Mitsui (MITSY)

3. Financial Conditions

(1) Assets, Liabilities and Shareholders’ Equity

Total assets as of March 31, 2007 were ¥9,813.3 billion, an increase of ¥ 1,239.7 billion from ¥8,573.6 billion as of March 31, 2006.

Current assets as of March 31, 2007 were ¥5,073.8 billion, an increase of ¥ 327.0 billion from ¥4,746.8 billion as of March 31, 2006, mainly attributable to increases in trade receivables primarily at the segments such as the Iron & Steel Raw Materials and Non-Ferrous Metals, the Machinery and Infrastructure Projects and the Iron & Steel Products, reflecting increased business transactions.

Total current liabilities as of March 31, 2007 were ¥3,810.2 billion, an increase of ¥299.3 billion from ¥3,510.9 billion as of March 31, 2006, primarily because of increases in:

As a result, working capital, or current assets minus current liabilities, as of March 31, 2007 was ¥1,263.6 billion, an increase of ¥27.7 billion from ¥1,235.9 billion as of March 31, 2006.

-16-

The sum of “total investments and non-current receivables,” “property and equipment—at cost,” and “other assets” as of March 31, 2007 totaled ¥4,739.5 billion, a ¥912.8 billion increase from ¥3,826.7 billion as of March 31, 2006, mainly due to the following factors:

In addition to the above-mentioned increases, there were increases which do not involve cash out flow as following:

Other investments were ¥1,238.9 billion, a ¥303.2 billion increase from ¥935.7 billion as of March 31, 2006. This is because:

Property leased to others—at cost, less accumulated depreciation was ¥259.2 billion, a ¥40.6 billion increase from ¥218.6 billion as of March 31, 2006.

-17-

In addition, a property and equipment valued at ¥62 billion at MOECO was newly recorded as of March 31, 2007.

For more information on development of the investment plan under Mitsui’s “Medium Term Management Outlook”, see “II Management Policies.”

Long-term debt, less current maturities as of March 31, 2007 was ¥2,887.5 billion, an increase of ¥228.8 billion from ¥2,658.7 billion as of March 31, 2006 mainly due to an increase in borrowings from financial institutions associated with funding for various investments at Mitsui, Mitsui & Co., (U.S.A.), Inc. and subsidiaries which are engaged in the ocean vessels businesses and leasing businesses (mainly real estate leasing subsidiaries).

Shareholders’ equity as of March 31, 2007 was ¥2,110.3 billion, an increase of ¥432.4 billion from ¥1,677.9 billion as of March 31, 2006, primarily due to ¥54.8 billion increase in common stock and capital surplus due to conversion of bonds, the increase in retained earnings by ¥248.1 billion, net improvement in foreign currency translation adjustments by ¥73.9 billion due to stronger Australian dollar, U.S. dollar and Euro against Japanese Yen, and net improvement in unrealized holding gains on available for securities ¥42.8 billion.

As a result, shareholders’ equity to total assets ratio as of March 31, 2007 was 21.5 %, a 1.9 percentage point improvement from 19.6 % as of March 31, 2006. ROE for the year ended March 31, 2007 was 15.9 %. Net interest bearing debt, or interest bearing debt minus cash and cash equivalents and time deposits as of March 31, 2007 was ¥3,098.4 billion, an increase of ¥267.8 billion from ¥2,830.6 billion as of March 31, 2006. Net debt-to-equity ratio as of March 31, 2007 was 1.47 times, an improvement by 0.22 point from 1.69 times as of March 31, 2006.

3. Financial Conditions

(1) Assets, Liabilities and Shareholders’ Equity

Total assets as of September 30, 2006 were ¥9,382.1 billion, an increase of ¥808.5 billion compared to ¥8,573.6 billion as of March 31, 2006.

Current assets as of September 30, 2006 were ¥5,156.5 billion, an increase of ¥409.7 billion compared to ¥4,746.8 billion as of March 31, 2006, mainly attributable to:

Total current liabilities as of September 30, 2006 were ¥4,085.5 billion, an increase of ¥574.6 billion compared to ¥3,510.9 billion as of March 31, 2006, primarily because of increases in:

As a result, working capital, or current assets minus current liabilities, as of September 30, 2006 was ¥1,071.0 billion, a decrease of ¥164.9 billion compared to ¥1,235.9 billion as of March 31, 2006.

-22-

The sum of total investments and non-current receivables, property and equipment—at cost, intangible assets less accumulated amortization, deferred tax assets—non current and other assets as of September 30, 2006 totaled ¥4,225.6 billion, a ¥398.9 billion increase compared to ¥3,826.7 billion as of March 31, 2006, mainly due to the following factors:

In addition to the above-mentioned increases, there were increases which do not involve cash outflow such as:

Other investments were ¥964.8 billion, a ¥29.1 billion increase compared to ¥935.7 billion as of March 31, 2006. This was due to purchases of shares in Nippon Steel Corporation for ¥10.0 billion and Brightstar Corp of the United States for ¥5.8 billion; and investment in partnership which owns Skylark Co., Ltd., restaurant chains in Japan, for ¥ 10.0 billion.

