MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2001

on recycled paper
Printed in Japan

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2001

EPORT 2001

Contents

Financial Highlights

Inside Cover

A Message from the Chairman and President

1

To Our Shareholders

2

Business Information

6

Promotion of Environmental Affairs and Corporate Philanthropy

19

Financial Review

20

Financial Statements

24

Mitsubishi Estate Corporate Data

49

Mitsubishi Estate Group51

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

Mitsubishi Estate Group

Mitsubishi Estate Group
Financial Highlights

Financial Highlights
Building Business

Building Segment
Millions of yen

Years ended March 31

Revenue from operations
Net income
As a percentage of revenue from operations
As a percentage of shareholders’ equity
Total assets
Total shareholders’ equity
Common stockThousands of U.S. dollars

2000

2001

2001

¥574,396¥630,990$5,092,736

18,421

19,832160,065

3.2%
4.1%

3.1%
4.1%

—
—

2,285,771

2,535,263

20,462,171

440,731
86,534

518,766
86,534

4,186,974
698,418

Yen

U.S. dollars

Years ended March 31

Revenue from operations
Operating income

Cash dividends applicable to the year

¥14.18¥15.26$0.123

8.00

8.00

0.065

2000

Millions of yen

Thousands of
U.S. dollars

2001

2001

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.
Millions of yen

Years ended March 31¥300,712 ¥317,906 $2,565,827
83,70079,939645,189

Revenue from operations
Operating income

Custom-Built Housing

Residential Development Segment

Note: Yen amounts shown are translated into U.S. dollars, solely for convenience, at the prevailing exchange rate on
March 31, 2001, of ¥123.90 to US$1.00.

Years ended March 31

Revenue from operations
Operating income

2000

Millions of yen

Thousands of
U.S. dollars

2001

2001

Revenue from operations
Operating income

Hotel Segment

Architectural & Engineering Segment

Custom-Built Housing•5.8%
Real Estate Brokerage•13.6%
Architectural & Engineering•2.4%

Building•49.5%
Residential
Development•20.7%

2001$705,117
50,646

Revenue for the architectural & engineering segment comprises the design and project supervision of building and civilengineering construction, and interior and building design services through MEC Design International Corporation.
Millions of yen

Years ended March 31

Revenue from operations
Operating income

Other Segment

2000

2001

2001

¥37,148586$299,822
4,729

Millions of yen

Thousands of
U.S. dollars

2000

2001

2001

¥32,952(601)¥32,604
699$263,148(5,642)

Revenue for the other segment comprises the managementof such leisure-related operations as golf courses and fitness
clubs, real estate appraisal, and telecommunication operations
through the Rockefeller Group, Inc.

Thousands of
U.S. dollars

2000

2001

2001

¥25,624
2,163¥15,616(32)$126,037(258)

Millions of yen

Years ended March 31

Revenue from operations
Operating income

Parking Business

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

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

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

Recreational Facility
Architectural Design & Engineering

Higashinihon Kaihatsu Co., Ltd.
MEC Urban Resort Tohoku Co., Ltd.
Liv Sports Co., Ltd.
Kume Country Club, Co., Ltd.
Fuji International Speedway Co., Ltd.
(4 other companies)

Mitsubishi Jisho Sekkei Inc.
MEC Design International Corporation(1 other company)

Thousands of
U.S. dollars¥35,668(9)¥102,845 ¥132,916 $1,072,768(1,430)9,971
80,476
Revenue from operations
Operating income

Revenue by
Segment(Percentage
Share)

2001¥87,364
6,275

Revenue for the hotel segment derives from the operation ofRoyal Park Hotels.
Years ended March 31

Other•2.9%
Hotel•5.1%

2000

Revenue for the custom-built housing segment derives fromthe contract construction of custom-built housing throughMitsubishi Estate Home Co., Ltd.
Years ended March 31

Revenue for the residential development segment comprises
the construction and sale of condominiums and single-unit
homes; development and sale of residential, resort and commercial lots; management of condominiums and homes; andtown development.

Building Management Business

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

Thousands of
U.S. dollars¥73,286
4,585

Millions of yen

Per share amounts:
Net income

Revenue for the building segment comprises the leasing andmanagement of office buildings in Japan, in the United States
through the Rockefeller Group, Inc., parking lot operations, anddistrict heating and cooling.

Building Leasing BusinessThousands of
U.S. dollars

2000

2001

2001

¥18,107(2,447)¥18,395(1,573)$148,467(12,695)

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

Mitsubishi EstateCo., Ltd.

International Business
Rockefeller Group, Inc. (RGI)
146 other companies
16 other companies

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

MEC Finance Co., Ltd.
MEC Information Development Co., Ltd.
MEC Human Resources, Inc.
(10 other companies)

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

Mitsubishi Real Estate Services Co., Ltd.
Ryoei Life Service Co., Ltd.

Otaru Toshi Kaihatsu Kosha Co., Ltd.
(2 other companies)

Consolidated Subsidiaries
Equity-method Affiliates(as of June 28, 2001)

Mitsubishi Estate Group51

A Message from the Chairman and President

A Message from the Chairman and President

Takeshi Fukuzawa

Shigeru Takagi

ChairmanPresident

The fiscal year ended March 31, 2001, was a significant turning

Division and the Hotel Business Division to subsidiaries, Group man-point as the Mitsubishi Estate Group made great strides in im-agement is getting off to a full-scale start for the Mitsubishi Estateproving Group management efficiency.
The Mitsubishi Estate Group has accelerated decision making

Group in the fiscal year ending March 31, 2002. On April 1, 2001,
Takeshi Fukuzawa and Shigeru Takagi were appointed chairman andthrough the introduction of a groupwide divisional structure and thepresident, respectively, of Mitsubishi Estate. Under this new manage-

clarification of authority and responsibility. We are striving tostrengthen competitiveness by implementing management systems

ment system, we aim to promote the key Marunouchi redevelopment
project, improve asset efficiency in each division and contribute to

tailored to each business area, thereby improving asset efficiency.

the value of society through community development activities.

In our efforts to improve the asset efficiency of the Building Business Division in the redevelopment of the Marunouchi district, weAugust 2001

announced reconstruction plans for two more buildings in March
2001 for a total of five reconstruction plans under way.
With the transfer of the Architectural Design & Engineering

Takeshi Fukuzawa

Shigeru Takagi

ChairmanPresident

A Message from the Chairman and President

1

To Our Shareholders

To Our Shareholders

Fiscal 2001 Results

continues for the Residential Development Division, concerns haveDuring the fiscal year under review, Mitsubishi Estate and its con-grown stronger over an impending deceleration in the condominium

solidated subsidiaries recorded revenue from operations ofmarket. Amid forecasts of further market polarization, the Mitsubishi¥630,990 million (US$5,092.7 million), an increase of 9.9% from

Estate Group is working hard to ensure profitability and improve

the previous fiscal year. Operating income increased 18.2% tooperating and product planning capabilities.

¥80,639 million (US$650.8 million). Brisk business in condominium

In this operating environment, I believe the Mitsubishi Estate

operations for the Residential Development Division and notable

Group must work to effectively utilize management resources andcontributions made by the International Business Division due tostrengthen Group management.

the booming U.S. economy were key factors in the increase. An

To maximize the effectiveness of management resources, we

extraordinary loss was recorded following the write-off of losses

are promoting improvements in asset efficiency and pursuing ef-

on non-performing fixed assets. However, extraordinary income

forts to invigorate human resources.

was recorded due to gains on the sale of marketable securities
and property and equipment. As a result, net income for the fiscal
year under review totaled ¥19,832 million (US$160.1 million).

Improving Asset Efficiency in the Redevelopmentof the Marunouchi District
The redevelopment of the Marunouchi district is a pivotal project

Operating Environment

in improving asset efficiency. The renewal of office buildings in

The business environment surrounding Mitsubishi Estate Groupthe Marunouchi district, which is central to the Building Businessremains unpredictable. Although the vacancy rate for office build-

Division and a fundamental business of the Group, is an under-ings is improving, completions of large-scale office buildings willtaking we must quickly complete to increase the profitability andpeak in 2003. Although the record-breaking condominium boom

competitiveness of the Group.

2Through the integrated efforts of Group companies,
we aim to be a competitive corporate Group thatmaximizes corporate value by
fulfilling our mission of creating value
for society as a comprehensive developer.

Investing ¥500 billion over a ten-year period started in 1998,

The selection and concentration of businesses is another im-

we are renovating these office buildings to meet tenant needs

portant issue. Although we transferred a majority of shares of ourthrough the reconstruction of six buildings and the renewal ofsubsidiary Fuji International Speedway Co., Ltd. to Toyota Motor

existing buildings. By flexibly responding to modern trends andCorporation, we are examining options including sale or withdrawal

user demands, we aim to create an attractive community throughwhen dealing with unprofitable or inefficient operations.

town-style management of the Marunouchi district. We believe

We are aggressively working to find new business opportu-

that reconstruction of the buildings and a new approach to man-nities. As the real estate investment trust (REIT) market begins

agement will enhance profitability of the Marunouchi district.

in 2001, we are continuing to expedite the listing of REITs.

To Our Shareholders

3

To Our Shareholders

Accompanying the creation of this market, new needs will arisefor such fee-based businesses as asset and property management of buildings in real estate funds and the development ofproperties to be sold to REITs. By employing our expertise as adeveloper, we are making aggressive efforts to take advantage ofbusiness opportunities.

Invigorating Human Resources
Another important point in maximizing the effectiveness of management resources is the invigoration of human resources. In April
2000, Mitsubishi Estate moved to an employee salary system thatemphasizes ability and performance. A performance-based compensation system tied to fulfillment of long-term management
objectives has been in effect for directors as well. In addition, astock option plan for directors was introduced in 2001. These
initiatives are designed to stimulate directors’ incentive to enhance
corporate value over the medium and long term, thus increasing
shareholder value.
In addition, Mitsubishi Estate has had in place an in-house venThe Marunouchi Building under construction, which is scheduled for completionin August 2002.

4

ture capital system since 1999 to encourage entrepreneurial

thinking. The system allows employees with business proposals to

Valuing Interaction with Stakeholders

become the president of their own company. Established in April

We believe that communication between Mitsubishi Estate and all

2001 to effectively utilize company-owned resorts, the Shiki Re-

its stakeholders is very important in dealing with management

sort Co., Ltd. was the first company created through this system.

issues. To this end, we have aggressively promoted information

In our new personnel system, we aim to invigorate human re-disclosure and aim for a high degree of transparency in Groupsources by aggressively shifting employees into such core operations

operations. In April 2001, we established the Investor Relations

as the Marunouchi redevelopment and the REIT business.

Office to provide investors with timely information through theInternet and other means.

Reinforcing Group Management

We are steadily advancing efforts to better respond to stake-

The Mitsubishi Estate Group has proclaimed 2001 as the full-

holder concerns with speed and flexibility, with the ultimate goal

scale start of Group management.

of maximizing corporate value. We look forward to the support

In moving to a divisional structure in April 2000, we restructured

and cooperation of our shareholders.

businesses and promoted improvements to efficiency in aiming toclarify authority and speed up decision making. In the Hotel Business
Division, we established Royal Park Hotels and Resorts Co., Ltd. tounify Group hotel management, which was previously done individually for each hotel. The Architectural Design & Engineering Division
was transferred to the subsidiary Mitsubishi Jisho Sekkei Inc. We

Shigeru Takagi
President

plan to strengthen competitiveness by instituting a management andorganizational structure optimal for an architectural office.

August 2001

To Our Shareholders

5Business Information

Business Information

Building Business Operations

Advancement of

Yasuhiko Watanabe

Marunouchi District Redevelopment andHead Officer ofthe Building Business Division
Senior Managing Director

Profit Restructuring
The operations of Mitsubishi Estate Co., Ltd.’s Building Businessyears from 1998, we are advancing business function and ame-

Division are centered on the leasing and property management ofnity upgrades for our buildings through reconstruction and renewal

office buildings, as well as management of large-scale shopping

projects and plan to speed up redevelopment through such means

centers, parking lot operations and district heating and cooling inas shortening construction schedules and engaging in joint

key metropolitan areas nationwide. The Group also aims to enrichprojects.

urban functionality from a town management perspective.

As the first stage of the redevelopment project, reconstruction

Two important issues facing the Division are building an opti-of the Marunouchi Building is proceeding smoothly toward comple-

mal portfolio and honing professional expertise in each area,tion in August 2002. Construction schedules have been shortened

including development, operations and management. From theseby about one year for the joint reconstruction of the Eiraku Build-perspectives, we are currently focusing most of our efforts on

ing and the adjacent hall owned by the Japan Industrial Club,advancing redevelopment of the Marunouchi district and reorga-

which was initiated in December 2000 along with the Tokyo Sta-

nization of the profit structure.

tion Marunouchi North Entrance Development Project, which began

Mitsubishi Estate’s redevelopment of the Marunouchi district,in June 2001.

