MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2002

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2002

CONTENTS
1 Financial Highlights
2 To Our Shareholders
6 Special Feature
10 Business Information
20 Financial Review
24 Financial Statements
49 Mitsubishi Estate Corporate Data
51 Mitsubishi Estate Group
52 Promotion of Environmental Affairs and Corporate Philanthropy
53 Code of Corporate Conduct

PROFILE
The Mitsubishi Estate Group is a comprehensive real estatedeveloper whose consolidated businesses include building
leasing, residential development and sales, and architecture, as
well as real estate brokerage and hotels. Operations are carriedout in Japan as well as in major cities of the United States andthe United Kingdom.
Mitsubishi Estate’s redevelopment of the Marunouchi district,Japan’s premier business center, is a major project that will set
the standard for urban design in the 21st century and embody theCompany’s philosophy, refined over the past 100 years, ofdeveloping multifaceted communities.

Forward-Looking and Cautionary Statements
Statements made in this annual report with respect to the
Mitsubishi Estate Group’s current plans, estimates and strategies
are forward-looking statements about the future performance of the
Mitsubishi Estate Group. These statements are based on
management’s assumptions, which are founded on currently
available information and therefore should not be unduly relied
upon. The Mitsubishi Estate Group cautions that a number ofsignificant factors could cause future results to differ from those in
the forward-looking statements.

FINANCIAL HIGHLIGHTS

Years ended March 31

Millions of yen
2001
2002

Thousands of
U.S. dollars
2002

1997

1998

1999

2000

¥559,119¥548,731¥565,259¥574,396¥630,990

38,362

31,84822,327

18,421

19,832(71,058)(533,268)

As a percentage ofrevenue from operations

6.9%

5.8%

3.9%

3.2%

3.1%

(11.3)%—As a percentage ofshareholders’ equity

9.2%

7.2%

4.9%

4.1%

4.1%

(10.5)%—

2,066,311

2,103,258

2,283,773

2,285,771

2,535,263

Total shareholders’ equity

432,786

454,057

459,574

440,731518,766

832,497

6,247,632

Common stock

86,53486,53486,53486,53486,53486,534649,411

Yen

U.S. dollars

Revenue from operations
Net income

Total assets¥631,564 $4,739,692

3,035,795 22,782,702

Per share amounts:
Net income
Cash dividends applicable to the year

¥29.53¥24.51¥17.19¥14.18¥15.26¥(54.70)$(0.41)

8.00

8.00

8.00

8.00

8.00

8.00

0.06

Note: Yen amounts shown are translated into U.S. dollars, solely for convenience, at the prevailing exchange rate on March 31, 2002, of ¥133.25 to US$1.00.

Revenue by Segment (Percentage Share)

Other 3.5%
Hotels 4.7%
Custom-Built Housing 4.8%
Real Estate Brokerage 12.4%
Architectural & Engineering 2.5%

Buildings 50.8%

Residential Development 21.3%

ANNUAL REPORT 2002 1

TO OUR SHAREHOLDERSFINANCIAL RESULTS
During the fiscal year under review, Mitsubishi Estate Co.,
Ltd. and its consolidated subsidiaries recorded revenue
from operations of ¥631,564 million (US$4,739.7 million),roughly equal to the previous fiscal year. Operating income
decreased 4.6% to ¥76,921 million (US$577.3 million).
Building Business operations recorded increases in revenue
and profit, while condominium sales by Residential Development operations turned brisk. Overseas-based Real Estate
Brokerage operations, however, saw declines in both revenue and profit due to the effects of the slowdown in the
U.S. economy.
Net income showed a deficit of ¥71,058 million(US$533.3 million), but this was due to the recording ofan extraordinary loss of ¥156,365 million (US$1,173.5 million) for impairment of property and equipment. In orderto enhance the transparency and soundness of the balance sheet, the Company cleared away unrealized losses

Advancement of
Marunouchi District Redevelopment
and Profit Restructuring

on land and buildings through a combination of revaluation of land and the impairment loss on property andequipment.
With this action the Mitsubishi Estate Group has eliminated all unrealized losses on land and buildings,
completing the restructuring of its balance sheet.

OPERATING ENVIRONMENT
The market for leased office buildings in Japan has seen aslowdown in demand due to restructuring among domestic
companies and the withdrawal of foreign companies,
resulting in a general decline in revenue from rented properties. In 2003, when the peak for completion of large-scalebuildings is reached, we expect the market to becomepolarized even further. The market for condominiums
remains favorable, bolstered by demand for large-scaleand high-rise condominiums in an era of low interest rates
and tax measures promoting residence purchasing. However, the future direction of the market cannot be easily
predicted.

2 MITSUBISHI ESTATE CO., LTD.

ANNUAL REPORT 2002 3

The Mitsubishi Estate Group is responding to these
operating conditions by looking for ways to strengthen
its sales and product planning while working to improve
profitability.

ANNOUNCEMENT OF THE MEDIUM-TERM
MANAGEMENT PLAN
In March 2002, the Mitsubishi Estate Group announced
its medium-term management plan for the three-year
period beginning in the fiscal year ending March 31, 2003.
As the functions of ownership and management of realestate continue to separate due to the collapse of theAssessing the Situation

myth of ever-higher land prices and the birth of the Japan-

With the demise of the myth of ever-rising land prices
and the birth of J-REITs, real estate companies need tochange their business models

ese Real Estate Investment Trust (J-REIT), it has become
necessary for real estate companies to change their business models.
Within the basic mission of the Mitsubishi EstateGroup to “Create a Truly Meaningful Society ThroughDevelopment is the key to the
Mitsubishi Estate Group’s growth

Urban Development,” we recognize that development is
at the heart of future business expansion in this constantly
changing business environment. And through our threebasic management directives—increase corporate value

Management Directions

based on cash flow, instill the principle of “customers
first” to survive in a competitive market, and pursue col-•Synchronization of the asset and non-asset businesses

laborative management to realize higher added value—we•Strengthening of asset solution functions•Strengthening of management systems

aim to increase the value of the entire Group.

BUSINESS STRATEGY
Building Business operations will complete the
Marunouchi Building, The Industry Club of Japan and
Mitsubishi Trust and Banking Building Development Project, and the Tokyo-Station Marunouchi North-Entrance
Development Project during the current management
plan. The contribution from these new buildings and cost
reductions in existing buildings will increase the profitability of Building Business operations, and by selling off
unprofitable buildings we aim to optimize our asset portfolio.
Residential Development operations will focus on
high-rise, large-scale condominiums in comfortable

4 MITSUBISHI ESTATE CO., LTD.

environments with convenient common facilities, andproperties in urban areas with short-term development
projects. This management plan includes projects such as
the M.M. Towers located in the Minato Mirai 21 district inYokohama, a high-rise condominium that will contributeto profitability.
Urban Development and Investment Management
operations are focusing on the business of developing
properties for real estate investors such as J-REITs. In
addition, through Mitsubishi Jisho Investment Advisors,
Inc., which was established in September 2001, we arestrengthening our asset management solution functions

Mid-term Targets(Billions of yen)800

in order to resolve any real estate difficulties faced by our

723.0

customers.
International Business operations are expecting
increased revenues from the completion of the Paternos-

EBITDA up 16%
02/3
02/3
05/3
05/3

¥146.2 billion¥170.0 billion

700
631.6
600

ter Square Redevelopment Project in London in 2003 andthe turnover of tenants in our New York properties. We
also expect a rapid recovery, led by cost reductions, in the
U.S.-centered global real estate brokerage business.

Revenue fromoperations up 14％
02/3
02/3
05/3
05/3

¥631.6 billion¥723.0 billion

500

400

In the architectural and engineering, custom-built housing, hotel and other segments we are working to improve
operating efficiency through cost reductions and increas-

Operating income 300
up 43%
02/3
02/3

es in profitability.

05/3
05/3

¥76.9 billion¥110.0 billion

200

170.0

146.2
100

76.9

110.0

A CLOSING WORD TO OUR SHAREHOLDERS
I believe that management means being responsive tochange. With the keywords of “speed” and “flexibility” in0
2002/3

2005/3

mind, and by properly responding to the rapidly changing
management environment, we will steadily realize the management plan outlined above. It is my intention to make theutmost effort to increase the value of the Company.

August 2002

Shigeru Takagi
President

ANNUAL REPORT 2002 5

SPECIAL FEATURE
OPENING OF THE MARUNOUCHIBUILDING AND THE MARUNOUCHIREDEVELOPMENT PROJECT➀ First-floor shopping zone
➁ First-floor atrium “MARUCUBE” (interior)➂ First-floor atrium “MARUCUBE “(exterior)➃ Entrance along Gyoko Dori➄ Exterior view of Marunouchi Building

➀
➁
➂
➃

6 MITSUBISHI ESTATE CO., LTD.

➄

THE FIRST PHASE OF THE MARUNOUCHIREDEVELOPMENT PROJECT: OPENING OF THE
MARUNOUCHI BUILDINGIn 1998 Mitsubishi Estate began work on the Marunouchi
Redevelopment Project, investing ¥500 billion over ten
years to rebuild six buildings and renovate others in the
Marunouchi district. As the first phase of the project, theMarunouchi Building will open on September 6, 2002. At
37 stories above ground and 180 meters at its tallest point,
this building gives form to the vibrant urban developmentenvisioned for the Marunouchi of the future.
With the redevelopment of the Marunouchi district,Mitsubishi Estate aims to increase the added value of thecity by strengthening its services not just in the construction of buildings, but also in the support and service
functions for tenants. Specific measures include the establishment in April 2001 of the “Marunouchi Brand
Management Office,” a dedicated branding section that is
the first of its kind in the real estate industry. The concept
envisioned for “Marunouchi” was decided as “a district
thriving with more interaction than any other in the world,”
and through the encouragement of such interaction, Mitsubishi Estate is providing high value-added business
opportunities and “total quality life” for company employees and visitors. This brand strategy heightens the appealof the city and sets it apart from other business areas.

THE MARUNOUCHI REDEVELOPMENT PROJECT
In addition to the Marunouchi Building, work is proceedingon the rest of the redevelopment project, with The Industry
Club of Japan and Mitsubishi Trust and Banking Building
Development Project due to be completed in February
2003 and the Tokyo-Station Marunouchi North-Entrance
Development Project in August 2004.
Plans are also progressing with the rebuilding of theTokyo Building and the Hibiya Park Building, which should
be completed in the fiscal year ending March 31, 2007. The
area on the side of Tokyo Station that includes Marunouchi,
Otemachi and Yurakucho where these buildings are located has been designated by the city government as a
special floor area ratio district, allowing buildings in that district to exceed the maximum amount of permitted floor
space by transferring the unused air rights from buildingsthat do not use their full allotment. Because there isunused space above the historical Tokyo Station building, aportion of the floor area has been allocated to the Tokyo
Building. Applying the idea of substitutional use, furthermore, the Hibiya Park Building is being designed with afocus on hotel use, while the Tokyo Building will containmostly office space.
The Shin-Marunouchi Building, the sixth in the project, isscheduled to be completed in the fiscal year ending March
31, 2008. Mitsubishi Estate is continuing with the reconstruction of buildings in the Marunouchi district as it plans
for the continued revitalization of district functions.

Overview of the Marunouchi Building Facilities
First-floor atrium “MARUCUBE”
A 30-meter cubical atrium facing Marunouchi
Naka-dori, the main thoroughfare, will serve as astation to disseminate information about the district. As the district gateway for people visiting
Marunouchi, this will be the venue for industry
promotions, concerts and art events, a space
overflowing with the excitement of the latest news
and information from around the world.
Commercial facilities(B1 to 6th, 35th and 36th floors)
There will be commercial space for approximately
140 stores, 100 retail and service outlets and 40
restaurants and cafés. As the heart of the enter-tainment area of the district, these will operate 365
days a year.
From the B1 level to the 4th floor will be the
shopping zone, a variety of domestic and international retail stores. There will be an array of storesfrom fashion and sundries to foods, each with its
own theme and continually renewed message.
The 5th and 6th floors will be designated forrestaurants, centered around an open plaza filledwith light from the skylights above. The 35th and36th floors will feature restaurants with spectacular views and will be suitable for business use.
Interactive Zone (7th and 8th floors)
The 7th and 8th floors will be an “Interactive Zone”

where people can gather and interact. There will
be a multipurpose hall on the 7th floor with acapacity for 400 persons and an assortment ofmeeting rooms on the 8th floor. The hall will beequipped with the latest audio-visual and IT facilities, an ideal space for presentations.
Office space (9th to 34th floors)
Total floor space is approximately 100,000 square
meters, and the ceiling height of a standard flooris 2.8 meters. Offices are equipped with the highest standards of IT facilities, with approximately
2,000 square meters of open space without pillars.
Tenants will mainly be leading companies thatlook to be major players in the next generation.

ANNUAL REPORT 2002 7

Marunouchi City Campus
Established in cooperation with Keio
University, the city campus has educational facilities in the businessarea. A cutting-edge educational
environment, it provides a stage forthe creation of new business models
and lifestyles.

A street gallery on Naka Dori in Marunouchi featuring Bound Rock by
Tomihisa Handa (above), and They Laughed at Columbus by Benbow
Bullock (right), both from the collection of The Hakone Open-Air Museum

a, Ch

iyod

a Lin

e

Hibiya, Toei Mita Line

15

Naka Dori

6

2

3

9

4

Yur
a

ku

ch

o

Tokyo International
Forum

10
12

4

6

2

17
JR Yokosuka Line13

Otemachi,Hanzomon Line

19

16
1

11

20

Otemachi, Tozai Line

7
Yurakucho, Yurakucho Line

Tokyo, JR Keiyo Line

Hib

iya

, Hib
iya

14

18

Eitai Dori

8

Otemachi, Chiyoda Line

Otemachi, Toei Mita Line

Gyoko Dori5

5

Hibiya Dori

Nijubashimae, Chiyoda LineBabasaki Dori

Lin
e

Hibiy

Imperial PalaceHarum
i Dori

Hibiya Park
1

Tokyo,
Marunouchi LineTokyo
Central
Post
OfficeTokyo,JR Sobu Line

3

Gin
za,
Ma
run
ou
chi
Lin
e

runouchi Line

Otemachi, Ma

21

Tokyo

22

24

23

Leasing Buildings
1
2
3
4
5
6
7
8
9

Hibiya Kokusai Building
Yurakucho Denki Building
Yurakucho Building
Shin-Yurakucho Building
Kokusai Building
Shin-Kokusai Building
Shin-Nisseki Building
Fuji Building
Shin-Tokyo Building

8 MITSUBISHI ESTATE CO., LTD.

Reconstruction Projects

Start of Construction

Completion

April 1999

August 2002

10 Furukawa Building
11 Mitsubishi Shoji Building
12 Marunouchi Yaesu Building

17 Mitsubishi Building

1

Marunouchi Building

18 Tokyo Ginko Kyokai
Building

2

The Industry Club of Japan and Mitsubishi Trust December 2000
and Banking Building Development ProjectFebruary 2003

13 Tokyo-Mitsubishi Ginko
Building

19
20
21
22
23
24

3

Tokyo Station Marunouchi North-Entrance
Development Project

June 2001

August 2004

4
5
6

Tokyo Building
Hibiya Park Building
Shin-Marunouchi Building

2004*
2004*
2005*

2007*
2007*
2008*

14 Kishimoto Building
15 Mitsubishi Denki Building
16 Mitsubishi Juko
Building

Togin Building
Otemachi Building
Shin-Otemachi Building
Nippon Building
Nippon Steel Building
Kawatetsu Shoji Building*Years indicate fiscal years ending March 31.

