M i t s u b i s h i M a t e rials Co rp o ratio n
A nnual Rep o rt 2015

Challenge to Become theWorld’s Leading Business Group

http://www.mmc.co.jp/

Annual Report
For the year ended March 31, 2015

2015

Printed in Japan

MMC̲AR2015̲c1-c4̲入稿データ̲0806.indd 1

2015/08/20 8:42

MITSUBISHI MATERIALS CORPORATION

Corporate Profile

ANNUAL REPORT 2015

Investor Information(As of March 31, 2015)

As a comprehensive materials manufacturer, the Mitsubishi Materials Group focuses on the supply of basic

Shares of Common Stockmaterials indispensable to the world.

Authorized:
3,400,000,000
Issued and Outstanding: 1,314,895,351

The Group has established operating bases in about 30 countries and regions worldwide while developing aprovide high-value-added products that meet today’s needs.

Financial Institutions

0.01%

Securities Companies
Other Corporations

vast array of businesses centered on cement, metals, cemented carbide tools and electronic materials.
The Group will contribute to people, society and the earth by further maximizing cross-business synergies toDistribution of Shareholders

Foreign Corporations &Individuals

Number of Shareholders

Individuals & Others

19.79%

National & Local Government

34.04%

81,57426.56%
Stock Listing
Tokyo Stock Exchange

17.34%
2.26%

Administrator of Shareholder Registry

Contents
01 Consolidated Financial Highlights

Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Division
10-11, Higashisuna 7-chome, Koto-ku
Tokyo 137-8081, Japan

02 At a Glance
04 Message from the President

Independent Certified Public Accountant

06 Special Feature

KPMG AZSA LLC

08 Review of Operations
13 Research and Development
14 Corporate Governance
15 Corporate Social Responsibility (CSR)
16 Management
17 Financial Section

For Further Information, Contact
Corporate Communications & IR Dept.
Tel: +81-3-5252-5206
Fax: +81-3-5252-5272
E-mail:ml-mmcir@mmc.co.jp

61 Main Consolidated Subsidiaries and Affiliates
62 Corporate Data

Annual Meeting of Shareholders

63 Investor Information

The annual meeting of shareholders of the Company isnormally held in June each year in Tokyo.

Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this annual report with respect to Mitsubishi Materials’ plans, strategies andbeliefs, and other statements that are not historical facts are forward-looking statements about
the future performance of Mitsubishi Materials which are based on management’s assumptions
and beliefs in light of the information currently available to it, and involve risks and uncertainties.
Potential risks and uncertainties include, without limitation, general economic conditions in
Mitsubishi Materials’ markets; industrial market conditions; exchange rates, particularly between
the yen and the U.S. dollar, and other currencies in which Mitsubishi Materials makes significant
sales or in which Mitsubishi Materials’ assets and liabilities are denominated; and Mitsubishi
Materials’ ability to continue to win acceptance of its products and services, which are offered inhighly competitive markets characterized by continual new product introductions, rapid developments in technology and changing customer preferences.

Major Shareholders• Japan Trustee Services Bank, Ltd. (Trust account)• The Master Trust Bank of Japan, Ltd. (Trust account)• National Mutual Insurance Federation of Agricultural
Cooperatives• Meiji Yasuda Life Insurance Co.
• The Bank of Tokyo-Mitsubishi UFJ, Ltd.

63

MMC̲AR2015̲c1-c4̲入稿データ̲0806.indd 2

2015/08/20 9:09

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Consolidated Financial Highlights
Mitsubishi Materials Corporation and Consolidated Subsidiaries
Years ended March 31, 2015, 2014, and 2013
Millions of yen

Thousands of U.S. dollars

2015

2014

2013

2015

¥1,517,265
71,87181,09356,147¥1,414,796
66,281
76,90252,551¥1,287,251
52,50074,41436,948$12,625,993
598,077
674,824
467,234¥1,898,157
629,514¥1,778,505
525,707¥1,811,767
466,231$15,795,600
5,238,528

¥42.8
420.3
8.0

¥40.1
348.5
6.0

¥28.1
309.1
4.0

$0.35
3.49
0.06

3.0
8.9

3.0
10.0

2.0
7.9

For the year:
Net Sales
Operating profit
Ordinary income (Under Japanese GAAP)Net income
At year-end:
Total assets
Total net assets
Per share data (in yen, dollars):
Net income (basic)
Net assets
Cash dividend applicable to the year
Ratios (%):
Return on assets (ROA)
Return on equity (ROE)
Notes:
1. Note: U.S. dollar amounts are translated from yen at the rate of ¥120.17 to US$1, the approximate exchange rate as of March 31, 2015.
2. Amounts of less than one million yen have been omitted. As a result, the total amounts in Japanese yen and translated U.S. dollars shown in the consolidated financial statements and notes to the consolidated financial statements do not necessarily agree with the sum of the individual amounts.
3. ROA = Net income / Total assets.
4. ROE = Net income / Total net assets.

Net Sales

Operating Profit/
Ordinary Income(Billions of yen)(Billions of yen)

1,600

80

1,200

60

Net Income

Operating Profit

Ordinary Income(Billions of yen)
60

40
800

40

400

20

20

0

2011

2012

2013

2014

2015

0

2011

2012

2013

2014

0

2015

2011

2012

2013

Total Assets

Total Net Assets

Return on Assets (ROA)/
Return on Equity (ROE)(%)(Billions of yen)(Billions of yen)

2,000

800

12

1,500

600

9

1,000

400

6

500

200

3

0

2011

2012

2013

2014

2015

0

2011

2012

2013

2014

2015

2014

2015

ROA

0

2011

2012

2013

2014

ROE

2015

1

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

At a Glance
Segment

Share of Net Sales (FY2015)

Cement12.5 %

Metals53.0 %

Advanced
Materials &Tools

Electronic
Materials &Components

7.5 %

3.7 %

Aluminum10.4 %

OthersPortland cement
Cement-related products
Ready-mixed concrete
Building materials

Copper smelting
Copper and copper alloy products
Precious metals

Cemented carbide products
Sintered parts
High-performance alloy productsElectronic materials
Electronic components
Polycrystalline silicon
Chemical products

Aluminum beverage cansRolled or extruded aluminum products
Processed aluminum products esource-, environment- and recyclingR
related products

13.0 %
2

Major Products and Services

Fossil fuels
Nuclear energy-related services
Engineering, real estate, etc.

MITSUBISHI MATERIALS CORPORATIONNet Sales (Billions of yen)

Operating Profit (Billions of yen)

200

20

150

15

100

10

50

5

0

2011

2012

2013

2014

2015

0

900

30

600

20

300

10

0

2011

2012

2013

2014

2015 *

150

0

2011

2012

2013

2014

2015

The Metals business develops its operations based on the pillars ofcopper mine development, smelting, processing, as well as the
production and sale of precious metals and bullions. In recent
years, we have been investing in copper mines, augmenting recycling operations in the copper smelting business, and reinforcing
the global expansion of the copper and copper alloy products business. These initiatives enable the Metals business to steadily manufacture and sell high-performance, high-quality copper products.
2011

2012

2013

2014

2015

Mitsubishi Materials provides core components, materials andother products to customers around the world primarily in theautomotive and aircraft markets. Such products include cemented carbide tools, which are indispensable for the metal processing of various components, as well as engines and transmissions.
The Company has also been focusing its energy in recent years
on recycling raw materials, including tungsten.

15
100
10

0

5

2011

2012

2013

2014

2015

0

2011

2012

2013

2014

2015

6

80
60

4
40
2

20
0

2011

2012

2013

2014

2015

0

200

8

150

6

100

4

50

2

0

2011

2012

2013

2014

2015

0

400

12

300

9

200

6

100

3

0

2011

2012

2013

2014

2015 *

0

ProfileBuilding a business framework that encompasses the production
and sale of each type of cement, along with ready-mixed concreteand cement-related products, Mitsubishi Materials is engaged in
cement businesses both in Japan and overseas. The Company isalso contributing to a resource-recycling society by actively promoting the recycling of waste materials and byproducts.

20

50

ANNUAL REPORT 2015

2011

2012

2013

2014

2015

Mitsubishi Materials provides the market with products that meet theneeds of such growth areas as sputtering targets for organic electroluminescent (EL) displays and solar cells, as well as electronic components used in energy-saving models of air conditioners andrefrigerators, both of which are gaining in popularity in emerging countries. In addition, the Company supplies the market with polycrystalline silicon, which is used as a raw material to produce silicon wafers
for semiconductors. This material features a superior “Eleven 9s” levelof purity thanks to unsurpassed purification technology.

The Aluminum business is engaged in the manufacturing and saleof products for a wide array of segments and with various uses,
including aluminum cans for beverages, automobile components,
materials used by the electric and electronics industries andeveryday items. Furthermore, the Company focuses on recycling
raw materials through the construction of a uniform processing
system that encompasses everything from the collection of usedbeverage cans (UBC) to the casting of recycled aluminum.
2011

2012

2013

2014

2015

In its Others business, Mitsubishi Materials is promoting developments in areas that include geothermal, hydro, and solar power
generation which provide green, renewable non-CO2-emittingenergy sources; the home appliance recycling business, which
contributes to the development of a recycling society and theengineering business, which undertakes the MMC Group’s civilengineering and construction operations.
2011

2012

2013

2014

2015

* ‌As of April 1, 2014, the precious metals business, which had been included in the Others business, was integrated into the Metals business. Segment information for the fiscal year ended
March 31, 2014 has also been adjusted to reflect the segment change, while information for the fiscal year ended March 31, 2013 and prior does not reflect the segment change.

3

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Message from the President‘‘

My basic policy is to carry forward the measures pursued by
the former president, Hiroshi Yao, who worked to fortify
the foundation for growth, promote a growth strategy, andembed safety and CSR measures. I seek to further develop
and strengthen these measures.
With absolute achievement of medium-term management‘‘

plan targets as our topmost priority, we will become theworld’s leading business group committed to supporting a
recycling-oriented society.

June 26, 2015
Akira Takeuchi, President

President’s Profile
Akira Takeuchi graduated from the Kyoto University Faculty of Economics in March 1977 and from Duke University School of Law in the
United States in December 1990. He entered Mitsubishi Metal Corporation (now Mitsubishi Materials) in April 1977. In June 2003, hebecame the General Manager of the General Affairs Dept. of the General Affairs Div. In December 2004, he became General Manager of theGeneral Affairs Div. In June 2006, he became an executive officer. In April 2009, he became a senior executive officer. In June 2009, hebecame a managing director and assistant to the president. In April 2014, he became executive vice president. In April 2015, he attained his
current position as president.

Fiscal 2015 Summary
During the fiscal year ended March 31, 2015, overall the global
economy headed toward modest recovery thanks to a steadyongoing U.S. economic rebound. In Asia, however, economic
growth continued to level off in China and other countries.
In spite of the negative impact of last-minute demand that
occurred before the increase in the consumption tax rate, overall
the Japanese economy sustained a gradual recovery, thanks to
improvement in such areas as employment and income.
Looking at the Mitsubishi Materials Group’s operating
environment, ongoing yen depreciation affected business overall.
Meanwhile, the Group faced such negative factors asconstruction delays and falling prices of copper and other key
metals in overseas markets.
In this environment, the Group embarked on the medium-term

4management plan (FY2015-2017), “Materials Premium 2016 —Challenge to become the world’s leading business group.” This
plan defines the group wide growth strategies of “Fortifying thefoundation for growth,” “Strengthening global competitiveness”
and “Pursuing a recycling-based business model.” The Group
continued to implement a variety of measures based on thesestrategies, established new overseas bases—particularly in Asia,and underwent a process of business selection and focus,
among other activities.
As a result, consolidated net sales for the fiscal year amounted
to ¥1,517,265 million, up 7.2% from the previous fiscal year.
Operating profit increased 8.4% to ¥71,871 million, and ordinary
income increased 5.5% to ¥81,093 million. Net income increased
6.8% to ¥56,147 million.

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Progress Update on the Medium-Term Management Plan and Future Initiatives
Under the medium-term management plan, our fiscal 2017
management targets are: operating profit of ¥100 billion, ordinary
income of ¥110 billion, return on assets of 6%, and a net D/E ratioof 1.0 time or lower. The progress made so far is detailed below.
FY2015(actual)

FY2016(forecast)

FY2017(targets)

Operating profit¥71.8 billion¥85.0 billion¥100.0 billion

Ordinary income¥81.0 billion¥92.0 billion¥110.0 billion

4.4%

4.8%

6%

1.0 time

0.9 time

1.0 time or
lower

Return on assets(ordinary income base)

Net D/E ratio

Going forward, we will take up the following three major
measures as we aim for certain achievement of medium-term
management plan targets.
1 Pursue growth strategies more swiftly and with more certainty
2 I‌ mplement appropriate measures through stronger PDCA
management of progress on the medium-term management plan

The first is about implementing the growth strategies laid out inthe medium-term management plan more swiftly and with morecertainty. Especially in regard to the strategic investment of up to¥100.0 billion over three years, I believe we can effectively
implement this by making meticulous preparations in advanceand then raising the speed of management decisions.
The second is about thoroughly strengthening the entire
Group’s progress management through PDCA cycles to secure
the first measure.
As for the third measure, “Building organizational culture thatdevelops personnel who take on challenge and have ability toachieve” is already set as a strategy under both the long-term
management policy and medium-term management plan. In April
2015, we established a Companywide project team, and themeasure is beginning to gain momentum.
Moreover, regarding the net D/E ratio, as a result of
simultaneously promoting improvements of our financial standing
alongside the growth strategies, Japan Credit Rating Agency,
Ltd. raised our credit rating from BBB+ to A− in fiscal 2015.

3 Reform corporate culture and revitalize human resources

Outlook for Fiscal 2016
Overall, the global economy is expected to see a continued
modest recovery, led by advanced countries, although economic
growth is expected to level off in China and other emerging
markets.
The Japanese economy is expected to continue enjoying a
gradual recovery, with lower crude oil prices and the impact of yen
depreciation contributing to improvements in corporate earnings
and the employment and income environment.
The Group expects its operating environment to be

characterized by firm private-sector housing investment andcapital investment centering on large corporations supported bydomestic economic recovery. At the same time, uncertainty
persists with regard to current price decreases on copper andother key metals.
In this situation, the Group is uniting to achieve the targets set
out in its medium-term management plan (FY2015-2017) and its
long-term management policy, which looks toward the beginningof 2020s.

To Our Shareholders and Investors
We regard the return to shareholders as one of our mostimportant priorities. Accordingly, our policy is to make decisions
on profit allocation, including the amount, timing and frequency
of dividend payments, based on comprehensive consideration ofvarious factors related to overall management, such as income
over the relevant period, retained earnings, and financial position.
Based on this policy, we decided to pay an annual dividend forfiscal 2015 of ¥8.00 per share (¥3.00 interim dividend plus ¥5.00

year-end dividend). Dividend payments for fiscal 2016 are
expected to increase by ¥2.00 to ¥10.00 per share (¥5.00 interim
dividend plus ¥5.00 year-end dividend).
The Mitsubishi Materials Group will endeavor to raise theGroup’s corporate value through initiatives in the medium-term
management plan.
We look forward to the unwavering support and understandingof the Company’s shareholders and investors.

5

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Special Feature:

Progress in the Medium-term Management Plan (FY2015-2017)
CementJapan‌“‌Promote Integrated Business Capabilities to Expand Recycling Operations”
In the Kanda area of Mitsubishi Material’s Kyushu Plant, we expanded recycling capacity of waste gypsum
board powder from 12,000 tons to 64,000 tons, with a portion of new equipment coming on line at the end of
fiscal 2015. For more details see Topics on page 8.

United States“‌Expanding earning from ready-mixed concrete operations through new construction
and purchases of ready-mixed concrete plants, and securing of aggregate quarries”
Eyeing future growth in ready-mixed concrete demand, we are continuing tosecure aggregate resources, which are becoming difficult to receive thedevelopment permission due to environmental regulations. The Hubbs
quarry commenced production and shipments in December 2014. We
expect to reduce the costs of transporting aggregate because this quarry isin a favorable location closer to a concentration area of ready-mixed
concrete plants compared to other quarries.
Hubbs quarry

MetalsMining“‌Participation in New Mine Development Project”
In June 2013, we acquired indirect interest of 20% of the Zafranal copper
project in Peru. We have been conducting a pre-feasibility study since July
2014. This project is located in an favorable location with developed
infrastructure and its favorable waste ore ratio. We expect the project to becost competitive. Aiming to secure a stable supply of copper concentrate,
we are working to acquire quality assets in earlier stages of development.
We pursue a captive mine ratio of 50% in the early 2020s, which is our longterm target, and strive to diversity our supply portfolio.
The site of the copper mining project in Peru

CopperSmelting“‌Strengthening of Recycling Operations”
During the medium-term management plan period, our target is to become No.1 globally in processing of precious
metals scrap (E-Scrap). We began construction to expand E-Scrap processing capacity at the Naoshima Smelter &Refinery in November 2014 to help achieve this target. For related information see the Topics on page 9.

Advanced Materials & Tools
Cemented
Carbide Products“‌Expanding Sales Networks and Production Locations, Focusing on Emerging
Countries”
1 Established new sales locations in Turkey and China(Wuhan and Qingdao)

To further expand the overseas business of cemented carbide products, weestablished new sales locations in Turkey and Wuhan, China in July 2014
and in Qingdao, China in August. To reinforce our technical service
capabilities, we established a new technical center in Thailand in December
2014. Going forward, we strive to continue steadily expanding our overseas
locations in line with the medium-term management plan.

6

Technical center in Thailand

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

2 ‌Completed expansion of production capacity (20% higher at

the Tsukuba Plant)

Eyeing expanded sales under the medium-term management plan, we worked
to enhance the production capacity of inserts at the Tsukuba Plant—the main
plant—in fiscal 2014, increasing capacity by around 20%. While the ability toprovide products is fundamental as a manufacturer, securing manufacturing
capacity preemptively and satisfying customers in terms of delivery time is theminimum requirement for success. We will continue to execute thefundamentals and seek to gain the trust of customers.

The Tsukuba Plant

Companywide‌“‌Fortifying the Foundation for Growth”
Growth Strategies
Of the ¥100.0 billion allocated for strategic investments across the Company, we are planning to invest ¥70.0 billion
mainly for mergers and acquisitions. As one tangible example, in the Advanced Materials & Tools business, we madeHitachi Tool Engineering, Ltd. a consolidated subsidiary on April 1, 2015. For more details see the Topics on page 10.

Electronics Materials & Components
Advanced
Materials“‌Promote Development of Unique, Value–Added Strategic Products”
Using our unique fluorination and organic synthesis technologies, wedeveloped the world’s first fluorine compound that has both hydrophilic andoil-repellent characteristics in October 2014. Going forward, we aim to quickly
release this product in a wide range of markets and nurture a large-scalebusiness. As for sputtering targets, we are strengthening cylindrical and largesize products. And for direct bonded aluminum (DBA) substrates, we are
increasing market share for next-generation hybrid automobiles and industrial
applications such as railcars.

Electronic
Components“‌Strengthening Production and Sales Systems”

Oil
Water

Oil

Water

Pour in a
mixture of oil
and water

Only the water
passes throughThe oil andwater areimmediately
separated

Separating oil and water (Example of a filter
coated with the newly developed product)

To step up production of the flagship thermistor sensor, we established a manufacturing subsidiary in Laos in April
2014, and production began in March 2015. For more details see the Topics on page 11.

Silicon“‌We will continue to observe autonomous reconstructing at SUMCO”
In May 2015, the total value of our class stock that we held in SUMCO Corporation was redeemed. In addition, wesold a portion of the common stock held and expect extraordinary income of around ¥30 billion yen in fiscal 2016.
Currently, we continue to maintain the company as an equity-method affiliate. The percentage of ownership after
the sale of shares is about 18%.

Aluminum
RolledProducts“Launching a Company in India and Achieving Profitability”
With the aim of further enhancing the heat exchanger business overseas, we established a local subsidiary in India in
July 2013. Construction of its plant is expected to be complete in autumn 2015. We are further raising ourcompetitiveness in India, where future growth is anticipated, by enhancing our production and sales locations there.

Aluminum Cans“Strengthening of Aluminum Bottle Cans Sales Overseas”
We are exploring overseas development of the aluminum bottle cans business.

7

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Review of Operations

CementPerformance FY 2015

• Net Sales¥189.6 billion yen
1.7%• Operating Profit¥17.3 billion yen

9.0%

Performance for Fiscal 2015
In the domestic cement business, overall demand declined and sales volumes
decreased, except for export sales. Contributing factors included labor shortages in theconstruction industry, which led to unsuccessful bids for public works and delays on
private-sector works projects, as well as a downturn in housing construction. In the
United States, bad weather at the beginning and end of the year in Southern California
led to construction delays. This factor and business policies emphasizing selling prices
contributed to driving down sales volumes. In China, a high-speed rail construction
project and new airport construction in Shandong Province partly stimulated demand.
However, sales volumes declined as a result of a falloff in demand related to real-estate
investment. In the entire Cement business, cement production amounted to 12.0 million
tons, down 0.3 million tons from the previous fiscal year.
Price increase on cement and ready-mixed concrete boosted sales in the UnitedStates, although operating costs increased.
As a result, segment sales rose 1.7%, or ¥3.1 billion, year on year to ¥189.6 billion,
while operating profit fell 9.0%, or ¥1.7 billion, to ¥17.3 billion

Outlook and Future Strategies
In the domestic cement business, public-sector demand is forecast to fall as theJapanese government reduces spending on public works. On the other hand, in theTokyo metropolitan area we anticipate construction related to the upcoming Olympic
Games, and favorable corporate earnings should fuel private-sector capital investment.
Consequently, we expect domestic demand to remain largely unchanged from its level inthe fiscal year ended March 31, 2015. Under these circumstances, we will work tosecure sales volumes by steadily implementing initiatives to benefit from demand related
to earthquake disaster reconstruction and large-scale projects leading up to the
Olympics.
In the U.S. cement business, we will endeavor to boost sales volume and raise prices
in response to an expected demand recovery centered on the private sector as the U.S.
economy steadily rebounds. We will also endeavor to reduce manufacturing costs
through stable operations, leading to increased profitability.
In the Chinese cement business, demand related to real estate investment is unlikely torecover. This situation is causing market competition to grow more pronounced. Amid these
conditions, we will endeavor to adjust prices, mainly on high-quality products. We will
simultaneously work to reduce manufacturing and selling costs in an aim to shore up
profitability.

