mec_ar_cover_E 04.8.25 7:29 PM ページ 2

M I T S U B I S H I E S T A T E C O . , LT D .

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2004

ANNUAL REPORT 2004

mec_ar_cover_E 04.8.25 7:29 PM ページ 3

CONTENTS
2.

To Our Shareholders
As work on the Marunouchi Redevelopment Project continues steadily, we provide an overview of the fiscal
year ended March 31, 2004, the second year of Mitsubishi Estate’s medium-term management plan, andoutline the Company’s future business strategies and corporate social responsibility.

6.

Special Feature
Marunouchi—Japan’s leading business and commercial district. In this section, we detail progress to dateand outline plans for future redevelopment. Leveraging the vast know-how accumulated through thisproject, we describe our activities in areas outside Marunouchi.

14. Business Information
Mitsubishi Estate acts with speed and flexibility to grasp every opportunity in each of its business activities:
Building Business, Residential Development, Architectural Design & Engineering, Urban Development
and Investment Management, International Business, Custom-Built Housing, Hotel Business, andRecreational Facilities.

24. Financial Review
Mitsubishi Estate promotes management activities that focus on shareholder value. We are working towardachieving an earnings before interest, taxes, depreciation and amortization (EBITDA) goal of ¥170 billion
by the fiscal year ending March 31, 2005, the final year of our medium-term management plan.

28. Financial Statements
52. Mitsubishi Estate Corporate Data
55. Social Contributions and Environmental Effor ts
Through the redevelopment of the Marunouchi district, Mitsubishi Estate implements a number of
initiatives directed toward protecting the local environment. As a corporate citizen, the Company also
supports the handicapped and elderly while working to promote a variety of cultural events.

56. Compliance
Guided by its fundamental mission of “Creating a Truly Meaningful Society Through Urban
Development,” Mitsubishi Estate formulated its “Code of Corporate Conduct,” and continues to share thiswith the entire Group.

Caution regarding forward-looking 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 arefounded on currently available information and therefore should not be unduly relied upon. The
Mitsubishi Estate Group cautions that a number of significant factors could cause future results todiffer from forecasts in the forward-looking statements.

mec_ar_01_24_E 04.8.25 7:24 PM ページ 1

OUR MISSION

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.
The Mitsubishi Estate Group’s fundamental mission is to create a truly meaningful society through urban
development. With a core in development in its Building Business operations, Residential Development operations,
Architectural Design & Engineering operations, and Urban Development and Investment Management operations, theMitsubishi Estate Group aims to increase corporate value by wielding the synergistic effects of its value chain of businesses related to real estate.
We have positioned compliance and consideration of the global environment as cornerstones of all our businesses.
By constantly strengthening our foundations, we aim to continue onward as a good corporate citizen accepted bysociety.

1

mec_ar_01_24_E 04.8.25 7:24 PM ページ 2

TO OUR SHAREHOLDERS

Thousands of
U.S. dollars

Millions of yen“ Beginning with the Marunouchi(Percentage Share)

Years ended March 31

1999

2000

2001

2002

2003

2004

2004

Revenue from operations¥679,918 $6,433,134¥565,259¥574,396¥630,990¥631,564¥681,726

Net income (loss)

22,327

18,421

19,832(71,058)

36,03934,989331,053

As a percentage ofrevenue from operations

3.9%

3.2%

3.1%

(11.3)%

5.3%

5.1%

—

remains active in a wide variety of

As a percentage ofshareholders’ equity

4.9%

4.1%

4.1%

(10.5)%

4.3%

4.0%

—

development projects. Leveraging our exper-

Total assets

2,283,773

2,285,771

2,535,263

3,035,795

3,007,927

3,068,842 29,036,256

Total shareholders’ equity

459,574

440,731518,766

832,497

839,953

897,499

8,491,806

tise across a diverse range of activities, we

Common stock

86,53486,53486,53486,53486,53486,534

818,752

Redevelopment Project, Mitsubishi EstateYenwill pursue each oppor tunity to create newvalue.

”

U.S. dollars

Cash dividends applicableto the year

¥17.19¥14.18¥15.26¥(54.70)¥27.61¥26.96

$0.25

8.00

8.00

8.00

8.00

8.00

8.00

0.07

Note: Yen amounts shown are translated into U.S. dollars, solely for convenience, at the prevailing exchange rate on March 31, 2004, of¥105.69 to US$1.00.

Financial Results

operations. As a result, operating income grew 8.0% toDuring the fiscal year ended March 31, 2004, Mitsubishi¥103,749 million.

Residential
Development 20.7%

In the residential market, the supply levels of condomini-

Real Estate
Brokerage 12.0%
Custom-Built
Housing 6.0%
Hotels 4.5%
Other 3.6%

bear for real estate companies to change their business models.

ums in the Tokyo Metropolitan area continued to be high.

In March 2002, the Mitsubishi Estate Group announced its

Stable low interest rates and a tax deduction allowance formedium-term management plan, which positioned “develop-

Estate Co., Ltd. and its consolidated subsidiaries recorded rev-

Mitsubishi Estate incurred a loss on disposal of fixed assets

enue from operations of ¥679,918 million, a slight decrease of

related to the Hibiya Park Building and other rebuilding activi-

housing loans, however, made for favorable market

ment” at the heart of future business expansion. At the same

0.3% from the previous fiscal year. In Building Business oper-

ties. Accordingly, net income for the fiscal year was ¥34,989

conditions. Confronted with these circumstances, consumers

time, we identified three fundamental directives—increase

ations, revenues were negatively impacted by the Company’s

million.

have become increasingly selective, casting a keen eye over the

corporate value based on cash flow; instill the principle oflocation, planning and merits of each development.

“customer first” to survive in a competitive market; and pur-decision to halt leasing activity for properties in connection

2

Buildings 50.6%

Architectural& Engineering 2.6%

Per share amounts:
Net income (loss)

Revenue by Segmentwith the Marunouchi Redevelopment Project and tenantOperating Environment

movements in existing buildings. Results in Residential

In the office building market, the impact of the so-called 2003

work swiftly to recognize changes in its operating

Development operations also declined owing to a drop in the

problem, a substantial supply of office space attributed to theenvironment. Based on the concept of speed and flexibility,

took significant strides toward sustained profitability andnumber of condominiums sold during the fiscal year undercompletion of several large-scale office buildings in Tokyo,

we will endeavor to increase management efficiency andgrowth. Entering the final year of the plan, we are well placed

review. Despite a decline in revenue, however, both Building

has increased vacancy rates and there has been a continuingenhance earnings power.

to achieve its objectives.

Business and Residential Development operations reported

downward trend in rent levels. Vacancy rates have improved

increases in earnings. Building Business operations benefited

since then, as new buildings have secured tenants and the sup-Medium-Term Management Plan

Business Conditions

from efforts to reduce building management costs, while

ply of new buildings has dropped off. However, market

Faced with the collapse of the myth relating to ever-higher

The goals of the Mitsubishi Estate Group are to effectively

improvements in the gross margin and decreases in marketing

leasing rates continue to lag behind improvements in vacancy

land prices and the emergence of the Japanese Real Estate

combine the merits of a stable cash flow-based asset business

expenses impacted favorably on Residential Development

rates, but this lag should lessen.

Investment Trust (J-REIT) market, pressures were brought towith those of a non-asset business that emphasizes capital

Against this background, the Mitsubishi Estate Group will

sue collaborative management to realize higher added value.
In the fiscal year ended March 31, 2004, Mitsubishi Estate3mec_ar_01_24_E 04.8.25 7:24 PM ページ 4

efficiency and external funds; and to expand operations byeffective real estate usage, disposal and management. In order

governance as a top priority and will strive to achieve the

Corporate Social Responsibility (CSR)

cultivating new opportunities. Our asset business primarily

to increase non-asset business profits, we will also develop

highest standards in governance.

Demands on the corporate sector to fulfill its social responsi-

consists of activities in Marunouchi. In other areas, we will

income-generating real estate projects based on exit strategies

strive to expand our real estate development business without

and actively expand our fee-based business.

bility continue to increase with each passing year. In addition

officer system. The objectives of the new system are toto standards of corporate ethics and compliance, companies

reinforce the management, oversight and executive functions,

are increasingly required to fulfill a variety of social responsi-

able and broad-based information, International Businessto increase management efficiency, and to accelerate thebilities including contributing to society as a corporate citizen

operations are positioned as a strategic business for the Group.

decision-making process. At the same time, we implemented aand reducing environmental burden and impact. The

represented the primary focus of the first stage of theWe will continue to pursue business overseas giving due con-number of initiatives with a view to raising the quality of deci-

Mitsubishi Estate Group recognizes the importance of com-Marunouchi Redevelopment Project. The period from 2008

sideration to the risk and return.

sions made by management. To encourage Group-widepliance and is aware that change in its fundamental way of

discussion of management strategies, we established a Strategic

thinking backed by an unwavering commitment by manage-

committing to excessive funding and to increase activities in
the non-asset business, including fee-based businesses.
In Building Business operations, the Marunouchi Building

through 2017 has been designated as the second stage during

Providing a significant risk hedge and as a source of valu-

In the context of the Group’s business portfolio,

which we will broaden and deepen the effect of the redevelop-

Mitsubishi Estate will reinforce its development and related

Planning Committee. We also launched a Strategic Investment

ment, are critical to fulfilling its corporate social

ment and further distinguish Marunouchi from all otherbusinesses. At the same time, we will improve optimization ofCommittee, to assess and consider major investment proposals,

responsibility. Accordingly, we are striving to instill in theareas. In our existing buildings, we aim to improve profitabil-

our asset portfolio through a comprehensive review of under-

as a support organization for the Group’s Executive Commit-

minds of all employees the importance of compliance as aity. We will conduct strategic marketing activities that

performing assets. We continued to reorganize our asset

tee. This provides the basis for the decision-making process sosource of corporate profits and the basis for sustainablehighlight the distinguishing features of each building, imple-

portfolio by selling the Hamamatsu ACT Tower during theessential to the executive function. In an effort to enhance

growth. Within the basic mission of the Mitsubishi Estate

ment property upgrade and renewal in an effort to maintainfiscal year under review.

management transparency and secure greater objectivity inGroup of “Creating a Truly Meaningful Society Throughmanagement decision-making, of our five statutory auditors,

Urban Development,” we strive to develop a secure, safe,

competitive advantage, and reduce costs.

Regarding funds procurement, the Company issues

In Residential Development operations, we will continue

relatively long-term corporate bonds and raises funds throughfour have been appointed from outside the Group. We estab-

comfortable and appealing urban environment, acting as rep-

our focus on the Tokyo Metropolitan area, which is expected

other alternatives against the backdrop of a low interest rate

lished the Internal Audit Office, to bolster the internal

resentatives of the people who live, work and seek leisure

to experience ongoing population growth. In addition to thisenvironment. We will stagger future maturity profiles andauditing function and created an Advisory Board, comprised ofthere. By carrying out this mission, we are fulfilling our cor-area-based strategy, we will enhance product planning to bet-

work to procure low-cost, long-term, fixed-rate funds.

externally appointed leading professionals.

porate social responsibility.

ter address the needs of demanding consumers and focus on
highly competitive products in an effort to eliminate sales risk.

In order to maximize corporate value, we introduced a comCorporate Governancepensation system for directors and executive officers linked toWith a focus on raising shareholder value, Mitsubishi Estate

the Group’s consolidated performance. In this manner, weoperations, we will strengthen our asset solutions business byworks diligently to enhance its systems with the aim ofhave focused the interests of shareholders and officers to a

providing optimal solutions for the real estate portfolios held

displaying increasingly efficient and sound management

common goal, greatly enhancing incentives and motivation.

by our customers and other parties, and best-fit proposals forthroughout the Group. To this end, we position corporate

In Urban Development and Investment Management

4

In April 2003, Mitsubishi Estate introduced an executive

July 2004

Shigeru Takagi
President5mec_ar_01_24_E 04.8.25 7:25 PM ページ 6

S P E C I A L F E AT U R E

spirit of6

Continuing Over a Century of Tradition—Creating
a Per fect Living Environment in Tune with
Modern Society

traditi on
Marunouchi has served as one of the world’s leading business centers for over a century. In an era of constant change, however, the area is primed for a vibrant rebirthin tune with the demands of today’s modern society. Charged with the responsibility of managing the treasure that is Marunouchi into the 21st century, Mitsubishi
Estate is looking to create an attractive and vibrant city center, acknowledged
throughout the world as a leading global center of dynamic interaction. In 1998,
Mitsubishi Estate began work on the first 10-year stage of the Marunouchi Redevelopment Project to significantly redevelop those areas adjoining Tokyo Station.
Beginning with the Marunouchi Building, which was completed in August 2002,
the project calls for the redevelopment of six buildings. The Shin-Marunouchi
Building, identified as the final phase of the first stage of redevelopment isscheduled for completion in the fiscal year ending March 31, 2008.
Formerly solely serving the function of a commercial center, the new
Marunouchi district will service the work, leisure and living needs of an entire community. The first stage plans to address the business and entertainment
requirements of those who work in the area, as well as visitors. The project creates avibrant commercial, academic, and business hub, while addressing environmental
concerns such as energy and resource conservation and demands for a green environment. Every aspect of today’s society has been incorporated in theredevelopment plans.
Boasting the status of Japan’s premier business center, Marunouchi is undergoing a major transformation, endearing itself to the increasing number of people
who taste the benefits of the Marunouchi experience.

