##### 









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549


FORM 20-F

o     REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g)

OF THE SECURITIES EXCHANGE ACT OF
1934


OR

þ     ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended March 31,
2004

OR

o     TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF
1934


For the transition period
from                     to

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 into
English)


JAPAN

(Jurisdiction of incorporation or organization)


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

(Address of principal executive offices)


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

None

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

Common Stock

(Title of class)


Securities for 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 the annual report.

As of March 31, 2004, 1,581,013,054
shares of common stock were outstanding including

5,507,840 shares represented by an
aggregate of 275,392 American Depositary Shares.


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 such shorter 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     þ          No     o

Indicate
by check mark which financial statement item the registrant has
elected to follow.

Item 17     o          Item 18     þ



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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 Depositary Receipt 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 accepted in 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, our industry and
capital markets around the world. Generally, these
forward-looking statements can be identified by the use of
forward-looking terminology such as may,
will, 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 of operations 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 any forward-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   |                                                                                      |                                                                | 4   |    
|         | Item 1. Identity of
    Directors, Senior Management and Advisers                    |                                                                |     | 4   |    
|         | Item 2. Offer
    Statistics and Expected Timetable                                  |                                                                |     | 4   |    
|         | Item 3. Key
    Information                                                          |                                                                |     | 4   |    
|         |                                                                                      | A. Selected Financial
    Data                                 |     |     | 4   | 
|         |                                                                                      | B. Capitalization and
    Indebtedness                         |     |     | 5   | 
|         |                                                                                      | C. Reasons for the Offer and
    Use of Proceeds               |     |     | 5   | 
|         |                                                                                      | D. Risk Factors                                                |     |     | 5   | 
|         | Item 4. Information on
    the Company                                               |                                                                |     | 11  |    
|         |                                                                                      | A. History and Development
    of the Company                  |     |     | 11  | 
|         |                                                                                      | B. Business Overview                                           |     |     | 16  | 
|         |                                                                                      | C. Organizational
    Structure                                |     |     | 45  | 
|         |                                                                                      | D. Property, Plants and
    Equipment                          |     |     | 48  | 
|         | Item 5. Operating and
    Financial Review and Prospects                             |                                                                |     | 59  |    
|         |                                                                                      | A. Operating Results                                           |     |     | 59  | 
|         |                                                                                      | B. Liquidity and Capital
    Resources                         |     |     | 90  | 
|         |                                                                                      | C. Research and Development,
    Patents and Licenses, etc.    |     |     | 96  | 
|         |                                                                                      | D. Trend Information                                           |     |     | 97  | 
|         |                                                                                      | E. Off-balance Sheet
    Arrangements                          |     |     | 97  | 
|         |                                                                                      | F. Tabular Disclosure of
    Contractual Obligations           |     |     | 98  | 
|         | Item 6. Directors,
    Senior Management and Employees                               |                                                                |     | 99  |    
|         |                                                                                      | A. Directors and Senior
    Management                         |     |     | 99  | 
|         |                                                                                      | B. Compensation                                                |     |     | 108 | 
|         |                                                                                      | C. Board Practices                                             |     |     | 109 | 
|         |                                                                                      | D. Employees                                                   |     |     | 114 | 
|         |                                                                                      | E. Share Ownership                                             |     |     | 114 | 
|         | Item 7. Major
    Shareholders and Related Party Transactions                        |                                                                |     | 115 |    
|         |                                                                                      | A. Major Shareholders                                          |     |     | 115 | 
|         |                                                                                      | B. Related Party
    Transactions                              |     |     | 116 | 
|         |                                                                                      | C. Interests of Experts and
    Counsel                        |     |     | 117 | 
|         | Item 8. Financial
    Information                                                    |                                                                |     | 117 |    
|         |                                                                                      | A. Consolidated Statements
    and Other Financial Information |     |     | 117 | 
|         |                                                                                      | B. Significant Changes                                         |     |     | 118 | 
|         | Item 9. The Offer and
    Listing                                                    |                                                                |     | 118 |    
|         |                                                                                      | A. Offer and Listing
    Details                               |     |     | 118 | 
|         |                                                                                      | B. Plan of Distribution                                        |     |     | 119 | 
|         |                                                                                      | C. Markets                                                     |     |     | 119 | 
|         |                                                                                      | D. Selling Shareholders                                        |     |     | 119 | 
|         |                                                                                      | E. Dilution                                                    |     |     | 119 | 
|         |                                                                                      | F. Expenses of the Issue                                       |     |     | 120 | 
|         | Item 10. Additional
    Information                                                  |                                                                |     | 120 |    
|         |                                                                                      | A. Share Capital                                               |     |     | 120 | 
|         |                                                                                      | B. Memorandum and Articles
    of Association                  |     |     | 120 | 
|         |                                                                                      | C. Material Contracts                                          |     |     | 127 | 
|         |                                                                                      | D. Exchange Controls                                           |     |     | 127 | 
|         |                                                                                      | E. Taxation                                                    |     |     | 128 | 
|         |                                                                                      | F. Dividends and Paying
    Agents                             |     |     | 130 | 
|         |                                                                                      | G. Statement by Experts                                        |     |     | 130 | 
|         |                                                                                      | H. Documents on Display                                        |     |     | 130 | 
|         |                                                                                      | I. Subsidiary Information                                      |     |     | 130 | 
|         | Item 11. Quantitative
    and Qualitative Disclosures about Market Risk              |                                                                |     | 130 |    
|         | Item 12. Description of
    Securities Other Than Equity Securities                  |                                                                |     | 134 |    
|PART II  |                                                                                      |                                                                | 134 |    
|         | Item 13. Defaults,
    Dividend Arrearages and Delinquencies                         |                                                                |     | 134 |    
|         | Item 14. Material
    Modifications to the Rights of Security Holders                |                                                                |     | 134 |    
|         | Item 15. Controls and
    Procedures                                                 |                                                                |     | 134 |    
|         | Item 16A. Audit
    Committee Financial Expert                                       |                                                                |     | 134 |    
|         | Item 16B. Code of
    Ethics                                                         |                                                                |     | 134 |    
|         | Item 16C. Principal
    Accountant Fees and Services                                 |                                                                |     | 135 |    
|         | Item 16D. Exemptions
    from the Listing Standards for Audit Committees             |                                                                |     | 135 |    
|         | Item 16E. Purchases of
    Equity Securities by the Issuer and Affiliated Purchasers |                                                                |     | 135 |    
|PART III |                                                                                      |                                                                | 135 |    
|         | Item 17. Financial
    Statements                                                    |                                                                |     | 136 |    
|         | Item 18. Financial
    Statements                                                    |                                                                |     | 136 |    
|         | Item 19. Exhibits                                                                    |                                                                |     | 136 |    

3



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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 consolidated income statement data
for the years ended March 31, 2004, 2003 and 2002 and the
selected consolidated balance sheet data as of March 31,
2004 and 2003 below are derived from our audited consolidated
financial statements prepared in accordance with U.S. GAAP,
which are included elsewhere in this annual report. The selected
consolidated income statement data for the years ended
March 31, 2001 and 2000 and balance sheet data as of
March 31, 2002, 2001 and 2000 are derived from our
previously published audited consolidated financial statements
prepared in accordance with U.S. GAAP, which are not included in
this annual report. The consolidated financial statements as of
March 31, 2004 and 2003 and for the years ended
March 31, 2004, 2003 and 2002 have been audited by Deloitte
Touche Tohmatsu, independent auditors, whose report is filed as
part of this annual report.

The selected consolidated financial statements
have been prepared 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 statements
and notes thereto included elsewhere in this annual report.

|                                    |                                 |                                                                      |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |           |           | 
|----------------------------------- | ------------------------------- | -------------------------------------------------------------------- | ------------------------------------------- | ---- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                                    |                                 |                                                                     
|                                    |                                 | As of or for the Year ended March 31,                               
|                                    |                                 |                                                                     
|                                    |                                 | 2004                                                                 |                                             | 2003 |           | 2002      |  | 2001 |           | 2000     
|                                    |                                 |                                                                      |                                             |      |           |           |  |      |           |          
|                                    |                                 |                                                                     
|                                    |                                 | (In millions of yen, except amounts per share and common stock data)
|Consolidated Income Statement Data: |                                 |                                                                      |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |  
|                                    | Results of Operations:          |                                                                      |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |          
|                                    |                                 | Revenues(2)(3)                                                       |                                             | ¥    | 2,980,342 |           |  | ¥    | 2,788,151 |           |  | ¥ | 2,491,250 |           |  | ¥ | 2,372,251 |           |  | ¥ | 2,340,060 |          
|                                    |                                 | Gross Profit(3)                                                      |                                             |      | 609,921   |           |  |      | 568,645   |           |  |   | 545,201   |           |  |   | 560,770   |           |  |   | 527,156   |          
|                                    |                                 | Income from Continuing Operations(3)                                 |                                             |      | 74,703    |           |  |      | 36,595    |           |  |   | 59,908    |           |  |   | 56,607    |           |  |   | 37,720    |          
|                                    |                                 | Net Income                                                           |                                             |      | 68,387    |           |  |      | 31,138    |           |  |   | 55,371    |           |  |   | 51,588    |           |  |   | 34,837    |          
|                                    |                                 | Income from Continuing Operations per
    Share(3):                  |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |           |          
|                                    |                                 |                                                                      | Basic                                       |      |           | 47.24     |  |      |           | 23.13     |  |   |           | 37.83     |  |   |           | 35.76     |  |   |           | 23.82     | 
|                                    |                                 |                                                                      | Diluted                                     |      |           | 44.64     |  |      |           | 21.89     |  |   |           | 35.50     |  |   |           | 33.58     |  |   |           | 22.51     | 
|                                    |                                 | Net Income per Share:                                                |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |           |          
|                                    |                                 |                                                                      | Basic                                       |      |           | 43.25     |  |      |           | 19.68     |  |   |           | 34.97     |  |   |           | 32.57     |  |   |           | 22.00     | 
|                                    |                                 |                                                                      | Diluted                                     |      |           | 40.89     |  |      |           | 18.69     |  |   |           | 32.85     |  |   |           | 30.63     |  |   |           | 20.82     | 
|                                    |                                 | Cash Dividends Declared per Share                                    |                                             |      | 8         |           |  |      | 8         |           |  |   | 8         |           |  |   | 8         |           |  |   | 8         |          
|                                    |                                 | Cash Dividends Declared per Share in U.S.
    Dollars(1)             |                                             |      | $0.07     |           |  |      | $0.07     |           |  |   | $0.06     |           |  |   | $0.07     |           |  |   | $0.07     |          
|Consolidated Balance Sheet Data:    |                                 |                                                                      |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |  
|                                    | Financial Position at Year-End: |                                                                      |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |          
|                                    |                                 | Total Assets                                                         |                                             | ¥    | 6,716,028 |           |  | ¥    | 6,540,520 |           |  | ¥ | 6,668,366 |           |  | ¥ | 6,710,107 |           |  | ¥ | 6,599,358 |          
|                                    |                                 | Long-term Debt, less Current Maturities                              |                                             |      | 2,541,221 |           |  |      | 2,500,470 |           |  |   | 2,619,867 |           |  |   | 2,708,608 |           |  |   | 2,462,724 |          
|                                    |                                 | Common Stock                                                         |                                             |      | 192,487   |           |  |      | 192,487   |           |  |   | 192,487   |           |  |   | 192,487   |           |  |   | 192,487   |          
|                                    |                                 | Total Shareholders Equity                                           |                                             |      | 963,278   |           |  |      | 862,147   |           |  |   | 914,970   |           |  |   | 834,427   |           |  |   | 795,852   |          
|                                    | Other Information at Year-End:  |                                                                      |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |          
|                                    |                                 | Common Stock:                                                        |                                             |      |           |           |  |      |           |           |  |   |           |           |  |   |           |           |  |   |           |          
|                                    |                                 |                                                                      | Number of Shares Outstanding (in Thousands) |      |           | 1,581,013 |  |      |           | 1,581,377 |  |   |           | 1,583,180 |  |   |           | 1,583,675 |  |   |           | 1,583,675 | 
|                                    |                                 |                                                                      | Number of Shareholders                      |      |           | 109,722   |  |      |           | 115,267   |  |   |           | 118,700   |  |   |           | 127,137   |  |   |           | 127,457   | 

4



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The U.S. dollar amounts represent translations of
    the Japanese yen amounts at the rates in effect on the
    respective dividend payment dates.                                                                                                                                                                                                                                                                                         
|   
|(2) | For the year ended March 31, 2004, the
    revenue presentation was changed in the Statements of
    Consolidated Income in a manner consistent with the accounting
    guidance in Financial Accounting Standards Board Emerging Issues
    Task Force Issue No. 99-19, Reporting Revenue Gross
    as a Principal versus Net as an Agent. The prior year
    figures have been restated to conform to the current year
    presentation.
|   
|(3) | In accordance with Statement of Financial
    Accounting Standards No. 144, Accounting for the
    Impairment or Disposal of Long-Lived Assets, the prior
    year figures relating to discontinued operations have been
    reclassified.                                                                                                                                                                                                

Exchange
Rate Information

The information 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 convenience of 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 Federal Reserve Bank of New York official
noon buying rate for Japanese yen on September 17, 2004 was
¥ 109.97 = U.S.$1.00. The following table
provides the high and low official rates for each of the
previous six months.

|            |  |                       |        |     |  |   |        | 
|----------- |  | --------------------- | ------ | --- |  | - | ------ | 
|            |  | High                  |        | Low
|            |  |                       |        |    
|            |  |                      
|            |  | (Yen per U.S. dollar)
|August 2004 |  | ¥                     | 111.53 |     |  | ¥ | 109.00 | 
|July 2004   |  |                       | 111.88 |     |  |   | 108.21 | 
|June 2004   |  |                       | 111.27 |     |  |   | 107.10 | 
|May 2004    |  |                       | 114.30 |     |  |   | 108.50 | 
|April 2004  |  |                       | 110.37 |     |  |   | 103.70 | 
|March 2004  |  |                       | 112.12 |     |  |   | 104.18 | 

The following table provides the average exchange
rate for each of the last five fiscal years. We have calculated
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.

|                     |  |                       |        | 
|-------------------- |  | --------------------- | ------ | 
|                     |  | Average Rate         
|                     |  |                      
|                     |  | (Yen per U.S. dollar)
|Year ended March 31, |  |                       |        | 
|2004                 |  | ¥                     | 112.75 | 
|2003                 |  |                       | 121.10 | 
|2002                 |  |                       | 125.64 | 
|2001                 |  |                       | 111.65 | 
|2000                 |  |                       | 110.02 | 

Fluctuations in the exchange rate between the yen
and the U.S. dollar will affect the U.S. dollar equivalent of
the yen-denominated prices of our shares and, as a result, will
affect the market prices of our ADSs in the United States.




B.     Capitalization
and Indebtedness.

Not required.




C.     Reasons
for the Offer and Use of Proceeds.

Not applicable.




D.     Risk
Factors.

You should carefully consider the risks 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 notes included
elsewhere in this annual report.

5



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##### 





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

We provide global import and export services for
our customers in various countries in a wide range of business
transactions. We are also involved in the financing of and
investing in various business activities worldwide including,
but not limited to, the procurement of raw materials and
industrial equipment, manufacturing a wide range of commodities
and providing logistics services.

Our global business activities, including our
trading activities are affected by the particular economic
conditions of the countries in which we operate. We are
particularly vulnerable to the downward economic trends in
Japan. In addition, an economic downturn in China, which has
become an increasingly important market for us due to increasing
trading and business transactions involving raw steel materials,
steel products, chemical products and infrastructure projects,
may also adversely affect our results of operations. An economic
downturn, either globally or in any regions in which we operate
may cause, among other things, a reduction in flow of goods and
materials, a decline in private consumption and fixed
investment, and subsequently a decrease in demand of our
customers for our products and services, which may have an
adverse impact on our business, results of operations and
financial condition.



| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | Fluctuations in commodity prices can
    adversely affect our results of operations and financial
    condition.

We trade in a variety of commodities in the
global commodities market including metal, energy, chemical and
agricultural products. Our trading activities in these
commodities in particular, have a significant impact on our
business operations. Commodity prices are highly volatile and
subject to cyclical fluctuations due to factors beyond our
control, including periods of excess supply due to increased
industrial production, decreased demand due to weakening
economic conditions, inventory cutbacks by customers, and
exchange rate movements. As a result, unexpected movements in
commodity prices may adversely affect our business, operating
results and financial condition. For example:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | declines in commodity prices may result in a
    decrease in sales of those commodities in which we act as a
    principal or a decrease in sales of services in which we act as
    an agent. For instance, the operating results of the Energy
    Segment, which reflect annual production from our oil and gas
    activities, are sensitive to the price of crude oil. A decline
    of U.S. $1 per barrel in the price of crude oil adversely
    affects the revenues and equity in earnings of associated
    companies of this segment and results in a decrease in the
    segments net income of approximately ¥1 billion
    as of the year ended March 31, 2004;
|
| |  | because we are engaged in spot and derivative
    trading of commodities, unexpected changes in price may result
    in trading losses; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | as we invest a substantial amount of money in the
    production of commodities, a prolonged or cyclical decline in
    the price of commodities can have a long term adverse effect on
    our results of operations and financial condition and make it
    increasingly difficult for us to recover our capital investments
    or to divest our interests at prices acceptable to us, if at all.                                                                                                                                                                                                                                                                          



| |                                                                           
| | --------------------------------------------------------------------------
| | Exchange rate fluctuations may adversely
    affect our operating results.

We are exposed to risks associated with foreign
currency exchange rate fluctuations. Although our reporting
currency is 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 currencies as compared to the Japanese yen could result in
material transactional gains or losses. As the financial
statements of overseas subsidiaries are stated in the
U.S. dollar, the Australian dollar, the Euro, 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 and liabilities denominated in foreign currencies.
For the year ended March 31, 2004, approximately 34% of our
revenues were from subsidiaries located in foreign countries,
and 49% of our net income was generated by subsidiaries located
in foreign countries. As a result, exchange rate fluctuations
may negatively affect our operating results.

See Item 3.A. Selected Financial
Data Exchange Rate Information.

6



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##### 





| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to significant counterparty
    credit risk from various companies or projects with which we do
    business or to which we lend.

In conducting our business activities as a
general trading company, we are exposed to significant
counterparty credit risks. We provide vendor financing services
and also act as guarantors to banks that provide financing to
our customers. In addition, many of our customers purchase
products and services from us on payment terms that do not
provide for immediate payment. At March 31, 2004, current trade
receivable (less unearned interest and allowance for doubtful
receivables current) were ¥2,338.1 billion,
representing 35% of our total assets and the recognized losses
for doubtful receivables current for the year ended
March 31, 2004 and the balance of the allowance for
doubtful receivables current were ¥6.5 billion
and ¥22.5 billion, respectively. We also engage in
significant project financing activities as a lender or
guarantor whereby we assume repayment risk. In addition, we also
have counterparty payment risks from various derivative
transactions we enter into as part of our hedging activities.

Our management policy for credit exposure cannot
eliminate entirely the risks relating to the possibility of our
customers experiencing financial difficulties. Moreover, we may
experience difficulty in collecting payments from our
counterparties if:



| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | liquidity crises arise in Japan or elsewhere in
    the world;                                                                                           
|
| |  | real estate prices or stock prices in Japan or
    other markets decline sharply, thereby adversely affecting the
    liquidity of our counterparties; or
|
| |  | the number of corporate bankruptcies in Japan
    increases.                                                                                             



| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Changes in interest rates could have an
    adverse effect on our operating results.

We are exposed to risks associated with interest
rate fluctuations, which may affect our overall operational
costs and the value of our financial assets and liabilities,
particularly, our debt obligations, which are primarily debt
raised in the capital markets and bank loans. We utilize various
financial and derivative instruments which are sensitive to
interest rate changes. An increase in interest rates, especially
in Japan and the United States, may adversely affect our results
of operations.



| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If the value of assets for which we act as
    lessor, such as real property and equipment, aircraft, ocean
    transport vessels and rolling stock decline, we may be forced to
    write down the value of these assets.

Assets for which we act as lessor, such as real
property and equipment, aircraft, ocean transport vessels and
rolling stock, are exposed to potential significant impairment
losses due to the decline in the value of these assets. As of
March 31, 2004, the value of these assets in which we act
as lessor, presented on our Consolidated Balance Sheets as
Property leased to othersat cost, less accumulated
depreciation, was ¥230.3 billion. These assets
are reviewed for impairment by using undiscounted future cash
flows whenever events or changes in circumstances indicate that
the carrying amount of these assets may not be recoverable. If
the sum of the expected future cash flows is less than the
carrying amount of such assets, an impairment loss is
recognized. The carrying amounts of certain assets in which we
act as lessor are affected by certain factors which are beyond
our control such as their global supply and demand, prevailing
interest rates, prices of relevant products and services and
regional and/or global cyclical trends. Impairment losses for
the year ended March 31, 2003 were partly due to the
recognition of a ¥9.4 billion impairment loss on MD-11
aircraft as a result of the marked downturn in the airline
industry and the continued decline of the market value of
aircraft. There can be no assurance that additional adjustments
for impairment losses with respect to such assets will not be
made. Any adjustments may have an adverse effect on our
financial condition and results 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 of equity
    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 our pension plan
assets. For the year ended March 31, 2004, pension costs of
amortization of unrecognized actuarial loss rose, reflecting
declines in the value of marketable equity securities in Japan
for the year ended March 31, 2003. Decline in the value of
our pension

7



---



##### 



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 investment policies of our creditors or breakdown of
    the banking system.

A downgrade in our credit ratings or a
significant change in the lending or investment policies of our
creditors 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.

As a general trading company, we settle large
amounts of payments on a day-to-day basis. In the case of any
failures of banks or the crash of a money market, and if our
payment settlement is involved in the breakdown of banking
system, our payment settlement could be adversely affected. Any
failure or delay of settlement may drive us into technical
default, even if we are solvent.

See Item 5.B. Liquidity and Capital
Resources.



| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Japanese equity securities market has
    experienced a decline and is still volatile, which could
    negatively affect our investment portfolio.

A significant portion of our investment portfolio
consists of marketable equity securities of Japanese issuers. At
March 31, 2004, our marketable equity securities of
Japanese issuers were carried at a fair value of approximately
¥243 billion, representing 48% of the fair value of
our total available-for-sale securities and 4% of our total
assets. The Japanese equity securities market has experienced a
decline recent years and is still volatile. For the year ended
March 31, 2004, losses on available-for-sale securities
were not significant, but for the year ended March 31, 2003
our Statement of Consolidated Income reflected valuation losses
on available-for-sale securities of ¥15.6 billion,
principally on the stocks of banking institutions reflecting the
overall decline in stock prices in Japan. While we periodically
review our equity portfolio, further volatility and decline in
the Japanese equity securities market could negatively impact
the value of our investment portfolio and our results of
operations and financial condition.

For information on our accounting policies and
estimates with respect 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.

We are engaged in various types of businesses
worldwide which expose us to risks associated with fluctuations
in commodity prices, the supply and demand of commodities,
foreign exchange rates and interest rates, in addition 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 which international financial institutions,
government financing agencies and rating agencies assign the
status of relatively high risk regions or countries. For example:



| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In Indonesia, we actively participate in
    infrastructure projects including the operation of power plants
    and construction of oil refineries.
|
| |  | In Russia and Brazil, our interests in the
    exploration, development and production of minerals and energy
    resources are increasing.         

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



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

We are in the ongoing process of restructuring
our underperforming businesses. We have introduced a
company-wide monitoring system to assess the performance of our
subsidiaries and associated companies in order to enhance this
process. If we fail to successfully eliminate or restructure our
underperforming

8



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##### 



subsidiaries and associated companies in a timely
manner or if these efforts fail to improve our business
operations as contemplated, we may become less efficient
compared to our competitors who are mainly other major Japanese
general trading companies, and our results of operations may be
materially and 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 joint ventures or by making strategic
investments in other companies and business enterprises. The
outcome of these joint ventures and strategic investments is
unpredictable because:



| |   |                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the operational success is critically dependent
    on factors that are beyond our control such as the financial
    condition and performance of the partner companies or the
    strategic 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 we invested 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.



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

The markets for many of the products and services
we provide are highly competitive. 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 and integrated 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 our business, financial condition and results of
operations.



| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | We may lose the opportunities of entry to
    new business areas because of the limitation of required human
    resources.

In response to the maturation of consumption in
Japan and other developed countries, we have 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 the rapid progress of
information technology (IT). To meet these goals, we
have been investing human resources in these new business areas,
who are capable of carrying out business plans and managing
other personnel. However, in certain business areas, we may have
a shortage of required human resources, which can cause a loss
of opportunities to start new businesses, which may adversely
affect our future business, operating results and financial
condition.



| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may lose cost effectiveness in our
    business activities, if we fail to start operation of our
    enterprise resource planning system in a timely
    manner.

An enterprise resource planning system which
records contracts, controls delivery of goods and manages
settlement and financial reporting is at the heart of our
operations as a general trading company. Our varied customer
base and corresponding businesses require increasingly rapid and
complex operations. For the year ended March 31, 2004, we
incurred communication and information expense of
¥33.5 billion of a total ¥496.4 billion
selling, general and administrative expense. In November 2004,
we plan to introduce a new enterprise resource planning system
aimed at increasing efficiency in operations at Mitsui and major
overseas subsidiaries. However, if we fail to start operation of
the system in a timely manner, we may lose cost

9



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##### 



effectiveness in our business activities, which
may adversely affect our operating results and financial
condition.




| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Restrictions under environmental laws and
    regulations and any accidents relating to our use of hazardous
    materials could negatively affect our business, results of
    operations and financial condition.

As a global general trading company, we are
involved in various projects and business transactions worldwide
that are subject to extensive environmental laws and
regulations. In particular, our Metal Products & Minerals
Segment and Energy Segment may be adversely affected by present
or future environmental regulations or enforcements in
connection with our extracting activities. For example, we are
subject 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.



| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 to laws and regulations
governing, among other things, tariffs, business and investment
approvals, import and export (including restrictions based on
national-security interests), antitrust, consumer and commercial
restrictions, currency exchange control, and environmental
protection. Moreover, many of our infrastructure projects in
developing countries conducted by our Machinery, Electronics
& Information Segment are subject to less developed legal
systems. As a result, our burden of compliance may increase due
to factors such as the lack of a comprehensive 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 to sudden 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, many of our oil and gas and mining
operations are located in politically or economically unstable
parts of the world including the Middle East, Russia and India.
Although we are involved in extracting and production activities
through various contractual arrangements in these regions, there
is no assurance that the contracts will be upheld or extended
when they expire. Moreover, there can be no assurance that the
regulatory bodies of these areas will not unilaterally interfere
and alter the contractual terms of our oil and gas operations
involving production rates, pricing formulas, royalties,
environmental provisions and land tenure. 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 condition could 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 of operations and reputation.

Due to our size, as well as the operational and
geographic breadth of our activities, our day-to-day operations
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

10



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##### 



in unauthorized trading activities 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 engage in 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. There can be no assurance that the efforts we
undertake to ensure employees compliance with applicable
laws and regulations as well as our internal policies will
succeed in preventing misconduct by our employees. Depending on
its nature, employees misconduct could have negative
effects on our results of operations and reputation.




| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 exchanges are 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 closing price. 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 to sell 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 a holder 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 voting shares, receiving dividends and
distributions, bringing derivative actions, examining our
accounting books and records and exercising appraisal rights are
available only to holders of record on our register of
shareholders. Because the depositary, through its custodian
agents, is the holder of record of the 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 dividends and distributions
collected from us. However, as an ADS holder, 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 Daiichi Bussan 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
import of 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 the 1950s, 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 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 a
business 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 Rand
Corporation of the United States, in 1958.

During the 1960s, the Japanese government
promoted trade with foreign countries and deregulated Japanese
capital markets, which led to high growth of the Japanese
economy. We played a pivotal role in

11



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##### 



promoting the growth of certain basic industries
by supplying foods, industrial raw material and energy such as
oil and coal from abroad. This included 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 source of natural
resources including development of liquefied natural gas
(LNG) resources. During this time, the export of
industrial plant 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 losses were 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 Mikuni
Coca-Cola Bottling Co., Ltd. in the beverage industry.

In the 1980s, Japans industrial structure
moved increasingly towards 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 late 1990s, 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 the 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 POWEREDCOM, Inc.),
JSAT Corporation, a communications satellites company, and
broadcasting companies such as SKY Perfect Communications.

Recent
Developments

We have had concerns that the above-mentioned
innovations in global communication might detract from the
advantages we have gained from having a global network with many
business hubs in the form of overseas offices, overseas
subsidiaries and associated companies. We also have additional
concerns that our traditional intermediary services as agent
have been diminishing in relevance reflecting global competition
among our customers and suppliers who are taking advantage of
increasingly efficient business methods. In this environment, in
order to provide a variety of solutions for our customers, we
are increasing our comprehensive strength by integrating the
resources that we have accumulated through our business history
as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are establishing more diversified and stable
    supply sources of mineral and energy resources through our
    global alliances with worldwide partners represented by the
    acquisition of shares of Valepar S.A. (the controlling
    shareholder of Companhia Vale do Rio Doce (CVRD), a
    Brazilian mineral resource producer) and the investment in the
    second phase of development of the crude oil and LNG producing
    Sakhalin II Project jointly promoted with Royal Dutch/Shell
    Group and Mitsubishi Corporation. See Item 4.B.
    Business OverviewMetal Products & Minerals
    SegmentIron & Steel Raw Materials Unit and
    Item 4.B. Business OverviewEnergy Segment.
|
| |  | In the food business, aiming to respond to
    changing demands of consumers in Japan by upgrading our
    logistics infrastructure, we made an equity infusion into MITSUI
    FOODS CO., LTD. (formerly Sanyu Koami Co., Ltd.), a nationwide
    wholesaler and the core of our domestic food distribution
    business. Additionally, we acquired a majority interest in
    Mitsui Norin Co., Ltd., a producer and seller of raw tea leaves
    in Japan. Furthermore, all the business units are establishing a
    supply chain management (SCM) system in order to
    integrate our information and logistics services with those of
    our customers. See Item 4.B. Business Overview.             

12



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##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We increased our equity ownership in the United
    Auto Group, an auto dealer in the United States, with the goal
    of developing joint retail operations in various regions outside
    the United States.                                                                                                                                                    
|
| |  | We are also increasing our participation in power
    generation businesses. On July 29, 2004, we announced that
    in partnership with International Power plc, a U.K. electric
    utility company, we entered into a share purchase agreement with
    Edison Mission Energy in the United States to acquire its
    international power generation portfolio.
|
| |  | We are also actively pursuing new technologies
    and materials. For example, we are promoting research and
    development of carbon nanotubes. See Item 5.C.
    Research and Development, Patents and Licenses, etc.                                                                                                                                        



| |                                                                   
| | ------------------------------------------------------------------
| | Our Organizational Structure for the Year
    Ended March 31, 2003

In April 2002, we implemented an introduction of
five major operating groups (the Five Major Operating
Groups Structure) which consisted of:



| |   |                                            
| | - | -------------------------------------------
| |  | Metal Products & Minerals Group;           
|
| |  | Machinery, Electronics & Information Group;
|
| |  | Chemical Group;                            
|
| |  | Energy Group; and                          
|
| |  | Consumer Products & Services Group         

within the head corporate office of Mitsui (the
Head Office). This Five Major Operating Groups
Structure delegated greater authority to the chief of each of
the five operating groups for his or her business decisions,
investments and reorganizations with respect to his or her group.



| |                                                                   
| | ------------------------------------------------------------------
| | Our Organizational Structure for the Year
    Ended March 31, 2004

In April 2003, the Five Major Operating Groups
Structure was abolished to further increase operational and
organizational efficiency. We simplified our overall operational
structure whereby the Chief Operating Officer of each of the 18
business units reported directly to the Chief Executive Officer
of Mitsui without having to report to other management layers of
the Head Office. As a result of this reorganization, we
increased our operational efficiency with respect to, but not
limited to:



| |   |                                                        
| | - | -------------------------------------------------------
| |  | company wide evaluation of business opportunities;     
|
| |  | re-allocation of assets and human resources; and       
|
| |  | analysis and selection of investment
    opportunities.

Despite this reorganization, there was no change
in our product and service focused business activities for the
year ended March 31, 2004. That is, as a result of the
aggregation of our operating segments (i.e., business units)
based on the nature of each of the 18 business units
products, services and other criteria, our products and services
based reportable segments for the year ended March 31, 2004
consisted of the same five products and services based
reportable segments as those of the year ended March 31,
2003. Moreover, for the year ended March 31, 2004, there
was no reorganization with respect to our four region-focused
reportable operating segments. Accordingly, for the year ended
March 31, 2004, we had nine reportable operating segments
which consisted of five product and service focused reportable
operating segments and four region-focused reportable operating
segments. See Item 4.B. Business
OverviewProducts and Services and Principal Activities by
Reportable Operating Segments.



| |                                                                            
| | ---------------------------------------------------------------------------
| | Our Current Organizational Structure for the
    Year Ending March 31, 2005

Effective April 1, 2004, with the aim of
improving operating efficiency and further facilitating our
exploration of global business opportunities, our current
operating structure was introduced as follows:



| |   |                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Domestic Branches and Offices Segment was
    abolished. As a result, the operating results previously
    reported by the Domestic Branches and Offices Segment are now
    reviewed by each of Chief Operating Officers of the related
    business units in the Head Office based on the categories of
    their products and services.
|
| |  | Reorganizations of the 18 business units
    were implemented whereby we integrated business units within the
    same five products and services focused reportable
    operating segments. For example, we                                                                                                                                  

13



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##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | combined the former Iron & Steel Raw
    Materials Unit and the former Non-Ferrous Metals Unit into the
    Iron & Steel Raw Materials and Non-Ferrous Metals
    Business Unit. Additionally, media related businesses such as
    broadcasting and content businesses previously included in the
    Machinery, Electronics & Information Segment were
    transferred to the Consumer Products & Services
    Segment. Furthermore, we introduced two new business units whose
    business activities were in most cases previously reported in
    All Other as businesses handled outside the five
    products and services based reportable segments. The first is
    the Transportation Logistics Business Unit which engages in
    logistics services. The other is the Financial Markets Business
    Unit which engages in financial services, including businesses
    previously handled in the Metal Products & Minerals
    Segment, such as commodity trading.

For the year ended March 31, 2004, we
conducted a comprehensive review of the performance and
viability of our subsidiaries and associated companies.
Approximately 700 companies were subject to an evaluation
process in which those companies were screened against nine
metrics including profit after cost of capital. As a result, a
decision was made to exit from approximately 190 companies,
and subsequently, various actions were implemented at
approximately 100 of our subsidiaries and associated companies
including the sale of the valve business of NBI Corporation
and the reorganization of Mitsui Bussan Machinery Co., Ltd.,
during the year ended March 31, 2004.

Our global strategy focuses on Asia where the
market is expanding mainly around China and the Association of
Southeast Asian Nations (ASEAN) free trade region.
Greater China which includes mainland China, Hong Kong and
Taiwan will play an even more significant role in world trade
now that China and Taiwan are members of the World Trade
Organization (WTO). We have been channeling human
resources to these regions, forging strategic alliances with
leading companies and creating a broad spectrum of new
businesses. For example, we established a joint venture with SVA
(GROUP) CO., LTD., an information electronics company in
China. The new joint venture, Shanghai SVA-Mitsui, has been
operating since November 2003 and markets products of SVA
(GROUP) CO., LTD. in the Chinese market and overseas.

Capital
Expenditures

Our capital expenditures including investments in
debt securities, property and equipment and leased assets
amounted to ¥491 billion, ¥396 billion and
¥266 billion for the years ended March 31, 2004,
2003 and 2002, respectively. A breakdown of our capital
expenditures is provided below.

|                                                                      |  |                      |     |      |  |      |     |  |  |   |     | 
|--------------------------------------------------------------------- |  | -------------------- | --- | ---- |  | ---- | --- |  |  | - | --- | 
|                                                                      |  |                     
|                                                                      |  | Billions of Yen     
|                                                                      |  |                     
|                                                                      |  |                     
|                                                                      |  | Year ended March 31,
|                                                                      |  |                     
|                                                                      |  | 2004                 |     | 2003 |  | 2002
|                                                                      |  |                      |     |      |  |     
|Investments in and advances to associated
    companies               |  | ¥                    | 203 |      |  | ¥    | 64  |  |  | ¥ | 38  | 
|Acquisitions of available-for-sale
    securities(1)                  |  |                      | 131 |      |  |      | 154 |  |  |   | 96  | 
|Acquisitions of held-to-maturity debt securities                      |  |                      | 0   |      |  |      | 4   |  |  |   |    | 
|Acquisitions of other investments                                     |  |                      | 47  |      |  |      | 40  |  |  |   | 43  | 
|Additions to property leased to others and
    property and equipment |  |                      | 113 |      |  |      | 123 |  |  |   | 89  | 
|Acquisitions of subsidiaries, net of cash acquired                    |  |                      | (3  | )    |  |      | 11  |  |  |   |    | 
|                                                                      |  |                      |     |      |  |      |     |  |  |   |     | 
|Total                                                                 |  | ¥                    | 491 |      |  | ¥    | 396 |  |  | ¥ | 266 | 
|                                                                      |  |                      |     |      |  |      |     |  |  |   |     | 



---



|    |                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amounts for the years ended March 31,
    2003 and 2002 have been restated. See Item 5.B.
    Liquidity and Capital Resources and Note 2,
    BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICIES, to our consolidated financial
    statements for further information.

14



---



##### 



Investments in and advances to associated
companies and acquisitions of subsidiaries include the following:

|           |      |          |  |                                         |  |                    |  |                          |  |  |     | 
|---------- | ---- | -------- |  | --------------------------------------- |  | ------------------ |  | ------------------------ |  |  | --- | 
|           |      |          |  |                                         |  |                    |  | Investment              
|           |      |          |  |                                         |  |                    |  | Amount                  
|Year ended |      |          |  |                                         |  | (Billions         
|March 31,  |      | Investee |  | Country                                 |  | of Yen)           
|           |      |          |  |                                         |  |                   
|           |      |          |  |                                         |  |                    |  |                         
|           | 2004 |          |  | Valepar S.A.                            |  | Associated company |  | Brazil                   |  |  | ¥97 | 
|           |      |          |  | Sakhalin Energy Investment Company Ltd. |  | Associated company |  | Bermuda (United Kingdom) |  |  | 57  | 
|           | 2003 |          |  | Sakhalin Energy Investment Company Ltd. |  | Associated company |  | Bermuda (United Kingdom) |  |  | 15  | 
|           |      |          |  | NextCom K.K.                            |  | Associated company |  | Japan                    |  |  | 12  | 
|           |      |          |  | Mitsui E&P Middle East B.V.             |  | Subsidiary         |  | Netherlands              |  |  | 11  | 
|           | 2002 |          |  | Sakhalin Energy Investment Company Ltd. |  | Associated company |  | Bermuda (United Kingdom) |  |  | 5   | 

For the year ended March 31, 2004, additions
to property leased to other and property and equipment, include
aircraft leased to global airline companies of
¥10 billion and ocean vessels chartered to global
shipping companies of ¥7 billion.

Except for acquisitions of available-for-sale
securities, capital expenditures are usually financed by
external sources, such as commercial banking institutions. For
the year ended March 31, 2004, acquisition of
available-for-sale securities includes acquisition of debt
securities amounting to ¥65 billion by Bussan Credit
Co., Ltd., a domestic subsidiary whose principal business
consists of providing financial services to our subsidiaries and
associated companies.

Furthermore, on May 14, 2004, we executed a
sales and purchase agreement with Woodside Energy Ltd. in
Australia to acquire a 40% interest in each of the WA-28-L
production license and WA-271-P exploration permit areas in
offshore Western Australia. The total consideration for the
acquisition was U.S. $464.5 million. Woodside Energy
Ltd., which owns the remaining 60% interest of these license and
permit and acts as the operator, announced the development of
the Enfield oil project on March 19, 2004 and development
activities are already under way. The total development
expenditure of the Enfield oil project prior to the expected
commencement of oil production in 2006 is budgeted at
approximately U.S. $1 billion, of which we will incur in
proportion to our 40% interest.

With respect to Sakhalin II Project, we extended
a loan to Sakhalin Energy Investment Company Ltd. for
¥90 billion as of March 31, 2004. See
Item 4.B. Business OverviewEnergy Segment
and Item 7.B. Related Party Transactions. The
¥90 billion loan has been financed by external banking
sources.

On September 2, 2003, we acquired 15%
ownership interest (or 18.24% in terms of voting share as of
March 31, 2004) of Valepar S.A. in Brazil for
$830 million and sold our shares in Caemi
Mineração e Metalurgia S.A. in Brazil for
$426 million. See Item 4.B. Business
OverviewMetal Products & Minerals
SegmentIron & Steel Raw Materials Unit. The
capital required for the acquisition of Valepar S.A. has been
financed by external banking sources.

15



---



##### 



Divestitures including that of the matured debt
securities amounted to ¥333 billion,
¥324 billion and ¥180 billion for the years
ended March 31, 2004, 2003 and 2002, respectively. A
breakdown of our divestitures is provided below.

|                                                                                |  |                      |      |      |  |      |      |  |  |  |      | 
|------------------------------------------------------------------------------- |  | -------------------- | ---- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                                                                                |  |                     
|                                                                                |  | Billions of Yen     
|                                                                                |  |                     
|                                                                                |  |                     
|                                                                                |  | Year ended March 31,
|                                                                                |  |                     
|                                                                                |  | 2004                 |      | 2003 |  | 2002
|                                                                                |  |                      |      |      |  |     
|Sales of investments in and collection of
    advances to associated companies  |  |                      | ¥68  |      |  |      | ¥10  |  |  |  | ¥25  | 
|Proceeds from sales of available-for-sale
    securities                        |  |                      | 51   |      |  |      | 66   |  |  |  | 29   | 
|Proceeds from maturities of available-for-sale
    securities (1)               |  |                      | 110  |      |  |      | 145  |  |  |  | 17   | 
|Proceeds from maturities of held-to-maturity debt
    securities                |  |                      | 15   |      |  |      | 11   |  |  |  | 20   | 
|Proceeds from sales of other investments                                        |  |                      | 29   |      |  |      | 30   |  |  |  | 38   | 
|Proceeds from sales of property leased to others
    and property and equipment |  |                      | 60   |      |  |      | 62   |  |  |  | 51   | 
|                                                                                |  |                      |      |      |  |      |      |  |  |  |      | 
|Total                                                                           |  |                      | ¥333 |      |  |      | ¥324 |  |  |  | ¥180 | 
|                                                                                |  |                      |      |      |  |      |      |  |  |  |      | 



---



|    |                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amounts for the years ended March 31,
    2003 and 2002 have been restated. See Item 5.B.
    Liquidity and Capital Resources and Note 2,
    BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICIES, to our consolidated financial
    statements for further information.

For the year ended March 31, 2004, we
obtained U.S.$426 million from the sale of our investment
in Caemi Mineração e Metalurgia S.A. With respect to
the sales of available-for-sale securities for the years ended
March 31, 2004, 2003 and 2002, the table below provides a
list of some of our significant investees in which we sold our
equity interests.

|           |      |          |  |                                      |  |  |        | 
|---------- | ---- | -------- |  | ------------------------------------ |  |  | ------ | 
|Year ended |      |          |  |                                     
|March 31,  |      | Investee |  | Country                             
|           |      |          |  |                                     
|           | 2004 |          |  | Caemi Mineração e Metalurgia S.A.(*) |  |  | Brazil | 
|           | 2003 |          |  | Sumitomo Mitsui Banking Corporation  |  |  | Japan  | 
|           |      |          |  | JSAT Corporation                     |  |  | Japan  | 
|           |      |          |  | Mitsui Trust Holdings, Inc.          |  |  | Japan  | 
|           | 2002 |          |  | SANYO SHOKAI Ltd.                    |  |  | Japan  | 
|           |      |          |  | Mitsui Chemicals, Inc                |  |  | Japan  | 



(*) Associated
company

For the year ended March 31, 2004, sales of
property leased to others and property and equipment included
sales of aircraft leased to global airline companies of
¥21 billion and ocean vessels chartered to worldwide
shipping companies of ¥6 billion. With the exception
of the proceeds from maturities of (i) available-for-sale
securities and (ii) held-to-maturity debt securities,
proceeds were mainly used for repayment of outstanding debt. The
proceeds from maturities of (i) available-for-sale
securities and (ii) held-to-maturity debt securities
amounted to ¥125 billion and were used for general
corporate purposes. See Item 5.B. Liquidity and
Capital Resources for further discussion.




B.     Business
Overview.

Nature
of our Operations and Principal Activities

We are a general trading company engaged in a
range of global business activities including general worldwide
trading of various commodities, arranging financing for
customers and suppliers in connection with our trading
activities, organizing and coordinating industrial projects,
participating in financing and investing arrangements, assisting
in the procurement of raw materials and equipment, providing new
technologies and processes for manufacturing, and coordinating
transportation and marketing of finished goods. Our trading
activities include the sale, distribution, purchase, marketing
and supply of wide variety of products including iron and steel,
non-ferrous metals, machinery, electronics, chemicals,
energy-related commodity and products, food products, textiles,
general merchandise and real estate. We also participate in the
development of natural resources such as oil, gas, iron and
steel raw materials. In addition, we engage in strategic
business investments whereby we invest our own capital and
provide management expertise in the development of joint
ventures and new enterprises in certain industries such as
information technology (IT) and biotechnology. We
also provide financial services whereby we assist our customers
in minimizing their risk exposures associated with their
businesses through the use of derivatives and other hedging
instruments.

16



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##### 



While we continue to diversify our activities,
our core activity remains the provision of transaction services.
Specifically, we act as an intermediary between buyers and
sellers engaging in import, export, offshore, and domestic
trading activities. For example, we develop markets overseas for
exporters and locate raw materials or product sources that meet
the needs of importers. To facilitate smooth customer
transactions, we draw upon our various capabilities such as
market information analysis, credit supervision, financing and
transportation logistics.

Mitsui had 23 branches and offices located in
Japan and 160 branches, offices and trading subsidiaries located
in other parts of the world as of July 1, 2004. They provide
market information to each other and cooperate in developing
various business opportunities. Each of our subsidiaries has its
own marketing strategy based on its particular business
activities and customer relationships.

Seasonality
of Our Business Activities

The trading of individual products such as
heating oil, foods and textiles is influenced by seasonal
factors. For example, heating oil is traded more frequently in
winter than in summer months. In addition, revenues of MITSUI
FOODS CO, LTD., our food wholesale subsidiary, increases from
October to December and decreases from January to March,
reflecting seasonal demand in Japan. However, the seasonality of
any product either individually or in the aggregate does not
significantly affect our consolidated financial position and
results of operations.

Dependence
on Patents and Licenses and Industrial, Commercial or Financial
Contracts

We have various patents and licenses as well as
industrial, commercial and financial contracts (including
contracts with customers or suppliers) to conduct our business.
These patents, licenses or contracts either individually or in
the aggregate are not material to our business operations or
results of operations.

Marketing
Channels

Marketing channels vary by commodity, customer,
and region. We have established subsidiaries and associated
companies for promotion and distribution in response to
individual business environment.

See Products and Services and Principal
Activities by Reportable Operating Segments below. Special
sales methods including financial arrangement provided by our
Machinery, Electronics & Information Segment and development
of SCM system conducted by various operating segments are also
described therein.

Competitive
Position

Our main competitors are other Japanese general
trading companies. Moreover, all of our potential business
partners could also be competitors. To ensure our
competitiveness, we strive to continue to successfully meet the
changing needs of our customers worldwide. Analysis of
competitive position by operating segment is provided in
Products and Services and Principal Activities by
Reportable Operating Segments below and also see
Item 3.D. Risk Factors.

Government
Regulations

Our business activities are subject to various
governmental regulations in the countries in which we operate.
These regulations generally relate to obtaining business and
investment approvals, and meeting the requirements of export
regulations including those related to national security
considerations, tariffs, antitrust, consumer and business
taxation, exchange controls, and environmental laws and
regulations. Certain of our business transactions such as our
activities in the energy, mining, telecommunications, financing,
food, consumer products, machinery, chemicals, etc. are
regulated and subject to the relevant laws and regulations. See
Item 3.D. Risk Factors.

Regulations
with Respect to the Exploration and Production of Oil, Gas, and
Mineral Resources

We are involved in various projects involving
exploration for and production of crude oil, natural gas, iron
raw material, and non-ferrous metals in many different countries
in which we participate as a minority stakeholder and
non-operator. These exploration and production activities are
subject to a broad range of local laws and regulations, which
affect virtually all aspects of these activities. Contractual
arrangements in connection with our oil, gas and mining
activities, such as leases, licenses and production agreements
are

17



---



##### 



generally entered into with a government entity
or a government owned company. See Item 4.B. Business
OverviewMetal Products & Minerals Segment and Energy
Segment.


To date, changes in governmental laws and
regulations have not had a material adverse effect on our oil,
gas and mining projects. Some of our oil, gas and mineral
projects are located in politically and economically stable
regions, such as Australia, where the legal systems are
relatively developed. However, we also hold interests in oil,
gas and mineral resources in regions where legal systems are
less developed. These investments may be adversely impacted by
factors such as a lack of comprehensive sets of laws and
regulations, an unpredictable judicial system based on
inconsistent application and interpretation of laws and
regulations, and constantly changing practices of regulatory and
administrative bodies.

Governmental
Regulations with Respect to Infrastructure Projects

We are engaged in various infrastructure projects
worldwide. These include construction of power plants, oil and
gas pipelines, telecommunications and broadcasting systems,
cargo transportation systems, and public transit systems in
developing countries. In these projects, we are subject to
extensive laws and regulations with respect to technical
specifications, environmental protection, pricing, labor,
taxation, foreign exchange, and other matters. We commonly enter
into contractual arrangements with government owned companies
that are subject to their own sets of laws and regulations.
Changes in laws and regulations after the commencement of
projects may result in lengthy delays which can negatively
impact our cash flows and hinder the repatriation of capital
from such projects.

Governmental
Regulations with Respect to Human Health and Environment

We are subject to extensive laws and regulations
worldwide with respect to human health and the environment.
Regulations governing food products for human consumption are
complex, detailed and stringent. For instance, in Japan, our
food related operations are under the supervision of the
Ministry of Agriculture, Forestry and Fisheries, and the
Ministry of Health, Labor and Welfare. We are subject to the
Food Safety Basic Law, which codifies the safety standard for
food products. For example, it determines the threshold amount
at which harmful substances such as pesticide residues are
considered to be unacceptable. We must expend significant
resources to comply with these regulations not only in Japan but
in all jurisdictions where we engage in food-related operations.

We are also subject to complex environmental laws
and regulations worldwide. For example, in Japan, when trading,
storing or transporting chemical products or disposing of wastes
and by-products from our industrial plants, we are required to
notify the local regulators and/or obtain approvals or licenses.
Any violation of laws and regulations may not only result in
severe fines and penalties, but the regulators may require us to
curtail or even cease operations, install expensive pollution
control systems, and comply with enhanced notification
obligations.

Products
and Services and Principal Activities by Reportable Operating
Segments

The
Establishment of the Five Major Operating Groups Structure for
the Year Ended March 31, 2003

We had undertaken a management reorganization in
our Head Office that included introduction of the Five Major
Operating Groups Structure in April 2002. The five operating
groups, which were organized based on our products and
services, planned overall and worldwide strategies for
their products and services and conducted their worldwide
operations. A discrete set of financial information was
available for each of the five operating groups and each of the
five operating results were regularly reviewed by the Chief
Executive Officer. As such, each of the five operating group was
determined to be an operating segment for financial
reporting purposes for the year ended March 31, 2003. The
five operating groups also collaborated with branches and
offices that are located in Japan and overseas countries and
with overseas trading subsidiaries in planning and executing
their strategies for products or regions.

For the year ended March 31, 2003, the
branches, offices and overseas trading subsidiaries were
separate operating units, which were delegated the
responsibilities of managing the businesses of their regions as
the centers of each particular regional strategy and operate
diversified businesses together with their subsidiaries and
associated companies in collaboration with the five operating
groups. Therefore, a discrete set of financial information was
also available for each of the regional operating units without
any overlap with the financial information of each of the five
products and services based operating groups. The operating
results of each of our regional operating units were regularly
reviewed by the Chief Executive Officer independent of the
operating results of each of the five products and services
based operating groups, and accordingly, each

18



---



##### 



regional operating unit was also determined to be
an operating segment for financial reporting
purposes. Thus, for the year ended March 31, 2003, our
operating segments were comprised of products and services
focused operating segments and region-focused operating
segments. Our reportable operating segments as of March 31,
2003 were comprised of those listed below:




| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | Our five products and services focused operating
    segments were:
|
| |   | Metal Products & Minerals;                                         
|
| |   | Machinery, Electronics & Information;                              
|
| |   | Chemical;                                                          
|
| |   | Energy; and                                                        
|
| |   | Consumer Products & Services;                                      
|
| |  | Our four region-focused operating segments were:                   
|
| |   | Domestic Branches and Offices;                                     
|
| |   | Americas;                                                          
|
| |   | Europe; and                                                        
|
| |   | Other Overseas Areas.                                              

Each of the five products and services based
operating groups in our Head Office have business units. The
business units, which are further divided into specialized
divisions, provide more focused products and services.

Abolishment
of the Five Major Operating Groups Structure for the Year Ended
March 31, 2004

We abolished the Five Major Operating Groups
Structure on April 1, 2003, to further increase operational
efficiency with a system in which the Chief Operating Officer of
each of the 18 business units directly reports the
units operating results to the Chief Executive Officer
based on the units discrete set of financial information.
Therefore, for the year ended March 31, 2004, each of the
18 business units was determined to be an operating
segment for financial reporting purposes. Despite this
reorganization, there was no change in our product and service
focused business activities for the year ended March 31,
2004. Accordingly, as a result of the aggregation of our
operating segments (i.e., the 18 business units) based on
the nature of each of the 18 business units products,
services and other criteria, our current products and services
based reportable segments consisted of the same five reportable
segments as for the year ended March 31, 2003.

There was no reorganization with respect to our
four region-focused reportable operating segments for the year
ended March 31, 2004. Each of our region-focused reportable
operating segments still consisted of region-specific branches,
offices and overseas trading subsidiaries, that remain
independent from the five product and service focused reportable
operating segments in the Head Office. As such, despite the
restructuring, for the year ended March 31, 2004, we had
the same nine reportable operating segments which consisted of
five products and services focused reportable operating segments
and four region-focused reportable operating segments as was the
case for the year ended March 31, 2003.

As of April 1, 2004, we made further changes
to our operating structure. See Item 4.A. History and
Development of the Company Recent Developments Our
Current Organizational Structure for the Year Ending
March 31, 2005.

19



---



##### 



Gross Profit, Operating Income (Loss) and Net
Income (Loss) by reportable operating segment for the years
ended March 31, 2004, 2003 and 2002 were as
follows(1)(2)(3)(4):

Gross Profit:

|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|------------------------------------ |  | ---------------------------------------- | ------- | ---- |  | ---- | ----- | - |  | - | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                                     |  |                                         
|                                     |  | Year ended March 31,                    
|                                     |  |                                         
|                                     |  |                                          |         |      |  |     
|                                     |  | 2004                                     |         | 2003 |  | 2002
|                                     |  |                                          |         |      |  |     
|                                     |  |                                          |         |      |  |      |       |   |  |  
|                                     |  |                                         
|                                     |  | (In millions of yen, except percentages)
|Metal Products & Minerals            |  | ¥                                        | 77,452  |      |  |      | 12.7  | % |  | ¥ | 70,674  |   |  |  | 12.4  | % |  | ¥ | 67,397  |   |  |  | 12.4  | %
|Machinery, Electronics & Information |  |                                          | 128,357 |      |  |      | 21.0  |   |  |   | 117,987 |   |  |  | 20.8  |   |  |   | 112,425 |   |  |  | 20.6  |  
|Chemical                             |  |                                          | 83,003  |      |  |      | 13.6  |   |  |   | 60,871  |   |  |  | 10.7  |   |  |   | 53,476  |   |  |  | 9.8   |  
|Energy                               |  |                                          | 53,814  |      |  |      | 8.8   |   |  |   | 53,027  |   |  |  | 9.3   |   |  |   | 48,061  |   |  |  | 8.8   |  
|Consumer Products & Services         |  |                                          | 116,254 |      |  |      | 19.1  |   |  |   | 105,947 |   |  |  | 18.6  |   |  |   | 108,610 |   |  |  | 19.9  |  
|Domestic Branches and Offices        |  |                                          | 39,962  |      |  |      | 6.6   |   |  |   | 41,405  |   |  |  | 7.3   |   |  |   | 47,553  |   |  |  | 8.7   |  
|Americas                             |  |                                          | 39,871  |      |  |      | 6.5   |   |  |   | 44,584  |   |  |  | 7.9   |   |  |   | 45,096  |   |  |  | 8.3   |  
|Europe                               |  |                                          | 19,965  |      |  |      | 3.3   |   |  |   | 22,470  |   |  |  | 4.0   |   |  |   | 20,623  |   |  |  | 3.8   |  
|Other Overseas Areas                 |  |                                          | 24,060  |      |  |      | 3.9   |   |  |   | 23,503  |   |  |  | 4.1   |   |  |   | 21,929  |   |  |  | 4.0   |  
|All Other                            |  |                                          | 27,324  |      |  |      | 4.5   |   |  |   | 29,721  |   |  |  | 5.2   |   |  |   | 27,735  |   |  |  | 5.1   |  
|Adjustments and Eliminations         |  |                                          | (141    | )    |  |      | (0.0  | ) |  |   | (1,544  | ) |  |  | (0.3  | ) |  |   | (7,704  | ) |  |  | (1.4  | )
|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Consolidated Total                   |  | ¥                                        | 609,921 |      |  |      | 100.0 | % |  | ¥ | 568,645 |   |  |  | 100.0 | % |  | ¥ | 545,201 |   |  |  | 100.0 | %
|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  

Operating Income (Loss)*:

|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |        |   |  |  |       |  
|------------------------------------ |  | ---------------------------------------- | ------- | ---- |  | ---- | ----- | - |  | - | ------- | - |  |  | ----- | - |  | - | ------ | - |  |  | ----- | -
|                                     |  |                                         
|                                     |  | Year ended March 31,                    
|                                     |  |                                         
|                                     |  |                                          |         |      |  |     
|                                     |  | 2004                                     |         | 2003 |  | 2002
|                                     |  |                                          |         |      |  |     
|                                     |  |                                          |         |      |  |      |       |   |  |  
|                                     |  |                                         
|                                     |  | (In millions of yen, except percentages)
|Metal Products & Minerals            |  | ¥                                        | 30,547  |      |  |      | 25.3  | % |  | ¥ | 25,722  |   |  |  | 26.1  | % |  | ¥ | 19,847 |   |  |  | 24.9  | %
|Machinery, Electronics & Information |  |                                          | 23,683  |      |  |      | 19.7  |   |  |   | 10,607  |   |  |  | 10.7  |   |  |   | 10,027 |   |  |  | 12.6  |  
|Chemical                             |  |                                          | 29,319  |      |  |      | 24.3  |   |  |   | 16,248  |   |  |  | 16.5  |   |  |   | 8,185  |   |  |  | 10.3  |  
|Energy                               |  |                                          | 21,686  |      |  |      | 18.0  |   |  |   | 25,541  |   |  |  | 25.9  |   |  |   | 16,661 |   |  |  | 20.9  |  
|Consumer Products & Services         |  |                                          | 20,026  |      |  |      | 16.6  |   |  |   | 19,897  |   |  |  | 20.2  |   |  |   | 5,082  |   |  |  | 6.4   |  
|Domestic Branches and Offices        |  |                                          | 9,540   |      |  |      | 7.9   |   |  |   | 6,760   |   |  |  | 6.9   |   |  |   | 8,873  |   |  |  | 11.1  |  
|Americas                             |  |                                          | 7,691   |      |  |      | 6.4   |   |  |   | 9,485   |   |  |  | 9.6   |   |  |   | 11,750 |   |  |  | 14.7  |  
|Europe                               |  |                                          | 3,030   |      |  |      | 2.5   |   |  |   | 4,163   |   |  |  | 4.2   |   |  |   | 4,484  |   |  |  | 5.6   |  
|Other Overseas Areas                 |  |                                          | (1,062  | )    |  |      | (0.9  | ) |  |   | (1,931  | ) |  |  | (2.0  | ) |  |   | (4,700 | ) |  |  | (5.9  | )
|All Other                            |  |                                          | 3,269   |      |  |      | 2.7   |   |  |   | 5,942   |   |  |  | 6.0   |   |  |   | 3,257  |   |  |  | 4.1   |  
|Adjustments and Eliminations         |  |                                          | (27,147 | )    |  |      | (22.5 | ) |  |   | (23,787 | ) |  |  | (24.1 | ) |  |   | (3,713 | ) |  |  | (4.7  | )
|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |        |   |  |  |       |  
|Consolidated Total                   |  | ¥                                        | 120,582 |      |  |      | 100.0 | % |  | ¥ | 98,647  |   |  |  | 100.0 | % |  | ¥ | 79,753 |   |  |  | 100.0 | %
|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |        |   |  |  |       |  



|  |                                                                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Operating income (loss) reflects our
    (a) Gross Profit, (b) Selling, general and
    administrative expenses, (c) Provision for doubtful
    receivables and (d) Government grant for transfer of
    substitutional portion of EPF, as presented in the Statements of
    Consolidated Income.

20



---



##### 



Net Income (Loss):

|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|------------------------------------ |  | ---------------------------------------- | ------- | ---- |  | ---- | ----- | - |  | - | ------- | - |  |  | ----- | - |  | - | ------- | - |  |  | ----- | -
|                                     |  |                                         
|                                     |  | Year ended March 31,                    
|                                     |  |                                         
|                                     |  |                                          |         |      |  |     
|                                     |  | 2004                                     |         | 2003 |  | 2002
|                                     |  |                                          |         |      |  |     
|                                     |  |                                          |         |      |  |      |       |   |  |  
|                                     |  |                                         
|                                     |  | (In millions of yen, except percentages)
|Metal Products & Minerals            |  | ¥                                        | 23,591  |      |  |      | 34.5  | % |  | ¥ | 14,944  |   |  |  | 48.0  | % |  | ¥ | 9,449   |   |  |  | 17.1  | %
|Machinery, Electronics & Information |  |                                          | 7,298   |      |  |      | 10.7  |   |  |   | (4,916  | ) |  |  | (15.8 | ) |  |   | 13,377  |   |  |  | 24.1  |  
|Chemical                             |  |                                          | 10,000  |      |  |      | 14.6  |   |  |   | (5,850  | ) |  |  | (18.8 | ) |  |   | (4,893  | ) |  |  | (8.8  | )
|Energy                               |  |                                          | 23,954  |      |  |      | 35.0  |   |  |   | 22,605  |   |  |  | 72.6  |   |  |   | 22,152  |   |  |  | 40.0  |  
|Consumer Products & Services         |  |                                          | 12,554  |      |  |      | 18.4  |   |  |   | 3,983   |   |  |  | 12.8  |   |  |   | 2,756   |   |  |  | 5.0   |  
|Domestic Branches and Offices        |  |                                          | 11,606  |      |  |      | 17.0  |   |  |   | 6,994   |   |  |  | 22.4  |   |  |   | 6,773   |   |  |  | 12.2  |  
|Americas                             |  |                                          | 161     |      |  |      | 0.2   |   |  |   | 3,291   |   |  |  | 10.6  |   |  |   | 6,461   |   |  |  | 11.7  |  
|Europe                               |  |                                          | 693     |      |  |      | 1.0   |   |  |   | 2,845   |   |  |  | 9.1   |   |  |   | 3,911   |   |  |  | 7.1   |  
|Other Overseas Areas                 |  |                                          | 7,758   |      |  |      | 11.3  |   |  |   | 6,193   |   |  |  | 19.9  |   |  |   | 5,271   |   |  |  | 9.5   |  
|All Other                            |  |                                          | 4,703   |      |  |      | 6.9   |   |  |   | 9,738   |   |  |  | 31.3  |   |  |   | 8,711   |   |  |  | 15.7  |  
|Adjustments and Eliminations         |  |                                          | (33,931 | )    |  |      | (49.6 | ) |  |   | (28,689 | ) |  |  | (92.1 | ) |  |   | (18,597 | ) |  |  | (33.6 | )
|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  
|Consolidated Total                   |  | ¥                                        | 68,387  |      |  |      | 100.0 | % |  | ¥ | 31,138  |   |  |  | 100.0 | % |  | ¥ | 55,371  |   |  |  | 100.0 | %
|                                     |  |                                          |         |      |  |      |       |   |  |   |         |   |  |  |       |   |  |   |         |   |  |  |       |  



|       |                                                                                                                                                                                                                                                                                                                               
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Notes: | (1) In accordance with Statement of
    Financial Accounting Standards (SFAS) No. 144,
    Accounting for the Impairment or Disposal of Long-Lived
    Assets, the figures of Consolidated Total for
    the years ended March 31, 2003 and 2002 have been
    reclassified to conform to the current year presentation.
|      
|       | (2) All Other includes business
    activities which primarily provide services, such as logistics
    service, financing service, development and marketing of
    systems, and office services, to external customers and/or to
    Mitsui, its subsidiaries and associated companies.                                    
|      
|       | (3) Net loss of Adjustments and
    Eliminations includes income and expense items that are
    not allocated to specific reportable operating segments, such as
    certain expenses of the corporate departments, and eliminations
    of intersegment transactions.                                                      
|      
|       | (4) Transfers between operating segments are
    made at cost plus a markup.                                                                                                                                                                                                                                                  

Metal Products & Minerals
Segment

The Metal Products & Minerals Segment is
engaged in the overseas development and trading of raw materials
for iron, steel and non-ferrous metals, and in the domestic and
global manufacturing, sale and trading of iron, steel and
non-ferrous products.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥77,452 million or 12.7% and ¥23,591 million
or 34.5% of our consolidated total, respectively.

This segment is composed of Iron & Steel
Products Unit, Iron & Steel Raw Materials Unit, and
Non-Ferrous Metals Unit, and has 48 subsidiaries including:



| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Mitsui Bussan Construction Materials Co., Ltd.
    (Iron & Steel Products Unit);                                                                                                                                          
|
| |  | Mitsui Bussan Raw Materials Development Corp.,
    Mitsui Iron Ore Development Pty. Ltd., Mitsui Itochu Iron Pty.
    Ltd., Sesa Goa Limited and Mitsui Coal Holdings Pty. Ltd. (Iron
    & Steel Raw Materials Unit); and
|
| |  | Mitsui & Co., Precious Metals, Inc., Mitsui
    Bussan Futures Ltd., Japan Colluasi Resources B.V. and Mitalco
    Inc. (Non-Ferrous Metals Unit).                                                                        

This segment has 40 associated companies
including:



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | Nippon Steel Trading Co., Ltd. (Iron & Steel
    Products Unit); and              
|
| |  | Valepar S.A. and BHP Mitsui Coal Pty., Ltd. (Iron
    & Steel Raw Materials Unit).

Effective April 1, 2004, our former Iron
& Steel Raw Materials Unit and our former Non-Ferrous Metals
Unit were combined to begin operations as the Iron & Steel
Raw Materials and Non-Ferrous Metals Business Unit. This
combination has allowed us to pursue our strategic goals to both
integrate and broaden our overseas acquisition network of iron
raw materials and non-ferrous mineral interests.

21



---



##### 



An overview of each business unit within the
segment is provided as follows:



| |                               
| | ------------------------------
| | Iron & Steel Products
    Unit

Iron and steel products are used in a wide range
of industries including the automobile, electronics,
transportation, construction and energy sectors. We have served
our customers in these industries worldwide and provided support
services for Japanese steel mills. The Iron & Steel
Products Unit conducts trading, marketing, processing and
distribution of:



| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | iron and steel products including steel strip,
    galvanized steel products, wire rod, steel plate and steel pipe;
    and                         
|
| |  | semi-finished items including steel slabs to be
    processed into steel plates and steel billets to be processed
    into steel bars and wire rods.

Through the global network of Mitsui and
collaboration with 18 subsidiaries and 19 associated
companies owned by this segment, we handle approximately
22 million tonnes of iron and steel products annually
worldwide.

The Iron & Steel Products Unit actively
participates in logistical and engineering services worldwide
for iron and steel related projects that require procurement and
distribution of large supplies of iron and steel. For example,
in Japan and overseas, we have established steel processing
centers with combined annual steel processing capacity of
approximately 4 million metric tonnes, at which we utilize
our supply chain management (SCM) models that employ
our information technology and logistics technology expertise in
order to implement steel products distribution arrangements for
our customers. In particular, we have recently established
subsidiaries and joint ventures with Japanese and overseas
business partners of our steel service centers, galvanized steel
plants, and tin-plating facilities to meet the rising demand
from manufacturers of automobiles, electric appliances and heavy
electric machinery that have moved their production centers to
the United States, Southeast Asia and China. For example, in
2002, we participated in Shanghai Bao-Mit Steel Distribution
Co., Ltd., a joint venture with Shanghai Baosteel Group
Corporation, a Chinese iron and steel manufacturing company, in
order to build a network of steel products service centers in
China. Moreover, we frequently draw upon the units
expertise in logistics and project finance and take advantage of
the marketing channels of other business units in the fields of
energy, industrial plants, shipping and machinery. As a result,
we have been involved in various industrial projects including
the construction of:



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | oil and gas pipeline projects in China, Malaysia,
    and Russia; and         
|
| |  | the steel structure for the Bangkok Second
    International Airport Terminal.

Our major competitors in Japan and overseas are
other Japanese trading companies. In their efforts to focus in
the field of iron and steel products, some of our competitors
have recently entered into joint ventures to increase their
business operation capabilities in this field. For example, in
2001, Marubeni-Itochu Steel Inc. was established by Marubeni
Corporation and Itochu Corporation, and in 2003, Metal One
Corporation was established by Mitsubishi Corporation and Sojitz
Corporation (formerly Nissho Iwai Corporation). In order to not
only remain competitive, but to pursue our strategic goals, in
April 2004 we established Iron & Steel Products Business
Promotion Division which specializes in making investments in
steel-related enterprises. This new division was founded in
order to respond to the need for joint investment amongst steel
users and steel manufacturers in Japan and overseas and to
participate in the development of new products.



| |                                    
| | -----------------------------------
| | Iron & Steel Raw Materials
    Unit

The Iron & Steel Raw Materials Unit is
engaged in various business activities, including trading,
investment, logistics management and transportation services
related to iron and steel raw materials, such as iron ore, coal,
steel scrap, ferro-alloys and other minerals.

The Iron & Steel Raw Materials Unit acts as
an agent to various major Japanese steel makers for their
procurement of iron ore, coal, steel scrap and ferro-alloys. For
example, we provide various services to assist Japanese steel
makers in negotiation and execution of iron and steel raw
material procurement contracts as well as providing various
information related to worldwide suppliers of iron and steel raw
materials obtained through our overseas network. One of our
traditional business activities, serving as an agent for
Japanese steel makers, has seen accelerated competition from
other Japanese trading companies. Due to the global trend of
eliminating intermediaries with respect to iron and steel
trading activities, we are enhancing our investments and
promoting our participation in alliances with mining companies
worldwide to provide cross-border services to our
clients, extending our services to both suppliers and consumers.

22



---



##### 



We also participate in joint ventures with
various iron ore and coal mining companies located in Australia,
Brazil and India, in order to secure stable supplies of those
materials. In April 2002, we entered into a strategic alliance
with Anglo American Plc to develop the Moura and German Creek
coalmines in Australia, which provided us with a solid
foundation for future growth in the coal business. In August
2002, we completed the construction of the West Angelas iron ore
mine in Australia (as a part of the Robe River Joint Venture
with Rio Tinto plc), which began shipments of iron ore to
customers worldwide. In March 2003, we agreed to purchase a 15%
ownership interest (or 18.24% in terms of voting share as of
March 31, 2004), of Valepar S.A., the controlling
shareholder of Companhia Vale do Rio Doce (CVRD) in
Brazil. CVRD is a mining enterprise with operations that include
mining of iron ore, and other raw non-ferrous metals. This
transaction was completed on September 2, 2003.

We also own and operate Pacific Coast Recycling,
LLC a steel scrap export terminal in the United States through
our subsidiary, Raw Materials Development Co.

The revenues from mineral producing activities
have accounted for a significant portion of Iron &
Steel Raw Materials Unit. The table below sets forth the break
down of revenues in the Iron & Steel Raw Materials Unit.

|           |      |                                             |  |                    |      |              |  |                |      |  |  |   |      |  |  |   |       | 
|---------- | ---- | ------------------------------------------- |  | ------------------ | ---- | ------------ |  | -------------- | ---- |  |  | - | ---- |  |  | - | ----- | 
|           |      |                                            
|           |      | Revenues of the Iron & Steel Materials Unit
|           |      |                                            
|           |      |                                            
|           |      | Billions of Yen                            
|           |      |                                            
|           |      |                                             |  | Revenues from      |      |             
|           |      |                                             |  | sales of services  |      |             
|           |      |                                             |  |                    |      |             
|           |      | Revenues from sales of products             |  | Commissions and    |      |             
|           |      |                                             |  | trading margins on |      |             
|Year ended |      | From mineral                                |  | From sales of      |      | intermediary |  |               
|March 31,  |      | producing activities                        |  | other products (*) |      | services     |  | Total Revenues
|           |      |                                             |  |                    |      |              |  |               
|           | 2004 |                                             |  | ¥                  | 49.9 |              |  | ¥              | 76.9 |  |  | ¥ | 10.4 |  |  | ¥ | 137.2 | 
|           | 2003 |                                             |  |                    | 34.7 |              |  |                | 57.9 |  |  |   | 8.7  |  |  |   | 101.3 | 
|           | 2002 |                                             |  |                    | 18.8 |              |  |                | 55.5 |  |  |   | 9.3  |  |  |   | 83.6  | 



| | 
| | 
| | 



| |     |                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------
| | (*) | Revenues from sales of other products mainly
    consist of trading of scrap metals as principal.

We have also entered into new joint venture
projects to meet the increasing demand for iron and steel raw
materials in Japan and abroad. For example, in January 2003, we
established POSCO Terminal Co., Ltd., a joint venture with POSCO
(a steel maker in Republic of Korea), whereby we provide
logistics services with respect to transactions involving iron
and steel raw materials for our various customers in Asia. We
are also enhancing our involvement in the general recycling
business and the greenhouse gas emission trading business.

The following tables provide information in
connection with our investments in iron ore and coal resource
related projects. In September 2003, we sold our interest in
Caemi Mineração e Metalurgia S.A., which had been our
associated company until the year ended March 31, 2003.
Accordingly, in the table below, we did not include mining
information attributable to Caemi Mineração e
Metalurgia S.A. For information regarding our production and
reserve amounts in connection with our mining activities, See
Item 4.D. Property, Plants and Equipment Mining
Activities.

IRON ORE

|                                |  |                                       |  |                                                 |  |                                   |  |                                    |       |                          |  |                                                                                |  |                         
|------------------------------- |  | ------------------------------------- |  | ----------------------------------------------- |  | --------------------------------- |  | ---------------------------------- | ----- | ------------------------ |  | ------------------------------------------------------------------------------ |  | ------------------------
|                               
|                               
|                                |  | Mitsuis                              |  |                                                
|Joint Venture or                |  | Mitsuis Subsidiary or                |  |                                                 |  | Percentage of                     |  | Other Major Participants and Their |       |                         
|Investee(1)                     |  | Associated Company(2)                 |  | Name of Mines(3)                                |  | Location                          |  | Ownership                          |       | Percentages of Ownership |  |                                                                               
|                               
|                               
|Robe River Iron Associates      |  | Mitsui Iron Ore Development Pty. Ltd. |  | Pannawonica West Angelas                        |  | Pilbara Region, Western Australia |  |                                    | 33.0% |                          |  | Rio Tinto plc
    Nippon Steel Corporation
    Sumitomo Metal Industries, Ltd. |  | 53.0%
    10.5%
    3.5%
|                               
|Mount Newman Joint Venture      |  | Mitsui Itochu Iron Pty. Ltd.          |  | Mount Whaleback                                 |  | Pilbara Region, Western Australia |  |                                    | 7.0%  |                          |  | BHP Billiton plc
    Itochu Corporation                                        |  | 85.0%
    8.0%          
|                               
|Yandi Joint Venture             |  | Mitsui Iron Ore Development Pty. Ltd. |  | Marillana Creek                                 |  | Pilbara Region, Western Australia |  |                                    | 7.0%  |                          |  | BHP Billiton plc
    Itochu Corporation                                        |  | 85.0%
    8.0%          
|                               
|Mount Goldsworthy Joint Venture |  | Mitsui Iron Ore Development Pty. Ltd. |  | North
    Area (Yarrie) (Nimingarra)
    Area C |  | Pilbara Region, Western Australia |  |                                    | 7.0%  |                          |  | BHP Billiton plc
    Itochu Corporation                                        |  | 85.0%
    8.0%          
|                               
|Sesa Goa Limited                |  | Sesa Goa Limited                      |  | Codli
    Sonshi
    Chitrandurga
    Hopset    |  | Goa, India
    Karnataka, India   |  |                                    | 51.0% |                          |  | (publicly listed company)                                                      |  |                         

23



---



##### 



COAL

|                           |  |                               |  |                                  |  |                            |  |                                    |       |                          |  |                                                         |  |                          
|-------------------------- |  | ----------------------------- |  | -------------------------------- |  | -------------------------- |  | ---------------------------------- | ----- | ------------------------ |  | ------------------------------------------------------- |  | -------------------------
|                          
|                          
|                           |  | Mitsuis                      |  |                                 
|Joint Venture or           |  | Mitsuis Subsidiary or        |  |                                  |  | Percentage of              |  | Other Major Participants and Their |       |                         
|Investee(1)                |  | Associated Company(2)         |  | Name of Mines(3)                 |  | Location                   |  | Ownership                          |       | Percentages of Ownership |  |                                                        
|                          
|                          
|BHP Mitsui Coal Pty. Ltd.  |  | BHP Mitsui Coal Pty. Ltd.     |  | Riverside
    South Walker Creek |  | Queensland,
    Australia  |  |                                    | 20.0% |                          |  | BHP Billiton plc                                        |  | 80.0%                    
|                          
|Bengalla Joint Venture     |  | Mitsui Coal Holding Pty. Ltd. |  | Bengalla                         |  | New South Wales, Australia |  |                                    | 10.0% |                          |  | Rio Tinto plc
    Westfarmers Ltd.
    Taiwan Power Co. |  | 40.0%
    40.0%
    10.0%
|                          
|Kestrel Joint Venture      |  | Mitsui Coal Holding Pty. Ltd. |  | Kestrel                          |  | Queensland, Australia      |  |                                    | 20.0% |                          |  | Rio Tinto plc                                           |  | 80.0%                    
|                          
|Moura Joint Venture        |  | Mitsui Coal Holding Pty. Ltd. |  | Moura                            |  | Queensland, Australia      |  |                                    | 49.0% |                          |  | Anglo American plc                                      |  | 51.0%                    
|                          
|German Creek Joint Venture |  | Mitsui Coal Holding Pty. Ltd. |  | German Creek                     |  | Queensland, Australia      |  |                                    | 30.0% |                          |  | Anglo American plc                                      |  | 70.0%                    
|                          



|    |                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The term Investee refers only to Sesa
    Goa Limited and BHP Mitsui Coal Pty. Ltd.                                                                                                                                                                                                                                                                                      
|   
|(2) | Mitsuis Subsidiary or Associated
    Company indicates names of the companies through which we
    own our interests in the joint ventures or the investee. Sesa
    Goa Limited is Mitsuis subsidiary in which it directly
    owns a 51% voting share. BHP Mitsui Coal Pty. Ltd. is
    Mitsuis associated company in which it directly owns a 20%
    voting share.
|   
|(3) | Name of Mines indicates the names of
    principal producing mines.                                                                                                                                                                                                                                                                                                      



| |                        
| | -----------------------
| | Non-Ferrous Metals Unit

The Non-Ferrous Metals Unit is engaged in
businesses and operations involving various non-ferrous metals,
and our business activities include trading, transporting, and
processing non-ferrous metal ores and ingots for our customers
in Japan and overseas such as:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | copper, lead, zinc, tin, nickel, aluminum,
    magnesium, cobalt, titanium, and other non-ferrous metals; and
|
| |  | precious metals, such as gold, silver, platinum
    and palladium.                                           

We are also engaged in sales of semi-fabricated
non-ferrous products such as construction materials and we act
as an agent in the nuclear fuel import business.

This business unit also engages in the trading
and brokerage of a wide range of derivative instruments such as
precious metals and other non-ferrous metals, crude oil, natural
gas and weather, as well as, the promotion of various derivative
or financial instruments developed by this segment for market
participants and investors.

The following are examples of business
transactions our Non-Ferrous Metals Unit is engaged in:



| |   |                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | import approximately 700,000 tonnes of copper
    concentrates annually into Japan, which represents approximately
    one-fifth of the total requirements of Japan;                                                                                                                                                  
|
| |  | handle approximately 45,000 metric tonnes of
    various forms of both imported and domestic nickel in the
    Japanese market whereby our trading market share of nickel and
    cobalt are approximately 25% and 40%, respectively; and                                                                             
|
| |  | import approximately 400,000 tonnes of primary
    aluminum ingots into Japan, which represents approximately 18%
    of total requirements of Japan and also carry out off-shore
    business transactions involving approximately 100,000 tonnes of
    primary aluminum ingots mainly in South-East Asia and China.

In order to respond to cross border supply and
demand, we diversify our business through natural resource
investments, global trading and development of various
non-ferrous metals. Securing stable sources is a critical issue,
for example:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we made an additional loan to the Collahuasi
    copper mining project in Chile, developed jointly with Anglo
    American Plc and Falconbridge Ltd., to increase the capacity of
    the project. The project is moving to a new mining site from the
    existing ore body, and is expected to expand its milling
    capacity from its present 60,000 tonnes per day to 110,000
    tonnes per day, so that we may make additional aggregate
    transactions of 1.3 million tonnes of copper concentrates
    from the mine to Japanese copper smelters;

24



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we further enhanced our resource investment
    activities by participating in a nickel-cobalt mining and
    refining project at Rio Tuba area in the Republic of
    Philippines, to be developed jointly with Sumitomo Metal Mining
    Co., Ltd., Sojitz Corporation (formerly Nissho Iwai
    Corporation), and a local partner. This project is expected to
    produce nickel-cobalt mixed sulfide through a high-pressure acid
    leaching process, an advanced processing technologies for nickel
    production; and
|
| |  | we own an undivided interest in both Eastalco and
    Intalco, aluminum smelting companies in the United States,
    providing access to 147,000 tonnes of aluminum ingots annually.
    Combining the metal taken from these companies with other
    sources, we have the capability to supply 220,000 tonnes of
    aluminum ingots annually.                                                                                                                                                                               

In addition, we steadily expanded our financial
services and derivative trading operations under highly volatile
market conditions for precious metals. Mitsui & Co., Energy
Risk Management Ltd., which we established in March 2002,
enjoyed growth in derivative trading operations, mainly for
crude oil and natural gas related commodities. Japan Alternative
Investment Co., Ltd. began operations in April 2002, acting as a
placement agent for alternative investment products, such as
hedge funds, private equity funds and commodity fund. Mitsui
Bussan Futures Ltd. is a domestic subsidiary engaged in the
future commodities brokering including precious metals and other
commodities such as foods and oil products.



| |                                                 
| | ------------------------------------------------
| | Machinery, Electronics & Information
    Segment

The Machinery, Electronics & Information
Segment consists of five business units as follows:



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | Electric Machinery, Plant & Project Business
    Unit;                    
|
| |  | Telecommunications, Transportation &
    Industrial Systems Business Unit;
|
| |  | Motor Vehicles, Marine & Aerospace Business
    Unit;                     
|
| |  | Information Business Unit; and                                            
|
| |  | Electronics Business Unit.                                                

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥128,357 million or 21.0% and ¥7,298 million
or 10.7% of our consolidated total, respectively.

Effective April 1, 2004, the
consumer-oriented and media-related businesses which had been
included in Information Business Unit were transferred to a
newly established Consumer Service Business Unit in the Consumer
Products & Services Segment.

The Machinery, Electronics & Information
Segment engages in, among other things, the following
businesses: manufacturing, global marketing and sales,
financing, leasing, and services involving electric machinery,
industrial plants and systems, transportation equipment and
systems, construction equipment, telecommunication systems,
motor vehicles, marine and aerospace systems. This segment is
also involved in IT and electronics related solutions business,
marketing and sales of IT and electronics related products,
components and materials, software and various services.
Services provided by each of our business units are sold
primarily to industrial customers, including original equipment
manufacturers, industrial end users, utility companies,
construction companies and distributors.

While traditional trading and sales activities
continue to be important to the Machinery, Electronics &
Information Segment, this segments business units are also
diversifying their business operations in response to changing
global market demands. In infrastructure projects, for example,
not only are we engaged in the sale of equipment used for such
projects, but we are now beginning to participate in the early
stages of potential projects whereby we:



| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | assess the commercial and technical feasibility
    of the projects;     
|
| |  | design projects utilizing our financial, legal
    and industrial skills;
|
| |  | select and invite capable partners; and                                  
|
| |  | arrange and/or assist the syndication of
    financing.                  

Moreover, we have also been increasing our equity
investments in some projects, especially in power generation
projects in the Electric Machinery, Plant & Project Business
Unit.

With respect to our IT business, rapid
innovations in technology and corresponding changes in the
technology market have resulted in new business opportunities.
As such, we are diversifying our operations

25



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from the sales of products to the provision of
new value, such as entertainment content and Internet-based
marketing services through joint ventures with worldwide
strategic partners. For example, we formed QVC Japan, Inc., a
joint venture with QVC Inc. of the United States in which we
hold a 40% interest. QVC Japan, Inc. provides 24-hour television
shopping channels nationwide.


The Machinery, Electronics & Information
Segment holds 81 subsidiaries such as Mitsui Bussan Plant &
Project Corp. (Electric Machinery, Plant & Project Business
Unit), The Mitsui Rail Capital, LLC (Telecommunications,
Transportation & Industrial Systems Business Unit), Lepta
Shipping Co., Ltd., Toyota Chile S.A., Mitsui Automotive Europe
B.V., Tombo Aviation Inc. (Motor Vehicles, Marine &
Aerospace Business Unit), Mitsui & Associates Telepark
Corporation, BSI Co., Ltd., ADAM NET Ltd., TOYO Officemation
Inc. (Information Business Unit) and Xion Holdings, Inc.
(Electronics Business Unit).

Additionally it has 77 associated companies such
as P.T. Paiton Energy (Electric Machinery, Plant &
Project Business Unit), Shin Nippon Air Technologies Co., Ltd.,
Komatsu Australia Pty. Ltd., Kioritz Corporation
(Telecommunications, Transportation & Industrial Systems
Business Unit), Toyota Canada Inc. (Motor Vehicles, Marine &
Aerospace Business Unit), Nihon Unisys Ltd., NextCom K.K.,
QVC Japan, Inc., Moshi Moshi Hotline Inc. (Information Business
Unit) and Ferrotec Corporation (Electronics Business Unit).



| |                                                      
| | -----------------------------------------------------
| | Electric Machinery, Plant & Project
    Business Unit

The business activities of the Electric
Machinery, Plant & Project Business Unit cover a wide range,
including power plants, power transmission and substation
facilities, oil refineries, liquefied natural gas
(LNG) manufacturing facilities, pipelines,
infrastructure, iron, non-ferrous metals, chemical plants, and
water and sewer facilities.

We are undertaking a number of projects that may
stimulate economic growth in developing countries and countries
rich in natural resources, such as in Asia, in countries
including Indonesia, Malaysia, Thailand and Vietnam, in the
Middle East, in countries including Saudi Arabia and United Arab
Emirates, in the Commonwealth of Independent States
(CIS), in countries including Russia and in Latin
America, including in Brazil. We focus on the needs of those
countries and apply our engineering capabilities and expert
knowledge in financing, logistics, taxation and legal affairs,
so as to devise optimum solutions that address the complex and
multifaceted issues facing those nations. This business unit
often organizes financing for projects through international
financial institutions and worldwide export credit agencies.
Moreover, it sometimes provides such loans or issues guarantees
on behalf of the project owners.

Effective April 1, 2004, the transportation
businesses which had been included in Telecommunications,
Transportation & Industrial Systems Business Unit were
transferred to the former Electric Machinery, Plant &
Project Business Unit, and as a result, the business unit
changed its name to the Power, Transportation & Plant
Project Business Unit.

The following are examples of the types of
projects in which this unit is engaged:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the CIS and the Middle East, we engaged in the
    structuring and the arrangement of debt and equity project
    financing for various natural gas energy projects. Together with
    export credit agencies and commercial banks, we also extended
    loans to project participants. We acted as the Engineering,
    Procurement and Construction (EPC) contractor in
    Japan for various oil and gas production projects and for the
    construction of infrastructure facilities including
    petrochemical plants whereby we procured manufacturing equipment
    from Japanese and overseas subcontractors.
|
| |  | For projects being promoted by Petrobras in
    Brazil, we were engaged in the structuring and the arrangement
    of debt, equity and lease financing. We also extended loans to
    the project participants.                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | In the United States Mid-American Thermal
    Project, we participated in the project as the primary EPC
    contractor, whereby we assisted in the construction and the
    installment of a 790 megawatt coal powered thermal power
    generation plant.                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | In a lead-free gasoline production project in
    Indonesia known as the Blue Sky Project, we were engaged in the
    structuring and the arrangement of debt and equity project
    financings. We also extended loans to the project participants.                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | In the Malaysia Port Dickson Combined Cycle
    Project, we are involved in the construction of a 750 megawatt
    combined cycle power plant as a member of the project consortium.                                                                                                                                                                                                                                                                                                                                                                                                                                        

The Electric Machinery, Plant & Project
Business Unit is increasing activities which facilitate the
implementation of projects. These activities go beyond the
conventional EPC approach of project engineering

26



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##### 



and supply of equipment, and the unit is
considering investments in certain related infrastructure
projects. For example:




| |   |                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | By obtaining a 15% equity interest, we
    participated in the investment company which invested in Arabian
    Power Company, which is managing the Umm Al Nar Power Plant and
    desalination facilities in Abu Dhabi on a built-own-operate
    basis;                         
|
| |  | We have entered into a joint venture project with
    Tarong Energy Corporation Ltd. and Tokyo Electric Power Company
    Inc. to own and operate the 450 megawatt Tarong North Coal Fired
    Power Plant in Australia; and                                                       
|
| |  | We, together with International Power plc.
    (U.K.), have entered into a share purchase agreement with Edison
    Mission Energy to acquire the international power generation
    portfolio of MEC International BV, a Dutch holding company
    owned by Edison Mission Energy.

We own a 36.324% interest in P.T. Paiton Energy,
an Indonesian power company, which owns a 1,230 megawatt coal
fired power plant in East Java, Indonesia. P.T. Paiton Energy
sells electricity to P.T. Perusahaan Listrik Negara, an electric
utility company owned by the Indonesian government, under a
power purchase agreement. In December 2002, an amendment to the
original power purchase agreement became effective, thereby
resolving a series of disputes between P.T. Paiton Energy and
P.T. Perusahaan Listrik Negara, which were caused in large part,
by the effects of the regional financial crisis in Asia,
particularly, in Indonesia.

Environmental issues are a common concern
throughout the world. Our initiatives in this field include
creating and implementing recycling systems for automobiles,
electric appliances and plastic bottles made from polyethylene
terephthalate. We invested in Ichihara Eco Cement Corporation,
our associated company which manufactures eco-cement (cement
produced from residual ash) at its own plant in Chiba, Japan and
we promote sales of the product. In our overseas markets, we are
engaged in the construction of waste processing facilities and
other environment-related projects.

Our major competitors include other Japanese
general trading companies, international financial institutions,
global engineering companies and construction companies.



| |                                                                          
| | -------------------------------------------------------------------------
| | Telecommunications, Transportation &
    Industrial Systems Business Unit

The Telecommunications, Transportation &
Industrial Systems Business Unit handled a wide range of
products and is engaged in diversified activities, which range
from the design and construction of large-scale projects to
industrial system distribution businesses involving industrial
machinery, construction machinery, and mining equipment
manufactured by Japanese manufacturers. Effective April 1,
2004, the Telecommunications, Transportation & Industrial
Systems Business Unit was abolished and the businesses which had
been included in this unit were transferred to the Power,
Transportation & Plant Project Business Unit, the
Machinery Business Unit (formerly the Motor Vehicles, Marine
& Aerospace Business Unit) and the Information Business Unit.

In large-scale projects, we leverage our
marketing capabilities, regional expertise, and financial
arrangement functions and build strategic alliances with major
domestic and overseas manufacturers, such as NEC Corporation,
Siemens AG and Komatsu, Ltd. in the field of communications
infrastructure projects, railway projects, and construction
equipment. Recently, we have been expanding our activities into
new regions, particularly greater China, Russia and CIS to
compliment activities in our primary Asia, North America and
South America markets. For example:



| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we are the prime contractor for the construction
    of a monorail system in Chongqing, China;                                                                                                   
|
| |  | we are supplying trains and track for the Taiwan
    High Speed Rail project, as a commercial leader of a consortium;                                                                            
|
| |  | we arranged financing for Tele Norte Leste
    Participacoes S.A. in Brazil for their procurement of
    telecommunication equipment from NEC Corporation and Siemens
    Aktiengesellschaft; and
|
| |  | we arranged a Yen denominated loan for the
    Telecommunications Network Expansion Project (II) in
    Uzbekistan.                                                                              

With respect to distribution activities in our
Industrial System Business Division, we distribute construction
machinery and mining equipment. Specifically, we are engaging in
the distribution of dump trucks and hydraulic shovels in
Australia by Komatsu Australia Pty Ltd., our associated company
acquired in

27



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##### 



2001. Furthermore, we are also trying to expand
construction machinery and mining equipment distribution in
other regions such as North and South America.


In conjunction with our effort to reevaluate and
restructure the businesses of subsidiaries and associated
companies, we sold the valve business of NBI Corporation and
reorganized Mitsui Bussan Machinery Co., Ltd. For more
information, see Item 5.A. Operating Results
and Note 23, EXIT OR DISPOSAL ACTIVITIES, to our
consolidated financial statements.

Competition in the business sector in which the
unit is engaged is increasingly intense. Competitors include
financial institutions, engineering companies, construction
companies, manufacturers and service providers. All of our
potential partners could become competitors.



| |                                                     
| | ----------------------------------------------------
| | Motor Vehicles, Marine & Aerospace
    Business Unit

The Motor Vehicles, Marine & Aerospace
Business Unit is comprised of the following divisions: First and
Second Motor Vehicles Divisions, Ship & Marine Project
Division, and Aerospace Systems Division. A brief description of
these divisions is provided below.

First
and Second Motor Vehicles Divisions

In our motor vehicles business, we undertake
activities such as the assembly and manufacturing, import and
export, and distribution of motor vehicles and their parts. For
example, we have been exporting Toyota, Subaru and motor
vehicles of other Japanese manufacturers to various countries
worldwide including Canada (Toyota), Chile (Toyota), Peru
(Toyota), Italy (Subaru), Germany (Subaru and Yamaha), Thailand
(Hino) and Malaysia (Daihatsu). We have set up subsidiaries and
associated companies in these countries for distribution
purposes.

We continue to proceed with the strategic
allocation of our financial and human resources to prioritized
areas of our motor vehicles business worldwide, such as
logistics and retail operations and retail finance and auction
businesses. For example:



| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have operated a retail finance company for
    Yamaha motorcycles in Indonesia since 1997;                                                                                                                                                                                                                                                  
|
| |  | we have been handling the logistics operations of
    automobile parts for Toyotas manufacturing operations in
    North America and Europe;                                                                                                                                                                                                  
|
| |  | we acquired a 15.7% interest in United Auto
    Group, Inc., an American automobile retail company which has
    expertise in retail operations in the United States and we have
    been seeking an opportunity to develop joint retail operations
    in various regions; and                                                                
|
| |  | we have also invested in an auction business for
    used cars as a business partner of Japan Automobile Auction,
    Inc. (J.A.A.), an auction trader in Japan. In order
    to establish ourselves in the automobile auction business,
    together with J.A.A., we established an automobile auction joint
    venture company in Germany.

Ship
& Marine Project Division

Our activities include marketing newly built
commercial vessels to ship owners and operators in Japan and
overseas, operating vessels, acting as a broker for the sale and
purchase of second hand vessels and for chartering vessels, and
marketing equipment for vessels to shipbuilding companies.

Along with these operations, we are engaged in
energy-related marine projects, including the joint ownership
and operation of Floating Storage and Offloading
(FSO) and Floating Production Storage and Offloading
(FPSO) facilities, and LNG vessels. We also provide
liquid petroleum gas (LPG) vessels to worldwide
clients, including oil companies. For example, we won projects
for FPSO in Angola with Chevron Group and in Vietnam with Conoco
Group.

In addition, we arrange various types of
financing for our customers such as syndicated loans involving
international export credit agencies and other financial
institutions for large scale transactions. In addition, we also
provide direct loans to some of our clients.

In connection with our other business activities,
we own and operate commercial vessels.

28



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##### 



Aerospace
Systems Division

We provide and arrange operating leases and
finance leases to various airlines worldwide and are engaged in
the sale and purchase of aircraft through our subsidiaries Tombo
Aviation Inc. in the United States and Tombo Capital Corporation
in Japan. As an agent in Japan for Airbus, we are engaged in
marketing Airbus aircraft, including the A380 super jumbo, to
Japanese airlines. Along with these activities, our subsidiary
Mitsui Bussan Aerospace Co., Ltd. represents Bell Helicopter
and, to date, has sold a total of 1,400 units in Japan. We are
actively introducing and marketing new types of aircraft,
including tiltrotor types.

The business sectors in which the above divisions
are engaged are highly competitive. Competitors include, but are
not limited to, other Japanese general trading firms,
international financial institutions and manufacturers.



| |                          
| | -------------------------
| | Information Business Unit

The Information Business Unit is involved in
information technology services and solutions, mainly through
finding potential and commercializing potential products and
business models developed in the United States and Europe. These
are delivered mainly to our customers in Japan through the
units 14 subsidiaries, and 11 associated companies
established by products and services.