TopicsBecause gypsum board is durable and provides superior insulation against heat andsound, it is widely used as a construction material in ceiling panels, wall materials andother applications. However, when an old building is demolished, the waste gypsum
board typically goes unrecycled and ends up in landfills. In light of this situation Mitsubishi
Materials uses proprietary treatment technology to recycle waste gypsum board powder
as a raw material for cement. The Company is already using this technology and receiving
waste materials from both within the Group and from outside sources. In July 2014, theCompany began carrying out its plan to expand the Kyushu Plant’s recycling capabilities
for waste gypsum board powder by roughly five times. In fiscal 2015, the entire Company
treated a total of 31,000 tons.
Unloading waste gypsum board powder prior to recycling

8

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Performance for Fiscal 2015

MetalsPerformance FY 2015

• Net Sales¥803.3 billion yen
11.9%• Operating Profit¥24.8 billion yen

3.7%

In the copper business, domestic smelters and refineries experienced higher electricity
and other operating costs. In addition, the Naoshima Smelter & Refinery underwent
periodic furnace repairs. However, substantial production increases at PT Smelting inIndonesia helped drive up net sales and operating profit. In the entire Metals business,copper cathode production amounted to 555 thousand tons, up 41 thousand tons fromthe previous fiscal year.
In the gold and other valuable metals business, net sales and operating profit bothincreased as a result of higher production volumes, stemming from higher ore grades.
In the processed copper products business, sales of products for automobiles
increased, but sales of products for nuclear power facilities fell. Consequently, net salesrose but operating profit fell.
As a result, segment sales rose 11.9%, or ¥85.3 billion, year on year to ¥803.3 billion,
while operating profit increased 3.7%, or ¥0.8 billion, to ¥24.8 billion.

Outlook and Future Strategies
We see the demand outlook for copper ore as unclear, as economic growth is levelingoff in China and other emerging markets, while the U.S. economy is recovering steadily.
Copper prices are relatively low at present. We will continue to monitor market trends,
along with price trends in the foreign exchange and stock markets.
In processed copper products, we anticipate continued firm demand for automotive
products.
Under these conditions, we will continue working to lower our breakeven point in themetals business by reducing energy costs and suppressing fixed expenses. Throughthese efforts, we aim to build a solid constitution that is impervious to price fluctuations.
In copper smelting, we will work toward stable operations at smelters in Japan andoverseas while expanding recycling operations by building a processing structure thatcan manage difficult-to-handle waste. By boosting revenues from waste treatment, theGroup expects to improve segment profits. In the processed copper products business,
we will continue to increase profitability by enhancing sales competitiveness throughaccelerated development of alloys, drawing on our technological and development
capabilities.

Topics
The recycling rate of waste home appliances and waste electronic equipment is increasing worldwide. At Mitsubishi
Materials, we are working to collect and recycle valuable metals by processing precious metals scrap (E-Scrap)
originating from crushed circuit boards of waste appliances and waste electronic equipment. This scrap provides themain raw materials for the recycling business in copper smelting. In recent years, we have expanded the volume
received from overseas, mainly from Europe and the United States, as well as from the domestic market in Japan.
Especially in North America, home appliances and electronic equipment manufacturers, as well as local municipalities
including state governments, are actively promoting material recycling. Therefore, in July 2014, we established a new
department for the E-Scrap recycling business within Mitsubishi Materials U.S.A. Corporation and strengthened its
collection system.

Collected precious metals scrap(E-Scrap)

9

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Review of Operations

Advanced
Materials &Tools
Performance FY 2015

• Net Sales¥113.5 billion yen
2.6%• Operating Profit¥16.7 billion yen

18.7%

Performance for Fiscal 2015
In the cemented carbide products business, net sales and operating profit bothincreased thanks to higher demand in Japan and overseas, particularly the UnitedStates, Europe and Southeast Asia, as well as proactive sales promotion efforts.
In the high-performance alloy products business, net sales and operating profit were
down. Sales of products for automobiles remained favorable, notably for North America.
However, costs rose in tandem with increases in production capacity. Other contributing
factors were the fact that Mitsubishi Materials C.M.I. Corporation (now NIDEC SANKYOCMI CORPORATION) ceased to be a subsidiary in January 2014, while MMC Superalloy
Corporation (now Hitachi Metals MMC Superalloy, Ltd.) became an equity-method
affiliate of the Group in July 2014.
As a result, overall net sales in this segment declined 2.6%, or ¥2.9 billion, year on yearto ¥113.5 billion. Operating profit rose 18.7%, or ¥2.6 billion, to ¥16.7 billion.

Outlook and Future Strategies
In the cemented carbide products business, a certain sense of stagnation is evident due
to falling levels of economic growth in China and other emerging markets. That said,
overall orders are trending upward, and over the medium to long term we expect
demand to expand, particularly among our customer base in the automotive and aircraft
industries.
Under these circumstances, we will strengthen our high-performance, high-precision
product development for cemented carbide products, and scale up our engineering
service organization. We will also endeavor to step up our sales activities by augmenting
our sales locations and extending our sales network, notably in emerging markets.
Furthermore, we will continue working to stabilize our sourcing of tungsten—a key
constituent of cemented carbide products—by improving the recycling ratio and throughother efforts to diversify procurement sources.
Turning to the high-performance alloy products business, in July 2014 MMC
Superalloy Corporation’s status changed from a consolidated subsidiary to being anequity-method affiliate, which is expected to reduce revenues and earnings in the shortterm. However, the Group will work to increase earnings by augmenting its overseas
production locations in response to anticipated growth in demand for sintered products
in tandem with expansion in the automotive industry.

TopicsOn April 1, 2015, Hitachi Tool Engineering, Ltd. became a consolidated subsidiary of theCompany, and we will acquire the top market share in Japan for cemented carbide tools.
Mitsubishi Materials is a cemented carbide tool manufacturer with comprehensive
strengths, including a solid global sales network and a fully integrated supply chain that starts
from raw material manufacturing. The Company is especially strong in material technology
and can accelerate growth by bolstering its ability to meet demand for complicated shapes.
On the other hand, Hitachi Tool Engineering is especially strong in milling and we believe it ispossible to further expand business by bolstering sales overseas.
In this way, both companies complement each other’s strengths and opportunities. Goingforward, we will continue to ramp up business expansion in overseas regions, where
demand is expected to grow.

10

Cemented carbide tools

MITSUBISHI MATERIALS CORPORATIONElectronic
Materials &Components
Performance FY 2015

• Net Sales¥56.0 billion yen

12.3%• Operating Profit¥4.4 billion yen

11.7%

ANNUAL REPORT 2015

Performance for Fiscal 2015
In the advanced materials business, sales of products related to semiconductor
manufacturing equipment were solid, but sales of products used in smartphone LSIs
and displays decreased. Sales of products for hybrid automobiles also declined. Thissituation led to higher net sales but lower operating profit.
The electronic components business saw increases in both net sales and operating
profit, benefiting from increased sales of products for household appliances.
In the polycrystalline silicon and chemical products business, sales of polycrystalline
silicon decreased. However, depreciation expenses for the Yokkaichi Plant diminished,
as impairment losses were recorded on assets at the Yokkaichi Plant in the preceding
fiscal year, and sales of automotive chemical products increased. Net sales in thisbusiness consequently fell, while operating profit increased.
As a result, in the entire Electronic Materials & Components business, net sales
increased 12.3%, or ¥6.1 billion, year on year to ¥56.0 billion, while operating profit
increased 11.7%, or ¥0.4 billion, to ¥4.4 billion.

Outlook and Future Strategies
In the advanced materials business, we expect sales of products for solar cells to remainstrong for the foreseeable future. The demand outlook for semiconductor-related
products, however, is opaque. Product demand for hybrid automobiles is expected todecrease, due to the consumption tax hike in Japan and sluggish sales of hybrid
automobiles in the United States. However, product demand in non-automotive
industries is expected to grow. In each market, we will continue to increase profitability
by using core technological capabilities, and enhancing sales competitiveness andproposal capabilities to clients.
In the electronic components business, sales of products for household appliances
are falling at present as Chinese economic growth levels off, but we are working toincrease sales of products for industrial equipment and vehicles. We will continue
working to strengthen our business structure by enhancing our sales structure in
emerging markets, introducing new products early and further reducing costs.
In polycrystalline silicon and chemical products, operations were suspended at the
Yokkaichi Plant following an explosion and fire on January 9, 2014. The plant went backon line on June 30, 2014, operating with a safety control system in place and withredoubled efforts to ensure operational stability.

TopicsMitsubishi Materials’s thermistor sensor is perfect for outdoor units that operate in hightemperatures and high humidity because it is highly reliable and uses high performanceelements. In China, which is already a large-scale market, sales remained firm for air
conditioners, refrigerators and other home appliances, and future demand growth isexpected. Amid this environment, we established a production and sales subsidiary forthermistor sensors in the Lao People’s Democratic Republic, and production began in
March 2015. In the future, we see sales of the product expanding for motorcycles andothers in Southeast Asia.

Ribbon cutting ceremony with Ambassador Kishino andthen-president (current chairman) Yao

11

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Review of Operations

Aluminum

OthersPerformance for Fiscal 2015

Performance for Fiscal 2015

In the aluminum cans business, demand increased for regularcans mainly for beer. Demand for bottle cans for black coffee andtea-based beverages also expanded.
In rolled aluminum and processed aluminum products,
demand for products used in solar cells declined, but demandfor products for automobiles expanded.
Overall, the aluminum segment saw an uptick in energy andmaterial costs.
As a result, in the entire Aluminum business, net sales rose
4.6%, or ¥6.9 billion, year on year to ¥157.2 billion, while
operating profit rose 2.4%, or ¥0.1 billion, to ¥5.6 billion.

In the energy-related business, coal sales were down but sales
related to nuclear power increased, resulting in lower net sales
but increased operating profit.
In the “E-waste” (used electronics and electrical products)
recycling business, both net sales and operating profit weredown, due to a reduction in the handling volume caused by the
declining impact of last-minute demand that occurred before theconsumption tax rate increase.
Orders for nuclear energy and engineering services amounted
to ¥68.6 billion, up ¥3.1 billion from the previous fiscal year. The
order backlog at the end of the period was ¥29.6 billion, up ¥4.7
billion from a year earlier.
As a result, overall net sales of this segment rose 2.0%, or¥3.9 billion, year on year to ¥197.3 billion, while operating profit
grew 26.6%, or ¥1.9 billion, to ¥9.3 billion.

Topics

TopicsIn December 2014, the cumulative number of shipments ofaluminum bottle cans manufactured by the MMC Group’s Universal
Can Corp. exceeded 10.0 billion. Starting production at the
Okayama Plant in 2001, the aluminum bottle can is used for blackcoffee and other beverages. The uses of this bottle can are
expanding due to the development of a high performance cap that iseasy to open yet still has good sealing performance. In addition, theproduct technology for our aluminum bottle can has received highpraise overseas, and the Group is considering overseas expansion.

In April 2015, Mitsubishi Materials commenced verification test for a
bio-gasification system designed to turn food and other waste into bio
gas. Bio gas is created by decomposing biomass such as food waste
and sewage sludge with microorganisms. This gas can then be
effectively used as energy to generate electricity, heat or other powersources. Currently, most food waste is incinerated. To further promote
recycling, it is important to convert more of this food waste into asource of energy. Through these recent tests, Mitsubishi Materials
aims to construct a bio-gasification system that excels in both cost
efficiency and eco-friendliness by partnering with sewage treatment
plants and utilizing our cement factories. We will move ahead withstudies on commercialization, which we aim to achieve in fiscal 2019.
Bio-Gasification Experimental Facility
Methanefermentation tankAcidfermentation tank

Aluminum bottle cans and caps12

Gas holder

Food waste

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Research and Development

Fundamental Policy of R&D

R&D Expenses Breakdown in FY2015

It is the fundamental policy of the Mitsubishi Materials Group’s R&D to rapidly conductongoing development activities, in tandem with management policies, in order to contribute to sustainable business expansion. As a comprehensive materials manufacturer,
the Mitsubishi Materials Group strengthens the cultivation of its indispensable basic andcore technologies. At the same time, the Group proposes and implements current development themes to support and expand ongoing operations as well as future themes
intended to create next-generation businesses.

CementOthers

Metals7.9%
13.0%
FY2015

38.6%¥10,530
million

5.6%
8.8%

Electronic
Materials &Components

26.1%

R&D Strategies

Advanced
Materials& Tools

Aluminum

The Group aims to accelerate development and differentiate its technologies and products by leveraging its unique raw material, processing and recycling technologies.
We are especially working to develop new business that will be pillars in the mediumto long-term, businesses that can meet future needs in the fields of automobiles, electronics, energy and environmental-related recycling.

R&D Expenses(Millions of yen)
12,000R&D Expenses

9,000

R&D expenses during the fiscal year ended March 31, 2015 decreased ¥456 million, or4.2% year-on-year, to ¥10,530 million. The breakdown of R&D expenses by business segment is as follows: Cement was ¥827 million, Metals stood at ¥1,374 million, Advanced
Materials & Tools reached ¥591 million, Electronic Materials & Components totaled ¥929
million and Aluminum amounted to ¥2,746 million.

6,000

3,000

0

2011

2012

2013

2014

2015

TopicsIn March 2015, Mitsubishi Materials successfully developed
MSP®5, a copper alloy with high strength and high conductivity as well as excellent bendability, using the Group’s
unique alloy design method of solid solution strengthening with highconcentrations of magnesium. MSP®5 has either equivalent or superior
characteristics to the Group’s existing conventional Corson copper
alloys in terms of strength, conductivity and stress relaxation resistance. In addition, it is especially well suited for use in small electricalterminal connectors in automobiles since it can be easily worked into
terminal connectors and doesn’t easily break or crack even in precision bending processes.

In August 2014, the Company developed new technology
for recycling the fluorine compounds and organic solventsin electrolytic solution of lithium-ion batteries. Fluorinecompounds are recovered as highly pure calcium fluoride powder
after going through hydrolysis or other processes. The recovered
calcium fluoride can be reused as a raw material for fluorine chemical products used in manufacturing semiconductors, LCDs andother products. The organic solvents are recovered as a liquid after
being vaporized and subsequently cooled. It can then be reused as
an auxiliary fuel for boilers and other products.

• Bendability in Comparison with the Group’s Existing Product• Work Flow for New Electrolytic Solution Treatment

Topic

1

Conventional
Corson copperalloy(an alloy of copper,
nickel and silicon)

Topic

2

Organic
solvent

Crack
Crack

Vaporization

Crack

Solvent
liquidUsed inauxiliary
fuels, etc.

Calcium
fluoride
powderFluorine
recycling

Condensation

Electrolytic
solution

MSP®5

Vaporization
Fluorinecompounds

Hydrolysis

13

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Corporate GovernanceFundamental Policy
With the aim of maintaining sustainable development and maximizing corporate value through fair business activities, Mitsubishi
Materials recognizes the importance of efficient and transparent
management and is undertaking measures that further enhance
its corporate governance.

The Board of Directors and Execution System
The Board of Directors comprises seven internal directors andtwo external directors. We consider this structure appropriate for
expediting decisions and ensuring management objectivity andtransparency. The external directors monitor the appropriatenessof the business executed by the directors from an objective position. They also offer a range of valuable perspectives for managing the Company, drawing on their unique experiences distinct
from those of internal directors as well as their specialized knowledge. Matters brought before the Board of Directors are fully
deliberated in advance by the Corporate Strategy Committee,
which is composed of the President, Assistant to the President,
and several other Senior Executive Officer, and appropriate decisions are made based on these deliberations.
Because the Company is an integrated organization composed of such businesses as Cement, Metals, Advanced
Materials & Tools, and Electronic Materials & Components, executive officer and internal company systems were introduced toensure that these businesses execute business activities in anagile and appropriate manner.

conducts audits at subsidiaries when necessary. Moreover,audits are undertaken in close coordination with accounting auditors and the Internal Audit Department and meetings are heldwith standing Audit & Supervisory Board Members from important Group companies in an effort to reinforce the auditing system for management of the Group. The Audit & Supervisory
Board Member Assistance Department was established as anorganization to support the auditing operations of the Audit &Supervisory Board Members.
The Internal Audit Department conducts internal audits to
identify the effectiveness and efficiency of corporate activities, thereliability of financial reports, the maintenance and effective utilization of assets, the status of risk management efforts and theadherence to both the law and to in-house rules and standards.
The Company appointed KPMG AZSA LLC as the independent auditor responsible for its accounting audits.

Internal Control System Maintenance
Mitsubishi Materials recognizes that the development of appropriate internal control systems is an important issue concerning
the fulfillment of its business objectives and management plans.
By developing the system that comply with the Companies Act
and the Ordinance for Enforcement of the Companies Act, theCompany strives to enhance our internal control systems. The
company will review the system as needed, and seek to manage
the system more effectively.

Audits, Internal Control Audits, Accounting Audits
The Audit & Supervisory Board is made up of three standing
Audit & Supervisory Board Members, one of whom is external,
and two part-time Audit & Supervisory Board Members (bothexternal). In order to monitor the execution of duties undertaken
by directors, each Audit & Supervisory Board Member attends
Board of Directors’ meetings and other important gatherings andholds hearings that assess the execution of duties of directors,
the Internal Audit Department and other employees,
addition OF SHAREHOLDERSrs
GENERALinMEETING
to reviewing important documents for approval. Moreover, each
Audit & Supervisory Board Member assesses the status of operations and assets at headquarters and main business sites andGeneral Meeting of Shareholders
Appointments and dismissals

Appointments and dismissals

Board of Directors

Audit & Supervisory Board

Management decision-making
and oversightOperational and financial audits

Appointments,
dismissals and oversightAppointments
and dismissals

Audit & Supervisory Board Member
Assistance Department
Corporate Strategy Committee
Discusses important matters

Independent Auditor
Accounting audit

CSR Committee
Deliberates on CSR activities

Representative Director andExecutive Officer
Operational execution

14

Headquarters and in-house companies

Internal Audit Department
Internal audits

CSR Department

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Corporate Social Responsibility (CSR)

Basic CSR Policy
The Mitsubishi Materials Group, as a comprehensive basic materials maker, provides resources, basic materials and energy indispensable to modern lifestyles. In these efforts, we adhere to a
corporate philosophy that emphasizes making contributions topeople, society and the earth.
The Group’s CSR policy thus hinges on making this philosophy
a reality, through the sincere fulfillment of the obligations andexpected role that society places on a corporate citizen. Theseobligations include disclosure, with proper explanation, of theapproaches taken and the constant pursuit of two-way communication with stakeholders to promote greater mutual understanding.
We believe these actions will underpin a position of trust in society.

CSR Promotion Framework
We established the CSR Committee, chaired by the president, and a
dedicated CSR Department in January 2005. Both organizations areactively promoting CSR activities at Mitsubishi Materials. In line withthe above basic policy, we are carrying out CSR activities that are
based on promoting compliance and risk management in order toearn greater trust from stakeholders. The status of compliance, risk
management operations, information security and other information
within the Group is regularly reported to the CSR Committee, which
implements reviews when necessary. In addition, the framework thathave in place is structured so that any compliance issues occurring
within the Group are reported to CSR department and other relevant
departments. The CSR Department then coordinates with otherrelated department to investigate the causes of the issue, implement
measures to prevent a recurrence and take any other necessary
action. The Internal Audit Department monitors the status of these
activities through internal audits.
Based on our Corporate Philosophy “For People, Society andthe Earth,” the Group always considers the environmental aspectsof its business activities. We leverage the unique characteristics ofour businesses that can contribute to the more effective use ofresources and help establish a recycling-based society by treating
and recycling waste. We are also committed to environmental
management, capitalizing on the nature of our operations to strikea balance between business and environment. The Environmental
Management Panel, a special subcommittee of the CSR

Committee, conducts reviews focusing mainly on Groupwide
issues, and then rolls out measures to individual facilities andgroup companies as necessary.

Strengthening the Crisis Management System
The Group carries out risk management activities in order to control the root causes of incidents that could have a negative impact
on our performance and provide ongoing support for sound business activities throughout the Group. In order to achieve the goal,
we have set out and actively implement three basic policies, whichare “Tackling high priority risks,” “Identifying unrecognized risks,”and “Sharing Information on risks.”
In addition to these activities, crisis management, which minimizes
effects and damage following a crisis situation, is also crucial tosteadily carry out business activities. At Mitsubishi Materials, we havecontinued to reinforce our crisis management framework spearheaded by our Crisis Management Committee to enable departments towork together, and respond quickly and precisely in the event of an
emergency. In Japan, the Company and major Group companies
have formulated a business continuity plan (BCP) in the event of amajor earthquake. Overseas, 59 key facilities have formulated a BCP(for ensuring employee safety, for restoring operations) tailored to suitspecific local risks. We are also working to make the crisis management system more effective, including by improving crisis management manuals overseas in 2013.