7mec_ar_01_24_E 04.8.25 7:25 PM ページ 8

Promoting Long-Term Urban Planning toEnhance Tokyo’s Standing in theInternational Communitys p ieaksr i t ooff interacti
traditi on
Marunouchi, located on the west side of Tokyo Station, is Japan’s premier economic center, occupying an important position in the nation’s development. As
the gateway to Japan it is the starting point from which travel to all parts of thecountry begins. It is said that the revitalization of Japan begins with the revitalization of its major city. With this in mind, Mitsubishi Estate is promoting
plans for the long-term redevelopment of the Marunouchi area. Our ultimate
goal is to enhance the competitive value of Tokyo as a leading international city.
A landmark undertaking, this project has brought together the interests ofdiverse parties including the local governments of Chiyoda Ward and Tokyo,
East Japan Railway Company, and private sector land and building owners
around one table to establish unified guidelines for the redevelopment of the
Otemachi, Marunouchi and Yurakucho districts. As a result, for example, it is
now possible for the transfer of unused air rights in connection with buildings ofhistoric significance, public offices and land with limited utilization, which create an optimum city environment, to building redevelopment. In successfully
prompting the relaxation of relevant regulations, all parties involved haveworked as one to accelerate reconstruction of an ideal working and living environment. As probably the first example of large-scale cooperation between the8

public and private sectors in urban redevelopment in Japan, this project will also
serve as a model for future projects.
The domed roof of the three-story Tokyo Station, a defining feature andgateway to the city, will be restored. In addition, the open area between Tokyo
Station and the Imperial Palace will be enhanced, creating a spacious image
commensurate with its role as the gateway to Tokyo.
Redevelopment projects also serve to enhance Tokyo’s reputation as a leadinginternational city and contribute to its and Japan’s economic revitalization, forwhich there is a pressing need. With over 4,000 offices, 240,000 workers, and
1.5 million visitors daily, a wealth of information accumulates in this part ofTokyo. It is the goal of this project to leverage this information and to maximize
the benefits and value of Marunouchi’s unique characteristics. Serviced by ninerail lines and seven underground services, how best to utilize Japan’s most accessible destination is one issue this project must work to answer. With over 100
years of tradition as Japan’s leading business center, it is the role of this project
to combine the old with the new, to consider present day and future concerns,
and to ensure Marunouchi achieves its maximum potential.

9mec_ar_01_24_E 04.8.25 7:25 PM ページ 10

The Second Stage from 2008—Contributing
to the Combined Otemachi,
Marunouchi and Yurakucho Areas

Hibiyya P
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The second stage of the Marunouchi Redevelopment Project is scheduled to commence in 2008. Over a ten-year period, Mitsubishi Estate will invest a total of¥450 billion to rebuild seven to eight buildings, and renew existing structures andconstruct infrastructure. The bustling vigor and prosperity present in the alreadysignificantly developed area adjoining Tokyo Station will be extended to include
Otemachi, Marunouchi and Yurakucho.
The first plans of the second stage involve the reconstruction of the Mitsubishi
Shoji Building, the Furukawa Building and the Marunouchi Yaesu Building.
Efforts will also be made to renew infrastructure and facilities throughout the area
and to create a broader, more deep-rooted city environment as befits the start ofthe second stage of the Marunouchi Redevelopment Project. According to theplan, the centerpiece will be the restoration of the Mitsubishi No. 1 Building, thefirst office building completed in Marunouchi in 1894. From a hospitality
perspective, this will serve as a center for the arts and culture, dissemination of
information, city tourism and area management.
As Marunouchi is one of the world’s leading business centers, the second stage
will also address IT and security concerns. Fulfilling the needs of a modern day
society commensurate with Japan’s premier urban redevelopment project, we will
also promote harmonious coexistence with the environment and create a sustainable growth community.

Harumi Doris p ark of i nnovatio nouchi LineTokyo
Marunouchi Li

Tokyo,JR Sobu Line

3

18

Tokyo

21

19

20

Leasing Buildings
1 Hibiya Kokusai Building
2 Yurakucho Denki Building
3 Yurakucho Building
4 Shin-Yurakucho Building
5 Kokusai Building
6 Shin-Kokusai Building
7 Shin-Nisseki Building
8 Fuji Building
9 Shin-Tokyo Building

Reconstruction Projects!0 Tokyo-Mitsubishi Ginko
Building!1 Kishimoto Building!2 Mitsubishi Denki Building!3 Ministry of Education,
Culture, Sports, Scienceand Technology Building!4 Mitsubishi Building!5 Tokyo Ginko Kyokai Building!6 Togin Building!7 Otemachi Building!8 Shin-Otemachi Building!9 Nippon Building
20 Nippon Steel Building
21 JFE Shoji Building
22 Mizuho Corporate Bank Ltd.
Head Office Building

First Stage (1998~2007)
1 Marunouchi Building
2 The Industry Club of Japan and
Mitsubishi Trust and Banking Building
3 Marunouchi OAZO
4 Tokyo Building
5 Hibiya Park Building
6 Shin-Marunouchi Building
Second Stage (2008~2017)
7 Furukawa Building
8 Mitsubishi Shoji Building
9 Marunouchi Yaesu Building*Years indicate fiscal years ending March 31.

Completion
September 2002
February 2003
August 2004
2006*
2008*
2008*
2010*
2010*
2010*

11

mec_ar_01_24_E 04.8.25 7:25 PM ページ 12

Leveraging Marunouchi Redevelopment Know-How
in Other Area Developmentss p eciali r i t osof phisticati
tradition
Mitsubishi Estate is leveraging the know-how accumulated through its activities
in the Marunouchi Redevelopment Project to benefit the tenants, residents andsurrounding environment of other areas in which it operates.
Together with The Dai-ichi Mutual Life Insurance Company and Taiyo Life
Insurance Company, Mitsubishi Estate completed the Nibancho Garden Projectin April 2004. This project called for the construction of a building thatcombines office space and luxury urban residences. Floors 1 through 6 comprise
offices, with each floor in excess of 3,300m2 and boasting an open floor design
completely unrestricted by pillars and reinforcement walls. Floors 7 through 9
also comprise offices, featuring rooftop gardens. In an advanced informationsociety, this building offers a new way of working. Floors 10 through 14 are forresidential leasing and offer the ultimate in urban living and travel convenience.
Focusing on harmonious coexistence with the environment, we have taken pains

12

to create and maintain a garden ambiance around the building and on its
rooftop.
In May 2003, the Company completed the Paternoster Square Redevelopment Project in London. Located in the heart of the financial district, theproject blends the ambiance of heritage buildings with the sophisticatedfunctions of modern day commercial activity. Conscious of the surroundingarea, the Paternoster design plan has attracted high praise. Mitsubishi Estate has
also secured long-term agreements with tenants ensuring stable income andearnings contribution.
Leveraging the know-how accumulated across numerous projects and circumstances, Mitsubishi Estate is committed to developing superior solutions for thecommunity at large, at home, in the office, or at play.

13mec_ar_01_24_E 04.8.25 7:25 PM ページ 14

Tokyo Building Reconstruction Project (far left)
Currently under construction and expected to be completed in the fiscal year ending March 31, 2006, thiswill be the first building in Japan to take advantage of
regulations allowing unused air rights to betransferred from another site in the district, toincrease floor space.

B U S I N E S S I N F O R M AT I O N

B U I L D I N G B U S I N E S S O P E R AT I O N S
Enhancing Urban Functions from the
Perspective of Area Management

Tosu Premium Outlets (left)
Opened in March 2004, this is the fourth premium
outlet operated by Chelsea Japan, a partnershipamong Mitsubishi Estate, U.S.-based Chelsea
Property Group, Inc. and Sojitz Corporation.

Building Business operations primarily handle the development, leasing and property management of office buildings in Japan’smajor cities, as well as management of large-scale shopping centers, operation of parking lots and operation of heating and cooling services throughout Japan, enhancing the capabilities of a city from the standpoint of area management.
Promoting Increased Interaction in the
Marunouchi District

Redevelopment continues to progress in the areaadjacent to Tokyo Station. The Marunouchi Building
opened in September 2002. Construction on The
Industry Club of Japan and Mitsubishi Trust andBanking Building was completed in February 2003.

Marunouchi OAZO (right)
A multi-function development comprising officebuildings, retail facilities and a hotel, Marunouchi
OAZO is scheduled for completion in August 2004.
The Shin-Marunouchi Building Rebuilding Plan
(far right)
Rebuilding plans proceed on schedule for the completion of the Shin-Marunouchi Building by the fiscal
year ending March 31, 2008. This year has been
designated the final year for completion of the firststage of the Marunouchi Redevelopment.

At the forefront of Building Business operations is the redevelopment of the Marunouchi district, a project, which in termsof infrastructure, corporate scale and population density,offers an overwhelming variety of business opportunities.
Mitsubishi Estate’s ultimate goal is to transform Marunouchi
into a world-class center of dynamic interaction, thereby creating even more opportunity.
As a part of these efforts, we established Tokyo 21c Club, afacility located within the Marunouchi Building, to allow
young up-and-comers to interact and exchange views. At thesame time, we launched Marunouchi Frontier, a network
aimed at supporting venture and new businesses, and actively
solicited Japan’s leading universities to locate their researchfacilities within the Marunouchi district. In addition, throughMarunouchi Direct Access Limited, we provide the latest in
optical fiber communications and through IT Plug-And-Go
Services, offer the optimal IT office environment. In an age
when security is of increasing concern within business circles,
we also offer the Marunouchi R&A Service, a facility to recycle confidential documents after they have been appropriately
processed and erased.
In its plans for redevelopment, Mitsubishi Estate strives tosurpass the most demanding expectations by delivering additional services that can be found only in Marunouchi.
A City of Dynamic Change and Development

14

In an effort to raise awareness of Tokyo as an international
city among business people all over the world, to maximize its
full potential, and to deliver new functions that meet today’s
and tomorrow’s business needs, Mitsubishi Estate must evolve
beyond the role of developer to that of a producer.
Our principal priority is of course to upgrade the featuresof the 31 buildings owned and managed in the Marunouchi

area through rebuilding and renovation. The Marunouchi
Building opened in September 2002, and The Industry Clubof Japan and Mitsubishi Trust and Banking Building wascompleted in February 2003. Plans call for completion of
Marunouchi OAZO in August 2004, rebuilding of the Tokyo
Building by the fiscal year ending March 31, 2006 andrebuilding of the Hibiya Park Building and the ShinMarunouchi Building by the fiscal year ending March 31,
2008. This will complete the first stage of the Marunouchi
Redevelopment, a 10-year program, which commenced in
1998. Thereafter, we will continue to advance the second
stage of the Marunouchi Redevelopment Project, investing¥450 billion over a 10-year period commencing 2008 for therebuilding of seven to eight buildings, the renovation of existing buildings, and further improvements to infrastructure.
Integral to our plans is the gradual development of the
district as a whole. Key to creating a dynamic and vibrant city
center is continuous change in tune with the needs of the day.
Mitsubishi Estate is committed to delivering constant changes,
bringing to the Marunouchi district a never-ending fresh appeal.
Shopping Center Business

Building Business operations include shopping centers inTokyo (Daiba), Yokohama, Hakata and other locations, andwork is also proceeding on the commercialization of
Marunouchi, as part of its redevelopment. Mitsubishi Estate isalso in a partnership with U.S.-based Chelsea Property
Group, Inc. and Sojitz Corporation. Chelsea Japan operates
outlet malls in Gotemba (Shizuoka Prefecture), Izumisano(Osaka Prefecture), and Sano (Tochigi Prefecture), andopened Tosu Premium Outlets in Tosu (Saga Prefecture) in
March 2004. In Spring 2005, we plan to open Toki Premium
Outlets in Toki (Gifu Prefecture) and will continue to expand
our network of outlet malls across Japan.
15mec_ar_01_24_E 04.8.25 7:25 PM ページ 16

Sanbancho Park Terrace Ouen (far left)
Sanbancho Park Terrace Ouen is a luxury 12-floor condominium complex
comprising 102 units, situated on high ground in Sanbancho, Chiyoda
Ward, Tokyo, currently under construction in collaboration with
Mitsubishi Corporation. The project was constructed with advanced
building techniques, minimizing the use of pillars and beams. The property boasts two-tier automated underground parking and a host ofquality functions and features.

RESIDENTIAL DEVELOPMENTO P E R AT I O N S
Strong Per formance in Condominiums
Continues to Attract High Acclaim

Park House Saitama Shin-Toshin MID TOWER (left)
The Park House Saitama Shin-Toshin MID TOWER is a large-scale 25floor condominium complex of 226 units currently under construction in
Kamiochiai, Chuo Ward, Saitama. In collaboration with the “Afternoon
Tea” brand, the project is an “All Electric-Powered Condominium.”

Residential Development operations aim to provide ideal living environments, by developing and marketing condominiums, singleunit homes and residential land, as well as engaging in businesses such as condominium administration and consulting services forthe optimal use of real estate.
Sustaining Solid Performance Based on Timely
Market-Oriented Activities

Izumi Park Town
Encompassing 1,070 hectares in total area, Izumi
Park Town was first established in Sendai, Miyagi
Prefecture in 1972 and is one of the largest multifunctional developments in the country, with aplanned population of approximately 50,000 residents. In September 2004, Izumi Park Town willcelebrate the 30th anniversary of its first housing
lot sale.

needs of customers. We are aiming for commercialization in
mainly the Jonan district of Tokyo and metropolitan areas.
In April 2003, Mitsubishi Estate established the Residential Development & Leasing Office to develop leasing
properties for eventual sale to mainly real estate funds. The
Company will complete its first property under this scheme in
September 2004 in Hatchobori, Chuo Ward, Tokyo. We
expect to expand our business in this area targeting the single,“dual income no kids (DINKS),” and family markets.

