##### Table of Contents

 

 

**UNITED STATES SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

**
 
**

**FORM 20-F**

 

**
 
**

 

**OR**

 

**For the fiscal year ended March 31, 2008**

**OR**

 

**For the transition period from                     to                     **

**OR**

 

**Date of event requiring this shell company report**

**Commission file number 0-9929**

 

**
 
**

**MITSUI BUSSAN KABUSHIKI KAISHA**

*(Exact name of Registrant as specified in its charter)*

**MITSUI & CO., LTD.**

*(Translation of Registrant’s name intoEnglish)*

**JAPAN**

*(Jurisdiction of incorporation or organization)*

**2-1, OHTEMACHI 1-CHOME, CHIYODA-KU, TOKYO 100-0004, JAPAN**

*(Address of principal executive offices)*

**Katsurao Yoshimori, 81-3-3285-7533, K.Yoshimori@mitsui.com**

*(Name, Telephone, E-mail Address of Company ContactPerson)*

 

**
 
**

**Securities registered or to be registered pursuant to Section 12(b) of the Act.**

 

**Securities registered or to be registered pursuant to Section 12(g) of the Act.**

**None**

**Securitiesfor which there is a reporting obligation pursuant to Section 15(d) of the Act.**

**None**

 

**
 
**

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by theannual report. 

**As of March 31, 2008, 1,816,639,918 shares of common stock were outstanding including**

**17,626,180 shares represented by an aggregate of 881,309 American Depositary Shares.**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

    Yes  x    No   ̈

If this report is an annual or transition report, indicate by check mark if the registrant is not requiredto file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 

    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 

Large acceleratedfiler  x                    Accelerated filer   ̈                    Non-accelerated filer   ̈

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: 

U.S. GAAP  x                    International Financial Reporting Standards asissued                    Other   ̈

         by the International Accounting Standards Board   ̈

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement itemthe registrant has elected to follow. 

Item 17   ̈    Item 18   ̈

If this is an annual report,indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

    Yes   ̈    No  x

 

 

 

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**Certain References and Information**

As used in this report, “Mitsui” is used to refer to Mitsui & Co., Ltd. (Mitsui Bussan Kabushiki Kaisha), “we”, “us”, and “our” are used to indicate Mitsui &Co., Ltd. and subsidiaries, unless otherwise indicated. “Share” means one share of Mitsui’s common stock, “ADS” means an American Depositary Share representing 20 shares, and “ADR” means an American DepositaryReceipt evidencing one or more ADSs. Also, “dollar” or “$” means the lawful currency of the United States of America, and “yen” or “¥” means the lawful currency of Japan. 

All financial statements and information contained in this annual report have been prepared in accordance with accounting principles generally acceptedin the United States, or U.S. GAAP, except where otherwise noted. 

**A Cautionary Note on Forward-Looking Statements**

This annual report includes forward-looking statements based on our current expectations, assumptions, estimates and projections about our business, ourindustry and capital markets around the world. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “expect”, “anticipate”, “estimate”,“plan” or similar words. The forward-looking statements in this annual report are subject to various risks, uncertainties and assumptions. These statements discuss future expectations, identify strategies, contain projections of results ofoperations or of our financial position, or state other forward-looking information. Known and unknown risks, uncertainties and other factors could cause our actual operating results to differ materially from those contained or implied in anyforward-looking statement. Our expectations expressed in these forward-looking statements may not turn out to be correct, and our actual results could materially differ from and be worse than our expectations. 

Important risks and factors that could cause our actual results to differ materially from our expectations are discussed in this “Item 3.D.Risk Factors” or elsewhere in this annual report and include, without limitation: 

 
 • 
changes in economic conditions that may lead to unforeseen developments in markets for products handled by us; 

 
 • 
fluctuations in currency exchange rates that may cause unexpected deterioration in the value of transactions; 

 
 • 
adverse political developments in the various jurisdictions where we operate, which among things, may create delays or postponements of transactions and projects;

 
 • 
changes in laws, regulations or policies in any of the countries where we conduct our operations; and 

 
 • 
significant changes in the competitive environment. 

We do not assume, and specifically disclaim, any obligation to update any forward-looking statements which speak only as of the date made. 

 