DISTRICT BRAND STRATEGY
STRENGTHENING BUSINESS SUPPORT FUNCTIONS
Seeking to create business opportunities with a highdegree of added value, the Shin-Marunouchi Building offers
the “Shinmaru Conference Square” for all kinds of meetings, while the Yurakucho Building offers “Business Center
Yurakucho,” 28 small offices with secretary services, acommon reception area and meeting rooms. These areused mainly by foreign companies as a base for startups,
satellite offices or marketing.
Marunouchi Direct Access Co., Ltd. has laid a fiber-optic
network connecting most of the buildings in the area. The
Marunouchi district has the most developed fiber-optic
communications environment in Japan, and tenants in the
district are able to utilize services from a variety of communication providers. From May 2002 Mitsubishi Estate beganproviding offices fully supported by IT, a service capitalizingon this communications environment. By using the IT outlet
plugs equipped in the office, tenants are able to outsource IT infrastructure and operations management,
making it possible to drastically reduce costs relating to IT setup and administration.

SUPPORT FOR VENTURE BUSINESSES AND
ALLIANCES WITH ACADEMIA
Mitsubishi Estate has also launched into support and cultivation of venture businesses, establishing “Marunouchi
Frontier,” a network of ten companies that specialize in the
support of venture business.
As an alliance with academia, in April 2001 Mitsubishi
Estate opened the Marunouchi City Campus in cooperation
with Keio University as part of a plan to expand the educational facilities in the business square. Also established was“The Marunouchi Academic Suites,” a place for university
research departments on the 9th floor of the Marunouchi
Building. Tenants include the Harvard Business School
Japan Research Office, University of Tokyo Graduate
School of Economics, and the Stockholm School of Economics European Institute of Japanese Studies, furthering
corporate interaction with academia.
A DISTRICT TO ENJOY OUTSIDEOF THE OFFICE AS WELL
Offering total quality life, the ground floors of buildings facing Marunouchi’s Naka Dori, the main thoroughfare, arebeing converted into shops. There are approximately 40
shops along this street—various brand outlets, restaurants
and cafés—turning Marunouchi into a lively district.
Over 1,000 people a day enjoy the Marunouchi Café, anopen space unveiled in 1998 and managed by Mitsubishi
Estate. A website for the area, Marunouchi.com, also provides a variety of information and promotes interaction both
real and virtual.

Marunouchi Café

ANNUAL REPORT 2002 9

BUSINESS INFORMATIONBUILDING BUSINESSOPERATIONSRevitalizing Marunouchi
and Increasing Profitability➀ Tokyo Building Reconstruction ProjectCurrently under planning and expected to becompleted in the fiscal year ending March 31,
2007, this will be the first building in Japan totake advantage of regulations allowing unused
air rights to be transferred from other sites in the
district to increase floor space.
➁ Sanno Park Tower
Completed in January 2001, this office building is
44 stories above ground and has a height of 194
meters. A large-scale office building in a prime
location in the urban center.

➀ ➁➂➂ Rinku Premium Outlets
A center for shopping operated by Chelsea Japan
Co., Ltd. in a partnership between U.S.-based
Chelsea Property Group, Inc. and Nissho Iwai
Corporation. The center was expanded in March
2002, making it the largest of its kind in Japan.

10 MITSUBISHI ESTATE CO., LTD.

The Building Business Division handles leasing and property management of office buildings, management oflarge-scale shopping centers, operation of parking lots, andoperation of heating and cooling services throughout
Japan, enhancing the capabilities of a city from the standpoint of urban management.

THE MARUNOUCHI REDEVELOPMENT PROJECT
At the forefront of building business operations is the redevelopment of the Marunouchi district, a project to enhance
the appeal of the area through the rebuilding and largescale renovation of office buildings. Six buildings will becompletely rebuilt, including the Marunouchi Building,which will open on September 6, 2002, and The Industry
Club of Japan and Mitsubishi Trust and Banking Building
Development Project, which will be completed in February
2003. We expect all six buildings to be completed by thefiscal year ending March 31, 2008.
Several buildings are currently being renovated. Renovation for one of these, the Shin-Otemachi Building, wascompleted in July 2001. Mitsubishi Estate’s redevelopment of Marunouchi involves not only the rebuilding andrenovation of buildings, but also extends to services andamenities intended to provide a complete brand strategy
for the district.

IMPROVING EFFICIENCY
As part of our efforts to strengthen the property management function of the Building Business Division, thedivision will switch to a new management structure whereby a section of the Marunouchi area that includes the

Marunouchi Building will be managed by Mitsubishi Estate
Building Management Co., Ltd. This will cut building management costs and strengthen the property management
functions of the Group, allowing us to more aggressively
pursue external orders.
The division is also working to improve the efficiency
of its assets, and in February 2002 sold its share of the
Kanazawa Park Building. Furthermore, through a combination of land revaluation and a loss on impairment ofproperty and equipment undertaken in the fiscal year ended March 31, 2002, we have brought the declared valueof our property holdings much closer to their market value. We are also planning a review of our property
portfolio by selling certain properties to further increase
asset efficiency.

SHOPPING CENTER BUSINESSThe Building Business Division operates shopping centersin Tokyo and Yokohama, among others, and work is also
proceeding on a plan to commercialize Naka-dori, the main
thoroughfare of Marunouchi, as part of its redevelopment.
Mitsubishi Estate is also in a partnership with U.S.-based
Chelsea Property Group, Inc. and Nissho Iwai Corporation
to form Chelsea Japan Co., Ltd., which operates outlet
malls in Gotemba in Shizuoka Prefecture and in Izumisano
in Osaka Prefecture. Floor space was increased at Rinku
Premium Outlets in Osaka in March 2002, making it thelargest outlet mall in Japan. Work is also scheduled to
begin on Sano Premium Outlets in Sano, Tochigi Prefecturein the spring of 2003, as part of the continued expansion of
the shopping center business.

ANNUAL REPORT 2002 11

RESIDENTIAL DEVELOPMENTOPERATIONSContinued Growth in Condominiums

New Mitsubishi Estate condominiums on the market➀ W Comfort Towers
Now under construction in Shinonome in Tokyo’s
Koto Ward, the W Comfort Towers will be among
the foremost high-rise condominiums in Japan,
with 1,149 residence units available.
➁ Ginza Tower
The Ginza Tower is a 25-story building currently
being constructed in the Ginza 1-chome district,with 180 condominiums offering a fixed-term landleasehold approximately 30% cheaper comparedwith general freehold ownership housing.

➀ ➂➁➂ Izumi Park Town
Encompassing 1,070 hectares in total area, Izumi
Park Town was first established for developmentin Sendai, Miyagi Prefecture in 1972 and is one of
the largest multifunctional developments in the
country, with a planned population of approximately 50,000 residents.

12 MITSUBISHI ESTATE CO., LTD.

(units)

02

3,087

01

2,353

00

1,984

99

1,075

98

983

The Residential Development Division, in its aim to fulfill its
role as a provider of ideal living environments, develops
and markets condominiums, single-unit homes and residential land, as well as engages in businesses such as
condominium administration and consulting services forthe optimal use of real estate.

FOR THE FIRST TIME, MORE THAN
3,000 NEW CONDOMINIUMSAs a result of the positive effects of low interest rates on
housing loans and tax measures promoting residence purchasing, market conditions for condominiums experienced
a favorable shift, and in the fiscal year ended March 31,
2002, the Company was able to bring to market more than
3,000 new condominiums for the first time in its history,
concentrating its efforts in popular areas. Furthermore,gross profit margin for the condominium business continued its year-on-year improvement, reaching approximately
20% for the fiscal year under review, owing to the implementation of an integrated site acquisition-to-productplanning system that shortens the development period andstrengthens marketing power, as well as improvements in
product planning such as cooperation with other types ofbusinesses.

The division is focusing its efforts in the condominium
business on high-rise, large-scale condominiums with
spectacular views and featuring shared facilities withpleasant surroundings, as well as convenient condominiums in urban centers with short-term development
periods. In the fiscal year under the review, furthermore,
we continued our tradition of providing spacious andaffordable housing by launching condominiums with afixed-term land leasehold in the Ginza district in Tokyo’s
Chuo Ward and Funabashi City in Chiba Prefecture offering price levels approximately 30% lower than general
freehold ownership housing.

ENSURING HIGH-QUALITY CONDOMINIUMSTHAT ANSWER CUSTOMER NEEDS
Mitsubishi Estate is pushing forward with the introduction of
its unique housing performance-quality indication system.
This system was created to release easy-to-understanddata to customers regarding quality standards from thedesign stage through construction and completion. It uses
design-quality evaluation reports published by rating agencies as well as the Company’s own performance-quality
indication index and disclosure reports.

ANNUAL REPORT 2002 13

ARCHITECTURAL DESIGN &ENGINEERING OPERATIONS
Establishing Brand Presence asa Leading Company
in the Design and Engineering Industry

Mitsubishi Estate’s Architectural Design & Engineering
Division is engaged in the business of design and administration of construction and engineering projects, services
that support building renovation and urban and regional
development, as well as comprehensive consulting. Formerly a division of Mitsubishi Estate, Mitsubishi Jisho
Sekkei Inc. was made an independent subsidiary andbegan operations in June 2001. While making full use of its
design and technology capabilities to support the Group’sbusiness as a comprehensive developer, Mitsubishi Jisho
Sekkei has aggressively sought to expand since gaining an
independent structure, increasing orders from new customers such as real estate developers and establishingbrand presence as a leading company in the design andengineering industry.
Our policy as we move forward is to encourage positive
exchanges with other major design companies both insideand outside Japan, and as a part of that policy in 2001 weformed an alliance with the major American design andengineering firm Sasaki Associates, Inc. Through the interchange of expertise with a company strong in the fields oflandscape design, campus planning, and urban design, weare seeking to strengthen our operational structure in thefield of environmental design centered on landscaping andcreate links to new business overseas.
Furthermore, to address environmental issues weacquired ISO 14001 certification in January 2002 and are
integrating operations with the ISO 9001 certification
already received as we work in an original way toward
increasing customer satisfaction and harmonious existencewith the global environment.
Targeting the interior design sector, MEC Design
International Corporation not only provides interior design
services but also functions as a strategic asset in the fieldof facility management, enabling the Group to form an optimized structure boasting multidimensional capabilities.
➀ ADK SHOCHIKU SQUARE
Scheduled completion date: October 2002
Two floors below ground, 23 above
Owner: Shochiku Co., Ltd.
➁ NIHON TEREBI TOWER
Scheduled completion date: April 2003
Four floors below ground, 32 above
Owner: Nippon Television Network Corporation (NTV)➀➁

14 MITSUBISHI ESTATE CO., LTD.

URBAN DEVELOPMENT AND
INVESTMENT MANAGEMENTOPERATIONS

Higashi-Azabu Residence (tentative)
Mitsubishi Estate entered the service apartment
business in April 2002 with the establishment ofAscott International Management Japan Co., Ltd. a
joint venture with Singapore-based the AscottGroup Limited to manage and operate service
apartments in Japan. The Higashi-Azabu Residence
service apartment is currently under construction in
Minato-ku, with completion planned for February
2003.

Expanding Business Along
the Two Axes of Development
and Management

The fundamental strategy of the Urban Development andInvestment Management Division is to respond to theneeds of institutional and individual investors for incomegenerating real estate investments by providing superior
growth-oriented real estate development and management
services. Under this strategy, the division is pushing forward with a two-phase system encompassing planning,
implementation and selling functions in development business and administration functions in the managementbusiness.

Although development operations form the core of Mitsubishi Estate’s identity, the Company plans to expand
beyond its traditional objective of long-term ownership toform a development business that generates capital gains
through sales in the market following project completionand start of operations. The Company is planning to invest¥10 billion on an annual basis through its equity base.
At the same time, we are pursuing fee-based management services through the operations of Japan Real Estate
Asset Management Co., Ltd., the flagship management
vehicle for Japan Real Estate Investment Corporation, thefirst J-REIT company listed on the Tokyo Stock Exchange,
as well as Mitsubishi Jisho Investment Advisors Inc.,
recently established as a comprehensive real estate investment advisory company.
Recently a tremendous opportunity has emerged in
response to the challenges of renewing urban redevelopment policy, reforming the tax and corporate accounting
systems and boosting growth in the J-REIT fund market.
To capitalize on this business opportunity, the division’s
development and management functions will work together to respond to the social and economic needs required
for the revitalization of real estate investment markets andurban redevelopment.

Overview of Urban Development and Investment Management Operations

Mitsubishi Estate
Urban Development &Investment Management
Division

Private real estate
investment market

Public real estate
investment market
Japan Real Estate AssetManagement Co., Ltd.

Urban Development& Investment Department

Urban Development
Promotion Department

Mitsubishi Jisho
Investment Advisors, Inc.

* Development of incomegenerating real estate* Consultation on andcoordination of urban
development and related
business* Management of incomegenerating real estate, advisoryand brokerage services* Real estate
investment fundmanagement

ANNUAL REPORT 2002 15

➀ ➁➀ Paternoster Square Redevelopment Project
Four complexes of offices and retail outlets being
built on a 15,000 square-meter site in the City of
London, the project is due to be completed in thefirst half of the fiscal year ending March 31, 2004.

INTERNATIONAL BUSINESSOPERATIONS
Construction Commenced on
Paternoster Square
Redevelopment Project➁ 777 Tower
Designed by Cesar Pelli, this office building
located in Los Angeles, California was completed
in 1991.

The International Business Division leases the office buildings it owns in such cities as New York and Los Angeles,and conducts real estate development across the UnitedStates and in London through the Rockefeller Group, Inc.
(RGI). In addition, the division operates a global network ofcomprehensive real estate services centered on the realestate brokerage services of RGI subsidiary Cushman &Wakefield, Inc.
After commencing construction in 2001, the Company isaiming to complete the Paternoster Square Redevelopment Project in London in the first half of the fiscal year
ending March 31, 2004. The project is being built on a

16 MITSUBISHI ESTATE CO., LTD.

15,000 square-meter site in the City of London next to St.
Paul’s Cathedral and will consist of office buildings, retail
outlets and leisure accommodations in four complexes(82,000-m2 total floor space), whose tenants will include
the London Stock Exchange, Goldman Sachs Internationaland CB Hillier Parker.
Furthermore, construction has been partially completed
on a midtown New York property on 745 Seventh Avenue(32 floors, 98,000-m2 total floor space). This project was codeveloped by RGI and Lehman Brothers Inc., which started
to move in from January 2002.

