(Translation)

Annual Securities Report(The 149th Business Term)
From April 1, 2017 to March 31, 2018

6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Hitachi, Ltd.

[Cover][Document Filed]Annual Securities Report (“Yukashoken Hokokusho”)[Applicable Law]

Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan[Filed with]

Director, Kanto Local Finance Bureau[Filing Date]

June 29, 2018

[Fiscal Year]

The 149th Business Term (from April 1, 2017 to March 31, 2018)[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Address of Head Office]6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo[Phone No.]

03-3258-1111[Contact Person]

Masachika Sawada, Manager, Legal Division[Contact Address]

6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo[Phone No.]

03-3258-1111[Contact Person]

Masachika Sawada, Manager, Legal Division[Place Where Available forTokyo Stock Exchange, Inc.

Public Inspection](2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)

This is an English translation of the Annual Securities Report filed with the Director of the Kanto Local Finance Bureau
via Electronic Disclosure for Investors’ NETwork (“EDINET”) pursuant to the Financial Instruments and Exchange Act ofJapan.
Certain information in “Part I. Information on the Company - II. Business Overview - 2. Risk Factors - Risks Related to
Our American Depositary Shares” is only included in this English translation of the Annual Securities Report for ADSs
holders and not included in the original report.
Certain information in “Part I. Information on the Company - V. Financial Information” in this document incorporates
financial statements prepared in conformity with the International Financial Report Standards (“IFRS”) as issued by theInternational Accounting Standards Board and independent auditor’s report instead of the English translation of the Annual
Securities Report.
The translation of the Internal Control Report, the Independent Auditors’ Report and the Confirmation Letter for theoriginal Annual Securities Report are included at the end of this document.
This English translation of the Annual Securities Report reflected the amendment that was reported in the Amendment Report of
the Annual Securities Report filed with the Director of the Kanto Local Finance Bureau via EDINET on June 19, 2019.
In this document, the terms “we,” “us,” “our” and “Hitachi” refer to Hitachi, Ltd. and consolidated subsidiaries or, as thecontext may require, Hitachi, Ltd. on a non-consolidated basis and the term “the Company” refers to Hitachi, Ltd. on a nonconsolidated basis.
Unless otherwise stated, in this document, where we present information in millions or hundreds of millions of yen, we
have truncated amounts of less than one million or one hundred million, as the case may be. Accordingly, the total of figures
presented in columns or otherwise may not equal the total of the individual items. We have rounded all percentages to thenearest percent, one-tenth of one percent or one-hundredth of one percent, as the case may be.
References in this document to the “Financial Instruments and Exchange Act” are to the Financial Instruments andExchange Act of Japan and other laws and regulations amending and/or supplementing the Financial Instruments andExchange Act of Japan.
References in this document to the “Companies Act” are to the Companies Act of Japan and other laws and regulations
amending and/or supplementing the Companies Act of Japan.

Contents
Part I Information on the Company ……………………………………………………………………………
1
I. Overview of the Company ………………………………………………………………………………
1
1. Key Financial Data …………………………………………………………………………………
1
2. History ………………………………………………………………………………………………
4
3. Description of Business ……………………………………………………………………………
6
4. Information on Affiliates …………………………………………………………………………
8
5. Employees ………………………………………………………………………………………… 17
II. Business Overview ……………………………………………………………………………………… 18
1. Management Policy, Economic Environment and Challenges Hitachi Group Faces…………… 18
2. Risk Factors …..…………………………………………………………………………………… 19
3. Management's Discussion and Analysis of Consolidated Financial Condition, Results ofOperations and Cash Flows ………………………………………………………………………… 28
4. Material Agreements, etc ………………………………………………………………………… 38
5. Research and Development ……………………………………………………………………… 39
III. Property, Plants and Equipment ……………………………………………………………………… 41
1. Summary of Capital Investment, etc. ……………………………………………………………… 41
2. Major Property, Plants and Equipment …………………………………………………………… 42
3. Plans for Capital Investment, Disposals of Property, Plants and Equipment, etc. ………………… 46
IV. Information on the Company ………………………………………………………………………… 47
1. Information on the Company’s Stock, etc. ………………………………………………………… 47(1) Total number of shares, etc. …………………………………………………………………… 47(2) Information on the stock acquisition rights, etc. ………………………………………………… 48(3) Information on moving strike convertible bonds, etc. …………………………………………… 50(4) Changes in the total number of issued shares and the amount of common stock and other …… 51(5) Shareholders composition ……………………………………………………………………… 51(6) Major shareholders ……………………………………………………………………………… 52(7) Information on voting rights …………………………………………………………………… 54
2. Information on Acquisition, etc. of Treasury Stock ……………………………………………… 55
3. Dividend Policy …………………………………………………………………………………… 56
4. Changes in Share Prices …………………………………………………………………………… 56
5. Directors and Senior Management ………………………………………………………………… 57
6. Corporate Governance, etc. ………………………………………………………………………… 68
V. Financial Information …………………………………………………………………………………… 81
VI. Stock-Related Administration for the Company ……………………………………………………… 82
VII. Reference Information on the Company ……………………………………………………………… 83
Part II Information on Guarantors, etc. for the Company ……………………………………………………… 83[Consolidated Financial Statements] …………………………………………………………………………… F-1
Consolidated Financial Statements. ……………………………………………………………………… F-2
Reports of Independent Registered Public Accounting Firm ……………………………………………… F-74
[Internal Control Report (Translation)] ………………………………………………………………………… A-1[Independent Auditors’ Report (Translation)] ………………………………………………………………… A-3[Confirmation Letter (Translation)] …………………………………………………………………………… A-6

Part I Information on the Company
I. Overview of the Company
1. Key Financial Data
(1) Consolidated financial data, etc.

