mec̲ar̲cover̲E 04.1.20 3:54 PM ページ 2

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2003

M I T S U B I S H I E S T A T E C O . , LT D . A N N U A L R E P O R T 2 0 0 3

mec̲ar̲cover̲E 04.1.20 3:54 PM ページ 3

CONTENTS
2

To Our Shareholders

8

Special Feature: Evolution of Marunouchi

10

Business Information

20

Financial Review

24

Financial Statements

48

Mitsubishi Estate Corporate Data

50

Mitsubishi Estate Group51

Social Contributions and Environmental Efforts

52

Compliance

CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements made in this annual report with respect to the Mitsubishi EstateGroup’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 forecasts in the forward-looking statements.

We will strive to create a truly meaningful society through thedevelopment of a secure, safe, comfortable and appealing urban
environment in each of our locations, acting as representativesof the people who live, work, and seek leisure there.
The Mitsubishi Estate Group’s fundamental mission is to create a truly meaningful society through urban development.
With a core in development in its Building Business operations, Residential Development operations, Architectural Design& Engineering operations, and Urban Development and Investment Management operations, the Mitsubishi Estate Groupaims to increase corporate value by wielding the synergistic effects of its value chain of businesses related to real estate.
We have positioned compliance and consideration of the global environment as cornerstones of all our businesses. By
constantly strengthening our foundations, we aim to continue onward as a good corporate citizen accepted by society.

ANNUAL REPORT 2003

1

MITSUBISHI ESTATE CO., LTD.

TO OUR SHAREHOLDERS

Financial Results
During the fiscal year under review, Mitsubishi Estate Co.,
Ltd. and its consolidated subsidiaries recorded revenue
from operations of ¥681,726 million (US$5,671.6 million), an
increase of 7.9% from the previous fiscal year. Operating
income grew 24.8% to ¥96,023 million (US$798.9 million).
Revenue and profit increased in Building Business operations owing to the sale of development projects by theRockefeller Group, Inc. Each of the remaining businesssegments also achieved higher revenues and profits on theback of improved operating performance.
Net income totaled ¥36,039 million (US$299.8 million),a considerable improvement from the net loss of ¥71,058
million recorded in the previous fiscal year. Last year, the Company wrote
off unrealized losses on land and buildings, through a revaluation of land
and an impairment loss on property and equipment, to enhance the transparency and soundness of the balance sheets.

Operating Environment
In the real estate industry in Japan, the so-called 2003 problem (when new
office space peaks from the completion of several large-scale office buildings in Tokyo) had the effect of increasing vacancy rates in office buildings

Years ended March 31

Revenue from operations

1998

1999

2000

2001

2002

Millions of yen

Thousands of
U.S. dollars

2003

2003

¥548,731¥565,259¥574,396¥630,990

Net income (loss)

31,84822,327

18,421

19,832(71,058)

36,039299,825

As a percentage ofrevenue from operations

5.8%

3.9%

3.2%

3.1%

(11.3)%

5.3%—

As a percentage ofshareholders’ equity

7.2%

4.9%

4.1%

4.1%

(10.5)%

4.3%—

Total assets

2,103,258 2,283,773 2,285,771 2,535,263 3,035,795 3,007,927 25,024,351
454,057

459,574

440,731518,766

832,497

839,953

6,987,962

Common stock

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

719,917

Yen

U.S. dollars

Per share amounts:
Cash dividends applicableto the year

(Percentage Share)¥631,564 ¥681,726 $5,671,597

Total shareholders’ equity

Net income (loss)

Revenue by Segment¥24.51¥17.19¥14.18¥15.26¥(54.70)¥27.61

$0.23

8.00

8.00

8.00

8.00

8.00

8.00

0.07

Note: Yen amounts shown are translated into U.S. dollars, solely for convenience, at the prevailing exchange rate on March 31, 2003,of ¥120.20 to US$1.00.

MITSUBISHI ESTATE CO., LTD.

2

ANNUAL REPORT 2003

Buildings 50.6%
Residential
Development 22.7%
Architectural& Engineering 2.6%
Real Estate
Brokerage 11.6%
Custom-Built
Housing 4.9%
Hotels 4.2%
Other 3.4%

and softening market leasing rates. In the market for homebuyers, condominium sales were relatively strong for properties in popular city locations.
Overall, however, there are concerns for a possible rise in inventories of
unsold, completed units in reaction to the recent massive supply of new
condominiums.
Under these business conditions, the Mitsubishi Estate Group is concentrating on the redevelopment of the Marunouchi district, including the
Marunouchi Building, while aiming to improve management efficiency andprofitability by responding to changes in the operating environment andreal estate market.

Introduction of Executive Officer System
In the fiscal year ended March 31, 2001, the Mitsubishi Estate Group implemented management restructuring, including a move to a Groupwide
divisional structure. In April 2003, to make further progress in this direction, the Company introduced an executive officer system based on thecurrent Japanese Commercial Code to reinforce management and supervisory functions, strengthen business execution functions, increase
management efficiency and accelerate decision-making.
This move divides the role of directors, who are in charge of management and supervising, from that of executive officers, who are in charge ofbusiness execution. At the same time, the new system aims to invigorate
the Board of Directors by reducing the number of directors, and accelerate
decision-making by allowing executive officers to devote their attention tobusiness execution.
We also established the Advisory Board, comprising outside experts, tocreate a structure that ensures transparency in decision-making.

Progress on Medium-Term Management Plan
In March 2002, the Mitsubishi Estate Group announced its medium-term
management plan for the three-year period beginning in the fiscal year
ended March 31, 2003.
As the functions of ownership and management of real estate continue toseparate due to the collapse of the myth of ever-higher land prices and thebirth of the Japanese Real Estate Investment Trust (J-REIT), it has become
necessary for real estate companies to change their business models.

ANNUAL REPORT 2003

3

MITSUBISHI ESTATE CO., LTD.

MITSUBISHI ESTATE CO., LTD.

4

ANNUAL REPORT 2003

Marunouchi Building

Within the basic mission of the Mitsubishi Estate Group to “Create a
Truly Meaningful Society Through Urban Development,” we recognize thatdevelopment is at the heart of future business expansion in this constantly
changing business environment. And through our three basic management
directives—increase corporate value based on cash flow; instill the principleof “customers first” to survive in a competitive market; and pursue collaborative management to realize higher added value—we aim to increase thevalue of the entire Group.
We are pleased to announce that the medium-term management plan
had an excellent start in the fiscal year ended March 31, 2003.

Medium-Term Targets
for the Fiscal Year Ending March 31, 2005
EBITDA¥170.0 billion

Revenue from Operations¥723.0 billion

Operating Income¥110.0 billion

Interest-Bearing Debt

¥1,160.0 billion

Business Conditions
In Building Business operations, we opened the Marunouchi Building in
September 2002 as the first stage of the Marunouchi Redevelopment Project.
The Marunouchi Building began operations at full occupancy, and visitorsand store sales in the commercial section surpassed our expectations.
As the second stage of Marunouchi redevelopment, the Mitsubishi Trustand Banking Building began operations with full occupancy. We will continue to increase the added value of the Marunouchi area through steadyprogress on the Marunouchi Redevelopment Project.
We aim to improve profitability in Building Business operations throughcost reductions at existing buildings. In areas other than Marunouchi, weare aggressively promoting fee-based businesses, such as consulting, as apart of our non-asset business.
In Residential Development operations, our strategy of focusing on theTokyo metropolitan area for condominium sales has been successful. Of
new unit sales in the fiscal year ended March 31, 2003, 78% were in theTokyo metropolitan area. In product planning, we are concentrating on
high-rise condominiums, large-scale condominiums in comfortable

ANNUAL REPORT 2003

5

MITSUBISHI ESTATE CO., LTD.

MITSUBISHI ESTATE CO., LTD.

6

ANNUAL REPORT 2003

The Yokohama Towers

environments with common facilities, and properties in urban areas withshort-term development turnaround. Although the condominium market issoftening, we are making every effort to maintain performance through ourarea strategy and differentiation in product planning.
In Architectural Design & Engineering operations, performance has
been strong since the division was made into the independent subsidiary
Mitsubishi Jisho Sekkei Inc. We believe this will lead to improved earnings
for the Mitsubishi Estate Group as synergistic effects are gained throughclose cooperation between Group companies.
We strengthened the Urban Development and Investment Management
Division in April 2003 due to the increasing importance of this business.
The division will focus on the business of developing and managing incomegenerating real estate properties for J-REIT and other real estate funds.
Moreover, through Mitsubishi Jisho Investment Advisors, Inc., we arestrengthening our asset management solution functions to resolve any realestate difficulties faced by our customers.
In International Business operations, we completed Paternoster Square in
London, England. Our office buildings in the United States are also enjoying
stable operations. We are working to improve operations mainly through cost
reductions in the U.S.-centered global real estate brokerage business.
In Custom-Built Housing, Hotel Business and Recreational Facility operations, we are working to improve operating efficiency and achieve higher
profitability through cost reductions.

A Closing Word to Our Shareholders
With the keywords “speed” and “flexibility” in mind, and by accurately
responding to the rapidly changing management environment, we haveworked to increase corporate value. In addition, based on the keywords ofestablishing superior competitiveness and taking on risk, we aim to makethe current fiscal year one of great progress. As a result, we are positioned totake several significant steps forward on the medium-term management plan.

August 2003

Shigeru Takagi

President

ANNUAL REPORT 2003

7

MITSUBISHI ESTATE CO., LTD.

SPECIAL FEATURE: EVOLUTION OF MARUNOUCHI

We are basing redevelopment on the concept of making
Marunouchi into a world-class center of dynamic interaction. And by promoting interaction, we will provide
high-value-added business opportunities and a better quality of life for people who work in and visit Marunouchi. As thefirst stage of Marunouchi redevelopment, we opened the
Marunouchi Building in
September 2002. The building
has become quite popular, attracting about 13.2 million
visitors in the first six months
after its opening, selling ¥17.0
billion at its commercial facilities, and making it one of themost successful attractions in
the area.

Hibiya Park
1Harumi Dori

Redevelopment of Marunouchi
Mitsubishi Estate has been redeveloping the Marunouchi
district of Tokyo since 1998, and plans to rebuild six officebuildings and renovate other existing buildings by investing
approximately ¥500.0 billion over a 10-year period. Our
strategy is to bolster profitability by increasing the value andcompetitiveness of our office buildings in Marunouchi.
Mitsubishi Estate aims to increase the added value of the
Marunouchi area by not only providing office buildings, butalso by offering strong support services in redevelopment of
the district. Moving away from its reputation as a weekday
business center, we plan tobrand Marunouchi as an exciting area where people
visit on their days off andcome to unwind after work.

Imperial Palace

Hibiya, Toei Mita Line

aL
biy

15

Hib

6
3

9

4

Yu
ra

G in

z a,

Ma

ru n

ou

ch

i Li

ku

ch

o

Tokyo International
Forum

10
12

4

6

2

17
JR Yokosuka Line13

Otemachi,Hanzomon Line

19

16
1

11

20

Tokyo,
Marunouchi LineTokyo
Central
Post
OfficeTokyo,JR Sobu Line3

Otemachi, Tozai Line

7
Yurakucho, Yurakucho Line

Tokyo, JR Keiyo Line

2

18

Naka Dori

iya

, Hi

14

Otemachi, Chiyoda Line

Eitai Dori

8

Otemachi,Toei Mita Line

Gyoko Dori5

5

Hibiya Dori

Nijubashimae, Chiyoda LineBabasaki Dori

ine

Hibiy
a, Ch
iyod
a Lin
e

runouchi Line

Otemachi, Ma

21

Tokyo
ne

22

24

23

LEASING BUILDINGS
1 Hibiya Kokusai Building
2 Yurakucho Denki Building
3 Yurakucho Building
4 Shin-Yurakucho Building
5 Kokusai Building
6 Shin-Kokusai Building
7 Shin-Nisseki Building
8 Fuji Building

Reconstruction Projects
9 Shin-Tokyo Building
10 Furukawa Building
11 Mitsubishi Shoji Building
12 Marunouchi Yaesu Building
13 Tokyo-Mitsubishi Ginko Building
14 Kishimoto Building
15 Mitsubishi Denki Building
16 Mitsubishi Juko Building

17 Mitsubishi Building
18 Tokyo Ginko Kyokai Building
19 Togin Building
20 Otemachi Building
21 Shin-Otemachi Building
22 Nippon Building
23 Nippon Steel Building
24 Kawatetsu Shoji Building

August 2002

2 The Industry Club of Japan and Mitsubishi Trustand Banking Building Development ProjectFebruary 2003

3 Marunouchi 1 chome 1 Area Development Project(Tokyo Station, Marunouchi north exit )August 2004

4 Tokyo Building
5 Hibiya Park Building
6 Shin-Marunouchi Building

2006*
2008*
2008*

*Years indicate fiscal years ending March 31.

MITSUBISHI ESTATE CO., LTD.

8

Completion

1 Marunouchi Building

ANNUAL REPORT 2003

include the Peninsula
Hotel. Plans for our sixth
project, the ShinMarunouchi Building, areprogressing toward completion in the fiscal year
ending March 31, 2008.
For the Tokyo Building,we plan to transfer unused air rights from theTokyo Station Marunouchi
Marunouchi Building atrium “MARUCUBE”
Building by taking advan- (interior)tage of new regulations
for such rights. Moreover, we plan to centralize office spacein the Tokyo Building and concentrate hotel facilities in the
Hibiya Park Building by interchanging their stated use.
Mitsubishi Estate aims to rejuvenate the attributes of the
Marunouchi area by continuing its plans to reconstruct office buildings.

