Mitsubishi Heavy Industries has revised the system governing treatment of its Directors and Statutory Auditors and will abolish the current retirement allowance system.

Mitsubishi Heavy Industries has revised the system governing treatment of its Directors and Statutory Auditors and will abolish the current retirement allowance system. In addition, with an aim to further enhance the motivation and morale of its Directors so as to improve the company's business performance, the company will grant to its Directors, excluding outside Directors, stock acquisition rights as stock options in a so-called stock-linked compensation scheme as part of the revision of its system. Accordingly, the company hereby gives notice that at the meeting of its Board of Directors convened today, a motion was passed under which the item described below will be submitted for consideration at the Ordinary General Meeting of Shareholders scheduled for June 28, 2006.

Note: Currently, benefits extended to Directors and Statutory Auditors take forms including monthly benefits, bonuses, stock options and retirement allowance.

As a result of the revision, going forward benefits extended to Directors and Statutory Auditors will take the forms of monthly benefits, stock options for stock-linked compensation, and business performance-based compensation (equivalent to existing bonuses).

I.

Abolishment of Retirement Allowance System The current retirement allowance system will be abolished effective as of the close of the Ordinary General Meeting of Shareholders scheduled to convene on June 28, 2006.

In accordance with guidelines set by the company, Directors and Statutory Auditors approved for continuing service at the General Meeting of Shareholders shall be furnished with the amount of retirement allowance appropriate to their service time to that date.

II.

Amount and Particulars of Stock Option Benefits, etc to Directors, excluding Outside Directors 1.

Maximum issue price of stock acquisition rights The limit will be a total of 200 million for the current year, taking into consideration grants of stock options in the past, the abolition of the retirement allowance, and other factors.

The stock acquisition rights will be issued within this maximum issue amount.

2.

Particulars of the stock acquisition rights to be issued (1) Type of shares to be issued upon exercise of the stock acquisition rights: Common stock of the company (2) Number of shares to be issued upon exercise of each of the stock acquisition rights: The number of shares to be issued upon exercise of the stock acquisition rights will be 1,000 ordinary shares of the company per stock acquisition right.

(3) Number of stock acquisition rights to be issued: The number of the stock acquisition rights to be granted will be calculated by dividing the total issue price of the stock acquisition rights by the fair value of a stock acquisition right calculated based on the Black-Scholes model, which factors in such conditions as the stock price on the day before the resolution of the Board of Directors concerning the issuance of the stock acquisition rights, stock price volatility calculated in accordance with certain criteria, the exercise period of the stock acquisition rights, etc, rounded down to the nearest whole number.

The total issue price of the stock acquisition rights will be determined by a resolution of the Board of Directors within the limit of the maximum issue price of the stock acquisition rights mentioned in item 1 above.

(4) Value of property to be invested upon exercise of the stock acquisition rights: 1,000 (5) Exercise period for the stock acquisition rights: A period to be determined by the Board of Directors, from not earlier than June 29, 2006 through not later than June 28, 2036 (6) Transfer restrictions on the stock acquisition rights: Any acquisition of the stock acquisition rights by transfer requires the approval of the company's Board of Directors.

Note 1: With respect to the said stock acquisition rights, we propose that the same amount of compensation as the amount payable be granted to Directors who were allotted the stock acquisition rights and that the stock acquisition rights be issued by a resolution of the Board of Directors on the condition that the compensation claims and the amount to be paid upon exercise of the stock acquisition rights are offset.

Furthermore, we would like to set the amount to be paid as the fair value of the stock acquisition rights.

Since the stock acquisition rights will be issued by offsetting Directors' compensation claims to the company and the amount to be paid, which is the fair value of the stock acquisition rights, such issuance does not fall under an issuance on especially advantageous terms.

Note 2: On April 28, 2006, a plan was adopted to provide stock options for stock-linked compensation to the Senior Vice Presidents of the company who are not Directors.