<Page>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 20-F/A
(AMENDMENT NO. 2)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
COMMISSION FILE NUMBER 1-12356
------------------------
DAIMLERCHRYSLER AG
(Exact name of Registrant as specified in its charter)
DAIMLERCHRYSLER AG
(Translation of Registrant's name into English)
FEDERAL REPUBLIC OF GERMANY
(Jurisdiction of incorporation or organization)
EPPLESTRASSE 225, 70567 STUTTGART, GERMANY
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
<Table>
<Caption>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Ordinary Shares, no par value Frankfurt Stock Exchange
New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
American Depositary Notes representing 5 3/4% Subordinated New York Stock Exchange
Mandatory Convertible Notes Due June 14, 2002(*)
* These notes matured on June 14, 2002
GUARANTEE OF THE FOLLOWING SECURITIES OF:
DaimlerChrysler North America Holding Corporation
8.50% Notes Due January 18, 2031 New York Stock Exchange
7 3/8% Notes Due September 15, 2006 New York Stock Exchange
</Table>
------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE
(Title of Class)
------------------------
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
NONE
(Title of Class)
------------------------
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:
Ordinary Shares, no par value . . . . . . . . . 1,003,271,998
(as of December 31, 2001)
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.
<Table>
Yes /X/ No / /
</Table>
Indicate by check mark which financial statement item the registrant has elected
to follow.
<Table>
Item 17 / / Item 18 /X/
</Table>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
The registrant hereby amends its Annual Report on Form 20-F filed
February 20, 2002 and amended by Amendment No. 1 on June 28, 2002, to provide
the separate consolidated financial statements of Mitsubishi Motors Corporation
and subsidiaries (MMC) for the fiscal year ended March 31, 2002, as required by
Rule 3-09 of Regulation S-X.
This amendment is being filed for the purpose of updating "Item 18.
Financial Statements," and "Item 19. Exhibits" and adding to the page reference
in "Item 8. Financial Information" under the heading "Consolidated Financial
Statements" the phrase "and pages M-i and M-1 through M-51."
2
<Page>
ITEM 18. FINANCIAL STATEMENTS.
Consolidated financial statements and schedule -- see pages F-i, F-1 through
F-66 and page S-1.
Separate consolidated financial statements for Mitsubishi Motors Corporation
and subsidiaries filed pursuant to Rule 3-09 of Regulation S-X - see pages M-i
and M-1 through M-51.
3
<Page>
ITEM 19. EXHIBITS
Documents filed as exhibits to this Annual Report:
<Table>
1.1 Memorandum and Articles of Association (SATZUNG) of DaimlerChrysler AG as amended through February 20, 2002 (English
translation filed as an Exhibit to DaimlerChrysler AG's Annual Report on Form 20-F for the year ended December 31, 2000,
and incorporated herein by reference).
2.1 The total amount of long-term debt securities of DaimlerChrysler AG authorized under any instrument does not exceed 10% of
the total assets of the Group on a consolidated basis. DaimlerChrysler AG hereby agrees to furnish to the Commission, upon
its request, a copy of any instrument defining the rights of holders of long-term debt of DaimlerChrysler AG or its
subsidiaries for which consolidated or unconsolidated statements are required to be filed.
4.1 The following agreements (without exhibits and schedules): the Amended and Restated Master Alliance Agreement dated as of
September 8, 2000 between DaimlerChrysler AG and Mitsubishi Motors Corporation; the Amended and Restated Standstill
Agreement between those parties dated as of September 8, 2000; the Securities Subscription Agreement between
DaimlerChrysler AG, Mitsubishi Motors Corporation, and DaimlerChrysler Japan Holding, LTD. dated as of July 28, 2000; the
Amendment to the Securities Subscription Agreement dated as of September 8, 2000; and Amendment No. 2 to the Securities
Subscription Agreement dated as of September 8, 2000. (Filed as an Exhibit to DaimlerChrysler AG's Annual Report on
Form 20-F for the year ended December 31, 2000, and incorporated herein by reference.)
4.2 Joint Venture Agreement, dated April 3, 2000, between DaimlerChrysler Services (debis) AG, Deutsche Telekom AG and Rubin
Telekommunikationdienste GmbH, and Option Agreement, dated April 3, 2000, between DaimlerChrysler Services (debis) AG and
Deutsche Telekom AG (Filed as an Exhibit to DaimlerChrysler AG's Annual Report on Form 20-F for the year ended
December 31, 2000, and incorporated herein by reference.)
8.1 Significant subsidiaries owned, directly or indirectly, by DaimlerChrysler AG as of December 31, 2001, as defined in
Regulation S-X, Section 210.1-02(w).
10.1 Independent Auditors' Report on Schedule and Consent of KPMG Deutsche Treuhand-Gesellschaft AG
10.2 Independent Auditors' Consent of Deloitte & Touche LLP
10.3 Independent Auditors' Report of Deloitte & Touche LLP on the consolidated financial statements of DaimlerChrysler
Corporation
10.4 Independent Auditors' Consent of KPMG, Tokyo, Japan
10.5 Independent Auditors' Consent of Ernst & Young LLP, Chicago, Illinois
10.6 Independent Auditors' Consent of Ernst & Young LLP, Long Beach, California
10.7 Independent Auditors' Consent of Ernst & Young Office Limited, Bangkok, Thailand
10.8 Independent Auditors' Consent of Ernst & Young Accountants, Amsterdam, the Netherlands
10.9 Independent Auditors' Consent of Ernst & Young Accountants, Amsterdam, the Netherlands
10.10 Independent Auditors' Consent of Ernst & Young Accountants, Eindhoven, the Netherlands
10.11 Independent Auditors' Consent of PricewaterhouseCoopers LLP, San Juan, Puerto Rico
10.12 Independent Auditors' Consent of PricewaterhouseCoopers, Adelaide, Australia
</Table>
4
<Page>
SIGNATURES
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/A and that it has duly caused and authorized the undersigned
to sign this amendment to its 2001 Annual Report on its behalf.
Date: September 27, 2002
<Table>
DAIMLERCHRYSLER AG
By: /S/ JUERGEN E. SCHREMPP
------------------------------------------
Juergen E. Schrempp
Chairman of the Board of Management
By: /S/ MANFRED GENTZ
------------------------------------------
Dr. Manfred Gentz
Member of the Board of Management
Finance & Controlling
</Table>
5
<Page>
CERTIFICATIONS
I, Juergen E. Schrempp, certify that:
1. I have reviewed this annual report on Form 20-F of DaimlerChrysler AG;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.
Date: September 27, 2002
<Table>
/s/ JUERGEN E. SCHREMPP
------------------------------------------------
Juergen E. Schrempp
Chairman of the Board of Management
DaimlerChrysler AG
</Table>
I, Dr. Manfred Gentz, certify that:
1. I have reviewed this annual report on Form 20-F of DaimlerChrysler AG;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.
Date: September 27, 2002
<Table>
/S/ MANFRED GENTZ
------------------------------------------------
Dr. Manfred Gentz
Member of the Board of Management
Finance & Controlling
DaimlerChrysler AG
</Table>
6
<Page>
DAIMLERCHRYSLER AG
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF MITSUBISHI MOTORS CORPORATION AND
SUBSIDIARIES
<Table>
<Caption>
PAGE
----
Independent Auditors' Report of KPMG............................................ M-1
Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 2002 and 2001........................ M-2
Consolidated Statements of Operations for the years ended March 31, 2002 and
2001........................................................................ M-4
Consolidated Statements of Stockholders' Equity for the years ended March 31,
2002 and 2001............................................................... M-5
Consolidated Statements of Cash Flows for the years ended March 31, 2002 and
2001........................................................................ M-6
Notes to the Consolidated Financial Statements................................ M-7
Other Independent Auditors' Reports:
Independent Auditors' Report of Ernst & Young LLP, Chicago, Illinois.......... M-43
Independent Auditors' Report of Ernst & Young LLP, Long Beach, California..... M-44
Independent Auditors' Report of Ernst & Young Office Limited, Bangkok,
Thailand.................................................................... M-45
Independent Auditors' Report of Ernst & Young Accountants, Amsterdam, the
Netherlands................................................................. M-47
Independent Auditors' Report of Ernst & Young Accountants, Amsterdam, the
Netherlands................................................................. M-48
Independent Auditors' Report of Ernst & Young Accountants, Eindhoven, the
Netherlands................................................................. M-49
Independent Auditors' Report of PricewaterhouseCoopers LLP, San Juan, Puerto
Rico........................................................................ M-50
Independent Auditors' Report of PricewaterhouseCoopers, Adelaide, Australia... M-51
</Table>
M-i
<Page>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mitsubishi Motors Corporation
We have audited the accompanying consolidated balance sheet of Mitsubishi
Motors Corporation and subsidiaries (the "Company") as of March 31, 2002 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended, all expressed in yen. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We did not audit the financial statements of
certain consolidated companies. The financial statements of those companies
reflect total assets constituting 40 percent and total revenues constituting
50 percent of the related consolidated totals as of and for the year ended
March 31, 2002. The financial statements of those companies were audited by
other auditors whose reports were furnished to us, and our opinion, insofar as
it relates to the amounts included for those companies, is based solely on the
reports of the other auditors.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of March 31, 2002,
and the results of their operations and their cash flows for the year then ended
in conformity with accounting principles and practices generally accepted in
Japan.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for sales denominated in foreign currencies and
related forward foreign currency exchange contracts qualifying as hedges for the
year ended March 31, 2002. As discussed in Note 3 to the consolidated financial
statements, the Company's consolidated subsidiaries that are domiciled in the
United States of America adopted Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, and Emerging Issues Task Force Issue No. 00-14, "Accounting for Certain
Sales Incentives", for the year ended March 31, 2002.
Accounting principles and practices generally accepted in Japan vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States of America would have affected the Company's
financial position as of March 31, 2002, and the results of its operations for
the year then ended, to the extent summarized in Note 18 to the consolidated
financial statements.
KPMG
Tokyo, Japan
June 25, 2002
M-1
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
MARCH 31,
-----------------------------------------------------------------
2002 2001 2002
----------------- ----------------- -----------------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS) (NOTE 4)
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
Current assets:
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents [JPY] 95,189 [JPY] 115,863 $ 714,364
- ---------------------------------------------------------------------------------------------------------------------------------
Trade notes and accounts receivable (Notes 5 and 9) 347,852 444,279 2,610,522
- ---------------------------------------------------------------------------------------------------------------------------------
Inventories (Note 6) 304,418 350,807 2,284,563
- ---------------------------------------------------------------------------------------------------------------------------------
Short-term loans (Note 5) 26,026 18,045 195,317
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred tax assets (Note 12) 71,692 97,102 538,026
- ---------------------------------------------------------------------------------------------------------------------------------
Prepaid expenses and other current assets 266,565 214,636 2,000,488
- ---------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts (12,754) (13,147) (95,715)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,098,991 1,227,588 8,247,587
- ---------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net (Notes 7 and 9) 1,219,469 1,270,179 9,151,737
- ---------------------------------------------------------------------------------------------------------------------------------
Intangible assets 11,506 11,024 86,349
- ---------------------------------------------------------------------------------------------------------------------------------
Investments and other non-current assets:
- ---------------------------------------------------------------------------------------------------------------------------------
Investments (Notes 8 and 9) 167,828 172,229 1,259,497
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term loans (Note 5) 80,959 84,432 607,572
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred tax assets (Note 12) 91,913 11,261 689,779
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term prepaid expenses and other 241,964 226,798 1,815,865
- ---------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful accounts (18,072) (21,844) (135,625)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS, NET 564,593 472,876 4,237,096
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS [JPY] 2,894,560 [JPY] 2,981,668 $21,722,777
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
M-2
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<Table>
<Caption>
MARCH 31,
-----------------------------------------------------------------
2002 2001 2002
----------------- ----------------- -----------------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS) (NOTE 4)
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
- ---------------------------------------------------------------------------------------------------------------------------------
Trade notes and accounts payable [JPY] 497,524 [JPY] 633,511 $ 3,733,764
- ---------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings (Note 9) 758,791 554,668 5,694,492
- ---------------------------------------------------------------------------------------------------------------------------------
Current portion of long-term debt (Note 9) 256,279 284,501 1,923,295
- ---------------------------------------------------------------------------------------------------------------------------------
Current portion of non-interest bearing long-term debt
(Note 9) 14,803 -- 111,092
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses 258,121 304,308 1,937,118
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued income taxes 5,287 7,200 39,677
- ---------------------------------------------------------------------------------------------------------------------------------
Other current liabilities (Note 12) 265,835 160,988 1,995,009
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,056,643 1,945,179 15,434,469
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt, excluding current portion (Note 9) 289,522 545,025 2,172,773
- ---------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing long-term debt, excluding current
portion (Note 9) 40,709 -- 305,508
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities (Note 12) 17,184 19,062 128,961
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued retirement benefits (Note 16) 176,558 202,939 1,325,013
- ---------------------------------------------------------------------------------------------------------------------------------
Other non-current liabilities 27,140 20,161 203,677
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,607,759 2,732,368 19,570,424
- ---------------------------------------------------------------------------------------------------------------------------------
Minority interests 16,138 (6,768) 121,111
- ---------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock:
- ---------------------------------------------------------------------------------------------------------------------------------
Authorized: 3,220,000,000 shares
- ---------------------------------------------------------------------------------------------------------------------------------
Issued: 1,470,163,624 shares 252,201 252,201 1,892,690
- ---------------------------------------------------------------------------------------------------------------------------------
Capital surplus 220,816 220,816 1,657,156
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated deficit (188,756) (200,304) (1,416,556)
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized holding gain on securities 34,830 36,400 261,389
- ---------------------------------------------------------------------------------------------------------------------------------
Translation adjustments (48,428) (53,045) (363,437)
- ---------------------------------------------------------------------------------------------------------------------------------
Treasury stock (0) (0) (0)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 270,663 256,068 2,031,242
- ---------------------------------------------------------------------------------------------------------------------------------
Contingent liabilities (Note 10)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS'
EQUITY [JPY] 2,894,560 [JPY] 2,981,668 $21,722,777
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
M-3
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<Table>
<Caption>
YEAR ENDED MARCH 31,
--------------------------------------------------------------
2002 2001 2002
------------------ ------------------ -------------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
(NOTE 4)
- ----------------------------------------------------------------------------------------------------------
Revenue, net [JPY] 3,200,699 [JPY] 3,276,716 $ 24,020,255
- ----------------------------------------------------------------------------------------------------------
Cost of sales (2,639,181) (2,754,852) (19,806,236)
- ----------------------------------------------------------------------------------------------------------
Reversal of deferred profit on
installment sales 233 239 1,749
- ----------------------------------------------------------------------------------------------------------
GROSS PROFIT 561,751 522,103 4,215,767
- ----------------------------------------------------------------------------------------------------------
Selling, general and administrative
expenses 521,523 595,968 3,913,869
- ----------------------------------------------------------------------------------------------------------
OPERATING PROFIT (LOSS) 40,227 (73,865) 301,891
- ----------------------------------------------------------------------------------------------------------
Interest and dividend income 10,767 12,162 80,803
- ----------------------------------------------------------------------------------------------------------
Interest expense 32,609 35,784 244,720
- ----------------------------------------------------------------------------------------------------------
Other income and expenses, net (Note 11) (50,262) (309,802) (377,201)
- ----------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES AND
MINORITY INTERESTS (31,875) (407,289) (239,212)
- ----------------------------------------------------------------------------------------------------------
Income tax expense (benefit):
- ----------------------------------------------------------------------------------------------------------
Current 9,892 10,372 74,236
- ----------------------------------------------------------------------------------------------------------
Deferred (52,547) (118,996) (394,349)
- ----------------------------------------------------------------------------------------------------------
(42,654) (108,623) (320,105)
- ----------------------------------------------------------------------------------------------------------
Minority interests 477 20,527 3,580
- ----------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) [JPY] 11,256 [JPY] (278,139) $ 84,473
- ----------------------------------------------------------------------------------------------------------
(IN U.S. DOLLARS)
Per share of common stock: (IN YEN) (NOTE 4)
- ----------------------------------------------------------------------------------------------------------
Net income (loss):
- ----------------------------------------------------------------------------------------------------------
Basic [JPY] 7.66 [JPY] (232.77) $ 0.06
- ----------------------------------------------------------------------------------------------------------