2 

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**TABLE OF CONTENTS**

 
    **Page**
PART I
  5
Item 1. Identity of Directors, Senior Management and Advisers
  5
Item 2. Offer Statistics and Expected Timetable
  5
Item 3. Key Information
  5
A. Selected Financial Data
  5
B. Capitalization and Indebtedness
  7
C. Reasons for the Offer and Use of Proceeds
  7
D. Risk Factors
  7
Item 4. Information on the Company
  13
A. History and Development of the Company
  13
B. Business Overview
  20
C. Organizational Structure
  55
D. Property, Plant and Equipment
  60
Item 4A. Unresolved Staff Comments
  73
Item 5. Operating and Financial Review and Prospects
  73
A. Operating Results
  73
B. Liquidity and Capital Resources
  129
C. Research & Development
  142
D. Trend Information
  142
E. Off-Balance Sheet Arrangements
  142
F. Tabular Disclosure of Contractual Obligations
  144
Item 6. Directors, Senior Management and Employees
  144
A. Directors and Senior Management
  144
B. Compensation
  154
C. Board Practices
  155
D. Employees
  161
E. Share Ownership
  162
Item 7. Major Shareholders and Related Party Transactions
  163
A. Major Shareholders
  163
B. Related Party Transactions
  165
C. Interests of Experts and Counsel
  166
Item 8. Financial Information
  166
A. Consolidated Statements and Other Financial Information
  166
B. Significant Changes
  167
Item 9. The Offer and Listing
  167
A. Offer and Listing Details
  167
B. Plan of Distribution
  168
C. Markets
  168
D. Selling Shareholders
  168
E. Dilution
  168
F. Expenses of the Issue
  168
Item 10. Additional Information
  168
A. Share Capital
  168
B. Memorandum and Articles of Association
  168
C. Material Contracts
  178
D. Exchange Controls
  178
E. Taxation
  179
F. Dividends and Paying Agents
  182
G. Statement by Experts
  182
 

3 

Table of Contents    **Page**
H. Documents on Display
  182
I. Subsidiary Information
  182
Item 11. Quantitative and Qualitative Disclosures about Market Risk
  183
Item 12. Description of Securities Other than Equity Securities
  186
PART II
  187
Item 13. Defaults, Dividend Arrearages and Delinquencies
  187
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  187
Item 15. Controls and Procedures
  187
Item 16A. Audit Committee Financial Expert
  188
Item 16B. Code of Ethics
  188
Item 16C. Principal Accountant Fees and Services
  189
Item 16D. Exemptions from the Listing Standards for Audit Committees
  190
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  191
PART III
  192
Item 17. Financial Statements
  192
Item 18. Financial Statements
  192
Item 19. Exhibits
  192
 

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**PART I**

**Item 1.    Identity of Directors, Senior Management and Advisers.**

Not applicable. 

**Item 2.    Offer Statistics and Expected Timetable.**

Not applicable. 

**Item 3.    Key Information.**

 
**A.****Selected Financial Data.**
The selected consolidatedincome statement data and the selected consolidated cash flow statement data for the years ended March 31, 2008, 2007 and 2006 and the selected consolidated balance sheet data as of March 31, 2008 and 2007 below are derived from ouraudited consolidated financial statements prepared in accordance with U.S. GAAP, which are included elsewhere in this annual report. The selected consolidated income statement data and the selected consolidated cash flow statement data for theyears ended March 31, 2005 and 2004 and the selected consolidated balance sheet data as of March 31, 2006, 2005 and 2004 are derived from our previously published audited consolidated financial statements prepared in accordance withU.S. GAAP, which are not included in this annual report. The consolidated financial statements as of March 31, 2008 and 2007 and for the years ended March 31, 2008, 2007 and 2006 have been audited by Deloitte Touche Tohmatsu,independent registered public accounting firm, whose report is filed as part of this annual report. 

The selected financial data have beenprepared in accordance with U.S. GAAP and should be read in conjunction with, and are qualified in their entirety by reference to “Item 5. Operating and Financial Review and Prospects,” and our consolidated financial statementsand notes thereto included elsewhere in this annual report. 

 
   **In Billions of Yen, Except Amounts per Share and Common Stock Data**   **As of or for the Years Ended March 31,**   **        2008        **  **      2007      **  **      2006      **  **      2005      **  **      2004      **
**Consolidated Income Statement Data:**
          
Results of Operations:
          
Revenues(1)
  ¥5,739  ¥4,794  ¥4,028  ¥3,421  ¥2,915
Gross Profit(1)
   988   866   785   680   595
Equity in Earnings of Associated Companies(1)
   154   153   94   64   40
Income from Continuing Operations(1)
   339   299   215   114   80
Net Income
   410   302   202   121   68
Income from Continuing Operations per Share(1):
          
Basic
   187.87   172.88   134.16   72.34   50.70
Diluted
   185.91   164.02   126.26   68.18   47.88
Net Income per Share:
          
Basic
   227.20   174.26   126.26   76.55   43.25
Diluted
   224.82   165.32   118.85   72.12   40.89
Cash Dividends Declared per Share
   40   31   20   9   8
Cash Dividends Declared per Share in U.S. Dollars(2)
  $0.35  $0.27  $0.17  $0.09  $0.07
 

5 

Table of Contents  **In Billions of Yen, Except Common Stock Data**   **As of or for the Years Ended March 31,**   **2008**  **2007**  **2006**  **2005**  **2004** 
**Consolidated Balance Sheet Data:**
     
Financial Position at Year-End:
     
Total Assets
 ¥9,691  ¥9,813  ¥8,574  ¥7,593  ¥6,716 
Total Shareholders’ Equity
  2,184   2,110   1,678   1,123   963 
Long-term Debt, less Current Maturities
  2,944   2,888   2,659   2,710   2,391 
Common Stock
  338   323   296   192   192 
Other Information at Year-End:
     