In the fiscal year under review, the Company was able to sell
2,299 new condominiums. Leveraging its capabilities, fromland acquisition through product planning, Mitsubishi Estate
is well equipped to reduce the business cycle. At the sametime, we work to strengthen marketing and secure sustainableprofits. Working to enhance product quality, the Company
engages leading designers and firms from a variety ofindustries to distinguish itself from its competitors. Throughactive collaboration with a broad cross section of companies,
Promising Quality Administration and Services
we are well positioned to deliver quality products that boast
In order to provide property owners with quality care after
the latest in design and function.
taking up residence, Mitsubishi Estate undertakes property
The supply of condominiums primarily in the Tokyo Metinspections and other after sales services, in line with its proropolitan area continues unabated. Mitsubishi Estate focusesprietary housing performance indication system. Following
on properties in popular urban areas thatthe introduction of housing performanceoffer convenience through superior locaindication system legislation in August
Mitsubishi
Estatetion and exhibit high turnover, large-scale
2002, the Company has stepped up efforts
Condominium Sales
properties with comprehensive communalin this area. In order to provide owners
2,437
facilities built with the environment inwith an indication of quality, an indepen2,299
mind, and high-rise condominiums thatdent appraisal certificate accompanies
2,096
provide spectacular views.
condominiums for sale as well as the Com1,955
pany’s own documentation at each stage of
Responding to Diverse Lifestyles
design, construction, completion and setA new housing option, cooperative houstlement.
ing, is gaining popularity with
Mitsubishi Jisho Community Service
1,316
homeowners. The Company completed
Co. Ltd. also provides support services andconstruction in February 2004 of Senzokucurrently manages 30,000 condominium
ike STYLE HOUSE, the first cooperative
units. Mitsubishi Estate and related comhousing units in Kamiikedai, Ota Ward,panies are making concerted efforts toTokyo. Mitsubishi Estate will continue toprovide excellent services and further
enhance the STYLE HOUSE brand byimprove condominium management.
incorporating the opinions, comments and2000/3 2001/3 2002/3 2003/3 2004/3

16

17

mec_ar_01_24_E 04.8.25 7:25 PM ページ 18

ARCHITECTURAL DESIGN &E N G I N E E R I N G O P E R AT I O N S
Outside the Group and Overseas —Proactive Development of
Accumulated Know-How

Nibancho Garden (far left)
Completed in April 2004, the Nibancho Garden
offers the latest in office functionality, with floors 1
through 6 featuring in excess of 3,300m2 of columnless space, and modern, high-grade rental housing
on the upper levels. With its roof-top gardens andgreen landscaping, the property delivers harmonious coexistence with the environment and its
surroundings.

Nippon Television Tower (right)
Completed in April 2003, 4 floors below
ground level, 32 stories above
Owner: Nippon Television Network Corporation
M.M. Towers (far right)
Completed in November 2003, 1 floor below
ground level, 30 stories above
Developers: Mitsubishi Estate Co., Ltd. and
Maeda Construction Co., Ltd.

URBAN DEVELOPMENT AND
INVESTMENT MANAGEMENTO P E R AT I O N S

Osaki 1-Chome Building (tentative name) (left)
Scheduled for completion in June 2005, the Osaki
1-Chome Building (tentative name) is under construction in Osaki, an area identified in need ofurgent urban revitalization. In this project, landowners have leased their property holdings withthe aim of maximizing efficiency and return. This isa prime example of the development securitization
method, a method by which we deliver optimal
asset solutions.

Prioritizing Development andManagement in Business Oppor tunity
Expansion
At the core of Mitsubishi Estate’s Architectural Design & Engineering operations is Mitsubishi Jisho Sekkei Inc., a business engaged
in the design and administration of construction and engineering projects, building renovation work, projects related to urban andregional development, as well as comprehensive consulting.

18

Demand is increasing for income-generating real estate for investment purposes among institutional and individual investors. Basedon the fundamental policy of developing and managing quality income-generating real estate, Urban Development and Investment
Management operations respond to these demands through the development business, which encompasses the functions of development, and the management business, which fulfills the administrative function.

Steady Expansion in Contracts from Outside
the Mitsubishi Estate GroupA Far-Sighted Look into the Burgeoning
Chinese Market

Actively Promoting the Development Businessby Strengthening the Solutions Function

Delivering a Broad Base of Real Estate
Investment Services

The major projects that were completed during the fiscal year
ended March 31, 2004 included Nippon Television Tower,
M.M. Towers and Leaf Minato Mirai. Also reflecting thehealthy expansion of contracts from outside the Mitsubishi
Estate Group, due for completion during the fiscal year ending March 31, 2005, are the planned redevelopment of the
Meiji Yasuda-Life Building, Osaka Securities Exchange
Building, and The House Minami-Azabu. In addition, ouraccumulated know-how has been brought to bear on the
refurbishment and consulting businesses, which are both
expected to show growth and are making a solid contribution
to profit expansion.

In recognizing a business opportunity in the Chinese market,
an alliance was formed with a major design business in April
2003. Personnel exchanges are currently underway with theaim of forging cooperative relationships to better undertake
specific projects in the future.
Mitsubishi Jisho Sekkei, and MEC Design International
Corporation, which provides interior design services, bothfully utilize the technological strengths that support the entire
Mitsubishi Estate Group. As leading companies of building
design in their industry, each aims to establish a brand, and todevelop its businesses proactively.

Development functions are undertaken with the purpose ofpromptly placing investment properties on the market andnot for the purpose of long-term gain. In deed, an objectiveof the development business is to generate profit in the formof capital gains. Equally important, however, is to hasten therecovery of invested capital.
In April 2004, construction of Nibancho Garden, a multifunctional office building in Nibancho, Chiyoda Ward,
Tokyo, was completed and the development opened at fulloccupancy. Construction is also proceeding smoothly on
projects including the Osaki 1-Chome Building (tentativename) and the Kudan-Kita Project (tentative name). In connection with its development business, Mitsubishi Estateutilizes special-purpose companies (SPCs), while limiting thelevel of business risk. The Company plans to invest approximately ¥10 billion annually through its equity base.
Mitsubishi Estate aims to expand operations further by making every effort to strengthen its solutions functions for theeffective utilization of customers’ assets.

In administrative functions, we offer fee-based management
services through the operations of Japan Real Estate AssetManagement Co., Ltd., the asset management company forJapan Real Estate Investment Corporation, a company listedon the Tokyo Stock Exchange as a Japan real estate investment
trust (J-REIT). Another Group company, Mitsubishi Jisho
Investment Advisors, Inc., offers comprehensive real estate
investment advisory services.
As a fund manager, Mitsubishi Jisho Investment Advisors,
Inc. included Kawasaki LeFRONT, a retail facility whose
value was enhanced through efforts by the Mitsubishi EstateGroup, in the MJ Retail Fund, a real estate private equity fundestablished in March 2004. This company provides us with astable earnings stream. Mitsubishi Jisho Investment Advisors
will continue efforts to acquire new projects and to increase
assets it holds on deposit on behalf of clients.
Prioritizing development and administrative functions, we
aim to expand business opportunities and respond to socialand economic needs for the revitalization of real estate investment markets and urban redevelopment.

19mec_ar_01_24_E 04.8.25 7:26 PM ページ 20

I N T E R N AT I O N A L
B U S I N E S S O P E R AT I O N S
Comprehensive, Worldwide Real
Estate Services
Paternoster Square Redevelopment Project(right)Located on an approximately 15,000m 2 site in
London’s financial district, this large-scale projectcomprises a four building facility complex. Completed in May 2003, its floor space totals
approximately 88,000m2.
The McGraw-Hill Building (far right)
Located in Manhattan, New York, this building wascompleted in March 1972. Five floors below groundand 51 stories above ground. Total floor space of
237,000m2.

C U S T O M - B U I LT H O U S I N GO P E R AT I O N S
Emphasizing Comfor t to Develop
Products that Suppor t HighQuality Lifestyles

In International Business operations, Rockefeller Group, Inc. (RGI), a subsidiary of Mitsubishi Estate Co., Ltd., engages in the leasing
and management of office buildings in such locations as New York (the Time-Life and McGraw-Hill buildings) and London (Paternoster
Square), as well as real estate development across the United States. In addition, Cushman & Wakefield, Inc., an RGI subsidiary,offers comprehensive real estate services, centered on real estate brokerage worldwide.
Paternoster Square Redevelopment Project
CompletedIn the fiscal year ended March 31, 2004, RGI sold development properties in Florida, successfully generating
development profits and cash flows for future investments.
May 2003 witnessed the completion of the Paternoster
Square Redevelopment Project, a combined office-retail development comprising four buildings located in London’s
financial district close to St. Paul’s Cathedral. With contracts
exchanged with long-term tenants including the London

Stock Exchange, Goldman Sachs International and CB
Richard Ellis, a stable income is expected.
In July 2003, one of the four buildings was sold to a
British insurance company, which not only realized a profit
from the development, but also accelerated the recovery ofinvestment funds.
Amid the sluggish recovery in the U.S. real estate market,
Cushman & Wakefield, Inc. has been making consistentefforts to secure profits by extending its market share andintroducing efficient improvements in cost reduction.

Cerenity (above left)“Cerenity” is an innovative open exterior design
series product.
u:D (above right)
Open exterior design series

Custom-Built Housing operations seek to supply the kind of quality housing that is the foundation of a rewarding life. Through Mitsubishi Estate Home Co., Ltd., our principal vehicle in these activities, we undertake construction contracts for custom-built
housing for individuals as well as housing development companies.
Enriching the Product Lineup by Emphasizing
Function and Designthat first came on the market in the spring of 2002, had a new
exterior design added to complete the product revamp. To
For the main thrust of our two-by-four construction method
further expand the lineup, in response to customer needs andsingle unit house business, we pioneered and commercialized
the preference for city dwellings said to have begun with thethe “Aerotech” 24-hour central heating, cooling and ventilaoffspring of the baby-boom generation, two innovative types
tion system that has been installed in over 3,500, mainly(20 plans) have been added to the systemized open-design
open-design homes. Derived from the “Space that increases
product “U-CONCE,” making a total of seven types (50three-dimensionally” concept, “Aerotech” and the openplans) in all.
design concept are fully satisfying customer
By establishing specialist segments, we aredemands.
working to expand the condominium andIn April 2004, thinking the open-design
house renovation business as well as increase
concept that so reflects customer individualcontracts to build accommodation for rent
ity was in need of further strengthening, the(housing complexes built by the two-by-fourinnovative “Cerenity” was marketed for theor reinforced concrete methods), as the next
first time as the base design series. At thepillars of the custom-built housing business.
Air mascot “Fu-san”
same time, “u:D,” a new type of urban home
The “Aerotech” cartoon figure (Aerotech
Mitsubishi Home)20

21

mec_ar_01_24_E 04.8.25 7:26 PM ページ 22

H O T E L B U S I N E S S O P E R AT I O N S
Enhancing Brand Power andManagement Ef ficiency
Royal Park Shiodome Tower (right)
Located in Shiodome, Tokyo, this new style ofhotel was created around the concepts ofstylish space, a convenient environment andflexible service.

Liv Fitness Club Kita-Asaka (far left)
This large-scale Liv Fitness Club opened in May
2002 and features a 3,050m2 training gym and avariety of relaxation facilities. It is an all-round club,
complete with general-purpose spaces and otheramenities.

Yokohama Royal Park Hotel (far right)
This hotel occupies the 52nd to 67th floors of
the Landmark Tower Yokohama skyscraper in
Minato Mirai, Yokohama. At a height of over
210 meters, the hotel is said to be the highest
in Japan, so it can offer breathtaking views
that change with the time of day and season,
and a new experience with every visit.

Higashi-Fuji Country Club (left)
Nestling in the slopes of Mt. Fuji, the Higashi-Fuji
Country Club is situated 600m above sea level. Itslong golf course offers the beauty of flat fairways
with an average width of 70m, lined with forest on
both sides.

R E C R E AT I O N A L FA C I L I T Y
O P E R AT I O N S
Contributing to Rich and HealthyLifestyles

In Hotel Business operations, Royal Park Hotels and Resorts Co., Ltd. integrates the administration and management of each hotel
to enhance efficiency, accumulates administrative expertise and improves the level of management. In July 2003, the company
opened its second city hotel in Tokyo, the Royal Park Shiodome Tower, in the much talked about Shiodome district. Together withhotels in Yokohama and Sendai, the Royal Park chain comprises a network of eight hotels offering 2,362 guestrooms.
A New Style of Hotel

The Royal Park Shiodome Tower offers a new paradigm inhotel experience, including the use of a time-sharing service
where members are able to use guestrooms on an hourly
basis. All 490 guestrooms feature personal computers
equipped with a high-speed Internet connection and information available through a “cyber concierge.” The hotel also
features such business amenities as dedicated meeting rooms,
a 24-hour business service center and Japan’s first Mandara
Spa for relaxation.

22

Increasing the Brand Value of Royal Park
HotelsThe Royal Park Hotels chain was the first in Japan to introduce a global room reservation system concept that has been
adopted as standard by all the large-scale hotel chains. Basedon this system, we launched Royal Access, Royal Park Hotels’
central reservation office in July 2004, and will aggressively
promote its use for hotels outside the Group.
We plan to increase the value of the Royal Park Hotels
brand by strengthening the functions of the hotel chain. To
this end we intend to actively share and apply common
expertise throughout the Group garnered through theexchange of personnel.

