Metgasco Limited
Annual Report 2012

Plain-text annual report

Contents 02 To Our Shareholders 03 Financial Highlights 04 Corporate Strategy 08 At a Glance Fiscal 2012 Overview 10 Review of Operations 10 Energy and Electric Systems 11 Industrial Automation Systems 12 Information and Communication Systems 13 Electronic Devices 14 Home Appliances 15 Research and Development / Intellectual Property 18 Corporate Social Responsibility 21 Corporate Governance 22 Directors and Executive Officers 23 Organization 24 Major Subsidiaries and Affiliates 25 Financial Section 73 Corporate Data / Shareholder Information Aiming to become a global, leading green company, enriching society with technology. Looking ahead to our 100th anniversary in 2021, our continued aim is to help enrich society. By enriching society, we mean creating a “people-friendly” society that ensures safety, peace of mind, health and comfort for all, as well as a more “earth-friendly” society that recycles and uses resources efficiently. We at the Mitsubishi Electric Group provide a wide spectrum of products and services, ranging from semiconductors to large-scale systems, with applications for homes, offices, factories, social infrastructure and even space systems. As we strive to become a global, leading green company that enriches society with technology, we will increase cross-cooperation within the Group while providing advanced technologies and engaging in a wide array of business pursuits. For the earth and for the future—the Mitsubishi Electric Group will continue to make steady steps toward achieving this goal. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 01 To Our Shareholders Amid downturns in the European and East Asian economies, supply chain pressures caused by flooding in Thailand and a slowdown in Japanese production and exports, the business environment in the latter half of the fiscal year ended March 31, 2012 (hereinafter, fiscal 2012) worsened. Stalled recovery trends in Japan and overseas, as well as the ongoing strength of the yen versus the US dollar and euro also made for a challenging operating environment. Under these circumstances, the Mitsubishi Electric Group continued to emphasize Growth, Profitability and Efficiency, and Soundness, the three key viewpoints of its Balanced Corporate Management. Accordingly, the Group placed greater emphasis than ever before on promoting growth strategies rooted in its competitive advantages as well as on efforts to boost its competitiveness and strengthen its management structure. As a result of these efforts, the Mitsubishi Electric Group recorded consolidated net sales of ¥3,639.5 billion in the fiscal year ended March 31, 2012, virtually unchanged from the previous fiscal year. Operating income decreased 4% to ¥225.4 billion, for a Group operating income ratio of 6.2%. Meanwhile, net income fell 10% to ¥112.1 billion. Consequently, with regard to standing management targets, for operating income ratio, return on equity (ROE) and interest-bearing debt to total assets (above 5%, above 10% and below 15%, respectively), we achieved the first two. The Mitsubishi Electric Group is taking steps to strengthen its initiatives in growing market segments. To that end, we are engaging in growth strategies that include: promoting environment-related business strategies; expanding business activities in China, India and other emerging economies; bolstering the social infrastructure sys- tems business; and developing the solutions business by combining a wide array of technologies with expertise gained in the security business and other fields. To facilitate new growth, we aim to enhance corporate value by promoting robust growth strategies based on renewed and meticulous efforts to bolster operations in the area of Soundness—one of the three key viewpoints of Balanced Corporate Management—with particular consideration given to corporate ethics and compli- ance. The promotion of such growth strategies is also underpinned by a manage- ment foundation realigned to be even stronger. As we stride forward resolutely to achieve our goals, we ask for your continued support and understanding. July 2012 President & CEO Kenichiro Yamanishi 02 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Financial Highlights Performance for the year ended March 31, 2012 Years ended March 31 Net sales Operating income2 Net income attributable to Mitsubishi Electric Corp. Total assets Interest-bearing debt Mitsubishi Electric Corp. shareholders’ equity Capital expenditures R&D expenditures Per-Share Amounts 2012 ¥3,639,468 225,444 112,063 3,391,651 542,291 1,132,465 159,346 169,686 Yen (millions) 2011 2010 ¥3,645,331 233,761 124,525 3,332,679 484,352 1,050,340 107,638 151,779 ¥3,353,298 94,302 28,278 3,215,094 537,500 964,584 109,069 133,781 U.S. dollars (thousands) 2012 $ 44,383,756 2,749,317 1,366,622 41,361,598 6,613,304 13,810,549 1,943,244 2,069,341 Yen U.S. dollars Net income attributable to Mitsubishi Electric Corp. Basic Diluted3 Cash dividends declared ¥52.20 ¥58.00 — 12 — 12 ¥13.18 13.18 4 % Statistical Information Operating income ratio Return on equity (ROE) Interest-bearing debt to total assets 6.2% 6.4% 2.8% 10.3 16.0 12.4 14.5 3.1 16.7 $0.637 — 0.146 — — — See accompanying notes to consolidated financial statements. 1 The Company prepares consolidated financial statements with procedures, accounting terms, forms, and preparation that are in conformity with accounting principles generally accepted in the United States of America based on the rules and regulations applicable in Japan. 2 Operating income is presented as net sales less cost of sales, selling, general, administrative and R&D expenses, and loss on impairment of long-lived assets. 3 For the years ended March 31, 2011 and 2012, diluted net income per share attributable to Mitsubishi Electric Corp. is not included in the above figure as no dilutive securities existed. Net Sales Breakdown by Business Segment 14.6% Others Net sales ¥611,619 million Energy and Electric Systems 24.6% Net sales ¥1,027,115 million Home Appliances 20.3% Net sales ¥849,274 million Industrial Automation Systems 23.4% ¥978,380 million Net sales Electronic Devices 4.8% Net sales ¥200,799 million Information and Communication Systems 12.3% ¥516,354 million Net sales MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 03 Corporate Strategy “Changes for the Better,” our corporate statement, encapsulates all that we stand for and aspire to—a brighter future for society, industry and everyday life through innovation. Supporting this commitment to innovation and sus- tainable operations is a solid management structure backed by balanced management initiatives that stem from three key viewpoints: Growth; Profitability and Efficiency; and Soundness. In terms of its corporate social responsibility (CSR) initiatives, the entire Mitsubishi Electric Group is steered by its Corporate Mission and Seven Guiding Principles. Putting particular emphasis on compliance with applica- ble laws and high ethical standards, we are committed to strengthening internal controls to ensure legal com- pliance Group-wide, as well as thoroughly implementing education and training. In addition, we continue to work diligently to safeguard the environment. Among a host of initiatives, we are striving to create a low-carbon, recycling-based society as part of our Environmental Vision 2021 program. To ensure that we continue to meet the expectations of shareholders, we have undertaken reforms that are guiding our ongoing evolution into a network of highly competitive, electric-electronic businesses while leverag- ing synergies to further enhance corporate value. Management Policy Achieve Balanced Corporate Management Further Enhance Soundness, Profitability, Efficiency and Growth Growth Profitability Efficiency Soundness Establish a Robust Management Foundation and Ensure Sustainable Growth Increase Corporate Value Pursuing Ever Higher Growth In fiscal 2012, with regard to management targets (which must be continuously and stably achieved) for operating income ratio, return on equity (ROE) and ratio of interest-bearing debt to total assets (above 5%, above 10% and below 15%, respectively), the Mitsubishi Electric Group surpassed the targets for the first two, achieving ratios of 6.2% and 10.3%, respectively. However, the Group was unable to reach its target for ratio of interest-bearing debt to total assets, recording a ratio of 16.0%. Guided by its overarching policy of Balanced Corporate Management, the Mitsubishi Electric Group will strive to continu- ously and stably achieve the above indicators set as its manage- ment targets, and aim to become a global, leading green company, enriching society with technology. With these two objectives in mind, the Group will strengthen its growth strate- gies in each business in order to pursue ever higher growth from three viewpoints: the environment and energy; social infrastruc- ture systems; and global business development. Three Management Targets to be Continuously and Stably Achieved Operating income ratio: ROE: 5% or more 10% or more Ratio of interest-bearing debt to total assets: 15% or less 04 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Framework for Implementing Balanced Corporate Management The Mitsubishi Electric Group undertakes management operations Growth Strategies The Mitsubishi Electric Group promotes the VI Strategy, which aims to make strong businesses stronger, and the AD Strategy, based on its Front-line Priority framework in the two areas of which is designed to reinforce solutions businesses centered on customer contact and production. In the first front-line area of strong businesses by promoting internal and external collabora- customer contact, the Group enhances its competitiveness in tion. In line with these growth strategies, in order to realize the marketing and services. In the latter front-line area of production, objective of ensuring growth compatible with profitability by the objective of the Front-line Priority works to bolster the making strong businesses stronger globally, the Group is promot- Group’s “craftsmanship” in the areas of quality, costs, production ing individual business strategies and bolstering regional strate- engineering technologies, research and development, and intel- gies, with a priority on Asia. Aiming at further growth, the Group lectual property (IP). In addition, by implementing its Strong is working to develop technologies that continuously enable its Synergistic Corporate Network framework, the Group is pursuing strong businesses to become even stronger, promoting compati- integration synergies. Such synergies are achieved by strengthen- bility between a low-carbon society and prosperous lifestyles. ing four collaborative links—(1) between production and sales As it moves forward, the Group is also pressing ahead in all divisions, (2) between business segments, (3) between business aspects of its efforts to strengthen global strategies with the segments and corporate divisions, and (4) globally, between purpose of maintaining sustainable growth as it strives for further parent factories in Japan and overseas facilities—as well as by global success. harmonizing business, product and regional strategies. Through the two aspects of the Front-line Priority framework and the four collaborative links within the Strong Synergistic Corporate Network framework, the Group is implementing Balanced Corporate Management that involves promoting growth strategies, strengthening its management foundation, improving its financial standing and undertaking CSR-related and corporate governance-related initiatives. Essential Growth Strategies: Promoting the VI Strategy and the AD Strategy VI1 Growth Strategy Make Strong Businesses Stronger Power Systems Elevators and Escalators Transportation Systems Factory Automation Products Electric and Electronic Products for Automobiles Satellites Optical Broadband Access Systems Power Devices Network Security Systems Air Conditioning and Housing Products AD2 Growth Strategy Reinforce Solutions Businesses Centered on Strong Businesses by Promoting Internal and External Cooperation Total Security Solutions Energy Conservation Solutions Smart Grids Smart Communities Visual Display Solutions 1 “VI” derives from “VICTORY” 2 “AD” derives from “ADVANCE” MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 05 Strengthening Global Strategies As part of its efforts to fortify its business systems to make strong businesses stronger globally, the Mitsubishi Electric Group contin- Compatibility between a Low-carbon Society and Prosperous Lifestyles The Mitsubishi Electric Group is actively working to realize an ues to invest capital in existing business bases, for example, build- “eco-electricity community,” one that aims to foster compatibility ing a new transformer plant in the United States. In addition, between a low-carbon society and safe, prosperous lifestyles. the Group is establishing manufacturing companies—such as To that end, the Group is combining its business expertise in all factory automation systems and automotive equipment produc- areas, from power systems to home appliances, to optimize energy tion bases in China—to serve rapidly growing markets, and usage community-wide based on the best possible mix of energy setting up new sales companies to tap into new markets in India sources, which includes maximizing the use of natural sources of and Vietnam. Beyond this, the Group will continue to carry out energy. Turning to future-oriented research and technological M&A to create synergies and expand its businesses, as seen in development measures, the Group is, in coordination with its the acquisition in May 2012 of the Messung Group, a factory Amagasaki, Wakayama and Ofuna facilities, constructing experi- automation systems-related business. mental smart grid equipment internally that anticipates the distri- bution networks to be developed in the future. In the Ofuna Promoting Global Business Strategies Regarding the businesses within the Group that possess notewor- facility, the Group will take steps to verify the concept of “painless electricity conservation” by building a “smart house” equipped with thy global growth potential (power systems, transportation sys- a photovoltaic system, all-electric-powered home equipment and tems, building systems, factory automation systems, automotive a Home Energy Management System (HEMS), in order to demon- equipment, space systems, power devices, air conditioning sys- strate the viability of zero-emission, energy-saving residential tems and other businesses), the Mitsubishi Electric Group will housing that is comfortable, safe and secure. expand such businesses to be a driving force of Group-wide The Mitsubishi Electric Group has developed power devices performance. This will be accomplished by implementing and that use silicon carbide (SiC); these energy-saving key devices augmenting global business promotion systems, while reinforcing efficiently regulate power usage and help contribute to the real- market strategies in priority markets. Through such actions, the ization of a low-carbon society. Consequently, the Group became Group is contributing to the improvement of corporate value. the first in the world to successfully develop the Full SiC-IPM in Bolstering Regional Strategies with Priority on Asia The Mitsubishi Electric Group will bolster cross-business regional February 2011, which achieves both low power loss and high reliability. By continuing to utilize the capabilities of its devices to the utmost extent while ensuring performance and reliability, strategies with priority on Asia in response to newly emerging the Group will strengthen the applications of its technologies in a markets, which are anticipated to experience high growth rates. wide array of power electronics products. Such products range In the Chinese market, where it has already established numerous from air conditioners, refrigerators and other home appliances to businesses and built a solid foundation, the Group will apply its photovoltaic systems, industrial equipment, electric/hybrid auto- combined strength to the further expansion of its operations by mobiles, railcars, and power equipment. strengthening collaborative links between its operating bases as well as its businesses. The Group will also take steps to augment partnerships with leading business groups in China. In India, where the time is ripe for full-scale business expansion, the Group will tap into growing markets by leveraging strong global businesses, particularly within the Energy and Electric Systems and Industrial Automation Systems business segments. 06 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Strengthening Our Management Foundation The Mitsubishi Electric Group consistently promotes Group-wide Striving for Constant Improvement Based on its Balanced Corporate Management policy, the operational improvement measures, taking active steps to further Mitsubishi Electric Group is steadily implementing the aforemen- solidify its operational structure. tioned management strategies, which are designed to enhance To this end, we constantly strive to reinforce the “craftsman- the formidable competitiveness of its individual businesses. ship” that is integral to our foundations as a manufacturer. In At the same time, we continue to implement reforms intended order to achieve this objective, we are always looking to enhance to guide our ongoing evolution into a network of highly competi- productivity and quality, to promote prioritized development tive, electric-electronic businesses while leveraging synergies to rooted in growth strategies, to strengthen our R&D capabilities further enhance corporate value and ensure sustainable growth. and the development of strategic IP activities by promoting such To accomplish these goals, it is increasingly important that we initiatives as the development of key components, and to strive for constant improvement, which puts into practice the improve material procurement by bolstering value engineering spirit that is embodied in our corporate statement, “Changes for (VE) and other activities. Furthermore, we are working to improve the Better.” The Mitsubishi Electric Group will continue to change our financial standing through measures that include inventory in order to create new value. We are confident these efforts will reduction and striving to allocate human resources effectively, yield even greater corporate value in the future. underpinned by the aim to make strong businesses stronger. The Mitsubishi Electric Group will continuously and resolutely promote these initiatives and make every effort to strengthen quality, cost efficiencies, production technology capabilities, development capabilities, IP activities, and sales and services, with the goal of further boosting profitability. Improving Our Financial Standing As of March 31, 2012, total interest-bearing debt, including bonds, stood at ¥542.3 billion for a ratio of interest-bearing debt to total assets of 16.0%. The Mitsubishi Electric Group is implementing comprehensive structural reforms to increase the competitiveness and earnings of all Group businesses. To raise overall profitability, we are striving to boost competitiveness in the areas of quality, costs, production technology capabilities, development capabilities, IP, marketing and services. In addition, in order to streamline asset turnover and the efficiency of funding operations, we are reduc- ing inventories, primarily through “just in time” activities, while expanding our global cash management system. These initiatives are aimed at generating stable cash flow. With accumulated cash flow, we are taking a balanced approach to invest in growth areas, provide returns to sharehold- ers through increased dividends, and reduce interest-bearing debt. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 07 At a Glance Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 1,058 1,044 1,040 1,028 1,027 Net sales Yen (billions) 1,200 1,000 1,018 800 600 400 200 0 08 09 10 11 12 (Years ended March 31) 927 978 852 733 08 09 10 11 12 (Years ended March 31) Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 644 582 526 488 516 08 09 10 11 12 (Years ended March 31) Operating income Operating income Operating income Yen (billions) 150 120 90 60 30 0 -30 69 75 75 83 85 08 09 10 11 12 (Years ended March 31) Yen (billions) 150 129 120 90 60 30 0 -30 100 101 50 26 08 09 10 11 12 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 25 19 14 21 2 08 09 10 11 12 (Years ended March 31) MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES Turbine generators, hydraulic turbine generators, nuclear power plant equipment, motors, transformers, power electronics equipment, circuit breakers, gas insulated switches, switch control devices, surveillance system control and security systems, large display devices, electrical equipment for locomotives and rolling stock, elevators, escalators, building security systems, building management systems, particle beam treatment systems, and others Programmable logic controllers, inverters, servomotors, human-machine interface, motors, hoists, magnetic switches, no-fuse circuit breakers, short circuit breakers, transformers for electricity distribution, time and power meters, uninterruptible power supply, industrial fans, computerized numerical controllers, electrical discharge machines, laser processing machines, industrial robots, clutches, automotive electrical equipment, car electronics and car mechatronics, car multimedia, and others Wireless and wired communications systems, surveillance cameras, satellite communications equipment, satellites, radar equipment, antennas, missile systems, fire control systems, broadcasting equipment, data transmission devices, network security systems, information systems equipment, systems integration, and others Fiscal 2012 Overview May • Commenced testing of a smart grid compatible Home Energy Management System (HEMS) at the Ofuna Smart House • Announced an order for the world’s first TAT-14 Cable Network project to upgrade the wavelength capacity of the transatlantic 40 Gbps optical submarine cable network • Successfully inserted into geostationary orbit the ST-2 The Ofuna Smart House commercial communications satellite, which was built for Singapore Telecommunications Limited (SingTel) and Taiwan’s Chunghwa Telecom Company Limited ST-2 in orbit July • Opened the Mitsubishi Electric Automation Solution Center in Shanghai to strengthen product sales and services in China • Received an order worth approximately ¥4.5 billion for electrical equipment for rolling stock to be used in subway lines serving Delhi, India Delhi subway train 2011 June • Established a new factory in China to manufacture and sell AC servos and numerical controllers (NCs) • Established a comprehensive sales compa- ny in Vietnam to sell air conditioning sys- tems, home appliances and other products Mitsubishi Electric Automation Manufacturing (Changshu) Co., Ltd. • Received an order for 106 elevators (including three that are the world’s fastest, traveling at 18 meters per second) to be installed in the Shanghai Tower, China’s tallest building Saigon Trade Center, location of Mitsubishi Electric Vietnam Company Limited August • Established a power module manufacturing joint venture in China to reinforce Mitsubishi Electric’s production system in that country, and commenced production of consumer and industrial power modules in January 2012 • Received an order to supply Narita International Airport with Japan’s largest digital signage system, comprising approximately 100 user stations and 340 display units Rendition of large LCD display wall September • Established a joint venture in China to develop, design, manufacture and market car multi- media products 08 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Electronic Devices Home Appliances Others Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 192 167 139 176 201 08 09 10 11 12 (Years ended March 31) Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 1,000 916 825 924 849 08 09 10 11 12 (Years ended March 31) Net sales Yen (billions) 1,200 1,000 800 600 400 200 0 661 596 553 609 612 08 09 10 11 12 (Years ended March 31) Operating income (loss) Operating income Operating income Yen (billions) 150 120 90 60 30 0 -30 8 -30 08 09 -7 10 6 4 11 12 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 66 35 5 42 22 08 09 10 11 12 (Years ended March 31) Yen (billions) 150 120 90 60 30 0 -30 17 12 3 14 20 08 09 10 11 12 (Years ended March 31) MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES MAIN PRODUCTS AND BUSINESS LINES Power modules, high-frequency devices, optical devices, LCD devices, microcomputers, system LSIs, and others LCD televisions, projection TVs, display monitors, projectors, Blu-ray disc recorders, room air conditioners, package air conditioners, air-to-water heat pump boilers, refrigerators, electric fans, ventilators, photovoltaic systems, hot water supply systems, LED lamps, fluorescent lamps, indoor lighting, compressors, chillers, dehumidifiers, air purifiers, showcases, cleaners, jar rice cookers, microwave ovens, IH cooking heaters, and others Procurement, logistics, real estate, advertising, finance and other services October • Began full-scale testing of smart grid and smart community equip- ment (total investment approximately ¥7.0 billion) and announced the Group’s 2015 (overall) net sales target for related businesses: ¥1.3 trillion • Established a parts supply and engineering company in Thailand for maintenance service of elevators and escalators installed overseas January • Announced the acquisition of the Messung Group (an India-based PLC/HMI equipment manufacturer and FA products distribution partner) through a merger with Mitsubishi Electric India Private Ltd. February • Announced Mitsubishi Elevator Asia Co., Ltd.’s surpassing the 100,000 mark in 2011 with regard to elevator/escalator production in Thailand Meltec Parts & Engineering Co., Ltd. Mitsubishi Elevator Asia Co., Ltd. 2012 December • Announced the establishment of a new joint venture in Xiamen, China, to develop, manufacture and sell low-voltage switchgear March • Developed the industry’s smallest EV motor system with built-in SiC inverter • Enhanced turbine generator facilities while undertaking new plant construc- tion at Mitsubishi Electric’s Kobe Works, increasing production capacity approxi- mately 30% EV motor system with built-in silicon carbide inverter Newly built stator outer frame plant MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 09 Review of Operations Energy and Electric Systems Net Sales Breakdown by Business Segment 24.6% Net Sales ¥1,027.1billion (unchanged year on year) Operating Income ¥84.9billion (up ¥1.9 billion year on year) The social infrastructure systems business saw an increase in orders compared with the previous fiscal year due to growth in Japan as well as in orders received for large projects overseas in the energy systems busi- ness. However, sales decreased compared with the previous fiscal year due to declines in the Japanese public utility systems and rolling-stock equipment businesses. The building systems business experi- enced increases in both orders and sales compared with the previous fiscal year, owing to growth in demand for elevators and escalators in the Chinese and ASEAN markets as well as for large projects record- ed for China and Korea. As a result, total sales in the Energy and Electric Systems segment stood at ¥1,027.1 billion, virtually unchanged from the previ- ous fiscal year. Operating income increased ¥1.9 billion year on year to ¥84.9 billion mainly due to a shift in sales components. 