Development Services—Strengthening Business Support
Functions
To create high-value-added business opportunities, we operate the “Marunouchi Building Conference Square” on theeighth floor of the Marunouchi Building to provide a variety ofmeeting rooms. From April 2003, we initiated the
Marunouchi Recycle & Archive service, which archives,
destroys and recycles classified corporate documents, as apart of efforts to strengthen business support functions.
Marunouchi Direct Access Limited installs fiber optic networks in primary buildings in the area. Marunouchi boasts
one of the most advanced fiber optic communications networks in Japan. We are working to make the area into a
cutting-edge environment for mobile information technology,
and provide public wireless LAN services in the Marunouchi
Building and the Shin-Tokyo Building. Using this communications environment, we offer IT Plug-And-Go Services totenants for the construction and operation of their IT environments. In this way, tenants are able to outsource their IT
equipment introduction and maintenance needs, allowing forconsiderable reductions in installation and upkeep costs. To
support the total quality of life, we are encouraging thedevelopment of stores along the road extending from
Marunouchi to Yurakucho, to create a flow of people along
Naka Dori, the main thoroughfare in Marunouchi.
Approximately 70 stores, including brand-name shops,
restaurants and cafes, will have opened their doors by
autumn 2003, changing Naka Dori into a busy shopping areawith the Marunouchi Building as the starting point.

Venture Support and Alliances between Industry andAcademia
To support and foster venture capital companies, Mitsubishi
Estate operates “Marunouchi Frontier” as a network for supporting venture companies. On the seventh floor of the
Marunouchi Building, we have established “Tokyo 21c Club”
as a members-only facility for creating new business opportunities. Taking advantage of the location and high density ofcompanies in Marunouchi, we are encouraging the creationof an environment that is conducive to the gathering of people and information exchange.
To reinforce educational opportunities in business fields,
we have been operating the Marunouchi City Campus sinceApril 2001 in conjunction with Keio University. On the ninth
floor of the Marunouchi Building, we have also opened the“Marunouchi Academic Suites,” which act as a researchbase for universities from around the world. The facility is
proud to have as tenants the Harvard Business School
Japan Research Office, University of Tokyo Graduate Schoolof Economics, and Stockholm School of Economics
European Instituteof Japanese Studies.
We promote interaction between
industry and academia, and are wooing
Hitotsubashi
University andTohoku University tojoin as well.
Naka Dori in Marunouchi

Opening of Marunouchi Building, and The Industry Club ofJapan and Mitsubishi Trust and Banking Building
Following the opening of the Marunouchi Building, we completed construction on The Industry Club of Japan and
Mitsubishi Trust and Banking Building in February 2003. The
building preserves some of the historical structure of The
Industry Club of Japan while providing financial functions
and acting as a place for exchange among industry in Japan.
The Marunouchi 1
chome 1 Area Development
Project is scheduled forcompletion in August
2004. Reconstruction of
the Tokyo Building is tobe completed in the fiscal
year ending March 31,
2006, and the Hibiya Park
Building Reconstruction
Project, to be completed
in the fiscal year ending
March 31, 2008, is to
Marunouchi Building atrium “MARUCUBE”(exterior)
ANNUAL REPORT 2003

9

MITSUBISHI ESTATE CO., LTD.

BUSINESS INFORMATIONBUILDING BUSINESS OPERATIONS
V i e w i n g U r b a n Fu n c t i o n s f ro m t h e Pe rs p e c t i ve o f A re a M a n a g e m e n t

Building Business operations handle leasing and property management of office buildings, management of large-scale shopping
centers, operation of parking lots and operationof heating and cooling services throughout
Japan, enhancing the capabilities of a city fromthe standpoint of area management.

Marunouchi Redevelopment ProjectAt the forefront of Building Business operations
is the redevelopment of the Marunouchi district, a project to upgrade the features of the 30
buildings owned in the area by Mitsubishi
Estate through rebuilding and large-scale renovation. The Marunouchi Building opened in
September 2002, and The Industry Club ofTokyo Building Reconstruction ProjectCurrently under planning andexpected to be completed in
the fiscal year ending March
31, 2006, this will be the firstbuilding in Japan to takeadvantage of regulations
allowing unused air rights to betransferred from another site
in the district, to increase floor
space.

Japan and Mitsubishi Trust and Banking
Building was completed in February 2003. Plans call for completionof the Marunouchi 1 chome 1 Area Development Project in August
2004, and rebuilding of the Tokyo Building, Hibiya Park Building andShin-Marunouchi Building by the fiscal year ending March 31, 2008.
We will continue to advance the Marunouchi Redevelopment
Project as the fundamental strategy
of Building Business operations after
the completion of these buildings.

Improving Profitability andReducing Costs through a New
Management System
As part of our efforts to strengthen
Building Business operations’ property management function, thedivision switched to a new management structure, whereby a section of the Marunouchi district that
includes the Marunouchi Building will be managed by Mitsubishi
Estate Building Management Co., Ltd. This is leading to stronger
management of multiple-function facilities and lower building

MITSUBISHI ESTATE CO., LTD.

10

ANNUAL REPORT 2003

Marunouchi 1 chome 1 Area
Development Project (Tokyo
Station, Marunouchi northexit)Construction on this project, acomplex of offices, commercial
facilities and a hotel, is scheduled for completion in August
2004.

management costs. The Company established the Building
Management Advisory Office in August 2002, and worked to expand
its fee-based business such as property management, to expand business scale.
A large supply of office buildings went on themarket in 2003 with the completion of several
large-scale redevelopment projects in central
Tokyo. Mitsubishi Estate aims to improve its competitiveness through the redevelopment of the
Marunouchi district, and to increase the efficiency
of its existing office buildings. The Company also
aims to reinforce earnings by strengthening proposal-based marketing in tune with tenant needs.

Shopping Center Business
Building Business operations include shopping
centers in Tokyo (Daiba), Yokohama and Fukuoka,
and work is also proceeding on a plan to commerYokohama Landmark Tower
Opened in July 1993, theYokohama Landmark Tower iscelebrating its 10th anniversary
this year as the first privatesector building completed in the
Minato Mirai 21 district. The
building is the highest in Japan,
standing at 296 meters.

cialize Naka Dori, the main thoroughfare of Marunouchi, as part ofits redevelopment. Mitsubishi Estate is also in a partnership with
U.S.-based Chelsea Property Group, Inc. and Nissho Iwai
Corporation to form Chelsea Japan Co.,
Ltd. Chelsea Japan operates outlet
malls in Gotemba (Shizuoka Prefecture)and in Izumisano (Osaka Prefecture),
and opened Sano Premium Outlets in
Sano (Tochigi Prefecture) in March
2003. Chelsea Japan is expanding on anational scale with plans to open premium outlet malls in Tosu (Saga
Prefecture) and Toki (Gifu Prefecture) in
spring 2004.
Sano Premium Outlet
Opened in March 2003, this is thethird premium outlet being operated in Japan by Chelsea Japan
Co., Ltd., a partnership of U.S.based Chelsea Property Group,
Inc., Nissho Iwai Corporation and
Mitsubishi Estate.

ANNUAL REPORT 2003

11

MITSUBISHI ESTATE CO., LTD.

RESIDENTIAL DEVELOPMENT OPERATIONS
A i m i n g to P rov i d e E xce l le n t L i v i n g E n v i ro n m e n t s T h ro u g h C o n d o m i n i u m s
a n d C o n s u l t i n g S e r v i ce s
Residential Development operations aim to provide ideal living environments, by developing and marketing condominiums, single-unit
homes and residential land, as well as engaging in businesses suchas condominium administration andconsulting services for the optimal useof real estate.

Strong Performance in Condominiums Continues due to Product
Planning and Area Strategies
Underpinned by the positive effects of
low interest rates on housing loans
Park House
Kiyosumishirakawa

and tax measures promoting residence purchasing, market condi-

The Park House
Kiyosumishirakawa is a largescale condominium complex
comprising two 20-story buildings and a total of 473 units,currently under construction in
Shirakawa, Koto Ward, Tokyo.

tions for condominiums continued to be relatively favorable, and in
the fiscal year ended March 31, 2003, the Company was able to sell
2,437 new condominiums. Mitsubishi Estate made every effort to add
value and distinguish itself from the competition through its strategy
to concentrate new condominiums in popular areas and throughproduct planning in cooperation with other types of businesses.
Furthermore, gross profit margin for thecondominium business continued its
year-on-year improvement, reachingapproximately 23% for the fiscal year
under review, owing to stronger marketing power and the implementation of an
integrated site acquisition-to-productplanning system that shortens the development period.
Despite signs of weakness in the condominium market,
Mitsubishi Estate is enjoying firm performance by emphasizing highrise, large-scale condominiums with spectacular views andfeaturing shared facilities with pleasant surroundings in tune withthe environment, as well as convenient condominiums in popularurban centers with short-term development periods.

Creating New Businesses for Diverse Lifestyles
A new housing option, cooperative housing, is gaining popularity withhomeowners. We began accepting applications in October 2002 for

MITSUBISHI ESTATE CO., LTD.

12

ANNUAL REPORT 2003

Park House Shiba Tower
The Park House Shiba Tower is
a 32-floor condominium
complex of 178 units currently
under construction in Shiba,
Minato Ward, Tokyo. Located in
the very center of Tokyo, theproperty is extremely
convenient for commuting. All
units in the building face southor occupy an entire corner ofthe building, offering amiable
living conditions.

the first cooperative housing units to be built in Kamiikedai, Ota
Ward, Tokyo. Mitsubishi Estate is aiming for commercialization
under the STYLE HOUSE brand name inmainly the Jyonan area.
In April 2003, Mitsubishi Estate established the Residential Development &Leasing Office to respond to changing
lifestyles as more people prefer to live incentral Tokyo. Following the first property in
Hacchobori, Chuo Ward, Tokyo, theCompany plans to aggressively develop
Izumi Park Town
Encompassing 1,070 hectares
in total area, Izumi Park Town
was first established for development in Sendai, Miyagi
Prefecture in 1972 and is one of
the largest multifunctional
developments in the country,with a planned population of
approximately 50,000
residents.

properties in central Tokyo for eventual sale to real estate funds andother investors in order to strengthen rental housing operations,which are expected to grow in the future.

Ensuring High-Quality Condominiums
that Answer Customer Needs
Mitsubishi Estate has used a unique quality indication system forhousing performance since October 2000. Following the introductionof the Housing Performance Evaluation System for existing housing
as a law in August 2002, the Company bolstered its information disclosure system to provide its customers with an analysis of theircondominiums after moving in as well as details on the(units)

1,084

1,316

1,955

2,096

2,437

1999/3

2000/3

2001/3

2002/3

2003/3Company’s after-sales services. As a result, Mitsubishi
Estate is able to provide customers with easy to understand information on the quality of condominiums in
the after-sales phase as well as the design, construction, and completion phases, by preparing such
documents as certifications from assessment institutions and the Company’s own performance indication
reports.
In April 2003, the Group condominium managementcompany Daiya Community Co., Ltd. changed its nameto Mitsubishi Jisho Community Services Co., Ltd. This

Mitsubishi Estate Condominium Sales

move more clearly shows the Group’s role in planning, development,
sales and management of condominiums. At the same time, theCompany is making concerted efforts to provide excellent services
and further improve condominium management.

ANNUAL REPORT 2003

13

MITSUBISHI ESTATE CO., LTD.

ARCHITECTURAL DESIGN &ENGINEERING OPERATIONS
E sta b l i s h i n g B ra n d P re s e n ce a s a L e a d i n g C o m p a n y i n t h e D e s i g n
a n d E n g i n e e r i n g I n d u st r y
Mitsubishi Estate’s Architectural Design & Engineering operations areengaged in the business of design and administration of constructionand engineering projects, services that support building
renovation and urban and regional development, as well ascomprehensive consulting. Mitsubishi Jisho Sekkei Inc.,
formerly a division of Mitsubishi Estate and made an independent subsidiary in June 2001, now forms an integral
part of the Architectural Design & Engineering Division.

Involved in a Wide Range of Fields, from Office
Buildings to Condominiums
Mitsubishi Jisho Sekkei has aggressively developed thebusiness while making full use of its design and technological capabilities that have supported the Group’sbusiness as a comprehensive developer.
Right: Shinagawa Mitsubishi
Building

Architectural design and engineering for new projects is progress-

Completion date: March 2003
Three floors below ground, 32
floors above
Owners: Mitsubishi
Corporation and Mitsubishi
Motors Corporation

ing well with the completion of the Marunouchi Building,

Left: Mitsubishi Juko
Building

compass commercial, educational, medical and otherCompletion date: March 2003
Three floors below ground, 29
floors above
Owner: Mitsubishi Heavy
Industries, Ltd.

facilities toward establishing the brand presence of a

Shinjuku Bunka Quint Building, Tokyo Twin Parks andother buildings. The Company is expanding its field ofexpertise from office buildings and condominiums to en-

leading company in the design and engineering industry.

Leveraging Comprehensive Group Capabilities
to Enter Fields of Growth
Backed by its accumulated know-how, Mitsubishi
Jisho Sekkei is making aggressive efforts in the renovation business, which is expected to grow, and in
consulting operations for private financing initiatives
Shinjuku Bunka Quint Building(PFIs), construction management, energy conservation and environmental assessment, to expand earnings in each of these areas.
Targeting the interior design sector, MEC Design International
Corporation not only provides interior design services, but alsofunctions as a strategic asset in the fields of facility management
and open-design condominiums, creating an optimized structureable to deploy the comprehensive capabilities of the Group.

MITSUBISHI ESTATE CO., LTD.