Common Stock:
     
Number of Shares Outstanding (in Thousands)
  1,816,640   1,784,627   1,722,954   1,582,211   1,581,013   **In Billions of Yen**   **For the Years Ended March 31,**   **    2008    **  **    2007    **  **    2006    **  **    2005    **  **    2004    ** 
**Consolidated Cash Flow Statement Data:**
     
Cash Flows:
     
Net Cash Provided by Operating Activities
 ¥416  ¥239  ¥146  ¥200  ¥100 
Net Cash Used in Investing Activities
  (105)  (418)  (347)  (224)  (134)
Net Cash (Used in) Provided by Financing Activities
  (185)  272   92   171   (12)  **For the Years Ended March 31,**   **2008**  **2007**  **2006**  **2005**  **2004** 
**Other:**
     
Return on Equity
  19.1%  15.9%  14.5%  11.6%  7.5%
Number of Shareholders
  105,338   102,324   121,503   107,034   109,722 
 
(1)In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the prior year figuresrelating to discontinued operations have been reclassified. (2)The U.S. dollar amounts represent translations of the Japanese yen amounts at the rates in effect on the respective dividend payment dates. (3)Return on Equity is calculated as annual consolidated net income divided by average balance of shareholders’ equity between beginning date and ending date of each fiscal year.
*Exchange Rate Information*

The information set forth below with respect to exchange rates is based on the official noon buying rates for Japanese yen of the Federal Reserve Bank of New York. These rates are provided solely for the convenienceof the reader and are not the exchange rates used by us in the preparation of our consolidated financial statements included in this annual report. 

The official exchange rate on July 31, 2008 was ¥108.10 = U.S.$1.00. The following table sets forth the high and low official noon buying rates for Japanese yen of the Federal Reserve Bank of New York in each month of the previoussix months. 

 
   **Yen per U.S. Dollar**   **        High        **  **        Low        **
July 2008
  ¥108.19  ¥104.64
June 2008
   108.29   104.41
May 2008
   105.52   103.01
April 2008
   104.56   100.87
March 2008
   103.99   96.88
February 2008
   108.15   104.19
 

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The following table sets forth the average exchange rate for each of the last five fiscal years. We havecalculated these average rates by using the rate on the official noon buying rates for Japanese yen of the Federal Reserve Bank of New York on the last business day of each month during the relevant fiscal year. 

 
   **Yen per U.S. Dollar**
**Year Ended March 31,**
  **Average Rate**
2008
  ¥113.61
2007
   116.55
2006
   113.67
2005
   107.28
2004
   112.75
Fluctuations in the exchange rate between the yen and the U.S. dollar will affect the U.S. dollarequivalent of the yen-denominated prices of Mitsui’s shares and, as a result, will affect the market prices of Mitsui’s ADSs in the United States. 

 
**B.****Capitalization and Indebtedness.**
Not required.

 
**C.****Reasons for the Offer and Use of Proceeds.**
Notapplicable. 

 
**D.****Risk Factors.**
*You should carefully consider therisks and uncertainties described below and the other information in this annual report, including the discussion in “Item 5. Operating and Financial Review and Prospects,” as well as our consolidated financial statements and related notesincluded elsewhere in this annual report.*

***The decrease in the volume of trade and the flow of goods and materials resulting fromthe worldwide economic downturn may adversely impact our business, results of operations and financial condition.***

Our globalbusiness activities are affected by economic conditions both globally and regionally. Among other locations, we are particularly vulnerable to downward economic trends in Japan, China and the United States. An economic downturn may cause a reductionin the flow of goods and materials, a decline in private consumption and fixed investment, and subsequently a decrease in demand from our customers for our products and services, which may have an adverse impact on our business, results ofoperations and financial condition. 

***Fluctuations in commodity prices, especially crude oil, iron ore, coal and copper may adverselyaffect our results of operations and financial condition.***

We are engaged in trades in and, as the case may be, production of avariety of commodities in the global commodities market including metal, energy, chemical and agricultural products. Among others, significance of operating results from our mineral resources and energy producing activities in our overall operatingresults has considerably intensified, reflecting the rising prices of such commodities as well as increased production in these operations. Unexpected movements in commodity prices may adversely affect our business, operating results and financialcondition. 

For further information about the impact by commodity price fluctuations on our business and results of operations for the yearended March 31, 2008 and in the future, see “Item 5.A. Operating Results.” 

 

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***Exchange rate fluctuations may adversely affect our operating results, especially because a majorpart of our operating results are generated at our overseas subsidiaries and associated companies.***

Although our reporting currencyis the Japanese yen, a significant portion of our business operations, consolidated revenues and operating expenses is denominated in currencies other than the Japanese yen. As a result, appreciation or depreciation in the value of other currenciesas compared to the Japanese yen could result in material transactional gains or losses. As most of revenues, costs of revenues, and selling, general and administrative expenses incurred from regular business activities at overseas subsidiaries andassociated companies are quoted in the U.S. dollar, the Australian dollar, the Brazilian Real, or other currencies, our net income may be affected by the fluctuations of these currencies and we are exposed to translation risk in our assets andliabilities denominated in foreign currencies. In addition, exchange rate fluctuations may reduce the value of investment in overseas subsidiaries and associated companies and adversely affect our accumulated other comprehensive income. As a result,exchange rate fluctuations may negatively affect our operating results. 