The main business areas of this unit are as
follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we provide integrated hardware and software
    solutions such as network infrastructure devices, billing
    systems, enterprise applications, network security and customer
    relationship management for corporate enterprises, government
    organizations and telecommunication companies. These solutions
    are provided through subsidiaries and associated companies such
    as NextCom K.K., ADAMNET, Ltd., BSI Co., Ltd., and Nihon Unisys,
    Ltd. Nihon Unisys, Ltd. is a publicly listed company in Japan.
    In both Mitsui and Unisys Corporation in the United States we
    held a 28.5% voting share as of March 31, 2004;
|
| |  | we are promoting various mobile communication
    businesses through alliances with domestic cell phone service
    providers and manufacturers. Mitsui & Associates Telepark
    Corporation, our domestic subsidiary, is one of the major
    distributors of cell phones in Japan and sold 2.5 million cell
    phones for the year ended March 31, 2004. Mitsui &
    Associates Telepark Corporation went public in Japan in April
    2004;                                                                                                                                                                                                   
|
| |  | in the communication service business, we have
    invested in telecommunication service providers including
    POWEREDCOM, Inc as well as several broadcasting companies; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | as a consumer service and content provider, we
    provide television shopping services operated by QVC Japan,
    Inc., a joint venture with QVC Inc., and an entertainment and
    educational channel for children and parents operated by
    Kids Station Inc., our wholly-owned subsidiary, both of
    which are delivered over cable or digital satellite broadcast
    networks.                                                                                                                                                                                                                                                          

Our unit is dependent on the operating results of
our subsidiaries and associated companies, most of which are
located in Japan, where technological advancement is rapid and
competition is fierce. We also rely on our investments in
overseas technology, business models and business partners,
which enable us to provide competitive services and solutions in
the domestic market.



| |                          
| | -------------------------
| | Electronics Business Unit

The Electronics Business Unit offers electronic
materials, devices, and products including:



| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | IC chips;                                                                                                   
|
| |  | liquid crystal display panels;                                                                              
|
| |  | storage devices;                                                                                            
|
| |  | opto-electronics devices; and                                                                               
|
| |  | manufacturing equipment and systems for
    semiconductor and flat panel display related electronic devices.

In the past, we promoted the distribution of
electronic products mainly through export and import of highly
advanced products. However, with the advent of broadband
technology, users require more diversified products in the era
of rapidly advancing technology. To respond to this market
environment, this business unit

29



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has been active in investing in joint ventures
related to manufacturing materials and products, as well as in
strengthening distribution networks through domestic and
overseas subsidiaries.


The operating environment in Japans
semiconductor industry has changed dramatically since the
telecommunications bubble burst in 2001. While Bussan
Microelectronics Corp. has been our core semiconductor trading
subsidiary to date, we acquired another trading company, TEKSEL
Co., Ltd., to broaden our customer base and our product
portfolio in 2002. To maximize synergies of the combined
operations, in 2002 we established Xion Holdings, Inc., as a
holding company for the two subsidiaries.

In Japan, marketing and sales are conducted
primarily through subsidiaries such as Mitsui Bussan Digital
Corp. and MBK Microtek Inc. International marketing is done
primarily through strategic marketing subsidiaries such as the
newly established Mitsui Electronics Information (Shanghai) Co.,
Ltd., Mitsui Comtek Corp. in the United States, and MEE Mitsui
Electronics Europe, GmbH in Germany, and various corporate
overseas branch offices. In some cases marketing and sales are
conducted through the units own joint ventures with
Japanese manufacturers such as Shibaura Mechatronics Corp.,
Toyoda Gosei Co., Ltd. and Senju Metal Industry Co., Ltd.

The shift of electronic device production to
mainland China has intensified since 2002, prompting our
Electronics Business Unit to allocate additional human and
capital resources to bolster our Chinese business strategy.
Moreover, we have undertaken the following in China:



| |   |                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We concluded a broad strategic partnership
    agreement with SVA (GROUP) CO., LTD., a Chinese electronics
    manufacturer, and set up a joint venture company in Shanghai to
    market the strategic products of SVA (GROUP) CO., LTD. in
    China and worldwide; and                                                                                              
|
| |  | We added manufacturing capacity through contract
    manufacturing services at the Shanghai plant of Ferrotec
    Corporation, our domestic associated company which also
    manufactures ferrofluidic products, starting with the relocation
    of the Japanese semiconductor wafer production base with a
    monthly production capacity of 400,000 5-inch wafers.

The business area in which the unit is engaged is
experiencing increasingly intense competition and rapid
technical innovation. Competitors range from global corporations
to specialized companies. To survive and grow in this
competitive environment, the unit believes that the equipment,
services and financing it handles must be competitive in terms
of price, technology, professional expertise, and quality of
services. It must precisely recognize and forecast the demand of
users and promote sales and procurement from a global
perspective, as we have started to do in our operations in China.



| |                 
| | ----------------
| | Chemical Segment

The operations of our Chemical Segment include
the production, trading, and developing of chemical products
both in Japan and overseas. We also promote development of new
technologies in the fields of nanotechnology and biotechnology.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥83,003 million or 13.6% and ¥10,000 million
or 14.6% of our consolidated total, respectively.

The Chemical Segment consists of the following
units: Inorganic Chemicals Unit, Performance Chemicals Unit,
Petrochemicals Unit, and Plastics Unit. The Chemical Segment has
56 consolidated subsidiaries including Daito
Chemical Co., Ltd. (Inorganic Chemicals Unit), Novus
International, Inc. (Performance Chemicals Unit), Mitsui Bussan
Solvent & Coating Co., Ltd. (Petrochemicals Unit), and 45
associated companies such as Advanced Composites Inc.
(Plastics Unit), Honshu Chemical Industry Co., Ltd. (Performance
Chemicals Unit) and Agro Kanesho Co., Ltd. (Performance
Chemicals Unit).

Effective April 1, 2004, the business units
in this segment were reorganized, and these changes are referred
to in the following discussion of each business unit.



| |                         
| | ------------------------
| | Inorganic Chemicals Unit

The Inorganic Chemicals Unit, which has been
engaged in the trading of inorganic chemicals used as basic
materials in a variety of industrial sectors, is comprised of
the following three divisions:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Inorganic Raw Materials Division mainly
    handles basic inorganic materials such as sulfur, sulfuric acid,
    salt, alkaline substance, and mineral products and operates
    logistic systems and SCM systems for various industries in Japan
    and overseas. For example, we export sulfur, a byproduct of
    petroleum refining, to Asian countries, by operating specialized
    tankers;

30



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| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Inorganic Products Division focuses on highly
    processed inorganic products including electronic materials as
    typified by electrolytic copper foil, and high-purity chemicals
    employed in semiconductor production; and
|
| |  | The Nanotechnology and New Technology Business
    Creation Division, as an incubator operation, concentrates on
    developing and marketing new commercial materials.                                                               

In the Inorganic Raw Materials Division, in order
to overcome various unfavorable economic conditions such as
depletion in the supply of mineral resources or an increase in
acquisition cost of raw materials from our existing suppliers,
we have been searching for new supply sources in order to
participate in new business opportunities. For example, we
reinforced ties with subsidiaries and associated companies such
as Daito Chemical Co., Ltd., which manufactures photographic
chemicals and other industrial chemical products. In addition,
we reallocated resources by restructuring logistics operations,
and built up our capabilities in sulfur, soda ash, and
fiberglass materials in Asia, primarily in China. In China, we
expanded operations at our salt farm, which complements our
existing sea salt joint venture in Shark Bay, Australia which
supplies industrial salt to Japan and other Asian markets.

The Nanotechnology & New Technology Business
Creation Division installed proprietary diesel particulate
filters for buses and trucks in Tokyo and seven other
prefectures and cities.

Among new technologies, we anticipate that
nanotechnology in particular could be applicable to many fields.
Our wholly- owned subsidiary, Carbon Nanotech Research Institute
Inc., succeeded in developing technology to produce high-quality
carbon nanotubes, and completed construction of its prototype
facility. It has drawn attention and generated expectations for
the creation of new business opportunities, which include use in
development of stronger plastic materials by compounding
nanotubes with plastics and use in semiconductors to take
advantage of their high degree of conductivity. Carbon Nanotech
Research Institute Inc. was merged with Bio Nanotec Research
Institute Inc. and Device Nanotech Research Institute Inc. to
form the newly established Bussan Nanotech Research Institute
Inc. in April 2004.

Effective April 1, 2004, the Inorganic
Chemicals Unit and the Plastic Unit were integrated into a
single business unit named the Plastics & Inorganic
Chemicals Business Unit.



| |                           
| | --------------------------
| | Performance Chemicals Unit

The Performance Chemicals Unit deals with more
than 2,000 kinds of commodities involving life science,
biotechnology, inorganic chemicals and specialty chemicals, such
as food and feed additives, agricultural chemicals and
fertilizers.

In the field of life sciences, we handle
pharmaceutical products, pharmaceutical intermediate and raw
materials, food and feed additives such as amino acids and
enzymes. Novus International, Inc. a feed additive manufacturing
subsidiary in the United States produces and sells amino acids.
In addition, we focus on pharmaceutical manufacturing processes
as represented by Beta-Chem, Inc., a domestic subsidiary in
which we increased our investment to expand the scope of that
companys operations. We are also involved in research,
development and marketing in the field of biotechnology and
agricultural chemicals. In Singapore, we established Pharma
Logicals Research Pte. Ltd., an operation to research
antibodies, with Chugai Pharmaceutical Co., Ltd. and the Central
Institute for Experimental Animals.

In the field of agricultural chemicals, we have
been concentrating our effort on the distribution of
agricultural chemical products through our subsidiary, Certis
Europe B.V., which operates mainly in Benelux, France and the
UK. In 2002, we acquired Spiess-Urania Chemicals GmbH in Germany
to bolster our global sales network.

China is strategically important to the future of
the Performance Chemicals Unit. As such, we look to expand our
operations in that region. For example, in the Life Science
Division, we invested in a local amino acid manufacturer in
China. In the field of sorbitol food additives, we concluded a
memorandum of understanding for the creation of a joint venture
with Hong Kongs Global Bio-chem Technology Group Co., Ltd.
The production plant is scheduled for completion in March 2005
and will start operations in April 2005.

In the growing biochemical market, other Japanese
general trading companies are our competitors, and, while we are
strengthening ties with chemical companies worldwide, they could
also be potential competitors. To maintain our competitiveness,
specialized knowledge for each market and the capability to find
the best technological and logistical solution is essential.

31



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Effective April 1, 2004, the Performance
Chemicals Unit and the Petrochemicals Unit were integrated into
a single business unit named the Organic Chemical Business Unit.



| |                    
| | -------------------
| | Petrochemicals Unit

The Petrochemicals Unit has four divisions, the
Basic Petrochemicals Division, the Synthetic Fiber Intermediates
Division, the Organic Chemical Products Division, and the
Methanol & Ammonia Division. This business unit handles
petrochemical products such as Olefins, Aromatics, Styrene
Monomer, Vinyl Chloride Monomer, Paraxylene, Terephthalic Acid,
Ethylene Glycol, Acrylonitrile, Phenol, Bis-phenols, Acetone,
Acetic Acid, Methanol and Ammonia.

The units main activities involve trading
of the above mentioned products in Japan and worldwide through
business relationships with manufacturers and customers such as
Mitsui Chemicals, Inc., Toray Industries, Inc., Tosoh
Corporation, The Dow Chemical Company, BP p.l.c., and Bayer
Aktiengesellschaft. We have also invested in manufacturing
facilities and logistic facilities such as tank terminals in
Houston, U.S.A.; Ningbo, China; Bangkok, Thailand; Johor,
Malaysia; and Merak, Indonesia. We invested in shipping
companies in Japan, primarily in our subsidiary, Daiichi Tanker
Co., Ltd. For several years, the petrochemical industry has seen
fierce international competition, and major Japanese
petrochemical manufacturers have shifted their production to
Asian countries to capitalize on cheaper raw materials and other
costs. This unit provides global and integrated logistics
services to such overseas petrochemical companies including
operations by our own chemical tankers.

The unit has been successful in earning revenues
by increasing market share in certain products such as Olefins
and Styrene Monomer. Moreover, the steady growth of demand for
petrochemicals in the world, especially in China and other Asian
countries is driving profitability for this unit. For the year
ended March 31, 2003, the unit discontinued operations at
North American petrochemical manufacturing subsidiaries Trans
Pacific Glycols Inc. and Pacific Ammonia Inc., which suffered
from weak market conditions and high natural gas costs in North
America. For more information, see Note 4,
DISCONTINUED OPERATIONS, to our consolidated
financial statements.

During the past several years, most worldwide
petrochemical companies have been struggling to survive through
drastic restructurings which include the reorganization of their
sales structures and mergers and acquisitions. However, despite
the difficult environment for participants in the petrochemical
market, we believe that we remain competitive with other
Japanese general trading companies and plan to strengthen our
market position by expanding our trade volume and market share.
Our sales channels to various customers in diverse geographic
areas enable us to make geographical and/or time swap
arrangements. With our facilities for global logistics services,
which we consider to be well organized compared with other
Japanese general trading companies, we believe that we have
advantages in business transactions which improve our chances
for obtaining opportunities for business transactions.



| |              
| | -------------
| | Plastics Unit

The Plastics Unit traditionally handles various
kinds of raw plastic materials and plastic products in domestic
and overseas markets. The Plastics Unit also handles newly
developed electronic materials and products as well as services
through our SCM system. Our role is to respond to increasing
demand by offering a full range of plastic materials through our
global network. The Plastics Unit consists of 3 divisions and 1
department, and has 16 subsidiaries and 17 associated companies
around the world, with major business activities as provided
below:



| |   |                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Industrial Material Division handles
    traditional industrial materials, such as polyvinyl chloride and
    elastomers;                                                                                                                                                                                                          
|
| |  | The Molding Polymers Division focuses on molding
    materials such as polyolefin, ABS resin, engineering plastics
    and polystyrene;                                                                                                                                                                                                
|
| |  | The Advanced Materials Division covers relatively
    new offeringsmainly electronic materials, such as
    industrial films, carbon fiber, and optical fiber; and                                                                                                                                                                    
|
| |  | The SCM Business Development Department
    concentrates on SCM. We place top priority on customer-oriented
    business and global developments. We expanded SCM for printer
    and liquid crystal display panels as well as reinforced our
    resin compound operations in China, Southeast Asia, the United
    States and Europe.

32



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##### 



With the focus of economic activity shifting to
Asia, the Plastics Unit enhanced its business in China. In 2003,
we established Mitsui Plastics Trading (Shanghai) Co., Ltd., an
engineering plastics sales company and Mitsui e-Film (Suzhou)
Mfg. Co., Ltd., a manufacturing company engaged in processing
film for liquid crystal display applications in Suzhou. In 2004,
we established Mitsui International Logistics and Trade (Suzhou)
Co., Ltd., which provides logistics services as an export/import
trading company in the Suzhou Industrial Zone, one of
Chinas national development regions. It handles special
chemicals, gases, parts, and other materials used in
semiconductors and liquid crystal displays. The Plastics Unit
also set up a chemical etching company in Singapore, Mitsui
Electronics Asia Pte. Ltd. for a liquid crystal display panel
project.

In the plastic materials and products market
where the scope of their usage is expanding, other Japanese
general trading companies are our competitors. To keep our
competitiveness, specialized knowledge for each market and the
capability to find the best technological and logistical
solution is essential.

Energy Segment

The Energy Segment is engaged in the general
trading activities, manufacturing, development and distribution
of various energy-related products including: crude oil and
petroleum products such as gasoline, naphtha, jet fuel,
kerosene, diesel oil, fuel oil, asphalt, petroleum coke,
lubricants and liquefied petroleum gas (LPG), as well as LNG.
This segment consists of one business unit, the Energy Business
Unit, which has 7 business divisions as well as 22 subsidiaries
such as Mitsui Oil & Gas Co., Ltd., Kokusai Oil &
Chemical Co., Ltd. and Mitsui Oil (Asia) Pte. Ltd. and Arcadia
Petroleum Ltd., and 13 associated companies such as Mitsui Oil
Exploration Co., Ltd., Kyokuto Petroleum Industries, Ltd., Japan
Australia LNG (MIMI) PTY. Ltd. and Sakhalin Energy
Investment Company Ltd. The business divisions in the Energy
Business Unit are: the E&P Division, the Petroleum Overseas
Business Division, the Petroleum Downstream Business Division,
the Energy Solution Division, the Natural Gas First Division,
the Natural Gas Second Division and the Sakhalin Development
Division.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥53,814 million or 8.8% and ¥23,954 million
or 35.0% of our consolidated total, respectively.

We are one of the worlds major oil traders
based on our total daily trading volume of crude oil and
petroleum products (excluding derivative products) which for the
year ended March 31, 2003 amounted to approximately one
third of Japans total imports of 5.3 million barrels
per day on a consolidated basis. We also engage in the domestic
marketing and refining of oil and gas related products through
Kyokuto Petroleum Industries, Ltd., a jointly owned refinery
(50:50) by a subsidiary of ExxonMobil Corp. and Mitsui Oil &
Gas Co., Ltd.

The Energy Business Unit is engaged in numerous
LNG and oil development projects that require long lead-times
for their development and implementation. We are involved in
four LNG projects that are in operation:



| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Abu Dhabi Gas Liquefaction Limited in Abu Dhabi,
    in which we hold a 15% interest in LNG production and exporting
    activities, and which has some 5 million tonnes per annum
    LNG production capacity;
|
| |  | Northwest Shelf JV (NWS JV) in
    Australia, in which we hold an 8.33% interest in LNG production
    and exporting activities, and which has some 7.5 million
    tonnes per annum production capacity;    
|
| |  | Qatar Liquefied Gas Company Ltd. in Qatar, in
    which we hold a 7.5% interest in LNG production and exporting
    activities, and which has some 7.7 million tonnes per annum
    production capacity; and   
|
| |  | Oman LNG L.L.C. in Oman, in which we hold a 2.77%
    interest in LNG production and exporting activities, and which
    has some 6.6 million tonnes production capacity.                                      

At the same time, we are also proceeding with our
fifth project, the Sakhalin II project in Russia,in
which we hold a 25% interest. The majority of the LNG produced
by these ventures is sold to customers in Japan and Republic of
Korea on long-term contracts with remaining volumes sold to
customers in various LNG markets on short-term agreements.
Twenty-one million tonnes a year of LNG from these ventures are
supplied to Japanese utility companies, which is about 36% of
the total amount of LNG imported to Japan.

We participate in oil and gas related joint
venture activities as a non-operator minority equity
holder. We have yet to accumulate enough technical knowledge and
expertise to act as an operator of oil and gas projects.
Operators are generally responsible for the entire operational
process which includes the exploration

33



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##### 



for, and development and production of, oil and
gas resources. Therefore, given our non-operator status, we have
limited or no control over the manner in which operations are
conducted including the timing and scheduling of the
development, the capital expenditures, production of the
reserves, and the safety and environmental standards used in
connection with these joint ventures. However, we have an
operational and financial policy that we, as a general trading
company, seek to diversify our investments in various countries
and broad range of projects rather than acting as operators on
few specific projects.


In 2002, the NWS JV was awarded the supply
contract for the first LNG terminal in China, to be located in
the Guangdong province in southeast China. The contract volume
is 3.3 million tonnes per annum and first deliveries are
scheduled for 2006. Also in the NWS JV, construction work has
progressed on the fourth LNG producing train, which has a
capacity of 4.2 million tonnes per year and is scheduled to
begin in the latter half of 2004. In Qatar, the modification
work for debottlenecking on the existing LNG facilities is under
way. Upon completion in 2005, LNG production capacities shall be
increased by 1.5 million tonnes per year. These new LNG
producing capacities will supply both existing and new
customers. A LNG producing train is a liquefaction
plant to produce LNG from natural gas. Furthermore,
debottlenecking refers to additional investment and
modification work on the existing LNG producing plants or trains
to increase their production capacity, which focus on the
portions of existing plants or trains that restrict production
capacity.

As for the Sakhalin II project, we hold a 25%
interest in Sakhalin Energy Investment Company Ltd. Since 1999,
seasonal oil production continued from the Molikpaq facility on
the Astokhskoye field, offshore Sakhalin Island. In addition,
Sakhalin Energy announced on May 15, 2003, that it would
begin the second phase of development of the Sakhalin II
Project. This announcement marks the beginning of the full-scale
development of the Piltun-Astokhskoye oil field aimed at
year-round crude oil production, which is scheduled for 2006,
and the Lunskoye gas field, including construction of a
two-train LNG plant in the south of Sakhalin Island for export
to the Asia Pacific LNG markets, which is scheduled for 2007. At
its peak, we believe the facility is expected to produce
60 million barrels of crude oil and 9.6 million tonnes
of LNG per annum.

We have put high priority on expanding our oil
and gas equity reserves together with our associated company
Mitsui Oil Exploration Co., Ltd. Identifying and implementing
prospective oil and gas reserves are key factors to success in
this area. Our principal strategic region for this business is
Australia, South East Asia and the Middle East. For the year
ended March 31, 2002, we acquired exploration and
production rights for the Block 9 oil and gas field in Oman
and participated in the Bass Gas Project in Australia. These
newly acquired properties helped boost our oil and gas reserves
to 530 million barrels of oil equivalent (boe) at the end
of March 2004, despite the decrease in production of
28 million boe of equity barrels during the year ended
March 31, 2004. As of March 31, 2004, the proportion
of proved developed reserves to proved developed and undeveloped
reserves is about 28 percent and relatively low. See
Item 4.D. Property, Plants and Equipment Oil
and Gas Producing Activities and Supplemental
Information on Oil and Gas Producing Activities to the
consolidated financial statements included elsewhere in this
annual report.

On March 31, 2004, we executed a sales and
purchase agreement with Woodside Energy Ltd. to acquire a 40%
interest in each of the WA-28-L production license and WA-271-P
exploration permit areas in offshore Western Australia. The
total consideration for the acquisition was U.S.
$464.5 million. All conditions precedent including the
approvals from the Australian government were fulfilled on
May 14, 2004. The WA-28-L and WA-271-P areas are located
offshore northwest of Western Australia, covering total area of
3,261 km2. The license and permit contain
various fields, including Enfield, Vincent and Laverda oil
discoveries. Woodside Energy Ltd., which owns the remaining 60%
interest of these license and permit and acts as the operator,
announced the development of the Enfield oil project on
March 19, 2004 and development activities are already under
way. The total development expenditure of the Enfield oil
project prior to the expected commencement of oil production in
2006 is budgeted at approximately U.S. $1 billion.

We are also exploring the business potential of
various newly emerging business opportunities in the energy
field, including power retailing, environment-related business,
gas to liquids (GTL) and di-methyl ether
(DME). Completion of the 45 megawatt power
plant in Kashima in the Ibaraki Prefecture of Japan by the GTF
Institute Co., Ltd., our associated company in which we hold a
40% interest along with JGC Corp. and Ishikawajima-Harima Heavy
Industries Co., Ltd. which hold 40% and 20% interests,
respectively, was one of the important milestones for us in this
newly emerging business during the year ended March 31,
2002. The Japanese electric power market, which is the third
largest in the world based on total consumption per annum, was
historically monopolized by ten private regional electric
companies. These regional electric companies were assigned
separate geographical sales and market areas such as the Tokyo
Metropolitan District, Hokkaido District, and Okinawa District.
However, in March 2000, the Japanese government

34



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deregulated 30% of the Japanese electric power
market with respect to users exceeding 20 kilovolts. This
permitted new power providers, referred to as the power
producer and suppliers (PPS), to supply
electric power within the specified power range to those once
monopolized areas. As of August 2004, 15 PPSs were
established, including the GTF Institute Co., Ltd. As such, the
completion of the 45 megawatt power plant by GTF Institute
Co., Ltd., was significant because it was our first entry into
the Japanese electric power market.


The international markets for crude oil and
petroleum products are highly competitive and volatile, as these
commodities are traded on exchanges such as NYMEX in New York,
IPE in London, SIMEX in Singapore, and TOCOM in Tokyo. In the
worldwide trading business, we compete with international oil
companies, national oil companies in oil producing countries and
oil trading companies, including Japanese trading companies. In
maintaining our competitive edge under these circumstances, it
is critical for us to maintain good relationships with suppliers
and customers as well as to mitigate price risk by utilizing
hedging tools in the futures markets. We are also active in
seeking to secure long-term offtake contracts of oil and gas
products such as LPG and fuel oil purchased by Japanese utility
and transportation companies. Long-term product offtake
contracts are sales and purchase contracts for various products,
such as oil products, entered into by suppliers and buyers, or
offtakers, of such products for one or more years.
Concurrent with the offtake contracts, the seller of such
products usually enter into project financing arrangements
whereby the sale proceeds from such products are used to finance
a related project. For example, on March 25, 2003, our
Energy Segment entered into an offtake contract with PERUSAHAAN
PERTAMBANGAN MINYAK DAN GAS BUMINEGRA (PERTAMINA),
the national oil and gas company of Indonesia, and committed
itself to lift and pay for the petroleum products
scheduled to be produced from the planned facilities for a
period of time. Concurrently, our Electric Machinery, Plant
& Project Business Unit engaged in the structuring and the
arrangement of debt and equity project financings with various
lenders to provide a U.S. $200 million loan to PERTAMINA
whereby it will utilize the funds to build a facility at its
existing Balongan Refinery to produce 52,000 barrels per
day of unleaded gasoline. PERTAMINA will supply us with
petroleum products from its existing refineries and the proceeds
from the sales of these products will be used as the source of
debt service for the U.S. $200 million loan.

In the domestic refining and marketing business
for oil and gas related products, we face severe competition
from domestic oil refining and distributing companies due to the
structural surplus situation of refining capacities in Japan.
Kyokuto Petroleum Industries, Ltd. and Mitsui Oil & Gas Co.,
Ltd., our core associated company and subsidiary, respectively,
for domestic oil and gas refining and marketing business
activities, are in relatively sound financial situations owing
to the extensive restructuring of inefficient assets and work
force, and are pursuing efficient and competitive operations.

With respect to the oil and gas exploration and
production (E&P) business, the key to success is
to constantly increase or at least maintain certain volumes of
prospective oil and gas reserves as is the common practice with
international oil and gas companies. However, despite our
managements intensive focus on expanding our E&P
business activities, our oil and gas reserves are still far less
than that of national oil companies of the oil producing
countries and major oil and gas companies. Moreover, other
Japanese companies that participate in E&P activities do not
commonly disclose their proved oil and gas reserves. Based on
the limited proved oil and gas reserves information of other
Japanese E&P companies that are publicly available, we
believe that we have higher amounts of proved oil and gas
reserves compared to some of the Japanese E&P companies.
Accordingly, we believe that we are competitive with other
Japanese E&P companies.

With respect to our LNG related operations, we
have entered into various long term sales contracts, based on
take or pay conditions, with customers such as Japanese utility
companies. We believe, the LNG business has been structurally
changing since the late 1990ss as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Exploration and development of natural gas and
    production of LNG require significant capital and financial
    commitments. Moreover, this involves a broad range of logistical
    and technological expertise ranging from linking suppliers to
    distributors and consumers while developing plants in order to
    efficiently extract and liquefy the natural gas for transporting
    and regasifying the LNG. Up until the mid-1990s, purchase
    commitments by buyers with full take or pay
    obligations for a period of 20 years or more had been an
    essential element for equity holders, distributors and sellers
    of LNG project to make the capital and financial commitment to
    build LNG production facilities. These equity investors resisted
    making a capital and financial commitment without being able to
    secure a stable long term offtake agreement. In recent years,
    however, equity holders of several LNG projects have been making
    investments without fully secured long-term purchase commitments
    from buyers.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Due to technological innovations in the last
    decade, LNG producers have successfully reduced capital costs
    with respect to the construction of LNG production plants and
    LNG tanker ships. Technological innovation also has enabled the
    producers to enlarge the design capacities of LNG production
    plants and LNG tanker ships allowing them to benefit from
    economies of scale. These technological developments allow LNG
    to be more competitive with other types of energy sources.
|
| |  | In order to adjust the supply and demand balance
    for LNG suppliers, the spot LNG market has been expanded,
    whereby the ratio of spot trade in relation to the worldwide LNG
    contracts rose to 8.1% in 2003 from 1.3% in 1992.                                                                                                                                                                                                                                                                            
|
| |  | In addition to traditional LNG markets in Japan,
    Republic of Korea, Taiwan and Europe, new markets have been
    emerging in countries such as China, India and the United States
    due to an increasing demand for electricity. Considering the
    sizable economies of these countries and the increasing
    popularity of LNG as clean energy, the LNG market
    has been developing worldwide.                                                                                                        

The recent structural changes in the LNG
industry, including the ones above, continue to have a mixed
effect on our business operations. For example, due to the
reduction in capital costs from technical innovations, the
emergence of the spot LNG market and other factors, not only has
the LNG industry become more competitive among the existing
energy-related companies, but it has also seen an increase of
new entrants.



| |                                         
| | ----------------------------------------
| | Consumer Products & Services
    Segment

The Consumer Products & Services Segment is
engaged in the business of trading various consumer-related
products such as foods, textile and fashion, general
merchandise, building materials, real estate development
including construction, catering, uniform rental, building
maintenance, services for supporting retailers such as
merchandising, logistics and inventory management and investment
for the above-mentioned business areas in Japan and various
other overseas markets all over the world.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥116,254 million or 19.1% and
¥12,554 million or 18.4% of our consolidated total,
respectively.

This segment is comprised of the Retail Unit,
Foods Unit, Textile & Fashion Unit, General Merchandise Unit
and Service Business Unit, and owns 64 subsidiaries including
MITSUI FOODS CO., LTD. (Foods Unit, formerly Sanyu Koami Co.,
Ltd.), Wilsey Foods Inc. (Foods Unit), Mitsui Norin Co., Ltd.
(Foods Unit), DAI-ICHI BROILER CO., LTD. (Foods Unit), Bussan
Real Estate Development Co., Ltd. (Service Business Unit),
Mitsui Bussan House-Techno, Inc. (Service Business Unit), Alta
Moda International Ltd. (Textile & Fashion Unit) and Retail
System Service Co., Ltd. (Retail Unit), and 76 associated
companies including Mikuni Coca-Cola Bottling Co., Ltd. (Foods
Unit), Shin Mitsui Sugar Co., Ltd. (Foods Unit), Kadoya Sesame
Mills Incorporated (Foods Unit), AIM Services Co., Ltd. (Service
Business Unit), ALCANTARA S.p.A. (Textile & Fashion Unit),
Max Mara Japan Co., Ltd. (Textile & Fashion Unit), Nippon
Brunswick Co., Ltd. (General Merchandise Unit) and Sumisho &
Mitsuibussan Kenzai Co., Ltd. (Service Business Unit).

Effective April 1, 2004, the business units
in this segment were reorganized, and these changes are referred
to in the following discussion of each business unit.



| |            
| | -----------
| | Retail Unit

Among our business units, the Retail Unit has the
unique function of focusing on providing retailers with support
services instead of trading commodities. For retailers to
concentrate on their core activities of services to shoppers and
operations of their stores, this unit offers:



| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | distribution, inventory management and
    procurement of packing and packaging material services, by
    integrating the information from sales at retailers with
    production processes at manufacturers, to achieve the most
    efficient logistics and cost reductions; and
|
| |  | planning capabilities as well as
    customer-oriented production services and merchandising of
    foods, beverages and sundries.                                                                                                                                                

This unit concentrates on the Japanese market as
our primary business target, operating various subsidiaries
including Retail System Service Co., Ltd. and Vendor Service
Co., Ltd.

We maintain a comprehensive alliance with the
Ito-Yokado Group,one of Japans leading diversified
retailers. The Ito-Yokado Group operates shopping malls,
supermarkets, convenience stores such as 7-Eleven,

36



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and restaurant chains such as Dennys.
Furthermore, through their subsidiary, IYBank Co., Ltd., they
engage in banking and credit card operations in Japan. We
utilize our SCM models to supply:




| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | packaging materials to vendors who supply food
    products such as boxed meals to more than ten thousand 7-Eleven
    stores in Japan; and
|
| |  | fast food and recreational products including
    toys and games to 7-Eleven stores.                                                       

Our alliance with the Ito-Yokado Group is one of
the core elements in the operation of our Retail Unit because it
provides us with increased opportunities to engage in retail
service distribution, inventory management and merchandising to
the various vendors, retailers, distributors, restaurants and
wholesalers that engage in business transactions with the
Ito-Yokado Group. Moreover, we have also entered into joint
ventures with the Ito-Yokado Group including projects to develop
storage and transportation systems in Japan.

Our primary competitors are Japanese general
trading companies. Our success depends on whether we can provide
our customers with products and services to their satisfaction.

Effective April 1, 2004, the Retail Unit and
the Foods Unit were integrated into a single business unit and
renamed the Foods and Retail Business Unit.



| |           
| | ----------
| | Foods Unit

Through Mitsuis global network and various
subsidiaries in the unit, the Foods Unit is engaged in:



| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | trading, production, marketing and distribution
    of various goods including wheat, rice, soybeans, canola, corn,
    milo, alcohol, molasses, animal and vegetable oils, wheat flour,
    feed, sugar, starch, processed foods, fresh and frozen
    vegetables and fruits, marine products, meat, tea, coffee,
    beverages, condiments, cocoa, and dairy products.
|
| |  | retail and distribution in the value chain
    ranging from production to inventory management and logistics,
    primarily led by MITSUI FOODS CO., LTD., our nationwide
    wholesaler subsidiary.                                                                                                                                                                    

We purchase grain, oilseeds, and raw sugar from
the United States, Canada, Brazil and Australia and sell them
primarily in Japan and other Asian countries. We also purchase
coffee, tea leaves, juice, marine products, and dairy products
from respective major supply sources around the world and
deliver them primarily to Japan. For example, tuna cultivated in
the western Mediterranean Sea and meat products from the United
States are generally imported to Japan. We are also engaged in
the domestic production and sale of broiler chicken through
DAI-ICHI BROILER CO., LTD., our subsidiary in Aomori Prefecture,
Japan.

To respond to the growing variety of needs in the
retail sector and provide stable supplies of goods, Mitsui has
positioned the United States as an important source of
foodstuffs and the core of its global food supply strategy:



| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the cereals and grains area, we have formed a
    joint venture, United Harvest, LLC, with Cenex Harvest States,
    Inc., an agricultural cooperative in the United States. Our
    exports of wheat from the United States amount to approximately
    four million tonnes annually, thus ranking us among the large
    suppliers in the United States.         
|
| |  | We have formed another joint venture with Cenex
    Harvest States, Inc., Ventura Foods, LLC, which is one of the
    largest suppliers of cooking oils for the institutional market
    in the United States. We invest in this company through Wilsey
    Foods Inc.                                                                                                
|
| |  | We have invested in Cheese & Protein
    International LLC in California, established by Land
    OLakes, Inc., a dairy cooperative in the United States.
    Cheese & Protein International LLC began operations at
    its new plant in April 2002. This operation is one step towards
    our strategy of building a major supply center in the United
    States.

Outside the United States, we are working to
strengthen our positions primarily in Brazil and China. Key
companies include Mitsui Alimentos Ltd., a coffee exporting
and processing company in Brazil, which provides stable supplies
to our worldwide customers. Similarly, we began operations of
logistics enterprises for distributing temperature-controlled
food products in China through Shanghai Xintiantian Dazhong Cold
Chain Logistics Co., Ltd in 2003 and Beijing Sanxin
Refrigeration Logistics Co., Ltd in 2001.

The needs of our retail and distribution
operations, including requirements for reducing distribution
costs, providing for stable supply such as cold chain systems
and speeding up operations, have become more diversified in
recent years. We have strengthened our sales to the Ito-Yokado
Group including Seven-Eleven

37



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Group, and other local retailers throughout Japan
by bolstering the operating base of MITSUI FOODS CO., LTD.,
which engages in various business transactions with general
merchandise stores, convenience stores, and catering and
restaurant chains. MITSUI FOODS CO., LTD. plays a vital role in
our Foods Units wholesale operations.


In food-manufacturing operations, during the year
ended March 31, 2004, we increased our stake of Mitsui
Norin Co., Ltd., which is one of the major manufacturers of tea
leaves in Japan, and made it our subsidiary under the hope that
it performs as a core company in our beverage business by
bringing about synergies among our existing network for
procurement of raw materials and domestic distribution. For more
information, see Note 3, BUSINESS COMBINATIONS,
to our consolidated financial statements.

Our strength lies in overseas procurement of food
products. For example, our import of grain, oilseeds and tea
leaves to Japan maintains a large share in Japan due to our long
lasting relationship with overseas suppliers and major buyers in
Japan. Moreover, as demonstrated by our alliance with Cenex
Harvest States, Inc. in the United States, we continuously
endeavor to form alliances with partners in other regions,
strengthen overseas product procurement capabilities, and expand
our position in major overseas production areas.

Competition varies depending on the goods and is
generally based on the price or the quality of the goods. Many
Japanese general trading companies, international producers and
traders are competitors to varying degrees with respect to most
of the food products we handle. In the domestic food wholesale
business, competition among suppliers is increasingly fierce. To
recover lower margins, wholesalers are making efforts to
increase revenues and reduce costs on logistics, sometimes by
means of mergers and acquisitions to achieve more economies of
scale.

Effective April 1, 2004, the Retail Unit and
the Foods Unit were integrated into a single business unit named
the Foods and Retail Business Unit, and other businesses were
transferred to the newly established Consumer Service Business
Unit.



| |                       
| | ----------------------
| | Textile & Fashion Unit

The Textile & Fashion Unit engages in the
trading, manufacturing and distribution of various goods
including textile raw materials, fabrics, synthetic fibers,
apparel, interior and industrial goods.

Effective April 1, 2004, the
Textile & Fashion Unit and General Merchandise Unit
were integrated into a single business unit named the Lifestyle
Business Unit.

We actively provide innovative services to
accommodate new developments in the fashion and apparel markets.
Our main business activities are divided into two categories:



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | original equipment manufacturing
    (OEM) business for domestic apparel manufacturers;
    and                     
|
| |  | business transactions involving brand name
    products from Europe and the United States for the Japanese
    market.

In the field of apparel and OEM, we play active
roles at various stages in the value chain including design,
planning and procurement of materials as well as sewing and
processing. To meet our goals for minimizing costs and enhancing
quality, we work with apparel makers and related companies on an
ongoing basis to select the optimal materials and processing
centers from the wide choice available not only in Japan but
also in Europe, the Americas, elsewhere in Asia, and other areas.

We regard China as an important manufacturing
base and also a significant consumer market as well. To further
strengthen our OEM business capabilities and our provision of
support services such as manufacturing or exhibition management,
we utilize our subsidiaries and associated companies such as
Mitsui Bussan Inter-Fashion Ltd. and Alta Moda International Ltd.

In the OEM business for domestic apparel
manufacturers, we have alliance partners with respect to various
goods. In this line of business, our competitors include other
apparel traders, because apparel manufacturers form partnership
with several apparel traders separately at the same time. As
such, we strive to provide higher quality of support services
for OEM than those of our competitors to attract apparel
manufacturer customers.

With respect to brand merchandise-related
businesses in Japan, we engage in business transactions
involving many internationally well-known branded merchandise
from Europe and the United States such as Burberry, Paul Stuart,
Pierre Cardin, Trussardi, Valentino, Max Mara and Mango. Based
on the license

38



---



##### 



agreements we enter into with the respective
European and American licensors, we sublicense certain rights
including, but not limited to, marketing and manufacturing
rights to apparel makers and wholesalers, while we retain the
exclusive distributorship rights. We establish subsidiaries
dealing in such European and American brand merchandise in order
to distribute the products nationwide to department stores and
wholesalers, or we sell the products at our own retail outlet.


In brand merchandise-related businesses, our
competitors are other general trading companies and apparel
specialty traders. Itochu Corporation, Mitsubishi Corporation,
and other Japanese general trading companies competing in this
business area are also promoting brand name products businesses.
The keys to keep our competitiveness are how to raise the value
of the brand which we promote in the market and how to increase
the number of valuable brands we are engaged in.



| |                         
| | ------------------------
| | General Merchandise Unit

The General Merchandise Unit is engaged in the
trading, production, processing and distribution of various
merchandise goods such as general household and consumer goods
light industrial machinery and supplies, medical equipment and
office automation systems as set forth below:



| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We supply a wide range of top-quality consumer
    goods imported from around the world which include high-quality
    Sonicare ultrasonic toothbrushes, Brunswick bowling equipment
    and systems, MAGLITE handy flashlights, and top-of-the-line
    Lladro porcelain;      
|
| |  | We trade woodchip and pulp, furthermore, we
    develop several afforestation projects in Australia, some of
    which are jointly promoted with several Japanese partners
    including paper manufacturing companies;                                                         
|
| |  | As for cement, paper and ceramic products, we
    closely partner with Japanese manufacturers and participate in
    joint venture production operations in China to sell products
    there and export them from China, as well as handling products
    in and from Japan; and

In the business area of consumer-related goods
such as sporting and leisure goods, continuous change in
lifestyles worldwide require new business models which reflect
such changes. Accordingly, we seek to locate new materials and
new suppliers, to arrange effective distribution methods and
develop attractive brand names. Such efforts are realized
through a combination of our human and organizational network
and industrial expertise.

Most Japanese general trading companies are
generally our competitors. We also compete with other
product-specific business enterprises with respect to products
such as cement, tires, paper and pulp, and office equipment.



| |                      
| | ---------------------
| | Service Business Unit

The Service Business Unit was established for the
year ended March 31, 2003 to build flexible new business
models that extend beyond our traditional strengths in trading
and distribution and to focus on services to consumers as
earnings sources. Major business areas of this unit consist of
the following:



| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | real estate development including construction,
    sale and leasing of houses, condominiums and office buildings
    and related construction material businesses; and
|
| |  | outsourcing services including catering, uniform
    rental, building maintenance and nursing care-related services.                                                   

In real estate development businesses, our core
area is development of condominium and commercial property in
the Tokyo metropolitan area and construction and marketing of
high-end home units, which are sold by Mitsui Bussan
House-Techno, Inc. under the Mitsui House brand. MBK Real Estate
Ltd. handles the sale of unit houses in the southern California
market, as well as commercial property on the west coast of the
United States. In the related business activities, our
associated company Sumisho & Mitsuibussan Kenzai Co., Ltd.
supplies construction materials in the domestic market.

In the outsourcing businesses, our catering
service business is active through AIM Services Co., Ltd., a
joint venture with ARAMARK Corporation in the United States,
which provides food and catering services in Japan. In July
2002, AIM Services acquired Atlas Corporation, which has a
majority stake in MEFOS Co., Ltd., a provider of hospital
cafeteria food services in Japan. We integrated the operations
of AIM Services and MEFOS Co., Ltd. to serve as the
foundation for further business expansion in this business area
in Japan.

39



---



##### 



We are also in the process of cultivating new
opportunities in medical services through our subsidiary,
Medivance Co., Ltd.

In the catering service business, a combination
of cost and quality advantage of both food and servicing
management is the key factor for competition. Several Japanese
catering companies and a couple of foreign-affiliated companies
are our competitors in this area. Competitors in the uniform
rental business are rather limited regionally, including some
linen suppliers and dust control companies. Our operation in
medical equipment rental business and nursing care business
remains local, and competition is limited within Japan, however,
the market is expected to grow reflecting the rapid aging of
Japan and some general trading companies are also participating
in this area. In the real estate development business area,
competition is fierce. We usually form a consortium by
partnering with major construction companies and/or a developer
to participate in certain transactions, but members of a
consortium vary depending on the business opportunity.

Effective April 1, 2004, this unit was
integrated into the Consumer Service Business Unit along with
other consumer oriented business which had previously been
included in the Information Business Unit and the Foods Unit.



| |                                          
| | -----------------------------------------
| | Domestic Branches and Offices
    Segment

In Japan we have domestic branches and offices in
27 cities to promote our business with customers located in each
area. This segment is comprised of:



| |   |                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | branches and offices located in areas such as
    Osaka, Nagoya, Fukuoka, Sapporo, Sendai, Hiroshima;                                                                                                                                                                                                                                                                        
|
| |  | 20 subsidiaries including Sadoshima Metal Co.,
    Ltd., located in Osaka whose business line is sales of
    non-ferrous metal products, and Chita Futo Co., Ltd., located in
    Chita, Aichi Prefecture, whose business line is warehousing and
    wharf-related business; and                                                                                           
|
| |  | 16 associated companies including Konan Utility
    Co., Ltd., located in Kobe, Hyogo Prefecture, whose business
    line is production of steam for power generation and processing
    of wastewater, and Kanebo Malaysia Spinning Mills Sdn. Bhd.,
    located in Malaysia, whose business line is spinning and dyeing
    of synthetic fiber and sales of processed yarn.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥39,962 million or 6.6% and ¥11,606 million
or 17.0% of our consolidated total, respectively.

Two major offices in Japan which are located in
Osaka and Nagoya are primarily engaged in the products and/or
services similar to that of the Head Office.

Effective April 2004, the Domestic Branches and
Offices Segment was abolished. As a result, the operating
results previously reported by domestic branches and offices are
reviewed based on the categories of products and services by
each Chief Operating Officer of the related business units in
the Head Office.



| |                 
| | ----------------
| | Americas Segment

The Americas Segment trades in various
commodities and conducts related business led by overseas
trading subsidiaries in North, Central and South America.
Mitsui & Co. (U.S.A.), Inc., or Mitsui U.S.A., manages
the business of the segment as the center of the regional
strategy.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥39,871 million or 6.5% and ¥161 million or
0.2% of our consolidated total, respectively.

This segment consists of 10 trading subsidiaries
including Mitsui U.S.A., Mitsui & Co.
(Canada) Ltd., Mitsui Brasileira Importacao e
Exportacao S.A., Mitsui Chile Ltda., and other
38 subsidiaries owned by these trading subsidiaries
including Portac Inc., Channel Terminal Corp.,
Westport Petroleum Inc., Mitsui Tubular Products, Inc.,
Bioproducts Inc. and Mitsui Comtek Corp. and
3 associated companies including TAMCO.

The main subsidiaries within our Americas Segment
and their respective principal lines of business are as follows:



| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Westport Petroleum Inc. is engaged in
    international trading of petroleum products and crude oil;                                                                             
|
| |  | Mitsui Steel Development Co., Inc. is engaged in
    investments in steel manufacturing and fabrication projects and
    sales of steel products in the United States and Canada;
|
| |  | Bioproducts Inc. is engaged in manufacture and
    sales of animal feed additives;                                                                                               

40



---



##### 





| |   |                                                              
| | - | -------------------------------------------------------------
| |  | Mitsui Comtek Corp. is engaged in IT-related
    business;   
|
| |  | Mitsui Foods Inc. is engaged in sales of canned
    food; and
|
| |  | Portac Inc. is engaged in operation of lumber
    business.  

Mitsui U.S.A. is our largest overseas subsidiary,
and carries out many diversified business activities together
with our affiliated companies in collaboration with the
operating segments of the Head Office. Mitsui U.S.A. has been
leading our entry in the U.S. market, and we believe that Mitsui
U.S.A. is one of the major exporters of American products.

Mitsui U.S.A. has its corporate head office in
New York City. Other offices are located in Chicago, Cleveland,
Detroit, Houston, Los Angeles, Nashville, Portland, San
Francisco, Seattle and Washington, D.C. Mitsui
U.S.A.s 10 operating divisions are: Steel and Coal,
Metals, First Machinery, Second Machinery, Electronic and
Information Business, Chemicals, Energy, Foods, General
Merchandise-Property Development-Textile and Transportation
Logistics.

Mitsui U.S.A. engages in business transactions
involving a full range of chemical products, such as
petrochemicals, specialty chemicals and crop nutrients and
protection chemicals. For example, we export various synthetic
fiber intermediates produced by United States manufacturers,
including Union Carbide Corporation, to Japan and other
countries in Asia.

Mitsui U.S.A.s Steel department supplies
the semi-processed steel used to make specialty products for
construction, automobiles, appliances, packaging, cutlery, oil
and storage terminals, among others. The core of its domestic
business is procuring high-tech products from United States
suppliers such as Ispat Inland Inc. and Wheeling-Nisshin, Inc.
for automotive, appliance, heating and air conditioning
manufacturers. Mitsui U.S.A. exports raw materials for base
metals such as copper, lead and zinc to Japan. It also handles
transactions in refined copper, aluminum, lead and zinc ingots,
and precious metals. It is also involved in complicated trading
transactions using various markets and entering into multiple
transactions between buyers and sellers in the Pacific Rim, the
Americas and Europe, based on the London Metal Exchange, COMEX
and NYMEX prices.

The Aerospace, Marine & Motor Vehicle
department of Mitsui U.S.A. handles the sales and leasing of
commercial aircraft, exports defense and aerospace products to
Japan and undertakes shipping and offshore oil and gas projects.
Mitsui U.S.A.s Electrical Machinery department focuses
most of its activities on exports from the United States to the
Japanese market, imports from Japan and other countries,
offshore trades and electric power wholesale business. We,
together with General Electric Company, have received orders
from Tokyo Electric Power Company Inc. for the supply of major
equipment and services with respect to its Advanced Combined
Cycle power projects at thermal power stations in Yokohama and
Chiba.



| |               
| | --------------
| | Europe Segment

Europe Segment trades in various commodities and
conducts related businesses led by overseas trading subsidiaries
in Europe and Africa. Mitsui & Co. Europe PLC (Mitsui
Europe) is authorized to manage the business of this
segment as the center of its regional strategy. Also, this
segment is responsible for carrying out diversified business
activities together with its affiliated companies in
collaboration with the operating segments of the Head Office.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥19,965 million or 3.3% and ¥693 million or
1.0% of our consolidated total, respectively.

This segment consists of 16 trading subsidiaries
including Mitsui Europe, Mitsui & Co. UK PLC,
Mitsui & Co. Deutschland GmbH, 9 subsidiaries including
Cohen & Wilks International Ltd. and Plalloy MTD B.V.
and 8 associated companies including Companhia Industrial De
Resinas Sinteticas.

Mitsui Europe, our wholly-owned subsidiary with
its head office in London, manages the overall business
activities in Western Europe, Africa, Central and Eastern Europe
through its 14 operating subsidiaries, 10 branch offices and 13
liaison offices. Mitsui Europe collaborates with our
subsidiaries and associated companies of other operating
segments to leverage our comprehensive business engineering
capabilities to meet the ever changing needs of our global
customers.

41



---



##### 



We engage in various trading, manufacturing, and
logistics-related activities in addition to making strategic
investments. For example,



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | August 2002: Mitsui Europe invested in RETAINA
    GROUP Limited, which is engaged in database-controlled
    automobile security and identification systems. This strengthens
    our vehicle security and parts-marking business.                                                                                                                                                                                                        
|
| |  | November 2002: Mitsui Europe invested in Oxford
    Biosensors Limited which increased our exposure to the
    industrial, governmental, and academic biotechnology and
    nanotechnology sectors, including the Universities of Oxford and
    Cambridge. Oxford Biosensors Limited makes high-speed, hand-held
    medical diagnostic tools that accurately measure various
    blood-based parameters using finger prick blood samples.
|
| |  | March 2003: Mitsui & Co. Southern Africa
    (Proprietary) Ltd., which is under the supervision of Mitsui
    Europe, invested in National Auto Glass (Proprietary) Limited, a
    South African automobile glassmaker, broadening business
    capabilities to include everything from raw materials supply to
    end-product sales.                                                                                                     



| |                             
| | ----------------------------
| | Other Overseas Areas Segment

This segment includes all of our region-based
subsidiaries, liaison offices and affiliated companies excluding
those in our Domestic Branches and Offices, Americas and Europe
Segments. The subsidiaries, liaison offices and affiliated
companies in this segment are located primarily in China, the
member countries of Association of Southeast Asian Nations
(ASEAN), Oceania, the Middle East, Southwest Asia
and CIS. The Overseas Areas Segment is engaged in business
activities that are essentially similar to that of Mitsui. We
conduct business activities in all industry sectors based on our
specialized knowledge particular to that region.

Gross profit and net income for this segment for
the year ended March 31, 2004 were
¥24,060 million or 3.9% and ¥7,758 million
or 11.3% of consolidated total, respectively.



| |      
| | -----
| | China

China has been a focus of recent global attention
as an attractive market, with 9% growth in gross domestic
product in 2003, accession to the World Trade Organization
(WTO), and a growing reputation as an efficient and
cost effective manufacturer of goods. Based on our assessment
that there is a tremendous potential in Greater China which
includes mainland China, Hong Kong and Taiwan, we have
considerably increased our presence in the market there. We have
been increasing our operations in, and shifting management
resources to, greater China in order to expand and strengthen
our business operations involving products such as automobiles,
consumer products, IT, electronics, energy, and metals, while
reinforcing our transportation and logistics services.

Our presence in China comprises of eight local
subsidiaries, including trading subsidiaries such as
Mitsui & Co., (China) Ltd. in Beijing and
Mitsui & Co. (Hong Kong) Ltd., as well as subsidiaries
in Shanghai and other strategic areas. In addition, we have
established representative offices in 12 cities in China as of
July 2004.

In April 2003, we realigned our operations in
China with the aim of creating a streamlined system to manage
our business in China, including Hong Kong. The realignment
included establishing three operating units in Beijing, Shanghai
and Hong Kong, each reporting to our single General
Representative in China. By centralizing decision-making
authority for our Chinese operations, we expect the new
structure to be better equipped to respond to and effectively
address new business opportunities. The following are some
examples of our activities:



| |   |                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We supply steel products such as steel sheets for
    use in automobiles, particularly those produced in Shanghai by
    U.S. automobile makers. We have formed an alliance with Shanghai
    Baosteel Group that enables us to maintain 7 steel service
    centers throughout China, and are in the process of creating an
    expanded system for distribution of our steel products.
|
| |  | In October 2002, we entered into a long-term
    collaboration agreement with New Hope Group, a privately-owned
    Chinese company, through which we are planning a number of
    projects, including housing, planting of trees in urban areas
    and businesses related to the food industry.                                                                                       

42



---



##### 





| |   |                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In March 2003, we entered into a comprehensive
    strategic alliance with China Postal Logistics Co., Ltd. Through
    this alliance, we are now in a position to utilize the
    facilities and distribution networks of Chinas postal
    service, the China State Post Bureau.
|
| |  | We are currently involved in a project to export
    LNG from Western Australia to provide gas and electricity in the
    Hong Kong and Canton Province area.                                                                                                                      

Moreover, we believe that the relationships
between China and member countries of ASEAN will be further
strengthened through the ASEAN Free Trade Area, or AFTA,
framework. In view of this trend, we are moving forward with
strategies to build closer links between China and other
regions, ASEAN in particular, where we can take advantage of our
business strength. For example, through our experience working
with Hino Motors Ltd., in retail, marketing, manufacturing and
other automobile related activities, we have developed
relationships with the automobile industry in Thailand.



| |             
| | ------------
| | ASEAN Region

In the ASEAN region, overseas offices, trading
subsidiaries and associated companies jointly collaborate with
the Head Office and engage in various business activities
involving, amongst other things, chemical and metal products and
industrial type projects. For example, in Indonesia, several
industrial projects that were interrupted by the 1997-1998
financial crises have resumed. For the year ended March 31,
2003, we won an approximately ¥32 billion contract for
the engineering, procurement and construction of a fertilizer
plant with P.T. Pupuk Kujang, an Indonesian fertilizer
company in conjunction with the export credit facilities
provided by the Japan Bank for International Cooperation.



| |        
| | -------
| | Oceania

In Australia, Mitsui & Co. (Australia)
Ltd. is active in the development of minerals such as iron ore
and coal, energy and agricultural exports in collaboration with
corresponding operating segments mainly in the Head Office.

Our strategy in Australia is based on forging
alliances and joint ventures with local partners. The following
are some examples of our recent projects in Australia:



| |   |                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In April 2002, we entered into an alliance with
    Anglo Coal Australia Pty Ltd. whereby we acquired 49% equity in
    that companys undeveloped deposit of coal at Theodore,
    Dawson and Taroom, as well as 30% equity in their operating mine
    at German Creek. In return, Anglo Coal acquired 51% equity in
    our Moura mine and agreed to manage the operations there.
|
| |  | In July 2002, the Robe River Project, a joint
    venture with Rio Tinto Limited, Nippon Steel Corporation and
    Sumitomo Metal Industries Limited began shipments from a new
    iron ore mine in Western Australia, West Angelas, to Japanese
    steel mills and other foreign customers.                                                                                      
|
| |  | We have entered into a joint venture project with
    Tarong Energy Corporation Ltd. and Tokyo Electric Power
    Company Inc. to own and operate the 450 megawatt
    Tarong North Coal Fired Power Plant.                                                                                                                                                                         



| |                
| | ---------------
| | The Middle East

The Middle East is the source of approximately
45% of Japans energy supply, and as such, we have been
actively developing our business there. We helped secure
supplies of LNG to Japan from Qatar, Abu Dahbi and Oman, and
took part in a U.S. $200 million joint contract with
Tokyo Engineering Corporation for an ethylene glycol
manufacturing plant in Saudi Arabia and an order to supply steel
pipes for a gas pipeline in Abu Dahbi.



| |               
| | --------------
| | Southwest Asia

Our operations in India were traditionally
handled by branch offices in New Delhi, Calcutta, Madras and
Bombay and were concentrated primarily in exporting commodities,
such as iron ore, finished iron and steel products, textiles,
and marine products, to Japan and other areas of the world.
However, with the increasing deregulation of the Indian economy,
in March 2003 we established Mitsui & Co.,
India Pvt. Ltd., which we believe will allow us to
create a more expansive business model. Through
Mitsui & Co., India Pvt. Ltd, we expect
not only to engage in import and export-related transactions but
also to pursue investment opportunities in domestic distribution
channels.

43



---



##### 



Our current business activities in India are
concentrated in iron and steel, as well as machinery. In exports
of iron and steel, we have expanded from the Middle East, our
traditional market for Indian commodities, to the United States
and China. We believe that China, in particular, will continue
to have record demand for iron and steel products, and we have
made substantial progress there in exporting iron ore. In the
machinery business, we are currently in the process of building
a facility for receiving and supplying LNG for Petronet LNG
Ltd., an energy company based in India.



| |                  
| | -----------------
| | Principal Markets

We are involved in the worldwide trading of
various commodities.The following table provides a
breakdown of our revenues by commodity type for the years ended
March 31, 2004, 2003 and 2002.

|                           |                               |                      |           |         |  |      |           |         |  |   |           |         | 
|-------------------------- | ----------------------------- | -------------------- | --------- | ------- |  | ---- | --------- | ------- |  | - | --------- | ------- | 
|                           |                               |                     
|                           |                               | Millions of Yen     
|                           |                               |                     
|                           |                               |                     
|                           |                               | Year ended March 31,
|                           |                               |                     
|                           |                               | 2004                 |           | 2003    |  | 2002
|                           |                               |                      |           |         |  |     
|Revenues(1)(2)             |                               |                      |           |         |  |      |           |         |  |   |           |        
|Distribution by Commodity: |                               |                      |           |         |  |      |           |         |  |   |           |        
|                           | Iron and Steel                |                      | ¥         | 312,853 |  |      | ¥         | 281,761 |  |   | ¥         | 258,316 | 
|                           | Non-Ferrous Metals            |                      |           | 157,248 |  |      |           | 152,145 |  |   |           | 162,110 | 
|                           | Machinery                     |                      |           | 298,087 |  |      |           | 299,913 |  |   |           | 270,094 | 
|                           | Electronics & Information     |                      |           | 119,843 |  |      |           | 108,110 |  |   |           | 112,509 | 
|                           | Chemicals                     |                      |           | 520,115 |  |      |           | 463,375 |  |   |           | 372,515 | 
|                           | Energy                        |                      |           | 954,556 |  |      |           | 830,997 |  |   |           | 676,952 | 
|                           | Foods                         |                      |           | 389,496 |  |      |           | 393,228 |  |   |           | 387,285 | 
|                           | Textiles                      |                      |           | 32,793  |  |      |           | 37,871  |  |   |           | 37,993  | 
|                           | General Merchandise           |                      |           | 88,791  |  |      |           | 96,773  |  |   |           | 93,962  | 
|                           | Property and Service Business |                      |           | 106,560 |  |      |           | 123,978 |  |   |           | 119,514 | 
|                           |                               |                      |           |         |  |      |           |         |  |   |           |        
|Consolidated Total         |                               | ¥                    | 2,980,342 |         |  | ¥    | 2,788,151 |         |  | ¥ | 2,491,250 |        
|                           |                               |                      |           |         |  |      |           |         |  |   |           |        

Notes:



|    |                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The revenues of each product have been changed in
    a manner consistent with the change of revenue presentation in
    the Statements of Consolidated Income for the year ended
    March 31, 2004. The figures for the years ended
    March 31, 2003 and 2002 have been restated to conform to
    the current year presentation.
|   
|(2) | In accordance with SFAS No. 144, revenues
    from discontinued operations are eliminated from each product
    amount and Consolidated Total. The figures the years
    ended March 31, 2003 and 2002 have been reclassified to
    conform to the current year presentation.                                                     

The following table shows our total trading
transactions in each of our major markets for the years ended
March 31, 2004, 2003 and 2002. (1)(2)(3)(4)

|                   |  |                      |            |      |  |      |            |  |  |   |            | 
|------------------ |  | -------------------- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                   |  |                     
|                   |  | Millions of Yen     
|                   |  |                     
|                   |  |                     
|                   |  | Year ended March 31,
|                   |  |                     
|                   |  | 2004                 |            | 2003 |  | 2003
|                   |  |                      |            |      |  |     
|Japan              |  | ¥                    | 7,193,370  |      |  | ¥    | 7,110,646  |  |  | ¥ | 7,064,899  | 
|United States      |  |                      | 831,566    |      |  |      | 808,293    |  |  |   | 685,882    | 
|United Kingdom     |  |                      | 159,698    |      |  |      | 154,142    |  |  |   | 270,830    | 
|All Other          |  |                      | 4,096,883  |      |  |      | 3,404,682  |  |  |   | 3,247,530  | 
|                   |  |                      |            |      |  |      |            |  |  |   |            | 
|Consolidated Total |  | ¥                    | 12,281,517 |      |  | ¥    | 11,477,763 |  |  | ¥ | 11,269,141 | 
|                   |  |                      |            |      |  |      |            |  |  |   |            | 

Notes:



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total trading transactions is a voluntary
    disclosure and represents the gross transaction volume or the
    nominal aggregate value of the sales contracts in which we act
    as principal and transactions in which we serve as agent. Total
    trading transactions is not meant to represent sales or revenues
    in accordance with U.S. GAAP. Total trading transactions should
    not be construed as equivalent to, or a substitute or proxy for,
    revenues, or as an indicator of our operating performance,
    liquidity or cash flows generated by operating, investing or
    financing activities. A substantial part of total trading
    transactions represents transactions in which title to and
    payment for the goods pass through us without physical
    acquisition and delivery through our inventories. We have
    included the information concerning total trading transactions

44



---



##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | because it is used by similar Japanese trading
    companies as an industry benchmark, and we believe it is a
    useful supplement to results of operations data as a measure of
    our performance compared to other similar Japanese trading
    companies. Total trading transactions is included in the measure
    of segment profit and loss reviewed by the chief operating
    decision maker. See Notes 2, BASIS OF FINANCIAL
    STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    and 17, SEGMENT INFORMATION accompanying the
    consolidated financial statements for further discussion.
|   
|(2) | Total trading transactions are attributed to
    countries based on the location of customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(3) | We provide total trading transactions instead of
    revenues, as certain costs related to revenues presented net in
    accordance with Financial Accounting Standards Board Emerging
    Issues Task Force Issue No. 99-19, Reporting Revenue
    Gross as a Principal versus Net as an Agent are not
    attributed to countries based on the location of customers.                                                                                                                                                                                                                                                
|   
|(4) | In accordance with SFAS No. 144, total
    trading transactions to external customers from discontinued
    operations are eliminated from each geographic area amount and
    Consolidated Total. The figures for the years ended
    March 31, 2003 and 2002 have been reclassified to conform
    to the current year presentation.                                                                                                                                                                                                                                                                                 




C.     Organizational
Structure.

We are a global general trading company and we
conduct our business with our subsidiaries and associated
companies. As of March 31, 2004, we had
424 subsidiaries and 299 associated companies that are
accounted for by the equity method.

The table below provides information on our
significant subsidiaries as of March 31, 2004. We have
supplementarily provided voting power where it differs from
ownership interest.

|                                     |  |                                                          |  |                  |  |                                                                           |  |           |        |        |  |      
|------------------------------------ |  | -------------------------------------------------------- |  | ---------------- |  | ------------------------------------------------------------------------- |  | --------- | ------ | ------ |  | -----
|                                     |  |                                                          |  |                  |  |                                                                           |  | Ownership |        | Voting
|                                     |  |                                                          |  | Country of       |  |                                                                           |  | Interest  |        | Power 
|Operating Segment                    |  | Company                                                  |  | Incorporation    |  | Principal Business                                                        |  | (%)       |        | (%)   
|                                     |  |                                                          |  |                  |  |                                                                           |  |           |        |       
|Metal Products & Minerals            |  | Mitsui Bussan Raw Materials Development Corp.            |  | Japan            |  | Wholesale of steel ferrous and non- ferrous scrap
    and ferroalloys     |  |           | 100.00 |        |  |      
|                                     |  | Mitsui Bussan Construction Materials Co., Ltd.           |  | Japan            |  | Sales of construction materials and
    semi-assembled steel products     |  |           | 100.00 |        |  |      
|                                     |  | Mitsui Bussan Futures Ltd.                               |  | Japan            |  | Future commodities brokering                                              |  |           | 100.00 |        |  |      
|                                     |  | Japan Collahuasi Resources B.V.                          |  | Netherlands      |  | Investments in a copper mine in Chile                                     |  |           | 61.90  |        |  |      
|                                     |  | Mitalco Inc.                                             |  | United States    |  | Aluminum smelting                                                         |  |           | 100.00 |        |  |      
|                                     |  | MITSUI BUSSAN PRECIOUS METALS (HONG KONG) LIMITED        |  | Hong Kong, China |  | Trading of precious metals                                                |  |           | 100.00 |        |  |      
|                                     |  | Mitsui Coal Holdings Pty. Ltd.                           |  | Australia        |  | Investments in Australian coal business                                   |  |           | 100.00 |        |  |      
|                                     |  | Mitsui & Co. Energy Risk Management Ltd.                 |  | United Kingdom   |  | Energy derivatives dealing                                                |  |           | 100.00 |        |  |      
|                                     |  | Mitsui Iron Ore Development Pty. Ltd.                    |  | Australia        |  | Mining and sales of Australian iron ore                                   |  |           | 100.00 |        |  |      
|                                     |  | Mitsui Itochu Iron Pty. Ltd.                             |  | Australia        |  | Mining and sales of Australian iron ore                                   |  |           | 70.00  |        |  |      
|                                     |  | Mitsui Minerals Development South Africa (Pty.)
    Ltd. |  | South Africa     |  | Sales of ferrochrome and owner of ferrochrome
    manufacturing facility  |  |           | 100.00 |        |  |      
|                                     |  | Mitsui & Co. Precious Metals, Inc.                       |  | United States    |  | Trading of precious metals                                                |  |           | 100.00 |        |  |      
|                                     |  | Raw Materials Development Co., Ltd.                      |  | United States    |  | Investments in ferrous raw materials business                             |  |           | 100.00 |        |  |      
|                                     |  | Sesa Goa Limited                                         |  | India            |  | Mining and sales of Indian iron ore                                       |  |           | 51.00  |        |  |      
|                                     |  |                                                          |  |                  |  |                                                                           |  |           |        |        |  |      
|Machinery, Electronics & Information |  | MBK Project Holdings Ltd.                                |  | Japan            |  | Investments in manufacturers of plant-related
    materials and equipment |  |           | 100.00 |        |  |      
|                                     |  | ADAM NET Ltd.                                            |  | Japan            |  | Sales of communications equipment and systems                             |  |           | 92.34  |        |  | 92.30
|                                     |  | Xion Holdings, Inc.                                      |  | Japan            |  | Investments in semiconductor device sales
    companies                   |  |           | 79.00  |        |  |      

45



---



##### 



|                  |  |                                                      |  |                |  |                                                                                           |  |           |        |        |  |      
|----------------- |  | ---------------------------------------------------- |  | -------------- |  | ----------------------------------------------------------------------------------------- |  | --------- | ------ | ------ |  | -----
|                  |  |                                                      |  |                |  |                                                                                           |  | Ownership |        | Voting
|                  |  |                                                      |  | Country of     |  |                                                                                           |  | Interest  |        | Power 
|Operating Segment |  | Company                                              |  | Incorporation  |  | Principal Business                                                                        |  | (%)       |        | (%)   
|                  |  |                                                      |  |                |  |                                                                                           |  |           |        |       
|                  |  | TOYO Officemation, Inc.                              |  | Japan          |  | Design, operation and maintenance of information
    systems                              |  |           | 58.61  |        |  | 58.46
|                  |  | Tombo Capital Corporation                            |  | Japan          |  | Purchase, sales and leasing of aircraft                                                   |  |           | 100.00 |        |  |      
|                  |  | BSI Co., Ltd.                                        |  | Japan          |  | Systems integration and packaged software business                                        |  |           | 100.00 |        |  |      
|                  |  | Mitsui Bussan Transportation System Co.,
    Ltd.(1) |  | Japan          |  | Monorail, other new transportation systems and
    machines and equipment for rail tracks |  |           | 100.00 |        |  |      
|                  |  | Mitsui Bussan Aerospace Co., Ltd.                    |  | Japan          |  | Sales of helicopters and defence related systems                                          |  |           | 100.00 |        |  |      
|                  |  | Mitsui & Associates Telepark Corporation             |  | Japan          |  | Sales of mobile devices and fixed
    telecommunication lines                             |  |           | 98.19  |        |  |      
|                  |  | Mitsui Bussan Plant & Project Corp.                  |  | Japan          |  | Sales of chemical plants and heavy machinery
    equipment                                |  |           | 100.00 |        |  |      
|                  |  | Clio Marine Inc.                                     |  | Liberia        |  | Shipping business                                                                         |  |           | 100.00 |        |  |      
|                  |  | CM Pacific Maritime Corporation                      |  | Liberia        |  | Shipping business                                                                         |  |           | 100.00 |        |  |      
|                  |  | Lepta Shipping Co., Ltd.                             |  | Liberia        |  | Shipping business                                                                         |  |           | 100.00 |        |  |      
|                  |  | Mitsui Automotive Europe B.V.                        |  | Netherlands    |  | Automobile dealers                                                                        |  |           | 100.00 |        |  |      
|                  |  | Mitsui Rail Capital, LLC                             |  | United States  |  | Freightcar leasing and management                                                         |  |           | 100.00 |        |  |      
|                  |  | Tombo Aviation Inc.                                  |  | United States  |  | Purchase, sales and leasing of aircraft                                                   |  |           | 100.00 |        |  |      
|                  |  | Toyota Chile S.A.                                    |  | Chile          |  | Import and sales of automobiles and auto parts in
    Chile                               |  |           | 100.00 |        |  |      
|                  |  |                                                      |  |                |  |                                                                                           |  |           |        |        |  |      
|Chemical          |  | Bussan Nanotech Research Institute
    Inc.(2)       |  | Japan          |  | Research, development and production of carbon
    nanotube products                      |  |           | 100.00 |        |  |      
|                  |  | Daito Chemical Co., Ltd.                             |  | Japan          |  | Production and sales of industrial chemicals                                              |  |           | 70.00  |        |  |      
|                  |  | Nikken Fine Chemicals Co., Ltd.                      |  | Japan          |  | Production and sales of Sorbitol and related
    organic chemical products                |  |           | 100.00 |        |  |      
|                  |  | Nippon Trading Co., Ltd.                             |  | Japan          |  | Sales of plastics and chemicals                                                           |  |           | 48.34  |        |  |      
|                  |  | Mitsui Bussan Agro Business Co., Ltd.                |  | Japan          |  | Development and sales of fertilizers and
    agricultural products                        |  |           | 100.00 |        |  |      
|                  |  | Mitsui Bussan Solvent & Coating Co., Ltd.            |  | Japan          |  | Sales of solvents and coating materials                                                   |  |           | 100.00 |        |  |      
|                  |  | Certis Europe B.V.                                   |  | Netherlands    |  | Sales of agricultural chemicals in Europe                                                 |  |           | 69.95  |        |  | 69.96
|                  |  | Fertilizantes Mitsui S.A. Industria e Comercio       |  | Brazil         |  | Production and sales of fertilizers                                                       |  |           | 100.00 |        |  |      
|                  |  | P.T. Kaltim Pasifik Amoniak                          |  | Indonesia      |  | Production and sales of anhydrous ammonia                                                 |  |           | 55.00  |        |  |      
|                  |  | Novus International, Inc.                            |  | United States  |  | Production and sales of Alimet® feed
    supplement and other animal nutritional products |  |           | 65.00  |        |  |      
|                  |  |                                                      |  |                |  |                                                                                           |  |           |        |        |  |      
|Energy            |  | Kokusai Oil & Chemical Co., Ltd.                     |  | Japan          |  | Sales of petroleum products in Japan                                                      |  |           | 100.00 |        |  |      
|                  |  | Mitsui Oil & Gas Co., Ltd.                           |  | Japan          |  | Sales of petroleum products in Japan                                                      |  |           | 89.93  |        |  |      
|                  |  | Arcadia Petroleum Ltd.                               |  | United Kingdom |  | Physical and future trading of crude oil and
    petroleum products                       |  |           | 100.00 |        |  |      
|                  |  | Endeavour Resources Limited                          |  | United Kingdom |  | Coordinating functions for investments in Japan
    Australia LNG (MIMI) Pty. Ltd.        |  |           | 100.00 |        |  |      
|                  |  | Mitsui & Co. E&P B.V.                                |  | Netherlands    |  | Exploration, development, production and
    investments in oil and natural gas resources |  |           | 100.00 |        |  |      
|                  |  | Mitsui E&P Middle East B.V.                          |  | Netherlands    |  | Holding development rights for petroleum and
    natural gas in Oman                      |  |           | 76.45  |        |  | 60.00

46



---



##### 



|                              |  |                                                |  |                  |  |                                                                       |  |           |        |        |  |       
|----------------------------- |  | ---------------------------------------------- |  | ---------------- |  | --------------------------------------------------------------------- |  | --------- | ------ | ------ |  | ------
|                              |  |                                                |  |                  |  |                                                                       |  | Ownership |        | Voting
|                              |  |                                                |  | Country of       |  |                                                                       |  | Interest  |        | Power 
|Operating Segment             |  | Company                                        |  | Incorporation    |  | Principal Business                                                    |  | (%)       |        | (%)   
|                              |  |                                                |  |                  |  |                                                                       |  |           |        |       
|                              |  | Mitsui Gas Development Qatar B.V.              |  | Netherlands      |  | Development and production of natural gas and
    condensate in Qatar |  |           | 100.00 |        |  |       
|                              |  | Mitsui LNG Nederland B.V.                      |  | Netherlands      |  | Investments in Qatar LNG project                                      |  |           | 100.00 |        |  |       
|                              |  | Mitsui Oil (Asia) Pte. Ltd.                    |  | Singapore        |  | Physical and future trading of crude oil and
    petroleum products   |  |           | 100.00 |        |  |       
|                              |  | Mitsui Sakhalin Holdings B.V.                  |  | Netherlands      |  | Investments in Sakhalin Energy Investment                             |  |           | 100.00 |        |  |       
|                              |  | Mittwell Energy Resources Pty., Ltd.           |  | Australia        |  | Sales of crude oil and condensate                                     |  |           | 100.00 |        |  |       
|                              |  | Wandoo Petroleum Pty Ltd.                      |  | Australia        |  | Exploration, development and production of oil
    and natural gas    |  |           | 68.97  |        |  | 100.00
|                              |  |                                                |  |                  |  |                                                                       |  |           |        |        |  |       
|Consumer Products & Services  |  | MITSUI FOODS CO., LTD.(3)                      |  | Japan            |  | Food wholesale                                                        |  |           | 99.87  |        |  |       
|                              |  | DAI-ICHI BROILER CO., LTD.                     |  | Japan            |  | Production, processing, and sales of broilers                         |  |           | 72.33  |        |  |       
|                              |  | Bussan Real Estate Development Co., Ltd.       |  | Japan            |  | Real estate sales, leasing and management                             |  |           | 100.00 |        |  |       
|                              |  | Mitsui Norin Co., Ltd.                         |  | Japan            |  | Manufacture and sales of food products                                |  |           | 50.06  |        |  | 84.50 
|                              |  | Mitsui Bussan House-Techno, Inc.               |  | Japan            |  | Housing business                                                      |  |           | 100.00 |        |  |       
|                              |  | Retail System Service Co., Ltd.                |  | Japan            |  | Sales of sundries and foodstuff to retailers                          |  |           | 100.00 |        |  |       
|                              |  | Alta Moda International Ltd.                   |  | Hong Kong, China |  | Sales of fabric and secondary textile products                        |  |           | 100.00 |        |  |       
|                              |  | MBK Laguna Inc.                                |  | United States    |  | Investments in real estate-related businesses                         |  |           | 100.00 |        |  |       
|                              |  | MCM FOODS B.V.                                 |  | Netherlands      |  | Sales of imported canned and processed foods                          |  |           | 100.00 |        |  |       
|                              |  | Wilsey Foods Inc.                              |  | United States    |  | Investments in processed oil food company                             |  |           | 90.00  |        |  |       
|                              |  |                                                |  |                  |  |                                                                       |  |           |        |        |  |       
|Domestic Branches and Offices |  | Sadoshima Metal Co., Ltd.                      |  | Japan            |  | Wholesale of non-ferrous metal products                               |  |           | 51.12  |        |  |       
|                              |  | Chita Futo Co., Ltd.                           |  | Japan            |  | Grain elevators and warehousing                                       |  |           | 83.33  |        |  |       
|                              |  |                                                |  |                  |  |                                                                       |  |           |        |        |  |       
|Americas                      |  | Mitsui Argentina S.A.                          |  | Argentina        |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. (Canada) Ltd.                     |  | Canada           |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui Chile Ltda.                             |  | Chile            |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui Brasileira Importacao e Exportacao S.A. |  | Brazil           |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. (U.S.A.), Inc.                    |  | United States    |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Bioproducts, Inc.                              |  | United States    |  | Manufacture and sales of feed additives                               |  |           | 100.00 |        |  |       
|                              |  | Channel Terminal Corp.                         |  | United States    |  | Investments in tank leasing business                                  |  |           | 100.00 |        |  |       
|                              |  | Mitsui Auto Steel Canada Inc.                  |  | Canada           |  | Warehouse services for storage and handling of
    auto steel         |  |           | 100.00 |        |  |       
|                              |  | Mitsui Comtek Corp.                            |  | United States    |  | Electronics and IT-related business                                   |  |           | 100.00 |        |  |       
|                              |  | Mitsui Steel Development Co., Inc.             |  | United States    |  | Investments in steel-related businesses                               |  |           | 100.00 |        |  |       
|                              |  | Mitsui Trading and Service Ltda.               |  | Chile            |  | Automobile sales finance in Chile                                     |  |           | 100.00 |        |  |       
|                              |  | Mitsui Tubular Products, Inc.                  |  | United States    |  | Sales of steel pipes                                                  |  |           | 100.00 |        |  |       
|                              |  | Portac, Inc.                                   |  | United States    |  | Manufacture of lumber and lumber products                             |  |           | 100.00 |        |  |       
|                              |  | Westport Petroleum Inc.                        |  | United States    |  | International trading of petroleum products and
    crude oil         |  |           | 100.00 |        |  |       
|                              |  |                                                |  |                  |  |                                                                       |  |           |        |        |  |       
|Europe                        |  | Mitsui & Co. Italia S.p.A.                     |  | Italy            |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. UK PLC                            |  | United Kingdom   |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. Europe PLC                        |  | United Kingdom   |  | Management of business in Europe and Africa                           |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. International B.V.                |  | Netherlands      |  | Investments and financial services                                    |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. Deutschland GmbH                  |  | Germany          |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. France S.A.S.                     |  | France           |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  | Mitsui & Co. Benelux S.A./N.V.                 |  | Belgium          |  | Trade                                                                 |  |           | 100.00 |        |  |       
|                              |  |                                                |  |                  |  |                                                                       |  |           |        |        |  |       

47



---



##### 



|                       |  |                                                 |  |                  |  |                                                                          |  |           |        |        |  |      
|---------------------- |  | ----------------------------------------------- |  | ---------------- |  | ------------------------------------------------------------------------ |  | --------- | ------ | ------ |  | -----
|                       |  |                                                 |  |                  |  |                                                                          |  | Ownership |        | Voting
|                       |  |                                                 |  | Country of       |  |                                                                          |  | Interest  |        | Power 
|Operating Segment      |  | Company                                         |  | Incorporation    |  | Principal Business                                                       |  | (%)       |        | (%)   
|                       |  |                                                 |  |                  |  |                                                                          |  |           |        |       
|Other Overseas Areas   |  | P.T. Mitsui Indonesia                           |  | Indonesia        |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co. (Australia) Ltd.                   |  | Australia        |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co. (Shanghai) Ltd.                    |  | China            |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co., (Thailand) Ltd.                   |  | Thailand         |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co. (Taiwan) Ltd.                      |  | Taiwan           |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co. (Middle East) E.C.                 |  | Bahrain          |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co. (Hong Kong) Ltd.                   |  | Hong Kong, China |  | Trade                                                                    |  |           | 100.00 |        |  |      
|                       |  | Mitsiam International Ltd.                      |  | Thailand         |  | Trade                                                                    |  |           | 52.91  |        |  | 52.13
|                       |  |                                                 |  |                  |  |                                                                          |  |           |        |        |  |      
|Corporate Headquarters |  | Toshin Soko Kaisha, Ltd.                        |  | Japan            |  | Warehousing and customs clearance                                        |  |           | 100.00 |        |  |      
|                       |  | Tri-Net (Japan) Inc.                            |  | Japan            |  | International integrated transportation services                         |  |           | 100.00 |        |  |      
|                       |  | Nitto Logistics Co., Ltd.                       |  | Japan            |  | Warehousing, customs clearance and real estate
    leasing               |  |           | 100.00 |        |  |      
|                       |  | Bussan Credit Co., Ltd.                         |  | Japan            |  | Financial services                                                       |  |           | 100.00 |        |  |      
|                       |  | Mitsui Knowledge Industry Co., Ltd.             |  | Japan            |  | Planning, development, maintenance and operation
    of computer systems |  |           | 67.47  |        |  | 67.37
|                       |  | Mitsuibussan Insurance and Consulting Co., Ltd. |  | Japan            |  | Property and casualty insurance consignment and
    agency services      |  |           | 100.00 |        |  |      
|                       |  | Mitsui & Co., Asia Investment Ltd.              |  | Singapore        |  | Financial services                                                       |  |           | 100.00 |        |  |      
|                       |  | Tri-Net Logistics (Asia) Pte. Ltd.              |  | Singapore        |  | International integrated transportation services                         |  |           | 100.00 |        |  |      



---



|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | Changed its corporate name from Bussan
    Transportation System Co., Ltd. in July 2004  
|   
|(2) | Changed its corporate name from Carbon Nanotech
    Research Institute Inc. in April 2004
|   
|(3) | Changed its corporate name from Sanyu Koami Co.,
    Ltd. in April 2004                  




D.     Property,
Plants and Equipment.

The following table provides a list of our
principal property, plants and equipment as of March 31,
2004.

|                                                    |  |          |  |                        |           |                 |  |                                    
|--------------------------------------------------- |  | -------- |  | ---------------------- | --------- | --------------- |  | -----------------------------------
|Property, Plants and Equipment Description          |  |          |  | Size or Annual         |           |                
|(Holder or lessee other than Mitsui)                |  | Location |  | Production Capacity(1) |           | Use of property
|                                                    |  |          |  |                        |           |                
|In Japan:                                           |  |          |  |                        |           |                 |  |                                    
|Mitsuibussan Building                               |  | Tokyo    |  |                        | 1,163,685 | Sft             |  | Office use (Corporate Headquarters)
|Osaka Mitsuibussan Building                         |  | Osaka    |  |                        | 336,492   | Sft             |  | Office use                         
|Nagoya Mitsuibussan Building                        |  | Nagoya   |  |                        | 152,068   | Sft             |  | Office use                         
|Hibiya Central Building                             |  | Tokyo    |  |                        | 509,845   | Sft             |  | Office building for lease          
|Bussan Building Annex                               |  | Tokyo    |  |                        | 210,707   | Sft             |  | Office building for lease          
|Wakamatsu Building                                  |  | Tokyo    |  |                        | 148,210   | Sft             |  | Office building for lease          
|Shinsuna Bayside Building                           |  | Tokyo    |  |                        | 129,943   | Sft             |  | Office building for lease          
|Meguro Techno Building                              |  | Tokyo    |  |                        | 119,222   | Sft             |  | Office building for lease          
|Asakusa Building                                    |  | Tokyo    |  |                        | 216,367   | Sft             |  | Office building for lease          
|Sun East Tatsumi Building                           |  | Tokyo    |  |                        | 150,609   | Sft             |  | Office building for lease          
|Tojin Building                                      |  | Tokyo    |  |                        | 127,769   | Sft             |  | Office use                         
|Company Housing & Dormitory                         |  | Chiba    |  |                        | 130,011   | Sft             |  | Employees residential facility    
|Human Resource Development Center                   |  | Shizuoka |  |                        | 83,874    | Sft             |  | Training facility                  
|Factory and Land (NBI Corporation)                  |  | Kanagawa |  |                        | 245,990   | Sft             |  | Valve production factory           
|Land and equipment
    (Mitsui Oil & Gas Co., Ltd.) |  | Hokkaido |  |                        | 1,911,751 | Sft             |  | Liquefied petroleum gas            
|Land (MITSUI FOODS CO., LTD.)                       |  | Saitama  |  |                        | 677,889   | Sft             |  | Distribution center                
|Aircraft (Tombo Capital Corporation)                |  | Japan    |  |                        | 3         |                 |  | Leasing asset                      

48



---



##### 



|                                                  |  |                |  |                        |            |                 |  |                                
|------------------------------------------------- |  | -------------- |  | ---------------------- | ---------- | --------------- |  | -------------------------------
|Property, Plants and Equipment Description        |  |                |  | Size or Annual         |            |                
|(Holder or lessee other than Mitsui)              |  | Location       |  | Production Capacity(1) |            | Use of property
|                                                  |  |                |  |                        |            |                
|Overseas:                                         |  |                |  |                        |            |                 |  |                                
|Office Building                                   |  | United Kingdom |  |                        | 103,571    | Sft             |  | Office use                     
|Office Building (Mitsui & Co. (U.S.A.), Inc.)     |  | United States  |  |                        | 183,386    | Sft             |  | Office space leased from others
|Land and plants (Mitalco Inc.)                    |  | United States  |  |                        | 465,108    | Sft             |  | Aluminium smelting factory     
|Land and plants
    (Novus International, Inc.)   |  | United States  |  |                        | 636,843    | Sft             |  | Methionine production facility 
|Land and plants (P.T. Kaltim Pasifik Amoniak)     |  | Indonesia      |  |                        | 579,397    | Sft             |  | Ammonia manufacturing plant    
|Equipment (Wandoo Petroleum Pty., Ltd.)           |  | Australia      |  |                        | 82,516     | Sft             |  | Offshore oil producing platform
|Shopping centers
    (MBK Newport Inc.)           |  | United States  |  |                        | 708,876    | Sft             |  | Leasing asset                  
|Equipment (Mitsui Coal Holdings Pty. Ltd.)        |  | Australia(2)   |  |                        | 5,883,000  | Mt              |  | Mining equipment for coal      
|Equipment (Mitsui Iron Ore Development Pty. Ltd.) |  | Australia(2)   |  |                        | 18,249,000 | Mt              |  | Mining equipment for iron ore  
|Equipment (Mitsui Itochu Iron Pty. Ltd.)          |  | Australia(2)   |  |                        | 2,543,000  | Mt              |  | Mining equipment for iron ore  
|Equipment (Mitsui E&P Middle East B.V.)           |  | Oman           |  |                        | 6,000,000  | Bbl             |  | Oil producing equipment        
|Aircraft (Tombo Aviation Inc.)                    |  | United States  |  |                        | 10         |                 |  | Leasing asset                  
|Oil tanker (CM Maritime Pacific Corporation)      |  | Liberia        |  |                        | 1          |                 |  | Leasing asset                  
|Ocean vessels (Clio Marine Inc.)                  |  | Liberia        |  |                        | 1          |                 |  | Leasing asset                  
|Ocean vessels (Lepta Shipping Co., Ltd.)          |  | Liberia        |  |                        | 3          |                 |  | Leasing asset                  
|Ocean vessels (LPG Transport Service Ltd.)        |  | Bermuda        |  |                        | 2          |                 |  | Leasing asset                  



---



|    |                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Sft: Square feet, Mt: Metric Ton, Bbl: Barrel                                                                                                                                                                                                                                                
|   
|(2) | Information on our mining activities related to
    Mitsui Coal Holdings Pty. Ltd., Mitsui Iron Ore Development Pty.
    Ltd., and Mitsui Itochu Iron Pty. Ltd. that are located in
    Australia is shown in Iron and Steel Raw Materials
    Unit of B. Business Overview in this Item.

A portion of the land, buildings and equipment
owned by us is subject to mortgages or other liens. As of
March 31, 2004, the aggregate amount of such mortgages or
other liens was ¥46,857 million. We know of no
material defect in our title to neither of any of the properties
nor of any material adverse claim with respect to them, either
pending or contemplated.

We consider our office and other facilities to be
well maintained and believe that our plant capacity is adequate
for our current requirements. We do not have material plans to
construct, expand or improve facilities. However, production
equipment for natural resources are likely to increase, as we
promote developing projects for iron and steel raw materials and
energy.

We do not believe there are any material
environmental issues that would affect the utilization of our
assets.

49



---



##### 



Mining
Activities

The information regarding our mining activities
are provided below.

IRON ORE

Name of Joint Venture or
Investee(1)

Entity by which Mitsui Participates in the
Mining Activity and its Ownership Interest


Area of Mining Operation (Region, State,
Country)


|                                                                                                                            |                 |                 |  |                                                        |  |                          |  |              |          |             |  |                                                                                                                                                                        |  |                                                                                                                                                                         |  |          |  |                                                            |  | 
|--------------------------------------------------------------------------------------------------------------------------- | --------------- | --------------- |  | ------------------------------------------------------ |  | ------------------------ |  | ------------ | -------- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | ---------------------------------------------------------- |  | 
|                                                                                                                           
|                                                                                                                           
|Name of                                                                                                                     |                 | Type of Mineral |  |                                                        |  | Means of Access to       |  |              |          | Type of     |  |                                                                                                                                                                       
|Mines(2)                                                                                                                    |                 | Location        |  | Resources(3)                                           |  | Fe Basis (%)             |  | the Property |          | Title/Lease |  | Mine                                                                                                                                                                   |  | Power Source                                                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Robe River Iron Associates
    Mitsui Iron Ore Development Pty. Ltd. (33%)
    Pilbara Region, Western Australia, Australia
|                                                                                                                           
|                                                                                                                            | Pannawonica     |                 |  | Near Pannawonica, 200 km southwest of Cape Lambert     |  | Pisolite                 |  |              | 57.0     |             |  | Railway (owned by Robe River Iron Associates and
    operated by Pilbara Rail Company) and port in Cape Lambert
    (owned and operated by Robe River Iron Associates) |  | Agreements for life of mine with Government of
    Western Australia                                                                                                    |  | Open pit |  | Supplied by Robe River Iron Associates                    
|                                                                                                                            | West Angelas    |                 |  | West Angelas, 110km southeast of Cape Lambert          |  | Marra Mamba              |  |              | 62.2     |             |  | Same as above                                                                                                                                                          |  | Same as above                                                                                                                                                           |  | Open pit |  | Supplied by Hamersley Iron Power                          
|                                                                                                                           
|Mount Newman Joint Venture
    Mitsui Itochu Iron Pty. Ltd. (7%)
    Pilbara Region, Western Australia, Australia          
|                                                                                                                           
|                                                                                                                            | Mt. Whaleback   |                 |  | Near the town of Newman, 426 km south of Port Headland |  | Brockman
    Marra Mamba |  |              | 62.761.9 |             |  | Railway (owned and operated by Mount Newman Joint
    Venture) and port in Port Head (owned and operated by Mount
    Newman Joint Venture)                            |  | Mineral lease granted in 1967 under the Iron Ore
    (Mount Newman) Agreement Act 1964 scheduled to expire in 2009
    with rights for successive renewals for 21 years |  | Open pit |  | Supplied by Alinta Ltd. (partially owned by the
    state)
|                                                                                                                           
|Yandi Joint Venture
    Mitsui Iron Ore Development Pty. Ltd. (7%)
    Pilbara Region, Western Australia, Australia        
|                                                                                                                           
|                                                                                                                            | Marillana Creek |                 |  | 92km north of Newman, 310 km south of Port Headland    |  | Channel Iron Deposit     |  |              | 58.3     |             |  | Railway (owned and operated by Yandi Joint
    Venture) and port in Port Head (owned and operated by Yandi
    Joint Venture)                                          |  | Mining lease granted in 1991 under the Iron Ore
    (Marillana Creek) Agreement Act scheduled to expire in 2012 with
    the right to extend for additional 42 years    |  | Open pit |  | Supplied by Alinta Ltd. (partially owned by state)        
|                                                                                                                           

50



---



##### 



IRON ORE (continued)


Name of Joint Venture or
Investee(1)

Entity by which Mitsui Participates in the
Mining Activity and its Ownership Interest


Area of Mining Operation (Region, State,
Country)


|                                                                                                                                |        |                              |  |                          |  |                    |      |              |      |                                                                                                                                                       |  |                                                                                                                                                                                                                                                                         |  |               |  |                                                    |  |                                                    |  | 
|------------------------------------------------------------------------------------------------------------------------------- | ------ | ---------------------------- |  | ------------------------ |  | ------------------ | ---- | ------------ | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | -------------------------------------------------- |  | -------------------------------------------------- |  | 
|                                                                                                                               
|                                                                                                                               
|Name of                                                                                                                         |        | Type of Mineral              |  |                          |  | Means of Access to |      |              |      | Type of                                                                                                                                               |  |                                                                                                                                                                                                                                                                        
|Mines(2)                                                                                                                        |        | Location                     |  | Resources(3)             |  | Fe Basis (%)       |      | the Property |      | Title/Lease                                                                                                                                           |  | Mine                                                                                                                                                                                                                                                                    |  | Power Source 
|                                                                                                                               
|                                                                                                                               
|Mount Goldsworthy Joint Venture
    Mitsui Iron Ore Development Pty. Ltd. (7%)
    Pilbara Region, Western Australia, Australia
|                                                                                                                               
|North Area (Yarrie) (Nimingarra)                                                                                                |        | 210 km east of Port Headland |  | Nimingarra               |  |                    | 62.6 |              |      | Railway (owned and operated by Mount Goldsworthy
    Joint Venture) and port in Port Head (owned and operated by
    Mount Goldsworthy Joint Venture) |  | Multiple mineral leases under the Iron Ore (Mount
    Goldsworthy) Agreement Act 1964 and the Iron Ore
    (Goldsworthy Nimingarra) Agreement Act 1972. The last one
    expires in 2014, with rights of renewal over these leases for
    successive 21-year periods. |  | Open pit      |  | Supplied by Alinta Ltd. (partially owned by state)
|                                                                                                                                | Area C |                              |  | 37 km southwest of Yandi |  | Marra Mamba        |      |              | 62.7 |                                                                                                                                                       |  | Same as above                                                                                                                                                                                                                                                           |  | Same as above |  | Open pit                                           |  | Supplied by Alinta Ltd. (partially owned by state)
|                                                                                                                               

51



---



##### 



IRON ORE (continued)


Name of Joint Venture or
Investee(1)

Entity by which Mitsui Participates in the
Mining Activity and its Ownership Interest


Area of Mining Operation (Region, State,
Country)


|                                                                         |             |                 |  |              |                  |                    |  |              |  |             |      |      |  |                                                                  |  |                                        |  |          |  |                  
|------------------------------------------------------------------------ | ----------- | --------------- |  | ------------ | ---------------- | ------------------ |  | ------------ |  | ----------- | ---- | ---- |  | ---------------------------------------------------------------- |  | -------------------------------------- |  | -------- |  | -----------------
|                                                                        
|                                                                        
|Name of                                                                  |             | Type of Mineral |  |              |                  | Means of Access to |  |              |  | Type of     |      |     
|Mines(2)                                                                 |             | Location        |  | Resources(3) |                  | Fe Basis (%)       |  | the Property |  | Title/Lease |      | Mine |  | Power Source                                                    
|                                                                        
|                                                                        
|Sesa Goa Limited
    Sesa Goa Limited (51%)
    Goa and Karnataka, India
|                                                                        
|                                                                         | Codli       |                 |  |              | Goa, India       |                    |  | Fines/ Lumps |  |             | 54.0 |      |  | Barge and port in Mormugao                                       |  | Combination of own lease and sub lease |  | Open pit |  | Supplied by state
|                                                                         | Sonshi      |                 |  |              | Goa, India       |                    |  | Fines/ Lumps |  |             | 54.0 |      |  | Barge and port in Mormugao                                       |  | Combination of own lease and sub lease |  | Open pit |  | Supplied by state
|                                                                         | Chitradurga |                 |  |              | Karnataka, India |                    |  | Fines/ Lumps |  |             | 60.0 |      |  | Railway, truck and shipping facility at Mormugao
    and Chennai |  | Combination of own lease and sub lease |  | Open pit |  | Supplied by state
|                                                                         | Hospet      |                 |  |              | Karnataka, India |                    |  | Fines/ Lumps |  |             | 60.0 |      |  | Railway, truck and shipping facility at Mormugao
    and Chennai |  | Combination of own lease and sub lease |  | Open pit |  | Supplied by state
|                                                                        



|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The term Investee refers only to Sesa
    Goa Limited.                                                                                                                            
|   
|(2) | Name of Mines indicates the names of
    principal producing mines.                                                                                                               
|   
|(3) | Pisolite, Marra Mamba,
    Brockman, Channel Iron Deposit and
    Nimingarra refer to the types of iron ore that are
    found in the Pilbara region of Western Australia.