CUSTOM-BUILT HOUSINGOPERATIONSThe Launch of “New Aerotech”

The Custom-Built Housing Division seeks to supply thekind of quality housing that is the foundation of a rich life.
Through Mitsubishi Estate Home Co., Ltd, we carry out
contracts for the building of homes for both individuals andhousing development companies. Our mainstay product is
two-by-four, single-unit houses. In January 2001 welaunched a new brand, “Mitsubishi Home,“ in a move toposition ourselves as the representative homebuilder ofthe Mitsubishi Group. From contract to post-purchase service, we are striving through close communication withcustomers to build homes that will satisfy our customers
for years to come.
In April 2002 Mitsubishi Estate Home launched “NewAerotech,” an upgraded and more efficient model of
Aerotech, the central heating and cooling system that has
been installed in over 2,500 homes. Also in April 2002 webegan marketing “u:D,” a new kind of urban home withfashionable and stylish designs to expand our product lineup and appeal to new customers.
The condominium and house renovation business saw
increased orders, and is set to grow into a pillar of thebusiness second only to custom-built houses.
We expect the difficult business environment to continue in the future, and will work to revive our businessperformance by reexamining cost structures such as marketing and administrative expenses, and by lowering the
primary costs of building.

➀ “u:D” Exterior
A new type of home that maximizes the potentialof the building lot. Leading designers make proposals for innovative homes.
➁ “u:D” Interior
Personalized living and dining rooms where families can relax and friends can visit.

➀➁

ANNUAL REPORT 2002 17

HOTEL BUSINESS OPERATIONSThe Royal Park Shiodome Tower
to Open in July 2003

In the Hotel Business Division, the hotel managementcompany Royal Park Hotels and Resorts Co., Ltd. has
integrated its administration and management functions in a move to improve the efficiency of each
hotel, accumulate administrative expertise, andimprove the level of management. Hotels in the Royal
Park Hotels chain have spread to eight locations
including Tokyo, Yokohama and Sendai, and a second
Tokyo location is due to begin operations in July 2003,
the Royal Park Shiodome Tower in the Shiodome district.
The Royal Park Shiodome Tower will have 490
guest rooms and aims to be a new kind of hotel
focused on lodging but with convenience facilities
such as dedicated meeting rooms, laundry corners, aconvenience store, business service center and arelaxation spa. With the completion of this hotel, ourhotel chain will consist of nine hotels with a total of
2,543 guest rooms.
We have also moved into the new business ofoperating conferencing facilities in the Marunouchi
district. This new business includes the managementof rental conference rooms and event halls, drawing
on our previous experience with other hotel services.
Moving forward, we plan to strengthen the functions of the hotel chain through the exchange of
personnel and sponsoring simultaneous events ateach hotel, as well as increasing the strength of theRoyal Park Hotels brand through hotel consulting andcontracted management of independently operated,
luxurious hotels in the downtown area.

➀➁➀ Royal Park Shiodome Tower
Located in Media City Shiodome, this new styleof hotel will be created around the concepts ofstylish space, a convenient environment andflexible service.
➁ Yokohama Royal Park HotelThis hotel is located in the high-rise section of
the Landmark Tower Yokohama in the Minato
Mirai 21 district. Guest rooms on the 52nd to 67th
floors are the highest in Japan at 210 meters,
offering scenery that changes with the direction,season and time of day.

18 MITSUBISHI ESTATE CO., LTD.

S

RECREATIONAL FACILITYOPERATIONS
Aggressive Expansion of
Suburban Fitness Club Facilities

In response to growth in leisure time and the advent of a
rapidly aging society, the Recreational Facility Division continues to expand its business in such facilities as fitness
and golf clubs.
Our fitness club chain, Liv Sports Co., Ltd., operates
seven branches of the Liv Fitness Club in the Tokyo metropolitan area. In recent years the chain has been
aggressively proceeding with openings of large-scale suburban clubs to satisfy expectations of increased demand
among families, and launched branches in Sagamihara,
Kanagawa Prefecture in August 2001 and Asaka, Saitama
Prefecture in May 2002.
While we are implementing such measures to augment facilities in our golf course operations as theintroduction of electromagnetic induction-guided carts at
our Shizuoka Prefecture-based Higashi-Fuji Country Cluband Fuji International Golf Club, we are also progressing
with efforts to improve management efficiency amid continued severe operating conditions through Groupwide
cost reductions.
In addition, the division is developing urban recreational
facilities business for such sports as “Futsal” (five-on-fivesoccer) and membership-based tennis clubs.

➀ Liv Fitness ClubThis large-scale Liv fitness club opened in May
2002 features a 3,050-m2 training gym and a variety of relaxation facilities. An all-around club
complete with general-purpose spaces and otheramenities.
➁ Resort Park Onikobe Golf Course
An 18-hole course located on a sprawling 144hectare resort where one can enjoy thedistinctive features of the front and back nine.

➀➁

ANNUAL REPORT 2002 19

FINANCIAL REVIEWSUMMARY
In the fiscal year ended March 31, 2002, revenue andprofit in the building segment increased, but the realestate brokerage segment saw declines in revenue andprofit due to the effects of the economic downturn in the
United States.
Over the last two fiscal years, in the creation of ahealthy balance sheet, Mitsubishi Estate recorded valuation losses on inventories and transferred non-performing
and under-performing fixed assets to inventories, recording valuation losses on those assets. At the end of the
fiscal year ended March 31, 2002, with the aim ofstrengthening its financial position further Mitsubishi
Estate revaluated its land at fair value in accordance withthe “Enforcement Ordinance for the Law Concerning
Revaluation Reserve for Land” and its amendments, aswell as revalued property and equipment on incomegenerating properties such as leasing buildings. This clears
away unrealized capital losses on land and properties on

a consolidated basis, and completes the restructuring of
the balance sheet.
ANALYSIS OF REVENUE
Revenue from operations for the fiscal year ended March
31, 2002 was ¥631,564 million (US$4,739.7 million), an
increase of 0.1% from the previous fiscal year. Breakdown by segment and the background for these results
are discussed below.
The building segment, the building leasing operationof Mitsubishi Estate, saw an increase in rental fees
resulting from an improvement in the vacancy rate, andrising revenue at subsidiary Rockefeller Group, Inc. (RGI)
that contributed to operating revenue of ¥327,422 million(US$2,457.2 million), an increase of 3.0% from the previous fiscal year. Revenue from the residential development
segment increased 3.3% to ¥137,350 million (US$1,030.8
million) due to an upturn in condominium sales despite
declining revenue from consignment business, and sales

Buildings Segment
Revenue for the buildings segment
comprises the leasing and management of office buildings in Japan, in
the United States through the Rockefeller Group, Inc., parking lot
operations, and district heating andcooling.

Revenue from Operations (Millions of yen)
2002

327,422

2001

317,906

2000

300,712Residential Development Segment
Revenue for the residential development segment comprises theconstruction and sale of condominiums and single-unit homes;
development and sale of residential,
resort and commercial lots; management of condominiums and homes;
and town development.

Revenue from Operations (Millions of yen)
2002

137,350

2001

132,916

2000

102,845

Architectural & Engineering Segment
Revenue for the architectural & engineering segment comprises thedesign and project supervision ofbuilding and civil engineering construction through Mitsubishi Jisho
Sekkei Inc., and interior and building
design services through MEC Design
International Corporation.

20 MITSUBISHI ESTATE CO., LTD.

Revenue from Operations (Millions of yen)
2002

16,358

2001

15,616

2000

25,624

of homes and residential lots. Revenue from the architectural and engineering segment increased 4.7% to¥16,358 million (US$122.8 million) due to progress onlarge-scale projects. Revenue from the real estate brokerage segment fell 8.8% to ¥79,691 (US$598.1 million)
due to a decline in revenue at Cushman & Wakefield,
Inc., a subsidiary of RGI, which is feeling the effects ofthe business slowdown in the United States, and reflecting the economic effects in the Japanese market on
brokerage business. Revenue from the custom-built
housing segment declined 16.8% to ¥30,898 million(US$231.9 million) due to falling revenues at Mitsubishi
Estate Home Co., Ltd. Revenue from the hotels segment
fell 6.6% to ¥30,450 million (US$228.5 million), and revenue from the other segment increased 20.6% to¥22,187 million (US$166.5 million) due to rising revenue
from the telecommunications business of a subsidiaryof RGI.

ANALYSIS OF INCOME
Operating income declined 4.6% to ¥76,921 million(US$577.3 million). The decline in income is mainly aresult of the effect of the performance of Cushman &Wakefield on the real estate brokerage segment, eventhough operating income from the building segment
rose.
OTHER INCOME AND EXPENSES
For the fiscal year under review, interest and dividend
income totaled ¥2,622 million (US$19.7 million) and interest expense totaled ¥32,639 million (US$244.9 million).
Loss on impairment of property and equipment
totaled ¥156,365 million (US$1,173.5 million). There was¥9,680 million (US$72.6 million) for valuation loss oninventories and ¥4,048 million (US$30.4 million) for unrealized loss on securities.

Real Estate Brokerage Segment
Revenue for the real estate brokerage segment comprises brokerage
operations through Mitsubishi Real
Estate Services Co., Ltd. and brokerage operations through Cushman &Wakefield Inc.

Revenue from Operations (Millions of yen)
2002

79,691

2001

87,364

2000

73,286

Custom-Built Housing Segment
Revenue for the custom-built housing segment derives from thecontract construction of custom-built
housing through Mitsubishi Estate
Home Co., Ltd.

Revenue from Operations (Millions of yen)
2002

30,898

2001

37,148

2000

35,668

Hotels Segment
Revenue for the hotels segment
derives from the operation of Royal
Park Hotels.

Revenue from Operations (Millions of yen)
2002

30,4502001

32,604

2000

32,952Other Segment
Revenue for the other segment
comprises the management ofsuch leisure-related operations as
golf courses and fitness clubs, realestate appraisal, and telecommunication operations through theRockefeller Group, Inc.

Revenue from Operations (Millions of yen)
2002

22,187

2001

18,395

2000

18,107

ANNUAL REPORT 2002 21

this was principally due to the non-cash items of depreciation and amortization, valuation loss on inventories andloss on impairment of property and equipment. Cash
was also provided by decreases in notes and accounts
receivables and inventories.

NET INCOME
Income before income taxes and minority interests
totaled a loss of ¥126,848 million (US$952.0 million). Net
income fell ¥90,890 million from the previous fiscal year
to a net loss of ¥71,058 million (US$533.3 million), andnet income per share ended at a loss of ¥54.70(US$0.41).

Cash flows from investing activities
In the fiscal year under review, cash used in investing
activities was ¥120,532 million (US$904.6 million), down
¥71,363 million from the previous fiscal year. This
¥120,532 million is mainly due to the construction of the
Marunouchi Building in the course of the Marunouchi
Redevelopment Project, payments for the acquisition ofinterests in the Sanno Park Tower and the Aoyama Building, and renewal of existing buildings owned by
Mitsubishi Estate. Also, to utilize idle funds the Company
made purchases of interest-bearing bonds and investment in the J-REIT of Japan Real Estate Investment
Corporation. Capital expenditures were also made for thePaternoster Square Redevelopment Project in the United
Kingdom, an integrated development project by a foreignsubsidiary.

ANALYSIS OF FINANCIAL POSITION(1) Consolidated Cash Flows
Cash and cash equivalents for the fiscal year underreview (hereafter “cash”) declined 26.6% from the fiscal
year to ¥131,374 million (US$985.9 million) owing to thepurchase of property and equipment and investment
securities, redemption of corporate bonds, and repayment of long-term borrowings, despite increases in cashfrom corporate bond issuance and loans for short andlong-term borrowings.
Cash flows from operating activities
In the fiscal year under review, cash provided by operating activities was ¥104,106 million (US$781.3 million),
down ¥3,537 million from the previous fiscal year.
Although income before income taxes and minority interests was a loss of ¥126,848 million (US$952.0 million),

Revenue from Operations

Operating Income(Billions of yen)(Billions of yen)

Cash flows from financing activities
In the fiscal year under review, cash used in financing
activities was ¥35,150 million (US$263.8 million), down

Net Income(Billions of yen)

548.7

565.3

574.4

631.0

631.6

58.3

68.8

68.2

80.6

76.9

31.8

22.3

18.4

19.8

(71.1)

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

22 MITSUBISHI ESTATE CO., LTD.

MANAGEMENT INITIATIVES AND FINANCIAL
STRATEGIES
Mitsubishi Estate’s three-year business plan wasannounced in March 2002, setting the goal of EBITDA(Earnings before interest, taxes, depreciation, and amortization) of ¥170 billion by March 31, 2005. This assumes
revenue from operations of ¥723 billion, operating
income of ¥110 billion, and an interest-bearing debt balance of ¥1,160 billion. Mitsubishi Estate will achieve its
goals through the management strategies of merging its
asset and non-asset businesses, strengthening assetsolution functions and strengthening management
systems.
The Mitsubishi Estate Group encourages management that places importance on shareholder value, andseeks to increase the value of the entire Group.

¥67,856 million from the previous fiscal year. This
¥35,150 million is mainly due to a net increase of shortand long-term borrowings, a net decrease for redemption
and issuance of corporate bonds, repurchase of bonds
and cash dividends paid.
(2) Consolidated Balance Sheets
In addition to the increases and decreases in assets andliabilities in operating, investing and financing activities
outlined above, during the fiscal year under review Mitsubishi Estate conducted a revaluation of land andrecorded an impairment loss on property and equipment,
valuation loss on inventories and an unrealized loss on
securities for investment, brought IMS Co., Ltd. underconsolidation as a subsidiary and removed Hokuriku
Estate Co., Ltd. from consolidation. As a result, assets
increased ¥500,532 million to ¥3,035,795 million(US$22,782.7 million).
Liabilities increased ¥184,412 million to ¥2,160,286
million (US$16,212.3 million) due to deferred income taxes, and minority interests increased ¥2,389 million to¥43,012 million (US$322.8 million). Shareholders’ equity
increased ¥313,731 million to ¥832,497 million(US$6,247.6 million), due to the recording of a land revaluation reserve and despite a decrease in an unrealized
gain in securities.

Net Income per Share

Shareholders’ Equity

Interest-Bearing Debt

(Yen)(Billions of yen)(Billions of yen)

24.51

17.19

14.18

15.26

(54.70)

454.1

459.6

440.7

518.8

832.5

1,164.9

1,275.8

1,219.8

1,271.5

1,260.2

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

1998

1999

2000

2001

2002

ANNUAL REPORT 2002 23

FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORTTo the Shareholders and Board of Directors of
Mitsubishi Estate Co., Ltd.:We have audited the consolidated balance sheets of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as ofMarch 31, 2002 and 2001 and the related consolidated statements of operations, shareholders’ equity and cash flows
for the years then ended, all expressed in Japanese yen. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion. As more fully described in Notes 2 and 16 to the consolidated financial
statements, effective in the year ended March 31, 2002, the Company has changed its method of accounting for revenue recognition policy concerning certain long-term projects from the completion method to the percentage ofcompletion method. Furthermore, as more fully described in Note 16 to the consolidated financial statements, effective in the year ended March 31, 2002, the Company has changed its classification of certain personnel expenses inthe segment information.
In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31, 2002 and2001, and the results of their operations and their cash flows for the years then ended in conformity with accounting
principles and practices generally accepted in Japan consistently applied during the period except for the changes ,with which we concur, as described in the preceding paragraphs.
As described in Note 1 to the consolidated financial statements, Mitsubishi Estate Co., Ltd. and consolidated subsidiaries have adopted new accounting standards for financial instruments including derivatives and retirement benefits
in the preparation of their consolidated financial statements for the year ended March 31, 2001.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March
31, 2002 are presented solely for convenience. Our audits also included the translation of Japanese yen amounts into
U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated financial statements.

