Metgasco Limited Annual Report 2019

Plain-text annual report

MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 01 01 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 To Our Shareholders and Investors Corporate Mission The Mitsubishi Electric Group will continually improve its technologies and services by applying creativity to all aspects of its business. By doing so, we enhance the quality of life in our society. To this end, all members of the Group will pursue the following Seven Guiding Principles. Seven Guiding Principles Trust, Quality, Technology, Citizenship, Ethics and Compliance, Environment, Growth During the fiscal year ended March 31, 2019 (hereinafter fiscal 2019), the econ- omy saw a buoyant expansion in the U.S. and a slight slowdown in the Chinese economy, while there were gradual trends of recovery in Japan and Europe despite a recent slowdown in some indicators such as export and production. In addition, the yen, compared to the previous fiscal year, was substantially unchanged against the U.S. dollar, and remained strong against the euro in and after August. 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 2019, the Mitsubishi Electric Group recorded revenue of ¥4,519.9 billion, up 2% from the previous fiscal year, operating profit of ¥290.4 billion, down 11%. In accordance with its management targets, the Group will remain committed to maintaining a return on equity (ROE) of above 10% and keeping the ratio of interest-bearing debt to total assets below 15% while striving to achieve its growth targets for fiscal 2021, namely, consolidated revenue of ¥5 trillion or more and an operating income ratio of 8% or more. Moving forward toward securing sustained business expansion thereafter, the Mitsubishi Electric Group will also keep a focus on committing to a variety of management initiatives. Based on our Corporate Mission and Seven Guiding Principles, we of the Mitsubishi Electric Group position Corporate Social Responsibility (CSR) initiatives as our main pillar of corporate management. Accordingly, the entire Group is committed to providing solutions that combine products, systems, and services to address the challenges that society faces, such as environmental issues and 02 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 resource and energy issues. In this way, we will further promote initiatives to cre- ate value, such as simultaneous achievement of "sustainability," and "safety, security, and comfort" in the four fields of Life, Industry, Infrastructure and Mobility. In an effort to promote value creation, in addition to enhancing business foun- dations (connection with customers, technologies, personnel, products, corporate culture,etc.) and evolving Technology Synergies and Business Synergies through strengthening all forms of collaboration while maintaining Balanced Corporate Management based on three perspectives: growth, profitability and efficiency, and soundness, the Mitsubishi Electric Group will transform our business models. As we resolutely advance forward to achieve our goals, we ask for your continued support. July 2019 President & CEO Takeshi Sugiyama Financial Highlights Performance for the Year Ended March 31, 2019 Years ended March 31 Revenue Operating profit Net profit attributable to Mitsubishi Electric Corp. stockholders Total assets Bonds and borrowings Mitsubishi Electric Corp. stockholders' equity Capital expenditure (Based on the recognized value of property, plant and equipment) R&D expenditures Per Share Amounts Earnings per share attributable to Mitsubishi Electric Corp. stockholders Basic Diluted Cash dividends declared Statistical Information Operating profit ratio Return on equity (ROE) Bonds and borrowings to total assets 2018 ¥4,444,424 327,444 255,755 4,305,580 311,950 2,294,174 181,513 210,308 ¥119.19 119.19 40 7.4% 11.7 7.2 2019 ¥4,519,921 290,477 226,648 4,356,211 298,438 2,399,946 198,442 212,794 ¥105.65 105.65 40 Yen (millions) U.S. dollars (thousands) 2019 $40,720,009 2,616,910 2,041,874 39,245,144 2,688,631 21,621,135 1,787,766 1,917,063 Yen U.S. dollars $0.952 0.952 0.360 — — — % 6.4% 9.7 6.9 1 The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) from the year ended March 31, 2019 and also for the fiscal year ended March 31, 2018 as comparative information. 2 R&D expenditures include elements spent on quality improvements which constitute manufacturing costs. 3 Diluted earnings per share attributable to Mitsubishi Electric Corp. stockholders is equal to Basic earnings per share attributable to Mitsubishi Electric Corp. stockholders, as no dilutive securities existed. 4 U.S. dollar amounts are translated from yen at the rate of ¥111= U.S.$1, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2019. Revenue Breakdown by Business Segment Others Revenue 13.2% 676,736 million Energy and Electric Systems 25.2% Revenue 1,296,745 million Home Appliances 20.9% Revenue 1,074,044 million Electronic Devices Revenue 3.9% 199,908 million Note: Inter-segment sales are included in the amounts of the diagram above. Industrial Automation Systems 28.5% Revenue 1,467,633 million Information and Communication Systems Revenue 8.3% 426,269 million MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 03 Non-financial Highlights Results of main initiatives in fiscal 2019 Reducing CO2 from Production Contribution to Reducing CO2 from Product Usage We will push forward with reductions in CO2 from production(CO2 originating from energy), as well as reducing non-CO2greenhouse gases (SF6, HFC, and PFC). We will help reduce CO2 emissions through reducing the electricity consumed by custom- ers during product use. FY2021 target Total emission of greenhouse gases from production (CO2 equiv- alent) 1.47 million tons or less FY2021 target Reducing CO2 emissions from product usage by an average of 35% compared to use in fiscal 2001 Results: FY2019 1.30 million tons Results: FY2019 36% reduction Effective Utilization of Resources Reducing Resource Inputs We will promote thorough waste separation, recycling, and greater efficiency of waste col- lection and transport in order to reduce final waste disposal. We will reduce the use of resources (resource inputs) as a measure towards creating a recycling-based society. FY2021 target Final disposal rate in Japan Less than 0.1% Final disposal rate overseas Less than 0.5% FY2021 target Reduce resource inputs by an average of 40% compared to fiscal 2001 Results: FY2019 Less than 0.1% for Mitsubishi Electric and domestic affiliates 0.52% for overseas affiliates Results: FY2019 45% reduction Nature Conservation Activities Product development that places top priority on customer safety We will continue to hold Mitsubishi Electric Outdoor Classrooms and proceed with the “Satoyama” Woodland Preservation Project. We will ensure safety through risk assessment and implement product develop- ment that places top priority on customer safety. FY2021 target The cumulative number of participants in Mitsubishi Electric Outdoor Classrooms and the “Satoyama” Woodland Preservation Project. Risk assessments of target home electronic products Results: FY2019 43,000 participants Results: FY2019 Maintain 100% implementation Promote human rights initiatives that are based on international norms We will identify and evaluate impacts on human rights across the Group. Compliance training on a continuous basis We provide compliance education that utilizes diverse methods, on a continuous basis. Human rights impact assessment Mitsubishi Electric’s e-learning programs on compliance Results: FY2019 Achieve a100% rate of implementation by target companies Results: FY2019 Maintained a 100% attendance rate web For results of fiscal 2019, please refer to the following: https://www.MitsubishiElectric.com/en/sustainability/csr/management/management/materiality_progress/index.html 04 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Initiatives / External Evaluation Main initiatives and external evaluations related to ESG are as follows: Initiatives Participation in the UN Global Compact In May 2018, the Mitsubishi Electric Group signed the UN Global Compact (UNGC) aimed at promoting CSR activities based on international norms. By signing the UNGC, the Group pledges to make continued efforts toward sustainable growth by complying with the ten principles in the four areas of human rights, labor, environment and anti-corruption to the extent that it can influence society. Efforts will be made to enhance the Group’s activities by maintaining close communica- tion with UN organizations and relevant initiatives. Expression of approval of the TCFD recommendations The Mitsubishi Electric Group has expressed approval of the recommendations by TCFD (Task Force on Climate- related Financial Disclosures). External Evaluation CDP Mitsubishi Electric has received the highest rating from CDP. - “A List” company for “Climate Change” and "Water Security“ for three consecutive years - “Supplier Engagement Leader” FTSE Index Series FTSE Russell (UK) is a company that engages in the development of global investment indexes and the provision of financial data to investors. Mitsubishi Electric was selected as a constituent of the company’s FTSE4Good Index Series. Additionally, Mitsubishi Electric was selected as a constituent of the FTSE Blossom Japan Index. The index has also been adopted as an investment outlet by the Government Pension Investment Fund (GPIF). MSCI Indexes MSCI (USA) is a company that calculates and announces various indexes of global constituents. Mitsubishi Electric was selected as a constituent of MSCI ESG Leaders Indexes. Mitsubishi Electric was selected as a constituent for the MSCI Japan ESG Select Leaders Index, which consists of Japanese stock names ranked according to their ESG (environment, social, governance) performance, and also for the MSCI Japan Empowering Women Index (WIN), consisting of select companies in Japan displaying excellent gender diversity. The two indexes have also been adopted as an investment outlet by GPIF. * THE INCLUSION OF Mitsubishi Electric Corporation IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF Mitsubishi Electric Corporation BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. S&P/JPX Carbon Efficient Index Mitsubishi Electric was selected as a constituent of the S&P/JPX Carbon Efficient Index designed to measure the performance of companies by focusing on the level of carbon efficiency (carbon emissions per sales). The Index, which is constructed by S&P Dow Jones Indices, is based on carbon emission data by Trucost, which assesses risks relating to climate change, natural resource constraints, and broader environmental, social, and governance factors. The index has also been adopted as an investment outlet by GPIF. S&P/JPX Carbon Efficient Index MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 05 Initiatives to Create Value The Mitsubishi Electric Group has taken on the challenge of resolving diversifying social challenges including environmental issues and resource and energy issues through its products, systems and services. In doing so, it promotes initiatives to create values, such as simultaneous achievement of “sustainability,” and “safety, security, and comfort.” In these ways, the Mitsubishi Electric Group pursues the sustainable growth of the entire Group. —Co-creating the future— 06 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Meanwhile, by pursuing sustainable growth of the Group through all its corporate activities including initiatives to create value, the Group will also contribute to achieving the SDGs, common global goals. —Co-creating the future— MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 07 Corporate Strategy The Mitsubishi Electric Group has positioned corporate social responsibility (CSR) as a pillar of its corporate management, based on its Corporate Mission and Seven Guiding Principles. Accordingly, the Group has made committed efforts to become a corporation whose actions are rated highly through its initiatives toward solving social challenges. In other words, we aim to become a corporation that is trusted by its stakeholders, including society, customers, shareholders, and employees, and that earns their satisfaction through its business practices. The Group has taken on the challenge of resolving diversifying social challenges including environmental issues and resource and energy issues through its products, systems and services. In doing so, it promotes initiatives to create values, such as simultaneous achievement of “sustainability,” and “safety, security, and comfort.” In these ways, the Mitsubishi Electric Group pursues the sustainable growth of the entire Group. 《Strategy》 Mitsubishi Electric will provide integrated solutions to address diversifying social challenges, in the four fields of Life, Industry, Infrastructure and Mobility, uniting all the capabilities inside and outside of the Group. For this purpose, we will enhance our business foundation fostered over the past 100 years and further transform business models. *Business foundation fostered over the past100 years: connection with customers, technologies, personnel, products, corporate culture,etc. Corporate Mission The Mitsubishi Electric Group will continually improve its technologies and services by applying creativity to all aspects of its business. By doing so, we enhance the quality of life in our society. Provide integrated solutions uniting all the capabilities inside and outside of the Group Initiatives to Create Value Transforming business models Enhance the 100-year business foundation × Strengthen all forms of collaboration = Evolution of Technology Synergies and Business Synergies Social Challenges Mobility Enrich leisure time Life Zero traffic accidents Eliminate regional disparities Comfortable life Improve QOL* of mobility impaired people Health Comfortable transport Eliminate traffic congestion Reduce air pollution Measures for deteriorating infrastructure Build communities Prevent global warming Equal opportunity for education and training Preserve the ecosystem Avoid water shortage/ food shortage Clean water Prepare for natural disasters Eliminate poverty/ inequalities Industry and technological innovation etc. Address labor shortage Response to uneven distribution and depletion of resources Prepare for man-made threats Infrastructure Sustainable society Industry *QOL:Quality of Life 08 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Mitsubishi Electric Group will contribute to meeting the SDGs' globally shared 17 goals by continuing to pursue sustainable growth through all corporate activities, including value creation to solve social challenges —Co-creating the future— Factory Automation Home Appliances Power Devices Contribute through value creation Satellites Power Systems … Surveillance Control Systems Facilities and Equipment for Buildings Automotive Equipment Transportation Systems Image Analyzing Solution Contribute through all corporate activities Recycling (Home Appliances) Strengthen Corporate Governance and Compliance on a Continuous Basis Reduce Environmental Burden During Production Tree Planting Intuitively-interfaced remote-control … Respect Human Rights and Promote the Active Participation of Diverse Human Resources Initiatives to Realize an Inclusive Society SOCIO-ROOTS Fund Further promote initiatives to create value, such as simultaneous achievement of “sustainability”, and “safety, security, and comfort” *SDGs :“Sustainable Development Goals” adopted by the United Nations as goals to achieve towards 2030 To ensure its corporate growth is sustainable, since fiscal 2002 the Group has adhered to the management policy of maintaining Balanced Corporate Management based on three perspectives: growth, profitability and efficiency, and soundness. Through these perspectives it has striven to secure greater corporate value. The Group is also committed to continuously enhancing its corporate governance and compliance systems. Growth • Sustainable growth through providing solutions to social challenges • Technology Synergies/Business Synergies • Agile response to changes in business environment Greater Corporate Value Proﬁtability Efﬁciency • Enhance capital efﬁciency • Increase utilization efﬁciency of natural resources and energy • Create a stronger business foundation Soundness • Constantly review and refresh business portfolio • Maintain sound ﬁnancial standing • Strengthen corporate governance and compliance on a continuous basis ■ Pursue the Satisfaction of the Four Stakeholder Categories Social Contributions Society Increase Corporate Value Shareholders Excellent Products and Services Customers Rewarding Workplace Employees ■ Strive for Continuous Innovation Always improving. Always delivering new value. ■ Toward a Higher Level of Growth 5 trillion JPY or more 8% or more Growth Targets for FY2021 ● Revenue ● OPM Management Targets to be Continuously and Stably Achieved ● ROE 10% or more ● Debt Ratio 15% or less *Debt Ratio represents ratio of Bonds and borrowings to total assets MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 09 Corporate Strategy Toward “High-Quality” Growth In line with its efforts to achieve a higher level of growth, the Mitsubishi Electric Group has revised its Growth Targets for FY 2021 to consolidated revenue of ¥5 trillion or more, and an operating profit ratio of 8% or more. The Group will work to continuously and stably achieve the following management targets: secure an ROE of 10% or more, and secure a ratio of bonds and borrowings to total assets of 15% on less. In fiscal 2019, the Mitsubishi Electric Group achieved consolidated revenue of ¥4,519.9 billion and operating profit ratio of 6.4%, achieving record highs for consolidated revenue. In addition, the Group achieved ROE of 9.7% and a ratio of bonds and borrowings to total assets of 6.9% as of March 31, 2019. As slowdown in economic growth makes the business environment ever more harsh, in FY2020, the Group will keep an eye on outcomes of past investments as well as on the progress of profitability improvements, and continue with initiatives to achieve Growth Targets for FY2021 and sustain growth into the future. Sustainable Growth through Providing Solutions to Social Challenges The Mitsubishi Electric Group’s distinctive strengths lie in the following three areas: 1) A wide range of technological assets such as controls and power electronics; 2) Activities in diverse businesses with different business features; and 3) “Kaizen” (improvement) culture that has taken root in every field, includ- ing production, quality management, sales, services, etc. Fully utilizing these strengths, the Group has positioned the creation of value toward providing solutions to challenges as the core of its growth strategies by taking full advantage of Technology Synergies and Business Synergies, etc., in the four fields with many social challenges. Meanwhile, by pursuing sustainable growth of the Group through all its cor- porate activities including initiatives to create value, the Group will also contrib- ute to achieving the SDGs, common global goals. The Four Fields Having defined a social challenge category to which the Mitsubishi Electric Group can contribute solutions by providing its products, systems, and services as a “Field,” we will promote initiatives for value creation in the following four fields where there are many social challenges: “Life” focusing on the daily lives of people, “Industry” enabling creation of things necessary for life, “Infrastructure” providing the foundation for society, and “Mobility” connecting all of the fields above-mentioned. By identifying the challenges and needs of society or each customer and continuing to pursue their satisfaction through proposing and implementing solutions, the Group will secure sustainable growth going forward. Technology Synergies and Business Synergies In promoting value creation, the Group will continue to strive to strengthen the business foundation (connection with customers, technologies, personnel, products, corporate culture, etc.) through operational improvement and trans- formation in every site and further unite all the capabilities, from R&D to sales and service, inside and outside of the Group, and thereby create Technology Synergies through optimal combinations of its strong technological assets, which encompass a wide range of technological fields, as well as Business Synergies through the collaboration of its diverse business activities. Furthermore, the Group will strive to improve customer satisfaction and competitive advantages by always checking business models, as well as reviewing and transforming models to the better from a viewpoint of whether the Group is aware of changes in the business environment, sufficiently meet- ing challenges and the needs of customers, and fully leveraging its advantages. Achieving Balance between “Growth,” “Profitability/Efficiency,” and “Soundness” For ensuring its sustainable growth, the Mitsubishi Electric Group will continue to allocate investment resources, including research and development and capital, while actively pursuing collaborative ties and M&As to boost corporate growth for the Group with the following three perspectives in mind: Supplement missing parts (products and services/technology) essential for business expan- sion; Secure distribution-/ service-network (supply chain) when entering new regions/markets; and Acquire talent in order to strengthen business execution capabilities. By doing this, the Group will maximize the outcome of its invest- ment. At the same time, the Group will review and refresh its business portfolio to reallocate its management resources to areas that show growth. Moreover, the Group will strengthen this portfolio by continuously creating new business- es capable of driving future growth. 10 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Strength of the Mitsubishi Electric Group — A wide range of technological assets such as controls and power electronics — Activities in diverse businesses with different business features — “Kaizen” (improvement) culture taking root in every ﬁeld, including production, quality management, sales, services, etc. Fully leverage our strength through all forms of collaboration inside and outside of the Group Technological Assets Value Creation p u o r G c i r t c e E l i h s i b u s t i M Control(motion, heat, ﬂuid, and electricity) Power Electronics Human Machine Interface Encryption Communication Data Processing Electromagnetic Analysis Sensing Design Devices …… n e h t g n e r t S Technological Platform R&D and IP i s e g r e n y S y g o o n h c e T l Energy & Electric Systems Industrial Automation Systems Information & Communication Systems Electronic Devices Home Appliances s e i g r e n y S s s e n i s u B n e h t g n e r t S Technology Synergies: Create value and strengthen competitiveness of products/systems/services through optimal combination of technological assets Business Synergies: Create additional value and competitiveness through collaboration of a wide variety of businesses （through combination of products/systems/services） Procurement Productivity Quality Sales Services Operating Platform Strengthen Collaboration Corporations Universities Government R&D Agency Standardization Organizations … Sustain growth into the future Provide integrated solutions uniting all the capabilities inside and outside of the Group Home Appliances Energy & Electric Systems Electronic Devices Industrial Automation Systems l D e v e o p a s c o m m o n t e c h n o o g e s i l 2 0 2 5 a n d m a i n t e n a n c e b u s i n e s R e n e w a l s 2 0 2 0 r A i i g e r a t r i o n i n g & R e f t i o n S y s t e m s B u s i n e s s : V P P / Z E H / Z E B e l e v a t o r s f o r e t c . ) r l c a r s m a d e w i t h S i C , i n e u p ( I n v e r t e r f o r r a i r e f o r m s a n d s t a b l e s u p p l y n e e d s c o n d i m o d e l s S a f e t y a n d e f ﬁ c i e n c y G l o b a l l d i n g S y s t e m s B u s i n e s s : t y s y s t e m S y s t e m s B u s i n e s s : i c i H i g h - v o l t a g e p o w e r e l e c t r o n i c s s y s t e m s E l e c t B u i P o w e r D e v i c e b u s i n e s s : H i g h - p e r f o r m a n c e / L o w p o w e r l o s s S i / S i C - m o u n t e d d e v i c e s P o w e r S y s t e m s B u s i n e s s : T r a n s p o r t E l e c t r i c p o w e r t r a i n s y s t e m s f o r E l e c t r i c V e h i c l e s ( N e x t g e n e r a t i o n S i / S i C ) Automotive Equipment Business: High efﬁciency equipment lineup Factory Automation Systems Business: e-F@ctory l Autonomous driving related systems e-F@ctory (Factory smartiﬁcation) Information & Communication Systems Space Systems Business: Contribution for global social infrastructure *ZEB:net Zero Energy Building, ZEH:net Zero Energy House, VPP:Virtual Power Plant, Si:Silicon, SiC:Silicon Carbide Building Robust Business Structure Striving for Continuous Innovation To strengthen its business structure, the Mitsubishi Electric Group continuously strives to improve its capital efficiency through management with awareness of capital procurement cost. As a part of initiatives to this end, the Group contin- ues to expand revenue and reduce costs while engaging in activities with the aim of improving inventory turnover, trade receivables turnover, and Just in Time operations. In addition to implementing these efforts in an exhaustive manner, in fiscal 2016 the Group began utilizing an internal performance indi- cator, ROIC (Mitsubishi Electric version) to monitor asset efficiency by business segment, thereby improving the ROE of all Group operations. Looking ahead, the Mitsubishi Electric Group will continue to focus on generating stable cash flows while maintaining a well balanced approach in securing funds for executing strategic growth investment and enhancing shareholder returns in step with profit growth. In these ways, the Group will diligently work to increase corporate value. The Mitsubishi Electric Group will steadfastly carry out its management policies guided by a commitment to Balanced Corporate Management, while putting into practice the concept behind its overarching corporate statement: Changes for the Better. Each and every employee will share the common goal of “Always improving” and “Always delivering new value,” and the Mitsubishi Electric Group—by continuing to undergo transformation itself—will mature into a cor- poration that is always producing something better. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 11 At a Glance Energy and Electric Systems Industrial Automation Systems 1,264 1,227 1,241 1,253 1,296 Revenue Yen (billions) 1,500 1,228 1,200 900 600 300 0 1,321 1,310 1,444 1,444 1,467 Revenue Yen (billions) 1,500 1,282 1,200 900 600 300 0 Information and Communication Systems Revenue Yen (billions) 1,500 1,200 559 561 447 436 438 426 900 600 300 0 15 16 17 18 18 19 (Years ended March 31) 15 16 17 18 18 19 (Years ended March 31) 15 16 17 18 18 19 (Years ended March 31) U.S. GAAP IFRS U.S. GAAP IFRS U.S. GAAP IFRS Operating profit Yen (billions) Operating profit Yen (billions) 200 160 120 80 40 0 72 50 44 51 82 65 200 160 120 80 40 0 190 187 159 145 140 142 15 16 17 18 18 19 (Years ended March 31) 15 16 17 18 18 19 (Years ended March 31) Operating profit Yen (billions) 200 160 120 80 40 0 18 15 14 16 12 17 11 18 11 12 18 19 (Years ended March 31) U.S. GAAP IFRS U.S. GAAP IFRS U.S. GAAP IFRS 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 switchgears, switch control devices, surveillance-system control and security systems, transmission and distribution ICT systems, large display devices, electrical equipment for locomotives and rolling stock, elevators, escalators, building security systems, building management 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, electric powertrain system, car electronics and car mechatronics, car multimedia, and others Wireless and wired communications systems, network camera systems, satellite communications equipment, satellites, radar equipment, antennas, missile systems, fire control systems, broadcasting equipment, data transmission devices, network security systems, information systems equipment, systems integration, and others Fiscal 2019 Topics In May Mitsubishi Electric launched iQ Edgecross, a software suite targeted for use on industrial computers such as the concurrently released MELIPC series. Once installed it enhances the industrial computers control and edge com- puting functions while also providing integration with the Edgecross open software platform. 2018 Mitsubishi Electric’s room air conditioner, Kirigamine FL series (launched in March 2016), won the Invention Award of the 2018 National Invention Award hosted by Japan Institute of Invention and Innovation for its design. Mitsubishi Electric US, Inc., a wholly owned subsidiary of Mitsubishi Electric, and Ingersoll-Rand in the U.S. estab- lished a joint venture, Mitsubishi Electric Trane HVAC US LLC, and started its operation in May. Mitsubishi Electric US and Ingersoll Rand each have equal ownership of the joint venture, which dis- tributes ductless air conditioner systems. Mitsubishi Electric’s new production building for boosting production of optical communication and wireless com- munication equipment and network camera system was completed in October in the premises of the company’s Communication Network Center, Koriyama Plant in Fukushima Prefecture, Japan. Plant No. 8 of the Hirohata Factory at Mitsubishi Electric’s Himeji Works (Hyogo Prefecture, Japan) for boosting pro- duction of motor genera- tors and invert- ers for HEV and EV was com- pleted in May. Mitsubishi Electric was selected via its subsidiary Mitsubishi Electric Asia (Thailand) Co., Ltd. to supply four substations of Electric Power Generation Enterprise (EPGE) in Myanmar with gas-in- sulated switchgears (GIS), transformers and other equipment including a special divided three-phase transformer, which can be packed in separate compact mod- ules for easier shipping to locations, 12 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Electronic Devices Home Appliances Revenue Yen (billions) 1,500 1,200 900 600 300 0 238 211 186 202 202 199 Revenue Yen (billions) 1,500 944 982 1,004 1,049 1,049 1,074 1,200 900 600 300 0 Others Revenue Yen (billions) 1,500 1,200 740 707 713 764 659 676 900 600 300 0 15 16 17 18 18 19 (Years ended March 31) 15 16 17 18 18 19 (Years ended March 31) 15 16 17 18 18 19 (Years ended March 31) U.S. GAAP IFRS U.S. GAAP IFRS U.S. GAAP IFRS Operating profit Yen (billions) Operating profit Yen (billions) Operating profit Yen (billions) 200 160 120 80 40 0 30 15 16 16 8 17 14 18 14 1 18 19 (Years ended March 31) 200 160 120 80 40 0 63 69 54 56 55 59 15 16 17 18 18 19 (Years ended March 31) 200 160 120 80 40 0 23 15 23 16 23 17 23 18 24 24 18 19 (Years ended March 31) U.S. GAAP IFRS U.S. GAAP IFRS U.S. GAAP IFRS 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 Procurement, logistics, real estate, advertising, finance, and other services Room air conditioners, package air conditioners, chillers, showcases, compressors, refrigeration units, air-to-water heat pump boilers, ventilators, photovoltaic systems, hot water supply systems, IH cooking heaters, LED lamps, fluorescent lamps, indoor lighting, LCD televisions, refrigerators, electric fans, dehumidifiers, air purifiers, cleaners, jar rice cookers, microwave ovens, and others Mitsubishi Electric was selected for the A-list of compa- nies by CDP, an international NGO, in the “CDP Climate Change” and “CDP Water” fields for the third consecutive year. In addition, Mitsubishi Electric was selected as a “Supplier Engagement leader.” Mitsubishi Electric has thus been highly rated across a number of fields. Mitsubishi Electric supplied the scoreboard at the MAZDA Zoom-Zoom Stadium Hiroshima owned by Hiroshima City with Diamond Vision™. The Es'hail-2 communica- tions satellite built by Mitsubishi Electric was launched successfully. The company received the order for the satellite from a Doha- based Qatar government satellite communication pro- vider, Es'hailSat. ©SpaceX "Es'hail-2" launch 2019 Mitsubishi Electric plans to build a test facility for its technologies for net Zero Energy Buildings (ZEB) at its Information Technology R&D Center in Kamakura, Kanagawa Prefecture, Japan. The facility is scheduled to start operating in 2020. Mitsubishi Electric opened the "TAKUMI" Inazawa Installation Training Center for elevator and escalator installation training for technicians from Japan and abroad in April 2019. The facility, which is named after the Japanese word for "great master," is located on the premises of the Inazawa Works, the company's mother factory for the manufacture of elevators and escala- tors, in Inazawa, Aichi Prefecture, Japan. Mitsubishi Electric constructed a new plant to produce motors and inverters for electric motor vehicles at Mitsubishi Electric Automotive Czech s.r.o., its automotive equipment and sales subsidiary in the Czech Republic. The factory is scheduled to start operating in 2020. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 13 Review of Operations Energy and Electric Systems Revenue Breakdown by Business Segment 25.2% Revenue ¥1,296.7billion up 3% year on year Operating Profit ¥82.5billion up ¥17.0 billion year on year The social infrastructure systems business remained Next-generation SiC Inverter for Railcars Mitsubishi Electric has developed and provided a traction inverter for railcars that incorporates silicon carbide (SiC), a new type of semiconductor. This new inverter, with its energy-efficient, compact, lightweight, low-maintenance, and low-noise design, contributes to play a major role in next-generation railcar propulsion systems. Large-scale Visual Information System Offerings in the Mitsubishi Electric Group’s lineup of large-scale visual information systems boast Diamond VisionTM—a technology that helps fuel audience excite- ment in such venues as stadiums—along with cut- ting-edge information distribution platforms that employ the internet and data broadcasting. As such, the Group provides visual information systems that enrich people’s lives in various ways. D-SMiree Smart Power Distribution Network Systems for Medium or Low Voltage Direct Current ©CHIBA LOTTE MARINES In response to growing calls for standalone power dis- tribution structures in which individual buildings’ elec- tricity needs are met by discrete on-site generation facilities, Mitsubishi Electric has created the Energy Management System (EMS), which is specifically designed for direct current distribution. Boasting predic- tive functions covering both generator output and elec- tricity demand, the EMS helps control charging and discharging schedules to best utilize direct current generated by photovoltaic generators as well as that released from batteries, thus eliminat- ing energy loss attributable to conversion to alternating current. substantially unchanged in orders compared to the Power Plants previous fiscal year, while revenue increased compared to the previous fiscal year due primarily to increases in the transportation systems business inside and outside Japan and the power systems business in Japan. The building systems business remained substantially unchanged in both orders and revenue compared to the previous fiscal year, experiencing a decrease in the new installation of elevators and escalators in China and buoyant growth in the renewal business in Japan and other factors. As a result, revenue for this segment increased by 3% from the previous fiscal year to 1,296.7 billion yen. Operating profit increased by 17.0 billion yen from the previous fiscal year to 82.5 billion yen due primarily to an increase in revenue. Mitsubishi Electric provides power system equipment for various power plants, which play a major role in power supply and are required to further reduce environmental impact. With high efficiency turbine generators and instru- mentation control systems that combine advanced network and measurement technologies, Mitsubishi Electric power plants realize improved reliability and cost efficiency. NEXIEZ Machine-room-less Elevators Compact, lightweight, and energy-saving, NEXIEZ machine-room-less elevators are the global flagship product. They are widely used throughout the world, mainly in low- to mid-rise buildings. Models designed with various functions and features for specific regions are also available to meet the preferences and custom- er needs of each region. Series Z Escalators The Z-Series escalators offer enhanced safety through several features that ease stepping on/off and help pre- vent clothing from getting caught, so that passengers of all ages, from small children to the elderly, can use the escalators safely. They also offer a higher level of ener- gy conservation by providing optional features such as VVVF inverters. Environmentally friendly, people-friendly, and beautiful, the Z-Series show the future of escala- tors. 14 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Industrial Automation Systems Revenue Breakdown by Business Segment 28.5% Revenue ¥1,467.6billion up 2% year on year Operating Profit ¥142.5billion down ¥44.7 billion year on year The factory automation systems business saw decreases in both orders and revenue from the previous fiscal year due primarily to a decrease in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, despite buoyant demand in Japan. The automotive equipment business saw increases in both orders and revenue from the previous fiscal year due primarily to increases in Japan, Europe and other markets in Asia, as well as increased revenue in electric-vehicle related equipment in response to market growth worldwide. As a result, revenue for this segment increased by 2% from the previous fiscal year to 1,467.6 billion yen. Operating profit decreased by 44.7 billion yen from the previous fiscal year to 142.5 billion yen due primarily to a shift in product mix,increases in material prices and upfront investment for growth drivers. 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 construc- tion of cutting-edge control systems owing to its capa- bilities, performance, product variety, and high reliability. AC Servos The MELSERVO Series enhance all aspects of produc- tion devices and facilities. From rotary servo motors to linear servo motors and direct drive motors, a wide range of products is available to meet any number of applications and to significantly improve the perfor- mance of all relevant devices. Computerized Numerical Controllers—CNCs A broad range of CNCs is available. Including, for exam- ple, the M800/80 Series, which increases productivity and precision and optimizes machine tool operation through an independently developed dedicated CPU and abundant control functions.It is also compatible with the various field networks that are necessary for construct- ing automation systems. Electrical Discharge Machines (EDMs) Beginning with the newly launched MP series, a strate- gic product on a global scale, Mitsubishi Electric pro- vides a lineup of EDMs that add value and improve the manufacturing productivity of molds and precision com- ponents. Such equipment is indispensable to the pro- duction 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 con- ditions. 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. Car Navigation System The DIATONE SOUND. NAVI car audio-navigation system eliminates the slight noise generated by audio devices and transmits sounds in full detail. In addition, it pro- vides high-speed multi-task processing, fast respon- siveness when searching and scrolling and beautiful images on the map screen and in video playback. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 15 Review of Operations Information and Communication Systems 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) “kizkia”: Video Analysis Solution using Artificial Intelligence Powered by AI, this system can identify attributes of persons or things and automatically recognize their movements, conditions and situations by analyzing security footage in real-time. It notifies irregular situa- tions which may require staff’s support but would oth- erwise been overlooked by human observers. The system also makes it possible to support forecasting future conditions. (Mitsubishi Electric Information Systems Corporation) DS2000 Standard Satellite Platform The DS2000 is a standard satellite platform modeled after JAXA’s ETS-VIII. It meets the need for high-quali- ty, low-cost satellites with shortened delivery times. It has already been adopted for use by Japan and other countries; more than ten satellites currently in orbit use it. It will eventually be incorporated into JAXA’s Engineering Test Satellite 9, which is being launched in response to the need for high-throughput communica- tions satellites. 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 are employed by Japanese broadcasters, the public sector, and infrastructure companies such as gas and elec- tricity 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. Network Camera System This Network Camera 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. Revenue Breakdown by Business Segment 8.3% Revenue Operating Profit ¥426.2billion down 3% year on year ¥12.2billion up ¥0.9 billion year on year The telecommunications systems business saw decreases in both orders and revenue compared to the previous fiscal year due primarily to decreased demand in communications infrastructure equipment. The information systems and service business remained substantially unchanged in orders, while revenue increased compared to the previous fiscal year owing to an increase in the system integrations business. The electronic systems business saw a decrease in orders compared to the previous fiscal year mainly due to a decrease in the space systems business, while revenue experienced a decrease compared to the previous fiscal year due primarily to a decrease in the defense systems business. As a result, revenue for this segment decreased by 3% from the previous fiscal year to 426.2 billion yen. Operating profit increased by 0.9 billion yen from the previous fiscal year to 12.2 billion yen due primarily to a shift in project portfolios. 16 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Electronic Devices Revenue Breakdown by Business Segment 3.9% Revenue Operating Profit ¥199.9billion down 1% year on year ¥1.4billion down ¥12.7 billion year on year The electronic devices business saw a decrease in orders and revenue fell by 1% from the previous fiscal year to 199.9 billion yen mainly due to decreased demand for optical communication devices. Operating profit decreased by 12.7 billion yen from the previous fiscal year to 1.4 billion yen due primarily to a decrease in revenue and a shift in product mix. 1200V SiC*1-SBD*2 By utilizing SiC, power loss is significantly reduced compared to Si (silicon). It achieves high-speed switching and downsizing of peripheral components, such as reactors, and will be instru- mental in reducing power loss and downsizing for the power supply systems for infrastructure, photovoltaic power systems and charging equipment for electric vehicles. *1 SiC: Silicon Carbide *2 SBD: Schottky Barrier Diode MISOP™ Surface-Mount Package IPM* Series Downsizing, design simplification, and design flexibility of invert- er systems of equipment such as fan motors of air conditioners are improved by utilizing a surface-mount package that allows reflow soldering, and by implementing optimized terminal layout and various ICs with protection functions. *IPM: Intelligent Power Module GaN*1 High Frequency Devices for Satellite Earth Stations These power amplifier GaN high frequency devices are suitable for satellite communication system earth stations, which are used for high-speed communication during natural disasters and in areas where ground networks are difficult to construct. This lineup of industry top-level*2 output power products will answer various needs related to satellite earth stations. *1 GaN: Gallium Nitride *2 Based on Mitsubishi Electric research as of September 27, 2016; com- pared with Ku-band GaN HEMT devices for use in satellite earth stations 25 Gbps EML*1 CAN*2 for 5G Mobile Base Stations This is a high-speed optical data transmission device for radio access networks within fifth-generation (5G) mobile base stations. With 25 Gbps transmission speed, higher data volumes for mobile communication systems and a 40% reduction in power consump- tion are achieved, contributing to mobile communications systems with low power consumption. *1 EML: Electro-absorption Modulator Laser *2 CAN (TO-CAN): Package with excellent productivity (for mass production) that is widely used in optical data transmission devices TFT LCD Modules with Touch Panels for Industrial Use(7.0-inch WXGA,10.4-inch SVGA,15.0-inch XGA) TFT-modules with projected capacitive touch panels using cover glass of up to 5 mm thick, support maximum ten-point multi- touch operation, and can be used even when using with thick, heat resistant gloves or when the screen is wet. They are ideal for outdoor applications that require impact resistance and water spill compatibility. Established Mass-Production Technology for Curved Color TFT-LCD Module and Began Taking Orders Mitsubishi Electric has established mass-production technology for a new curved (concave) color TFT-LCD module that combines environmental ruggedness to withstand extreme temperatures and an attractive design, making it ideal for use in automobiles and boats. The module offers a curvature radius* from 700 mm to less than 1,000 mm and optical performance equivalent to that of flat screens. Mitsubishi Electric has started accepting orders for the new module. * Value of the radius of the curve if the curvature arc extended to a circle. The smaller the value, the higher the curvature. 