Metgasco Limited
Annual Report 2015

Plain-text annual report

A Global, Leading Green Company That Contents 02 To Our Shareholders 03 Financial Highlights 04 Corporate Strategy 06 At a Glance Fiscal 2015 Overview 08 Review of Operations 08 Energy and Electric Systems 09 Industrial Automation Systems 10 Information and Communication Systems 11 Electronic Devices 12 Home Appliances 13 Research and Development / Intellectual Property 16 Corporate Social Responsibility 19 Corporate Governance 21 Directors and Executive Officers 22 Organization 23 Major Subsidiaries and Affiliates 25 Financial Section 75 Corporate Data / Shareholder Information Enriches Society with Technology. As the Mitsubishi Electric Group comes closer to celebrating in fiscal 2021 the 100th anniversary of our founding, we will contribute to the enrichment of society as a global, leading green company. By "enriching society," we mean creating a “people-friendly” society where everyone can live their lives in safety, peace of mind, health, and comfort—and at the same time an “earth-friendly” society that reduces impact to the environment by advancing the efficient use and reuse of resources and energy. We of the Mitsubishi Electric Group have come to provide cutting-edge technologies and diverse businesses globally, and on a broad scale of applications ranging from homes, offices, and factories to social infrastructure and outer space. “To pave the way to a better and brighter tomorrow”— this will be our mindset for future efforts as we increase collaboration within the Group and continually challenge ourselves to innovate. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 01 To Our Shareholders Looking back on the economic situation during the fiscal year management targets. At the same time, our goal is to achieve ended March 31, 2015 (hereinafter fiscal 2015), the recovery of consolidated net sales of ¥5.0 trillion or more and an operating Japan’s domestic economy, which mainly relied on personal con- income ratio of 8% or more by fiscal 2021. sumption, remained weak. Outside of Japan, while the pace of The Mitsubishi Electric Group is committed to further expand- economic growth slowed in China and some newly emerging ing its business worldwide. As a global leading green company, nations, expansion continued in North America, and European we will pursue every avenue to develop operations in fields relat- economies showed positive growth. Thus in general, economies ed to the environment and energy, and social infrastructure. To continued to experience modest expansion. Turning to move- this end, we will build an optimal global business promotion ments in foreign currency exchange rates, the yen remained structure encompassing the Group as a whole and continue to weak against the U.S. dollar and strong against the euro. Under strengthen it on an ongoing basis. Specifically, we will focus on these circumstances, the Mitsubishi Electric Group placed greater bolstering business operations in Europe, the United States, and emphasis than ever before on promoting growth strategies root- China, and work diligently to respond to demand and capture ed in its competitive advantages, as well as on efforts to boost its market share in growth regions including India, Southeast Asia, competitiveness and strengthen its management structure. and Central and South America. As a result, the Mitsubishi Electric Group recorded consolidated Furthermore, we will endeavor to increase our corporate value net sales of ¥4,323.0 billion in the fiscal year ended March 31, by building a robust management structure that is capable of 2015, an increase of 7% compared to the previous fiscal year. realizing “high-quality” growth and steadfastly promoting CSR- Operating income increased 35% year-on-year to ¥317.6 billion, related activities. for a Group operating income ratio of 7.3%. Meanwhile, net As we resolutely advance forward to achieve our goals, we ask income increased 53% to ¥234.6 billion. Moving forward, we for your continued support. will carry out a variety of measures in effort to maintain a return on equity (ROE) above 10% while keeping the ratio of interest- bearing debt to total assets below 15%, in accordance with 02 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 July 2015 President & CEO Masaki Sakuyama Financial Highlights Performance for the Year Ended March 31, 2015 Yen (millions) U.S. dollars (thousands) Years ended March 31 2015 2014 2013 Net sales Operating income 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 Net income attributable to Mitsubishi Electric Corp. Basic Diluted Cash dividends declared Statistical Information Operating income ratio Return on equity (ROE) Interest-bearing debt to total assets ¥4,323,041 317,604 234,694 4,059,451 381,994 1,842,203 199,758 195,314 ¥4,054,359 235,172 153,473 3,612,966 373,478 1,524,322 151,840 178,945 ¥3,567,184 152,095 69,517 3,410,410 540,572 1,300,070 150,425 172,222 2015 $36,025,342 2,646,700 1,955,783 33,828,758 3,183,282 15,351,692 1,664,650 1,627,617 Yen U.S. dollars ¥109.32 ¥71.49 ¥32.38 — 27 7.3% 13.9 9.4 — 17 5.8% 10.9 10.3 — 11 % 4.3% 5.7 15.9 $0.911 — 0.225 — — — See accompanying Notes to Consolidated Financial Statements on page 41. 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 Diluted net income per share attributable to Mitsubishi Electric Corp. is not included in the above figure as no dilutive securities existed. 4 U.S. dollar amounts are converted from yen at the rate of ¥120=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2015. Net Sales Breakdown by Business Segment 14.8% Others Net sales ¥740,517 million Energy and Electric Systems 24.6% Net sales ¥1,228,958 million Home Appliances 18.9% Net sales ¥944,830 million Electronic Devices 4.8% Net sales ¥238,402 million Industrial Automation Systems 25.7% ¥1,282,749 million Net sales Information and Communication Systems 11.2% ¥559,521 million Net sales MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 03 Corporate Strategy The Mitsubishi Electric Group, based on its Corporate Mission and Seven Guiding Principles, has positioned corporate social responsibility (CSR) initiatives as the pillar of its corporate management. It seeks to become a corporation that is trusted by society, customers, shareholders, and employees, and that earns their satisfaction through its business activities. At the same time, the Group strives to simultaneously address the need to create an environment in which people can live safe, secure, and comfortable lives and promote a sustainable society. Concerning CSR—in particular, corporate ethics and compliance—the entire Mitsubishi Electric Group will continue to strictly observe all statutory, regulatory, and ethical require- ments while strengthening internal control. In addition, every effort will be made to implement improvement measures, including initiatives aimed at properly addressing Japan's Corporate Governance Code. Since fiscal 2002, the Mitsubishi Electric Group has continued Management Policy Maintain Balanced Corporate Management for Sustainable Growth Growth • Accelerate the growth of strong businesses • Further global expansion • Create new strong businesses • Reinforce the solutions business Greater Corporate Value Profitability Efficiency • Enhance capital efficiency • Create a stronger business foundation Soundness • Constantly review and refresh business portfolio • Maintain sound financial standing • Promote thorough Ethics and Compliance and CSR initiatives to pursue sustainable growth by undertaking balanced management initiatives that stem from the three perspectives of growth, profitability and efficiency, and soundness. Looking ahead, the Group will carry out these initiatives while promot- ing the global expansion of business in the areas of environment and energy- and social infrastructure- related systems. As a global, leading green company, Mitsubishi Electric is committed to creating an affluent society, securing business growth, and diligently working to increase corporate value. Management Targets In line with its efforts to achieve a higher level of growth, the • Growth Targets to be Achieved by Fiscal 2021 Mitsubishi Electric Group has revised its growth targets for fiscal 2021 to consolidated net sales of ¥5.0 trillion or more and an Net sales ¥5.0 trillion or more Operating income ratio 8% or more operating income ratio of 8% or more. Looking ahead, the Group will also continue with efforts to achieve the following management targets: secure an ROE of 10% or more and secure an interest-bearing debt to total assets ratio of 15% or less. • Management Targets to be Continuously and Stably Achieved ROE 10% or more Ratio of interest-bearing debt to total assets 15% or less Bolstering Growth Strategies: For a Higher Level of Growth N Fundamental Concepts of the Group’s Growth Strategies as control technologies and power electronics. In addition, the The Mitsubishi Electric Group’s strength lies in its solid technology Group possesses a solid business platform that encompasses platform, which encompasses a wide range of technologies such materials procurement, production, quality assurance, and sales Overview of Growth Strategies Technological Assets Control (motion, heat, fluid, and electricity) Power Electronics Human Machine Interface Encryption Communication Electromagnetic Analysis Sensing Design Devices etc. Technological Platform R&D and IP Mitsubishi Electric Group s e i g r e n y S l l a c i g o o n h c e T (cid:31) Make Strong Businesses Stronger (cid:31) Continuous Creation of New Strong Businesses (cid:31) Reinforce the Solutions Business Centered on Strong Businesses s e i g r e n y S s s e n i s u B Procurement Productivity Quality Sales and Services Operating Platform Open & Global Innovation Enhance technological development capabilities through joint R&D initiatives Universities Corporations National Research and Development Agency Government Standardization Organizations 04 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Management Policy and services, in all of which a culture of improvement is firmly In increasing the allocation of development, capital, and other entrenched. The Mitsubishi Electric Group’s growth strategies are investment resources, the Group will target businesses that are built on its efforts to create technological and operating synergies capable of quickly securing growth while generating short-term by coordinating and combining operations between these plat- investment benefits and exhibiting a high probability of expan- forms consistently, as well as its efforts to make strong businesses sion with little or no performance volatility. Additionally, aiming stronger, continuously create new strong businesses, and rein- to augment its growth, the Mitsubishi Electric Group will actively force the solutions business centered on strong businesses. pursue collaborative ties and M&As from the three perspectives N Further Global Business Expansion of: supplementing product groups and technology fields in which the Group is lacking, to expand business; securing sales and ser- The Mitsubishi Electric Group works actively to achieve stable vice networks when advancing into new regions and markets; growth and greater profitability in the Japanese market. The and acquiring new customer segments in order to bolster the Group’s principal operating market Japan accounts for Group’s business platform. approximately 60% of total net sales. In markets outside of Japan, the Group will strengthen the competitiveness of opera- N Initiatives for Creating New Businesses Capable tions and expand its business scale in Europe, the United States, of Driving Growth and China, which form the nucleus of its global business To ensure sustainable growth beyond fiscal 2021, the Mitsubishi development endeavors. Electric Group will work to maximize the operations of its Furthermore, in order to realize an even higher level of growth, overseas bases in Europe, the United States, and China, and the Group will promote the cultivation of new markets by estab- engage in joint research and development with external partners. lishing business systems in newly emerging regions such as India, Such efforts are in line with the Group‘s commitment to Southeast Asia, and Central and South America. forward-looking R&D aimed at creating new businesses that are capable of driving future growth. Toward “High-Quality” Growth In fiscal 2015, the Mitsubishi Electric Group achieved record highs in net sales and operating income on a consolidated basis. Building a Robust Management Foundation To strengthen its management foundation, the Mitsubishi Electric Specifically, consolidated net sales and operating income totaled Group will reallocate management resources to growth fields by ¥4,323.0 billion and ¥317.6 billion, respectively. reviewing and refreshing its business portfolio and continuously In addition, the Group continued to achieve its management enhancing capital efficiency. targets for ROE of 10% or more and a ratio of interest-bearing As a part of the initiatives to enhance capital efficiency, the debt to total assets of 15% or less, recording figures of 13.9% Group will continue to expand net sales and reduce costs while and 9.4%, respectively. engaging in activities aimed at improving inventory turnover, Moving forward, the Group will continue to focus on executing trade receivables turnover, and Just in Time operations. balanced management initiatives while boosting competitiveness. Furthermore, in fiscal 2016, a new internal performance At the same time, it will endeavor to expand sales, increase indicator that comprehensively measures operating efficiency was profitability, and pursue “high-quality” growth by constantly introduced to widen the scope of improvement activities. This will reviewing and refreshing its business portfolio and enhancing enable the Group as a whole to secure further improvements in capital efficiency. Boosting Competitiveness N Increasing the Allocation of Resources to Businesses Driving Future Growth ROE by continuously improving this indicator for each business. Looking ahead, the Mitsubishi Electric Group will continue to focus on generating stable cash flows, actively investing in growth fields, pursuing the balanced distribution of profits to shareholders through the payment of dividends, and diligently The Mitsubishi Electric Group is active across a wide range of working to increase corporate value. diverse businesses. Aiming for “high-quality” growth, the Group has positioned the power systems, transportation systems, building systems, fac- Continuous Innovation The Mitsubishi Electric Group will steadfastly carry out its tory automation (FA) systems, automotive equipment, space sys- management policies guided by a commitment to balanced man- tems, power devices, and air conditioning (AC) systems agement, while putting into practice its overarching corporate businesses as the drivers of future growth. In addition to increas- statement, Changes for the Better. Each and every employee will ing the allocation of resources to each of these businesses, the share the common goal of developing new frontiers through Mitsubishi Electric Group will boost competitiveness in line with continuous innovation, and the Mitsubishi Electric Group—by each business’ attributes. continuing to undergo transformation itself—will mature into a corporation that is always producing something better. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 05 At a Glance Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Net sales Yen (billions) 1,400 1,200 1,000 800 600 400 200 0 1,027 1,027 1,058 1,180 1,228 11 12 13 14 15 (Years ended March 31) Net sales Yen (billions) 1,400 1,200 1,000 800 600 400 200 0 927 978 927 1,282 1,098 11 12 13 14 15 (Years ended March 31) Net sales Yen (billions) 1,400 1,200 1,000 800 600 400 200 0 487 516 522 548 559 11 12 13 14 15 (Years ended March 31) Operating income Operating income Operating income Yen (billions) 160 140 120 100 80 60 40 20 0 -20 83 84 85 76 72 11 12 13 14 15 (Years ended March 31) Yen (billions) 160 140 120 100 80 60 40 20 0 -20 145 100 101 98 60 11 12 13 14 15 (Years ended March 31) Yen (billions) 160 140 120 100 80 60 40 20 0 -20 13 11 21 12 1 13 18 5 14 15 (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 therapy 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 M Fiscal 2015 Overview April Particle Therapy System May June • Reorganized particle therapy business opera- tions for expansion into global markets. • Announced that Singapore-based subsidiary, Mitsubishi Electric Asia Pte Ltd, has estab- lished a branch office in Yangon, Myanmar. Yangon Branch Office, Mitsubishi Electric Asia Pte Ltd • Launched a new division at Mitsubishi Electric Europe B.V. to strengthen the market position of transportation systems business in Europe. • Successfully launched the ALOS-2: DAICHI-2 advanced land-observation satellite. • Began operating a new production facility for factory automation products at Nagoya Works. • Reorganized particle therapy business operations for expansion into global markets. • Launched the MELSEC iQ-R Controller series. ALOS-2 New production facility at Nagoya Works MELSEC iQ-R series 2014 July • Completed the integration of former air conditioning distributor Klima Plus into local subsidiary Mitsubishi Electric Turkey A.S, ., which now consists of two business units, Factory Automation Systems and Air Conditioning. • Began operation at new elevator manufacturing factory in China, owned by Mitsubishi Electric Shanghai Electric Elevator Co., Ltd. • Began using the same corporate logo both in Japan and overseas. 06 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 September • Awarded contract to deliver the Es’hail 2 communications satellite to operator Qatar Satellite Company (Es’hailSat) in Doha. • Awarded a project to modernize traction equipment in 46 Intercity Express 2 (ICE-2) High-Speed trains by Deutsche Bahn AG (DB). Es’hail 2 Intercity Express 2 high-speed trains by DB Electronic Devices Home Appliances Others Net sales Yen (billions) 1,400 1,200 1,000 800 600 400 200 0 175 200 164 194 238 11 12 13 14 15 (Years ended March 31) Net sales Yen (billions) 1,400 1,200 1,000 800 600 400 200 0 924 849 821 944 944 11 12 13 14 15 (Years ended March 31) Net sales Yen (billions) 1,400 1,200 1,000 800 600 400 200 0 609 611 590 676 740 11 12 13 14 15 (Years ended March 31) Operating income (loss) Operating income Operating income Yen (billions) 160 140 120 100 80 60 40 20 0 -20 5 11 3 12 -5 13 30 10 14 15 (Years ended March 31) Yen (billions) 160 140 120 100 80 60 40 20 0 -20 42 22 19 52 54 11 12 13 14 15 (Years ended March 31) Yen (billions) 160 140 120 100 80 60 40 20 0 -20 14 11 20 18 19 23 12 13 14 15 (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, and others LCD televisions, 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 • Completed Elevators and Escalators QM center located at the company’s Inazawa Works to develop and test global models. • Successfully launched the Himawari-8 satellite. • Commenced automotive parts manufacturing and sales operations in new Mexican subsid- iary, Mitsubishi Electric Automotive de Mexico, S.A. de C.V. Himawari-8 Mitsubishi Electric Automotive de Mexico, S.A. de C.V • Established Mitsubishi Electric (Russia) LLC, a comprehensive sales company of Mitsubishi Electric for Russia. Mitsubishi Electric (Russia) LLC February • Delivered 15 elevators and 36 escala- tors to Shanghai New World Daimaru Department Store. • Completed the upgrade and the Cable network expansion project expansion of the South East Asia—Middle East—Western Europe 4 (SEA-ME-WE 4) Cable System. Elevators and spiral escala- tors in Shanghai New World Daimaru Department Store, China (image) Spiral Escalators November • Established a new FA product show- room in the headquarters of Mitsubishi Electric Automation Korea Co., Ltd. • Unveiled a Diamond Vision display that exceeds 4k ultra-high-definition pixel density at 1535 Broadway in New York City‘s iconic Times Square. New FA product showroom in Korea Diamond Vision screen at Marriott Marquis Hotel 2015 December • Received an order for railcar traction inverter with all-silicon carbide (SiC) power modules incorporating SiC transistors and SiC diodes, placed by Odakyu Electric Railway Co., Ltd. • Launched a new line of computerized numer- ical controllers (CNCs), the M800W series. • Announced the successful completion of verification tests on VP-X turbine generator for thermal power plants. Commercial launch planned for April 2015. Odakyu 1000 series train M800W series VP-X high-efficiency 870 MVA generator MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 07 Review of Operations Energy and Electric Systems Net Sales Breakdown by Business Segment 24.6% Net Sales ¥1,228.9billion up 4% year on year Operating Income ¥72.4billion down ¥3.8 billion year on year The social infrastructure systems business saw a decrease in orders compared to the previous fiscal year due primarily to a decrease in the power generation and public utility systems businesses in Japan. Sales, meanwhile, remained unchanged compared to the previous fiscal year owing to increases in the rolling-stock equipment business outside Japan. The building systems business experienced increases in both orders and sales compared to the previous fiscal year, owing to growth in new installation of elevators and escala- tors overseas, mainly in China and ASEAN countries, as well as the weaker yen. As a result, total sales for this segment increased by 4% from the previous fiscal year to 1,228.9 billion yen. Operating income decreased by 3.8 billion yen from the previous fiscal year to 72.4 billion yen due primarily to a shift in project portfolio. 08 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 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. Digital Signage System at Narita International Airport Mitsubishi Electric has successfully installed Japan’s largest digital signage system1 at Narita International Airport. This system comprises 100 display units made up of a total of 336 display panels, including a unit consisting of 27 46-inch LCD multi-display screens. As a part of efforts to ensure the presen- tation of information in an appropriate and timely manner, a wide range of content, including airport news and entertain- ment, is delivered according to the location of each display. 1 Based on Mitsubishi Electric research as of June 2012 Particle Therapy System Utilizing the characteristic features of protons, carbon, and other heavy ions, particle therapy is a cutting edge technology that allows for the pinpoint targeting of cancerous tumors while minimizing side effects on surrounding normal tissues. It is increasingly selected as an advanced solution in the treat- ment of cancer. 