See “Item 3.A. Selected Financial Data—Exchange RateInformation”, “Item 5.A. Operating Results—Impact of Foreign Currency Exchange Fluctuation on Operating Results” and “Item 5. B. Liquidity and Capital Resources.” 

***We are subject to diverse counterparty credit risks which our management policy for credit exposure cannot eliminate entirely.***

We are exposed to diverse counterparty credit risks reflecting a variety of businesses. For example: 

 
 • 
Many of our customers purchase products and services from us on credit. At March 31, 2008, current trade receivable (less unearned interest and allowance fordoubtful receivables—current) was ¥2,755.6 billion, representing 28.4% of our total assets and recognized losses for doubtful receivables—current for the year ended March 31, 2008 and balance of the allowance for doubtfulreceivables—current were ¥4.0 billion and ¥23.3 billion, respectively; 

 
 • 
We engage in significant project financing activities as a lender or guarantor whereby we assume repayment risk; and 

 
 • 
We have counterparty payment risk from various derivative transactions we enter into as part of our hedging activities. 

Diverse types of credit losses may adversely affect our operating results and business. 

***Changes in interest rates could have an adverse effect on our operating results because of our significant short-term and long-term debt.***

We are exposed to risks associated with interest rate fluctuations, which may affect our overall operational costs and the value of ourfinancial assets and liabilities, particularly our significant debt obligations, including ¥464.5 billion short-term debt and ¥3,221.0 billion long-term debt as of March 31, 2008. An increase in interest rates, especially in Japan andthe United States, may adversely affect our results of operations. 

See “Item 5.B. Liquidity and Capital Resources—FundingSources.” 

***If the value of assets for which we act as lessor, such as real property, rolling stock, ocean transport vessels,aircraft and equipment declines, we may record a significant impairment loss.***

Assets for which we act as lessor, such as realproperty, aircraft, ocean transport vessels, rolling stock and equipment, are exposed to potential significant impairment losses due to the decline in the value of these assets. 

As of March 31, 2008, the value of these assets in which we act as lessor, presented on our Consolidated Balance Sheets as “Property leased toothers—at cost, less accumulated depreciation,” was ¥184.4 billion. The 

 

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carrying amounts of these assets in which we act as lessor are affected by certain factors which are beyond our control such as their global supply anddemand, prevailing interest rates, prices of relevant products and services and regional and/or global cyclical trends. Any adjustments for impairment losses with respect to such assets may have an adverse effect on our financial condition andresults of operations. 

For information on our accounting policies and estimates with respect to impairment on long-lived assets, see“Critical Accounting Policies and Estimates” of “Item 5.A. Operating Results.” 

***Declines in the market value ofequity and/or debt securities in Japan may decrease the value of our pension assets which in turn may increase the cost of satisfying our unfunded pension obligations.***

Declines in the market value of Japanese government bonds, other debt securities and marketable equity securities in Japan would reduce the value of ourpension plan assets. Decline in the value of our pension plan assets or increase in our unfunded pension obligations could adversely affect our results of operations and financial condition. 

See “Item 5.A. Operating Results” and Note 14, “PENSION COSTS AND SEVERANCE INDEMNITIES,” to our consolidated financial statements.

***Our liquidity could be adversely affected by a downgrade in our credit ratings, significant changes in the lending or investmentpolicies of our creditors or investors.***

A downgrade in our credit ratings or a significant change in the lending or investmentpolicies of our creditors or investors could result in an increase in our interest expense and could adversely impact our ability to access the debt markets, and could have an adverse effect on our financial position and liquidity. 

For information on our funding sources and credit ratings, see “Item 5.B. Liquidity and Capital Resources.” 

***Due to our significant investments in marketable equity securities of Japanese issuers, a substantial decline in the Japanese stock market, asexperienced in the past, could negatively affect our investment portfolio.***

A significant portion of our investment portfolioconsists of marketable equity securities of Japanese issuers. At March 31, 2008, our marketable equity securities were carried at a fair value of ¥652.0 billion. Among others, Mitsui’s marketable equity securities of Japanese issuersamounted to ¥383.1 billion, representing 53.9% of the fair value of our total available-for-sale securities and 4.0% of our total assets. Volatility and decline in the Japanese equity securities market could negatively impact the value of ourinvestment portfolio and our results of operations and financial condition. 

For information on our accounting policies and estimates withrespect to impairment on marketable securities, see “Critical Accounting Policies and Estimates” of “Item 5.A. Operating Results.” 