The main activities in our Recreational Facility operations include the management of fitness clubs and golf courses and thedevelopment of businesses associated with increased leisure time and an aging society.
Developing Business in Response to Active
Health-Related Needs

Increasing Management Efficiency in Golf
Course Operations

Liv Sports Co., Ltd., which operates nine branches of the Liv
Fitness Club, one futsal (five-on-five soccer) club and two
massage facilities within the Tokyo area, is turning in solid
performances.
In the future, we plan to add to this base by opening new
branches, taking over the management of fitness clubs
affiliated with large corporations. In addition to the April
2004 post-refurbishment opening of a branch in Makuhari,
Chiba Prefecture, which we took over from anothercompany, a new branch opened near Hashimoto Station in
Sagamihara City in August.
Recent years have witnessed heightened consumer interestin health matters allied to a steadily aging society, which is
expected to bring about an even greater increase in fitness
needs. Family-oriented branches in suburban areas aroundTokyo are at the core of active plans for future openings.

In our golf course operations, Higashi-Fuji Country Club andits sister club Fuji International Golf Club in Shizuoka Prefecture, and Izumi Parktown Golf Club in Miyagi Prefecture areamong those that the Company has developed. As well as
being involved in the planning behind each club course andits facilities, and bringing them to fruition, progress is being
made in efficiency improvements that will bring down costs.
In the spring of 2004, remodeling of the greens at Izumi
Parktown Golf Club was undertaken, which has added totheir charm.
In addition, the division is developing its urban
recreational facilities, such as its futsal business andmembership-based tennis clubs.

23

mec_ar_01_24_E 04.8.25 7:26 PM ページ 24

FINANCIAL REVIEWBUILDINGS SEGMENT
Revenue for the buildings segment comprises the leasing and management ofoffice buildings in Japan, in the UnitedStates through the Rockefeller Group,
Inc., parking lot operations, and district
heating and cooling.

Revenue from Operations (Millions of yen)
2004/3351,246

2003/3

353,577

2002/3

327,422

2001/3317,906

RESIDENTIAL DEVELOPMENT SEGMENT
Revenue for the residential development
segment comprises the construction andsale of condominiums and single-unit
homes; development and sale of residential, resort and commercial lots;
management of condominiums andhomes; and town development.

Revenue from Operations (Millions of yen)
2004/3

143,747

2003/3

158,516

2002/3

137,350

2001/3

132,916

ARCHITECTURAL & ENGINEERING SEGMENT
Revenue for the architectural & engineering
segment comprises the design and project
supervision of building and civil engineering
construction through Mitsubishi Jisho Sekkei
Inc., and interior and building design services
through MEC Design International Corporation.

Revenue from Operations (Millions of yen)
18,3292004/318,488

2003/3
16,358

2002/3

15,616

2001/3

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)
2004/3

83,417

2003/3

81,291

2002/3

79,691

2001/387,364CUSTOM-BUILT HOUSING SEGMENT
Revenue for the custom-built housing segment derives from the contract
construction of custom-built housing
through Mitsubishi Estate Home Co., Ltd.

Revenue from Operations (Millions of yen)
41,318

2004/3
2003/3
2002/334,09530,89837,148

2001/3

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

Revenue from Operations (Millions of yen)
2004/331,134

2003/329,308

2002/330,4502001/332,604OTHER SEGMENT
Revenue for the other segment comprises
the management of such leisure-related
operations as golf courses and fitness clubs,
real estate appraisal, and telecommunication operations through the Rockefeller
Group, Inc.

Revenue from Operations (Millions of yen)
24,893

2004/3

23,5992003/322,187

2002/3
2001/3

18,395

Note: Revenue from Operations in the above graphs includes intersegment transactions.
24

SummaryIn the fiscal year ended March 31, 2004, revenue from operations showed a decline. In the buildings segment, revenues were
impacted by the Company’s decision to halt lease activity forproperties related to the Marunouchi redevelopment and tenant
movements in existing buildings. In addition, in the residential
development segment, there was a decrease in the number ofcondominium units sold. Operating income showed an
improvement with the buildings segment reducing its management costs, the residential development segment improving its
gross margin, and bringing down its selling expenses.
The improvement shown by each business segment also
resulted in increased earnings. With regard to income before
income taxes, there was an increase due to the distribution of
benefits from anonymous association investments and improvements in the non-operating profit and loss account caused by
reduced interest expenses from a fall in interest rates.
Under extraordinary profit and loss, a gain on sale of investment securities was recorded as other income and the loss on
disposal of fixed assets related mainly to the rebuilding of the
Hibiya Park Building as an extraordinary loss. Loss on cancellation of sublease contracts, loss on sales of fixed assets and loss on
valuation of inventories were also recorded. As a result, net
income amounted to ¥34,989 million.
Analysis of Revenue
Revenue from operations for the fiscal year ended March 31,
2004 was ¥679,918 million, a decrease of 0.3% compared withthe previous fiscal year. There follows a breakdown by segment
and the background to these results.
In the buildings segment, the Mitsubishi Trust and Banking
Building, which was completed in February 2003, commenced
full operations. However, due to the Company’s decision to haltlease activity for properties related to the planned rebuilding of
the Marunouchi redevelopment (the Shin-Marunouchi Building
and the Hibiya Park Building) and tenant movements in existing buildings, total revenue (including intersegment transactions)edged down 0.7% compared with the previous fiscal year, to¥351,246 million.
In the residential development segment, revenue declined
9.3% compared with the previous year, to ¥143,747 million.
This was due to a fall in both the number of condominium units
sold and developed lot sales of large-scale provincial properties.
Revenue from the architectural & engineering segment edged
down 0.8% compared with the previous fiscal year, to ¥18,329
million. This was attributable to declining revenues from interior design work.
Revenue from the real estate brokerage segment increased
2.6% compared with the previous fiscal year, to ¥83,417 million. Instrumental in this were economic conditions in Europe
and signs of a gentle recovery in the U.S. economy, where Cushman & Wakefield, Inc. showed a growth in business activities.
Revenue from the custom-built housing segment increased
21.1% compared with the previous year, to ¥41,318 million due
to the increase in volume of orders and number of completions.
The reasons for this increase were product differentiation of

Revenue from Operations

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

681.7
631.0

103.7

679.9

631.6

96.0

574.4
80.6
76.9
68.2

2000/3

2001/3

2002/3

2003/3

2004/3

2000/3

2001/3

2002/3

2003/3

2004/325

“Aerotech” 24-hour central heating, cooling and ventilation systems, and orders of large-scale properties from corporations.
The hotels segment was affected in the first half of the period
under review by the Iraq conflict and the SARS outbreak, butwith the opening for business of Royal Park Shiodome Tower,
revenue increased 6.2% compared with the previous year, to¥31,134 million.
Revenue from the other segment increased 5.4% comparedwith the previous year, to ¥24,893 million. This was due to anincrease in Mitsubishi Jisho Investment Advisors, Inc. commission revenue received from investors.
Analysis of Income
Compared with the previous fiscal year, operating income
increased 8.0%, to ¥103,749 million.
Operating income in the buildings segment increased 2.6%
compared with the previous fiscal year, due to lower payments
for real estate acquisition tax and reduced management costs.
Operating income in the residential development segment
climbed 21.8% compared with the previous year as a result of alowering of sales costs brought about by improvements in condominium gross margin and advertising costs. Every othersegment recorded an increase, except for the hotels segment,
which was affected by both the Iraq war and the SARS outbreak.
Other Income and Expenses
Mitsubishi Estate recorded net other expenses of ¥46,806

million in fiscal 2004, compared with net other expenses of¥26,159 million in the previous fiscal year. The main factors
behind this change were the loss on disposal of fixed assets of¥18,002 million relating to the redevelopment of existing properties, loss on sales of fixed assets of ¥4,562 million, and the loss
on cancellation of sublease contracts of ¥5,061 million.
Net Income
Compared with the previous fiscal term, income before income
taxes and minority interests fell ¥12,921 million, to ¥56,943
million, and net income in the period under review fell ¥1,050
million, to ¥34,989 million. Net income per share was ¥26.96.
Analysis of Financial Position(1) Consolidated Cash Flows
On a consolidated basis, cash and cash equivalents (hereafter“cash”) at the end of the fiscal year under review declined¥16,387 million, to ¥136,063 million. Main cash sources wereincome before income taxes and minority interests, depreciation,issuance of corporate bonds, and long-term borrowings. Main
uses of cash were for purchases of property and equipment, andrepayments of corporate bonds and long-term borrowings.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥77,708 million(down ¥56,898 million compared with the previous fiscal year.).
In the period under review, income before income taxes andNet Income

Net Income per Share

(Billions of yen)

(Yen)

36.0

27.61
35.0

15.26

19.8
14.18

18.4

(71.1)

26

2000/3

26.96

2001/3

2002/3(54.70)2003/3

2004/3

2000/3

2001/3

2002/3

2003/3

2004/3

minority interests of ¥56,943 million and non-cash items suchas depreciation and amortization of ¥56,982 million wererecorded.
Cash Flows from Investing Activities
In the fiscal year under review, net cash used in investing activities was ¥60,645 million, down ¥11,666 million from theprevious fiscal year. Mitsubishi Estate Co., Ltd. used this forconstruction work related mainly to the Marunouchi redevelopment project, including Marunouchi OAZO, and for building
and renovation work carried out on existing properties.
Cash Flows from Financing Activities
In the fiscal year under review, net cash used in financing activities was ¥31,658 million, a decrease of ¥7,243 million year on
year. Compared with the cash increases from long-term debt andthe issuance of corporate bonds, the drop in capital from net
decrease in short-term borrowings and repayments of long-term
debt and corporate bonds were extensive.
(2) Consolidated Balance Sheets
Compared with the previous fiscal year-end, total assets
increased ¥60,915 million, to ¥3,068,842 million. This wasachieved through operating activities, investments and financial
activities previously mentioned.
Liabilities, when compared with the previous fiscal year,
increased ¥15,237 million, to ¥2,139,240 million. Minority

interests fell ¥11,869 million when compared with the previous
fiscal year, to ¥32,102 million. Total shareholders’ equity
increased ¥57,546 million compared with the previous fiscal
year, to ¥897,499 million, due to the recording of net income
and an increase in unrealized gain in securities.
Management Initiatives andFinancial Strategies
Mitsubishi Estate’s three-year medium-term management plan
was announced in March 2002. This set an earnings before
interest, taxes, depreciation and amortization (EBITDA) goal of¥170 billion to be achieved by the fiscal year ending March 31,
2005. The goal will be achieved through the management strategies of integrating Mitsubishi Estate’s asset and non-asset
businesses, and strengthening asset solution functions and management systems.
Concerning the financial strategy, Mitsubishi Estate is focusing on the procurement of long-term fixed-rate debt in theknowledge that it maintains long-term cash inflows from theCompany’s core building business operations. Particularly at thepresent time, taking advantage of favorably low interest rates,
long-term corporate bonds with maturity dates of more than 10
years are being obtained.
The Mitsubishi Estate Group encourages a style of management that places importance on shareholder value, seeks toincrease the value of the Group as a whole and that places anemphasis on cash flow.

Shareholders’ Equity

Interest-Bearing Debt

(Billions of yen)(Billions of yen)

1,271.5

897.5

1,260.2

1,219.8
832.5

840.0

2002/3

2003/3

1,227.5

1,211.9

2003/3

2004/3

518.8
440.7

2000/3

2001/3

2004/3

2000/3

2001/3

2002/327

F I N A N C I A L S TAT E M E N T S

Independent Auditors’ Report

To the Shareholders and Board of Directors of
Mitsubishi Estate Co., Ltd.:We have audited the accompanying consolidated balance sheets of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as ofMarch 31, 2004 and 2003 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of theyears in the three-year period ended March 31, 2004, all expressed in Japanese yen. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in 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 of completion method. Furthermore, as more fully described in Note 16 to the consolidated financial statements, effective inthe year ended March 31, 2002, the Company has changed its classification of certain personnel expenses in the segment information.
In our opinion, the 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, 2004 and 2003, and the results of their operations and their
cash flows for each of the years in the three-year period ended March 31, 2004 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 thepreceding paragraph.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2004 arepresented 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 29, 2004
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 and practices.

28

Consolidated Statements of Operations
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2004, 2003 and 2002

Thousands of
U.S. dollars (Note 3)

Millions of yen

2004

2003

2002

2004

¥679,918¥681,726¥ 631,564$6,433,134

530,729

538,105

510,378

5,021,563

Selling, general and administrative expenses

45,43847,59844,265429,917

Operating income

103,749

96,02376,921

981,634

Revenue from operations
Cost of revenue from operations

Other income (expenses):
Interest and dividend income
Interest expense

2,240

2,618

2,621

21,194(27,482)(29,647)(32,552)(260,024)

2,164

1,811

1,667

20,474Equity in earnings of unconsolidated subsidiaries
and affiliates
Other, net (Note 13)(23,729)(942)(175,506)(224,515)(46,806)(26,159)(203,769)(442,861)

56,94369,864(126,848)

538,773

Income (loss) before income taxes andminority interests
Income taxes (Notes 1 and 9):
Current

10,97011,925

7,018

103,794

Deferred (credit)

7,872

18,786(61,191)

74,481

18,84230,711(54,173)

178,276

3,111

3,114

(1,617)29,435¥ 34,989¥ 36,039¥ (71,058)$ 331,053

Minority interests (credit)
Net income (loss)

Yen

U.S. dollars (Note 3)

Net income (loss) per share:Basic¥26.96¥27.61¥(54.70)$0.25

Diluted

25.33

25.87

—

0.23

8.00

8.00

8.00

0.07

Cash dividends per share
See accompanying notes to consolidated financial statements.