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 lighting that is entirely LED, AXIEZ machine-room-less elevators offer outstanding function and design. Furthermore, Mitsubishi Electric has added a new large-capacity model to the AXIEZ lineup, thereby extending the range of target buildings to include large-scale office buildings, commercial facilities, and hospitals. Facima BA-System, an Open Integrated Management System for Building Facilities The Facima BA-system provides a variety of functions which help save energy and make building management more efficient. In order to target buildings of a wider range of sizes and purposes, Mitsubishi Electric has launched a new wall-mounted model with an LCD touch panel as part of its Facima lineup. Industrial Automation Systems Net Sales Breakdown by Business Segment 25.7% Net Sales ¥1,282.7billion up 17% year on year Operating Income ¥145.9billion up ¥47.9 billion year on year The factory automation systems business saw increases in both orders and sales from the previous fiscal year due to growth in capital expenditures relating to smartphone and automotive industries as well as facility replacements by manufacturers in Japan, and due additionally to the weaker yen. The automotive equipment business saw increases in both orders and sales from the previous fiscal year due primarily to growth in the car sales market in North America and China, as well as the positive influence of the weaker yen. As a result, total sales for this segment increased by 17% from the previous fiscal year to 1,282.7 billion yen. Operating income increased by 47.9 billion yen from the previous fiscal year to 145.9 billion yen due primarily to an increase in sales. Programmable Logic Controllers Mitsubishi Electric’s MELSEC series of programmable logic controllers supports a wide array of production and social infrastructure applications; solutions range from control and safety devices to information and instrumentation management. As a leading global brand, the MELSEC series contributes to the construction of cutting-edge control systems owing to its capabilities, performance, product variety, and high reliability. Industrial Robots Featuring cutting-edge technologies, Mitsubishi Electric's robotic systems are key components in Factory Automation (FA). They are ideal for cell-based production coupled with intelligent sensors, thanks to their high-speed, high-precision core performance characteristics. By providing complete FA solutions that combine programmable logic controllers and AC servomotors, Mitsubishi Electric can create automated systems that encompass the assembly, inspection, and conveyance processes. Low-voltage Circuit Breakers Low-voltage Circuit Breakers are used for wiring protection and short-circuit protection in low-voltage circuits. Since 1933, Mitsubishi Electric has been continuously designing and developing such breakers, the latest of which is the new WS-V “World” series. The lineup is ideal for both power distribution and OEM markets. Electrical Discharge Machines (EDMs) Beginning with the newly launched MP series, a strategic product on a global scale, Mitsubishi Electric provides a lineup of EDMs that add value and improve the manufacturing pro- ductivity of molds and precision components. Such equipment is indispensable to the production of automobiles, home electronics, and IT-related devices. Electric Power Steering (Motors and Controllers) Mitsubishi Electric was the first company in the world to mass produce motors and controllers for electric power steering to assist driver steering in line with driving conditions. Over the years, Mitsubishi Electric has helped to improve steering feel, response, and stability while delivering compact units and high-output performance, and contributing to reduced automobile CO2 emissions. Memory Car Navigation System Mitsubishi Electric’s DIATONE SOUND.NAVI is a car navigation system that incorporates acoustic technology cultivated during the development of DIATONE products to offer improved sound quality. The impressive audio reproduction properties of the NR-MZ90 series bring more excitement to driving. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 09 Information and Communication Systems Net Sales Breakdown by Business Segment 11.2% Net Sales ¥559.5billion up 2% year on year Operating Income ¥18.9billion up ¥13.4 billion year on year The telecommunications equipment busi- ness saw decreases in both orders and sales from the previous fiscal year due primarily to a decrease in demand for communica- tions infrastructure products. Sales in the information systems and services business saw decreases compared to sales of the previous fiscal year mainly due to decreases in the system integration business. The electronic systems business saw a decrease in orders compared to the previous fiscal year due to decreases in large-scale projects in the defense system and space system businesses. Sales, meanwhile, expe- rienced an increase compared to the previ- ous fiscal year due to progress in orders already received for projects in the defense systems business. As a result, total sales for this segment increased by 2% compared to the previous fiscal year to 559.5 billion yen. Operating income increased by 13.4 billion yen from the previous fiscal year to 18.9 billion yen due primarily to an increase in sales. 10 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 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) Mission-critical Server Employing virtualization technology in its complete fault-tolerant system as an overarching concept, this server not only ensures the succession of customers’ application assets, but also integrates internal mission-critical tasks and systems for situations where failure is not an option. (Mitsubishi Electric Information Network 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, having been selected for use in satellites Himawari-7, 8, and 9, and commercial satellites for Turkey and Qatar, and is employed in eight satellites currently circling the earth. 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 ¥238.4billion up 22% year on year Operating Income ¥30.1billion up ¥20.1 billion year on year, The electronic devices business saw increases in both orders and sales from the previous fiscal year due to an increase in demand mainly for power modules used in automo- tive applications owing to expansion in hybrid and electric vehicle markets, as well as an increase in demand for power mod- ules used in railcar, consumer, and industrial applications and for optical communication devices mainly in the Chinese market, and due additionally to the weaker yen. As a result, total sales for this segment increased by 22% compared to the previous fiscal year to 238.4 billion yen. Operating income increased by 20.1 billion yen com- pared to the previous fiscal year to 30.1 billion yen due primarily to an increase in sales. Hybrid SiC Large DIPIPMTM for Photovoltaic Applications This hybrid SiC large DIPIPM1 is designed with built-in SiC2- SBDs3 and seventh-generation IGBT4 chips, enabling power loss to be reduced by 25%, thereby contributing to a reduction of power consumption in PV inverter systems. 1 Dual In-line Package Intelligent Power Module 2 Silicon Carbide 3 Schottky Barrier Diodes 4 Insulated Gate Bipolar Transistor J1 Series Power Semiconductor Modules for Automobiles Mitsubishi Electric has expanded its lineup of J1 Series power semiconductor modules mainly for motor drive applications in electric and hybrid vehicles. The new modules contribute to more compact, highly reliable automotive inverters thanks to a direct cooling package with cooling fins. 3.5GHz-band GaN-HEMT for 4G Mobile Communication Base Transceiver Stations Mitsubishi Electric GaN1-HEMTs2 boast an industry-leading3 level output power of 100W and superior efficiency through the use of GaN and an optimized transistor structure. Small in design, these devices help to make base transceiver stations more compact and energy efficient, enabling telecommunications providers to increase the number of small-cell base stations and thus expand the coverage area of macro-cell base stations for 3.5GHz-band 4th-generation mobile communications systems. 1 Gallium Nitride 2 High Electron Mobility Transistor 3 Based on survey conducted by Mitsubishi Electric Corporation on March 11, 2015 DFB Laser Diode Developed for 25Gbps Optical-fiber Communication in 100Gbps Systems Mitsubishi Electric has developed a DFB1 laser diode that is capable of operating in a wide range of temperatures for 25Gbps optical-fiber com- munication applications. As a light source for communication applica- tions, the device can be used in 100Gbps optical-fiber communication systems. Using four DFB laser diodes for 25Gbps optical-fiber communi- cation systems operating in tandem, it is possible to create high-speed 100Gbps optical-fiber communication systems with simpler designs, and that consume less power while offering improved performance. 1 Distributed Feed-Back Tough Series 7.0-inch WVGA Color TFT-LCD Modules for Industrial Applications Tough Series 7.0-inch WVGA color TFT-LCD modules are highly resistant to vibration (6.8G acceleration resistance) and can operate over a wide temperature range (–40°C to +85°C). These in harsh environments, or characteristics make them ideal for use as displays in construction and agricultural equipment. 12.1-inch WXGA and 15.0-inch SXGA+ Color TFT-LCD Modules for Industrial Applications Mitsubishi Electric TFT-LCD modules are designed for a broad range of applications including as displays for medical and machining equipment. Unique features include ultra-wide view- ing angles (170° horizontally and vertically), high resolution, high brightness, high contrast ratio, and an industry-leading operating temperature range (-30°C - +80°C). MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 11 Current blocking structureCurrentActive regionElectrodeInP substrateOptical outputPassive waveguideDFB laser diodeHome Appliances Net Sales Breakdown by Business Segment 18.9% Net Sales ¥944.8billion unchanged year on year Operating Income ¥54.2billion up ¥1.4 billion year on year The home appliances business remained substantially unchanged compared to the previous fiscal year with total sales for this segment amounting to 944.8 billion yen, despite increased sales in air conditioners in Asian, North American, and European markets and in package air conditioners in Japan, as well as the weaker yen, due to impact from the last-minute surge in demand experienced in Japan before the rise in consumption tax the previous year. Operating income increased by 1.4 billion yen compared to the previous fiscal year to 54.2 billion yen largely due to the weaker yen. 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. Housing Equipment ENEDIA is a system that effectively uses renewable energy through the ingenious application of a home energy manage- ment system (HEMS) that stores electricity generated by solar panels in the batteries of an electric vehicle. ENEDIA is based on our concept of a smart electric home that conserves energy by using highly efficient air conditioners, water heaters, and cooking equipment. It gives residents a way to conserve ener- gy without sacrificing comfort. Home Appliances The home appliances business strives to deliver technologies and products that bring convenience, comfort, and enjoyment to everyday life. Focusing on keywords such as “delicious,” “delightful,” and “soothing,” every effort is made to further enhance people’s quality of life through intelligent, connected, and economical—or, in short, ”smart”—technologies. LED Lighting Mitsubishi Electric offers an extensive lineup of high-efficiency, long-lasting LED products that meet diverse needs for energy- saving light bulbs and equipment in households, stores, offic- es, and factories. Our LED products make the future brighter for families and society as a whole. Visual Equipment for Public and Business Applications Mitsubishi Electric's high-quality image processing technolo- gies deliver exceptionally sharp images with superior color reproduction and are incorporated in a wide range of products developed to suit a variety of application needs. These systems are being used in Japan and abroad for large-screen applica- tions, such as digital signage used to display images, data, and information at public facilities and other venues. Customers Consumer electronics and home appliances Used products Mitsubishi Electric Corporation Hyper Cycle Systems Corporation Materials manufacturers Metals and glass Original recycling system Simple plastics Plastic PP, PS, ABS Mixed plastics Green Cycle Systems Corporation Recycling Consumer Electronics and Home Appliances Mitsubishi Electric has developed technologies for automati- cally sorting the three major types of plastic (polypropylene (PP), polystyrene (PS), and acrylonitrile-butadiene-styrene (ABS)) used in consumer electronics and home appliances. This original recycling system is being utilized to promote the reuse of plastics in the Company's products by improving the physi- cal properties of the sorted materials. 12 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Research and Development / Intellectual Property Research and Development N R&D Initiatives The Mitsubishi Electric Group’s R&D network consists of the building systems, FA systems, automotive equipment, space sys- Advanced Technology R&D Center, Information Technology R&D tems, power devices, air conditioning systems, and other systems. Center, and Industrial Design Center in Japan as well as laborato- To reinforce the solutions business centered on strong busi- ries in the United States, Europe, and China. These centers nesses, the Group is pursuing R&D that will expand the solutions operate under the umbrella of the Corporate Research and business, which encompasses products and services in the smart Development Group working in collaboration with the develop- community, rail, factory, building, housing, security, and ment departments of individual Mitsubishi Electric business other fields. groups. Through the diligent pursuit of R&D, the Group is pro- Global strategies are simultaneously being reinforced, with moting the achievement of an even higher level of growth by energies channeled toward development that takes advantage of making strong businesses stronger, continuously creating new increasingly robust ties with local bases, research laboratories, strong businesses, and reinforcing the solutions business centered and universities in North America, Europe, China, and Asia. on strong businesses. R&D is the vehicle that drives growth strategies forward. To make strong businesses stronger and continuously create Moving forward, the Mitsubishi Electric Group will aim for devel- new strong businesses, the Mitsubishi Electric Group is promoting opments that can be leveraged in tomorrow's products while R&D that will bolster power systems, transportation systems, pursuing R&D themes that will yield results in ten, or even N R&D Achievements in Fiscal 2015 Q Development of New Irradiation Technology for Proton-type Particle Therapy System twenty, years from now. Particle beam irradiation apparatus Mitsubishi Electric Corporation has developed a new irradia- tion technology for particle therapy systems used in cancer treatment that can treat various types of tumors by switching between three different particle beams. The shapes and locations of tumors differ from patient to patient, and this has made it difficult to use a single therapy system for treatments. However, the new technology allows for irradiation of a wide range of tumors with a high degree of precision using a single therapy system. Mitsubishi Electric Corporation will continue to work on developing more advanced particle therapy systems, and offering systems that are reliable to use. Treating various types of tumors utilizing new irradiation technology Q Development of Support Technologies for Tsunami Radar Monitoring Mitsubishi Electric Corporation has developed the world’s first* tsunami monitoring support technologies that can detect the development of tsunamis from sea-surface data produced with radar observations, and estimate the height of the wave. Over the horizon Line-of-sight distance Traditional observation methods could only observe tsunami waves on ocean surfaces up to 20 km offshore, due to the Epicenter Observation distance: Maximum 20 km curvature of the Earth. However, the new technologies can observe tsunami waves on ocean surfaces up to 50 km offshore under certain conditions, by using oceanographic radar technology. Being able to quickly detect tsunamis arising at a greater distance will help mitigate and prevent damage to coastal regions. *As of February 17, 2015 (survey conducted by Mitsubishi Electric Corporation) Conventional technology Epicenter Observation distance: Maximum 50 km Proprietary technology Helping to mitigate and prevent damage to coastal regions MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 13 Q Development of Water Treatment Technology Using Gas/Liquid Interfacial* Discharge Mitsubishi Electric Corporation has developed a novel water treatment technology for treating and reusing industrial wastewater and sewage that can decompose substances which were difficult with conventional technologies. The treatment system places electrodes on slanted surfaces, over which the water to be treated flows. Discharges from the electrodes then generate hydroxyl radicals with strong capaci- ty to decompose substances. These hydroxyl radicals are used for the highly efficient breakdown of substances which were difficult using chlorination or ozonation. This enables building a system for reusing industrial waste- Electrical discharge machine Electrode Discharge Water to be treated Reactor Water treatment equipment that utilizes gas/liquid interfacial discharge Reuse Wastewater g n i s s e c o r p e r P Factory water and sewage at a lower cost, contributing to the cre- Conceptual diagram of a system that reuses industrial wastewater ation of a sustainable water recycling society. *Gas/liquid interface: the contact surface between a gas and a liquid Contributing to the creation of a water recycling society through the low-cost reuse of industrial wastewater and sewage Intellectual Property L Basic Policy The Mitsubishi Electric Group recognizes that intellectual property L Global IP Strategy The Mitsubishi Electric Group identifies critical IP-related themes (IP) rights represent a vital management resource essential to its in connection with mainstay businesses and important R&D proj- future. Therefore, every effort is made to integrate the Group’s ects. At the same time, the Group channels its energies toward business, R&D, and IP activities. Moving forward, the Mitsubishi the globalization of its robust patent portfolio by promoting Electric Group will further strengthen its IP capabilities while patent filing activities. With regard to its overseas operations, the promoting its growth strategy. L Structure of the Intellectual Property Division The Mitsubishi Electric Group’s IP-related operations are the direct Group is accelerating the globalization of its IP activities through actions such as working to increase the number of patent appli- cations it files prior to undertaking business development in emerging countries, including India and Brazil. responsibility of the president and are overseen by the Head Office Moreover, the Mitsubishi Electric Group is actively engaging in IP Division under an appointed IP executive officer. Day-to-day activities aimed at acquiring design rights in Japan and overseas issues are handled by IP departments at relevant facilities, R&D to further enhance its robust patent portfolio. These efforts are centers, and affiliated companies. The Head Office IP Division intended to specifically protect proprietary assets in both technol- formulates strategies for the entire Group, promotes critical ogy and design areas. IP-related projects, and coordinates interaction with the patent office. At the manufacturing facility, R&D center, and affiliated company levels, IP departments pursue specific objectives in line with the Group’s overall IP strategies. Annual Trends in Overseas Patent Applications by the Mitsubishi Electric Group Integrating Business, R&D, and IP Activities (No. of Applications) 10,000 Integration IP Network IP/Standardization Strategy IP Division at Headquarters President Business Strategy IP Departments at Business Groups, Facilities, Affiliates Development Strategy R&D Centers IP Departments 7,500 5,000 2,500 0 14 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 2012 2013 2014 2015 (FY) USA Europe China Other Further Strengthening Global IP Capabilities IP representative Europe Asia USA / Brazil Head Office IP Division P Protecting products through IP rights P Acquiring international standard-related patents P Counterfeit product countermeasures The Mitsubishi Electric Group has assigned IP representatives to L Activities Aimed at Preventing Infringement each of its bases in the United States, Europe, and China. Every on the Group’s IP Rights effort is being made to strengthen IP capabilities at Group facili- The Mitsubishi Electric Group works diligently to prevent any ties, R&D centers, and affiliated companies in each country. infringement on its IP rights by other companies. In addition to L Standardization Strategy As companies continue to globalize their business activities, the in-house activities, the Group places particular weight on collabo- rating with industry organizations while approaching government agencies both in Japan and overseas as a part of a wide range of international standardization of technologies that contribute to measures to prevent the counterfeiting of its products. global market growth is significantly impacting business strategies. For this reason, the importance of promoting IP strategies in consideration of international standards is increasing. In response L Respecting the IP Rights of Others The Mitsubishi Electric Group recognizes that any infringement on to this situation, the Mitsubishi Electric Group is placing emphasis the IP rights of another company has the potential to significantly on activities to standardize its development technologies and impair the Group’s continued viability as a going concern. The acquire related IP rights. The Group is paying particular attention resulting potential impairments include being obliged to pay to the acquisition of international standard patents, while patent significant licensing fees or being forced to discontinue the man- pools, including those for MPEG and Blu-ray DiscTM*, are proving ufacture of a certain product. In order to prevent any infringement to be a wellspring for IP revenues. These revenues are contribut- on the IP rights of other companies, the Group provides education ing to improvement and growth in business earnings. and training to raise employee awareness and promote greater Furthermore, the Mitsubishi Electric Group is working to reinforce respect for the IP rights of others. At the same time, the Group its activities to acquire rights for international standard-related has put in place a set of rules to facilitate appropriate actions technologies. The Group is looking to utilize these patents to such as surveying other companies’ patent rights at every stage help increase the market share of its products. from development to production. The Mitsubishi Electric Group *Blu-ray DiscTM is a trademark of the Blu-ray Disc Association works diligently to ensure strict adherence to these rules. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 15 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. It is vigilant in its enforcement of corporate ethics and compliance and constantly works to improve educational programs and strengthen its internal control system. At the same time, it pursues initiatives related to quality management, global environmental conservation, philanthropy, and improved communication with all stakeholders. Corporate Mission The Mitsubishi Electric Group will continually improve its technol- ogies and services by applying creativity to all aspects of its busi- ness. 