Diluted 7.42 -- 0.06
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
M-4
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<Table>
<Caption>
YEAR ENDED MARCH 31,
----------------------------------------------------------
2002 2001 2002
----------------- ----------------- ------------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
(NOTE 4)
- -------------------------------------------------------------------------------------------------------------
COMMON STOCK:
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year [JPY] 252,201 [JPY] 150,730 $1,892,690
Issuance of common stock -- 101,470 --
- -------------------------------------------------------------------------------------------------------------
Balance at end of year 252,201 252,201 1,892,690
- -------------------------------------------------------------------------------------------------------------
CAPITAL SURPLUS:
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year 220,816 119,846 1,657,156
Issuance of common stock -- 100,971 --
- -------------------------------------------------------------------------------------------------------------
Balance at end of year 220,816 220,816 1,657,156
- -------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS (ACCUMULATED DEFICIT):
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year (200,304) 76,786 (1,503,220)
Net income (loss) 11,256 (278,139) 84,473
Change due to inclusion (exclusion) of
subsidiaries and affiliates in (from)
consolidation or equity method of accounting 292 (117) 2,191
Revaluation of assets in subsidiaries -- 1,165 --
- -------------------------------------------------------------------------------------------------------------
Balance at end of year (188,756) (200,304) (1,416,556)
- -------------------------------------------------------------------------------------------------------------
UNREALIZED HOLDING GAIN ON SECURITIES:
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year 36,400 -- 273,171
Effect of adoption of new accounting standard -- 36,400 --
Net change (1,570) -- (11,782)
- -------------------------------------------------------------------------------------------------------------
Balance at end of year 34,830 36,400 261,389
- -------------------------------------------------------------------------------------------------------------
TRANSLATION ADJUSTMENTS:
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year (53,045) -- (398,086)
Effect of adoption of new accounting standard -- (53,045) --
Net change 4,617 -- 34,649
- -------------------------------------------------------------------------------------------------------------
Balance at end of year (48,428) (53,045) (363,437)
- -------------------------------------------------------------------------------------------------------------
TREASURY STOCK:
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year (0) (0) (0)
Net change (0) (0) (0)
- -------------------------------------------------------------------------------------------------------------
Balance at end of year (0) (0) (0)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR [JPY] 270,663 [JPY] 256,068 $2,031,242
- -------------------------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
M-5
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
YEAR ENDED MARCH 31,
----------------------------------------------------------
2002 2001 2002
----------------- ----------------- ------------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
(NOTE 4)
- ------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) [JPY] 11,256 [JPY] (278,139) $ 84,473
- ------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
- ------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 174,919 164,488 1,312,713
- ------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful receivables, net of reversal (5,184) 8,089 (38,904)
- ------------------------------------------------------------------------------------------------------------------------
Accrued retirement benefits, net of reversal (24,888) 109,160 (186,777)
- ------------------------------------------------------------------------------------------------------------------------
Gain on sales of investments in securities, net (3,998) (7,750) (30,004)
- ------------------------------------------------------------------------------------------------------------------------
Loss on devaluation of investment in securities 1,377 5,706 10,334
- ------------------------------------------------------------------------------------------------------------------------
Gain (loss) on sales and disposal of property, plant and
equipment, net (187) 3,629 (1,403)
- ------------------------------------------------------------------------------------------------------------------------
Equity in income of affiliates (4,352) (3,164) (32,660)
- ------------------------------------------------------------------------------------------------------------------------
Deferred income taxes (52,547) (118,996) (394,349)
- ------------------------------------------------------------------------------------------------------------------------
Minority interests (477) (20,527) (3,580)
- ------------------------------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities:
- ------------------------------------------------------------------------------------------------------------------------
Trade notes and accounts receivable 107,132 87,700 803,992
- ------------------------------------------------------------------------------------------------------------------------
Inventories 65,361 7,131 490,514
- ------------------------------------------------------------------------------------------------------------------------
Other assets (29,651) (51,272) (222,522)
- ------------------------------------------------------------------------------------------------------------------------
Trade notes and accounts payable (162,793) 87,050 (1,221,711)
- ------------------------------------------------------------------------------------------------------------------------
Other liabilities 13,283 111,486 99,685
- ------------------------------------------------------------------------------------------------------------------------
Other 2,734 22,696 20,518
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 91,982 127,289 690,296
- ------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in short-term investments (184) 1,814 (1,381)
- ------------------------------------------------------------------------------------------------------------------------
Purchase of property, plant and equipment (155,840) (157,483) (1,169,531)
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from sales of property, plant and equipment 124,899 94,936 937,328
- ------------------------------------------------------------------------------------------------------------------------
Decrease in investments in securities 7,798 8,669 58,522
- ------------------------------------------------------------------------------------------------------------------------
Loans made (795,174) (624,193) (5,967,535)
- ------------------------------------------------------------------------------------------------------------------------
Collection of loans receivable 821,927 605,508 6,168,308
- ------------------------------------------------------------------------------------------------------------------------
Changes in scope of consolidation -- (15,650) --
- ------------------------------------------------------------------------------------------------------------------------
Other (8,309) (5,044) (62,356)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (4,882) (91,441) (36,638)
- ------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in short-term borrowings 137,871 (140,871) 1,034,679
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of long-term debt 226,500 181,629 1,699,812
- ------------------------------------------------------------------------------------------------------------------------
Repayment or redemption of long-term debt (476,770) (256,992) (3,578,011)
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of common stock -- 201,745 --
- ------------------------------------------------------------------------------------------------------------------------
Other (245) (78) (1,839)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (112,643) (14,567) (845,351)
- ------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 4,870 4,395 36,548
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (20,673) 25,675 (155,144)
- ------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 115,863 89,590 869,516
- ------------------------------------------------------------------------------------------------------------------------
ADJUSTMENTS TO BEGINNING BALANCE FOR INCLUSION OF
SUBSIDIARIES IN CONSOLIDATION -- 597 --
- ------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR [JPY] 95,189 [JPY] 115,863 $ 714,364
- ------------------------------------------------------------------------------------------------------------------------
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
M-6
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
Mitsubishi Motors Corporation ("MMC") and its domestic consolidated
subsidiaries maintain their books of account in conformity with the financial
accounting standards of Japan, and its foreign subsidiaries, in conformity with
those of their countries of domicile.
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles and practices generally accepted and
applied in Japan and have been compiled from the consolidated financial
statements filed with the Ministry of Finance as required by the Securities and
Exchange Law of Japan.
The accompanying consolidated financial statements have been prepared from
the accounts maintained by MMC and its consolidated subsidiaries in accordance
with the provisions set forth in the Japanese Commercial Code and in conformity
with accounting principles and practices generally accepted in Japan, which may
differ in certain material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
Additionally, the accompanying consolidated financial statements reflect the
accounts of MMC's foreign subsidiaries as of their fiscal year end, which is
December 31.
In addition, the notes to the consolidated financial statements include
information which is not required under accounting principles generally accepted
in Japan but is presented herein as additional information.
Certain reclassifications have been made to the prior year's consolidated
financial statements to conform to the current year's presentation.
As permitted, amounts of less than one million yen have been omitted.
Consequently, the totals shown in the accompanying consolidated financial
statements (both in yen and U.S. dollars) do not necessarily agree with the sum
of the individual amounts.
(b) PRINCIPLES OF CONSOLIDATION
All significant companies for which MMC has effective control are
consolidated. Significant companies which MMC has the ability to exercise
significant influence over the financial and operating policies have been
accounted for by the equity method.
All significant intercompany transactions have been eliminated in
consolidation.
The difference at the date of acquisition between the acquisition cost and
the fair value of the underlying net assets acquired are amortized over periods
that do not exceed 10 years.
M-7
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) CASH AND CASH EQUIVALENTS
All highly liquid investments with original maturities of three months or
less when purchased are considered cash equivalents.
(d) INVENTORIES
Inventories of MMC and its domestic consolidated subsidiaries are
principally stated at cost determined by the first-in first-out or specific
identification method. Inventories of the foreign consolidated subsidiaries are
principally stated at the lower of cost or market value. Inventory costs of the
foreign consolidated subsidiaries are principally determined by the
specific-identification method.
(e) INVESTMENTS IN SECURITIES
Investments in securities that are expected to be held-to-maturity are
stated at their amortized costs. Other securities with a readily determinable
market value are stated at fair value. Other securities without a readily
determinable market value are stated at cost determined by the moving average
method.
The difference between the acquisition cost and the carrying value of other
securities, including unrealized gain and loss, is recognized in "Unrealized
holding gain on securities". The cost of other securities sold is computed based
on the moving average method. See Note 3(d).
(f) DEPRECIATION
Depreciation of property, plant and equipment at MMC and its consolidated
subsidiaries is principally calculated by the declining-balance method or the
straight-line method over the estimated useful lives of the respective assets.
Significant renewals and additions are capitalized at cost. Maintenance and
repairs are charged to expenses.
(g) RETIREMENT BENEFITS
Accrued retirement benefits for employees have been provided mainly at an
amount calculated based on the retirement benefit obligation and the fair value
of the pension plan assets as adjusted for unrecognized actuarial gain or loss
and unrecognized prior service cost.
The transition difference of [JPY]128,370 million at April 1, 2000 arising
from the adoption of the new accounting standard, "Accounting Standard for
Retirement Benefits", is charged to other income and expenses for the year ended
March 31, 2001. See Notes 3(c) and 11.
Prior service cost is being amortized on the straight-line method over
periods of 10 to 22 years and 10 to 18 years in the years ended March 31, 2002
and 2001, respectively, which are within the estimated average remaining service
years of the employees.
Actuarial gains and losses are amortized on the straight-line method over 10
to 22 years and 10 to 18 years for the years ended March 31, 2002 and 2001,
respectively, which is within the estimated average remaining service years of
the employees.
Certain directors and corporate auditors of MMC and its domestic
consolidated subsidiaries are customarily entitled to lump-sum payments under
their respective unfunded severance benefit plans subject to the stockholders'
approval. Provision for severance benefits for those officers has been made at
an estimated amount.
M-8
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(h) REVENUE RECOGNITION
Revenue is generally recognized on sales of vehicles, service parts and
other products at the time of shipment.
Certain domestic and foreign subsidiaries recognize revenue by the
installment sales method whereby gross profit on such sales is deferred and
credited to income in proportion to the amount of the installment receivables
which become due.
(i) INCOME TAXES
MMC and its consolidated subsidiaries provide for income taxes applicable to
all items included in the consolidated statements of operations regardless of
when such taxes are payable. Income taxes arising from temporary differences in
the recognition of assets and liabilities for tax and financial reporting
purposes are reflected as deferred income taxes in the consolidated financial
statements by the asset and liability method.
Deferred tax assets and liabilities were measured using the enacted tax
rates which will be in effect when the temporary differences are expected to
reverse.
(j) TRANSLATION OF FOREIGN CURRENCY ACCOUNTS
The accounts of the consolidated foreign subsidiaries are translated into
yen as follows:
a. Asset and liability items are translated at the exchange rates in effect
on the balance sheet date of each subsidiary;
b. Components of stockholders' equity are translated at the historical
exchange rates at acquisition or upon occurrence; and
c. Revenue, expenses and cash flow items are translated at the average
exchange rates for the financial year of each subsidiary.
Translation adjustments are included in "Stockholders' equity" and "Minority
interests".
(k) AMOUNTS PER SHARE
The computation of basic net income (loss) per share is based on the
weighted average number of shares outstanding during each year. Diluted net
income per share is computed based on the weighted average number of shares of
common stock outstanding each year after giving effect to the dilutive potential
of shares of common stock to be issued upon the exercise of warrants and the
conversion of convertible bonds. Diluted net income per share is not presented
as a loss was recorded for the year ended March 31, 2001.
(l) APPROPRIATIONS (DISPOSITIONS) OF RETAINED EARNINGS (ACCUMULATED DEFICIT)
Cash dividends, bonuses to directors and corporate auditors and other
appropriations or dispositions of retained earnings (accumulated deficit) are
recorded in the financial year in which the appropriations (dispositions) are
approved at a general meeting of the stockholders.
(m) LEASES
Noncancelable lease transactions at MMC and its domestic consolidated
subsidiaries are accounted for as operating leases regardless of whether such
leases are classified as operating or capital leases, except that lease
agreements which stipulate the transfer of ownership of the leased property to
the lessee are accounted for as capital leases. Ownership of the leased property
is deemed to be transferred to the lessee, if any of the following conditions
are met: (i) the lease agreement provides for an ownership transfer provision,
(ii) the lease agreement provides a bargain purchase option, or (iii) the leased
assets are specifically designed for MMC or any of its subsidiaries.
M-9
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Noncancelable lease transactions at the foreign subsidiaries except for
operating leases are capitalized.
(n) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are generally expensed when incurred. As a
result of the transitional treatment of the accounting standard, "Accounting
Standard for Research and Development Costs", newly applied in the year ended
March 31, 2000, previously capitalized research and development costs continue
to be amortized. Further, certain foreign subsidiaries capitalize and amortize
research and development costs.
(o) DERIVATIVE FINANCIAL INSTRUMENTS
MMC and its consolidated subsidiaries are exposed to risks arising from
fluctuations in foreign currency exchange rates and interest rates. In order to
manage those risks, MMC and its consolidated subsidiaries enter into various
derivative agreements including forward foreign exchange contracts and interest
rate swaps. Forward foreign exchange contracts are utilized to manage risks
arising from forecasted export of finished goods and related foreign currency
receivables. Interest rate swaps are utilized to manage interest rate risk for
debts. MMC and its consolidated subsidiaries do not utilize derivatives for
trading purposes.
Forward foreign exchange contracts related to forecasted export of finished
goods are accounted for using deferral hedge accounting. Deferral hedge
accounting requires unrealized gains or losses to be deferred as liabilities or
assets. See Note 2.
MMC and its consolidated subsidiaries have also developed a hedging policy
to control various aspects of the derivative transactions including
authorization levels and transaction volumes. Based on this policy, MMC and its
consolidated subsidiaries hedge, within certain limits, the risks arising from
changes in foreign currency exchange rates and interest rates. MMC and its
consolidated subsidiaries review, each month, the effectiveness of all hedging
policies considering the cumulative cash flows and changes in the market.
2. CHANGE IN ACCOUNTING POLICY
(a) ACCOUNTING FOR FORWARD FOREIGN EXCHANGE CONTRACTS
In the year ended March 31, 2002, MMC changed its accounting for sales
denominated in foreign currencies and related forward foreign exchange contracts
qualifying as hedges. In the year ended March 31, 2001, sales and related
receivables hedged by qualified forward foreign exchange contracts were
translated at the corresponding foreign exchange contract rates. Effective
April 1, 2001, sales are translated into Japanese yen at the exchange rates in
effect at the dates they are transacted, and related receivables are translated
at the exchange rates in effect at the balance sheet date, while forward foreign
exchange contracts qualifying as hedges on those sales transactions are
recognized at their fair value at the balance sheet date and changes in fair
values are charged to earnings. This change was made as MMC developed its
internal systems to meet the requirements of the new accounting method that is
defined as standard accounting treatment. As a result of this change, compared
to the same method applied to the prior year's consolidated financial
statements, operating profit increased by [JPY]12,299 million
($92,300 thousand), and loss before income taxes and minority interests
decreased by [JPY]159 million ($1,193 thousand). The effects on the segment
information are stated in the Note 13.