External Evaluation
Mitsubishi Materials has been selected for inclusion as a component stock in the Asia Pacific section of the Dow Jones
Sustainability Indices (DJSI Asia Pacific), ever since the index was
first created in April 2009. DJSI is the worldfamous index based on socially responsible
investment (SRI). In addition, the Company’s
recent CSR Reports achieved application level
A+ as specified in Global Reporting Initiative(GRI) guidelines.
CSR Report 2014

http://www.mmc.co.jp/corporate/
en/csr/csr.html

Board of Directors

Corporate Strategy Committee
Senior Executive Officer
in Charge of CSR

CSR Committee

Senior Executive Officer
Responsible for PersonnelInternal Contact Office

CSR Department

Evaluation Committee

Corporate Divisions

In-House Companies, Business Divisions and Departments

Plants, Branches

Mitsubishi Materials (Group’s) Subsidiaries and Affiliates

15

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Management(As of June 26, 2015)

Board of Directors

Audit & Supervisory Board Members(Standing)
Keisuke Yamanobe
Akihiko Minato**
Toshikazu Murai

Audit & Supervisory Board Members
Akio Utsumi**
Naoto Kasai**

Hiroshi Yao*

Akira Takeuchi*

Toshinori Kato*

ChairmanPresident

Executive Vice President

Senior Executive Officers
Kimball McCloud
Hiroshi Kondo
Chitoshi Mori
Yoshihiko Kimura
Yasunobu Suzuki
Hikaru Kimura
Fumio Tsurumaki
Soichi Fukui

Akio Hamaji*

Osamu Iida*

Naoki Ono*

Executive Vice PresidentManaging Director

Managing Director

Executive Officers
Kenichiro Ishizuka
Kenichi Watase
Dairiku Matsumoto
Masato Koide
Kenji Shimamura
Koji Sakamoto
Tatsuro Maeda
Kazuhiro Kishi

Nobuo Shibano*

Yukio Okamoto**

Takashi Matsumoto**

Kiyoshi Furukawa

Managing Director

Director

Director

Tatsuro Mizuno
Shinichi Nakamura
Junichi Harada
Yoshikazu Yasui

16*

Representative Director**

External

Kazuki Mizushima

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Financial Section

Contents
18
Five-Year Summary
19Management’s Discussion and Analysis
24
Consolidated Balance Sheets
26	Consolidated Statements of Income/Consolidated Statements of Comprehensive Income

27
29
30
60

Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors’ Report

17

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Five-Year Summary
Mitsubishi Materials Corporation and Consolidated Subsidiaries
Years ended March 31

Millions of yen

Thousands of
U.S. dollars (Note 1)

2015

2014

2013

2012

2011

2015

Net sales¥1,517,265¥1,414,796¥1,287,251¥1,440,847¥1,333,992$12,625,993

Cost of sales

1,313,259

1,220,333

1,094,588

1,249,744

1,141,094

10,928,343

Operating profit

71,871

66,28152,50052,29357,290598,077

Net income

56,14752,551

36,948

9,565

14,274467,234

Capital expenditures

57,63665,94452,95752,141

43,213479,622

Depreciation and amortization

56,74660,49860,37062,514

66,365472,221

R&D expenses

10,53010,986

11,401

11,743

11,24387,627For the Year:At Year-End:

1,898,157

1,778,505

1,811,767

1,751,870

1,837,405

15,795,600

Total long-term liabilities

490,825514,279

549,198

565,542572,321

4,084,427

Total net assets

629,514525,707466,231409,074

402,868

5,238,528

1,314,895

1,314,895

1,314,895

1,314,895

1,314,895

23,413

23,112

22,18122,015

21,762

Total assets

Number of shares of common
stock (thousands)
Number of employees

U.S. dollars (Note 1)

Per Share Amounts:
Basic net income

42.8

¥40.1

¥28.1

¥7.2

¥10.8

0.35

Diluted net income

—

—

—

—

—

—

Cash dividends applicable to the
year

8.0

6.0

4.0

2.0

2.0

0.06

Operating margin

4.7%

4.7%

4.1%

3.6%

4.3%

Return on assets (ROA)

3.0

3.0

2.0

0.5

0.8

Return on equity (ROE)

8.9

10.0

7.9

2.3

3.5

Equity ratio

29.0

25.7

22.4

20.0

18.7

Financial Ratios (%):

Notes:
1. Japanese yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of ¥120.17 to U.S. $1, the prevailing exchange rate at March 31, 2015.
2. ROA = Net income / Total assets.
3. ROE = Net income / Total net assets.

18

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Management’s Discussion and Analysis
Mitsubishi Materials Corporation and Consolidated Subsidiaries

Overview

Economic and Business Environment

Operating Results by Business Segment

During the fiscal year ended March 31, 2015, overall the global
economy headed toward modest recovery thanks to a steadyongoing U.S. economic rebound. In Asia, however, economic
growth continued to level off in China and other countries.
In spite of the negative impact from a market recoil, which followed the last-minute demand surge that occurred before theincrease in the consumption tax rate, overall the Japanese economy sustained a gradual recovery, thanks to improvement insuch areas as employment and income.
Looking at the Mitsubishi Materials Group’s operating environment, ongoing yen depreciation affected business overall.
Meanwhile, the Group faced such negative factors as construction delays and falling prices of copper and other key metals inoverseas markets.

An overview of net sales and operating profit by business segment in fiscal 2015 is as follows. In the Cement business, net
sales rose thanks to a revision of sales prices in the UnitedStates. Operating profit, however, fell due mainly to declining
sales volume, both in Japan and overseas, and rising operating
costs. The Metals business posted higher revenue and earnings
thanks to a significant increase in production at PT Smelting inIndonesia. The Advanced Materials & Tools business, on theother hand, enjoyed higher earnings due to increased demand
for and sales promotions of cemented carbide products in Japanand overseas but saw revenue decline owing mainly to costs
associated with business selection and focus for the high-performance alloy products business. In the Electronic Materials &Components, net sales fell due mainly to weak demand in theadvanced materials business while operating profit rose due toan increase in sales of products for household appliances. The
Aluminum business posted higher revenue and earnings due toincreased demand for aluminum can materials and products forautomobiles. The Others business posted higher revenue andearnings. For details of each segment’s performance, pleaserefer to the Review of Operations on pages 8–12.

Business Performance Summary
In this environment, the Group embarked on the medium-term
management plan (FY2015–2017), “Materials Premium 2016 –Challenge to become the world’s leading business group.” This
plan defines the Group-wide growth strategies of “Fortifying thefoundation for growth,” “Strengthening global competitiveness”
and “Pursuing a recycling-based business model.” The Group
continued to implement a variety of measures based on thesestrategies, established new overseas bases—particularly in Asia,and underwent a process of business selection and focus,
among other activities.
As a result, consolidated net sales for the fiscal year amounted
to ¥1,517,265 million, up 7.2% from the previous fiscal year.
Operating profit increased 8.4% to ¥71,871 million, and ordinary
income increased 5.5% to ¥81,093 million. Net income increased
6.8% to ¥56,147 million.

Financial Position and Liquidity
As of March 31, 2015, total assets amounted to ¥1,898.1 billion,up ¥119.6 billion, or 6.7%, from a year earlier. Total current
assets increased ¥93.9 billion, or 12.1%, to ¥868.4 billion mainly
due to increases in cash and time deposits. Total long-term
assets—which consist of property, plant and equipment, investments and long-term receivables and other assets—increased¥25.7 billion, or 2.6%, to ¥1,029.7 billion, largely as a result of anincrease in investment securities.
Total liabilities increased ¥15.8 billion, or 1.3%, year-on-year to¥1,268.6 billion. Total current liabilities rose ¥39.2 billion, or
5.3%, to ¥777.8 billion due primarily to a rise in notes andaccounts payable. Total long-term liabilities fell ¥23.4 billion, or

Net Income (Loss)/Return on Equity (ROE)

Operating Profit/Operating Margin

Net Sales

Operating Profit(Billions of yen)

Operating Margin(Billions of yen/%)

Net Income (Loss)

1,500

100

100

1,200

80

80

900

60

4.3

3.6

4.1

10.0

60

4.7

4.7

7.9

600

40

40

300

20

20

3.5

0

FY

2011

2012

2013

2014

2015

0

FY

2011

ROE

(Billions of yen/%)

2012

2013

2014

2015

0

FY

2011

8.9

2.3

2012

2013

2014

2015

19

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥189,674¥186,545$1,578,387

17,385

19,105

144,673

9.2%

10.2%

Sales

803,394

718,082

6,685,481

Operating profit

24,852

23,959206,812

3.1%

3.3%

Sales

113,534

116,516

944,782

Operating profit

16,724

14,090139,170

Operating margin

14.7%

12.1%

Sales

56,00949,882

466,089

Operating profit

4,471

4,001

37,205

Operating margin

8.0%

8.0%

For the years ended March 31

CementSales
Operating profit
Operating margin
MetalsOperating margin
Advanced Materials & Tools

Electronic Materials & Components

Aluminum
Sales

157,271

150,296

1,308,741

Operating profit

5,695

5,559

47,394

Operating margin

3.6%

3.7%

197,380

193,472

1,642,509

Operating profit

9,350

7,385

77,807

Operating margin

4.7%

3.8%

OthersSales

4.6%, to ¥490.8 billion, reflecting the fall in bonds and other factors. The balance of interest-bearing debt, which adds bonds
and commercial paper to outstanding loans, came to ¥630.8 billion, down ¥18.9 billion, or 2.9%, from the previous fiscal year.
Total net assets amounted to ¥629.5 billion, up ¥103.8 billion,
or 19.7%, due mainly to an increase in retained earnings following the recording of net income in the fiscal year under review.
As a result, the consolidated equity ratio increased from 25.7%
at the previous fiscal year-end to 29.0%, and net assets per
share, based on the total number of shares outstanding as ofMarch 31, 2015, grew to ¥420.36, compared with ¥348.54 ayear earlier.

Cash FlowsNet cash provided by operating activities amounted to ¥108.0
billion, up ¥5.1 billion from the previous fiscal year. This rise wasdue mainly to robust performance.
Net cash used in investing activities totaled ¥42.3 billion, down
¥2.4 billion from the previous fiscal year. This cash was primarily
used for outlays related to capital investments.

20

Together, operating activities and investing activities produced
a net inflow of ¥65.7 billion, which was mainly applied to theredemption of bonds. Accordingly, net cash used in financing
activities was ¥42.2 billion, down ¥27.0 billion from the previous
fiscal year.
As a result of the above, as well as exchange rate changes
and other factors, the balance of cash and cash equivalents at
March 31, 2015, stood at ¥92.0 billion, up ¥30.0 billion fromMarch 31, 2014.

Capital Expenditure
Capital expenditures undertaken by the Group are tempered byefforts to reduce interest-bearing debt, and the content ofspending plans will therefore be determined through carefulselection of projects in business areas which present high profit
and growth potential.
In fiscal 2015, capital expenditures amounted to ¥57.6 billion,
reflecting maintenance and repairs at existing facilities in eachbusiness segment, as well as expansion, rationalization and renovation at certain production facilities.

MITSUBISHI MATERIALS CORPORATION

Fiscal 2015 capital expenditures by business segment were as
follows.

Cement
The Company allocated funds to limestone mine developmentrelated works in Japan as well as maintenance and repair ofexisting facilities mainly in Japan and the United States. Capital
expenditures in this segment increased ¥3.6 billion, or 27.4%,
compared with ¥13.1 billion recorded in the previous fiscal yearto ¥16.7 billion.

MetalsThe Company allocated funds for the maintenance and repair ofcopper smelters and domestic copper-processing facilities aswell as for E-Scrap processing facility construction. Capital
expenditures in this segment fell ¥4.2 billion, or 21.8%, compared with ¥19.5 billion recorded in the previous fiscal year to¥15.2 billion.

Advanced Materials & Tools
Funds were mainly allocated for the expansion and rationalizationof facilities to respond to increased production in the overall business, and the maintenance and repair of existing facilities. Capital
expenditures in this segment fell ¥7.3 billion, or 43.8%, compared with ¥16.7 billion recorded in the previous fiscal year to¥9.4 billion.

Electronic Materials & Components
The Company directed funds into maintenance and repair ofexisting facilities that produce electronic materials mainly forsemiconductor-related products. Capital expenditures in thissegment dropped ¥0.2 billion, or 8.9%, compared with ¥3.1 billion recorded in the previous fiscal year to ¥2.9 billion.

Aluminum
Funds were allocated to the maintenance and repair of facilities
that produce aluminum beverage cans and rolled aluminumproducts. Capital expenditures in this segment decreased ¥0.5
billion, or 7.9%, compared with ¥7.3 billion recorded in the previous fiscal year to ¥6.7 billion.

ANNUAL REPORT 2015

OthersThe Company allocated funds to the maintenance and repair ofexisting facilities. Capital expenditures in this segment increased¥0.5 billion, or 9.7%, compared with ¥5.9 billion recorded in theprevious fiscal year to ¥6.4 billion.

Forecast for Fiscal Year 2015
Overall, the global economy is expected to see a continued modest
recovery, led by advanced countries, although economic growth isexpected to level off in China and other emerging markets.
The Japanese economy is expected to continue enjoying a
gradual recovery, with lower crude oil prices and the impact ofyen depreciation contributing to improvements in corporate earnings and the employment and income environment.
The Group expects its operating environment to be characterized by firm private-sector housing investment and capital investment centering on large corporations supported by domestic
economic recovery. At the same time, uncertainty persists withregard to current price decreases on copper and other key metals.
Amid this, all Group companies are working to help the Group
become the world’s leading business group committed to supporting recycling-oriented society through materials innovation,with use of our unique and distinctive technologies. Each Group
company is also striving to leverage the Group’s unique technology to create valuable products and services and create a presence occupying an important position in their respective
industries and markets.
In this environment, our consolidated performance forecasts
for the year ending March 31, 2016 are as follows: net sales of¥1,580.0 billion, operating profit of ¥85.0 billion, and net income
attributable to owners of the parent of ¥65.0 billion.
The above forecasts are calculated based on information available as of June 2015. Accordingly, actual performance may differ
due to a variety of factors. The main reasons are included in therisk factors listed below.

Total Assets

Total Long-Term Liabilities

Total Net Assets/Equity Ratio(Billions of yen)(Billions of yen%)(Billions of yen/%)Total Net Assets
2,000

750

1,600

750

600

25.7

600

18.7
1,200

450

450

800

300

300

400

150

150

0

FY

2011

2012

2013

2014

2015

0

FY

2011

2012

2013

2014

2015

0

Equity Ratio

29.0

FY

2011

20.0

2012

22.4

2013

2014

2015

21

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Business Risks

4. Trends in the Semiconductor Market

The companies under the Mitsubishi Materials Group umbrella
are involved in a wide range of businesses. Consequently, various external influences—including domestic and overseas political and economic developments, weather conditions, markets,currency trends, and laws and ordinances—could influence theGroup’s financial results and position. The following risks carry
the potential for a particularly significant impact on operations.
Forward-looking statements in this section are based on information available to management as of June 26, 2015.

5. Interest-Bearing Debt

1. Business Restructuring
Management subscribes to the selection-and-concentration
approach for business expansion, whereby management
resources are actively invested in operations with high profitability. Management also considers alliances with other companies, if
such alliances will facilitate the rigorous review, restructuring andliquidation of operations to reinforce the bottom line. This emphasis could affect the Group’s financial results and position.

2. Market and Customer Trends
The Group provides products and services to various industries.
Worldwide economic developments as well as customer-driven
developments—such as sudden changes in markets and market
shares, new business strategies and product development initiatives—may influence sales of the Group’s products. The automotive and IT sectors are subject to particularly severe price wars
and technological competition. The Group strives to cut overall
costs and engineer new products and technologies. However, if
its efforts do not accurately match industry and customer market
changes, the Group’s financial results and position could beeroded.

3. Fluctuations in Nonferrous Metal and Currency
Markets
In the Metals business, the Group’s key revenue sources are mining investment dividends, smelting and other operations forwhich payment is in foreign currencies. Consequently, these
operations are susceptible to fluctuations in the nonferrous metal
and currency markets and the effects of custom ore purchasing
conditions. The cost of raw materials acquired for inventory carries the risk of fluctuating nonferrous metal prices and exchange
rates over the period, starting with the purchase of copper concentrate and ending with the production and sale of copper cathodes.
In addition, nonferrous metal materials—used predominantly
by the Aluminum and Advanced Materials & Tools segments—aswell as materials (particularly coal) used by the Cement segment,
are international commodities. The procurement prices of these
raw materials, as well as fuels, are linked to changes in the nonferrous metal and coal markets, currency markets and also maritime freight rates.

22

Certain members of the Group supply the semiconductor industry with such products as electronic materials and components
and polycrystalline silicon, while SUMCO CORPORATION—anequity-method affiliate—makes silicon wafers used in semiconductor fabrication. Trends in the semiconductor market could
influence the operations of these companies and thus the financial results and position of the Group.

As of March 31, 2015, the interest-bearing debt carried by theGroup stood at ¥630.8 billion—comprising short-term loans,bonds due within one year, commercial paper, bonds and longterm loans—and represented 33.2% of consolidated total assets.
Management seeks to improve the balance sheet of the Groupby restricting inventories and divesting assets. However, unfavorable trends in interest rates could hurt the financial results andposition of the Group.

6. Important Matters Concerning Fund Procurement
The Group has borrowings, such as syndicated loans, in which it
has promised the lenders to uphold arrangements such as themaintenance of shareholders’ equity at a certain level or higher inaccordance with such loan agreements. If the financial status of
the Company or the Group were to deteriorate and thereby preclude the observance of such arrangements, the Group might beunder an obligation to repay the extended loans before the maturity date. This situation could adversely impact the Group’s ability
to procure funds depending on how the Group manages this situation in the future.

7. Debt Guarantees
In fiscal 2015, Mitsubishi Materials extended debt guarantees
totaling ¥35.4 billion, mainly for the monetary liabilities of unconsolidated affiliates. If conditions warrant the fulfillment of debt
guarantees, the situation could affect the financial results andposition of the Group.

8. Fluctuations in the Market Value of Assets
Fluctuations in the market value of securities, land and otherassets held by members of the Group could have a detrimental
impact on the financial results and position of the Group.

9. Pension Benefit Expenses and Obligations
The costs and obligations of the Group’s pension plans for
employees are based on actuarial assumptions. These assumptions take into account the average number of years of service
remaining, long-term yields on Japanese government bonds,
stock contributed to trust accounts and other factors in pension
plan management. However, losses stemming from lower discount rates and pension plan management could influence futureGroup costs and the calculation of obligations.

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

10. Environmental Regulations

14. Workers’ Health and Safety, Plant Incidents

All Group locations in Japan and overseas strive to prevent pollution, especially air, wastewater, soil and groundwater pollution, in
accordance with local environmental legislation. Efforts are also
made to prevent pollution from inactive mines in Japan, in accordance with the Mine Safety Law. This focuses on neutralizing thewater that seeps into excavation pits from tunnels and the safe
maintenance of tailing piles. However, in the event of the amendment of related laws and regulations as well as the introductionof new regulations to cap total greenhouse gas emissions, suchchanges could lead to new maintenance and treatment costs for
the Group.

The Group takes thorough measures to prevent industrial accidents, injuries and incidents at its numerous production plants.
The Group is taking these measures from both a soft side(including management frameworks for workers’ health, safety,
security and accident prevention) and a hard side (including
operational and maintenance management and improving thesafety of equipment). However, if a serious plant accident or anindustrial accident or injury were to occur at a production plant orsome other type of facility, the situation could adversely impact
the business results and financial position of the Group.

15. Information Management
11. Overseas Activities
The Group maintains production and sales bases in 29 countries
and regions. Overseas operations account for 39.5% of consolidated net sales. In addition to varying political and economic circumstances, currency rates, unforeseen changes in laws andregulations—or their interpretations related to trade rules andrestrictions, mining sector policies, environmental regulations andtax systems in these countries—changes in the management
policies of local partners and other factors could affect theGroup’s financial results and position.

12. Intellectual Property
Management recognizes the importance of intellectual property,
and steps are taken throughout the Group to safeguard such
assets. However, the financial results and position of the Group
could be hurt by inadequate protection and legal infringements ofproprietary intellectual assets. From the opposite perspective, theGroup duly respects the intellectual property of other companies.
However, in the unlikely event that a member of the Group isfound to have infringed upon the rights of another company, thesubsequent compensation for damages could negatively impact
the financial results and position of the Group.

13. Product Quality
The Group strives to provide high-quality products and makes
every effort to control quality. In addition, the Group carries insurance as a precaution in the unlikely event that a serious productdefect leads to liability issues. However, a large-scale productrecall promoted by unforeseen circumstances, for example,
could mar the financial results and position of the Group.

The Group endeavors to properly control its information, including personal data. However, in the unlikely event that the unauthorized disclosure of information was to occur, such a situation
could damage the Group’s social standing, which could negatively impact the Group’s financial results and position.

16. Litigation
The Group is or could become involved in decisions, settlements
or legal judgments stemming from litigation, disputes and otherlegal proceedings related to present or past operations in Japanor overseas, which could adversely affect the Group’s financial
results and position.

17. Procurement of Electricity
The financial results and position of the Group may be influenced
by price increases for electricity resulting from such factors as
supply instability due to the suspension of nuclear power stations, cost increases of imported fossil fuels, and increased
charges for renewable energy.

18. Other risks
Other risks that may affect the Group’s financial results and position include changes in business practices, events such as terrorism, war, epidemics, earthquakes and other natural disasters,
and other unforeseen developments.

23

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Consolidated Balance Sheets
Mitsubishi Materials Corporation and Consolidated Subsidiaries
March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen
ASSETS

Current assets:
Cash and time deposits (Notes 5, 15 and 19)

2015

2014

2015

¥   93,152¥   63,486$   775,173
1,774,454

Notes and accounts receivable (Notes 5, 10 and 15):Trade

213,236

204,500

Unconsolidated subsidiaries and affiliates

21,562

17,561

179,432

Other

22,358

10,561

186,056

296,734

284,952

2,469,287

Deferred tax assets (Note 9)

11,747

10,92497,754

Leased gold bullion

100,169

93,635

833,562

Other current assets (Note 16)
Allowance for doubtful accounts

111,572(2,129)90,687(1,843)

928,459(17,722)

Total current assets

868,403774,465

7,226,457

2,391,463

Inventories (Notes 3 and 5)

Property, plant and equipment (Notes 4 and 5):
Land (Note 18)

287,382

283,953

Buildings and structures

452,849

452,0423,768,404

Machinery and equipment

1,206,325

1,169,877

10,038,490

Construction in progress
Less accumulated depreciation

17,476(1,308,998)

22,510(1,277,812)

145,431(10,892,888)

655,034

650,571

5,450,901

1,139,650

Net property, plant and equipment

Investments and long-term receivables:
136,951

125,775

Net asset for retirement benefits (Note 6)

Investments in securities (Notes 5, 14 and 15)

242

19

2,020

Unconsolidated subsidiaries and affiliates

154,018

134,072

1,281,668

1,032

609

8,593

Other

5,073

19,61742,216

Allowance for doubtful accounts
Valuation allowance for investments in unconsolidated subsidiaries and affiliates(5,807)(1,168)(5,797)(1,168)(48,328)(9,724)

290,342

273,127

2,416,095

Deferred tax assets (Note 9)30,111

31,255250,571

Goodwill
Other (Notes 5 and 16)

41,24913,01538,816
10,268343,263
108,310

84,376¥1,898,157

80,340¥1,778,505

702,145$15,795,600

Long-term receivables

Total investments and long-term receivables

Other assets:

Total other assets
Total assets
The accompanying notes are an integral part of these statements.