Japan’s premier business center that has grown successfully for

In addition to the reconstruction of the Marunouchi Build-many years, is a major project for the 21st century and a coreing, we unveiled reconstruction plans in March 2001 for theasset of the Group. Investing ¥500 billion over the course of 10

Tokyo Building and Hibiya Park Building. The Tokyo Building is

6

Redevelopment of the Marunouchi District

Imperial PalaceHarum

i Dori

Hibiya Park
1

Chiy
oda
Line

aL
biy
, Hi

19

14
15

iya
Hib

6
3

9

4

Yur
a

ku

ch

o

Tokyo International
Forum

10
12

18

2

17
Tokyo,
Marunouchi Line

JR Yokosuka Line

13
4

Otemachi,Hanzomon Line

20

16
1

11

21

Tokyo
Central
Post
Officerunouchi Line

Otemachi, Tozai Line

7
Yurakucho, Yurakucho Line

Tokyo, JR Keiyo Line2

Otemachi, Chiyoda Line

Eitai Dori

8

Otemachi, Toei Mita Line

Gyoko Dori5

5

Hibiya Dori

Nijubashimae, Chiyoda Line

Hibiya, Toei Mita LineBabasaki Dori

ine

Hibiy
a,

Tokyo,JR Sobu Line

Otemachi, Ma

3

22

Gin

za,

Ma
ru

no

uch

Tokyo

i Li

ne

23

25

24

Leasing Buildings

Reconstruction Projects

Start of Construction

Completion

1

Hibiya Kokusai Building

10 Furukawa Building

19 Tokyo Ginko Kyokai Building

1

Marunouchi Building

April 1999

August 2002

2

Yurakucho Denki Building

11 Mitsubishi Shoji Building

20 Togin Building

2

The Japan Industrial Club and Eiraku Building Reconstruction ProjectDecember 2000

February 2003

3

Yurakucho Building

12 Marunouchi Yaesu Building

21 Otemachi Building

3

Tokyo Station Marunouchi North Entrance Development Project

June 2001

August 2004

4

New Yurakucho Building

13 Bank of Tokyo Mitsubishi, Headquarters

22 New Otemachi Building

4

Tokyo Building

2003

2006

5

Kokusai Building

14 Kishimoto Building

23 Nippon Building

5

Hibiya Park Building

2003

2006

6

New Kokusai Building

15 Mitsubishi Denki Building

24 Nippon Steel Building

7

New Nisseki Building

16 Mitsubishi Heavy Industries Building

25 Kawatetsu Shoji Building

8

Fuji Building

17 Mitsubishi Building

9

New Tokyo Building

18 New Marunouchi Building

Business Information

7

Business Information

to be reconstructed into a highly functional office building andof new people through the area, we are attracting brand-namethe Hibiya Park Building transformed into a luxurious world-classstores, cafes and restaurants to Nakadori Avenue, the main

hotel in a joint project with Peninsula Hotel. Both projects will be-

street running through the district. We are putting substantial

gin in 2003 and be completed in 2006. In addition, one more

efforts into creating a brand that popularizes a new urban im-building reconstruction is currently being planned.

age for the district.

While reconstruction continues, plans are being made for

In our efforts to reorganize the profit structure, improving

bolstering communications infrastructure and improving ameni-

the earnings power of existing buildings, starting new opera-

ties in the district. To accelerate the advancement of IT andtions and engaging in such fee-based businesses as thethe expansion of e-commerce, the joint venture Marunouchi

management of leased buildings are the most important. As a

Direct Access Co., Ltd. was established by Mitsubishi Estate

result of our efforts in strengthening marketing capabilities andand Marubeni Corporation for the construction of a large-

aggressive leasing activities, we significantly improved thecapacity high-speed communications network infrastructure

vacancy rate of our leased office buildings to 4.8% by the end

to provide tenants of the Otemachi, Marunouchi and Yurakucho

of March 2001. We are considering to establish a more effi-

areas with fiber optic connections using heating utility tunnels

cient profit structure, steadily implementing cost reductions

and the Ministry of Land, Infrastructure and Transport’s under-that leverage Marunouchi’s economies of scale and outsourcing

ground electric wire tunnels. The new company has acquiredbuilding management operations. With the completion of thea type-1 telecommunications business license and began op-

Marunouchi Building next summer, we plan to improve the ef-

erations in July 2001.

ficiency of office building management by reviewing newWith the movement toward retail electric power liberalization

management systems.

as a result of deregulation, the Group is making full use of theThrough the above measures, the Company is reorganizing

advantages of the number of buildings that are concentrated in

its assets to increase portfolio profitability in current building

the Marunouchi district by receiving low-cost electric power fromoperations. In March 2001, the beneficiary rights of Mitsubishi

new providers.

Research Institute, Inc. Building were transferred to a special

To enrich the amenities of Marunouchi and to create a flow

8

purpose company (SPC). We acquired a joint ownership stakein the centrally located Sanno Park Tower in Nagatacho, Tokyoand the Aoyama Building in Minato-ku, Tokyo, both of whichhave strong earnings power.
In the future, we aim to increase our portfolio profitability andfoster Group professionalism as a developer.

Marunouchi City Campus
One part of the redevelopment plans for the Marunouchi district, to enrich the educational
functionality of the business area, was the opening of a joint collaboration with Keio
University in April 2001 called Marunouchi City Campus. The research and developmentof innovative programs in continuing and adult education at Marunouchi City Campus are
unseen anywhere else.

Outlet Mall Development
Tokyo Station Marunouchi North Entrance Development ProjectThis project is a joint venture between Mitsubishi Estate and The Marunouchi Hotel Co., In 2000, Chelsea Japan Co., Ltd., a joint venture between Chelsea Property Group, Inc. ofLtd., Nippon Life Insurance Company, Chuo Real Estate Co., Ltd., and Asahi Mutual Life the United States, and Nissho Iwai Corporation, opened one of the most successful outlet
Insurance Company. While maintaining the fine urban environment characteristic of the malls in Japan-Gotemba Premium Outlets in Shizuoka Prefecture. This was followed byarea, we have already started construction of three office buildings and one building with the opening of Rinku Premium Outlets near Osaka in the Kansai region. The possibility of
hotel and shopping facilities in June 2001 and will complete construction in August 2004. opening a third and fourth premium outlet mall is currently under examination.

Business Information

9

Business Information

Residential Development Operations

Providing well-planned,
spacious condominiums

Hiroshi Baba
Head Officer ofthe Residential Development Division
Executive Vice President

To provide high-quality residential environments that address di-increasing interest in durable residences. We have focused ef-

verse customer needs, the Residential Development Division

forts on providing high-rise condominiums in convenient urban

develops and markets condominiums, single-unit homes and resi-

locations with pleasant surroundings and sweeping views. In thedential land from the customer’s perspective. We also provide

fiscal year ending March 31, 2002, while continuing to provide

consulting services for the effective use of real estate and man-these amenities, we aim to increase the size of every residence

agement of condominiums.

we build. Currently, we are planning to build condominiums in

As favorable conditions in the market for the condominium busi-

Ginza and another centrally located area with an average size ofness continue, sales of new residences totaled approximatelyroughly 90 square meters per unit and keeping prices down by

2,300 units for the fiscal year ended March 31, 2001. From April

using fixed-term land leaseholds. In the future, we intend to con-2000, development periods have been further shortened and costs

tinue supplying affordable, spacious and well-planned housing.

were reduced by moving to a new system in which each develop-

We introduced our own housing performance quality indication

ment team takes charge of every phase of a project, from landsystem in fall 2000. Backed by strict quality management in de-purchase to condominium sales, thereby improving the condo-

sign and construction for basic performance standards the Groupminium business’s gross profit margin to 19%.

has developed, Mitsubishi Estate’s original system is promoted in

The Group’s condominiums have remained highly competitive

each of the centrally-located condominiums we develop indepen-

for their high-added value and careful planning that reflects thedently. Through our new system, condominium quality is explained10

to our customers in easy-to-understand information.
In the Residential Development Division, Mitsubishi Estate iscontract and consulting services for the effective use of real estate and expand orders for due diligence services.

making concerted efforts to foster fee-based businesses, provide
Izumi Park Town
The Izumi Park Town project has
been under development since1972 in Sendai, Miyagi Prefecture.
The area measures 1,070 hectares
and is one of the largest private
multifunctional developments inJapan, with a population of approximately 50,000 residents. ThroughMitsubishi Estate’s community
building efforts, Izumi Park Town
provides convenient, comfortableliving with the perfect balance Fixed-Term Land Leasehold Condominiums
among “living, working, resting, Currently planned for Funabashi, Chiba, Park House Prescia is a large-scale metropolilearning, gathering and enjoying.” tan fixed-term land leasehold project housing 325 condominiums. We aim to provide
condominiums that make full and active living easier in a partnership with the Afternoon Tea brand. Approximately 40% of the condominiums will be larger than 100
M.M. Towers
square meters with an average size of 93 square meters.
M.M. Towers, located in Minato
Mirai 21, Yokohama, consists ofPartner Program
three high-rise towers with a total
With an emphasis on effective land use,of 862 condominiums. From thewe provide a wide range of know-how
opening of sales in April 2001, thein such areas as leased condominiums
condominiums quickly sold out.
for foreigners, commercial buildings andVarious new technologies havehotel development. In the fiscal year unbeen implemented, including the
der review, the Company’s projects
introduction of a registration appliincluded leased condominiums incation system over the Internet andDaikanyama, leased condominiums
the installation of fiber optic cables
for foreigners in Omotesando, the Itoto each residence in addition to a
Yokado store in Musashisakai, and avariety of marketing tools and housbusiness hotel in Shin-Yokohama.
ing plans.

Business Information

11

Business Information

Architectural Design & Engineering Operations

Mitsubishi Jisho Sekkei Inc. is

Katsuhisa Shimada
Head Officer ofthe Architectural Design & Engineering Division
President of Mitsubishi Jisho Sekkei Inc.
Senior Managing Director

aiming to become the forerunner in
the architecture industry.
Mitsubishi Estate’s Architectural Design & Engineering Division was

Mitsubishi Jisho Sekkei, not only provides interior design services, buttransferred to the subsidiary Mitsubishi Jisho Sekkei Inc. and beganalso is a strategic asset in the field of facility management to form an

operations in June 2001. As expressed in the company slogan, “Grand

optimized Group structure. Until now, the Architectural Design & Engi-

designs for the environment, culture and the future,” our employees

neering Division used its technological capabilities to support theaim to secure new customers and improve competitiveness with the

Mitsubishi Estate Group’s business as a comprehensive real estatespirit and excitement of entrepreneurship. By accumulating successes,

developer. The Division covers a wide range of activities such as thewe aim to become the world leader in architecture.

design of buildings and civil-engineering structures, building renova-

The new company will be divided into four divisions comprising thetion, urban planning and a variety of consulting services.

Design Division, Engineering Division, Consulting Division, and Interior

Creative

Division. We plan to further strengthen the Design Division and Engineering Division, one of Japan’s leading organizations boasting an
impressive record of historical achievements. The newly established
Consulting Division will be responsible for fostering Mitsubishi Estate’s
in-house urban development, construction management, environment
and energy-related know-how to generate new sources of revenue.
MEC Design International Corporation, a wholly owned subsidiary of

12

MITSUBISHI JISHO SEKKEIExerting our creative abilities to thefullest extent to provide beautiful,comfortable living environments

Grand designs for the environment,
culture and the future

Impressive
Contributing to society and culture with timelessdesigns and state-of-the-art engineering

Progressive
Meeting the needs of tomorrow's society
with advanced technology andaccumulated expertiseUrban Development andInvestment Management Operations

We aim to create a real estate

Terutake Miyamoto
Head Officer of
the Urban Development
and Investment Management Division
Managing Director

investment trust that meetsinvestor needs.
The Urban Development and Investment Management Division

We have launched projects in several Tokyo locations for de-handles such fee-based businesses as consulting, project man-velopment and management of real estate for the real estate

agement, asset management, property management and real estate

investment market. Furthermore, we established the Urban De-

appraisal in each stage of planning, implementation and manage-

velopment Promotion Office in December 2000 as a specialized

ment in the development business. The Division also develops

office with the purpose of unifying information gathering and cus-

high-quality real estate for the real estate investment market while

tomer relations for new large-scale multi-purpose projects.

applying such new techniques as the securitization of real estate.

