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Annual Report 2011 for the year ended March 31, 2011 Discovering Our Potential annual report 2011 contents Top Message p.01 Management p.64 A message from President Ken Kobayashi. Management information such as Mitsubishi Corporation’s history, management philosophy and management To Our Stakeholders structure, as well as stock information for shareholders. Interview with the President Corporate Profile / Corporate History Organizational Structure Potential p.07 Global Network Principal Subsidiaries and Affiliates Summary of major investments made in line with the General Information investment strategies contained in Midterm Corporate Strategy 2012. TRILITY Sustainability p.78 China / Brazil / India MC’s corporate governance, CSR & environmental affairs. BMA / Donggi-Senoro Aircraft Leasing Business / Princes / Discussion Biopharmaceuticals / Ship Owning and Chartering Business Corporate Governance Internal Control System Business Risks Performance p.19 Message from the Chief Compliance Officer Sustainability at MC Operating results for the year ended March 2011 and International Advisory Committee our past and present medium-term management plans. Members of the Board Corporate Auditors Medium-Term Management Plan Progress Executive Officers Level of Investments / Main Investment Projects A Message from the CFO Financial Overview Financial Highlights Corporate Data p.108 Metals and Energy Resource Data Operations p.30 Activities in two groups directly under the president and business groups. Two Groups Directly Under the President Global Environment Business Development Group Business Service Group Results of Business Groups Profiles of Business Groups Industrial Finance, Logistics & Development Group / Enhanced CSR & Environmental Affairs Content in Energy Business Group / Metals Group / Annual Report 2011 Machinery Group / Chemicals Group / Mitsubishi Corporation is aiming to create sustainable corporate Living Essentials Group value, which consists of economic value, along with societal Global Strategy value and environmental value. Annual Report 2011 integrates information concerning the creation of societal value and envi- ronmental value (CSR and environmental initiatives) that was previously contained in our Sustainability Report. The report is thus designed to serve as a comprehensive report on our initia- tives to create sustainable corporate value. < Financial Section of Annual Report 2011 > < Inclusion in SRI Indexes > Please refer to “Financial Section of Annual Report 2011” for detailed infor- MC has earned a solid reputation for its past CSR and environmental mation for the year ended March 2011. affairs initiatives, and transparency in the disclosure of information. URL: http://www.mitsubishicorp.com/jp/en/ir/library/ar/financial/ Underscoring this is MC’s inclusion in various socially responsible invest- ment (SRI) indices. (As of August 2011) < Website Information > Annual Report (Online Version) URL: http://www.mitsubishicorp.com/ar2011/en/ Information Regarding Environment and CSR URL: http://www.mitsubishicorp.com/jp/en/csr/ Forward-Looking Statements This annual report contains forward-looking statements about Mitsubishi Corporation’s future plans, strategies, beliefs and performance that are not historical facts. They are based on current expectations, estimates, forecasts and projections about the industries in which Mitsubishi Corporation operates and beliefs and assumptions made by management. As the expectations, estimates, forecasts and projections are subject to a number of risks, uncertainties and assumptions, they may cause actual results to differ materially from those projected. Mitsubishi Corporation, therefore, wishes to caution readers not to place undue reliance on forward-looking statements. Furthermore, the company undertakes no obligation to update any forward-looking statements as a result of new information, future events or other developments. Risks, uncertainties and assumptions mentioned above include, but are not limited to, commodity prices; exchange rates and economic conditions; the outcome of pending and future litigation; and the continued availability of financing, financial instruments and financial resources. Mitsubishi Corporation Annual Report 2011 to our stakeholders It is my pleasure to write to you in our annual report for the year ended March 2011. Let me begin by expressing my heartfelt condolences to people who lost loved ones and were affected in other ways by the Great East Japan Earthquake. Efforts to recover and rebuild after this massive disaster will almost certainly stretch out for years. Through our businesses, we are determined to play a part in Japan’s economic recovery. At the same time, we have established the Mitsubishi Corporation East Japan Earthquake Recovery Fund with a contribution of ¥10.0 billion to offer support from many angles over the crucial next several years. In these and other ways, we are working across the company to provide relief and support to stricken areas. The past year was a pivotal year for Mitsubishi Corporation (MC) with changes in top management. I took over as presi- dent in June 2010 and the following month unveiled a new medium-term management plan for the three-year period through March 2013. In the sense that we launched a new management policy and moved to achieve its goals, the year ended March 2011 was a period of profound change indeed. The new medium-term management plan’s overarching goal is to create sustainable corporate value while helping solve global problems through our various businesses. In this way, we will meet the expectations of all stakeholders, including our customers, employees, shareholders, creditors, society and our planet. At Mitsubishi Corporation, we are committed to creating societal and environmental value, as well as economic value to ensure our perpetual existence and strengthen our competitiveness as a company. One way we are demonstrating this commitment is through our participation in the UN Global Compact, which we joined in 2010. Since the launch of our latest medium-term manage- ment plan, I have held lively discussions with business groups as the basis for deciding on specific growth strate- gies, investment plans and other actions to achieve our goals. In fact, I see the year ending March 2012 as a year of action. We will move with a sense of speed to grow businesses that underpin our growth while creating new earnings streams. Our operating environment remains filled with uncer- tainty. The Japanese economy is still feeling the impact of the Great East Japan Earthquake. Globally, emerging mar- kets grow unabated, while in industrialized economies, lingering financial instability in Europe, among other factors, clouds the outlook. Pro-democracy movements across the Middle East are also having an impact on governments and economies worldwide. Despite these uncertainties, we will act and take on challenges without fear of failure to create sustainable corporate value. We want to carve out a profound pres- ence through our businesses. July 2011 Ken Kobayashi President and CEO 01 Mitsubishi Corporation Annual Report 2011 interview with the president In the year ended March 2011, we began taking steps to achieve the goals of Midterm Corporate Strategy 2012. We made steady progress in doing so. The year ended March 2011 was your first year as president. Could you sum up the year? q.1 I think it was a year in which we made steady progress as a company. a I took the helm as president in June 2010 and the The year ended March 2011 was shaped by following month announced Midterm Corporate political unrest in the Middle East and North Strategy 2012. Following detailed examination, in Africa, economic stagnation in industrialized December 2010 we launched various initiatives to countries, and the Great East Japan Earthquake. bring this three-year medium-term management These and other factors heightened the sense of plan to fruition. In the sense that we launched a uncertainty in markets. Nevertheless, we posted new management policy and began taking actions net income of ¥463.2 billion. This bottom-line to achieve its goals, the past year was a period of result eclipsed the forecast we issued in October profound change indeed. 2010. And this result was our second best ever. The tailwind created by rising resource prices net income and dividend per share certainly served as a fillip for our performance. (¥ billion, yen) But we also reaped the rewards of various initia- 500 100 tives in both resource and non-resource fields. I feel that this was why we delivered a better-than- 400 80 expected performance overall. We paid a record annual ordinary dividend per 300 60 share of ¥65. We also retired treasury stock as we worked to return profits to shareholders. 200 40 One of our goals under Midterm Corporate Strategy 2012 is to deliver earnings growth by 100 20 strengthening earnings drivers while maintaining capital efficiency and a sound balance sheet. 0 0 Based on our performance in the past fiscal year, I 2006.3 2007.3 2008.3 2009.3 2010.3 2011.3 am convinced that we made steady strides toward ■ Net income ■■ Dividend per share achieving that goal. * Net income as used on this page and subsequent pages denotes net income 02 attributable to Mitsubishi Corporation. Mitsubishi Corporation Annual Report 2011 How has MC responded in the aftermath of the Great East Japan Earthquake? q.2 It has steeled our resolve to contribute to the economy a and Japan’s rebirth through our core businesses. Just 10 minutes after the devastating earthquake struction process. struck northeastern Japan, we established the As the magnitude of the devastation became Crisis Response Office. This office set into motion clear, I felt that it was incumbent upon me to visit our Business Continuity Plan and took steps to the disaster-stricken areas myself. I went to the ascertain the extent of damage suffered by MC Tohoku region twice in April. I was deeply moved at Group companies and suppliers. We also distrib- the sight of people trying desperately to cope with uted food and other necessities to employees who the disaster and felt strongly that the speed of sup- had trouble getting home that day. We hold drills port for these people must be maintained above on a regular basis, and I believe this equipped us anything else. That’s why we established the Mit- well to handle the extraordinary circumstances we subishi Corporation East Japan Earthquake Recov- faced on March 11. ery Fund with a total contribution of ¥10.0 billion. Having handled the initial emergency, our basic These funds will be used mainly to support victims responsibility now is to complete the tasks ahead of the disaster over the next four years. The support of us thoroughly, so that we contribute to Japan’s will primarily consist of supplies and assistance that reconstruction and rebirth through our core busi- can be provided immediately to residents of the nesses. MC is involved in a broad range of indus- devastated areas. We have also continued to dis- tries. I believe that the most important role we can patch employee volunteers to disaster-stricken play now is to grease the wheels of economic areas to help with restoration efforts. activity. I have told our employees to prioritize One of the Three Corporate Principles that form operations in the short term that support the our corporate philosophy is Corporate Responsibil- industries we are involved in. Over the medium ity to Society. I’m convinced that contributing to term, I have asked them to give their full efforts to society as a corporate citizen based on the spirit of Japan’s recovery. And over the long term, I want this principle will ensure our perpetual existence them to create new businesses by coming up with and strengthen our competitiveness as a company. new ideas conceived of in the course of the recon- Emergency Scholarships Recovery Support Grants n For undergraduate or graduate students who are otherwise n Grants of ¥2.5 million (annual) for NPOs, social welfare incapable of continuing their studies due to the disaster groups and others involved with relief and recovery efforts (to be awarded to 500 students each year for 4 years) in affected areas (¥2.5 billion) (to be provided to 200 groups annually for 4 years) ¥2.0 billion Monetary Donations Housing for Evacuees n Donations and humanitarian aid n MC single-employee dormitories, (for orphans, the elderly, etc.) Mitsubishi Corporation East company training facilities and (¥2.5 billion) Japan Earthquake Recovery Fund other leased facilities will be made available to evacuees Amount ¥10 billion (¥1.0 billion) (over 4 years) Volunteer Activities Other Support n Employee volunteers n Donations of supplies (Some 1,200 MC volunteers are expected to help in the n Provision of 30 i-MiEVs to affected areas affected areas over the course of one year.) n Other support in the afflicted regions n Other employees will be given the chance to attend camps (¥2.0 billion) and other events with children affected by the disaster. * In addition to these contributions, all MC officers plan to contribute between 10% and 30% of their bonuses. 03 Mitsubishi Corporation Annual Report 2011 What progress have you made with Midterm Corporate Strategy 2012? q.3 We are steadily executing Midterm Corporate Strategy 2012 a as initially planned. Under Midterm Corporate Strategy 2012, we plan when we find prime projects. Shale gas is attract- to invest ¥2-2.5 trillion over the 3 years of the ing attention as an unconventional source of plan. In the year ended March 2011, we only energy. I see developing such new resources as invested ¥370.0 billion, partly because the plan also being important to expand and enhance our wasn’t launched until July 2010. However, there investment portfolio. are many projects that we are highly likely to Another major theme under Midterm Corporate invest in during the year ending March 2012, so Strategy 2012 is responding to changes in the our plans haven’t changed. shape of our business. Obviously, we still engage In the resource field in the year ended March in the traditional activities of a trading company. 2011, we made a final investment decision (FID) on But our business models are diversifying. We now the Donggi-Senoro LNG Project in Indonesia. This also aim to generate earnings from investments project is a first for us, as it will see us take the such as in resources and the provision of finance. lead as the largest shareholder. Another notewor- Furthermore, we seek to generate earnings thy investment was the acquisition of a working through the management of manufacturers and interest in a shale gas project in Canada. other types of operating companies. In order to It is becoming increasingly important when develop these different types of businesses, the investing in the resource field to consider how best past notion that MC itself as the Parent Company to own resource rights and participate in such or head office in Tokyo should be the central businesses. In other words, management of the player is no longer valid. We must create organiza- various forms of risk that arise depending on the tions and systems that are in step with the times. business model is key. With competition to secure This includes handing a certain level of authority natural resources heating up, it is no longer easy and financial control to business investees and to participate in new gas and oil development overseas offices. projects without taking on risk. In the past, we I view the year ending March 2012 as a year for linked buyers and sellers, acquiring partial rights action. I am urging our employees to think freely and earnings dividends. However, as competition and tackle many more new challenges. To begin has escalated, no longer can we expect to con- with, they must focus on leveraging MC’s diversity. tinue growing by taking that approach alone. Then, as the next step, we must solidify our diver- We must consider the option of becoming the sified business portfolio, including strengthening operator on a project with other parties and lead- our management platform, in ways suited to the ing it ourselves. That’s exactly what we plan to do changing shape of the company. [midterm corporate strategy 2012] basic policy for investment plan (¥ billion) Regions/Domains Business Portfolio Capital Allocation (three years) Strategic China, India, Brazil Regions Development of Infrastructure new business Strategic Global Environmental Approx. 300 Domains Businesses Mineral Resources Strengthen current 100–200 1,000–1,200 Oil and Gas Resources earnings drivers Industrial Finance, Steel Products, Broaden other Carbon Materials, Ships, Motor Vehicles, 600–800 earnings drivers Chemicals, Retail, Foods, etc. Total (gross) 2,000–2,500 04 Mitsubishi Corporation Annual Report 2011 What is your medium- to long-term outlook for the world economy? q.4 I think the distinction between industrialized countries and emerging mar- a kets will lose its meaning and change will happen at an even faster rate. Emerging nations, which have driven the world economy since the onset of the global financial crisis, are experiencing increasingly serious infla- tionary pressures. In the Middle East and North Africa, there is a growing democratization move- ment. Meanwhile, there is no solution in sight for government debt problems plaguing Europe, and the U.S. economic recovery has been more muted than expected. With many countries, including the U.S. and Russia, scheduled to hold elections in 2012, the outlook is harder and harder to read. In the midst of this, I have traveled on busi- ness outside of Japan, and I gained a new appre- ciation for the accelerating speed of change in the world economy. In modern society, with the Internet and other ing nations is fast becoming moot. network infrastructure, information literally flashes When human needs have been satisfied, econ- around the globe, unlike the era when Japan experi- omies tend to plateau. For this reason, the pace of enced high growth. As a result, people are demand- change we have seen until now won’t necessarily ing a higher standard of living and some regions are last forever. However, in the next 10 years at least, seeing unprecedented rapid economic growth with- we are likely to see even faster change in the out the phases of growth seen in the past. As we second decade of the 21st century. I don’t expect are witnessing with the likes of China and Brazil, the the pace of change to slow. distinction between developed nations and emerg- share of world economy (gdp) (%) 35 European Union 30 25 United States 20 Brazil Russia 15 India Japan 10 5 China 0 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 (year) Source: International Monetary Fund, World Economic Outlook Database, April 2011 Forecasts 05 Mitsubishi Corporation Annual Report 2011 What is your vision for Mitsubishi Corporation as a company? q.5 I’d like us to be a company that musters its strengths to create sustain- a able corporate value no matter what the economic environment. As I mentioned before, Mitsubishi Corporation our human resources, who are our greatest asset. today no longer generates its earnings only from Therefore, I will ensure that we develop employees traditional trading activities. We are now develop- with high-quality skill sets. We are not preoccu- ing a multitude of businesses around the world. In pied with chasing short-term profits. Rather, our fact, it was this business portfolio shaped over focus is on sowing the seeds to nurture future many years that enabled us to still generate earn- earnings drivers while at the same time keeping ings of a certain level even after the onset of the something in reserve to fulfill our responsibility to global financial crisis. I want us to be a company all our stakeholders. that has no Achilles’ heel, one that can leverage its I won’t let us be bound by the conventional strengths in various fields even when resource and notion of a general trading company. I see it as commodity prices are volatile or economic condi- my mission to create a company that can create tions change suddenly. sustainable corporate value no matter what the At present, one of our strengths is the resource economic climate. field. So it is only natural that we will continue to focus on this area. But we also aim to remain the top general trading company in various segments in non-resource fields. Key to this is strengthening 06 Mitsubishi Corporation Annual Report 2011 Discovering our Potential This section provides a summary of major investments made in line with the investment strategies contained in Midterm Corporate Strategy 2012. Development of new businesses TRILITY China Brazil India p.8 p.9 p.10 p.11 Strengthen current earnings drivers BMA Donggi-Senoro 1 p. 2 p.14 Broaden other earnings drivers Aircraft Leasing Princes Biopharmaceuticals Ship Owning Business and Chartering p.15 p.16 p.17 1 p. 8 07 Mitsubishi Corporation Annual Report 2011 TRILITY Regional Growth Forecasts for Global Water Business Market (¥ trillion) Sub-Saharan Africa East Asia and Oceania Central and Eastern Europe Central and South America Middle East and North Africa North America South Asia Western Europe 2007 2025 Source: Global Water Market 2008 and Ministry of Economy, Trade and Industry estimation (Note) US$1=¥100 TRILITY — Providing Comprehensive Water Utility Management in Australia The global water business market is growing rapidly. Amid this growth, MC is developing a comprehensive water business on a global basis, from securing water resources to water supply and reuse. Here we look at Australian company TRILITY, which is part of this comprehensive push. In October 2010, MC, Innovation Network Corporation Established in 1991, TRILITY operates 14 of Japan, a public-private partnership, JGC Corporation individual businesses, comprising 60 water treat- and Manila Water Company, Inc. teamed up to acquire ment, wastewater processing, wastewater recla- United Utilities Australia Pty Limited, a private-sector mation, and seawater desalination facilities, water utility solutions provider based in Australia. The across Australia. company’s name was subsequently changed to Most of these facilities were designed and con- TRILITY in March 2011. structed by TRILITY, which has been supplying high- The company was renamed to reflect the aim of quality water services to communities for around 20 being a comprehensive water utility services provider years. Today, TRILITY supplies water and water treat- based on three (tri-) key elements. Specifically, in ment services for over 3 million water users and it three key fields (Water, Wastewater, and Reuse plans to further develop services from the general Water), the company plans to leverage three functions public to industry, as it develops the water business (Design, Finance, and Operate) to provide value to market, particularly in Australia. customers in three main markets (Municipal, Industrial and Resource). [From the Business Frontline] TRILITY Business Model The company has embarked on a new, 3 key field s expanded strategic direction, which includes organic growth as well as M&As, following the change in ownership. Our new share- holders bring with them a wealth of oppor- tunity, knowledge and financial strength, 3 functio which will greatly enhance TRILITY’s already dominant position in the Australian water PPP market. s ket TRILITY looks to leverage the many rela- ns ar tionships its new shareholders bring across various market sectors, particularly m mining and resources, to accelerate growth both nationally and abroad. n Francois Gouws ai Managing Director 3 m Photo: On completion, the Adelaide desalination plant will deliver up to 300 million liters of water each day (about 100 billion liters per year) and is one of the largest in Australia. 08 Mitsubishi Corporation Annual Report 2011 China Meat Production in China (million tons) 80 70 60 50 40 30 20 10 0 00 01 02 03 04 05 06 07 08 09 Source: Agriculture & Livestock Industries Corpora- tion’s report “China Meat and Meat Prod- ucts Demand and Supply Since 2009” China (Strategic Region) — Tapping Into Economic Growth, Expanding Businesses With its expansive land area and the world’s largest population, China continues to experience strong economic growth. Eyeing increasing internal demand, MC is engaging in a meat project and other businesses in China. Targeting the Creation of New Business in a business with Chinese companies in other countries. High-growth Environment In April 2011, MC stationed a senior executive vice Amid the growing presence of emerging markets in president in China for the first time. Under his leader- the global economy, China above all is expected to ship, we plan to develop business in China in a more grow at a high rate. The Chinese government’s 12th flexible manner. five-year plan, which began in 2011, designates As one project targeting growing internal demand internal demand expansion, energy saving, the envi- in China, in June 2011, MC, Itoham Foods Inc., and ronment, renewable energy, hybrid and electric vehi- Yonekyu Corporation decided to invest in the meat cles and certain other fields as strategic businesses and livestock business in China of COFCO Limited. for expansion, as the country seeks to transform its The four companies plan to invest a total of 10 billion model for economic development. At the same time, Chinese yuan (approximately ¥125 billion) through China continues to build infrastructure in its interior. 2017 for expanding meat products and processed Another noteworthy dynamic is that Chinese corpo- foods businesses. We believe this will contribute to a rations are stepping up the pace and breadth of stable food supply framework and develop the meat global activities. industry in China. Recognizing the potential of the Chinese market, In this way, MC aims to achieve mutual and sus- all MC business groups plan to broaden their busi- tained development by working with leading partners ness development in China. They are expanding initia- in Japan and overseas to conduct globally oriented tives from various angles, including businesses business investments. targeting internal demand and the development of Targeting East Asia’s Unlimited Potential I believe that China, with its 1.3 billion people, has unlimited potential both as a production center and a consumer market. As MC actively looks to expand business in China, I believe it’s important to promote ties that are mutually beneficial by seeking to supplement China’s growth and contribute to its develop- ment, such as through businesses that address environmental problems or energy conservation. Meanwhile, other countries and regions in East Asia are also seeing robust economic development. I earnestly hope to contribute to development in East Asia, including Mongolia, by enhancing coordination across the MC Group, while continuing to delve further into China’s business environment. MC Senior Executive Vice President, Regional CEO, East Asia & Chief Representative for China Masahide Yano 09 Mitsubishi Corporation Annual Report 2011 Brazil Export Structure in Brazil ($ billion) 200 150 100 50 0 2004 2005 2006 2007 2008 2009 ■ Primary Products ■ Semi-processed Products ■ Industrial Products Primary Products: Iron ore, coffee beans, soybeans Semi-processed Products: Pulp, crude sugar, semi-finished steel Industrial Products: Aircraft, automobiles, orange juice Source: Ministry of Economy, Trade and Industry “White Paper on International Economy and Trade 2010” Brazil (Strategic Region) — Unlocking Potential in Agriculture, Resources, and Consumption Brazil has massive potential both as a major supplier of resources and as a consumer market. MC aims to engage with this market by focusing on the urban infrastructure sector and by improving links with influential business partners. Brazil: A Major Market and Source of Supply In April 2011, recognizing Brazil’s growth potential, The Brazilian economy has established a solid recov- MC appointed an executive vice president to lead ery track since the Lehman Shock. The twin driving local business operations and enhance capabilities for forces are the country’s position as a supplier of making quick management decisions. MC has also resources and as a consumer market. established working groups to function as Group- Blessed with vast fertile plains, Brazil has more wide taskforces targeting promising sectors. MC is than 200 million hectares of arable agricultural land focusing on businesses related to urban infrastruc- plus about 20% of the world’s freshwater supplies. ture, a sector that is expanding rapidly ahead of the These features make the country a potential agri- FIFA World Cup soccer tournament in 2014 and cultural superpower. Brazil is also a rich source of summer Olympic Games in 2016. MC is also seeking natural resources from oil to iron ore, making it one to develop new business opportunities in other fields, of the world’s leading resource nations. In addition based on addressing problems for specific major to its natural strengths as a supplier, the population customers. has an average age of just 32 years, which gives Looking further ahead to future decades, MC Brazil the potential to become a major consumer plans to engage aggressively in next-generation market as well. businesses. Looking to Enhance Our Presence in Brazil Brazil is poised to be a major force in the global economy. It boasts rich mineral and energy resources and is also a major agricultural country. In addition, Brazil’s upper and middle classes are expected to grow; they currently comprise 60% of the nation’s approximately 200 million people. Moreover, the pace of economic growth is likely to accelerate as new social infrastructure is developed. Brazil is aiming to raise the overall level of industry and for this it needs to bolster efficiency and quality as well as promote improvements related to environmental sustainability and energy conservation. To help Brazil achieve its goals, the MC Group must team up with highly skilled Japanese manufacturers and work to establish itself in the country. Meanwhile, I’d also like to explore collaboration with Brazilian companies on business in other countries as well. MC Executive Vice President, Regional CEO, Latin America Seiji Shiraki 10 Mitsubishi Corporation Annual Report 2011 India Nominal GDP and Growth Rate ($ billion) 2,000 1,800 1,600 8.5% 9.0% 12.0 10.0 (%) 1,400 8.0 1,200 6.0 1,000 800 4.0 600 2.0 400 0 0.0 2007 2008 2009 2010 2011 (est.) Nominal GDP [left] Growth Rate [right] Source: Ministry of Finance, Government of India “Economic Survey 2010-2011” India (Strategic Region) — Targeting Domestic Demand and Infrastructure India continues to sustain high economic growth rates, supported by strong domestic demand. MC is pursuing broad ongoing business development in India based on the two themes of capturing domestic demand and developing infrastructure business, with the goal of creating future earnings drivers. Key Themes: Infrastructure and Capturing and transportation system-related areas, and we are Domestic Demand also involved in activities related to smart communities India recorded GDP growth of 8.5% in the year ended and other environmental businesses. We have created March 2011, and is expected to maintain growth at a two working groups (WGs) to upgrade MC’s engage- high level over the next 5 years. Since export depen- ment in India: “Gas & Power” and “Transportation dence is low and domestic demand is the primary Material.” These WGs are working to realize first-class driver of economic growth, India is forecast to con- projects within these two sectors based on Group- tinue growing rapidly over the next 30 years. Invest- wide cooperation. The Gas & Power WG aims to build ment in infrastructure is one of the main driving forces gas value chains, including receiving terminals for behind the country’s high economic growth. The liquefied natural gas (LNG), demand for which is pro- Indian government plans to invest upwards of US$1 jected to grow significantly in India in the future, and trillion in infrastructure projects over the 5-year period gas-fired power generation. The Transportation Mate- starting in 2012. MC’s wide-ranging business devel- rial WG is focusing on entry into India’s rapidly expand- opment in the country is guided by the twin themes of ing market for vehicle tires. Plans are being studied to capturing domestic demand and getting actively create a sales and distribution network for tires, along involved in the infrastructure sector. with raw material purchasing capabilities. In terms of internal demand, automobile-related Going forward, the Indian market’s dynamic businesses such as chemical products and steel prod- growth will continue to present many business devel- ucts are growing rapidly, and we are also involved in a opment opportunities that MC aims to pursue aggres- frozen products distribution business. In the infrastruc- sively by harnessing its collective capabilities. ture field, business development is focused on railway India is attracting growing attention, and MC has designated the country as a Strategic Region under its Midterm Corporate Strategy 2012. Our key strategies in India are to capture domestic demand and to develop infrastructure business. We have been working to promote the infrastructure business and investment projects related to internal demand since 2008, while also focusing on building human networks in India during this time. We have now developed the multi-functional project capabilities needed to create new business. It is increas- ingly important for MC that project development occurs across the boundaries between different business groups and business divisions, which is why all the staff at MC’s Indian operations try to share information to enable better cooperation with other offices and business groups. I am sure this approach will foster business opportunities. Senior Vice President, Chairman & Managing Director, Mitsubishi Corporation India Pvt. Ltd. Keiichi Nakagaki 11 Mitsubishi Corporation Annual Report 2011 BMA BMA — A Coking Coal Business That Is Meeting Global Demand Through wholly owned subsidiary Mitsubishi Development Pty Ltd (MDP), we have been developing and operating coking coal mines continuously for more than 40 years. With demand rising worldwide, we will work to ensure a stable supply of coking coal by developing new mines and expanding existing mine assets. The World’s Largest Coking Coal Business ing stable supplies of coking coal. We established MDP in Australia back in 1968, when But we were still convinced that demand for Japan was in the midst of a period of high economic coking coal would continue to increase in the future. growth. Steel demand was rising dramatically; it was Given this conviction, we felt that it was imperative to an era when we needed to ensure the stable supply ensure a stable coking coal supply. So, in 2001, we of coking coal, an essential steelmaking raw material. increased our minority working interest to a 50% equal In order to cater to the burgeoning demand, we partnership and launched BMA, a coal joint venture formed a partnership with a U.S. company in the state with global resource major BHP Billiton Ltd. of Queensland in northeastern Australia with the goal BMA owns reserves of some 2.1 billion tons at of developing coking coal mines. Thereafter, from the coalfields in the Bowen Basin in central Queensland. 1970s to the beginning of the 1990s, coking coal From its 7 coal mines, BMA produces approximately demand rose on the back of higher steel production 50 million tons per year of mainly high-grade coking around the world. However, market conditions took a coal. This is equivalent to roughly 30% of the global turn for the worse in the 1990s when Japan’s eco- seaborne coking coal trade by volume, making BMA nomic bubble burst and Asia experienced a currency the world’s largest coking coal operator, supplying crisis. Earnings worsened in the steel industry and the quality coking coal to customers around the globe. coking coal industry felt the repercussions, endanger- [From the Business Frontline] At MDP, our multinational workforce of roughly 60 employees is working as one to develop the BMA coking coal business as well as to make invest- ments in thermal coal, iron ore, uranium and other resources. Demand for resources is rising because of firm growth in traditional markets, economic growth in China and other emerging markets, and increasing energy demand worldwide. At the same time, the global economy is undergoing dynamic change and we have had to contend with unexpected natural disasters such as heavy rains in Australia. Nevertheless, we are working hard to ensure a stable supply of resources. We aim to grow further in step with the market. Mitsubishi Development Pty Ltd CEO Kaoru Yamanaka 12 Mitsubishi Corporation Annual Report 2011 World Coal Exports (million tons) World Coal Exports Total Export Volume 938 million tons ■ Australia ■ Indonesia ■ Russia ■ Colombia ■ U.S. ■ South Africa ■ China ■ Canada ■ Kazakhstan ■ Vietnam ■ Others *2008 (Forecast) Source: White Paper on Energy 2010, Agency for Natural Resources and Energy Laying the Foundations for Higher Production BMA continues to make investments and conduct and More Stable Supplies surveys with a view to developing several new mines Global coking coal demand is soaring due to robust and expanding existing operational mines. This demand from India, Brazil, China and other emerging includes the 2008 acquisition of quality undeveloped nations, as well as demand from more traditional blocks that are expected to be developed into large- markets. To meet future demand for coking coal, we scale mines. BMA aims to make timely decisions on are working to ramp up output at BMA. mine development to meet future increases in coking Around the beginning of 2011, we decided to coal demand. Looking ahead, through MDP we will make a substantial investment in developing new stably supply high-grade coking coal to customers in mines, as well as in expanding railway capacity for Japan and other parts of the world. transporting the coal to the loading and shipping port, which will also be upgraded to handle more coal. This investment should increase production by 4.5 million tons a year from 2013. BMA Mines in Queensland, Australia Mackay Dalrymple Bay Hay Point Goonyella Riverside Port Broadmeadow Daunia Saraji Peak Downs Norwich Park Gregory Crinum Rockhampton Emerald Blackwater Gladstone In operation In development BMA Mines Brisbane Perth Sydney Melbourne 13 Mitsubishi Corporation Annual Report 2011 Donggi-Senoro Natural Gas Production in Asia Pacific area (2001–2010) (million tons) 500 400 300 200 100 0 01 02 03 04 05 06 07 08 09 10 Source BP Statistical Review of World Energy June 2011 Donggi-Senoro LNG Project — With Its Shareholders Coming from Japan, Indonesia and South Korea, This Is the First All-Asian LNG Project. Much is expected of LNG as an energy source with a relatively low environmental impact. At the Donggi-Senoro LNG Project, MC is serving as the operator, running and managing the entire project. Global consumption of natural gas is increasing at an owned by MC, is the project operator. Plans call for annual rate of 2%. In particular, demand is growing for the production and sale of LNG (approx. 2.0 million use as a fuel source for generating electricity. The tons/year) to begin in 2014. With its shareholders main reasons for natural gas being in high demand coming from Japan, Indonesia and South Korea, this are its relatively low environmental impact compared is the first all-Asian LNG project, and it is notable for with other fossil fuels, and its increased economic the absence of any energy majors. viability as a feedstock for power generation because The project is attracting the limelight as an under- of technological advancements. taking with extremely profound significance in terms In 2011, MC commenced the Donggi-Senoro of effectively utilizing and making commercially viable LNG project, an LNG production and sales business small and medium-sized gas fields. Besides supplying in Central Sulawesi Province, Indonesia. MC is under- LNG to Japan and South Korea, the project will also taking this project in partnership with PT. Pertamina, meet demand for natural gas from within Indonesia. Indonesia’s state-owned oil and gas company, PT. MC has spearheaded this project right from the initial Medco Energi International Tbk, Indonesia’s largest planning stages and will also play a central role in oper- private oil and gas company, and Korea Gas Corpo- ating the liquefaction plant once construction is com- ration, one of the world’s largest buyers of LNG. PT pleted. The Donggi-Senoro LNG project is therefore Donggi-Senoro LNG (PT DSLNG), which is 44.9% expected to promote growth in MC’s LNG business. [From the Business Frontline] The main role of human resources during plant construction is to attract and recruit talented people with relevant technical skills and experiences who are expected to share the same values. It is a challenge due to the scarcity of people with the right capabilities and increasing demand in the industry. It is also a significant opportu- nity to build competencies in the first downstream business model in Indonesia related to an LNG project. Both serve as highly motivating factors for me to find the right people so that we can deliver on our commitment. I think HR can make a valuable contribution to Mitsubishi Corporation in achieving success in terms of talent management. General Manager – Head of Human Resources, PT. Donggi Senoro LNG—Indonesia. Juni Kuntari [right] Juni Kuntari 14 Mitsubishi Corporation Annual Report 2011 Aircraft Leasing Commercial Jet Aircraft Fleet: Operating Lease Share (thousand aircrafts) (%) Business 25 100 20 80 15 60 10 40 5 20 0 0 1990 1995 2000 2005 2010 ■ Operating Leased Aircraft [ left] ■ Other Aircraft [ left] ■■Operating Lease Share [right] Source: SH&E Aircraft Leasing Business — A Leading Player in the Growing Aircraft Leasing Market Today, some 20,000 commercial aircraft traverse the world’s skies, of which a little over 30% are procured using operating leases. The aircraft leasing market is expected to grow consistently in the future. As Japan’s leading air- craft leasing company, MC Aviation Partners Inc. (MCAP), a wholly owned subsidiary established by MC, owns a fleet of about 80 aircraft and manages this asset portfolio to generate a stable income stream. Expansion plans for this business imply that aircraft leasing is set to become an earnings pillar for the Industrial Finance, Logistics & Devel- opment Group, based on a successful asset management business model in which physical assets are underpinned by expertise accumulated in aviation industries. Dynamic Business Development Operating from Bases in MCAP operates globally using bases located in three Three Key Regions regions: MCAP is headquartered in Tokyo, with MC Aviation The future projected annual growth rate for the global air Partners Americas Inc. based in Los Angeles and MCAP transportation market is 5% over the long term. Forecasts Europe Limited operating from Dublin. The MCAP fleet of some show this market doubling in size over the next 20 years, 100 aircraft includes about 80 owned and a further 20 that driven by the high rates of economic growth in the develop- MCAP manages under contract. Total aircraft leasing assets ing world. Growth prospects for the aircraft leasing business amount to approximately US$2.7 billion, which makes MCAP are good because airlines are concerned with up-front capi- the top firm in its field in Japan and number 13 globally. Going tal investment and a flexibility in managing fleets. forward, based on the close relationships that MC has devel- Since entering the aircraft leasing sector in 1984, MC has oped with airlines and aircraft manufacturers in Japan and been developing this business by building up its own fleet and overseas, MCAP aims to enter the global top 10 in the sector using operating leases, accumulating expertise in aviation by accumulating blue-chip assets targeting higher returns on industries and expanding its international network. In 2008, MC invested capital, and will continue to tap into the strong growth established MCAP to integrate aircraft leasing operations with in demand for air transportation worldwide. related services such as asset management, marketing and technical support. [From the Business Frontline] Number of Owned Aircraft Basis MC Aviation Partners Americas is a core MC firm involved in the management of aircraft leas- by Region ing business assets. We comprise marketing personnel, aircraft engineers and many other professionals such as lawyers. We are working hard together to manage the existing asset base and to develop new projects so that we can grow MC’s aircraft leasing business further. Total MC Aviation Partners Americas Inc. VP, Administration 80 aircraft Shigeru Kizawa Apr. 30, 2011 Management team of MC Aviation Partners Americas. ■ Asia-Pacific ■ Europe and Africa Far-left: Shigeru Kizawa ■ Central and South America ■ North America ■ Others 15 Mitsubishi Corporation Annual Report 2011 Princes Revenues of Princes (£ million) 1,200 Bottled water business acquisition (2004) 1,000 Italian food ingredients business acquisition (2001) 800 Spread business acquisition (2001) 600 Oil business investment (1998) 400 Drinks business acquisition (1991) 200 0 1980 1984 1989 1994 1999 2004 2010 Before M&A by MC Princes Limited — Growth Driven by Branded Products and Private Brands UK-based food and drink supplier Princes is executing a growth strategy which includes M&As and the formation of partnerships with leading suppliers. Through this strategy, this wholly owned MC subsidiary is making great strides expanding its food business in the European market. In 1989, when MC acquired Princes, the company’s pany. Princes is now well and truly one of the top UK- main business was the sale of canned products. Since based food and drink suppliers. then, Princes has conducted no less than 19 M&As. In February 2011, Princes made another move These acquisitions included a drinks business in toward expansion, by instigating its 20th M&A. 1991, an oil business in 1998, a spread business and Princes entered into a conditional agreement to an Italian food ingredients business in 2001, and a acquire the canning operations of another UK-based bottled water business in 2004. With these acquisi- food supplier, Premier Foods plc. tions, Princes’ business model has evolved from With this latest acquisition, Princes expects to be being predominantly a trading company to a more the leading manufacturer of canned foods for the manufacturing-focused business, and its category retail market in the UK. Princes’ market leadership of reach has expanded. canned fish and meat will be supplemented and Alongside efforts to rationalize and achieve busi- enhanced by canned beans and vegetables. As part ness efficiencies, Princes has expanded the range of of the acquisition, Princes will acquire two additional branded products it supplies, and has undertaken the manufacturing sites. Armed with these new assets, production of private brands for other companies. Due Princes will endeavor to serve the retail market even to this continuous focus on the growth of its business, more by further enhancing quality assurance and Princes has increased annual revenues to £1.2 billion, price competitiveness, strengthening traceability and nearly 7 times more than when MC acquired the com- taking other actions. MC views Princes as the growth vehicle of its food and drinks business in Europe and aims to achieve even greater successes in the future. One of Princes’ key strategies is to further expand and enhance its business platform in continental Europe. To this end, we have strengthened operating structures at Princes Foods B.V., our sales Liverpool subsidiary in the Netherlands, and established EOL Polska, a Polish (Head office) edible oils affiliate, in 2010. In these and other ways, we have expanded our business. Looking ahead, we plan to seize other opportunities to conduct M&As to acquire more manufacturing bases, businesses and brands as we rise to the challenge of driving more business expansion. ■ Operating bases: UK, Netherlands, Italy and Poland. ● Plants: UK 9, Mauritius 1 and Poland 1. Princes Limited Chairman Kazuo Ito 16 Mitsubishi Corporation Annual Report 2011 Biopharmaceuticals Global Pharmaceuticals Market (Prescription drug basis) ($ billion) 800 600 400 200 0 1990 2006 2015 (est.) ■ Small molecule ■ Biologics Source Evaluate Pharma Biopharmaceuticals — Working with Excellent Companies Possessing Advanced Biopharmaceuticals Manufacturing Technologies Under an equity-based business alliance with FUJIFILM Corporation, we have invested in a business custom man- ufacturing biopharmaceuticals using advanced biotechnologies. Our aim is to tap into the market for unmet medi- cal needs, which is expected to grow going forward. Unmet medical needs cannot be effectively treated with existing treatments. The Chemicals Group has, to date, amassed much pharmaceuticals applying constituents found in the insight in the biopharmaceuticals sector through its human body. In therapeutics areas where there are investments in bioventures. This has enabled it to high unmet medical needs such as cancer and rheu- build a network in the industry. We have also carried matoid arthritis, and where effective therapies still don’t our custom manufacturing of intermediates and sold exist, the market for effective medical treatments is active pharmaceutical ingredients in our small mol- expected to grow going forward. The manufacture of ecule drugs* business for many years. Through these biopharmaceuticals requires sophisticated biotechnolo- activities, we have built relationships with major phar- gies, including gene recombination and cell culturing. maceuticals firms in Japan, the U.S. and Europe. We The two FUJIFILM Diosynth Biotechnologies compa- are also deeply involved in companies selling generic nies MC has invested in under the alliance agreement drugs, having established joint ventures with partners. possess advanced biopharmaceuticals manufacturing As a new undertaking, in June 2011, we formed an technologies. MC aims to capture business in the alliance with FUJIFILM Corporation to enter the busi- contract manufacturing sector, a market that is ness of custom manufacturing biopharmaceuticals. expected to grow by at least 15% annually. Biopharmaceutical is a general term for * Conventional pharmaceuticals created from chemical synthesis [From the Business Frontline] This is a cooperative project in the advanced field of biopharmaceuticals between MC and FUJIFILM. The alliance will draw on the strengths of each company—FUJIFILM’s advanced technologies and MC’s global business-making capabilities—to expand business. This project will contribute through biop- harmaceuticals to the development of a new business domain and address unmet medical needs. In doing so, I strongly hope that we can help improve people’s quality of life. Pharmaceuticals Team Leader, Bio-Fine Chemicals Unit Maki Hosoda 17 Mitsubishi Corporation Annual Report 2011 Ship Owning Scheme of Ship Owning and Chartering Business and Chartering Mitsubishi Corporation Ownership 100% Shipbuilding Ship Owning and Contract Management Company Shipyard Charter Contract Charterer / Operator Freight Contract Shipper Ship Owning and Chartering Business — Leveraging Insight and Expertise from the Shipbuilding and Marine Transport Industries The marine transportation business serves as a main artery for international logistics, as the optimal means for transporting large volumes of cargo over long distances. MC is aiming to capture new business opportunities in this industry through its ship owning and chartering business, leveraging the insight and expertise it has amassed in ship trading activities. The ship owning and chartering business is one busi- expertise is the major driving force propelling our ship ness MC is focusing on in particular. It is a business in owning and chartering business. which we own ships for chartering to marine transport Market rates in the marine transport industry companies, cargo owners and other parties in Japan slumped in the wake of the global financial crisis in and overseas. But there is more to this business than 2008. However, the market is recovering, led by merely chartering vessels. It also requires us to bulk carriers, against a backdrop of rising demand arrange ship captains, chief engineers, crew and for constructing infrastructure in China, India and other essential personnel. In the sense that we oper- other emerging markets. Amid this recovery, in May ate according to the demands of customers in terms 2011 we established a new ship owning company, of destination, schedule and other aspects, it could Diamond Star Shipping Pte. Ltd., in Singapore. With be compared to a limousine-for-hire business. a base in what is a major hub of the marine trans- MC has engaged in ship trading over many years. port industry, we are poised to directly tap into Through these deeply rooted connections with the logistics demand. Having a base in Singapore will shipbuilding and marine transport industry, we have also enable us to secure the skilled seafarers that an expansive network, ranging from shipbuilders and are so essential to a ship-owning business. We shipowners to charterers, who charter shipowners’ believe that these advantages will allow us to cap- vessels, and cargo owners. This mass of insight and ture new business opportunities. [From the Business Frontline] Today, Singapore is one of the world’s major marine transport hubs. The island nation is home to a host of cargo owners, shipowners, operators, shipbuilders, ship management companies, financial institutions, insurers, law offices and other businesses connected with marine transportation. Singapore thus offers a whirlpool of important information for running our ship owning and chartering business. We are working to pick up valuable and timely information for our business while looking for business expansion opportuni- ties by developing new customers, for example. At the same time, we ensure a reliable supply of safe, high-quality vessels for our clients. Managing Director Diamond Star Shipping Pte. Ltd. Jun Yanagawa 18 Mitsubishi Corporation Annual Report 2011 Performance This section summarizes our operating results for the year ended March 2011 and discusses our past and present medium-term management plans. Medium-Term Management Plan Progress . . . . . . . . . . . . . . . . . . . . . . . 20 Level of Investments / Main Investment Projects A Message from the CFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Financial Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Metals and Energy Resource Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 19 Mitsubishi Corporation Annual Report 2011 Mitsubishi Corporation Annual Report 2011 medium-term management plan progress Figures from the year ended March 2006 through the year ended March 2010 have been retrospectively adjusted to reflect a change in year-end at certain consolidated subsidiaries. However, no retrospective adjustments have been made to figures in the year ended March 2009 or prior years for gross interest-bearing liabilities, net interest-bearing liabilities, and the net debt-to-equity ratio. MC2000, MC2003 INNOVATION 2007, INNOVATION 2009 Midterm Corporate Strategy 2012 The aim of the MC2000 medium-term management plan that ran from Under INNOVATION 2007 (2004 to 2008) and INNOVATION 2009 (2008 In July 2010, we launched our latest plan called Midterm Corporate Strategy 2012. Covering the period from 2010 to 2013, this plan has 1998 to 2001 was self-reform for the 21st century. The subsequent to 2010) we set forth the vision of becoming “A New Industry Innovator” three themes: respond to fast-growing emerging economies and new growth markets; leverage MC’s diversified business portfolio; and plan, MC2003, which covered the period from 2001 to 2004, was with the aim of opening up a new era. These plans had three basic based on the theme of “Driven to Create Value.” solidify MC’s diversified business portfolio. Implementation of these three themes will strengthen and expand our earnings drivers and concepts: Grasp Change and Open Up A New Era, Develop Human Assets, and Solidify Our Ground. We pushed through management develop new businesses for future growth. initiatives based on these concepts. NET INCOME Target:¥122.0 billion Result:¥117.6 billion (04.3) NET INCOME Target:¥200.0 billion Result: ¥346.1billion NET INCOME Target:¥500.0 billion (13.3) Designate strategic domains and regions: (¥ billion) (¥ billion) (6-year average) (¥ billion) MC will respond to fast-growing emerging economies and new growth 99.3 00.3 01.3 02.3 03.3 04.3 05.3 06.3 07.3 08.3 09.3 10.3 11.3 12.3* 13.3* markets. • MC has designated infrastructure and global environmental businesses as strate- 31.2 26.3 92.6 60.7 63.0 117.6 186.6 356.4 419.1 470.9 369.5 274.8 463.2 450.0 500.0 gic domains, responding to new growth markets and helping to solve global problems. • MC has designated China, India and Brazil as strategic regions, capturing fast- growing domestic demand in emerging markets. RETURN ON EQUITY Target:12.0% Result:10.9 % (04.3) RETURN ON EQUITY Target: At least 15.0% Result:14.8% RETURN ON EQUITY (ROE) Target:12~15% (%) (%) (mid-to-long term average) (6-year average) (%) (During current plan) Initiatives to leverage MC’s diversified business portfolio: 99.3 00.3 01.3 02.3 03.3 04.3 05.3 06.3 07.3 08.3 09.3 10.3 11.3 12.3* 13.3* MC will cultivate several earnings drivers by leveraging its diversified business 3.2 2.8 9.9 6.1 6.4 10.9 13.7 18.6 15.9 16.3 14.1 10.3 14.8 13.2 12~15 portfolio and business models. • MC will build a tool capable of visualizing its diversified business portfolio, and set targets according to business models and business risk profiles. 1. ROE is calculated by dividing net income by the average of NET DEBT-TO-EQUITY RATIO Target: Under 2.0 Result: 1.38 NET DEBT-TO-EQUITY RATIO Target: 1.0~1.5 Initiatives to solidify MC’s diversified business portfolio: total Mitsubishi Corporation shareholders’ equity at the beginning (times) (6-year average) (times) (During current plan) MC will enhance the MC Group’s strengths by solidifying its diversified and end of the fiscal year. 05.3 06.3 07.3 08.3 09.3 10.3 11.3 12.3* 13.3* business portfolio. 2. Net debt-to-equity ratio is calculated by dividing year-end net interest-bearing liabilities by total Mitsubishi Corporation share- • Establish a new committee (under the Executive Committee) in order to promote holders’ equity at the end of the fiscal year. 2.3 1.3 1.1 1.2 1.5 1.0 0.9 1.1 1.0~1.5 investment in strategic domains/regions and company-wide projects. Net interest-bearing liabilities is defined as gross interest- bearing liabilities minus cash and cash equivalents and time • MC will review its management platform, including regional offices, human deposits. resources and IT governance, in light of the diversification of its business models. *estimate Gross interest-bearing liabilities is defined as short-term debt INVESTMENT ASSETS TO and long-term debt, including current maturities, less the effect of markdowns on liabilities. CONSOLIDATED SHAREHOLDERS’ Target: Under EQUITY RATIO 1.5 Result: 1.45 (times) (6-year average) 3. The investment assets to consolidated shareholders’ equity ratio is calculated by dividing year-end investment assets by total 05.3 06.3 07.3 08.3 09.3 10.3 Mitsubishi Corporation shareholders’ equity. Investment assets include related investments and non-current receivables, cost of available-for-sale securities (shares only), 1.9 1.4 1.2 1.3 1.6 1.3 unlisted securities, property and equipment (excluding real estate held for development and resale), intangible assets, and goodwill. Net Income by Operating Segment (Years ended March 2000 – 2013) Year ending March 2013 (target) (¥ billion) 500.0 Create Sustainable Corporate Value by helping to solve global problems through business activities in light of the needs and 500 expectations of all stakeholders 400 300 ■ Industrial Finance, Logistics Create Sustainable Sustainable Economic Value & Development Group Corporate Value Aim for sound earnings growth and ■ Energy Business Group increased corporate value through ■ Metals Group the proactive reshaping of our 200 ■ Machinery Group business models and portfolio ■ Chemicals Group Sustainable Societal Value ■ Living Essentials Group Contribute to economic development 100 ■ Others as a responsible corporate citizen ■ Adjustments and Eliminations Sustainable Environmental Value 0 Aim to conserve and contribute to the global environment, recognizing that our –50 00.3 01.3 02.3 03.3 04.3 05.3 06.3 07.3 08.3 09.3 10.3 11.3 12.3 13.3 planet is our greatest stakeholder (est.) (est.) 20 21 Mitsubishi Corporation Annual Report 2011 level of investments / main investment projects Investment Assets • Investment assets include related investments and non-current receivables, cost of available-for-sale securities (shares only), unlisted securities, property and equipment (excluding real estate held for development and resale), intangible assets, and goodwill. 3.86 3.80 3.90 Under the investment plan in Midterm Corporate Strategy 2012, MC expects to invest a total of ¥2.0–2.5 trillion 3.71 over the plan’s 3-year period. 