29

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2004 and 2003

Thousands of
U.S. dollars (Note 3)

Millions of yen

Assets
2004

2003

2004

¥ 127,185¥ 143,553$ 1,203,377

Notes and accounts receivable—trade60,49755,473

572,400

Marketable securities (Note 4)

7,612

14,48972,021

Allowance for doubtful receivables(3,041)(5,226)(28,772)

Inventories (Note 5)

276,445

240,253

2,615,621

Deferred income taxes (Note 9)

50,07335,018473,772

Other current assets

37,02728,938350,335

555,799

512,498

5,258,766

Current assets:
Cash (Note 14)

Total current assets

Investments:
Investments in and advances to unconsolidated
subsidiaries and affiliates

26,52625,725250,979

Investment securities (Note 4)

190,040

124,107

1,798,088

Other investments (Notes 6 and 7)

151,230

148,044

1,430,882

367,798

297,876

3,479,969

Total investments

Property and equipment (Note 7):Land

1,341,932

1,355,160

12,696,868

Buildings and structures

1,492,552

1,515,249

14,121,979

Machinery and equipment

89,99594,450851,499

Construction in progress
Less accumulated depreciation
Property and equipment, net

Intangible and other assets (Note 9)

Total assets
See accompanying notes to consolidated financial statements.

30

30,11961,438284,974

2,954,600

3,026,297

27,955,341(867,778)(886,965)(8,210,597)

2,086,821

2,139,332

19,744,734

58,42258,221

552,767¥3,068,842¥3,007,927$29,036,256

Thousands of
U.S. dollars (Note 3)

Millions of yen

Liabilities and shareholders’ equity
2004

2003

2004

Current liabilities:
Short-term borrowings and current portion of¥ 300,328¥ 262,241$ 2,841,593

Notes and accounts payable—trade

long-term debt (Note 7)

59,27068,969560,790

Accrued income taxes (Note 9)

5,913

6,730

55,946

Advances and deposits

72,20861,517683,205

Accrued expenses and other current liabilities (Note 9)42,92048,881

406,093

Total current liabilities

480,641

448,338

4,547,648

Long-term debt (Note 7)

911,559

965,2838,624,836

Lease deposits received

309,209

320,199

2,925,622

Accrued employees’ retirement benefits (Note 8)

9,644

9,560

91,247

Deferred income taxes (Note 9)383,484

331,084

3,628,384

Other noncurrent liabilities

44,70049,539422,934

2,139,240

2,124,003

20,240,703

32,102

43,971

303,737

Total liabilities
Minority interests
Shareholders’ equity (Note 10):
Common stock, without par value:
Authorized—1,980,000,000 shares;

86,53486,534

818,752

Capital surplus

Issued and outstanding—1,299,185,054 shares

115,216

115,216

1,090,131

Land revaluation reserve

421,663

410,606

3,989,620

Retained earnings

220,178

206,8132,083,243

Unrealized gain on securities

70,29628,359665,114

Foreign currency translation adjustments(15,016)(6,456)(142,075)

898,872

841,072

8,504,797

Less treasury stock—1,471,130 shares in 2004;
1,229,510 shares in 2003
Total shareholders’ equity(1,373)(1,119)(12,990)

897,499

839,953

8,491,806¥3,068,842¥3,007,927$29,036,256

Contingent liabilities (Note 12)
Total liabilities and shareholders’ equity

31Consolidated Statements of Changes in Shareholders’ Equity
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2004, 2003 and 2002

Millions of yen

Commonstock

Capitalsurplus

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 method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock¥86,534—¥115,216——

Land
revaluation
reserve¥

Retainedearnings

Foreign
Unrealized currency
gain ontranslation Treasury
securities adjustments
stock

—
—

¥264,091(71,058)¥ 63,156—¥(10,224)
—

—

—

—

—

—

—

—

—

—

—

399,769

—
—

—
—

—
—

Balance at March 31, 2002
Net income
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 method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock

¥

Total
shareholders’equity(7)—¥518,766(71,058)

10,080—10,080(14,447)——(14,447)

—

—

—

—

399,769——72(10,393)

—
—

—
—

—
—

72
(10,393)

—
—

—
—

(183)
—

—
—

—
—

—
(109)

(183)
(109)

86,534—

115,216—

399,769—

182,529
36,03948,709
—

(144)
—

(116)
—

832,497
36,039

—

—

—

—

—

(6,312)—(6,312)

—
—

—
—

—
10,837—(1,421)(20,350)
—

—
—

—
—

(20,350)
9,416

—
—

—
—

—
—

61
(10,392)

—
—

—
—

—
—

61
(10,392)

—
—

—
—

—
—

(3)
—

—
—

—
—

—
(1,003)(3)(1,003)

Balance at March 31, 2003
Net income
Foreign currency translation
adjustments
Net increase in unrealized
gain on securities
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted for by
the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock

86,534—

115,216—

410,606—

206,81334,98928,359—(6,456)—(1,119)—839,953
34,989

—

—

—

—

—

(8,560)—(8,560)

—
—

—
—

—
11,056—(11,056)

41,937—————41,937
—

—
—

—
—

—
—

1
(10,383)

—
—

—
—

—
—

1
(10,383)

—
—

—
—

—
—

(184)
—

—
—

—
—

—
(254)

(184)
(254)

Balance at March 31, 2004

¥86,534¥115,216¥421,663¥220,178¥70,296¥(15,016)¥(1,373)¥897,499

Thousands of U.S. dollars (Note 3)

32

Balance at March 31, 2003
Net income
Foreign currency translation
adjustments
Net increase in unrealized
gain on securities
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted for by
the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock$818,752—$1,090,131—$3,885,003—$1,956,788
331,053$268,322—$ (61,084)—$(10,587)—$7,947,327
331,053

—

—

—

—

—

(80,991)—(80,991)

—
—

—
—

—
104,607—(104,607)

396,792
—

—
—

—
—

396,792
—

—
—

—
—

—
—

9
(98,240)

—
—

—
—

—
—

9
(98,240)

—
—

—
—

—
—

(1,740)
—

—
—

—
—

—
(2,403)(1,740)(2,403)

Balance at March 31, 2004

$818,752$1,090,131$3,989,620$2,083,243$665,114$(142,075)$(12,990)$8,491,806

See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2004, 2003 and 2002

Thousands of
U.S. dollars (Note 3)

Millions of yen

Operating activities
Income (loss) before income taxes andminority interests
Depreciation and amortization
Loss (gain) on sales or disposal ofproperty and equipment
Loss (gain) on sales of beneficial
interests in trust of property and equipment
Gain on sales of securities
Valuation loss on securities
Valuation loss on inventories
Loss on impairment of property and equipment
Equity in net income of affiliates
Decrease in allowancesInterest and dividend income
Interest expense(Increase) decrease in notes and accounts
receivable(Increase) decrease in inventories(Decrease) increase in notes and accounts payable(Decrease) in lease deposits received
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 and equipment
Purchases of property and equipment
Proceeds from sales of investment securities
Purchases of investment securities
Proceeds from sales of beneficial interests
in trust of property and equipment
Other
Net cash used in investing activities
Financing activities
Net (decrease) 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 (used in) provided by 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)

2004

2003

2002

2004

¥ 56,943
56,982¥ 69,864
56,739¥(126,848)
63,63812,809(10,508)

7,575

121,194

174(7,074)
1,059
4,008
—
(2,164)(3,324)(2,240)27,482—(1,887)
3,957
5,915
—
(1,811)(225)(2,619)29,649

—
(616)
4,048
9,680
156,365(1,667)(1,234)(2,622)
32,6391,646(66,931)
10,01937,922—(20,474)(31,450)(21,194)
260,024(8,126)(614)(7,529)(10,989)(4,705)(7,342)
12,917
17,518(2,907)
1,816

10,39010,856(3,749)(796)(15,673)(76,885)(5,809)(71,236)(103,973)(44,516)

112,692
3,457(26,991)(11,449)

171,076
3,010(29,854)(9,626)

141,986
3,091(34,229)(6,742)

1,066,250
32,708(255,378)(108,326)

77,708

134,606

104,106

735,244

10,028(8,200)3,459(70,205)
9,292(7,149)41,946(20,093)
29,325(128,807)
6,689(4,609)15,873(18,257)
19,895(115,618)
4,472(22,561)

94,881(77,585)
32,727(664,253)
87,917(67,641)

954
1,175

—
3,238

(8,825)
4,489

9,026
11,117(60,645)(72,311)(120,532)(573,800)(39,609)—
139,960(78,737)
85,190(115,406)(10,383)(12,672)(5,566)(1,877)
61,972(42,760)
132,538(171,723)(10,391)(1,094)

16,951—
82,270(89,013)43,431(77,960)(10,393)(436)(374,765)—
1,324,250(744,980)
806,036(1,091,929)(98,240)(119,897)(31,658)(38,901)(35,150)(299,536)(1,801)(2,431)

2,771(17,040)(16,397)
152,450

20,963
131,374(48,805)
178,922(155,142)
1,442,425$

538,773
539,142

9

113

1,257

85

¥ 136,063¥ 152,450¥ 131,374$ 1,287,378

See accompanying notes to consolidated financial statements.

33

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2004 and 2003

1.

SIGNIFICANT ACCOUNTING POLICIESBasis of preparation

The accompanying consolidated financial statements of Mitsubishi
Estate Co., Ltd. (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial statements prepared by the Company as required by the Securities andExchange Law of 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.
As permitted by the Securities and Exchange Law, amounts ofless than one million yen have been rounded off. As a result, thetotals shown in the accompanying consolidated financial statements(both in yen and U.S. dollars) do not necessarily agree with thesums of the individual amounts.
Principles of consolidation

The accompanying consolidated financial statements include theaccounts of the Company and the subsidiaries that 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 have been
eliminated in consolidation.
Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. The actual results
could differ from those estimates.
Foreign currency translation

Current and non-current monetary accounts denominated in foreign currencies are translated into yen at the current rates.
The revenue and expense accounts of the foreign consolidated
subsidiaries are translated using the average rate during the year.
Except for shareholders’ equity, the balance sheet accounts are alsotranslated into yen at the rates of exchange in effect at the balance
sheet date. The components of shareholders’ equity are translated attheir historical exchange rates.

into three categories: trading, held-to-maturity or other securities.
Trading securities are carried at fair value and held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes,
included directly in shareholders’ equity. Non-marketable securities
classified as other securities are carried at cost. Cost of securities
sold is determined by the moving average method.
Inventories

Inventories are mainly stated at cost, determined by the identified
cost method; however, when the fair value is substantially less thancost 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, is stated at cost less accumulated depreciation. Depreciation is calculated
principally by the declining-balance method, except for buildings
acquired in Japan subsequent to March 31, 1998 and property andequipment of foreign subsidiaries on which depreciation is calculated by the straight-line method at rates determined based on theestimated useful lives of the respective assets. The Company has
capitalized the costs incurred for significant renewals and additions;however, costs for maintenance and repairs are charged to income.
As of March 31, 2002, the Company revalued its land at fair value, pursuant to Article 2 of the “Enforcement Ordinance for the
Law Concerning Revaluation Reserve for Land” and its amendments (the “Law”). The related unrealized gain, net of applicable
income taxes, has been recorded as “Land revaluation reserve” inshareholders’ equity.
The Company reviews its property and equipment (includingland) for impairment whenever events or changes in its business circumstances indicate that the carrying amount of the assets may not
be fully recoverable. The Company performs cash flow analyses todetermine if an impairment exits. If impairment is determined toexist, any related loss on impairment is calculated based on the cash
flow analyses.
Leases

Noncancelable leases are primarily accounted for as operating leases(whether such leases are classified as operating or finance leases)
except that leases that stipulate the transfer of ownership of theleased assets to the lessee are accounted for as finance leases.
Intangible and other assets

Cash equivalents

The Company considers all highly liquid investments that are readily convertible into cash and have an original maturity of threemonths or less to be cash equivalents. Reconciliation between cashin the balance sheet and cash equivalents at March 31, 2004, 2003
and 2002 is presented in Note 14.
Marketable securities and investment securities

Securities other than those of subsidiaries and affiliates are classified

34

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 straight-line
basis, except for any goodwill and any indefinite lived intangible
assets of subsidiaries in the United States acquired in a businesscombination completed after June 30, 2001, which have not beenamortized. A loss is recognized if the fair value falls below the carrying amount. Land use rights are stated on a cost basis.

Retirement benefits

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 the conditions under which the termination occurs.
Accrued employees’ retirement benefits are provided mainly at
an amount calculated based on the retirement benefit obligationand the fair value of the pension plan assets as of the balance sheet
date, as adjusted for unrecognized actuarial gain or loss and unrecognized prior service cost. The retirement benefit obligation is
attributed to each period by the straight-line method over the estimated years of service of the employees.
The net retirement benefit obligation at transition incurred at
the Company and its domestic consolidated subsidiary was charged
to operations as incurred. The net retirement benefit obligation attransition incurred at certain foreign subsidiaries is amortized over
20 years.
Actuarial gain and loss are amortized in the year following theyear in which the gain or loss is recognized by the straight-line
method over the period of the range from 5 years to 17 years which
are shorter than the average remaining years of service of theemployees.
Prior service cost is being amortized as incurred by the straightline method over the period of 6 years or 10 years which are shorter
than the average remaining years of service of the employees.
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.

(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 accepted by
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 recognizedat the date of completion of each relevant project, except thatcertain long-term projects over ¥500 million in total revenue arerecognized by the percentage of completion method.
(e)Revenue from construction contracts is recognized at the date ofcompletion of each relevant project, except that certain longterm projects over ¥5,000 million in total revenue are recognizedby the percentage of completion method.
(f) Other operating revenue is recognized on an accrual basis.
Treasury stock and reduction of legal reserves

Effective April 1, 2002, the Company and consolidated subsidiaries
adopted a new accounting standard for treasury stock and reduction of legal reserves. The adoption of this new standard had noeffect on profit and loss.
Net income (loss) per share

Deferred tax assets and liabilities are determined based on thefinancial statements and the tax bases of assets and liabilities, using
the enacted tax rates in effect for the year in which the temporary
differences are expected to reverse. Deferred tax assets are also recognized for the estimated future tax effects attributable to operating
loss carry forwards. Valuation allowances are established to reducedeferred tax assets if it is more likely than not that the some portionor all of the deferred tax assets will not be realized.