COAL

Name of Joint Venture or
Investee

Entity by which Mitsui Participates in the
Mining Activity and its Ownership
Interest(2)


Area of Mining Operation (Region, State,
Country)


|                                                                                              |  |                                                  |  |                                     |  |                                              |  |                                                                         |  |             |  |                 
|--------------------------------------------------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------------------- |  | -------------------------------------------- |  | ----------------------------------------------------------------------- |  | ----------- |  | ----------------
|                                                                                             
|                                                                                             
|                                                                                              |  | Type of                                          |  | Means of Access                     |  |                                              |  | Type of                                                                 |  | Power      
|Name of Mines(3)                                                                              |  | Location                                         |  | Resources                           |  | to the Property                              |  | Title/Lease                                                             |  | Mine        |  | Source          
|                                                                                             
|                                                                                             
|BHP Mitsui Coal Pty. Ltd.                                                                    
|BHP Mitsui Coal Pty. Ltd.(1)(20%)
    Queensland, Australia                                  
|                                                                                             
|Riverside                                                                                     |  | In the Bowen Basin, 145 km west of Mackay        |  | Metallurgical coal                  |  | Railway (Queensland Rail) and port in Mackay |  | Leases granted by State and renewable subject to
    States discretion |  | Open pit    |  | State owned grid
|South Walker Creek                                                                            |  | In the Bowen Basin, 145 km west of Mackay        |  | Metallurgical coal                  |  | Same as above                                |  | Same as above                                                           |  | Open pit    |  | State owned grid
|                                                                                             
|Bengalla Joint Venture
    Mitsui Coal Holding Pty. Ltd. (10%)
    New South Wales, Australia
|                                                                                             
|Bengalla                                                                                      |  | West of Muswellbrook in the Upper Hunter Valley  |  | Metallurgical coal and thermal coal |  | Railway and port at Newcastle                |  | Leases granted by State                                                 |  | Open pit    |  | State owned grid
|                                                                                             
|Kestrel Joint Venture
    Mitsui Coal Holding Pty. Ltd. (20%)
    Queensland, Australia      
|                                                                                             
|Kestrel                                                                                       |  | In the Bowen Basin, 300 km west of Rockhampton   |  | Metallurgical coal and thermal coal |  | Railway and port at Gladstone                |  | Leases granted by State                                                 |  | Underground |  | State owned grid
|                                                                                             
|Moura Joint Venture
    Mitsui Coal Holding Pty. Ltd. (49%)
    Queensland, Australia        
|                                                                                             
|Moura                                                                                         |  | In the Bowen Basin 185 km southwest of Gladstone |  | Metallurgical coal and thermal coal |  | Railway and port at Gladstone                |  | Leases granted by State                                                 |  | Open pit    |  | State owned grid
|                                                                                             

52



---



##### 



|                                                                                       |  |                                                |  |                    |  |                               |  |                         |  |             |  |                 
|-------------------------------------------------------------------------------------- |  | ---------------------------------------------- |  | ------------------ |  | ----------------------------- |  | ----------------------- |  | ----------- |  | ----------------
|                                                                                      
|                                                                                      
|                                                                                       |  | Type of                                        |  | Means of Access    |  |                               |  | Type of                 |  | Power      
|Name of Mines(3)                                                                       |  | Location                                       |  | Resources          |  | to the Property               |  | Title/Lease             |  | Mine        |  | Source          
|                                                                                      
|                                                                                      
|German Creek Venture
    Mitsui Coal Holding Pty. Ltd. (30%)
    Queensland, Australia
|                                                                                      
|German Creek                                                                           |  | In the Bowen Basin, 250 km southwest of Mackay |  | Metallurgical coal |  | Railway and port at Gladstone |  | Leases granted by State |  | Underground |  | State owned grid
|                                                                                      



|    |                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | BHP Mitsui Coal Pty. Ltd. indicates
    the name of the company established by BHP Billiton plc and
    Mitsui.                                                                                                                                                               
|   
|(2) | BHP Mitsui Coal Pty. Ltd. is our associated
    company in which Mitsui has 20% interest. Mitsui Coal Holding
    Pty. Ltd. is our subsidiary which owns interests in Bengalla
    Joint Venture, Kestrel Joint Venture, Moura Joint Venture and
    German Creek Joint Venture.
|   
|(3) | Name of mines indicates the names of
    principal producing mines.                                                                                                                                                                                                           

53



---



##### 



A brief history and the present condition of each
of the above-mentioned mines, including the current state of
development, if applicable, are provided below.

IRON ORE

Name of Joint Venture or
Investee

Entity by which Mitsui Participates in the
Mining Activity and its Ownership Interest


Area of Mining Operation (Region, State,
Country)




---

Robe River Iron Associates

Mitsui Iron Ore Development Pty. Ltd.
(33%)


Pilbara Region, Western Australia,
Australia


|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            
|Pannawonica  |  | The development of Robe River project began in
    1962 (*) near Pannawonica. The Robe River project was
    commissioned and the first shipment was made in 1972. Iron ore
    reserves at the Mesa J production Base provide the cornerstone
    of Pannawonicas sinter fines and lump output. Development
    of Mesa J began in 1992, and all mine administration, workshops,
    warehousing and other support facilities were integrated there
    in 1994. Process Plant 1 was commissioned in 1999. The plant
    processes clay-contaminated pisolite, sub-grade material which
    was once discarded, to reduce contaminants and retain
    on-specification ore. Total material hauled at Mesa J is between
    50 and 60 million tonnes per year. From this production
    base, the joint venture produces approximately 32 million
    tonnes of iron ore each year.
|            
|West Angelas |  | The development of West Angelas began in 1998.
    Mining of ore commenced in March 2002. The West Angelas deposits
    contain Marra Mamba type iron ore with higher iron content than
    Robe Rivers Mesa J mine. The West Angelas operation is
    comprised of an open pit mine; a crushing and screening ore
    processing plant producing lump and sinter fines iron ore, as
    well as stockpiling, reclaiming and train-loading facilities.
    West Angelas mine is scheduled to expand its capacity from its
    current 20 million tonnes per year to 25 million
    tonnes per year by the middle of 2005.                                                                                                                                                                                                                                                          
|            



|    |                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*) | The Robe River project was originally started by
    Cleveland Cliffs Iron Company, an iron and steel producer in the
    United States. Since then, there were major changes in ownership
    before Rio Tinto took a 53% stake in Robe River Iron Associates
    in 2000.

Mount Newman Joint Venture

Mitsui Itochu Iron Pty. Ltd. (7%)


Pilbara Region, Western Australia,
Australia


|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               
|Mount Whaleback |  | The joint venture began production in 1969 at the
    Mount Whaleback ore body. Today, production continues to be
    sourced from the major Mount Whaleback ore body and is
    complemented by production from other ore bodies. The facilities
    at Mount Whaleback include primary and secondary crushing plants
    with a nominal capacity of 35 million tonnes of product per
    year, a heavy media beneficiation plant with an annual capacity
    of 8 million tonnes and a train-loading facility. The
    mining plant and port facilities were originally built in the
    late 1960s and have been maintained and enhanced many
    times since then.

Yandi Joint Venture

Mitsui Iron Ore Development Pty. Ltd.
(7%)


Pilbara Region, Western Australia,
Australia


|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               
|Marillana Creek |  | Development of the ore body began in 1991. This
    included construction of a rail connection to the existing
    Newman/ Headland rail line, crushing and screening facilities
    with an annual capacity of 10 million tonnes, ore stacker,
    mine load-out tunnel, and on-site administration infrastructure.
    The mines first shipment of iron ore was in March 1992.
    Following a number of modifications between 1994 and 2003,
    Yandis capacity has been increased to 42 million
    tonnes per year, including both fine and lump ores.

Mount Goldsworthy Joint Venture

Mitsui Iron Ore Development Pty. Ltd.
(7%)


Pilbara Region, Western Australia,
Australia


|                                         |  |                                                                                                                                                                                                                                                             
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                        
|North Area
    (Yarrie)
    (Nimingarra) |  | Mount Goldsworthy was commissioned in 1966 in
    North Area. The original Goldsworthy mine was closed in 1982 and
    mining operations ceased at Shay Bay in 1993. Since then, mining
    has continued from the adjacent Nimingarra mine and Yarrie mine.
|                                        

54



---



##### 



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Area C |  | The Area C Mine is operated by the Mount
    Goldsworthy Joint Venture. Area C Mine is located near the
    mines operated by the Yandi Joint Venture and it was officially
    opened in October 2003. First ore was railed from Area C to Port
    Headland in August 2003, with the first shipment of ore
    departing the port in September 2003. Area C represents the
    largest undeveloped Marra Mamba resource in the Pilbara region.
    The project involves developing mine infrastructure and a rail
    spur link to the existing Yandi/ Newman railway.
|       |  | In July 2003, BHP Billiton, a major partner in
    the Mount Newman Joint Venture, the Yandi Joint Venture and the
    Mount Goldsworthy Joint Venture, announced the acceleration of
    the development of the Products and Capacity Expansion Project
    which involves the expansion of rail and port facilities to
    ensure a system capacity of 100 million tonnes per year in
    connection with those three joint ventures. This project
    was originally planned to be completed by 2011 at a total
    capital cost of U.S.$351 million.                

Sesa Goa Limited

Sesa Goa Limited (51%)


Goa and Karnataka, India


|                       |  |                                                                                                                                                                                                                                                                                                                            
|---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      
|Codli
    Sonshi       |  | Sesa Goa Limited commenced operations in 1954 in
    North Goa, India. Sesa Goas main mining operations are at
    the Codli and Sonshi mines. Goan ore tends to be relatively high
    in alumina content, and most Goan ore is beneficiated to raise
    the iron content. We acquired 51% interest in Sesa Goa in 1996.
|                      
|Chitradurga
    Hospet |  | The main operation in Karnataka is at Chitradurga
    mine. A second mine is located at Hospet. These mines are
    equidistant from the part of Mormugao and Chennai and ore can be
    shipped from either port.                                                                                                         

COAL

|                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name of Joint Venture or Investee
    Entity by which Mitsui Participates in the Mining Activity and
    its Ownership Interest
    Area of Mining Operation (Region, State, Country)
|                                                                                                                                                                                     
|BHP Mitsui Coal Pty. Ltd.
    BHP Mitsui Coal Pty. Ltd. (20%)
    Queensland, Australia                                                                                              
|                                                                                                                                                                                     
|Riverside                                                                                                                                                                             |  | In 1983, the joint venture commissioned the
    Riverside mine. Riverside mine produces metallurgical coal and
    has a production capacity of three million tonnes per year.                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                     
|South Walker Creek                                                                                                                                                                    |  | South Walker Creek became operational in 1998. It
    produces pulverized coal injection fuel and minor quantities of
    by-product energy coal. South Walker Creek has a production
    capacity of 4.3 million tonnes per year. Exploration has
    increased the reserve base in the past year. BHP Mitsui Coal
    holds undeveloped leases in the Bowen Basin (principally, the
    areas of Wards Well, Poitrel, Kemmis-Walker and Nebo West).

Bengalla Joint Venture

Mitsui Coal Holding Pty. Ltd. (10%)


New South Wales, Australia


|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        
|Bengalla |  | Development consent was granted in 1996 and
    production commenced in 1999. Coal & Allied, Rio
    Tintos subsidiary in Australia, acquired its interest in
    Bengalla in 2001. Its coal preparation plant has a washing
    capacity of 8 million tonnes per year giving nominal
    product of 6.6 million tonnes per year. Its plant equipment
    consists of three stage double roll crushers, dense medium
    cyclones, spirals, a froth flotation unit, screen bowl
    centrifuges and automatic stackers/reclaimers.

Kestrel Joint Venture

Mitsui Coal Holding Pty. Ltd. (20%)


Queensland, Australia


|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|Kestrel |  | The Kestrel Coal mine, previously known as
    Gordonstone Mine commenced operation in 1992. Coal is extracted
    by underground mining. The Kestrel Preparation Plant has been
    designed to allow the mine to produce low ash coking coal and
    high energy thermal coal. Production in 2003 was
    3.3 million tonnes saleable high quality coking coal and
    export thermal coal, and the production is expected to rise to
    5.5 million tonnes in a few years.

55



---



##### 



Moura Joint Venture

Mitsui Coal Holding Pty. Ltd. (49%)


Queensland, Australia


|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|Moura |  | The Moura Mine commenced operation in 1961. Since
    1994, all production at Moura has been from its surface
    operation. Production tonnage has been increasing steadily
    throughout the years. Originally the mine was operated by BHP
    Mitsui Coal Pty Ltd, and after a few changes of ownership, Anglo
    Coal acquired a 51% share in 2002. In September 2003, the
    adjacent Theodore deposit was developed which further expanded
    its capacity. As of early 2004, Anglo Coal and Mitsui Coal
    Holding Pty. Ltd. were carrying out a feasibility study into
    developing the Dawson reserve complex, which includes both Moura
    and the new Theodore mine, into a single operating unit.

German Creek Joint Venture

Mitsui Coal Holding Pty. Ltd. (30%)


Queensland, Australia


|             |  |                                                                                                                                                                                                                                                                     
|------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            
|German Creek |  | Open pit mining commenced in 1981. Underground
    mining in the Central Colliery area started in 1984, while
    underground mining in the Southern Colliery area began in 1988.
    Development of a new underground mine has commenced in the
    Grasstree area.

Production Tonnage

IRON ORE

|                                    |                     |                                       |  |                                   |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |        |  | 
|----------------------------------- | ------------------- | ------------------------------------- |  | --------------------------------- | --------- | ------------------------ | ------- | -------- |  | ---------- | ------ | -------- |  | ---------- | ------- | -------- |  |  | ------ | ------ |  |  | ------- | ------ |  |  | ------ | ------ |  | 
|                                    |                     |                                       |  |                                   |           |                         
|                                    |                     |                                       |  |                                   |           | Year ended March 31,    
|                                    |                     |                                       |  |                                   |           |                         
|                                    |                     |                                       |  |                                   |           |                          |         |          |  |           
|                                    |                     |                                       |  |                                   |           | 2004                     |         | 2003     |  | 2002      
|                                    |                     |                                       |  |                                   |           |                          |         |          |  |           
|                                    |                     |                                       |  |                                   |           |                         
|                                    |                     | Mitsuis Subsidiary                   |  |                                   |           | (In Thousands of Tonnes)
|Joint Venture or Investee and       |                     | or Associated                         |  |                                   |           | Total                    |         | Mitsuis |  | Total      |        | Mitsuis |  | Total      |         | Mitsuis
|Name of Mines                       |                     | Company                               |  | Location                          |           | Production               |         | Share    |  | Production |        | Share    |  | Production |         | Share   
|                                    |                     |                                       |  |                                   |           |                          |         |          |  |            |        |          |  |            |         |         
|Robe River Iron Associates          |                     | Mitsui Iron Ore Development Pty. Ltd. |  | Pilbara Region, Western Australia |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |       
|                                    | Pannawonica         |                                       |  |                                   |           |                          |         | 30,240   |  |            |        | 9,979    |  |            |         | 31,155   |  |  |        | 10,281 |  |  |         | 32,131 |  |  |        | 10,603 | 
|                                    | West Angelas        |                                       |  |                                   |           |                          |         | 14,181   |  |            |        | 4,680    |  |            |         | 7,342    |  |  |        | 2,423  |  |  |         | 129    |  |  |        | 43     | 
|Mount Newman Joint Venture          |                     | Mitsui Itochu Iron Pty. Ltd.          |  | Pilbara Region, Western Australia |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |       
|                                    | Mt. Whaleback       |                                       |  |                                   |           |                          |         | 36,333   |  |            |        | 2,543    |  |            |         | 30,348   |  |  |        | 2,124  |  |  |         | 32,291 |  |  |        | 2,260  | 
|Yandi Joint Venture                 |                     | Mitsui Iron Ore Development Pty. Ltd. |  | Pilbara Region, Western Australia |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |       
|                                    | Marillana Creek     |                                       |  |                                   |           |                          |         | 40,548   |  |            |        | 2,838    |  |            |         | 35,410   |  |  |        | 2,479  |  |  |         | 32,322 |  |  |        | 2,263  | 
|Mount Goldsworthy Joint
    Venture |                     | Mitsui Iron Ore Development Pty. Ltd. |  | Pilbara Region, Western Australia |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |       
|                                    | North Area          |                                       |  |                                   |           |                          |         | 7,006    |  |            |        | 490      |  |            |         | 8,101    |  |  |        | 567    |  |  |         | 7,700  |  |  |        | 539    | 
|                                    |                     | (Yarrie)
    (Nimingarra)             |  |                                   |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |        |  | 
|                                    | Area C              |                                       |  |                                   |           |                          |         | 3,736    |  |            |        | 262      |  |            |         |         |  |  |        |       |  |  |         |       |  |  |        |       | 
|Sesa Goa Limited                    |                     | Sesa Goa Limited                      |  | India                             |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |       
|                                    | Codli, Sonshi       |                                       |  |                                   | Goa       |                          |         | 2,941    |  |            |        | 1,500    |  |            |         | 2,402    |  |  |        | 1,225  |  |  |         | 1,954  |  |  |        | 997    | 
|                                    | Chitradurga, Hospet |                                       |  |                                   | Karnataka |                          |         | 1,556    |  |            |        | 794      |  |            |         | 1,255    |  |  |        | 640    |  |  |         | 853    |  |  |        | 435    | 
|                                    |                     |                                       |  | TOTAL                             |           |                          | 136,541 |          |  |            | 23,086 |          |  |            | 116,013 |          |  |  | 19,739 |        |  |  | 107,380 |        |  |  | 17,140 |       
|                                    |                     |                                       |  |                                   |           |                          |         |          |  |            |        |          |  |            |         |          |  |  |        |        |  |  |         |        |  |  |        |       

56



---



##### 



Production Tonnage

COAL

|                                  |                    |                               |  |                            |  |                          |        |          |  |            |       |          |  |            |        |          |  |  |       |     |  |  |        |       |  |  |       |     | 
|--------------------------------- | ------------------ | ----------------------------- |  | -------------------------- |  | ------------------------ | ------ | -------- |  | ---------- | ----- | -------- |  | ---------- | ------ | -------- |  |  | ----- | --- |  |  | ------ | ----- |  |  | ----- | --- | 
|                                  |                    |                               |  |                            |  |                         
|                                  |                    |                               |  |                            |  | Year ended March 31,    
|                                  |                    |                               |  |                            |  |                         
|                                  |                    |                               |  |                            |  |                          |        |          |  |           
|                                  |                    |                               |  |                            |  | 2004                     |        | 2003     |  | 2002      
|                                  |                    |                               |  |                            |  |                          |        |          |  |           
|                                  |                    |                               |  |                            |  |                         
|                                  |                    | Mitsuis Subsidiary           |  |                            |  | (In Thousands of Tonnes)
|Joint Venture or Investee         |                    | or Associated                 |  |                            |  | Total                    |        | Mitsuis |  | Total      |       | Mitsuis |  | Total      |        | Mitsuis
|and Name of Mines                 |                    | Company                       |  | Location                   |  | Production               |        | Share    |  | Production |       | Share    |  | Production |        | Share   
|                                  |                    |                               |  |                            |  |                          |        |          |  |            |       |          |  |            |        |         
|BHP Mitsui Coal Pty. Ltd.         |                    | BHP Mitsui Coal Pty. Ltd.     |  | Queensland, Australia      |  |                          |        |          |  |            |       |          |  |            |        |          |  |  |       |     |  |  |        |       |  |  |       |    
|                                  | Riverside          |                               |  |                            |  |                          |        | 2,641    |  |            |       | 528      |  |            |        | 3,402    |  |  |       | 680 |  |  |        | 3,272 |  |  |       | 654 | 
|                                  | South Walker Creek |                               |  |                            |  |                          |        | 3,927    |  |            |       | 785      |  |            |        | 3,341    |  |  |       | 668 |  |  |        | 3,146 |  |  |       | 629 | 
|Bengalla Joint Venture            |                    | Mitsui Coal Holding Pty. Ltd. |  | New South Wales, Australia |  |                          | 6,203  |          |  |            | 620   |          |  |            | 5,385  |          |  |  | 539   |     |  |  | 5,235  |       |  |  | 524   |    
|Kestrel Joint Venture             |                    | Mitsui Coal Holding Pty. Ltd. |  | Queensland, Australia      |  |                          | 3,322  |          |  |            | 664   |          |  |            | 4,091  |          |  |  | 818   |     |  |  | 3,270  |       |  |  | 654   |    
|Moura Joint Venture               |                    | Mitsui Coal Holding Pty. Ltd. |  | Queensland, Australia      |  |                          | 5,964  |          |  |            | 2,922 |          |  |            | 5,845  |          |  |  | 2,786 |     |  |  | 5,352  |       |  |  | 2,408 |    
|German Creek Joint
    Venture(1) |                    | Mitsui Coal Holding Pty. Ltd. |  | Queensland, Australia      |  |                          | 5,422  |          |  |            | 1,627 |          |  |            | 2,905  |          |  |  | 872   |     |  |  |       |       |  |  |      |    
|                                  |                    |                               |  | TOTAL                      |  |                          | 27,479 |          |  |            | 7,146 |          |  |            | 24,969 |          |  |  | 6,363 |     |  |  | 20,275 |       |  |  | 4,869 |    
|                                  |                    |                               |  |                            |  |                          |        |          |  |            |       |          |  |            |        |          |  |  |       |     |  |  |        |       |  |  |       |    



| | 
| | 
| | 



|    |                                                                        
|--- | -----------------------------------------------------------------------
|(1) | Reflects production tonnage from our
    participation since July 2002.

Reserve Tonnage

IRON ORE(1)

|                                    |                     |                                       |  |                                   |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |     |   | 
|----------------------------------- | ------------------- | ------------------------------------- |  | --------------------------------- | --------- | ------------------------ | ----- | -------- | -- | ------- | --- | -------- | - | ------- | ----- | -------- | -- |  | --- | --- | - |  | ----- | ----- | -- |  | --- | --- | - | 
|                                    |                     |                                       |  |                                   |           |                         
|                                    |                     |                                       |  |                                   |           | As of March 31,         
|                                    |                     |                                       |  |                                   |           |                         
|                                    |                     |                                       |  |                                   |           |                          |       |          |    |        
|                                    |                     |                                       |  |                                   |           | 2004                     |       | 2003     |    | 2002   
|                                    |                     |                                       |  |                                   |           |                          |       |          |    |        
|                                    |                     |                                       |  |                                   |           |                         
|                                    |                     | Mitsuis Subsidiary                   |  |                                   |           | (In Thousands of Tonnes)
|Joint Venture or Investee           |                     | or Associated                         |  |                                   |           | Total                    |       | Mitsuis |    | Total   |     | Mitsuis |   | Total   |       | Mitsuis
|and Name of Mines                   |                     | Company                               |  | Location                          |           | Reserve                  |       | Share    |    | Reserve |     | Share    |   | Reserve |       | Share   
|                                    |                     |                                       |  |                                   |           |                          |       |          |    |         |     |          |   |         |       |         
|Robe River Iron
    Associates(2)   |                     | Mitsui Iron Ore Development Pty. Ltd. |  | Pilbara Region, Western Australia |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |    
|                                    | Pannawonica         |                                       |  |                                   |           |                          |       | 200      |    |         |     | 66       |   |         |       | 230      |    |  |     | 76  |   |  |       | 255   |    |  |     | 84  |  
|                                    | West Angelas        |                                       |  |                                   |           |                          |       | 440      |    |         |     | 145      |   |         |       | 455      |    |  |     | 150 |   |  |       | 450   |    |  |     | 149 |  
|Mount Newman Joint
    Venture(3)   |                     | Mitsui Itochu Iron Pty. Ltd.          |  | Pilbara Region, Western Australia |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |    
|                                    | Mt. Whaleback       |                                       |  |                                   |           |                          |       | 1,026    |    |         |     | 72       |   |         |       | 1,193    |    |  |     | 84  |   |  |       | 1,197 |    |  |     | 84  |  
|Yandi Joint Venture                 |                     | Mitsui Iron Ore Development Pty. Ltd. |  | Pilbara Region, Western Australia |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |    
|                                    | Marillana creek     |                                       |  |                                   |           |                          |       | 641      |    |         |     | 45       |   |         |       | 687      |    |  |     | 48  |   |  |       | 708   |    |  |     | 50  |  
|Mount Goldsworthy Joint
    Venture |                     | Mitsui Iron Ore Development Pty. Ltd. |  | Pilbara Region, Western Australia |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |    
|                                    | North Area          |                                       |  |                                   |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |     |  
|                                    |                     | (Yarrie) (Nimingarra)                 |  |                                   |           |                          |       |          | 21 |         |     |          | 2 |         |       |          | 28 |  |     |     | 2 |  |       |       | 32 |  |     |     | 2 | 
|                                    | Area C              |                                       |  |                                   |           |                          |       | 204      |    |         |     | 14       |   |         |       | 209      |    |  |     | 15  |   |  |       | 182   |    |  |     | 13  |  
|Sesa Goa Limited                    |                     | Sesa Goa Limited                      |  | India                             |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |    
|                                    | Codli, Sonshi       |                                       |  |                                   | Goa       |                          |       | 55       |    |         |     | 28       |   |         |       | 53       |    |  |     | 27  |   |  |       | 57    |    |  |     | 29  |  
|                                    | Chitradurga, Hospet |                                       |  |                                   | Karnataka |                          |       | 20       |    |         |     | 10       |   |         |       | 20       |    |  |     | 10  |   |  |       | 21    |    |  |     | 11  |  
|                                    |                     |                                       |  | TOTAL                             |           |                          | 2,607 |          |    |         | 382 |          |   |         | 2,875 |          |    |  | 412 |     |   |  | 2,902 |       |    |  | 422 |    
|                                    |                     |                                       |  |                                   |           |                          |       |          |    |         |     |          |   |         |       |          |    |  |     |     |   |  |       |       |    |  |     |    



| | 
| | 
| | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reserve of Robe River Iron Associates is
    proved + probable marketable reserve. (Marketable
    reserve is tonnage after accounting for extraction and
    beneficiation losses.) Reserve amounts of Mt. Newman,
    Yandi, Mt. Goldsworthy and Sesa Goa consist of
    proved + probable recoverable reserve. (Recoverable
    reserve is tonnage after accounting for extraction losses.)
|   
|(2) | Reserves of Robe River Iron Associates indicate
    reserves as of the end of December 2003, 2002 and 2001,
    respectively.                                                                                                                                                                                                                                                                     
|   
|(3) | Reserves of Mount Newman Joint Venture, Yandi
    Joint Venture and Mount Goldsworthy Joint Venture indicate
    reserves as of the end of June 2003, 2002 and 2001, respectively.                                                                                                                                                                                                                

57



---



##### 



COAL(1)

|                                  |                    |                               |  |                            |  |                          |     |          |  |         |     |          |  |         |     |          |  |  |     |    |  |  |     |    |  |  |     |    | 
|--------------------------------- | ------------------ | ----------------------------- |  | -------------------------- |  | ------------------------ | --- | -------- |  | ------- | --- | -------- |  | ------- | --- | -------- |  |  | --- | -- |  |  | --- | -- |  |  | --- | -- | 
|                                  |                    |                               |  |                            |  |                         
|                                  |                    |                               |  |                            |  | As of March 31,         
|                                  |                    |                               |  |                            |  |                         
|                                  |                    |                               |  |                            |  |                          |     |          |  |        
|                                  |                    |                               |  |                            |  | 2004                     |     | 2003     |  | 2002   
|                                  |                    |                               |  |                            |  |                          |     |          |  |        
|                                  |                    |                               |  |                            |  |                         
|                                  |                    | Mitsuis Subsidiary           |  |                            |  | (In Thousands of Tonnes)
|Joint Venture or Investee         |                    | or Associated                 |  |                            |  | Total                    |     | Mitsuis |  | Total   |     | Mitsuis |  | Total   |     | Mitsuis
|and Name of Mines                 |                    | Company                       |  | Location                   |  | Reserve                  |     | Share    |  | Reserve |     | Share    |  | Reserve |     | Share   
|                                  |                    |                               |  |                            |  |                          |     |          |  |         |     |          |  |         |     |         
|BHP Mitsui Coal
    Pty. Ltd.     |                    | BHP Mitsui Coal Pty. Ltd.     |  | Queensland, Australia      |  |                          |     |          |  |         |     |          |  |         |     |          |  |  |     |    |  |  |     |    |  |  |     |   
|                                  | Riverside          |                               |  |                            |  |                          |     | 5        |  |         |     | 1        |  |         |     | 7        |  |  |     | 1  |  |  |     | 11 |  |  |     | 2  | 
|                                  | South Walker Creek |                               |  |                            |  |                          |     | 96       |  |         |     | 19       |  |         |     | 60       |  |  |     | 12 |  |  |     | 63 |  |  |     | 13 | 
|Bengalla Joint Venture            |                    | Mitsui Coal Holding Pty. Ltd. |  | New South Wales, Australia |  |                          | 166 |          |  |         | 17  |          |  |         | 185 |          |  |  | 19  |    |  |  | 191 |    |  |  | 19  |   
|Kestrel Joint Venture             |                    | Mitsui Coal Holding Pty. Ltd. |  | Queensland, Australia      |  |                          | 123 |          |  |         | 25  |          |  |         | 127 |          |  |  | 25  |    |  |  | 132 |    |  |  | 26  |   
|Moura Joint Venture               |                    | Mitsui Coal Holding Pty. Ltd. |  | Queensland, Australia      |  |                          | 132 |          |  |         | 65  |          |  |         | 97  |          |  |  | 48  |    |  |  | 103 |    |  |  | 46  |   
|German Creek Joint
    Venture(2) |                    | Mitsui Coal Holding Pty. Ltd. |  | Queensland, Australia      |  |                          | 90  |          |  |         | 27  |          |  |         | 111 |          |  |  | 33  |    |  |  |    |    |  |  |    |   
|                                  |                    |                               |  | TOTAL                      |  |                          | 612 |          |  |         | 154 |          |  |         | 587 |          |  |  | 138 |    |  |  | 500 |    |  |  | 106 |   
|                                  |                    |                               |  |                            |  |                          |     |          |  |         |     |          |  |         |     |          |  |  |     |    |  |  |     |    |  |  |     |   






|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Proved + Probable Marketable Reserve
    (Marketable Reserve is tonnage after accounting for
    extraction and processing and preparation losses.)
|   
|(2) | Reflects production tonnage from our
    participation since July 2002 onwards.                                                                      

We own 15% profit share of Valepar S.A., which
owns 34% of profit share of the common stock and preferred stock
of Companhia Vale do Rio Doce (CVRD). Accordingly,
CVRDs 5.1% (34% × 15%) of its production and
reserve amounts are indirectly attributable to us. The following
table provides production and reserve amounts of CVRD and
Mitsuis share of the production and reserve amounts of
CVRD.

Production Tonnage (for the year ended
December 31)

| |  |            |       |          |  |            |     |          |  |                      |       |          |  |  |     |  |  |  |       |  |  |  |     | 
| |  | ---------- | ----- | -------- |  | ---------- | --- | -------- |  | -------------------- | ----- | -------- |  |  | --- |  |  |  | ----- |  |  |  | --- | 
| |  |            |       |          |  |            |     |          |  |                     
| |  |            |       |          |  |            |     |          |  | (millions of tonnes)
| |  |            |       |          |  |           
| |  | 2003       |       | 2002     |  | 2001      
| |  |            |       |          |  |           
| |  | Total      |       | Mitsuis |  | Total      |     | Mitsuis |  | Total                |       | Mitsuis
| |  | Production |       | Share    |  | Production |     | Share    |  | Production           |       | Share   
| |  |            |       |          |  |            |     |          |  |                      |       |         
| |  |            | 188.3 |          |  |            | 9.6 |          |  |                      | 168.7 |          |  |  | 8.6 |  |  |  | 164.2 |  |  |  | 8.4 | 

Proven and Probable Reserves (as of
December 31)

| |  |         |          |          |  |         |       |          |  |                      |          |          |  |  |       |  |  |  |          |  |  |  |       | 
| |  | ------- | -------- | -------- |  | ------- | ----- | -------- |  | -------------------- | -------- | -------- |  |  | ----- |  |  |  | -------- |  |  |  | ----- | 
| |  |         |          |          |  |         |       |          |  |                     
| |  |         |          |          |  |         |       |          |  | (millions of tonnes)
| |  |         |          |          |  |        
| |  | 2003    |          | 2002     |  | 2001   
| |  |         |          |          |  |        
| |  | Total   |          | Mitsuis |  | Total   |       | Mitsuis |  | Total                |          | Mitsuis
| |  | Reserve |          | Share    |  | Reserve |       | Share    |  | Reserve              |          | Share   
| |  |         |          |          |  |         |       |          |  |                      |          |         
| |  |         | 4,926.20 |          |  |         | 251.6 |          |  |                      | 4,458.60 |          |  |  | 227.7 |  |  |  | 3,991.90 |  |  |  | 203.9 | 



| |                                 
| | --------------------------------
| | Oil and Gas Producing Activities

The following table shows crude oil, condensate,
natural gas liquids and natural gas production from our reserves
for the three fiscal years indicated:

Production Information

|                     |  |                           |   |                        |  |        |   |           |  |             |   |         |  |        |    |           |  |  |   |  |  |  |    |  |  |  |    |  |  |  |    | 
|-------------------- |  | ------------------------- | - | ---------------------- |  | ------ | - | --------- |  | ----------- | - | ------- |  | ------ | -- | --------- |  |  | - |  |  |  | -- |  |  |  | -- |  |  |  | -- | 
|                     |  |                           |   |                        |  |        |   |           |  |            
|                     |  | Crude Oil, Condensate and |   |                       
|                     |  | Natural Gas Liquids(1)    |   | Natural Gas(1)        
|                     |  |                           |   |                       
|                     |  |                           |   |                       
|                     |  | Millions of Barrels       |   | Billions of Cubic Feet
|                     |  |                           |   |                       
|Year ended March 31, |  | Middle East               |   | Oceania                |  | Others |   | Worldwide |  | Middle East |   | Oceania |  | Others |    | Worldwide
|                     |  |                           |   |                        |  |        |   |           |  |             |   |         |  |        |    |          
|2004                 |  |                           | 2 |                        |  |        | 8 |           |  |             | 5 |         |  |        | 15 |           |  |  |  |  |  |  | 45 |  |  |  | 29 |  |  |  | 74 | 
|2003                 |  |                           | 3 |                        |  |        | 8 |           |  |             | 4 |         |  |        | 15 |           |  |  |  |  |  |  | 41 |  |  |  | 24 |  |  |  | 65 | 
|2002                 |  |                           | 0 |                        |  |        | 9 |           |  |             | 5 |         |  |        | 14 |           |  |  |  |  |  |  | 40 |  |  |  | 23 |  |  |  | 63 | 

58



---



##### 



The following tables show proved reserves and
proved developed reserves of crude oil, condensate, natural gas
liquids and natural gas as of the ending date of three fiscal
years indicated:



| |                            
| | ---------------------------
| | Proved Reserve Information:

Proved
Reserves

|                  |  |                                                  |    |                        |  |        |    |           |  |             |     |         |  |        |     |           |  |  |    |  |  |  |       |  |  |  |     |  |  |  |       | 
|----------------- |  | ------------------------------------------------ | -- | ---------------------- |  | ------ | -- | --------- |  | ----------- | --- | ------- |  | ------ | --- | --------- |  |  | -- |  |  |  | ----- |  |  |  | --- |  |  |  | ----- | 
|                  |  |                                                  |    |                       
|                  |  | Crude Oil, Condensate and Natural Gas Liquids(1) |    | Natural Gas(1)        
|                  |  |                                                  |    |                       
|                  |  |                                                  |    |                       
|                  |  | Millions of Barrels                              |    | Billions of Cubic Feet
|                  |  |                                                  |    |                       
|                  |  | Middle East                                      |    | Oceania                |  | Others |    | Worldwide |  | Middle East |     | Oceania |  | Others |     | Worldwide
|                  |  |                                                  |    |                        |  |        |    |           |  |             |     |         |  |        |     |          
|At March 31, 2004 |  |                                                  | 23 |                        |  |        | 49 |           |  |             | 127 |         |  |        | 199 |           |  |  | 84 |  |  |  | 873   |  |  |  | 965 |  |  |  | 1,922 | 
|At March 31, 2003 |  |                                                  | 28 |                        |  |        | 52 |           |  |             | 71  |         |  |        | 151 |           |  |  |   |  |  |  | 1,200 |  |  |  | 221 |  |  |  | 1,421 | 
|At March 31, 2002 |  |                                                  | 9  |                        |  |        | 50 |           |  |             | 59  |         |  |        | 118 |           |  |  |   |  |  |  | 1,155 |  |  |  | 219 |  |  |  | 1,374 | 

Proved
Developed Reserves(2)

|                  |  |                                                  |    |                        |  |        |    |           |  |             |    |         |  |        |    |           |  |  |    |  |  |  |     |  |  |  |    |  |  |  |     | 
|----------------- |  | ------------------------------------------------ | -- | ---------------------- |  | ------ | -- | --------- |  | ----------- | -- | ------- |  | ------ | -- | --------- |  |  | -- |  |  |  | --- |  |  |  | -- |  |  |  | --- | 
|                  |  |                                                  |    |                       
|                  |  | Crude Oil, Condensate and Natural Gas Liquids(1) |    | Natural Gas(1)        
|                  |  |                                                  |    |                       
|                  |  |                                                  |    |                       
|                  |  | Millions of Barrels                              |    | Billions of Cubic Feet
|                  |  |                                                  |    |                       
|                  |  | Middle East                                      |    | Oceania                |  | Others |    | Worldwide |  | Middle East |    | Oceania |  | Others |    | Worldwide
|                  |  |                                                  |    |                        |  |        |    |           |  |             |    |         |  |        |    |          
|At March 31, 2004 |  |                                                  | 23 |                        |  |        | 21 |           |  |             | 19 |         |  |        | 63 |           |  |  | 84 |  |  |  | 330 |  |  |  | 69 |  |  |  | 483 | 
|At March 31, 2003 |  |                                                  | 28 |                        |  |        | 26 |           |  |             | 18 |         |  |        | 72 |           |  |  |   |  |  |  | 364 |  |  |  | 58 |  |  |  | 422 | 
|At March 31, 2002 |  |                                                  | 9  |                        |  |        | 28 |           |  |             | 18 |         |  |        | 55 |           |  |  |   |  |  |  | 370 |  |  |  | 66 |  |  |  | 436 | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 1 barrel of crude oil = 5,800 cubic feet of
    natural gas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(2) | The proportion of Proved Developed Reserves to
    Proved Developed and Undeveloped Reserves is about
    28 percent as of March 31, 2004 and relatively low.
    The expected costs to develop these undeveloped reserves are
    estimated to be ¥238,598 million in total as of
    March 31, 2004. The major undeveloped reserves are
    attributable to an associated company in Russia and an
    associated company in Australia. It is expected to commence the
    production of crude oil in 2006 and LNG in 2007, for the
    associated company in Russia. With respect to the associated
    company in Australia, the production of crude oil and LNG has
    already commenced at the existing facilities. Moreover, the
    drilling of additional development wells will be performed over
    the project life according to the drilling program of the
    project provided by the operator.

Information on our oil and gas producing
activities is shown in the Supplemental Information on Oil
and Gas Producing Activities (Unaudited) to the
consolidated financial statements included elsewhere in this
annual report.






|        |                                                  
|------- | -------------------------------------------------
|Item 5. | Operating and Financial Review and
    Prospects.





|   |                   
|-- | ------------------
|A. | Operating Results.

You should read the following discussion and
analysis of our financial condition and results of operations
together with Selected Financial Data under
Item 3.A. and our consolidated financial statements, that
appear elsewhere in this annual report. This discussion and
analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results may differ
materially from those anticipated in these forward-looking
statements as a result of factors including but not limited to
those set forth under Item 3.D. Risk Factors
and elsewhere in this annual report.

Operations of a subsidiary that either have been
disposed of or are classified as held for sale have been
accounted for as discontinued operations under accounting
principles generally accepted in the United States of America
(U.S. GAAP). This means that income statement
and cash flow information are reclassified for all years
presented to separate the discontinued operations from our
continuing operations. This presentation is required by
U.S. GAAP and facilities historical and future trend
analysis of our continuing operations.

All references to Note throughout the
Operating and Financial Review and Prospects relate to the Notes
to Consolidated Financial Statements contained elsewhere in this
Annual Report.

As a result of a careful review of the revenue
presentation on the face of the Statements of Consolidated
Income subsequent to the issuance of the consolidated financial
statements for the year ended March 31, 2003, we decided to
classify our revenues by major class and report certain revenue
transactions with the corresponding costs on a gross basis for
the year ended March 31, 2004 as required by the SEC
Regulation S-X, Rule 5-03 and Financial Accounting
Standards Board (FASB) Emerging Issues Task Force
Issue (EITF) No. 99-19, Reporting Revenue
Gross as a Principal versus Net as an Agent. Specifically,
we classified our revenues into Sales of products,
Sales of services and Other sales with
the

59



---



##### 



corresponding costs of revenues and restated the
Statements of Consolidated Income for all prior periods
presented to conform to the current year presentation. The
adoption of this principle and the application to our
consolidated financial statements had no impact on gross
profits, net income and shareholders equity.


In accordance with EITF No. 99-19, revenues
are reported based on the gross amount billed to a customer or
on the net amount retained (that is, the amount billed to a
customer less the amount paid to a supplier). Revenue is
reported based on the gross amount for transactions where we
have the related risks and rewards such as transactions where we
are a primary obligor in the arrangement, and/or assume general
inventory risk without any significant mitigation of our risk
level. Revenue is reported based on net amounts where we assume
a low degree of related risks and rewards, effectively acting as
an agent for the applicable product or service. A typical
example is a transaction where we receive a commission at a
fixed rate or a fee based on transaction volume or amount.



| |                      
| | ---------------------
| | Results of Operations



| |                                                                       
| | ----------------------------------------------------------------------
| | Summary of Results of Operations for the
    Year Ended March 31, 2004

The global economic recovery gained momentum from
late 2003. The principal developments in the economic
environment influencing our results of operations during the
year ended March 31, 2004 included the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Major expansion in the exports and imports of
    emerging economies such as those of Asian countries, drove the
    growth of the world economy. The Chinese economy reported an
    exceptionally strong performance with its government seeking
    sustainable economic growth and showing a cautious attitude in
    its monetary and foreign exchange policies to avoid overheating
    of the economy;
|
| |  | There was marked overall appreciation in
    international commodity prices reflecting increasing demand from
    Asian countries, especially from China;                                                                                                                                                                                                                                                    
|
| |  | The Japanese economy began to recover gradually
    along with the improvement in the world economic conditions and
    the risks of a recession arising from instability of Japanese
    financial system appeared to be reduced;                                                                                                                                                                           
|
| |  | As a result of the improvement in the Japanese
    economy, stock prices in Japan bottomed out in the beginning of
    the year ended March 31, 2004; and                                                                                                                                                                                                                                                    
|
| |  | Major countries around the world maintained their
    low interest rate policies.                                                                                                                                                                                                                                                                                                                            

For the year ended March 31, 2004, we
recorded net income of ¥68.4 billion, an increase of
¥37.3 billion or 119.6% from ¥31.1 billion
for the year ended March 31, 2003. Our overview of the
results of the operations for the year ended March 31, 2004
is set forth below:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gross profit and equity in earnings of associated
    companies net (after income tax effect) benefited from
    rising commodity market prices driven by strong demand in China
    and other Asian countries for energy and mineral resources. As a
    result, the Metal Products & Minerals Segment improved
    its operating results and the Energy Segment continued to
    perform well as compared with the year ended March 31, 2003;                                                                                                                                                                                                                                                                                                        
|
| |  | Increased overseas demand for plant projects,
    automobiles and ocean vessels improved gross profit in the
    Machinery, Electronics & Information Segment and higher
    prices and increased demand for petrochemical products,
    including ammonia and olefin, improved the results of operations
    of the Chemical Segment. Charges for impairment losses on leased
    property and equipment, investments in securities and
    receivables in the Machinery, Electronics & Information
    Segment and losses resulting from the discontinued operations of
    North American petrochemical subsidiaries in the Chemical
    Segment were reduced for the year ended March 31, 2004 as
    compared to the year ended March 31, 2003; and
|
| |  | The turnaround of MITSUI FOODS CO., LTD.
    (formerly Sanyu Koami Co., Ltd.) that had recorded a net loss
    for the year ended March 31, 2003 due to impairment losses
    on non-marketable equity securities and unused land and for the
    year ended March 31, 2002 due to an expense with respect to
    an early retirement program and provision for doubtful
    receivables contributed to the improvement in the Consumer
    Products & Services Segment.                                                                                                                                                                                                                                                                                

60



---



##### 



Reflecting development in the above-mentioned
operating segments, our operating results for the year ended
March 31, 2004 improved as compared with the year ended
March 31, 2003 as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gross profit increased by ¥41.3 billion
    to ¥609.9 billion for the year ended March 31,
    2004 compared with ¥568.6 billion for the year ended
    March 31, 2003; and                                                                                                                                                                                                                                                                     
|
| |  | Equity in earnings of associated companies
    net (after income tax effect) rose by ¥24.8 billion to
    ¥40.1 billion for the year ended March 31, 2004.
    Associated companies in the natural resources business
    contributed to this growth, while there were significant losses
    for the year ended March 31, 2003 from associated companies
    in the Machinery, Electronics & Information Segment and
    the Chemical Segment.

These improvements were partially offset by an
increase in other expense net by ¥17.9 billion
to ¥28.9 billion for the year ended March 31,
2004, which was primarily attributable to litigation charges for
the U.S. antitrust lawsuits related to Bioproducts Inc.,
our U.S. chemical subsidiary.

The average U.S. dollar-yen exchange rate
for the year ended March 31, 2004 was ¥112.76= U.S.$1
compared with ¥121.20= U.S.$1 for the year ended
March 31, 2003, a yen appreciation of ¥8.44, or 7.0%.
The appreciation of the yen had the net effect of reducing gross
profit by approximately ¥13.0 billion.

61



---



##### 





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Discussion and Analysis of Operating
    Results for the Year Ended March 31, 2004

|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |         |         | 
|---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------- | ------- | ----------- | --------- | ------ | ------- | --------- | --------- | - | ------ | ------- | ------- | 
|                                                                                                     |                                                                            |                       
|                                                                                                     |                                                                            | Millions of Yen       
|                                                                                                     |                                                                            |                       
|                                                                                                     |                                                                            |                        |         |            
|                                                                                                     |                                                                            | Year ended March 31,   |         |            
|                                                                                                     |                                                                            |                        |         |            
|                                                                                                     |                                                                            |                        |         | 2003        |           |       
|                                                                                                     |                                                                            | 2004                   |         | As restated |           | Change
|                                                                                                     |                                                                            |                        |         |             |           |       
|Revenues:                                                                                            |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|                                                                                                     | Sales of products                                                          |                        | ¥       | 2,493,993   |           |        | ¥       | 2,324,849 |           |   | ¥      | 169,144 |        
|                                                                                                     | Sales of services                                                          |                        |         | 424,838     |           |        |         | 390,079   |           |   |        | 34,759  |        
|                                                                                                     | Other sales                                                                |                        |         | 61,511      |           |        |         | 73,223    |           |   |        | (11,712 | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|                                                                                                     |                                                                            | Total revenues         |         |             | 2,980,342 |        |         |           | 2,788,151 |   |        |         | 192,191 | 
|Cost of Revenues:                                                                                    |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|                                                                                                     | Cost of products sold                                                      |                        |         | 2,295,886   |           |        |         | 2,137,328 |           |   |        | 158,558 |        
|                                                                                                     | Cost of services sold                                                      |                        |         | 41,437      |           |        |         | 44,706    |           |   |        | (3,269  | )      
|                                                                                                     | Cost of other sales                                                        |                        |         | 33,098      |           |        |         | 37,472    |           |   |        | (4,374  | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|                                                                                                     |                                                                            | Total cost of revenues |         |             | 2,370,421 |        |         |           | 2,219,506 |   |        |         | 150,915 | 
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|Gross Profit                                                                                         |                                                                            |                        | 609,921 |             |           |        | 568,645 |           |           |   | 41,276 |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|Other Expenses (Income):                                                                             |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|                                                                                                     | Selling, general and administrative                                        |                        |         | 496,375     |           |        |         | 456,349   |           |   |        | 40,026  |        
|                                                                                                     | Provision for doubtful receivables                                         |                        |         | 10,188      |           |        |         | 13,649    |           |   |        | (3,461  | )      
|                                                                                                     | Interest expense, net of interest income                                   |                        |         | 890         |           |        |         | 2,764     |           |   |        | (1,874  | )      
|                                                                                                     | Dividend income                                                            |                        |         | (18,448     | )         |        |         | (16,266   | )         |   |        | (2,182  | )      
|                                                                                                     | Gain on securities contributed to an employee
    retirement benefit trust |                        |         |            |           |        |         | (15,831   | )         |   |        | 15,831  |        
|                                                                                                     | Government grant for transfer of substitutional
    portion of EPF         |                        |         | (17,224     | )         |        |         |          |           |   |        | (17,224 | )      
|                                                                                                     | Gain on sales of securitiesnet                                            |                        |         | (27,465     | )         |        |         | (11,026   | )         |   |        | (16,439 | )      
|                                                                                                     | Loss on write-down of securities                                           |                        |         | 31,024      |           |        |         | 37,907    |           |   |        | (6,883  | )      
|                                                                                                     | (Gain) loss on disposal or sales of property and
    equipmentnet         |                        |         | (3,874      | )         |        |         | 1,745     |           |   |        | (5,619  | )      
|                                                                                                     | Impairment loss of long-lived assets                                       |                        |         | 22,683      |           |        |         | 23,903    |           |   |        | (1,220  | )      
|                                                                                                     | Other expensenet                                                          |                        |         | 28,885      |           |        |         | 10,983    |           |   |        | 17,902  |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|                                                                                                     |                                                                            | Total other expenses   |         |             | 523,034   |        |         |           | 504,177   |   |        |         | 18,857  | 
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|Income from Continuing Operations before Income
    Taxes, Minority Interests and Equity in Earnings |                                                                            |                        | 86,887  |             |           |        | 64,468  |           |           |   | 22,419 |        
|Income Taxes                                                                                         |                                                                            |                        | 44,792  |             |           |        | 38,757  |           |           |   | 6,035  |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|Income from Continuing Operations before Minority
    Interests and Equity in Earnings               |                                                                            |                        | 42,095  |             |           |        | 25,711  |           |           |   | 16,384 |        
|Minority Interests in Earnings of Subsidiaries                                                       |                                                                            |                        | (7,470  | )           |           |        | (4,411  | )         |           |   | (3,059 | )      
|Equity in Earnings of Associated
    CompaniesNet (After Income Tax Effect)                         |                                                                            |                        | 40,078  |             |           |        | 15,295  |           |           |   | 24,783 |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|Income from Continuing Operations                                                                    |                                                                            |                        | 74,703  |             |           |        | 36,595  |           |           |   | 38,108 |        
|Loss from Discontinued OperationsNet (After
    Income Tax Effect)                                  |                                                                            |                        | (4,031  | )           |           |        | (5,457  | )         |           |   | 1,426  |        
|Cumulative Effect of Change in Accounting
    Principle (After Income Tax Effect)                    |                                                                            |                        | (2,285  | )           |           |        |        |           |           |   | (2,285 | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        
|Net Income                                                                                           |                                                                            | ¥                      | 68,387  |             |           | ¥      | 31,138  |           |           | ¥ | 37,249 |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |        |        



| |                  
| | -----------------
| | Sales of Products

For the year ended March 31, 2004, sales of
products were ¥2,494.0 billion, an increase of
¥169.1 billion from ¥2,324.8 billion for the
year ended March 31, 2003. The major reason for this
increase was a ¥112.9 billion increase in revenues
from subsidiaries involved in oil and gas trading activities.
This growth was mainly attributable to an 8.5% increase in the
average price of crude oil during the year ended March 31,
2004 caused by turmoil in Iraq and a lower inventory level of
petroleum products.

62



---



##### 





| |                  
| | -----------------
| | Sales of Services

For the year ended March 31, 2004, sales of
services were ¥424.8 billion, an increase of
¥34.7 billion from ¥390.1 billion for the
year ended March 31, 2003. Major components of these
revenues for the year ended March 31, 2004 were revenues
related to sales and purchases of products, which are reported
net under EITF No. 99-19. These include commissions
received at a fixed amount or rate in relation to the volume or
amount of transactions, and revenues reported net for some
back-to-back sales and purchase transactions of products where
the difference between sales price and purchase price is
recorded as revenue. Revenues from such trading margins and
commissions increased from ¥273.6 billion for the year
ended March 31, 2003 to ¥304.0 billion for the
year ended March 31, 2004. This increase was mainly due to
the growth in trading transactions at subsidiaries such as
MITSUI FOODS CO., LTD. primarily with Japanese supermarkets.
Revenues from logistics and warehouse services, information and
communication services, technical support and many other types
of services increased from ¥77.5 billion for the year
ended March 31, 2003 to ¥83.3 billion for the
year ended March 31, 2004. Revenues from commissions for
facilitating conclusion of the contracts between manufacturers
and customers and for delivering products between suppliers and
customers decreased from ¥39.0 billion for the year
ended March 31, 2003 to ¥37.5 billion for the
year ended March 31, 2004.



| |            
| | -----------
| | Other Sales

For the year ended March 31, 2004, leasing
revenues decreased from ¥49.9 billion to
¥42.2 billion, mainly due to the disposal of leased
aircraft and the termination of the lease contracts in relation
with ocean transport vessels. Derivative trading revenues
decreased from ¥22.1 billion for the year ended
March 31, 2003 to ¥18.2 billion for the year
ended March 31, 2004.



| |             
| | ------------
| | Gross Profit



| |                                                    
| | ---------------------------------------------------
| | Gross profit classified by category of
    revenues

For the year ended March 31, 2004, gross
profit (GP) increased by ¥41.3 billion to
¥609.9 billion. The changes in GP and GP ratio
classified by category of revenues are set forth below:

|                                    |  |                      |        |          |  |        |      |          |  |    |        |          |  |  |      |   |  |  |       |   |  |  |      |   
|----------------------------------- |  | -------------------- | ------ | -------- |  | ------ | ---- | -------- |  | -- | ------ | -------- |  |  | ---- | - |  |  | ----- | - |  |  | ---- | --
|                                    |  |                     
|                                    |  | Billions of Yen     
|                                    |  |                     
|                                    |  |                      |        |         
|                                    |  | Year ended March 31, |        |         
|                                    |  |                      |        |         
|                                    |  |                      |        |          |  |       
|                                    |  | 2004                 |        | 2003     |  | Change
|                                    |  |                      |        |          |  |       
|                                    |  | GP                   |        | GP ratio |  | GP     |      | GP ratio |  | GP |        | GP ratio
|                                    |  |                      |        |          |  |        |      |          |  |    |        |         
|Gross profit from sales of products |  |                      | ¥198.1 |          |  |        | 7.9  | %        |  |    | ¥187.5 |          |  |  | 8.1  | % |  |  | ¥10.6 |   |  |  | (0.2 | )%
|Gross profit from sales of services |  |                      | 383.4  |          |  |        | 90.2 | %        |  |    | 345.4  |          |  |  | 88.5 | % |  |  | 38.0  |   |  |  | 1.7  | % 
|Gross profit from other sales       |  |                      | 28.4   |          |  |        | 46.2 | %        |  |    | 35.7   |          |  |  | 48.8 | % |  |  | (7.3  | ) |  |  | (2.6 | )%
|                                    |  |                      |        |          |  |        |      |          |  |    |        |          |  |  |      |   |  |  |       |   |  |  |      |   
|Total                               |  |                      | ¥609.9 |          |  |        | 20.5 | %        |  |    | ¥568.6 |          |  |  | 20.4 | % |  |  | ¥41.3 |   |  |  | 0.1  | % 
|                                    |  |                      |        |          |  |        |      |          |  |    |        |          |  |  |      |   |  |  |       |   |  |  |      |   

Gross profit from sales of products for the year
ended March 31, 2004 increased ¥10.6 billion
compared with the year ended March 31, 2003. This increase
was mainly due to the contribution of newly acquired
subsidiaries, such as Mitsui Norin Co., Ltd.

Gross profit from sales of services for the year
ended March 31, 2004 increased ¥38.0 billion
compared with the year ended March 31, 2003. This increase
was mainly due to the growth in commissions for facilitating the
conclusion of contracts between manufacturers and customers and
profit margin for construction projects of oil refineries and
power plants, trading margins from transactions relating to cell
phones and from the domestic transactions with supermarkets by
MITSUI FOODS CO., LTD. Gross profit ratio for the year ended
March 31, 2004 improved 1.7 points compared with the year
ended March 31, 2003, mainly due to the increase in
revenues from trading margins and commissions reported net,
where the corresponding costs are fully offset by the billed
amount and the gross profit ratio becomes 100%.

Gross profit from other sales for the year ended
March 31, 2004 decreased ¥7.3 billion from the
year ended March 31, 2003. This decrease was mainly due to
the derivative trading losses at Arcadia Petroleum Ltd. relating
to petroleum products tradings. Gross profit ratio for the year
ended March 31, 2004 also decreased 2.6 points
compared with the year ended March 31, 2003, mainly due to
the decrease in revenues from petroleum products derivative
trading transactions.

63



---



##### 





| |                                                 
| | ------------------------------------------------
| | Gross profit classified by operating
    segment

For the year ended March 31, 2004, the
growth in gross profit was mainly attributable to the operating
segments as set forth below:

|                                     |  |                 |       |      |  |        |       |  |  |   |      | 
|------------------------------------ |  | --------------- | ----- | ---- |  | ------ | ----- |  |  | - | ---- | 
|                                     |  |                
|                                     |  | Billions of Yen
|                                     |  |                
|                                     |  |                 |       |     
|                                     |  | Year ended      |       |     
|                                     |  | March 31,       |       |     
|                                     |  |                 |       |     
|Segment                              |  | 2004            |       | 2003 |  | Change
|                                     |  |                 |       |      |  |       
|Chemical                             |  | ¥               | 83.0  |      |  | ¥      | 60.9  |  |  | ¥ | 22.1 | 
|Machinery, Electronics & Information |  |                 | 128.4 |      |  |        | 118.0 |  |  |   | 10.4 | 
|Consumer Products & Services         |  |                 | 116.3 |      |  |        | 105.9 |  |  |   | 10.4 | 
|Metal Products & Minerals            |  |                 | 77.5  |      |  |        | 70.7  |  |  |   | 6.8  | 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Growth in the Chemical Segment was due to higher
    market prices of ammonia and other petrochemicals resulting from
    the rising crude oil and natural gas prices;                                                                                                                                                                                                                                                
|
| |  | Results in the Machinery, Electronics &
    Information Segment benefited from a higher volume of
    transactions for construction of oil refineries and power
    plants, sales of automobiles, ocean vessels and cell phones;                                                                                                                                                                                      
|
| |  | In the Consumer Products & Services
    Segment, newly acquired subsidiary Mitsui Norin Co., Ltd., a
    producer and seller of tea leaves in Japan, made a contribution
    while MITSUI FOODS CO., LTD. also recorded higher sales mainly
    to supermarkets in Japan; and                                                                                                                                         
|
| |  | In the Metal Products & Minerals
    Segment, gross profit increased at Sesa Goa Limited, an iron ore
    subsidiary in India, because of growing iron ore exports to
    China and higher market prices of its products in India, and at
    Mitsui Iron Ore Development Pty. Ltd., an Australian subsidiary,
    reflecting increased shipments of iron ore driven by the demand
    from China and other countries.



| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    Expenses

Selling, general and administrative expenses for
the year ended March 31, 2004 increased to
¥496.4 billion from ¥456.3 billion for the
year ended March 31, 2003.

Despite lower expenses for the early retirement
support plan at Mitsui, total personnel expenses for the year
ended March 31, 2004 increased by ¥19.3 billion
to ¥261.3 billion because:



| |   |                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | At Mitsui, pension costs increased sharply due to
    a ¥13.0 billion increase in amortization of the
    unrecognized net actuarial loss; and                                                           
|
| |  | A settlement loss of ¥10.5 billion was
    incurred due to the completion of the transfer to the Japanese
    government of the substitutional portion of the Mitsuis
    Employee Pension Fund (EPF).

Communication and information expenses for the
year ended March 31, 2004 increased by
¥2.4 billion to ¥33.5 billion from the year
ended March 31, 2003 because of the introduction of a new
enterprise resource planning system designed to raise
productivity by standardizing business processes at Mitsui.

Selling, general and administrative expenses
other than personnel and communication and information expenses
increased by ¥18.3 billion to ¥155.8 billion
from the year ended March 31, 2003 due to an increase in
newly acquired subsidiaries, including Mitsui Norin Co., Ltd.,
where there were additional depreciation and sales promotion
expenses.



| |                                   
| | ----------------------------------
| | Provision for Doubtful Receivables

Provision for doubtful receivables fell to
¥10.2 billion compared with ¥13.6 billion
for the year ended March 31, 2003. For the year ended
March 31, 2004, provision for doubtful receivables
consisted mainly of individually small provisions for a number
of customers, primarily overseas customers in the machinery
business and domestic and overseas customers in the steel
product business.

For the year ended March 31, 2003, the
provision was mainly for amounts due from United Airlines, Inc.
and other receivables relating to aircraft leasing caused by the
deterioration of the worldwide airline industry, especially in
the United States; for receivables from customers in Argentina
and Honduras reflecting weak economic conditions; and for
receivables from domestic customers of MITSUI FOODS CO., LTD.
and Mitsui Bussan Plant & Project Corp.

64



---



##### 





| |                                             
| | --------------------------------------------
| | Interest Expense, Net of Interest
    Income

Interest expense, net of interest income, for the
year ended March 31, 2004 decreased by
¥1.9 billion, which was attributable to lower net
interest expenses at overseas subsidiaries due to lower interest
rates. Furthermore, there was a decrease in interest expenses
associated with aircraft leases at foreign subsidiaries and an
increase in interest income from the growth of businesses at a
consumer automobile financing subsidiary.

The average of the month-end U.S. dollar
three-month London Interbank Offered Rate (LIBOR)
was 1.16% for the year ended March 31, 2004, which fell
from 1.63% for the year ended March 31, 2003 because of the
continuing low interest rate policy in the United States. As for
the Japanese yen, the average of the month-end Japanese yen
three-month LIBOR was 0.06% and 0.07% for the year ended
March 31, 2004 and 2003, respectively. The average
long-term prime rate in Japan was 1.59% for the year ended
March 31, 2004 compared to 1.79% for the year ended
March 31, 2003.



| |                
| | ---------------
| | Dividend Income

Our dividend income for the year ended
March 31, 2004 increased by ¥2.2 billion mainly
due to the ¥1.1 billion increase in dividends received
by Mitsui & Co. (Hong Kong) Ltd. from local Hong Kong
investee companies. Dividends from investments in the Energy
Segment amounting to ¥8.1 billion, principally from
LNG projects in Abu Dhabi, Oman and Qatar, were consistent
with dividends for the year ended March 31, 2003 of
¥8.3 billion.



| |                                                                           
| | --------------------------------------------------------------------------
| | Gain on Securities Contributed to an Employee
    Retirement Benefit Trust

During the year ended March 31, 2004, no
contribution of securities to an employee retirement benefit
trust was made. For the year ended March 31, 2003, Mitsui
made a contribution of certain available-for-sale securities to
the trust and recorded a ¥15.8 billion gain.



| |                                                                   
| | ------------------------------------------------------------------
| | Government Grant for Transfer of
    Substitutional Portion of EPF

On March 12, 2004, Mitsui completed the
transfer of the substitutional portion of EPF, a defined benefit
pension program established under the Welfare Pension Insurance
Law, to the Japanese government. As a result, a government grant
for transfer of a substitutional portion of EPF of
¥17.2 billion was recorded. The grant represents the
difference between the accumulated benefit obligations settled
with regard to the substitutional portion and the related
government-specified portion of the plan assets that were
transferred. For information concerning the accounting for the
transfer of the substitutional portion of EPF, see Note 14,
PENSION COSTS AND SEVERANCE INDEMNITIES.



| |                                
| | -------------------------------
| | Gain on Sales of SecuritiesNet

The net realized gain on sales of securities for
the year ended March 31, 2004 increased by
¥16.4 billion from the year ended March 31, 2003.
For the year ended March 31, 2004, gain related to sales of
shares of SKY Perfect Communications Inc., Caemi
Mineração e Metalurgia S.A. (Caemi) and
MODEC, Inc.

For the year ended March 31, 2003, there
were gains resulting from the exchange of shares accompanying
the merger of Japan Airlines Company, Ltd. and Japan Air System
Co., Ltd. and the sale of shares of information
technology-related companies, offsetting losses on sales of
listed shares of banking institutions.



| |                                 
| | --------------------------------
| | Loss on Write-Down of Securities

For the year ended March 31, 2004, the loss
on write-down of securities decreased by ¥6.9 billion
to ¥31.0 billion from ¥37.9 billion recorded
for the year ended March 31, 2003.

Stock prices in Japan fell sharply in early 2003
as non-performing loan problems sparked concerns about the
Japanese financial system and the Nikkei Stock Average reached
its post-bubble record low in April 2003. However, a
rebound in stock markets began in May 2003 after the Japanese
governments decision to inject public funds into certain
banks alleviated concerns about financial instability. Improving
corporate earnings and a gradual upturn in the Japanese economy
also drove stock prices higher for the year ended March 31,
2004. The Nikkei Stock Average closed at ¥11,715.39,
¥7,972.71 and ¥11,024.94 on March 31, 2004, 2003
and 2002, respectively.

65



---



##### 



Due to the rebound in Japanese stock markets, the
loss from write-down of marketable securities decreased sharply
to ¥1.3 billion from ¥15.6 billion for the
year ended March 31, 2003. The loss on write-down of
marketable securities for the year ended March 31, 2003
primarily consisted of those of banking institutions.

For the year ended March 31, 2004, however,
with respect to non-marketable securities, we posted a
¥21.7 billion loss on shares of POWEREDCOM, Inc., a
Japanese telecommunications company, in consideration of the
deterioration in its financial position reflecting the operating
loss caused by the fierce price competition along with expansion
of the Internet and the decrease in revenues from the fixed-line
business. We also recorded a ¥1.5 billion loss on
shares of Mitsui Denman (Ireland) Co., Ltd., a company in the
chemical industry located in Ireland. For the year ended
March 31, 2003, losses on non-marketable securities were
¥22.3 billion, which included those of information
technology-related companies amounting to ¥7.6 billion.



| |                                                                   
| | ------------------------------------------------------------------
| | (Gain) Loss on Disposal or Sales of Property
    and EquipmentNet

For the year ended March 31, 2004, gain on
disposal or sales of property and equipmentnet was
¥3.9 billion, an improvement by ¥5.6 billion
compared with the year ended March 31, 2003. This
improvement is mostly attributable to a gain of
¥5.7 billion on sales of Mitsuis corporate
residences and dormitories in Japan. The corporate residences
and dormitories on which we recorded a gain on sales during the
year ended March 31, 2004 had been acquired long before the
land prices significantly increased in Japan in the late 1980s
and the early 1990s.

For the year ended March 31, 2003, loss on
disposal or sales of property and equipmentnet, which were
mainly incurred by domestic subsidiaries, were not significant.



| |                                     
| | ------------------------------------
| | Impairment Loss of Long-Lived Assets

The impairment loss of long-lived assets for the
year ended March 31, 2004 slightly decreased by
¥1.2 billion to ¥22.7 billion. The main
elements of impairment losses for the year ended March 31,
2004 were as follows:



| |   |                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Impairment losses on Mitsuis corporate
    residences and dormitories of ¥8.0 billion were
    recorded due to a further decline in land prices in Japan. The
    corporate residences and dormitories on which we recorded
    impairment losses during the year ended March 31, 2004 had
    been acquired mainly in the early 1990s;
|
| |  | In the Machinery, Electronics &
    Information Segment, there were impairment losses of
    ¥4.3 billion that resulted from the exit from and
    disposal of certain businesses at NBI Corporation (formerly Toyo
    Valve Co., Ltd.) and Mitsui Bussan Machinery Co., Ltd.; and                                                     
|
| |  | Impairment losses were also recorded at two
    domestic subsidiaries that operate golf courses.                                                                                                                                                                                                                                        

For more information on our reevaluation and
restructuring of subsidiaries and associated companies, see
Note 23, EXIT OR DISPOSAL ACTIVITIES. As
compared with the year ended March 31, 2003, we saw the
following improvement in impairment losses on long-lived assets
for the year ended March 31, 2004:



| |   |                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For the year ended March 31, 2003, there was
    an impairment loss of ¥9.4 billion on MD-11 leased
    aircraft due to a substantial decline in the fair value of this
    type of aircraft. For the year ended March 31, 2004, a
    similar loss on our leased aircraft was not significant;          
|
| |  | In the Energy Segment, there was an impairment
    loss of ¥9.2 billion mainly related to gas stations
    operated by Mitsui Oil & Gas Co., Ltd. and Kokusai
    Oil & Chemical Co., Ltd. for the year ended
    March 31, 2003. For the year ended March 31, 2004,
    such losses were immaterial; and
|
| |  | MITSUI FOODS CO., LTD. recorded an impairment
    loss on unused land in Japan for the year ended March 31,
    2003. For the year ended March 31, 2004, it reported an
    immaterial impairment loss resulting from the gradual
    integration and closing of distribution facilities.                

66



---



##### 





| |                  
| | -----------------
| | Other ExpenseNet

For the year ended March 31, 2004, other
expensenet increased by ¥17.9 billion to
¥28.9 billion. The increase was mainly caused by:



| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | litigation charges of ¥13.7 billion
    related to the settlement of an antitrust lawsuit filed against
    our U.S. subsidiary, Bioproducts Inc., which manufactures
    and sells feed ingredient; and            
|
| |  | restructuring charges of ¥7.0 billion
    arising from certain subsidiaries such as Mitsui Bussan
    Machinery Co., Ltd. and NBI Corporation. For more information,
    see Note 23, EXIT OR DISPOSAL ACTIVITIES.

With regard to the litigation charges related to
Bioproducts Inc., there are still pending lawsuits, but we
believe there is less than a reasonable possibility that the
pending lawsuits would materially affect our results of
operations. For more details, see Note 21,
COMMITMENTS AND CONTINGENT LIABILITIES.

For the year ended March 31, 2003, out of
¥11.0 billion of other expensenet, litigation
charges were ¥4.1 billion which included the charge in
connection with the lawsuits against Novus International, Inc.,
one of our U.S. subsidiaries. Additionally, there were
foreign exchange losses amounting to ¥2.4 billion
mainly at Mitsui due to the yen appreciation.



| |             
| | ------------
| | Income Taxes

Income taxes for the year ended March 31,
2004 increased by ¥6.0 billion to
¥44.8 billion compared with the year ended
March 31, 2003. The effective tax rate was 52%, which was
higher than the normal statutory corporate tax rate of 42% in
Japan. The difference was primarily caused by the valuation
allowance provided for deferred tax assets for operating losses
of certain subsidiaries. For the year ended March 31, 2003,
the effective tax rate of 60% was also mainly due to a valuation
allowance for operating losses of certain subsidiaries. For more
detailed information on our income taxes, see Note 20,
INCOME TAXES.



| |                                                   
| | --------------------------------------------------
| | Minority Interests in Earnings of
    Subsidiaries

For the year ended March 31, 2004, minority
interests in earnings of subsidiaries increased by
¥3.1 billion to ¥7.5 billion from the year
ended March 31, 2003. The increase was mainly attributable
to the strong performance of an Indian iron ore subsidiary, Sesa
Goa Limited, in which the minority interest portion was 49% for
the year ended March 31, 2004.



| |                                                                             
| | ----------------------------------------------------------------------------
| | Equity in Earnings of Associated
    CompaniesNet (After Income Tax Effect)

For the year ended March 31, 2004, equity in
earnings of associated companiesnet rose by
¥24.8 billion to ¥40.1 billion due to the
following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the Energy Segment, earnings increased at
    Japan Australia LNG (MIMI) Pty. Ltd.
    (JAL-MIMI), which operates in Western Australia, as
    both sales volumes and crude oil prices rose;                                                                                                                                                                                                                                                                                    
|
| |  | In the Metal Products & Minerals
    Segment, the operating results of Valepar S.A., the Brazilian
    holding company of Companhia Vale do Rio Doce
    (CVRD), were included from the second quarter of the
    year ended March 31, 2004, and there were higher earnings
    of Compania Minera Dona Ines de Collahuasi SCM, a copper mine
    development company in Chile reflecting rising copper prices
    from around the middle of the year ended March 31,
    2004; and
|
| |  | In the Machinery, Electronics &
    Information Segment, earnings rose at P.T. Paiton Energy in
    Indonesia due to higher electric power sales volume and at
    overseas automobile sales subsidiaries.                                                                                                                                                                                                                                                                           

For the year ended March 31, 2003, there
were contributions from associated companies in the Energy and
the Metal Products & Minerals segments, which were
offset by the substantial losses from:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an other than temporary decline in the value of
    investments in NextCom K.K., a domestic associated company
    engaged in the information technology business, as a result of
    the sharp decline in its stock price, and an increase in the
    reserve for impaired loans at Furukawa Industrial S.A. Produtos
    Eletrico (FISA), a telecommunications associated
    company in Brazil; and
|
| |  | an impairment loss on a production facility of
    Vinylchloride (Malaysia) Sdn. Bhd. (VCM-Malaysia),
    an overseas associated company in the chemical business.                                                                                                                                                                                                                                    

67



---



##### 



The absence of such significant losses for the
year ended March 31, 2004 was another reason for the
increase in net equity in earnings of associated companies.



| |                                                                    
| | -------------------------------------------------------------------
| | Loss from Discontinued OperationsNet
    (After Income Tax Effect)

For the year ended March 31, 2004, loss from
discontinued operations was ¥4.0 billion. The primary
component of the loss from discontinued operations was the
disposal of Takeoka Golf Club, amounting to
¥3.5 billion after income taxes. Takeoka Golf Club,
which had been engaged in the operation of a public golf club in
Japan, suffered from the declining number of visitors due to
keen competition with adjacent golf clubs and was disposed of by
sale during the year ended March 31, 2004.

The year ended March 31, 2003 loss from
discontinued operations was ¥5.5 billion. The primary
components of loss from discontinued operations for the year
ended March 31, 2003 were related to the following
petrochemical subsidiaries in North America and amounted to
¥6.3 billion after income tax effect:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Transpacific Glycols, Inc., a subsidiary
    partially reported in both the Chemical and Americas segments,
    which had been engaged in the sale of ethylene glycol, had
    ceased its sales operations during the year ended March 31,
    2003 due to its declining performance caused by overall market
    conditions; and                                                                                                                                                                                                                                 
|
| |  | Pacific Ammonia Inc., a subsidiary reported in
    the Chemical Segment, which had been engaged in the manufacture
    and sale of ammonia primarily on the West Coast of the United
    States, had suffered from high natural gas costs, its main raw
    material ingredient, and a relatively weak ammonia price due to
    a worldwide oversupply. Due to this business environment,
    Pacific Ammonia Inc. recognized an impairment loss on fixed
    assets during the year ended March 31, 2003 based on a plan
    to dispose of the operation by sale.

For additional information about our discontinued
operations, see Note 4, DISCONTINUED OPERATIONS.



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Cumulative Effect of Change in Accounting
    Principle (After Income Tax Effect)

On April 1, 2003, we adopted Statement of
Financial Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement Obligations.
SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially
recorded, the entity capitalizes the related cost by increasing
the carrying amount of the long-lived asset. We recognized the
cumulative effect of the initial application of
SFAS No. 143 as a separate line item in the Statements
of Consolidated Income under Cumulative Effect of Change
in Accounting Principle (After Income Tax Effect)
amounting to ¥2.3 billion including our share of
amounts attributable to associated companies. This represents
the difference between the net amount that was recognized in the
Consolidated Balance Sheets upon the retroactive application of
SFAS No. 143 as of April 1, 2003 and the amounts
recognized in the Consolidated Balance Sheets at that date prior
to the application of SFAS No. 143. The asset
retirement obligations are principally related to the costs of
dismantling and removing mining facilities and gas production
facilities owned by subsidiaries and associated companies in
Australia, which are engaged in mining operations or oil and gas
producing activities.

For additional information about the cumulative
effect of change in accounting principle, see Note 11,
ASSET RETIREMENT OBLIGATIONS.



| |                                                                       
| | ----------------------------------------------------------------------
| | Summary of Results of Operations for the
    Year Ended March 31, 2003

Although the global economy seemed to have
bottomed out after the events of September 11, 2001, the
recovery was not strong enough, except for some areas in Asia.
Deflation, weakening stock markets, and the situation in Iraq
prevented a quick recovery in the global economy.

For the year ended March 31, 2003, we
recorded net income of ¥31.1 billion, a decrease of
¥24.2 billion or 43.8% from ¥55.3 billion
for the year ended March 31, 2002.

The main factors affecting our operating results
during the year ended March 31, 2003 included improved
performance by the Energy Segment due to active trading in crude
oil and petroleum products by overseas subsidiaries, and
improved performances by the Metal Products & Minerals
Segment which

68



---



##### 



experienced increasing numbers of transactions
involving iron ore, coal and metal products. On the other hand,
such improved performance was offset by:




| |   |                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | lack of business confidence and weak domestic
    demand in a broad range of business areas, despite the Japanese
    governments easy-money policies and the supplementary
    budget announced in November 2002 containing additional
    expenditures of ¥3 trillion;
|
| |  | continued asset deflation in Japan, particularly
    declines in the values of real estate and listed equity
    securities in Japan partly due to uncertainty caused by the
    long-standing problem of non-performing loans in the domestic
    financial sector;     
|
| |  | the divestiture of construction materials sales
    operations which led to a lower volume of transactions in the
    Domestic Branches and Offices Segment; and                                                                                                         
|
| |  | a lower number of transactions in the Machinery,
    Electronics & Information Segment which was partially
    due to a decrease in plant exports.                                                                                                                       

Compared to the results of operations during the
year ended March 31, 2002:



| |   |                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our gross profit rose by ¥23.4 billion,
    to ¥568.6 billion. Selling, general and administrative
    expenses increased by ¥11.9 billion, to
    ¥456.3 billion, primarily due to early retirement
    severance benefit payouts;                                                                                                         
|
| |  | The provision for doubtful receivables decreased
    by ¥7.3 billion to ¥13.6 billion;                                                                                                                                                                                                                                                      
|
| |  | Interest expense, net of interest income,
    improved from the year ended March 31, 2002 because of
    repeated interest rate cuts in the United States and in Europe
    in an attempt to improve their respective economies;                                                                                                            
|
| |  | a loss on impairment of aircraft due to the
    continued decline in the aircraft market after
    September 11, 2001; and                                                                                                                                                                                                                  
|
| |  | Equity in earnings of associated
    companiesnet (after income tax effect) decreased by
    ¥8.5 billion from the year ended March 31, 2002
    to ¥15.3 billion, due to the write-down of domestic
    investments to reflect the other than temporary decline in stock
    prices and facilities owned by overseas associated companies.

As a result of these developments, and after the
deduction of a net loss of ¥5.5 billion from
discontinued operations, net income was ¥31.1 billion.

The change in the value of the yen against
foreign currencies decreased our gross profit by approximately
¥1.5 billion. The average exchange rate for the
U.S. dollar to the Japanese yen for the year ended
March 31, 2003 was ¥121.20=U.S.$1 compared with
¥122.21=U.S.$1 for the year ended March 31, 2002.

69



---



##### 





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Discussion and Analysis of Operating
    Results for the Year Ended March 31, 2003

|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |         |         | 
|---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------- | ------- | ----------- | --------- | ------ | ------- | --------- | --------- | - | ------- | ------- | ------- | 
|                                                                                                     |                                                                            |                       
|                                                                                                     |                                                                            | Millions of Yen       
|                                                                                                     |                                                                            |                       
|                                                                                                     |                                                                            |                        |         |            
|                                                                                                     |                                                                            | Year ended March 31,   |         |            
|                                                                                                     |                                                                            |                        |         |            
|                                                                                                     |                                                                            | 2003                   |         | 2002        |           |       
|                                                                                                     |                                                                            | As restated            |         | As restated |           | Change
|                                                                                                     |                                                                            |                        |         |             |           |       
|Revenues:                                                                                            |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|                                                                                                     | Sales of products                                                          |                        | ¥       | 2,324,849   |           |        | ¥       | 2,025,969 |           |   | ¥       | 298,880 |        
|                                                                                                     | Sales of services                                                          |                        |         | 390,079     |           |        |         | 389,512   |           |   |         | 567     |        
|                                                                                                     | Other sales                                                                |                        |         | 73,223      |           |        |         | 75,769    |           |   |         | (2,546  | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|                                                                                                     |                                                                            | Total revenues         |         |             | 2,788,151 |        |         |           | 2,491,250 |   |         |         | 296,901 | 
|Cost of Revenues:                                                                                    |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|                                                                                                     | Cost of products sold                                                      |                        |         | 2,137,328   |           |        |         | 1,857,122 |           |   |         | 280,206 |        
|                                                                                                     | Cost of services sold                                                      |                        |         | 44,706      |           |        |         | 45,432    |           |   |         | (726    | )      
|                                                                                                     | Cost of other sales                                                        |                        |         | 37,472      |           |        |         | 43,495    |           |   |         | (6,023  | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|                                                                                                     |                                                                            | Total cost of revenues |         |             | 2,219,506 |        |         |           | 1,946,049 |   |         |         | 273,457 | 
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|Gross Profit                                                                                         |                                                                            |                        | 568,645 |             |           |        | 545,201 |           |           |   | 23,444  |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|Other Expenses (Income):                                                                             |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|                                                                                                     | Selling, general and administrative                                        |                        |         | 456,349     |           |        |         | 444,467   |           |   |         | 11,882  |        
|                                                                                                     | Provision for doubtful receivables                                         |                        |         | 13,649      |           |        |         | 20,981    |           |   |         | (7,332  | )      
|                                                                                                     | Interest expense, net of interest income                                   |                        |         | 2,764       |           |        |         | 12,799    |           |   |         | (10,035 | )      
|                                                                                                     | Dividend income                                                            |                        |         | (16,266     | )         |        |         | (18,191   | )         |   |         | 1,925   |        
|                                                                                                     | Gain on securities contributed to an employee
    retirement benefit trust |                        |         | (15,831     | )         |        |         | (29,242   | )         |   |         | 13,411  |        
|                                                                                                     | Gain on sales of securitiesnet                                            |                        |         | (11,026     | )         |        |         | (31,310   | )         |   |         | 20,284  |        
|                                                                                                     | Loss on write-down of securities                                           |                        |         | 37,907      |           |        |         | 43,183    |           |   |         | (5,276  | )      
|                                                                                                     | Loss on disposal or sales of property and
    equipmentnet                |                        |         | 1,745       |           |        |         | 2,456     |           |   |         | (711    | )      
|                                                                                                     | Impairment loss of long-lived assets                                       |                        |         | 23,903      |           |        |         | 24,442    |           |   |         | (539    | )      
|                                                                                                     | Other expensenet                                                          |                        |         | 10,983      |           |        |         | 10,717    |           |   |         | 266     |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|                                                                                                     |                                                                            | Total other expenses   |         |             | 504,177   |        |         |           | 480,302   |   |         |         | 23,875  | 
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|Income from Continuing Operations before Income
    Taxes, Minority Interests and Equity in Earnings |                                                                            |                        | 64,468  |             |           |        | 64,899  |           |           |   | (431    | )      
|Income Taxes                                                                                         |                                                                            |                        | 38,757  |             |           |        | 31,745  |           |           |   | 7,012   |        
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|Income from Continuing Operations before Minority
    Interests and Equity in Earnings               |                                                                            |                        | 25,711  |             |           |        | 33,154  |           |           |   | (7,443  | )      
|Minority Interests in (Earnings) Losses of
    Subsidiaries                                          |                                                                            |                        | (4,411  | )           |           |        | 2,971   |           |           |   | (7,382  | )      
|Equity in Earnings of Associated
    CompaniesNet (After Income Tax Effect)                         |                                                                            |                        | 15,295  |             |           |        | 23,783  |           |           |   | (8,488  | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|Income from Continuing Operations                                                                    |                                                                            |                        | 36,595  |             |           |        | 59,908  |           |           |   | (23,313 | )      
|Loss from Discontinued OperationsNet (After
    Income Tax Effect)                                  |                                                                            |                        | (5,457  | )           |           |        | (4,537  | )         |           |   | (920    | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        
|Net Income                                                                                           |                                                                            | ¥                      | 31,138  |             |           | ¥      | 55,371  |           |           | ¥ | (24,233 | )      
|                                                                                                     |                                                                            |                        |         |             |           |        |         |           |           |   |         |        



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Changes of Subsidiaries Fiscal Year-Ends
    to March 31 During the Year Ended March 31,
    2002

During the year ended March 31, 2002, 231
subsidiaries changed their fiscal year-ends to March 31,
mainly from December 31, to increase the timeliness of our
consolidated financial position and results of operations.

The earnings or losses of the subsidiaries for
the stub period (i.e., fiscal periods that exceeded
12 months, such as the 3-month period from January 1,
to March 31, 2002, for the subsidiaries that changed their
year-ends from December 31 to March 31) were directly
credited or charged to unappropriated retained earnings in order
to maintain the comparability of periodic earnings. The other
comprehensive income (loss) and cash flows of the subsidiaries
for the stub period are separately presented in the Statements
of Consolidated Shareholders Equity and the Statements of
Consolidated Cash Flows, respectively.

The aggregate net earnings or losses of
subsidiaries for the stub period amounted to a loss of
¥2.6 billion, which was directly charged to
shareholders equity, for the purpose of maintaining
comparability with our periodic earnings.

70



---



##### 



The main subsidiaries that accounted for the loss
in the stub period were Global Octanes Holding Inc. and Global
Octanes Investment Inc., which experienced trouble in operations
at certain plants; Mitalco Inc., which was forced to stop
production due to an electricity price increase; and certain
other subsidiaries such as MITSUI FOODS CO., LTD. that
experienced losses due to the seasonality of their businesses.

Other comprehensive income generated during the
stub period by those subsidiaries amounted to a profit of
¥1.6 billion. Other comprehensive income during the
stub period was mainly generated from foreign currency
translation adjustments and net unrealized gains on derivatives,
mainly foreign exchange forward contracts, reflecting yen
depreciation for the period.



| |                  
| | -----------------
| | Sales of Products

For the year ended March 31, 2003, sales of
products were ¥2,324.8 billion,
¥298.9 billion more than ¥2,026.0 billion
reported for the year ended March 31, 2002. The major
reason for this increase was a ¥137.8 billion increase
in revenues of subsidiaries involved in the oil and gas trading
activities, mainly due to the increased sales volume and higher
oil price in petroleum products and an ¥89.3 billion
increase in revenues associated with chemical products, mainly
due to the recovery of market prices of certain petrochemical
products, such as olefin, reflecting increasing demand in Asia.



| |                  
| | -----------------
| | Sales of Services

Sales of services were ¥390.1 billion
for the year ended March 31, 2003, an increase of
¥0.6 billion from ¥389.5 billion for the
year ended March 31, 2002. Major components of this revenue
category for the year ended March 31, 2003 were revenues
related to sales and purchases of products, which are reported
net under EITF No. 99-19. Revenues from these sources
increased from ¥272.9 billion for the year ended
March 31, 2002 to ¥273.6 billion for the year
ended March 31, 2003. Revenues from logistics and warehouse
services, information and communication services, technical
support and many other types of services increased from
¥76.2 billion for the year ended March 31, 2002
to ¥77.5 billion for the year ended March 31,
2003. Revenues from commissions for facilitating conclusion of
the contracts between manufacturers and customers and for
delivering products between suppliers and customers decreased
from ¥40.5 billion for the year ended March 31,
2002 to ¥39.0 billion for the year ended
March 31, 2003.



| |            
| | -----------
| | Other Sales

For the year ended March 31, 2003, leasing
revenues decreased from ¥52.9 billion to
¥49.9 billion and derivative trading revenues
increased from ¥19.7 billion to
¥22.1 billion.



| |             
| | ------------
| | Gross Profit



| |                                                    
| | ---------------------------------------------------
| | Gross profit classified by category of
    revenues

For the year ended March 31, 2003, gross
profit (GP) increased by ¥23.5 billion to
¥568.7 billion. The change in GP and GP ratio
classified by category of revenues is as set forth below:

|                                    |  |                     |        |          |  |        |      |          |  |    |        |          |  |  |      |   |  |  |       |  |  |  |      |   
|----------------------------------- |  | ------------------- | ------ | -------- |  | ------ | ---- | -------- |  | -- | ------ | -------- |  |  | ---- | - |  |  | ----- |  |  |  | ---- | --
|                                    |  |                    
|                                    |  | Billions of Yen    
|                                    |  |                    
|                                    |  |                     |        |         
|                                    |  | Year ended March 31 |        |         
|                                    |  |                     |        |         
|                                    |  |                     |        |          |  |       
|                                    |  | 2003                |        | 2002     |  | Change
|                                    |  |                     |        |          |  |       
|                                    |  | GP                  |        | GP ratio |  | GP     |      | GP ratio |  | GP |        | GP ratio
|                                    |  |                     |        |          |  |        |      |          |  |    |        |         
|Gross profit from sales of products |  |                     | ¥187.5 |          |  |        | 8.1  | %        |  |    | ¥168.8 |          |  |  | 8.3  | % |  |  | ¥18.7 |  |  |  | (0.2 | )%
|Gross profit from sales of services |  |                     | 345.4  |          |  |        | 88.5 | %        |  |    | 344.1  |          |  |  | 88.3 | % |  |  | 1.3   |  |  |  | 0.2  | % 
|Gross profit from other sales       |  |                     | 35.7   |          |  |        | 48.8 | %        |  |    | 32.3   |          |  |  | 42.6 | % |  |  | 3.4   |  |  |  | 6.2  | % 
|                                    |  |                     |        |          |  |        |      |          |  |    |        |          |  |  |      |   |  |  |       |  |  |  |      |   
|Total                               |  |                     | ¥568.6 |          |  |        | 20.4 | %        |  |    | ¥545.2 |          |  |  | 21.9 | % |  |  | ¥23.4 |  |  |  | (1.5 | )%
|                                    |  |                     |        |          |  |        |      |          |  |    |        |          |  |  |      |   |  |  |       |  |  |  |      |   

Gross profit from sales of products for the year
ended March 31, 2003 increased ¥18.7 billion from
the year ended March 31, 2002. This increase was mainly due
to the contributions of Mitsui Iron Ore Development Pty. Ltd.,
resulting from the growth in output driven by high level
worldwide production in the steel industry and newly acquired
subsidiaries, such as Mitsui E&P Middle East B.V.

Gross profit ratio of other sales for the year
ended March 31, 2003 improved 6.2 points compared with the
year ended March 31, 2002, mainly due to the increase in
foreign exchange derivative trading and energy derivative
trading revenues which were reported net under U.S. GAAP
and whose gross profit ratio becomes 100%.

71



---



##### 





| |                                                 
| | ------------------------------------------------
| | Gross profit classified by operating
    segment

The following table presents major elements of
the improvement in gross profit classified by operating segment
compared with the year ended March 31, 2002:

|                                     |  |                      |       |      |  |        |       |  |  |   |     | 
|------------------------------------ |  | -------------------- | ----- | ---- |  | ------ | ----- |  |  | - | --- | 
|                                     |  |                     
|                                     |  | Billions of Yen     
|                                     |  |                     
|                                     |  |                      |       |     
|                                     |  | Year ended March 31, |       |     
|                                     |  |                      |       |     
|Segment                              |  | 2003                 |       | 2002 |  | Change
|                                     |  |                      |       |      |  |       
|Chemical                             |  | ¥                    | 60.9  |      |  | ¥      | 53.5  |  |  | ¥ | 7.4 | 
|Machinery, Electronics & Information |  |                      | 118.0 |      |  |        | 112.4 |  |  |   | 5.6 | 
|Energy                               |  |                      | 53.0  |      |  |        | 48.1  |  |  |   | 4.9 | 
|Metal Products & Minerals            |  |                      | 70.7  |      |  |        | 67.4  |  |  |   | 3.3 | 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Market prices of petrochemical products, such as
    olefin, recovered, reflecting increasing demand in Asia, which
    caused an increase in gross profit for the Chemical Segment;                                                                                                                                                                                                                                                              
|
| |  | In the Machinery, Electronics &
    Information Segment, foreign subsidiaries in the automobile
    distribution and ocean vessel leasing and financing business
    recorded strong performances with increasing transactions;                                                                                                                                                                                                                   
|
| |  | In the Energy Segment, a newly established
    subsidiary, Mitsui E&P Middle East B.V., acquired a new
    mineral right in the Middle East, which contributed to the
    increase in gross profit. The Energy Segment also reported
    strong performance in oil products trading; and                                                                                                                                                          
|
| |  | In the Metal Products & Minerals
    Segment, Mitsui Iron Ore Development Pty. Ltd. and Mitsui Coal
    Holding Pty. Ltd. recorded growth due to the high level of
    production worldwide by steel mills, reflecting strong demand in
    Asian countries, especially in China, where, due to its recent
    entry into the World Trade Organization, there have been
    increasing foreign and public investments in local
    infrastructure.

However, the Domestic Branches and Offices
Segment recorded a decline in gross profit because of the
continued sluggishness in the Japanese economy and the spin-off
of the domestic building material business to Sumisho &
Mitsuibussan Kenzai Co., Ltd. The Consumer Products &
Services Segment also experienced a decline in gross profit,
primarily due to the decline in the profitability of the food
business conducted at Mitsui.



| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    Expenses

Selling, general and administrative expenses for
the year ended March 31, 2003 increased due primarily to a
¥7.1 billion increase in expense of the Early
Retirement Support Plan at Mitsui, which was recorded in its
entirety as personnel expenses, and additional costs in
connection with newly acquired subsidiaries.



| |                                   
| | ----------------------------------
| | Provision for Doubtful Receivables

The provision for doubtful receivables for the
year ended March 31, 2003 decreased to
¥13.6 billion.

For the year ended March 31, 2003, this
provision was mainly related to the amounts due from United Air
Lines, Inc. and other aircraft-related receivables caused by the
deterioration in the business environments of the worldwide
airline industry, especially in the United States; receivables
from customers in Argentina and Honduras reflecting their weak
economic conditions; and receivables from domestic customers at
MITSUI FOODS CO., LTD. and Mitsui Bussan Plant &
Project Corporation. The provision for the year ended
March 31, 2002 was made principally in connection with
machinery, general merchandise, foods, and certain other
transactions.



| |                                             
| | --------------------------------------------
| | Interest Expense, Net of Interest
    Income

The average of the month-end U.S. dollar
three-month LIBOR was 1.63% for the year ended March 31,
2003, which fell from 2.82% for the year ended March 31,
2002 because of repeated interest rate cuts in the United
States. The average of the month-end Japanese yen three-month
LIBOR was 0.07% and 0.08% for the year ended March 31, 2003
and 2002, respectively. Under such circumstances, our interest
expense, net of interest income, declined to
¥2.8 billion primarily at overseas subsidiaries.

72



---



##### 





| |                
| | ---------------
| | Dividend Income

Dividend income for the year ended March 31,
2003 was ¥16.3 billion, a decrease of
¥1.9 billion from the year ended March 31, 2002.
This was mainly due to the decreased amount of dividends
received by Mitsui & Co. (Hong Kong) Ltd. Dividends
from investments in the Energy Segment, principally LNG projects
in the Middle East, were stable compared to the year ended
March 31, 2002.



| |                                                                           
| | --------------------------------------------------------------------------
| | Gain on Securities Contributed to an Employee
    Retirement Benefit Trust

Mitsui made an additional contribution of certain
available-for-sale securities to this trust for the year ended
March 31, 2003 and recorded a ¥15.8 billion gain
on the contribution.

This represented a decline of
¥13.4 billion from the gain of ¥29.2 billion
recognized on the contribution of certain available-for-sale
securities to the employee retirement benefit trust for the year
ended March 31, 2002.



| |                                
| | -------------------------------
| | Gain on Sales of SecuritiesNet

The net gain on sales of securities decreased to
¥11.0 billion, which included a gain of
¥3.7 billion from the sale of information
technology-related stock, and a gain of ¥2.1 billion
from the exchange of shares accompanying the merger of Japan
Airlines Company, Ltd. and Japan Air System Co., Ltd. The
decrease from the year ended March 31, 2002 was primarily
due to the ¥16.2 billion gain for the year ended
March 31, 2002 from the exchange of shares accompanying the
merger of The Sakura Bank, Ltd. and The Sumitomo Bank, Ltd.



| |                                 
| | --------------------------------
| | Loss on Write-Down of Securities

Japanese stock markets experienced a significant
downturn during the period from the year ended March 31,
2001 to the year ended March 31, 2003. The Nikkei stock
average closed at ¥7,972.71, ¥11,024.94, and
¥12,999.70 yen on March 31, 2003, 2002 and 2001,
respectively. We recognized impairment losses in each of the
above reporting periods on marketable securities with other than
temporary declines in their fair values. Most of the impairment
losses were related to shares of Japanese banking institutions
where the significant amounts of impaired loans held by them led
investors to doubt the financial stability of the Japanese
banking system.

The decline in the Japanese stock market for the
year ended March 31, 2003 also reflected the general
economic recession in Japan, which forced many companies to
record operating losses, causing the reduction of net assets of
those companies. In the ordinary course of business, we, as a
general trading company, hold a large number of non-marketable
securities. For those investments that exhibit indicators of
potential impairment, the impairment is individually determined
and recorded, when necessary, based on the facts and
circumstances available throughout the year. Specifically, on a
quarterly basis, we obtain financial statements for investees
with deteriorated financial condition, earnings performance or
business prospects, and recognize an impairment loss when
necessary.

For the year ended March 31, 2003, the loss
on write-down of securities was ¥37.9 billion,
including a ¥15.6 billion loss in marketable
securities, which primarily included equity securities of
banking institutions amounting to ¥9.0 billion, and a
¥22.1 billion loss in non-marketable securities, which
included equity securities of information technology-related
companies amounting to ¥7.6 billion.

For the year ended March 31, 2002, valuation
losses of ¥34.5 billion were reported on marketable
securities, including the equity securities of banking
institutions amounting to ¥28.8 billion, reflecting
the fall in stock prices in Japan, of which the decline in fair
value was considered other than temporary, bringing the total of
valuation losses on securities to ¥43.2 billion.



| |                                                            
| | -----------------------------------------------------------
| | Loss on Disposal or Sales of Property and
    EquipmentNet

For the year ended March 31, 2003, total
loss on disposal or sales of property and equipmentnet
decreased by ¥0.7 billion to ¥1.7 billion,
mainly reported in Japan. For the year ended March 31,
2002, the loss on disposal or sales of property and
equipment net was ¥2.5 billion, representing the
disposal of fixed assets of domestic subsidiaries.

73



---



##### 





| |                                     
| | ------------------------------------
| | Impairment Loss of Long-Lived Assets

The total impairment loss of long-lived assets
for the year ended March 31, 2003 decreased to
¥23.9 billion, due to a decline in the market value of
leased aircraft and the decline in land value owned by certain
domestic subsidiaries of the Energy Segment. For the year ended
March 31, 2002, we recognized impairment loss mainly on the
land held by Mitsui and land and equipment to be disposed of by
Mitsui and certain of its subsidiaries.



| |                  
| | -----------------
| | Other ExpenseNet

Other expensenet for the year ended
March 31, 2003 was ¥11.0 billion, a slight
increase from the year ended March 31, 2002. The foreign
exchange rate for yen per U.S. dollar was lower for the
year ended March 31, 2003 compared to the year ended
March 31, 2002, which caused an increase in the foreign
exchange loss on net assets denominated in foreign currencies by
¥7.5 billion to ¥2.4 billion loss for the
year ended March 31, 2003 compared with
¥5.1 billion gain for the year ended March 31,
2002. However, the decrease in the litigation charges to
¥4.1 billion for the year ended March 31, 2003
from ¥12.5 billion for the year ended March 31,
2002 in connection with the lawsuits against Novus
International, Inc. that had existed for the year ended
March 31, 2002 offset this increase in the foreign exchange
loss.



| |             
| | ------------
| | Income Taxes

For the year ended March 31, 2003, income
taxes amounted to ¥38.8 billion, representing an
increase of ¥7.0 billion from the year ended
March 31, 2002, of which ¥5.9 billion resulted
from the valuation allowance provided on deferred tax assets for
operating losses of certain subsidiaries.