3.54 • Prior-year investment assets have not been reclassified to take into account the impact of unifying domestic subsidiaries’ fiscal year-ends. 3.19 2.75 2.73 2.80 2.70 Balance of investment assets (¥ trillion) ■ Gross investments (Resources) ■ Gross investments (Non-resources) ■ Asset realignments, etc. ■ Balance of investment assets 2002.3 2003.3 2004.3 2005.3 2006.3 2007.3 2008.3 2009.3 2010.3 2011.3 (¥ billion) Gross investments 330 370 450 750 700 270 370 (Resources) 100 140 160 300 270 70 170 (Non-resources) 240 230 290 450 430 200 210 Asset realignments, etc. –260 20 –100 –430 –850 –180 –270 Change 50 –20 70 390 350 320 –150 90 100 Balance of investment assets 2,700 2,750 2,730 2,800 3,190 3,540 3,860 3,710 3,800 3,900 Main Investment Projects k Established BMA (Australian coal joint venture) k Established Metal One Corporation n Invested in develop- ment of Sakhalin II m Subscribed to private placement of shares by n Invested in develop- ment of Sakhalin II n Invested in develop- ment of Sakhalin II n Invested in K2 oil field project in the Gulf of k Acquired working interest in Saraji East l Made Nosan Corpora- tion a wholly owned s Acquired aircraft for leasing (Steel products business) LNG Project Mitsubishi Motors LNG Project LNG Project Mexico coking coal project in subsidiary Corporation (MMC) (E&P) Australia n Invested in Tangguh n Invested in develop- n Acquired additional n Invested in develop- e Invested in IPP busi- k Invested in develop- k Invested in Jack Hills k Acquired working s Invested in Marunouchi k Acquired additional LNG Project in ment of Sakhalin II working interest ment of Sakhalin II nesses in Thailand and ment of Clermont iron ore project in interest in Kintyre Capital Co., Ltd. fund CMP shares Indonesia LNG Project in Malaysia LNG LNG Project Taiwan thermal coal mine in Western Australia uranium project in (Chilean iron ore business Project ( I ) Australia Australia company) n Invested in expansion of k Increased investment in l Invested in San-Esu m Subscribed to private l Subscribed to private l Made Nosan Corporation, m Purchased additional m Invested in Rolf Import n Invested in Canadian production facilities at Hernic Ferrochrome Inc. placement of shares by placement by Hokuetsu Nitto Fuji Flour Milling shares in Chiyoda (Russian automobile shale gas development North West Shelf LNG (Pty) Ltd. (Confectionery wholesaler) MMC Kishu Paper Co., Ltd. Co., Ltd. and Nihon Corporation importer and wholesaler) project Project in Australia (Extraction of chromium (Manufacture, processing Shokuhin Kako Co., Ltd. ore, production and sales and sales of paper, pulp, etc.) subsidiaries e Increased investment of ferrochrome) l Established Meidi-ya l Acquired additional m Purchased additional s Acquired aircraft for l Invested in AEON e Invested in Swing* n Invested in Senoro-Toili in Tenaska, U.S. IPP Corporation shares of Life common shares of leasing Co., Ltd. Corporation natural gas project in business (Food wholesaler) Corporation Isuzu Motors (Comprehensive water Indonesia (Food supermarket chain) service provider) (upstream interest in the Donggi-Senoro LNG Project) k Invested in expansion of c Acquired additional n Established Astomos k Purchased shares of n Injected capital into s Invested in Mitsubishi e Invested in Amper e Invested in TRILITY MOZAL production line shares in SPDC Ltd. Energy Corporation CMP ENCORE ENERGY PTE. UFJ Lease & Finance Central Solar, S.A. Pty Ltd (Aluminum smelter business (Import and trading of LPG, (Chilean iron ore business LTD. Company Ltd. (Solar photovoltaic power (Australian water utility in Mozambique) as well as domestic company) (Holding company of generation business in business) distribution and sales) Medco, Indonesia) Portugal) m Acquired preferred c Made Kohjin Co., Ltd. a n Invested in develop- n Acquired interest in k Acquired additional shares of Isuzu Motors consolidated subsidiary ment of Sakhalin II North Sea oil field working interest in Limited (films, biochemicals and fine LNG Project Escondida copper mine e Global Environment Business chemicals manufacturer) (Chilean copper production Development Group and sales) c Acquired additional l Invested in Itoham t Business Service Group shares in SPDC Foods, Inc. s Industrial Finance, Logistics & Development Group n Invested in Kangean n Energy Business Group project in Indonesia (E&P) k Metals Group m Machinery Group m Purchased additional shares in Nikken c Chemicals Group Corporation * Ebara Engineering Service Co., Ltd. was renamed l Living Essentials Group Swing Corporation in April 2011. Mitsubishi Corporation Annual Report 2011 a message from the cfo It is my pleasure to greet you in delivering our annual report for the year was the issuance of foreign currency-denominated straight year ended March 2011. I would like to review our performance for bonds in September 2010. This was the first time we have the past fiscal year and discuss our capital structure policy. issued such bonds in 25 years, demonstrating how we are diver- Net income in the year ended March 2011 was ¥463.2 billion. sifying our fund procurement channels. These and other steps We therefore came close to beating our record performance of have strengthened our financial base further. This will be an ¥470.9 billion in the year ended March 2008. And this outcome important factor supporting further investment and business was achieved despite the negative impact of heavy rains in Austra- activities going forward. lia in the latter half of the fiscal year on our mainstay coking coal Given our investment plans and steady increase in retained operations. Fortunately, resource prices rose strongly, driven by earnings, we plan to manage the company with an awareness of robust economies in emerging markets. Another contributor was capital efficiency and financial discipline. We are determined to healthy growth in non-resource businesses. One standout was our meet the expectations of shareholders and other stakeholders in automobile operations in Asia. this way. Regarding our capital structure policy, our basic policy is to As CFO of Mitsubishi Corporation, my aim is to achieve an sustain growth and maximize corporate value by balancing earn- optimal capital structure. This will be achieved by further buttress- ings growth, capital efficiency and financial soundness. For this, ing our financial base, which will support our ability to create sus- we will continue to make investments to drive growth, while main- tainable corporate value. taining our financial soundness. Total Mitsubishi Corporation share- holders’ equity at March 31, 2011 was ¥3,284.4 billion. That was a record level and represented a ¥321.9 billion increase from March 31, 2010. One indicator of our financial soundness is the net debt-to- Ryoichi Ueda equity ratio. This key indicator improved by 0.1 of a point from Member of the Board, Senior Executive Vice President, March 31, 2010 to 0.9 at March 31, 2011. A highlight of the past Chief Financial Officer 22 Mitsubishi Corporation Annual Report 2011 financial overview Net Income Jumps in Both Resource and Non-Resource Fields MC posted net income of 463.2 billion yen, up 69% year on year. Both resource and non-resource fields posted sharply higher earnings. All segments recorded higher earnings except Chemicals and Living Essentials, which would have done so had it not been for special one-time factors. Shareholders’ Equity Rises Sharply, Reaches Record Level of 3,284.4 Billion Yen Shareholders’ equity rose 321.9 billion yen from March 31, 2010 to a record level of 3,284.4 billion yen. Although accumulated other comprehensive income declined due to the impact of the yen’s appreciation against the US dollar, this increase reflected higher retained earnings, which were boosted by the net income result. Moreover, the net debt-to-equity ratio, an indicator of financial health, improved by 0.1 of a point from March 31, 2010, to 0.9 times. Annual Dividend per Common Share Raised to a Record 65 Yen MC raised the annual dividend per common share applicable to the year ended March 2011 by 9 yen from the forecast of 56 yen to 65 yen given that it achieved its projected net income attributable to Mitsubishi Corporation of 400.0 billion yen. This equates to a consoli- dated dividend payout ratio of 23%. net income attributable to mitsubishi corporation by segment Reasons for Changes by Operating Segment (¥ billion) Industrial Finance, Logistics & Development: 19.2 billion yen increase 500 Increase due to the absence of share write-downs (investment impair- ments) recorded in the previous fiscal year, gains on the sale of overseas 463.2 real estate, and an improvement in lease-related business earnings. 11.6 – Industrial Finance, Logistics & Development Energy Business: 31% increase Increase due to higher gross profit and equity in earnings because of rising 400 94.0 Energy Business crude oil and other commodity prices, and the absence of losses related to fuel derivative transactions recorded in the previous fiscal year. Metals: 67% increase Increase resulted primarily from gains on a share transfer at a Chilean iron 274.8 ore-related subsidiary and higher equity-method earnings of related busi- 300 ness investees, as well as higher sales prices at an Australian resource- related subsidiary (coking coal). 71.9 230.1 Metals Machinery: 239% increase Increase due to strong results at overseas automobile-related businesses, 200 notably in Asia, as well as the absence of a share write-down recorded in the previous fiscal year. 137.9 Chemicals: 10% decrease Decrease reflects absence of gain on reversal of deferred tax liabilities of a petrochemical business-related company in the previous fiscal year, offset 100 61.4 Machinery in part by higher earnings due to strong transactions at a petrochemical 18.1 business-related company. 32.4 29.1 Chemicals Living Essentials: Largely Unchanged Flat due to higher earnings on transactions and equity-method earnings at 46.8 46.3 Living Essentials 0 general merchandise-related businesses, as well as an increase in equity- Adjustments and method earnings at food-related subsidiaries, which were offset by tax – 24.7 – 9.3 Eliminations expenses associated with adopting the consolidated tax filing system. –50 –7.6 23 Mitsubishi Corporation Annual Report 2011 financial highlights Mitsubishi Corporation and Subsidiaries Years ended March 31 (U.S. GAAP) Figures from the year ended March 2006 through the year ended March 2010 have been retrospectively adjusted to reflect a change in year-end at certain consolidated subsidiaries. However, 1) No retrospective adjustments have been made to figures in the year ended March 2009 or prior years for gross interest-bearing liabilities, net interest-bearing liabilities, net debt-to-equity ratio or ROIC. 2) No retrospective adjustments have been made to figures for the year ended March 2008 or prior years for cash flows. 2001.3 2002.3 2003.3 2004.3 Performance Measure: Operating transactions*1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥13,995,298 ¥13,230,675 ¥13,604,304 ¥15,177,367 Results of Operations: Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,020,626 3,142,597 3,313,554 3,475,848 Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603,716 643,922 723,615 766,080 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,391 68,189 100,550 130,069 Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . 17,010 9,293 44,878 57,037 Net income attributable to Mitsubishi Corporation. . . . . . . . . . . . . 92,605 60,702 62,969 117,556 2 Core earnings* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,516 134,813 183,081 212,977 Financial Position at Year-End: Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,069,384 8,148,902 8,113,317 8,397,868 3 Working capital* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,386 694,282 682,715 828,971 4 Gross interest-bearing liabilities* . . . . . . . . . . . . . . . . . . . . . . . . . 4,194,873 4,239,764 3,938,720 4,017,130 Long-term debt, less current maturities . . . . . . . . . . . . . . . . . . . . 2,798,152 3,238,871 3,119,391 3,033,276 Net interest-bearing liabilities*5 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,823,221 3,813,947 3,531,372 3,521,951 Total Mitsubishi Corporation shareholders’ equity . . . . . . . . . . . . . 971,551 1,032,499 942,067 1,224,256 Cash Flows: Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . (43,146) 162,500 270,281 247,710 Cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . . . 113,169 38,057 (24,388) (70,329) Cash flows from financing activities. . . . . . . . . . . . . . . . . . . . . . . . (244,579) (130,469) (282,681) (56,203) Net cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154,556) 70,088 (36,788) 121,178 Notes: The U.S. dollar amounts represent translations, for convenience, of yen amounts at the rate of ¥83=$1. *1 Operating transactions is a voluntary disclosure commonly made by Japanese trading companies, and is not meant to represent sales or revenues in accordance with U.S. GAAP. See Note 1 to consolidated financial statements, financial section.” *2 Core earnings = Operating income (before the deduction of provision for doubtful receivables) + Interest expense (net of interest income) + Dividend income + Equity in earnings of affiliated companies” net income attributable to mitsubishi corporation net interest-bearing liabilities/net debt-to-equity-ratio (¥ billion) (¥ billion, times) 4,000 500 3,823.2 3,813.9 470.9 463.2 3,500 3,531.4 3,522.0 3,423.5 3,567.6 3,443.9 419.1 3,130.0 3,081.1 400 3,000 2,968.2 2,947.3 356.4 369.5 3.9 2,500 3.7 300 3.7 274.8 2,000 2.9 2.3 200 186.6 1,500 1,000 1.5 117.6 100 92.6 60.7 63.0 500 1.3 1.2 1.1 1.0 0.9 (times) 0 0 Net interest-bearing liabilities Net debt-to-equity-ratio 24 Mitsubishi Corporation Annual Report 2011 millions of millions of yen U.S. Dollars 2005.3 2006.3 2007.3 2008.3 2009.3 2010.3 2011.3 2011.3 ¥17,122,034 ¥19,085,562 ¥20,526,402 ¥23,105,053 ¥22,393,595 ¥17,102,782 ¥19,233,443 $231,728 4,133,338 4,813,468 5,068,199 6,050,654 6,156,365 4,540,793 5,206,873 62,733 878,707 1,054,371 1,144,982 1,172,665 1,465,027 1,016,597 1,149,902 13,854 185,192 351,040 409,563 354,931 590,502 182,253 316,141 3,809 99,624 124,867 152,211 154,993 156,776 113,363 161,455 1,946 186,641 356,444 419,109 470,860 369,543 274,846 463,188 5,581 336,905 548,453 685,582 628,419 857,337 379,384 604,829 7,287 9,048,561 10,283,887 11,399,928 11,695,007 10,871,554 10,856,850 11,347,442 136,716 1,017,681 1,243,841 1,335,452 1,429,764 1,613,776 1,780,008 2,012,098 24,242 4,040,199 3,766,343 3,829,060 4,183,592 4,879,397 4,154,692 4,257,563 51,296 2,975,701 2,877,050 2,863,558 3,096,818 3,467,766 3,246,029 3,188,749 38,418 3,423,498 3,130,046 3,081,050 3,443,861 3,567,633 2,968,151 2,947,308 35,510 1,493,175 2,347,451 2,917,764 2,872,253 2,382,930 2,962,521 3,284,387 39,571 145,700 384,278 448,573 327,712 558,226 761,573 331,204 3,990 6,597 (91,851) (303,251) (353,480) (693,550) (138,502) (262,601) (3,164) (60,414) (239,415) (108,363) 69,700 650,608 (755,347) 76,749 925 91,883 53,012 36,959 43,932 515,284 (132,276) 145,352 1,751 *3 Working capital consists of all current assets and liabilities, including cash and short-term debt. *4 Gross interest-bearing liabilities is defined as short-term debt and long-term debt, including current maturities, less the effect of markdowns on liabilities. *5 Net interest-bearing liabilities is defined as gross interest-bearing liabilities minus cash and cash equivalents and time deposits. total mitsubishi corporation shareholders’ equity/ return on average shareholders’ equity (roe) cash flows (¥ billion, %) (¥ billion) 3,500 3,284.4 1,000 3,000 2,917.8 2,872.3 2,962.5 2,500 515.3 2,347.5 2,382.9 500 2,000 121.2 91.9 145.4 70.1 53.0 37.0 1,500 1,493.2 0 43.9 18.6 1,224.3 16.3 –36.8 14.1 14.8 (%) –132.3 1,000 971.6 1,032.5 942.1 –154.6 10.9 15.9 –500 13.7 500 6.1 10.3 6.4 0 –1,000 Shareholders’ equity ROE Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flows 25 Mitsubishi Corporation Annual Report 2011 2001.3 2002.3 2003.3 2004.3 Financial Measures: Return on average shareholders’ equity (ROE) (%) . . . . . . . . . . . . 9.9 6.1 6.4 10.9 Return on average total assets (ROA)*1 (%) . . . . . . . . . . . . . . . . . 1.2 0.7 1.8 Net debt-to-equity-ratio (times) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 3.7 3.7 2.9 ROIC (core earnings) (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 2.8 4.1 4.5 Dividend on equity ratio (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.2 1.7 Stock Price Information: Stock price (annual average) (yen) . . . . . . . . . . . . . . . . . . . . . . . . 864 919 822 965 Price Earnings Ratio (PER)*2 (times) . . . . . . . . . . . . . . . . . . . . . . . 14.63 23.73 20.45 12.86 Price Book-value Ratio (PBR)*3 (times) . . . . . . . . . . . . . . . . . . . . . 1.4 1.4 1.4 1.2 Common Stock: Number of shares outstanding at year-end (thousands of shares)*4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,567,172 1,566,553 1,565,647 1,565,557 Net income attributable to Mitsubishi Corporation per share: Basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.09 38.74 40.21 75.09 Diluted EPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.09 38.74 37.69 69.31 Mitsubishi Corporation shareholders’ equity per share . . . . . . . . . 633.97 682.28 601.71 781.99 Cash dividends declared for the year . . . . . . . . . . . . . . . . . . . . . . 8.00 8.00 8.00 12.00 5 Payout ratio (%)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 21 20 16 <ESG Index> (ESG: Environment/Society/Governance) Environment: Global Consolidated CO2 Emissions (t-CO2)*6 . . . . . . . . . . . . . . . Society: Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,126 44,034 47,370 49,219 Governance: Outside Director Ratio (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.2 22.2 17.6 16.7 *1 ROA is calculated by dividing income from continuing operations before income taxes and equity in earnings of Affiliated companies by the average of total assets at the beginning and end of the fiscal year. *2 PER is calculated by dividing market capitalization, as determined by multiplying the average share price during the fiscal year by the number of shares issued at the fiscal year-end, by net income attributable to Mitsubishi Corporation. net income attributable to mitsubishi corporation total assets/roa per share (diluted) (¥ billion, %) (yen) 12,000 300 11,399.9 11,695.0 11,347.4 282.55 281.05 10,871.6 10,856.9 10,283.9 10,000 250 247.07 9,048.6 224.51 8,397.9 209.39 8,000 8,069.4 8,148.9 8,113.3 200 5.5 5.0 166.89 4.8 4.8 (%) 6,000 150 110.11 4,000 100 3.4 1.8 69.31 2.5 2.7 59.09 2,000 1.2 50 38.74 37.69 0 0.7 0 Total assets ROA 26 Mitsubishi Corporation Annual Report 2011 (¥) (U.S. Dollars) 2005.3 2006.3 2007.3 2008.3 2009.3 2010.3 2011.3 2011.3 13.7 18.6 15.9 16.3 14.1 10.3 14.8 — 2.5 5.0 5.5 4.8 3.4 2.7 4.8 — 2.3 1.3 1.1 1.2 1.5 1.0 0.9 — 6.9 10.0 11.4 9.9 14.4 6.4 9.7 — 2.1 3.0 2.9 3.2 3.2 2.3 3.4 — 1,202 2,042 2,371 3,110 2,299 1,969 2,102 25.33 10.09 9.67 9.56 11.19 10.55 12.16 7.70 — 1.3 1.5 1.4 1.8 1.6 1.1 1.1 — 1,565,749 1,685,767 1,688,303 1,641,203 1,642,904 1,643,532 1,644,074 — 119.21 219.32 248.42 283.82 225.00 167.28 281.80 3.40 110.11 209.39 247.07 282.55 224.51 166.89 281.05 3.39 953.65 1,392.51 1,728.22 1,750.09 1,450.44 1,802.53 1,997.71 24.07 18.00 35.00 46.00 56.00 52.00 38.00 65.00 0.78 15 16 19 20 23 23 23 — 1,385,892 1,805,930 1,991,207 1,340,963 1,393,277 1,827,778 — 51,381 53,738 55,867 60,664 60,095 58,583 58,470 — 25.0 23.5 22.2 25.0 33.3 33.3 33.3 — *3 PBR is calculated by dividing market capitalization, as determined by multiplying the average share price during the fiscal year by the number of shares issued at the fiscal year-end, by total Mitsubishi Corporation shareholders’ equity. *4 Excluding treasury stock held by the Company. 5 * Payout ratio was calculated based on net income attributable to Mitsubishi Corporation for the fiscal year before reclassification. *6 MC, and subsidiaries and sub-subsidiaries in which it owned a more than 50% equity interest (As of March 31) cash dividends declared for the year/payout ratio stock price (annual average)/per (yen, %) (yen, times) 70 3,110 3,000 65.0 60 23.7 56.0 2,500 2,371 2,299 50 52.0 20.5 2,102 46.0 2,000 2,042 1,969 40 23 23 (%) 38.0 21 20 35.0 20 1,500 12.9 19 23 12.2 30 14.6 1,202 11.2 16 16 15 1,000 919 965 20 864 822 10.1 10.6 14 18.0 9.7 9.6 12.0 500 7.7 (times) 10 8.0 8.0 8.0 0 0 Cash dividends Payout ratio Stock price (annual average) PER 27 Mitsubishi Corporation Annual Report 2011 metals and energy resource data coal business Imports to Japan and MC’s Share* (Year ended December 31, 2010) coking coal thermal coal MC 15% MC 33% 59 119 Mil. Tons Mil. Tons Others 67% Others 85% * MC’s share includes imports where MC’s only involvement is trading. bma annual production volume (50% basis) mdp annual sales volume (Million tons) (Million tons) 26.1 25.7 30 29.9 30.4 25 24.8 28.7 29.1 23.7 23.7 27.8 27.7 22.1 25 20 20 15 15 10 10 5 5 0 0 ■ 1Q ■ 2Q ■ 3Q ■ 4Q ■ Hard coking coal ■ Semi soft coking coal ■ Thermal coal * Total from April to March. * Includes equity share of thermal coal sales volume other than from BMA. ** Totals for the year ended December 31, 2006 and prior years are from January to December in each year, while totals for the year ended March 31, 2008 and thereafter are from April to March. other metals resources business Imports to Japan and MC’s Share* (Year ended December 31, 2010) iron ore copper aluminum MC 7% MC MC 16% 15% 134 1.6 1.9 Mil. Tons Mil. Tons Mil. Tons Others Others Others 84% 85% 93% * MC’s share includes imports where MC’s only involvement is trading. 28 Mitsubishi Corporation Annual Report 2011 energy resources business lng imports to japan and equity share of lng production mc’s share* (Million ton/year) 7 7.05 7.05 7.05 6 5.34 5 4.85 4.97 4.97 MC 4 70.6 41% Others Mil. Tons 3 59% 2 1 0 (Year ended March 31, 2011) ■ Brunei ■ Malaysia I ■ Malaysia II ■ Malaysia III* ■ Western Australia* ■ Oman * MC’s share includes imports where MC’s ■ Qalhat (Oman) ■ Sakhalin II* ■ Tangguh* only involvement is trading. * Owns upstream working interest mc’s reserves equity share of oil and gas production (yearly average)* (Billion BBL) (Thousand BBL/Day) Crude oil/condensate 160 0.23 146 140 120 116 100 Total*1*2 90 Natural gas 1.18 80 82 84 76 0.95 60 40 20 0 (As of December 31, 2010) *1 Oil equivalent. Includes consolidated subsidiar- ■ Natural gas ■ Crude oil/condensate ies and equity-method affiliates * Oil equivalent. Includes consolidated subsidiaries and equity-method affiliates *2 Participating interest equivalent. Includes reserves based on original standards set by MC Equity Share of Production (Total from January to December) iron ore (Million tons) copper (Thousand tons) aluminum (Thousand tons) 7 6.9 7.0 150 148 6.6 6.5 141 250 6.3 138 138 240 240 232 233 6 6.1 230 230 128 121 200 5 100 4 150 3 100 50 2 50 1 0 0 0 ■ IOC ■ CMP ■ Escondida ■ Antamina ■ Los Pelambres ■ Mozal ■ Boyne ■ Others 29 Mitsubishi Corporation Annual Report 2011 Operations 30 Mitsubishi Corporation Annual Report 2011 This section explains two groups directly under the president and activities in business groups. Two Groups Directly Under the President Global Environment Business Development Group . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Business Service Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Results of Business Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Profiles of Business Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Industrial Finance, Logistics & Development Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Energy Business Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Metals Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Machinery Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Chemicals Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Living Essentials Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Global Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 31 Mitsubishi Corporation Annual Report 2011 < Two Groups Directly Under the President > Global Environment Business Development Group Group CEO Message The fulcrum of the Global Environment Business Development manufacturing large-capacity lithium-ion batteries, which are vital Group is the infrastructure business, namely power generation for the uptake of eco-friendly vehicles and electricity storage. and comprehensive water services. This business has a direct In order to help realize a sustainable society, I believe that connection with the quality of people’s lives. Along with this core above all it is extremely important to develop frameworks, sys- business, we are working on renewable energy and emissions tems and technologies necessary to enable more people to live reduction businesses, which help prevent global warming and with fewer resources. These frameworks, systems and tech- ensure energy security. Another business we are involved in is nologies must be developed with a long-term perspective, taking the environment into account. With this recognition, the Global Environment Business Development Group will endeavor to create a sustainable soci- ety through businesses in high-growth industries that have significant benefits for society. At the same time, we aim to create a long-term, stable earnings platform and achieve higher corporate value. Nobuaki Kojima Executive Vice President, Group CEO Global Environment Business Development Group Organizational Structure New Energy & Power Generation Division Global Environment Business Development Group Global Environment Business Development Group CEO Office New Energy & Power Generation Div. Environmental & Water Business Div. ACCIONA Termosolar is a concentrated solar power (CSP) DIAMOND GENERATING ASIA, LIMITED (DGA) is a power business in Spain that is operated as a joint venture with business company established in Hong Kong in 2009 with Spanish company ACCIONA, one of the world’s leading 100% investment by MC. Owning power generation assets integrated renewable energy enterprises. of approximately 1,100 MW, DGA develops, constructs, ACCIONA Termosolar owns 4 CSP plants in southern operates and maintains power generation projects. In Spain. Together, the 4 plants produce 200,000 kilowatts Thailand, DGA has invested in a large-scale photovoltaic of electricity per year. solar plant, which is under construction (pictured). Environmental & Water Business Division Lithium Energy Japan (LEJ) began mass producing large- TRILITY Pty Ltd, a water business company that is 59% capacity lithium-ion batteries in the year ended March 2010. owned by MC, conducts operations and maintenance LEJ is a joint venture with GS Yuasa International and management in 14 projects across Australia, including water Mitsubishi Motors Corporation (MMC). It is currently con- supply, sewerage and water reuse, seawater desalination, structing a new plant (pictured) in Ritto City, Shiga Prefec- and industrial wastewater processing and recycling. ture, to meet demand stemming from the uptake of electric (The Victor Harbor sewerage and water reuse plant) vehicles and electricity storage, among other applications. 32 Mitsubishi Corporation Annual Report 2011 Business Service Group Group CEO Message The Business Service Group, through the provision of inte- Specifically, under Midterm Corporate Strategy 2012, we grated services centered on the twin fields of IT and logistics, are working mainly on creating consolidated IT governance and helps MC and MC Group companies increase corporate value, developing a consolidated management core system, as part of implement business process reforms and develop businesses, group management foundations. Furthermore, we seamlessly thus supporting a sophisticated consolidated management provide IT services integrating consulting, systems integration framework for the MC Group. This should also lead to the cre- (SI) and outsourcing on a global basis, and work also to estab- ation of new business opportunities. lish management frameworks for trade, logistics and insurance. Ichiro Ando Executive Vice President, Group CEO, Business Service Group Organizational Structure IT Service Business Division Key Business Investees Business Service Group In order to both help solve issues faced by MC Group companies and customers, and also raise Business Service Group CEO Office their corporate value, we will enhance consulting IT Frontier Corporation IT Service Business Div. and system integration (SI) services through One of the MC Group’s core IT companies, IT Frontier helps improve the sophistication of business investees such as SIGMAXYZ Inc. and management on a consolidated basis. The com- MC Group IT Management Div. IT Frontier Corporation. In addition, we are devel- pany provides customer-centric comprehensive oping outsourcing businesses in order to offer support, extending from support for formulating IT strategies and plans, system design and develop- Logistics Management Dept. integrated IT services. ment, and IT infrastructure construction, to IT infrastructure operation. MC Group IT Management Division This division builds consolidated management systems and creates consolidated IT governance systems that support MC Group management. In this way, it endeavors to take a group-based approach to enhancing IT infrastructure, formu- lating IT plans and strengthening information systems. SIGMAXYZ Inc. SIGMAXYZ is a business consulting services firm that helps clients boost their corporate value. It provides consulting services that help solve Logistics Management Department corporate issues, including business model forma- tion, business process design, and support for IT system implementation. To support development of businesses by MC and its Group companies on a consolidated and global basis, this department enhances trade- and logistics-related management systems, ensures compliance and promotes company-wide insurance risk countermeasures. 33 Mitsubishi Corporation Annual Report 2011 results of business groups Fiscal 2011 Results Operating transactions . . . . . . . . . . . ¥ 171,523 million Share of Net Income Gross profit . . . . . . . . . . . . . . . . . . . . ¥ 47,112 million (%) Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . . ¥ 8,892 million Industrial Finance, Net income . . . . . . . . . . . . . . . . . . . . ¥ 11,553 million Segment assets . . . . . . . . . . . . . . . . ¥ 793,265 million Logistics & No. of employees*1 Consolidated . . . . . . . . . . . . . . . . . 2,431 Development Group Parent company . . . . . . . . . . . . . . 383 No. of consolidated subsidiaries FY2011 and equity-method affiliates*2 . . . . . 80 Net Income ¥463.2 billion Operating transactions . . . . . . . . . . . ¥ 3,874,156 million Gross profit . . . . . . . . . . . . . . . . . . . . ¥ 43,798 million Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . . ¥ 55,720 million Energy Business Net income . . . . . . . . . . . . . . . . . . . . ¥ 94,007 million Segment assets . . . . . . . . . . . . . . . . ¥ 1,279,639 million Group No. of employees*1 Consolidated . . . . . . . . . . . . . . . . . 1,535 Parent company . . . . . . . . . . . . . . 485 No. of consolidated subsidiaries and equity-method affiliates*2 . . . . . 70 ■ Industrial Finance, Logistics & Development Group . . . . . . . . . . . . . . 2.5% ■ Energy Business Group . . . . . . . . . . . 20.3% Operating transactions . . . . . . . . . . . ¥ 4,408,817 million Gross profit . . . . . . . . . . . . . . . . . . . . ¥ 326,281 million ■ Metals Group . . . . . . . . . . . . . . . . . . . 49.7% Equity in earnings of Affiliated ■ Machinery Group . . . . . . . . . . . . . . . . 13.2% companies . . . . . . . . . . . . . . . . . . . . ¥ 36,333 million ■ Chemicals Group . . . . . . . . . . . . . . . . 6.3% Metals Group Net income . . . . . . . . . . . . . . . . . . . . ¥ 230,113 million Segment assets . . . . . . . . . . . . . . . . ¥ 3,104,933 million ■ Living Essentials Group . . . . . . . . . . . 10.0% No. of employees*1 Consolidated . . . . . . . . . . . . . . . . . 11,297 Parent company . . . . . . . . . . . . . . 398 No. of consolidated subsidiaries and equity-method affiliates*2 . . . . . 24 Share of Total Assets Operating transactions . . . . . . . . . . . ¥ 3,524,312 million (%) Gross profit . . . . . . . . . . . . . . . . . . . . ¥ 182,019 million Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . . ¥ 18,441 million Machinery Group Net income . . . . . . . . . . . . . . . . . . . . ¥ 61,369 million Segment assets . . . . . . . . . . . . . . . . ¥ 1,848,878 million No. of employees*1 Consolidated . . . . . . . . . . . . . . . . . 9,554 Parent company . . . . . . . . . . . . . . 1,034 FY2011 No. of consolidated subsidiaries and equity-method affiliates*2 . . . . . 126 Total Assets ¥11,347.4 billion Operating transactions . . . . . . . . . . . ¥ 2,027,368 million Gross profit . . . . . . . . . . . . . . . . . . . . ¥ 84,180 million Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . . ¥ 14,688 million Chemicals Group Net income . . . . . . . . . . . . . . . . . . . . ¥ 29,117 million Segment assets . . . . . . . . . . . . . . . . ¥ 708,598 million No. of employees*1 Consolidated . . . . . . . . . . . . . . . . . 3,222 Parent company . . . . . . . . . . . . . . 653 No. of consolidated subsidiaries and equity-method affiliates*2 . . . . . 43 ■ Industrial Finance, Logistics & Development Group . . . . . . . . . . . . . . 7.0% ■ Energy Business Group . . . . . . . . . . . 11.3% Operating transactions . . . . . . . . . . . ¥ 5,313,607 million ■ Metals Group . . . . . . . . . . . . . . . . . . . 27.4% Gross profit . . . . . . . . . . . . . . . . . . . . ¥ 456,783 million ■ Machinery Group . . . . . . . . . . . . . . . . 16.3% Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . . ¥ 23,308 million ■ Chemicals Group . . . . . . . . . . . . . . . . 6.2% Living Essentials Net income . . . . . . . . . . . . . . . . . . . . ¥ 46,260 million ■ Living Essentials Group . . . . . . . . . . . Segment assets . . . . . . . . . . . . . . . . ¥ 2,183,855 million ■ Adjustments and Eliminations . . . . . . . 19.2% 12.6% Group No. of employees*1 Consolidated . . . . . . . . . . . . . . . . . 24,161 Parent company . . . . . . . . . . . . . . 888 No. of consolidated subsidiaries and equity-method affiliates*2 . . . . . 118 *1 Data as of March 31, 2011. The number of Corporate Staff Section employees not shown on this page was 6,270 on a consolidated basis and 1,824 on a parent company basis. Accordingly, the total number of employees was 58,470 on a consolidated basis and 5,665 on a parent company basis. *2 Data as of March 31, 2011. Figures do not include companies consolidated by subsidiaries. Not shown on this page are 28 consolidated subsidiaries and equity-method affiliates belonging to the Global Environment Business Development Group, 6 consolidated subsidiaries and equity-method affiliates belonging to the Business Service Group, 13 consolidated subsidiaries and equity-method affiliates belonging to the Corporate Staff Section, and 40 overseas regional subsidiaries. Accordingly, the total number of consolidated subsidiaries and equity-method affiliates was 548. 34 Mitsubishi Corporation Annual Report 2011 Equity in Earnings of Gross Profit Affiliated Companies Net Income (Loss) Segment Assets, ROA (¥ billion) (¥ billion) (¥ billion) (¥ billion, %) 47 11 12 836 798 793 45 45 9 0 –8 1.5 ROA*5 0 3 – 0.9 –5.0 – 41 *3 *3 *3 *3 *3 *3 *3 *3 69 70 94 1,342 1,323 1,280 83 56 72 44 7.2 40 40 ROA*5 5.4 5.4 570 48 230 217 2,866 3,105 2,902 36 138 7.0 ROA*5 326 7.7 232 4.8 6 18 61 1,913 1,913 1,849 174 182 155 3.3 11 ROA*5 7 20 18 0.8 0.9 *3 *3 * 3 *3 ** 3 6 ** 3 6 *3 *3 95 17 32 733 709 15 29 629 78 84 27 11 4.8 3.7 ROA*5 4.0 *4 *4 *4 *4 484 457 457 23 47 46 2,157 2,184 2,184 21 19 34 2.2 2.1 ROA*5 1.5 *4*7 *7 *4*7 *7 *4*7 *7 *4*7 *7 *3 Effective April 1, 2010, MC transferred parts of the business of the Industrial Finance, Logistics & Development and Machinery segments to Other. Fig- ures for the related operating segments for the years ended March 2009 and 2010 have been restated accordingly. *4 On April 1, 2009, Mitsubishi Corporation transferred all the businesses of the Business Innovation Group to the Living Essentials Group and Others, and some businesses of the Chemicals Group were transferred to the Machinery Group. Consequently, figures for the fiscal year ended March 31, 2009 for the affected segments have been reclassified or adjusted. *5 ROA is calculated by dividing net income by the average of total assets at the beginning and end of the fiscal year. The ROA figure for the year ended March 2009 has not been restated. *6 Figures less than one million yen have been rounded. *7 Restated figures are shown due to a change in year-end at certain subsidiaries from December to March. 35 Mitsubishi Corporation Annual Report 2011 profiles of business groups industrial finance, logistics & development group The Industrial Finance, Logistics & Develop- Main Products and Services ment Group is developing shosha-type b Asset management business, infrastructure related finance business, leasing business, industrial finance businesses. These include airline-related business, buyout investment business, healthcare fund business, real estate asset management businesses, buyout funds business, real estate portfolio management, real estate development (commercial investment businesses, leasing businesses, facilities and logistics), sales of condominiums, urban development, construction, real real estate development businesses, logis- estate consulting, equipment supply, hospital revitalization, Private Finance Initiative (PFI) tics services, and insurance businesses. business, global real estate investment, integrated logistics business, bulk carrier owner- ship and operations, insurance business, others energy business group The Energy Business Group, in addition to Main Products and Services developing and investing in oil and gas b LNG (liquefied natural gas), LPG (liquefied petroleum gas), crude oil, gasoline, naphtha, projects, conducts trading activities in kerosene, diesel oil, fuel oil, lubricating oil, asphalt, other petroleum products, coal coke, areas such as crude oil, petroleum prod- petroleum coke, carbon black feedstock, coal tar and tar products, carbon fibers and ucts, liquefied petroleum gas (LPG), lique- activated carbon, artificial graphite electrodes, oil and gas exploration and production, fied natural gas (LNG), and carbon others materials and products. metals group The Metals Group trades, develops busi- Main Products and Services nesses, and invests in a wide range of b Coking coal, thermal coal, iron ore, raw materials for stainless steel such as nickel and metals fields. These include steel products chrome, ferro-alloys, non-ferrous metal raw materials such as copper and aluminum, such as steel sheets and thick plates, steel non-ferrous metals, precious metals, automotive body parts, pig iron, scrap steel, steel raw materials such as coking coal and iron sheets and coils, steel tubes and pipes, stainless steel, other steel products, others ore, and non-ferrous raw materials and products such as copper and aluminum. 36 Mitsubishi Corporation Annual Report 2011 machinery group The Machinery Group trades machinery in a Main Products and Services broad range of fields in which it also invests b Power generation equipment, power transmission and transformer facilities, transport and provides finance and distribution services. and import of nuclear fuel, on-site (inside the fence) power generation business in Japan, These fields extend from large-scale plants for retail electricity sales in Japan, offshore transmission business overseas, elevators and power generation or for production of natural escalators gas, petroleum, chemicals and steel, to ships, b Plant equipment for oil, gas, chemical, steel, non-ferrous metals and cement industries, railway systems, automobiles, aerospace rolling stock and related infrastructure and equipment, railway project development, smart equipments, as well as mining, construction, community business integration, mining equipment, port facilities, off-shore marine struc- and industrial machinery. tures, agricultural machinery, construction machinery, industrial machinery b Ships and vessels, marine machinery, ship owning and management business, space- related equipment, defense-related equipment, satellite imagery sales business b Automobiles (built-up vehicles, assembly parts, spare parts), export, overseas production, sales, sales finance, others chemicals group The Chemicals Group’s trade and investments Main Products and Services cover a broad scope of industries, involving b Petrochemical products, salt, fertilizers, inorganic chemical products, synthetic plastics commodity chemicals, functional chemicals, and plastic products, functional materials, electronic materials, food ingredients and feed and the life-sciences. Commodity chemicals additives, pharmaceutical and agricultural chemical intermediates manufacturing, life include petrochemicals, olefins and aromatics, science business, advanced materials, others methanol, ammonia, chlor-alkali, fertilizer and inorganic chemicals; functional chemicals include plastics, functional materials, elec- tronic materials, and specialty chemicals; and life-sciences include food ingredients, pharma- ceuticals, and agricultural chemicals. living essentials group The Living Essentials Group provides prod- Main Products and Services ucts and services, develops businesses and b Dispensing pharmacy business, hospital management solutions through procurement of invests in various fields closely linked with medical supplies and pharmaceuticals, marketing and rental of nursing care equipment, people’s lives, including foods, clothing, strategy planning, project planning of retail business, mail-order and marketing business, paper, packaging materials, cement, con- point-based loyalty programs, payment settlement service businesses struction materials, medical equipment and b Rice, wheat, barley, wheat flour, corn, milo, fresh produce, marine products, sugar, starch, nursing care. These fields extend from the corn syrup and other sweeteners, corn grits, salt, brewing malt/hops, soybean, canola, procurement of raw materials to the con- sesame seed, oils & fats, oil and fat products, chicken, pork, beef, processed meat prod- sumer market. ucts, livestock and fish feed ingredients b Coffee ingredients, confectionery ingredients, fruit juices, raw tea products, cheese, dairy products, processed foods, frozen and chilled products, confectionery, mineral water, canned foods, liquor, pet food b Brand business, fashion apparel, footwear, furniture and interior products, household goods, cotton, yarn, textile, knitted fabric, industrial materials, high-function materials b Paper & paperboard, packaging materials, woodchips, pulp, afforestation, printing and photosensitive materials and equipment, cement, ready-mixed concrete, lumber, housing and construction materials, silica sand, kaolin clay, tires, industrial rubber materials, others 37 Mitsubishi Corporation Annual Report 2011 Industrial Finance, Logistics & Development Group Group CEO Message The Industrial Finance, Logistics & Development Group integrates In October 2010, we created the Real Estate Investment & MC’s strengths in terms of extensive knowledge of and expertise Management Unit to help develop a more dynamic role for the in industrial fields, plus a vast global network of contacts in all group in real estate finance. Reporting directly to the Group industries, to develop various industrial finance businesses. CEO, this unit will oversee the development of MC’s medium- to Our main businesses are in leasing, buyout investment*, long-term real estate portfolio and facilitate the development of asset management and real estate finance. We have built on related financial products. traditional financing models to develop new types of financial In the year ended March 2011, we feel that our operations intermediation that only a major trading company such as MC gradually gained momentum due to certain proven business could deliver. The group is also involved in the development of frameworks that were established when the group was formed. logistics facilities, other commercial real estate and residential Financial markets in the year ended March 2011 generally housing, and in the provision of solutions in the logistics and marked healthy growth as the world recovered from the global insurance fields. financial crisis. Given these factors, we posted net income of ¥11.6 billion. This represented a ¥19.2 billion turnaround from the Midterm Corporate Strategy 2012 Targets and Progress ¥7.6 billion net loss we posted in the year ended March 2010. Under MC’s Midterm Corporate Strategy 2012, the group is focusing on building blue-chip asset portfolios and reinforcing Business Environment and Outlook MC’s asset management skills. We are also seeking to take for Year Ending March 2012 advantage of the growth in emerging economies such as China. Although we will need to continue monitoring business conditions Strategically, we have defined five business domains where in the coming year due to the impact of the Great East Japan we are targeting growth: real estate finance and property devel- Earthquake, we believe that the temporary effects of the down- opment in China and other overseas markets; aircraft, automo- turn associated with the global financial crisis have now receded. bile and general leasing; infrastructure-related finance to develop For the year ending March 2012, we are projecting a ¥1.4 financing models for the infrastructure sector; buyout investment billion year-on-year increase in net income to ¥13.0 billion. This for corporate clients in Japan and overseas; and logistics-related forecast is based on projected strong earnings from the leasing finance for shipping and other logistics assets. Overall, our aim business and other assumptions. is to develop a globally integrated industrial finance business * Buyout investment: an investment technique for earning a return by investing where we offer financial intermediary services linked to real in an existing company and providing management support to increase the assets or underlying operations. invested company’s corporate value. Hideshi Takeuchi Executive Vice President, Group CEO, Industrial Finance, Logistics & Development Group 38 Mitsubishi Corporation Annual Report 2011 Organizational Structure Industrial Finance, Logistics & Development Group Industrial Finance, Logistics & Development Group CEO Office Industrial Finance, Logistics & Development Group Administration Dept. Real Estate Investment & Management Unit Asset Finance & Business Development Div. Development & Construction Project Div. Logistics Div. Yuichi Hiromoto Ichiro Miyahara Shin Sasaki Koichi Murata No. of employees Senior Vice President, Senior Vice President, Senior Vice President, Real Estate Investment & Consolidated. . . . . . . . . 2,431 Division COO, Asset Finance & Division COO, Development Division COO, Management Unit Parent company . . . . . . 383 Business Development Div. & Construction Project Div. Logistics Div. Executive Assistant to Group CEO, General Manager No. of consolidated subsidiaries and equity- method affiliates . . . . . . . . 80 Net Income (Loss) Creating Social and Environmental Value (¥ billion) <Development of Low-Carbon-Emitting Condominiums> MC’s Development & Construction Project Div. actively develops eco-friendly condo- miniums. One such example is the TER- RACE TOYOCHO NXTOWER in Tokyo’s Koto Ward, which was completed in Janu- ary 2011. This condominium emits much less CO2 than the CASBEE standard for CO2 emissions. CASBEE, or Comprehen- sive Assessment System for Building Environmental Efficiency, is a system that comprehensively assesses the environmen- 09.3 10.3 11.3 12.3 tal performance of buildings. (est.) The condominium was developed ■ 1Q ■ 2Q ■ 3Q ■ 4Q based on three themes: reducing CO2 emissions, a cause of global warming, by using equipment with outstanding energy [Main Positive and Negative Factors] efficiency; enhancing living and surround- Change Between Year Ended March ing environments with an enlarged area set 2009 and Year Ended March 2010 aside for greenery; and using resources (Positive) efficiently by recycling materials and • Lower share write-downs (investment impairments) employing water-saving equipment. • Improved fund investment-related Beyond the building itself, we are earnings contributing to better living and surround- Change Between Year Ended March ing environments by offering various ser- 2010 and Year Ended March 2011 vices, including a car sharing scheme (Positive) using Mitsubishi Motors Corporation-made • Decreased share write-downs • Gains on the sale of overseas real estate i-MiEV electric vehicles. • Improvement in lease-related business earnings The TERRACE TOYOCHO NXTOWER 39 Mitsubishi Corporation Annual Report 2011 Industrial Finance, Logistics & Development Group functions as a financial intermediary. Real estate transactions in Japan plunged in Asset Finance & Business In the asset management business, MC the wake of the global financial crisis and Development Division subsidiary Alternative Investment Capital have been slow to recover amid an anemic Ltd. and Development Bank of Japan Inc. economy. In the year ended March 2011, Financial Business Development Unit established a new fund to invest in Asian we finally saw signs that the market had Infrastructure & Project Finance Unit private equity funds. Looking ahead, we will bottomed out. That said, the impact of the Leasing & Finance Unit work to reinforce and develop our asset Great East Japan Earthquake on the real Airline Business Unit management business through this fund, estate market is complex and careful obser- along with structuring and selling other vation will be required over some time in Merchant Banking Unit funds matching investor needs. many respects. Stock Indices of Emerging Markets and In the leasing business, results are improv- This division leverages MC’s access to Developed Markets (07.4~11.3) ing at MC affiliates Mitsubishi UFJ Lease & a broad range of industries and an exten- (Index, Developed Markets) (Index, Emerging Markets) Finance Company Ltd. and Mitsubishi Auto sive global network to provide customers 2,100 1,500 Leasing Holdings Corporation. Furthermore, with sophisticated solutions in the con- in the aircraft leasing business, wholly struction and real estate fields, as well as owned subsidiary MC Aviation Partners Inc. develop value-added real estate in Japan 1,400 1,000 is working to build up prime assets to capi- and overseas. talize on the tailwind created by recovering In July 2010, we sold an office building in 700 500 passenger demand. the City of London known as “Bow Bells In the buyout investment business, a House” to a European investor. Developed fund managed by Marunouchi Capital Co., by MC and its partners, this office building is 0 0 Ltd., a joint venture set up by MC and a prime example of a successful real estate 2007 2008 2009 2010 2011 Mitsubishi UFJ Financial Group, Inc., made development that won recognition as an ■■ Index, Emerging Markets ■■ Index, Developed Markets two new investments. One was in Seijo Ishii institutional-grade investment even amid the * MSCI Inc. Developed Markets and Emerging Markets Co., Ltd., which runs a chain of high-quality market uncertainty caused by the global indices are stock indices covering shares in more than food supermarkets. The other, in September financial crisis. 20 countries each in the developed and emerging 2010, saw the establishment of Japan In Japan, subsidiary Mitsubishi Corpora- markets. Morgan Stanley Capital Inc. Emerging Market Index Industrial Solutions, Ltd. with some major tion Urban Development, which focuses on Japanese banks to invest in companies developing and managing urban commercial The global economy remains in recovery needing to rehabilitate. This fund aims to real estate, leased a retail building from mode, having bottomed out after the slump provide funding for business restructuring Musashino-shi Public Corporation, after a induced by the 2008 global financial crisis. and rehabilitation. major department store exited, and In emerging markets such as China and In the future, we will continue to expand reopened it as “coppice KICHIJOJI” in India, which continue to record higher and enhance our industrial finance business October 2010 following a major renovation. growth rates than industrialized countries, through new undertakings such as investing MC intends to pursue opportunities for there is strong demand for funds as these in infrastructure funds overseas. developing value-added real estate on a nations invest in infrastructure and industry. global basis. In fast-growing China, we are Along with this, there is a growing number moving into full swing with efforts to develop of investment opportunities and business condominiums, retail and industrial proper- chances for this division. Development & Construction ties. In the U.S., the world’s largest real Adopting an industrial finance perspec- Project Division estate market, we are also investing sub- tive, the Asset Finance & Business Develop- stantial resources in some unique, growing ment Division focuses on three main fields: Commercial Property Development & real estate sectors such as student housing. (1) asset management business, (2) leasing Management Unit business, and (3) buyout investment busi- Urban & Residential Development Unit ness. The division provides risk capital to Construction & Building Equipment Unit industry, and varied investment opportuni- Global Real Estate Unit ties to investors. In this way, the division Amounts and Number of Transactions of Real Estate Securitized in Japan (¥ trillion, units) “coppice KICHIJOJI,” a multipurpose commercial facility, was renovated and is managed and operated by Mitsubishi Corporation Urban Development. 07.3 08.3 09.3 10.3 11.3 Together with Mitsubishi UFJ Lease & Finance Com- pany, we invested in Ekim Turizm Ticaret Ve Sanayi A.S, ■ Amounts of Real Estate one of Turkey’s largest auto leasing firms that operates ■■ Number of Transactions of Real Estate under the brand name Intercity. The aim of this invest- * Including J-REIT ment was to capture demand for auto finance in an Source: Ministry of Land, Infrastructure, emerging market. Transport and Tourism 40 Mitsubishi Corporation Annual Report 2011 crisis. This market dropped temporarily agency services, and New Century Insurance Logistics Division following the impact of the 2008 collapse of Co., Ltd. is developing captive insurance Lehman Brothers, after having risen through operations. Through these entities we are Insurance Business Unit the year ended March 2008. developing broad-based insurance The Logistics Division leverages the MC operations. Logistics Business Unit Group’s integrated global network of operat- In terms of developing new business Dry Bulk Business Unit ing bases to provide comprehensive and models, this division is promoting a logistics Tank Terminals Business Unit integrated logistics services. It has pro- real estate business and fund management Logistics Business Development Unit duced consistent results in three main fields: business targeting logistics assets. It is also (1) logistics business, (2) dry bulk business, employing logistics functions in business and (3) insurance business. restructuring projects and enterprise invest- Seaborne Container Trade In and As a member of the Industrial Finance, ment projects. Out of Japan Logistics & Development Group, the division (¥ trillion) can integrate financial elements to create 40 logistics finance business models unique to a trading company like MC. 30 In the logistics business, MC subsidiary Mitsubishi Corporation LT, Inc. is engaged in 20 ship ownership and operation of car carriers as well as warehousing and transportation 10 in Japan and overseas, and integrated international logistics services. With these 0 services, it meets various client needs. 2006 2007 2008 2009 2010 Our dry bulk business conducts compre- ■ Export ■ Import hensive bulk cargo logistics operations, which includes ownership and operation of Daikoku Logistics Center Source: Prepared by Mitsubishi Corporation based on Trade Statistics of Japan an international shipping fleet for transport- The Daikoku Logistics Center was completed in March ing coal, grains and other cargo, and termi- 2010 in Yokohama. It was developed as a securitized development. The seaborne container trade in and out of nal operations. Japan began to recover in the year ended In insurance, Mitsubishi Corporation March 2011 to levels seen before the financial Insurance Co., Ltd. provides insurance earnings. The Japanese real estate holding of revenue-generating real estate Real Estate Investment & market is valued at ¥2,200 trillion, yet the using internally generated funds. It will Management Unit securitized sector of this market still also create and manage REITs and pri- represents a mere 1% or so. Such a low vate funds utilizing third-party financing The Tokyo Stock Exchange REIT Index figure has aroused expectations that it through a portfolio management subsid- (2010.4–2011.5) can grow to account for 5% of the overall iary. Going forward, the unit will expand 1,200 market in Japan, as it does in the U.S. and enhance its business base in Japan, The Real Estate Investment & Man- while at the same time building a busi- 1,000 agement Unit was established on Octo- ness overseas to connect investors in ber 1, 2010 to promote the real estate Japan and elsewhere with real estate 800 business as a finance business since it mainly in China and the U.S. straddles all of the Industrial Finance, 600 Logistics & Development Group’s divi- sions. The new unit integrates the real 400 estate-related businesses and funds of 4 5 6 7 8 9 10 11 12 1 2 3 4 5 the three existing business group divi- (month) sions, Asset Finance & Business Develop- The Tokyo Stock Exchange REIT Index ment Division, Development & TOPIX Construction Project Division, and Logis- tics Division as well as related personnel. There is an emerging sense that the Reporting directly to the Group CEO, the Japanese real estate market has bot- unit will manage the real estate finance tomed out from a slump following the business with greater flexibility as a new global financial crisis. Investors are once organizational body. The new unit will again seeking listed REITs and private real develop and manage a portfolio through mozo wondercity is a large-scale shopping estate funds that generate stable acquisitions and medium- to long-term center owned by MC in Nagoya City. 41 Mitsubishi Corporation Annual Report 2011 Energy Business Group Group CEO Message The Energy Business Group’s business model extends through- Africa. The bottom-line result also reflected the absence of losses out the energy value chain, from upstream to downstream sec- related to fuel derivative transactions for a Japan Airlines Corpo- tors. It encompasses oil and gas exploration, development and ration subsidiary recorded in the previous fiscal year. Key devel- production (E&P) business; investment in LNG (Liquefied Natural opments in the past year with major Midterm Corporate Strategy Gas) liquefaction projects; importation and offshore trading of 2012 projects included a final investment decision (FID) on the crude oil, petroleum products, carbon materials and products, Donggi-Senoro LNG Project in Indonesia, which is set to become LNG, and LPG (Liquefied Petroleum Gas); and domestic trading a major part of the Group’s LNG business. We later acquired and retail operations related to these commodities and products. further related upstream working interests in this project. In Canada, we entered a project to develop unconventional shale Midterm Corporate Strategy 2012 Targets and Progress gas resources. Under MC’s Midterm Corporate Strategy 2012, we have several key strategies: maintain and expand existing projects, particu- Business Environment and Outlook larly natural gas projects, and bring online new projects or ones for Year Ending March 2012 under development; develop and strengthen E&P business; Amid ongoing market concern about the fiscal positions of create new business models for tapping into globalization and countries such as Greece, Portugal and Ireland, economic growth markets; and strengthen MC’s strategies and functions growth rates in developing countries are forecast to remain high in support of these activities. We conduct our businesses mind- in the year ending March 2012. Demand for energy is expected ful of creating social and environmental value. As the energy arm to grow. Oil prices are projected to remain firm, albeit fairly vola- of a major general trading company, we aim to be a unique and tile due to the uncertainty that surrounds the situation in oil- sustainable energy business group over the medium and long producing nations in the Middle East and North Africa. Under terms. While focusing on Japan, we intend to develop our busi- these conditions, we are projecting net income of ¥90.0 billion nesses globally to capture demand in other Asian countries and for the year ending March 2012. In line with Midterm Corporate emerging economies. Strategy 2012, we plan to make steady progress in developing In the year ended March 2011, we posted net income of the Donggi-Senoro LNG and shale gas projects while also seek- ¥94.0 billion, a year-on-year increase of ¥22.1 billion. One reason ing opportunities to participate in new natural gas and oil proj- was oil and other commodity price rises caused by instability ects. Our focus remains to build petroleum products and carbon resulting from a crisis for the euro and anti-government move- materials and products businesses that generate income by ments demanding democracy in the Middle East and North supplying the growing demand within the developing world. Jun Yanai Executive Vice President, Group CEO, Energy Business Group 42 Mitsubishi Corporation Annual Report 2011 Organizational Structure Energy Business Group Energy Business Group CEO Office Energy Business Group Administration Dept. Exploration & Production Unit Natural Gas Business Div. A Natural Gas Business Div. B Petroleum Business Div. Carbon & LPG Business Div. No. of employees Hajime Hirano Ryoichi Hayashi Kazuyuki Mori Consolidated. . . . . . . . 1,535 Senior Vice President, Senior Vice President, Senior Vice President, Parent company . . . . . 485 Division COO, Petroleum Division COO, Carbon & Division COO, Natural No. of consolidated Business Div. LPG Business Div. Gas Business Div. A subsidiaries and equity- method affiliates . . . . . . . 70 Takahiro Mazaki Junichi Iseda Senior Vice President, Senior Vice President, Officer for E&P, Energy Division COO, Natural Business Group Gas Business Div. B Creating Social and Environmental Value Net Income (¥ billion) <Biofuel Research Center Inaugurated at Malaysian University> On February 24, 2011, a ceremony was held in Tronoh, Perak, Malaysia, to commemorate the opening of the Centre for Biofuel and Biochemical Research (CBBR) at Universiti Teknologi Petronas (UTP). The development of the centre has been spearheaded by Pro- fessor Dr. Yoshimitsu Uemura and his team with funding support from the Mitsubishi Corporation Education Trust Fund, which was established to advance educational initia- tives in Malaysia. As Mitsubishi Chair in Green Technology at UTP, Professor Uemura has won praise for his tireless efforts to advance education at the university. During the cer- emony, UTP officials also expressed their gratitude for MC’s support. UTP’s Vice Chancellor is confident CBBR will become a leading hub for biomass research in Asia. The centre will seek to produce top researchers and engineers while also striving to spur collaboration between academia and industry. 