14

ANNUAL REPORT 2003

Completion date: January 2003
Three floors below ground, 23
floors above
Owner: Yoyogi Sanchome Kyodo
Building Promotion Council(Bunka Gakuen, Fujikura Ltd.,Tokyo Metropolitan Government
Bureau of Waterworks, Tokyo
Urban Development Co., Ltd.,
Keio Electric Railway Co., Ltd.)URBAN DEVELOPMENT AND INVESTMENTMANAGEMENT OPERATIONS
E x p a n d i n g B u s i n e ss O p p o r t u n i t i e s w i t h D e ve lo p m e n t a n d M a n a g e m e n t
Demand is increasing for income-generating real estate for investment purposes among institutional and individual investors. Urban
Development and Investment Management operations respond to
this need through the development business, which
encompasses the functions of development, andthe management business, which provides administration functions.

Developing Real Estate for Investment
Purposes and Providing Solutions
Development functions are undertaken with theSomerset Azabu East
Somerset Azabu East is a service apartment that began
operations on March 1, 2003,
and is managed by AscottInternational Management
Japan Co., Ltd., a service
apartment management company jointly established with
The Ascott Group Limited ofSingapore.

purpose of placing investment properties on the market. The sale ofreal estate hastens the recovery of invested capital and provides development profits in the form of capital gains.
The Company plans to invest ¥10 billion annually through its equity
base. In February 2003, Mitsubishi Estate completed construction on
the first service apartment it developed, the Somerset Azabu East.
Construction is proceeding smoothly on a number of projects, including the Nibancho Project (tentative name) in Nibancho, Chiyoda Ward,
Tokyo. The Company aims to expand operations further by making
every effort to strengthen its solution functions for the effective utilization of assets held mainly by corporate customers.

Acquiring New Projects While Expanding
Fee-Based Businesses
In administrative functions, we offer fee-based management services through the operations of Japan Real
Estate Asset Management Co., Ltd., which engages in
the management of J-REIT assets, and Mitsubishi Jisho
Investment Advisors, Inc., a comprehensive real estate investment

Nibancho Project (tentative
name)advisory company. Mitsubishi Jisho Investment Advisors, Inc. has

Scheduled for completion inearly summer 2004, the Nibancho Project is underconstruction in Nibancho, Chiyoda Ward in Tokyo. This project
offers the latest in office functionality, with each floorfeaturing up to approximately
4,000 square meters ofcolumn-less space andmodern, high-grade rental
housing on the upper levels.

steadily expanded earnings since its foundation in September 2001,
and aims to increase assets on deposit through efforts to acquire
new investments.
With development and administrative functions working in unison,
we aim to expand business opportunities and respond to social andeconomic needs for the revitalization of real estate investment markets and urban redevelopment.

ANNUAL REPORT 2003

15

MITSUBISHI ESTATE CO., LTD.

INTERNATIONAL BUSINESS OPERATIONS
C o m p re h e n s i ve , Wo r l d w i d e R e a l E sta te S e r v i ce sInternational Business operations lease office buildings in suchcities as New York and Los Angeles, and conducts real estate development across the United States and in London through theRockefeller Group, Inc. (RGI). In addition,
Cushman & Wakefield, Inc., an RGI subsidiary,
operates a global network of comprehensive
real estate services centered on real estate
brokerage services.

Developing Real Estate in the UnitedStates and the United Kingdom
In August 2002, in a joint project with Lehman
Brothers, construction was completed on a
midtown New York property at 745 Seventh
Avenue (32 floors, 97,400m2 total floor space).
Paternoster Square
Redevelopment Project

We are aggressively developing real estate projects in New Jersey

Started in May 1999 andfinished in May 2003, the fourbuilding project has a
combined floor space of 79,700
square meters on a 9,800
square meter site in thefinancial district of London.

and other parts of the United States. In fiscal 2002, RGI sold toinvestors portions of some development properties such as theRockefeller Group Corporate Park.
In May 2003, the Company completed thePaternoster Square Redevelopment Project inLondon. With floor space of 79,700 square meters, the project is a four building complex of
offices and retail outlets in the financial districtof London next to St. Paul’s Cathedral. Longterm office space tenants include the London
Stock Exchange, Goldman Sachs Internationaland CB Hillier Parker, providing a stable business foundation. One building was sold to a
U.K. insurance company for an early recovery
on invested capital.
Amid challenging conditions in the depressed
real estate market in the United States, Cushman & Wakefield, Inc.
aims to improve profit margins through cost reductions and othermeans to make operations more efficient.

MITSUBISHI ESTATE CO., LTD.

16

ANNUAL REPORT 2003

777 Tower
Designed by Cesar Pelli, thisoffice building located in Los
Angeles, California wascompleted in 1991.

C U S T O M - B U I LT H O U S I N G O P E R AT I O N S
Fro m C u sto m - B u i l t H o u s i n g t o R e m o d e l i n g o f C o n d o m i n i u m s a n d
S i n g le - U n i t H o u s e s
Custom-Built Housing operations seek to supply the kind of quality
housing that is the foundation of a rich life. Through Mitsubishi
Estate Home Co., Ltd., we carry out contracts for the building of
homes for both individuals and housing development companies.

Building High-Quality Homes that
Last a Lifetime
In January 2001 we launched a new brandof two-by-four, single-unit houses,“Mitsubishi Home.” From contract to postpurchase service, we are striving throughclose communication with customers tobuild homes that will satisfy them for years
Affilia
Affilia is a new product with
options for customizing design.
Along with a feeling of
spaciousness, Affilia’s sharp
accent lines emphasize individuality and a presence thatstands out from other homes.

to come. In September 2002, Mitsubishi Estate Home timed theopening of Marunouchi Home Nexus, a showroom of information
about homes and lifestyles, to coincide with that of the Marunouchi
Building.
In May 2003, Mitsubishi Estate Home upgraded “Aerotech” the24-hour central heating, cooling and ventilation system that has
been installed in over 2,800 homes, and madeit standard equipment in Mitsubishi Home
custom-built houses. We believe this movehas led to increased product value for
Mitsubishi Home, amid heightened social concerns for air quality in homes following©mitsubishi jisho home/2002/fu-sanrevisions to the Building Standard Law inJapan. In addition, we began marketing “u:D,” a new kind of urban
home with fashionable and stylish designs, and launched the new
product “Affilia,” a series of open-design homes to expand our
product lineup and appeal to new customers.
Facing increased demand, the condominium and house renovation business aims to expand orders through the establishment ofspecialist sections, and is set to grow into a business pillar second
only to custom-built housing.

ANNUAL REPORT 2003

17

MITSUBISHI ESTATE CO., LTD.

Air Mascot Fu-san“Fu-san” is the air mascot for
Aerotech that promotes awareness of air quality. After a fullmodel change, the new
Aerotech features higher
efficiency than before, providing more comfort in homes.

HOTEL BUSINESS OPERATIONS
B u i l d i n g t h e R oya l Pa r k H o te l s B ra n d N a m e

In Hotel Business operations, Royal Park Hotels and Resorts Co.,
Ltd. integrates the administration and management of each hotel toenhance efficiency, accumulate administrative expertise and improve the level of management.

A New Style of Hotels
The Royal Park Hotels chain has grown to accommodate 2,535 guestrooms in nine hotels in locations
including Tokyo, Yokohama and Sendai. Opened in July
2003 in Shiodome, Tokyo, the Royal Park Shiodome
Tower has 490 guestrooms featuring personal computers equipped with a high-speed Internet
connection, and information is available through a“cyber concierge.” The hotel also features such business amenities as dedicated meeting rooms, a
24-hour business service center, a convenience store
and Japan’s first Mandara Spa for relaxation. The
Royal Park Shiodome Tower
Located in Shiodome, Tokyo,
this new style of hotel was created around the concepts ofstylish space, a convenientenvironment and flexible
service.

Royal Park Shiodome Tower offers a new paradigm in hotel experiences, including the use of a time-sharing service where members
are able to use guestrooms on an hourly basis.

Increasing the Brand Value of Royal Park
HotelsAs a hotel group backed by domestic capital, we also
introduced the first room reservation system based on
global standards used by large-scale hotel chainsaround the world. Based on this system, we will
launch the Royal Park Hotels Central Reservation
Office and aggressively promote its use for hotels outside the Group.
We plan to strengthen the functions of the hotel
chain through the exchange of personnel and by sponsoring simultaneous events at each hotel, as well as by increasing the value of
the Royal Park Hotels brand through hotel consulting and contracted management of independently operated, luxurious hotels in
downtown areas.

MITSUBISHI ESTATE CO., LTD.

18

ANNUAL REPORT 2003

Sendai Royal Park Hotel
Located in a central location in
the beautiful suburbs of
Sendai, the Sendai Royal Park
Hotel offers breathtaking guestroom views of lush gardens
and the downtown area. The
hotel was honored to host soccer players representing Italy
and Japan during the 2002 FIFA
World Cup™.

RECREATIONAL FACILITY OPERATIONS
S u p p o r t i n g t h e D eve lo p m e n t o f H e a l t h y M i n d s a n d B o d i e s

In response to growth in leisure time and the advent of a rapidly
aging society, Recreational Facility operations continue to expand
its business in such facilities as fitness and golf clubs. In this way,
we support efforts to maintain healthy minds and bodies.

Aggressively Opening Fitness Centers
in Response to Growing Demand
Our fitness club chain, Liv Sports Co., Ltd.,
operates seven branches of the Liv Fitness
Club, one futsal (five-on-five soccer) cluband two massage facilities in the Tokyo
metropolitan area. Business performanceis strong at Liv Sports. We opened largeLiv Fitness Club Kita-Asaka
This large-scale Liv Fitness
Club opened in May 2002 andfeatures a 3,050 m2 training
gym and a variety of relaxation
facilities. It is an all-roundclub, complete with generalpurpose spaces and otheramenities.

scale suburban clubs in response to growing interest in fitness
clubs among families, with one in Sagamihara, Kanagawa, inAugust 2001, and another in Asaka, Saitama, in May 2002. The chainis planning to aggressively open large-scale suburban clubs to satisfy expectations of increased demand among families, as fitness
needs are expected to grow in tandem with greater health consciousness and an aging society.

Increasing Management
Efficiency in Golf Course
Operations
In our golf course operations, we
are working to increase management efficiency through cost
reductions while planning to upgrade facilities. In April 2003, wechanged the Resort Park Onikobe Golf Course in Miyagi Prefecture
into a public golf course, restarting operations there as a resortstyle golf course where anyone can enjoy playing. We also
introduced electromagnetic induction-guided carts at our Izumi
Parktown Golf Club. In addition, the division is developing urban
recreational facilities business for membership-based tennis clubs
and other sports.

ANNUAL REPORT 2003

19

MITSUBISHI ESTATE CO., LTD.

Fuji International Golf ClubThe Fuji International Golf Clubhas a total of 36 holes divided
between the Fuji Course andthe Otome Course, offering
gradual slopes with Mt. Fuji
framed majestically in the
background. The Fuji Course
has broad fairways and beautiful views, and the Otome
Course challenges golfer technique with its curvaceous
topography.

FINANCIAL REVIEW

posted other losses including losses on the disposal ofproperty and equipment for reconstructing the Tokyo Building, valuation loss on inventories, and unrealized loss on
securities. Net income totaled ¥36,039 million (US$299.8
million), a marked year-on-year improvement in comparison
with the net loss recorded in the previous fiscal year, which
included a sizable loss on impairment of property andequipment, undertaken to shore up the balance sheet.

Summary
In the fiscal year ended March 31, 2003, revenue from operations grew considerably due to an increase in revenue in all
businesses except the hotels segment. Higher revenues
were posted in the buildings segment from the sale ofdevelopment properties by subsidiary Rockefeller Group,
Inc. (RGI), and in the residential development segment fromstrong sales of condominiums. Operating income rose
thanks to improvement in profitability in each business segment. Mitsubishi Estate returned to profitability with income
before income taxes and minority interests of ¥69,864 million (US$581.2 million), owing mainly to the absence oflosses on impairment of property and equipment incurred
during the previous fiscal year.
The Company recorded other income from a gain on
sales of property and equipment, including the sale of landof the Mitsubishi Shoji Building Annex. Mitsubishi Estate

Analysis of Revenue
Revenue from operations for the fiscal year ended March 31,
2003 was ¥681,726 million (US$5,671.6 million), an increaseof 7.9% from the previous fiscal year. Breakdown by segment
and the background for these results are discussed below.
In the buildings segment, revenue climbed 8.0% to¥353,577 million (US$2,941.6 million). Despite strong operations at the Marunouchi Building that was completed in

Buildings Segment
Revenue for the buildings 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.

Revenue from Operations (Millions of yen)
2003

353,577

2002

327,422

2001

317,906

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

Revenue from Operations (Millions of yen)
2003

158,516

2002

137,350

2001

132,916

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

MITSUBISHI ESTATE CO., LTD.

20

Revenue from Operations (Millions of yen)
2003

18,488

2002

16,358

2001

15,616

ANNUAL REPORT 2003

United States.
Revenue from the custom-built housing segment
advanced 10.4% to ¥34,095 million (US$283.7 million) due toan increase in orders and completed homes, despite sluggish conditions in the housing market. Revenue from thehotels segment fell 3.8% on account of the prolonged economic slump. Revenue from the other segment increased
6.4% due to rising revenue at Mitsubishi Jisho Investment
Advisors, Inc., which was established in the previous fiscal
year, service apartment management subsidiary AscottInternational Management Japan Co., Ltd., which wasestablished during the fiscal year under review, and Liv
Sports Co., Ltd., which opened a new fitness center.