Through the development and management of real estate in line with

Full-fledged real estate funds began to appear in fiscal 2001 andinvestor needs, we aim to contribute to the development of the real es-

we can expect more expansion in the real estate investment trust

tate investment market and the securitization of prime real estate.

market. Mitsubishi Estate, Tokio Marine and Fire Insurance Co., Ltd.

BASIC SCHEME OF INVESTMENT FUND (Company-type Investment Trust)and The Dai-ichi Mutual Life Insurance Company formed Japan Real
Estate Asset Management Co., Ltd. to undertake fund operations.

Real estate portfolio

The fund portfolio contains high-quality office buildings located in
the heart of Tokyo and other centrally located urban areas with anestimated value of ¥100 billion. We aim for steady growth whilebolstering investor confidence with fair, transparent operations.

Financial institutions

Establisher and planner

Mitsubishi Estate Co., Ltd.
The Tokio Marine & Fire
Insurance Co., Ltd.
The Dai-ichi Mutual Life
Insurance

Investment corporation(Real estate
investment fund)
Asset management
entrustment contract
Investment trust
advisory company(Asset management)
Operations andmanagement company(Property management)

Investors
Capital market(Listing on the TSE)
Outside provider
of generalclerical services
Asset custody company

Business Information

13

Business Information

International Business Operations

Full-scale redevelopment has
begun on Paternoster Square

Takayuki Hara
Head Officer of
the International Business Division
Senior Managing Director

The International Business Division manages office buildings in

We are also looking forward to the completion of our midtown

the United States through the Rockefeller Group, Inc., headquar-

New York property on 745 Seventh Avenue in spring 2002.

tered in New York, and participates in the real estate brokerage

While preserving the United States as our prime location, webusiness through a global network organized by real estate ser-intend to expand operations in Europe and Asia, and carry out de-vices provider Cushman & Wakefield, Inc.

velopments tailored to each location’s individual characteristics.

In the fiscal year under review, construction work has begun
on the common areas of the Paternoster Square Redevelopment
Project in London, England. Plans for this project, located on a
15,000-square-meter site in the City of London next to St. Paul’sCathedral, consist of offices and retail outlets in four complexes.
Construction of the buildings will begin when lease agreementswith the major tenants are signed.
In a comprehensive alliance with Singapore-based CapitaLand
Limited, joint projects in Tokyo and Singapore real estate investment and development have been agreed on and periodic
information exchanges have already begun.

14

Paternoster Square Redevelopment Project
The Paternoster Square Redevelopment Project in London’s financial district commenced in May 1999. The master plan, designed by the U.K. architect Sir William
Whitfield, blends the beauty of the adjoining St. Paul’s Cathedral with four complexes
consisting of offices and retail outlets located around a central open space. Based on
the concept of the master plan, we have designated different architects for eachbuilding to create a distinguished square.

Custom-Built Housing Operations

Taketo Yamazaki
Head Officer of
the Custom-Built Housing Division
President of
Mitsubishi Estate Home Co., Ltd.
Director

Kicking off the new brand“Mitsubishi Home”
The Custom-Built Housing Division aims to provide high-quality

dreams in home building.

housing to support a full life with operations in the construction

In spite of a cool down in the market in the current fiscal year,

and marketing of custom-built homes conducted principally by

we were able to secure the usual number of orders through the

Mitsubishi Estate Home Co., Ltd. Our mainstay product is two-by-

successful implementation of the measures mentioned above.

four single-unit houses. While maintaining close communication

Although severe operating conditions continue, by making efforts

with our customers from the order to after-sales service, we strive

to elevate brand status, expand orders and enhance cost man-to provide full satisfaction in home construction.

agement, we are establishing a foundation for management

We have been selling the Eco-Feel brand of environmentally

structure able to respond to the housing market.

oriented homes since April 2000, and have expanded our ISO
14001 activities. We are also working hard to strengthen customer confidence and have started a 50-year building examination
system, Home Dock 50.
In January 2001, Mitsubishi Estate Home kicked off its new
brand “Mitsubishi Home.” By adopting the brand “Mitsubishi
Home,” we have decided to represent the Mitsubishi Group in the
manufacture of housing and help our customers realize their

Launching a New Brand
In January 2001, we changed the brand name for open design 2 X 4 homes fromASSET to Mitsubishi Home.

Business Information

15

Business Information

Hotel Business Operations

Expanding hotel chain
development by creating an
integrated company

Yutaka Nakamura
Head Officer of the Hotel Business Division
President of Royal Park Hotels
and Resorts Co., Ltd.
Director

The Hotel Business Division is expanding the 2,054-room Royal

expand our development of the Royal Park Hotels and Resorts

Park Hotels chain in eight locations. In November 2000, thechain while making significant efforts to bolster each hotel’s

hotel management company, Royal Park Hotels and Resorts

specialization and competitiveness.

Co., Ltd., was established. Plans call for enhancing efficiency,
accumulating management expertise and improving the levelof operations through the integration of management andoperations.
We plan to focus efforts on expanding fee-based businesses
by improving the operational efficiency of existing hotels andby consulting and consignment of management activities
through a new company. In March 2001, we received requests
for consulting services for two hotels and in May 2001, wewere contracted to manage the 131-room Hotel the Manhattan in Makuhari, Chiba.
Although competition in the hotel industry has intensified,by securing clients for our consulting services, we plan to16

Yokohama Royal Park Hotel
Yokohama Royal Park Hotel is located in the high-rise Yokohama Landmark Tower inthe Minato Mirai 21 district. Along with the Yokohama Royal Park Hotel Co., Ltd. becoming a wholly-owned subsidiary, the hotel’s technical support contract with JAL
Hotels Co., Ltd. ended in April 2001. We will actively use the Royal Park brand as thecenterpiece of our hotel operations.

Recreational Facility Operations

Providing attractive recreational

Kaoru Kohno

facilities centered on

Head Officer ofthe Recreational Facility Division
Senior Managing Director

fitness operations
While operating fitness and golf clubs, the Recreational Facil-

will take the leading role in its operation while aggressively

ity Division is developing operations to address the issues ofrenovating the facilities.

increased leisure time and the aging of the population.
We are developing the fitness club chain Liv Sports Co.,
Ltd. by opening new large-scale suburban clubs where we
can expect increased demand from families. We opened asecond club in suburban Tokyo in December 2000 and a third
opening is scheduled for August 2001 with plans for moreclub openings.
In our golf club operations and sales of resort villas, we aim
to enhance operational efficiency and stability in the entire
Group despite widespread severe operating conditions. For golfcourses, we are proposing improvements to make the play environment more casual.
In December 2000, Toyota Motor Corporation took managerial control of Fuji International Speedway Co., Ltd. Toyota

Liv Fitness Club in Hibarigaoka
Opened in December 2000, the Liv Fitness Club in Hibarigaoka is our second largescale suburban fitness club.

Business Information

17

Business Information

Corporate Planning
Operations

Corporate Administration
Operations

Promoting management thatemphasizes shareholder value

Taking a hands-on approach toservice, support andbusiness ethics

Eiji Tan

Hirofumi Okuizumi

Head Officer of
the Corporate Planning Division
In theManaging
fiscal year
ended March,
SeniorDirector

Head Officer of
the Corporate Administration Division
Senior Managing Director

the Japanese economy continThe Corporate Planning Division is responsible for the generalued in recession, characterizedmanagement strategy of the Mitsubishi Estate Group. The division’sby instability in the financial
principal duties include Group strategic planning, medium- andsystemlong-term policy-making, organizational and personnel-system
in private capital investment.
design, performance management, investor and public relations
and philantrophy.

The Corporate Administration Division is responsible for service
and support functions in operational activities and compliance withbusiness ethics.
We provide service and support functions in legal matters,
matters relating to stocks, liaison service, facility management,
large-scale construction orders and secretarial work.

To foster a business mindset in employees at Mitsubishi Es-

To promote business ethics, we have laid out the Code of Cor-tate, we are introducing an assistance fund of ¥100 million toporate Conduct expressing our basic mission to create a truly

support an intracompany venture system. As the first step in put-meaningful society through urban development and strive towardting this system in motion, in February 2001, we established thefollowing the eight principles set forth in the Code to cultivate

Shiki Resort Co., Ltd. to effectively utilize company-owned resorts.

communication with society and act as a good corporate citizen.

As part of our plans to strengthen investor relations, we set up

In addition, we focus efforts on disaster prevention planning

the Investor Relations Office in April 2001 to promote manage-and have set up our own disaster countermeasures, which arement that emphasizes shareholder value and reflects investor

practiced every September by all employees.

concerns more than ever before.

18

Promotion of Environmental Affairs and Corporate Philanthropy

Promotion of Environmental Affairs and Corporate Philanthropy

Upholding Our Responsibility as a Corporate Citizen
The Mitsubishi Estate Group is conducting activities in line withphysically handicapped and environmental study sessions for

management values that are founded on a commitment to en-

families in the community.
In cooperation with the Wild Bird Society of Japan, we es-

vironmental stewardship and corporate citizenship.
In January 2001, Mitsubishi Estate issued the first report on

tablished the Marunouchi Bird Song Plaza as a base forenvironmental preservation activities by a Japanese real estate

managing the Marunouchi Fun with Nature Club, which raises

company entitled Mitsubishi Estate Environment Report 2000. In

awareness about environmental preservation. We also con-this report, we introduce our construction projects, building man-ducted an event during Bird Week in May 2000 at theagement and demolition activities, as well as efforts to acquire ISO

fashionable Marunouchi Café.

14001 certification and environment-related training symposiums.

Furthermore, we co-sponsor the NHK Symphony Orchestra

We have also quantified the cost of environmental preservation in

and operate cultural facilities in major cities in Japan, in suchour operations through environmental accounting. According toareas as Fukuoka and Yokohama.

environmental accounting, environment-related expenditures totaled ¥6.7 billion in the fiscal year ended March 31, 2001.

As a first-rate corporate citizen, the Mitsubishi Estate Groupwill continue to carry out its philanthropy and cultural promo-

We have obtained ISO 14001 certification for all our officebuilding operations in the Tokyo and Yokohama areas. Mitsubishition activities to further develop relationships with local
communities.

Estate Home has obtained ISO 14001 certification in all its
operations.
In demolition work at our current Marunouchi construction
site, we are promoting waste reduction and recycling throughsuch activities as the recycling of pine columns used in thefoundation of the previous Marunouchi building into raw material for paper.
Group employees act as community volunteers to support
annual chamber music performances for the elderly and the

NHK Symphony Orchestra, co-sponsored by Mitsubishi Estate

Promotion of Environmental Affairs and Corporate Philanthropy

19Financial Review

Financial Review
Summary

loss on inventories of ¥94,239 million (US$760.6 million).

In the fiscal year ended March 31, 2001, revenue and income

Restructuring of affiliates with poor performance continued

increased in line with favorable performance in Mitsubishi Estate’swith the transfer of managerial control of Fuji International Speedcondominium operations, brisk growth at affiliated companies way Co., Ltd. to Toyota Motor Corporation through capital
Rockefeller Group, Inc. and Aqua City Co., Ltd. and profitable participation, and Yokohama Royal Park Hotel Co., Ltd. began its
operations of Mitsubishi Real Estate Services Co., Ltd. and three-year reform plan.
Mitsubishi Estate Home Co., Ltd.
In the fiscal year ended March 31, 2000, to improve thesoundness of the balance sheet we recorded a valuation loss

Analysis of Revenue
Revenue from operations rose 9.9% to ¥630,990 million

on inventories of ¥32,614 million (US$263.2 million), which (US$5,092.7 million). Results and conditions for each segment
included the completion of writing off losses on real estate for are discussed below.
sale. In the fiscal year ended March 31, 2001, we transferred

Revenue from the building segment comprises 49.5% of to-

non-performing fixed assets to inventories and disposed oftal revenues. Revenue from this segment rose 5.7% to ¥317,906

losses on non-performing fixed assets by posting a valuation

million (US$2,565.8 million) owing to improvement in the

Revenue form Operations(Billions of yen)
630.9

2001
574.3

2000

565.2

1999
1998

548.7
559.1

1997

Operating Income(Billions of yen)
2001

80.6
6.82

2000

68.8

1999
58.2

1998

62.3

1997

Net Income(Billions of yen)
19.8

2001
2000
1999
1998
1997

20

18.4
22.3
31.8
38.3

vacancy rate and operations of the Sanno Park Tower for a full

million (US$263.1 million). The other segment also remained

fiscal year. Revenue from the residential development segment,

relatively unchanged from the previous year at ¥18,395 million

which comprises 20.7% of total revenue, grew 29.2% to(US$148.5 million).