7.0-inch WXGA Curvature radius: 800 mm MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 17 Review of Operations Home Appliances Revenue Breakdown by Business Segment 20.9% Revenue ¥1,074.0billion up 2% year on year Operating Profit ¥59.4billion up ¥3.9 billion year on year The home appliances business saw a 2% increase in revenue from the previous fiscal year to 1,074.0 billion yen due to increases in revenue of air conditioners for Japan, Europe and North America. Operating profit increased by 3.9 billion yen compared to the previous fiscal year to 59.4 billion yen due primarily to an increase in revenue. 18 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Air Conditioning Systems In addition to KIRIGAMINE room air conditioners, Mitsubishi Electric offers an extensive lineup of prod- ucts 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. Home Equipment Electricity generated by solar panels is charged in the batteries of electric vehicles, leveraging the use of renewable energy. Mitsubishi Electric offers ener- gy-saving home environments using highly efficient air conditioners and ventilation, water heaters and cooking equipment. Create a comfortable living environment for the whole family. Home Appliances Mitsubishi Electric develops home appliances by incor- porating its unique technologies and perspectives so that its products can be used in various scenes of daily life, such as the kitchen, living room, and bedroom. Efforts are made to develop products that contribute to making life more comfortable for users, meeting and even surpassing their expectations. Lighting Fixtures and Light Bulbs Mitsubishi Electric offers an extensive lineup of high-efficiency, long-lasting LED products that meet diverse needs for energy-saving light bulbs and equip- ment in households, stores, offices, and factories. The company’s 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 technologies 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 applications, such as digital signage used to display images, data, and information at public facilities and other venues. Recycling Consumer Electronics and Home Appliances Mitsubishi Electric has developed technologies for automatically sorting the three major types of plastic (polypropylene (PP), polystyrene (PS), and acryloni- trile-butadiene-styrene (ABS)) used in consumer elec- tronics and home appliances. This original recycling system is being utilized to promote the reuse of plas- tics in the company’s products by improving the physi- cal properties of the sorted materials. 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 Research and Development Research and Development As the cornerstone of its growth strategy, the Mitsubishi Electric Group will promote short-, medium-, and long-term R&D themes in a balanced manner. In addition to promoting development toward strengthening current businesses and achieving innovation, the Company is striving to create further value through synergy of technologies and businesses by leveraging the Company’s diverse technolo- gies and businesses, while also working to realize sustainable growth through the development of future technologies. To support these efforts, the Company is developing com- mon basic technologies that are the source of the competitive advantages of the Company’s products, on a continuous basis. Furthermore, the Company will promote enhancement of efficiency of development through proactive utilization of open innovation in collaboration with universities and other external R&D institutions. During fiscal 2019, the total R&D expenses for the entire Group have amounted to 212.7 billion yen (1% increase compared to the previous fiscal year). Representative achievements are as follows. R&D policy Well balanced short-, mid- and long-term R&D External technologies/entities Open Innovation Realizing sustainable growth through the development of future technologies Backcasting Future society —Co-creating the future— —Co-creating the future— Creating further value through synergy of technologies and businesses Promoting development toward strengthening current businesses and achieving innovation Short- term Mid- term (4Ys-) Long- term (10Ys-) Developing common basic technologies that are the source of competitive advantages, on a continuous basis Society 5.0: It is contained in the 5th Science and Technology Basic Plan approved by the Government of Japan in Jan. 2016. SDGs: “Sustainable Development Goals” adopted by the United Nations as goals to achieve towards 2030 Main R&D Achievements in Fiscal 2019 (consolidated results) Development of New Dot Forming Technology that Achieves High-precision Three-dimensional Metal Shaping In recent years, there has been a growing demand for multi-product small-lot production. In order to shorten manufacturing processes and increase design flexibility, application of three-dimensional shaping technologies to metal parts have been spreading in various fields, primarily in the aircraft and automobile manufacturing fields. The Company has developed a unique dot forming technology that realizes high-precision shaping by combining laser, computer numerical control and computer aided manufacturing CAM*1 technologies in 3D printers. The technolo- gy produces high-quality three-dimensional parts with few voids at high speed, employing a laser wire DED*2 method. With this new technology, the shape accuracy has improved by 60% (in-house comparison) compared to that of conventional consecutive forming technology. The technology will contribute to greater productivity in a wide range of applications, such as the “near-net” shaping*3 of aircraft and automobile parts and build-up repairs. *1 Computer Aided Manufacturing: A technology that uses input three-dimensional shape data to perform all production preparations, such as the creation of processing programs, on a computer *2 Directed Energy Deposition: An additive-manufacturing process that uses focused thermal energy to fuse materials as they are deposited, and add layer by layer to solidify *3 A manufacturing technique to produce the item in near-final form Laser Wire DED Type Metal 3D Printer Laser oscillator Gas nozzle Laser Wire Consecutive forming (conventional) Dot forming (new) The shape accuracy of cylindrically shaped items is increased by 60% Development of Seamless Speech Recognition Technology Using its proprietary Maisart*1 AI technology, the Company developed “Seamless Speech Recognition,” the world’s first*2 technology capable of highly accurate multilingual speech recognition without being informed which language is being spoken. The technology can understand multiple people speaking either the same or different languages simultaneously. Going forward, the Company will work to further improve the accuracy and applicability of automatic speech recognition in real environments. *1 Mitsubishi Electric’s AI creates the State-of-the-ART in technology Mitsubishi Electric’s AI technology brand aimed at making every device smarter *2 As of February 13, 2019 (based on the Company’s research) Seamless Multilingual Speech Recognition End-to-End neural network distinguishes languages and recognizes the meaning of what is spoken Speaking in native languages without prior language setting Image of the Seamless Speech Recognition Technology こんにちは Hello Guten Tag 你好 Hola Bonjour Buon pomeriggio … … … More than 10 languages are recognized with high accuracy Voice recognition is possible even in situations where it is not known what languages will be spoken by an indefinite large number of users MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 19 businesses (in 2018) announced by the World Intellectual Property Organization (WIPO). In conjunction with creating a patent network, we are also actively pursuing activities toward acquiring design rights in Japan and overseas, to protect both the functional and design aspects of our technologies. Annual Trends in Overseas Patent Applications by the Mitsubishi Electric*1 (Number of Applications) 6,000 5,000 4,000 3,000 2,000 1,000 0 2016 2017 2018 2019 (FY) ■■ USA ■■ Europe ■■ China ■■ Others *1 Starting in FY2019, we began using the number of overseas patent applications of Mitsubishi Electric as a single entity. Respecting IP Rights The Mitsubishi Electric Group firmly recognizes the importance of mutually acknowledging and respecting not only its own intellectual property rights but the intellectual property rights of others as well. This stance is clearly set forth in the Mitsubishi Electric Group Conduct Guidelines and practiced throughout the Group. Any infringements on the IP rights of others not only violate the Code of Corporate Ethics and Compliance, but also have the potential to significantly impair the Group's continued viability as a going concern. The resulting poten- tial impairments include being obliged to pay significant licensing fees or being forced to discontinue the manufacture of a certain product. In order to prevent any infringement on the IP rights of others, various edu- cational measures are provided mainly to engineers and IP officers, to raise employee awareness and promote greater respect for the IP rights of others. At the same time, a set of rules has been put in place to ensure that a survey of the patent rights of others is carried out at every stage from development to production, and is strictly enforced throughout the entire Group. The Mitsubishi Electric Group also works diligently to prevent any infringe- ment on its IP rights by others. In addition to in-house activities, we place par- ticular weight on collaborating with industry organizations while approaching government agencies both in Japan and overseas as a part of a wide range of measures to prevent the counterfeiting of our products. Intellectual Property Protection of Intellectual Property Rights Basic Policy The proper protection of intellectual property (IP) rights promotes technological progress and sound competition, and also contributes to realizing affluent life- styles and the development of society. The Mitsubishi Electric Group recognizes that intellectual property (IP) rights represent a vital management resource essential to its future and must be pro- tected. Through integrating business, R&D, and IP activities, the Group is pro- actively strengthening its global IP assets, which are closely linked to the Group's business growth strategies and contribute to both business and soci- ety, and also working on protecting IP rights. Structure of the Intellectual Property Division The IP divisions of the Mitsubishi Electric Group include the Head Office IP Division, which is the direct responsibility of the president, and the IP divisions at the Works, R&D centers, and affiliated companies. The activities of each IP division are carried out under the executive officer in charge of IP at each loca- tion. The Head Office IP Division formulates strategies for the entire Group, pro- motes critical projects, coordinates interaction with external agencies including patent offices, and is in charge of IP public relations activities. At the Works, R&D center, and affiliated company level, IP divisions promote individual strate- gies in line with the Group's overall IP strategies. Through mutual collaboration, these divisions work to link and fuse their activities in an effort to develop more effective initiatives. Integrating Business, R&D and IP Activities Integration IP Network IP/Standardization Strategy IP Division at Headquarters Business Strategy IP Departments Business Groups, Facilities, Afﬁliates Development Strategy R&D Centers IP Departments Global IP Strategy The Mitsubishi Electric Group identifies critical IP-related themes based on its mainstay businesses and important R&D projects, and is accelerating the glo- balization of IP activities also by filing patents prior to undertaking business development in emerging countries where an expansion of business opportuni- ties is expected. Furthermore, resident officers are assigned to Mitsubishi Electric sites in the United States, Europe, China, and Southeast Asia to take charge of IP activities and strengthen the IP capabilities of business offices, R&D centers, and affiliated companies in each country. Through these initia- tives, we strive to create a robust global patent network. As an indication of the Mitsubishi Electric Group's IP capability and global IP activities, the company ranked No.1 in Japan in terms of the number of patent registrations (in 2018) announced by the Japan Patent Office (JPO), and No.2 in the world in terms of Patent Cooperation Treaty (PCT) applications by 20 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 CSR at Mitsubishi Electric Group CSR Management Principles of CSR The Mitsubishi Electric Group regards its corporate social responsibility (CSR) initiatives as the foundation of its corporate management, and upholds its Corporate Mission and Seven Guiding Principles as the basic policies of its CSR. Particularly with respect to initiatives related to ethics and legal compliance, Group-wide efforts are made to enforce measures such as enhancing training and strengthening internal controls. Active measures are also taken to ensure and improve quality assur- ance, environmental preservation activities, philanthropic activities, and communication with stakeholders. Mitsubishi Electric Group's stakeholders To achieve sustainable growth, the Mitsubishi Electric Group must maintain communication with its various stakeholders. We have a corporate social responsibility to reflect the expectations, requests, and opinions of each stakeholder in our corporate activities, and to increase our positive impact on society while reducing any nega- tive impact. To help maintain communication with stakeholders, we have established "Four Satisfactions" as a management policy, with the aim of satisfying all of our stakehold- ers, including society, customers, shareholders, and employees. Stakeholders of the Mitsubishi Electric Group Pursue the Satisfaction of the Four Stakeholder Categories Promotional System for CSR The policies and planning for the CSR activities of the Mitsubishi Electric Group are decided by a CSR Committee appointed by Mitsubishi Electric’s executive officers. The Committee is composed of the heads of Mitsubishi Electric’s man- agement departments (19 members in charge of environmental, social and gov- Main agenda of the CSR Committee (held in April 2019) • Report on achievements made in the previous fiscal year and activities planned in the current fiscal year • Response to the sustainable development goals (SDGs) • Further enhancement of information disclosure by taking into account ernance aspects from divisions such as Corporate Strategic Planning and ESG (environment, social, governance) investment Corporate Human Resources), and discusses the results of activities performed • Human rights initiatives during the previous fiscal year, decisions on future activity plans, and responses • Supply chain management to law amendments, from a perspective that spans the entire Mitsubishi Electric • Long-term environmental vision Group. Knowing that CSR activities are directly linked to corporate management, each department responsible for ethics and legal compliance, quality assurance and improvement, environmental conservation and philanthropy activities, and communication with stakeholders implements their own initiatives, based on the CSR policy of the Mitsubishi Electric Group. In addition to the CSR Committee that is generally held once a year, various activities are also promoted and implemented in communication with the CSR Expert Committee and CSR Business Promotion Committee, which are con- vened as a forum for sharing and executing the policies and plans established by the CSR Committee. CSR Promotion System CSR Committee Chairman: Director in charge of CSR Director-general: General Manager of the Corporate Administration Div. Corporate Administration Div. CSR Promotion Center CSR Expert Committee CSR Business Promotion Committee Departments Afﬁliates in Japan Overseas Afﬁliates MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 21 CSR at Mitsubishi Electric Group CSR Materiality and SDGs Management CSR Materiality Considering requests from the Global Reporting Initiative (GRI)*, social trends and the business envi- ronment, in fiscal 2016 the Mitsubishi Electric Group identified CSR materiality and targets / Key Performance Indicators (KPI) to fulfill the materiality towards realizing the further integration of CSR with management and the long-term advancement of CSR initiatives. We will implement activities to continuously improve our performance related to CSR materiality and targets / Key Performance Indicators (KPI) based on the PDCA (Plan-Do- Check-Action) Cycle approach. * An international body that proposes shared global guidelines for corporate sustainability reporting Initiatives to Address the SDGs The Mitsubishi Electric Group, which is committed to enhancing the quality of life in our society, as stated in our corporate mission, will contribute to accomplishing the 17 goals of the SDGs, through the Group's diverse businesses as well as all corporate activities related to the environment, society and governance (ESG), for solving challenges in society. In fiscal 2019, we decided on goals that we would address on a priority basis to further contrib- ute to the SDGs. • Goal 7: Affordable and Clean Energy • Goal 11: Sustainable Cities and Communities • Goal 13: Climate Action By further promoting initiatives to create value for these goals to which we can contribute signifi- cantly as a comprehensive electrical and electron- ics manufacturer, we will make a specific contribution to achieving the SDGs. In doing this, the Mitsubishi Electric Group will integrate the concept of the SDGs into its manage- ment strategy and contribute to the SDGs that we will prioritize through the CSR materiality initiatives of "Realize a Sustainable Society," and "Provide Safety, Security, and Comfort." 22 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 CSR Materiality and SDGs G: Governance Corporate Governance Basic Corporate Governance Policy While maintaining the flexibility of its operations and promoting management transparency, Mitsubishi Electric, as a Company with Three-committee System, works to strengthen the supervisory functions of management with the goal of realizing sustained growth. Our fundamental policy is to build and improve a cor- porate structure that is more able to meet the expectations of society, customers, shareholders, employees and all of its stakeholders while endeavoring to further increase corporate value. web For the IR Library, please refer to the following: https://www.MitsubishiElectric.com/en/investors/library/index.html Corporate Management and Governance Structure Corporate Management Structure In June 2003, Mitsubishi Electric became a Company with Three-committee System. Key to this structure is the separation of supervisory and executive func- tions; the Board of Directors plays a supervisory decision-making role and Executive Officers handle the day-to-day running of the Company. A salient characteristic of Mitsubishi Electric’s management structure is that the roles of Chairman of the Board, who heads the supervisory function, and the President & CEO, who is head of all Executive Officers, are clearly separated. Additionally, neither is included among the members of the Nomination and Compensation Committees. The clear division of supervisory and executive func- tions allows the Company to ensure effective corporate governance. The present Board of Directors is comprised of twelve members (five of whom are Outside Directors, one of whom is a woman), who objectively supervise and advise the Company’s management by executing their duties based on the objec- tives and authority of the Companies Act, as well as by delegating to Executive Officers the decision authority for executing all operations, except the matters listed in the items of paragraphs 1 and 4 of Article 416 of the Companies Act. The Board of Directors has three internal bodies: the Nomination, Audit and Compensation Committees. Each body has five members, the majority of whom are Outside Directors, who are chosen by the Board of Directors taking into account the experience and specialties of each person. Each Committee under- takes its duties based on the objectives and authority of the Companies Act. The bureaus have been established for the Board of Directors and each of the Committees to support directors. The Audit Committee is supported by dedicated independent staff. Executive Officers make decisions about the execution of operations on mat- ters delegated by the Board of Directors within the range of duties allocated to each Executive Officer based on the objectives and authority of the Companies Act, and then execute such operations. Important items among such matters del- egated by the Board of Directors are deliberated and decided upon in Executive Officers’ meetings attended by all Executive Officers. Internal Control System (1) For the execution of the duties of the Audit Committee, its independence is secured by assigning employees whose job is exclusively to assist the Audit Committee members. In addition, internal regulations regarding the processing of expenses and debts incurred in the execution of the duties of the Audit Committee members are established and such expenses and debts are properly processed. A system for reporting to the Audit Committee is developed to report information about the Company and its subsidiaries to the Audit Committee via the divisions in charge of internal control, and an internal whistle-blower system is developed and its details are reported to the Audit Committee members. Furthermore, the Audit Committee members attend important meetings including Executive Officer meetings and conduct investigations such as inter- views with Executive Officer and the executives of the Company’s offices and subsidiaries, and undertake deliberations to determine audit policies, methods, implementation status, and results of the audit by regularly receiving reports from the Independent Auditor and Executive Officers in charge of audits. (2) Internal regulations and systems to ensure the properness of operations within the Mitsubishi Electric Group are established. Executive Officers take responsibili- ty for constructing such systems within the areas over which they are appointed. Important matters are deliberated by convening Executive Officer meetings. Executive Officers regularly monitor the status of management of the systems. The divisions in charge of internal control monitor the status of design Corporate Governance Framework Decision Making and Execution Executive Ofﬁcers President & CEO Executive Vice President Senior Vice Presidents Executive Ofﬁcers Business/Administration Divisions Report General Shareholders’ Meeting Report Appointment Appointment/Dismissal/Supervision/Delegating the decision authority for executing all operations Report Supervision Board of Directors Chairman s r o t c e r i D Nomination Committee Outside Directors (majority) Audit Committee Outside Directors (majority) Compensation Committee Outside Directors (majority) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 23 CSR at Mitsubishi Electric Group and management of internal control system and regulations. Also an internal whistle-blower system is established and the matters reported thereto are informed to the Audit Committee members. Furthermore, the status of management of the system is audited by internal auditors, and the audit results are reported regularly to the Audit Committee via Executive Officers in charge of audit. - Audit Committee The Audit Committee is made up of five directors, three of whom are outside directors. In accordance with the policies and assignments agreed upon by the Committee, committee members- mainly those from the Audit Committee responsible for investigation- attend Executive Officers’ meetings and other such important conferences, and conduct hearings and surveys of Executive Officers and the executive staff of Mitsubishi Electric offices and affiliated companies. Divisions in charge of internal control including the Corporate Auditing Division, through a responsible Executive Officer, submit reports to the Audit Committee, which holds periodic report meetings to exchange information and discuss poli- cies. In addition, the Audit Committee discusses policies and methods of auditing with accounting auditors, who furnish it with reports on the status and results of the audits of the Company that they themselves conduct. Akihiro Matsuyama, Chairman of the Audit Committee, and Masahiko Sagawa, a member of the Audit Committee, have long years of experience in the account- ing and financial operations of the Company. Kazunori Watanabe, a member of the Audit Committee, is a Certified Public Accountant and has a considerable degree of knowledge about finance and accounting. - Status of Internal Audit Internal audit is intended to contribute to the sound management and strength- ened management structure of Mitsubishi Electric and its affiliated companies in Japan and overseas by improving management efficiency, strengthening risk management, thoroughly observing the code of corporate ethics and ensuring compliance, and enhancing internal control. With approximately 40 members acting independently, Mitsubishi Electric’s Corporate Auditing Division conducts internal audits of the Company from a fair and impartial standpoint. In addition, the division’s activities are supported by auditors with extensive knowledge of their particular fields, assigned from rele- vant business units. Through an Executive Officer in charge of auditing, the Corporate Auditing Division regularly reports the results of such audits to the Audit Committee. Providing Directors with Appropriate Information at the Appropriate Time, and Conducting Reviews of the Board with Analyses and Evaluations To strengthen the Board’s capacity to supervise Company’s management, the bureaus of the Board of Directors and each committee provide the directors with the information necessary for supervising management, in a timely and appropri- ate manner. And, to further improve the Board of Directors’ capacity to supervise management, venues have been established for supplying information to and exchanging views with Outside Directors, and the Company is working to further enhance the provision of management-related information to the Board of Directors itself. Additionally, in order to further enhance the functioning of the Board of Directors, the Board meetings are reviewed on an annual basis, and analyses and evaluations are conducted in the following areas. • Frequency, scheduling, and time spent on the meetings • The information supplied in relation to discussions at the meetings (quality and quantity) and the method of its provision • Materials, details and methods of explanation, question-and-answer guidelines, time apportioned for each proposal on the meetings • Points for improvement of policies based on previous reviews of the Board of Directors • Opinions about and points for improvement in the method for reviewing the Board of Directors,etc. As a result of the Board of Directors review, the Board of Directors was evaluated as making ongoing and effective improvements in response to the results of annual reviews, and achieving even better results every time with respect to sharing timely and appropriate management information with Executive Officers, which is essential for the Board to properly fulfill its business supervisory function. This evaluation in effect endorses the performance of the Board of Directors, but going forward further efforts will be made to improve the performance of the Board of Directors by enhancing the opportunities for exchanging opinions between the supervisory side and executive side and improving the management of the Board of Directors review through conducting individual interviews regard- ing review results and expanding time for opinion exchange. Policies Regarding Decisions on Compensation, etc. 1. Basic Policies (1) As a Company with Three-Committee System, the Company has separate functions for the supervision and execution of business, with the Board of Directors undertaking the business supervisory function, and Executive Officers, the business execution function. Accordingly, Directors and Executive Officers have separate compensation schemes according to the content and responsibilities of their duties. (2) Directors give advice to and supervise the Company’s management from an objective point of view, and therefore, the compensation scheme for Directors is the payment of fixed-amount compensation and the payment of a retire- ment benefit upon resignation. (3) The compensation scheme for the Executive Officers focuses on incentives for the realization of management policies and the improvement of business per- formance, and performance-based compensation will be paid in addition to the payment of fixed-amount compensation and a retirement benefit upon resignation. The basic policies of such performance-based compensation are as follows: 1) Compensation for the improvement of business performance over the mid- to long-term, and that increases awareness regarding contributing to increased corporate value 2) Compensation that is closely linked to the Company’s performance and highly transparent and objective 3) Compensation focused on sharing profits with shareholders and increasing awareness of management that gives weight to shareholder benefits (4) In order to introduce an objective perspective from outside the Company and expert knowledge about the Directors’ and Executive Officers’ compensation scheme, the Company will hire an external remuneration consultant, and with the support of the consultant it will consider the compensation levels and compensation schemes by taking into account external data on the compen- sation of major companies in Japan operating globally, domestic economic environment, industry trends, and the Company’s conditions, etc. 2. Compensation Scheme for Directors and Executive Officers and Policies Regarding Decisions on Compensation, etc. (1) Compensation scheme for Directors 1) Directors will receive their compensation as a fixed amount, and the com- pensation to be paid will be set at a level considered reasonable, while tak- ing into account the contents of the Directors’ duties and the Company’s conditions, etc. • Other mechanisms for improving the functioning of the Board of Directors. 2) Directors will receive the retirement benefit upon resignation, and the retire- 24 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 ment benefit to be paid will be set at a level decided on the basis of the monthly amount of compensation and the number of service years, etc. Outside Directors (2) Compensation scheme for Executive Officers 1) Fixed-amount compensation will be set at a level considered reasonable taking into account the contents of the Executive Officers’ duties and the Company's conditions, etc. 2) Performance-based compensation will be as follows: ∙ The Mitsubishi Electric Group has been pursuing sustainable growth by main- taining Balanced Corporate Management based on three perspectives: growth, profitability and efficiency, and soundness. In line with its efforts to further increase corporate value, the Group has set its growth targets for fis- cal 2021 as consolidated net sales of ¥5.0 trillion or more, and an operating income ratio of 8% or more. The payment base amount for perfor- mance-based compensation will be determined based on the consolidated business performance (Net profit attributable to Mitsubishi Electric Corp. stockholders) while taking into account the Group’s management policy and targets. ∙ The payment amount of each Executive Officer will be determined, within the range of ±20% of the payment base amount while taking into account the performance of the business to which the respective Executive Officer is assigned, etc. ∙ With the purposes of meshing the interests of shareholders with the Executive Officers and further raising management awareness that places importance on the interest of shareholders, and increasing the incentives for the improve- ment of business performance from 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, for the compensation paid in the form of shares, the Company shares will be issued after a three-year waiting period. In addition,The shares are required to continue holding the shares until 1 year has passed from resignation. 3) 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. (3) Decision-making process, etc. Policies regarding decisions on compensation, etc. of Directors and Executive Officers and individual compensation details based on the policies will be made through resolutions by the Compensation Committee, which the majority of the members are Outside Directors. The details of activities of the Compensation Committee will be reported to the Board of Directors each time an activity is performed. Outside Directors The Company has five Outside Directors, each of whom has no special interest with the Company. Although companies in which each of the Outside Directors holds office in or has been a director or officer of include those with trading rela- tionships with the Company, no such relationships have an impact on the inde- pendence of each relevant Outside Directors based on the scale or nature of such trading, and thus they possess no risk of giving rise to any conflict of interest with the general shareholders of the Company. Outside Directors are expected to supervise management from a high-level perspective based on their abundant experience. Those who are comprehensively judged to possess the character, acumen, and business and professional experi- ence suited to fulfill that role, and who satisfy the requirements of independent executives specified by the Tokyo Stock Exchange and the requirements specified in Mitsubishi Electric’s Guidelines on the Independence of Outside Directors (see note at below) and thus possess no risk of giving rise to any conflict of interest with the general shareholders of the company, are selected as Outside Director candidates by the Nomination Committee. Independency Guideline for Outside Directors Mitsubishi Electric Corporation nominates persons with experience in company management in the business world, attorneys and academics, among other specialists, who are appropriate to oversee the Company’s business operations and not falling under any of the following cases, as candidates for Outside Directors. Each of the following 1), 2), 4) and 5) includes a case in any fiscal year during the past three fiscal years. 1. Persons who serve as Executive Directors, Executive Officers, man- agers or other employees (hereinafter ”business executers”) at a company whose amount of transactions with the Company accounts for more than 2% of the consolidated sales of the Company or the counterparty 2. Persons who serve as business executers at a company to which the Company has borrowings that exceed 2% of the consolidated total assets 3. Persons who are related parties of the Company’s independent audi- * For the amount of compensation given to Directors and Executive Officers, please refer to our tor web financial statements. (Only in Japanese) http://www.MitsubishiElectric.co.jp/ir/data/negotiable_securities/ 4. Persons who receive more than ¥10 million of compensation from the Company as specialists or consultants 5. Persons who serve as Executive Officers (Directors, etc.) of an orga- nization to which the Company offers contribution that exceeds ¥10 million and 2% of the total revenue of the organization 6. Persons who are the Company’s major shareholders (holding more than 10% of voting rights) or who serve as their business executers 7. Persons who are related parties of a person or company that have material conflict of interest with the Company In addition, Outside Directors enhance the checking function of management by receiving reports about the activity status of internal auditors, the audit commit- tee, accounting auditors, and divisions in charge of internal control via the Board of Directors, and providing valuable comments regarding Mitsubishi Electric’s management from an objective perspective. By doing this, they bring greater transparency to the management framework and strengthen the Board's function of supervising management. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 25 CSR at Mitsubishi Electric Group Outside Directors (as of June 27, 2019) Title Name Positions Held Reasons for Nomination Outside Director Mitoji Yabunaka Outside Director Hiroshi Obayashi Outside Director Kazunori Watanabe Outside Director Hiroko Koide Outside Director Takashi Oyamada Member of the Nomination Committee Member of the Com- pensation Committee Mr. Yabunaka's experience and insights as an expert in interna- tional affairs cultivated through the course of a career are highly beneficial to Mitsubishi Electric. Mitsubishi Electric thus expects him to bring an objective viewpoint to the overseeing of the Company's business operations. Chairman of the Nomination Committee Member of the Audit Committee Mr. Obayashi's experience and insights cultivated through the course of a career as a lawyer (public prosecutor, attor- ney-at-law) are highly beneficial to Mitsubishi Electric. Mitsub- ishi Electric thus expects him to bring an objective viewpoint to the overseeing of the Company's business operations. Member of the Audit Committee Member of the Com- pensation Committee Mr. Watanabe's experience and insights as a certified public accountant cultivated over the course of his career are highly beneficial to Mitsubishi Electric. Mitsubishi Electric thus expects him to bring an objective viewpoint to the overseeing of the Company's business operations. Member of the Nomination Committee Member of the Com- pensation Committee Ms. Koide's experience and insights as a business specialist cultivated over the course of her career in international corpo- rate management are highly beneficial to Mitsubishi Electric. Mitsubishi Electric thus expects her to bring an objective view- point to the overseeing of the Company's business operations. Board Attendance Rate (FY2019) 100% (7/7) 100% (7/7) 100% (7/7) 100% (7/7) Member of the Nomination Committee Member of the Audit Committee Mr. Oyamada's experience and insights as a business specialist cultivated over the course of his career in bank management are highly beneficial to Mitsubishi Electric. Mitsubishi Electric thus expects him to bring an objective viewpoint to the oversight of the Company's business operations. − Mitsubishi Electric Corporation held seven Board of Directors meetings during fiscal 2019. 