August 2002, parent revenues declined due to a rise invacancy rates for existing buildings. This was overcome,however, by higher revenues at subsidiary RGI owing to thesale of development properties in New Jersey, U.S.A.
Revenue from the residential development segment
increased 15.4% to ¥158,516 million (US$1,318.8 million) as
a result of firm sales of large-scale condominiums mainly in
the Tokyo metropolitan area.
Revenue from the architectural & engineering segment
increased 13.0% to ¥18,488 million (US$153.8 million) due tothe completion of large-scale projects including architectural and engineering services for new construction projects.
Revenue from the real estate brokerage segment edged up
2.0% to ¥81,291 million (US$676.3 million), on account of anincrease in foreign currency translations from the weak yen,despite stagnant revenues at Cushman & Wakefield, Inc.,
which is feeling the effects of the business slowdown in the

Analysis of Income
Operating income jumped 24.8% to ¥96,023 million (US$798.9
million). Operating income in the buildings segment

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

Revenue from Operations (Millions of yen)
2003

81,291

2002

79,691

2001

87,364

Custom-Built Housing Segment
Revenue for the custom-built
housing segment derives fromthe contract construction ofcustom-built housing throughMitsubishi Estate Home Co., Ltd.

Revenue from Operations (Millions of yen)
2003

34,095

2002

30,898

2001

37,148

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

Revenue from Operations (Millions of yen)
2003

29,308

2002

30,4502001

32,604

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

ANNUAL REPORT 2003

21

Revenue from Operations (Millions of yen)
2003

23,5992002

22,187

2001

18,395

MITSUBISHI ESTATE CO., LTD.

increased 16% compared with the previous fiscal year owing
to a decline in depreciation due to the devaluation of property
and equipment and the sale of development properties by RGI.
Operating income in the residential development segment
soared 48.6% on the back of robust condominium sales. The
real estate brokerage segment saw higher operating income
due to improvement at Cushman & Wakefield.

Analysis of Financial Position(1) Consolidated Cash Flows
Cash and cash equivalents (hereafter “cash”) at the end of
the fiscal year under review increased ¥21,076 million(US$175.3 million) from the previous fiscal year to ¥152,450
million (US$1,268.3 million). Main sources of cash wereincome before income taxes and minority interests, depreciation, sales of property and equipment, increase inlong-term borrowings, and the issuance of corporate bonds.
Main uses of cash were for purchases of property andequipment (the construction of new office buildings), repayment of corporate bonds, and repayment of long-termborrowings.

Other Income and Expenses
Mitsubishi Estate recorded net other expenses of ¥26,159
million (US$217.6 million) in fiscal 2003, compared with net
other expenses of ¥203,769 million in the previous fiscal
year. The main factor behind this change was the absence ofa ¥156,365 million loss on impairment of property andequipment. Interest and dividend income was ¥2,619 million(US$21.8 million) while interest expense was ¥29,649 million(US$246.7 million).

Cash Flows From Operating Activities
In the fiscal year under review, net cash provided by operating activities was ¥134,606 million (US$1,119.9 million), up¥30,500 million from the previous fiscal year. Main contributors were income before income taxes and minority
interests of ¥69,864 million (US$581.2 million), after the
non-cash items of depreciation and amortization, valuation
loss on inventories and unrealized loss on securities.

Net Income
Income before income taxes and minority interests totaled¥69,864 million (US$581.2 million), an improvement of¥196,711 million (US$1,636.5 million) from the loss in theprevious fiscal year. Net income was ¥36,039 million(US$299.8 million) compared with net loss of ¥71,058 million
in the previous fiscal year. Net income per share was ¥27.61(US$0.23).

Revenue from Operations

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

Cash Flows From Investing Activities
In the fiscal year under review, net cash used in investing
activities was ¥72,311 million (US$601.6 million), down

Net Income(Billions of yen)

565.3

574.4

631.0

631.6

681.7

68.8

68.2

80.6

76.9

96.0

22.3

18.4

19.8

(71.1)

36.0

1999

2000

2001

2002

2003

1999

2000

2001

2002

2003

1999

2000

2001

2002

2003

MITSUBISHI ESTATE CO., LTD.

22

ANNUAL REPORT 2003

Total liabilities decreased ¥36,282 million to ¥2,124,003
million (US$17,670.6 million). Minority interests increased ¥958
million to ¥43,971 million (US$365.8 million). Shareholders’equity increased ¥7,456 million to ¥839,953 million (US$6,988.0
million), due to the recording of net income and a decrease inunrealized gain in securities.

¥48,221 million from the previous fiscal year. Main uses ofcash were for the acquisition of the Mitsubishi Juko Building
and construction work done on the Marunouchi Building andthe Mitsubishi Trust and Banking Building, while cash wasprovided by the sale of land of the Mitsubishi Shoji Building
Annex in the course of the Marunouchi Redevelopment Project. Cash was also allocated for the renovation of existingbuildings owned by Mitsubishi Estate.

Management Initiatives and Financial Strategies
Mitsubishi Estate’s three-year medium-term management
plan was announced in March 2002, setting the goal of EBITDA (earnings before interest, taxes, depreciation andamortization) of ¥170 billion by the fiscal year ending March
31, 2005. Mitsubishi Estate will achieve its goals through the
management strategies of merging its asset and non-asset
businesses, strengthening asset solution functions andstrengthening management systems.
Since the core business of Mitsubishi Estate is the leasing of office buildings, the Company focuses operations on
the procurement of long-term funds. Taking advantage of
low interest rates, Mitsubishi Estate conducts financing
mainly through the issuance of long-term corporate bonds
with maturity dates of more than 10 years.
The Mitsubishi Estate Group encourages managementthat places importance on shareholder value, and seeks toincrease the value of the entire Group while emphasizing
cash flow.

Cash Flows From Financing Activities
In the fiscal year under review, net cash used in financing
activities was ¥38,901 million (US$323.6 million), an increaseof ¥3,751 million from the previous fiscal year. This was
mainly due to a net increase of short and long-term borrowings of ¥13,645 million (US$113.5 million), a net repaymentof corporate bonds of ¥39,184 million (US$326.0 million),and cash dividends paid of ¥10,391 million (US$86.4 million).
(2) Consolidated Balance Sheets
In addition to the increases and decreases in assets and liabilities in operating, investing and financing activities outlined
above, during the fiscal year under review, Mitsubishi Estate
devalued inventories and securities for investment, andincurred a loss on the disposal of property and equipment.
As a result, total assets decreased ¥27,867 million to¥3,007,927 million (US$25,024.4 million).

Net Income per Share

Shareholders’ Equity

Interest-Bearing Debt

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

17.19

14.18

15.26

(54.70)

27.61

459.6

440.7

518.8

832.5

840.0

1,275.8

1,219.8

1,271.5

1,260.2

1,227.5

1999

2000

2001

2002

2003

1999

2000

2001

2002

2003

1999

2003

2001

2002

2003

ANNUAL REPORT 2003

23

MITSUBISHI ESTATE CO., LTD.

FINANCIAL STATEMENTS

Independent Auditors’ Report

To the Shareholders and Board of Directors of
Mitsubishi Estate Co., Ltd.:We have audited the consolidated balance sheets of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31,
2003 and 2002 and the related consolidated statements of operations, shareholders’ equity and cash flows for each of theyears in the three-year period ended March 31, 2003, all expressed in Japanese yen. These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis forour opinion. As more fully described in Notes 2 and 16 to the consolidated financial statements, effective in the year ended
March 31, 2002, the Company has changed its method of accounting for revenue recognition policy concerning certain longterm projects from the completion method to the percentage of completion method. Furthermore, as more fully described in
Note 16 to the consolidated financial statements, effective in the year ended March 31, 2002, the Company has changed its
classification of certain personnel expenses in the segment information.
In our opinion, the accompanying consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Mitsubishi Estate Co., Ltd. and consolidated subsidiaries as of March 31, 2003 and 2002, and the resultsof their operations and their cash flows for each of the years in the three-year period ended March 31, 2003 in conformity withaccounting principles and practices generally accepted in Japan consistently applied during the period except for thechanges, with which we concur, as described in the preceding paragraphs.
As described in Note 1 to the consolidated financial statements, Mitsubishi Estate Co., Ltd. and consolidated subsidiaries haveadopted new accounting standards for financial instruments including derivatives and retirement benefits in the preparationof 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,
2003 are presented solely for convenience. Our audits also included the translation of Japanese yen amounts into U.S. dollar
amounts and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated financial
statements.

Toyo & Co.
Tokyo, Japan
June 27, 2003
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.

MITSUBISHI ESTATE CO., LTD.

24

ANNUAL REPORT 2003

Consolidated Statements of Operations
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003, 2002 and 2001

Millions of yen

Revenue from operations
Cost of revenue from operations
Selling, general and administrative expenses
Operating income

2003

2002

2001

2003

¥681,726
538,105
47,59896,023¥ 631,564
510,378
44,26576,921¥630,990
507,447
42,90480,639$5,671,597
4,476,747
395,990
798,860

2,619(29,649)

2,622(32,639)

3,777(36,436)

21,789(246,664)—(156,365)

—

—

871
(26,159)(17,387)(203,769)(14,840)(47,499)

7,246(217,629)

69,864(126,848)

33,140581,231

11,92518,78630,711
3,114¥ 36,039

7,018(61,191)(54,173)(1,617)¥ (71,058)

8,383
2,839
11,222
2,086¥ 19,832

99,210156,289
255,499
25,907$ 299,825

Yen

U.S. dollars (Note 3)

Other income (expenses):
Interest and dividend income
Interest expense
Loss on impairment of property andequipment
Other, net (Note 13)
Income (loss) before income taxes andminority interests
Income taxes (Notes 1 and 9):
Current
Deferred (credit)
Minority interests (credit)
Net income (loss)

Thousands of
U.S. dollars (Note 3)

Net income (loss) per share:
Basic
Diluted¥27.61
25.87¥(54.70)—¥15.26
14.84

$0.23
0.22

Cash dividends per share

8.00

8.00

8.00

0.07

See accompanying notes to consolidated financial statements.

ANNUAL REPORT 2003

25

MITSUBISHI ESTATE CO., LTD.

Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2003 and 2002

Millions of yen

Thousands of
U.S. dollars (Note 3)

2003

2002

2003

¥ 143,553
14,48955,473(5,226)240,253
35,01828,938512,498¥ 131,738
28,862
49,793(5,008)242,405
50,44032,147530,377$ 1,194,285
120,541
461,506(43,478)
1,998,777291,331240,748
4,263,710

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

25,725
124,107

23,206
164,458

214,018
1,032,504

Other investments (Notes 6 and 7)
Total investments

148,044
297,876

161,633
349,297

1,231,648
2,478,170

1,355,160
1,515,249
94,4501,341,163
1,443,094
94,00011,274,210
12,606,065
785,774

Less accumulated depreciation
Property and equipment, net

61,4383,026,297(886,965)
2,139,332

57,6012,935,858(858,384)
2,077,474

511,131
25,177,180(7,379,077)
17,798,103

Intangible and other assets (Note 9)58,22178,647484,368¥3,007,927¥3,035,795$25,024,351

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
Total current assets

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

Total assets
See accompanying notes to consolidated financial statements.

MITSUBISHI ESTATE CO., LTD.

26

ANNUAL REPORT 2003

Millions of yen

Thousands of
U.S. dollars (Note 3)

2003

2002

2003

¥ 262,241
68,9696,730
61,517¥ 300,432
52,401
4,679
57,034$ 2,181,705
573,785
55,990511,789

48,881
448,338

43,798458,344406,664
3,729,933

965,283
320,199
9,560
331,084

959,753
323,869
10,731
349,977

8,030,641
2,663,885
79,5342,754,443

49,5392,124,003

57,6122,160,286

412,138
17,670,574

Minority interests

43,97143,012365,815

Shareholders’ equity (Note 10):
Common stock, without par value:
Authorized—1,980,000,000 shares;
Issued and outstanding—1,299,185,054 shares
Capital surplus
Land revaluation reserve
Retained earnings
Unrealized gain on securities

86,534
115,216
410,606
206,81328,35986,534
115,216
399,769
182,529
48,709719,917
958,536
3,416,023
1,720,574
235,932(6,456)
841,072(144)
832,613(53,711)
6,997,271(1,119)839,953(116)
832,497(9,309)6,987,962¥3,007,927¥3,035,795$25,024,351

Liabilities, minority interests andshareholders’ equity

Current liabilities:
Short-term borrowings and current portion of
long-term debt (Note 7)
Notes and accounts payable—trade
Accrued income taxes (Note 9)
Advances and deposits
Accrued expenses and other current liabilities(Note 9)Total current liabilities
Long-term debt (Note 7)
Lease deposits
Employees’ retirement allowances (Note 8)
Deferred income taxes (Note 9)
Other noncurrent liabilities
Total liabilities

Foreign currency translation adjustments
Less treasury stock—1,229,510 shares in 2003;
113,913 shares in 2002
Total shareholders’ equity
Contingent liabilities (Note 12)
Total liabilities, minority interests and shareholders’ equity
See accompanying notes to consolidated financial statements.

ANNUAL REPORT 2003

27

MITSUBISHI ESTATE CO., LTD.