M-10
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. NEW ACCOUNTING STANDARDS
(a) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
During the year ended March 31, 2002, MMC's consolidated subsidiaries
domiciled in the United States of America adopted Statement of Financial
Accounting Standards ("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". Upon adoption of these
statements in the United States, MMC recorded a total net loss of
[JPY]3,892 million ($32,023 thousand) in the consolidated statement of
operations for the year ended March 31, 2002, which includes a net transition
loss of [JPY]946 million ($7,100 thousand).
(b) ACCOUNTING FOR SALES INCENTIVES
In May 2000, the Emerging Issues Task Force in the United States of America
reached a final consensus on Issue No. 00-14 ("EITF 00-14"), "Accounting for
Certain Sales Incentives". EITF 00-14 requires that the cost of incentives be
recognized at the date of sale and classified as a reduction of revenue. Certain
consolidated subsidiaries domiciled in the United States of America recognize
sales incentives that are in substance sales discounts as a reduction of revenue
since April 1, 2001. In prior years, those sales incentives had been included in
selling, general and administrative expenses. As a result of adoption of EITF
00-14, compared to the same method applied to the prior year's consolidated
financial statements, gross profit decreased by [JPY]49,751 million
($373,366 thousand) with no effect on operating profit. Prior year's
consolidated financial statements have not been reclassified. The effects on the
segment information are stated in the Note 13.
(c) ACCOUNTING STANDARD FOR RETIREMENT BENEFITS
Effective the year ended March 31, 2001, MMC and its domestic consolidated
subsidiaries adopted the new accounting standard, "Accounting Standard for
Retirement Benefits". In accordance with this standard, the accrual for
retirement benefits for employees is provided based on the projected retirement
benefit obligation and the pension assets. In prior years, the retirement
benefits had been provided as 40% of the retirement benefits payable at the
year-end for employees who terminate services voluntarily. As a result of the
adoption of this standard, retirement benefit costs increased by
[JPY]116,984 million, and loss before income taxes and minority interests
increased by [JPY]117,569 million in the year ended March 31, 2001.
(d) ACCOUNTING STANDARD FOR FINANCIAL INSTRUMENTS
A new accounting standard, "Accounting Standard for Financial Instruments",
which became effective April 1, 2000, requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Under the
new standard, trading securities are carried at fair value and held-to-maturity
securities are carried at amortized cost. Marketable securities classified as
other securities are carried at fair value with changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly in
stockholders' equity. Non-marketable securities classified as other securities
are carried at cost. Cost of securities sold is determined by the moving average
method.
As of April 1, 2000, MMC and its domestic consolidated subsidiaries assessed
their intent to hold their investments in securities and classified their
investments as "held-to-maturity securities" or "other securities" and accounted
for the securities at March 31, 2001 in accordance with the new standard
referred to above. As a result of the adoption of this standard, securities in
current assets decreased by [JPY]51,475 million and investment securities
increased by [JPY]51,475 million at April 1, 2000.
The effect of the adoption of this new standard for financial instruments
was to increase loss before income taxes and minority interests by
[JPY]9,680 million for the year ended March 31, 2001.
M-11
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(e) ACCOUNTING STANDARD FOR FOREIGN CURRENCY TRANSACTIONS
A revised accounting standard, "Accounting Standard for Foreign Currency
Transactions", became effective April 1, 2000. As a result of translating the
long-term foreign loan receivable using the foreign exchange rate at the balance
sheet date, foreign exchange loss and loss before income taxes and minority
interests increased by [JPY]224 million. Translation adjustments were classified
in "Assets" in the consolidated balance sheet at March 31, 2000. Effective for
the year ended March 31, 2001, they are included in "Stockholders' equity" and
"Minority interests".
4. U.S. DOLLAR AMOUNTS
The U.S. dollar amounts in the accompanying consolidated financial
statements are unaudited and are included, solely for convenience, at
[JPY]133.25 = U.S.$1.00, the exchange rate prevailing on March 31, 2002. The
translation should not be construed as a representation that the yen amounts
represent or have been, or could be, converted into U.S. dollars at that or any
other rate.
5. ACCOUNTS AND LOANS RECEIVABLE SOLD TO OTHERS
MMC and its subsidiaries sell trade receivables to third parties without
recourse, which are deducted from "Trade notes and accounts receivable" in the
consolidated balance sheets. The outstanding balances of trade receivables sold
to third parties totaled [JPY]95,985 million ($720,338 thousand) and
[JPY]99,201 million as of March 31, 2002 and 2001, respectively.
A subsidiary of MMC domiciled in the United States of America also sells
retail and wholesale finance receivables to third parties without recourse,
which are also deducted from "Short-term loans" and "Long-term loans" in the
consolidated balance sheets. The outstanding balances of those receivables sold
to third parties totaled [JPY]838,353 million ($6,291,580 thousand) and
[JPY]493,562 million as of March 31, 2002 and 2001, respectively.
6. INVENTORIES
Inventories at March 31, 2002 and 2001 consisted of the following:
<Table>
<Caption>
MARCH 31,
-------------------------------------------------
2002 2001 2002
--------------- --------------- -------------
(IN MILLIONS OF YEN) (IN
THOUSANDS OF
U.S. DOLLARS)
Finished products.......................... [JPY] 188,456 [JPY] 225,577 $1,414,304
Raw materials.............................. 39,010 38,903 292,758
Work in process............................ 76,950 86,326 577,486
--------------- --------------- ----------
[JPY] 304,418 [JPY] 350,807 $2,284,563
=============== =============== ==========
</Table>
M-12
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 2002 and 2001 consisted of the
following:
<Table>
<Caption>
MARCH 31,
----------------------------------------------------------
2002 2001 2002
------------------ ------------------ ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS
OF U.S. DOLLARS)
Land................................. [JPY] 370,097 [JPY] 409,082 $ 2,777,463
Buildings and structures............. 542,760 540,527 4,073,246
Machinery and equipment.............. 1,879,292 1,837,419 14,103,505
Construction in progress............. 38,802 34,760 291,197
------------------ ------------------ ------------
2,830,952 2,821,790 21,245,418
Accumulated depreciation............. (1,611,483) (1,551,610) (12,093,681)
------------------ ------------------ ------------
Property, plant and equipment, net... [JPY] 1,219,469 [JPY] 1,270,179 $ 9,151,737
================== ================== ============
</Table>
8. INVESTMENTS
Held-to-maturity securities and other securities at March 31, 2002 and 2001
were as follows:
<Table>
<Caption>
MARCH 31,
-----------------------------------------------------------------------------------------
2002 2001
------------------------------------------ --------------------------------------------
NET NET
CARRYING ESTIMATED UNREALIZED CARRYING ESTIMATED UNREALIZED
AMOUNT FAIR VALUE GAIN AMOUNT FAIR VALUE GAIN
------------- ------------- ---------- -------------- -------------- ----------
(IN MILLIONS OF YEN)
Held-to-maturity securities:
Securities with market value........ [JPY] 336 [JPY] 337 [JPY] 1 [JPY] 173 [JPY] 175 [JPY] 2
Securities without market value..... 5,851 5,851 -- 15,338 15,338 --
------------- ------------- --------- -------------- -------------- ---------
Total held-to-maturity securities..... [JPY] 6,187 [JPY] 6,188 [JPY] 1 [JPY] 15,511 [JPY] 15,513 [JPY] 2
============= ============= ========= ============== ============== =========
</Table>
<Table>
<Caption>
MARCH 31,
--------------------------------------------
2002
--------------------------------------------
NET
CARRYING ESTIMATED UNREALIZED
AMOUNT FAIR VALUE GAIN
-------------- -------------- ----------
(IN THOUSANDS OF U.S. DOLLARS)
Held-to-maturity securities:
Securities with market value....... $ 2,522 $ 2,529 $ 7
Securities without market value.... 43,910 43,910 --
-------------- -------------- ---------
Total held-to-maturity securities.... $ 46,432 $ 46,439 $ 7
============== ============== =========
</Table>
M-13
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
MARCH 31,
-----------------------------------------------------------------------------------------------------
2002 2001
------------------------------------------------- -------------------------------------------------
NET NET
ACQUISITION CARRYING UNREALIZED ACQUISITION CARRYING UNREALIZED
COST AMOUNT GAIN COST AMOUNT GAIN
-------------- --------------- -------------- -------------- --------------- --------------
(IN MILLIONS OF YEN)
Other securities:
Securities with market
value................. [JPY] 56,483 [JPY] 116,423 [JPY] 59,940 [JPY] 66,357 [JPY] 125,363 [JPY] 59,005
Securities without
market value.......... 8,317 8,317 -- 8,683 8,683 --
-------------- --------------- -------------- -------------- --------------- --------------
Total other securities.... [JPY] 64,800 [JPY] 124,740 [JPY] 59,940 [JPY] 75,041 [JPY] 134,046 [JPY] 59,005
============== =============== ============== ============== =============== ==============
</Table>
<Table>
<Caption>
MARCH 31,
---------------------------------------------------
2002
---------------------------------------------------
NET
ACQUISITION CARRYING UNREALIZED
COST AMOUNT GAIN
--------------- --------------- ---------------
(IN THOUSANDS OF U.S. DOLLARS)
Other securities:
Securities with market
value................. $ 423,887 $ 873,719 $ 449,831
Securities without
market value.......... 62,417 62,417 --
--------------- --------------- ---------------
Total other securities.... $ 486,303 $ 936,134 $ 449,831
=============== =============== ===============
</Table>
Investment in unconsolidated subsidiaries and affiliates, and investment in
securities were as follows:
<Table>
<Caption>
MARCH 31,
----------------------------------------------------
2002 2001 2002
--------------- --------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Investment in unconsolidated subsidiaries
and affiliates......................... [JPY] 43,085 [JPY] 38,183 $ 323,340
Investment in securities................. 124,742 134,046 936,150
--------------- --------------- ----------
[JPY] 167,828 [JPY] 172,229 $1,259,497
=============== =============== ==========
</Table>
M-14
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2002 and 2001 consisted of the following:
<Table>
<Caption>
MARCH 31,
----------------------------------------------------
2002 2001 2002
--------------- --------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Loans, principally from banks............ [JPY] 678,852 [JPY] 531,718 $5,094,574
Commercial paper......................... 79,939 22,950 599,917
--------------- --------------- ----------
[JPY] 758,791 [JPY] 554,668 $5,694,492
=============== =============== ==========
</Table>
Long-term debt at March 31, 2002 and 2001 consisted of the following:
<Table>
<Caption>
MARCH 31,
----------------------------------------------------
2002 2001 2002
--------------- --------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Loans, principally from banks and insurance companies due
through 2022 at rates averaging 2.8% in 2002 and 3.8%
in 2001:
Secured................................................ [JPY] 111,946 [JPY] 115,793 $ 840,120
Unsecured.............................................. 145,440 250,037 1,091,482
2.15% bonds due 2001..................................... -- 13,600 --
1.9% bonds due 2001...................................... -- 26,100 --
2.25% bonds due 2002..................................... 20,000 20,000 150,094
2.4% bonds due 2003...................................... 29,500 29,500 221,388
2.7% bonds due 2004...................................... 20,000 20,000 150,094
3.1% bonds due 2007...................................... 8,700 8,700 65,291
3.3% bonds due 2009...................................... 26,400 26,400 198,124
0.4% convertible bonds due 2003.......................... 80,094 80,094 601,081
1.7% convertible bonds due 2003.......................... 19,200 19,200 144,090
Euro medium-term notes due through 2003 at rates ranging
from 0.5% to 5.1% in 2002 and from 4.3% to 8.1% in
2001................................................... 84,521 220,101 634,304
--------------- --------------- -----------
545,801 829,525 4,096,068
Less current portion..................................... (256,279) (284,501) (1,923,295)
--------------- --------------- -----------
[JPY] 289,522 [JPY] 545,025 $ 2,172,773
=============== =============== ===========
</Table>
The 0.4% unsecured convertible bonds due 2003 are convertible through
March 28, 2003 into shares of common stock of MMC at [JPY]887 ($6.66) per share.
At March 31, 2002, if all the outstanding convertible bonds had been converted
at the current conversion price, 90,297 thousand new shares would have been
issuable. The conversion price is subject to adjustment in certain cases
including stock splits.
The 1.7% unsecured convertible bonds due 2003 are convertible through
April 28, 2003 into shares of common stock of MMC at [JPY]405 ($3.04) per share.
At March 31, 2002, if all the outstanding convertible bonds had been converted
at the current conversion price, 47,407 thousand new shares would have been
issuable. The conversion price is subject to adjustment in certain cases
including stock splits.
M-15
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of long-term debt are summarized as follows:
<Table>
<Caption>
(IN MILLIONS OF (IN THOUSANDS OF
YEAR ENDING MARCH 31, YEN) U.S. DOLLARS)
- --------------------- --------------- ----------------
2003............................................. [JPY] 256,279 $1,923,295
2004............................................. 114,974 862,844
2005............................................. 66,533 499,310
2006............................................. 25,135 188,630
2007............................................. 15,280 114,672
Thereafter....................................... 67,598 507,302
--------------- ----------
Total............................................ [JPY] 545,801 $4,096,068
=============== ==========
</Table>
Non-interest bearing long-term debt is mainly due to Dutch State and Volvo
Car Corporation. The maturities of non-interest bearing long-term debt are
summarized as follows:
<Table>
<Caption>
(IN MILLIONS OF (IN THOUSANDS OF
YEAR ENDING MARCH 31, YEN) U.S. DOLLARS)
- --------------------- --------------- ----------------
2003............................................. [JPY] 14,803 $111,092
2004............................................. 25,906 194,417
2005............................................. 14,803 111,092
-------------- --------
Total............................................ [JPY] 55,512 $416,600
============== ========
</Table>
Assets pledged as collateral for short-term borrowings, long-term debt and
guarantees at March 31, 2002 and 2001 were as follows:
<Table>
<Caption>
MARCH 31,
----------------------------------------------------
2002 2001 2002
--------------- --------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Trade notes receivable................... [JPY] 33,363 [JPY] 53,357 $ 250,379
Investments.............................. 38,051 45,542 285,561
Property, plant and equipment, net....... 138,688 141,020 1,040,811
Other.................................... 2,043 4,059 15,332
--------------- --------------- ----------
[JPY] 212,146 [JPY] 243,979 $1,592,090
=============== =============== ==========
</Table>
10. CONTINGENT LIABILITIES
Notes discounted in the ordinary course of business amounted to
[JPY]141 million ($1,058 thousand) at March 31, 2002. Notes endorsed amounted to
[JPY]131 million ($983 thousand) at March 31, 2002.
Loan guarantees given in the ordinary course of business amounted to
[JPY]22,659 million ($170,049 thousand) at March 31, 2002. Agreements similar to
guarantees given in the ordinary course of business amounted to
[JPY]3,744 million ($28,098 thousand) at March 31, 2002.