26 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Compliance Our Concept of Compliance The Corporate Ethics and Compliance Statement With the Mitsubishi Electric Group Corporate Ethics and Compliance Statement formulated in 2001 as our basic guideline for compliance, the Mitsubishi Electric Group recognizes the importance of ethics and absolute compliance with legal require- ments as a fundamental precondition for the Group’s continued existence. Based on this awareness, we are attempting to perfect a compliance system which promotes compliance in the broadest sense, encompassing the perspective of corporate ethics, rather than merely focusing on following the letter of the law. At the same time, we are working to educate our employees in this area. Compliance with the Law Respect for Human Rights We will conduct ourselves always in compliance with applicable laws and with a high degree of sensitivity to changes in social ethics or local practices. We will never establish a target, nor make a commitment, that can only be achieved with conduct that would violate applicable laws or business ethics or practices. We will conduct ourselves always with a respect for human rights. We will not discriminate based on nation- ality, race, religion, gender, disability, or any other reason prohibited by applicable laws nor will we violate international laws providing protection for individual and human rights or any treaties providing such protec- tion to which the country where any of our companies is located is a party. Contributing to Society Concurrently with the pursuit of a reasonable profit, we will conduct ourselves always with an awareness of our corporate social responsibility in order to further the progress of society as a whole. Collaboration and Harmonization with the Community As a good corporate citizen and neighbor, we will support civic and charitable organizations and activities in the communities where we reside or work that in our view contribute to community development. Consideration of Environmental Issues As part of our goal to achieve a recycling-oriented society, we will pay attention to and respect the global environment in every aspect of our business. Awareness of Personal Integrity We will conduct ourselves with the highest integrity, making a proper distinction between public and pri- vate matters, and we will use company resources—including money, time, and information—for legiti- mate business purposes. We will use company computers and various networks and online services, including e-mail and Internet access, primarily for company business. Mitsubishi Electric Group compliance promotion structures Associated companies in Japan Mitsubishi Electric Corporation Associated companies outside of Japan President Executive Ofﬁcers Meeting Corporate Compliance Committee Legal and regulatory management divisions Compliance Promotion Committee President Group President President Corporate Compliance Ofﬁcers Conference Corporate Compliance Ofﬁcer Head of each division Group Compliance General Manager Group Vice President, head of site Compliance Manager Department Senior Manager Compliance Leader Group Compliance General Manager Conference Compliance Managers Conference Compliance Manager Section Manager Operation site Business unit, branch ofﬁce, manufacturing site, research center Site-Speciﬁc Compliance Promotion Committee Compliance Information Liaison Conference Compliance Promotion Committee Compliance Information Liaison Conference Regional Chief Compliance Ofﬁcer Corporate Compliance Ofﬁcer Regional Compliance Managers Conferences Head of each division Risk Management Risk Management Framework The Mitsubishi Electric Group maintains a multi-dimensional risk management system in which all executive officers participate. Under this system, executive officers are responsible for risk management in their assigned areas of operation. In addition, executive officers exchange infor- mation and participate in important management initiatives and decisions through regularly scheduled executive officers' meetings. In the event an incident occurs that seriously calls into question the Group's social responsibility and is expected to have a profound impact on management, or in the case of such emergencies as large-scale disasters, accidents or pan- demics, a company-wide Emergency Response Center will be established to implement measures under the leadership of the president, to ensure prompt and proper initial response. Risk Management Framework (Mitsubishi Electric Group) Executive Board Company-wide Emergency Response Ofﬁce (emergency situations) Planning Committee Business Council Business Investment Review Committee Risk Review Board Joint Review Commission Regional Corporate Ofﬁces (overseas) Important matters Risk cases Quality / Environment Disasters, etc. Operations departments MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 27 CSR at Mitsubishi Electric Group Information Security Basic Policy The Mitsubishi Electric Group handles confidential corporate and personal infor- mation appropriately as part of its corporate social responsibility to make certain that such sensitive information does not leaked out and cause concern for our customers and society, as can be caused by cyber-attacks or the loss of storage media. The Mitsubishi Electric Group manages confidential corporate information, which includes information on Mitsubishi Electric’s sales, engineering matters and intellectual property, based on the “Declaration of Confidential Corporate Information Security Management” that was established in February 2005. Information that is entrusted to us by our corporate customers is managed and protected in compliance with a non-disclosure agreement, as well as by the same level of security measures that are applied to our own confidential corporate information. Framework and guidelines The President & CEO assigns a Corporate Manager for Confidential Corporate Information Management and Personal Information Protection (hereafter Corporate Manager), who assumes overall responsibility for confidential corpo- rate information management, and an Audit Manager for Personal Information Protection, who is responsible for implementing and reporting the results of per- sonal information audits. The Corporate Manager assumes overall responsibility for information security, and the Corporate Secretariat for Confidential Corporate Information Management and Personal Information Protection (hereafter Corporate Secretariat) under the Corporate Manager is in charge of planning and promoting information security measures. Responsibility for the actual utilization and management of confidential corporate information and personal information lies with the General Manager of each business group (the Confidential Corporate Information Management and Personal Information Protection Manager) and the manager of each business site (office directors, etc.). The Business Group Framework and guidelines President & CEO Audit manager of personal information protection Policy and Instruction Coordination Business group headquarters -Managers (General Managers of business groups) -Secretariat Ofﬁces, branches, works[production plants] -Managers (ofﬁce directors, etc.) -Secretariat I n s t r u c t i o n Corporate manager of conﬁdential corporate information management and personal information protection Principal: Executive Ofﬁcer for General Affairs; Assistant: Executive Ofﬁcer for Information Technology ( Corporate secretariat for conﬁdential corporate information management and personal information protection Corporate Administration Division and Corporate IT Strategy Division ( ( ( Overseas regional representative managers Coordination Afﬁliates in Japan Afﬁliates outside Japan Personal information protection In efforts to protect personal information, Mitsubishi Electric first created com- pany rules on personal information protection in October 2001, and since then it has required all employees and affiliated persons to obey those rules strictly. Mitsubishi Electric issued a personal information protection policy in 2004, complying with the requirements of JIS Q 15001:2006 Personal Information Protection Management Systems. In January 2008, we were granted the right to use the “PrivacyMark,” which certifies the establishment of management sys- tems that ensure proper measures for personal information protection. We have maintained our “PrivacyMark” certification until the present. We have also conducted a review of our internal regulations to ensure a prop- er response to Japan’s amended Act on the Protection of Personal Information, Secretariats and Business Office Secretariats,under the General Manager of each which went into force in May 2017. business group and manager of each business site strive to ensure information security by maintaining close coordination and regularly holding meetings with Information Security Education the Corporate Secretariat. In the event an incident were to occur, reports and instructions would be given in keeping with this framework and appropriate responses taken to prevent sec- ondary damage. Business groups and offices (offices, branches, works [production plants]) issue instructions and guidance on information security to affiliates in and outside Japan. Paying special attention to the circumstances and special characteristics of overseas affiliates, the Corporate Secretariat places overseas regional repre- sentative managers at sites in the Americas, Europe, China, and other Asian countries and coordinates with them to ensure information security. Mitsubishi Electric provides the following education programs to foster a corporate culture that enforces the proper handling of confidential corporate information and personal information. ·Education for all employees An e-learning program on information security is offered once a year to all of the Company’s roughly 50,000 employees, to disseminate thorough knowledge of various issues on information security, including Mitsubishi Electric's policies, the status of information leakage incidents, laws and regulations on the protection of personal information, the Unfair Competition Prevention Act, and security measures (human, physical, technological, and organizational) to be taken by all employees. ·Education corresponding to each career stage Education on confidential corporate information management and personal information protec- tion is provided to new employees, employees in their twenties and thirties, and newly appointed section managers, so that they may fulfill the roles that are expected of them at each career stage. ·Exercises to practice handling phishing e-mails As a measure against cyber-attacks, Mitsubishi Electric regularly conduct exercises that allow all employees, including officers, to verify that they know how to handle phishing e-mails. Employees of affiliates in Japan can participate in this exercise. At overseas affiliates in the Americas, Europe, and China, practice exercises are conducted according to local circumstanc- es under the direction of regional representative managers. ·Other individual training Employees posted overseas are provided with a preliminary education program, which covers risks in confidential corporate information management and personal information protection out- side Japan, examples of information leakage incidents that have occurred overseas, and the global information security situation. 28 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 E: Environment Environmental Vision 2021 Mitsubishi Electric Group is promoting environmental activities aimed toward achieving the Environmental Vision 2021, which is our long-term environmental manage- ment vision established in 2007. The Vision sets 2021 as its target year, coinciding with the 100th anniversary of Mitsubishi Electric's founding. In order to make positive contributions to the earth and its people through technology and action, we are working toward the realization of a sustainable society through our business activities uti- lizing wide-ranging and sophisticated technologies, as well as the promotion of proactive and ongoing actions by our employees. 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 Promote product “3Rs”; reduce, reuse, and recycle Reduce resource inputs Aim for zero emissions from manufacturing Creating a Low-Carbon Society Creating a Recycling-Based Society Respecting Biodiversity Ensuring harmony with nature and fostering environmental awareness Environmental Initiatives and the SDGs Shaping the World of 2030 SDGs Closely Related to Mitsubishi Electric Group Environmental Activities Example 1 Offering Technologies that Contribute to the Conservation of the Aquatic Environment Example 2 Increasing Product Energy Efficiency We have provided ozone generators, which use ozone instead of chlorine to purify water, for nearly 50 years. The ozone generators can be used at water purification and sewage treatment plants, pharmaceutical and chemical plants, and aquari- ums, contributing to the conservation of our aquatic environment. Mitsubishi Electric Group products consume elec- tricity when used. As increased product energy effi- ciency results in less CO2 generated during use, our goal is to develop energy-efficient products. Cultivating Innovation for the Future Great expectations are being placed on corporate innovation to achieve the SDGs and Paris Agreement goals. Mitsubishi Electric set up the Center for Future Innovation in July 2015 to promote open innovation, with future-oriented research and development instead of focusing on prolonging the use of existing technologies. Accelerating the cultivation of innovation in this way, alongside making full use of the strengths of our products and services, will allow us to contribute to the environment across a wide range of fields. 9th Environmental Plan Every three years since 1993, Mitsubishi Electric Group has formulated an environmental plan with specific targets, and has continued to make efforts to improve our environmental management vision on a global scale. In April 2018, in order to achieve the Environmental Vision 2021, we established the 9th Environmental Plan (fiscal 2018–2020) that considers the medium to long-term vision based on the Paris Agreement, as well as future water shortage measures. Furthermore, through this plan, we aim to contribute to achieving seven of the 17 Sustainable Development Goals (SDGs) established by the United Nations that are deeply related to the environment, including “7. Affordable and clean energy” and “13. Climate action.” MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 29 CSR at Mitsubishi Electric Group Major initiatives of the Mitsubishi Electric Group’s 9th Environmental Plan 1. Realizing a Low-carbon Society (1) Reduce CO2 emissions from production and emissions of non-CO2 greenhouse gases (gases such as SF6, PFCs and HFCs), and suppress total annual emis- sions (CO2 equivalent) from 2.66 million tons in the base year*1 to less than 1.47 million tons in fiscal 2021. (2) Improve the energy-saving performance of products and reduce CO2 emis- sions from product usage by 35% on average compared to fiscal 2001. *1 CO2 emissions from production: Mitsubishi Electric, FY1991; affiliates in Japan, FY2001; overseas affili- ates, FY2006.Non-CO2 greenhouse gases: Mitsubishi Electric and affiliates in Japan, FY2001; overseas affiliates, FY2006. 2. Creating a Recycling-based Society (1) Reduce final disposalrate (Japan:below 0.1%;overseas:below0.5%) (2) Make products compact and lightweight, and reduce resource inputs by an average of 40% from fiscal 2001. (3) Reduce water usage per unit of sales by 1% per annum compared to the base year (FY2011). 3. Creating a Society in Tune with Nature (1) Based on our guidelines set in line with the Aichi Targets*2, we will conduct liv- ing creature studies, preserve local species, control non-native species, and maintain green spaces in consideration of the surrounding ecosystem as part of our biodiversity protection activities at all manufacturing bases in Japan. 12,000 participants (cumulative total: 51,000 participants). *2 Global targets adopted at the 10th Meeting of the Conference of the Parties to the Convention of Biological Diversity (COP 10), which was held in Nagoya City, Aichi Prefecture in October 2010. They form the core of the Strategic Plan for Biodiversity 2011-2020. Initiatives for creating a low-carbon society — Reducing CO2 emissions from product usage by improving the energy-saving performance of products— Base year FY2001 0 10 20 30 40 2012 2016 2017 2018 2019 2021 26% 34% 35% 35% 36% 35% Environmental Vision 2021 target (30%) (2) We will continue to hold Mitsubishi Electric Outdoor Classrooms and the Average reduction rate of CO2 emissions (%) Satoyama Woodland Preservation Project in Japan, with the aim of exceeding Initiatives for creating a low-carbon society —Reducing CO2 emissions from production— Total emissions (10,000t-CO2) CO2 emissions*3 Non-CO2 greenhouse gas emissions*4 266 146 120 45% reduction 30% reduction 128 24 104 134 26 108 127 19 108 143 25 118 130 18 113 144 25 119 147 25 122 186 300 250 200 150 100 50 0 *1 Base year for CO2: Mitsubishi Electric, FY1991; affiliates in Japan, FY2001; overseas affiliates, FY2006 Base year for non- CO2 greenhouse gases: Mitsubishi Electric and affiliates in Japan, FY2001; overseas affiliates, FY2006 *2 The emission coefficient for Japan has been calculated based on the figure published by the Federation of Electric Power Companies of Japan at the time of formulation of the 8th Environmental Plan(2013, two nuclear plants in operation). *3 The overseas emission coefficient has been calculated in refer- ence to the figure published by JEMA (2006). *4 The Global Warming Potential (GWP) of non-CO2 greenhouse Base year*1 2016 result 2017 result 2018 result 2019 plan 2019 result 2020 plan 2021 plan Environmental Vision 2021 Target gases has been calculated in reference to the figure published in IPCC’s Second Assessment Report (1995). 8th Environmental Plan *2 9th Environmental Plan web For results of fiscal 2019, please refer to the following: https://www.MitsubishiElectric.com/en/sustainability/environment/report/index.html Challenging to Solve Environmental Issues by 2050 “Environmental Sustainability Vision 2050” Announced (June 2019) The Mitsubishi Electric Group has placed contributing to preser- vation of the environment as an important issue for manage- ment, and its “Environmental Sustainability Vision 2050” stipulates that the Group will commit itself to taking the initiative to solve environmental problems. Our aim in this environmental declaration is to resolve issues related to air, land, and water. We hope that all employees in the Group and those we work with outside of it will passionately take action and work towards creating a sustainable future. 30 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Environmental Sustainability Vision 2050 Environmental Declaration Protect the air, land, and water with our hearts and technologies to sustain a better future for all. To solve various factors that lead to environment issues, the Mitsubishi Electric Group shall unite the wishes of each and every person, and strive to create new value for a sustainable future. 1 Apply diverse technologies in wide-ranging business areas to solve environmental issues Three Environmental Action Guidelines 2 Challenge to develop business innovations for future generations 3 Publicize and share new values and lifestyles S: Social Human rights management The Mitsubishi Electric Group established Policies on Respect for Human Rights in September 2017 and declared its commitment to ensure human rights responses that match international norms. In particular, we are striving to imple- ment measures to prevent and mitigate adverse impacts on human rights. To do so, we are conducting due diligence on human rights in conformance with the UN Guiding Principles on Business and Human Rights, and creating a corrective mechanism in the event it comes to light that a company’s action or involvement has inflicted an adverse impact on human rights. Trend in the number of female employees (main career track) Number of Female Employees Ratio of Female Employees (No.) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (FY) Progress of human rights due diligence and materiality Results of activities in fiscal 2019 1.Human rights impact assessment Mitsubishi Electric assessed and evaluated the impact on human rights related to the Group’s corporate activities for a total of 336 sites, including the internal Mitsubishi Electric offices, domestic affiliated companies, and overseas affiliated companies. We also checked whether the Technical Intern Training Program has been implemented, and whether it is operating according to the law. 2.Efforts regarding human rights in the supply chain Based on the CSR Procurement Guidelines formulated in June 2018, the procurement divi- sions have begun ensuring that when dealing with transaction partners, agreements are reached with regard to social issues, including human rights. 3. Human rights education We provided an e-learning program to 71,588 employees of Mitsubishi Electric and domes- tic affiliated companies. In addition to the human rights impact assessment, we conducted human rights education for employees involved in CSR at Mitsubishi Electric offices and at domestic affiliated companies. Approaches for fiscal 2020 1. Implement human rights risk reduction measures within the Mitsubishi Electric Group To prevent the risks pointed out in the human rights impact assessment conducted in fiscal 2019 from surfacing, we will strengthen our efforts through human rights education, and so on. 2. Human rights efforts in supply chain Ensure that measures that started in fiscal 2019 to consider social issues, such as human rights, in agreements concluded with suppliers, will continue. In addition, we will continue to promote efforts to fully understand human rights violation risks by suppliers. 3. Consider upgrading the system for handling grievances The Mitsubishi Electric Group has multiple inquiry channels that serve as a system for lis- tening to various grievances and questions related to human rights. We aim to raise the per- formance of these channels to meet international standards. Workforce Diversity Basic policy Within today’s rapidly changing workforce environment, providing a workplace where employees can work to their full potential regardless of gender or age is essential to business development. Furthermore, it has become more vital than ever before to employ an even greater diversity of people, given the increasingly aging and diminishing population in Japan. Based on this awareness, Mitsubishi Electric promotes employee diversity through the following measures. Women’s Participation To formulate and implement original measures that would help female employees and employees with children form a career while also enriching their personal lives, Mitsubishi Electric established the CP-Plan* Promotion Center within its Corporate Human Resources Division in April 2006, with a mandate to promote recruitment, training, assignment, and institutional initiatives from a diversified perspective. *Career management & Personal life well-balanced Plan 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Outcomes of the Work Style Reform Three years have passed since Work Style Reform began in fiscal 2017. Through driving the reform based on the four perspectives, the percentage of employees who experienced changes in their work style increased and working hours fell sharply. This reform, therefore, has produced positive outcomes. Percentage of employees who responded that they had a good work-life balance (Employee Attitude Survey) Changes in the number of employees who worked more than 80 hours of overtime a month 2017 2018 2019 （FY） 2016 2017 2018 2019 （FY） Examples of Work Style Reform in the Office More and more employees are feeling that their work style has changed. For example, using laptops in meetings is now an everyday sight. We will continue to foster enhancements in the corporate culture and environment so that all employ- ees can feel the change. Yet Work Style Reform extends beyond just improving operational efficiency. To achieve the reform goal of "creating a workplace envi- ronment in which everyone can maintain physical and psychological health and work in good spirits," we aim to develop a company where every single employee is always aware of the value of improving their work and finds their work fulfilling. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 31 CSR at Mitsubishi Electric Group Supply Chain Management Basic policy procurement officers and other such meetings. Accompanying this initiative, the The Mitsubishi Electric Group ensures fair and impartial selection and evaluation supply chain has also expanded to various countries where the Group operates, of business partners in Japan and overseas by providing an explanation of the so initiatives are also pursued to mitigate any perceived risks regarding a range Group’s Purchasing Policy and CSR Procurement Policy, and requesting business of issues related to labor laws and regulations, and to environmental problems. partners’ understanding of these policies. By ensuring proper evaluation of sup- pliers based on selection and evaluation criteria established by the Group, risks are also mitigated along the supply chain. The Group's criteria for selecting and evaluating suppliers include not only quality, cost, delivery schedules, and services, but also initiatives in response to environmental regulations and CSR initiatives. As a basic policy, the Group prefer- entially procures materials from suppliers who rank high in a comprehensive evaluation. Framework for Promotion of Supply Chain Management The Mitsubishi Electric Group launched the WΣ21II (Worldwide Strategic Integration for Global Markets in the 21st Century Advance to the Next Stage)* activity in April 2017, and is promoting optimal procurement activities suited to each region through the Materials Planning Office. The Materials Planning Office was established in collaboration among regional corporate offices in China, Asia, Europe and Americas to implement purchasing strategies through conferences of * WΣ21II: An initiative of purchasing departments to work toward achieving the Mitsubishi Electric Group’s management goal of reaching net sales of 5 trillion yen and an operating income ratio of 8% or more by 2020. Framework for promotion of supply chain management Mitsubishi Electric Head Ofﬁce Corporate Purchasing Division Purchasing divisions of domestic manufacturing sites and research facilities Cooperation Purchasing divisions of overseas afﬁliated companies (China, Asia, Europe, US) Overseas Materials Planning Ofﬁce Purchasing divisions of domestic afﬁliated companies Quality Management Basic policy each product and are implementing concrete improvement initiatives in relation The Mitsubishi Electric Group is committed to improving its technologies and ser- to quality assurance measures (quality management) for processes at each stage, vices by applying creativity to all aspects of its business, to thereby enhance the from market surveys regarding Mitsubishi Electric products, through product quality of life in our society, as stated in our corporate mission. This commitment planning, development and design, manufacturing, transportation, storage, instal- inherits the principles outlined in the Keys to Management (in Japanese, Keiei no lation, maintenance and servicing, and education, to the disposal of the product. Yotei) with regard to ”our contribution to social prosperity,” ”quality improvement,” In addition, in operating our Quality Management System (QMS), we regularly and ”customer satisfaction,” and forms the basic spirit of our relationship with check our PDCA cycle with reference to ISO and other international certification society and our customers. standards, seeking to realize ever higher quality by process improvement. To give concrete shape to this basic spirit, the Seven Guiding Principles define our actions in response to society and customers. It teaches us to establish rela- tionships based on trust, provide the best products and services with unsur- passed quality, and respond to customer expectations through technology by promoting research and development and pioneering new markets. Executive Ofﬁcer in Charge of Quality Assurance Promotion of Quality Assurance and Improvement Activities President Business Group Business Group General Manager of Business Group General Manager of Business Group Quality Assurance Manager Quality Assurance Manager Executive Ofﬁcers’ Meeting Head Ofﬁce Liaison Committee t n e m t r a p e D g n n n a P l i Corporate Quality Assurance Managers’ Committee Factory Factory Factory Manager Factory Manager Quality Assurance Manager Quality Assurance Manager Individual quality improvement projects and activities Under these principles, we constantly strive to increase customer satisfaction and contribute to social prosperity in all aspects of our business, from the pro- duction of high-quality, easy-to-use products to our after-purchase support and response to major issues. Management system Based on the Four Basic Quality Assurance Principles, we have established a sys- tem for quality assurance and improvement activities throughout the entire Group, including the appointment of a quality assurance promotion manager in all busi- ness group headquarters. We have also formulated quality assurance guidelines to ensure compliance with quality assurance legislation and standards and fur- ther develop quality improvement activities. At the level of management, we also regularly report on the status of quality at meetings of executive officers. Worldwide manufacturing bases take responsibility for the quality assurance of e c n a r u s s A y t i l a u Q e t a r o p r o C 32 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Philanthropic Activities Philosophy and Policies ronment in the vicinity of operational sites with the help of employee volunteers. The Mitsubishi Electric Group shares a common Philosophy and Policies based The Mitsubishi Electric Science Workshop invites children to experience the fun of on its Corporate Mission and Seven Guiding Principles, and carries out a variety science with the aim of nurturing future engineers. In addition to these key activi- of activities accordingly. Philosophy ties undertaken by Mitsubishi Electric, employees at Group affiliates in Japan and overseas are strongly committed to philanthropic activities, participating in As a corporate citizen committed to meeting societal needs and expectations, the various volunteer activities and supporting local social welfare organizations and Mitsubishi Electric Group will make full use of the resources it has at hand to sports teams. contribute to creating an affluent society in partnership with its employees. Policies Foundations • We shall carry out community-based activities in response to societal needs in The Mitsubishi Electric America Foundation and Mitsubishi Electric Thai the fields of social welfare and global environmental conservation. Foundation, both founded in 1991, also carry out various activities in the spirit of • We shall contribute to developing the next generation through activities that the Mitsubishi Electric Group’s Philosophy and Policies. The Mitsubishi Electric support the promotion of science and technology, culture and arts, and sports. America Foundation, with the cooperation of its branches in the United States, helps young people with disabilities to become employed and participate more Community Contributions and Human Resource Development Activities fully in society. The Mitsubishi Electric Thai Foundation, in addition to providing The Mitsubishi Electric SOCIO-ROOTS Fund matching-gift program supports such scholarships to university students and supporting a school lunch program for beneficiaries as social welfare facilities through donations, with the Company grade school students, has been promoting employee-involved volunteer activities making contributions equivalent in value to the donations of employees. The that support education and environmental protection. “Satoyama” Woodland Preservation Project focuses on restoring the natural envi- “Satoyama” Woodland Preservation Project Mitsubishi Electric America Foundation was chosen to receive the “2018 CATALYST AWARD” by the American Association of People with Disabilities (the United States) The Mitsubishi Electric Science Workshop Local Group companies engaging in joint planting activities (Thailand) “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 CORPORATION ANNUAL REPORT 2019 33 CSR at Mitsubishi Electric Group ESG Information Disclosure List (CSR website) President’s Message CSR at Mitsubishi Electric Corporate Strategy Mitsubishi Electric’s Business Segments Initiatives that Contribute to Addressing Social Issuse CSR Management CSR Materiality Initiatives to Address the SDGs Communication with Stakeholders Corporate Governance Compliance Risk Management Our Approach to Information Security R&D/Technology Intellectual Property Communication with Shareholders and Investors Responsibility to Customers Human Rights Labor Practices Supply Chain Management Philanthropic Activities ISO26000 GRI Standard Environmental Reporting Guidelines 2018 Governance Environment Social About the Report Guideline Comparison Table ESG Survey Index Initiatives to Create Value Initiatives Related to the Value Chain Management CSR Materiality and SDGs Management Initiatives/External Evaluation Process of Identification and Review of CSR Materiality Management of CSR Materiality Realize a Sustainable Society Provide Safety, Security, and Comfort Respect Human Rights and Promote the Active Participation of Diverse Human Resources Strengthen Corporate Governance and Compliance on a Continuous Basis Status of Communication Results of Reader Surveys Interviews with Experts Dialogues with Experts Measures for Internal Dissemination For more information related to CSR at the Mitsubishi Electric Group, refer to the following websites: web CSR https://www.MitsubishiElectric.com/en/sustainability/csr/index.html Environment https://www.MitsubishiElectric.com/en/sustainability/environment/index.html About https://www.MitsubishiElectric.com/en/about/index.html Overview of CSR-related information disclosure 34 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Directors and Executive Officers Directors (As of June 27, 2019) Executive Officers (As of April 1, 2019) Masaki Sakuyama ............................Chairman Takeshi Sugiyama Nobuyuki Okuma Akihiro Matsuyama ..........................Chairman of the Audit Committee Masahiko Sagawa ............................Member of the Audit Committee Shinji Harada .................................... Member of the Nomination Committee, Chairman of the Compensation Committee Tadashi Kawagoishi ..........................Member of the Compensation Committee Mitoji Yabunaka ................................ Member of the Nomination Committee, Member of the Compensation Committee Hiroshi Obayashi .............................. Chairman of the Nomination Committee, Member of the Audit Committee, Attorney-at-Law Kazunori Watanabe .......................... Member of the Audit Committee, Member of the Compensation Committee, Certified Public Accountant, Registered Tax Accountant Hiroko Koide ..................................... Member of the Nomination Committee, Member of the Compensation Committee Takashi Oyamada ............................. Member of the Nomination Committee, Member of the Audit Committee, Senior Advisor, MUFG Bank, Ltd. Representative Executive Officers (As of April 1, 2019) Takeshi Sugiyama Yutaka Ohashi Nobuyuki Okuma President & CEO: Takeshi Sugiyama Executive Vice President: Yutaka Ohashi ................................... In charge of Export Control and Information Systems & Network Service Senior Vice Presidents: Nobuyuki Okuma .............................. In charge of Corporate Strategic Planning and Operations of Associated Companies Yasuyuki Ito .......................................In charge of Building Systems Kei Uruma .........................................In charge of Public Utility Systems Hisashi Kato ...................................... In charge of Government & External Relations, Export Control and Intellectual Property Executive Officers: Takashi Nishimura ............................In charge of Communication Systems Masamitsu Okamura ........................In charge of Semiconductor & Device Masahiro Fujita ................................. In charge of IT and Research & Development Satoshi Matsushita ........................... In charge of Global Strategic Planning & Marketing Hiroshi Onishi ................................... In charge of Automotive Equipment Yoshikazu Miyata .............................. In charge of Factory Automation Systems Tadashi Matsumoto .......................... In charge of Living Environment & Digital Media Equipment Jun Nagasawa .................................. In charge of Advertising and Domestic Marketing Shinji Harada .................................... In charge of General Affairs, Human Resources and Public Relations Tadashi Kawagoishi ..........................In charge of Accounting and Finance Takakazu Murozono ......................... In charge of Auditing and Legal Affairs & Compliance Koichi Orito .......................................In charge of Energy & Industrial Systems Juichi Shikata ................................... In charge of Purchasing Yoshihisa Hara ..................................In charge of Electronic Systems Atsuhiro Yabu .................................... In charge of Total Productivity Management & Environmental Programs MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 35 Organization (As of June 27, 2019) Corporate Auditing Div. Corporate Marketing Group Board of Directors Chairman Nomination Committee Audit Committee Compensation Committee Audit Committee Office Executive Officers’ Meeting Corporate Strategic Planning Div. Corporate IT Strategy Div. Associated Companies Div. Government & External Relations Div. Corporate Administration Div. Corporate Human Resources Div. Corporate Accounting Div. Corporate Finance Div. Corporate Purchasing Div. Public Relations Div. Corporate Advertising Div. Corporate Legal & Compliance Div. Corporate Export Control Div. Corporate Licensing Div. Global Strategic Planning & Marketing Group Corporate Total Productivity Management & Environmental Programs Group Corporate Research and Development Group Information Systems & Network Service Group Public Utility Systems Group Energy & Industrial Systems Group Building Systems Group Electronic Systems Group Corporate Intellectual Property Div. Communication Systems Group Living Environment & Digital Media Equipment Group Factory Automation Systems Group Automotive Equipment Group Semiconductor & Device Group 36 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Business Planning Office Market Planning & Administration Dept. Compliance Dept. Marketing Research & Business Development Dept. Olympic and Paralympic Promotion 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 Component Production 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 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. Domestic Marketing Div. Overseas Marketing Div. Building Systems Field Operation Div. Branch Offices Inazawa Works Electronic Systems Compliance Dept. Planning & Administration Dept. High-precision Positioning Systems Dept. Defense Systems Div. Space Systems Div. Integrated Sensing System 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 & Solutions 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. Solution Business Strategy Div. Industrial Products Marketing Div. Industrial Automation Marketing Div. Overseas Marketing 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 Dept. 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, 2019) Manufacturing Sales/Installation/Services Comprehensive Sales Companies Energy and Electric Systems Toyo Electric Corporation Mitsubishi Electric Building Techno-Service Co., Ltd. Mitsubishi Electric Control Panel Corporation 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. Industrial Automation Systems Mitsubishi Elevator Asia Co., Ltd. Mitsubishi Elevator Korea Co., Ltd. Taiwan Mitsubishi Elevator Co., Ltd. Toshiba Mitsubishi-Electric Industrial Systems Corporation Mitsubishi Hitachi Home Elevator Corporation Shanghai Mitsubishi Elevator Co., Ltd. Ryoko Co., Ltd. RYO-SA BUILWARE Co., Ltd. Mitsubishi Elevator Hong Kong Co., Ltd. Mitsubishi Electric Saudi Ltd. Hitachi Mitsubishi Hydro Corporation AG MELCO Elevator Co. L.L.C. DB Seiko Co., Ltd. Mitsubishi Electric Automotive America, Inc. Mitsubishi Electric Thai Auto-Parts Co., Ltd. Mitsubishi Electric Automotive (China) Co., Ltd. Mitsubishi Electric Automotive de Mexico, S.A. de C.V. Mitsubishi Electric Automation Manufacturing (Changshu) Co., Ltd. Setsuyo Astec Corporation Ryowa Corporation Mitsubishi Electric Mechatronics Engineering Corporation Meldas System Engineering Corporation Mitsubishi Electric Mechatronics Software Corporation Mitsubishi Electric Automation (Hong Kong) Ltd. Mitsubishi Electric Dalian Industrial Products Co., Ltd. Mitsubishi Electric Automation Korea Co., Ltd. Shizuki Electric Co., Inc. Nippon Injector Corporation Shihlin Electric & Engineering Corporation SETSUYO ENTERPRISE CO., LTD. Information and Communication Systems Mitsubishi Electric TOKKI Systems Corporation Mitsubishi Electric Information Network Corporation Mitsubishi Precision Co., Ltd. SPC Electronics Corporation Seiryo Electric Co., Ltd. Miyoshi Electronics Corporation Mitsubishi Electric Information Systems Corporation Mitsubishi Space Software Co., Ltd. Mitsubishi Electric Business Systems Co., Ltd. Mitsubishi Electric Micro-Computer Application Software Co., Ltd. Electronic Devices Melco Display Technology Inc. Melco Power Device Corporation Vincotech Holdings S.à r.l. Home Appliances Others 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. Mitsubishi Electric Hydronics & IT Cooling Systems S.p.A. Siam Compressor Industry Co., Ltd. Mitsubishi Electric Air Conditioning Systems Europe Ltd. Kang Yong Electric Public Co., Ltd. Itec Hankyu Hanshin Co., Ltd. Melco Semiconductor Engineering Corporation Mitsubishi Electric Living Environment Systems Corporation Mitsubishi Electric Life Network Co., Ltd. Mitsubishi Electric Air Conditioning & Refrigeration Equipment Sales Co., Ltd. Mitsubishi Electric 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 Chiyoda Mitsubishi Electric Co., Ltd. and other regional comprehensive sales companies (9 companies) Mitsubishi Electric Europe B.V. Mitsubishi Electric US, Inc. Mitsubishi Electric & Electronics (Shanghai) Co., Ltd. Mitsubishi Electric (H.K.) Ltd. Mitsubishi Electric Taiwan Co., Ltd. Mitsubishi Electric Asia Pte. Ltd. Mitsubishi Electric Australia Pty. Ltd. Ryoden Trading Co., Ltd. Kanaden Corporation Mansei 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. Consolidated subsidiaries are shaded in , while equity method companies are shaded in . 3. As of the end of March 2019, the number of consolidated subsidiaries and equity method companies are 206 and 37, respectively. MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 37 38 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 Financial Section Contents 40 Five-Year Summary 41 Financial Review 56 Consolidated Statement of Financial Position 58 Consolidated Statement of Profit or Loss 59 Consolidated Statement of Comprehensive Income 60 Consolidated Statement of Changes in Equity 62 Consolidated Statement of Cash Flows 63 Notes to Consolidated Financial Statements 126 Independent Auditors’ Report 表紙 39 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries Years ended March 31 U.S. GAAP Yen (millions) IFRS 2015 2016 2017 2018 2018 2019 U.S. dollars (thousands) IFRS 2019 Revenue Operating profit ¥ 4,323,041 ¥ 4,394,353 ¥ 4,238,666 ¥ 4,431,198 ¥ 4,444,424 ¥ 4,519,921 $ 40,720,009 317,604 301,172 270,104 318,637 327,444 290,477 2,616,910 Profit before income taxes 322,968 318,476 296,249 364,578 353,206 315,958 2,846,468 Net profit attributable to Mitsubishi Electric Corp. stockholders 234,694 228,494 210,493 271,880 255,755 226,648 2,041,874 Cash flows from operating activities 378,313 366,677 365,950 240,450 265,768 239,817 2,160,514 Cash flows from investing activities (198,163) (255,443) (148,632) (178,219) (182,015) (210,668) (1,897,910) Free cash flows 180,150 111,234 217,318 62,231 83,753 29,149 262,604 Cash flows from financing activities (49,623) (82,144) (123,495) (128,291) (149,813) (112,067) (1,009,613) Dividends paid 42,936 57,963 57,963 68,696 68,696 85,871 773,613 Capital expenditures (Based on the recognized value of property, plant and 194,458 177,801 175,542 181,513 181,513 198,442 1,787,766 equipment) Depreciation 156,205 145,249 141,584 154,559 153,161 152,315 1,372,207 R&D expenditures 195,314 202,922 201,330 210,308 210,308 212,794 1,917,063 Cash and cash equivalents 568,517 574,170 662,469 599,199 599,199 514,224 4,632,649 Bonds and borrowings 381,994 404,039 352,124 311,485 311,950 298,438 2,688,631 Mitsubishi Electric Corp. stockholders' equity Total assets Per Share Amounts: Earnings per share attributable to Mitsubishi Electric Corp. stockholders (Yen/U.S. dollars) Basic Diluted Cash dividends declared (Yen/U.S. dollars) Mitsubishi Electric Corp. stockholders' equity (Yen/U.S. dollars) Financial Ratios: Operating profit ratio (%) Return on revenue (%) Return on equity (ROE) (%) Return on assets (ROA) (%) Mitsubishi Electric Corp. stockholders' equity ratio (%) Bonds and borrowings to total assets (%) 1,842,203 1,838,773 2,039,627 2,259,355 2,294,174 2,399,946 21,621,135 ¥ 4,059,451 ¥ 4,059,941 ¥ 4,172,270 ¥ 4,264,559 ¥ 4,305,580 ¥ 4,356,211 $ 39,245,144 ¥ 109.32 ¥ 106.43 ¥ 98.07 ¥ 126.70 ¥ 119.19 ¥ 105.65 $ ― 27 ― 27 ― 27 ― 40 119.19 105.65 40 40 0.952 0.952 0.360 ¥ 858.11 ¥ 856.52 ¥ 950.37 ¥ 1,052.96 ¥ 1,069.19 ¥ 1,118.83 $ 10.080 7.3 5.4 13.9 6.1 45.4 9.4 6.9 5.2 12.4 5.6 45.3 10.0 6.4 5.0 10.9 5.1 48.9 8.4 7.2 6.1 12.6 6.4 53.0 7.3 7.4 5.8 11.7 6.0 53.3 7.2 6.4 5.0 9.7 5.2 55.1 6.9 ― ― ― ― ― ― ― ― ― Employees (at the end of the year) 129,249 135,160 138,700 142,340 142,340 145,817 Total Shareholder Return (%) 　 (Comparison Index： Nikkei stock average) (%) 125.3 129.5 106.2 113.0 144.4 127.5 156.8 144.7 156.8 144.7 136.3 143.0 1. The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) from the year ended March 31, 2019 and also for the fiscal year ended March 31, 2018 as comparative information. 2. R&D expenditures include elements spent on quality improvements which constitute manufacturing costs. 3. Diluted earnings per share attributable to Mitsubishi Electric Corp. stockholders is equal to Basic earnings per share attributable to Mitsubishi Electric Corp. stockholders under IFRS, as no dilutive securities existed. 4. U.S. dollar amounts are translated from yen at the rate of ¥111= U.S.$1, the approximate rate on the Tokyo Foreign Exchage Market on March 31, 2019. 40 Five-Year Summary Five-Year SummaryMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019OVERVIEW During the fiscal year ended March 31, 2019, the economy saw a buoyant expansion in the U.S. and a slight slowdown in the Chinese economy, while there were gradual trends of recovery in Japan and Europe despite a recent slowdown in some indicators such as export and production. In addition, the yen, compared to the previous fiscal year, was substantially unchanged against the U.S. dollar, and remained strong against the euro in and after August. 　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, the Mitsubishi Electric Group has recorded revenue of ¥4,519.9 billion and consolidated operating profit of ¥290.4 billion for fiscal 2019. In addition profit before income taxes was ¥315.9 billion and net profit attributable to Mitsubishi Electric Corp. stockholders was ¥226.6 billion. Revenue Revenue of ¥4,519.9 billion was recorded for fiscal 2019, an increase of ¥75.4 billion compared to the previous fiscal year. This was due to increased revenue mainly in the Energy and Electric Systems, Industrial Automation Systems and Home Appliances segments. Operating Profit The cost of sales increased by ¥96.4 billion compared to the previous fiscal year to ¥3,186.8 billion, representing 70.5% of total revenue, a deterioration of 1.0 percentage point. Selling, general and administrative (SG&A) expenses totaled ¥1,043.2 billion, up ¥21.9 billion year on year. As a result, the ratio of SG&A expenses to revenue deteriorated by 0.1 of a percentage point year on year to 23.1%. Other profit (loss) totaled ¥0.7 billion, an improvement of ¥5.8 billion year on year. 　Accounting for the aforementioned factors, operating profit amounted to ¥290.4 billion, a decrease of ¥36.9 billion compared to the previous fiscal year. This decrease was primarily attributable to decreases in operating profit in the Industrial Automation Systems and Electronic Devices business segments. Profit Before Income Taxes Financial income amounted to ¥9.7 billion, an increase of ¥1.1 billion year on year, and financial expenses totaled ¥4.3 billion, a decrease of ¥2.4 billion year on year. Share of profit of investments accounted for using the equity method totaled ¥20.1 billion, a decrease of ¥3.8 billion compared to the previous fiscal year. 　