***Some of our operations are concentrated in a limited number of regions or countries, which could harm our business and results of operations if activity levels in these regions or countries decline.***

Various types of businesses worldwide sometimes expose us to risks associated with regional political and economic instabilities.Furthermore, some of our business activities may be exposed to concentration risk in particular industries located in specific regions or countries. For example: 

 
 • 
In Russia and Brazil, we have significant size of interests in the exploration, development and production of mineral resources and energy.

 
 • 
In Indonesia, we actively participate in infrastructure projects, including the operation of power plants, and maintain a nationwide motorcycle retail financebusiness. 

 

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As a result, declining levels of trading activities or asset volumes in specific sectors in certainregions or countries could have a disproportionately negative effect on our business, financial condition and results of operations. 

Formore information, see “Energy Segment”, “Mineral & Metal Resources Segment” and “Machinery & Infrastructure Projects Segment” of “Item 4.B. Business Overview.” 

***We may not be able to successfully restructure or eliminate unprofitable or underperforming subsidiaries or associated companies in a timely mannerand any efforts to do so may not lead to improved results of operations.***

As of March 31, 2008, we had 356 consolidatedsubsidiaries and 202 associated companies. We have been continuously restructuring underperforming businesses of our consolidated subsidiaries and associated companies from the viewpoint of operational efficiency as well as profitability. If we failto successfully eliminate or restructure our underperforming subsidiaries and associated companies in a timely manner or if these efforts fail to improve our business operations as contemplated, our business operations may become less efficient andour results of operations may be adversely affected. 

***Our alliances by forming joint ventures with, and strategic investments in,third parties may not result in successful operations.***

We participate in various businesses directly or indirectly through jointventures or by making strategic investments in other companies and business enterprises. The outcome of these joint ventures and strategic investments is unpredictable because: 

 
 • 
operational success is critically dependent on factors that are beyond our control such as the financial condition and performance of the partner companies or thestrategic investees; or 

 
 • 
with respect to certain associated companies, we may fail to exercise adequate control over the management, operations and assets of the companies in which weinvested or may fail to make major decisions without the consent of other shareholders or participants due to lack of common business goals and strategic objectives with our alliance partners. 

Any occurrence of these events could have a material adverse effect on our business, results of operations or financial condition. 

***Our businesses in exploration, development and production of mineral resources and oil and gas may not develop in line with assumed costs andschedules, and are subject to the risks associated with estimating reserves and the operating performance of third party operators.***

Reflecting rising prices of mineral resources and oil and gas in recent years, exploration, development and production of mineral resources and oil and gas are gaining in importance to our operating results. Mining and oil and gas projectsinvolve risks, for example: 

 
 • 
development of projects may face schedule delays or cost overruns due to difficulties in technical conditions, procurement of materials, financial conditions andgovernment regulations; 

 
 • 
reserves are estimated based on available geological, technical, contractual and economic information, therefore actual development and production may significantlydiffer from originally estimated reserves; and 

 
 • 
reserve replacement, on which future production will depend, may not be successfully implemented due to uncertainties such as failures in exploration ornegotiations for acquisitions of known reserves with their owners. 

We participate as a non-operator in many of theseprojects. Under these circumstances, we carefully consider the business potential and profitability of projects based on the information and data provided by 

 

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operators, who substantially control operations of such projects, including decision-making in the course of development and production. In addition to theabove-mentioned risks, operators’ failure in managing those projects may adversely affect our operating results and financial condition. 

For more information, see “Mineral & Metal Resources Segment” and “Energy Segment” of “Item 4.B. Business Overview.” 

***Intense competition from other Japanese general trading companies could have an adverse effect on our results of operations.***

Our primary competition is with other Japanese general trading companies which engage in similar business activities in various fields. Our competitors may have: 

 
 • 
stronger business associations and relationships with our customers, suppliers and business partners in both domestic and global markets; or

 
 • 
stronger global network and regional expertise, diversified global customer bases, greater financial engineering skills and market insights.

Unless we can successfully continue to meet the changing needs of our customers by providing them with innovative andintegrated services in a cost effective manner, we may lose our market share or relationships with our existing customers in certain of our operating segments. Failure to successfully compete with our competitors may have an adverse effect on ourbusiness, financial condition and results of operations. 

***We may lose opportunities for entry into new business areas because of thelimitation of required human resources.***

In response to the maturation of consumption in Japan and other developed countries, wehave been focusing on entering new consumer oriented businesses. Additionally, we are undertaking a reorganization of our traditional businesses in industrial products and raw materials to better reflect the globalization of the economy and therapid progress of information technology. However, in certain new business areas which we regard as important, we may have a shortage of required human resources for carrying out our business plans and managing other personnel, which can cause aloss of opportunities to start new businesses, which in turn may adversely affect our future business. 