Consolidated Statements of Changes in Shareholders’ Equity
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003, 2002 and 2001

Millions of yen

Balance at March 31, 2000
Net income
Foreign currency translation
adjustments
Cumulative effect of adopting fairvalue accounting for securities(Note 1)
Changes in consolidated subsidiaries
and companies accounted forby the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2001
Net loss
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Land revaluation reserve(Note 1)
Changes in consolidated subsidiaries
and companies accounted for by
the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2002
Net income
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted for by
the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2003

Commonstock

Capitalsurplus¥86,534—¥115,195——

Land
revaluation
reserve¥

Foreign
Unrealized
currency
Total
Retained
gain on translation Treasury shareholders’earnings securities adjustmentsstockequity——¥254,871
19,832

—

—

—

—

—
—

¥

—
—

¥(15,860) ¥
—

(9)
—

¥440,731
19,832

—

—

5,636

—

5,636

—

—

63,156——

63,156

21
—

—
—

(36)
(10,393)

—
—

—
—

—
—

(15)
(10,393)——
86,534———
115,216
—

—
—
—
—

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

—
2
(7)
—

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

—

—

—

—

—

10,080—10,080————(14,447)——(14,447)——

399,769

—

—

—

—

399,769

—
—

—
—

—
—

72
(10,393)

—
—

—
—

—
—

72
(10,393)——
86,534———
115,216———
399,769—(183)—
182,529
36,039——48,709
—

—
—
(144)
—

—
(109)
(116)
—

(183)
(109)
832,497
36,039

—

—

—

—

—

(6,312)—(6,312)

—
—

—
—

—
10,837—(1,421)(20,350)
—

—
—

—
—

(20,350)
9,416

—
—

—
—

—
—

61
(10,392)

—
—

—
—

—
—

61
(10,392)——¥86,534——¥115,216——¥410,606——— (1,003)¥ (6,456) ¥(1,119)(3)(1,003)¥839,953$719,917—$958,536 $3,325,865 $1,518,544 $ 405,233——
299,825
—

(3)
—
—
—
¥206,813 ¥28,359

Thousands of U.S. dollars (Note 3)

Balance at March 31, 2002
Net income
Foreign currency translation
adjustments
Net decrease in unrealized
gain on securities
Land revaluation reserve (Note 1)
Changes in consolidated subsidiaries
and companies accounted for by
the equity method
Cash dividends paid
Directors’ and statutory
auditors’ bonuses
Treasury stock
Balance at March 31, 2003

—

—

—

—
—

—
—

—
90,158

—
—

—
—

—
—

—
—
$719,917——(52,513)—(52,513)— (169,301)(11,822)
—

—
—

—
—

(169,301)
78,336508(86,456)

—
—

—
—

508
(86,456)

—
—

—
—
(25)
—
—
—
—
—
$958,536 $3,416,023 $1,720,574 $ 235,932

See accompanying notes to consolidated financial statements.

MITSUBISHI ESTATE CO., LTD.

28

$ (1,198) $ (965) $6,925,932——
299,825

ANNUAL REPORT 2003

—
—
(25)
— (8,344)(8,344)$(53,711) $(9,309) $6,987,962

Consolidated Statements of Cash Flows
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003, 2002 and 2001

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

Thousands of
U.S. dollars (Note 3)

2003

2002

2001

2003

¥ 69,864
56,739¥(126,848)
63,638¥ 33,140
65,728$ 581,231
472,038(10,508)(1,887)
3,957
5,915
—
(1,811)

7,575
(616)
4,048
9,680
156,365(1,667)(43,440)(21,497)
1,664
94,239—(1,507)(87,421)(15,699)
32,92049,210—(15,067)—(225)(2,619)29,649—(1,234)(2,622)
32,639(23,280)
10,899(3,777)36,436—(1,872)(21,789)
246,664(7,342)
12,917
17,518(2,907)
1,816
171,076
3,010(29,854)(9,626)
134,606

10,39010,856(3,749)(796)(15,673)
141,986
3,091(34,229)(6,742)
104,106(4,514)(6,106)(1,129)22,003(10,023)
148,836
3,962(37,400)(7,755)
107,643(61,082)
107,463
145,740(24,185)
15,1101,423,261
25,041(248,369)(80,083)
1,119,850

41,946(20,093)
29,325(128,807)
6,689(4,609)—3,238(72,311)15,873(18,257)
19,895(115,618)
4,472(22,561)(8,825)
4,489(120,532)

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

348,968(167,163)
243,968(1,071,606)
55,649(38,344)—
26,939(601,589)(5,566)(1,877)
61,972(42,760)
132,538(171,723)(10,391)(1,094)(38,901)

16,951—
82,270(89,013)43,431(77,960)(10,393)(436)(35,150)

2,311—
12,961(32,207)
141,391(81,440)(10,393)83
32,706(46,306)(15,616)
515,574(355,740)
1,102,646(1,428,644)(86,448)(9,102)(323,636)(2,431)

2,771

1,150

(20,224)

20,963
131,374(48,805)
178,922

92,33086,457

174,401
1,092,962

113¥ 152,450

1,257¥ 131,374

135¥ 178,922

940$ 1,268,303

See accompanying notes to consolidated financial statements.
ANNUAL REPORT 2003

Millions of yen

29

MITSUBISHI ESTATE CO., LTD.

Notes to Consolidated Financial Statements
Mitsubishi Estate Co., Ltd. and Consolidated Subsidiaries
March 31, 2003 and 2002

1. SIGNIFICANT ACCOUNTING POLICIES
rates. Revenue and expense accounts are translated at the averageexchange rate for the year. Adjustments resulting from this translation
process have been accumulated and are presented as foreign currency translation adjustments in shareholders’ equity.

Basis of preparation
Mitsubishi Estate Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their accounting records and prepare their financial
statements in accordance with accounting 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 required by the Securities and Exchange Law of Japan and havebeen 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 acceptedin 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 in Japan but is presented herein as
additional information.

Cash equivalents
The Company considers all highly liquid investments which are readily
convertible into cash and have an original maturity of three months orless to be cash equivalents. A reconciliation between cash in thebalance sheet and cash equivalents at March 31, 2003, 2002 and 2001
is presented in Note 14.

Marketable securities and investment securities
Prior to the year ended March 31, 2001, marketable securities in thecurrent and noncurrent portfolios had been valued principally at thelower 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 ofJapan issued a new accounting standard for financial instruments,
which requires the Company to classify its investments in debt andequity securities into three categories: trading securities, held-tomaturity securities, or other securities. Under the new standard,
trading securities are carried at fair value, with any unrecognized gains
and losses included in earnings, and held-to-maturity securities arecarried at amortized cost. Marketable securities classified as othersecurities are carried at fair value with unrealized holding gains andlosses, net of the related income taxes, included directly 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 appropriate classification of their investments in securities and made certain reclassifications.
Cost of securities sold is determined by the moving averagemethod.
The adoption of a new accounting standard for financial instruments related to securities decreased income before income taxes by¥329 million for the year ended March 31, 2001.

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

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

Foreign currency transactions and translation
Foreign currency transactions

Inventories

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

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 fair value is considered to be permanent, inventories
are revalued at fair value.

Property and equipment, depreciation and impairment
Property and equipment, except for land as discussed below, is statedat cost less accumulated depreciation. Depreciation is calculated principally by the declining-balance method, except for buildings acquiredin Japan subsequent to March 31, 1998 and property and equipment offoreign subsidiaries on which depreciation is calculated by thestraight-line method at rates determined based on the estimated 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.
As of March 31, 2002, the Company revalued its land at fair value,
pursuant to Article 2 of the “Enforcement Ordinance for the Law Concerning Revaluation Reserve for Land” and its amendments (the“Law”). The related unrealized gain, net of applicable income taxes,
has been recorded as “Land revaluation reserve” in shareholders’Translation of foreign currency financial statements
The assets and liabilities of the foreign consolidated subsidiaries andaffiliates are translated into Japanese yen at the rates of exchange
prevailing at the balance sheet date, except for the components ofshareholders’ equity which are translated at their historical exchange

MITSUBISHI ESTATE CO., LTD.

30

ANNUAL REPORT 2003

equity.
The difference between the book value after revaluation and the fairvalue as of March 31, 2003 was ¥10,298 million ($85,674 thousand).
The Company reviews its property and equipment (including land)
for impairment whenever events or changes in its business circumstances indicate that the carrying amount of the assets may not be
fully recoverable. The Company performs cash flow analyses to determine if an impairment exits. If an impairment is determined to exist,
any related loss on impairment is calculated based on the cash flow
analyses.

to lump-sum payments under the Company’s internal regulations.
Accrued severance benefits for these officers of the Company havebeen provided at estimated amounts and are included in other noncurrent liabilities.

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

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 theleased assets to the lessee are accounted for as finance leases.

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

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 amortizedover periods ranging from 5 to 25 years on a straight-line basis, except
for any goodwill and any indefinite lived intangible assets of subsidiaries in the United States acquired in a business combination
completed after June 30, 2001, which have not been amortized. A loss
is recognized if the fair value falls below the carrying amount. Landuse rights are stated on a cost basis.

Pension and severance plans
The Company and most consolidated subsidiaries have noncontributory funded and unfunded defined benefit plans covering most of theiremployees. Employees of the Company and its consolidated subsidiaries are entitled under most employment termination
circumstances to annuity payments or lump-sum payments, theamounts of which are determined principally by reference to theirbasic rates of pay, length of service, and the conditions under which
the termination occurs.
Prior to the year ended March 31, 2001, employees’ retirement
allowances were stated at the amount which would be required to be
paid if all eligible employees covered by 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 the Company and its domestic consolidated
subsidiaries to accrue employees’ severance and retirement benefits
for the amount calculated based on the actuarially determined retirement benefit obligations 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 priorservice costs. The Company and its domestic consolidated subsidiaries
expensed the net retirement benefit obligation at transition of ¥4,714
million in the year ended March 31, 2001. The net retirement benefit
obligation of the foreign consolidated subsidiaries, however, is amortized by the straight-line method over 20 years in accordance withgenerally accepted accounting principles in the country. Actuarial gainor loss is amortized by the straight-line method over a period which isless than the average remaining years of service of the employees. The
adoption of this new standard for retirement benefits decreased
income before income taxes by ¥4,587 million for the year ended
March 31, 2001.
In order to improve the funded status of the pension plan, the Company contributed marketable securities in the amount of ¥29,000
million to the employees’ retirement benefit trust during the year
ended March 31, 2001. The difference between the book value of ¥5,720
million and the market value at the time of the contribution of ¥29,000
million has been, was recorded as a gain in the consolidated statementof income for the year ended March 31, 2001.
In addition, directors and statutory auditors are customarily entitled

ANNUAL REPORT 2003

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 the leasing 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 lease agreement goes into force or the underlying units aredelivered.
(d) Revenue from architectural design and supervision is recognized at
the date of completion of each relevant project, except that certain
long-term projects over ¥500 million in total revenue are recognized by the percentage of completion method.
(e) Revenue from construction contracts is recognized at the date ofcompletion of each relevant project, except that certain long-term
projects over ¥5,000 million in total revenue are recognized by thepercentage of completion method.
(f) Other operating revenue is recognized on an accrual basis.

Treasury stock and reduction of legal reserves
Effective April 1, 2002, the Company and consolidated subsidiaries
adopted a new accounting standard for treasury stock and reduction oflegal reserves. The adoption of this new standard had no effect on
profit and loss.

Net income (loss) per share
Until the year ended March 31, 2002, in computing net income (loss)
per share assuming no dilution, the average number of shares outstanding during each year, adjusted to give retroactive effect to any
free distribution of shares, had been used. Net income (loss) per shareassuming full dilution had been computed on the assumption that all
convertible bonds were converted into common stock at the beginningof the year, or at the time of issuance in the case of newly issued
bonds, with an appropriate adjustment of the related interest expense,

31

MITSUBISHI ESTATE CO., LTD.

net of income taxes, for such convertible bonds.
In accordance with a new accounting standard for earnings per
share which became effective April 1, 2002, basic net income per shareis computed based on the net income available for distribution toshareholders of common stock and the weighted average number ofshares of common stock outstanding during each year. Diluted net
income per share is computed based on the net income available for
distribution to the shareholders and the weighted average number ofshares of common stock outstanding during each year assuming fullconversion of convertible bonds.

Appropriation of retained earnings
Under the Commercial Code of Japan (the “Code”), the appropriationof retained earnings with respect to a given financial year is made byresolution of the shareholders at a general meeting held subsequent
to the close of such financial year. The accounts for that year do not,therefore, reflect such appropriations.

Reclassifications
Certain reclassifications have been made to the 2002 and 2001 financial statements in order to conform them to the 2003 presentation.

2. ACCOUNTING CHANGE
Effective April 1, 2001, the Company changed its revenue recognition
policy for certain long-term projects over ¥500 million in revenue forarchitectural design and supervision and ¥5,000 million in revenue forconstruction contracts, from the completion method to the percentage
of completion method. This change was made in order to achieve amore accurate presentation of the operating results of the Company.
The effect of this change was to increase revenue from operations by¥5,453 million and income before income taxes by ¥1,691 million,
respectively, for the year ended March 31, 2002.

3. U.S. DOLLAR AMOUNTS
Translation of yen amounts into U.S. dollar amounts is included solely
for convenience, as a matter of arithmetic computation only, at the rateof ¥120.20 = U.S.$1.00, the approximate rate of exchange prevailing on

March 31, 2003. The 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 SECURITIESMarketable and investment securities classified as other securities at March 31, 2003 and 2002 are summarized as follows:
2003
Millions of yen

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

Thousands of U.S. dollars

Cost

Fair value

Unrealized
gain (loss)

Cost

Fair value

Unrealized
gain (loss)¥44,272¥ 99,261¥54,988$368,319$825,799$457,471

1,347
45,6191,347
100,608—
54,988

11,206
379,525

11,206
837,005—
457,471

4,054
4,054
¥49,673

3,224
3,224
¥103,832

(829)
(829)
¥54,159

33,72833,728$413,253

26,822
26,822$863,827(6,897)(6,897)$450,574

2002
Millions of yen

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

Cost

Fair value

Unrealized
gain (loss)¥52,140¥137,633¥85,493946
53,086946
138,579—
85,4936,921
6,921¥60,007

5,929
5,929
¥144,508

(992)
(992)
¥84,501

Proceeds from sales of securities classified as other securities totaled ¥2,191 million ($18,228 thousand) in 2003 and ¥26,871 million in 2002.
Gross realized gain and gross realized loss were ¥1,872 million ($15,574 thousand) and ¥59 million ($491 thousand) in 2003 and ¥861 million and¥360 million in 2002, respectively.