10 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Next-generation SiC Inverter for Railcars Mitsubishi Electric has developed a traction inverter for railcars that incorporates silicon carbide (SiC), a new type of semicon- ductor. This new inverter, with its energy-efficient, compact, lightweight, low-maintenance and low-noise design, is expected to play a major role in next-generation railcar propulsion systems. Diamond Vision OLED Measuring six meters in diameter, this Diamond Vision OLED is the world’s first large-scale spherical display system* to use organic light-emitting diode (OLED) panels. This display system has been used to create ”Geo-Cosmos,” an OLED display globe developed by the National Museum of Emerging Science and Innovation. Incorporating more than 10,000 of the most advanced OLED panels, Geo-Cosmos is suspended in midair, allowing viewers to see the constantly changing face of the Earth. *As of June 3, 2011 Southern Tohoku Proton Therapy Cancer Center Particle Beam Treatment System Proton Type This cutting-edge system uses linear protons and heavy- particle beams to target the affected areas. Easier on pa- tients, this treatment method is expected to help improve quality of life. Power Plants Mitsubishi Electric power plant installations are used both by power utility companies and by companies in various industries as in-house power generators. Owing to its accumulated expertise and leading technological capabilities, Mitsubishi Electric is able to provide optimal power plants in various power generation fields. AXIEZ Machine-room-less Elevators Along with enhanced energy-saving functions, including all- LED lighting, the AXIEZ’s variable-speed control elevator sys- tem reduces waiting times thanks to advances in leading-edge speed adjustment technology. This technology has evolved into a super variable speed control system for improved conve- nience and operational efficiency. The AXIEZ also features an improved design. Facima BA-System, an Open Integrated Management System for Building Facilities The Facima BA-System centrally controls building facilities and equipment through open management integration that is com- patible with facilities and equipment made by different manu- facturers. Owing to its enhanced functions and support menu, ranging from energy-saving to efficient building management operations, the Facima BA-System offers a new style of build- ing management. Industrial Automation Systems Net Sales Breakdown by Business Segment 23.4% Net Sales ¥978.4billion (up 6% year on year) Operating Income ¥101.2billion (up ¥1.1 billion year on year) The factory automation systems business saw an increase in sales compared with the previous fiscal year owing to stable demand for smartphone- and tablet PC-related investments, mainly in Asia. This result occurred despite a year-on-year decrease in orders for flat panel display-related invest- ments in Korea and Taiwan. The automotive equipment business recorded increases in both orders and sales compared with the previous fiscal year due to expansions in emerging markets, includ- ing China and India, as well as a recovery in the North American market. These rises took place in spite of the impact of the Great East Japan Earthquake and flooding in Thailand. As a result, total sales in the Industrial Automation Systems segment amounted to ¥978.4 billion, up 6% compared with the previous fiscal year. Operating income improved ¥1.1 billion year on year to ¥101.2 billion due primarily to this increase in sales. Programmable Logic Controllers Mitsubishi Electric’s MELSEC series of programmable logic controllers supports a wide array of production lines and social infrastructure equipment, from control devices to safety assur- ance, information provision and instrumentation operations. Japan’s top brand, the MELSEC series contributes to the construction of leading-edge systems, owing to its capabilities, performance, product variety and high reliability. AC Servos The MELSERVO-J4 series features the world’s highest level of performance and functionality. Designed as drive sources that enhance the speed and precision of production equipment and manufacturing devices, the MELSERVO-J4 series has applications in numerous fields, including semiconductors, FPD (Flat Panel Display) production and transport equipment, and industrial machinery. No-fuse Circuit Breakers and Earth Leakage Circuit Breakers No-fuse circuit breakers and earth leakage circuit breakers are used for wiring protection and short-circuit protection in low-voltage circuits. Mitsubishi Electric offers a wide variation of products, including its brand new ”WS-V” series, for both power distribution and OEM markets. Electrical Discharge Machines (EDMs) Beginning with the newly launched MV series, a strategic product globally, Mitsubishi Electric provides a lineup of EDMs that add value and improve the manufacturing productivity of molds and precision components. Such equipment is indis- pensable to the production of automobiles, home electronics and IT-related devices. Memory Car Navigation System Mitsubishi Electric’s memory car navigation system is equipped with such leading technologies as a new LSI developed specifically for navigation in order to realize high-definition, easy-to-understand map displays, as well as numerous functions that feature high processing speed. High-definition, full-segment, terrestrial digital broadcasts and unique audio technology allow users to fully enjoy high-quality and immersive music playback. ETC Equipment for Vehicles To ease the insertion and extraction of ETC (Electronic Toll Collection) cards in the relatively dim interior of a vehicle, LED lighting has been combined into the indicator and card insertion slot. With its strikingly delicate curves, this product realizes a design that beautifully complements contoured vehicle interiors. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 11 Information and Communication Systems Net Sales Breakdown by Business Segment 12.3% Net Sales ¥516.4billion (up 6% year on year) Operating Income ¥21.3billion (up ¥7.6 billion year on year) The telecommunications equipment business experienced increases in both orders and sales compared with the previous fiscal year because of higher demand for communications infra- structure and other equipment and large orders received for submarine line terminal equipment used in fiber-optic cable networks. The information systems and services busi- ness saw increased sales compared with the previous fiscal year due to growth in the sys- tem integration as well as the network and system operations businesses. The electronic systems business recorded a year-on-year decrease in orders because of a reduction in the number of large projects in the space systems business. In contrast, sales increased compared with the previous fiscal year owing to an increase in the electronics business. As a result, total sales in the Information and Communication Systems segment amounted to ¥516.4 billion, up 6% compared with the previous fiscal year. Operating income increased ¥7.6 billion year on year to ¥21.3 billion due primarily to higher sales. 12 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Information System Integrated Control Center Specialist engineers are available 24/7 to remotely operate and monitor client information systems and to analyze and determine any problem that might occur using automated tools, enabling a rapid response to any system malfunction. (Mitsubishi Electric Information Network Corporation) Server Integration Solution Using Virtualization Technology Utilizing virtualization technology to consolidate multiple server assets onto a single hardware platform, this server integration solution can easily incorporate servers widely scattered through- out an office. As a ”Green IT” technology, it enables lower operational costs and energy consumption, as well as more efficient use of space. (Mitsubishi Electric Information Technology Corporation) DS2000 Standard Satellite Platform The DS2000 is a standard satellite platform modeled after JAXA’s ETS-VIII platform, which was designed to meet the need for high-quality, low-cost satellites with shortened delivery times. The DS2000 has maintained a competitive edge internationally, and is employed in such satellites as Himawari-7, 8, 9, Superbird-C2, ST-2 and Türksat-4A/4B. Vehicle-mounted Stations for Satellite Communications Vehicle-mounted satellite communication equipment enables transmission of video and audio for broadcast news (satellite news gathering) and information for disaster management. Mitsubishi Electric products have achieved Japan’s highest market share in this field, and are employed by Japanese broadcasters, the public sector and infrastructure companies such as gas and electricity utilities. Broadband Optical Access Systems Mitsubishi Electric is progressively installing Gigabit Ethernet Passive Optical Network (GE-PON) systems, which play a central role in broadband services. The need for GE-PON systems is steadily expanding due to high-capacity broadband content, including the increased use of visual services. Digital CCTV (Closed-circuit Television) System This digital CCTV system meets the expanding range of needs for video surveillance systems, which is achieved through new digital technology incorporated into its high-resolution megapixel camera and its high level of scalability, which can accommodate even large-scale systems. Electronic Devices Net Sales Breakdown by Business Segment 4.8% Net Sales ¥200.8billion (up 14% year on year) Operating Income ¥3.6billion (down ¥2.3 billion year on year) The semiconductor business saw a decrease in orders compared with the previous fiscal year due to a decline in demand mainly for industrial-use power modules as well as high-frequency and optical transmission devices. However, sales rose thanks to growth in demand for power modules for industrial, commercial, automotive and rail- car applications. The LCD module business experienced increases in both orders and sales year on year amid higher demand for industrial and automotive applications. As a result, total sales in the Electronic Devices segment totaled ¥200.8 billion, up 14% compared with the previous fiscal year. Operating income fell ¥2.3 billion year on year to ¥3.6 billion mainly because of the stronger yen. 1,200-volt Large-type Transfer-mold Dual In-line Package Intelligent Power Module (DIPIPM) Ver.4 Mitsubishi Electric’s DIPIPM incorporates a sixth-generation LPT-CSTBT1 that cuts power loss by 15% compared with conventional models, realizes an industry-leading2 current rating of 50 amperes and has a built-in, high-precision temperature sensor. These features make this power module suitable for inverter drive system applications in package air conditioners and industrial motors. 1. Light-punch-through Carrier Stored Trench-gate Bipolar Transistor 2. As of January 26, 2012; based on internal research 600V High-voltage Integrated Circuit (HVIC) for Automotive Applications Used mainly in such power semiconductors as the voltage converters of electric vehicles (EVs) and hybrid electric vehicles (HEVs), this highly reliable 600 V HVIC is suited to the demands of automotive applications, achieving a wide guaranteed operational temperature range of -40° to +125°C. Gallium Nitride (GaN) High-electron Mobility Transistor (HEMT) C-band (4-8GHz) Amplifiers for Satellite Earth Stations Employing GaN to enable high-voltage operation, these GaN HEMT amplifiers boast an efficiency rate exceeding 43% when output power is at a high 100 W, thereby contributing to reductions in satellite earth station size. 10 Gbps EML1-TOSA2 EML operability at high temperatures allows for miniaturization of thermo-electric coolers, enabling this 10 Gbps optical trans- mission device to cut power consumption by 50% compared with conventional models used for high-speed, large-volume data transmission between data centers. In addition, this device can transmit data up to 40 km due to higher signal quality. 1. Electro-absorption Modulator Laser 2. Transmitter Optical Sub Assembly Industrial-use, Super-Wide Viewing Angle Color TFT-LCD Modules TFT-LCD modules feature high brightness, high contrast, and wide 170° viewing angles to ensure excellent visibility, while possessing a long operating life of 100,000 hours.1 The product lineup includes units suitable for diverse installations ranging from outdoor digital signage to devices installed on ships. 1. Standard value at normal temperatures of 25°C Industrial-use, Super High Brightness TFT-LCD Modules TFT LCD modules are available in various sizes, boast excellent visibility in bright environments (including outdoors) owing to a super-high brightness of 1,500 cd/m2, have a long operating life of 100,000 hours1, and can withstand severe outdoor environments due to their ability to operate in a wide range of temperatures. 1. Standard value at normal temperatures of 25°C MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 13 Home Appliances Net Sales Breakdown by Business Segment 20.3% Net Sales Room Air Conditioners In addition to KIRIGAMINE room air conditioners, Mitsubishi Electric offers an extensive lineup of products with applications extending from stores, offices and buildings to factories and industrial facilities while featuring environmentally compatible, energy-saving technologies. These qualities allow Mitsubishi Electric to meet air conditioning needs globally. Photovoltaic system Smart All-electric Homes Energy Generation In-house Power Generation Induction cooking heater Energy Savings Heat Pump Technology To ensure the comfort and convenience of all-electric-powered homes, Mitsubishi Electric is proposing “smart all-electric home” lifestyle ideas that improve energy creation via photovoltaic generation and effective energy usage through high-efficiency technologies such as heat pumps. ¥849.3billion (down 8% year on year) Built-in dishwasher Heat pump hot water supply system Comfortable Lifestyle Safe/Convenient Hot water floor heating system Mitsubishi Ecomist bath drying, heating, and ventilation system with mist function Operating Income ¥22.4billion (down ¥19.7 billion year on year) The home appliances business experienced an 8% decrease in sales compared with the previous fiscal year. This result is attributable to such various factors as a change in the eco-point incentive program during the third quarter of fiscal 2011 that caused a last-minute surge in demand for LCD televi- sions in Japan, declining overseas sales of photovoltaic systems mainly in Europe, and lower domestic sales of hot water supply and induction heating (IH) cooking systems. As a result, total sales in the Home Appliances segment were ¥849.3 billion, down 8% compared with the previous fiscal year. Operating income fell ¥19.7 billion year on year to ¥22.4 billion due primarily to a decrease in sales. 14 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Home Appliance Lineup Mitsubishi Electric strives to provide an array of home appliances that are highly attractive to consumers. This is made possible through home appliances equipped with “RakuRaku-UD” usability functions—which ensure high performance and superior usability—and “Power-saving Assist” functions that make ongoing energy conservation easy and enjoyable. LED Lighting Currently seeing rapid development, LEDs possess outstanding features that expand lighting possibilities, including longevity, low power consumption, absence of mercury and the enabling of more compact fixtures. LEDs also significantly contribute to power conservation efforts. Digital Signage Mitsubishi Electric offers a full lineup of visual display products, including high-brightness, high-resolution projectors, large-screen LCD public displays and multiple large-screen systems. Through these products, the Company is providing solutions for meeting rooms, schools, retail stores and other indoor venues, as well as for a wide range of businesses and applications, such as train stations and public facilities. Visual Equipment for Public and Business Applications Our high-quality image processing technologies deliver exceptionally sharp color reproduction. Mitsubishi Electric offers a range of products developed to suit a variety of application needs. These systems are being used in Japan and abroad for large-screen applications that display images, data and information. Research and Development / Intellectual Property Research and Development R&D Initiatives The Mitsubishi Electric Group’s R&D network comprises the Advanced Technology R&D Center, Information Technology R&D Center and Industrial Design Center in Japan and laboratories R&D Achievements in Fiscal 2012 The Industry’s Smallest1 EV/HEV Motor System with Built-in Silicon Carbide (SiC) Inverter Mitsubishi Electric has developed a motor system featuring a in the United States and Europe. These centers operate under the unique built-in inverter design that is 50% the size of existing umbrella of the Corporate Research and Development Group, motor systems with external inverters. In addition, the newly working in collaboration with the development departments in developed inverter reduces power loss by more than 50% individual business groups. compared with conventional silicon-based inverters due to the R&D is essential for supporting Mitsubishi Electric’s ongoing use of power semiconductor elements composed entirely of growth. Based on a global standpoint, we are promoting SiC materials. cost-effective development activities—ranging from initial devel- Mitsubishi Electric will promote further size reductions and opment to manufacturing—that combine business, development, greater efficiency to expand the battery installation space and intellectual property and international standardization strategies. passenger compartments of EVs/HEVs and improve fuel economy. The Group promotes development activities that continually 1. As of January 31, 2012; based on internal research create and foster the evolution of strong businesses and products. In addition, we are moving ahead with efforts to bolster our technological capabilities and thoroughly augment common, forward-looking core technologies in areas indispensable to the implementation of growth strategies. At the same time, we are promoting international standardization activities, a source of our competitive advantages in the global market. We are also pursu- ing active collaboration with industry, academia and government concerns mainly through joint research with leading Japanese and international institutions. Regarding R&D based on the VI Strategy—which makes strong Conventional system Motor system with built-in inverter Inverter Motor businesses stronger in such areas as automotive equipment, car The industry’s smallest EV/HEV motor system multimedia, air conditioning systems, factory automation equip- ment, power systems, and elevators and escalators—the Mitsubishi Electric Group is enhancing its technological capabili- ties in order to differentiate itself from other companies and maintain its competitive edge in international markets. In addi- tion, the Group is promoting activities that increase the number of new, profitable businesses. Under the AD Strategy, which aims at bolstering the solutions business centered on these strong businesses, the Group will integrate various products and tech- nologies related to smart community/smart grid, energy-efficient buildings and digital signage as it moves forward with develop- ment activities that create new solutions businesses. From the standpoint of safeguarding the environment, the Group is aggressively addressing technological challenges related to the power device, heat pump application and other energy and environmental businesses. Such initiatives are being under- taken with the aim of realizing the Group’s Environmental Vision 2021. Through these efforts, Mitsubishi Electric is working to achieve a sustainable society by combining leading technologies from its wide array of business fields and by developing energy-saving products and systems. Compact 100kW Full SiC Inverter Mitsubishi Electric has achieved a reduction in inverter power loss even under high electrical current/high-voltage conditions. This accomplishment is attributable to the complete use of SiC semiconductor devices, including a SiC-MOSFET1 with a built-in current sensor, along with short-circuit protection functions.2 The Company’s unique internal wiring structure further enhances inverter capabilities under high electrical current conditions. Mitsubishi Electric will contribute to energy savings in industrial power electronics equipment and in automotive equipment as it pursues further miniaturization utilizing this technology. 1. MOSFET: Metal Oxide Semiconductor Field Effect Transistor 2. Short-circuit protection function: A function that prevents damage to semiconductor devices by turning off the transistors when excessive electrical current is detected. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 15  These advanced key technologies, including the emergency safety system for the super high speed elevator, will be applied to the world’s fastest elevator, which is to be installed in the 632m tall Shanghai Tower, soon to be the highest building in China. Moreover, the newly developed elevator system will also be incorporated into other planned high-rise buildings. 1. Mitsubishi Electric survey carried out on Sept. 1, 2011 2. Compared with Mitsubishi Electric’s fastest conventional elevator 3. Compared with Mitsubishi Electric elevators without vibration control system 4. The car selection system selects from among several available cars to minimize passenger waiting time on each floor. Uses a unique wiring configuration Equipped with SiC-MOSFET with a built-in current sensor and short-circuit protection functions SiC inverter realizes energy savings Control panel Winch Energy savings Elevator Technologies for High-rise Buildings Mitsubishi Electric has developed the world’s fastest1 elevator, which can reach a speed of 1,080 meters per minute. Due to a new noise reduction system, the elevator cage retains the quiet- ness of conventional units.2 In addition, the newly developed cage vibration control system, “new active roller guides,” reduces Rope vibration by more than half the amount a conventional unit is Elevator car able to.3 These technologies deliver superior ride comfort even under high-speed conditions. The new group-control system contributes to energy savings in buildings where it is installed by dispatching the optimal car based on each cars’ position and passenger load. The system realizes the same level of traffic efficiency as conventional systems4. Energy-saving group-control system Comfort Active roller guides System that produces less internal noise Safety/Security Elevator car enlargement Emergency safety system for high-rise buildings Elevator technologies achieve ultra-high speed operations, comfort, safety/security and energy savings Intellectual Property Essential to the Mitsubishi Electric Group’s pursuit of global critical IP-related projects, and coordinates interaction with the business development is the rigorous promotion and protection patent office. At manufacturing facility, R&D center and affiliated of intellectual property (IP) rights. company levels, IP departments pursue specific objectives in line Recognizing IP as a vital resource that underpins corporate with the Group’s overall IP strategies. strengths, the Mitsubishi Electric Group continues to integrate its business, R&D and IP activities. With approximately 43,000 patents and about 12,000 new applications filed each year in Japan and overseas, the Group’s extensive portfolio forms the wellspring of its global competitive advantage. Structure of the Intellectual Property Division The Group’s IP-related operations are the direct responsibility of the President and overseen by the IP Division at headquarters handled by IP departments at relevant facilities, R&D centers and affiliated companies. Focusing on integration as the means to improve the structure and effectiveness of the IP network, the Group coordinates activities at each level. The IP Division at head- quarters formulates strategies for the entire Group, promotes 16 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Integrating Business, R&D and IP Activities Integration IP Network IP Strategy IP Division at Headquarters IP Departments at Business Groups, Facilities, Affiliates Development Strategy R&D Centers IP Departments under an appointed IP executive officer. Day-to-day issues are President Business Strategy IP Strategy In all its IP-related activities, the Group strives to enhance IP capa- international standardization of its technologies, as well as to obtain standard patents. The securing of overseas IP rights is a bilities in order to contribute to business based on the effective critical issue in light of progress made by the Group as well as by utilization of the IP creation cycle. Specifically, the IP Division and its competitors to further globalize business activities. Moreover, its departments identify critical IP-related themes in connection in response to further business globalization, Group IP represen- with mainstay businesses and important R&D projects. In strategi- tatives in the United States, Europe and China actively work to cally promoting IP activities, the Group further reinforces its strengthen IP capabilities and to accelerate global IP activities. global competitiveness. At the same time, the Group is accelerating the globalization of In the Group’s IP strategy of recent years, maintaining a close its IP activities through such actions as filing patents prior to correlation with international standards has been particularly undertaking business development in emerging countries, important. Therefore, the Group is working to ensure the including India and Brazil. Mitsubishi Electric Group’s Core Technologies and Patents SEGMENT FIELD CORE TECHNOLOGY PRODUCTS/TECHNOLOGIES/PATENTS Energy and Electric Systems Power Systems Power generation systems, substation systems, power distribution systems, particle beam treatment technology, insulation technology, large-current control systems, smart community, smart grids, energy management systems Transportation Systems Propulsion control systems, transportation planning and control systems, train information systems, train vision systems Elevators/Escalators Super high-speed elevators, machine-room-less elevators, high-speed elevators, high-efficiency group control systems, escalators, elevator adjustable speed control technology, elevator electric safety technology, high-efficiency group-control systems, low-vibration roller guide systems, low-noise elevator car systems Supervisory Control Systems Total security solution (DIGUARD: security network integration platform), multiple large-screen systems, network visual monitoring systems, ozone generators Industrial Automation Systems Industrial Automation Products and Systems Programmable controllers, human machine interfaces, AC servo systems, inverters, low-voltage circuit breakers, computerized numerical controllers, electrical discharge machines, laser processing machines, micro spark coating technology, industrial robots Measurement and Control Systems Energy diagnosis technology, power meters, EcoMonitor, smart meters Automotive Electric & Electronic Products and Car Multimedia Systems Electrical power steering, high-efficiency alternators, ISS1 starters, high-power starters, onboard ETC equipment, car navigation technology, car multimedia technology, EV/HEV motors/inverters Information and Communication Systems Wireless Systems Digital modulation and demodulation technology, wireless access control technology, error detection and correction technology, amplifier circuit technology, super-compact base stations for femto-cells, digital train radio systems Closed Circuit Television Systems Video storage technology, video encoding and decoding technology, sensor information processing technology, speech coding technology Space, Satellite Communication Systems Satellites, posture control technology, H-II transfer vehicle, optical sensor technology, synthetic aperture radar (SAR) Antennas and Radar Devices Radar system technology, antenna technology, microwave and millimeter wave technology, tracking and signal processing technology Information Communications Network Systems Information security technology, quantum cryptography systems, data management technology, information system construction technology, optical communication technology, optical access technology, optical core/metro network technology, IP network technology, NGN2 home gateways, optical network technology, optical transmission protocol Power Devices High-efficiency power devices/modules, (IGBT3, IPM4), transfer molds/power modules, SiC power devices High Frequency and Optical Devices GaN HEMT power amplifiers/devices, amplifiers for mobile phones, optical devices (LD/PD modules) LCD Displays Curved displays, 3D LCDs Air-Conditioning Systems Photovoltaic Power Generation Systems TVs Recorders and Players Compressors, fans, heat exchangers, refrigerating cycle technology, next-generation refrigerants, chlorofluorocarbon-free technology, hybrid nano-coating, IAQ5, energy-saving systems, Universal Design High-efficiency photovoltaic cells, PV inverters Laser light source technology, intelligent image/sound processing technology, super-resolution technology, acoustic technology Blu-ray disc recorders, digital terrestrial broadcasting receiver technology for automobiles, image retrieval technology, high-resolution image compression coding technology Electronic Devices Home Appliances 1 ISS: Idle Start and Step 2 NGN: Next Generation Network 3 IGBT: Insulated Gate Bipolar Transistor 4 IPM: Intelligent Power Module 5 IAQ: Indoor Air Quality MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 17 Corporate Social Responsibility The Mitsubishi Electric Group promotes its corporate social responsibility (CSR) activities based on the conviction that all business activities must take CSR into consideration. The Group’s Corporate Mission and Seven Guiding Principles form its basic CSR policies. We are vigilant in our enforcement of cor- porate ethics and compliance and constantly work to improve educational programs and strengthen our internal control system. At the same time, we pursue initiatives related to quality management, environmental preservation, philanthropy and improved communication with all stakeholders. Corporate Mission The Mitsubishi Electric Group will continually improve its technologies and services by applying creativity to all aspects of its business. By doing so, we enhance the quality of life in our society. To this end, all members of the Group will pursue the following Seven Guiding Principles. Seven Guiding Principles Trust, Quality, Technology, Citizenship, Ethics, Environment, Growth Mitsubishi Electric Group’s Corporate Social Responsibility The operating environment continues to undergo dramatic Philanthropic Activities To help create a society full of smiles, where caring and harmony are a way of life, the Mitsubishi Electric Group carries out a vari- changes, reflecting advances in globalization, revisions to legisla- ety of philanthropic activities both in Japan and overseas in the tion, and other factors. What must continue regardless of how spirit of its corporate mission. This mission states that we “will the times may change is a respect for corporate ethics and com- continually improve our technologies and services by applying pliance and a commitment to never compromise on environmen- creativity to all aspects of our business” and thereby enhance tal issues and product quality. This commitment of the Mitsubishi quality of life in society. Electric Group was first articulated in the Keiei no Yotei, or Keys to Management, which was drawn up at the time of Mitsubishi Electric’s founding in 1921. The spirit of this document, which Promoting Activities Deeply Rooted in Local Communities Emphasizing the three categories of social welfare, environmental states our contributions in areas such as the prosperity of society, preservation and the promotion of science and technology, our product quality and customer satisfaction, lives on today in our philanthropic activities in Japan are underpinned primarily by the Corporate Mission and Seven Guiding Principles. With these Mitsubishi Electric SOCIO-ROOTS Fund, a gift program in which tenets as our core principles, the Group promotes various initia- the Company matches any donation made by an employee to tives in order to fulfill its corporate social responsibilities. social welfare facilities; the “Satoyama” Woodland Preservation In particular, our commitment to compliance has underpinned Project, which involves employee volunteers participating in envi- corporate management while forming the core of our efforts to ronmental restoration activities in the areas surrounding our offic- strengthen the Group’s internal control system and implement es and production facilities; and science classes that encourage employee training programs. Despite this commitment, it has children to experience for themselves the appeal of science and been revealed that in Mitsubishi Electric’s electronic systems busi- thereby foster the development of the engineers of tomorrow. ness there was some overcharging of expenses as well as inap- Focusing on our philanthropic activities overseas, we imple- propriate invoicing with regard to contracts involving its ment a broad range of initiatives, including undertaking nature defense- and space-related businesses. This has led to the conservation activities with the help of employee volunteers, Company’s suspension by Japanese authorities from participating funding social welfare facilities and organizations, and offering in further bidding. Taking this matter very seriously, we will con- support for young musicians and sports teams. duct a detailed investigation to determine details and causes while further strengthening the Group’s compliance system in order to prevent similar incidents from recurring. Through these measures, we will make every possible effort to regain the trust of all stakeholders as quickly as possible. As a member of society, the Mitsubishi Electric Group is responsible for upholding corporate ethics and compliance as well as engaging in social contribution and environmental activi- ties. The Group also recognizes its responsibility to contribute to society through the technologies it has built up over the years. In fiscal 2012, we began the full-scale testing of smart grid and smart community equipment. By combining its own far-ranging technological capabilities, the Mitsubishi Electric Group will work to realize the full potential of these technologies and thereby continue to contribute to the creation of a low-carbon society. 