***Restrictions underenvironmental laws and regulations and any accidents relating to our use of hazardous materials could negatively affect our business, results of operations and financial condition.***

We are involved in various projects and business transactions worldwide that are subject to extensive environmental laws and regulations. In particular,our Mineral & Metal Resources Segment and Energy Segment may be adversely affected by present or future environmental regulations or enforcement in connection with our exploration, development and production activities. For example, we aresubject to complex sets of environmental regulations in Australia, Brazil, Russia, and the Middle East. These laws and regulations may: 

 
 • 
require us to perform site clean-ups; 

 
 • 
require us to curtail or cease certain operations; 

 
 • 
impose fines and payments for significant environmental damage; 

 
 • 
require us to install costly pollution control equipment; and 

 
 • 
require us to modify our operations. 

Newly enacted environmental laws and regulations or changes therein and protests by environmental groups may materially impact the progress of these projects. 

 

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Mitsui and its United States subsidiary, Mitsui & Co. (U.S.A.), Inc. are shareholders of CoronetIndustries Inc. (“Coronet”), a former manufacturer of animal feed supplements, each with 18% and 12% share interest respectively. Coronet has been working with the U.S. Environmental Protection Agency (“EPA”) and the State ofFlorida on an investigation on environmental conditions related to its prior operations at its facility in the state of Florida. In addition, Coronet has been named as defendant in two civil actions initiated by residents residing in areas adjacentto the facility. Mitsui and Mitsui & Co. (U.S.A.), Inc., together with prior owners of Coronet’s assets, have been named as defendants in one of these actions. 

***We are subject to extensive laws and regulations in Japan and other countries throughout the world.***

***Changes in these laws and regulations could adversely affect our results of operations.***

Our business operations are subject to extensive laws and regulations in Japan and other countries throughout the world. Our operations are subject tolaws and regulations governing, among other things, taxation, business and investment approvals, import and export (including restrictions from the viewpoint of national and international-security), antitrust, consumer and commercial restrictions,currency exchange control, and environmental protection. Moreover, many of our infrastructure projects in developing countries are subject to less developed legal systems. As a result, our costs may increase due to factors such as the lack of acomprehensive set of laws and regulations, an unpredictable judicial system based on inconsistent application and interpretation of laws and regulations, and changing practices of regulatory and administrative bodies. For example, we are subject tosudden and unpredictable changes to: 

 
 • 
tariffs for products and services that we provide; 

 
 • 
technical specifications with respect to environmental regulations; 

 
 • 
income tax and duty rates; and 

 
 • 
foreign exchange controls with respect to repatriation of investments and dividends. 

Furthermore, while we are involved in the exploration, development and production activities through various contractual arrangements, the contracts maynot be upheld or extended when they expire. Moreover, the regulatory bodies of these areas may unilaterally interfere and alter the contractual terms of our oil and gas operations involving production rates, pricing formulas, royalties,environmental protection cost, land tenure or otherwise. If these regulatory bodies unilaterally alter such contractual terms or if we are unable to comply with any new laws and regulations, our business, operating results and financial conditioncould be adversely affected. Furthermore, we could incur substantial additional costs to comply with any new laws and regulations. 

See“Item 4.B. Business Overview—Government Regulations.” 

***Employee misconduct could adversely affect our results ofoperations and reputation.***

Due to our size, as well as the operational and geographic breadth of our activities, our day-to-dayoperations are necessarily de-centralized. As a result, we cannot fully ensure that our employees comply with all applicable laws and regulations as well as our internal policies. For example, our employees may engage in unauthorized tradingactivities and exceed the allotted market risk exposure for various commodities or extend an unauthorized amount of credit to a client, which, in either case, may result in unknown losses or unmanageable risks. Moreover, our employees could engagein various unauthorized activities prohibited under the laws of Japan or other jurisdictions to which we are subject, including export regulations, anticorruption laws, antitrust laws and tax regulations. The efforts we undertake to ensureemployees’ compliance with applicable laws and regulations as well as our internal policies may not succeed in preventing misconduct by our employees. Depending on its nature, employees’ misconduct could have negative effects on ourresults of operations and reputation. 

 

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***Failure to maintain adequate internal controls over financial reporting could negatively affect ourreputation.***

The adequate maintenance of our internal controls over financial reporting requires effective monitoring of ourbusiness activities in a variety of products and services worldwide. We may fail to prevent the occurrence of material weaknesses in our internal controls over financial reporting, or due to any unanticipated issues, may be unable to assert that ourinternal control over financial reporting is effective, which could adversely affect the capital market’s perception of us and may cause negative market reactions. 

***Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell your shares of our common stock at a particular price on any particular trading day, or at all.***

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchangesare order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price range limitations for each stock, based on the previous day’s closingprice. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits on these exchanges. Consequently, an investor wishing tosell at a price above or below the relevant daily limit on these exchanges may not be able to effect a sale at such price on a particular trading day, or at all. 

See “Item 10.B. Memorandum and Articles of Association—Daily Price Fluctuation Limits under Japanese Stock Exchange Rules.” 

