Since the Kajima Group took on the challenge of its first overseas construction project, the Group has expanded its reach to more than 50 countries. Kajima now maintains local subsidiaries and affiliates, district offices, or other permanent presences in 22 countries, with projects in 13 countries directly managed by Kajima headquarters.

As the Kajima Group works to integrate overseas operations, the subsidiaries and affiliates in Kajima's main regions of operation the United States, Europe, Southeast Asia, and Taiwan continue to streamline corporate structure and enhance profitability to contend with a dramatically changing market environment. At the same time, they are focusing their efforts on increasing the volume of contracts awarded by the leading local companies in these regions. These efforts are driven by Kajima's strategy of advancing into new arenas to offset the decrease of foreign direct investment by Japanese companies, which had been the principal pillar of Kajima's overseas sales. This approach enabled Kajima's subsidiaries and affiliates to post more than 100 billion in total new contracts for the third consecutive year. Of the 102.7 billion in new contracts, local non-Japanese companies placed more than 70%, demonstrating the steadily increasing localization of Kajima Group operations.

In real estate development operations undertaken by subsidiaries and affiliates, the Kajima Group is improving the return on investment of the operating properties and working to reduce each company's indebtedness. On the other side of the equation, new investments such as the development of distribution warehouse facilities in the United States and Private Finance Initiative (PFI) projects in the United Kingdom are being selectively undertaken in line with profitability and risk management criteria.

Kajima U.S.A. Inc. (KUSA), which is responsible for the North American market, has focused on strategic markets such as automobiles, pharmaceuticals, food products, and schools where Kajima can capitalize on its experience and expertise. This approach countered the lackluster capital investment of the post-IT bubble environment, resulting in 44.9 billion in new contracts for KUSA, which surpassed the volume of the previous year.

Excelling in distribution warehouse facility development, Industrial Developments International, Inc. (IDI), an affiliate of KUSA, continued to post robust performance, contributing to KUSA's consolidated revenues and profits.

Hualalai Resort, developed and managed by Kajima Kona Company (KKCo), has been rated one of Hawaii's premier luxury resorts since its opening in 1996. The resort features an award-winning five-star Four Seasons hotel, championship golf courses, and other recreational facilities all catering to the discriminating tastes of the high-end resort guests and home owners of Hualalai. Hotel performance for this year rebounded relatively quickly as the impact of September 11, 2001 dissipated and the number of individual repeat guests increased.

Kajima Overseas Asia Pte. Ltd. (KOA) handles the Southeast Asia market, which has been buffeted by the Asian economic slump, the secondary effects of the Iraq war, and most recently by the outbreak of Severe Acute Respiratory Syndrome (SARS). The current challenging business environment has not altered Kajima's long-term prospects in the Southeast Asian region, which is one of the Group's most important overseas markets. With contracts for a large-scale public construction project in Singapore and a steady flow of projects in Thailand and Malaysia, KOA won new contracts worth 33.8 billion in 2002, an increase over the previous year.

Although the market environment for real estate development continues to be as harsh as in recent years in the Southeast Asian region, low interest rates have supported KOA's steady performance in the leasing and operation of offices, hotels, shopping malls, and other facilities.

Chung-Lu Sino-Kajima Construction Co., Ltd., the Kajima Group's affiliate in the Taiwanese market, posted record profits due to improved gross profit ratios in plant construction for Japanese companies. Total new contracts, however, declined to 6.2 billion, in comparison with the extraordinary performance of the previous year, when the volume of new contracts doubled due to projects for large-scale Japanese plants and local apartment buildings. As the company has earned credibility with clients in Taiwan for its capability to execute large-scale construction, it will seek to improve management stability by selectively undertaking projects based on a thorough analysis of profitability and risk management.

In the face of the mature European construction market, Kajima Europe B.V. (KE) is working to improve business performance by focusing on specific projects in the United Kingdom, as well as seeking to expand its operations on the continent with select projects for Japanese companies. In terms of real estate development operations, proactive involvement in national and local governmental PFI projects in the United Kingdom is beginning to bear fruit. The Department for Environment, Food and Rural Affairs (DEFRA) office building in Cambridge, a project already in progress in 1999 and the first PFI project commissioned to a Japanese company, was completed and opened in April 2003. KE also secured contracts from North Tyneside and two other local governments for PFI school construction projects, which are currently underway.

The projects directly managed by Kajima headquarters in regions and arenas not covered by subsidiaries and affiliates are primarily in the field of large-scale civil engineering. Although total new contracts for directly managed projects in this year did not exceed that of the previous year, Kajima was able to secure contracts for large-scale, locally financed, infrastructure projects in Taiwan.

With the projected cutbacks in official development assistance (ODA) projects, which have formed the core of directly managed operations, Kajima's long term strategy is to expand its involvement in prospective projects in China, Russia, Central Europe, and other promising regions, while reinforcing its presence in the fields of locally financed infrastructure projects where Kajima leads in technological expertise.

The following are the major projects completed this year: Chirundu Bridge over the Zambezi River between Zambia and Zimbabwe, rehabilitation works for the Trunk Road in Ethiopia, rehabilitation works for National Route 3 in Central Africa, the Yazaki Surabaya Factory in Indonesia, the Toppan CFI Taiwan Color Filter Factory in Taiwan, and the Pampered Chef headquarters building and central distribution warehouse facilities in the United States.

Domestic Operations
Design

Research and Development
R&D Toics