Fiscal 2008 Performance

Integrating expertise in assets and businesses that MC has acquired as a sogo shosha with financial expertise, the Industrial Finance, Logistics & Development Group is developing shosha-type industrial finance businesses in areas such as asset finance.

Consolidated net income for fiscal 2008, this group's first year, was ¥17.7 billion, ahead of the initial target of ¥17.0 billion. This marked a year-on-year increase of ¥7.2 billion compared with the pro forma figure of ¥10.5 billion for fiscal 2007, which excluded the gain on the sale of shares in Diamond City Co., Ltd. (on paper, net income fell by ¥14.1 billion due to the latter effect). The growth in earnings was mainly due to gains on sales of developed real estate, increased earnings related to real estate investment trusts (REITs), and a solid performance in the logistics business.

We also built up our asset base with the view to generating future earnings through acquisition of aircraft leasing assets, and investments in overseas infrastructure funds and Asian property funds, income-generating properties in Japan and so on. In addition, Mitsubishi Corp.-UBS Realty Inc. (MCUBSR), a REIT management joint venture between MC and UBS AG., launched Industrial & Infrastructure Fund Investment Corporation (IIF) in October 2007. IIF, MCUBSR's second listed J-REIT, focuses on logistics facilities and other industrial infrastructure, while Japan Retail Fund Investment Corporation (JRF), MCUBSR's first listed J-REIT, specializes in retail facilities.

Group Strategy and Fiscal 2009 Outlook

Under INNOVATION 2009, MC has designated finance as one of its Next-Generation Core Businesses. The Industrial Finance, Logistics & Development Group seeks to further expand and develop shosha-type industrial finance, integrating our financial insight with expertise in such areas as real estate, construction and logistics, in cooperation with other MC business groups. In fiscal 2009, this business group's second year, we expect to begin entering the execution phase on a number of projects that we have been developing to expand the earnings platform for the medium and long term.

In our buyout investment business, we established Marunouchi Capital Co., Ltd. as a fund management company in a joint venture with Mitsubishi UFJ Financial Group, Inc. in April 2008. MC is committing ¥50 billion to the new buyout fund formed by this new company. The fund will mainly invest in domestic businesses and propose strategies for continuously raising their corporate value, while building relationships of trust with the management teams of these companies.

In the leasing business, we purchased additional shares newly issued by Mitsubishi UFJ Lease & Finance Company Limited, one of the largest leasing companies in Japan in April 2008. This move gave MC a 20% equity stake in the company. We expect that this investment would help further develop our relationship in order to jointly promote the leasing business both in Japan and overseas.

In the asset management business, in May 2008 MC acquired an equity stake of 19.5% in Aladdin Capital Holdings LLC (ACH), a U.S.-based investment management company that specializes in credit-related financial products. We are committing up to US$300 million as seed capital for funds to be established by the company. This move should increase ACH's assets and corporate value as well as expand MC's asset management business.

Elsewhere, while taking steps to strengthen our existing operations, we will also adopt a selective stance by focusing our resources on strategic projects with the aim of generating substantial income.

In fiscal 2009, while we expect higher income from the leasing business and some other sectors, gains from sales of developed real estate are likely to be lower than in fiscal 2008. We also expect an increase in operating expenses and interest expenses related to ongoing business development. Overall, consolidated net income for the group is forecast at ¥17.0 billion, on a par with the previous year.