¥132,916 million (US$1,072.8 million) from robust condominium
sales. Revenue from the architectural and engineering segment

Analysis of Income

fell 39.1% to ¥15,616 million (US$126.0 million) as sales ofOperating income increased 18.2% to ¥80,639 million (US$650.8

designs for large-scale properties were recorded in the previous

million). This significant increase was largely due to brisk condo-

fiscal year. Revenue from the real estate brokerage segment

minium sales that improved operating income by ¥11,401 million

grew 19.2% to ¥87,364 million (US$705.1 million) mainly due(US$92.0 million) for the residential development segment.

to brisk revenue from Cushman & Wakefield, Inc. of the Rockefeller
Group, Inc. Revenue from the custom-built housing segment, in

Other Income and Expenses

line with increased revenue at Mitsubishi Estate Home, climbed

For the fiscal year under review, interest and dividend income

4.1% to ¥37,148 million (US$299.8 million). Revenue from thetotaled ¥3,777 million (US$30.5 million) and interest expense

hotel segment stayed roughly in line with last year at ¥32,604

totaled ¥36,436 million (US$294.1 million).

Net Income per Share
(Yen)
2001
2000
1999
1998

15.26
14.18
17.19
24.51

1997

29.53

Shareholders’ Equity(Billions of yen)
518.7

2001
2000

440.7

1999

459.5

1998

454.0

1997

432.7

Interest-Bearing Debt
(Billions of yen)
2001

1,271.5
1,219.8

2000
1999
1998
1997

1,275.7
1,164.9
1,124.5

Financial Review

21Financial Review

The Company recorded a net gain on sales of property andAnalysis of Financial Position

equipment of ¥43,440 million (US$350.6 million), net gain Net cash provided by operating activities amounted to ¥107,643
on sales of securities of ¥21,497 million (US$173.5 million) million (US$868.8 million). Net cash used in investing activities
and gain on contribution of securities to employees’ retire- totaled ¥49,169 million (US$396.8 million), mainly due to thement benefit trust of ¥23,280 million (US$187.9 million). ongoing redevelopment of the Marunouchi district and capital
However, valuation loss on inventories totaled ¥94,239 mil-investment in the renewal of existing buildings. However, this waslion (US$760.6 million).

partially offset by proceeds from sales of property and equipment and sales of securities. Net cash provided by financing
activities was ¥32,706 million (US$264.0 million). In aggregate,

Net Income

Income before income taxes and minority interests totaled cash and cash equivalents at end of year was ¥178,922 million¥33,140 million (US$267.5 million). Net income rose 7.7% to (US$1,444.1 million), compared with ¥86,457 million (US$697.8¥19,832 million (US$160.1 million) and net income per share million) a year earlier.
was ¥15.26 (US$0.12).

Interest-bearing debt at fiscal year-end rose ¥51,681 million (US$417.1 million) to ¥1,271,504 million (US$10,262.3
million) primarily due to the advanced procurement of funds

Building
Revenue

Operating Income(Millions of yen)

(Millions of yen)
317,906

2001

300,712

2000

Residential Development
Revenue(Millions of yen)
132,916

2001
102,845

2000

Architectural & Engineering
Revenue

9,971

2000

(1,430)(Millions of yen)
15,61625,624

2000

Real Estate Brokerage
Revenue

2001

(32)

2000

2,163

Operating Income(Millions of yen)

(Millions of yen)
87,364

2001

22

2001

Operating Income(Millions of yen)

2000

83,7002000

Operating Income(Millions of yen)

2001

79,9392001

73,286

6,275

2001
2000

4,585

to increase liquidity. Total assets at fiscal year-end increased

ICR of 2.5 times by the fiscal year ending March 31, 2003.

¥249,492 million (US$2,013.6 million) to ¥2,535,263 mil-To achieve this objective, management is placing priority onlion (US$20,462.2 million). Total shareholders’ equity

accelerating the redevelopment of the Marunouchi district andincreased ¥78,035 million (US$629.8 million) to ¥518,766

the construction of six new buildings scheduled for completion

million (US$4,187.0 million). This was mainly the result of

by 2008. In our robust residential development operations, theposting an unrealized gain on securities of ¥63,156 million

Company plans to improve the gross profit margin and increase(US$509.7 million) in accordance with the introduction of acondominium sales by focusing on condominiums with rapid turn-

new accounting standard for financial instruments.

over and high-rise condominium developments. In the J-REIT

As a result, the shareholders’ equity ratio rose 1.2 percentage
points to 20.5%.

business, the Company is expanding orders in such fee-based
businesses as asset management and property management,
and is developing profitable real estate for sale to J-REITs.

Management Initiatives and Financial Strategies

To raise ROA through higher asset efficiency, the Company is

The Group’s core business of building operations requires sub-shifting assets by selling non-performing and underutilized real

stantial capital investment over a long period of time. Owing toestate as well as moving assets into J-REITs. The Company isthe need to continuously evaluate and improve asset efficiency,

considering measures to deal with unprofitable operations in-

we have adopted return on assets (ROA) and interest coveragecluding the selling off and withdrawal of such businesses.

ratio (ICR) as management indicators to improve asset efficiency
and evaluate risk management.

While using cash flows from sales of assets and higher profitability on operations to reduce interest-bearing debt, Mitsubishi

Compared with an ROA of 3.6% and an ICR of 2.4 times for the

Estate aims to improve its financial structure and raise its ICR by

fiscal year under review, we are targeting an ROA of 3.9% and an

reducing interest expenses through flexible financing activities.

Custom-Built Housing
Revenue

Operating Income(Millions of yen)
2001
2000

(Millions of yen)
37,14835,668

Hotel
Revenue

2001

586

2000

(8)

Operating Income(Millions of yen)

(Millions of yen)2001

32,604

2000

32,953

Other
Revenue

699

2001
(601)

2000

Operating Income(Millions of yen)

(Millions of yen)

2001

18,395

2000

18,107(1,573)

2001(2,449)2000

Financial Review

23

Financial Statements

Financial Statements
Independent Auditors’ Report
To the Shareholders and Board of Directors of
Mitsubishi Estate Co., Ltd.:We have audited the consolidated balance sheet of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31, 2001 and the related
consolidated statements of income, shareholders’ equity and cash flows for the year ended March 31, 2001, all expressed in Japanese yen. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on atest 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.
In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31, 2001, and the results of their operations and their cash flows for the year
ended March 31, 2001 in conformity with accounting principles and practices generally accepted in Japan consistently applied during the period
except for the change, with which we concur, in the grouping of business segments reclassified in terms of the nature of each operation and service
as described in Note 16 to the consolidated financial statements.
As described in Note 1 to the consolidated financial statements, Mitsubishi Estate Co., Ltd. and consolidated subsidiaries have adopted new
accounting standards for financial instruments including derivatives and retirement benefits in the preparation of their consolidated financial statements for the year ended March 31, 2001.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2001 are presented solely
for convenience. Our audits also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has
been made on the basis described in Note 3 to the consolidated financial statements.

Toyo & Co.
Tokyo, Japan
June 28, 2001
See Note1 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.

24

Report of Independent Public Accountantson the Consolidated Financial Statements

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

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

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

Financial Statements

25

Financial Statements

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2001 and 2000

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

2001¥ 171,805
17,29456,088(5,248)251,11364,00823,636

Thousands ofMillions of yen U.S. dollars (Note 3)
2000
2001

¥

74,58287,58549,274(4,744)
235,297
35,29925,142$ 1,386,642
139,580
452,688(42,357)
2,026,739
516,610
190,767

Total current assets

578,696

502,435

4,670,669

Investments:
Investments in and advances to unconsolidated subsidiaries and affiliates
Investment securities (Note 4)
Other investments (Notes 6 and 7)

21,011
193,117
148,781

24,2489,615
125,320

169,580
1,558,652
1,200,816

Total investments

362,909

159,1832,929,048

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

660,136
1,403,110
88,29039,413

693,207
1,368,962
82,97931,4605,327,974
11,324,536
712,591
318,103

Total property and equipment

2,190,949

2,176,608

17,683,204(655,617)(607,305)(5,291,501)

1,535,332

1,569,303

12,391,703

58,32654,850470,751¥2,535,263¥2,285,771$20,462,171

Less accumulated depreciation
Property and equipment, net
Intangible and other assets (Note 9)
Total assets
See accompanying notes to consolidated financial statements.

26

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2000 and 1999

Liabilities, minority interests and shareholders’ equity

Current liabilities:
Short-term borrowings and current portion of long-term debt (Note 7)
Notes and accounts payable – trade
Accrued income taxes (Note 9)
Advances and deposits
Accrued expenses and other current liabilities (Note 9)

2001

Thousands ofMillions of yen U.S. dollars (Note 3)
2000
2001

¥ 234,360
59,865
4,092
56,844
61,178¥ 183,626
57,286
3,172
51,79649,537$ 1,891,525
483,172
33,027458,789493,769

416,339

345,4173,360,282

Long-term debt (Note 7)
Lease deposits
Employees’ retirement allowances (Note 8)
Deferred income taxes (Note 9)
Other noncurrent liabilities

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

1,036,197
296,934
29,356
61,69945,5988,370,815
2,578,402
82,308
1,184,310
371,211

Total liabilities

1,975,874

1,815,201

15,947,328

Minority interests

40,62329,839327,869

Shareholders’ equity (Note 10):
Common stock, par value ¥50:
Authorized – 1,980,000,000 shares;
Issued and outstanding – 1,299,185,054 shares
Capital surplus
Retained earnings
Unrealized gain on securities
Foreign currency translation adjustments

86,534
115,216
264,091
63,156(10,224)

86,534
115,195
254,871—(15,860)

698,418
929,9112,131,485
509,734(82,518)

518,773(7)

440,740(9)4,187,030(56)

518,766

440,7314,186,974¥2,535,263¥2,285,771$20,462,171

Total current liabilities

Less treasury stock – 6,533 shares in 2001; 9,395 shares in 2000
Total shareholders’ equity
Contingent liabilities (Note 12)
Total liabilities, minority interests and shareholders’ equity

Financial Statements

27

Financial Statements

Consolidated Statements of Income
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2001, 2000 and 1999

Millions of yen

Thousands of
U.S. dollars (Note 3)

2001

2000

1999

2001

¥630,990
507,447
42,904¥574,396
463,708
42,487¥565,259
438,171
58,260$5,092,736
4,095,617
346,279

80,63968,201

68,828650,840

3,777(36,436)(14,840)

4,310(40,318)
4,355

4,713
(44,349)
2,624

30,484(294,076)(119,774)(47,499)(31,653)(37,012)(383,366)

33,14036,54831,816

267,474

Current
Deferred

8,383
2,839

8,887
7,531

7,944
—

67,65922,914

Total

11,222

16,418

7,944

90,573

2,086

1,709

1,545

16,836¥ 19,832¥ 18,421¥ 22,327$ 160,065

Yen

U.S. dollars(Note 3)

Revenue from operations
Cost of revenue from operations
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Other, net (Note 13)
Total
Income before income taxes and minority interests
Income taxes (Notes 1 and 9):

Minority interests
Net income

Net income per share:
Basic
Diluted¥15.2614.84¥14.18—¥17.19—$0.1230.120

Cash dividends per share

8.00

8.00

8.00

0.065

See accompanying notes to consolidated financial statements.

28

Consolidated Statements of Changes in Shareholders’ Equity
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2001, 2000 and 1999

Millions of yen
Foreign
Currency
Translation
Adjustments

Treasury
Stock

Total
Shareholders’Equity———¥(362)—(7,509)¥(9)——¥453,695
22,327(7,509)Unrealized
Gain onSecurities

CommonStockCapitalSurplusRetained
Earnings

Balance at March 31, 1998
Net income
Foreign currency translation adjustments
Change in consolidated subsidiaries andcompanies accounted forby the equity method (Note 1)
Cash dividends paid
Directors’ and statutory auditors’ bonuses
Balance at March 31, 1999
Net income
Foreign currency translation adjustments
Change in consolidated subsidiaries andcompanies accounted forby the equity method (Note 1)
Cash dividends paid
Directors’ and statutory auditors’ bonuses
Cumulative effect of adopting
tax-effect accounting (Note 1)
Balance at March 31, 2000
Net income
Foreign currency translation adjustments
Cumulative effect of adopting fair value
accounting for other securities
Change in consolidated subsidiaries
and companies accounted forby the equity method (Note 1)
Cash dividends paid
Directors’ and statutory auditors’ bonuses
Treasury stock
Balance at March 31, 2001

¥86,534——¥115,195——¥252,337
22,327————86,534—————
115,195——(6,236)(10,393)(181)
257,854
18,421
—

—
—
—
—
—
—

—
—
—
(7,871)—(7,989)

—
—
—
(9)
—
—

(6,236)(10,393)(181)
451,703
18,421(7,989)

—
—
—

—
—
—

2
(10,393)
(183)

—
—
—

—
—
—

—
—
—

2
(10,393)(183)—
86,534———
115,195——(10,830)
254,871
19,832
—

—
—
—
—

—
(15,860)
—
5,636

—
(9)
—
—

(10,830)
440,731
19,832
5,636

—

—

—

63,156——

63,156————¥86,534

21———¥115,216(36)(10,393)(183)—¥264,091————¥63,156————¥(10,224)

—
—
—
2
¥(7)

(15)
(10,393)(183)
2¥518,766

Balance at March 31, 2000
Net income
Foreign currency translation adjustments
Cumulative effect of adopting fair value
accounting for other securities
Change in consolidated subsidiaries andcompanies accounted forby the equity method (Note 1)
Cash dividends paid
Directors’ and statutory auditors’ bonuses
Treasury stock
Balance at March 31, 2001

$698,418——$929,742 $2,057,070—
160,065—————$(128,006)—
45,488—509,734

—

169
(291)
—
(83,882)—(1,477)——$929,911 $2,131,485————$509,734————$(82,518)¥

Thousands of U.S. dollars (Note 3)

—
—
—
—
—
$698,418—$$(73) $3,557,151—
160,065—
45,488—509,734—(122)—(83,882)—(1,477)1717$(56) $4,186,974

See accompanying notes to consolidated financial statements.