Toyo & Co.
Tokyo, Japan
June 27, 2002
See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial statements of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries under Japanese accounting principles andpractices.

24 MITSUBISHI ESTATE CO., LTD.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
on the Consolidated Financial Statements

To The Board of Directors and Shareholders of
Mitsubishi Estate Co., Ltd.

We have audited the consolidated balance sheets of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as ofMarch 31, 2000 and 1999, and the related consolidated statements of income, shareholders’ equity, and cash flows foreach of the three years in the period ended March 31, 2000, all expressed in yen. Our audits were made in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the consolidated
financial position of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries at March 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31,
2000, in conformity with accounting principles and practices generally accepted in Japan consistently applied during
the period except for the changes, with which we concur, in the method of accounting for prior service cost of the pension plan and in the classification of certain expenses related to the hotel business in the statement of income as
described in Note 2 to the consolidated financial statements, and in the grouping of business segments separately presenting brokerage segment from sales segment as described in Notes to segment information in Note 16 to theconsolidated financial statements.
As described in Note 1 to the consolidated financial statements, Mitsubishi Estate Co., Ltd. adopted new accounting
standards for tax-effect accounting in the preparation of its consolidated financial statements for the year ended March
31, 2000.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March
31, 2000, are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar
amounts and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated
financial statements.

Century Ota Showa & Co.
Tokyo, Japan
June 29, 2000
See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial statements of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries under Japanese accounting principles andpractices.

ANNUAL REPORT 2002 25

CONSOLIDATED BALANCE SHEETS
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2002 and 2001

Millions of yen

Thousands of
U.S. dollars (Note 3)

2002

2001

2002

¥ 131,738
28,862
49,793(5,008)242,405
50,44032,147¥ 171,805
17,29456,088(5,248)251,11364,00823,636

Total current assets

530,377

578,696

3,980,315

Investments:
Investments in and advances tounconsolidated subsidiaries and affiliates
Investment securities (Note 4)

23,206
164,458

21,011
193,117

174,154
1,234,206

Other investments (Notes 6 and 7)
Total investments

161,633
349,297

148,781362,909

1,213,006
2,621,366

Less accumulated depreciation
Property and equipment, net

1,341,163
1,443,094
94,00057,6012,935,858(858,384)
2,077,474

660,136
1,403,110
88,29039,413
2,190,949(655,617)
1,535,332

10,065,013
10,829,973
705,441
432,278
22,032,705(6,441,906)
15,590,799

Intangible and other assets (Note 9)78,64758,326590,222¥3,035,795¥2,535,263$22,782,702

AssetsCurrent assets:
Cash (Note 14)
Marketable securities (Note 4)
Notes and accounts receivable—trade
Allowance for doubtful receivables
Inventories (Note 5)
Deferred income taxes (Note 9)
Other current assets

Property and equipment (Note 7):Land
Buildings and structures
Machinery and equipment
Construction in progress

Total assets
See accompanying notes to consolidated financial statements.

26 MITSUBISHI ESTATE CO., LTD.

$

988,653
216,600
373,681(37,583)
1,819,174
378,537
241,253

Liabilities, minority interests andshareholders’ equity
Current liabilities:
Short-term borrowings and current portion of
long-term debt (Note 7)
Notes and accounts payable—trade
Accrued income taxes (Note 9)
Advances and deposits
Accrued expenses and other current liabilities(Note 9)Total current liabilities
Long-term debt (Note 7)
Lease deposits
Employees’ retirement allowances (Note 8)
Deferred income taxes (Note 9)
Other noncurrent liabilities
Total liabilities
Minority interests
Shareholders’ equity (Note 10):
Common stock, without par value:
Authorized—1,980,000,000 shares;
Issued and outstanding—1,299,185,054 shares
Capital surplus
Land revaluation reserve
Retained earnings
Unrealized gain on securities
Foreign currency translation adjustments
Less treasury stock—113,913 shares in
2002; 6,533 shares in 2001
Total shareholders’ equity

Millions of yen

Thousands of
U.S. dollars (Note 3)

2002

2001

2002

¥ 300,432
52,401
4,679
57,034¥ 234,360
59,865
4,092
56,844$ 2,254,649
393,253
35,114
428,023

43,798458,344

61,178416,339

328,691
3,439,730

959,753
323,869
10,731
349,977
57,6122,160,286

1,037,144
319,464
10,198
146,736
45,993
1,975,874

7,202,649
2,430,537
80,5332,626,469
432,360
16,212,278

43,012

40,623322,792

86,534
115,216
399,769
182,529
48,709(144)
832,61386,534
115,216—
264,091
63,156(10,224)
518,773

649,411864,660
3,000,143
1,369,824
365,546(1,081)
6,248,503(116)
832,497(7)
518,766(871)
6,247,632¥3,035,795¥2,535,263$22,782,702

Contingent liabilities (Note 12)
Total liabilities, minority interests andshareholders’ equity
See accompanying notes to consolidated financial statements.

ANNUAL REPORT 2002 27

CONSOLIDATED STATEMENTS OF OPERATIONS
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002, 2001 and 2000

Millions of yen

Revenue from operations
Cost of revenue from operations
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Loss on impairment of property andequipment
Other, net (Note 13)
Income (loss) before income taxes andminority interests
Income taxes (Notes 1 and 9):
Current
Deferred
Minority interests
Net income (loss)

Net income (loss) per share:
Basic
DilutedCash dividends per share
See accompanying notes to consolidated financial statements.

28 MITSUBISHI ESTATE CO., LTD.

Thousands of
U.S. dollars (Note 3)

2002

2001

2000

2002

¥631,564
510,378
44,26576,921¥630,990
507,447
42,90480,639¥574,396
463,708
42,487
68,201$4,739,692
3,830,229
332,195
577,268

2,622(32,639)

3,777(36,436)

4,310(40,318)

19,677(244,945)(156,365)(17,387)(203,769)—(14,840)(47,499)—
4,355(31,653)(1,173,471)(130,484)(1,529,223)(126,848)

33,14036,548(951,955)

7,018(61,191)(54,173)

8,383
2,839
11,222

8,887
7,531
16,41852,668(459,220)(406,552)(1,617)¥(71,058)

2,086¥ 19,832

1,709¥ 18,421(12,135)$ (533,268)

Yen

U.S. dollars (Note 3)¥(54.70)—¥15.2614.84¥14.18—$(0.41)
—

8.00

8.00

8.00

0.06

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002, 2001 and 2000

Millions of yen

Commonstock

Capitalsurplus

Balance at March 31, 1999
Net income
Foreign currency translation
adjustments
Changes in consolidated
subsidiaries and companies
accounted for by the equity
methodCash dividends paid
Directors’ and statutory
auditors’ bonuses
Cumulative effect of adopting
tax-effect accounting (Note 1)
Balance at March 31, 2000
Net income
Foreign currency translation
adjustments
Cumulative effect of adopting
fair value accounting for
securities (Note 1)
Changes in consolidated
subsidiaries and companies
accounted for by the equity
methodCash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2001
Net loss
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Land revaluation reserve(Note 1)
Changes in consolidated
subsidiaries and companies
accounted for by the equity
methodCash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2002

¥86,534 ¥115,195——

Balance at March 31, 2001
Net loss
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Land revaluation reserve(Note 1)
Changes in consolidated
subsidiaries and companies
accounted for by the equity
methodCash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2002

$649,411—

Land
revaluation
reserve¥

Foreign
Unrealized
currency
Total
Retained
gain ontranslation Treasury shareholders’earnings securities adjustmentsstockequity— ¥257,854 ¥—
18,421——¥(7,871)—¥(9) ¥451,703—
18,421

—

—

—

—

—

(7,989)—(7,989)

—
—

—
—

—
—

2
(10,393)

—
—

—
—

—
—

2
(10,393)

—

—

—

(183)

—

—

—

(183)

—
86,534——
115,195————(10,830)
254,871
19,832————(15,860)
—

—
(9)
—

(10,830)
440,731
19,832

—

—

—

—

—

5,636

—

5,636

—

—

—

—

63,156——

63,156

—
—

21
—

—
—

(36)
(10,393)

—
—

—
—

—
—

(15)
(10,393)——
86,534———
115,216
—

—
—
—
—

(183)
—
264,091(71,058)——
63,156———(10,224)
—

—
2
(7)
—

(183)
2
518,766(71,058)

—

—

—

—

—

10,080—10,080————(14,447)——(14,447)——

399,769

—

—

—

—

399,769

—
—

—
—

—
—

72
(10,393)

—
—

—
—

—
—

72
(10,393)

—
—
—
(183)
—
—
—
—
—
—
¥86,534 ¥115,216 ¥399,769 ¥182,529 ¥48,709

—
—
(183)
—
(109)
(109)
¥(144) ¥(116) ¥832,497
Thousands of U.S. dollars (Note 3)$864,660 $—— $1,981,921 $473,966—(533,268)—$(76,728)—$ (53) $3,893,177—(533,268)

—

—

—

—

—

75,647—75,647———— (108,420)——(108,420)——

3,000,143

—

—

—

—

3,000,143

—
—

—
—

—
—

540
(77,996)

—
—

—
—

—
—

540
(77,996)(1,373)
—
—
—
—
—
—
—
$864,660 $3,000,143 $1,369,824 $365,546——$(1,081)——$649,411—(1,373)(818)(818)$(871) $6,247,632

See accompanying notes to consolidated financial statements.

ANNUAL REPORT 2002 29

CONSOLIDATED STATEMENTS OF CASH FLOWS
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2002, 2001 and 2000

Operating activities
Income (loss) before income taxes andminority interests
Depreciation and amortization
Net realized gain (loss) on sales ofproperty and equipment
Net realized gain on sales of securities
Unrealized loss on securities
Valuation loss on inventories
Loss on impairment of property andequipment
Equity in net income of affiliates
Gain on contribution of securities to
employees’ retirement benefit trust
Net changes in allowancesInterest and dividend income
Interest expense(Increase) decrease in notes and accounts
receivable(Increase) decrease in inventories
Increase (decrease) in notes andaccounts payable
Increase (decrease) in lease deposits
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Investing activities
Proceeds from sales of marketable securities
Purchases of marketable securities
Proceeds from sales of property andequipment
Purchases of property and equipment
Proceeds from sales of investment securities
Purchases of investment securities
Purchases of land use rights
Other
Net cash used in investing activities
Financing activities
Net increase in short-term borrowings
Net decrease in commercial paper
Increase in long-term borrowings
Repayment of long-term borrowings
Proceeds from issuance of corporate bonds
Repayment of corporate bonds
Cash dividends paid
Other
Net cash provided by (used in) financing
activities
Effect of exchange rate changes on cash
and cash equivalents
Net increase (decrease) in cash andcash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents
arising from mergers and acquisitions
Cash and cash equivalents at end of year
(Note 14)30 MITSUBISHI ESTATE CO., LTD.

Millions of yen

Thousands of
U.S. dollars (Note 3)

2002

2001

2000

2002

¥(126,848)
63,638¥33,140
65,728¥36,548
64,167$(951,955)
477,583

7,575
(616)
4,048
9,680

(43,440)(21,497)
1,664
94,239(37,407)(18,012)2,166
32,61456,848(4,623)30,37972,645

156,365(1,667)—(1,507)—(1,689)1,173,471(12,510)—(1,234)(2,622)
32,639(23,280)
10,899(3,777)36,436—(2,431)(4,310)40,318—(9,261)(19,677)
244,946

10,39010,856(4,514)(6,106)(8,267)399

77,974
81,471(3,749)(796)(15,673)
141,986
3,091(34,229)(6,742)
104,106(1,129)22,003(10,023)
148,836
3,962(37,400)(7,755)
107,643

12,000(893)
2,685
117,888
3,948(40,706)(8,729)72,401(28,135)(5,974)(117,621)
1,065,561
23,197(256,878)(50,597)781,283

15,873(18,257)

2,417(13,593)

24,183(2,938)

119,122(137,013)

19,895(115,618)
4,472(22,561)(8,825)
4,489(120,532)

56,749(105,644)
35,250(20,160)(4,235)47(49,169)

68,866(102,160)
1,950(1,529)(2,581)
2,598(11,611)

149,306(867,677)
33,561(169,313)(66,229)
33,689(904,554)

16,951—
82,270(89,013)43,431(77,960)(10,393)
(436)

2,311
—
12,961(32,207)
141,391(81,440)(10,393)
83

5,290(17,000)
77,508(120,770)
62,929(55,619)(10,393)724

127,212—617,411(668,015)
325,936(585,066)(77,996)(3,272)(35,150)

32,706(57,331)(263,790)

2,771

1,150

(3,744)

20,795(48,805)
178,922

92,33086,457(285)
86,695(366,266)
1,342,754

1,257

135

47

9,433

¥131,374¥178,922¥86,457$985,921

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2002 and 2001

1. SIGNIFICANT ACCOUNTING POLICIESBasis of preparation
Mitsubishi Estate Co., Ltd. (the “Company”) and its domestic
subsidiaries maintain their accounting records and prepare theirfinancial statements in accordance with accounting principles andpractices generally accepted and applied in Japan, while its foreign subsidiaries do so in accordance with those of theircountries of domicile. The accompanying consolidated financial
statements have been compiled from the consolidated financial
statements prepared by the Company as required by the Securities and Exchange Law of Japan and have been prepared inaccordance with accounting principles and practices generally
accepted in Japan, which may differ in certain material respects
from accounting principles and practices generally accepted incountries and jurisdictions other than Japan. Certain reclassifications have been made to present the accompanying consolidated
financial statements in a format which is familiar to readers outside Japan.
In addition, the notes to the consolidated financial statements
include information which may not be required under accounting
principles generally accepted in Japan but is presented herein as
additional information..

Principles of consolidation
The accompanying consolidated financial statements include theaccounts of the Company and the subsidiaries which it controls
directly or indirectly. Companies over which the Company exercises significant influence in terms of their operating and financial
policies have been included in the consolidated financial statements on an equity basis.
All significant intercompany balances and transactions havebeen eliminated in consolidation.

Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management tomake certain estimates and assumptions which affect theamounts reported in the financial statements and accompanying
notes. The actual results could differ from those estimates.

Foreign currency transactions and translation
Foreign currency transactions
Until the year ended March 31, 2000, short-term receivables andpayables denominated in foreign currencies had been translated
into Japanese yen at the exchange rates prevailing at the balance
sheet date. Long-term receivables and payables denominated inforeign currencies had been translated at their historical exchange
rates, except that long-term debt hedged by forward foreignexchange contracts was translated at the respective contracted
forward rate.
Effective April 1, 2000, the Company adopted a new accounting standard for foreign currency translation, which requires that
all receivables and payables denominated in foreign currencies betranslated into Japanese yen at the exchange rates prevailing at
the balance sheet date, with the resulting gain or loss includedin earnings. The adoption of this new accounting standard had
no effect on the consolidated financial position or results ofoperations.