Long-term debt, less current maturities as of September 30, 2006 was ¥2,699.3 billion, an increase of ¥40.6 billion compared to ¥2,658.7 billion as of March 31, 2006 mainly due to a ¥13.9 billion increase in borrowings from financial institutions associated with funding for the acquisition of leased assets at rolling stock leasing subsidiaries.

Shareholders’ equity as of September 30, 2006 was ¥1,834.2 billion, an increase of ¥156.3 billion compared to ¥1,677.9 billion as of March 31, 2006, primarily due to the increase in retained earnings by ¥135.0 billion and net improvement in foreign currency translation adjustments by ¥26.8 billion as a result of stronger U.S. dollar and Australian dollar against Japanese Yen.

-23-

As a result of the above, shareholders’ equity to total assets ratio as of September 30, 2006 was 19.5%, a 0.1 percentage point decline compared to 19.6 % as of March 31, 2006. Net interest bearing debt, or interest bearing debt minus cash and cash equivalents and time deposits as of September 30, 2006 was ¥3,102.3 billion, an increase of ¥271.7 billion compared to ¥2,830.6 billion as of March 31, 2006. Net debt-to-equity ratio as of September 30, 2006 was 1.69 times, the same level as March 31, 2006.

3. Financial Conditions

(1) Assets, Liabilities and Shareholders’ Equity

Total assets as of March 31, 2006 increased by ¥980.2 billion to ¥8,573.6 billion compared to ¥7,593.4 billion as of March 31, 2005.

Total current assets as of March 31, 2006 increased by ¥326.1 billion to ¥4,746.8 billion compared to ¥4,420.7 billion as of March 31, 2005 due mainly to increases in trade receivables, inventories and derivative assets primarily at subsidiaries of the Iron & Steel Raw Materials and Non-Ferrous Metals Segment, the Energy Segment and the Logistics & Financial Markets Segment, reflecting higher market prices and increased business transactions.

Total current liabilities as of March 31, 2006 increased by ¥229.1 billion to ¥3,510.9 billion compared to ¥3,281.8 billion as of March 31, 2005, primarily because of increases in trade payables and derivative liabilities corresponding to increase in the above-mentioned current assets. As a result of above, working capital, or current assets minus current liabilities, as of March 31, 2006 was ¥1,235.9 billion, a ¥97.0 billion increase compared to ¥1,138.9 billion as of March 31, 2005.

– 20 –

Total Investments and non-current receivables, property and equipment—at cost, intangible assets less accumulated amortization, deferred tax assets—non current and other assets totaled ¥3,826.7 billion as of March 31, 2006, a ¥654.0 billion increase compared to ¥3,172.7 billion as of March 31, 2005, mainly due to the following factors:

Other “non-cash” items such as increases corresponding to equity in earnings and improvement in foreign exchange translation adjustments (including the above-mentioned ¥18.9 billion effect regarding the Sakhalin II project), unrealized holding gains on securities reported by associated companies totaled approximately ¥160 billion.

Other investments were ¥935.7 billion, a ¥275.5 billion increase compared to ¥660.2 billion as of March 31, 2005. This was due to purchase of shares in Seven-Eleven Japan Co., Ltd. and Ito-Yokado Co., Ltd. for ¥50.0 billion, participation in Equatorial Guinea LNG project amounting to ¥15.9 billion, and purchase of shares in Tokyo Broadcasting System, Inc. for ¥6.0 billion and the combined total of approximately ¥170 billion of an increase in unrealized holding gains on available-for-sale securities and gains on sale in exchange of shares of Seven-Eleven Japan Co., Ltd. and Ito-Yokado Co., Ltd. for newly issued Seven & I Holdings Co., Ltd. shares.

For the year ended March 31, 2006, the Group acquired a real estate in the United Kingdom and rolling stock, thus, property leased to others increased by ¥35.4 billion over March 31, 2005.

Long-term debt, less current maturities as of March 31, 2006 increased by ¥6.0 billion to ¥2,910.9 billion compared to ¥2,904.9 billion as of March 31, 2005 primarily because of increases in borrowings from financial institutions, which corresponded to funding for the above-mentioned investments and acquisitions of fixed assets.

Shareholders’ equity as of March 31, 2006 increased by ¥555.1 billion to ¥1,677.9 billion compared to ¥1,122.8 billion as of March 31, 2005, primarily because of the ¥204.3 billion increase of common stock and capital surplus as a result of issuance of common stock by the Company, the increase in retained earnings by ¥170.8 billion, increase in unrealized holding gains on available-for-sale securities by ¥115.9 billion and net improvement in foreign currency translation adjustments as a result of stronger U.S. dollar and Brazilian Real against Japanese Yen by ¥59.5 billion.

As a result of the above, shareholders’ equity to total assets ratio as of March 31, 2006 increased by 4.8 percentage points to 19.6 % compared to 14.8 % as of March 31, 2005. Net interest-bearing debt, or interest-bearing debt minus cash and cash equivalents and time deposits as of March 31, 2006 was ¥2,831.7 billion, an increased of ¥111.8 billion compared to ¥2,719.9 billion as of March 31, 2005. Net debt-to-equity ratio as of March 31, 2006 was 1.69 times compared to 2.42 times as of March 31, 2005.

– 21 –