18 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Satoyama Woodland Preservation Project participants (Japan) A “Science Show” that helps communicate the appeal of science to children (Japan) Environmental preservation activity participants on National Trust Day (United Kingdom)  Common to all of Mitsubishi Electric’s philanthropic initiatives is environmental statement in Japan, “Eco Changes – from in the a focus on activities deeply rooted in local communities. In this home to outer space,” in June 2009. This statement expresses way, we are promoting greater communication with all members the Group’s stance and environmental management initiatives. of society through actions that meet local needs. Since June 2010, the Company has been promoting the environ- Philanthropic Activities through Mitsubishi Electric’s Overseas Foundations The Mitsubishi Electric America Foundation and Mitsubishi mental statement outside Japan as “Eco Changes – for a greener tomorrow.” Mitsubishi Electric began promoting this environ- mental statement in China in April 2012. Through the formulation of this new environmental statement, the Group is emphasizing Electric Thai Foundation, both founded in 1991, play leading internally and externally its conviction that any product or business roles in our social welfare activities and the promotion of science activity that lacks the perspective of environmental performance and technology. The Mitsubishi Electric America Foundation helps or improvement should not exist and is also demonstrating its young people with disabilities to participate more fully in society. commitment to carry out activities around the world that are The Mitsubishi Electric Thai Foundation provides scholarships to grounded in local reality. university students, supports a school lunch program for grade Aiming to be a leading green company that continues to school students, and promotes volunteer work in schools. address the needs of a global society, the Mitsubishi Electric Group Recipients of university scholarships and Foundation representatives (Thailand) In the school lunch program, students use funds from the Foundation to grow crops for school lunches. (Thailand) An employee volunteer working with a student on Disability Mentoring Day (United States) President (then Senator) Barack Obama with a 2008 Congressional intern (United States) Environmental Activities The Mitsubishi Electric Group’s Environmental Statement, “Eco Changes” Following the establishment of the Mitsubishi Electric Group’s will strive to strengthen its corporate constitution (disciplining itself to use less energy and fewer resources while manufacturing in a responsible, self-regulated manner and increasing production efficiency to its highest level) and contribute to society (striving to ensure that an environmental benefit or improvement is delivered when people use our products and services). Strengthening Our Corporate Constitution • Reducing CO2 from Production The 6th Environmental Plan (fiscal 2010 – fiscal 2012) established total CO2 emission targets for fiscal 2012 of 510,000 tons by Mitsubishi Electric, 190,000 tons by affiliates in Japan and 260,000 tons by overseas affiliates. In order to achieve these targets, the Group promoted CO2 reduction measures at its production facilities and offices. The total amount of CO2 emitted by the Mitsubishi Electric Group in fiscal 2012 was 933,000 tons, surpassing the Group’s target of 960,000 tons. This success was primarily due to vigor- ous CO2 reduction efforts undertaken mainly at the Company’s operating bases in Japan. Particularly in 2011, there was social demand to take measures in response to summer and winter Environmental Vision 2021, Mitsubishi Electric formulated its power shortages following the Great East Japan Earthquake, Reduce CO2 emissions from product usage by 30% (Base year: fiscal 2001) Reduce total emissions from production by 30% (Base year: fiscal 1991) Aim to reduce CO2 emissions from power generation Environmental Vision 2021 Global Leading Green Company Promote product “3Rs”; reduce, reuse and recycle Reduce resource inputs Aim for zero emissions from manufacturing Contribute to Society (through our products, services and business activities) Strengthen our Constitution (through boosting efficiency and reducing waste) Creating a Low-Carbon Society Creating a Recycling-Based Society Respecting Biodiversity Ensuring harmony with nature and fostering environmental awareness MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 19 which struck in March of that year. Taking full advantage of this Company, while adopting a joint-use restriction scheme to opportunity to improve its operations, Mitsubishi Electric redou- coordinate and monitor peak energy demand at numerous sites. bled its efforts to undertake Company-wide energy generation- Aiming to reduce year-on-year energy use by 25% (surpassing and conservation-related investments such as introducing the Japanese government target) at all 18 operating bases, the photovoltaic generation and upgrading to LED lighting. In addi- Company successfully cut power use by as much as 27.6% at the tion, with the aim of effectively curbing and regulating power 16 operating bases in the Tokyo Electric Power Company area. use during peak demand periods in order to respond directly to This system was introduced in the winter at our operating bases power shortages, Mitsubishi Electric and its affiliates in Japan located in areas covered by the Kansai Electric Power Company introduced a demand management system while engaging in and Kyushu Electric Power Company. In fiscal 2013, the Group is intensive regional power management at the Company’s head- scheduled to expand this system to all of its major electricity users quarters. Owing to these initiatives, we have reduced the total (68 operating bases). amount of CO2 emitted Group-wide in spite of a significant expansion of overseas production in recent years. In the summer of 2011, Mitsubishi Electric introduced its Contributing to Society • Recovering Rare Earth Magnets from Used Room demand management system at 16 of its operating bases located Air Conditioners in the area covered by Tokyo Electric Power Company and 2 The procurement of rare earth metals, which are indispensable to operating bases in the area covered by Tohoku Electric Power improving the energy-saving performance of room air condition- Groupwide Plan to Reduce CO2 from Production utilize rare earth metals, Mitsubishi Electric developed automatic ers, has become increasingly difficult. In order to more effectively Total emissions (10,000 tons) 120 Base year Environmental Vision 2021 Goal (FY2021) 24 23 67 95 25 19 51 86 22 17 47 97 27 19 51 93 18% 27 16 50 80 30% 17 16 47 114 100 80 60 40 20 0 dismantling equipment for extracting rare earth magnets (neo- dymium magnets) from the compressor rotors of used room air conditioners (with assistance from the Ministry of Economy, Trade and Industry’s program to support businesses that introduce industrial facilities that use rare earth metals). In April 2012, Mitsubishi Electric commenced rare earth magnet collection oper- ations through its subsidiary, Green Cycle Systems Corporation (GCS), which operates Japan’s first large-scale, high-purity plastic 1991 2009 2010 2011 2012 2021 (FY) recycling system business. Recovered rare earth magnets are Mitsubishi Electric (Base year: FY1991) Affiliates in Japan (Base year: FY2001) Overseas Affiliates (Base year: FY2006) supplied to magnet manufacturers that recycle magnets in Japan. Mitsubishi Electric Group’s Demand Management System Demand monitoring system Demand-related data is collected from all relevant locations every 10 seconds and is viewable via web browser Energy conservation database server software EcoManager II Demand management software Demand load curve l e u a v d n a m e D Projected value Demand target (maximum value) Actual value Fixed warning value Prior warning limitation value Time Headquarters Administrative computer Transmit warning email Collect data Accumulate energy conservation measures Power input Internal network Electricity meter Pulse detector Demand monitor E-Energy Factories/offices (Contracted power over 500kW) More information about the Mitsubishi Electric Group’s environmental and CSR initiatives is available on our website at the following URL. http://www.MitsubishiElectric.com/company/csr/ 20 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Corporate Governance Basic Corporate Governance Policy To realize sustained growth and increase corporate value, Executive officers are responsible for ensuring compliance and management efficiency in their assigned areas of operations. Mitsubishi Electric works to maintain the flexibility of its operations Internal auditors monitor executive officers’ performance of while promoting management transparency. These endeavors are duties. Internal auditors report on the results of such monitoring supported by an efficient corporate governance structure that to the executive officer in charge of auditing. And the executive clearly defines and reinforces the supervisory functions of manage- officer in charge of auditing and accounting auditors report on ment while ensuring that the Company is responsive to the expec- the results of such monitoring to the Audit Committee. tations of customers, shareholders, and all of our stakeholders. Mitsubishi Electric maintains a multi-dimensional risk manage- Corporate Management and Governance Structure Corporate Management Structure In June 2003, Mitsubishi Electric became a company with a ment system in which all executive officers participate. Under this system, executive officers are responsible for risk management in their assigned areas of operation. In addition, executive officers exchange information and participate in important management initiatives and decisions through regularly scheduled executive committee system. Key to this structure is the separation of officers’ meetings. supervisory and executive functions; the Board of Directors plays a supervisory decision-making role and executive officers handle the day-to-day running of the Company. The Corporate Auditing Division and Audit Committee Acting independently, Mitsubishi Electric’s Corporate Auditing The present Board is comprised of 12 directors (five of whom Division conducts internal audits of the Company from a fair and are outside directors), who objectively supervise and advise the impartial standpoint. In addition, the division’s activities are Company’s management. The Board of Directors has three inter- supported by auditors with profound knowledge of their particu- nal bodies: the Audit, Nomination and Compensation commit- lar fields, assigned from certain business units. tees. Each body has five members, three of whom are outside The Audit Committee is made up of five directors, three of directors. The Audit Committee is supported by dedicated whom are outside directors. In accordance with the policies and independent staff. Internal Control System Further ensuring effective corporate governance, the roles of assignments agreed to by the committee, the performances of directors and executive officers as well as affiliated companies are audited. The Corporate Auditing Division, through the executive officer Chairman and President & CEO are clearly defined and exclusive. in charge of auditing, submits reports to the Audit Committee, The Chairman heads the board of directors and the President & which holds periodic meetings to exchange information and dis- CEO heads the Company’s executive officers. Neither the Chair- cuss auditing policies. In addition, the Audit Committee discusses man nor the President & CEO is a member of the Nomination or policies and methods of auditing with accounting auditors, who Compensation Committees. This allows for the clear division of furnish it with reports on the status and results of the audits of executive and supervisory functions, thereby enabling Mitsubishi the Company that they themselves conduct. Electric to ensure effective corporate governance. Decision Making and Execution Report Executive Officers President & CEO Executive Vice Presidents Senior Vice Presidents Executive Officers Business/Administration Divisions General Shareholders’ Meeting Report Appointment Appointment/Dismissal/Supervision Reporting to Supervision Board of Directors Chairman Nomination Committee Directors Outside Directors (majority) Audit Committee Directors Outside Directors (majority) Compensation Committee Directors Outside Directors (majority) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 21 Directors and Executive Officers Directors (As of June 28, 2012) Setsuhiro Shimomura ........................... Chairman Kenichiro Yamanishi ............................ Representative Executive Officer, President & CEO Masanori Saito ...................................... Chairman of the Audit Committee Hiroki Yoshimatsu ................................ Member of the Compensation Committee, Executive Officer Noritomo Hashimoto ........................... Member of the Nomination Committee, Senior Vice President Ryosuke Fujimoto ................................. Member of the Audit Committee Nobuyuki Okuma ................................. Chairman of the Nomination Committee, Chairman of the Compensation Committee, Executive Officer Hiroyoshi Murayama ............................ Member of the Nomination Committee, Member of the Audit Committee, Attorney-at-Law Mikio Sasaki .......................................... Member of the Compensation Committee, Senior Corporate Advisor, Mitsubishi Corporation Shigemitsu Miki .................................... Member of the Nomination Committee, Member of the Audit Committee, Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Fujiatsu Makino .................................... Member of the Audit Committee, Member of the Compensation Committee, Certified Public Accountant, Registered Tax Accountant Mitoji Yabunaka ................................... Member of the Nomination Committee, Member of the Compensation Committee, Advisor, Nomura Research Institute, Ltd. Executive Officers (As of April 1, 2012) Representative Executive Officer President & CEO: Kenichiro Yamanishi Representative Executive Officers Executive Vice Presidents: Mitsuo Muneyuki ................................. In charge of Export Control and Building Systems Masaki Sakuyama ................................. In charge of Semiconductor & Device Senior Vice Presidents: Takashi Sasakawa ................................. In charge of Electronic Systems Susumu Shikata .................................... In charge of Public Utility Systems Noritomo Hashimoto ........................... In charge of Corporate Strategic Planning and Operations of Associated Companies Executive Officers: Hiroki Yoshimatsu ................................ In charge of Accounting and Finance Shoichi Sakata ...................................... In charge of Purchasing Kazuhiko Tsutsumi ............................... In charge of Research & Development Yoshiaki Nakatani ................................ In charge of Energy & Industrial Systems Tsuyoshi Nakamura .............................. In charge of Auditing, Legal Affairs, Export Control and Intellectual Property Masaharu Moriyasu ............................. In charge of Total Productivity Management & Environmental Programs Hiroyuki Umemura ............................... In charge of Living Environment & Digital Media Equipment Yasuyuki Nakanishi .............................. In charge of Communication Systems Takayuki Sueki ..................................... In charge of Global Strategic Planning & Marketing Masayuki Ichige .................................... In charge of Government & External Relations, General Affairs and Public Relations Isao Iguchi ............................................. In charge of Advertising and Domestic Marketing Hideyuki Okubo ................................... In charge of Factory Automation Systems Yutaka Ohashi ...................................... In charge of Automotive Equipment Toru Yoshinaga ..................................... In charge of Information Systems & Network Service Nobuyuki Okuma ................................. In charge of Human Resources 22 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Organization (As of June 28, 2012) Board of Directors Chairman Nomination Committee Audit Committee Compensation Committee Audit Committee Office Executive Officers’ Meeting President & CEO Executive Vice Presidents Senior Vice Presidents Executive Officers (cid:31) Corporate Auditing Div. (cid:31) Corporate Marketing Group (cid:31) Corporate Strategic Planning Div. (cid:31) Associated Companies Div. (cid:31) Government & External Relations Div. (cid:31) Corporate Administration Div. (cid:31) Global Strategic Planning & Marketing Group (cid:31) Corporate Total Productivity Management & Environmental Programs Group (cid:31) Corporate Human Resources Div. (cid:31) Corporate Research and Development Group (cid:31) Corporate Accounting Div. (cid:31) Corporate Finance Div. (cid:31) Information Systems & Network Service Group (cid:31) Public Utility Systems Group (cid:31) Corporate Purchasing Div. (cid:31) Public Relations Div. (cid:31) Energy & Industrial Systems Group (cid:31) Corporate Advertising Div. (cid:31) Legal Div. (cid:31) Corporate Export Control Div. (cid:31) Building Systems Group (cid:31) Corporate Licensing Div. (cid:31) Electronic Systems Group (cid:31) Corporate Intellectual Property Div. (cid:31) Communication Systems Group (cid:31) Living Environment & Digital Media Equipment Group (cid:31) Factory Automation Systems Group (cid:31) Automotive Equipment Group (cid:31) Semiconductor & Device Group Business Planning Office Market Planning & Administration Dept. Marketing Research & Business Development Dept. Branch Offices (Hokkaido, Tohoku, Kanetsu, Kanagawa, Hokuriku, Chubu, Kansai, Chugoku, Shikoku, Kyushu) Global Planning & Administration Div. Global Strategy & Marketing Div. Regional Corporate Offices Americas (U.S.A.) Europe (U.K.) Asia (Singapore) China Taiwan Corporate Productivity Engineering Dept. Corporate Quality Assurance Planning Dept. Corporate Environmental Sustainability Group Corporate Logistics Dept. Information Technology Center Design Systems Engineering Center Manufacturing Engineering Center Planning & Administration Dept. Advanced Technology R&D Center Information Technology R&D Center Industrial Design Center Planning & Administration Dept. Engineering Planning Dept. Marketing Dept. Planning & Administration Dept. Engineering Planning Dept. ITS Business Development Group Public-Use Systems Marketing Div. Transportation Systems Div. Overseas Marketing Div. Plant Engineering & Construction Div. Branch Offices Kobe Works, Itami Works, Nagasaki Works Planning & Administration Dept. Engineering Planning Dept. Nuclear Power Plant Technical Supervisory Office Power Systems Marketing Div. Overseas Marketing Div. Power Plant Engineering & Construction Center Branch Offices Energy Systems Center, Transmission & Distribution Systems Center, Power Distribution Systems Center Planning & Administration Dept. Engineering Planning Dept. Total Security Systems Dept. Domestic Marketing Div. Overseas Marketing Div. Building Systems Field Operation Div. Branch Offices Inazawa Works Electronic Systems Compliance Office Planning & Administration Dept. Defense Systems Div. Space Systems Div. IT Space Solutions Div. Branch Offices Communication Systems Center, Kamakura Works Planning & Administration Dept. Communication Systems Engineering Center Telecommunication Systems Sales & Marketing Div. NTT Projects Div. Branch Offices Communication Networks Center Planning & Administration Dept. Engineering Dept. External Relations Dept. Customer Satisfaction Promotion Dept. Marketing & Operations Strategic Planning Dept. Eco-Facility Systems Marketing Dept. Air-Conditioning & Refrigeration Systems Div. Lighting, Ventilation & Housing Systems Div. PV Systems Div. Home Appliances Div. Digital Media Equipment Div. Living Environment Systems Laboratory Branch Offices Nakatsugawa Works, Air-Conditioning & Refrigeration Systems Works, Shizuoka Works, Kyoto Works, Gunma Works, Nagasaki Works Planning & Administration Dept. Industrial Products Marketing Div. Industrial Automation Marketing Div. Overseas Marketing Div. Branch Offices Nagoya Works, Fukuyama Works Automotive Equipment Compliance Office Planning & Administration Dept. Automotive Equipment Marketing Div. Automotive Equipment Overseas Marketing Div. Automotive Electronics Development Center Branch Offices Himeji Works, Sanda Works Planning & Administration Div. Semiconductor & Device Marketing Div. A Semiconductor & Device Marketing Div. B LCD Div. Branch Offices Power Device Works, High Frequency & Optical Device Works MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 23 Major Subsidiaries and Affiliates (As of March 31, 2012) Manufacturing Sales/Installation/Services Comprehensive Sales Companies Energy and Electric Systems Toyo Electric Corporation Tada Electric Co., Ltd. Mitsubishi Electric Building Techno-Service Co., Ltd. Mitsubishi Electric Plant Engineering Corporation Mitsubishi Electric Power Products, Inc. Mitsubishi Electric Control Software Corporation Mitsubishi Elevator Asia Co., Ltd. Ryoden Elevator Construction, Ltd. Mitsubishi Electric Shanghai Electric Elevator Co., Ltd. RYO-SA BUILWARE Co.,Ltd. Toshiba Mitsubishi-Electric Industrial Systems Corporation Mitsubishi Elevator Hong Kong Co., Ltd. Mitsubishi Elevator Korea Co., Ltd. Mitsubishi Hitachi Home Elevator Corporation ETA-Melco Elevator Co. L.L.C. Shanghai Mitsubishi Elevator Co., Ltd. Hitachi Mitsubishi Hydro Corporation Industrial Automation Systems DB Seiko Co., Ltd. Meiryo Technica Co., Ltd. Ryowa Corporation Ryoden Koki Engineering Co., Ltd. Mitsubishi Electric Automotive America, Inc. Meldas System Engineering Corporation Mitsubishi Electric Thai Auto-Parts Co., Ltd. Mitsubishi Electric Mechatronics Software Corporation Mitsubishi Electric Dalian Industrial Products Co., Ltd. Mitsubishi Electric Automation (Hong Kong) Ltd. Mitsubishi Electric Automation, Inc. Mitsubishi Electric Automation Korea Co., Ltd. Mitsubishi Electric Automotive Czech s.r.o. Shizuki Electric Co., Inc. Nippon Injector Corporation Shihlin Electric & Engineering Corporation Setsuyo Astec Corporation Mitsubishi Electric TOKKI Systems Corporation Mitsubishi Electric Information Systems Corporation Chiyoda Mitsubishi Electric Co., Ltd. and other regional comprehensive sales companies (10 companies) Mitsubishi Electric Europe B.V. Mitsubishi Electric & Electronics USA, Inc. Mitsubishi Electric Taiwan Co., Ltd. Mitsubishi Electric (H.K.) Ltd. Mitsubishi Electric Asia Pte. Ltd. Mitsubishi Electric Australia Pty. Ltd. Mitsubishi Electric & Electronics (Shanghai) Co., Ltd. Ryoden Trading Co., Ltd. Kanaden Corporation Mansei Corporation Information and Communication Systems Electronic Devices Mitsubishi Precision Co., Ltd. SPC Electronics Corporation Seiryo Electric Co., Ltd. Miyoshi Electronics Corporation Oi Electric Co., Ltd. Melco Display Technology Inc. IT Semicon Co., Ltd. Mitsubishi Electric Metecs Co., Ltd. Vincotech Holdings S.à r.l. Renesas Electronics Corporation Powerex, Inc. Home Appliances Mitsubishi Electric Home Appliance Co., Ltd. Mitsubishi Electric Lighting Corporation Mitsubishi Electric Consumer Products (Thailand) Co., Ltd. Shanghai Mitsubishi Electric & Shangling Air-Conditioner and Electric Appliance Co., Ltd. Mitsubishi Electric (Guangzhou) Compressor Co., Ltd. Siam Compressor Industry Co., Ltd. Mitsubishi Electric Visual Solutions America, Inc. Osram Melco Ltd. Kang Yong Electric Public Co., Ltd. Others Diamond Telecommunication Co., Ltd. Mitsubishi Electric Information Network Corporation Mitsubishi Electric Information Technology Corporation Mitsubishi Space Software Co., Ltd. Mitsubishi Electric Business Systems Co., Ltd. Mitsubishi Electric Micro-Computer Application Software Co., Ltd. Itec Hankyu Hanshin Co., Ltd. Melco Semiconductor Engineering Corporation Mitsubishi Electric Living Environment Systems Corporation Mitsubishi Electric Life Network Co., Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Equipment Sales Co., Ltd. Mitsubishi Electric Osram Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Systems Co., Ltd. Melco Facilities Corporation Mitsubishi Electric Kang Yong Watana Co., Ltd. Mitsubishi Electric Ryoden Air-Conditioning & Visual Information Systems (Hong Kong) Ltd. Mitsubishi Electric Trading Corporation Mitsubishi Electric Engineering Co., Ltd. Mitsubishi Electric Logistics Corporation Mitsubishi Electric System & Service Co., Ltd. Mitsubishi Electric Life Service Corporation The Kodensha Co., Ltd. iPLANET Inc. Mitsubishi Electric Credit Corporation KITA KOUDENSHA Corporation Notes: 1. Comprehensive sales companies include several companies that are responsible for selling products from a number of businesses, and therefore are put into their own separate category rather than separating them by business segment. 2. Companies shaded in gray are consolidated subsidiaries, while others are equity-method affiliate companies. 