The normal effective statutory tax rate in Japan
for the year ended March 31, 2003 was 42%, the same as the
rate in the previous fiscal year. On March 31, 2003, the
tax laws in Japan were amended, and an enterprise tax based on
the size of the business will be introduced for the year ending
March 31, 2005. As a result, the statutory tax rate for the
year ending March 31, 2005 will be approximately 41%,
effective from April 1, 2004. The newly enacted statutory
tax rate was used in calculating the deferred tax assets and
liabilities as of March 31, 2003 for those temporary
differences which are expected to be realized or settled after
March 31, 2004. The effect of the changes in the tax rates
on the balance of deferred tax assets and liabilities was
insignificant.



| |                                                            
| | -----------------------------------------------------------
| | Minority Interests in (Earnings) Losses of
    Subsidiaries

Minority interests in earnings of subsidiaries
increased by ¥7.4 billion to ¥4.4 billion
for the year ended March 31, 2003. Earnings of subsidiaries
increased mainly due to strong performances of overseas
subsidiaries for energy development in the Middle East and
Australia, including Mitsui E&P Middle East B.V. and Wandoo
Petroleum Pty., Ltd.



| |                                                                             
| | ----------------------------------------------------------------------------
| | Equity in Earnings of Associated
    CompaniesNet (After Income Tax Effect)

Net equity in earnings of associated companies
for the year ended March 31, 2003 decreased to
¥15.3 billion. This was attributable to the write-down
for an other than temporary decline in the value of investments
in NextCom K.K., a domestic associated company engaged in the
information technology business, as a result of the sharp
decline in its stock price; an impairment loss on a production
facility of VCM-Malaysia, an overseas associated company in the
chemical business; and an increase in reserve for impaired loans
at FISA.



| |                                                                    
| | -------------------------------------------------------------------
| | Loss from Discontinued OperationsNet
    (After Income Tax Effect)

For the year ended March 31, 2003, loss
from discontinued operations was ¥5.5 billion. The
primary components of loss from discontinued operations for the
year ended March 31, 2003 were the following petrochemical
subsidiaries in North America amounting to
¥6.3 billion after income tax effect:



| |   |                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Transpacific Glycols, Inc., a subsidiary
    partially reported in both the Chemical and Americas segments,
    had been engaged in the sale of ethylene glycol, but ceased its
    sales operations during the year ended March 31, 2003 due
    to its declining performance caused by the overall market
    conditions; and
|
| |  | Pacific Ammonia Inc., a subsidiary reported in
    the Chemical Segment, which had been engaged in the manufacture
    and sale of ammonia primarily on the West Coast of the United
    States, suffered from                                                                                                                 

74



---



##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                  
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | high natural gas costs as its main raw material
    ingredient and a relatively weak ammonia price due to a
    worldwide oversupply situation. Considering this business
    environment, Pacific Ammonia Inc. recognized an impairment loss
    of fixed assets during the year ended March 31, 2003 based
    on the plan to dispose of the operation by sale.

Operating Results by Operating
Segment

The business units of the head corporate office
of Mitsui, which are organized based on products and
services, plan overall and worldwide strategies for their
products and services and conduct their worldwide operations.
The business units also collaborate with branches and offices
that are located in Japan and overseas countries and with
overseas trading subsidiaries in planning and executing their
strategies for products or regions. The branches, offices, and
overseas trading subsidiaries are separate operating units,
which are delegated the business of their regions as the centers
of each particular regional strategy and operate diversified
business together with their subsidiaries and associated
companies in collaboration with the business units. Therefore,
our operating segments consist of product-focused operating
segments comprised of the business units of the head corporate
office of Mitsui and region-focused operating segments comprised
of branches, offices and overseas trading subsidiaries.

Our operating segments have been aggregated based
on the nature of the products and other criteria into five
product-focused reportable operating segments and four
region-focused reportable operating segments, totaling nine
reportable operating segments.



| |             
| | ------------
| | Gross Profit

|           |  |                 |        |               |  |          |         |            |  |          |        |             |  |          |        |        |  |             |         |              |  |              |        |       |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |   |  |   |         | 
|---------- |  | --------------- | ------ | ------------- |  | -------- | ------- | ---------- |  | -------- | ------ | ----------- |  | -------- | ------ | ------ |  | ----------- | ------- | ------------ |  | ------------ | ------ | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  | - | ------- | 
|           |  |                
|           |  | Millions of Yen
|           |  |                
|           |  | Metal           |        | Machinery,    |  |          |         | Consumer   |  | Domestic |        |             |  | Other    |        |        |  | Adjustments |         |             
|Year ended |  | Products &      |        | Electronics & |  |          |         | Products & |  | Branches |        |             |  | Overseas |        |        |  | and         |         | Consolidated
|March 31,  |  | Minerals        |        | Information   |  | Chemical |         | Energy     |  | Services |        | and Offices |  | Americas |        | Europe |  | Areas       |         | All Other    |  | Eliminations |        | Total
|           |  |                 |        |               |  |          |         |            |  |          |        |             |  |          |        |        |  |             |         |              |  |              |        |      
|2004       |  | ¥               | 77,452 |               |  | ¥        | 128,357 |            |  | ¥        | 83,003 |             |  | ¥        | 53,814 |        |  | ¥           | 116,254 |              |  | ¥            | 39,962 |       |  | ¥ | 39,871 |  |  | ¥ | 19,965 |  |  | ¥ | 24,060 |  |  | ¥ | 27,324 |  |  | ¥ | (141   | ) |  | ¥ | 609,921 | 
|2003       |  |                 | 70,674 |               |  |          | 117,987 |            |  |          | 60,871 |             |  |          | 53,027 |        |  |             | 105,947 |              |  |              | 41,405 |       |  |   | 44,584 |  |  |   | 22,470 |  |  |   | 23,503 |  |  |   | 29,721 |  |  |   | (1,544 | ) |  |   | 568,645 | 
|2002       |  |                 | 67,397 |               |  |          | 112,425 |            |  |          | 53,476 |             |  |          | 48,061 |        |  |             | 108,610 |              |  |              | 47,553 |       |  |   | 45,096 |  |  |   | 20,623 |  |  |   | 21,929 |  |  |   | 27,735 |  |  |   | (7,704 | ) |  |   | 545,201 | 



| |                        
| | -----------------------
| | Operating Income (Loss)

|           |  |                 |        |               |  |          |        |            |  |          |        |             |  |          |        |        |  |             |        |              |  |              |       |       |  |   |        |  |  |   |       |  |  |   |        |   |  |   |       |  |  |   |         |   |  |   |         | 
|---------- |  | --------------- | ------ | ------------- |  | -------- | ------ | ---------- |  | -------- | ------ | ----------- |  | -------- | ------ | ------ |  | ----------- | ------ | ------------ |  | ------------ | ----- | ----- |  | - | ------ |  |  | - | ----- |  |  | - | ------ | - |  | - | ----- |  |  | - | ------- | - |  | - | ------- | 
|           |  |                
|           |  | Millions of Yen
|           |  |                
|           |  | Metal           |        | Machinery,    |  |          |        | Consumer   |  | Domestic |        |             |  | Other    |        |        |  | Adjustments |        |             
|Year ended |  | Products &      |        | Electronics & |  |          |        | Products & |  | Branches |        |             |  | Overseas |        |        |  | and         |        | Consolidated
|March 31,  |  | Minerals        |        | Information   |  | Chemical |        | Energy     |  | Services |        | and Offices |  | Americas |        | Europe |  | Areas       |        | All Other    |  | Eliminations |       | Total
|           |  |                 |        |               |  |          |        |            |  |          |        |             |  |          |        |        |  |             |        |              |  |              |       |      
|2004       |  | ¥               | 30,547 |               |  | ¥        | 23,683 |            |  | ¥        | 29,319 |             |  | ¥        | 21,686 |        |  | ¥           | 20,026 |              |  | ¥            | 9,540 |       |  | ¥ | 7,691  |  |  | ¥ | 3,030 |  |  | ¥ | (1,062 | ) |  | ¥ | 3,269 |  |  | ¥ | (27,147 | ) |  | ¥ | 120,582 | 
|2003       |  |                 | 25,722 |               |  |          | 10,607 |            |  |          | 16,248 |             |  |          | 25,541 |        |  |             | 19,897 |              |  |              | 6,760 |       |  |   | 9,485  |  |  |   | 4,163 |  |  |   | (1,931 | ) |  |   | 5,942 |  |  |   | (23,787 | ) |  |   | 98,647  | 
|2002       |  |                 | 19,847 |               |  |          | 10,027 |            |  |          | 8,185  |             |  |          | 16,661 |        |  |             | 5,082  |              |  |              | 8,873 |       |  |   | 11,750 |  |  |   | 4,484 |  |  |   | (4,700 | ) |  |   | 3,257 |  |  |   | (3,713  | ) |  |   | 79,753  | 



| |                  
| | -----------------
| | Net Income (Loss)

|           |  |                 |        |               |  |          |        |            |  |          |        |             |  |          |        |        |  |             |        |              |  |              |        |       |  |   |       |  |  |   |       |  |  |   |       |  |  |   |       |  |  |   |         |   |  |   |        | 
|---------- |  | --------------- | ------ | ------------- |  | -------- | ------ | ---------- |  | -------- | ------ | ----------- |  | -------- | ------ | ------ |  | ----------- | ------ | ------------ |  | ------------ | ------ | ----- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ------- | - |  | - | ------ | 
|           |  |                
|           |  | Millions of Yen
|           |  |                
|           |  | Metal           |        | Machinery,    |  |          |        | Consumer   |  | Domestic |        |             |  | Other    |        |        |  | Adjustments |        |             
|Year ended |  | Products &      |        | Electronics & |  |          |        | Products & |  | Branches |        |             |  | Overseas |        |        |  | and         |        | Consolidated
|March 31,  |  | Minerals        |        | Information   |  | Chemical |        | Energy     |  | Services |        | and Offices |  | Americas |        | Europe |  | Areas       |        | All Other    |  | Eliminations |        | Total
|           |  |                 |        |               |  |          |        |            |  |          |        |             |  |          |        |        |  |             |        |              |  |              |        |      
|2004       |  | ¥               | 23,591 |               |  | ¥        | 7,298  |            |  | ¥        | 10,000 |             |  | ¥        | 23,954 |        |  | ¥           | 12,554 |              |  | ¥            | 11,606 |       |  | ¥ | 161   |  |  | ¥ | 693   |  |  | ¥ | 7,758 |  |  | ¥ | 4,703 |  |  | ¥ | (33,931 | ) |  | ¥ | 68,387 | 
|2003       |  |                 | 14,944 |               |  |          | (4,916 | )          |  |          | (5,850 | )           |  |          | 22,605 |        |  |             | 3,983  |              |  |              | 6,994  |       |  |   | 3,291 |  |  |   | 2,845 |  |  |   | 6,193 |  |  |   | 9,738 |  |  |   | (28,689 | ) |  |   | 31,138 | 
|2002       |  |                 | 9,449  |               |  |          | 13,377 |            |  |          | (4,893 | )           |  |          | 22,152 |        |  |             | 2,756  |              |  |              | 6,773  |       |  |   | 6,461 |  |  |   | 3,911 |  |  |   | 5,271 |  |  |   | 8,711 |  |  |   | (18,597 | ) |  |   | 55,371 | 



| |                        
| | -----------------------
| | Operating Income (Loss)

Operating income is included in the measure of
segment profit and loss reviewed by the chief operating decision
maker. Operating income (loss) reflects our (a) Gross
Profit, (b) Selling, general and administrative expenses,
(c) Provision for doubtful receivables and
(d) Government grant for transfer of substitutional portion
of EPF, as presented in the Statements of Consolidated Income.

75



---



##### 



Results of Operations for the Year Ended
March 31, 2004



| |                                      
| | -------------------------------------
| | Metal Products & Minerals
    Segment

|                 |  |                      |        |      |  |        |        |  |  |   |       | 
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ----- | 
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2004                 |        | 2003 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 77,452 |      |  | ¥      | 70,674 |  |  | ¥ | 6,778 | 
|Operating Income |  |                      | 30,547 |      |  |        | 25,722 |  |  |   | 4,825 | 
|Net Income       |  |                      | 23,591 |      |  |        | 14,944 |  |  |   | 8,647 | 

For the year ended March 31, 2004, gross
profit increased by ¥6.8 billion to
¥77.5 billion, primarily attributable to the growth at
overseas subsidiaries engaged in iron and steel raw materials
driven by higher demand in China and other areas of Asia as well
as strong market prices. Operating income also rose by
¥4.8 billion to ¥30.5 billion, reflecting
the increase in gross profit.

For the year ended March 31, 2004, iron ore
production volume at Australian iron ore subsidiaries, including
Mitsui Iron Ore Development Pty. Ltd., increased by
3.6 million tonnes, reflecting strong demand for iron ore
in China and other countries. During the year ended
March 31, 2004, the U.S. dollar price of iron ore
increased by 9% compared with the price of iron ore for the year
ended March 31, 2003. Meanwhile, during the year ended
March 31, 2004, the Australian dollar appreciated steeply
against the U.S. dollar, rising from an average of
U.S.$0.5656 for the year ended March 31, 2003 to
U.S.$0.6941 for the year ended March 31, 2004, which
reduced Australian dollar denominated revenues at Mitsui Iron
Ore Development Pty. Ltd. and a coal subsidiary Mitsui Coal
Holdings Pty. Ltd. As a result, gross profit and operating
income at Australian iron and steel raw material subsidiaries
remained at the same high levels as for the year ended
March 31, 2003. At an iron ore subsidiary, Sesa Goa Limited
in India, there were sharp increases in gross profit and
operating income because of growing iron ore exports to China
and higher market prices of products in India.

In addition, gross profit from steel scrap
operations in the United States and Japan also increased as
market prices rose in the first half of the year ended
March 31, 2004.

For steel products, gross profit declined
slightly. Although exports to China and other Asian countries
were stepped up and prices increased in Japan, gross profit for
the year ended March 31, 2003 had included a significant
contribution from highly profitable steel pipe export projects
to China and other Asian countries, which did not continue into
the year ended March 31, 2004.

Net income for the year ended March 31, 2004
was ¥23.6 billion, increased by
¥8.6 billion, which was attributable to the increase
in equity earnings of associated companies as well as the
above-mentioned growth in operating income. The following are
reasons for the increase in equity in earnings of associated
companies:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the iron and steel raw material operations, we
    sold shares of Caemi in September 2003 under a sales contract in
    March 2003 with CVRD, a Brazilian producer of iron ore and other
    minerals, and recognized a gain of ¥4.4 billion. At
    the same time, Mitsui acquired an 18.24% voting share of the
    outstanding shares of Valepar S.A., a controlling shareholder of
    CVRD that owns a 52.3% voting share of CVRD. Due to the strong
    performance of CVRD, our equity in earnings of Valepar S.A.
    for the year ended March 31, 2004 was
    ¥2.5 billion; and
|
| |  | In the non-ferrous metal operations, equity in
    earnings of Compania Minera Dona Ines de Collahuasi SCM, a
    copper mine development company in Chile, rose to
    ¥1.9 billion as the global market price of copper
    increased from around the middle of the year ended
    March 31, 2004.                                                                                                                                                                                                                                                                                        



| |                                                 
| | ------------------------------------------------
| | Machinery, Electronics &
    Information Segment

|                  |  |                      |         |      |  |        |         |   |  |   |        | 
|----------------- |  | -------------------- | ------- | ---- |  | ------ | ------- | - |  | - | ------ | 
|                  |  |                     
|                  |  | Millions of Yen     
|                  |  |                     
|                  |  |                      |         |     
|                  |  | Year ended March 31, |         |     
|                  |  |                      |         |     
|                  |  | 2004                 |         | 2003 |  | Change
|                  |  |                      |         |      |  |       
|Gross Profit      |  | ¥                    | 128,357 |      |  | ¥      | 117,987 |   |  | ¥ | 10,370 | 
|Operating Income  |  |                      | 23,683  |      |  |        | 10,607  |   |  |   | 13,076 | 
|Net Income (Loss) |  |                      | 7,298   |      |  |        | (4,916  | ) |  |   | 12,214 | 

76



---



##### 



Gross profit for the year ended March 31,
2004 increased by ¥10.4 billion to
¥128.4 billion. The main elements of the growth were:



| |   |                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the contribution of large-scale electrical
    machinery and plant projects, including a power plant in
    Malaysia and an oil refinery in Russia;                                                                                                                                                            
|
| |  | in the information technology category, the
    increase at Mitsui & Associates Telepark Corporation by
    ¥3.0 billion reflected the introduction of new cell
    phone models which raised the sales volume and the contribution
    by newly acquired subsidiaries including Cablenet
    Saitama Co., Ltd.
|
| |  | higher gross profit at automobile sales companies
    and logistics and transportation companies in certain areas of
    the world; and                                                                                                                                                                        
|
| |  | increased sales and lease operations for ocean
    transport vessels as market prices, including the price of used
    vessels, climbed, despite lower gains on sales of leased
    aircraft.                                                                                                                  

For the year ended March 31, 2004, operating
income of ¥23.7 billion was also much higher by
¥13.1 billion due to an increase in gross profit and a
decrease in provision for doubtful receivables, in contrast to
the year ended March 31, 2003 when this segment suffered
from provisions for doubtful receivables from: United Airlines,
Inc. and other airline companies; domestic customers at Mitsui
Bussan Plant & Project Corp.; and communications and
transportation projects in Argentina.

For the year ended March 31, 2004, in
addition to an increase in operating income, net income
recovered to ¥7.3 billion, an increase of
¥12.2 billion, which was primarily due to the recovery
of equity in earnings of associated companies from the year
ended March 31, 2003, in spite of a material write-down of
securities for the year ended March 31, 2004 held by this
segment.

There was a ¥21.7 billion impairment
loss on Mitsuis investment in telecommunications carrier
POWEREDCOM, Inc. in consideration of the deterioration in its
financial position reflecting the operating loss caused by the
fierce price competition along with expansion of the Internet
and the decrease in revenues from fixed-line business, partly
offset by a gain on the sale of all shares held in
SKY Perfect Communications Inc.

For the year ended March 31, 2003, we
recorded an impairment loss of ¥9.4 billion on MD-11
leased aircraft due to a substantial decline in the fair value
of this type of aircraft. As the business environment in the
airline industry also remained weak during the year ended
March 31, 2004, we posted another, but much less
significant, impairment loss. Furthermore, in conjunction with
our effort of reevaluating and restructuring the businesses of
subsidiaries and associated companies, we sold the valve
business of NBI Corporation due to declining demand for its
products caused by the sluggish capital investment in Japan. We
also reorganized Mitsui Bussan Machinery Co., Ltd. due to
its poor performance caused by the shrinking construction and
industrial machinery market. Regarding these two subsidiaries,
we recorded impairment losses on property and equipment of
¥4.3 billion and other expense-net of
¥3.7 billion.

Equity in earnings of associated companies for
the year ended March 31, 2003 was impacted by an impairment
of ¥4.5 billion at NextCom K.K. in Japan because
of the other-than-temporary decline in the fair value of the
securities and a loss of ¥4.6 billion at FISA, a
telecommunications associated company in Brazil, because of a
significant provision for doubtful receivables. The absence of
such items for the year ended March 31, 2004 generated a
substantial increase in equity in earnings of associated
companies because of:



| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing sales volume of electric power at P.T.
    Paiton Energy in Indonesia;                                                                                                            
|
| |  | growth in sales at QVC Japan, Inc., our
    associated company engaged in a television shopping service that
    broadcasts live retail programs, as the number of viewers
    increased; and
|
| |  | increased production and sales of automobile
    companies in Canada and Indonesia.                                                                                                          



| |                 
| | ----------------
| | Chemical Segment

|                  |  |                      |        |      |  |        |        |   |  |   |        | 
|----------------- |  | -------------------- | ------ | ---- |  | ------ | ------ | - |  | - | ------ | 
|                  |  |                     
|                  |  | Millions of Yen     
|                  |  |                     
|                  |  |                      |        |     
|                  |  | Year ended March 31, |        |     
|                  |  |                      |        |     
|                  |  | 2004                 |        | 2003 |  | Change
|                  |  |                      |        |      |  |       
|Gross Profit      |  | ¥                    | 83,003 |      |  | ¥      | 60,871 |   |  | ¥ | 22,132 | 
|Operating Income  |  |                      | 29,319 |      |  |        | 16,248 |   |  |   | 13,071 | 
|Net Income (Loss) |  |                      | 10,000 |      |  |        | (5,850 | ) |  |   | 15,850 | 

77



---



##### 



For the year ended March 31, 2004, gross
profit increased by ¥22.1 billion to
¥83.0 billion due primarily to higher market prices of
ammonia and other petrochemicals.

During the year ended March 31, 2004, market
prices of petrochemicals climbed along with prices of crude oil
and natural gas. The price of ammonia reached the highest level
in 30 years, and prices of olefins, aromatics, synthetic
textile materials and other petrochemicals also increased. In
addition, there was higher demand in Asia for all categories of
petrochemicals. The result was growth in gross profit of
petrochemical products, chiefly ammonia. In the plastics
business, a new operation in China that produces liquid crystal
cells for personal computers and mobile phones contributed to
growth in gross profit.

Operating income for the year ended
March 31, 2004 was ¥29.3 billion. The improvement
of ¥13.1 billion was attributable to the increase in
gross profit.

This segment turned net loss for the year ended
March 31, 2003 to net income of ¥10.0 billion for
the year ended March 31, 2004, an improvement of
¥15.9 billion. In the petrochemicals business, losses
were recorded for the year ended March 31, 2003 due to the
discontinued operations at two North American subsidiaries,
Transpacific Glycols, Inc. and Pacific Ammonia Inc. In addition,
impairment losses of long-lived assets in a factory of a
Malaysian associated company, VCM-Malaysia were recorded due to
the lower market price for the year ended March 31, 2003.
For the year ended March 31, 2004, there were no
significant charges of this nature, which contributed to the
improvement of net income for the year ended March 31,
2004, along with the increase in operating income.

During the year ended March 31, 2004, losses
on write-down of securities were decreased from the year ended
March 31, 2003 and included a ¥3.1 billion loss
in investment in Ishihara Sangyo Kaisha, Ltd. Additionally, we
recorded a ¥1.5 billion loss in the investment in
Mitsui Denman (Ireland) Co., Ltd. for the year ended
March 31, 2004.

However, this segment recorded a loss of
¥2.8 billion for the year ended March 31, 2004,
after income tax effect, reflecting the segments share of
charges for the settlement of choline chloride antitrust
lawsuits by Bioproducts Inc., a U.S. subsidiary jointly
owned by the Chemical Segment and Mitsui & Co.
(U.S.A.), Inc. that produces choline chloride, a feed ingredient.



| |               
| | --------------
| | Energy Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2004                 |        | 2003 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 53,814 |      |  | ¥      | 53,027 |  |  | ¥ | 787    |  
|Operating Income |  |                      | 21,686 |      |  |        | 25,541 |  |  |   | (3,855 | )
|Net Income       |  |                      | 23,954 |      |  |        | 22,605 |  |  |   | 1,349  |  

Gross profit for the year ended March 31,
2004 increased slightly by ¥0.8 billion to
¥53.8 billion. Gross profit rose at Mitsui
Oil & Gas Co., Ltd., as a result of an increase in
sales prices of petroleum products which more than offset the
increase in costs of these products. However, this increase was
offset by petroleum products trading losses at Arcadia
Petroleum Ltd.

Crude oil prices (Japan Crude Cocktail) were
strong during the year ended March 31, 2004 due to
OPECs announcement of its decision to cut production in
the middle of the year ended March 31, 2004, turmoil in
Iraq, and a low inventory level of petroleum products. The
average price of crude oil per barrel rose from US$26.7 for the
year ended March 31, 2003 to US$29.4 for the year ended
March 31, 2004. Furthermore, the year ended March 31,
2004 showed growth in the demand for LNG and crude oil in Japan
as the demand for electricity from thermal power plants
increased and in China, South Korea and other Asian countries
due to their expanding economies.

Operating income was lower by
¥3.9 billion primarily because of an increase in
selling, general and administrative expenses including research
expenses for new businesses.

Despite the decrease in operating profit, net
income for the year ended March 31, 2004 was
¥24.0 billion, a slight increase of
¥1.3 billion compared with the year ended
March 31, 2003. For the year ended March 31, 2004,
impairment losses on long-lived assets substantially decreased
by ¥7.5 billion to ¥1.7 billion from
¥9.2 billion for the year ended March 31, 2003 at
two domestic subsidiaries, Mitsui Oil & Gas Co.,
Ltd. and Kokusai Oil & Chemical Co., Ltd. Their
impairment losses on long-lived assets for the year ended
March 31, 2003 primarily related to their gas stations in
Japan.

78



---



##### 



The cumulative effect of the initial application
of SFAS No. 143 had an impact of
¥2.2 billion, which was mainly the cost of dismantling
and removing gas production facilities owned by an associated
company, but its equity in earnings slightly increased during
the year ended March 31, 2004 because of strong operating
results backed by higher sales volumes and high crude oil
prices. In addition, equity in earnings of Mitsui Oil
Exploration Co., Ltd. increased due to the improvement in the
performance of its main business, Thai offshore gas development.



| |                                         
| | ----------------------------------------
| | Consumer Products & Services
    Segment

|                 |  |                      |         |      |  |        |         |  |  |   |        | 
|---------------- |  | -------------------- | ------- | ---- |  | ------ | ------- |  |  | - | ------ | 
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |         |     
|                 |  | Year ended March 31, |         |     
|                 |  |                      |         |     
|                 |  | 2004                 |         | 2003 |  | Change
|                 |  |                      |         |      |  |       
|Gross Profit     |  | ¥                    | 116,254 |      |  | ¥      | 105,947 |  |  | ¥ | 10,307 | 
|Operating Income |  |                      | 20,026  |      |  |        | 19,897  |  |  |   | 129    | 
|Net Income       |  |                      | 12,554  |      |  |        | 3,983   |  |  |   | 8,571  | 

For the year ended March 31, 2004, gross
profit increased by ¥10.3 billion to
¥116.3 billion. Higher gross profit in the foods
operations, which contributed in large part to the improvement
of this segment, was primarily attributable to our newly
acquired subsidiary Mitsui Norin Co., Ltd. and secondly to
the higher earnings at MITSUI FOODS CO., LTD., our food
wholesaler subsidiary, resulting from a higher volume of trading
transactions with Ito-Yokado Group and other retailers. Bovine
Spongiform Encephalopathy (BSE) and avian influenza
had a negligible impact on this segments results. Also,
these increases were partially offset by the decreases in gross
profit in:



| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the real estate operations after a strong
    performance for the year ended March 31, 2003 that was
    driven by the sales of condominiums in Japan and the sale of a
    large U.S. commercial facility by MBK Real Estate Ltd. in
    the United States; and
|
| |  | the general merchandise operations due to our
    lower trading transactions involved in sports and leisure
    activities for the year ended March 31, 2004.                                                                                                   

Operating income for the year ended
March 31, 2004 was ¥20.0 billion, an increase of
only ¥0.1 billion from the year ended March 31,
2003 in spite of the improvement in gross profit. In the foods
operations, selling, general and administrative expenses rose at
Mitsui Norin Co., Ltd. and MITSUI FOODS CO., LTD.,
although the improvement in gross profit still outweighed the
increase in expenses.

The increase of ¥8.6 billion in net
income to ¥12.6 billion for the year ended
March 31, 2004 was primarily attributable to a turnaround
of MITSUI FOODS CO., LTD. It reported net income of
¥1.6 billion for the year ended March 31, 2004,
which was a ¥6.5 billion improvement from the year
ended March 31, 2003, due to the drastic decrease in
impairment losses on non-marketable equity securities and unused
land, as well as the above-mentioned improvement in its gross
profit.



| |                                          
| | -----------------------------------------
| | Domestic Branches and Offices
    Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2004                 |        | 2003 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 39,962 |      |  | ¥      | 41,405 |  |  | ¥ | (1,443 | )
|Operating Income |  |                      | 9,540  |      |  |        | 6,760  |  |  |   | 2,780  |  
|Net Income       |  |                      | 11,606 |      |  |        | 6,994  |  |  |   | 4,612  |  

Gross profit for the year ended March 31,
2004 was stagnant or lower at almost all branches and offices in
Japan. ¥1.4 billion declines in gross profit were
particularly attributable to:



| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Osaka Office, where certain subsidiaries were
    divested; and                                                                              
|
| |  | the Nagoya Office because of a fall in the
    Machinery, Electronics & Information related
    transactions, mainly those involving cell phones.

Operating income increased by
¥2.8 billion due to a decline in selling, general and
administrative expenses, mainly personnel expenses at the Osaka
Office, which outweighed the decrease in gross profit, and to a
decrease in provision for doubtful receivables.

79



---



##### 



Net income increased by ¥4.6 billion,
in addition to the improvement in operating income, due mainly
to lower net interest expense at all branches and offices and
gains from the sales of company residences and dormitories by
the Nagoya Office.



| |                 
| | ----------------
| | Americas Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2004                 |        | 2003 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 39,871 |      |  | ¥      | 44,584 |  |  | ¥ | (4,713 | )
|Operating Income |  |                      | 7,691  |      |  |        | 9,485  |  |  |   | (1,794 | )
|Net Income       |  |                      | 161    |      |  |        | 3,291  |  |  |   | (3,130 | )

Gross profit was lower by ¥4.7 billion
mainly because of a decline in the steel products and machinery
transactions at Mitsui & Co. (U.S.A.), Inc. and
appreciation of the Japanese yen against the U.S. dollar.
The strong yen also held down selling, general and
administrative expenses, allowing this segment to hold the
decline in operating income to less than the downturn in gross
profit.

Net income for the year ended March 31, 2004
decreased by ¥3.1 billion to only
¥0.1 billion due to the charges for the settlement of
the antitrust lawsuits at our wholly owned subsidiary
Bioproducts Inc. Such settlement charges were shared with the
Chemical Segment that owns shares of this subsidiary jointly
with Mitsui & Co. (U.S.A.) Inc.



| |               
| | --------------
| | Europe Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2004                 |        | 2003 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 19,965 |      |  | ¥      | 22,470 |  |  | ¥ | (2,505 | )
|Operating Income |  |                      | 3,030  |      |  |        | 4,163  |  |  |   | (1,133 | )
|Net Income       |  |                      | 693    |      |  |        | 2,845  |  |  |   | (2,152 | )

For the year ended March 31, 2004, gross
profit and operating income declined by ¥2.5 billion
and ¥1.1 billion, respectively, as a result of the
decline in the automobile businesses.

Net income also decreased by
¥2.2 billion because there was a valuation loss on the
investment of Mitsui & Co. UK PLC in Mitsui Denman
(Ireland) Co., Ltd., a company in the chemical industry. Another
cause of the lower net income was a loss at Arcadia Petroleum
Ltd. due to poor petroleum products trading results.



| |                             
| | ----------------------------
| | Other Overseas Areas Segment

|               |  |                      |        |      |  |        |        |   |  |   |       | 
|-------------- |  | -------------------- | ------ | ---- |  | ------ | ------ | - |  | - | ----- | 
|               |  |                     
|               |  | Millions of Yen     
|               |  |                     
|               |  |                      |        |     
|               |  | Year ended March 31, |        |     
|               |  |                      |        |     
|               |  | 2004                 |        | 2003 |  | Change
|               |  |                      |        |      |  |       
|Gross Profit   |  | ¥                    | 24,060 |      |  | ¥      | 23,503 |   |  | ¥ | 557   | 
|Operating Loss |  |                      | (1,062 | )    |  |        | (1,931 | ) |  |   | 869   | 
|Net Income     |  |                      | 7,758  |      |  |        | 6,193  |   |  |   | 1,565 | 

Gross profit for the year ended March 31,
2004 was slightly higher because of the growth at
Mitsui & Co. (Shanghai) Ltd. and other subsidiaries in
China and the contribution of a newly established foreign
trading subsidiary, Mitsui & Co., India Pvt. Ltd. The
operating loss shrank for the same reason as the above.

Net income increased by ¥1.6 billion
due to an increase of ¥1.1 billion in dividend income
at Mitsui & Co. (Hong Kong) Ltd. from local Hong Kong
investee companies.

80



---



##### 





| |          
| | ---------
| | All Other

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2004                 |        | 2003 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 27,324 |      |  | ¥      | 29,721 |  |  | ¥ | (2,397 | )
|Operating Income |  |                      | 3,269  |      |  |        | 5,942  |  |  |   | (2,673 | )
|Net Income       |  |                      | 4,703  |      |  |        | 9,738  |  |  |   | (5,035 | )

The All Other includes business activities which
primarily provide services, such as logistics service, financing
service, development and marketing of systems, and office
services, to external customers and/or to ourselves and
associated companies.

Gross profit and operating income for the year
ended March 31, 2004 declined by ¥2.4 billion and
by ¥2.7 billion, respectively, due to two reasons:
(1) a decrease in gain from foreign exchange transactions
at Mitsui and (2) decreases in the profit margin in the
transportation businesses.

Net income decreased by ¥5.0 billion,
which was primarily attributable to a loss in relation with
Takeoka Golf Club, which was disposed of by sale during the year
ended March 31, 2004 due to the declining number of
visitors reflecting keen competition from adjacent golf clubs,
and to impairment losses on long-lived assets at two other golf
clubs.

Results of Operations for the year ended
March 31, 2003



| |                                      
| | -------------------------------------
| | Metal Products & Minerals
    Segment

|                 |  |                      |        |      |  |        |        |  |  |   |       | 
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ----- | 
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 70,674 |      |  | ¥      | 67,397 |  |  | ¥ | 3,277 | 
|Operating Income |  |                      | 25,722 |      |  |        | 19,847 |  |  |   | 5,875 | 
|Net Income       |  |                      | 14,944 |      |  |        | 9,449  |  |  |   | 5,495 | 

For the year ended March 31, 2003, gross
profit rose by ¥3.3 billion mainly due to:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | contributions by Mitsui Coal Holding Pty. Ltd.
    and Mitsui Iron Ore Development Pty. Ltd., resulting from the
    growth in output against high-level worldwide production in the
    steel industry including the increase in steel products exported
    to Asian countries, especially in China, where due to its recent
    entry in the WTO, there have been increasing foreign and public
    investments in local infrastructure; and
|
| |  | newly acquired interests in mining sources in
    Australia.                                                                                                                                                                                                                                                                                                                                                                                   

Operating income rose by ¥5.9 billion
reflecting an increase in gross profit as mentioned above and a
decrease in the provision for doubtful receivables regarding
mainly domestic customers.

Net income increased by ¥5.5 billion,
which was also attributable to the increase of net income in
Mitsui Coal Holding Pty. Ltd. and Mitsui Iron Ore Development
Pty. Ltd.



| |                                                 
| | ------------------------------------------------
| | Machinery, Electronics &
    Information Segment

|                  |  |                      |         |      |  |        |         |  |  |   |         |  
|----------------- |  | -------------------- | ------- | ---- |  | ------ | ------- |  |  | - | ------- | -
|                  |  |                     
|                  |  | Millions of Yen     
|                  |  |                     
|                  |  |                      |         |     
|                  |  | Year ended March 31, |         |     
|                  |  |                      |         |     
|                  |  | 2003                 |         | 2002 |  | Change
|                  |  |                      |         |      |  |       
|Gross Profit      |  | ¥                    | 117,987 |      |  | ¥      | 112,425 |  |  | ¥ | 5,562   |  
|Operating Income  |  |                      | 10,607  |      |  |        | 10,027  |  |  |   | 580     |  
|Net (Loss) Income |  |                      | (4,916  | )    |  |        | 13,377  |  |  |   | (18,293 | )

Despite a decrease of ¥3.4 billion in
industrial plant related transactions, gross profit for the year
ended March 31, 2003 rose by ¥5.6 billion,
principally because of an increase of ¥9.2 billion in
automobile and vessel related transactions.

Operating income increased by only
¥0.6 billion, primarily because of an increase of
¥5.6 billion in gross profit, which was mostly offset
by an increase in selling, general and administrative expenses.

81



---



##### 



This segment reported a net loss of
¥4.9 billion as profitability declined by
¥18.3 billion from the year ended March 31, 2002,
due to the recognition of a ¥9.4 billion impairment
loss on leased MD-11 aircraft at Tombo Aviation Inc., resulting
from deterioration of the business environment in the airline
industry in the United States; the recognition of a
¥4.5 billion impairment loss of an investment in
NextCom K.K., a domestic associated company due to a sharp
decline in its stock price; and deterioration in the performance
of FISA which experienced a loss of ¥4.6 billion due
to financial difficulties of certain of its main customers.



| |                 
| | ----------------
| | Chemical Segment

|                 |  |                      |        |      |  |        |        |   |  |   |       |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ | - |  | - | ----- | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 60,871 |      |  | ¥      | 53,476 |   |  | ¥ | 7,395 |  
|Operating Income |  |                      | 16,248 |      |  |        | 8,185  |   |  |   | 8,063 |  
|Net Loss         |  |                      | (5,850 | )    |  |        | (4,893 | ) |  |   | (957  | )

For the year ended March 31, 2003, gross
profit increased by ¥7.4 billion to
¥60.9 billion, reflecting the recovery of the chemical
products market. During the year ended March 31, 2003, we
experienced a general recovery in market prices of petrochemical
materials due to the war in Iraq, and by an increase in demand
for such products in Asia. Transactions of basic petrochemicals,
synthetic fiber intermediates, methanol, and ammonia also
increased during the year ended March 31, 2003.

Operating income increased by
¥8.1 billion due to the increase in gross profit and a
decrease in the provision for doubtful receivables.

However, the net loss of this segment increased
by ¥1.0 billion to ¥5.9 billion due to the
recognition of a loss associated with Pacific Ammonia Inc. and
Transpacific Glycols Inc., both of which discontinued their
operations, and the impairment of production facilities of
VCM-Malaysia. The above-mentioned losses relate to the
operations which have been showing negative profitability in
recent years which include the manufacture and sales of ammonia,
ethylene glycol, and other petrochemical materials in North
America and Asia.



| |               
| | --------------
| | Energy Segment

|                 |  |                      |        |      |  |        |        |  |  |   |       | 
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ----- | 
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 53,027 |      |  | ¥      | 48,061 |  |  | ¥ | 4,966 | 
|Operating Income |  |                      | 25,541 |      |  |        | 16,661 |  |  |   | 8,880 | 
|Net Income       |  |                      | 22,605 |      |  |        | 22,152 |  |  |   | 453   | 

For the year ended March 31, 2003, the
average oil price (Japan Crude Cocktail) was US$27.4 per
barrel, while it was US$23.8 per barrel in the previous
year. Gross profit for the year ended March 31, 2003
increased by ¥5.0 billion to ¥53.0 billion,
due to an increase in oil and LNG sales to domestic power
companies which in turn was because of the troubles and
shutdowns of nuclear power plants in Japan. In addition, newly
acquired oil producing assets of Mitsui E&P Middle East B.V.
contributed to the increase of gross profit.

Operating income increased by
¥8.9 billion to ¥25.5 billion, where
¥5.0 billion was from the increase of gross profit and
¥3.9 billion was from the decrease of selling, general
and administrative expenses. The decrease of selling, general
and administrative expenses was the result of expense reduction
activities, especially with respect to salary and transportation
expenses in domestic operations.

For the year ended March 31, 2003, net
income increased by ¥0.5 billion from the year ended
March 31, 2002 to ¥22.6 billion. Impairment
losses of tangible fixed assets of ¥9.2 billion in
Mitsui Oil & Gas Co., Ltd. and Kokusai Oil &
Chemical Co., Ltd., primarily related to their gas stations in
Japan, were recognized to reduce the carrying amounts of these
assets. However, such losses were partially offset by strong
performances of JAL-MIMI which contributed to equity in earnings
of associated companies.

82



---



##### 





| |                                         
| | ----------------------------------------
| | Consumer Products & Services
    Segment

|                 |  |                      |         |      |  |        |         |  |  |   |        |  
|---------------- |  | -------------------- | ------- | ---- |  | ------ | ------- |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |         |     
|                 |  | Year ended March 31, |         |     
|                 |  |                      |         |     
|                 |  | 2003                 |         | 2002 |  | Change
|                 |  |                      |         |      |  |       
|Gross Profit     |  | ¥                    | 105,947 |      |  | ¥      | 108,610 |  |  | ¥ | (2,663 | )
|Operating Income |  |                      | 19,897  |      |  |        | 5,082   |  |  |   | 14,815 |  
|Net Income       |  |                      | 3,983   |      |  |        | 2,756   |  |  |   | 1,227  |  

For the year ended March 31, 2003, despite
strong performances by the textile business, gross profit
decreased by ¥2.7 billion due mainly to decreases in
gross profit derived from transactions involving food-related
businesses in Mitsui by ¥2.1 billion.

Operating income increased due to a decrease in
selling, general and administrative expenses with respect to the
early retirement program at MITSUI FOODS CO., LTD. and a
decrease in the provision for doubtful receivables with respect
to the general merchandise and property development related
business for the year ended March 31, 2002.

Net income increased for the year ended
March 31, 2003, despite impairment losses on marketable
equity securities and certain real estate holdings of MITSUI
FOODS CO., LTD. due to the increase in operating income.



| |                                          
| | -----------------------------------------
| | Domestic Branches and Offices
    Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 41,405 |      |  | ¥      | 47,553 |  |  | ¥ | (6,148 | )
|Operating Income |  |                      | 6,760  |      |  |        | 8,873  |  |  |   | (2,113 | )
|Net Income       |  |                      | 6,994  |      |  |        | 6,773  |  |  |   | 221    |  

For the year ended March 31, 2003, gross
profit declined by ¥6.1 billion to
¥41.4 billion, because of the decrease in the number
of domestic trading transactions due to the depressed Japanese
economy.

Operating income also fell ¥2.1 billion
to ¥6.8 billion due to decreases in gross profit,
despite a decrease in selling, general and administrative
expenses.

However, net income rose slightly by
¥0.2 billion to ¥7.0 billion because of a
gain on securities contributed to an employee retirement benefit
trust of the Nagoya Office.



| |                 
| | ----------------
| | Americas Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 44,584 |      |  | ¥      | 45,096 |  |  | ¥ | (512   | )
|Operating Income |  |                      | 9,485  |      |  |        | 11,750 |  |  |   | (2,265 | )
|Net Income       |  |                      | 3,291  |      |  |        | 6,461  |  |  |   | (3,170 | )

For the year ended March 31, 2003, despite
the contribution of Westport Petroleum Inc., gross profit
decreased by ¥0.5 billion to ¥44.6 billion,
as a result of a weaker performance in the machinery division at
Mitsui & Co. (U.S.A.) Inc., due primarily to decreased
sales of machine tools.

Operating income decreased by
¥2.3 billion to ¥9.5 billion, due to an
increase in the provisions for doubtful receivables associated
with aircraft leases, which were impaired because of an overall
airline industry decline after September 11, 2001, and due
to an increase in selling, general and administrative expenses,
mainly personnel expenditures, reflecting the increase in
expenses associated with U.S. subsidiaries increasing
business activities.

Net income declined by ¥3.2 billion to
¥3.3 billion, due to losses on write-down of
securities, mainly in information technology-related venture
capital investments, and the withdrawal from chemical-related
businesses in the United States.

83



---



##### 





| |               
| | --------------
| | Europe Segment

|                 |  |                      |        |      |  |        |        |  |  |   |        |  
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ------ | -
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 22,470 |      |  | ¥      | 20,623 |  |  | ¥ | 1,847  |  
|Operating Income |  |                      | 4,163  |      |  |        | 4,484  |  |  |   | (321   | )
|Net Income       |  |                      | 2,845  |      |  |        | 3,911  |  |  |   | (1,066 | )

Gross profit rose by ¥1.8 billion to
¥22.5 billion for the year ended March 31, 2003,
due mainly to the growth in the volume of chemical related
business and also to the recovery in sales prices in the retail
market of automobile related transactions.

Operating income remained the same as in the
previous year at ¥4.2 billion because of an increase
in selling, general and administrative expenses, including
information technology-related expenses.

Net income decreased by ¥1.1 billion to
¥2.8 billion for the year ended March 31, 2003,
which was attributable to the decline in the yield for
investment in corporate bonds.



| |                             
| | ----------------------------
| | Other Overseas Areas Segment

|               |  |                      |        |      |  |        |        |   |  |   |       | 
|-------------- |  | -------------------- | ------ | ---- |  | ------ | ------ | - |  | - | ----- | 
|               |  |                     
|               |  | Millions of Yen     
|               |  |                     
|               |  |                      |        |     
|               |  | Year ended March 31, |        |     
|               |  |                      |        |     
|               |  | 2003                 |        | 2002 |  | Change
|               |  |                      |        |      |  |       
|Gross Profit   |  | ¥                    | 23,503 |      |  | ¥      | 21,929 |   |  | ¥ | 1,574 | 
|Operating Loss |  |                      | (1,931 | )    |  |        | (4,700 | ) |  |   | 2,769 | 
|Net Income     |  |                      | 6,193  |      |  |        | 5,271  |   |  |   | 922   | 

For the year ended March 31, 2003, gross
profit rose by ¥1.6 billion to
¥23.5 billion, which was principally attributable to
the growth of steel products and chemicals at Mitsui &
Co. (Hong Kong) Ltd. and Mitsui & Co., (Thailand) Ltd.,
resulting from expanding economies in China and other Asian
countries.

This segment reported an operating loss of
¥1.9 billion, representing an improvement from a loss
of ¥4.7 billion for the year ended March 31,
2002, due to decreases in provisions for doubtful receivables of
Mitsui & Co. (Hong Kong) Ltd. and Mitsui & Co.
(Australia) Ltd.

In the meantime, because of a decrease in
dividend income of Mitsui & Co. (Hong Kong) Ltd., the
increase in net income was limited to ¥0.9 billion to
¥6.2 billion for the year ended March 31, 2003.



| |          
| | ---------
| | All Other

|                 |  |                      |        |      |  |        |        |  |  |   |       | 
|---------------- |  | -------------------- | ------ | ---- |  | ------ | ------ |  |  | - | ----- | 
|                 |  |                     
|                 |  | Millions of Yen     
|                 |  |                     
|                 |  |                      |        |     
|                 |  | Year ended March 31, |        |     
|                 |  |                      |        |     
|                 |  | 2003                 |        | 2002 |  | Change
|                 |  |                      |        |      |  |       
|Gross Profit     |  | ¥                    | 29,721 |      |  | ¥      | 27,735 |  |  | ¥ | 1,986 | 
|Operating Income |  |                      | 5,942  |      |  |        | 3,257  |  |  |   | 2,685 | 
|Net Income       |  |                      | 9,738  |      |  |        | 8,711  |  |  |   | 1,027 | 

For the year ended March 31, 2003, gross
profit increased by ¥2.0 billion and was due mainly to
gains on sales of real estate handled by this segment and
expanding logistics service activities including property and
casualty insurance agency services. Operating income for the
year ended March 31, 2003 increased by
¥2.7 billion reflecting the improvement in gross
profit.

Net income increased by ¥1.0 billion
compared with the year ended March 31, 2002, as the
increase in operating income was partly offset by a decrease in
dividend income from a transport-related company and the loss on
write-down on investment in real estate related companies.

Inflation

Management believes that inflation did not have a
significant effect on our reported results of operations.

Critical Accounting Policies and
Estimates

Accounting policies and estimates are considered
to be critical if they are important to our financial condition
and results of operations and involve estimates that require
managements subjective or significant

84



---



##### 



judgment about the effect of matters that are
inherently uncertain. For a summary of our significant
accounting policies including the critical accounting policies
discussed below, please see Note 2, BASIS OF
FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.


The preparation of the consolidated financial
statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the carrying
values of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. On an ongoing
basis, we evaluate the estimates that are based on historical
experiences and on various other assumptions that are believed
to be reasonable under the circumstances. The results of these
evaluations form the basis for making judgments about the
carrying values of assets and liabilities and the reported
amounts of revenues and expenses that are not readily apparent
from other sources. Actual results may differ from those
estimates under different assumptions. The following items
require significant management judgments and estimates.



| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

The amount of impairment losses on long-lived
assets, other than goodwill and other intangible assets, for the
years ended March 31, 2004 and 2003 and the balance of the
long-lived assets, net of accumulated depreciation, as of the
end of March 31, 2004, 2003 and 2002 were as follows:

|                  |  |                 |       |      |  |      |       |  |  |   |       | 
|----------------- |  | --------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                  |  |                
|                  |  | Billions of Yen
|                  |  |                
|                  |  |                
|                  |  | As of March 31,
|                  |  |                
|                  |  | 2004            |       | 2003 |  | 2002
|                  |  |                 |       |      |  |     
|Long-lived assets |  | ¥               | 807.1 |      |  | ¥    | 811.2 |  |  | ¥ | 855.7 | 
|Impairment loss   |  |                 | 21.2  |      |  |      | 23.9  |  |  |   | 24.4  | 

Impairment losses on long-lived assets had a
material impact on our net income for recent years. These losses
were mainly due to the decline in the market value of the leased
aircraft and land values of assets owned by Mitsui and its
domestic subsidiaries. See Impairment Loss of Long-Lived
Assets line-by-line explanation in Results of
Operations for additional information.

Our long-lived assets to be held and used or to
be disposed of other than by sale are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. This review
is performed by comparing the carrying amount of the asset with
the aggregate amount of the estimated undiscounted future cash
flows (impairment analysis). If the carrying value
of the asset is greater than the aggregate amount of
undiscounted future cash flows, then the asset is considered
impaired, and an impairment loss is recorded for the amount by
which the carrying value of the asset exceeds its fair value.
The fair value of the asset is calculated as present value of
the future cash flows that are expected from the asset.

Cash flow projections used in our impairment
analysis and fair value calculations are based on the business
plan authorized by our management or, if this is not available,
on the operating plan reflecting the most recent condition of
the long-lived asset. In these plans, we assume, for example,
that the most recent selling prices of the real estate in the
surrounding areas will reasonably continue in the future, and
the sales prices of the products from facilities and equipment
will remain consistent with current year sales prices.

As for the discount rate used in fair value
calculations, when expected variation of cash flows is not
considered in the cash flow estimate, the discount rate, which
includes the risk factor for the cash flow deviation, is used.
Assumptions that marketplace participants would use in their
estimates of fair value are incorporated in the discount rate
when such information is available. When such information is not
available, an expected internal rate of return used for
management purposes or a weighted average cost of capital,
whichever is higher, is also considered for the discounted cash
flow calculation.

Factors to be considered when estimating future
cash flows and determining discount rates varies for each
long-lived asset because of the difference in nature of the
assets and in operating circumstances, such as location, owner,
operator, profitability and other factors.

Management believes that the estimates of future
cash flows and the determination of discount rates and fair
value are reasonable; however, changes in estimates resulting in
lower future cash flows and fair value due to unforeseen changes
in business assumptions could negatively affect the valuations
of those long-lived assets.

85



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| |                                   
| | ----------------------------------
| | Allowance for Doubtful Receivables

Since we are general trading companies, trade
receivables represent a large portion of our total assets, and
therefore, the accounting estimates used to establish an
allowance for doubtful receivables are critical.

For certain large loan receivables, when we deem
it is probable that we will be unable to collect amounts that
are contractually due to us, the specific loan is reviewed for
impairment. Factors considered in assessing collectibility
include length of overdue period, financial condition of the
debtor, requests for debt restructuring and filings for
bankruptcy.

An impairment loss for a specific loan deemed to
be impaired, as specifically determined under
SFAS No. 114, Accounting by Creditors for
Impairment of a Loan an amendment of FASB Statements
No. 5 and 15, is measured based on the present value
of expected cash flows discounted at the loans original
effective interest rate or the fair value of collateral if the
loan is collateral dependent. The expected cash flows from
assets and liabilities of the debtor and the fair value of
collateral are determined mainly based on an evaluation of
independent real estate appraisers, publicly available
indication of the real estate price, market price of financial
assets and liabilities, guarantors, financial condition and
other factors. As of March 31, 2004, 64% of the recorded
investment in impaired loans was covered by an allowance for
doubtful receivables and this represents 80% of the total amount
of allowance for doubtful receivables. An additional 10%
decrease in collectible amount of such impaired loans would
result in an additional impairment loss of
¥5.9 billion. The recoverable amounts are reviewed on
a quarterly basis and if necessary, an additional allowance is
established. See Note 7, ALLOWANCE FOR DOUBTFUL
RECEIVABLES for impaired loan amounts and the respective
allowance amounts.

In addition to the above, an allowance for
doubtful receivables is recognized for probable losses inherent
in receivables not specifically deemed to be impaired. The
amount of allowance is the amount judged to be adequate based
primarily on our credit loss experiences and an evaluation of
potential losses on the receivables, considering various
factors, including current economic conditions and financial
condition of the debtors. We review the adequacy of the
allowance for doubtful receivables by assessing both the
collateral exposure and the applicable default rate. Collateral
exposure for a particular receivable is the excess of the
carrying value over the applicable collateral value. A
receivable with an estimated collateral value in excess of the
carrying value is considered to have no collateral exposure. The
applicable default rate is determined by a customers
credit rating that is identified for each customer based on our
financial analysis. The default rate of each credit rating is
determined based on our historical experiences.

Management believes that the estimates of the
future cash flows, the fair value of collateral, the credit
rating of customers and the corresponding default rate are
reasonable; however, changes in estimates resulting in lower
future cash flows and fair value of the collateral, due to
unforeseen changes in business assumptions, or drastic increases
in default rates based on negative changes in economic
conditions could negatively affect the valuations of related
receivables.



| |                                    
| | -----------------------------------
| | Impairment of Investment Securities

An impairment of investment securities is charged
to earnings when a decline in fair value below cost is other
than temporary. The impairment of investment equity securities
charged to earnings for recent fiscal years had a significant
impact on our income. The following table shows the cost of
marketable and non-marketable equity securities as of
March 31, 2004, 2003 and 2002, and the impairment loss for
the years ended March 31, 2004, 2003 and 2002:

|                                 |  |                      |       |            |  |      |      |            |  |      |       |            |  |   |      |  |  |   |       |  |  |   |      | 
|-------------------------------- |  | -------------------- | ----- | ---------- |  | ---- | ---- | ---------- |  | ---- | ----- | ---------- |  | - | ---- |  |  | - | ----- |  |  | - | ---- | 
|                                 |  |                     
|                                 |  | Billions of Yen     
|                                 |  |                     
|                                 |  |                     
|                                 |  | Year ended March 31,
|                                 |  |                     
|                                 |  |                      |       |            |  |     
|                                 |  | 2004                 |       | 2003       |  | 2002
|                                 |  |                      |       |            |  |     
|                                 |  |                      |       | Impairment |  |      |      | Impairment |  |      |       | Impairment
|                                 |  | Cost                 |       | loss       |  | Cost |      | loss       |  | Cost |       | loss      
|                                 |  |                      |       |            |  |      |      |            |  |      |       |           
|Marketable equity securities     |  | ¥                    | 178.6 |            |  | ¥    | 1.3  |            |  | ¥    | 140.5 |            |  | ¥ | 15.6 |  |  | ¥ | 177.8 |  |  | ¥ | 34.5 | 
|Non-marketable equity securities |  |                      | 216.6 |            |  |      | 29.7 |            |  |      | 234.0 |            |  |   | 22.3 |  |  |   | 327.5 |  |  |   | 8.7  | 
|                                 |  |                      |       |            |  |      |      |            |  |      |       |            |  |   |      |  |  |   |       |  |  |   |      | 
|Total                            |  | ¥                    | 395.2 |            |  | ¥    | 31.0 |            |  | ¥    | 374.5 |            |  | ¥ | 37.9 |  |  | ¥ | 505.3 |  |  | ¥ | 43.2 | 
|                                 |  |                      |       |            |  |      |      |            |  |      |       |            |  |   |      |  |  |   |       |  |  |   |      | 

Impairments were mainly due to the decline in the
world economy for the year ended March 31, 2003, and the
total amount of impairment loss has been decreasing along with
the recovery of the world economy. Significantly, impairment
losses on marketable equity securities have decreased
substantially for the year

86



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##### 



ended March 31, 2004, which implies the
securities market prices and economic conditions of Japan, which
predominantly affects our portfolio, have bottomed out.


As for non-marketable equity securities, a
¥21.7 billion loss was recorded for an investee,
POWEREDCOM, Inc., based on the deterioration in its financial
position reflecting the operating loss from its data
communication business for the year ended March 31, 2004,
whereas losses of ¥22.3 billion for the year ended
March 31, 2003 consisted of various smaller amounts of
losses, indicating many of our investees had suffered losses as
a result of the stagnant world economy for the year ended
March 31, 2003.

Management principally recognizes that a 50% or
more decline in fair value of a security leads to the conclusion
that the security has other than temporary impairment. If the
decline is less than 50%, various factors, such as the extent to
which the cost exceeds the market value, the duration of the
market decline, our intention and ability to hold the investment
until its market price recovery and the financial condition of
the investees, are considered in concluding if the decline is
temporary or not.

As of March 31, 2004, there was no
individual marketable security that had been in a continuous
unrealized loss position for one year or more. There were
marketable securities of approximately 40 issuers that had
been in continuous unrealized loss positions for less than one
year, and their severity of decline of fair value below cost
range from 2% to 18%, and had an aggregate unrealized loss of
¥1.1 billion. But considering the combination of the
length of time that fair values have been below cost, the extent
of decline and the financial condition of the investees, we
expect that their fair values will recover above their costs
while we hold these investments.

For non-marketable securities, fair value of an
investment is generally determined based on our equity in a net
amount of the fair value of investees assets and
liabilities. In addition, where future business plans formally
adopted by management of the entities are available and when
deemed appropriate, the discounted future cash flow method is
used to determine the fair value of the non-marketable equity
securities. The discount rate reflects risk factors for the cash
flow deviation from the future business plans and assumptions
that market place participants would use in their estimates of
fair value when the information is available and appropriate.

Management believes that the criteria for
evaluating the significance of the decline in fair value are
reasonable and that as long as the economic conditions continue
to improve, the amount of impairment losses in investment
securities will continue to decrease in the near future.
However, changes in the securities market or circumstances of
each individual investment due to unforeseen changes in economic
and business assumptions could affect the valuation of the
investment securities.



| |                      
| | ---------------------
| | Pension Benefit Costs

Employee pension benefit costs and obligations
are dependent on various assumptions, including discount,
retirement and mortality rates, which are based on the current
statistical data, as well as the expected long-term rate of
return on plan assets and other factors. In accordance with
U.S. GAAP, the difference between actual results and the
assumptions is accumulated and amortized over future periods
and, therefore, generally affects the recognized costs and the
recorded obligations in future periods. Management believes that
the assumptions used are appropriate; however, differences in
actual experience or changes in assumptions may affect our
future pension costs and obligations.

We determine the discount rates each year as of
the measurement date, based on a review of interest rates
associated with long-term Japanese government bonds or
high-quality fixed-income corporate bonds. The discount rates
determined on each measurement date are used to calculate the
benefit obligation as of that date, and are also used to
calculate the net periodic pension costs for the upcoming plan
year.

On March 31, 2003, to reflect declining
current market interest rates in Japan, Mitsui, which is liable
for most of our benefit obligations, reduced the discount rate
for its pension plans from 3% to 2.25%. This change resulted in
an increase in its projected benefit obligation
(PBO) as of March 31, 2003 and its net periodic
pension costs (NPPC) for the year ended
March 31, 2004 by approximately ¥26.0 billion and
¥4.2 billion, respectively.

Mitsui determines the expected long-term rate of
return on plan assets based on the weighted-average rate of
return computed by using the expected long-term rate of return
on each asset class, which is derived from an extensive study
conducted by investment advisors and actuaries on a periodic
basis, and the target allocations for each asset class. The
study includes a review of anticipated future performance with
market analysis of individual asset classes, and also gives
appropriate consideration to actual historical returns

87



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##### 



achieved by the plans. The subsidiaries determine
the expected long-term rates of return on plan assets mainly
based on the expectations for future returns by investment
advisors and actuaries.


The following table illustrates the sensitivity
to changes in certain assumptions for Mitsuis pension
plans:

|                                                                                |  |                       |      |                  |  |   |       |  
|------------------------------------------------------------------------------- |  | --------------------- | ---- | ---------------- |  | - | ----- | -
|                                                                                |  |                      
|                                                                                |  | Billions of Yen      
|                                                                                |  |                      
|                                                                                |  | Impact of change      |      | Impact of change
|                                                                                |  | in assumption on      |      | in assumption on
|                                                                                |  | NPPC for the year     |      | PBO as of       
|                                                                                |  | ending March 31, 2005 |      | March 31, 2004  
|                                                                                |  |                       |      |                 
|50 basis point decrease in discount rate                                        |  | ¥                     | 2.8  |                  |  | ¥ | 14.0  |  
|50 basis point increase in discount rate                                        |  |                       | (2.4 | )                |  |   | (13.1 | )
|50 basis point decrease in expected
    long-term rate of return on plan assets |  |                       | 0.8  |                  |  |   |      |  
|50 basis point increase in expected
    long-term rate of return on plan assets |  |                       | (0.8 | )                |  |   |      |  

See Note 14, PENSION COSTS AND
SEVERANCE INDEMNITIES, for further discussion about the
estimates and assumptions on PBO and NPPC.



| |                    
| | -------------------
| | Tax Asset Valuation

Deferred tax assets (net of deferred tax
liabilities on an entity basis) on the Consolidated Balance
Sheets as of March 31, 2004 and 2003 are shown in the
following table:

|                        |  |                 |       |      |  |   |       |  
|----------------------- |  | --------------- | ----- | ---- |  | - | ----- | -
|                        |  |                
|                        |  | Billions of Yen
|                        |  |                
|                        |  |                
|                        |  | As of March 31,
|                        |  |                
|                        |  | 2004            |       | 2003
|                        |  |                 |       |     
|Deferred tax assets     |  | ¥               | 95.1  |      |  | ¥ | 112.2 |  
|Valuation allowance     |  |                 | (31.2 | )    |  |   | (22.9 | )
|                        |  |                 |       |      |  |   |       |  
|Deferred tax assetsnet |  | ¥               | 63.9  |      |  | ¥ | 89.3  |  
|                        |  |                 |       |      |  |   |       |  

We classify subsidiaries and associated companies
into the following five categories and evaluate the
realizability of deferred tax assets by each category. The
valuation allowance for the deferred tax assets is established
for the amount determined to be unrealizable.



| |               
| | --------------
| | First category

The companies, which constantly generate
sufficient taxable income every year to cover all the future
deductible temporary differences as of the end of each fiscal
year, and no significant change exists or is expected in the
business environment. For this category, we view all deferred
tax asset amounts as realizable.



| |                
| | ---------------
| | Second category

The companies with stable operating results in
the past years (approximately in the last three years), but do
not generate sufficient taxable income in the current year to
cover all the future deductible temporary differences as of the
end of the fiscal year. For this category, the portion of the
deferred tax assets that is recoverable based on an analysis of
the scheduled taxable income in the future is determined to be
realizable.



| |               
| | --------------
| | Third category

The companies with unstable operating results in
the past years, and that do not generate sufficient taxable
income in the current year to cover all the future deductible
temporary differences as of the end of the fiscal year. For this
category, the portion of the deferred tax assets that is
recoverable based on an analysis of the scheduled taxable income
within a reasonable estimation period (approximately five years)
is determined to be realizable.



| |                
| | ---------------
| | Fourth category

The companies, which have significant amounts of
tax loss carryforwards at the end of the fiscal year, have
experienced the expiration of a significant amount of tax loss
carryforward in the past three years, or will fail to utilize
significant amount of tax loss carryforward up to the expiration
date in the current period.

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For this category, the portion of the deferred
tax assets that is recoverable with a high degree of certainty
based on an analysis of the scheduled taxable income within the
next fiscal year is determined to be realizable.


If the tax loss carryforward results from a
non-recurring and unusual event such as a significant
restructuring of the business or a change in law or regulation,
and the companies otherwise consistently generate taxable
income, the portion of the deferred tax assets that is
recoverable based on an analysis of the scheduled taxable income
within a reasonable estimation period (approximately five years)
is determined to be realizable.



| |               
| | --------------
| | Fifth category

The companies, which recorded a significant
amount of tax loss carryforwards for each of the past three
years and are expected to record a significant tax loss in the
current year as well. For this category, no deferred tax assets
are determined to be realizable.

For Mitsui, the realizability of deferred tax
assets is determined based on all available evidence, both
positive and negative, including all currently available
information on future years and ability to generate sufficient
taxable income prior to the expiration of loss carryforward.

Management believes it is more likely than not
that all of our deferred tax assets, net of valuation allowance,
will be realized. However, the amount of realizable net deferred
tax assets may change in the near term if estimates of future
taxable income during the carryforward period are changed or if
statutory tax rates are changed.

New Accounting Standards



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | The meaning of other-than-temporary impairment
    and its application to certain investments

In Issue No. 03-1, The Meaning of
Other-than-Temporary Impairment and Its Application to Certain
Investments, the FASB Emerging Issues Task Force reached a
consensus in November 2003 on certain quantitative and
qualitative disclosures about unrealized losses on debt and
marketable equity securities and also reached a consensus in
March 2004 on the application of a three-step impairment model
for certain investments in securities and disclosures about
investments accounted for under the cost method.

We adopted the provisions for disclosures about
unrealized losses for the year ended March 31, 2004 and
disclosed additional information in Note 5,
MARKETABLE SECURITIES AND OTHER INVESTMENTS.

The three-step impairment model of investments is
effective for reporting periods beginning after June 15,
2004, and the disclosure provision for investments accounted for
under the cost method is effective for fiscal years ending after
June 15, 2004. The effect of adoption of this consensus on
our financial position and results of operations is not expected
to be material as long as the current market environment remains
unchanged and the unrealized losses on available-for-sale
securities remain immaterial as they were as of March 31,
2004.



| |                                                        
| | -------------------------------------------------------
| | Investments in limited liability companies
    (LLCs)

In March 2004, the FASB Emerging Issues Task
Force reached a consensus on Issue No. 03-16 (EITF
No. 03-16), Accounting for Investments in
Limited Liability Companies. EITF No. 03-16 requires
investments of more than 3 to 5 percent in an LLC that
maintain a specific ownership account for each investor be
accounted for by the equity method.

EITF No. 03-16 is effective for reporting
periods beginning after June 15, 2004. The effect of
adoption of this consensus on our financial position and results
of operations is not currently known and cannot be reasonably
estimated until further analysis is completed.



| |                                 
| | --------------------------------
| | Classification of mineral rights

In March 2004, the FASB Emerging Issues Task
Force reached a consensus on Issue No. 04-2 (EITF
No. 04-2), Whether Mineral Rights are Tangible
or Intangible Assets, and in April 2004, FASB, in relation
to this, issued FASB Staff Position Nos. FAS 141-1 and
FAS 142-1 which amends SFAS No. 141,
Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. EITF
No. 04-2 requires mineral rights held by mining entities
other than oil and gas producing entities that are within the

89



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scope of SFAS No. 19, Financial
Accounting and Reporting by Oil and Gas Producing
Companies, be accounted for as tangible assets.


EITF No. 04-2 is effective for the first
reporting period beginning after April 29, 2004. Upon
adoption of this consensus, ¥14,328 million of mineral
rights (net of ¥3,170 million of accumulated
amortization) that were classified as intangible assets in the
Consolidated Balance Sheets as of March 31, 2004 will be
reclassified as tangible assets.






|   |                                 
|-- | --------------------------------
|B. | Liquidity and Capital Resources.

Finance and Liquidity
Management



| |                                                 
| | ------------------------------------------------
| | Funding and Treasury Policies and
    Objectives

Our basic funding policy is to secure stable
sources of funds to maintain adequate liquidity and financing to
satisfy capital requirements for our operations and to maintain
the strength of our balance sheet. In order to achieve our
objectives, our principal strategy is to obtain long-term funds
(those with maturities of around 10-years) from financial
institutions, including insurance companies and banks, and
through the issuance of corporate bonds. In addition, we utilize
financing programs provided by government financing agencies for
various projects to obtain long-term financing. Another strategy
is to maintain sufficient liquidity to flexibly meet capital
requirements and to prepare for future debt-service requirements
in case of unforeseen deteriorations in financial markets. We
hold cash and cash equivalents as liquidity sources, which
consist mainly of highly-liquid and highly-rated short-term
financial instruments and deposits. We aim to maintain the level
of cash and cash equivalents at about 10% of total assets,
reflecting the current financial market conditions and future
capital requirements.

In principle, our wholly owned domestic
subsidiaries do not raise their funds in financial markets or
borrow from banks, but instead use a cash management service
provided by Bussan Credit Co., Ltd., our financing subsidiary,
which centralizes fund raising function and promotes efficient
use of funds. We are currently extending this policy to our
principal overseas subsidiaries.



| |                
| | ---------------
| | Funding Sources

We borrow funds based on our longstanding
relations with financial institutions in Japan and overseas,
borrow from government financing agencies, and also utilize
project financing. In addition to these funding sources, Mitsui
maintains a ¥200 billion debt shelf-registration and a
¥2,400 billion commercial paper program in Japan.
Similarly, Mitsui & Co. (U.S.A.), Inc.,
Mitsui & Co. UK PLC, Mitsui & Co.
International (Europe) B.V., Mitsui & Co., Asia
Investment Ltd. and Mitsui & Co., Ltd. have arranged a
joint Euro medium-term note (MTN) program of
U.S.$5 billion. Mitsui guarantees notes issued by these
overseas subsidiaries. For raising short-term funds,
Mitsui & Co. (U.S.A.), Inc. has a U.S.$1.5 billion
U.S. domestic commercial paper program, and we have made
arrangements for commercial paper programs in some other
overseas markets.

Unused lines of credit, for short-term financing
outside Japan, aggregated ¥508.8 billion at
March 31, 2004. Certain foreign subsidiaries compensate
banks for these facilities in the form of commitment fees, which
were not material in each of the past three years.

Taking advantage of a favorable financial market
environment, during the year ended March 31, 2004, we
increased long-term funding by issuing bonds in Japan and MTNs
in overseas markets for debt retirement and for working capital
requirements. There were seven bond issues that raised
¥76.0 billion (maturities of 10-12.5 years,
including some callable bonds) under the shelf-registration in
Japan during the year ended March 31, 2004. As a result,
long-term debt accounted for approximately 80% of total debt as
of March 31, 2004, in which we regard as a satisfactory
level from the viewpoint of our financial policies.

Approximately 75% of the balance of short-term
and long-term debt as of March 31, 2004 was denominated in
Japanese yen and the rest was mainly denominated in
U.S. dollars.

We employ certain derivative financial
instruments, which include interest rate swaps, currency swaps
and foreign exchange forward contracts, to manage financial
exposures resulting from our financing activities. Currency swap
agreements and foreign exchange forward contracts are used to
manage risks associated with the fluctuations in foreign
exchange rates. The principal financial derivative instruments
that are employed to manage interest rate risk exposure are
interest rate swap agreements. A large part of such agreements
are used for fair value hedging of fixed rate interest-bearing
debt, including fixed interest rate borrowing, bonds and notes,
converting into floating interest rates based on the three-month
or six-month LIBOR. The interest

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rates on approximately 84% of Mitsuis
long-term debt, other than borrowings for certain projects, was
floating after taking into account interest rate swap
arrangements as of March 31, 2004.


See Note 24, DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES for further description of our risk
management policies.

Credit
Ratings

To facilitate access to funds from capital
markets, Mitsui and our certain foreign trading subsidiaries
have obtained ratings for their commercial paper (short-term
debt) and long-term senior unsecured debt (long-term debt) from
Rating and Investment Information, Inc. (R&I),
Moodys Investors Service, Inc. (Moodys)
and Standard and Poors Services (S&P). The
ratings as of March 31, 2004 were as follows:

|                |  |     |      |         |  |     |     |  |  |  |      |  
|--------------- |  | --- | ---- | ------- |  | --- | --- |  |  |  | ---- | -
|                |  | R&I |      | Moodys |  | S&P
|                |  |     |      |         |  |    
|Short-term debt |  |     | a-1+ |         |  |     | P-2 |  |  |  | A-2  |  
|Long-term debt  |  |     | AA-  |         |  |     | A3  |  |  |  | BBB+ | *



|  |                                                                                 
|- | --------------------------------------------------------------------------------
|* | The credit rating by S&P on long-term debt
    was provided without our request.

S&P in March 2004 raised the outlook for our
credit rating from Stable to Positive.
S&P cited the following factors for the change in the
outlook: a clear improvement in Mitsuis fundamental
earning power; improvement in the risk balance between
shareholders equity and investments and loans, due to
stricter risk management for investments and loans; and
improvement in the financial condition due to continuing
measures to boost profitability after credit costs.

Mitsui intends to maintain and improve its
current credit ratings by enhancing its earnings and risk
management.

Credit ratings are an assessment by the rating
agencies of the credit risks associated with us and are based on
information provided by us and other sources that the rating
agencies consider reliable. Lower ratings generally result in
higher borrowing costs and reduced access to capital markets.
Credit ratings do not constitute a recommendation to buy, sell
or hold securities and are subject to change or withdrawal by
each rating agencies at any time. As rating agencies may have
different criteria in evaluating the risk associated with a
company, you should evaluate each rating independently of other
ratings. Ratings may be changed without pre-notice at any
time.

Liquidity
Management

For the interest rate structure and the maturity
profile of our outstanding debt, see Note 13,
SHORT-TERM AND LONG-TERM DEBT to the consolidated
financial statements.

We had working capital, or current assets minus
current liabilities, of ¥901 billion,
¥806 billion and ¥797 billion as of
March 31, 2004, 2003 and 2002, respectively.

Short-term debt was ¥647 billion,
¥691 billion and ¥607 billion, and long-term
debt was ¥2,541 billion, ¥2,500 billion and
¥2,581 billion as of March 31 2004, 2003 and
2002, respectively. Cash and cash equivalents were
¥638 billion, ¥695 billion and
¥634 billion as of March 31, 2004, 2003 and 2002,
respectively.

In addition to cash and cash equivalents, we had
time deposits and marketable securities of ¥47 billion
and ¥29 billion, ¥38 billion and
¥64 billion, and ¥78 billion and
¥77 billion, at March 31, 2004, 2003 and 2002,
respectively.

Net interest-bearing debt (interest-bearing debt
less cash and cash equivalents and time deposits) was
¥2,676 billion, an increase of ¥56 billion
from the year ended March 31, 2003. However, the net
debt-to-equity ratio improved from 3.04 as of March 31,
2003 to 2.78 as of March 31, 2004, reflecting a strong
increase in shareholders equity. Our Medium-Term Strategic
and Financial Plan that runs through the fiscal year ending
March 31, 2006 anticipates an increase in total assets from
¥6,716 billion as of March 31, 2004 to
¥7,300 billion as of March 31, 2006 due to our
new investments; however, we intend to keep the debt-to-equity
ratio below a maximum of 3.0 in order to maintain our sound
financial standing while refraining from a highly leveraged
funding policy and utilizing operating cash flows during this
period for new investments.

The ratio of current assets to current
liabilities improved from 126.7% as of March 31, 2003 to
129.7% as of March 31, 2004 partly because long-term bonds
and notes increased in line with our principal funding

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strategies as mentioned above. The ratio of
current assets to current liabilities as of March 31, 2002
was the same percentage of 126.7% as of March 31, 2003.


As of March 31, 2004, we have given
guarantees for obligations of various third parties and
associated companies. These guarantees are not expected to
require substantial use of our capital resources. We have not
had any material payment requirements resulting from activities
for the past three years. For details on guarantees issued by
us, see Note 21, COMMITMENTS AND CONTINGENT
LIABILITIES to the consolidated financial statements.

In any of our material financing arrangements,
there are no financial covenants that would cause acceleration
of our obligations, including debt incurrence restrictions,
negative pledge, restrictions on dividend payments and various
financial ratio limits.

Assuming that our subsidiaries have sufficient
distributable net assets or retained earnings as provided under
the local laws of the relevant jurisdictions, there are no
material contractual or legal restrictions on the ability of our
subsidiaries to transfer funds to us in the form of dividends,
loans or advances. There are no material economic restrictions
on payments of dividends, loans or advances to us by our
subsidiaries other than general withholding or other taxes
calculated at the rates determined by the local tax laws of the
relevant jurisdictions.

We held ¥638 billion of cash and cash
equivalents as of March 31, 2004 in comparison to
¥274 billion of outstanding debt from commercial
papers, MTNs and bonds with current maturities. Of the cash and
cash equivalents, approximately 70% was held by Mitsui and
approximately 80% was denominated in Japanese yen. We believe
that we maintain sufficient liquidity to satisfy our working
capital and debt-service requirements for the foreseeable future
through the existing cash and cash equivalents and time
deposits, the sales of certain assets in parallel with outside
borrowings from financial institutions, as well as, the issuance
of bonds and notes.

We expect sizable capital expenditures and
commitments for investments, loans and guarantees for our
natural resource projects, specifically, the second phase
development of Sakhalin II in Russia, which aims at
year-round crude oil and LNG production, and the Enfield
offshore oil field in Western Australia, which will create
capital requirements of about ¥350 billion over the
next three years. The above capital spending would be financed
by Mitsuis borrowing, direct financing from capital
markets, internal liquidity and project financing from private
and public financial institutions.

The Medium-Term Strategic and Financial Plan that
runs through the fiscal year ending March 2006 incorporates new
investments of more than ¥400 billion (including the
above investments in the Sakhalin II and Enfield projects)
during the two year period. These requirements for investment
will be financed by Mitsuis borrowing, direct financing
from capital markets, internal liquidity and project financing
from private and public financial institutions. We expect
interest-bearing debt to increase by ¥340 billion by
the end of March 2006. This is subject to change mainly
depending on the progress in executing anticipated investments
in the Medium-Term Strategic and Financial Plan. We plan to
contribute ¥34.6 billion to our defined benefit
pension plans for the year ending March 31, 2005. This fund
requirement will be managed under our funding policy mentioned
above. We also believe that our liquidity and capital resources
provide adequate flexibility to accelerate or slow down the pace
of planned capital spending programs as appropriate to address
the future business environment.

Non-exchange Traded Commodity Contracts at
Fair Value

We perform trading activities in commodities that
are listed on the terminal (futures) markets. Our trading
consists of derivative instruments traded in the commodity
futures markets, as well as non-exchange traded commodity
contracts including commodity derivatives. Non-exchange traded
commodity contracts are recorded at fair value based on prices
actively quoted in the terminal (futures) market for
commodities such as precious metals. Some non-exchange traded
commodity contracts, such as non-exchange traded derivatives of
crude oil and oil products, are recorded at fair value based on
the prices provided by other external sources. Their effect on
earnings and financial position is immaterial.

Transactions with Related
Parties

When conducting our business operations
throughout the world, we form alliances with the leading partner
companies in Japan and overseas, including manufacturers and
companies in the raw materials resources fields, such as energy
and ferrous materials. In addition to investing in associated
companies where

92



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##### 



we are a minority shareholder, we conduct selling
and purchasing transactions of various products on a recurring
basis with such associated companies.


Our principal associated companies include
Valepar S.A. (18.24%), Japan Australia LNG (MIMI) Pty. Ltd.
(50.00%), Nihon Unisys, Ltd. (27.85%), Mitsui Leasing &
Development, Ltd. (40.63%), Mitsui Oil Exploration Co., Ltd.
(40.75%) and Sakhalin Energy Investment Company Ltd. (25.00%),
among others.

During the years end March 31, 2004, 2003
and 2002, our gross revenues from transactions with these
associated companies amounted to ¥108 billion,
¥91 billion and ¥76 billion, respectively,
and the values of goods and services purchased from such
companies and reported as cost of revenues were
¥161 billion, ¥143 billion and
¥45 billion, respectively.

Prices applied in transactions with associated
companies are computed in the same way that such prices would be
calculated in transactions with unrelated third parties. In
addition, when associated companies are counterparties in
transactions with us and we conduct such business under
long-term procurement and/or sales contracts, in general, we
conclude a corresponding sales contract with the purchasers
(unrelated parties) of goods procured by us and/or with
suppliers (unrelated parties) of the goods we sell to associated
companies. In addition, as of March 31, 2004, we were the
guarantor for ¥62.3 billion in funds borrowed and
other financial obligations of associated companies. Regarding
any other commitments related to transactions with associated
companies, we do not normally assume risk in excess of our
percentage of share ownership in such associated companies.

Assets, Liabilities and Shareholders
Equity

Total assets as of March 31, 2004 increased
by ¥176 billion to ¥6,716 billion compared
with the previous fiscal year-end.

Current assets as of March 31, 2004
increased by ¥103 billion to ¥3,934 billion
compared with the previous fiscal year-end due mainly to
increases in trade receivables of Mitsui and domestic
subsidiaries primarily caused by increased sales of iron and
chemicals.

Total investments and non-current receivables as
of March 31, 2004 increased by ¥65 billion to
¥1,949 billion compared with the previous fiscal
year-end due mainly to increases in the current value of
Mitsuis marketable securities reflecting the recovery of
stock prices in Japan and increases in investments in associated
companies that engage in natural resources development such as a
new investment in Valepar S.A.

Intangible assets, less accumulated amortization
as of March 31, 2004 increased by ¥42 billion to
¥113 billion compared with the previous fiscal
year-end due mainly to an increase in unpatented technologies
acquired and goodwill recognized by consolidating Mitsui
Norin Co., Ltd. during the year ended March 31, 2004.

Other assets as of March 31, 2004 decreased
by ¥19 billion to ¥110 billion compared with
the previous fiscal year-end due mainly to the decrease in
prepaid pension costs as a result of amortization of
unrecognized net actuarial loss.

Current liabilities as of March 31, 2004
increased slightly by ¥8 billion to
¥3,034 billion compared with the previous fiscal
year-end, primarily because of increases in trade account
payables of domestic subsidiaries by ¥54 billion
caused by increased purchases of chemical products, which were
partially offset by a decrease in short-term debt by
¥456 billion due to repayments by Mitsui and domestic
subsidiaries.

Long-term debt, less current maturities as of
March 31, 2004 increased by ¥41 billion to
¥2,541 billion compared with the previous fiscal
year-end primarily because of an increase in capital
requirements for new investments.

Minority interests as of March 31, 2004
increased by ¥10 billion to ¥78 billion
compared with the previous fiscal year-end, due mainly to the
effect of newly acquired Mitsui Norin Co., Ltd. during the
year ended March 31, 2004.

Shareholders equity as of March 31,
2004 increased by ¥101 billion to
¥963 billion compared with the previous fiscal
year-end, primarily because of the current year earnings and an
increase in unrealized holding gains on available-for-sale
securities resulting from the recovery of stock prices in Japan,
partially offset by a change in foreign currency translation
adjustments due to the appreciation of the Japanese yen against
the U.S. dollar.

93



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##### 



Cash Flows

|                                                                 |  |                      |          |      |  |      |         |   |  |   |          |  
|---------------------------------------------------------------- |  | -------------------- | -------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                                                 |  |                     
|                                                                 |  | Millions of Yen     
|                                                                 |  |                     
|                                                                 |  |                     
|                                                                 |  | Year ended March 31,
|                                                                 |  |                     
|                                                                 |  | 2004                 |          | 2003 |  | 2002
|                                                                 |  |                      |          |      |  |     
|Net cash provided by operating activities                        |  | ¥                    | 100,079  |      |  | ¥    | 52,148  |   |  | ¥ | 133,712  |  
|Net cash used in investing activities                            |  |                      | (134,154 | )    |  |      | (4,243  | ) |  |   | (82,616  | )
|Net cash (used in) provided by financing
    activities          |  |                      | (12,248  | )    |  |      | 17,824  |   |  |   | (126,076 | )
|Effect of exchange rate changes on cash and cash
    equivalents |  |                      | (10,191  | )    |  |      | (4,499  | ) |  |   | 9,433    |  
|Effect of change in fiscal year-end of certain
    subsidiaries  |  |                      |         |      |  |      |        |   |  |   | (6,201   | )
|Net (decrease) increase in cash and cash
    equivalents         |  |                      | (56,514  | )    |  |      | 61,230  |   |  |   | (71,748  | )
|Cash and cash equivalents at beginning of year                   |  |                      | 694,813  |      |  |      | 633,583 |   |  |   | 705,331  |  
|Cash and cash equivalents at end of year                         |  |                      | 638,299  |      |  |      | 694,813 |   |  |   | 633,583  |  

On April 1, 2003, we changed our accounting
policy regarding which items to classify as cash equivalents in
the Consolidated Balance Sheets and the Statements of
Consolidated Cash Flows. Cash equivalents formerly included
certificates of deposit and time deposits with original
maturities of three months or less. In addition to the above, we
decided to include financing bills and commercial papers with
original maturities of three months or less, which are readily
convertible into cash and have no significant risk of change in
value, as cash equivalents. This change reflects the recent
change in our short-term cash management policies and has been
made to more fairly present our cash management activities in
the Consolidated Balance Sheets and the Statements of
Consolidated Cash Flows.

In relation to this change, the amounts in the
Consolidated Balance Sheets and the Statements of Consolidated
Cash Flows for the prior years have been restated. As a result
of this restatement, cash and cash equivalents increased by
¥34.6 billion and marketable securities decreased by
the same amounts in the Consolidated Balance Sheets as of the
end of the year ended March 31, 2003. Also, net cash used
in investing activities decreased by ¥9.0 billion and
¥25.6 billion in the Statements of Consolidated Cash
Flows for the years ended March 31, 2003 and 2002,
respectively.

Cash flows during the year ended
March 31, 2004



| |                                     
| | ------------------------------------
| | Cash Flows from Operating Activities

Net cash provided by operating activities for the
year ended March 31, 2004 was ¥100.1 billion,
which was primarily attributable to:



| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | operating income in almost all segments,
    especially in the Metal Products & Minerals Segment and
    the Chemical Segment; and                                                    
|
| |  | dividends from associated companies and unrelated
    investees, particularly those operating in the natural resources
    business (e.g., iron and steel raw materials, oil and gas).

The above net cash inflow was partly offset by
the payment of U.S.$126.5 million, or
¥13.7 billion, for the settlement of a major part of
choline chloride lawsuits in the United States.

Net cash provided by operating activities
increased by ¥47.9 billion compared to the year ended
March 31, 2003. The principal reasons for this increase
were:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | ¥21.9 million higher operating
    income; and                                                             
|
| |  | ¥25.9 billion decline in contributions
    to defined benefit plans from ¥26.0 billion to
    ¥0.1 billion.

In addition, during the year ended March 31,
2003, our domestic financing subsidiary, Bussan Credit Co.,
Ltd., purchased trade receivables (Mitsuis trade payables)
at a discount from various suppliers, which caused early
payments of our trade payables, which reduced net cash from
operating activities.



| |                                     
| | ------------------------------------
| | Cash Flows from Investing Activities

Net cash used in investing activities was
¥134.2 billion. There was a net cash outflow of
¥80.9 billion for investments and loans, which
consisted of:



| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | ¥124.8 billion cash inflow from
    proceeds from maturities of debt securities held by financing
    subsidiaries;
|
| |  | proceeds of ¥49.8 billion from the sale
    of investments in Caemi;                                               

94



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| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | payment of ¥97.1 billion for investment
    in Valepar S.A.; and                                               
|
| |  | payment of ¥56.7 billion for the
    purchase of preferred stock of Sakhalin Energy Investment
    Company Ltd.

As for the additions and sales of long-lived
assets, cash inflow and outflow mainly consisted of:



| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | purchases of mining facilities in the Metal
    Products & Minerals Segment;     
|
| |  | purchases of aircraft, rolling stock and ocean
    transport vessels for leasing;
|
| |  | proceeds from sales of leased aircraft and ocean
    transport vessels; and      
|
| |  | proceeds from sales of Mitsuis residences
    and dormitories.                  

Net cash used in investing activities increased
by ¥129.9 billion compared to the year ended
March 31, 2003, due mainly to investments in Valepar S.A.
in the Metal Products & Minerals Segment and Sakhalin
Energy Investment Company Ltd. in the Energy Segment.



| |                                     
| | ------------------------------------
| | Cash Flows from Financing Activities

During the year ended March 31, 2004, Mitsui
and its financial subsidiaries repaid short-term and long-term
debt, while Mitsui and its foreign trading subsidiaries raised
¥177.4 billion through the issuance of bonds. As a
result, net cash provided by short-term and long-term financing
activities totaled ¥0.7 billion. After the payments of
cash dividends, net cash used in financing activities totaled
¥12.2 billion.

Cash flows used in financing activities increased
by ¥30.1 billion from the cash flows of
¥17.8 billion provided by financing activities for the
year ended March 31, 2003, because:



| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | there was an increase in borrowings at the
    above-mentioned consolidated financing subsidiary in Japan to
    finance early repayments of Mitsuis trade payables during
    the year ended March 31, 2003; and
|
| |  | Mitsui and the domestic financial subsidiary
    increased the repayments of short-term debt.                                                                                                                     



| |                                             
| | --------------------------------------------
| | Cash and cash equivalents at end of
    year

Cash and cash equivalents declined by
¥56.5 billion after the effect of exchange rate
changes on cash and cash equivalents. As a result, cash and cash
equivalents as of March 31, 2004 were
¥638.3 billion.

Cash flows during the year ended
March 31, 2003



| |                                     
| | ------------------------------------
| | Cash Flows from Operating Activities

Net cash provided by operating activities during
the year ended March 31, 2003 was ¥52.1 billion,
compared to ¥133.7 billion for the year ended
March 31, 2002. One reason for the decrease in net cash
inflows from operating activities was the repayment of trade
payables in advance during the year ended March 31, 2003.
In order to respond to the cash needs of our various suppliers,
our domestic financing subsidiary purchased trade receivables
(Mitsuis trade payables) held by suppliers with
appropriate discounts. This caused early payments of our trade
payables, which, in turn, reduced net cash inflows from
operating activities. An increase in trade receivables and
inventories also contributed to the decrease in net cash inflows
from operating activities compared with the previous year.



| |                                     
| | ------------------------------------
| | Cash Flows from Investing Activities

Net cash used in investing activities during the
year ended March 31, 2003 was ¥4.2 billion, which
included expenditures for investments in the resource business
such as Sakhalin Energy Investment Company Ltd. and Mitsui
E&P Middle East B.V. and the information business such as
NextCom K.K., offset by proceeds from sales of leased aircraft
and ocean vessels, compared to ¥82.6 billion for the
year ended March 31, 2002. The primary factor related to
the ¥78.4 billion improvement from the year ended
March 31, 2002 was a decrease in time deposits.



| |                                     
| | ------------------------------------
| | Cash Flows from Financing Activities

Net cash provided by financing activities during
the year ended March 31, 2003 was ¥17.8 billion,
compared to ¥126.1 billion in cash used for the year
ended March 31, 2002. During the year ended March 31,
2003, borrowings by Mitsui decreased, while the borrowings of
our domestic financing subsidiary increased. The
¥143.9 billion change from the year ended
March 31, 2002 was due primarily to relatively

95



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##### 



large cash out flows for the year ended
March 31, 2002 related to repayment of commercial paper and
certain borrowings.




| |                                             
| | --------------------------------------------
| | Cash and cash equivalents at end of
    year

The effect of exchange rate changes on cash and
cash equivalents decreased cash and cash equivalents by
¥4.5 billion for the year ended March 31, 2003.
As a result, cash and cash equivalents at the end of the year
ended March 31, 2003 were ¥694.8 billion.






|   |                                                         
|-- | --------------------------------------------------------
|C. | Research and Development, Patents and
    Licenses, etc.

For the year ended March 31, 2004, research
and development (R&D) expenses were
¥6,019 million. Principal R&D activities
undertaken were related to nanotechnology and biotechnology in
the Chemical Segment, electrolysis technology in the Machinery,
Electronics & Information Segment and food-related
initiatives in the Consumer Products & Services
Segment. R&D expenses incurred in these three segments were
¥4,470 million, ¥1,058 million and
¥291 million, respectively.

In the nanotechnology field, carbon nanotubes are
likely to be used in a wide range of advanced applications in
the future, and we have conducted R&D into mass-production
methods and applications of carbon nanotubes. We have been
producing carbon nanotubes at a demonstration plant constructed
in October 2002 and supplying products to a number of
researchers at universities and private enterprises for the
purpose of application development. Our second major project in
the nanotechnology field is nano-porous membrane R&D, which
may help to counteract global warming. Recently, biomass ethanol
has attracted considerable attention as a renewable energy
source and nano-porous membrane technology drastically improves
the energy efficiency of biomass ethanol production. We
commenced demonstrations of our technology in April 2003, in
Brazil, one of large ethanol producing countries, and following
their successful completion we have been conducting further
demonstrations in Japan and Brazil.

Biomass ethanol is being considered as a fuel
additive for automobiles and in the electricity industry in
countries around the world and we intend to vigorously pursue
this environmentally friendly application of nanotechnology.
Overall we plan to invest approximately ¥4 billion in
nanotechnology up to March 2006, primarily in carbon nanotubes
and nano-porous membranes.

In the electrolysis technology field, Chlorine
Engineers Corp., Ltd., our subsidiary and a supplier of
electrolysis technology and products to major chlor-alkali
producers throughout the world, continues to upgrade its
technology and products. Through its research of the structure
and the optimization of the raw materials used in electrolyzers
manufactured by it, Chlorine Engineers Corp., Ltd. enables
users to operate under energy-saving conditions and to extend
the lifetime of such electrolyzers, thereby reducing maintenance
costs. This contributes not only to competitiveness in cost and
technology, but also to the preservation of the global
environment.

In food-related R&D, our subsidiary Mitsui
Norin Co., Ltd. has been developing food ingredients such as tea
catechins, establishing analysis methods, identifying
microorganisms using genetic applications, and conducting
large-scale clinical trials for the potential development of
pharmaceuticals. Joint research with domestic and overseas
universities and other research institutions is continuing.

For the year ended March 31, 2003, R&D
expenses were ¥3,415 million. R&D activities were
mainly related to nanotechnology and biotechnology in the
Chemical Segment (¥1,968 million) and information
technology in the Machinery, Electronics & Information
Segment (¥1,196 million).

In the nanotechnology area, we performed research
and development activities for production techniques as
mentioned above.

In information technology areas, BSI Co.,
Ltd., our subsidiary, developed packaging systems and carried
out experiments for technologies for the cell phone business,
making use of know-how fostered in communications, broadcast and
other media, and systems integration businesses. Furthermore, in
the web application development area, BSI developed web content
management systems.

For the year ended March 31, 2002, R&D
expenses were ¥2,949 million, which mainly related to
biotechnology and nanotechnology in the Chemical Segment
(¥1,521 million) and information technology in the
Machinery, Electronics & Information Segment
(¥1,149 million).

96



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##### 








|   |                   
|-- | ------------------
|D. | Trend Information.

This section contains forward-looking statements
about our possible future performance and should be read in
light of the cautionary statement on the subject.



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Investments in Core and Key Areas during
    Medium-Term Strategic and Financial Plan Through the Fiscal Year
    Ending March 2006

On May 19, 2004, we announced a new
Medium-Term Strategic and Financial Plan that will run through
the fiscal year ending March 2006. Under the Medium-Term
Strategic and Financial Plan, we intend to make investments
exceeding ¥400 billion in the two-year period up to
March 2006.

We intend to allocate ¥300 billion of
this amount to strengthen core areas: expansion of existing
production capacity of iron ore and coal operations in
Australia; acquisitions of new interests in non-ferrous metals;
upstream investments at the Sakhalin II Project in Russia
and Enfield offshore oil field in Western Australia; and
investments in power generation and water desalination projects
in the plant project businesses.

The remaining ¥100 billion and the
funds acquired from selling and restructuring of existing
investments will be used to develop and strengthen other key
areas, including various businesses in the Consumer
Products & Services Segment and motor vehicle
businesses in the Machinery, Electronics & Information
Segment.

We expect that most of the above-mentioned
investments will contribute to our results of operations beyond
the two-year period ending March 2006. As for capital resources
of these investments, see Item 5. B. Liquidity and
Capital Resources.



| |                                                               
| | --------------------------------------------------------------
| | Rigorous Scrutiny of Subsidiaries and
    Associated Companies

For the year ended March 31, 2003,
unprofitable subsidiaries and associated companies posted an
aggregate loss of ¥71.1 billion that includes losses
such as losses on withdrawals from investments in North American
petrochemical operations and impairment of the aircraft leasing
businesses.

To rectify this situation, during the year ended
March 31, 2004 we conducted a comprehensive review of the
viability of our subsidiaries and associated companies. This
process covered 702 companies, in which we rigorously
screened against nine metrics including profit after cost of
capital. As a result, we decided to exit from
190 companies. Definitive actions were taken at
approximately 100 of these companies by the end of the year
ended March 31, 2004. While we still posted a total loss of
¥53.4 billion from unprofitable companies, partially
due to the additional exit or disposal costs to expedite
restructuring, aggregate net income from our subsidiaries and
associated companies rose to ¥62.3 billion for the
year ended March 31, 2004, substantially higher than the
¥22.9 billion net income for the year ended
March 31, 2003.

Under the new Medium-Term Strategic and Financial
Plan, we are committed to continuing our rigorous review of the
subsidiaries and associated companies. Through this process, we
expect to reduce the total losses from our unprofitable
subsidiaries and associated companies to ¥20.0 billion
for the years ending March 2005 and 2006 compared with the
¥53.4 billion aggregate loss for the year ended
March 31, 2004.






|   |                                
|-- | -------------------------------
|E. | Off-balance Sheet Arrangements.

We use off-balance sheet arrangements in the
ordinary course of business to further our trading, fund-raising
and other activities. Categories of off-balance arrangements are
as follows:

Guarantees

The following tables summarize our guarantees as
of March 31, 2004 and 2003.