MITSUBISHI ESTATE CO., LTD.

32

ANNUAL REPORT 2003

Marketable debt securities classified as held-to-maturity securities at March 31, 2003 and 2002 are summarized as follows:
2003
Millions of yen

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

Thousands of U.S. dollars

Amortized
cost

Fair value

Unrealized
gain (loss)

Amortized
cost

Fair value

Unrealized
gain (loss)

¥ 222
222

¥ 224
224

¥2
2

$ 1,847
1,847$ 1,864
1,864

$16
16

1,899
1,899
¥2,121

1,898
1,898¥2,122(1)(1)¥1

15,79915,799$17,646

15,79015,790$17,654

(8)
(8)
$ 8
2002
Millions of yen

Amortized
cost

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

¥

227
227

13,21912,72925,948¥26,175

Fair value¥

Unrealized
gain (loss)

231
231

¥ 4
4

13,15912,72325,882¥26,113

(60)
(6)
(66)
¥(62)

Marketable and investment securities recorded at cost at March 31, 2003 and 2002 are summarized as follows:

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

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

¥20,387
1,674
1,486
8,945
148

¥19,372
2,173
—
—
93

$169,609
13,927
12,36374,4181,231—¥32,640

999¥22,637—$271,548

The redemption schedule for securities classified as other securities at March 31, 2003 is summarized as follows:
Millions of yen

Due within
one yearor less

Government bonds
Corporate bonds
Commercial paper
Total

Due after
one yearthroughfive years

Due after
five years
or more

¥ 173
839
—
¥1,012

¥20
—
—
¥20

¥

30
479
1,900
¥2,409Thousands of U.S. dollars

Due within
one yearor less

$

250
3,985
15,807$20,042Due after
one yearthroughfive years

Due after
five years
or more$1,4396,980—$8,419

$166
—
—
$166

The Company recognized losses on other securities considered other-than-temporary amounting to ¥3,956 million ($32,912 thousand) and ¥3,594
million for the years ended March 31, 2003 and 2002, respectively.

ANNUAL REPORT 2003

33

MITSUBISHI ESTATE CO., LTD.

5. INVENTORIESInventories at March 31, 2003 and 2002 are summarized as follows:
Millions of yen

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

Thousands of
U.S. dollars

2003

2002

2003

¥130,369
80,63418,75010,500¥240,253¥167,555
40,51924,161
10,170¥242,405$1,084,601
670,832
155,99087,354$1,998,777

Millions of yen

Thousands of
U.S. dollars

6. OTHER INVESTMENTS
Other investments at March 31, 2003 and 2002 were as follows:

Lease deposits
Long-term prepaid expenses and other
Total

2003

2002

2003

¥ 84,250
63,794¥148,044¥ 90,580
71,053¥161,633$ 700,915
530,732$1,231,647

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBTAt March 31, 2003 and 2002, short-term borrowings and the current portion of long-term debt consisted of the following:
Millions of yen

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

Thousands of
U.S. dollars

2003

2002

2003

¥ 87,181—
175,060¥262,241¥ 89,919
1,979
208,534¥300,432$ 725,300—
1,456,405$2,181,705

The weighted-average interest rates per annum on short-term borrowings outstanding at March 31, 2003 and 2002 were 0.48% and 0.59%,
respectively. Short-term borrowings are principally unsecured.

MITSUBISHI ESTATE CO., LTD.

34

ANNUAL REPORT 2003

At March 31, 2003 and 2002, long-term debt consisted of the following:
Millions of yen

2003

1.5% convertible bonds due 2003¥

Zero coupon convertible bonds due 2006
5.6% mortgage bonds due 2004
5.275% mortgage bonds due 2005
4.8% mortgage bonds due 2005
2.95% mortgage bonds due 2002
4% mortgage bonds due 2002
2.125% unsecured bonds due 2002
1.5% unsecured bonds due 2002
2.05% unsecured bonds due 2003
1.775% unsecured bonds due 2003
2.35% unsecured bonds due 2003
3.05% unsecured bonds due 2003
1.7% unsecured bonds due 2003
3.1% unsecured bonds due 2003
2.55% unsecured bonds due 2003
1.7% unsecured bonds due 2004
0.9% unsecured bonds due 2004
2.55% unsecured bonds due 2004
2.125% unsecured bonds due 2005
2.21% unsecured bonds due 2006
1.325% unsecured bonds due 2006
3.4% unsecured bonds due 2006
3% unsecured bonds due 2006
2.975% unsecured bonds due 2007
2.575% unsecured bonds due 2008
0.37% unsecured bonds due 2008
2.525% unsecured bonds due 2008
3.1% unsecured bonds due 2008
1.82% unsecured bonds due 2009
3.075% unsecured bonds due 2009
2% unsecured bonds due 2009
1.985% unsecured bonds due 2009
0.72% unsecured bonds due 2009
1.9% unsecured bonds due 2010
1.55% unsecured bonds due 2011
1.44% unsecured bonds due 2011
1.16% unsecured bonds due 2011
3.275% unsecured bonds due 2012
1.47% unsecured bonds due 2012
1.58% unsecured bonds due 2012
1.2% unsecured bonds due 2012
1% unsecured bonds due 2013
1.65% unsecured bonds due 2014
1.655% unsecured bonds due 20143.125% unsecured bonds due 20173% unsecured bonds due 2018
2.5% unsecured bonds due 2020
2.42% unsecured bonds due 2022
2.9% unsecured bonds due 2032
2.615% unsecured bonds due 2032
7.37% unsecured bonds due 2008 (payable in U.S. dollars)
Floating rate bonds due 2002 (payable in U.S. dollars)
Floating rate bonds due 2003 (payable in U.S. dollars)
Floating rate bonds due 2004 (payable in U.S. dollars)
Floating rate bonds due 2005 (payable in U.S. dollars)
Loans from banks and insurance companies:
SecuredUnsecuredLess current portion

—

35

2002

¥

90,886

2003$—

100,000
50,00050,00050,000—————10,00020,00015,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00030,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00020,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,0005,139—
21,8137,758
2,602

100,000
50,00050,00050,00010,00020,00010,00010,00020,00010,00020,00015,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00010,00030,00010,000—10,00010,00010,00010,00010,00010,000—10,00010,00010,000—10,00010,000—————10,00010,00010,000
—
—
—
6,598
9,452
11,9537,266
2,863

831,947
415,973
415,973
415,973—————
83,195
166,389
124,792
83,19583,19583,19583,19583,19583,19583,19583,19583,19583,19583,195249,574
83,19583,19583,19583,19583,19583,19583,19583,19583,19583,19583,19583,19583,19583,19583,195
166,389
83,19583,19583,19583,19583,19583,19583,19583,19583,19583,19542,754—
181,473
64,542
21,64798,314
299,717
1,140,343(175,060)¥ 965,283

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

817,920
2,493,486
9,487,047(1,456,406)$ 8,030,641

Certain bonds have call options that may be exercised at the respective expiry dates.

ANNUAL REPORT 2003

Thousands of
U.S. dollars

MITSUBISHI ESTATE CO., LTD.

The agreements under which the zero coupon convertible bonds were issued provide for conversion of the bonds into shares of common stock at
the current conversion prices per share of ¥1,200 ($10) subject to adjustment in certain cases, for example, the Company issues stock at a pricewhich is lower than market value.
The aggregate annual maturities of long-term debt subsequent to March 31, 2003 are summarized as follows:Year ending March 31:
2004
2005
2006
2007
2008 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars¥ 175,060
256,483
127,027
173,025
408,748¥1,140,343$1,456,406
2,133,802
1,056,797
1,439,476
3,400,566$9,487,047

The assets pledged as collateral for short-term borrowings of ¥1,710 million ($14,226 thousand), other current liabilities of ¥387 million ($3,220
thousand), long-term debt of ¥98,313 million ($817,912 thousand) and other noncurrent liabilities of ¥5,423 million ($45,116 thousand) at March 31,
2003 were as follows:
Millions of yen

Other investments
Land
Buildings and structures
Machinery and equipment
Total

¥

2,634
23,851
133,802
4,107¥164,394

Thousands of
U.S. dollars$

21,914
198,428
1,113,161
34,168$1,367,671

Additionally, all assets of the Company are subject to the terms of an enterprise mortgage for mortgage bonds, which amounted to ¥150,000
million ($1,247,920 thousand) at March 31, 2003.
As is customary in Japan, collateral must be given if requested by lending institutions under certain circumstances, and banks, in general, havethe right to offset cash deposited with them against any debt or obligations payable to a bank which become 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.

MITSUBISHI ESTATE CO., LTD.

36

ANNUAL REPORT 2003

8. PENSION AND SEVERANCE PLANS
The following table sets forth the funded status of the plans, and the amounts recognized in the consolidated balance sheets at March 31, 2003
and 2002 for the Company’s and its consolidated subsidiaries’ defined benefit pension plans:Millions of yen

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

Thousands of
U.S. dollars

2003

2002

2003

¥(72,019)
39,271(32,748)
563
25,49099(6,596)2,964¥ (9,560)¥(68,576)
47,561(21,015)682
11,537120(8,676)
2,055¥(10,731)$(599,160)
326,714(272,446)
4,684
212,063824(54,875)
24,659$ (79,534)

The components of expenses related to the pension and severance plans for the years ended March 31, 2003 and 2002 were as follows:
Millions of yen

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

Thousands of
U.S. dollars

2003

2002

2003

¥2,9502,185(1,221)
58
2,266¥6,238¥2,814
2,274(1,223)56
856¥4,777$24,542
18,178(10,158)483
18,852$51,897

The assumptions used in accounting for the pension and severance plans for the years ended March 31, 2003 and 2002 were as follows:

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

2003

2002

2.50–6.75%
2.25–7.50%
6 or 10 years
5–17 years

2.50–7.50%
2.25–7.50%
6 or 10 years
5–17 years

9. INCOME TAXES
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’ taxes andenterprise tax which, in the aggregate, resulted in statutory tax rates of approximately 42%. Income taxes of the foreign consolidated subsidiaries
are based generally on the tax rates applicable in their countries of incorporation.
The effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2002 differs from the statutory tax rate of 42.05% primarily because of the effect of permanently nondeductible expenses.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2003 and 2001 differ from the statutory
tax rate for the following reasons:Statutory tax rate
Increase (decrease) in income taxes resulting from:
Change in valuation allowance
Different tax rates applied
Revenues deductible for income tax purposes
Expenses not deductible for income tax purposes
Undistributed earnings of affiliates
Adjustment of deferred tax assets to reflect change
in effective tax rate
Other
Effective tax rates

2003

2002

2001

42.05%*1

42.05%(7.62)
1.07(0.10)
0.65
2.69(5.88)
1.70(2.37)
1.13
—

1.41
3.81
43.96%—(2.77)
33.86%*1 The differences between the statutory tax rate and the effective tax rate reflected in the accompanying consolidated statement of income for the year ended
March 31, 2002 was less than 5% and, therefore, no reconciliation has been disclosed.

ANNUAL REPORT 2003

37

MITSUBISHI ESTATE CO., LTD.

The significant components of deferred tax assets and liabilities as of March 31, 2003 and 2002 were as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

¥ 46,307
12,01336,82278,755
114,615
14,170302,682(34,549)
268,133$

Valuation allowance
Total deferred tax assets¥ 28,490
12,021
29,827
67,570108,566
17,540264,014(18,252)
245,762

Deferred tax liabilities:
Reserves under Special Taxation Measures Law
Land revaluation reserve
Unrealized gain on property and equipment
Unrealized gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities(68,680)(390,265)(40,104)(21,173)(20,108)(540,330)¥(294,568)(64,981)(404,698)(41,506)(36,183)(19,087)(566,455)¥(298,322)(571,381)(3,246,797)(333,644)(176,148)(167,288)(4,495,258)$(2,450,649)

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

237,022
100,008
248,145
562,146
903,211
145,924
2,196,456(151,847)
2,044,609

New legislation was enacted in March 2003 which will change the aggregate statutory tax rate from 42.05% to 40.69% effective the fiscal year
beginning after March 31, 2004. The effect of this tax rate change was to decrease deferred tax liabilities related to land revaluation and unrealized
gain on securities by ¥9,415 million ($78,328 thousand) and ¥613 million ($5,100 thousand), respectively and was to increase land revaluation
reserve and unrealized gain on securities in Shareholders’ equity by the same amount at March 31, 2003. The effect of this change was also todecrease deferred tax assets by ¥986 million ($8,203 thousand) at March 31, 2003 and to increase income taxes-deferred by the same amount for
the year ended March 31, 2003.

10. LEGAL RESERVEOn October 1, 2001, an amendment (the “Amendment”) to the Code became effective. The Amendment eliminates the stated par value of the Company’s outstanding shares which results in all outstanding shares having no par value as of October 1, 2001. The Amendment also provides that all
share issuances after September 30, 2001 will be of shares with no par value. Before the date on which Amendment became effective, the Company’s shares had a par value of ¥50 per share.
The Code provides that an amount equal to at least 10% of the amounts to be disbursed as distributions of earnings be appropriated to the legal
reserve until the total legal reserve and the capital surplus account equals 25% of the common stock account. The Code also provides that, to theextent that the sum of capital surplus and the legal reserve exceeds 25% of the common stock account, the amount of the excess (if any) is available for dividend by resolution of the shareholders.
Retained earnings in the accompanying consolidated balance sheets included a legal reserve of ¥21,658 million ($180,183 thousand) as ofMarch 31, 2003 and 2002.

MITSUBISHI ESTATE CO., LTD.