***As holders of ADSs, you will have fewer rights than a direct shareholder and you will have to act through the depositary to exercise those rights.***

The rights of shareholders under Japanese law to take actions, including exercising voting rights, receiving dividends and distributions, bringingderivative actions, examining our accounting books and records and exercising appraisal rights are available only to holders recorded on our register of shareholders. Because the depositary, through its custodian agents, is the recorded holder ofthe shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying your ADSs as instructed by you and will pay to you the dividendsand distributions collected from us. However, as ADS holders, you will not be able to bring a derivative action, examine our accounting books and records or exercise appraisal rights except through and with the consent of the depositary. 

**Item 4.    Information on the Company.**

 
**A.****History and Development of the Company.**
*History*

Mitsui Bussan Kabushiki Kaisha (“Mitsui & Co., Ltd.” in English) was incorporated on July 25, 1947, as DaiichiBussan Kabushiki Kaisha, a corporation (*Kabushiki Kaisha*) under the Commercial Code of Japan with common stock of ¥195,000. We were originally listed on the Tokyo Stock Exchange in May 1949. 

Our registered office is located at 2-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, Japan. Mitsui’s telephone number is+81-3-3285-1111. 

Since our establishment, our business lines have involved trading in a variety of commodities, including the importof raw materials and the export of industrial products. As we grew in tandem with the Japanese postwar economic recovery, we expanded into overseas activities, such as the establishment of Mitsui & Co. (Australia) Ltd. in 1956. During the1950s, Daiichi Bussan Kabushiki Kaisha was formed through the merger of various trading companies. On February 16, 1959, that entity took our present name, after having attained the status of 

 

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being one of the largest general trading companies, and a history closely connected to the development of foreign trade in postwar Japan. An example of abusiness activity which introduced innovative industrial systems to Japan in our early days was the establishment of Nippon Remington Univac Kaisha Ltd. (currently Nihon Unisys Ltd.), a domestic computer related joint venture with Sperry RandCorporation of the United States, in 1958. 

During the 1960s, the Japanese government promoted trade with foreign countries and deregulatedJapanese capital markets, which led to high growth of the Japanese economy. We played a pivotal role in promoting the growth of certain basic industries by supplying foods, industrial raw material and energy such as oil and coal from abroad. Thisincluded the development of mineral resources overseas, nurturing markets for Japanese exports and introducing various new technologies. We established Mitsui & Co. (U.S.A.), Inc. in April 1966, and Mitsui Knowledge Industry Co., Ltd.in October 1967. In May 1963, we issued American Depositary Shares which were subsequently listed on The NASDAQ National Market in February 1971. 

In the 1970s, as the world economy weathered two oil crises, we began to diversify the supply source of natural resources including development of liquefied natural gas (“LNG”) resources. During this time, the export of industrialplant from Japan, mainly to oil producing countries, drastically increased and we organized and supported projects by arranging finance and on occasion establishing markets for products. 

During this period, we suffered losses with respect to a joint venture project we entered into in connection with Iranian petrochemicals. These losseswere a result of the petrochemical manufacturing complex being damaged by military attacks, causing the project to finally be dissolved in 1991. 

Also during the 1970s, we entered into new industries. For example, in 1971 we established Mitsui Leasing & Development, our associated company in the leasing industry, and in 1972 we purchased an equity interest in MikuniCoca-Cola Bottling Co., Ltd. in the beverage industry. 

In the 1980s, Japan’s industrial structure moved increasinglytowards the production of high-value-added products such as products related to information technology (“IT”) and new materials used for high tech products. Consequently, we began extending our business field to target these new markets.Most notable were the semiconductor materials and carbon fiber fields promoted mainly by our chemical related divisions. 

In the late1990s, the Asian economies experienced a financial crisis. Although the appreciation in real estate and stocks prior to the crisis created a temporary economic boom in Japan, their eventual collapse resulted in a wide-ranging economic slowdown.These conditions necessitated the reorganization of our profit structures and the development of new businesses. 

At the same time,however, there was also a rapid development of information infrastructure worldwide, reflecting the deregulation of the communication sector proceeding from the 1980s in Japan and other countries, and the spread of new technology, such as Internet,accelerated communication among market participants in real time and at reduced costs. From the late 1980s, we made investments in IT and communication businesses, including in common carriers such as Tokyo Telecommunication Network Co., Inc(currently KDDI Corporation), JSAT Corporation, a communications satellites company, and broadcasting companies, such as SKY Perfect Communications Inc. 

*Medium-Term Strategic and Financial Plan to March 2006*

In May 2004, Mitsui formulated and announcedthe Medium-Term Strategic and Financial Plan for the two years to March 31, 2006, aiming at a solid foundation for sustainable longer-term growth. The plan called for investments in the amount of ¥500 billion (including ¥100 billion inproperty and equipment) over the two year period to March 2006, mainly in our core areas of strength, namely mineral resources, including expansion of iron ore and coal mines in Australia, and energy, including the Sakhalin II LNG and oildevelopment project in Russia and the Enfield oil project in Western Australia, and infrastructure project businesses, including our power producing business. It also called for developing other key areas, such as consumer products and servicesbusinesses. The investing activities resulted in net cash outflows of ¥347.3 billion and ¥224.0 billion for the years ended March 31, 2006 and 2005, respectively. 