The maximum potential amount of future payments
represents the amount without consideration of possible
recoveries under recourse provision or from collateral held or
pledged that we could be obliged to pay if there were defaults
by guaranteed parities or there were changes in an underlying
which would cause triggering events under market value
guarantees and indemnification contracts. Such amounts bear no
relationship to the anticipated losses on these guarantees and
indemnifications, and they greatly exceed anticipated losses.
Estimated proceeds from collateral and recourse represent the
anticipated values of assets we could liquidate or receive from
other parties to offset our payments under guarantees. The
carrying

97



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##### 



amounts of liabilities recorded on the
Consolidated Balance Sheets reflect our best estimate of future
payments we may incur as part of fulfilling our guarantee
obligations.


|                        |  |                    |     |             |  |             |    |  |  |   |   | 
|----------------------- |  | ------------------ | --- | ----------- |  | ----------- | -- |  |  | - | - | 
|                        |  |                   
|                        |  | Billions of Yen   
|                        |  |                   
|                        |  | Maximum            |     | Recourse    |  | Carrying   
|                        |  | potential amount   |     | provisions/ |  | amount of  
|As of March 31, 2004:   |  | of future payments |     | collateral  |  | liabilities
|                        |  |                    |     |             |  |            
|Financial Guarantees    |  | ¥                  | 258 |             |  | ¥           | 41 |  |  | ¥ | 6 | 
|Performance Guarantees  |  |                    | 37  |             |  |             | 6  |  |  |   | 0 | 
|Market Value Guarantees |  |                    | 62  |             |  |             | 36 |  |  |   |  | 

|                        |  |                    |     |             |  |             |    |  |  |   |   | 
|----------------------- |  | ------------------ | --- | ----------- |  | ----------- | -- |  |  | - | - | 
|                        |  |                   
|                        |  | Billions of Yen   
|                        |  |                   
|                        |  | Maximum            |     | Recourse    |  | Carrying   
|                        |  | potential amount   |     | provisions/ |  | amount of  
|As of March 31, 2003:   |  | of future payments |     | collateral  |  | liabilities
|                        |  |                    |     |             |  |            
|Financial Guarantees    |  | ¥                  | 284 |             |  | ¥           | 47 |  |  | ¥ | 4 | 
|Performance Guarantees  |  |                    | 26  |             |  |             |   |  |  |   |  | 
|Market Value Guarantees |  |                    | 63  |             |  |             | 38 |  |  |   |  | 

In the furtherance of our trading activities, it
is a customary practice for us to guarantee, severally or
jointly with others, indebtedness of certain of our customers
and suppliers and of certain associated companies as well as to
guarantee the performance of contracts by such entities.

As lessees in operating lease contracts, certain
subsidiaries have issued residual value guarantees of leased
aircraft and ocean transport vessels, and on the date of
expiration of operating lease contracts, such subsidiaries will
either purchase the leased assets at a fixed price or will be
responsible for making up any shortfall between the actual sales
price and the guaranteed value. Upon our adoption of FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (revised December 2003) an
Interpretation of ARB No. 51, on December 31,
2003, we consolidated ¥20 billion of assets and
liabilities related to certain ocean transport vessel entities.
This information is provided in Note 22, VARIABLE
INTEREST ENTITIES.

Sales of Trade Receivables

Mitsui & Co. (U.S.A.), Inc. and
Mitsui & Co. (Canada) Ltd. use off-balance sheet
arrangements in which certain trade receivables are sold to
third parties. At March 31, 2004 and 2003, the outstanding
amounts of these off-balance sheet arrangements were immaterial.

Variable Interest Entities

We are involved with and have significant
variable interests in a number of variable interest entities
that are not consolidated because we are not the primary
beneficiary, but in which we have significant variable
interests. These variable interest entities mainly engage in
leasing and financing activities. Further information is
provided in Note 22, VARIABLE INTEREST ENTITIES.






|   |                                                   
|-- | --------------------------------------------------
|F. | Tabular Disclosure of Contractual
    Obligations.

The following table provides our contractual
obligations as of March 31, 2004 and payment due by period
of these contractual obligations:

|                        |       |                 |       |                       |  |            |     |            |  |                  |     |       |  |   |     |     |  |   |       |       | 
|----------------------- | ----- | --------------- | ----- | --------------------- |  | ---------- | --- | ---------- |  | ---------------- | --- | ----- |  | - | --- | --- |  | - | ----- | ----- | 
|                        |       |                
|                        |       | Billions of Yen
|                        |       |                
|                        |       |                 |       |                      
|                        |       |                 |       | Payment Due by Period
|                        |       | Balance as of   |       |                      
|Contractual Obligations |       | March 31, 2004  |       | March 2005            |  | March 2007 |     | March 2009 |  | After March 2009
|                        |       |                 |       |                       |  |            |     |            |  |                 
|Long-Term Debt          |       | ¥               | 2,859 |                       |  | ¥          | 348 |            |  | ¥                | 691 |       |  | ¥ | 496 |     |  | ¥ | 1,324 |      
|Operating Leases        |       |                 | 112   |                       |  |            | 22  |            |  |                  | 33  |       |  |   | 21  |     |  |   | 36    |      
|Purchase Obligations    |       |                 | 1,537 |                       |  |            | 512 |            |  |                  | 532 |       |  |   | 218 |     |  |   | 275   |      
|                        |       |                 |       |                       |  |            |     |            |  |                  |     |       |  |   |     |     |  |   |       |      
|                        | Total |                 | ¥     | 4,508                 |  |            | ¥   | 882        |  |                  | ¥   | 1,256 |  |   | ¥   | 735 |  |   | ¥     | 1,635 | 
|                        |       |                 |       |                       |  |            |     |            |  |                  |     |       |  |   |     |     |  |   |       |      

The amounts of Long-Term Debt include
bank borrowings, bonds and long-term trade payables.
Operating Leases represents the schedule of payments
for future minimum rentals. Minimum rental payments have not
been reduced by minimum sublease rentals of
¥64 billion due in the future under noncancelable
subleases. Purchase Obligations represents the
schedule of payments for long-term purchase obligations, net of
advance payments of ¥38 billion made to suppliers as
of March 31, 2004. The purchased items are principally
ocean transport vessels, chemical materials, oil products,
metals and machinery and

98



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##### 



equipment, either at fixed prices or at basic
purchase prices adjustable to the market. In general, our
customers, primarily large Japanese industrial companies, are
also parties to the contracts or by separate agreements and are
committed to purchase the items from us.


In addition to the above, we plan to contribute
¥34.6 billion to our defined benefit pension plans for
the year ending March 31, 2005.

For additional information regarding long-term
debt, operating leases and purchase obligations, see
Note 13, SHORT-TERM AND LONG-TERM DEBT,
Note 8, LEASES, and Note 21,
COMMITMENTS AND CONTINGENT LIABILITIES, respectively.




Item 6.     Directors,
Senior Management and Employees.



A.     Directors
and Senior Management.

We are managed by a Board of Directors and
Executive Officers. As of June 30, 2004, we have eleven
Directors and forty Executive Officers including eight of which
are also Directors. In accordance with our Articles of
Incorporation and Rules of the Board of Directors, each Director
was elected for a term of one year ending at the close of the
ordinary general meeting of shareholders relating to the last
closing of accounts. Each Executive Officer has been appointed
by the Board of Directors.

The Board of Directors is our decision-making
body. The Board of Directors determines our basic guidelines and
policies by establishing our corporate strategy, reviewing our
business plans, and supervising and monitoring the activities of
our Executive Officers.

The Executive Officers are responsible for the
execution of our corporate activities. They must follow and
enforce the general guidelines and policies established by the
Board of Directors and our Articles of Incorporation.

Our Executive Officers consist of one President,
three Executive Vice Presidents, four Senior Executive Managing
Officers, fourteen Executive Managing Officers and eighteen
Managing Officers.

The execution of the Directors functions is
audited by Corporate Auditors. Each Corporate Auditor is elected
by Mitsuis shareholders. As of June 30, 2004, we have
five Corporate Auditors. In performing their auditing
activities, they act independently of each other while they
constitute and act through the Board of Corporate Auditors as
the applicable Japanese laws and regulations require.



| |                                                         
| | --------------------------------------------------------
| | Directors, Corporate Auditors and Executive
    Officers

Our Directors, Corporate Auditors and Executive
Officers as of the end of June 2004 were:

Directors

|                  |  |                                                                                                                                                      
|----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Name              |  | Position                                                                                                                                             
|                  |  |                                                                                                                                                      
|Nobuo Ohashi      |  | Chairman and Director                                                                                                                                
|Shoei Utsuda      |  | Executive Director                                                                                                                                   
|Tasuku Kondo      |  | Executive Director                                                                                                                                   
|Katsuto Momii     |  | Executive Director                                                                                                                                   
|Tetsuya Matsuoka  |  | Executive Director                                                                                                                                   
|Masataka Suzuki   |  | Executive Director                                                                                                                                   
|Gempachiro Aihara |  | Executive Director                                                                                                                                   
|Yushi Nagata      |  | Executive Director                                                                                                                                   
|Yasunori Yokote   |  | Executive Director                                                                                                                                   
|Akishige Okada    |  | Director(1), Chairman of the Board of
    Sumitomo Mitsui Banking Corporation; Director, Chairman of the
    Board of Sumitomo Mitsui Financial Group
|Akira Chihaya     |  | Director(1), Representative Director
    and Chairman of the Board of Directors of Nippon Steel
    Corporation                                      



|    |                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Akishige Okada and Mr. Akira
    Chihaya are external directors as defined in the Commercial Code
    of Japan. See Item 6.C. Board Practices.

99



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##### 



Corporate Auditors

|                  |  |                                                                            
|----------------- |  | ---------------------------------------------------------------------------
|Name              |  | Position                                                                   
|                  |  |                                                                            
|Makoto Ejima      |  | Corporate Auditor                                                          
|Ko Matsukata      |  | Corporate Auditor(1)                                                       
|Yasutaka Okamura  |  | Corporate Auditor(1), Corporate
    Auditor of Toyota Motor Corporation    
|Hiroshi Matsuura  |  | Corporate Auditor                                                          
|Hideharu Kadowaki |  | Corporate Auditor(1), Chairman of The
    Japan Research Institute, Limited



|    |                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Ko Matsukata, Mr. Yasutaka Okamura
    and Mr. Hideharu Kadowaki are external Corporate Auditors
    as defined in the Law for Special Exceptions to the Commercial
    Code concerning Audit, etc. of joint stock corporations. See
    Item 6.C. Board Practices.

Executive Officers

|                  |  |                                                                                                                             
|----------------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Name              |  | Position                                                                                                                    
|                  |  |                                                                                                                             
|Shoei Utsuda      |  | President and Chief Executive Officer                                                                                       
|Tasuku Kondo      |  | Executive Vice President; Chief Financial Officer                                                                           
|Katsuto Momii     |  | Executive Vice President                                                                                                    
|Yasuo Hayashi     |  | Executive Vice President; Managing Director,
    Mitsui & Co. Europe PLC                                                    
|Tetsuya Matsuoka  |  | Senior Executive Managing Officer                                                                                           
|Masataka Suzuki   |  | Senior Executive Managing Officer                                                                                           
|Gempachiro Aihara |  | Senior Executive Managing Officer                                                                                           
|Yushi Nagata      |  | Senior Executive Managing Officer; Chief
    Operating Officer, Business Process Re-engineering Project
    Headquarters    
|Jun Moriyama      |  | Executive Managing Officer; General Manager,
    Nagoya Office                                                              
|Hiroshi Tada      |  | Executive Managing Officer; Chairman for the
    Americas                                                                   
|Motokazu Yoshida  |  | Executive Managing Officer; Chief Operating
    Officer, Machinery Business Unit                                            
|Yoshiyuki Kagawa  |  | Executive Managing Officer; Chief Operating
    Officer, Energy Business Unit                                               
|Yasunori Yokote   |  | Executive Managing Officer; Chief Compliance
    Officer                                                                    
|Yoshiyuki Izawa   |  | Executive Managing Officer; General Manager,
    Osaka Office                                                               
|Osamu Mori        |  | Executive Managing Officer; Chief Operating
    Officer, Financial Markets Business Unit                                    
|Kazuya Imai       |  | Executive Managing Officer; General Manager,
    Internal Auditing Division                                                 
|Toshihiro Soejima |  | Executive Managing Officer; General
    Representative of Mitsui & Co., Ltd. in China                                       
|Satoru Miura      |  | Executive Managing Officer; Chief Operating
    Officer, Iron & Steel Products Business Unit                                
|Masayoshi Sato    |  | Executive Managing Officer; Chief Operating
    Officer, Foods & Retail Business Unit                                       
|Kenji Dewa        |  | Executive Managing Officer; Chief Operating
    Officer, Organic Chemicals Business Unit                                    
|Michio Matsuda    |  | Executive Managing Officer; Chief Operating
    Officer, Power, Transportation & Plant Projects
    Business Unit           
|Ken Abe           |  | Executive Managing Officer; Chief Operating
    Officer, Iron & Steel Raw Materials and Non-Ferrous Metals
    Business Unit
|Takeshi Ohyama    |  | Managing Officer; General Representative of
    Mitsui & Co., Ltd. in Indonesia                                             
|Takao Sunami      |  | Managing Officer; General Manager, Fukuoka Office                                                                           
|Hirokazu Mizukami |  | Managing Officer; Deputy Chief Operating Officer,
    Foods & Retail Business Unit                                          
|Junichi Matsumoto |  | Managing Officer; Chief Operating Officer,
    Transportation Logistics Business Unit                                       
|Kazuo Tasaka      |  | Managing Officer; Deputy Chief Operating Officer,
    Iron & Steel Raw Materials and Non-Ferrous Metals
    Business Unit   
|Shunichi Miyazaki |  | Managing Officer; General Manager, Consumer
    Products & Services Administrative Division                                 

100



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##### 



|                   |  |                                                                                                            
|------------------ |  | -----------------------------------------------------------------------------------------------------------
|Name               |  | Position                                                                                                   
|                   |  |                                                                                                            
|Shinjiro Ogawa     |  | Managing Officer; Chief Operating Officer,
    Information, Electronics and Telecommunication Business Unit
|Toshimasa Furukawa |  | Managing Officer; General Manager, Machinery,
    Electronics & Information Administrative Division        
|Akio Ikeda         |  | Managing Officer; Chairman & Managing
    Director, Mitsui & Co. (Australia) Ltd.                          
|Hiroshi Ito        |  | Managing Officer; Chief Operating Officer,
    Consumer Service Business Unit                              
|Jitsuro Terashima  |  | Managing Officer; President, Mitsui Global
    Strategic Studies Institute                                 
|Motonori Murakami  |  | Managing Officer; General Manager, General
    Accounting & Risk Management Division                       
|Kyoichi Endo       |  | Managing Officer; Managing Director,
    Mitsui & Co. UK PLC                                               
|Toshio Awata       |  | Managing Officer; Chief Information Officer,
    General Manager, Business Process Re-Engineering Division 
|Koji Nakamura      |  | Managing Officer; Chief Operating Officer,
    Plastics & Inorganic Chemicals Business Unit                
|Toru Kitamura      |  | Managing Officer; Chief Operating Officer,
    Lifestyle Business Unit                                     
|Kenichi Yamamoto   |  | Managing Officer; General Manager, Personnel
    Division                                                  
|Masaaki Murakami   |  | Managing Officer; General Manager, Chemical
    Administrative Division                                    

The date of birth, the current position and the
prior positions of our Directors, Corporate Auditors, and
Executive Officers is provided below.

|                 |  |                                                                   |  |                                                                                                                                   
|---------------- |  | ----------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|                
|Directors       
|                
|                
|Name             |  | Nobuo Ohashi                                                      |  |                                                                                                                                   
|Date of Birth    |  | September 13, 1938                                                |  |                                                                                                                                   
|Current Position |  | Chairman and Director (since April 1, 2004)                      
|Prior Positions  |  |  1994                                                            |  | A member of Board of Directors (Director, General
    Manager of Seoul Office)                                                    
|                 |  |  1996                                                            |  | Director, Chief Operating Officer of Foods Unit                                                                                   
|                 |  |  1997                                                            |  | Executive Managing Director, Chief Operating
    Officer of Foods Unit                                                            
|                 |  |  1998                                                            |  | Executive Managing Director, General Manager of
    Corporate Planning Division                                                   
|                 |  |  1999                                                            |  | Senior Executive Managing Director, General
    Manager of Corporate Planning Division                                            
|                 |  |  2000                                                            |  | Executive Vice President                                                                                                          
|                 |  |  2002                                                            |  | Executive Vice President, President of Consumer
    Products & Services Group                                                     
|                
|Name             |  | Shoei Utsuda                                                      |  |                                                                                                                                   
|Date of Birth    |  | February 12, 1943                                                 |  |                                                                                                                                   
|Current Position |  | President and Chief Executive Officer (since
    October 1, 2002)
|Prior Positions  |  |  1997                                                            |  | A member of Board of Directors (Director, General
    Manager of Machinery, Electronics & Information
    Administrative Division)
|                 |  |  1998                                                            |  | Director, Chief Operating Officer of Information
    Business Unit                                                                
|                 |  |  2000                                                            |  | Executive Managing Director, General Manager of
    Corporate Planning Division                                                   
|                 |  |  2002                                                            |  | Senior Executive Managing Officer, Chief
    Strategic Officer, Responsible for Administration Division                           

101



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##### 



|                 |  |                                                                                |  |                                                                                                                                                                                         
|---------------- |  | ------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                
|Name             |  | Tasuku Kondo                                                                   |  |                                                                                                                                                                                         
|Date of Birth    |  | August 12, 1942                                                                |  |                                                                                                                                                                                         
|Current Position |  | Executive Vice President and Chief Financial
    Officer (since April 1, 2004)
|Prior Positions  |  |  1996                                                                         |  | A member of Board of Directors (Director, General
    Manager of Finance Division)                                                                                                      
|                 |  |  1998                                                                         |  | Executive Managing Director                                                                                                                                                             
|                 |  |  2002                                                                         |  | Senior Executive Managing Officer and Chief
    Financial Officer, Responsible for General Accounting Division,
    Finance Division and Corporate Risk Management Division             
|                
|Name             |  | Katsuto Momii                                                                  |  |                                                                                                                                                                                         
|Date of Birth    |  | March 4, 1943                                                                  |  |                                                                                                                                                                                         
|Current Position |  | Executive Vice President (since April 1,
    2004)                            
|Prior Positions  |  |  1997                                                                         |  | A member of Board of Directors (Director,
    Operating Officer of Iron & Steel Raw Materials Unit)                                                                                     
|                 |  |  1998                                                                         |  | Director, Chief Operating Officer of
    Iron & Steel Raw Materials Unit                                                                                                                
|                 |  |  2000                                                                         |  | Executive Managing Director, Chairman for the
    Americas, and President and Chief Executive Officer of
    Mitsui & Co. (U.S.A.), Inc.                                                
|                 |  |  2002                                                                         |  | Senior Executive Managing Officer, Chairman for
    the Americas, and President and Chief Executive Officer of
    Mitsui & Co. (U.S.A.), Inc.                                          
|                 |  |  2003                                                                         |  | Senior Executive Managing Officer                                                                                                                                                       
|                
|Name             |  | Tetsuya Matsuoka                                                               |  |                                                                                                                                                                                         
|Date of Birth    |  | January 5, 1945                                                                |  |                                                                                                                                                                                         
|Current Position |  | Senior Executive Managing Officer (since
    April 1, 2004)                   
|Prior Positions  |  |  1998                                                                         |  | A member of Board of Directors (Director, General
    Manager of Metals Administrative Division)                                                                                        
|                 |  |  1999                                                                         |  | Director, Chief Operating Officer of Non-Ferrous
    Metals Unit                                                                                                                        
|                 |  |  2001                                                                         |  | Executive Managing Director, Managing Director of
    Mitsui & Co. Europe PLC, Managing Director of
    Mitsui & Co. UK PLC and Chairman of Mitsui &
    Co. International (Europe) B.V.
|                 |  |  2002                                                                         |  | Senior Executive Managing Officer &
    Chief Strategic Officer, Responsible for Administration Division                                                                                
|                 |  |  2003                                                                         |  | Senior Executive Managing Officer and Chief
    Operating Officer of Business Process Re-Engineering Project
    Headquarters                                                           
|                
|Name             |  | Masataka Suzuki                                                                |  |                                                                                                                                                                                         
|Date of Birth    |  | April 2, 1944                                                                  |  |                                                                                                                                                                                         
|Current Position |  | Senior Executive Managing Officer (since
    April 1, 2003)                   
|Prior Positions  |  |  1999                                                                         |  | A member of Board of Directors (Director, Chief
    Operating Officer of Textile & Fashion Unit)                                                                                        
|                 |  |  2002/6                                                                       |  | Executive Managing Director, Chief Operating
    Officer of Textile & Fashion Unit, Consumer
    Products & Services Group                                                              
|                 |  |  2002/10                                                                      |  | Executive Managing Director, President of
    Consumer Products & Services Group                                                                                                        
|                
|Name             |  | Gempachiro Aihara                                                              |  |                                                                                                                                                                                         
|Date of Birth    |  | October 3, 1943                                                                |  |                                                                                                                                                                                         
|Current Position |  | Senior Executive Managing Officer (since
    April 1, 2004)                   
|Prior Positions  |  |  2000                                                                         |  | A member of Board of Directors (Director, Chief
    Operating Officer of Performance Chemicals Unit)                                                                                    
|                 |  |  2002/4                                                                       |  | Executive Managing Director, Executive Managing
    Officer, General Representative of Mitsui & Co., Ltd.
    in China                                                                  
|                 |  |  2002/6                                                                       |  | Executive Managing Officer, General
    Representative of Mitsui & Co., Ltd. in China                                                                                                   

102



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##### 



|                   |  |                                                                                                                                                  |  |                                                                                                                                                                                        
|------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  
|Name               |  | Yushi Nagata                                                                                                                                     |  |                                                                                                                                                                                        
|Date of Birth      |  | August 30, 1946                                                                                                                                  |  |                                                                                                                                                                                        
|Current Position   |  | Senior Executive Managing Officer, Chief
    Operating Officer of Business Process Re-Engineering Project
    Headquarters (since April 1, 2004)
|Prior Positions    |  |  2000                                                                                                                                           |  | A member of Board of Directors (Director, Chief
    Operating Officer of Plant & Project Business Unit)                                                                                
|                   |  |  2001                                                                                                                                           |  | Director, Operating Officer of Electric
    Machinery, Plant & Project Business Unit                                                                                                   
|                   |  |  2002/4                                                                                                                                         |  | Executive Managing Director, Executive Managing
    Officer, Operating Officer of Electric Machinery,
    Plant & Project Business Unit, Machinery,
    Electronics & Information Group
|                   |  |  2002/6                                                                                                                                         |  | Executive Managing Officer, Operating Officer of
    Electric Machinery, Plant & Project Business Unit,
    Machinery, Electronics & Information Group                                 
|                   |  |  2002/10                                                                                                                                        |  | Executive Managing Officer, Chief Operating
    Officer of Electric Machinery, Plant & Project Business
    Unit                                                                       
|                  
|Name               |  | Yasunori Yokote                                                                                                                                  |  |                                                                                                                                                                                        
|Date of Birth      |  | June 23, 1946                                                                                                                                    |  |                                                                                                                                                                                        
|Current Position   |  | Executive Managing Officer, Chief Compliance
    Officer (since April 1, 2004)                                                                  
|Prior Positions    |  |  2000                                                                                                                                           |  | A member of Board of Directors (Director, General
    Manager of Personnel Division)                                                                                                   
|                   |  |  2002/4                                                                                                                                         |  | Director, Senior Managing Officer, General
    Representative of Mitsui & Co., Ltd. in Indonesia                                                                                       
|                   |  |  2002/6                                                                                                                                         |  | Senior Managing Officer, General Representative
    of Mitsui & Co., Ltd. in Indonesia                                                                                                 
|                  
|Name               |  | Akishige Okada                                                                                                                                   |  |                                                                                                                                                                                        
|Date of Birth      |  | April 9, 1938                                                                                                                                    |  |                                                                                                                                                                                        
|Current Position   |  | Director (since June 27, 2003)                                                                                                                  
|Prior Positions    |  |  2001                                                                                                                                           |  | Director, Chairman of Sumitomo Mitsui Banking
    Corporation (remaining as the same position on June 30,
    2003)                                                                    
|                   |  |  2002                                                                                                                                           |  | Director, Chairman of Sumitomo Mitsui Financial
    Group (remaining as the same position on June 30, 2003)                                                                            
|                  
|Name               |  | Akira Chihaya                                                                                                                                    |  |                                                                                                                                                                                        
|Date of Birth      |  | March 6, 1935                                                                                                                                    |  |                                                                                                                                                                                        
|Current Position   |  | Director (since June 24, 2004)                                                                                                                  
|Prior Positions    |  |  2003                                                                                                                                           |  | Director, Representative Director and Chairman of
    the Board of Directors of Nippon Steel Corporation (remaining as
    the same position on June 30, 2004)                         
|                  
|Corporate Auditors
|                  
|                  
|Name               |  | Makoto Ejima                                                                                                                                     |  |                                                                                                                                                                                        
|Date of Birth      |  | April 23, 1937                                                                                                                                   |  |                                                                                                                                                                                        
|Current Position   |  | Corporate Auditor (since June 28, 2002)                                                                                                         
|Prior Positions    |  |  1992                                                                                                                                           |  | Director, Chief Operating Officer of Non-Ferrous
    Metals Unit                                                                                                                       
|                   |  |  1995                                                                                                                                           |  | Executive Managing Director, General Manager of
    Osaka Office                                                                                                                       
|                   |  |  1997                                                                                                                                           |  | Senior Executive Managing Director, General
    Manager of Osaka Office                                                                                                                
|                   |  |  2000                                                                                                                                           |  | Executive Vice President                                                                                                                                                               
|                  
|Name               |  | Ko Matsukata                                                                                                                                     |  |                                                                                                                                                                                        
|Date of Birth      |  | March 27, 1933                                                                                                                                   |  |                                                                                                                                                                                        
|Current Position   |  | Corporate Auditor (since June 27, 1996)                                                                                                         
|Prior Positions    |  |  1990                                                                                                                                           |  | President of Mitsui Marine and Fire Insurance
    Co., Ltd.                                                                                                                            
|                   |  |  1996                                                                                                                                           |  | Vice Chairman of Mitsui Marine and Fire Insurance
    Co., Ltd.                                                                                                                        
|                   |  |  1997                                                                                                                                           |  | Senior Advisor to Board of Mitsui Marine and Fire
    Insurance Co., Ltd. (remaining as the same position on
    June 30, 2004)                                                        

103



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##### 



|                                                                              |  |                                                                                                                                                               |  |                                                                                                                                                             
|----------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                             
|Name                                                                          |  | Yasutaka Okamura                                                                                                                                              |  |                                                                                                                                                             
|Date of Birth                                                                 |  | June 13, 1929                                                                                                                                                 |  |                                                                                                                                                             
|Current Position                                                              |  | Corporate Auditor (since June 27, 2003)                                                                                                                      
|Prior Positions                                                               |  |  1992                                                                                                                                                        |  | Prosecutor, General                                                                                                                                         
|                                                                              |  |  1994                                                                                                                                                        |  | Attorney at Law (remaining as the same position
    on June 30, 2004)                                                                                       
|                                                                              |  |  1997                                                                                                                                                        |  | Corporate Auditor of Toyota Motor Corporation
    (remaining as the same position on June 30, 2004)                                                         
|                                                                             
|Name                                                                          |  | Hiroshi Matsuura                                                                                                                                              |  |                                                                                                                                                             
|Date of Birth                                                                 |  | May 24, 1946                                                                                                                                                  |  |                                                                                                                                                             
|Current Position                                                              |  | Corporate Auditor (since June 27, 2003)                                                                                                                      
|Prior Positions                                                               |  |  1996                                                                                                                                                        |  | General Manager of Credit Division                                                                                                                          
|                                                                              |  |  2002                                                                                                                                                        |  | General Manager of Corporate Risk Management
    Division                                                                                                   
|                                                                             
|Name                                                                          |  | Hideharu Kadowaki                                                                                                                                             |  |                                                                                                                                                             
|Date of Birth                                                                 |  | June 20, 1944                                                                                                                                                 |  |                                                                                                                                                             
|Current Position                                                              |  | Corporate Auditor (since June 24, 2004)                                                                                                                      
|Prior Positions                                                               |  |  2001                                                                                                                                                        |  | Executive Managing Director of Sumitomo Mitsui
    Banking Corporation                                                                                      
|                                                                              |  |  2003                                                                                                                                                        |  | Director, Executive Vice President of Sumitomo
    Mitsui Financial Group                                                                                   
|                                                                              |  |  2004                                                                                                                                                        |  | Chairman of the Japan Research Institute, Limited
    (remaining as the same position on June 30, 2004)                                                     
|                                                                             
|Executive Officers (excluding Executive
    Officers who are also a Director)
|                                                                             
|                                                                             
|Name                                                                          |  | Yasuo Hayashi                                                                                                                                                 |  |                                                                                                                                                             
|Date of Birth                                                                 |  | August 5, 1942                                                                                                                                                |  |                                                                                                                                                             
|Current Position                                                              |  | Executive Vice President, Managing Director of
    Mitsui & Co. Europe PLC (since April 1, 2004)                                                             
|Prior Positions                                                               |  |  2000                                                                                                                                                        |  | A member of Board of Directors (Executive
    Managing Director)                                                                                            
|                                                                              |  |  2001                                                                                                                                                        |  | Executive Managing Director, Chief Operating
    Officer of Electric Machinery, Plant & Project Business
    Unit, Machinery Electronics & Information Group
|                                                                              |  |  2002                                                                                                                                                        |  | Executive Managing Director, President of
    Machinery Electronics & Information Group                                                                     
|                                                                              |  |  2003                                                                                                                                                        |  | Senior Executive Managing Officer                                                                                                                           
|                                                                             
|Name                                                                          |  | Jun Moriyama                                                                                                                                                  |  |                                                                                                                                                             
|Date of Birth                                                                 |  | December 7, 1946                                                                                                                                              |  |                                                                                                                                                             
|Current Position                                                              |  | Executive Managing Officer, General Manager of
    Nagoya Office (since April 1, 2003)                                                                       
|Prior Positions                                                               |  |  1999                                                                                                                                                        |  | A member of Board of Directors (Director, Chief
    Operating Officer of Iron & Steel Products Unit)                                                        
|                                                                              |  |  2001                                                                                                                                                        |  | Director, General Manager of Nagoya Office                                                                                                                  
|                                                                              |  |  2002/4                                                                                                                                                      |  | Director, Senior Managing Officer, General
    Manager of Nagoya Office                                                                                     
|                                                                              |  |  2002/6                                                                                                                                                      |  | Senior Managing Officer, General Manager of
    Nagoya Office                                                                                               
|                                                                             
|Name                                                                          |  | Hiroshi Tada                                                                                                                                                  |  |                                                                                                                                                             
|Date of Birth                                                                 |  | March 3, 1945                                                                                                                                                 |  |                                                                                                                                                             
|Current Position                                                              |  | Executive Managing Officer, Chairman for the
    Americas, and President and Chief Executive Officer of
    Mitsui & Co. (U.S.A.), Inc. (since April 1, 2003)
|Prior Positions                                                               |  |  2000                                                                                                                                                        |  | A member of Board of Directors (Director, Chief
    Operating Officer of Iron & Steel Raw Materials Unit)                                                   
|                                                                              |  |  2002/4                                                                                                                                                      |  | Director, Senior Managing Officer, Chief
    Operating Officer of Iron & Steel Raw Materials Unit,
    Metals Group                                         
|                                                                              |  |  2002/6                                                                                                                                                      |  | Senior Managing Officer, Chief Operating Officer
    of Iron & Steel Raw Materials Unit, Metals Group                                                       

104



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##### 



|                 |  |                                                                                                                      |  |                                                                                                                                                                  
|---------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                
|Name             |  | Motokazu Yoshida                                                                                                     |  |                                                                                                                                                                  
|Date of Birth    |  | January 7, 1948                                                                                                      |  |                                                                                                                                                                  
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Machinery Business Unit (since April 1, 2004)            
|Prior Positions  |  |  2001                                                                                                               |  | A member of Board of Directors (Director, Chief
    Operating Officer of Motor Vehicles, Marine & Aerospace
    Business Unit)                                   
|                 |  |  2002/4                                                                                                             |  | Director, Senior Managing Officer Chief Operating
    Officer of Motor Vehicles, Marine & Aerospace Business
    Unit, Machinery, Electronics & Information Group
|                 |  |  2002/6                                                                                                             |  | Senior Managing Officer, Chief Operating Officer
    of Motor Vehicles, Marine & Aerospace Business Unit,
    Machinery, Electronics & Information Group         
|                 |  |  2003                                                                                                               |  | Executive Managing Officer, Chief Operating
    Officer of Motor Vehicles, Marine & Aerospace Business
    Unit                                                  
|                
|Name             |  | Yoshiyuki Kagawa                                                                                                     |  |                                                                                                                                                                  
|Date of Birth    |  | November 22, 1946                                                                                                    |  |                                                                                                                                                                  
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Energy Business Unit (since April 1, 2003)               
|Prior Positions  |  |  2002                                                                                                               |  | Managing Officer, Chief Operating Officer of
    Energy Business Unit, Energy Group                                                                              
|                
|Name             |  | Yoshiyuki Izawa                                                                                                      |  |                                                                                                                                                                  
|Date of Birth    |  | February 10, 1948                                                                                                    |  |                                                                                                                                                                  
|Current Position |  | Executive Managing Officer, General Manager of
    Osaka Office (since April 1, 2004)                               
|Prior Positions  |  |  2000                                                                                                               |  | A member of Board of Directors (Director, Chief
    Operating Officer of Information Business Unit)                                                              
|                 |  |  2002/4                                                                                                             |  | Director, Senior Managing Officer, Chief
    Operating Officer of Information Business Unit, Machinery,
    Electronics & Information Group                      
|                 |  |  2002/6                                                                                                             |  | Senior Managing Officer, Chief Operating Officer
    of Information Business Unit                                                                                
|                
|Name             |  | Osamu Mori                                                                                                           |  |                                                                                                                                                                  
|Date of Birth    |  | January 1, 1949                                                                                                      |  |                                                                                                                                                                  
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Financial Markets Business Unit (since April 1,
    2004)
|Prior Positions  |  |  2000                                                                                                               |  | A member of Board of Directors (Director, General
    Manager of Finance Division)                                                                               
|                 |  |  2002/4                                                                                                             |  | Director, Senior Managing Officer, General
    Manager of Finance Division                                                                                       
|                 |  |  2002/6                                                                                                             |  | Senior Managing Officer, General Manager of
    Finance Division                                                                                                 
|                 |  |  2003                                                                                                               |  | Senior Managing Officer, Chief Operating Officer,
    of Financial Markets Business Unit                                                                         
|                
|Name             |  | Kazuya Imai                                                                                                          |  |                                                                                                                                                                  
|Date of Birth    |  | April 20, 1946                                                                                                       |  |                                                                                                                                                                  
|Current Position |  | Executive Managing Officer, General Manager of
    Internal Auditing Division (since April 1, 2004)                 
|Prior Positions  |  |  2001                                                                                                               |  | A member of Board of Directors (Director,
    Executive Vice President of Mitsui & Co. (U.S.A.), Inc.)                                                           
|                 |  |  2002/1                                                                                                             |  | Director                                                                                                                                                         
|                 |  |  2002/4                                                                                                             |  | Director, Senior Managing Officer                                                                                                                                
|                 |  |  2002/6                                                                                                             |  | Senior Managing Officer                                                                                                                                          

105



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##### 



|                 |  |                                                                                                                                                      |  |                                                                                                                                             
|---------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|                
|Name             |  | Toshihiro Soejima                                                                                                                                    |  |                                                                                                                                             
|Date of Birth    |  | November 10, 1946                                                                                                                                    |  |                                                                                                                                             
|Current Position |  | Executive Managing Officer, General
    Representative of Mitsui & Co., Ltd. in China (since
    April 1, 2004)                                     
|Prior Positions  |  |  2001                                                                                                                                               |  | A member of Board of Directors (Director, Chief
    Operating Officer of Electronics Devices Business Unit)                                 
|                 |  |  2002/4                                                                                                                                             |  | Director, Senior Managing Officer, Chief
    Operating Officer of Electronics Business Unit, Machinery,
    Electronics & Information Group 
|                 |  |  2002/6                                                                                                                                             |  | Senior Managing Officer, Chief Operating Officer
    of Electronics Business Unit, Machinery, Electronics &
    Information Group           
|                 |  |  2003                                                                                                                                               |  | Senior Managing Officer, General Manager of
    Corporate Planning & Strategy Division                                                      
|                
|Name             |  | Satoru Miura                                                                                                                                         |  |                                                                                                                                             
|Date of Birth    |  | March 2, 1947                                                                                                                                        |  |                                                                                                                                             
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Iron & Steel Products Business Unit (since
    April 1, 2004)                            
|Prior Positions  |  |  2001                                                                                                                                               |  | A member of Board of Directors (Director, Chief
    Operating Officer of Iron & Steel Products Unit)                                        
|                 |  |  2002/4                                                                                                                                             |  | Director, Senior Managing Officer, Chief
    Operating Officer of Iron & Steel Products Unit, Metals
    Group                              
|                 |  |  2002/6                                                                                                                                             |  | Senior Managing Officer, Chief Operating Officer
    of Iron & Steel Products Unit                                                          
|                
|Name             |  | Masayoshi Sato                                                                                                                                       |  |                                                                                                                                             
|Date of Birth    |  | November 30, 1945                                                                                                                                    |  |                                                                                                                                             
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Foods & Retail Business Unit (since
    April 1, 2004)                                   
|Prior Positions  |  |  2002                                                                                                                                               |  | Managing Officer, Chief Operating Officer of
    Foods Unit                                                                                 
|                
|Name             |  | Kenji Dewa                                                                                                                                           |  |                                                                                                                                             
|Date of Birth    |  | June 17, 1946                                                                                                                                        |  |                                                                                                                                             
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Organic Chemicals Business Unit (since April 1,
    2004)                                
|Prior Positions  |  |  2002                                                                                                                                               |  | Managing Officer, Chief Operating Officer of
    Petrochemicals Unit                                                                        
|                
|Name             |  | Michio Matsuda                                                                                                                                       |  |                                                                                                                                             
|Date of Birth    |  | October 3, 1946                                                                                                                                      |  |                                                                                                                                             
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Power, Transportation & Plant Projects
    Business Unit (since April 1, 2004)           
|Prior Positions  |  |  2002/4                                                                                                                                             |  | Managing Officer, Operating Officer of Electric
    Machinery, Plant & Project Business Unit, Machinery,
    Electronics & Information Group
|                 |  |  2002/9                                                                                                                                             |  | Managing Officer, Chief Operating Officer of
    Communications, Transportation & Industrial Project
    Business Unit                      
|                 |  |  2003/1                                                                                                                                             |  | Managing Officer, Chief Operating Officer of
    Telecommunications, Transportation & Industrial Systems
    Business Unit                  
|                
|Name             |  | Ken Abe                                                                                                                                              |  |                                                                                                                                             
|Date of Birth    |  | September 19, 1947                                                                                                                                   |  |                                                                                                                                             
|Current Position |  | Executive Managing Officer, Chief Operating
    Officer of Iron & Steel Raw Materials and Non-Ferrous
    Metals Business Unit (since April 1, 2004)
|Prior Positions  |  |  2002                                                                                                                                               |  | Managing Officer, General Manager of Metals
    Administrative Division                                                                     
|                 |  |  2003                                                                                                                                               |  | Managing Officer, Chief Operating Officer of
    Iron & Steel Raw Materials Unit                                                            

106



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##### 



|                 |  |                                                                                                                                                   |  |                                                                                                      
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------
|                
|Name             |  | Takeshi Ohyama                                                                                                                                    |  |                                                                                                      
|Date of Birth    |  | May 18, 1947                                                                                                                                      |  |                                                                                                      
|Current Position |  | Managing Officer, General Representative of
    Mitsui & Co., Ltd. in Indonesia (since April 1,
    2004)                                        
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, General Manager of Personnel
    Division                                          
|                
|Name             |  | Takao Sunami                                                                                                                                      |  |                                                                                                      
|Date of Birth    |  | August 22, 1947                                                                                                                                   |  |                                                                                                      
|Current Position |  | Managing Officer, General Manager of Fukuoka
    Office (since January 1, 2003)                                                                  
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, General Manager of e-Mitsui
    Business Division                                  
|                
|Name             |  | Hirokazu Mizukami                                                                                                                                 |  |                                                                                                      
|Date of Birth    |  | August 24, 1947                                                                                                                                   |  |                                                                                                      
|Current Position |  | Managing Officer, Deputy Chief Operating Officer
    of Foods & Retail Business Unit (since April 1,
    2004)                                   
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, Chief Operating Officer of
    Retail Unit                                         
|                
|Name             |  | Junichi Matsumoto                                                                                                                                 |  |                                                                                                      
|Date of Birth    |  | September 25, 1947                                                                                                                                |  |                                                                                                      
|Current Position |  | Managing Officer, Chief Operating Officer of
    Transportation Logistics Business Unit (since April 1, 2004)                                    
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, General Manager of Corporate
    Planning Division                                 
|                 |  |  2003                                                                                                                                            |  | Managing Officer, Deputy General Vice
    Representative of Mitsui & Co., Ltd. in China              
|                
|Name             |  | Kazuo Tasaka                                                                                                                                      |  |                                                                                                      
|Date of Birth    |  | December 27, 1947                                                                                                                                 |  |                                                                                                      
|Current Position |  | Managing Officer, Deputy Chief Operating Officer
    of Iron & Steel Raw Materials and Non-Ferrous Metals
    Business Unit (since April 1, 2004)
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, Chief Operating Officer of
    Non-Ferrous Metals Unit                             
|                
|Name             |  | Shunichi Miyazaki                                                                                                                                 |  |                                                                                                      
|Date of Birth    |  | February 11, 1948                                                                                                                                 |  |                                                                                                      
|Current Position |  | Managing Officer, General Manager of Consumer
    Products & Services Administrative Division (since
    April 1, 2002)                          
|                
|Name             |  | Shinjiro Ogawa                                                                                                                                    |  |                                                                                                      
|Date of Birth    |  | September 17, 1948                                                                                                                                |  |                                                                                                      
|Current Position |  | Managing Officer, Chief Operating Officer of
    Information, Electronics and Telecommunication Business Unit
    (since April 1, 2004)          
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, General Manager of Machinery,
    Electronics & Information Administrative Division
|                
|Name             |  | Toshimasa Furukawa                                                                                                                               
|Date of Birth    |  | December 25, 1948                                                                                                                                 |  |                                                                                                      
|Current Position |  | Managing Officer, General Manager of Machinery,
    Electronics & Information Administrative Division
    (since April 1, 2004)                  
|Prior Positions  |  |  2002                                                                                                                                            |  | Managing Officer, President of Mitsui &
    Co. (Taiwan) Ltd.                                        
|                
|Name             |  | Akio Ikeda                                                                                                                                        |  |                                                                                                      
|Date of Birth    |  | January 1, 1947                                                                                                                                   |  |                                                                                                      
|Current Position |  | Managing Officer, Chairman & Managing
    Director of Mitsui & Co. (Australia) Ltd.
    (since April 1, 2004)                                    
|Prior Positions  |  |  2003                                                                                                                                            |  | Managing Officer, Chief Operating Officer of
    General Merchandise Unit                            

107



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##### 



|                 |  |                                                                                                                                         |  |                                                                       
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|                
|Name             |  | Hiroshi Ito                                                                                                                             |  |                                                                       
|Date of Birth    |  | February 8, 1947                                                                                                                        |  |                                                                       
|Current Position |  | Managing Officer, Chief Operating Officer of
    Consumer Service Business Unit (since April 1, 2004)                                  
|Prior Positions  |  |  2003                                                                                                                                  |  | Managing Officer, Chief Operating Officer of
    Service Business Unit
|                
|Name             |  | Jitsuro Terashima                                                                                                                       |  |                                                                       
|Date of Birth    |  | August 11, 1947                                                                                                                         |  |                                                                       
|Current Position |  | Managing Officer, President of Mitsui Global
    Strategic Studies Institute (since April 1, 2003)                                     
|                
|Name             |  | Motonori Murakami                                                                                                                       |  |                                                                       
|Date of Birth    |  | November 19, 1948                                                                                                                       |  |                                                                       
|Current Position |  | Managing Officer, General Manager of General
    Accounting & Risk Management Division (since April 1,
    2004)                       
|Prior Positions  |  |  2003                                                                                                                                  |  | Managing Officer, General Manager of General
    Accounting Division  
|                
|Name             |  | Kyoichi Endo                                                                                                                            |  |                                                                       
|Date of Birth    |  | October 5, 1947                                                                                                                         |  |                                                                       
|Current Position |  | Managing Officer, Managing Director of
    Mitsui & Co. UK PLC (since April 1, 2004)                                                   
|                
|Name             |  | Toshio Awata                                                                                                                            |  |                                                                       
|Date of Birth    |  | July 28, 1948                                                                                                                           |  |                                                                       
|Current Position |  | Managing Officer, Chief Information
    Officer & General Manager of Business Process
    Re-Engineering Division (since April 1, 2004)
|                
|Name             |  | Koji Nakamura                                                                                                                           |  |                                                                       
|Date of Birth    |  | August 15, 1948                                                                                                                         |  |                                                                       
|Current Position |  | Managing Officer, Chief Operating Officer of
    Plastics & Inorganic Chemicals Business Unit (since
    April 1, 2004)                
|                
|Name             |  | Toru Kitamura                                                                                                                           |  |                                                                       
|Date of Birth    |  | March 23, 1949                                                                                                                          |  |                                                                       
|Current Position |  | Managing Officer, Chief Operating Officer of
    Lifestyle Business Unit (since April 1, 2004)                                         
|                
|Name             |  | Kenichi Yamamoto                                                                                                                        |  |                                                                       
|Date of Birth    |  | July 25, 1949                                                                                                                           |  |                                                                       
|Current Position |  | Managing Officer General Manager of Personnel
    Division (since April 1, 2004)                                                       
|                
|Name             |  | Masaaki Murakami                                                                                                                        |  |                                                                       
|Date of Birth    |  | August 10, 1949                                                                                                                         |  |                                                                       
|Current Position |  | Managing Officer, General Manager of Chemical
    Administrative Division (since April 1, 2004)                                        

There is no family relationship between any
Directors, Corporate Auditors, Executive Officers and any other
persons named above. There is no arrangement or understanding
between any of the above and any other person pursuant to which
they were selected as a Director, a Corporate Auditor or a
member of the senior management.




B.     Compensation.

The aggregate amount of compensation, including
benefits from Directors, Auditors and Executive
Officers Pension Plan, paid to Directors, Corporate
Auditors and Executive Officers during the year ended
March 31, 2004, was ¥2,891 million.

In accordance with customary Japanese business
practices, a retiring Director or Corporate Auditor receives a
retirement allowance, which is subject to approval by
shareholders at a general meeting of the shareholders. The
amount of the retirement allowance generally reflects the number
of years of service, rank at the time of retirement and special
contributions to our performance.

Retirement allowances, including benefits from
Directors, Corporate Auditors and Executive
Officers Pension Plan, paid to retired individual
Directors, Corporate Auditors and Executive Officers totaled

108



---



##### 



¥1,476 million, and the annual bonuses
paid to Directors, Corporate Auditors and Executive Officers
during the year ended March 31, 2004 was
¥98 million, both of which were included in the
¥2,891 million aggregate compensation discussed above.


The amount set aside by us for Directors,
Corporate Auditors and Executive Officers Pension
Plan to provide pension benefit to retired Directors, Corporate
Auditors, and Executive Officers was ¥904 million as
of March 31, 2004.

Since the retirement allowance is subject to the
approval of shareholders at a general meeting of shareholders,
there are no retirement allowances to be accrued for the
Directors, Corporate Auditors, and Executive officers as of
March 31, 2004.

The retirement allowance system for Directors,
Corporate Auditors and Executive Officers was abolished pursuant
to a resolution of the Board of Directors in February 2004.

Mitsuis Articles of Incorporation do not
provide for the establishment of stock option plans for
Mitsuis directors and senior management.




C.     Board
Practices.

The information in Item 6.A. Directors
and Senior Management is incorporated into this section by
reference.

None of our Directors have entered into any
service contracts with us providing for benefits upon
termination of his or her employment.

A 2002 amendment to the Commercial Code of Japan
gave the company the alternative of selecting the
Committee System as the framework for corporate
governance. We decided, however, to maintain the current system
with corporate auditors because we believe that our corporate
auditors, of which two are full-time and three are external
auditors as of March 31, 2004 and their functions are
legally defined and reinforced, provide adequate auditing
functions. Furthermore, internal directors are familiar with our
business operations and can therefore contribute to effective
management. Although we retained the corporate auditor system,
we did decide to adopt certain aspects of the Committee System
and have established three committees (The Governance Committee,
the Nomination Committee, and the Remuneration Committee) to
provide advice to the Board of Directors. In addition, other
measures have been taken, such as shortening the term of
Directors and Executive Officers from two years to one year, the
eliminating retirement allowance, and increasing the number of
external directors.

Our Directors and Corporate Auditors are elected
at the general meeting of shareholders. In accordance with
Mitsuis Articles of Incorporation, Rules of the Board of
Directors and Rules of the Corporate Auditors, the normal term
of office for its Directors is one year(2) and for
its Corporate Auditors is four years. However, they may both
serve any number of consecutive terms. The following table shows
our Directors, Corporate Auditors and Executive
Officers terms of office and their shareholdings as of
June 30, 2004.

At Mitsuis ordinary general meeting of
shareholders held on June 24, 2004, an amendment to the
Articles of Incorporation was resolved whereby the normal term
of office for Directors has been changed from two years to
one year. Provided, however, that the term of Directors who
were elected prior to the ordinary general meeting of
shareholders held on June 27, 2003 remains two years.
In accordance with a supplementary provision to amendments of
the Commercial Code of Japan, the term of Corporate Auditors who
were elected prior to the ordinary general meeting of
shareholders held on June 27, 2003 remains three years.

109



---



##### 



|          |                   |                   |  |                     |  |  |  |        | 
|--------- | ----------------- | ----------------- |  | ------------------- |  |  |  | ------ | 
|          |                   | Length of Time    |  |                    
|          |                   | Served in Office  |  |                    
|          |                   | (From Appointment |  | Shareholdings as of
|          |                   | to June 2004)(2)  |  | June 30, 2004      
|          |                   |                   |  |                    
|Director: |                   |                   |  |                     |  |  |  |       
|          | Nobuo Ohashi      |                   |  | 10 years            |  |  |  | 42,000 | 
|          | Shoei Utsuda      |                   |  | 7 years             |  |  |  | 22,103 | 
|          | Tasuku Kondo      |                   |  | 8 years             |  |  |  | 21,000 | 
|          | Katsuto Momii     |                   |  | 7 years             |  |  |  | 14,163 | 
|          | Tetsuya Matsuoka  |                   |  | 5 years             |  |  |  | 2,000  | 
|          | Masataka Suzuki   |                   |  | 4 years             |  |  |  | 13,000 | 
|          | Akishige Okada(1) |                   |  | 1 year              |  |  |  |       | 
|          | Gempachiro Aihara |                   |  | 2 years             |  |  |  | 5,000  | 
|          | Yushi Nagata      |                   |  | 2 years             |  |  |  | 14,000 | 
|          | Yasunori Yokote   |                   |  | 2 years             |  |  |  | 7,000  | 
|          | Akira Chihaya(1)  |                   |  | Less than 1 year    |  |  |  | 1,000  | 



| | 
| | 
| | 



| |     |                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Mr. Akishige Okada and Mr. Akira
    Chihaya are external directors as defined in the Commercial Code
    of Japan.                                                                                                                                
|
| | (2) | At Mitsuis ordinary general meeting of
    shareholders held on June 24, 2004, an amendment to the
    Articles of Incorporation was resolved whereby the normal term
    of office for Directors has been changed from two years to one
    year.

|                   |                      |                        |  |                   |  |                     |  |                  |  |  |  |        | 
|------------------ | -------------------- | ---------------------- |  | ----------------- |  | ------------------- |  | ---------------- |  |  |  | ------ | 
|                   |                      |                        |  | Length of Time    |  |                    
|                   |                      |                        |  | Served in Office  |  |                    
|                   |                      | Date of Expiration of  |  | (From Appointment |  | Shareholdings as of
|                   |                      | Current Term of Office |  | to June 2004)     |  | June 30, 2004      
|                   |                      |                        |  |                   |  |                    
|Corporate Auditor: |                      |                        |  |                   |  |                     |  |                  |  |  |  |       
|                   | Makoto Ejima         |                        |  | June 2005         |  |                     |  | 2 years          |  |  |  | 40,900 | 
|                   | Ko Matsukata(3)      |                        |  | June 2005         |  |                     |  | 8 years          |  |  |  | 12,000 | 
|                   | Yasutaka Okamura(3)  |                        |  | June 2007         |  |                     |  | 1 year           |  |  |  | 1,000  | 
|                   | Hiroshi Matsuura     |                        |  | June 2007         |  |                     |  | 1 year           |  |  |  | 10,000 | 
|                   | Hideharu Kadowaki(3) |                        |  | June 2008         |  |                     |  | Less than 1 year |  |  |  |       | 



| | 
| | 
| | 



| |     |                                                                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | Mr. Ko Matsukata, Mr. Yasutaka Okamura
    and Mr. Hideharu Kadowaki are external Corporate Auditors
    as defined in the Law for Special Exceptions to the Commercial
    Code of Japan Concerning Audit, etc. of Joint Stock Corporations.

110



---



##### 



|                                                                                 |                    |                   |  |                     |  |  |         |        | 
|-------------------------------------------------------------------------------- | ------------------ | ----------------- |  | ------------------- |  |  | ------- | ------ | 
|                                                                                 |                    | Length of Time    |  |                    
|                                                                                 |                    | Served in Office  |  |                    
|                                                                                 |                    | (From Appointment |  | Shareholdings as of
|                                                                                 |                    | to June 2004)(4)  |  | June 30, 2004      
|                                                                                 |                    |                   |  |                    
|Executive Officer (excluding Executive
    Officers who are also a Director):    |                    |                   |  |                     |  |  |         |       
|                                                                                 | Yasuo Hayashi      |                   |  | 4 years             |  |  |         | 21,000 | 
|                                                                                 | Jun Moriyama       |                   |  | 5 years             |  |  |         | 17,103 | 
|                                                                                 | Hiroshi Tada       |                   |  | 4 years             |  |  |         | 14,000 | 
|                                                                                 | Motokazu Yoshida   |                   |  | 3 years             |  |  |         | 7,000  | 
|                                                                                 | Yoshiyuki Kagawa   |                   |  | 2 years             |  |  |         | 9,133  | 
|                                                                                 | Yoshiyuki Izawa    |                   |  | 4 years             |  |  |         | 8,000  | 
|                                                                                 | Osamu Mori         |                   |  | 4 years             |  |  |         | 18,166 | 
|                                                                                 | Kazuya Imai        |                   |  | 3 years             |  |  |         | 9,266  | 
|                                                                                 | Toshihiro Soejima  |                   |  | 3 years             |  |  |         | 11,000 | 
|                                                                                 | Satoru Miura       |                   |  | 3 years             |  |  |         | 8,206  | 
|                                                                                 | Junichi Masuda     |                   |  | 2 years             |  |  |         | 11,000 | 
|                                                                                 | Masayoshi Sato     |                   |  | 2 years             |  |  |         | 8,334  | 
|                                                                                 | Kenji Dewa         |                   |  | 2 years             |  |  |         | 5,000  | 
|                                                                                 | Michio Matsuda     |                   |  | 2 years             |  |  |         | 3,000  | 
|                                                                                 | Takeshi Ohyama     |                   |  | 2 years             |  |  |         | 10,339 | 
|                                                                                 | Takao Sunami       |                   |  | 2 years             |  |  |         | 6,755  | 
|                                                                                 | Hirokazu Mizukami  |                   |  | 2 years             |  |  |         | 3,532  | 
|                                                                                 | Ken Abe            |                   |  | 2 years             |  |  |         | 11,000 | 
|                                                                                 | Junichi Matsumoto  |                   |  | 2 years             |  |  |         | 14,000 | 
|                                                                                 | Kazuo Tasaka       |                   |  | 2 years             |  |  |         | 20,948 | 
|                                                                                 | Shunichi Miyazaki  |                   |  | 2 years             |  |  |         | 8,000  | 
|                                                                                 | Shinjiro Ogawa     |                   |  | 2 years             |  |  |         | 8,000  | 
|                                                                                 | Toshimasa Furukawa |                   |  | 2 years             |  |  |         | 10,000 | 
|                                                                                 | Akio Ikeda         |                   |  | 1 year              |  |  |         | 7,000  | 
|                                                                                 | Hiroshi Ito        |                   |  | 1 year              |  |  |         | 7,000  | 
|                                                                                 | Jitsuro Terashima  |                   |  | 1 year              |  |  |         | 12,000 | 
|                                                                                 | Motonori Murakami  |                   |  | 1 year              |  |  |         | 14,769 | 
|                                                                                 | Kyoichi Endo       |                   |  | Less than 1 year    |  |  |         | 6,000  | 
|                                                                                 | Toshio Awata       |                   |  | Less than 1 year    |  |  |         | 1,680  | 
|                                                                                 | Koji Nakamura      |                   |  | Less than 1 year    |  |  |         | 6,000  | 
|                                                                                 | Toru Kitamura      |                   |  | Less than 1 year    |  |  |         |       | 
|                                                                                 | Kenichi Yamamoto   |                   |  | Less than 1 year    |  |  |         | 7,650  | 
|                                                                                 | Masaaki Murakami   |                   |  | Less than 1 year    |  |  |         | 15,000 | 
|                                                                                 |                    |                   |  |                     |  |  |         |       
|Total Shareholdings by Directors, Corporate
    Auditors, and Executive Officers |                    |                   |  |                     |  |  | 525,047 |       
|                                                                                 |                    |                   |  |                     |  |  |         |       



| | 
| | 
| | 



| |     |                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------
| | (4) | The rules of Executive Officers provides for the
    term of the Executive Officers as one year starting April 1
    and ending March 31.

Mitsuis Articles of Incorporation provide
that the Board of Directors shall elect from among its members
Representative Directors, one of whom shall be the President.
Under the Commercial Code of Japan, each of the Representative
Directors has statutory authority and power to represent and act
on behalf of the company in all respects.

At least one of Corporate Auditors(5)
should be a person who has not been a director, general manager
or employee of a company or any of its subsidiaries during the
five-year period(6) prior to his or her election as a
Corporate Auditor. Each Corporate Auditor has a statutory duty
to examine financial statements, in collaboration with
independent certified public accountants, and business reports
to be submitted by the Board of Directors at the general meeting
of shareholders and also to supervise the administration of the
companys affairs by Directors. Corporate Auditors are
required to participate in meetings of the Board of Directors
but are not entitled to vote.



| | 
| | 
| | 



| |     |                                                                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | In accordance with amendments of the Law for
    Special Exceptions to the Commercial Code of Japan Concerning
    Audit, etc. of Joint Stock Corporations, the number of external
    corporate auditors after the conclusion of the first ordinary
    general meeting of

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##### 



| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | shareholders held with respect to the fiscal year
    ending on and after May 1, 2005, is required to be at least
    half the number of corporate auditors of a large company whose
    capital is not less than ¥500 million, or whose total
    debt amount is not less than ¥20 billion.                                                                                   
|
| | (6) | In accordance with the same amendment as (4), an
    external corporate auditor who is elected at the first ordinary
    general meeting of shareholders held with respect to the fiscal
    year ending on and after May 1, 2005, is defined as any
    person who has not at any time been an employee, manager or
    director of the company or of any of its subsidiaries.

Corporate Auditors constitute the Board of
Corporate Auditors. The Board of Corporate Auditors has a
statutory duty to prepare and submit its audit report to the
Board of Directors each year. A Corporate Auditor may note his
or her opinion in the audit report if his or her opinion is
different from the opinion expressed in the independent
auditors report. The Board of Corporate Auditors is
empowered to establish audit principles, methods of examination
by the Corporate Auditors of the companys affairs and
financial position and other matters concerning the performance
of the Corporate Auditors duties. The Corporate Auditors
may not at the same time be directors, managers or employees of
the company or any of its subsidiaries or executive officers of
any of its subsidiaries.

Exemption from Certain Corporate Governance
Requirements of NASDAQ.

NASDAQ rules provide that NASDAQ may grant
exemptions from the NASDAQ corporate governance standards to a
foreign issuer when those standards are contrary to a law, rule
or regulation of any public authority exercising jurisdiction
over such issuer or contrary to generally accepted business
practices in the issuers country of domicile, except to
the extent that such exemptions would be contrary to the
U.S. federal securities laws. In connection with the
renewal of the Listing Agreement with NASDAQ for listing of
American Depositary Shares representing our common stock on the
NASDAQ National Market in 1989, we received from NASDAQ
exemptions from certain NASDAQ corporate governance standards.
These exemptions and the practices we follow are described below:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are exempt from NASDAQs requirement that
    there be a distribution to shareholders of copies of our annual
    report containing our audited financial statements a reasonable
    period of time prior to our annual meeting of shareholders. In
    accordance with Japanese law, we hold an annual meeting of
    shareholders within three months after the end of each fiscal
    year. Also, in accordance with Japanese law, we distribute to
    shareholders, prior to the annual meeting of shareholders,
    copies of a report of business operations, together with our
    audited unconsolidated financial statements prepared in
    accordance with Japanese GAAP in Japanese. Concurrently with
    such distribution, we distribute Japanese GAAP audited
    unconsolidated financial statements in English to the depository
    for the ADSs, and instruct the depository to distribute the same
    to the registered ADS holders in a timely manner. The English
    version contains a statement that, upon request by an interested
    party, we will provide the party with a copy of our annual
    report on Form 20-F. As a reporting company under the
    Securities Exchange Act of 1934, we are required to prepare
    financial statements in accordance with U.S. GAAP for
    inclusion in our annual report on Form 20-F, which must be
    filed within six months after the end of each fiscal year.                                                                                                             
|
| |  | We are exempt from NASDAQs requirement that
    there be independent directors on the board of directors.
    Currently, for a foreign issuer, NASDAQ requires that there be
    two independent directors on its board of directors. For large
    Japanese companies, including us, which employ a corporate
    governance system based on a board of corporate auditors,
    Japans company law has no independence requirement with
    respect to directors. The task of overseeing management and
    accounting firms is assigned to the corporate auditors, who are
    separate from the companys management. Large Japanese
    companies, including us, are required to have at least one
    outside corporate auditor who must meet independence
    requirements under Japans company law. An outside
    corporate auditor is defined as a corporate auditor who has not
    served as a director, manager or any other employee of the
    company or any of its subsidiaries for the last five years prior
    to the appointment. Currently, we have three outside corporate
    auditors. Starting on the date of our ordinary meeting of
    shareholders relating to the fiscal year ending March 31,
    2005 at least 50% of our corporate auditors will be required to
    be outside corporate auditors. Also, starting on the same date,
    the independence requirements for outside corporate auditors
    will be strengthened by extending the five-year period referred
    to above to any time prior to the appointment.
|
| |  | We are exempt from NASDAQs requirement that
    there be an audit committee of the board of directors.
    Currently, for a foreign issuer, NASDAQ requires that a majority
    of such an audit committees members be independent
    directors. Like a majority of Japanese companies, we employ the
    corporate auditor system as described above. Under this system,
    the board of corporate auditors is                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | a legally separate and independent body from the
    board of directors. The function of the board of corporate
    auditors is similar to that of independent directors, including
    those who are members of the audit committee, of a
    U.S. company: to monitor the performance of the directors,
    and review and express opinion on the method of auditing by the
    companys accounting firm and on such accounting
    firms audit reports, for the protection of the
    companys shareholders. Large Japanese companies, including
    us, are required to have at least three corporate auditors.
    Currently, we have five corporate auditors, three out of which
    are outside corporate auditors as described above. In addition,
    as discussed above, our corporate auditors serve a longer term
    than our directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | We are exempt from NASDAQs requirement that
    there be a provision in the by-laws for a quorum for any meeting
    of the holders of common stock and that such quorum be not less
    than 33 1/3% of the outstanding shares of the common voting
    stock. In accordance with the Commercial Code of Japan (the
    Commercial Code), however, under our Articles of
    Incorporation no quorum is required for the adoption of
    resolutions at a general meeting of shareholders, except for
    (i) the election of directors and corporate auditors for
    which the quorum shall not be less than one-third of the total
    voting rights and (ii) resolutions for other specified
    issues required by the Commercial Code (the special
    shareholders resolutions), including an amendment to the
    Articles of Incorporation, a reduction of stated capital, the
    removal of a director or corporate auditor, dissolution, merger
    or consolidation requiring shareholders resolution, the transfer
    of the whole or an important part of the business, the taking
    over of the whole of the business of any other corporation
    requiring shareholders resolution, share exchange or share
    transfer requiring shareholders resolution for the purpose of
    establishing 100% parent-subsidiary relationships, splitting of
    the corporation into two or more corporations requiring
    shareholders resolution, any offering of new shares at a
    specially favorable price (or any offering of the
    rights to subscribe for, or acquire its shares at a
    specially favorable conditions) to any persons other
    than shareholders, for which the quorum shall be at least
    one-third of the total voting rights and the approval of the
    holders of at least two-thirds of the voting rights represented
    at the meeting is required. This approach is consistent with
    generally accepted business practices of publicly-held companies
    in Japan.
|
| |  | We are exempt from NASDAQs requirement that
    shareholder approval be obtained for the issuance of the
    issuers stock in certain conditions or certain specified
    transactions described in NASDAQ Rule 4350(i)(1). The
    Commercial Code requires us to seek shareholder approval of
    various matters, and in certain instances the special
    shareholders resolutions as described above are required for
    approval. In addition, while the Commercial Code permits, in
    certain instances, the issuance of equity securities without
    shareholder approval, the Commercial Code also contains
    provisions requiring the timely dissemination of information
    relating to such issuance, allowing for opportunities for
    shareholders to voice their concern with such issuance, and
    mandating the election of statutory auditors whose fiduciary
    duty is to, among other things, oversee on behalf of the
    shareholders actions by the board of directors relating to such
    issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

As described in this Item 6.C. Board
Practices, we have a Board of Corporate Auditors which
examines our financial statements and business reports which are
submitted by the Board of Directors to the general meeting of
shareholders and supervise the administration of our affairs by
Directors. We plan to take appropriate steps with respect to our
corporate governance system by July 31, 2005 so that our
Board of Corporate Auditors will fully satisfy the conditions
set forth in paragraph (c)(3) of Rule 10A-3, for the
purpose of availing ourselves of the general exemption provided
by that paragraph from the amended corporate governance
standards of NASDAQ implementing the requirements of
Rule 10A-3, including the requirements relating to the
independence of the audit committee members and responsibilities
of the audit committee.

The rights of ADS holders, including their rights
relating to corporate governance practices, are provided in the
deposit agreement which is an exhibit to this annual report.

Limitation of Liabilities of Directors and
Corporate Auditors

The Articles of Incorporation of Mitsui provide
that Mitsui may, by resolution of the Board of Directors, limit
the liabilities of Directors and Corporate Auditors to the
extent as permitted by Japanese laws. The Articles of
Incorporation of Mitsui also provide that Mitsui may conclude a
contract with external Directors to limit the liability of such
Directors to the extent as permitted by Japanese laws. In
accordance with such provision of the Articles of Incorporation,
Mitsui has concluded with Mr. Akishige Okada, an external

113



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##### 



Director, a contract dated June 27, 2003 and
has also concluded with Mr. Akira Chihaya, an external
Director, a contract dated June 24, 2004, to limit their
liability to the extent permitted by Japanese laws.







|   |          
|-- | ---------
|D. | Employees

As of March 31, 2004, 2003 and 2002, we had
39,735, 37,734, and 36,116 employees, respectively. The
average number of temporary employees during the year ended
March 31, 2004 was 9,537.

The following table provides the number of
employees by operating segment as of the years ended
March 31, 2004, 2003 and 2002.

|                                            |  |                      |        |      |  |      |        |  |  |  |        | 
|------------------------------------------- |  | -------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                            |  |                     
|                                            |  | Year ended March 31,
|                                            |  |                     
|                                            |  | 2004                 |        | 2003 |  | 2002
|                                            |  |                      |        |      |  |     
|Operating Segment:                          |  |                      |        |      |  |      |        |  |  |  |        | 
|Metals Products & Minerals                  |  |                      | 4,065  |      |  |      | 4,033  |  |  |  | 4,213  | 
|Machinery, Electronics &
    Information(1) |  |                      | 7,243  |      |  |      | 6,565  |  |  |  | 6,187  | 
|Chemical                                    |  |                      | 3,581  |      |  |      | 3,075  |  |  |  | 2,742  | 
|Energy                                      |  |                      | 1,466  |      |  |      | 1,303  |  |  |  | 1,349  | 
|Consumer Products & Services                |  |                      | 10,809 |      |  |      | 9,796  |  |  |  | 9,242  | 
|Domestic Branches and Offices               |  |                      | 2,736  |      |  |      | 2,945  |  |  |  | 3,309  | 
|Americas                                    |  |                      | 2,612  |      |  |      | 2,637  |  |  |  | 2,567  | 
|Europe                                      |  |                      | 1,098  |      |  |      | 1,173  |  |  |  | 1,263  | 
|Other Overseas Areas                        |  |                      | 3,138  |      |  |      | 3,182  |  |  |  | 3,064  | 
|Corporate                                   |  |                      | 2,987  |      |  |      | 3,025  |  |  |  | 2,180  | 
|                                            |  |                      |        |      |  |      |        |  |  |  |        | 
|Total                                       |  |                      | 39,735 |      |  |      | 37,734 |  |  |  | 36,116 | 
|                                            |  |                      |        |      |  |      |        |  |  |  |        | 



|    |                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | From the year ended March 31, 2003,
    Electronics & Information is combined with
    Machinery. The operating segment information for the
    year ended March 31, 2002 has been restated to conform to the
    presentation for the years ended March 31, 2004 and 2003.

We consider relations between management and our
labor unions to be good.






|   |                 
|-- | ----------------
|E. | Share Ownership.



| |                                                         
| | --------------------------------------------------------
| | Directors, Corporate Auditors and Executive
    Officers

As of June 30, 2004, the members of
Mitsuis Board of Directors, Corporate Auditors and
Executive Officers held as a group, 574,556 shares of our
common stock, representing 0.04% of the shares outstanding. This
number of shares includes 49,509 shares held by Mitsui
Executives Shareholding Association.

None of Mitsuis Directors, Corporate
Auditors nor Executive Officers is the beneficial owner of more
than 1% of Mitsuis common stock. The number of shares held
by Mitsuis Directors, Corporate Auditors and Executive
Officers, on an individual basis, is provided in
Item 6.C. Board Practices, and is incorporated
herein by reference.



| |                                   
| | ----------------------------------
| | Employees Shareholding Association

Mitsui operates an Employees Shareholding
Association which, as of June 30, 2004, had
3,321 employee member participants.

Employee members declare monthly the amount to be
deducted from their salary to be used to purchase shares of
common stock of Mitsui through the Employees Shareholding
Association. Employee members receive from Mitsui a monthly
subsidy equivalent to 10% of the declared amount, enabling them
to purchase shares equivalent to 110% of the declared amount.
Employee members are entitled to dividends which are applied
towards the purchase of additional shares through the
Employees Shareholding Association. Employee members are
able to sell part of their shares that have been reserved for
them under the Employees Shareholding Associations
plan, in multiples of 1,000 shares, once every month. As of
June 30, 2004, the total amount of shares having voting
rights owned by the Employees Shareholding Association was
13,502,336, representing 0.85% of the total shares issued and
outstanding.

Mitsui does not have any other arrangements for
involving its employees in the capital of Mitsui, including any
arrangement that involves the issue or grant of options, shares
or securities of Mitsui.

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##### 








|        |                                                       
|------- | ------------------------------------------------------
|Item 7. | Major Shareholders and Related Party
    Transactions.





|   |                    
|-- | -------------------
|A. | Major Shareholders.

As of March 31, 2004, there were
1,583,674,837 shares of our common stock issued (including
2,661,783 shares of treasury stock), of which
5,507,840 shares were in the form of ADSs, representing
0.35% of our then outstanding common stock, and
75,017,128 shares, representing 4.74% of our then
outstanding common stock, were held of record in the form of
common stock by residents in the United States. The number of
registered ADS holders was 43, and the number of registered
holders of shares of common stock in the United States was 109.

The following table shows our major shareholders
as of March 31, 2004, including shareholders who owned less
than 5% of our then outstanding common stock, disclosed under
the Security and Exchange Law of Japan.

|                                                                       |  |                        |         |                      |  |  |      |  
|---------------------------------------------------------------------- |  | ---------------------- | ------- | -------------------- |  |  | ---- | -
|                                                                       |  | Thousands of shares of |         | Percentage of common
|Shareholders                                                           |  | common stock owned     |         | stock Outstanding(*)
|                                                                       |  |                        |         |                     
|The Master Trust Bank of Japan, Ltd. (trust
    account)               |  |                        | 151,817 |                      |  |  | 9.58 | %
|Japan Trustee Services Bank, Ltd. (trust account)                      |  |                        | 132,563 |                      |  |  | 8.37 |  
|Mitsui Mutual Life Insurance Co.                                       |  |                        | 57,411  |                      |  |  | 3.62 |  
|Sumitomo Mitsui Banking Corporation                                    |  |                        | 56,570  |                      |  |  | 3.57 |  
|The Chuo Mitsui Trust and Banking Company, Limited                     |  |                        | 49,278  |                      |  |  | 3.11 |  
|Mizuho Corporate Bank, Ltd.                                            |  |                        | 48,083  |                      |  |  | 3.03 |  
|The Chase Manhattan Bank, N.A. London Sees
    Lending Omnibus Account |  |                        | 44,008  |                      |  |  | 2.77 |  
|Nippon Life Insurance Co.                                              |  |                        | 36,025  |                      |  |  | 2.27 |  
|Mitsui Sumitomo Insurance Co., Ltd.                                    |  |                        | 30,908  |                      |  |  | 1.95 |  
|The Bank of Tokyo-Mitsubishi, Ltd.                                     |  |                        | 30,375  |                      |  |  | 1.91 |  



|    |                                                        
|--- | -------------------------------------------------------
|(*) | The figures are rounded down to two decimal
    places.

Under the Securities and Exchange Law of Japan,
any person that becomes a holder (together with its related
persons) of 5% of the total issued voting shares of a company
listed on any Japanese stock exchange (including ADSs
representing such shares) must file a report with the Director
of the relevant Local Finance Bureau and send a copy of such
report to the company. A similar report must also be filed if
the percentage holding of a holder of more than 5% of the total
issued voting shares of a company increases or decreases by 1%
or more.

Based on such reports we have received, we are
aware that each of the following persons, together with its
affiliates, was the beneficial owner of our common stock in the
amounts and as of the dates shown in the following tables:

Schroder Investment Management (Japan)
Ltd.

|                   |  |                        |             |                      |  |  |       |  
|------------------ |  | ---------------------- | ----------- | -------------------- |  |  | ----- | -
|                   |  | Thousands of shares of |             | Percentage of common
|                   |  | common stock owned     |             | stock outstanding   
|Ownership as of    |  |                        |             |                     
|March 31, 2002     |  |                        | 128,384,568 |                      |  |  | 8.10  | %
|September 30, 2002 |  |                        | 150,816,435 |                      |  |  | 9.52  |  
|November 28, 2002  |  |                        | 167,083,785 |                      |  |  | 10.55 |  
|March 31, 2004     |  |                        | 146,045,454 |                      |  |  | 9.22  |  

Mitsui Asset Trust Banking Company,
Limited

|                  |  |                        |             |                      |  |  |      |  
|----------------- |  | ---------------------- | ----------- | -------------------- |  |  | ---- | -
|                  |  | Thousands of shares of |             | Percentage of common
|                  |  | common stock owned     |             | stock outstanding   
|Ownership as of   |  |                        |             |                     
|March 31, 2002    |  |                        | 110,312,214 |                      |  |  | 6.96 | %
|November 30, 2003 |  |                        | 87,912,465  |                      |  |  | 5.55 |  

115



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Mizuho Corporate Bank, Ltd.

|                 |  |                        |            |                      |  |  |      |  
|---------------- |  | ---------------------- | ---------- | -------------------- |  |  | ---- | -
|                 |  | Thousands of shares of |            | Percentage of common
|                 |  | common stock owned     |            | Stock outstanding   
|Ownership as of  |  |                        |            |                     
|April 30, 2002   |  |                        | 86,611,342 |                      |  |  | 5.46 | %
|July 31, 2002    |  |                        | 84,466,738 |                      |  |  | 5.32 |  
|January 31, 2003 |  |                        | 85,155,623 |                      |  |  | 5.37 |  
|April 30, 2003   |  |                        | 76,810,314 |                      |  |  | 4.84 |  

Mitsubishi Tokyo Financial Group,
Ltd.

|                 |  |                        |            |                      |  |  |      |  
|---------------- |  | ---------------------- | ---------- | -------------------- |  |  | ---- | -
|                 |  | Thousands of shares of |            | Percentage of common
|                 |  | common stock owned     |            | Stock outstanding   
|Ownership as of  |  |                        |            |                     
|October 31, 2002 |  |                        | 78,749,296 |                      |  |  | 4.97 | %

The Fuji Bank, Ltd.

|                 |  |                        |            |                      |  |  |      |  
|---------------- |  | ---------------------- | ---------- | -------------------- |  |  | ---- | -
|                 |  | Thousands of shares of |            | Percentage of common
|                 |  | common stock owned     |            | Stock outstanding   
|Ownership as of  |  |                        |            |                     
|January 31, 2002 |  |                        | 88,498,432 |                      |  |  | 5.57 | %

The voting rights of our major shareholders do
not differ from the voting rights of other shareholders.

To our knowledge, we are not directly or
indirectly owned or controlled by any other corporations, by any
foreign government or by any other natural or legal persons
severally or jointly.

We know of no arrangements which may, at a
subsequent date, result in a change in control of Mitsui.



B.     Related
Party Transactions.

In conducting our business operations involving a
broad range of products throughout the world, we have, in the
ordinary course of business, formed alliances with leading
partner companies in Japan and overseas, including manufacturers
and companies in the field of natural resources, such as energy
and ferrous materials. Moreover, in the ordinary course of
business, from time to time, we make minority investments in, or
provide loans to, amongst others, our customers, manufacturers,
alliance partners, distributors or suppliers. We conduct our
global business operations on a continuing basis with these
associated companies (investees owned 20% to 50%, corporate
joint ventures and other investees over which we have the
ability to exercise significant influence). Our principal
associated companies include Valepar S.A. (18.24%), Japan
Australia LNG (MIMI) Pty. Ltd. (50.00%), Mitsui
Leasing & Development, Ltd. (40.63%), Nihon Unisys,
Ltd. (27.85%), Mitsui Oil Exploration Co., Ltd. (40.75%) and
Sakhalin Energy Investment Company Ltd. (25.00%), among others.

The following table shows information regarding
account balances and transactions with associated companies:

|                                 |  |                 |         |      |  |   |         | 
|-------------------------------- |  | --------------- | ------- | ---- |  | - | ------- | 
|                                 |  |                
|                                 |  | Millions of Yen
|                                 |  |                
|                                 |  |                
|                                 |  | As of March 31,
|                                 |  |                
|                                 |  | 2004            |         | 2003
|                                 |  |                 |         |     
|Accounts receivable, trade       |  | ¥               | 186,373 |      |  | ¥ | 195,411 | 
|Advances to associated companies |  |                 | 202,293 |      |  |   | 170,038 | 
|Accounts payable, trade          |  |                 | 76,360  |      |  |   | 77,033  | 

Dividends received from associated companies for
the years ended March 31, 2004, 2003 and 2002 amounted to
¥18,714 million, ¥13,037 million and
¥9,590 million, respectively.

See Note 6, INVESTMENTS IN AND
ADVANCES TO ASSOCIATED COMPANIES to our consolidated
financial statements.

Prices applied in transactions with associated
companies are computed in the same way that such prices would be
calculated in transactions with unrelated third parties. In
addition, when associated companies are counterparties in
transactions with us and we conduct such business under
long-term procurement and/or sales contracts, in general, we
conclude a corresponding sales contract with the purchasers
(unrelated parties) of goods procured by us and/or with
suppliers (unrelated parties) of the goods we sell to associated
companies. Regarding any other commitments related to
transactions with associated companies, we do not normally
assume risk in excess of its percentage of share ownership in an
associated company.

116



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##### 



In furtherance of their trading activities, it is
customary practice for us to loan or guarantee, severally and
jointly with others, indebtedness of certain customers and
suppliers and of certain associated companies as well as to
guarantee the performance of contracts by such entities. At
March 31, 2004, the aggregate amount of loans (including
¥62,290 million of guarantees) relating to associated
companies was ¥305,203 million. The largest amount
outstanding as of March 31, 2004 was a
¥90,389 million no interest loan to Sakhalin Energy
Investment Company Ltd., which is also the largest amount
outstanding during the period from the beginning of our fiscal
year ended March 31, 2004. Sakhalin Energy Investment
Company Ltd. was formed in 1994 to develop the Piltun
Astokhskoye field and the Lunskoye field in the Sea of Okhotsk,
offshore from Sakhalin Island in the Russian Far East. The loan
was mainly from Mitsui Sakhalin Holdings B.V., which is our
wholly-owned subsidiary engaged in investing and financing for
Sakhalin Energy Investment Company Ltd. Other major loans to
associated companies are related to power plant projects and
natural resource development projects jointly invested with
other partners.

In the ordinary course of our business, we have
entered into transactions with various organizations with which
certain of our Directors and Senior Management are associated,
but no material transactions have been entered into for the
three-year period ended March 31, 2004.

As of March 31, 2004, no person was the
beneficial owner of more than 10% of our common stock.




C.     Interests
of Experts and Counsel.

Not applicable.




Item 8.     Financial
Information.



A.     Consolidated
Statements and Other Financial Information.



| |                                  
| | ---------------------------------
| | Consolidated Financial Statements

The audited consolidated financial statements
required by this item are included elsewhere in this annual
report.



| |             
| | ------------
| | Export Sales

Our total revenues from export transactions
constitute a significant portion of our total revenues. The
total amount of revenues from export transactions for the year
ended March 31, 2004 were ¥197,614 million or 7%
of total revenues of ¥2,980,342 million.



| |                  
| | -----------------
| | Legal Proceedings



| |                                                                          
| | -------------------------------------------------------------------------
| | Antitrust Suits against Mitsui, Mitsui U.S.A.
    and Novus International

Since July 1999, Mitsui, Mitsui & Co.
(U.S.A.), Inc. (Mitsui U.S.A.) and Novus
International, Inc., our subsidiaries, have been defendants in a
series of lawsuits in the United States by methionine
purchasers, who are claiming that there was a violation of the
U.S. antitrust laws regarding methionine, an animal feed
additive. In 2002, Mitsui, Mitsui U.S.A. and Novus
International, Inc. reached agreements for settlement with the
federal class action plaintiffs and the plaintiffs who opted out
of that class action. Under these settlements, Novus
International, Inc. paid U.S.$96 million as settlement
amount, which had been already recorded as a provision in our
consolidated financial statements for the year ended
March 31, 2002. All other related lawsuits are pending.
However, we believe the pending lawsuits will not have a
significant adverse effect on our consolidated results of
operations.



| |                                                                  
| | -----------------------------------------------------------------
| | Antitrust Suits against Mitsui, Mitsui U.S.A.
    and Bioproducts

Our wholly-owned U.S. subsidiary,
Bioproducts, Inc., which is producing choline chloride, an
ingredient of animal feed and pet foods, was named as a
defendant in the lawsuits in the United States, together with
other third-party choline chloride manufacturers. In these
cases, manufacturers of choline chloride allegedly violated
U.S. antitrust laws.

Although Mitsui and Mitsui U.S.A. are neither
manufacturers nor sellers of choline chloride in the
U.S. market, Mitsui and Mitsui U.S.A. were also named as
defendants, together with the manufacturers in a class action
lawsuit, based on the plaintiffs allegation that Mitsui
and Mitsui U.S.A. were involved in the violation of the
antitrust laws. During the course of the legal proceedings,
Mitsui and Mitsui U.S.A. have consistently denied any
wrongdoing. However, in the trial before the Federal District
Court of the District of

117



---



##### 



Columbia in June 2003, the jury rendered a
verdict stating that the defendants participated in the
violation of the antitrust laws and that the damages suffered by
the plaintiffs are U.S.$49.5 million. Mitsui and Mitsui
U.S.A. which have always denied all allegations of wrongdoing,
considered undertaking the legal proceedings necessary to
overrule the verdict. But given the circumstances, it was
determined that a settlement with the class plaintiffs would be
in the best interest of Mitsui and all of its stakeholders. As a
result, Mitsui, Mitsui U.S.A. and Bioproducts, Inc. entered
into an agreement for settlement with the class action
plaintiffs in October 2003. Under this settlement, Mitsui,
Mitsui U.S.A. and Bioproducts, Inc. will be released from
the class action proceedings and pay the class action plaintiffs
U.S.$53.0 million as a settlement amount. The settlement is
subject to and in the process of obtaining court approval. This
amount is recorded as other expense net in the Statements
of Consolidated Income for the year ended March 31, 2004.


Also, Mitsui, Mitsui U.S.A. and
Bioproducts, Inc. were also named as defendants in other
lawsuits made by the plaintiffs who opted out of that class
action, but entered into an agreement for settlement with most
of the plaintiffs in February 2004. Under this settlement,
Mitsui, Mitsui U.S.A. and Bioproducts, Inc. were released
from the legal proceedings by paying the opt-out plaintiffs
U.S.$73.5 million as a settlement amount. This amount was
paid in February 2004 and is recorded as other expense net
in the Statements of Consolidated Income for the year ended
March 31, 2004. There are still pending lawsuits, but the
management believes that there is less than a reasonable
possibility that the pending lawsuits would materially affect
the consolidated results of operations of Mitsui.



| |              
| | -------------
| | Other Matters

Various other claims and legal actions are
pending against us in respect of contractual obligations and
other matters arising out of the conduct of our business.
Appropriate provision has been recorded for the estimated loss
on claims and legal actions including those mentioned above. In
the opinion of management, any additional liability will not
materially affect the consolidated financial position, results
of operations, or cash flows of Mitsui.



| |                
| | ---------------
| | Dividend Policy

Under our Medium-Term Strategic &
Financial Plan that we announced on May 19, 2004, which
runs thorough March 31, 2006, we have set the target
dividend payout ratio at 20% of consolidated net income, and by
growing profits at Mitsui will aim to progressively and
sustainably increase dividend payments. Such payments will,
however, be subject to our future earnings, financial condition,
approval at the shareholders meeting (in the case of
year-end dividends) and other factors, including statutory and
other restrictions with respect to the payment of dividends.




B.     Significant
Changes.

Except as disclosed in this annual report, there
has not been any significant change since the date of the latest
annual consolidated financial statements included elsewhere in
this annual report.




Item 9.     The
Offer and Listing.



A.     Offer
and Listing Details.

The primary market for our common stock is the
Tokyo Stock Exchange, or TSE. Our common stock is traded on the
First Section of the TSE and is also listed on four other stock
exchanges in Japan (Osaka, Nagoya, Fukuoka and Sapporo Stock
Exchanges).

Our ADSs, each representing 20 shares of
common stock, are traded on the National Market of NASDAQ under
the symbol MITSY. In addition, our common stock is listed on the
Luxembourg Stock Exchange, in the form of European Depositary
Shares, each representing 20 shares; on the Frankfurt Stock
Exchange, in the form of co-ownership shares, each representing
1 share, in Global Bearer Certificates; and on the Amsterdam
Stock Exchange through the Amsterdam Securities Account System.

There may, from time to time, be a differential
between our common stocks price on exchanges outside the
United States and the market price of ADSs in the United States.
The majority of our common stock traded outside of Japan is
traded on the National Market of NASDAQ.

ADRs, each evidencing one or more ADSs, were
originally issued pursuant to a Deposit Agreement in May 1963,
as amended from time to time, that we entered into with Citibank
N.A. of New York as Depositary and the holders of the ADRs.

118



---



##### 



The following table provides for the periods
indicated the reported high and low closing sales prices of our
common stock on the TSE, and the reported high and low closing
bid price quotations per ADS on the National Market of NASDAQ:

|                            |                |                 |   |                   |  |      |   |     |  |  |   |        |  |  |   |        | 
|--------------------------- | -------------- | --------------- | - | ----------------- |  | ---- | - | --- |  |  | - | ------ |  |  | - | ------ | 
|                            |                |                 |   |                  
|                            |                | TSE             |   | NASDAQ           
|                            |                |                 |   |                  
|                            |                |                 |   |                  
|                            |                | Price per Share |   |                  
|                            |                | of Common       |   | Price per ADS    
|                            |                | Stock (Yen)     |   | (U.S. dollars)(1)
|                            |                |                 |   |                  
|                            |                | High            |   | Low               |  | High |   | Low
|                            |                |                 |   |                   |  |      |   |    
|Year ended March 31:        |                |                 |   |                   |  |      |   |     |  |  |   |        |  |  |   |       
|                            | 2000           |                 | ¥ | 1,019             |  |      | ¥ | 670 |  |  | $ | 164.75 |  |  | $ | 122.38 | 
|                            | 2001           |                 |   | 851               |  |      |   | 605 |  |  |   | 161.50 |  |  |   | 98.00  | 
|                            | 2002           |                 |   | 926               |  |      |   | 575 |  |  |   | 152.13 |  |  |   | 91.00  | 
|                            | 2003           |                 |   | 910               |  |      |   | 531 |  |  |   | 146.75 |  |  |   | 89.40  | 
|                            | 2004           |                 |   | 946               |  |      |   | 541 |  |  |   | 181.50 |  |  |   | 90.90  | 
|Year ended March 31, 2003:  |                |                 |   |                   |  |      |   |     |  |  |   |        |  |  |   |       
|                            | First quarter  |                 | ¥ | 910               |  |      | ¥ | 756 |  |  | $ | 146.75 |  |  | $ | 113.50 | 
|                            | Second quarter |                 |   | 825               |  |      |   | 603 |  |  |   | 135.00 |  |  |   | 100.42 | 
|                            | Third quarter  |                 |   | 636               |  |      |   | 531 |  |  |   | 103.01 |  |  |   | 89.40  | 
|                            | Fourth quarter |                 |   | 679               |  |      |   | 550 |  |  |   | 111.50 |  |  |   | 91.40  | 
|Year ended March 31, 2004:  |                |                 |   |                   |  |      |   |     |  |  |   |        |  |  |   |       
|                            | First quarter  |                 | ¥ | 629               |  |      | ¥ | 541 |  |  | $ | 106.59 |  |  | $ | 90.90  | 
|                            | Second quarter |                 |   | 800               |  |      |   | 620 |  |  |   | 140.50 |  |  |   | 106.76 | 
|                            | Third quarter  |                 |   | 903               |  |      |   | 727 |  |  |   | 162.77 |  |  |   | 136.00 | 
|                            | Fourth quarter |                 |   | 946               |  |      |   | 770 |  |  |   | 181.50 |  |  |   | 150.80 | 
|Year ending March 31, 2005: |                |                 |   |                   |  |      |   |     |  |  |   |        |  |  |   |       
|                            | First quarter  |                 | ¥ | 1,010             |  |      | ¥ | 773 |  |  | $ | 191.11 |  |  | $ | 137.50 | 
|Month of:                   |                |                 |   |                   |  |      |   |     |  |  |   |        |  |  |   |       
|                            | March 2004     |                 | ¥ | 946               |  |      | ¥ | 869 |  |  | $ | 181.50 |  |  | $ | 159.00 | 
|                            | April 2004     |                 |   | 1,010             |  |      |   | 910 |  |  |   | 191.11 |  |  |   | 168.00 | 
|                            | May 2004       |                 |   | 886               |  |      |   | 773 |  |  |   | 169.00 |  |  |   | 137.50 | 
|                            | June 2004      |                 |   | 884               |  |      |   | 807 |  |  |   | 161.25 |  |  |   | 147.98 | 
|                            | July 2004      |                 |   | 853               |  |      |   | 801 |  |  |   | 157.40 |  |  |   | 144.45 | 
|                            | August 2004    |                 |   | 905               |  |      |   | 840 |  |  |   | 165.50 |  |  |   | 153.01 | 



|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | All fractional figures of the prices per ADS are
    rounded to the nearest two decimal points.

Share prices on Japanese stock exchanges are
determined on a real-time basis by the equilibrium between bids
and offers. These exchanges set daily price limits, which limit
the maximum range of fluctuation within a single trading day.
Daily price limits are set according to the previous days
closing price or special quote. 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. Consequently, an investor
wishing to sell at a price above or below the relevant daily
limit may not be able to sell his shares at such price on a
particular trading day, or at all.

On September 17, 2004, the closing sales
price per share of our common stock on the TSE was ¥919,
and the closing sales price per ADS on The NASDAQ National
Market was U.S.$169.48.




B.     Plan
of Distribution.

Not applicable.




C.     Markets.

See Item 9.A. Offer and Listing
Details.




D.     Selling
Shareholders.

Not applicable.




E.     Dilution.

Not applicable.

119



---



##### 






F.     Expenses
of the Issue.

Not applicable.




Item 10.     Additional
Information.



A.     Share
Capital.

Not applicable.




B.     Memorandum
and Articles of Association.



| |             
| | ------------
| | Organization

Mitsui is a corporation (kabushiki kaisha)
incorporated in Japan under the Commercial Code of Japan (the
Commercial Code). It is registered in the Commercial
Register (shogyo tokibo) maintained by the Tokyo Legal
Affairs Bureau and several other registry offices of the
Ministry of Justice.



| |                     
| | --------------------
| | Objects and Purposes

Article 2 of Mitsuis Articles of
Incorporation provides that our objects are to engage in the
following business:



|   |                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Foreign trading business, purchasing and selling
    business, wholesaling business, agency business and brokerage
    business, relating to the following commodities:



| |      |                                                                                                                                                                                                                                                                                                                                 
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)  | Ferrous and non-ferrous metals and their raw
    materials and manufactured goods, and minerals.                                                                                                                                                                                                                                
|
| | (2)  | Coal, petroleum, natural gas and other fuels and
    their by-products.                                                                                                                                                                                                                                                         
|
| | (3)  | All kinds of machines and appliances (including
    measuring instruments and medical apparatus), equipment
    including manufacturing equipment, communications equipment and
    antipollution equipment, rolling stock and vehicles, ships and
    boats, aerospace equipment and aircraft, and parts for the
    foregoing.
|
| | (4)  | All kinds of chemical products, salt,
    fertilizers, high-pressure gas, explosives, pharmaceuticals
    (including medicines, non-medicinal drugs, medicine for
    veterinary use, narcotics, powerful poison and poison), radio
    isotope, toilet preparations and their raw materials.                                   
|
| | (5)  | Cereals, sugar, oils and fats, feeds and their
    raw materials; livestocks, agricultural, dairy and marine
    products, processed foods, alcoholic beverage and other
    foodstuffs and drinks.                                                                                                                             
|
| | (6)  | All kinds of textile products and their raw
    materials.                                                                                                                                                                                                                                                                      
|
| | (7)  | All kinds of fur products and raw fur.                                                                                                                                                                                                                                                                                          
|
| | (8)  | Lumber, cement and other building materials.                                                                                                                                                                                                                                                                                    
|
| | (9)  | Rubber, pulp, paper and their manufactured goods;
    tobacco, cigars, cigarettes and sundry goods.                                                                                                                                                                                                                             
|
| | (10) | Industrial water and drinking water.                                                                                                                                                                                                                                                                                            



|   |                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Exploration, development, manufacturing,
    processing, scrapping and recycling business relating to the
    above-mentioned commodities.                                                                                                     
|  
|3. | Acquisition, planning, preservation, utilization
    and disposition of copyrights, patent rights, other intellectual
    property rights, know-how, system technology, and other software
    and acting as intermediary in such transactions.
|  
|4. | Information processing and supply,
    telecommunications business, broadcasting business, advertising
    business, publishing business, printing, translation, and
    production and sales of audio and visual copyright products.          
|  
|5. | Forestry business, sawing business and lumber
    processing business.                                                                                                                                                                         
|  
|6. | Movable assets leasing business.                                                                                                                                                                                                               
|  
|7. | Secondhand goods business.                                                                                                                                                                                                                     

120



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##### 





|    |                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.  | Freight forwarding and agency business, land
    transportation business, marine transportation business, port
    transportation business, freight forwarding business, customs
    brokerage business, shipping agency business and warehousing
    business.
|   
|9.  | Intermediary business for life insurance,
    non-life insurance and also for insurance under the Automobile
    Liability Law.                                                                                                                                
|   
|10. | Business as contractor, design of building,
    supervision and management of various construction works.                                                                                                                                                      
|   
|11. | Acquisition, disposition, leasing, utilization in
    any other manner and development of real estate and acting as
    intermediary in such transactions.                                                                                                     
|   
|12. | Surveying and researching business relating to
    land, sea and sky.                                                                                                                                                                                          
|   
|13. | Investment in, purchasing, selling and handling
    as intermediary of negotiable instruments, etc.                                                                                                                                                            
|   
|14. | Lending money, guaranteeing and assuming debts,
    engaging in the sale and purchase of various credits, dealing in
    foreign exchange transactions, and conducting any other
    financing business.                                                       
|   
|15. | Operation and management of medical facilities,
    sports facilities and restaurants, and hotel business and travel
    business.                                                                                                                             
|   
|16. | Planning, administration and implementation of
    various events.                                                                                                                                                                                             
|   
|17. | Temporary personnel placement service business,
    training of personnel for development of appropriate job skills
    and qualifications, personnel guidance and training business.                                                                          
|   
|18. | Maintenance and management of real estate.                                                                                                                                                                                                                     
|   
|19. | Business as investor, commodities investment
    dealer, commodities investment adviser, trustee for investment
    trusts, asset manager for investment corporations.                                                                                         
|   
|20. | Generation, supply, and sale or purchase of
    electricity.                                                                                                                                                                                                   
|   
|21. | Provision of accountancy services.                                                                                                                                                                                                                             
|   
|22. | Buying, selling, and derivative transactions for
    greenhouse effect gas emissions rights and related intermediary
    services.                                                                                                                             
|   
|23. | Agent and intermediary for credit cards
    application.                                                                                                                                                                                                       
|   
|24. | Consultancy business relating to the foregoing
    items.                                                                                                                                                                                                      
|   
|25. | Other lines of business relating to any of the
    foregoing items.                                                                                                                                                                                            

Directors

Mitsuis Articles of Incorporation do not
have provisions with respect to: (a) a Directors
power to vote on a proposal, arrangement or contract in which
the Director is materially interested; (b) the
Directors power, in the absence of an independent quorum,
to vote compensation to themselves or any members of their body;
(c) the borrowing powers exercisable by the Directors and
how such borrowing powers can be varied; (d) the retirement
or non-retirement of Directors under an age limit requirement,
or (e) the number of shares, if any, required for
Directors qualification.

Under the Commercial Code, unless approved by the
Board of Directors, the Directors must refrain from effecting
any transaction with a company on his or her behalf or on that
of a third person or otherwise effecting with a person other
than the Director a transaction in which interests are contrary
between a company and the Director, and any Director who has a
material interest in the subject matter of a resolution to be
taken by the Board of Directors cannot vote in such resolution.
The total amounts of remuneration to Directors and that to
Corporate Auditors are subject to the approval of the general
meeting of shareholders and within such authorized amounts, the
Board of Directors and the Board of Corporate Auditors are
respectively authorized to determine the compensation to each
Director and Corporate Auditor.