M-16
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. OTHER INCOME AND EXPENSES
Other income and expenses for the years ended March 31, 2002 and 2001
consisted of the following:
<Table>
<Caption>
YEAR ENDED MARCH 31,
-----------------------------------------------------
2002 2001 2002
--------------- ---------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Gain on sales of investments in
securities............................. [JPY] 3,977 [JPY] 7,750 $ 29,846
Gain (loss) on sales and disposal of
property, plant and equipment and
intangible assets...................... 266 (3,629) 1,996
Equity in income of affiliates........... 4,352 3,164 32,660
Foreign exchange gain (loss)............. (11,174) 31 (83,857)
Restructuring (expense) reversal......... 1,644 (105,786) 12,338
Costs associated with product recall..... -- (50,652) --
Amortization of net retirement benefit
obligation at transition............... -- (128,370) --
Severance payments for early
retirement............................. (14,926) -- (112,015)
Impairment of goodwill................... (27,285) -- (204,765)
Other.................................... (7,116) (32,247) (53,403)
--------------- ---------------- ---------
[JPY] (50,262) [JPY] (309,802) $(377,201)
=============== ================ =========
</Table>
Severance payments for early retirement for the year ended March 31, 2001
are included in the restructuring expense.
12. INCOME TAXES
MMC and its domestic consolidated subsidiaries are subject to corporation,
inhabitants' and enterprise taxes based on taxable income, which, in the
aggregate, resulted in a statutory tax rate of approximately 42% for the years
ended March 31, 2002 and 2001. Income taxes of the foreign consolidated
subsidiaries are based generally on the tax rates applicable in their countries
of incorporation.
The effective tax rates reflected in the consolidated statements of
operations for the years ended March 31, 2002 and 2001 differ from the statutory
tax rate for the following reasons:
<Table>
<Caption>
YEAR ENDED
MARCH 31,
-------------------
2002 2001
-------- --------
(%) (%)
Statutory income tax rate for MMC........................... (41.7) (41.8)
Income (loss) at subsidiaries............................... (9.4) 11.3
Increase (decrease) in valuation allowance.................. 12.4 (0.2)
Equity in income in affiliates.............................. (4.5) (0.2)
Impairment of goodwill...................................... 39.8 2.5
Increase by tax effect of subsidiaries in North America..... (130.1) --
Other....................................................... (0.3) 1.7
------ -----
Income taxes as a percentage of loss before income taxes and
minority interests........................................ (133.8) (26.7)
====== =====
</Table>
M-17
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of deferred tax assets and liabilities as of
March 31, 2002 and 2001 were as follows:
<Table>
<Caption>
MARCH 31,
------------------------------------------------------
2002 2001 2002
---------------- ---------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Deferred tax assets:
Net operating loss carry forward...... [JPY] 134,409 [JPY] 145,671 $1,008,698
Accrued retirement benefits........... 50,337 57,412 377,764
Other................................. 160,652 102,074 1,205,644
Less valuation allowance.............. (120,596) (109,507) (905,036)
---------------- ---------------- ----------
Total deferred tax assets............... 224,803 195,650 1,687,077
Deferred tax liabilities:
Reserves under the Special Taxation
Measures Law........................ (16,822) (20,158) (126,244)
Differences between cost of
investments and underlying net
equity at fair value................ (17,858) (19,575) (134,019)
Accelerated depreciation.............. (13,710) (20,657) (102,889)
Other................................. (30,023) (45,982) (225,313)
---------------- ---------------- ----------
Total deferred tax liabilities.......... (78,415) (106,375) (588,480)
---------------- ---------------- ----------
Net deferred tax assets................. [JPY] 146,387 [JPY] 89,275 $1,098,589
================ ================ ==========
</Table>
Deferred tax assets and liabilities at March 31, 2002 and 2001 are included
in the consolidated balance sheets as follows:
<Table>
<Caption>
YEAR ENDED MARCH 31,
----------------------------------------------------
2002 2001 2002
--------------- --------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Current assets........................... [JPY] 71,692 [JPY] 97,102 $ 538,026
Investments and other non-current
assets................................. 91,913 11,261 689,779
Other current liabilities................ (33) (25) (248)
Other non-current liabilities............ (17,184) (19,062) (128,961)
--------------- --------------- ----------
Net deferred tax assets.................. [JPY] 146,387 [JPY] 89,275 $1,098,589
=============== =============== ==========
</Table>
M-18
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SEGMENT INFORMATION
(a) BUSINESS SEGMENTS
The business segment information for MMC and its consolidated subsidiaries
for the years ended March 31, 2002 and 2001 are summarized as follows:
<Table>
<Caption>
YEAR ENDED MARCH 31,
--------------------------------------------------------
2002 2001 2002
----------------- ----------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS
OF U.S. DOLLARS)
Revenue, net:
Automobiles.......................................... [JPY] 3,106,403 [JPY] 3,194,059 $23,312,593
Financial services................................... 99,326 93,962 745,411
----------------- ----------------- -----------
Total.............................................. 3,205,730 3,288,022 24,058,011
Intersegment......................................... (5,030) (11,305) (37,749)
----------------- ----------------- -----------
Consolidated....................................... [JPY] 3,200,699 [JPY] 3,276,716 $24,020,255
================= ================= ===========
Operating profit (loss):
Automobiles.......................................... [JPY] 49,877 [JPY] (70,527) $ 374,311
Financial services................................... (5,008) 365 (37,583)
----------------- ----------------- -----------
Total.............................................. 44,869 (70,161) 336,728
Intersegment......................................... (4,641) (3,703) (34,829)
----------------- ----------------- -----------
Consolidated....................................... [JPY] 40,227 [JPY] (73,865) $ 301,891
================= ================= ===========
Total assets:
Automobiles.......................................... [JPY] 2,504,608 [JPY] 2,587,864 $18,796,308
Financial services................................... 513,670 448,104 3,854,934
----------------- ----------------- -----------
Total.............................................. 3,018,278 3,035,968 22,651,242
Corporate and eliminations........................... (123,717) (54,300) (928,458)
----------------- ----------------- -----------
Consolidated....................................... [JPY] 2,894,560 [JPY] 2,981,668 $21,722,777
================= ================= ===========
Depreciation:
Automobiles.......................................... [JPY] 100,500 [JPY] 113,648 $ 754,221
Financial services................................... 46,036 40,949 345,486
----------------- ----------------- -----------
Consolidated....................................... [JPY] 146,537 [JPY] 154,598 $ 1,099,715
================= ================= ===========
Capital expenditures:
Automobiles.......................................... [JPY] 64,842 [JPY] 75,102 $ 486,619
Financial services................................... 93,657 111,251 702,867
----------------- ----------------- -----------
Consolidated....................................... [JPY] 158,500 [JPY] 186,353 $ 1,189,493
================= ================= ===========
</Table>
As a result of a change in accounting for sales in foreign currencies and
related forward foreign exchange contracts qualified as hedges as explained in
Note 2, compared to the same method applied to the prior year's consolidated
financial statements, operating profit increased by [JPY]12,299 million
($92,300 thousand) in "automobiles" segment in the year ended March 31, 2002.
M-19
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of a change in accounting for sales incentives as explained in
Note 3(b), compared to the same method applied to the prior year's consolidated
financial statements, net sales decreased by [JPY]49,751 million
($373,366 thousand) with no effect on operating profit in "automobiles" segment
in the year ended March 31, 2002.
(b) GEOGRAPHICAL SEGMENTS
The geographical segment information for MMC and its consolidated
subsidiaries for the years ended March 31, 2002 and 2001 are summarized as
follows:
<Table>
<Caption>
YEAR ENDED MARCH 31,
--------------------------------------------------------
2002 2001 2002
----------------- ----------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Revenue, net:
Japan............................... [JPY] 2,198,819 [JPY] 2,436,967 $16,501,456
North America....................... 896,668 911,158 6,729,216
Europe.............................. 543,107 395,265 4,075,850
Asia................................ 157,693 152,903 1,183,437
Other areas......................... 228,385 230,257 1,713,959
----------------- ----------------- -----------
Total............................. 4,024,673 4,126,553 30,203,925
Interarea........................... (823,974) (849,837) (6,183,670)
----------------- ----------------- -----------
Consolidated...................... [JPY] 3,200,699 [JPY] 3,276,716 $24,020,255
================= ================= ===========
Operating profit (loss):
Japan............................... [JPY] 22,795 [JPY] (61,246) $ 171,069
North America....................... 45,538 33,559 341,749
Europe.............................. (17,971) (30,278) (134,867)
Asia................................ 492 (1,901) 3,692
Other areas......................... (2,298) (9,075) (17,246)
----------------- ----------------- -----------
Total............................. 48,557 (68,942) 364,405
Interarea........................... (8,329) (4,922) (62,507)
----------------- ----------------- -----------
Consolidated...................... [JPY] 40,227 [JPY] (73,865) $ 301,891
================= ================= ===========
Total assets:
Japan............................... [JPY] 2,175,866 [JPY] 2,289,550 $16,329,201
North America....................... 843,977 701,803 6,333,786
Europe.............................. 222,648 255,638 1,670,904
Asia................................ 100,146 90,144 751,565
Other areas......................... 109,460 118,919 821,463
----------------- ----------------- -----------
Total............................. 3,452,099 3,456,055 25,906,934
Interarea........................... (557,538) (474,386) (4,184,150)
----------------- ----------------- -----------
Consolidated...................... [JPY] 2,894,560 [JPY] 2,981,668 $21,722,777
================= ================= ===========
</Table>
As a result of a change in accounting for sales in foreign currencies and
related forward foreign exchange contracts qualified as hedges as explained in
Note 2, compared to the same method applied to the prior year's consolidated
financial statements, operating profit increased by [JPY]12,299 million
($92,300 thousand) in "Japan" segment in the year ended March 31, 2002.
M-20
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of a change in accounting for sales incentives as explained in
Note 3(b), compared to the same method applied to the prior year's consolidated
financial statements, net sales decreased by [JPY]49,751 million
($373,366 thousand) with no effect on operating profit in "North America"
segment in the year ended March 31, 2002.
(c) OVERSEAS REVENUE
Overseas sales, which include export sales of MMC and its domestic
consolidated subsidiaries and sales (other than exports to Japan) of the foreign
consolidated subsidiaries for the years ended March 31, 2002 and 2001 are
summarized as follows:
<Table>
<Caption>
YEAR ENDED MARCH 31,
--------------------------------------------------------
2002 2001 2002
----------------- ----------------- ----------------
(IN MILLIONS OF YEN) (IN THOUSANDS OF
U.S. DOLLARS)
Overseas revenue:
North America....................... [JPY] 891,696 [JPY] 911,481 $ 6,691,902
Europe.............................. 540,690 404,920 4,057,711
Asia................................ 261,359 312,038 1,961,418
Other areas......................... 330,441 354,847 2,479,857
----------------- ----------------- -----------
Total............................. [JPY] 2,024,187 [JPY] 1,983,287 $15,190,897
================= ================= ===========
Consolidated revenue, net............. [JPY] 3,200,699 [JPY] 3,276,716 $24,020,255
================= ================= ===========
</Table>
<Table>
<Caption>
(%) (%)
----------------- -----------------
Overseas revenue as a percentage of
consolidated revenue:
North America........................ 27.8 27.8
Europe............................... 16.9 12.4
Asia................................. 8.2 9.5
Other areas.......................... 10.3 10.8
----------------- -----------------
Total.............................. 63.2 60.5
================= =================
</Table>
14. DERIVATIVE FINANCIAL INSTRUMENTS
MMC and its consolidated subsidiaries utilize derivative financial
instruments such as forward foreign exchange contracts and interest rate swaps
for the purpose of hedging exposure to adverse fluctuations in foreign currency
exchange rates and interest rates in the normal course of business. MMC does not
enter into such transactions for speculative or trading purposes.
MMC and its consolidated subsidiaries are exposed to the risk of credit loss
in the event of nonperformance by the counterparties to the derivatives, but any
such loss would not be expected to be material because MMC enters into
derivative transactions only with financial institutions with high credit
ratings. The notional amounts of the derivative financial instruments do not
necessarily represent the amounts exchanged by the parties and, therefore, are
not a direct measure of MMC's risk exposure in connection with derivatives.
M-21
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized below are the notional amounts and the estimated fair value of
the derivative positions, except for those accounted for as hedges, outstanding
at March 31, 2002 and 2001:
<Table>
<Caption>
MARCH 31,
----------------------------------------------------------------------------------------------------
2002 2001
--------------------------------------------------- -----------------------------------------------
NOTIONAL FAIR UNREALIZED NOTIONAL FAIR UNREALIZED
AMOUNT VALUE GAIN (LOSS) AMOUNT VALUE GAIN (LOSS)
---------------- ---------------- --------------- --------------- --------------- -------------
(IN MILLIONS OF YEN)
Forward foreign exchange
contracts:
Sell:
US $................... [JPY] 72,701 [JPY] 74,137 [JPY] (1,435) [JPY] 10,422 [JPY] 10,740 [JPY] (317)
Euro................... 112,754 118,833 (6,079) -- -- --
[GBP].................. 1,250 1,254 (4) -- -- --
Buy:
US..................... 46,115 46,416 300 -- --
Euro................... 3,471 3,483 11 -- -- --
---------------- ---------------- --------------- --------------- --------------- -------------
Total...................... [JPY] 236,294 [JPY] 244,125 [JPY] (7,207) [JPY] 10,422 [JPY] 10,740 [JPY] (317)
================ ================ =============== =============== =============== =============
</Table>
<Table>
<Caption>
MARCH 31,
-------------------------------------
2002
-------------------------------------
NOTIONAL FAIR UNREALIZED
AMOUNT VALUE GAIN (LOSS)
---------- ---------- -----------
(IN THOUSANDS OF U.S. DOLLARS)
Forward foreign exchange
contracts:
Sell:
US $......................... $ 545,598 $ 556,375 $(10,769)
Euro......................... 846,184 891,805 (45,621)
[GBP]........................ 9,381 9,411 (30)
Buy:
US $......................... 346,079 348,338 2,251
Euro......................... 26,049 26,139 83
---------- ---------- --------
Total............................ $1,773,313 $1,832,083 $(54,086)
========== ========== ========
</Table>
<Table>
<Caption>
MARCH 31,
----------------------------------------------------------------------------------------------------
2002 2001
--------------------------------------------------- -----------------------------------------------
NOTIONAL FAIR UNREALIZED NOTIONAL FAIR UNREALIZED
AMOUNT VALUE GAIN (LOSS) AMOUNT VALUE GAIN (LOSS)
---------------- ---------------- --------------- --------------- --------------- -------------
(IN MILLIONS OF YEN)
Interest rate swaps:
Receive-fixed,
pay-floating........... [JPY] -- [JPY] -- [JPY] -- [JPY] 460 [JPY] 3 [JPY] 3
Pay-fixed,
receive-floating....... 78,694 (4,571) (4,571) 13,000 (916) (916)
---------------- ---------------- --------------- --------------- --------------- -------------
Total...................... [JPY] 78,694 [JPY] (4,571) [JPY] (4,571) [JPY] 13,460 [JPY] (912) [JPY] (912)
================ ================ =============== =============== =============== =============
</Table>
M-22
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
MARCH 31,
-------------------------------------
2002
-------------------------------------
NOTIONAL FAIR UNREALIZED
AMOUNT VALUE GAIN (LOSS)
---------- ---------- -----------
(IN THOUSANDS OF U.S. DOLLARS)
Interest rate swaps:
Receive-fixed, pay-floating............ $ -- $ -- $ --
Pay-fixed, receive-floating............ 590,574 (34,304) (34,304)
---------- ---------- --------
Total.................................... $ 590,574 $ (34,304) $(34,304)
========== ========== ========
</Table>
15. LEASES
AS LESSEE
MMC and its consolidated subsidiaries lease certain property, plant and
equipment. For the years ended March 31, 2002 and 2001, finance leases, except
for agreements which stipulate the transfer of title of the assets to the
lessee, were as follows:
<Table>
<Caption>
MARCH 31,
---------------------------------------------
2002 2001 2002
--------------- --------------- ---------
(IN MILLIONS OF YEN) (IN
THOUSANDS
OF U.S.
