Financial Highlights (Consolidated)
MITSUBISHI ESTATE CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Thousands of
U.S. dollars

Millions of yen

Years ended March 31

1998

1999

1999

Revenue from operations .................................................

ｴ0,548,731

ｴ0,565,259$14,689,000

Net income .......................................................................

31,84822,327

185,209

As a percentage of revenue from operations ...................

5.8%

3.9%

As a percentage of shareholdersﾕ equity ..........................

7.0%

4.9%

Totalassets.........................................................................

2,103,258

2,283,773

18,944,611

Total shareholdersﾕ equity..................................................

454,057

459,574

3,812,311

Common stock .................................................................

86,53486,534

717,827

Yen

U.S. dollars

Per share amounts:
Net income..........................................................................

ｴ24.51

ｴ17.19$0.143

Cash dividends applicable to the year..................................

8.00

8.00

0.066

Note: Yen amounts shown are translated into U.S. dollars, solely for convenience, at the prevailing exchange rate on March 31, 1999, ofｴ120.55 to US$1.00.

1Financial Information
Financial Review

Analysis of Revenue
During the fiscal year ended March 31, 1999, Mitsubishi
Estate recorded revenue from operations of ｴ565,259
million (US$4,689.0 million), an increase of 3.0%. Revenue in the Building Leasing Division rose 6.2% toｴ296,480 million (US$2,459.4 million), spurred by
growth in overseas leasing operations and an increase in
the number of consolidated subsidiaries. In the Development and Sales Division, revenue increased 2.7% toｴ155,408 million (US$1,289.2 million), supported by arecovery in domestic sales of condominiums and increased
sales by overseas subsidiaries. Architectural Division revenue edged up 2.0% to ｴ11,822 million (US$98.1
million). In the Construction Division, revenue fell 28.5%
to ｴ47,467 million (US$393.8 million), primarily due
to the absence of a large-scale project completed andrecorded as revenue in the previous term. Other Business revenue climbed 34.1% to ｴ54,082 (US$448.6
million) as a result of an increased number of consolidated subsidiaries.

expenses as a percentage of revenue from operations
increased 1.9 percentage points to 10.3%.
Operating income climbed 18.2% to ｴ68,828 million (US$570.9 million), mainly owing to substantially
improved performance in the Building Leasing andDevelopment and Sales Divisions. The operating income
margin improved 1.6 percentage points to 12.2%.
Other income decreased 24.7% to ｴ13,112 million (US$108.8 million), while other expenses
declined 10.3% to ｴ50,124 million (US$415.8 million). Interest expenses edged down 1.8% to ｴ44,349
million (US$367.9 million), reflecting historically
low interest rates in Japan, and the interest coverage
ratio improved 0.23 to 1.66. Overall, other expenses,
net of other income, declined ｴ1,460 million toｴ37,012 (US$307.0 million).
Income before taxes and special items climbed 60.8%
to ｴ31,816 million (US$263.9 million). However, owing to the absence of special profit, net, recorded during
the previous fiscal year, net income declined 29.9% toｴ22,327 million (US$185.2 million). Net income pershare was ｴ17.19 (US$0.143), and management maintained cash dividends per share at ｴ8.00 (US$0.066).

Analysis of Income
Cost of revenue from operations declined 1.4% toｴ438,171 million (US$3,634.8 million), with the grossprofit margin improving 3.5 percentage points to 22.5%.
Selling, general and administrative (SG&A) expenses rose
26.3% to ｴ58,260 million (US$483.3 million) as a result of the increase in consolidated subsidiaries. SG&A

Analysis of Financial Position
Net cash provided by operating activities rose 15.9% toｴ91,065 million (US$755.4 million). Net cash used ininvesting activities increased 52.1% to ｴ135,448 million