Until the year ended March 31, 2002, in computing net income(loss) per share assuming no dilution, the average number of shares
outstanding during each year, adjusted to give retroactive effect toany free distribution of shares, had been used. Net income (loss)
per share assuming full dilution had been computed on theassumption that all convertible bonds were converted into common
stock at the beginning of the year, or at the time of issuance in thecase of newly issued bonds, with an appropriate adjustment of therelated interest expense, net of income taxes, for such convertible
bonds.
In accordance with a new accounting standard for earnings per
share which became effective April 1, 2002, basic net income pershare is computed based on the net income available for distribution to shareholders of common stock and the weighted average
number of shares of common stock outstanding during each year.
Diluted net income per share is computed based on the net income
available for distribution to the shareholders and the weighted average number of shares of common stock outstanding during eachyear assuming full conversion of convertible bonds.

Derivative financial instruments

Appropriation of retained earnings

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 intosuch transactions for speculative or trading purposes.
Derivative financial instruments are carried at fair value with any
changes in unrealized gain or loss charged or credited to operations,
except for those which meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as an asset or
liability.

Under the Commercial Code of Japan, the appropriation ofretained earnings with respect to a given financial year is made byresolution of the shareholders at a general meeting held subsequent
to the close of such financial year. The accounts for that year donot, therefore, reflect such appropriations.

Income taxes

Reclassifications

Certain reclassifications have been made to the 2003 and 2002
financial statements in order to conform them to the 2004 presentation.

Revenue recognition

The consolidated statements of income reflect revenue from operations in the following manner:35

2. ACCOUNTING CHANGE
Effective April 1, 2001, the Company changed its revenue recognition policy for certain long-term projects over ¥500 million inrevenue for architectural design and supervision and ¥5,000 million
in revenue for construction contracts, from the completion method
to the percentage of completion method. This change was made inorder to achieve a more accurate presentation of the operating
results of the Company. The effect of this change was to increase
revenue from operations by ¥5,453 million and income before
income taxes by ¥1,691 million, 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 ¥105.69 = U.S.$1.00, the approximate rate ofexchange prevailing on March 31, 2004. 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 theabove or any other rate.

4. MARKETABLE SECURITIES AND INVESTMENT SECURITIESMarketable and investment securities classified as other securities at March 31, 2004 and 2003 are summarized as follows:
2004
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)¥60,088¥178,687¥118,599$568,530$1,690,670$1,122,140

392
60,480392
179,079—
118,599

3,708
572,239

3,708
1,694,379—
1,122,140——¥60,480——¥179,079——¥118,599——$572,239——$1,694,379——$1,122,140

2003
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

Proceeds from sales of securities classified as other securities totaled¥8,755 million ($82,836 thousand) in 2004 and ¥2,191 million in
2003. Gross realized gain and gross realized loss were ¥7,160 million

36

Unrealized
gain (loss)

Cost

Fair value¥44,272¥ 99,261¥54,988

1,347
45,6191,347
100,608—
54,9884,054
4,054¥49,673

3,224
3,224
¥103,832

(829)
(829)
¥54,159($67,745 thousand) and ¥86 million ($813 thousand) in 2004 and¥1,872 million and ¥59 million in 2003, respectively.

Marketable debt securities classified as held-to-maturity securities at March 31, 2004 and 2003 are summarized as follows:
2004
Millions of yen

Amortized
cost

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

Fair value

Thousands of U.S. dollars

Unrealized
gain (loss)

Amortized
cost

Fair value

Unrealized
gain (loss)

¥ 222
222

¥ 224
224

¥1
1

$ 2,100
2,100$ 2,119
2,119

$9
9

1,899
1,899
¥2,121

1,898
1,898¥2,122(1)(1)¥0

17,967
17,967$20,068

17,958
17,958$20,077

(9)
(9)
$0

2003
Millions of yen

Amortized
cost

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

Fair value

Unrealized
gain (loss)

¥ 222
222

¥ 224
224

¥2
2

1,899
1,899
¥2,121

1,898
1,898¥2,122(1)(1)¥1

Marketable and investment securities recorded at cost at March 31, 2004 and 2003 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2004
Other securities:
Nonmarketable equity securities(other than equity securities listedon the over-the-counter market)
Mutual funds
Commercial paper
MMF
Other
Corporate bonds
Held-to-maturity securities:
Commercial paper
Total

2003

2004

¥10,831
448
2,142
9
20
1,000

¥20,387
1,674
1,486
8,945
148
—

$102,478
4,238
20,266
85
189
9,461

1,999
¥16,449—¥32,640

18,913$155,634

The redemption schedule for securities classified as other securities at March 31, 2004 is summarized as follows:
Millions of yen

Due within
one yearor less

Bonds:
Government bonds
Corporate bonds
Other bonds
Other
Total

¥ 143
1,000
1,900
2,000
¥5,043Due after
one yearthroughfive years

¥ 60
374
—
—
¥434

The Company recognized losses on other securities considered otherthan-temporary amounting to ¥1,059 million ($10,019 thousand)Thousands of U.S. dollars

Due after
five years
or more

¥20
—
—
—
¥20

Due within
one yearor less$ 1,353
9,461
17,97718,923$47,715

Due after
one yearthroughfive years

$ 567
3,538
—
—
$4,106

Due after
five years
or more

$189
—
—
—
$189

and ¥3,956 million for the years ended March 31, 2004 and 2003,
respectively.

37

5. INVENTORIESInventories at March 31, 2004 and 2003 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

2004
¥141,443
109,668
14,262
11,070¥276,445

2003¥130,369
80,63418,75010,500¥240,253

2004$1,338,281
1,037,638
134,941
104,740$2,615,621

6. OTHER INVESTMENTS
Other investments at March 31, 2004 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

Lease deposits
Long-term prepaid expenses and other
Total

2004
¥ 74,691
76,539¥151,230

2003¥ 84,250
63,794¥148,044

2004$ 706,698
724,183$1,430,882

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBTAt March 31, 2004 and 2003, short-term borrowings and the current portion of long-term debt consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2004 and 2003 were 0.46% and0.48%, respectively. Short-term borrowings are principally unsecured.

38

2004
¥ 47,325
253,003¥300,328

2003¥ 87,181
175,060¥262,2412004$ 447,771
2,393,821$2,841,593

At March 31, 2004 and 2003, long-term debt consisted of the following:Thousands of
U.S. dollars

Millions of yen

Zero coupon convertible bonds due 2006
5.6% mortgage bonds due 2004
5.275% mortgage bonds due 2005
4.8% mortgage bonds due 2005
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
1.7% unsecured bonds due 2004
0.9% 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
0.37% 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
0.72% unsecured bonds due 2009
1.9% unsecured bonds due 2010
1.55% unsecured bonds due 2011
1.44% unsecured bonds due 2011
1.16% unsecured bonds due 2011
3.275% unsecured bonds due 2012
1.47% unsecured bonds due 2012
1.58% unsecured bonds due 2012
1.395% unsecured bonds due 2012
1.2% unsecured bonds due 2012
1% unsecured bonds due 2013
0.785% unsecured bonds due 2013
1.349% unsecured bonds due 2014
1.65% unsecured bonds due 2014
1.655% unsecured bonds due 20143.125% unsecured bonds due 20173% unsecured bonds due 2018
2.5% unsecured bonds due 2020
2.42% unsecured bonds due 2022
1.50% unsecured bonds due 2022
2.9% unsecured bonds due 2032
2.615% unsecured bonds due 2032
2.04% unsecured bonds due 2032
1.72% unsecured bonds due 2033
7.37% unsecured bonds due 2008 (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)
Loans from banks and insurance companies:
SecuredUnsecuredLess current portion2004¥ 100,000
50,00050,00050,000
—
—
—
—
—
—
—
10,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,00010,0003,826—
14,0242,324

2003¥ 100,000
50,00050,00050,00010,00020,00015,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,000—10,00010,000——10,00010,00010,00010,00010,00010,000—10,00010,000——5,139
21,813
7,758
2,602

72,599381,788
1,164,561(253,002)¥ 911,559

98,314
299,717
1,140,343(175,060)¥ 965,283$

2004
946,163
473,081473,081473,081
—
—
—
—
—
—
—
94,616
94,616
94,616
94,616
94,616
94,616
94,616
283,848
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
189,232
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
94,616
189,232
94,61636,200—132,689
21,988686,905
3,612,337
11,018,648(2,393,812)$ 8,624,836
39

Certain bonds have call options that may be exercised at therespective expiry dates.
The agreements under which the zero coupon convertible
bonds were issued provide for conversion of the bonds into sharesof common stock at the current conversion prices per share of¥1,200 ($11) subject to adjustment in certain cases, for example,
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, 2004 are summarized as follows:
Millions of yen

Year ending March 31:
2005
2006
2007
2008
2009 and thereafter
Total

The assets pledged as collateral for short-term borrowings of ¥7,359
million ($69,628 thousand), other current liabilities of ¥387 million ($3,661 thousand), long-term debt of ¥72,598 million¥ 253,002
126,216
240,81271,543472,988¥1,164,561$ 2,393,812
1,194,209
2,278,474
676,9134,475,238$11,018,648($686,895 thousand) and other noncurrent liabilities of ¥5,036
million ($47,648 thousand) at March 31, 2004 were as follows:
Millions of yen

Other investments
Land
Buildings and structures
Machinery and equipment
Total

Additionally, all assets of the Company are subject to the terms ofan enterprise mortgage for mortgage bonds, which amounted to¥150,000 million ($1,419,244 thousand) at March 31, 2004.
As is customary in Japan, collateral must be given if requested
by lending institutions under certain circumstances, and banks, inThousands of
U.S. dollars

¥

1,046
18,358
114,534
6,138¥140,078

Thousands of
U.S. dollars

$

9,896
173,696
1,083,678
58,075$1,325,366

general, have the right to offset cash deposited with them against
any debt or obligations payable to a bank which become due incases of 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.

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,
2004 and 2003 for the Company’s and its consolidated subsidiaries’ defined benefit pension plans:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized net benefit obligation at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Unrecognized gain of plan assets
Net amounts recognized in the consolidated balance sheet
Prepaid pension expenses
Accrued employees’ retirement benefits

40

2004
¥(77,622)
63,190(14,432)453
10,397
1,083(2,903)(5,402)4,241¥ (9,644)

2003¥(72,019)
39,271(32,748)
563
25,49099—(6,596)2,964¥ (9,560)

2004$(734,430)
597,880(136,550)
4,286
98,372
10,246(27,467)(51,111)
40,126$ (91,247)

The components of expenses related to the pension and severance plans for the years ended March 31, 2004 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

2004¥ 3,470
2,210(1,105)54
3,202¥ 7,833

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

2003
¥ 2,950
2,185(1,221)
58
2,266¥ 6,238

2004$ 32,831
20,910(10,455)510
30,296$ 74,112

The assumptions used in accounting for the pension and severance plans for the years ended March 31, 2004 and 2003 were as follows:

Discount rate
Expected rate of return on plan assets

2004

2003

2.0–6.25%
2.25–7.5%

2.50–6.75%
2.25–7.5%

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 instatutory tax rates of 42.05%. Income taxes of the foreign
consolidated subsidiaries are based generally on the tax rates
applicable in their countries of incorporation.

The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2004 and 2003 differ from thestatutory 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
Undistributed earnings of affiliates
Adjustment of deferred tax assets to reflect change in effective tax rate
Other
Effective tax rates

2004
42.05%

2003
42.05%(15.95)1.41(0.22)
0.77
4.86
—
0.17
33.09%(7.62)
1.07(0.10)
0.65
2.69
1.41
3.81
43.96%

2002*1*1 The differences between the statutory tax rate and the effective tax rate reflected in the accompanying consolidated statement of operation for the year ended March 31, 2002 was less than
5% and, therefore, no reconciliation has been disclosed.

41

The significant components of deferred tax assets and liabilities as of March 31, 2004 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2004

2003

2004

¥

¥

28,49012,021
29,827
67,570108,566
17,540264,014(18,252)
245,762$ 271,738
112,829
285,864
464,935
954,536
179,723
2,269,656(139,805)
2,129,851(68,680)(390,265)(40,104)(21,173)(20,108)(540,330)¥(294,568)(601,911)(3,691,645)(294,833)(456,599)(220,919)(5,265,919)$(3,136,067)

Valuation allowance
Total deferred tax assets
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

28,72011,92530,21349,139100,885
18,995
239,880(14,776)
225,104(63,616)(390,170)(31,161)(48,258)(23,349)(556,555)¥(331,451)

New legislation was enacted in March 2003 which will change theaggregate statutory tax rate from 42.05% to 40.69% effective thefiscal year beginning after March 31, 2004. The effect of this tax
rate change was to decrease deferred tax liabilities related to land
revaluation and unrealized gain on securities by ¥9,415 million and¥613 million, respectively and was to increase land revaluation

reserve and unrealized gain on securities in Shareholders’ equity by
the same amount at March 31, 2003. The effect of this change wasalso to decrease deferred tax assets by ¥986 million at March 31,
2003 and to increase income taxes-deferred by the same amount for
the year ended March 31, 2003.

