Corporate Strategy

Nov. 2016 © Mitsubishi Electric Corporation Contents 1. Forecast for FY2016 2. Management Policy 3. Embodiment of the Corporate Mission 4. Growth through Value Creation 5. Additional Value Creation through Technology & Business Synergies 6. Strengthen Business Competitiveness 7. Future-oriented R&D for Continuous and Stable Growth (Examples) 8. Greater Corporate Value 9. Corporate Governance Note FY2012: April 1, 2012-March 31, 2013 FY2013: April 1, 2013-March 31, 2014 FY2014: April 1, 2014-March 31, 2015 FY2015: April 1, 2015-March 31, 2016 FY2016: April 1, 2016-March 31, 2017 © Mitsubishi Electric Corporation 1 1. Forecast for FY2016 (1) Consolidated performance FY2012 FY2013 FY2014 FY2015 FY2016 Actual Actual Actual 6-Month Actual 6-Month Forecast (Oct. 2016) 2nd half rate 83JPY/USD 100JPY/USD 110JPY/USD 122JPY/USD 121JPY/USD 107JPY/USD 100JPY/USD (Billions of yen) 106JPY/EUR 134JPY/EUR 139JPY/EUR 135JPY/EUR 133JPY/EUR 120JPY/EUR 110JPY/EUR Net Sales 3,567.1 4,054.3 4,323.0 2,063.2 4,394.3 1,972.3 4,150.0 Operating Income 152.0 235.1 317.6 127.0 301.1 121.7 250.0 (%) 4.3% 5.8% 7.3% 6.2% 6.9% 6.2% 6.0% Income before income taxes 65.1 248.9 322.9 133.0 318.4 123.7 265.0 Net Income 69.5 153.4 234.6 92.9 228.4 88.3 185.0 ROE ‐ (Return On Equity) 5.7% 10.9% 13.9% 12.4% - Shareholders’ Equity 1,300.0 1,524.3 1,842.2 1,811.8 1,838.7 1,777.6 (%) 38.1% 42.2% 45.4% 46.9% 45.3% 46.6% Debt 540.5 373.4 381.9 357.4 404.0 370.7 (%) 15.9% 10.3% 9.4% 9.3% 10.0% 9.7% FCF (Free Cash Flow) -70.9 310.2 180.1 84.8 111.2 118.6 Dividend (yen per share) 11 17 27 9 27 9 Dividend ratio(%) 34.0% 23.8% 24.7% ‐ 25.4% - © Mitsubishi Electric Corporation 2 1. Forecast for FY2016 (2) Segment Forecast FY2012 FY2013 FY2014 FY2015 FY2016 Actual Actual Actual Actual Forecast (Oct. 2016) 2nd half rate 83JPY/USD 100JPY/USD 110JPY/USD 121JPY/USD 100JPY/USD (Billions of Yen) 106JPY/EUR 134JPY/EUR 139JPY/EUR 133JPY/EUR 110JPY/EUR Energy & Net Sales 1,058.1 1,180.0 1,228.9 1,264.6 1,200.0 Operating Electric Income/Loss 85.1 76.3 72.4 50.3 49.0 Systems (%) 8.0% 6.5% 5.9% 4.0% 4.1% Industrial Net Sales 927.8 1,098.7 1,282.7 1,321.9 1,250.0 Operating Automation Income/Loss 60.5 98.0 145.9 159.1 125.0 Systems (%) 6.5% 8.9% 11.4% 12.0% 10.0% Information & Net Sales 522.4 548.2 559.5 561.1 460.0 Operating Communication Income/Loss 1.5 5.5 18.9 14.9 13.0 Systems (%) 0.3% 1.0% 3.4% 2.7% 2.8% Net Sales 164.0 194.6 238.4 211.5 170.0 Electronic Operating Devices Income/Loss -5.5 10.0 30.1 16.8 3.0 (%) -3.4% 5.2% 12.7% 8.0% 1.8% Net Sales 821.2 944.3 944.8 982.0 1,000.0 Home Operating Appliances Income/Loss 19.3 52.8 54.2 63.8 71.0 (%) 2.3% 5.6% 5.7% 6.5% 7.1% Net Sales 590.3 676.0 740.5 707.7 690.0 Operating Others Income/Loss 18.7 19.8 23.7 23.6 19.0 (%) 3.2% 2.9% 3.2% 3.3% 2.8% Net Sales 3,567.1 4,054.3 4,323.0 4,394.3 4,150.0 Operating Total Income/Loss 152.0 235.1 317.6 301.1 250.0 (%) 4.3% 5.8% 7.3% 6.9% 6.0% * Inter-segment sales are included in the above chart. © Mitsubishi Electric Corporation 3 2. Management Policy (1) Maintain Balanced Corporate Management for Sustainable Growth Toward a Higher Level of Growth Growth Targets to be Achieved by FY2020 Net Sales 5 trillion yen or more OPM 8% or more Management Targets to be Continuously and Stably Achieved Accelerate growth of strong businesses ROE 10% or more Further global expansion Debt Ratio 15% or less Create new strong The debt ratio target, “15% or less,” represents the Company’s financial businesses discipline, which will allow the Company to secure the financing capability Reinforce the solutions to raise necessary funds for further, greater investment. business Strive for Continuous Innovation Through continuous innovation, we develop new frontiers. Constantly review and refresh Pursue the Satisfaction business portfolio Enhance capital efficiency Maintain sound financial of the Four Stakeholder Categories Create a stronger business standing Social Contributions, CSR Excellent Products and Services foundation Promote thorough Ethics and Compliance and Society Customers CSR initiatives Increase Corporate Value Rewarding Workplace Shareholders Employees © Mitsubishi Electric Corporation 4 2. Management Policy (2) Ensure “High-Quality” Growth Billions of yen CAGR 4.8% 5,000 or more ・ Sales50,000 Operating Income Sales OPM5,000 Target Growth through value creation with Growth Drivers Composition ・ Operating Income by Segment 4,323 4,394 (Outlook) 4,150 4,129 4,049 4,054 23% 6% or more Others40,000 4,000 Home 3,665 3,645 3,639 3,567 5% 7% or more Appliances 3,353 317.6 301.1 11% 5% or more Electronic Enhance 30,000 264.0 250.0 earning power by 3,000 Devices additional value 233.7 225.4 235.1 creation through Information & 162 195.3 147 technology & 30% 13% or more Communication business synergies 20,000 139 133 2,000 Systems 130 134 JPY/EUR 139.7 152.0 121 Industrial 109 114 113 110 110 Automation 100 10,000 JPY/USD 94.3 110 1,000 Systems 102 106 100 100 29% or more 92 86 8% Energy & 79 83 Electric Systems 0 0 2000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2020 (FY) Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Forecast (at the latest) % Growth Target OPM 4.7 6.5 3.8 2.8 6.4 6.2 4.3 5.8 7.3 6.9 6.0 8% or more To Be Continuously and Stably Achieved ROE 18.2 15.1 1.3 3.1 12.4 10.3 5.7 10.9 13.9 12.4 10% or more Debt ratio 33.6 15.8 20.3 16.7 14.5 16.0 15.9 10.3 9.4 10.0 15% or less *CAGR: Compound Average Growth Rate © Mitsubishi Electric Corporation 5 3. Embodiment of the Corporate Mission (1) Aim to Become a “Global, Leading Green Company” Corporate Mission The Mitsubishi Electric Group will continually improve its technologies and services by applying creativity to all aspects of its business. By doing so, we enhance the quality of life in our society. 