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 and Compliance, Environment, Growth N The Mitsubishi Electric Group’s Corporate Social Responsibility The operating environment continues to undergo dramatic changes, reflecting advances in globalization, revisions to legisla- tion, and other factors. What must continue regardless of how the times may change is a respect for corporate ethics and com- pliance and a commitment to never compromise on environmen- tal issues and product quality. This commitment of the Mitsubishi Electric Group was first articulated in the Keys to Management (in Japanese, Keiei no Yotei), which was drawn up at the time of Mitsubishi Electric’s founding in 1921. The spirit of this document, which states the Group‘s contribu- tions in areas such as the prosperity of society, product quality, and customer satisfaction, lives on today in its Corporate Mission and Seven Guiding Principles. With these tenets as its core princi- ples, the Group promotes various initiatives in order to fulfill its corporate social responsibilities. In particular, the Group‘s commitment to corporate ethics and compliance has underpinned corporate management while form- ing the core of the Group‘s efforts to strengthen its internal control system and implement employee training programs. Looking ahead, the Group will continue to strictly adhere to a policy of compliance. It will also redouble its efforts to bolster activities and to establish relationships built on robust mutual trust with all stakeholders. As a member on society, the Mitsubishi Electric Group is respon- sible for upholding corporate ethics and compliance as well as contributing to society. The Group recognizes its responsibility to contribute to society through the technologies it has built up over the years. A sincere concern for the environment permeates every facet of the Mitsubishi Electric Group’s operations. Thus, it can be said that each facet of the Group‘s business activities is geared toward contributing to the environment. The technologies and products that make up its portfolio support environmental protection, energy conservation, and social infrastructure while being gentle to humankind and the earth, thereby enriching society. Looking ahead, the Group will help create a more prosperous and sustainable society by harnessing the strengths of its wide-ranging technological capabilities. N Philanthropic Activities Philosophy and Policies on Philanthropic Activities The Mitsubishi Electric Group shares a common Philosophy and 16 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Policies based on its Corporate Mission and Seven Guiding Principles, and carries out a variety of activities accordingly. Philosophy As a corporate citizen committed to meeting societal needs and expectations, the Mitsubishi Electric Group will make full use of the resources it has at hand to contribute to creating an affluent society in partnership with its employees. Policies • We shall carry out community-based activities in response to societal needs in the fields of social welfare and global environ- mental conservation. • We shall contribute to developing the next generation through activities that support the promotion of science and technology, culture and arts, and sports. Promoting Activities Deeply Rooted in Local Communities and Activities that Develop the Next Generation The Mitsubishi Electric’s philanthropic activities are underpinned primarily by the Mitsubishi Electric SOCIO-ROOTS Fund, a gift program in which the Company matches any donation made by an employee to social welfare facilities; the “Satoyama” Woodland Preservation Project, which involves employee volun- teers participating in environmental restoration activities in the areas surrounding its offices and production facilities; and science workshops that foster the development of the engineers of tomorrow by encouraging children to experience for themselves the appeal of science. Focusing on philanthropic activities of affiliate companies in and outside of Japan, the Group implements a broad range of initiatives, including undertaking activities with the help of Supporting Children Affected by the Great East Japan Earthquake (Mitsubishi Electric Corporation) “Mouth and Foot Painting Artists of the World Exhibition” (Mitsubishi Electric Building Techno-Service Co., Ltd.) Supporting the Special Olympics (Mitsubishi Electric Europe B.V. Italian Branch, Mitsubishi Electric Europe, B.V. German Branch) employee volunteers, funding social welfare organizations, and offering support for young musicians and sports teams. activity item identified in the Group’s 7th Environmental Plan, covering fiscal 2013 through fiscal 2015, it has embarked on the 8th Environmental Plan, covering fiscal 2016 through fiscal 2018. Foundations The Mitsubishi Electric America Foundation and Mitsubishi Electric Thai Foundation, both founded in 1991, also carry out various activities in the spirit of the Mitsubishi Electric Group‘s Philosophy and Policies. The Mitsubishi Electric America Foundation, with the cooperation of its branches in the United States, helps young people with disabilities to become employed and participate more fully in society. The Mitsubishi Electric Thai Foundation, in addition to providing scholarships to university students and sup- porting a school lunch program for grade school students, has in recent years been promoting employee-involved volunteer activi- ties that support education and environmental protection. An employee volunteer working with a student on Disability Mentoring Day (United States) Local Mitsubishi Electric Companies in joint mangrove tree planting activity (Thailand) N Environmental Activities Transitioning from the 7th Environmental Plan to the 8th Environmental Plan The Mitsubishi Electric Group has set the goal of becoming a global, leading green company that helps to realize a sustainable society in which people around the world live contentedly and in comfort, and where diverse forms of life coexist. In 2007, the Group put in place the Environmental Vision 2021, a long-term vision for environmental management. Under this vision, the Group will fulfill its responsibilities to society from an environ- mental perspective by developing and promoting the widespread use of products and services that boast outstanding resource and energy efficiency across all business fields, and advancing efforts to reduce the environmental impact of all of its business activities from procurement through production to logistics. In order to incorporate a PDCA cycle into its environmental activities in a systematic and definitive manner, the Group has identified specific activity targets as a part of its latest medium-term environmental plan, which has been renewed every three years since 1993. Having successfully completed each P Activity Items of the 8th Environmental Plan 1. Initiatives aimed at realizing a low-carbon society Increase the level of contribution to society by reducing CO2. Specifically, (1) reduce CO2 from production, and (2) reduce CO2 from product usage. 2. Initiatives aimed at forming a low-carbon society (1) Promote the effective use of resources utilizing the final disposal ratio as a key indicator, (2) reduce resource inputs, and (3) strengthen partnerships with resource recycling businesses. 3. Initiatives aimed at realizing a symbiotic society (1) Hold various events, including the Mitsubishi Electric Outdoor Classroom and the Satoyama Woodland Preservation Project, and (2) foster environmental awareness by promoting online environmental education on a global scale. 4. Efforts toward strengthening the environmental management platform (1) Improve the execution of quantitative assessment of environmental risk and management at factories in Japan and overseas, and (2) adhere strictly to environmental rules and regulations. • Major Activity Item 1: Reducing CO2 Emissions from Production Under its 8th Environmental Plan, the Mitsubishi Electric Group will integrate and promote the reduction of CO2 from energy sources and the management of efforts aimed at reducing greenhouse gases other than CO2*, activities that were previously undertaken on an individual basis, in order to comprehensively evaluate and manage the impact of greenhouse gases on the goal of realizing a low-carbon society. The plan, ending in fiscal 2018, calls for the total of CO2 from energy sources and greenhouse gases other than CO2 to be kept below 1,370,000 tons on an annual CO2 equivalent emission basis, considerably lower than the base year figure of 2,640,000 tons**. * Emissions of such substances as SF6, PFC, and HFC that are subject to reduction under the Kyoto Protocol ** CO2 from energy sources: Mitsubishi Electric (non-consolidated) 1990; affiliates in Japan 2000; overseas affiliates 2005 Greenhouse gases other than CO2: Mitsubishi Electric (non-consolidated) and affiliates in Japan 2000; overseas affiliates 2005 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 the Environment and Society (through our products, services, and business activities) Reduce environmental impact (by further honing highly efficient manufacturing techniques to minimize our environmental impact) 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 2015 17 Plan to Reduce CO2 from Production across the Mitsubishi Electric Group 24 264 146 Reduction 118 300 200 100 0 120 119 124 28 92 26 93 29 95 140 28 143 27 137 22 42% reduction 154 30 112 116 115 124 ) 2 O C - t 0 0 0 , 0 1 ( s n o i s s i m E 2 O C f o t n u o m A l a t o T (Base fiscal year)** 2013 2014 2015 2016 2017 2018 2021 (FY) 7th Environmental Plan 8th Environmental Plan Environmental Vision 2021 Target Amount of CO2 emissions Amount of greenhouse gas emissions other than CO2 Total greenhouse gases Note: CO2 emissions are calculated using an emission coefficient of 0.422t-CO2/MWh up to fiscal 2015 and an emission coefficient of 0.487t-CO2/MWh from fiscal 2016. In an effort to reduce CO2 from energy sources, the Mitsubishi Electric Group is introducing high-efficiency air conditioners and other equipment while shifting to LED lighting. The Group is also striving to understand energy consumption at the point of produc- tion. To eliminate waste, the Group is looking at improving heat loss while reducing standby power. Working to reduce such green- house gases as SF6, HFC, and PFC, the Group is shifting to the use of refrigerant gases with low global warming potential. Other ongoing initiatives include the building of a handling scheme that extends from gas recovery through recycling to eventual destruc- tion; efforts to reinforce countermeasures aimed at preventing leaking; and the early introduction of treatment systems. The amount of emissions came to 1,240,000 tons in fiscal 2015, an increase of 50,000 tons compared with the level recorded in fiscal 2014. While the scale of production is projected to rise during the period of the 8th Environmental Plan, the Mitsubishi Electric Group expects to achieve the aforementioned target by steadfastly implementing the previously identified measures. • Major Activity Item 2: Reducing CO2 Emissions from Product Usage through Improved Energy Efficiency Performance Regarding greenhouse gas emissions outside the scope of the Mitsubishi Electric Group’s business activities, a principal source is the CO2 derived from electric power consumption during the period that products are used. When the amount of CO2 emitted during product use is calculated, the levels during product use can be several dozen to several hundred times the amount emitted during production. Therefore, the development and widespread use of highly energy-efficient products can contribute significantly to the reduction of CO2 emissions. Under the 8th Environmental Plan, the Mitsubishi Electric Group is aiming for an average CO2 reduction ratio of 35% or more compared with fiscal 2001 for specific products where the Group can take the initiative regard- ing design and development and where the reduction of CO2 emissions during product use is deemed important from an environmental aspect. The number of specified products in fiscal 2015 was 107 (90 end products and 17 intermediate products). The average rate of CO2 emissions reduction among these products was 33%. Based on this result, the Group is making steady progress toward achieving its target. Looking ahead, the Group will continue to promote improvements. Plan for Reducing CO2 from Product Usage through Improved Energy Efficiency 17% 26% 29% 33% 33% 35% 30% or more 0 10 20 30 ) % ( n o i t c u d e r f o e t a r e g a r e v A 100 2001 (Base fiscal year) 2008 2012 2013 2014 2015 2016 2017 2018 7th Environmental Plan 8th Environmental Plan (FY) 2021 Environmental Vision 2021 Target More information about the Mitsubishi Electric Group’s environmental and CSR initiatives is available on the following websites: http://www.MitsubishiElectric.com/company/csr/ http://www.MitsubishiElectric.co.jp/corporate/environment/ 18 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Corporate Governance N Basic Corporate Governance Policy To realize sustained growth and increase corporate value, duties. Internal auditors report on the results of such monitoring to the executive officer in charge of auditing, and the executive Mitsubishi Electric works to maintain the flexibility of its operations officer in charge of auditing and accounting auditors report on while promoting management transparency. These endeavors are the results of such monitoring to the Audit Committee. supported by an efficient corporate governance structure that Mitsubishi Electric maintains a multi-dimensional risk manage- clearly defines and reinforces the supervisory functions of manage- ment system in which all executive officers participate. Under this ment while ensuring that the Company is responsive to the expec- system, executive officers are responsible for risk management in tations of customers, shareholders, and all of its stakeholders. their assigned areas of operation. In addition, executive officers N Corporate Management and Governance Structure Corporate Management Structure In June 2003, Mitsubishi Electric became a company with a exchange information and participate in important management initiatives and decisions through regularly scheduled executive officers’ meetings. committee system. Key to this structure is the separation of The Corporate Auditing Division and Audit Committee supervisory and executive functions; the Board of Directors plays Acting independently, Mitsubishi Electric’s Corporate Auditing a supervisory decision-making role and executive officers handle Division conducts internal audits of the Company from a fair and the day-to-day running of the Company. impartial standpoint. In addition, the division’s activities are The present Board is comprised of twelve directors (five of supported by auditors with profound knowledge of their particu- whom are outside directors), who objectively supervise and advise lar fields, assigned from certain business units. the Company’s management. The Board of Directors has three The Audit Committee is made up of five directors, three of internal bodies: the Audit, Nomination and Compensation com- whom are outside directors. In accordance with the policies and mittees. Each body has five members, three of whom are outside assignments agreed to by the committee, the performances of directors. The Audit Committee is supported by dedicated directors and executive officers as well as affiliated companies independent staff. Internal Control System are audited. The Corporate Auditing Division, through the executive officer in charge of auditing, submits reports to the Audit Committee, Further ensuring effective corporate governance, the roles of which holds periodic meetings to exchange information and dis- Chairman and President & CEO are clearly defined and exclusive. cuss auditing policies. In addition, the Audit Committee discusses The Chairman heads the board of directors and the President & policies and methods of auditing with accounting auditors, who CEO heads the Company’s executive officers. Neither the Chair- furnish it with reports on the status and results of the audits of man nor the President & CEO is a member of the Nomination or the Company that they themselves conduct. Compensation Committees. This allows for the clear division of executive and supervisory functions, thereby enabling Mitsubishi Electric to ensure effective corporate governance. Executive officers are responsible for ensuring compliance and management efficiency in their assigned areas of operations. Internal auditors monitor executive officers’ performance of Report General Shareholders’ Meeting Report Appointment Appointment/Dismissal/Supervision Reporting to Decision Making and Execution Executive Officers President & CEO Executive Vice Presidents Senior Vice Presidents Executive Officers Business/Administration Divisions Supervision Board of Directors Chairman Nomination Committee Outside Directors (majority) s r o t c e r i D Audit Committee Outside Directors (majority) Compensation Committee Outside Directors (majority) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 19 N Policies Regarding Decisions on Compensation, etc. Policies regarding decisions on compensation, etc. will be made The compensation scheme for the Executive Officers 1. The compensation scheme for the Executive Officers focuses through resolutions by the Compensation Committee, the major- on incentives for the realization of management policies and ity of which consists of Outside Directors. A summary of the poli- the improvement of business performance, and performance- cies is as follows. based compensation will be paid in addition to the payment of fixed-amount compensation and the retirement benefit upon The compensation scheme for Directors resignation. 1. Directors give advice to and supervise the Company's manage- 2. Fixed-amount compensation will be set at a level considered ment from an objective point of view, and therefore, the com- reasonable taking into account the contents of the Executive pensation scheme for Directors is the payment of fixed-amount Officers duties and the Company's conditions. compensation and the retirement benefit upon resignation. 3. The level of performance-based compensation will be decided 2. Directors will receive their compensation as a fixed amount, while taking into account the consolidated business perfor- and the compensation to be paid will be set at a level consid- mance and the performance of the business to which the ered reasonable, while taking into account the contents of the respective Executive Officer is assigned, etc. With the purposes Directors' duties and the Company's conditions, etc. of meshing the interest of shareholders with the Executive 3. Directors will receive the retirement benefit upon their resigna- Officers and further raising management awareness that places tion, and the retirement benefit to be paid will be set at a level importance on the interest of shareholders, and increasing the decided on the basis of the monthly amount of compensation incentives for the improvement of business performance from and the number of service years, etc. the mid- and long-term perspectives, 50% of performance- based compensation will be paid in the form of shares. The Company sets a rule that, when the Executive Officers acquire the Company shares as a part of compensation, they are required to continue the shareholding until 1 year has passed from resignation. 4. The amount of the retirement benefit will be decided on the basis of the monthly amount of compensation and the number of service years, etc. 20 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Directors and Executive Officers Directors (As of June 26, 2015) Executive Officers (As of April 1, 2015) Kenichiro Yamanishi ......... Chairman Masaki Sakuyama .............. Representative Executive Officer, President & President & CEO: Masaki Sakuyama CEO Hiroki Yoshimatsu ............. Chairman of the Audit Committee Noritomo Hashimoto ........ Member of the Nomination Committee, Senior Vice President Nobuyuki Okuma .............. Chairman of the Nomination Committee, Chairman of the Compensation Committee, Executive Officer Akihiro Matsuyama ........... Member of the Compensation Committee, Executive Officer Takashi Sasakawa .............. Member of the Audit Committee Mikio Sasaki ....................... Member of the Compensation Committee, Senior Corporate Advisor, Mitsubishi Corporation Senior Vice Presidents: Hideyuki Okubo ................ In charge of Export Control and Total Productivity Management & Environmental Programs Yutaka Ohashi ................... In charge of Automotive Equipment Noritomo Hashimoto ........ In charge of Corporate Strategic Planning and Operations of Associated Companies Yoshiaki Nakatani.............. In charge of Electronic Systems Masayuki Ichige ................. In charge of Auditing, Government & External Relations and Public Relations Shigemitsu Miki ................. Member of the Nomination Committee, Executive Officers: Member of the Audit Committee, Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Isao Iguchi .......................... In charge of Advertising and Domestic Marketing Nobuyuki Okuma .............. In charge of General Affairs and Mitoji Yabunaka ................ Member of the Nomination Committee, Human Resources Member of the Compensation Committee, Advisor, Nomura Research Institute, Ltd. Hiroshi Obayashi ............... Member of the Nomination Committee, Member of the Audit Committee, Attorney-at-Law Akihiro Matsuyama ........... In charge of Accounting and Finance Takashi Sakamoto ............. In charge of Purchasing Takahiro Kikuchi ................ In charge of Public Utility Systems Kenji Kondo ....................... In charge of IT and Research & Development Kazunori Watanabe .......... Member of the Audit Committee, Nobuyuki Abe .................... In charge of Building Systems Member of the Compensation Committee, Certified Public Accountant, Registered Tax Accountant Katsuya Takamiya .............. In charge of Global Strategic Planning & Marketing Takaaki Kukita ................... In charge of Global Strategic Planning & Marketing Representative Executive Officers (As of April 1, 2015) Takeshi Sugiyama .............. In charge of Living Environment & Masaki Sakuyama Hideyuki Okubo Yutaka Ohashi Digital Media Equipment Nobushi Morooka ............. In charge of Legal Affairs & Compliance, Export Control and Intellectual Property Yasuyuki Ito ....................... In charge of Energy & Industrial Systems Hideaki Nagatomo ............ In charge of Living Environment & Digital Media Equipment Toru Sanada ....................... In charge of Semiconductor & Device Takashi Nishimura ............. In charge of Communication Systems Shinya Fushimi ................... In charge of Information Systems & Network Service Kei Uruma .......................... In charge of Factory Automation Systems MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 21 Organization (As of June 26, 2015) Board of Directors Chairman Nomination Committee Audit Committee Compensation Committee Audit Committee Office Executive Officers’ Meeting President & CEO Senior Vice Presidents Executive Officers (cid:31) Corporate Auditing Div. (cid:31) Corporate Marketing Group (cid:31) Corporate Strategic Planning Div. (cid:31) Corporate IT Strategy Div. (cid:31) Associated Companies Div. (cid:31) Government & External Relations Div. (cid:31) Global Strategic Planning & Marketing Group (cid:31) Corporate Total Productivity Management & Environmental Programs Group (cid:31) Corporate Administration Div. (cid:31) Corporate Research and Development Group (cid:31) Corporate Human Resources Div. (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) Energy & Industrial Systems Group (cid:31) Public Relations Div. (cid:31) Corporate Advertising Div. (cid:31) Corporate Legal & Compliance Div. (cid:31) Corporate Export Control Div. (cid:31) Corporate Licensing Div. (cid:31) Corporate Intellectual Property Div. (cid:31) Building Systems Group (cid:31) Electronic Systems Group (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 22 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Business Planning Office Market Planning & Administration Dept. Compliance Dept. Marketing Research & Business Development Dept. Branch Offices (Hokkaido, Tohoku, Kanetsu, Kanagawa, Hokuriku, Chubu, Kansai, Chugoku, Shikoku, Kyushu) Global Planning & Administration Div. Compliance Dept. Regional Marketing Div. Regional Strategic Development Div. Regional Corporate Offices Americas (U.S.A.) Europe (U.K.) Asia (Singapore) China Taiwan Corporate Productivity Engineering Dept. Compliance Dept. Corporate Quality Assurance Planning Dept. Corporate Environmental Sustainability Group Corporate Logistics Dept. Design Systems Engineering Center Manufacturing Engineering Center Planning & Administration Dept. Compliance Dept. Advanced Technology R&D Center Information Technology R&D Center Industrial Design Center Planning & Administration Dept. Compliance Dept. Information Systems & Network Service Div. Planning & Administration Dept. Compliance 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. Compliance Dept. Engineering Planning Dept. Nuclear Power Plant Technical Supervisory Office Business Development & Strategic Planning Div. Transmission & Distribution Systems Marketing Div. Power & Energy Systems Marketing Div. Nuclear Energy, Advanced Magnetic & Medical Systems Marketing Div. Power Plant Engineering & Construction Center Branch Offices Energy Systems Center, Transmission & Distribution Systems Center, Power Distribution Systems Center Planning & Administration Dept. Compliance 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 Dept. Planning & Administration Dept. Defense Systems Div. Space Systems Div. IT Space Solutions Div. Branch Offices Communication Systems Center, Kamakura Works Planning & Administration Dept. Compliance Dept. Communication Systems Engineering Center Telecommunication Systems Sales & Marketing Div. Branch Offices Communication Networks Center Planning & Administration Dept. Compliance Dept. Engineering Dept. Branding Strategy Dept. External Relations Dept. Customer Satisfaction Promotion Dept. Marketing & Operations Strategic Planning Dept. Eco-Facility Systems Marketing Dept. Air-Conditioning & Refrigeration Systems Div. Overseas Air-Conditioning & Refrigeration Systems Div. Lighting, Ventilation, Home Equipment and Photovoltaic Systems Div. Home Appliances & Digital Media Equipment Div. Living Environment Systems Laboratory Branch Offices Nakatsugawa Works, Air-Conditioning & Refrigeration Systems Works, Shizuoka Works, Kyoto Works, Gunma Works Planning & Administration Dept. Compliance Dept. Industrial Products Marketing Div. Industrial Automation Marketing Div. Overseas Marketing Div. Global Account Management Div. Branch Offices Nagoya Works, Fukuyama Works Planning & Administration Dept. Automotive Equipment Compliance Dept. Automotive Equipment Marketing Div. Automotive Electronics Development Center Branch Offices Himeji Works, Sanda Works Planning & Administration Div. Compliance Dept. Semiconductor & Device Marketing Div. A Semiconductor & Device Marketing Div. B LCD Div. Branch Offices Power Device Works, High Frequency & Optical Device Works Major Subsidiaries and Affiliates (As of March 31, 2015) 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 Electric Shanghai Electric Elevator Co., Ltd. Ryoden Elevator Construction, Ltd. Mitsubishi Elevator Asia Co., Ltd. Ryoko Co., Ltd. Taiwan Mitsubishi Elevator Co., Ltd. RYO-SA BUILWARE Co., Ltd. Toshiba Mitsubishi-Electric Industrial Systems Corporation Mitsubishi Hitachi Home Elevator Corporation Shanghai Mitsubishi Elevator Co., Ltd. Zhuzhou Shiling Transportation Equipment Company Limited Mitsubishi Elevator Hong Kong Co., Ltd. Mitsubishi Elevator Korea Co., Ltd. Hitachi Mitsubishi Hydro Corporation ETA-Melco Elevator Co. L.L.C. Industrial Automation Systems DB Seiko Co., Ltd. Ryowa Corporation Mitsubishi Electric Automotive America, Inc. Setsuyo Astec Corporation Mitsubishi Electric Thai Auto-Parts Co., Ltd. Ryoden Koki Engineering Co., Ltd. Mitsubishi Electric Automotive (China) Co., Ltd. Meldas System Engineering Corporation Mitsubishi Electric Dalian Industrial Products Co., Ltd. Mitsubishi Electric Mechatronics Software Corporation Mitsubishi Electric Automation, Inc. Mitsubishi Electric Automation (Hong Kong) Ltd. Mitsubishi Electric Automotive Czech s.r.o. Mitsubishi Electric Automation Korea Co., Ltd. Chiyoda Mitsubishi Electric Co., Ltd. and other regional comprehensive sales companies (9 companies) Mitsubishi Electric Europe B.V. Mitsubishi Electric US, Inc. Mitsubishi Electric Taiwan Co., Ltd. Mitsubishi Electric & Electronics (Shanghai) Co., Ltd. Mitsubishi Electric Asia Pte. Ltd. Mitsubishi Electric (H.K.) Ltd. Mitsubishi Electric Australia Pty. Ltd. Ryoden Trading Co., Ltd. Kanaden Corporation Mansei Corporation Information and Communication Systems Electronic Devices Home Appliances Others Shizuki Electric Co., Inc. Nippon Injector Corporation Shihlin Electric & Engineering Corporation Mitsubishi Electric TOKKI Systems Corporation Diamond Telecommunication Co., Ltd. Mitsubishi Precision Co., Ltd. SPC Electronics Corporation Seiryo Electric Co., Ltd. Oi Electric Co., Ltd. Miyoshi Electronics Corporation Mitsubishi Electric Information Systems Corporation Mitsubishi Electric Information Network 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 Power Device Corporation Melco Semiconductor Engineering Corporation Melco Display Technology Inc. Vincotech Holdings S.