire its own shares by resolution of the board of directors in pursuit of flexible implementation of future capital policy.

Furthermore, in order for directors and statutory auditors to fulfill the roles expected of them and in accordance with Article 426, Paragraph 1 of the Companies Act, the Company may, within the limits of laws and ordinances, exempt directors and statutory auditors (including a person who was a director and a statutory auditor in the Company) from liability, by resolution of the board of directors.

For the purpose of implementing flexible profit return to shareholders, the Company may make cash distribution (here and hereinafter, “interim dividends”) to the shareholders or pledge right holders registered or recorded in the final shareholders’ register, and the holders of fractional shares registered or recorded in the register of fractional shares as of September 30 of each year in accordance with Article 454, Paragraph 5 of the Companies Act.