24

MITSUBISHI MATERIALS CORPORATION

Thousands of
U.S. dollars (Note 1)

Millions of yen
LIABILITIESCurrent liabilities:
Short-term bank loans (Notes 5 and 15)
Current portion of long-term debt (Notes 5 and 15)
Commercial paper (Notes 5 and 15)

ANNUAL REPORT 2015

2015

2014

2015

¥  171,900¥  154,534$ 1,430,478

100,336

141,563

834,958

5,000—

41,607

Notes and accounts payable (Note 15):
117,561

98,412

978,292

Unconsolidated subsidiaries and affiliates

Trade

9,744

7,154

81,093

Other

29,63819,564

246,642

9,545

9,576

79,434

275

648

2,295

Accrued expenses

49,37539,854

410,878

Provision for bonuses

12,362

11,975

102,875

Deposited gold bullion

227,505

212,760

1,893,199

Reserve for loss on disposal of inventories
Other current liabilities (Notes 5, 7 and 16)844
43,725923
41,547

7,025
363,861

777,817738,518

6,472,644

Income taxes payable
Deferred tax liabilities (Note 9)

Total current liabilities
Long-term liabilities:

353,634

353,745

2,942,789

Accrual for officers’ lump-sum severance benefits

Long-term debt (Notes 5 and 15)

1,758

1,740

14,630Reserve for loss on unconsolidated subsidiaries and affiliates

1,458

1,698

12,132

Reserve for environmental measures

4,547

4,117

37,841

Net liability for retirement benefits (Note 6)

39,66252,787330,056

Deferred tax liabilities (Note 9)26,65931,650221,846

Deferred tax liabilities for land revaluation (Notes 9 and 18)
Other (Notes 5, 7 and 16)

28,44934,65532,53236,007

236,740
288,389

490,825514,279

4,084,427

994,074

Total long-term liabilities
Contingent liabilities and commitments (Notes 10 and 11)
NET ASSETS (Notes 8 and 23)
Shareholders’ equity
Common stock
Authorized 3,400,000,000 shares

119,457

119,457

Capital surplus

Issued 1,314,895,351 shares

92,272

92,272

767,845

Retained earnings
Treasury stock, at cost

252,858(1,865)

207,354(1,782)

2,104,175(15,523)

462,723

417,3023,850,572
355,475

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities

42,717

31,972

Deferred (losses) gains on hedges (Note 16)(1,025)218(8,536)

Revaluation reserve for land (Note 18)

33,85632,907281,739

Foreign currency translation adjustments

15,746(12,348)

131,038

Accumulated adjustments for retirement benefits(3,256)(13,302)(27,096)

Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

88,03939,447

732,62178,751

68,957655,335

629,514¥1,898,157

525,707¥1,778,505

5,238,528$15,795,600

25

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Consolidated Statements of Income
Mitsubishi Materials Corporation and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net sales (Note 17)
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 12)
Operating profit
Other income (expenses):
Interest and dividend income
Interest expense (Note 5)
Income from leased property
Expense for leased property
Expense for the maintenance and management of abandoned mines
Loss on valuation of investment securities (Note 14)
Gain on abolishment of retirement benefit plan
Gain on contribution of securities to retirement benefit trust
Gain on net sales of investments in securities
Gain on sales of property, plant and equipment
Loss on disposal and sales of property, plant and equipment
Loss on impairment of fixed assets (Note 22)
Foreign exchange (losses) gains, net
Equity in earnings of affiliates
Other, net
Income before income taxes and minority interests
Income taxes (Note 9)
Income before minority interests
Minority interests in income of consolidated subsidiaries
Net income

2015

2014

2015

¥1,517,265
1,313,259
204,006
132,135
71,871¥1,414,796
1,220,333
194,463
128,181
66,281$12,625,993
10,928,343
1,697,649
1,099,571
598,077

15,900(8,233)
4,966(3,234)(3,589)(9,278)
1,451
—
1,694

19,880(9,686)
4,559(3,399)(2,704)(850)—
10,94931,553132,318(68,516)
41,330(26,920)(29,867)(77,211)
12,074—
14,099

8,749

4,334

72,811(3,830)(499)(1,489)6,557(5,406)
3,757
75,62814,07461,553(5,406)¥   56,147(3,054)(32,308)
176
4,377(4,761)
19,06485,346
26,46558,880(6,328)¥   52,551(31,879)(4,153)(12,394)
54,571(44,994)
31,268629,346
117,124
512,222(44,987)$   467,234

YenAmounts per share (Note 20):
Basic net income
Cash dividends applicable to the year

¥42.85
8.0

U.S. dollars (Note 1)

¥40.1
6.0

$0.35
0.06

The accompanying notes are an integral part of these statements.

Consolidated Statements of Comprehensive Income
Mitsubishi Materials Corporation and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars (Note 1)

Millions of yen
2015

2014

2015

Income before minority interests
Other comprehensive income (Note 13):
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of affiliates accounted forusing the equity method¥ 61,553¥58,880$  512,222

10,691(1,434)
2,801
33,215
11,714(8,513)572—
28,032—

88,970(11,936)
23,313
276,406
97,485

2,411

5,594

20,069Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests

59,401¥120,954

25,685¥84,565494,308$1,006,530¥106,600
14,354¥70,864
13,701$  887,077
119,453

The accompanying notes are an integral part of these statements.

26

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Consolidated Statements of Changes in Net Assets (Note 24)
Mitsubishi Materials Corporation and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Millions of yen
Shareholders’ equity

Balance at April 1, 2013
Dividends
Net income for the year
Increase due to reversal of revaluation reserve for land
Increase resulting from changes in fiscal period of consolidated subsidiaries
Increase resulting from increase in the number of consolidated subsidiaries
Acquisition of treasury stock
Sales of treasury stock
Net change other than shareholders’ equity
Balance at March 31, 2014
Cumulative effect of changes in accounting policies
Restated balance
Dividends
Net income for the year
Increase due to reversal of revaluation reserve for land
Increase resulting from increase in the number of consolidated subsidiaries
Decrease resulting from increase in the number of affiliates accounted for using theequity method
Acquisition of treasury stock
Sales of treasury stock
Net change other than shareholders’ equity
Balance at March 31, 2015

Retainedearnings

Treasury stock,at costCommon stock

Capital surplus¥119,457¥92,272¥158,456(7,864)52,551
1,923
281
2,005

(0)

(0)

119,457

92,272

119,457

92,272

207,354(3,611)
203,742(9,172)56,147
1,861
327¥(1,692)(92)
2(1,782)(1,782)(46)(0)¥119,457¥92,272¥252,858

Total
shareholders’equity¥368,495(7,864)52,551
1,923
281
2,005
(92)
1
417,302(3,611)
413,690(9,172)56,147
1,861
327
(46)

(84)
1

(84)
1

¥(1,865)¥462,723

Millions of yen
Accumulated other comprehensive income
Valuationdifference on
Deferred gains
available-for-sale or losses on
securities
hedgesBalance at April 1, 2013
Dividends
Net income for the year
Increase due to reversal of revaluation reserve
for land
Increase resulting from changes in fiscal periodof consolidated subsidiaries
Increase resulting from increase in the numberof consolidated subsidiaries
Acquisition of treasury stock
Sales of treasury stock
Net change other than shareholders’ equity
Balance at March 31, 2014
Cumulative effect of changes in accounting
policies
Restated balance
Dividends
Net income for the year
Increase due to reversal of revaluation reserve
for land
Increase resulting from increase in the numberof consolidated subsidiaries
Decrease resulting from increase in the number
of affiliates accounted for using the equity
methodAcquisition of treasury stock
Sales of treasury stock
Net change other than shareholders’ equity
Balance at March 31, 2015

¥40,516¥(1,189)

Accumulated
Revaluation
Foreign currency adjustments forreserve for landtranslation
retirement(Note 18):
adjustments
benefits¥34,830¥(37,422)¥     —

Total
accumulated
othercomprehensive
incomeMinority interests Total net assets¥36,735¥61,001¥466,231(7,864)52,551
1,923
281(8,543)
31,972

1,407
218(1,923)32,90725,073(12,348)(13,302)(13,302)

2,711
39,447

7,956
68,957

2,005
(92)
1
10,668525,707(3,611)

31,972

218

32,907(12,348)(13,302)39,447

68,957522,095(9,172)56,147
1,861
327

10,745¥42,717(1,244)¥(1,025)949¥33,856

28,095¥ 15,746

10,046¥ (3,256)

48,591¥88,039

9,793¥78,751

(46)
(84)
1
58,385¥629,514

The accompanying notes are an integral part of these statements.

27

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Thousands of U.S. dollars (Note 1)
Shareholders’ equity
Common stock

Balance at March 31, 2014
Cumulative effect of changes in accounting policies
Restated balance
Dividends
Net income for the year
Increase due to reversal of revaluation reserve for land
Increase resulting from increase in the number of consolidated subsidiaries
Decrease resulting from increase in the number of affiliates accounted for using theequity method
Acquisition of treasury stock
Sales of treasury stock
Net change other than shareholders’ equity
Balance at March 31, 2015

$994,074
994,074

Capital surplus

Retainedearnings

Total
shareholders’equity$767,847 $1,725,507(30,056)
767,847 1,695,451(76,333)
467,234
15,4882,725$(14,832) $3,472,597(30,056)(14,832) 3,442,540(76,333)
467,234
15,488
2,725

(390)

(390)
(705)
14

(1)
$994,074

Treasury stock,at cost$767,845 $2,104,175

(705)
12

$(15,523) $3,850,572

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Valuationdifference on
Deferred gains
available-for-sale or losses on
securities
hedgesBalance at March 31, 2014
Cumulative effect of changes in accounting
policies
Restated balance
Dividends
Net income for the year
Increase due to reversal of revaluation reserve
for land
Increase resulting from increase in the numberof consolidated subsidiaries
Decrease resulting from increase in the number
of affiliates accounted for using the equity
methodAcquisition of treasury stock
Sales of treasury stock
Net change other than shareholders’ equity
Balance at March 31, 2015
The accompanying notes are an integral part of these statements.

28

Accumulated
Revaluation
Foreign currency adjustments forreserve for landtranslation
retirement(Note 18):
adjustments
benefits

Total
accumulated
othercomprehensive
incomeMinority interests Total net assets$266,059$   1,818$273,841$(102,759)$(110,696)$328,263$573,836 $4,374,697(30,056)

266,059

1,818

273,841(102,759)(110,696)

328,263

573,836

4,344,640(76,333)
467,234
15,4882,725

89,416$355,475(10,354)$ (8,536)

7,897$281,739

233,798$ 131,038

83,600$ (27,096)

404,357$732,621

(390)
(705)
12
81,499485,856$655,335 $5,238,528

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Millions of yen

Thousands of
U.S. dollars (Note 1)

Consolidated Statements of Cash Flows
Mitsubishi Materials Corporation and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating
activities:
Depreciation
Amortization of goodwill
Decrease in allowance for doubtful accounts
Decrease in valuation allowance for investments in unconsolidated subsidiaries and affiliates
Decrease in reserve for loss on unconsolidated subsidiaries and affiliates
Increase (decrease) in reserve for environmental measures
Decrease in net liability for retirement benefits and directors’ retirement benefits
Interest and dividend income
Interest expense
Gain on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on impairment of fixed assets
Gain on sales of investments in securities
Write-down of investments in securities
Gain on securities contribution to employees’ retirement benefits trust(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Proceeds from sales of gold bullion deposited from customers under consuming bailment My Gold Partner
Payment for purchases of gold bullion from market for customers under My Gold Partner
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued expenses
Equity in earnings of affiliates
Other, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Disbursement of loan receivables
Proceeds from collection of loan receivables
Payments for purchases of intangible fixed assets
Payments for additional acquisition of subsidiaries’ shares
Proceeds from sale of subsidiaries’ shares
Proceeds from sale of subsidiaries’ shares resulting in change in scope of consolidation
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt
Repayments of long-term debt
Payments for redemption of bonds
Proceeds from issuance of bonds
Increase (decrease) in commercial paper, net
Payment of cash dividends
Payments for purchase of treasury stock
Increase (decrease) in short-term bank loans, net
Cash dividends paid to minority shareholders
Other, net
Net cash used in financing activities
Effect of exchange rate fluctuation on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of changes in consolidated subsidiaries
Decrease in cash and cash equivalents from changes in fiscal period of consolidated subsidiaries
Cash and cash equivalents at end of year (Note 19)

2015

2014

2015

¥ 75,628¥ 85,346$ 629,346

53,911
2,835
(54)
—
—
395
(4,187)(15,900)
8,233(8,208)3,183
499(1,696)
9,278—(25,184)(8,613)
77,188(76,957)
27,267
9,003(6,557)(6,716)113,347
17,399(8,392)(14,283)
108,070

57,428
3,070
(402)
(580)
(27)
(139)
(1,837)(19,880)
9,686(4,254)2,755
32,308(31,553)850(10,949)
8,345
3,296
76,961(82,771)(2,938)(6,561)(4,377)(8,177)
105,597
21,438(10,046)(14,056)
102,932

448,626
23,595
(453)
—
—
3,288
(34,850)(132,318)
68,516(68,309)
26,4904,153(14,115)
77,211—(209,571)(71,675)
642,324(640,406)
226,91074,923(54,571)(55,889)
943,224
144,789(69,838)(118,859)
899,315(54,821)
7,448(2,116)
5,490(1,775)
5,781(3,237)
(471)
229
1,506
(399)
(42,366)(63,816)
11,400(3,678)40,213(1,433)
1,152(1,303)(31,289)
—
4,335
(442)
(44,863)(456,200)
61,983(17,616)
45,686(14,771)
48,107(26,938)(3,926)
1,912
12,532(3,324)(352,553)

100,361(105,638)(40,000)—
5,000(9,172)(88)
14,862(4,317)(3,279)(42,273)
5,837
29,26862,078732—¥ 92,079

100,057(111,075)—
15,100(26,000)(7,864)(106)(30,544)(5,652)(3,242)(69,329)
8,094(3,165)63,2992,007(62)¥ 62,078

835,165(879,075)(332,861)—
41,607(76,333)(735)
123,675(35,931)(27,293)(351,782)
48,579243,560
516,591
6,092—$ 766,244

The accompanying notes are an integral part of these statements.

29

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Notes to Consolidated Financial Statements
Mitsubishi Materials Corporation and Consolidated Subsidiaries
March 31, 2015 and 2014

Note 1 Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Mitsubishi
Materials Corporation (the “Company”) and its consolidated subsidiaries
have been prepared in accordance with the provisions set forth in the
Financial Instruments and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally acceptedin Japan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements have been reformatted and translated into English from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP
and filed with the appropriate Local Finance Bureau of the Ministry of
Finance as required by the Financial Instruments and Exchange Law.
Certain supplementary information included in the statutory Japanese
language consolidated financial statements, but not required for fair pre-sentation, is not presented in the accompanying consolidated financial
statements.
The translations of the Japanese yen amounts into U.S. dollars areincluded solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2015, which was ¥120.17 to U.S.
$1. The convenience translation should not be construed as representation that the Japanese yen amounts have been, could have been, or
could in the future be, converted into U.S. dollars at this or any other rateof exchange.
Fractions less than one million yen (one tenth yen in respect to pershare amount) have been omitted. As a result, the total amounts inJapanese yen and translated U.S. dollars shown in the consolidated
financial statements and notes to the consolidated financial statements
do not necessarily agree with the sum of the individual amounts.

Note 2 Summary of Significant Accounting Policies(a) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies which the Company
controls through majority voting right or existence of certain conditions.
All significant intercompany balances and transactions have been eliminated in consolidation. Investments in affiliates of which the Company
has the ability to exercise significant influence over operating and financial
policies, except for insignificant companies, are accounted for by theequity method, and accordingly, stated at cost adjusted for the earnings
and losses after elimination of unrealized inter­company profits from thedate of acquisition.
As discussed in Note 2 (r) and (s), the accounts of consolidated overseas subsidiaries and affiliates accounted for by the equity method areprepared in accordance with either International Financial ReportingStandards or U.S. Generally Accepted Accounting Principles, with adjustments for the specified five items as applicable.
Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are carried at cost, adjusted for any substantial and nonrecoverable decline in value.
In the elimination of investments in subsidiaries, assets and liabilities ofthe subsidiaries, including the portion attributable to minority shareholders, are evaluated based on their fair values at the time the Company
acquired control of the respective subsidiaries.
The excess of investment amounts, at the acquisition date, over net
assets of consolidated subsidiaries or unconsolidated subsidiaries andaffiliates accounted for by the equity method, except for SUMCOCORPORATION, Copper Mountain Mine (BC) Ltd., Robertson’s Ready
Mix, Ltd., RRM Properties, Ltd., and Robertson’s Transport, Ltd. (the latter three are collectively called “Robertson’s”) are being amortized over a
period of five years on a straight-line basis.
Regarding SUMCO CORPORATION, Copper Mountain Mine (BC) Ltd.
and Robertson’s, it is 20 years on a straight-line basis. Negative goodwill
and insignificant amounts of goodwill are fully charged to income whenincurred. Negative goodwill incurred on or before March 31, 2010 isamortized over a period of five years on a straight-line basis.

30(b) Translation of Foreign Currencies
Receivables and payables denominated in foreign currencies are translated into Japanese yen at the year-end rates. Gains or losses resulting
from foreign currency transactions are credited or charged to otherincome as incurred.
The financial statements of consolidated foreign subsidiaries and affiliates are translated into Japanese yen amounts at the current rate except
for net assets, which is translated at historical rates. The difference resulting from translation adjustments is reported as a separate component of
net assets.

(c) Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided in an amount sufficient tocover probable losses on collection. It consists of individually estimateduncollectible amounts, and an amount calculated using the past rate ofactual losses on collection.

(d) Inventories
The amounts of inventories are stated primarily at acquisition cost modified by writing down cost to net selling value. Nonferrous metals are stated primarily at the first-in, first-out (FIFO) method. Other inventories areprimarily stated at average cost method.

(e) Derivative Transactions and Hedge Accounting
Derivative financial instruments are stated at fair value. Gains or losses
resulting from changes in fair value are recognized in income except forthe derivative financial instruments to which hedge accounting is applied.
If derivative financial instruments are used as hedges and meet certain
hedging criteria, the Company defers recognition of gains or losses
resulting from changes in fair value of derivative financial instruments until
the related losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts are usedas hedges and meet certain hedging criteria, forward foreign exchange
contracts and hedged items are accounted for in the following manner:

MITSUBISHI MATERIALS CORPORATION

1.	If a forward foreign exchange contract is executed to hedge an existing foreign currency receivable or payable,(1) the difference, if any, between the Japanese yen amount of thehedged foreign currency receivable or payable translated at the spot
rate as of the inception date of the contract and the carrying amountof the receivable or payable is recognized in the consolidated statements of income in the period which includes the inception date, and(2) the discount or premium on the contract (that is, the difference
between the Japanese yen amount of the contract translated at thecontracted forward rate and that translated at the spot rate as of the
inception date of the contract) is recognized in income over the termof the contract.
2. If a forward foreign exchange contract is executed to hedge a futureforecasted transaction denominated in foreign currency, the future transaction will be recorded at the contracted forward rate, and no gains orlosses on the forward foreign exchange contract are recognized.
Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under thecontract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.

ANNUAL REPORT 2015

Property, plant and equipment are stated at cost, except for certain revalued land as explained in Note 18. Depreciation is calculated primarily
using the declining-balance method at rates based on the estimated useful lives of depreciable assets. The straight-line method is applied to certain plant facilities based on the estimated useful lives of thosedepreciable assets.
Cost and accumulated depreciation applicable to assets retired or otherwise disposed of are eliminated from the related accounts, and gain onsale or loss on disposal is credited or charged to income. Expenditures
for new facilities and those which substantially increase the useful lives ofexisting property, plant, and equipment are capitalized. Maintenance,
repair and minor renewals are charged to income as incurred.

(h) Reserve for Loss on Investments
Reserve for loss on investments is provided for loss on investments inaffiliates based on the amount to be required considering the financial
position of the affiliates.

(i) Reserve for bonuses
Reserve for bonuses is provided for future payments of bonuses to
employees based on the amount to be attributed to the current fiscal
year.

(f) Securities
Based on the intent of holding, securities are classified as (a) securities
held for trading purposes, (b) debt securities intended to be held tomaturity (hereafter, “held-to-maturity debt securities”), (c) equity securities
issued by unconsolidated subsidiaries and affiliates (hereafter, “equity
securities”) and (d) all other securities that are not classified in any of theabove categories (hereafter, “available-for-sale securities”).
Held-to-maturity debt securities are stated at amortized cost. Equity
securities, which are not accounted for by the equity method, are statedat moving-average cost. Available-for-sale securities with available fairvalue are stated at fair market value. Valuation difference on these securities is reported, net of applicable income taxes, as a separate component of net assets. Gains and losses on the sale of such securities arecalculated with the moving-average cost. Available-for-sale securities
with no available fair market value are stated at moving-average cost.
There are no securities held for trading purposes.
If the market value of held-to-maturity debt securities, equity securities,
and available-for-sale securities declines significantly, such securities arestated at fair value and the difference between the fair value and the carrying amount is recognized as losses in the period of decline. If the fairmarket value of these securities is not readily available, such securities
are written down to net asset value with corresponding charge in the
consolidated statement of income, in the event that net asset value
declines significantly. In these cases, such fair value or net asset value will
become the carrying amount of the securities at the beginning of the nextyear.
The fair value is determined based on the average market price during
one month before the balance sheet date.

(g) Property, Plant and Equipment and Depreciation (except for
the leased assets of which the ownership is not transferredto the lessee)(j) Reserve for Loss on Disposal of Inventories
Reserve for loss on disposal of inventories is provided for future payments for disposal of inventories based on the management estimation.

(k) Valuation Allowance for Investments in Unconsolidated
Subsidiaries and Affiliates and Reserve for Loss on
Unconsolidated Subsidiaries and Affiliates
Valuation allowance for investments in unconsolidated subsidiaries andaffiliates and reserve for loss on unconsolidated subsidiaries and affiliates
are provided based on the evaluation of individual financial and otherconditions of subsidiaries and affiliates.

(l) Reserve for Environmental Measures
Reserve for environmental measures is provided for future payments for
waste disposal, and to clean up soil contamination at Kazuno (Akita
Prefecture) area, based on the management estimation. In addition, theestimated cost of the particular water treatment measures for abandoned
mines at Kurihara city of Miyagi Prefecture among the future remaining
costs for abandoned mines.