 

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*Medium-Term Management Outlook Announced in May 2006*

Following the completion of the period covered by the Medium-Term Strategic and Financial Plan to March, 2006, Mitsui established and announced a newMedium-Term Management Outlook in May 2006, based on a company-wide consideration of the business activities that we should develop over the next three-to-five years (namely, years ending March 31, 2009 to 2011) as below: 

*Development of Strategic Business Portfolio*

We developed key policies based on dividing our business into the four areas outlined below. In working toward our vision for the next three to five years, we intended to make investments of approximately ¥800 billion over two years upto March 2008. 

 
 • 
In mineral resources and energy, we intend to complete the development of large-scale projects such as Sakhalin II, and to expand existing projects such as our LNGproject in Western Australia and iron ore and coal production in Australia, while investing selectively in high-quality new projects. 

 
 • 
In the area of global marketing networks, particularly in steel products, chemical products and machinery, we provide and refine supply chain management(“SCM”) and other sophisticated functions. We will focus on the automobile, IT and energy businesses, and focus on developing areas through collaboration among operating segments outside Japan, particularly Asia.

 
 • 
In the consumer service area, we plan to create closer collaboration by bringing together the Lifestyle, Consumer Services and Information, Electronics &Telecommunication business units, and to focus on developing businesses that have the potential to become future earnings sources. 

 
 • 
In the infrastructure area, we plan to invest selectively in high-quality projects, mainly in power generation, water supply, energy and transportation.

For further information, including the development of investing activities for the years ended March 31, 2008 and2007, also see “Item 5.B. Liquidity and Capital Resources.” 

*Evolution of business models leveraging business engineeringcapabilities*

We seek to leverage our strengths in marketing, finance and logistics, and actively promote joint operations betweenbusiness units. Furthermore, we continue to make efforts to develop new business opportunities, for example: 

 
 • 
We plan to focus on consumer-oriented services in Japan that show great potential for growth, including: media and information, health, medical and senior care,retail support and outsourcing. 

 
 • 
We plan to pursue business development in environment-related businesses, such as emission rights trading and recycling, along with new energy businesses, such asbiomass ethanol and solar power. 

*Implementation of global strategies*

We will focus the allocation of human resources on growth sectors in Asia, and align our strategy with our customers. We will employ and foster thedevelopment of a diverse group of personnel at overseas trading and other subsidiaries and associated companies around the world. 

 

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*Capital Expenditures*

*Major expenditures*

See “Item 5.B. Liquidity and Capital Resources—Cash Flows”for further information. Our capital expenditures, including investments in debt securities, property and equipment and leased assets, amounted to ¥735 billion, ¥798 billion and ¥613 billion for the years endedMarch 31, 2008, 2007 and 2006, respectively. A breakdown is provided below. 

 
   **Billions of Yen**   **Years Ended March 31,**   **    2008    **  **    2007    **  **    2006    **
Investments in and advances to associated companies
  ¥207  ¥222  ¥176
Acquisitions of available-for-sale securities
   63   135   121
Acquisitions of held-to-maturity debt securities
   —     —     2
Acquisitions of other investments
   131   102   67
Additions to property leased to others and property and equipment
   282   327   247
Acquisitions of subsidiaries, net of cash acquired
   52   12   —              
Total
  ¥735  ¥798  ¥613            
Of additions to property leased to others and property and equipment, the following were our mostsignificant expenditures with respect to property and equipment: 

 
 • 
acquisition of property and equipment in the Energy Segment for the oil projects of the Enfield and Vincent oil fields in Australia, Tui oil field in New Zealand,oil and gas projects in Oman, and oil and gas projects offshore in the Gulf of Mexico as well as oil and gas projects by Mitsui Oil Exploration Co., Ltd. mainly in offshore Thailand for the years ended March 31, 2008, 2007 and 2006 amounting to¥80 billion, ¥91 billion and ¥22 billion, respectively; and 

 
 • 
expansion of our iron ore and coal mines in Australia in the Mineral & Metal Resources Segment and the Energy Segment for ¥62 billion, ¥58 billionand ¥36 billion for the years ended March 31, 2008, 2007 and 2006, respectively. 

See “Energy Segment”and “Mineral & Metal Resources Segment” of “Item 4.B. Business Overview.” 

Additions to property leased toothers included rolling stock leased to railway companies mainly in the United States and European countries, aircraft leased to global carriers and ocean vessels chartered to global shipping companies as follows: 

 
 • 
¥11 billion of rolling stock for the year ended March 31, 2008; 

 
 • 
¥71 billion of rolling stock for the year ended March 31, 2007; and 

 
 • 
¥54 billion of rolling stock and ¥8 billion of aircraft for the year ended March 31, 2006. 

 

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Investments in and advances to associated companies, and acquisitions of subsidiaries include thefollowing capital expenditures: 

 

**Years Ended**