Financial Statements

29

Financial Statements

Consolidated Statements of Cash Flows
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2001, and 2000

Thousand of
U.S. dollars (Note 3)
2001

2001

Millions of yen
2000

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Net gain on sales of property and equipment
Net gain on sales of securities
Unrealized loss on securities
Valuation loss on inventories
Equity in net income of affiliates
Gain on contribution of securities to employees retirement benefit trust
Net change in allowancesInterest and dividend income
Interest expense
Increase in notes and accounts receivable(Increase) decrease in inventories(Decrease) increase in notes and accounts payable
Increase (decrease) in lease deposits
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 33,140
65,728(43,440)(21,497)
1,664
94,239(1,507)(23,280)
10,899(3,777)36,436(4,514)(6,106)(1,129)22,003(10,023)
148,836
3,962(37,400)(7,755)
107,643¥36,548
64,167(37,407)(18,012)2,166
32,614(1,689)—(2,431)(4,310)40,318(8,267)399
12,000(893)
2,685
117,888
3,948(40,706)(8,729)72,401$ 267,474
530,492(350,605)(173,503)
13,430760,605(12,163)(187,893)
87,966(30,484)
294,076(36,433)(49,282)(9,112)
177,587(80,896)
1,201,259
31,977(301,856)(62,591)
868,789

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
Purchases of land use rights
Other
Net cash used in investing activities

2,417(13,593)
56,749(105,644)
35,250(20,160)(4,235)47(49,169)

24,183(2,938)68,866(102,160)
1,950(1,529)(2,581)
2,598(11,611)

19,508(109,709)
458,022(852,655)
284,504(162,712)(34,181)379(396,844)

Financing activities
Net increase in short-term borrowings
Net decrease in commercial paper
Increase in long-term borrowings
Repayment of long-term borrowings
Proceeds from issuance of corporate bonds
Repayment of corporate bonds
Cash dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents due to mergers and acquisitions
Cash and cash equivalents at end of year (Note 14)

2,311—
12,961(32,207)
141,391(81,440)(10,393)83
32,706
1,150
92,33086,457
135¥178,922

5,290(17,000)
77,508(120,770)
62,929(55,619)(10,393)724(57,331)(3,744)(285)
86,695
47¥86,457

18,652—
104,609(259,944)
1,141,170(657,304)(83,882)670
263,971
9,282
745,198
697,796
1,090$1,444,084

See accompanying notes to consolidated financial statements.

30

Consolidated Statements of Cash Flows
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 1999

Millions of yen
1999

Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Provision for reserve for retirement benefits
Other
Changes in assets and liabilities:
Increase in notes and accounts receivable
Decrease in inventories
Increase in other current assets
Increase in notes and accounts payable
Decrease in accrued income taxes
Other
Payment of directors’ bonuses
Net cash provided by operating activities¥22,327
63,050(627)
8,364(11,505)
4,163
(233)
5,509
(2,683)2,881(181)
91,065Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Decrease in marketable securities
Increase in lease deposits
Decrease in loans to unconsolidated subsidiaries and affiliates
Other
Net cash used in investing activities(148,324)
629
4,642
4,811
1,448
1,346
(135,448)

Financing activities
Increase in bonds and notes
Increase in long-term borrowings
Decrease in commercial paper
Decrease in short-term borrowings
Cash dividends paid
Net cash provided by financing activities
Net decrease in cash
Increase in cash due to change in scope of consolidation
Cash at beginning of year
Cash at end of year

41,66919,153(15,701)(3,539)(10,393)
31,189(13,194)
6,422
77,297¥70,525

Financial Statements

31

Financial Statements

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2001

1. Significant Accounting Policies
Basis of preparation
Mitsubishi Estate Co., Ltd. (the “Company”) and its domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance withaccounting principles and practices generally accepted and applied in Japan, while
its foreign subsidiaries do so in accordance with those of their countries of domicile. The accompanying consolidated financial statements have been compiled
from the consolidated financial statements prepared by the Company as requiredby the Securities and Exchange Law of Japan and have been prepared in accordance with accounting principles and practices generally accepted in Japan, which
may differ in certain material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan. Certain reclassifications have been made to present the accompanying consolidated financial
statements in a format which is familiar to readers outside Japan.
In addition, the notes to the consolidated financial statements include information which may not be required under accounting principles generally accepted inJapan but is presented herein as additional information.
Principles of consolidation
Until the year ended March 31, 1998, the consolidated financial statements included the accounts of the Company and its significant subsidiaries (owned morethan 50%), and investments in certain unconsolidated subsidiaries and significant
affiliates (owned 20% to 50%) were accounted for by the equity method.
Effective April 1, 1998, the Company initially adopted a new accounting standard for consolidation in Japan, under which consolidated financial statements
include the accounts of the Company and significant companies controlled directly
or indirectly by the Company. Companies over which the Company exercises significant influence in terms of their operating and financial policies have been includedin the consolidated financial statements on an equity basis. As a result, retained
earnings as of April 1, 1998 decreased by ¥6,236 million. The prior years’ financial statements have not been restated.
All significant intercompany balances and transactions have been eliminated inconsolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates andassumptions which affect the amounts reported in the financial statements andaccompanying notes. The actual results could differ from those estimates.
Foreign currency transactions and translation(Foreign currency transactions)
Until the year ended March 31, 2000, short-term receivables and payables denominated in foreign currencies had been translated into Japanese yen at theexchange rates prevailing at the balance sheet date. Long-term receivables andpayables denominated in foreign currencies had been translated at their historicalexchange rates, except that long-term debt hedged by forward foreign exchange

32

contracts was translated at the respective contracted forward rate.
Effective April 1, 2000, the Company adopted a new accounting standard for foreign
currency translation, which requires all receivables and payables denominated in foreign currencies to be translated into Japanese yen at the exchange rates prevailing at
the balance sheet date. The adoption of this new accounting standard had no effect on
the consolidated financial position or results of operations.
(Translation of foreign currency financial statements)
The assets and liabilities of the foreign consolidated subsidiaries and affiliates aretranslated into Japanese yen at the rates of exchange prevailing at the balance
sheet date, except for the components of shareholders’ equity which are translated
at their historical exchange rates. Revenue and expense accounts are translated at
the average exchange rate for the year. In accordance with the new accounting
standard for foreign currency translation which was adopted early by the Company
during the year ended March 31, 2000, the Company has included foreign currency translation adjustments in stockholders’ equity.
Cash flow statements and cash equivalents
The Company prepared consolidated statements of cash flows for the years ended
March 31, 2001 and 2000 as required by and in accordance with the “AccountingStandards for Consolidated Statements of Cash Flows” which became effective theyear ended March 31, 2000. The consolidated statement of cash flows for the year
ended March 31, 1999, which was not customarily prepared in Japan and was not
required to be filed with Ministry of Finance prior to the year ended March 31, 2000,
was prepared for the purpose of inclusion in the consolidated financial statements in
a form familiar to readers outside Japan. Significant differences between the consolidated statements of cash flows for the years ended March 31, 2001 and 2000
and that for the year ended March 31, 1999 include the following: the use of cash
and cash equivalents and income (loss) before income taxes in 2001 and 2000
instead of cash and time deposits and net income in 1999, and the disclosure in cash
flows from operating activities of interest expense, interest and dividend income andproceeds from interest and dividend income in 2001 and 2000. A reconciliation
between cash in the balance sheets and cash equivalents at March 31, 2001 and2000 is presented in Note 14. The consolidated statement of cash flows for the year
ended March 31, 1999 has not been restated.
Marketable securities and investment securities
Prior to the year ended March 31, 2001, marketable securities in current andnoncurrent portfolios had been valued principally at the lower of cost or market,
cost being determined mainly by the moving average method, and other securities
had been stated at cost determined by the moving average method.
In January 1999, the Business Accounting Deliberation Council of Japan issued
a new accounting standard for financial instruments, which requires the Company
to classify its investments in debt and equity securities into three categories: trading securities, held-to-maturity securities, or other securities. Under the newstandard, trading securities are carried at fair value, with unrecognized gains andlosses included in earnings, and held-to-maturity securities are carried atamortized cost. Marketable securities classified as other securities are carried atfair value with unrealized holding gains and losses, net of income taxes, directly
included in stockholders’ equity. Non-marketable securities classified as other securities are carried at cost.
In applying the new accounting standard for financial instruments as of April 1,
2000, the Company and its consolidated subsidiaries assessed the appropriateclassification of their investments in securities and made certain reclassifications.
Cost of securities sold is determined by the moving average method.
The adoption of a new accounting standard for financial instruments related to securities decreased income before income taxes by ¥329 million ($2,655 thousand) for theyear ended March 31, 2001.
Inventories
Inventories are mainly stated at cost, determined by the identified cost method;
however, when the fair value is substantially less than cost and the decline in fairvalue is considered to be permanent, inventories are revalued at fair value.
Property and equipment and depreciation
Domestic property and equipment is stated at cost, less accumulated depreciation.
Foreign subsidiaries primarily in the United States have adopted Financial AccountingStandards Board Statement No. 121, “Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of,” which requires impaired losses
to be recorded as long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by thoseassets are less than the assets’ carrying value.
Depreciation of property and equipment is calculated principally by the declining-balance method, except for buildings acquired in Japan subsequent to March
31, 1998 and property and equipment 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 thecosts incurred for significant renewals and additions; however, costs for maintenance and repairs are charged to income.
Leases
Noncancelable leases are primarily accounted for as operating leases (whether
such leases are classified as operating or finance leases) except that leases which
stipulate the transfer of ownership of the leased assets to the lessee are accounted
for as finance leases.
Intangible and other assets
Intangible and other assets primarily consist of goodwill and land use rights. Goodwill
is stated on the basis of cost and is being amortized over periods ranging from 5 to 25
years on a straight-line basis. Land use rights are stated on the basis of cost.
Pension and severance plans
The Company and most consolidated subsidiaries have noncontributory funded andunfunded defined benefit plans covering most of their employees. Employees of theCompany and its consolidated subsidiaries are entitled under most employment

termination circumstances to annuity payments or lump-sum payments, the amountsof which are determined principally by reference to their basic rates of pay, length ofservice, and the conditions under which the termination occurs.
Prior to the year ended March 31, 2001, employees’ retirement allowanceswere stated at the amount which would be required to be paid if all eligible employees covered by the unfunded benefit plan voluntarily terminated their employment
as of the balance sheet date. Costs with respect to the funded pension plans were
determined actuarially and charged to income when paid.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries
adopted a new accounting standard for retirement benefits, which requires theCompany and its domestic consolidated subsidiaries to accrue employees’ severance and retirement benefits for the amount calculated based on the actuariallydetermined retirement benefit obligation and the fair value of the plan assets as
adjusted for the unrecognized net retirement benefit obligation at transition, unrecognized net actuarial gain or loss and unrecognized prior service cost. The Company
expensed the net retirement benefit obligation at transition of ¥4,714 million($38,047 thousand) in the year ended March 31, 2001. Actuarial gain or loss isamortized by the straight-line method over a period which is less than the averageremaining years of service of the employees. The adoption of this new standard for
retirement benefits decreased income before income taxes by ¥4,587 million($37,022 thousand) for the year ended March 31, 2001.
In order to improve the funded status of the pension plan, the Company contributed marketable securities in the amount of ¥29,000 million ($234,060 thousand)to the employees’ retirement benefit trust during the year ended March 31, 2001.
The difference between the book value of ¥5,720 million ($46,166 thousand) andthe market value at the time of the contribution of ¥29,000 million ($234,060
thousand) has been recorded as a gain in the consolidated statement of income forthe year ended March 31, 2001.
In addition, directors and statutory auditors are customarily entitled to lumpsum payments under the Company’s internal regulations. Accrued severance
benefits for these officers of the Company have been provided at estimated amounts
and are included in other noncurrent liabilities.
Income taxes
Effective April 1, 1999, the Company and its domestic subsidiaries adopted a new
accounting standard for deferred income taxes. Under this standard, deferred tax
assets and liabilities are determined based on the financial statements and the tax
bases of assets and liabilities, using the enacted tax rates in effect for the year inwhich the temporary differences are expected to reverse. Deferred tax assets arealso recognized for the estimated future tax effects attributable to operating loss
carryforwards. Valuation allowances are established to reduce deferred tax assets if
it is more likely than not that some or all of the deferred tax assets will not be realized.
Derivative financial instruments
The Company utilizes derivative financial instruments for the purpose of hedging its
exposure to adverse fluctuations in foreign currency exchange rates and interest rates,
but does not enter into such transactions for speculative or trading purposes.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries

Financial Statements

33

Financial Statements

adopted a new accounting standard for financial instruments including derivatives.
The new accounting standard requires the Company and its domestic consolidated
subsidiaries to recognize all derivatives on the balance sheet at fair value with certain
exceptions. Derivatives which are not hedges must be adjusted to fair value throughincome. If the derivative is a hedge, changes in the fair value of derivatives aredeferred until the underlying hedged item is recognized in earnings. The adoption ofthis new accounting standard decreased income before income taxes by ¥24 million($194 thousand) for the year ended March 31, 2001.
Revenue recognition
The consolidated statements of income reflect revenue from operations in the following manner:(a) Revenue from the leasing of office space is recognized as rent accrued over theleasing period.
(b) Revenue from sales of condominiums, residential houses and land is recognized when the units are delivered and accepted by the customers.
(c) Revenue from real estate brokerage is recognized when an underlying leaseagreement goes into force or the underlying units are delivered.
(d) Revenue from architectural design and supervision is recognized at the date ofcompletion of each relevant project.
(e) Revenue from construction contracts is recognized at the date of completion ofeach contract.

(f) Other operating revenue is recognized on an accrual basis.
Net income per share
In computing net income per share assuming no dilution, the average number ofshares outstanding during each year, adjusted to give retroactive effect to any free
distribution of shares, has been used. Net income per share assuming full dilution
has been computed on the assumption 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 the related interest
expense, net of income taxes, for such convertible bonds.
Diluted net income per share for the years ended March 31, 2000 and 1999
has not been presented since conversion of the outstanding convertible bonds
would have had no dilutive effect.
Appropriation of retained earnings
Under the Commercial Code of Japan, the appropriation of retained earnings withrespect to a given financial year is made by resolution of the shareholders at a
general meeting held subsequent to the close of such financial year. The accounts
for that year do not, therefore, reflect such appropriations.
Reclassifications
Certain reclassifications have been made to the 2000 and 1999 financial statements in order to conform them to the 2001 presentation.

2. Accounting Changes(1) Effective April 1, 1999, the Company changed its method of accounting for priorservice cost with respect to its funded pension plans from expensing these upon
payment, to recognizing such costs as expense when actuarially determined.
This change was made in order to establish a solid financial position for theCompany, considering the amount of the unfunded prior service cost of the pension plan. The cumulative effect of this change in method of accounting amounted
to ¥8,664 million at April 1, 1999 and was charged to income for the year ended
March 31, 2000, resulting in an increase in operating income of ¥1,765 million
and a decrease in income before income taxes of ¥6,899 million.
(2) Effective April 1, 1999, the Company changed its classification of certain

expenses related to its hotel business in the statement of income and began
including these expenses in cost of revenue from operations instead of in selling,
general and administrative expenses. This change was made to achieve a moreaccurate presentation of the operating results of the Company and its consolidated subsidiaries as these expenses are directly related to the revenue from thehotel business operations. The effect of this change was to increase cost ofrevenue from operations and to decrease selling, general and administrative expenses by ¥13,503 million. This change, however, had no effect on income
before income taxes for the year ended March 31, 2000. The prior years’ statements of income have not been restated.

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 ¥123.90 =U.S.$1.00, the approximate rate of exchange prevailing on March 31, 2001. The

34

inclusion of such amounts is not intended to imply that yen amounts have been or
could be readily converted, realized or settled in U.S. dollars at the above or any
other rate.

4. Marketable Securities and Investment Securities
Information regarding marketable securities classified as other securities at March 31, 2001 was as follows:
Millions of yen

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

Thousands of U.S. dollars

Cost

Fair value

Unrealized
gain (loss)¥51,177¥161,707¥110,530$413,051$1,305,141$892,090—
455—
51,632—455—
162,162—0—
110,530—
3,672—
416,723—
3,672—
1,308,813—
0—892,090¥7,136¥6,303¥(833)$57,595$50,872$(6,723)

—
—
—
7,136
¥58,768

—
—
—
6,303
¥168,465

—
—
—
(833)
¥109,697———
57,595$474,318———
50,872$1,359,685———(6,723)$885,367

Proceeds from sales of securities classified as other securities totaled ¥34,274
million ($276,626 thousand), with gross realized gain of ¥20,392 million ($164,584
thousand) and gross realized loss of ¥385 million ($3,107 thousand) for the year

Cost

Fair value

Unrealized
gain (loss)

ended March 31, 2001.
Information regarding marketable debt securities classified as held-to-maturity
securities at March 31, 2001 was as follows:
Millions of yen

Amortized cost

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

¥

315
18
99
432

—
11,000
1,916
12,916¥13,348

Thousands of U.S. dollars

Unrealized
gain (loss)

Amortized cost

Fair value

Unrealized
gain (loss)

321
20
99
440

¥ 6
2
0
8

$ 2,542
145
800
3,487

$ 2,591
161
800
3,552

$ 49
16
0
65

—
10,9491,912
12,861¥13,301

—
(51)
(4)
(55)
¥(47)

—
88,781
15,464104,245$107,732—
88,36915,432
103,801$107,353

—
(412)
(32)
(444)
$(379)

Fair value¥

Financial Statements

35

Financial Statements

Information regarding securities recorded at cost at March 31, 2001 was as follows:

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

Millions of yen

Thousands of
U.S. dollars¥18,543
6,209
2,018
1,209
119

$149,661
50,113
16,287
9,758
961

500
¥28,598

4,035$230,815

The redemption schedule for securities classified as other securities at March 31, 2001 is summarized as follows:
Millions of yen

Government bonds
Corporate bonds
Commercial paper
Other debt securities
Total

Due within
one year or lessDue after one year
through five years

Due after five
years or more

¥ 100
5,729
2,018
2,028
¥9,875

¥ 196
6,249
—
—
¥6,445

¥19
—
—
—
¥19

Thousands of U.S. dollars
Due within
one year or less$807
46,23916,287
16,368$79,701

Due after one year
through five years

Due after five
years or more

$ 1,582
50,436——$52,018

$153
—
—
—
$153

The cost and related fair value of current and noncurrent marketable securities at March 31, 2000 were as follows:
Millions of yen

Current:
Equity securities
Debt securities
Subtotal
Noncurrent:
Debt securities
Total

Cost

Fair value

Unrealized gain (loss)¥69,694
3,200
72,894¥255,277
3,292
258,569¥185,583
92
185,675

67¥72,96170¥258,639

3¥185,678

2001

Millions of yen
2000

Thousands of
U.S. dollars
2001¥172,649
42,30923,99912,156¥251,113¥152,741
38,274
31,63812,644¥235,297$1,393,454
341,477
193,697
98,111$2,026,739

5. Inventories
Inventories at March 31, 2001 and 2000 are summarized as follows:

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

36

6. Other Investments
Other investments at March 31, 2001 and 2000 were as follows:

Lease deposits
Long-term prepaid expenses and other
Total

2001

Millions of yen
2000

Thousands of
U.S. dollars
2001¥ 86,054
62,727¥148,781¥ 75,382
49,938¥125,320$ 694,544
506,272$1,200,816

2001

Millions of yen
2000

Thousands of
U.S. dollars
2001¥ 72,031
1,721
160,608¥234,360¥ 68,151
1,536
113,939¥183,626$ 581,364
13,8901,296,271$1,891,525

7. Short-Term Borrowings and Long-Term Debt
At March 31, 2001 and 2000, short-term borrowings and the current portion of long-term debt consisted of the following:

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

The annual interest rates applicable to short-term borrowings outstanding at March 31, 2001 and 2000 ranged principally from 0.183% to 7.900% and from 0.382%
to 6.675%, respectively.
At March 31, 2001 and 2000, long-term debt consisted of the following:

2001

1.5% convertible bonds due 2003
Zero coupon convertible bonds due 2006
4.9% mortgage bonds due 2000
3.85% mortgage bonds due 2000
5.6% mortgage bonds due 2004
8.625% mortgage bonds due 2001
4.4% mortgage bonds due 2001
2.7% mortgage bonds due 2001
2.95% mortgage bonds due 2002
4% mortgage bonds due 2002
5.275% mortgage bonds due 2005
4.8% mortgage bonds due 2005
2.125% unsecured bonds due 2002
1.5% unsecured bonds due 2002
1.675% unsecured bonds due 2002
2.55% unsecured bonds due 2003
2.35% unsecured bonds due 2003
2.05% unsecured bonds due 2003
1.775% unsecured bonds due 2003
1.7% unsecured bonds due 2003
3.1% unsecured bonds due 2003
3.05% unsecured bonds due 2003¥

92,682100,000——
50,00028,00010,0005,000
10,00020,00050,00050,00010,00010,00010,00010,00020,00020,00010,00010,00010,00015,000Thousands of
U.S. dollars
2001

Millions of yen
2000¥

92,682—35,00035,00050,00028,00010,0005,000
10,00020,00050,00050,00010,00010,00010,00010,00020,00020,00010,00010,00010,00015,000$748,039807,103——
403,551
225,989
80,71040,35580,710161,421403,551
403,551
80,71080,71080,71080,710161,421
161,42180,71080,71080,710121,065

Financial Statements

37

Financial Statements

2001

2.55% unsecured bonds due 2004
1.7% unsecured bonds due 2004
0.9% unsecured bonds due 2004
2.125% unsecured bonds due 2005
3.4% unsecured bonds due 2006
3% unsecured bonds due 2006
2.21% unsecured bonds due 2006
1.325% unsecured bonds due 2006
2.975% unsecured bonds due 2007
3.1% unsecured bonds due 2008
2.575% unsecured bonds due 2008
2.525% unsecured bonds due 2008
3.075% unsecured bonds due 2009
1.82% unsecured bonds due 2009
2% unsecured bonds due 2009
1.985% unsecured bonds due 2009
1.9% unsecured bonds due 2010
1.55% unsecured bonds due 2011
3.275% unsecured bonds due 2012
3.125% unsecured bonds due 20173% unsecured bonds due 2018
2.5% unsecured bonds due 2020
0.86% unsecured bonds due 2000 (payable in US dollars)
0.4% unsecured bonds due 2000 (payable in US dollars)
0.3% unsecured bonds due 2000 (payable in US dollars)
0.2% unsecured bonds due 2000 (payable in US dollars)
0.2% unsecured bonds due 2001 (payable in US dollars)
7.37% unsecured bonds due 2008 (payable in US dollars)
Floating rate bonds due 2001 (payable in US dollars)
Floating rate bonds due 2003 (payable in US dollars)
Floating rate bonds due 2001 (payable in US dollars)
Floating rate bonds due 2001 (payable in US dollars)
Floating rate bonds due 2001 (payable in US dollars)
Floating rate bonds due 2001 (payable in US dollars)
Floating rate bonds due 2001 (payable in US dollars)
Floating rate bonds due 2002 (payable in US dollars)
Floating rate bonds due 2004 (payable in US dollars)
Floating rate bonds due 2005 (payable in US dollars)
Floating rate bonds due 2009 (payable in US dollars)
Loans from banks and insurance companies:
SecuredUnsecured
Loans from tenants
Total
Less current portion
Total long-term debt

38¥

10,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,000
—
—
—
—
—
5,148
7,463
1,147
2,502
1,724
2,869
1,783
3,270
2,488
1,721
1,090
1,087

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

Millions of yen
2000

Thousands of
U.S. dollars
2001

¥

$

10,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,000——10,00010,00010,000
—
882
2,590
1,718
1,751
3,922
4,970
6,660
1,024
2,232
—
—
—
—
—
—
—
970