(m) Severance and Pension Benefits
1. For employees
The Group provide two types of post-employment benefit plans, anunfunded lump-sum severance payment plan, and a funded defined benefit pension plan, under which all eligible employees are entitled to benefits based on the level of wages and salaries at the time of retirement or
abolishment, the length of service, and certain other factors.
Net liability for retirement benefits is provided based on the estimatedamounts of projected benefit obligations that were actuarially calculated
on certain assumptions and the fair value of plan assets at balance sheet
dates, as adjusted for unrecognized actuarial gains and losses and

31

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

unrecognized past service costs. Projected benefit obligations are attributed to periods on a benefit formula basis in determining retirement benefit obligations.
Past service costs are amortized by the straight-line method over acertain period (10 years) which falls within the average remaining years ofservice of the employees when incurred. Actuarial gains and losses areamortized in the following years after incurred by the straight-line method
over a certain period (10 years) which falls within the average remaining
years of service of the employees.
2. For officers
Officers (directors and corporate auditors) are entitled to lump-sum severance payments based on the length of service and certain other factors. Some consolidated subsidiaries accrue a liability for lump-sum
severance payments equal to 100% of the amounts required, had all officers voluntarily retired at the balance sheet dates.

(s) Unification of Accounting Policies Applied to Foreign
Affiliates for the Equity Method(p) Cash and Cash Equivalents

Under ASBJ Statement No. 16, “Accounting Standard for Equity Methodof Accounting for Investments” and Practical Issue Task force (PITF) No.
24, “Practical Solution on Unification of Accounting Policies Applied to
Associates Accounted for Using the Equity Method” issued on March 10,
2008, the adjustments are made to conform the affiliate’s accounting policies for similar transactions and events under similar circumstances tothose of the Company when the affiliate’s financial statements are used inapplying the equity method unless it is impracticable to determine adjustments. In addition, financial statements prepared by foreign affiliates inaccordance with either International Financial Reporting Standards or thegenerally accepted accounting principles in the United States tentatively
may be used in applying the equity method. In this case, same adjustments as those for foreign subsidiaries are required in the consolidation
process unless the impact is not material.

Cash and cash equivalents include all highly liquid investments withmaturity of three months or less at the time of purchase.

(t) Changes in accounting policies(n) Income Taxes
The Company provides for income taxes on the basis of current tax liabilities and reflects the tax effects of the temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and their respective tax bases.

(o) Net Income per Share
Basic net income per share is calculated based upon the weighted-average number of shares of common stock outstanding during each period.

(q) Accounting Standard for Lease Transactions as Lessee
Finance lease transactions are capitalized to recognize lease assets andlease obligations in the balance sheet. Such lease assets are depreciatedover the lease terms without residual values on a straight-line method. Allother leases are accounted for as operating leases.
Finance leases other than those that transfer ownership of the leased
assets to the lessees, entered into on or before March 31, 2008, aretreated in the same way as ordinary operating leases for accounting purpose.

(r) Application of the “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements”
Under Accounting Standards Board of Japan (ASBJ) Practical Issues
Task Force No. 18 “Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for Consolidated Financial
Statements” (“PITF No. 18”) issued on May 17, 2006, accounting policies
and procedures applied by the Company and its subsidiaries to similartransactions and events under similar circumstances are in principle unified for the preparation of the consolidated financial statements. PITF No.
18, however, as a tentative measure, allows a parent company to prepare
consolidated financial statements using foreign subsidiaries’ financial
statements prepared in accordance with either International Financial

32

Reporting Standards or U.S. Generally Accepted Accounting Principles.
In this case, adjustments for the following five items in accordance withJapanese GAAP are required in the consolidation process unless theimpact is not material.
(a) Goodwill not subject to amortization(b) Actuarial gains and losses of defined benefit plans recognized as outside profit or loss(c) Capitalized expenditures for research and development activities(d) Fair value measurement of investment properties, and revaluation ofproperty, plant and equipment, and intangible assets(e) Accounting for net income attributable to minority interests(Application of the “Accounting Standard for Retirement Benefits”)
Effective from the year ended March 31, 2014, the Group applied“Accounting Standard for Retirement Benefits” issued by the AccountingStandards Board of Japan (“ASBJ”) (ASBJ Statement No. 26, revised on
May 17, 2012) and “Guidance on Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25, revised on May 17, 2012) except thearticle 35 of ASBJ Statement No. 26 and the article 67 of ASBJ
Guidance No. 25 and recorded retirement benefit obligations, net of plan
assets, as net liability or asset for retirement benefits. The Group recorded actuarial gains and losses, past service costs and transitional obligations that are yet to be recognized as net liability for retirement benefits.
In the application of the revised accounting standard for retirement benefits, pursuant to the transitional treatments prescribed in the article 37 of
ASBJ Statement No. 26, the Group included the related effects from theapplication in accumulated adjustments for retirement benefits underaccumulated other comprehensive income. As a result, net liability for
retirement benefits was recorded in the amount of ¥52,787 million atMarch 31, 2014 and accumulated other comprehensive income andminority interests decreased by ¥13,302 million and ¥131 million, respectively. Accordingly, net assets per share decreased by ¥10.05.
The Company and its domestic consolidated subsidiaries adopted
article 35 of the “Accounting Standard for Retirement Benefits” (ASBJ
Statement No.26, May 17, 2012 (hereinafter, “Statement No.26”)) andarticle 67 of the “Guidance on Accounting Standard for Retirement

MITSUBISHI MATERIALS CORPORATION

Benefits” (ASBJ Guidance No.25, May 17, 2012 (hereinafter, “Guidance
No.25”)) from the current fiscal year, and have changed the determinationof retirement benefit obligations and current service costs. In addition, theCompany and its domestic consolidated subsidiaries have changed themethod of attributing expected benefit to periods from a straight-line
basis to a benefit formula basis and also changed the determination
method of the discount rate from the method of using the discount rate
based on the periods approximate to the employee’s average remaining
service years to the method of using a single weighted average discountrate that reflects the estimated benefit payment period and amounts ofbenefit payments in each period.
In accordance with article 37 of Statement No.26, the effect of changing the determination of retirement benefit obligations and current service
costs has been recognized in retained earnings at the beginning of thecurrent fiscal year.
As a result of the application, the liability for retirement benefits obligation increased by ¥4,617million ($38,425 thousand) and retained earnings decreased by ¥3,611 million ($30,056 million) at the beginning of thecurrent fiscal year. In addition, the effect on operating income and income
before income taxes and minority interests was immaterial.
Net assets per share at the end of the current fiscal year decreased by¥2.53 ($0.02), but the effect on net income per share was immaterial.
(Change in the depreciation method of property, plant and equipment)
The Company and its domestic consolidated subsidiaries had previously
depreciated manufacturing facilities for cemented carbide products principally by declining balance method, while changed the depreciation
method to a straight-line method effective for the year ended March 31,
2015. This change was made because the straight-line method is considered to be more reasonable since the return on investment is expected to be more evenly arising than ever, because stable demand is
expected and technical obsolescence risk is less from the viewpoint of
the global demand forecast on cemented carbide products as a result of
the study of the depreciation method, after the production capacity wasincreased mainly by the introduction of manufacturing facilities for
cemented carbide products at Tsukuba Plant of the Company andMedium-term Management Plan (FY2014-2016) was established.
As a result, operating income and income before income taxes andminority interest for the year ended March 31, 2015 increased by ¥1,804
million ($15,016 thousand), respectively, compared with those under theprevious method.
In addition, the company’s domestic consolidated subsidiaries had
previously depreciated manufacturing facilities for aluminum cans principally by declining balance method, while changed the depreciation method to a straight-line method effective for the year ended March 31, 2015.
This change was made because the straight-line method is considered tobe more reasonable since the return on investment is expected to be
more evenly arising than ever, because stable demand is expected andtechnical obsolescence risk is less from the viewpoint of the global
demand forecast on aluminum cans as a result of the study of the depre-

ANNUAL REPORT 2015

ciation method, after Medium-term Management Plan (FY2014-2016)
was established.
As a result, operating income and income before income taxes andminority interest for the year ended March 31, 2015 increased by ¥936
million ($7,795 thousand), respectively, compared with those under theprevious method.

(u) New Accounting Standard not Adopted as Yet
Accounting Standards for Business Combinations and RelatedStandards and Guidance
On September 13, 2013, the ASBJ issued revised ASBJ Statement No.
21, “Accounting Standard for Business Combinations,” No. 22,“Accounting Standard for Consolidated Financial Statements,” No. 7,“Accounting Standard for Business Divestitures,” and No. 2, “AccountingStandard for Earnings per Share” and revised ASBJ Guidance No. 10,“Guidance on Accounting Standards for Business Combinations andBusiness Divestitures” and No. 4, “Guidance on Accounting Standard for
Earnings per Share.”
These accounting standards were revised principally concerning“Treatment for changes in parent’s ownership interest in a subsidiary that
do not result in a loss of control in the additional acquisitions of shares ina subsidiary,” “Accounting for acquisition-related costs,” “Presentation of
net income and change from minority interests to non-controlling interests,” and “Provisional accounting treatments.”
The Company expects to apply these standards and guidance from
April 1, 2015, except for provisional accounting treatments, which are
expected to be applied to business combinations to be implemented on
or after April 1, 2015.
The effects of applying the revised accounting standard are not material.

(v) Change in presentation method
One of the consolidated subsidiaries in the United States, engaging in the
cement business, had previously presented the cost related to transportation of ready-mixed concrete as “Selling, general and administrative
expenses”. However, the presentation method was changed and thecost has been presented as “Cost of sales” from the fiscal year ended
March 31, 2015.
Since the revenue growth of the ready-mixed concrete business in the
United States is expected in the “Medium-term Management Plan (20142016), beginning from the current fiscal year, the relationship between thecost and the related revenue, and the way the costs incur were both
reviewed. As a result, the change was made to present “Cost of sales”
and “Selling, general and administrative expenses” more appropriately.
The Company reclassified the consolidated statement of income forthe year ended March 31, 2014 to reflect the change of presentation.
Accordingly, the cost related to transportation in an amount of¥21,141 million ($175,926 thousand) was reclassified from “Selling, general and administrative expenses” to “Cost of sales” in the consolidated
statement of income for the year ended March 31, 2014.

33

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Note 3 Inventories
Inventories as of March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Merchandise and finished goods¥ 85,100¥ 81,516$  708,167

Work in process

107,093

100,280

891,186

Raw materials and supplies

104,539

103,155

869,933

Total¥296,734¥284,952$2,469,287

Note 4 Investment and Rental Property
Information about fair value of investment and rental property included in the consolidated financial statements at March 31, 2015 and 2014 was as follows:
Millions of yen
Carrying amount

Fair value

April 1, 2014

Increase/(Decrease)

March 31, 2015

March 31, 2015

¥70,981¥(3,133)¥67,847¥67,297

Millions of yen
Carrying amount

Fair value

April 1, 2013

Increase/(Decrease)

March 31, 2014

March 31, 2014

¥71,324¥(343)¥70,981¥71,267

Thousands of U.S. dollars
Carrying amount

Fair value

April 1, 2014

Increase/(Decrease)

March 31, 2015

March 31, 2015

$590,671$(26,079)$564,592$560,023

Notes:
1. Carrying amount is net of accumulated depreciation and accumulated impairment loss.
2.	Fair values of significant properties as of March 31, 2015 and 2014 are based on appraisal by external or internal real estate appraisers. Fair value ofother properties is calculated based on the reasonable indices reflecting market prices such as posted prices or property tax valuation, etc.
Operating performances of the investment and rental properties for the fiscal years ended March 31, 2015 and 2014 were as follows:
Millions of yen
Year ended March 31, 2015
Rental income

Rental expenses

ProfitImpairment loss

¥5,913¥4,046¥1,867¥274

Millions of yen
Year ended March 31, 2014
Rental income

Rental expenses

ProfitImpairment loss

¥5,882¥3,926¥1,955¥139

Thousands of U.S. dollars
Year ended March 31, 2015
Rental income

Rental expenses

ProfitImpairment loss

$49,206$33,669$15,536$2,282

Note:
Rental expenses include costs related to depreciation, maintenance and repairs, insurance premiums, taxes and dues and others.

34

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Note 5 Short-Term Bank Loans, Commercial Paper and Long-Term Debt
Short-term bank loans and commercial paper outstanding as of March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Unsecured
Secured
Total

2015

2014

2015

¥146,936¥141,352$1,222,741

24,963

13,181

207,737¥171,900¥154,534$1,430,478

The average interest rate per annum for short-term bank loans outstanding at March 31, 2015 and 2014 was 0.7%. The average interest rate perannum for commercial paper at March 31, 2015 was 0.1%. (No commercial paper outstanding at March 31, 2014)
Long-term debt as of March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥356,402¥327,800$2,965,818

12,42942,368103,432

2.060% unsecured yen bonds, due 2014—

30,000—1.610% unsecured yen bonds, due 2015—

10,000—0.800% unsecured yen bonds, due 2016

15,00015,000124,8231.160% unsecured yen bonds, due 2018

10,00010,00083,2150.790% unsecured yen bonds, due 2016

10,00010,00083,2150.570% unsecured yen bonds, due 2015

20,00020,000166,430

0.790% unsecured yen bonds, due 2017

15,00015,000124,8230.780% unsecured yen bonds, due 2018

15,00015,000124,8230.518% unsecured yen bonds, due 2016

40

40

332

0.434% unsecured yen bonds, due 2016

100

100

832

453,971495,308

3,777,747

Banks, insurance companies and other financial institutions, maturing serially until 2042
with an average rate of 1.0% per annum as of March 31, 2015:
Unsecured
SecuredLess current portion
Total(100,336)(141,563)(834,958)¥353,634¥353,745$2,942,789

The aggregate annual maturities of long-term debt as of March 31, 2015 were as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

2016¥100,336$  834,958

2017

82,816689,164

2018

64,190534,160

2019

74,717621,765

2020

38,763

322,5702021 and thereafter

93,147775,127¥453,971$3,777,747

Total

Assets pledged as collateral for short-term bank loans and long-term debt as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits

2015

2014

2015

¥ 20,710¥ 12,029$ 172,346

Notes and accounts receivable

10,2184,083

85,031Inventories

28,89329,401

240,441

Investments:
Investments in securities
Property, plant and equipment, at net book value
Other assets
Total

6,183

3,611

51,45259,587

61,191495,8592

3

21¥125,596¥110,320$1,045,154

35

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Note 6 Employees’ Severance and Pension Benefits
1. Outline of the retirement benefit plans
The Company and consolidated subsidiaries have lump-sum severance
payment plans, defined benefit corporate pension plans and welfare pension fund plans. Under the lump-sum severance payment plans (they are
principally unfunded plans, but some plans are funded after retirement
benefit trust was established.), lump-sum payments may be provided
based on a function of qualifications and service length. Under thedefined benefit corporate pension plans (all plans are funded), lump-sum
payments or annuities may be provided based on a function of qualifications and service length. Certain consolidated subsidiaries calculate net
liability for retirement benefits and retirement benefit costs using a simplified method. Certain consolidated subsidiaries have defined contributionplans.

2.	Movement in retirement benefit obligations for the years ended March 31, 2015 and 2014, was as follows (excluding plans to which a simplified method is applied):Thousands of
U.S. dollars

Millions of yen

Balance at beginning of year
Cumulative effects of accounting changes

2015

2014

2015

¥140,948¥140,378$1,172,911

4,617

—

38,425145,566

140,378

1,211,337

Service costs

6,777

7,208

56,396

Interest costs

1,677

1,985

13,959Actuarial gains and losses

(746)

1,917

(6,214)(9,390)(9,602)(78,142)

131

116

1,097

(13,296)—(110,647)

Balance at beginning of year, as restated

Benefits paid
Past service costs
Gain on abolishment of retirement benefit plans
Other
Balance at end of year

(2,462)(1,055)(20,495)¥128,256¥140,948$1,067,290

3. Movement in plan assets for the years ended March 31, 2015 and 2014, was as follows (excluding plans to which a simplified method is applied):Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥90,184¥68,055$750,477

Expected return on plan assets

1,342

1,266

11,173

Actuarial gains and losses

9,362

893

77,912Contributions paid by the employer

6,885

7,480

57,294—

18,821—

Benefits paid

(5,762)(5,626)(47,950)

Gain on abolishment of retirement benefit plans(9,218)—(76,714)

Other(1,819)(705)(15,139)¥90,975¥90,184$757,054

Balance at beginning of year

Amount of established retirement benefit trust

Balance at end of year

4.	Movement in net liability for retirement benefits under the plans to which a simplified method is applied for the years ended March 31, 2015 and 2014,
was as follows:
Thousands of
U.S. dollars

Millions of yen

Balance at beginning of year

2014

2015

¥1,969$16,676Retirement benefit costs

263

279

2,196

Benefits paid

(219)

(178)

(1,826)

Contributions to the plans

(67)

(63)

(564)

Other

158

(3)

1,319

¥2,139¥2,004$17,801

Balance at end of year

36

2015
¥2,004

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

5.	Reconciliation between net liability or asset for retirement benefits recorded in the consolidated balance sheets and the balances of retirement benefit
obligations and plan assets
Thousands of
U.S. dollars

Millions of yen

Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net liability recorded in the consolidated balance sheets

2015

2014

2015

¥117,570¥130,489$978,367(91,230)(90,396)(759,177)

26,34040,092

219,189

13,08012,675

108,846¥ 39,420¥ 52,767$328,036
Thousands of
U.S. dollars

Millions of yen

Net liability for retirement benefits
Net asset for retirement benefits
Net liability recorded in the consolidated balance sheets

2015

2014

2015

¥39,662¥52,787$330,056

(242)

(19)

(2,020)¥39,420¥52,767$328,036

6. The components of retirement benefit costs for the years ended March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

Service costs

2015

2014

2015

¥ 7,041¥ 7,488$ 58,592

Interest costs

1,677

1,985

13,959

Expected return on plan assets(1,342)(1,266)(11,173)

Amortization of actuarial gains and losses

1,357

1,448

11,296

Amortization of past service costs

(158)

(184)

(1,322)—297—

Retirement benefit costs on defined benefit plans¥ 8,574¥ 9,768$ 71,352

Gain on abolishment of retirement benefit plans¥(1,451)¥      —

$(12,074)

Other

Notes: 1. Retirement benefit costs under the plans to which a simplified method is applied are included in “Service costs.”
2. Gain on abolishment of retirement benefits is recorded under “Other income (expenses).”
7. Adjustments for retirement benefits
Components of adjustments for retirement benefits (before adjusting for tax effects) for the years ended March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

Past service costs

2015

2014

2015

¥  (290)¥—$  (2,420)

Actuarial gains and losses

12,615—

104,976

Total¥12,324¥—$102,556

8. Accumulated adjustments for retirement benefits
Components of accumulated adjustments for retirement benefits (before adjusting for tax effects) as of March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Unrecognized past service costs¥ (913)¥ (1,204)$ (7,600)

Unrecognized actuarial gains and losses

27,142

3,261

15,657

Other

—

(0)

—

Total

¥2,348¥14,452$19,541

37

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

9. Plan assets(1) Components of plan assets
Plan assets consisted of the followings:
2015

2014

Bonds

37%

34%

Equity securities

49

47

Insurance assets (general account)

11

10

Cash and deposits

3

8

Other

1

1

Total

100%

100%

Note: Total plan assets include retirement benefit trust established on lump-sum severance payment plans or corporate pension plans by 30% and 31%
at March 31, 2015 and 2014, respectively.
(2) Method of determining the long-term expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined by considering the allocation of plan assets which are expected currently and in the
future and long-term rates of return which are expected currently and in the future from the various components of the plan assets.
10. The principal assumptions used for the years ended March 31, 2015 and 2014, were set forth as follows:
2015

2014

Discount rate

Mainly 1.4%

Mainly 1.4%

Long-term expected rate of return on plan assets

Mainly 2.0%

Mainly 2.0%

11. Defined contribution plans
The amount of the required contribution to the defined contribution plans of the consolidated subsidiaries was ¥255 million ($2,126 thousand) and ¥148
million for the years ended March 31, 2015 and 2014, respectively.

Note 7 Asset Retirement Obligations
The asset retirement obligations are based on the reasonably estimatedamount for the obligation regarding treatment of hazardous substancessuch as asbestos and PCB as prescribed by the various laws and ordinances, and greening obligation for mine closure of coal and limestone.
In computing the amount of asset retirement obligations, the Groupestimates the expected terms until expenditure (maximum 72 years) andapplies discount rates ranging from 1.4% to 2.7%.
The changes in asset retirement obligations for the fiscal years ended
March 31, 2015 and 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen
Year ended March 31,

2015

2014

2015

Beginning balance¥3,494¥2,874$29,076

Increase associated with acquisitions of tangible fixed assets

25

335

214

Reconciliation associated with passage of time

65

49

542

Reduction associated with settlement of asset retirement obligations

(15)

(55)

(127)

Decrease (increase) due to changes in estimates

(135)

45

(1,124)Foreign currency translation adjustments

227

262

1,896

Other, net

(231)

(17)

(1,929)¥3,430¥3,494$28,548

Ending balance

Note 8 Net Assets
Under the Japanese Corporate Law (“the Law”) and regulations, the entire
amount paid for new shares is required to be desig­nated as common stock.
However, a company may, by a resolu­tion of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares asadditional paid-in-capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of sur­plus ismade, the smaller of an amount equal to 10% of the dividend or the38

excess, if any, of 25% of common stock over the total of additional paidin-capital and legal earnings reserve must be set aside as additional paidin-capital or legal earnings reserve. Legal earnings reserve is included inretained earnings in the accompanying consolidated balance sheets.
Under the Law, both elimination and capitalization related to legal earnings reserve and additional paid-in capital generally require a resolution of
the shareholders’ meeting.

MITSUBISHI MATERIALS CORPORATION

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital and all legal
earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.

ANNUAL REPORT 2015

The maximum amount that the Company can distribute as dividends is
calculated based on the non-consolidated financial statements of theCompany in accordance with the laws and regulations.