DOLLARS)
Finance lease obligations:
Due within 1 year............................ [JPY] 20,233 [JPY] 22,918 $151,842
Due after 1 year............................. 37,882 44,670 284,293
--------------- --------------- --------
Total.......................................... [JPY] 58,116 [JPY] 67,588 $436,143
=============== =============== ========
</Table>
At March 31, 2002 and 2001, the equivalent of the acquisition cost of
finance lease transactions, except for agreements which stipulate the transfer
of title of the assets to the lessee, amounted to [JPY]77,636 million
($582,634 thousand) and [JPY]91,136 million for tools and equipment
respectively, and [JPY]31,818 million ($238,784 thousand) and
[JPY]31,967 million for others, respectively. At March 31, 2002 and 2001, the
total equivalent of the related net book value was [JPY]41,122 million
($308,608 thousand) and [JPY]46,352 million, respectively, that was calculated
with deductions of the related accumulated depreciation of [JPY]68,332 million
($512,811 thousand) and [JPY]76,751 million, respectively.
For the years ended March 31, 2002 and 2001, lease payments for finance
lease transactions, except for agreements which stipulate the transfer of title
of the assets to the lessee, amounted to [JPY]24,546 million
($184,210 thousand) and [JPY]29,434 million, respectively. The equivalent of the
related depreciation for the years ended March 31, 2002 and 2001 amounted to
[JPY]20,489 million ($153,764 thousand) and [JPY]25,999 million, respectively.
The equivalent of the related interest expense for the years ended March 31,
2002 and 2001 amounted to [JPY]2,158 million ($16,195 thousand) and
[JPY]2,786 million, respectively.
M-23
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating lease transactions entered into as lessee by MMC and its
consolidated subsidiaries at March 31, 2002 and 2001 were as follows:
<Table>
<Caption>
MARCH 31,
-------------------------------------------
2002 2001 2002
-------------- -------------- ---------
(IN MILLIONS OF YEN) (IN
THOUSANDS
OF U.S.
DOLLARS)
Future minimum lease payments on operating
leases:
Due within 1 year............................ [JPY] 11,839 [JPY] 16,227 $ 88,848
Due after 1 year............................. 74,653 70,638 560,248
-------------- -------------- --------
Total.......................................... [JPY] 86,493 [JPY] 86,866 $649,103
============== ============== ========
</Table>
AS LESSOR
Operating lease transactions entered into as lessor by MMC and its
consolidated subsidiaries at March 31, 2002 and 2001 were as follows:
<Table>
<Caption>
MARCH 31,
---------------------------------------------
2002 2001 2002
--------------- --------------- ---------
(IN MILLIONS OF YEN) (IN
THOUSANDS
OF U.S.
DOLLARS)
Future minimum lease revenue from operating
leases:
Due within 1 year.......................... [JPY] 56,879 [JPY] 52,904 $426,859
Due after 1 year........................... 71,754 67,011 538,492
--------------- --------------- --------
Total........................................ [JPY] 128,634 [JPY] 119,916 $965,358
=============== =============== ========
</Table>
16. RETIREMENT BENEFITS
MMC and its consolidated subsidiaries have several pension plans covering
substantially all their employees. The contributory plan includes a portion of
the government-sponsored welfare pension benefits which would otherwise be
provided by the Japanese government in accordance with the Welfare Pension
Insurance Law of Japan. These contributory and noncontributory plans are funded
in accordance with the funding requirements set forth in the applicable
government regulations.
The discount rate used to determine the retirement benefit obligation was
2.5% for MMC and its domestic consolidated subsidiaries, 7.3%--7.5% for its
foreign consolidated subsidiaries and 3.0% for all consolidated subsidiaries at
March 31, 2002 and 2001, respectively. The rate of return on plan assets assumed
was 4.0% for MMC and its domestic consolidated subsidiaries, 8.3%--8.5% for its
foreign consolidated subsidiaries and 4.0% for MMC and all consolidated
subsidiaries for the years ended March 31, 2002 and 2001, respectively.
M-24
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The retirement benefit obligation for MMC's and its consolidated
subsidiaries' employees' defined benefit plans at March 31, 2002 and 2001 is
summarized as follows:
<Table>
<Caption>
MARCH 31,
---------------------------------------------------
2002 2001 2002
---------------- ---------------- -------------
(IN MILLIONS OF YEN) (IN THOUSANDS
OF U.S.
DOLLARS)
Retirement benefit obligation............ [JPY] (270,776) [JPY] (258,825) $(2,032,090)
Pension plan assets at fair value........ 67,517 53,585 506,694
---------------- ---------------- -----------
Unfunded status.......................... (203,259) (205,239) (1,525,396)
Unrecognized actuarial loss.............. 32,589 6,038 244,570
Unrecognized prior service cost.......... (1,957) 6 (14,687)
---------------- ---------------- -----------
Net recognized retirement benefit
obligation............................. (172,627) (199,195) (1,295,512)
Prepaid pension cost..................... 1,322 -- 9,921
---------------- ---------------- -----------
Accrued retirement benefits.............. [JPY] (173,950) [JPY] (199,195) $(1,305,441)
================ ================ ===========
</Table>
Accrued retirement benefits include [JPY]2,608 million ($19,572 thousand)
and [JPY]3,744 million for directors and corporate auditors of MMC and its
domestic consolidated subsidiaries at March 31, 2002 and 2001, respectively.
Pension expenses for MMC's and its consolidated subsidiaries' employees'
retirement defined benefit plans for the years ended March 31, 2002 and 2001 are
as follows:
<Table>
<Caption>
YEAR ENDED MARCH 31,
--------------------------------------------
2002 2001 2002
-------------- --------------- ---------
(IN MILLIONS OF YEN) (IN
THOUSANDS
OF U.S.
DOLLARS)
Service cost.................................. [JPY] 15,546 [JPY] 14,406 $116,668
Interest cost................................. 8,213 7,302 61,636
Expected return on plan assets................ (2,829) (1,697) (21,231)
Amortization of net retirement benefit
obligation at transition.................... -- 128,370 --
Amortization of actuarial loss................ 608 -- 4,563
Amortization of prior service cost............ (35) (5) (263)
-------------- --------------- --------
Pension expenses.............................. [JPY] 21,502 [JPY] 148,377 $161,366
============== =============== ========
</Table>
17. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid for the years ended March 31, 2002 and 2001 amounted to
[JPY]22,435 million ($168,368 thousand) and [JPY]23,037 million, respectively.
Income taxes paid for the years ended March 31, 2002 and 2001 amounted to
[JPY]11,726 million ($88,000 thousand) and [JPY]6,896 million, respectively.
M-25
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES AND PRACTICES IN JAPAN AND GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES IN THE UNITED STATES OF AMERICA
As discussed in Note 1(a), MMC and its domestic subsidiaries maintain their
books of account in conformity with the financial accounting standards in Japan,
while its foreign subsidiaries prepare financial statements in conformity with
generally accepted accounting principles of their respective countries of
domicile or International Accounting Standards ("IAS"). Generally accepted
accounting principles and practices in Japan ("Japanese GAAP") do not require
MMC's consolidated financial statements to be prepared and presented using the
financial accounting standards in Japan for all of its subsidiaries and investee
companies. Accordingly, all of MMC's significant foreign subsidiaries and
foreign investee companies domiciled in the United States of America, Puerto
Rico, the Netherlands, Thailand, Australia and other foreign countries have been
included and presented in the MMC's consolidated financial statements using
generally accepted accounting principles of their respective countries or IAS.
Generally accepted accounting principles in the United States of America ("U.S.
GAAP") require that all subsidiaries and affiliates be included and presented in
the consolidated financial statements using U.S. GAAP.
For MMC, its domestic subsidiaries, its domestic investee companies, its
non-U.S. foreign subsidiaries and its non-U.S. foreign investee companies, a
description of the accounting principles used in the preparation of the
consolidated financial statements that differ in certain significant respects
from U.S. GAAP follows:
(a) RETIREMENT BENEFITS FOR EMPLOYEES
Effective April 1, 2000, MMC and its domestic subsidiaries adopted a new
Japanese accounting standard "Accounting for Retirement Benefits" which requires
the recognition of retirement costs based on the actuarially determined present
value of retirement benefit obligations. The transitional difference arising
from the adoption of the new accounting standard was charged to earnings in the
year of adoption as permitted by Japanese GAAP. Under Japanese GAAP, there is
also no requirement to recognize an additional minimum pension liability and
related additional intangible asset or other comprehensive income (loss).
Further, certain of MMC's foreign subsidiaries account for their retirement
benefit plans on a "pay as you go" basis, which is permitted using generally
accepted accounting principles of their respective countries of domicile.
Under U.S. GAAP, MMC and its subsidiaries are required to account for their
defined benefit pension plans in accordance with Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions". As a result
of the adoption of SFAS No. 87, U.S. GAAP requires the transition amount to be
amortized over the average remaining service period of the employees expected to
receive benefits under the plan. Further, U.S. GAAP requires the recognition of
an additional minimum pension liability in certain circumstances when an
unfunded accumulated benefit obligation exists and does not permit qualifying
defined benefit plans to be accounted for on a "pay as you go" basis. These
accounting differences resulted in an additional intangible asset, a decrease in
deferred tax assets, a decrease in accrued retirement benefits and an increase
in stockholders' equity of [JPY]16,888 million ($126,739 thousand),
[JPY]9,406 million ($70,589 thousand), [JPY]6,632 million ($49,771 thousand) and
[JPY]14,114 million ($105,921 thousand), respectively, at March 31, 2002, and a
net increase to the loss before income taxes and minority interests of
[JPY]8,224 million ($61,718 thousand) under U.S. GAAP for the year ended
March 31, 2002.
(b) IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL
Under the financial accounting standards in Japan, there is no requirement
to recognize impairments with respect to certain long-lived assets. MMC recorded
a goodwill impairment charge of [JPY]27,285 million ($204,765 thousand) for the
year ended March 31, 2002. Under U.S. GAAP, it was determined that this charge
should be classified as a write-off of a minority interest receivable in
connection with the purchase of the remaining shares in Mitsubishi Motors Sales
of Europe B.V. from Mitsubishi Corporation. This difference in classification
had no impact on net income determined in accordance with U.S. GAAP.
M-26
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under U.S. GAAP, MMC and its subsidiaries are required to assess impairment
for long-lived assets in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
MMC and certain of its domestic subsidiaries have recognized additional
impairment losses under U.S. GAAP primarily for long-lived assets to be disposed
of. These accounting differences resulted in a reduction to property, plant and
equipment, net by [JPY]6,935 million ($52,045 thousand), an increase in deferred
tax assets by [JPY]2,851 million ($21,396 thousand) and a decrease in
stockholders' equity by [JPY]4,084 million ($30,649 thousand), respectively, at
March 31, 2002, and a net increase to the loss before income taxes and minority
interests of [JPY]5,622 million ($42,191 thousand) under U.S. GAAP for the year
ended March 31, 2002.
(c) ASSET REVALUATION
Japanese GAAP permits companies to revalue (i.e., write-up to fair value)
certain long-lived assets used for business purposes that are recognized in
accordance with laws of each country including Japan. Certain asset revaluation
increases have been recorded with an offsetting amount included in the
accumulated deficit.
Under U.S. GAAP, such revaluations are not permitted and long-lived assets
are carried at historical cost, less accumulated depreciation and any impairment
adjustments. These accounting differences resulted in a reduction to property,
plant and equipment, net and a decrease in stockholders' equity by
[JPY]4,568 million ($34,281 thousand), respectively, at March 31, 2002, and a
net decrease to the loss before income taxes and minority interests of
[JPY]40 million ($300 thousand) under U.S. GAAP for the year ended March 31,
2002. These adjustments had no income tax affect because a valuation allowance
is provided for the entire deferred tax assets created by these temporary
differences under U.S. GAAP
(d) INTEREST COSTS
Under the financial accounting standards in Japan, there is no specific
accounting standard for capitalization of interest costs. Certain of MMC's
foreign subsidiaries capitalize interest costs that are expected to be recovered
by future net sales as permitted under generally accepted accounting standards
in the respective countries of domicile.
U.S. GAAP requires that interest costs for qualifying assets be capitalized
and amortized over the respective estimated useful lives of the qualifying
assets. Certain interest costs that have been capitalized and amortized under
Japanese GAAP do not qualify for capitalization and amortization under U.S.
GAAP. These accounting differences resulted in a reduction to property, plant
and equipment, net of [JPY]4,863 million ($36,495 thousand) and a decrease in
stockholders' equity of [JPY]4,863 million ($36,495 thousand), respectively, at
March 31, 2002, and a net increase to the loss before income taxes and minority
interests of [JPY]533 million ($4,000 thousand) under U.S. GAAP for the year
ended March 31, 2002. These adjustments had no income tax affect because a
valuation allowance is provided for the entire deferred tax assets created by
these temporary differences under U.S. GAAP.
(e) LEASES ACCOUNTING
Under the financial accounting standards in Japan, MMC accounts for finance
lease arrangements as operating leases, unless any of the following conditions
are met; (i) the lease agreement provides for an ownership transfer provision,
(ii) the lease agreement provides a bargain purchase option, or (iii) the leased
assets are specifically designed for MMC or any of its subsidiaries. Lease
payments accounted for as operating leases are charged to income when paid.
Further, under Japanese GAAP, a lessee is allowed to recognize a gain or loss
upon the sale of leased assets in sale and leaseback transaction if a lessee
accounts for the finance lease arrangement as an operating lease.
Under U.S. GAAP, leases that meet one or more of the criteria specified in
SFAS No. 13, "Accounting for Leases", as amended, must be classified as a
capital lease. In such cases, the lessee must record an asset and an obligation
at an amount equal to the present value of the minimum lease payments during the
lease term. The asset is then amortized during the lease term to its expected
value at the end of the lease. These accounting differences resulted in an
increase in property, plant and equipment, net by [JPY]39,026 million
M-27
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($292,878 thousand), an increase to financial and other liabilities by
[JPY]56,019 million ($420,405 thousand), an increase in deferred tax assets by
[JPY]6,031 million ($45,261 thousand) and a decrease in stockholders' equity by
[JPY]10,962 million ($82,266 thousand), respectively, at March 31, 2002, and a
net decrease to the loss before income taxes and minority interests of
[JPY]1,898 million ($14,244 thousand) under U.S. GAAP for the year ended
March 31, 2002.
During the year ended March 31, 2002, MMC sold certain land to Special
Purpose Entities ("SPE's") and then leased the land back as a lessee. Under
Japanese GAAP, transfers of land to SPE's are recognized as sales if the risks
of ownership of the land are transferred and, the transferor does not
consolidate the SPE's if the SPE's act within their stated objectives.
Under U.S. GAAP, these transactions did not qualify for sale-leaseback
accounting because of the nature of MMC's continuing involvement with the SPE's.
Under U.S. GAAP, these transactions are accounted for as a financing. This
accounting difference resulted in an increase in property, plant and equipment,
net of [JPY]40,409 million ($303,257 thousand), a decrease in prepaid expenses
and other current assets of [JPY]49 million ($368 thousand), an increase to
financial liabilities of [JPY]43,614 million ($327,309 thousand), an increase in
deferred tax assets of [JPY]872 million ($6,544 thousand), and a decrease in
stockholders' equity of [JPY]2,382 million ($17,876 thousand), respectively, at
March 31, 2002, and a net increase to the loss before income taxes and minority
interests of [JPY]2,219 million ($16,653 thousand), and a decrease to minority
interests of [JPY]68 million ($510 thousand) under U.S. GAAP for the year ended
March 31, 2002.
(f) COMPENSATED ABSENCES
Under the financial accounting standards in Japan and under generally
accepted accounting principles in certain non-U.S. foreign countries, there is
no specific accounting standard for compensated absences and recognition of such
liabilities is not generally practiced in Japan.