09.3 10.3 11.3 12.3 (est.) ■ 1Q ■ 2Q ■ 3Q ■ 4Q [Main Positive and Negative Factors] Change Between Year Ended March 2009 and Year Ended March 2010 (Negative) • Lower earnings on transactions and equity- method earnings from overseas resource- related subsidiaries due to lower land prices and the yen’s appreciation • Losses related to fuel derivative transactions Change Between Year Ended March 2010 and Year Ended March 2011 (Positive) • Higher gross profit and equity in earnings because of higher crude oil and other The official opening ceremony for the CBBR commodity prices • Lower losses related to fuel derivative transactions 43 Mitsubishi Corporation Annual Report 2011 Energy Business Group Natural Gas Business Division A Petroleum Business Division Brunei Project Unit Petroleum Supply & Marketing Unit Malaysia Project Unit Industrial Petroleum Marketing Unit Australia Unit Utility Feedstock Unit Indonesia Project Unit Petroleum Feedstock Unit Global LNG Demand Oil Demand in Asia Pacific The North West Shelf Project in Western Australia (million tons/year) (million tons) 346 produces 16.3 million tons of LNG a year. 1,400 Others (South America, ME) 288 1,200 Europe 1,000 222 North America America AP Side Other Asia Pacific Other Asia Natural Gas Business Division B 800 India 600 China Taiwan Oman Project Unit 400 China Korea Sakhalin Project Unit 200 Japan New Business Development Unit 0 Japan 2010 2015* 2020* Global Gas Unit 01 02 03 04 05 06 07 08 09 10 * MC’s estimate Source: Poten & Partners Donggi-Senoro Project Unit Source: BP Statistical Review of World Energy June Shale Gas Business Unit 2011 The global LNG market amounted to 180 million tons as a whole in 2009. In 2010, Although demand for petroleum is declining this market grew around 20% to 220 million Besides involvement in gas projects in in Japan, petroleum remains a vital energy tons. More growth is forecast on the back of Russia (Sakhalin II) and Oman, this division lifeline as evidenced in the aftermath of the increasing demand from China, India and trades LNG from Oman and is leveraging Great East Japan Earthquake. Furthermore, other emerging markets. rights to use receiving terminals in the U.S. demand is expected to increase in Asia and MC handles around 40% of the LNG to trade LNG globally. The main mission of emerging markets. imported into Japan by volume. MC boasts this division is to unearth new business MC is involved in the marketing of crude strong capabilities in executing LNG proj- opportunities for the future. In Indonesia, oil and petroleum products; in petroleum ects based on experience gained over the MC made a final investment decision in refining through an equity stake in Showa years. This division is developing business January 2011 on the Donggi-Senoro LNG Yokkaichi Sekiyu Co., Ltd.; the ownership across many parts of the LNG value chain. project to act as the overall business opera- and operation of oil tankers; the operation of MC produces and liquefies natural gas and tor of natural gas liquefaction. In Iraq, we petroleum terminals; sales of petroleum ships the resulting LNG from the world’s are taking part in the South Gas Utilisation products to electric utilities and industrial main exporting countries and regions of Project, being developed by Royal Dutch firms; and in the operation of a fuel retailing Brunei, Malaysia, Australia and Indonesia. Shell plc and the Iraqi Ministry of Oil. This business through a national network of MC is also an LNG import agent for the project involves the collection and effective approximately 1,100 service stations in Japanese market. LNG is an energy source utilization of associated gas produced Japan owned by Mitsubishi Shoji Sekiyu that is expected to see long-term growth in during crude oil production in Basra, in Co., Ltd., their subsidiaries and partners. demand. Amid expected expansion in the southern Iraq. This division is turning its MC is thus developing businesses in a wide LNG industry, we will continue building the focus to projects in regions outside of Asia range of domains in the midstream and earnings base of LNG businesses by and Oceania as well. In September 2010, downstream sectors of the petroleum value expanding existing projects and adding to we decided to invest in a shale gas develop- chain. In these operations, MC deals with gas reserves within existing franchises while ment project, acquiring shale gas assets in overseas oil-producing nations and corpo- also seeking to enhance the division’s func- Western Canada. This project has already rate oil majors as well as a wide range of tional strengths in the LNG value chain. begun production in limited quantities. domestic customers, including electric 2010 saw the expiry of a 41-year con- utilities, petroleum wholesalers, industrial tract with Alaska LNG, which was the start- firms, and service station operators. We are ing point of our LNG business back in 1969. also engaged in petroleum products whole- Similarly, our involvement ended with the saling and retailing in the U.S., in California, Arun II LNG Project in Indonesia, which and Asia, where we are developing business began in 1983. While 2010 marked an end closely tied to local markets. While strength- to these projects, it also marked a steady ening sales of petroleum products that increase in production at the Tangguh LNG match customers’ needs in the Japanese Project in Indonesia, where shipments market, the division also aims to leverage began in 2009. MC’s unique network centered on Singa- pore to expand trading of crude oil and A gas treatment plant at the shale gas development in petroleum products further within the Asia- British Columbia, Canada Pacific region. 44 Mitsubishi Corporation Annual Report 2011 <LPG Business> The division is targeting further growth in the Global LPG Consumption LPG (liquefied petroleum gas) business (million tons) through Astomos Energy Corporation, 250 which is the LPG industry leader in Japan. 200 The recent Great East Japan Earthquake has caused many people to take another 150 Onahama Petroleum look at the high potential utility of LPG in Co., Ltd., which is 100 times of disaster. Building on the experience based in Iwaki City, Fukushima Prefec- and know-how that MC has cultivated over 50 ture, stores and sells many years, Astomos Energy is looking to crude oil and expand its sourcing business overseas, 0 petroleum products. while building on its strong partnerships with 99 00 01 02 03 04 05 06 07 08 domestic distributors to develop operations ■ Asia & Oceania in Japan for marketing LPG as an environ- Carbon & LPG Business Division mentally superior fuel. Efforts are also under Source: Agency for Natural Resources and Energy “Energy in Japan 2010” way to boost demand for LPG in connection Carbon Materials Unit with the promotion of residential fuel cell systems under the ENE-FARM brand name. Petroleum Coke Unit Specialty Carbon & Graphite Business Unit Crude oil is currently LPG Business Unit Exploration & Production Unit produced at the Senoro-Toili natural gas Namikata Terminal Business Unit field, but the aim is to Global demand for oil and natural gas is Senoro-Toili begin natural gas natural gas field <Carbon Business> expected to rise, led by emerging markets. production in 2014. The main customers for this business are in However, competition is escalating to the steel and aluminum industries, where secure and develop prime resource demand is expected to increase over the assets, with prices soaring and amid South China Sea Brunei medium and long terms. Furthermore, rising geopolitical risk. This is creating a Kuala Lumpur Singapore applications continue to broaden for carbon challenging business environment. Kalimantan in various other fields, including the renew- This unit is conducting MC’s oil and able energy field. natural gas exploration, development and Jakarta Sulawesi Under these market conditions, the production (E&P) operations around the division handles a vast and varied range of world in conjunction with subsidiary carbon materials and products. MC’s aim is Mitsubishi Corporation Exploration Co., Senoro-Toili natural gas field in Indonesia, to expand this business through involve- Ltd. We contribute to the development from PT. Medco Energi Internasional Tbk, ment across the entire value chain. and stable supply of finite oil and natural an Indonesian energy company. In the carbon business, MC handles gas, as an important part of the value With this acquisition, we will create exports and imports as well as overseas chain in the LNG and oil businesses. synergies through the activities of the trading and domestic trading transactions Specifically, MC is conducting offshore Donggi-Senoro LNG Project, by being for a broad range of carbon materials and E&P activities in Gabon and Angola in involved in the LNG value chain from products, including petroleum cokes, coal West Africa, in the U.S. Gulf of Mexico, in upstream to downstream. MC has made cokes, tar and tar distillates. MC is pursuing the U.K. North Sea, and in Indonesia, a final investment decision regarding the a dual-track expansion strategy for this Venezuela and elsewhere. We are actively Donggi-Senoro LNG Project. This should business based on increased trading of key engaged in these operations, while taking raise the value of the project, as well as products alongside business investments. all possible measures to protect the ensure stable supplies of LNG to users in environment and ensure safety. Japan and South Korea. At the same In January 2011, we acquired a com- time, it will contribute further to Indone- pany owning a 20% working interest in the sia’s economic growth. MC-related Oil and Gas Development and LNG Projects Oil and gas E&P projects LNG and natural gas projects Based in Omuta City, Fukuoka Prefecture, SG Chemicals Co., Ltd. produces and sells calcined petroleum coke. 45 Mitsubishi Corporation Annual Report 2011 Metals Group Group CEO Message The Metals Group handles a broad range of products in the business as a true industrial player. We are not simply an inves- fields of steel products, ferrous raw materials and non-ferrous tor or a trader. metals. Based on the two pillars of resource investment and Human resources are vital to developing our business in this trading, we aim to stably and continuously supply world markets way. That’s why the Metals Group is also concentrating its with quality raw materials and products. efforts on developing human resources. In particular, as we promote multiple resource projects, ongoing human resource Midterm Corporate Strategy 2012 Targets and Progress development will increase the number of specialists who are so In the year ended March 2011, the Metals Group posted net vital to mine development and management. Over the medium income of ¥230.1 billion, representing an increase of ¥92.2 and long terms, we aim to evolve to a level where we can take billion year on year. This was a record result for this group. The the lead in mine management. This should strengthen our busi- main reasons were higher earnings at an Australian resource- ness base. related subsidiary as well as gains on a share transfer at a Chil- ean iron ore-related subsidiary and higher equity-method Business Environment and Outlook earnings of related business investees. for Year Ending March 2012 Under Midterm Corporate Strategy 2012, the Metals Group Our business environment in the year ending March 2012 is will buttress two main pillars—resource investment and trad- clouded with instability and uncertainty. Tension in the Middle ing—as it aims to steadily contribute to MC’s bottom line. East, financial unease in Europe and measures to rein in inflation In terms of resources, we are making substantial invest- by China and other emerging nations are shaping our business ments in six significant mineral resource fields where robust environment. The impact of the March 11 Great East Japan demand is expected in step with world economic growth: coal, Earthquake is another factor we have to contend with. That iron ore, copper, aluminum, stainless steel raw materials, and said, we expect to see healthy growth in both demand and uranium. We are expanding existing projects and developing prices across the board in metals, driven by economic growth in projects to which we have already committed ourselves. At the China, India, Brazil and other emerging markets. same time, we are targeting new projects that will drive future In this business environment, we will work to achieve the growth. Additionally, we are exploring possibilities in the new goals of Midterm Corporate Strategy 2012. To this end, we will fields of platinum and palladium. In trading, we are bolstering continue to steadily execute our strategies in both resource our supply framework for materials, semi-finished products and investment and trading. other products, all underpinned by high-quality services and In the year ending March 2012, the Metals Group is project- functions, as we seek to tap into expansion in growth markets. ing net income of ¥230.0 billion, largely on a par with the past We have amassed considerable business expertise in resources fiscal year. This forecast assumes higher sales volumes and over many years, and have an information network that is rooted prices at our Australian resource-related subsidiary, which in key markets. Leveraging these advantages, we aim to expand should offset the absence of gains on a share transfer at a Chil- ean iron ore-related subsidiary recorded in the year ended March 2011. Jun Kinukawa Executive Vice President, Group CEO, Metals Group 46 Mitsubishi Corporation Annual Report 2011 Organizational Structure Metals Group Metals Group CEO Office Metals Group Administration Dept. Steel Business Div. Ferrous Raw Materials Div. Non-Ferrous Metals Div. No. of employees Consolidated. . . . . . . . . 11,297 Parent company . . . . . . 398 No. of consolidated subsidiaries and equity- method affiliates . . . . . . . . 24 Mitsuyuki Takada Kanji Nishiura Iwao Toide Division COO, Senior Vice President, Senior Vice President, Steel Business Div. Division COO, Division COO, Ferrous Raw Non-Ferrous Metals Div. Materials Div. Net Income Creating Social and Environmental Value (¥ billion) < Developing Coal Mining in Harmony With the Natural Environment > BMA, which is owned 50% by MC through wholly owned resource subsidiary Mitsubishi Development Pty Ltd, undertakes extensive rehabilitation to restore mining sites to their natural state. Prior to open-cut mining, the topsoil and rest of the overburden are first removed and stored in a separate location. The environmental rehabilitation process involves filling in the site, replacing the topsoil and then replanting native trees and vegetation. After restoration, the site is monitored regularly to check that trees, plants and shrubs have started to grow and that local wildlife has returned. The water used in coal-mining processes is managed to strict standards to preserve local water quality, and is recycled for use in washing coal or watering vegetation. Rainwa- 09.3 10.3 11.3 12.3 ter and groundwater are stored at the mine (est.) and used for preventing a wide spread of ■ 1Q ■ 2Q ■ 3Q ■ 4Q particulates or watering vegetation. In these and other ways, BMA is working in harmony with the local natural environment. [Main Positive and Negative Factors] Change Between Year Ended March 2009 and Year Ended March 2010 (Negative) • Lower sales prices at an Australian resource-related subsidiary • Losses related to fuel derivative transactions Change Between Year Ended March 2010 and Year Ended March 2011 (Positive) • Higher sales prices at an Australian resource-related subsidiary (coking coal) • Gains on a share transfer at a Chilean iron ore-related subsidiary A coal mining site before (top) and after (bottom) environmental rehabilitation. 47 Mitsubishi Corporation Annual Report 2011 Metals Group limited recovery in domestic demand, also begun efforts to create businesses in Steel Business Division although the market has turned the corner new fields such as the environment and after temporarily declining. renewable energy. Metal One Business Unit For Metal One, the year ending March Looking ahead, this division will continue 2012 will be the last year of its third Mid- to develop strategic businesses in various Steel Investment and Business Development Unit term Consolidated Management Plan, which markets in the pressed steel auto parts field was announced in June 2010. Under this and develop the steel business, centered on Components Business Development Unit plan, in the Japan market Metal One aims to Metal One. Our aim is to consistently pro- establish a more solid position based on the vide optimum steel products as well as Harnessing the collective capabilities of MC company’s strong operating base. In over- logistics and services. and working together with key subsidiary seas markets, Metal One aims to capitalize Metal One Corporation, a joint venture on growing demand by strengthening and created in 2003 with the former Nissho Iwai expanding businesses in Asia and North Corporation (now Sojitz Corporation) that is America, where it already conducts various Ferrous Raw Materials Division the industry’s largest trading firm special- businesses, while forging ahead with the izing in steel products, the Steel Business development of new businesses in Brazil, Ferrous Raw Materials Sales and Division is constructing and developing a China, India and other emerging markets. Marketing Business Unit global value chain for steel products. In the Specifically, in Japan, Metal One has estab- Thermal Coal Business Unit upstream sector of this value chain, the lished a supervisory management company Iron Ore Business Unit division is taking capital stakes in steel for the steel processing service centers businesses in countries such as Brazil as business, as well as restructured steel pipe Stainless and Specialty Steel Raw part of efforts to deepen ties with steelmak- and tubular product operations. Overseas, Materials Business Unit ers. In the downstream sector, MC is devel- in addition to strengthening the functions of MDP Unit oping operations for pressed steel auto Soluções em Aço Usiminas S.A. (Solutions parts in Thailand, Australia and elsewhere. Usiminas), which was established in Brazil in This division is focusing efforts on reinforc- Within the midstream sector, the emphasis the year ended March 2010, Metal One ing the business through resources invest- is on rationalizing and reinforcing the steel established new service centers in Mexico, ment as well as in trading. product distribution value chain through China, India and elsewhere. Metal One has The investment business provides a Metal One, a core contributor to divisional major pillar of sustained earnings growth for earnings. At the same time, MC is looking to the division. MC’s coking coal business in develop the business by strengthening Australia, owned through subsidiary Mitsubi- relations with key industries and by quickly shi Development Pty Ltd, boasts the largest anticipating market needs. output in the world and plans call for further Global demand for steel, which nose- expansion in the future. MC also has sub- dived temporarily due to the global reces- stantial investments across a wide range of sion, has resumed a growth trajectory along businesses, including the production of with rapid economic recovery in emerging stainless steel raw materials and iron ore, as markets, particularly in Asia. In 2010, world well as the production of coal and uranium steel production set a new record on the for use as fuel for power generation. In back of this growth and is expected to particular, MC is expanding production increase further over the medium and long capacity at several projects in anticipation of Metal One has more than 70 service centers in Japan terms. However, demand in the Japanese future growth in global demand. These and other countries around the world, providing com- domestic market is expected to reach only prehensive services, including steel processing, storage include ferrochrome production by Hernic around 80% of its peak level, due to a and delivery management. Ferrochrome (Pty) Ltd. in South Africa and Metals Group Value Chain Raw Materials Procurement Production Processing, Distribution & Marketing End Users Coking Coal BMA Ferrous Raw Materials Iron Ore Processing & Distribution Power IOC Companies Nickel & Chrome Isuzu Corporation CMP Mitsubishi Corporation Sales & Marketing Component Steel Sheets & Plates Oil & Gas & Products Integrated Steel Mills Metal One Steel Service Hernic Metal One Corporation Keiyo Blanking Kogyo Manufacturers Companies Specialty Steel & Wire etc. etc. (Worldwide sales network) Solutions Usiminas DMET Construction ISTW etc. Hirotec Australia Companies Metal One Group etc. Automobile Metal One Structural EAF Mills Metal One America Manufacturers Scrap Steel Steel & Resource Corporation Kyushu Steel etc. Machinery Shinkansai Steel etc. Manufacturers Home Appliance Manufacturers Non-Ferrous Raw Materials Copper Escondida Makers of Copper Processing & Distribution Aluminum Mitsubishi Corporation & Copper Alloy Wire Sales & Marketing Can Los Pelambres Component Manufacturers Platinum Mitsubishi International & Other Products Manufacturers Antamina Mitsubishi Corporation Other Non-Ferrous Corporation (MIC) Rolling Mills & Foundries Tata Toyo Radiator Shipbuilders & Products Raw Material Mozal Unimetals Varopakorn T.RAD Czech s.r.o. Non-Ferrous Products Boyne Mitsubishi Corporation Muang-Max etc. Cable etc. Qingdao Toyo Heat Exchanger etc. International (Europe) Thai-MC Company Toyo Radiator Zhongshan Manufacturers Precious Metal Processors Mitsubishi Corporation Mitsubishi Corporation Furuya Metal (Shanghai) Beverage Makers Unimetals Other Manufacturers Jewelry Makers Non-Ferrous Scrap Triland Metals (UK) 48 Mitsubishi Corporation Annual Report 2011 iron ore projects in Chile through Compañía 2010, increasing our equity interest in pro- Minera del Pacífico S.A. (CMP) and in duction. At the Los Pelambres copper mine Canada through Iron Ore Company of in Chile, production is now in full swing Canada (IOC). following the safe completion of expansion In trading, the division trades coking work in the previous fiscal year. At the coal, thermal coal and iron ore as well as Antamina copper mine in Peru, expansion materials for production of stainless and work is currently underway with a target specialty steels on a global basis. completion date in 2012. On the other Global demand for ferrous raw materials hand, at the MOZAL aluminum smelter in and fuel for power generation dipped tem- Mozambique, Africa, and the BOYNE alumi- porarily from 2008, but picked up gradually num smelter in Australia, we continue to in the second half of 2010 on the back of seek greater cost competitiveness and are BMA, the world’s largest producer of hard coking coal economic recovery in emerging markets thus running these operations in ways that in terms of global seaborne trade, continues to provide such as China. Demand is projected to a stable supply to customers around the world. achieve greater efficiency and reduce costs. increase steadily over the medium and long In these and other ways, we are working to terms, underpinned by robust growth in secure quality and stable supply sources of such markets, centered on Asia. Based on non-ferrous raw materials around the world this projected demand trend, the division is Non-Ferrous Metals Division to meet growing demand in industrialized focused on ensuring future stable supply nations, BRICs countries, and elsewhere. capacity for materials and fuels, and is Base Metals Business Unit In terms of our trading business, in April conducting strategic business development 2010, we consolidated trading of non- Aluminum Business Unit activities to this end. ferrous metals, raw materials and products, In Australia, MC has invested in a joint Precious Metals Business Unit except precious metals, in Mitsubishi Cor- venture with local producer Murchison Metals Unimetals Unit poration Unimetals Ltd. This wholly owned Ltd. to develop an iron ore deposit at Jack Non-Ferrous Metals Business MC subsidiary is positioned at the core of Hills along with rail and port infrastructure. In Development Unit our trading business, and will thus spear- April 2010, Compañia Minera Huasco S.A. head our drive to expand business and (CMH), an iron ore project in Chile in which World Supply of Copper and Aluminum increase earnings in this area. In the pre- we owned a 50% interest through our sub- (million tons) cious metals trading field, June 2010 saw sidiary M.C. Inversiones Limitada, merged several precious metals exchange traded with CMP, a subsidiary of Chilean iron ore 50 funds listed and begin trading on the Tokyo and steelmaking company Compañía de 40 Stock Exchange. Going forward, MC will Acero del Pacífico S.A. We own a 25% stake continue working to provide speedy and in the new CMP. Also in April 2010, commer- 30 sophisticated products and services that cial operations began at the Clermont ther- cater to various needs in the growing 20 mal coal mine, one of the largest coal mines global market. in Australia. In November 2010, we decided 10 to expand production capacity of the Ulan 0 thermal coal mine located in New South 2006 2007 2008 2009 2010 Wales, Australia, in which we own a 10% working interest through MDP. And in March ■ Copper ■ Aluminum 2011, we made a decision regarding large- scale expansion of our BMA coking coal This division has two business pillars: business in Queensland through MDP. resources investment, and trading. In the upstream sector, we are involved in securing the key non-ferrous metals resources of copper and aluminum in various countries, Global Crude Steel Output by Country including Chile, Peru, Mozambique, and (billion tons) Australia. In midstream and downstream The Escondida mine in Chile produces more than one sectors, we trade non-ferrous metals, raw million tons of copper each year. It is the world’s largest 1.5 materials and products in certain countries copper mine, with reserves for at least another 50 years and regions, namely, the U.S., China, of operation. ASEAN nations including Thailand, and 1.0 Europe. Prices for non-ferrous metals have risen steadily along with the general recov- ery in the global economy, which has been underpinned by strong economies in BRICs 0.5 nations, including China, which accounts for 40% of global copper demand, in the wake of the collapse of Lehman Brothers in Sep- tember 2008. 0 Under this global economic environment 2004 2005 2006 2007 2008 2009 2010 in the field of resource investments, we ■ Japan ■ China ■ Other increased our ownership interest in the Source: World Steel Association Escondida copper mine in Chile in May 49 Mitsubishi Corporation Annual Report 2011 Machinery Group Group CEO Message The Machinery Group handles machinery across many different In motor vehicles, MC has been involved in developing sectors, ranging from large-scale plants for power generation or related businesses across Asia for many years. In Indonesia, for production of natural gas, petroleum, chemicals or steel, to one of our most critical markets, we work in partnership with ships, railway systems, automobiles, and aerospace equipment, Mitsubishi Motors Corporation (MMC) and with Mitsubishi Fuso as well as mining and industrial machinery. Leveraging our Truck & Bus Corporation. We are also developing businesses in knowledge and customer network across these fields, we aim to China, Russia and other countries with MMC. Finally, our Isuzu expand value chains spanning finance, distribution and our Business Division has been supporting the sale of Isuzu vehicles extensive business investments. for over 50 years in Thailand as well as other ASEAN nations and Australia. Midterm Corporate Strategy 2012 Targets and Progress We posted net income of ¥61.4 billion in the year ended Under Midterm Corporate Strategy 2012, the group’s goal is to March 2011, which was ¥43.3 billion higher year on year. This generate business by grasping market and customer needs large earnings increase resulted from the absence of share write- based on the connections we can forge between customers, downs recorded in the previous fiscal year, as well as strong manufacturers and business partners across a diverse range of performances in automobile operations, especially in Asia. industries, while at the same time seeking to enhance MC’s core competences. We have defined the four key domains for the Business Environment and Outlook Machinery Group as (1) social infrastructure, including power for Year Ending March 2012 generation, transport and ports, (2) resources and energy, (3) We expect the business environment in the year ending March shipping, and (4) motor vehicles. We are working to reinforce our 2012 to remain different for each field and market. We expect existing operations and to create new businesses. harsh business conditions due to the impact of a strong yen, In the infrastructure domain, MC is involved in on-site increased competition with overseas players and the effects of (inside-the-fence) power generation as well as emerging busi- the Great East Japan Earthquake, among other factors. We will nesses such as undersea power cabling. In the shipping focus on tapping strong demand in overseas markets, especially domain, we are building a business portfolio to generate stable within the developing world, through the steady implementation income streams from the four pillars of trading, finance, fleet of our detailed plans. ownership and offshore operations. For the year ending March 2012, we are projecting net income of ¥45.0 billion. Osamu Komiya Executive Vice President, Group CEO, Machinery Group 50 Mitsubishi Corporation Annual Report 2011 Organizational Structure Machinery Group Machinery Group CEO Office Machinery Group Administration Dept. Power & Electrical Systems Div. Infrastructure Project Div. Ship & Aerospace Div. Motor Vehicle Business Div. Isuzu Business Div. No. of employees Consolidated. . . . . . . . . 9,554 Hirotsugu Ishiyama Kuninori Kaneshige Kozo Shiraji Morikazu Chokki Kazushi Okawa Parent company . . . . . . 1,034 Division COO, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Ship & Aerospace Div. Division COO, Division COO, Division COO, Division COO, No. of consolidated Power & Electrical Motor Vehicle Isuzu Business Div. Infrastructure Project Div. subsidiaries and equity- Systems Div. Business Div. method affiliates . . . . . . . . 126 Net Income Creating Social and Environmental Value (¥ billion) <Helping Reduce Environmental Loads at Plants> MC’s on-site (inside-the-fence) power generation business involves an independent opera- tor (MC) installing a power generation system within the grounds of customers’ plants to supply electricity and steam. Besides supplying energy, MC undertakes power generation plant engineering and procurement, finance, fuel procurement, and maintenance. To date, MC has been involved in six such on-site projects. One of these projects is for chemicals manufacturer JSR Corporation. This system, which came onstream in April 2010, was installed at JSR’s Yokkaichi Plant, which produces semiconductor, electronics and other materials. The system has helped reduce the plant’s environmental load and improve energy efficiency at the plant by converting from a system 09.3 10.3 11.3 12.3 (est.) that burned heavy oil to one fired by low-CO2-emiiting natural gas. MC will continue to focus on on-site power generation as a business that has considerable social significance ■ 1Q ■ 2Q ■ 3Q ■ 4Q from the standpoint of preserving the environment. [Main Positive Factors] Change Between Year Ended March 2009 and Year Ended March 2010 (Positive) • Higher earnings at overseas IPP companies • Lower share write-downs (investment impairments) and impairment losses on property and equipment Change Between Year Ended March 2010 and Year Ended March 2011 (Positive) • Lower share write-downs (investment impairments) • Strong results at overseas automobile- related businesses, notably in Asia. This natural gas-fired cogeneration facility was installed at JSR’s Yokkaichi Plant (Construction completed in April 2010) 51 Mitsubishi Corporation Annual Report 2011 Machinery Group Together, these actions are directed at Power & Electrical Systems strengthening our earnings drivers. Division This division is engaged in an elevator Power Systems Unit business with Mitsubishi Electric Corpora- tion. In this business, we are endeavoring to Power Systems International Unit expand earnings by optimizing the portfolio Elevator & Escalator Operation & of overseas sales businesses to achieve Marketing Unit greater efficiency. Power Marketing, Japan Unit *EPC: Engineering, Procurement, Construction Supported by 32 offices worldwide, this Rail cars like this will be delivered for Cairo Metro Line 3 division is developing a business model from 2011 through 2013. centered on EPC* and trading of power Infrastructure Project Division generation and transmission plants, eleva- tors and other equipment. We are also Smart Community Business Integration actively developing business involving Unit investment in areas such as on-site power Engineering Business Unit generation. Plant Project Business Unit In the year ended March 2011, orders for EPC projects were sluggish overseas due Transportation Infrastructure Business mainly to the impact of the strong yen. Unit However, EPC projects for Japanese elec- Industrial Machinery & Equipment tricity utilities and the on-site power genera- Business Unit tion business grew steadily. We also took Construction & Mining Equipment An event open to the public at MC Machinery Systems. steps that we hope will lead to medium- to Project Unit long-term growth. One illustration is the start of activities to develop offshore trans- Working in the basic industry and infrastruc- mission business overseas. ture sectors, this division seeks to leverage Ship & Aerospace Division In the year ending March 2012, we are MC’s resources and capabilities to propose determined to take part in EPC projects in best-fit solutions for satisfying customers Ship Unit Japan and overseas, including projects to worldwide while helping them realize their Defense Systems Unit construct emergency thermal power genera- plans. In the fiscal year ended March 2011, tion facilities that will contribute to Japan’s transportation infrastructure-related busi- Space & Integrated Defense Systems Unit reconstruction following the major natural nesses were added to the division’s existing disaster. At the same time, we will promote responsibilities in oil, gas, chemical-related, business undertakings involving investment. steel and other plants, and machinery and This division is involved in shipping, as well equipment sold in large volumes, including as aerospace-related businesses. construction machinery and machine tools. In the ship-related business, MC con- The division’s fundamental policy is to con- ducts wide-ranging business activities in four tribute to the development of the Japanese pivotal businesses: trading centered on sales economy and the rest of the world over the and purchases and brokering transactions of medium to long term in cooperation with newly built ships and marine machinery; customers, business partners and other chartering of company-owned vessels; ship parts of MC. Under this fundamental policy, finance; and offshore business. We are the division is committed to taking the neces- developing our business globally by taking sary actions to target growth going forward. advantage of the strengths of each business, In the year ended March 2011, we saw which fit together organically. The Kansai Electric Power Co., Inc.’s Sakaikou Power an increase in projects, particularly in the In the year ended March 2011, the busi- Station was completed in September 2010. This plant and transportation infrastructure fields, ness environment remained difficult due to LNG-fired plant with an output of 2 million kW, achieves flow from an improving business environ- the impact of a sluggish marine transport generating efficiency of 58%, one of the highest levels in the world. ment, driven by growth in emerging econo- market caused by the 2008 global financial mies such as China, India and Brazil. crisis, and the impact of the extremely Additionally, in sales of machinery and equip- strong yen. However, our operating results ment in large volumes, an upturn in contracts grew strongly, backed by contracts for some in emerging markets led to a noticeable large new projects, and our ship charter improvement in the business environment. business. Looking ahead, we intend to In the year ending March 2012, the bolster our earnings structure by expanding appreciating yen, stiffer competition with new businesses so that we are less suscep- overseas companies and other factors are tible to market conditions in the marine expected to make for a challenging operating transport market. environment. However, as in the year ended As for aerospace and defense business, March 2011, growth in demand is expected we aim to contribute more to Japan’s national Elevators at the headquarters building of the Securities in the plant and transportation infrastructure security. We plan to do this by providing Commission of Malaysia. MC helped supply 12 eleva- fields as well as machinery and equipment defense equipment and services as well as by tors, including observation elevators, with glass walls sold in large volumes, led by emerging mar- complying with new procurement methods for this building. kets. We will take the necessary actions to based on the National Defense Program capture this growth. Guideline that was approved in December 52 Mitsubishi Corporation Annual Report 2011 2010. Moreover, we are involved in space- vehicles produced by Mitsubishi Motors related businesses that cater to social needs. Corporation (MMC) and Mitsubishi Fuso Thailand Pickup Trucks Market and TIS Share This includes satellite imagery-related ser- Truck & Bus Corporation. (10 thousands units) vices provided through MC business investee The business environment in the year Japan Space Imaging Corporation. ended March 2011 saw healthy growth, supported by a recovery in the global auto market, and strong economic conditions in emerging markets. In Indonesia, which is the most important market for this division, the auto market in the year ended March 2011 posted record sales on the back of high economic growth. In this expanding market, MC affiliate PT. Krama Yudha Tiga 07.3 08.3 09.3 10.3 11.3 Berlian Motors (KTB) sold 117,000 units, Thailand Demand TIS Sales TIS Share setting a new record. * Tri Petch Isuzu Sales Co., Ltd. (TIS) retail sales units The Motor Vehicle Business Division also (in Thailand) = pickup trucks (Incl. Derived Vehicle) regards China as a strategically important * Exports from Thailand are not included. MC owns and operates approximately 35 vessels, mainly bulkers. Pictured is the Pleasant Sky. region, in the mid- to long- term. In this market, Mitsubishi Motor Sales (China) Co., the number of vehicles sold in Thailand Ltd., a joint venture with MMC, saw their reached 160,000 units, representing a sales grow steadily. Similarly, Russia is year-on-year increase of approximately another strategically important region. Here, 20%. Furthermore, exports of vehicles from MC affiliate Rolf Import (RI) is the importer Thailand jumped roughly 70% to 60,000 and distributor of MMC vehicles, and their units. On the back of these much higher sales are making a steady recovery from the sales and exports, the division’s earnings effects of the global financial crisis. increased. We look to further enhance the value of our In Thailand, which is the most important business activities by strengthening the value market for this division, we have built a chain centered around our core automotive broad-based value chain centered on the GeoEye distribution business in these growth markets. sales business over a period of more than MC provides Earth imagery collected by a commercial 50 years. This value chain extends from satellite operated by U.S.-based GeoEye that has the upstream operations (development, parts highest resolution in the world of 0.41 meters. manufacture and vehicle assembly) to downstream operations (services and auto- mobile finance). The business has estab- lished Isuzu as the leading brand in the Motor Vehicle Business Division commercial vehicle market in Thailand. Besides Thailand, the division has Motor Vehicle Asean & South West Asia invested in businesses in the ASEAN region, Unit Europe, Mexico and Australia. We are using Motor Vehicle North Asia Unit business experience and know-how gained Our motor vehicle business in Indonesia is working to in Thailand to grow further in other countries Motor Vehicle Europe, Middle East & strengthen the value chain, centered on KTB. Pictured around the world. Africa Unit is KTB’s headquarters. We continue to work with Isuzu Motors Motor Vehicle Americas & Australia Unit to boost the competitiveness of the product Motor Vehicle Domestic Operation Unit range. We will also reinforce the export and sales system for next-generation vehicles. In Indonesian Auto Market and KTB Share Isuzu Business Division these and other ways, we aim to strengthen (10 thousands units) and expand our earnings drivers. Thai & ASEAN Unit Europe, Middle East, Americas & Oceania Unit This division is developing a wide range of businesses with Isuzu Motors Limited in Thailand, extending from the development and production of pickup trucks, a mainstay Isuzu Motors product, to export and sales 07.3 08.3 09.3 10.3 11.3 to around 100 countries worldwide. The Total demand in Indonesia KTB sales division is also involved in exporting Isuzu Isuzu UTE Australia Pty Ltd (IUA), an Isuzu pickup truck KTB share trucks from Japan and sales in countries sales company in Australia, achieved cumulative sales This division conducts business through a around the world. of 10,000 units in only its third year in business. broad-based value chain encompassing In the year ended March 2011, the divi- automobile distribution and auto loan opera- sion’s markets staged a recovery, most tions. The products concerned are motor noticeably in emerging markets. As a result, 53 Mitsubishi Corporation Annual Report 2011 Chemicals Group Group CEO Message The Chemicals Group constantly seeks to strengthen existing Business Environment and Outlook businesses and create new businesses, with an eye on for Year Ending March 2012 expected changes in the business environment. At the same In the year ending March 2012, we envisage potential opportu- time, we are leveraging the fact that the chemical products nities for the group to leverage MC’s capabilities to take advan- industry intersects with clothing, food and housing fields to tage of structural changes caused by the emergence of shale achieve further growth. gas as a feedstock. We see this driving the rehabilitation of the petrochemical industry within North America. Moreover, ever- Midterm Corporate Strategy 2012 Targets and Progress increasing interest in health, safety, comfort and the environment This group’s target under Midterm Corporate Strategy 2012 is to caused by environmental problems and trends such as aging generate net income of ¥32.0 billion. To achieve this goal, we societies and falling birthrates are expected to continue under- aim to create a strong group with sustainable earnings power pinning growing demand in the life science and environmental grounded in its functions. In the year ended March 2011, we and new energy fields. In developing countries, meanwhile, we focused on strengthening existing core business models, expect growth in demand to remain relatively firm but to slacken expanding businesses through participation in business invest- in pace a little. A range of factors imply lingering uncertainty, ments in resource countries, and bolstering businesses in the life including price volatility for crude oil and other commodities, the science field. We took concrete steps and sowed the seeds for situation in the Middle East, and the impact of the Great East future growth. Japan Earthquake. Under these conditions, we forecast a year- In the year ended March 2011, we posted net income of on-year decline in net income of ¥1.1 billion to ¥28.0 billion. ¥29.1 billion, down ¥3.2 billion year on year. The absence of To achieve our Midterm Corporate Strategy 2012 goals, we gains on the reversal of deferred tax liabilities of SPDC Ltd. will continue to undertake business investments that reinforce recorded in the previous fiscal year was a big factor for this our trading capabilities. We plan to increase our investments in decline. Excluding that, we achieved a large earnings increase income-generating businesses, notably in the fields of life sci- while maintaining high capital efficiency due to the results of the ence and resource-site development business. In April 2011, we initiatives I mentioned earlier, higher earnings on transactions, created the Life Sciences Division to target growth from new lower share write-downs and higher dividend income. All in all, sectors such as fermentation products and generic pharmaceu- we are making solid progress toward achieving our Midterm ticals. We also aim to deepen our global business development Corporate Strategy 2012 target. efforts by forging stronger connections inside countries such as China to tap into growth in the developing world. Takahisa Miyauchi Executive Vice President, Group CEO, Chemicals Group 54 Mitsubishi Corporation Annual Report 2011 Organizational Structure Chemicals Group Chemicals Group CEO Office Chemicals Group Administration Dept. Phoenix Unit Saudi Petrochemical Project Unit Commodity Chemicals Div. A Commodity Chemicals Div. B Functional Chemicals Div. Life Sciences Div. No. of employees Consolidated. . . . . . . . . 3,222 Shinichi Nakayama Tatsuya Kiyoshi Tadahiko Igarashi Tetsuro Momosaki Parent company . . . . . . 653 Division COO, Senior Vice President, Senior Vice President, Senior Vice President, No. of consolidated Commodity Chemicals Div. B Division COO, Commodity Division COO, Division COO, subsidiaries and equity- Chemicals Div. A Functional Chemicals Div. Life Sciences Div. method affiliates . . . . . . . . 43 Net Income Creating Social and Environmental Value (¥ billion) <Consideration for the Environment and Contribution to Job Creation in the World’s Largest Solar Salt Fields> Exportadora de Sal, S.A. de C.V. (ESSA), a salt manufacturer in which MC and the Mexican government have equity interests of 49% and 51%, respectively, operates the world’s largest solar salt fields. Supplying approximately half of the solar salt imported into Japan, ESSA has become Mexico’s leading exporter of salt and has also established a solid posi- tion as a company that supports Japan’s chlor-alkali business. In promoting ESSA’s business development, MC’s basic policies include considering the national interests of Mexico and employing locals in management as a matter of principle. 09.3 10.3 11.3 12.3 As a result, it has grown to the point where it is regarded as a blueprint for joint ventures (est.) between Japan and Mexico. Consideration is also always given to the surrounding ecosys- ■ 1Q ■ 2Q ■ 3Q ■ 4Q tem, and towards sustainable development in harmony with the environment and the local community. The community that has sprung up around ESSA employees now has a school, hospital, church, supermarket and other amenities. Moreover, the various jobs that ESSA [Main Positive and Negative Factors] has spawned have helped further contribute to the stability of the local community. Change Between Year Ended March 2009 and Year Ended March 2010 (Positive) • Lower share write-downs (investment impairments) • Higher equity-method earnings due to the reversal of deferred tax liabilities of a petrochemical business-related company Change Between Year Ended March 2010 and Year Ended March 2011 (Positive) • Higher earnings due to strong transac- tions at petrochemical business-related companies (Negative) • Absence of one-time gains from the previous fiscal year ESSA’s salt fields have an annual production capacity of approximately 7.5 million tons of solar salt. 55 Mitsubishi Corporation Annual Report 2011 Chemicals Group market, we will strive to deliver value. In deliver value to customers, and will support Commodity Chemicals Division A China and other growth markets especially, our long-term business growth. we plan to expand and enhance our flexible Oleﬁns & Aromatics Unit supply framework for both imported and domestically produced products, as we Petrochemical Intermediates Unit seek to grow our business further by devel- Polyester Unit oping within markets. Chlor-Alkali Unit Global Polyester Fiber Production (10 thousand tons) Commodity Chemicals Division B 3,500 Methanol Unit 3,000 Ammonia Unit METOR is a joint venture between MC, Venezuelan 2,500 state-owned company Pequiven, Mitsubishi Gas Chemical 2,000 Fertilizer Unit Company, Inc. and others. In the year ended March 2011, Inorganic Chemicals Unit METOR completed construction of an 850,000 ton/year 1,500 second facility adjoining an existing plant that is capable of 1,000 producing 750,000 tons of methanol a year. Commercial 500 Methanol Demand operations at the new facility began in August 2010. (10 thousand tons) 0 99 00 01 02 03 04 05 06 07 08 09 10 China Other countries In the Commodity Chemicals Division A, we trade raw materials for plastics and syn- thetic fibers, salt and caustic soda, among other commodities in the petrochemical and chlor-alkali fields. We also make investments to complement these transactions. 2009 2010 2011 (forecast) Demand for products in the year ended KPI is a joint venture between Indonesian and Japanese China Other countries March 2011 was solid as a whole. Polyester companies that can produce 500,000 tons of ammonia raw materials in particular saw rapid growth a year. It commenced operations in February 2002 as a base for securing basic raw materials for industry. in demand in China for use in textiles and In the Commodity Chemicals Division B, we PET bottles. trade chemical commodities such as metha- Demand is expected to continue increas- nol, ethanol, ammonia, chemical fertilizers ing, led by emerging markets. However, we and inorganic chemicals. We also make Functional Chemicals Division also expect to see major structural changes investments to complement these in the petrochemical industry and in distribu- transactions. Plastics Unit tion flows. These changes are being cata- Demand in the year ended March 2011 PVC Unit lyzed by the supply of products from the was firm overall. There was notable growth Middle East, which has a competitive in demand for methanol in particular in Functional Materials Unit advantage in terms of cost, and a notable China and other emerging markets. Specialty Chemicals Unit resurgence in the petrochemical industry in In our business domain, we are seeing Electronics Materials Unit North America on the back of shale gas growing demand in emerging markets and development. In response, we will leverage an increase in supply due to new facility Global PVC/PE Production Volume by Region our expansive worldwide network to grasp construction in various countries. These (10 thousand tons) changes in the business environment and market dynamics are leading to changes in customer needs, and by correcting imbal- the structure of the industry and in distribu- Polyvinyl chloride Polyethylene 10,000 ances between supply and demand in the tion flows. We are responding by bolstering our ability to correct imbalances in supply 8,000 and demand. One way we are doing this is by upgrading our logistics capabilities. 6,000 The mainstay products of this division are 4,000 those using natural resources as feedstocks such as natural gas, mining products, and 2,000 agricultural products. We expect these 0 resources to increase in scarcity primarily 08 09 10 11 12 13 14 08 09 10 11 12 13 14 because they are unevenly distributed China Middle East Other countries around the world. In addition to increasing Source: Report of Minister of Economy, Trade and the volume we procure in our trading activi- Industry AMSB is a joint venture between Japanese and Malay- ties, we will pursue opportunities to make Created in 2010 sian companies that is capable of producing 540,000 business investments in resource countries tons of paraxylene and 200,000 tons of benzene per and regions, and sign long-term purchasing This division conducts trading activities to year. It began operations in July 2000 as a base for agreements. These actions will ensure we strengthen and expand business chains basic materials for synthetic fibers and resin, where demand continues to increase. secure competitive products, so we can globally in the midstream and downstream 56 Mitsubishi Corporation Annual Report 2011 sections of the chemicals industry. Business on a consolidated basis to better serve business domains are food chemicals, chains extend from raw materials and other customer needs. pharmaceuticals and agrochemicals. materials used in plastics, functional In the year ended March 2011, we In emerging markets, people are increas- products and electronic materials fields, to acquired an equity interest in a Taiwanese ingly calling for a higher standard of living in materials and products. We also make company that makes wafers for solar cells, line with industrial development, and these investments to reinforce these activities. and jointly acquired a U.S. manufacturer of markets are expanding rapidly also as their In the year ended March 2011, demand resins for coatings and adhesives. In the populations grow. In developed countries increased in China and other emerging year ending March 2012, we will strengthen and China, meanwhile, low birthrates and markets. Furthermore, transactions of all and expand our business base and busi- aging populations are behind changing social products handled increased, including ness chain globally by actively making these needs, namely for government measures to plastics and vinyl chloride as we tapped into sorts of business investments. reduce medical expenses and a shift in the global economic recovery. mindset from treatment to prevention. We have seen some success following We believe that these changes will drive our motto of “Develop value-added materi- expansion in markets in terms of health, als on a global scale.” But in order to grow Life Sciences Division safety, comfort and good taste. Based on further, we will aggressively develop and this belief, we will capitalize on our chemical leverage competitive products, and our Bio- Fine Chemicals Unit and technological strengths as well as the ability to evaluate manufacturers’ technical inherent strength of a trading company Life Science Products Unit capabilities and cost competitiveness, in network to capture growth in global mar- addition to our overseas staff and group kets, targeting food chemicals, pharmaceu- employees of spin-offs and sales compa- Global Spending on Medicines ticals and agrochemicals. ($ billion) nies. Our goal is to strengthen our functions 2005 2010 2015 Since commencing operations in 2005, in a joint Source: IMS Market Prognosis, Apr 2011 Utech Solar is a joint venture with a major Taiwanese venture with Mitsubishi Shoji Food Tech Co., Ltd. in company, and manufactures solar-grade silicon wafers, Thailand, MTIS has been supplying the sweetener a base component of solar cells. In July 2011, produc- The Life Sciences Division was formed on maltitol mainly to major confectionery makers around tion commenced at a plant with a capacity of 330,000 April 1, 2011 as the Chemicals Group’s the world. Made from tapioca starch, this product is low KW. Plans call for this capacity to be increased to 1 calorie and helps prevent tooth decay. fourth division. This new division’s main million KW in the future. glycol producer. The petrochemical opera- cooperation with the Living Essentials Saudi Petrochemical Project tions of SPDC are one of the Chemicals Group, including Mitsubishi Shoji Pack- Unit Group’s most important businesses as a aging Corporation. source of raw materials in the upstream We plan to continue strengthening the Production Capacity Since SHARQ part of fields such as packaging, film, PET value chain from basic materials to fin- Operations Commenced resins and polyester fiber. ished products to capitalize on SHARQ’s (10 thousand tons/year) At SHARQ, since the completion of increased supply capacity. 200 third-stage expansion, which came on- stream in April 2010, output has nearly 150 doubled. MC sells the products pro- 100 duced by SHARQ to customers in China and elsewhere in Asia as well as Europe. 50 As part of measures to strengthen sales of resin, we are investing in film, plastic 0 bag and other processing businesses in 1987 1995 2001 2010 the downstream part of the value chain. 1st stage 2nd stage 3rd stage 4th stage In tandem with this, these cost-competi- Polyethylene Ethylene glycol tive products are imported and sold to Japanese users through our subsidiary After the completion of stage expansion, SHARQ has MC owns an equity interest of just over Mitsubishi Shoji Plastics Corp. in the the capacity to produce 2.5 million tons of ethylene, 1.55 million tons of polyethylene, and 1.4 million tons 30% in SPDC Ltd. which is a shareholder packaging materials value chain. In terms of ethylene glycol per year, almost double the existing in Eastern Petrochemical Co. (SHARQ), a of sales in Japan, we are working to capacity. SHARQ thus has the largest annual produc- Saudi Arabian polyethylene and ethylene expand transactions through close tion capacity for a single plant in the world. 57 Mitsubishi Corporation Annual Report 2011 Living Essentials Group Group CEO Message The Living Essentials Group works to procure and provide various earnings, the bottom-line result was largely unchanged because products and services for consumers in a stable manner centered of tax expenses associated with adopting the consolidated tax on the fields of foods, clothing and housing. Our core fields are filing system. food products and foods, textile products and essential supplies. We are also involved in the healthcare and marketing Business Environment and Outlook service fields. for Year Ending March 2012 The global supply-demand balance is changing due to limits on Midterm Corporate Strategy 2012 Targets and Progress the supply of resources. At the same time, structural changes During Midterm Corporate Strategy 2012, the Living Essentials are taking place in emerging markets, along with Japan, the Group is focusing on the following key strategies: (1) expanding U.S., Europe and other major markets. Eyeing these changes, and improving our raw materials procurement network, (2) we intend to strengthen our business platform extending from strengthening our Japan business base, and (3) targeting over- raw materials procurement to transportation and processing, seas growth markets. These strategies are guiding our efforts to and product distribution and sales. These platform revolve contribute to MC’s growth. around core subsidiaries and affiliated companies in each field. In terms of the first of these three strategies in the year While taking actions in line with the three key strategies I men- ended March 2011, we enhanced our ability to supply grains tioned earlier, we plan to allocate businesses resources to and raw materials for animal feed in the U.S. and Australia. enhance our procurement ability in foods and other fields, and Meanwhile, in China and Brazil, we established grain sales com- to expand businesses, centered on existing business investees, panies. These moves have expanded our business in terms of with the aim of augmenting our earnings power. In emerging both supply and sales. With regards to the second strategy, four markets such as China and Brazil, we will take steps to develop Mitsubishi Corporation food distribution wholesale subsidiaries across business domains where we are strong and work with signed a merger agreement, which culminated in the July 2011 leading partners to create new earnings platforms from which to launch of Mitsubishi Shokuhin Co., Ltd. In overseas growth drive growth. markets, Princes Limited, a U.K. subsidiary manufacturing food We are projecting net income of ¥55.0 billion for the year products and soft drinks, agreed with U.K.-based Premier ending March 2012, which would represent an ¥8.7 billion Foods plc to acquire its canning operations, thus making further increase year on year. This forecast factors in the absence of tax strides with business expansion. expenses recorded in the past fiscal year from adopting the Net income for the year ended March 2011 was ¥46.3 consolidated tax filing system. We also expect higher equity- billion, a decrease of ¥0.5 billion year on year. While general method earnings in food-related businesses. merchandise- and food-related businesses posted higher Toru Moriyama Executive Vice President, Group CEO, Living Essentials Group 58 Mitsubishi Corporation Annual Report 2011 Organizational Structure Living Essentials Group Living Essentials Group CEO Office Living Essentials Group Administration Dept. Living Essentials Group Information System Office Retail & Healthcare Div. Foods (Commodity) Div. Foods (Products) Div. Textiles Div. General Merchandise Div. Akira Murakoshi Morinobu Obata Takehiko Kakiuchi Osamu Miyashita Kunio Hishida No. of employees Division COO, Senior Vice President, Senior Vice President, Senior Vice President, Senior Vice President, Consolidated. . . . . . . . 24,161 General Merchandise Division COO, General Manager, Division COO, Division COO, Parent company . . . . . 888 Div. Textiles Div. Living Essentials Group Retail & Healthcare Div. Foods (Products) Div. CEO Office (Currently) No. of consolidated Division COO, subsidiaries and equity- Foods (Commodity) Div. method affiliates . . . . . . . 118 Net Income Creating Social and Environmental Value (¥ billion) <A Pulp Business That Coexists With the Local Community> Alpac Forest Products Inc., which is 70% owned by MC, produces wood pulp in Alberta, Canada. Since commencing operations in 1993, Alpac has championed a management policy of working to coexist in harmony with the local community and the natural environ- ment. It strives to minimize environmental impacts by using proper equipment and proac- tively implementing sophisticated environmental policies, while also engaging in continued dialogue and partnership with the local community. Moreover, the company works to pro- tect biodiversity and forest ecosystems by such measures as conducting ongoing monitor- ing of wildlife inhabiting the forest. As a result of these efforts, the Forest Stewardship Council (FSC)* has certified the company’s Forest Management Area since 2005. 09.3 10.3 11.3 12.3 Power for Alpac’s mill is generated by burning biomass, such as wood waste, created (est.) in the pulp production process. Surplus power is then supplied to the Alberta power grid ■ 1Q ■ 2Q ■ 3Q ■ 4Q as green energy. Alpac also actively employs local people. In these and other ways, it is working actively to coexist with the local community. * Forest Stewardship Council: One of the independent institutions that certifies forests around the world. It is a mem- [Main Positive and Negative Factors] bership-based not-for-profit organization jointly established by various environmental groups, concerned business Change Between Year Ended March representatives, citizens groups, forestry certification institutions and other parties. World Wildlife Fund (WWF), the 2009 and Year Ended March 2010 world’s largest environmental NGO, recommends FSC certification as the most trusted forestry certification. (Positive) • Lower share write-downs (investment impairments) Change Between Year Ended March 2010 and Year Ended March 2011 (Positive) • Higher earnings on transactions and equity-method earnings at general merchandise-related businesses • Higher equity-method earnings of food-related companies (Negative) • Tax expenses associated with adopting the consolidated tax filing system By using a logging method that replicates forest loss from a bush fire, forests are made to regenerate in a form close to the natural regeneration cycle. 