24 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Financial Section Contents 26 Five-Year Summary 27 Financial Review 36 Consolidated Balance Sheets 38 Consolidated Statements of Income 39 Consolidated Statements of Equity 40 Consolidated Statements of Cash Flows 41 Notes to Consolidated Financial Statements 72 Independent Auditors’ Report MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 25 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 25 Five-Year Summary Mitsubishi Electric Corporation and Subsidiaries Years ended March 31 2012 2011 2010 2009 Yen (millions) 2008 U.S. dollars (thousands) 2012 Summary of Operations Net sales Cost of sales Selling, general, administrative and R&D expenses Loss on impairment of long-lived assets Operating costs Operating income Income before income taxes Net income attributable ¥3,639,468 2,628,964 ¥3,645,331 2,622,959 ¥3,353,298 2,505,095 ¥3,665,119 2,710,976 ¥4,049,818 2,957,185 $44,383,756 32,060,537 781,278 784,606 736,959 783,673 825,428 9,527,780 3,782 4,005 16,942 30,742 3,189 46,122 3,414,024 3,411,570 3,258,996 3,525,391 3,785,802 41,634,439 225,444 224,080 233,761 210,237 94,302 64,259 139,728 43,933 264,016 244,137 2,749,317 2,732,683 to Mitsubishi Electric Corp. ¥ 112,063 ¥ 124,525 ¥ 28,278 ¥ 12,167 ¥ 157,977 $ 1,366,622 Financial Ratios Return on sales (%) Return on equity (%) Return on assets (%) Equity ratio (%) Per-Share Amounts Net income attributable to Mitsubishi Electric Corp. (yen/U.S. dollars) Basic Diluted Cash dividends declared (yen/U.S. dollars) Statistical Information Current assets Current liabilities Working capital Mitsubishi Electric Corp. shareholders’ equity Cash dividends paid Total assets Capital expenditures R&D expenditures Depreciation Employees 3.08 10.27 3.33 33.39 3.42 12.36 3.80 31.52 0.84 3.12 0.86 30.00 0.33 1.29 0.36 25.48 3.90 15.11 4.55 29.60 — — — — ¥52.20 — ¥58.00 — ¥13.18 13.18 ¥5.67 5.67 ¥73.60 73.59 $0.637 — ¥ 12 ¥ 12 ¥ 4 ¥ 6 ¥ 13 $0.146 ¥2,197,384 1,433,501 ¥2,073,064 1,470,387 ¥1,927,473 1,266,909 ¥1,939,916 1,413,015 ¥2,060,628 1,505,901 $26,797,366 17,481,720 763,883 602,677 660,564 526,901 554,727 9,315,646 1,132,465 27,910 3,391,651 159,346 169,686 1,050,340 19,315 3,332,679 107,638 151,779 ¥ 127,244 ¥ 105,280 964,584 — 3,215,094 109,069 133,781 ¥ 119,762 849,476 27,904 3,334,123 141,434 144,444 ¥ 148,018 1,031,438 25,758 3,485,080 144,623 148,790 ¥ 136,283 13,810,549 340,366 41,361,598 1,943,244 2,069,341 $ 1,551,756 (at the end of the year) 117,314 114,443 109,565 106,931 105,651 — Notes: 1. The Company prepares consolidated financial statements with procedures, accounting terms, forms, and preparation that are in conformity with accounting principles generally accepted in the United States of America based on the rules and regulations applicable in Japan. 2. Operating income is presented as net sales less cost of sales, selling, general, administrative and R&D expenses, and loss on impairment of long-lived assets. Total operating income for each segment conforms to above mentioned operating income. Business restructuring expenses are shown as non-operating expenses. 3. R&D expenditures include elements spent on quality improvements, which constitute manufacturing costs. 4. U.S. dollar amounts are translated from yen at the rate of ¥82=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2012. 5. The Company has 161 consolidated subsidiaries and 40 equity-method companies as of March 31, 2012. 6. For the year ended March 31, 2010, the Company applies FASB ASC Topic 810 “Consolidation”. Due to the adoption of ASC Topic 810, “Net Income” is renamed “Net income attributable to Mitsubishi Electric Corp.”. Also, income before income taxes includes equity in earnings (losses) of affiliated companies, while excluding net income attributable to noncontrolling interests. Consequently, the Company has reclassified the figures for all prior periods. 7. For the years ended March 31, 2011 and 2012, diluted net income per share attributable to Mitsubishi Electric Corp. is not included in the above figure as no dilutive securities existed. 26 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Financial Review OVERVIEW Fiscal 2012, the year ended March 31, 2012, saw the business environment in the latter half worsen amid setbacks in the European and East Asian economies, tight supply of parts due to flooding in Thailand and a slowdown in Japanese production and exports. Also affecting the business environment were stagnating recovery trends in Japan and overseas as well as the ongo- ing strength of the yen against the U.S. dollar and euro. Under these circumstances, the Mitsubishi Electric Group placed greater emphasis than ever before on promoting growth strategies rooted in its own advantages as well as on Group efforts undertaken to date to boost its competitiveness and on strengthening its business structure. As a result, in fiscal 2012, the Mitsubishi Electric Group recorded net sales of ¥3,639.5 billion, operating income of ¥225.4 billion, income before income taxes of ¥224.1 billion, and ¥112.1 billion in net income attributable to Mitsubishi Electric Corp. Net Sales The Mitsubishi Electric Group recorded decreases in sales in the following business segments: Energy and Electric Systems, and Home Appliances. In the fiscal year under review, consolidated net sales fell by ¥5.9 billion year on year to ¥3,639.5 billion. Cost of Sales, Expenses and Operating Income The cost of sales increased by ¥6.0 billion compared with the previous fiscal year to ¥2,629.0 billion, representing 72.2% of total net sales, a decrease of 0.2 points. Selling, general and administrative (SG&A) expenses together with research and development (R&D) expenses totaled ¥781.3 billion, down ¥3.3 billion year on year. As a result, the ratio of SG&A and R&D expenses to net sales remained unchanged at 21.5%. Loss on impairment of long-lived assets decreased by ¥0.2 billion year on year to ¥3.8 billion. Accounting for the aforementioned factors, operating income amounted to ¥225.4 billion, a decline of ¥8.3 billion compared with the previous fiscal year. This decrease was primarily attributable to lower income in the Electronic Devices and Home Appliances business segments. Non-Operating Income and Expenses Financial income, the sum of interest and dividend income less interest expenses, amounted to ¥1.5 billion, an improvement of ¥1.1 billion year on year. Equity in losses of affiliated companies totaled ¥3.4 billion, an improvement of ¥16.9 billion compared with the previous fiscal year. Other income fell by ¥5.8 billion to ¥22.2 billion year on year due primar- ily to reduced gain from sales of investment securities year on year. Other expenses declined by ¥10.0 million year on year to ¥21.7 billion because of such factors as lower foreign currency exchange losses. Also the Mitsubishi Electric Group recorded a special cost required to restore damage caused by the Great East Japan Earthquake in the previous fiscal year, which has resulted in comparatively less expenses. Income before Income Taxes Income before income taxes increased by ¥13.8 billion compared with the previous Net sales / Operating income 4.05 3.67 3.65 3.35 264 3.64 234 225 140 94 08 09 10 11 12 08 09 10 11 12 Net sales (Yen in trillions) Operating income (Yen in billions) Net income attributable to Mitsubishi Electric Corp. / Basic net income per share attributable to Mitsubishi Electric Corp. 158 73.60 125 112 58.00 52.20 28 12 5.67 13.18 08 09 10 11 12 08 09 10 11 12 Net income attributable to Mitsubishi Electric Corp. (Yen in billions) Basic net income per share attributable to Mitsubishi Electric Corp. (Yen) fiscal year to ¥224.1 billion, for a ratio to net sales of 6.2%. Despite the aforementioned decrease in operating income of ¥8.3 billion, this result was primarily due to a ¥22.2 billion improvement in non-operating income. Net Income Attributable to Mitsubishi Electric Corp. Net income attributable to Mitsubishi Electric Corp. fell by ¥12.5 billion year on year to ¥112.1 billion (a ratio to net sales of 3.1%). This was largely due to the recording of ¥32.0 billion tax costs relating to an adjustment on deferred tax assets and liabilities caused by lower corporate tax rates coming into force from April 2012 onward, by virtue of promulgation of the “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and “Act of Special Measures for Securing Financial Resources Necessary to Implement Measures for Restructure follow- ing the Great East Japan Earthquake” (Act No. 117 of 2011). MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 27 Business Risks The Mitsubishi Electric Group engages in the development, manufacture and sale of products in the Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices, Home Appliances and Other busi- ness fields in Japan as well as North America, Europe, Asia and other overseas regions. As a result, the Group’s financial standing and business performance may be affected by a variety of factors. Factors that may affect the financial standing and business performance of the Mitsubishi Electric Group include but are not limited to the following. As such, additional factors may arise at any given time. (1) Important trends The Mitsubishi Electric Group’s operations may be affected by trends in the global economy, social conditions, laws, tax codes and regulations. (2) Foreign currency exchange rates Fluctuations in foreign currency markets may affect Mitsubishi Electric’s sales of exported products and purchases of import- ed materials that are denominated in U.S. dollars or euros, as well as its Asian production bases’ sales of exported products and purchases of imported materials that are denominated in foreign currencies. (3) Stock markets A fall in stock market prices may cause Mitsubishi Electric to record devaluation losses on marketable securities or cause an increase in retirement benefit obligations in accordance with a decline in the fair value of pension assets. (4) Supply/demand balance for products and procurement conditions for materials and components A decline in prices and shipments due to changes in the supply/demand balance as well as an increase in costs due to a worsening of material and component procurement conditions may adversely affect the Mitsubishi Electric Group’s performance. (5) Fund raising An increase in interest rates, the yen interest rate in particular, would increase Mitsubishi Electric’s interest expenses. (6) Significant intellectual property matters Important patent filings, licensing, copyrights and patent-related disputes may adversely affect related businesses. (7) Environmental legislation or relevant issues Mitsubishi Electric may incur losses or expenses owing to changes in environmental legislation or the occurrence of envi- ronmental issues. Such changes in legislation or the occurrence of environmental issues may also affect the Group’s overall operations, including manufacturing activities. (8) Flaws or defects in products or services Mitsubishi Electric may incur losses or expenses relating to flaws or defects in products or services. A decrease in the general assessment of the quality of Group products and services may also impact overall operations. (9) Lawsuits and other legal proceedings Lawsuits and/or other legal proceedings against the Mitsubishi Electric Group may affect its overall operations. (10) Disruptive changes Disruptive changes in the technology, development and manufacturing of products using new technology and timing of market introduction may adversely affect the Mitsubishi Electric Group’s performance. (11) Business restructuring The Mitsubishi Electric Group may record losses due to restructuring measures. (12) Natural disasters The Mitsubishi Electric Group’s operations, particularly manufacturing activities, may be affected by the occurrence of earth- quakes, typhoons, tsunami, fires and other large-scale disasters. (13) Other significant factors The Mitsubishi Electric Group‘s operations may be affected by the outbreak of social or political upheaval due to terrorism, war, pandemic by new strains of influenza and other diseases, or other factors. 28 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 RESULTS BY BUSINESS SEGMENT Net Sales by Business Segment Years ended March 31 2012 2011 2010 2009 Yen (millions) 2008 U.S. dollars (thousands) 2012 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations Consolidated total ¥1,027,115 978,380 ¥1,027,749 927,002 ¥1,039,669 733,132 ¥1,043,633 851,688 ¥1,057,935 1,017,503 $12,525,793 11,931,463 516,354 200,799 849,274 611,619 4,183,541 (544,073) ¥3,639,468 487,915 175,910 924,478 609,416 4,152,470 (507,139) ¥3,645,331 526,161 138,985 824,679 552,981 3,815,607 (462,309) ¥3,353,298 582,146 166,969 915,710 596,091 4,156,237 (491,118) ¥3,665,119 644,388 192,087 1,000,258 660,822 4,572,993 (523,175) ¥4,049,818 6,297,000 2,448,768 10,357,000 7,458,769 51,018,793 (6,635,037) $44,383,756 Operating Income (Loss) by Business Segment Years ended March 31 2012 2011 2010 2009 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations Consolidated total ¥ 84,920 101,192 ¥ 83,055 100,089 ¥ 74,727 26,138 ¥ 74,539 49,934 21,312 3,585 22,358 20,348 253,715 (28,271) ¥225,444 13,743 5,901 42,008 14,475 259,271 (25,510) ¥233,761 18,672 (7,141) 4,809 3,204 120,409 (26,107) ¥ 94,302 24,869 (29,807) 34,706 12,341 166,582 (26,854) ¥139,728 Yen (millions) 2008 ¥ 68,543 129,257 2,352 8,395 65,754 16,916 291,217 (27,201) ¥264,016 U.S. dollars (thousands) 2012 $1,035,610 1,234,049 259,902 43,720 272,659 248,145 3,094,085 (344,768) $2,749,317 Energy and Electric Systems The social infrastructure systems business saw an increase in orders compared with the previous fiscal year due to growth in Japan as well as in orders received for large projects overseas in the energy systems business. However, sales decreased compared with the previous fiscal year due to declines in the Japanese public utility systems and rolling-stock equipment businesses. The building systems business experienced increases in both orders and sales compared with the previous fiscal year, owing to growth in demand for elevators and escalators in the Chinese and ASEAN markets as well as for large projects recorded for China and Korea. Net sales and Operating income of Energy and Electric Systems 1,058 1,044 1,040 1,028 1,027 83 85 75 75 69 As a result, total sales in the Energy and Electric Systems segment amounted to ¥1,027.1 billion, virtually unchanged from the previous fiscal year. Operating income increased by ¥1.9 billion year on year to ¥84.9 billion mainly due to a shift 08 09 10 11 12 08 09 10 11 12 Net sales (Yen in billions) Operating income (Yen in billions) in sales components. Industrial Automation Systems The factory automation systems business saw an increase in sales compared with the previous fiscal year owing to stable demand for smartphone- and tablet PC-related investments, mainly in Asia. This result occurred despite a year-on- year decrease in orders for flat panel display-related investments in Korea and Taiwan. The automotive equipment business recorded increases in both orders and sales compared with the previous fiscal year due to expansions in emerging markets, including China and India, as well as a recovery in the North American Net sales and Operating income of Industrial Automation Systems 1,018 852 978 927 129 733 100 101 50 26 market. These rises took place in spite of the impact of the Great East Japan 08 09 10 11 12 08 09 10 11 12 Earthquake and flooding in Thailand. As a result, total sales in the Industrial Automation Systems segment amounted Net sales (Yen in billions) Operating income (Yen in billions) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 29 to ¥978.4 billion, up 6% compared with the previous fiscal year. Operating income increased by ¥1.1 billion year on year to ¥101.2 billion due primarily to Net sales and Operating income of Information and Communication Systems this increase in sales. Information and Communication Systems The telecommunications equipment business experienced increases in both orders and sales compared with the previous fiscal year because of higher demand for communications infrastructure and other equipment and large orders received for submarine line terminal equipment used in fiber-optic cable networks. The information systems and services business saw increased sales compared with the previous fiscal year due to growth in the system integration as well as the network and system operations businesses. The electronic systems business recorded a year-on-year decrease in orders because of a reduction in the number of large projects in the space systems busi- ness. In contrast, sales increased compared with the previous fiscal year owing to an increase in the electronics business. As a result, total sales in the Information and Communication Systems seg- ment amounted to ¥516.4 billion, up 6% compared with the previous fiscal year. Operating income increased by ¥7.6 billion year on year to ¥21.3 billion due pri- marily to higher sales. Electronic Devices The semiconductor business saw a decrease in orders compared with the previ- 644 582 526 516 488 25 21 19 14 2 08 09 10 11 12 08 09 10 11 12 Net sales (Yen in billions) Operating income (Yen in billions) Net sales and Operating income (loss) of Electronic Devices 192 201 176 167 139 8 6 -7 4 -30 -7 ous fiscal year due to a decline in demand mainly for industrial-use power mod- 08 09 10 11 12 08 09 10 11 12 ules as well as high-frequency and optical transmission devices. However, sales Net sales rose thanks to growth in demand for power modules for industrial, commercial, (Yen in billions) Operating income (loss) (Yen in billions) automotive and railcar applications. Net sales and Operating income of Home Appliances The LCD module business experienced increases in both orders and sales year on year amid higher demand for industrial and automotive applications. As a result, total sales in the Electronic Devices segment totaled ¥200.8 bil- lion, up 14% compared with the previous fiscal year. Operating income fell by ¥2.3 billion year on year to ¥3.6 billion mainly because of the stronger yen. 1,000 916 825 924 849 66 Home Appliances The home appliances business experienced an 8% decrease in sales compared with the previous fiscal year. This result is attributable to such various factors as 42 35 22 5 a change in the eco-point incentive program in the third quarter of fiscal 2011 08 09 10 11 12 08 09 10 11 12 that caused a last-minute surge in demand for LCD televisions in Japan, declin- Net sales ing overseas sales of photovoltaic systems mainly in Europe, and lower domestic (Yen in billions) Operating income (Yen in billions) sales of hot water supply and induction heating (IH) cooking systems. Net sales and Operating income of Others As a result, total sales in the Home Appliances segment were ¥849.3 bil- lion, down 8% compared with the previous fiscal year. Operating income fell by ¥19.7 billion year on year to ¥22.4 billion due primarily to a decrease in sales. 661 596 553 609 612 17 20 Others Net sales amounted to ¥611.6 billion, virtually unchanged compared with the previous fiscal year, and were carried out mainly by affiliated companies involved in materials procurement and engineering. Operating income increased by ¥5.9 billion year on year to ¥20.3 billion, largely because of cost improvements. 30 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 14 12 3 08 09 10 11 12 08 09 10 11 12 Net sales (Yen in billions) Operating income (Yen in billions) RESULTS BY GEOGRAPHIC SEGMENT Net Sales by Geographic Segment Years ended March 31 Japan North America Asia (excluding Japan) Europe Others Eliminations Consolidated total Yen (millions) 2008 U.S. dollars (thousands) 2012 2012 2011 2010 2009 ¥3,186,719 222,543 582,888 309,997 40,184 ¥3,176,605 229,958 583,827 293,952 38,200 ¥2,886,502 205,713 445,722 282,822 33,140 ¥3,178,807 240,589 461,549 321,501 34,107 ¥3,468,792 275,579 561,759 386,113 31,905 (702,863) ¥3,639,468 (677,211) ¥3,645,331 (500,601) ¥3,353,298 (571,434) ¥3,665,119 (674,330) ¥4,049,818 $38,862,427 2,713,939 7,108,390 3,780,451 490,049 (8,571,500) $44,383,756 Operating Income (Loss) by Geographic Segment Years ended March 31 Japan North America Asia (excluding Japan) Europe Others Eliminations Consolidated total 2012 2011 ¥179,452 3,339 34,220 6,319 3,905 (1,791) ¥225,444 ¥177,354 1,363 43,734 7,830 4,329 (849) ¥233,761 2010 ¥49,673 5,531 27,337 3,091 1,949 6,721 ¥94,302 2009 ¥ 89,293 (3,599) 32,072 10,727 1,020 10,215 ¥139,728 Yen (millions) 2008 ¥194,413 5,861 49,088 16,044 1,321 (2,711) ¥264,016 U.S. dollars (thousands) 2012 $2,188,439 40,719 417,317 77,061 47,622 (21,841) $2,749,317 Japan Sales totaled ¥3,186.7 billion virtually on par with the previous fiscal year, and operating income rose by ¥2.1 billion to ¥179.5 billion. Despite the negative impact of downturns in such businesses as photovoltaic and visual equipment, increases in such businesses as the power systems, factory automation, and automotive equipment brought about the above referred growth. North America Sales fell by 3% year on year to ¥222.5 billion primarily due to lower sales of visual equipment. However, operating income increased by ¥2.0 billion to ¥3.3 billion owing primarily to cost improvements. Asia Sales totaled ¥582.9 billion, remaining virtually unchanged from the previous fiscal year mainly because of lower sales of air conditioners. This result occurred despite increased sales in such businesses as the elevators and escalators, and semiconductor. Operating income declined by ¥9.5 billion to ¥34.2 billion, as a result of deteriorating cost conditions caused by the flooding damage in Thailand. Europe Sales increased by 5% year on year to ¥310.0 billion mainly because of higher sales in the automotive equipment- and semicon- ductor-related businesses. Operating income decreased by ¥1.5 billion to ¥6.3 billion due to a drop in prices and other factors. Others Sales in other regions, including figures for Mitsubishi Electric’s Australian subsidiary, amounted to ¥40.2 billion, while operating income was ¥3.9 billion. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 31 RESEARCH AND DEVELOPMENT R&D Expenditures Years ended March 31 2012 2011 2010 2009 Yen (billions) 2008 U.S. dollars (millions) 2012 Energy and Electric Systems ¥ 30.5 ¥ 27.1 ¥ 23.5 ¥ 24.0 ¥ 21.1 $ 372.0 Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Consolidated total 54.9 16.2 9.4 30.4 28.3 45.0 14.9 8.6 30.7 25.5 34.7 12.5 7.3 29.6 26.1 37.8 15.1 8.3 32.4 26.9 37.1 25.2 8.6 29.6 27.2 669.7 197.3 114.1 371.2 345.0 ¥169.7 ¥151.8 ¥133.8 ¥144.4 ¥148.8 $2,069.3 Note: Figures for each segment and the consolidated total are rounded to the nearest unit. The Mitsubishi Electric Group actively promotes R&D initiatives that cover fundamental and advanced applications as well as product commercialization and manufacturing technologies. Carrying out these initiatives are various Group facilities, including corporate laboratories in Japan and laboratories in the United States and Europe as well as the R&D departments of factories and consolidated subsidiaries. Moreover, we pursue advanced and wide-ranging R&D activities in partnership with universities and research institutions both in Japan and overseas. In fiscal 2012, total R&D expenditures, including quality improvement expenses constituting manufacturing costs, amounted to ¥169.7 billion. Mitsubishi Electric reports R&D activities by business segment according to purpose, type, result and expendi- ture. However, expenditure on fundamental and basic research that does not fall under the purview of a specific business seg- ment is accounted for under Others. In the Energy and Electric Systems segment, our research is directed at boosting the competitiveness of such core products as rotating machines for generators, electric motors and other machinery, switches and transformers; other power transmission/ distribution/reception equipment and systems; transportation systems; and elevators and escalators. Other R&D areas include IT-application systems for supervision and control, power information systems and building management systems. Notable among Mitsubishi Electric’s recent R&D achievements are commercialized SiC inverter for railcars; a next-generation SCADA sys- tem for public systems; MLCNET-G200 series, metal line IP modem; an image processing-based traffic monitoring system with traffic flow and incident detection; PreSerV, an information software facilitating management over the facilities by geographic location; commercialized compact particle beam treatment system proton type; the commencement of full-scale operation of the experiment equipment for verifying the effectiveness of smart grid and relevant smart community technologies; the announce- ment of achievement of joint comprehensive research into next-generation proton cancer treatment system; ultra-high-speed elevator technologies for high-rise buildings; AXIEZ Mitsubishi standard elevator; and, the EleFine®*1 modernizing existing hydrau- lic elevators into traction type machine-room-less elevators. R&D expenditures in this segment totaled ¥30.5 billion. In the Industrial Automation Systems segment, R&D activities are aimed at enhancing the competitiveness of our lineup, which includes motors and related products; mechatronics equipment; FA control equipment and systems; automotive elec- tric and electronic components; electric power steering (EPS) and related products; and car multimedia systems. Mitsubishi Electric’s important R&D successes include MELSEC-FX3GC series, programmable controllers; MELSERVO-J4 series, servo amplifiers & motors; FREQUPS FW-S R&D expenditures R&D expenditures ratio series, small-capacity UPS; MV series, wire-cut electrical discharge machines; ML3015NX-60XF, CO2 laser two-dimensional processing machines; a memory car navigation system; DSRC on-board unit; DIATONE speaker SW-G50 for automo- bile; a display system for curved surfaces; and, Blu-ray disc player for automobile. R&D expenditures in this segment totaled ¥54.9 billion. In the Information and Communication Systems segment, Mitsubishi Electric pursues research related to the development of information and communication technology (ICT) systems, which include network systems for telecommunication operators and network solutions equipment, as well as space systems, includ- 170 149 144 152 134 4.7 4.2 3.9 4.0 3.7 ing satellites, ground systems and large telescopes. Notable R&D successes for 08 09 10 11 12 08 09 10 11 12 Mitsubishi Electric include NGN Home Gateway; 10G-EPON system; MELOOK μ II digital CCTV system; an increased transmission design capacity using 40Gbps R&D expenditures (Yen in billions) R&D expenditures / Net sales (%) 32 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 upgrades for the AAG (Asia America Gateway) Cable Network Consortium; an increased transmission design capacity using 40Gbps upgrades for the TAT-14 Cable Network Upgrade Purchasing Consortium; the large capacity GE-PON system; the IPTV set top box; a small color camera for car vision system; digital watermarking solution for HDTV; airport information display system; iDcenter®*2 Version 4.0, integrated ID management solution; AnalyticMart®*3 AQL Base Express, BI/data analysis system for small and medium-sized businesses; and, Software as a Service “Internet-S 3cube®*4 on Demand.” R&D expenditures in this segment totaled ¥16.2 billion. In the Electronic Devices segment, our R&D focuses on semiconductor and other electronic devices that are themselves vital components used in all our business segments. Major R&D achievements include GaN HEMT C-band amplifier for satellite communication; uncooled 25Gbps direct-modulation LD; the path switching-type W-CDMA high-efficiency transmission power amplifier; DIAFINE®*5, industrial TFT20 LCD module; J series automotive power semiconductor modules; MOSFET installed DIPIPM; and, 1200V HVIC for inverter systems. R&D expenditures in this segment totaled ¥9.4 billion. In the Home Appliances segment, Mitsubishi Electric is directing its R&D efforts toward environment-conscious products that focus on energy conservation, recycling, reducing environmental impact, universal design, and digital imaging systems. Notable results include home appliances with “Setsuden Assist” home appliances; KIRIGAMINE Move Eye series with a built-in hybrid system that save electricity by intelligent combination of cooling operation and fan mode controlled by sensed temperature; five-part, multi-coil and heating control technology for IH cooking heaters; RAIJIN TC-BXA series paper bag-type vacuum clean- ers; REAL MDR2 series LCD television with built-in carbon nanotube speakers; the launch of a business to collect rare earth metal magnets from used room air conditioners; and, “Ofuna Smart House”, a smart grid experimental house. R&D expenditures in this segment totaled ¥30.4 billion. In Others, fundamental technology R&D that benefits the entire Group is carried out at the Corporate Research and Development Group and the Corporate Total Productivity Management & Environmental Programs Group research centers, which strive to enhance Group competitiveness and create new businesses. In our main areas of R&D we have developed a motor sys- tem with a built-in SiC inverter; a robot system aligning bulk components; and, a multi-band power amplifier for automatic band switching and seamless roaming. R&D expenditures in this area amounted to ¥28.3 billion. 1. EleFine is a registered trademark of Mitsubishi Electric Building Techno-Service Co., Ltd. 2. iDcenter is a registered trademark of Mitsubishi Electric Information Technology Corporation 3. AnalyticMart is a registered trademark of Mitsubishi Electric Information Technology Corporation 4. Internet-S 3cube is a registered trademark of Mitsubishi Electric Information Network Corporation 5. DIAFINE is a registered trademark of Mitsubishi Shindoh Co., Ltd.: Mitsubishi Electric is licensed to use this technology during a term of 10 years from January 17, 2008 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 33 FINANCIAL POSITION Total assets amounted to ¥3,391.7 billion as of March 31, 2012, an increase of Interest-bearing debt Debt ratio ¥59.0 billion compared with the previous fiscal year-end. Cash and cash equiva- lents fell by ¥79.9 billion. Other assets decreased by ¥64.2 billion mainly due 678 to an adjustment to deferred tax assets accompanying the promulgation of the 551 538 542 20.3 “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating 484 Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and ”Act of Special Measures for Securing Financial Resources Necessary to Implement Measures for Restructure following the Great East Japan Earthquake” (Act No. 117 of 2011). The total amount of trade receivables and long-term trade receivables increased by ¥158.7 billion. 