Accounting for the aforementioned factors, profit before income taxes decreased by ¥37.2 billion compared to the previous fiscal year to ¥315.9 billion, for a ratio to revenue of 7.0%. Net Profit Attributable to Mitsubishi Electric Corp. Stockholders Net profit attributable to Mitsubishi Electric Corp. stockholders decreased by ¥29.1 billion year on year to ¥226.6 billion (a ratio to revenue of 5.0%) largely on the back of a decrease in profit before income taxes. OVERVIEW 41 Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Business Risks The Mitsubishi Electric Group (hereinafter “the Group”) is involved in development, manufacturing and sales in a wide range of fields including Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices and Home Appliances, and these operations extend globally, not only inside Japan, but also in North America, Europe, Asia and other regions. While the statements herein are based on certain assumptions and premises that the Group trusts and considers to be reasonable under the circumstances on the date of announcement, actual financial standings and operating results are subject to change due to any of the factors as contemplated hereunder and/or any additional factor unforeseeable as of the date of this announcement. Such factors materially affecting the expectations expressed herein shall include but are not limited to the following: (1)　Important trends The 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 the Group’s sales of exported products and purchases of imported 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 a decline in value of the Group’s marketable securities and 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 material prices due to a worsening of material and component procurement conditions, may adversely affect the Group’s performance. (5)　Fund raising An increase in interest rates, the yen interest rate in particular, would increase the Group’s interest expenses. (6)　Significant patent matters Important patent filings, licensing, copyrights and patent-related disputes may adversely affect related businesses. (7)　Environmental legislation or relevant issues The Group may incur losses or expenses owing to changes in environmental legislation or the occurrence of environmental issues. Such changes in legislation or the occurrence of environmental issues may also impact manufacturing and all corporate activities of the Group. (8)　Flaws or defects in products or services The Group may incur losses or expenses resulting out of flaws or defects in products or services, and the lowered reputation of the quality of all its products and services may affect the entire Group. (9)　Litigation and other legal proceedings The Group’s operations may be affected by lawsuits or other legal proceedings against Mitsubishi Electric, its subsidiaries and/or equity-method associates and joint ventures. (10) Disruptive changes Disruptive changes in technology, development of products using new technology, timing of production and market introduction may adversely affect the Group’s performance. (11) Business restructuring The Group may record losses due to restructuring measures. (12) Information security The performance of the 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 Group’s operations, particularly manufacturing activities, may be affected by the occurrence of earthquakes, typhoons, tsunamis, fires and other large-scale disasters. (14) Other significant factors The 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. 42 OVERVIEW Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019RESULTS BY BUSINESS SEGMENT Revenue by Business Segment Years ended March 31 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations Consolidated total U.S. GAAP Yen (millions) IFRS 2015 2016 2017 2018 2018 2019 U.S. dollars (thousands) IFRS 2019 ¥ 1,228,958 ¥ 1,264,604 ¥ 1,227,906 ¥ 1,241,952 ¥ 1,253,062 ¥ 1,296,745 $ 11,682,387 1,282,749 1,321,937 1,310,136 1,444,928 1,444,928 1,467,633 13,221,919 559,521 561,119 447,754 436,068 438,184 426,269 3,840,261 238,402 944,830 740,517 4,994,977 (671,936) 202,294 1,049,369 764,346 5,138,957 (707,759) ¥ 4,323,041 ¥ 4,394,353 ¥ 4,238,666 ¥ 4,431,198 186,554 1,004,415 713,603 4,890,368 (651,702) 211,580 982,064 707,746 5,049,050 (654,697) 202,294 1,049,369 659,059 5,046,896 (602,472) 199,908 1,074,044 676,736 5,141,335 (621,414) ¥ 4,444,424 ¥ 4,519,921 1,800,973 9,676,072 6,096,721 46,318,333 (5,598,324) $ 40,720,009 Operating Profit by Business Segment Years ended March 31 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Subtotal Eliminations and Corporate Consolidated total U.S. GAAP Yen (millions) IFRS 2015 2016 2017 2018 2018 2019 U.S. dollars (thousands) IFRS 2019 ¥ 72,448 ¥ 50,342 ¥ 44,319 ¥ 51,710 ¥ 65,457 ¥ 82,501 $ 743,252 145,982 159,160 140,073 190,826 187,350 142,563 1,284,351 18,934 30,163 54,296 23,742 345,565 14,999 16,870 63,856 23,620 328,847 12,700 8,382 69,696 23,214 298,384 11,987 14,554 56,057 23,900 349,034 11,340 14,164 55,496 24,034 357,841 12,247 1,442 59,451 24,172 322,376 110,333 12,991 535,595 217,766 2,904,288 (27,961) (27,675) (28,280) (30,397) (30,397) (31,899) (287,378) ¥ 317,604 ¥ 301,172 ¥ 270,104 ¥ 318,637 ¥ 327,444 ¥ 290,477 $ 2,616,910 Energy and Electric Systems The social infrastructure systems business remained substantially unchanged in orders compared to the previous fiscal year, while revenue increased compared to the previous fiscal year due primarily to increases in the transportation systems business inside and outside Japan and the power systems business in Japan. 　The building systems business remained substantially unchanged in both orders and revenue compared to the previous fiscal year, experiencing a decrease in the new installation of elevators and escalators in China and buoyant growth in the renewal business in Japan and other factors. 　As a result, revenue for this segment increased by 3% from the previous fiscal year to 1,296.7 billion yen. Operating profit increased by 17.0 billion yen from the previous fiscal year to 82.5 billion yen due primarily to an increase in revenue. Industrial Automation Systems The factory automation systems business saw decreases in both orders and revenue from the previous fiscal year due primarily to a decrease in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, despite buoyant demand in Japan. 　The automotive equipment business saw increases in both orders and revenue from the previous fiscal year due primarily to increases in Japan, Europe and other markets in Asia, as well as increased revenue in electric-vehicle related equipment in response to market growth worldwide. 　As a result, revenue for this segment increased by 2% from the previous fiscal year to 1,467.6 billion yen. Operating profit decreased by 44.7 billion yen from the previous fiscal year to 142.5 billion yen due primarily to a shift in product mix, increases in material prices and upfront investment for growth drivers. RESULTS BY BUSINESS SEGMENT 43 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Information and Communication Systems The telecommunications systems business saw decreases in both orders and revenue compared to the previous fiscal year due primarily to decreased demand in communications infrastructure equipment. 　The information systems and service business remained substantially unchanged in orders, while revenue increased compared to the previous fiscal year owing to an increase in the system integrations business. 　The electronic systems business saw a decrease in orders compared to the previous fiscal year mainly due to a decrease in the space systems business, while revenue experienced a decrease compared to the previous fiscal year due primarily to a decrease in the defense systems business. 　As a result, revenue for this segment decreased by 3% from the previous fiscal year to 426.2 billion yen. Operating profit increased by 0.9 billion yen from the previous fiscal year to 12.2 billion yen due primarily to a shift in project portfolios. Electronic Devices The electronic devices business saw a decrease in orders and revenue fell by 1% from the previous fiscal year to 199.9 billion yen mainly due to decreased demand for optical communication devices. 　Operating profit decreased by 12.7 billion yen from the previous fiscal year to 1.4 billion yen due primarily to a decrease in revenue and a shift in product mix. Home Appliances The home appliances business saw a 2% increase in revenue from the previous fiscal year to 1,074.0 billion yen due to increases in revenue of air conditioners for Japan, Europe and North America. 　Operating profit increased by 3.9 billion yen compared to the previous fiscal year to 59.4 billion yen due primarily to an increase in revenue. Others Revenue increased by 3% compared to the previous fiscal year to 676.7 billion yen mainly due to an increase in revenue at affiliated companies involved in logistics. 　Operating profit increased by 0.1 billion yen from the previous fiscal year to 24.1 billion yen due primarily to an increase in revenue. 44 RESULTS BY BUSINESS SEGMENT Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019RESULTS BY GEOGRAPHIC SEGMENT Revenue from external customers by the location of customers Years ended March 31 2015 2016 2017 2018 2018 2019 U.S. GAAP Yen (millions) IFRS U.S. dollars (thousands) IFRS 2019 Japan North America Asia (excluding Japan) Europe Others ¥ 2,512,357 ¥ 2,521,194 ¥ 2,405,552 ¥ 2,423,626 ¥ 2,438,942 ¥ 2,556,644 $ 23,032,829 398,501 959,540 360,668 91,975 447,578 963,684 369,978 91,919 422,259 417,423 419,121 429,451 3,868,928 940,150 1,075,683 1,089,176 1,013,883 9,134,081 384,075 86,630 431,316 83,150 431,316 65,869 453,748 4,087,820 66,195 596,351 Consolidated total ¥ 4,323,041 ¥ 4,394,353 ¥ 4,238,666 ¥ 4,431,198 ¥ 4,444,424 ¥ 4,519,921 $ 40,720,009 Japan Revenue increased by 5% year on year to ¥2,556.6 billion primarily due to increases in the social infrastructure systems, automotive equipment and air conditioner businesses. North America Despite a decrease in the automotive equipment business, revenue increased by 2% year on year to ¥429.4 billion primarily due to increases in the social infrastructure systems, factory automation systems and air conditioner businesses. Asia (excluding Japan) Revenue decreased by 7% year on year to ¥1,013.8 billion primarily due to decreases in the factory automation systems, electronic devices and air conditioner businesses. 　In China, revenue decreased by 11% year on year to ¥486.4 billion primarily due to decreases in the social infrastructure systems, electronic devices and air conditioner businesses. Europe Revenue increased by 5% year on year to ¥453.7 billion primarily due to increases in the social infrastructure systems, automotive equipment and air conditioner businesses. Others Revenue in other regions, including Oceania, was flat year on year at ¥66.1 billion. RESULTS BY GEOGRAPHIC SEGMENT 45 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019RESEARCH AND DEVELOPMENT R&D Expenditures Years ended March 31 Energy and Electric Systems Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Consolidated total R&D expenditures /revenue (％) U.S. GAAP Yen (billions) IFRS 2015 2016 2017 2018 2018 2019 U. S. dollars (millions) IFRS 2019 ¥ 31.4 ¥ 33.7 ¥ 35.5 ¥ 35.4 ¥ 35.4 ¥ 34.7 $ 312.9 70.5 16.3 10.9 37.3 28.6 70.8 18.9 10.6 39.8 28.7 66.4 18.2 10.0 41.1 29.7 69.5 17.9 13.4 41.8 32.2 69.5 17.9 13.4 41.8 32.2 70.8 15.3 14.1 43.8 33.9 638.1 138.4 127.1 394.9 305.7 ¥ 195.3 ¥ 202.9 ¥ 201.3 ¥ 210.3 ¥ 210.3 ¥ 212.7 $ 1,917.1 4.5 4.6 4.7 4.7 4.7 4.7 － As the cornerstone of its growth strategy, the Mitsubishi Electric Group will promote short-, medium-, and long-term R&D themes in a balanced manner. In addition to promoting development toward strengthening current businesses and achieving innovation, the Group is striving to create further value through synergy of technologies and businesses by leveraging the Group’s diverse technologies and businesses, while also working to realize sustainable growth through the development of future technologies. To support these efforts, the Group is developing common basic technologies that are the source of the competitive advantages of the Group’s products, on a continuous basis. Furthermore, the Group will promote enhancement of efficiency of development through proactive utilization of open innovation in collaboration with universities and other external R&D institutions. During fiscal 2019, the total R&D expenses for the entire Group have amounted to 212.7 billion yen (1% increase compared to the previous fiscal year). The main R&D achievements for each business segment are as follows. In the Energy and Electric Systems segment, our research is directed at boosting the competitiveness of core products, including such rotating machinery as generators and electric motors; such power transmission/distribution equipment and systems as switchgears and transformers; 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. The R&D expenditures for these fields were 34.7 billion yen and the main achievements are as follows. 1) Gas-insulated Switchgear Technologies for Electric Power Applications The Group has developed two technologies for gas-insulated switchgears: an arc-cooling technology that achieves a 25 percent improvement in the interruption of electrical current in sulfur-hexafluoride (SF6 *1) gas-insulated switchgears used in high-voltage power systems, and a high-density dielectric coating technology that improves insulation performance by 30 percent in high-voltage conductors. The two technologies will contribute to the further miniaturization of switchgears and help to reduce the use of SF6 gas, which has a high global-warming potential. 2) Train Information Monitoring and Analysis System “TIMA” for Railway Companies The Group has developed a system that makes full use of IoT technology, allowing visualization and analysis of information on trains in service collected by the Group’s brand new Train-control Information Management System. The new system makes full use of big-data to contribute to improvement of passenger service, faster responses to operational problems, as well as optimization of the timing of inspection and parts replacement for extra-safe and reliable train operations. 3) Passive Rope-sway Control Device for Elevators in High-rise Buildings The Group has developed a device that passively controls rope sway when high-rise building elevator sway due to strong winds or long-period earthquakes. By enabling elevators to continue operating under such conditions, the new device will help to stabilize elevator operations and contribute to greater user convenience. 46 RESEARCH AND DEVELOPMENT Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019In 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 control equipment; mechatronics equipment; industrial robots; automotive electric and electronic components, including electric power steering (EPS) and related products; car multimedia systems; and automated driving, accident avoidance, and driving assistance systems. The R&D expenditures for these fields were 70.8 billion yen and the main achievements are as follows. 1) MELIPC Series Industrial-use Computers The Group has developed a total of five MELIPC series industrial-use computer models for FA control applications and edge computing: the flagship MI5000, two MI3000 models, which are panel computers with integrated touch screens, the midrange MI2000 and the compact, low-cost MI1000. By collecting real-time data from the production area, linking it with IT systems and allowing the visualization of various types of data, the computers enable the introduction of IoT to the factory floor, thus helping to improve productivity. 2) Driver Monitoring System (DMS) The Group has installed the functionality of individual-recognition judgment in DMS, which uses a camera to monitor both the driver and the front passenger. By identifying each individual, the onboard HMI (Human Machine Interface) and the device settings can be optimized for the users. This contributes to peace-of-mind, safety and convenience by providing comfortable driving environments. In the Information and Communication Systems segment, the Group pursues research related to the development of information and communications infrastructure, network solutions equipment, and space systems. The R&D expenditures for these fields were 15.3 billion yen and the main achievements are as follows. 1) “MMS-G” Mobile Mapping System The Group has developed the new version of mobile mapping system (MMS), a highly precise 3D mobile measuring system used to create high-definition 3D maps for autonomous driving and infrastructure inspections. This version is now more compact and lightweight, making it easy to transport, install and remove, suited to various measuring purposes, including mounted on automobiles, railways, ships or carts etc. 2) Mitsubishi Communication Gateway for IoT Systems “Extended-temperature IoT GW” The Group has developed the new Extended-Temperature IoT GW that can be installed horizontally. Based on the standard IoT GW commercialized in 2017, while keeping the wireless WAN (Wide Area Network) communication feature and SD card slot, the operating temperature has been extended to 55 degrees C. 3) Electronic Signature Cloud Service “MELSIGN” The Group developed a function that enables online signature and tamper detection for electronic medical documents using the HPKI (Healthcare Public Key Infrastructure) card, and launched the service as the electronic signature cloud service “MELSIGN.” 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. The R&D expenditures for these fields were 14.1 billion yen and the main achievements are as follows. 1) High-Performance Power Semiconductor Modules The Group has developed “MISOP,” a surface-mount package IPM equipped with the latest 7th generation Si chip that supports reflow soldering, as well as the “3.3kV full SiC power module” that contributes to loss reduction and downsizing of inverter systems. 2) Optical and High Frequency Devices for 5th Generation Mobile Communication System Base Stations The Group has developed the optical communication device “25 Gbps EML CAN” that contributes to achieving high- speed, high-capacity and low-power consumption of mobile communication systems, and the “ultra-wideband digitally controlled GaN amplifier,” one device capable of supporting multiple frequency bands. RESEARCH AND DEVELOPMENT 47 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019In the Home Appliances segment, the Group 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. The R&D expenditures for these fields were 43.8 billion yen and the main achievements are as follows. 1) Mitsubishi Room Air Conditioner “Kirigamine FZ Series” The “Kirigamine FZ Series” provides even more comfort and an improved energy saving feature through the updated “Automatic AI Mode,” which automatically switches to the optimal mode of operation and style of air flow by predicting changes in temperature and humidity about to occur in the room. The Mitsubishi room air conditioner “Kirigamine FZ Series” has won the 1st Eco Pro Awards and the 2018 Energy Conservation Grand Prize for its improved energy saving features. 2) Lightweight High Dust-Absorbing Cordless Stick Vacuum Cleaner The Group has developed the cordless stick vacuum cleaner HC-JXH “iNSTICK ZUBAQ” equipped with the high performance brushless DC blower motor “JC Motor,” that despite its small size, achieves high power through 125 thousand revolutions per minute while still keeping industry-leading high efficiency*2. By equipping the “JC Motor,” the stick vacuum cleaner achieves both high dust absorption performance and weight reduction. In the area of cutting-edge R&D, the Group has been promoting R&D for cutting-edge technology in order to create customer value by solving social issues. The R&D expenditures for these fields were 33.9 billion yen and the main achievements are as follows. 1) New Dot Forming Technology that Achieves High-precision Three-dimensional Metal Shaping The Group has developed a unique dot forming technology that realizes high-precision shaping by combining laser, computer numerical control and computer aided manufacturing CAM*3 technologies in 3D printers. The technology produces high-quality three-dimensional parts with few voids at high speed, employing a laser wire DED*4 method. With this new technology, the shape accuracy has improved by 60% (in-house comparison) compared to that of conventional consecutive forming technology. 2) High-performance Injection-molded-resin Slotted Waveguide Array Antenna The Group has developed*5 a slotted waveguide array antenna made of injection-molded resin that uses a manufacturing approach that combines resin-molding and plating. The antenna achieves industry-leading performance*6 thanks to its proprietary structure, as well as being lightweight and low-cost. The Group is now working to commercialize the antenna for use in a wide range of fields, such as weather radar, air traffic control radar, surface observation radar, and satellite communication antennas. 3) Seamless Speech Recognition Technology Using its proprietary Maisart*7 AI technology, the Group developed “Seamless Speech Recognition,” the world’s first*8 technology capable of highly accurate multilingual speech recognition without being informed which language is being spoken. The technology can understand multiple people speaking either the same or different languages simultaneously. 4) Interpolation Technology for 3D Measurement Data The Group has developed technology that complements missing sections of measurement data in order to utilize the measurement data from 3D scanners in the design phase. This technology facilitates the design of maintenance parts by making it possible to use computers to accurately extract the dimensions of other companies’ older equipment whose drawings cannot be procured. *1　Sulfur hexafluoride. It has a high environmental impact with a global warming potential 22,800 times higher than CO2 *2　According to the Company’s research on April 5, 2018, targeting applications in household cordless cleaner *3　CAM (Computer Aided Manufacturing): A technology that uses input three-dimensional shape data to perform all production preparations, such as the creation of processing programs, on a computer *4　DED (Directed Energy Deposition): An additive-manufacturing process that uses focused thermal energy to fuse materials as they are deposited, and add layer by layer to solidify. *5　The development received support from the Japan Science and Technology Agency’s A-STEP program under a project entitled “Development of a novel resin ridge waveguide antenna with eminent low sidelobe” *6　As of January 25, 2019, in comparison to conventional patch array antenna (based on the Company’s research) *7　Mitsubishi Electric’s AI creates the State-of-the-ART in technology Mitsubishi Electric’s AI technology brand aimed at making every device smarter *8　As of February 13, 2019 (based on the Company’s research) 48 RESEARCH AND DEVELOPMENT Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 FINANCIAL POSITION Total assets as of the end of this fiscal year increased from the end of the previous fiscal year by 50.6 billion yen to 4,356.2 billion yen. The change in the balance of total assets was mainly due to increases in the balance of inventories by 82.8 billion yen, in contract assets by 26.7 billion yen, and in trade receivables by 15.5 billion yen, while cash and cash equivalents decreased by 84.9 billion yen. 　Total liabilities decreased from the end of the previous fiscal year by 63.3 billion yen to 1,845.0 billion yen. The outstanding balances of bonds and borrowings decreased by 13.5 billion yen from the end of the previous fiscal year to 298.4 billion yen, resulting in a decline in the ratio of bonds and borrowings to total assets to 6.9%, representing a 0.3 point decrease compared to the end of the previous fiscal year. Meanwhile, trade payables decreased by 19.9 billion yen, and contract liabilities decreased by 15.0 billion yen. 　Mitsubishi Electric Corporation stockholders’ equity increased by 105.7 billion yen compared to the end of the previous fiscal year to 2,399.9 billion yen. The stockholders’ equity ratio was recorded at 55.1%, representing a 1.8 point increase compared to the end of the previous fiscal year. The changes referred to above primarily resulted from an increase from recording a net profit attributable to Mitsubishi Electric Corporation stockholders of 226.6 billion yen, despite a decrease due to dividend payment of 85.8 billion yen and a decrease in other comprehensive income of 45.6 billion yen reflecting a fall in stock prices and the stronger yen. FINANCIAL POSITION 49 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019CAPITAL EXPENDITURES Years ended March 31 2015 2016 2017 2018 2018 2019 U.S. GAAP Yen(millions) IFRS U.S.dollars (thousands) IFRS 2019 Energy and Electric Systems ¥ 36,119 ¥ 39,456 ¥ 39,574 ¥ 30,861 ¥ 30,861 ¥ 27,165 $ 244,730 Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others Commons 54,238 20,850 21,363 40,258 7,312 14,318 54,653 17,366 15,458 31,448 3,300 16,120 60,233 16,599 9,485 36,295 4,122 9,234 68,376 17,522 17,197 32,849 4,758 9,950 68,376 17,522 17,197 32,849 4,758 9,950 79,257 21,925 21,072 31,199 7,437 10,387 714,027 197,522 189,838 281,072 67,000 93,577 Consolidated total ¥ 194,458 ¥ 177,801 ¥ 175,542 ¥ 181,513 ¥ 181,513 ¥ 198,442 $ 1,787,766 * The data above are based on the recognaized value of property, plant and equipment. In line with its policy of improving performance by implementing the Balanced Corporate Management Policy and pursuing sustainable growth, the Mitsubishi Electric Group aims to realize its growth strategies as it increases profitability. To that end, the Group directed its capital investment mainly toward the areas of energy and electric systems, factory automation equipment, automotive equipment, power devices, and air conditioning equipment. At the same time the Group continued to reinforce its solid business platform through the careful selection and concentration of investments. 　On an individual business segment basis, investments were made in Energy and Electric Systems (including power systems, electric equipment for rolling stock, and elevators/escalators) aimed at streamlining operations, and enhancing quality. In Industrial Automation Systems, capital expenditures were used primarily for boosting production capacity for factory automation systems and automotive equipment operations. In Information and Communication Systems, funds were appropriated for bolstering research and development capabilities,and streamlining operations, 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 fiscal year ended March 31, 2019, cash flows from operating activities was ¥239.8 billion, while cash flows from investing activities was ¥210.6 billion. As a result, free cash flow was an inflow of ¥29.1 billion, down ¥54.6 billion compared to the previous fiscal year. Taking this into account along with other factors, including cash flows from financing activities of ¥112.0 billion, fiscal year-end cash and cash equivalents amounted to ¥514.2 billion, a decrease of ¥84.9 billion year on year. 　Net cash provided by operating activities decreased by ¥25.9 billion compared to the previous fiscal year. This downturn was largely attributable to a decrease in net profit and an increase in contract assets, despite a decrease in the payments made for trade payables. 　Net cash used in investing activities increased by ¥28.6 billion year on year, due mainly to a decrease in proceeds from sale of investment securities. 　Net cash used in financing activities decreased by ¥37.7 billion year on year, due mainly to an increase in proceeds from bonds and long-term borrowings, despite an increase in dividend payments. 50 CAPITAL EXPENDITURES、CASH FLOWS Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Capital Resources and Funding Liquidity It is the policy of the Mitsubishi Electric Group to secure procurement capacity of funds for growth, while maintaining a solid balance sheet. 　The main component within the need for working funds is operating expenses such as costs for purchasing necessary materials for production, manufacturing costs and selling, general and administrative expenses. The need for funds for investment is due to components such as capital expenditure and M&As. 　Short-term working funds are derived from cash on hand and short-term borrowings from financial institutions. Capital expenditure and long-term working funds are derived from long-term borrowings from financial institutions and issuance of corporate bonds while utilizing cash on hand. 　At the end of fiscal 2019, the balance of cash and cash equivalents totaled ¥514.2 billion and the balance of bonds and borrowings totaled ¥298.4 billion. In detail, short-term borrowings totaled ¥55.5 billion, issuance of corporate bonds and long-term borrowings totaled ¥220.3 billion and lease obligations totaled ¥22.4 billion. In addition, the Group had unused committed lines of credit that can provide short-term funds from subscribing financial institutions amounting to ¥82.7 billion. Capital Resources and Funding Liquidity 51 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Status of Stocks Held 1) Criteria and Approach on Classification of Stocks for Investment With regard to the classification of stocks for investment held for pure investment purposes and stocks for investment held for purposes other than pure investment purposes, the Company classifies stocks held solely for profit purposes from changes in the stock value or dividends on stock as pure investment. There are no stocks held solely for pure investment. 2) Stocks for Investment Held for Purposes Other Than Pure Investment Purposes a. The Holding Policy, and the Method for Verifying the Reasonableness of Holding and the Outline of the Verifications Regarding the Propriety of Individually Held Stocks at the Meetings of the Board of Directors and others. The Company holds stocks that are determined to be necessary for business operations, taking into consideration maintaining and strengthening relationships with business partners. The Company comprehensively judges whether or not stocks held are significant, from the viewpoint of their profitability, bussiness feasibility, holding risks, etc., aspects which are verified and confirmed yearly in the Executive Officers’ meeting and in the Board of Directors’ meeting. Furthermore, the Company performs verifications with regard to profitability, as to whether the income gained from related businesses and total dividends received are reaching a level above the capital cost, with regard to business feasibility whether there are not any significant changes in business relationships or amounts of transactions, etc., and with regard to holding risks, whether the corporate value of the investee has fallen or not. When stocks are thus judged to have a low holding significance, the Company considers reduction such as by selling them, taking into consideration the situation of the concerned company. Based on the results of the above verifications, the Company sold a part of its held stocks in the current fiscal year. b. Number of Issues and Amount on the Balance Sheet Number of issues (issues) Total amount on the balance sheet (millions of yen) Unlisted stocks Stocks other than unlisted stocks 188 127 13,172 189,840 (Issues whose number of shares increased in the current fiscal year) Number of issues (issues) Total purchase price for the increased number of shares (millions of yen) Reasons for the increased number of shares Unlisted stocks Stocks other than unlisted stocks 3 9 395 534 Number of shares increased due to acquisition of shares with the aim of maintaining and strengthening business relationships Number of shares increased due to acquisition of shares with the aim of maintaining and strengthening business relationships (Issues whose number of shares decreased in the current fiscal year) Number of issues (issues) Total selling price for the decreased number of shares (millions of yen) Unlisted stocks Stocks other than unlisted stocks 17 10 452 7,016 Note: The figures in the table above are on a non-consolidated basis of the Company. 52 Status of Stocks Held Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019c. Number of Shares of Specified Investment Stocks and Deemed Stockholdings per Issue and the Amount on the Balance Sheet, and others Specified Investment Stocks Fiscal Year Ended March 31, 2018 Fiscal Year Ended March 31, 2019 Issue Number of shares (thousands of shares) Amount on the Statement of Balance Sheet (millions of yen) Number of shares (thousands of shares) Amount on the Statement of Balance Sheet (millions of yen) Shares held by each company Renesas Electronics Corporation SUZUKI MOTOR CORPORATION Central Japan Railway Company East Japan Railway Company Mitsubishi Heavy Industries, Ltd. Mitsubishi Materials Corporation Mitsubishi Estate Company, Limited Shimadzu Corporation Shin-Etsu Chemical Co., Ltd. RYOYO ELECTRO CORPORATION TAKEBISHI CORPORATION TACHIBANA ELETECH CO., LTD. The Kansai Electric Power Company, Incorporated Mitsubishi Research Institute, Inc. Citizen Watch Co., Ltd. TEIKOKU ELECTRIC MFG. CO., LTD. Hankyu Hanshin Holdings, Inc. Mitsubishi Logistics Corporation SOHGO SECURITY SERVICES CO., LTD. JEOL Ltd. Mitsubishi Gas Chemical Company, Inc. Keisei Electric Railway Co., Ltd. THE SHIZUOKA BANK, LTD. AGC Inc. RYOBI LIMITED The Chugoku Electric Power Company, Incorporated KDDI CORPORATION Tohoku Electric Power Company, Incorporated 75,706 4,105 770 958 1,394 1,458 2,003 1,250 406 2,246 2,340 1,921 1,957 902 3,523 2,286 551 733 455 2,000 1,133 440 2,033 441 660 1,161 632 1,056 81,006 23,524 15,512 9,448 5,679 4,668 3,602 3,741 4,475 3,891 4,027 4,048 2,676 3,026 2,692 3,571 2,177 1,656 2,393 1,958 2,888 1,440 2,045 1,942 1,849 1,488 1,717 1,500 75,706 4,105 770 958 1,394 1,458 2,003 1,250 406 2,246 2,340 1,921 1,957 902 4,317 2,286 551 733 455 1,000 1,133 441 2,033 441 660 1,161 632 1,056 38,761 No 20,108 19,812 10,232 6,410 4,262 4,017 4,001 3,774 3,635 3,306 3,195 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 3,194 No 3,017 2,664 2,569 2,290 2,264 2,193 1,992 1,789 1,772 1,714 1,711 1,639 1,603 1,508 1,491 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No Status of Stocks Held 53 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Specified Investment Stocks Fiscal Year Ended March 31, 2018 Fiscal Year Ended March 31, 2019 Issue Number of shares (thousands of shares) Amount on the Statement of Balance Sheet (millions of yen) Number of shares (thousands of shares) Amount on the Statement of Balance Sheet (millions of yen) Shares held by each company Sekisui House, Ltd. Tokyo Electric Power Company Holdings, Incorporated NIPPON STEEL & SUMITOMO METAL CORPORATION Keikyu Corporation JFE Holdings, Inc. OSAKA GAS CO., LTD. 749 1,924 643 663 640 509 Mitsubishi Chemical Holdings Corporation 1,399 Keio Corporation KAGA ELECTRONICS CO., LTD. Mazda Motor Corporation KYOEI SANGYO CO., LTD. AISAN TECHNOLOGY CO., LTD. Chubu Electric Power Company, Incorporated SEIBU HOLDINGS INC. YAMADA DENKI CO., LTD. NARASAKI SANGYO CO., LTD. AEON CO., LTD. SUMITOMO CORPORATION Sumitomo Mitsui Trust Holdings, Inc. EDION Corporation TAISEI CORPORATION TODA CORPORATION PIONEER CORPORATION Kirin Holdings Company, Limited Oi Electric Co., Ltd. SEIKA CORPORATION K’S HOLDINGS CORPORATION Mebuki Financial Group, Inc. * 500 710 558 350 * 419 1,485 2,096 * 448 * 597 * * 27,886 1,592 2,472 286 259 1,818 1,454 789 1,504 1,226 1,373 1,069 1,441 * 1,380 998 1,092 1,100 * 776 947 842 * 803 * 739 * * 4,908 4,511 830 762 762 743 749 1,924 643 664 640 509 1,399 147 500 710 558 350 478 419 1,485 419 318 448 150 597 109 820 - - * * * * 1,372 1,347 No No 1,257 Yes 1,247 No 1,203 Yes 1,112 No 1,090 1,052 1,016 879 877 846 827 812 810 788 737 686 596 577 561 557 - - * * * * Yes Yes No No Yes No No No No Yes No Yes Yes No Yes Yes No Yes Yes Yes No Yes 54 Status of Stocks Held Financial ReviewMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Notes: 1 As it involves trade secrets, the Company will not disclose the quantitative effect of stocks held. However, the Company comprehensively judges whether or not stocks held are significant, from the viewpoint of each issue’s profitability, feasibility, holding risks, etc., aspects which are verified and confirmed yearly in the Executive Officers’ meeting and in the Board of Directors’ meeting. Furthermore, we perform verifications with regard to profitability, as to whether the income gained from related businesses and total dividends received are reaching a level above the capital cost, with regard to business feasibility whether there aren’t any significant changes in business relationships or amounts of transactions, etc., and with regard to holding risks, whether the corporate value of the investee has fallen or not. 2 “-” signifies that the Company does not own shares of the issue. 3 “*” signifies that the figures are not displayed because the amount on the balance sheet of the issue is less than 1/100 of the Company’s capital amount and the issue’s amount on the balance sheet is less than the top 50 issues displayed. 4 The meaning of “Yes” in the “Shares held by each company” column includes shares held by operating subsidiaries under holding companies. 5 NIPPON STEEL & SUMITOMO METAL CORPORATION has changed its company name to NIPPON STEEL CORPORATION as of April 1, 2019. 6 The figures in the table above are on a non-consolidated basis of the Company. Deemed Stockholdings The Company has contributed own shares to an employee retirement benefit trust, of which the Company has the power to instruct exercise of voting rights. Fiscal Year Ended March 31, 2018 Fiscal Year Ended March 31, 2019 Issue Number of shares (thousands of shares) Amount on the Statement of Balance Sheet (millions of yen) Number of shares (thousands of shares) Amount on the Statement of Balance Sheet (millions of yen) Shares held by each company Mitsubishi Corporation Odakyu Electric Railway Co., Ltd. Mitsubishi UFJ Financial Group, Inc. OBIC Co., Ltd. Tokio Marine Holdings, Inc. Mitsubishi Estate Company, Limited Mitsubishi Heavy Industries, Ltd. TIS Inc. Central Japan Railway Company NTT DOCOMO, INC. 17,768 12,908 44,121 2,160 3,219 6,390 2,408 1,598 219 1,625 50,852 27,790 30,752 19,116 15,244 11,492 9,810 6,731 4,408 4,414 17,768 12,908 44,121 2,160 3,219 6,390 2,408 1,598 219 1,625 54,618 34,632 24,266 24,105 17,262 12,815 11,072 8,378 5,630 3,983 Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Notes: 1 In regard to the quantitative effects of stocks held, as part of management of the trust accounts for retirement benefits, the Company makes sure that there are stable yields to investments, to be used as a source of payment of retirement benefits in the future. 2 The meaning of “Yes” in the “Shares held by each company” column includes shares held by operating subsidiaries under holding companies. 