Under U.S. GAAP, MMC and its subsidiaries are generally required to accrue a
liability for employees' rights to receive compensation for future absences when
certain conditions are met. These accounting differences resulted in an increase
in accrued expenses, an increase in deferred tax assets and a decrease in
stockholders' equity of [JPY]4,219 million ($31,662 thousand),
[JPY]1,559 million ($11,700 thousand) and [JPY]2,660 million
($19,962 thousand), respectively, at March 31, 2002, and a net decrease to the
loss before income taxes and minority interests of [JPY]2,277 million
($17,088 thousand) under U.S. GAAP for the year ended March 31, 2002.
(g) DERIVATIVE FINANCIAL INSTRUMENTS
Under Japanese GAAP, derivative financial instruments are generally
recognized as either assets or liabilities at fair value and the corresponding
changes in fair value are recognized in the determination of net income in the
period of change. If certain hedging criteria are met, gains and losses should
either be deferred and accounted for as assets or liabilities or recognized in
earnings in the period of change together with the corresponding gains or losses
of the hedged item attributable to the risk being hedged. In the year ended
March 31, 2001, sales and related receivables hedged by qualified forward
foreign exchange contracts were translated at the corresponding foreign exchange
contract rates, as permitted under Japanese GAAP. As discussed in Note 2, in the
year ended March 31, 2002, MMC changed its accounting for its sales in foreign
currencies and related forward foreign exchange contracts qualifying as hedges.
MMC also accounts for qualified interest rate swaps as if the underlying debt
was issued at the hedged rate.
Under U.S. GAAP, MMC and its subsidiaries account for derivative financial
instruments under SFAS No. 133, as amended by SFAS No. 138. Under SFAS No. 133,
as amended, entities are required to recognize all derivative instruments in the
consolidated balance sheet at fair value. The accounting for changes in the fair
value of a derivative instrument depends on whether it has been designated and
qualifies as part of a hedging relationship and, if so, on the reason for
holding it. If certain conditions are met, entities may elect to designate a
derivative instrument as a hedge of exposures to changes in fair values, cash
flows, or foreign currencies.
M-28
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
If the hedged exposure is a cash flow exposure, the effective portion of the
gain or loss for the change in fair value of the derivative instrument is
reported initially as a component of other comprehensive income (loss) and
subsequently reclassified into net earnings when the hedged transaction is
recognized or the forecasted transaction is no longer anticipated to occur. If
the hedged exposure is a fair value exposure, the gain or loss for the change in
fair value of the derivative instrument is recognized in net earnings, and the
hedged item is also recorded at fair value and the gain or loss for the changes
in fair value of the hedged item is recognized in net earnings. If the
derivative instrument is not designated as a hedge, the gain or loss is
recognized in earnings in the period of change.
The accounting for derivative financial instruments under U.S. GAAP resulted
in a decrease in prepaid expenses and other current assets, an increase in
investments, a decrease in long-term loans, an increase to liabilities, an
increase in deferred tax assets and a net decrease in stockholders' equity of
[JPY]2,248 million ($16,871 thousand), [JPY]244 million ($1,832 thousand),
[JPY]6 million ($45 thousand), [JPY]4,232 million ($31,760 thousand),
[JPY]518 million ($3,887 thousand) and [JPY]5,724 million ($42,957 thousand),
respectively, at March 31, 2002, and a net decrease to the loss before income
taxes and minority interests of [JPY]729 million ($5,471 thousand) under U.S.
GAAP for the year ended March 31, 2002.
As described in Note 3(a), net unrealized losses on derivative financial
instruments at transition amounting to [JPY]946 million ($7,100 thousand) for
MMC's consolidated subsidiaries domiciled in the United States of America were
included in expenses in MMC's consolidated statement of operations under
Japanese GAAP for the year ended March 31, 2002. Under U.S. GAAP, these net
unrealized losses at transition are reclassified as part of the cumulative
effect of change in accounting principle and are required to be reported net of
tax benefits. Further, net unrealized losses on derivative financial instruments
at transition amounting to [JPY]923 million ($6,926 thousand) for non-U.S. group
companies are not recognized in MMC's consolidated financial statements under
Japanese GAAP for the year ended March 31, 2002. Under U.S. GAAP, these net
unrealized losses at transition are recognized, net of tax benefits, and are
also included as part of the cumulative effect of change in accounting
principle. No deferred tax benefit was recognized because a valuation allowance
was recorded for the entire amount of the deferred tax assets created for these
unrealized losses as management believes that it is more likely than not such
tax benefits will not ultimately be realized.
Also under Japanese GAAP, net cash flow hedging losses on derivative
financial instruments in the subsidiaries domiciled in the United States of
America were classified in assets in the consolidated balance sheets. Under U.S.
GAAP, such losses are classified in accumulated other comprehensive income
(loss). These accounting differences resulted in a decrease in assets and a
decrease in shareholders' equity of [JPY]2,909 million ($21,831 thousand) under
U.S. GAAP at March 31, 2002. Net cash flow hedging losses on derivative
financial instruments at transition amounted to [JPY]2,567 million
($19,265 thousand), which are net of income tax benefits, are included in the
amounts classified as "Derivatives" in the consolidated statement of
comprehensive income (loss) and consolidated statement of accumulated other
comprehensive income (loss) for the year ended March 31, 2002, on pages M-41 and
M-42, respectively.
(h) RESEARCH AND DEVELOPMENT COSTS
As discussed in Note 1(n), research and development costs generally are
expensed. Certain research and development costs are capitalized and amortized
as permitted or required under generally accepted accounting principles in
Japan, certain non-U.S. foreign countries or IAS.
Under U.S. GAAP, research and development costs are generally required to be
expensed as incurred. These accounting differences resulted in a decrease in
inventories, a decrease in prepaid expenses and other current assets, a decrease
in intangible assets, an increase in deferred tax assets, an increase in
minority interests and a decrease in stockholders' equity of
[JPY]30,351 million ($227,775 thousand), [JPY]37,246 million
($279,520 thousand), [JPY]175 million ($1,313 thousand), [JPY]23,511 million
($176,443 thousand), [JPY]1,006 million ($7,550 thousand) and
[JPY]45,267 million ($339,715 thousand), respectively at March 31, 2002, and a
net increase to the loss before income taxes and minority interests by
[JPY]7,020 million ($52,683 thousand) and an increase in minority interests of
[JPY]366 million ($2,747) under U.S. GAAP for the year ended March 31, 2002.
M-29
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(i) INCOME TAXES
Both under U.S. GAAP and the financial accounting standards in Japan,
deferred tax assets and liabilities are generally recognized for all temporary
differences. Under the financial accounting standards in Japan, deferred tax
assets and liabilities are also generally recognized for all temporary
differences except for differences between the accounting basis and tax basis of
investments in affiliates that are accounted for under an equity method. Under
the financial accounting standards in Japan, deferred tax assets and liabilities
may not be recognized in certain cases such as (a) when an investor has no
intention to sell the investments in a foreseeable future or (b) no future
dividends are expected to be received from the affiliates that will cause
additional income taxes. Under U.S. GAAP, deferred tax liabilities are
recognized for temporary taxable differences of between the financial reporting
and tax bases of investments in affiliates unless there is sufficient evidence
that the investor will be able to recover its investments in affiliates
tax-free. Because MMC does not control its affiliates' operations, including
policies for dividends from affiliates that may be taxable or tax-free, and
since Japanese tax regulations do not consider sales of investments in
affiliates to be a tax-free event, MMC is required to recognize additional
deferred tax liabilities under U.S. GAAP.
These accounting differences resulted in an increase of deferred tax
liabilities of [JPY]6,300 million ($47,280 thousand) and a decrease in
stockholders' equity of [JPY]6,300 million ($47,280 thousand), respectively, at
March 31, 2002 and an increase to net loss of [JPY]700 million
($5,253 thousand) under U.S. GAAP for the year ended March 31, 2002.
Under U.S. GAAP, deferred taxes are reduced by a valuation allowance to the
extent that it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Generally accepted accounting principles used
for subsidiaries in certain non-U.S. foreign countries only permit the
recognition of deferred tax assets to the extent that realization is probable or
virtually certain. Had U.S. GAAP been applied to these subsidiaries, the
increase in the amount of additional deferred tax assets would have been
directly offset with a corresponding increase in the amount of valuation
allowance.
The income tax effects of U.S. GAAP adjustments to the loss before income
tax benefits and cumulative effect of the change in accounting principle was
[JPY]7,159 million ($53,724 thousand) of additional tax benefits for the year
ended March 31, 2002.
(j) OTHER U.S. GAAP ADJUSTMENTS
Other differences in accounting principles between Japanese GAAP and U.S.
GAAP primarily consist of the following:
DEBT ISSUANCE COSTS
Under Japanese GAAP, costs incurred by MMC in connection with obtaining debt
financing may be charged directly to expense in the period incurred. Under U.S.
GAAP, certain debt issuance costs are required to be deferred and amortized to
interest expense during the term of the debt.
NEGATIVE GOODWILL
Under Japanese GAAP, negative goodwill that was derived from the acquisition
of minority shares in certain MMC subsidiaries as of March 31, 2002, will be
amortized over 3 years on a straight-line basis. Commencing April 1, 2002, MMC
will begin to amortize negative goodwill of [JPY]2,172 million
($16,300 thousand). This amount has been reflected as deferred income on MMC's
consolidated balance sheet at March 31, 2002. Under U.S. GAAP, entities are
required to allocate negative goodwill to certain acquired assets and any
unallocated negative goodwill is reported as an extraordinary gain in the period
of acquisition. The entire amount of negative goodwill was allocated to reduce
the carrying value of certain long-lived
M-30
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assets of these subsidiaries under U.S. GAAP. This difference in accounting
treatment had no impact on net income and net stockholders' equity as of and for
the year ended March 31, 2002.
INVENTORIES
Under Japanese GAAP, inventories of MMC and its domestic consolidated
subsidiaries are principally stated at cost determined by the first-in first-out
or specific identification method. Under U.S. GAAP, inventories are required to
be valued at the lower of cost or market.
(k) CLASSIFICATION OF OTHER COMPREHENSIVE INCOME (LOSS)
Japanese GAAP has no specific accounting standard for reporting other
comprehensive income (loss) items in the financial statements. Accordingly, in
preparing the Japanese GAAP consolidated financial statements, MMC included
certain other comprehensive income (loss) items and certain accumulated other
comprehensive income (loss) items recognized by foreign subsidiaries in MMC's
consolidated statement of operations and the accumulated deficit, respectively.
Under U.S. GAAP, MMC is required to classify all items qualifying as "other
comprehensive income (loss)" by their nature in the consolidated financial
statements and display the accumulated balance of other comprehensive income
(loss) separately from the accumulated deficit. A consolidated statement of
comprehensive income (loss) and a consolidated statement of accumulated other
comprehensive income (loss) for the year ended March 31, 2002, prepared in
accordance with U.S. GAAP, are included on pages M-41 and M-42, respectively.
(l) TRANSACTIONS WITH PRINCIPAL AND OTHER SHAREHOLDERS
DaimlerChrysler AG and one its wholly owned subsidiaries own a total of
37.3% of the outstanding shares of common stock of MMC at March 31, 2002. During
the year ended March 31, 2002, MMC sold vehicles and materials to
DaimlerChrysler AG and its subsidiaries totaling approximately
[JPY]64,451 million ($483,685 thousand).
Mitsubishi Heavy Industries, Ltd. and its subsidiaries own a total of
approximately 15% of the outstanding shares of common stock of MMC at March 31,
2002. During the year ended March 31, 2002, MMC purchased certain vehicle
components from Mitsubishi Heavy Industries, Ltd. and its subsidiaries totaling
approximately [JPY]40,595 million ($304,653 thousand).
Mitsubishi Corporation owns approximately 5% of the outstanding shares of
common stock of MMC at March 31, 2002. During the year ended March 31, 2002, MMC
derived approximately 5% of its automotive revenue from vehicles sold to
Mitsubishi Corporation.
(m) ADDITIONAL INFORMATION ON SIGNIFICANT FINANCE OPERATIONS
Mitsubishi Motors Sales of America, Inc. ("MMSA"), a wholly-owned subsidiary
of MMC domiciled in the United States of America, distributes automobiles and
related parts and accessories manufactured by MMC or other group companies.
Mitsubishi Motors Credit of America, Inc. ("MMCA"), a wholly-owned subsidiary of
MMSA domiciled in the United States of America, provides wholesale and retail
financing services. Retail financing activities are provided for the purchase or
lease of Mitsubishi automobiles by customers with prime credit and nonprime
credit experience. Wholesale financing activities are provided for the purchase
of inventory of Mitsubishi Motors dealers.
REVENUE RECOGNITION
Interest income from finance receivables and finance leases is generated
primarily by MMCA and is recognized using the interest method. Revenue from
operating leases is also generated primarily by MMCA
M-31
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and is recognized on a straight-line basis over the lease term. Accrual of
interest income on finance receivables is suspended when a loan is contractually
delinquent for 120 days or upon the occurrence of other significant events.
Accrual of revenue on operating leases may be suspended when a lease is
contractually delinquent for 150 days or upon the occurrence of other
significant events. Investment income from residual interests in securitized
assets is recorded as earned. Any gain or loss on sale of finance receivables is
recorded when the Company surrenders control over these assets.
Certain vehicles have been sold in the United States of America to daily
rental car companies with a right of return, usually with terms of four to
twelve months. Revenue and cost are recognized over a period of four to twelve
months utilizing predetermined rates depending on the model of the vehicles.
MMSA is subject to residual risk related to vehicles sold under buyback. Such
residual risk is measured based on the difference between the originally
estimated residual values and actual sales proceeds from the sale of the
returned vehicles. Included in "Prepaid expenses and other current assets" and
"Other current liabilities" in the consolidated balance sheets are the deferred
cost and the deferred revenue of [JPY]92,566 million ($694,679 thousand) and
[JPY]103,708 million ($778,296 thousand), respectively, for vehicles sold under
buyback at March 31, 2002. Such deferred cost and deferred revenue was
[JPY]57,852 million and [JPY]70,516 million, respectively, at March 31, 2001.
MMSA utilizes below market rate loans under special financing programs to
promote sales of vehicles to dealers. On the contract origination date,
marketing expense is recorded for the rate differential and a corresponding
deferred income amount is recorded on the balance sheet. The deferred income
balance is amortized into income using the interest rate method over the
original (contractual) life of the receivables. Upon prepayment or sale of the
receivable, the unamortized deferred income is recognized into earnings.
FINANCE RECEIVABLES
Finance receivables consist primarily of retail receivables, finance leases
and wholesale and other dealer loans. Retail finance receivables are
collateralized by the related vehicles. Wholesale receivables are collateralized
by the related dealers' inventories. Other dealer loans may be collateralized by
real estate or other assets of the borrowers.
Finance receivables are primarily held for sale and reported based on the
outstanding unpaid principal balances reduced by charge-offs and allowance for
credit losses and residual risk. The carrying amount of finance receivables held
for sale, net of deferred income, approximate market value. Net finance
receivables due after 1 year totaled [JPY]59,637 million ($447,557 thousand) and
[JPY]61,456 million at March 31, 2002 and 2001, respectively, and are included
in "Long-term loans" in the consolidated balance sheets. Net finance receivables
due within 1 year totaled [JPY]20,690 million ($155,272 thousand) and
[JPY]13,367 million at March 31, 2002 and 2001, respectively, and are included
in "Short-term loans" in the consolidated balance sheets.