à r.l. Powerex, Inc. Mitsubishi Electric Lighting Corporation Mitsubishi Electric Home Appliance Co., Ltd. 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 Air Conditioning Systems Europe Ltd. Kang Yong Electric Public Co., Ltd. Mitsubishi Electric Living Environment Systems Corporation Mitsubishi Electric Life Network Co., Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Equipment Sales Co., Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Systems Co., Ltd. Melco Facilities Corporation Mitsubishi Electric Kang Yong Watana Co., Ltd. Mitsubishi Electric Air-Conditioning & Visual Information Systems (Shanghai) 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. Melco Trading (Thailand) Co.,Ltd. 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 these are placed into their own separate category rather than grouped by business segment. 2. Companies shaded in gray are consolidated subsidiaries, while others are equity-method affiliate companies. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 23 24 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Financial Section Contents 26 Five-Year Summary 27 Financial Review 36 Consolidated Balance Sheets 38 Consolidated Statements of Income 38 Consolidated Statements of Comprehensive Income 39 Consolidated Statements of Equity 40 Consolidated Statements of Cash Flows 41 Notes to Consolidated Financial Statements 74 Independent Auditors’ Report MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 25 Five-Year Summary Mitsubishi Electric Corporation and Subsidiaries Years ended March 31 2015 2014 2013 2012 2011 Yen (millions) U.S. dollars (thousands) 2015 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 ¥4,323,041 3,032,161 ¥4,054,359 2,914,589 ¥3,567,184 2,604,360 ¥3,639,468 2,628,964 ¥3,645,331 2,622,959 $36,025,342 25,268,009 970,191 900,807 806,412 781,278 784,606 8,084,925 3,085 3,791 4,317 3,782 4,005 25,708 4,005,437 3,819,187 3,415,089 3,414,024 3,411,570 33,378,642 317,604 322,968 235,172 248,990 152,095 65,141 225,444 224,080 233,761 210,237 2,646,700 2,691,400 to Mitsubishi Electric Corp. ¥ 234,694 ¥ 153,473 ¥ 69,517 ¥ 112,063 ¥ 124,525 $ 1,955,783 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 5.43 13.94 6.12 45.38 3.79 10.87 4.37 42.19 1.95 5.72 2.04 38.12 3.08 10.27 3.33 33.39 3.42 12.36 3.80 31.52 — — — — ¥109.32 — ¥71.49 — ¥32.38 — ¥52.20 — ¥58.00 — $0.911 — ¥ 27 ¥ 17 ¥ 11 ¥ 12 ¥ 12 $0.225 ¥2,633,445 1,612,582 ¥2,290,007 1,494,243 ¥2,129,395 1,386,067 ¥2,180,362 1,387,744 ¥2,052,887 1,421,174 $21,945,375 13,438,183 1,020,863 795,764 743,328 792,618 631,713 8,507,192 1,842,203 42,936 4,059,451 199,758 195,314 ¥ 156,205 1,524,322 25,762 3,612,966 151,840 178,945 ¥ 132,956 1,300,070 23,616 3,410,410 150,425 172,222 ¥ 127,942 1,132,465 27,910 3,391,651 159,346 169,686 ¥ 127,244 1,050,340 19,315 3,332,679 107,638 151,779 ¥ 105,280 15,351,692 357,800 33,828,758 1,664,650 1,627,617 $ 1,301,708 (at the end of the year) 129,249 124,305 120,958 117,314 114,443 — 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 ¥120=U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2015. 5. The Company has 172 consolidated subsidiaries and 36 equity-method companies as of March 31, 2015. 6. Diluted net income per share attributable to Mitsubishi Electric Corp. is not included in the above table as no dilutive securities existed. 26 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Financial Review OVERVIEW The business environment in the fiscal year ended March 31, 2015 (hereinafter, fiscal 2015) in general experienced an gradual upward trend, with buoyant economic expansion in the U.S. and economic recovery in Europe having a positive effect, despite Japan’s economy remaining in a state of weak recovery centered around consumption and despite the economic slowdown in China and some emerging markets. In addition, the weakening of the yen advanced against the U.S. dollar, while the yen became stronger against the euro. Under these circumstances, the Mitsubishi Electric Group has been working even harder than before to promote growth strategies rooted in its advantages, while continuously implementing initiatives to strengthen its competitiveness and business structure. As a result, in fiscal 2015, the Mitsubishi Electric Group recorded net sales of 4,323.0 billion yen and operating income of 317.6 billion yen. Income before income taxes came to 322.9 billion yen. Net income attributable to Mitsubishi Electric Corporation was 234.6 billion yen for the fiscal year. Net Sales The Mitsubishi Electric Group recorded increases in sales in all its business seg- ments, namely, Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices, Home Appliances and Others. In the fiscal year, consolidated net sales climbed by ¥268.6 billion Net sales / Operating income 4.32 4.05 3.643.63 3.56 year on year to ¥4,323.0 billion. Cost of Sales, Expenses and Operating Income The cost of sales increased by ¥117.5 billion compared with the previous fiscal year to ¥3,032.1 billion, representing 70.1% of total net sales, an improvement of 1.8 percentage points. Selling, general and administrative (SG&A) expenses 317 233 225 235 152 together with research and development (R&D) expenses totaled ¥970.1 billion, 11 12 13 14 15 11 12 13 14 15 up ¥69.3 billion year on year. As a result, the ratio of SG&A and R&D expenses to Net sales net sales deteriorated by 0.3 of a percentage point year on year to 22.5%. Loss (Yen in trillions) Operating income (Yen in billions) on impairment of long-lived assets decreased by ¥0.7 billion year on year to ¥3.0 billion. Accounting for the aforementioned factors, operating income amounted to ¥317.6 billion, an increase of ¥82.4 billion compared with the previous fiscal year. This increase was primarily attributable to higher income in the Industrial Automation Systems, Information and Communications Systems, Electronic Devices, Home Appliances, and Other business segments. Non-Operating Income and Expenses Financial income, the sum of interest and dividend income less interest expenses, amounted to ¥3.3 billion, essentially unchanged from the previous fiscal year. Equity in earnings of affiliated companies totaled ¥27.7 billion, an improve- ment of ¥4.5 billion compared with the previous fiscal year. Net income attributable to Mitsubishi Electric Corp. / Basic net income per share attributable to Mitsubishi Electric Corp. 234 153 124 112 69 109.32 71.49 58.00 52.20 32.38 Other income increased by ¥18.7 billion to ¥43.3 billion year on year. Other 11 12 13 14 15 11 12 13 14 15 expenses grew by ¥31.8 billion year on year to ¥69.0 billion. Income before Income Taxes Net income attributable to Mitsubishi Electric Corp. (Yen in billions) Basic net income per share attributable to Mitsubishi Electric Corp. (Yen) Income before income taxes increased by ¥73.9 billion compared with the previous fiscal year to ¥322.9 billion, for a ratio to net sales of 7.5%. As previously mentioned, this is largely attributable to the aforementioned upswing in operating income of ¥82.4 billion. Net Income Attributable to Mitsubishi Electric Net income attributable to Mitsubishi Electric Corp. grew by ¥81.2 billion year on year to ¥234.6 billion (a ratio to net sales of 5.4%) largely on the back of the increase in income before income taxes. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 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) Incidents related to information security The performance of the Mitsubishi Electric Group may be affected by computer virus infections, unauthorized access and other unpredictable incidents that lead to the loss or leakage of personal information held by the Group or confidential information regarding the Group’s business such as its technology, sales and other operations. (13) 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. (14) 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 2015 RESULTS BY BUSINESS SEGMENT Net Sales by Business Segment Yen (millions) U.S. dollars (thousands) Years ended March 31 2015 2014 2013 2012 2011 2015 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations Consolidated total ¥1,228,958 1,282,749 ¥1,180,093 1,098,796 ¥1,058,177 927,857 ¥1,027,115 978,380 ¥1,027,749 927,002 $10,241,317 10,689,575 559,521 238,402 944,830 740,517 4,994,977 (671,936) ¥4,323,041 548,282 194,658 944,351 676,034 4,642,214 (587,855) ¥4,054,359 522,422 164,065 821,298 590,366 4,084,185 (517,001) ¥3,567,184 516,354 200,799 849,274 611,619 4,183,541 (544,073) ¥3,639,468 487,915 175,910 924,478 609,416 4,152,470 (507,139) ¥3,645,331 4,662,675 1,986,683 7,873,583 6,170,975 41,624,808 (5,599,466) $36,025,342 Operating Income (Loss) by Business Segment Yen (millions) U.S. dollars (thousands) Years ended March 31 2015 2014 2013 2012 2011 2015 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Consolidated total ¥ 72,448 145,982 ¥ 76,324 98,079 ¥ 85,140 60,592 ¥ 84,920 101,192 ¥ 83,055 100,089 $ 603,733 1,216,517 18,934 30,163 54,296 23,742 345,565 (27,961) ¥317,604 5,529 10,050 52,878 19,801 262,661 (27,489) ¥235,172 1,591 (5,580) 19,300 18,790 179,833 (27,738) ¥152,095 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) ¥233,761 157,783 251,358 452,467 197,850 2,879,708 (233,008) $2,646,700 Energy and Electric Systems The social infrastructure systems business saw a decrease in orders compared to the previous fiscal year due primarily to a decrease in the power genera- tion and public utility systems businesses in Japan. Sales, meanwhile, remained unchanged compared to the previous fiscal year owing to increases in the rolling- stock equipment business outside Japan. The building systems business experienced increases in both orders and sales compared to the previous fiscal year, owing to growth in new installation of elevators and escalators overseas, mainly in China and ASEAN countries, as well as the weaker yen. Net sales and Operating income of Energy and Electric Systems 1,1801,228 83 84 85 1,0271,027 1,058 76 72 As a result, total sales for this segment increased by 4% from the previous 11 12 13 14 15 11 12 13 14 15 fiscal year to 1,228.9 billion yen. Operating income decreased by 3.8 billion yen from the previous fiscal year to 72.4 billion yen due primarily to a shift in project Net sales (Yen in billions) Operating income (Yen in billions) portfolio. Industrial Automation Systems The factory automation systems business saw increases in both orders and sales from the previous fiscal year due to growth in capital expenditures relating to smartphone and automotive industries as well as facility replacements by manu- facturers in Japan, and due additionally to the weaker yen. The automotive equipment business saw increases in both orders and sales from the previous fiscal year due primarily to growth in the car sales market in North America and China, as well as the positive influence of the weaker yen. As a result, total sales for this segment increased by 17% from the previous Net sales and Operating income of Industrial Automation Systems 1,282 145 1,098 978 927 927 100 101 98 60 fiscal year to 1,282.7 billion yen. Operating income increased by 47.9 billion yen 11 12 13 14 15 11 12 13 14 15 from the previous fiscal year to 145.9 billion yen due primarily to an increase in sales. Net sales (Yen in billions) Operating income (Yen in billions) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 29 Information and Communication Systems The telecommunications equipment business saw decreases in both orders and sales from the previous fiscal year due primarily to a decrease in demand for communications infrastructure products. Sales in the information systems and services business saw decreases com- Net sales and Operating income of Information and Communication Systems 559 548 21 516 522 487 18 pared to sales of the previous fiscal year mainly due to decreases in system inte- 13 gration business. The electronic systems business saw a decrease in orders compared to the previous fiscal year due to decreases in large-scale projects in the defense system and space system businesses. Sales, meanwhile, experienced an increase com- pared to the previous fiscal year due to progress in orders already received for projects in the defense systems business. 5 1 11 12 13 14 15 11 12 13 14 15 As a result, total sales for this segment increased by 2% compared with the previous fiscal year to 559.5 billion yen. Operating income increased by 13.4 billion yen from the previous fiscal year to 18.9 billion yen due primarily to an Net sales (Yen in billions) Operating income (Yen in billions) Net sales and Operating income (loss) of Electronic Devices increase in sales. Electronic Devices The electronic devices business saw increases in both orders and sales from the previous fiscal year due to an increase in demand mainly for power modules used in automotive applications owing to expansion in hybrid and electric vehicle mar- kets, as well as an increase in demand for power modules used in railcar, con- sumer and industrial applications and for optical communication devices mainly in the Chinese market, and due additionally to the weaker yen. 238 30 200 194 164 175 10 5 3 -5 As a result, total sales for this segment increased by 22% compared with the 11 12 13 14 15 11 12 13 14 15 previous fiscal year to 238.4 billion yen. Operating income increased by 20.1 bil- lion yen compared with the previous fiscal year to 30.1 billion yen due primarily to an increase in sales. Home Appliances The home appliances business remained substantially unchanged compared with the previous fiscal year with total sales for this segment amounting to 944.8 billion yen, despite increased sales in air conditioners in Asian, North American and European markets and in package air conditioners in Japan, as well as the weaker yen, due to impact from the last-minute surge in demand experienced in Japan before the rise in consumption tax the previous year. Operating income increased by 1.4 billion yen compared with the previous Net sales (Yen in billions) Operating income (loss) (Yen in billions) Net sales and Operating income of Home Appliances 924 944 944 849 821 54 52 42 22 19 fiscal year to 54.2 billion yen largely due to the weaker yen. 11 12 13 14 15 11 12 13 14 15 Others Sales increased by 10% compared with the previous fiscal year to 740.5 billion yen, mainly at affiliated companies involved in materials procurement. Operating income increased by 3.9 billion yen compared with the previous fiscal year to 23.7 billion yen due primarily to an increase in sales. Net sales (Yen in billions) Operating income (Yen in billions) Net sales and Operating income of Others 740 676 609 611 590 23 20 19 18 14 30 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 11 12 13 14 15 11 12 13 14 15 Net sales (Yen in billions) Operating income (Yen in billions) RESULTS BY GEOGRAPHIC SEGMENT Net Sales by Geographic Segment Yen (millions) U.S. dollars (thousands) Years ended March 31 Japan North America Asia (excluding Japan) Europe Others Eliminations Consolidated total 2015 2014 2013 2012 2011 2015 ¥ 3,578,960 388,021 1,047,758 383,965 49,495 ¥3,362,854 325,224 887,022 352,950 47,824 ¥3,064,014 248,105 624,724 289,933 40,255 ¥3,186,719 222,543 582,888 309,997 40,184 ¥3,176,605 229,958 583,827 293,952 38,200 (1,125,158) ¥ 4,323,041 (921,515) ¥4,054,359 (699,847) ¥3,567,184 (702,863) ¥3,639,468 (677,211) ¥3,645,331 $29,824,667 3,233,508 8,731,317 3,199,708 412,458 (9,376,316) $36,025,342 Operating Income (Loss) by Geographic Segment Yen (millions) U.S. dollars (thousands) Years ended March 31 Japan North America Asia (excluding Japan) Europe Others Eliminations Consolidated total 2015 2014 2013 2012 2011 2015 ¥226,199 5,178 82,419 11,803 402 (8,397) ¥317,604 ¥177,315 1,679 59,023 4,768 1,735 (9,348) ¥235,172 ¥116,923 (1,744) 36,172 4,527 2,209 (5,992) ¥152,095 ¥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 $1,884,992 43,150 686,825 98,358 3,350 (69,975) $2,646,700 Japan Sales totaled 3,578.9 billion yen, up 6% compared with the previous fiscal year. This largely reflected the upswing in sales in the FA systems, automotive equipment, and semiconductor businesses. Operating income increased by 48.8 billion yen to 226.1 bil- lion yen. North America Sales increased by 19% year on year to 388.0 billion yen primarily due to higher sales in the FA systems, and automotive equip- ment businesses. Mitsubishi Electric reported operating income in its operations in North America totaling 5.1 billion yen. This was an improvement of 3.4 billion yen compared with the previous fiscal year. Asia (excluding Japan) Sales totaled 1,047.7 billion yen, up 18% compared with the previous fiscal year mainly because of higher sales in the FA sys- tems, automotive equipment, and air conditioner businesses. Operating income increased by 23.3 billion yen to 82.4 billion yen. Europe Sales increased by 9% year on year to 383.9 billion yen mainly because of higher sales in the FA systems, automotive equipment, and air conditioner businesses. Operating income increased by 7.0 billion yen to 11.8 billion yen. Others Sales in other regions, including figures for Mitsubishi Electric’s Australian subsidiary, amounted to 49.4 billion yen, while operat- ing income was 0.4 billion yen. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 31 RESEARCH AND DEVELOPMENT R&D Expenditures Yen (billions) U.S. dollars (millions) Years ended March 31 2015 2014 2013 2012 2011 2015 Energy and Electric Systems ¥ 31.4 ¥ 28.8 ¥ 29.8 ¥ 30.5 ¥ 27.0 $ 261.7 Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Consolidated total 70.5 16.3 10.9 37.3 28.6 63.4 15.6 9.3 34.1 27.5 58.9 16.4 8.2 30.8 27.7 54.9 16.1 9.3 30.4 28.2 44.9 14.9 8.5 30.7 25.5 587.5 135.8 90.8 310.8 238.3 ¥195.3 ¥178.9 ¥172.2 ¥169.6 ¥151.7 $1,627.6 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 2015, total R&D expenditures, including quality improvement expenses constituting manufacturing costs, amount- ed to ¥195.3 billion. Mitsubishi Electric reports R&D activities by business segment according to purpose, type, result and expenditure. 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 transmis- sion/ 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, building management systems and visual information systems. Notable among Mitsubishi Electric’s recent R&D achievements are the 3 screen layout train vision system; the MELNET-ES1200 high-reliability Ethernet switch; heat pump technologies for rolling stock air-conditioning equipment; the SVC-Diamond static synchronous compensator; the acquisition of three communication standards between communication unit for smart meter and HEMS equipment; the completion of VP-X series high efficiency turbine generator verification tests; the launch of NEXIEZ-LITE low- and mid-rise residential and office building elevators in the Indian market; the Destination Oriented Allocation System for elevators; and the MELSAFETY-Px access control system for small to mid-sized buildings. R&D expenditures in this segment totaled ¥31.4 billion. In the Industrial Automation Systems segment, R&D activities are aimed at enhancing the competitiveness of our lineup, which includes FA control equipment and systems; drive products such as AC servo motor systems; power distribution and con- trol equipment; mechatronics equipment; industrial robots; automotive electric and electronic components, including electric power steering (EPS) and related products; and car multimedia systems. Mitsubishi Electric’s important R&D successes encompass the MELSEC iQ-R and iQ-F series programmable controllers; the FREQROL-F800 series of general-purpose inverters; the M800S series and M80 series of computerized numerical controllers; the MP series of wire-cut electrical discharge machines; the NR-MZ90 series DIATONE SOUND. R&D expenditures R&D expenditures ratio NAVI car audio and navigation system; the DS-G500 DIATONE car speaker; a power unit for the three-motor HEV system; an eighth-generation airbag control unit; and a next-generation brushless alternator. R&D expenditures in this seg- 195 172 178 169 151 4.7 4.8 4.5 4.4 4.2 ment totaled ¥70.5 billion. In the Information and Communication Systems segment, Mitsubishi Electric pursues research related to the development of information and communications infrastructure, network solutions equipment, and space systems. Notable R&D successes for Mitsubishi Electric include the “smartstar” communication gate- way; the new functions of MELOOKμI I recorder; the PON protection function for 10G-EPON system; GE-PON systems for smart grid; the 100G media converter; 11 12 13 14 15 11 12 13 14 15 the HM-3000 high-sensitivity 3 MOS HD PTZ camera; the DIAPLANET smart control cloud service; the DIASITE website solution; and the MIND tablet PC that R&D expenditures (Yen in billions) R&D expenditures / Net sales (%) 32 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 combines PC functions with the lightweight convenience of a portable tablet device. R&D expenditures in this segment totaled ¥16.3 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 SiC power semiconductor modules such as the super-mini full SiC DIPPFC; power semiconductor modules for 3-level inverters; the J1-Series of power semiconductor modules for automobiles; the 3.5GHz-band GaN-HEMT for 4G mobile-communication base transceiver stations; the 100Gbps DWDM tunable DFB laser array; and tough-series 7.0-inch WVGA color TFT-LCD modules for industrial applications. R&D expenditures in this segment totaled ¥10.9 billion. In the Home Appliances segment, Mitsubishi Electric is engaged in the development of products in such wide-ranging fields as air conditioning equipment, kitchen appliances, vacuum cleaners, lighting, visual information systems, electronic housing products and photovoltaic systems. Major R&D achievements include the KIRIGAMINE L series room air conditioners that can be installed in narrow spaces above windows; the JX series of smart refrigerators with super cool chilling case; the iNSTICK cordless stick cleaner; the REAL 4K LS1 series of LCD televisions equipped with 4K high-definition laser backlights; and the smart house- related brand called ENEDIA:Energy-management Network Enhancing Demand-side Integration Activities. R&D expenditures in this segment totaled ¥37.3 billion. In Others, fundamental technology R&D that benefits the entire Group is carried out to enhance global business competitive- ness and create new businesses. In our main areas of R&D we have developed multi-function irradiation technologies for proton- type particle therapy systems; tsunami radar monitoring technologies; water treatment technology using gas/liquid interfacial discharge; security solution for IoT devices; cutting tool position-control method for machine; a multihop wireless network for surveillance cameras; and the establishment of production systems for multi-story production facilities. R&D expenditures in this area amounted to ¥28.6 billion. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 33 FINANCIAL POSITION Total assets amounted to ¥4,059.4 billion as of March 31, 2015, an increase of Interest-bearing debt Debt ratio ¥446.4 billion compared with the end of previous fiscal year. The change in the balance of total assets is mainly attributable to increases of ¥150.4 billion in cash and cash equivalents; ¥103.0 billion in inventories; ¥87.3 billion in investments in 542 540 484 securities and other on the back of such factors as the upswing in share prices; ¥65.8 billion in trade receivables and long-term trade receivables; and ¥57.0 bil- 373 381 16.0 15.9 lion in tangible fixed assets. Under liabilities, the outstanding balance of debt and corporate bonds grew by ¥8.5 billion compared with the end of the previous fiscal year to ¥381.9 bil- lion. As a result, the ratio of interest-bearing debt to total assets was 9.4%, a decrease of 0.9 of a percentage point year on year. While retirement and sever- ance benefits fell by ¥30.3 billion largely because of an increase in pension plan assets caused by higher share prices, trade payables and other current liabilities increased by ¥48.3 billion and ¥34.6 billion, respectively. As a result of these and other factors, total liabilities increased by ¥116.6 billion to ¥2,129.2 billion. Mitsubishi Electric Corp. shareholders’ equity rose by ¥317.8 billion com- pared with the end of previous fiscal year to ¥1,842.2 billion and the ratio of Mitsubishi Electric Corp. shareholders’ equity to total assets was 45.4%, up 3.2 percentage points year on year. Despite the decrease attributable to the payment of cash dividends totaling ¥42.9 billion, this increase was largely the result of the net income attributable to Mitsubishi Electric Corp. amounting to ¥234.6 billion for the fiscal year and the increase in accumulated other comprehensive income of ¥122.1 billion, reflecting such factors as the weak yen and upswing in share prices. 14.5 10.3 9.4 11 12 13 14 15 11 12 13 14 15 Interest-bearing debt (Yen in billions) Interest-bearing debt / Total assets (%) Total assets / Mitsubishi Electric Corp. shareholders’ equity Shareholders’ equity ratio 4,059 3,3323,3913,410 3,612 45.4 42.2 38.1 33.4 31.5 1,842 1,524 1,300 1,050 1,132 11 12 13 14 15 11 12 13 14 15 Total assets (Yen in billions) Mitsubishi Electric Corp. shareholders’ equity (Yen in billions) Shareholders’ equity ratio (%) 34 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 CAPITAL EXPENDITURES In line with its policy of improving performance by implementing the Balanced Capital expenditures Depreciation Corporate Management Policy and pursuing sustainable growth, the Mitsubishi Electric Group aims to realize its growth strategies as it increases profitability. To 199 that end, the Group directed its capital investment mainly toward the areas of energy and electric systems, factory automation equipment, automotive equip- ment, power devices, and air conditioning equipment. At the same time the Group continued to reinforce its solid business platform through the careful 159 150 151 107 156 127 127 132 105 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 roll- ing stock, and elevators/escalators) aimed at increasing production capacity, streamlining operations, 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 11 12 13 14 15 11 12 13 14 15 Capital expenditures (Yen in billions) Depreciation (Yen in billions) Communication Systems, funds were appropriated for bolstering research and development capabilities, 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 air conditioners production capacity, 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. For this fiscal year, 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, 2015, net cash provided by operating activities Cash flows amounted to ¥378.3 billion, while net cash used in investing activities was ¥198.1 billion. As a result, free cash flow was an inflow of ¥180.1 billion, down ¥130.1 billion compared with the previous fiscal year. Taking this into account along with net cash used in financing activities of ¥49.6 billion, the end of fis- cal year cash and cash equivalents amounted to ¥568.5 billion, an increase of ¥150.4 billion year on year. Net cash provided by operating activities decreased by ¥62.1 billion com- 440 378 327 310 182 180 75 82 pared with the previous fiscal year to ¥378.3 billion. Despite posting net income 248.0 billion, this downturn was largely attributable to increases in invento- of ¥248.0 billion, this downturn was largely attributable to increases in invento- ¥248.0 billion, this downturn was largely attributable to increases in invento- -145 -156 -153 -130 -198 -80 -70 ries and trade receivables. Net cash used in investing activities increased by ¥67.9 billion year on year to ¥198.1 billion. During the period, purchase of property, plant and equipment increased while proceeds from the sale of short-term investments and investment securities decreased. Net cash used in financing activities was ¥49.6 billion, down ¥159.3 bil- lion year on year. Despite an outflow due to cash dividends paid, cash inflows increased due to the procurement of funds through increases in borrowings and the issuance of bonds. 11 12 13 14 15 11 12 13 14 15 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 2015 35 Consolidated Balance Sheets Mitsubishi Electric Corporation and Subsidiaries March 31, 2015 and 2014 Assets Current assets: 2015 Yen (millions) 2014 U.S. dollars (thousands) (note 2) 2015 Cash and cash equivalents ¥ 568,517 ¥ 418,049 $ 4,737,642 Short-term investments (notes 3, 17 and 18) Trade receivables (notes 4, 6 and 15) Inventories (note 5) Prepaid expenses and other current assets (notes 9, 14 and 18) — 1,048,542 705,420 310,966 51 983,468 602,341 286,098 Total current assets 2,633,445 2,290,007 — 8,737,850 5,878,500 2,591,383 21,945,375 Long-term receivables and investments: Long-term trade receivables (note 17) Investments in securities and other (notes 3, 10, 14, 17 and 18) Investments in affiliated companies (note 6) Total long-term receivables and investments 5,633 401,367 194,461 601,461 4,813 314,047 183,463 502,323 46,942 3,344,725 1,620,508 5,012,175 Property, plant and equipment (notes 18, 19 and 20): Land Buildings Machinery and equipment Construction in progress Less accumulated depreciation Net property, plant and equipment 109,708 749,926 104,272 703,223 1,844,255 1,712,632 48,328 2,752,217 2,045,742 706,475 54,632 2,574,759 1,925,374 649,385 914,233 6,249,384 15,368,792 402,733 22,935,142 17,047,850 5,887,292 Other assets (notes 9 and 18) 118,070 171,251 983,916 Total assets ¥4,059,451 ¥3,612,966 $33,828,758 See accompanying notes to consolidated financial statements. 36 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Liabilities and Equity Current liabilities: Bank loans (note 7) Current portion of long-term debt (notes 7, 17 and 20) Trade payables (notes 6 and 8) Accrued expenses (note 16) Accrued income taxes (note 9) Other current liabilities (notes 10, 14 and 18) 2015 Yen (millions) 2014 U.S. dollars (thousands) (note 2) 2015 ¥ 72,385 ¥ 60,275 $ 603,208 92,017 807,289 358,082 29,624 253,185 101,777 758,913 337,571 17,151 218,556 766,808 6,727,408 2,984,017 246,867 2,109,875 Total current liabilities 1,612,582 1,494,243 13,438,183 Long-term debt (notes 7, 17 and 20) Retirement and severance benefits (note 10) Other liabilities (notes 9 and 16) Total liabilities 217,592 182,282 116,828 211,426 212,638 94,308 2,129,284 2,012,615 1,813,266 1,519,017 973,567 17,744,033 Mitsubishi Electric Corp. shareholders' equity Common stock (note 11): Authorized 8,000,000,000 shares; issued 2,147,201,551 shares in 2015 and in 2014 Capital surplus (note 11) Legal reserve Retained earnings Accumulated other comprehensive 175,820 211,155 64,058 175,820 207,089 62,739 1,267,438 1,076,999 1,465,167 1,759,625 533,817 10,561,984 income (loss) (notes 3, 9, 10, 12 and 14) 124,064 1,957 1,033,866 Treasury stock, at cost 385,990 shares in 2015 and 348,999 shares in 2014 (332) (282) (2,767) Total Mitsubishi Electric Corp. shareholders' equity 1,842,203 1,524,322 15,351,692 Noncontrolling interests Total equity 87,964 76,029 1,930,167 1,600,351 733,033 16,084,725 Commitments and contingent liabilities (note 16) Total liabilities and equity ¥4,059,451 ¥3,612,966 $33,828,758 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 37 Consolidated Statements of Income Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2015, 2014 and 2013 Revenues: Net sales (note 6) Interest and dividends (note 6) Equity in earnings of affiliated companies (note 6) Other (notes 3, 12, 14 and 19) Total revenues Costs and expenses: Cost of sales (notes 10 and 20) Selling, general and administrative (notes 10, 19 and 20) Research and development Loss on impairment of long-lived assets (notes 18 and 19) Interest Equity in losses of affiliated companies (note 6) Other (notes 3, 12, 14, 15, 16 and 19) Total costs and expenses 2015 2014 Yen (millions) 2013 ¥4,323,041 7,365 27,725 43,304 4,401,435 ¥4,054,359 7,799 23,153 24,554 4,109,865 ¥3,567,184 7,742 — 25,361 3,600,287 3,032,161 790,563 179,628 3,085 4,023 — 69,007 4,078,467 2,914,589 737,042 163,765 3,791 4,539 — 37,149 3,860,875 2,604,360 648,890 157,522 4,317 6,507 14,619 98,931 3,535,146 U.S. dollars (thousands) (note 2) 2015 $36,025,342 61,375 231,042 360,866 36,678,625 25,268,009 6,588,025 1,496,900 25,708 33,525 — 575,058 33,987,225 Income before income taxes 322,968 248,990 65,141 2,691,400 Income taxes (note 9): Current Deferred 60,183 14,730 74,913 34,241 51,957 86,198 23,490 (32,999) (9,509) 501,525 122,750 624,275 Net income 248,055 162,792 74,650 2,067,125 Net income attributable to noncontrolling interests 13,361 9,319 5,133 111,342 Net income attributable to Mitsubishi Electric Corp. ¥ 234,694 ¥ 153,473 ¥ 69,517 $ 1,955,783 Net income per share attributable to Mitsubishi Electric Corp. (note 13): Basic Diluted See accompanying notes to consolidated financial statements. ¥109.32 — ¥71.49 — Yen ¥32.38 — U.S. dollars (note 2) $0.911 — Consolidated Statements of Comprehensive Income Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2015, 2014 and 2013 Net income Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) Total 2015 ¥248,055 2014 ¥162,792 Yen (millions) 2013 ¥74,650 72,583 21,171 36,710 7 130,471 51,769 (6,756) 55,556 (80) 100,489 66,592 47,633 14,845 43 129,113 Comprehensive income 378,526 263,281 203,763 U.S. dollars (thousands) (note 2) 2015 $2,067,125 604,858 176,425 305,917 58 1,087,258 3,154,383 Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Mitsubishi Electric Corp. See accompanying notes to consolidated financial statements. 21,725 14,364 12,130 181,042 ¥356,801 ¥248,917 ¥191,633 $2,973,341 38 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Consolidated Statements of Equity Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2015, 2014 and 2013 Balance at March 31, 2012 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) 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, 2013 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) 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, 2014 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) 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, 2015 Balance at March 31, 2014 Comprehensive income (loss): Net income attributable to Mitsubishi Electric Corp. Net income attributable to noncontrolling interests Other comprehensive income (loss), net of tax (note 12): Foreign currency translation adjustments Pension liability adjustments (note 10) Unrealized gains (losses) on securities (note 3) Unrealized gains (losses) on derivative instruments (note 14) 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, 2015 Common stock Legal reserve ¥175,820 ¥206,343 ¥61,040 Capital surplus Retained earnings ¥905,086 69,517 Accumulated other comprehensive income (loss) ¥(215,603) Total Mitsubishi Electric Corp. shareholders’ equity ¥1,132,465 Non- controlling interests ¥58,555 Treasury stock ¥ (221) Yen (millions) Total equity ¥1,191,020 69,517 5,133 66,592 47,633 14,845 43 203,763 — 69,517 59,631 47,633 14,803 49 191,633 — 5,133 6,961 42 (6) 12,130 59,631 47,633 14,803 49 366 (366) (398) (398) (3,764) (4,162) (23,616) ¥175,820 ¥205,945 ¥61,406 ¥ 950,621 ¥ (93,487) 153,473 (16) 2 ¥ (235) (23,616) (16) 2 ¥1,300,070 153,473 46,675 (6,756) 55,591 (66) 46,675 (6,756) 55,591 (66) 248,917 — 1, 333 (1,333) (23,616) (16) 2 ¥1,366,991 153,473 9,319 51,769 (6,756) 55,556 (80) 263,281 — ¥66,921 9,319 5,094 (35) (14) 14,364 1.144 1,144 (5,256) (4,112) (25,762) ¥175,820 ¥207,089 ¥62,739 ¥1,076,999 ¥ 1,957 234,694 64,307 21,171 36,616 13 1,319 (1,319) (48) 1 ¥ (282) (25,762) (48) 1 ¥1,524,322 234,694 64,307 21,171 36,616 13 356,801 — (25,762) (48) 1 ¥1,600,351 234,694 13,361 72,583 21,171 36,710 7 378,526 — ¥76,029 13,361 8,276 94 (6) 21,725 4,066 4,066 (9,790) (5,724) (42,936) ¥175,820 ¥211,155 ¥64,058 ¥1,267,438 ¥124,064 (42,936) (50) 0 ¥(332) ¥1,842,203 (50) 0 (42,936) (50) 0 ¥1,930,167 ¥87,964 U.S. dollars (thousands) (note 2) Accumulated other comprehensive Legal income (loss) reserve $1,465,167 $1,725,742 $522,825 $8,974,993 $ 16,308 Common stock Retained earnings Capital surplus Total Mitsubishi Electric Corp. shareholders’ equity Non- controlling interests Treasury stock Total equity $(2,350) $12,702,685 $633,574 $13,336,259 1,955,783 1,955,783 535,892 176,425 305,133 108 535,892 176,425 305,133 108 111,342 68,966 784 (50) 1,955,783 111,342 604,858 176,425 305,917 58 10,992 (10,992) 33,883 (357,800) $1,465,167 $1,759,625 $533,817 $10,561,984 $1,033,866 2,973,341 — 181,042 3,154,383 — 33,883 (81,583) (47,700) (357,800) (417) 0 $(2,767) $15,351,692 $733,033 $16,084,725 (357,800) (417) 0 (417) 0 See accompanying notes to consolidated financial statements. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 39 Consolidated Statements of Cash Flows Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2015, 2014 and 2013 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 (earnings) of affiliated companies Decrease (increase) in trade receivables Decrease (increase) in inventories Decrease (increase) in other assets Increase (decrease) in trade payables Increase (decrease) in accrued expenses and retirement and severance benefits Increase 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 2015 2014 Yen (millions) 2013 U.S. dollars (thousands) (note 2) 2015 ¥248,055 ¥162,792 ¥ 74,650 $2,067,125 156,205 132,956 127,942 1,301,708 2,751 3,627 4,014 22,925 (1,950) 14,730 (383) 1,148 (27,725) (42,044) (75,829) (6,966) 47,948 (18,772) 60,595 20,550 378,313 67 51,957 1,108 607 (23,153) 14,812 18,141 (12,580) 83,179 (10,756) 21,494 (3,764) 440,487 (296) (32,999) (2,480) 4,828 14,619 (49) 16,706 (21,241) (62,549) (63,638) 16,787 6,458 82,752 (16,250) 122,750 (3,192) 9,567 (231,042) (350,367) (631,908) (58,050) 399,567 (156,433) 504,958 171,250 3,152,608 (199,758) (151,840) (150,425) (1,664,650) 6,768 4,930 4,792 56,400 and investment securities (net of cash acquired) (5,608) (21,312) (13,036) (46,733) 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 2015 10,722 24 (10,311) (198,163) 90,598 (103,497) 11,392 (42,936) (50) 0 (5,130) 44,134 1,882 (8,015) (130,221) 193 (105,445) (73,266) (25,762) (48) 1 (4,694) 29,088 (14,398) (9,722) (153,701) 57,003 (90,786) 19,237 (23,616) (16) 2 (2,977) 89,350 200 (85,925) (1,651,358) 754,984 (862,475) 94,933 (357,800) (417) 0 (42,750) (49,623) (209,021) (41,153) (413,525) 19,941 150,468 418,049 ¥568,517 17,923 119,168 298,881 ¥418,049 18,802 (93,300) 392,181 ¥298,881 166,175 1,253,900 3,483,742 $4,737,642 Notes to Consolidated Financial Statements Mitsubishi Electric Corporation and Subsidiaries (1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Mitsubishi Electric Corporation (the “Company”) is a multina- tional organization which develops, manufactures, sells and distributes a broad range of electrical and electronic equip- ments in the fields as diverse as home appliances and 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, 2015 are as follows: Energy and Electric Systems – 24%, Industrial Automation Systems – 26%, Information and Communication Systems – 11%, Electronic Devices – 5%, Home Appliances – 19% 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, 2015 comprises of the following geo- graphical locations: Japan – 58%, North America – 9%, Asia (excluding Japan) – 22%, Europe – 9% and Others – 2%. Our manufacturing operations are conducted principally consolidate the entity as the primary beneficiary when the Company has a controlling financial interest. (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- at the Parent company with 23 manufacturing sites located in rities into trading, available-for-sale, or held-to-maturity Japan as well as overseas manufacturing sites located in the securities. United States, United Kingdom, Thailand, Malaysia, China and Trading securities are bought and held principally for the 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 on which the Company does not have significant influence are accounted for by the cost method. The Company evaluates Variable Interest Entities (VIEs) whether it has a controlling financial interest in an entity through means other than voting rights and whether it should purpose of selling them in the near term. Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. All securities 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. To determine whether an impairment of equity security is other-than-temporary, the Company considers whether it has the ability and intent to hold the security until a market price recovery and considers whether evidence indicating the market price of the security is recoverable to the carrying MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 41 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 debt security and it is more likely than Valuation allowances are established to reduce deferred not that 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 receivables (l) Product Warranties The Company generally offers warranties on its products based on credit loss history and evaluation of specific doubtful against certain manufacturing and other defects for the spe- 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 differ- Raw material and finished product inventories are gener- ence between the fair value of plan assets and the projected ally recorded using the average-cost method, and evaluated benefit obligations) of its pension plans in the consolidated at the lower of cost or market. In accordance with the general balance sheet at the end of the year, and records the cor- practice in the heavy electrical industry, inventories related to responding amount to accumulated other comprehensive Energy and Electric Systems include items with long manufac- income (loss), net of tax. The adjustment items for accumulat- turing periods which are not realizable within one year. ed other comprehensive income (loss) are unrecognized prior (i) Property, Plant and Equipment The Company records property, plant and equipment at cost. Depreciation of property, plant and equipment is generally service cost and unrecognized net gain or loss. The amounts of these adjustments are recognized as net periodic pension cost in future 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 class, type of construction, and use of these assets. of an arrangement including title transfer exists, delivery has 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 depreciation of the leased assets is calculated in accordance with the Company’s normal depreciation policy. (k) Income Taxes The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating 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 recognized over the contract term when the maintenance is 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 42 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 the current year to the aggregate amount of estimated cost. effective portion of the hedging instruments are recognized as Any anticipated losses on fixed price contracts are charged a component of other comprehensive income (loss) until the to operations when such losses can be estimated. Provisions hedged item is recognized in earnings. The ineffective portion are made for contingencies in the period when they become of all hedges is recognized in earnings immediately. known pursuant to specific contract terms and conditions and The Company discloses the use and purpose of derivative are estimable. instruments, accounting for derivative instruments and related For the contract which may consists of any combination hedged items. The Company also discloses the effects on the of products, equipment, installation and maintenance, rev- entity’s financial position, results of operations, and cash flows enue is allocated to each accounting unit based on its relative by the derivative instruments and hedging activities. fair value, when each deliverable is accounted for by each separate accounting unit. (t) Securitizations The Company accounts for the securitization of the accounts (o) Research and Development and Advertising The Company accounts for the costs of research and devel- receivables as a sale, if it is determined based on the Company’s evaluation that it has surrendered control over the opment and advertising as expense when those costs are transferred receivables. incurred. (p) Shipping and Handling Costs The Company records shipping and handling costs mainly as selling, general and administrative expenses. (q) Net Income per Share The Company calculates basic net income per share attribut- able to Mitsubishi Electric Corp. by dividing net income attrib- utable to Mitsubishi Electric Corp. by the weighted-average number of common shares outstanding during each year. 