3 The figures in the table above are on a non-consolidated basis of the Company. Status of Stocks Held 55 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries The date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 Notes Date of transition to IFRS (April 1, 2017) Yen (millions) U.S. dollars (thousands) 2018 2019 2019 (Assets) Cash and cash equivalents ¥ 662,469 ¥ 599,199 ¥ 514,224 $ 4,632,649 Trade receivables 7,28,30 899,678 922,667 938,264 Contract assets 23,28,30 255,788 268,862 295,652 Other financial assets Inventories Other current assets 8,28 9 39,801 47,581 48,768 559,902 646,262 729,098 6,568,450 90,919 98,164 98,287 885,468 8,452,829 2,663,532 439,351 Current assets 2,508,557 2,582,735 2,624,293 23,642,279 Investments accounted for using the equity method 13 187,358 194,308 197,959 1,783,414 Other financial assets Property, plant and equipment Goodwill and intangible assets Deferred tax assets Other non-current assets Non-current assets Total assets 8,28 10,12 11,12 14 19 390,579 363,171 303,834 699,478 724,257 760,540 124,582 132,960 137,615 273,485 242,698 233,087 53,991 65,451 98,883 2,737,243 6,851,712 1,239,775 2,099,883 890,838 1,729,473 1,722,845 1,731,918 15,602,865 ¥ 4,238,030 ¥ 4,305,580 ¥ 4,356,211 $ 39,245,144 56 Consolidated Statement of Financial Position Consolidated Statement of Financial PositionMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Notes Date of transition to IFRS (April 1, 2017) Yen (millions) U.S. dollars (thousands) 2018 2019 2019 (Liabilities) Bonds and borrowings 15,17,28 ¥ 146,355 ¥ 122,895 ¥ 104,969 $ 945,667 Trade payables Contract liabilities Other financial liabilities Accrued expenses Accrued income taxes Provisions Other current liabilities 18,30 23,30 16,28 14 20 19 635,083 579,566 559,641 150,610 153,922 138,877 169,993 165,346 159,579 248,358 261,392 268,651 26,295 33,179 24,298 130,183 117,357 106,006 59,422 54,592 54,314 5,041,811 1,251,144 1,437,649 2,420,279 218,901 955,009 489,315 Current liabilities 1,566,299 1,488,249 1,416,335 12,759,775 Bonds and borrowings 15,17,28 227,756 189,055 193,469 Net defined benefit liabilities Provisions Deferred tax liabilities Other non-current liabilities Non-current liabilities Total liabilities (Equity) Common stock Capital surplus Retained earnings 19 20 14 21 21 21 203,034 171,520 176,087 11,284 12,862 49,832 5,856 9,137 44,544 6,905 10,164 42,096 1,742,964 1,586,369 62,207 91,568 379,243 504,768 420,112 428,721 3,862,351 2,071,067 1,908,361 1,845,056 16,622,126 175,820 175,820 175,820 1,583,964 198,745 199,442 202,834 1,827,333 1,593,660 1,811,348 1,960,466 17,661,856 Accumulated other comprehensive income (loss) 14,19, 21,28 101,166 109,492 63,809 574,856 Treasury stock, at cost 21 (1,228) (1,928) (2,983) (26,874) Mitsubishi Electric Corp. stockholders' equity 2,068,163 2,294,174 2,399,946 21,621,135 Non-controlling interests 98,800 103,045 111,209 1,001,883 Total equity 2,166,963 2,397,219 2,511,155 22,623,018 Total liabilities and equity ¥ 4,238,030 ¥ 4,305,580 ¥ 4,356,211 $ 39,245,144 Consolidated Statement of Financial Position 57 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2018 and 2019 Revenue Cost of sales Selling, general and administrative expenses Other profit (loss) Operating profit Financial income Financial expenses Share of profit of investments accounted for using the equity method Profit before income taxes Income taxes Net profit Net profit attributable to: Notes 2018 Yen (millions) 2019 U.S. dollars (thousands) 2019 23,30 ¥ 4,444,424 ¥ 4,519,921 $ 40,720,009 9,10,11, 17,19 10,11, 17,19 3,090,449 3,186,869 28,710,532 1,021,361 1,043,294 9,399,045 12,24,28 (5,170) 719 6,478 25 25 13 14 327,444 290,477 2,616,910 8,611 6,796 9,747 4,382 87,811 39,477 23,947 20,116 181,224 353,206 315,958 2,846,468 86,807 78,304 705,441 266,399 237,654 2,141,027 Mitsubishi Electric Corp. stockholders 27 255,755 226,648 2,041,874 Non-controlling interests ¥ 10,644 ¥ 11,006 $ 99,153 Earnings per share (attributable to Mitsubishi Electric Corp. stockholders) Basic Diluted 27 ¥ 119.19 ¥ 105.65 $ 0.952 Yen U.S. dollars 27 119.19 105.65 0.952 58 Consolidated Statement of profit or loss Consolidated Statement of Profit or LossMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2018 and 2019 Net profit ¥ 266,399 ¥ 237,654 $ 2,141,027 Notes 2018 Yen (millions) 2019 U.S. dollars (thousands) 2019 Other comprehensive income (loss), net of tax Items that will not be reclassified to net profit Changes in fair value of financial assets measured at fair value through other comprehensive income Remeasurements of defined benefit plans Share of other comprehensive income of investments accounted for using the equity method 28 19 13 (52) (39,284) (353,910) 21,323 12,234 110,216 170 (995) (8,964) Total items that will not be reclassified to net profit 21,441 (28,045) (252,658) Items that may be reclassified to net profit Exchange differences on translating foreign operations 16,992 (6,756) (60,865) Net changes in the fair value of cash flow hedges Share of other comprehensive income of investments accounted for using the equity method Total items that may be reclassified to net profit Total other comprehensive income (loss) 28 13 26 (71) (37) (333) 1,869 (2,645) (23,828) 18,790 (9,438) (85,026) 40,231 (37,483) (337,684) Comprehensive income 306,630 200,171 1,803,343 Comprehensive income attributable to: Mitsubishi Electric Corp. stockholders 294,710 189,306 1,705,460 Non-controlling interests ¥ 11,920 ¥ 10,865 $ 97,883 Consolidated Statement of Comprehensive Income 59 Consolidated Statement of Comprehensive IncomeMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2018 and 2019 2018 Mitsubishi Electric Corp. stockholders’ equity Accumulated other comprehensive income (loss) Retained earnings Treasury stock, at cost Yen (millions) Total Non-controlling interests Total equity Notes Common stock Capital surplus Balance at beginning of year Comprehensive income Net profit Other comprehensive income (loss), net of tax Comprehensive income Reclassification to retained earnings Dividends Purchase of treasury stock Disposal of treasury stock Transactions with non- controlling interests and others 26 8, 19 22 ¥ 175,820 ¥ 198,745 ¥ 1,593,660 ¥ 101,166 ¥ (1,228) ¥ 2,068,163 ¥ 98,800 ¥ 2,166,963 255,755 255,755 10,644 266,399 38,955 38,955 1,276 40,231 ― ― 255,755 38,955 ― 294,710 11,920 306,630 30,629 (30,629) ― ― (68,696) (68,696) (7,085) (75,781) 0 697 (700) 0 (700) 0 697 (700) 0 107 (590) Balance at end of year ¥ 175,820 ¥ 199,442 ¥ 1,811,348 ¥ 109,492 ¥ (1,928) ¥ 2,294,174 ¥ 103,045 ¥ 2,397,219 2019 Mitsubishi Electric Corp. stockholders’ equity Accumulated other comprehensive income (loss) Retained earnings Treasury stock, at cost Yen (millions) Total Non-controlling interests Total equity Notes Common stock Capital surplus Balance at beginning of year Comprehensive income Net profit Other comprehensive income (loss), net of tax Comprehensive income Reclassification to retained earnings Dividends Purchase of treasury stock Disposal of treasury stock Transactions with non- controlling interests and others 26 8, 19 22 ¥ 175,820 ¥ 199,442 ¥ 1,811,348 ¥ 109,492 ¥ (1,928) ¥ 2,294,174 ¥ 103,045 ¥ 2,397,219 226,648 226,648 11,006 237,654 (37,342) (37,342) (141) (37,483) ― ― 226,648 (37,342) ― 189,306 10,865 200,171 8,341 (8,341) (85,871) ― (85,871) (1,055) 0 (1,055) 0 (5,872) ― (91,743) (1,055) 0 3,392 3,171 6,563 0 3,392 Balance at end of year ¥ 175,820 ¥ 202,834 ¥ 1,960,466 ¥ 63,809 ¥ (2,983) ¥ 2,399,946 ¥ 111,209 ¥ 2,511,155 60 Consolidated Statement of Changes in Equity Consolidated Statement of Changes in EquityMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 20192019 Mitsubishi Electric Corp. stockholders’ equity Accumulated other comprehensive income (loss) Retained earnings Treasury stock, at cost U.S. dollars (thousands) Total Non-controlling interests Total equity Notes Common stock Capital surplus Balance at beginning of year Comprehensive income Net profit Other comprehensive income (loss), net of tax Comprehensive income Reclassification to retained earnings Dividends Purchase of treasury stock Disposal of treasury stock Transactions with non- controlling interests and others 26 8, 19 22 $ 1,583,964 $ 1,796,774 $ 16,318,451 $ 986,414 $ (17,369) $ 20,668,234 $ 928,333 $ 21,596,567 2,041,874 2,041,874 99,153 2,141,027 (336,414) (336,414) (1,270) (337,684) ― ― 2,041,874 (336,414) ― 1,705,460 97,883 1,803,343 75,144 (75,144) ― ― (773,613) (773,613) (52,901) (826,514) 0 30,559 (9,505) (9,505) 0 0 (9,505) 0 30,559 28,568 59,127 Balance at end of year $ 1,583,964 $ 1,827,333 $ 17,661,856 $ 574,856 $ (26,874) $ 21,621,135 $ 1,001,883 $ 22,623,018 Consolidated Statement of Changes in Equity 61 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries Years ended March 31, 2018 and 2019 Cash flows from operating activities Net profit Adjustments to cash flows from operating activities Depreciation and amortization Impairment losses Loss (gain) from sales and disposal of property, plant and equipment, net Income taxes Share of profit of investments accounted for using the equity method Financial income and financial expenses Decrease (increase) in trade receivables Decrease (increase) in contract assets Decrease (increase) in inventories Decrease (increase) in other assets Increase (decrease) in trade payables Increase (decrease) in net defined benefit liabilities Increase (decrease) in other liabilities Others, net Subtotal Interest and dividends received Interest paid Income taxes paid Cash flows from operating activities 2018 Yen (millions) 2019 U.S. dollars (thousands) 2019 ¥ 266,399 ¥ 237,654 $ 2,141,027 177,272 4,202 (1,122) 86,807 176,247 2,645 369 78,304 (23,947) (20,116) (1,815) (19,274) (13,074) (82,975) (16,348) (57,717) (12,003) (651) (5,915) 299,839 26,611 (2,617) (58,065) 265,768 (5,365) (13,949) (26,831) (82,718) (3,981) (20,792) (11,692) (29,713) 8,843 288,905 24,788 (2,428) (71,448) 239,817 1,587,811 23,829 3,324 705,441 (181,224) (48,333) (125,667) (241,721) (745,207) (35,865) (187,315) (105,333) (267,685) 79,667 2,602,749 223,315 (21,874) (643,676) 2,160,514 Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of intangible assets Purchase of investment securities, net of cash acquired Proceeds from sale of investment securities, net of cash disposed Others, net Cash flows from investing activities (186,792) (188,042) (1,694,072) 3,005 (22,400) (8,518) 35,194 (2,504) 4,170 (29,985) (13,304) 11,824 4,669 37,568 (270,135) (119,856) 106,523 42,062 (182,015) (210,668) (1,897,910) Cash flows from financing activities Proceeds from bonds and long-term borrowings Repayment of bonds and long-term borrowings Increase (decrease) in short-term borrowings, net Dividends paid to Mitsubishi Electric Corp. stockholders Purchase of treasury stock Disposal of treasury stock Dividends paid to non-controlling interests Transactions with non-controlling interests Cash flows from 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 20,180 (64,186) (27,496) (68,696) (700) 0 (7,613) (1,302) 77,604 (100,496) (2,077) (85,871) (1,055) 0 (6,617) 6,445 (149,813) (112,067) 2,790 (63,270) 662,469 (2,057) (84,975) 599,199 699,135 (905,369) (18,712) (773,613) (9,505) 0 (59,613) 58,063 (1,009,613) (18,532) (765,541) 5,398,190 ¥ 599,199 ¥ 514,224 $ 4,632,649 62 Consolidated Statement of Cash Flows Consolidated Statement of Cash FlowsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Mitsubishi Electric Corporation and Subsidiaries 1．Reporting entity 　Mitsubishi Electric Corporation (“the Company”) is an entity located in Japan. The consolidated financial statements of the Mitsubishi Electric Group ("the Group") comprises the Company, its subsidiaries and equity in the Company’s associates and joint ventures. 　The Group is a multinational organization which develops, manufactures, sells and distributes a broad range of electrical and electronic equipment in the fields as diverse as home appliances to 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. The Group’s manufacturing operations are c o n d u c t e d p r i n c i p a l l y b y t h e C o m p a n y w i t h 2 3 manufacturing sites located in Japan, as well as overseas manufacturing sites located in Thailand, China, the United States, Mexico, Italy and other countries. 2．Basis of preparation (1) Statement of consolidated financial statements in accordance with IFRS 　 T h e G r o u p p r e p a r e s i t s c o n s o l i d a t e d f i n a n c i a l statements in accordance with International Financial Reporting Standards (“IFRS”) since the Group meets all the requirements of a “specified international accounting standard company” in Article 1-2 of the Ordinance of the Ministry of Finance No. 28 of 1976, “Ordinance on T e r m i n o l o g y , F o r m s a n d P r e p a r a t i o n M e t h o d s o f Consolidated Financial Statements”, and therefore Article 93 of that Ordinance applies to the Group. 　The Group has applied IFRS from the year ended March 31, 2019. The date of transition to IFRS is April 1, 2017. Note “34. First-time adoption” describes how the transition to IFRS affected the Group's reported financial position, financial performance and cash flows at the date of transition to IFRS and in the comparative consolidated fiscal years. 3．Significant accounting policies (1) Basis of consolidation (a) Subsidiary 　Subsidiaries are entities that are controlled by the Company. The Company determines that it controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 　The subsidiary's financial statements are included in the consolidation from the date the Company gains control to the date when it ceases to control the subsidiary. 　When the accounting policies used by a subsidiary differ from those of the Group, the subsidiary’s financial statements are adjusted as necessary. The balances of receivables and payables among consolidated companies, inter-company transactions, and unrealized gains and losses arising from inter-company transactions are eliminated upon preparation of the consolidated financial statements. 　Changes in the ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. 　If there are changes in the ownership interest in a subsidiary that result in a loss of control, the gains or losses resulting from the loss of control are recognized in profit or loss. (b) Associates and joint ventures 　Associates are entities over which the Company has significant influence, but not control or joint control in terms of its financial and operating policies. (2) Basis of measurement 　The consolidated financial statements of the Group are prepared using a historical cost basis except for certain financial instruments, defined benefit obligations, and plan assets that are measured at fair value and other items as described in Note “3. Significant accounting policies.” (3) Functional currency and presentation currency 　The consolidated financial statements of the Group are presented in Japanese yen, which is the Company’s functional currency, rounded down in units of millions of yen. In addition, for the convinience of the readers, amounts in United States dollars at the rate of ￥111=U.S. $1, which was the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market at the end of March 2019, is also presented. 　Joint ventures are investees where two or more parties including the Company share the contractually agreed control over economic activities and have rights to the net asset of the investees under a joint arrangement which requires the unanimous consent of the parties sharing control when strategic financing and operating decisions related to these activities are made. 　Investments in associates and joint ventures are accounted for using the equity method from the date when significant influence or joint control is obtained to the date when it is lost. 　When the accounting policies applied by associates and joint ventures differ from those applied by the Group, the associates and joint ventures’ financial statements are adjusted as necessary. 　Gains or losses on discontinuation of application of the equity method resulting from the loss of significant influence on or joint control over associates and joint ventures are recognized in profit or loss. (2) Business combinations 　Business combinations are accounted for by applying the acquisition method. 　Consideration for an acquisition is measured at the aggregate of the fair value of assets transferred and liabilities assumed, in exchange for control over an acquiree, and equity instruments issued by the Company and its consolidated subsidiaries as of the date when control was obtained. 63 注記、Reporting entity、Basis of preparation、Significant accounting policies Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 　Non-controlling interests are measured at fair value or at the net identifiable assets multiplied by the ratio of non- controlling interest as of the date when control was obtained, for each individual business combination. 　If the aggregate of consideration for the acquisition, recognized amount of the non-controlling interest and the fair value as of the date when control was obtained of any interest in the acquiree held before the date when control was obtained exceeds the fair value of the identifiable assets and liabilities, this excess is recognized as goodwill in the Consolidated Statement of Financial Position. If the aggregate is less than the fair value of the identifiable assets and liabilities, this deficiency amount is recognized immediately in profit or loss in the Consolidated Statement of Profit or Loss. 　Acquisition-related costs are accounted for as expenses when incurred. (3) Foreign currency translation (a) Foreign currency transactions 　Foreign currency transactions are translated into the functional currencies of the Company and its consolidated subsidiaries at the exchange rates at the date of the transactions. 　Foreign currency monetary assets and liabilities at the end of the year are translated into functional currencies at the exchange rate at the end of the year. 　Foreign currency non-monetary assets and liabilities measured at fair value are translated into functional currencies using the exchange rate at the date when the fair value was measured. 　The exchange differences arising from translation or settlement are recognized in profit or loss. However, financial assets measured through other comprehensive income and exchange differences arising from the effective part of qualifying cash flow hedges are recognized in other comprehensive income. (b) Financial statements of a foreign operation 　Assets and liabilities of a foreign operation are translated into Japanese yen at the exchange rate at the end of the year and, unless there are significant changes in foreign exchange rates, income and expenses of a foreign operation are translated into Japanese yen at the average exchange rate prevailing during the year. Exchange differences arising on the translation of the financial statements of a foreign operation are recognized in other comprehensive income. Cumulative exchange differences on translating a foreign operation are reclassified to profit or loss if a foreign operation is disposed and control, significant influence and joint control are lost. (4) Financial instruments (a) Non-derivative financial assets 　The Company and its consolidated subsidiaries classify non-derivative financial assets as financial assets measured at amortized cost or financial assets measured at fair value through profit or loss or other comprehensive income. This classification is determined at initial recognition. Among financial assets, equity and debt instruments are initially recognized on the commitment date and all other financial assets are initially recognized on the date of the transaction. 　Among non-derivative financial assets, trade receivables recognized in accordance with IFRS 15 are initially measured at the transaction price, while others are initially measured at fair value (after adding transaction costs directly attributable to the financial assets). (i) Financial assets measured at amortized cost 　Financial assets are classified as financial assets measured at amortized cost if both of the following conditions are met: - the financial assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. 　Financial assets measured at amortized cost are measured at the initial recognition amount plus or minus accumulated amortization using the effective interest method, adjusting allowance for credit losses. (ii) Financial assets measured at fair value 　Financial assets that are not measured at amortized cost are measured at fair value. Financial assets measured at fair value are classified in the following categories according to the objective of holding the financial assets: - Financial assets measured at fair value through other comprehensive income 　Equity instruments which are held primarily to maintain and strengthen business relationships are designated as financial assets measured at fair value through other comprehensive income. 　Changes in fair value after initial recognition of financial assets measured at fair value through other c o m p r e h e n s i v e i n c o m e a r e r e c o g n i z e d i n o t h e r comprehensive income. However, dividends from financial assets measured at fair value through other comprehensive income are recognized as financial income in profit or loss. When these financial assets are derecognized, cumulative gains or losses previously r e c o g n i z e d i n o t h e r c o m p r e h e n s i v e i n c o m e a r e reclassified to retained earnings. - Financial assets measured at fair value through profit or loss 　Financial assets that are not classified as financial a s s e t s m e a s u r e d a t f a i r v a l u e t h r o u g h o t h e r comprehensive income are classified as financial assets measured at fair value through profit or loss. 　Changes in fair value after initial recognition of financial assets measured at fair value through profit or loss are recognized in profit or loss. (iii) Impairment of financial assets 　Expected credit losses of financial assets measured at amortized cost are recognized as allowances for credit losses. Expected credit losses are the present value of the difference between the cash flows that are due to the Company and its consolidated subsidiaries in accordance with the contract and the cash flows that the Company and its consolidated subsidiaries expect to receive. 　It is determined whether credit risk on a financial asset has increased significantly since initial recognition. If it has not increased significantly, allowance for credit losses is measured at an amount equal to 12-month expected credit losses.If it has increased significantly, allowance for credit losses is measured at an amount equal to the lifetime expected credit losses. When the fact of past due exist, 64 Significant accounting policies Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019actual or anticipated significant changes in debtors’ results of operations are considered in assessing whether the credit risk on a financial asset has increased significantly since initial recognition. For financial assets that fall under any of the following categories, the possibility of credit impairment is determined: - significant financial difficulty of the issuer or the borrower; - a breach of contract, such as a default or past due event; or - it is becoming probable that the borrower will enter bankruptcy or other financial reorganization. 　Regardless of the events above, the amount of allowance for credit losses for trade receivables and contract assets that do not contain a significant financing component is measured at an amount equal to the lifetime expected credit losses. 　The amount of reversal in impairment losses are recognized in profit or loss. (iv) Derecognition of financial assets 　The Company and its consolidated subsidiaries derecognize financial assets if the contractual rights to the cash flows from the financial asset expire, or the contractual rights to receive the cash flows of the financial a s s e t a r e t r a n s f e r r e d a n d t h e C o m p a n y a n d i t s consolidated subsidiaries transfer substantially all the risks and rewards of ownership of the financial asset. (b) Non-derivative financial liabilities 　The Company and its consolidated subsidiaries initially measure non-derivative financial liabilities at fair value (after deducting transaction costs directly attributable to the financial liabilities) and measure them at amortized cost using the effective interest method after initial recognition. 　The Company and its consolidated subsidiaries derecognize financial liabilities when they are extinguished, that is, when the obligation specified in the contract is discharged, canceled or expires. (c) Derivatives and hedge accounting 　The Company and its consolidated subsidiaries use derivatives such as forward exchange contracts to hedge foreign currency risks. These derivatives are initially measured at fair value at the time that contracts are entered into. They are subsequently remeasured at fair value and resulting gains or losses are recognized in profit or loss. However, the effective part of cash flow hedges is recognized in other comprehensive income. 　At the inception of the hedge, the Company and its consolidated subsidiaries formally designate and document the hedging relationship and the risk management objective and strategy for undertaking the hedge. It is assessed at the inception of the hedge and in subsequent periods on an ongoing basis whether derivatives used for hedging transactions are highly effective in offsetting changes in cash flows of the hedged item. 　Hedges that meet the qualifying criteria are accounted for as follows: (i) Cash flow hedges 　The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in other comprehensive income in the Consolidated Statement of Comprehensive Income. The ineffective portion is recognized immediately in profit or loss in the Consolidated Statement of Profit or Loss. 　Amounts related to the hedging instrument that have been recognized in other comprehensive income are reclassified to profit or loss when hedged transaction affects profit or loss. (5) Cash and cash equivalents 　Cash and cash equivalents are cash on hand and cash in banks which can be withdrawn at any time. Cash and cash equivalents are classified as financial assets measured at amortized cost. (6) Inventories 　Inventories are measured at the lower of cost or net realizable value. The costs of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, work-in-progress for build-to-ordered products are recorded under the specific identification method and make-to-stock products are recorded at the average production costs. Raw material and finished goods inventories are generally recorded using the average-cost method. 　Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (7) Property, plant and equipment 　The cost model is used to measure property, plant and e q u i p m e n t w h i c h a r e p r e s e n t e d a t c o s t l e s s a n y a c c u m u l a t e d d e p r e c i a t i o n a n d a n y a c c u m u l a t e d impairment losses. 　Cost includes the costs directly related to the acquisition of the asset as well as the costs of dismantling and removing it and restoring the site. 　Depreciation of property, plant and equipment is generally calculated by the diminishing-balance method, except for certain assets which are depreciated by the straight-line method, over the estimated useful life of the assets according to general assets classification, type of construction, and use of these assets. 　The estimated useful life of buildings is 3 to 50 years, while machinery and equipment and others is 2 to 20 years. 　Useful life, residual value and the depreciation method are reviewed at least at each fiscal year-end. If there have been any changes, they are prospectively reflected as changes in accounting estimates. (8) Goodwill and intangible assets (a) Goodwill 　Goodwill is not amortized but is tested for impairment at least annually. Goodwill is presented at cost less accumulated impairment losses. (b) Intangible assets 　Intangible assets are measured at cost on initial recognition and presented at cost less any accumulated amortization and any accumulated impairment losses. 　Development expenditures are recognized as intangible assets only if they are reliably measurable and technically and commercially realizable; it is probable that they will result in future economic benefits; and the Company and its consolidated subsidiaries intend and have sufficient ability to complete development and use or sell the assets. Significant accounting policies 65 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　Intangible assets acquired in a business combination are measured at fair value on initial recognition. 　Intangible assets with finite useful lives are mainly software for internal use and customer relationship which are amortized on a straight-line basis over the estimated useful life. The estimated useful life of software is approximately 3 to 5 years, while that of customer relationship is approximately 13 to 20 years. 　Estimated useful life, residual value and the amortization method are reviewed at each fiscal year-end. If there have been any changes, they are prospectively reflected as changes in accounting estimates. 　The Company does not amortize intangible assets with indefinite useful lives but tests them for impairment at least annually. (9) Leases 　A lease which contractually transfers substantially all the risks and rewards of ownership of an asset to the Company and its consolidated subsidiaries is classified as a finance lease. Other lease transactions are classified as operating leases. 　A leased asset in a finance lease transaction is recorded at the commencement of the lease at the lower of the present value of the minimum lease payments or the fair value of the asset. The depreciation of the leased assets is calculated in accordance with the Company’s depreciation policy for owned property, plant and equipment. 　Minimum lease payments in finance lease transactions are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. 　In an operating lease transaction, lease payments are recognized as an expense over the lease term on a straight-line basis. (10) Impairment of non-financial assets 　The Group determines whether there is an indication of impairment for non-financial assets, excluding inventories and deferred tax assets. If there is an indication of impairment, these non-financial assets are tested for impairment. Goodwill and intangible assets with an indefinite useful life are tested for impairment at least annually at the same time every year. 　The recoverable amount of an asset or cash generating unit is the higher of its value in use and its fair value less costs of disposal. Estimated future cash flows used in the calculation of value in use are discounted to their present value using a pre-tax discount rate reflecting the time value of money and the risks specific to the asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash- generating units are determined by integrating the asset into the smallest group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. 　Impairment losses are recognized in profit or loss if the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount. Impairment losses recognized on cash-generating units are allocated first to reduce the carrying amount of goodwill allocated to the unit and then to reduce pro rata the carrying amounts of the other assets in the unit. 　Impairment losses for goodwill are not reversed. For assets other than goodwill, it is assessed whether there is any indication that impairment losses recognized in prior p e r i o d s m a y h a v e d e c r e a s e d o r n o l o n g e r e x i s t . Impairment losses are reversed if the recoverable amount exceeds the carrying amount. When reversing impairment losses, the maximum to which the carrying amount of an asset is increased is its carrying amount (less necessary depreciation and amortization) if the impairment loss had not been recognized. (11) Employee benefits (a) Post-employment benefits 　The Company and its consolidated subsidiaries provide defined contribution plans and defined benefit plans as employee retirement benefit plans. 　The present value of the defined benefit obligations and the related current service cost and past service cost are determined using the projected unit credit method. 　The period of discount is determined based on the period to the date on which future annual benefits are expected to be paid. Discount rates are determined by reference to market yields consistent with the period of discount on high quality corporate bonds, at the end of the consolidated fiscal year. 　Net defined benefit liability or asset is determined at the present value of the defined benefit obligation less the fair value of the plan assets. If the determination shows that a defined benefit plan has been overfunded for the Company and its consolidated subsidiaries, the defined benefit asset is recognized at the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan as a ceiling. 　The amount of change in fair value arising from remeasurement of the present value of defined benefit obligations and the fair value of plan assets is fully recognized in other comprehensive income in the periods in which it arises and immediately reclassified to retained earnings. 　Past service costs arising on plan amendments are recognized in profit or loss for the period in which they arise. 　C o n t r i b u t i o n s t o d e f i n e d c o n t r i b u t i o n p l a n s a r e recognized as expenses for the period in which the employees render the related service. (b) Short-term employee benefits 　Short-term employee benefits are not discounted. They are recognized as expenses at the time that the employees render the related service. 　For bonuses, the amount expected to be paid is recognized as a liability if there is a legal or constructive obligation for payments and it can be reliably estimated. (12) Provisions 　Provisions are recognized when the Company and its consolidated subsidiaries have a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are recognized at the amounts of estimated future cash flows discounted to their present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the liabilities. 66 Significant accounting policies Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(13) Revenues 　The Company and its consolidated subsidiaries r e c o g n i z e r e v e n u e i n a n a m o u n t t h a t r e f l e c t s t h e consideration to which they expect to be entitled by transferring a good or service to a customer using the five- step approach below, except for income from interest and dividends as defined in IFRS 9. Step1：Identify the contract(s) with a customer. Step2：Identify the performance obligations in the contract. Step3：Determine the transaction price. Step4：Allocate the transaction price to the separate performance obligations in the contract. Step5：Recognize revenue when (or as) the entity satisfies a performance obligation. 　For mass-produced goods such as home appliances, semiconductors and industrial products, revenue is recognized when the customer accepts the product. For products requiring acceptance inspection of delivered goods, revenue is only recognized when the customer accepts the product, the Group verifies that the product achieves predefined performance and there remain only verification of items that are not significant for the customer’s final operation check. Consideration for transactions is received primarily within one year after the performance obligation has been satisfied. 　Revenue from maintenance agreements is recognized over the contract term as the maintenance is provided. 　Revenue from specific construction contracts meeting certain criteria is recognized according to the progress of the construction if progress can be reasonably measured. Revenue is recognized only to the extent of the cost incurred if progress cannot be reasonably measured. The progress of construction is measured by comparing the cost incurred through the current year to the estimated total cost. Estimates and underlying assumptions for the aggregate amount of estimated cost are reviewed on an ongoing basis since there is a possibility that the cost incurred may change due to the progress of construction. 　Consideration from maintenance agreements and specific construction contracts meeting certain criteria is received incrementally during the period of the contract, separately from the satisfaction of performance obligations, and the remaining amount is received primarily within one year after all performance obligations are satisfied. 　 C o n t r a c t a s s e t s a r e r e c o g n i z e d a s r i g h t s t o consideration recorded due to recognizing revenue according to progress. Contract assets are reclassified to trade receivables when the rights to consideration become unconditional. Advance consideration received from customers before fulfillment of the contract is recognized as a contract liability and reversed as revenue from the contract related to the advance consideration is recognized. 　Revenue is recognized in an amount that reflects the consideration to which the Company and its consolidated subsidiaries expect to be entitled by transferring the good or service. For contracts which consist of any combination of products, equipment, installation and maintenance, each element is treated as a separate performance obligation and revenue is allocated to each element in proportion to its stand-alone selling price when the good or service provided has a stand-alone value as a separate product. 　For contracts which include subsequent changes in consideration such as rebates and discounts, the transaction price is determined by taking into account the variable consideration in a way that the actual value does not significantly diverge from the estimate. 　For contracts in which significant financing benefits are received because the timing of satisfaction of the performance obligation and the customer’s payment differ, the transaction price is determined after adjustment to reflect the time value of money. The adjustment is recognized as interest expense or income. 　For contracts in which the Company and its consolidated subsidiaries do not have discretion in establishing the transaction price, do not have inventory risk, or another party is primarily responsible for fulfilling the contract, revenue is recognized on a net basis. 　Any anticipated losses on fixed-price contracts are recognized in the Consolidated Statement of Profit or Loss when such losses can be reliably estimated. Provisions are made for contingencies in the period when they become known pursuant to specific contract terms and conditions and are reliably estimable. (14) Income taxes 　Income taxes consist of current and deferred taxes. Income taxes are recognized in profit or loss except for those related to business combinations and those related t o i t e m s r e c o g n i z e d d i r e c t l y i n e q u i t y o r o t h e r comprehensive income. 　Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities. The amount of tax is calculated based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. 　Deferred taxes are recognized for temporary differences between the accounting carrying amounts of assets and liabilities and their tax basis, tax loss carryforwards and tax credit carryforwards at the end of the reporting period. 　Deferred tax assets and liabilities are not recognized for the following temporary differences: - Taxable temporary differences arising from the initial recognition of goodwill - Temporary differences arising from the initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit - T a x a b l e t e m p o r a r y d i f f e r e n c e s a s s o c i a t e d w i t h investments in consolidated subsidiaries, associates and joint ventures, when the timing of reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future 　Deferred tax assets and liabilities are measured at the tax rates and in accordance with tax laws that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. 　Deferred tax assets and liabilities are offset if the Company and its consolidated subsidiaries have a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to settle on a net basis. 　A deferred tax asset is recognized for deductible temporary differences, unused tax losses and tax credit carryforwards to the extent that is probable that they can be utilized against future taxable profit. Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that is no longer probable that the related tax benefits will be realized. 67 Significant accounting policies MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 　In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. (15) Earnings per share 　The Company and its consolidated subsidiaries calculate basic earnings per share for net profit attributable to Mitsubishi Electric Corp. stockholders by dividing net profit attributable to Mitsubishi Electric Corp. stockholders by the weighted-average number of ordinary shares outstanding adjusted for treasury stock during each year. 　Diluted earnings per share for net profit attributable to Mitsubishi Electric Corp. stockholders is calculated after adjusting for the effect of all dilutive potential ordinary shares. (16) Government grants 　Asset-related government grants are recognized when there is reasonable assurance that the Company and its consolidated subsidiaries will comply with the attached conditions and will receive the grants. Grants are recognized by calculating the carrying amount of the asset, in which the amount of government grants measured at fair value is directly deducted from the cost of the asset. 4．Significant accounting estimates and judgments 　Management is required to make judgments, estimates and assumptions that affect the application of accounting policies and amounts of assets, liabilities, income and expenses in preparation of the consolidated financial statements in accordance with IFRS. Actual results may differ from these estimates. 　Estimates and underlying assumptions are reviewed on an ongoing basis. The effects resulting from changes in accounting estimates are recognized in the period when estimates are revised and in the subsequent periods. 　Accounting estimates and assumptions which could have a significant effect on amounts in the consolidated financial statements are as follows: - Recoverable amount of property, plant and equipment, goodwill and intangible assets (see Note “12: Impairment losses”) - Recoverability of deferred tax assets (see Note “14: Income taxes”) - Measurement of defined benefit obligation (see Note “19: Employee benefits”) - Recognition and measurement of provisions (see Note “20: Provisions”) - Estimated total cost of contracts in which performance obligations are satisfied over time (see Note “23: Revenues”) - Fair value of financial instruments (see Note “28: Financial instruments”) 5．New accounting standards not yet adopted 　Major standards and interpretations issued as of the date of the approval of the consolidated financial statements that have not yet been adopted as of March 31, 2019 are as follows. Standard Title Mandatory application date (fiscal years beginning on or after) Fiscal year of adoption by the Group Overview of new standards/amendments IFRS 16 Leases January 1, 2019 The year ending March 31, 2020 Revision of definition of leases and primarily lessee accounting 　The Group introduce single accounting model to capitalize lessee’s lease in principle by applying IFRS 16. For all leases other than leases that have a lease term of 12 months or less and leases for which the underlying asset is of low value, right-of-use assets that represent a right to use an underlying asset and lease liabilities that represent the obligation for lease payment are recognized at the commencement date. After recognition of right-of-use assets and lease liabilities, depreciation of right-of-use assets and interest expense on lease liabilities are recognized. The Group will adopt the modified retrospective approach that recognize the cumulative effects of the application as an adjustment of the opening balance of retained earnings at the date of initial application. 　The adoption of this standard is expected to newly increase lease assets and lease liabilities by approximately ¥94,000 million (847 million U.S dollars) and ¥96,000 million (865 million U.S dollars), respectively, in the consolidated statement of financial position at the beginning of the year. The effect on the consolidated statement of profit or loss is not expected to be material. For the presentation of the consolidated statement of cash flows, the lease payment of operating lease classified within operating activities previously will be classified within financing activities as payment for lease liabilities after deductions for interest equivalent. 68 Significant accounting policies、Significant accounting estimates and judgments、New accounting standards not yet adopted Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 20196．Segment information (1) Overview of reportable segments 　The operating segments presented below are identified based on the segments for which separate financial information is available, and are periodically used for decisions on business resources allocation and evaluation of business operation by the Company’s management. 　The Group conducts business through 6 categories, Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices, Home Appliances, and Others, by aggregating multiple operating segments based on types and characteristics of products, production methods, and similarities in market. 　Principal operating segments and major products and services included in each category are as follows: Energy and Electric Public Utility Systems Turbine generators, hydraulic turbine generators, nuclear power plant equipment, Systems Energy & Industrial motors, transformers, power electronics equipment, circuit breakers, gas insulated Systems switchgears, switch control devices, surveillance-system control and security Building Systems systems, transmission and distribution ICT systems, large display devices, electrical equipment for locomotives and rolling stock, elevators, escalators, building security systems, building management systems, and others Industrial Automation Systems Factory Automation Programmable logic controllers, inverters, servomotors, human-machine interface, Systems Automotive Equipment 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, electric powertrain system, car electronics and car mechatronics, car multimedia, and others Information and Communication Wireless and wired communications systems, network camera systems, satellite Communication Systems communications equipment, satellites, radar equipment, antennas, missile Systems Information Systems systems, fire control systems, broadcasting equipment, data transmission devices, & Network Service network security systems, information systems equipment, systems integration, Electronic Systems and others Electronic Devices Semiconductor & Power modules, high-frequency devices, optical devices, LCD devices, and others Device Home Appliances Living Environment Room air conditioners, package air conditioners, chillers, showcases, & Digital Media compressors, refrigeration units, air-to-water heat pump boilers, ventilators, Equipment photovoltaic systems, hot water supply systems, IH cooking heaters, LED lamps, fluorescent lamps, indoor lighting, LCD televisions, refrigerators, electric fans, dehumidifiers, air purifiers, cleaners, jar rice cookers, microwave ovens, and others Others ― Procurement, logistics, real estate, advertising, finance, and other services 　Intersegment transactions are conducted generally at prices that the Company’s management recognizes as approximate arm's length prices. The calculation method of operating profit (loss) for reportable segments is consistent with that used in the Consolidated Statement of Profit or Loss. It does not include share of profit of investments accounted for using the equity method, financial income or financial expenses. Segment information 69 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(2) Segment information by business categories 　Segment information by business categories are as follows. Amounts of operating profit in Eliminations and corporate are unallocatable research and development expenses. Energy and Industrial Information and 2018 Automation Communication Electronic Home Yen (millions) Eliminations and Consolidated Systems Systems Devices Appliances Others Total corporate total Electric Systems I Revenue and operating profit Revenue (1)External customers ¥ 1,244,941 ¥ 1,431,713 ¥ 390,915 ¥ 165,378 ¥ 1,033,134 ¥ 178,343 ¥ 4,444,424 ¥ ― ¥ 4,444,424 (2)Intersegment 8,121 13,215 47,269 36,916 16,235 480,716 602,472 (602,472) ― Total 1,253,062 1,444,928 438,184 202,294 1,049,369 659,059 5,046,896 (602,472) 4,444,424 Operating profit 65,457 187,350 11,340 14,164 55,496 24,034 357,841 (30,397) 327,444 II Other items Depreciation and amortization 28,925 70,727 18,402 Impairment losses 361 131 ― 12,546 1,514 40,293 1,935 6,379 261 177,272 4,202 ― ― 177,272 4,202 Capital expenditures ¥ 30,603 ¥ 83,992 ¥ 17,984 ¥ 15,497 ¥ 43,834 ¥ 17,282 ¥ 209,192 ¥ ― ¥ 209,192 Energy and Industrial Information and 2019 Automation Communication Electronic Home Yen (millions) Eliminations and Consolidated Systems Systems Devices Appliances Others Total corporate total Electric Systems I Revenue and operating profit Revenue (1)External customers ¥ 1,287,724 ¥ 1,453,958 ¥ 384,851 ¥ 157,987 ¥ 1,056,943 ¥ 178,458 ¥ 4,519,921 ¥ ― ¥ 4,519,921 (2)Intersegment 9,021 13,675 41,418 41,921 17,101 498,278 621,414 (621,414) ― Total 1,296,745 1,467,633 426,269 199,908 1,074,044 676,736 5,141,335 (621,414) 4,519,921 Operating profit 82,501 142,563 12,247 1,442 59,451 24,172 322,376 (31,899) 290,477 II Other items Depreciation and amortization 26,032 72,355 19,740 14,368 Impairment losses 190 ― ― 930 37,556 1,212 6,196 313 176,247 2,645 ― ― 176,247 2,645 Capital expenditures ¥ 28,808 ¥ 92,056 ¥ 20,271 ¥ 19,384 ¥ 42,406 ¥ 15,102 ¥ 218,027 ― ¥ 218,027 Energy and Industrial Information and 2019 Automation Communication Electronic Home U.S. dollars (thousands) Eliminations and Consolidated Systems Systems Devices Appliances Others Total corporate total Electric Systems I Revenue and operating profit Revenue (1)External customers $ 11,601,117 $ 13,098,721 $ 3,467,126 $ 1,423,306 $ 9,522,009 $ 1,607,730 $ 40,720,009 $ ― $ 40,720,009 (2)Intersegment 81,270 123,198 373,135 377,667 154,063 4,488,991 5,598,324 (5,598,324) ― Total 11,682,387 13,221,919 3,840,261 1,800,973 9,676,072 6,096,721 46,318,333 (5,598,324) 40,720,009 Operating profit II Other items 743,252 1,284,351 110,333 12,991 535,595 217,766 2,904,288 (287,378) 2,616,910 Depreciation and amortization 234,523 651,847 177,838 129,441 338,342 55,820 1,587,811 Impairment losses 1,712 ― ― 8,378 10,919 2,820 23,829 ― ― 1,587,811 23,829 Capital expenditures $ 259,532 $ 829,332 $ 182,622 $ 174,631 $ 382,036 $ 136,054 $ 1,964,207 $ ― $ 1,964,207 70 Segment information Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(3) Information by geographical areas 　Revenue from external customers by the location of customers are as follows: 2018 2019 2019 Revenue from external customers % of total revenue Revenue from external customers % of total revenue Revenue from external customers % of total revenue Yen (millions) U.S. dollars (thousands) Japan ¥ 2,438,942 54.9% ¥ 2,556,644 56.6% $ 23,032,829 North America 419,121 Asia (excluding Japan) 1,089,176 Europe Others Overseas Total Consolidated total 431,316 65,869 2,005,482 4,444,424 9.4% 24.5% 9.7% 1.5% 45.1% 100.0% 429,451 1,013,883 453,748 66,195 1,963,277 4,519,921 9.5% 22.4% 10.0% 1.5% 43.4% 3,868,928 9,134,081 4,087,820 596,351 17,687,180 100.0% 40,720,009 China (within Asia) ¥ 545,072 12.3% ¥ 486,405 10.8% $ 4,382,027 56.6% 9.5% 22.4% 10.0% 1.5% 43.4% 100.0% 10.8% 　There are no individual countries or regions with significant revenue from external customers in the years ended March 31, 2018 and 2019, except for Japan and China. 　