Note 9 Income Taxes
The income taxes reflected in the accompanying consolidated statements of income for the fiscal years ended March 31, 2015 and 2014 consisted of
the following:Thousands of
U.S. dollars

Millions of yen

Current
Deferred
Total

2015

2014

2015

¥19,649¥16,509$163,513(5,574)

9,956(46,388)¥14,074¥26,465$117,124

The following table summarizes the significant differences between the statutory income tax rate and the effective income tax rate for the fiscal years
ended March 31, 2015 and 2014:

Statutory income tax rate
Nondeductible expenses

2015

2014

35.6%

38.0%

1.0

1.1

Temporary differences for which tax effect cannot be recognized(12.4)(5.6)

Differences in statutory tax rates of consolidated subsidiaries

(3.3)

(4.5)

Equity in earnings of affiliates

(2.9)

(1.7)

Nontaxable dividends received

(4.0)

(3.6)

Nondeductible foreign withholding taxes

3.0

3.5

Loss on impairment of goodwill

—

1.6
0.0

Deferred tax liabilities related to retained earnings of overseas consolidated subsidiaries

1.0

Reduction of deferred tax assets and liabilities due to the change in income tax rates

0.5

1.0

Other

(0.1)

1.1

Effective tax rate

18.6%

31.0%

Significant components of deferred tax assets and liabilities as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Deferred tax assets:¥ 15,409¥ 19,610$  128,227

Net operating loss carried forward

Nondeductible loss on impairment of fixed assets

15,364

19,987

127,856

Loss on write-down of securities

14,302

15,700119,022Net liability for retirement benefits
Retirement benefit trust asset
Temporary difference on the excess of investment in overseas consolidated
subsidiaries
Intercompany profits

12,047
9,334

18,358
10,636100,250
77,678

8,963

11,691

74,593

6,926

7,066

57,643

Loss on write-down of buildings

4,913

5,592

40,891

Accrued employees’ bonuses

3,885

4,108

32,329Allowance for doubtful accounts

2,085

2,121

17,351

Loss on write-down of inventories

2,082

2,138

17,333

Depreciation

2,012

1,687

16,746

Reserve for environmental measures

1,474

1,715

12,271

Other

29,54722,526245,878

128,350

142,942

1,068,076(68,835)(90,188)(572,814)¥ 59,515¥ 52,753$  495,262

Subtotal
Valuation allowance
Total deferred tax assets

39

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥(17,137)¥(14,984)$(142,608)

Deferred tax liabilities:
Valuation difference on available-for-sale securities
Excess of fair value over the book value of the assets and liabilities of the consolidated
subsidiaries and affiliates at the acquisition date

(7,058)(7,819)(58,740)

Accelerated depreciation of property, plant and equipment(5,934)(5,502)(49,387)

Gain on contribution of securities to retirement benefit trust(4,318)(4,931)(35,938)

Deferred gain on sale of property, plant and equipment(2,951)(2,008)(24,562)

Revaluation of land, as a result of the merger(1,586)(1,748)(13,204)

Reserve for loss on particular business reorganization(1,262)—(10,502)

Retained earnings of overseas consolidated subsidiaries(1,046)(289)(8,704)

Deferred gains or losses on hedges

(181)

(529)

(1,508)Reserve for mining exploration

(135)

(430)

(1,125)Reserve for special account for advanced depreciation of fixed assets

(77)

(97)

(642)

(2,902)(4,532)(24,151)

Other(44,592)(42,873)(371,077)

Net deferred tax assets

Total deferred tax liabilities¥ 14,923¥   9,880$ 124,184

Net deferred tax liabilities for land revaluation¥(28,449)¥(32,532)$(236,740)

Adjustments of the amounts of deferred tax assets and liabilities due to the change in income tax rates
New tax reform act proclaimed on March 31, 2014 repealed the special
reconstruction corporation tax from the fiscal year beginning on April 1,
2014. As a result, the statutory tax rate to be used in computing deferred
tax assets and liabilities was reduced from 38.0% to 35.6% for the temporary differences estimated to be expired in the fiscal year beginning on April
1, 2014. The effects of this rate change on the consolidated financial statements as of March 31, 2014 and for the year then ended were immaterial.
On March 31, 2015, amendments to the Japanese tax regulations
were enacted into law. Based on the amendments, the statutory income
tax rates utilized for the measurement of deferred tax assets and liabilities
expected to be settled or realized from April 1, 2015 to March 31, 2016

and on or after April 1, 2016 are changed from 35.6% for the fiscal year
ended March 31, 2015 to 33.1% and 32.3%, respectively, as of March
31, 2015. As a result, deferred tax liabilities, net of deferred tax assets,
decreased by ¥1,401 million ($11,664 thousand) and income taxes deferred and valuation difference on available-for-sale securities
increased by ¥340 million ($2,832 thousand) and ¥1,762 million ($14,662
thousand), respectively, and deferred gains on hedges decreased by ¥36
million ($304 thousand). In addition, deferred tax liabilities for land revaluation decreased by ¥2,801 million ($23,313 thousand) and revaluation
reserve for land increased by ¥2,763 million ($22,994 thousand).

Note 10 Contingent Liabilities
1. Contingent liabilities regarding notes and loans guaranteed:Contingent liabilities for notes receivable discounted with banks, notes
receivable endorsed with recourse, notes and accounts receivable securitized with recourse, and loans guaranteed by the Group primarily on behalfof unconsolidated subsidiaries and affiliates, including employees’ housing
loans from banks, as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Notes receivable discounted
Notes receivable endorsed
Notes and accounts receivable securitized with recourse

2014

2015

¥ 3,658$  6,897

30

—

256

7,239

7,976

60,241Loans guaranteed

35,43833,053294,904

Total¥43,537¥44,688$362,299

2. Contingent liabilities regarding the consolidated subsidiary:
On December 30, 2014, PT. Smelting, which is a consolidated subsidiaryof the Company, received a notice of reassessment in an amount of $47
million (¥5,752 million) from Indonesian National Tax Authority regarding
sales transaction pricing of the consolidated subsidiary for the year ended
December 2009. The consolidated subsidiary made a provisional depositof $14 million (¥1,682 million) as a part of the assessment on January 28,

40

2015
¥   828

2015. However, the consolidated subsidiary submitted a written objection
to Indonesian National Tax Authority on March 25, 2015, because thisassessment, which claims sales shortage of the consolidated subsidiary
based on comparison of profit margin ratio with other companies thatIndonesian Natural Tax Authority selected, is remarkably unreasonable andcannot be accepted by the Company and the consolidated subsidiary.

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Note 11 Lease Transactions
In related to Note 2 (q), pro-forma information of finance leases that do not transfer ownership of leased assets to the lessee commenced prior to April 1,
2008, the first year of implementation of the new accounting standard, which are accounted for as operating leases, was as follows:
1. Noncancelable operating lease commitments as lessee were as follows:

Thousands of
U.S. dollars

Millions of yen

Due within one year
Due after one year
Total

2015

2014

2015

¥ 2,459¥ 2,256$ 20,468

9,987

11,046

83,107¥12,446¥13,302$103,576

2. Noncancelable operating lease commitments as lessor were as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year

2015

2014

2015

¥1,212¥1,040$10,091

Due after one year

6,068

6,521

50,497

Total¥7,281¥7,561$60,589

Note 12 Research and Development Expenses
Research and development expenses for the fiscal years ended March 31, 2015 and 2014 were ¥10,530 million ($87,627 thousand) and ¥10,986 million, respectively, and were included in selling, general and administrative expenses.

Note 13 Other Comprehensive Income
The components of other comprehensive income for the years ended March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Valuation difference on available-for-sale securities:
Gains (losses) incurred during the year
Reclassification adjustment to net income
Amount before tax effect

2015

2014

2015

¥12,762¥ (9,637)$106,20581(4,868)678

12,844(14,506)

106,883

Tax effect(2,152)

5,992(17,912)Valuation difference on available-for-sale securities

10,691(8,513)

88,970(72,886)

Deferred gains or losses on hedges:(Losses) gains incurred during the year

(8,758)3,040

Reclassification adjustment to net income

6,561(2,478)54,602(2,197)561(18,283)

Amount before tax effectTax effect
Deferred gains or losses on hedges

762

10

6,346

(1,434)572(11,936)

2,801—

23,31333,21527,924276,406—

107—

33,21528,032

276,406

Revaluation reserve for landTax effectForeign currency translation adjustments:
Gains incurred during the year
Reclassification adjustment to net income
Amount before tax effectTax effect

—

—

—

33,21528,032

276,406

Gains incurred during the year

10,786—89,763

Reclassification adjustment to net income

1,537

—

12,792

12,324—

102,556

Foreign currency translation adjustments
Adjustments for retirement benefits:

Amount before tax effect41

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Thousands of
U.S. dollars

Millions of yen

Tax effect
Adjustments for retirement benefits

2015

2014

2015

(609)

—

(5,071)

11,714—

97,485

2,349

5,511

19,554

61

82

515

Share of other comprehensive income of affiliates accounted for using the equity method:
Gains incurred during the year
Reclassification adjustment to net income
Share of other comprehensive income of affiliates accounted for using the equity
methodTotal other comprehensive income

2,411

5,594

20,069¥59,401¥25,685$494,308

Note 14 Securities
1. The following tables summarize carrying amounts and acquisition costs of securities with available fair values as of March 31, 2015:
Available-for-sale securities(1) Securities with carrying amount exceeding acquisition cost
At March 31, 2015
Millions of yen
Type

Equity securities

Acquisition cost

Difference

Carrying amount

Acquisition cost

Difference¥116,355¥54,413¥61,941$968,258$452,807$515,451

—

—

—

—

—

—

¥116,355¥54,413¥61,941$968,258$452,807$515,451

Difference

Carrying amount

Acquisition cost

Difference$(11,282)

Bonds
Total

Thousands of U.S. dollars

Carrying amount(2) Securities with carrying amount not exceeding acquisition cost
At March 31, 2015
Millions of yen
Type

Equity securities

Carrying amountThousands of U.S. dollars¥9,823¥11,179¥(1,355)$81,748$93,030

—

—

—

—

—

—

¥9,823¥11,179¥(1,355)$81,748$93,030$(11,282)

Bonds
Total

Acquisition cost

Note:
Unlisted equity securities of which carrying amount is ¥10,772 million ($89,642 thousand) are not included in the above table, because there is no market price and it is extremely difficult to recognize their fair values.
2. The following tables summarize carrying amounts and acquisition costs of securities with available fair values as of March 31, 2014:
Available-for-sale securities(1) Securities with carrying amount exceeding acquisition cost
At March 31, 2014
Millions of yen
Type

Equity securities
Bonds
Total

Carrying amount

Acquisition cost

Difference¥94,539¥43,371¥51,168———¥94,539¥43,371¥51,168(2) Securities with carrying amount not exceeding acquisition cost
At March 31, 2014
Millions of yen
Type

Equity securities
Bonds
Total

Carrying amount

Acquisition cost

¥20,068¥24,170

Difference

—

—

—

¥20,068¥24,170¥(4,101)¥(4,101)

Note:
Unlisted equity securities of which carrying amount is ¥11,166 million are not included in the above table, because there is no market price and it isextremely difficult to recognize their fair values.

42

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

3. The Group did not hold any available-for-sale securities with maturity, and held-to-maturity debt securities as of March 31, 2015 and 2014.
4. Total amounts of available-for-sale securities sold, and the resulting gains and losses, for the fiscal years ended March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥1,884¥34,846$15,681

Gains

655

27,906

5,455

Losses

(—)

(4)

(—)

Sales amount

5. The amounts of write-down of investments in securities for the years ended March 31, 2015 and 2014 were ¥9,278 million ($77,211 thousand) and¥850 million, respectively.
When the fair value of each issue of securities declined more than 50% of the acquisition cost, losses on write-down were recognized. When the fairvalue declined between 30% and 50% of the acquisition cost, the write-down amount is determined by considering the recoverability, etc. by each issue.
6. Loss on valuation of investment securities.
The loss on valuation of investment securities for the fiscal year ended March 31, 2015 was mainly incurred for the nuclear fuel processing business fornuclear power generation based on the perspective on the future performance. The shutdown of the business has been expected to prolong due to thedelay of resuming nuclear power plant operations.

Note 15 Financial Instruments
Information on financial instruments for the fiscal years ended March 31,
2015 and 2014 was as follows.
1. Qualitative information on financial instruments(1) Policies for using financial instruments
The Group raises the necessary funds for its capital investment plans to
conduct its business mainly by bank loans or issuance of bonds. The
Group invests temporary cash surpluses in highly secured financial instruments and raises short-term working funds by bank loans or issuance ofcommercial paper. The Group fol­lows the policy of using derivatives notfor speculative purposes, but for managing financial risks as describedlater.

tracts and currency swap contracts for the purpose of hedging foreign
currency exchange fluctuation risk on trade receivables and payables
denominated in foreign currencies, forward commodity contracts andcommodity price swap contracts for the purpose of hedging commodity
price fluctuation risk on nonferrous metal and interest rate swaps for the
purpose of hedging interest rate fluctu­ation risk on debt and reducing
fund raising costs. Interest rate swaps which convert fixed interest rates
into floating rates are exposed to market interest rate fluctuation.
Hedging instruments and hedged items, hedge policy, assessment method for hedge effectiveness and others related to hedge accounting, aredescribed in Note 2. (e) “Derivative Transactions and Hedge Accounting”
and Note 16 “Derivative Transactions.”(2)	Details of financial instruments used and the exposures to risk andhow they arise
Notes and accounts receivable are exposed to customer’s credit risk. As
trade receivables denominated in foreign currencies arising from thedevelopment of global business are exposed to foreign currency
exchange fluctuation risk, they are principally hedged using forward foreign exchange contracts. Investment securities, mainly consisting ofequity securities related to customers and suppliers in relation to business or capital alliances, are exposed to the risk of market price fluctuations.
Payment terms of notes and accounts payable are less than one year.
As certain payables in foreign currencies arising from the import transactions of raw materials are exposed to foreign currency exchange fluctuation risk, they are principally hedged using forward foreign exchange
contracts. Short-term bank loans and commercial paper are used for
raising funds related to operating transactions.
Long-term debt including corporate bonds is used mainly for raising
the necessary funds related to capital investments. Maturities of longterm debt including corporate bonds are less than 20 years. As some ofthem with floating interest rates are exposed to interest rate fluctuation
risk, they are hedged using derivatives.
Derivative transactions mainly include forward foreign currency con-(3)	Policies and processes for managing the risk
a. Credit Risk Management (customers’ default risk)
The Company manages and mitigates customers’ credit risk on tradereceivables in accordance with the Credit Control Policy, which includes
monitoring of payment term and balances of customers by each responsible department of each company to recognize the cus­tomers’ default
risk at an early stage. Consolidated subsidiaries also manage and mitigate the risk in accordance with a similar credit con­trol policy based on
the Group Accounting Policy and Manual. The Company deals with highly creditworthy foreign or domestic financial institutions or trading firms
only to mitigate the default risk.
b. Market Risk Management (foreign currency exchange and interest rate
fluctuation risks)
The Company and its certain consolidated subsidiaries use princi­pally
forward foreign exchange contracts to hedge foreign cur­rency exchange
fluctuation risk identified by currency and monthly basis for trade receivables and payables denominated in foreign currencies. In addition, interest rate swap contracts are used to manage interest rate fluctuation risk
on debt.
With respect to investment securities, the Company identifies andmonitors fair values and financial positions of the issuers on a regularbasis and continuously reviews its status of these securities considering

43

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

the relationships with the issuers.
With respect to derivative transactions, the Company has “Rules on
Utilizing Derivative Transactions” in its “Operation Standards” applicableto the whole Company. In addition, there are specific rules and standards
for derivative transactions provided for each business unit based on thetype of business. In accordance with the authority and limits provided inthese rules and standards, forward foreign currency contracts are utilized
and controlled by the Finance Department and other responsible departments; interest rate swap contracts are utilized and controlled by the
Finance Department; and forward commodity contracts are utilized andcontrolled by each responsible department. Furthermore, departments
utilizing derivative transactions are required to report the status andresults of derivative transactions to the Management Audit Department
for financial transaction at each annual and semi-annual year-end.

Consolidated subsidiaries utilizing derivative transactions have provided
the operational standards individually, according to the purpose of derivative transactions.
c. Liquidity Risk Management on Fund Raising
The Group manages its liquidity risk by preparing and updating cash flowplans on a timely basis at each company.
(4)	Supplemental information on fair values
Fair values of financial instruments include market prices and values calculated reasonably when there is no market price. Since variable factors
are incorporated in calculating the rele­vant fair values, the fair values maychange depending on the different assumptions. The contract amounts
described in Note 16 “Derivative Transactions” do not indicate theamounts of mar­ket risk or credit risk related to derivative transactions.

2. Fair values of financial instruments
Carrying amounts, fair value of the financial instruments and the difference between them as of March 31, 2015 and 2014 were as follows (Financial
instruments whose fair values are not readily determinable are excluded from the following table):
Millions of yen
March 31, 2015

Carrying amount

Fair value

Difference(1) Cash and time deposits¥ 93,152¥ 93,152¥     —

(2) Notes and accounts receivable

230,874

230,874—

Shares in affiliates

57,406

180,591

123,184

Available-for-sale securities

126,179

126,179—

Total assets¥507,612¥630,797¥123,184(1) Notes and accounts payable¥128,375¥128,375¥      —

(2) Short-term bank loans

252,197

252,197—(3) Current portion of bonds

20,04020,05212(3) Investment securities:(4) Commercial paper

5,000

5,000

—

(5) Bonds

65,10066,009909(6) Long-term loans payable

288,534

289,075

540

Total liabilities¥759,247¥760,710¥  1,462¥  6,473¥  6,473¥      —

(1,210)(3,519)(2,309)¥  5,263¥  2,954¥  (2,309)

Derivative transactions (*)
a. Derivatives to which hedge accounting is not appliedb. Derivatives to which hedge accounting is applied
Total derivative transactions

44

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Millions of yen
March 31, 2014

Carrying amount

Fair value

Difference(1) Cash and time deposits¥ 63,486¥ 63,486¥    —(2) Notes and accounts receivable

219,016

219,016—
26,960(3) Investment securities:
Shares in affiliates

53,58580,545

Available-for-sale securities

114,608

114,608—

Total assets¥450,696¥477,657¥26,960(1) Notes and accounts payable¥106,656¥106,656¥    —(2) Short-term bank loans

256,098

256,098—(3) Current portion of bonds

40,00040,314314(4) Commercial paper(5) Bonds———

85,14086,2571,117(6) Long-term loans payable

268,605

269,559954

Total liabilities¥756,500¥758,885¥ 2,385¥    728¥    728¥    —

637(1,446)(2,083)¥  1,366¥   (717)¥ (2,083)

Derivative transactions (*)
a. Derivatives to which hedge accounting is not appliedb. Derivatives to which hedge accounting is applied
Total derivative transactions(*) Receivables and payables arising from derivative transactions are presented in net. Net payables are presented in parenthesis.
Thousands of U.S. dollars
March 31, 2015

(1) Cash and time deposits(2) Notes and accounts receivable(3) Investment securities:
Shares in affiliates
Available-for-sale securities
Total assets(1) Notes and accounts payable(2) Short-term bank loans(3) Current portion of bonds(4) Commercial paper(5) Bonds(6) Long-term loans payable
Total liabilities
Derivative transactions (*)
a. Derivatives to which hedge accounting is not appliedb. Derivatives to which hedge accounting is applied
Total derivative transactions

Carrying amount$  775,173
1,921,228

Fair value$  775,173
1,921,228

Difference$       —477,7111,050,007$4,224,120$1,068,279
2,098,673
166,763
41,607541,7322,401,056$6,318,114

1,502,798
1,050,007$5,249,207$1,068,279
2,098,673
166,863
41,607549,300
2,405,557$6,330,282

1,025,087—$1,025,087$        —

$   53,870(10,071)$   43,799$   53,870(29,287)$   24,582$        —(19,216)$  (19,216)

99
—
7,568
4,500
$   12,168(*) Receivables and payables arising from derivative transactions are presented in net. Net payables are presented in parenthesis.
Notes:
1. Calculation method of fair values of financial instruments as well as securities and derivative transactions are as follows:
Assets:(1) Cash and time deposits and (2) Notes and accounts receivable
The fair values approximate book values because of their short-term maturities. Therefore, the fair values are recognized using book values.
(3) Investment securities (Shares in affiliates and available-for-sale securities)
The fair values of equity securities are determined based on the market price. The information of securities categorized by holding purposes is
described in Note 14 “Securities.”
Liabilities:(1) Notes and accounts payable, (2) Short-term bank loans and (4) Commercial paper
The fair values approximate book values because of their short-term maturities. Therefore, the fair values are recognized using book values.
(3) Current portion of bonds and (5) Bonds
The fair values of these liabilities are determined based on the market price.