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- age market price of the Company’s common stock). (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 consolidated 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 Accordingly, the receivables sold under these facilities are excluded from Trade receivables in the accompanying consolidated balance sheets. Gain or loss on sale of receiv- ables is calculated based on the allocated carrying amount of the receivables sold. When a portion of accounts receivables is transferred, the participating interest that continues to be held is recorded at the allocated carrying amount of the assets based on their relative fair values at the date of the transfer. The Company estimates fair value based on the present value of future expected cash flows less credit losses. (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 assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment loss is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of other than sale continue to be classified as held and used until they are disposed. Long-lived assets classified as held-for-sale are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held-for-sale are presented separately in the appropriate asset and liability sections of the consolidated balance sheets. (v) Goodwill and Other Intangible Assets The Company accounts for business combinations using the acquisition method. The Company recognizes at fair value the assets acquired, the liabilities assumed, any noncontrolling interests in the acquiree, and acquired goodwill at the acquisi- MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 43 tion date. The Company discloses the nature of business com- reasonable estimate of fair value can be made. The associated bination to enable the readers to evaluate the effects of such asset retirement costs are capitalized as part of the carrying transaction on the consolidated financial statements. amount of the long-lived asset and subsequently allocated to The Company does not amortize goodwill and other expense over the asset’s useful life. Subsequent to the initial intangible assets with indefinite useful life but tests it for measurement of the asset retirement obligation, the obliga- impairment at least annually. Also other intangible assets tion is adjusted at the end of each period to reflect the pas- determined to have useful life are amortized over their respec- sage of time and changes in the estimated future cash flows tive estimated useful life and tested for impairment. underlying the obligation. (w) Cost Associated with Exit or Disposal Activities The Company recognizes the costs associated with exit or dis- (z) Reclassifications The Company has made certain reclassifications of the previ- posal activities as liability only when it meets the definition of ous fiscal years’ consolidated financial statements to conform a liability in the Statements of Financial Accounting Concepts to the presentation used for the year ended March 31, 2015. No. 6, “Elements of Financial Statements”. The Company uses fair value for initial measurement of liabilities related to exit or disposal activities. (aa) Future Application of New Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates (ASU) 2014-09 (x) Guarantees The Company recognizes the guarantees and indemnifica- “Revenue from Contracts with Customers” (A Creation of Accounting Standards Codification (ASC) Topic 606 “Revenue tion arrangements as liability measured at fair value as they are issued or modified by the Company, and discloses the from Contracts with Customers”). ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised guarantees that the Company has undertaken, including a goods or services to customers in an amount that reflects rollforward of the Company’s product warranty liabilities. The the consideration to which the entity expects to be entitled Company continually monitors the conditions of the guaran- in exchange for those goods or services. The Company is tees and indemnifications to identify occurrence of probable required to adopt ASU 2014-09 on April 1, 2017 retrospec- losses, and when such losses are identified and if estimable, tively to each prior reporting period presented or retrospec- they are recognized in current earnings. tively with the cumulative effect of initially adopting this (y) 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 update recognized at the date of the initial adoption. In April 2015, FASB issued proposed ASU “Revenue from Contracts with Customers-Deferral of the Effective Date” which defers an adoption date of ASU2014-09 for one year. The Company has not yet determined which method it will apply and is cur- rently evaluating the effects on the Company’s consolidated financial position and results of operations upon adoption of ASU 2014-09. (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 2015. 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 ¥120=U.S.$1, which was the approximate could be converted into United States dollars at such rate. 44 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 (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, 2015 and sale securities. The cost, gross unrealized holding gains, gross 2014 were as follows: 2015: Available-for-sale: Equity securities Debt securities 2014: Available-for-sale: Equity securities Debt securities 2015: Available-for-sale: Equity securities Debt securities Gross unrealized holding gains Gross unrealized holding losses Cost Yen (millions) Fair value ¥96,210 500 ¥96,710 ¥176,013 21 ¥176,034 ¥780 2 ¥782 ¥271,443 519 ¥271,962 Gross unrealized holding gains Gross unrealized holding losses Cost Yen (millions) Fair value ¥ 96,587 3,861 ¥100,448 ¥127,931 — ¥127,931 ¥1,345 49 ¥1,394 ¥223,173 3,812 ¥226,985 Gross unrealized holding gains Gross unrealized holding losses Cost Fair value U.S. dollars (thousands) $801,750 4,167 $1,466,775 175 $805,917 $1,466,950 $6,500 17 $6,517 $2,262,025 4,325 $2,266,350 Debt securities consist of Japanese government debt securi- ($305,133 thousand), ¥55,591 million and ¥14,803 million, ties, corporate debt securities and others. respectively. In the years ended March 31, 2015, 2014 and 2013, net As of March 31, 2015 and 2014, the cost of non-market- unrealized gains on available-for-sale securities, net of taxes able equity securities were ¥14,545 million ($121,208 thou- and noncontrolling interests, increased by ¥36,616million sand) and ¥14,550 million, respectively. Maturities of marketable securities classified as available-for-sale at March 31, 2015 were as follows: Due after one year through five years Due after five years Marketable equity securities Cost ¥ 200 300 96,210 ¥96,710 Yen (millions) Fair value ¥ 198 321 271,443 ¥271,962 U.S. dollars (thousands) Fair value $ 1,650 2,675 2,262,025 $2,266,350 Cost $ 1,667 2,500 801,750 $805,917 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 45 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, 2015 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 ¥528 198 ¥726 ¥139 2 ¥141 ¥444 — ¥444 ¥641 — ¥641 ¥ 972 198 ¥1,170 ¥780 2 ¥782 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 $4,400 1,650 $6,050 $1,158 17 $1,175 $3,700 — $3,700 $5,342 — $5,342 $8,100 1,650 $9,750 $6,500 17 $6,517 The Company did not recognize an impairment loss from the decline in the fair value of the marketable securities including the unrealized losses. Based on that evaluation and the Company’s ability and intent to hold those securities for a reasonable period of time sufficient for a recovery of fair value, the Company does not consider those securities to be other-than-temporarily impaired. Proceeds from the sale of available-for-sale securities and gross realized gains and losses on those sales in the years ended March 31, 2015, 2014 and 2013 were as follows: Proceeds Gross realized gains Gross realized losses 2015 ¥3,034 111 74 2014 ¥26,964 161 1,327 Yen (millions) 2013 ¥22,287 2,527 47 U.S. dollars (thousands) 2015 $25,283 925 617 For the years ended March 31, 2015 and 2014, the Company did not recognize any material losses on impairment of marketable securities due to other-than-temporary declines in fair value. For the year ended March 31, 2013, the Company recognized loss on impairment of marketable securities of ¥3,860 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 2015 ¥ 81,995 977,044 (10,497) ¥1,048,542 Yen (millions) 2014 ¥ 68,335 925,181 (10,048) ¥983,468 U.S. dollars (thousands) 2015 $ 683,292 8,142,033 (87,475) $8,737,850 46 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 (5) INVENTORIES Inventories are comprised of the following: Work in process Less accumulated billings on long-term contracts Raw materials Finished products 2015 ¥297,976 19,182 278,794 116,027 310,599 Yen (millions) 2014 ¥262,466 14,955 247,511 100,150 254,680 ¥705,420 ¥602,341 U.S. dollars (thousands) 2015 $2,483,133 159,850 2,323,283 966,892 2,588,325 $5,878,500 (6) INVESTMENTS IN AFFILIATED COMPANIES A summary of the combined financial information relating to affiliated companies accounted for by the equity method of accounting (Toshiba Mitsubishi-Electric Industrial Systems Corporation, Shanghai Mitsubishi Elevator Co., Ltd, etc.) as of March 31, 2015 and 2014, and for the years ended March 31, 2015, 2014 and 2013 is as follows: Results of Operations for the years ended March 31, 2014 and 2013 include the financial information of Renesas Electric Corporation (Renesas) which was excluded from affiliated companies accounted for by the equity method of accounting on September 30, 2013. Financial Position Current assets Property, plant and equipment Other assets Total assets Current liabilities Long-term debt Total liabilities Shareholders’ equity 2015 ¥1,363,332 114,754 115,663 ¥1,593,749 ¥ 933,014 139,057 1,072,071 521,678 Yen (millions) 2014 U.S. dollars (thousands) 2015 ¥1,240,376 109,668 105,591 ¥1,455,635 ¥ 830,046 133,766 963,812 491,823 $11,361,101 956,283 963,858 $13,281,242 $ 7,775,117 1,158,808 8,933,925 4,347,317 Total liabilities and shareholders’ equity ¥1,593,749 ¥1,455,635 $13,281,242 Results of Operations Sales Net income (loss) attributable to affiliated companies ¥1,255,026 70,429 ¥1,648,617 54,383 ¥1,869,079 (84,953) $10,458,550 586,908 2015 2014 Yen (millions) 2013 U.S. dollars (thousands) 2015 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 47 The balances and transactions with affiliated companies accounted for by the equity method of accounting as of March 31, 2015 and 2014, and for the years ended March 31, 2015, 2014 and 2013 are as follows: The transactions for the years ended March 31, 2014 and 2013 include those with Renesas. Trade receivables Trade payables Sales Purchases Dividends 2015 ¥ 69,997 154,915 2015 ¥307,841 143,904 16,886 2014 ¥313,119 173,897 12,418 Yen (millions) 2014 ¥ 71,578 149,964 Yen (millions) 2013 ¥298,033 166,633 10,174 U.S. dollars (thousands) 2015 $ 583,308 1,290,958 U.S. dollars (thousands) 2015 $2,565,342 1,199,200 140,717 Investments in affiliated companies accounted for by the equity method of accounting include the shares of 9 publicly quoted affiliates, which are summarized as follows: Investments at equity Quoted market value (7) BANK LOANS AND LONG-TERM DEBT Bank loans consisted of the following: Borrowings from banks and others 2015 ¥41,121 55,640 Yen (millions) 2014 ¥35,378 45,595 2015 ¥72,385 Yen (millions) 2014 ¥60,275 U.S. dollars (thousands) 2015 $342,675 463,667 U.S. dollars (thousands) 2015 $603,208 The weighted average interest rates on borrowings from unused committed lines of credit that can provide short-term banks and others outstanding as of March 31, 2015 and 2014 funds from subscribing financial institutions amounting to were 0.83% and0.51%, respectively. ¥81,500 million ($679,167 thousand). At March 31, 2015, the Company and its subsidiaries had 48 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 2015 Yen (millions) 2014 U.S. dollars (thousands) 2015 Long-term debt consisted of the following: Borrowings from banks and other companies, due2015 to 2022 with bearing interest rate ranging from 0.15% to 5.42% at March 31, 2015: due2014 to 2022 with bearing interest rate ranging from 0.29% to 3.20% at March 31, 2014: Secured Unsecured 1.17% Japanese yen bonds due 2014 0.27% Japanese yen bonds due 2019 0.43% Japanese yen bonds due 2021 Capital lease obligations Less amount due within one year ¥ — 245,765 — 20,000 20,000 23,844 309,609 92,017 ¥217,592 ¥ 403 256,877 30,000 — — 25,923 313,203 101,777 ¥211,426 $ — 2,048,042 — 166,666 166,666 198,700 2,580,074 766,808 $1,813,266 U.S. dollars (thousands) $ 766,808 427,150 330,466 511,342 254,708 289,600 $2,580,074 The aggregate annual maturities of long-term debt outstanding at March 31,2015 were as follows: Year ending March 31: 2016 2017 2018 2019 2020 Thereafter Total Yen (millions) ¥ 92,017 51,258 39,656 61,361 30,565 34,752 ¥309,609 Substantially all of the loans with banks and others have basic banks’ requests and that any collateral furnished pursuant to written agreements. With respect to all present or future such agreements will be used against repayment of debts in loans, these agreements state that the Company would need case of default. to provide collateral or guarantors immediately upon the (8) TRADE PAYABLES Trade payables are summarized as follows: Notes payable Accounts payable 2015 ¥ 14,141 793,148 ¥807,289 Yen (millions) 2014 ¥ 15,029 743,884 ¥758,913 U.S. dollars (thousands) 2015 $ 117,842 6,609,566 $6,727,408 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 49 (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 2015 ¥ 74,913 2014 ¥ 86,198 Yen (millions) 2013 ¥ (9,509) 9,096 12,595 14,316 7 4,280 (2,151) 30,818 (24) 5,037 26,637 7,230 38 ¥110,927 ¥119,121 ¥29,433 The significant components of deferred tax expense attributable to income taxes are as follows: Change in valuation allowance related to deferred tax assets Other 2015 2014 Yen (millions) 2013 ¥(14,531) 29,261 ¥ 14,730 ¥ (4,129) 56,086 ¥51,957 ¥(40,029) 7,030 ¥(32,999) U.S. dollars (thousands) 2015 $624,275 75,800 104,958 119,300 59 $924,392 U.S. dollars (thousands) 2015 $(121,092) 243,842 $ 122,750 The Company is subjected to a number of income taxes. The or after April 1, 2015. Before the adjustment, the statutory statutory tax rate is approximately 35.5% for the year ended tax rate applied was approximately 35.5% for temporary dif- March 31, 2015, approximately 38% for the years ended ferences expected to be recovered or settled on or after April March 31, 2014 and 2013. 1, 2015. After the adjustment, the statutory tax rates applied The “Act to Partially Revise the Local Tax Act” (Act No. are approximately 33.0% for temporary differences expected 2 of 2015) and the “Act to Partially Revise the Income Tax to be recovered or settled between April 1, 2015 and March Act” (Act No. 9 of 2015) were enacted and promulgated in 31, 2016 and approximately 32.0% for temporary differences March 2015 in Japan, resulting in a reduction of the corpora- expected to be recovered or settled on or after April 1, 2016. tion tax rate effective for fiscal years beginning on or after For the year ended March 31, 2015, ¥14,697 million April 1, 2015. As a result, the Company and domestic sub- ($122,475 thousand) of income tax expense is included in sidiaries adjusted the statutory tax rates to be applied in the “Income taxes – Deferred” in the Consolidated Statements calculation of deferred tax assets and liabilities arising from of Income, as a result of the aforementioned adjustment of temporary differences expected to be recovered or settled on deferred tax assets and liabilities balances. The effective tax rate for the years ended March 31,2015, 2014 and 2013 is reconciled with the Japanese statutory tax rate in the following table: Japanese statutory tax rate Change in valuation allowance Adjustment for unrealized profit on intercompany transactions 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 2015 35.5% (1.6) (4.3) 0.5 (7.3) (4.1) (0.6) 4.6 0.5 23.2% 2014 38.0% (1.9) 2.4 4.2 (8.4) (0.1) (2.1) 3.2 (0.7) 34.6% 2013 38.0% (60.1) 21.4 2.8 (17.9) (0.3) (10.4) 7.6 4.3 (14.6)% 50 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 For the year ended March 31, 2013, because it was expected more likely than not that the temporary differences related to that certain investments in affiliated companies would no its investment in affiliated companies would be realized. The longer be accounted for by the equity method of accounting effects were included in Change in valuation allowance. during the following year, the Company concluded that it was The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2015 and 2014 are as follows: 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 2015 ¥ 41,966 82,973 30,699 39,260 62,436 12,738 89,508 359,580 (50,016) 309,564 27,407 5,900 32,315 61,873 127,495 ¥182,069 Yen (millions) 2014 U.S. dollars (thousands) 2015 ¥ 60,624 88,148 32,566 21,779 81,317 35,506 78,569 398,509 (64,547) 333,962 30,404 10,252 25,385 39,298 105,339 ¥228,623 $ 349,716 691,442 255,825 327,167 520,300 106,150 745,900 2,996,500 (416,800) 2,579,700 228,391 49,167 269,292 515,608 1,062,458 $1,517,242 The valuation allowance for deferred tax assets as of April scheduled reversal of deferred tax liabilities, projected future 1, 2013 was ¥68,676 million. The net change in the total taxable income, and tax planning strategies in making this valuation allowance for the years ended March 31, 2015 and assessment. 2014 was a decrease of ¥14,531 million ($121,092 thousand) At March 31, 2015, the Company and certain subsidiar- and ¥4,129 million, respectively. In assessing the realizability ies had net operating loss carryforwards of ¥30,980 million of deferred tax assets, management considers whether it is ($258,167 thousand) and ¥70,670 million ($588,917 thou- more likely than not that some portion or all of the deferred sand) for corporate and local income tax purposes, respective- tax assets will be realized. The ultimate realization of deferred ly, which were available to offset future taxable income, if any. tax assets is dependent upon the generation of future tax- A significant portion of the net operating loss carryforwards able income during the periods in which those temporary will expire in the years ending March 31, 2019 and 2023. differences become deductible. Management considers the Net deferred tax assets and liabilities at March 31, 2015 and 2014 are reflected in the accompanying consolidated balance sheets under the following captions: Prepaid expenses and other current assets Other assets Other liabilities 2015 ¥135,994 51,593 (5,518) ¥182,069 Yen (millions) 2014 ¥120,413 113,773 (5,563) ¥228,623 U.S. dollars (thousands) 2015 $1,133,283 429,942 (45,983) $1,517,242 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 51 Deferred tax liabilities have been recognized for the undis- Consolidated Statements of Income. Both interest and pen- tributed earnings of subsidiaries and affiliated companies. alties accrued as of March 31, 2015 and 2014, and interest Deferred tax liabilities have not been recognized for undis- and penalties for the years ended March 31, 2015, 2014 and tributed earnings of some domestic subsidiaries and affiliated 2013 are not material. companies as such earnings, if distributed in the form of divi- The Company and its subsidiaries file income tax returns dends, are either not taxable under present circumstances or in Japan and various foreign tax jurisdictions. The tax years are not material. that remain subject to examination by major tax jurisdictions Although the Company believes that there are no sig- are as follows: nificant unrecognized tax benefits as of March 31, 2015 and 2014, future determination by tax authorities could affect the effective tax rate in the future periods. The Company records interest and penalties relat- ed to additional income tax, etc. in Income Taxes in the Location Japan United States Thailand Europe (10) RETIREMENT AND SEVERANCE BENEFITS Open tax years 2008-2015 2011-2015 2010-2015 2010-2015 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. Under the non-contributory plans, employees with less defined benefit plan and introduced a cash balance pension 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 subsidiary’s 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 sponsor defined contribu- the contributory plans, employees are entitled to annuity tion 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. corresponding adjustment to Accumulated other comprehen- The Company amended its benefit plan under labor and sive income (loss), net of tax. management agreement during the year ended March 31, 52 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 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 2015 ¥1,067,140 30,284 15,205 1,047 — 73,625 (68,263) 95 1,119,133 857,933 113,876 47,513 1,047 (34,029) 174 986,514 Yen (millions) 2014 U.S. dollars (thousands) 2015 ¥1,038,169 29,486 19,123 1,063 339 50,408 (74,167) 2,719 1,067,140 784,686 56,929 48,280 1,063 (35,477) 2,452 857,933 $ 8,892,833 252,367 126,708 8,725 — 613,542 (568,858) 791 9,326,108 7,149,441 948,967 395,942 8,725 (283,575) 1,450 8,220,950 Funded status at end of year ¥ (132,619) ¥ (209,207) $(1,105,158) Amounts recognized in the consolidated balance sheets at March 31, 2015 and 2014 consist of: Investments in securities and other Other current liabilities Retirement and severance benefits 2015 ¥ 53,691 (4,028) (182,282) ¥(132,619) Yen (millions) 2014 ¥ 7,651 (4,220) (212,638) ¥(209,207) Amounts recognized in accumulated other comprehensive income (loss) at March 31, 2015 and 2014 consist of: Actuarial gain or loss Prior service cost 2015 ¥240,293 (42,837) ¥197,456 Yen (millions) 2014 ¥286,221 (54,959) ¥231,262 The accumulated benefit obligations for all defined benefit plans were as follows: Accumulated benefit obligations 2015 ¥1,093,819 Yen (millions) 2014 ¥1,050,423 U.S. dollars (thousands) 2015 $ 447,425 (33,566) (1,519,017) $(1,105,158) U.S. dollars (thousands) 2015 $2,002,442 (356,975) $1,645,467 U.S. dollars (thousands) 2015 $9,115,158 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 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, 2015, 2014 and 2013 consisted of the following components: Service cost Interest cost on projected benefit obligation Expected return on plan assets Amortization of prior service cost Amortization of actuarial loss Plan participants’ contributions 2015 ¥ 31,331 15,205 (15,123) (12,122) 20,721 40,012 (1,047) 2014 ¥ 30,549 19,123 (13,911) (22,216) 21,544 35,089 (1,063) Yen (millions) 2013 ¥ 30,510 21,562 (13,556) (21,748) 27,253 44,021 (1,077) Net periodic retirement and severance costs ¥ 38,965 ¥ 34,026 ¥ 42,944 U.S. dollars (thousands) 2015 $ 261,092 126,708 (126,025) (101,017) 172,675 333,433 (8,725) $ 324,708 Other changes in plan assets and projected benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2015 and 2014 were summarized as follows: Actuarial gain or loss Amortization of actuarial loss (gain) Prior service cost Amortization of prior service cost 2015 ¥(25,207) (20,721) — 12,122 ¥(33,806) Yen (millions) 2014 ¥ 7,674 (21,544) 339 22,216 ¥ 8,685 U.S. dollars (thousands) 2015 $ 210,059 (172,675) — 101,017 $(281,717) The estimated actuarial gain or loss and prior service cost for the defined benefit pension plans that will be amortized from accu- mulated other comprehensive income (loss) into net periodic benefit cost over the next year are summarized as follows: Actuarial gain or loss Prior service cost Yen (millions) ¥ 13,146 (11,571) U.S. dollars (thousands) $109,550 (96,425) Actuarial assumptions Actuarial assumptions used to determine benefit obligations at March 31, 2015 and 2014 were as follows: Discount rate Assumed rate of increase in future compensation levels 2015 1.0% 1.7% 2014 1.5% 1.7% Actuarial assumptions used to determine net periodic retirement and severance costs for the years ended March 31, 2015, 2014 and 2013 were as follows: Discount rate Assumed rate of increase in future compensation levels Expected long-term rate of return on plan assets 2015 1.5% 1.7% 2.5% 2014 2.0% 1.7% 2.5% 2013 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 2015 Plan Assets The fair values of the Company’s pension plan assets at March 31, 2015 and 2014 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 Total plan assets 2015 Yen (millions) Level 1 Level 2 Level 3 Total ¥228,741 — ¥ — 188,634 ¥ — — ¥228,741 188,634 4,864 — 18,862 354,320 — — 23,726 354,320 — — 95,127 60,525 — 35,441 95,127 95,966 ¥233,605 ¥717,468 ¥35,441 ¥986,514 Notes: 1. Marketable equity securities include mainly domestic stocks. 2. Pooled funds of equity securities include approximately 20% domestic stocks and 80% 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 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 Total plan assets 2014 Yen (millions) Level 1 Level 2 Level 3 Total ¥178,946 — ¥ — 179,921 ¥ — — ¥178,946 179,921 5,111 — 21,727 322,495 — — 26,838 322,495 — — 91,567 42,604 — 15,562 91,567 58,166 ¥184,057 ¥658,314 ¥15,562 ¥857,933 Notes: 1. Marketable equity securities include mainly domestic stocks. 