38

ANNUAL REPORT 2003

11. LEASESThe following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of the leased assets as of March
31, 2003 and 2002, which would have been reflected in the consolidated balance sheets if finance lease accounting had been applied to the financeleases currently accounted for as operating leases:
Thousands of
U.S. dollars

Millions of yen

Acquisition
costs

Accumulated
depreciation

Net bookvalue

Acquisition
costs

Accumulated
depreciation

Net book
value

March 31, 2003
Buildings and structures
Machinery and equipment
Total¥ 2,666
8,114¥10,780

¥ 596
3,618
¥4,214¥2,0704,496¥6,566$22,180
67,504$89,684$ 4,958
30,100$35,058$17,22137,405$54,626

March 31, 2002
Buildings and structures
Machinery and equipment
Total¥1,322
8,085¥9,407¥ 602
4,763¥5,365¥ 720
3,322¥4,042

Lease payments relating to finance leases accounted for as operating leases in the accompanying consolidated financial statements amounted to¥1,864 million ($15,507 thousand), ¥1,798 million and ¥1,877 million for the years ended March 31, 2003, 2002 and 2001, respectively.
Future minimum lease payments subsequent to March 31, 2003 on noncancelable operating leases and finance leases accounted for as
operating leases are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Year ending March 31:
20042005 and thereafter

FinanceleasesOperatingleasesFinanceleasesOperatingleases¥1,872
4,694¥6,566¥ 4,264
26,386¥30,650$15,574
39,052$54,626$ 35,474
219,518$254,992

The Company and its consolidated subsidiaries lease office buildings and commercial properties and earn income on these leases. Future minimum lease income subsequent to March 31, 2003 from noncancelable operating leases are summarized as follows:Year ending March 31:
20042005 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 54,210
435,008¥489,218$ 450,998
3,619,035$4,070,033

Millions of yen

Thousands of
U.S. dollars¥1,223784
163¥2,170$10,175
6,522
1,356$18,053

12. CONTINGENT LIABILITIESAt March 31, 2003, 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

ANNUAL REPORT 2003

39

MITSUBISHI ESTATE CO., LTD.

13. OTHER INCOME (EXPENSES)The components of “Other, net” in “Other income (expenses)” for each of the years ended March 31, 2003, 2002 and 2001 were as follows:
Millions of yen

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

Thousands of
U.S. dollars

2003

2002

2001

2003

¥ 1,811¥ 1,667¥ 1,507$ 15,067

10,508(5,915)
1,887(3,957)—(7,575)(9,680)616(4,048)—43,440(94,239)
21,497(1,664)
1,793

87,421(49,210)
15,699(32,920)———(4,714)——(3,463)
¥ 871

—
1,633
¥(17,387)

23,280(5,740)¥(14,840)—(28,811)$ 7,246

14. SUPPLEMENTAL CASH FLOW INFORMATION
The following table represents a reconciliation of cash and cash equivalents as of March 31, 2003, 2002 and 2001.
Millions of yen

CashTime deposits with maturities ofmore than three months
Marketable securities with maturitiesof three months or less
Cash and cash equivalents

Thousands of
U.S. dollars

2003

2002

2001

2003

¥143,553¥131,738¥171,805$1,194,285(1,925)(2,055)(2,319)(16,015)

10,822¥152,450

1,691¥131,374

9,436¥178,922

90,033$1,268,303

15. DERIVATIVESThe Company and certain of its consolidated subsidiaries utilize derivative financial instruments for the purpose of hedging their exposure toadverse fluctuations in foreign currency exchange rates and interest rates, but do not enter into such transactions for speculative or trading purposes.
The Company is exposed to credit loss in the event of nonperformance by the counterparties to the derivatives, but any loss would not be material because the Company enters into such transactions only with financial institutions with high credit ratings. The notional amounts of thederivatives do not necessarily represent the amounts exchanged by the parties and, therefore, are not a direct measure of the Company’s related
risk exposure.
Summarized below are the notional amounts and the estimated fair value of the interest-related derivative positions outstanding at March 31,
2003 and 2002:
Millions of yen

March 31, 2003
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total
March 31, 2002
Interest rate swaps:
Receive/floating and pay/fixed
Receive/fixed and pay/floating
Total

Notional
amountThousands of U.S. dollars

Fair value

Unrealized
gain (loss)

Notional
amountFair value

Unrealized
gain (loss)¥ 5,000
5,000¥10,000¥(137)
214¥ 77¥(137)
214¥ 77$41,597
41,597$83,194$(1,140)
1,781
$ 641

$(1,140)
1,781
$ 641

¥ 5,000
5,000¥ 10,000¥ (137)240¥ 103¥ (137)240¥ 103

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

MITSUBISHI ESTATE CO., LTD.

40

ANNUAL REPORT 2003

16. SEGMENT INFORMATIONBusiness segments
The Company and its consolidated subsidiaries are primarily engaged in the real estate business. Their business segments are classified in termsof the nature of each operation or service and consist of seven segments: (1) buildings; (2) residential development; (3) architectural & engineering; (4) real estate brokerage; (5) custom-built housing; (6) hotels; and (7) other businesses.
The business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2003, 2002 and 2001 aresummarized as follows:
Millions of yen

2003
Residential Architectural
Buildings development & engineering

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

Real estate Custom-built
brokerage
housing

Hotels

Other

Total

Eliminations
or corporate Consolidated¥ 347,661
5,916
353,577
254,951¥ 98,626¥158,168348
158,516
146,006¥ 12,510¥11,596
6,892
18,48818,246¥ 242¥81,108
183
81,291
79,037¥ 2,254¥32,623
1,472
34,09534,970¥ (875)¥29,131
177
29,30828,785¥ 523¥ 21,439 ¥ 681,726
2,160
17,14823,599698,874
25,484
587,479¥ (1,885) ¥ 111,395¥— ¥ 681,726(17,148)—(17,148)
681,726(1,776)585,703¥ (15,372) ¥ 96,023¥2,277,103
48,261
133,269¥276,459
674
915¥17,28794
365¥70,299
3,168
2,352

¥16,209171
113¥31,197
1,155
786¥100,647 ¥2,789,201
1,913
55,436
3,425
141,225¥218,726 ¥3,007,927
686
56,122
1,550
142,775

Thousands of U.S. dollars

2003
Residential Architectural
Buildings development & engineering

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

Real estate Custom-built
brokerage
housing

Hotels

Other

Total

Eliminations
or corporate Consolidated$ 2,892,354 $1,315,874
49,2182,895
2,941,572 1,318,769
2,121,056 1,214,692$ 820,516 $ 104,077$ 96,472
57,338
153,810
151,797$ 2,013$674,776
1,522
676,298
657,546$ 18,752$271,406
12,246283,652
290,932$ (7,280)$242,354
1,473
243,827
239,476$ 4,351$178,361 $ 5,671,597 $— $ 5,671,597
17,970142,662 (142,662)—
196,3315,814,259 (142,662) 5,671,597
212,014
4,887,513(14,776) 4,872,737$ (15,683) $ 926,746 $ (127,886) $ 798,860$18,944,285 $2,299,992
401,506
5,607
1,108,727
7,612$143,819
782
3,037$584,850
26,356
19,567$134,850
1,423
940$259,542
9,609
6,539

$837,329 $23,204,667 $1,819,684 $25,024,351
15,915461,198
5,707
466,905
28,495
1,174,917
12,895 1,187,812
Millions of yen

2002
Residential Architectural
Buildings development & engineering

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

Real estate Custom-built
brokerage
housing

Hotels

Other

Total

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

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

ANNUAL REPORT 2003

41

MITSUBISHI ESTATE CO., LTD.

¥

Millions of yen

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

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

HotelsOther

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

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

Revenue recognition

Land revaluation

As described in Note 2, “Accounting Change,” the architectural engineering segment has changed its revenue recognition policy forarchitectural design and supervision services contracts with revenueof over ¥500 million and for construction contracts with revenue of over
¥5,000 million from the completion method to the percentage of completion method. The effect of this change for the year ended March 31,
2002 was to increase or decrease the revenue from operation andoperating income in each of the respective segments as follows:As described in Note1, the Company revalued certain land as of March
31, 2002. Due to this land revaluation, the total assets of each segment
as of March 31, 2002 increased or decreased as follows:

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

Millions of yen

Architectural & engineering
Eliminations or corporate

Revenue fromoperations

Operatingincome (loss)¥6,580(1,127)¥5,453¥2,086(395)¥1,691

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

The Company changed its classification of certain personnel expenses
relating to employees who are seconded from the Company to its subsidiaries. Such expenses were included in “Eliminations or corporate”
in prior years but have been allocated to each relevant segment in2002. The effect of this change for the year ended March 31, 2002 was
to increase operating expenses in each of the respective segments asfollows:

Buildings
Residential development
Architectural & engineering
Custom-built housing
HotelsOther

Decrease of assets
Segments
Buildings
Residential development
HotelsOther

Millions of yen¥1,393
327
1,765
454
329
191
¥4,459MITSUBISHI ESTATE CO., LTD.

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

Loss on impairment

Allocation of expenses

Segments

Millions of yen

42

ANNUAL REPORT 2003

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

Geographical segments
The Company and its consolidated subsidiaries operate primarily in Japan, the United States and certain other areas. The geographical segment
information of the Company and its consolidated subsidiaries for the years ended March 31, 2003, 2002 and 2001 is summarized as follows:
Millions of yen

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

Japan

UnitedStates

Other

Total

¥ 531,044
943
531,987439,555¥ 92,432¥2,445,190¥126,666
85
126,751
110,047¥ 16,704¥316,421¥24,016202
24,21822,711¥ 1,507¥19,786¥ 681,726
1,230
682,956
572,313¥ 110,643¥2,781,397

2003
Eliminations
or corporate Consolidated¥—(1,230)(1,230)13,390¥ (14,620)¥226,530¥ 681,726—
681,726
585,703¥ 96,023¥3,007,927

Thousands of U.S. dollars

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

Japan

UnitedStates

Other

Total

$ 4,418,004
7,845
4,425,849
3,656,864$ 768,985$20,342,679$1,053,794
707
1,054,501
915,533$ 138,968$2,632,454$199,799
1,682
201,481
188,943$ 12,538$164,609$ 5,671,597
10,234
5,681,831
4,761,340$ 920,491$23,139,742

2003
Eliminations
or corporate Consolidated$—(10,234)(10,234)
111,397$ (121,631)$1,884,609$ 5,671,597—
5,671,597
4,872,737$ 798,860$25,024,351
Millions of yen

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

Japan

UnitedStates

Other

Total

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

2002
Eliminations
or corporate Consolidated¥—(1,318)(1,318)9,800¥ (11,118)¥326,239¥ 631,564—
631,564554,643¥ 76,921¥3,035,795
Millions of yen

2001
Eliminations
or corporate Consolidated

Japan

UnitedStates

Revenue andoperating income
Revenue from:
External customers
Intersegment or transfers
Total revenue
Operating expenses
Operating income¥ 510,990
686
511,676
431,737¥ 79,939¥102,036
161
102,197
86,650¥ 15,547¥17,964
298
18,262
17,695¥ 567¥ 630,990
1,145
632,135
536,082¥ 96,053¥—(1,145)(1,145)
14,269¥ (15,414)¥ 630,990—
630,990
550,351¥ 80,639

Total assets¥1,861,545¥260,368¥21,287¥2,143,200¥392,063¥2,535,263

ANNUAL REPORT 2003

43

Other

Total

MITSUBISHI ESTATE CO., LTD.

Unallocatable operating expenses

Loss on impairment

Unallocatable operating expenses included under “Eliminations or
corporate” for the years ended March 31, 2003, 2002 and 2001 amounted to ¥14,806 million ($123,178 thousand), ¥12,689 million and ¥15,630
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, 2003, 2002 and 2001 amounted to ¥248,536 million ($2,067,687
thousand), ¥332,193 million and ¥392,135 million, respectively, andconsisted principally of cash, marketable securities, investments inother securities, deferred tax assets and other assets allocated to the
Administration Department of the Company.

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

Overseas revenue
The following table represents overseas revenue earned by the Company’s consolidated subsidiaries in foreign countries during the years
ended March 31, 2003, 2002 and 2001.

Millions of yen

2003

Revenue recognition
As described in Note 2, “Accounting Change,” the architectural engineering segment has changed its revenue recognition policy forarchitectural design and supervision services contracts with revenueof over ¥500 million and for construction contracts with revenue of over
¥5,000 million from the completion method to the percentage of completion method. The effect of this change was to increase revenue fromoperations in the Japan segment by ¥5,453 million and operating
income by ¥1,691 million, respectively, for the year ended March 31,
2002.

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

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

Japan
U.S.A.
Other

Other
areas

¥104,178¥24,029¥128,207¥681,726

15.3%

3.5%

18.8%

Total

Thousands of U.S. dollars

Overseas revenue
Overseas revenue
Consolidated revenue

Allocation of expenses

Segments

UnitedStates$866,706$199,908 $1,066,614$5,671,597
Millions of yen

2002

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

Millions of yen¥4,459156
109¥4,724

UnitedStates

Other
areas

¥101,335¥20,238¥121,573¥631,564

16.0%

3.2%

19.2%

Total

Millions of yen

2001

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

MITSUBISHI ESTATE CO., LTD.