59 Mitsubishi Corporation Annual Report 2011 Living Essentials Group China, Southeast Asia and elsewhere. At the Retail & Healthcare Division same time, the division is creating a stable supply of food by strengthening and expand- Pharmaceutical Business Unit ing its procurement capabilities. Healthcare Business Unit Retail Business Unit New Channel Development Unit Consumer Service Unit Medical Expenses of Japanese Citizens (¥ trillion) The multi-partner loyalty program “Ponta” was rolled out at all Kentucky Fried Chicken Japan stores nation- 34.1 34.8 wide on June 30, 2011. 32.1 33.1 33.1 A grain storage facility owned by AGREX, Inc. This MC Foods (Commodity) Division subsidiary is strengthening its procurement capabilities in the U.S. Produce Unit Grain Unit 2004 2005 2006 2007 2008 Marine Products Unit Foods (Products) Division Source: Ministry of Health, Labour and Welfare Sweetener & Starch Products Unit “Estimates of National Medical Care Oil & Fats Unit Beverage Materials Unit Expenditure 2010” Feed & Meat Business Unit Dairy Foods Unit The Retail & Healthcare Division was Processed Foods A Unit launched in April 2011 with the aim of gen- Changes in the demand for, production Processed Foods B Unit of, and ending stocks/use ratio for grain erating mutual synergies in responding to (Million tons, %) the retail and healthcare sectors. Japanese Processed Food Market The Japanese consumer market is 2,300 25 (¥ trillion) seeing consumer behavior change due to a low birthrate and aging population as 30.7 30.6 30.6 30.4 29.8 well as a prolonged economic downturn. 2,200 20 This change in a mature market is driving industry restructuring as companies battle 2,100 15 for survival. In the healthcare field, amid rising medical expenses for the citizens of Japan, a number of regulations are being 2,000 10 eased. This division intends to swiftly and 2007 2008 2009 2010 2011 (est.) (forecast) dynamically respond to this substantial ■ Demand ■ Production change in a challenging operating environ- ■■ Ending stocks/use ratio 2005* 2006* 2007* 2008* 2009* (est.) ment, to provide innovative products and Source: Changes in the Demand for, Production of, and services matching consumer needs, and Ending Stocks/Use Ratio for grain, Ministry of Source: Yano Research Institute Ltd., “Food Industry promote sales. Agriculture, Forestry and Fisheries (Updated 2010” June 10, 2011) * Fiscal year The division’s businesses are run ** Monetary value of manufacturer shipments through many subsidiaries and business This division handles grains, rice, fresh *** As of September, 2010 investees. These include convenience store produce, marine products, sweeteners and chain operator LAWSON, INC., supermar- starch products, oils and fats, feed and Utilizing an expansive network in Japan and ket chain Life Corporation, restaurant chain meat, and other products, and is developing overseas, this division responds to customers’ Kentucky Fried Chicken Japan Ltd., Ponta a business platform, extending from the varying needs, from the procurement of food multi-partner loyalty program operator procurement of raw materials to processing and beverage raw materials such as coffee, Loyalty Marketing, Inc., and mobile handset and manufacturing, and sales to the con- cocoa, juice and dairy products, to the sale of sales company T-Gaia Corporation. In the sumer market. Under the leadership of the processed foods and finished products. healthcare field, MC Healthcare, Inc., which division, the division and business investees, The consumer market in Japan is being provides outsourcing services for hospitals, which have various functions, are working radically altered by such factors as the is helping its customers across Japan with as one to meet the needs of society for the economic malaise the country is experienc- its cost-cutting efforts. stable supply of food, improving the food ing, a declining birthrate and aging popula- self-sufficiency ratio, safe and reliable food, tion, and diversification in consumer and more efficient production and logistics. preferences and values. In order to respond Demand continues to increase for food accurately and flexibly to the prevailing around the world due to economic growth market environment, we are refining our and population growth in emerging markets. business models in all sectors, from pro- Under these circumstances, the division is curement to processing, sales and interme- expanding business in Japan, while promot- diary distribution. These efforts are geared ing efforts to meet increasing demand in toward supporting the food products sector 60 Mitsubishi Corporation Annual Report 2011 as a vital part of everyday life. By expanding apparel, shoes, furniture and interior This division has three mainstay businesses: and enhancing our procurement capabili- furnishing goods, but also fiber, yarn, fabrics the paper-related business, the cement ties, we are ensuring ongoing stable sup- and high-function materials like optical fiber. business, and the tire business. In the plies and improving quality management. In the year ended March 2011, the paper-related field, we are developing an The division also provides comprehensive market underwent tumultuous change integrated business that extends from support to the consumer market. because of unseasonal weather, soaring upstream raw materials provided by pulp In July 2011, four food distribution resource prices, increased China-related producer Alpac Forest Products Inc. of wholesale subsidiaries (RYOSHOKU LIM- risk and other factors. In addition, consumer Canada and other entities, to the manufac- ITED, Meidi-ya Corporation, San-Esu Inc. spending on apparel continued to languish, ture of paper and paperboard through and Food Service Network Co., Ltd. (FSN)) exacerbating the tough business climate. downstream product distribution and sales merged to form Mitsubishi Shokuhin Co., Under these conditions, the division is work- handled by Mitsubishi Shoji Packaging Ltd. The new entity aims to optimize distri- ing to ensure the stable supply of products Corporation. In the cement business, we bution as a comprehensive food products matching diverse needs. At the core of this have a number of entities, including U.S.- wholesaler handling a full line of products. framework is MC Fashion Co., Ltd., an OEM based Mitsubishi Cement Corporation, MCC Overseas, our business investees are subsidiary. At the same time, we are making Development Corporation, and Yantai Mit- developing and expanding. One example is proposals, supporting overseas business subishi Cement Co., Ltd. in China, which Princes Limited, a U.K.-based food and and offering other comprehensive support are joint ventures with Mitsubishi Materials beverage manufacturer. This development to customers to expand business. In fast- Corporation. Cement sales in Japan are and expansion process is buttressing our growing China, we began developing a new conducted by Mitsubishi Shoji Construction businesses in Europe and the U.S., along business in the home furnishings sector with Materials Corporation, a comprehensive with emerging markets. partner companies. In the year ending construction materials trading company. Our March 2012, we will launch a joint venture tire business is conducted through joint apparel sales business in Thailand with Fast ventures in Europe, China and other Asian Retailing Co., Ltd., which is developing the countries. UNIQLO brand. Looking ahead, we will continue efforts By providing products and services imbu- to strengthen our businesses such as by ing even higher added value, we are intent capturing global growth in demand, and on meeting market and customer needs. carving out new businesses. One business doing just this is Cape Flattery Silica Mines Pty., Ltd. Wholly owned since 1978, this Australian subsidiary commands an over- whelming share of the market for silica sand for LCD substrate glass raw material. By bolstering its ability to supply raw material An expansive coffee plantation in Brazil. MC delivers traceable coffee around the world through a global for solar battery glass applications, where coffee network. demand is expected to expand, we aim to grow Cape Flattery Silica Mines as a core business over the coming years. Textiles Division MC Fashion holds exhibitions twice a year as a forum Textile Business Unit for communicating design concepts and information to customers. S.P.A. Development Unit Apparel Retail Sales Market by Channel General Merchandise Division (¥ trillion) 10.2 10.3 10.3 9.8 Living Materials Unit 9.1 Paper & Packaging Unit Housing & Construction Materials Unit The world’s largest silica-sand mine, Cape Flattery Silica Mines, produces high-quality silica sand, while giving the highest priority to environmental considerations. Global Consumption of Paper-Grade Market Pulp (million tons) 54.8 54.6 56.6 53.0 53.9 2005 2006 2007 2008 2009 ■ Department stores ■ General Merchandise Stores ■ Specialty stores ■ Others Source: Ministry of Economy, Trade and Industry, “Yearbook of the Current Survey of Commerce”, Yano Research Institute, Ltd., “Textile Industry 2011” This division handles wide-ranging products 2007 2008 2009 2010 2011 in Japan and overseas. We handle not only (forecast) lifestyle-related products such as fashion Source: RISI 61 Mitsubishi Corporation Annual Report 2011 Global Strategy Message From Senior Executive Vice President, Global Strategy & Business Development MC has designated China, India and Brazil as Strategic Regions (North America, Latin America, Europe-CIS, Middle East & Africa, under Midterm Corporate Strategy 2012 unveiled in July 2010, East Asia, and Asia & Oceania), and assigned a Regional CEO to capturing fast-growing economies in emerging markets for build- each. Each Regional CEO is endeavoring to ensure that optimal ing MC’s future earnings drivers. activities are conducted on a consolidated basis within their MC is aware that it needs to enter these markets proactively. respective regions. We will therefore be investing heavily in both financial and human By adopting this framework, MC will improve the dissemina- resources in these regions. Specifically, 100-200 billion yen will tion of information from each region, including Japan, with the be invested during the Midterm Corporate Strategy 2012 period goal of developing a more sophisticated global strategy on a through to March 2013. consolidated basis. We have also strengthened our support systems in each local office, and introduced companywide promotion measures in order to identify and develop new projects across our business spectrum. Given this regional strategic approach, MC has adopted a new global management structure with the aim of gaining a Hideto Nakahara Member of the board, thorough understanding of local conditions and thereby enabling Senior Executive Vice President, better-informed management decisions. Specifically, in addition Global Strategy & Business Development to Japan, we have mapped out overseas into five key regions Structure to Promote Companywide Global Strategies President and CEO Senior Executive Vice President, Global Strategy & Business Development Regional CEO, Europe-CIS, EVP, Regional Regional Middle East & Africa Regional Regional Regional CEO, CEO, CEO, CEO, Strategy North Latin Europe- CRO, CRO, Asia & Middle East Asia (Japan) America America CIS Africa Oceania East Office GMs Office GMs Office GMs Office GMs Office GMs Office GMs Office GMs Office GMs 62 Mitsubishi Corporation Annual Report 2011 East Asia Japan Economic ties in East Asia have strength- The structure of industry is changing in ened considerably in recent years. Attentive Japan as the country’s economy has to the rapidly growing demand in China, MC matured, and companies are increasingly has taken strides to expand its business in looking to develop business overseas. The this market, and is working more closely with Great East Japan Earthquake may in fact leading Chinese, South Korean, and Taiwan- accelerate these moves. ese enterprises to create new businesses In response, MC’s branches and offices in around the world. Japan will diversify the roles they play, includ- ing drawing on MC’s collective capabilities Masahide Yano Yasuo Nagai through cooperation with MC Group compa- Member of the Board, Member of the Board, nies. In this way, we will solidify our business Senior Executive Vice President, Executive Vice President, platform and, at the same time, work to Regional CEO, East Asia Regional Strategy (Japan) create new business opportunities. North America Europe-CIS, Middle East & Africa The U.S., Canada and Mexico have close Europe-CIS economic ties and following the 2008 finan- cial crisis are starting to benefit from a broader-based recovery which is gaining MC is strengthening its core operations. In momentum. The U.S. economy continues to Western Europe, this is being done primarily play a central role in the global economy, through the Metals, Machinery, Chemicals, driving innovation across many industries. and Living Essentials business groups. Canada’s strength is underpinned by its Meanwhile in Central and Eastern Europe, surging resource sector, while Mexico offers Turkey, Russia, and other regions, MC is also Seiei Ono great potential in infrastructure development Tetsuro Terada responding to consumer market trends and Executive Vice President, and as a consumer market of over 100 Executive Vice President, significant infrastructure demand. MC is Regional CEO, million people. MC is striving to build on its Regional CEO, taking further action to promote renewable North America existing businesses and remains focused on Europe-CIS, Middle East & Africa energy businesses like solar photovoltaic, creating new businesses in infrastructure, solar thermal, and wind power, as well as environmental and new energy fields. electric vehicle and next-generation battery businesses. MC remains steadfast in its efforts to solidify relations with leading enterprises throughout Europe & CIS. Latin America Middle East Latin America boasts abundant reserves of Our focus in the Middle East is on three metals, energy and food resources, and points: the overwhelming competitive growth in its consumer markets has been advantage in energy resource reserves, extraordinary. MC looks to unearth business robust infrastructure demand, and the opportunities that can exploit demand within expanding consumer market. In addition to Latin America, spanning not only resource trading oil and gas, developing energy and fields, but infrastructure projects as well. MC resources businesses, engaging in power is also working to bolster activities in new plant, water, transportation and other energy, water, and other environmental infrastructure projects, and developing Seiji Shiraki fields, where efforts nowadays are essential Shigeaki Yoshikawa business in environmental fields, we are Executive Vice President, to the company’s harmonious co-existence Senior Vice President, engaged in trading activities for automo- Regional CEO, with society. Further action is being taken to Chief Regional Officer, biles, chemical products and general mer- Latin America strengthen MC’s approach to Corporate Middle East chandise, as well as leasing operations. At Social Responsibility (CSR). the same time, MC is pursuing new invest- ments in a wide range of industries. Asia & Oceania Africa In Asia & Oceania, where economic growth In addition to developing commercial trans- continues, MC is promoting infrastructure actions in automobiles, general merchandise, projects and businesses that address the foods, chemical raw materials and other region’s ever-growing internal demand. MC is products in a growth market with 1.0 billion also stepping up operations in resource and people, MC is active in infrastructure devel- energy fields, and strengthening activities in opment, which will be essential to regional the environmental, new energy, and agricul- growth. MC is also focusing on viable green- ture sectors. The company will continue to field and brownfield projects that may come deepen its affiliations with important custom- to fruition in the future, the aim being to Masayuki Mizuno ers and devise ways to expand its Haruki Hayashi bolster its holdings of metals and energy Executive Vice President, businesses. Senior Vice President, resources. The company has made great Regional CEO, Chief Regional Officer, progress in its ODA and CSR activities as Asia & Oceania Africa well, helping to build and contribute to sustainable local communities. 63 64 3002CM E U L A V E TA E R C O T N E V I R D -eerht a slievnu noitaroproC ihsibustiM ,3002CM — nalp tnemeganam raey hguorht 1002 ,1 lirpA doirep eht rof ?wonK uoY diD ?wonK uoY diD mutnemoM gniniaG 4002 ,13 hcraM .napaJ ni sdnert cimonoce ot tsartnoc krats ni gnidnats ,3002 lacsif ni sgninrae eroc hgih emit-lla detsop CM .1 si htworg s’CM dniheb ecrof gnivird ehT .3 .htworg sgninrae erom rof srallip cigetarts gnidda si CM .2 seuqinhcet tnemeganam ksir suoirav gnisu m rofe r teehs ecnalaB . 4 .noitavonni ledom ssenisub sseltnele r .CM ta emeht gniogno na si I ilk T T T T seussI gnilkcaT htworG sgninraE deniatsuS rof 7002 NOITAVONNI arE weN A pU gninepO sU tuobA stcaF yeK erom dna... sU tuobA stcaF yeK erom dna... 2002 tropeR launnA 2002 ,13 HCRAM DEDNE RAEY EHT ROF 5002 tropeR launnA 5002 ,13 hcraM dedne raey eht rof 4002 tropeR launnA 4002 ,13 hcraM dedne raey eht rof 3002 ,13 hcraM dedne raey eht rof 3002 t ropeR launnA 1002 ,13 hcraM dedne raey eht roF 1002 tropeR launnA Annual Report 2003 for the year ended March 31, 2003 Annual Report 2001 For the year ended March 31, 2001 for the year ended March 31, 2004 Annual Report 2004 for the year ended March 31, 2005 Annual Report 2005 FOR THE YEAR ENDED MARCH 31, 2002 Annual Report 2002 Key Facts About Us ...and more Opening Up A New Era Earnings Growth for Sustained INNOVATION 2007 is an ongoing theme at MC. Tackling Issues relentless business model innovation. 4. Balance sheet reform using various risk management techniques 2. MC is adding strategic pillars for more earnings growth. 3. The driving force behind MC’s growth is 1. MC posted all-time high core earnings in fiscal 2003, standing in stark contrast to economic trends in Japan. March 31, 2004 for the period April 1, 2001 through year management plan — MC2003, Did You Know? Gaining Momentum Mitsubishi Corporation unveils a three- DRIVEN TO CREATE VALUE MC2003 Management Annual Report 2011 Mitsubishi Corporation Mitsubishi Corporation Annual Report 2011 This section includes management information such as Mitsubishi Corporation’s history, management philosophy and management structure, as well as stock information for shareholders. Annual Report 2009 Annual Report 2010 for the year ended March 31, 2010 for the year ended March 31, 2009 No Matter How the World Is Changing, Creating Sustainable Corporate Value A “Step” Toward Sustained What is MC’s Value ? Earnings Growth Annual Report 2006 for the year ended March 31, 2006 6002 ,13 hcraM dedne raey eht rof 6002 tropeR launnA Rl A 6002 tropeR launnA ht G g i E htworG sgninraE deniatsuS drawoT ”petS“ A s’CM si tahW ? eulaV i hC I dl W ht H ,gnign ahC sI dlroW eht woH eulaV etaroproC elbaniatsuS gnitaerC rettaM oN 9002 ,13 hcraM dedne raey eht rof Corporate Profile / Corporate History . . . . . . . . . . . . . . . . . . . . . . . . . . 66 0102 ,13 hcraM dedne raey eht rof 9002 t ropeR launnA 0102 t ropeR launnA Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Global Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Principal Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 65 Mitsubishi Corporation Annual Report 2011 corporate profile / corporate history Mitsubishi Corporation (MC) is a global integrated business enterprise that develops and operates businesses across virtually every industry including industrial ﬁnance, energy, metals, machinery, chemicals, foods, and environmental business. MC’s current activities are expanding far beyond its traditional trading operations as its diverse business ranges from natural resources development to investment in retail business, infrastructure, ﬁnancial products and manufacturing of industrial goods. With a presence in approximately 80 countries worldwide and a network of over 500 group companies, MC employs a multinational workforce of nearly 60,000 people. Corporate Philosophy—Three Corporate Principles Corporate Responsibility to Society “Shoki Hoko” Strive to enrich society, both materially and spiritually, while contributing towards the preserva- tion of the global environment. Integrity and Fairness “Shoji Komei” Maintain principles of transparency and openness, The Three Corporate Principles were formulated in 1934, as the action conducting business with guidelines of Mitsubishi Trading Company (Mitsubishi Shoji Kaisha), integrity and fairness. based on the teachings of Koyata Iwasaki, the fourth president of Mit- subishi. Although Mitsubishi Trading Company ceased to exist as of Global Understanding through 1947, the principles were adopted as MC’s corporate philosophy, and Business “Ritsugyo Boeki” this spirit lives on in the actions of today’s management and employees. Expand business, based on an all- The Three Corporate Principles also serve as the cornerstone of the encompassing global perspective. management ethos of the so-called Mitsubishi group of companies. Active in many business ﬁelds and united by a common history and (The modern day interpretation of the Three Corporate Principles, as agreed on at the philosophy, the Mitsubishi group companies continue to grow through a Mitsubishi Kinyokai meeting of the companies strong spirit of friendly competition with one another. that constitute the so-called Mitsubishi group in January 2001.) Corporate History In 1954 the new Mitsubishi Shoji was founded, and that same year was listed on In 1992, MC announced a new management policy: namely to both the Tokyo and Osaka stock exchanges. In 1967, the company announced reinvent the company as a “Sound, Global Enterprise.” MC began its ﬁrst management plan. In 1968, the company committed to a large project in placing greater focus on its consolidated operations and increasing Brunei to develop LNG (liqueﬁed natural gas). This was its ﬁrst large-scale the value of its assets. More efforts were made to globalize the investment. Not content with mere trade-based activities, the company began company’s operations and its people. In 1998, MC established expanding its development and investment-based businesses on a global scale, “MC2000” which introduced a “Select & Focus” approach to as evidenced by iron-ore and metallurgical coal projects in Australia and Canada, business, strengthened strategic ﬁelds, and emphasized customer- and salt ﬁeld business in Mexico. In 1971, the company made “Mitsubishi oriented policies. The new plan was instrumental in shoring up the Corporation” its ofﬁcial English name. company’s foundations and paving the way to a prosperous future. Foundation to 1970s The 1980s The 1990s Into the New Millennium MC needed to construct new systems to In 2001, MC introduced “MC2003”, an aggressive new blueprint for growth, involving an expansion of the com- generate proﬁts. The company began pany’s value chains, a strengthening of its proﬁtability, and focused strategies to create new businesses. In 2004, streamlining its established businesses and “INNOVATION 2007” was unveiled which sought to establish MC as a “New Industry Innovator,” with an aim to developing more efﬁcient operations. In 1986 open up a new era and grow hand in hand with society. In 2007, MC newly established the Business Innovation the company ﬁrmly entrenched a new policy, Group and Industrial Finance, Logistics & Development Group. Then, in 2008, MC announced its management shifting its focus from operating transactions plan, “INNOVATION 2009.” In 2009, MC systematically reorganized the Business Innovation Group and established to proﬁts. That same year a new manage- its Corporate Development Section. In April, 2010, MC reorganized and enhanced this section through the ment plan was drawn up. In 1989, MC was establishment of two new Groups, the Global Environment Business Development Group and Business Service listed on the London Stock Exchange. Group. In July 2010, MC announced a new management plan, “Midterm Corporate Strategy 2012.” 66 Mitsubishi Corporation Annual Report 2011 organizational structure (As of July 1, 2011) General Meeting of Industrial Finance, Logistics & Shareholders Development Group CEO Office Industrial Finance, Logistics & Industrial Finance, Development Group Administration Dept. Logistics & Real Estate Investment & Management Unit Corporate Auditors Corporate Auditors’ Office Development Group Asset Finance & Business Development Div. Development & Construction Project Div. Board of Corporate Auditors Logistics Div. Governance & Compensation Committee Board of Directors Energy Business Group CEO Office International Advisory Energy Business Group Administration Dept. Committee Exploration & Production Unit Natural Gas Business Div. A Energy Business Group Natural Gas Business Div. B Internal Audit Dept. Corporate Planning Dept. Petroleum Business Div. President Carbon & LPG Business Div. Executive Committee Corporate Staff Section Metals Group CEO Office Metals Group Administration Dept. Administration Dept. of Corporate Section Metals Group Steel Business Div. Chief Compliance Officer SEVP, CSR & Corporate Communications Ferrous Raw Materials Div. Environmental Affairs Dept. Non-Ferrous Metals Div. SEVP, MC Group Corporate Administration Dept. Management Foundations CSR & Environmental Development Affairs Dept. Chief Information Officer Legal Dept. Machinery Group CEO Office Compliance Dept. Human Resources Machinery Group Administration Dept. Management Dept. Power & Electrical Systems Div. Business Development Center for Human Committee Resources Development Machinery Group Infrastructure Project Div. Disclosure Committee Corporate Strategy & Ship & Aerospace Div. Compliance Committee Research Dept. Motor Vehicle Business Div. CSR & Environmental Affairs Committee Global Strategy & Coordination Dept. Isuzu Business Div. Human Resources Development Committee Corporate Accounting Dept. Risk Management Dept. Secretariat to the Investment Chemicals Group CEO Office Advisory Committee Finance Dept. Chemicals Group Administration Dept. Structured Finance, Phoenix Unit M&A Advisory Dept. Saudi Petrochemical Project Unit Investor Relations Dept. Chemicals Group Commodity Chemicals Div. A Commodity Chemicals Div. B Business Service Group Functional Chemicals Div. Life Sciences Div. Business Service Group CEO office IT Service Business Div. MC Group IT Management Living Essentials Group CEO Office Div. Logistics Management Dept. Living Essentials Group Administration Dept. Living Essentials Group Information System Office Retail & Healthcare Div. Global Environment Business Living Essentials Group Development Group Foods (Commodity) Div. Foods (Products) Div. Global Environment Business Development Textiles Div. Group CEO Office General Merchandise Div. New Energy & Power Generation Div. Environmental & Water Business Div. 67 Mitsubishi Corporation Annual Report 2011 global network (As of June 1, 2011) Including its ofﬁces in Japan, MC has more than 200 bases of operations in 80 countries around the world. Mitsubishi Corporation (Head Ofﬁce) Overseas Ofﬁces Subsidiaries Head Ofﬁce Overseas Network (194 bases of operations, including 116 ofﬁces, 40 subsidiary headquarters, and 38 branches) Tokyo North America Latin America Europe Mitsubishi International Africa Ofﬁces G.m.b.H. Subsidiaries Ofﬁces Ofﬁces Düsseldorf Mitsubishi International Guatemala City Oslo Johannesburg Domestic Corporation Frankfurt Network (32) San Salvador Prague Dakar New York Berlin Quito Stockholm Casablanca San Francisco Munich Sapporo La Paz Warsaw Abidjan Seattle Brussels Asunción Bucharest Algiers Sendai Silicon Valley Mitsubishi Italia S.p.A. Beograd Tunis Los Angeles Subsidiaries Milano Nagoya Soﬁa Maputo Houston Mitsubishi International, S.A. Mitsubishi Hellas A.E.E. Niigata Istanbul Nairobi Chicago Panama City Athens Ankara Dar es Salaam Toyama Washington, D.C. Mitsubishi Peru S.A. MC Europe Holdings N.V. Dallas Lima Subsidiaries London Subsidiaries Shizuoka Mitsubishi Colombia Ltda. Pittsburgh Mitsubishi Corporation Mitsubishi Shoji Kaisha, Osaka Bogotá International (Europe) Plc. (Nigeria) Ltd. Boston CIS Mitsubishi Chile Ltda. London Lagos Takamatsu Tucson Ofﬁces Santiago Las Palmas Mitsubishi Ethiopia Trading Mitsubishi Canada Ltd. Moscow Hiroshima Mitsubishi Venezolana C.A. (Spain) Private Limited Company Vancouver Kiev Caracas Mitsubishi España S.A. Addis Ababa Fukuoka Toronto Yuzhno-Sakhalinsk Puerto Ordaz Madrid Oita Mitsubishi de Mexico S.A. Baku de C.V. Mitsubishi Argentina Mitsubishi France S.A.S. Tashkent Nagasaki Mexico City S.A.C. y R. Paris Astana Buenos Aires Mitsubishi Nederland B.V. Naha Almaty Mitsubishi Corporation do Amsterdam Brasil, S.A. 19 annexed ofﬁces in São Paulo addition to the above Rio de Janeiro Belo Horizonte 68 Mitsubishi Corporation Annual Report 2011 Number of Consolidated Subsidiaries and Equity-Method Afﬁliates by Operating Segment (As of March 31, 2011) No. of Consolidated Subsidiaries and Equity-Method Afﬁliates Industrial Finance, Logistics & Development Group 80 Energy Business Group 70 Metals Group 24 Machinery Group 126 Chemicals Group 43 Living Essentials Group 118 Global Environment Business Development Group 28 Business Service Group 6 Corporate Staff Section 13 Regional Subsidiaries 40 Total 548 Number of employees at parent company and all of its consolidated subsidiaries: 58,470 (As of March 31, 2011) Number of employees at parent company alone: 5,665 (As of March 31, 2011) Companies afﬁliated with subsidiaries are not included in the number of consolidated subsidiaries and equity-method afﬁliates. Middle East Asia Ulaanbaatar PT. MC Indonesia Mitsubishi Corporation Oceania Beijing Jakarta (Hong Kong) Ltd. Ofﬁces Ofﬁces Ofﬁces Chengdu Surabaya Hong Kong Tripoli Karachi Noumea Chongqin Mitsubishi Corporation Xiamen Cairo Islamabad Subsidiaries Guangzhou China Co., Ltd. Shenzhen Tel Aviv Lahore Mitsubishi Australia Ltd. Qingdao Shanghai Mitsubishi Corporation Ramallah New Delhi (Taiwan) Ltd. Melbourne Shanghai Mitsubishi Corporation Amman Mumbai China Commerce Co., Ltd. Taipei Sydney Dalian Riyadh Kolkata Beijing Mitsubishi Corporation Perth Shenyang Jeddah Chennai Mitsubishi Corporation (Korea) Ltd. Brisbane Al Khobar Bangalore Subsidiaries (Guangzhou) Ltd. Seoul Mount Waverley Doha Colombo Mitsubishi Corporation Guangzhou Kwangyang Mitsubishi New Zealand Ltd. Abu Dhabi Dhaka India Pvt. Ltd. Mitsubishi Corporation Pohang Auckland Dubai Yangon New Delhi (Tianjin) Ltd. Dangjin Muscat Kuala Lumpur Chennai Tianjin Vientiane Mumbai Mitsubishi Corporation Subsidiaries (Qingdao) Ltd. Bintulu Kolkata Al-Masat Al-Thalath Trading Qingdao Singapore Mitsubishi Company Company (Mitsubishi) K.S.C. Mitsubishi Corporation Phnom Penh (Thailand), Ltd. Kuwait (Shanghai) Ltd. Hanoi Bangkok Mitsubishi International Shanghai Ho Chi Minh City Haadyai Corp. (Iran), Ltd. Nanjing Jakarta Thai MC Company Ltd. Tehran Mitsubishi Corporation Surabaya Bangkok Mitsubishi Corporation (Dalian) Ltd. Trading Middle East F.Z.E. Bandar Seri Begawan Haadyai Dalian Dubai (Brunei) Sinar Berlian Sdn. Bhd. Manila Kuala Lumpur 33 project ofﬁces in addition to the above 69 Mitsubishi Corporation Annual Report 2011 principal subsidiaries and affiliates (As of March 31, 2011) Business Service Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Bewith, Inc. (Japan) 100.00 Outsourcing service provider (Contact Center) IT Frontier Corporation (Japan) 100.00 IT-related business solutions, system integration services, IT management services and product marketing, etc. Global Environment Business Development Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Diamond Generating Asia, Limited (Hong Kong) 100.00 Independent power producer Diamond Generating Corporation (U.S.A.) 100.00 Independent power producer TeaM Diamond Holding Corporation (Philippines) 51.21 Independent power producer <Equity-method afﬁliates> Amper Central Solar, S.A. (Portugal) 34.40 Solar photovoltaic energy Curaçao Energy Company, Ltd. 50.00 Independent power producer (Cayman Islands, British overseas territory) Electricidad Aguila de Tuxpan, S. de R.L. de C.V. 50.00 Independent power producer (Mexico) Frontier Carbon Corporation (Japan) 50.00 Production and sales of fullerenes Industrial Finance, Logistics & Development Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Alternative Investment Capital Ltd. (Japan) 51.00 Investment management business Diamond Realty Investments, Inc. (U.S.A.) 100.00 Real estate investment Diamond Realty Management Inc. (Japan) 100.00 Real estate asset management and investment advisory Healthcare Management Partners, Inc. (Japan) 66.00 Investment management business Lifetime Partners, Inc. (Japan) 100.00 Management support for hospitals and nursing care providers MC ASSET MANAGEMENT (Japan) 100.00 Financial instruments dealing business MC Aviation Financial Services (Europe) B.V. 100.00 Aircraft leasing and ﬁnance (The Netherlands) MC Aviation Partners Inc. (Japan) 100.00 Aircraft leasing and management services MC Capital Europe Ltd. (U.K.) 100.00 Investment and related activities MC Capital Inc. (U.S.A.) 100.00 Investment and related activities MC Finance International B.V. (The Netherlands) 100.00 Financial investment company MC Financial Services Ltd. (U.S.A.) 100.00 M&A advisory and private equity investment MC Terminal Co., Ltd. (Japan) 100.00 Tankyard operation Mcap Europe Limited (Ireland) 100.00 Aircraft leasing and management services Mitsubishi Corporation Insurance Co., Ltd. (Japan) 100.00 Insurance agency Mitsubishi Corporation LT, Inc. (Japan) 100.00 Warehousing and total logistics services Mitsubishi Corp.-UBS Realty Inc. (Japan) 51.00 Investment management business New Century Insurance Co., Ltd. 98.80 Insurance business (Bermuda, British overseas territory) Port South Aircraft Leasing Co., Ltd. (Japan) 100.00 Aircraft leasing and ﬁnance Red Diamond Capital Partners, LP (U.S.A.) 100.00 Investment fund Seto Futo Co., Ltd. (Japan) 61.65 Dry bulk terminal business and warehousing business TRM Aircraft Leasing Co., Ltd. (Japan) 100.00 Aircraft leasing and ﬁnance Yebise Limited (Cayman Islands, British overseas territory) 100.00 Aircraft leasing and ﬁnance Zonnet Aviation Financial Services Co., Ltd. (Japan) 100.00 Aircraft leasing and ﬁnance <Equity-method afﬁliates> Mitsubishi Auto Leasing Holdings Corporation (Japan) 50.00 Auto leases, installment sales and other ﬁnancial services through subsidiaries Mitsubishi UFJ Lease & Finance Company Ltd. (Japan) 20.00 Leasing, installment sales, other ﬁnancing Mitsubishi Ore Transport Co., Ltd. (Japan) 40.28 Operation and chartering of bulkers for coking coal, iron ore, automobiles and other products Energy Business Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Ajoco Exploration Co., Ltd. (Japan) 55.00 Development and production of oil in Angola Ajoco’91 Exploration Co., Ltd. (Japan) 55.00 Development and production of oil in Angola Angola Japan Oil Co., Ltd. (Japan) 51.00 Exploration, development and production of oil in Angola Cordova Gas Resources Ltd. (Canada) 100.00 Development and production of shale gas in Canada Diamond Gas Resources Pty. Ltd. (Australia) 100.00 Sales agent of JALP crude oil and condensate Diamond Gas Sakhalin B.V. (The Netherlands) 100.00 Stockholding company for Sakhalin II project in Russia Diamond Tanker Pte. Ltd. (Singapore) 100.00 Marine transportation, etc. MC Energy, Inc. (Japan) 100.00 Marketing and sales of asphalt and petroleum products MCX Exploration (USA) Ltd. (U.S.A.) 100.00 Exploration, development and production of oil and natural gas 70 Mitsubishi Corporation Annual Report 2011 Mitsubishi Shoji Sekiyu Co., Ltd. (Japan) 100.00 Marketing and sales of petroleum products MPDC Gabon Co., Ltd. (Japan) 100.00 Exploration, development and production of oil in Gabon Onahama Petroleum Co., Ltd. (Japan) 80.00 Oil import, storage and sales as well as land and facility leasing Paciﬁc Orchid Shipping S.A. (Panama) 100.00 Ownership of tankers for transporting crude and heavy oil Petro-Diamond Inc. (U.S.A.) 100.00 Marketing and sales of petroleum products Petro-Diamond Singapore (Pte) Ltd. (Singapore) 100.00 Marketing and sales of petroleum products <Equity-method afﬁliates> Astomos Energy Corporation (Japan) 49.00 Import, trading, domestic distribution and sales of LPG Brunei LNG Sendirian Berhad (Brunei) 25.00 Manufacturing and sales of LNG Brunei Shell Tankers Sendirian Berhad (Brunei) 25.00 Ownership of LNG tankers Encore Energy Pte. Ltd. (Singapore) 39.40 Stockholding company for P.T. Medco Energi Internasional (Indonesia) Energi Mega Pratama Inc. (Indonesia) 25.00 Exploration, development, and production of oil and natural gas in Indonesia Japan Australia LNG (MIMI) Pty. Ltd. (Australia) 50.00 Development and sales of resources (LNG, LPG, condensate and crude oil) Metals Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Hernic Ferrochrome (Pty) Ltd. (Republic of South Africa) 50.98 Mining of chrome ore, production and sales of ferrochrome JECO Corporation (Japan) 70.00 Investment company for Minera Escondida Ltda. copper mines in Chile M.C. Inversiones Limitada (Chile) 100.00 Investment company for Chilean iron ore mines MC Copper Holdings B.V. (The Netherlands) 100.00 Investment company for Los Pelambres copper mine in Chile MC Iron Ore Sales Inc. (U.S.A.) 100.00 Partner in partnership (IOC OS) selling Iron Ore Company of Canada iron ore Metal One Corporation (Japan) 60.00 Steel products operations Mitsubishi Development Pty Ltd (Australia) 100.00 Investment, production and sales of coals and other metals resources Mitsubishi Corporation Unimetals Ltd. (Japan) 100.00 Metal trading company Ryowa Development Pty., Ltd. (Australia) 100.00 Investment company for BOYNE aluminum smelter and sales of aluminum Ryowa Development II Pty., Ltd. (Australia) 100.00 Investment company for BOYNE aluminum smelter and sales of aluminum Triland Metals Ltd. (U.K.) 100.00 Commodity broker on the London Metal Exchange (LME) Triland USA Inc. (U.S.A.) 100.00 Commodity broker <Equity-method afﬁliates> Compania Minera del Paciﬁco S.A. (Chile) 25.00 Iron ore production and sales Iron Ore Company of Canada (Canada) 26.18 Iron ore production and sales Mozal S.A.R.L. (Mozambique) 25.00 Production and sales of aluminum ingots NIKKEI MC ALUMINIUM CO., LTD. (Japan) 45.00 Manufacturing and sales of secondary aluminum alloy ingots <Metal One Subsidiaries> Isuzu Corporation (Japan) 56.60 Steel processing and sales Kyushu Steel Corporation (Japan) 55.00 Steel (building materials) manufacturing Kyushu Steel Center Co., Ltd. (Japan) 55.29 Steel (thick plates) processing MC Metal Service Asia (Thailand) Co., Ltd. (Thailand) 100.00 Steel processing and sales Metal One Holdings America, Inc. (U.S.A.) 80.00 Holding company of steel processing and sales business Metal One SSS West Japan, Ltd. (Japan) 100.00 Steel (building materials) processing and sales Metal One Ryowa Corporation (Japan) 100.00 Steel processing and sales Metal One Specialty Steel Corporation (Japan) 100.00 Special steel processing and sales Metal One Stainless (Asia) Pte. Ltd. (Singapore) 91.70 Steel (stainless) processing and sales Metal One Steel Service Corporation (Japan) 67.33 Steel processing and sales Metal One Structural Steel & Resource Corporation (Japan) 100.00 Steel (building materials) processing and sales OTOFUJI Corporation (Japan) 100.00 Sales of steel pipes and accessories Sus-Tech Corporation (Japan) 64.48 Steel (stainless) processing and sales Tamatsukuri Corporation (Japan) 97.31 Steel (thick plates) processing and sales <Metal One Equity-method afﬁliates> Koho CD Bars Service Center Co., Ltd. (Japan) 33.33 Steel (cold ﬁnished steel bars, special steel, etc.) sales M.O. TEC CORPORATION (Japan) 41.49 Construction materials rentals and sales Sanwa Tekko Co., Ltd. (Japan) 33.41 Steel processing and sales Siam Hi-Tech Steel Center Co., Ltd. (Thailand) 50.00 Steel processing and sales Machinery Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Auto Technic (Thailand) Co., Ltd. (Thailand) 100.00 Automobile maintenance Constructora Geotermoelectrica Del Paciﬁco, S.A. de C.V. 100.00 Construction and leasing of power plants (Mexico) Diamond Camellia S.A. (Panama) 100.00 Ship owning and chartering Diamond Power Corporation (Japan) 100.00 Electricity retailing Isuzu Operations (Thailand) Co., Ltd. (Thailand) 80.00 Distribution of automobiles MAC Funding Corporation (U.S.A.) 100.00 Industrial machinery sales ﬁnance MC Automobile (Europe) N.V. (The Netherlands) 100.00 Automobile-related business 71 Mitsubishi Corporation Annual Report 2011 MC Machinery Systems, Inc. (U.S.A.) 100.00 Sales and service of machine tools and industrial machinery Mitsubishi Corporation Power Systems, Inc. (Japan) 100.00 Domestic & Import sales of power plant equipment & services MCE Bank GmbH (Germany) 100.00 Automobile ﬁnance Mitsubishi Corporation Machinery, Inc. (Japan) 100.00 Export, import and domestic trading of machine parts Mitsubishi Corporation Technos (Japan) 100.00 Sales of machine tools and industrial machinery Mitsubishi Motors Malaysia Sdn. Bhd. (Malaysia) 52.00 Distribution of automobiles MMC Automoviles Espana S.A. (Spain) 75.00 Distribution of automobiles MMC Car Poland Sp. z o.o. (Poland) 100.00 Distribution of automobiles MSK FARM MACHINERY CORPORATION (Japan) 100.00 Sales and service of agricultural machinery and facilities Nikken Corporation (Japan) 96.83 Rental and sales of construction machinery and other equipment Norelec Del Norte, S.A. de C.V. (Mexico) 100.00 Construction and leasing of power plants Orient Gas Transport Inc. (Liberia) 100.00 Ship ﬁnance PT. Dipo Star Finance (Indonesia) 85.00 Automobile ﬁnance Spitalgate Dealer Services Ltd. (U.K.) 100.00 Automobile ﬁnance The Colt Car Company Ltd. (U.K.) 100.00 Distribution of automobiles Tri Petch Isuzu Leasing Co., Ltd. (Thailand) 93.50 Automobile ﬁnance Tri Petch Isuzu Sales Co., Ltd. (Thailand) 88.73 Distribution of automobiles <Equity-method afﬁliates> Chiyoda Corporation (Japan) 33.74 Plant engineering business FF Sheffe B.V. (The Netherlands) 40.00 Automobile-related holding company Isuzu Engine Manufacturing Co., (Thailand) Ltd. (Thailand) 15.00 Manufacturing of automotive engines Isuzu Motors Co., (Thailand) Ltd. (Thailand) 27.50 Manufacturing of automobiles Isuzu Philippines Corporation (Philippines) 35.00 Import, manufacture, and sales of automobiles Mitsubishi Elevator Hong Kong Company Limited 25.00 Elevator import, sales, installation and maintenance (Hong Kong) Mitsubishi Motor Sales (China) Co., Ltd. (China) 50.00 Distribution of automobiles MMC Chile S.A. (Chile) 40.00 Distribution of automobiles Mitsubishi Motors de Portugal, S.A. (Portugal) 50.00 Distribution of automobiles PT. Krama Yudha Tiga Berlian Motors (Indonesia) 40.00 Distribution of automobiles PT. Mitsubishi Krama Yudha Motors and Manufacturing 32.28 Manufacturing and distribution of automobile engines and sheet metal parts (Indonesia) Vina Star Motors Corporation (Vietnam) 25.00 Automobile assembly and distribution Chemicals Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Chuo Kasei Co., Ltd. (Japan) 100.00 Manufacturing and marketing of chemical products KIBIKASEI CO., LTD. (Japan) 100.00 Wholesale and trading of synthetic resin raw materials and products made from these materials as well as industrial chemicals Kohjin Co., Ltd. (Japan) 100.00 Manufacturing of plastic ﬁlms, biochemicals and ﬁne chemicals MC Ferticom Co., Ltd. (Japan) 72.83 Manufacturing and marketing of fertilizer MC Life Science Ventures, Inc. (U.S.A.) 100.00 Corporate venture capital and business incubation Mitsubishi Shoji Chemical Corp. (Japan) 100.00 Marketing of solvents, coating resins, silicones, fumed silica Mitsubishi Shoji Food Tech Co., Ltd. (Japan) 100.00 Manufacturing and marketing of functional food ingredients Mitsubishi Shoji Plastics Corp. (Japan) 100.00 Marketing of synthetic raw materials and plastics <Equity-method afﬁliates> Aromatics Malaysia Sdn. Bhd. (Malaysia) 30.00 Manufacturing and marketing of benzene and paraxylene Exportadora de Sal, S.A. de C.V. (Mexico) 49.00 Manufacturing of solar salt Meiwa Corporation (Japan) 33.05 Trading company Metanol de Oriente, METOR, S.A. (Venezuela) 25.00 Manufacturing and marketing of methanol Nippon Resibon Corporation (Japan) 20.00 Grinding wheels, coated abrasive products, machinery and tools, materials and other businesses PT. Kaltim Parna Industri (Indonesia) 50.00 Manufacturing of ammonia SPDC Ltd. (Japan) 30.39 Investment and petroleum and petrochemicals-related businesses Living Essentials Group COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> AGREX, Inc. (U.S.A.) 100.00 Storage and marketing of grain Alpac Forest Products Inc. (Canada) 70.00 Manufacturing and sales of wood pulp Alpac Pulp Sales Inc. (Canada) 100.00 Sales of wood pulp California Oils Corporation (U.S.A.) 100.00 Manufacturing and sales of processed vegetable oils and fats Cape Flattery Silica Mines Pty., Ltd. (Australia) 100.00 Mining and sales of silica sand Dai-Nippon Meiji Sugar Co., Ltd. (Japan) 100.00 Manufacturing and wholesale of sugar products d-rights Inc. (Japan) 100.00 Production of animation and other contents, sale of broadcasting rights and licensing business Food Service Network Co., Ltd. (Japan)* 100.00 Food wholesaling business for convenience stores Foodlink Corporation (Japan) 99.39 Sales of meat and meat products Green Houser Co., Ltd. (Japan) 100.00 Sales of wood products, construction materials and housing equipment Indiana Packers Corporation (U.S.A.) 80.00 Processing and sales of pork Kentucky Fried Chicken Japan Ltd. (Japan) 65.81 Fast-food restaurant chain and home-delivery pizza stores Life Gear Corporation (Japan) 100.00 Sales and marketing of footwear 72 Mitsubishi Corporation Annual Report 2011 MC Healthcare, Inc. (Japan) 80.00 Back-ofﬁce support for hospital management, sales of medical equipment and pharmaceuticals MC Merchant Services Co., Ltd. (Japan) 100.00 Credit card processing and payment services Meidi-ya Corporation (Japan)* 80.00 Wholesale of food products MITSUBISHI CORPORATION FASHION (Japan) 100.00 Design, manufacturing and sales of apparel products Mitsubishi Shoji Construction Materials Corporation (Japan) 100.00 Marketing of construction materials and construction work Mitsubishi Shoji Packaging Corporation (Japan) 92.15 Sales and marketing of packaging materials, paper, paperboard and corrugated containerboard, as well as export of paper and paperboard MRS Corporation (Japan) 100.00 Operation of ultra-low temperature transport vessels Nihon Shokuhin Kako Co., Ltd. (Japan) 59.77 Manufacturing of corn starch and related processed products Nippon Care Supply Co., Ltd. (Japan) 65.53 Rental and sales of nursing care equipment and items Nitto Fuji Flour Milling Co., Ltd. (Japan) 64.02 Flour miller Nosan Corporation (Japan) 100.00 Manufacturing and marketing of livestock feed Princes Limited (U.K.) 100.00 Manufacturing of food products and soft drinks Riverina (Australia) Pty., Ltd. (Australia) 100.00 Marketing of grains and manufacturing of animal feed and its marketing RYOSHOKU LIMITED (Japan)* 51.17 Wholesale of food products SAN-ESU INC. (Japan)* 91.93 Wholesale of confectionery Sanyo Foods Co., Ltd. (Japan) 100.00 Manufacturing and sales of food products TH FOODS, Inc. (U.S.A.) 53.16 Manufacturing of rice crackers Toyo Reizo Co., Ltd. (Japan) 81.83 Processing and sales of marine products Tredia Fashion Co., Ltd. (Hong Kong) 100.00 Sales and production control of apparel products <Equity-method afﬁliates> Coca-Cola Central Japan Co., Ltd. (Japan) 23.25 Manufacturing and sales of soft drinks create restaurants holdings inc. (Japan) 41.07 Operation of restaurants based on various concepts under different brands in Japan Ensuiko Sugar Reﬁning Co., Ltd. (Japan) 31.26 Manufacturing and wholesale of sugar products Hokkaido Sugar Co., Ltd. (Japan) 27.16 Manufacturing of beet sugar Hokuetsu Kishu Paper, Co., Ltd. (Japan) 24.72 Manufacturing, processing and sales of paper and pulp Itoham Foods, Inc (Japan) 20.43 Manufacturing and sales of meats and processed foods Kadoya Sesame Mills, Inc. (Japan) 27.40 Manufacturing and sales of sesame oil and sesame Kirin MC Danone Waters Co., Ltd. (Japan) 24.00 Manufacturing, importing and sales of mineral water LAWSON, INC. (Japan) 32.44 Franchise chain of LAWSON convenience stores Life Corporation (Japan) 21.30 Supermarket chain stores Maruichi Co., Ltd. (Japan) 20.00 Wholesale of food products Matsutani Chemical Industry Co., Ltd. (Japan) 30.00 Processing of starch MCC Development Corporation (U.S.A.) 30.00 Holding company of ready-mixed concrete companies Mitsubishi Cement Corporation (U.S.A.) 28.71 Manufacturing and marketing of cement ROKKO BUTTER CO., LTD. (Japan) 20.49 Manufacturing and sales of cheese products T-Gaia Corporation (Japan) 22.78 Handling of subscriber contracts for various communication services, sales of handsets and equipment The Nisshin OilliO Group, Ltd. (Japan) 16.63 Oils and meal, healthy foods and ﬁne chemicals businesses TOYO TYRE & RUBBER AUSTRALIA LIMITED (Australia) 25.60 Importing and sales of tyres YONEKYU CORPORATION (Japan) 24.60 Sales of meats, manufacturing and sales of processed foods * RYOSYOKU LIMITED, Meidi-ya Corporation, SAN-ESU INC., and Food Service Network Co., Ltd. were integrated and renamed Mitsubishi Shokuhin Co., Ltd. on July 1, 2011. Corporate Staff Section COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> Business Trip International Inc. (Japan) 100.00 Travel agency Human Link Corporation (Japan) 100.00 Personnel operation outsourcing services and consulting MC Facilities Co., Ltd. (Japan) 100.00 Ofﬁce building management and operation services MC Finance & Consulting Asia Pte. Ltd. (Singapore) 100.00 Treasury services MC Silicon Valley, Inc. (U.S.A.) 100.00 Management of marketable securities Mitsubishi Corporation Finance PLC (U.K.) 100.00 Treasury services Mitsubishi Corporation Financial & Management Services 100.00 Accounting, ﬁnancial and foreign exchange services, credit control and management consulting (Japan) Ltd. (Japan) Main Regional Subsidiaries COMPANY NAME VOTING RIGHTS (%) MAIN BUSINESS <Subsidiaries> MC Europe Holdings N.V. (U.K.) 100.00 Holding company for European subsidiaries MC International (Europe) (U.K.) 100.00 Trading Mitsubishi Australia Ltd. 100.00 Trading Mitsubishi Corporation (Hong Kong) Ltd. 100.00 Trading Mitsubishi Corporation (Korea) Ltd. 100.00 Trading Mitsubishi Corporation (Shanghai) Ltd. 100.00 Trading Mitsubishi International Corporation (U.S.A.) 100.00 Trading Mitsubishi International GmbH. (Germany) 100.00 Trading Mitsubishi Corporation Taiwan Ltd. 100.00 Trading Thai-MC Company Ltd. 67.80 Trading 73 Mitsubishi Corporation Annual Report 2011 general information (As of July 1, 2011) Share Data (1) Authorized share capital: 2,500,000,000 shares of common stock (2) Number of shares issued and number of shareholders as of March 31, 2011 Number of Number of shares issued shareholders As of March 31, 2010 1,696,686,871 233,034 Change 581,400 20,282 As of March 31, 2011 1,697,268,271 253,316 Note: The increase in the number of shares issued was due to the exercise of stock options and stock acquisition rights of bonds with acquisition rights during the fiscal year ended March 31, 2011. (3) The Company decided to reduce its Unit Stock from 1,000 shares to 100 shares on September 1, 2004. Principal Shareholders Shareholding (Rounded down to the nearest thousand shares) Number of shares Shareholding Name (thousands) (%) Japan Trustee Services Bank, Ltd. (Trust Account) 118,122 7.18 Tokio Marine & Nichido Fire Insurance Co., Ltd. 84,331 5.12 The Master Trust Bank of Japan, Ltd. (Trust Account) 77,302 4.70 Meiji Yasuda Life Insurance Company 64,846 3.94 The Master Trust Bank of Japan, Ltd. (Mitsubishi Heavy Industries, Ltd. Account, Retirement Benefit Trust Account) 48,920 2.97 SSBT OD05 OMNIBUS ACCOUNT — TREATY CLIENTS 31,127 1.89 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 25,620 1.55 The Nomura Trust and Banking Co., Ltd. (Pension Benefit Trust Account, Mitsubishi UFJ Trust and Banking Corporation) 22,088 1.34 State Street Bank and Trust Company 505225 19,705 1.19 Japan Trustee Services Bank, Ltd. (Trust Account 9) 18,133 1.10 Notes: 1. As of March 31, 2011. 2. In addition to the above, the Company has treasury stock of 52,933,783 shares. 3. Shareholding was computed excluding total treasury stock. Number of Shareholders (number of shareholders) 300,000 281,707 253,316 200,000 188,925 233,034 158,521 161,590 100,000 70,000 65,298 60,605 60,000 57,334 50,000 54,943 54,322 74 Mitsubishi Corporation Annual Report 2011 Shareholder Composition (Shareholding Ratio) Public Securities Other Foreign Individuals sector Financial institutions companies companies companies, etc. and others Year ended March 2011 40.9% 2.4% 8.2% 31.7% 16.8% 0.0% Year ended March 2006 43.4% 2.0% 11.3% 32.9% 10.4% 0.0% Year ended March 2001 58.6% 0.3% 13.8% 17.5% 9.8% 0.0% (One Unit Stock) Public Financial Securities Other Foreign Individuals sector institutions companies companies companies, etc. and others Total Year ended March 2011 2 6,819,371 413,464 1,354,221 5,611,341 2,239,403 16,437,802 Year ended March 2006 2 7,334,119 329,991 1,899,677 5,553,916 1,749,361 16,867,066 Year ended March 2001 0 914,359 4,296 214,864 273,140 152,377 1,559,036 Notes: 1. Figures represent Unit Stock. 2. The number of shares for 1 Unit Stock for the year ended March 2001 was 1,000 shares, and from the year ended March 2005 was 100 shares. Stock Price Range and Trading Volume (yen) 4,000 3,000 2,000 1,000 (thousand shares) 4,000,000 0 3,000,000 2,000,000 í Stock Price í Trading Volume 1,000,000 Year ended March 2007 2008 2009 2010 2011 Trading volume (thousand shares) 2,451,005 3,173,028 3,661,608 2,437,151 2,079,763 High (yen) 2,940 3,810 3,950 2,542 2,500 Low (yen) 1,984 2,245 923 1,317 1,756 Note: The stock price range and trading volume are based on stock prices and volumes, respectively, on the Tokyo Stock Exchange (First Section). 75 Mitsubishi Corporation Annual Report 2011 Stock Acquisition Rights (1) Stock Options Fiscal Year Granted August 1, 2001 August 15, 2002 August 15, 2003 August 13, 2004 August 10, 2005 August 10, 2006 Number of stock acquisition rights 108 89 379 504 8,854 13,324 Class and number of 108,000 shares of 89,000 shares of 379,000 shares of 504,000 shares of 885,400 shares of 1,332,400 shares of shares to be issued for the Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi Mitsubishi purpose of issuing stock Corporation's Corporation's Corporation's Corporation's Corporation's Corporation's acquisition rights common stock common stock common stock common stock common stock common stock Issue price of stock Issued in gratis Issued in gratis Issued in gratis Issued in gratis Issued in gratis Issued in gratis acquisition rights Price per share due upon ¥1,002 ¥809 ¥958 ¥1,090 ¥1,691 ¥2,435 exercise of stock acquisition rights (Exercise Price) Exercise period From June 29, 2003 From June 28, 2004 From June 28, 2005 From June 25, 2006 From June 25, 2007 From July 22, 2008 through June 28, 2011 through June 27, 2012 through June 27, 2013 through June 24, 2014 through June 24, 2015 through June 27, 2016 Notes: 1. The Exercise Price may be adjusted in accordance with terms specified at the time of issue. 2. The “Number of stock acquisition rights” is the number remaining as of March 31, 2011. 3. The number of shares to be issued per stock acquisition right with regard to stock options from 2005 is 100 shares. (2) Stock Options for a Stock-Linked Compensation Plan Fiscal Year Granted August 10, 2005 April 28, 2006 August 10, 2006 August 6, 2007 June 2, 2008 Number of stock acquisition rights 2,282 54 1,339 2,880 266 Class and number of shares to 228,200 shares of 5,400 shares of 133,900 shares of 288,000 shares of 26,600 shares of be issued for the purpose of Mitsubishi Corporation’s Mitsubishi Corporation’s Mitsubishi Corporation’s Mitsubishi Corporation’s Mitsubishi Corporation’s issuing stock acquisition rights common stock common stock common stock common stock common stock Issue price of stock acquisition rights Issued in gratis Issued in gratis Issued in gratis Issued in gratis Issued in gratis Price per share due upon exercise of ¥1 ¥1 ¥1 ¥1 ¥1 stock acquisition rights (Exercise Price) Exercise period August 11, 2005 through April 29, 2006 through August 11, 2006 through August 7, 2007 through June 3, 2008 through June 24, 2035 June 24, 2035 June 27, 2036 June 26, 2037 June 26, 2037 Fiscal Year Granted August 4, 2008 June 1, 2009 August 3, 2009 June 7, 2009 August 2, 2010 Number of stock acquisition rights 3,649 590 10,938 621 6,012 Class and number of shares to 364,900 shares of 59,0000 shares of 1,093,800 shares of 62,100 shares of 601,200 shares of be issued for the purpose of Mitsubishi Corporation’s Mitsubishi Corporation’s Mitsubishi Corporation’s Mitsubishi Corporation’s Mitsubishi Corporation’s issuing stock acquisition rights common stock common stock common stock common stock common stock Issue price of stock acquisition rights Issued in gratis Issued in gratis Issued in gratis Issued in gratis Issued in gratis Price per share due upon exercise of ¥1 ¥1 ¥1 ¥1 ¥1 stock acquisition rights (Exercise Price) Exercise period August 5, 2008 through June 2, 2009 through August 4, 2009 through June 8, 2010 through August 3, 2010 through June 25, 2038 June 25, 2038 June 24, 2039 June 24, 2039 August 2, 2040 Notes: 1. Regarding grants in 2005 and 2006, eligible persons may exercise their stock acquisition rights, provided this is done within 10 years from the day after losing their position as either a director or executive officer of the Company. Regarding 2007 and June 2008 grants, eligible persons may exercise their stock acquisition rights from the earlier of June 27, 2009 or the day after losing their position as either a director, executive officer or senior vice president (“riji”) of the Company. However, if 10 years have passed from the day after losing their position as either a director, executive officer or senior vice president (“riji”) of the Company, they cannot exercise such rights. Regarding August 2008 and June 2009 grants, eligible persons may exercise their stock acquisition rights from the earlier of June 26, 2010 or the day after losing their position as either a director, executive officer or senior vice president (“riji”) of the Company. However, if 10 years have passed from the day after losing their position as either a director, executive officer or senior vice president (“riji”) of the Company, they cannot exercise such rights. Regarding grants in August 2009, eligible persons may exercise their stock acquisition rights from the earlier of June 25, 2011 or the day after losing their position as either a director, executive officer or senior vice president (“riji”) of the Company. However, if 10 years have passed from the day after losing their position as either a director, executive officer or senior vice president (“riji”) of the Company, they cannot exercise such rights. 2. The “Number of stock acquisition rights” is the number remaining as of March 31, 2011. (3) Stock Acquisition Rights of Bonds With Acquisition Rights Yen-Denominated Zero Interest Convertible Bonds With Acquisition Rights Due 2011 Issue date June 17, 2002 Number of stock acquisition rights 181 Class and number of shares to be issued for the purpose of 761,784 shares of Mitsubishi Corporation’s common stock issuing stock acquisition rights Issue price of stock acquisition rights Issued in gratis Price per share due upon exercise of stock acquisition rights (Conversion price) ¥1,188 Exercise period From July 1, 2002 through June 3, 2011 Notes: 1. The conversion price may be adjusted in accordance with terms specified at the time of issue. 2. The “Number of stock acquisition rights” is the number remaining as of March 31, 2011. 76 Mitsubishi Corporation Annual Report 2011 Directors’ and Corporate Auditors’ Shareholdings Number of Number of shares held shares held Title Name (thousands) Title Name (thousands) Chairman of the Board Yorihiko Kojima 132 Director Kunio Ito - President, Chief Executive Officer Ken Kobayashi 58 Director Kazuo Tsukuda 3 Director Ryoichi Ueda 39 Director Ryozo Kato 3 Director Masahide Yano 64 Director Hidehiro Konno 4 Director Hideyuki Nabeshima 36 Senior Corporate Auditor Yukio Ueno 90 Director Hideto Nakahara 32 Corporate Auditor Osamu Noma 5 Director Kiyoshi Fujimura 39 Corporate Auditor Shigeru Nakajima - Director Yasuo Nagai 21 Corporate Auditor Eiko Tsujiyama - Director Tamotsu Nomakuchi 3 Corporate Auditor Eisuke Nagatomo - Note: The number of shares held is as of June 24, 2011. Shares have been rounded down to the nearest thousand shares. General Meeting of Shareholders The ordinary general meeting of the Company’s shareholders is convened in June each year. An extraordinary general meeting of share- holders is immediately convened whenever necessary. Dividends (1) Record date for payment of final dividend: March 31 (2) Record date for payment of interim dividend: September 30 (3) The Company is not obliged to pay any final or interim dividends unclaimed for a period of three years after the date on which they are first made available by the Company. Handling of Shares Regarding the procedures for handling shares, shareholders with a trading account at a securities company or other institution should contact that securities company or other institution, while shareholders who have not opened an account with a securities company or other institution should contact the following Account Management Institution regarding special accounts. Non-resident shareholders are required to appoint and notify the Company of a standing proxy in Japan. (Transfer Agent for Shares and Special Accounts, Account Management Institution) Mitsubishi UFJ Trust and Banking Corporation Corporate Agency Division 10-11, Higashisuna 7-chome, Koto-ku, Tokyo 137-8081, Japan Telephone: 0120-232-711 (within Japan) IR Site Mitsubishi Corporation makes investor information available on its website. Please use the following URLs. (English) http://www.mitsubishicorp.com/jp/en/ir/ (Japanese) http://www.mitsubishicorp.com/jp/ja/ir/ 77 Mitsubishi Corporation Annual Report 2011 Sustainability This section looks at MC’s corporate governance, CSR & environmental affairs. Discussion –– Corporate Governance That Supports MC’s Growth as a Global Organization Chairman of the Board Yorihiko Kojima and Outside Director Kunio Ito . . . . . . . . . . . 79 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Internal Control System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Business Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Message from the Chief Compliance Officer . . . . . . . . . . . . . . . . . . . . . . . . 