Translation of foreign currency financial statements
The assets and liabilities of the foreign consolidated subsidiaries
and affiliates are translated into Japanese yen at the rates of
exchange prevailing at the balance sheet date, except for thecomponents of shareholders’ equity which are translated at their

historical exchange rates. Revenue and expense accounts aretranslated at the average exchange rate for the year. Adjustments resulting from this translation process have been
accumulated and are presented as foreign currency translation
adjustments in shareholders’ equity.

Cash equivalents
The Company considers all highly liquid investments which arereadily convertible into cash and have an original maturity of threemonths or less to be cash equivalents. A reconciliation between
cash in the balance sheet and cash equivalents at March 31,
2002, 2001 and 2000 is presented in Note 14.

Marketable securities and investment securities
Prior to the year ended March 31, 2001, marketable securities in
the current and noncurrent portfolios had been valued principallyat the lower of cost or market, cost being determined mainly by
the moving average method, and other securities had been stated at cost determined by the moving average method.
In January 1999, the Business Accounting Deliberation Councilof Japan issued a new accounting standard for financial instruments, which requires the Company to classify its investments indebt and equity securities into three categories: trading securities, held-to-maturity securities, or other securities. Under the
new standard, trading securities are carried at fair value, with any
unrecognized gains and losses included in earnings, and heldto-maturity securities are carried at amortized cost. Marketablesecurities classified as other securities are carried at fair value
with unrealized holding gains and losses, net of the related
income taxes, included directly in stockholders’ equity. Nonmarketable securities classified as other securities are carried atcost.
In applying the new accounting standard for financial instruments as of April 1, 2000, the Company and its consolidated
subsidiaries assessed the appropriate classification of their investments in securities and made certain reclassifications.
Cost of securities sold is determined by the moving averagemethod.
The adoption of a new accounting standard for financial instruments related to securities decreased income before income
taxes by ¥329 million for the year ended March 31, 2001.

Inventories
Inventories are mainly stated at cost, determined by the identified
cost method; however, when the fair value is substantially lessthan cost and the decline in fair value is considered to be permanent, inventories are revalued at fair value.

Property and equipment, depreciation and impairment
Property and equipment, except for land as discussed below, arestated at cost less accumulated depreciation. Depreciation is calculated principally by the declining-balance method, except forbuildings acquired in Japan subsequent to March 31, 1998 andproperty and equipment of foreign subsidiaries on which depreciation is calculated by the straight-line method at rates determinedbased on the estimated useful lives of the respective assets. The
Company has capitalized the costs incurred for significant
renewals and additions; however, costs for maintenance andrepairs are charged to income.
As of March 31, 2002, the Company revalued its land at fairvalue, pursuant to Article 2 of the “Enforcement Ordinance forthe Law Concerning Revaluation Reserve for Land” and its
amendments (the “Law”). The related unrealized gain, net of
applicable deferred income taxes, has been recorded as “Land

ANNUAL REPORT 2002 31

revaluation reserve” in shareholders’ equity.
The Company reviews its property and equipment (includingland) for impairment whenever events or changes in business circumstances indicate the carrying amount of the assets may not
be fully recoverable. If an evaluation is required, the estimatedfuture undiscounted cash flows associated with the asset would
be compared to the asset’s carrying amount to determine if awritedown is required. If this evaluation indicates that the assets
will not be recoverable, the carrying value of the Company’s
assets would be reduced to their estimated fair value.

Leases
Noncancelable leases are primarily accounted for as operatingleases (whether such leases are classified as operating or financeleases) except that leases which stipulate the transfer of ownership of the leased assets to the lessee are accounted for as
finance leases.

Intangible and other assets
Intangible and other assets primarily consist of goodwill and land
use rights. Goodwill is stated on the basis of cost and is being
amortized over periods ranging from 5 to 25 years on a straightline basis, except for any goodwill and any indefinite lived
intangible assets of subsidiaries in the United States that was
acquired in a business combination completed after June 30,
2001, which have not been amortized. Land use rights are statedon a cost basis.

Pension and severance plans
The Company and most consolidated subsidiaries have noncontributory funded and unfunded defined benefit plans covering
most of their employees. Employees of the Company and its
consolidated subsidiaries are entitled under most employment
termination circumstances to annuity payments or lump-sum payments, the amounts of which are determined principally byreference to their basic rates of pay, length of service, and theconditions under which the termination occurs.
Prior to the year ended March 31, 2001, employees’ retirement allowances were stated at the amount which would be
required to be paid if all eligible employees covered by theunfunded benefit plan voluntarily terminated their employment asof the balance sheet date. Costs with respect to the funded pension plans were determined actuarially and charged to income
when paid.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries adopted a new accounting standard for
retirement benefits, which requires the Company and its domestic consolidated subsidiaries to accrue employees’ severance andretirement benefits for the amount calculated based on the actuarially determined retirement benefit obligations and the fair valueof the plan assets as adjusted for the unrecognized net retirement benefit obligation at transition, unrecognized net actuarial
gain or loss and unrecognized prior service costs. The Company
expensed the net retirement benefit obligation at transition of¥4,714 million in the year ended March 31, 2001. Actuarial gainor loss is amortized by the straight-line method over a period
which is less than the average remaining years of service of theemployees. The adoption of this new standard for retirement
benefits decreased income before income taxes by ¥4,587 million for the year ended March 31, 2001.
In order to improve the funded status of the pension plan, theCompany contributed marketable securities in the amount of¥29,000 million to the employees’ retirement benefit trust during
the year ended March 31, 2001. The difference between thebook value of ¥5,720 million and the market value at the time of
the contribution of ¥29,000 million has been, was recorded as again in the consolidated statement of income for the year ended

32 MITSUBISHI ESTATE CO., LTD.

March 31, 2001.
In addition, directors and statutory auditors are customarily
entitled to lump-sum payments under the Company’s internal
regulations. Accrued severance benefits for these officers of theCompany have been provided at estimated amounts and areincluded in other noncurrent liabilities.

Income taxes
Effective April 1, 1999, the Company and its domestic subsidiaries adopted a new accounting standard for deferred income
taxes. Under this standard, deferred tax assets and liabilities are
determined based on the financial statements and the tax basesof assets and liabilities, using the enacted tax rates in effect for
the year in which the temporary differences are expected toreverse. Deferred tax assets are also recognized for the estimated future tax effects attributable to operating loss carryforwards.
Valuation allowances are established to reduce deferred tax
assets if it is more likely than not that some portion or all of thedeferred tax assets will not be realized.

Derivative financial instruments
The Company utilizes derivative financial instruments for the purpose of hedging its exposure to adverse fluctuations in foreign
currency exchange rates and interest rates, but does not enter
into such transactions for speculative or trading purposes.
Effective April 1, 2000, the Company and its consolidated subsidiaries adopted a new accounting standard for financial
instruments including derivatives. The new accounting standard
requires the Company and its consolidated subsidiaries to recognize all derivatives in the balance sheet at fair value with certain
exceptions. Derivatives, which are not hedges, must be adjusted
to fair value through income. If the derivative qualifies as a hedge,changes in the fair value of the derivative are deferred until theunderlying hedged item is recognized in earnings. The adoption ofthis new accounting standard decreased income before income
taxes by ¥24 million for the year ended March 31, 2001.

Revenue recognition
The consolidated statements of income reflect revenue fromoperations in the following manner:(a) Revenue from the leasing of office space is recognized as rent
accrued over the leasing period.
(b) Revenue from sales of condominiums, residential houses andland is recognized when the units are delivered and acceptedby the customers.
(c) Revenue from real estate brokerage is recognized when anunderlying lease agreement goes into force or the underlying
units are delivered.
(d) Revenue from architectural design and supervision is recognized at the date of completion of each relevant project,
except that certain long-term projects over ¥500 million in
total revenue are recognized by the percentage of completion
method.
(e) Revenue from construction contracts is recognized at the dateof completion of each relevant project, except that certain
long-term projects over ¥5,000 million in total revenue are recognized by the percentage of completion method.
(f) Other operating revenue is recognized on an accrual basis.

Net income (loss) per share
In computing net income (loss) per share assuming no dilution,
the average number of shares outstanding during each year,
adjusted to give retroactive effect to any free distribution ofshares, has been used. Net income (loss) per share assuming full
dilution has been computed on the assumption that all convertible bonds were converted into common stock at the beginningof the year, or at the time of issuance in the case of newly issued

bonds, with an appropriate adjustment of the related interest
expense, net of income taxes, for such convertible bonds.
Diluted net income (loss) per share for the years ended March
31, 2002 and 2000 has not been presented since conversion of
the outstanding convertible bonds would have had no dilutive
effect.

Appropriation of retained earnings
Under the Commercial Code of Japan, the appropriation ofretained earnings with respect to a given financial year is madeby resolution of the shareholders at a general meeting held subsequent to the close of such financial year. The accounts for thatyear do not, therefore, reflect such appropriations.

Reclassifications
Certain reclassifications have been made to the 2001 and 2000
financial statements in order to conform them to the 2002
presentation.

2. ACCOUNTING CHANGE
Effective April 1, 2001, the Company changed its revenue recognition policy for certain long-term projects over ¥500 million in
total revenue for architectural design and supervision and ¥5,000
million in total revenue for construction contracts, from the completion method to the percentage of completion method. Thischange was made in order to achieve a more accurate presentationof the operating results of the Company. The effect of this change
was to increase revenue from operations by ¥5,453 million($40,923 thousand) and income before income taxes by ¥1,691
million ($12,690 thousand), respectively, for the year ended
March 31, 2002.

3. U.S. DOLLAR AMOUNTS
Translation of yen amounts into U.S. dollar amounts is included
solely for convenience, as a matter of arithmetic computation
only, at the rate of ¥133.25=U.S.$1.00, the approximate rate ofexchange prevailing on March 31, 2002. The inclusion of suchamounts is not intended to imply that yen amounts have been or
could be readily converted, realized or settled in U.S. dollars at
the above or any other rate.

4. MARKETABLE SECURITIES AND INVESTMENT SECURITIESMarketable and investment securities classified as other securities at March 31, 2002 and 2001 are summarized as follows:

2002
Millions of yen

Securities whose fair value
exceeds their cost:
Equity securities
Debt securities:
Corporate bonds
Subtotal
Securities whose costexceeds their fair value:
Equity securities
Subtotal
Total

Thousands of U.S. dollars

Cost

Fair value

Unrealized
gain (loss)

Cost

Fair value

Unrealized
gain (loss)¥52,140¥137,633¥85,493$391,295$1,032,893$641,598

946
53,086946
138,579—
85,493

7,099
398,394

7,099
1,039,992—
641,598

6,921
6,921
¥60,007

5,929
5,929
¥144,508

(992)
(992)
¥84,501

51,94051,940$450,334

44,49644,496$1,084,488(7,444)(7,444)$634,154

2001
Millions of yen

Securities whose fair value exceeds their cost:
Equity securities
Debt securities:
Corporate bonds
Subtotal
Securities whose cost exceeds their fair value:
Equity securities
Subtotal
Total

Cost

Fair value

Unrealized
gain (loss)¥51,177¥161,707¥110,530

455
51,632455
162,162—
110,530

7,136
7,136
¥58,768

6,303
6,303
¥168,465

(833)
(833)
¥109,697

Proceeds from sales of securities classified as other securities totaled ¥26,871 million ($201,659 thousand) in 2002 and ¥34,274 million
in 2001. Gross realized gain and gross realized loss were ¥861 million ($6,462 thousand) and ¥360 million ($2,702 thousand) in 2002and ¥20,392 million and ¥385 million in 2001, respectively.

ANNUAL REPORT 2002 33

Marketable debt securities classified as held-to-maturity securities at March 31, 2002 and 2001 are summarized as follows:

2002
Millions of yen
Amortized
cost

Fair value¥¥

Debt securities whose fairvalue exceeds their cost:
Government bonds
Subtotal
Debt securities whose costexceeds their fair value:
Corporate bonds
Other
Subtotal
Total

227
227

13,21912,72925,948¥26,175

Unrealized
gain (loss)

Thousands of U.S. dollars
Amortized
cost

Fair value

$

231
231

¥ 4
4

$

1,704
1,704

13,15912,72325,882¥26,113

(60)
(6)
(66)
¥(62)

99,204
95,527
194,731$196,435

Unrealized
gain (loss)

1,734
1,734

$ 30
30

98,754
95,482
194,236$195,970

(450)
(45)
(495)
$(465)

2001
Millions of yen

Debt securities whose fair value exceeds their cost:
Government bonds
Corporate bonds
Other
Subtotal
Debt securities whose cost exceeds their fair value:
Corporate bonds
Other
Subtotal
Total

Amortized
cost

Fair value

¥

¥

315
18
99
432

11,000
1,916
12,916¥13,348

Unrealized
gain (loss)

321
20
99
440

¥ 6
2
—
8

10,9491,912
12,861¥13,301

(51)
(4)
(55)
¥(47)

Marketable and investment securities recorded at cost at March 31, 2002 and 2001 are summarized as follows:

Other securities:
Nonmarketable equity securities(other than equity securities listedon the over-the-counter market)
Mutual funds
Commercial paper
MMF
Other
Held-to-maturity securities:
Bonds
Total

Millions of yen

Thousands of
U.S. dollars

2002

2001

2002

¥19,372
2,173
—
—
93

¥18,543
6,209
2,018
1,209
119

$145,381
16,308——698

999¥22,637500¥28,598

7,497$169,884

The redemption schedule for securities classified as other securities at March 31, 2002 is summarized as follows:
Millions of yen
Due within
one yearor less

Government bonds
Corporate bonds
Commercial paper
Other debt securities
Total

34 MITSUBISHI ESTATE CO., LTD.

¥ 125
13,22012,347
1,000¥26,692

Due after
one yearthroughfive years

¥

65
943
384
—
¥1,392

Due after
five years
or more

¥20
—
—
—
¥20

Thousands of U.S. dollars
Due within
one yearor less

Due after
one yearthroughfive years

$

$

938
99,212
92,6607,505$200,315

488
7,077
2,882
—
$10,447

Due after
five years
or more

$150
—
—
—
$150

The Company recognized losses on other securities considered other-than-temporary amounting to ¥3,594 million ($26,972 thousand)and ¥1,470 million for the years ended March 31, 2002 and 2001, respectively.