2. Pooled funds of equity securities include approximately 20% domestic stocks and 80% 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 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 Total plan assets U.S. dollars (thousands) 2015 Level 1 Level 2 Level 3 Total $1,906,175 — $ — 1,571,950 $ — $1,906,175 1,571,950 — 40,533 — 157,183 2,952,667 — — 197,716 2,952,667 — — 792,725 504,375 — 295,342 792,725 799,717 $1,946,708 $5,978,900 $295,342 $8,220,950 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 55 The Company’s investment policies are designed to ensure tents of investment, and appropriately diversified investments. adequate plan assets are available to provide future pay- See note 18 which shows categorized input for fair value ments of pension benefits to eligible participants. Taking into measurements by the valuation technique into a three-level account the expected long-term rate of return on plan assets, hierarchy. the Company formulates an investment portfolio comprised Each level into which assets are categorized is based on of the optimal combination of equity and debt securities. inputs used to measure the fair value of the assets. Plan assets are invested in individual equity and debt securi- Level 1 assets are comprised principally of equity securi- ties using the guidelines of the investment portfolio in order ties and government bonds, which are valued using unad- to produce a total return that will match the expected return justed quoted market prices in active markets with sufficient on a mid-term to long-term basis. The Company evaluates the volume and frequency of transactions. Level 2 assets are gap between expected return and actual return of invested comprised principally of pooled funds that invest in equity plan assets on an annual basis. In addition, taking into the and debt securities, corporate bonds and investments in life consideration the management environment and the revision insurance company general accounts. Pooled funds are valued of regulations, the Company revises the investment portfolio at their net asset values that are calculated by the sponsor of when and to the extent considered necessary to achieve the the fund. Corporate bonds are valued using quoted prices for expected long-term rate of return on plan assets based on the identical assets in markets that are not active. Investments in pension asset and liability management method. life insurance company general accounts are valued at the The Company’s investment portfolio consists of three amounts that are the conventional interest adding to the major components. The Company’s target asset allocation percentage is that approximately 25% is invested in equity principle amounts calculated by life insurance company. Level 3 assets comprise hedge funds, which are valued based on securities, approximately 65% is invested in debt securities unobservable inputs. and investments in life insurance company general accounts, An analysis of the changes in Level 3 assets which com- and approximately 10% is invested in hedge funds. As for prise hedge funds measured at fair value for the years ended selection of plan assets, the Company has examined the con- March 31, 2015 and 2014 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 2015 ¥15,562 — 379 19,500 — Yen (millions) 2014 ¥15,138 (8) 432 — — ¥35,441 ¥15,562 U.S. dollars (thousands) 2015 $129,684 — 3,158 162,500 — $295,342 Cash Flows The Company expects to contribute ¥48,928 million ($407,733 thousand) to its pension plan in the year ending March 31, 2016. Estimated future benefit payments are as follows: Year ending March 31: 2016 2017 2018 2019 2020 2021-2025 Yen (millions) ¥ 69,840 63,592 58,372 58,902 56,729 267,228 U.S. dollars (thousands) $ 582,000 529,933 486,433 490,850 472,742 2,226,900 The amount of cost recognized for the Company and certain subsidiaries’ defined contribution plans for the years ended March 31, 2015, 2014 and 2013 were ¥9,469million ($78,908 thousand), ¥8,423 million and ¥7,447 million, respectively. 56 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 (11) SHAREHOLDERS’ EQUITY Changes in common stock for the years ended March 31, 2015 and 2014 were as follows: Number of common shares issued: Balance at beginning of year Balance at end of year 2015 2014 Shares 2,147,201,551 2,147,201,551 2,147,201,551 2,147,201,551 Conversions into common stock of convertible debenture Corporate Law is based on the amount recorded in the issued subsequent to October 1, 1982 and exercise of war- Company’s books of account in accordance with accounting rants were accounted for in accordance with the provisions of standards of Japan. The adjustments included in the accom- the Japanese Commercial Code by crediting one-half of the panying consolidated financial statements to have them conversion price and exercise price to each of the common conform with accounting principles generally accepted in stock account and the capital surplus account. the United States of America, but not recorded in the books The Japanese Corporate Law enforced on May 1, 2006 of account, have no effect on the determination of retained requires that an amount equal to 10% of dividends and other earnings available for dividends under the Japanese Corporate distributions paid in cash by the Company and its domes- Law. Retained earnings available for dividends shown in the tic subsidiaries be appropriated as a legal reserve until the Company’s books of account amounted to ¥383,927 million aggregated amount of additional paid-in capital and the legal reserve equal to 25% of the common stocks. The additional ($3,199,392 thousand) at March 31, 2015. Cash dividends and appropriations to the legal reserve paid-in capital and the legal reserve may be used to reduce charged to retained earnings during the years ended March a deficit or transferred to common stock with a resolution of 31, 2015, 2014 and 2013 represent dividends paid out during the shareholders’ meeting. the years and the related appropriations to the legal reserve. The amount available for dividends under the Japanese (12) OTHER COMPREHENSIVE INCOME (LOSS) Changes in accumulated other comprehensive income (loss) for the years ended March 31, 2015, 2014 and 2013 are as follows: Yen (millions) Foreign currency translation adjustments Pension liability adjustments 2015 Unrealized gains (losses) on securities Balance at beginning of year ¥ 38,652 ¥(119,279) ¥ 82,636 Other comprehensive income before reclassifications Amounts reclassified from accumulated other comprehensive income Net change during the year Balance at end of year 65,788 15,625 36,452 (1,481) 5,546 164 64,307 ¥102,959 21,171 ¥ (98,108) 36,616 ¥119,252 Foreign currency translation adjustments Pension liability adjustments 2014 Unrealized gains (losses) on securities Balance at beginning of year ¥ (8,023) ¥(112,523) ¥27,045 Other comprehensive income before reclassifications Amounts reclassified from accumulated other comprehensive income Net change during the year Balance at end of year 46,675 (6,323) 54,831 — (433) 760 46,675 ¥38,652 (6,756) ¥(119,279) 55,591 ¥82,636 Unrealized gains (losses) on derivative instruments ¥(52) 22 (9) 13 ¥(39) Unrealized gains (losses) on derivative instruments ¥ 14 (98) 32 (66) ¥(52) Total ¥ 1,957 117,887 4,220 122,107 ¥124,064 Yen (millions) Total ¥(93,487) 95,085 359 95,444 ¥ 1,957 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 57 Balance at beginning of year Net change during the year Balance at end of year Foreign currency translation adjustments ¥(67,654) 59,631 ¥ (8,023) Pension liability adjustments ¥(160,156) 47,633 ¥(112,523) Foreign currency translation adjustments Pension liability adjustments 2013 Unrealized gains (losses) on securities ¥12,242 14,803 ¥27,045 2015 Unrealized gains (losses) on securities Balance at beginning of year $322,100 $(993,992) $688,633 Unrealized gains (losses) on derivative instruments ¥(35) 49 ¥ 14 Yen (millions) Total ¥(215,603) 122,116 ¥ (93,487) U.S. dollars (thousands) Unrealized gains (losses) on derivative instruments $(433) Total $ 16,308 Other comprehensive income before reclassifications Amounts reclassified from accumulated other comprehensive income Net change during the year Balance at end of year 548,234 130,208 303,766 183 982,391 (12,342) 46,217 1,367 (75) 35,167 535,892 $857,992 176,425 $(817,567) 305,133 $993,766 108 $(325) 1,017,558 $1,033,866 Reclassifications out of accumulated other comprehensive income (loss) for the years ended March 31, 2015 and 2014 are as follows: Details about Accumulated other comprehensive income components Foreign currency translation adjustments Pension liability adjustments Amortization of prior service cost Amortization of actuarial loss Unrealized gains (losses) on securities Realized losses on sales Other Unrealized gains (losses) on derivative instruments 2015 Amounts reclassified from accumulated other comprehensive income Yen (millions) U.S. dollars (thousands) Affected line items in consolidated statements of income ¥ (1,481) (1,481) — (1,481) (12,122) 20,721 8,599 (3,053) 5,546 (37) 189 152 12 164 (15) (15) 6 (9) $ (12,342) (12,342) — (12,342) (101,017) 172,675 71,658 (25,441) 46,217 (308) 1,575 1,267 100 1,367 (125) (125) 50 (75) Other revenues Total before tax Income tax Net of tax See Note See Note Total before tax Income tax Net of tax Other revenues Other costs and expenses Total before tax Income tax Net of tax Other revenues Total before tax Income tax Net of tax Total amounts reclassified ¥ 4,220 $ 35,167 Net of tax Note: These accumulated other comprehensive income components are included in the computation of net periodic retirement and severance costs. See Note 10 “Retirement and Severance Benefits”. 58 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Details about Accumulated other comprehensive income components Pension liability adjustments Amortization of prior service cost Amortization of actuarial loss Unrealized gains (losses) on securities Realized losses on sales Other Unrealized gains (losses) on derivative instruments Other Yen (millions) 2014 Amounts reclassified from accumulated other comprehensive income Affected line items in consolidated statements of income ¥(22,216) 21,544 (672) 239 (433) 1,166 13 1,179 (419) 760 42 42 (10) 32 See Note See Note Total before tax Income tax Net of tax Other costs and expenses Other costs and expenses Total before tax Income tax Net of tax Other costs and expenses Total before tax Income tax Net of tax Total amounts reclassified ¥ 359 Net of tax Note: These accumulated other comprehensive income components are included in the computation of net periodic retirement and severance costs. See Note 10 “Retirement and Severance Benefits”. Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments for the years ended March 31, 2015, 2014 and 2013 are as follows: 2015: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year Less reclassification adjustments for gains (losses) realized 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) realized 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) realized 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 Less reclassification adjustments for gains (losses) realized in net income Net change in unrealized gains (losses) on derivative instruments Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount ¥ 74,884 ¥ (9,096) ¥ 65,788 (1,481) — (1,481) 73,403 25,167 8,599 33,766 50,780 152 50,932 35 (15) 20 (9,096) (9,542) (3,053) (12,595) (14,328) 12 (14,316) (13) 6 (7) 64,307 15,625 5,546 21,171 36,452 164 36,616 22 (9) 13 Other comprehensive income (loss) ¥158,121 ¥(36,014) ¥122,107 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 59 Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount 2014: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥ 50,955 ¥ (4,280) ¥46,675 Less reclassification adjustments for gains (losses) realized 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) realized 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) realized 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 Less reclassification adjustments for gains (losses) realized in net income Net change in unrealized gains (losses) on derivative instruments — — — 50,955 (4,280) 46,675 (8,235) (672) (8,907) 85,230 1,179 86,409 (132) 42 (90) 1,912 239 2,151 (30,399) (419) (30,818) 34 (10) 24 (6,323) (433) (6,756) 54,831 760 55,591 (98) 32 (66) Other comprehensive income (loss) ¥128,367 ¥(32,923) ¥95,444 Before-tax amount Tax (expense) or benefit Yen (millions) Net-of-tax amount 2013: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year ¥ 64,668 ¥ (5,037) ¥ 59,631 Less reclassification adjustments for gains (losses) realized 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) realized 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) realized 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 Less reclassification adjustments for gains (losses) realized in net income Net change in unrealized gains (losses) on derivative instruments Other comprehensive income (loss) — 64,668 68,765 5,505 74,270 20,071 1,962 22,033 134 — (5,037) (24,545) (2,092) (26,637) (6,489) (741) (7,230) (53) — 59,631 44,220 3,413 47,633 13,582 1,221 14,803 81 (47) 87 ¥161,058 15 (38) ¥(38,942) (32) 49 ¥122,116 60 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Before-tax amount U.S. dollars (thousands) Tax (expense) or benefit Net-of-tax amount 2015: Foreign currency translation adjustments: Amount arising during the year on investments in foreign entities held at end of year $ 624,034 $ (75,800) $ 548,234 Less reclassification adjustments for gains (losses) realized 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) realized 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) realized 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 Less reclassification adjustments for gains (losses) realized in net income Net change in unrealized gains (losses) on derivative instruments (12,342) — (12,342) 611,692 (75,800) 535,892 209,725 (79,517) 130,208 71,658 281,383 (25,441) (104,958) 46,217 176,425 423,166 (119,400) 303,766 1,267 424,433 100 (119,300) 1,367 305,133 292 (125) 167 (109) 50 (59) 183 (75) 108 Other comprehensive income (loss) $1,317,675 $(300,117) $1,017,558 (13) 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: Diluted common shares outstanding Net income per share attributable to Mitsubishi Electric Corp.: Basic Diluted 2015 2014 Yen (millions) 2013 U.S. dollars (thousands) 2015 ¥234,694 — ¥153,473 — ¥69,517 — $1,955,783 — ¥234,694 ¥153,473 ¥69,517 $1,955,783 2015 2,146,835,581 — 2,146,835,581 2014 2,146,871,671 — 2,146,871,671 Shares 2013 2,146,906,220 — 2,146,906,220 2015 2014 2013 2015 Yen U.S. dollars ¥109.32 — ¥71.49 — ¥32.38 — $0.911 — Diluted net income per share attributable to Mitsubishi Electric Corp. is not presented as no dilutive securities existed as of and for the years ended March 31, 2015, 2014 and 2013. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 61 (14) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Foreign Exchange Risk Management and Interest Rate Risk Management The Company and its subsidiaries operate internationally, giv- Information with Respect to Cash Flow Hedges The Company and certain of its subsidiaries have entered into forward foreign exchange contracts mainly with forecasted ing rise to significant exposure to market risks from changes transactions to hedge against market risks from changes in foreign currencies and interest rates. Derivative financial in foreign currencies and interest rate swap agreements to instruments are comprised principally of foreign exchange modify the interest rate characteristics of a portion of its long- contracts, foreign currency swaps and interest rate swaps uti- term debt from a variable to a fixed rate. The Company and lized by the Company and certain of its subsidiaries to reduce certain of its subsidiaries designate them as cash flow hedges. these risks. The Company and its subsidiaries do not hold or The maximum period for cash flow hedges is 30 months. The issue financial instruments for trading purposes. Company expects that the amounts of net loss of ¥46 mil- 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. Information with Respect to Fair Value Hedges Certain subsidiaries have entered into foreign currency swaps to hedge currency exposure and designate them as fair value hedges. lion ($383 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 at March 31, 2015 and 2014 are as follows: Foreign exchange contracts: Forwards to sell foreign currencies Forwards to buy foreign currencies Foreign currency swaps Interest rate swaps 2015 ¥240,279 97,441 31,400 2,000 Yen (millions) 2014 ¥208,775 91,194 37,010 2,000 U.S. dollars (thousands) 2015 $2,002,325 812,008 261,667 16,667 The estimated fair values of foreign exchange contracts, foreign currency swaps and interest rate swaps at March 31, 2015 and 2014 are as follows: Derivatives designated as hedging instruments Consolidated balance sheet line item 2015 Yen (millions) 2014 Asset derivatives Estimated fair value U.S. dollars (thousands) 2015 Foreign exchange contracts Prepaid expenses and other current assets ¥95 ¥27 $792 Derivatives designated as hedging instruments Consolidated balance sheet line item Foreign exchange contracts Other current liabilities 2015 ¥61 Yen (millions) 2014 ¥115 Liability derivatives Estimated fair value U.S. dollars (thousands) 2015 $508 62 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 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 Total Other current liabilities Other current liabilities 2015 Yen (millions) 2014 Asset derivatives Estimated fair value U.S. dollars (thousands) 2015 ¥5,499 ¥1,006 $45,825 126 21 ¥5,646 70 1,050 60 ¥1,136 175 $47,050 2015 ¥2,673 381 ¥3,054 Yen (millions) 2014 ¥1,993 2 ¥1,995 Liability derivatives Estimated fair value U.S. dollars (thousands) 2015 $22,275 3,175 $25,450 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, 2015 and 2014 are as follows: Derivatives designated as cash flow hedging instruments Foreign exchange contracts Interest rate swaps Total Derivatives designated as cash flow hedging instruments Line item of gain or (loss) recognized from accumulated OCI into income Amount of gain or (loss) recognized in OCI on derivative (effective portion) U.S. dollars (thousands) 2015 ¥20 — ¥20 Yen (millions) 2014 ¥(151) 61 ¥ (90) 2015 $167 — $167 Amount of gain or (loss) recognized from accumulated OCI into income (effective portion) U.S. dollars (thousands) Yen (millions) 2014 2015 2015 Foreign exchange contracts Other revenues (cost and expenses) ¥15 ¥(42) $125 The effect of foreign exchange contracts, foreign currency swaps and interest rate swaps not designated as hedging instruments on the consolidated statements of income for the years ended March 31, 2015 and 2014 are set forth below: Derivatives not designated as hedging instruments Line item of gain or (loss) recognized in income on derivative Amount of gain or (loss) recognized in income on derivative U.S. dollars (thousands) Yen (millions) 2014 2015 2015 Foreign exchange contracts Foreign currency swaps Interest rate swaps Total Other revenues (cost and expenses) Other revenues (cost and expenses) Other revenues (cost and expenses) ¥(12,324) ¥(19,807) $(102,700) (1,779) 704 (14,825) (39) ¥(14,142) (24) ¥(19,127) (325) $(117,850) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 63 (15) SECURITIZATIONS The Company sells its accounts receivable under several secu- these receivables. ritization programs. When the Company retains subordinated interests in the certain accounts receivables after the sale of these receivables, The Company recognized losses of ¥541 million ($4,508 485 million and ¥492 million on the securitiza- thousand), ¥485 million and ¥492 million on the securitiza- tions of receivables for the years ended March 31, 2015, 2014 a portion of these, where the Company retains subordi- and 2013, respectively. nated interests, is not taken off from the balance sheet and Subsequent to securitization, the Company retains collec- is recorded at their fair value. Such carrying value is adjusted tion and administrative responsibilities for the receivables. The to reflect the portion that is not expected to be collectible. As Company has not recorded a servicing asset or liability since of March 31, 2015, the Company did not retain subordinated the cost of collection effort is approximate to the amount of interests in the certain accounts receivables after the sale of commission income. Certain cash flows received from special purpose entities (SPEs) and banks on the above transactions for the years ended March 31, 2015, 2014 and 2013 are as follows: Proceeds from new securitizations 2015 ¥441,395 2014 ¥424,556 Yen (millions) 2013 ¥404,156 U.S. dollars (thousands) 2015 $3,678,292 Quantitative information about trade receivables including securitized receivables as of March 31, 2015 and 2014 are as follows: Trade receivables Less: Securitized receivables Total receivables 2015 ¥1,182,431 133,889 Yen (millions) 2014 ¥1,106,139 122,671 ¥1,048,542 ¥ 983,468 U.S. dollars (thousands) 2015 $9,853,592 1,115,742 $8,737,850 As of March 31, 2015 and 2014, delinquencies and credit losses of trade receivables including securitized receivables are immaterial. (16) COMMITMENTS AND CONTINGENT LIABILITIES At March 31, 2015, commitments outstanding for the pur- infringement of EU Competition Law in connection with its chase of property, plant and equipment were ¥23,450 million sales of certain gas-insulated switchgears in Europe. However, ($195,417 thousand). there was a significant inconsistency on recognition of the It is common practice in Japan for companies, in the ordi- material underlying facts between the European Commission nary course of business, to receive promissory notes in settle- and the Company. Therefore, the Company appealed to the ment of accounts receivable and to subsequently discount European General Court and challenged the decision. In July such notes at banks. At March 31, 2015, certain subsidiaries 2011, the Company received a judgment from the European were contingently liable to trade notes discounted in the General Court upholding the European Commission’s deci- amount of ¥414 million ($3,450 thousand). Certain subsidiar- sion on the underlying facts while annulling the fine imposed ies account for the discounted notes as sale of receivables. on the Company on the basis that the European Commission As of March 31, 2015, the Company has no significant applied inconsistent methods of calculation to different concentrations of credit risk. companies. While the Company and certain of its subsidiaries are In September 2011, since there was still a significant defendants and co-defendants in various lawsuits and inconsistency on recognition of the material underlying facts legal actions, based upon the advice of legal counsel, the between the European Commission and the Company, the Company’s management is of the opinion that damages, if Company appealed to the European Court of Justice. any, would not have a material effect on the Company’s con- solidated financial position and results of operations, except In June 2012, the Company received the European Commission’s decision presenting an amount of fine as pay- for the following cases. able by the Company after revision of the pertinent computa- In January 2007, the Company received a decision ren- tions. In September 2012, the Company took another legal dered by the European Commission imposing fines for an action with the European General Court seeking a revision of 64 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 the current computation method presented by the European payments. Commission, which would result in a downward modifica- tion of the fine. In December 2013, the Company received a judgment from the European Court of Justice upholding the European Commission’s underlying facts. The legal action the Company filed in September 2012 with the European General Court is currently pending. Since July 2011, the Company has been cooperating with Competition Law investigations and inquiries conducted by the European Commission regarding the sales of certain automotive parts in Europe. In addition, civil lawsuits relating to the Antitrust Laws regarding the sale of certain automotive parts have also been raised in the United States of America. The Company agreed to settle with some purchasers in rela- tion to the aforementioned matter and made settlement As of March 31, 2015, the Company recorded an esti- mated amount of ¥36,763 million ($306,358 thousand) as a reserve for these various competition-law-related expenses in “Other liabilities” relating to the gas-insulated switchgears case in Europe and certain automotive parts cases in the United States of America and Europe. For the year ended March 31, 2015, the Company also recorded ¥44,163 mil- lion ($368,025 thousand) as various competition-law-related expenses in “Costs and expenses – Other”, which represents the difference between the reserve amount at the prior year- end and the sum of the reserve amount at the current year– end plus the actual amounts paid and other miscellaneous items recorded during the current year. The following table provides the undiscounted maximum amount of potential future payments for each major group of guaran- tees at March 31, 2015: Guarantees of bank loan: Employees Affiliated and other companies Other Total Yen (millions) ¥3,191 260 6,203 ¥9,654 U.S. dollars (thousands) $26,592 2,166 51,692 $80,450 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. 