89 Sustainability at MC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 International Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Letter from an International Advisory Committee member Herminio Blanco Mendoza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Members of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Corporate Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 78 Mitsubishi Corporation Annual Report 2011 Discussion <discussion between> Chairman of the Board Yorihiko Kojima [left] and Outside Director Kunio Ito [right] Corporate Governance That Supports MC’s Growth as a Global Organization MC is constantly enlarging and diversifying its business activities. Operations extend from trading to business invest- ment, leading positions in various projects as the largest shareholder or a manufacturer. Corporate governance is becoming increasingly important as major changes take place in how companies function. This section presents a discussion of corporate governance by two MC directors. As chairman of the Board of Direc- tors, Yorihiko Kojima supervises the management of MC. Kunio Ito is an outside director and a professor at the Gradu- ate School of Commerce and Management of Hitotsubashi University. Mr. Ito uses his objective perspective and expertise to provide valuable opinions and insights. This dialogue centers on the proper role of corporate governance at MC and goals for the future as MC aims to create sustainable corporate value as an organization that operates on a global scale. An overview of corporate governance at MC advisory body for the directors. The goal is to ensure that our Mr. Kojima: MC is an enormous organization with more than 200 corporate governance is the best possible match with the type of offices around the world and over 500 subsidiaries and affiliates. organization MC is today. Activities encompass upstream to downstream operations in a broad array of business sectors. MC is always paying attention to Mr. Ito: I believe there are three aspects of corporate governance: strengthening and entrenching corporate governance. the management oversight function, the pursuit of greater man- There are three basic themes for strengthening corporate gov- agement efficiency, and the transparency of management. ernance at a company with this breadth: reinforcing management For the oversight of management, MC is a company with cor- supervision, separating the roles of supervising management and porate auditors but also a company with multiple committees that conducting business operations, and separating the management serve as advisory bodies. The company’s Governance & Compen- and business execution functions. sation Committee is particularly significant because it allows a Based on these themes, MC has created a hybrid framework single unit to examine governance and compensation at once. that incorporates the advantages of both the corporate auditor In addition, the Board of Directors is well balanced by including five system and committee systems. To strengthen the supervisory outside directors who have a broad range of backgrounds. function of the Board of Directors, this framework also includes a To improve management efficiency, MC provides thorough Governance & Compensation Committee that serves as an explanations of proposals submitted to the Board of Directors. 79 Mitsubishi Corporation Annual Report 2011 Yorihiko Kojima Jun. 2010 Chairman of the Board (Present Position) Apr. 2004 Member of the Board, President and CEO Jun. 2001 Member of the Board, Senior Executive Vice President, Group CEO, New Business Initiative Group Apr. 2001 Executive Vice President, Director, Group CEO, New Business Initiative Group Apr. 2000 Managing Director, Group CEO, New Business Initiative Group Apr. 1999 Managing Director, Chief Business Development and Coordination Officer (Concurrently) Division COO, Financial Services Div. Apr. 1998 Managing Director, Administration [A] Apr. 1997 Managing Director, Administration Feb. 1996 Director, Development & Coordination Jun. 1995 Director, General Manager, Corporate Planning Office May 1965 Joined Mitsubishi Corporation (MC) In addition, key issues involving these proposals are identified in are outside directors and other individuals from outside the MC advance. For instance, MC shows directors the conditions that organization. Final decisions are then reached after factoring in must be satisfied in order to follow through with proposals accord- MC’s performance, remuneration at other companies and other ing to the nature of the project. Not many other companies do this. applicable items. The disclosure system is a key point concerning management transparency. MC has established a clear Corporate Disclosure Mr. Ito: Many companies have proclaimed their commitment to Policy and it conducts IR programs in which executives partici- increasing corporate value in recent years. But I believe that the pate. For these and other reasons, I think that MC has a relatively overwhelming majority of companies probably pay bonuses as high level of disclosure. long as they generate a profit because management views growth in corporate value and directors’ remuneration and bonuses as Mr. Kojima: Under MC’s corporate auditor system, corporate separate entities. But MC is different. Simply reporting a bottom- auditors attend meetings of the Board of Directors and various line profit is not enough. Remuneration and incentives are deter- other important meetings, where they provide appropriate opinions mined by looking at whether or not earnings actually contribute to and advice. Corporate auditors also perform periodic audits at corporate value. I think this is one of the greatest strengths of MC’s important offices around the world, including at consolidated compensation system. companies. I believe that MC has a corporate auditor system that is functioning very well. The roles of outside directors and corporate auditors Furthermore, MC has formed an International Advisory Com- Mr. Ito: Contributing to the sound growth of MC’s corporate value mittee, which is something no other company has done. Made up is definitely the most important role of outside directors. But this of prominent people, including senior executives from other coun- role involves more than increasing shareholder value. I believe that tries, this committee provides advice to the Board of Directors outside directors should focus on overall value by adopting the concerning MC’s management from a global standpoint. viewpoints of all stakeholders. This is why Midterm Corporate Strategy 2012 has the goal of “creating sustainable corporate Compensation for directors and corporate auditors value” based on a concept that combines economic value, soci- Mr. Kojima: For MC’s compensation system, we must be certain etal value and environmental value. I am very impressed with MC’s that individuals receive payments that are not too high or low with broad-based approach to value creation that rejects placing undue respect to their responsibilities and performance. Another require- emphasis on any single category of value. ment is setting compensation at a level that is acceptable to shareholders and all other stakeholders. This is not merely a Mr. Kojima: MC believes that objective opinions from a diverse matter of selecting a particular monetary figure. Achieving the range of perspectives are essential to strengthening the manage- greatest amount of transparency possible for the decision-making ment oversight function. This is why MC places so much impor- process itself is even more important. tance on the roles of outside directors and corporate auditors. Remuneration for MC’s in-house directors has four compo- Some outside directors can draw on years of experience as nents: monthly remuneration, bonuses, stock options, and corporate executives. Others can provide objective views based reserved retirement remuneration. The Governance & Compensa- on an extensive knowledge of world affairs, and social and eco- tion Committee discusses the overall remuneration system as well nomic trends. By selecting outside directors with different back- as remuneration for individuals. This provides an objective view of grounds, MC gains access to input from a large variety of compensation issues because the majority of committee members viewpoints. 80 Mitsubishi Corporation Annual Report 2011 Kunio Ito Jun. 2007 Member of the Board, MC (Present Position) Dec.2006 Professor in Postgraduate School of Hitotsubashi University’s Department of Commerce and Management (Present Position) Dec.2004 Associate Chancellor and Director, Hitotsubashi University Aug.2002 Professor in Postgraduate School of Hitotsubashi University, Head of Department of Commerce and Management Apr. 1992 Professor in Hitotsubashi University’s Department of Commerce and Management Apr. 1980 Lecturer, Assistant in Hitotsubashi University’s Department of Commerce and Management Successively held posts of Assistant Professor in Hitotsubashi University’s Department of Commerce and Management Outside corporate auditors as well are selected from candi- Mr. Kojima: The general trading company is a business model dates with a broad range of knowledge and experience in various that is unique in the world. MC has been enlarging this model by fields. They are asked to perform audits from a neutral and objec- extending activities outward from trading to include business tive perspective. These audits play a vital part in maintaining the investments. Making these investments has allowed us to partici- soundness of our management. pate directly in management of businesses in upstream to down- stream areas of industries. The operating environment for MC One illustration is our participation in a public-private sector Mr. Kojima: In January, I was co-chair of the World Economic consortium that acquired a water utility in Australia. At the Donggi- Forum in Davos, Switzerland. I accepted this post because people Senoro LNG project in Indonesia, MC is the project’s operator as asked me to disseminate information from Japan. After all, when its largest shareholder. In China, we are involved in the meat busi- people talk about Asia today, they invariably turn their attention to ness following an investment in a subsidiary of COFCO Limited, India and China. China’s largest food company. All of these activities demonstrate The theme of this year’s forum was “Shared Norms for the New how MC has established business models that were inconceivable Reality.” Momentous changes are taking place in the world. Solu- for our company not long ago. tions to issues needing global initiatives will require multinational Over the years, MC has conducted many types of business activities based on the understanding that these are not issues for activities while altering its appearance to match changes in the individual countries. operating environment. These activities allowed us to establish a I spoke with leading figures from many countries. I was left with network of relationships with companies worldwide in almost every the strong impression that the goal of the entire world should be industry. At the same time, we have made each business more “sustainable growth” as economies recover after the Lehman powerful while sharing know-how so that we can leverage the col- Shock. This unified goal transcends individual circumstances and lective strengths of the MC Group. This is a distinctive strength of applies to developed countries and emerging countries alike. I am MC that our competitors cannot match. Structural changes are convinced that MC can play an extremely significant role in the taking place around the world. Japan is at a turning point as well process of aiming for sustainable growth. because of the earthquake last March. I believe that our distinctive strengths put MC in an excellent position to play a leading role in Mr. Ito: Economic growth in Japan was backed by the country’s capitalizing on opportunities that are emerging in Japan and global leadership in manufacturing. In recent years, though, Japan’s worldwide. prominence in manufacturing has been declining. Companies in Japan are advanced in terms of technologies for products. But their Vision for corporate governance at MC manufacturing superiority is eroding due to the inability to assemble Mr. Ito: In my opinion, it is best not to come up with a precon- the frameworks that are needed to succeed. ceived idea of corporate governance. Clinging to a specific vision MC excels with regard to having the comprehensive capabilities would make MC inflexible and less able to respond to rapid required to build these idea-based frameworks for success. For changes like the global financial crisis. Flexibility is needed for example, a tie-up between MC and a manufacturer can lead to the corporate governance in order to change in step with the operat- best possible business model in an emerging country. This would ing environment. This is another reason that MC must have a risk help energize manufacturing in Japan, support sustainable growth management infrastructure to ensure flexibility. in that country, and yield other benefits. Overall, I think that there I believe that PDCA (plan, do, check, act) is the basis for all are very high expectations for MC in the coming years. companies. However, PDCA alone is not sufficient to manage risk effectively. 81 Mitsubishi Corporation Annual Report 2011 this, To accomplish this MC also needs the “3S” characteristics of employees o for our employees. I hope that all of our employees take the time to sensitivity, speed and a sense of urgency. All risks are accompa- discuss MC’s principles and values in their respective languages. nied by warning signs. Sensing these beforehand is crucial for Assistance we provided following the Great East Japan Earthquake limiting damage. Amid rapid-fire movements in the economic reflects the spirit of “corporate responsibility to society,” which is environment, companies must move through the PDCA cycle one of the Three Corporate Principles. We are currently using a faster. Once every year is too slow. The sense of urgency I men- fund to extend assistance, and employees are making frequent tioned must not be ambiguous. Successful risk management visits to damaged areas to perform volunteer work. I am proud of demands a constant risk mentality even when there are no prob- the fact that the number of employees who volunteered was far lems. It is almost as if someone is always poking you in the back more than we anticipated. Naturally, our business activities are to force you to move forward. important. But we must also be aware of the importance of having a strong commitment to corporate social responsibility. Mr. Kojima: Just creating a manual and handing it to people is not enough to entrench corporate governance in an organization. At Mr. Ito: An enduring corporate philosophy and values should MC, we send many of our employees to work at business invest- always sit at the core of a company. Additionally, MC must never ees. I think that deepening communication with the CEO and abandon its dedication to seek the best possible system for cor- employees of these companies is important in order to foster a porate governance. Even an excellent governance system can shared understanding of corporate governance and raise corpo- become outdated by not keeping up with changes in the social rate value. and economic climate. Companies must have the energy to con- Moreover, with the aim of achieving “visualization” of consoli- stantly ask themselves what is needed to maintain an exemplary dated management, we are building IT systems and other compo- corporate governance system. The reason is that MC’s business nents of a consolidated management infrastructure, with efforts domains extend both vertically and horizontally. The massive scale spearheaded by the Business Service Group. of our activities means shifts in the operating environment that we encounter are just as large. Dealing with these shifts calls for Mr. Ito: All outstanding global companies have a common set of speed as we constantly advance through a PDCA cycle. corporate principles and values that each employee shares. I once attended a seminar by the president of a U.S. company in the Mr. Kojima: We appreciate your valuable insights very much, Mr. healthcare industry. I was very surprised that the corporate phi- Ito. MC has for many years been guided by a culture of aggres- losophy accounted for about 80% of the presentation. Why are sively developing businesses in fields with attractive prospects for principles and values so important? The answer is that establishing growth. Our current midterm corporate strategy aims to foster new a shared nucleus at a company provides the basis for diversifica- businesses that have the potential of becoming drivers of growth tion in all other aspects of operations. at MC 10 or 20 years from now. Two bodies overseen directly by The Midterm Corporate Strategy 2012 includes the themes of MC’s president play a central role in these initiatives: the Business “leveraging MC’s diversified business portfolio and solidifying MC’s Service Group and the Global Environment Business Development diversified business portfolio.” Establishing a common set of prin- Group. All business groups are involved, too. The plan also desig- ciples and values for MC Group employees worldwide is the most nates Strategic Domains and Regions and establishes a structure important requirement for accomplishing these goals. for initiatives that encompass the entire company. To back up these activities, MC is determined to build a corporate governance Mr. Kojima: I agree completely. We publish a corporate brochure in system that can meet the company’s needs as we advance to the 10 languages. Each version begins with the Three Corporate Prin- next stage of our development. ciples that make up our corporate philosophy. I call this a textbook 82 Mitsubishi Corporation Annual Report 2011 corporate governance basic policy MC’s corporate philosophy is enshrined in the Three Corporate ■ Board of Directors’ Advisory Bodies Principles—Corporate Responsibility to Society, Integrity and MC also has a Governance & Compensation Committee and an Fairness, and Global Understanding Through Business. Through International Advisory Committee as advisory bodies to the corporate activities rooted in the principles of fairness and integ- Board of Directors. These committees are made up mostly of rity, MC strives to continuously raise corporate value. MC outside directors and outside corporate auditors as well as other believes that by helping to enrich society, both materially and experts from outside MC. The Governance & Compensation spiritually, it will also meet the expectations of shareholders, Committee conducts continuous reviews of corporate gover- customers and all other stakeholders. nance-related issues at MC and also discusses the remuneration In order to ensure sound, transparent and efficient manage- system for directors and corporate auditors, including the policy ment, MC is working to put in place a corporate governance for setting remuneration and appropriateness of remuneration system, based on the Corporate Auditor System, that is even levels for these corporate officers, and monitors operation of this more effective. This includes strengthening management supervi- system. The International Advisory Committee holds discussions sion by appointing independent directors and independent cor- on management issues and advises MC management from a porate auditors, and using the executive officer system to global perspective. expedite and bolster decision-making and business execution. ■ Business Execution ■ Board of Directors The president, as the Company’s Chief Executive Officer, man- MC’s Board of Directors has 13 members, including 5 outside ages the Company’s business through the Executive Committee, directors. Outside directors represent more than one-third of all a decision-making body of executive officers. Important manage- directors. Board meetings are also attended by the 5 corporate ment issues are first determined by the Executive Committee, auditors, 3 of whom are outside corporate auditors. which meets around twice a month, and then referred to the As a rule, the Board convenes once a month and is respon- Board of Directors for deliberation and final determination. sible for making decisions concerning important management Furthermore, in order to clarify the functions and responsibili- issues and overseeing business execution. The objective and ties of officers for executing duties, we introduced the executive expert viewpoints of outside directors and outside corporate officer system, thereby promoting faster and more efficient busi- auditors ensure appropriate decision-making and management ness execution. oversight. corporate governance framework (As of June 24, 2011) General Meeting of Shareholders Appointment/Dismissal Appointment/Dismissal Appointment/ Determination of Determination of Dismissal Remuneration Parameters Remuneration Parameters Request Corporate Auditors Board of Directors (Board of Corporate Independent 8 Executive Directors Audit/ Auditors) Report Auditors Advice Report 5 Outside Directors 2 Full-time Corporate Auditors 3 Outside Corporate Auditors Appointment and Report Governance & Oversight of Accounting Compensation Submit Important Matters Audit Audit Executive Committee and Report on Execution Officers of Operations International Advisory Committee Executive Organization Refer to page 85 83 Mitsubishi Corporation Annual Report 2011 policy for setting directors’ and corporate auditors’ remuneration Basic Policy creating value over the medium and long terms. As a basic The remuneration system for Company directors has been policy, incumbent directors cannot sell shares during their designed in order to provide further incentive and motivation to terms until their shareholdings reach a certain level stipulated improve the Company’s performance, further align the directors’ by position in the Company’s shareholding guidelines. interests with those of the shareholders, and strengthen the link with business results. Remuneration for outside directors and Level of Directors’ and Corporate Auditors’ Remuneration corporate auditors is limited to monthly remuneration only, and and Remuneration Setting Method there is no results-linked element. • The level of directors’ and corporate auditors’ remuneration shall be commensurate with the Company’s performance in Composition of In-house Director Remuneration conformity with the abovementioned basic policy and also take The remuneration of Company in-house directors consists of into consideration levels of remuneration at other companies. monthly remuneration, bonuses, reserved retirement remunera- • Regarding directors’ monthly remuneration, reserved retirement tion and stock options as remuneration. Details of each type of remuneration and stock options as remuneration, the June 24, remuneration are as follows: 2010 Ordinary General Meeting of Shareholders approved a The Company has an executive officer system, and for in- payment limit of ¥1.6 billion per annum. Remuneration is paid house directors who also serve as executive officers, the position within this remuneration limit subject to approval of the Board as an executive officer is taken into account as one factor when of Directors. setting director remuneration. Meanwhile, bonuses are subject to approval by the Ordinary • Monthly remuneration is determined on an individual basis General Meeting of Shareholders every year, given their strong taking comprehensively into consideration factors such as linkage to the Company’s net income. evaluation of an individual’s performance in prior years. • The monthly remuneration of corporate auditors was set at an • Bonuses are determined on an individual basis after deciding upper limit of ¥15 million per month in total by resolution of the whether or not bonuses will be paid and the total amount based June 26, 2007 Ordinary General Meeting of Shareholders. on the prior-year consolidated earnings and other factors. Monthly remuneration is paid within this remuneration limit • Reserved retirement remuneration is set aside in a certain subject to discussions by the corporate auditors. amount every year as consideration for the performance of • The Governance & Compensation Committee, most of whose duties, and the accumulated amount is calculated and paid in members are outside directors and outside corporate auditors, full upon retirement of a director by resolution of the Board of as well as other experts from outside MC discuss and monitor Directors. the policy for setting remuneration, appropriateness of remu- • Stock options as remuneration are grants from the perspective neration levels and operation of the remuneration system for of aligning directors’ interests with those of shareholders and directors. The amounts of directors’ and corporate auditors’ remuneration, and the number of eligible corporate officers were as follows. directors’ and corporate auditors’ remuneration (millions of yen) Monthly Reserved Retirement Bonuses Stock Options Total Remuneration Remuneration Title Remuneration Eligible Eligible Eligible Eligible Total Total Total Total Persons Persons Persons Persons Directors (In-house) 1,398 14 695 9 240 9 118 14 344 Directors (Outside) 93 6 93 – – – – – – Corporate Auditors 124 3 124 – – – – – – (In-house) Corporate Auditors 39 3 39 – – – – – – (Outside) Notes: 1. The figures above include 5 directors (including 1 outside director) and 1 corporate auditor who resigned during the year ended March 2011. The number of people as of March 31, 2011 comprised 15 directors (including 5 outside directors) and 5 corporate auditors (including 3 outside corporate auditors). 2. Stock option-based remuneration above shows the amount recognized as an expense in the year ended March 2011 of expenditures related to stock options (stock options as remuneration issued in the years ended March 2010 and 2011) granted to 14 in-house directors. 3. In addition to the above amounts, the Company paid executive pensions to retired directors and corporate auditors. The amounts paid in the year ended March 2011 were as follows: The retirement bonus system, including executive pensions for directors and corporate auditors, was abolished at the close of the 2007 Ordinary General Meeting of Shareholders. The Company paid ¥227 million to 128 directors (outside directors were ineligible for payment). The Company paid ¥8 million to 12 corporate auditors (outside corporate auditors were ineligible for payment). 84 Mitsubishi Corporation Annual Report 2011 internal control system The demands on companies seeking to fulfill their corporate corporate information disclosure (financial reporting) and adher- social responsibilities are growing amid major changes in the ence to laws and regulations and social norms (compliance). business environment such as globalization and rising interest in Mitsubishi Corporation monitors the status of operation of this the natural environment. In light of this, Mitsubishi Corporation is system every year and the Board of Directors verifies continuously working to improve and strengthen its management improvements. system (internal control system) so as to ensure business activi- The internal control system is increasing in importance for ties are conducted properly to raise its corporate value and to management of the Mitsubishi Corporation Group because of the fulfill its social responsibilities. larger number of business investees, diversifying business Specifically, Mitsubishi Corporation has built a system for models and other factors. In this context, the Executive Vice ensuring that business operations are conducted properly and President in charge of Audits and Internal Control is working efficiently (systematic management execution, formation of a together with the corporate auditors, independent auditors and rational organization, clarification of the organizational chain of other parties to develop an internal control promotion system for command, risk management, etc.) while ensuring the reliability of ensuring proper business conduct. internal control framework Corporate Governance Framework Executive Organization Cooperation among Corporate Auditors/EVP in charge of President and CEO Audits and Internal Control/Independent Auditors Executive Committee Main Internal Control-Related Committees EVP, Audits and Internal Control Disclosure Committee Compliance Committee Internal Audit Dept. Establish and inform CSR & Environmental Affairs Committee about internal control- related systems and Investment Advisory Committee strategies Corporate Staff Section National Security Trade Management Committee, etc. Executive Organization (Business Groups, etc.) ■■ Refer to page 83 more information about corporate governance and internal control system Corporate Governance Report http://www.mitsubishicorp.com/jp/en/about/governance/pdf/governance_report_e.pdf business risks 1) Risks of Changes in Global Macroeconomic Conditions sales companies and financial services companies jointly estab- As we conduct businesses on a global scale, our operating lished with Japanese automakers. Because automobile sales results are impacted by economic trends in overseas countries volume reflects internal demand in each of these countries, eco- as well as those in Japan. nomic trends in both Thailand and Indonesia may have a signifi- For instance, a decline in prices of energy and metal cant bearing on earnings from our automobile operations. resources could have a large impact on our resource-related The global economy saw healthy growth as a whole in the import transactions and earnings from business investments. past fiscal year. In industrialized nations, while unemployment Furthermore, the worldwide economic slowdown could affect our remained at high levels, moderate economic expansion was entire export-related business, including plants, construction driven by pump-priming measures and ongoing quantitative machinery parts, automobiles, steel products, ferrous raw mate- easing. Meanwhile, emerging economies such as China and rials, chemical products, and other products. India enjoyed high rates of growth, underpinned by robust inter- In Thailand and Indonesia, we have various automobile busi- nal demand. That said, some countries tightened monetary nesses, including automobile assembly plants, distribution and policy because of rising inflationary pressures. 85 Mitsubishi Corporation Annual Report 2011 2) Market Risks (Petrochemical Products) (Unless otherwise stated, calculations of effects on future con- We are engaged in a broad range of trading activities for petro- solidated net income are based on consolidated net income for chemical products manufactured from raw materials such as the year ended March 2011. Consolidated net income, as used naphtha and natural gas. The prices of petrochemical products are hereinafter, refers to “Consolidated net income attributable to largely determined for each product on an individual basis based Mitsubishi Corporation.”) on the prices of the above raw materials, supply-demand dynam- ics and other factors. Fluctuations in the prices of these raw mate- (1) Commodity Market Risk rials may affect earnings from these trading transactions. In the course of our business activities, we are exposed to vari- We have made investments in manufacturing and sales com- ous risks relating to movements in prices of commodities as a panies for petrochemicals such as ethylene glycol, paraxylene trader, an owner of rights to natural and energy resources, and a and methanol in Saudi Arabia, Malaysia and Venezuela. Our producer and seller of industrial products of our investees. Prod- equity-method earnings would be affected by changes in the uct categories that may have a large impact on our operating operating results of these companies due to price movements. results are as follows: (2) Foreign Currency Risk (Energy Resources) We bear some risk of fluctuations in foreign currency rates rela- We hold upstream rights to LNG and crude oil, and/or liquefac- tive to the yen in the course of our trading activities, such as tion facilities in Australia, Malaysia, Brunei, Sakhalin, Indonesia, export, import and offshore trading. While we use forward con- the U.S., including the Gulf of Mexico, Gabon, Angola and other tracts and other hedging strategies, there is no assurance that regions. Movements in LNG and crude oil prices may have a we can completely avoid foreign currency risk. significant impact on operating results in these businesses. In addition, dividends received from overseas businesses and Fundamentally, LNG prices are linked to crude oil prices. As equity in earnings of overseas consolidated subsidiaries and an estimate, a US$1/BBL fluctuation in the price of crude oil equity-method affiliates are relatively high in proportion to our would have an approximate ¥1.0 billion effect on consolidated consolidated net income. Because most of these earnings are net income for LNG and crude oil combined, mainly through a denominated in foreign currencies, which are converted to yen change in equity-method earnings. However, fluctuations in the solely for reporting purposes, an appreciation in the yen relative price of LNG and crude oil might not be immediately reflected in to foreign currencies has a negative impact on consolidated net our operating results because of timing differences. income. In terms of sensitivity, a 1 yen change relative to the U.S. dollar would have an approximate ¥2.5 billion effect on consoli- (Metal Resources) dated net income. Through wholly owned Australian subsidiary Mitsubishi Regarding our investments in overseas businesses, an appre- Development Pty Ltd (MDP), we sell around 27–28 million tons of ciation in the yen poses the risk of lowering shareholders’ equity coal per year, mainly coking coal, a ferrous raw material. Fluctua- through a negative effect on the foreign currency translation tions in the price of coking coal may affect our consolidated adjustments account. Consequently, we implement various mea- operating results through MDP’s earnings. MDP’s operating sures to prevent increased exposure to foreign currency risk on results cannot be determined by the coal price alone as they are investments, such as by hedging foreign currency risks with also significantly affected by fluctuations in exchange rates for respect to new large investments. However, there is no assur- the Australian dollar, U.S. dollar and yen, as well as production ance that we can completely avoid these risks. and sales volumes and production costs. In addition, as a producer, we are exposed to the risk of price (3) Stock Price Risk fluctuations in copper and aluminum. Regarding copper, a US$100 As of March 31, 2011, we owned approximately ¥1,400.0 billion fluctuation in the price per MT of copper would have a ¥0.5 billion (market value basis) of marketable securities, mostly equity effect on our net income. However, variables besides price fluctua- issues of customers, suppliers and Affiliated companies. These tions can also have an impact. These include the grade of mined investments expose us to the risk of fluctuations in stock prices. ore, the status of production operations, and reinvestment plans As of the same date, we had net unrealized gains of approxi- (capital expenditures). Therefore, the impact on earnings cannot be mately ¥500.0 billion based on market prices, a figure that could determined by the copper price alone. Regarding aluminum, a change depending on future trends in stock prices. US$100 fluctuation in the price per MT of aluminum would have a In our corporate pension fund, some of the pension assets ¥1.0 billion effect on our consolidated net income. managed are marketable stocks. Accordingly, a fall in stock prices could cause an increase in pension expenses by reducing pension assets. 86 Mitsubishi Corporation Annual Report 2011 (4) Interest Rate Risk 4) Country Risk As of March 31, 2011, we had gross interest-bearing liabilities of We bear country risk in relation to transactions and investments approximately ¥4,257.6 billion. Because almost all of these liabili- with overseas companies in the form of delays or inability to ties bear floating interest rates, there is a risk of an increase in collect money or conduct business activities due to socioeco- interest expenses caused by a rise in interest rates. nomic conditions in the countries where they are domiciled. However, the vast majority of these interest-bearing liabilities We take appropriate risk hedging measures that involve, in are corresponding to trade receivables, loans receivable and principle, hedges via third parties through such means as taking other operating assets that are positively affected by changes in out insurance, depending on the nature of the project. Further- interest rates. Because a rise in interest rates produces an more, we have established a Country Risk Committee, under increase in income from these assets, while there is a time lag, which country risk is managed through a country risk counter- interest rate risk is offset. For the remaining interest-bearing measure system. The country risk countermeasure system clas- liabilities exposed to interest rate risk without such offsets, com- sifies countries with which we trade into six categories based on mensurate asset holdings such as investment securities, prop- risk money in terms of the sum total of the amount of invest- erty and equipment generate trading income as well as other ments, advances, and guarantees, and the amount of trade income streams such as dividends that are strongly correlated receivables, net of hedges, as well as creditworthiness by coun- with economic cycles. Accordingly, even if interest rates increase try (country rating). Country risk is controlled through the estab- as the economy improves, leading to higher interest expenses, lishment of risk limits for each category. we believe that these expenses would be offset by an increase in However, even with these risk hedging measures, it is difficult income from the corresponding asset holdings. to completely avoid risks caused by deterioration in the political, However, our operating results may be negatively affected economic, or social conditions in the countries or regions where temporarily if there is a rapid rise in interest rates because our customers, portfolio companies or we have ongoing projects. increased income from commensurate asset holdings would fail Such eventualities may have a significant impact on our operat- to offset the effects of a preceding increase in interest expenses. ing results. To monitor market movements in interest rates and respond flexibly to market risks, we established the ALM (Asset Liability Management) Committee. This committee establishes fund 5) Business Investment Risk procurement strategy and manages the risk of interest rate We participate in the management of various companies by fluctuations. acquiring equity and other types of interests. These business investment activities are carried out with the aim of increasing our commercial rights and deriving capital gains. However, we bear 3) Credit Risk various risks related to business investments, such as the pos- We extend credit to customers in the form of trade credit, includ- sible inability to recover our investments and exit losses and ing accounts receivables and advance payments, finance, guar- being unable to earn the planned profits. Regarding the manage- antees and investments due to our various operating ment of business investment risk, in the case of new business transactions. We are therefore exposed to credit risk in the form investments, we clarify the investment meaning and purpose, of losses arising from deterioration in the credit of or bankruptcy quantitatively grasp the downside risk of investments and evalu- of customers. Furthermore, we utilize derivative instruments, ate whether the investment return exceeds the minimum primarily swaps, options and futures, for the purpose of hedging expected rate of return, which is determined internally according risks. In this case, we are exposed to the credit risk of the coun- to the extent of the risk. After investing, we manage risk on an terparties to these derivative instruments. individual basis with respect to business investments to achieve To manage this risk, we have established credit and transac- the investment goals set forth in the business plan formulated tion limits for each customer as well as introduced an internal every year. Furthermore, we apply exit rules for the early sale of rating system. Based on internal rules determined by internal our equity interest or the liquidation of the investee in order to ratings and the amount of credit, we also require collateral or a efficiently replace assets in our portfolio. guarantee depending on the credit profile of the counterparty. While we follow strict standards for the selection and man- However, there is no guarantee that we will be able to com- agement of investments, it is difficult to completely avoid the risk pletely avoid credit risk with these risk hedging strategies. We of investments not delivering the expected profits. Therefore, we reduce transactions and take measures to protect our receivables may incur losses resulting from such actions as the withdrawal when there is deterioration in the credit condition of customers. from an investment. We also have a policy for dealing with bankrupt customers and work to collect receivables. However, failure to collect receivables and other credit could affect our operating results. 87 Mitsubishi Corporation Annual Report 2011 6) Risks Related to Specific Investments 8) Risks from Natural Disasters Investment in and Operations with A natural disaster, such as an earthquake, heavy rain or flood, Mitsubishi Motors Corporation which damages our offices, facilities or systems and affects Following requests from Mitsubishi Motors Corporation (MMC), employees could hinder sales and production activities. we injected equity totaling ¥140.0 billion in MMC from June 2004 We have established adequate countermeasures, having through January 2006 by subscribing to ordinary and preferred prepared an employee safety check system; disaster contin- MMC shares. We cooperate with MMC developing business at gency manual for business contingency plan (BCP) execution; sales companies mainly outside of Japan and across the related earthquake-proof measures for buildings, facilities or systems value chain. Our risk exposure to MMC proper was approxi- (including backup of data); and introduced a program of disaster mately ¥130.0 billion as of March 31, 2011. Our risk exposure in prevention drills. However, no amount of preparation of this sort connection with investments in businesses, finance, trade receiv- can completely avoid the risk of damage caused by a natural ables and other related business was approximately ¥240.0 disaster. Accordingly, damage from a natural disaster could affect billion as of March 31, 2011. Our total MMC-related risk expo- the Company’s operating results. sure, including both the aforementioned risk exposure to MMC The Great East Japan Earthquake in March 2011 did not proper and our risk exposure to related business, was thus result in any significant damage to the Company’s offices. around ¥370.0 billion as of March 31, 2011. However, this natural disaster may lead to an economic down- For the year ended March 2011, MMC posted consolidated turn, deterioration at many companies, and lower stock prices sales of ¥1,828.5 billion, operating profit of ¥40.3 billion and a and have other consequences. The Company’s operating net profit of ¥15.6 billion. results may be affected by losses on sale or write-downs of shareholdings or financial instruments, or deterioration in the credit condition of customers. 7) Risks Related to Compliance We are engaged in businesses in all industries through our many offices around the world. These activities subject us to a wide variety of laws and regulations. Specifically, we must comply with the Companies Act, tax laws, Financial Instruments and Exchange Act, anti-monopoly laws, international trade-related laws, environmental laws and various business laws in Japan. In addition, in the course of conducting business overseas, we must abide by the laws and regulations in the countries and regions where we operate. We have established a Compliance Committee, which is headed by a Chief Compliance Officer, who is at the forefront of our efforts to raise awareness of compliance. This officer also directs and supervises compliance with laws and regulations on a consolidated basis. Notwithstanding these initiatives, compliance risks cannot be completely avoided. Failure to fulfill our obligations under related laws and regulations could affect our businesses and operating results. 88 Mitsubishi Corporation Annual Report 2011 message from the chief compliance officer We will continue to upgrade and reinforce compliance initiatives so as to instill awareness of compliance issues in each and every officer and employee of MC and employees of MC's subsidiaries and affiliated companies. MC has long engaged in creating a framework to ensure that it continues to conduct proper and fair business activities, in addition to upholding legal and regulatory compliance. This longstanding commitment is based on the Three Corporate Principles, which encapsulate our corporate philosophy, and is stipulated in our Corporate Standards of Conduct. In September 2000, we formulated a Code of Conduct, and all officers and employees are required to carry a booklet containing this code. In addition, every year all officers and employees are required to sign a written commitment to this Code. Through these measures, we are ensuring legal and regulatory com- pliance by each and every employee, as well as instilling an awareness of proper conduct that reflects social norms. In another initiative, we intro- duced the Compliance Officer post and compliance officers have been appointed in all business groups and all regions in Japan and overseas. To assist their activities, we have also appointed compliance-related staff. Together, these people work to foster compliance in daily activities. The compliance activities of all officers and employees are the basis upon which we conduct all our corporate activities, as well as an important strat- egy for raising corporate value on a consolidated basis. From the base of the Hideyuki Nabeshima compliance activities conducted thus far, we will continue to upgrade and Member of the Board, reinforce compliance initiatives that are effective at instilling awareness of Senior Executive Vice President, compliance issues in each and every officer and employee of MC and Chief Compliance Officer, employees of MC’s subsidiaries and affiliated companies. CSR & Environmental Affairs compliance framework Mitsubishi Corporation President and CEO Appointment Compliance Committee Report Chairperson: Chief Compliance Officer Group CEO, Regional CEO Chief Compliance Officer Administration Office: Compliance Dept. Compliance Administration Office Appointment Directive Report Compliance Officer Internal Whistleblower System Group Compliance Officer Compliance Mail Box and Hotline Domestic Branch Compliance Officer Internal Audit Dept. Compliance Mail Box and Hotline Report Overseas Regional Compliance Officer Outside Legal Counsel Compliance Mail Box and Hotline Directive Report and Consultation Organization Heads Report and Consultation (BU, Division, Department, Branch, etc.) Directive Report and Consultation Employees Report and Subsidiaries and Affiliated Companies MC Group Consultation Outside Legal Counsel Compliance Immediate Manager Compliance Officer Mail Box and Hotline Report and Consultation Directive Report and Consultation Report and Consultation Employees Target: Registered Companies 89 Mitsubishi Corporation Annual Report 2011 sustainability at mc creating sustainable corporate value Aiming to Create Societal and Environmental Value Through Creating Sustainable Corporate Value Business Activities Environmental Economic Societal Our Corporate Standards of Conduct build upon the foundation Value Value Value of the Three Corporate Principles and establish our expectations with regard to how business should be conducted, encompass- ing aspects such as commitment to enriching society; respecting human rights and striving to protect and improve the global environment. We have also established an Environmental Char- Shareholders Community ter, which sets out our policy with respect to consideration for the Customers NPO/NGO natural environment. We conduct our business activities with Employees Government reference to all these policies and principles. Environmental and social issues have evolved over the years significantly and continue to change today. The Midterm Corpo- rate Strategy 2012 defines the creation of “sustainable corporate nt Respect for Human and value” as one of MC’s core goals. To achieve this goal through Addressing Climate Change me Indigenous People’s Rights Soc Preservation of Biodiversity our business activities, which span numerous industrial sectors, Sustainable Use of Resources Supply Chains Guidelines on Community Engagement we must be quick to grasp wide-ranging changes within the vir ial environment and society. Our aim is to generate societal and En environmental value while also making a contribution to address- Business Activities ing these issues through our business activities. As one action to achieve this, in 2010 Mitsubishi Corporation Governance began participating in the UN Global Compact. We have declared Strengthening of Management Supervision our commitment to the UN Global Compact’s universal principles Expediting and Bolstering Decision-Making and Business Execution in four fields: human rights, labor, the environment and anticorrup- tion. Guided also by the spirit of the Three Corporate Principles, we are promoting initiatives in each of these four fields. We are also focusing our efforts on creating societal and environmental value through social contribution activities and Mitsubishi Corporation Environmental Charter international contribution activities overseas. We believe it is important in promoting environmental and Corporate Social At Mitsubishi Corporation we consider the Earth itself to Responsibility (CSR) -related initiatives to incorporate feedback be our most important stakeholder and are continually from all stakeholders, based on an ongoing dialogue. working towards the realization of a sustainable society through our business activities. Actively Tackling Environmental Issues Based on the Envi- ■ We will strive to reduce greenhouse gas emissions by ronmental Charter continually implementing new efficiency measures and MC views efforts in regards to CSR and environmental affairs as embracing new technologies. one of its most important management issues. We are therefore ■ We will promote the sustainable use of natural resources actively engaged in promoting a range of initiatives aimed at including energy, minerals, food stocks and water realizing a sustainable society. These activities encompass every throughout our global business operations. aspect of our business activities. The cornerstone of these activi- ■ We recognize the critical importance of what ecosystems ties is our Environmental Charter, which we established in 1996. can provide and are committed to protecting ecosystems This charter clearly shows our basic stance regarding environ- and mitigating any potential impacts on biodiversity. mental affairs to all stakeholders. In 2010, we revised the Envi- ■ We will strive to create and enhance environmental ben- ronmental Charter, reflecting the fact that environmental efits by undertaking conservation activities and reducing awareness and issues evolve over time. This saw us add climate our environmental footprint. change, biodiversity, and the sustainable use of resources as ■ We will continue to actively engage and work with our new items reflecting their importance as environmental themes. various stakeholders openly and transparently and dis- Furthermore, we set out to create and improve environmental close information on the environmental impacts of our value, signaling our commitment to boosting businesses that business operations in an appropriate and timely manner. help preserve the environment and reduce environmental impacts. ■ We will conduct all of our activities in compliance with environmental laws while adhering to international rules and social standards. 90 Mitsubishi Corporation Annual Report 2011 CSR & Environmental Framework MC established the CSR & Environmental Affairs Committee as CSR & Environmental Framework an organization to discuss basic policy pertaining to environmen- tal affairs and CSR. Furthermore, we appointed a Senior Execu- Executive Committee tive Vice President in charge of CSR & Environmental Affairs with responsibility for supervising activities relating to environmental policies and philanthropic activities. Meanwhile, the CSR & Environmental Affairs Advisory Com- CSR & Environmental CSR & Environmental Affairs Advisory mittee, which is composed of outside experts, provides advice Affairs Committee Committee and recommendations regarding the MC Group’s CSR and envi- ronmental activities. MC greatly values the objective opinions of external specialists in helping to promote the development of business activities from a global perspective, as well as views from within the company. ESG Management of Loans and Investments As part of MC’s strategic decision-making process, all loan and investment proposals are examined by MC’s Executive Commit- tee. The screening and review process is an extensive one taking into account not only financial and legal risks but also environ- ment, social and governance (ESG) factors as well. Proposals for some projects are examined by the Board of Directors as well. Loan and investment decisions by the Executive Committee are based on advisory input from the Investment Advisory Committee, which in turn bases its advice on comments sub- mitted by specialized internal departments. The process in the Investment Advisory Committee is specifically guided by the following mechanisms: The CSR & Environmental Affairs Advisory Committee met twice in the year ended March 2011: April and October 2010. ■ Analysis of environmental and social impacts as well as governances system of loans and investments for all pro- Screening Process for Loan and Investment Proposals posals by the Corporate Staff Section and business groups. ■ Screening from an ESG perspective by the Corporate Board of Directors Administration Dept. and the CSR & Environmental Affairs Comment(s) Comment(s) Dept., and submission of opinion as necessary Executive Committee CFO Investment Advisory Committee Environmental and social screening takes into account Inter- Comment(s) national Finance Corporation (IFC) guidelines, Guidelines for Confirmation of Environmental and Social Considerations pub- Corporate Administration Dept., CSR & Proposal lished by the Japan Bank for International Cooperation (JBIC), Application Environmental Affairs Dept. and other guidelines. ■ ■ Environment (climate change, biodiversity, etc.) Community and Society (indigenous people, MC has also formulated a CSR checklist for consideration cultural heritage, etc.) ■ Human Rights and Labor (child labor, forced before advancing loan and investment proposals. In addition to Corporate Group labor, etc.) Corporate Development ■ Governance (management system, internal screening for environmental criteria, social criteria such as human Section control, etc.) rights and working conditions are also examined with careful consideration for each country or region’s unique circumstances. Socially Responsible Investment (SRI) Indices MC has earned a solid reputation for its past CSR and envi- ronmental affairs initiatives, and transparency in the disclosure of information. Underscoring this is MC’s inclusion in various socially responsible investment (SRI) indices. (As of August 2011) 91 Mitsubishi Corporation Annual Report 2011 key environmental and csr themes for mc Materiality Assessment MC has identified the following CSR and environmental issues as having high materiality in its business activities: climate change, biodi- versity, sustainable use of resources, pollution and accident prevention, human and labor rights, and rights of indigenous people. By helping to address these key issues through our business activities, we will create sustainable corporate value. Stakeholder Expectations and Concerns Impacts on MC ■ Advice from our CSR & Environmental Affairs Advisory Committee ■ Important internal measures/policies ■ Insight received from various NGOs and SRI indexes through ■ Creation of new business opportunities direct engagement ■ Ongoing risk management for business projects ■ Domestic and international media monitoring ■ Stricter laws and regulations ■ Developments within international treaties and conventions (climate change, biodiversity, etc.) Addressing Climate Change Preservation of Biodiversity As a company with many business MC benefits greatly from the services investees, MC views the strengthening that ecosystems provide in the many of carbon management on a consoli- regions worldwide where it promotes a dated and global basis to be an impor- broad spectrum of businesses. Accord- tant management theme. We recognize ingly, MC views efforts to maintain and that we have a responsibility to reduce preserve biodiversity as a vitally impor- our carbon footprint, and we are com- tant issue. mitted to harnessing our potential to develop systems and technologies to help communities and other industries to do the same. Respect for Human Rights and Sustainable Use of Resources MC’s Business Labor Rights MC is developing businesses in various MC is developing a diverse array of resource fields around the world, includ- Activities businesses around the world and as ing metals, energy, food and water. We part of this handles a multitude of therefore see efforts to use resources in products. We therefore see consider- a sustainable manner as an important ation for human rights, and labor rights, focus. particularly in our supply chains, as vitally important issues. Respect for Human and Indigenous Rights Pollution and Accident Prevention MC conducts activities in regions inhab- MC views efforts to prevent pollution and ited by indigenous peoples, particularly accidents as important from both environmen- where it is engaged in resource develop- tal and occupational health and safety per- ment projects. MC acknowledges the spectives. We work continuously to create unique social and legal status of indig- and manage systems toward this end. enous people under national and inter- national laws, conventions and declarations, as well as their unique histories and cultural contributions throughout the world. 92 Mitsubishi Corporation Annual Report 2011 creating environmental value Environmental Management System (EMS) reviewed parties, MC also used the reviews as the basis for MC is a hugely diverse organization, developing business developing numerical performance targets with suppliers and across the globe in a wide range of industries. We believe it is business investees as part of specific business development important to assess how our commodity trading operations, plans. Environmental reviews are also used as a tool for develop- global offices and business investees impact the environment. ing environmental management systems (EMS) for MC’s supply Doing so improves our ability to respond to global environmen- chains. tal issues such as climate change and biodiversity. Each busi- ness group and business unit, and domestic corporate center Addressing Climate Change (in charge of domestic branches and offices) has a senior man- MC recognizes that climate change is a pressing issue that ager in place who reports to the president and is responsible should be addressed on a global level. We believe that, while for environmental and CSR activities. These managers oversee tackling this issue will depend a great deal on the development the development of ISO 14001-compliant environmental man- and implementation of global climate regulatory frameworks, agement systems across MC. business leadership and technological innovation will also be vital MC also conducts surveys of environmental impacts, inter- in the move toward a lower carbon society. views and site visits to assess the status of environmental man- As a global business enterprise, we recognize that we have a agement at product suppliers, subcontractors and business responsibility to reduce our carbon footprint, and we are committed investees, as well as emergency response systems. The results to harnessing our potential to develop systems and technologies to of these environmental reviews are used to provide suggestions help communities and other industries to do the same. In June and requests to make further improvements in environmental 2011, the Mitsubishi Shoji Building, our headquarters, was certified performance, with the goal of reducing the environmental impact as an “Office Taking Excellent Specific Global Warming Counter- of all parties. measures” (a top-level office) by the Tokyo metropolitan govern- In the year ended March 2011, Head Office business groups ment. This recognizes the use of automated modulation of office conducted both environmental reviews of 10 commodity trading lighting, and a high-performance air-conditioning system, along operations and 12 business investees. Besides providing sug- with other aspects such as employee energy-saving initiatives. gestions and requests to reduce environmental impact of MC Environmental Performance (Non-consolidated, Japan) Electricity Consumption ✓ ■ Waste Production ✓ ■ CO2 Emissions ✓ ■ (Unit: Thousand kWh) (Unit: Tons) (Unit: Tons of CO2) 12,000 1,200 5,000 10,000 9,812 9,649 1,000 4,000 4,105 4,036 8,954 862 3,746 8,000 800 764 783 3,000 6,000 600 2,000 4,000 400 96.3% 95.7% 98.6% 2,000 200 1,000 0 0 0 09.3 10.3 11.3 09.3 10.3 11.3 09.3 10.3 11.3 ■ Head offices ■ Domestic branches and offices ■ Waste produced ■ Waste recycling rate ■ Head offices ■ Domestic branches and offices * Data for the years ended March 2009 and 2010 have * The increase in the year ended March 2010 was due * Converted from the left electricity consumption. been revised following the data collection for the year primarily to office relocation. * The conversion from electricity consumption to CO2 ended March 2011 emissions was performed using coefficients contained in The Greenhouse Gas Protocol (GHG Protocol) “GHG Emissions from Purchased Electricity Version 4.2” (WRI/ WBCSD) (Country: Japan, Year: 2006, Fuel mix: All) Paper Consumption ✓ ■ CO2 Emissions From Logistics ✓ ■ [Period] April 1, 2010 to March 31, 2011 (Unit: Thousand sheets) (Unit: Tons of CO2) [Policies and Standards] Information is provided in accordance with internal regulations such as the 100,000 100,000 Environmental Management Policy Regulations and the 83,874 80,000 82,253 80,562 80,000 83,500 Environmental Impact Evaluation Standards, and in 68,600 67,100 compliance with relevant environmental laws and 60,000 60,000 regulations. [Scope of Aggregation] The scope of all data provided is 40,000 40,000 for MC’s branches and offices in Japan. 20,000 20,000 * Head Offices: Mitsubishi Shoji Building, Marunouchi Park Building and some other offices in Tokyo. 0 0 * Domestic branches and offices: 6 Japan-based branches 09.3 10.3 11.3 09.3 10.3 11.3 and offices under the jurisdiction. * Electricity consumption: Excludes electricity of common areas of the Mitsubishi Shoji Building, etc. ■ Head offices ■ Domestic branches and offices * Data collected in compliance with the Act on the Rational Use of Energy in Japan and covers domestic (Japan) * Waste production: Aggregate for Head Offices only. * Copy paper consumption transport where MC is the cargo owner. * Paper consumption: Excludes paper consumption of some offices. 