The Commercial Code specifically requires the
approval of the Board of Directors for a company to borrow a
large amount of money. The Commercial Code does not specifically
provide for what constitutes a large amount in these
contexts. It has been the general practice of Mitsuis
Board of Directors to adopt an individual resolution for a
borrowing in excess of certain amount determined by the Board of
Directors to be a large amount for Mitsui. The
Commercial Code has no provision with respect to: retirement or
non-

121



---



##### 



retirement of directors under an age limit
requirement; and the Commercial Code prohibits any corporation
from requiring a qualification share for a Director.




| |             
| | ------------
| | Common Stock

Set forth below is information relating to
Mitsuis common stock, including brief summaries of the
relevant provisions of Mitsuis Articles of Incorporation
and Share Handling Regulations adopted by Mitsuis Board of
Directors, as currently in effect, and of the Commercial Code
and related legislation.



| |                   
| | ------------------
| | Authorized capital

Article 5 of the Mitsuis Articles of
Incorporation provides that the total number of shares
authorized to be issued by Mitsui is two billion
five hundred million (2,500,000,000) shares.

Under Mitsuis Articles of Incorporation,
currently in effect, only shares of common stock are issuable
and 1,583,674,837 shares of common stock (including
treasury stock of 2,661,783 shares) were issued, fully paid
as of March 31, 2004.



| |          
| | ---------
| | Dividends

The Mitsuis Articles of Incorporation
provide that dividends, if any, shall be paid to shareholders,
beneficial shareholders or pledgees of record as of the end of
the Mitsuis fiscal year, i.e., March 31. After the
close of the fiscal period, the Board of Directors prepares,
among other things, a proposed allocation of profits for
dividends and other purposes; this proposal is submitted to
Mitsuis Corporate Auditors and to independent certified
public accountants and then submitted for approval to
shareholders at the ordinary general meeting, which is normally
held in June of each year. In addition to provisions for
dividends, if any, and for the legal reserve and other reserves,
the allocation of profits customarily includes a bonus to
Directors. In addition to year-end dividends, the Board of
Directors may, by its resolution, declare a cash distribution
pursuant to Article 293-5 of the Commercial Code (an
interim dividend) to shareholders, beneficial
shareholders or pledgees of record as of each September 30,
without shareholders approval, but subject to the
limitations described below.

The Commercial Code provides that a company may
not make any distribution of profit by way of dividends or
interim dividends for any fiscal period unless it has set aside
in its legal reserve an amount equal to at least one-tenth of
the amount paid by way of appropriation of retained earnings for
such fiscal period until the aggregate amount of capital surplus
and legal reserve reaches one-quarter of its stated capital.
Under the Commercial Code, a company is permitted to distribute
profits by way of year-end or interim dividends out of the
excess of its net assets over the aggregate of:



| |       |                                                                                                                                                                                                                                      
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | its stated capital;                                                                                                                                                                                                                  
|
| | (ii)  | its capital surplus;                                                                                                                                                                                                                 
|
| | (iii) | its accumulated legal reserve;                                                                                                                                                                                                       
|
| | (iv)  | the legal reserve to be set aside in respect of
    the fiscal period concerned;                                                                                                                                                     
|
| | (v)   | the excess, if any, of unamortized expenses
    incurred in preparation for commencement of business and in
    connection with research and development over the aggregate of
    amounts referred to in (ii), (iii) and (iv) above;
|
| | (vi)  | the subscription price or the security deposit
    for the subscription price of new shares issued by the company;
    and                                                                                                           
|
| | (vii) | if certain assets of the company are stated at
    market value pursuant to the provisions of the Commercial Code,
    the aggregate amount by which their market value exceeds
    acquisition cost.                                

In the case of interim dividends, the net assets
are calculated by reference to the balance sheet as at the last
closing of Mitsuis accounts, but adjusted to reflect any
subsequent payment by way of appropriation of retained earnings
and transfer to legal reserve in respect thereof, provided that
interim dividends may not be paid where there is a risk that at
the end of the fiscal year there might not be any excess of net
assets over the aggregate of the amounts referred to in (i)
through (vii) above. In addition, if Mitsuis Board of
Directors has adopted a resolution for its purchase of its own
shares, the total amount of purchase price authorized by such
resolution shall, whether or not such purchase has been
effected, be deducted from the amount available for interim
dividend.

122



---



##### 



Under certain loan agreements with
government-owned banks, the lenders may require us to submit
proposals as to the payment of dividends and other
appropriations of earnings for the lenders review and
approval before presentation to the shareholders. Certain of
such agreements require the borrower, upon the request of the
lender, to reduce outstanding loans before scheduled maturity
dates when the lender considers that Mitsui is able to reduce
such loans through increased earnings or through the proceeds
from the sale of common stock or bonds and notes. During the
fiscal years ended March 31, 2004 and 2003, Mitsui did not
receive any such requests, and there is no expectation that any
such requests will be made.

In Japan the ex-dividend date and the
record date for dividends precede the date of determination of
the amount of the dividends to be paid.

Under the Articles of Incorporation, Mitsui is
not obligated to pay any dividends or interim dividends which
are left unclaimed for a period of three years after the date on
which they first became payable.



| |                       
| | ----------------------
| | Shareholders Meetings

Mitsui normally holds its ordinary general
meeting of shareholders in June of each year in Tokyo, Japan. In
addition, Mitsui may hold an extraordinary general meeting of
shareholders whenever necessary by giving at least two weeks
advance notice to shareholders.

Under the Commercial Code, notice of a
shareholders meeting setting forth the place, time,
purpose thereof and providing a summary of the matters to be
acted upon, must be mailed to each shareholder having voting
rights (or, in the case of a non-resident shareholder, to his or
her resident proxy or mailing address in Japan) at least two
weeks prior to the date set for the meeting. The record date for
any ordinary general meeting of shareholders of Mitsui is
March 31.

Any shareholder or group of shareholders holding
at least 3% of the total outstanding voting rights, for a
continuous period of six months or longer, may require the
convocation of a general meeting of shareholders for a
particular purpose. Unless such shareholders meeting is
convened promptly or a convocation notice of a meeting which is
to be held not later than eight weeks from the day such demand
is dispatched, the requiring shareholders may, upon obtaining
court approval, convene such shareholders meeting.

Any shareholder or group of shareholders holding
at least 300 voting rights, or 1% of the total outstanding
voting rights, for a continuous period of six months or longer,
may propose a matter to be considered at a general meeting of
shareholders by submitting a written request to a Representative
Director at least eight weeks prior to the date set for such
meeting.

To attend a shareholders meeting in person
or by proxy, shareholders must provide proof of identity upon
request. Shareholders may be represented by proxies in writing
appointed for the meeting. The representative must be
Mitsuis shareholder holding voting rights. The President
of Mitsui acts as a chairman of the general meeting of
shareholders pursuant to Mitsuis Articles of Incorporation.



| |              
| | -------------
| | Voting rights

A shareholder is entitled to one vote per unit
subject to the limitations on voting rights set forth in the
following paragraph and Unit share
systemVoting rights under the unit share system
below. Except as otherwise provided by law or by the Articles of
Incorporation, a resolution can be adopted at a general meeting
of shareholders by a majority of the voting rights represented
at the meeting. The Commercial Code and Mitsuis Articles
of Incorporation provide, however, that the quorum for the
election of Directors and Corporate Auditors shall not be less
than one-third of the total voting rights. Mitsuis
shareholders are not entitled to cumulative voting in the
election of Directors. A corporate shareholder, more than
one-quarter of whose outstanding shares are directly or
indirectly owned by Mitsui, may not exercise its voting rights
with respect to shares of Mitsui that it owns. Shareholders may
exercise their voting rights through proxies, provided that the
proxies are also Mitsuis shareholders holding voting
rights. Mitsuis shareholders also may cast their votes in
writing.

The Commercial Code provides that in order for a
company to amend the Articles of Incorporation and in certain
other instances, including a reduction of stated capital, the
removal of a Director or Corporate Auditor, dissolution, merger
or consolidation requiring shareholders resolution, the transfer
of the whole or an important part of the business, the taking
over of the whole of the business of any other corporation
requiring shareholders resolution, share exchange or share
transfer requiring shareholders resolution for the purpose of
establishing 100% parent-subsidiary relationships, splitting of
the corporation into two or more corporations requiring
shareholders resolution, any offering of new shares at a
specially favorable price (or any offering

123



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##### 



of the rights to subscribe for, or acquire its
shares at a specially favorable conditions) to any
persons other than shareholders, the quorum shall be at least
one-third of the total voting rights and the approval of the
holders of at least two-thirds of the voting rights represented
at the meeting is required (the special shareholders
resolutions); provided that any amendment to the Articles
of Incorporation reducing the number of shares constituting a
unit or eliminating the provisions for the unit of shares may be
made by the resolution of the Board of Directors rather than by
the special shareholders resolution, as set forth in
Unit share systemVoting rights under the
unit share system.




| |                    
| | -------------------
| | Subscription rights

Holders of Mitsuis shares of common stock
have no pre-emptive rights under its Articles of Incorporation.
Authorized but unissued shares may be issued at such times and
upon such terms as the Board of Directors determines, subject to
the limitations as to the offering of new shares at a
specially favorable price mentioned under
Voting rights above. The Board of Directors may,
however, determine that shareholders shall be given subscription
rights regarding a particular issue of new shares, in which case
such rights must be given on uniform terms to all shareholders
as at a record date of which not less than two weeks prior
public notice must be given. Each of the shareholders to whom
such rights are given must also be given notice of the
expiration thereof at least two weeks prior to the date on which
such rights expire.

Under the amendments to the Commercial Code which
became effective on April 1, 2002, a company may also issue
the rights to subscribe for or acquire its shares. Subscription
rights and the rights to subscribe for or acquire shares may be
made transferable or nontransferable by the Board of Directors.
Whether or not a company will make such rights generally
transferable in future rights offerings will depend upon the
circumstances at the time of such offerings.



| |                   
| | ------------------
| | Liquidation rights

In the event of Mitsuis liquidation, the
assets remaining after payment of all debts and liquidation
expenses and taxes will be distributed among shareholders in
proportion to the respective number of shares of common stock
held.



| |            
| | -----------
| | Record date

March 31 is the record date for
Mitsuis year-end dividends. The shareholders and
beneficial shareholders who are registered as the holders of the
number of shares constituting 1 unit or more whole units in
Mitsuis register of shareholders and/or beneficial
shareholders at the end of each March 31 are also entitled
to exercise shareholders voting rights at the ordinary
general meeting of shareholders with respect to the fiscal year
ending on such March 31. September 30 is the record
date for interim dividends. In addition, Mitsui may set a record
date for determining the shareholders and/or beneficial
shareholders entitled to other rights and for other purposes by
giving at least two weeks prior public notice.

The price of shares generally goes ex-dividends
or ex-rights on Japanese stock exchanges on the third business
day prior to a record date (or if the record date is not a
business day, the fourth business day prior thereto), for the
purpose of dividends or rights offerings.



| |                                         
| | ----------------------------------------
| | Repurchase by Mitsui of its Common Stock

Under the amendments to the Commercial Code which
became effective on September 25, 2003, subject to an
amendment to articles of incorporation, a board of directors is
authorized to resolve to purchase its own shares. Mitsuis
ordinary general meeting of shareholders held on June 24,
2004 resolved an amendment to the Articles of Incorporation to
that effect. Except as otherwise permitted by the Commercial
Code, Mitsui may purchase its own shares by a resolution of the
Board of Directors, provided, however, that Mitsui shall report
at the upcoming ordinary shareholders meeting the reason for its
purchase, the total number of shares and the total acquisition
amount which Mitsui may purchase, and the total amount of
purchase price referred to the above cannot exceed the amount
which can be distributed as interim dividends as above-mentioned
in Dividends, less the sum of dividends which have
been actually paid as interim dividends.

Mitsui may also acquire its own shares in
response to a shareholders request for purchase of his or
her shares representing less than 1 unit. See
Unit share systemRepurchase by Mitsui of
shares constituting less than a full unit below.

124



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##### 





| |                   
| | ------------------
| | Transfer of shares

Under the Commercial Code, the transfer of shares
is effected by delivery of share certificates but, in order to
assert shareholders rights against a company, the
transferee must have its name and address registered on a
companys register of shareholders. For this purpose,
Mitsuis shareholders are required to file their names,
addresses and seals with The Chuo Mitsui Trust and Banking
Company, Limited, which is the transfer agent for Mitsuis
shares. Foreign shareholders may file specimen signatures in
lieu of seals. Non-resident shareholders are required to appoint
a standing proxy in Japan or designate a mailing address in
Japan.

The central clearing system of share certificates
under the Law Concerning Central Clearing of Share Certificates
and Other Securities in Japan applies to the shares. Pursuant to
this system, a holder of the share is able to choose, at his/her
discretion, to participate in this system and all certificates
of the shares elected to be put into this system are deposited
with the Japan Securities Depository Center, Inc.
(JASDEC) (through a participating institution having
a clearing account with JASDEC, if the holder is not such a
participating institution) and all such shares are registered in
the name of JASDEC, on Mitsuis register of shareholders.
Each participating shareholder (beneficial
shareholder) will, in turn, be registered in the register
of Mitsuis beneficial shareholders, and be treated in the
same way as shareholders registered on Mitsuis register of
shareholders. In connection with the transfer of the shares held
under this system, entry of the share transfer in the book
maintained by JASDEC for the participating institutions shall
have the same effect as delivery of share certificates.



| |                    
| | -------------------
| | Unit share system

Pursuant to the Commercial Code, Mitsui has
adopted 1,000 shares (50 ADSs) as 1 unit of shares.
This unit share system is called
tangen-kabu-system.

Any amendment to the Articles of Incorporation
reducing the number of shares constituting a unit or eliminating
the provisions for the unit of shares may be made by a
resolution of the Board of Directors rather than by a special
shareholders resolution. The number of shares constituting 1
unit cannot exceed 1,000 or one two-hundredth (1/200) of all
issued shares.



| |                                              
| | ---------------------------------------------
| | Voting rights under the unit share
    system

Under the unit share system, shareholders shall
have one voting right for each unit of shares that they hold.
Any number of shares less than a full unit will carry no voting
rights.



| |                                                      
| | -----------------------------------------------------
| | Share certificates for less than a unit of
    shares

Under its Article of Incorporation, except as
otherwise provided in the Share Handling Regulations, Mitsui
will not issue share certificates for less than a unit of
shares. Thus, unless Mitsuis Board of Directors takes a
resolution to eliminate the provision for the unit shares from
the Articles of Incorporation or the shareholders amend the
Articles of Incorporation by a special shareholders resolution
to eliminate the provision for not to issue share certificates
for less than a unit of shares, a share certificate for any
number of shares less than a full unit will in general not be
issued. As the transfer of shares normally requires the delivery
of the share certificates, therefore, any fraction of a unit for
which no share certificates are issued is not transferable.



| |                                                                      
| | ---------------------------------------------------------------------
| | Repurchase by Mitsui of shares constituting
    less than a full unit

A holder of shares constituting less than 1 unit
may require Mitsui to purchase such shares at their market value.



| |                                                        
| | -------------------------------------------------------
| | Increase in purchase of the shares to make one
    unit

By the resolution of Mitsuis ordinary
general meeting of shareholders held on June 27, 2003,
Mitsui amended the Articles of Incorporation to add a new
provision as Article 7. Under this Article, any shareholder
who holds shares less than one unit, may request Mitsui to sell
such number of shares owned by Mitsui as are necessary to make
one unit by adding the number of shares owned by such
shareholder in accordance with the Share Handling Regulations
and the Commercial Code.

125



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##### 





| |                                                       
| | ------------------------------------------------------
| | Effect of the unit share system on holders of
    ADSs

A holder who owns ADSs evidencing less than 1,000
common shares will indirectly own less than a whole unit.
Although, as discussed above, under the unit share system
holders of less than a unit have the right to require Mitsui to
purchase their shares or sell such number of shares owned by
Mitsui as are necessary to make one unit by adding the number of
their shares, holders of ADSs that represent other than integral
multiples of whole units are unable to withdraw the underlying
shares of capital stock representing less than a unit and,
therefore, are unable, as a practical matter, to exercise the
rights to require Mitsui to purchase nor sell such underlying
shares, unless Mitsuis Articles of Incorporation are
amended to eliminate the provision not to issue share
certificates for the numbers of shares less than a whole unit.
As a result, access to the Japanese markets by holders of ADSs
through the withdrawal mechanism will not be available for
dispositions of shares in lots less than a unit. The unit share
system does not affect the transferability of ADSs, which may be
transferred in lots of any size.



| |                                       
| | --------------------------------------
| | Reporting of Substantial Shareholdings

The Securities and Exchange Law of Japan and its
related regulations require any person who has become,
beneficially and solely or jointly, a holder of more than 5% of
the total issued shares of a company listed on any Japanese
stock exchange or whose shares are traded on an over-the-counter
market in Japan, to file a report concerning such shareholdings
with the director of the relevant Local Finance Bureau of the
Ministry of Finance within five business days. With certain
exceptions, a similar report must also be made in respect of any
subsequent change of 1% or more in any such holding or of any
change in material matters set out in any previously-filed
reports. For this purpose, shares issuable or transferable to
such person upon exercise of exchangeable securities, conversion
of convertible securities or exercise of warrants or stock
acquisition rights (including those incorporated in bonds with
share subscription rights) are taken into account in determining
both the number of shares held by such holder and the
issuers total issued share capital. Copies of each report
must also be furnished to the issuer of the shares and to all
Japanese stock exchanges on which the shares are listed or, in
the case of shares traded over-the-counter, to the Japan
Securities Dealers Association.



| |                          
| | -------------------------
| | Exercise of Voting Rights

Except for the general limitation under Japanese
anti trust and anti monopoly regulations against holding of
shares of capital stock of a Japanese corporation which leads or
may lead to a restraint of trade or monopoly, and except for
general limitations under the Commercial Code or Mitsuis
Articles of Incorporation on the rights of shareholders
applicable regardless of residence or nationality, there is no
limitation under Japanese laws and regulations applicable to
Mitsui or under its Articles of Incorporation on the rights of
non-resident or foreign shareholders to hold or exercise voting
rights on the shares of common stock of Mitsui.



| |                  
| | -----------------
| | Change in Control

There is no provision in Mitsuis Articles
of Incorporation that would have an effect of delaying,
deferring or preventing a change in control of Mitsui and that
would operate only with respect to merger, consolidation,
acquisition or corporate restructuring involving Mitsui.



| |                                                                       
| | ----------------------------------------------------------------------
| | Daily Price Fluctuation Limits under Japanese
    Stock Exchange Rules

Share prices on Japanese stock exchanges are
determined on a real-time basis by the equilibrium between bids
and offers. These exchanges are order-driven markets without
specialists or market makers to guide price formation. To
prevent excessive volatility, these exchanges set daily upward
and downward price fluctuation limits for each share, based on
the previous days closing price. 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. Consequently, an investor
wishing to sell at a price above or below the relevant daily
limit may not be able to sell his or her shares at such price on
a particular trading day, or at all.

On September 17, 2004, the closing price of
our shares on the Tokyo Stock Exchange was ¥919 per share.
The following table shows the daily price limit for a stock on
the Tokyo Stock Exchange with a closing price of between
¥500 and ¥1,000 per share, as well as the daily price
limit if our per share price

126



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##### 



were to rise to between ¥1,000 and
¥1,500, or fall to between ¥200 and ¥500. Other
daily price limits would apply if our per share price moved to
other ranges.


Selected
Daily Price Limits

|                    |  |                                 |       |             |  |           |  |   |       |  |  |   |     | 
|------------------- |  | ------------------------------- | ----- | ----------- |  | --------- |  | - | ----- |  |  | - | --- | 
|                    |  |                                 |       | Maximum    
|                    |  | Previous Days Closing Price or |       | Daily Price
|                    |  | Special Quote                   |       | Movement   
|                    |  |                                 |       |            
|Greater or equal to |  | ¥                               | 200   |             |  | Less than |  | ¥ | 500   |  |  | ¥ | 80  | 
|Greater or equal to |  |                                 | 500   |             |  | Less than |  |   | 1,000 |  |  |   | 100 | 
|Greater or equal to |  |                                 | 1,000 |             |  | Less than |  |   | 1,500 |  |  |   | 200 | 

For a history of the trading price of our shares
on the Tokyo Stock Exchange, see Item 9.A. Offer and
Listing Details of this annual report.






|   |                    
|-- | -------------------
|C. | Material Contracts.

We have not been a party to any material contract
other than contracts entered into in the ordinary course of
business in the past two years.






|   |                   
|-- | ------------------
|D. | Exchange Controls.



| |                             
| | ----------------------------
| | Foreign Exchange Regulations

The Foreign Exchange and Foreign Trade Law of
Japan, as currently in effect, and the cabinet orders and
ministerial ordinances thereunder (the Foreign Exchange
Regulations) govern certain matters relating to the
acquisition and holding of the shares or the ADSs, by
Non-Residents of Japan and by Foreign
Investors as hereinafter defined.

Non-Residents of Japan are defined as
individuals who are not resident in Japan and corporations whose
principal offices are located outside Japan. Branches and other
offices of Japanese corporations located outside Japan are
regarded as Non-Residents of Japan, and branches and other
offices located within Japan of foreign corporations are
regarded as residents of Japan. Foreign Investors
are defined to be (i) individuals not resident in Japan,
(ii) corporations which are organized under the laws of
foreign countries or whose principal offices are located outside
Japan, and (iii) other corporations of which (a) 50%
or more of the shares are held directly or indirectly by (i) or
(ii) above, (b) a majority of officers consists of
Non-Residents of Japan or (c) a majority of officers having
the power of representation consists of Non-Residents of Japan.



| |                      
| | ---------------------
| | Acquisition of Shares

In general, acquisition of shares of stock of a
Japanese company listed on any Japanese stock exchange or traded
in any over-the-counter market in Japan (Listed
Shares) by a Non-Resident of Japan from a resident of
Japan is not subject to any prior filing requirements except as
described below. However, the Minister of Finance of Japan (the
MOF) and other Ministers having jurisdiction over
the business of the subject company (together, the
Ministers) may require a prior approval for any such
acquisition in certain exceptional circumstances. The resident
of Japan who transferred the shares of a Japanese company to a
Non-Resident of Japan must file a report concerning such
transfer with the MOF within 20 days after the transfer
unless such transfer is made through a bank, securities company
or financial futures trader licensed under the relevant Japanese
law or consideration of such transfer is ¥100 million
or less.

If the number of Listed Shares to be acquired, or
the number of Listed Shares that will be held as a result of
such acquisition, by a Foreign Investor (whether from a resident
of Japan, another Foreign Investor or from or through security
companies) is 10% or more of the total outstanding shares of the
subject company, the Foreign Investor must file a post facto
report with the Ministers within 15 days of the date of
acquisition. In certain exceptional cases, a prior notification
is required in respect of such an acquisition.



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Acquisition of Shares upon Exercise of
    Subscription Rights Attached to Bonds

The acquisition by a Non-Resident of Japan of
shares upon exercise of his or her rights under the bonds with
rights for subscription of new shares offered overseas is
exempted from the notification and reporting requirements
described under this Item 10.D. Exchange
Controls Acquisition of Shares above.

127



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##### 





| |     
| | ----
| | ADRs

The deposit of the shares by a Non-Resident of
Japan, the issuance of the ADRs, in exchange therefore and the
withdrawal of the underlying shares upon surrender of the ADRs
are not subject to any formalities referred to under
Acquisition of Shares above, except where as a
result of such deposit (or withdrawal) the aggregate number of
shares held by the depositary (or its nominee) or the holder
surrendering the ADRs, as the case may be, would be certain
percentage of the total outstanding shares, in which event the
relevant report is required as outlined under
Item 10. B. Memorandum and Articles of
Association Reporting of Substantial Shareholdings
and/or under this Item 10.D. Exchange Controls
Acquisition of Shares.



| |                                
| | -------------------------------
| | Dividends and Proceeds of Sales

Dividends paid on, and the proceeds of sales in
Japan of the shares held by Non-Residents of Japan may be
convertible into any foreign currency and repatriated abroad
with no limit on the amount under the Foreign Exchange
Regulations currently in effect. The acquisition of the shares
by Non-Residents of Japan by way of stock splits is not subject
to any of the aforesaid notification and confirmation
requirements.






|   |          
|-- | ---------
|E. | Taxation.

Japanese Taxation

The following is a summary of the principal
Japanese tax consequences to owners of our shares or ADSs who
are non-resident individuals or non-Japanese corporations
without a permanent establishment in Japan to which income from
our shares is attributable. The tax treatment is subject to
possible changes in the applicable Japanese laws or double
taxation conventions occurring after that date. This summary is
not exhaustive of all possible tax considerations that may apply
to a particular investor. Investors are encouraged to consult
their own tax advisers as to:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the overall tax consequences of the acquisition,
    ownership and disposition of shares or ADSs, including
    specifically the tax consequences under Japanese law;
|
| |  | the laws of the jurisdiction of which they are
    resident; and                                                                                                     
|
| |  | any tax treaty between Japan and their country of
    residence.                                                                                                     

Generally, a non-resident holder of shares or
ADSs is subject to Japanese withholding tax on dividends paid by
us. In the absence of any applicable tax treaty, convention or
agreement reducing the maximum rate of withholding tax, the rate
of Japanese withholding tax applicable to dividends paid by us
to non-resident holders is 10% for dividends to be paid between
April 1, 2003 and December 31, 2003, 7% for dividends
to be paid between January 1, 2004 and March 31, 2008,
and 15% thereafter, except for dividends paid to any individual
shareholder who holds 5% or more of the issued shares of Mitsui.
Japan has income tax treaties, conventions or agreements whereby
the maximum withholding tax rate for dividend payment is set at,
in most cases, 15% for portfolio investors, with, among other
countries, Australia, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, The Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland and the
United Kingdom. The maximum withholding rate for dividend
payments under the new U.S.-Japan tax treaty is 10%. Japanese
tax law provides in general that if the Japanese statutory rate
is lower than the maximum rate applicable under tax treaties,
conventions or agreements, the Japanese statutory rate shall be
applicable.

Stock splits are not subject to Japanese income
or corporate tax. A capitalization of retained earnings or legal
reserve by Japanese corporations is not subject to Japanese
income or corporate tax as constructive dividends in
case of no cash payment or assets delivery. A capitalization of
capital surplus is not subject to Japanese income or corporate
tax.

Non-resident holders who are entitled to a
reduced rate of Japanese withholding tax on payments of
dividends on the shares by us are required to submit an
Application Form for the Income Tax Convention regarding Relief
from Japanese Income Tax on Dividends in advance through us to
the relevant tax authority before the payment of dividends. A
standing proxy for non-resident holders may provide the
application. With respect to ADSs, this reduced rate is
applicable if the depositary or its agent submits two
Application Forms for Income Tax Convention (one prior to
payment of dividends, the other within eight months after our
fiscal year-end). To claim this reduced rate, a non-resident
holder of ADSs will be required to file proof of taxpayer
status, required by the depositary. Non-resident holders who do
not submit an application in advance will generally be entitled
to claim a refund from the relevant Japanese tax authority of
withholding taxes withheld in excess of the rate of an
applicable tax treaty. Gains derived from the sale outside Japan
of Mitsuis shares

128



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##### 



or the ADSs by Non-Residents of Japan, including
non-Japanese corporations, will not be subject to Japanese taxes
on income. Gains derived from the sale in Japan of Mitsuis
shares or the ADSs by a Non-Resident of Japan or a non-Japanese
corporation not having a permanent establishment in Japan to
which such income is attributable are, in general, not subject
to Japanese income or corporate tax.


In the case of United States investors, under the
Tax Convention, gains derived from the sale in Japan of
Mitsuis shares or the ADSs by a United States resident
individual or by a United States corporation are exempt from
Japanese income or corporation taxes, unless the resident of the
United States has a permanent establishment in Japan and such
gains are effectively connected therewith.

Japanese inheritance and gift taxes, at
progressive rates, may be payable by an individual who acquire
the shares or the ADSs as a legatee, heir or donee.

United States Taxation



| |        
| | -------
| | General

This discussion of certain U.S. federal tax
consequences only applies to U.S. holders who hold our ADSs or
common shares as capital assets for tax purposes and are not
members of a special class of holders subject to special rules,
including: dealers in securities; traders in securities who
elect to use a mark-to-market method of accounting for their
securities holdings; tax-exempt organizations; insurance
companies; persons liable for alternative minimum tax; persons
who actually or constructively own 10% or more of Mitsui voting
stock; persons who hold shares or ADSs as part of a hedging or
straddle or conversion transaction; or U.S. holders whose
functional currency is not the U.S. dollar. A U.S. holder is a
beneficial owner of shares or ADSs that is: a citizen or
resident of the United States; a domestic corporation; an estate
whose income is subject to U.S. federal income tax regardless of
its source; or a trust, if a U.S. court can exercise primary
supervision over the trusts administration and one or more
U.S. persons are authorized to control all substantial decisions
of the trust.

Moreover, the effect of any applicable U.S. state
or local tax laws is not discussed in this annual report.

For U.S. federal income tax purposes, if a person
holds ADRs evidencing ADSs, that person will be treated as the
owner of the underlying shares represented by those ADSs.
Exchanges of common shares for ADRs, and ADRs for ordinary
shares, will not be subject to U.S. federal income tax.



| |                      
| | ---------------------
| | Taxation of Dividends

Subject to the passive foreign investment company
(PFIC) rules discussed below, the gross amount of
any dividend paid by Mitsui out of its current or accumulated
earnings and profits (as determined for U.S. federal income tax
purposes) is subject to tax. For noncorporate U.S. holders,
dividends paid in taxable years beginning after
December 31, 2002 and before January 1, 2009 that
constitute qualified dividend income will be taxable at a
maximum tax rate of 15% provided that shares or ADSs were held
for more than 60 days during the 120-day period beginning
60 days before the ex-dividend date and other holding
period requirements are met. Dividends Mitsui pays with respect
to its shares or ADSs generally will be qualified dividend
income. Dividends are taxable to U.S. holders when they, in the
case of shares, or the depositary, in the case of ADSs, receive
them, either actually or constructively. The dividend will not
be eligible for the dividends-received deduction generally
allowed to U.S. corporations in respect of dividends received
from other U.S. corporations. Any distribution in excess of
current and accumulated earnings and profits (as determined for
U.S. federal income tax purposes) will be treated as a
non-taxable return of capital to the extent of a holders
basis in the ADSs or common shares and thereafter as capital
gain.

The amount of the dividend distribution that a
holder must include in his or her income will be the U.S. dollar
value of the Japanese yen payments made, determined at the spot
Japanese yen/ U.S. dollar rate on the date such dividend
distribution is includible in such holders income,
regardless of whether the payment is in fact converted into U.S.
dollars. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date a holder
includes the dividend payment in income to the date such payment
is converted into U.S. dollars will be treated as ordinary
income or loss and will not be eligible for the special tax rate
applicable to qualified dividend income. Such gain or loss will
generally be income or loss from sources within the United
States for foreign tax credit limitation purposes.

For foreign tax credit purposes, the dividend
will be income from sources outside the United States, but
generally will be passive income or financial
services income which is treated separately from other
types of income for purposes of computing the foreign tax credit
allowable to a holder. No U.S. foreign tax

129



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##### 



credit will be allowed to U.S. holders of common
shares or ADSs in respect of any personal property or similar
tax imposed by Japan (or any taxing authority thereof or
therein). Special rules apply in determining the foreign tax
credit limitation with respect to dividends that are subject to
the maximum 15% tax rate.


Distributions of additional shares or rights to
subscribe for additional shares to U.S. holders with respect to
their common shares or ADSs that are made as part of a pro rata
distribution to all shareholders generally will not be subject
to U.S. federal income tax.



| |                          
| | -------------------------
| | Taxation of Capital Gains

Subject to the PFIC rules discussed below, a U.S.
holder who sells or otherwise disposes of common shares or ADSs
will recognize gain or loss for U.S. federal income tax purposes
in an amount equal to the difference between the U.S. dollar
value of the amount realized and his or her tax basis
(determined in U.S. dollars) in such shares or ADSs. Capital
gain of a noncorporate U.S. holder that is recognized on or
after May 6, 2003 and before January 1, 2009 is
generally taxed at a maximum rate of 15% where the holder has a
holding period greater than one year. The gain or loss will
generally be income or loss from sources within the U.S. for
foreign tax credit limitation purposes.



| |           
| | ----------
| | PFIC Rules

Mitsui does not believe that the common shares or
ADSs will be treated as stock of a PFIC for United States
federal income tax purposes, but this conclusion is a factual
determination that is made annually and thus is subject to
change. If Mitsui were treated as a PFIC, unless a U.S. holder
elected to be taxed annually on a mark-to-market basis with
respect to the common shares or ADSs, gain realized on the sale
or other disposition of the shares or ADSs would in general not
be treated as capital gain. Instead a U.S. holder would be
treated as if he or she had realized such gain and certain
excess distributions ratably over the holding period
for the shares or ADSs and would be taxed at the highest tax
rate in effect for each such year to which the gain was
allocated, in addition to which an interest charge in respect of
the tax attributable to each such year would apply. In addition,
dividends received from Mitsui would not be eligible for the
special tax rates applicable to qualified dividend income if
Mitsui were a PFIC either in the taxable year of the
distribution or the preceding taxable year, but instead would be
taxable at rates applicable to ordinary income.






|   |                             
|-- | ----------------------------
|F. | Dividends and Paying Agents.

Not applicable.






|   |                      
|-- | ---------------------
|G. | Statement by Experts.

Not applicable.






|   |                      
|-- | ---------------------
|H. | Documents on Display.

We are subject to the informational requirements
of the Securities Exchange Act of 1934 and, in accordance
therewith, we file annual reports on Form 20-F within six
months of our fiscal year-end and furnish other reports and
information on Form 6-K with the Securities and Exchange
Commission. These reports and other information can be inspected
at the public reference room at the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. You can also obtain copies of such material by mail from
the public reference room of the Securities and Exchange
Commission at prescribed fees. You may obtain information on the
operation of the Securities and Exchange Commission public
reference room by calling the Securities and Exchange Commission
in the United States at 1-800-SEC-0330. You can also access to
the documents filed via the Electronic Data Gathering, Analysis
and Retrieval, or EDGAR, system on the website of the Securities
and Exchange Commission (http://www.sec.gov).






|   |                        
|-- | -----------------------
|I. | Subsidiary Information.

Not applicable.






|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 11. | Quantitative and Qualitative Disclosures about
    Market Risk.

In the normal course of business, we are exposed
to many risks arising from the potential change in financial and
other instruments values caused by fluctuations in
interest rates, foreign currency exchange rates, commodity
prices and equity prices. We maintain a comprehensive risk
management policy to use derivative financial and commodity
instruments, including foreign exchange forward contracts,
interest rate

130



---



##### 



and currency swap agreements, commodity futures,
forwards, options and swap agreements, however, these risks are
not fully insulated. To a lesser degree, Mitsui and certain
subsidiaries also enter into derivative financial and commodity
instruments for trading purposes within position limits and loss
limits (trading limits) strictly set under the risk management
structure, which is described below.


We have established market risk management
procedures at several levels throughout an organization. Chief
Operating Officers of operating segments have the first line of
responsibility for managing market risk within prescribed
limits. These officers have in-depth knowledge of the primary
sources of risk in their individual markets and the instruments
available to hedge their exposures.

The General Accounting & Risk Management
Division within our headquarters monitors the company-wide
process of risk management and compliance with trading limits
set for operating segments. The General Accounting & Risk
Management Division also provides general oversight with respect
to the market risk management process for operating segments.

Interest Rate Risk

Our normal business activities expose us to
market risk arising from changes in interest rates. To manage
our interest rate risk, we enter into interest rate swap
agreements and interest rate and currency swap agreements in
order to modify and match the interest rate characteristics of
our assets and liabilities.

Foreign Currency Exchange Rate Risk

Our global operations in many countries generate
foreign currency exposures related to imports, exports and
financing in currencies other than the local currency. We use
derivative instruments such as foreign exchange forward
contracts, currency swap agreements, and interest rate and
currency swap agreements to hedge market risk arising from the
changes in foreign exchange rates associated with existing
assets, obligations, future cash flows from receivables and
payables resulting from selling and purchasing activities,
long-term financing transactions, identifiable commitments and
forecasted transactions denominated in foreign currencies.

Commodity Price Risk

As major participants in global commodities
markets, we trade in physical precious and base metals, energy
products (crude oil and refined oil products) and agricultural
products (wheat, coffee, sugar and others), and utilize a
variety of derivatives related to these commodities, such as
futures, forwards, swaps and options. Derivatives on those
commodities are often used to hedge price movements in the
underlying physical inventory or future inventory needs and to
fix the expected future cash flows from forecasted transactions.
To facilitate hedging, we are often required to take positions
in the commodity markets in the form of future, forward, swap
and option contracts involving those commodities.

Equity Price Risk

We hold stocks issued by our business partners
including, amongst others, our customers and suppliers as
marketable securities for the promotion of business and
strategic objectives. We also hold other marketable securities,
such as of banking institutions, for investment purposes. We are
exposed to equity price risk inherent in these stocks. We do not
take continuous hedging measures against the market exposures on
those securities.

Risk Management of Derivative Financial
Instruments and Other Financial Instruments

As an independent monitoring and advisory
division for currency and interest rate risks to which we are
exposed, the General Accounting & Risk Management Division
obtains and analyzes detailed information on financial
transactions, measures the risks and reports them directly to a
member of senior management. For financial instruments entered
into for trading purposes, such as interest rate swap
transactions, foreign exchange forward contracts, interest rate
futures and others, the General Accounting & Risk Management
Division measures daily Value-at-Risk (VaR) and
conducts back-testing, validating their risk model by comparing
its assumptions with actual results semi-annually.

In addition to a policy that the counterparties
in most derivative transactions are strictly limited to highly
rated financial institutions, the General Accounting & Risk
Management Division continuously evaluates the creditworthiness
and the level of transactions with individual institutions and
estimates our current and

131



---



##### 



potential exposure, or the cost of replacing
existing swaps and other transactions, in the event that a
counterparty is unable to meet its obligations.


Risk Management of Derivative Commodity
Instruments

Each of our operating segments has a general
framework for measuring portfolio risk which is based on
aggregate risk limits approved by our management and credit risk
of counterparties. The transactions are confirmed with
counterparties and are recorded by independent risk management
sections. The results of trading are periodically reported to
our Executive Officers in charge of risk management.

In order to strengthen our risk monitoring
process, particularly by sharing and exchanging information on
newly developed risk measurement methods, we periodically hold
company-wide conferences among the concerned operating segments
and related divisions in the corporate headquarters.

VaR

We use the VaR method to measure market risk. VaR
is a statistical measure of the potential maximum loss in the
fair value of a portfolio resulting from adverse market
movements in underlying risk factors, over a defined period,
within a certain confidence level. As VaR incorporates
historical data regarding changes in market risk factors, our
actual results may differ materially from the calculations
below. The sum of the VaRs for the risk categories do not
represent our aggregate VaR, because market risk factors such as
interest rates and currency exchange rates are partially
correlated to offset a portion of the simple sum of the VaRs. At
March 31, 2004 and 2003, we estimated VaR in one day with
respect to the interest rate, foreign currency exchange rate and
commodity price risks (with some exceptions to certain commodity
price risks in which case VaRs in five days are used) using a
variance-covariance method and a historical simulation approach
with a confidence level of 97.7%.

VaRs for Non-Trading Activities

The following table sets forth the year-end,
high, low and average VaR figures of interest rate risk, foreign
currency exchange rate risk and commodity price risk for
non-trading purposes, for the years ended March 31, 2004
and 2003.

The following VaR figures do not reflect the full
effect of the hedging activities related to all of the
underlying exposures such as the effect of receivables, payables
and cash flows from anticipated transactions that are hedged
items.

Interest rate risk consists of the net risk
position based on the management of our assets and liabilities.
Foreign exchange rate risk consists of the net risk position of
transactions denominated in foreign currencies, but mainly in
U.S. dollars. Commodity price risk consists of the net risk
position of commodity positions and commodity derivative
instruments utilized to hedge the commodity price risk
associated with physical commodity inventories and firm
commitments.

|                                    |  |                      |       |      |  |     |       |         |  |          |       |      |  |     |       |         |  |   |     |  |  |   |       |  |  |   |     |  |  |   |     | 
|----------------------------------- |  | -------------------- | ----- | ---- |  | --- | ----- | ------- |  | -------- | ----- | ---- |  | --- | ----- | ------- |  | - | --- |  |  | - | ----- |  |  | - | --- |  |  | - | --- | 
|                                    |  |                     
|                                    |  | Millions of Yen     
|                                    |  |                     
|                                    |  |                     
|                                    |  | Year ended March 31,
|                                    |  |                     
|                                    |  |                      |       |     
|                                    |  | 2004                 |       | 2003
|                                    |  |                      |       |     
|                                    |  | Year End             |       | High |  | Low |       | Average |  | Year End |       | High |  | Low |       | Average
|                                    |  |                      |       |      |  |     |       |         |  |          |       |      |  |     |       |        
|Interest rate risk                  |  | ¥                    | 1,096 |      |  | ¥   | 1,453 |         |  | ¥        | 197   |      |  | ¥   | 983   |         |  | ¥ | 245 |  |  | ¥ | 392   |  |  | ¥ | 210 |  |  | ¥ | 293 | 
|Foreign currency exchange rate risk |  |                      | 535   |      |  |     | 1,179 |         |  |          | 402   |      |  |     | 738   |         |  |   | 921 |  |  |   | 1,134 |  |  |   | 660 |  |  |   | 876 | 
|Commodity price risk                |  |                      | 1,336 |      |  |     | 1,336 |         |  |          | 1,089 |      |  |     | 1,207 |         |  |   | 866 |  |  |   | 1,256 |  |  |   | 693 |  |  |   | 936 | 

VaRs for Trading Activities

Mitsui and certain trading subsidiaries conduct
trading activities within well-defined position limits and loss
limits strictly set under the risk management structure
mentioned above. The results of the transactions and positions
are confirmed, monitored daily and reported to management by
independent sections to eliminate or reduce unacceptable losses
from the trading activities. The items traded by Mitsui and
certain subsidiaries are principally foreign exchange contracts,
interest rate swap agreements and commodity futures, forwards,
swaps and options related to base metals and agricultural
products.

132



---



##### 



The following table sets forth the year end,
high, low, and average VaR figures of interest rate risk,
foreign exchange rate risk and commodity price risk, for trading
purposes, for the years ended March 31, 2004 and 2003.

|                                    |  |                      |       |      |  |     |       |         |  |          |       |      |  |     |       |         |  |   |       |  |  |   |       |  |  |   |       |  |  |   |       | 
|----------------------------------- |  | -------------------- | ----- | ---- |  | --- | ----- | ------- |  | -------- | ----- | ---- |  | --- | ----- | ------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                    |  |                     
|                                    |  | Millions of Yen     
|                                    |  |                     
|                                    |  |                     
|                                    |  | Year ended March 31,
|                                    |  |                     
|                                    |  |                      |       |     
|                                    |  | 2004                 |       | 2003
|                                    |  |                      |       |     
|                                    |  | Year End             |       | High |  | Low |       | Average |  | Year End |       | High |  | Low |       | Average
|                                    |  |                      |       |      |  |     |       |         |  |          |       |      |  |     |       |        
|Interest rate risk                  |  | ¥                    | 1     |      |  | ¥   | 107   |         |  | ¥        | 1     |      |  | ¥   | 48    |         |  | ¥ | 44    |  |  | ¥ | 84    |  |  | ¥ | 36    |  |  | ¥ | 61    | 
|Foreign currency exchange rate risk |  |                      | 157   |      |  |     | 157   |         |  |          | 1     |      |  |     | 65    |         |  |   | 0     |  |  |   | 201   |  |  |   | 0     |  |  |   | 89    | 
|Commodity price risk                |  |                      | 2,106 |      |  |     | 2,496 |         |  |          | 1,531 |      |  |     | 2,035 |         |  |   | 2,337 |  |  |   | 2,376 |  |  |   | 1,979 |  |  |   | 2,170 | 

Tabular Presentation of Equity Price
Risk

The cost, fair value and unrealized holding net
gains (losses) on marketable equity securities by industry
at March 31, 2004 and 2003 were as follows:

|                                    |  |                      |         |            |  |            |         |           |  |            |         |          |  |   |         |  |  |   |         |  |  |   |        |  
|----------------------------------- |  | -------------------- | ------- | ---------- |  | ---------- | ------- | --------- |  | ---------- | ------- | -------- |  | - | ------- |  |  | - | ------- |  |  | - | ------ | -
|                                    |  |                     
|                                    |  | Millions of Yen     
|                                    |  |                     
|                                    |  |                     
|                                    |  | Year ended March 31,
|                                    |  |                     
|                                    |  |                      |         |           
|                                    |  | 2004                 |         | 2003      
|                                    |  |                      |         |           
|                                    |  |                      |         |            |  | Unrealized
|                                    |  |                      |         | Unrealized |  |            |         | Holding  
|                                    |  |                      |         | Holding    |  |            |         | Net Gains
|                                    |  | Cost                 |         | Fair Value |  | Net Gains  |         | Cost      |  | Fair Value |         | (Losses)
|                                    |  |                      |         |            |  |            |         |           |  |            |         |         
|Manufacturing                       |  | ¥                    | 101,307 |            |  | ¥          | 172,984 |           |  | ¥          | 71,677  |          |  | ¥ | 80,046  |  |  | ¥ | 91,326  |  |  | ¥ | 11,280 |  
|Commercial, finance and real estate |  |                      | 43,166  |            |  |            | 68,374  |           |  |            | 25,208  |          |  |   | 22,508  |  |  |   | 21,185  |  |  |   | (1,323 | )
|Transport and telecommunication     |  |                      | 11,150  |            |  |            | 15,589  |           |  |            | 4,439   |          |  |   | 17,160  |  |  |   | 18,527  |  |  |   | 1,367  |  
|Energy, service and others          |  |                      | 22,986  |            |  |            | 40,071  |           |  |            | 17,085  |          |  |   | 20,761  |  |  |   | 25,108  |  |  |   | 4,347  |  
|                                    |  |                      |         |            |  |            |         |           |  |            |         |          |  |   |         |  |  |   |         |  |  |   |        |  
|Total                               |  | ¥                    | 178,609 |            |  | ¥          | 297,018 |           |  | ¥          | 118,409 |          |  | ¥ | 140,475 |  |  | ¥ | 156,146 |  |  | ¥ | 15,671 |  
|                                    |  |                      |         |            |  |            |         |           |  |            |         |          |  |   |         |  |  |   |         |  |  |   |        |  

For the year ended March 31, 2004, the
general increase in unrealized holding gains compared to the
year ended March 31, 2003 was due to the overall
improvement in Japanese stock prices. The decrease in cost and
fair value of the transport and telecommunication sector was
mainly due to sales of stock of the satellite service industry.
The increase in cost and fair value of the manufacturing sector
was due to new investment in the industry such as chemical and
motor vehicles. The commercial, finance and real estate sector
showed the increase in cost and fair value was also due to new
investment categorized as retail industry and finance industry.

Maturities and fair values of debt securities
classified as available-for-sale and held-to-maturity at
March 31, 2004 were as follows:

|                        |                                |                    |   |                  |         |          |   |            |         |  |   |       |       |  |   |       |       | 
|----------------------- | ------------------------------ | ------------------ | - | ---------------- | ------- | -------- | - | ---------- | ------- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                        |                                |                   
|                        |                                | Millions of Yen   
|                        |                                |                   
|                        |                                |                    |   |                 
|                        |                                | Available-for-sale |   | Held-to-maturity
|                        |                                |                    |   |                 
|                        |                                | Carrying           |   | Aggregate        |         | Carrying |   | Aggregate 
|                        |                                | Amount             |   | Fair Value       |         | Amount   |   | Fair Value
|                        |                                |                    |   |                  |         |          |   |           
|Contractual maturities: |                                |                    |   |                  |         |          |   |            |         |  |   |       |       |  |   |      
|                        | Within 1 year                  |                    | ¥ | 182,221          |         |          | ¥ | 182,303    |         |  | ¥ | 1,785 |       |  | ¥ | 1,785 |      
|                        | After 1 year through 5 years   |                    |   | 22,404           |         |          |   | 22,445     |         |  |   | 314   |       |  |   | 314   |      
|                        | After 5 years through 10 years |                    |   | 1,801            |         |          |   | 1,800      |         |  |   | 7     |       |  |   | 7     |      
|                        | After 10 years                 |                    |   | 3                |         |          |   | 3          |         |  |   |      |       |  |   |      |      
|                        |                                |                    |   |                  |         |          |   |            |         |  |   |       |       |  |   |      
|                        |                                | Total              |   | ¥                | 206,429 |          |   | ¥          | 206,551 |  |   | ¥     | 2,106 |  |   | ¥     | 2,106 | 
|                        |                                |                    |   |                  |         |          |   |            |         |  |   |       |       |  |   |      

The actual maturities may differ from the
contractual maturities shown above because certain issuer may
have the right to redeem debt securities before their maturity.

133



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##### 








|         |                                                            
|-------- | -----------------------------------------------------------
|Item 12. | Description of Securities Other than Equity
    Securities.

Not applicable.




PART II





|         |                                                     
|-------- | ----------------------------------------------------
|Item 13. | Defaults, Dividend Arrearages and
    Delinquencies.

None.






|         |                                                                                  
|-------- | ---------------------------------------------------------------------------------
|Item 14. | Material Modifications to the Rights of
    Security Holders and Use of Proceeds.

None.






|         |                         
|-------- | ------------------------
|Item 15. | Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of its
principal executive and principal financial officer, has
performed an evaluation of the effectiveness of disclosure
controls and procedures (as defined by Rule 13a-15(e) under
the U.S. Securities Exchange Act of 1934) as of the end of the
period covered by this report. Based upon that evaluation, our
principal executive and principal financial officer concluded
that the disclosure controls and procedures were effective as of
the end of the period covered by this report.

Changes in Internal Control over Financial
Reporting

There was no change in our internal control over
financial reporting that occurred during the period covered by
this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.

Subsequent to the end of the period covered by
this report, we have begun implementing and are continuing to
implement remedial measures. This is in response to our
managements determination that, at a subsidiary of Mitsui
Automotive Europe B.V. (MAE), which is wholly-owned
by Mitsui, there were internal control deficiencies relating to
improper transactions engaged in by an employee of the
subsidiary, although the deficiencies did not cause our
disclosure control and procedures to fail to be effective. The
remedial measures implemented and to be implemented at the above
subsidiary include strengthening our monitoring of the
subsidiarys operating activities through a newly
established administration department and enhancing
comprehensive and daily control over its credit management.



|         |           
|-------- | ----------
|Item 16. | [Reserved]





|          |                                  
|--------- | ---------------------------------
|Item 16A. | Audit Committee Financial Expert.

Our Board of Corporate Auditors has determined
that Hiroshi Matsuura and Hideharu Kadowaki qualify as an
audit committee financial expert as defined in this
Item 16A serving on our Board of Corporate Auditors.

Mr. Matsuura joined Mitsui in 1970. Since
then he had always worked in the field of management of credit
risk, country risk, investment risk and market risk and was
appointed as General Manager of the Corporate Risk Management
Division before having been elected as one of our Corporate
Auditors. Through his career, he has acquired, among other
things, experience auditing, analyzing and evaluating financial
statements of a great number of companies to be granted our
credit including loan, guarantee and investment for various
transactions.

Mr. Kadowaki was elected as one of our
Corporate Auditors at the ordinary general meeting of
shareholders held in June 2004. His main career has been in the
field of financial risk management at Mitsui Bank, Sakura Bank,
Sumitomo Mitsui Banking Corporation, and Sumitomo Mitsui
Financial Group, Inc. His final position in the bank was an
executive vice president who, while overseeing the entire
operation of the bank, was responsible for risk management and
internal auditing.






|          |                
|--------- | ---------------
|Item 16B. | Code of Ethics.

Mitsui maintains Business Conduct Guidelines for
Employees and Officers, applicable to all employees and
officers. The Business Conduct Guidelines set forth provisions
relating to compliance with applicable laws and regulations,
honest and ethical conduct including the handling of conflicts
of interest.

134



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##### 



In addition, Mitsui adopted a Code of
Ethics as a supplement to the Business Conduct Guidelines.
The Code of Ethics applies to Mitsuis financial
professionals including our principal executive officer,
principal financial officer, principal accounting officer and
persons performing similar functions.

Both the Business Conduct Guidelines for
Employees and Officers and the Code of Ethics are filed as
exhibits to this annual report.






|          |                                            
|--------- | -------------------------------------------
|Item 16C. | Principal Accountant Fees and
    Services.

Deloitte Touche Tohmatsu (formerly Tohmatsu &
Co.), a Japanese member firm of Deloitte Touche Tohmatsu (Swiss
Verein), has been our principal accountant for SEC reporting
purposes.

The table below shows aggregate fees billed for
each of the last two fiscal years for professional services
rendered to Mitsui and its subsidiaries by Deloitte Touche
Tohmatsu and other member firms of Deloitte Touche Tohmatsu
(Swiss Verein).

|                      |  |                      |       |      |  |   |       | 
|--------------------- |  | -------------------- | ----- | ---- |  | - | ----- | 
|                      |  |                     
|                      |  | Millions of Yen     
|                      |  |                     
|                      |  |                     
|                      |  | Year ended March 31,
|                      |  |                     
|                      |  | 2003                 |       | 2004
|                      |  |                      |       |     
|Audit fees(1)         |  | ¥                    | 1,119 |      |  | ¥ | 1,223 | 
|Audit-related fees(2) |  |                      | 136   |      |  |   | 143   | 
|Tax Fees(3)           |  |                      | 373   |      |  |   | 430   | 
|All other fees(4)     |  |                      | 122   |      |  |   | 181   | 
|                      |  |                      |       |      |  |   |       | 
|Total                 |  | ¥                    | 1,750 |      |  | ¥ | 1,977 | 
|                      |  |                      |       |      |  |   |       | 



|    |                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees are fees billed for professional
    services rendered by the principal accountant for the audit of
    our annual financial statements and services that are provided
    by the accountant in connection with statutory and regulatory
    filings or engagements.                                                                                    
|   
|(2) | Audit-related fees are fees billed for assurance
    and related services that are reasonably related to the
    performance of the audit or review of our financial statements,
    such as assessment of internal accounting controls and due
    diligence services in connection with potential business
    acquisitions, that are not reported in audit fees.
|   
|(3) | Tax fees are fees billed for professional
    services rendered by the principal accountant for tax
    compliance, tax advice and tax planning.                                                                                                                                                                                                                   
|   
|(4) | All other fees are fees billed for services
    provided by the principal accountant, other than services
    reported in audit fees, audit-related fees and tax fees, such as
    advisory services for risk management and regulatory matters.                                                                                                                   

Beginning with the year ended March 31,
2004, the first fiscal year of application of
paragraph (c)(7) of Rule 2-01 of Regulation S-X,
our Board of Corporate Auditors has adopted pre-approval
policies and procedures requiring pre-approval by the Board of
Corporate Auditors for all audit and non-audit services provided
by the principal accountant. All of the services provided by the
principal accountant for the year ended March 31, 2004 were
approved by our Board of Corporate Auditors pursuant to the
pre-approval policies and procedures described above, and none
of such services were approved pursuant to the procedures
described in Rule 2-01(c)(7)(i)(C) of Regulation S-X,
which waives the general requirement for pre-approval in certain
circumstances.






|          |                                                                
|--------- | ---------------------------------------------------------------
|Item 16D. | Exemptions from the Listing Standards for
    Audit Committees.

Not applicable.



|          |                                                                            
|--------- | ---------------------------------------------------------------------------
|Item 16E. | Purchases of Equity Securities by the Issuer
    and Affiliated Purchasers.

Not applicable.

135



---



##### 






PART III





|         |                      
|-------- | ---------------------
|Item 17. | Financial Statements.

Not applicable.






|         |                      
|-------- | ---------------------
|Item 18. | Financial Statements.

The information required by this item has been
provided elsewhere in this annual report.






|         |          
|-------- | ---------
|Item 19. | Exhibits.

Exhibits

|        |      |          |  |                                                                                                                                                 
|------- | ---- | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |         
|Number  |      | Document
|        |      |         
|        | 1.1  |          |  | The Articles of Incorporation of Mitsui &
    Co., Ltd., as of June 24, 2004 (English-language
    translation).                                
|        | 1.2  |          |  | The Share Handling Regulation of Mitsui &
    Co., Ltd., as amended on June 24, 2004 (English-language
    translation).                        
|        | 1.3  |          |  | The Rules of the Board of Directors of Mitsui
    & Co., Ltd., as amended on April 1, 2004
    (English-language translation).                  
|        | 1.4  |          |  | The Rules of the Board of Corporate Auditors of
    Mitsui & Co., Ltd., as amended on October 29, 2003
    (English-language translation).      
|        | 2.1  | *        |  | Deposit Agreement, dated October 1, 1982
    among Mitsui & Co., Ltd., Citibank, N.A., and holders of
    ADRs and European Depositary Receipts.
|        | 8.1  |          |  | List of Subsidiaries of Mitsui & Co., Ltd.                                                                                                      
|        | 11.1 |          |  | Code of Ethics for Senior Financial Officers and
    Professionals                                                                              
|        | 11.2 |          |  | Business Conduct Guidelines for Employees and
    Officers of Mitsui & Co., Ltd.                                                                
|        | 12.1 |          |  | Certification of the principal executive officer
    of Mitsui & Co., Ltd. required by Rule 13a-14(a).                                          
|        | 12.2 |          |  | Certification of the principal financial officer
    of Mitsui & Co., Ltd. required by Rule 13a-14(a).                                          
|        | 13.1 |          |  | Certification required by Rule 13a-14(b) and
    Section 1350 of Chapter 63 of Title 18 of the
    United States Code.                          



|  |                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
|* | Incorporated by reference to the corresponding
    exhibit to our annual report on Form 20-F
    (File No. 0-9929) filed on September 27, 2002.

We have not included as exhibits certain
instruments with respect to our long-term debt, the amount of
debt authorized under each of which does not exceed 10% of our
total assets, and we agree to furnish a copy of any such
instruments to the Securities and Exchange Commission upon
request.

136



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##### 



Table of Contents

MITSUI & CO., LTD. (MITSUI BUSSAN KABUSHIKI KAISHA) AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES



The audited consolidated financial statements of Mitsui & Co., Ltd. (Mitsui
Bussan Kabushiki Kaisha) and subsidiaries, together with the report of Deloitte
Touche Tohmatsu as of March 31, 2004 and 2003, and for the years ended March
31, 2004, 2003 and 2002, filed as part of this annual reports are as follows:

|                                                                                                  |  |      |      | 
|------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                  |  | Page
|                                                                                                  |  |      |      | 
|Report of Independent Registered Public Accounting Firm                                           |  |      | F-2  | 
|                                                                                                  |  |      |      | 
|Consolidated Balance Sheets, March 31, 2004 and 2003                                              |  |      | F-3  | 
|                                                                                                  |  |      |      | 
|Statements of Consolidated Income for the Years Ended March 31, 2004, 2003 and 2002               |  |      | F-5  | 
|                                                                                                  |  |      |      | 
|Statements of Consolidated Shareholders Equity for the Years Ended March 31, 2004, 2003 and 2002 |  |      | F-7  | 
|                                                                                                  |  |      |      | 
|Statements of Consolidated Cash Flows for the Years Ended March 31, 2004, 2003 and 2002           |  |      | F-9  | 
|                                                                                                  |  |      |      | 
|Notes to Consolidated Financial Statements                                                        |  |      | F-10 | 
|                                                                                                  |  |      |      | 
|Supplemental
Information on Oil and Gas Producing Activities (Unaudited)                          |  |      | F-60 | 



Supplemental Information:

Schedules for the Years Ended March 31, 2004, 2003 and 2002:

(Schedules are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
consolidated financial statements or notes thereto.)

Financial statements of majority-owned subsidiaries of the registrant not
consolidated and of 50% or less owned persons accounted for by the equity
method have been omitted because Mitsui & Co., Ltd.s proportionate share of
the income from continuing operations before income taxes, and total assets of
each such company is less than 20% of the respective consolidated amounts, and
the investment in and advances to each company is less than 20% of consolidated
total assets.

F-1





---



##### 



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of
Mitsui & Co., Ltd. (Mitsui Bussan Kabushiki Kaisha): We have audited the accompanying consolidated balance sheets of Mitsui &
Co., Ltd. (Mitsui Bussan Kabushiki Kaisha) and subsidiaries as of March 31,
2004 and 2003, and the related statements of consolidated income, consolidated
shareholders equity, and consolidated cash flows for each of the three years
in the period ended March 31, 2004 (all expressed in Japanese yen). These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan 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 for our opinion. In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mitsui & Co., Ltd. and
subsidiaries as of March 31, 2004 and 2003, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
2004, in conformity with accounting principles generally accepted in the United
States of America. As discussed in Note 2 to the consolidated financial statements, the
accompanying statements of consolidated income for the years ended
March 31,
2003 and 2002 have been restated. As discussed in Note 2 to the consolidated financial statements, the
Company changed its policy regarding the definition of cash equivalents as of
April 1, 2003 and restated the accompanying consolidated balance sheet as of
March 31, 2003 and statements of consolidated cash flows for the
years ended
March 31, 2003 and 2002. As discussed in Note 2 to the consolidated financial statements, effective
April 1, 2003, the Company changed its method of accounting for asset
retirement obligations to conform to Statement of Financial Accounting
Standards No. 143. Our audits also comprehended the translation of Japanese yen amounts into
U.S. dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2. Such U.S. dollar amounts are
presented solely for the convenience of readers outside Japan. /s/
DELOITTE TOUCHE TOHMATSU
Deloitte Touche Tohmatsu
Tokyo, Japan May 11, 2004, except for Note 27, as to which the date is June 24, 2004 F-2




---



##### 



Consolidated Balance Sheets     Millions of U.S.Millions of Yen
    
    Dollars (Note 2)2004
    
    2003
    
    2004ASSETSCurrent Assets:Cash and cash equivalents (Note 2)
    
    ¥
    638,299
    
    
    ¥
    694,813
    
    
    $
    6,137Time deposits
    
    
    46,710
    
    
    
    37,702
    
    
    
    449Marketable securities (Notes 2 and 5)
    
    
    29,337
    
    
    
    64,487
    
    
    
    282Trade receivables (Note 9):Notes and loans, less unearned interest
    
    
    467,380
    
    
    
    467,820
    
    
    
    4,494Accounts (Note 8)
    
    
    1,706,850
    
    
    
    1,589,379
    
    
    
    16,412Associated companies
    
    
    186,373
    
    
    
    195,411
    
    
    
    1,792Allowance for doubtful receivables (Notes 2, 7 and 8)
    
    
    (22,498
    )
    
    
    (21,236
    )
    
    
    (216
    )Inventories (Notes 2 and 9)
    
    
    513,016
    
    
    
    488,672
    
    
    
    4,933Advance payments to suppliers
    
    
    62,038
    
    
    
    57,090
    
    
    
    597Deferred tax assetscurrent (Notes 2 and 20)
    
    
    31,473
    
    
    
    35,819
    
    
    
    303Other current assets
    
    
    275,496
    
    
    
    221,787
    
    
    
    2,648Total current assets
    
    
    3,934,474
    
    
    
    3,831,744
    
    
    
    37,831Investments and Non-current Receivables(Notes 2 and 9):Investments in and advances to associated companies (Notes 6, 11 and 17)
    
    
    726,521
    
    
    
    584,511
    
    
    
    6,986Other investments (Note 5)
    
    
    617,189
    
    
    
    525,063
    
    
    
    5,935Non-current receivables, less unearned interest (Note 8)
    
    
    485,446
    
    
    
    674,681
    
    
    
    4,668Allowance for doubtful receivables (Notes 7 and 8)
    
    
    (110,098
    )
    
    
    (139,793
    )
    
    
    (1,059
    )Property leased to othersat cost, less accumulated depreciation (Notes 8, 10 and 22)
    
    
    230,311
    
    
    
    240,304
    
    
    
    2,214Total investments and non-current receivables
    
    
    1,949,369
    
    
    
    1,884,766
    
    
    
    18,744Property and Equipmentat Cost(Notes 2, 9 and 10):Land, land improvements and timberlands
    
    
    220,842
    
    
    
    232,469
    
    
    
    2,124Buildings, including leasehold improvements
    
    
    329,405
    
    
    
    347,408
    
    
    
    3,167Equipment and fixtures (Note 11)
    
    
    395,010
    
    
    
    342,012
    
    
    
    3,798Vessels
    
    
    18,215
    
    
    
    19,970
    
    
    
    175Projects in progress
    
    
    26,224
    
    
    
    20,801
    
    
    
    252Total
    
    
    989,696
    
    
    
    962,660
    
    
    
    9,516Accumulated depreciation
    
    
    (412,874
    )
    
    
    (391,733
    )
    
    
    (3,970
    )Net property and equipment
    
    
    576,822
    
    
    
    570,927
    
    
    
    5,546Intangible Assets, less Accumulated Amortization(Notes 2, 3, 12 and 14)
    
    
    113,126
    
    
    
    71,179
    
    
    
    1,088Deferred Tax AssetsNon-current(Notes 2, 11 and 20)
    
    
    32,406
    
    
    
    53,527
    
    
    
    312Other Assets(Note 14)
    
    
    109,831
    
    
    
    128,377
    
    
    
    1,056Total
    
    ¥
    6,716,028
    
    
    ¥
    6,540,520
    
    
    $
    64,577
 See notes to consolidated financial statements. F-3




---



##### 



Millions of U.S.Millions of Yen
    
    Dollars (Note 2)2004
    
    2003
    
    2004LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Short-term debt (Notes 9 and 13)
    
    ¥
    646,746
    
    
    ¥
    690,881
    
    
    $
    6,219Current maturities of long-term debt (Notes 9 and 13)
    
    
    357,675
    
    
    
    417,063
    
    
    
    3,439Trade payables:Notes and acceptances
    
    
    124,321
    
    
    
    124,276
    
    
    
    1,195Accounts
    
    
    1,467,516
    
    
    
    1,417,472
    
    
    
    14,111Associated companies
    
    
    76,360
    
    
    
    77,033
    
    
    
    734Accrued expenses:Income taxes (Notes 2 and 20)
    
    
    32,628
    
    
    
    23,076
    
    
    
    314Interest
    
    
    20,210
    
    
    
    23,633
    
    
    
    194Other
    
    
    39,522
    
    
    
    39,681
    
    
    
    380Advances from customers
    
    
    83,273
    
    
    
    73,155
    
    
    
    801Other current liabilities (Notes 2, 11, 20 and 21)
    
    
    185,534
    
    
    
    139,060
    
    
    
    1,784Total current liabilities
    
    
    3,033,785
    
    
    
    3,025,330
    
    
    
    29,171Long-term Debt, less Current Maturities(Notes 9, 11 and 13)
    
    
    2,541,221
    
    
    
    2,500,470
    
    
    
    24,434Accrued Pension Costs and Liability for Severance
Indemnities(Notes 2 and 14)
    
    
    52,296
    
    
    
    53,148
    
    
    
    503Deferred Tax LiabilitiesNon-current(Notes 2 and 20)
    
    
    47,387
    
    
    
    31,459
    
    
    
    456Commitments
and Contingent Liabilities(Notes 9 and 21)Minority Interests(Note 11)
    
    
    78,061
    
    
    
    67,966
    
    
    
    751Shareholders Equity(Note 15):Common stockno par valueAuthorized, 2,500,000,000 shares;Issued, 2004 and 20031,583,674,837 shares
    
    
    192,487
    
    
    
    192,487
    
    
    
    1,851Capital surplus
    
    
    287,763
    
    
    
    287,756
    
    
    
    2,767Retained earnings:Appropriated for legal reserve
    
    
    36,633
    
    
    
    36,382
    
    
    
    352Unappropriated (Notes 6, 13, 20 and 27)
    
    
    549,521
    
    
    
    494,038
    
    
    
    5,284Accumulated other comprehensive income (loss) (Note 2):Unrealized holding gains and losses on available-for-sale securities (Note 5)
    
    
    69,729
    
    
    
    3,405
    
    
    
    670Foreign currency translation adjustments
    
    
    (161,454
    )
    
    
    (141,053
    )
    
    
    (1,553
    )Minimum pension liability adjustment (Note 14)
    
    
    (5,743
    )
    
    
    (6,731
    )
    
    
    (55
    )Net unrealized gains and losses on derivatives (Note 24)
    
    
    (3,996
    )
    
    
    (2,759
    )
    
    
    (38
    )Total accumulated other comprehensive loss
    
    
    (101,464
    )
    
    
    (147,138
    )
    
    
    (976
    )Treasury
stock, at cost: 2,661,783 shares in 2004 and 2,297,845 shares in 2003 (Note 27)
    
    
    (1,662
    )
    
    
    (1,378
    )
    
    
    (16
    )Total shareholders equity
    
    
    963,278
    
    
    
    862,147
    
    
    
    9,262Total
    
    ¥
    6,716,028
    
    
    ¥
    6,540,520
    
    
    $
    64,577
 F-4




---



##### 



Statements of Consolidated Income     Millions of U.S.Millions of Yen
    
    Dollars (Note 2)2004
    
    2003
    
    2002
    
    2004As restated
    
    As restated(Note 2)
    
    (Note 2)Revenues(Notes 2, 17 and 18):Sales of products
    
    ¥
    2,493,993
    
    
    ¥
    2,324,849
    
    
    ¥
    2,025,969
    
    
    $
    23,981Sales of services
    
    
    424,838
    
    
    
    390,079
    
    
    
    389,512
    
    
    
    4,085Other sales (Note 8)
    
    
    61,511
    
    
    
    73,223
    
    
    
    75,769
    
    
    
    591Total revenues
    
    
    2,980,342
    
    
    
    2,788,151
    
    
    
    2,491,250
    
    
    
    28,657Total Trading Transactions (Notes 2 and 17):2004, ¥12,281,517 million$118,092 million;2003, ¥11,477,763 million;2002, ¥11,269,141 millionCost of Revenues(Notes 2, and 18):Cost of products sold
    
    
    2,295,886
    
    
    
    2,137,328
    
    
    
    1,857,122
    
    
    
    22,076Cost of services sold
    
    
    41,437
    
    
    
    44,706
    
    
    
    45,432
    
    
    
    398Cost of other sales (Note 8)
    
    
    33,098
    
    
    
    37,472
    
    
    
    43,495
    
    
    
    318Total cost of revenues
    
    
    2,370,421
    
    
    
    2,219,506
    
    
    
    1,946,049
    
    
    
    22,792Gross Profit
    
    
    609,921
    
    
    
    568,645
    
    
    
    545,201
    
    
    
    5,865Other
Expenses (Income):Selling, general and administrative (Notes 2, 8, 12, 14, 18 and 23)
    
    
    496,375
    
    
    
    456,349
    
    
    
    444,467
    
    
    
    4,773Provision for doubtful receivables (Notes 2 and 7)
    
    
    10,188
    
    
    
    13,649
    
    
    
    20,981
    
    
    
    98Interest
expense, net of interest income:2004, ¥36,953 million$355 million;2003, ¥44,490 million;2002, ¥59,777 million
    
    
    890
    
    
    
    2,764
    
    
    
    12,799
    
    
    
    9Dividend income
    
    
    (18,448
    )
    
    
    (16,266
    )
    
    
    (18,191
    )
    
    
    (177
    )Gain on
securities contributed to an employee retirement benefit trust(Notes 5 and 14)
    
    
    
    
    
    
    (15,831
    )
    
    
    (29,242
    )
    
    
    Government grant for transfer of substitutional portion of EPF (Notes 2 and 14)
    
    
    (17,224
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Gain on sales of securitiesnet (Notes 2 and 5)
    
    
    (27,465
    )
    
    
    (11,026
    )
    
    
    (31,310
    )
    
    
    (264
    )Loss on
write-down of securities (Notes 2 and 5)
    
    
    31,024
    
    
    
    37,907
    
    
    
    43,183
    
    
    
    298(Gain) loss on disposal or sales of property and equipmentnet (Note 23)
    
    
    (3,874
    )
    
    
    1,745
    
    
    
    2,456
    
    
    
    (37
    )Impairment
loss of long-lived assets (Notes 2, 10, 12 and 23)
    
    
    22,683
    
    
    
    23,903
    
    
    
    24,442
    
    
    
    218Other
expensenet (Notes 18, 19, 21 and 23)
    
    
    28,885
    
    
    
    10,983
    
    
    
    10,717
    
    
    
    278Total other expenses
    
    
    523,034
    
    
    
    504,177
    
    
    
    480,302
    
    
    
    5,030Income from Continuing Operations before Income Taxes,
Minority Interests and Equity in Earnings(Note 20)
    
    
    86,887
    
    
    
    64,468
    
    
    
    64,899
    
    
    
    835Income Taxes(Notes 2 and 20):Current
    
    
    45,019
    
    
    
    39,200
    
    
    
    32,536
    
    
    
    432Deferred
    
    
    (227
    )
    
    
    (443
    )
    
    
    (791
    )
    
    
    (2
    )Total
    
    
    44,792
    
    
    
    38,757
    
    
    
    31,745
    
    
    
    430Income from Continuing Operations before Minority Interests
and Equity in Earnings
    
    
    42,095
    
    
    
    25,711
    
    
    
    33,154
    
    
    
    405Minority Interests in (Earnings) Losses of Subsidiaries
    
    
    (7,470
    )
    
    
    (4,411
    )
    
    
    2,971
    
    
    
    (72
    )Equity in Earnings of Associated CompaniesNet
(After Income Tax Effect)(Notes 2, 6 and 20)
    
    
    40,078
    
    
    
    15,295
    
    
    
    23,783
    
    
    
    385Income from Continuing Operations
    
    
    74,703
    
    
    
    36,595
    
    
    
    59,908
    
    
    
    718Loss from Discontinued OperationsNet
(After Income Tax Effect)(Notes 2, 4, 20 and 23)
    
    
    (4,031
    )
    
    
    (5,457
    )
    
    
    (4,537
    )
    
    
    (38
    )Cumulative Effect of Change in Accounting Principle
(After Income Tax Effect)(Notes 11 and 20)
    
    
    (2,285
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Net
Income
    
    ¥
    68,387
    
    
    ¥
    31,138
    
    
    ¥
    55,371
    
    
    $
    658
 F-5




---



##### 



(Continued)

U.S. DollarsYen
    
    (Note 2)Net Income per Share(Notes 2, 11 and 16):Basic:Continuing operations
    
    ¥
    47.24
    
    
    ¥
    23.13
    
    
    ¥
    37.83
    
    
    $
    0.45Discontinued operations
    
    
    (2.55
    )
    
    
    (3.45
    )
    
    
    (2.86
    )
    
    
    (0.02
    )Cumulative effect of change in accounting principle
    
    
    (1.44
    )
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Total
    
    ¥
    43.25
    
    
    ¥
    19.68
    
    
    ¥
    34.97
    
    
    $
    0.42Diluted:Continuing operations
    
    ¥
    44.64
    
    
    ¥
    21.89
    
    
    ¥
    35.50
    
    
    $
    0.43Discontinued operations
    
    
    (2.39
    )
    
    
    (3.20
    )
    
    
    (2.65
    )
    
    
    (0.02
    )Cumulative effect of change in accounting principle
    
    
    (1.36
    )
    
    
    
    
    
    
    
    
    
    
    (0.02
    )Total
    
    ¥
    40.89
    
    
    ¥
    18.69
    
    
    ¥
    32.85
    
    
    $
    0.39
 See notes to consolidated financial statements. F-6




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##### 



Statements of Consolidated Shareholders Equity     Millions of U.S.Millions of Yen
    
    Dollars (Note 2)2004
    
    2003
    
    2002
    
    2004Common Stock(Note 15):Balance at beginning of yearShares
issued: 2004, 2003 and 20021,583,674,837 shares
    
    ¥
    192,487
    
    
    ¥
    192,487
    
    
    ¥
    192,487
    
    
    $
    1,851Balance at end of yearShares
issued: 2004, 2003 and 20021,583,674,837 shares
    
    ¥
    192,487
    
    
    ¥
    192,487
    
    
    ¥
    192,487
    
    
    $
    1,851Capital Surplus(Note 15):Balance at beginning of year
    
    ¥
    287,756
    
    
    ¥
    287,756
    
    
    ¥
    287,756
    
    
    $
    2,767Gain on sales of treasury stock
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    0Balance at end of year
    
    ¥
    287,763
    
    
    ¥
    287,756
    
    
    ¥
    287,756
    
    
    $
    2,767Retained Earnings(Note 15):Appropriated for Legal Reserve:Balance at beginning of year
    
    ¥
    36,382
    
    
    ¥
    35,873
    
    
    ¥
    34,341
    
    
    $
    350Transfer from unappropriated retained earnings
    
    
    251
    
    
    
    509
    
    
    
    1,532
    
    
    
    2Balance at end of year
    
    ¥
    36,633
    
    
    ¥
    36,382
    
    
    ¥
    35,873
    
    
    $
    352Unappropriated(Notes 6, 13, 20 and 27):Balance at beginning of year
    
    ¥
    494,038
    
    
    ¥
    476,074
    
    
    ¥
    437,548
    
    
    $
    4,750Net income
    
    
    68,387
    
    
    
    31,138
    
    
    
    55,371
    
    
    
    658Cash
dividends paid (annual rate per share: 2004, ¥8.07.7 ¢; 2003, ¥8.0; 2002, ¥8.0)
    
    
    (12,653
    )
    
    
    (12,665
    )
    
    
    (12,669
    )
    
    
    (122
    )Transfer to retained earnings appropriated for legal reserve
    
    
    (251
    )
    
    
    (509
    )
    
    
    (1,532
    )
    
    
    (2
    )Effect of change in fiscal year-end of certain subsidiaries (Note 2)
    
    
    
    
    
    
    
    
    
    
    (2,644
    )
    
    
    Balance at end of year
    
    ¥
    549,521
    
    
    ¥
    494,038
    
    
    ¥
    476,074
    
    
    $
    5,284Accumulated Other Comprehensive Income (Loss) (After Income Tax Effect)(Notes 2, 15 and 20):Balance at beginning of year
    
    ¥
    (147,138
    )
    
    ¥
    (76,918
    )
    
    ¥
    (117,705
    )
    
    $
    (1,415
    )Unrealized holding gains and losses on available-for-sale securities (Note 5)
    
    
    66,324
    
    
    
    (40,841
    )
    
    
    (51,384
    )
    
    
    638Foreign currency translation adjustments
    
    
    (20,401
    )
    
    
    (22,384
    )
    
    
    69,057
    
    
    
    (196
    )Minimum pension liability adjustment (Note 14)
    
    
    988
    
    
    
    (6,358
    )
    
    
    24,514
    
    
    
    9Net unrealized gains and losses on derivatives (Note 24)
    
    
    (1,237
    )
    
    
    (637
    )
    
    
    (2,950
    )
    
    
    (12
    )Effect of change in fiscal year-end of certain subsidiaries (Note 2)
    
    
    
    
    
    
    
    
    
    
    1,550
    
    
    
    Balance at end of year
    
    ¥
    (101,464
    )
    
    ¥
    (147,138
    )
    
    ¥
    (76,918
    )
    
    $
    (976
    )Treasury Stock, at Cost(Notes 15 and 27):Balance at beginning of yearShares in
treasury: 20042,297,845 shares; 2003494,860 shares;
20020 shares
    
    ¥
    (1,378
    )
    
    ¥
    (302
    )
    
    
    
    
    
    $
    (14
    )Purchase of treasury stockShares
purchased: 2004472,590 shares; 20031,802,985 shares;
2002494,860 shares
    
    
    (356
    )
    
    
    (1,076
    )
    
    ¥
    (302
    )
    
    
    (3
    )Sales of treasury stockShares sold:
2004108,652 shares; 2003 and 20020 shares
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    1Balance at end of yearShares in
treasury: 20042,661,783 shares; 20032,297,845 shares;
2002494,860 shares
    
    ¥
    (1,662
    )
    
    ¥
    (1,378
    )
    
    ¥
    (302
    )
    
    $
    (16
    )
 F-7




---



##### 



(Continued) Millions of U.S.Millions of Yen
    
    Dollars (Note 2)2004
    
    2003
    
    2002
    
    2004Summary
of Changes in Equity from Nonowner Sources
(Comprehensive Income (Loss))(Notes 2, 15 and 20):Before the effect of change in fiscal year-end of certain subsidiariesNet income
    
    ¥
    68,387
    
    
    ¥
    31,138
    
    
    ¥
    55,371
    
    
    $
    658Other comprehensive income (loss) (after income tax effect):Unrealized holding gains and losses on available-for-sale securities (Note 5)
    
    
    66,324
    
    
    
    (40,841
    )
    
    
    (51,384
    )
    
    
    638Foreign currency translation adjustments
    
    
    (20,401
    )
    
    
    (22,384
    )
    
    
    69,057
    
    
    
    (196
    )Minimum pension liability adjustment (Note 14)
    
    
    988
    
    
    
    (6,358
    )
    
    
    24,514
    
    
    
    9Net unrealized gains and losses on derivatives (Note 24)
    
    
    (1,237
    )
    
    
    (637
    )
    
    
    (2,950
    )
    
    
    (12
    )Changes in equity from nonowner sources
    
    ¥
    114,061
    
    
    ¥
    (39,082
    )
    
    ¥
    94,608
    
    
    $
    1,097The effect of change in fiscal year-end of certain subsidiariesNet loss directly charged to retained earnings
    
    
    
    
    
    
    
    
    
    ¥
    (2,644
    )
    
    
    Other comprehensive income (loss) (after income tax effect):Unrealized holding gains and losses on available-for-sale securities (Note 5)
    
    
    
    
    
    
    
    
    
    
    (176
    )
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    944
    
    
    
    Minimum pension liability adjustment (Note 14)
    
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    Net unrealized gains and losses on derivatives (Note 24)
    
    
    
    
    
    
    
    
    
    
    828
    
    
    
    Changes in equity from nonowner sources
    
    
    
    
    
    
    
    
    
    ¥
    (1,094
    )
    
    
    After the effect of change in fiscal year-end of certain subsidiariesNet income
    
    ¥
    68,387
    
    
    ¥
    31,138
    
    
    ¥
    55,371
    
    
    $
    658Net loss directly charged to retained earnings
    
    
    
    
    
    
    
    
    
    
    (2,644
    )
    
    
    Other comprehensive income (loss) (after income tax effect):Unrealized holding gains and losses on available-for-sale securities (Note 5)
    
    
    66,324
    
    
    
    (40,841
    )
    
    
    (51,560
    )
    
    
    638Foreign currency translation adjustments
    
    
    (20,401
    )
    
    
    (22,384
    )
    
    
    70,001
    
    
    
    (196
    )Minimum pension liability adjustment (Note 14)
    
    
    988
    
    
    
    (6,358
    )
    
    
    24,468
    
    
    
    9Net unrealized gains and losses on derivatives (Note 24)
    
    
    (1,237
    )
    
    
    (637
    )
    
    
    (2,122
    )
    
    
    (12
    )Changes in equity from nonowner sources
    
    ¥
    114,061
    
    
    ¥
    (39,082
    )
    
    ¥
    93,514
    
    
    $
    1,097
 See notes to consolidated financial statements. F-8




---



##### 



Statements of Consolidated Cash Flows    Millions of U.S.Millions of Yen
    
    Dollars (Note 2)2004
    
    2003
    
    2002
    
    2004Operating Activities(Note 26):Net income
    
    ¥
    68,387
    
    
    ¥
    31,138
    
    
    ¥
    55,371
    
    
    $
    658Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    66,130
    
    
    
    58,331
    
    
    
    56,806
    
    
    
    636Pension and severance costs, less payments
    
    
    35,441
    
    
    
    (9,660
    )
    
    
    (1,725
    )
    
    
    341Provision for doubtful receivables
    
    
    10,188
    
    
    
    13,649
    
    
    
    20,981
    
    
    
    98Gain on securities contributed to an employee retirement benefit trust
    
    
    
    
    
    
    (15,831
    )
    
    
    (29,242
    )
    
    
    Government grant for transfer of substitutional portion of EPF
    
    
    (17,224
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Gain on sales of securitiesnet
    
    
    (27,465
    )
    
    
    (11,026
    )
    
    
    (31,310
    )
    
    
    (264
    )Loss on write-down of securities
    
    
    31,024
    
    
    
    37,907
    
    
    
    43,183
    
    
    
    298(Gain) loss on disposal or sale of property and equipmentnet
    
    
    (3,874
    )
    
    
    1,745
    
    
    
    2,456
    
    
    
    (37
    )Impairment loss of long-lived assets
    
    
    22,683
    
    
    
    23,903
    
    
    
    24,442
    
    
    
    218Deferred income taxes
    
    
    (227
    )
    
    
    (443
    )
    
    
    (791
    )
    
    
    (2
    )Minority interests in earnings (losses) of subsidiaries
    
    
    7,470
    
    
    
    4,411
    
    
    
    (2,971
    )
    
    
    72Equity in earnings of associated companies, less dividends received
    
    
    (21,364
    )
    
    
    (2,258
    )
    
    
    (14,193
    )
    
    
    (205
    )Loss from discontinued operationsnet (after income tax effect)
    
    
    4,031
    
    
    
    5,457
    
    
    
    4,537
    
    
    
    38Cumulative effect of change in accounting principle (after income tax effect)
    
    
    2,285
    
    
    
    
    
    
    
    
    
    
    
    22Changes in operating assets and liabilities:(Increase) decrease in trade receivables
    
    
    (126,259
    )
    
    
    (42,647
    )
    
    
    148,412
    
    
    
    (1,214
    )(Increase) decrease in inventories
    
    
    (32,689
    )
    
    
    (27,512
    )
    
    
    32,586
    
    
    
    (315
    )Increase (decrease) in trade payables
    
    
    45,549
    
    
    
    (12,703
    )
    
    
    (166,813
    )
    
    
    438Advances from customers
    
    
    21,509
    
    
    
    177
    
    
    
    (116
    )
    
    
    207Othernet
    
    
    14,484
    
    
    
    (2,490
    )
    
    
    (7,901
    )
    
    
    139Net cash provided by operating activities
    
    
    100,079
    
    
    
    52,148
    
    
    
    133,712
    
    
    
    962Investing Activities(Notes 2 and 26):Net (increase) decrease in time deposits
    
    
    (9,603
    )
    
    
    40,220
    
    
    
    (17,102
    )
    
    
    (92
    )Investments in and advances to associated companies
    
    
    (203,380
    )
    
    
    (63,769
    )
    
    
    (38,008
    )
    
    
    (1,955
    )Sales of investments in and collection of advances to associated companies
    
    
    67,772
    
    
    
    10,111
    
    
    
    25,377
    
    
    
    652Acquisitions of available-for-sale securities
    
    
    (131,207
    )
    
    
    (154,050
    )
    
    
    (95,723
    )
    
    
    (1,262
    )Proceeds from sales of available-for-sale securities
    
    
    51,250
    
    
    
    66,106
    
    
    
    28,419
    
    
    
    493Proceeds from maturities of available-for-sale securities
    
    
    110,063
    
    
    
    144,368
    
    
    
    17,007
    
    
    
    1,058Acquisitions of held-to-maturity debt securities
    
    
    (17
    )
    
    
    (4,231
    )
    
    
    
    
    
    
    Proceeds from maturities of held-to-maturity debt securities
    
    
    14,793
    
    
    
    10,560
    
    
    
    20,202
    
    
    
    142Acquisitions of other investments
    
    
    (46,856
    )
    
    
    (39,838
    )
    
    
    (43,365
    )
    
    
    (451
    )Proceeds from sales of other investments
    
    
    28,829
    
    
    
    30,242
    
    
    
    37,632
    
    
    
    277Increase in long-term loan receivables
    
    
    (42,768
    )
    
    
    (56,169
    )
    
    
    (40,424
    )
    
    
    (411
    )Collection of long-term loan receivables
    
    
    76,384
    
    
    
    84,445
    
    
    
    61,472
    
    
    
    734Additions to property leased to others and property and equipment
    
    
    (113,197
    )
    
    
    (123,216
    )
    
    
    (89,060
    )
    
    
    (1,088
    )Proceeds
from sales of property leased to others and property and equipment
    
    
    59,924
    
    
    
    62,186
    
    
    
    50,957
    
    
    
    576Acquisitions of subsidiaries, net of cash acquired
    
    
    3,859
    
    
    
    (11,208
    )
    
    
    
    
    
    
    37Net cash used in investing activities
    
    
    (134,154
    )
    
    
    (4,243
    )
    
    
    (82,616
    )
    
    
    (1,290
    )Financing Activities(Note 26):Net (decrease) increase in short-term debt
    
    
    (71,759
    )
    
    
    94,026
    
    
    
    (90,069
    )
    
    
    (690
    )Proceeds from long-term debt
    
    
    636,957
    
    
    
    509,517
    
    
    
    374,137
    
    
    
    6,125Repayments of long-term debt
    
    
    (564,529
    )
    
    
    (571,968
    )
    
    
    (397,338
    )
    
    
    (5,428
    )Purchases of treasury stocknet
    
    
    (264
    )
    
    
    (1,086
    )
    
    
    (137
    )
    
    
    (3
    )Payments of cash dividends
    
    
    (12,653
    )
    
    
    (12,665
    )
    
    
    (12,669
    )
    
    
    (122
    )Net cash (used in) provided by financing activities
    
    
    (12,248
    )
    
    
    17,824
    
    
    
    (126,076
    )
    
    
    (118
    )Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (10,191
    )
    
    
    (4,499
    )
    
    
    9,433
    
    
    
    (98
    )Effect of Change in Fiscal Year-End of Certain Subsidiaries(Note 2)
    
    
    
    
    
    
    
    
    
    
    (6,201
    )
    
    
    Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (56,514
    )
    
    
    61,230
    
    
    
    (71,748
    )
    
    
    (544
    )Cash and Cash Equivalents at Beginning of Year
    
    
    694,813
    
    
    
    633,583
    
    
    
    705,331
    
    
    
    6,681Cash and Cash Equivalents at End of Year
    
    ¥
    638,299
    
    
    ¥
    694,813
    
    
    ¥
    633,583
    
    
    $
    6,137
 See notes to consolidated financial statements F-9




---



##### 



Notes to Consolidated
Financial Statements   1. NATURE OF OPERATIONS Mitsui & Co., Ltd. (Mitsui Bussan Kabushiki Kaisha) and subsidiaries
(collectively, the companies), as sogo shoshaor general trading companies,
are engaged in business activities, such as worldwide trading in various
commodities, financing for customers and suppliers relating to such trading
activities in Japan, North America and other areas in the world, and organizing
and coordinating industrial projects through their worldwide business networks. The companies conduct export, import, offshore and domestic trades through
the sale and manufacture of products in the areas of Metal Products &
Minerals, Machinery, Electronics & Information, Chemical, Energy and
Consumer Products & Services (foods, textile and fashion, general merchandise,
service business and retail), while providing services for retailing,
information and communications, technical support, transportation and logistics
and financing. Further, the companies are also engaged in development of natural
resources such as oil and gas, and iron and steel raw materials. In addition to the above, the companies are engaged in strategic business
investments in new areas such as information technology, biotechnology and
nanotechnology. 2. BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. BASIS OF FINANCIAL STATEMENTS The accompanying consolidated financial statements are stated in Japanese yen,
the currency of the country in which Mitsui & Co., Ltd. (the Company) is
incorporated and principally operates. The translation of Japanese yen amounts
into U.S. dollar amounts for the year ended March 31, 2004 is included solely
for the convenience of readers outside Japan and has been made at the rate of
¥104=U.S.$1, the approximate rate of exchange at March 31, 2004. The
translation should not be construed as a representation that the Japanese yen
amounts could be converted into U.S. dollars at the above or any other rate. The accompanying consolidated financial statements have been prepared on
the basis of accounting principles generally accepted in the United States of
America (U.S. GAAP). Effect has been given in the consolidated financial
statements to adjustments which have not been entered in the companies general
books of account maintained principally in accordance with accounting practices
prevailing in the countries of incorporation. Major adjustments include those
relating to accounting for derivative instruments and hedging activities,
recognition of expected losses on purchase and sale commitments, accounting for
certain investments including non-monetary exchange of investments, accounting
for warrants, accounting for pension costs and severance indemnities,
recognition of installment sales on the accrual basis of accounting, accounting
for business combinations, accounting for goodwill and other intangible assets,
accounting for asset retirement obligations and accounting for consolidation of
variable interest entities. As a result of a careful review of the revenue presentation on the face of
the Statements of Consolidated Income subsequent to the issuance of the
consolidated financial statements for the year ended March 31, 2003, the
companies determined to classify their revenues by major class and report
certain revenue transactions with corresponding costs on a gross basis for the
year ended March 31, 2004 as required by the SEC Regulation S-X, Rule 5-03 and
Financial Accounting Standards Board (FASB) Emerging Issues Task Force Issue
(EITF) No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
Agent. Specifically, the companies classified their revenues into Sales of
products, Sales of services and Other sales with corresponding cost of
revenues and restated the Statements of Consolidated Income for all prior
periods presented to conform to the current year presentation. The adoption of
this principle and the application to the consolidated financial statements had
no impact on gross profits, net income or shareholders equity. Total trading transactions, as presented in the accompanying Statements of
Consolidated Income, are a voluntary disclosure as permitted by EITF No. 99-19,
and represent the gross transaction volume or the aggregate nominal value of
the sales contracts in which the companies act as principal and transactions in
which the companies serve as agent. Total trading transactions should not be
construed as equivalent to, or a substitute or a proxy for, revenues, or as an
indicator of the companies operating performance, liquidity or cash flows
generated by operating, investing or financing activities. The companies have
included the gross transaction volume information because similar Japanese
trading companies have generally used it as an industry benchmark. As such,
management believes that total trading transactions are a useful supplement to
the results of operations information for users of the consolidated financial
statements. In consideration of a consensus relating to the net presentation of all
gains and losses on derivative instruments held for trading purposes under EITF
No. 02-3, Issues Involved in Accounting for Derivative Contracts Held for
Trading Purposes and Contracts Involved in Energy Trading and Risk Management
Activities, all gains and losses on forward contracts held by certain foreign
subsidiaries for trading purposes for crude oil and oil products, which also
meet the definition of derivative instruments, are shown net in total trading
transactions effective April 1, 2003 to more appropriately present the gross
transaction volume as general trading companies. In relation to this change,
the Statements of Consolidated Income for the years ended March 31, 2003 and
2002 have been reclassified. F-10




---



##### 



During the year ended March 31, 2002, 231 subsidiaries changed their
fiscal year-ends to March 31, mainly from December 31, in order to conform the
subsidiaries year-ends with that of the Company. The earnings or losses of the
subsidiaries for the stub period of the fiscal year exceeding 12 months were
directly credited or charged to unappropriated retained earnings in order to
maintain the comparability of periodic earnings. The other comprehensive income
(loss) and cash flows of the subsidiaries for the stub period of the fiscal
year exceeding 12 months are separately presented in the Statements of
Consolidated Shareholders Equity and the Statements of Consolidated Cash
Flows, respectively. Major subsidiaries that changed their fiscal year-ends
were Mitsui & Co. (U.S.A.), Inc., Mitsui & Co. UK PLC, Mitsui & Co., (Hong
Kong) Ltd., Mitsui & Co. (Thailand) Ltd., Novus International, Inc., Mitsui Oil
& Gas Co., Ltd. and Sanyu Koami Co., Ltd. II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The consolidated financial statements include the accounts of the Company, its
majority-owned domestic and foreign subsidiaries, the variable interest
entities (VIEs) where the Company or one of its subsidiaries is a primary
beneficiary, and its proportionate shares of the assets, liabilities, revenues
and expenses of certain of its oil and gas producing, and mining unincorporated
joint ventures in which the companies own an undivided interest in the assets,
and pursuant to the joint venture agreements, are severally liable for their
share of each liability. The VIEs are defined by FASB Interpretation (FIN)
No. 46, Consolidation of Variable Interest Entities (revised December
2003)an Interpretation of ARB No. 51 (FIN
No. 46R). The unincorporated
joint ventures proportionately consolidated by the companies include but are
not limited to Oman Block 9 J/V (35%), Wandoo Oil Field J/V (40%), Robe River
Iron Associates J/V (33%), German Creek J/V (30%) and Moura J/V (49%). The
difference between the cost of investments in VIEs which are not a
business and the equity in the fair value of the net assets at the dates of
acquisition is accounted for as an extraordinary gain or loss while the excess
of the cost of investments in other subsidiaries over the equity in the fair
value of the net assets at the dates of acquisition is accounted for as
goodwill. Certain subsidiaries with a fiscal year-end on or after December 31, but
prior to the parent companys fiscal year-end of March 31, are included on the
basis of the subsidiaries respective fiscal year-end. Foreign currency translation Foreign currency financial statements have been translated in accordance with
Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency
Translation. Pursuant to this statement, the assets and liabilities of foreign
subsidiaries and associated companies are translated into Japanese yen at the
respective year-end exchange rates. All income and expense accounts are
translated at average rates of exchange. The resulting translation adjustments
are included in accumulated other comprehensive income. Receivables and payables denominated in foreign currencies are translated
into Japanese yen at year-end exchange rates with the resulting gains and
losses recognized in earnings. Cash equivalents Cash equivalents are defined as short-term (original maturities of three months
or less), highly liquid investments which are readily convertible into cash and
have no significant risk of change in value. On April 1, 2003, the companies changed their accounting policy regarding
which items to classify as cash equivalents in the Consolidated Balance Sheets
and the Statements of Consolidated Cash Flows. Cash equivalents formerly
included certificates of deposit and time deposits with original maturities of
three months or less. In addition to the above, the companies decided to
include financing bills and commercial papers with original maturities of three
months or less, which are readily convertible into cash and have no significant
risk of change in value, as cash equivalents. This change reflects the recent
change in the companies short-term cash management policies and has been made
to more fairly present their cash management activities in the Consolidated
Balance Sheets and the Statements of Consolidated Cash Flows. In relation to this change, the amounts in the Consolidated Balance Sheets
and the Statements of Consolidated Cash Flows for the prior years have been
restated. As a result of this restatement, cash and cash equivalents increased
by ¥34,597 million and marketable securities decreased by the same amounts in
the Consolidated Balance Sheets as of March 31, 2003. Also, net cash used in
investing activities decreased by ¥9,001 million and ¥25,596 million in the
Statements of Consolidated Cash Flows for the years ended March 31, 2003 and
2002, respectively. F-11