16.7 16.0 15.8 14.5 Under liabilities, the outstanding balance of debt and corporate bonds rose 08 09 10 11 12 08 09 10 11 12 by ¥57.9 billion compared with the end of the previous fiscal year to ¥542.3 bil- lion. As a result, the ratio of interest-bearing debt to total assets was 16.0%, a increase of 1.5 points year on year. Trade payables grew by ¥2.5 billion. At the same time, retirement and severance benefits fell by ¥46.9 billion largely because of an increase in pension plan assets in line with higher share prices, while accrued income taxes declined by ¥31.6 billion. As a result of these and other factors, total liabilities dropped by ¥23.0 billion to ¥2,200.6 billion. Interest-bearing debt (Yen in billions) Interest-bearing debt / Total assets (%) Total assets / Mitsubishi Electric Corp. shareholders’ equity Shareholders’ equity ratio Mitsubishi Electric Corp. shareholders’ equity rose by ¥82.1 billion compared with the previous fiscal year-end to ¥1,132.5 billion and the ratio of Mitsubishi 3,485 3,334 3,215 3,333 3,392 33.4 31.5 29.6 30.0 Electric Corp. shareholders’ equity to total assets was 33.4%, up 1.9 points year on year. The principal contributor to these increases was ¥112.1 billion in net income attributable to Mitsubishi Electric Corp. and the payment of cash divi- dends totaling ¥27.9 billion. 25.5 1,031 849 1,050 965 1,132 08 09 10 11 12 08 09 10 11 12 Total assets (Yen in billions) Mitsubishi Electric Corp. shareholders’ equity (Yen in billions) Shareholders’ equity ratio (%) 34 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 CAPITAL EXPENDITURES In line with its policy of improving performance by implementing the Balanced Capital expenditures Depreciation Corporate Management Policy while pursuing further growth, the Mitsubishi Electric Group aims to realize its growth strategies as it increases profitability. To that end, the Group directed its capital investment mainly toward the areas of 145 141 energy and electric systems, factory automation equipment, automotive products and power devices. At the same time the Group continued to reinforce its solid 109 108 159 148 136 120 127 105 business platform through the careful selection and concentration of investments. On an individual business segment basis, investments were made in Energy and Electric Systems (including power systems, electric equipment for rolling stock and elevators/escalators) aimed at increasing production capacity, stream- lining and enhancing quality. In Industrial Automation, capital expenditures were used primarily for boosting production capacity for factory automation systems and automotive equipment operations. In Information and Communication Systems, funds were appropriated for bolstering research and development capa- 08 09 10 11 12 08 09 10 11 12 Capital expenditures (Yen in billions) Depreciation (Yen in billions) bilities, while in Electronic Devices, Mitsubishi Electric directed investment mainly toward augmenting production in the power device business. In Home Appliances, expenditures focused largely on increasing the production capacity of air-conditioning equipment, streamlining operations and enhancing quality. In Common and Others, investments mainly went toward boosting research and development capabilities. Capital expenditures are derived from cash on hand and funds from operations. During the consolidated fiscal year under review, production capacity was not materially affected by the sale, disposal, damage or loss due to natural disaster of property, plant and equipment. CASH FLOWS In the year ended March 31, 2012, net cash provided by operating activities Cash flows amounted to ¥75.2 billion, while net cash used in investing activities was ¥156.2 billion. As a result, free cash flow was an outflow of ¥81.0 billion, a ¥263.0 bil- 330 328 lion turnaround from the inflow recorded in the previous fiscal year. Taken into account along with net cash provided by financing activities of ¥7.0 billion, fiscal 259 181 year-end cash and cash equivalents amounted to ¥392.2 billion, a decrease of 75 196 182 127 ¥79.9 billion year on year. Net cash provided by operating cash flows decreased by ¥252.5 billion compared with the previous fiscal year to ¥75.2 billion. This was mainly due to a decline in net income attributable to noncontrolling interests along with a rise in trade receivables. Net cash used in investing activities increased by ¥10.5 billion year on year to ¥156.2 billion. This was mainly the result of higher purchases of property, plant and equipment. Net cash provided by financing activities was ¥7.0 billion, a ¥96.3 billion turnaround from the outflow recorded in the previous fiscal year. This reflected an increase in funds procured from borrowings. -132 -134 -146 -156 -34 -215 08 09 10 11 12 08 09 10 11 -81 12 Net cash provided by operating activities (Yen in billions) Net cash used in investing activities (Yen in billions) Free cash flows (Yen in billions) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 35 Consolidated Balance Sheets Mitsubishi Electric Corporation and Subsidiaries March 31, 2012 and 2011 2012 Yen (millions) 2011 U.S. dollars (thousands) (note 2) 2012 Assets Current assets: Cash and cash equivalents ¥ 392,181 ¥ 472,067 $ 4,782,695 Short-term investments (notes 3, 19 and 20) Trade receivables (notes 4, 6 and 16) Inventories (note 5) Prepaid expenses and other current assets (notes 9, 15 and 20) Total current assets 2,995 950,736 576,179 10,031 790,991 527,504 275,293 272,471 2,197,384 2,073,064 36,524 11,594,342 7,026,573 3,357,232 26,797,366 Long-term receivables and investments: Long-term trade receivables (note 19) Investments in securities and other (notes 3, 15, 19 and 20) Investments in and advances to affiliated companies (notes 6 and 20) Total long-term receivables and investments 1,017 240,463 179,039 420,519 2,090 259,164 189,789 451,043 12,402 2,932,476 2,183,402 5,128,280 Property, plant and equipment (notes 7, 20, 21 and 22): Land Buildings Machinery and equipment Construction in progress Less accumulated depreciation Net property, plant and equipment 102,298 624,495 99,438 611,574 1,541,239 1,475,820 41,365 2,309,397 1,752,552 556,845 26,862 2,213,694 1,686,241 527,453 1,247,537 7,615,793 18,795,597 504,451 28,163,378 21,372,585 6,790,793 Other assets (notes 9, 10 and 20) 216,903 281,119 2,645,159 Total assets ¥3,391,651 ¥3,332,679 $41,361,598 See accompanying notes to consolidated financial statements. 36 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Liabilities and Equity Current liabilities: Bank loans (note 7) Current portion of long-term debt (notes 7, 19 and 22) Trade payables (notes 6 and 8) Accrued expenses (note 17) Accrued income taxes (note 9) Other current liabilities (notes 10, 15 and 20) 2012 Yen (millions) 2011 U.S. dollars (thousands) (note 2) 2012 ¥ 111,670 ¥ 64,905 $ 1,361,829 88,832 700,262 350,740 15,866 166,131 137,856 697,789 367,995 47,418 154,424 1,083,317 8,539,780 4,277,317 193,488 2,025,989 Total current liabilities 1,433,501 1,470,387 17,481,720 Long-term debt (notes 7, 19 and 22) Retirement and severance benefits (note 10) Other liabilities (notes 9, 15, 17 and 20) 341,789 372,082 53,259 281,591 419,008 52,668 4,168,158 4,537,585 649,501 Total liabilities 2,200,631 2,223,654 26,836,964 Mitsubishi Electric Corp. shareholders’ equity Common stock (note 11): Authorized 8,000,000,000 shares; issued 2,147,201,551 shares in 2012 and in 2011 Capital surplus (note 11) Legal reserve Retained earnings Accumulated other comprehensive 175,820 206,343 61,040 905,086 175,820 208,669 59,223 822,750 2,144,146 2,516,379 744,390 11,037,634 income (loss) (notes 3, 9, 10, 13 and 15) (215,603) (215,919) (2,629,305) Treasury stock, at cost 285,390 shares in 2012 and 264,421 shares in 2011 (221) (203) (2,695) Total Mitsubishi Electric Corp. shareholders’ equity 1,132,465 1,050,340 13,810,549 Noncontrolling interests Total equity 58,555 58,685 1,191,020 1,109,025 714,085 14,524,634 Commitments and contingent liabilities (note 17) Total liabilities and equity ¥3,391,651 ¥3,332,679 $41,361,598 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 37 Consolidated Statements of Income Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2012, 2011 and 2010 Revenues: Net sales (note 6) Interest and dividends (note 6) Other (notes 3, 13, 15 and 21) Total revenues Costs and expenses: Cost of sales (notes 10 and 22) Selling, general and administrative (notes 10, 21 and 22) Research and development Loss on impairment of long-lived assets (notes 20 and 21) Interest Equity in losses of affiliated companies (notes 6 and 20) Other (notes 3, 13, 15, 16 and 21) 2012 2011 Yen (millions) 2010 U.S. dollars (thousands) (note 2) 2012 ¥3,639,468 ¥3,645,331 ¥3,353,298 $44,383,756 8,332 22,196 8,162 28,035 8,921 18,277 101,610 270,683 3,669,996 3,681,528 3,380,496 44,756,049 2,628,964 2,622,959 2,505,095 32,060,537 625,283 155,995 645,779 138,827 614,062 122,897 7,625,402 1,902,378 3,782 6,818 3,366 21,708 4,005 7,749 20,285 31,687 16,942 9,345 34,801 13,095 46,122 83,146 41,049 264,732 Total costs and expenses 3,445,916 3,471,291 3,316,237 42,023,366 Income before income taxes 224,080 210,237 64,259 2,732,683 Income taxes (note 9): Current Deferred 42,187 63,628 105,815 54,309 22,788 77,097 23,958 7,432 31,390 514,476 775,951 1,290,427 Net income 118,265 133,140 32,869 1,442,256 Net income attributable to noncontrolling interests Net income attributable to Mitsubishi Electric Corp. 6,202 8,615 4,591 75,634 ¥ 112,063 ¥ 124,525 ¥ 28,278 $ 1,366,622 Net income per share attributable to Mitsubishi Electric Corp. (note 14): Basic Diluted See accompanying notes to consolidated financial statements. ¥52.20 — ¥58.00 — Yen ¥13.18 13.18 U.S. dollars (note 2) $0.637 — 38 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Consolidated Statements of Equity Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2012, 2011 and 2010 Balance at March 31, 2009 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 13): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 15) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2010 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 13): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 15) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2011 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 13): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 15) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2012 Balance at March 31, 2011 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 13): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 15) Transfer to legal reserve Equity transactions with noncontrolling interests and other Dividends paid to Mitsubishi Electric Corp. shareholders’ equity Purchase of treasury stock Reissuance of treasury stock Balance at March 31, 2012 Accumulated other comprehensive income (loss) ¥(285,066) Total Mitsubishi Electric Corp. shareholders’ equity ¥ (644) ¥ 849,476 Treasury stock Non- controlling interests Total equity ¥52,464 ¥ 901,940 Yen (millions) Common stock Legal reserve ¥175,820 ¥210,881 ¥57,225 Capital surplus Retained earnings ¥691,260 28,278 5,975 61,699 20,699 184 1,056 (1,056) (868) (7) ¥175,820 ¥210,006 ¥58,281 ¥718,482 ¥(196,509) 124,525 (17,876) 9,284 (10,643) (175) 942 (942) (19,315) (1,516) 179 ¥175,820 ¥208,669 ¥59,223 ¥822,750 ¥(215,919) 112,063 (8,254) 2,234 6,285 51 1, 817 (1,817) 28,278 5,975 61,699 20,699 184 116,835 — 4,591 1,226 51 8 5,876 28,278 4,591 7,201 61,699 20,750 192 122,711 — (868) (1,730) (2,598) (872) 20 (872) 13 ¥(1,496) ¥ 964,584 (872) 13 ¥56,610 ¥1,021,194 124,525 (17,876) 9,284 (10,643) (175) 105,115 — 8,615 (3,337) (36) (8) 5,234 124,525 8,615 (21,213) 9,284 (10,679) (183) 110,349 — (1,516) (3,159) (4,675) (19,315) (46) 1,518 ¥ (203) ¥1,050,340 (46) 1,339 (19,315) (46) 1,518 ¥58,685 ¥1,109,025 112,063 (8,254) 2,234 6,285 51 112,379 — 6,202 (589) 13 3 5,629 112,063 6,202 (8,843) 2,234 6,298 54 118,008 — (2,326) (2,326) (5,759) (8,085) (27,910) ¥175,820 ¥206,343 ¥61,040 ¥905,086 ¥(215,603) (27,910) (20) 2 ¥ (221) ¥1,132,465 (20) 2 (27,910) (20) 2 ¥58,555 ¥1,191,020 U.S. dollars (thousands) (note 2) Accumulated other comprehensive Legal income (loss) reserve $2,144,146 $2,544,744 $722,231 $10,033,537 $(2,633,159) Common stock Retained earnings Capital surplus Total Mitsubishi Electric Corp. shareholders’ equity Non- controlling interests Treasury stock Total equity $(2,475) $12,809,024 $715,671 $13,524,695 1,366,622 (100,658) 27,244 76,646 622 22,159 (22,159) 1,366,622 (100,658) 27,244 76,646 622 1,370,476 — 75,634 (7,183) 158 37 68,646 1,366,622 75,634 (107,841) 27,244 76,804 659 1,439,122 — (28,365) (28,365) (70,232) (98,597) (340,366) $2,144,146 $2,516,379 $744,390 $11,037,634 $(2,629,305) (340,366) (244) 24 $(2,695) $13,810,549 $714,085 $14,524,634 (340,366) (244) 24 (244) 24 See accompanying notes to consolidated financial statements. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 39 Consolidated Statements of Cash Flows Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2012, 2011 and 2010 2012 2011 Yen (millions) 2010 U.S. dollars (thousands) (note 2) 2012 ¥ 118,265 ¥ 133,140 ¥ 32,869 $ 1,442,256 127,244 105,280 119,762 1,551,756 3,367 3,538 16,425 41,061 834 63,628 (1,682) 6,961 3,366 (166,091) (55,737) (17,553) 9,113 (61,108) (7,311) 51,884 75,180 (463) 22,788 (1,300) 3,979 20,285 (14,594) (65,512) 2,493 66,177 (29,019) 43,653 37,196 327,641 (1,056) 7,432 (946) 3,099 34,801 (16,170) 56,358 10,977 45,373 (13,047) 7,069 27,295 330,241 10,171 775,951 (20,512) 84,890 41,049 (2,025,500) (679,720) (214,061) 111,134 (745,219) (89,159) 632,732 916,829 (159,346) (107,638) (109,069) (1,943,244) 5,085 4,504 6,347 62,012 (11,766) (51,640) (46,107) (143,488) 15,961 90 (6,198) (156,174) 138,283 (139,775) 46,630 (27,910) (20) 2 (10,182) 18,895 (19) (9,732) (145,630) 100 (62,248) (5,114) (19,315) (46) 5 (2,610) 20,145 831 (6,638) (134,491) 92,711 (106,584) (146,487) — (872) 13 (3,988) 194,646 1,098 (75,585) (1,904,561) 1,686,378 (1,704,573) 568,659 (340,366) (244) 24 (124,171) 7,028 (89,228) (165,207) 85,707 (5,920) (79,886) 472,067 ¥ 392,181 (11,834) 80,949 391,118 ¥ 472,067 1,959 32,502 358,616 ¥ 391,118 (72,195) (974,220) 5,756,915 $ 4,782,695 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Impairment losses of property, plant and equipment Loss (gain) from sales and disposal of property, plant and equipment, net Deferred income taxes Loss (gain) from sales of securities and other, net Devaluation losses of securities and other, net Equity in losses of affiliated companies Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in other assets Increase in trade payables Increase (decrease) in accrued expenses and retirement and severance benefits Increase (decrease) in other liabilities Other, net Net cash provided by operating activities Cash flows from investing activities: Capital expenditure Proceeds from sale of property, plant and equipment Purchase of short-term investments and investment securities Proceeds from sale of short-term investments and investment securities Decrease (increase) in loans receivable Other, net Net cash used in investing activities Cash flows from financing activities: Proceeds from long-term debt Repayment of long-term debt Increase (decrease) in short-term debt, net Dividends paid Purchase of treasury stock Reissuance of treasury stock Other, net Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year See accompanying notes to consolidated financial statements. 40 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Notes to Consolidated Financial Statements Mitsubishi Electric Corporation and Subsidiaries (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business The Company evaluates Variable Interest Entities (VIEs) Mitsubishi Electric Corporation (the “Company”) is a whether it has a controlling financial interest in an entity multinational organization which develops, manufactures, through means other than voting rights and whether it should sells and distributes a broad range of electrical and electronic consolidate the entity as the primary beneficiary when the equipments in the fields as diverse as home appliances and Company has a controlling financial interest. space electronics. The Company and its subsidiaries’ principal lines of business are: (1) Energy and Electric Systems, (2) Industrial Automation Systems, (3) Information and Communication Systems, (4) Electronic Devices, (5) Home Appliances and (6) Others. Each line’s sales as a percentage of total consolidated sales, before elimination of internal sales, for the year ended March 31, 2012 are as follows: Energy and Electric Systems – 25%, Industrial Automation Systems – 23%, Information and Communication Systems – 12%, Electronic Devices – 5%, Home Appliances – 20% and Others – 15%. Majority of the operations of the Company and its sub- sidiaries is mainly conducted in Japan. Net sales for the year ended March 31, 2012 comprises of the following geo- graphical locations: Japan – 67%, North America – 7%, Asia (excluding Japan) – 16%, Europe – 8% and Others – 2%. Our manufacturing operations are conducted principally at the Parent company with 22 manufacturing sites located in Japan as well as overseas manufacturing sites located in the United States, United Kingdom, Thailand, Malaysia, China and other countries. (b) Basis of Presentation The Company and its subsidiaries maintain their books of account in conformity with financial accounting standards in the countries of their domicile. The Company prepares the consolidated financial state- ments with reflecting the adjustments which are considered necessary to conform with accounting principles generally accepted in the United States of America. (c) Consolidation The Company prepares the consolidated financial statements including the accounts of the parent company and those of its majority-owned subsidiaries, whether directly or indi- rectly controlled. All significant intercompany transactions, accounts, and unrealized gains or losses have been eliminated. Investments in corporate joint ventures and affiliated companies with the ownership interest of 20% to 50%, in which the Company does not have control, but has the abil- ity to exercise significant influence, are accounted for by the equity method of accounting. Investments of less than 20% or where the Company does not have significant influence are accounted for by the cost method. (d) Use of Estimates The Company makes estimates and assumptions to prepare the consolidated financial statements in conformity with generally accepted accounting principles, and those estimates and assumptions affect the reported amounts of assets and liabilities as well as the disclosed amounts of contingent assets and liabilities at the date of the consolidated financial state- ments and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include valuation allowances for receivables, inventories and deferred tax assets; the carrying amount of property, plant and equipment; and assets and obligations related to employee benefits. Actual results could differ from those estimates. (e) Cash and Cash Equivalents The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equiva- lents for the consolidated cash flow statements. (f) Short-Term Investments and Investment Securities The Company classifies investments in debt and equity secu- rities into trading, available-for-sale, or held-to-maturity securities. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All securi- ties not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amor- tized cost, adjusted for the amortization or accretion of pre- miums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for- sale securities are excluded from earnings and are reported as a separate component of other comprehensive income (loss) until realized. Realized gains or losses from the sale of securi- ties are determined on the average cost of the particular secu- rity held at the time of sale. A decline in the fair value of any available-for-sale security below costs that is other-than-temporary results in a reduction in carrying amount to the fair value, which becomes the new cost basis for the security. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 41 To determine whether an impairment of equity security is other-than-temporary, the Company considers whether it (k) Income Taxes The Company recognizes deferred tax assets and liabilities has the ability and intent to hold the security until a market for the future tax consequences attributable to differences price recovery and considers whether evidence indicating between the financial statement carrying amounts of existing the market price of the security is recoverable to the carrying assets and liabilities and their respective tax basis, operating amount outweighs the counter evidence. Evidence considered loss and tax credit carryforwards. Deferred tax assets and in this assessment includes the reasons for the impairment, liabilities are measured using enacted tax rates expected to the severity and duration of the impairment, changes in value apply to taxable income in the years in which the temporary subsequent to year-end, and forecasted performance of the differences are expected to be recovered or settled. The effect investee. on deferred tax assets and liabilities of a change in tax rates To determine whether an impairment of debt security is is recognized in income in the period that includes the enact- other-than-temporary, the Company considers whether it has ment date. the intent to sell the equity investment and more likely than Valuation allowances are established to reduce deferred not where the Company is required to sell until a market price tax assets to their net realizable value if it is more likely than of the investment is recoverable to the amortized cost. not that some portion or all of the deferred tax asset will not Other investments are stated at cost. The Company rec- be realized. ognizes a loss when there is other-than-temporary decline in The Company recognizes the financial statement effects value of other investments, using the same policy as described of unrecognized tax benefits only if those positions are more above for available-for-sale security impairments. likely than not of being sustained. (g) Allowance for Doubtful Receivables The Company records an allowance for doubtful receiv- (l) Product Warranties The Company generally offers warranties on its products ables based on credit loss history and evaluation of specific against certain manufacturing and other defects for the spe- doubtful receivables. (h) Inventories In work-in-process, the Company records the ordered prod- ucts at the acquisition cost and the regular purchased prod- ucts at the average production costs. Those products are cific periods of time and/or usage of the product depending on the nature of the product, the geographic location of its sale and other factors. The Company recognizes accrued war- ranty costs based primarily on historical experience of actual warranty claims as well as current information on repair costs. recorded at the lower of cost or market. Net costs in excess of billings on long-term contracts are included in inventories. (m) Retirement and Severance Benefits The Company recognizes the funded status (i.e., the dif- Raw material and finished product inventories are gener- ference between the fair value of plan assets and the ally recorded using the average-cost method, and evaluated projected benefit obligations) of its pension plans in the con- at the lower of cost or market. In accordance with the general solidated balance sheet at the end of the year, and records practice in the heavy electrical industry, inventories related to the corresponding amount to Accumulated other compre- Energy and Electric Systems include items with long manufac- hensive income (loss), net of tax. The adjustment items for turing periods which are not realizable within one year. Accumulated other comprehensive income (loss) are unrecog- (i) Property, Plant and Equipment The Company records property, plant and equipment at cost. Depreciation of property, plant and equipment is generally nized prior service cost and unrecognized net gain or loss. The amounts of these adjustments are recognized as net periodic pension cost in future fiscal years. calculated by the declining-balance method, except for certain assets which are depreciated by the straight-line method, over (n) Revenue Recognition The Company recognizes revenue when persuasive evidence the estimated useful life of the assets according to general of an arrangement including title transfer exists, delivery has class, type of construction, and use of these assets. occurred, the sales price is fixed or determinable, and collect- The estimated useful life of buildings is 3 to 50 years, ibility is probable. These criteria are met for mass-merchandis- while machinery and equipment is 2 to 20 years. ing products such as consumer products and semiconductors (j) Leases The Company records capital leases at the inception of the lease at the lower of the discounted present value of future minimum lease payments or the fair value of the leased assets. The amortization of the leased assets is calculated in accordance with the Company’s normal depreciation policy. at the time when the product is received by the customer, and for products with acceptance provisions such as heavy machinery and industrial products at the time when the prod- uct is received by the customer and the specific criteria of the product are demonstrated by the Company with only certain inconsequential or perfunctory work left to be performed by the customer. Revenue from maintenance agreements is 42 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 recognized over the contract term when the maintenance is age market price of the Company’s common stock). provided and the cost is incurred. Also, the Company applies the percentage of completion method for long-term con- struction contracts. The Company measures the percentage of completion by comparing expenses recognized through the current year to the aggregate amount of estimated cost. Any anticipated losses on fixed price contracts are charged to operations when such losses can be estimated. Provisions are made for contingencies in the period when they become known pursuant to specific contract terms and conditions and are estimable. The contract which may consists of any combination of products, equipment, installation and maintenance is allo- cated revenue to each accounting unit based on its relative fair value, when each deliverable is accounted for separate accounting unit. Starting this Year, the Company applies Financial Accounting Standards Boards (FASB) Accounting Standards Update (ASU) 2009-13 “Multiple-Deliverable Revenue Arrangements-a consensus of the FASB Emerging Issues Task Force” (An Amendment of Accounting Standards Codification (ASC) Topic 605 “Revenue Recognition”). ASU 2009-13 requires the selling price used for each deliverable will be based on estimated selling price (ESP) if neither vender specific objective evidence nor third party evidence is available, and that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative sell- ing price method regardless of the selling price is determined biased on VSOE, TPE, or ESP. As a result, the residual method of allocating arrangement consideration will no longer be per- mitted. The adoption of ASU 2009-13 does not have a mate- rial effect on the Company’s consolidated financial position and results of operation. (o) Research and Development and Advertising The Company accounts for the costs of research and devel- opment and advertising as expense when those costs are incurred. (p) Shipping and Handling Costs The Company records shipping and handling costs mainly as selling, general and administrative expenses. (r) Foreign Currency Translation The Company translates receivables and payables in foreign currency at the prevailing rates of exchange at the balance sheet date. Gains and losses resulting from translation of receivables and payables are recognized in current earnings. Assets and liabilities of the Company’s overseas consolidating subsidiaries are translated into Japanese yen at the prevail- ing rates of exchange at the balance sheet date. Income and expense items are translated at the average exchange rate prevailing during the year. Gains and losses resulting from translation of financial statements are recognized as foreign currency translation adjustments in other comprehensive income (loss). (s) Derivatives The Company recognizes all derivatives as either assets or lia- bilities in the consolidated financial statements and measures them at fair value. For derivatives designated as fair value hedges, changes in fair value of the hedged item and the derivative are recognized in current earnings. For derivatives designated as cash flow hedges, fair