14 years. The guarantees for the affiliated and other compa- Change in accrued product warranty for the years ended March 31, 2015 and 2014 is summarized as follows: Balance at beginning of year Addition Utilization Foreign currency translation adjustments Balance at end of year 2015 ¥58,268 47,922 51,160 453 ¥55,483 Yen (millions) 2014 ¥46,920 50,781 40,091 658 ¥58,268 U.S. dollars (thousands) 2015 $485,566 399,350 426,333 3,775 $462,358 (17) FAIR VALUE OF FINANCIAL INSTRUMENTS The Company uses the following methods and assumptions (b) Short-term investments and Investments in securities to estimate the fair value of each class of financial instrument and other for which it is practical to estimate its value: The fair values of most short-term investments and invest- (a) Cash and cash equivalents, Trade receivables, Bank loans, Trade payables and Other current liabilities The carrying amount approximates fair value because of the short term nature of these instruments. ments in securities and other are estimated based on quoted market prices for these instruments. For other investments for which there are no quoted market prices, a reasonable estimate of fair value could not be made without incurring excessive costs. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 65 (c) Long-term trade receivables The fair value of the Company’s long-term trade receivables is calculated under income approach using market interest rates, therefore, it is classified in level 2. (d) Long-term debt The fair value of the Company’s corporate bonds is calculated 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. (e) Derivative financial instruments The fair values of derivative financial instruments, consisting principally of foreign exchange contracts, foreign currency under market approach using quoted published price, there- swaps and interest rate swaps are estimated by obtaining fore, it is classified in level 2. The fair value of the Company’s quotes from brokers. (See note 14 about estimated fair value.) long-term debt is calculated under income approach using The estimated fair values of the Company’s financial instruments at March 31, 2015 and 2014 are summarized as follows: 2015 Carrying amount Yen (millions) 2014 Estimated fair value Carrying amount Estimated fair value U.S. dollars (thousands) Estimated fair value 2015 Carrying amount Nonderivatives: Assets: Marketable securities and other Long-term trade receivables ¥271,962 5,633 ¥271,962 5,615 ¥226,985 4,813 ¥226,985 4,865 $2,266,350 46,942 $2,266,350 46,792 Liabilities: Long-term debt, including current portion 285,765 285,407 287,280 287,852 2,381,375 2,378,392 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. (18) FAIR VALUE MEASUREMENTS The Company defines fair value as “the price that would be Level 1: Quoted prices in active markets for identical assets or received to sell an asset or paid to transfer a liability in an liabilities. orderly transaction between market participants at the mea- surement date”. On that basis, the Company has categorized Level 2: Inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the the inputs for fair value measurement by the valuation tech- asset or liability. nique into a three-level hierarchy, and placed the order of Level 3: Unobservable inputs for the asset or liability. priority. 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, 2015 and 2014. 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 66 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Level 1 Level 2 Level 3 Total 2015 Yen (millions) ¥271,443 ¥ — ¥ — ¥271,443 — — — — — 519 5,741 3,115 — — — — — 519 5,741 3,115 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 2014 Yen (millions) ¥223,173 ¥ — ¥ — ¥223,173 — — — — 2,952 860 1,163 2,110 — — — — 2,952 860 1,163 2,110 U.S. dollars (thousands) 2015 Level 1 Level 2 Level 3 Total Assets: Equity securities Marketable equity securities Debt securities Government, municipal and corporate debt securities, and others Investment trusts Derivatives Liabilities: Derivatives $2,262,025 $ — $ — $2,262,025 — — — — — 4,325 47,842 25,958 — — — — — 4,325 47,842 25,958 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, 2015, in accordance with the requirements of portion of long-lived assets was written down to their fair FASB ASC Topic 360 “Property, Plant and Equipment”, a por- value of ¥4,162 million, resulting in an impairment charge tion of long-lived assets was written down to their fair value of ¥3,791 million, which was included in loss on impairment of ¥4,197 million ($34,975 thousand), resulting in an impair- of long-lived assets for the year ended March 31, 2014. The ment charge of ¥3,085 million ($25,708 thousand), which was impaired long-lived assets are classified as Level 3 assets, included in loss on impairment of long-lived assets for the year because they are measured based on the unobservable inputs ended March 31, 2015. The impaired long-lived assets are clas- such as estimated future cash flows under income approach sified as Level 3 assets, because they are measured based on the or net sale price under market approach. unobservable inputs such as estimated future cash flows under The valuation process of long-lived assets is docu- income approach or net sale price under market approach. mented in “Notes to Consolidated Financial Statements (1) At March 31, 2014, in accordance with the requirements BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT of FASB ASC Topic 360 “Property, Plant and Equipment”, a ACCOUNTING POLICIES (u)Impairment of Long-Lived Assets”. (19) SUPPLEMENTARY INCOME AND EXPENSE INFORMATION Advertising expenses Shipping and handling costs Exchange gains Business restructuring costs Competition-law-related expenses (for the United States Department of Justice) Refund payment for overcharged expenses Loss on impairment of long-lived assets 2015 ¥(28,101) (87,610) 7,749 (4,804) — — (3,085) 2014 ¥(23,847) (79,634) 9,709 — (7,738) — (3,791) Yen (millions) 2013 ¥(18,029) (71,613) 8,034 — — (75,717) (4,317) U.S. dollars (thousands) 2015 $(234,175) (730,083) 64,575 (40,033) — — (25,708) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 67 Advertising expenses are included in “Costs and expenses - Technology. Also, similar incidents were identified concerning Selling, general and administrative”. contracts between four of the Company’s affiliates and MOD. Shipping and handling costs represents the costs included As a result of investigation conducted by the entities, for the in “Costs and expenses - Selling, general and administrative”. year ended March 31, 2013, the Company recorded a total of Exchange gains are included in “Revenues - Other”. ¥75,717 million as a refund payment for overcharged expens- Business restructuring costs are included in “Costs and es in “Costs and expenses – Other” that covered the refund expenses - Other”. of overcharged expenses, related penalties and interest arising For the year ended March 31,2015, the Company recog- from the series of incidents referred to herein. nized business restructuring costs of ¥4,804 million ($40,033 Loss on impairment of long-lived assets is included in thousand) related to the loss associated with inventories “Costs and expenses - Loss on impairment of long-lived under sales contracts, the removal and disposal of facilities assets”. and the retirement benefits resulting from the Company’s For the year ended March 31, 2015, the Company and decision to discontinue the copper alloy business. certain of its subsidiaries recognized impairment losses of Competition-law-related expenses (for the United States ¥2,751 million ($22,925 thousand) on tangible assets such Department of Justice) are included in “Costs and expenses as buildings and tools, and ¥334 million ($2,783 thousand) - Other”. on intangible assets. The impairment losses included ¥562 Since July 2011, the Company and certain of its sub- million ($4,683 thousand) for Energy and Electric Systems sidiaries had been subject to investigations and inquiries business related assets and ¥1,740 million ($14,500 thousand) conducted by the United States Department of Justice in relation to United States Antitrust Laws regarding the sale for Home Appliances business related assets due to a decline in profitability. The impairment losses were mainly measured of certain automotive parts in the United States of America. based on the fair value less costs to sell. Consequently, in September 2013, the Company entered For the year ended March 31, 2014, the Company and into a plea agreement with the United States Department certain of its subsidiaries recognized impairment losses of of Justice in which the Company agreed to pay US$190,000 ¥3,627 million on tangible assets such as land, buildings and thousand (¥18,573 million based on the rate of exchange in tools, and ¥164 million on intangible assets. The impairment effect at the date of the transaction) in fines for the infringe- losses included ¥1,217 million for Home Appliances business ment of United States Antitrust Laws. For the year ended related assets due to a decline in profitability and ¥2,260 mil- March 31, 2014, the Company recorded ¥7,738 million, lion for welfare related assets which are scheduled to be sold. which was equivalent to the difference between the fines and The impairment losses were mainly measured based on the its reserves as of March 31, 2013 as various competition-law- fair value less costs to sell. related expenses. For the year ended March 31, 2013, the Company Refund payment for overcharged expenses is included in and certain of its subsidiaries recognized impairment loss- “Costs and expenses - Other”. es of ¥4,014 million on tangible assets such as buildings For the electronic systems business, it was revealed in and machinery, and ¥303 million on intangible assets. The January 2012 that the Company had been billing improperly impairment losses included ¥2,404 million for Electronic overcharged project costs by transferring man-hours among Devices business related assets and ¥1,212 million for Home different contracts which the Company entered into with Appliances business related assets due to a decline in profit- the Japanese Ministry of Defense(MOD), Cabinet Satellite ability. The impairment losses were mainly measured based Intelligence Center, Japan Aerospace Exploration Agency, on the fair value of the discounted present value of expected and National Institute of Information and Communications future cash flow. (20) LEASES The Company and certain of its subsidiaries enter into capital The Company and certain of its subsidiaries lease machin- lease and operating lease agreements with Mitsubishi Electric ery and equipments. At March 31, 2015, the aggregated cost Credit Corporation, an equity method investee. The leased and accumulated depreciation of leased assets under capital assets, which are committed under capital lease agreements, leases amounted to ¥39,264 million ($327,200 thousand) and are capitalized. ¥21,671 million ($180,592 thousand), respectively. 68 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Future minimum lease payments under capital and non-cancelable operating leases as of March 31, 2015 are as follows: Year ending March 31: 2016 2017 2018 2019 2020 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 ¥ 6,076 4,315 2,847 1,649 1,155 3,003 ¥19,045 ¥10,009 7,761 5,069 2,455 614 47 25,955 1,314 24,641 797 23,844 9,199 ¥14,645 $ 50,633 35,958 23,725 13,742 9,625 25,025 $158,708 $ 83,408 64,675 42,242 20,458 5,117 392 216,292 10,950 205,342 6,642 198,700 76,658 $122,042 Rental expenses related to operating leases for the years ended March 31, 2015, 2014 and 2013 amounted to ¥42,587 million, respectively. These operating leases are for office space, warehouses, employee facilities and computer ¥47,670 million ($397,250 thousand), ¥45,246 million and equipment, and are customarily renewed. (21) SUPPLEMENTARY CASH FLOW INFORMATION Cash paid during the year for: Interest Income taxes (22) SEGMENT INFORMATION 2015 2014 Yen (millions) 2013 ¥ 3,816 53,712 ¥ 4,795 37,434 ¥ 6,425 41,022 U.S. dollars (thousands) 2015 $ 31,800 447,600 Operating segment presented below is identified based on the business segments, Energy and Electric Systems, Industrial segments for which separate financial information is available, Automation Systems, Information and Communication and is periodically used for decision of business resources allo- Systems, Electronic Devices, Home Appliances, and Others, cation and evaluation of business operation by the Company’s based on types and characteristics of products, production management. method, and similarity in market. The Company conducts business through 6 reportable MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 69 Principal businesses of each segment are as follows: Energy and Electric 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 Industrial Automation Systems 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, and others Home Appliances LCD televisions, room air conditioners, package air conditioners, air-to-water heat pump boilers, refrigerators, electric fans, ventilators, photovoltaic power generation systems, 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 operat- ing income. Segment Information Segment information for the years ended March 31, 2015, 2014 and 2013 are as follows: As of and for the year ended March 31, 2015 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 ¥1,219,983 8,975 1,228,958 1,156,510 ¥ 72,448 ¥1,268,858 13,891 1,282,749 1,136,767 ¥ 145,982 ¥520,853 38,668 559,521 540,587 ¥ 18,934 ¥209,235 29,167 238,402 208,239 ¥ 30,163 ¥925,004 19,826 944,830 890,534 ¥ 54,296 ¥179,108 561,409 740,517 716,775 ¥ 23,742 ¥4,323,041 671,936 4,994,977 4,649,412 ¥ 345,565 ¥ — ¥4,323,041 — (671,936) 4,323,041 (671,936) 4,005,437 (643,975) ¥ 317,604 ¥ (27,961) ¥1,300,581 ¥1,064,560 ¥383,692 ¥206,981 ¥769,899 ¥246,136 ¥3,971,849 ¥ 87,602 ¥4,059,451 29,056 56,842 23,814 26,055 30,605 6,241 172,613 562 35,500 26 67,943 2 18,383 203 38,406 1,740 46,598 552 8,382 3,085 215,212 — — — 172,613 3,085 215,212 70 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 As of and for the year ended March 31, 2014 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, 2013 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 ¥1,171,292 8,801 1,180,093 1,103,769 ¥ 76,324 ¥1,089,109 9,687 1,098,796 1,000,717 ¥ 98,079 ¥513,712 34,570 548,282 542,753 ¥ 5,529 ¥174,082 20,576 194,658 184,608 ¥ 10,050 ¥927,868 16,483 944,351 891,473 ¥ 52,878 ¥178,296 497,738 676,034 656,233 ¥ 19,801 ¥4,054,359 587,855 4,642,214 4,379,553 ¥ 262,661 ¥ — ¥4,054,359 — 4,054,359 3,819,187 ¥ 235,172 (587,855) (587,855) (560,366) ¥ (27,489) ¥1,161,790 ¥932,857 ¥399,215 ¥172,925 ¥706,833 ¥242,496 ¥3,616,116 ¥ (3,150) ¥3,612,966 27,852 52,381 21,289 11,638 28,748 6,000 147,908 — 32,639 — 63,660 — 22,172 115 10,405 1,217 30,334 2,459 8,490 3,791 167,700 — — — 147,908 3,791 167,700 Yen (millions) Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and other Total ¥1,049,982 8,195 1,058,177 973,037 ¥ 85,140 ¥918,123 9,734 927,857 867,265 ¥ 60,592 ¥491,792 30,630 522,422 520,831 ¥ 1,591 ¥142,961 21,104 164,065 169,645 ¥ (5,580) ¥799,817 21,481 821,298 801,998 ¥ 19,300 ¥164,509 425,857 590,366 571,576 ¥ 18,790 ¥3,567,184 517,001 4,084,185 3,904,352 ¥ 179,833 ¥ — (517,001) (517,001) (489,263) ¥ (27,738) ¥3,567,184 — 3,567,184 3,415,089 ¥ 152,095 ¥1,134,443 ¥863,477 ¥486,183 ¥132,793 ¥668,313 ¥213,989 ¥3,499,198 ¥ (88,788) ¥3,410,410 26,274 46,477 24,769 11,573 25,821 6,393 141,307 143 39,449 — 55,824 — 19,706 2,404 13,732 1,212 27,869 558 6,913 4,317 163,493 — — — 141,307 4,317 163,493 U.S. dollars (thousands) As of and for the year ended March 31, 2015 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 $10,166,525 $10,573,817 115,758 10,689,575 9,473,058 $ 603,733 $ 1,216,517 74,792 10,241,317 9,637,584 $4,340,442 $1,743,625 243,058 1,986,683 1,735,325 $ 157,783 $ 251,358 322,233 4,662,675 4,504,892 $7,708,366 $1,492,567 $36,025,342 $ — $36,025,342 — 5,599,466 36,025,342 41,624,808 33,378,642 38,745,100 $ 452,467 $ 197,850 $ 2,879,708 $ (233,008) $ 2,646,700 (5,599,466) (5,599,466) (5,366,458) 4,678,408 6,170,975 5,973,125 165,217 7,873,583 7,421,116 $10,838,175 $ 8,871,333 $3,197,433 $1,724,843 $6,415,825 $2,051,133 $33,098,742 $ 730,016 $33,828,758 242,134 473,683 198,450 217,125 255,042 52,008 1,438,442 4,683 295,833 217 566,192 17 153,192 1,691 320,050 14,500 388,316 4,600 69,850 25,708 1,793,433 — — — 1,438,442 25,708 1,793,433 Notes: 1 The amount of unallocatable R&D expenditure included in “Eliminations and other” on “Operating costs” for the years ended March 31, 2015, 2014 and 2013 are ¥27,961 million ($233,008 thousand), ¥27,489 million and ¥27,738 million, respectively. 2 The amount of company-wide shared assets included in “Eliminations and other” on “Assets” for the years ended March 31, 2015, 2014 and 2013 are ¥309,521 million ($2,579,342 thousand), ¥197,227 million and ¥126,212 million, respectively, and those amounts are mainly the Company’s deposit in bank. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 71 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, 2015, 2014 and 2013 are as follows: As of and for the year ended March 31, 2015 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,512,357 North America ¥398,501 Asia (excluding Japan) ¥959,540 Europe ¥360,668 Others ¥91,975 Overseas total ¥1,810,684 Consolidated total ¥4,323,041 58.1% 9.2% 22.2% 8.4% 542,524 55,757 144,669 24,391 2.1% 3,611 41.9% 228,428 100.0% 770,952 As of and for the year ended March 31, 2014 Yen (millions) Overseas Sales to external customers % of total net sales Long-lived assets Japan ¥2,480,369 North America ¥330,861 Asia (excluding Japan) ¥811,081 61.2% 8.2% 20.0% 534,521 39,831 109,774 Europe ¥340,611 8.4% 17,426 Others ¥91,437 Overseas total ¥1,573,990 Consolidated total ¥4,054,359 2.2% 3,742 38.8% 170,773 100.0% 705,294 As of and for the year ended March 31, 2013 Sales to external customers % of total net sales Long-lived assets Japan ¥2,335,713 65.5% 516,568 North America ¥262,706 7.4% 27,663 Asia (excluding Japan) ¥604,335 16.9% 90,798 Europe ¥280,126 7.8% 14,160 Others ¥84,304 Overseas total ¥1,231,471 2.4% 2,692 34.5% 135,313 Overseas Yen (millions) Consolidated total ¥3,567,184 100.0% 651,881 As of and for the year ended March 31, 2015 U.S. dollars (thousands) Overseas Sales to external customers % of total net sales Long-lived assets Japan $20,936,308 North America $3,320,842 Asia (excluding Japan) $7,996,167 Europe $3,005,567 Others $766,458 Overseas total $15,089,034 Consolidated total $36,025,342 58.1% 9.2% 22.2% 8.4% 2.1% 41.9% 100.0% 4,521,033 464,642 1,205,575 203,258 30,092 1,903,567 6,424,600 Notes: The major countries and regions included in each segments are as follows: (1) North America : United States, Canada, and Mexico (2) Asia (excluding Japan) : China, South Korea, Thailand, Malaysia, Singapore, Indonesia, and India (3) Europe : United Kingdom, France, Germany, the Netherlands, Spain, Italy, and Czech 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, 2015 Yen (millions) Japan North America Asia (excluding Japan) Europe 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 ¥2,782,686 796,274 3,578,960 3,352,761 ¥ 226,199 ¥2,809,868 ¥364,686 23,335 388,021 382,843 ¥ 5,178 ¥304,311 ¥ 755,081 292,677 1,047,758 965,339 ¥ 82,419 ¥ 872,163 ¥371,235 12,730 383,965 372,162 ¥ 11,803 ¥248,599 ¥49,353 142 49,495 49,093 ¥ 402 ¥45,607 ¥4,323,041 1,125,158 5,448,199 5,122,198 ¥ 326,001 ¥4,280,548 ¥ — (1,125,158) (1,125,158) (1,116,761) ¥ (8,397) ¥ (221,097) ¥4,323,041 — 4,323,041 4,005,437 ¥ 317,604 ¥4,059,451 72 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 As of and for the year ended March 31, 2014 Yen (millions) Japan North America Asia (excluding Japan) Europe 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 ¥2,719,567 643,287 3,362,854 3,185,539 ¥ 177,315 ¥2,637,710 ¥306,537 18,687 325,224 323,545 ¥ 1,679 ¥254,978 ¥638,518 248,504 887,022 827,999 ¥ 59,023 ¥673,309 ¥342,072 10,878 352,950 348,182 ¥ 4,768 ¥233,252 ¥47,665 159 47,824 46,089 ¥ 1,735 ¥39,884 ¥4,054,359 921,515 4,975,874 4,731,354 ¥ 244,520 ¥3,839,133 ¥ — ¥4,054,359 — 4,054,359 3,819,187 ¥ 235,172 ¥3,612,966 (921,515) (921,515) (912,167) ¥ (9,348) ¥(226,167) As of and for the year ended March 31, 2013 Yen (millions) Japan North America Asia (excluding Japan) Europe Others Subtotal Eliminations and other Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income (loss) II Assets ¥2,561,242 502,772 3,064,014 2,947,091 ¥ 116,923 ¥2,594,608 ¥233,548 14,557 248,105 249,849 ¥ (1,744) ¥210,356 ¥450,791 173,933 624,724 588,552 ¥ 36,172 ¥559,138 ¥281,400 8,533 289,933 285,406 ¥ 4,527 ¥184,872 ¥40,203 52 40,255 38,046 ¥ 2,209 ¥34,043 ¥3,567,184 699,847 4,267,031 4,108,944 ¥ 158,087 ¥3,583,017 ¥ — ¥3,567,184 — (699,847) 3,567,184 (699,847) 3,415,089 (693,855) ¥ 152,095 ¥ (5,992) ¥3,410,410 ¥(172,607) As of and for the year ended March 31, 2015 Japan North America Asia (excluding Japan) Europe Others Subtotal U.S. dollars (thousands) Eliminations and other Total I Net sales and operating income Sales: (1) External customers (2) Intersegment Net sales Operating costs Operating income II Assets 6,635,617 29,824,667 27,939,675 $23,189,050 $3,039,050 $6,292,342 $3,093,625 $411,275 $36,025,342 $ — $36,025,342 — 36,025,342 33,378,642 $ 1,884,992 $ 43,150 $ 686,825 $ 98,358 $ 3,350 $ 2,716,675 $ (69,975) $ 2,646,700 $23,415,567 $2,535,925 $7,268,025 $2,071,658 $380,058 $35,671,233 $(1,842,475) $33,828,758 (9,376,316) (9,376,316) (9,306,341) 9,376,316 45,401,658 42,684,983 194,458 3,233,508 3,190,358 2,438,975 8,731,317 8,044,492 106,083 3,199,708 3,101,350 1,183 412,458 409,108 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, Canada, and Mexico (2) Asia (excluding Japan) : China, South Korea, Thailand, Malaysia, Singapore, Indonesia, and India (3) Europe : United Kingdom, France, Germany, the Netherlands, Spain, Italy, and Czech 3 The amount of company-wide shared assets included in “Eliminations and other” on “Assets” for the years ended March 31, 2015, 2014 and 2013 is ¥309,521 million ($2,579,342 thousand), ¥197,227 million and ¥126,212 million, respectively, and those amounts are mainly the Company’s deposit in bank. (23) SUBSEQUENT EVENT On June 26, 2015, the date the consolidated financial statements were issued, there are no incidence of subsequent events that would have material effects on the Company’s consolidated financial position and results of operations. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 73 Independent Auditors’ Report 74 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 Corporate Data / Shareholder Information (As of March 31, 2015) 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: 129,249 Major Shareholders The Master Trust Bank of Japan, Ltd. (Trust Account) Japan Trustee Services Bank, Ltd. (Trust Account) Meiji Yasuda Life Insurance Company State Street Bank and Trust Company Nippon Life Insurance Company Mitsubishi Electric Group Employees Shareholding Union The Bank of Tokyo-Mitsubishi UFJ, Ltd. The Bank of New York Mellon SA/NV 10 Japan Trustee Services Bank, Ltd. (Trust Account 4) State Street Bank West Client—Treaty 505234 Annual Meeting The annual meeting of shareholders of the Corporation is regularly held in June each year. Additionally, special shareholders meetings may be held as necessary. Stock Exchange Listings Japan: Tokyo Europe: London Number of Shares (thousands) Percentage of Ownership 150,017 88,748 81,862 68,109 61,639 44,610 36,822 34,894 33,592 26,228 7.0% 4.1% 3.8% 3.2% 2.9% 2.1% 1.7% 1.6% 1.6% 1.2% Distribution of Shareholders Other Corporations 6.4% Traders of Financial Instruments 1.5% Foreign Corporations 37.4% Financial Institutions 40.9% Individuals and Others 13.8% Stock Price (Yen) 2,000 1,600 1,200 800 400 0 ’12/4 Mitsubishi Electric’s Stock Price Nikkei Stock Average ’13/4 ’14/4 The Nikkei Stock Average is based on information copyrighted by Nihon Keizai Shimbun, Inc. 20,000 15,000 10,000 5,000 ’15/4 Nikkei Stock Average (Yen) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2015 75 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-X01-5-C9584-A　HQ 1507〈IP〉 

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