5. INVENTORIESInventories at March 31, 2002 and 2001 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Real estate for saleLand and housing projects in progress
Land held for development
Other
Total

2002

2001

2002

¥167,555
40,51924,161
10,170¥242,405¥172,649
42,30923,99912,156¥251,113$1,257,448
304,083
181,32176,322$1,819,174

Millions of yen

Thousands of
U.S. dollars

6. OTHER INVESTMENTS
Other investments at March 31, 2002 and 2001 were as follows:

Lease deposits
Long-term prepaid expenses and other
Total

2002

2001

2002

¥ 90,580
71,053¥161,633¥ 86,054
62,727¥148,781$ 679,775
533,231$1,213,006

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBTAt March 31, 2002 and 2001, short-term borrowings and the current portion of long-term debt consisted of the following:
Millions of yen

Loans, principally from banks
Commercial paper
Current portion of long-term debt
Total

Thousands of
U.S. dollars

2002

2001

2002

¥ 89,919
1,979
208,534¥300,432¥ 72,031
1,721
160,608¥234,360$ 674,814
14,852
1,564,983$2,254,649

ANNUAL REPORT 2002 35

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2002 and 2001 were 0.59% and0.77%, respectively. Short-term borrowings are principally unsecured.
At March 31, 2002 and 2001, long-term debt consisted of the following:
Millions of yen

2002
1.5% convertible bonds due 2003
Zero coupon convertible bonds due 2006
8.625% mortgage bonds due 2001
4.4% mortgage bonds due 2001
2.7% mortgage bonds due 2001
5.6% mortgage bonds due 2004
5.275% mortgage bonds due 2005
4.8% mortgage bonds due 2005
2.95% mortgage bonds due 2002
4% mortgage bonds due 2002
1.675% unsecured bonds due 2002
2.125% unsecured bonds due 2002
1.5% unsecured bonds due 2002
2.05% unsecured bonds due 2003
1.775% unsecured bonds due 2003
2.35% unsecured bonds due 2003
3.05% unsecured bonds due 2003
1.7% unsecured bonds due 2003
3.1% unsecured bonds due 2003
2.55% unsecured bonds due 2003
0.9% unsecured bonds due 2004
1.7% unsecured bonds due 2004
2.55% unsecured bonds due 2004
2.125% unsecured bonds due 2005
2.21% unsecured bonds due 2006
1.325% unsecured bonds due 2006
3.4% unsecured bonds due 2006
3% unsecured bonds due 2006
2.975% unsecured bonds due 2007
2.575% unsecured bonds due 2008
2.525% unsecured bonds due 2008
3.1% unsecured bonds due 2008
1.82% unsecured bonds due 2009
3.075% unsecured bonds due 2009
2% unsecured bonds due 2009
1.985% unsecured bonds due 2009
1.9% unsecured bonds due 2010
1.55% unsecured bonds due 2011
1.44% unsecured bonds due 2011
1.47% unsecured bonds due 2012
3.275% unsecured bonds due 2012
3.125% unsecured bonds due 20173% unsecured bonds due 2018
2.5% unsecured bonds due 2020
7.37% unsecured bonds due 2008 (payable in U.S. dollars)
Floating rate bonds due 2001 (payable in U.S. dollars)
Floating rate bonds due 2002 (payable in U.S. dollars)
Floating rate bonds due 2003 (payable in U.S. dollars)
Floating rate bonds due 2004 (payable in U.S. dollars)
Floating rate bonds due 2005 (payable in U.S. dollars)
Floating rate bonds due 2009 (payable in U.S. dollars)
Loans from banks and insurance companies:
SecuredUnsecured
Loans from tenants
Less current portion

36 MITSUBISHI ESTATE CO., LTD.

Thousands of
U.S. dollars

2001

2002

¥ 90,886
100,000———
50,00050,00050,00010,00020,000—10,00010,00020,00010,00020,00015,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,000
6,598
—
9,452
11,953
7,266
2,863
—

¥

92,682100,000
28,00010,0005,000
50,00050,00050,00010,00020,00010,00010,00010,00020,00010,00020,00015,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,000——10,00010,00010,00010,0005,148
19,611
2,488
1,147
—
1,090
1,087

$ 682,071
750,469———
375,234
375,234
375,234
75,047150,094—
75,04775,047150,094
75,047150,094
112,57075,04775,04775,04775,04775,04775,04775,04775,04775,04775,04775,047225,141
75,04775,04775,04775,04775,04775,04775,04775,04775,04775,04775,04775,04775,04775,04775,04749,516—70,93489,70354,52921,486—

110,740
273,529—
1,168,287(208,534)¥ 959,753

105,160
279,557
61
1,197,752(160,608)¥1,037,144

831,069
2,052,750—
8,767,632(1,564,983)$ 7,202,649

Certain bonds have call options that may be exercised at the respective expiry dates.
The agreements under which the 1.5% convertible bonds and zero coupon convertible bonds were issued provide for conversion of
the bonds into shares of common stock at the current conversion prices per share of ¥2,600 ($20) and ¥1,200 ($9), respectively, subject
to adjustment in certain cases such as, for example, if the Company issues stock at a price which is lower than market value.
The aggregate annual maturities of long-term debt subsequent to March 31, 2002 are summarized as follows:Year ending March 31:
2003
2004
2005
2006
2007 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 208,534
168,540
233,912
121,688435,613¥1,168,287$1,564,983
1,264,840
1,755,437
913,2313,269,141$8,767,632

The assets pledged as collateral for short-term borrowings of ¥1,970 million ($14,784 thousand), other current liabilities of ¥151 million($1,133 thousand), long-term debt of ¥110,739 million ($831,062 thousand) and other noncurrent liabilities of ¥5,848 million ($43,887
thousand) at March 31, 2002 were as follows:
Millions of yen

Other investments
Land
Buildings and structures
Machinery and equipment
Total

¥

1,900
29,133
149,228
4,840¥185,101

Thousands of
U.S. dollars$

14,259218,634
1,119,910
36,323$1,389,126

Additionally, all assets of the Company are subject to the terms of an enterprise mortgage for mortgage bonds which amounted to¥150,000 million ($1,125,704 thousand) at March 31, 2002.
As is customary in Japan, collateral must be given if requested by lending institutions under certain circumstances, and banks, ingeneral, have the right to offset cash deposited with them against any debt or obligations payable to a bank which become due in casesof default or certain other specified events. The Company has never received any such requests nor does it expect that any such
requests will be made.

ANNUAL REPORT 2002 37

8. PENSION AND SEVERANCE PLANS
The following table sets forth the funded status of the plans, and the amounts recognized in the consolidated balance sheets at March
31, 2002 and 2001 for the Company’s and its consolidated subsidiaries’ defined benefit pension plans:Millions of yen

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized net benefit obligation at transition
Unrecognized actuarial (gain) loss
Unrecognized prior service cost
Net amounts recognized in the consolidatedbalance sheet
Prepaid pension expenses
Employees’ retirement allowances

Thousands of
U.S. dollars

2002

2001

2002

¥(68,576)
47,561(21,015)682
11,537
120¥(63,467)
52,700(10,767)
646
(148)
71

$(514,642)
356,931(157,711)
5,118
86,581901(8,676)
2,055¥(10,731)(10,198)—¥(10,198)(65,111)
15,422$ (80,533)

The components of expenses related to the pension and severance plans for the years ended March 31, 2002 and 2001 were as follows:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of net retirement benefit
obligation at transition
Other
Total

Thousands of
U.S. dollars

2002

2001

2002

¥2,814
2,274(1,223)¥2,762
2,148(1,019)$21,118
17,066(9,178)56856¥4,7774,750
706¥9,347420
6,424$35,850

The assumptions used in accounting for the pension and severance plans for the years ended March 31, 2002 and 2001 were as follows:

Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Amortization period of actuarial loss

38 MITSUBISHI ESTATE CO., LTD.

2002

2001

2.50–7.50%
2.25–7.50%
6 or 10 years
5–11 years

3.00–7.50%
2.25–7.50%
10 or 11 years
5–11 years

9. INCOME TAXES
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise tax which, in the aggregate, resulted in statutory tax rates of approximately 42%. Income taxes of the foreign
consolidated subsidiaries are based generally on the tax rates applicable in their countries of incorporation.
The effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2002 differsfrom the statutory tax rate of 42.05% primarily because of the effect of permanently nondeductible expenses and nontaxable income.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2001 and 2000 differ fromthe statutory tax rate for the following reasons:Statutory tax rate
Increase (decrease) in income taxes resulting from:
Change in valuation allowance
Different tax rates applied
Revenues deductible for income tax purposes
Expenses not deductible for income tax purposes
Other
Effective tax rates

2001

2000

42.05%

42.05%(5.88)
1.70(2.37)
1.13(2.77)
33.86%

1.32
1.78(1.65)
1.18
0.24
44.92%The significant components of deferred tax assets and liabilities as of March 31, 2002 and 2001 were as follows:
Millions of yen

Thousands of
U.S. dollars

2002

2001

2002

¥ 32,108
13,09952,856
10,869—10,644
119,576(29,019)
90,557$

Valuation allowance
Total deferred tax assets¥ 46,307
12,01336,82278,755
114,615
14,170302,682(34,549)
268,133

Deferred tax liabilities:
Reserves under Special Taxation Measures Law
Land revaluation reserve
Unrealized gain on property and equipment
Unrealized gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities(64,981)(404,698)(41,506)(36,183)(19,087)(566,455)¥(298,322)(65,858)—(41,030)(46,940)(17,924)(171,752)¥ (81,195)(487,662)(3,037,133)(311,490)(271,542)(143,242)(4,251,069)$(2,238,814)

Deferred tax assets:
Net operating loss carryforwards
Accrued retirement allowances and pension costs
Valuation loss on inventories
Unrealized loss on property and equipment
Land revaluation reserve
Other

347,520
90,154
276,338
591,032
860,150
106,341
2,271,535(259,280)
2,012,255

10. LEGAL RESERVEOn October 1, 2001, an amendment (the “Amendment”) to the Commercial Code of Japan (the “Code”) became effective. The
Amendment eliminates the stated par value of the Company’s outstanding shares which results in all outstanding shares having no parvalue as of October 1, 2001. The Amendment also provides that all share issuances after September 30, 2001 will be of shares with nopar value. Before the date on which the Amendment became effective, the Company’s shares had a par value of ¥50 per share.
The Code provides that an amount equal to at least 10% of the amounts to be disbursed as distributions of earnings be appropriatedto the legal reserve until the total legal reserve and the capital surplus account equals 25% of the common stock account. The Codealso provides that, to the extent that the sum of capital surplus and the legal reserve exceeds 25% of the common stock account, theamount of the excess (if any) is available for dividend by resolution of the shareholders.
Retained earnings in the accompanying consolidated balance sheets included a legal reserve of ¥21,658 million ($162,537 thousand)as of March 31, 2002.

ANNUAL REPORT 2002 39

11. LEASESThe following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of the leased assets asof March 31, 2002 and 2001, which would have been reflected in the consolidated balance sheets if finance lease accounting had been
applied to the finance leases currently accounted for as operating leases:
Thousands of
U.S. dollars

Millions of yen
Acquisition
costs

Accumulated
depreciation

Net bookvalue

Acquisition
costs

Accumulated
depreciation

Net book
value

March 31, 2002
Buildings and structures
Machinery and equipment
Total¥1,322
8,085¥9,407¥ 602
4,763¥5,365¥ 720
3,322¥4,042$ 9,92160,676$70,597$ 4,518
35,745$40,263$ 5,403
24,931$30,334

March 31, 2001
Buildings and structures
Machinery and equipment
Total¥1,1598,232¥9,391¥800
4,570¥5,370¥359
3,662¥4,021

Lease payments relating to finance leases accounted for as operating leases in the accompanying consolidated financial statements
amounted to ¥1,798 million ($13,493 thousand), ¥1,877 million and ¥1,750 million for the years ended March 31, 2002, 2001 and 2000,
respectively.
Future minimum lease payments subsequent to March 31, 2002 on noncancelable operating leases and finance leases accounted
for as operating leases are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Year ending March 31:
20032004 and thereafter

FinanceleasesOperatingleasesFinanceleasesOperatingleases¥1,5692,473¥4,042¥ 5,035
32,150¥37,185$11,775
18,559$30,334$ 37,786
241,276$279,062

The Company and its consolidated subsidiaries lease office buildings and commercial properties and earn income on these leases.
Future minimum lease income subsequent to March 31, 2002 from noncancelable operating leases are summarized as follows:
Millions of yen

Thousands of
U.S. dollars¥ 47,300
454,660¥501,960$ 354,972
3,412,082$3,767,054

Millions of yen

Thousands of
U.S. dollars¥1,320$ 9,906

990
375¥2,685

7,430
2,814$20,150

Year ending March 31:
20032004 and thereafter

12. CONTINGENT LIABILITIESAt March 31, 2002, the Company and its consolidated subsidiaries had the following contingent liabilities:

Guarantees of affiliates’ loans from banks
Guarantees of employees’ housing loans
from banks and others
Other
Total

In addition to the above, at March 31, 2002, the Company was committed to provide guarantees for the following bonds which weretransferred to banks under debt assumption agreements.

6.0% unsecured bonds due 2002

40 MITSUBISHI ESTATE CO., LTD.

Millions of yen

Thousands of
U.S. dollars (Note 3)

Date ofagreement¥50,000$375,235

Feb. 28, 1997

13. OTHER INCOME (EXPENSES)The components of “Other, net” in “Other income (expenses)” for each of the years ended March 31, 2002, 2001 and 2000 were as
follows:
Thousands of
U.S. dollars

Millions of yen

Equity in net income of affiliates
Net realized gain (loss) on salesof property and equipment
Valuation loss on inventories
Net realized gain on sales of securities
Unrealized loss on securities
Gain (loss) on investments in affiliates
Amortization of prior service cost ofpension plan
Amortization of net retirement benefit
obligation at transition
Gain on contribution of securities to
employees’ retirement benefit trust
Other

2002

2001

2000

2002

¥ 1,667¥ 1,507¥ 1,689$ 12,510(7,575)(9,680)616(4,048)—43,440(94,239)
21,497(1,664)
1,793

37,407(32,614)18,012(2,166)(7,015)(56,848)(72,645)
4,623(30,379)———(8,664)——(4,714)

—

—

—
1,633
¥(17,387)

23,280(5,740)¥(14,840)—(2,294)¥ 4,355—
12,255$(130,484)

14. SUPPLEMENTAL CASH FLOW INFORMATION
The following table represents a reconciliation of cash and cash equivalents as of March 31, 2002 and 2001:
Thousands of
U.S. dollars

Millions of yen

CashTime deposits with maturities of morethan three months
Marketable securities with maturitiesof three months or less
Cash and cash equivalents

2002

2001

2000

2002

¥131,738¥171,805¥74,582$988,653(2,055)(2,319)(887)(15,422)

1,691¥131,374

9,436¥178,922

12,762¥86,457

12,690$985,921

15. DERIVATIVESThe Company and certain of its consolidated subsidiaries utilize derivative financial instruments for the purpose of hedging their exposure to adverse fluctuations in foreign currency exchange rates and interest rates, but do not enter into such transactions for
speculative or trading purposes.
The Company is exposed to credit loss in the event of nonperformance by the counterparties to the derivatives, but any loss would
not be material because the Company enters into such transactions only with financial institutions with high credit ratings. The notionalamounts of the derivatives do not necessarily represent the amounts exchanged by the parties and, therefore, are not a direct measureof the Company’s related risk exposure.
Summarized below are the notional amounts and the estimated fair value of the interest-related derivative positions outstanding at
March 31, 2002 and 2001:
Millions of yen

March 31, 2002
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total
March 31, 2001
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Receive/floating and pay/floating
Total

Notional
amountThousands of U.S. dollars

Fair value

Unrealized
gain (loss)

Notional
amountFair value

Unrealized
gain (loss)¥ 5,000
5,000¥10,000¥(137)
240¥ 103¥(137)
240¥ 103$37,523
37,523$75,046$(1,028)
1,801
$ 773

$(1,028)
1,801
$ 773

¥ 5,000
5,000
5,000¥15,000¥(108)
236
(12)
¥ 116

¥(108)
236
(12)
¥ 116

The notional amounts and estimated fair value of the derivatives to which hedge accounting has been applied have been excluded fromthe presentation in the above table.