Non-current assets (property, plant and equipment, goodwill and intangible assets) by location of the Company and its consolidated subsidiaries are as follows: Japan North America Asia (excluding Japan) Non-current assets ¥ 543,714 33,617 142,094 Japan North America Asia (excluding Japan) Non-current assets ¥ 571,492 29,650 144,719 Japan North America Asia (excluding Japan) Non-current assets ¥ 614,966 29,992 143,566 Japan North America Asia (excluding Japan) Non-current assets $ 5,540,234 270,198 1,293,388 Date of transition to IFRS (April 1, 2017) Overseas Europe 57,011 Overseas Europe 59,939 Overseas Europe 60,036 Overseas Europe 540,865 2018 2019 2019 Others 2,601 Total 235,323 Others 2,124 Total 236,432 Others 1,914 Total 235,508 Others 17,243 Total 2,121,694 Note :The major countries and regions included in each segment 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 Republic Yen (millions) Corporate Consolidated total 45,023 ¥ 824,060 Yen (millions) Corporate Consolidated total 49,293 ¥ 857,217 Yen (millions) Corporate Consolidated total 47,681 ¥ 898,155 U.S. dollars (thousands) Corporate Consolidated total 429,559 $ 8,091,487 Segment information 71 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 20197．Trade receivables 　Components of trade receivables are as follows. Trade receivables are classified as financial assets measured at amortized cost. Notes receivable Accounts receivable Total 8．Other financial assets Yen (millions) U.S. dollars (thousands) Date of transition to IFRS (April 1, 2017) 93,612 ¥ 806,066 ¥ 899,678 2018 2019 2019 ¥ ¥ 99,267 823,400 922,667 ¥ ¥ 99,778 838,486 938,264 $ 898,901 7,553,928 $ 8,452,829 (1) Components of other financial assets 　Components of other financial assets are set out in the table below. Equity instruments are classified as financial assets measured at fair value through other comprehensive income. Derivative assets and debt instrumens are classified as financial assets measured at fair value through profit or loss. Accounts receivable (non-trade), loans and others are classified as financial assets measured at amortized cost. Other financial assets Equity instruments Accounts receivables (non-trade) Loans Derivative assets Debt instruments Others Total Current assets Non-current assets Total Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Date of transition to IFRS (April 1, 2017) ¥ 348,925 ¥ 321,129 ¥ 262,572 $ 2,365,514 33,760 5,227 1,602 198 40,668 430,380 39,801 390,579 37,574 6,109 4,751 197 40,992 410,752 47,581 363,171 43,817 4,079 1,134 ― 41,000 352,602 48,768 303,834 394,748 36,748 10,216 ― 369,368 3,176,594 439,351 2,737,243 ¥ 430,380 ¥ 410,752 ¥ 352,602 $ 3,176,594 72 Trade receivables、Other financial assets Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(2) Financial assets measured at fair value through other comprehensive income 　Equity instruments which are held primarily to maintain and strengthen business relationships are designated as financial assets measured at fair value through other comprehensive income. 　Major equity instruments held and their fair value are as follows: Investees Renesas Electronics Corporation Suzuki Motor Corporation Central Japan Railway Company East Japan Railway Company Mitsubishi Heavy Industries, Ltd. Others Total Others comprise many small equity instruments. Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Date of transition to IFRS (April 1, 2017) ¥ 121,955 ¥ 81,006 ¥ 20,000 14,160 9,288 6,385 24,794 15,713 9,449 5,829 38,762 21,194 20,069 10,233 6,584 $ 349,207 190,937 180,802 92,189 59,315 177,137 184,338 165,730 1,493,064 ¥ 348,925 ¥ 321,129 ¥ 262,572 $ 2,365,514 Note: Dividend income related to financial assets measured at fair value through other comprehensive income is disclosed in note “25. Financial income and financial expenses”. (3) Derecognition of financial assets measured at fair value through other comprehensive income 　The Company and its consolidated subsidiaries derecognize some financial assets measured at fair value through other comprehensive income by selling them in order to improve the efficiency of assets or revise business relationships. 　The fair value and cumulative gain (loss) before tax effect at the time of sale are as follows: Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Fair value Cumulative gain (loss) Fair value Cumulative gain (loss) Fair value Cumulative gain (loss) ¥ 29,664 ¥ 12,833 ¥ 7,702 ¥ (4,065) $ 69,387 $ (36,622) 　Cumulative gain (loss) recognized as other comprehensive income were reclassified to retained earnings at the time of derecognition of financial assets. The amounts after tax effect reclassified in the years ended March 31, 2018 and 2019 were 8,668 million yen (gain) and 3,709 million yen ($33,414 thousand) (loss), respectively. 9．Inventories 　Components of inventories are as follows: Finished goods Work in process Raw materials 　Total Yen (millions) U.S. dollars (thousands) Date of transition to IFRS (April 1, 2017) 277,870 ¥ 2018 2019 2019 ¥ 319,479 ¥ 376,147 $ 3,388,712 170,391 111,641 194,146 132,637 199,360 153,591 1,796,036 1,383,702 ¥ 559,902 ¥ 646,262 ¥ 729,098 $ 6,568,450 　The amount of write-downs of inventories recognized as expenses in the years ended March 31, 2018 and 2019 are 11,644 million yen and 15,845 million yen (142,748 thousand U.S. dollars), respectively. These amounts are included in “Cost of sales” in the Consolidated Statement of Profit or Loss. Other financial assets、Inventories 73 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201910．Property, plant and equipment 　Change in the carrying amount, cost and accumulated depreciation and impairment losses on property, plant and equipment are as follows: (1) Carrying amount Balance at beginning of year ¥ Acquisition Reclassification from construction in progress Depreciation Impairment losses Sales and disposals Exchange differences on translating foreign operations Others Balance at end of year Balance at beginning of year Acquisition Reclassification from construction in progress Depreciation Impairment losses Sales and disposals Exchange differences on translating foreign operations Others Balance at end of year Balance at beginning of year Acquisition Reclassification from construction in progress Depreciation Impairment losses Sales and disposals Exchange differences on translating foreign operations Others Balance at end of year ¥ ¥ ¥ $ Land 99,573 113 Buildings and structures 320,810 1,806 ¥ 2018 Machinery and equipment, and others 222,937 16,568 ¥ Construction in progress 56,158 166,909 ¥ ¥ 126,311 (176,850) 100 ― (145) (599) 224 50,439 (22,624) (1,262) (1,427) (130,537) (1,259) (2,179) 965 1,447 ― (1,154) (676) 456 (251) 99,015 ¥ 997 349,704 ¥ (1,063) 232,225 ¥ (1,530) 43,313 ¥ Land 99,015 1,944 Buildings and structures 349,704 2,749 ¥ 2019 Machinery and equipment, and others 232,225 21,050 ¥ Construction in progress 43,313 172,699 ¥ ¥ 119,417 (153,197) (129,273) (1,240) (2,940) (713) ― ― (16) (161) 33,536 (23,042) (926) (1,760) (686) 231 359,806 ¥ (104) 238,422 ¥ (1,190) 61,448 ¥ Yen (millions) Total 699,478 185,396 ― (153,161) (3,820) (4,881) 3,092 (1,847) 724,257 Yen (millions) Total 724,257 198,442 ― (152,315) (2,465) (5,070) (1,781) (528) 760,540 U.S. dollars (thousands) 2019 Machinery and equipment, and others 2,092,118 189,639 $ Buildings and structures 3,150,486 24,766 Construction in progress 390,207 1,555,847 $ $ Total 6,524,838 1,787,766 302,126 1,075,829 (1,380,153) ― (207,586) (8,342) (15,856) (1,164,621) (11,171) (26,487) ― ― (144) (1,372,207) (22,207) (45,676) (6,180) (6,424) (1,450) (16,045) 244 ― (299) (354) (221) 535 100,864 Land 892,027 17,514 2,198 ― (2,694) (3,189) (1,991) ¥ $ 4,820 908,685 2,081 3,241,495 $ (937) 2,147,946 $ $ (10,721) 553,586 $ (4,757) 6,851,712 $ Note: Depreciation on property, plant and equipment is included in “Cost of sales” and “Selling, general and administrative expenses” in the Consolidated Statement of Profit or Loss. 74 Property, plant and equipment Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(2) Cost Balance at April 1, 2017 Balance at March 31, 2018 Balance at March 31, 2019 Balance at March 31, 2019 Land 101,513 101,220 103,286 Buildings and structures 802,053 847,428 871,713 Land 930,505 Buildings and structures 7,853,270 ¥ ¥ ¥ $ (3) Accumulated depreciation and impairment losses Balance at April 1, 2017 Balance at March 31, 2018 Balance at March 31, 2019 Balance at March 31, 2019 Land 1,940 2,205 2,422 Buildings and structures 481,243 497,724 511,907 Land 21,820 Buildings and structures 4,611,775 ¥ ¥ ¥ $ Machinery and equipment, and others 1,888,224 1,961,467 2,013,412 Machinery and equipment, and others 18,138,847 Machinery and equipment, and others 1,665,287 1,729,242 1,774,990 Machinery and equipment, and others 15,990,901 Yen (millions) Construction in progress 56,160 43,810 61,930 Total ¥ 2,847,950 ¥ 2,953,925 ¥ 3,050,341 U.S. dollars (thousands) Construction in progress 557,928 Total $ 27,480,550 Yen (millions) Construction in progress 2 497 482 Total ¥ 2,148,472 ¥ 2,229,668 ¥ 2,289,801 U.S. dollars (thousands) Construction in progress 4,342 Total $ 20,628,838 　Leased assets under finance leases are primarily included in machinery and equipment, and others above. The carrying amount as of the date of transition to IFRS (April 1,2017), March 31, 2018 and 2019 was 14,467 million yen, 14,046 million yen and 15,714 million yen ($141,568 thousand), respectively. Property, plant and equipment 75 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201911．Goodwill and intangible assets 　Change in the carrying amount, cost and accumulated amortization and impairment losses on goodwill and intangible assets are as follows: (1) Carrying amount Balance at beginning of year ¥ Acquisition Acquisitions through business combinations Amortization Impairment losses Sales and disposals Exchange differences on translating foreign operations Others Balance at end of year Balance at beginning of year Acquisition Acquisitions through business combinations Amortization Sales and disposals Exchange differences on translating foreign operations Others Balance at end of year Balance at beginning of year Acquisition Acquisitions through business combinations Amortization Sales and disposals Exchange differences on translating foreign operations Others Balance at end of year ¥ ¥ ¥ $ ¥ ¥ ¥ ¥ $ Goodwill 45,023 ― 1,102 ― ― ― 3,609 (441) 49,293 Goodwill 49,293 ― 1,111 ― ― (2,834) 111 47,681 Goodwill 444,081 ― 10,009 ― ― ¥ ¥ ¥ ¥ $ Software 37,805 18,041 ― (18,804) (40) (150) 14 2,657 39,523 Software 39,523 20,235 172 (19,013) (255) (118) 1,440 41,984 Software 356,063 182,297 1,550 (171,288) (2,297) (25,532) (1,063) ¥ ¥ ¥ ¥ $ 2018 Customer relationship 20,659 ― 841 (2,274) ― ― 1,680 ― 20,906 2019 Customer relationship 20,906 ― ― (1,898) ― (786) (98) 18,124 2019 Customer relationship 188,342 ― ― (17,099) ― (7,081) Yen (millions) Total 124,582 22,400 2,036 (24,111) (75) (173) 6,535 1,766 132,960 Yen (millions) Total 132,960 29,985 1,834 (23,932) (345) (4,312) ¥ ¥ ¥ Others 21,095 4,359 93 (3,033) (35) (23) 1,232 (450) 23,238 Others 23,238 9,750 551 (3,021) (90) (574) (28) 29,826 ¥ 1,425 137,615 U.S.dollars (thousands) Others 209,351 87,838 4,964 (27,216) (811) Total $ 1,197,837 270,135 16,523 (215,603) (3,108) (5,171) (38,847) 1,000 429,558 $ 12,973 378,235 $ (883) 163,279 $ (252) 268,703 12,838 $ 1,239,775 $ Notes: 1 Amortization of intangible assets are included in “Cost of sales” and “Selling, general and administrative expenses” in the Consolidated Statement of Profit or Loss. 2 Significant intangible assets excluding goodwill as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 are customer relationship in the Home Appliances segment acquired in the December 2015 purchase of DeLclima S.p.A. (currently Mitsubishi Electric Hydronics & IT Cooling Systems S.p.A. and others). The carrying amount and remaining amortization periods as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 are 19,582 million yen (average remaining amortization period of 12 years), 19,112 million yen (average remaining amortization period of 11 years) and 16,544 million yen (149,045 thousand U.S. dollars) (average remaining amortization period of 10 years), respectively. 76 Goodwill and intangible assets Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 (2) Cost Balance at April 1, 2017 Balance at March 31, 2018 Balance at March 31, 2019 Balance at March 31, 2019 Goodwill 45,023 49,293 47,681 Software 108,287 119,382 127,216 Goodwill 429,558 Software 1,146,091 ¥ ¥ ¥ $ (3) Accumulated amortization and impairment losses Balance at April 1, 2017 Balance at March 31, 2018 Balance at March 31, 2019 Balance at March 31, 2019 Goodwill ― ― ― Software 70,482 79,859 85,232 Goodwill ― Software 767,856 ¥ ¥ ¥ $ Customer relationship 27,028 29,279 27,985 Customer relationship 252,117 Customer relationship 6,369 8,373 9,861 Customer relationship 88,838 Yen (millions) Others 37,868 43,402 51,775 ¥ ¥ ¥ Total 218,206 241,356 254,657 U.S.dollars (thousands) Others 466,442 Total $ 2,294,208 Yen (millions) Others 16,773 20,164 21,949 ¥ ¥ ¥ Total 93,624 108,396 117,042 U.S.dollars (thousands) Others 197,739 Total $ 1,054,433 　The amount of research and development expenses for the years ended March 31, 2018 and 2019 are 210,308 million yen and 212,794 million yen (1,917,063 thousand U.S. dollars), respectively. 12．Impairment losses (1) Property, plant and equipment and intangible assets (excluding goodwill) 　Impairment losses are recognized in “Other profit (loss))” in the Consolidated Statement of Profit or Loss. 　For the year ended March 31, 2018, impairment losses consisted of 3,820 million yen of impairment of property, plant and equipment and 382 million yen of impairment of intangible assets and others. The recoverable amount of an asset or cash-generating unit is mainly measured based on the fair value less cost of disposal. 　For the year ended March 31, 2019, impairment losses consisted of 2,645 million yen ($23,829 thousand) of impairment mainly of property, plant and equipments. The recoverable amount of an asset or cash generating unit is mainly measured based on the fair value less cost of disposal. (2) Goodwill 　The cash-generating unit group to which significant goodwill is allocated as of the date of transition to IFRS (April 1, 2017), March 31, 2018,and 2019 was the Home Appliances segment. The carrying amount of goodwill allocated to the Home Appliances segment are 40,973 million yen, 44,167 million yen and 41,285 million yen (371,937 thousand U.S. dollars), respectively. 　The recoverable amount in impairment tests is calculated using value in use. 　Value in use is primarily calculated by discounting to the present value the estimated cash flows based on a five-year business plan and growth rates approved by management. The discount rate is calculated based on the pre-tax weighted average cost of capital. The discount rate as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 are 8.9%, 9.7% and 10.2%, respectively. Growth rates are calculated by reference to long-term expected growth rates of the market to which the cash-generating unit belongs. The growth rate as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 are all 0.8%. 　Impairment losses on goodwill are not recognized in the years ended March 31, 2018 and 2019．　It is considered unlikely that a significant impairment would have occurred even if the key assumptions used in determinations of impairment were changed within a reasonably predictable range. Goodwill and intangible assets、Impairment losses 77 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201913．Investments accounted for using the equity method 　The carrying amount of investment and share of comprehensive income in individually immaterial associates and joint ventures are as follows: (1) Carrying amount of investment Associates Joint ventures 　Total (2) Share of comprehensive income Associates Net profit Other comprehensive income (loss) Total comprehensive income Joint ventures Net Profit Other comprehensive income (loss) Total comprehensive income Total 14．Income taxes Yen (millions) U.S. dollars (thousands) Date of transition to IFRS (April 1, 2017) 114,291 ¥ 73,067 187,358 ¥ 2018 2019 2019 ¥ ¥ 121,309 72,999 194,308 ¥ ¥ 119,464 78,495 197,959 $ 1,076,252 707,162 $ 1,783,414 2018 Yen (millions) 2019 ¥ ¥ 20,895 2,080 22,975 3,052 (41) 3,011 25,986 ¥ ¥ 15,101 (3,100) 12,001 5,015 (540) 4,475 16,476 U.S. dollars (thousands) 2019 136,045 (27,928) 108,117 45,180 (4,865) 40,315 148,432 $ $ 　Major components of deferred tax assets and liabilities are as follows: Yen (millions) U.S. dollars (thousands) Yen (millions) U.S. dollars (thousands) Consolidated Statement of Financial Position Consolidated Statement of Profit or Loss Date of transition to IFRS (April 1, 2017) 2018 2019 2019 2018 2019 2019 ¥ 82,140 ¥ 69,454 ¥ 61,395 $ 553,108 ¥ (4,177) ¥ (2,889) $ (26,027) Deferred tax assets Net defined benefit liabilities Accrued expenses 93,387 90,929 84,843 764,351 (2,458) (6,126) (55,189) Property, plant and equipment Inventories Tax loss carryforwards Others Total 40,739 39,105 38,488 346,739 (1,637) (624) (5,622) 40,809 40,877 34,514 310,937 68 (6,372) (57,405) 1,117 847 737 6,640 (270) (303) (2,730) 67,347 325,539 55,062 296,274 55,077 275,054 496,189 2,477,964 (11,972) (20,446) (1,116) (17,430) (10,055) (157,028) 3,387 3,860 3,790 34,144 473 (70) (631) 40,180 38,587 25,720 231,712 ― ― ― Deferred tax liabilities Property,plant and equipment Financial assets measured at fair value through other comprehensive income Others 21,349 64,916 Net deferred tax assets ¥ 260,623 Total 20,266 62,713 ¥ 233,561 22,621 52,131 ¥ 222,923 203,793 469,649 $2,008,315 (1,145) (672) 2,809 2,739 ¥ (19,774) ¥ (20,169) 25,306 24,675 $(181,703) 78 Investments accounted for using the equity method、Income taxes Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　Changes in net deferred tax assets are as follows: Balance at beginning of year Amounts recognized in profit or loss Amounts recognized in Other comprehensive income Others Balance at end of year 2018 Yen (millions) 2019 ¥ 260,623 ¥ 233,561 $ (19,774) (7,361) 73 (20,169) 8,471 1,060 U.S. dollars (thousands) 2019 2,104,153 (181,703) 76,315 9,550 ¥ 233,561 ¥ 222,923 $ 2,008,315 　In assessing the realizability of deferred tax assets, the Company and its consolidated subsidiaries consider whether it is probable that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profit during the periods in which those temporary differences become deductible. The Company and its consolidated subsidiaries consider the scheduled reversal of deferred tax liabilities, projected future taxable profit, and tax planning strategies in making this assessment. Based on these factors, the Company and its consolidated subsidiaries consider the probability that deferred tax assets determined to be recognizable at March 31, 2019 will be realized to be high, but if future estimated taxable profit decreases during the deferral period, deferred tax assets considered likely to be realized will be reduced. 　Tax loss carryforwards, tax credit carryforwards and deductible temporary differences for which deferred tax assets are not recognized are as follows: Tax loss carryforwards Tax credit carryforwards Deductible temporary differences 　Total Yen (millions) U.S. dollars (thousands) Date of transition to IFRS (April 1, 2017) 79,974 ¥ 2018 2019 2019 ¥ 58,685 ¥ 51,464 $ 463,640 3,312 10,279 2,448 10,227 1,113 3,690 10,027 33,243 ¥ 93,565 ¥ 71,360 ¥ 56,267 $ 506,910 　The expiration schedule of tax loss carryforwards for which deferred tax assets are not recognized are as follows: Within one year One to five years Over five years 　Total Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Date of transition to IFRS (April 1, 2017) 3,244 ¥ ¥ 20,418 56,312 ¥ 6,836 7,391 44,458 2,826 4,698 43,940 51,464 $ 25,460 42,324 395,856 $ 463,640 ¥ 79,974 ¥ 58,685 ¥ 　The total amount of taxable temporary differences related to investments in consolidated subsidiaries for which deferred tax liabilities are not recognized as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 are 449,218 million yen, 497,276 million yen and 529,955 million yen (4,774,369 thousand U.S. dollars),respectively. 　The components of income tax expenses are as set out in the table below. 　The amount of the benefit arising from a tax loss or temporary difference of a prior period for which deferred tax assets were not recognized is included in current and deferred tax expenses. The effect of this on current and deferred tax expenses in the years ended March 31, 2018 and 2019 are insignificant. Current tax expense Deferred tax expense Origination and reversal of temporary differences Effect of income tax rate change Total 2018 Yen (millions) 2019 67,033 ¥ 58,135 19,044 730 86,807 ¥ 20,169 ― 78,304 ¥ ¥ U.S. dollars (thousands) 2019 523,738 181,703 ― 705,441 $ $ 　The Company and its domestic consolidated subsidiaries are subject mainly to corporate tax, inhabitant tax and business tax. Statutory tax rate of the Company is approximately 31.0% and 30.5% for the years ended March 31, 2018 and 2019, respectively. Foreign consolidated subsidiaries are subject to income taxes at their locations. 79 Income taxes MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　The causes of the difference between the statutory tax rate and the average effective tax rate are as follows: Statutory tax rate Changes in unrecognized deferred tax assets Expenses permanently not deductible for tax purposes International tax rate difference Tax credits Tax effect attributable to investments accounted for using the equity method Others Average effective tax rate 15．Bonds and borrowings (1) Components of bonds and borrowings 　Components of bonds and borrowings are as follows: 2018 2019 31.0% 0.2 0.6 (5.8) (2.5) (2.2) 3.3 24.6% 30.5% (0.2) 0.6 (4.7) (2.0) (2.0) 2.6 24.8% Unsecured borrowings Weighted average interest rate Final maturity Balance at end of year Sub total Unsecured bonds Annual interest rate: 0.27%, due June 5, 2019 Annual interest rate: 0.43%, due June 4, 2021 Sub total Lease obligations Sub total Total Current liabilities Non-current liabilities Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Date of transition to IFRS (April 1, 2017) 0.72% 2025 311,765 311,765 20,000 20,000 40,000 22,346 22,346 374,111 146,355 227,756 ¥ ¥ 0.59% 2025 250,468 250,468 20,000 20,000 40,000 21,482 21,482 311,950 122,895 189,055 ¥ ¥ 0.53% 2025 235,972 235,972 20,000 20,000 40,000 22,466 22,466 298,438 104,969 193,469 ¥ ¥ 0.53% 2025 $ 2,125,874 2,125,874 180,180 180,180 360,360 202,397 202,397 2,688,631 945,667 $ 1,742,964 As of March 31, 2019, the Company and its subsidiaries had unused commited lines of credit that can provide short-term funds from subscribing financial institutions amounting to ¥82,790 million ($745,856 thousand). (2) Changes in liabilities related to financing activities 　Changes in liabilities related to financing activities are as follows: Yen (millions) Balance at end of others 1,148 ― 20 2 1,170 ¥ ¥ year 56,507 40,000 193,961 21,482 311,950 The year ended March 31, 2018 Non-cash changes Changes from Balance at financing cash Increase from new beginning of year flows leases Foreign currency translation adjustments and Short-term borrowings Bonds Long-term borrowings Lease obligations 　Total ¥ ¥ 82,855 40,000 228,910 22,346 374,111 ¥ ¥ (27,496) ― (34,969) (9,037) (71,502) ¥ ¥ ― ¥ ― ― 8,171 8,171 ¥ Note: Balances to be repaid or redeemed in 1 year or less are included in “Bonds”, “Long-term borrowings” and “Lease obligations”. 80 Income taxes、Bonds and borrowings Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019The year ended March 31, 2019 Non-cash changes Changes from Balance at financing cash Increase from new beginning of year flows leases Foreign currency translation adjustments and Short-term borrowings Bonds Long-term borrowings Lease obligations 　Total ¥ ¥ 56,507 40,000 193,961 21,482 311,950 ¥ ¥ (2,077) ― (13,534) (9,358) (24,969) ¥ ¥ ― ¥ ― ― 10,424 10,424 ¥ Note: Balances to be repaid or redeemed in 1 year or less are included in “Bonds”, “Long-term borrowings” and “Lease obligations”. The year ended March 31, 2019 Non-cash changes U.S. dollars (thousands) Changes from Balance at financing cash Increase from new beginning of year flows leases Foreign currency translation adjustments and Short-term borrowings Bonds Long-term borrowings Lease obligations 　Total $ $ 509,072 360,360 1,747,396 193,532 2,810,360 $ $ (18,712) ― (121,928) (84,306) (224,946) $ $ ― $ ― ― 93,910 93,910 $ Yen (millions) Balance at end of others 1,150 ― (35) (82) 1,033 ¥ ¥ year 55,580 40,000 180,392 22,466 298,438 Balance at end of year $ $ 500,721 360,360 1,625,153 202,397 2,688,631 others 10,361 ― (315) (739) 9,307 Note: Balances to be repaid or redeemed in 1 year or less are included in “Bonds”, “Long-term borrowings” and “Lease obligations”. 16．Other financial liabilities 　Components of other financial liabilities are as set out in the table below. Accounts payable (non-trade) and guarantee deposits received are financial liabilities measured at amortized cost. Derivative liabilities are financial liabilities measured at fair value through profit or loss. Other financial liabilities Accounts payable-others Guarantee deposits received Derivative liabilities Total Current liabilities Non-current liabilities 　Total Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Date of transition to IFRS (April 1, 2017) ¥ ¥ 156,169 9,441 4,383 169,993 169,993 ― 169,993 ¥ ¥ 152,123 10,025 3,198 165,346 165,346 ― 165,346 ¥ ¥ 147,521 10,115 1,943 159,579 159,579 ― 159,579 $ 1,329,018 91,126 17,505 1,437,649 1,437,649 ― $ 1,437,649 Bonds and borrowings、Other financial liabilities 81 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201917．Leases 　The Company and its consolidated subsidiaries engage in finance lease and operating lease transactions in which they lease assets mainly including buildings, machinery and equipment. (1) Finance lease obligations 　Minimum lease payments and their present value based on finance lease agreements are as follows: Yen (millions) Minimum lease payments U.S. dollars (thousands) Yen (millions) U.S. dollars (thousands) Present value of minimum lease payments Date of transition to IFRS (April 1, 2017) ¥ 8,836 ¥ 16,355 48 25,239 2018 2019 2019 8,731 ¥ 15,608 37 24,376 9,302 16,111 49 25,462 $ 83,802 145,145 441 229,388 (2,893) (2,894) (2,996) (26,991) ¥ 22,346 ¥ 21,482 ¥ 22,466 $ 202,397 Within one year One to five years Over five years 　Total Deductions for financial expenses and others Present value of lease obligations Date of transition to IFRS (April 1, 2017) ¥ 2018 2019 2019 7,697 ¥ 7,822 ¥ 8,204 14,217 45 ¥ 22,346 ¥ 21,482 ¥ 22,466 14,480 44 13,752 33 $ 73,910 128,081 406 $ 202,397 (2) Operating leases 　Future minimum lease payments under non-cancelable operating leases are as follows: Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Within one year One to five years Over five years 　Total 　Minimum lease payments related to operating leases recognized as expenses in the years ended March 31, 2018 and 2019 are 53,380 million yen and 57,904 million (521,658 thousand U.S. dollars) yen, respectively. These operating leases were mainly for office space, warehouses, employee facilities and computer equipment. 208,451 394,279 85,883 688,613 21,376 42,961 6,199 70,536 23,138 43,765 9,533 76,436 $ ¥ ¥ $ ¥ ¥ ¥ Date of transition to IFRS (April 1, 2017) 18,459 ¥ 44,302 11,115 73,876 18．Trade payables 　Components of trade payables are as set out in the table below. Trade payables are classified as financial liabilities measured at amortized cost. Yen (millions) U. S. dollars (thousands) Date of transition to IFRS (April 1, 2017) 127,585 ¥ 507,498 635,083 ¥ 2018 2019 2019 ¥ ¥ 89,661 489,905 579,566 ¥ ¥ 90,840 468,801 559,641 $ 818,378 4,223,433 $ 5,041,811 Notes payable Accounts payable 　Total 19．Employee benefits (1) Post-employment benefits 　The Company has non-contributory and contributory defined benefit plans covering its employees who meet eligibility requirements. Under the non-contributory plans, employees with less than twenty years of service are entitled to lump-sum payments at date of severance, and employees with twenty or more years of service are entitled to annuity payments subsequent to retirement, determined by the current basic rate of pay, length of service and termination conditions. In addition, certain employees who meet the eligibility requirements are entitled to additional lump-sum payments at the date of retirement based on the retirement age. Under the contributory plans, employees are entitled to lump-sum or annuity payments at a certain age. The assets of certain of the non-contributory plans and the contributory plans are combined in accordance with the regulations and administered by a board of trustees comprised equally of employer and employee representatives. An employee retirement benefit trust is established for certain of the non-contributory plans. 82 Leases、Trade payables、Employee benefits Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　The institution managing the fund and plan assets is legally obligated to act with the objective of maximizing the benefit to plan participants, and bears responsibility for management of the plan assets according to a prescribed investment policy. The Company is obligated to contribute to the fund over the future, and the amount of the contribution is periodically revised to the extent as is permitted in laws and regulations. 　The Company amended its benefit plan under labor and management agreement during the year ended March 31, 2005, and established a defined contribution plan in part of non-contributory benefit plan on April 1, 2005. In addition, the Company amended its contributory defined benefit plan and introduced a cash balance pension plan. Under the cash balance pension plan, each participant has a notional account which is credited yearly based on the current rate of contribution and market-related interest rate. 　The domestic consolidated subsidiaries provide various pension plans, including employees’ pension fund plans, and/or corporate pension fund plans, based on each subsidiary’s respective pension policies. 　In addition, foreign consolidated subsidiaries that have adopted a pension policy mainly provides defined contribution pension plans. (2) Defined benefit plans 　Changes in the present value of defined benefit obligations and fair value of plan assets are as follows: Present value of a defined benefit obligation Balance at beginning of year ¥ 1,179,673 ¥ 1,177,570 $ 10,608,739 2018 2019 2019 Yen (millions) U.S.dollars (thousands) Service cost Interest cost Remeasurements of defined benefit pension plans Actuarial gains and losses arising from changes in demographic assumptions Actuarial gains and losses arising from changes in financial assumptions Others Benefits paid Others Balance at end of year Fair value of plan assets Balance at beginning of year Interest income Remeasurements of defined benefit pension plans Return on plan assets (excluding interest income) Employer contributions Plan participants' contributions Benefits paid Others Balance at end of year Net defined benefit liability recognized in the Consolidated Statement of Financial Position 36,750 7,527 (598) 9,307 4,017 (60,193) 1,087 38,483 6,567 617 6,190 5,185 (58,447) (1,145) 346,694 59,162 5,559 55,766 46,712 (526,551) (10,315) 1,177,570 1,175,020 10,585,766 1,015,173 1,055,222 6,904 6,396 43,274 27,358 833 (39,600) 1,280 29,551 27,422 850 (38,003) (979) 1,055,222 1,080,459 122,348 94,561 9,506,505 57,622 266,225 247,045 7,658 (342,370) (8,820) 9,733,865 851,901 Net defined benefit liabilities Net defined benefit assets Net amount 174,717 52,369 ¥ 122,348 ¥ 180,576 86,015 94,561 1,626,811 774,910 851,901 $ Notes: 1　Service costs, interest costs and interest income are included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement of profit or loss. 2　Part of net defined benefit liabilities is included in “Other current liabilities” in the consolidated statement of financial position. 3　Net defined benefit assets are included in “Other non-current assets” in the consolidated statement of financial position. 　The company and its consolidated subsidiaries plan to pay contributions of 27,323 million yen (246,153 thousand U.S. dollars) in the next fiscal year. Employee benefits 83 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　The Company’s investment policies are designed to ensure adequate plan assets are available to provide future payments of pension benefits to eligible participants. Taking into account the expected long-term rate of return on plan assets, the Company formulates an investment portfolio comprised of the optimal combination of equity and debt instruments. Plan assets are invested in individual equity and debt instruments using the guidelines of the investment portfolio in order to produce a total return that will match the expected return on a mid-term to long-term basis. The Company evaluates the gap between expected return and actual return of invested plan assets on an annual basis. In addition, taking into consideration the management environment and the revision of regulations, the Company revises the investment portfolio when and to the extent considered necessary to achieve the expected long-term rate of return on plan assets based on the pension asset and liability management method. 　The Company’s target asset allocation ratios are as follows: approximately 18% is invested in equity instruments, approximately 65% is invested in debt instruments and investments in life insurance company general accounts and approximately 17% is invested in other investments, primarily in hedge funds. As for selection of plan assets, the Company examines the nature of investments, and appropriately diversifies investments. 　Major components of plan assets are as follows: Date of transition to IFRS (April 1, 2017) 2018 2019 2019 Has quoted market prices in active markets Total Has quoted market prices in active markets Total Has quoted market prices in active markets Total Yes No Yes No Yes No Has quoted market prices in active markets Yes No Total Yen (millions) U.S.dollars (thousands) ¥ 22,090 ― 22,090 ¥ 21,178 ― 21,178 ¥ 21,320 ― 21,320 $ 192,072 ― 192,072 211,657 ― 211,657 230,408 ― 230,408 248,472 ― 248,472 2,238,486 ― 2,238,486 Cash and cash equivalents Equity instruments Marketable equity securities Pooled funds ― 179,368 179,368 ― 154,156 154,156 ― 158,605 158,605 ― 1,428,874 1,428,874 Debt instruments Government, municipal and corporate bonds Pooled funds Life insurance company general accounts Others 5,414 14,804 20,218 6,036 14,161 20,197 3,485 14,272 17,757 31,397 128,577 159,974 ― ― ― 373,851 373,851 101,100 101,100 106,889 106,889 ― ― ― 387,779 387,779 102,436 102,436 139,068 139,068 ― ― ― 375,343 375,343 104,184 104,184 154,778 154,778 ― ― ― 3,381,468 3,381,468 938,595 938,595 1,394,396 1,394,396 Total ¥ 239,161 776,012 1,015,173 ¥ 257,622 797,600 1,055,222 ¥ 273,277 807,182 1,080,459 $ 2,461,955 7,271,910 9,733,865 Notes: 1　Marketable equity securities include mainly domestic stocks. 2　Equity instrument pooled funds are invested into approximately 30% domestic equities and approximately 70% foreign equities as of the date of transition to IFRS (April 1, 2017), approximately 40% domestic equities and 60% foreign equities as of March 31, 2018 and approximately 40% domestic equities and 60% foreign equities as of March 31, 2019. 3　Debt instrument pooled funds are invested into approximately 60% domestic bonds and approximately 40% foreign bonds as of the date of transition to IFRS (April 1, 2017), approximately 50% domestic bonds and 50% foreign bonds as of March 31, 2018 and approximately 60% domestic bonds and 40% foreign bonds as of March 31, 2019. 4　Others include hedge funds. 84 Employee benefits Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　The key actuarial assumptions used to determine the present value of the defined benefit obligation are as follows: Date of transition to IFRS (April 1, 2017) 2018 2019 Discount rate 0.7% 0.6% 0.5% 　The effect of 0.5% change in the discount rate used in actuarial calculations on the present value of the defined benefit obligation is as follows. The sensitivity analysis assumes no change in other assumptions, but in actuality, changes in other assumptions may affect the sensitivity analysis. Discount rate increases 0.5% Discount rate decreases 0.5% ¥ ¥ Yen (millions) U.S.dollars (thousands) 2018 Decrease of 2019 ¥ Decrease of 63,212 64,649 2019 $ Decrease of 569,477 Increase of 68,986 ¥ Increase of 69,061 $ Increase of 622,171 　The weighted average duration of the defined benefit obligation for the years ended March 31, 2018 and 2019 are both 11.6 years. (3) Defined contribution plans 　The amount of cost recognized for the Company and certain consolidated subsidiaries’ defined contribution plans for the years ended March 31, 2018 and 2019 are 10,881 million yen and 11,570 million yen (104,234 thousand U.S. dollars), respectively. (4) Employee benefits expense 　The total amount of employee benefits expense included in the Consolidated Statement of Profit or Loss for the years ended March 31, 2018 and 2019 are 1,128,632 million yen and 1,168,476 million yen (10,526,811 thousand U.S. dollars), respectively. 20．Provisions 　Components and changes in provisions in the year ended March 31, 2019 are as follows: Balance at beginning of year Additions Utilized Reversed Exchange differences on translating foreign operations and others Balance at end of year Current liabilities Non-current liabilities ¥ ¥ Provision for product Provision for loss on 2019 warranties 60,853 17,630 (17,343) (3,037) (21) ¥ construction contracts 48,646 36,349 (42,826) (342) ¥ Other provisions 13,714 7,185 (3,820) (4,075) 84 (86) 58,082 ¥ 41,911 ¥ 12,918 Yen (millions) Total 123,213 61,164 (63,989) (7,454) (23) 112,911 106,006 6,905 ¥ ¥ ¥ Employee benefits、Provisions 85 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Balance at beginning of year Additions Utilized Reversed Exchange differences on translating foreign operations and others Balance at end of year Current liabilities Non-current liabilities $ $ Provision for product Provision for loss on 2019 warranties 548,225 158,829 (156,243) (27,360) (189) $ construction contracts 438,252 327,468 (385,820) (3,081) $ Other provisions 123,549 64,730 (34,414) (36,712) 757 (775) 523,262 $ 377,576 $ 116,378 U.S. dollars (thousands) $ $ $ Total 1,110,026 551,027 (576,477) (67,153) (207) 1,017,216 955,009 62,207 (1) Provision for product warranties 　The Company and its consolidated subsidiaries generally offer warranties on their products against certain manufacturing and other defects for specific periods of time and/or used conditions of the product depending on the nature of the product, the geographic location of its sale and other factors. The Company and its consolidated subsidiaries recognize accrued warranty costs based primarily on historical experience of actual warranty claims as well as current information on repair costs. (2) Provision for loss on construction contracts 　The Company and its consolidated subsidiaries record the expected amount of future losses on an individual construction order as a provision for loss on construction, if it is likely that the estimated total cost of such construction will exceed the contract order amount and if the expected loss amount can be reasonably estimated. The timing of expenditure is affected by future construction progress. 21．Equity and other equity items (1) Common stock (a) Number of total authorized shares 　The number of total authorized shares as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 was 8,000,000,000 shares. (b)Number of shares issued 　Changes in the number of shares issued are as follows: Balance at beginning of year Changes during the year Balance at end of year 2018 2,147,201,551 ― 2,147,201,551 (Unit: share) 2019 2,147,201,551 ― 2,147,201,551 Note: The shares issued by the Company are ordinary shares with no par value and outstanding shares are fully paid. (2) Treasury stock, at cost 　Changes in the number of treasury stock, at cost are as follows: Balance at beginning of year Changes during the year Balance at end of year 2018 2019 (Unit: share) 1,059,870 433,590 1,493,460 1,493,460 662,862 2,156,322 Note: Shares in the Company held by the Board Incentive Plan Trust are included in the number of treasury stock. (637,000 shares as of the date of transition to IFRS (April 1, 2017), 1,068,700 shares as of March 31, 2018, and 1,730,700 shares as of March 31, 2019) 86 Provisions、Common stock and other equity items Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(3) Capital surplus 　In the Companies Act of Japan ("Companies Act"), it is stipulated that one half or more of the amount pertaining to payment or benefits for the issuance of shares shall be included in common stock and the remainder shall be included in capital reserve within capital surplus. Capital reserve can be transferred to common stock with a resolution of the shareholders’ meeting. (4) Retained earnings 　The Companies Act requires that an amount equal to 10% of the surplus reduced by dividends of surplus be appropriated as capital reserve or legal reserve included in retained earnings until the aggregated amount of capital reserve and the legal reserve equals 25% of common stock. Legal reserve may be appropriated to cover deficit or reversed with a resolution of the shareholders’ meeting. (5) Accumulated other comprehensive income (loss) 　Changes in each item of accumulated other comprehensive income (loss) are as follows: 2018 Yen (millions) Exchange differences on translating foreign operations Changes in fair value of financial assets measured at fair value through other comprehensive income Remeasurements of defined benefit plans Net changes in the fair value of cash flow hedges Total Balance at beginning of year Net change in other comprehensive income Reclassification to retained earnings Balance at end of year ¥ ¥ ― ¥ 101,129 ¥ ― ¥ 37 ¥ 101,166 17,549 ― (509) (8,668) 21,961 (21,961) (46) ― 38,955 (30,629) 17,549 ¥ 91,952 ¥ ― ¥ (9) ¥ 109,492 2019 Yen (millions) Exchange differences on translating foreign operations Changes in fair value of financial assets measured at fair value through other comprehensive income Remeasurements of defined benefit plans Net changes in the fair value of cash flow hedges Total Balance at beginning of year Net change in other comprehensive income Reclassification to retained earnings Balance at end of year ¥ ¥ 17,549 ¥ 91,952 ¥ ― ¥ (9) ¥ 109,492 (9,181) ― (40,158) 3,709 12,050 (12,050) (53) ― 8,368 ¥ 55,503 ¥ ― ¥ (62) ¥ (37,342) (8,341) 63,809 2019 U.S. dollars (thousands) Exchange differences on translating foreign operations Changes in fair value of financial assets measured at fair value through other comprehensive income Remeasurements of defined benefit plans Net changes in the fair value of cash flow hedges Total Balance at beginning of year Net change in other comprehensive income Reclassification to retained earnings Balance at end of year $ $ 158,099 $ 828,396 $ ― $ (81) $ 986,414 (82,712) (361,784) ― 33,415 108,559 (108,559) (477) ― (336,414) (75,144) 75,387 $ 500,027 $ ― $ (558) $ 574,856 Common stock and other equity items 87 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　Net changes in other comprehensive income (loss) attributable to non-controlling interests are as follows: Exchange differences on translating foreign operations Changes in fair value of financial assets measured at fair value through other comprehensive income Remeasurements of defined benefit plans Net changes in the fair value of cash flow hedges Total 2018 Yen (millions) 2019 U.S. dollars (thousands) 2019 1,306 ¥ (210) $ (1,892) 65 (76) (19) 83 (20) 6 748 (180) 54 1,276 ¥ (141) $ (1,270) ¥ ¥ 22．