【Contemporary Social Issues】 Environmental issues Resource/ Energy issues Solving problems globally by producing energy-saving products & systems and building social infrastructure 【Contribution to Society】 Realize Provide a sustainable society safety, security, and comfort Embodiment of the corporate mission in the context of the current environment “Global, Leading Green Company” Contribute to the realization of a prosperous society © Mitsubishi Electric Corporation 6 3. Embodiment of the Corporate Mission (2) Contribution to Society Value Creation through Simultaneously Achieving a “Sustainable Society” and “Safety/ Security/ Comfort” (Value for Society) Other examples of Realize a sustainable society Provide safety, security, and comfort CSR initiatives Low-carbon society 【Examples】【Examples】 Environmental Activities All-SiC power module inverter equipment Security Selected as one of the companies on the “CDP 2016 Climate A List”, which for railcars Provide security systems for recognizes companies’ activities Achieve energy-savings (40% buildings and factories according responding to reducing CO2 emissions compared to before) through reducing to their varying security levels and alleviating climate change size significantly and improving regenerative Safe driving assistance (under development) “A List” Companies electricity by mounting SiC power modules which realize Realize a safe and comfortable motorized society ・193 companies were low electricity consumption on railcar inverter equipment through advances in driving-assistance technology selected out of 6,000 which combine HMI/ communication/ sensors major companies world High-capacity energy storage system wide Improve the balance of electricity supply technologies with automobile control technologies ・In Japan, 22 companies and demand when renewable energy such as engine and steering control were selected among is introduced on a massive scale Utilizing of quasi-zenith satellites (under R&D) the 500 nominees High efficiency packaged air-conditioner for Improve safety precision of automated driving shops/offices systems and realize appropriate maintenance ・ Realize high levels of energy-savings (APF 5.5) by of social infrastructure by utilizing Activities under the Eighth Environment adopting low-loss power semiconductor module high-accuracy positioning information Plan all-SiC DIPIPM and high efficiency compressors Safety standard (FA equipment) ・Reduce CO2 emission during product ・ Reduce environmental impact by adopting low global Achieve both high productivity and use (make them more energy efficient) warming potential refrigerant R32 safety in the production fields with a ・Reduce green house gas emission wide range of products from control during production Resource conservation/ Recycling 【Examples】 equipment to driving equipment and robots, which have ・Increase the recycling % of plastic Aftermarket service been certified as conforming to international safety used in home appliances (to 70% or Promote resource saving through aftermarket services standards more) ・ Renewal of elevators (minimum refurbishing) Room Air Conditioner Social Contribution Activities ・ Rebuilt automotive electric equipment ※ The world’s first independent double-fan system ・ creating a comfortable atmosphere with temperature Supporting social welfare facilities Recycling (home appliances) and disaster relief aids by a Promote “closed recycling” by using technology to sort space fit for each person with advanced sensing technology matching gift program (Japan) main plastics (PP/ PS/ ABS) from mixed plastics of ・ Empowering youth with home appliances and reusing them in our Company’s ※Our company survey disabilities to lead productive lives products regarding residential air-conditioner th and to be prepared to enter the Reduce environmental burden indoor unit (as of October 30 2015 at time of product launch) workforce (U.S.) *SiC: Silicon Carbide, DIPIPM: Dual Inline Package Intelligent Power Module, ・ Supporting the Special Olympics Improve environmental management level of APF: Annual Performance Factor, PP: Polypropylene, PS: Polystyrene, (Europe) domestic and overseas manufacturing bases ABS: Acrylonitrile Butadiene Styrene, HMI: Human Machine Interface, © Mitsubishi Electric Corporation 7 4.

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