value changes of the effective portion of the hedging instruments are recognized as a component of other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of all hedges is recognized in earnings immediately. The Company discloses the use and purpose of derivative instruments, accounting for derivative instruments and related hedged items. The Company also discloses the effects on the entity’s financial position, financial performance, and cash flows by the derivative instruments and hedging activities. (t) Securitizations The Company accounts for the securitization of the accounts receivables as a sale, if it is determined based on the Company’s evaluation that it has surrendered control over the transferred receivables. Accordingly, the receivables sold under these facilities are excluded from Trade receivables in the accompanying con- solidated balance sheets. Gain or loss on sale of receivables is calculated based on the allocated carrying amount of the receivables sold. When a portion of accounts receivables is (q) Net Income per Share The Company calculates basic net income per share attribut- transferred, the participating interest that continues to be held is recorded at the allocated carrying amount of the assets able to Mitsubishi Electric Corp. divided net income attribut- based on their relative fair values at the date of the transfer. able to Mitsubishi Electric Corp. by the weighted-average The Company estimates fair value based on the present value number of common shares outstanding during each year. of future expected cash flows less credit losses. Diluted net income per share attributable to Mitsubishi Electric Corp. reflects the potential dilution and is calculated on the basis that dilutive securities were converted at the beginning of the year or at time of issuance (if later), and that dilutive stock option were exercised (less the number of treasury stock assumed to be purchased from the proceeds using the aver- (u) Impairment of Long-Lived Assets The Company reviews for impairment of long–lived assets such as property, plant, and equipment and purchased intan- gibles subject to amortization, to be held and used whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 43 assets to be held and used is measured by a comparison of ment exists, to perform Step 2 of the goodwill impairment the carrying amount of an asset to estimated undiscounted test and calculate the amount of impairment loss by compar- future cash flows expected to be generated by the asset. If ing the implied fair value of reporting unit’s goodwill with the the carrying amount of an asset exceeds its estimated future carrying amount of goodwill. ASU 2011-08 permits an entity cash flows, an impairment loss is recognized by the amount to make a qualitative assessment of whether it is more likely by which the carrying amount of the asset exceeds the fair than not that a reporting unit’s fair value is less than its car- value of the asset. Long-lived assets to be disposed of other rying amount before applying the two-step goodwill impair- than sale continue to be classified as held and used until they ment test. If an entity concludes it is not more likely than not are disposed. that the fair value of a reporting unit is less than its carrying Long-lived assets classified as held-for-sale are separately amount, it need not perform the two-step impairment test. presented in the balance sheet and reported at the lower of The adoption of ASU 2010-28 and ASU 2011-08 does not the carrying amount or fair value less costs to sell, and are have a material effect on the Company’s consolidated finan- no longer depreciated. The assets and liabilities of a disposed cial position and results of operation. group classified as held-for-sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheets. (v) Stock-based Compensation When the Company grants stock-option to employees and (x) Cost Associated with Exit or Disposal Activities The Company recognizes the costs associated with exit or dis- posal activities as liability only when it meets the definition of a liability in the Statements of Financial Accounting Concepts No. 6, “Elements of Financial Statements”. The Company others, the Company recognizes the cost of employee services uses fair value for initial measurement of liabilities related to received in exchange for stock compensation based on the exit or disposal activities. grant-date fair value of the employee stock options and incre- mental compensation costs arising from subsequent modifica- tions of awards after the grant date. (y) Guarantees The Company recognizes the guarantees and indemnifica- tion arrangements as liability measured at fair value as they (w) Goodwill and Other Intangible Assets The Company accounts for business combinations using the are issued or modified by the Company, and discloses the guarantees that the Company has undertaken, including a acquisition method. The Company recognizes at fair value the rollforward of the Company’s product warranty liabilities. The assets acquired, the liabilities assumed, any noncontrolling Company continually monitors the conditions of the guaran- interests in the acquiree, and acquired goodwill at the acquisi- tees and indemnifications to identify occurrence of probable tion date. The Company discloses the nature of business com- losses, and when such losses are identified and if estimable, bination to enable the readers to evaluate the effects of such they are recognized in current earnings. transaction on the consolidated financial statements. The Company does not amortize goodwill but tests it for impairment at least annually. Also other intangible assets with indefinite useful life are not amortized, but instead tested for impairment until its useful life is determined. On the other hand, other intangible assets determined to have useful life are amortized over their respective estimated useful life and tested for impairment. Starting this year, the Company applies FASB ASU 2010- 28 ”When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (An Amendment of ASC Topic 350 “Intangibles-Goodwill and Other”) and ASU 2011-08 “Testing Goodwill for Impairment” (An Amendment of ASC Topic 350 “Intangibles-Goodwill and Other”). ASU 2010-28 modifies Step 1 of the goodwill impair- ment test which required an entity to compare the fair value of reporting unit with its carrying amount including goodwill for reporting units with zero or negative carrying amounts, and requires the entity, if there are any adverse qualitative factors indicating that it is more likely than not that an impair- (z) Asset Retirement Obligations The Company recognizes legal obligations associated with the retirement of long-lived assets that result from an acquisition, construction and development, and (or) from a normal opera- tion of a long-lived asset, except for certain lease obligations. The Company recognizes a liability for an asset retirement obligation at fair value in the period 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. Subsequent to the initial measurement of the asset retirement obligation, the obliga- tion is adjusted at the end of each period to reflect the pas- sage of time and changes in the estimated future cash flows underlying the obligation. (aa) Reclassifications The Company has made certain reclassifications of the previ- ous fiscal years’ consolidated financial statements to conform to the presentation used for the year ended March 31, 2012. 44 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 (bb) Future Application of New Accounting Standards income. The Company is required to adopt ASU 2011-05 and In June 2011, the FASB issued ASU 2011-05 ASU 2011-12 on April 1, 2012 retrospectively. The adoption “Presentation of Comprehensive Income” (An Amendment of ASU 2011-05 and ASU 2011-12 will not have a material of ASC Topic 220 “Comprehensive Income”). Under ASU effect on the Company’s consolidated financial position and 2011-05, an entity will have the option to present the com- results of operation. ponents of net income and comprehensive income in either In December 2011, the FASB issued ASU 2011-11 one or two consecutive financial statements. The ASU elimi- “Disclosures about Offsetting Assets and Liabilities” (An nates the option to present other comprehensive income in Amendment of ASC Topic 210 “Balance Sheet”). ASU 2011- the consolidated statement of equity. In December 2011, 11 requires to disclose both gross information and net infor- the FASB issued ASU 2011-12 “Deferral of the Effective Date mation about both instruments and transactions eligible for Amendments to the Presentation of Reclassifications of for offset in the statement of financial position and instru- Items Out of Accumulated Other Comprehensive Income in ments and transactions subject to an agreement similar to Accounting Standards Update No. 2011-05” (An Amendment a master netting arrangement. The Company is required to of ASC Topic 220 “Comprehensive Income”). ASU 2011- adopt ASU 2011-11 on April 1, 2013 retrospectively. The 12 defers the effective date of the requirement to present adoption of ASU 2011-11 will not have a material effect on separate line items for reclassification adjustments of items the Company’s consolidated financial position and results of out of accumulated other comprehensive income into net operation. (2) U.S. DOLLAR AMOUNTS The Company has presented the consolidated financial state- exchange rate prevailing on the Tokyo Foreign Exchange ments in Japanese yen, and solely for the convenience of the Market at the end of March 2012. This translation should not reader, has provided translated amounts in United States dol- be construed as a representation that the amounts shown lars at the rate of ¥82=U.S.$1, which was the approximate could be converted into United States dollars at such rate. (3) SECURITIES Marketable securities included in short-term investments and unrealized holding losses and fair value for such securities by investments in securities and other consist of available-for- equity securities and debt securities at March 31, 2012 and sale securities. The cost, gross unrealized holding gains, gross 2011 were as follows: 2012: Available-for-sale: Equity securities Debt securities 2011: Available-for-sale: Equity securities Debt securities Gross unrealized holding gains Gross unrealized holding losses Yen (millions) Fair value ¥28,533 783 ¥29,316 Gross unrealized holding gains ¥27,900 2,714 ¥30,614 ¥4,891 4,315 ¥9,206 ¥119,054 42,573 ¥161,627 Gross unrealized holding losses Yen (millions) Fair value ¥ 9,946 9,478 ¥19,424 ¥120,563 52,689 ¥173,252 Cost ¥ 95,412 46,105 ¥141,517 Cost ¥102,609 59,453 ¥162,062 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 45 2012: Available-for-sale: Equity securities Debt securities Gross unrealized holding gains Gross unrealized holding losses Cost Fair value U.S. dollars (thousands) $1,163,561 562,256 $1,725,817 $347,963 9,549 $357,512 $ 59,646 52,622 $1,451,878 519,183 $112,268 $1,971,061 Debt securities consist of Japanese government debt securi- In the year ended 2011, net unrealized gains on available- ties, corporate debt securities and others. for-sale securities, net of taxes and noncontrolling interests, In the years ended March 31, 2012 and 2010, net unre- decreased by ¥10,643 million. alized gains on available-for-sale securities, net of taxes and As of March 31, 2012 and 2011, the cost of non-market- noncontrolling interests, increased by ¥6,285 million ($76,646 able equity securities were ¥14,627 million ($178,378 thou- thousand) and ¥20,699 million, respectively. sand) and ¥13,779 million, respectively. Maturities of marketable securities classified as available-for-sale at March 31, 2012 were as follows: Due within one year Due after one year through five years Due after five years Marketable equity securities Cost ¥ 3,149 4,292 38,664 95,412 ¥141,517 Yen (millions) Fair value ¥ 2,995 4,793 34,785 119,054 ¥161,627 Cost $ 38,402 52,342 471,512 1,163,561 U.S. dollars (thousands) Fair value $ 36,525 58,451 424,207 1,451,878 $1,725,817 $1,971,061 Gross unrealized losses on available-for-sale securities and the fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss positions, at March 31, 2012 were as follows: Available-for-sale: Equity securities Debt securities Available-for-sale: Equity securities Debt securities Less than 12 months Fair value Unrealized losses 12 months or more Fair value Unrealized losses Yen (millions) Total Fair value Unrealized losses ¥12,326 892 ¥13,218 ¥1,807 108 ¥1,915 ¥20,916 32,301 ¥53,217 ¥3,084 4,207 ¥7,291 ¥33,242 33,193 ¥66,435 ¥4,891 4,315 ¥9,206 Less than 12 months Fair value Unrealized losses 12 months or more Fair value Unrealized losses U.S. dollars (thousands) Total Fair value Unrealized losses $150,317 10,878 $22,037 1,317 $255,073 393,915 $37,609 51,305 $405,390 $ 59,646 52,622 404,793 $161,195 $23,354 $648,988 $88,914 $810,183 $112,268 The Company did not recognize an impairment loss from the sonable period of time sufficient for a recovery of fair value, decline in the fair value of the marketable securities includ- the Company does not consider those securities to be other- ing the unrealized losses. Based on that evaluation and the than-temporarily impaired. Company’s ability and intent to hold those securities for a rea- 46 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Proceeds from the sale of available-for-sale securities and gross realized gains and losses on those sales in the years ended March 31, 2012, 2011 and 2010 were as follows: Proceeds Gross realized gains Gross realized losses 2012 ¥1,460 486 5 2011 ¥3,955 1,157 11 Yen (millions) 2010 ¥1,406 672 27 U.S. dollars (thousands) 2012 $17,805 5,927 61 For the years ended March 31, 2012, 2011 and 2010 the Company recognized loss on impairment of marketable securities ¥6,912 million ($84,293 thousand),¥3,679 million and ¥2,864 million due to other-than-temporary declines in fair value. (4) TRADE RECEIVABLES Trade receivables are summarized as follows: Notes receivable Accounts receivable Allowance for doubtful receivables (5) INVENTORIES Inventories are comprised of the following: Work in process Less accumulated billings on long-term contracts Raw materials Finished products 2012 ¥ 61,745 897,332 (8,341) ¥950,736 Yen (millions) 2011 ¥ 58,931 740,433 (8,373) ¥790,991 U.S. dollars (thousands) 2012 $ 752,988 10,943,073 (101,719) $11,594,342 2012 ¥277,017 24,220 252,797 90,471 232,911 Yen (millions) 2011 ¥249,173 16,198 232,975 79,334 215,195 ¥576,179 ¥527,504 U.S. dollars (thousands) 2012 $3,378,256 295,366 3,082,890 1,103,305 2,840,378 $7,026,573 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 47 (6) INVESTMENTS IN AFFILIATED COMPANIES Summary of combined financial information relating to affiliated companies accounted for by the equity method of accounting (Renesas Electronics Corp., Toshiba Mitsubishi-Electric Industrial Systems Corp., etc.) as of March 31, 2012 and 2011, and for the years ended March 31, 2012, 2011 and 2010 are as follows: Yen (millions) 2011 U.S. dollars (thousands) 2012 Financial Position Current assets Property, plant and equipment Other assets Total assets Current liabilities Long-term debt Total liabilities Shareholders’ equity 2012 ¥1,431,161 403,553 204,841 ¥2,039,555 ¥1,213,890 285,338 1,499,228 540,327 ¥1,570,042 438,814 252,402 ¥2,261,258 ¥1,270,234 387,360 1,657,594 603,664 Total liabilities and shareholders’ equity ¥2,039,555 ¥2,261,258 $17,453,183 4,921,378 2,498,061 $24,872,622 $14,803,536 3,479,732 18,283,268 6,589,354 $24,872,622 Results of Operations Sales Net income (loss) attributable to affiliated companies ¥1,956,596 (36,010) ¥2,181,546 (69,818) ¥1,614,702 (37,851) $23,860,927 (439,146) 2012 2011 Yen (millions) 2010 U.S. dollars (thousands) 2012 The balances and transactions with affiliated companies accounted for by the equity method of accounting as of March 31, 2012 and 2011, and for the years ended March 31, 2012, 2011 and 2010 are as follows: Trade receivables Trade payables Sales Purchases Dividends 2012 ¥ 76,720 144,502 2012 ¥314,740 184,766 6,945 2011 ¥314,174 160,188 8,963 Yen (millions) 2011 ¥ 69,625 146,925 Yen (millions) 2010 ¥281,043 148,308 7,558 U.S. dollars (thousands) 2012 $ 935,610 1,762,220 U.S. dollars (thousands) 2012 $3,838,293 2,253,244 84,695 Investments in affiliated companies accounted for by the equity method of accounting include the shares of 10 publicly quoted affiliates (10 publicly quoted affiliates existed in 2011), which are summarized as follows: Investments at equity Quoted market value 2012 ¥75,783 92,453 Yen (millions) 2011 ¥ 95,177 107,758 U.S. dollars (thousands) 2012 $ 924,183 1,127,476 Due to an affiliated company accounted for by the equity Renesas offered allocation of new stocks which is method of accounting named Renesas Technology Corp. merged with NEC Electronics Corp., Renesas Electronics Corp. total amounts of ¥134,600 million to the Company, NEC Corporation and Hitachi, Ltd. The Company was accepted (Renesas) was established on April 1, 2010. The Company ¥35,235 million to new stocks allocation. As a result of its was allocated 20.5 shares of Renesas per share of Renesas merger, the Company’s ownership interest for Renesas is Technology Corp. at the effective date of its merger. 25.05% and the Company accounts for by equity method to 48 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 investment on Renesas. The Company includes the amounts goodwill related to equity investment on consolidated balance of $13,785 million which is difference between the costs of sheets. investments $98,472 million and the amounts of net assets At March 31, 2012 and 2011, the Company recognizes which is after fair value measurements at effective date that no impairment exists on its goodwill. $84,687 million in investments in affiliated companies as (7) BANK LOANS AND LONG-TERM DEBT Bank loans consisted of the following: Borrowings from banks and others Commercial paper 2012 ¥111,450 220 ¥111,670 Yen (millions) 2011 ¥64,555 350 ¥64,905 U.S. dollars (thousands) 2012 $1,359,146 2,683 $1,361,829 The weighted average interest rates on borrowings from At March 31, 2012, the Company had unused committed banks and others outstanding as of March 31, 2012 and 2011 lines of credit that can provide short-term funds from sub- were 1.04% and 0.74%, respectively. scribing financial institutions amounting to ¥114,000 million ($1,390,244 thousand). Long-term debt consisted of the following: Borrowings from banks and other companies, due 2012 to 2022 with bearing interest rate ranging from 0.40% to 4.70% at March 31, 2012: due 2011 to 2021 with bearing interest rate ranging from 0.42% to 8.00% at March 31, 2011: Secured Unsecured 1.76% Japanese yen bonds due 2011 1.70% Japanese yen bonds due 2012 1.40% Japanese yen bonds due 2012 1.17% Japanese yen bonds due 2014 0.58% Japanese yen bonds due 2013 1.38% Japanese yen bonds due 2011 0.94% Japanese yen bonds due 2012 Capital lease obligations Less amount due within one year 2012 Yen (millions) 2011 U.S. dollars (thousands) 2012 ¥ 935 290,439 — 10,000 40,000 30,000 30,000 — — 29,247 430,621 88,832 ¥341,789 ¥ 1,305 253,532 25,000 10,000 40,000 30,000 30,000 14 200 29,396 419,447 137,856 ¥281,591 $ 11,402 3,541,939 — 121,951 487,804 365,854 365,854 — — 356,671 5,251,475 1,083,317 $4,168,158 The aggregate annual maturities of long-term debt outstanding at March 31, 2012 were as follows: Year ending March 31: 2013 2014 2015 2016 2017 Thereafter Total Yen (millions) U.S. dollars (thousands) ¥ 88,832 102,192 82,119 55,787 44,811 56,880 ¥430,621 $1,083,317 1,246,244 1,001,451 680,329 546,476 693,658 $5,251,475 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 49 Substantially all of the loans with banks and others have basic Certain of the secured loan agreements contain provi- written agreements. With respect to all present or future sions that permit the lenders to require additional collateral, loans, these agreements state that the Company would need and substantially all of the unsecured loan agreements permit to provide collateral or guarantors immediately upon the the lenders to require collateral or guarantors. Property, plant banks’ request and that any collateral furnished pursuant to and equipment carried at ¥1,170 million ($14,268 thousand) such agreements will be used against repayment of debts in are pledged as security for long-term loans from banks and case of default. others. (8) TRADE PAYABLES Trade payables are summarized as follows: Notes payable Accounts payable (9) INCOME TAXES Total income taxes were allocated as follows: Income before income taxes Shareholders’ equity—accumulated other comprehensive income (loss): Foreign currency translation adjustments Pension liability adjustments Unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments 2012 ¥ 19,653 680,609 ¥700,262 Yen (millions) 2011 ¥ 21,781 676,008 ¥697,789 U.S. dollars (thousands) 2012 $ 239,670 8,300,110 $8,539,780 2012 ¥105,815 2011 ¥77,097 Yen (millions) 2010 ¥31,390 U.S. dollars (thousands) 2012 $1,290,427 (135) (144) 2,777 37 (1,978) (1,651) (6,886) (7) 550 45,284 12,652 (8) (1,646) (1,756) 33,866 451 ¥108,350 ¥66,575 ¥89,868 $1,321,342 The significant components of deferred tax expense attributable to income taxes are as follows: Change in valuation allowance related to deferred tax assets Other 2012 2011 Yen (millions) 2010 ¥ (6,686) 70,314 ¥63,628 ¥ (9,232) 32,020 ¥22,788 ¥1,633 5,799 ¥7,432 U.S. dollars (thousands) 2012 $ (81,537) 857,488 $775,951 The Company is subjected to a number of income taxes. The reduced corporation tax rate effective in the fiscal years begin- statutory tax rate is approximately 41% for the years ended ning after April 1, 2012. As a result, the Company adjusted March 31, 2012, 2011 and 2010. the statutory tax rates to be applied in the calculation of The “Act for Partial Revision of the Income Tax Act etc. deferred tax assets and liabilities arising from temporary differ- for the Purpose of Creating Taxation System Responding ences expected to be recovered or settled after April 1, 2012. to Changes in Economic and Social Structures”(Act No.114 of 2011) and the “Act on Special Measures for After the adjustment, the statutory tax rates are reduced from the current approximately 41% to approximately 38% for the Securing Financial Resources Necessary to Implement fiscal years from April 1, 2012 to March 31, 2015 and approx- Measures for Reconstruction following the Great East Japan imately 35.5% for the subsequent fiscal years after April 1, Earthquake”(Act No.117 of 2011) were enacted in November 2015. 2011 and promulgated in December 2011, resulting in For the year ended March 31, 2012, ¥31,967 million 50 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 ($389,841 thousand) of income tax expense is included in Income, as a result of the adjustment of deferred tax assets “Income taxes – Deferred” in Consolidated Statements of and liabilities. The effective tax rate for the years ended March 31, 2012, 2011 and 2010 is reconciled with the Japanese statutory tax rate in the following table: Japanese statutory tax rate Change in valuation allowance Expenses permanently not deductible for tax purposes International tax rate difference Tax credits Tax effect attributable to investments at equity Effect of income tax rate change Other Effective tax rate 2012 41.0% (0.3) 1.0 (5.1) (3.3) 0.9 14.3 (1.3) 47.2% 2011 41.0% (0.9) 1.0 (6.9) (4.2) 4.0 — 2.7 36.7% 2010 41.0% 0.7 3.2 (16.5) (4.1) 23.5 — 1.0 48.8% The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2012 and 2011 are as follows: Yen (millions) 2011 U.S. dollars (thousands) 2012 Deferred tax assets: Retirement and severance benefits Accrued expenses Property, plant and equipment Inventories Pension liability adjustments Tax loss carryforwards Other Total gross deferred tax assets Valuation allowance Deferred tax assets, less valuation allowance Deferred tax liabilities: Securities contributed to employee retirement benefit trust Property, plant and equipment Net unrealized gains on securities Other Total gross deferred tax liabilities Net deferred tax assets 2012 ¥ 93,206 101,762 33,172 41,234 106,170 7,652 70,108 453,304 (55,904) 397,400 30,404 12,135 7,407 33,236 83,182 ¥122,238 113,118 40,517 42,699 121,765 7,687 85,216 533,240 (62,590) 470,650 32,856 15,284 4,630 25,576 78,346 ¥314,218 ¥392,304 $1,136,659 1,241,000 404,537 502,854 1,294,756 93,317 854,975 5,528,098 (681,756) 4,846,342 370,780 147,988 90,329 405,318 1,014,415 $3,831,927 The valuation allowance for deferred tax assets as of April temporary differences become deductible. Management 1, 2010 was ¥71,822 million. The net change in the total considers the scheduled reversal of deferred tax liabilities, pro- valuation allowance for the year ended March 31, 2011 was jected future taxable income, and tax planning strategies in a decrease of ¥9,232 million. The net change in the total making this assessment. valuation allowance for the year ended March 31, 2012 was At March 31, 2012, the Company and certain subsidiar- a decrease of ¥6,686 million ($81,537 thousand). In assessing ies had net operating loss carryforwards of ¥14,937 million the realizability of deferred tax assets, management considers ($182,159 thousand) and ¥40,044 million ($488,341 thou- whether it is more likely than not that some portion or all of sand) for corporate and local income tax purposes, respective- the deferred tax assets will be realized. The ultimate realiza- ly, which were available to offset future taxable income, if any. tion of deferred tax assets is dependent upon the generation A significant portion of the net operating loss carryforwards of future taxable income during the periods in which those will expire in the years ending March 31, 2017 and 2016. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 51 Net deferred tax assets and liabilities at March 31, 2012 and 2011 are reflected in the accompanying consolidated balance sheets under the following captions: Prepaid expenses and other current assets Other assets Other liabilities 2012 ¥146,077 172,204 (4,063) ¥314,218 Yen (millions) 2011 ¥159,559 237,459 (4,714) ¥392,304 U.S. dollars (thousands) 2012 $1,781,427 2,100,049 (49,549) $3,831,927 Deferred tax liabilities have not been recognized for undis- of income. Both interest and penalties accrued as of March tributed earnings of domestic subsidiaries and some affili- 31, 2012 and 2011, and interest and penalties for the years ated companies as such income, if distributed in the form of ended March 31, 2012, 2011 and 2010 are not material. dividends, is either not taxable under present circumstances The Company and its subsidiaries file income tax returns or is not material. Deferred tax liabilities for the undistributed in Japan and various foreign tax jurisdictions. The tax years income of foreign subsidiaries and affiliated companies have that remain subject to examination by major tax jurisdictions been recognized. Although the Company believes that there are no sig- nificant unrecognized tax benefits as of March 31, 2012 and 2011, future determination by tax authorities could affect the effective tax rate in the future periods. The Company records interest and penalties related to additional income tax, etc. in the consolidated statements are as follows: Location Japan United States Thailand Europe (10) RETIREMENT AND SEVERANCE BENEFITS Open tax years 2005-2012 2009-2012 2007-2012 2008-2012 The Company has non-contributory and contributory defined 2005, and established a defined contribution plan on April benefit plans covering substantially all of its employees who 1, 2005. In addition, the Company amended its contributory meet eligibility requirements. defined benefit plan and introduced a cash balance pension Under the non-contributory plans, employees with less plan. Under the cash balance pension plan, each participant than twenty years of service are entitled to lump-sum sever- has a notional account which is credited yearly based on the ance indemnities at date of severance, and employees with current rate of contribution and market-related interest rate. twenty or more years of service are entitled to annuity pay- The domestic consolidated subsidiaries sponsor various ments subsequent to retirement, determined by the current pension plans, which are partially or entirely employees’ pen- basic rate of pay, length of service and termination condi- sion fund plan, and/ or corporate pension fund plan, based on tions. In addition, certain employees who meet the eligibility each subsidiaries’ respective pension policies. requirements are entitled to additional lump-sum payments In addition, the foreign consolidated subsidiaries that at the date of retirement based on the retirement age. Under have adopted pension policy mainly sponsors defined contri- the contributory plans, employees are entitled to annuity bution pension plan. payments at a certain age. The assets of certain of the non- The Company measures the fair value of plan assets and contributory plans and the contributory plans are combined in the projected benefit obligation at the end of the year, and accordance with the regulations and administered by a board recognizes the funded status (i.e., the difference between the of trustees comprised equally of employer and employee fair value of plan assets and the projected benefit obligations) representatives. An employee retirement benefit trust is estab- of pension in consolidated balance sheets with the amount of lished for certain of the non-contributory plans. The Company amended its benefit plan under labor and management agreement during the year ended March 31, corresponding adjustment to Accumulated other comprehen- sive income（loss（, net of tax. 52 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Obligations and funded status Reconciliations of beginning and ending balances of the benefit obligations and the fair value of the plan assets are as follows: Change in benefit obligations: Benefit obligations at beginning of year Service cost Interest cost Plan participants’ contributions Amendments Actuarial loss Benefits paid Acquisitions and divestitures, etc. Benefit obligations at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Plan participants’ contributions Benefits paid Acquisitions and divestitures, etc. Fair value of plan assets at end of year 2012 ¥1,072,082 29,222 21,838 1,108 — 11,147 (82,476) 49 1,052,970 655,586 15,024 46,238 1,108 (34,456) (242) 683,258 Yen (millions) 2011 U.S. dollars (thousands) 2012 ¥1,095,652 28,925 22,346 1,129 (576) 82 (74,651) (825) 1,072,082 637,716 (10,465) 63,243 1,129 (35,579) (458) 655,586 $13,074,171 356,366 266,317 13,512 — 135,939 (1,005,805) 598 12,841,098 7,994,951 183,220 563,878 13,512 (420,195) (2,951) 8,332,415 Funded status at end of year ¥ (369,712) ¥ (416,496) $ (4,508,683) Amounts recognized in the consolidated balance sheet at March 31, 2012 and 2011 consist of: Other assets Other current liabilities Retirement and severance benefits 2012 ¥ 7,912 (5,542) (372,082) ¥(369,712) Yen (millions) 2011 ¥ 8,192 (5,680) (419,008) ¥(416,496) Amounts recognized in accumulated other comprehensive income (loss) at March 31, 2012 and 2011 consist of: Actuarial gain or loss Prior service benefit (gain) 2012 ¥ 395,639 (100,219) ¥ 295,420 Yen (millions) 2011 ¥ 414,793 (117,263) ¥ 297,530 U.S. dollars (thousands) 2012 $ 96,488 (67,586) (4,537,585) $(4,508,683) U.S. dollars (thousands) 2012 $ 4,824,866 (1,222,183) $ 3,602,683 The accumulated benefit obligations for all defined benefit plans were as follows: Accumulated benefit obligations 2012 ¥1,046,736 Yen (millions) 2011 ¥1,066,581 U.S. dollars (thousands) 2012 $12,765,073 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 53 Components of net periodic retirement and severance costs and other amounts recognized in other comprehensive income (loss) Net periodic retirement and severance costs for the years ended March 31, 2012, 2011 and 2010 consisted of the following components: Service cost Interest cost on projected benefit obligation Expected return on plan assets Amortization of prior service benefit (gain) Amortization of actuarial loss Plan participants’ contributions 2012 ¥ 30,330 21,838 (12,834) (17,044) 27,904 50,194 (1,108) 2011 ¥ 30,054 22,346 (12,057) (16,996) 35,107 58,454 (1,129) Yen (millions) 2010 ¥ 32,526 23,108 (10,373) (15,529) 42,220 71,952 (1,168) Net periodic retirement and severance costs ¥ 49,086 ¥ 57,325 ¥ 70,784 U.S. dollars (thousands) 2012 $ 369,878 266,317 (156,512) (207,854) 340,293 612,122 (13,512) $ 598,610 Other changes in plan assets and projected benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2012 and 2011 were summarized as follows: Actuarial gain or loss Amortization of actuarial loss (gain) Prior service benefit (gain) Amortization of prior service benefit 2012 ¥ 8,750 (27,904) — 17,044 ¥ (2,110) Yen (millions) 2011 ¥ 22,785 (35,107) (576) 16,996 ¥ 4,098 U.S. dollars (thousands) 2012 $ 106,707 (340,293) — 207,854 $ (25,732) The estimated actuarial gain or loss and prior service benefit for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next year are summarized as follows: Actuarial gain or loss Prior service benefit (gain) Yen (millions) ¥ 21,083 (21,748) U.S. dollars (thousands) $ 257,110 (265,220) Actuarial assumptions Actuarial assumptions used to determine benefit obligations at March 31, 2012 and 2011 were as follows: Discount rate Assumed rate of increase in future compensation levels 2012 2.0% 1.7% 2011 2.0% 1.7% Actuarial assumptions used to determine net periodic retirement and severance costs for the years ended March 31, 2012, 2011 and 2010 were as follows: Discount rate Assumed rate of increase in future compensation levels Expected long-term rate of return on plan assets 2012 2.0% 1.7% 2.5% 2011 2.0% 1.7% 2.5% 2010 2.0% 1.7% 2.5% The expected long-term rate of return is based on actual historical returns and the expectations for future returns of each plan asset category in which the Company invests. 54 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Plan Assets The fair values of the Company’s pension plan assets at March 31, 2012 and 2011 were as follows: Equity securities Marketable equity securities Pooled funds Debt securities Government, municipal and corporate debt securities Pooled funds Other assets Life insurance company general accounts Other 2012 Yen (millions) Level 1 Level 2 Level 3 Total ¥137,940 — ¥ — 141,103 ¥ — — ¥137,940 141,103 3,410 — 22,548 248,523 — — 25,958 248,523 — — 83,287 31,296 — 15,151 83,287 46,447 ¥141,350 ¥526,757 ¥15,151 ¥683,258 Notes: 1. Marketable equity securities include mainly domestic stocks. 2. Pooled funds of equity securities include approximately 30% domestic stocks and 70% foreign stocks. 3. Pooled funds of debt securities include approximately 70% domestic bonds and 30% foreign bonds. 4. Government, municipal and corporate debt securities of level1 include government debt securities. Equity securities Marketable equity securities Pooled funds Debt securities Government, municipal and corporate debt securities Pooled funds Other assets Life insurance company general accounts Other 2011 Yen (millions) Level 1 Level 2 Level 3 Total ¥139,744 — ¥ — 164,206 ¥— — ¥139,744 164,206 2,334 — 20,876 207,468 — — 77,383 43,575 — — — — 23,210 207,468 77,383 43,575 ¥142,078 ¥513,508 ¥— ¥655,586 Notes: 1. Marketable equity securities include mainly domestic stocks. 2. Pooled funds of equity securities include approximately 40% domestic stocks and 60% foreign stocks. 3. Pooled funds of debt securities include approximately 60% domestic bonds and 40% foreign bonds. 4. Government, municipal and corporate debt securities of level 1 include government debt securities. Equity securities Marketable equity securities Pooled funds Debt securities Government, municipal and corporate debt securities Pooled funds Other assets Life insurance company general accounts Other U.S. dollars (thousands) 2012 Level 1 Level 2 Level 3 Total $1,682,195 — $ — 1,720,768 $ — $1,682,195 1,720,768 — 41,586 — 274,976 3,030,768 — — 316,562 3,030,768 — — 1,015,695 381,659 — 184,768 1,015,695 566,427 $1,723,781 $6,423,866 $184,768 $8,332,415 The Company’s investment policies are designed to ensure adequate plan assets are available to provide future pay- ments of pension benefits to eligible participants. Taking into account the expected long-term rate of return on plan assets, the Company formulates an investment portfolio comprised of the optimal combination of equity and debt securities. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 55 Plan assets are invested in individual equity and debt securi- ties using the guidelines of the investment portfolio in order to produce a total return that will match the expected return on a mid-term to long-term basis. The Company evaluates the gap between expected return and actual return of invested plan assets on an annual basis. In addition, taking into the consideration the management environment and the revision of regulations, the Company revises the investment portfolio when and to the extent considered necessary to achieve the expected long-term rate of return on plan assets based on the pension asset and liability management method. The Company’s investment portfolio consists of three major components: approximately 30% is invested in equity securities, approximately 65% is invested in debt securities and investments in life insurance company general accounts, and approximately 5% is invested in hedge funds. As for selection of plan assets, the Company has examined the con- tents of investment, and appropriately diversified investments. See note 20 which shows categorized input for fair value measurements by the valuation technique into a three-level hierarchy. Each level into which assets are categorized is based on inputs used to measure the fair value of the assets. Level 1 assets are comprised principally of equity securi- ties and government bonds, which are valued using unad- justed quoted market prices in active markets with sufficient volume and frequency of transactions. Level 2 assets are comprised principally of pooled funds that invest in equity and debt securities, corporate bonds and investments in life insurance company general accounts. Pooled funds are valued at their net asset values that are calculated by the sponsor of the fund. Corporate bonds are valued using quoted prices for identical assets in markets that are not active. Investments in life insurance company general accounts are valued at the amounts that are the conventional interest adding to the principle amounts calculated by life insurance company. Level 3 assets comprise hedge funds, which are valued based on unobservable inputs. An analysis of the changes in Level 3 assets measured at fair value for the year ended March 31, 2012 is as follows: Balance at beginning of year Actual return: Relating to assets sold Relating to assets still held Purchases , sales and settlements Transfers in and/or out of Level 3 Balance at end of year Yen (millions) Hedge funds ¥ — — (51) 14,000 1,202 ¥15,151 U.S. dollars (thousands) Hedge funds $ — — (622) 170,732 14,658 $184,768 Cash Flows The Company expects to contribute ¥47,561 million ($580,012 thousand) to its pension plan in the year ending March 31, 2013. Estimated future benefit payments are as follows: Year ending March 31: 2013 2014 2015 2016 2017 2018—2022 Yen (millions) U.S. dollars (thousands) ¥ 72,013 68,275 65,585 65,654 59,297 258,452 $ 878,207 832,622 799,817 800,659 723,134 3,151,854 The amount of cost recognized for the Company and certain subsidiaries’ defined contribution plans for the years ended March 31, 2012, 2011 and 2010 were ¥6,938 million ($84,610 thousand), ¥6,709 million and ¥6,225 million, respectively. (11) SHAREHOLDERS’ EQUITY Changes in common stock for the years ended March 31, 2012 and 2011 were as follows: Number of common shares issued: Balance at beginning of year Balance at end of year 2012 Shares 2011 2,147,201,551 2,147,201,551 2,147,201,551 2,147,201,551 56 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Conversions into common stock of convertible debenture issued subsequent to October 1, 1982 and exercise of warrants were accounted for in accordance with the provisions of the Japanese Commercial Code by crediting one-half of the con- version price and exercise price to each of the common stock account and the capital surplus account. The Japanese Corporate Law enforced on May 1, 2006 requires that an amount equal to 10% of dividends and other distributions paid in cash by the Company and its domestic sub- sidiaries be appropriated as a legal reserve until the aggregated amount of additional paid-in capital and the legal reserve equal to 25% of the common stocks. The additional paid-in capital and the legal reserve may be used to reduce a deficit or trans- ferred to common stock with a resolution of the shareholders’ meeting. The amount available for dividends under the Japanese Corporate Law is based on the amount recorded in the Company’s books of account in accordance with accounting standards of Japan. The adjustments included in the accompa- nying consolidated financial statements to have them conform with accounting principles generally accepted in the United States of America, but not recorded in the books of account, have no effect on the determination of retained earnings avail- able for dividends under the Japanese Corporate Law. Retained earnings available for dividends shown in the Company’s books of account amounted to ¥231,947 million ($2,828,622 thou- sand) at March 31, 2012. Cash dividends and appropriations to the legal reserve charged to retained earnings during the years ended March 31, 2012, 2011 and 2010 represent dividends paid out during the years and the related appropriations to the legal reserve. (12) STOCK OPTION PLANS The Company had granted stock options to directors, execu- tive officers and senior employees. Under the stock option plan, options to purchase common stock, granted at the exercise prices not less than market value at date of grant, become exercisable in two years after the date of grant and expire within four years after the date of grant. The stock option plan activity for the years ended March 31, 2012, 2011 and 2010 is shown as follows: Outstanding at March 31, 2009 Exercised Outstanding at March 31, 2010 Outstanding at March 31, 2011 Outstanding at March 31, 2012 (13) OTHER COMPREHENSIVE INCOME (LOSS) Shares Weighted average exercise price Yen U.S. dollars 16,000 16,000 — — — ¥437 437 — — ¥ — $ — $ — Change in accumulated other comprehensive income (loss) is as follows: 2012 2011 Yen (millions) 2010 U.S. dollars (thousands) 2012 Foreign currency translation adjustments: Balance at beginning of year Adjustments for the year Balance at end of year Pension liability adjustments: Balance at beginning of year Adjustments for the year Balance at end of year Unrealized gains (losses) on securities: Balance at beginning of year Adjustments for the year Balance at end of year Unrealized gains (losses) on derivative instruments: Balance at beginning of year Adjustments for the year Balance at end of year Total accumulated other comprehensive income (loss): Balance at beginning of year Adjustments for the year Balance at end of year ¥ (59,400) (8,254) (67,654) ¥ (41,524) (17,876) (59,400) ¥ (47,499) 5,975 (41,524) (162,390) 2,234 (160,156) 5,957 6,285 12,242 (86) 51 (35) (171,674) 9,284 (162,390) 16,600 (10,643) 5,957 89 (175) (86) (233,373) 61,699 (171,674) (4,099) 20,699 16,600 (95) 184 89 $ (724,391) (100,658) (825,049) (1,980,366) 27,244 (1,953,122) 72,647 76,646 149,293 (1,049) 622 (427) (215,919) 316 ¥(215,603) (196,509) (19,410) ¥(215,919) (285,066) 88,557 ¥(196,509) (2,633,159) 3,854 $(2,629,305) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 57 Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments are as follows: Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount 2012: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥(8,379) ¥ 135 ¥(8,244) Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) (10) (8,389) — 135 (10) (8,254) (8,770) 4,597 (4,173) 10,860 2,090 3,536 5,526 9,062 88 ¥ 2,851 (4,453) 144 (654) (2,123) (2,777) 6,407 2,234 2,882 3,403 6,285 (37) ¥(2,535) 51 ¥ 316 Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount 2011: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥(22,684) ¥ 1,948 ¥(20,736) Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) 58 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 2,830 30 2,860 (19,854) 1,978 (17,876) (23,921) 9,077 (14,844) 31,554 7,633 (7,426) 1,651 24,128 9,284 (22,250) 8,864 (13,386) 4,721 (17,529) (182) ¥(29,932) (1,978) 6,886 7 ¥10,522 2,743 (10,643) (175) ¥(19,410) 2010: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥ 6,100 ¥ (550) ¥ 5,550 Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) 425 6,525 — (550) 425 5,975 80,292 (34,341) 45,951 26,691 106,983 (10,943) (45,284) 15,748 61,699 29,832 (11,214) 18,618 3,519 33,351 176 ¥147,035 (1,438) (12,652) 8 ¥(58,478) 2,081 20,699 184 ¥88,557 Before-tax amount U.S. dollars (thousands) Tax (expense) or benefit Net-of-tax amount 2012: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year $(102,183) $ 1,647 $(100,536) Less reclassification adjustments for gains (losses) included in net income Net change in foreign currency translation adjustments during the year Pension liability adjustments: Amount arising during the year on pension liability adjustments Less reclassification adjustments for gains (losses) included in net income Net change in pension liability adjustment Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the year Less reclassification adjustments for gains (losses) included in net income Net change in unrealized gains (losses) on securities Unrealized gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Other comprehensive income (loss) (122) — (122) (102,305) 1,647 (100,658) (106,951) 56,061 (50,890) 132,439 25,488 (54,305) 1,756 78,134 27,244 43,122 (7,976) 35,146 67,390 110,512 1,073 $ 34,768 (25,890) (33,866) 41,500 76,646 (451) 622 $(30,914) $ 3,854 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 59 (14) NET INCOME PER SHARE ATTRIBUTABLE TO MITSUBISHI ELECTRIC CORP. A reconciliation of the numerators and denominators of the basic and diluted net income per share attributable to Mitsubishi Electric Corp. calculations is as follows: Net income attributable to Mitsubishi Electric Corp. Effect of dilutive securities Diluted net income attributable to Mitsubishi Electric Corp. Average common shares outstanding Effect of dilutive securities: Stock option Diluted common shares outstanding Net income per share attributable to Mitsubishi Electric Corp.: Basic Diluted 2012 2011 Yen (millions) 2010 U.S. dollars (thousands) 2012 ¥112,063 — ¥124,525 — ¥28,278 — $1,366,622 — ¥112,063 ¥124,525 ¥28,278 $1,366,622 2012 2,146,926,221 — 2,146,926,221 2011 2,146,959,471 — 2,146,959,471 Shares 2010 2,146,133,669 826 2,146,134,495 2012 2011 2010 2012 Yen U.S. dollars ¥52.20 — ¥58.00 — ¥13.18 13.18 $0.637 — Diluted net income per share attributable to Mitsubishi Electric Corp. is not presented as no dilutive securities existed as of and for the year ended March 31, 2012 and 2011. (15) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Foreign Exchange Risk Management and Interest Rate Risk Management The Company and its subsidiaries operate internationally, giv- ing rise to significant exposure to market risks from changes in foreign currencies and interest rates. Derivative financial instruments are comprised principally of foreign exchange contracts, foreign currency swaps and interest rate swaps uti- lized by the Company and certain of its subsidiaries to reduce these risks. The Company and its subsidiaries do not hold or issue financial instruments for trading purposes. Contract Amounts, Notional Principal Amounts and Credit Risk The Company and its subsidiaries are exposed to risk of credit- related losses in the event of nonperformance by counterpar- ties to foreign exchange contracts, foreign currency swaps and interest rate swaps. The Company believes such risk is minimal due to the high credit ratings of these counterparties. Other derivative instruments are debt securities that contain embedded derivatives with intention to hold for a certain period. The Company believes that no material risks exist on its debt securities because the principal of those debt securi- ties are guaranteed. Information with Respect to Fair Value Hedge Certain subsidiaries have entered into foreign currency swaps to 60 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 hedge currency exposure and designate them as fair value hedges. Information with Respect to Cash Flow Hedges The Company and certain of its subsidiaries have entered into forward foreign exchange contracts mainly with forecasted transactions to hedge against market risks from changes in foreign currencies and interest rate swap agreements to modify the interest rate characteristics of a portion of its long- term debt from a variable to a fixed rate. The Company and certain of its subsidiaries designate them as cash flow hedges. The maximum period for cash flow hedges is 15 months. The Company expects that the amounts of net gain of ¥44 mil- lion ($537 thousand) in accumulated other comprehensive income (loss) will be reclassified into earnings over the next 12 months with transactions such as collection of foreign cur- rency receivables and payment of foreign currency payables and interests on long-term debt. Derivatives not designated as hedging Instruments The Company and certain of its subsidiaries enter into foreign exchange contracts and certain of foreign currency swaps and interest rate swaps that are not designated as hedging instru- ments to hedge against certain foreign currency and interest rate exposures. The Company and certain of its subsidiaries recognize the changes in unrealized gains and losses on such instruments in earnings. Contract amounts of foreign exchange contracts and foreign currency swaps and notional principal amounts of interest rate swaps and other derivative instruments at March 31, 2012 and 2011 are as follows: Foreign exchange contracts: Forwards to sell foreign currencies Forwards to buy foreign currencies Foreign currency swaps Interest rate swaps Other derivative instruments 2012 ¥91,946 47,207 23,651 7,000 29,800 Yen (millions) 2011 ¥129,398 57,395 13,121 7,000 29,800 U.S. dollars (thousands) 2012 $1,121,293 575,695 288,427 85,366 363,415 The estimated fair values of foreign exchange contracts, foreign currency swaps, interest rate swaps and other derivative instru- ments at March 31, 2012 and 2011 are as follows: Derivatives designated as hedging instruments Consolidated balance sheet line item 2012 Yen (millions) 2011 Asset derivatives Estimated fair value U.S. dollars (thousands) 2012 Foreign exchange contracts Prepaid expenses and other current assets ¥72 ¥ — $878 Derivatives designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Interest rate swaps Total Other current liabilities Other liabilities Derivatives not designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Foreign currency swaps Interest rate swaps Total Prepaid expenses and other current assets Prepaid expenses and other current assets Investments in securities and other Derivatives not designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Foreign currency swaps Other derivative instruments Total Other current liabilities Other current liabilities Other fixed liabilities 2012 ¥ 16 115 ¥131 Yen (millions) 2011 ¥ 16 163 ¥179 2012 Yen (millions) 2011 Liability derivatives Estimated fair value U.S. dollars (thousands) 2012 $ 195 1,403 $1,598 Asset derivatives Estimated fair value U.S. dollars (thousands) 2012 ¥2,339 ¥ 580 $28,525 21 108 ¥2,468 816 128 ¥1,524 2012 ¥3,682 27 3,909 ¥7,618 Yen (millions) 2011 ¥2,208 784 — ¥2,992 256 1,317 $30,098 Liability derivatives Estimated fair value U.S. dollars (thousands) 2012 $44,902 329 47,671 $92,902 The effect of foreign exchange contracts and interest rate swaps designated as cash flow hedges on the consolidated statements of income for the years ended March 31, 2012 and 2011 are as follows: Derivatives in cash flow hedging relationships Foreign exchange contracts Interest rate swaps Total 2012 ¥ 68 45 ¥113 Amount of gain or (loss) recognized in OCI on derivative (effective portion) U.S. dollars (thousands) Yen (millions) 2011 ¥(224) 25 ¥(199) 2012 $ 829 549 $1,378 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 61 Derivatives in cash flow hedging relationships Line item of gain or (loss) recognized from accumulated OCI into income (effective portion) Amount of gain or (loss) recognized from accumulated OCI into income (effective portion) U.S. dollars (thousands) Yen (millions) 2011 2012 2012 Foreign exchange contracts Other revenues (cost and expenses) ¥(16) ¥213 $(195) The effect of foreign exchange contracts, foreign currency swaps, interest rate swaps and other derivative instruments not desig- nated as hedging instruments on the consolidated statements of income for the years ended March 31, 2012 and 2011 are set forth below: Derivatives not designated as hedging instruments Line item of gain or (loss) recognized in income on derivative Foreign exchange contracts Foreign currency swaps Interest rate swaps Other derivative instruments Total (16) SECURITIZATIONS Other revenues Other revenues (cost and expenses) Other revenues (cost and expenses) Other revenues (cost and expenses) 2012 ¥ 3,130 (945) (20) (3,909) ¥(1,744) Amount of gain or (loss) recognized in income on derivative U.S. dollars (thousands) Yen (millions) 2011 ¥5,817 2012 $ 38,171 (159) (11,524) 5 — ¥5,663 (244) (47,671) $(21,268) The Company sells its accounts receivable under several secu- these receivables. ritization programs. The Company recognized losses of ¥450 million ($5,488 When the Company retains subordinated interests in the thousand), ¥643 million and ¥783 million on the securitiza- certain accounts receivables after the sale of these receiv- tions of receivables for the years ended March 31, 2012, 2011 ables, a portion of these, where the Company retains sub- and 2010, respectively. ordinated interests, is not taken off the balance sheet and is Subsequent to securitization, the Company retains collec- recorded at their fair value. Such carrying value is adjusted to tion and administrative responsibilities for the receivables. The reflect the portion that is not expected to be collectible. As of Company has not recorded a servicing asset or liability since March 31, 2012, the Company did not retain subordinated the cost of collection effort is similar to the amount of com- interests in the certain accounts receivables after the sale of mission income. Certain cash flows received from special purpose entities (SPEs) and banks on the above transactions for the years ended March 31, 2012, 2011 and 2010 are as follows: Proceeds from new securitizations 2012 ¥383,396 2011 ¥413,959 Yen (millions) 2010 ¥366,112 U.S. dollars (thousands) 2012 $4,675,561 Quantitative information about trade receivables including securitized receivables as of March 31, 2012 and 2011 are as follows: Trade receivables Less: Securitized receivables Total receivables 2012 ¥1,039,731 88,995 ¥ 950,736 Yen (millions) 2011 ¥923,510 132,519 ¥790,991 U.S. dollars (thousands) 2012 $12,679,647 1,085,305 $11,594,342 As of March 31, 2012 and 2011, delinquencies and credit losses of trade receivables including securitized receivables are immaterial. 62 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 (17) COMMITMENTS AND CONTINGENT LIABILITIES At March 31, 2012, commitments outstanding for the pur- chase of property, plant and equipment were ¥15,986 million ($194,951 thousand). It is common practice in Japan for companies, in the ordi- nary course of business, to receive promissory notes in settle- ment of accounts receivable and to subsequently discount such notes at banks. At March 31, 2012, certain subsidiaries were contingently liable to trade notes discounted in the amount of ¥810 million ($9,878 thousand). Certain subsidiar- ies account for the discounted notes as sale of receivables. As of March 31, 2012, the Company had no significant concentrations of credit risk. While the Company and certain of its subsidiar- ies are defendants and co-defendants in various lawsuits and legal actions, based upon the advice of legal counsel, the Company’s management is of the opinion that dam- ages, if any, would not have a material adverse effect on the Company’s consolidated financial position and results of operations, except for the following cases. The Company and certain of its subsidiaries move toward reconciliation with some DRAM purchasers in relation to the possibility of the violation of competition law concerning DRAM sales. In January 2007, the Company received a decision ren- dered by the European Commission imposing fines for an infringement of EU Competition Law against its sales of certain gas-insulated switchgears in Europe. However, there was a significant inconsistency on recognition of the mate- rial underlying facts between the European Commission and the Company. Therefore, the Company had appealed to the European General Court and was challenging the deci- sion. In July 2011, the Company received the judgment from the European General Court which upheld the European Commission’s decision on the underlying facts while annul- ling the fine imposed on the Company on the basis that the European Commission applied inconsistent methods of calcu- lation to different companies. In September 2011, since there is still a significant inconsistency on recognition of the material underlying facts between the European Commission and the Company, the Company has appealed to the European Court of Justice and is challenging the decision. On June 27, 2012, the Company received a part of decision re-rendered by the European Commission. Since July 2011, the Company has been subject to inves- tigation conducted by Japan Fair Trade Commission for a suspected infringement of Antimonopoly Act in connection with the sales of certain automotive parts in Japan. Also, the Company and certain of its subsidiaries have been cooperating with Competition Law investigations and inquiries conducted by the United States Department of Justice and the European Commission regarding the sales of certain automotive parts in the United States of America and European countries. As of March 31, 2012, the Company recorded reasonably estimated amount of ¥21,375 million ($260,671 thousand) as a reserve for various competition-law-related expenses in “Other liabilities” relating to the DRAM case in the United States and in Europe, and the gas-insulated switchgears case in Europe. The Company is unable to estimate the impact on the Company’s consolidated financial position and results of operation as to be arising out of the other legal proceedings. The following table provides the undiscounted maximum amount of potential future payments for each major group of guaran- tees at March 31, 2012: Guarantees of bank loan: Employees Affiliated and other companies Other Total Yen (millions) U.S. dollars (thousands) ¥ 6,841 1,348 6,368 ¥14,557 $ 83,427 16,439 77,658 $177,524 The guarantees for the employees are principally made for nies are made to enhance their credit, and the term of guar- their housing loans, and the term of guarantees is 1 year to antees is 1 year to 3 years. 