Dividends 　Dividends paid for the years ended March 31, 2018 and 2019 are as follows: Resolution date Total amount of dividends Yen (millions) Dividend per share Yen 2018 April 28, 2017 Board of Directors Meeting October 31, 2017 Board of Directors Meeting ¥ ¥ 38,642 30,054 Resolution date Total amount of dividends Yen (millions) April 27, 2018 Board of Directors Meeting October 29, 2018 Board of Directors Meeting ¥ ¥ 55,816 30,054 Resolution date Total amount of dividends U.S. dollars (thousands) April 27, 2018 Board of Directors Meeting October 29, 2018 Board of Directors Meeting $ $ 502,847 270,757 ¥ ¥ ¥ ¥ $ $ Record date Effective date March 31, 2017 June 2, 2017 September 30, 2017 December 4, 2017 18 14 2019 Dividend per share Yen Record date Effective date 26 March 31, 2018 June 4, 2018 14 September 30, 2018 December 4, 2018 2019 Dividend per share U.S. dollars Record date Effective date 0.234 March 31, 2018 June 4, 2018 0.126 September 30, 2018 December 4, 2018 　Dividends with a record date in the year ended March 31, 2019 and the effective date in the next fiscal year are as follows: Resolution date Total amount of dividends Dividend per share Record date Effective date April 26, 2019 Board of Directors Meeting ¥ Yen (millions) 55,816 ¥ Yen 26 March 31, 2019 June 4, 2019 Resolution date Total amount of dividends Dividend per share Record date Effective date U.S. dollars (thousands) U.S. dollars April 26, 2019 Board of Directors Meeting $ 502,847 $ 0.234 March 31, 2019 June 4, 2019 88 Common stock and other equity items、Dividends Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201923．Revenues (1) Disaggregation of revenue 　The Group’s business consists of 6 reportable segments: Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices, Home Appliances and Others. Revenue is presented by these categories since the Company's management periodically uses them for decision of business resources allocation and evaluation of business operations. 　Revenue is disaggregated by region according to the customer’s location. The relationship between these disaggregated revenue and segment revenue are as follows: Japan 2018 Overseas Asia Yen (millions) Consolidated Total North America (excluding Japan) Europe Others total Energy and Electric Systems ¥ 822,769 ¥ 105,467 ¥ 277,392 ¥ 16,011 ¥ 23,302 ¥ 422,172 ¥ 1,244,941 Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others 565,876 377,805 49,501 464,377 158,614 207,820 457,740 194,763 6,404 7,737 90,910 783 4,743 83,979 246,556 18,766 1,420 23,873 195,102 147 5,514 543 288 36,189 33 865,837 13,110 115,877 568,757 19,729 1,431,713 390,915 165,378 1,033,134 178,343 Consolidated total ¥ 2,438,942 ¥ 419,121 ¥ 1,089,176 ¥ 431,316 ¥ 65,869 ¥ 2,005,482 ¥ 4,444,424 Japan 2019 Overseas Asia Yen (millions) Consolidated Total North America (excluding Japan) Europe Others total Energy and Electric Systems ¥ 876,378 ¥ 110,662 ¥ 257,538 ¥ 20,510 ¥ 22,636 ¥ 411,346 ¥ 1,287,724 Industrial Automation Systems Information and Communication Systems Electronic Devices Home Appliances Others 611,392 370,702 50,012 486,205 161,955 205,034 431,092 201,068 4,560 10,818 97,650 727 7,278 72,192 230,329 15,454 1,581 24,639 205,657 293 5,372 730 326 37,102 29 842,566 14,149 107,975 570,738 16,503 1,453,958 384,851 157,987 1,056,943 178,458 Consolidated total ¥ 2,556,644 ¥ 429,451 ¥ 1,013,883 ¥ 453,748 ¥ 66,195 ¥ 1,963,277 ¥ 4,519,921 Japan 2019 Overseas Asia U.S. dollars (thousands) Consolidated Total North America (excluding Japan) Europe Others total Energy and Electric Systems $ 7,895,297 $ 996,955 $ 2,320,162 $ 184,775 $ 203,928 $ 3,705,820 $ 11,601,117 Industrial Automation Systems 5,508,036 1,847,153 3,883,713 1,811,423 48,396 7,590,685 13,098,721 Information and Communication Systems Electronic Devices Home Appliances Others 3,339,658 450,559 4,380,225 1,459,054 41,081 97,459 65,567 650,378 14,243 221,973 6,577 2,937 127,468 972,747 879,730 2,075,036 1,852,766 334,252 5,141,784 6,550 139,225 2,640 261 148,676 3,467,126 1,423,306 9,522,009 1,607,730 Consolidated total $ 23,032,829 $ 3,868,928 $ 9,134,081 $ 4,087,820 $ 596,351 $ 17,687,180 $ 40,720,009 　The principal businesses and major products and services of each operating segment are shown in Note “6. Segment information”. 　The Group conducts business through 6 categories by aggregating multiple operating segments based on types and characteristics of products, production methods, and similarities in market. 89 Revenues MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　Revenue is accounted for according to Note “3. Significant accounting policies (13) Revenues”, and revenue recognition methods for each categories are primarily as follows: (a) Energy and Electric Systems, Information and Communication Systems 　Major revenue recognition methods are as follows. Revenue is primarily recorded over time. 　Many contracts related to the production of products qualify as specific construction contracts meeting certain criteria, and revenue is recognized according to the progress of the construction if progress can be reasonably measured. Revenue is recognized only to the extent of the cost incurred if progress cannot be reasonably measured. The progress of construction is measured by comparing the cost incurred through the current year to the aggregate amount of estimated cost. Estimates and underlying assumptions for the aggregate amount of estimated cost are reviewed on an ongoing basis since there is a possibility that the cost incurred may change due to the progress of construction. 　Revenue from maintenance agreements is recognized over the contract term as the maintenance is provided. (b)Industrial Automation Systems, Electronic Devices, Home Appliances, Others 　Major revenue recognition methods are as follows. Revenue is primarily recorded at a point in time. 　Revenue from mass-produced goods such as home appliances, semiconductors and industrial products are recognized at the time when the product is accepted by the customer. 　Revenue from some products requiring acceptance inspection are recognized at the time when the product is received by the customer and the functionality of the product is substantially demonstrated by the Company and its consolidated subsidiaries. (2) Contract liabilities 　The amount of revenue recognized during the year that was included in the contract liability balance at the beginning of each year is as follows: 2018 2019 2019 Yen (millions) U.S. dollars (thousands) Amount of the contract liability balance at the beginning of the year recognized as revenue during the year ¥ 113,780 ¥ 122,246 $ 1,101,315 (3)Transaction price allocated to remaining performance obligations 　The total amount of transaction price allocated to remaining performance obligations is 1,250,705 million yen as of March 31, 2018. The Company and its consolidated subsidiaries recognize this revenue primarily according to satisfaction of the performance obligations. The period in which this revenue is expected to be recognized is from the years ending March 31, 2019 to 2040. 　The total amount of transaction price allocated to remaining performance obligations is 1,306,385 million yen (11,769,234 thousand U.S. dollars) as of March 31, 2019. The Company and its consolidated subsidiaries recognize this revenue primarily according to satisfaction of the performance obligations. The period in which this revenue is expected to be recognized is from the years ending March 31, 2020 to 2040. 　The Company and its consolidated subsidiaries apply the practical expedient in IFRS 15 paragraph 121(a) and do not include contracts that have an original expected duration of one year or less in the total amount of the transaction price allocated to remaining performance obligations. 90 Revenues Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201924．Other profit (loss) 　The major components of other profit (loss) are as follows: Gain on sales of fixed assets ¥ 645 ¥ 1,609 $ 14,495 Impairment losses (4,202) (2,645) (23,829) 2018 2019 2019 Yen (millions) U.S. dollars (thousands) 25．Financial income and financial expenses 　Components of financial income and financial expenses are as set out in the table below. Dividend income were related to financial assets measured at fair value through other comprehensive income. Financial income 　Dividends 　Interest income 　　Financial assets measured at amortized cost 　　　Total Financial expenses 　Interest expenses 　　Financial liabilities measured at amortized cost 　Exchange losses 　　　Total 2,727 4,069 6,796 ¥ ¥ Note:Gains (losses) on derivative instruments not designated as hedges are included in exchange losses. 2018 2019 2019 Yen (millions) U.S. dollars (thousands) ¥ 5,467 ¥ 6,282 $ 56,595 3,144 8,611 3,465 9,747 2,627 1,755 4,382 $ 31,216 87,811 23,667 15,810 39,477 Other profit (loss)、Financial income and financial expenses 91 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201926．Other comprehensive income 　The amount arising during the year on each item of other comprehensive income (loss), reclassification adjustments to profit or loss and tax effects is as follows: Before-tax amount 2018 Tax (expense) or benefit Yen (millions) Net-of-tax amount Items that will not be reclassified to net profit Changes in fair value of financial assets measured at fair value through other comprehensive income Amount arising during the year ¥ Net change during the year Remeasurements of defined benefit plans Amount arising during the year Net change during the year Share of other comprehensive income of investments accounted for using the equity method Amount arising during the year Net change during the year Items that may be reclassified to net profit Exchange differences on translating foreign operations Amount arising during the year Net change during the year Net changes in the fair value of cash flow hedges Amount arising during the year Reclassification adjustments to net profit Net change during the year Share of other comprehensive income of investments accounted for using the equity method Amount arising during the year Net change during the year (744) ¥ (744) ¥ 692 692 30,548 30,548 245 245 16,908 16,908 (265) 173 (92) 2,091 2,091 (9,225) (9,225) (75) (75) 84 84 63 (42) 21 (222) (222) Other comprehensive income (loss) ¥ 48,956 ¥ (8,725) ¥ (52) (52) 21,323 21,323 170 170 16,992 16,992 (202) 131 (71) 1,869 1,869 40,231 92 Other comprehensive income Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Before-tax amount 2019 Tax (expense) or benefit Yen (millions) Net-of-tax amount Items that will not be reclassified to net profit Changes in fair value of financial assets measured at fair value through other comprehensive income Amount arising during the year ¥ (52,768) ¥ 13,484 ¥ Net change during the year (52,768) 13,484 Remeasurements of defined benefit plans Amount arising during the year Net change during the year Share of other comprehensive income of investments accounted for using the equity method Amount arising during the year Net change during the year Items that may be reclassified to net profit Exchange differences on translating foreign operations Amount arising during the year Net change during the year Net changes in the fair value of cash flow hedges Amount arising during the year Reclassification adjustments to net profit Net change during the year Share of other comprehensive income of investments accounted for using the equity method Amount arising during the year Net change during the year 17,559 17,559 (1,432) (1,432) (6,729) (6,729) (75) 24 (51) (2,942) (2,942) (5,325) (5,325) 437 437 (27) (27) 23 (9) 14 297 297 Other comprehensive income (loss) ¥ (46,363) ¥ 8,880 ¥ (39,284) (39,284) 12,234 12,234 (995) (995) (6,756) (6,756) (52) 15 (37) (2,645) (2,645) (37,483) Other comprehensive income 93 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Before-tax amount 2019 Tax (expense) or benefit Items that will not be reclassified to net profit Changes in fair value of financial assets measured at fair value through other comprehensive income Amount arising during the year $ (475,387) $ 121,477 $ Net change during the year (475,387) 121,477 Remeasurements of defined benefit plans Amount arising during the year Net change during the year Share of other comprehensive income of investments accounted for using the equity method Amount arising during the year Net change during the year Items that may be reclassified to net profit Exchange differences on translating foreign operations Amount arising during the year Net change during the year Net changes in the fair value of cash flow hedges Amount arising during the year Reclassification adjustments to net profit Net change during the year Share of other comprehensive income of investments accounted for using the equity method Amount arising during the year Net change during the year 158,189 158,189 (12,901) (12,901) (60,622) (60,622) (675) 216 (459) (26,504) (26,504) (47,973) (47,973) 3,937 3,937 (243) (243) 207 (81) 126 2,676 2,676 Other comprehensive income (loss) $ (417,684) $ 80,000 $ U.S. dollars (thousands) Net-of-tax amount (353,910) (353,910) 110,216 110,216 (8,964) (8,964) (60,865) (60,865) (468) 135 (333) (23,828) (23,828) (337,684) 94 Other comprehensive income Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201927．Earnings per share 　Basic earnings per share and diluted earnings per share for net profit attributable to Mitsubishi Electric Corp. stockholders are as follows: Net profit attributable to Mitsubishi Electric Corp. stockholders Basic average ordinary shares outstanding Basic earnings per share for net profit attributable to Mitsubishi Electric Corp. stockholders Diluted earnings per share for net profit attributable to Mitsubishi Electric Corp. stockholders 2018 Yen (millions) 2019 U.S. dollars (thousands) 2019 255,755 ¥ 226,648 $ 2,041,874 2018 2,145,808,679 Shares 2019 2,145,198,524 2018 2019 119.19 119.19 ¥ ¥ Yen 105.65 105.65 U.S. dollars 2019 0.952 0.952 $ $ ¥ ¥ ¥ Note: The number of the Company’s shares held through the Board Incentive Plan Trust were included in the shares of treasury stock that were deducted from the average number of ordinary shares outstanding in the calculation of Earnings per share attributable to Mitsubishi Electric Corp. stockholders. (969,077 shares as of March 31, 2018, and 1,577,931 shares as of March 31, 2019). 28．Financial instruments (1) Capital management 　The Company and its consolidated subsidiaries carry out capital management using ROE and the ratio of interest bearing debt to total assets as continuing key performance indicators in order to establish a strong financial basis and enable further business expansion globally. Capital is defined as equity (Mitsubishi Electric Corp. stockholders’ equity) as presented in the Consolidated Statement of Financial Position. 　ROE and the ratio of interest bearing debt to total assets are as set out in the table below. ROE is calculated as Net profit attributable to Mitsubishi Electric Corp. stockholders divided by equity. The ratio of interest bearing debt to total assets is calculated as bonds and borrowings divided by total assets. Date of transition to IFRS (April 1, 2017) 2018 2019 ROE Ratio of interest bearing debt to total assets ― 8.8% 11.7% 7.2% 9.7% 6.9% 　There are no significant capital regulations that apply to the Company and its consolidated subsidiaries. (2) Financial risk management 　In the course of their management activities, the Company and its consolidated subsidiaries face financial risks including market risk, credit risk and liquidity risk, and carry out risk management to mitigate these risks. (a) Market risk management (i) Currency risk management 　The Group is engaged in production and sales activities in various regions including Japan, North America, Europe, Asia and other regions. Revenue and expenses as well as assets and liabilities denominated in foreign currencies may be affected by foreign exchange rate fluctuations. 　The Company and certain consolidated subsidiaries have entered into forward exchange contracts mainly to hedge cash flows from foreign currency-denominated forecast transactions. Currency risk exposure 　The Company and its consolidated subsidiaries’ currency risk exposure (net) is primarily as set out in the table below. Amounts for which currency risk is hedged using forward exchange contracts are excluded. U.S. dollars Euros Yen (millions) U.S. dollars (thousands) 2018 2019 2019 ¥ ¥ 37,820 29,273 ¥ ¥ 11,344 23,404 $ $ 102,198 210,847 Earnings per share、Financial instruments 95 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Foreign exchange sensitivity analysis 　With regards to foreign currency-denominated financial instruments held by the Company and its consolidated subsidiaries, assuming that all variables other than foreign exchange are constant, the effect of a 1% increase in the value of the yen against the U.S. dollar and euro on profit before income taxes in the Consolidated Statement of Profit or Loss are as follows (negative values shown in parentheses): U.S. dollars Euros Yen (millions) U.S. dollars (thousands) 2018 2019 2019 ¥ ¥ (378) (293) ¥ ¥ (113) (234) $ $ (1,018) (2,108) (ii) Interest rate risk management 　The Company and its consolidated subsidiaries may be affected by fluctuations in interest rates of borrowings with variable interest. The Company and its consolidated subsidiaries limit interest rate risk exposure by procuring most of their bonds and borrowings with fixed interest rates. Interest rate risk exposure 　The interest rate risk exposure of the Company and its consolidated subsidiaries are as follows: Yen (millions) U.S. dollars (thousands) Variable interest rate bonds and borrowings ¥ 56,641 ¥ 55,682 $ 501,640 2018 2019 2019 Interest rate sensitivity analysis 　With regard to financial instruments held by the Company and its consolidated subsidiaries, assuming that all variables other than interest rates are constant, the effect of a 1% increase in the interest rate on profit before income taxes in the Consolidated Statement of Profit or Loss are as follows (negative values shown in parentheses): 2018 2019 2019 Yen (millions) U.S. dollars (thousands) Effect on profit before income taxes ¥ (566) ¥ (557) $ (5,018) (b) Credit risk management 　Receivables arising from the operating activities of the Company and its consolidated subsidiaries may be affected by changes in the financial conditions of customers. 　The Company and its consolidated subsidiaries determine trade receivables and other receivables, to be in default if they cannot be recovered in part or in full or recovery is considered extremely difficult. 　In order to mitigate risk by setting transaction amount limits in line with credit risk, the Company and its consolidated subsidiaries first conduct screening through external agencies and then, establish customer credit limits and regularly monitor customers’ financial condition. 　Derivative transactions with the purpose of mitigating market risk are carried out with highly reputable financial institutions to minimize credit risk. 　Excluding guarantees, the carrying amount after impairment of financial assets and contract assets presented in the consolidated financial statements is the maximum exposure without taking account of collateral received for credit risk on the financial assets and contract assets of the Company and its consolidated subsidiaries. 　The Company and its consolidated subsidiaries have given guarantees to financial institutions related to transactions of associates and employees as follows: Guarantees of bank loan 　Associates 　Employees Others 　　Total 2018 2019 2019 Yen (millions) U.S. dollars (thousands) ¥ ¥ 532 ¥ 1,414 6,559 8,505 ¥ 50 1,002 6,257 7,309 $ $ 450 9,027 56,369 65,846 　Allowance for credit losses relating to performance of guarantee above is not recognized because the effect on the consolidated financial statements is immaterial. 　The amount of allowance for credit losses for trade receivables and contract assets is calculated by estimating the lifetime expected credit losses until collection. 　The amount of allowance for credit losses for other financial assets is in principle calculated by estimating 12-month expected credit losses. However, allowance for credit losses for financial assets for which credit risk has increased significantly since initial recognition or credit-impaired financial assets is calculated as an amount equal to lifetime expected credit losses. 96 Financial instruments Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　The amount of allowance for credit losses is calculated as follows: -Trade receivables and contract assets 　Grouping is performed based on credit risk rating, then receivables are multiplied by an allowance rate based on the historical credit loss rate and adjusted for forecasts of future economic conditions. Further, trade receivables and contract assets consists of a lot of homogenous customers, and their credit ratings are deemed to be identical. . -Other financial assets 　For financial assets whose credit risk has not been determined to have increased significantly since initial recognition, grouping is performed based on risks having similar characteristics, then cost is multiplied by an allowance rate based on the historical credit loss rate and adjusted for forecasts of future economic conditions. However, for financial assets whose credit risk has increased significantly since initial recognition and credit-impaired financial assets, the difference between the present value of the amount expected to be recovered and adjusted for forecasts of future economic conditions, and the carrying amount is used individually. 　Changes in allowance for credit losses are as follows: 2018 Lifetime expected credit losses 12-month expected credit losses Financial assets always measured at an amount equal to lifetime expected credit losses Financial assets for which credit risk has increased significantly since initial recognition Credit-impaired financial assets Balance at beginning of year ¥ 116 ¥ Additions Utilized Reversed Exchange differences on translating foreign operations, others 1 ― ― ― 5,728 6,125 (1,316) (1,884) (36) ¥ ― ¥ ― ― ― ― ¥ 8,137 2,070 (4,776) (1,268) (1) (37) Balance at end of year ¥ 117 ¥ 8,617 ¥ ― ¥ 4,162 ¥ 12,896 2019 2019 Lifetime expected credit losses 12-month expected credit losses Financial assets always measured at an amount equal to lifetime expected credit losses Financial assets for which credit risk has increased significantly since initial recognition Credit-impaired financial assets Balance at beginning of year ¥ 117 ¥ Additions Utilized Reversed Exchange differences on translating foreign operations, others 1 ― (1) ― 8,617 5,085 (2,030) (3,768) (73) ¥ ― ¥ ― ― ― ― ¥ 4,162 1,588 (614) (1,002) (7) (80) Yen (millions) Total 13,981 8,196 (6,092) (3,152) Yen (millions) Total 12,896 6,674 (2,644) (4,771) Balance at end of year ¥ 117 ¥ 7,831 ¥ ― ¥ 4,127 ¥ 12,075 Financial instruments 97 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 20192019 2019 Lifetime expected credit losses 12-month expected credit losses Financial assets always measured at an amount equal to lifetime expected credit losses Financial assets for which credit risk has increased significantly since initial recognition Credit-impaired financial assets Balance at beginning of year $ 1,054 $ Additions Utilized Reversed Exchange differences on translating foreign operations, others 9 ― (9) ― 77,631 45,811 (18,288) (33,946) (658) $ ― $ ― ― ― ― U.S. dollars (thousands) $ 37,495 14,306 (5,532) (9,027) Total 116,180 60,126 (23,820) (42,982) (63) (721) Balance at end of year $ 1,054 $ 70,550 $ ― $ 37,179 $ 108,783 　The carrying amounts (before deducting the allowance for credit losses) of financial assets and contract assets subject to recognition of allowance for credit losses are as follows: Lifetime expected credit losses Financial assets measured at an amount equal to 12-month expected credit losses Financial assets always measured at an amount equal to lifetime expected credit losses Financial assets for which credit risk has increased significantly since initial recognition Credit-impaired financial assets Date of transition to IFRS 2018 2019 ¥ ¥ ¥ 75,432 80,129 84,232 1,161,194 1,200,146 1,241,747 ― ― ― 9,831 6,107 6,156 ¥ ¥ ¥ Yen (millions) Total 1,246,457 1,286,382 1,332,135 Lifetime expected credit losses U.S. dollars (thousands) Financial assets measured at an amount equal to 12-month expected credit losses Financial assets always measured at an amount equal to lifetime expected credit losses Financial assets for which credit risk has increased significantly since initial recognition Credit-impaired financial assets Total 2019 $ 758,847 11,186,910 ― 55,459 $ 12,001,216 (c) Liquidity risk management 　The Company and its consolidated subsidiaries finance through borrowings from financial institutions and by issuing bonds, which may be affected by deterioration in the financing environment. 　In order to hedge the risk of not being able to make payment on financial liabilities by the due date, the Company and its consolidated subsidiaries manage liquidity risk by preparing adequate funds for repayment, securing readily available lines of credit from financial institutions and continuously monitoring planned and actual cash flows. 　Balances of financial liabilities (including derivative instruments) classified by due dates are as set out in the table below. Date of transition to IFRS (April 1, 2017) Carrying amount Contractual cash flows Within one year One to five years Over five years Yen (millions) ¥ 800,693 82,855 228,910 40,000 22,346 ¥ 800,693 83,381 233,300 40,592 25,239 ¥ 800,693 83,381 57,336 140 8,836 ― ¥ ― 133,800 40,452 16,355 ― ― 42,164 ― 48 4,383 4,383 4,383 ― ― ¥ 1,179,187 ¥ 1,187,588 ¥ 954,769 ¥ 190,607 ¥ 42,212 Non-derivatives financial liabilities Trade payables and other financial liabilities ¥ Short-term borrowings Long-term borrowings Bonds Lease obligations Derivatives financial liabilities Forward exchange contracts and others 　Total 98 Financial instruments Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Non-derivatives financial liabilities Trade payables and other financial liabilities ¥ Short-term borrowings Long-term borrowings Bonds Lease obligations Derivatives financial liabilities Forward exchange contracts and others 　Total Non-derivatives financial liabilities Trade payables and other financial liabilities ¥ Short-term borrowings Long-term borrowings Bonds Lease obligations Derivatives financial liabilities Forward exchange contracts and others 　Total Non-derivatives financial liabilities Trade payables and other financial liabilities $ Short-term borrowings Long-term borrowings Bonds Lease obligations Derivatives financial liabilities Forward exchange contracts and others 　Total Carrying amount Contractual cash flows Within one year One to five years Over five years 2018 Yen (millions) ¥ 741,714 56,507 193,961 40,000 21,482 ¥ 741,714 57,177 197,067 40,452 24,376 ¥ 741,714 57,177 59,932 140 8,731 ― ¥ ― 123,063 40,312 15,608 ― ― 14,072 ― 37 3,198 3,198 3,198 ― ― ¥ 1,056,862 ¥ 1,063,984 ¥ 870,892 ¥ 178,983 ¥ 14,109 Carrying amount Contractual cash flows Within one year One to five years Over five years 2019 Yen (millions) ¥ 717,277 55,580 180,392 40,000 22,466 ¥ 717,277 56,201 182,712 40,312 25,462 ¥ 717,277 56,201 22,000 20,140 9,302 ― ¥ ― 155,690 20,172 16,111 ― ― 5,022 ― 49 1,943 1,943 1,943 ― ― ¥ 1,017,658 ¥ 1,023,907 ¥ 826,863 ¥ 191,973 ¥ 5,071 Carrying amount Contractual cash flows Within one year One to five years Over five years 2019 U.S. dollars (thousands) 6,461,955 500,721 1,625,153 360,360 202,397 $ 6,461,955 506,315 1,646,054 363,171 229,388 $ 6,461,955 506,315 198,198 181,441 83,802 $ ― $ ― 1,402,613 181,730 145,145 ― ― 45,243 ― 441 17,505 17,505 17,505 ― ― $ 9,168,091 $ 9,224,388 $ 7,449,216 $ 1,729,488 $ 45,684 (3) Derivatives and hedging activities 　The Company and its consolidated subsidiaries operate internationally, giving rise to significant exposure to market risks from changes in foreign currencies and interest rates. Derivative instruments are comprised principally of forward exchange contracts and currency swaps utilized by the Company and certain consolidated subsidiaries to reduce these risks. The Company and certain consolidated subsidiaries do not hold or issue financial instruments for trading purposes. Currency swaps are utilized to hedge changes in fair value, but are not designated as hedging instruments. Financial instruments 99 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019(a) Cash flow hedges 　The Company and certain consolidated subsidiaries have entered into forward exchange contracts mainly to hedge market risk of claims and debts denominated in foreign currencies from foreign exchange rate fluctuations. The Company and certain consolidated subsidiaries designate the forward exchange contracts as hedging instruments in cash flow hedges. The Company and certain consolidated subsidiaries set an appropriate hedge ratio at the inception of the hedging relationship based on the quantities of the hedged items and the hedging instruments. In principle, a one-to-one hedging relationship is used. The significant conditions of the hedged items and the hedging instruments are in principal matched. 　The Company and certain consolidated subsidiaries consider the period in which hedged cash flows are expected to occur and the period in which those are expected to affect profit or loss are from April 2019 to June 2020. 　The notional principal amount of forward exchange contracts designated as hedging instruments as of the date of transition to IFRS, and the years ended March 31, 2018 and 2019 are as follows: Yen (millions) U.S. dollars (thousands) Type of hedge Date of transition to IFRS (April 1, 2017) 2018 2019 2019 Forward exchange contracts ¥ 6,361 ¥ 5,850 ¥ 5,464 $ 49,225 　The fair value of forward exchange contracts designated as hedging instruments as of the date of transition to IFRS, and the years ended March 31, 2018 and 2019 are as follows: Yen (millions) U.S. dollars (thousands) Type of hedge Line item Forward exchange contracts Other financial assets Date of transition to IFRS (April 1, 2017) 103 ¥ Other financial liabilities ¥ 49 2018 2019 2019 ¥ ¥ 30 67 ¥ ¥ 50 59 $ $ 450 532 　The amount of ineffective portion of hedges recognized in profit or loss is insignificant. (4) Fair value of financial instruments 　The Group classifies fair value measurements from level 1 to level 3 according to the observability of the inputs used in measurement: Level 1: quoted prices for identical assets or liabilities in active markets Level 2: fair value calculated directly or indirectly using observable prices other than those in level 1 Level 3: fair value calculated using valuation techniques including unobservable inputs 　A determination is made at the end of each consolidated fiscal year as to whether there are financial instruments for which transfers between levels were carried out. There were no financial instruments with significant transfers between levels in the years ended March 31, 2018 and 2019. 　For financial instruments classified as level 3, changing the unobservable inputs to reasonably possible alternative assumptions would not change the fair value significantly. (a) Financial instruments measured at amortized cost 　Methods of measurement of fair value, carrying amount and fair value of financial instruments measured at amortized cost are as follows: Bonds and borrowings (excluding short-term borrowings and lease obligations) 　Fair values of bonds are calculated using the Reference Statistical Prices of the Japan Securities Dealers Association and are classified as level 2 because fair value is calculated using observable market data. Fair values of borrowings are calculated using the present value of future cash flows discounted by the expected interest rate for similar new contracts and are classified as level 2 because fair value is calculated using observable market data. 100 Financial instruments Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Date of transition to IFRS (April 1, 2017) 2018 2019 2019 Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Yen (millions) U.S. dollars (thousands) Financial instruments measured at amortized cost 　Bonds and borrowings ¥ 268,910 ¥ 266,961 ¥ 233,961 ¥ 231,418 ¥ 220,392 ¥ 216,712 $ 1,985,513 $ 1,952,358 Note: The fair value of financial assets and financial liabilities measured at amortized cost other than the above approximated the carrying amounts. (b) Financial instruments measured at fair value on a recurring basis 　The method of measurement of fair value and fair value of financial instruments measured at fair value on a recurring basis are as follows: Equity instruments 　The fair value of marketable equity instruments is calculated based on the market price at the end of the consolidated fiscal year and are classified as level 1 because fair value is calculated using the market value of an identical asset in an active market. The fair value of non-marketable equity instruments is calculated based on comprehensively taking into consideration quantitative information on the net assets and other financial information of the investee and forecasts of its future cash flows, and are classified as Level 3 because fair value is calculated based on valuation techniques using unobservable indicators. The reasonableness of the valuation techniques has been verified by the department in charge using various methods, and they have been approved by an appropriate management. Debt financial instruments 　Fair values of investment trusts are classified as level 2 because fair value is calculated as the market value of an identical asset in an inactive market based on the market approach. Derivative assets and liabilities 　Fair values of derivatives are calculated based on market interest rates and market rates of foreign exchange banks as financial assets or financial liabilities measured at fair value through profit or loss and are classified as level 2 because fair value is calculated using observable market data. Date of transition to IFRS (April 1, 2017) Level 1 Level 2 Level 3 Total Yen (millions) Assets Financial assets measured at fair value through profit or loss Debt instruments Derivative assets Financial assets measured at fair value through other comprehensive income Equity instruments Total Liabilities Financial liabilities measured at fair value through profit or loss 　Derivative liabilities Total ¥ ¥ ― ¥ ― 198 ¥ 1,602 ― ¥ ― 198 1,602 290,297 290,297 ― 1,800 58,628 58,628 348,925 350,725 ― ― ¥ 4,383 4,383 ¥ ― ― ¥ 4,383 4,383 Financial instruments 101 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Assets Financial assets measured at fair value through profit or loss Debt instruments Derivative assets Financial assets measured at fair value through other comprehensive income Equity instruments Total Liabilities Financial liabilities measured at fair value through profit or loss 　Derivative liabilities Total 2019 Assets Financial assets measured at fair value through profit or loss Derivative assets Financial assets measured at fair value through other comprehensive income Equity instruments Total Liabilities Financial liabilities measured at fair value through profit or loss 　Derivative liabilities Total 2019 Assets Financial assets measured at fair value through profit or loss Derivative assets Financial assets measured at fair value through other comprehensive income Equity instruments Total Liabilities Financial liabilities measured at fair value through profit or loss 　Derivative liabilities Total ¥ ¥ ¥ ¥ $ $ 2018 Yen (millions) Level 1 Level 2 Level 3 Total ― ¥ ― 197 ¥ 4,751 ― ¥ ― 197 4,751 260,889 260,889 ― 4,948 60,240 60,240 321,129 326,077 ― ― ¥ 3,198 3,198 ¥ ― ― ¥ 3,198 3,198 2019 Yen (millions) Level 1 Level 2 Level 3 Total ― ¥ 1,134 ¥ ― ¥ 1,134 201,898 201,898 ― 1,134 60,674 60,674 262,572 263,706 ― ― ¥ 1,943 1,943 ¥ ― ― ¥ 1,943 1,943 Level 1 2019 Level 2 U.S. dollars (thousands) Level 3 Total ― $ 10,216 $ ― $ 10,216 1,818,902 1,818,902 ― 10,216 546,613 546,613 2,365,514 2,375,730 ― ― $ 17,505 17,505 $ ― ― $ 17,505 17,505 102 Financial instruments Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019　Changes in financial instruments measured at fair value on a recurring basis classified as Level 3 are as follows: Balance at beginning of year Gains (losses) Purchases Sale Balance at end of year 2018 2019 2019 Yen (millions) U.S. dollars (thousands) ¥ ¥ 58,628 ¥ 60,240 (496) 2,816 (708) (953) 2,178 (791) 60,240 ¥ 60,674 $ $ 542,703 (8,586) 19,622 (7,126) 546,613 Note: Gains (losses) are related to financial assets measured at fair value through other comprehensive income as of the end of the reporting period and included in “Changes in fair value of financial assets measured at fair value through other comprehensive income” in the Consolidated Statement of Comprehensive Income. (5) Securitizations 　The Company and its consolidated subsidiaries have transferred trade receivables and other receivables, to unconsolidated securitization-purpose structured entities, and losses on securitization of 210 million yen and 225 million yen (2,027 thousand U.S. dollars) were recorded in the years ended March 31, 2018 and 2019, respectively. (a) Involvement with unconsolidated securitization-purpose structured entities 　Unconsolidated securitization-purpose structured entities are used in the securitization of trade receivables and other receivables. Because these entities are structured by third-party financial institutions who operate the entities as part of their business and the entities purchase a large amount of assets from customers other than the Company, the ratio of financial assets transferred by the Company to the entities’ total assets is low and the Company has therefore determined that their assessed risk exposure has low relevance to the Company. The Company and its consolidated subsidiaries do not provide significant non-contractual support to the structured entities. The Company’s involvement with the structured entities primarily consists of the provision of limited credit quality enhancements, servicing the assets and the receipt of commissions for services provided. 　The transferred financial assets, in some cases, may be repurchased under limited and specific conditions. Losses on securitization are expected to be all offset within a year and the maximum exposure as of the date of transition to IFRS (April 1, 2017), March 31, 2018 and 2019 were 4,414 million yen , 5,799 million yen and 5,518 million yen (49,712 thousand U.S. dollars), respectively. (b) Transfer of financial assets that were derecognized in their entirety 　Subsequent to securitization, the Company and its consolidated subsidiaries retain collection and administrative responsibilities for the receivables. They have not recorded a servicing asset or liability since the cost of collection effort approximates the amount of commission income. The maximum exposure to losses from continuing involvement on financial assets derecognized as of March 31, 2019 was included in the maximum exposure to losses stated in (a) Involvement with unconsolidated securitization-purpose structured entities above. Financial instruments 103 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201929．Principal subsidiaries 　The Company’s principal subsidiaries are as follows: Reportable segment Name of subsidiary Toyo Electric Corporation Mitsubishi Electric Control Panel Corp. Mitsubishi Electric Building Techno-Service Co., Ltd. Mitsubishi Electric Plant Engineering Corporation Mitsubishi Electric Control Software Corporation Ryoden Elevator Construction, Ltd. Ryoko Co., Ltd. Energy and Electric Systems RYO-SA BUILWARE Co., Ltd. Mitsubishi Electric Power Products, Inc. Mitsubishi Electric Saudi Ltd. Mitsubishi Elevator Asia Co., Ltd. Mitsubishi Electric Shanghai Electric Elevator Co., Ltd. Mitsubishi Elevator Hong Kong Co., Ltd. Taiwan Mitsubishi Elevator Co., Ltd. Mitsubishi Elevator Korea Co., Ltd. DB Seiko Co., Ltd. Setsuyo Astec Corporation Ryowa Corporation Mitsubishi Electric Mechatronics Engineering Corporation Meldas System Engineering Corporation Mitsubishi Electric Mechatronics Software Corporation Mitsubishi Electric Automotive America, Inc. Industrial Automation Systems Mitsubishi Electric Automotive de Mexico, S.A. de C.V. Mitsubishi Electric Thai Auto-Parts Co., Ltd. Mitsubishi Electric Automotive (China) Co., Ltd. Mitsubishi Electric Automation Manufacturing(Changshu) Co., Ltd. Mitsubishi Electric Dalian Industrial Products Co., Ltd. Mitsubishi Electric Automation (Hong Kong) Ltd. SETSUYO ENTERPRISE CO., LTD. Mitsubishi Electric Automation Korea Co., Ltd. Mitsubishi Electric TOKKI Systems Corporation Mitsubishi Precision Co., Ltd. SPC Electronics Corporation Information and Communication Systems Mitsubishi Electric Information Network Corporation Mitsubishi Electric Information Systems Corporation Mitsubishi Space Software Co., Ltd. Mitsubishi Electric Business Systems Co., Ltd. Mitsubishi Electric Micro-Computer Application Software Co., Ltd. Business Location Ownership persentage of voting rights （％） Japan Japan Japan Japan Japan Japan Japan Japan U.S.A. Saudi Arabia Thailand China China Taiwan Korea Japan Japan Japan Japan Japan Japan U.S.A. Mexico Thailand China China China China Taiwan Korea Japan Japan Japan Japan Japan Japan Japan Japan 93.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 51.0 100.0 60.0 75.0 54.8 80.0 69.9 100.0 79.7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 74.7 100.0 100.0 100.0 89.0 100.0 100.0 104 Significant subsidiaries Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reportable segment Name of subsidiary Electronic Devices Melco Display Technology Inc. Melco Power Device Corporation Melco Semiconductor Engineering Corporation Vincotech Holdings S.à r.l. Mitsubishi Electric Lighting Corporation Mitsubishi Electric Home Appliance 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 Home Appliances Mitsubishi Electric Hydronics & IT Cooling Systems S.p.A. Mitsubishi Electric Air Conditioning Systems Europe Ltd. Mitsubishi Electric Consumer Products (Thailand) Co., Ltd. Siam Compressor Industry Co., Ltd. Mitsubishi Electric Kang Yong Watana Co., Ltd. Shanghai Mitsubishi Electric & Shangling Air-Conditioner and Electric Appliance Co., Ltd. Mitsubishi Electric (Guangzhou) Compressor Co., Ltd. Mitsubishi Electric Air-Conditioning &Visual Information Systems (Shanghai) Ltd. Mitsubishi Electric Trading Corporation Mitsubishi Electric Engineering Co., Ltd. Mitsubishi Electric Logistics Corporation Others Mitsubishi Electric System & Service Co., Ltd. Mitsubishi Electric Life Service Corporation The Kodensha Co., Ltd. iPLANET Inc. Melco Trading (Thailand) Co.,Ltd. Comprehensive Sales Companies C h i y o d a M i t s u b i s h i E l e c t r i c C o . , L t d . a n d o t h e r r e g i o n a l comprehensive sales companies (9 companies) Mitsubishi Electric US, Inc. Mitsubishi Electric Europe B.V. Mitsubishi Electric Asia Pte. Ltd. Mitsubishi Electric & Electronics (Shanghai) Co., Ltd. Mitsubishi Electric (H.K.) Ltd. Mitsubishi Electric Taiwan Co., Ltd. Mitsubishi Electric Australia Pty. Ltd. Business Location Japan Japan Japan Luxembourg Japan Japan Japan Japan Japan Japan Japan Italy U.K. Thailand Thailand Thailand China China China Japan Japan Japan Japan Japan Japan Japan Thailand Japan U.S.A. Netherlands Singapore China China Taiwan Australia Ownership persentage of voting rights （％） 100.0 67.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 90.0 98.0 50.1 52.4 100.0 100.0 100.0 100.0 99.2 100.0 100.0 51.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Companies that does not belong to one reportable segment (comprehensive sales companies with multi-segment products) are listed as "comprehensive sales companies" as a reportable segment. From the date of transition to IFRS (April 1, 2017) to the end of March 31, 2019, there were no significant changes in principal subsidiaries and ownership persentages of voting rights of the principal subsidiaries. Significant subsidiaries 105 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201930．