10. SHAREHOLDERS’ EQUITY
Retained earnings include a legal reserve provided in accordancewith the Commercial Code of Japan. The Code provides that neither capital surplus nor the legal reserve is available for dividends,
but both may be used to reduce or eliminate a deficit by resolutionof the shareholders or may be transferred to common stock byresolution of the Board of Directors. The Code also provides that if
the total amount of capital surplus and the legal reserve exceeds
25% of the amount of common stock, the excess may be distributed to the shareholders either as a return of capital or as dividends
subject to the approval of the shareholders.

11. LEASESThe following pro forma amounts represent the acquisition costs,
accumulated depreciation and net book value of the leased assets asof March 31, 2004 and 2003, 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 operatingleases:Millions of yen

Acquisition
costs

42

Accumulated
depreciation

Thousands of U.S. dollars

Net book
value

March 31, 2004
Buildings and structures
OthersTotal¥ 4,3228,432¥12,756

¥ 888
3,864
¥4,753¥3,434
4,567¥8,002

March 31, 2003
Buildings and structures
OthersTotal¥ 2,666
8,114¥10,780

¥ 596
3,618
¥4,214¥2,0704,496¥6,566

Acquisition
costs$ 40,893
79,780$120,692

Accumulated
depreciation$ 8,401
36,559$44,971

Net book
value$32,491
43,211$75,711

Lease payments relating to finance leases accounted for as operatingleases in the accompanying consolidated financial statements
amounted to ¥2,105 million ($19,916 thousand), ¥1,864 millionand ¥1,798 million for the years ended March 31, 2004, 2003 and2002, respectively.

Future minimum lease payments subsequent to March 31, 2004 on noncancelable operating leases and finance leases accounted for as
operating leases are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

FinanceleasesYear ending March 31:
20052006 and thereafter¥2,070
5,932¥8,002

OperatingleasesFinanceleasesOperatingleases$19,585
56,126$75,711$ 50,950
395,316$446,267¥ 5,385
41,781¥47,166

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, 2004 from noncancelable operating leases are summarized as follows:
Millions of yen

Year ending March 31:
20052006 and thereafter¥ 86,799
731,739¥818,539

Thousands of
U.S. dollars$ 821,260
6,923,445$7,744,715

12. CONTINGENT LIABILITIESAt March 31, 2004, the Company and its consolidated subsidiaries had the following contingent liabilities:
Millions of yen

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

¥1,117600
109¥1,827

Thousands of
U.S. dollars$10,568
5,676
1,031$17,286

13. OTHER INCOME (EXPENSES)The components of “Other, net” in “Other income (expenses)” for each of the years ended March 31, 2004, 2003 and 2002 were as
follows:
Thousands of
U.S. dollars

Millions of yen

Loss on disposal of fixed assets
Loss on sales of fixed assets
Loss on impairment of fixed assets
Gain on sales of fixed assets
Gain on sales of investment securities
Loss on valuation of investment securities
Loss on cancellation of sublease contracts
Loss on valuation of inventories
Other, net

2004¥(18,002)(4,562)——
7,160(1,059)(5,061)(4,008)1,806¥(23,729)

2003¥(7,541)——
18,427
1,872(3,957)—(5,915)(3,828)¥ (942)

2002¥—(7,171)(156,365)
1,741—(3,595)—(9,680)(435)¥(175,506)

2004$(170,328)(43,163)——
67,745(10,019)(47,885)(37,922)
17,087$(224,515)

43

14. SUPPLEMENTAL CASH FLOW INFORMATION
The following table represents a reconciliation of cash and cash equivalents as of March 31, 2004, 2003 and 2002:
Thousands of
U.S. dollars

Millions of yen

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

2004¥127,185

2003¥143,553

2002¥131,738

2004$1,203,377(1,665)(1,925)(2,055)(15,753)

5,543

10,822

1,691

52,4455,000¥136,063—¥152,450—¥131,374

47,308$1,287,378

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 suchtransactions only with financial institutions with high credit ratings.
The notional amounts of the derivatives do not necessarily represent the amounts exchanged by the parties and, therefore, are not a
direct measure of 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, 2004 and 2003:
Millions of yen

Notional
amountFair value

Thousands of U.S. dollars

Unrealized
gain (loss)

March 31, 2004
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total¥ 5,000
5,000¥10,000

¥(86)
138
¥ 51

¥(86)
138
¥ 51

March 31, 2003
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total¥ 5,000
5,000¥10,000¥(137)
214¥ 77¥(137)
214¥ 77

Notional
amount$47,308
47,308$94,616

Fair value$ (813)
1,305
$ 482

Unrealized
gain (loss)$ (813)
1,305
$ 482

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

16. SEGMENT INFORMATIONBusiness segments

The Company and its consolidated subsidiaries are primarily
engaged in the real estate business. Their business segments areclassified in terms of the nature of each operation or service and44

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, 2004, 2003 and 2002
are summarized as follows:
Millions of yen

2004

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

Buildings

Residential
development

Architectural& engineering

Real estate
brokerage

Custom-built
housing

Hotels¥ 345,519
5,727
351,246
250,004¥ 101,242¥143,383
363
143,747
128,506¥ 15,240¥14,172
4,156
18,32917,291¥ 1,038¥83,266
151
83,41780,508¥ 2,908¥39,560
1,757
41,31841,668¥ (350)¥30,986
148
31,13430,813¥ 321¥ 23,028 ¥ 679,918
1,864
14,16924,893694,087
25,535574,327¥ (641) ¥ 119,760¥—(14,169)(14,169)
1,840¥ (16,010)¥ 679,918—
679,918
576,168¥ 103,749¥2,224,297
49,402
69,331¥306,393
655
701¥16,831122
81¥63,836
2,909
1,390

¥14,871167
164¥32,272
1,265
2,381

¥127,891 ¥2,786,395
1,794
56,317
7,062
81,113¥282,447707
11¥3,068,842
57,024
81,125

Eliminations
or corporate

Consolidated

Other

Total

Eliminations
or corporate

Consolidated

Thousands of U.S. dollars

2004

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

Buildings

Residential
development

Architectural& engineering

Real estate
brokerage

Custom-built
housing

Hotels

Other

Total

$ 3,269,173
54,186$1,356,637
3,434$134,090
39,322$787,832
1,428$374,302
16,624$293,178
1,400$ 217,882
17,636$ 6,433,134
134,061

3,323,360
2,365,446

1,360,081
1,215,876

173,422
163,601

789,261
761,737

390,935
394,247

294,578
291,541

235,528
241,602$ 957,914$ 144,195$ 9,821$ 27,514$ (3,311)$ 3,037$$21,045,482
467,423
655,984$2,898,978
6,197
6,632

$159,248
1,154
766$603,992
27,523
13,151$140,703
1,580
1,551

$305,345
11,96822,528$—(134,061)$ 6,433,134—

6,567,196
5,434,071(134,061)
17,4096,433,134
5,451,490(6,064)$ 1,133,125$ (151,480)$ 981,634$1,210,057
16,974
66,818$26,363,847
532,850
767,461$2,672,409
6,689
104

$29,036,256
539,540
767,574

Eliminations
or corporate

Consolidated

Millions of yen

2003

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

Buildings

Residential
development

Architectural& engineering

Real estate
brokerage

Custom-built
housing

Hotels

Other

Total

¥ 347,661
5,916¥158,168
348¥11,596
6,892¥81,108183¥32,623
1,472¥29,131177¥ 21,439
2,160¥ 681,726
17,148353,577
254,951

158,516
146,006

18,48818,246

81,291
79,03734,09534,97029,30828,78523,59925,484

98,626¥ 12,510¥

242¥ 2,254¥ (875)¥523¥2,277,103
48,261
133,269¥276,459
674
915¥17,28794
365¥70,299
3,168
2,352

¥16,209171
113¥31,197
1,155
786

¥

¥

—
(17,148)¥ 681,726—

698,874
587,479(17,148)(1,776)

681,726
585,703¥ (1,885)¥ 111,395¥ (15,372)¥¥100,647
1,913
3,425

¥2,789,201
55,436141,225¥218,726
686
1,550¥3,007,927
56,122
142,775

96,02345

Millions of yen

2002

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

Buildings

Residential
development

Architectural& engineering

Real estate
brokerage

Custom-built
housing

Hotels

Other

Total

¥ 321,916
5,506¥136,604
746¥12,783
3,575¥79,357334¥29,943955¥30,37080¥20,591
1,596¥ 631,564
12,792

327,422242,379

137,350
128,932

16,35817,066

79,69180,85430,89832,06330,45030,04622,187
24,47185,043¥ 8,418¥ (708)¥ (1,163)¥ (1,165)¥404¥ (2,284)¥¥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
1,912
2,317

¥

¥

Consolidated—(12,792)¥ 631,564—

644,356
555,811(12,792)(1,168)631,564554,643

88,545¥ (11,624)¥¥2,719,234
64,537
131,654¥316,561
545(39)¥3,035,795
65,082
131,615

76,921

Revenue recognition

Land revaluation

As described in Note 2, “Accounting Change,” the architectural
engineering segment has changed its revenue recognition policy forarchitectural design and supervision services contracts with revenueof 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 for the year ended
March 31, 2002 was to increase or decrease the revenue from operation and operating income in each of the respective segments asfollows:

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

Millions of yen

Architectural and engineering
Eliminations or corporate

Revenue fromoperation

Operatingincome (loss)¥6,580(1,127)¥5,453¥2,086(395)¥1,691The Company changed its classification of certain personnel
expenses relating to employees who are seconded from the Company to its subsidiaries. Such expenses were included in “Eliminations
or corporate” in prior years but have been allocated to each relevant
segment in 2002. The effect of this change for the year ended
March 31, 2002 was to increase operating expenses in each of therespective segments as follows:
Segments
Buildings
Residential development
Architectural and engineering
Custom-built housing
HotelsOther

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

Millions of yen¥707,482(4,848)(755)
1,573(32,172)
18,572¥689,852

Loss on impairment

Allocation of expenses

46

Eliminations
or corporate

Millions of yen¥1,393
327
1,765
454
329
191
¥4,459As 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 by eachsegment were as follows:
Decrease of assets

Segments
Buildings
Residential development
HotelsOther

Millions of yen¥140,776
5,106
9,409
1,074
¥156,365

Geographical segments

The Company and its consolidated subsidiaries operate primarily in Japan, the United States and certain other areas. The geographical segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2004, 2003 and 2002 is summarized asfollows:
Millions of yen

2004

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

Japan

UnitedStates¥ 526,598
594
527,193423,862¥ 103,331¥2,482,924¥110,043—
110,043
97,927¥ 12,116¥219,673

Other

Total

¥43,276
4
43,28039,169¥ 4,111¥77,921

Eliminations
or corporate¥ 679,918
599
680,517560,959¥ 119,558¥2,780,519

¥

—
(599)
(599)
15,209¥ (15,809)¥288,323

Consolidated¥ 679,918—
679,918
576,168¥ 103,749¥3,068,842

Thousands of U.S. dollars

2004
Japan

Revenue andoperating income (loss)
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income (loss)
Total assets$ 4,982,477
5,620
4,988,106
4,010,426$ 977,680$23,492,515

UnitedStatesOther$1,041,186—
1,041,186
926,549$ 114,637$2,078,465$409,461
37
409,499
370,602$ 38,896$737,259

Total$ 6,433,134
5,667
6,438,802
5,307,588$ 1,131,213$26,308,250

Eliminations
or corporate$—(5,667)(5,667)
143,901$ (149,578)$2,728,006

Consolidated$ 6,433,134—
6,433,134
5,451,490$ 981,634$29,036,256

Millions of yen

2003

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

Japan

UnitedStates¥ 531,044
943
531,987439,555¥ 92,432¥2,445,190¥126,666
85
126,751
110,047¥ 16,704¥316,421

Other

Total

¥24,016202
24,21822,711¥ 1,507¥19,786¥ 681,726
1,230
682,956
572,313¥ 110,643¥2,781,397

Eliminations
or corporate¥—(1,230)(1,230)13,390¥ (14,620)¥226,530

Consolidated¥ 681,726—
681,726
585,703¥ 96,023¥3,007,927

Millions of yen

2002

Revenue andoperating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income
Total assets

Japan

UnitedStates¥ 510,017
786
510,803
432,021¥ 78,782¥2,376,728¥101,320
340
101,660
92,019¥ 9,641¥313,664

Other¥20,227
192
20,41920,803¥ (384)¥19,164

Total¥ 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
47

Unallocatable operating expenses

Loss on impairment

Unallocatable operating expenses included under “Eliminations or
corporate” for the years ended March 31, 2004, 2003 and 2002
amounted to ¥15,729 million ($148,822 thousand), ¥14,806 million and ¥12,689 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, 2004, 2003 and 2002 amounted to¥378,598 million ($3,582,155 thousand), ¥248,536 million and¥332,193 million, respectively, and consisted principally of cash,
marketable securities, investments in other securities, deferred tax
assets and other assets allocated to the Administration Departmentof 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 for the year ended March 31, 2002.

Revenue recognition

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

As described in Note 2, “Accounting Change,” the architectural
engineering segment has changed its revenue recognition policy forarchitectural design and supervision services contracts with revenueof 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
revenue from operations in the Japan segment by ¥5,453 million
and operating income by ¥1,691 million, respectively, 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, 2004, 2003 and 2002:
Millions of yen

UnitedStates

2004
Other
areas

¥112,568¥40,665¥153,233¥679,918

16.6%

6.0%

22.5%

Thousands of U.S. dollars

Overseas revenue
Overseas revenue
Consolidated revenue$1,065,077

Allocation of expenses

Japan
U.S.A.
Other

Millions of yen

Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue
to consolidated revenue¥4,459156
109¥4,724

Land revaluation

As described in Note 1, the Company revalued certain land as ofMarch 31, 2002. Due to this land revaluation, the total assets as ofMarch 31, 2002 increased by ¥671,278 million and ¥18,574
million in the Japan segment and in “Eliminations and corporate,”
respectively.