16

(US$1,123.6 million), owing mainly to a decline in proceeds from property and equipment. Purchases ofproperty and equipment were essentially unchanged atｴ148,324 million (US$1,230.4 million). Net cash provided by financing activities increased 4.2% to ｴ31,189
million (US$258.7 million). Cash at end of year decreased 8.8% to ｴ70,525 million (US$585.0 million).
Consolidated interest-bearing debt increased 9.5% toｴ1,275,796 million (US$10,583.1 million), primarily due
to bond issues to finance real estate investment, including the acquisition of 50% ownership of two buildings
and accompanying land from the Bank of TokyoMitsubishi, Ltd. Total assets increased 8.6% to ｴ2,283,773
million (US$18,944.6 million), reflecting strategic investments in Japan and overseas, and an increased numberof consolidated subsidiaries, while total shareholdersﾕequity edged up 1.2% to ｴ459,574 million (US$3,812.3
million). The shareholdersﾕ equity ratio decreased 1.5
percentage points to 20.1%.

Management aims to reduce interest-bearing debt tounder ｴ1 trillion yen on a non-consolidated basis by
the fiscal year ending March 31, 2003, through liquidating assets and other measures. During the fiscal year
ending March 31, 1999, the Company established a committed credit line with financial institutions to ensure
available sources of short-term funding.
Steps are being taken in each operating division to
improve performance and asset utilization through a focus on free cash flow generation. In the Building Leasing
Division, the Marunouchi Redevelopment Plan calls forcapital investment of approximately ｴ500 billion over a
10-year period. As annual depreciation of the Divisionﾕs
assets is in the range of ｴ50 billion, we expect to meetthese funding requirements through internal cash flow.
Redevelopment may be further accelerated through joint
projects with other companies, securitization and otherfinancing schemes. In the Development and Sales
Division, land acquisition and construction costs will
be held within the divisionﾕs cash flow to reduce
interest-bearing debt. Further, asset efficiency is being
increased through a streamlining of the entire development process, securitization and other methods.
The reduction of overhead is one of the high priorities over the next three fiscal years. Measures will
include shifting staff from administrative to operational
divisions, especially areas related to the Marunouchi
Redevelopment Plan.

Management Initiatives
Mitsubishi Estateﾕs core business, office building leasing operations, is characterized by substantial capitalcommitments for each project and long investment
horizons. Consequently, controlling interest-bearing
debt is a key management issue. As raising asset efficiency and managing risk are primary management
concerns, we have introduced the use of return on
assets (ROA) and the interest coverage ratio (ICR) as
Company-wide management benchmarks.

17

Consolidated Balance Sheets
MITSUBISHI ESTATE CO., LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 1998 and 1999

Thousands of
U.S. dollars

Millions of yen

ASSETS

1998

1999

1999

Current assets:
Cash ...................................................................................... ｴ77,297

ｴ70,525$585,027

Marketable securities (Notes 2 (D) and 8)............................

105,927

97,236806,603

Notes and accounts receivableﾑtrade ..................................

32,12444,317

367,623

Inventories (Notes 2 (C) and 7)............................................

264,885259,738

2,154,608

Advances on purchases..........................................................

5,191

6,462

53,604

Other current assets ..............................................................

24,795

23,100191,622

Less allowance for doubtful accounts (Note 6)......................

(6,423)(7,604)(63,078)

Total current assets ............................................................

503,796493,774

4,096,009

and affiliates (Notes 2 (A) and 8) ........................................

28,39920,328167,607

Investments in other securities (Notes 2 (D) and 8) ..............

17,478

10,46287,806

Other investments (Note 9) ..................................................

134,494

131,762

1,093,007

Less allowance for doubtful accounts (Note 6)......................

(34)

(21)

(174)

Total investments................................................................

180,337

162,531

1,348,246

Land ......................................................................................

601,483

691,5735,736,815

Buildings................................................................................

1,190,080

1,324,436

10,986,611

Machinery and equipment....................................................

65,21470,481

584,662

Others ....................................................................................

13,04012,835

106,470

Construction in progress........................................................

20,48332,472

269,365

Total property and equipment at cost ................................