45

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

(6) Long-term loans payable
The fair values of long-term loans payable are determined by discounting the aggregated values of the principal and interest using an assumed interest rate if the same type of loans were newly made.
Derivative financial instruments:
The information on derivative transactions is described in Note 16 “Derivative Transactions.”
2. Financial instruments that fair values are extremely difficult to calculate
Carrying amountThousands of
U.S. dollars

Millions of yen

2015

2014

2015

Shares in affiliates (unlisted equity securities)¥70,694¥71,216$588,286

Available-for-sale securities (unlisted equity securities)

10,772

11,166

89,642Category

It is extremely difficult to calculate their fair values because there is no market price. Therefore, these items are not included in “(3) Investment securities.”
3. Redemption schedule of monetary assets with contractual maturities as of March 31, 2015
Millions of yen
Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

More than 5 years

Cash and time deposits¥ 93,152

¥—

¥—

¥—

¥—

Notes and accounts receivable

230,874

—

—

—

—

—

Total

¥324,026

¥—

¥—

¥—

¥—

¥—

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Cash and time deposits$  775,173

$—

$—

$—

$—

$—

Notes and accounts receivable
Total

1,921,228$2,696,401

—
$—

—
$—

—
$—

—
$—

—
$—

¥—

Thousands of U.S. dollars
More than 5 years

4. Repayment schedule of short-term bank loans, commercial paper, bonds and long-term loans payable as of March 31, 2015
Millions of yen
Within 1 year

Short-term bank loans

1 to 2 years¥252,197¥

2 to 3 years—¥

3 to 4 years—¥

4 to 5 years—¥

More than 5 years

—

¥

—

Commercial paper

5,000

—

—

—

—

Bonds

20,04025,10015,00025,000———57,71649,19049,717

38,763

93,147¥277,237¥82,816¥64,190¥74,717¥38,763¥93,147

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

More than 5 years$2,098,673

$

$

$

$

Long-term loans payable
Total

—

Thousands of U.S. dollars

Short-term bank loans

—

—

—

—

$

—

Commercial paper

41,607

—

—

—

—

Bonds

166,763

208,870

124,823

208,038———

480,294

409,337

413,726

322,570775,127$2,307,045$689,164$534,160$621,765$322,570$775,127

Long-term loans payable
Total

—

Note 16 Derivative Transactions
Derivative financial instruments currently utilized by the Group include forward foreign currency contracts, interest rate swap contracts, currency
swap contracts, forward commodity contracts and commodity priceswap contracts.
The Company utilizes forward foreign currency contracts to hedge theimpact of foreign exchange fluctuations on receivables and payables, andon advance payments for purchase of ores.
The Company enters into interest rate swap contracts to reduce exposure to adverse movements in interest rates, and to lower finance costs

46

on debts.
The Company also utilizes forward commodity contracts to hedge theimpact of future price fluctuations of nonferrous metal inventories andsold gold bullion deposited from customers under consuming bailment
named “My Gold Partner.”
Some consolidated subsidiaries utilize forward foreign currency contracts and interest swap contracts to hedge the impact of foreign currency fluctuations on foreign currency receivables and payables, and forward
commodity contracts and commodity price swap contracts to hedge theMITSUBISHI MATERIALS CORPORATION

impact of price fluctuations of nonferrous metal inventories.
The Company evaluates hedge effectiveness by comparing the cumulative changes in cash flows or the changes in fair value of the hedged
items with the corresponding changes in the hedging derivative instruments. Furthermore, the Company periodically controls the transaction

ANNUAL REPORT 2015

volume of forward commodity contracts in order to balance them withhedged nonferrous metal inventories and to evaluate their hedge effectiveness at each annual and semi-annual year-end.
As of March 31, 2015 and 2014, the Group had outstanding derivativetransactions as follows:

1. Derivative transactions to which hedge accounting is not applied at March 31, 2015 and 2014
(1) Currency related derivatives
March 31, 2015

Contract amountMillions of yen
Contract amountdue after one year
Fair value

Gain (Loss)

Transactions other than market transactions
Forward foreign exchange contracts:
Sell

U.S. dollars¥2,404

¥—

¥(20)

—

—

—

—

—

—

—

—

613

—

(6)

(6)

6,668

—

(84)

(84)

—

—

—

¥(111)

Millions of yen
Contract amountdue after one year
Fair value

Gain (Loss)

Other
Buy

U.S. dollars
Other¥ (20)

Currency swaps:
Pay Japanese yen/ Receive U.S. dollars
Total

March 31, 2014

Contract amountTransactions other than market transactions
Forward foreign exchange contracts:
Sell

U.S. dollars¥1,898

¥—

¥(10)

—

—

—

—

—

—

—

—

468

—

10

10

Other
Buy

U.S. dollars
Other

¥(10)

Currency swaps:
Pay Japanese yen/ Receive U.S. dollars

3,086

—

(2)

(2)

—

—

—

¥ (2)

Thousands of U.S. dollars
Contract amountdue after one year
Fair value

Gain (Loss)

Total

March 31, 2015

Contract amountTransactions other than market transactions
Forward foreign exchange contracts:
Sell

U.S. dollars$20,012$—$(168)

—

—

—

—

—

—

—

—

5,105

—

(52)

(52)

55,494

—

(704)

(704)

—

—

—

$(925)Other
Buy

U.S. dollars
Other$(168)

Currency swaps:
Pay Japanese yen/ Receive U.S. dollars
Total
Note:
Fair value is determined based on the price obtained from financial institutions.
(2) Interest rate related derivatives
Not applicable

47

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

(3) Commodity related derivatives
March 31, 2015

Contract amountMillions of yen
Contract amountdue after one year
Fair value

Gain (Loss)

Transactions other than market transactions
Nonferrous metals forward:Sell¥ 46,651¥—¥  746

Buy

111,295

—

5,838

5,838

—

—

—

¥6,584

Millions of yen
Contract amountdue after one year
Fair value

Gain (Loss)

Total

March 31, 2014

Contract amount¥  746

Transactions other than market transactions
Nonferrous metals forward:
Sell¥46,038

¥—

¥800

Buy

92,289

—

(77)

(77)

—

—

—

¥723

Thousands of U.S. dollars
Contract amountdue after one year
Fair value

Gain (Loss)

Total

March 31, 2015

Contract amount¥800

Transactions other than market transactions
Nonferrous metals forward:Sell$388,216$—$ 6,209Buy

926,148—

48,586

48,586———$54,795

Total$ 6,209

Note:
Fair value is determined based on the price obtained from financial institutions.
2. Derivative transactions to which hedge accounting is applied at March 31, 2015 and 2014
(1) Currency related derivatives
March 31, 2015
Hedge accounting method

Transaction type

Major hedged items

Contract amountMillions of yen
Contract amountdue after one year

Accounts
receivable,accounts
payable¥45,522¥     0¥(395)

938

—

15

382

—

0

84

—

(2)

Accounts
receivable,accounts
payable¥10,367¥    —

4,240

—

209

—

—

—

Long-term debt

¥11,800¥11,800

Fair value

Forward foreign exchange contracts:
Sell U.S. dollars
Principle method

Other
Buy U.S. dollars
Other
Forward foreign exchange contracts:

Hedged items are translatedusing forward contract rates.

Sell U.S. dollars
Other
Buy U.S. dollars
Other

Hedged items are translatedusing currency swaps

48

Currency swaps:
Pay Japanese yen/
Receive U.S. dollars

Note 2

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

March 31, 2014
Hedge accounting method

Transaction type

Major hedged items

Contract amountMillions of yen
Contract amountdue after one year

Accounts
receivable,accounts
payable¥66,599¥  377

1,458

—

(9)

11,231

—

61

—

—

—

Accounts
receivable,accounts
payable¥13,321

¥   —

4,061

—

319

—

—

—

Long-term debt

¥ 4,500¥4,500Fair value

Forward foreign exchange contracts:
Sell U.S. dollars
Other

Principle method

Buy U.S. dollars
Other¥(309)

Forward foreign exchange contracts:
Sell U.S. dollars

Hedged items are translatedusing forward contract rates.

Other
Buy U.S. dollars
Other
Currency swaps:
Pay Japanese yen/
Receive U.S. dollars

Hedged items are translatedusing currency swaps

Note 2

March 31, 2015
Hedge accounting method

Transaction type

Major hedged items

Thousands of U.S. dollars
Contract amountContract amountdue after one year

Fair value

Forward foreign exchange contracts:
Sell U.S. dollars

Accounts
receivable,accounts
payable$378,818$ 6,060$(3,288)

7,811

—

127

3,182

—

2

705

—

(19)

Accounts
receivable,accounts
payable$ 86,274$    —

35,288

—

1,747

—

—

—

Long-term debt

$ 98,194$98,194

Other

Principle method

Buy U.S. dollars
Other
Forward foreign exchange contracts:
Hedged items are translatedusing forward contract rates.

Sell U.S. dollars
Other
Buy U.S. dollars
Other

Hedged items are translatedusing currency swaps

Currency swaps:
Pay Japanese yen/
Receive U.S. dollars

Note 2

Notes:
1. Fair value is determined based on the price obtained from financial institutions.
2. Fair value of derivatives is included in the fair values of the related accounts receivable, accounts payable and long-term debt, since accounts receivable, accounts payable and long-term debt in foreign currencies as hedged items are translated into Japanese yen using the forward contract rates, etc.
(2) Interest rate related derivatives
March 31, 2015
Millions of yen

Hedge accounting method

Interest income or expense on the hedged
items reflects net amount to be paid or
received under the derivatives

Transaction type

Major hedged items

Contract
amountContract
amount due
after one year

Fair value

Long-term debt¥     —

¥     —

¥     —

143,755

102,177(2,147)

Interest rate swap contracts:
Receive fixed rate, pay floating rate
Pay fixed rate, receive floating rate

49

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

March 31, 2014
Millions of yen

Hedge accounting method

Interest income or expense on the hedged
items reflects net amount to be paid or
received under the derivatives

Transaction type

Major hedged items

Contract
amountContract
amount due
after one year

Fair value

Long-term debt¥     —

¥     —

¥     —

150,193130,082(2,578)Interest rate swap contracts:
Receive fixed rate, pay floating rate
Pay fixed rate, receive floating rate

March 31, 2015
Thousands of U.S. dollars

Hedge accounting method

Interest income or expense on the hedged
items reflects net amount to be paid or
received under the derivatives

Transaction type

Contract
amount due
after one year

Fair value

Major hedged items

Contract
amountLong-term debt$       —

$     —

$     —

1,196,267

850,273(17,872)

Interest rate swap contracts:
Receive fixed rate, pay floating rate
Pay fixed rate, receive floating rate

Note:
Fair value is determined based on the price obtained from financial institutions.
(3) Commodity related derivatives
March 31, 2015
Millions of yen

Hedge accounting method

Transaction type

Nonferrous metals forward:
Principle method

Sell
Buy

Major hedged items

Accounts receivable,accounts payable

Contract
amountContract
amount due
after one year

Fair value¥110,726¥32,624¥(2,463)

80,18525,974

1,474

March 31, 2014
Millions of yen

Hedge accounting method

Transaction type

Nonferrous metals forward:
Principle method

Sell
Buy

Major hedged items

Accounts receivable,accounts payable

Contract
amountContract
amount due
after one year

Fair value¥130,292¥32,717¥ 4,958

106,340

25,920(3,570)March 31, 2015
Thousands of U.S. dollars

Hedge accounting method

Transaction type

Nonferrous metals forward:
Principle method

Sell
Buy

Note:
Fair value is determined based on the price obtained from financial institutions.

50

Major hedged items

Accounts receivable,accounts payable

Contract
amountContract
amount due
after one year

Fair value$921,417$271,489$(20,504)

667,263

216,145

12,266

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Note 17 Segment Information(a) General information about reportable segments
The Company’s reportable segments are composed of those individual
business units for which separate financial information is available, about
which the Board of Directors makes decisions regarding the allocation ofmanagement resources and for which operating performance can beevaluated.
The Company operates a system of in-house companies. Each inhouse company and business department formulates comprehensive
domestic and overseas strategies for its own products and services andadvances its business accordingly. Consequently, the in-house companies are classified into segments along these in-house companies’ product and service lines. There are five segments: Cement, Metals,
Advanced Materials & Tools, and Electronic Materials & Components, aswell as Aluminum which has high performance within the Company’sbusiness departments. According to the reorganization implemented
effective April 1, 2014, the precious metal bullion business which had
been included in “Others” segment in the past has been currently included in “Metals” segment. Segment information as of and for the fiscal year
ended March 31, 2014 has been accordingly restated in accordance with
the new segmentation policy.

Primary products and services included in each segment are as follows:
Cement: Cement, cement-related products, ready-mixed concrete andaggregate
Metals: Copper smelting (copper, gold, silver, sulfuric acid, etc.) and copper alloy products
Advanced Materials & Tools: Cemented carbide products, high-performance alloy productsElectronic Materials & Components: Advanced materials, electronic components, polycrystalline silicon andchemical products
Aluminum: Aluminum cans, rolled aluminum products and processed aluminum products(b) Basis of measurement about reported segment profit or loss, segment
assets, segment liabilities and other material items
The accounting method for business segments reported in this note isconsistent with those stated in Note 2 “Summary of Significant
Accounting Policies.” Segment profit or loss is based on the figures ofordinary income or loss. Intersegment sales are based on the market
prices.
(c) Information about reportable segment profit or loss, segment assets,
segment liabilities and other material items.

(1) Segment information as of and for the fiscal year ended March 31, 2015 is as follows:
Millions of yen
March 31, 2015

Sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Segment liabilities
Other items:
Depreciation
Amortization of goodwill
Interest income
Amortization of negative goodwill
Interest expense
Equity in earnings of affiliates
Investments in affiliates accounted
for by the equity method
Increase in tangible and intangible
fixed assets

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components¥189,674
3,625¥193,300¥ 16,729
365,120
194,371¥803,394
8,239¥811,633¥ 32,851
713,346557,872¥113,534
21,112¥134,647¥ 16,579
179,009
98,426¥56,009
10,995¥67,005¥ 7,273
126,124
140,132¥157,271
2,156¥159,427¥ 5,139
154,021
118,556¥197,380
43,843¥241,224¥ 9,899
195,517
142,949¥1,517,265
89,972¥1,607,238¥ 88,472
1,733,139
1,252,309¥     —
(89,972)¥(89,972)¥ (7,378)
165,017
16,333¥1,517,265—¥1,517,265¥   81,093
1,898,157
1,268,643¥ 10,999
2,789
98
—
2,290
1,210

¥ 18,851
—
369
—
2,627
300

¥

8,083
35
64
29
1,164
378

¥ 3,398
—
88
—
1,698
4,348

¥

¥

3,134
10
328
—
1,008
152

¥   51,510
2,835
963
29
9,601
6,566

¥   2,400—(355)—(1,367)(8)¥   53,911
2,835
607
29
8,233
6,557

19,85919,236

5,591

56,151881

15,284

117,003(199)

116,804

16,74815,278

9,424

2,904

6,789

3,443

54,587

3,048

57,636

Aluminum

Others

Total

Adjustment

Consolidated

7,044
—
12
—
812
174

51

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Thousands of U.S. dollars
March 31, 2015

Sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Segment liabilities
Other items:
Depreciation
Amortization of goodwill
Interest income
Amortization of negative goodwill
Interest expense
Equity in earnings of affiliates
Investments in affiliates accounted
for by the equity method
Increase in tangible and intangible
fixed assets

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components

Aluminum

Others

Total

Adjustment

Consolidated$1,578,387 $6,685,481 $ 944,782 $ 466,089 $1,308,741 $1,642,509 $12,625,993
30,17068,565
175,690
91,497
17,941
364,847
748,712$1,608,558 $6,754,047 $1,120,473 $ 557,586 $1,326,683 $2,007,357 $13,374,705$ 139,211 $ 273,374 $ 137,967 $ 60,525 $ 42,770 $ 82,378 $ 736,228
3,038,362 5,936,141 1,489,634 1,049,553 1,281,697 1,627,007 14,422,397
1,617,474 4,642,364
819,061 1,166,121
986,569 1,189,557 10,421,149$       — $12,625,993(748,712)—$ (748,712) $12,625,993$ (61,403) $ 674,824
1,373,203
15,795,600
135,922
10,557,071$$

91,528 $ 156,870 $
23,215
—
823
3,075
—
—
19,062
21,86010,0762,501

67,265 $
296
536
243
9,689
3,147

28,280 $—739—
14,132
36,19058,622 $
—
106
—
6,764
1,453

26,080 $
83
2,734
—
8,389
1,272

428,647
23,595
8,016
243
79,90054,64019,978 $—(2,960)—(11,383)(68)

448,626
23,5955,055
243
68,51654,571

165,258

160,076

46,526467,267

7,335

127,190973,653(1,661)

971,992

139,372

127,139

78,42624,16756,49828,652454,256

25,366479,622

Notes:
1.	“Others” includes nuclear energy-related services, precious metals, environmental and recycling-related business, real estate business and engineering-related services.
2.	Included in “Adjustment” of “Segment profit” in an amount of ¥ (7,378) million ($(61,403) thousand) are intersegment transaction elimination in an
amount of ¥404 million ($3,364 thousand) and corporate expenses that cannot be allocated to each reportable segment in an amount of ¥ (7,783)
million ($(64,767) thousand). Corporate expenses consist mainly of general and administrative expenses, basic research and development expenses
and financial income or expenses which are not attributable to any reportable segment.
3.	“Adjustment” of “Segment assets” in an amount of ¥165,017 million ($1,373,203 thousand) includes intersegment transaction elimination of ¥(40,257) million ($(335,007) thousand) and corporate assets that are not allocated to each reportable segment in an amount of ¥205,275 million($1,708,211 thousand). Corporate assets are mainly assets related to administrative departments which do not belong to any reportable segment andassets related to basic research and development.
4.	“Adjustment” of “Segment liabilities” in an amount of ¥16,333 million ($(135,922) thousand) includes intersegment transaction elimination of ¥ (40,620)
million ($(338,023) thousand) and corporate liabilities that are not allocated to each reportable segment in an amount of ¥56,954 million ($473,946
thousand). Corporate liabilities are mainly liabilities related to administrative departments which do not belong to any reportable segments and liabilities related to basic research and development.
5.	“Adjustment” of “Increase in tangible and intangible fixed assets” in an amount of ¥3,048 million ($25,366 thousand) mainly refers to capital expenditures related to the Central Research Institute.
6.	“Segment profit” is reconciled with ordinary income. Ordinary income is calculated by adding “Interest and dividend income,” “Income from leased
property,” etc. and deducting “Interest expense,” “Expense for leased property,” “Loss on disposal and sales of property, plant and equipment,”“Equity in losses of affiliates,” etc. from operating profit or loss.

52

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015(2) Segment information as of and for the fiscal year ended March 31, 2014 is as follows:
Millions of yen
March 31, 2014

Sales:
External customers
Intersegment
Total
Segment profit
Segment assets
Segment liabilities
Other items:
Depreciation
Amortization of goodwill
Interest income
Amortization of negative
goodwillInterest expense
Equity in earnings (losses) ofaffiliates
Investments in affiliates
accounted for by the equity
methodIncrease in tangible andintangible fixed assets

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components¥186,545
3,653¥190,199¥ 18,813
353,263
209,216¥718,082
10,092¥728,175¥ 38,024
659,302528,457¥116,516
29,381¥145,898¥ 13,999
184,998
116,088¥ 49,882
17,842¥ 67,724¥  2,195
118,325
142,896¥150,296
1,267¥151,564¥  4,739
146,698
114,466¥193,472
45,289¥238,761¥  8,081
200,496
143,704¥1,414,796 ¥      —107,527 (107,527)¥1,522,324 ¥(107,527)¥   85,854 ¥  (8,951)
1,663,085 115,419
1,254,829(2,031)¥1,414,796—¥1,414,796¥   76,902
1,778,505
1,252,797¥ 10,458
2,431
208¥ 18,441
654
602¥  9,31624
53¥  5,827—66¥  8,015—10¥  3,13120
295¥   55,189 ¥   2,238
3,131
(60)
1,237
(321)

¥   57,428
3,070
916

—
2,705

—
3,154

38
1,153

—
2,178

—
876

—
1,115

38
11,184—(1,498)

38
9,686

1,663

2,561

28

159

212

(250)

4,375

2

4,377

17,66818,028312

52,498656

25,973

115,137(224)

114,912

13,144

19,544

16,775

3,189

7,374

3,572

63,6002,344

65,944

Aluminum

Others

Total

Adjustment

Consolidated(d) Related information
1. Information about products and services
This information is omitted because the same information is disclosed above.
2. Information about geographic areas
Millions of yen
March 31, 2015

Japan

U.S.A.

EuropeAsia

OthersTotal

Net sales¥917,811¥96,701¥25,812¥462,596¥14,343¥1,517,265

Tangible fixed assets

522,297

92,047

1,509

37,0762,104

655,034

Millions of yen
March 31, 2014

Japan

U.S.A.

EuropeAsia

OthersTotal

Net sales¥922,214¥86,519¥25,352¥368,404¥12,305¥1,414,796

Tangible fixed assets

530,631

79,206

1,272

37,111

2,349

650,571

Thousands of U.S. dollars
March 31, 2015

Japan

U.S.A.

EuropeAsia

OthersTotal

Net sales$7,637,613$804,707$214,798$3,849,514$119,360$12,625,993

Tangible fixed assets

4,346,319

765,977

12,561

308,532

17,5105,450,901

Notes:
1. Countries or regions have been classified in terms of their geographic proximity.
2. Main countries or regions that belong to the geographic segments other than Japan and the United States are as follows:(1) Europe:
Germany, United Kingdom, Spain, France(2) Asia:		
Indonesia, South Korea, Malaysia, Singapore, China, Taiwan, Hong Kong, Thailand(3) Others:
Australia, Canada, Brazil
3. Information about major customers
This information is omitted because the Company does not have any major customers that account for 10% or more of net sales in the consolidated
statements of income.

53

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015(e) Information about loss on impairment of fixed assets by reportable segments
Millions of yen
March 31, 2015

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Loss on impairment

¥120

¥155

¥—

¥25

Consolidated

¥22

¥144

¥467

¥31

¥499

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Consolidated

¥21

¥833

¥32,398¥(90)¥32,308

Millions of yen
March 31, 2014

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components

Loss on impairment¥203¥4,077¥—¥27,261

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Consolidated$184$1,200$3,887$266$4,153Thousands of U.S. dollars
March 31, 2015

Loss on impairment

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components$1,004$1,290$—$208,295

Note:“Elimination and corporate assets or expenses” of “Loss on impairment” for the fiscal year ended March 31, 2015 in an amount of ¥31 million ($266
thousand) mainly refers to loss on impairment of idle assets.
“Elimination and corporate assets or expenses” of “Loss on impairment” for the fiscal year ended March 31, 2014 in an amount of ¥(90) million mainlyrefers to loss on impairment of goodwill.
(f) Information about amortization and unamortized balance of goodwill by reportable segments
Millions of yen
March 31, 2015

Amortization
Unamortized balance

Cement¥ 2,789
41,127

Metals¥——Advancedmaterials & tools

Electronicmaterials &components

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

¥ 35
107

¥—
—

¥—
—

¥10
20

¥ 2,835
41,255

Advancedmaterials & tools

Electronicmaterials &components

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Consolidated

¥24
67

¥—
—

¥—
—

¥20
38

¥ 3,131
38,833¥(60)(16)¥ 3,070
38,816

Advancedmaterials & tools

Electronicmaterials &components

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Consolidated

$296
895

$—
—

$—
—

$ 83
169

$ 23,595
343,309$—(46)$ 23,595
343,263¥—(5)Consolidated¥ 2,835
41,249Millions of yen
March 31, 2014

Amortization
Unamortized balance

Cement¥ 2,431
38,727

Metals¥654—

Thousands of U.S. dollars
March 31, 2015

Amortization
Unamortized balance

Cement$ 23,215
342,244

Metals$——Amortization and unamortized balance of negative goodwill incurred from business combinations that were conducted prior to April 1, 2010 are as follows:
Millions of yen
March 31, 2015

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Amortization
Unamortized balance

¥—
—

¥   —
2,221

¥29
—

¥—
—

Consolidated

¥—
—

¥—
—

¥   292,221¥——¥   292,221

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Consolidated

¥—
—

¥—
—

¥   382,250¥——¥   382,250

Millions of yen

54

March 31, 2014

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components

Amortization
Unamortized balance

¥—
—

¥   —
2,221

¥38
29

¥—
—

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Thousands of U.S. dollars
March 31, 2015

CementMetalsAdvancedmaterials & tools

Electronicmaterials &components

Amortization
Unamortized balance$——$    —
18,485

$243
—

$—
—

Aluminum

OthersTotal

Elimination andcorporate assets
or expenses

Consolidated

$—
—

$—
—

$   243
18,485$——$   243
18,485(g) Gain from negative goodwill by reportable segment
Fiscal years ended March 31, 2015 and 2014
Not applicable

Note 18 Revaluation Reserve for Land
Pursuant to Article 2, Paragraphs 3, 4 and 5 of the Enforcement
Ordinance for the Law concerning Revaluation Reserve for Land (the“Revaluation Law”), effective on March 31, 1998, and to the partial revision to this law on March 31, 2001, the Company and its certain consolidated subsidiaries revalued their own lands for business at fair value. The
related unrealized gain, net of income taxes and minority interests, wasdirectly credited to “Revaluation reserve for land” in net assets in the consolidated balance sheets, and the applicable income tax effect wasrecorded as “Deferred tax liabilities for land revaluation” in liabilities in the
consolidated balance sheets. When such land is sold, the revaluation
reserve for land is reversed and credited to the retained earnings.
According to the Revaluation Law, the Group is not permitted to revalue the land at any time even if fair value of the land declines. Such unrecorded revaluation losses at March 31, 2015 and 2014 amounted to¥46,242 million ($ 384,807 thousand) and ¥42,053 million, respectively.