98,504
304,16467
1,150,136(113,939)¥1,036,197

80,71080,71080,71080,71080,71080,71080,71080,710242,13180,71080,71080,71080,71080,71080,71080,71080,71080,71080,71080,71080,71080,710—————41,55060,234
9,258
20,194
13,915
23,156
14,391
26,39320,081
13,891
8,798
8,774

848,749
2,256,312
492
9,667,086(1,296,271)$8,370,815

The agreements under which the 1.5% convertible bonds and zero coupon convertible bonds were issued provide for conversion into shares of common stock at
current conversion prices per share of ¥2,600 ($21) and ¥1,200 ($10), respectively, subject to adjustment for certain events including free distributions of sharesand stock dividends declared as a result of stock splits.
The aggregate annual maturities of long-term debt subsequent to March 31,
2001 are summarized as follows:Year ending March 31:
2002
2003
2004
2005
2006 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 160,608
202,652
154,410
179,944
500,138¥1,197,752$1,296,271
1,635,609
1,246,247
1,452,333
4,036,626$9,667,086

The assets pledged as collateral for short-term borrowings of ¥1,500 million($12,107 thousand), long-term debt of ¥105,160 million ($848,749 thousand)and other noncurrent liabilities of ¥6,000 million ($48,426 thousand) at March 31,
2001 were as follows:
Millions of yen

Other investments
Land
Buildings
Machinery and equipment
Total

¥

422
24,085
146,816
5,716¥177,039

Thousands of
U.S. dollars

$

3,406
194,391
1,184,955
46,134$1,428,886

Additionally, all assets of the Company are subject to the terms of an enterprisemortgage for mortgage bonds which amounted to ¥150,000 million ($1,210,654
thousand) at March 31, 2001.
As is customary in Japan, collateral must be given if requested by lending institutions under certain circumstances, and banks, in general, have the right to offset
cash deposited with them against any debt or obligations payable to a bank whichbecome due in cases 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 sheet at March 31, 2001 for the Company’s
and its consolidated subsidiaries’ defined benefit pension plans:

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

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

Millions of yen

Thousands of
U.S. dollars¥ 2,762
2,148(1,019)$22,292
17,337(8,224)4,750
706¥ 9,347

38,337
5,698$75,440

Millions of yen

Thousands of
U.S. dollars¥(63,467)
52,700(10,767)$(512,244)
425,343(86,901)

646
(148)
71

5,214
(1,194)573¥(10,198)$ (82,308)

The assumptions used in accounting for the pension and severance plans for theyear ended March 31, 2001 were as follows:
Discount rate
3.00 ~ 7.50%
Expected return on plan assets
2.25 ~ 7.50%

Income taxes in Japan applicable to the Company and its domestic consolidated
subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise tax, whichin the aggregate, resulted in statutory tax rates of approximately 42% for 2001 and
2000, and 48% for 1999. Income taxes of the foreign consolidated subsidiaries

are based generally on the tax rates applicable in their countries of incorporation.
The effective tax rate reflected in the accompanying consolidated statement ofincome for the year ended March 31, 1999 differs from the statutory tax rate
primarily because of the effect of temporary differences in the recognition of cer-

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrealized net benefit obligation
at transition
Unrecognized actuarial loss
Unrecognized prior service cost
Amounts recognized in the
consolidated balance sheet

9. Income Taxes

Financial Statements

39

Financial Statements

tain income and expenses for tax and financial reporting purposes and the effectsof permanently nondeductible expenses.
The effective tax rates reflected in the consolidated statements of income forthe years ended March 31, 2001 and 2000 differ from the statutory tax rate for thefollowing reasons:Statutory tax rate
Increase (decrease) in income taxes resulting from:
Change in valuation allowance
Different tax rates applied
Revenues deductible for income tax purposes
Expenses not deductible for income tax purposes
Other
Effective tax rates

2001

2000

42.05%

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

1.32
1.78(1.65)
1.18
0.24
44.92%The significant components of deferred tax assets and liabilities as of March 31, 2001 and 2000 were as follows:

Deferred tax assets:
Net operating loss carryforwards
Accrued retirement allowances and pension costs
Valuation loss on inventories
Unrealized loss on property and equipment
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserves under Special Taxation Measures Law
Unrealized gain on property and equipment
Unrealized gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities

Thousands of
U.S. dollars
2001

2001

Millions of yen
2000¥ 32,108
13,09952,856
10,86910,644
119,576(29,019)
90,557¥ 50,975
11,605
13,714
9,823
8,213
94,330(28,293)
66,037$(65,858)(41,030)(46,940)(17,924)(171,752)¥(81,195)(51,419)(35,249)—(5,487)(92,155)¥(26,118)(531,542)(331,154)(378,854)(144,665)(1,386,215)$ (655,327)

259,145
105,722426,60287,72485,908965,101(234,213)
730,888

10. Legal Reserve and Capital Surplus
In accordance with the Commercial Code of Japan, the Company has provided alegal reserve as an appropriation of retained earnings. The Code provides thatneither capital surplus nor the legal reserve is available for dividends, but both may
be used to reduce or eliminate a deficit by resolution of the shareholders or may be

40transferred to common stock by resolution of the Board of Directors. Retained
earnings in the accompanying consolidated financial statements include the legal
reserve of ¥21,658 million ($174,802 thousand) and ¥21,633 million as of March
31, 2001 and 2000, respectively.

11. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of the leased assets as of March 31, 2001 and 2000,
which would have been reflected in the consolidated balance sheets if finance lease accounting had been applied to the finance leases currently accounted for as
operating leases:
Thousands of
U.S. dollars

Millions of yen

March 31, 2001
Buildings and structures
Machinery and equipment
Total
March 31, 2000
Buildings and structures
Machinery and equipment
Total

Acquisition costs

Accumulated
depreciation

Net book value

Acquisition costs

Accumulated
depreciation

Net book value¥1,1598,232¥9,391¥800
4,570¥5,370¥359
3,662¥4,021$9,354
66,441$75,795$6,45736,884$43,341$2,89729,557$32,454¥1,3607,504¥8,864¥887
4,211¥5,098¥473
3,293¥3,766

Lease payments relating to finance leases accounted for as operating leases in theaccompanying consolidated financial statements amounted to ¥1,877 million($15,149 thousand), ¥1,750 million and ¥1,786 million for the years ended March
31, 2001, 2000 and 1999, respectively. If finance lease accounting had been
adopted, depreciation of the leased assets over the respective lease terms would

have amounted to ¥1,877 million ($15,149 thousand), ¥1,750 million and ¥1,786
million for the years ended March 31, 2001, 2000 and 1999, respectively.
Future minimum lease payments subsequent to March 31, 2001 on noncancelable operating leases and finance leases accounted for as operating leases are
summarized as follows:

Finance leases

Millions of yen
Operating leases

Finance leases

Thousands of U.S. dollars
Operating leases¥1,6082,413¥4,021¥ 3,884
31,965¥35,849$12,978
19,476$32,454$ 31,348
257,990$289,338

Year ending March 31:
20022003 and thereafter
Total
The Company and its consolidated subsidiaries lease office buildings and commercial properties and earn lease income. Future minimum lease income subsequent
to March 31, 2001 for noncancelable operating leases are summarized as follows:Year ending March 31:
20022003 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 30,559
340,420¥370,979$ 246,642
2,747,539$2,994,181

Financial Statements

41

Financial Statements

12. Contingent Liabilities
At March 31, 2001, the Company and its consolidated subsidiaries had the following contingent liabilities:

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

Millions of yen

Thousands of
U.S. dollars¥1,140$ 9,201

1,344
546¥3,03010,847
4,407$24,455

In addition to the above, at March 31, 2001, the Company was committed to provide guarantees for the following bonds which were transferred to banks underdebt assumption agreements.
Millions of yen

7.05% unsecured
bonds due 2001
6.0% unsecured
bonds due 2002

Thousands of
U.S. dollars

Date ofagreement¥30,000$242,131 Sept. 20, 1994

50,000403,551

Feb. 28, 1997

13. Other Income (Expenses)
The components of “Other, net” in “Other income (expenses)” for each of the three years in the period ended March 31, 2001 were as follows:
Millions of yen

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

Thousands of
U.S. dollars

2001

2000

1999

2001

¥ 1,50743,440(94,239)
21,497(1,664)
1,793—(4,714)23,280(5,740)¥(14,840)¥ 1,689
37,407(32,614)18,012(2,166)(7,015)(8,664)——(2,294)¥ 4,355

¥ 512
—
—
2,870
—
—
—
—
—
(758)
¥2,624$ 12,163
350,605(760,605)
173,503(13,430)
14,471—(38,047)
187,893(46,327)$(119,774)

2001

Millions of yen
2000

Thousands of
U.S. dollars
2001¥171,805(2,319)9,436¥178,922¥74,582(887)
12,762¥86,457$1,386,642(18,716)
76,158$1,444,084

14. Supplemental Cash Flow Information
The following table represents a reconciliation of cash and cash equivalents as of March 31, 2001 and 2000:

Cash
Time deposits with maturities of more than three months
Marketable securities with maturities of three months or less
Cash and cash equivalents

15. Derivative Financial Instruments
The Company and certain of its consolidated subsidiaries utilize derivative financial
instruments for the purpose of hedging its exposure to adverse fluctuations inforeign currency exchange rates and interest rates, but do not enter into suchtransactions for speculative or trading purposes.

42

The Company is exposed to credit loss in the event of nonperformance by thecounterparties to the derivatives, but any loss would not be material because theCompany enters into such transactions only with financial institutions with highcredit 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 risk exposure in connection with derivatives.

Summarized below are the notional amounts and the estimated fair value of theinterest-related derivative positions outstanding at March 31, 2001 and 2000:
Thousands of
U.S. dollars

Millions of yen
Notional amount

Fair value

Unrealized
gain (loss)

Notional amount

Fair value

Unrealized
gain (loss)¥ 5,000
5,000
5,000¥15,000¥(108)
236
(12)
¥ 116

¥(108)
236
(12)
¥ 116

$ 40,355
40,35540,355$121,065$ (872)
1,905
(97)
$ 936

$ (872)
1,905
(97)
$ 936

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

Millions of yen

March 31, 2000
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Receive/floating and pay/floating
Total¥11,101
11,0245,000¥27,125

¥ 73
(41)
(31)
¥ 1

¥ 73
(41)
(31)
¥ 1

Due to the adoption of this new accounting standard, the notional amounts and estimated fair value of the interest rate swaps to which hedge accounting has been
applied have been excluded from the in 2001 presentation in the above table.

16. Segment Information
Business segment
The Company and its consolidated subsidiaries are primarily engaged in the realestate business. The Company changed its business segments in the year ended
March 31, 2001 and these are now classified in terms of the nature of each operation and service and consist of seven segments: (1) building; (2) residential

development; (3) architectural and engineering; (4) real estate brokerage;(5) custom-built housing; (6) hotel; and (7) other business. The 2000 segment
information has been restated to conform to the 2001.
The revised business segment information of the Company and its consolidated
subsidiaries for the years ended March 31, 2001 and 2000 are summarized as follows:
Millions of yen
2001

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

Building

Residential
development

Architectural& engineering

Real estate
brokerage

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

¥13,870154
343¥42,527
2,035
856¥119,809
1,960
4,256

¥377,274
615
1,432

Other

Total

¥2,157,989
64,098116,282

Eliminations
or corporate

Consolidated— ¥ 630,990(10,959)—(10,959)
630,990
4,267
550,351¥ (15,226) ¥ 80,639¥2,535,263
64,713
117,714

Financial Statements

43

Financial Statements

Thousands of U.S. dollars
2001

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

Building

Residential
development

Architectural& engineering

Real estate
brokerage

Custom-built
housingHotel$2,528,063
37,7642,565,827
1,920,638$ 645,189$1,067,118
5,650
1,072,768
992,292$ 80,476$115,383
10,654
126,037
126,295$ (258)$702,203
2,914
705,117654,471$ 50,646$281,566
18,256
299,822
295,093$ 4,729$262,502
646
263,148257,506$ 5,642$135,901 $ 5,092,736
12,56688,450148,467
5,181,186
161,162
4,407,457$ (12,695) $ 773,729$$13,008,289
457,224
848,039$2,256,925
7,159
23,035$157,780
355
1,178$572,026
19,112
22,236$111,945
1,243
2,768

$343,236
16,425
6,909$966,982 $17,417,183
15,819517,337
34,350938,515$3,044,988 $20,462,171
4,963
522,300
11,558950,073

Other

Eliminations
or corporate

Total

Consolidated— $ 5,092,736(88,450)—(88,450) 5,092,736
34,439 4,441,896$ (122,889) $ 650,840