93 Mitsubishi Corporation Annual Report 2011 CO2 Emissions Assessment MC is working to reduce CO2 emissions in all aspects of its busi- Global Consolidated CO2 Emissions (Tons of CO2) ness activities, including office work and logistics. 2,000,000 1,827,778 MC has also been participating in the Carbon Disclosure Mitsubishi 1,500,000 1,393,277 Corporation Project (CDP)* since the year ended March 2004, pursuant to 1,340,963 which we disclose our CO2 emissions data as well as details on 1,000,000 Consolidated Subsidiaries how we are addressing the issue of climate change. Further- 500,000 more, we have requested third-party reviews of our CO2 emis- sions data on a global, consolidated basis in order to ensure the 09.3 10.3 11.3 integrity of CO2 emissions reporting. Environmental Efficiency Index: 17 12 11 As part of ongoing efforts to reduce our carbon footprint, in April Sales / CO2 Emissions ¥ million t-CO2 2009, MC embarked upon its “CO2 Action Project,” which is designed to promote the reduction of CO2 throughout our Japanese offices. The project requires each division and business group to set * Coverage: Indirect emissions from electricity consumption (Scope 2 GHG Protocol). * Boundary: MC and its consolidated subsidiaries (including sub-subsidiaries) specific reduction targets for its CO2 emissions on an annual basis. The reply rate was approximately 70%. * Method: Accounts for all (100%) CO2 emissions of consolidated subsidiaries. CO2 emissions (indirect CO2 emissions from electricity con- * References •The GHG Protocol “GHG emissions from purchased electricity” sumption) in the year ended March 2011 on a non-consolidated •CO2 Emissions from Fuel Combustion (International Energy Agency) basis were 3,746 tons, approximately 7.2% lower year on year. * The environmental efficiency index is calculated by dividing MC’s consolidated operating transactions by consolidated CO2 emissions on a global basis, with reference to the Furthermore, MC has begun conducting surveys of direct CO2 Environmental Reporting Guidelines (Fiscal 2007 version) published by the Ministry of the Environment of Japan. emissions from fuel consumption on a consolidated, global basis. CO2 emissions data is a voluntarily aggregated figure based on the above conditions (in Emissions in the year ended March 2011 were approximately terms of boundary, reply rate, etc.) Consolidated operating transactions and the scope of aggregation (boundary) do not completely match and are therefore for reference only. 1.83 million tons. * Carbon Disclosure Project (CDP): A project conducted in conjunction with institu- tional investors that requires major companies around the world to disclose their greenhouse gas emissions as well as climate change strategies. Contributing to a Low-Carbon Society Through Business MC is contributing to the creation of a low-carbon society Renewable Energy Share in Mitsubishi Corporation’s Equity Share of Power Generation through businesses such as transportation infrastructure and (units: MW) renewable energy development. Renewable energy As a measure of our dedication to this goal, in April 2010 we Renewable energy 1,000 established the Global Environment Business Development Group. 140 Overseen directly by the President & CEO, this group has integrated Year ending Mar. Year ended 2016 (Target) energy solutions businesses and overseas power generation Mar. 2011 Equity share of Equity share of power generation businesses initiatives with new energy and environment and water power generation 6,000 4,420 business, and is working to strengthen our focus on the global environment in infrastructure projects. Moreover, each business group is involved in developing technologies and business models Share of Renewable Share of Renewable that will contribute to the creation of a low-carbon society. These Energy 3% Energy 20% (approximate) (approximate) include carbon capture and storage, renewable energy, Clean Development Mechanisms (CDM), and electric vehicles. MC is jointly operating this solar photovoltaic power generation project in Moura, U.S.-based Diamond Generating Corporation, a wholly owned MC subsidiary, Portugal, with Spain’s ACCIONA S.A., one of the world’s leading renewable owns the Goshen II wind farm in the state of Idaho. energy companies. 94 Mitsubishi Corporation Annual Report 2011 Water Preservation of Biodiversity Drought, pollution and other issues affecting water supplies Humanity benefits greatly from the services that ecosystems replete worldwide are forecast to become more severe in the future due with diverse forms of life offer. These services are varied and multi- to economic growth and increasing populations, notably in the faceted. For example, ecosystems supply us with food and water, developing world. Changes in rainfall patterns due to global regulate climate and purify the water we drink. What enables all of warming are also expected to exacerbate this situation. The these benefits is biodiversity—the sum of the many varieties of life Midterm Corporate Strategy 2012 designates infrastructure and on Earth and the rich and balanced ecosystems that they form. global environmental businesses as Strategic Domains for the Similarly, MC benefits from the services that ecosystems entire MC Group. MC is making a contribution to addressing provide in the many regions worldwide where it promotes a water-related issues faced by countries around the world as a broad spectrum of businesses. Accordingly, MC views efforts to comprehensive water services provider with various international maintain and preserve biodiversity as a vitally important issue. operations in the water infrastructure sector. We are involved in For MC, the greatest stakeholder of all is the Earth itself. Recog- every aspect, from the maintenance, supply and recycling of nizing this, MC strives to mitigate the impact that its business activi- water resources to the integrated management of complete ties have on biodiversity, and seeks ways to contribute to water systems. Furthermore, MC discloses water-related activi- ecosystem conservation through its business and social contribu- ties through CDP Water Disclosure, an information disclosure tion activities. initiative under the CDP. Water Consumption ✓ ■ (Non-consolidated, Head Offices only) (m3) 50,000 48,005 43,385 40,000 32,853 30,000 20,000 10,000 Exportadora de Sal, S.A. de C.V. (ESSA), a salt manufacturer in 0 which MC and the Mexican government have equity interests of 09.3 10.3 11.3 49% and 51%, respectively, cooperates with the activities of WHSRN* such as surveys of bird species in the salt fields, observa- tion during the breeding seasons for Osprey and Peregrine Falcon, * Please refer to page 93 for period, policies and standards, and scope and maintenance and protection of nesting sites. of aggregation. * Western Hemisphere Shorebird Reserve Network (WHSRN) is a U.S.-based wild bird protection group. Environmental Partnerships MC provides ongoing philanthropic support to a number of projects aimed at conserving valuable global and Contributions ecosystems. Through such partnerships with NGOs and other groups we hope not only to make a lasting contribution to conservation, but also to provide opportunities for our employees to enhance their awareness and understanding of environmental issues. ■ Partnership With Earthwatch Institute ■ Global Coral Reef Conser- In 1993, we formed a partnership with the vation Project Earthwatch Institute, an international environ- Coral reefs play an important mental NGO that conducts programs that role in the marine ecosystem. engage volunteers in scientific field projects, with Since 2005, MC’s Global Coral the aim of helping to maintain and preserve Reef Conservation Project has biodiversity. MC employees take part in environ- conducted research at key mental survey and research work conducted by locations in Okinawa, Australia this organization around the world. The data and the Seychelles with the collected by MC employees in these projects cooperation of industry and academia, including universities and NGOs, supports the work of scientists and specialists. with the aims of maintaining the health of coral reefs, and developing and sharing technologies to revive them. Volunteers, including MC Group ■ Tropical Forest Regeneration Experimental Project employees, support survey and research activities. The project also Tropical forests are home to some of the world’s greatest biodiversity and includes holding academic conferences and seminars so the results of this their destruction is a serious environmental issue in the context of global work can be applied in coral reef conservation efforts globally. warming. Since the 1990s, we have run the Tropical Forest Regeneration Experimental Project. This project aims to regenerate tropical forest eco- ■ Charitable Foundations systems within 40-50 years, using intensive and mixed planting of trees Through Mitsubishi Corporation Foundation for the Americas (MCFA) and and plants indigenous to local areas to speed up the process of natural Mitsubishi Corporation Fund for Europe and Africa (MCFEA), we support regeneration. These efforts continue today through our ongoing initiatives in education and research on environmental protection activities and the Malaysia, Brazil and Kenya. Employee volunteers take part in tree-planting environment, and the promotion of efforts to mitigate poverty. trips to Malaysia where they interact with local people to gain a deeper understanding of tropical forest conservation. 95 Mitsubishi Corporation Annual Report 2011 creating societal value Respect for Human and Indigenous Rights Supply Chains MC believes that respect for human rights is a key component of MC regards supply chain management as being a vital part of CSR in the development of global business. Our Corporate Stan- corporate responsibility. We established a series of “CSR Action dards of Conduct incorporates respect for human rights, while Guidelines for Supply Chains” in February 2008, which we share our Code of Conduct stipulates clearly that we “will respect with all parties concerned. These guidelines are explained to new human rights,” “will not engage in discrimination on the basis of recruits and managers at various internal training sessions and to race, ethnicity, creed, religion, or other grounds,” and “will employees of overseas business sites and affiliated companies at respect the cultures, customs, and language of other countries seminars and other events. and regions.” MC also supports international norms and codes Supplier surveys and site visits also play an important role in regarding human rights, including the Universal Declaration of our supply chain management and provide a valuable opportu- Human Rights, the core labor standards of the ILO (International nity for us to communicate MC’s stance on CSR and environ- Labour Organization), and the Voluntary Principles on Security mental affairs. Moving forward, we plan to continue efforts to and Human Rights. ensure that our supply chain guidelines are embraced by over- In the context of our overall commitment to respecting human seas offices and MC Group companies, while eliciting the under- rights, MC pays special attention to business activities in regions standing and cooperation of suppliers on a global basis. inhabited by indigenous peoples to acknowledge their unique MC plans to make public on its website the results of supplier social and legal status under national and international laws, surveys and site visits in a timely manner. conventions and declarations, such as the International Labor Organization Convention 169 and the United Nations Declaration on the Rights of Indigenous Peoples. When examining new busi- CSR Action Guidelines for Supply Chains ness investment proposals, MC takes into consideration if and Mitsubishi Corporation conducts various trading models and how the business operations may impact indigenous peoples must manage supply chains according to the characteristics of and will consult with all relevant stakeholders to ensure that such each industry. In order to communicate Mitsubishi Corporation’s investment is made having regard to relevant international stan- stance regarding supply chains, the Company has established dards, and with full respect for the dignity, human rights, aspira- guidelines identifying the following key precepts it expects all suppliers to embrace, understand and abide by: tions, cultures and natural resource-based livelihoods of the indigenous peoples concerned. 1. Prevention of Forced Labor At MC, we have created a compliance framework to enforce 2. Prevention of Child Labor these policies and initiatives, as well as to ensure that we con- 3. Safe and Healthy Working Environments tinue to conduct proper business activities, in addition to uphold- 4. Freedom of Association ing legal and regulatory compliance. We work constantly to 5. Prevention of Discrimination improve and strengthen this framework. The Corporate Stan- 6. Prevention of Abuse & Harassment dards of Conduct and Code of Conduct are distributed to all 7. Regulated Working Hours employees and explained at various internal training sessions for 8. Suitable Remuneration new recruits and managers. 9. Consideration for Environmental Issues 10. Information Disclosure Supply Chain Field Surveys In September 2010, MC representatives visited the Minako factory of Saigon 3 Garment Joint Stock Company (SG3), a leading apparel manu- facturer based in Ho Chi Minh City, Vietnam. This site visit included interviews with the senior managers responsible for CSR issues and inspection of production facilities. Established in 1986 as an apparel manufacturer, SG3 employs 2,700 people (as of July 2010). The firm has been doing business with MC for over 10 years. The factory that was the focus of MC’s site inspection is primarily involved in the manufacture of jeans. At SG3, the on-site monitoring confirmed that the factory operations did not result in any significant emissions of wastewater containing by checks in place to verify the ages of all new recruits against personal harmful substances or greenhouse gases. No issues regarding potential identification to ensure all workers are 18 or over. In addition, the factory environmental impacts were identified. undergoes regular and stringent auditing with regard to environmental Managers at SG3 displayed a high level of awareness, as exemplified and social issues, mainly labor and human rights, by multiple customers. 96 Mitsubishi Corporation Annual Report 2011 MC’s Employees women from various nationalities, and employees who are MC’s greatest assets are its employees. MC has over 200 bases responsible for caring for children and other family members. MC of operations in approximately 80 countries around the world, believes that employee growth through friendly competition and including Japan, and has more than 500 subsidiaries and affili- diligence is essential to creating sustainable corporate value. To ates. Around 60,000 people work for the MC Group worldwide. this end, MC promotes varied measures designed to encourage Our basic human resources policy is to provide good jobs and further growth in its greatest asset, its human capital, and to working environments that maximize the skills and realize the create structures and environments that allow employees to potential of individual employees so that they can enhance their maximize their potential through meaningful work. value. MC’s HR policies on recruitment, training, assignment, For more details on Mitsubishi Corporation’s HR policies, please evaluation and remuneration are supplemented by programs visit the “Relationships with Employees” section of our website. designed to strengthen the organization and corporate culture, and to improve working environments. These programs form the core of efforts to develop and build MC’s human capital. Employee Data (Non-Consolidated) As a company with global business operations, we actively Employee Gender Composition develop our employees and promote equal employment oppor- tunities for our diverse workforce. Our global HR development Male 75% Female 25% functions comply with national laws and regulations while remain- ing sensitive to differences in working environments, among * Data as of March 31, 2011 other cultural aspects. MC also pursues a policy of proactive personnel development of employees at consolidated subsidiar- Proportion of Female Managers (Non-Consolidated) ies and overseas offices. (%) We provide individual employees with a variety of experiences 5.0 4.8 4.0 3.7 and career opportunities–a practice we believe invigorates 3.0 3.1 employees and the organization. Measures include staff rotation 2.4 2.0 1.9 between corporate departments and business groups, sending 1.0 staff recruited overseas to Japan on assignment or as trainees, 0 and transferring personnel between overseas bases. This system 2007 2008 2009 2010 2011 is applied to the consolidated MC Group all over the world. * Data as of April 1 in each year. MC is home to many types of employees, including men and Social Contribution Activities MC’s corporate culture is based on a fundamental desire to grow Number of “Tokens” for Volunteer Work together with local and international communities in order to con- tribute to building truly prosperous, sustainable societies around the world. With this in mind, we are engaged in a variety of ongoing 12,000 11,000 10,707 social contribution projects. Our employees play an active role in 10,000 these activities as MC continues to promote and support a wide 8,000 Contribution 6,000 6,221 by “tokens” variety of volunteer activities at our operations around the world. 4,000 ¥5,353,500 MC’s social contribution activities prioritize continual programs 2,000 2,085 and voluntary efforts by employees worldwide, mainly in the fields of the global environment, public welfare, education, culture and the 0 08.3 09.3 10.3 11.3 arts and international exchange. MC believes it is important for each and every employee to have a heightened awareness of MC makes donations to public welfare, educational and environmental contributing to society. For this reason, MC runs various programs NPOs or foundations based on a system of virtual “tokens.” Employees that encourage employees to participate in volunteer activities, earn virtual tokens for volunteering their time, with each token worth a including a volunteer leave system and a program where employees corporate donation of ¥500. Tokens are not only awarded for volunteer use their lunchtimes to conduct volunteer activities. work designated by MC, but also for activities undertaken independently by For more details on Mitsubishi Corporation’s social contribution employees during their private time away from work. activities, please visit the “Corporate Citizenship” section of our website. Year ended March 2011 (Non-Consolidated) No. of people taking No. of days of volunteer leave (cumula- tive no. of people): 77 volunteer leave taken: 95.5 days 97 Mitsubishi Corporation Annual Report 2011 ✓ ■ 98 Mitsubishi Corporation Annual Report 2011 csr & environmental affairs advisory committee MC’s CSR & Environmental Affairs Advisory Committee is made up of nine external experts. In the year ended March 2011, the committee held meetings in April and October 2010, and provided advice on the MC Group’s CSR and environmental activities. At the April 2011 meeting, the committee members expressed their views on supporting recovery efforts following the Great East Japan Earthquake. On creating sustainable societal and environmental value • MC needs to recognize that positive societal value also some- • We think that devising indicators to measure MC’s contribution times has a negative flipside in terms of impacts on protecting in terms of creating societal and environmental value is an biodiversity and climate change countermeasures. extremely difficult task. A vital consideration is the level of detail to apply. Given the broad range of businesses in which MC is On response to the March earthquake engaged, it is probably unrealistic to think that a single indica- • Our feeling is that many firms and individuals are now starting tor could be applied to every individual business. We believe to realize that they have to take specific action to assist in the the best approach might be to establish and employ some clean-up and recovery efforts. lowest-common-denominator indicators that would work • With its networks, we would like to see MC explain how Japan across every business and region. is moving forward and what the real situation is. We believe • To entrench the concept of creating sustainable societal and that is what MC needs to do to meet the expectations of environmental value in the company, we believe that MC must stakeholders. We would also like to see MC communicate make employees aware that this is not an extraordinary more about its contribution to efforts to restore people’s way of demand in terms of the quality of a business. life following this disaster. • The creation of indicators for environmental and CSR activities • We want to see MC make major contributions that will still be is a cutting-edge endeavor worldwide. Since MC’s operations remembered a century from now. Besides scholarships for have various positive and negative impacts, we think that it is university students, we think that MC should also take actions important for MC to try to provide related explanations and to bring some happiness to children and other victims, and to commentary. Rather than being concerned about how the give everybody hope. value might change from year to year, the evaluation horizon • It is important to respond to real needs that will be just as for any indicator must take into account the fact that initiatives relevant 10 years from now, rather than making some big take 10–20 years to generate results. gesture that is quickly forgotten. Members of the CSR & Environmental Affairs Advisory Committee James E. Brumm Eiichiro Adachi Executive Advisor, Takejiro Sueyoshi Chief, ESG Research Center Special Advisor to the UNEP Finance Mitsubishi International The Japan Research Institute, Ltd. Initiatives in the Asia Pacific Region Corporation Takeshi Okada Mizue Unno Director, Japan Football Association Managing Director, Peter D. Pedersen So-Tech Consulting, Inc. Chief Executive, E-Square Inc. Director, Global Environment Initiative Hiroshi Kito Yasushi Hibi Professor of Economic History Keiko Katsu Director of Japan Program, Freelance Newscaster Conservation International and Historical Demography, Sophia University Hideyuki Nabeshima (Chairperson) Senior Executive Vice President, CSR & Environmental Affairs 99 Mitsubishi Corporation Annual Report 2011 mc group’s response to the earthquake and tsunami in northeastern japan MC established the Crisis Response Office just 10 minutes after Japan’s reconstruction, making support for disaster victims our the earthquake struck, and immediately set out to gather up-to- top priority through the Mitsubishi Corporation East Japan Earth- date information on the safety of corporate officers and person- quake Recovery Fund (Refer to page 3). We are also addressing nel, the extent of the damage, and the impact on MC Group power shortages, as well as reviewing our Business Continuity businesses. The Crisis Response Office has been continuing to Planning (BCP). hold daily meetings. We mobilized company-wide efforts to Japan continues to face tough conditions as it deals with this gather information regarding damage at MC Group companies national crisis. Under these conditions, each and every employee and our partners, requests for emergency assistance, and other in the MC Group is doing what they can, including participating in information. We then formulated our response based on this volunteer activities in disaster-stricken areas and conserving information, and proceeded to take action. We prioritized the electricity. At the same time, through our business activities, we provision of emergency supplies in the disaster region, leveraging will do our part to get the Japanese economy moving again, our collective strengths to enable us to take swift action. At pres- since we believe that this will ultimately also contribute to the ent, we are harnessing our collective strengths to promote nation’s recovery. Volunteer Activities in Affected Areas Charity Auction Held to Support Recovery Efforts In association with a disaster volunteer center in Sendai MC has developed the Mitsubishi Corporation Art Gate City, teams of MC and MC Group volunteers will succes- Program (MCAGP) in order to support aspiring young sively undertake activities in the disaster area. Teams of 10 artists with their dreams of becoming professional artists. volunteers will be successively dispatched to the disaster On April 16, the MCAGP held a special charity auction at area for a period of 4 days. Plans call for some 1,200 the Mitsubishi Shoji Building in order to support recovery people to take part in these volunteer activities. efforts. The auction raised ¥4.12 million from art sales. All of these proceeds will be donated to support relief efforts. On May 4, a special charity bazaar was held at the TOKYO M.A.P.S event sponsored by J-WAVE that was taking place in the Roppongi Hills Arena. Eleven young artists who have been supported by the MCAGP sketched caricatures of customers and created other works on the spot, drawing everyone’s attention. The resulting sales will be used to support people who have been badly affected by the disaster. MC employee volunteers have helped with mud removal and clearing away the remnants of houses that were Special charity auction destroyed by the tsunami. 100 Mitsubishi Corporation Annual Report 2011 MC Group Company Emergency Support Efforts Related to Energy Supply 30 i-MiEV Electric Vehicles Provided Free to Earthquake- After the earthquake, the disaster-stricken region faced increasingly seri- Stricken Region ous shortages of fuel, especially gasoline. After receiving requests from the The situation in disaster-stricken areas was compounded by serious Japanese government and local authorities in the area, petroleum prod- fuel shortages. In response to these circumstances, an entirely new ucts wholesaler Mitsubishi Shoji Sekiyu Co., Ltd. decided to begin emer- form of disaster relief has been introduced: electric cars. With gasoline gency shipments of fuel on March 19 to Fukushima Prefecture’s shortages persisting, local government workers in many areas still Headquarters for Emergency Disaster Response. These represented the have only limited means of transportation for reaching evacuation first fuel shipments in the area after the onset of the disaster. A crew of centers. Therefore, MC has loaned out 30 i-MiEVs made by Mitsubishi employees at Onahama Petroleum of Fukushima, which stockpiles and Motors Corporation to local governments free of charge. supplies oil and petroleum products, volunteered to handle these emer- The i-MiEVs were delivered to local governments in early April. In gency shipments from Mitsubishi Shoji Sekiyu. Mitsubishi Shoji Sekiyu has response to requests from local governments, MC also carried out also been focusing on providing humanitarian aid and contributing to electrical work in order to secure power sources for charging these society. These actions have included the provision of fuel, such as kero- vehicles. The vehicles sene for consumers, and fuel oil for hospitals and gasoline for vehicles. are now being used to MC also procured emergency supplies of LNG, LPG and oil. A link local disaster special taskforce for emergency procurement of LNG was established response headquar- on the night of the earthquake. MC worked to secure supplies for ters with those afflicted power companies with the cooperation of business partners and areas that are located suppliers in Japan and overseas. MC procured emergency supplies of in their respective oil for power companies and disaster-stricken areas from Indonesia, jurisdictions. Africa, and nearby Asian countries. i-MiEVs on the road in the Town of Onagawa, which sustained extensive damage Distribution of Medical Supplies & Pharmaceuticals MC Healthcare (MCH) provides inventory control services for medical Providing Emergency Water Supplies & Restoring Water-Related supplies and pharmaceuticals, while at the same time leveraging its Infrastructure nationwide network of supply centers. The company provides medi- Swing Corporation* has supplied equipment to most of the water cal supplies and pharmaceuticals to 11 hospitals in the disaster area, treatment plants in the disaster area—some 350 in all—and has also including some that were damaged by the tsunami. operated and maintained these facilities at approximately 40 loca- Immediately after the earthquake, MCH began collecting medical tions. The company’s workforce was bolstered with support staff from supplies and pharmaceuticals from across its nationwide network of its head office and other locations around Japan. Swing has made 33 supply centers. On March 13, two days after the disaster, five company-wide efforts to provide emergency water supplies and employees departed the Kanto area in trucks loaded with supplies, restore water-related infrastructure in disaster-stricken areas. later arriving in Ishinomaki, one of the areas that had suffered exten- In order to provide emergency water supplies to areas that were sive damage. These trucks are said to have been the first deliveries without water service, and to supply the water necessary for restora- of medical supplies to reach this area after the disaster. The distribu- tion work, Swing Corporation has successively installed emergency tion system at the Sendai Supply Center was not functioning, but water-supply units with a total daily supply capacity of approximately employees manually carried out the delivery of supplies. While many 600 tons over an expanding area. At the same time, Swing also hospitals in disaster-stricken areas have experienced shortages of promptly initiated restoration work at the large water treatment facili- pharmaceuticals and other supplies, MCH has continued to make ties in Miyagi Prefecture that had sustained the most extensive deliveries thanks to the efforts of its spirited employees and the damage. In addition to company’s nationwide system of inventory management. Further- draining water and more, in response to conducting emergency requests from hospi- repairs to equipment at tals, the company also these sites, the company provided supplies of has worked on the everyday goods and restoration of sewage other commodities treatment facilities in that it had procured other areas. from across Japan. The emergency water-supply unit set up in the Abukuma area. * Formerly known as Ebara Engineering Service Co., Ltd., Swing aims to provide The Sendai Supply Center immediately after the comprehensive water services. Since April 2010, Swing has been jointly run by Ebara earthquake Corporation, JGC Corporation and MC. The company was renamed Swing Corporation in April 2011. 101 Mitsubishi Corporation Annual Report 2011 international advisory committee international advisory committee: purpose, function and recent news MC’s International Advisory Committee was established in 2001 The committee held its 10th meeting in October 2010. The with the aim of strengthening the Board of Directors’ functions. It committee discussed the direction MC should head amid has met once a year since it was established. Committee mem- increasing uncertainty in developed nations, despite the worst bers offer advice and recommendations on management of MC’s period of the global financial crisis being over for the global econ- global businesses from the perspective of enhancing governance, omy two years after it began as a financial crisis in the U.S. and on corporate strategy from an international standpoint. The committee members also report and exchange opinions on the geopolitical and economic conditions in their respective regions. International Advisory Committee (As of October 18, 2010) front row from left back row from left Dr. Herminio Blanco Mendoza Sir John Bond Ryozo Kato Former Secretary of Trade & Industry (Mexico) Chairman, Xstrata plc (U.K.) Member of the Board 1985 Deputy Secretary, Ministry of Commerce and 1993 Group Chief Executive of HSBC Holdings Industrial Promotion 1998 Group Chairman of HSBC Holdings 1988 Chief of Negotiation of NAFTA Treaty 2006 Chairman of Vodafone Group Minoru Makihara 1994 Secretary of Commerce and Industrial 2011 Chairman of Xstrata plc Senior Corporate Advisor Promotion ~ 2000 Mr. Jaime Augusto Zobel de Ayala II Mikio Sasaki Professor Joseph S Nye Chairman and CEO, Ayala Corporation (the Philippines) Former Chairman University Distinguished Service Professor and Sultan of Senior Advisor to the Board 1987 MBA, Harvard Oman Professor (U.S.A.) 1994 President & CEO, Ayala Corporation 1993 Chairman of the National Intelligence 2006 Chairman & CEO, Ayala Corporation Yorihiko Kojima Council Chairman of the Board 1994 Assistant Secretary of Defense for International Security Affairs 1995 Dean of Harvard’s Kennedy School of Government (~ 2004) Ken Kobayashi University Distinguished Service Professor Member of the Board, President, Chief Executive Officer Mr. Ratan N Tata Chairman, Tata Sons Limited (India) Hidehiro Konno Member of the Board 1975 Harvard AMP 1981 Chairman of Tata Industries Ltd. 1991 Chairman of Tata Sons Limited Note: Positions are as of August 1, 2011. 102 Mitsubishi Corporation Annual Report 2011 letter from an international advisory committee member July 2011 This is especially likely in the competition to secure natural resources given rising resource nationalism worldwide. This Dear Stakeholders competition, in fact, is widely predicted to heat up with no end in sight. Companies from countries like China and South Korea, I have served as a member of the International Advisory Commit- with government backing behind them, are aggressively entering tee since it was established in 2001. Each of our meetings has the fray. been host to lively debates and discussions on approaches to While certain countries in the region may present obstacles, organizational structure and human resources, and business including social problems such as underdeveloped infrastructure development in emerging markets, all from a global perspective. and poverty, as well as political instability, these are not the rea- The diverse background of the committee members brings a sons to hesitate and miss out on clear business opportunities. variety of viewpoints to the discussion regarding vital topics and Mitsubishi Corporation has developed its global business and a range of advice is offered to management, which I believe has chalked up many accomplishments over the years by joining been beneficial for Mitsubishi Corporation in its global business forces with prominent local partners. The insights it has gained in developments efforts. the process will prove invaluable in Latin America. At the 10th International Advisory Committee meeting last When pursuing business not only in Latin America but all year, the debate centered on the medium- to long-term outlook emerging markets, encouraging employees to gain insight into for the global economy. The backdrop to the discussion was the how things operate on the ground is one point that must not be steady and continued economic growth in emerging markets, in forgotten. Along with showing due respect to the history and contrast to the shadow of uncertainty being cast over growth in culture of each respective country and region, Mitsubishi Corpo- developed countries by protracted problems of unemployment ration should work vigorously to take advantage of local talented and financial uncertainty in Europe. Debate also turned to Mid- human resources. These two steps together should go far in term Corporate Strategy 2012 announced in July 2010, where making success a more likely outcome. In terms of business we shared input on the direction in which Mitsubishi Corporation potential, one can imagine Mitsubishi Corporation partnering with appears to be headed. The highly knowledgeable opinions a Japanese company with outstanding technology to produce expressed by the committee members were invaluable for under- high-quality Japanese products in Latin America. Japanese standing economic circumstances and business in each region, products have earned a strong reputation for their energy effi- and will likely play a critical role in helping to decide Mitsubishi ciency and environmental performance, and so can be expected Corporation’s course going forward. to enjoy market acceptance. Mitsubishi Corporation can also Initiatives targeting emerging markets hold a greater impor- contribute to local society by creating employment opportunities tance than ever before for Mitsubishi Corporation. A case in point and through technology transfer. is Latin America. This massive consumer market is made up of For my part, I hope that my own insight and networks in Latin 20 countries and has a population of over 500 million. Some of America may contribute to the success of Mitsubishi Corpora- the countries are also supply sources for the world’s resources. tion’s endeavors in the region. Examples include crude oil from Brazil, Colombia, Mexico and Venezuela, iron ore from Brazil, copper from Peru and Chile, and Yours Sincerely, grains from Argentina and Brazil. In recent years, the prevailing political and economic climate has become increasingly more conducive for business. Already, intra-regional trade is extremely active via a number of free-trade agreements (FTAs) with multiple countries in other regions. In this context, Mitsubishi Corporation has identified Brazil as one of its Strategic Regions, and is advancing a host of businesses there. But in order to capture the high growth expected for Latin America as a whole, Mitsubishi Corporation will also have to vigilantly monitor trends in the surrounding countries with which Brazil has deep economic ties. Undoubt- edly, Mexico is a country with a clear logistics and energy com- petitive advantage in North America and it will keep on forging every significant business opportunity possible. Business in Dr. Herminio Blanco Mendoza Latin America will invariably see competition grow more intense. Former Secretary of Trade & Industry (Mexico) 103 Mitsubishi Corporation Annual Report 2011 members of the board (As of July 1, 2011) Yorihiko Kojima Ken Kobayashi* Jun. 2010 Chairman of the Board (Present Position) Jun. 2010 Member of the Board, President and CEO Apr. 2004 Member of the Board, President and CEO (Present Position) Jun. 2001 Member of the Board, Senior Executive Apr. 2010 Senior Executive Vice President, Executive Vice President, Group CEO, New Business Assistant to President Initiative Group Jun. 2008 Retired as Member of the Board Apr. 2001 Executive Vice President, Director, Group Executive Vice President, Group CEO, CEO, New Business Initiative Group Industrial Finance, Logistics & Apr. 2000 Managing Director, Group CEO, New Development Group Business Initiative Group Jun. 2007 Member of the Board, Executive Vice Apr. 1999 Managing Director, Chief Business President, Group CEO, Industrial Finance, Development and Coordination Officer Logistics & Development Group (Concurrently) Division COO, Financial Apr. 2007 Executive Vice President, Group CEO, Services Div. Industrial Finance, Logistics & Apr. 1998 Managing Director, Administration [A] Development Group Apr. 1997 Managing Director, Administration Apr. 2006 Senior Vice President, Division COO, Ship, Feb. 1996 Director, Development & Coordination Aerospace & Transportation Systems Div. Jun. 1995 Director, General Manager, Corporate Jun. 2004 Senior Vice President, Division COO, Plant Planning Office Project Div. May 1965 Joined Mitsubishi Corporation (MC) Apr. 2003 Senior Vice President, General Manager, Singapore Branch Jul. 1971 Joined MC Ryoichi Ueda* Masahide Yano Apr. 2010 Member of the Board, Senior Executive Apr. 2011 Member of the Board, Senior Executive Vice President, Chief Financial Officer, Vice President, Regional CEO, East Asia Developing MC Group Management (Concurrently) President, Mitsubishi Foundations (Present Position) Corporation China Co., Ltd. (Present Jun. 2009 Member of the Board, Executive Vice Position) President, Chief Financial Officer Jun. 2010 Member of the Board, Senior Executive Apr. 2009 Executive Vice President, Chief Financial Vice President, Group CEO, Living Officer Essentials Group, Regional Strategy Apr. 2008 Executive Vice President, Executive Vice (Japan) President, Americas (Concurrently) Apr. 2010 Senior Executive Vice President, Group President, MIC CEO, Living Essentials Group, Regional Apr. 2006 Executive Vice President, Regional CEO for Strategy (Japan) North America (Concurrently) President, Apr. 2008 Executive Vice President, Group CEO, MIC Living Essentials Group Mar. 2006 Senior Vice President, Regional CEO for Apr. 2006 Executive Vice President, Group COO, North America (Concurrently) President, Living Essentials Group (Concurrently) Mitsubishi International Corporation (MIC) Division COO, Life Style Div. Apr. 2003 Senior Vice President, Controller Apr. 2004 Senior Vice President, Division COO, Apr. 1973 Joined MC Textiles Div. Apr. 1971 Joined MC Hideyuki Nabeshima* Hideto Nakahara* Jul. 2011 Member of the Board, Senior Executive Apr. 2011 Member of the Board, Senior Executive Vice President, Corporate Functional Vice President, Corporate Functional Officer (Corporate Communications, Officer (Corporate R&D & Global Strategy) Corporate Administration, Legal & Human (Present Position) Resources), Chief Compliance Officer, CSR Apr. 2010 Member of the Board, Executive Vice & Environmental Affairs, Chief Information President, Corporate Functional Officer Officer (Present Position) (Corporate R&D & Global Strategy) Apr. 2011 Member of the Board, Senior Executive Jun. 2009 Member of the Board, Executive Vice Vice President, Corporate Functional President, Corporate Functional Officer Officer (Corporate Communications, (Global Strategy), Regional Development Corporate Administration, Legal & Human Apr. 2009 Executive Vice President, Corporate Resources), Chief Compliance Officer, CSR Functional Officer (Global Strategy), & Environmental Affairs Regional Development Jun. 2010 Member of the Board, Senior Executive Apr. 2007 Executive Vice President, Chief Vice President, Group CEO, Business Representative for China (Concurrently) Service Group, Corporate Functional President, Mitsubishi Corporation China Officer (Corporate Communications), Chief Co., Ltd. Compliance Officer, CSR & Environmental Apr. 2006 Senior Vice President, Chief Representative Affairs for China (Concurrently) President, Apr. 2010 Senior Executive Vice President, Group Mitsubishi Corporation China Co., Ltd. CEO, Business Service Group, Corporate Apr. 2004 Senior Vice President, CEO, Mitsubishi Functional Officer (Corporate Corporation European Headquarter Communications), Chief Compliance (Concurrently) Chairman and Managing Officer, CSR & Environmental Affairs Director, Mitsubishi Corporation Jun. 2008 Retired as Member of the Board International N.V. (Concurrently) Managing Executive Vice President, Group CO-CEO, Director, Mitsubishi Corporation (UK) PLC Machinery Group Apr. 1973 Joined MC Jun. 2007 Member of the Board, Executive Vice President, Group CO-CEO, Machinery Group Apr. 2007 Executive Vice President, Group CO-CEO, Machinery Group Apr. 2004 Senior Vice President, General Manager, Corporate Planning Dept. Apr. 1972 Joined MC 104 Mitsubishi Corporation Annual Report 2011 Kiyoshi Fujimura Yasuo Nagai* Apr. 2010 Member of the Board, Executive Vice Apr. 2011 Member of the Board, Executive Vice President, Audits & Internal Control President, Regional Strategy (Japan) (Present Position) (Concurrently) General Manager, Kansai Apr. 2009 Member of the Board, Executive Vice Branch (Present Position) President, Corporate Functional Officer Jun. 2010 Member of the Board, Executive Vice (BPI & Internal Control), IT Service President, Regional Strategy (Japan) Development (CIO) (Concurrently) General Manager, Kansai Jun. 2008 Member of the Board, Executive Vice Branch President, Corporate Functional Officer Apr. 2010 Executive Vice President, Regional (CIO, BPI & Internal Control) Strategy (Japan) (Concurrently) General Apr. 2008 Executive Vice President, Corporate Manager, Kansai Branch Functional Officer (CIO, BPI & Internal Apr. 2007 Senior Vice President (“Riji”), Division COO, Control) Power & Electrical Systems Div. Jun. 2007 Senior Vice President, Corporate Apr. 1977 Joined MC Functional Officer (CIO & CISO), Senior Assistant to BPI and Internal Control Jun. 2003 Corporate Auditor (full time) Apr. 1972 Joined MC Tamotsu Nomakuchi** Kunio Ito** Apr. 2009 President, National Institute of Advanced Jun. 2007 Member of the Board, MC (Present Position) Industrial Science and Technology (Present Dec.2006 Professor in Postgraduate School of Position) Hitotsubashi University’s Department of Jun. 2007 Member of the Board, MC (Present Position) Commerce and Management (Present Apr. 2006 Chairman, Mitsubishi Electric Corporation (April Position) 2009: Director, Mitsubishi Electric Corporation; Dec.2004 Associate Chancellor and Director, Hitotsubashi University June 2010: Retired as Director of Mitsubishi Aug.2002 Professor in Postgraduate School of Electric Corporation) Hitotsubashi University, Head of Department Jun. 2003 President and CEO, Mitsubishi Electric of Commerce and Management Corporation Apr. 1992 Professor in Hitotsubashi University’s Apr. 2002 President, Mitsubishi Electric Corporation Department of Commerce and Jun. 1995 Director, Mitsubishi Electric Corporation. Management Successively held posts of Executive Officer Apr. 1980 Lecturer, Assistant in Hitotsubashi and Senior Vice President University’s Department of Commerce and Apr. 1965 Joined Mitsubishi Electric Corporation Management Successively held posts of Assistant Professor in Hitotsubashi University’s Department of Commerce and Management Kazuo Tsukuda** Ryozo Kato** Jun. 2008 Member of the Board, MC (Present Jun. 2009 Member of the Board, MC (Present Position) Position) Apr. 2008 Chairman, Mitsubishi Heavy Industries, Ltd. Aug.2008 Corporate Advisor, MC (Present Position) Jul. 2008 Commissioner, Nippon Professional Jun. 2003 President, Mitsubishi Heavy Industries, Ltd. Baseball (Present Position) Apr. 2002 Managing Director, Mitsubishi Heavy Jun. 2008 Retired from the Ministry of Foreign Affairs Industries, Ltd. of Japan Jun. 1999 Director, Mitsubishi Heavy Industries, Ltd. Apr. 1965 Joined the Ministry of Foreign Affairs of Apr. 1968 Joined Mitsubishi Heavy Industries, Ltd. Japan Successively held the posts of Director- General, Asian Affairs Bureau, Director, General Affairs, Director Foreign Policy, and Ambassador to the U.S. Hidehiro Konno** Jun. 2010 Member of the Board, MC (Present Position) Jan. 2010 Corporate Advisor, MC Feb. 2003 Chairman and CEO, Nippon Export and Investment Insurance (Retired in July 2009) Jul. 2002 Retired from MITI Apr. 1968 Joined Ministry of International Trade and Industry (MITI) Successively held posts of Director- General, Commerce and Distribution Policy, Director-General, International Trade Administration Bureau, Director-General, International Trade Policy Bureau and Vice- Minister for International Affairs * Indicates a representative director. ** Indicates an outside director as provided for in Article 2-15 of the Companies Act. 105 Mitsubishi Corporation Annual Report 2011 corporate auditors (As of July 1, 2011) Yukio Ueno Shigeru Nakajima* Jun. 2010 Senior Corporate Auditor (full time) (Present Jun. 2004 Corporate Auditor, MC (Present Position) Position) Nov. 1984 Admitted to the Japan Patent Attorneys Apr. 2007 Member of the Board, Senior Executive Vice Association President, Corporate Functional Officer Apr. 1983 Founded Nakajima Transaction Law Office (Corporate Communications, Corporate (Present Position) Administration & Legal), Chief Compliance Apr. 1979 Admitted to the Japan Bar Officer, Regional CEO for Japan Apr. 2005 Member of the Board, Senior Executive Vice President, Regional CEO for Kansai Block (Concurrently) General Manager, Kansai Branch, Regional Officer for Japan. Oct. 2001 Executive Vice President, General Manager, Corporate Planning Dept. Apr. 2001 Managing Director, General Manager, Corporate Planning Dept. Jun. 1998 Director, General Manager, President Office Apr. 1968 Joined MC Osamu Noma Eiko Tsujiyama* Jun. 2011 Corporate Auditor Jun. 2008 Corporate Auditor, MC (Present Position) Apr. 2010 Senior Vice President (“Riji”), General Apr. 2003 Professor, Graduate School of Commerce, Manager, Corporate Auditors’ Office Waseda University (Present Position) Apr. 1978 Joined MC Apr. 1991 Professor, Faculty of Economics, Musashi Successively held posts of Division COO, University (Retired Mar. 2003) Merchant Banking, M&A Division, General Apr. 1985 Assistant Professor, Faculty of Economics, Manager, Corporate Auditors’ Office Musashi University Aug. 1980 Assistant Professor, Humanities Department, Ibaraki University (Retired Mar. 1985) Apr. 1977 Lecturer, Humanities Department, Ibaraki University Eisuke Nagatomo* Jun. 2008 Corporate Auditor, MC (Present Position) Apr. 2008 Visiting Professor, Graduate School of Commerce, Waseda University (Present Position) Oct. 2007 President and CEO, EN Associates Co., Ltd. (Present Position) Dec. 2005 Managing Director, Chief Regulatory Officer, Tokyo Stock Exchange, Inc. (Retired in Jun. 2007) Jun. 2003 Managing Director, Tokyo Stock Exchange, Inc. Nov. 2001 Executive Officer, Tokyo Stock Exchange, Inc. Apr. 1971 Joined Tokyo Stock Exchange * Indicates an outside corporate auditor as provided for in Article 2-16 of the Companies Act. message from the board of corporate auditors MC’s Board of Corporate Auditors has three outside corporate audi- state of affairs. The Board of Corporate Auditors works closely with tors and two full-time in-house corporate auditors who are former MC’s independent auditors and Internal Audit Department, holding MC employees. Each of the outside corporate auditors has a field of regular meetings and sharing opinions. expertise. Besides attending meetings of the Board of Directors and Furthermore, corporate auditors visit main subsidiaries and affili- Board of Corporate Auditors, the outside corporate auditors meet ates and hold discussions with directors and other management with MC’s independent auditors, directors and executive officers in personnel of these entities. At the same time, we regularly exchange order to accurately grasp the current state of affairs. Based on this information with full-time auditors of main subsidiaries and affiliates, information, they actively express opinions from a neutral and objec- using these meetings as a forum to share MC’s management policy tive standpoint. The two full-time in-house corporate auditors draw in our efforts to create an environment conducive to auditing the on their experience working at MC to fulfill their responsibilities. One corporate group. of them serves as the senior corporate auditor, who chairs the Board In addition, we create opportunities to hold discussions with of Corporate Auditors and is also the specified corporate auditor respected individuals from outside the company who give us their stipulated by law. MC also has a Corporate Auditors’ Office to assist expert opinions. These external perspectives are put to good use in the activities of the corporate auditors, as an independent organiza- MC’s audit activities. tional body. The 5-member dedicated staff of the Corporate Auditors’ Through these activities, we audit directors’ decision-making Office provide assistance as required. process and their performance of duties based on the Companies Corporate auditors and staff of the Corporate Auditors’ Office Act and other laws and regulations, MC’s Articles of Incorporation attend important in-house meetings, and visit and hold discussions and internal rules and regulations. By requesting improvements and with internal departments, including important offices in Japan and providing advice as necessary, we seek to help ensure MC’s healthy, overseas, so as to keep channels of communication open with sustained growth and contribute to the establishment of a corporate people in the company and in doing so correctly assess the current governance system that earns society’s trust. 106 Mitsubishi Corporation Annual Report 2011 executive officers (As of July 1, 2011) Ken Kobayashi** Nobuaki Kojima Yasuyuki Sakata Yasuhito Hirota President & Group CEO, Senior Assistant to Regional CEO, Senior Assistant to Chief Executive Ofﬁcer Global Environment East Asia, Corporate Functional Ofﬁcer, Business Development Group (Concurrently) (Concurrently) President, General Manager, Senior Executive Vice Masayuki Mizuno Mitsubishi Corporation Corporate Administration Dept. Presidents Regional CEO, (Hong Kong) Ltd. Asia & Oceania, Hajime Hirano Ryoichi Ueda** (Concurrently) Yasuyuki Sugiura Division COO, Chief Financial Ofﬁcer, General Manager, Executive Vice President, Petroleum Business Div. MC Group Management Jakarta Liaison Ofﬁce Mitsubishi International Foundations Development Corporation Yuichi Hiromoto Seiji Shiraki Division COO, Asset Finance & Masahide Yano* Regional CEO, Shuma Uchino Business Development Div. Regional CEO, East Asia, Latin America General Manager, (Concurrently) Corporate Accounting Dept., Kanji Nishiura President, Toru Moriyama (Concurrently) Division COO, Mitsubishi Corporation Group CEO, Senior Assistant to Corporate Non-Ferrous Metals Div. China Co., Ltd. Living Essentials Group Functional Ofﬁcer Tatsuya Kiyoshi Hideyuki Nabeshima** Yasuo Nagai** Toshimitsu Urabe Division COO, Corporate Communications, Regional Strategy (Japan), Senior Assistant to Corporate Commodity Chemicals Div. A Corporate Administration, (Concurrently) Functional Ofﬁcer Legal & Human Resources, General Manager, Kazuya Mizuno Chief Compliance Ofﬁcer, Kansai Branch Morikazu Chokki President & CEO, CSR & Environmental Affairs, Division COO, KOHJIN Co., Ltd. Chief Information Ofﬁcer Ichiro Ando Isuzu Business Div. Group CEO, Yasuhiko Kitagawa Hideto Nakahara** Business Service Group Keiichi Asai General Manager, Global Strategy Division COO, Global Strategy & & Business Development Environmental & Coordination Dept. Senior Vice Presidents Water Business Div. Executive Vice Presidents Kenji Yasuno Tetsuro Kuwabara Ichiro Miyahara General Manager, Senior Assistant to Group CEO, Division COO, Singapore Branch Hideshi Takeuchi Energy Business Group Development & Group CEO, Construction Project Div. Industrial Finance, Logistics Hidemoto Mizuhara Chikara Yamaguchi President, Director, & Development Group Senior Assistant to Regional CEO, Kozo Shiraji PT. Krama Yudha Tiga Berlian East Asia, Division COO, Motors. Jun Yanai (Concurrently) Motor Vehicle Business Div. Group CEO, President, Energy Business Group Junichi Iseda Mitsubishi Corporation Shunichi Matsui Division COO, (Shanghai) Ltd. President, Natural Gas Business Div. B Shosuke Yasuda Mitsubishi International G.m.b.H., General Manager, Hironobu Abe (Concurrently) Hiroshi Sakuma Nagoya Branch General Manager, Senior Assistant to Regional CEO, Deputy Division COO, Kyushu Branch Europe-CIS, New Energy & Power Jun Kinukawa Middle East & Africa Generation Div. Group CEO, Tomohiko Fujiyama Metals Group Senior Assistant to Morinobu Obata Iwao Toide Corporate Functional Ofﬁcer Division COO, Division COO, Kiyoshi Fujimura* Textiles Div. Ferrous Raw Materials Div. Audits & Internal Control Shigeaki Yoshikawa Chief Regional Ofﬁcer, Kenji Tani Kazuyasu Misu Osamu Komiya Middle East President, Head of Living Essentials Group CEO, Mitsubishi Corporation Group for China Machinery Group Koichi Narita Unimetals Ltd. President, SIGMAXYZ Inc. Seiei Ono Takehiko Kakiuchi Regional CEO, Keiichi Nakagaki General Manager, North America, Chairman & Managing Living Essentials Group CEO (Concurrently) Director, Ofﬁce, President, Mitsubishi Corporation (Concurrently) Mitsubishi International India Pvt. Ltd. Division COO, Corporation Foods (Commodity) Div. Eiichi Tanabe Takahisa Miyauchi General Manager, Kazushi Okawa Group CEO, Industrial Finance, Division COO, Chemicals Group Logistics & Development Infrastructure Project Div. Group CEO Ofﬁce Tetsuro Terada Yoshihiko Kawamura Regional CEO, Takahiro Mazaki Division COO, Europe-CIS, Ofﬁcer for E&P, IT Service Business Div. Middle East & Africa, Energy Business Group (Concurrently) Managing Director, Mitsubishi Corporation International (Europe) Plc. * Represents members of the Board ** Represents representative directors 107 Mitsubishi Corporation Annual Report 2011 corporate data (As of March 31, 2011) Mitsubishi Corporation Contact: Date Established: July 1, 1954 Investor Relations Department, (Date Registered: April 1, 1950) Mitsubishi Corporation 3-1, Marunouchi 2-chome, Capital: ¥203,598,076,906 Chiyoda-ku, Tokyo 100-8086, Japan Shares of Common Stock Issued: Telephone: +81-3-3210-2121 1,697,268,271 Head Office: Internet Mitsubishi Shoji Building Mitsubishi Corporation’s latest annual reports, financial 3-1, Marunouchi 2-chome, reports and news releases are available on the Investor Chiyoda-ku, Tokyo, 100-8086, Japan Relations homepage. (Registered address of our company) URL: http://www.mitsubishicorp.com/jp/en/ir/ Telephone: +81-3-3210-2121 Marunouchi Park Building 6-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo, 100-8086, Japan Number of Employees: Parent company: 5,665 Consolidated: 58,470 Independent Auditors: Deloitte Touche Tohmatsu LLC/ Tohmatsu Tax Co. Number of Shareholders: 253,316 Stock Listings: Tokyo, Osaka, Nagoya, London Transfer Agent for Shares and Special Accounts, Account Management Institution: Mitsubishi UFJ Trust and Banking Corporation Corporate Agency Division 10-11, Higashisuna 7-chome, Koto-ku, Tokyo 137-8081, Japan Telephone: 0120-232-711 (within Japan) American Depositary Receipts: Ratio (ADR:ORD): 1:2 Exchange: OTC (Over-the-Counter) Symbol: MSBHY CUSIP: 606769305 Depositary: The Bank of New York Mellon 101 Barclay Street, New York, NY 10286, U.S.A. Telephone: (201) 680-6825 U.S. toll free: 888-269-2377 (888-BNY-ADRS) URL: http://www.adrbnymellon.com 108 www.mitsubishicorp.com Printed in Japan Financial Section of Annual Report 2011 for the year ended March 31, 2011 financial section of annual report <for the year ended march 2011> contents Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 02 Six-Year Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Consolidated Statements of Comprehensive (Loss) Income . . . . . . . . . . . . . . . . 33 Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Supplementary Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Management Internal Control Report (Translation) . . . . . . . . . . . . . . . . . . . . . . . 91 Independent Auditors’ Report filed under the Financial Instruments and Exchange Act of Japan (Translation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Forward-Looking Statements This financial section of Mitsubishi Corporation’s Annual Report for the year ended March 2011 contains forward-looking statements about Mitsubishi Corporation’s future plans, strategies, beliefs and performance that are not historical facts. They are based on current expectations, estimates, forecasts and projections about the industries in which Mitsubishi Corporation operates and beliefs and assumptions made by management. As the expectations, estimates, forecasts and projections are subject to a number of risks, uncertainties and assumptions, they may cause actual results to differ materially from those projected. Mitsubishi Corporation, therefore, wishes to caution readers not to place undue reliance on forward-looking statements. Furthermore, the company undertakes no obligation to update any forward-looking statements as a result of new information, future events or other developments. Risks, uncertainties and assumptions mentioned above include, but are not limited to, commodity prices; exchange rates and economic conditions; the outcome of pending and future litigation; and the continued availability of financing, financial instruments and financial resources. Mitsubishi Corporation Annual Report for the year ended March 2011 01 Management’s Discussion and Analysis of Financial Condition and Results of Operations 1. Results of Operations impact of the Great East Japan Earthquake on the results for the The Great East Japan Earthquake (The major earthquake that year ended March 2011 was limited. struck northeastern Japan in March 2011) not only caused Total assets at March 31, 2011 were ¥11,347.4 billion, up massive human suffering, but also considerable physical ¥490.5 billion, or 4.5%, from March 31, 2010. The year-on-year damage to social infrastructure, production facilities, homes and increase was attributable to raising the level of cash and cash other assets. Production dropped as a result of interruptions to equivalents in preparedness for unexpected demand for funds component supply chains, leading to a large downturn in eco- such as what arose in the wake of the major earthquake that struck nomic activity. The earthquake is expected to have a continuing northeastern Japan, as well as increased investments in affiliated impact on the Japanese economy going forward. companies, and higher notes and accounts receivable—trade Before the disaster, Japan’s economy saw a moderate recov- and inventories in line with recovering market prices. ery continue through the first half of the year ended March 2011, Total liabilities were ¥7,746.5 billion, up ¥158.3 billion, or supported principally by exports to Asia. However, the Japanese 2.1% from March 31, 2010. This was due to borrowing to meet economy struggled to grow in the second half, hampered by demand for funds. anemic consumer spending following the end of a subsidy Interest-bearing liabilities (net), which are interest-bearing system for new vehicle purchases and other factors. liabilities (gross) minus cash and cash equivalents and time Contrastingly, the global economy saw healthy growth as a deposits, decreased by ¥20.9 billion, or 0.7% to ¥2,947.3 whole in the past fiscal year. In industrialized nations, while billion. The net debt-to-equity ratio, which is net interest-bearing unemployment remained at high levels, moderate economic liabilities divided by total equity, was 0.9. expansion was driven by pump-priming measures and ongoing Total Mitsubishi Corporation shareholders’ equity increased quantitative easing. Meanwhile, emerging economies such as by ¥321.9 billion, or 10.9% from March 31, 2010 to ¥3,284.4 China and India enjoyed high rates of growth, underpinned by billion. This reflected the consolidated net income attributable robust domestic demand. That said, some countries tightened to Mitsubishi Corporation in the year ended March 2011, which monetary policy because of rising inflationary pressures. outweighed a deterioration in foreign currency translation Under such circumstances, we saw our total revenues for adjustments accompanying the yen’s appreciation and a the year ended March 2011 increase by ¥666.1 billion, or decrease due to dividend payments. 