The allowance for credit losses on finance receivables is based on an
estimate considered by management to be appropriate in relation to the amount
and type of receivables outstanding. Estimated losses are recorded at the time a
loss is considered to be probable and an estimate of the amount can be
determined. Repossessed collateral is carried at the lower of the recorded
receivable balance or estimated net realizable value. Actual losses are charged
to the allowance at time of disposition of repossessed collateral. Where
repossession has not occurred, losses are recorded as soon as it is determined
that collateral cannot be repossessed, generally not more than 120 days after
default.
At contract origination, management estimates the risk for the excess of the
contractual residual values over the estimated residual values of the vehicles
expected to be returned and amortizes such excess of the terms of the balloon
loans. The Company is required to refinance balloon loans, made to customers in
certain locations within the United States of America, based on the original
interest rate and/or original monthly payment. In many cases, the interest rates
and/or monthly payments are below market. As a result, management estimates and
provides for the risk that customers will choose to refinance the balloon
payments.
M-32
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SALE OF FINANCE RECEIVABLES
During the financial year ended March 31, 2002, MMCA sold retail finance
receivables in four transactions, aggregating $1,026,610 thousand,
$778,534 thousand, $1,557,152 thousand and $623,577 thousand. MMCA sold these
retail finance receivables to securitization trusts. Sales of these finance
receivables were subject to certain limited recourse provisions. MMCA is paid a
servicing fee as servicer of the sold receivables of approximately 1% per year
of the outstanding receivable balance. In a subordinated capacity, MMCA retains
any excess cash flows from its limited interest in the securitization trusts.
MMCA is entitled to receive these excess cash flows after the investors in the
securitization trusts are repaid their investment plus interest. These
subordinated interests (residual interests) are held as restricted assets and
amounted to $839,026 thousand and $634,597 thousand at end of the financial
years ended March 31, 2002 and 2001, respectively. The values of the
subordinated interests (residual interests) are subject to credit loss, balloon
loss, prepayment, and interest rate risks on the securitized finance
receivables.
MMCA sells undivided variable ownership interests in wholesale finance
receivables under a revolving purchase agreement with a multiseller conduit. In
June 2001, the multiseller conduit sold the wholesale finance receivables to
MMCA and the wholesale finance receivables were sold to a securitization trust.
Sale of these finance receivables was subject to limited recourse provisions.
MMCA is paid a servicing fee as servicer of the sold receivables of
approximately 1% per year of the outstanding receivable balance. In a
subordinated capacity, MMCA retains any excess cash flows from its limited
interest in the securitization trust or its agreement with the multiseller
conduit. MMCA's subordinated interest (residual interest) under the wholesale
finance receivable sale agreement was $94,016 thousand and $210,133 thousand at
end of the financial years ended March 31, 2002 and 2001, respectively.
The outstanding balance of the retail finance receivables sold to the
securitization trusts and serviced by MMCA totaled $5,963,764 thousand and
$3,853,007 thousand at end of the financial years ended March 31, 2002 and 2001,
respectively. The outstanding balance of the senior notes payable by the
securitization trusts to the investors totaled $5,039,232 thousand and
$3,183,389 thousand at end of the financial years ended March 31, 2002 and 2001,
respectively. The securitized retail finance receivables and senior notes
payable of the securitization trusts are not included in the consolidated
financial statements of MMC.
The outstanding balance of the wholesale finance receivables sold to the
securitization trust or multiseller conduit and serviced by MMCA totaled
$389,801 thousand and $448,188 thousand at end of the financial years ended
March 31, 2002 and 2001, respectively. The outstanding balance of the senior
notes payable by the securitization trust to the investors and the undivided
variable ownership interest of the multiseller conduit totaled
$305,000 thousand and $240,000 thousand at end of the financial years ended
March 31, 2002 and 2001, respectively. The securitized wholesale finance
receivables and senior notes payable of the securitization trust and variable
ownership interest of the multiseller conduit are not included in the
consolidated financial statements of MMC.
RESIDUAL INTERESTS IN SECURITIZED ASSETS
Residual interests in securitized assets represent certain subordinated
interests in securitized finance receivables. The residual interests are
subordinated to the senior notes payable by the securitization trusts to
investors.
The residual interests are initially recorded based on an allocation of the
net investment in the finance receivables between the portion sold and the
portion retained. The gain or loss on sale of finance receivables is based on
the estimated fair value of the residual interests. Residual interests are
subsequently adjusted to estimated fair value through earnings.
M-33
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
An active market with quoted prices for the residual interests does not
exist. Therefore, management estimates the fair value based on the present value
of future expected cash flows using management's best estimates of the key
assumptions--credit losses, balloon losses, prepayments, and discount rates.
Management believes that its valuation assumptions are reasonable.
Management periodically revises its assumptions, based on the performance of the
securitized finance receivables, changes in general economic conditions and
other factors. Such revisions could have a material adverse impact on the
estimated fair value of the residual interests.
Residual interests are included in "Long-term prepaid expenses and other" in
the consolidated balance sheets and totaled to [JPY]123,114 million
($923,932 thousand) and [JPY]96,932 million at March 31, 2002 and 2001,
respectively.
Key economic assumptions used in initially measuring the residual interests
at the date of the securitizations completed in the years ended March 31, 2002
and 2001 were as follows:
<Table>
<Caption>
YEAR ENDED MARCH 31,
---------------------------
2002 2001
------------ ------------
Prepayment speed (ABS)...................................... 0.8% TO 1.6% 1.0% to 1.3%
Weighted average life of the receivables (in years)......... 2 2
Net credit loss rate (annual percentage of the declining
balance of the receivables)............................... 1.3% TO 4.1% 1.2% to 2.4%
Balloon receivable return loss rate (percentage of the
balloon payment).......................................... 5.5% TO 7.5% 3.8% to 5.5%
Weighted average discount rate.............................. 9.0% TO 9.5% 12.0%
</Table>
INVESTMENTS IN OPERATING LEASES
MMCA acquires consumer operating leases from Mitsubishi Motors dealers.
Investments in motor vehicles subject to operating leases are recorded at cost
and depreciated to the estimated residual value of a straight-line basis over
the lease term. These investments are subject to residual risk, which is
measured based on the difference between the originally estimated residual
values and actual sale proceeds from the sale of the returned vehicles.
Net investments in motor vehicles subject to operating leases are included
in "Property, plant and equipment" in the consolidated balance sheets and
totaled [JPY]276,617 million ($2,075,925 thousand) and [JPY]258,484 million at
March 31, 2002 and 2001, respectively.
Scheduled future minimum lease receipts are disclosed in Note 15. It is
anticipated that a substantial portion of these operating leases will be prepaid
prior to contractual maturity. Accordingly, the contractual maturities should
not be considered as necessarily indicative of future cash flows.
Vehicles returned to MMC and its consolidated subsidiaries at the end of the
lease terms as well as repossessed vehicles were [JPY]6,157 million
($46,206 thousand) and [JPY]4,771 million, which are net of an allowance for
residual risk of [JPY]263 million ($1,973 thousand) and [JPY]229 million, at
March 31, 2002 and 2001, respectively. These vehicles are recorded at estimated
net realizable value and are included in inventories.
CASH FLOW INFORMATION FOR SIGNIFICANT INVESTING ACTIVITIES OF THE COMPANY'S
FINANCE OPERATIONS
The following cash flow transactions relating to the above finance
operations are included in "Loans made" in the consolidated statements of cash
flows prepared under Japanese GAAP:
M-34
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
YEAR ENDED MARCH 31,
-------------------------------------------------
2002 2001 2002
--------------- --------------- -------------
(IN MILLIONS OF YEN) (IN THOUSANDS
OF U.S.
DOLLARS)
Purchase of finance receivables............................ [JPY] 764,123 [JPY] 623,520 $5,734,506
Purchase of wholesale finance receivables.................. 29,123 -- 218,559
</Table>
The following cash flow transactions relating to the above finance
operations are included in "Collection of loans receivables" in the consolidated
statements of cash flows prepared under Japanese GAAP:
<Table>
<Caption>
YEAR ENDED MARCH 31,
-------------------------------------------------
2002 2001 2002
--------------- --------------- -------------
(IN MILLIONS OF YEN) (IN THOUSANDS
OF U.S.
DOLLARS)
Liquidation of finance receivables......................... [JPY] 272,998 [JPY] 283,335 $2,048,765
Proceeds from sale of wholesale finance receivables........ 36,692 4,318 275,362
Proceeds from sale of retail finance receivables........... 439,224 276,288 3,296,240
</Table>
(n) SIGNIFICANT CONCENTRATIONS AND CONTINGENCIES
MMC conducts business operations in various countries, including Thailand,
which are experiencing economic difficulties. At end of the financial year ended
March 31, 2002, MMC Sittipol Company Limited ("MSC"), a subsidiary of MMC
domiciled in Thailand, had short-term trade accounts, notes and other
receivables totaling Baht 4,461 million, equivalent to [JPY]13,338 million
($100,100 thousand), which included short-term receivables of Baht
1,997 million, equivalent to [JPY]5,971 million ($44,811 thousand), from the
same dealers who have had parts of their debts rescheduled by MSC to be paid in
installments over the long-term under various debt acknowledgement and
rescheduling agreements. These receivables are included in "Trade notes and
accounts receivable" in MMC's consolidated balance sheets. Approximately Baht
325 million, equivalent to [JPY]972 million ($7,293 thousand), of these
receivables are overdue, against which an allowance for doubtful accounts of
Baht 27 million, equivalent to [JPY]81 million ($606 thousand), has been set up.
Further, at end of the financial year ended March 31, 2002, MSC had
long-term receivables, loans and other receivables due from dealers totaling
approximately Baht 4,824 million, equivalent to [JPY]14,424 million
($108,246 thousand), (Baht 5,169 million, equivalent to [JPY]15,455 million
($115,987 thousand), at March 31, 2001). These receivables are included in
"Long-term loans" in MMC's consolidated balance sheets. MSC has set up an
allowance for doubtful accounts of approximately Baht 1,687 million, equivalent
to [JPY]5,044 million ($37,855 thousand), (Baht 1,057 million, equivalent to
[JPY]3,160 million ($23,718 thousand), at March 31, 2001). MSC management
expects to recover the net carrying value of these receivables in Thailand.
In addition, at end of the financial year ended March 31, 2002, MSC has
contingent liabilities to a bank under outstanding letters of guarantee issued
to secure approximately Baht 1,179 million, equivalent to [JPY]3,525 million
($26,456 thousand), (Baht 1,607 million, equivalent to [JPY]4,805 million
($36,060 thousand), at March, 2001) of the debts of its dealers for which a
provision for estimated losses of approximately Baht 359 million, equivalent to
[JPY]1,073 million ($8,056 thousand), has been recorded.
(o) NEW U.S. ACCOUNTING STANDARDS -- NOT YET ADOPTED
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually. SFAS No. 142
will also require
M-35
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized intangible assets be amortized over their respective estimated useful
lives and reviewed for impairment in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and subsequently SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets", after its adoption.
SFAS No. 142 is effective for MMC on April 1, 2002. Goodwill and any
intangible assets determined to have an indefinite useful life that is acquired
in a business combination completed after June 30, 2001 will not be amortized.
Goodwill and intangible assets acquired in business combinations completed
before July 1, 2001 continued to be amortized until March 31, 2002.
SFAS No. 142 will require MMC to evaluate its intangible assets and goodwill
and to make any necessary reclassifications in order to conform to the new
requirements in SFAS No. 141, "Business Combinations". Upon adoption of SFAS
No. 142, MMC will be required to reassess the useful lives and residual values
of all intangible assets and make any necessary amortization period adjustments
by September 30, 2002.
As of the date of adoption of SFAS No. 142, MMC expects to have unamortized
goodwill of [JPY]151 million ($1,133 thousands). Total amortization expense
related to goodwill was [JPY]76 million ($570 thousands) for the year ended
March 31, 2002. MMC is currently evaluating SFAS No. 142 and is not able to
determine the potential impact at this time.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and (or) the normal operation of a long-lived asset, except for certain
obligations of lessees. SFAS No. 143 requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset and subsequently allocated to expense over the asset's useful
life. MMC will adopt SFAS No. 143 on April 1, 2003. Management is not currently
able to determine the impact of the adoption of SFAS No. 143 on MMC's
consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". SFAS No. 144 retains the current requirement
to recognize an impairment loss only if the carrying amounts of long-lived
assets to be held and used are not recoverable from their expected undiscounted
future cash flows. However, goodwill is no longer required to be allocated to
these long-lived assets when determining their carrying amounts. SFAS No. 144
requires that a long-lived asset to be abandoned, exchanged for a similar
productive asset, or distributed to owners in a spin-off be considered held and
used until it is disposed. However, SFAS No. 144 requires the depreciable life
of an asset to be abandoned be revised. SFAS No. 144 requires all long-lived
assets to be disposed of by sale be recorded at the lower of its carrying amount
or fair value less cost to sell and to cease depreciation (amortization).
Therefore, discontinued operations are no longer measured on a net realizable
value basis, and future operating losses are no longer recognized before they
occur. MMC will adopt SFAS No. 144 on April 1, 2002, which is not expected to
have a material impact on MMC's consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt", and an amendment of that Statement, SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". SFAS
No. 145 also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers". SFAS No. 145 amends SFAS No. 13, "Accounting for Leases", to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. SFAS
No. 145 also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. MMC expects to adopt SFAS No. 145 effective May 15, 2002.
The adoption of SFAS No. 145 is not expected to have a material impact on MMC's
consolidated financial statements.
M-36
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECONCILIATION OF CONSOLIDATED NET INCOME FROM JAPANESE GAAP TO U.S. GAAP
Application of U.S. GAAP would have the following effect on MMC's
consolidated net income (loss) for the year ended March 31, 2002:
<Table>
<Caption>
(IN MILLIONS OF (IN THOUSANDS OF
YEN) U.S. DOLLARS)
NOTE ---------------- ----------------
Net income in accordance with Japanese GAAP................ [JPY] 11,256 $ 84,473
Retirement benefits for employees.......................... (a) (8,224) (61,718)
Impairment of long-lived assets and goodwill............... (b) (5,622) (42,191)
Asset revaluation.......................................... (c) 40 300
Interest costs............................................. (d) (533) (4,000)
Leases accounting.......................................... (e) (389) (2,919)
Compensated absences....................................... (f) 2,277 17,088
Derivative financial instruments........................... (g) 729 5,471
Reclassification of derivative losses at transition to
cumulative effect of change in accounting principle...... (g) 946 7,100
Research and development costs............................. (h) (6,654) (49,936)
Deferred taxes on investments in affiliates................ (i) (700) (5,253)
Other U.S. GAAP adjustments................................ (j) (802) (6,019)
Income tax effects of U.S. GAAP adjustments................ (i) 7,159 53,724
---------------- ----------
Loss before cumulative effect of change in accounting
principle in accordance with U.S. GAAP................... (517) (3,880)
Cumulative effect of change in accounting principle, net of
tax benefits............................................. (g) (1,869) (14,026)
---------------- ----------
Loss in accordance with U.S. GAAP.......................... [JPY] (2,386) $ (17,906)
================ ==========
Basic net loss per share, in accordance with U.S. GAAP:
Loss before cumulative effect of change in accounting
principle.............................................. [JPY] (0.35) $ (0.00)
Cumulative effect of change in accounting principle...... (1.27) (0.01)
---------------- ----------
Net loss................................................. [JPY] (1.62) $ (0.01)
================ ==========
Diluted net loss per share, in accordance with U.S. GAAP:
Loss before cumulative effect of change in accounting
principle.............................................. [JPY] (0.35) $ (0.00)
Cumulative effect of change in accounting principle...... (1.27) (0.01)
---------------- ----------
Net loss................................................. [JPY] (1.62) $ (0.01)
================ ==========
</Table>
Because MMC reported a consolidated loss before cumulative effect of change
in accounting principle under U.S. GAAP for the year ended March 31, 2002, the
diluted loss per share does not include the antidilutive effects of warrants and
convertible bonds. The weighted average number of shares outstanding would have
potentially been diluted by 138 million shares resulting from the exercise of
warrants and the conversion of bonds.