Note 19 Notes to the Consolidated Statements of Cash Flows
Cash reconciliation between the consolidated balance sheets and the consolidated statements of cash flows is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Less term deposits with maturities extending more than three months

2015

2014

2015

¥93,152(908)¥63,486(1,193)$775,173(7,558)

Restricted cash
Cash and cash equivalents

(164)

(214)

(1,369)¥92,079¥62,078$766,244

Note 20 Net Income per Share of Common Stock
Reconciliation of the numbers and amounts used in the basic net income per share of common stock computation for the fiscal years ended March 31,
2015 and 2014 is as follows:
Millions of yen
Year ended March 31, 2015

Net income

Thousands
Weighted
average shares

Yen
Net income
per share

U.S. dollars
Net income
per share$0.35

Basic net income per share:
Net income¥56,147

Net income attributable to common shareholders

56,147

1,310,342¥42.85

Millions of yen

Thousands
Weighted
average shares

Yen
Net income
per share

1,310,573¥40.1

Year ended March 31, 2014

Net income

Basic net income per share:
Net income¥52,551

Net income attributable to common shareholders

52,551

Diluted net income per share has not been disclosed since there were no dilutive securities for the fiscal years ended March 31, 2015 and 2014.

55

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Note 21 Related Party Information
1.	The information for the fiscal years ended March 31, 2015 and 2014 was omitted because there were no significant transactions with related parties
for the fiscal years ended March 31, 2015 and 2014.
2. A significant affiliate as of March 31, 2015 was Mitsubishi Nuclear Fuel Co., Ltd. and summary of its financial statements was as follows:
Millions of yen

Thousands of
U.S. dollars

Current assets¥18,125$150,832

Fixed assets

12,262102,046

Current liabilities

10,03383,497Long-term liabilities

15,744

131,021

Net assets

4,609

38,359Net sales

2,849

23,709Loss before income taxes

29,521

245,661

Net loss

34,116

283,898

A significant affiliate as of March 31, 2014 was SUMCO CORPORATION, and summary of its consolidated financial statements was as follows:
Millions of yen

Current assets¥244,259

Fixed assets

254,263

Current liabilities

135,238

Long-term liabilities

168,447

Net assets

194,836

Net sales

185,105

Income before income taxes

4,392

Net income

715

Note 22 Loss on Impairment of Fixed Assets
In reviewing fixed assets for impairment, the Group categorizes their operating assets mainly by product group within the reportable segments, andidle assets by asset unit.
For the fiscal years ended March 31, 2015 and 2014, the Company
and the domestic consolidated subsidiaries recognized the loss on
impairment of fixed assets amounting to ¥499 million ($4,153 thousand)and ¥32,308 million, respectively, as other expenses in the consolidated

statements of income by devaluating the carrying amount of each fixed
asset to its recoverable amount. The devalued assets were in operating
asset groups whose profitability has significantly deteriorated due to thedecline in market value of products or others and also were idle assets
whose recoverable amounts were lower than their carrying amounts dueto the decline in market value of each asset, etc.

The details for the fiscal year ended March 31, 2015 were as follows:
Loss on impairment
Thousands ofMillions of yen
U.S. dollars

Asset group

Location

Asset type

MetalsQingdao, Shandong, China

Machinery and equipment, etc.

¥134

$1,120

25

208

65

542

84

701

189

1,580

¥499

$4,153

Electronic materials & components Akita, Akita prefecture.
OthersPerth, Australia, etc.

Rental property

Akita, Akita prefecture etc.

Machinery and equipment
Tools, instruments and buildings,
etc.
Land, buildings, etc.

Idle assets

Akoh, Hyogo prefecture, etc.

Land, buildings, etc.

Total

*Details of loss on impairment by account
Buildings ¥47 million ($395 thousand), Machinery and equipment ¥166 million ($1,384 thousand), Land ¥217 million ($1,810 thousand), Others ¥67 million ($563 thousand).

56

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

The details for the fiscal year ended March 31, 2014 were as follows:
Loss on impairment
Asset group

Location

Asset type

Electronic materials & components Yokkaichi, Mie prefecture, etc.

Millions of yen

Buildings, machinery, etc.

¥27,261

MetalsKumagaya, Saitama prefecture,etc. Goodwill, machinery, etc.

3,713

Others

Kitamoto, Saitama prefecture, etc.

Land, buildings, etc.

1,082

Rental property

Uki, Kumamoto prefecture, etc.

Land, buildings, etc.

115

Idle assets

Yonezawa, Yamagata prefecture, etc. Land, buildings, etc.

134

Total

¥32,308*Details of loss on impairment by account
Buildings ¥3,572 million, Machinery ¥20,857 million, Land ¥1,690 million, Goodwill ¥3,560 million, Others ¥2,626 million.

Note 23 Information on Net Assets(a) Type and Number of Shares Issued and Treasury Stock
For the fiscal years ended March 31, 2015 and 2014, information on shares issued and treasury stock is presented as follows:

Number of shares as of March 31, 2013

Type of shares issued

Type of treasury stock

Common stock

Common stock*1, 2, 3, 4

1,314,895,351

4,193,557

Increase during the fiscal year ended March 31, 2014—

261,010Decrease during the fiscal year ended March 31, 2014

—

5,493

1,314,895,351

4,449,074

Increase during the fiscal year ended March 31, 2015—

232,457

Decrease during the fiscal year ended March 31, 2015

—

4,226

1,314,895,351

4,677,305

Number of shares as of March 31, 2014

Number of shares as of March 31, 2015
*1. Increase in the number of treasury shares during the fiscal year ended March 31, 2014
			 Purchase of less-than-one-unit shares*2. Decrease in the number of treasury shares during the fiscal year ended March 31, 2014
			 Sales of less-than-one-unit shares*3. Increase in the number of treasury shares during the fiscal year ended March 31, 2015
			 Purchase of less-than-one-unit shares*4. Decrease in the number of treasury shares during the fiscal year ended March 31, 2015
			 Sales of less-than-one-unit shares

261,010 shares
5,493 shares
232,457 shares
4,226 shares(b) Dividends
1. Dividend payment
Approvals by the Board of Directors’ meeting held on May 12, 2014 are as follows:
Type of shares:
Total amount of dividends:
Dividends per share:

Common stock¥5,241 million ($43,620 thousand)¥4.00 ($0.03)

Record date:

March 31, 2014

Effective date:June 2, 2014

Approvals by the Board of Directors’ meeting held on November 11, 2014 are as follows:
Type of shares:
Total amount of dividends:
Dividends per share:

Common stock¥3,931 million ($32,712 thousand)¥3.00 ($0.02)

Record date:

September 30, 2014

Effective date:

December 5, 2014

57

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

2. Dividends whose record date is attributable to the fiscal year ended March 31, 2015, but to be effective in the following fiscal year.
Approvals by the Board of Directors’ meeting held on May 12, 2015 are as follows:
Type of shares:
Total amount of dividends:
Source:Dividends per share:

Common stock¥6,551 million ($54,516 thousand)
Retained earnings¥5.00 ($0.04)

Record date:

March 31, 2015

Effective date:June 1, 2015

Note 24 Subsequent Events
1. Business combination through acquisition
Overview of the business combinationa.	Name and business of the acquired company
Name of the acquired company: Hitachi Tool Engineering, Ltd.
Business: M anufacture and sales of tips, cutting tools, wear-resistant products, tools for urban development and various
machine tools made of special steels, cemented carbide,etc.
b.	Principal purpose of the business combination
The purpose of this combination is to strengthen the base of theCompany’s cemented carbide products business through Hitachi
Tool’s leading-edge lineup of cemented carbide products, with highprecision, high-efficiency and high-speed processing ability, as wellas its proposal ability for processing complicated shapes for a variety of materials.
c.	Date of the business combination
April 1, 2015d.	Legal form of the business combination
Acquisition of shares by cashe.	Name after the business combination
Mitsubishi Hitachi Tool Engineering, Ltd.
f.	Ratio of voting rights acquired
51%g.	Principal basis for deciding the company had been acquired
By acquiring shares of Hitachi Tool Engineering, Ltd., the Company
holds 51% of voting rights.
Items related to calculation of the acquisition cost
Acquisition cost of the company to be acquired
Cost for acquisition (purchase price for share): ¥22,083 million($183,764 thousand)(Note) T he above-mentioned amount is an estimate at the time ofacquisition. The actual amount may vary according to future
price adjustments.
Items related to allocation of the acquisition costa.	Breakdown of principal amounts of assets acquired and liabilities
assumed on the date of the combination
AssetsCurrent assets: ¥14,788 million ($123,064 thousand)Non-current assets: ¥12,334 million ($102,643 thousand)Total: ¥27,123 million ($225,707 thousand)

58

Liabilities
Current liabilities: ¥7,704 million ($64,114 thousand)Non-current liabilities: ¥3,352 million ($27,898 thousand)Total: ¥11,057 million ($92,013 thousand)b.	Amount allocated to intangible assets other than goodwill, its nature
and weighted average amortization period
Amount allocated to intangible assets: ¥3,099 million ($25,790
thousand)Content: patent rights
Weighted average amortization period: 8 yearsc.	Amount of goodwill generated , reason for generation, method ofamortization and amortization period
Amount of goodwill: ¥10,790 million ($89,789 thousand) (estimate)
Reason for generation: Investments reflecting expected future
cash flows in the assessment of acquisition exceeded net assets as of the date ofbusiness combination. Accordingly, it’s difference except for patent rights was recognized as goodwill.
Method of amortization and amortization period: straight-line basis
over 10 years
2. Significant sales of shares in affiliated companies
At a Board of Directors meeting on March 3, 2015, a resolution was
passed by the Board of Directors of the Company based on the publicly announced “Capital Increase and Restructuring Plan” (the “Plan”)
and “New Mid-term Management Strategy” approved by the Board of
Directors of SUMCO Corporation (“SUMCO”), an equity method affiliateof the Company, at the meeting on the same date. The resolutions
involved the conclusion of a “Memorandum of Treatment of Classified
Stock” (the MOT”) defining items necessary relating to the treatment of
SUMCO’s classified stock and the policy for disposing of a part of thecommon stock of SUMCO that the Company holds in the event of apublic offering taking place as a part of the Plan. Thereafter, based on a
resolution passed at a Board of Directors meeting of SUMCO on April
2, 2015, issuance of common stock of SUMCO through a public offering with a payment date of April 27, 2015 was conducted and theCompany sold a part of the Company’s common stock of SUMCO
through the secondary distribution, with a delivery date of April 28,
2015. In addition, through the exercise of a put option stipulated by the
MOT, the Company received cash and classified B stock as the payment for classified A stock held by the Company on May 11, 2015.
Meanwhile, the Company received cash as payment for classified B

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

stock. In addition, the company sold a part of common stock of
SUMCO to SMBC Nikko Securities Inc. (“SMBC Nikko Securities”) on
May 27, 2015, as a settlement date, since the Green Shoe option
which the Company had granted to SMBC Nikko Securities was executed on May 20, 2015 in relation to the secondary distribution throughoverallotment by SMBC Nikko Securities. The purpose for conducting
this transaction and the impact on the Company’s operating performance are described below.
	Reason
The Company reached the conclusion that SUMCO’s accomplishmentof the “Plan” as well as support for its management policy promoting
the New Medium-Term Management Strategy, would contribute to themaintenance and improvement of SUMCO’s corporate value. In addition, the Company concluded that disposing of a part of the common
stock of SUMCO that the Company holds through the secondary distribution in concurrence with the public offering by SUMCO would also
accord with the group strategy and financial strategy of the Company.
Name and business of the affiliated company and the content of its
transactions with the Company
Name: SUMCO Corporation
Business: M anufacture and sale of silicon wafers for semi-conductors
Content of transactions: S ale of polycrystalline silicon to the affiliatedcompany
Gain or loss on change in equity associated with the public offering
Gain on change in equity: ¥10,465 million ($87,084 thousand)Number of shares sold, sale price and gain or loss on sale
Number of shares sold: 17,766,800 shares
Sale price: ¥32,111 million ($267,219 thousand)Gain or loss on sale
Gain on sales of investment securities: ¥19,007 million ($158,167
thousand)Gain or loss on redemption of classified stock
Gain on redemption of investment securities: ¥1,235 million ($10,277
thousand)
Percentage of ownership before and after the above-mentioned public
offering and sale of shares
Before the public offering and sale of shares: 27.8%
After the public offering and sale of shares (Note): 18.4%(Note)SUMCO remains an equity-method affiliate of the Company both
immediately before and immediately after the public offering and saleof shares.

59

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Independent Auditors’ Report
To the Board of Directors of Mitsubishi Materials Corporation:
We have audited the accompanying consolidated financial statements of Mitsubishi Materials Corporation and its consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2015 and 2014, and the consolidated statements of income, statements of comprehensive
income, statements of changes in net assets and statements of cash flows for the years then ended, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance withauditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of
the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, while the objective of the financial
statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Mitsubishi Materials Corporation andits consolidated subsidiaries as at March 31, 2015 and 2014, and their financial performance and cash flows for the years then ended in accordancewith accounting principles generally accepted in Japan.
Emphasis of Matter
Without qualifying our opinion, we draw attention to the following:
1. As described in Note 2, one of the consolidated subsidiaries in the United States, engaging in the cement business, had previously presented the cost
related to transportation of ready-mixed concrete as “Selling, general and administrative expenses”. However, the presentation method was changed
and the cost has been presented as “Cost of sales” from the fiscal year ended March 31, 2015.
2. As described in Note 24, issuance of common stock of SUMCO through a public offering with a payment date of April 27, 2015 was conducted andthe Company sold a part of the Company’s common stock of SUMCO through the secondary distribution, with a delivery date of April 28, 2015 basedon the resolution which was passed by the Board of Directors of the Company on March 3, 2015. In addition, the Company received cash and classified B stock as the payment for classified A stock held by the Company on May 11, 2015.
		 Meanwhile, the Company received cash as payment for classified B stock. In addition, the company sold a part of common stock of SUMCO to
SMBC Nikko Securities Inc. (“SMBC Nikko Securities”) on May 27, 2015, as a settlement date, since the Green Shoe option which the Company had
granted to SMBC Nikko Securities was executed on May 20, 2015.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2015 are presented solely forconvenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on thebasis described in Note 1 to the consolidated financial statements.

KPMG AZSA LLC
July 10, 2015
Tokyo, Japan

60

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Main Consolidated Subsidiaries and Affiliates (As of June 26, 2015)

Main Consolidated Subsidiaries
Cement
MCC Development Corp.
Mitsubishi Cement Corp.
Mitsubishi Materials Kenzai Corp.
Robertson’s Ready Mix, Ltd.
Ryoko Lime Industry Co., Ltd.
Tokyo Hoso Kogyo Co., Ltd.
MetalsMitsubishi Cable Industries, Ltd.
Mitsubishi Shindoh Co., Ltd.
Onahama Smelting & Refining Co., Ltd.
PT. Smelting
Advanced Materials & Tools
Diamet Corp.
Japan New Metals Co., Ltd.
Mitsubishi Materials U.S.A. Corp.
Mitsubishi Hitachi Tool Engineering, Ltd.
Electronic Materials & Components
Mitsubishi Materials Electronic Chemicals Co., Ltd.
Mitsubishi Polycrystalline Silicon America Corp.
Aluminum
Mitsubishi Aluminum Co., Ltd.
Tachibana Metal Manufacturing Co., Ltd.
Universal Can Corp.
OthersDia Consultants Co., Ltd.
Diasalt Corp.
Materials’ Finance Co., Ltd.
Mitsubishi Materials Real Estate Corp.
Mitsubishi Materials (Shanghai) Corp.
Mitsubishi Materials Techno Corp.
Mitsubishi Materials Trading Corp.

Line of Business

Percentage of Ownership

Investment in cement-related industries
Production and sales of cement
Production and sales of concrete products and other building
materials
Production and sales of ready-mixed concrete and aggregates
Production and sales of limestone
Construction

70%
67%

Production and sales of electric wire and cable
Production and sales of copper, copper alloy and brass semis
Smelting and refining of copper
Smelting, refining and sales of copper

100%
100%
56%
61%

Production and sales of powder metallurgical products
Production and sales of tungsten and molybdenum
Surveys in the United States and sales of fabricated metal
products and electronic parts
Manufacture and sales of tips, cutting tools, wear-resistantproducts, and tools for urban development, etc.

100%89%, 11% (indirectly)

Production and sales of chemical products
Production and sales of polycrystalline silicon

100%
100%

Production and sales of aluminum sheets, extrusion and foil
Production and sales of fabricated aluminum products
Production and sales of aluminum beverage cans88%
63% (indirectly)
80%

Soil analysis and consulting
Production and sales of salt
Financing
Real estateManagement, consulting and sales in China
Technical engineering and construction
Trading

81%, 3% (indirectly)
95%
100%
100%
100%
100%
100%

Line of Business

Percentage of Ownership

Construction
Sales of cement

33%
50%

Production and sales of copper tubes and related products

45%

Production and sales of high-performance alloy products

49%

Production and sales of silicon wafers

18%

Production and sales of nuclear fuels for power generation

30%

100%
100% (indirectly)
100%
97%

100%
51%

Main Affiliates*
CementP.S. Mitsubishi Construction Co., Ltd.**
Ube-Mitsubishi Cement Corp.
Metals
Kobelco & Materials Copper Tube, Ltd.
Advanced Materials & Tools
Hitachi Metals MMC Superalloy, Ltd.
Electronic Materials & Components
SUMCO Corp.**
OthersMitsubishi Nuclear Fuel Co., Ltd.

* Companies to which the equity method is applied** Companies whose shares are listed on the Tokyo Stock Exchange

61

MITSUBISHI MATERIALS CORPORATIONANNUAL REPORT 2015

Corporate Data
(As of March 31, 2015)

Company Name
Mitsubishi Materials Corporation

Head Office3-2, Otemachi 1-chome, Chiyoda-ku, Tokyo
100-8117 Japan
URL: http://www.mmc.co.jp/corporate/en/

Date Established
April 1, 1950

Paid-in Capital¥119,457 million

Number of Employees
Parent company:
Consolidated:

62

4,448
23,413

MITSUBISHI MATERIALS CORPORATION

Corporate Profile

ANNUAL REPORT 2015

Investor Information(As of March 31, 2015)

As a comprehensive materials manufacturer, the Mitsubishi Materials Group focuses on the supply of basic

Shares of Common Stockmaterials indispensable to the world.

Authorized:
3,400,000,000
Issued and Outstanding: 1,314,895,351

The Group has established operating bases in about 30 countries and regions worldwide while developing aprovide high-value-added products that meet today’s needs.

Financial Institutions

0.01%

Securities Companies
Other Corporations

vast array of businesses centered on cement, metals, cemented carbide tools and electronic materials.
The Group will contribute to people, society and the earth by further maximizing cross-business synergies toDistribution of Shareholders

Foreign Corporations &Individuals

Number of Shareholders

Individuals & Others

19.79%

National & Local Government

34.04%

81,57426.56%
Stock Listing
Tokyo Stock Exchange

17.34%
2.26%

Administrator of Shareholder Registry

Contents
01 Consolidated Financial Highlights

Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Division
10-11, Higashisuna 7-chome, Koto-ku
Tokyo 137-8081, Japan

02 At a Glance
04 Message from the President

Independent Certified Public Accountant

06 Special Feature

KPMG AZSA LLC

08 Review of Operations
13 Research and Development
14 Corporate Governance
15 Corporate Social Responsibility (CSR)
16 Management
17 Financial Section

For Further Information, Contact
Corporate Communications & IR Dept.
Tel: +81-3-5252-5206
Fax: +81-3-5252-5272
E-mail:ml-mmcir@mmc.co.jp

61 Main Consolidated Subsidiaries and Affiliates
62 Corporate Data

Annual Meeting of Shareholders

63 Investor Information

The annual meeting of shareholders of the Company isnormally held in June each year in Tokyo.

Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this annual report with respect to Mitsubishi Materials’ plans, strategies andbeliefs, and other statements that are not historical facts are forward-looking statements about
the future performance of Mitsubishi Materials which are based on management’s assumptions
and beliefs in light of the information currently available to it, and involve risks and uncertainties.
Potential risks and uncertainties include, without limitation, general economic conditions in
Mitsubishi Materials’ markets; industrial market conditions; exchange rates, particularly between
the yen and the U.S. dollar, and other currencies in which Mitsubishi Materials makes significant
sales or in which Mitsubishi Materials’ assets and liabilities are denominated; and Mitsubishi
Materials’ ability to continue to win acceptance of its products and services, which are offered inhighly competitive markets characterized by continual new product introductions, rapid developments in technology and changing customer preferences.

Major Shareholders• Japan Trustee Services Bank, Ltd. (Trust account)• The Master Trust Bank of Japan, Ltd. (Trust account)• National Mutual Insurance Federation of Agricultural
Cooperatives• Meiji Yasuda Life Insurance Co.
• The Bank of Tokyo-Mitsubishi UFJ, Ltd.

63

MMC̲AR2015̲c1-c4̲入稿データ̲0806.indd 2

2015/08/20 9:09

M i t s u b i s h i M a t e rials Co rp o ratio n
A nnual Rep o rt 2015

Challenge to Become theWorld’s Leading Business Group

http://www.mmc.co.jp/

Annual Report
For the year ended March 31, 2015

2015

Printed in Japan

MMC̲AR2015̲c1-c4̲入稿データ̲0806.indd 1

2015/08/20 8:42