1,890,300

2,131,797

17,683,923

Less accumulated depreciation............................................

(501,307)(568,118)(4,712,717)

Net property and equipment at cost..................................

1,388,993

1,563,679

12,971,206

Other assets ............................................................................

29,77055,919463,866

Translation adjustments ........................................................

362

7,870

65,284

Total assets.......................................................................... ｴ2,103,258

ｴ2,283,773$18,944,611

Investments:
Investments in unconsolidated subsidiaries

Property and equipment at cost (Notes 2 (E) and 10):

See notes to consolidated financial statements.

18

Thousands of
U.S. dollars

Millions of yen

LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERSﾕ EQUITY

1998

1999

1999

Current liabilities:
Short-term bank loans (Note 10) ............................................ ｴ62,690ｴ

73,621$

610,709

Commercial paper ...................................................................

34,437

18,736

155,421

Current portion of long-term debt (Note 10) ........................

179,738

126,029

1,045,450

Notes and accounts payableﾑtrade .........................................

46,75552,712437,262

Accrued expenses.....................................................................

19,61922,692

188,237

Accrued income taxes..............................................................

5,668

3,231

26,802

Advances and deposits..............................................................

48,65848,716404,114

Other current liabilities ...........................................................

13,94917,400144,338

Total current liabilities ...........................................................

411,514363,137

3,012,333

Long-term debt (Note 10) .....................................................

888,067

1,057,410

8,771,547

Guarantee deposits and lease deposits (Note 11) ..............

266,813297,8082,470,411

Employeesﾕ retirement allowances (Note 2 (G)) .................

30,01930,047249,249

Other long-term liabilities (Note 2 (G)) ..............................

35,272

46,459385,392

Total liabilities.........................................................................

1,631,685

1,794,861

14,888,932

Minority interests ...................................................................

17,51629,338

243,368

1,299,185,054 shares in 1998 and 1999 ..............................

86,53486,534

717,827

Capital surplus .........................................................................

115,195

115,195

955,579

Legal reserve ............................................................................

21,634ﾑﾑ

Retained earnings....................................................................

230,703257,854

2,138,980

Treasury stock ..........................................................................

(9)

(9)

(75)

Total shareholdersﾕ equity.......................................................

454,057

459,574

3,812,311

Total liabilities, minority interests and shareholdersﾕ equity ... ｴ2,103,258

ｴ2,283,773$18,944,611

Shareholdersﾕ equity (Note 13):
Common stock, par value ｴ50 per share
Authorizedﾑ1,980,000,000 shares
Issued and outstandingﾑContingent liabilities (Note 14)

Consolidated Statements of Income
MITSUBISHI ESTATE CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years Ended March 31, 1997, 1998 and 1999

Thousands of
U.S. dollars

Millions of yen

1997

1998

1999

1999

Revenue from operations .........................................

ｴ559,119

ｴ548,731

ｴ565,259$4,689,000

Cost of revenue from operations .................................

447,360

444,359

438,1713,634,766

Selling, general and administrative expenses ................

49,365

46,12058,260483,285

Operating income .....................................................

62,39458,252

68,828570,949

Interest .........................................................................

5,417

2,834

2,399

19,900

Dividends.....................................................................

3,680

3,421

2,313

19,187

Other ...........................................................................

10,352

11,153

8,400

69,681

Total ...........................................................................

19,44917,408

13,112

108,768

Interest .........................................................................

51,89345,17944,349367,889

Other ...........................................................................

9,547

10,701

5,775

47,905

Total ...........................................................................

61,44055,88050,124

415,794

Income before taxes and special items ..................

20,403

19,78031,816

263,923

Special profit (loss), net (Note 5) .............................

20,95023,086ﾑﾑ

Net income before taxes and others.......................

41,35342,866

31,816

263,923

Income taxes (Notes 2 (F) and 12) .............................

(490)

8,264

7,944

65,898

Amortization of goodwill*.......................................