14.7%, year on year to ¥5,206.9 billion. In addition to a recov- Cash and cash equivalents at March 31, 2011 were ¥1,208.7 ery in demand for steel products, this increase reflected higher billion, up ¥128.2 billion, or 11.9%, from March 31, 2010. oil prices and robust growth in automobile and other machin- Net cash provided by operating activities was ¥331.2 billion, ery-related transactions. despite an increase in working capital requirements. Cash was Gross profit rose by ¥133.3 billion, or 13.1%, to ¥1,149.9 billion mainly provided by strong cash flows from operating transac- due to rising prices for coking coal and other resources, and to tions, primarily at resource-related subsidiaries, and firm growth strong sales in steel products and automobile-related operations. in dividend income from business investments, mainly resource- Selling, general and administrative expenses declined by related companies. ¥4.8 billion, or 0.6%, to ¥824.6 billion due to the absence of Net cash used in investing activities was ¥262.6 billion. Cash head office building relocation expenses recorded in the year was used mainly for subscribing to a capital increase at a Chilean ended March 2010, and lower pension expenses. iron ore business, and for capital expenditures and the acquisi- In other P/L items, there was an improvement in gain on tion of working interests, primarily at overseas subsidiaries, marketable securities and investments—net due primarily to despite proceeds from the sale of shares. gains on a share transfer at a Chilean iron ore-related subsidiary. As a result of the above, free cash flow, the sum of operating Furthermore, dividend income increased from resource-related and investing cash flows, was ¥68.6 billion. business investees. Net cash provided by financing activities was ¥76.7 billion. As a result, income before income taxes and equity in earn- While cash was used for the payment of dividends, this was ings of Affiliated companies rose by ¥236.4 billion, or 79.4%, to outweighed by the procurement of funds by borrowing to meet ¥534.3 billion. Equity in earnings of Affiliated companies was an increase in working capital requirements and in preparedness ¥161.5 billion, ¥48.1 billion, or 42.4%, higher year on year. This for unexpected demand for funds in the wake of the Great East was the result of strong performances at resource- and Japan Earthquake. automobile-related business investees. Accordingly, net income In terms of our forecast for the year ending March 2012, we attributable to Mitsubishi Corporation for the year ended March are projecting gross profit of ¥1,280.0 billion, ¥130.1 billion 2011 climbed by ¥188.3 billion, or 68.5%, to ¥463.2 billion. The higher year on year due to higher coking coal prices and other factors. Combined with the fact that selling, general and 02 Mitsubishi Corporation Annual Report for the year ended March 2011 administrative expenses are projected to slightly increase from Mitsubishi Corporation is projected to be ¥450.0 billion, a the year ended March 2011, operating income is forecast to decrease of ¥13.2 billion year on year. increase by ¥73.9 billion to ¥390.0 billion. In other items, we are forecasting a decrease due to the absence of gains on market- Note: Earnings forecasts and other forward-looking statements in this annual report are based on data currently available to management and certain able securities and investments recorded in the previous fiscal assumptions that management believes are reasonable. Actual results year. As a result, consolidated net income attributable to may therefore differ materially from these statements for various reasons. Core Earnings Millions of Yen 2007.3 2008.3 2009.3 2010.3 2011.3 Gross profit—SG&A expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥410,790 ¥351,097 ¥599,208 ¥187,146 ¥325,280 Interest expense (net of interest income) . . . . . . . . . . . . . . . . . . . . . . . . (14,390) (12,294) (23,319) (12,647) (6,699) Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,971 134,623 124,672 91,522 124,793 Equity in earnings of Affiliated companies . . . . . . . . . . . . . . . . . . . . . . . 152,211 154,993 156,776 113,363 161,455 Core earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥685,582 ¥628,419 ¥857,337 ¥379,384 ¥604,829 * Core earnings = Operating income (before the deduction of provision for doubtful receivables) + Interest expense (net of interest income) + Dividend income + Equity in earnings of Affiliated companies. Year Ended March 2011 vs. Year Ended March 2010 office building relocation expenses recorded in the year ended 1) Total Revenues March 2010, and lower pension expenses. Total revenues were ¥5,206.9 billion, up ¥666.1 billion, or 4) Provision for Doubtful Receivables 14.7%, from the year ended March 2010. The expense for provision for doubtful receivables was ¥9.1 There was a ¥623.2 billion, or 15.7%, year-on-year increase in billion, which was ¥4.2 billion, or 86.8%, higher year on year. revenues from trading, manufacturing and other activities to This increase was mainly due to the accumulation of doubtful ¥4,590.9 billion. Trading margins and commissions on trading receivables at metal products-related and other consolidated transactions increased by ¥42.9 billion, or 7.5%, to ¥616.0 billion. subsidiaries, and at the Parent. The main reasons for changes were as follows: 5) Interest Expense (net of interest income) • The Energy Business Group saw revenues increase by Net interest expense was ¥6.7 billion, down ¥5.9 billion, or ¥279.7 billion, or 28.9%, to ¥1,248.9 billion, in line with rising 47.0%, from the year ended March 2010. This resulted from crude oil prices and other commodity prices and increased lower funding costs due mainly to lower yen interest rates. sales volumes. 6) Dividend Income • The Metals Group saw revenues rise by ¥162.4 billion, or Dividend income increased by ¥33.3 billion, or 36.4%, to ¥124.8 24.2%, to ¥834.8 billion. This was chiefly due to rising sales billion. The main reason was an increase in dividend income prices at an Australian resource-related subsidiary (coking coal). particularly from non-ferrous metals-related businesses in line • The Machinery Group saw revenues rise by ¥112.5 billion, or with improving commodity prices. Of the dividend income, 19.9%, to ¥677.7 billion. This result was mainly attributable to resource-related dividend income was ¥101.7 billion. higher sales in overseas automobile-related operations, par- 7) Gain on Marketable Securities and Investments—Net ticularly in Asia. In the year ended March 2011, we recorded a net gain on mar- • The Chemicals Group saw revenues rise by ¥88.2 billion, or ketable securities and investments of ¥53.4 billion, which repre- 12.3%, to ¥803.7 billion. This reflected strong transactions at sented a year-on-year increase of ¥53.2 billion. the Parent, overseas regional subsidiaries and specialty paper In addition to the absence of write-downs on Japan Airlines business-related subsidiaries. Corporation shares and Mitsubishi Motors Corporation preferred 2) Gross Profit shares recorded in the year ended March 2010, this increase Gross profit increased by ¥133.3 billion, or 13.1%, to reflected gains on a share transfer at a Chilean iron ore-related ¥1,149.9 billion due to rising prices for coking coal and other subsidiary, and gains on the sale of shares at the Parent. resources, and to strong sales in steel products and 8) Loss on Property and Equipment—Net automobile-related operations. We recorded a net loss on property and equipment of ¥2.6 3) Selling, General and Administrative Expenses billion, which was ¥13.3 billion less year on year. This reflected Selling, general and administrative expenses declined by ¥4.8 impairment losses on property and equipment recorded in the billion, or 0.6%, to ¥824.6 billion due to the absence of head previous fiscal year at real estate-related subsidiaries. Mitsubishi Corporation Annual Report for the year ended March 2011 03 9) Other Expense (Income)—Net 13) Net Income Attributable to the Noncontrolling Interest We recorded net other income of ¥49.2 billion, down ¥3.2 Net income attributable to the noncontrolling interest increased billion year on year, despite improved funding costs and gains by ¥15.8 billion year on year to ¥33.9 billion. on fund management at the Parent. The overall decrease 14) Net Income Attributable to Mitsubishi Corporation reflected a deterioration in foreign exchange gains and losses of Net income attributable to Mitsubishi Corporation increased overseas subsidiaries. by ¥188.3 billion, or 68.5%, to ¥463.2 billion. ROE was 10) Income from Continuing Operations Before Income 14.8%, a 4.5 percentage point improvement from the year Taxes and Equity in Earnings of Affiliated Companies ended March 2010. Income from continuing operations before income taxes and equity in earnings of Affiliated companies was ¥534.3 billion, up Net Income per Share (Diluted EPS), Cash Dividends, ¥236.4 billion, or 79.4%, year on year. This reflected a ¥133.3 Return on Equity (ROE) billion, or 13.1%, year-on-year increase in gross profit resulting 2009.3 2010.3 2011.3 from higher coking coal and other resource prices, as well as Diluted EPS (yen) . . . . . . . . . ¥224.51 ¥166.89 ¥281.05 strong sales growth in the steel products business and Cash dividends (yen) . . . . . . 52.00 38.00 65.00 automobile-related operations. ROE (%) . . . . . . . . . . . . . . . 14.1 10.3 14.8 Another factor was the ¥4.8 billion, or 0.6%, decrease in selling, general and administrative expenses due to lower pen- Year Ended March 2010 vs. Year Ended March 2009 sion expenses and the absence of head office building reloca- 1) Total Revenues tion expenses recorded in the year ended March 2010. Total revenues were ¥4,540.8 billion, down ¥1,615.6 billion, or Furthermore, there were large improvements in dividend income, 26.2%, from the year ended March 2009. net gain on marketable securities and investments, and net loss There was a ¥1,485.8 billion, or 27.2%, year-on-year on property and equipment. decrease in revenues from trading, manufacturing and other 11) Income Taxes activities to ¥3,967.7 billion. Trading margins and commissions Income taxes increased by ¥80.4 billion from the year ended on trading transactions decreased by ¥129.8 billion, or 18.5%, March 2010 to ¥198.7 billion. In addition to the increase in to ¥573.1 billion. income from continuing operations before income taxes and The main reasons for changes were as follows: equity in earnings of Affiliated companies, this increase reflected • The Energy Business Group saw revenues decrease by one-time charges such as taxes on revaluations associated ¥584.9 billion, or 37.6%, to ¥969.2 billion, as the result mainly with the adoption of the consolidated tax system from the year of a decline in earnings on transactions at the Parent and ending March 2012 onward at the Parent. Our effective tax rate overseas resource-related subsidiaries, due to lower crude oil was 37.2%. prices and the stronger yen, which led to a decline in revenues 12) Equity in Earnings of Affiliated Companies from trading, manufacturing and other activities. Equity in earnings of Affiliated companies increased by ¥48.1 • The Metals Group recorded a ¥651.1 billion, or 49.2%, year- billion, or 42.4%, to ¥161.5 billion, despite the absence of gains on-year decline in revenues to ¥672.4 billion, reflecting a on the reversal of deferred tax liabilities recorded in the year decrease in revenues from trading, manufacturing and other ended March 2010 at a petrochemical-related company. The activities. This decline was attributable to a number of factors, increase reflected strong performances at business investees, including lower commodity prices and lower transactions at particularly overseas resource-related business investees. the Parent, lower sales prices at an Australian resource-related subsidiary (coking coal), and lower sales prices for steel prod- Dividend Income, Equity in Earnings of Affiliated ucts and sales volume at a steel products-related subsidiary. Companies, Interest Expense (net of interest income) • The Chemicals Group recorded a ¥156.0 billion, or 17.9%, Billions of Yen decline in revenues to ¥715.5 billion, reflecting a decline in 2009.3 2010.3 2011.3 revenues from trading, manufacturing and other activities from Dividend income . . . . . . . . . ¥124.7 ¥ 91.5 ¥124.8 the previous fiscal year when strong commodity chemical Equity in Earnings of transactions were recorded on the back of soaring prices. Affiliated Companies . . . . . 156.8 113.4 161.5 • The Living Essentials Group recorded a ¥163.7 billion, or Interest Expenses (net of interest income) . . . . (23.3) (12.6) (6.7) 9.9%, year-on-year decline in revenues to ¥1,494.2 billion. This reflected a decrease in revenues from trading, manufac- turing and other activities due to lower earnings on transac- tions at the Parent, food-related businesses and general merchandise-related subsidiaries. 04 Mitsubishi Corporation Annual Report for the year ended March 2011 2) Gross Profit an improvement in foreign exchange gains and losses of over- Gross profit declined by ¥448.4 billion, or 30.6%, to ¥1,016.6 seas subsidiaries commensurate with gross profit. billion, mainly reflecting the impact of lower coking coal 10) Income from Continuing Operations Before Income prices, lower sales volumes of steel products accompanying Taxes and Equity in Earnings of Affiliated Companies soft demand, and declines mainly in resource-related com- Income from continuing operations before income taxes and modity prices. equity in earnings of Affiliated companies decreased by ¥88.8 3) Selling, General and Administrative Expenses billion, or 23.0%, to ¥297.9 billion. This reflected a ¥448.4 bil- Selling, general and administrative (SG&A) expenses decreased lion, or 30.6%, drop in gross profit resulting from lower coking by ¥36.4 billion, or 4.2%, to ¥829.5 billion. This decline resulted coal prices, lower sales volumes of steel products accompany- from successful efforts to reduce general and administrative ing falling demand, and falling resource-related and other com- expenses, including travel, transportation and entertainment modity prices. expenses, as well as lower selling expenses in line with a drop in The extent of the decline in earnings, however, was limited by sales volumes. reduced selling, general and administrative expenses, in addition 4) Provision for Doubtful Receivables to substantial improvements in net loss on marketable securities The expense for provision for doubtful receivables that was and investments, net loss on property and equipment, and net recorded during the year ended March 2010 was ¥4.9 billion, other income. which is a ¥3.8 billion or 43.8% decrease from the provision 11) Income Taxes expensed in the previous fiscal year. The decline in provision is a Income taxes decreased by ¥29.9 billion, or 20.2%, to ¥118.3 result of a partial recovery in the global economy from the severe billion, due mainly to the decline in income from continuing economic conditions that existed in the previous fiscal year. operations before income taxes and equity in earnings of 5) Interest Expense (net of interest income) Affiliated companies. Our effective tax rate was 39.7%. Net interest expense was ¥12.6 billion, ¥10.7 billion, or 45.8%, 12) Equity in Earnings of Affiliated Companies lower year on year. This resulted from lower funding costs due Equity in earnings of Affiliated companies decreased by ¥43.4 mainly to lower yen interest rates. billion, or 27.7%, to ¥113.4 billion, primarily due to lower earn- 6) Dividend Income ings at overseas resource-related companies. Dividend income decreased by ¥33.2 billion, or 26.6%, to ¥91.5 13) Net Income Attributable to the Noncontrolling Interest billion, due to a drop in dividend income particularly from non- Net income attributable to the noncontrolling interest decreased ferrous metals-related businesses in line with falling commodity by ¥12.2 billion, or 40.2%, to ¥18.1 billion. prices. Of the dividend income, resource-related dividend 14) Net Income Attributable to Mitsubishi Corporation income was ¥68.0 billion and dividend income related to manu- Net income attributable to Mitsubishi Corporation decreased by facturing, sales and other activities was ¥23.5 billion. ¥94.7 billion, or 25.6%, to ¥274.8 billion. 7) Loss on Marketable Securities and Investments—Net In the year ended March 2010, we recorded a net loss of ¥0.2 2. Year Ended March 2011 Segment Information billion, but this represented a substantial improvement of ¥159.3 Operating Segments billion, or 100.1%, from the previous fiscal year, when we 1) Industrial Finance, Logistics & Development Group recorded large write-downs of listed shares due to falling share The Industrial Finance, Logistics & Development Group is devel- prices across the board. The improvement in the year ended oping shosha-type industrial finance businesses. These include March 2010 reflected the impairment losses in the previous asset management businesses, buyout investment businesses, fiscal year as well as an increase in gains on the sale of shares. leasing businesses, real estate development businesses, logis- 8) Loss on Property and Equipment—Net tics services, and insurance businesses. We recorded a net loss on property and equipment of ¥15.8 In the year ended March 2011, segment revenues billion, ¥29.4 billion, or 65.0%, less than the net loss recorded decreased by ¥5.2 billion, or 5.3%, to ¥92.6 billion, mainly due in the year ended March 2009, when we recorded impairment to the absence of real estate sales recorded in the year ended losses on property and equipment at overseas resource- March 2010. related projects. Gross profit rose by ¥2.4 billion, or 5.4%, to ¥47.1 billion due 9) Other (Income) Expense—Net mainly to higher transaction volumes in distribution-related busi- We recorded net other income of ¥52.4 billion, an improvement nesses. The segment posted a ¥4.8 billion, or 109.1%, increase of ¥153.2 billion, or 151.9%, from the net other expense in operating income to ¥9.2 billion. recorded in the year ended March 2009. This primarily reflected Mitsubishi Corporation Annual Report for the year ended March 2011 05 Equity in earnings of Affiliated companies decreased by ¥1.8 The segment recorded net income attributable to Mitsubishi billion, or 16.8%, to ¥8.9 billion, despite gains on the sale of Corporation of ¥94.0 billion, an increase of ¥22.1 billion, or overseas real estate and an improvement in lease-related busi- 30.7%, year on year. In addition to the above reasons, this result ness earnings. The overall decrease was the result mainly of reflected factors such as the absence of losses related to fuel fund investment-related earnings recorded in the year ended derivative transactions for a JAL subsidiary recorded in the year March 2010. ended March 2010. The segment recorded net income attributable to Mitsubishi 3) Metals Group Corporation of ¥11.6 billion, an improvement of ¥19.2 billion The Metals Group trades, develops businesses and invests in a year on year. In addition to the above reasons, this result range of fields. These include steel products such as steel reflected factors such as the absence of share write-downs on sheets and thick plates, steel raw materials such as coking coal Japan Airlines Corporation (JAL) and other shares recorded in and iron ore, and non-ferrous raw materials and products such the year ended March 2010. as copper and aluminum. 2) Energy Business Group In the year ended March 2011, the segment recorded a The Energy Business Group conducts oil and gas exploration, ¥162.4 billion, or 24.2%, year-on-year increase in revenues to development and production (E&P) business; investment in LNG ¥834.8 billion. This was chiefly due to rising sales prices at an (Liquefied Natural Gas) liquefaction projects; and trading of Australian resource-related subsidiary (coking coal). crude oil, petroleum products, carbon materials and products, Gross profit increased by ¥94.5 billion, or 40.8%, to ¥326.3 LNG, and LPG (Liquefied Petroleum Gas) and so forth. billion, the result mainly of higher transactions at a steel In the year ended March 2011, segment revenues products-related subsidiary, and the absence of losses related increased by ¥279.7 billion, or 28.9%, to ¥1,248.9 billion in line to fuel derivative transactions for a JAL subsidiary recorded in with rising crude oil and other commodity prices and increased the year ended March 2010. Operating income rose by ¥81.6 sales volumes. billion, or 78.9%, to ¥185.0 billion. Gross profit increased by ¥4.0 billion, or 10.1%, to ¥43.8 Equity in earnings of Affiliated companies climbed by ¥30.1 billion. The segment recorded operating income of ¥3.7 billion, a billion, or 485.5%, to ¥36.3 billion due to higher equity-method ¥5.1 billion improvement from the year ended March 2010. earnings from iron ore- and copper-related business investees. Equity in earnings of Affiliated companies increased by ¥16.0 The segment recorded net income attributable to Mitsubishi billion, or 40.3%, to ¥55.7 billion. This increase was the result of Corporation of ¥230.1 billion, an increase of ¥92.2 billion, or higher equity in earnings of overseas resource-related business 66.9%, year on year. In addition to the above reasons, this earn- investees due to higher oil prices. ings increase resulted mainly from gains on a share transfer at a Chilean iron ore-related subsidiary. Gross Profit by Operating Segment (Year Ended March, 2010) Net Income by Attributable to Mitsubishi Corporation Operating Segment (Year Ended March, 2010) (¥ billion) (¥ billion) 500 250 400 200 300 150 200 100 100 50 0 0 Industrial Energy Metals Machinery Chemicals Living Industrial Energy Metals Machinery Chemicals Living Finance, Business Essentials Finance, Business Essentials Logistics & Logistics & Development Development 06 Mitsubishi Corporation Annual Report for the year ended March 2011 4) Machinery Group 6) Living Essentials Group The Machinery Group trades machinery in a broad range of The Living Essentials Group provides products and services, fields, in which it also develops businesses and invests. These develops businesses and invests in various fields closely linked fields extend from large plants for essential industrial materials, with people’s lives, including foods, clothing, paper, packaging including electricity, gas, petroleum, chemicals and steel, to materials, cement, construction materials, medical equipment equipment and machinery for transportation and distribution and nursing care. These fields extend from the procurement of industries, including ships, trains and automobiles. It is also raw materials to the consumer market. active in the aerospace and defense industries, and in general In the year ended March 2011, the segment recorded a industrial equipment and machinery, including construction ¥31.6 billion, or 2.1%, increase in revenues to ¥1,525.8 billion. machinery, machine tools, and agricultural machinery. This mainly reflected higher grain prices. In the year ended March 2011, this segment saw revenues Gross profit declined by ¥0.3 billion year on year to ¥456.8 increase by ¥112.5 billion, or 19.9%, to ¥677.7 billion. This billion, despite higher earnings on transactions at general result was mainly attributable to higher sales in overseas merchandise-related subsidiaries. The overall decrease automobile-related operations, particularly in Asia. reflected the deconsolidation of and lower earnings on transac- Gross profit increased by ¥26.9 billion, or 17.3%, to ¥182.0 tions at healthcare and marketing service-related subsidiaries, billion. Furthermore, operating income climbed by ¥25.0 billion, as well as lower earnings on transactions at food- and feed- or 60.4%, to ¥66.4 billion. related subsidiaries. Operating income rose by ¥7.0 billion, or Equity in earnings of Affiliated companies increased by ¥7.4 11.2%, to ¥69.4 billion. billion, or 67.3%, to ¥18.4 billion due primarily to increased Equity in earnings of Affiliated companies increased by ¥3.8 equity in earnings of Asian automobile-related operations. billion, or 19.5%, to ¥23.3 billion due to higher equity-method The segment recorded net income attributable to Mitsubishi earnings of general merchandise- and food-related companies. Corporation of ¥61.4 billion, an increase of ¥43.3 billion, or The segment recorded net income attributable to Mitsubishi 239.2%, year on year. In addition to the above reasons, this Corporation of ¥46.3 billion, a slight decrease of ¥0.5 billion, or increase was due to factors such as the absence of a write- 1.1%, year on year. In addition to the above reasons, the down of preferred shares of Mitsubishi Motors Corporation decrease was due to factors such as the recording of tax recorded in the year ended March 2010. expenses related to the consolidated tax system to be adopted 5) Chemicals Group from the year ending March 2012 onward. The Chemicals Group trades chemical products in a broad range of fields, in which it also develops businesses and invests. Geographic Information These fields extend from raw materials used in industrial prod- 1) Japan ucts such as ethylene, methanol and salt produced from crude Revenues in the year ended March 2011 were ¥3,812.1 billion, oil, natural gas, minerals, plants, marine resources and so forth, up ¥423.3 billion, or 12.5%, year on year. This increase mainly to plastics, electronic materials, food ingredients, fertilizer and reflected higher revenues in energy-related businesses due to fine chemicals. higher crude oil prices. In the year ended March 2011, segment revenues increased Gross profit increased by ¥24.8 billion, or 3.5%, to by ¥88.2 billion, or 12.3%, to ¥803.7 billion. This reflected ¥735.1 billion due to higher transactions at steel products- strong transactions at the Parent, overseas regional subsidiaries related subsidiaries. and specialty paper business-related subsidiaries. 2) Australia Gross profit increased by ¥6.4 billion, or 8.2%, to ¥84.2 In the year ended March 2011, revenues were ¥493.4 billion, billion. Furthermore, operating income rose by ¥6.0 billion, or ¥105.1 billion, or 27.1%, higher year on year. This increase was 25.9%, to ¥29.2 billion. primarily attributable to higher sales prices at an Australian Equity in earnings of Affiliated companies decreased by ¥2.5 resource-related subsidiary (coking coal). billion, or 14.5%, to ¥14.7 billion. Although equity-method earn- Gross profit was ¥175.8 billion, up ¥50.5 billion, or 40.3%, ings of petrochemical business-related companies increased on because of the increased revenues. strong transactions, the overall decrease resulted from the 3) Thailand absence of a gain on reversal of deferred tax liabilities recorded In the year ended March 2011, revenues were ¥381.0 billion, up in the year ended March 2010. ¥83.7 billion, or 28.2%, year on year. This mainly reflected higher The segment recorded net income attributable to Mitsubishi sales in automobile-related operations. Corporation of ¥29.1 billion, down ¥3.3 billion, or 10.2%, year Because of this increase, gross profit rose by ¥14.1 billion, or on year. 36.0%, to ¥53.3 billion. Mitsubishi Corporation Annual Report for the year ended March 2011 07 4) U.K. 2) Energy Business Group In the year ended March 2011, revenues were ¥165.9 billion, In the year ended March 2010, segment revenues declined by ¥18.0 billion, or 12.2%, higher year on year. This increase ¥584.9 billion, or 37.6%, to ¥969.2 billion, the result mainly of a mainly reflected the absence of losses related to fuel derivative decline in earnings on transactions at the Parent and overseas transactions for a JAL subsidiary recorded in the year ended resource-related subsidiaries, due to lower crude oil prices and March 2010. the stronger yen. Because of this increase, gross profit rose by ¥23.6 billion, or Gross profit declined by ¥29.0 billion, or 42.2%, to ¥39.8 122.9%, to ¥42.8 billion. billion. Furthermore, the segment recorded an operating loss of 5) U.S.A. ¥1.4 billion, which was ¥28.4 billion, or 105.2%, worse than the In the year ended March 2011, revenues were ¥150.6 billion, up profit recorded in the year ended March 2009. ¥16.0 billion, or 11.9%, year on year. This increase mainly Equity in earnings of Affiliated companies declined by ¥30.1 reflected higher revenues at overseas regional subsidiaries due billion, or 43.1%, to ¥39.7 billion due to the impact of lower to rising commodity prices, and at food-related subsidiaries. equity-method earnings from overseas resource-related business Because of this increase, gross profit rose by ¥1.6 billion, or investees due to lower crude oil prices and the stronger yen. 3.3%, to ¥49.9 billion. The segment recorded net income attributable to Mitsubishi Corporation of ¥71.9 billion, a decrease of ¥10.9 billion, or 6) Other 13.2%, year on year. The absence of impairment losses on In the year ended March 2011, revenues rose by ¥20.0 billion, property and equipment recorded at overseas resource-related or 10.9%, to ¥203.9 billion. Gross profit increased by ¥18.7 subsidiaries in the previous fiscal year contributed to segment billion, or 25.2%, to ¥93.0 billion. performance. The improvements were offset by losses related to fuel derivative transactions with a JAL subsidiary. Performance of Consolidated Subsidiaries and Affiliates Billions of Yen 3) Metals Group 2010.3 2011.3 In the year ended March 2010, the segment recorded a ¥651.1 Total profits . . . . . . . . . . . . . . . . . . . . . ¥359.4 ¥504.8 billion, or 49.2%, year-on-year decline in revenues to ¥672.4 No. of companies reporting profits . . . . 425 432 billion, reflecting a number of factors. These included lower Total losses . . . . . . . . . . . . . . . . . . . . . ¥ (68.8) ¥ (38.8) commodity prices and lower transactions at the Parent, lower No. of companies reporting losses . . . . 137 116 sales prices at an Australian resource-related subsidiary (coking Percentage of profitable coal), and lower sales prices for steel products and sales volume group companies . . . . . . . . . . . . . . . . 76% 79% at a steel products-related subsidiary. Gross profit declined by ¥337.9 billion, or 59.3%, to ¥231.8 3. Year Ended March 2010 Segment Information billion for the above reasons, as well as the recording of losses Operating Segments related to fuel derivative transactions with a JAL subsidiary. 1) Industrial Finance, Logistics & Development Group Furthermore, operating income declined by ¥313.8 billion, or In the year ended March 2010, segment revenues decreased by 75.2%, to ¥103.4 billion. ¥14.9 billion, or 13.2%, to ¥97.8 billion, mainly due to lower Equity in earnings of Affiliated companies dropped by contract construction and real estate transactions. ¥41.7 billion, or 87.1%, to ¥6.2 billion due to lower equity- Gross profit was ¥44.7 billion, which was the same as that of method earnings from overseas resource-related business the year ended March 2009. The segment posted a ¥2.2 billion, investees (iron ore, aluminum and copper) and a steel prod- or 33.3%, drop in operating income to ¥4.4 billion. ucts-related subsidiary. Equity in earnings of Affiliated companies increased by ¥7.7 The segment recorded net income attributable to Mitsubishi billion, or 256.7%, to ¥10.7 billion, the result of higher fund Corporation of ¥137.9 billion, representing a decrease of ¥78.8 investment-related earnings outweighing a drop in equity- billion, or 36.4%, year on year, despite the absence of share method earnings at lease-related businesses. write-downs (investment impairments) recorded in the previous The segment recorded a net loss attributable to Mitsubishi fiscal year. Corporation of ¥7.6 billion, an improvement of ¥33.7 billion year 4) Machinery Group on year. Although it recorded an impairment of its investment in In the year ended March 2010, this segment saw revenues edge JAL and certain other shares, the narrower loss reflected the down ¥3.0 billion, or 0.5%, to ¥565.2 billion year on year. In absence of share write-downs recorded in the year ended addition to a pull-back from the high ship charter rates in the March 2009. previous fiscal year, and lower transactions of machinery and 08 Mitsubishi Corporation Annual Report for the year ended March 2011 Performance at Principal Subsidiaries and Affiliates (Profits over ¥1.0 billion or losses over ¥1.0 billion) Companies Reporting Profits Equity in earnings (¥ Billion) Share- Year Ended Year Ended holding March March Group Company Name (%) 2011 2010 Main Business Domestic: Metals JECO Corporation 70.00 15.7 7.1 Investment company for Minera Escondida Ltda. copper mines in Chile Metals Metal One Corporation 60.00 11.2 5.4 Steel products operations Chemicals SPDC Ltd. 30.39 9.9 16.3 Investment and petroleum and petrochemicals-related businesses Living Essentials LAWSON, INC. 32.44 8.2 3.6 Franchise chain of LAWSON convenience stores Energy Business Mitsubishi Shoji Sekiyu Co., Ltd. 100.00 5.6 0.8 Marketing and sales of petroleum products Industrial Finance, Mitsubishi UFJ Lease & Finance Company Ltd. 20.00 5.3 2.5 Leasing, installment sales, other financing Logistics & Development Living Essentials RYOSHOKU LIMITED 51.17 3.6 4.1 Wholesale of food products Chemicals Kohjin Co., Ltd. 100.00 2.1 1.3 Manufacturing of specialty papers, plastic films, biochemicals and fine chemicals Metals Mitsubishi Corporation Unimetals Ltd. 100.00 2.0 0.2 Metal trading company Living Essentials Hokuetsu Kishu Paper, Co., Ltd. 24.72 1.9 0.8 Manufacturing, processing, and sales of paper and pulp Industrial Finance, Mitsubishi Corporation LT, Inc. 100.00 1.8 1.2 Warehousing and total logistics services Logistics & Development Industrial Finance, MC Aviation Partners Inc. 100.00 1.6 0.7 Aircraft leasing and management services Logistics & Development Living Essentials Mitsubishi Shoji Packaging Corporation 92.15 1.6 1.4 Sales and marketing of packaging materials, paper, paperboard and corrugated containerboard, as well as export of paper and paperboard Living Essentials San-Esu Inc. 91.93 1.6 1.4 Wholesale of confectionery Energy Business Astomos Energy Corporation 49.00 1.5 2.4 Import, trading, domestic distribution and sales of LPG Machinery MSK FARM MACHINERY CORPORATION 100.00 1.5 0.6 Sales and service of agricultural machinery and facilities Machinery Nikken Corporation 96.83 1.5 (1.6) Rental and sales of construction machinery and other equipment Living Essentials Dai-Nippon Meiji Sugar Co., Ltd. 100.00 1.4 1.7 Manufacturing and wholesale of sugar products Chemicals Mitsubishi Shoji Plastics Corp. 100.00 1.3 1.3 Marketing of synthetic raw materials and plastics Machinery Mitsubishi Corporation Power Systems, Inc. 100.00 1.2 1.1 Supply, installation work, maintenance, inspection of power generat- ing systems and related equipment, in-plant transportation services Living Essentials Kentucky Fried Chicken Japan Ltd. 65.81 1.2 0.9 Fast-food restaurant chain and home-delivery pizza stores Living Essentials MC Healthcare, Inc. 80.00 1.1 – Hospital management solutions through procurement of medical supplies and pharmaceuticals Machinery Mitsubishi Corporation Machinery, Inc. 100.00 1.0 1.2 Export, import and domestic trading of machine parts Living Essentials Food Service Network Co., Ltd. 100.00 1.0 0.6 Food wholesaling business for convenience stores Overseas: Metals Mitsubishi Development Pty Ltd (Australia) 100.00 135.8 112.8 Investment, production and sales of coal and other metals resources Metals M.C. Inversiones Limitada (Chile) 100.00 41.7 5.3 Investment company for iron ore mine in Chile Metals Iron Ore Company of Canada (Canada) 26.18 18.8 4.6 Iron ore production and sales Machinery Tri Petch Isuzu Sales Co., Ltd. (Thailand) 88.73 14.3 6.7 Distribution of automobiles Machinery P.T. Krama Yudha Tiga Berlian Motors (Indonesia) 40.00 6.4 2.7 Distribution of automobiles Metals MC Copper Holdings B.V. (The Netherlands) 100.00 5.6 2.8 Investment company for Los Pelambres copper mine in Chile Corporate Staff Mitsubishi International Corporation 100.00 4.9 7.3 Trading Machinery Isuzu Operations (Thailand) Co., Ltd. (Thailand) 80.00 4.7 2.9 Distribution of automobiles Global Environment Diamond Generating Asia, Limited (Hong Kong) 100.00 4.0 4.6 Independent power producer Business Development Group Living Essentials Princes Limited (U.K.) 100.00 3.7 3.9 Manufacturing of food products and soft drinks Machinery Isuzu Motors Co., (Thailand) Ltd. (Thailand) 27.50 3.2 2.4 Manufacturing of automobiles Living Essentials Alpac Forest Products Inc. (Canada) 70.00 3.2 (0.4) Manufacturing and sales of wood pulp Metals JECO 2 LTD. (U.K.) 50.00 3.1 – Investment company for Minera Escondida Ltda. copper mines in Chile Living Essentials Indiana Packers Corporation (U.S.A.) 80.00 2.8 1.3 Processing and sales of pork Corporate Staff Mitsubishi Corporation International (Europe) Plc. 100.00 2.6 0.2 Trading Industrial Finance, Bow Bells House Investment L-1 (U.K.) 100.00 2.5 (0.1) Financial investment company Logistics & Development Living Essentials AGREX Inc. (U.S.A.) 100.00 2.1 1.5 Storage and marketing of grain Machinery Tri Petch Isuzu Leasing Co., Ltd. (Thailand) 93.50 1.8 1.1 Plant engineering business Corporate Staff Mitsubishi Corporation (Shanghai) Ltd. 100.00 1.7 1.3 Trading Metals Triland Metals Limited (U.K.) 100.00 1.3 1.9 Commodity broker and market maker on the London Metal Exchange (LME) Energy Business Diamond Gas Resources Pty., Ltd. (Australia) 100.00 1.2 2.8 Sales agent of JALP crude oil and condensate Machinery MCE Bank GmbH (Germany) 100.00 1.2 1.0 Automobile finance Chemicals Metanol de Oriente, METOR, S.A. (Venezuela) 25.00 1.2 0.5 Manufacturing and marketing of methanol Global Environment Diamond Generating Corporation (U.S.A.) 100.00 1.1 1.9 Independent power producer Business Development Group * Equity in earnings of RYOSHOKU LIMITED has been retrospectively adjusted for the year ended March 2010, since the company had changed its fiscal year ending date. Mitsubishi Corporation Annual Report for the year ended March 2011 09 Companies Reporting Losses Equity in earnings (¥ Billion) Share- Year Ended Year Ended holding March March Group Company Name (%) 2011 2010 Main Business Domestic: Living Essentials Loyalty Marketing, Inc. 90.00 (1.6) (0.8) Managing the operations of Multi-Partner Loyalty Program “Ponta” Living Essentials Nosan Corporation 100.00 (3.4) 0.8 Manufacturing and marketing of livestock feed Overseas: Energy Business Energi Mega Pratama Inc. (Indonesia) 25.00 (1.2) (1.5) Exploration, development, and production of oil and natural gas in Indonesia Metals Strand Minerals (Indonesia) Pte. Ltd. (Singapore) 33.40 (1.7) (1.0) Investment company for nickel mine in Indonesia Energy Business MCX Exploration (USA) Ltd. (U.S.A.) 100.00 (2.7) (1.9) Exploration, development and production of oil and natural gas Energy Business ENCORE ENERGY PTE. LTD. (Singapore) 39.40 (3.4) (0.6) Stockholding company for P.T. Medco Energi Internasional (Indonesia) equipment sold in large volumes, the decreased revenues were 6) Living Essentials Group due to the impact of lower sales in overseas automobile opera- In the year ended March 2010, the segment recorded a ¥163.7 tions and foreign currency fluctuations. billion, or 9.9%, decline in revenues to ¥1,494.2 billion. This Gross profit decreased by ¥18.5 billion, or 10.7%, to ¥155.1 reflected a decrease in revenues from trading, manufacturing billion. Furthermore, operating income decreased by ¥17.0 and other activities due to lower earnings on transactions at billion, or 29.1%, to ¥41.4 billion. Parent, food-related businesses and general merchandise- Equity in earnings of Affiliated companies increased by ¥4.1 related subsidiaries. billion, or 59.4%, to ¥11.0 billion. Gross profit declined ¥26.5 billion, or 5.5%, to ¥457.1 billion. The segment recorded net income attributable to Mitsubishi Furthermore, operating income declined by ¥12.1 billion, or Corporation of ¥18.1 billion, a loss of ¥1.6 billion, or 8.1%, 16.2%, to ¥62.4 billion. year on year. Despite the absence of share write-downs Equity in earnings of Affiliated companies decreased by (investment impairments) and impairment losses on property ¥2.0 billion, or 9.3%, to ¥19.5 billion primarily due to a and equipment recorded in the previous fiscal year, there was decrease resulting from the recording of losses at a LAWSON, an investment impairment of preferred shares of Mitsubishi INC. subsidiary. Motors Corporation of ¥16.7 billion (after-tax), or ¥28.3 billion The segment recorded net income attributable to Mitsubishi (before tax). Corporation of ¥46.8 billion, an increase of ¥13.0 billion, or 5) Chemicals Group 38.5%, year on year, the result chiefly of the absence of share In the year ended March 2010, segment revenues declined by write-downs (investment impairments) recorded in the year ¥156.0 billion, or 17.9%, to ¥715.5 billion. This reflected a ended March 2009. decline in revenues from trading, manufacturing and other activi- ties from the previous fiscal year when strong commodity chemi- Geographic Information cal transactions were recorded on the back of soaring prices. 1) Japan Gross profit declined by ¥17.1 billion, or 18.0%, to ¥77.8 Revenues in the year ended March 2010 were ¥3,388.8 billion, billion. Furthermore, operating income declined by ¥11.7 billion, ¥1,220.4 billion, or 26.5%, down year on year. This decline or 33.5%, to ¥23.2 billion. reflected a drop in energy-related transactions at the Parent Equity in earnings of Affiliated companies increased by ¥6.4 because of lower crude oil prices and sales volumes, as well as billion, or 59.3%, to ¥17.2 billion due to the reversal of deferred a decrease due to soft demand for steel products at a steel tax liabilities at a petrochemical business-related company, products-related subsidiary. despite lower earnings accompanying a fall in market prices. Gross profit declined by ¥86.9 billion, or 10.9%, to ¥710.3 The segment recorded net income attributable to Mitsubishi billion for the same reasons as above. Corporation of ¥32.4 billion, an increase of ¥5.6 billion, or 20.9%, 2) Australia year on year due mainly to the absence of share write-downs In the year ended March 2010, revenues declined by ¥258.4 (investment impairments) recorded in the previous fiscal year. billion, or 40.0%, to ¥388.3 billion, due primarily to lower coking coal prices at an Australian resource-related subsidiary. 10 Mitsubishi Corporation Annual Report for the year ended March 2011 As a result of this decline in revenues, gross profit decreased overseas business development and taking other measures to by ¥250.4 billion, or 66.7%, to ¥125.3 billion. raise corporate value. In the leasing business, we strengthened cooperation with 3) Thailand Mitsubishi UFJ Lease & Finance Company Ltd. in various fields Revenues in the year ended March 2010 increased by ¥9.2 and regions, including the environment, ships, real estate and billion, or 3.2%, to ¥297.3 billion on the back of an increase from overseas markets, and through MC Aviation Partners Inc. we a recovery in our automobile operations, among other factors. enhanced our aircraft leasing business. In the airline industry in Gross profit inched up ¥0.1 billion, or 0.3%, to ¥39.2 billion. the year ended March 2011, conditions picked up considerably 4) U.K. from the slump witnessed in the aftermath of the global financial Revenues in the year ended March 2010 dropped by ¥49.1 crisis. Further, we anticipate continued demand for aircraft oper- billion, or 24.9%, to ¥147.9 billion due mainly to losses related ating leases going forward. We will therefore continue to prop- to fuel derivative transactions for a JAL subsidiary. erly manage our fleet of aircraft in the year ending March 2012, Because of this decline, gross profit fell ¥32.3 billion, or while continuing to add to our portfolio of aircraft for leasing. 62.7%, to ¥19.2 billion. In the Japanese real estate market in the year ended March 5) U.S.A. 2011, a certain degree of recovery was seen in investment unit Revenues in the year ended March 2010 decreased by ¥51.6 prices, in part because of the purchase of Japanese real estate billion, or 27.7%, to ¥134.6 billion. The decline reflected lower investment trusts by the Bank of Japan as part of its comprehen- transactions at resource-related subsidiaries due to falling sive qualitative easing strategy. Furthermore, real estate transac- commodity prices, lower transactions at food-related subsid- tions are beginning to show signs of a recovery, despite iaries, and lower steel products transactions at steel products- remaining soft since the onset of the financial crisis. In the year related subsidiaries. ended March 2011, we established the Real Estate Investment & Gross profit declined by ¥20.4 billion, or 29.7%, to ¥48.3 billion. Management Unit with the aim of creating an earnings structure 6) Other resilient to changes in market conditions by drawing on the busi- Revenues in the year ended March 2010 dropped by ¥45.2 ness group’s finance, development and construction, and logis- billion, or 21.3%, to ¥183.9 billion. Gross profit declined by tics functions. With this move, we have put in place an ¥58.4 billion, or 44.0%, to ¥74.3 billion. organizational structure for building a medium- to long-term real estate portfolio and turning properties into financial instruments. 4. Year Ended March 2011 Operating Environment In the year ending March 2012, we plan to expand and enhance and Year Ending March 2012 Outlook our real estate business in Japan, while monitoring the impact of 1) Industrial Finance, Logistics & Development Group the Great East Japan Earthquake. At the same time, we will Financial markets in the year ended March 2011 generally promote the real estate development business, focusing in par- marked healthy growth as the world recovered from the global ticular on the new area for us of residential development in China. financial crisis. In industrialized economies, although persistently The Japanese logistics industry in the year ending March high unemployment rates in the U.S. and elsewhere and sover- 2012 is expected to see a temporary drop in freight due to the eign debt problems in Europe were a cause for concern, expan- impact of the Great East Japan Earthquake and impact of sionary fiscal policies and monetary easing supported financial planned power outages. On the other hand, transportation markets and contributed to an improvement in the real econ- volume is forecast to slowly recover on demand associated with omy. In contrast, in emerging markets, China, India and other recovery efforts in Japan. The distribution sector worldwide is countries achieved high economic growth, driven by buoyant growing, driven by economic growth in China and other emerg- internal demand. That said, warning bells sounded louder for a ing markets, and this trend is likely to continue in the year change in government strategy to tighten monetary policy to rein ending March 2012. in inflationary pressures. At the same time, there were concerns While the impact of the Great East Japan Earthquake must about the negative impact on the global economy of increasing continue to be watched closely, we believe that markets have instability in the Middle East and North Africa. already picked up from the temporary drop caused by the finan- In our buyout investment*1 business in Japan, a fund man- cial crisis. We feel that our operations have gradually increased aged by Marunouchi Capital Co., Ltd. purchased shares in due to certain proven business frameworks that were estab- Yamamoto Co., Ltd., which manufactures auto parts using the lished when the group was formed. In the year ending March fine-blanking technology. Yamamoto Co., Ltd. is stepping up 2012, in addition to enhancing our portfolio of quality assets and Mitsubishi Corporation Annual Report for the year ended March 2011 11 strengthening asset management capabilities, we will push change in the price of crude oil has an approximate ¥1.0 billion ahead with efforts to capitalize on growth in emerging markets effect on net income attributable to Mitsubishi Corporation in such as China. this business group, mainly through a change in equity-method earnings. However, because of timing differences, this price *1: Buyout investment: an investment technique for earning an investment return by investing in an existing company and providing management fluctuation might not be immediately reflected in our operating support to increase the invested company’s corporate value. results in the fiscal year in which it occurs. 3) Metals Group 2) Energy Business Group In the metal resources business, global steel production recov- The Greek government debt problems that occurred in April ered steadily in the year ended March 2011. Furthermore, driven 2010 escalated into a crisis for the euro, which caused instability by economic growth in China, India, Brazil and other emerging in the price of crude oil throughout the year ended March 2011. markets, demand and prices for coal and iron ore rose robustly Furthermore, in addition to a sharp increase in global oil demand as a whole. In non-ferrous metals, including copper and alumi- from the previous year, surplus funds from monetary easing in num, recovering and expanding demand in China and other the U.S. and Europe were directed by speculators into crude oil emerging markets, and healthy demand in the U.S. and Europe, and other commodity markets, driving up prices. In this market along with the inflow of speculative money with the U.S. dollar environment, the Dubai spot price for crude oil traded in the weak and interest rates low and other factors led to an upturn in range of US$70/BBL to US$90/BBL between April and prices as a whole. That said, some commodities performed September 2010, continuing the trend from the previous fiscal better than others. The average annual price of copper cathode year. However, anti-government movements demanding democ- rose from US$2.77 per pound to US$3.69 per pound for the racy that erupted in Tunisia at the end of 2010 quickly spread to year ended March 2011, and in February 2011 set a new record many Middle Eastern and North African countries, causing a price of US$4.62 per pound. The average annual price of alumi- further noticeable rise in the Dubai spot price to as high as num ingots rose from US$1,866 per MT to US$2,257 per MT US$100/BBL in February 2011. for the year ended March 2011 on buoyant demand from With no solution in sight, these problems are expected to Europe, the U.S. and Asia. Against this backdrop, net income become drawn out. The political situation in the regions con- attributable to Mitsubishi Corporation in the metal resources cerned, which account for approximately 30% of global crude oil business in the past fiscal year increased sharply year on year. production by volume, has a large impact on crude oil supplies There were three main factors for this result: a substantial ¥23.0 to Japan, and developments must be watched going forward. In billion increase in net income to ¥135.8 billion at key Australian a more encouraging development, the U.S. economy is recover- resource-related subsidiary MDP due mainly to higher sales ing from the slump induced by the collapse of Lehman Brothers prices; higher equity in earnings of overseas resource-related in 2008, although it continues to lack real strength. Also, emerg- business investees; and gains on a share exchange at a Chilean ing markets are growing steadily, with China and India registering iron ore-related subsidiary. GDP growth rates above 10% and Brazil growing at 7.5%. In the steel products business in the year ended March 2011, The crude oil market in the year ending March 2012 is being global steel production recovered steadily, growing 15% from overshadowed by increasing supply-side concerns surrounding the previous year to 1,414 million tons, surpassing 1.4 billion the unrest in the Middle East and North Africa. Nevertheless, tons for the first time. Prices also rose because of rising prices the price of crude oil is expected to increase, despite some for key materials such as iron ore and coal, in addition to solid uncertainly. This forecast is based on more demand for oil demand. Metal One Corporation, which was established in spurred by economic recovery in the U.S. and Europe, and January 2003 by joint investment of Mitsubishi Corporation stable economic growth in emerging markets, along with the (60%) and Sojitz Corporation (40%), worked to capture demand impact of the March 2011 Great East Japan Earthquake and for steel in China and other Asian countries and auto demand Fukushima nuclear accident. worldwide. As a result of these efforts, its results were generally Our consolidated net income projection for the year ending strong on account of higher transaction volumes, and higher March 2012 for this business group assumes a crude oil price of sales prices due to an increase in steel prices. It also recorded US$92/BBL (Dubai spot price). The Energy Business Group lower operating expenses. holds upstream rights to LNG and crude oil, and/or liquefaction In terms of the business environment in the year ending facilities in Australia, Malaysia, Brunei, Sakhalin, Indonesia, the March 2012, there are some uncertainties clouding the outlook, U.S., including the Gulf of Mexico, Gabon, Angola and other namely the impact of the Great East Japan Earthquake and parts of the world. Therefore, our operating results are subject to weather conditions in Australia. Nevertheless, with demand the effect of fluctuations in the price of crude oil. A US$1/BBL expected to continue growing strongly, underpinned by strong 12 Mitsubishi Corporation Annual Report for the year ended March 2011 economies in emerging markets like China, we expect consoli- environment is expected to persist for the time being, we aim to dated net income in the Metals Group to be almost the same as build an earnings structure that is resilient to changing market the year ended March 2011. This projection is premised mainly conditions, while keeping a watchful eye on movements in on higher earnings from higher sales prices and sales volumes supply and demand. for coking coal at MDP, which should offset the absence of the In business related to Mitsubishi Motors Corporation (MMC) gain on share exchange at a Chilean iron ore-related subsidiary brand automobiles, performance improved, underpinned by that was recorded in the year ended March 2011. recovery in Asia. In the year ending March 2012, the impact of 4) Machinery Group the Great East Japan Earthquake is making it difficult to form an In the year ended March 2011, the Machinery Group posted a outlook for obtaining auto parts for production. Together with steady improvement in performance. One notable performer the strong yen and other factors, there are concerns that the was automobile operations, especially in Asia, which benefited operating environment will worsen. We will strengthen our exist- from economic recovery in emerging markets. For the year ing business bases, centered on Indonesia, as well as step up ending March 2012, the yen’s appreciation and impact of the actions in Russia, China and other emerging markets. Great East Japan Earthquake make the operating environment In business related to Isuzu Motors Limited brand automo- difficult to predict. However, we will actively develop growth biles, operating results improved considerably, as sales in markets in ship- and automobile-related businesses, as well as ASEAN countries, including Thailand, and Australia rose on the in infrastructure and resource and energy projects, where global back of steadily recovering demand in Asia, Australia and the demand prospects remain firm. Middle East. In the year ending March 2012, the impact of the In plant-related business, the external operating environment Great East Japan Earthquake, the yen’s ongoing appreciation began to improve in the year ended March 2011, following a and other factors may make further deterioration in the operat- drop in orders in the wake of the global financial crisis as new ing environment unavoidable. We intend to strengthen the foun- projects were frozen or postponed. However, overseas plant dations of our existing businesses, including a manufacturing orders in the year ended March 2011 were only approximately and sales business for commercial vehicles in Thailand that is ¥480.0 billion, below the approximate ¥550.0 billion recorded in operated as a joint venture with Isuzu Motors Limited. At the the year ended March 2010. This decline reflected factors such same time, we will focus on expanding the export business of as stiffer competition with overseas companies due to the completed vehicles from Thailand to other countries. impact of the strong yen. In the year ending March 2012, orders 5) Chemicals Group for overseas projects may languish due to the impact of the The chemical products market in the year ended March 2011 strong yen, and projects in Japan may be put off due to the saw high growth as a whole due to rising prices for crude oil, a Great East Japan Earthquake and nuclear accident. For these feedstock for many products, and to recovering global demand. reasons, we will work to generate earnings by focusing on proj- In the Middle East and China, large, new petrochemical ects that are highly likely to come to fruition. plants came on-stream one after another and production capac- In the industrial machinery business where we sell machinery ity was increased at existing plants. However, strong demand and equipment in large volumes, market conditions improved from China, Asia, South America, India and elsewhere drove from the first half of the year ended March 2011. However, with market prices along with the rising price of crude oil. substantial capital investment still elusive, we worked in Japan In terms of the outlook, although the pace of growth may to raise our earnings power through an ongoing management slow, we expect to see continued strong demand centered on efficiency drive. We also concentrated on capturing demand in emerging markets and the price of oil remain at a relatively high China, Brazil and other emerging markets where we are fielding level. We also expect to see structural changes in the petro- many inquiries. chemical industry in the form of industry restructuring and facility In the ship-related business, market conditions were gener- closings and integrations resulting from increasing supplies and ally firm in the first half of the fiscal year. In the second half, competitiveness of ethylene-based petrochemicals using shale however, China imported less iron ore, the number of vessels on gas in North America. We also expect to see changes in the the market increased with the delivery of a large number of new distribution flows of products. Ethylene-based petrochemicals vessels, and coal shipments from Australia were interrupted by that use cheap Middle Eastern natural gas in particular are flooding. The Great East Japan Earthquake also had an impact expected to compete in the Asian market with the aforemen- on cargo movement. Together, these and other factors tioned North American products, which may bring about global depressed the market in the second half, resulting in a largely changes in distribution and supply flows. We see this as an flat business performance in the ship-related business for the full opportunity to showcase our functions. year. In the year ending March 2012, while a difficult business Mitsubishi Corporation Annual Report for the year ended March 2011 13 Some of our main suppliers who were affected by the Great respond to market needs, such as for the stable supply of food East Japan Earthquake will likely achieve an early recovery in and for quality food products, while keeping an eye on changes their operations. However, the outlook for other companies is in the global supply-demand balance. At the same time, we plan still unclear. As a result of this situation, there are concerns to build and reinforce integrated value chains extending from surrounding the procurement of raw materials and the impact raw materials to transportation and processing, and product on product manufacturing and supply chains. On the other distribution and sales. These value chains will revolve around hand, demand is expected to increase as Japanese industry core subsidiaries in each field. In Japan, there are growing recovers from the disaster. But measuring the future impact of moves to restructure intermediary distribution companies the disaster is challenging with so many unknown variables. against a backdrop of increased domination by a few major Ever-increasing interest in health, safety, security and the players in the retailing sector. In light of this building momentum, environment caused by environmental problems and trends four Mitsubishi Corporation food distribution wholesale subsid- such as aging societies and falling birthrates are expected to iaries signed a merger agreement, which culminated in the continue underpinning growing demand in the life science, and launch in July 2011 of Mitsubishi Shokuhin Co., Ltd. Overseas, environment and new energy fields. we will continue to actively target our efforts at growth markets. We will make organizational changes to respond to the The functions of AGREX, Inc., a U.S. subsidiary engaged in the needs of the times, globally developing our trading business and storage and marketing of grain, and Princes Limited, a U.K. making related business investments, as we seek to tap into subsidiary manufacturing food products and soft drinks, will play growth markets in Japan and other countries. a pivotal role here. At the same time as strengthening core businesses, namely In the textiles field, the business environment remains difficult Saudi Arabian petrochemical operations, Venezuelan methanol due to a host of factors including slowing personal consumption business and aromatics in Malaysia, we will continue to develop and persistent price deflation, along with rising processing costs the business chain in midstream and downstream sectors and and soaring cotton prices in China. In order to respond to these strengthen consolidated businesses. changes in our business environment, we established MC 6) Living Essentials Group Fashion Co., Ltd. by consolidating the functions of three subsid- In the year ended March 2011, in fields closely linked to con- iaries into one entity. This company has begun raising its com- sumer behavior in the Living Essentials Group’s business petitiveness as an apparel OEM (Original Equipment domains such as food, textiles and retailing, difficult conditions Manufacturing) company. Furthermore, we will continue looking persisted. Political instability outside of Japan, the yen’s appre- to actively sell environment-related products and materials for ciation, rising materials prices and other factors meant concerns optical communications, among other highly functional materials. lingered about an economic downturn. Personal consumption In general merchandise, our U.S. cement operations had was subdued and consumers continued to show a preference faced a tough business environment due to the economic for lower-priced products as a result. At the same time, there downturn in the wake of the economic crisis. In the second half were signs of recovery in some sectors of the business environ- of the year ended March 2011, however, demand in Southern ment. Pulp prices recovered, and demand was robust in China California turned upward year on year. We expect a gradual and other emerging markets for grains and other staple foods recovery going forward. In the first half of the year ended March and tires and other products. 