Fiscal year
Year end(Millions of yen, unless otherwise stated)
IFRS
145th
146th
147th
148th
149th
business term business term business term business term business term
March 2014
March 2015
March 2016
March 2017
March 2018
9,666,446
9,774,930
10,034,305
9,162,264
9,368,614

Revenues
Income from continuing
678,498
518,994
517,040
469,091
638,646
operations, before income taxes
Net income attributable to413,877
217,482
172,155
231,261
362,988
Hitachi, Ltd. stockholders
Comprehensive income
attributable to Hitachi, Ltd.
665,372
337,578(127,557)
299,397382,341stockholders
Total Hitachi, Ltd.
2,668,657
2,942,281
2,735,078
2,967,085
3,278,024
stockholders’ equity
Total equity
3,868,831
4,296,342
4,125,570
4,096,995
4,511,671
Total assets
11,098,191
12,433,727
12,551,005
9,663,917
10,106,603
Total Hitachi, Ltd.
stockholders’ equity per share
552.62609.35566.48614.56679.00(yen)
Earnings per share attributable
to Hitachi, Ltd. stockholders,
85.69
45.04
35.65
47.90
75.19
basic (yen)Earnings per share attributable
to Hitachi, Ltd. stockholders,
85.66
45.00
35.62
47.88
75.12
diluted (yen)Total Hitachi, Ltd.
24.0
23.7
21.8
30.7
32.4
stockholders’ equity ratio (%)
Return on equity (%)
17.5
7.8
6.1
8.1
11.6
Price earnings ratio (times)
8.9
18.3
14.8
12.6
10.3
Net cash provided by operating
306,777
451,825
812,226
629,582
727,168
activities
Net cash used in investing(550,179)(612,545)(730,799)(337,955)(474,328)
activities
Net cash provided by (used in)
228,840
233,206(26,467)(209,536)(321,454)
financing activities
Cash and cash equivalents at
560,657
701,703699,315765,242
697,964
end of year
Number of employees
323,919
336,670
335,244
303,887
307,275[Average number of part-time[48,432][48,592][45,111]
employees, etc.](Notes) 1. Our consolidated financial statements have been prepared in conformity with IFRS since the 146thbusiness term.
2. Revenues do not include the consumption tax, etc.
3. Average numbers of part-time employees, etc. are not stated for the 148th business term and the 149th
business term since those were less than 10% of the number of employees.
-1-Fiscal year

(Millions of yen, unless otherwise stated)
U.S. GAAP
145th
146th
business term business term
March 2014
March 2015
9,563,791
9,761,970

Year end
Revenues
Income from continuing
573,691
535,612
operations, before income taxes
Net income attributable to264,975
241,301
Hitachi, Ltd. stockholders
Comprehensive income
769,178
525,081
Total Hitachi, Ltd.
2,651,241
2,930,309
stockholders’ equity
Total equity
3,852,464
4,274,313
Total assets
11,016,899
12,395,379
Total Hitachi, Ltd.
stockholders’ equity per share
549.02606.87(yen)
Net income attributable to
Hitachi, Ltd. stockholders per
54.86
49.97
share, basic (yen)Net income attributable to
Hitachi, Ltd. stockholders per
54.85
49.93
share, diluted (yen)Total Hitachi, Ltd.
24.1
23.6
stockholders’ equity ratio (%)
Return on equity (%)
11.2
8.6
Price earnings ratio (times)
13.9
16.5
Net cash provided by operating
439,406
447,348
activities
Net cash used in investing(491,363)(610,255)
activities
Net cash provided by (used in)
32,968250,335
financing activities
Cash and cash equivalents at
558,217709,531
end of year
Number of employees
320,725
333,150[Average number of part-time[48,391][48,548]
employees, etc.](Notes) 1. Our consolidated financial statements had been prepared in conformity with accounting principles
generally accepted in the United States until the 145th business term. The figures for the 146thbusiness term in the above table are unaudited financial information pursuant to the Financial
Instruments and Exchange Act.
2. Revenues do not include the consumption tax, etc.
3. Effective from the 146th business term, in accordance with the provisions of the Accounting Standards
Codification 205-20 “Presentation of Financial Statements - Discontinued Operations” of the U.S.
Financial Accounting Standards Board, a part of the thermal power generation systems business isclassified as a discontinued operation, which was not transferred to MITSUBISHI HITACHI POWER
SYSTEMS, LTD. for the business integration in the thermal power generation systems with Mitsubishi
Heavy Industries, Co., Ltd. The results of the discontinued operation are reported separately fromcontinuing operations. In line with this classification, “Revenues” and “Income from continuing
operations, before income taxes” for the 145th business term are reclassified.
-2-