Millions of yen
2000

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

Building

Residential
development

Architectural& engineering

Real estate
brokerage

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

¥14,074134
274¥42,304
2,146
627¥140,840
2,296
2,239

¥159,630
396
682

Geographical segments
The Company and its consolidated subsidiaries operate primarily in Japan, theUnited States and certain other areas. The geographical segment information of

Other

Total

¥2,126,141
62,307110,730

Eliminations
or corporate

Consolidated— ¥ 574,396(14,798)—(14,798)574,3962,962
506,195¥ (17,760) ¥ 68,201¥2,285,771
62,703
111,412

the Company and its consolidated subsidiaries for the years ended March 31,
2001 and 2000 is summarized as follows:

Millions of yen
2001

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

44

Japan

United States

Other

Total

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

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

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

Thousands of U.S. dollars

2001

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

Japan

United States

Other

Total

$ 4,124,213
5,537
4,129,750
3,484,560$ 645,190$15,024,576$ 823,535
1,300
824,835
699,355$ 125,480$2,101,437$144,988
2,405
147,393
142,817$ 4,576$171,808$ 5,092,736
9,241
5,101,977
4,326,731$ 775,246$17,297,821

Eliminations
or corporate

Consolidated—(9,241)(9,241)
115,165$ (124,406)$3,164,350$ 5,092,736—
5,092,736
4,441,896$ 650,840$20,462,171$

Millions of yen
2000

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

Japan

United States

Other

Total

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

Unallocatable operating expenses included under “Eliminations or corporate” forthe years ended March 31, 2001 and 2000 amounted to ¥15,630 million ($126,150
thousand) and ¥17,078 million, respectively, and consisted of operating expenses
incurred in the Administration Department of the Company. Corporate assets included under “Eliminations or corporate” for the years ended March 31, 2001 and2000 amounted to ¥392,135 million ($3,164,931 thousand) and ¥193,728 million, respectively, and consisted principally of cash, marketable securities,
investments in other securities and deferred income taxes of the Company.
Overseas revenue
The following table represents overseas revenue earned by the Company’s consolidated
subsidiaries in foreign countries during the years ended March 31, 2001 and 2000.

Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue toconsolidated revenue

Millions of yen
2001
Total

United States

Other areas¥102,186¥17,820¥120,006¥630,990

16.2%

2.8%

19.0%

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

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

Thousands of U.S. dollars

Overseas revenue
Overseas revenue
Consolidated revenue

Overseas revenue
Overseas revenue
Consolidated revenue% of overseas revenue toconsolidated revenue$824,746$143,825$ 968,571$5,092,736
Millions of yen
2000
Total

United States

Other areas¥98,963¥15,343¥114,306¥574,396

17.2%

2.7%

19.9%

17. Subsequent Event
On June 21, 2001, the Company issued a ¥10,000 million ($80,710 thousand)
1.44% unsecured corporate bond which is due in 2011. The Company intends touse the proceeds from the issuance of the corporate bond for the repayment ofborrowings and the redemption of other corporate bonds which fall due in the year
ending March 31, 2002.

Financial Statements

45

Financial Statements

Non-Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd.
March 31, 2001 and 2000

AssetsCurrent assets:
Cash
Marketable securities
Notes and accounts receivable – trade
Allowance for doubtful receivables
Inventories
Deferred income taxes
Other current assets

2001¥ 117,968
6,916
22,011(957)
247,319
62,947
9,838

Thousands of
U.S. dollars
2001

Millions of yen
2000¥

37,182
69,66525,469(958)
228,242
34,795
12,244$

952,123
55,819177,651(7,724)
1,996,118
508,047
79,403

Total current assets

466,042406,639

3,761,437

Investments:
Investments in and advances to subsidiaries and affiliates
Investment securities
Lease deposits
Other investments
Allowance for doubtful accounts

179,653
180,033
75,497
21,252(1,627)

180,277
8,916
65,414
19,246(6)

1,449,984
1,453,051
609,338
171,525(13,131)

Total investments

454,808

273,847

3,670,767

Property and equipment:
Land
Buildings and structures
Machinery and equipment
Construction in progress

568,200
1,144,296
21,284
31,918616,037
1,113,689
21,30928,992

4,585,956
9,235,642
171,784
257,611

Total property and equipment
Less accumulated depreciation

1,765,698(540,267)

1,780,027(501,380)

14,250,993(4,360,509)

Property and equipment, net

1,225,431

1,278,647

9,890,484

Intangible and other assets

10,411

10,37584,027¥2,156,692¥1,969,508$17,406,715

Total assets

46

2001

Millions of yen
2000

Thousands of
U.S. dollars
2001¥ 190,682
28,61036,64535,716¥ 147,596
32,87635,72928,592$ 1,538,999
230,912295,763
288,265

Total current liabilities

291,653244,793

2,353,939

Long-term debt
Lease deposits
Employees’ retirement allowances
Deferred income taxes
Other noncurrent liabilities

925,700
268,828
399
101,866
24,621

911,764
249,527
22,46428,133
26,397

7,471,348
2,169,717
3,220
822,163
198,717

1,613,067

1,483,078

13,019,104

86,534
115,216
21,658262,395
57,82986,534
115,194
21,633
263,078—

698,418
929,911
174,802
2,117,797
466,739543,632

486,439

4,387,667

(7)

(9)

(56)

543,625

486,430

4,387,611¥2,156,692¥1,969,508$17,406,715

Liabilities and shareholders’ equity

Current liabilities:
Short-term borrowings and current portion of long-term debt
Accounts payable – trade
Advance and deposits
Accrued expenses and other current liabilities

Total liabilities
Shareholders’ equity:
Common stock, par value ¥50:
Authorized – 1,980,000,000 shares;
Issued and outstanding – 1,299,185,054 shares
Capital surplus
Legal Reserve
Retained earnings
Unrealized gain on securities
Less treasury stock – 6,533 shares in 2001;
9,395 shares in 2000
Total shareholders’ equity
Contingent liabilities
Total liabilities and shareholders’ equity

Financial Statements

47

Financial Statements

Non-Consolidated Statements of Income
Mitsubishi Estate Co., Ltd.
Years ended March 31, 2001, 2000 and 1999

Thousands of
U.S. dollars

Millions of yen
2001

2000

1999

2001

¥ 389,995(315,002)(21,893)¥ 359,078(289,060)(22,518)¥ 363,732(288,974)(23,273)$ 3,147,659(2,542,389)(176,699)

53,10047,50051,485428,571

2,627(29,499)(16,191)

2,522(32,404)
1,967

2,866
(34,823)
2,245

21,203(238,087)(130,678)(43,063)(27,915)(29,712)(347,562)

Income before income taxes

10,037

19,585

21,77381,009

Income taxes:
Current
Deferred(19)(3,615)(26)(7,778)

(28)
—

(153)
(29,177)(3,634)(7,804)(28)(29,330)

6,403¥ 11,781¥ 21,745

Revenue from operations
Cost of revenue from operations
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Other, net

Net income

48

¥

$

51,679Mitsubishi Estate Corporate Data

Mitsubishi Estate Corporate Data
Directors and Statutory Auditors Corporate Information
Chairman of the Board
Takeshi Fukuzawa*
President
Shigeru Takagi*
Executive Vice President
Hiroshi Baba*
Senior Managing Directors
Hirofumi Okuizumi*
Katsuhisa Shimada*
Takayuki Hara*
Eiji Tan*
Kaoru Kohno*
Yasuhiko Watanabe*Managing Directors
Atsushi Morimoto
Terutake Miyamoto
Satoshi Oyama
Kazuo Odagawa
Yasuto Suzuki
Directors
Shigeo Shimizu
Taketo Yamazaki
Masahiro Yamanaka
Yutaka Nakamura
Mikio Aoki
Toshiaki Hara
Hajime Ito
Hiroharu Koinuma
Hirotaka Kanki
Keiji Kimura
Nobuyuki Iizuka
Takaya Endo
Toshio Nagashima
Seiichiro Suzuki
Statutory Auditors
Yasuo Satake
Kunihiro Inoue
Terumichi Tsuchida
Satoru Kishi
Hiroshi Hayashi

Head Office:Tokyo Building, 7-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8330, Japan
Telex: MECDIA J22174
Internet Home Page: http://www.mec.co.jp
Phone: (03) 3287-5100
Date of Establishment:
May 7, 1937
Paid-in Capital:¥86,534 million
Number of Shares of Common Stock Issued:
1,299,185,054 shares
Number of Shareholders:
94,266 (excluding shareholders with less than 1,000 shares)
Major Shareholders:Japan Trustee Services Bank, Ltd. (Trust Account)
The Bank of Tokyo-Mitsubishi, Limited
The Meiji Mutual Life Insurance Company
The Mitsubishi Trust and Banking Corporation
The Tokio Marine and Fire Insurance Co., Ltd.
The Mitsubishi Trust and Banking Corporation (Trust Account)Obayashi Corporation
Taisei Corporation
Takenaka Corporation
Shimizu Corporation% of total
5.01
4.76
4.50
3.44
3.29
2.68
2.31
2.25
2.17
1.87

Major Consolidated Subsidiaries:
Mitsubishi Real Estate Services Co., Ltd.
Mitsubishi Estate Home Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
Aqua City Co., Ltd.
Marunouchi Heat Supply Co., Ltd.
Yokohama Sky Building Co., Ltd.
Royal Park Hotel Co., Ltd.
Rockefeller Group, Inc.
Stock Exchange Listings:
Tokyo Stock Exchange and other major Japanese stock exchanges
Transfer Agent and Registrar:
The Mitsubishi Trust and Banking Corporation
11-1, Nagatacho 2-chome, Chiyoda-ku, Tokyo 100-8212, Japan*Representative Director

Auditor:Toyo & Co.

(as of June 28, 2001)(as of March 31, 2001)

Mitsubishi Estate Corporate Data

49

Mitsubishi Estate Corporate Data

Organization•Building Business Promotion Department•Building Fund Office•Regional Business Planning & Promotion Office•Marunouchi Brand Management Office•Building Management Department•Transference Management Office•Marunouchi Area Building Management Office I•Marunouchi Area Building Management Office II•Yurakucho Area Building Management Office I•Yurakucho Area Building Management Office II•Building Business Division•Otemachi Area Building Management Office I•Otemachi Area Building Management Office II•Aoyama Area Building Management Office•Metropolitan Area Building Management Office•Building Leasing Department•Shopping Center Business Department•Meeting of Shareholders•Marunouchi Development Promotion Department•City Planning Project Office•Board of Directors•Residential Development Promotion Department•Chairman of the Board•Condominium Development Department•Residential Development Division•President•Master-Planned Development Department•Chiba Liaison Office•PARTNER System Department•Residential Planning & Marketing Department•Executive Committee•Urban Development& Investment Management Division•Customer Service Office•Urban Development & Investment Management Department•Urban Development Promotion Office•Appraisal Service Office•International Business Division•International Business Department•Recreational Facility Division•Recreational Facility Office•Board of Statutory Auditors•Statutory Auditor•Corporate Planning Department•Affiliated Companies Business Planning Department•Office of Statutory Auditors•Corporate Planning Division•Personnel Planning Department•Finance & Accounting Department•Corporate Communications Department•Investor Relations Office•Corporate Philanthropy & Environment Affairs Promotion Office•General Affairs Department•Corporate Administration Division•Purchasing Management Office•Corporate Ethics Office•Sapporo Branch•Tohoku Branch•Yokohama Branch•Nagoya Branch•Osaka Branch•Chugoku Branch•Kyushu Branch(as of June 28, 2001)

50•Secretary OfficeMitsubishi Estate Group

Mitsubishi Estate Group

Building Business
Building Leasing Business

Building Management Business

Parking Business

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

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

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

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

Recreational Facility
Architectural Design & Engineering

Higashinihon Kaihatsu Co., Ltd.
MEC Urban Resort Tohoku Co., Ltd.
Liv Sports Co., Ltd.
Kume Country Club, Co., Ltd.
Fuji International Speedway Co., Ltd.
(4 other companies)

Mitsubishi Jisho Sekkei Inc.
MEC Design International Corporation(1 other company)

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

Mitsubishi EstateCo., Ltd.

International Business
Rockefeller Group, Inc. (RGI)
146 other companies
16 other companies

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

MEC Finance Co., Ltd.
MEC Information Development Co., Ltd.
MEC Human Resources, Inc.
(10 other companies)

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

Mitsubishi Real Estate Services Co., Ltd.
Ryoei Life Service Co., Ltd.

Otaru Toshi Kaihatsu Kosha Co., Ltd.
(2 other companies)

Consolidated Subsidiaries
Equity-method Affiliates(as of June 28, 2001)

Mitsubishi Estate Group51

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2001

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