---



##### 



Allowance for doubtful receivables In accordance with SFAS No. 114, Accounting by Creditors for Impairment of a
Loanan amendment of FASB Statements No. 5 and 15, an impairment loss for a
specific loan deemed to be impaired is measured based on the present value of
expected cash flows discounted at the loans original effective interest rate
or the fair value of the collateral if the loan is collateral dependent. An allowance for doubtful receivables is recognized for all receivables
not subject to the accounting requirement of SFAS No. 114 based primarily upon
the companies credit loss experiences and an evaluation of potential losses in
the receivables. Inventories Inventories, consisting mainly of commodities and materials for resale, are
stated at the lower of cost, principally on the specific-identification basis,
or market. Derivative instruments and hedging activities In accordance with SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activitiesan amendment of FASB
Statement No. 133 and SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, all derivative instruments are recognized
and measured at fair value as either assets or liabilities in the Consolidated
Balance Sheets. The accounting for changes in the fair value depends on the
intended use of the derivative instruments and its resulting hedge designation. The companies enter into derivative commodity instruments, such as future,
forward, option and swap contracts, as a means of hedging the exposure to
changes in the fair value of inventories and unrecognized firm commitments and
the exposure to variability in the expected future cash flows from forecasted
transactions, principally for non-ferrous metals, crude oil and agricultural
products. Changes in the fair value of derivative commodity instruments, designated
and effective as fair value hedges, are recognized in sales of products or cost
of products sold as offsets to changes in the fair value of the hedged items.
Changes in the fair value of derivative commodity instruments, designated and
effective as cash flow hedges, are initially recorded as other comprehensive
income and reclassified into earnings as sales of products or cost of products
sold when the hedged transactions affect earnings. Changes in the fair value of
the ineffective portion are recognized in sales of products or cost of products
sold immediately. Changes in the fair value of derivative commodity instruments, for which
hedge requirements are not met under SFAS No. 133, are currently recognized in
sales of products or cost of products sold without any offsetting changes in
the fair value of the hedged items. The Company and certain subsidiaries also enter into agreements for
derivative commodity instruments as a part of their trading activities. These
derivative instruments are marked to market and gains or losses resulting from
these contracts are reported in other sales. Changes in the fair value of all open positions of precious metals traded
in terminal (future) markets are recognized in other sales in order to reflect
the fair value of commodity trading transactions consisting of inventories,
unrecognized firm commitments and derivative commodity instruments as a whole. The companies enter into derivative financial instruments such as interest
rate swap agreements, foreign exchange forward contracts, currency swap
agreements, and interest rate and currency swap agreements as a means of
hedging their interest rate and foreign exchange exposure. Changes in the fair value of interest rate swap agreements, designated and
effective as fair value hedges for changes in the fair value of fixed-rate
financial assets or liabilities attributable to changes in the designated
benchmark interest rate, are recognized in interest expense as offsets to
changes in the fair value of hedged items. Changes in the fair value of
interest rate swap agreements, designated and effective as cash flow hedges for
changes in the cash flows of floating-rate financial assets or liabilities
attributable to changes in the designated benchmark interest rate, are
initially recorded in other comprehensive income and reclassified into earnings
as interest expense when the hedged transactions affect earnings. Changes in
the fair value of the ineffective portion are recognized in interest expense
immediately. Changes in the fair value of foreign exchange forward contracts and
currency swap agreements, designated and effective as cash flow hedges for
changes in the cash flows of foreign-currency-denominated assets or
liabilities, unrecognized firm commitments and forecasted transactions
attributable to changes in the related foreign currency exchange rate, are
initially recorded in other comprehensive income and reclassified into earnings
as foreign exchange gains or losses when the hedged transactions affect
earnings. Changes in the fair value of the ineffective portion are recognized
in foreign exchange gains or losses immediately. Changes in the fair value of interest rate and currency swap agreements,
designated and effective as fair value hedges or cash flow hedges for changes
in the fair values or cash flows of foreign-currency-denominated assets or
liabilities attributable to changes in the designated benchmark interest rate
or the related foreign currency exchange rate are recorded as either earnings
or other comprehensive income depending on the treatment of foreign currency
hedges as fair value hedges or cash flow hedges. Changes in the fair value of derivative financial instruments, for which hedge
requirements are not met under SFAS No. 133, are currently F-12




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recognized in interest expense for interest rate swap agreements and
in foreign exchange gains or losses for foreign exchange forward contracts,
currency swap agreements and interest rate and currency swap agreements. The Company and certain subsidiaries also enter into agreements for
certain derivative financial instruments as a part of their trading activities.
These derivative instruments are marked to market and the related gains or
losses are reported in interest expense for interest rate swap agreements and
in other sales for foreign exchange forward contracts. The companies use non-derivative financial instruments, such as
foreign-currency-denominated debt, in order to reduce the foreign currency
exposure in net investment in a foreign operation. The foreign currency
transaction gains or losses on these instruments, designated as and effective
as hedging instruments, are deferred and recorded as foreign currency
translation adjustments within other comprehensive income to the extent they
are effective as hedge. These amounts are only recognized in income upon the
complete or partial sale of the related investment or the complete liquidation
of the investment. For the Statements of Consolidated Cash Flows, cash flows from derivative
commodity instruments and derivative financial instruments that qualify for
hedge accounting are included in the same category as the items being hedged. Debt and marketable equity securities The companies classify debt and marketable equity securities, at acquisition,
into one of three categories: held-to-maturity, available-for-sale or trading
under provisions of SFAS No. 115, Accounting for Certain Investments in Debt
and Equity Securities. Trading securities are carried at fair value and unrealized holding gains
and losses are included in earnings. Debt securities are classified as held-to-maturity and measured at
amortized cost in the Consolidated Balance Sheets only if the companies have
the positive intent and ability to hold those securities to maturity. Premiums
and discounts amortized in the period are included in interest income. Debt and marketable equity securities other than those classified as
trading or held-to-maturity securities are classified as available-for-sale
securities and carried at fair value with related unrealized holding gains and
losses reported in accumulated other comprehensive income in shareholders
equity on a net-of-tax basis. For other than a temporary decline in the value of debt and marketable
equity securities below their cost or amortized cost, the investment is reduced
to its fair value, which becomes the new cost basis of the investment. The
amount of the reduction is reported as a loss for the year in which such
determination is made. Various factors, such as the extent which the cost
exceeds the market value, the duration of the market decline, the financial
condition and near-term prospects of the issuer, and the intent and ability to
retain the investment for a period of time sufficient to allow for any
anticipated recovery in market value, are reviewed to judge whether the decline
is other than temporary. The cost of debt and marketable securities sold is determined based on the
moving-average cost method. Non-marketable equity securities Non-marketable equity securities are carried at cost. When other than a
temporary decline in the value of such securities below their cost occurs, the
investment is reduced to its fair value and an impairment loss is recognized.
Various factors, such as the financial condition and near-term prospects of the
issuer, are reviewed to judge whether it is other than temporary. The cost of non-marketable equity securities sold is determined based on
the moving-average cost method. Investments in associated companies Investments in associated companies (investees owned 20% to 50%, corporate
joint ventures and other investees over which the companies have the ability to
exercise significant influence) are accounted for under the equity method,
after appropriate adjustments for intercompany profits and dividends. The
differences between the cost of such investments and the companies equity in
the underlying fair value of the net assets of associated companies at the
dates of acquisition are recognized as equity method goodwill. For other than a temporary decline in the value of investments in
associated companies below the carrying amount, the investment is reduced to
its fair value and an impairment loss is recognized. Issuance of stock by subsidiaries and associated companies A subsidiary or an associated company may issue its shares to third parties at
amounts per share in excess of or less than the Company s average per share
carrying value. With respect to such transactions, the resulting gains or
losses arising from the change in equity interest are recorded in income for
the year in which such shares are issued. F-13




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Leasing The companies are engaged in lease financing consisting of direct financing
leases and leveraged leases, and in operating leases of properties. For direct
financing leases, unearned income is amortized to income as other sales over
the lease term at a constant periodic rate of return on the net investment.
Income on leveraged leases is recognized as other sales over the life of the
lease at a constant rate of return on the positive net investment. Initial
direct costs are deferred and amortized using the interest method over the
lease period. Operating lease income is recognized as other sales over the term
of underlying leases on a straight-line basis. The companies are also lessees of various assets. Rental expenses on
operating leases are recognized over the respective lease terms using the
straight-line method. Property and equipment Property and equipment are stated at cost. Depreciation of property and equipment (including property leased to
others) is computed principally under the declining-balance method for assets
located in Japan and under the straight-line method for assets located outside
Japan, using rates based upon the estimated useful lives of the related
property and equipment. The estimated useful lives for buildings, equipment and
fixtures, and vessels are primarily 10 to 65 years, 2 to 30 years, and 13 to 18
years, respectively. Leasehold improvements are amortized over the lessor of the useful life of
the improvement or the term of the underlying lease. Significant renewals and additions are capitalized at cost. Maintenance
and repairs, and minor renewals and betterments are charged to income as
incurred. Impairment of long-lived assets In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, long-lived assets to be held and used or to be disposed of
other than by sale are reviewed, by using undiscounted future cash flows, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the asset, an
impairment loss is recognized. Such impairment loss is measured as the amount
by which the carrying amount of the asset exceeds its fair value. Long-lived
assets to be disposed of by sale are reported at the lower of carrying amount
or fair value less cost to sell. Business combinations In accordance with SFAS No. 141, Business Combinations, the purchase method
of accounting is used for all business combinations. The companies separately
recognize and report acquired intangible assets as goodwill or other intangible
assets. Any excess of fair value of acquired net assets over cost arising from
a business combination is immediately recognized as an extraordinary gain. The cumulative effect of a change in accounting principles on the
write-off of any unamortized deferred credit as of April 1, 2002 was
immaterial. Goodwill and other intangible assets In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,
goodwill is not amortized but tested for impairment annually or more frequently
if impairment indicators arise. Identifiable intangible assets with a finite
useful life are amortized over their respective estimated useful lives and
reviewed for impairment in accordance with SFAS No. 144. Any identifiable
intangible asset determined to have an indefinite useful life is not amortized,
but instead tested for impairment in accordance with SFAS No. 142 until its
useful life is determined to be no longer indefinite. Equity method goodwill is reviewed for impairment as a part of other than
a temporary decline in the value of investments in associated companies below
the carrying amount in accordance with APB Opinion No. 18, The Equity Method
of Accounting for Investments in Common Stock. The goodwill and equity method goodwill were amortized over periods of
less than 20 years using the straight-line method for the year ended March 31,
2002, except that those recognized after June 30, 2001 were not amortized in
accordance with SFAS No. 142. Goodwill and equity method goodwill are no longer
amortized. The companies completed the transitional impairment test for goodwill as
of April 1, 2002 in accordance with SFAS No. 142 and determined that the fair
value of the reporting units including goodwill was in excess of their carrying
amount. Intangible assets subject to amortization consist primarily of mineral
rights, software, unpatented technologies, trademarks and patents. F-14




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Mineral rights are amortized over their respective estimated useful lives,
which are 10 to 20 years, using the straight-line method or the
unit-of-production method. Software, unpatented technologies, trademarks and
patents are amortized over their respective estimated useful lives using the
straight-line method. The estimated useful lives for software, unpatented
technologies, trademarks and patents are 3 to 5 years, 10 years, 5 to 10 years
and 5 to 8 years, respectively. Intangible assets not subject to amortization
mainly consist of land rights and trademarks. The companies completed the transitional reassessment of the useful lives
of identifiable intangible assets as of April 1, 2002. The companies also
completed the transitional impairment test for intangible assets not subject to
amortization and determined that they are not impaired. Oil and gas producing activities Oil and gas exploration and development costs are accounted for using the
successful efforts method of accounting. The costs of acquiring properties,
costs of drilling and equipping exploratory wells and costs of development
wells and related plant and equipment are capitalized, and amortized using the
unit-of-production method. Exploratory well costs are expensed, if economically
recoverable reserves are not found. Other exploration costs, such as geological
and geophysical costs, are expensed as incurred. In
accordance with SFAS No. 144, proved properties are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. If the proved properties are determined
to be impaired, an impairment loss is recognized based on the fair value.
Unproven properties are assessed annually for impairment in accordance with
the guidance in SFAS No. 19, Financial Accounting and Reporting by Oil and Gas
Producing Companies, with any impairment charged to expense. The companies
policy is to consider the unproved properties not impaired if the estimated
reserves of those properties can be established to be economically viable.
Economically viable means that they may be developed in such a way that it is
probable that over their project lives they will generate, at a minimum, zero
net cash flow on an undiscounted pre-tax basis, based on current prices. For
the purpose of this test the current price is the price at the end of the
period for which the review is conducted for the reserves concerned. Mining operations Mining exploration costs are expensed as incurred until the mining project has
been established as commercially viable by a final feasibility study. Once
established as commercially viable, costs are capitalized as development costs
and are amortized using the unit-of-production method or straight-line method
based on the proven and probable reserves. In open pit mining operations, it is necessary to remove overburden and
other waste materials to access mineral deposits. The costs of removing waste
materials are referred to as stripping costs. During the development of a
mine, before production commences, such costs are generally capitalized as part
of the development costs. Removal of waste materials continues during the
production stage of the mine. Such post-production stripping costs are a
variable production cost to be considered a component of mineral inventory cost
and are recognized as a component of cost of products sold in the same period
as the related revenues from the sales of the minerals. Depending on the
configuration of the mineral deposits, the post-production stripping costs
could lead to a lower of cost or market inventory adjustment. Pension and severance indemnities plans The companies have pension plans and/or severance indemnities plans covering
substantially all employees other than directors. The costs of the pension
plans and severance indemnities plans are accrued based on amounts determined
using actuarial methods, in accordance with SFAS No. 87, Employers Accounting
for Pensions. Guarantees In accordance with FIN No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Othersan Interpretation of FASB Statements No. 5, 57 and 107 and rescission
of FASB Interpretation No. 34, the companies recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken for the
guarantee issued or modified after December 31, 2002. Revenue recognition The companies recognize revenues when they are realized or realizable and
earned. Revenues are realized or realizable and earned when the companies have
persuasive evidence of an arrangement, the goods have been delivered or the
services have been rendered to the customer, the sales price is fixed or
determinable and collectibility is reasonably assured. In addition to this
general policy, the following are specific revenue recognition policies: F-15




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Sales of products Sales of products include the sales of various products as a principal in
the transactions, the manufacture and sale of a wide variety of products such
as metals, chemicals, foods and general consumer merchandise, the development
of natural resources such as coal, iron ore, oil and gas, and the development
and sale of real estate. The companies recognize those revenues at the time the
delivery conditions agreed with customers are met. These conditions are usually
considered to have been met when the goods are received by the customer, the
title to the warehouse receipts are transferred, or the implementation testing
is duly completed. For long-term construction contracts such as railroad projects, depending
on the nature of the contract, revenues are accounted for by the
percentage-of-completion method if costs to complete and extent of progress
toward completion of long-term contracts are reasonably dependable, otherwise
the companies use the completed contract method. Sales of services Sales of services include the revenues from trading margins and
commissions related to various trading transactions in which the companies act
as a principal or an agent. Specifically, the companies charge a commission for
the performance of various services such as logistic and warehouse services,
information and communication services, technical support. For some
back-to-back sales and purchase transactions of products, the companies act as
a principal and record the net amount of sales and purchase prices as revenues.
The companies also facilitate conclusion of the contracts between manufacturers
and customers and deliveries for the products between suppliers and customers.
Revenues from service related businesses are recorded as revenues when the
contracted services are rendered to third-party customers pursuant to the
agreements. Other sales Other sales principally include the revenues from leasing activities of
real estate and equipment, aircraft, ocean transport vessels and rolling stock,
and the revenues from derivative commodity instruments and derivative financial
instruments held for trading purposes. See accounting policies for leasing and
derivative instruments and hedging activities for the revenue recognition
policies regarding leasing and derivative transactions, respectively. Research and development expenses Research and development costs are charged to expenses when incurred. Advertising expenses Advertising costs are charged to expenses when incurred. Income taxes Income tax expense is based on reported earnings before income taxes. Deferred
income taxes reflect the impact of temporary differences between assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes and tax loss carryforwards. These deferred taxes
are measured using the currently enacted tax rates in effect for the year in
which the temporary differences or tax loss carryforward are expected to
reverse. Valuation allowances are established when it is more likely than not
that some or all of the deferred tax assets will not be realized. Net income per share Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted
net income per share reflects the potential dilution as a result of issuance of
shares upon conversion of the companies convertible bonds. III. RECLASSIFICATION Certain reclassifications and format changes have been made to prior year
amounts to conform to the current year presentation. IV. NEW ACCOUNTING STANDARDS Asset retirement obligations On April 1, 2003, the companies adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair value of a liability for
an asset retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes the related cost by
increasing the carrying amount of the long-lived asset. Over F-16




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time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. See
Note 11, ASSET RETIREMENT OBLIGATIONS for the effect of adoption of
this statement. Derivative contracts held for trading purposes and contracts involved in energy
trading and risk management activities On April 1, 2003, the companies fully adopted EITF No. 02-3, Issues Involved
in Accounting for Derivative Contracts Held for Trading Purposes and Contracts
Involved in Energy Trading and Risk Management Activities, which rescinds EITF
No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. EITF No. 02-3 addresses certain issues relating to
gross or net presentation of gains and losses on energy trading contracts in
the income statement, whether recognition of unrealized gains and losses at
inception of an energy trading contract is appropriate in the absence of quoted
market prices or current market transactions for contracts with similar terms,
and additional disclosure requirements for energy trading activities. EITF No.
02-3 requires that gains and losses (realized and unrealized) on all derivative
instruments within the scope of SFAS No. 133 be shown net in the income
statement, whether or not settled physically, if the derivative instruments are
held for trading purposes. The effect of adoption of this consensus on the companies financial
position and results of operations was immaterial. Accounting for the transfer to the Japanese government of the substitutional
portion of employee pension fund liabilities The companies have adopted EITF No. 03-2, Accounting for the Transfer to the
Japanese Government of the Substitutional Portion of Employee Pension Fund
Liabilities. EITF No. 03-2 addresses accounting for the transfer to the Japanese
government of the substitutional portion of an Employee Pension Fund Plan
(EPF), which is a defined benefit pension plan established under the Welfare
Pension Insurance Law. EITF No. 03-2 requires employers to account for the
entire separation process of a substitutional portion from an entire plan
(including a corporate portion) upon completion of the transfer to the
government of the substitutional portion of the benefit obligation and related
plan assets as the culmination of a series of steps in a single settlement
transaction. Under this approach, the difference between the fair value of the
obligation and the assets transferred to the government should be accounted for
and separately disclosed as a subsidy. See Note 14, PENSION COSTS AND SEVERANCE INDEMNITIES for the effect of
adoption of this consensus. Consolidation of VIEs On December 31, 2003, the companies fully adopted FIN No. 46R. This
interpretation addresses consolidation by a primary beneficiary of a VIE. A VIE
is defined as an entity (1) that has an equity investment at risk that is not
sufficient to permit the entity to finance its activities without additional
subordinated financial support from other parties, or (2) where equity
investors do not have the ability to make significant decisions about the
entitys activities through voting or similar rights, or the obligation to
absorb the entitys expected losses, or the right to receive the entitys
expected residual returns. See Note 22, VARIABLE INTEREST ENTITIES for the effect of adoption of
this interpretation. Derivative instruments and hedging activities During the year ended March 31, 2004, the companies adopted SFAS No. 149. SFAS
No. 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133. The effect of adoption of this statement on the companies financial
position and results of operations was immaterial. Certain financial instruments with characteristics of both liabilities and equity During the year ended March 31, 2004, the companies adopted SFAS No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity, except for certain mandatorily redeemable
noncontrolling interests. SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. In accordance with this statement, an issuer is
required to classify certain financial instruments as liabilities such as a
financial instrument issued in the form of shares that are mandatorily
redeemable. In November 2003, FASB issued FASB Staff Position No. FAS 150-3 which
deferred the effective date of SFAS No. 150 for certain mandatorily redeemable
noncontrolling interests. For mandatorily redeemable noncontrolling interests
that would be classified as equity by the subsidiary, but would be classified
as liabilities by the parent company in consolidated financial statements, the
classification and measurement provisions of SFAS No. 150 are deferred
indefinitely. For other mandatorily redeemable noncontrolling interests that
were issued F-17




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before November 5, 2003, the measurement provisions of SFAS No. 150
are deferred indefinitely, both for the parent in consolidated financial
statements and for the subsidiary that issued the instruments that result in
the mandatorily redeemable noncontrolling interests. The effect of adoption of this statement on the companies financial
position and results of operations was immaterial. Employers disclosures about pensions and other postretirement benefits In December 2003, the FASB issued SFAS No. 132 (revised 2003) Employers
Disclosures about Pensions and Other Postretirement Benefitsan amendment of
FASB Statements No. 87, 88, and 106 (SFAS No. 132R). SFAS No. 132R extends
the disclosure requirements for defined benefit pension plans and other defined
benefit postretirement plans but does not change the measurement or recognition
provisions of SFAS No. 87, 88, and 106. SFAS No. 132R is effective for fiscal years ended after December 15, 2003
with certain exceptions. SFAS No. 132R relates only to disclosures and does not
affect the companies financial position and results of operations. The meaning of other-than-temporary impairment and its application to certain investments In Issue No. 03-1, The Meaning of Other-than-Temporary Impairment and Its
Application to Certain Investments, the FASB Emerging Issues Task Force
reached a consensus in November 2003 on certain quantitative and qualitative
disclosures about unrealized losses on debt and marketable equity securities and also reached a consensus in March 2004 on the application of a three-step
impairment model for certain investments in securities and disclosures about
investments accounted for under the cost method. The companies adopted the provisions for disclosures about unrealized
losses for the year ended March 31, 2004 and disclosed additional information
in Note 5, MARKETABLE SECURITIES AND OTHER INVESTMENTS. The three-step impairment model of investments is effective for reporting
periods beginning after June 15, 2004, and the disclosure provision for
investments accounted for under the cost method is effective for fiscal years
ending after June 15, 2004. The effect of adoption of this consensus on the
companies financial position and results of operations will be immaterial as
long as the current market environment remains unchanged. Investments in limited liability companies (LLCs) In March 2004, the FASB Emerging Issues Task Force reached a consensus on Issue
No. 03-16 (EITF No. 03-16), Accounting for Investments in Limited Liability
Companies. EITF No. 03-16 requires investments of more than 3 to 5 percent in
an LLC that maintain a specific ownership account for each investor be
accounted for by the equity method. EITF No. 03-16 is effective for reporting periods beginning after June 15,
2004. The effect of adoption of this consensus on the companies financial
position and results of operations is not currently known and cannot be
reasonably estimated until further analysis is completed. Classification of mineral rights In March 2004, the FASB Emerging Issues Task Force reached a consensus on Issue
No. 04-2 (EITF No. 04-2), Whether Mineral Rights are Tangible or Intangible
Assets, and in April 2004, FASB, in relation to this, issued FASB Staff
Position No. FAS 141-1 and FAS 142-1 which amends SFAS No. 141 and 142. EITF
No. 04-2 requires mineral rights held by mining entities other than oil and gas
producing entities that are within the scope of SFAS No. 19 be accounted for as
tangible assets. EITF No. 04-2 is effective for the first reporting period beginning after
April 29, 2004. Upon adoption of this consensus, ¥14,328 million of mineral
rights (net of ¥3,170 million of accumulated amortization) that were classified
as intangible assets in the Consolidated Balance Sheets as of March 31, 2004
will be reclassified as tangible assets. V. USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS The preparation of consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. F-18




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3. BUSINESS COMBINATIONS For the year ended March 31, 2004 The following is a primary business combination, which was completed during the
year ended March 31, 2004. On
May 30, 2003, the Company entered into an agreement with Mitsui Norin Co., Ltd. (Mitsui
Norin) to acquire the newly issued shares of Mitsui Norin for ¥6,400 million
and completed the acquisition on August 19, 2003, resulting in the 85%
ownership of voting shares of Mitsui Norin. Mitsui Norin mainly manufactures
and sells processed products of tea and beverage material for tea. Prior to the acquisition, Mitsui Norin had suffered from a large amount of
impaired real estate investment made during the Japanese bubble economy period.
In connection with a revival plan, Mitsui Norin exited the property development
business and focused its management resources on the profitable food business.
Having considered the plan, the Company decided to acquire the newly issued
shares to further strengthen Mitsui Norins competitiveness in the food
businesses, which consist mainly of manufacturing and sales of tea for home use
and business use and leaves for tea beverages. The Company has a strategic
business plan to assist and expand the operations of Mitsui Norin as a core
consolidated subsidiary in the tea material businesses conducted by the
companies. The consolidated financial statements for the year ended March 31, 2004
include the operating results of Mitsui Norin from the date of acquisition. The purchase price was determined based on expected future cash flows
Mitsui Norin will generate. The excess of the purchase price over the fair
value of net assets acquired was recorded as goodwill. The significant factors
that contributed to the determination of the purchase price that resulted in
the recognition of goodwill include the following: (1) Mitsui
Norins long-term
relationships with customers in the food market, (2) growth potential of Mitsui
Norins tea materials business and (3) the synergies that
might be achieved from combining the operations with the
Companys food businesses. In connection with this acquisition, ¥16,607 million, ¥2,387 million and
¥16,547 million were assigned to intangible assets subject to amortization,
intangible assets not subject to amortization and goodwill, respectively. The
intangible assets subject to amortization consist primarily of unpatented
technologies of ¥15,658 million with an amortization period of ten years. The
intangible assets not subject to amortization consist primarily of a trademark
of ¥2,375 million. The goodwill is deductible for tax purposes and has been
assigned to the Consumer Products & Services Segment. The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition: Millions of YenCurrent assets
    
    ¥
    30,736Property and equipment
    
    
    8,162Intangible assets
    
    
    35,541Investments and other assets
    
    
    3,263Total assets acquired
    
    
    77,702Current liabilities
    
    
    (54,414
    )Long-term liabilities
    
    
    (11,151
    )Minority interest
    
    
    (5,737
    )Total liabilities assumed
    
    
    (71,302
    )Net assets acquired
    
    ¥
    6,400
 Pro forma results of operations for the above business combination have not
been presented because the effects were not material to the consolidated
financial statements. For the year ended March 31, 2003 The following is a primary business combination, which was completed during the
year ended March 31, 2003. Mitsui & Co. (E&P) B.V. (a wholly owned Dutch subsidiary of the Company) and
MOECO International B.V. (a wholly owned Dutch subsidiary of Mitsui Oil
Exploration Co., Ltd., an associated company of the Company) acquired all the
outstanding shares of Fortum (E&P) B.V., a wholly owned Dutch subsidiary of
Fortum Finance B.V., which is also a wholly owned subsidiary of a Finnish
energy company, Fortum Oyj. Fortum (E&P) B.V. held a 35% participating interest
in the oil-producing Block 9 area in Oman. In the first quarter of the year
ended March 31, 2003, Mitsui & Co. (E&P) B.V. and MOECO International B.V. paid
the equivalent amount to the fair value F-19




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of the net assets acquired and completed the acquisition of Fortum (E&P) B.V.
The proportion of acquired shares of Fortum (E&P) B.V. is 60% for Mitsui & Co.
(E&P) B.V. and 40% for MOECO International B.V. The companies changed the name
of Fortum (E&P) B.V. into Mitsui E&P Middle East B.V. Block 9, the second largest oil field in Oman, is located onshore about
300 kilometers west of the capital city, Muscat, and is operated by Occidental
Petroleum Corporation, which holds the remaining 65% participating interest of
the Block 9. Block 9 has had a proven track record of production since 1984,
and is expected to continue producing crude oil for approximately 25 years. The
companies consider the acquisition to be an excellent addition to their
upstream portfolios, providing stable cash inflows immediately after the
acquisition and over the long term. This acquisition is consistent with the companies core strategy, which
places the strategic investments in energy and natural resources and aims to
acquire excellent upstream assets for the purpose of maintaining a stable
earnings structure. The consolidated financial statements include the operating results of
Mitsui E&P Middle East B.V. from the beginning of the year ended March 31,
2003. The companies acquired a mineral right in the Block 9 area as an
intangible asset for ¥9,051 million which is being amortized using the
unit-of-production method. The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition: Millions of YenCurrent assets
    
    ¥
    3,104Property and equipment
    
    
    8,528Intangible assets
    
    
    9,051Total assets acquired
    
    
    20,683Current liabilities
    
    
    (2,514
    )Minority interest
    
    
    (5,822
    )Total liabilities assumed
    
    
    (8,336
    )Net assets acquired
    
    ¥
    12,347
 Pro forma results of operations for the above business combination have not
been presented because the effects were not material to the consolidated
financial statements. For the year ended March 31, 2002 There were no individually or collectively material business combinations
during the year ended March 31, 2002. 4. DISCONTINUED OPERATIONS In accordance with SFAS
No. 144, the companies present the results of
discontinued operations (including operations of a subsidiary that either has
been disposed of or is classified as held for sale) as a separate line item in
the Statements of Consolidated Income under loss from discontinued
operationsnet (after income tax effect). The figures of the Statements of
Consolidated Income and the Statements of Consolidated Cash Flows for the prior
years related to the discontinued operations have been reclassified to conform
to the current year presentation. The carrying amounts of assets and liabilities of a disposal group
classified as held for sale were immaterial for the years ended March 31, 2004
and 2003. Summarized selected financial information for the years ended March 31,
2004, 2003 and 2002 for the discontinued operations reclassified during the
year ended March 31, 2004 was as follows: F-20




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Millions of YenTakeoka
    
    OtherGolf Club
    
    subsidiaries
    
    TotalYear ended March 31, 2004:Revenues
    
    ¥
    423
    
    
    ¥
    2,393
    
    
    ¥
    2,816Loss from discontinued operations before income taxes
    
    ¥
    (5,919
    )
    
    ¥
    (2,139
    )
    
    ¥
    (8,058
    )Loss on disposalnet
    
    
    (49
    )
    
    
    (1,958
    )
    
    
    (2,007
    )Income tax benefit
    
    
    2,449
    
    
    
    3,585
    
    
    
    6,034Loss from discontinued operationsnet
    
    ¥
    (3,519
    )
    
    ¥
    (512
    )
    
    ¥
    (4,031
    )Year ended March 31, 2003:Revenues
    
    ¥
    432
    
    
    ¥
    3,989
    
    
    ¥
    4,421Loss from discontinued operations before income taxes
    
    ¥
    (282
    )
    
    ¥
    (3,621
    )
    
    ¥
    (3,903
    )Income tax benefit
    
    
    339
    
    
    
    583
    
    
    
    922Income (loss) from discontinued operationsnet
    
    ¥
    57
    
    
    ¥
    (3,038
    )
    
    ¥
    (2,981
    )Year ended March 31, 2002:Revenues
    
    ¥
    203
    
    
    ¥
    6,161
    
    
    ¥
    6,364Loss from discontinued operations before income taxes
    
    ¥
    (287
    )
    
    ¥
    (940
    )
    
    ¥
    (1,227
    )Income tax (expense) benefit
    
    
    (1
    )
    
    
    211
    
    
    
    210Loss from discontinued operationsnet
    
    ¥
    (288
    )
    
    ¥
    (729
    )
    
    ¥
    (1,017
    )


The primary discontinued operations for the year ended March 31, 2004 were
as follows: Takeoka Golf Club Takeoka Golf Club, a subsidiary reported in the All Other Segment, had
been engaged in the operation of a public golf club in Japan. Takeoka Golf Club had
suffered from the declining number of visitors due to keen competition with
other golf clubs adjacent to the golf club and was disposed of by sale during
the year ended March 31, 2004. Other subsidiaries The main subsidiaries in this category are Global Octanes Corporation, a
subsidiary partially reported in both the Chemical and Americas segments,
Global Octanes Investment Inc., a subsidiary reported in the Chemical Segment,
and Global Octanes Holding Inc., a subsidiary reported in the Americas Segment. These subsidiaries had managed Global Octanes Texas Limited Partnership,
which had been engaged in the manufacture and sale of Methyl Tertiary-Butyl Ether
(MTBE), as its partners, but dissolved the partnership and disposed of the
operations during the year ended March 31, 2004. This is because the demand for
MTBE was expected to decrease in the future due to the increased probability
that mandatory use of oxygenates including MTBE for gasoline would be abolished
in the United States. The loss on disposal of the operations before income
taxes was ¥3,054 million. The loss from discontinued operations before income taxes for the years
ended March 31, 2004, 2003 and 2002 were ¥2,160 million, ¥1,478 million and
¥539 million, respectively. The revenues for the years ended March 31, 2004,
2003 and 2002 were immaterial. Summarized selected financial information for the years ended March 31,
2003 and 2002 for the discontinued operations reclassified during the year
ended March 31, 2003 was as follows: F-21




---



##### 



Millions of YenPetrochemicalssubsidiaries in
    
    OtherNorth America
    
    subsidiaries
    
    TotalYear ended March 31, 2003:Revenues
    
    
    
    
    
    ¥
    3,740
    
    
    ¥
    3,740Loss from discontinued operations before
income taxes
    
    ¥
    (12,776
    )
    
    ¥
    (1,912
    )
    
    ¥
    (14,688
    )(Loss) gain on disposalnet
    
    
    (1,724
    )
    
    
    3,425
    
    
    
    1,701Income tax benefit
    
    
    8,171
    
    
    
    2,340
    
    
    
    10,511(Loss) income from discontinued operationsnet
    
    ¥
    (6,329
    )
    
    ¥
    3,853
    
    
    ¥
    (2,476
    )Year ended March 31, 2002:Revenues
    
    
    
    
    
    ¥
    13,041
    
    
    ¥
    13,041Loss from discontinued operations before
income taxes
    
    ¥
    (2,637
    )
    
    ¥
    (438
    )
    
    ¥
    (3,075
    )Income tax benefit (expense)
    
    
    235
    
    
    
    (680
    )
    
    
    (445
    )Loss from discontinued operationsnet
    
    ¥
    (2,402
    )
    
    ¥
    (1,118
    )
    
    ¥
    (3,520
    )


The primary discontinued operations for the year ended March 31, 2003 were
as follows: Petrochemicals subsidiaries in North America (Transpacific Glycols, Inc. and
Pacific Ammonia Inc.) Transpacific Glycols, Inc., a subsidiary partially reported in both the Chemical and
Americas segments, had been engaged in the sale of ethylene glycol, but ceased
its sales operations during the year ended March 31, 2003 due to its declining
performance caused by the overall market conditions. Pacific Ammonia Inc., a subsidiary reported in the Chemical
Segment, which has been engaged in manufacture and sale of ammonia primarily on
the West Coast of the United States, suffered from high natural gas
costs as its
main raw material ingredient and a relatively weak ammonia price due to a
worldwide oversupply situation. Considering this business environment, Pacific
Ammonia Inc. recognized an impairment loss of fixed assets during the year
ended March 31, 2003 based on the plan to dispose of the operation by sale. Other subsidiaries The main subsidiary in this category is Bussan Promotion Co., Ltd. The Company was the sole agent for import and wholesale of Philip Morris
cigarettes in eastern Japan, and was promoting them to various retailers
through Bussan Promotion Co., Ltd., a subsidiary reported in the Consumer
Products & Services Segment. Philip Morris International Inc., however, changed
its strategy to directly manage their sales promotion operations, and
accordingly, the Company sold all of the shares of Bussan Promotion Co., Ltd.
to FTR HOLDINGS S.A., a member of Philip Morris Group, in April, 2002,
resulting in a gain on disposal of ¥2,398 million for the year ended March 31,
2003. No revenues and income from discontinued operations before income taxes
were recognized by Bussan Promotion Co., Ltd. for the year ended March 31,
2003. No revenues were recognized for the year ended March 31, 2002 and income
from discontinued operations before income taxes of ¥129 million was reported
for the year ended March 31, 2002. 5. MARKETABLE SECURITIES AND OTHER INVESTMENTS Debt and marketable equity securities At March 31, 2004 and 2003, the cost, fair value and gross unrealized holding
gains and losses on available-for-sale securities and held-to-maturity debt
securities were as follows: F-22




---



##### 



Millions of YenUnrealized holding gains (losses)Cost
    
    Fair value
    
    Gains
    
    Losses
    
    NetMarch 31, 2004:Available-for-sale:Marketable equity securities
    
    ¥
    178,609
    
    
    ¥
    297,018
    
    
    ¥
    119,438
    
    
    ¥
    (1,029
    )
    
    ¥
    118,409Foreign debentures, commercial paper and other debt securities
    
    
    206,429
    
    
    
    206,551
    
    
    
    159
    
    
    
    (37
    )
    
    
    122Held-to-maturity debt securities, consisting principally of foreign debentures
    
    
    2,106
    
    
    
    2,106
    
    
    
    0
    
    
    
    
    
    
    
    0March 31, 2003:Available-for-sale:Marketable equity securities
    
    ¥
    140,475
    
    
    ¥
    156,146
    
    
    ¥
    31,037
    
    
    ¥
    (15,366
    )
    
    ¥
    15,671Foreign debentures, commercial paper and other debt securities
    
    
    130,091
    
    
    
    130,175
    
    
    
    131
    
    
    
    (47
    )
    
    
    84Held-to-maturity debt securities, consisting principally of foreign debentures
    
    
    16,793
    
    
    
    16,804
    
    
    
    16
    
    
    
    (5
    )
    
    
    11




The fair value and gross unrealized holding losses on available-for-sale
securities and held-to-maturity debt securities, aggregated by investment
category and length of time that individual securities have been in continuous
unrealized loss positions, at March 31, 2004 were as follows:

Millions of YenLess Than 12 Months
    
    12 Months or MoreUnrealized
    
    
    
    
    
    UnrealizedFair value
    
    holding losses
    
    Fair value
    
    holding lossesAvailable-for-sale:Marketable equity securities
    
    ¥
    8,234
    
    
    ¥
    (1,029
    )
    
    
    
    
    
    
    Foreign debentures, commercial paper and other debt securities
    
    
    9,084
    
    
    
    (37
    )
    
    
    
    
    
    
    Held-to-maturity debt securities, consisting principally of foreign debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    ¥
    17,318
    
    
    ¥
    (1,066
    )
    
    
    
    
    
    
    




For the years ended March 31, 2004, 2003 and 2002, losses of ¥1,262
million, ¥15,573 million and ¥34,521 million, respectively, were recognized on
write-downs of available-for-sale securities to reflect the decline in market
value considered to be other than temporary.

The portion of net trading losses for the year that relates to trading
securities still held at March 31, 2004, 2003 and 2002 were ¥32 million, ¥136
million and ¥44 million, respectively.

The proceeds from sales of available-for-sale securities and the gross
realized gains and losses on those sales for the years ended March 31, 2004,
2003 and 2002 are shown below:

Millions of Yen2004
    
    2003
    
    2002Proceeds from sales
    
    ¥
    51,250
    
    
    ¥
    66,106
    
    
    ¥
    28,419Gross realized gains
    
    ¥
    18,741
    
    
    ¥
    9,661
    
    
    ¥
    8,915Gross realized losses
    
    
    (239
    )
    
    
    (4,628
    )
    
    
    (1,030
    )Net realized gains
    
    ¥
    18,502
    
    
    ¥
    5,033
    
    
    ¥
    7,885


On October 2, 2002, in connection with the foundation of Japan Airlines
System Corporation, the Company exchanged shares of Japan Air System Co., Ltd.
for those of Japan Airlines System Corporation. In accordance with EITF No.
91-5 Nonmonetary Exchange of Cost-Method Investments, a non-cash gain of
¥2,055 million was recorded for the year ended March 31, 2003, and is included
in gain on sales of F-23




---



##### 



securities-net in the Statements of Consolidated Income. During the year ended March 31, 2002, the Company contributed certain
available-for-sale securities to an employee retirement benefit trust at fair
value of ¥45,770 million and recognized ¥29,242 million in a realized gain,
which is included in gain on securities contributed to an employee retirement
benefit trust in the Statements of Consolidated Income. On April 1, 2001, in connection with the merger of The Sakura Bank, Ltd.
and The Sumitomo Bank, Ltd., the Company exchanged shares of The Sakura Bank,
Ltd. for those of Sumitomo Mitsui Banking Corporation. In accordance with EITF
No. 91-5, a non-cash gain of ¥16,168 million was recorded for the year ended
March 31, 2002 as a result of the exchange, which is included in gain on sales
of securities-net in the Statements of Consolidated Income. Debt securities classified as available-for-sale and held-to-maturity at
March 31, 2004 mature as follows: Millions of YenAvailable-for-sale
    
    Held-to-maturityCarrying
    
    Aggregate fair
    
    Carrying
    
    Aggregate fairamount
    
    value
    
    amount
    
    valueContractual maturities:Within 1 year
    
    ¥
    182,221
    
    
    ¥
    182,303
    
    
    ¥
    1,785
    
    
    ¥
    1,785After 1 year through 5 years
    
    
    22,404
    
    
    
    22,445
    
    
    
    314
    
    
    
    314After 5 years through 10 years
    
    
    1,801
    
    
    
    1,800
    
    
    
    7
    
    
    
    7After 10 years
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Total
    
    ¥
    206,429
    
    
    ¥
    206,551
    
    
    ¥
    2,106
    
    
    ¥
    2,106
 The actual maturities may differ from the contractual maturities shown above
because certain issuers may have the right to redeem debt securities before
their maturity. For the year ended March 31, 2002, certain subsidiaries transferred part of
their securities classified as held-to-maturity to the available-for-sale
category at the date of initial application of SFAS No. 133. The carrying amount
of the transferred securities at the time of transfer was ¥15,322 million, and
the amount of the related unrealized gain or loss was immaterial. Investments other than debt and marketable equity securities Investments other than investments in debt and marketable equity securities
consisted primarily of non-marketable equity securities and non-current time
deposits and amounted to ¥297,492 million and ¥320,301 million at March 31,
2004 and 2003, respectively. The estimation of the corresponding fair values at
those dates was not practicable, as the fair value for all the individual
non-marketable securities held by the companies was not readily determinable at
each balance sheet date. Investments in non-marketable equity securities are carried at cost;
however, if the fair value of an investment has declined and is judged to be
other than temporary, the investment is written down to its estimated fair
value. Losses on write downs of these investment securities recognized to
reflect the declines in fair value considered to be other than temporary were
¥29,804 million, ¥22,103 million and ¥9,041 million for the years ended March
31, 2004, 2003 and 2002, respectively. 6. INVESTMENTS IN AND ADVANCES TO ASSOCIATED COMPANIES Investments in associated companies (investees owned 20% to 50%, corporate
joint ventures and other investees over which the companies have the ability to
exercise significant influence) are accounted for under the equity method. Such
investments include, but are not limited to, the companies investments in
Valepar S.A. (18.24%), Japan Australia LNG (MIMI) Pty. Ltd. (50.00%), Nihon
Unisys, Ltd. (27.85%), Mitsui Leasing & Development, Ltd. (40.63%), Mitsui Oil
Exploration Co., Ltd. (40.75%) and Sakhalin Energy Investment Company Ltd.
(25.00%). Associated companies are engaged primarily in the development of
natural resources and the manufacture and distribution of various products. The
major geographic areas of such entities are Japan, the Americas, Asia and
Oceania. The investment in Valepar S.A. is accounted for under the equity method
because of the Companys ability to exercise significant influence over
operating and financial policies primarily through board representation and
power of veto over significant operating and financial decisions
through the board of directors. As the sole operating company among the
shareholders, which consist primarily of pension F-24




---



##### 



funds and financial institutions, the Company is expected to
capitalize on its experience and expertise in the iron ore business and
substantively participates in the decision-making processes. Investments in and advances to associated companies at March 31, 2004 and 2003
consisted of the following: Millions of Yen2004
    
    2003Investments in capital stock
    
    ¥
    524,228
    
    
    ¥
    414,473Advances
    
    
    202,293
    
    
    
    170,038Total
    
    ¥
    726,521
    
    
    ¥
    584,511
 The carrying value of the investments in associated companies exceeded the
companies equity in the underlying net assets of such associated companies by
¥84,142 million and ¥34,431 million at March 31, 2004 and 2003, respectively.
The excess is attributed first to certain fair value adjustments on a
net-of-tax basis at the time of the initial and subsequent investments in those
companies with the remaining portion considered as equity method goodwill. The
fair value adjustments are generally attributed to intangible assets subject to
amortization which consist primarily of mineral rights amortized over their
respective estimated useful lives, principally 8 to 42 years, using either the
straight-line or the unit-of-production method. Investments in common stock of publicly traded associated companies
include marketable equity securities carried at ¥85,244 million and ¥86,409
million at March 31, 2004 and 2003, respectively. Corresponding aggregate
quoted market values were ¥106,516 million and ¥65,852 million, respectively. Summarized financial information for associated companies at March 31, 2004 and
2003 and for the years ended March 31, 2004, 2003 and 2002 was as follows: Millions of Yen2004
    
    2003Current assets
    
    ¥
    2,770,593
    
    
    ¥
    2,434,282Property and equipmentnet of accumulated depreciation
    
    
    2,857,888
    
    
    
    2,028,094Other assets
    
    
    1,265,743
    
    
    
    916,754Total assets
    
    ¥
    6,894,224
    
    
    ¥
    5,379,130Current liabilities
    
    ¥
    2,362,786
    
    
    ¥
    2,119,214Long-term liabilities
    
    
    2,546,743
    
    
    
    1,971,251Minority interests
    
    
    376,730
    
    
    
    14,970Shareholders equity
    
    
    1,607,965
    
    
    
    1,273,695Total liabilities and shareholders equity
    
    ¥
    6,894,224
    
    
    ¥
    5,379,130The companies equity in the net assets of associated companies
    
    ¥
    440,086
    
    
    ¥
    380,042
 Millions of Yen2004
    
    2003
    
    2002Revenues *
    
    ¥
    4,212,195
    
    
    ¥
    3,460,933
    
    
    ¥
    2,843,354Gross profit *
    
    
    986,659
    
    
    
    730,929
    
    
    
    650,092Income before cumulative effect of change in accounting principle
    
    
    195,059
    
    
    
    92,593
    
    
    
    92,132Net income
    
    
    190,857
    
    
    
    92,593
    
    
    
    92,132
  *
    
    The revenue presentation in the summarized financial information for
associated companies has been changed in a manner consistent with the
change of the revenue presentation in the Statements of Consolidated
Income for the year ended March 31, 2004. The figures of revenues for the
years ended March 31, 2003 and 2002 have been restated to conform to the
current year presentation. See Note 2, BASIS OF FINANCIAL STATEMENTS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The companies revenues and purchases from associated companies included in
cost of revenues during the years ended March 31, 2004, 2003 and 2002 were as
follows: F-25




---



##### 



Millions of Yen2004
    
    2003
    
    2002Revenues *
    
    ¥
    107,816
    
    
    ¥
    91,372
    
    
    ¥
    76,186Purchases *
    
    
    161,221
    
    
    
    143,107
    
    
    
    45,454
  *
    
    The presentation of transactions with associated companies has been changed
to present revenues from associated companies and purchases from associated
companies included in cost of revenues in a manner consistent with the change
of the revenue and cost of revenues presented in the Statements of Consolidated
Income for the year ended March 31, 2004. Dividends received from associated companies for the years ended March 31,
2004, 2003 and 2002 amounted to ¥18,714 million, ¥13,037 million and ¥9,590
million, respectively. Consolidated unappropriated retained earnings at March 31, 2004 and 2003
included the companies equity in net undistributed earnings of associated
companies in the amount of ¥92,385 million and ¥70,502 million, respectively. 7. ALLOWANCE FOR DOUBTFUL RECEIVABLES An analysis of the change in the allowance for doubtful receivables is as
follows: Millions of YenCurrent
    
    Non-current
    
    TotalYear ended March 31, 2004:Balance at beginning of year
    
    ¥
    21,236
    
    
    ¥
    139,793
    
    
    ¥
    161,029Credits charged off
    
    
    (3,230
    )
    
    
    (33,584
    )
    
    
    (36,814
    )Provision for doubtful receivables
    
    
    6,523
    
    
    
    3,665
    
    
    
    10,188Charged to other accounts*1
    
    
    (2,031
    )
    
    
    224
    
    
    
    (1,807
    )Balance at end of year
    
    ¥
    22,498
    
    
    ¥
    110,098
    
    
    ¥
    132,596Year ended March 31, 2003:Balance at beginning of year
    
    ¥
    20,625
    
    
    ¥
    139,478
    
    
    ¥
    160,103Credits charged off
    
    
    (3,974
    )
    
    
    (10,163
    )
    
    
    (14,137
    )Provision for doubtful receivables
    
    
    6,063
    
    
    
    7,586
    
    
    
    13,649Charged to other accounts*1
    
    
    (1,478
    )
    
    
    2,892
    
    
    
    1,414Balance at end of year
    
    ¥
    21,236
    
    
    ¥
    139,793
    
    
    ¥
    161,029Year ended March 31, 2002*2:Balance at beginning of year
    
    ¥
    43,930
    
    
    ¥
    121,684
    
    
    ¥
    165,614Credits charged off
    
    
    (25,899
    )
    
    
    (11,141
    )
    
    
    (37,040
    )Provision for doubtful receivables
    
    
    2,574
    
    
    
    18,407
    
    
    
    20,981Charged to other accounts*1
    
    
    20
    
    
    
    10,528
    
    
    
    10,548Balance at end of year
    
    ¥
    20,625
    
    
    ¥
    139,478
    
    
    ¥
    160,103
  *1
    
    Principally reclassification to discontinued operations and effect of changes
in foreign exchange rates.*2
    
    The effect of the change in the fiscal year-end of certain subsidiaries was
immaterial. The recorded investment in impaired loans, as defined in SFAS No. 114, and
the allowance for doubtful receivables related to such loans at March 31, 2004
and 2003 were as follows: Millions of Yen2004
    
    2003Allowance for
    
    
    
    
    
    Allowance forImpaired
    
    doubtful
    
    Impaired
    
    doubtfulloans
    
    receivables
    
    loans
    
    receivablesImpaired loans with an allowance for doubtful receivables
    
    ¥
    158,884
    
    
    ¥
    106,242
    
    
    ¥
    189,637
    
    
    ¥
    130,996Impaired loans without an allowance for doubtful receivables
    
    
    6,249
    
    
    
    
    
    
    
    5,391
    
    
    
    Total
    
    ¥
    165,133
    
    
    ¥
    106,242
    
    
    ¥
    195,028
    
    
    ¥
    130,996
 F-26




---



##### 



The average investment in impaired loans and interest income on impaired
loans for the years ended March 31, 2004, 2003 and 2002 were as follows:

Millions of Yen2004
    
    2003
    
    2002Average investment in impaired loans
    
    ¥
    180,434
    
    
    ¥
    181,687
    
    
    ¥
    170,206Interest income recognized on impaired loans
    
    
    1,701
    
    
    
    1,800
    
    
    
    2,855


Interest income on impaired loans has been recognized mainly using the
cash-basis method of accounting during the period that the loans were impaired.

8. LEASES

Lessor

The companies lease real estate and equipment, aircraft, ocean transport
vessels and rolling stock.

Certain leases of aircraft, ocean transport vessels and rolling stock are
classified as direct financing leases or leveraged leases, and the net
investments are included as part of trade receivablesaccounts and non-current
receivables, less unearned interest in the accompanying Consolidated Balance
Sheets. The companies have no general obligation for principal and interest on
notes and other instruments related to third-party participation in leveraged
leases. Such notes and other instruments have not been included in liabilities
but have been offset against the related lease receivables. The residual values
represent the estimate of the values of the leased assets at the end of the
lease contracts and are initially recorded based on appraisals and estimates.
Realization of the residual values is dependent on the companies future
ability to sell the related assets under then prevailing market conditions.

Other leases are classified as operating leases and the related assets are
presented as property leased to othersat cost, less accumulated depreciation
in the accompanying Consolidated Balance Sheets.

The following comprises the components of the net investment in direct
financing leases as of March 31, 2004 and 2003:

Millions of Yen2004
    
    2003Total minimum lease payments to be received
    
    ¥
    73,065
    
    
    ¥
    86,502Estimated unguaranteed residual value of leased assets
    
    
    13,632
    
    
    
    15,942Deferred initial direct costs
    
    
    
    
    
    
    10Less unearned income
    
    
    (30,317
    )
    
    
    (34,070
    )Investment in direct financing leases
    
    
    56,380
    
    
    
    68,384Less allowance for doubtful receivables
    
    
    (855
    )
    
    
    (903
    )Net investment in direct financing leases
    
    ¥
    55,525
    
    
    ¥
    67,481


The following is a schedule by years of future minimum lease payments to
be received from direct financing leases as of March 31, 2004:

Millions of YenYear ending March 31:2005
    
    ¥
    8,0592006
    
    
    7,3982007
    
    
    6,1182008
    
    
    5,7692009
    
    
    5,517Thereafter
    
    
    40,204Total
    
    ¥
    73,065


F-27



---



##### 



The following represents the components of the net investment in leveraged
leases as of March 31, 2004 and 2003:


Millions of Yen2004
    
    2003Total minimum lease payments to be received (net of principal and
interest on third-party nonrecourse debt)
    
    ¥
    4,605
    
    
    ¥
    5,242Estimated unguaranteed residual value of leased assets
    
    
    8,344
    
    
    
    9,495Less unearned income
    
    
    (3,115
    )
    
    
    (4,074
    )Investment in leveraged leases
    
    
    9,834
    
    
    
    10,663Less deferred tax liabilities arising from leveraged leases
    
    
    (6,627
    )
    
    
    (4,791
    )Net investment in leveraged leases
    
    ¥
    3,207
    
    
    ¥
    5,872


The following schedule provides an analysis of the companies investment
in property on operating leases and property held for lease by classes as of
March 31, 2004 and 2003:

Millions of Yen2004
    
    2003Accumulated
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    depreciation
    
    Net
    
    Cost
    
    depreciation
    
    NetReal estate and equipment
    
    ¥
    231,657
    
    
    ¥
    (77,253
    )
    
    ¥
    154,404
    
    
    ¥
    220,333
    
    
    ¥
    (72,873
    )
    
    ¥
    147,460Aircraft
    
    
    45,588
    
    
    
    (9,351
    )
    
    
    36,237
    
    
    
    73,890
    
    
    
    (13,601
    )
    
    
    60,289Ocean transport vessels
    
    
    44,222
    
    
    
    (4,552
    )
    
    
    39,670
    
    
    
    40,872
    
    
    
    (8,317
    )
    
    
    32,555Total
    
    ¥
    321,467
    
    
    ¥
    (91,156
    )
    
    ¥
    230,311
    
    
    ¥
    335,095
    
    
    ¥
    (94,791
    )
    
    ¥
    240,304


The following is a schedule by years of minimum future rentals on
noncancelable operating leases as of March 31, 2004:

Millions of YenYear ending March 31:2005
    
    ¥
    14,2242006
    
    
    10,7472007
    
    
    8,7422008
    
    
    7,7922009
    
    
    6,579Thereafter
    
    
    34,695Total
    
    ¥
    82,779


Lessee

The companies lease ocean transport vessels, aircraft, real estate and
equipment. Most of the ocean transport vessels and aircraft under operating
leases are subleased to third parties. The other leases are primarily
classified as operating leases. Leased assets under capital leases were not
significant in any period presented.

The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of March 31, 2004. Minimum payments have
not been reduced by minimum sublease rentals of ¥63,950 million due in the
future under noncancelable subleases:

Millions of YenYear ending March 31:2005
    
    ¥
    22,2242006
    
    
    19,2302007
    
    
    14,4302008
    
    
    12,3892009
    
    
    8,298Thereafter
    
    
    35,836Total
    
    ¥
    112,407


F-28



---



##### 



Rental expenses incurred for operating leases for the years ended March
31, 2004, 2003 and 2002 were ¥35,770 million, ¥35,420 million and ¥32,896
million, respectively. Sublease rental income for the years ended March 31,
2004, 2003 and 2002 were ¥16,562 million, ¥20,184 million and ¥13,165 million,
respectively. 9. PLEDGED ASSETS AND FINANCIAL ASSETS ACCEPTED AS COLLATERAL Pledged assets At March 31, 2004 and 2003, the following assets (exclusive of assets covered
by trust receipts discussed below) were pledged as collateral for certain
liabilities of the companies: Millions of Yen2004
    
    2003Trade receivables (current and non-current)
    
    ¥
    47,354
    
    
    ¥
    47,240Inventories
    
    
    17,073
    
    
    
    783Investments
    
    
    24,665
    
    
    
    12,399Property leased to others (net book value)
    
    
    23,691
    
    
    
    14,047Property and equipment (net book value)
    
    
    46,857
    
    
    
    25,657Other
    
    
    969
    
    
    
    419Total
    
    ¥
    160,609
    
    
    ¥
    100,545
 The distribution of such collateral among short-term debt, long-term debt
and guarantees of contracts, etc. was as follows: Millions of Yen2004
    
    2003Short-term debt
    
    ¥
    22,866
    
    
    ¥
    7,005Long-term debt
    
    
    113,384
    
    
    
    73,351Guarantees of contracts, etc.
    
    
    24,359
    
    
    
    20,189Total
    
    ¥
    160,609
    
    
    ¥
    100,545
 Trust receipts issued under customary import financing arrangements
(short-term bank loans and bank acceptances) give banks a security interest in
the merchandise imported and/or the accounts receivable resulting from the sale
of such merchandise. Because of the companies large volume of import
transactions, it is not practicable to determine the total amount of assets
covered by outstanding trust receipts. Financial assets accepted as collateral At March 31, 2004 and 2003, the fair values of financial assets that the
companies accepted as security for trade receivables and that they are
permitted to sell or repledge consisted of the following: Millions of Yen2004
    
    2003Bank deposits
    
    ¥
    1,971
    
    
    ¥
    2,451Promissory notes
    
    
    10,796
    
    
    
    42,617Trade
receivablesaccounts
    
    
    54
    
    
    
    Stocks and bonds
    
    
    12,695
    
    
    
    7,169
 Promissory notes of ¥3,554 million and ¥9,191 million which have been
provided as collateral were repledged at March 31, 2004 and 2003, respectively. At March 31, 2003, under security repurchase agreements, the companies
accepted corporate bonds of ¥3,599 million from the counterparties. These
financial assets were not sold or repledged as of March 31, 2003. There were no
financial assets accepted as collateral under security repurchase agreements at
March 31, 2004. F-29




---



##### 



10. IMPAIRMENT LOSS OF LONG-LIVED ASSETS The companies recognized impairment losses of long-lived assets in accordance
with the provisions of SFAS No. 144 during the years ended March 31, 2004 and
2003, and under SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of for the year ended March
31, 2002. See to Note 4, DISCONTINUED OPERATIONS, for the impairment loss
of long-lived assets reported in discontinued operations and Note 23, EXIT OR
DISPOSAL ACTIVITIES, for the impairment loss of long-lived assets related to
exit or disposal activities. The impairment losses of long-lived assets consist principally of real
estate such as corporate residences and dormitories owned by the Company for
employees in the Adjustments and Eliminations of the operating segment
information which includes the assets not allocated to specific operating
segments and production facilities and real estate owned by domestic
subsidiaries in the Machinery, Electronics & Information, Energy and All Other
operating segments for the year ended March 31, 2004, property leased to others
and real estate owned by subsidiaries in the Machinery, Electronics &
Information, Energy and Consumer Products & Services operating segments for the
year ended March 31, 2003, real estate such as corporate residences and
dormitories owned by the Company for employees in the Adjustments and
Eliminations of the operating segment information and real estate and
production facilities in the Metal Products & Minerals and Energy operating
segments for the year ended March 31, 2002. The impairments for the year ended March 31, 2004 mainly related to land in
Japan which had experienced significant decreases in market value, and to
production facilities of certain subsidiaries resulting from operating losses.
The impairments for the year ended March 31, 2003 mainly related to operating
cutbacks by the airline industry in the United States resulting from
deterioration of its business environment, and to land in Japan which had
experienced significant decreases in the market value. The impairments for the
year ended March 31, 2002 mainly related to land in Japan which had experienced
significant decreases in the market value, and to production facilities of
certain subsidiaries resulting from operating losses. The fair value of the assets is calculated based on independent
appraisals, market value or discounted future cash flows whichever management
considers the most appropriate. 11. ASSET RETIREMENT OBLIGATIONS The companies recognized the cumulative effect of the initial application of
SFAS No. 143 as a separate line item in the Statements of Consolidated Income
under cumulative effect of change in accounting principle (after income tax
effect) amounting to ¥2,285 million (loss) including the Companys share of
amounts attributable to associated companies. The cumulative-effect adjustment
represents the difference between the net amount that was recognized in the
Consolidated Balance Sheets upon the retroactive application of SFAS No. 143 as
of April 1, 2003 and the amounts recognized in the Consolidated Balance Sheets
at that date prior to the application of SFAS No. 143. The cumulative-effect
adjustment resulted in a decrease in investments in and advances to associated
companies by ¥2,098 million, an increase in equipment and fixtures by ¥1,812
million (net of accumulated depreciation of ¥1,165 million), an increase in
deferred tax assetsnon-current by ¥161 million, an increase in long-term
debt, less current maturities by ¥2,231 million and a decrease in minority
interests by ¥71 million. The asset retirement obligations are principally related to the costs of
dismantling and removing mining facilities and gas production facilities owned
by subsidiaries and associated companies in Australia, which are engaged in
mining operations or oil and gas producing activities. The changes in asset retirement obligations for the year ended March 31,
2004, and on a pro forma basis for the years ended March 31,
2003 and 2002,
assuming adoption of SFAS No. 143 on April 1, 2001, were as follows: Millions of Yen2004
    
    2003
    
    2002Pro forma
    
    Pro formaBalance at beginning of year
    
    ¥
    6,423
    
    
    ¥
    4,469
    
    
    ¥
    3,599Liabilities incurred
    
    
    3,124
    
    
    
    3,380
    
    
    
    1,770Liabilities settled
    
    
    (2,805
    )
    
    
    (1,660
    )
    
    
    (1,461
    )Accretion expense
    
    
    168
    
    
    
    131
    
    
    
    113Foreign currency translation adjustments
    
    
    418
    
    
    
    103
    
    
    
    448Balance at end of year
    
    ¥
    7,328
    
    
    ¥
    6,423
    
    
    ¥
    4,469
 F-30




---



##### 



The pro forma effects of the retroactive application on net income and basic
and diluted net income per share for the years ended March 31, 2004, 2003 and
2002, as if SFAS No. 143 had been adopted on April 1, 2001, were as follows: Millions of Yen2004
    
    2003
    
    2002Net income
    
    ¥
    70,672
    
    
    ¥
    31,003
    
    
    ¥
    54,454
 Yen2004
    
    2003
    
    2002Basic net income per share
    
    ¥
    44.69
    
    
    ¥
    19.59
    
    
    ¥
    34.39Diluted net income per share
    
    
    42.25
    
    
    
    18.61
    
    
    
    32.31
  Notes: (1)
    
    Pro forma net income for the year ended March 31, 2004 represents
reported net income excluding cumulative effect of change in accounting
principle (after income tax effect) of ¥2,285 million (loss) (¥1.44 per
basic share and ¥1.36 per diluted share).(2)
    
    Basic and diluted net income per share presented in the
Statements of Consolidated Income were ¥19.68 and ¥18.69,
respectively, for the year ended March 31, 2003 and ¥34.97 and
¥32.85, respectively, for the year ended March 31, 2002. 12. GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets subject to amortization at March 31, 2004 and 2003 consisted
of the following: Millions of Yen2004
    
    2003Gross carrying
    
    Accumulated
    
    Gross carrying
    
    Accumulatedamount
    
    amortization
    
    amount
    
    amortizationSoftware
    
    ¥
    35,779
    
    
    ¥
    15,151
    
    
    ¥
    23,123
    
    
    ¥
    10,407Mineral rights
    
    
    27,349
    
    
    
    5,032
    
    
    
    29,306
    
    
    
    5,248Unpatented technologies
    
    
    15,658
    
    
    
    1,174
    
    
    
    
    
    
    
    Trademarks
    
    
    11,461
    
    
    
    6,750
    
    
    
    10,061
    
    
    
    5,732Patents
    
    
    9,073
    
    
    
    8,539
    
    
    
    9,906
    
    
    
    9,711Other
    
    
    28,234
    
    
    
    15,265
    
    
    
    26,856
    
    
    
    17,031Total
    
    ¥
    127,554
    
    
    ¥
    51,911
    
    
    ¥
    99,252
    
    
    ¥
    48,129
 The aggregate amortization expense of intangible assets for the years
ended March 31, 2004, 2003 and 2002 was ¥13,048 million, ¥11,984 million and
¥7,190 million, respectively. The estimated aggregate amortization expense of
intangible assets at March 31, 2004 for each of the next five years is as
follows: Millions of YenYear ending March 31:2005
    
    ¥
    14,4352006
    
    
    12,8022007
    
    
    9,5382008
    
    
    6,9712009
    
    
    4,883
 Total carrying amount of intangible assets not subject to amortization
(excluding goodwill) at March 31, 2004 and 2003 consisted of: F-31




---



##### 



Millions of Yen2004
    
    2003Land rights
    
    ¥
    7,212
    
    
    ¥
    8,947Trademarks
    
    
    2,383
    
    
    
    8Other
    
    
    2,657
    
    
    
    3,144Total
    
    ¥
    12,252
    
    
    ¥
    12,099
 Intangible assets subject to amortization acquired during the year ended
March 31, 2004 totaled ¥37,756 million, and consist primarily of unpatented
technologies of ¥15,658 million and software of ¥13,581 million. The weighted average
amortization periods for unpatented technologies and software are 10 years and
5 years, respectively. Intangible assets not subject to amortization acquired
during the year ended March 31, 2004 totaled ¥3,105 million, and consist
primarily of trademarks. Intangible assets subject to amortization acquired during the year ended
March 31, 2003 totaled ¥35,859 million, and consist primarily of mineral rights
of ¥25,107 million and software of ¥5,204 million. The weighted average
amortization periods for mineral rights and software are 17 years and 5 years,
respectively. Acquisition of intangible assets not subject to amortization
during the year ended March 31, 2003 was immaterial. During the year ended March 31, 2004, the companies recognized impairment
losses of ¥1,533 million on intangible assets which are included in impairment
loss of long-lived assets in the Statements of Consolidated Income. The
impairment losses consist primarily of ¥1,034 million on the write-down of land
rights which are held by domestic subsidiaries within the Consumer Products &
Services and Energy segments. The impairments of land rights resulted from a
decrease in the fair value. The fair value for the basis of determining the
impairment loss was calculated based on discounted future cash flows. No Impairment loss was recorded for intangible assets subject to amortization
and not subject to amortization for the year ended March 31, 2003. In addition to the intangible assets shown in the above tables, intangible
assets in the Consolidated Balance Sheets at March 31, 2004 and 2003 also
included unrecognized prior service costs totaling ¥112 million and ¥180
million, respectively, which were recorded under SFAS No. 87 as discussed in
Note 14, PENSION COSTS AND SEVERANCE INDEMNITIES. The changes in the carrying amount of goodwill by operating segment for
the years ended March 31, 2004 and 2003 were as follows: Millions of YenMetal
    
    Machinery,
    
    
    
    
    
    ConsumerProducts &
    
    Electronics &
    
    
    
    
    
    Products &
    
    
    
    
    
    ConsolidatedMinerals
    
    Information
    
    Chemical
    
    Services
    
    Americas
    
    TotalBalance at April 1, 2002
    
    ¥
    3,228
    
    
    ¥
    1,012
    
    
    ¥
    919
    
    
    ¥
    1,068
    
    
    ¥
    479
    
    
    ¥
    6,706Acquisition
    
    
    
    
    
    
    1,557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,557Foreign currency translation adjustments
    
    
    (316
    )
    
    
    17
    
    
    
    (90
    )
    
    
    (51
    )
    
    
    (46
    )
    
    
    (486
    )Balance at March 31, 2003
    
    
    2,912
    
    
    
    2,586
    
    
    
    829
    
    
    
    1,017
    
    
    
    433
    
    
    
    7,777Acquisition
    
    
    
    
    
    
    822
    
    
    
    616
    
    
    
    16,547
    
    
    
    
    
    
    
    17,985Foreign currency translation adjustments
    
    
    (352
    )
    
    
    (125
    )
    
    
    (100
    )
    
    
    (55
    )
    
    
    (11
    )
    
    
    (643
    )Balance at March 31, 2004
    
    ¥
    2,560
    
    
    ¥
    3,283
    
    
    ¥
    1,345
    
    
    ¥
    17,509
    
    
    ¥
    422
    
    
    ¥
    25,119
 No impairment loss was recorded for goodwill during the years ended March
31, 2004 and 2003. Net income and basic and diluted net income per share adjusted to exclude
goodwill amortization and equity method goodwill amortization for the years
ended March 31, 2004, 2003 and 2002 were as follows: F-32




---



##### 



Millions of Yen2004
    
    2003
    
    2002Reported net income
    
    ¥
    68,387
    
    
    ¥
    31,138
    
    
    ¥
    55,371Add back: Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    202Add back: Equity method goodwill amortization
    
    
    
    
    
    
    
    
    
    
    136Adjusted net income
    
    ¥
    68,387
    
    
    ¥
    31,138
    
    
    ¥
    55,709
 Yen2004
    
    2003
    
    2002Basic net income per share:Reported net income
    
    ¥
    43.25
    
    
    ¥
    19.68
    
    
    ¥
    34.97Add back: Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    0.13Add back: Equity method goodwill amortization
    
    
    
    
    
    
    
    
    
    
    0.08Adjusted net income
    
    ¥
    43.25
    
    
    ¥
    19.68
    
    
    ¥
    35.18Diluted net income per share:Reported net income
    
    ¥
    40.89
    
    
    ¥
    18.69
    
    
    ¥
    32.85Add back: Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    0.12Add back: Equity method goodwill amortization
    
    
    
    
    
    
    
    
    
    
    0.07Adjusted net income
    
    ¥
    40.89
    
    
    ¥
    18.69
    
    
    ¥
    33.04
 13. SHORT-TERM AND LONG-TERM DEBT Short-term debt Short-term debt at March 31, 2004 and 2003 was comprised of the following: Millions of Yen2004
    
    2003Interest
    
    
    
    
    
    Interestrate*1
    
    
    
    rate*1Short-term bank loans and others
    
    ¥
    401,493
    
    
    
    1.8
    %
    
    ¥
    450,632
    
    
    
    1.5
    %Commercial paper
    
    
    120,976
    
    
    
    0.5
    
    
    
    96,187
    
    
    
    0.3Notes under medium-term note programme
    
    
    120,796
    
    
    
    0.1
    
    
    
    144,074
    
    
    
    0.1Total
    
    
    643,265
    
    
    
    
    
    
    
    690,893SFAS No. 133 fair value adjustment*2
    
    
    3,481
    
    
    
    
    
    
    
    (12
    )Total
    
    ¥
    646,746
    
    
    
    
    
    
    ¥
    690,881
  *1
    
    The interest rates represent weighted average rates in effect at March 31, 2004 and 2003, regardless of
borrowing currencies, though the range of the interest rates varies by borrowing currency.*2
    
    In accordance with the requirements of SFAS No. 133, the portion of the companies fixed-rate debt
obligations that is designated and effective as a fair value hedge is reflected in the Consolidated Balance
Sheets as an amount equal to the sum of the debts carrying value plus a SFAS No. 133 fair value adjustment
representing changes recorded in the fair value of the hedged debt obligations attributable to movements in
the designated benchmark interest rates and applicable foreign currency exchange rates during the term of the
hedge. Unused lines of credit, for short-term financing outside Japan, aggregated
¥508,754 million at March 31, 2004. Certain foreign subsidiaries compensate
banks for these facilities in the form of commitment fees, which were not
material in each of the past two years. F-33




---



##### 



Long-term debt Long-term debt at March 31, 2004 and 2003 consisted of the following: Millions of Yen2004
    
    2003Long-term debt with collateral (Note 9):Banks and
insurance companies, maturing serially through 2013principally 0.2% to 7%
    
    ¥
    56,112
    
    
    ¥
    79,307Government-owned
banks and government agencies, maturing serially through
2056principally 0.7% to 7%
    
    
    60,187
    
    
    
    36,448Other,
maturing serially through 2018principally 2%
    
    
    5,885
    
    
    
    5,889Total
    
    
    122,184
    
    
    
    121,644Long-term debt without collateral:Banks and others (principally insurance companies):Principally 0.1% to 7%, maturing serially through 2018
    
    
    1,461,479
    
    
    
    1,573,410Principally
0.8% to 8%, maturing serially through 2017 (payable in foreign currencies)
    
    
    387,352
    
    
    
    359,277Bonds and notes:Japanese yen convertible bonds (fixed rate 1.05%, due 2009)
    
    
    92,786
    
    
    
    92,786Japanese yen bonds with early redemption clause (fixed rate 0.7% to 1.4%, due 2016)
    
    
    71,000
    
    
    
    35,000Japanese yen bonds (fixed rate 0.5% to 3.6%, due 2003-2019)
    
    
    240,500
    
    
    
    220,000Japanese yen bonds (fixed and floating rate: floating rate 1.2% to 1.8%, due 2003-2013)
    
    
    38,500
    
    
    
    48,500Japanese yen bonds (fixed and floating rate: fixed rate 2.0% to 2.5%, due 2014)
    
    
    33,000
    
    
    
    33,000Japanese yen bonds (floating rate 1.8% to 2.5%, due 2016)
    
    
    72,000
    
    
    
    62,000Reverse dual currency yen/U.S. dollar bonds (fixed rate 3.0% to 3.25%, due 2007-2012)
    
    
    30,000
    
    
    
    30,000Notes under global medium-term note programme (fixed rate 0.15% to 4.6%, due 2003-2014)
    
    
    25,205
    
    
    
    40,573Notes under euro medium-term note programme (fixed and floating rate: fixed rate 0.06% to 7.9%, due 2003-2024)
    
    
    118,380
    
    
    
    49,186Account payables, derivative liabilities and others due through 2019:Interest bearing
    
    
    50,380
    
    
    
    43,295Non-interest bearing
    
    
    116,441
    
    
    
    113,012Total
    
    
    2,737,023
    
    
    
    2,700,039Total
    
    
    2,859,207
    
    
    
    2,821,683SFAS No. 133 fair value adjustment*
    
    
    39,689
    
    
    
    95,850Total
    
    
    2,898,896
    
    
    
    2,917,533Less current maturities
    
    
    357,675
    
    
    
    417,063Long-term debt, less current maturities
    
    ¥
    2,541,221
    
    
    ¥
    2,500,470
  *
    
    In accordance with the requirements of SFAS No. 133, the portion of the companies fixed-rate debt obligations that is designated and effective as a fair value hedge is reflected in the
Consolidated Balance Sheets as an amount equal to the sum of the debts carrying value plus a SFAS No. 133 fair value adjustment representing changes recorded in the fair value of the
hedged debt obligations attributable to movements in the designated benchmark interest rates and applicable foreign currency exchange rates during the term of the hedge. The companies have entered into currency swap agreements and interest rate
swap agreements in connection with certain bonds, notes and other long-term
borrowings. The floating interest rates for interest rate swap agreements are
generally based on the three-month or six-month LIBOR (London Interbank Offered
Rate). The three-month and six-month LIBORs for U.S. dollar denominated debt as
of March 31, 2004 were 1.11% and 1.16%, respectively. The three-month and
six-month LIBORs for U.S. dollar denominated debt as of March 31, 2003 were
1.28% and 1.23%, respectively. (See Note 24, DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, and Note 25, FINANCIAL INSTRUMENTS.) The 1.05% Convertible Bonds due 2009 may be converted into common stock at
¥881.00 per share, at the option of the holder and may be redeemed at the
option of the Company at specified percentages of the principal. F-34




---



##### 



The indenture, under which the bonds were issued, does not require
maintenance of a prescribed amount of net assets, a minimum debt/equity ratio
or limit the payment of cash dividends by the Company. Substantially all short-term and long-term bank borrowings are made under
agreements which, as is customary in Japan, provide that under certain
conditions a bank may require the borrower to provide collateral (or additional
collateral) or guarantors with respect to the borrowings and that the bank may
treat any collateral, whether furnished as security for short-term or long-term
loans or otherwise, as collateral for all indebtedness to such bank. Default
provisions of certain loan agreements grant certain rights of possession to the
lenders. Under certain loan agreements with government-owned banks, the creditors
may require the companies to submit proposals as to the payment of dividends
and other appropriations of earnings for the creditors review and approval
before presentation to the shareholders. Certain of those agreements require
the borrower, upon the request of the lender, to reduce outstanding loans
before scheduled maturity dates when the lender considers that the companies
are able to reduce such loans through increased earnings or through the
proceeds from the sale of common stock or bonds and notes. During the years
ended March 31, 2004 and 2003, the companies did not receive any such requests,
and there is no expectation that any such requests will be made. Maturities of long-term debt outstanding at March 31, 2004 were as
follows, excluding the effect of the SFAS No. 133 fair value adjustment: Millions of YenYear ending March 31:2005
    
    ¥
    348,2572006
    
    
    346,0592007
    
    
    345,2702008
    
    
    295,2562009
    
    
    200,436Thereafter
    
    
    1,323,929Total
    
    ¥
    2,859,207
 14. PENSION COSTS AND SEVERANCE INDEMNITIES The Company and certain subsidiaries have non-contributory defined benefit
pension plans and contributory defined benefit pension plans, covering
substantially all employees other than directors. The primary pension plan is the Companys contributory Corporate Pension
Fund (CPF) under the Defined Benefit Corporate Pension Law, which was newly
transferred from the Companys contributory defined benefit Japanese government
welfare pension program for its employees (the Employees Pension Fund, EPF)
during the year ended March 31, 2004. EPF was composed of a substitutional
portion of Japanese Pension Insurance and a corporate portion of a contributory
defined benefit plan. For the former, the benefits were based on a standard
remuneration schedule under the Welfare Pension Insurance Law and the length of
participation. For the latter, the benefits were based on length of service. Effective April 1, 1997, the Company merged a non-contributory defined
benefit pension plan (the Tax Qualified Pension Plan, TQPP) into EPF. Only
retired employees with vested benefits as of March 31, 1997, remained in the
TQPP. The benefits for CPF are based on the length of service. EPF was approved by the Japanese Minister of Health, Labour and Welfare
for an exemption from the obligation to pay benefits for future employee
service related to the substitutional portion on October 1, 2002, and an
exemption from the obligation to pay benefits for past employee service related
to the substitutional portion on January 1, 2004. EPF transferred the benefit
obligation and the related government-specified portion of the plan assets to
the Japanese government on March 12, 2004 and completed the entire process of
the transfer of the substitutional portion. In accordance with EITF No. 03-2,
the Company recognized (1) the difference of ¥17,224 million between the
accumulated benefit obligations settled and the assets transferred to the
Japanese government as a government grant for transfer of substitutional
portion of EPF, (2) the proportionate amount of the net
unrealized loss of
¥10,508 million for the substitutional portion, F-35




---



##### 



as settlement loss, and (3) the difference of ¥2,183 million
between the projected benefit obligations and the accumulated benefit
obligations related to the substitutional portion, as gain on derecognition of
previously accrued salary progression. The remaining corporate portion of EPF was transferred to the Companys
CPF. The Company and certain subsidiaries have unfunded severance indemnities
plans. Benefits under the plans are based on the level of compensation at
retirement, or earlier termination of employment, and the length of service. The Company and most subsidiaries use a measurement date of March 31 for
their defined benefit pension plans. Obligations and funded status The following table sets forth the reconciliation of benefit obligations,
plan assets and funded status of the plans: Millions of Yen2004
    
    2003Change in benefit obligation:Benefit obligation at beginning of year
    
    ¥
    286,075
    
    
    ¥
    253,885Service cost
    
    
    11,920
    
    
    
    11,582Interest cost
    
    
    5,487
    
    
    
    7,234Plan participants contributions
    
    
    385
    
    
    
    829Plan amendments
    
    
    1,155
    
    
    
    (620
    )Actuarial loss
    
    
    4,610
    
    
    
    32,509Benefits paid from plan assets
    
    
    (13,794
    )
    
    
    (12,651
    )Direct benefit payments
    
    
    (5,739
    )
    
    
    (5,344
    )Curtailments
    
    
    (64
    )
    
    
    Settlements
    
    
    (38,057
    )
    
    
    (160
    )Acquisitions and divestitures
    
    
    4,763
    
    
    
    (544
    )Foreign currency translation adjustments
    
    
    (935
    )
    
    
    (645
    )Benefit obligation at end of year
    
    
    255,806
    
    
    
    286,075Change in plan assets:Fair value of plan assets at beginning of year
    
    
    228,418
    
    
    
    233,229Actual return (loss) on plan assets
    
    
    65,183
    
    
    
    (46,372
    )Employer contribution
    
    
    140
    
    
    
    53,298Plan participants contributions
    
    
    385
    
    
    
    829Benefits paid from plan assets
    
    
    (13,794
    )
    
    
    (12,651
    )Settlements
    
    
    (18,650
    )
    
    
    (101
    )Acquisitions and divestitures
    
    
    1,657
    
    
    
    620Foreign currency translation adjustments
    
    
    (553
    )
    
    
    (434
    )Fair value of plan assets at end of year
    
    
    262,786
    
    
    
    228,418Funded status at end of year
    
    
    6,980
    
    
    
    (57,657
    )Unrecognized prior service cost
    
    
    (6,483
    )
    
    
    (7,754
    )Unrecognized net actuarial loss
    
    
    59,499
    
    
    
    145,833Net amount recognized
    
    ¥
    59,996
    
    
    ¥
    80,422Amounts recognized in the Consolidated Balance Sheets consist of:Intangible assets
    
    ¥
    112
    
    
    ¥
    180Other assets (prepaid pension costs)
    
    
    102,872
    
    
    
    119,727Accrued pension costs and liability for severance indemnities
    
    
    (52,296
    )
    
    
    (53,148
    )Accumulated other comprehensive loss (before income tax effect)
    
    
    9,308
    
    
    
    13,663Net amount recognized
    
    ¥
    59,996
    
    
    ¥
    80,422
 The prior service cost is amortized over the average remaining service
period of employees expected to receive related benefits. F-36




---



##### 



The amortization periods of the unrecognized net actuarial loss are seven
years for CPF and the average remaining service period for other defined
benefit pension plans. The accumulated benefit obligation for the companies defined benefit
pension plans as of March 31, 2004 and 2003 was ¥249,595 million and ¥276,192
million, respectively. The aggregate projected benefit obligation and aggregate fair value of
plan assets for plans with projected benefit obligations in excess of plan
assets were ¥92,213 million and ¥38,273 million at March 31, 2004 and ¥286,075
million and ¥228,418 million at March 31, 2003. The aggregate accumulated
benefit obligation and aggregate fair value of plan assets for plans with
accumulated benefit obligations in excess of plan assets were ¥86,124 million
and ¥38,273 million at March 31, 2004 and ¥49,461 million and ¥22,405 million
at March 31, 2003. Components of net periodic pension costs Net periodic pension costs of the companies defined benefit pension plans
for the years ended March 31, 2004, 2003 and 2002 included the following
components: Millions of Yen2004
    
    2003
    
    2002Service costbenefits earned during the period
    
    ¥
    11,920
    
    
    ¥
    11,582
    
    
    ¥
    12,834Interest cost on projected benefit obligation
    
    
    5,487
    
    
    
    7,234
    
    
    
    7,528Expected return on plan assets
    
    
    (6,013
    )
    
    
    (5,815
    )
    
    
    (5,004
    )Amortization of unrecognized prior service cost
    
    
    (137
    )
    
    
    (171
    )
    
    
    (53
    )Amortization of unrecognized net actuarial loss
    
    
    21,806
    
    
    
    8,809
    
    
    
    8,867Curtailment gain
    
    
    (64
    )
    
    
    
    
    
    
    Settlement loss
    
    
    10,504
    
    
    
    
    
    
    
    Gain on derecognition of previously accrued salary progression
    
    
    (2,183
    )
    
    
    
    
    
    
    Net periodic pension costs
    
    ¥
    41,320
    
    
    ¥
    21,639
    
    
    ¥
    24,172
 Assumptions Weighted-average assumptions used to determine the companies benefit
obligations as of March 31, 2004 and 2003 are set forth as follows: 2004
    
    2003Discount rate
    
    
    2.4
    %
    
    
    2.5
    %Rate of increase in future compensation levels
    
    
    0.5
    %
    
    
    1.0
    %
 Weighted-average assumptions used to determine the companies net periodic
pension costs for the years ended March 31, 2004, 2003 and 2002 are set forth
as follows: 2004
    
    2003
    
    2002Discount rate
    
    
    2.5
    %
    
    
    3.2
    %
    
    
    3.2
    %Expected long-term rate of return on plan assets
    
    
    2.6
    %
    
    
    2.6
    %
    
    
    2.9
    %Rate of increase in future compensation levels
    
    
    1.0
    %
    
    
    1.0
    %
    
    
    0.9
    %
 The companies determine the discount rates each year as of the measurement
date, based on a review of interest rates associated with long-term Japanese
government bonds or high-quality fixed-income
corporate bonds. The discount rates determined on each measurement date are
used to calculate the benefit obligation as of that date, and are also used to
calculate the net periodic pension costs for the upcoming plan year. The rate of increase in future compensation levels was not applied in
determining the projected benefit obligation of CPF and the corporate portion
of EPF which was transferred to CPF, because the benefit formulas of these
plans do not contain factors relating to compensation levels. The Company determines the expected long-term rate of return on plan
assets based on the weighted-average rate of return computed by using the
expected long-term rate of return on each asset class, which is derived from an
extensive study conducted by investment advisors and actuaries on a periodic
basis, and the target allocations for each asset class. The study includes a
review of anticipated future F-37




---



##### 



performance with market analysis of individual asset classes, and also
gives appropriate consideration to actual historical returns achieved by the
plans. The subsidiaries determine the expected long-term rates of return on
plan assets mainly based on the expectations for future returns by investment
advisors and actuaries. Plan assets The companies pension plan weighted-average asset allocations based on
the fair value of such assets as of March 31, 2004 and 2003 are set forth as
follows: Asset category
    
    2004
    
    2003Equity securities
    
    
    58
    %
    
    
    71
    %Debt securities
    
    
    26
    %
    
    
    14
    %Life insurance company general accounts
    
    
    4
    %
    
    
    10
    %Cash and deposits
    
    
    6
    %
    
    
    1
    %Other
    
    
    6
    %
    
    
    4
    %Total
    
    
    100
    %
    
    
    100
    %
 Equity securities include securities held in the Companys employee
retirement benefit trust. The fair value of those securities as of March 31,
2004 and 2003 are 39% and 42% of total fair value of plan assets, respectively.
Life insurance company general accounts are pooled investment portfolios
managed by insurance companies and guarantee a minimum rate of return. The Companys investment objective is to build high quality plan assets,
and the investment policy is targeted to ensure adequate returns available to
provide future payments of pension benefits and severance indemnities. The
basic strategy is diversified investment in various asset classes which have
different risk return characteristics. The Company sometimes uses derivative
instruments to hedge the exposure to changes in the fair value of debt and
equity securities, and never uses them for speculation. The subsidiaries
investment strategies are mainly based on diversified investment, and are
targeted to stably ensure adequate returns to provide future payments of
pension benefits over the long term. The companies weighted-average target allocation of plan assets as of
March 31, 2004 is 60% equity securities (including securities held in the
employee retirement benefit trust), 34% debt securities (including life
insurance company general accounts)and 6% other assets. The Company contributed certain available-for-sale securities to the
employee retirement benefit trust for retirement obligations during the years
ended March 31, 2003 and 2002. As stated in Note 5, MARKETABLE SECURITIES AND
OTHER INVESTMENTS, fair value at contribution of these securities for the
years ended March 31, 2003 and 2002 were ¥27,343 million and ¥45,770 million,
respectively. The fair value of equity securities of an associated company included in
plan assets is ¥15,765 million (6% of total fair value of plan assets) and
¥10,313 million (5% of total fair value of plan assets) at March 31, 2004 and
2003, respectively. Cash flows The companies expect to contribute ¥34,600 million to their defined benefit
pension plans for the year ending March 31, 2005. In addition to the above defined benefit pension plans, the Company
provides the Early Retirement Support Plan to eligible employees, which
guarantees, prior to normal retirement age, certain supplemental payments based
on preretirement compensation levels. During the years ended March 31, 2004,
2003 and 2002, the Company recorded ¥3,201 million, ¥12,687 million and ¥5,595
million of periodic payments in excess of previous projections and projected
benefits based on factors including the history of benefit payments as selling,
general and administrative expenses, respectively. 15. SHAREHOLDERS EQUITY Common stock and capital surplus Prior to October 1, 2001, under the Commercial Code of Japan (the Code),
certain issuances of common stock, including conversions of bonds and notes and
exercises of warrants issued, were required to be credited to the common stock
account for at least the greater of par value or 50% of the proceeds. An
amendment to the Code, which became effective on October 1, 2001, required that
the stated par value be eliminated resulting in the outstanding shares having
no par value as of October 1, 2001. After the amendment, issuances of F-38




---



##### 



common stock are required to be credited to the common stock account for at
least 50% of the proceeds. At March 31, 2004, 105,318,956 shares of common stock were reserved for
the conversion of outstanding bonds. The Code permits, upon approval by the Board of Directors, transfers of
amounts from capital surplus to the common stock account. The amounts available
for transfer are based on capital surplus as defined by accounting practices
prevailing in Japan. Additional amounts recorded as capital surplus to conform with U.S. GAAP shall
not be transferred to the common stock account under the Code. Such additional
amounts were ¥69,049 million at March 31, 2004 and primarily relate to
accounting for warrants and business combinations. When debt securities were
previously issued with detachable stock purchase warrants, the portion of the
proceeds which was allocable to the warrants was credited to capital surplus
under U.S. GAAP. In addition, the step acquisition of the shares held by
minority shareholders of a subsidiary by selling unissued shares of the Company
was accounted for by the purchase method under U.S. GAAP rather than by the
pooling of interests method which was prevailing in Japan when such business
combinations occurred. Pursuant to the resolution of the Board of Directors, the Company made
free distributions of common stock in prior years. Such free distributions did
not result in the transfer of retained earnings to common stock or capital
surplus. Corporations in the United States issuing shares in similar
transactions would be required to account for them as stock dividends as of the
shareholders record date by reducing retained earnings and increasing
appropriate capital accounts by an amount equal to the fair value of the shares
issued. If such United States practice had been applied to the above free
distributions of shares made on and after September 30, 1986, capital surplus
at March 31, 2004 would have been increased by ¥87,860 million with a
corresponding decrease in unappropriated retained earnings. Retained earnings appropriated for legal reserve Prior to October 1, 2001, the Code provided that an amount at least equal to
10% of the aggregate amount of cash dividends and certain other appropriations
of retained earnings associated with cash outlays applicable to each period be
appropriated as a legal reserve until such reserve equals 25% of common stock.
The amendment to the Code, which became effective on October 1, 2001, provides
that the amount to be appropriated as a legal reserve shall be in an amount
such that the total amount of capital surplus and the legal reserve equals 25%
of common stock. The retained earnings so appropriated may be used to eliminate
or reduce a deficit by resolution of the shareholders or may be transferred to
capital stock by resolution of the Board of Directors. The amendment to the
Code also provides that to the extent that the sum of capital surplus and the
legal reserve exceeds 25% of common stock, the excess, if any, is available for
appropriations by resolution of the shareholders. Retained earnings unappropriated The amount of retained earnings available for dividends under the Code is based
on the amount of retained earnings recorded in the Companys general books of
account in accordance with accepted Japanese accounting practices. The
adjustments included in the accompanying consolidated financial statements for
U.S. GAAP purposes but not recorded in the general books of account have no
effect on the determination of retained earnings available for dividends under
the Code. Retained earnings, exclusive of retained earnings appropriated for the
legal reserve, shown in the Companys general books of account amounted to
¥196,235 million at March 31, 2004. The amount does not include any retained
earnings to be appropriated for the legal reserve as a part of appropriations
of retained earnings associated with cash outlays but includes ¥4,896 million
restricted as to the payment of dividends under the Code. See Note 13,
SHORT-TERM AND LONG-TERM DEBT, for the rights of certain creditors to review
and approve the companies proposal for the payment of dividends and other
appropriations of earnings. Dividends are approved by shareholders at a meeting
held subsequent to the fiscal year to which the dividends are applicable. A
mid-year interim dividend may be paid by resolution of the Board of Directors,
subject to limitations imposed by the Code. The Code permits transfers, upon approval of shareholders, of a portion of
unappropriated retained earnings, available for dividends, to the common stock
account. Purchase by the Company of shares Prior to October 1, 2001, the Company was generally prohibited from acquiring
its own shares except, among others, by means of retirement of shares or grant
of stock option for employees, in the manner as provided in the Code, and the
purchased shares had to be sold or otherwise transferred to a third party
within a reasonable period thereafter. The amendment to the Code, which became effective on October 1, 2001, permits
the Company to purchase and hold its own shares. The Company is allowed to
decide the total number and amount of the shares to be acquired, not to exceed
the amount of retained earnings available for dividends, subject to the prior
approval of the shareholders at an ordinary general meeting of shareholders. In
addition, the amendment to the Code, which became effective on September 25,
2003, permits the Company to purchase its own shares upon the approval of the
Board of Directors, as far as it is permitted under the Articles of
Incorporation, subject to limitations imposed by the Code. Public companies are
generally required to purchase the shares through market transactions or tender
offer and may dispose of them, subject to the approval of the Board of
Directors, unless otherwise specified in the Code, or as far as the Articles of
Incorporation do not require a resolution of the shareholders at the shareholders meeting. As an
example of the disposal of its own shares, the Company sells the shares or
chooses to transfer the shares instead of issuing new shares in case of merger,
stock transfer or exchange, or spin-off. In addition, the Code enables the
Company to retire its own shares by resolution of the Board of Directors. It was approved on May 11, 2004 that the Board of Directors propose a
resolution at the ordinary general meeting of shareholders to be held on June
24, 2004 that the Company may amend the Articles of Incorporation to entitle
the Board of Directors to purchase outstanding shares of its own common stock
by its resolution. F-39




---



##### 



Accumulated other comprehensive income (loss) Changes in each component of accumulated other comprehensive income (loss) for
the years ended March 31, 2004, 2003 and 2002 are as follows: Millions of Yen2004
    
    2003
    
    2002Unrealized Holding Gains and Losses on Available-for-Sale Securities:Balance at beginning of year
    
    ¥
    3,405
    
    
    ¥
    44,246
    
    
    ¥
    95,806Pre-tax amount of unrealized holding gains and losses on
available-for-sale securities
    
    
    125,856
    
    
    
    (85,488
    )
    
    
    (119,796
    )Deferred income taxes
    
    
    (49,395
    )
    
    
    34,673
    
    
    
    49,085Adjustments for year (after income tax effect)
    
    
    76,461
    
    
    
    (50,815
    )
    
    
    (70,711
    )Pre-tax amount of reclassification adjustments
    
    
    (17,240
    )
    
    
    10,540
    
    
    
    28,272Deferred income taxes
    
    
    7,103
    
    
    
    (566
    )
    
    
    (8,945
    )Adjustments for year (after income tax effect)
    
    
    (10,137
    )
    
    
    9,974
    
    
    
    19,327The effect of change in fiscal year-end of certain subsidiaries:Pre-tax amount of unrealized holding gains and losses on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (290
    )Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    122Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    (168
    )Pre-tax amount of reclassification adjustments
    
    
    
    
    
    
    
    
    
    
    (8
    )Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    (8
    )Balance at end of year
    
    ¥
    69,729
    
    
    ¥
    3,405
    
    
    ¥
    44,246Foreign Currency Translation Adjustments:Balance at beginning of year
    
    ¥
    (141,053
    )
    
    ¥
    (118,669
    )
    
    ¥
    (188,670
    )Pre-tax amount of translation adjustments
    
    
    (27,098
    )
    
    
    (26,957
    )
    
    
    73,838Deferred income taxes
    
    
    4,538
    
    
    
    1,032
    
    
    
    (5,421
    )Adjustments for year (after income tax effect)
    
    
    (22,560
    )
    
    
    (25,925
    )
    
    
    68,417Pre-tax amount of reclassification adjustments
    
    
    2,969
    
    
    
    4,721
    
    
    
    818Deferred income taxes
    
    
    (810
    )
    
    
    (1,180
    )
    
    
    (178
    )Adjustments for year (after income tax effect)
    
    
    2,159
    
    
    
    3,541
    
    
    
    640The effect of change in fiscal year-end of certain subsidiaries:Pre-tax amount of translation adjustments
    
    
    
    
    
    
    
    
    
    
    954Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (10
    )Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    944Pre-tax amount of reclassification adjustments
    
    
    
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    ¥
    (161,454
    )
    
    ¥
    (141,053
    )
    
    ¥
    (118,669
    )Minimum Pension Liability Adjustment:Balance at beginning of year
    
    ¥
    (6,731
    )
    
    ¥
    (373
    )
    
    ¥
    (24,841
    )Pre-tax amount
    
    
    4,355
    
    
    
    (10,584
    )
    
    
    48,577Deferred income taxes
    
    
    (3,367
    )
    
    
    4,226
    
    
    
    (24,063
    )Adjustments for year (after income tax effect)
    
    
    988
    
    
    
    (6,358
    )
    
    
    24,514The effect of change in fiscal year-end of certain subsidiaries:Pre-tax amount
    
    
    
    
    
    
    
    
    
    
    (73
    )Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    27Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    (46
    )Balance at end of year
    
    ¥
    (5,743
    )
    
    ¥
    (6,731
    )
    
    ¥
    (373
    )
 F-40




---



##### 



(Continued)
    
    Millions of Yen2004
    
    2003
    
    2002Net Unrealized Gains and Losses on Derivatives:Balance at beginning of year
    
    ¥
    (2,759
    )
    
    ¥
    (2,122
    )
    
    
    Pre-tax amount of net unrealized gains and losses on derivatives
    
    
    (6,467
    )
    
    
    (3,782
    )
    
    ¥
    (7,545
    )Deferred income taxes
    
    
    3,101
    
    
    
    1,621
    
    
    
    2,787Adjustments for year (after income tax effect)
    
    
    (3,366
    )
    
    
    (2,161
    )
    
    
    (4,758
    )Pre-tax amount of reclassification adjustments
    
    
    3,542
    
    
    
    2,762
    
    
    
    3,015Deferred income taxes
    
    
    (1,413
    )
    
    
    (1,238
    )
    
    
    (1,207
    )Adjustments for year (after income tax effect)
    
    
    2,129
    
    
    
    1,524
    
    
    
    1,808The effect of change in fiscal year-end of certain subsidiaries:Pre-tax amount of net unrealized gains and losses on derivatives
    
    
    
    
    
    
    
    
    
    
    1,016Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (353
    )Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    663Pre-tax amount of reclassification adjustments
    
    
    
    
    
    
    
    
    
    
    257Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (92
    )Adjustments for year (after income tax effect)
    
    
    
    
    
    
    
    
    
    
    165Balance at end of year
    
    ¥
    (3,996
    )
    
    ¥
    (2,759
    )
    
    ¥
    (2,122
    )Accumulated Other Comprehensive Income (Loss)Total:Balance at beginning of year
    