Related parties (1) Related party transactions 　The balance of receivables and payables with associates and joint ventures are as follows: Balance of trade receivables and contract assets 　Associates 　Joint ventures 　　Total Balance of trade payables and contract liabilities 　Associates 　Joint ventures 　　Total Date of transition to IFRS (April 1, 2017) Yen (millions) U.S. dollars (thousands) 2018 2019 2019 ¥ 50,569 ¥ 57,499 ¥ 64,712 $ 582,991 15,192 65,761 20,526 8,835 19,502 77,001 17,774 9,014 20,324 85,036 17,050 9,939 183,099 766,090 153,603 89,541 ¥ 29,361 ¥ 26,788 ¥ 26,989 $ 243,144 　Other than the above, the balance of receivables under factoring transactions with joint ventures as of the date of transition to IFRS (April 1, 2017), the years ended March 31, 2018 and 2019 are 9,498 million yen, 7,346 million yen and 6,613 million yen (59,577 thousand U.S. dollars), respectively. The balance of payables under factoring transactions with joint ventures as of the date of transition to IFRS (April 1, 2017), the years ended March 31, 2018 and 2019 are 59,512 million yen, 40,590 million yen and 35,023 million yen (315,523 thousand U.S. dollars), respectively. 　The amount of transactions with associates and joint ventures are as follows: Revenue Associates Joint ventures Total Purchases Associates Joint ventures Total 2018 2019 2019 Yen (millions) U.S. dollars (thousands) ¥ 242,412 ¥ 59,933 302,345 101,169 37,628 ¥ 138,797 ¥ 244,047 59,149 303,196 102,632 40,238 142,870 $ 2,198,621 532,874 2,731,495 924,612 362,505 $ 1,287,117 　Other than the above, the amount of factoring transactions for trade receivables with joint ventures for the years ended March 31, 2018 and 2019 are 67,471 million yen and 64,193 million yen (578,315 thousand U.S. dollars), respectively. The amount of factoring transactions for trade payables with joint ventures for the years ended March 31, 2018 and 2019 are 171,447 million yen and 126,993 million yen (1,144,081 thousand U.S. dollars), respectively. (2) Total key management personnel compensation 　The amount of expenses recognized related to key management personnel compensation, for the years ended March 31, 2018 and 2019 are 3,613 million yen and 3,144 million yen (28,324 thousand U.S. dollars), respectively. This include officers' retirement benefits of 344 million yen and 433 million yen (3,901 thousand U.S. dollars), respectively. 106 Related parties Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201931．Commitments 　Contractual commitments related to purchases of property, plant and equipment is as follows: Date of transition to IFRS (April 1, 2017) Yen (millions) U.S. dollars (thousands) 2018 2019 2019 Contractual commitments related to purchases of property, plant and equipment ¥ 27,915 ¥ 27,671 ¥ 38,245 $ 344,550 32．Contingent liabilities 　There were no significant events as of March 31 2019. 33．Subsequent events 　There were no significant subsequent events which should be disclosed as of the date of the approval of the consolidated financial statements for the year ended March 31, 2019. Commitments、Contingent liabilities、Subsequent events 107 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201934．First-time adoption 　The Group adopted IFRS for the year ended March 31, 2019. The most recent consolidated financial statements prepared in accordance with U.S. GAAP are for the year ended March 31, 2018. The date of transition to IFRS was April 1, 2017. (1) Exemptions and exceptions in IFRS 1 　IFRS 1 requires entities adopting IFRS for the first time to retrospectively apply IFRS in principle; however, with regard to certain items, it allows exemption from, or prohibits, retrospective application of IFRS. 　The Company and its consolidated subsidiaries use the following exemptions on retrospective application permitted by IFRS 1: - Business combinations 　The Company and its consolidated subsidiaries elected not to apply IFRS 3 Business Combinations retrospectively to past business combinations that occurred on or before December 22, 2015. Consequently, the amount of goodwill that arose from business combinations that occurred on or before December 22, 2015 is recorded at the carrying amount in accordance with U.S. GAAP. Goodwill was tested for impairment at the transition date irrespective of whether there was any indication of impairment. - Exchange differences on translating foreign operations 　The Company and its consolidated subsidiaries elected to deem the cumulative translation differences for foreign operations at the transition date to be zero. Consequently, the cumulative translation differences for foreign operations at the transition date were reclassified from accumulated other comprehensive income (loss) to retained earnings. - Designation of financial instruments recognized before the date of transition to IFRS 　The Company and its consolidated subsidiaries elected to designate the classification of financial instruments on the basis of the facts and circumstances that existed at the date of transition to IFRS. (2) Reconciliations 　Reconciliations for which disclosures are required on first time adoption of IFRS are set out below. 　Items that do not affect retained earnings and comprehensive income are presented in “Reclassification” and items that affect retained earnings and comprehensive income are presented in “Recognition and measurement differences”. 108 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reconciliation of equity as at the Date of transition to IFRS (April 1, 2017) Consolidated Statement of Financial Position Presentation under U.S. GAAP U.S. GAAP Reclassification Assets Current assets Recognition and measurement differences IFRS Notes Presentation under IFRS (Assets) Yen (millions) Cash and cash equivalents 662,469 ― Trade receivables 1,037,201 (137,523) ― ― 662,469 Cash and cash equivalents 899,678 (1)(b) Trade receivables ― ― 152,784 103,004 255,788 (1)(b) Contract assets 39,801 ― 39,801 (1)(a) Other financial assets Inventories 643,040 ― (83,138) 559,902 Inventories Prepaid expenses and other current assets 157,975 (52,000) (15,056) 90,919 (1)(b) Other current assets Total current assets 2,500,685 3,062 4,810 2,508,557 Total current assets Long-term receivables and investments Long-term trade receivables 2,815 (2,815) 421,455 (421,455) ― ― ― (1)(b) ― (1)(b) Investments in securities and other Investments in affiliated companies 197,480 (15,756) 5,634 187,358 (1)(b) Investments accounted for using the equity method ― 362,869 27,710 390,579 (1)(a), (2)(b) Other financial assets Total long-term receivables and investments 621,750 ― ― ― Property, plant and equipment Land Buildings 113,241 807,201 Machinery and equipment 1,891,377 Construction in progress 56,160 Total Less accumulated depreciation Net property, plant and equipment 2,867,979 (2,135,368) 732,611 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (33,133) 699,478 143,439 (18,857) 124,582 162,169 111,316 273,485 Other assets 317,224 (231,513) (31,720) 53,991 (2)(f), (g) (1)(b), (2)(g), (h) (1)(b), (2)(c) (1)(b), (2)(a) Property, plant and equipment Goodwill and intangible assets Deferred tax assets Other non-current assets Total assets 4,172,270 ― 65,760 4,238,030 Total assets ― (3,062) 60,950 1,729,473 Total non-current assets 109 First-time adoption MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Presentation under U.S. GAAP U.S. GAAP Reclassification Recognition and measurement differences IFRS Notes Presentation under IFRS Yen (millions) (Liabilities) Liabilities Current liabilities Bank loans 60,868 63,500 21,987 146,355 (1)(c) Bonds and borrowings Current portion of long-term debt 63,500 (63,500) Trade payables 780,202 (145,119) ― ― ― (1)(c) 635,083 (1)(c) Trade payables ― ― 150,048 562 150,610 (1)(c) Contract liabilities 159,269 10,724 169,993 (1)(a) Other financial liabilities Accrued expenses 363,849 (115,491) Accrued income taxes 26,295 ― ― 130,183 ― ― ― 248,358 (1)(c) Accrued expenses 26,295 Accrued income taxes 130,183 (1)(c) Provisions Other current liabilities 231,047 (171,434) (191) 59,422 (1)(c) Other current liabilities Total current liabilities 1,525,761 7,456 33,082 1,566,299 Total current liabilities Long-term debt Retirement and severance benefits 227,756 194,990 ― ― ― ― ― 227,756 Bonds and borrowings 8,044 203,034 (2)(a) Net defined benefit liabilities 11,284 ― 11,284 (1)(c) Provisions 14,483 (1,621) 12,862 (1)(c), (2)(c) Deferred tax liabilities Other liabilities 83,055 (33,223) ― 49,832 (1)(c) Other non-current liabilities ― (7,456) 6,423 504,768 Total non-current liabilities Total liabilities 2,031,562 ― 39,505 2,071,067 Total liabilities Equity Mitsubishi Electric Corp. shareholders' equity Common stock Capital surplus Legal reserve (Equity) 175,820 212,530 ― ― ― 175,820 Common stock (13,785) 198,745 (2)(h) Capital surplus 68,482 (68,482) ― ― (1)(c) Retained earnings 1,586,075 68,482 (60,897) 1,593,660 103,218 101,166 (1)(c), (2)(i) (2)(a), (b),(c), (d),(e) Retained earnings Accumulated other comprehensive income(loss) ― (1,228) Treasury stock, at cost 28,536 2,068,163 Mitsubishi Electric Corp. stockholders’ equity (2,281) 98,800 Non-controlling interests 26,255 2,166,963 Total equity 65,760 4,238,030 Total liabilities and equity Accumulated other comprehensive income (loss) (2,052) Treasury stock, at cost (1,228) Total Mitsubishi Electric Corp. shareholders' equity Noncontrolling interests Total equity 2,039,627 101,081 2,140,708 Total liabilities and equity 4,172,270 ― ― ― ― ― ― 110 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reconciliation of equity as at the Date of transition to IFRS (April 1, 2017) Consolidated Statement of Financial Position Presentation under U.S. GAAP U.S. GAAP Reclassification Assets Current assets Recognition and measurement differences U.S.dollars (thousands) IFRS Notes Presentation under IFRS (Assets) Cash and cash equivalents 5,968,189 ― Trade receivables 9,344,153 (1,238,946) ― ― 5,968,189 Cash and cash equivalents 8,105,207 (1)(b) Trade receivables ― ― 1,376,432 927,964 2,304,396 (1)(b) Contract assets 358,568 ― 358,568 (1)(a) Other financial assets Inventories 5,793,153 ― (748,991) 5,044,162 Inventories Prepaid expenses and other current assets 1,423,199 (468,468) (135,641) 819,090 (1)(b) Other current assets Total current assets 22,528,694 27,586 43,332 22,599,612 Total current assets Long-term receivables and investments Long-term trade receivables 25,360 (25,360) 3,796,892 (3,796,892) ― ― ― (1)(b) ― (1)(b) Investments in securities and other Investments in afiliated companies 1,779,099 (141,946) 50,757 1,687,910 (1)(b) Investments accounted for using the equity method ― 3,269,090 249,640 3,518,730 (1)(a), (2)(b) Other financial assets Total long-term receivables and investments 5,601,351 ― ― ― Property, plant and equipment Land Buildings 1,020,189 7,272,081 Machinery and equipment 17,039,432 Construction in progress 505,947 Total Less accumulated depreciation Net property, plant and equipment 25,837,649 (19,237,550) 6,600,099 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (298,495) 6,301,604 ― 1,292,243 (169,883) 1,122,360 ― 1,460,982 1,002,847 2,463,829 Other assets 2,857,876 (2,085,703) (285,768) 486,405 (2)(f), (g) (1)(b), (2)(g), (h) (1)(b), (2)(c) (1)(b), (2)(a) Property, plant and equipment Goodwill and intangible assets Deferred tax assets Other non-current assets Total assets 37,588,020 ― 592,430 38,180,450 Total assets ― (27,586) 549,098 15,580,838 Total non-current assets 111 First-time adoption MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Presentation under U.S. GAAP U.S. GAAP Reclassification Liabilities Current liabilities Recognition and measurement differences U.S.dollars (thousands) IFRS Notes Presentation under IFRS (Liabilities) Bank loans 548,360 572,072 198,082 1,318,514 (1)(c) Bonds and borrowings Current portion of long-term debt 572,072 (572,072) Trade payables 7,028,847 (1,307,379) ― ― ― (1)(c) 5,721,468 (1)(c) Trade payables ― ― 1,351,784 5,063 1,356,847 (1)(c) Contract liabilities 1,434,856 96,613 1,531,469 (1)(a) Other financial liabilities Accrued expenses 3,277,919 (1,040,460) Accrued income taxes 236,892 ― ― 1,172,820 ― ― ― 2,237,459 (1)(c) Accrued expenses 236,892 Accrued income taxes 1,172,820 (1)(c) Provisions Other current liabilities 2,081,505 (1,544,450) (1,722) 535,333 (1)(c) Other current liabilities Total current liabilities 13,745,595 67,171 298,036 14,110,802 Total current liabilities Long-term debt Retirement and severance benefits 2,051,856 1,756,667 ― ― ― 2,051,856 Bonds and borrowings 72,468 1,829,135 (2)(a) Net defined benefit liabilities ― ― 101,658 ― 101,658 (1)(c) Provisions 130,477 (14,603) 115,874 (1)(c), (2)(c) Deferred tax liabilities Other liabilities 748,243 (299,306) ― 448,937 (1)(c) Other non-current liabilities ― (67,171) 57,865 4,547,460 Total non-current liabilities Total liabilities 18,302,361 ― 355,901 18,658,262 Total liabilities Equity Mitsubishi Electric Corp. shareholders' equity Common stock Capital surplus Legal reserve (Equity) 1,583,964 1,914,685 ― ― ― 1,583,964 Common stock (124,190) 1,790,495 (2)(h) Capital surplus 616,955 (616,955) ― ― (1)(c) Retained earnings 14,288,964 616,955 (548,622) 14,357,297 929,891 911,405 (1)(c), (2)(i) (2)(a), (b),(c), (d),(e) Retained earnings Accumulated other comprehensive income(loss) ― (11,063) Treasury stock, at cost 257,079 18,632,098 Mitsubishi Electric Corp. stockholders’ equity (20,550) 890,090 Non-controlling interests 236,529 19,522,188 Total equity 592,430 38,180,450 Total liabilities and equity Accumulated other comprehensive income (loss) (18,486) Treasury stock, at cost (11,063) Total Mitsubishi Electric Corp. shareholders' equity 18,375,019 Noncontrolling interests 910,640 Total equity 19,285,659 Total liabilities and equity 37,588,020 ― ― ― ― ― ― 112 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reconciliation of equity as of March 31, 2018 Consolidated Statement of Financial Position Presentation under U.S. GAAP U.S. GAAP Reclassification Assets Current assets Recognition and measurement differences IFRS Notes Presentation under IFRS (Assets) Yen (millions) Cash and cash equivalents 599,199 ― Trade receivables 1,087,593 (164,926) ― ― 599,199 Cash and cash equivalents 922,667 (1)(b) Trade receivables ― ― 179,151 89,711 268,862 (1)(b) Contract assets 47,581 ― 47,581 (1)(a) Other financial assets Inventories 741,782 ― (95,520) 646,262 Inventories Prepaid expenses and other current assets 177,919 (63,240) (16,515) 98,164 (1)(b) Other current assets Total current assets 2,606,493 (1,434) (22,324) 2,582,735 Total current assets Long-term receivables and investments Long-term trade receivables 1,965 (1,965) 410,715 (410,715) ― ― ― (1)(b) ― (1)(b) Investments in securities and other Investments in afiliated companies 203,580 (15,752) 6,480 194,308 (1)(b) Investments accounted for using the equity method ― 335,474 27,697 363,171 (1)(a), (2)(b) Other financial assets Total long-term receivables and investments 616,260 ― ― ― Property, plant and equipment Land Buildings 112,647 852,574 Machinery and equipment 1,964,737 Construction in progress 43,313 Total Less accumulated depreciation Net property, plant and equipment 2,973,271 (2,232,823) 740,448 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (16,191) 724,257 150,375 (17,415) 132,960 142,093 100,605 242,698 Other assets 301,358 (198,076) (37,831) 65,451 (2)(f), (g) (1)(b), (2)(g), (h) (1)(b), (2)(c) (1)(b), (2)(a) Property, plant and equipment Goodwill and intangible assets Deferred tax assets Other non-current assets Total assets 4,264,559 ― 41,021 4,305,580 Total assets ― 1,434 63,345 1,722,845 Total non-current assets 113 First-time adoption MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Presentation under U.S. GAAP U.S. GAAP Reclassification Recognition and measurement differences IFRS Notes Presentation under IFRS Yen (millions) (Liabilities) Liabilities Current liabilities Bank loans 56,042 66,388 465 122,895 (1)(c) Bonds and borrowings Current portion of long-term debt 66,388 (66,388) Trade payables 719,404 (139,838) ― ― ― (1)(c) 579,566 (1)(c) Trade payables ― ― 157,139 (3,217) 153,922 (1)(c) Contract liabilities 154,350 10,996 165,346 (1)(a) Other financial liabilities Accrued expenses 361,948 (100,556) Accrued income taxes 33,179 ― Other current liabilities 234,406 (179,866) ― 117,357 ― ― ― 52 261,392 (1)(c) Accrued expenses 33,179 Accrued income taxes 117,357 (1)(c) Provisions 54,592 (1)(c) Other current liabilities Total current liabilities 1,471,367 8,586 8,296 1,488,249 Total current liabilities Long-term debt Retirement and severance benefits Other liabilities 189,055 171,017 ― ― ― ― 5,856 9,989 ― 189,055 Bonds and borrowings 503 171,520 (2)(a) Net defined benefit liabilities ― 5,856 (1)(c) Provisions (852) 9,137 (1)(c), (2)(c) Deferred tax liabilities 68,975 (24,431) ― 44,544 (1)(c) Other non-current liabilities ― (8,586) (349) 420,112 Total non-current liabilities Total liabilities 1,900,414 ― 7,947 1,908,361 Total liabilities Equity Mitsubishi Electric Corp. shareholders' equity Common stock Capital surplus Legal reserve (Equity) 175,820 213,250 ― ― ― 175,820 Common stock (13,808) 199,442 (2)(h) Capital surplus 69,382 (69,382) ― ― (1)(c) Retained earnings 1,788,359 69,382 (46,393) 1,811,348 95,020 109,492 (1)(c), (2)(i) (2)(a), (b),(c), (d),(e) Retained earnings Accumulated other comprehensive income(loss) ― (1,928) Treasury stock, at cost 34,819 2,294,174 Mitsubishi Electric Corp. stockholders’ equity (1,745) 103,045 Non-controlling interests 33,074 2,397,219 Total equity 41,021 4,305,580 Total liabilities and equity Accumulated other comprehensive income (loss) 14,472 Treasury stock, at cost (1,928) Total Mitsubishi Electric Corp. shareholders' equity Noncontrolling interests Total equity 2,259,355 104,790 2,364,145 Total liabilities and equity 4,264,559 ― ― ― ― ― ― 114 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reconciliation of equity as of March 31, 2018 Consolidated Statement of Financial Position Presentation under U.S. GAAP U.S. GAAP Reclassification Assets Current assets Recognition and measurement differences U.S.dollars (thousands) IFRS Notes Presentation under IFRS (Assets) Cash and cash equivalents 5,398,189 ― Trade receivables 9,798,135 (1,485,820) ― ― 5,398,189 Cash and cash equivalents 8,312,315 (1)(b) Trade receivables ― ― 1,613,973 808,207 2,422,180 (1)(b) Contract assets 428,658 ― 428,658 (1)(a) Other financial assets Inventories 6,682,721 ― (860,541) 5,822,180 Inventories Prepaid expenses and other current assets 1,602,874 (569,730) (148,784) 884,360 (1)(b) Other current assets Total current assets 23,481,919 (12,919) (201,118) 23,267,882 Total current assets Long-term receivables and investments Long-term trade receivables 17,703 (17,703) 3,700,135 (3,700,135) ― ― ― (1)(b) ― (1)(b) Investments in securities and other Investments in afiliated companies 1,834,054 (141,910) 58,379 1,750,523 (1)(b) Investments accounted for using the equity method ― 3,022,288 249,523 3,271,811 (1)(a), (2)(b) Other financial assets Total long-term receivables and investments 5,551,892 ― ― ― Property, plant and equipment Land Buildings 1,014,838 7,680,847 Machinery and equipment 17,700,333 Construction in progress 390,207 Total Less accumulated depreciation Net property, plant and equipment 26,786,225 (20,115,523) 6,670,702 ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― ― (145,864) 6,524,838 ― 1,354,730 (156,892) 1,197,838 ― 1,280,117 906,351 2,186,468 Other assets 2,714,937 (1,784,468) (340,820) 589,649 (2)(f), (g) (1)(b), (2)(g), (h) (1)(b), (2)(c) (1)(b), (2)(a) Property, plant and equipment Goodwill and intangible assets Deferred tax assets Other non-current assets Total assets 38,419,450 ― 369,559 38,789,009 Total assets ― 12,919 570,677 15,521,127 Total non-current assets 115 First-time adoption MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Presentation under U.S. GAAP U.S. GAAP Reclassification Liabilities Current liabilities Recognition and measurement differences U.S.dollars (thousands) IFRS Notes Presentation under IFRS (Liabilities) Bank loans 504,883 598,090 4,189 1,107,162 (1)(c) Bonds and borrowings Current portion of long-term debt 598,090 (598,090) Trade payables 6,481,117 (1,259,802) ― ― ― (1)(c) 5,221,315 (1)(c) Trade payables ― ― 1,415,667 (28,982) 1,386,685 (1)(c) Contract liabilities 1,390,541 99,064 1,489,605 (1)(a) Other financial liabilities Accrued expenses 3,260,793 (905,910) Accrued income taxes 298,910 ― ― 1,057,270 ― ― ― 2,354,883 (1)(c) Accrued expenses 298,910 Accrued income taxes 1,057,270 (1)(c) Provisions Other current liabilities 2,111,766 (1,620,414) 468 491,820 (1)(c) Other current liabilities Total current liabilities 13,255,559 77,352 74,739 13,407,650 Total current liabilities Long-term debt Retirement and severance benefits Other liabilities 1,703,198 1,540,694 ― ― ― ― ― 1,703,198 Bonds and borrowings 4,531 1,545,225 (2)(a) Net defined benefit liabilities 52,757 ― 52,757 (1)(c) Provisions 89,990 (7,675) 82,315 (1)(c), (2)(c) Deferred tax liabilities 621,396 (220,099) ― 401,297 (1)(c) Other non-current liabilities ― (77,352) (3,144) 3,784,792 Total non-current liabilities Total liabilities 17,120,847 ― 71,595 17,192,442 Total liabilities Equity Mitsubishi Electric Corp. shareholders' equity Common stock Capital surplus Legal reserve (Equity) 1,583,964 1,921,171 ― ― ― 1,583,964 Common stock (124,397) 1,796,774 (2)(h) Capital surplus 625,063 (625,063) ― ― (1)(c) Retained earnings 16,111,342 625,063 (417,955) 16,318,450 856,037 986,415 (1)(c), (2)(i) (2)(a), (b),(c), (d),(e) Retained earnings Accumulated other comprehensive income(loss) ― (17,369) Treasury stock, at cost 313,685 20,668,234 Mitsubishi Electric Corp. stockholders’ equity (15,721) 928,333 Non-controlling interests 297,964 21,596,567 Total equity 369,559 38,789,009 Total liabilities and equity Accumulated other comprehensive income (loss) 130,378 Treasury stock, at cost (17,369) Total Mitsubishi Electric Corp. shareholders' equity 20,354,549 Noncontrolling interests 944,054 Total equity 21,298,603 Total liabilities and equity 38,419,450 ― ― ― ― ― ― 116 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Notes to reconciliation of equity 　The principal effects of transition to IFRS in the 　Under IFRS, all equity instruments are recognized at fair value irrespective of whether there is an active market. reconciliation of equity above are as follows: Since it is permitted to recognize changes in fair value in (1) Reclassification 　The main elements of reclassification are as follows: other comprehensive income (loss), the Company and its consolidated subsidiaries have elected to recognize changes in fair value of equity instruments in other a. In accordance with the presentation provisions under comprehensive income (loss). Accordingly, impairment IFRS, other financial assets and other financial liabilities l o s s e s a n d g a i n s o r l o s s e s o n t h e s a l e o f e q u i t y are presented separately. instruments recognized in profit or loss under U.S. GAAP b. Part of trade receivables, prepaid expenses and other are recognized in other comprehensive income as well. current assets and other assets are reclassified based on the definition and recognition criteria of IFRS. c. Part of trade payables, accrued expenses, other current c. Income taxes 　Under U.S. GAAP, tax expenses incurred by sellers are liabilities and other non-current liabilities are reclassified deferred using the deferred method for differences arising based on the definition and recognition criteria of IFRS. from unrealized profits and losses from intercompany (2) Reconciliation and measurement differences 　The main elements of recognition and measurement differences are as follows: a. Employee benefits 　Under U.S. GAAP, actuarial gains and losses and past transactions. 　Under IFRS, on the other hand, a difference between the carrying amount and the sale price of an asset sold is recognized as a future deductible temporary difference based on the asset and liability method. A deferred tax asset is recognized for the future deductible temporary s e r v i c e c o s t s a r e d e f e r r e d i n a c c u m u l a t e d o t h e r difference using the purchaser’s effective tax rate while comprehensive income (loss), subsequently amortized for a specified future period and recognized in profit or loss. taking its recoverability into consideration. 　Under U.S. GAAP, deferred tax liabilities for temporary Current service costs, interest costs and expected return differences associated with investments in equity method on plan assets are recognized in profit or loss for the investees are recognized using tax rates applicable on the consolidated fiscal year. 　Under IFRS, defined benefit obligations and plan assets premise that the temporary difference will be reversed at the time of sale of the equity method investees even if a relating to defined benefit corporate pension plans and company intends to continue to hold the investments. In lump-sum payment plans are remeasured in accordance principle, deferred tax liabilities are recognized for the w i t h I F R S r e q u i r e m e n t s . C h a n g e s r e s u l t i n g f r o m remeasurement are recognized in accumulated other undistributed earnings of subsidiaries. 　Under IFRS, deferred tax liabilities are in principle comprehensive income (loss), and reclassified directly recognized for all the taxable temporary differences using from accumulated other comprehensive income (loss) to tax rates applied when the taxable temporary differences retained earnings, not through profit or loss. Past service reverse, such as when receiving dividends or selling the costs arising from plan amendments are fully recognized investments. Deferred tax liabilities are recognized for the immediately in profit or loss. Current service costs are taxable temporary differences associated with investments recognized in profit or loss. Interest costs are recognized in in subsidiaries and others which are probable to reverse in profit or loss at the amount determined by multiplying the the foreseeable future. net amount of the defined benefit obligation and plan assets by the discount rate used to determine the present value of the obligation. d. Exchange differences on translating foreign operations 　Cumulative exchange differences on translating foreign operations are all deemed to be zero at the date of b. Equity instruments 　Under U.S. GAAP, non-marketable equity instruments transition to IFRS. Consequently, exchange differences on translating foreign operations included in accumulated are recognized at their cost. If fair value of financial assets other comprehensive income as at the transition date were has decreased and the decrease is considered not to be fully reclassified to retained earnings. temporary, impairment losses are recognized for the amount of the cost of the financial assets in excess of fair value. Gains or losses on the sale of these financial assets e. Exclusion of equity method investees 　Under U.S. GAAP, when an investee no longer qualifies are recognized in profit or loss. as an equity method investee, the difference between the 117 First-time adoption MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019sale price and the carrying amount of the interest sold is recognized in profit or loss. If an investor retains a residual h. Business combinations 　Under U.S. GAAP, in business combinations, the interest, gains or losses recognized in prior periods remain acquirer measures the acquiree as a whole (including non- included in the carrying amount of the residual interest. 　Under IFRS, when an investee no longer qualifies as an equity method investee, any residual interest is measured at fair value. The difference between the sum of the sales controlling interests) at fair value and goodwill is recognized including the portion of goodwill attributable to the non-controlling interests. 　Under IFRS, in business combinations, it is permitted to price and the fair value of the residual interest and the elect to apply either of two methods: the acquirer carrying amount of the interest at the point when an measures the acquiree as a whole (including non- investee no longer qualifies as an equity method investee controlling interests) at fair value and goodwill is is recognized in profit or loss. recognized including the portion of goodwill attributable to the non-controlling interests; or non-controlling interests f. Government grants 　Under U.S. GAAP, government grants related to are measured as a proportional interest in the fair value of the acquiree's net identifiable assets and goodwill is acquisition of assets are not reflected in the carrying recognized only for the acquirer’s share. The Company amounts of assets because there are no accounting elected the method of measuring non-controlling interest standards for such government grants. 　Under IFRS, government grants related to assets are as a proportional interest in the fair value of the acquiree's net identifiable assets and recognizing goodwill only for the recognized as deducting the carrying amount of the asset acquirer’s share. Capital surplus is recognized when non- by the government grants received. controlling interests are additionally acquired after the date when control was obtained. g. Impairment of non-financial assets 　Under U.S. GAAP, if there is an indication that a non- current asset may be impaired, the carrying amount and the undiscounted estimated future cash flows of the asset are compared. If the carrying amount exceeds the estimated future cash flows, any excess of the carrying amount over the fair value is recognized as impairment losses. 　Under IFRS, if there is an indication that a non-current asset may be impaired, any excess of the carrying amount over the recoverable amount of the non-current asset (the higher of value in use or fair value less costs of disposal) is recognized as impairment losses of the non-current asset. 　As of the date of transition to IFRS, property, plant and equipment, intangible assets and other assets, decreased by 18,605 million yen (167,612 thousand U.S. dollars) and 4,162 million yen (37,495 thousand U.S. dollars), respectively, due to the recognition of impairment losses. The impairment losses include 16,875 million yen (152,027 thousand U.S. dollars) for assets belonging to the Energy and Electric Systems segment, mainly at a certain part of the power systems business in North America due to a decline in profitability. The recoverable amount related to the impairment losses is measured at fair value less costs of disposal based on the market approach, and market transaction price of similar assets is used for the measurement (level 3 in the fair value hierarchy). 118 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019i. Retained earnings and capital surplus 　Major amounts of the impact on retained earnings and capital surplus (net of tax, except income taxes) are as follows: Date of transition to IFRS (April 1, 2017) Yen (millions) 2018 (184,627) (167,743) 38,319 57,485 38,893 53,462 18,535 18,535 24,188 17,504 Employee benefits Equity instruments Income taxes Exchange differences on translating foreign operations Exclusion of equity method investees Government grants (11,633) (11,458) Impairment of non-financial assets (13,003) (2,665) Others 9,839 7,079 Total retained earnings (60,897) (46,393) Business combinations and others (13,785) (13,808) Total capital surplus (13,785) (13,808) U.S.dollars (thousands) Date of transition to IFRS (April 1, 2017) 2018 (1,663,306) (1,511,198) 345,216 517,883 350,387 481,640 166,982 166,982 217,910 157,694 Employee benefits Equity instruments Income taxes Exchange differences on translating foreign operations Exclusion of equity method investees Government grants (104,802) (103,225) Impairment of non-financial assets (117,144) (24,009) Others 88,639 63,774 Total retained earnings (548,622) (417,955) Business combinations and others (124,190) (124,397) Total capital surplus (124,190) (124,397) First-time adoption 119 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reconciliation of profit or loss and comprehensive income for the year ended March 31,2018 (From April 1, 2017 to March 31, 2018) Consolidated Statement of Profit or Loss Presentation under U.S. GAAP U.S. GAAP Reclassification IFRS Notes Presentation under IFRS Yen (millions) Recognition and measurement differences Net sales 4,431,198 ― 13,226 4,444,424 (2)(a) Revenue Cost of sales and expenses Cost of sales 3,030,902 ― 59,547 3,090,449 (1)(c), (2)(a) Cost of sales Selling, general and administrative expenses 868,812 193,695 (41,146) 1,021,361 (1)(b), (c) Selling, general and administrative expenses Research and development 192,966 (192,966) Loss on impairment of long- lived assets 19,881 (19,881) ― ― ― (1)(b) ― (1)(c) Operating income 318,637 (1,838) 10,645 327,444 Operating profit ― (20,990) 15,820 (5,170) (1)(c) Other profit (loss) Other income Interest and dividends 8,611 23,637 (23,637) 8,611 (1)(a), (2)(b) Financial income Equity in earnings of affiliated companies 22,261 (22,261) Other 29,542 (29,542) ― ― ― (1)(c) ― (1)(c) Other expenses Interest Other 2,727 4,726 (657) 6,796 (1)(a) Financial expenses 11,746 (11,746) ― ― (1)(c) ― 22,261 1,686 23,947 (1)(c) Share of profit of investments accounted for using the equity method Income before income taxes 364,578 (723) (10,649) 353,206 Profit before income taxes Income taxes Current Deferred 62,213 19,303 5,291 86,807 (1)(c), (d) Income taxes 20,026 (20,026) ― ― (1)(d) Net income 282,339 ― (15,940) 266,399 Net profit Net profit attributable to: Net income attributable to the noncontrolling interests 10,459 ― 185 10,644 Non-controlling interests Net income attributable to Mitsubishi Electric Corp. 271,880 ― (16,125) 255,755 Mitsubishi Electric Corp. stockholders 120 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Reconciliation of profit or loss and comprehensive income for the year ended March 31,2018 (From April 1, 2017 to March 31, 2018) Consolidated Statement of Profit or Loss Presentation under U.S. GAAP U.S. GAAP Reclassification U.S.dollars (thousands) IFRS Notes Presentation under IFRS Recognition and measurement differences Net sales 39,920,703 ― 119,153 40,039,856 (2)(a) Revenue Cost of sales and expenses Cost of sales 27,305,423 ― 536,460 27,841,883 (1)(c), (2)(a) Cost of sales Selling, general and administrative expenses 7,827,135 1,744,999 (370,684) 9,201,450 (1)(b), (c) Selling, general and administrative expenses Research and development 1,738,432 (1,738,432) Loss on impairment of long- lived assets 179,108 (179,108) ― ― ― (1)(b) ― (1)(c) Operating income 2,870,605 (16,558) 95,899 2,949,946 Operating profit ― (189,099) 142,522 (46,577) (1)(c) Other profit (loss) Other income Interest and dividends 77,577 212,946 (212,946) 77,577 (1)(a), (2)(b) Financial income Equity in earnings of affiliated companies 200,550 (200,550) Other 266,144 (266,144) ― ― ― (1)(c) ― (1)(c) Other expenses Interest Other 24,568 42,577 (5,920) 61,225 (1)(a) Financial expenses 105,820 (105,820) ― ― (1)(c) ― 200,550 15,189 215,739 (1)(c) Equity in earnings of associate companies Income before income taxes 3,284,488 (6,513) (95,938) 3,182,037 Profit before income taxes Income taxes Current Deferred 560,477 173,901 47,667 782,045 (1)(c), (d) Income taxes 180,414 (180,414) ― ― (1)(d) Net income 2,543,597 ― (143,605) 2,399,992 Net profit Net income attributable to the noncontrolling interests 94,225 ― 1,667 95,892 Non-controlling interests Net profit attributable to: Net income attributable to Mitsubishi Electric Corp. 2,449,372 ― (145,272) 2,304,100 Mitsubishi Electric Corp. stockholders 121 First-time adoption MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Consolidated Statement of Comprehensive Income Presentation under U.S. GAAP U.S. GAAP Reclassification IFRS Notes Presentation under IFRS Yen (millions) Recognition and measurement differences Net income 282,339 ― (15,940) 266,399 Net profit Other comprehensive income (loss), net of tax Unrealized gains (losses) on securities (14,875) 392 14,431 Other comprehensive income (loss), net of tax Items that will not be reclassified to net profit (52) (1)(e), (2)(b) Changes in fair value of financial assets measured at fair value through other comprehensive income Pension liability adjustments 15,857 (596) 6,062 21,323 (1)(e) ― 204 (34) 170 (1)(e) Foreign currency translation adjustments Unrealized gains (losses) on derivative instruments 17,023 (1,908) 1,877 16,992 (1)(e) (88) (6) 23 (71) (1)(e) ― 1,914 (45) 1,869 (1)(e) Remeasurements of defined benefit pension plans Share of other comprehensive income of investments accounted for using the equity method Items that may be reclassified to net profit Exchange differences on translating foreign operations Net changes in the fair value of cash flow hedges Share of other comprehensive income of investments accounted for using the equity method Total 17,917 Comprehensive income 300,256 ― ― 22,314 40,231 Total other comprehensive income (loss) 6,374 306,630 Comprehensive income Comprehensive income attributable to: Comprehensive income attributable to the non-controlling interests 11,852 ― 68 11,920 Non-controlling interests Comprehensive income attributable to Mitsubishi Electric Corp. 288,404 ― 6,306 294,710 Mitsubishi Electric Corp. stockholders 122 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Consolidated Statement of Comprehensive Income Presentation under U.S. GAAP U.S. GAAP Reclassification U.S.dollars (thousands) IFRS Notes Presentation under IFRS Recognition and measurement differences Net income 2,543,597 ― (143,605) 2,399,992 Net profit Other comprehensive income (loss), net of tax Unrealized gains (losses) on securities (134,009) 3,532 130,009 (468) (1)(e), (2)(b) Pension liability adjustments 142,856 (5,369) 54,612 192,099 (1)(e) ― 1,837 (305) 1,532 (1)(e) Foreign currency translation adjustments Unrealized gains (losses) on derivative instruments 153,360 (17,189) 16,910 153,081 (1)(e) (793) (54) 207 (640) (1)(e) ― 17,243 (405) 16,838 (1)(e) Other comprehensive income (loss), net of tax Items that will not be reclassified to net profit Changes in fair value of financial assets measured at fair value through other comprehensive income Remeasurements of defined benefit pension plans Share of other comprehensive income of investments accounted for using the equity method Items that may be reclassified to net profit Exchange differences on translating foreign operations Net changes in the fair value of cash flow hedges Share of other comprehensive income of investments accounted for using the equity method Total 161,414 Comprehensive income 2,705,011 ― ― 201,028 362,442 Total other comprehensive income (loss) 57,423 2,762,434 Comprehensive income Comprehensive income attributable to: Comprehensive income attributable to the non-controlling interests 106,775 ― 612 107,387 Non-controlling interests Comprehensive income attributable to Mitsubishi Electric Corp. 2,598,236 ― 56,811 2,655,047 Mitsubishi Electric Corp. stockholders First-time adoption 123 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Notes to reconciliation of profit or loss and 　Consequently, revenue and cost of sales in the comprehensive income 　The principal effects of transition to IFRS in the reconciliation of profit or loss and comprehensive income above are as follows: Consolidated Statement of Profit or Loss for the year ended March 31, 2018 have increased by 13,226 million yen (119,153 thousand U.S. dollars). 　The amount of contract assets increased by 105,163 million yen (947,414 thousand U.S. dollars) and 118,389 (1) Reclassification 　The main elements of reclassification are as follows: million yen (1,066,568 thousand U.S. dollars) as of the date of transition to IFRS and as of March 31, 2018 , a. In accordance with the presentation provisions under respectively, and inventories decreased by the same IFRS, financial income and financial expenses are amount. Part of the contract assets were offset against presented separately. contract liabilities. b. Research and development expenses are included and presented in selling, general and administrative expenses. b. Equity instruments 　Non-marketable equity instruments are recognized at c. Part of other income and other expenses is included and their cost under U.S. GAAP. If fair value of financial assets presented in operating profit. has decreased and the decrease is considered not to be d. Deferred income taxes are included and presented in temporary, impairment losses are recognized for the income tax expenses. amount of the cost of the financial assets in excess of fair e. Other comprehensive income related to unrealized gains value. Gains or losses on the sale of these financial assets (losses) on securities, pension liability adjustments, foreign currency translation adjustments and unrealized are recognized in profit or loss. 　Under IFRS, equity instruments are recognized at fair gains (losses) on derivative instruments attributable to value irrespective of whether there is an active market. equity method investees are reclassified to share of Because it is permitted to recognize changes in fair value other comprehensive income of investments accounted in other comprehensive income, the Company and its for using the equity method. (2) Reconciliation and measurement differences 　The main elements of recognition and measurement differences are as follows: consolidated subsidiaries have elected to recognize changes in fair value of equity instruments in other comprehensive income. Accordingly, impairment losses and gains or losses on the sale of equity instruments recognized in profit or loss under U.S. GAAP are a. Reconciliation of revenue and cost of sales 　Under U.S. GAAP, if progress of construction contracts recognized in other comprehensive income as well. 　Consequently, other income of 23,637 million yen cannot be reliably estimated, all construction costs and (212,946 thousand U.S. dollars)under U.S. GAAP in the construction revenue are recognized when the construction Consolidated Statement of Profit or Loss for the year is complete. 　Under IFRS, revenue from a performance obligation ended March 31, 2018 was recognized as changes in fair value of financial assets measured at fair value through satisfied over time is only recognized for costs incurred to other comprehensive income and not recognized in profit the extent that it is probable that the cost will be recovered or loss under IFRS. and costs are recognized as expenses in the period in which they are incurred if the progress cannot be reliably estimated. Notes to reconciliation of cash flows 　There are no significant differences in the statement of cash flows resulting from the transition from U.S. GAAP to IFRS. 124 First-time adoption Notes to Consolidated Financial StatementsMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 201935．Approval of the consolidated financial statements 　The consolidated financial statements were approved by Takeshi Sugiyama, President & CEO, on June 27, 2019. Approval of the consolidated financial statements 125 MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019126 Independent Auditors’ Report Independent Auditors’ ReportMITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019Corporate Data / Shareholder Information (As of March 31, 2019) 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: 145,817 Major Shareholders The Master Trust Bank of Japan, Ltd. (Trust Account) SSBTC CLIENT OMNIBUS ACCOUNT Japan Trustee Services Bank, Ltd. (Trust Account) Meiji Yasuda Life Insurance Company Nippon Life Insurance Company Mitsubishi Electric Group Employees Shareholding Union Japan Trustee Services Bank, Ltd. (Trust Account 5) Japan Trustee Services Bank, Ltd. (Trust Account 7) Japan Trustee Services Bank, Ltd. (Trust Account 4) JP MORGAN CHASE BANK 385632 Note: Shareholder ratio calculations deduct 425,622 company-owned shares. Distribution of Shareholders Individual et al. 13.1% Shareholders’ 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 162,251 124,997 106,568 81,862 61,639 42,038 39,241 38,720 35,583 32,653 7.6% 5.8% 5.0% 3.8% 2.9% 2.0% 1.8% 1.8% 1.7% 1.5% Foreign Corporations et al. 38.0% Financial Institutions 40.8% Other Corporations 5.8% Traders of Financial Instruments 2.3% Stock Price (Yen) 2,500 2,000 1,500 1,000 500 Mitsubishi Electric’s Stock Price Nikkei Stock Average 0 ‘16/4 ‘17/4 ‘18/4 The Nikkei Stock Average is based on information copyrighted by Nihon Keizai Shimbun, Inc. 25,000 20,000 15,000 10,000 ‘19/4 Nikkei Stock Average (Yen) MITSUBISHI ELECTRIC CORPORATION ANNUAL REPORT 2019 127 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-X01-9-CA400-C HQ1910〈IP〉

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