2011, pulp prices soared due to an earthquake in Chile and In the year ending March 2012, the business environment rising demand in China, but have since settled back. While a is expected to be even more uncertain due to cooling con- bona fide recovery in demand is still elusive in the markets sumer sentiment and the impact of power supply problems served by the General Merchandise Division, we will bolster following the Great East Japan Earthquake, among other paper-related businesses, centered on Hokuetsu Kishu Paper factors. As the business group that is active in fields closest to Co., Ltd., Mitsubishi Shoji Packaging Corporation and Canadian consumers, we are determined to help Japan’s economy and pulp manufacturing subsidiary Alpac Forest Products Inc. society stage the quickest recovery possible in fields that are Moreover, we will upgrade the basic capabilities of our cement essential for daily life such as food, textiles, general merchan- businesses in the U.S. and China. We will also continue to dise, healthcare and retailing. steadily expand sales of tires in overseas growth markets, In the food field, there are concerns over tight supplies of including emerging nations. grain and other commodities due to the impact of a heat wave In the retail and healthcare fields, we integrated operations in in North America in 2010 as well as robust demand from China. the Retail & Healthcare Division in April 2011. The healthcare In light of this, we will push ahead with efforts to strengthen our field is expected to grow in size as a market along with the aging framework for procuring raw materials globally in order to of Japan’s population and increasing awareness of lifestyle 14 Mitsubishi Corporation Annual Report for the year ended March 2011 diseases. We will also be active in developing new distribution As a result of these funding activities, on March 31, 2011, channels and providing sales promotion, payment settlement, gross interest-bearing liabilities stood at approximately ¥4,257.6 loyalty point and other services to cater to changing market billion, ¥102.9 billion higher than March 31, 2010. Of these needs. At the same time, we aim to further strengthen coopera- gross interest-bearing liabilities, 84.8% represented long-term tion between these functions and retail businesses. financing. Gross interest-bearing liabilities at the Parent were ¥3,107.9 billion, of which 98.8% represented long-term financ- 5. R&D Activities ing, and the average remaining period was about 5 years. There were no material R&D activities in the year ended March 2011. In the year ending March 2012, we plan to continue procur- ing funds mainly through long-term financing. Furthermore, so 6. Liquidity and Capital Resources as to prepare for future demand for funds, we will seek to diver- 1) Fund Procurement and Liquidity Management sify funding sources and at the same time look to continue Our basic policy concerning the procurement of funds to sup- raising funding efficiency on a consolidated basis. Moreover, port business activities is to procure funds in a stable and cost- because financial markets remain unpredictable, we will remain effective manner. For funding purposes, we select and utilize, as vigilant and secure sufficient cash and deposits, and bank com- needed, both direct financing, such as commercial paper and mitment lines, to enhance our liquidity further. corporate bonds, and indirect financing, including bank loans. Regarding management of funds on a consolidated basis, We seek to use the most advantageous means, according to we have a group financing policy in which funds are raised prin- market conditions at the time. We have a strong reputation in cipally by the Parent, as well as domestic and overseas finance capital markets. Regarding indirect financing, we maintain good companies and overseas regional subsidiaries, and distributed relationships with a broad range of financial institutions in addi- to other subsidiaries. As of March 31, 2011, 81.6% of consoli- tion to our main banks, including foreign-owned banks, life dated gross interest-bearing liabilities were accounted for by the insurance companies and regional banks. This diversity allows Parent, domestic and overseas finance companies, and over- us to procure funds on terms that are cost competitive. seas regional subsidiaries. Looking ahead, we plan to enhance In the year ended March 2011, instability persisted due to our fund management system on a consolidated basis, espe- European debt problems, escalating geopolitical risk in the cially in light of our stated management policy of continuously Middle East and North Africa, and the impact of the Great East upgrading consolidated management. Japan Earthquake. We continued to diversify our fund procure- The current ratio as of March 31, 2011 was 150.5% on a ment channels while ensuring our financial soundness. This consolidated basis. In terms of liquidity, management has included the issuance of foreign currency-denominated straight judged that the Parent has a high level of financial soundness. bonds for the first time in 25 years. The Parent, Mitsubishi International Corporation (U.S.A.) and Mitsubishi Corporation Finance PLC (U.K.) had ¥288.9 billion in short-term debt as of March 31, 2011, namely commercial paper and bonds scheduled for repayment within a year. But, Working Capital, Current Ratio (¥ billion) (%) since the sum of cash and deposits, bond investments due to mature within a year, and securities for trading purpose together 2,500 250 with a commitment line amounted to ¥1,465.5 billion, we believe we have a sufficient level of liquidity to meet current obligations. 2,000 200 The excess coverage amount was ¥1,176.6 billion. The Parent 1,500 150 has a yen-denominated commitment line of ¥410.0 billion with major Japanese banks, a commitment line of US$1.0 billion and 1,000 100 a soft currency facility equivalent to US$0.3 billion with major international banks, mainly in the U.S. and Europe. 500 50 To procure funds in global financial markets and ensure smooth business operations, we obtain ratings from three agen- 0 0 cies: Rating and Investment Information, Inc. (R&I), Moody’s Investors Service, and Standard and Poor’s (S&P). Our current ratings (long-term/short-term) are AA–/a-1+ (outlook stable) by Working Capital (Left) Current Ratio (Right) R&I, A1/P-1 (outlook stable) by Moody’s, and A+/A-1 (outlook stable) by S&P. Mitsubishi Corporation Annual Report for the year ended March 2011 15 Rating Information (As of June 1, 2011) Total liabilities increased by ¥158.3 billion, or 2.1%, to Credit Agency Long-Term/Short-Term ¥7,746.5 billion from March 31, 2010 due primarily to an increase Rating and Investment in current liabilities, although long-term liabilities declined. Information, Inc. (R&I) AA–/a-1+ (outlook stable) Current liabilities increased by ¥269.9 billion, or 7.3%, from Moody’s Investors Service A1/P-1 (outlook stable) March 31, 2010 to ¥3,981.3 billion at March 31, 2011. One Standard and Poor’s (S&P) A+/A-1 (outlook stable) reason was an increase in short-term debt in line with higher demand for working capital and other funds. Also, current Interest Coverage Ratio maturities of long-term debt increased because of the reclas- Billions of Yen sification from long-term debt. Moreover, trade accounts pay- 2009.3 2010.3 2011.3 able increased due to higher purchases resulting from Operating income . . . . . . . . . ¥590.5 ¥182.3 ¥316.1 recovering demand for steel products and other products, and Interest income . . . . . . . . . . . 59.1 37.7 33.1 Dividend income . . . . . . . . . . 124.7 91.5 124.8 higher crude oil prices. Total . . . . . . . . . . . . . . . . . . . 774.3 311.5 474.0 Short-term debt rose by ¥101.9 billion, or 18.4%, to ¥656.9 Interest expense . . . . . . . . . . (82.5) (50.3) (39.8) billion. Current maturities of long-term debt increased by ¥60.4 Interest coverage ratio billion, or 14.8%, to ¥468.7 billion. Trade accounts payable rose (times) . . . . . . . . . . . . . . . . . 9.4 6.2 11.9 by ¥15.1 billion, or 0.8%, to ¥1,880.0 billion. * Operating income = Gross profit – (Selling, general and administrative Long-term liabilities decreased by ¥111.6 billion, or 2.9%, expenses + Provision for doubtful receivables) from March 31, 2010 to ¥3,765.2 billion at March 31, 2011 due mainly to a decline in long-term debt. Long-term debt declined 2) Total Assets, Liabilities and Total Equity by ¥57.3 billion, or 1.8%, to ¥3,188.7 billion from March 31, Total assets as of March 31, 2011 were ¥11,347.4 billion, up 2010 because of the reclassification to current maturities of ¥490.6 billion, or 4.5%, from March 31, 2010, primarily due to long-term debt. an increase in current assets. Total equity increased by ¥332.3 billion, or 10.2%, from Current assets increased by ¥502.0 billion, or 9.1%, to March 31, 2010 to ¥3,601.0 billion at March 31, 2011. ¥5,993.4 billion. Cash and cash equivalents increased because Total Mitsubishi Corporation shareholders’ equity rose by the level of cash was raised in preparedness mainly for unex- ¥321.9 billion, or 10.9%, to ¥3,284.4 billion, despite an pected demand for funds in the wake of the Great East Japan increase in foreign currency translation adjustments related to a Earthquake. In addition, accounts receivable—trade and decrease in net assets denominated in U.S. dollars because of inventories increased in line with higher sales resulting from the yen’s appreciation. The increase was primarily due to the recovering steel product demand and higher crude oil prices. accumulation of net income attributable to Mitsubishi Cash and cash equivalents increased by ¥128.2 billion, or Corporation. As of March 31, 2011, the U.S. dollar-yen 11.9%, to ¥1,208.7 billion from March 31, 2010. Accounts exchange rate was ¥83.15, an appreciation of ¥9.89, or 10.6%, receivable—trade increased by ¥114.6 billion, or 5.7%, to from ¥93.04 at March 31, 2010. ¥2,133.4 billion. Inventories increased by ¥122.2 billion, or Retained earnings increased by ¥385.9 billion, or 14.0%, 14.4%, to ¥970.7 billion. from March 31, 2010 to ¥3,135.2 billion at March 31, 2011. Property and equipment decreased by ¥11.4 billion, or 0.2%, Foreign currency translation adjustments increased by ¥71.6 to ¥5,354.0 billion from March 31, 2010. There was an increase billion, or 22.1%, to negative ¥396.0 billion. in investments due to subscription to a capital increase and Noncontrolling interest increased by ¥10.4 billion, or 3.4%, share exchange at a Chilean iron ore business, which led to an to ¥316.6 billion. increase in investments in and advances to Affiliated companies. Net interest-bearing liabilities, gross interest-bearing liabilities However, this increase was exceeded by a decline in other minus cash and cash equivalents, at March 31, 2011 were investments due to the sale of listed shares at the Parent. ¥2,947.3 billion, a decrease of ¥20.9 billion, or 0.7%, from Investments in and advances to Affiliated companies increased March 31, 2010. As a result, the net debt-to-equity ratio, which by ¥81.5 billion, or 6.6%, to ¥1,320.1 billion, while other invest- is net interest-bearing liabilities divided by total Mitsubishi ments decreased by ¥109.2 billion, or 6.7%, to ¥1,522.2 billion. Corporation shareholders’ equity at year-end, was 0.9, which was 0.1 of a point lower than at March 31, 2010. 16 Mitsubishi Corporation Annual Report for the year ended March 2011 Interest-Bearing Liabilities, Net Debt-to-Equity Ratio, There was an ¥832.1 billion change from the previous year Return on Invested Capital (ROIC) when cash was used for the repayment of debt in line with a Billions of Yen decrease in working capital requirements. 2010.3 2011.3 Short-term borrowings . . . . . . . . . . . . ¥ 961.6 ¥ 1,122.3 7. Strategic Issues Long-term borrowings . . . . . . . . . . . . . 3,193.1 3,135.3 Cash and deposits . . . . . . . . . . . . . . . (1,186.5) (1,310.3) 1) Management Issues and Plans Interest-bearing liabilities (net) . . . . . . . 2,968.2 2,947.3 (1) Midterm Corporate Strategy 2012 Total Mitsubishi Corporation In July 2010, we released our new three-year management plan, shareholders’ equity . . . . . . . . . . . . . . 2,962.5 3,284.4 the Midterm Corporate Strategy 2012, which covers the year Net debt-to-equity ratio (times) . . . . . . 1.0 0.9 ended March 2011 through the year ending March 2013. ROIC (core earnings) (%) . . . . . . . . . . . 6.4 9.7 ■ Management Goals Notes: 1. Interest-bearing liabilities excludes the impact of adopting ASC 815, The overarching goal of Midterm Corporate Strategy 2012 is “Accounting for Derivative Instruments and Hedging Activities.” creating sustainable corporate value. This new concept of 2. Short-term borrowings above is the total of short-term debt, com- mercial paper and current maturities of long-term debt. Long-term ‘Sustainable Corporate Value’ comprises three elements: borrowings is the total of long-term debt and long-term bonds. “Economic,” “Societal,” and “Environmental.” We aim to create 3. ROIC (core earnings) = Core earnings / (Total shareholders’ equity + sustainable corporate value by helping solve global problems Interest-bearing liabilities (net)) through business activities in light of the needs and expectations of all stakeholders. 3) Cash Flows Cash and cash equivalents at March 31, 2011 were ¥1,208.7 Sustainable Corporate Value billion, up ¥128.2 billion, or 11.9%, from March 31, 2010. Sustainable Economic Value: Aim for sound earnings growth (Operating activities) and increased corporate value through the proactive reshaping Net cash provided by operating activities was ¥331.2 billion, of our business models and portfolio despite an increase in working capital requirements. Cash was Sustainable Societal Value: Contribute to economic develop- mainly provided by strong cash flows from operating transac- ment as a responsible corporate citizen tions primarily at resource-related subsidiaries and firm growth in Sustainable Environmental Value: Aim to conserve and con- dividend income from business investments, mainly resource- tribute to the global environment, recognizing that our planet is related companies. our greatest stakeholder Net cash provided by operating activities decreased by ¥430.4 billion year on year, the result of an increase in working We will strengthen existing earnings drivers and develop new capital requirements, although cash flows from operating trans- business for future growth in light of changes in the external actions increased year on year. business environment, including fast-growing emerging econo- (Investing activities) mies and stagnating OECD countries, the birth of new growth Net cash used in investing activities was ¥262.6 billion. Net cash markets triggered by changing values, technological innovation was used mainly for subscribing to a capital increase at a Chilean and the rise of emerging economies, and our expanding stake- iron ore business, and for capital expenditures and the acquisi- holder base. Midterm Corporate Strategy 2012 has also been tion of working interests, primarily at overseas subsidiaries, drawn up in response to our internal business environment, despite proceeds from the sale of shares. which is undergoing changes in terms of our business portfolio, There was an increase of ¥124.1 billion in net cash used by diversification of our business models and a shift of businesses investing activities. This was due to a decrease in proceeds from to subsidiaries and affiliates. the sale of shares as well as capital expenditures and invest- ■ Financial Targets ments in Affiliated companies in the year ended March 2011. Under the new strategy, we will reinforce our earnings base by As a result of the above, free cash flow, the sum of operating maintaining capital efficiency and a sound balance sheet. We will and investing cash flows, was ¥68.6 billion. target consolidated net income of ¥500 billion in the year ending (Financing activities) March 2013, the final year of the plan, with return on equity Net cash provided by financing activities was ¥76.7 billion. While (ROE) throughout the 3-year plan period of 12–15%. At the cash was used for the payment of dividends, this was out- same time, as we aim to achieve our earnings target, we aim to weighed by the procurement of funds by borrowing to meet an maintain a sound balance sheet by targeting a net debt-to- increase in working capital requirements and in preparedness for equity ratio (DER) of 1.0–1.5 times. Based on our past basic unexpected demand for funds in the wake of the Great East Japan Earthquake. Mitsubishi Corporation Annual Report for the year ended March 2011 17 policy, we plan to maintain a consolidated dividend payout ratio stronger earnings base and financial position. In tandem, in the range of 20–25%. through our diverse businesses, we aim to create sustainable ■ Investment Plans corporate value while helping solve global problems. Moreover, We will maintain investment at a constant ¥700–800 billion per guided by the spirit of the Three Corporate Principles, which year, with a total of ¥2.0–2.5 trillion invested over the mid-term form Mitsubishi Corporation’s corporate philosophy, we are corporate strategy’s three-year period. determined to support economic activities and contribute to the Specifically, we will invest ¥400–500 billion in Strategic revival of the Japanese economy through our businesses. Domains and Regions, ¥1.0–1.2 trillion in mineral resources, and (2) Response to the Earthquake and Tsunami in oil and gas resources, and ¥600-800 billion in other areas. Northeastern Japan ■ Strategic Domains and Strategic Regions There was no loss of life or personal injury among corporate One of the themes of Midterm Corporate Strategy 2012 is to officers or employees of Mitsubishi Corporation as a result of the target high economic growth in emerging nations and new Great East Japan Earthquake on March 11, 2011, and growth markets. In this context, we have designated infrastruc- Mitsubishi Corporation’s Tohoku Branch located in Sendai City ture and global environmental businesses as Strategic Domains, suffered only minor damage. However, some business premises and China, India and Brazil as Strategic Regions. We are priori- of MC Group companies suffered extensive damage. Group tizing these domains and regions in terms of allocating manage- companies have worked hard to restore operations in the after- ment resources. By promoting investments in them, we aim to math of the disaster. Under these circumstances and in line with build future earnings drivers. the spirit of Corporate Responsibility to Society*, one of Specifically, in the Strategic Domains of infrastructure and Mitsubishi Corporation’s Three Corporate Principles, we have global environmental businesses, we will respond to new growth steadily continued to implement Midterm Corporate Strategy markets and help to solve global problems. At the same time, in 2012, which was announced in July 2010. We are determined the Strategic Regions of China, India and Brazil, we plan to to contribute to the recovery of the Japanese economy by creat- capture fast-growing domestic demand in emerging markets. ing sustainable corporate value, which is the overarching goal of ■ Leveraging and Solidifying a Diversified Business Portfolio the plan. At the same time, we are supporting areas affected by We plan to build and introduce tools for enabling visualization of the disaster through the Mitsubishi Corporation East Japan our diversified business portfolio, and set targets according to Earthquake Recovery Fund (¥10.0 billion, which will be used business model and business risk profile. In this way, we will over the next 4 years), which we founded in April 2011. develop multiple streams of earnings, while strengthening indi- * Corporate Responsibility to Society: Strive to enrich society, both materially vidual businesses and leveraging portfolio diversity. and spiritually, while contributing towards the preservation of the global In terms of solidifying our diversified business portfolio, we environment. have established the Business Development Committee with the brief of discussing policy pertaining to initiatives cutting 2) Basic Policy Regarding the Appropriation of Profits across business groups and units that relate to the Strategic (1) Investment Plans Domains and Strategic Regions defined by Midterm Corporate We plan to invest in the mineral resources and oil and gas Strategy 2012. This Committee is headed by the president of resources fields, which we expect to remain key earnings driv- Mitsubishi Corporation. Moreover, we are reviewing our man- ers, as well as global environmental businesses, and the indus- agement platform considering management relating to our trial finance, machinery, chemicals, living essentials and other bases, human resources and IT associated with diversification fields, including Strategic Regions and Strategic Domains, which of business models. we see as future sources of earnings. All investments will be The business environment in the year ending March 2012 is made with the aim of sustaining our growth. expected to see emerging economies such as China, India and Under Midterm Corporate Strategy 2012, which was announced Brazil continue to grow strongly. However, the global economic in July 2010, MC plans to invest between ¥2,000 to ¥2,500 outlook remains uncertain due to factors such as rising inflation- billion over the 3-year period ending March 2013. MC is targeting ary pressures on goods in emerging economies, and fiscal annual investments of ¥700 to ¥800 billion during this period. deficits mainly in industrialized nations. The impact of the Great (2) Capital Structure Policy and Dividend Policy East Japan Earthquake and subsequent restoration efforts are Our basic policy is to sustain growth and maximize corporate also factors to watch not just for Japan but for the global value by balancing earnings growth, capital efficiency and economy as well. financial soundness. For this, we will continue to utilize retained Conscious of these conditions, we will forge ahead with earnings for investments to drive growth, while maintaining our Midterm Corporate Strategy 2012 as we work to create an even financial soundness. 18 Mitsubishi Corporation Annual Report for the year ended March 2011 In terms of shareholder returns, our basic policy is to increase in our shareholding in CMP being 25%, making CMP an equity- the annual dividend per share through earnings growth with a method affiliate. targeted consolidated dividend payout ratio in the range of 20% The Los Colorados mine owned by CMH, which produces to 25% throughout the period of Midterm Corporate Strategy approximately 5.2 million tons of iron ore per year, is expected to 2012. We will also flexibly purchase treasury stock depending be depleted by 2028. However, CMP owns operating mines other on earnings growth and progress with our investment plans and than Los Colorados, as well as undeveloped mines. CMP has other factors. plans in hand to double current annual capacity by around 2016. The Board of Directors passed a resolution raising the divi- The iron ore business harbors the potential for growth on a dend per common share applicable to the fiscal year ended global scale. This investment is aimed at further deepening the March 2011 by ¥9 from the previous forecast to ¥65 because iron ore business between the two companies based on a consolidated net income attributable to Mitsubishi Corporation at friendly relationship between MC and CAP stretching back ¥463.2 billion exceeded the forecast announced in October almost half a century. We will work hand in hand with CAP to 2010. (The interim dividend applicable to the fiscal year ended promote CMP’s growth strategy, which hinges on expansion of March 2011 was ¥26 per common share, making the year-end production scale. dividend ¥39 per common share.) In May 2010, a joint venture established by MC, JX Nippon In accordance with the aforementioned policy, we plan to Mining & Metals Corporation and Mitsubishi Materials pay a dividend of ¥65 per common share for the year ending Corporation (MC (50%), JX Nippon Mining & Metals Corporation March 2012, providing we achieve our forecast for consoli- (40%) and Mitsubishi Materials Corporation (10%)) reached an dated net income attributable to Mitsubishi Corporation of agreement with International Finance Corporation (Headquarters: ¥450.0 billion. Washington D.C., U.S.) to acquire a 2.5% ownership interest in Chilean company Minera Escondida Limitada after obtaining [For Reference: Annual Ordinary Dividends] approval of existing shareholders and the Chilean authorities. Year ended March 2004 = ¥12 per common share Through JECO Corporation, which is an existing joint ven- Year ended March 2005 = ¥18 per common share ture owned 70% by MC, 20% by JX Nippon Mining & Metals Year ended March 2006 = ¥35 per common share Corporation and 10% by Mitsubishi Materials Corporation since Year ended March 2007 = ¥46 per common share 1988, we indirectly held a 7% interest in Minera Escondida Year ended March 2008 = ¥56 per common share Limitada. As a result of the acquisition from International Year ended March 2009 = ¥52 per common share Finance Corporation, we indirectly own 8.25% of Minera Year ended March 2010 = ¥38 per common share Escondida Limitada. Year ended March 2011 = ¥65 per common share This project commenced production in 1990, and through subsequent expansion phases has increased its production 3) Main Investment Activities capacity to become the largest copper mine in the world. In We plan to maintain investment at a constant ¥700–800 billion 2010, the project produced 1.05 million tons of fine payable per year, with a total of ¥2.0–2.5 trillion invested over the mid- copper. Even after completing this acquisition, MC aims to con- term corporate strategy’s three-year period. Specifically, we will tinue expanding its investment in the copper mining sector to invest ¥400–500 billion in Strategic Domains and Regions, acquire prime production assets, including replacing existing ¥1.0–1.2 trillion in mineral resources, and oil and gas resources, copper assets in its portfolio. and ¥600–800 billion in other areas. In August 2010, we entered into an agreement in connection During the year ended March 2011, we invested ¥370.0 with investing in a natural gas development project centered on billion. The main investments were as follows: shale gas in the Cordova Embayment in northeastern British In April 2010, through M.C. Inversiones Limitada (MCI), a Columbia, Canada. The project is owned by a senior indepen- consolidated iron ore subsidiary in Chile, we executed an agree- dent Canadian oil and natural gas producer, Penn West Energy ment to merge Compania Minera Huasco S.A. (CMH), a 50%- Trust (PWE)*1, which is headquartered in Calgary. The agreement owned equity-method affiliate, with Compania Minera del became effective in September 2010 following approval by our Pacifico S.A. (CMP), a subsidiary of CAP S.A., a mining and Board of Directors and approval for the acquisition by the steel producing conglomerate in Chile. We received shares in Canadian Federal Government and other parties. CMP after the merger in exchange for our 50% stake in CMH. Subsequently, Cordova Gas Resources Ltd. (CGR)*2, our Furthermore, in May 2010, we subscribed to a private place- subsidiary established in Calgary, acquired a 50% interest in ment of shares to raise additional capital by CMP. This resulted shale gas assets, conventional natural gas assets and related Mitsubishi Corporation Annual Report for the year ended March 2011 19 natural gas facilities in several sections owned by PWE. An Corporation 25%) 59.9%, a subsidiary of Indonesia state-owned unincorporated joint venture formed with PWE will actively oil and gas company PT. Pertamina 29%, and a subsidiary of develop and produce natural gas. Indonesia’s largest private oil and gas company PT. Medco PWE is a promising partner with a significant position in the Energi Internasional Tbk 11.1%. Cordova Embayment, which boasts a high-quality shale gas This project marks the first time we will take the lead in plan- resource comparable to the top tier shale gas resources in North ning and operations following the LNG plant’s construction as America. PWE has been conducting initial drilling operations the largest shareholder. From the second half of 2014, DSLNG since 2006 and, based upon third-party evaluations, we believe plans to begin production and sale of approximately 2 million that the shale gas resources in this project are approximately tons of LNG per year (approximately 45,000 B/D crude oil 5–8 trillion cubic feet (our estimate, over 100–160 million tons in equivalent), along with associated condensate (approximately LNG equivalents). The potential of this enormous resource could 2,300–2,500 B/D crude oil equivalent). greatly exceed Japan’s annual demand for natural gas. In addition, with the aim of having an involvement in the LNG The joint venture will develop shale gas in these sections, value chain from upstream to downstream in this project, we where the current plans are to lift current output of approxi- have acquired all the shares of Tomori E&P Limited, which owns mately 30 million cubic feet per day to approximately 500 million a 20% working interest in the Senoro-Toili natural gas field, from cubic feet per day in 2014 (approximately 3.5 million tons of PT. Medco Energi Internasional Tbk. The Senoro-Toili natural LNG equivalents per year). We will promote development and gas field is also located in Central Sulawesi Province. production in this region over the next 50 years together with The Senoro-Toili natural gas field was owned 50:50 by wholly PWE and will market natural gas, proportionate to our equity owned subsidiaries of PT. Pertamina, and PT. Medco Energi share of production in the North American market, partly Internasional Tbk. We acquired a 20% working interest from PT. through CIMA ENERGY LTD., a U.S.-based gas marketing Medco Energi Internasional Tbk through the acquisition of company in which we have a 34% equity interest. Tomori E&P Limited. As a result, ownership of the field is now Shale gas can now be produced in large volumes at com- split as follows: PT. Pertamina subsidiary (50%), PT. Medco petitive cost thanks to recent technological innovations. Energi Internasional Tbk subsidiary (30%), and our subsidiary Because shale gas projects tend to establish large reserves, it Tomori E&P Limited (20%). has attracted attention worldwide as a new natural gas The field began producing crude oil (approximately 1,900 resource. Leveraging this investment, we intend to build up its B/D) in 2005, and will commence development work with the knowledge and expertise in the shale gas business with the aim aim of commencing natural gas production in 2014. Natural gas of acquiring more assets in North America. As part of its produced at the field will be partially supplied within Indonesia. resource and energy strategy going forward, we also aim to The remaining amount of the natural gas (approximately 250 secure a stable supply of energy resources by diversifying its million standard cubic feet per day, approximately 1.5 million asset holdings, including through the acquisition and develop- tons/year LNG equivalent) will be supplied to PT DSLNG and ment of unconventional natural gas sources such as shale gas. contribute to approximately 75% of the required volume for producing LNG that will be exported from the second half of *1 Penn West Energy Trust changed its name to Penn West Exploration in January 2011 following conversion from a trust company to a joint-stock company. 2014 to Japan and South Korea. *2 In May 2011, we announced that it transferred 7.5% equity interests in CGR We will help ensure stable LNG supplies and raise the value of to Chubu Electric Power Co., Inc., Tokyo Gas Co., Ltd. and Osaka Gas Co., the entire project through integrated management. Together with Ltd., as well as approximately 10% of the shares of our wholly owned, development of the Kangean oil and gas field and operation of Amsterdam-headquartered subsidiary Shale Gas Investment B.V., which owns CGR shares, to Japan Oil, Gas and Metals National Corporation the Tangguh LNG Project, in which we are also participating, this (JOGMEC). JOGMEC gained a 7.5% share in CGR through its investment in will contribute even further to Indonesia’s fast-growing economy. Shale Gas Investment B.V. As a result of these transfers, our equity interest declined from 50% at the time of acquisition to 35%. Note: Forward-looking statements in this annual report are management’s current views and beliefs in accordance with data currently available, In January 2011, we made a final investment decision (FID) and are subject to a number of risks, uncertainties and other factors that may cause actual results to differ materially from those projected. on the Donggi-Senoro LNG (DSLNG) project in Indonesia’s Central Sulawesi Province. The project, for the construction and 4) Outlook for Year ending March 2012 operation of a natural gas liquefaction facility (LNG plant) is In terms of our forecast for the year ending March 2012, we are being spearheaded by PT Donggi-Senoro (PT DSLNG). The projecting gross profit of ¥1,280.0 billion, ¥130.1 billion, higher shareholders and shareholdings of PT DSLNG are as follows: year on year due to higher coking coal prices and other factors. Sulawesi LNG Development Limited (MC 75%, Korea Gas 20 Mitsubishi Corporation Annual Report for the year ended March 2011 Combined with the fact that selling, general and administra- 2) Market Risks tive expenses are projected to slightly increase from the year (Unless otherwise stated, calculations of effects on future con- ended March 2011, operating income is forecast to increase by solidated net income are based on consolidated net income for ¥73.9 billion to ¥390.0 billion. In other items, we are forecasting the year ended March 2011. Consolidated net income, as used a decrease due to the absence of gains on marketable securi- hereinafter, refers to “Consolidated net income attributable to ties and investments recorded in the previous fiscal year. Mitsubishi Corporation.”) As a result, consolidated net income attributable to (1) Commodity Market Risk Mitsubishi Corporation is projected at ¥450.0 billion, a decrease In the course of our business activities, we are exposed to vari- of ¥13.2 billion year on year. Projections are based on the fol- ous risks relating to movements in prices of commodities as a lowing assumptions. trader, an owner of rights to natural and energy resources, and a producer and seller of industrial products of our investees. Prod- Reference: Change of basic assumptions uct categories that may have a large impact on our operating Year Ended Year Ending results are as follows: March 2011 March 2012 (Actual) (Forecasts) Change (Energy Resources) Exchange rate 85.7 JPY/US$1 80.0 JPY/US$1 –5.7 JPY/US$1 We hold upstream rights to LNG and crude oil, and/or liquefac- Crude oil price 84.2 US$/BBL 92.0 US$/BBL +7.8 US$/BBL tion facilities in Australia, Malaysia, Brunei, Sakhalin, Indonesia, Interest rate the U.S., including the Gulf of Mexico, Gabon, Angola and other (TIBOR) 0.36% 0.40% 0.04% regions. Movements in LNG and crude oil prices may have a Note: Earnings forecasts and other forward-looking statements in this release significant impact on operating results in these businesses. are based on data currently available to management and certain Fundamentally, LNG prices are linked to crude oil prices. As assumptions that management believes are reasonable. Actual results may therefore differ materially from these statements for various an estimate, a US$1/BBL fluctuation in the price of crude oil reasons. would have an approximate ¥1.0 billion effect on consolidated net income for LNG and crude oil combined, mainly through a 8. Business Risks change in equity-method earnings. However, fluctuations in the 1) Risks of Changes in Global Macroeconomic Conditions price of LNG and crude oil might not be immediately reflected in As we conduct businesses on a global scale, our operating our operating results because of timing differences. results are impacted by economic trends in overseas countries (Metal Resources) as well as those in Japan. Through wholly owned Australian subsidiary Mitsubishi For instance, a decline in prices of energy and metal Development Pty Ltd (MDP), we sell around 27–28 million tons resources could have a large impact on our resource-related of coal per year, mainly coking coal, a ferrous raw material. import transactions and earnings from business investments. Fluctuations in the price of coking coal may affect our consoli- Furthermore, the worldwide economic slowdown could affect dated operating results through MDP’s earnings. MDP’s operat- our entire export-related business, including plants, construction ing results cannot be determined by the coal price alone as they machinery parts, automobiles, steel products, ferrous raw mate- are also significantly affected by fluctuations in exchange rates rials, chemical products, and other products. for the Australian dollar, U.S. dollar and yen, as well as produc- In Thailand and Indonesia, we have various automobile busi- tion and sales volumes and production costs. nesses, including automobile assembly plants, distribution and In addition, as a producer, we are exposed to the risk of price sales companies and financial services companies jointly estab- fluctuations in copper and aluminum. Regarding copper, a lished with Japanese automakers. Because automobile sales US$100 fluctuation in the price per MT of copper would have a volume reflects internal demand in each of these countries, ¥0.5 billion effect on our net income. However, variables besides economic trends in both Thailand and Indonesia may have a price fluctuations can also have an impact. These include the significant bearing on earnings from our automobile operations. grade of mined ore, the status of production operations, and The global economy saw healthy growth as a whole in the reinvestment plans (capital expenditures). Therefore, the impact past fiscal year. In industrialized nations, while unemployment on earnings cannot be determined by the copper price alone. remained at high levels, moderate economic expansion was Regarding aluminum, a US$100 fluctuation in the price per MT driven by pump-priming measures and ongoing quantitative of aluminum would have a ¥1.0 billion effect on our consolidated easing. Meanwhile, emerging economies such as China and net income. India enjoyed high rates of growth, underpinned by robust inter- (Petrochemical Products) nal demand. That said, some countries tightened monetary We are engaged in a broad range of trading activities for petro- policy because of rising inflationary pressures. chemical products manufactured from raw materials such as Mitsubishi Corporation Annual Report for the year ended March 2011 21 naphtha and natural gas. The prices of petrochemical products However, the vast majority of these interest-bearing liabilities are largely determined for each product on an individual basis are corresponding to trade receivables, loans receivable and based on the prices of the above raw materials, supply-demand other operating assets that are positively affected by changes in dynamics and other factors. Fluctuations in the prices of these interest rates. Because a rise in interest rates produces an raw materials may affect earnings from these trading transactions. increase in income from these assets, while there is a time lag, We have made investments in manufacturing and sales com- interest rate risk is offset. For the remaining interest-bearing panies for petrochemicals such as ethylene glycol, paraxylene liabilities exposed to interest rate risk without such offsets, com- and methanol in Saudi Arabia, Malaysia and Venezuela. Our mensurate asset holdings such as investment securities, prop- equity-method earnings would be affected by changes in the erty and equipment generate trading income as well as other operating results of these companies due to price movements. income streams such as dividends that are strongly correlated (2) Foreign Currency Risk with economic cycles. Accordingly, even if interest rates increase We bear some risk of fluctuations in foreign currency rates rela- as the economy improves, leading to higher interest expenses, tive to the yen in the course of our trading activities, such as we believe that these expenses would be offset by an increase export, import and offshore trading. While we use forward con- in income from the corresponding asset holdings. tracts and other hedging strategies, there is no assurance that However, our operating results may be negatively affected we can completely avoid foreign currency risk. temporarily if there is a rapid rise in interest rates because In addition, dividends received from overseas businesses and increased income from commensurate asset holdings would fail equity in earnings of overseas consolidated subsidiaries and to offset the effects of a preceding increase in interest expenses. equity-method affiliates are relatively high in proportion to our To monitor market movements in interest rates and consolidated net income. Because most of these earnings are respond flexibly to market risks, we established the ALM denominated in foreign currencies, which are converted to yen (Asset Liability Management) Committee. This committee solely for reporting purposes, an appreciation in the yen relative establishes fund procurement strategy and manages the risk to foreign currencies has a negative impact on consolidated net of interest rate fluctuations. income. In terms of sensitivity, a 1 yen change relative to the 3) Credit Risk U.S. dollar would have an approximate ¥2.5 billion effect on We extend credit to customers in the form of trade credit, consolidated net income. including accounts receivables and advance payments, finance, Regarding our investments in overseas businesses, an guarantees and investments due to our various operating trans- appreciation in the yen poses the risk of lowering shareholders’ actions. We are therefore exposed to credit risk in the form of equity through a negative effect on the foreign currency transla- losses arising from deterioration in the credit of or bankruptcy of tion adjustments account. Consequently, we implement various customers. Furthermore, we utilize derivative instruments, pri- measures to prevent increased exposure to foreign currency risk marily swaps, options and futures, for the purpose of hedging on investments, such as by hedging foreign currency risks with risks. In this case, we are exposed to the credit risk of the coun- respect to new large investments. However, there is no assur- terparties to these derivative instruments. ance that we can completely avoid these risks. To manage this risk, we have established credit and transac- (3) Stock Price Risk tion limits for each customer as well as introduced an internal As of March 31, 2011, we owned approximately ¥1,400.0 billion rating system. Based on internal rules determined by internal (market value basis) of marketable securities, mostly equity ratings and the amount of credit, we also require collateral or a issues of customers, suppliers and Affiliated companies. These guarantee depending on the credit profile of the counterparty. investments expose us to the risk of fluctuations in stock prices. However, there is no guarantee that we will be able to com- As of the same date, we had net unrealized gains of approxi- pletely avoid credit risk with these risk hedging strategies. We mately ¥500.0 billion based on market prices, a figure that could reduce transactions and take measures to protect our receivables change depending on future trends in stock prices. when there is deterioration in the credit condition of customers. In our corporate pension fund, some of the pension assets We also have a policy for dealing with bankrupt customers and managed are marketable stocks. Accordingly, a fall in stock work to collect receivables. However, failure to collect receivables prices could cause an increase in pension expenses by reducing and other credit could affect our operating results. pension assets. 4) Country Risk (4) Interest Rate Risk We bear country risk in relation to transactions and investments As of March 31, 2011, we had gross interest-bearing liabilities of with overseas companies in the form of delays or inability to approximately ¥4,257.6 billion. Because almost all of these collect money or conduct business activities due to socioeco- liabilities bear floating interest rates, there is a risk of an increase nomic conditions in the countries where they are domiciled. in interest expenses caused by a rise in interest rates. 22 Mitsubishi Corporation Annual Report for the year ended March 2011 We take appropriate risk hedging measures that involve, in business at sales companies mainly outside of Japan and principle, hedges via third parties through such means as taking across the related value chain. Our risk exposure to MMC out insurance, depending on the nature of the project. Further- proper was approximately ¥130.0 billion as of March 31, 2011. more, we have established a Country Risk Committee, under Our risk exposure in connection with investments in businesses, which country risk is managed through a country risk counter- finance, trade receivables and other related business was measure system. The country risk countermeasure system approximately ¥240.0 billion as of March 31, 2011. Our total classifies countries with which we trade into six categories MMC-related risk exposure, including both the aforementioned based on risk money in terms of the sum total of the amount of risk exposure to MMC proper and our risk exposure to related investments, advances, and guarantees, and the amount of business, was thus around ¥370.0 billion as of March 31, 2011. trade receivables, net of hedges, as well as creditworthiness by For the year ended March 2011, MMC posted consolidated country (country rating). Country risk is controlled through the sales of ¥1,828.5 billion, operating profit of ¥40.3 billion and a establishment of risk limits for each category. net profit of ¥15.6 billion. However, even with these risk hedging measures, it is difficult 7) Risks Related to Compliance to completely avoid risks caused by deterioration in the political, We are engaged in businesses in all industries through our many economic, or social conditions in the countries or regions where offices around the world. These activities subject us to a wide our customers, portfolio companies or we have ongoing proj- variety of laws and regulations. Specifically, we must comply ects. Such eventualities may have a significant impact on our with the Companies Act, tax laws, Financial Instruments and operating results. Exchange Act, anti-monopoly laws, international trade-related 5) Business Investment Risk laws, environmental laws and various business laws in Japan. In We participate in the management of various companies by addition, in the course of conducting business overseas, we acquiring equity and other types of interests. These business must abide by the laws and regulations in the countries and investment activities are carried out with the aim of increasing regions where we operate. our commercial rights and deriving capital gains. However, we We have established a Compliance Committee, which is bear various risks related to business investments, such as the headed by a Chief Compliance Officer, who is at the forefront of possible inability to recover our investments and exit losses and our efforts to raise awareness of compliance. This officer also being unable to earn the planned profits. Regarding the man- directs and supervises compliance with laws and regulations on agement of business investment risk, in the case of new busi- a consolidated basis. ness investments, we clarify the investment meaning and Notwithstanding these initiatives, compliance risks cannot purpose, quantitatively grasp the downside risk of investments be completely avoided. Failure to fulfill our obligations under and evaluate whether the investment return exceeds the mini- related laws and regulations could affect our businesses and mum expected rate of return, which is determined internally operating results. according to the extent of the risk. After investing, we manage 8) Risks from Natural Disasters risk on an individual basis with respect to business investments A natural disaster, such as an earthquake, heavy rain or flood, to achieve the investment goals set forth in the business plan which damages our offices, facilities or systems and affects formulated every year. Furthermore, we apply exit rules for the employees could hinder sales and production activities. early sale of our equity interest or the liquidation of the investee We have established adequate countermeasures, having in order to efficiently replace assets in our portfolio. prepared an employee safety check system; disaster contin- While we follow strict standards for the selection and man- gency manual for business contingency plan (BCP) execution; agement of investments, it is difficult to completely avoid the risk earthquake-proof measures for buildings, facilities or systems of investments not delivering the expected profits. Therefore, we (including backup of data); and introduced a program of disaster may incur losses resulting from such actions as the withdrawal prevention drills. However, no amount of preparation of this sort from an investment. can completely avoid the risk of damage caused by a natural 6) Risks Related to Specific Investments disaster. Accordingly, damage from a natural disaster could Investment in and Operations with affect the Company’s operating results. Mitsubishi Motors Corporation The Great East Japan Earthquake in March 2011 did not Following requests from Mitsubishi Motors Corporation (MMC), result in any significant damage to the Company’s offices. we injected equity totaling ¥140.0 billion in MMC from June However, this natural disaster may lead to an economic down- 2004 through January 2006 by subscribing to ordinary and turn, deterioration at many companies, and lower stock prices preferred MMC shares. We cooperate with MMC developing and have other consequences. The Company’s operating Mitsubishi Corporation Annual Report for the year ended March 2011 23 results may be affected by losses on sale or write-downs of For each of our customers, we monitor financial condition, shareholdings or financial instruments, or deterioration in the credit level and collections on receivables as part of an effort to credit condition of customers. reach an appropriate accounting estimate for the allowance for doubtful accounts. Also, for the valuation of long-term loans Note: Earnings forecasts and other forward-looking statements in this release are based on data currently available to management and certain receivable, we use the discounted cash flow method, which is assumptions that management believes are reasonable. Actual results based on assumptions such as an estimate of the future repay- may therefore differ materially from these statements for various ment plan and discount rates. reasons. For the year ended March 31, 2010, we increased our total allowance for doubtful accounts by ¥0.5 billion, or 0.8%, to 9. Critical Accounting Policies and Estimates ¥63.2 billion. The preparation of these consolidated financial statements For the year ended March 31, 2011, we decreased our total requires management to make estimates that may affect the allowance for doubtful accounts by ¥8.9 billion, or 14.0%, to reported amounts of assets and liabilities, the disclosure of ¥54.3 billion. The allowance for doubtful accounts represented contingent assets and liabilities at the date of the fiscal year-end approximately 1.8% and 1.5% of our total receivables (current and the reported amounts of revenues and expenses during the and noncurrent) as of March 31, 2010 and 2011, respectively. reporting period. On an ongoing basis, management reviews its Management believes that the evaluation of receivables is estimates and judgments, including the valuation of receivables, reasonable, the balance of the allowance for doubtful accounts investments, long-lived assets, inventories, revenue recognition, is adequate and the receivables are presented at net realizable income taxes, financing activities, restructuring costs, pension value; however, these valuations include uncertainties that may benefits, contingencies, litigation and others. Management result in the need for the Company to increase the allowance for bases its estimates and judgments on historical experience and doubtful accounts in the future. on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for 2) Valuation of Investments making judgments about the carrying values of assets and The valuation of investments is a critical accounting estimate liabilities that are not readily apparent from other sources. Actual because fair value is susceptible to change from period to results may differ from these estimates under different assump- period, and also because the outstanding balance of our invest- tions or conditions. ments is significant. Management believes the following are our critical account- We assess impairment of investments by considering ing policies and estimates. These policies and estimates were whether a decline in value is other-than-temporary based on, considered “critical” because: among others, the length of time and the extent to which the fair • the estimate requires us to make assumptions about matters value has been less than the carrying value and our intent and that are highly uncertain at the time the estimate is made, and ability to retain the investment for a period of time sufficient to • different assumptions that we reasonably could have used in allow for any anticipated recovery in fair value. We assess the current period could have a material impact on the presen- impairment of available-for-sale securities based on their market tation of our financial condition, changes in financial condition, values, while equity-method investments and other investments or results of operations. are assessed by considering their market values, financial condi- tion, performance, business circumstance, near-term prospects 1) Valuation of Receivables and future cash flows of the issuer. The valuation of receivables is a critical accounting estimate, as If the decline in value is judged to be other-than-temporary, the balance of our trade receivables, notes and loans is signifi- the carrying value of the investment is written down to fair value. cant. We perform ongoing credit valuations of our customers In each of the last three years, we have assessed invest- and adjust credit limits based upon the customer’s payment ments for impairment using similar methods and determined history and current credit worthiness, as determined by our that, based on our assumptions, certain investments have been review of the customer’s current credit information. We continu- other-than-temporarily impaired. For the years ended March 31, ously monitor collections and payments from our customers. 2009, 2010 and 2011, impairment losses of ¥169.3 billion, We establish credit limits and an allowance for doubtful ¥68.1 billion, and ¥20.3 billion respectively, were recognized in accounts based upon factors surrounding specific customer “Loss (gain) on marketable securities and investments—net” in collection issues that we have identified, past credit loss experi- the consolidated statements of income to reflect the declines in ence, historical trends, evaluation of potential losses in the fair value of certain available-for-sale securities, investments in receivables outstanding, credit ratings from applicable agencies Affiliated companies and other investments that were consid- and other information. ered to be other-than-temporary. 24 Mitsubishi Corporation Annual Report for the year ended March 2011 Management believes that the carrying value of its invest- assumptions annually or when events occur that may have an ments and evaluation of its investments determined not to be impact on these critical assumptions. other-than-temporarily impaired is reasonable. However, these The discount rate assumptions are determined on the rate valuations are subject to a number of uncertainties which may available on high-quality fixed-income investments with a dura- require further write-downs in the future. tion that approximately matches our employees’ estimated 3) Impairment of Long-Lived Assets period of service and benefit payments at the respective mea- We review long-lived assets for impairment whenever events or surement dates of each plan. We decreased the weighted aver- changes in circumstances indicate that the carrying amount of age discount rate to 2.7%, a decrease of 0.4 of a percentage an asset may not be recoverable. Recoverability of assets to be point for the year ended March 31, 2010. For the year ended held and used is measured by a comparison of the carrying March 31, 2011, we set the weighted average discount rate at amount of an asset to the estimated undiscounted future net 2.7%, an equal to the previous year. cash flows expected to be generated by the asset. If the carry- The assumption for the expected long-term return on plan ing amount of an asset exceeds its estimated discounted future assets is determined after considering the investment policy, cash flows, an impairment loss is recognized in the amount by long-term historical returns, asset allocation, and future esti- which the carrying amount of the assets exceeds the fair value mates of long-term investment returns. We used the expected of the assets. A long-lived asset to be disposed of by sale is long-term rate of return of 2.1% for the year ended March 31, reported at the lower of the carrying amount or fair value less 2010. For the year ended March 31, 2011, we calculated pen- costs to sell and is no longer depreciated. A long-lived asset to sion benefit costs using a rate of return of 2.6%, an increase of be disposed of other than by sale is considered as held and 0.5 of a percentage point from the previous year. used until disposed of. In accordance with U.S. GAAP, the difference between actual Estimated fair values of assets are primarily determined based results and assumptions is accumulated and amortized over on independent appraisals and discounted cash flow analysis. future periods. Therefore, actual results generally affect the These evaluations use many estimates and assumptions such as expenses recognized in future periods. Management believes future market growth, forecast revenue and costs, useful lives of that the actuarial assumptions and methods used are appropri- utilization of the assets, discount rates and other factors. ate in the circumstances. However, differences in actual experi- In each of the last three years, we have determined that, ence or changes in assumptions may affect the pension based on our estimates and assumptions, certain long-lived obligations and future expenses. assets were impaired. These amounts were included in “Loss on 5) Revenue Recognition property and equipment—net” in the consolidated statements of We recognize revenues when there is persuasive evidence of an income. For the years ended March 31, 2009, 2010 and 2011, arrangement, the goods have been delivered or the services such impairment losses amounted to ¥45.6 billion, ¥18.3 billion have been rendered to the customer, the sales price is fixed or and ¥7.2 billion respectively. determinable, and collectability is reasonably assured. During the year ended March 31, 2011, we recognized We manufacture a wide variety of products, such as metals, impairment losses for long-lived assets attributable to a machinery, chemicals and general consumer merchandise, and decline of profitability related to certain logistics properties develop natural resources. We also trade a wide variety of owned by a subsidiary in the Living Essentials segment and commodities and may take ownership risk of such inventory or certain oil and gas properties owned by a subsidiary in the merely facilitate our customer’s purchase and sale of com- Energy Business segment. modities and other products, where we earn a commission for Management believes that the estimates of discounted cash this service. flows and fair values are reasonable; however, these valuations We act as a principal or agent in our activities for earning are subject to a number of uncertainties that may change the revenues. We present revenue transactions with corresponding valuation of the long-lived assets due to unforeseen changes in cost of revenues on a gross basis as “Revenues from trading, business assumptions. As a result, we may be required to rec- manufacturing and other activities” in the consolidated state- ognize further impairment in the future. ments of income for transactions traded as a primary obligor in 4) Pension Benefit Costs and Obligations manufacturing, processing and service rendering for sales with Employee pension benefit costs and obligations are dependent general inventory risk before customer orders. For transactions on assumptions used by actuaries in calculating such amounts. traded as agent, the revenues are presented as “Trading mar- The discount rate and the expected long-term rate of return on gins and commissions on trading transactions” in the consoli- plan assets are two critical assumptions in determining periodic dated statements of income on a net basis. pension benefit costs and pension liabilities. We evaluate these Mitsubishi Corporation Annual Report for the year ended March 2011 25 We act as a principal seller in manufacturing and other activi- Fair Value Hedge—Derivative instruments designated as fair ties. We also act as a principal in various trading transactions value hedges primarily consist of interest rate swaps used to where we carry commodity inventory and generate a profit or convert fixed rate assets or debt obligations to floating rate loss on the spread between bid and asked prices for commodi- assets or debt. Changes in fair values of hedging derivative ties. Delivery in these transactions is considered to have instruments are recognized in earnings, offset against the occurred at the point in time when the delivery conditions as changes in the fair value of the related assets, liabilities and firm agreed to by customers have been met. This is generally when commitment, and are included in “Other expense (income)—net.” the goods have been delivered to and accepted by the cus- Cash Flow Hedge—Derivative instruments designated as tomer, title to the goods has been transferred, or the implemen- cash flow hedges include interest rate swaps to convert tation testing has been duly completed.