ANNUAL REPORT 2002 41

16. SEGMENT INFORMATIONBusiness segments
The Company and its consolidated subsidiaries are primarily engaged in the real estate business. Their business segments are classified in terms of the nature of each operation or service and consist of seven segments: (1) buildings; (2) residential development; (3)architectural and engineering; (4) real estate brokerage; (5) custom-built housing; (6) hotels; and (7) other businesses.
The business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2002, 2001 and2000 are summarized as follows:
Millions of yen

2002
Residential Architectural Real estate Custom-built
Buildings development & engineering brokerage
housing

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)
Total assets, depreciation,and capital expenditures
AssetsDepreciation
Capital expenditures

HotelsOther

Eliminations
Total or corporate Consolidated¥ 321,916
5,506
327,422242,379¥ 85,043¥136,604
746
137,350
128,932¥ 8,418¥12,783
3,575
16,35817,066¥ (708)¥79,357
334
79,69180,854¥ (1,163)¥29,943955
30,89832,063¥ (1,165)¥30,37080
30,45030,046¥ 404¥20,591 ¥ 631,564
1,596
12,792
22,187644,356
24,471555,811¥ (2,284) ¥ 88,545¥— ¥ 631,564(12,792)—(12,792) 631,564(1,168) 554,643¥ (11,624) ¥ 76,921¥2,216,571
56,683
124,179¥262,492
881
329¥15,869179
328¥80,391
2,761
3,512

¥13,983
181
95¥32,325
1,940
894¥97,603 ¥2,719,234
1,912
64,537
2,317
131,654¥316,561 ¥3,035,795
545
65,082(39) 131,615
Thousands of U.S. dollars

2002
Residential Architectural Real estate Custom-built
Buildings development & engineering brokerage
housing

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)
Total assets, depreciation,and capital expenditures
AssetsDepreciation
Capital expenditures

HotelsOther

Eliminations
Total or corporate Consolidated$ 2,415,880
41,321
2,457,201
1,818,980$ 638,221$1,025,171
5,598
1,030,769
967,595$ 63,174$ 95,932
26,830122,762
128,075$ (5,313)$595,550
2,506
598,056
606,784$ (8,728)$224,713
7,167
231,880
240,623$ (8,743)$227,917
601
228,518
225,486$ 3,032$154,529 $ 4,739,692
11,97796,000166,506 4,835,692
183,647 4,171,190$ (17,141) $ 664,502$— $ 4,739,692(96,000)—(96,000) 4,739,692(8,766) 4,162,424$ (87,234) $ 577,268$16,634,679
425,388931,925$1,969,921
6,612
2,469

$119,092
1,343
2,462

$603,310
20,721
26,356$104,938
1,358
713$242,589
14,5596,709$732,480 $20,407,009
14,349484,330
17,389988,023$2,375,693 $22,782,702
4,090
488,420(293)
987,730
Millions of yen

2001
Residential Architectural Real estate Custom-built
Buildings development & engineering brokerage
housing

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)
Total assets, depreciation,and capital expenditures
AssetsDepreciation
Capital expenditures

42 MITSUBISHI ESTATE CO., LTD.

HotelsOther

Eliminations
Total or corporate Consolidated¥ 313,227
4,679
317,906
237,967¥ 79,939¥132,216700
132,916
122,945¥ 9,971¥14,296
1,320
15,616
15,648¥ (32)¥87,003361
87,36481,089¥ 6,275¥34,886
2,262
37,14836,562¥ 586¥32,52480
32,60431,905¥ 699¥ 16,838 ¥ 630,990
1,557
10,95918,395641,949
19,968546,084¥ (1,573) ¥ 95,865¥— ¥ 630,990(10,959)—(10,959)
630,990
4,267
550,351¥ (15,226) ¥ 80,639¥1,611,727
56,650105,072¥279,633
887
2,854¥19,54944
146¥70,874
2,368
2,755

¥13,870154
343¥42,527
2,035
856¥119,809 ¥2,157,989
1,960
64,0984,256
116,282¥377,274 ¥2,535,263
615
64,713
1,432
117,714

Millions of yen

2000
Residential Architectural Real estate Custom-built
Buildings development & engineering brokerage
housing

Revenue and operating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expense
Operating income (loss)
Total assets, depreciation,and capital expenditures
AssetsDepreciation
Capital expenditures

HotelsOther

Eliminations
Total or corporate Consolidated¥ 294,217
6,495
300,712217,012¥ 83,700¥101,974
871
102,845
104,275¥ (1,430)¥22,9142,710
25,624
23,461¥ 2,163¥73,029
257
73,286
68,701¥ 4,585¥32,681
2,987
35,66835,677¥ (9)¥32,894
58
32,95233,553¥ (601)¥ 16,687 ¥ 574,396
1,420
14,798
18,107589,194
20,554503,233¥ (2,447) ¥ 85,961¥— ¥ 574,396(14,798)—(14,798)574,3962,962
506,195¥ (17,760) ¥ 68,201¥1,539,678
55,695
103,932¥316,282
886
1,332¥19,79427
76¥53,169
1,123
2,250

¥14,074134
274¥42,304
2,146
627¥140,840 ¥2,126,141
2,296
62,307
2,239
110,730¥159,630 ¥2,285,771
396
62,703
682
111,412

Revenue recognition
As described in Note 2, “Accounting Change,” the architectural engineering segment has changed its revenue recognition policy forarchitectural design and supervision services contracts with revenue of over ¥500 million and for construction contracts with revenue ofover ¥5,000 million from the completion method to the percentage of completion method. The effect of this change was to increase or
decrease the revenue from operation and operating income in each of the respective segments as follows:
Millions of yen

Architectural and engineering
Eliminations or corporate

Thousands of U.S. dollars

Revenue fromoperation

Operatingincome (loss)

Revenue fromoperation

Operatingincome (loss)¥6,580(1,127)¥5,453¥2,086(395)¥1,691$49,381(8,458)$40,923$15,654(2,964)$12,690

Allocation of expenses

Loss on impairment

The Company changed its classification of certain personnel
expenses relating to employees who are seconded from theCompany to its subsidiaries. Such expenses were included in“Eliminations or corporate” in prior years but have been allocatedto each relevant segment in 2002. The effect of this change wasto increase operating expenses in each of the respective segments as follows:

As a result of the impairment analysis, the Company recognizedimpairment losses on its property and equipment for the year
ended March 31, 2002. The impairment losses recognized byeach segment were as follows:

Segments
Buildings
Residential development
Architectural andengineering
Custom-built housing
HotelsOther

Millions of yen

Thousands of
U.S. dollars¥1,393327$10,454
2,454

1,765
454
329
191
¥4,45913,246
3,407
2,469
1,433
$33,463

Decrease of assets
Segments
Buildings
Residential development
HotelsOther

Millions of yen

Thousands of
U.S. dollars¥140,776
5,106
9,409
1,074
¥156,365$1,056,480
38,31970,612
8,060$1,173,471

Land revaluation
As described in Note 1, the Company revalued certain land as ofMarch 31, 2002. Due to this land revaluation, the total assets ofeach segment increased or decreased as follows:

Increase (decrease) of assets
Segments
Buildings
Residential development
Custom-built housing
HotelsOther
Eliminations or corporate

Millions of yen

Thousands of
U.S. dollars¥707,482(4,848)(755)
1,573(32,172)
18,572¥689,852$5,309,433(36,383)(5,666)
11,805(241,440)
139,377$5,177,126

ANNUAL REPORT 2002 43

Geographical segments
The Company and its consolidated subsidiaries operate primarily in Japan, the United States and certain other areas. The geographicalsegment information of the Company and its consolidated subsidiaries for the years ended March 31, 2002, 2001 and 2000 is summarized as follows:
Millions of yen

2002
Revenue andoperating income (loss)
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income (loss)
Total assets

Japan

UnitedStates

Other

Total

¥ 510,017
786
510,803
432,021¥ 78,782¥2,376,728¥101,320
340
101,660
92,019¥ 9,641¥313,664¥20,227
192
20,41920,803¥ (384)¥19,164¥ 631,564
1,318
632,882544,843¥ 88,039¥2,709,556

Eliminations
or corporate¥—(1,318)(1,318)9,800¥ (11,118)¥326,239

Consolidated¥ 631,564—
631,564554,643¥ 76,921¥3,035,795

Thousands of U.S. dollars

2002
Revenue andoperating income (loss)
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income (loss)
Total assets

Japan

UnitedStates

Other

Total

$ 3,827,520
5,899
3,833,419
3,242,184$ 591,235$17,836,608$ 760,375
2,552
762,927
690,574$ 72,353$2,353,951$151,797
1,440
153,237
156,120$ (2,883)$143,820$ 4,739,692
9,891
4,749,583
4,088,878$ 660,705$20,334,379

Eliminations
or corporate$—(9,891)(9,891)73,546$ (83,437)$2,448,323

Consolidated$ 4,739,692—
4,739,692
4,162,424$ 577,268$22,782,702
Millions of yen

2001
Revenue andoperating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income (loss)
Total assets

Japan

UnitedStates

Other

Total

¥ 510,990
686
511,676
431,737¥ 79,939¥1,861,545¥102,036
161
102,197
86,650¥ 15,547¥260,368¥17,964
298
18,262
17,695¥ 567¥21,287¥ 630,990
1,145
632,135
536,082¥ 96,053¥2,143,200

Eliminations
or corporate¥—(1,145)(1,145)
14,269¥ (15,414)¥392,063

Consolidated¥ 630,990—
630,990
550,351¥ 80,639¥2,535,263
Millions of yen

2000
Revenue andoperating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income (loss)
Total assets

44 MITSUBISHI ESTATE CO., LTD.

Japan

UnitedStates

Other

Total

¥ 466,192
961
467,153
395,023¥ 72,130¥1,870,283¥ 92,889260
93,14979,846¥ 13,303¥218,721¥15,314210
15,524
14,225¥ 1,299¥17,957¥ 574,396
1,430
575,826
489,093¥ 86,733¥2,106,962

Eliminations
or corporate¥—(1,430)(1,430)17,102¥ (18,532)¥178,809

Consolidated¥ 574,396—
574,396506,195¥ 68,201¥2,285,771

Unallocatable operating expenses

Loss on impairment

Unallocatable operating expenses included under “Eliminations or
corporate” for the years ended March 31, 2002, 2001 and 2000
amounted to ¥12,689 million ($95,227 thousand), ¥15,630 millionand ¥17,078 million, respectively, and consisted of operating
expenses incurred in the Administration Department of the Company. Corporate assets included under “Eliminations or
corporate” for the years ended March 31, 2002, 2001 and 2000
amounted to ¥332,193 million ($2,493,006 thousand), ¥392,135
million and ¥193,728 million, respectively, and consisted principally of cash, marketable securities, investments in other securities,
deferred tax assets and other assets allocated to the Administration Department of the Company.

As a result of the impairment analysis, the Japan segment recognized an impairment loss on its property and equipment of¥156,365 million ($1,173,471 thousand) for the year ended March
31, 2002.

Overseas revenue
The following table represents overseas revenue earned by theCompany’s consolidated subsidiaries in foreign countries during
the years ended March 31, 2002, 2001 and 2000.

Millions of yen

Revenue recognition

2002

As described in Note 2, “Accounting Change,” the architectural
engineering segment has changed its revenue recognition policy
for architectural design and supervision services contracts withrevenue of over ¥500 million and for construction contracts withrevenue of over ¥5,000 million from the completion method tothe percentage of completion method. The effect of this change
was to increase revenue from operations in the Japan segmentby ¥5,453 million ($40,923 thousand) and operating income (loss)by ¥1,691 million ($12,690 thousand), respectively, for the year
ended March 31, 2002.

Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue

Allocation of expenses

Overseas revenue
Overseas revenue
Consolidated revenue

The Company changed its classification of certain personnel
expenses relating to employees who are seconded from theCompany to its subsidiaries. Such expenses were included in“Eliminations or corporate” in prior years but have been allocatedto each individual segment in 2002. The effect of this change
was to increase operating expenses in each of the respective
segments as follows:

Segments
Japan
U.S.A.
Other

Millions of yen

Thousands of
U.S. dollars¥4,459156
109¥4,724$33,463
1,171
818$35,452

Other
areas

¥101,335¥20,238¥121,573¥631,564

16.0%

3.2%

19.2%

Total

Thousands of U.S. dollars$760,488$151,880$912,368$4,739,692

Millions of yen

2001
Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue

UnitedStates

Other
areas

¥102,186¥17,820¥120,006¥630,990

16.2%

2.8%

19.0%

Total

Millions of yen

2000

Land revaluation
As described in Note 1, the Company revalued certain land as ofMarch 31, 2002. Due to this land revaluation, the total assets
increased by ¥671,278 million ($5,037,734 thousand) and¥18,574 million ($139,392 thousand) in the Japan segment and in“Eliminations and corporate,” respectively.

UnitedStatesOverseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue

UnitedStates

Other
areas

¥98,963¥15,343¥114,306¥574,396

17.2%

2.7%

19.9%

Total

ANNUAL REPORT 2002 45

NON-CONSOLIDATED BALANCE SHEETS
Mitsubishi Estate Co., Ltd.
March 31, 2002 and 2001

Millions of yen

Thousands of
U.S. dollars

2001

2002

Assets2002
Current assets:
Cash
Marketable securities
Notes and accounts receivable — trade
Allowance for doubtful receivables
Inventories
Deferred income taxes

Other current assets¥

62,79525,563
22,799(892)
232,364
48,923¥

117,968
6,916
22,011(957)
247,319
62,947$471,257
191,842
171,099(6,694)
1,743,820
367,152

18,208

9,838

136,646

Total current assets

409,760

466,0423,075,122

Investments:
Investments in and advances tosubsidiaries and affiliates
Investment securities
Lease deposits
Other investments

188,532
154,592
78,512
22,231

179,653
180,033
75,497
21,252

1,414,874
1,160,165
589,208
166,837

Allowance for doubtful accounts
Total investments
Property and equipment:
Land
Buildings and structures
Machinery and equipment

Construction in progress(1,640)(1,627)(12,307)442,227454,808

3,318,777

1,246,362
1,167,676
20,514568,200
1,144,296
21,2849,353,561
8,763,047
153,951

49,474

31,918371,2872,484,026

1,765,698

18,641,846(726,259)(540,267)(5,450,349)

Property and equipment, net

1,757,767

1,225,431

13,191,497

Intangible and other assets

10,838

10,411

81,336¥2,620,592¥2,156,692$19,666,732

Less accumulated depreciation

Total assets

46 MITSUBISHI ESTATE CO., LTD.

Millions of yen

Thousands of
U.S. dollars

2002

2001

2002

Current liabilities:
Short-term borrowings and current portion of
long-term debt
Accounts payable - trade
Advance and deposits¥ 269,912
17,37137,308¥ 190,682
28,61036,645$ 2,025,606
130,364
279,985

Accrued expenses and other current liabilities
Total current liabilities

14,977
339,568

35,716291,653

112,3982,548,353

822,915
273,897
312,241
29,012
1,777,633

925,700
268,828
101,866
25,0201,613,067

6,175,722
2,055,512
2,343,272
217,727
13,340,586

86,534
115,216
399,769
21,658174,367

86,534
115,216—
21,658262,395

649,411864,660
3,000,143
162,537
1,308,570

45,531
843,075

57,829543,632

341,696
6,327,017(116)
842,959(7)543,625(871)
6,326,146¥2,620,592¥2,156,692$19,666,732

Liabilities, minority interests andshareholders’ equity

Long-term debt
Lease deposits
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Shareholders’ equity:
Common stock, without par value:
Authorized—1,980,000,000 shares;
Issued and outstanding—1,299,185,054 shares
Capital surplus
Land revaluation reserve
Legal reserve
Retained earnings
Unrealized gain on securities
Less treasury stock— 113,913 shares in 2002;
6,533 shares in 2001
Total shareholders’ equity
Contingent liabilities
Total liabilities and shareholders’ equity

ANNUAL REPORT 2002 47

NON-CONSOLIDATED STATEMENTS OF OPERATIONS
Mitsubishi Estate Co., Ltd.
Years ended March 31, 2002, 2001 and 2000

Millions of yen

Revenue from operations
Cost of revenue from operations
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Impairment loss on property and equipment
Other, net
Income (loss) before income taxes
Income taxes:
Current
Deferred
Net income (loss)

48 MITSUBISHI ESTATE CO., LTD.

Thousands of
U.S. dollars

2002

2001

2000

2002

¥ 381,145
299,790
24,55756,798¥389,995
315,002
21,893
53,100¥359,078
289,060
22,51847,500$ 2,860,375
2,249,831
184,293426,251

2,002(25,982)(143,915)(23,202)(191,097)(134,299)

2,627(29,499)—(16,191)(43,063)
10,037

2,522(32,404)—
1,967(27,915)
19,58515,024(194,987)(1,080,037)(174,123)(1,434,123)(1,007,872)

16(56,860)(56,844)¥ (77,455)

19
3,615
3,634
6,403

26
7,778
7,804
¥ 11,781

120(426,716)(426,596)$ (581,276)¥

MITSUBISHI ESTATE CORPORATE DATADIRECTORS ANDSTATUTORY AUDITORSCORPORATE INFORMATION

Chairman of the Board
Takeshi Fukuzawa*

Head Office:Tokyo Building, 7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8330, Japan
Telex: MECDIA J22174
Internet Home Page: http://www.mec.co.jp
Phone: (03) 3287-5100

President
Shigeru Takagi*
Executive Vice President
Hiroshi Baba*
Senior Managing Directors
Katsuhisa Shimada*
Takayuki Hara*
Eiji Tan*
Yasuhiko Watanabe*
Atsushi Morimoto*Managing Directors
Terutake Miyamoto
Satoshi Oyama
Kazuo Odagawa
Yasuto Suzuki
Directors
Taketo Yamazaki
Masahiro Yamanaka
Yutaka Nakamura
Hajime Ito
Hiroharu Koinuma
Hirotaka Kanki
Keiji Kimura
Nobuyuki Iizuka
Takaya Endo
Toshio Nagashima
Seiichiro Suzuki
Mitsuo Iwai
Toshihide Yoshimura
Masaaki Kono
Toyohisa Miyauchi
Hiroshi Danno
Statutory Auditors
Yasuo Satake
Kunihiro Inoue
Terumichi Tsuchida
Hiroshi Hayashi
Kazuya Okamoto*Representative Director

Date of Establishment:
May 7, 1937
Paid-in Capital:¥86,534 million
Number of Shares of Common Stock Issued:
1,299,185,054 shares
Number of Shareholders:
94,977 (excluding shareholders with less than 1,000 shares)
Major Shareholders:% of total
The Meiji Mutual Life Insurance Company
4.50
Japan Trustee Services Bank, Ltd. (Trust Account)
4.38
The Bank of Tokyo-Mitsubishi, Limited
3.73
The Mitsubishi Trust and Banking Corporation
3.49
The Tokio Marine and Fire Insurance Co., Ltd.
3.29
The Mitsubishi Trust and Banking Corporation (Trust Account)
3.25
Obayashi Corporation
2.31
Taisei Corporation
2.25
UFJ Trust Bank Limited (Trust Account A)
2.20
Takenaka Corporation
2.17
Major Consolidated Subsidiaries:
Mitsubishi Jisho Sekkei Inc.
Mitsubishi Real Estate Services Co., Ltd.
Mitsubishi Estate Home Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
Aqua City Co., Ltd.
Marunouchi Heat Supply Co., Ltd.
Yokohama Sky Building Co., Ltd.
Royal Park Hotel Co., Ltd.
Rockefeller Group, Inc.
Stock Exchange Listings:
Tokyo Stock Exchange and other major Japanese stock exchanges
Transfer Agent and Registrar:
The Mitsubishi Trust and Banking Corporation
11-1, Nagatacho 2-chome, Chiyoda-ku, Tokyo 100-8212, Japan
Auditor:Toyo & Co.

(as of June 27, 2002)(as of March 31, 2002)

ANNUAL REPORT 2002 49

ORGANIZATION•Business Planning Department•Group Companies Management Office•Asset Management Advisory Office•Leasing Department•Relocation Management Office•Property Management Department•Building Management Advisory Office•Commercial Real Estate Division•Marunouchi Area Building Management Department•Yurakucho Area Building Management Department•Otemachi Area Building Management Department•Tokyo Metropolitan Area Building Management Department•Area Promotion Department•Marunouchi Brand Management Office•Retail & Shopping Center Department•Development Department•Area Planning Office•Meeting of Shareholders•Residential Development Promotion Department•Board of Directors•Condominium Development Department•Chairman of the Board•Residential Development Division•President•Master-Planned Development Department•Chiba Liaison Office•PARTNER System Department•Residential Planning & Marketing Department•Customer Service Office•Executive Committee•Board of Statutory Auditors•Urban Development& Investment Management Division•Urban Development & Investment Department•International Business Division•International Business Department•Recreational Facility Division•Recreational Facility Office•Urban Development Promotion Department•Statutory Auditor•Corporate Planning Department•Corporate Audit & Monitoring Department•Personnel Planning Department•Office of Statutory Auditors•Corporate Planning Division•Finance & Accounting Department•Corporate Communications Department•Investor Relations Office•Corporate Philanthropy & Environmental Affairs Promotion Office•General Affairs Department•Corporate Administration Division•Secretary Office•Compliance Department•Sapporo Branch•Tohoku Branch•Yokohama Branch•Nagoya Branch•Osaka Branch•Chugoku Branch•Kyushu Branch(as of August 1, 2002)

50 MITSUBISHI ESTATE CO., LTD.

MITSUBISHI ESTATE GROUP

Building Business
Building Leasing Business

Building Management Business

Parking BusinessJyoni Shoji Co., Ltd.
IMS Co., Ltd.
Aqua City Co., Ltd.
Yokohama Sky Building Co., Ltd.
Keiyo Tochi Kaihatsu Co., Ltd.
Tokyo Kotsu Kaikan Co., Ltd.
Chelsea Japan Co., Ltd.
ACT CITY CORPORATION

Mitsubishi Estate Building
Management Co., Ltd.

Marunouchi Parking Co., Ltd.
Grand Parking Center Co., Ltd.
Hibiya City Parking Co., Ltd.
Tokyo Garage Co., Ltd.

Marunouchi Direct Access Limited

Ryoei Building Management Co., Ltd.
MEC Building Management Co., Ltd.
MEC Building Facilities Co., Ltd.
Marunouchi Tatemono Kanri Co., Ltd.
Chiyoda Tatemono Kanri Co., Ltd.
Hokuryo City Service Co., Ltd.
Hibiya City Co., Ltd.
Yuden Building Kanri Co., Ltd.
O.A.P. Management Co., Ltd.

District Heating
and Cooling Business
Marunouchi Heat Supply Co., Ltd.
O.A.P. D.H.C. Supply Co., Ltd.
Minato Mirai 21 D.H.C Co., Ltd.

Custom-Built Housing
Mitsubishi Estate Home Co., Ltd.
Mitsubishi Estate Housing
Component Co., Ltd.

Architectural Design & Engineering
Mitsubishi Jisho Sekkei Inc.
MEC Design International Corporation

KANTO GANG-NAIL TRUSS CO., LTD.

Urban Development& Investment Management
Mitsubishi Jisho Investment Advisors, Inc.
Japan Real Estate
Asset Management Co., Ltd.

Hotel BusinessRoyal Park Hotels and Resorts Co., Ltd.
Ryoei Kanko Development Co., Ltd.
Royal Park Inn Nagoya Co., Ltd.
Tohoku Royal Park Hotel Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
Royal Park Hotel Co., Ltd.
Okayama International Hotel Co., Ltd.

Mitsubishi EstateCo., Ltd.

International Business
Rockefeller Group, Inc. (RGI)
170 other companies
14 other companies

Recreational Facility

OthersHigashinihon Kaihatsu Co., Ltd.
MEC Urban Resort Tohoku Co., Ltd.
Liv Sports Co., Ltd.
Kume Country Club Co., Ltd.
Fuji International Speedway Co., Ltd.

MEC Finance Co., Ltd.
MEC Information Development Co., Ltd.
MEC Human Resources, Inc.
Tsunagu Network Communications, Inc.
Super Regional, Inc.
(4 other companies)

Residential Development
Real Estate Agency

Development BusinessResidence Management Business

Mitsubishi Real Estate Services Co., Ltd.

Otaru Toshi Kaihatsu Kosha Co., Ltd.

Izumi Park Town Service Co., Ltd.
Daiya Community Co., Ltd.

Ryoei Life Service Co., Ltd.
Consolidated Subsidiaries
Equity-Method Affiliates(as of June 27, 2002)

ANNUAL REPORT 2002 51

PROMOTION OF ENVIRONMENTALAFFAIRS AND CORPORATEPHILANTHROPY➀ The NHK Symphony Orchestra, of which Mitsubishi
Estate is a sponsor.
➁ The Mitsubishi Estate Environmental Report,
detailing our environmental preservation efforts,
is published annually.

➀➁

52 MITSUBISHI ESTATE CO., LTD.

The Mitsubishi Estate Group is conducting activities in linewith management values founded on a commitment toenvironmental stewardship and corporate citizenship.
Mitsubishi Estate has published the Mitsubishi Estate
Environmental Report annually since 2000, the first reporton environmental preservation by a Japanese real estatecompany. We are also aggressively pushing forward withobtaining ISO 14001 certification. Following all our officebuilding operations in the Tokyo and Yokohama areas and
Mitsubishi Estate Home, in January 2002 Mitsubishi Jisho
Sekkei obtained certification. The Residential Development Division is also obtaining certification.
Each new project is undertaken with consideration for
the environment. In the Marunouchi Building due to open
on September 6, 2002, improvements have been made in
longevity and low-energy functionality, and a system forrecycling organic waste is also being employed. We alsoestablished the Marunouchi Bird Song Plaza in cooperation
with the Wild Bird Society of Japan in order to heighten
awareness of environmental preservation, and have organized nature-watching clubs in the Marunouchi district.
Volunteers both inside and outside the Group also help
produce 6,000 cassette tapes each year of “News on
Birds and Nature” that are donated to facilities for thevision impaired throughout the country.
In order to fulfill our responsibility to be a good corporate citizen, as part of our corporate philanthropy activities
we plan and run events such as inviting elderly and disabled persons to concerts, running a noodle delivery
service and sponsoring pottery classes. We have also
begun cooperating with non-profit organizations on a worksupport project with the goal of helping the disabled live
independent lives. Furthermore, we have expanded ourvarious assistance projects such as the introduction of the“Volunteer Leave” program in 2001, creating an environment conducive to employee participation in corporate
philanthropy activities.
In addition, Mitsubishi Estate is a sponsor of the NHK
Symphony Orchestra and the Japan Philharmonic Symphony Orchestra and operates cultural facilities in major
cities throughout Japan such as Fukuoka and Yokohama.
As a first-rate corporate citizen, the Mitsubishi EstateGroup will continue to carry out its philanthropy and cultural promotion activities to further develop relationships withlocal communities.

CODE OF CORPORATE CONDUCTOUR MISSION“Creating a Truly Meaningful Society Through Urban Development”
We will strive to create a truly meaningful society through the development of a secure,safe, comfortable and appealing urban environment in each of our locations, acting as
representatives of the people who live, work, and seek leisure there.
To achieve this goal, we will adhere to the following eight principles:

PRINCIPLES OF CORPORATE CONDUCTARTICLE 1 : FOSTERING COMMUNICATION
We will make fair disclosure of corporate information by communicating withshareholders, investors, business partners, local community members and all otherpersons affected by our activities.

ARTICLE 2 : BEING GOOD CITIZENS
We, as good corporate citizens, will respect human rights and actively contribute tosociety, and will support our employees in their endeavors to this end.

ARTICLE 3 : CARING ABOUT THE ENVIRONMENT
We will place conservation of the global environment as a business priority. We will strive
to operate in harmony with the environment in all our business activities, by promoting
conservation of energy, reduction of waste, recycling and so forth.

ARTICLE 4 : FOSTERING INTEGRITY
We will conduct our business on the basis of free, fair and transparent market
competition. We will consider our social credibility as the most important factor when
making management decisions.

ARTICLE 5 : UPHOLDING THE LAW AND AVOIDING ANTISOCIAL FORCES
We will observe all laws and ordinances and endeavor to conduct ourselves at all times incompliance with social morals. We will avoid ties with forces that threaten to disrupt civilsociety or undermine public safety.

ARTICLE 6 : HAVING A GLOBAL OUTLOOK
We will develop our business based on a global perspective and contribute to local
development while respecting local rules and cultures in our overseas operations.

ARTICLE 7 : ENHANCING CREATIVITY AND MOTIVATION
We will strive to create a business environment conducive to the full utilization of ouremployees’ capabilities. We will endeavor to maximize our employees’ creativity andexpertise while respecting their dignity and individuality.

ARTICLE 8 : DUTIES OF OUR DIRECTORS AND MANAGEMENT STAFF
The directors and management staff of our company recognize that it is their duty to put
the spirit of this Code into practice. Each director and manager will take the initiative to
exercise leadership and create a corporate system to achieve our goals. Infractions of theCode will be investigated and the findings made public. We will reaffirm theresponsibilities of our directors and managers in such an event and take measures toprevent any recurrences.

ANNUAL REPORT 2002 53

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2002

Mitsubishi Estate Company, Limited
Tokyo Building, 7-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8330, Japan
http://www.mec.co.jp

Printed on recycled paper
Printed in Japan