1,361

1,321

ﾑ

ﾑ

Minority interests .......................................................

2,120

1,433

1,545

12,816

Net income..................................................................

ｴ 38,362

ｴ 31,848

ｴ 22,327$ 185,209

Other income:

Other expenses:

Yen

U.S. dollars

Net income and dividends
per share (Note 2 (I)):
Net income per share ................................................... ｴ29.53

ｴ 24.51

ｴ 17.19$

0.143

Net income per share assuming full dilution................

ﾑ

ﾑ

ﾑ

ﾑ

Cash dividends per share applicable to the year ...........

8.00

8.00

8.00

0.066

Interest coverage ratio**............................................

1.38

1.43

1.66

*In accordance with a change in accounting standards for the preparation of consolidated financial statements, beginning with the fiscal year ended
March 31, 1999, amortization of goodwill is included in selling, general and administrative expenses.
**Interest coverage ratio is calculated by dividing the sum of operating income, interest income and dividends by interest expense.
See notes to consolidated financial statements.

20

Consolidated Statements of Shareholdersﾕ Equity
MITSUBISHI ESTATE CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years Ended March 31, 1997, 1998 and 1999

Thousands of
U.S. dollars

Millions of yen

1997

1998

1999

1999

ｴ 86,534

ｴ 86,534$ 717,827

ﾑ

ﾑ

ﾑ

Common stock:
Balance at beginning of the period .............................. ｴ 86,534
Conversion of convertible bonds:
During fiscal 1997: 0 shares ........................................

0

During fiscal 1998: 0 shares ........................................

ﾑ

0

ﾑ

ﾑ

During fiscal 1999: 0 shares ........................................

ﾑ

ﾑ

0

0

Balance at end of the period ........................................ ｴ 86,534

ｴ 86,534

ｴ 86,534$ 717,827

ｴ115,195

ｴ115,195$ 955,579

0

0

0

0

Balance at end of the period ........................................ ｴ115,195

ｴ115,195

ｴ115,195$ 955,579

ｴ 21,634ｴ$

Capital surplus:
Balance at beginning of the period .............................. ｴ115,195
Conversion of convertible bonds..................................

Legal reserve*:
Balance at beginning of the period .............................. ｴ 21,634
Transfer from unappropriated retained earnings ...........

ﾑ
ﾑ

ﾑ

ﾑ

ﾑ

Balance at end of the period ........................................ ｴ 21,634

ｴ 21,634ｴｴ209,435

ｴ230,703$1,913,753

ﾑ

ﾑ
$

ﾑ

Retained earnings:
Balance at beginning of the period .............................. ｴ180,238
Legal reserve at beginning of the year* ........................

ﾑ

ﾑ

21,634

179,461

AddﾑNet income ........................................................

38,362

31,84822,327

185,209

and equity-method companies .......................

1,234

ﾑ

8,965

74,368DeductﾑCash dividends..............................................

(10,393)(10,393)(10,393)(86,213)ﾑﾑ(15,201)(126,097)

(6)

(187)

(181)

(1,501)

Balance at end of the period ........................................ ｴ209,435

ｴ230,703

ｴ257,854$2,138,980

ﾑChange in consolidated subsidiaries

ﾑChange in consolidated subsidiaries
and equity-method companies ...................
ﾑDirectorsﾕ and statutory auditorsﾕ bonuses ....

*In accordance with a change in accounting standards for the preparation of consolidated financial statements, beginning with the fiscal year ended
March 31, 1999, legal reserve is included in retained earnings.
See notes to consolidated financial statements.