M-37
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECONCILIATION OF CONSOLIDATED STOCKHOLDERS' EQUITY FROM JAPANESE GAAP TO U.S.
GAAP
Application of U.S. GAAP would have had the following effects on MMC's
consolidated stockholders' equity at March 31, 2002:
<Table>
<Caption>
(IN MILLIONS OF (IN THOUSANDS OF
YEN) U.S. DOLLARS)
NOTE ---------------- ----------------
Stockholders' equity in accordance with Japanese GAAP...... [JPY] 270,663 $2,031,242
Retirement benefits for employees.......................... (a) 14,114 105,921
Impairment of long-lived assets and goodwill............... (b) (4,084) (30,649)
Asset revaluation.......................................... (c) (4,568) (34,281)
Interest costs............................................. (d) (4,863) (36,495)
Leases accounting.......................................... (e) (13,344) (100,142)
Compensated absences....................................... (f) (2,660) (19,962)
Derivative financial instruments........................... (g) (5,724) (42,957)
Cash flow hedging losses................................... (g) (2,909) (21,831)
Research and development costs............................. (h) (45,267) (339,715)
Deferred taxes on investments in affiliates................ (i) (6,300) (47,280)
Other U.S. GAAP adjustments................................ (j) 2,978 22,347
---------------- ----------
Stockholders' equity in accordance with U.S. GAAP.......... [JPY] 198,036 $1,486,198
================ ==========
</Table>
M-38
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY IN ACCORDANCE WITH U.S. GAAP
The changes in consolidated stockholders' equity in accordance with U.S.
GAAP for the year ended March 31, 2002, are as follows:
<Table>
<Caption>
ACCUMULATED
COMMON STOCK CAPITAL SURPLUS DEFICIT
--------------- --------------- ----------------
(IN MILLIONS OF YEN)
Balance at April 1, 2001.............................. [JPY] 252,201 [JPY] 237,704 [JPY] (269,022)
Net loss.............................................. -- -- (2,386)
Change due to inclusion (exclusion) of subsidiaries
and affiliates in (from) consolidation or equity
method of accounting................................ -- -- 292
--------------- --------------- ----------------
Balance at March 31, 2002............................. [JPY] 252,201 [JPY] 237,704 [JPY] (271,116)
=============== =============== ================
</Table>
<Table>
<Caption>
ACCUMULATED OTHER
COMPREHENSIVE
LOSS TREASURY STOCK TOTAL
----------------- -------------- ---------------
(IN MILLIONS OF YEN)
Balance at April 1, 2001............................. [JPY] (14,845) [JPY] (0) [JPY] 206,038
Net loss............................................. -- -- (2,386)
Other comprehensive loss, net........................ (5,908) -- (5,908)
Change due to inclusion (exclusion) of subsidiaries
and affiliates in (from) consolidation or equity
method of accounting............................... -- -- 292
--------------- ----------- ---------------
Balance at March 31, 2002............................ [JPY] (20,753) [JPY] (0) [JPY] 198,036
=============== =========== ===============
</Table>
M-39
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
ACCUMULATED
COMMON STOCK CAPITAL SURPLUS DEFICIT
------------ --------------- -----------
(IN THOUSANDS OF U.S. DOLLARS)
Balance at April 1, 2001............................. $1,892,690 $1,783,895 $(2,018,927)
Net loss............................................. -- -- (17,906)
Change due to inclusion (exclusion) of subsidiaries
and affiliates in (from) consolidation or equity
method of accounting............................... -- -- 2,191
---------- ---------- -----------
Balance at March 31, 2002............................ $1,892,690 $1,783,895 $(2,034,642)
========== ========== ===========
</Table>
<Table>
<Caption>
ACCUMULATED OTHER
COMPREHENSIVE
LOSS TREASURY STOCK TOTAL
----------------- -------------- ----------
(IN THOUSANDS OF U.S. DOLLARS)
Balance at April 1, 2001........................... $(111,407) $ (0) $1,546,251
Net loss........................................... -- -- (17,906)
Other comprehensive loss, net...................... (44,338) -- (44,338)
Change due to inclusion (exclusion) of subsidiaries
and affiliates in (from) consolidation or equity
method of accounting............................. -- -- 2,191
--------- ---- ----------
Balance at March 31, 2002.......................... $(155,745) $ (0) $1,486,198
========= ==== ==========
</Table>
M-40
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Following is the consolidated statement of comprehensive income (loss) in
accordance with U.S. GAAP for the year ended March 31, 2002.
<Table>
<Caption>
(IN MILLIONS OF (IN THOUSANDS OF
YEN) U.S. DOLLARS)
--------------- ----------------
Net loss in accordance with U.S. GAAP....................... [JPY] (2,386) $ (17,906)
Other comprehensive income (loss):
Unrealized gain on securities (net of tax benefits of
[JPY]1,123 million ($8,428 thousand))................... (1,570) (11,782)
Foreign currency translation adjustments.................. 4,217 31,647
Minimum pension liability adjustments (net of tax benefits
of [JPY]649 million ($4,871 thousand)).................. (907) (6,807)
Derivatives (net of tax benefits of [JPY]3,390 million
($25,444 thousand))..................................... (7,648) (57,396)
-------------- ---------------
Comprehensive loss.......................................... [JPY] (8,294) $ (62,244)
============== ===============
</Table>
M-41
<Page>
MITSUBISHI MOTORS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATED STATEMENT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Following is the consolidated statement of accumulated other comprehensive
income (loss) in accordance with U.S. GAAP for the year ended March 31, 2002.
<Table>
<Caption>
TOTAL
FOREIGN MINIMUM ACCUMULATED
UNREALIZED CURRENCY PENSION OTHER
GAIN ON TRANSLATION LIABILITY COMPREHENSIVE
SECURITIES ADJUSTMENTS ADJUSTMENTS DERIVATIVES LOSS
-------------- --------------- ------------ -------------- ---------------
(IN MILLIONS OF YEN)
April 1, 2001....................... [JPY] 36,400 [JPY] (51,245) [JPY] -- [JPY] -- [JPY] (14,845)
Current period change............... (1,570) 4,217 (907) (7,648) (5,908)
-------------- --------------- ------------ -------------- ---------------
March 31, 2002...................... [JPY] 34,830 [JPY] (47,028) [JPY] (907) [JPY] (7,648) [JPY] (20,753)
============== =============== ============ ============== ===============
</Table>
<Table>
<Caption>
TOTAL
FOREIGN MINIMUM ACCUMULATED
UNREALIZED CURRENCY PENSION OTHER
GAIN ON TRANSLATION LIABILITY COMPREHENSIVE
SECURITIES ADJUSTMENTS ADJUSTMENTS DERIVATIVES LOSS
---------- ----------- ----------- ----------- -------------
(IN THOUSANDS OF U.S. DOLLARS)
April 1, 2001....................... $273,171 $(384,578) $ -- $ -- $(111,407)
Current period change............... (11,782) 31,647 (6,807) (57,396) (44,338)
-------- --------- ------- -------- ---------
March 31, 2002...................... $261,389 $(352,931) $(6,807) $(57,396) $(155,745)
======== ========= ======= ======== =========
</Table>
M-42
<Page>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Mitsubishi Motor Manufacturing of America, Inc.
We have audited the balance sheets of Mitsubishi Motor Manufacturing of
America, Inc. (the Company), a subsidiary of Mitsubishi Motors Corporation, as
of December 31, 2001 and 2000, and the related statements of income,
shareholders' equity, and cash flows for the years then ended (not presented
separately herein). 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 auditing standards generally
accepted in the 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Mitsubishi Motor
Manufacturing of America, Inc. at December 31, 2001 and 2000, and the results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
January 28, 2002
M-43
<Page>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
Mitsubishi Motor Sales of America, Inc.
We have audited the consolidated balance sheets of Mitsubishi Motor Sales of
America, Inc., a wholly-owned subsidiary of Mitsubishi Motors Corporation, and
Subsidiaries (the Company) as of December 31, 2001 and 2000, and the related
consolidated statements of income, shareholder's equity, and cash flows for the
years then ended (not presented separately herein). 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 auditing standards generally
accepted in the 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Mitsubishi
Motor Sales of America, Inc. and subsidiaries at December 31, 2001 and 2000, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
Long Beach, California
February 28, 2002
M-44
<Page>
REPORT OF INDEPENDENT AUDITOR
To The Board of Directors and Shareholders of
MMC Sittipol Company Limited
I have audited the accompanying consolidated balance sheets of MMC Sittipol
Company Limited and subsidiaries as at 31 December 2001 and 2000, the related
consolidated statements of earnings, changes in shareholders' equity and cash
flows for the years then ended and the separate financial statements of MMC
Sittipol Company Limited for the same period. These financial statements are the
responsibility of the management of the Company and subsidiaries as to their
correctness and the completeness of the presentation. My responsibility is to
express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I 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. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial positions of MMC Sittipol Company Limited
and subsidiaries, and of MMC Sittipol Company Limited as at 31 December 2001 and
2000 and the results of their operations and cash flows for the years then
ended, in accordance with accounting principles generally accepted in Thailand.
Without qualifying my opinion to the above financial statements, I draw
attention to the matters as follows:-
1) As described in Note 6 to the financial statements, as at 31
December 2001, the Company had short-term trade accounts, notes and
hire-purchase receivables amounting to Baht 4,461 million, which included
short-term receivables of Baht 1,997 million from the same dealers who have had
part of their debts rescheduled by the Company to be paid in installments over
the long-term under the debt acknowledgement and rescheduling agreements
(Note 11). Approximately Baht 325 million of these receivables are overdue,
against which an allowance for doubtful accounts of Baht 27 million has been set
up. The Company is in the process of following up on these, and expects to be
able to make collection of such debts. Because of the continuing economic
problems and financial crisis in the country, the recoverability of the debts
depends upon the ability of the debtors to continue their operations in the
future.
2) As described in Note 11 to the financial statements, as at 31
December 2001, the Company had balances of long-term receivables from and loans
to dealers and related interest receivable totaling approximately Baht
4,824 million (2000: Baht 5,169 million), mainly consisting of trade accounts
receivable, hire-purchase receivables and notes receivable for which the credit
terms were extended. The Company has set up an allowance for doubtful accounts
of approximately Baht 1,687 million (2000: Baht 1,057 million) and expects to be
able to make collection of the majority of these debts. In addition, the Company
has contingent liabilities to a bank under outstanding letters of guarantee
issued to secure approximately Baht 1,179 million (2000: Baht 1,607 million) of
the debts of its
M-45
<Page>
dealers for which allowance for estimated losses of approximately Baht
359 million has been set up. Because of the continuing economic problems and
financial crisis in the country, the recoverability of the debts depends upon
the ability of the debtors to continue their operations in the future.
Sophon Permsirivallop
Certified Public Accountant (Thailand) No. 3182
Ernst & Young Office Limited
Bangkok : 8 March 2002
M-46
<Page>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MMC International Finance (Netherlands) B.V.
We have audited the accompanying balance sheet of MMC International Finance
(Netherlands) B.V. as of December 31, 2001, and the related statements of
income, stockholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MMC International Finance
(Netherlands) B.V. as of December 31, 2001, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in The Netherlands.
Ernst & Young
February 22, 2002
Amsterdam, the Netherlands
M-47
<Page>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Mitsubishi Motors Europe B.V.
We have audited the accompanying consolidated balance sheet of Mitsubishi
Motors Europe B.V. and subsidiaries as of December 31, 2001, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mitsubishi
Motors Europe B.V and subsidiaries as of December 31, 2001, and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in The Netherlands.
Ernst & Young
March 22, 2002
Amsterdam, the Netherlands
M-48
<Page>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Netherlands Car BV
We have audited the accompanying balance sheet of Netherlands Car BV as of
December 31, 2001, and the related statements of income, stockholders' equity
and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Netherlands Car BV as of
December 31, 2001, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
The Netherlands.
Ernst & Young
May 22, 2002
Eindhoven, the Netherlands
M-49
<Page>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Mitsubishi Motor Sales of Caribbean, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholder's deficiency and of cash flows present
fairly, in all material respects, the financial position of Mitsubishi Motor
Sales of Caribbean, Inc. (a wholly-owned subsidiary of Mitsubishi Motors
Corporation) at December 31, 2001, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America. 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 audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Juan, Puerto Rico
February 20, 2002
M-50
<Page>
INDEPENDENT AUDIT REPORT TO THE DIRECTORS OF
MITSUBISHI MOTORS AUSTRALIA LIMITED AND
KPMG TOKYO
SCOPE
We have audited the financial statements of the Mitsubishi Motors Australia
Limited (the Company) and Subsidiaries for the financial year ended 31 December
2001 as set out on the statement of financial performance, statement of
financial performance, cash flows and notes thereto. The directors are
responsible for the financial report which include the financial statements of
the Company and the consolidated financial statements of the consolidated entity
comprising the Company and the entities it controlled at the end of, or during,
the financial year. We have conducted an independent audit of the financial
statements in order to express an opinion on them to the Directors of the
Company and KPMG Tokyo.
Our audit has been conducted in accordance with Australian Auditing
Standards and auditing standards generally accepted in the United States of
America to provide reasonable assurance as to whether the financial statements
are free of material misstatement. Our procedures included examination, on a
test basis, of evidence supporting the amounts and other disclosures in the
financial statements, and the evaluation of accounting policies and significant
accounting estimates. These procedures have been undertaken to form an opinion
as to whether, in all material respects, the financial statements are presented
fairly in accordance with Accounting Standards and other mandatory professional
reporting requirements in Australia so as to present a view which is consistent
with our understanding of the Company's and the economic entity's financial
position, the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above
basis.
AUDIT OPINION
In our opinion, the financial statements of the Company present fairly, in
accordance with Australian Accounting Standards, and other mandatory
professional reporting requirements, the financial position of the Company and
the economic entity as at 31 December 2001 and the results of their operations
and their cash flows for the financial year ended on that date.
PricewaterhouseCoopers Adelaide, Australia
Chartered Accountants 1 May 2002
M-51
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INDEX OF EXHIBITS
<Table>
<Caption>
EXHIBIT
--------
Independent Auditors' Report on Schedule and Consent of KPMG
Deutsche Treuhand-Gesellschaft AG......................... 10.1
Independent Auditors' Consent of Deloitte & Touche LLP...... 10.2
Independent Auditors' Report of Deloitte & Touche LLP on the
consolidated financial statements of DaimlerChrysler
Corporation............................................... 10.3
Independent Auditors' Consent of KPMG, Tokyo, Japan......... 10.4
Independent Auditors' Consent of Ernst & Young LLP, Chicago,
Illinois.................................................. 10.5
Independent Auditors' Consent of Ernst & Young LLP, Long
Beach, California......................................... 10.6
Independent Auditors' Consent of Ernst & Young Office
Limited, Bangkok, Thailand................................ 10.7
Independent Auditors' Consent of Ernst & Young Accountants,
Amsterdam, the Netherlands................................ 10.8
Independent Auditors' Consent of Ernst & Young Accountants,
Amsterdam, the Netherlands................................ 10.9
Independent Auditors' Consent of Ernst & Young Accountants,
Eindhoven, the Netherlands................................ 10.10
Independent Auditors' Consent of PricewaterhouseCoopers LLP,
San Juan, Puerto Rico..................................... 10.11
Independent Auditors' Consent of PricewaterhouseCoopers,
Adelaide, Australia....................................... 10.12
</Table>