In recent years, markets have become significantly more global in nature, while the Japanese market has matured considerably due to the changing structure of its population. These and other factors underscore the huge structural changes taking place around us. In response, in the fiscal period ended March 2008 the Mitsui Fudosan Group launched its new long-term business plan, called New Challenge Plan 2016. Under the plan, the Group is striving to realize sustainable growth by advancing its operations based on an accurate understanding of the changing business environment.

The fiscal period ended March 2009 was the second year of the plan. Following worldwide economic instability sparked by the subprime loan problem in the previous fiscal year, the collapse of the Lehman Brothers in September 2008 led to a global financial crisis with increasing severity. The impact spread to the real economies of various nations, causing the world to plunge into a widespread global recession. The Japanese economy, as well, was plagued by sudden and significant declines in corporate earnings and a fall in personal consumption, making economic recession more prominent and significantly affecting the real estate sector. Even now, therefore, such business conditions give no reason for optimism.

Facing these challenges, the Mitsui Fudosan Group has been implementing three key strategies under New Challenge Plan 2016: customer-focused management, business model reform, and efficient group management. We have also targeted balanced growth across our three core businesses of holding, trading, and management. In the process, we have created a highly stable earnings structure and built a record of steady achievements even in this difficult business climate.

Amid challenging economic conditions, the Japanese housing market has continued to languish due to declining purchasing sentiment and other factors. Given the huge influence of the housing market on the economy however, stimulation of internal demand is expected to serve as a driving force underpinning early recovery of both the new and secondary market sectors. A number of measures have been implemented by the government, including a major widening of tax deductions on housing loans. This has caused latent demand among second-generation baby boomers to awaken. While such demand remains moderate, we are on a path for recovery. As the “best partner in living and lifestyles,” we will meticulously respond to the diversified needs of customers, harnessing our Groupwide resources to address the expected recovery of internal demand.

To propel the Japanese economy along a new growth trajectory in the midst of global economic slowdown, it is essential to step up measures to stimulate internal demand and target growth that is balanced between internal and external demand. We at Mitsui Fudosan are confident that our community development initiatives—which are aimed at urban and regional renewal—we serve as a major driver of internal demand. For this reason, in the year ending March 2010 we will continue and expedite our relentless urban and regional renewal initiatives that “improve with age” in order to raise the appeal and value of local communities.

In the Roppongi and Akasaka areas of Tokyo, we have two highly attractive, leading-edge complexes—Tokyo Midtown and Akasaka Sacas—which have attracted numerous people to the area. Going forward, we will disseminate information, hold events, and work in other ways to create higher levels of appeal and value in our tireless effort to enhance our town management capabilities.

In Nihonbashi, full-scale construction is under way on the Muromachi East District Development Project, which is scheduled to open in 2010. We will continue to accelerate the urban renaissance of Nihonbashi by creating an area that blends history and innovation. Here, we are endeavoring to introduce cutting-edge facilities, functions, and programs while retaining the nostalgic appeal of the old traditions, stores, and back alleys of Tokyo’s birthplace. Under this project, we will preserve the key aspects of Mitsui Main Building, a renowned symbol of Tokyo’s roots that celebrates its 80th birthday in 2009.

Hibiya is not only the retail and cultural center of Tokyo, but also lies near the economic and administrative heart of the city. With the addition of its vast green expanses, such as Hibiya Park, Hibiya is an area brimming with potential. Our urban renewal activities, aimed at maximizing Hibiya’s assets, center on the development of the Hibiya Mitsui Building under the theme of “enrichment and comfort.”

The Kashiwanoha Campus City project is an urban redevelopment project undertaken in conjunction with universities and hospitals. Designed to create a sustainable community based on the concepts of the environment and health, it is a future-oriented, suburban, community revitalization project. We will continue to actively develop this campus city model project with the aim of creating the finest campus city in the whole of Asia.

Mitsui Fudosan will continue to develop its portfolio of projects in key regional cities that are both highly profitable and highlight their unique regional characteristics. Two recent examples were the openings of Mitsui Outlet Park Sendai port and LaLaport Iwata. We have also commenced Mitsui Outlet Park projects in Sapporo and Shiga. Through these projects, we will create new value and make a contribution to local communities.

In order to expedite the aforementioned urban and regional renewal projects, it is essential to re-energize the J-REIT market, which serves as the linchpin of the real estate investment market in Japan. The Mitsui Fudosan Group is currently formulating a framework capable of addressing the diversified needs of investors for one-stop services, including REITS for various buildings, residential complexes, and retail facilities, as well as private funds and joint investment schemes. As a central player in the Japanese real estate investment market, we will pursue alliances with various other relevant institutions and work hard to completely fulfill our role in promoting the early recovery of the market.

Going forward, we will strengthen our ability to provide corporate real estate (CRE) and public real estate (PRE) solutions, which are being heavily promoted by the private and public sectors. Under New Challenge Plan 2016, we are also fostering the international operations and the resort business as new sectors for the future. Here, we are pursuing environmental and infrastructural development as important strategies to ensure our advancement and progress after full-scale economic recovery, while closely watching economic and market trends.

New Challenge Plan 2016 sets out two major missions for the Mitsui Fudosan Group. One is to evolve into a global real estate solutions partner by achieving sustainable growth based on a revised business model that takes account of socioeconomic structural changes. The other is to foster social progress and create comfortable lifestyles for our customers through urban developments that “improve with age.” The Mitsui Fudosan Group is committed to achieving sustainable growth while fulfilling its responsibilities as a corporate citizen. To this end, we will continue to strengthen corporate governance, including enhancing our internal control framework, while embracing harmony with the environment in our urban development activities.

Based on the principles of “harmonious coexistence” and “linking diverse values perceptions” (symbolized by our “&” logo), we will accelerate the strategies of New Challenge Plan 2016 by advancing innovation as we strive to become a corporate group that creates new levels of value.