Consolidated Statements of Cash Flows
MITSUBISHI ESTATE CO., LTD. AND CONSOLIDATED SUBSIDIARIES
Years Ended March 31, 1997, 1998 and 1999

Thousands of
U.S. dollars

Millions of yen

1997

1998

1999

1999

Cash flows from operating activities:
Net income................................................................... ｴ 38,362 ｴ 31,848 ｴ 22,327 $Adjustment to reconcile net income to net
cash provided by operating activities:
Gain from sales of fixed asset ......................................
(65,937)(49,159)
ﾑ
Gain from sales of affiliated companiesﾕ stock ............
ﾑ(7,715)ﾑ
Loss from sales of fixed assets......................................
10,856ﾑﾑ
Loss from write-down on fixed asset..........................
6,292
33,789ﾑ
Loss related to the reconstruction of
Marunouchi Building ........................................................
9,017
ﾑ
ﾑ
Loss from provision for bad debt................................
4,494
ﾑ
ﾑ
Loss from prepayment of bonds under debt
assumption agreements..............................................
14,327ﾑ
ﾑ
Depreciation and amortization...................................
53,11753,932
63,050
Provision for reserve for retirement benefits ..............
3,150
646
(627)
Others.........................................................................
430(4,783)
8,364
Changes in assets and liabilities:
Increase/decrease in notes and accounts receivables ..
14,291(1,392)(11,505)
Increase in inventories ................................................
11,96533,462
4,163
Increase/decrease in other current assets....................
3,798
(198)
(233)
Increase/decrease in notes and accounts payable........
(2,155)3,423
5,509
Increase/decrease in accrued income taxes ................
(8,172)
3,391(2,683)
Others.........................................................................
3,055(18,476)
2,881
Payment of directorsﾕ bonuses.......................................
(6)
(187)
(181)
Net cash provided by operating activities ................ ｴ 96,884 ｴ 78,581 ｴ 91,065 $

185,209
ﾑ
ﾑ
ﾑ
ﾑ
ﾑ
ﾑ
ﾑ
523,020(5,201)
69,382(95,438)
34,533(1,933)45,699(22,256)
23,899(1,501)
755,413

Cash flows from investing activities:
Purchases of property and equipment .......................... ｴ (78,569) ｴ(148,023) ｴ(148,324) $(1,230,394)
Proceeds from property and equipment .......................
77,401
51,360629
5,218
Aquisition of minority interest inconsolidated subsidiaries.................................................
(18,522)ﾑ
ﾑ
ﾑ
Proceeds from sales of affiliated companiesﾕ stock ........
ﾑ
8,477
ﾑ
ﾑ
Increase/decrease in marketable securities....................
2,617(1,253)
4,642
38,507
Increase in guarantee deposits and lease deposits..........
(4,152)(7,209)4,811
39,909
Increase/decrease in loans to unconsolidated
subsidiaries and affiliates ..............................................
(711)
10,851
1,448
12,011Others...........................................................................
(10,491)(3,261)
1,346
11,165
Net cash used in investing activities......................... ｴ (32,427) ｴ (89,058) ｴ(135,448) $(1,123,584)
Cash flows from financing activities:
Increase/decrease in bonds and notes ........................... ｴ (68,913) ｴ 75,072 ｴ 41,669 $ 345,657
Loss from prepayment of bonds underdebt assumption agreements........................................
(14,327)ﾑﾑ
ﾑ
Increase/decrease in long-term borrowings .................
(40,331)(34,549)
19,153
158,880
Increase/decrease in commercial paper ........................
48,282(21,360)(15,701)(130,244)
Increase/decrease in short-term borrowings ................
(16,673)
21,174(3,539)(29,357)
Cash dividends paid ......................................................
(10,393)(10,393)(10,393)(86,213)
Net cash provided by (used in) financing activities...... ｴ(102,355) ｴ 29,944 ｴ 31,189 $ 258,723
Changes in cash ........................................................... ｴ (37,898)
Increase in cash from addition of
consolidated companies..............................................
ﾑ
Cash at beginning of the year.......................................
95,728Cash at end of the year ................................................. ｴ 57,830
See notes to consolidated financial statements.
22

ｴ 19,467

ｴ (13,194) $ (109,448)

ﾑ
57,830ｴ 77,297

6,422
77,297ｴ 70,525$

53,273641,203
585,027