    ¥
    (147,138
    )
    
    ¥
    (76,918
    )
    
    ¥
    (117,705
    )Pre-tax amount
    
    
    85,917
    
    
    
    (108,788
    )
    
    
    27,179Deferred income taxes
    
    
    (40,243
    )
    
    
    38,568
    
    
    
    12,058Other comprehensive income (loss) for year
(after income tax effect)
    
    
    45,674
    
    
    
    (70,220
    )
    
    
    39,237The effect of change in fiscal year-end of certain subsidiaries:Pre-tax amount
    
    
    
    
    
    
    
    
    
    
    1,856Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (306
    )Other comprehensive income (loss) for the stub period
(after income tax effect)
    
    
    
    
    
    
    
    
    
    
    1,550Balance at end of year
    
    ¥
    (101,464
    )
    
    ¥
    (147,138
    )
    
    ¥
    (76,918
    )
 16. NET INCOME PER SHARE The following is a reconciliation of basic net income per share to diluted net
income per share for the years ended March 31, 2004, 2003 and 2002: 2004
    
    
    2003
    
    
    2002Net income
    
    Shares
    
    Per share
    
    
    Net income
    
    Shares
    
    Per share
    
    
    Net income
    
    Shares
    
    Per share(numerator)
    
    (denominator)
    
    amount
    
    
    (numerator)
    
    (denominator)
    
    amount
    
    
    (numerator)
    
    (denominator)
    
    amountMillions of Yen
    
    In Thousands
    
    Yen
    
    
    Millions of Yen
    
    In Thousands
    
    Yen
    
    
    Millions of Yen
    
    In Thousands
    
    YenBasic Net Income per Share:Income from continuing operations
    
    ¥
    74,703
    
    
    
    1,581,195
    
    
    ¥
    47.24
    
    
    
    ¥
    36,595
    
    
    
    1,582,278
    
    
    ¥
    23.13
    
    
    
    ¥
    59,908
    
    
    
    1,583,427
    
    
    ¥
    37.83Loss from discontinued operationsnet (after income tax effect)
    
    
    (4,031
    )
    
    
    1,581,195
    
    
    
    (2.55
    )
    
    
    
    (5,457
    )
    
    
    1,582,278
    
    
    
    (3.45
    )
    
    
    
    (4,537
    )
    
    
    1,583,427
    
    
    
    (2.86
    )Cumulative effect of change in
accounting principle (after
income tax effect)
    
    
    (2,285
    )
    
    
    1,581,195
    
    
    
    (1.44
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income available to common
shareholders
    
    
    68,387
    
    
    
    1,581,195
    
    
    
    43.25
    
    
    
    
    31,138
    
    
    
    1,582,278
    
    
    
    19.68
    
    
    
    
    55,371
    
    
    
    1,583,427
    
    
    
    34.97Effect of Dilutive Securities:1.5% Convertible Bonds due 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    189
    
    
    
    19,266
    
    
    
    
    
    
    
    
    150
    
    
    
    19,2661.05% Convertible Bonds due 2009
    
    
    581
    
    
    
    105,319
    
    
    
    
    
    
    
    
    581
    
    
    
    105,319
    
    
    
    
    
    
    
    
    581
    
    
    
    105,319
 F-41




---



##### 



(Continued)

2004
    
    
    2003
    
    
    2002Net income
    
    Shares
    
    Per share
    
    
    Net income
    
    Shares
    
    Per share
    
    
    Net income
    
    Shares
    
    Per share(numerator)
    
    (denominator)
    
    amount
    
    
    (numerator)
    
    (denominator)
    
    amount
    
    
    (numerator)
    
    (denominator)
    
    amountMillions of Yen
    
    In Thousands
    
    Yen
    
    
    Millions of Yen
    
    In Thousands
    
    Yen
    
    
    Millions of Yen
    
    In Thousands
    
    YenDiluted Net Income per Share:Income from continuing operations
    
    
    75,284
    
    
    
    1,686,514
    
    
    
    44.64
    
    
    
    
    37,365
    
    
    
    1,706,863
    
    
    
    21.89
    
    
    
    
    60,639
    
    
    
    1,708,012
    
    
    
    35.50Loss from discontinued operationsnet (after income tax effect)
    
    
    (4,031
    )
    
    
    1,686,514
    
    
    
    (2.39
    )
    
    
    
    (5,457
    )
    
    
    1,706,863
    
    
    
    (3.20
    )
    
    
    
    (4,537
    )
    
    
    1,708,012
    
    
    
    (2.65
    )Cumulative effect of change in
accounting principle (after
income tax effect)
    
    
    (2,285
    )
    
    
    1,686,514
    
    
    
    (1.36
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income available to common
shareholders after effect of
dilutive securities
    
    ¥
    68,968
    
    
    
    1,686,514
    
    
    ¥
    40.89
    
    
    
    ¥
    31,908
    
    
    
    1,706,863
    
    
    ¥
    18.69
    
    
    
    ¥
    56,102
    
    
    
    1,708,012
    
    
    ¥
    32.85
 17. SEGMENT INFORMATION SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, requires disclosure of financial and descriptive information
about operating segments, which are components of an enterprise whose operating
results are regularly reviewed by the enterprises chief operating decision
maker in deciding about resources to be allocated to the segment and assessing
its performance. The business units of the companies Head Office, which are organized
based on products and services, plan overall and worldwide strategies for
their products and services and conduct their worldwide operations. The
business units also collaborate with branches and offices that are located in
Japan and overseas countries and with overseas trading subsidiaries in planning
and executing their strategies for products and regions. The branches, offices,
and overseas trading subsidiaries are separate operating units, which are
delegated the business of their regions as the centers of each particular
regional strategy and operate diversified business together with their
subsidiaries and associated companies in collaboration with the business units.
Therefore, the companies operating segments consist of product-focused
operating segments comprised of the business units of the Head Office and
region-focused operating segments comprised of branches, offices and overseas
trading subsidiaries. The companies operating segments have been aggregated based on the nature
of the products and other criteria into five product-focused reportable
operating segments and four region-focused reportable operating segments,
totaling nine reportable operating segments. A description of reportable operating segments of the Company follows. Metal Products & Minerals develops raw material resources of iron or
non-ferrous metals in foreign countries, and manufactures, sells and trades
products in Japan and abroad. Machinery, Electronics & Information manufactures, sells and trades
machinery products and electronics and information related products and
services, and executes projects such as the construction of plants and
infrastructure, in Japan and abroad. Chemical manufactures, sells and trades chemical products in Japan and
abroad. Energy develops energy resources overseas and manufactures, sells and
trades oil and gas products in Japan and abroad. Consumer Products & Services manufactures, constructs, sells and trades
consumer-related products, such as foods, textiles, general merchandise and
houses in Japan and abroad. Domestic Branches and Offices trade in various commodities and conduct
related business in branches and offices in Japan, such as in the Kansai and
Chubu districts. Americas, Europe and Other Overseas Areas trade in various commodities and
conduct related business led by overseas trading subsidiaries or offices
located in each region. All gains and losses on forward contracts held by certain foreign
subsidiaries for trading purposes for crude oil and oil products and also
recognized as derivative instruments are shown net in total trading
transactions effective April 1, 2003. In relation to this change, the figures
for the years ended March 31, 2003 and 2002 have been reclassified. F-42




---



##### 



The companies operating segment information, product information and
geographic area information for the years ended March 31, 2004, 2003 and 2002
presented in conformity with SFAS No. 131 are as follows: OPERATING SEGMENT INFORMATION Millions of YenMachinery,
    
    
    
    
    
    
    
    
    
    Consumer
    
    DomesticMetal Products
    
    Electronics &
    
    
    
    
    
    
    
    
    
    Products &
    
    Branches andYear ended March 31, 2004:
    
    & Minerals
    
    Information
    
    Chemical
    
    Energy
    
    Services
    
    Offices
    
    AmericasTotal trading transactions:External customers
    
    ¥
    1,782,451
    
    
    ¥
    2,492,357
    
    
    ¥
    1,299,021
    
    
    ¥
    1,255,820
    
    
    ¥
    2,125,075
    
    
    ¥
    1,472,648
    
    
    ¥
    842,324Intersegment
    
    
    280,678
    
    
    
    134,145
    
    
    
    415, 753
    
    
    
    100,189
    
    
    
    135,058
    
    
    
    228,847
    
    
    
    448,399Total
    
    ¥
    2,063,129
    
    
    ¥
    2,626,502
    
    
    ¥
    1,714,774
    
    
    ¥
    1,356,009
    
    
    ¥
    2,260,133
    
    
    ¥
    1,701,495
    
    
    ¥
    1,290,723Gross profit
    
    ¥
    77,452
    
    
    ¥
    128,357
    
    
    ¥
    83,003
    
    
    ¥
    53,814
    
    
    ¥
    116,254
    
    
    ¥
    39,962
    
    
    ¥
    39,871Operating income (loss)
    
    ¥
    30,547
    
    
    ¥
    23,683
    
    
    ¥
    29,319
    
    
    ¥
    21,686
    
    
    ¥
    20,026
    
    
    ¥
    9,540
    
    
    ¥
    7,691Net income
    
    ¥
    23,591
    
    
    ¥
    7,298
    
    
    ¥
    10,000
    
    
    ¥
    23,954
    
    
    ¥
    12,554
    
    
    ¥
    11,606
    
    
    ¥
    161Total assets at March 31, 2004
    
    ¥
    1,099,185
    
    
    ¥
    1,216,319
    
    
    ¥
    542,868
    
    
    ¥
    565,535
    
    
    ¥
    907,929
    
    
    ¥
    453,031
    
    
    ¥
    399,599
 Millions of YenOther Overseas
    
    
    
    
    
    
    
    
    
    Adjustments andYear ended March 31, 2004:
    
    Europe
    
    Areas
    
    Total
    
    All Other
    
    Eliminations
    
    Consolidated TotalTotal trading transactions:External customers
    
    ¥
    342,286
    
    
    ¥
    624,435
    
    
    ¥
    12,236,417
    
    
    ¥
    52,857
    
    
    ¥
    (7,757
    )
    
    ¥
    12,281,517Intersegment
    
    
    335,262
    
    
    
    826,195
    
    
    
    2,904,526
    
    
    
    14,334
    
    
    
    (2,918,860
    )
    
    
    Total
    
    ¥
    677,548
    
    
    ¥
    1,450,630
    
    
    ¥
    15,140,943
    
    
    ¥
    67,191
    
    
    ¥
    (2,926,617
    )
    
    ¥
    12,281,517Gross profit
    
    ¥
    19,965
    
    
    ¥
    24,060
    
    
    ¥
    582,738
    
    
    ¥
    27,324
    
    
    ¥
    (141
    )
    
    ¥
    609,921Operating income
(loss)
    
    ¥
    3,030
    
    
    ¥
    (1,062
    )
    
    ¥
    144,460
    
    
    ¥
    3,269
    
    
    ¥
    (27,147
    )
    
    ¥
    120,582Net income
    
    ¥
    693
    
    
    ¥
    7,758
    
    
    ¥
    97,615
    
    
    ¥
    4,703
    
    
    ¥
    (33,931
    )
    
    ¥
    68,387Total assets at March 31,
2004
    
    ¥
    247,574
    
    
    ¥
    220,862
    
    
    ¥
    5,652,902
    
    
    ¥
    2,259,248
    
    
    ¥
    (1,196,122
    )
    
    ¥
    6,716,028
 Millions of YenMachinery,
    
    
    
    
    
    
    
    
    
    Consumer
    
    DomesticMetal Products
    
    Electronics &
    
    
    
    
    
    
    
    
    
    Products &
    
    Branches andYear ended March 31, 2003:
    
    & Minerals
    
    Information
    
    Chemical
    
    Energy
    
    Services
    
    Offices
    
    AmericasTotal trading transactions:External customers
    
    ¥
    1,612,401
    
    
    ¥
    2,294,414
    
    
    ¥
    1,099,142
    
    
    ¥
    1,083,326
    
    
    ¥
    2,077,329
    
    
    ¥
    1,547,002
    
    
    ¥
    786,707Intersegment
    
    
    265,050
    
    
    
    162,294
    
    
    
    322,658
    
    
    
    40,886
    
    
    
    127,811
    
    
    
    237,165
    
    
    
    485,566Total
    
    ¥
    1,877,451
    
    
    ¥
    2,456,708
    
    
    ¥
    1,421,800
    
    
    ¥
    1,124,212
    
    
    ¥
    2,205,140
    
    
    ¥
    1,784,167
    
    
    ¥
    1,272,273Gross profit
    
    ¥
    70,674
    
    
    ¥
    117,987
    
    
    ¥
    60,871
    
    
    ¥
    53,027
    
    
    ¥
    105,947
    
    
    ¥
    41,405
    
    
    ¥
    44,584Operating income (loss)
    
    ¥
    25,722
    
    
    ¥
    10,607
    
    
    ¥
    16,248
    
    
    ¥
    25,541
    
    
    ¥
    19,897
    
    
    ¥
    6,760
    
    
    ¥
    9,485Net income (loss)
    
    ¥
    14,944
    
    
    ¥
    (4,916
    )
    
    ¥
    (5,850
    )
    
    ¥
    22,605
    
    
    ¥
    3,983
    
    
    ¥
    6,994
    
    
    ¥
    3,291Total assets at March 31, 2003
    
    ¥
    887,517
    
    
    ¥
    1,250,695
    
    
    ¥
    484,628
    
    
    ¥
    572,660
    
    
    ¥
    803,842
    
    
    ¥
    488,026
    
    
    ¥
    412,659
 F-43




---



##### 



Millions of YenOther Overseas
    
    
    
    
    
    
    
    
    
    Adjustments and
    
    ConsolidatedYear ended March 31, 2003:
    
    Europe
    
    Areas
    
    Total
    
    All Other
    
    Eliminations
    
    TotalTotal trading transactions:External customers
    
    ¥
    355,061
    
    
    ¥
    577,425
    
    
    ¥
    11,432,807
    
    
    ¥
    54,472
    
    
    ¥
    (9,516
    )
    
    ¥
    11,477,763Intersegment
    
    
    224,247
    
    
    
    729,116
    
    
    
    2,594,793
    
    
    
    10,759
    
    
    
    (2,605,552
    )
    
    
    Total
    
    ¥
    579,308
    
    
    ¥
    1,306,541
    
    
    ¥
    14,027,600
    
    
    ¥
    65,231
    
    
    ¥
    (2,615,068
    )
    
    ¥
    11,477,763Gross profit
    
    ¥
    22,470
    
    
    ¥
    23,503
    
    
    ¥
    540,468
    
    
    ¥
    29,721
    
    
    ¥
    (1,544
    )
    
    ¥
    568,645Operating income (loss)
    
    ¥
    4,163
    
    
    ¥
    (1,931
    )
    
    ¥
    116,492
    
    
    ¥
    5,942
    
    
    ¥
    (23,787
    )
    
    ¥
    98,647Net income (loss)
    
    ¥
    2,845
    
    
    ¥
    6,193
    
    
    ¥
    50,089
    
    
    ¥
    9,738
    
    
    ¥
    (28,689
    )
    
    ¥
    31,138Total assets at March 31, 2003
    
    ¥
    218,304
    
    
    ¥
    208,318
    
    
    ¥
    5,326,649
    
    
    ¥
    2,196,484
    
    
    ¥
    (982,613
    )
    
    ¥
    6,540,520


Millions of YenMetal
    
    Machinery,
    
    
    
    
    
    
    
    
    
    Consumer
    
    DomesticProducts &
    
    Electronics &
    
    
    
    
    
    
    
    
    
    Products &
    
    Branches andYear ended March 31, 2002:
    
    Minerals
    
    Information
    
    Chemical
    
    Energy
    
    Services
    
    Offices
    
    AmericasTotal trading transactions:External customers
    
    ¥
    1,501,933
    
    
    ¥
    2,335,049
    
    
    ¥
    1,019,745
    
    
    ¥
    1,009,329
    
    
    ¥
    2,034,648
    
    
    ¥
    1,633,061
    
    
    ¥
    691,271Intersegment
    
    
    282,948
    
    
    
    170,725
    
    
    
    292,098
    
    
    
    53,816
    
    
    
    139,398
    
    
    
    272,492
    
    
    
    492,620Total
    
    ¥
    1,784,881
    
    
    ¥
    2,505,774
    
    
    ¥
    1,311,843
    
    
    ¥
    1,063,145
    
    
    ¥
    2,174,046
    
    
    ¥
    1,905,553
    
    
    ¥
    1,183,891Gross profit
    
    ¥
    67,397
    
    
    ¥
    112,425
    
    
    ¥
    53,476
    
    
    ¥
    48,061
    
    
    ¥
    108,610
    
    
    ¥
    47,553
    
    
    ¥
    45,096Operating income (loss)
    
    ¥
    19,847
    
    
    ¥
    10,027
    
    
    ¥
    8,185
    
    
    ¥
    16,661
    
    
    ¥
    5,082
    
    
    ¥
    8,873
    
    
    ¥
    11,750Net income (loss)
    
    ¥
    9,449
    
    
    ¥
    13,377
    
    
    ¥
    (4,893
    )
    
    ¥
    22,152
    
    
    ¥
    2,756
    
    
    ¥
    6,773
    
    
    ¥
    6,461Total assets at March 31, 2002
    
    ¥
    935,835
    
    
    ¥
    1,419,375
    
    
    ¥
    511,248
    
    
    ¥
    459,226
    
    
    ¥
    863,005
    
    
    ¥
    538,853
    
    
    ¥
    400,387
 Millions of YenOther Overseas
    
    
    
    
    
    
    
    
    
    Adjustments andYear ended March 31, 2002:
    
    Europe
    
    Areas
    
    Total
    
    All Other
    
    Eliminations
    
    Consolidated TotalTotal trading transactions:External customers
    
    ¥
    414,857
    
    
    ¥
    590,622
    
    
    ¥
    11,230,515
    
    
    ¥
    54,583
    
    
    ¥
    (15,957
    )
    
    ¥
    11,269,141Intersegment
    
    
    179,837
    
    
    
    798,560
    
    
    
    2,682,494
    
    
    
    12,513
    
    
    
    (2,695,007
    )
    
    
    Total
    
    ¥
    594,694
    
    
    ¥
    1,389,182
    
    
    ¥
    13,913,009
    
    
    ¥
    67,096
    
    
    ¥
    (2,710,964
    )
    
    ¥
    11,269,141Gross profit
    
    ¥
    20,623
    
    
    ¥
    21,929
    
    
    ¥
    525,170
    
    
    ¥
    27,735
    
    
    ¥
    (7,704
    )
    
    ¥
    545,201Operating income (loss)
    
    ¥
    4,484
    
    
    ¥
    (4,700
    )
    
    ¥
    80,209
    
    
    ¥
    3,257
    
    
    ¥
    (3,713
    )
    
    ¥
    79,753Net income (loss)
    
    ¥
    3,911
    
    
    ¥
    5,271
    
    
    ¥
    65,257
    
    
    ¥
    8,711
    
    
    ¥
    (18,597
    )
    
    ¥
    55,371Total assets at March 31, 2002
    
    ¥
    232,656
    
    
    ¥
    241,271
    
    
    ¥
    5,601,856
    
    
    ¥
    2,148,473
    
    
    ¥
    (1,081,963
    )
    
    ¥
    6,668,366
  Notes: (1)
    
    In accordance with SFAS No. 144, the figures of Consolidated Total
for the years ended March 31, 2003 and 2002 have been reclassified to
conform to the current year presentation. The reclassifications to Loss
from Discontinued OperationsNet (After Income Tax Effect) are included
in Adjustments and Eliminations.(2)
    
    All Other includes business activities which primarily provide
services, such as logistics service, financing service, development and
marketing of systems, and office services, to external customers and /or
to the companies and associated companies. Total assets of All Other at
March 31, 2004, 2003 and 2002 consist primarily of cash and cash
equivalents and time deposits related to finance activities and assets of
certain subsidiaries related to the above services. F-44




---



##### 





|   
|---
|(3)
|   
|   
|   
|   
|   
|   
|   
|(4)
|   
|(5)

PRODUCT INFORMATION Millions of YenNon-Ferrous
    
    
    
    Electronics &Year ended March 31, 2004:
    
    Iron and Steel
    
    Metals
    
    Machinery
    
    Information
    
    Chemicals
    
    EnergyRevenues
    
    ¥
    312,853
    
    
    ¥
    157,248
    
    
    ¥
    298,087
    
    
    ¥
    119,843
    
    
    ¥
    520,115
    
    
    ¥
    954,556Year ended March 31,
2003 (As restated):Revenues
    
    ¥
    281,761
    
    
    ¥
    152,145
    
    
    ¥
    299,913
    
    
    ¥
    108,110
    
    
    ¥
    463,375
    
    
    ¥
    830,997Year ended March 31,
2002 (As restated):Revenues
    
    ¥
    258,316
    
    
    ¥
    162,110
    
    
    ¥
    270,094
    
    
    ¥
    112,509
    
    
    ¥
    372,515
    
    
    ¥
    676,952
 Millions of YenGeneral
    
    Property andYear ended March 31, 2004:
    
    Foods
    
    Textiles
    
    Merchandise
    
    Service Business
    
    Consolidated TotalRevenues
    
    ¥
    389,496
    
    
    ¥
    32,793
    
    
    ¥
    88,791
    
    
    ¥
    106,560
    
    
    ¥
    2,980,342Year ended March 31, 2003 (As restated):Revenues
    
    ¥
    393,228
    
    
    ¥
    37,871
    
    
    ¥
    96,773
    
    
    ¥
    123,978
    
    
    ¥
    2,788,151Year ended March 31, 2002 (As restated)::Revenues
    
    ¥
    387,285
    
    
    ¥
    37,993
    
    
    ¥
    93,962
    
    
    ¥
    119,514
    
    
    ¥
    2,491,250
  Notes: (1)
    
    The revenues of each product have been changed in a manner consistent
with the change of revenue presentation in the Statements of Consolidated
Income for the year ended March 31, 2004. The figures for the years ended
March 31, 2003 and 2002 have been restated to conform to the current year
presentation.(2)
    
    In accordance with SFAS No. 144, revenues from discontinued operations
are eliminated from each product amount and Consolidated Total. The
figures for the years ended March 31, 2003 and 2002 have been
reclassified to conform to the current year presentation. F-45




---



##### 



GEOGRAPHIC AREA INFORMATION

Millions of YenYear ended March 31, 2004:
    
    Japan
    
    United States
    
    United Kingdom
    
    All Other
    
    Consolidated TotalTotal trading
transactions to external
customers
    
    ¥
    7,193,370
    
    
    ¥
    831,566
    
    
    ¥
    159,698
    
    
    ¥
    4,096,883
    
    
    ¥
    12,281,517Year ended March 31, 2003:Total trading
transactions to external
customers
    
    ¥
    7,110,646
    
    
    ¥
    808,293
    
    
    ¥
    154,142
    
    
    ¥
    3,404,682
    
    
    ¥
    11,477,763Year ended March 31, 2002:Total trading
transactions to external
customers
    
    ¥
    7,064,899
    
    
    ¥
    685,882
    
    
    ¥
    270,830
    
    
    ¥
    3,247,530
    
    
    ¥
    11,269,141




|Notes: (1) |  | Total trading transactions are attributed to countries based on the
location of customers.                                                                                                                                                                                                                          
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          
|(2)        |  | The Company provides total trading transactions instead of
revenues, as certain costs related to revenues presented net in
accordance with EITF No. 99-19 are not attributed to countries based on
the location of customers.                                                                                       
|          
|(3)        |  | In accordance with SFAS No. 144, total trading transactions to external
customers from discontinued operations are eliminated from each geographic
area amount and Consolidated Total. The figures for the years ended March
31, 2003 and 2002 have been reclassified to conform to the current year
presentation.

Millions of YenAt March 31, 2004:
    
    Japan
    
    United States
    
    Australia
    
    All Other
    
    Consolidated TotalLong-lived assets
    
    ¥
    469,072
    
    
    ¥
    128,100
    
    
    ¥
    81,211
    
    
    ¥
    128,750
    
    
    ¥
    807,133At March 31, 2003 (As restated):Long-lived assets
    
    ¥
    497,110
    
    
    ¥
    113,433
    
    
    ¥
    55,221
    
    
    ¥
    145,467
    
    
    ¥
    811,231At March 31, 2002 (As restated):Long-lived assets
    
    ¥
    524,247
    
    
    ¥
    124,404
    
    
    ¥
    34,821
    
    
    ¥
    172,243
    
    
    ¥
    855,715




|Note: |  | Long-lived assets located in Australia, which were previously included
in All Other, were separately presented in consideration of the importance
of the amount at March 31, 2004. The figures at March 31, 2003 and 2002
have been restated to conform to the current year presentation.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There are no individual material customers with respect to revenues for
the years ended March 31, 2004, 2003 and 2002.

18. SUPPLEMENTAL INCOME STATEMENT INFORMATION Supplemental information related to the Statements of Consolidated Income is as
follows: Millions of Yen2004
    
    2003
    
    2002Depreciation of property and equipment
    
    ¥
    52,950
    
    
    ¥
    47,798
    
    
    ¥
    50,869Research and development expenses
    
    
    6,019
    
    
    
    3,415
    
    
    
    2,949Advertising expenses
    
    
    7,915
    
    
    
    6,898
    
    
    
    6,671Foreign
exchange gainsnet
    
    
    2,887
    
    
    
    3,154
    
    
    
    10,975
 F-46




---



##### 



19. OTHER EXPENSENET

Other expensenet for the years ended March 31, 2004, 2003 and 2002 consists
of the following;

Millions of Yen2004
    
    2003
    
    2002Litigation charges
    
    ¥
    16,173
    
    
    ¥
    4,050
    
    
    ¥
    12,476Restructuringrelated charges
    
    
    6,959
    
    
    
    1,131
    
    
    
    1,400Exploration expenses
    
    
    1,367
    
    
    
    932
    
    
    
    744Foreign
exchange (gains) lossesnet
    
    
    (7
    )
    
    
    2,365
    
    
    
    (5,083
    )Other
    
    
    4,393
    
    
    
    2,505
    
    
    
    1,180Total
    
    ¥
    28,885
    
    
    ¥
    10,983
    
    
    ¥
    10,717




|Note: |  | In accordance with SFAS No. 144, the expense and/or income from
discontinued operations, if any, is eliminated from each line item
presented in the above table. The figures for the years ended March 31,
2003 and 2002 have been reclassified to conform to the current year
presentation.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20. INCOME TAXES

Income taxes in Japan applicable to the companies, imposed by the national,
prefectural and municipal governments, in the aggregate resulted in a normal
effective statutory tax rate of approximately 42% for the years ended March 31,
2004, 2003 and 2002. Foreign subsidiaries are subject to income taxes of the
countries in which they operate.

On March 31, 2003, the local tax laws in Japan were amended, and an
enterprise tax on the basis of the size of business will be introduced for the
year ending March 31, 2005. As a result, the statutory tax rate for the year
ending March 31, 2005 will be approximately 41% effective April 1, 2004. The
newly enacted statutory tax rate was used in calculating the deferred tax
assets and liabilities as of March 31, 2004 and 2003 for those temporary
differences which are expected to be realized or settled after March 31, 2004.
The effect of the changes in the tax rates on the balance of deferred tax
assets and liabilities as of March 31, 2003 was insignificant.

A reconciliation between taxes on income from continuing operations
calculated at the normal statutory rate in Japan and the companies provision
for income taxes on income from continuing operations for the years ended March
31, 2004, 2003 and 2002 is summarized as follows: Millions of Yen2004
    
    2003
    
    2002Taxes calculated at the normal rate in Japan applied to income from continuing
operations before income taxes, minority interests and equity in earnings
    
    ¥
    36,493
    
    
    ¥
    27,077
    
    
    ¥
    27,258Increases (decreases) in taxes resulting from:Expenses not
deductible for tax purposes and income not taxablenet
    
    
    3,860
    
    
    
    2,918
    
    
    
    2,676Application of lower tax rates to certain taxable income
    
    
    (5,070
    )
    
    
    (6,444
    )
    
    
    (4,429
    )Effect of taxation on dividends from subsidiaries and corporate joint ventures
    
    
    2,356
    
    
    
    6,738
    
    
    
    4,422Operating losses of certain subsidiaries
    
    
    10,333
    
    
    
    10,947
    
    
    
    5,038Tax benefits on losses of subsidiaries
    
    
    (4,922
    )
    
    
    (3,156
    )
    
    
    (2,193
    )Othernet
    
    
    1,742
    
    
    
    677
    
    
    
    (1,027
    )Total income taxes on income from continuing operations
    
    ¥
    44,792
    
    
    ¥
    38,757
    
    
    ¥
    31,745
 F-47




---



##### 



Amounts provided for income taxes for the years ended March 31, 2004, 2003
and 2002 are allocated as follows:

Millions of Yen2004
    
    2003
    
    2002Income taxes on income from continuing operations
    
    ¥
    44,792
    
    
    ¥
    38,757
    
    
    ¥
    31,745Loss from
discontinued operationsnet
    
    
    (6,034
    )
    
    
    (11,433
    )
    
    
    235Equity in earnings of associated companies
    
    
    9,096
    
    
    
    26
    
    
    
    1,876Cumulative effect of change in accounting principle
    
    
    (161
    )
    
    
    
    
    
    
    Other comprehensive income (loss)
    
    
    40,243
    
    
    
    (38,568
    )
    
    
    (12,058
    )Total
    
    ¥
    87,936
    
    
    ¥
    (11,218
    )
    
    ¥
    21,798


The tax effects of significant temporary differences and carryforwards
which result in deferred tax assets and liabilities at March 31, 2004 and 2003
are as follows:

Millions of Yen2004
    
    2003Deferred Tax Assets:Accrued pension costs and liability for severance indemnities
    
    ¥
    25,083
    
    
    ¥
    29,133Allowance for doubtful receivables
    
    
    21,994
    
    
    
    29,515Estimated losses
    
    
    38,690
    
    
    
    43,161Loss carryforwards of subsidiaries and associated companies
    
    
    76,528
    
    
    
    60,516Unrealized intercompany profit
    
    
    21,107
    
    
    
    28,249Foreign currency translation
    
    
    15,110
    
    
    
    17,131Other
    
    
    19,709
    
    
    
    14,841Total deferred tax assets
    
    
    218,221
    
    
    
    222,546Valuation allowance
    
    
    (31,245
    )
    
    
    (22,855
    )Deferred tax
assetsnet
    
    
    186,976
    
    
    
    199,691Deferred Tax Liabilities:Property
    
    
    74,428
    
    
    
    64,576Investment securities
    
    
    56,256
    
    
    
    32,929Undistributed earnings of associated companies other than corporate joint ventures
    
    
    42,566
    
    
    
    39,867Other
    
    
    2,089
    
    
    
    8,523Deferred tax liabilities
    
    
    175,339
    
    
    
    145,895Net deferred tax assets
    
    ¥
    11,637
    
    
    ¥
    53,796


Net deferred tax assets at March 31, 2004 and 2003 are included in the
Consolidated Balance Sheets as follows:

Millions of Yen2004
    
    2003Current
AssetsDeferred tax assetscurrent
    
    ¥
    31,473
    
    
    ¥
    35,819Deferred Tax
AssetsNon-current
    
    
    32,406
    
    
    
    53,527Current
LiabilitiesOther current liabilities
    
    
    (4,855
    )
    
    
    (4,091
    )Deferred Tax
LiabilitiesNon-current
    
    
    (47,387
    )
    
    
    (31,459
    )Net deferred tax assets
    
    ¥
    11,637
    
    
    ¥
    53,796 F-48




---



##### 



The valuation allowance is provided principally on deferred tax assets for
loss carryforwards of certain subsidiaries where it is more likely than not
that a tax benefit will not be realized. During the years ended March 31, 2004,
2003 and 2002, the valuation allowances were increased by ¥8,390 million,
decreased by ¥290 million and decreased by ¥3,561 million, respectively. With
respect to the remaining deferred tax assets, the companies believe it is more
likely than not that such benefits will be realized through the reduction of
future taxable income. Income taxes or foreign withholding taxes are not provided on
undistributed earnings of foreign subsidiaries and foreign corporate joint
ventures which are considered to be indefinitely reinvested in the operations
of such subsidiaries and corporate joint ventures. At March 31, 2004 and 2003,
the amounts of undistributed earnings of such foreign subsidiaries and foreign
corporate joint ventures were ¥299,574 million and ¥259,502 million,
respectively. Determination of the amount of unrecognized deferred income taxes
with respect to these foreign earnings is not practicable. The domestic
undistributed earnings would not, under present Japanese tax laws, be subject
to additional taxation. At March 31, 2004, certain subsidiaries had aggregate operating loss
carryforwards of ¥101,189 million, which are available to reduce taxable income
in subsequent periods. If not utilized, such loss carryforwards expire as
follows: Millions of YenWithin 5 years
    
    ¥
    48,884After 5 to 10 years
    
    
    6,797After 10 to 15 years
    
    
    364After 15 years
    
    
    45,144Total
    
    ¥
    101,189
 Income from continuing operations before income taxes, minority interests
and equity in earnings for the years ended March 31, 2004, 2003 and 2002
comprised the following: Millions of YenThe Companyand its domestic
    
    Foreignsubsidiaries
    
    subsidiaries
    
    TotalYear ended March 31, 2004
    
    ¥
    36,519
    
    
    ¥
    50,368
    
    
    ¥
    86,887Year ended March 31, 2003
    
    ¥
    10,073
    
    
    ¥
    54,395
    
    
    ¥
    64,468Year ended March 31, 2002
    
    ¥
    22,961
    
    
    ¥
    41,938
    
    
    ¥
    64,899
 Income taxes on income from continuing operations for the years ended
March 31, 2004, 2003 and 2002 comprised the following: Millions of YenThe Companyand its domestic
    
    Foreignsubsidiaries
    
    subsidiaries
    
    TotalYear ended March 31, 2004:Current
    
    ¥
    27,169
    
    
    ¥
    17,850
    
    
    ¥
    45,019Deferred
    
    
    811
    
    
    
    (1,038
    )
    
    
    (227
    )Total
    
    ¥
    27,980
    
    
    ¥
    16,812
    
    
    ¥
    44,792Year ended March 31, 2003:Current
    
    ¥
    20,620
    
    
    ¥
    18,580
    
    
    ¥
    39,200Deferred
    
    
    (6,536
    )
    
    
    6,093
    
    
    
    (443
    )Total
    
    ¥
    14,084
    
    
    ¥
    24,673
    
    
    ¥
    38,757Year ended March 31, 2002:Current
    
    ¥
    16,191
    
    
    ¥
    16,345
    
    
    ¥
    32,536Deferred
    
    
    802
    
    
    
    (1,593
    )
    
    
    (791
    )Total
    
    ¥
    16,993
    
    
    ¥
    14,752
    
    
    ¥
    31,745
 F-49




---



##### 



21. COMMITMENTS AND CONTINGENT LIABILITIES I. LONG-TERM PURCHASE
CONTRACTS AND FINANCING COMMITMENTS The companies customarily enter into long-term purchase contracts for certain
items, principally ocean transport vessels, chemical materials, oil products,
metals, and machinery and equipment, either at fixed prices or at basic
purchase prices adjustable to market. In general, customers of the companies
are also parties to the contracts or by separate agreements are committed to
purchase the items from the companies; such customers are generally large
Japanese industrial companies. Long-term purchase contracts at fixed or basic
purchase prices amounted to ¥1,574,725 million at March 31, 2004. Scheduled
deliveries are at various dates through 2021. II. GUARANTEES The table below summarizes the companies guarantees as defined in FIN No. 45
at March 31, 2004 and 2003. The maximum potential amount of future payments
represents the amounts without consideration of possible recoveries under
recourse provision or from collateral held or pledged that the companies could
be obliged to pay if there were defaults by guaranteed parties or there were
changes in an underlying which would cause triggering events under market value
guarantees and indemnification contracts. Such amounts bear no relationship to
the anticipated losses on these guarantees and indemnifications, and they
greatly exceed anticipated losses. Millions of YenRecourse
    
    Maximum potentialExpire within
    
    Expire after
    
    Total amount
    
    provisions/
    
    amount of future1 year
    
    1 year
    
    outstanding
    
    collateral
    
    paymentsMarch 31, 2004:Type of guarantees:Financial guarantees
    
    ¥
    44,692
    
    
    ¥
    155,938
    
    
    ¥
    200,630
    
    
    ¥
    41,153
    
    
    ¥
    257,628Performance guarantees
    
    
    10,688
    
    
    
    26,094
    
    
    
    36,782
    
    
    
    5,766
    
    
    
    36,787Market value guarantees
    
    
    41,655
    
    
    
    19,983
    
    
    
    61,638
    
    
    
    36,361
    
    
    
    61,638Derivative instruments
    
    
    271,761
    
    
    
    37,353
    
    
    
    309,114
    
    
    
    
    
    
    
    309,114March 31, 2003:Type of guarantees:Financial guarantees
    
    ¥
    41,925
    
    
    ¥
    208,363
    
    
    ¥
    250,288
    
    
    ¥
    46,596
    
    
    ¥
    284,237Performance guarantees
    
    
    1,652
    
    
    
    23,757
    
    
    
    25,409
    
    
    
    
    
    
    
    25,530Market value guarantees
    
    
    45,423
    
    
    
    17,976
    
    
    
    63,399
    
    
    
    38,077
    
    
    
    63,399Derivative instruments
    
    
    268,741
    
    
    
    5,243
    
    
    
    273,984
    
    
    
    
    
    
    
    273,984
 (1) Financial guarantees The companies provide various types of guarantees to the benefit of third
parties and related parties principally to enhance their credit standings, and
would be required to execute payments if a guaranteed party failed to fulfill
its obligation with respect to a borrowing or trade payable. Categories of financial guarantees are as follows: Guarantees for third parties It is a customary practice for the companies to guarantee, severally or jointly
with others, indebtedness of certain customers and suppliers in the furtherance
of their trading activities. At March 31, 2004, the outstanding balance of such
guarantees issued for third parties, the carrying amount of the liabilities
for the companies obligations under the guarantees, and the maximum potential
amount of future payments under the guarantees were ¥119,816 million, ¥884
million and ¥143,654 million, respectively, and at March 31, 2003, the
outstanding balance of such guarantees issued for third parties, the carrying
amount of the liabilities for the companies obligations under the guarantees,
and the maximum potential amount of future payments under the guarantees were
¥147,496 million, ¥64 million and ¥154,918 million, respectively. The
outstanding guarantees at March 31, 2004 and 2003 will expire no later than
2021. The aggregate amount of recourse provisions and collateral at March 31,
2004 and 2003 was ¥31,178 million and ¥31,506 million, respectively. F-50




---



##### 



Guarantees for associated companies The companies, severally or jointly with others, issue guarantees for
associated companies for the purpose of furtherance of their trading activities
and credit enhancement of associated companies. At March 31, 2004, the
outstanding balance of guarantees issued for associated companies, the carrying
amount of the liabilities for the companies obligations under the guarantees,
and the maximum potential amount of future payments under the guarantees were
¥62,290 million, ¥5,275 million and ¥72,586 million, respectively, and at March
31, 2003, the outstanding balance of guarantees issued for associated
companies, the carrying amount of the liabilities for the companies
obligations under the guarantees, and the maximum potential amount of future
payments under the guarantees were ¥79,674 million, ¥3,636 million and ¥87,931
million, respectively. The outstanding guarantees at March 31,2004 and 2003
will expire no later than 2022 and 2017, respectively. The aggregate amount of
recourse provisions and collateral at March 31, 2004 and 2003 was ¥9,975
million and ¥15,090 million, respectively. Guarantees to financial institutions for employees housing loans As a part of the benefits program for its employees, the Company issues
guarantees to financial institutions for employees housing loans. The maximum
duration of the guarantees is 25 years. The Company obtains a mortgage on the
employees assets, if necessary. The outstanding balance of the guarantees at
March 31, 2004 and 2003 was ¥18,524 million and ¥23,118 million, respectively,
and no liabilities relating to the guarantees were recorded in the consolidated
financial statements. The Company has obtained lines of credit from several
financial institutions for this program and the maximum potential amount of
future payments as the sum of these lines was
¥41,388 million at March 31, 2004 and 2003. At March 31, 2004 and 2003, the following table sets forth the major
parties who have received the companies financial guarantees. The amounts
shown below were calculated by offsetting the recourse provisions and
collateral against outstanding balance of the guarantee provided to each
guaranteed party. Millions of YenMarch 31, 2004:Guaranteed party:POWEREDCOM*
    
    ¥
    19,640Hutchison 3G UK
    
    
    10,302Usinas Siderurgicas de Minas Gerais
    
    
    9,195Sanha Fpso
    
    
    6,256Qatar LNG Investment
    
    
    6,062Project Finance BLRE
    
    
    5,372Telefonos De Mexico
    
    
    5,342Siam Cement
    
    
    4,129Nippon Asahan Aluminium
    
    
    3,862Vinyl Chloride (Malaysia)
    
    
    3,805Others
    
    
    85,512Total
    
    ¥
    159,477March 31, 2003:Guaranteed party:Tokyo Telecommunication Network*
    
    ¥
    21,813Usinas Siderurgicas de Minas Gerais
    
    
    10,863Qatar LNG Investment
    
    
    9,865Hutchison 3G UK
    
    
    9,553Project Finance BLRE
    
    
    6,146Sakhalin Energy Investment
    
    
    5,856Telefonos De Mexico
    
    
    5,693Siam Cement
    
    
    5,550Vinyl Chloride (Malaysia)
    
    
    5,289Bontang Train G Project Finance
    
    
    4,644Others
    
    
    118,420Total
    
    ¥
    203,692
  *
    
    Tokyo Telecommunication Network and POWEREDCOM merged on April 1, 2003,
and subsequently, Tokyo Telecommunication Network, as the surviving
company, changed its corporate name to POWEREDCOM. F-51




---



##### 



(2) Performance guarantees Main items of performance guarantees are contractual guarantees of Toyo
Engineering Corporation regarding plant construction contracts executed under
the name of the guaranteed party in the Middle East and other regions. The
Company has pledged bank guarantees and performance bonds to the project
owners, and in case that Toyo Engineering Corporation failed to fulfill the
contractual obligation, the project owners would execute bank guarantees and
performance bonds to claim compensation for damages. The outstanding balance of these performance guarantees at March 31, 2004
and 2003 was ¥36,782 million and ¥25,409 million, respectively, and the maximum
potential amount of future payments at March 31, 2004 and 2003 was ¥36,787
million and ¥25,530 million, respectively. At March 31, 2004, the carrying
amount of the liabilities relating to the guarantees was ¥408 million and no
liabilities were recorded in the consolidated financial statements at March 31,
2003. The performance guarantees outstanding at March 31, 2004 and 2003 will
expire no later than 2013 and 2005, respectively. The aggregate amount of
recourse provisions and collateral at March 31, 2004 was ¥5,766 million and
there were no recourse provisions and collateral at March 31, 2003. (3) Market value guarantees Obligation to repurchase
bills of exchange In connection with export transactions, the Company issues bills of exchange,
some of which are discounted by its negotiating banks. If a customer failed to
fulfill its obligation with respect to the bills, the Company would be
obligated to repurchase the bills based on the banking transaction agreement.
At March 31, 2004 and 2003, the maximum potential amount of future payments
represented by the aggregate par value of the bills discounted by the banks was
¥41,951 million and ¥45,472 million, respectively. The outstanding guarantees
at March 31, 2004 and 2003 will expire no later than 2006 and 2004,
respectively. Of these discounted bills, ¥36,361 million and ¥38,077 million
were backed by letters of credit from the issuing banks of the customers at
March 31, 2004 and 2003, respectively. No amounts were recognized as
liabilities relating to the guarantees at March 31, 2004 and 2003. Minimum purchase price
guarantees The companies provide marketing services of aircraft for domestic and overseas
airline companies, and as a part of such businesses, the companies issue market
value guarantees of the aircraft for certain customers. At March 31, 2004 and
2003, these guarantees will expire in 2013 and the maximum potential amount of
future payments at March 31, 2004 and 2003 was ¥3,171 million and ¥3,606
million, respectively. No liabilities for the companies obligations under
these market value guarantees were recorded at March 31, 2004 and 2003. Residual value guarantees
of leased assets As lessees in operating lease contracts, certain subsidiaries have issued
residual value guarantees of the leased aircraft and ocean transport vessels,
and on the date of expiration of operating lease contracts, such subsidiaries
will either purchase the leased assets at a fixed price or be responsible for
making up any shortfall between an actual sales price and the guaranteed price.
Those guarantees will remain in effect no later than 2008 at March 31, 2004 and
2003, and the maximum potential amount of future payments at March 31, 2004 and
2003 was ¥16,516 million and ¥14,321 million, respectively. No amounts were
recognized as liabilities relating to these guarantees at March 31, 2004 and
2003. (4) Derivative instruments Certain derivative contracts, including written put options and credit default
swaps, meet the accounting definition of guarantees under FIN No. 45. While the
companies do not specifically identify whether the counterparties of such
derivative contracts have underlying assets and liabilities, the companies
disclose all the derivative contracts that could meet the definition under FIN
No. 45. The companies have written put options as a part of their various
derivative transactions related to non-ferrous metals, energy and grain. At
March 31, 2004, the maximum potential amount of future payments and the fair
value of such written options recorded in the consolidated financial statements
were ¥309,114 million and ¥18,210 million, respectively. At March 31, 2003, the
maximum potential amount of future payments and the fair value of such written
options recorded in the consolidated financial statements were
¥273,984 million and F-52




---



##### 



¥9,907 million, respectively. The aggregation of notional amounts
computed based on the strike prices and quantities of written options are
disclosed as the maximum potential amount of future payments. The companies manage the market and credit risks on these derivative
instruments by monitoring fair values against loss limits and credit lines, and
generally the maximum potential amount of future payments as stated above
greatly overstates the companies exposure to market and credit risks. (5) Indemnification contracts Indemnification issued
through corporate reorganization The companies divested certain of their businesses through a sale to a
third-party purchaser and a spin-off to an associated company. In connection
with these transactions, the companies have provided certain indemnities and
the terms and conditions of indemnifications differ by contracts. The maximum
potential amount of future payments could not be quantified because the limits
of those indemnifications are often indefinite. At March 31, 2004 and 2003, the
companies recognized liabilities of ¥882 million and ¥1,205 million,
respectively, for estimated losses for their indemnifications where the
companies obligations are probable and estimable. Joint obligation under
membership agreement in commodity exchanges The companies are members of major commodity exchanges in Japan and overseas.
In connection with these memberships, the companies provide guarantees to the
exchanges. Under the membership agreements, if a member becomes unable to
satisfy its obligations to the exchange, the other members would be required to
meet such shortfalls apportioned among the non-defaulting members in the
prescribed manner. The companies maximum potential amount of future payments
related to these joint obligations is not quantifiable and the probability of
being required to make any payments under these obligations is remote. (6) Product warranties Certain subsidiaries provide product warranties, in relation to their sales of
assets, including machinery and equipment and residential houses, for the
performance of such products during specified warranty periods, and they are
responsible for mending or payments of compensation against the claims by the
customers regarding defects in performance or function. Estimated warranty
costs are accrued at the time the products are sold based on the historical
claim experiences. A tabular reconciliation of changes in such liabilities for the product
warranties for the years ended March 31, 2004 and 2003 is as follows: Millions of Yen2004
    
    2003Balance at beginning of year
    
    ¥
    2,130
    
    
    ¥
    2,356Payments made in cash or in kind
    
    
    (486
    )
    
    
    (419
    )Accrual for warranties issued during the year
    
    
    828
    
    
    
    956Changes in accrual related to pre-existing warranties
    
    
    (718
    )
    
    
    (763
    )Balance at end of year
    
    ¥
    1,754
    
    
    ¥
    2,130
 III. LITIGATION Methionine litigation The Company and two of its subsidiaries, together with other third-party
methionine manufacturers, were named as defendants in class action lawsuits in
the United States, filed by direct and indirect customers of methionine. In
these cases, manufacturers of methionine allegedly violated federal and/or
state antitrust laws by conspiring to fix the prices of methionine. The
lawsuits sought compensatory and treble damages in unspecified amounts. In May 2002, the Company and the subsidiaries reached an agreement for
settlement with the class action plaintiffs constituted by direct customers.
Under this settlement, Novus International, Inc., the Companys 65%-owned
subsidiary, paid U.S.$37.8 million as a settlement amount. In November 2002, the Company and the subsidiaries reached an agreement
for settlement with the plaintiffs who opted out of that class action. Under
this settlement, Novus International, Inc. paid U.S.$58.2 million as a
settlement amount. F-53




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##### 



This did not affect the Companys consolidated results of operations for
the years ended March 31, 2004 and 2003, since Novus International, Inc. had
previously recorded an estimated provision for the full settlement amount that
was recorded as other expensenet in the Statement of Consolidated Income for
the year ended March 31, 2002. Other related lawsuits are still pending, but the management believes that
there is less than a reasonable possibility that the pending lawsuits would
materially affect the consolidated results of operations of the Company. Choline chloride litigation The Companys wholly owned U.S. subsidiary, Bioproducts Inc., which is
producing choline chloride, an ingredient of animal feed and pet foods, was
named as a defendant in the lawsuits in the United States, together with other
third-party choline chloride manufacturers. In these cases, manufacturers of
choline chloride allegedly violated U.S. antitrust laws. Although the Company and its wholly owned U.S. subsidiary, Mitsui & Co.
(U.S.A.), Inc., are neither a manufacturer nor a seller of choline chloride in
the U.S. market, they were also named as defendants together with other
manufacturers in a class action lawsuits based on the plaintiffs allegation
that the Company and Mitsui & Co. (U.S.A.), Inc. were involved in the violation
of the antitrust laws. During the course of legal proceedings, the Company and
Mitsui & Co. (U.S.A.), Inc. have consistently denied any wrongdoing. However,
in the trial before Federal District Court of the District of Columbia in June
2003, the jury rendered a verdict stating that the defendants participated in
the violation of the antitrust laws and that the damages suffered by the
plaintiffs are US$49.5 million. The Company and Mitsui & Co. (U.S.A.), Inc.
considered undertaking the legal proceedings necessary to overrule the verdict,
but given the circumstances, it was determined that a settlement with the class
action plaintiffs would be in the best interest of the Company and all of its
stakeholders. As a result, the Company, Mitsui & Co. (U.S.A.), Inc. and
Bioproducts Inc. entered into an agreement for settlement with the class
plaintiffs in October 2003. Under this settlement, the Company, Mitsui & Co.
(U.S.A.), Inc. and Bioproducts Inc. will be released from the class action
proceedings and pay the class action plaintiffs U.S.$53.0 million as a
settlement amount. The settlement is subject to and in the process of obtaining
court approval. This amount is recorded as other expensenet in the Statement
of Consolidated Income for the year ended March 31, 2004. The Company, Mitsui & Co. (U.S.A.), Inc. and Bioproducts Inc. were also
named as defendants in other lawsuits made by the plaintiffs who opted out of
that class action, but entered into an agreement for settlement with most of
the plaintiffs in February 2004. Under this settlement, the Company, Mitsui &
Co. (U.S.A.), Inc. and Bioproducts Inc. were released from the legal
proceedings paying the opt-out plaintiffs U.S.$73.5 million as a settlement
amount. This amount was paid in February 2004 and is recorded as
other expensenet in the Statements of Consolidated Income for the year ended March 31,
2004. For all other related lawsuits that are pending, although there can be no
assurance of the ultimate results, management believes that there is less than
a reasonable possibility that losses in addition to amounts that have been
reserved for possible litigation losses will occur, and that the amount of any
such additional losses, would not have a material impact on the consolidated
financial position, results of operations or cash flows of the Company. Other matters Various other claims and legal actions are pending against the companies in
respect of contractual obligations and other matters arising out of the conduct
of the companies business. Appropriate provision has been recorded for the
estimated loss on claims and legal actions including those mentioned above. In
the opinion of management, any additional liability will not materially affect
the consolidated financial position, results of operations, or cash flows of
the Company. 22. VARIABLE INTEREST ENTITIES The Companies are involved with VIEs which mainly engage in leasing and
financing activities within the Machinery, Electronics & Information and Energy
segments. The VIEs that have been consolidated by the companies in accordance with
FIN No. 46R are described as follows (excluding VIEs of which the companies
also hold a majority voting interest): As lessees in operating lease contracts concluded with lessors that have
been established for those lease contracts in Europe and Latin America, certain
subsidiaries have issued residual value guarantees of the leased vessels. On
the date of expiration of operating lease contracts, such subsidiaries will
either purchase the leased assets at a fixed price or be responsible for making
up any shortfall between an actual sales price and the guaranteed value. The
lessors of the leased vessels are VIEs and the companies have consolidated the
lessors as the primary beneficiary during the year ended March 31, 2004. Total
assets of the lessors as of March 31, 2004 were ¥19,878 million. F-54




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##### 



A portion of the leased assets, which are consolidated, is collateral for
the VIEs obligations . The carrying amount of those assets was ¥7,542 million
and was classified as property leased to othersat cost, less accumulated
depreciation in the Consolidated Balance Sheets. The creditors or beneficial interest holders of the consolidated VIEs do
not have recourse to the general credit of the companies, except for the
aforementioned residual value guarantees. In addition, the VIEs that are not consolidated because the companies are
not the primary beneficiary, but in which the companies have significant
variable interests, are described as follows: The companies are involved with and have significant variable interests in
a number of VIEs that have been established to finance crude oil and LNG
producing plants and equipment by providing guarantees or subordinated loans to
the VIEs. Those VIEs provide financing for customers located principally in
Latin America and Middle East in the form of leases and loans. Total assets of
the VIEs as of March 31, 2004 were ¥839,521 million and the maximum exposure to
loss as a result of the companies involvement with the VIEs was ¥47,434
million. The
amount of maximum exposure to loss represents a loss that the
companies could incur from the variability in value of the leased assets, from
financial difficulties of the customers or from other causes without
consideration of possible recoveries through insurance and the like. In
addition, the amount bears no relation to the loss anticipated to be incurred
from the companies involvement with the VIEs and is considered to exceed
greatly the anticipated loss. 23. EXIT OR DISPOSAL ACTIVITIES The Company focuses on the maximization of its consolidated corporate value. To
achieve this objective, the Company is trying to strengthen its consolidated
capabilities through optimal group management. The Company actively
restructures its businesses to make them more efficient by regularly
reassessing the business environment and operational objectives of each of its
businesses. The Companys primary focus during the year ended March 31, 2004 was on
reevaluating and restructuring the businesses of subsidiaries and associated
companies where the total losses incurred by subsidiaries and associated
companies were significant for the year ended March 31, 2003. In addition to
these restructurings, the companies have disposed of certain long-lived assets
based on reviews of whether the companies should keep holding those assets from
the standpoint of profitability. For the year ended March 31, 2004, the
companies recorded total exit or disposal costs of ¥18,432 million, which are
defined by SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. The costs consisted of losses on disposal and impairment of
long-lived assets of ¥10,458 million, contract termination costs of ¥4,537
million, and other associated costs of ¥3,437 million. These exit or disposal
costs were recorded principally in the Machinery, Electronics & Information
Segment of ¥9,461 million, the Energy Segment of ¥3,742 million, the Chemical
and Americas segments of ¥3,054 million for the year ended March 31, 2004. During the years ended March 31, 2003 and 2002, the exit or disposal activities
were immaterial, except for the exit activities completed by petrochemicals
subsidiaries in North America which are disclosed in Note 4, DISCONTINUED
OPERATIONS. Each exit or disposal activity defined by SFAS No. 146 commenced
and was substantially completed within the same year. The ending balances of
liabilities for the exit or disposal costs were immaterial at March 31, 2004
and 2003. The primary exit or disposal activities for the year ended March 31, 2004
were as follows: NBI Co., Ltd. (former Toyo Valve Co., Ltd.), a subsidiary reported in the
Machinery, Electronics & Information Segment, has been engaged in the
manufacture and sale of valves and system equipment. On March 31, 2004, it sold
its valve business to KITZ Material Corporation, a subsidiary of KITZ
Corporation which engages in the manufacture and sale of valves for
construction facilities and industrial plants. The decision to sell the valve
business was made as a result of the continuing oversupply of valves within the
valve industry in Japan due to deterioration in capital investment. As a
result of this disposal activity, the companies recorded ¥157 million in loss
on disposal or sales of property and equipmentnet, ¥4,127 million in
impairment loss of long-lived assets, and other associated costs of ¥1,747
million in other expensenet in the Statements of Consolidated Income for the
year ended March 31, 2004. F-55




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##### 



Mitsui Bussan Machinery Co., Ltd., a subsidiary reported in the Machinery,
Electronics & Information Segment, has been engaged in the sale and leasing of machine tools and construction and industrial
machinery. Because of its unprofitable performance in the shrinking Japanese
construction and industrial machinery markets, the Company has decided to exit
from the construction and industrial machinery businesses, as they have been
evaluated as businesses with low historical profitability and future
growth potential compared to the machine tools business. As a result of this
exit decision, the companies recorded ¥150 million in impairment loss of
long-lived assets, lease termination and asset disposal costs of ¥1,957 million
in other expensenet, and other associated costs of ¥216 million in selling,
general and administrative in the Statements of Consolidated Income for the
year ended March 31, 2004. Mitsui Oil & Gas Co., Ltd. and Kokusai Oil & Chemical Co., Ltd.,
subsidiaries reported in the Energy Segment, are engaged in the import and
domestic sale of petroleum products. In order to maintain their competitiveness
in gasoline station operations, they have relocated stations, introduced
self-service stations, and established multifunctional value-added stations,
such as stations with convenience stores. These subsidiaries have also disposed
of and/or combined previously existing stations and streamlined their
distribution processes. In connection with such restructuring and streamlining
efforts, the subsidiaries disposed of certain unprofitable gasoline stations,
which resulted in recording ¥1,742 million in loss on disposal or sales of
property and equipmentnet and other associated costs of ¥2,000 million in
other expensenet in the Statements of Consolidated Income for the year ended
March 31, 2004. Global Octanes Corporation, a subsidiary partially reported in both the
Chemical and Americas segments, Global Octanes Investment Inc., a subsidiary
reported in the Chemical Segment, and Global Octanes Holding Inc., a subsidiary
reported in the Americas Segment had managed Global Octanes Texas Limited
Partnership, which had been engaged in manufacture and sale of MTBE, as its
partners. These subsidiaries, however, disposed of the operations, since the
future demand for MTBE in the United States was expected to decline. As a
result of these disposal activities, the companies recorded impairment loss of
long-lived assets and other assets of ¥3,054 million (before income tax) in
loss from discontinued operationsnet (after income tax effect) in the
Statements of Consolidated Income for the year ended March 31, 2004. Refer to
Note 4, DISCONTINUED OPERATIONS, for further discussion on discontinued
operations. 24. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The companies are exposed to market risks related to foreign currency exchange
rates, interest rates and commodity prices in the ordinary course of business. In order to offset or reduce these risks, the companies use derivative
instruments, such as foreign exchange forward contracts, currency swap
agreements, interest rate swap agreements, commodity future contracts and
commodity forward contracts, to hedge the exposure to changes in the fair value
or expected future cash flows of recognized assets and liabilities,
unrecognized firm commitments and forecasted transactions. The companies also
use non-derivative financial instruments, such as foreign-currency-denominated
debt, to hedge the foreign currency exposure in the net investment in a foreign
operation. Foreign currency exchange rate risk hedging activities The companies use derivative instruments, such as foreign exchange forward
contracts, currency swap agreements and interest rate and currency swap
agreements, to fix the expected future cash flows from
foreign-currency-denominated receivables and payables resulting from selling
and purchasing activities in currencies other than the local currency and
long-term financing transactions as part of the companies global operations in
many countries. The companies also use non-derivative financial instruments,
such as foreign-currency-denominated debt, in order to hedge the foreign
currency exposure in the net investment in a foreign operation. Interest rate risk hedging activities The companies use interest rate swap agreements and interest rate and currency
swap agreements to diversify the sources of fund raising, reduce fund-raising
costs, fix the expected future cash flows from long-term financial assets and
liabilities with floating interest rates and reduce the exposure to changes in
the fair value of long-term financial assets and liabilities with fixed
interest rates. Commodity price risk hedging activities The companies use derivative instruments, such as commodity future, forward,
option and swap contracts, to reduce the exposure to changes in the fair value
of inventories and unrecognized firm commitments and to fix the expected future
cash flows from forecasted transactions in marketable commodities, such as
non-ferrous metals, crude oil and agricultural products. F-56




---



##### 



Risk management policy The companies have strictly segregated the trading sections from the sections
that record the results and positions of derivative instruments and are responsible for cash settlement and account confirmation
with counterparties. Risk management sections classify the derivative
transactions into trading transactions and hedging transactions. The distinction between
trading and hedging transactions is strictly managed by affirming the
correspondence with the hedged items for transactions for hedging purposes.
Furthermore, these risk management sections comprehensively monitor, evaluate
and analyze the positions of derivative instruments and report the results
periodically to the Companys executive officers in charge of risk management.
Based on these reports, the executive officers assess derivative instruments
and the market risks surrounding these instruments, and establish the
companies policy regarding derivative instruments. Fair value hedges Changes in the fair value of derivative instruments designated as hedging the
exposure to changes in the fair value of recognized assets or liabilities or
unrecognized firm commitments are recorded in earnings together with changes in
the fair value of the corresponding hedged items. The net gain or loss recognized in earnings representing the amount of the
hedges ineffectiveness and the component of the derivative instruments gain
or loss excluded from the assessment of hedge effectiveness were immaterial for
the years ended March 31, 2004 and 2003. The amount of net gain or loss recognized in earnings when a hedged firm
commitment no longer qualifies as a fair value hedge was immaterial for the
years ended March 31, 2004 and 2003. Cash flow hedges Changes in the fair value of foreign exchange forward contracts, currency swap
agreements and interest rate and currency swap agreements designated as hedging
instruments to hedge the exposure to variability in expected future cash flows
of recognized assets or liabilities, unrecognized firm commitments and
forecasted transactions denominated in foreign currencies are initially
recorded as other comprehensive income. The amounts in accumulated other
comprehensive income are reclassified into earnings when earnings are affected
by the hedged items. Changes in the fair value of interest rate swap agreements designated as
hedging instruments to reduce the exposure to variability in expected future
cash flows of floating-rate financial assets and liabilities are initially
recorded as other comprehensive income. The amounts in accumulated other
comprehensive income are reclassified into earnings as interest expense when
earnings are affected by the hedged items. Changes in the fair value of commodity forward and swap contracts
designated as hedging instruments to hedge the exposure to variability in
expected future cash flows of the marketable commodities are initially recorded
as other comprehensive income. The amounts in accumulated other comprehensive
income are reclassified into earnings as sales of products or cost of products
sold when earnings are affected by the hedged transactions. The ineffective portion of the hedging instruments gain or loss and the
component of the derivative instruments gain or loss excluded from the
assessment of hedge effectiveness are reported in earnings immediately. If the
hedged forecasted transaction will not occur by the end of the originally
specified time period, gain or loss on the hedging instrument reported in
accumulated other comprehensive income is reclassified into earnings. These
amounts were immaterial for the years ended March 31, 2004 and 2003. Net gains of ¥1,156 million, relating to the transition adjustment
included in accumulated other comprehensive income upon adoption of SFAS No.
133 on April 1, 2001, were reclassified from accumulated other comprehensive
income into earnings because earnings were affected by the hedged items. The estimated net amount of the existing gains or losses in accumulated
other comprehensive income at March 31, 2004 that is expected to be
reclassified into earnings within the next 12 months is a net loss of ¥1,223
million. The maximum length of time over which the companies are hedging their
exposure to the variability in expected future cash flows for forecasted
transactions (excluding those forecasted transactions related to the payment of
variable interest on existing financial instruments) is 56 months. Foreign
exchange forward contracts are used as hedging instruments for the forecasted
transactions. Hedges of the net investment in a foreign operation The foreign currency transaction gain or loss on the non-derivative financial
instrument that is designated as, and is effective as, hedging instruments to
hedge the foreign currency exposure of a net investment in a foreign operation
is recorded as foreign currency translation adjustments within other
comprehensive income to the extent it is effective as a hedge. The net amount
of gains or losses included in the foreign currency translation adjustments was
immaterial for the year ended March 31, 2004. F-57




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##### 



Derivative instruments for trading purposes and risk management policy The Company and certain subsidiaries use derivative instruments such as foreign
exchange forward contracts, interest rate swap agreements and commodity future,
forward, swap and option contracts for trading purposes. The Companys
executive officers in charge of risk management have set strict position and
loss limits for these instruments. Independent back offices and middle offices
strictly separated from trading sections (front offices) monitor, evaluate and
analyze the position of trading transactions and market risks. Those results
are periodically reported to the executive officers. Among others, VaR (Value
at Risk: Statistical measure of the potential maximum loss in the fair value of
a portfolio resulting from adverse market movements in the underlying risk
factors such as foreign currency exchange rates, interest rates and commodity
prices, over a defined period, within a certain confidence level) is used to
measure the market risks of derivative instruments for trading purposes. 25. FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, the companies have provided the following fair
value estimates and information about valuation methodologies. Quoted market prices, where available, are used to estimate fair values of
financial instruments. However, quoted market prices are not available for a
substantial portion of the financial instruments. Accordingly, fair values for
such financial instruments are estimated using discounted cash flow analysis or
other valuation techniques. Current financial assets other than marketable securities and current financial liabilities The carrying amount is believed to approximate the fair value of the majority
of these instruments because of their short maturities. Marketable securities and other investments See Note 5, MARKETABLE SECURITIES AND OTHER INVESTMENTS. Non-current receivables and advances to associated companies The fair values of non-current receivables, including fixed rate, long-term
loans receivable, are estimated by discounted cash flow analysis, using
interest rates currently being offered for loans or accounts receivable with
similar terms to borrowers or customers of similar credit quality and remaining
maturities. It is believed that the carrying amounts of loans with floating
rates approximate the fair value. Long-term debt The fair values for long-term debt, except for debt with floating rates whose
carrying amounts approximate fair value, are estimated by discounted cash flow
analysis, using rates currently available for similar types of borrowings with
similar terms and remaining maturities. Financial guarantees and financing commitments The fair values of financial guarantees are estimated based on the present
values of expected future cash flows, considering the remaining terms of the
arrangements and the counterparties credit standings. The companies have not estimated the fair values of financing commitments
because management does not believe it is practicable to estimate the fair
values due to uncertainty involved in attempting to assess the likelihood and
timing of commitments being drawn upon, coupled with the lack of an established
market. However, management believes the likelihood is remote that material
payments will be required under these financing commitments. Currency and interest rate swap agreements The fair values of currency and interest rate swap agreements are estimated by
discounted cash flow analysis, using rates currently available for similar
types of swap agreements at the reporting date. Currency swap agreements
include certain derivatives with both foreign exchange and interest rate
exposures. Fair values of those agreements consist of foreign exchange and
interest rate factors. Foreign exchange forward contracts The fair values of foreign exchange forward contracts are estimated based on
market prices for contracts with similar terms. F-58




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##### 



The estimated fair values of certain financial instruments and derivative
financial instruments at March 31, 2004 and 2003 were as follows: Millions of Yen2004
    
    2003Carrying
    
    
    
    Carryingamount
    
    Fair value
    
    amount
    
    Fair valueFinancial Assets (other than Derivative Financial Instruments):Current financial assets other than marketable securities
    
    ¥
    3,108,795
    
    
    ¥
    3,108,795
    
    
    ¥
    3,078,772
    
    
    ¥
    3,078,772Non-current receivables and advances to associated
companies(less allowance for doubtful receivables)
    
    
    477,991
    
    
    
    485,434
    
    
    
    578,794
    
    
    
    586,749Financial Liabilities (other than Derivative Financial Instruments):Current financial liabilities
    
    
    (2,381,894
    )
    
    
    (2,381,894
    )
    
    
    (2,371,506
    )
    
    
    (2,371,506
    )Long-term debt (including current maturities)
    
    
    (2,826,102
    )
    
    
    (2,877,995
    )
    
    
    (2,970,336
    )
    
    
    (3,001,991
    )Derivative Financial Instruments (Assets):Interest rate swap agreements
    
    
    28,378
    
    
    
    28,378
    
    
    
    96,247
    
    
    
    96,247Currency swap agreements
    
    
    24,714
    
    
    
    24,714
    
    
    
    10,909
    
    
    
    10,909Foreign exchange forward contracts
    
    
    20,540
    
    
    
    20,540
    
    
    
    30,192
    
    
    
    30,192Derivative Financial Instruments (Liabilities):Interest rate swap agreements
    
    
    (3,825
    )
    
    
    (3,825
    )
    
    
    (6,027
    )
    
    
    (6,027
    )Currency swap agreements
    
    
    (8,227
    )
    
    
    (8,227
    )
    
    
    (9,346
    )
    
    
    (9,346
    )Foreign exchange forward contracts
    
    
    (8,878
    )
    
    
    (8,878
    )
    
    
    (11,879
    )
    
    
    (11,879
    )
 CONCENTRATION OF CREDIT RISK The companies global operations include a variety of businesses with diverse
customers and suppliers which reduces concentrations of credit risks. The
companies deal with selective international financial institutions to minimize
the credit risk exposure of derivative financial instruments. Credit risk
represents the likelihood that the counterparties may be unable to meet the
terms of the agreements. Management does not expect any losses as a result of
counterparty default on financial instruments. Credit risk is managed through
credit line approval by management and by periodically monitoring the
counterparties. 26. SUPPLEMENTAL CASH FLOW INFORMATION Supplemental information related to the Statements of Consolidated Cash Flows
is as follows: Millions of Yen2004
    
    2003
    
    2002Cash paid during the year for:Interest
    
    ¥
    58,235
    
    
    ¥
    55,211
    
    
    ¥
    79,614Income taxes (Note 20)
    
    
    35,676
    
    
    
    31,002
    
    
    
    59,017Non-cash investing and financing activities:Exchange of shares in connection with a business combination of investees (EITF
No. 91-5) (Note 5):Fair market value of shares received
    
    
    
    
    
    
    7,110
    
    
    
    35,874Cost of shares surrendered
    
    
    
    
    
    
    2,635
    
    
    
    18,649Acquisitions of subsidiaries (Note 3):Fair value of assets acquired
    
    
    77,702
    
    
    
    20,683
    
    
    
    Fair value of liabilities assumed
    
    
    71,302
    
    
    
    8,336
    
    
    
    Acquisition costs of subsidiaries
    
    
    6,400
    
    
    
    12,347
    
    
    
    Cash acquired
    
    
    10,259
    
    
    
    1,139
    
    
    
    Acquisitions of subsidiaries, net of cash acquired
    
    
    (3,859
    )
    
    
    11,208
    
    
    
    Consolidation of
VIEs related to the implementation of FIN No. 46R (Note 22):Total assets recorded
    
    
    20,439
    
    
    
    
    
    
    
    Total liabilities recorded
    
    
    20,439
    
    
    
    
    
    
    
    Acquisition of investment by business split-off:Transferred assets
    
    
    
    
    
    
    
    
    
    
    43,450Transferred liabilities
    
    
    
    
    
    
    
    
    
    
    39,365Acquired investments
    
    
    
    
    
    
    
    
    
    
    4,085Contribution of securities to an employee retirement benefit trust (Notes 5 and 14)
    
    
    
    
    
    
    27,343
    
    
    
    45,770
 27. SUBSEQUENT EVENT On June 24, 2004, the shareholders approved the payment of a cash dividend to
shareholders of record on March 31, 2004 of ¥4 per share or a total of
¥6,325 million at the ordinary general meeting of shareholders. The shareholders also approved the amendment to the Articles of
Incorporation to provide that the Company could purchase outstanding shares of
its own common stock by resolution of the Board of Directors. F-59




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Supplemental Information
on Oil and Gas Producing Activities (Unaudited)


In accordance with Statement of Financial Accounting Standards (SFAS) No. 69,
Disclosures about Oil and Gas Producing Activities, this section provides
supplemental information on oil and gas exploration and producing activities of
the companies in five separate tables. Tables 1 through 3 provide historical
cost information pertaining to costs incurred for property acquisitions,
exploration and development; capitalized costs; and results of operations.
Tables 4 and 5 present information on the companies estimated net proved
reserve quantities and standardized measure of estimated discounted future net
cash flows related to proved reserves. The amounts for investments that are
accounted for by the equity method are separately presented as Associated
Companies, for which the companies share of the investees information on oil
and gas producing activities is presented in the following tables. The
Consolidated Companies column includes activities in Australia, New Zealand
and the Middle East. The Associated Companies column includes activities in
the Pacific Rim which consists of Australia, Sakhalin (Russia) and
Thailand. The Associated Companies column of the following tables includes information
on liquefied natural gas (LNG) producing activities as an integral part of natural gas producing
activities.

TABLE 1. COSTS INCURRED
FOR PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT*1, *2, *3

Millions of YenConsolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideYear Ended March 31, 2004:Acquisition of Proved Properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    ¥
    1,015
    
    
    ¥
    1,015Acquisition of Unproved Properties
    
    ¥
    1,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,553Exploration
    
    
    1,102
    
    
    ¥
    467
    
    
    ¥
    599
    
    
    
    209
    
    
    
    2,377Development
    
    
    2,443
    
    
    
    7,816
    
    
    
    9,973
    
    
    
    51,187
    
    
    
    71,419Total Costs Incurred
    
    ¥
    5,098
    
    
    ¥
    8,283
    
    
    ¥
    10,572
    
    
    ¥
    52,411
    
    
    ¥
    76,364Year Ended March 31, 2003:Acquisition of Proved Properties
    
    ¥
    1,444
    
    
    ¥
    15,986
    
    
    
    
    
    
    ¥
    44
    
    
    ¥
    17,474Acquisition of Unproved Properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    441
    
    
    
    441Exploration
    
    
    637
    
    
    
    586
    
    
    ¥
    136
    
    
    
    1,360
    
    
    
    2,719Development
    
    
    998
    
    
    
    4,809
    
    
    
    5,636
    
    
    
    16,957
    
    
    
    28,400Total Costs Incurred
    
    ¥
    3,079
    
    
    ¥
    21,381
    
    
    ¥
    5,772
    
    
    ¥
    18,802
    
    
    ¥
    49,034Year Ended March 31, 2002:Acquisition of Proved Properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    ¥
    437
    
    
    ¥
    437Acquisition of Unproved Properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    663
    
    
    
    663Exploration
    
    ¥
    1,049
    
    
    
    
    
    
    ¥
    253
    
    
    
    947
    
    
    
    2,249Development
    
    
    
    
    
    
    
    
    
    
    3,247
    
    
    
    11,696
    
    
    
    14,943Total Costs Incurred
    
    ¥
    1,049
    
    
    
    
    
    
    ¥
    3,500
    
    
    ¥
    13,743
    
    
    ¥
    18,292




|*1 |  | Includes costs incurred whether capitalized or expensed.                                                                                                                                                           
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|*2 |  | Excludes the cumulative-effect adjustment of ¥ 5,821 million for the
initial application of SFAS No. 143, Accounting for Asset Retirement
Obligations, from the costs incurred for the year ended
March 31, 2004.
|  
|*3 |  | Includes capitalized asset retirement costs incurred in accordance with SFAS No.143 for the year ended March 31, 2004.                                                                                             

F-60



---



##### 



TABLE 2. CAPITALIZED COSTS
RELEASED TO OIL AND GAS PRODUCING ACTIVITIES Millions of YenConsolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideYear Ended March 31, 2004:Proved Properties*
    
    ¥
    21,989
    
    
    ¥
    23,674
    
    
    ¥
    118,332
    
    
    ¥
    185,443
    
    
    ¥
    349,438Unproved Properties
    
    
    1,977
    
    
    
    
    
    
    
    
    
    
    
    4,928
    
    
    
    6,905Gross Capitalized Properties
    
    
    23,966
    
    
    
    23,674
    
    
    
    118,332
    
    
    
    190,371
    
    
    
    356,343Accumulated Depreciation, Depletion, Amortization and
Valuation
Allowances
    
    
    14,191
    
    
    
    3,193
    
    
    
    63,119
    
    
    
    77,686
    
    
    
    158,189Net Capitalized Costs
    
    ¥
    9,775
    
    
    ¥
    20,481
    
    
    ¥
    55,213
    
    
    ¥
    112,685
    
    
    ¥
    198,154Year Ended March 31, 2003:Proved Properties
    
    ¥
    16,652
    
    
    ¥
    21,194
    
    
    ¥
    81,810
    
    
    ¥
    95,413
    
    
    ¥
    215,069Unproved Properties
    
    
    
    
    
    
    
    
    
    
    365
    
    
    
    33,059
    
    
    
    33,424Gross Capitalized Properties
    
    
    16,652
    
    
    
    21,194
    
    
    
    82,175
    
    
    
    128,472
    
    
    
    248,493Accumulated Depreciation, Depletion, Amortization and
Valuation
Allowances
    
    
    11,596
    
    
    
    3,157
    
    
    
    43,554
    
    
    
    58,549
    
    
    
    116,856Net Capitalized Costs
    
    ¥
    5,056
    
    
    ¥
    18,037
    
    
    ¥
    38,621
    
    
    ¥
    69,923
    
    
    ¥
    131,637Year Ended March 31, 2002:Proved Properties
    
    ¥
    13,003
    
    
    ¥
    3,751
    
    
    ¥
    79,278
    
    
    ¥
    84,514
    
    
    ¥
    180,546Unproved Properties
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    27,786
    
    
    
    27,980Gross Capitalized Properties
    
    
    13,003
    
    
    
    3,751
    
    
    
    79,472
    
    
    
    112,300
    
    
    
    208,526Accumulated Depreciation, Depletion, Amortization and
Valuation Allowances
    
    
    10,197
    
    
    
    926
    
    
    
    40,302
    
    
    
    49,300
    
    
    
    100,725Net Capitalized Costs
    
    ¥
    2,806
    
    
    ¥
    2,825
    
    
    ¥
    39,170
    
    
    ¥
    63,000
    
    
    ¥
    107,801
  *
    
    Includes capitalized asset retirement costs in accordance with SFAS No.143. TABLE 3. RESULTS OF
OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES* The companies results of operations from oil and gas producing activities are shown in the
following table. In accordance with SFAS No. 69, income taxes are based on
statutory tax rates. Interest income and expense are excluded from the results
reported. Millions of YenConsolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideYear Ended March 31, 2004:Sales to Unaffiliated Enterprises
    
    
    
    
    
    ¥
    1,385
    
    
    ¥
    30,254
    
    
    ¥
    21,564
    
    
    ¥
    53,203Transfers to Affiliated Enterprises
    
    ¥
    4,240
    
    
    
    11,086
    
    
    
    6,603
    
    
    
    
    
    
    
    21,929Total Revenues
    
    
    4,240
    
    
    
    12,471
    
    
    
    36,857
    
    
    
    21,564
    
    
    
    75,132Production Cost
    
    
    2,345
    
    
    
    2,320
    
    
    
    13,426
    
    
    
    5,997
    
    
    
    24,088Exploration Expenses
    
    
    900
    
    
    
    467
    
    
    
    242
    
    
    
    209
    
    
    
    1,818Depreciation,
Depletion, Amortization, Accretion and Valuation
Allowances
    
    
    597
    
    
    
    2,365
    
    
    
    5,230
    
    
    
    6,281
    
    
    
    14,473Income Tax Expense
    
    
    342
    
    
    
    4,331
    
    
    
    5,203
    
    
    
    5,573
    
    
    
    15,449Results of Operations for Oil and Gas Producing
Activities
    
    ¥
    56
    
    
    ¥
    2,988
    
    
    ¥
    12,756
    
    
    ¥
    3,504
    
    
    ¥
    19,304
 F-61




---



##### 



(Continued)

Millions of YenConsolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideYear Ended March 31, 2003:Sales to Unaffiliated Enterprises
    
    ¥
    43
    
    
    ¥
    8,790
    
    
    ¥
    28,789
    
    
    ¥
    19,856
    
    
    ¥
    57,478Transfers to Affiliated Enterprises
    
    
    4,916
    
    
    
    3,123
    
    
    
    7,351
    
    
    
    
    
    
    
    15,390Total Revenues
    
    
    4,959
    
    
    
    11,913
    
    
    
    36,140
    
    
    
    19,856
    
    
    
    72,868Production Cost
    
    
    2,156
    
    
    
    2,460
    
    
    
    13,402
    
    
    
    5,867
    
    
    
    23,885Exploration Expenses
    
    
    637
    
    
    
    295
    
    
    
    489
    
    
    
    1,360
    
    
    
    2,781Depreciation, Depletion, Amortization and Valuation
Allowances
    
    
    530
    
    
    
    2,272
    
    
    
    4,984
    
    
    
    4,503
    
    
    
    12,289Income Tax Expense
    
    
    521
    
    
    
    3,168
    
    
    
    7,320
    
    
    
    4,239
    
    
    
    15,248Results of Operations for Oil and Gas Producing
Activities
    
    ¥
    1,115
    
    
    ¥
    3,718
    
    
    ¥
    9,945
    
    
    ¥
    3,887
    
    
    ¥
    18,665Year Ended March 31, 2002:Sales to Unaffiliated Enterprises
    
    
    
    
    
    ¥
    1,291
    
    
    ¥
    28,088
    
    
    ¥
    19,932
    
    
    ¥
    49,311Transfers to Affiliated Enterprises
    
    ¥
    6,881
    
    
    
    
    
    
    
    6,677
    
    
    
    
    
    
    
    13,558Total Revenues
    
    
    6,881
    
    
    
    1,291
    
    
    
    34,765
    
    
    
    19,932
    
    
    
    62,869Production Cost
    
    
    2,538
    
    
    
    115
    
    
    
    15,018
    
    
    
    4,983
    
    
    
    22,654Exploration Expenses
    
    
    744
    
    
    
    
    
    
    
    213
    
    
    
    947
    
    
    
    1,904Depreciation, Depletion, Amortization
and Valuation Allowances
    
    
    3,089
    
    
    
    156
    
    
    
    5,122
    
    
    
    4,527
    
    
    
    12,894Income Tax Expense
    
    
    24
    
    
    
    314
    
    
    
    4,216
    
    
    
    5,055
    
    
    
    9,609Results of Operations for Oil and Gas Producing
Activities
    
    ¥
    486
    
    
    ¥
    706
    
    
    ¥
    10,196
    
    
    ¥
    4,420
    
    
    ¥
    15,808
  *
    
    Excludes the cumulative-effect adjustment of ¥ 2,214 million for the
initial application of SFAS No. 143 from the results of operations for the
year ended March 31, 2004. TABLE 4. PROVED RESERVE
QUANTITY INFORMATION The following table describes proved oil and gas reserves and changes thereto for the years ended March 31,
2004, 2003 and 2002. The definitions used herein are in accordance with SFAS
No. 25, Suspension of Certain Accounting Requirements for Oil and Gas
Producing Companies. Proved Developed and Undeveloped Reserves: Crude Oil, Condensate and Natural Gas Liquids
    
    Natural GasMillions of Barrels
    
    Billions of Cubic FeetConsolidated Companies
    
    Associated Companies
    
    
    
    
    
    Consolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    Worldwide
    
    Oceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideReserves at April 1, 2001
    
    
    14
    
    
    
    9
    
    
    
    45
    
    
    
    98
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    1,195
    
    
    
    242
    
    
    
    1,437Changes Attributable to:Revision of Previous Estimates
(includes improved recovery)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Extensions and Discoveries
    
    
    
    
    
    
     
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (3
    )
    
    
    
    
    
    
    (6
    )
    
    
    (5
    )
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    (40
    )
    
    
    (23
    )
    
    
    (63
    )
 F-62




---



##### 



(Continued) Crude Oil, Condensate and Natural Gas Liquids
    
    Natural GasMillions of Barrels
    
    Billions of Cubic FeetConsolidated Companies
    
    Associated Companies
    
    
    
    
    
    Consolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    Worldwide
    
    Oceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideReserves at March 31, 2002
    
    
    11
    
    
    
    9
    
    
    
    39
    
    
    
    59
    
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    1,155
    
    
    
    219
    
    
    
    1,374Changes Attributable to:Revision of Previous Estimates
(includes improved recovery)
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    16
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    (3
    )
    
    
    56Extensions and Discoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchases
    
    
    3
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    56Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (2
    )
    
    
    (3
    )
    
    
    (6
    )
    
    
    (4
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (24
    )
    
    
    (65
    )Reserves at March 31, 2003
    
    
    12
    
    
    
    28
    
    
    
    40
    
    
    
    71
    
    
    
    151
    
    
    
    27
    
    
    
    
    
    
    
    1,173
    
    
    
    221
    
    
    
    1,421Changes Attributable to:Revision of Previous Estimates
(includes improved recovery)
    
    
    
    
    
    
    (3
    )
    
    
    5
    
    
    
    7
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    2
    
    
    
    (280
    )Extensions and Discoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    729
    
    
    
    813Purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    42Sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (2
    )
    
    
    (2
    )
    
    
    (6
    )
    
    
    (5
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    (29
    )
    
    
    (74
    )Reserves at March 31, 2004.
    
    
    10
    
    
    
    23
    
    
    
    39
    
    
    
    127
    
    
    
    199
    
    
    
    27
    
    
    
    84
    
    
    
    846
    
    
    
    965
    
    
    
    1,922Proved
Developed Reserves*:Reserves at April 1, 2001
    
    
    14
    
    
    
    9
    
    
    
    19
    
    
    
    49
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    380
    
    
    
    73
    
    
    
    453Reserves at March 31, 2002
    
    
    11
    
    
    
    9
    
    
    
    17
    
    
    
    18
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    66
    
    
    
    436Reserves at March 31, 2003
    
    
    9
    
    
    
    28
    
    
    
    17
    
    
    
    18
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    364
    
    
    
    58
    
    
    
    422Reserves at March 31, 2004
    
    
    7
    
    
    
    23
    
    
    
    14
    
    
    
    19
    
    
    
    63
    
    
    
    
    
    
    
    84
    
    
    
    330
    
    
    
    69
    
    
    
    483* The proportion of
Proved Developed Reserves to Proved Developed and
Undeveloped Reserves is about 28 percent as of March 31, 2004 and relatively low. The
expected costs to develop these undeveloped reserves are estimated to
be ¥238,598 million in total as of March 31, 2004,
which is included in "Future Development Cost" in Table 5. The
major undeveloped reserves are attributable to an associated
company in Russia and an associated company in Australia.  It is expected to commence the production of
crude oil in 2006 and LNG in 2007, for the associated company
in Russia. In relation to the associated company in Australia, the
production of crude oil and LNG has already commenced at the existing
facilities. The drilling of additional development wells will be
performed over the project life according to the drilling program of
the project provided by an operator.
 TABLE 5. STANDARDIZED
MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO PROVED OIL AND
GAS RESERVES The standardized measure of discounted future cash flows, related to preceding
proved oil and gas reserves, is calculated in accordance with SFAS No. 69.
Estimated future cash inflows from production are computed by applying year-end
prices to year-end quantities of estimated net proved reserves. Future
development and production costs are those estimated future expenditures
necessary to develop and produce year-end estimated proved reserves based on
year-end cost indices, assuming continuation of year-end economic conditions.
Estimated future income taxes are calculated by applying appropriate year-end
statutory tax rates. Discounted future net cash flows are calculated using
discount factor of 10 percent. The information provided does not represent
managements estimate of the companies expected future cash flows or value of
proved oil and gas reserves. Estimates of proved reserve quantities shall
change over time as new information becomes available. Moreover, probable and
possible reserves, which may become proved in the future, are excluded from the
calculations. The arbitrary valuation prescribed under SFAS No. 69 requires
assumptions as to the timing of future development and production costs. The
calculations are made as of each fiscal year-end and should not be relied upon
as an indication of the companies future cash flows or value of their oil and
gas reserves. F-63




---



##### 



The standardized measure for the associated companies includes a
negative contribution of ¥45,902 million from the companies Sakhalin
properties. The standardized measure for Sakhalin is negative due to the inclusion of the full
committed costs of development and operation for the asset under the integrated
Production Sharing Agreement. Meanwhile, revenues are registered only in
relation to the currently estimated proved reserves. Proved gas reserves are
restricted to those volumes that are related to firm sales commitments. Consequently the currently stated proved reserves are only a small fraction of
the volume that is expected to be produced for to sales over time and upon
which the decision to proceed with development was based. 1) Standardized Measure
of Discounted Future Net Cash Flows Millions of YenConsolidated Companies
    
    Associated CompaniesOceania
    
    Middle East
    
    Oceania
    
    Others
    
    WorldwideAt March 31, 2004:Future Cash Inflows from Production
    
    ¥
    36,333
    
    
    ¥
    138,382
    
    
    ¥
    382,405
    
    
    ¥
    656,697
    
    
    ¥
    1,213,817Future Production Cost
    
    
    (20,177
    )
    
    
    (20,641
    )
    
    
    (226,059
    )
    
    
    (145,972
    )
    
    
    (412,849
    )Future Development Cost
    
    
    (5,140
    )
    
    
    (9,067
    )
    
    
    (4,850
    )
    
    
    (228,608
    )
    
    
    (247,665
    )Future Income Taxes
    
    
    (2,085
    )
    
    
    (58,820
    )
    
    
    (51,950
    )
    
    
    (98,338
    )
    
    
    (211,193
    )Undiscounted Future Net Cash Flows
    
    
    8,931
    
    
    
    49,854
    
    
    
    99,546
    
    
    
    183,779
    
    
    
    342,11010% Annual Discount for Timing of Estimated Cash
Flows
    
    
    (1,539
    )
    
    
    (21,446
    )
    
    
    (39,289
    )
    
    
    (211,595
    )
    
    
    (273,869
    )Standardized Measure of Discounted Future Net Cash
Flows
    
    ¥
    7,392
    
    
    ¥
    28,408
    
    
    ¥
    60,257
    
    
    ¥
    (27,816
    )
    
    ¥
    68,241At March 31, 2003:Future Cash Inflows from Production
    
    ¥
    51,459
    
    
    ¥
    124,006
    
    
    ¥
    795,677
    
    
    ¥
    307,554
    
    
    ¥
    1,278,696Future Production Cost
    
    
    (21,526
    )
    
    
    (21,462
    )
    
    
    (348,748
    )
    
    
    (76,675
    )
    
    
    (468,411
    )Future Development Cost
    
    
    (6,246
    )
    
    
    (10,206
    )
    
    
    (15,476
    )
    
    
    (41,685
    )
    
    
    (73,613
    )Future Income Taxes
    
    
    (7,773
    )
    
    
    (50,141
    )
    
    
    (119,352
    )
    
    
    (60,375
    )
    
    
    (237,641
    )Undiscounted Future Net Cash Flows
    
    
    15,914
    
    
    
    42,197
    
    
    
    312,101
    
    
    
    128,819
    
    
    
    499,03110% Annual Discount for Timing of Estimated Cash
Flows
    
    
    (5,774
    )
    
    
    (18,320
    )
    
    
    (191,033
    )
    
    
    (67,421
    )
    
    
    (282,548
    )Standardized Measure of Discounted Future Net Cash
Flows
    
    ¥
    10,140
    
    
    ¥
    23,877
    
    
    ¥
    121,068
    
    
    ¥
    61,398
    
    
    ¥
    216,483At March 31, 2002:Future Cash Inflows from Production
    
    ¥
    22,260
    
    
    ¥
    21,301
    
    
    ¥
    781,736
    
    
    ¥
    220,384
    
    
    ¥
    1,045,681Future Production Cost
    
    
    (11,934
    )
    
    
    (3,384
    )
    
    
    (362,763
    )
    
    
    (53,327
    )
    
    
    (431,408
    )Future Development Cost
    
    
    (2,029
    )
    
    
    
    
    
    
    (19,754
    )
    
    
    (40,486
    )
    
    
    (62,269
    )Future Income Taxes
    
    
    (1,696
    )
    
    
    (9,123
    )
    
    
    (117,261
    )
    
    
    (41,315
    )
    
    
    (169,395
    )Undiscounted Future Net Cash Flows
    
    
    6,601
    
    
    
    8,794
    
    
    
    281,958
    
    
    
    85,256
    
    
    
    382,60910% Annual Discount for Timing of Estimated Cash
Flows
    
    
    (1,761
    )
    
    
    (4,683
    )
    
    
    (192,525
    )
    
    
    (49,124
    )
    
    
    (248,093
    )Standardized Measure of Discounted Future Net Cash
Flows
    
    ¥
    4,840
    
    
    ¥
    4,111
    
    
    ¥
    89,433
    
    
    ¥
    36,132
    
    
    ¥
    134,516
 F-64




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##### 



2) Details of Changes for the Year Millions of YenConsolidated Companies
    
    Associated Companies
    
    Worldwide2004
    
    2003
    
    2002
    
    2004
    
    2003
    
    2002
    
    2004
    
    2003
    
    2002Present Value at April 1
    
    ¥
    34,017
    
    
    ¥
    8,951
    
    
    ¥
    12,427
    
    
    ¥
    182,466
    
    
    ¥
    125,565
    
    
    ¥
    149,605
    
    
    ¥
    216,483
    
    
    ¥
    134,516
    
    
    ¥
    162,032Sales/Transfers of Oil and Gas
Produced, Net of Production
Costs
    
    
    (12,046
    )
    
    
    (12,256
    )
    
    
    (5,519
    )
    
    
    (38,998
    )
    
    
    (36,727
    )
    
    
    (34,696
    )
    
    
    (51,044
    )
    
    
    (48,983
    )
    
    
    (40,215
    )Development Costs Incurred
    
    
    10,259
    
    
    
    5,807
    
    
    
    
    
    
    
    61,160
    
    
    
    22,593
    
    
    
    24,116
    
    
    
    71,419
    
    
    
    28,400
    
    
    
    24,116Purchases of Reserves in Place
    
    
    
    
    
    
    24,635
    
    
    
    
    
    
    
    1,894
    
    
    
    
    
    
    
    
    
    
    
    1,894
    
    
    
    24,635
    
    
    
    Extensions and Discoveries
    
    
    16,746
    
    
    
    
    
    
    
    
    
    
    
    119,609
    
    
    
    
    
    
    
    
    
    
    
    136,355
    
    
    
    
    
    
    
    Net Changes in Prices,
Development and Production
Cost
    
    
    (2,475
    )
    
    
    7,156
    
    
    
    (2,762
    )
    
    
    (253,034
    )
    
    
    (4,650
    )
    
    
    (5,090
    )
    
    
    (255,509
    )
    
    
    2,506
    
    
    
    (7,852
    )Revisions of Previous Quantity
Estimates*1
    
    
    (2,837
    )
    
    
    
    
    
    
    
    
    
    
    (37,158
    )
    
    
    64,001
    
    
    
    (46,076
    )
    
    
    (39,995
    )
    
    
    64,001
    
    
    
    (46,076
    )Accretion of Discount
    
    
    3,402
    
    
    
    895
    
    
    
    1,243
    
    
    
    18,247
    
    
    
    12,557
    
    
    
    14,961
    
    
    
    21,649
    
    
    
    13,452
    
    
    
    16,204Net Changes in Income Taxes
    
    
    (137
    )
    
    
    (1,127
    )
    
    
    700
    
    
    
    29,126
    
    
    
    (6,076
    )
    
    
    17,882
    
    
    
    28,989
    
    
    
    (7,203
    )
    
    
    18,582Others*2
    
    
    (11,129
    )
    
    
    (44
    )
    
    
    2,862
    
    
    
    (50,871
    )
    
    
    5,203
    
    
    
    4,863
    
    
    
    (62,000
    )
    
    
    5,159
    
    
    
    7,725Net Changes for the Year
    
    
    1,783
    
    
    
    25,066
    
    
    
    (3,476
    )
    
    
    (150,025
    )
    
    
    56,901
    
    
    
    (24,040
    )
    
    
    (148,242
    )
    
    
    81,967
    
    
    
    (27,516
    )Present Value at March 31
    
    ¥
    35,800
    
    
    ¥
    34,017
    
    
    ¥
    8,951
    
    
    ¥
    32,441
    
    
    ¥
    182,466
    
    
    ¥
    125,565
    
    
    ¥
    68,241
    
    
    ¥
    216,483
    
    
    ¥
    134,516
  *1
    
    Includes amounts resulting from changes in the timing of production.*2
    
    Main portion of Others is foreign currency translation adjustments. F-65




---



##### 



SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

|                         |  |  |  |     |                                                                  
|------------------------ |  |  |  | --- | -----------------------------------------------------------------
|                         |  |  |  |     | MITSUI & CO., LTD.                                               
|                         |  |  |  |    
|                         |  |  |  |     | (Registrant)                                                     
|                         |  |  |  |     |                                                                  
|                         |  |  |  |     |                                                                  
|Date: September 30, 2004 |  |  |  | By: | /s/ Tasuku Kondo                                                 
|                         |  |  |  |    
|                         |  |  |  |     | Tasuku Kondo
Executive Vice President and
Chief Financial Officer





---



##### 





INDEX OF EXHIBITS

|        |      |          |  |                                                                                                                                                 
|------- | ---- | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |         
|Number  |      | Document
|        |      |         
|        | 1.1  |          |  | The Articles of Incorporation of Mitsui &
    Co., Ltd., as of June 24, 2004 (English-language
    translation).                                
|        | 1.2  |          |  | The Share Handling Regulation of Mitsui &
    Co., Ltd., as amended on June 24, 2004 (English-language
    translation).                        
|        | 1.3  |          |  | The Rules of the Board of Directors of Mitsui
    & Co., Ltd., as amended on April 1, 2004
    (English-language translation).                  
|        | 1.4  |          |  | The Rules of the Board of Corporate Auditors of
    Mitsui & Co., Ltd., as amended on October 29, 2003
    (English-language translation).      
|        | 2.1  | *        |  | Deposit Agreement, dated October 1, 1982
    among Mitsui & Co., Ltd., Citibank, N.A., and holders of
    ADRs and European Depositary Receipts.
|        | 8.1  |          |  | List of Subsidiaries of Mitsui & Co., Ltd.                                                                                                      
|        | 11.1 |          |  | Code of Ethics for Senior Financial Officers and
    Professionals                                                                              
|        | 11.2 |          |  | Business Conduct Guidelines for Employees and
    Officers of Mitsui & Co., Ltd.                                                                
|        | 12.1 |          |  | Certification of the principal executive officer
    of Mitsui & Co., Ltd. required by Rule 13a-14(a).                                          
|        | 12.2 |          |  | Certification of the principal financial officer
    of Mitsui & Co., Ltd. required by Rule 13a-14(a).                                          
|        | 13.1 |          |  | Certifications required by Rule 13a-14(b)
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code.                         



|  |                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
|* | Incorporated by reference to the corresponding
    exhibit to our annual report on Form 20-F
    (File No. 0-9929) filed on September 27, 2002.

We have not included as exhibits certain
instruments with respect to our long-term debt, the amount of
debt authorized under each of which does not exceed 10% of our
total assets, and we agree to furnish a copy of any such
instruments to the Securities and Exchange Commission upon
request.