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

44

ANNUAL REPORT 2003

UnitedStates

Other
areas

¥102,186¥17,820¥120,006¥630,990

16.2%

2.8%

19.0%

Total

Non-Consolidated Statements of Operations
Mitsubishi Estate Co., Ltd.
Years ended March 31, 2003, 2002 and 2001

Millions of yen

Thousands of
U.S. dollars

2003

2002

2001

2003

Revenue from operations
Cost of revenue from operations
Selling, general and administrative expenses
Operating income¥397,102
304,537
25,75966,806¥ 381,145
299,790
24,55756,798¥389,995
315,002
21,893
53,100$3,303,677
2,533,586
214,301
555,790

Other income (expenses):
Interest and dividend income
Interest expense
Loss on impairment of property and equipment
Other, net

2,381(24,601)—
3

2,002(25,982)(143,915)(23,202)2,627(29,499)—(16,191)

19,809(204,667)—
25(22,217)(191,097)(43,063)(184,833)

44,589(134,299)

10,037

370,957

16
19,98319,999¥ 24,590

16(56,860)(56,844)¥ (77,455)

19
3,615
3,634
6,403

133
166,248
166,381$ 204,576

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

ANNUAL REPORT 2003

45

MITSUBISHI ESTATE CO., LTD.

¥

Non-Consolidated Balance Sheets
Mitsubishi Estate Co., Ltd.
March 31, 2003 and 2002

Millions of yen

Thousands of
U.S. dollars

2002

2003

Assets2003

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

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

Property and equipment:
Land
Buildings and structures
Machinery and equipment
Construction in progress
Less accumulated depreciation
Property and equipment, net
Intangible and other assets

Total assets

MITSUBISHI ESTATE CO., LTD.

46

62,793
1,899
41,763(1,269)230,594
33,71015,306
384,796¥

62,79525,563
22,799(892)
232,364
48,923
18,208409,760$

522,404
15,799347,446(10,557)
1,918,419
280,449
127,338
3,201,298

191,519
115,482
74,93322,483

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

1,593,336
960,749
623,403
187,046(1,438)402,979(1,640)442,227(11,964)
3,352,570

1,268,182
1,254,794
20,497
11,4622,554,935(751,627)
1,803,308

1,246,362
1,167,676
20,51449,4742,484,026(726,259)
1,757,767

10,550,599
10,439,218
170,524
95,35821,255,699(6,253,136)
15,002,563

13,084

10,838108,852¥2,604,167¥2,620,592$21,665,283

ANNUAL REPORT 2003

Liabilities, minority interests andshareholders’ equity

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Current liabilities:
Short-term borrowings and current portionof long-term debt
Accounts payable—trade
Advances and deposits
Accrued expenses and other current liabilities
Total current liabilities¥ 219,683
39,772
43,05921,865324,379¥ 269,912
17,37137,308
14,977
339,568$ 1,827,645
330,882358,228
181,905
2,698,660

Long-term debt
Lease deposits
Deferred income taxes
Other noncurrent liabilities
Total liabilities

840,132
274,321292,552
26,517
1,757,901

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

6,989,451
2,282,205
2,433,877
220,607
14,624,800

86,534
115,216
410,60721,658187,143

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

719,917
958,536
3,416,032
180,183
1,556,930

26,226
847,384

45,531
843,075

218,186
7,049,784(1,118)846,266(116)
842,959(9,301)7,040,483¥2,604,167¥2,620,592$21,665,283

Shareholders’ equity:
Common stock, without par value:
Authorized—1,980,000,000 shares;
Issued and outstanding—1,299,185,054 shares
Capital surplus
Land revaluation reserve
Legal reserve
Retained earnings
Unrealized gain on securities
Less treasury stock—1,229,510 shares in 2003;
113,913 shares in 2002
Total shareholders’ equity
Total liabilities, minority interestsand shareholders’ equity

ANNUAL REPORT 2003

47

MITSUBISHI ESTATE CO., LTD.

MITSUBISHI ESTATE CORPORATE DATA

Directors andStatutory Auditors

Corporate Information

Chairman of the Board
Takeshi Fukuzawa

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

President and Chief Executive Officer
Shigeru Takagi*
Director/Deputy President
Eiji Tan*

Date of Establishment:
May 7, 1937

Directors/Executive Vice Presidents
Katsuhisa Shimada
Takayuki Hara*
Yasuhiko Watanabe*
Atsushi Morimoto*
Terutake Miyamoto*
Senior Executive Officers
Masahiro Yamanaka
Yutaka Nakamura
Satoshi Oyama
Kazuo Odagawa
Yasuto Suzuki
Hajime Ito
Hiroharu Koinuma
Keiji Kimura
Executive Officers
Hirotaka Kanki
Takaya Endo
Seiichiro Suzuki
Nobuyuki Iizuka
Toshio Nagashima
Mitsuo Iwai
Toshihide Yoshimura
Masaaki Kono
Toyohisa Miyauchi
Hiroshi Danno
Kazuo Takahashi
Yuzuru Shibagaki
Takao Yagihashi
Hiroyoshi Ito
Yutaka Yanagisawa

Paid-in Capital:¥86,534 million
Number of Shares of Common Stock Issued:
1,299,185,054 shares
Number of Shareholders:
90,117 (excluding shareholders with less than 1,000 shares)
Major Shareholders:% of total
The Master Trust Bank of Japan, Ltd. (Trust Account)
6.08
Japan Trustee Services Bank, Ltd. (Trust Account)
5.97
The Meiji Mutual Life Insurance Company
4.53
The Bank of Tokyo-Mitsubishi, Limited
3.61
The Tokio Marine and Fire Insurance Co., Ltd.
3.15
Obayashi Corporation
2.33
Taisei Corporation
2.26
Takenaka Corporation
2.19
The Mitsubishi Trust and Banking Corporation
2.11
The Chase Manhattan Bank, N.A. London, S.L. Omnibus Account
2.11
Major Consolidated Subsidiaries:
Mitsubishi Jisho Sekkei Inc.
Mitsubishi Real Estate Services Co., Ltd.
Mitsubishi Estate Home Co., Ltd.
Yokohama Royal Park Hotel Co., Ltd.
Aqua City Co., Ltd.
Marunouchi Heat Supply Co., Ltd.
Yokohama Sky Building Co., Ltd.
Royal Park Hotel Co., Ltd.
Rockefeller Group, Inc.
Stock Exchange Listings:
Tokyo Stock Exchange and other major Japanese stock exchanges

Statutory Auditors
Yasuo Satake
Kunihiro Inoue
Terumichi Tsuchida
Kazuya Okamoto
Toyoshi Nakano

Transfer Agent and Registrar:
The Mitsubishi Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan*Representative Director(as of March 31, 2003)

Auditor:Toyo & Co.

(as of June 27, 2003)
MITSUBISHI ESTATE CO., LTD.

48

ANNUAL REPORT 2003

Organization•Business Planning Department•Group Companies Management Office•Leasing Department•Relocation Management Office•Property Management Department•Building Management Advisory Office•Commercial Real Estate Division•Marunouchi Area Building Management Department•Yurakucho Area Building Management Department•Otemachi Area Building Management Department•Tokyo Metropolitan Area Building Management Department•Area Promotion Department•Marunouchi Brand Management Office•Retail & Shopping Center Department•Meeting of Shareholders•Development Department•Area Planning Office•Board of Directors•Residential Development Promotion Department•Condominium Development Department•Chairman of the Board•Strategic Planning
Committee•Master-Planned Development Department•Residential Development Division•Chiba Liaison Office•PARTNER System Department•President•Residential Development & Leasing Office•Residential Planning & Marketing Department•Executive Committee•Strategic Investment
Committee•Advisory Board•Board of Statutory Auditors•Statutory Auditor•Customer Service Office•Urban Development &Investment Management Division•Urban Development & Investment Department•International Business Division•International Business Department•Recreational Facility Division•Recreational Facility Office•Urban Development Promotion Department•Corporate Planning Department•Office of Statutory Auditors•Corporate Monitoring Department•Internal Audit Office•Personnel Planning Department•Finance & Accounting Department•Corporate Planning &Administration Division•Corporate Communications Department•Investor Relations Office•Corporate Philanthropy &Environmental Affairs Promotion•General Affairs Department•Secretary Office•Compliance Department•Sapporo Branch•Tohoku Branch•Yokohama Branch•Nagoya Branch•Osaka Branch•Chugoku Branch•Kyushu Branch(as of July 1, 2003)

ANNUAL REPORT 2003

49

MITSUBISHI ESTATE CO., LTD.

MITSUBISHI ESTATE GROUP

Building Business
Building Leasing Business

Building Management Business

Parking Business

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

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

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

Jyoni Shoji Co., Ltd.
Marunouchi Direct Access Limited

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

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

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

TECHNO-TRUSS Co., Ltd.

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

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

Mitsubishi EstateCo., Ltd.

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

OthersRecreational Facility

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

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

Residential Development
Real Estate Agency

Development BusinessResidence Management Business

Mitsubishi Real Estate Services Co., Ltd.

Otaru Toshi Kaihatsu Kosha Co., Ltd.

Izumi Park Town Service Co., Ltd.
Mitsubishi Jisho Community Service Co., Ltd.

Ryoei Life Service Co., Ltd.
Consolidated Subsidiaries
Equity-Method Affiliates(as of June 27, 2003)

MITSUBISHI ESTATE CO., LTD.

50

ANNUAL REPORT 2003

SOCIAL CONTRIBUTIONS AND ENVIRONMENTAL EFFORTS

Fu l f i l l i n g O u r R e s p o n s i b i l i t y a s a C o r p o r a te
C i t i z e n a n d a C o m p re h e n s i ve D eve lo p e r
As a comprehensive developer, the Mitsubishi Estate Group engages in activities that contribute to society and the protection of the global environment,
and as a corporate citizen, places a high management priority on exchanges with local communities.
Spreading Awareness of Environmental
Preservation
In 2000, we became the first company in the realestate industry in Japan to begin publishing an Environmental Report. We are working hard toacquire ISO 14001 certification for environmental
management systems. So far, our office building
Mitsubishi Estate is asponsor of the NHK
Symphony Orchestra.

management business in the Tokyo and Yokohama areas has received ISO
14001 certification, as well as the headquarters of Residential Development
Operations, Mitsubishi Estate Home Co., Ltd. and Mitsubishi Jisho Sekkei
Inc. In February 2003, Mitsubishi Jisho Community Service Co., Ltd., which
manages housing complexes, received ISO 14001 certification.
Opened in September 2002, the Marunouchi Building incorporates alonger lifespan in design plans, improvements in energy conservation andgarbage recycling on the premises. To broaden awareness of environmental issues, we established the Marunouchi Bird
Song Plaza in Marunouchi, Tokyo, in cooperation
with the Wild Bird Society of Japan. We hold nature-watching events in areas around Marunouchi,
and volunteers from inside and outside the Company produce 6,000 audiocassette tapes of wild
birds in natural setting and donate them to facilities for the visually impaired throughout Japan.
Contributing to Society as a Corporate Citizen
As a part of our activities to contribute to society, we invite the handicapped
and the elderly to Mitsubishi Estate-organized local concerts, hold the
Kirakiratto Art Contest for physically disabled children, provide Japanese
handmade noodle delivery services, and offer ceramic art classrooms. In
2001, we significantly expanded our various support programs, including
Volunteer Vacation, making it easier for our employees to participate in activities for the good of society.
In support of cultural activities, we are special sponsors for the NHK
Symphony Orchestra and the Japan Philharmonic Orchestra. In addition,
we operate cultural facilities in Yokohama, Fukuoka, and other regions inJapan to contribute to local communities.

ANNUAL REPORT 2003

51

MITSUBISHI ESTATE CO., LTD.

Greenery is planted on therooftop of the lower levelof the Marunouchi Building, helping alleviate theheat island effect.

COMPLIANCE

The Mitsubishi Estate Group views compliance as basic to its business activities and essential to fulfilling its public responsibility as an organization with various stakeholders. We believe that constantly improving compliance and gaining the trust ofsociety are our duties as a good corporate citizen. We believe that compliance is also a prerequisite as an ongoing concern.
Our basic mission is to create a truly meaningful society through urban development. In 1997, Mitsubishi Estate formulated the“Code of Corporate Conduct,” and to reinforce our compliance structure we decided to share this with the entire Group in 2002.

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

Principles of Corporate Conduct
Article 1 : Fostering Communication
We will make fair disclosure of corporate information by communicating with shareholders,investors, business partners, local community members and all other persons affected by ouractivities.

Article 2 : Being Good Citizens
We, as good corporate citizens, will respect human rights and actively contribute to society, andwill support our employees in their endeavors to this end.

Article 3 : Caring about the Environment
We will place conservation of the global environment as a business priority. We will strive tooperate in harmony with the environment in all our business activities, by promoting conservationof energy, reduction of waste, recycling and so forth.

Article 4 : Fostering Integrity
We will conduct our business on the basis of free, fair and transparent market competition. We willconsider our social credibility as the most important factor when making management decisions.

Article 5 : Upholding the Law and Avoiding Antisocial Forces
We will observe all laws and ordinances and endeavor to conduct ourselves at all times incompliance with social morals. We will avoid ties with forces that threaten to disrupt civil society or
undermine public safety.

Article 6 : Having a Global Outlook
We will develop our business based on a global perspective and contribute to local development
while respecting local rules and cultures in our overseas operations.

Article 7 : Enhancing Creativity and Motivation
We will strive to create a business environment conducive to the full utilization of our employees’capabilities. We will endeavor to maximize our employees’ creativity and expertise while respecting
their dignity and individuality.

Article 8 : Duties of Our Directors and Management Staff
The directors and management staff of our company recognize that it is their duty to put the spiritof this Code into practice. Each director and manager will take the initiative to exercise leadershipand create a corporate system to achieve our goals. Infractions of the Code will be investigated andthe findings made public. We will reaffirm the responsibilities of our directors and managers insuch an event and take measures to prevent any recurrences.

MITSUBISHI ESTATE CO., LTD.

52

ANNUAL REPORT 2003

mec̲ar̲cover̲E 04.1.20 3:54 PM ページ 4mec̲ar̲cover̲E 04.1.20 3:54 PM ページ 1

MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2003

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

Printed on recycled paper
Printed in Japan