25 years. The guarantees for the affiliated and other compa- Change in accrued product warranty for the years ended March 31, 2012 and 2011 is summarized as follows: Balance at beginning of year Addition Utilization Foreign currency translation adjustments Balance at end of year 2012 ¥49,392 35,690 43,613 (362) ¥41,107 Yen (millions) 2011 ¥45,904 44,363 40,420 (455) ¥49,392 U.S. dollars (thousands) 2012 $602,341 435,244 531,866 (4,414) $501,305 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 63 (18) MATERIAL OBLIGATIONS For electronic systems business, it was revealed in January cooperating with investigations conducted by each of afore- 2012 that the Company had been billing improperly over- said entities, information over accurate past man-hours has charged project costs by transferring man-hours among not been clarified yet. In addition, calculation methods to different contracts which the Company entered into with estimate the overcharged man-hour by contract, scope of the Japanese Ministry of Defense (MOD), Cabinet Satellite calculation and the factors to estimate the amount of refunds Intelligence Center (CSICE), Japan Aerospace Exploration are still under the verification process with these entities, and Agency (JAXA), National Institute of Information and it will still take time. Therefore, despite the Company recog- Communications Technology (NICT) and Ministry of Internal nizes its obligations concerning refunds, contract penalties and Affairs and Communications (MIC). Also similar incidents interest as a result of these overcharges, the Company has not were identified concerning contracts between four of the recorded any provision since the amount of liability cannot be Company’s affiliates and MOD. Consequently, since January reasonably estimated. 2012, the Company and the aforementioned affiliates have For the future fiscal years, it may cause material effects been suspended by those entities from nomination, nor partici- on the Company’s consolidated results of operation when it pating in further bidding. becomes possible to reasonably estimate the amount of such As of March 31, 2012, although the Company has been refunds and associated payments. (19) FAIR VALUE OF FINANCIAL INSTRUMENTS The Company uses the following methods and assumptions to estimate the fair value of each class of financial instrument (c) Long-term trade receivables The fair value of the Company’s long-term trade receivables is for which it is practical to estimate its value: calculated under income approach using market interest rates, (a) Cash and cash equivalents, Trade receivables, Bank loans, Trade payables, Accrued expenses and Other current liabilities therefore, it is classified in level 2. (d) Long-term debt The fair value of the Company’s corporate bonds is calculated The carrying amount approximates fair value because of the under market approach using quoted published price, there- short term nature of these instruments. fore, it is classified in level 2. The fair value of the Company’s (b) Short-term investments and Investments in securities and other The fair values of most short-term investments and invest- ments in securities and other are estimated based on quoted long-term debt is calculated under income approach using market interest rates, therefore, it is classified in level 2. The Company excludes the financial instruments relating to lease activities because its carrying amount approximates fair value. market prices for these instruments. For other investments for which there are no quoted market prices, a reasonable (e) Derivative financial instruments The fair values of derivative financial instruments, consisting estimate of fair value could not be made without incurring principally of foreign exchange contracts, foreign currency excessive costs. swaps and interest rate swaps are estimated by obtaining quotes from brokers. (See note 15 about estimated fair value.) The estimated fair values of the Company’s financial instruments at March 31, 2012 and 2011 are summarized as follows: 2012 Carrying amount Yen (millions) 2011 Estimated fair value Carrying amount Estimated fair value U.S. dollars (thousands) Estimated fair value 2012 Carrying amount Nonderivatives: Assets: Marketable securities and other Long-term trade receivables ¥166,824 1,017 ¥166,824 1,056 ¥173,252 2,090 ¥173,252 2,142 $2,034,439 12,402 $2,034,439 12,878 Liabilities: Long-term debt, including current portion 401,374 403,718 390,051 392,774 4,894,805 4,923,390 64 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Limitations Fair value estimates are made at a specific point in time based and involve uncertainties and matters of significant judgment on relevant market information and information about the and therefore cannot be determined with precision. Changes financial instrument. These estimates are subjective in nature in assumptions could significantly affect the estimates. (20) FAIR VALUE MEASUREMENTS The Company defines fair value as “the price that would be the asset or liability. received to sell an asset or paid to transfer a liability in an orderly Level 3 : Unobservable inputs for the asset or liability. transaction between market participants at the measurement date”. On that basis, the Company has categorized the inputs for Starting in the fourth quarter of this year, the Company applies fair value measurement by the valuation technique into a three- FASB ASU 2011-04 ”Amendments to Achieve Common Fair level hierarchy, and placed the order of priority. Level 1 : Quoted prices in active markets for identical assets Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU 2011-04 intends to align the fair value mea- or liabilities. surement and disclosure in U.S. GAAP and IFRSs, and expands Level 2 : Inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the disclosure requirements of ASC Topic 820. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and 2011. The Company measures the fair value of those assets and liabilities in accordance with the require- ments of FASB ASC for those assets and liabilities. Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives Level 1 Level 2 Level 3 Total 2012 Yen (millions) ¥119,054 ¥ — ¥— ¥119,054 — — — — 44,288 3,482 2,540 7,749 — — — — 44,288 3,482 2,540 7,749 Yen (millions) Level 1 Level 2 Level 3 Total 2011 ¥120,563 ¥ — ¥— ¥120,563 1,506 — — 47,505 3,678 1,524 — 3,171 — — — — 49,011 3,678 1,524 3,171 U.S. dollars (thousands) Level 1 Level 2 Level 3 Total 2012 $1,451,878 $ — $— $1,451,878 — — — — 540,098 42,463 30,976 94,500 — — — — 540,098 42,463 30,976 94,500 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 65 Level 1 equity securities are marketable equity securities, and frequency of transactions. Level 2 debt securities are which are valued using unadjusted quoted market prices in valued based on market approach, using quoted prices for active markets with sufficient volume and frequency of trans- identical assets in markets that are not active. Level 2 deriva- actions. Debt securities are comprised of government, munici- tives are comprised principally of foreign exchange contracts, pal and corporate debt securities and others, and investment which are valued based on market approach, using quotes trusts. Level 1 debt securities are valued using unadjusted obtained from counterparties or third parties. quoted market prices in active markets with sufficient volume Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis At March 31, 2012, in accordance with the requirements of FASB ASC Topic 360 “Property, Plant and Equipment”, long- lived assets were written down to their fair value of ¥6,423 million ($78,329 thousand), resulting in an impairment charge of ¥3,782 million ($46,122 thousand), which was included in loss on impairment of long-lived assets for the year ended March 31, 2012. The impaired long-lived assets are clas- sified as Level 3 assets, because they are measured based on the unobservable inputs such as estimated future cash flows under income approach or net sale price under market approach. The valuation process of long-lived assets is docu- mented in “Notes to Consolidated Financial Statements (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (u)Impairment of Long-Lived Assets”. At December 31, 2010, equity securities with an equity method were written down to their fair value of ¥8,348 mil- lion, resulting in an other-than-temporary impairment charge of ¥8,414 million, which was included in equity in earnings (losses) of affiliated companies for the year ended March 31, 2011. The impaired equity securities were classified as Level 1 instruments, because they were measured by the quoted prices in active markets. At March 31, 2011, long-lived assets were written down to their fair value of ¥6,040 million, resulting in an impair- ment charge of ¥4,005 million, which was included in loss on impairment of long-lived assets for the year ended March 31, 2011. The impaired long-lived assets were classified as Level 3 assets, because they were measured by the unobservable inputs, based on income approach. (21) SUPPLEMENTARY INCOME AND EXPENSE INFORMATION Advertising expenses Shipping and handling costs Exchange gains (losses) Business restructuring costs Loss on disaster Loss on impairment of long-lived assets 2012 ¥(18,372) (73,283) (2,000) — — (3,782) 2011 ¥(17,053) (74,782) (10,174) (2,501) (5,456) (4,005) Yen (millions) 2010 ¥(16,462) (63,198) 68 — — (16,942) U.S. dollars (thousands) 2012 $(224,049) (893,695) (24,390) — — (46,122) Advertising expenses are included in “Costs and expenses— Selling, general and administrative”. Shipping and handling costs represents the costs included in “Costs and expenses—Selling, general and administrative”. Exchange gains (losses) are included in “Revenues— Other” and “Costs and expenses—Other”. Business restructuring costs are included in “Costs and expenses—Other”. For the year ended March 31, 2011, the Company rec- ognized business restructuring costs of ¥2,501 million for the after-sale service expense and retirement benefits and others associated with the restructuring of the visual equipment busi- nesses in North America. Loss on disaster is included in “Costs and expenses —Other”. For the year ended March 31, 2011, the Company rec- ognized disaster losses of ¥5,456 million for the repair and removal of facilities, the disposal and inspection of inventories and restoration support for counterparties which is suffered from an earthquake associated with the recovery from dam- age suffered from the Great East Japan Earthquake. Loss on impairment of long-lived assets is included in “Costs and expenses—Loss on impairment of long-lived assets.” For the year ended March 31, 2012, the Company and certain of its subsidiaries recognized impairment losses of ¥3,367 million ($41,061 thousand) for tangible assets such as buildings and machinery as well as ¥415 million ($5,061 thou- sand) for intangible assets. The impairment losses included ¥2,429 million ($29,622 thousand) for the Electronic Devices business related assets and ¥1,110 million ($13,537 thousand) for the Home Appliances business related assets due to a decline in the profitability. The impairment losses were mainly measured based on the fair value less cost to sell. 66 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 For the year ended March 31, 2011, the Company and certain of its subsidiaries recognized impairment losses of ¥3,538 million for tangible assets such as buildings and machinery as well as ¥467 million for intangible assets. The impairment losses included ¥1,879 million for the Home Appliances business related assets due to a decline in the profitability and ¥1,908 million for the welfare related assets. The impairment losses were mainly measured based on the fair value less cost to sell. For the year ended March 31, 2010, the Company and certain of its subsidiaries recognized impairment losses of ¥16,425 million for tangible assets such as buildings and machinery as well as ¥517 million for intangible assets. The impairment losses included ¥11,053 million for the Home Appliances business related assets due to a decline in the profitability and ¥5,436 million for the welfare related assets. The impairment losses were mainly measured based on the fair value of the discounted present value of expected future cash flow. (22) LEASES The Company and certain of its subsidiaries enter into capital lease and operating lease agreements with Mitsubishi Electric Credit Corporation, an equity method investee. The leased assets, which are committed under capital lease agree- ments, are capitalized. The Company and certain of its subsidiaries lease machin- ery and equipments. At March 31, 2012, the aggregated cost and accumulated depreciation of leased assets under capital leases amounted to ¥48,606 million ($592,756 thousand) and ¥25,281 million ($308,305 thousand), respectively. Future minimum lease payments under capital and non-cancelable operating leases as of March 31, 2012 are as follows: Year ending March 31: 2013 2014 2015 2016 2017 Thereafter Total minimum lease payments Less: Estimated executory costs Net minimum lease payments Less: Amount representing interest Present value of net minimum capital lease payments Less: Current portion of obligations under capital leases Obligations under capital leases, excluding current portion Yen (millions) U.S. dollars (thousands) Capital leases Operating leases Capital leases Operating leases ¥ 4,510 3,229 2,357 1,366 812 677 ¥12,951 ¥11,050 9,506 5,380 3,004 812 76 29,828 278 29,550 303 29,247 10,712 ¥18,535 $ 55,000 39,378 28,744 16,659 9,902 8,256 $157,939 $134,756 115,927 65,610 36,634 9,902 927 363,756 3,390 360,366 3,695 356,671 130,634 $226,037 Rental expenses related to operating leases for the years ended March 31, 2012, 2011 and 2010 amounted to ¥42,076 million ($513,122 thousand), ¥41,007 million and ¥40,760 million, respectively. These operating leases are for office space, warehouses, employee facilities and computer equipment, and are customarily renewed. (23) SUPPLEMENTARY CASH FLOW INFORMATION Cash paid during the year for: Interest Income taxes 2012 2011 Yen (millions) 2010 ¥ 6,413 65,901 ¥ 7,722 34,166 ¥ 8,748 17,596 U.S. dollars (thousands) 2012 $ 78,207 803,671 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 67 (24) SEGMENT INFORMATION Starting from financial results for the fiscal year ended March The Company conducts business through 6 reportable 31, 2010, the Company discloses its segment information in business segments, Energy and Electric Systems, Industrial accordance with FASB ASC Topic 280 “Segment Reporting”. Automation Systems, Information and Communication Operating segment presented below is identified based Systems, Electronic Devices, Home Appliances, and Others, on the segments for which separate financial information based on types and characteristics of products, production is available, and is periodically used for decision of business method, and similarity in market. resources allocation and evaluation of business operation by the Company’s management. Principal businesses of each segment are as follows: Energy and Electric Systems Industrial Automation Systems Turbine generators, hydraulic turbine generators, nuclear power plant equipment, motors, transformers, power electronics equipment, circuit breakers, gas insulated switches, switch control devices, surveillance-system control and security systems, large display devices, electrical equipment for locomotives and rolling stock, elevators, escalators, building security systems, building management systems, particle beam treatment systems, and others Programmable logic controllers, inverters, servomotors, human-machine interface, motors, hoists, magnetic switches, no-fuse circuit breakers, short-circuit breakers, transformers for electricity distribution, time and power meters, uninterruptible power supply, industrial fans, computerized numerical controllers, electrical-discharge machines, laser processing machines, industrial robots, clutches, automotive electrical equipment, car electronics and car mechatronics, car multimedia, and others Information and Communication Systems Wireless and wired communications systems, surveillance cameras, satellite communications equipment, satellites, radar equipment, antennas, missile systems, fire control systems, broadcasting equipment, data transmission devices, network security systems, information systems equipment, systems integration, and others Electronic Devices Power modules, high-frequency devices, optical devices, LCD devices, microcomputers, system LSIs, and others Home Appliances LCD televisions, projection TVs, display monitors, projectors, blu-ray disc recorders, room air conditioners, package air conditioners, air-to-water heat pump boilers, refrigerators, electric fans, ventilators, photovoltaic power generation sys- tems, hot water supply systems, LED lamps, fluorescent lamps, indoor lighting, compressors, chillers, dehumidifiers, air purifiers, showcases, cleaners, rice cookers, microwave ovens, IH cooking heaters, and others Others Procurement, logistics, real estate, advertising, finance and other services Intersegment transactions are conducted generally at the price that the Company’s management recognizes as approximate arm's length price. Operating income (loss) in Segment Information is measured in a manner consistent with consolidated oper- ating income. Segment Information Segment information in the years ended March 31, 2012, 2011 and 2010 are as follows: As of and for the year ended March 31, 2012 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures ¥1,018,949 8,166 1,027,115 942,195 ¥ 84,920 ¥967,779 10,601 978,380 877,188 ¥101,192 ¥489,824 26,530 516,354 495,042 ¥ 21,312 ¥170,412 30,387 200,799 197,214 ¥ 3,585 ¥821,270 28,004 849,274 826,916 ¥ 22,358 ¥171,234 440,385 611,619 591,271 ¥ 20,348 ¥3,639,468 544,073 4,183,541 3,929,826 ¥ 253,715 ¥ — ¥3,639,468 — 3,639,468 3,414,024 ¥ 225,444 (544,073) (544,073) (515,802) ¥ (28,271) ¥1,064,369 ¥855,710 ¥477,646 ¥147,926 ¥636,835 ¥191,056 ¥3,373,542 ¥ 18,109 ¥3,391,651 24,365 43,380 29,036 11,207 26,678 5,480 140,146 — 30,269 — 56,487 — 22,116 2,429 21,424 1,110 35,160 243 5,620 3,782 171,076 — — — 140,146 3,782 171,076 68 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 As of and for the year ended March 31, 2011 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total As of and for the year ended March 31, 2010 I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income (loss) II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures ¥1,019,270 8,479 1,027,749 944,694 ¥ 83,055 ¥921,667 5,335 927,002 826,913 ¥100,089 ¥465,688 22,227 487,915 474,172 ¥ 13,743 ¥149,623 26,287 175,910 170,009 ¥ 5,901 ¥911,788 12,690 924,478 882,470 ¥ 42,008 ¥177,295 432,121 609,416 594,941 ¥ 14,475 ¥3,645,331 507,139 4,152,470 3,893,199 ¥ 259,271 ¥ — ¥3,645,331 — 3,645,331 3,411,570 ¥ 233,761 (507,139) (507,139) (481,629) ¥ (25,510) ¥1,030,968 ¥806,494 ¥369,813 ¥139,333 ¥695,730 ¥164,719 ¥3,207,057 ¥ 125,622 ¥3,332,679 21,076 40,193 16,123 10,414 25,280 5,616 118,702 — 22,582 — 35,989 42 12,123 — 15,130 1,879 29,139 2,084 3,323 4,005 118,286 — — — 118,702 4,005 118,286 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total ¥1,029,573 10,096 1,039,669 964,942 ¥ 74,727 ¥714,145 18,987 733,132 706,994 ¥ 26,138 ¥505,192 20,969 526,161 507,489 ¥ 18,672 ¥119,531 19,454 138,985 146,126 ¥ (7,141) ¥813,862 10,817 824,679 819,870 ¥ 4,809 ¥170,995 381,986 552,981 549,777 ¥ 3,204 ¥3,353,298 462,309 3,815,607 3,695,198 ¥ 120,409 ¥ — ¥3,353,298 — (462,309) 3,353,298 (462,309) 3,258,996 (436,202) ¥ 94,302 ¥ (26,107) ¥1,051,406 ¥758,993 ¥403,024 ¥110,978 ¥669,638 ¥164,873 ¥3,158,912 ¥ 56,182 ¥3,215,094 22,041 48,256 20,477 6,331 29,878 6,055 133,038 6 20,882 — 36,442 50 11,162 397 12,835 11,053 32,380 5,436 5,402 16,942 119,103 — — — 133,038 16,942 119,103 U.S. dollars (thousands) As of and for the year ended March 31, 2012 I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets, depreciation and amortization, loss on impairment of long-lived assets, and capital expenditures Assets Depreciation and amortization Loss on impairment of long-lived assets Capital expenditures Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total $12,426,207 $11,082,183 129,280 11,931,463 10,697,414 $ 1,035,610 $ 1,234,049 99,586 12,525,793 11,490,183 $5,973,463 $2,078,195 370,573 2,448,768 2,405,048 $ 259,902 $ 43,720 323,537 6,297,000 6,037,098 $10,015,488 $2,088,220 $44,383,756 $ — $44,383,756 — 6,635,037 44,383,756 51,018,793 41,634,439 47,924,708 $ 272,659 $ 248,145 $ 3,094,085 $ (344,768) $ 2,749,317 (6,635,037) (6,635,037) (6,290,269) 341,512 10,357,000 10,084,341 5,370,549 7,458,769 7,210,624 $12,980,110 $10,435,488 $5,824,951 $1,803,976 $ 7,766,280 $2,329,951 $41,140,756 $ 220,842 $41,361,598 297,134 529,024 354,098 136,671 325,341 66,830 1,709,098 — 369,134 — 688,866 — 269,707 29,622 261,268 13,537 428,781 2,963 68,537 46,122 2,086,293 — — — 1,709,098 46,122 2,086,293 Notes: 1 The amount of unallocatable R&D expenditure included in “Eliminations and other” on “Operating costs” for the years ended March 31, 2012, 2011 and 2010 are ¥28,271 million ($344,768 thousand), ¥25,510 million and ¥26,107 million, respectively. 2 The amount of company-wide shared assets included in “Eliminations and other” on “Assets” for the years ended March 31, 2012, 2011 and 2010 are ¥211,012 million ($2,573,317 thousand), ¥267,159 million and ¥204,551 million, respectively, and those amounts are mainly the Company’s deposit in bank. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 69 Geographical Information Sales to external customers by the location of customers, and long-lived assets by the location of the Company and its subsidiar- ies as of and for the years ended March 31, 2012, 2011 and 2010 are as follows: As of and for the year ended March 31, 2012 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,419,275 North America ¥239,566 Asia (excluding Japan) ¥590,890 66.5% 6.6% 505,529 12,550 16.2% 66,488 Europe ¥304,233 8.4% 13,127 Others ¥85,504 Overseas total ¥1,220,193 Consolidated total ¥3,639,468 2.3% 2,235 33.5% 94,400 100.0% 599,929 As of and for the year ended March 31, 2011 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,416,090 66.3% 488,524 North America ¥251,071 Asia (excluding Japan) ¥603,261 6.9% 8,055 16.6% 57,465 Europe ¥289,440 7.9% 13,481 Others ¥85,469 Overseas total ¥1,229,241 Consolidated total ¥3,645,331 2.3% 2,154 33.7% 81,155 100.0% 569,679 As of and for the year ended March 31, 2010 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,262,834 North America ¥236,409 Asia (excluding Japan) ¥488,613 67.5% 7.0% 467,367 10,182 14.6% 62,647 Europe ¥286,284 8.5% 11,534 Others ¥79,158 Overseas total ¥1,090,464 Consolidated total ¥3,353,298 2.4% 2,110 32.5% 86,473 100.0% 553,840 As of and for the year ended March 31, 2012 U.S. dollars (thousands) Overseas Sales to external customers % of total net sales Long-lived assets Japan $29,503,354 North America $2,921,536 Asia (excluding Japan) $7,205,976 Europe $3,710,158 Others $1,042,732 Overseas total $14,880,402 Consolidated total $44,383,756 66.5% 6.6% 16.2% 8.4% 2.3% 33.5% 100.0% 6,164,988 153,049 810,829 160,085 27,256 1,151,219 7,316,207 Notes: The major countries and regions included in each segments are as follows: (1) North America : United States, and Canada (2) Asia (excluding Japan) : China, South Korea, Thailand, Malaysia, Singapore, and Indonesia (3) Europe : United Kingdom, France, Germany, the Netherlands, Spain, and Italy In addition to the disclosure requirement of FASB ASC Topic 280 “Segment Reporting”, the Company discloses the following information as supplement. Geographical Information Based on the Location of the Company and Its Subsidiaries As of and for the year ended March 31, 2012 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets ¥2,675,473 511,246 3,186,719 3,007,267 ¥ 179,452 ¥2,594,841 ¥206,359 16,184 222,543 219,204 ¥ 3,339 ¥177,694 ¥416,574 166,314 582,888 548,668 ¥ 34,220 ¥448,911 ¥300,891 9,106 309,997 303,678 ¥ 6,319 ¥169,676 ¥40,171 13 40,184 36,279 ¥ 3,905 ¥28,783 ¥3,639,468 702,863 4,342,331 4,115,096 ¥ 227,235 ¥3,419,905 ¥ — (702,863) (702,863) (701,072) ¥ (1,791) ¥ (28,254) ¥3,639,468 — 3,639,468 3,414,024 ¥ 225,444 ¥3,391,651 70 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 As of and for the year ended March 31, 2011 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets ¥2,685,219 491,386 3,176,605 2,999,251 ¥ 177,354 ¥2,552,679 ¥216,536 13,422 229,958 228,595 ¥ 1,363 ¥155,972 ¥419,557 164,270 583,827 540,093 ¥ 43,734 ¥430,965 ¥285,862 8,090 293,952 286,122 ¥ 7,830 ¥183,427 ¥38,157 43 38,200 33,871 ¥ 4,329 ¥26,958 ¥3,645,331 677,211 4,322,542 4,087,932 ¥ 234,610 ¥3,350,001 ¥ — (677,211) (677,211) (676,362) ¥ (849) ¥ (17,322) ¥3,645,331 — 3,645,331 3,411,570 ¥ 233,761 ¥3,332,679 As of and for the year ended March 31, 2010 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets ¥2,531,542 354,960 2,886,502 2,836,829 ¥ 49,673 ¥2,527,697 ¥189,927 15,786 205,713 200,182 ¥ 5,531 ¥130,586 ¥325,730 119,992 445,722 418,385 ¥ 27,337 ¥391,891 ¥272,993 9,829 282,822 279,731 ¥ 3,091 ¥162,568 ¥33,106 34 33,140 31,191 ¥ 1,949 ¥22,101 ¥3,353,298 500,601 3,853,899 3,766,318 ¥ 87,581 ¥3,234,843 ¥ — (500,601) (500,601) (507,322) ¥ 6,721 ¥ (19,749) ¥3,353,298 — 3,353,298 3,258,996 ¥ 94,302 ¥3,215,094 As of and for the year ended March 31, 2012 U.S. dollars (thousands) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets 6,234,707 38,862,427 36,673,988 $32,627,720 $2,516,573 $5,080,171 $3,669,402 $489,890 $44,383,756 $ — $44,383,756 — 44,383,756 41,634,439 $ 2,188,439 $ 40,719 $ 417,317 $ 77,061 $ 47,622 $ 2,771,158 $ (21,841) $ 2,749,317 $31,644,403 $2,167,000 $5,474,524 $2,069,220 $351,012 $41,706,159 $ (344,561) $41,361,598 (8,571,500) (8,571,500) (8,549,659) 8,571,500 52,955,256 50,184,098 2,028,219 7,108,390 6,691,073 111,049 3,780,451 3,703,390 197,366 2,713,939 2,673,220 159 490,049 442,427 Notes: 1 The Company has identified 5 location segments based on geographical proximity, similarity in market, and interconnectedness within business activities. 2 The major countries and regions included in each segments are as follows: (1) North America : United States, and Canada (2) Asia (excluding Japan) : China, South Korea, Thailand, Malaysia, Singapore, and Indonesia (3) Europe : United Kingdom, France, Germany, the Netherlands, Spain, and Italy 3 The amount of company-wide shared assets included in “Eliminations and other” on “Assets” for the years ended March 31, 2012, 2011 and 2010 is ¥211,012 million ($2,573,317 thousand), ¥267,159 million and ¥204,551 million, respectively, and those amounts are mainly the Company’s deposit in bank. (25) SUBSEQUENT EVENT On June 28, 2012, the date the consolidated financial statements were issued, there are no incidence of subsequent events that would give material effects on the Company’s consolidated financial position and results of operations. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 71 Independent Auditors’ Report 72 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 Corporate Data / Shareholder Information (As of March 31, 2012) Corporate Data Mitsubishi Electric Corporation Tokyo Building, 2-7-3, Marunouchi, Chiyoda-ku, Tokyo 100-8310, Japan Tel: +81(3)3218-2111 Established: January 15, 1921 Paid-in Capital: ¥175,820 million Shares issued: 2,147,201,551 shares Employees: 117,314 Major Shareholders The Master Trust Bank of Japan, Ltd. (Trust Account) Japan Trustee Services Bank, Ltd. (Trust Account) State Street Bank and Trust Company Meiji Yasuda Life Insurance Company Nippon Life Insurance Company Mitsubishi Electric Group Employees Shareholding Union SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS The Bank of Tokyo-Mitsubishi UFJ, Ltd. Japan Trustee Services Bank, Ltd. (Trust Account 4) The Chase Manhattan Bank, NA. London SL Omnibus Account Annual Meeting The annual meeting of shareholders of the Corporation is normal- ly held in June each year. In addition, the Corporation may hold a special meeting of shareholders as necessary, giving at least two weeks advance notice to shareholders. Stock Exchange Listings Japan: Tokyo Europe: London Number of Shares (thousands) Percentage of Total 156,653 129,439 102,025 81,862 72,439 50,303 48,905 36,849 35,428 33,899 7.3% 6.0% 4.8% 3.8% 3.4% 2.3% 2.3% 1.7% 1.7% 1.6% Distribution of Shareholders Other Corporations 6.4% Traders of Financial Instruments 1.6% Foreign Corporations 30.0% Financial Institutions 44.2% Individuals and Others 17.8% Stock Price (Yen) 1,500 1,200 900 600 300 0 ’09/4 ’10/4 ’11/4 The Nikkei Stock Average is based on information copyrighted by Nihon Keizai Shimbun, Inc. 20,000 15,000 10,000 5,000 ’12/4 Nikkei Stock Average (Yen) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2012 73 Please address inquiries for further information to: Mitsubishi Electric Corporation, Corporate Finance Div. Tokyo Building, 2-7-3, Marunouchi, Chiyoda-ku, Tokyo 100-8310, Japan Phone: 81-3-3218-2391 X-X01-2-C9000-A　HQ1207〈MDOC〉 

Continue reading text version or see original annual report in PDF format above