48$384,757$1,449,834$6,433,134

Millions of yen

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

Total

UnitedStates

2003
Other
areas

¥104,177¥24,029¥128,207¥681,726

15.3%

3.5%

18.8%

Total

Millions of yen

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

UnitedStates

2002
Other
areas

¥101,335¥20,238¥121,573¥631,564

16.0%

3.2%

19.2%

Total

Non-Consolidated Statements of Operations
Mitsubishi Estate Co., Ltd.
Years ended March 31, 2004, 2003 and 2002

Thousands of
U.S. dollars

Millions of yen

Revenue from operations

2004

2003

2002

2004

¥379,340¥397,102¥ 381,145$3,589,176

Cost of revenue from operations

281,684

304,537

299,7902,665,190

Selling, general and administrative expenses

23,08725,75924,557

218,440

74,56866,806

56,798705,535

Operating income
Other income (expenses):
Interest and dividend income

3,554

2,381

2,002

33,626

Interest expense(22,398)(24,601)(25,982)(211,921)

Other, net(29,902)3(167,117)(282,921)(48,747)(22,217)(191,097)(461,226)

25,821

44,589(134,299)

244,308

Income (loss) before income taxes andminority interests
Income taxes:
Current

15

16

16

141

Deferred

10,87519,983(56,860)

102,895

10,891

19,999(56,844)

103,046

Net income (loss)¥ 14,930¥ 24,590¥ (77,455)$ 141,262

49

Non-Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd.
March 31, 2004 and 2003

Thousands of
U.S. dollars

Millions of yen

Assets
2004

2003

¥

¥

2004

Current assets:
Cash

89,74462,793$

849,124

Notes and accounts receivable—trade41,202

41,763389,838

Marketable securities

2,899

1,899

27,429Allowance for doubtful receivables(276)(1,269)(2,611)Inventories

251,565

230,594

2,380,215

Deferred income taxes

48,59833,710459,816

Other current assets

25,45615,306

240,855

459,189384,796

4,344,677

Investments in and advances to unconsolidated
subsidiaries and affiliates

193,352

191,519

1,829,425

Investment securities

188,964

115,482

1,787,908

Lease deposits

65,801

74,933

622,584

Other investments

37,551

22,483355,293

Total current assets
Investments:

Allowance for doubtful accounts(1,212)(1,438)(11,467)

484,456

402,979

4,583,744

Property and equipment:
Land

1,264,825

1,268,182

11,967,310

Buildings and structures

1,208,645

1,254,794

11,435,755

Machinery and equipment

18,817

20,497

178,039

Construction in progress

23,486

11,462

222,215

2,515,775

2,554,935

23,803,339(728,865)(751,627)(6,896,253)

Property and equipment, net

1,786,909

1,803,308

16,907,077

Intangible and other assets

13,006

13,084

123,057¥2,743,562¥2,604,167$25,958,576

Less accumulated depreciation

Total assets50Thousands of
U.S. dollars

Millions of yen

Liabilities and shareholders’ equity
2004

2003

¥ 232,929¥

2004

Current liabilities:
Short-term borrowings and current portionof long-term debt

219,683$ 2,203,888

Accounts payable—trade

30,056

39,772

284,378

Advances and deposits

105,794

43,0591,000,984

17,821

21,865

168,615

Total current liabilities

Accrued expenses and other current liabilities

386,601

324,379

3,657,876

Long-term debt

827,562

840,132

7,830,087

Lease deposits received

263,085

274,3212,489,213

334

—

3,160

Deferred income taxes

Accrued employees’ retirement benefits

348,538

292,552

3,297,738

Other noncurrent liabilities

23,00526,517

217,664

1,849,129

1,757,901

17,495,780

Total liabilities

Shareholders’ equity:
Common stock, without par value:
Authorized—1,980,000,000 shares;
86,53486,534

818,752

Capital surplus

Issued and outstanding—1,299,185,054 shares

115,216

115,216

1,090,131

Land revaluation reserve

421,663

410,6073,989,620

Legal reserve

21,65821,658204,920

Retained earnings

180,453

187,143

1,707,380

Unrealized gain on securities

70,28026,226

664,963

895,806

847,384

8,475,787

Less treasury stock—1,471,130 shares in 2004;
1,229,510 shares in 2003
Total shareholders’ equity
Total liabilities and shareholders’ equity(1,373)(1,118)(12,990)

894,433

846,266

8,462,796¥2,743,562¥2,604,167$25,958,576

51

M I T S U B I S H I E S TAT E C O R P O R AT E D ATA

Directors andStatutory Auditors

Corporate Information

Chairman of the Board

Head Office:Takeshi Fukuzawa

Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku,
Tokyo 100-8133, JapanWeb site: http://www.mec.co.jp
Phone: (03) 3287-5100

President and Chief Executive Officer

Shigeru Takagi*
Director/Deputy President

Eiji Tan*
Directors/Executive Vice Presidents

Takayuki Hara
Yasuhiko Watanabe*
Atsushi Morimoto*
Terutake Miyamoto*Kazuo Odagawa
Hiroharu Koinuma
Keiji Kimura*
Senior Executive Officers

Satoshi Oyama
Yasuto Suzuki
Takaya Endo
Seiichiro Suzuki
Nobuyuki Iizuka
Toshio Nagashima
Mitsuo Iwai
Executive Officers

Toshihide Yoshimura
Toyohisa Miyauchi
Masaaki Kono
Hiroshi Danno
Kazuo Takahashi
Yuzuru Shibagaki
Takao Yagihashi
Hiroyoshi Ito
Yutaka Yanagisawa
Hiroshi Nakajima
Masao Ouchi
Hirotaka Sugiyama
Yasuo Fujiwara
Ichiro Watarai

May 7, 1937
Paid-in Capital:¥86,534 million
Number of Shares of Common Stock Issued:

1,299,185,054 shares
Number of Shareholders:

83,566 (excluding shareholders with less than 1,000 shares)
Major Shareholders:

The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
State Street Bank and Trust Company
Meiji Yasuda Life Insurance Company
The Bank of Tokyo-Mitsubishi, Limited
The Tokio Marine and Fire Insurance Co., Ltd.
The Chase Manhattan Bank, N.A. London, S.L. Omnibus Account
Taisei Corporation
Mellon Bank Treaty Clients Omnibus
Takenaka Corporation
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

Statutory Auditors

Transfer Agent and Registrar:

Yasuo Satake
Kunihiro Inoue
Kenjiro Hata
Kazuya Okamoto
Toyoshi Nakano

The Mitsubishi Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan*Representative Director

52

Date of Establishment:(as of June 29, 2004)

Auditor:Toyo & Co.
(as of March 31, 2004)% of total

5.79
5.42
5.01
4.46
3.36
3.15
3.15
2.26
2.21
2.19

Organization•Business Planning Department•Group Companies Management Office•Leasing Department•Relocation Management Office•Property Management Department•Building Management Advisory Office•Commercial Real Estate Division•Building Safety Management Office•Marunouchi Area Building Management Department•Yurakucho Area Building Management Department•Otemachi Area Building Management Department•Tokyo Metropolitan Area Building Management Department•Meeting of Shareholders•Area Promotion Department•Marunouchi Brand Management Office•Board of Directors•Retail & Shopping Center Department•Development Department•Chairman of the Board•President•Area Planning Office•Strategic Planning
Committee•Compliance Committee•Residential Development Promotion Department•Condominium Development Department•Residential Development Division•Master-Planned Development Department•PARTNER System Department•Residential Development & Leasing Office•Residential Planning & Marketing Department•Executive Committee•Strategic Investment
Committee•Advisory Board•Statutory Auditor•Board of Statutory Auditors•Customer Service Office•Urban Development &Investment Management Division•Urban Development & Investment Department•International Business Division•International Business Department•Recreational Facility Division•Recreational Facility Office•Real Estate Consulting & Solution Department•Corporate Planning Department•Office of Statutory Auditors•Corporate Monitoring Department•Internal Audit Office•Personnel Planning Department•Finance & Accounting Department•Corporate Planning &Administration Division•Corporate Communications Department•Investor Relations Office•Social & Environmental Affairs Office•General Affairs Department•Secretary Office•Compliance Department•Sapporo Branch•Tohoku Branch•Yokohama Branch•Nagoya Branch•Osaka Branch•Chugoku Branch•Kyushu Branch(as of July 1, 2004)

53

Mitsubishi Estate Group

Building Business
Building Leasing Business

Building Management Business

Parking Business

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.

Mitsubishi Estate Building
Management Co., Ltd.
Ryoei Building Management Co., Ltd.
MEC Building Management Co., Ltd.
MEC Building Facilities Co., Ltd.
Hokuriku City Management 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.

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

MJ Building Service Co., Ltd.
Marunouchi Direct Access Limited

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.
Prime Truss Co., Ltd.

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

Urban Development &Investment Management
Mitsubishi Jisho Investment Advisors, Inc.
Ascott International Management Japan Co., Ltd.
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.
Royal Park Shiodome Tower Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
Royal Park Hotel Co., Ltd.

Mitsubishi EstateCo., Ltd.

International Business
Rockefeller Group, Inc. (RGI)
177 other companies
19 other companies

OthersRecreational Facility

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

Higashinihon Kaihatsu Co., Ltd.
MEC Urban Resort Tohoku Co., Ltd.
Liv Sports Co., Ltd.
Kume Country Club Co., Ltd.

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.
Mitsubishi Jisho Community Service Co., Ltd.

Ryoei Life Service Co., Ltd.
Consolidated Subsidiaries
Equity-Method Affiliates54(as of June 29, 2004)

S O C I A L C O N T R I B U T I O N S A N D E N V I R O N M E N TA L E F F O R T S

Conscious of the heat island phenomenon, rooftop gardens have been planted on
the low-rise levels of the Marunouchi Building.

Concert performance by the New Nishirokugo Boys and Girls Chorus. Each year
since 1996, the disabled and local residents have been invited to attend annual
concerts organized by the Company.

As a corporate citizen, the Mitsubishi Estate Group engages in activities that contribute to a sustainable society and has positioned
protection of the global environment as a key priority of management.

Environmental Preservation Measurescooperation with the Wild Bird Society of Japan. We sponsor

As a part of our environmental activities, we formulated theexhibitions of photographs and paintings and hold nature-

Mitsubishi Estate Group Environmental Charter to provide

watching events in areas around Marunouchi.

guidelines for each Group company in their environmental
preservation activities and efforts to reduce environmental
impact. Mitsubishi Estate was also the first in the industry to
begin publishing an Environmental Report in 2000 and we areworking hard to acquire ISO 14001 certification forenvironmental management systems. So far, our office building
management business and residential development, architecturaldesign & engineering, custom-built housing, and hotel business
operations have all acquired accreditation.
Opened in September 2002, the Marunouchi Building
incorporates a longer lifespan in design plans, improvements inenergy conservation and garbage recycling on the premises. To
broaden awareness of environmental issues, we established theContributing to Society

As a part of our activities to contribute to society and to fulfill our
responsibility as a corporate citizen, we invite the handicapped
and the elderly to Mitsubishi Estate organized local concerts. In
addition, we hold the Kirakiratto Art Contest for physicallydisabled children, publishing all exhibits on a Web site, andparticipate in the Overseas Support Project in cooperation with
non-profit organizations.
In support of cultural activities, we are special sponsors for the
NHK Symphony Orchestra and the Japan Philharmonic
Orchestra. We also operate cultural facilities in Yokohama,Fukuoka, and other regions in Japan.

Marunouchi Bird Song Plaza in Marunouchi, Tokyo, in
55

COMPLIANCE

The Mitsubishi Estate Group views compliance as basic to its

fundamental mission of “Creating a Truly Meaningful Society

business activities and essential to fulfilling its public responsibili-

Through Urban Development.”ty as an organization with various stakeholders.

Mitsubishi Estate also believes that gaining the unwavering

In 1997, Mitsubishi Estate formulated its “Code of Corporate

trust of society is its duty as a good corporate citizen. To this end

Conduct,” and to reinforce its compliance structure thewe constantly promote compliance to ensure the Group’s contin-

Company decided to share this with the entire Group in 2002.

uous development as a going concern.

Guided by its principles, we continue toward fulfilling our

CODE OF CORPORATE CONDUCTOUR MISSION“Creating a Truly Meaningful Society ThroughUrban Development”
We will strive to create a truly meaningful society through the development of asecure, 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 Conduct
Article 1 : Fostering Communication
We will make fair disclosure of corporate information by communicating with shareholders, investors,
business partners, local community members and all other persons affected by our activities.

Article 2 : Being Good Citizens
We, as good corporate citizens, will respect human rights and actively contribute to society, 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 inharmony 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 willconsider 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 in compliancewith social morals. We will avoid ties with forces that threaten to disrupt civil society 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 our employees’capabilities. We will endeavor to maximize our employees’ creativity and expertise 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 ofthis Code into practice. Each director and manager will take the initiative to exercise leadership andcreate a corporate system to achieve our goals. Infractions of the Code will be investigated and thefindings made public. We will reaffirm the responsibilities of our directors and managers in such an
event and take measures to prevent any recurrences.

56

The Mitsubishi Estate Group acknowledges compliance as more than observing all laws and ordinances. Compliance also encompasses strict adherence to internal regulations, corporate ethics and management philosophy.

mec_ar_cover_E 04.8.25 7:29 PM ページ 4

mec_ar_cover_E 04.8.25 7:29 PM ページ 1

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2004

Mitsubishi Estate Company, Limited
Otemachi Building, 6-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-8133, Japan
http://www.mec.co.jp

Printed on recycled paper
Printed in Japan