(2) Financial data etc. of the Company

Fiscal year
Year end
Revenues
Ordinary income (loss)(Millions of yen, unless otherwise stated)
145th
146th
147th
148th
149th
business term business term business term business term business term
March 2014
March 2015
March 2016
March 2017
March 2018
2,070,147
1,842,126
1,859,605
1,906,532
1,930,293
17,887(300)(20,944)

71,599131,294

Net income
57,85685,26264,934
97,724
136,117
Common stock
458,790458,790458,790458,790458,790
Number of issued shares
4,833,463
4,833,463
4,833,463
4,833,463
4,833,463(thousands of shares)
Total net assets
1,373,336
1,399,885
1,378,441
1,497,428
1,535,472
Total assets
3,570,087
3,749,326
3,868,633
4,070,247
4,040,853
Net assets per share (yen)284.39289.92285.50310.10317.84
Dividends per share (yen)
10.5
12
12
13
15
[Of the above, interim
[5]
[6]
[6]
[6]
[7]
dividends per share (yen) ]Net income per share, basic
11.98
17.66
13.45
20.24
28.19
(yen)
Net income per share, diluted
20.23
28.17
(yen)
Stockholders’ equity ratio (%)
38.5
37.3
35.6
36.8
38.0
Return on equity (%)
4.3
6.1
4.7
6.8
9.0
Price earnings ratio (times)
63.6
46.6
39.2
29.8
27.3
Dividend payout ratio (%)
87.6
68.0
89.2
64.2
53.2
Number of employees
33,50031,37537,35335,631
34,925(Notes) 1. Revenues do not include the consumption tax, etc.
2. “Net income per share, diluted” is not stated for the 145th, 146th and 147th business terms since there
are no dilutive shares.
3. Average number of part-time employees, etc. is not stated since it was less than 10% of the number of
employees.

-3-2. History
Month/Year
1910
February, 1920
February, 1921
May, 1935
May, 1937
April, 1939
September, 1940
April, 1942
September, 1943
March, 1944
December, 1944
April, 1947
May, 1949
February, 1950
May, 1955
October, 1956
November, 1956
June, 1957
February, 1959
October, 1959
June, 1960
August, 1960
February, 1961

August, 1961
August, 1962
February, 1963
April, 1963
February, 1966
February, 1968
February, 1969
April, 1969
August, 1969
December, 1969
May, 1970
September, 1970
April, 1971
June, 1971
February, 1973
June, 1974
November, 1974
June, 1982
April, 1985
February, 1989
February, 1991
August, 1991

HistoryFounded as a repair shop at Hitachi copper mine of Kuhara Mining Company
Incorporated as Hitachi, Ltd. with the Hitachi and Kameido Works
Acquired the Kasado shipyard from Nippon Kisen Co., Ltd. and established Kasado
Works
Equity participation in Kyousei Reiki Kogyo K.K. (later changed its name to Hitachi
Plant Engineering & Construction Co., Ltd.)
Merged Kokusan Industries, Ltd. and established 7 factories, including Totsuka Works
Established Taga Works, spun off Hitachi Research Laboratory from Hitachi Works
Established Mito Works
Established Central Research Laboratory
Merged Riken Vacuum Industry and established Mobara Works
Spun off Shimizu Works from Kameari Works
Spun off Tochigi Works from Taga Works
Established Hinode Shokai Co., Ltd. (currently Hitachi High-Technologies Corporation)
Established Higashi-Nippon Senikikai KK (later changed its name to Hitachi Medical
Corporation)
Established Nitto Transport KK. (currently Hitachi Transport System, Ltd.)
Established Hitachi Sales Corporation
Spun off Hitachi Metals Industries, Ltd. (currently Hitachi Metals, Ltd.) and Hitachi
Cable, Ltd.
Established Hitachi Kiden Kogyo, Ltd.
Spun off Kokubu Works from Hitachi Works
Established Yokohama Works
Established Hitachi New York, Ltd. (currently Hitachi America, Ltd.)
Equity participation in Nippon Business Consultant Co., Ltd. (later changed its name to
Hitachi Information Systems, Ltd.)
Established Hitachi Geppan Corp. (later changed its name to Hitachi Credit Corporation)
Spun off Naka Works from Taga Works;
Equity participation in Maxell Electric Industrial Co., Ltd. (currently Maxell Holdings,
Ltd.)
Established Katsuta Works
Established Kanagawa Works
Spun off Narashino Works from Kameido Works
Spun off Hitachi Chemical Company, Ltd.
Established Mechanical Engineering Research Laboratory
Spun off Sawa Works from Taga Works, spun off Tokai Works from Yokohama Works,
and spun off Odawara Works from Kanagawa Works
Established Software Works
Established Ome Works
Established Omika Works
Spun off Hitachi Construction Machinery Co., Ltd.
Established Takasaki Works
Established Hitachi Software Engineering Co., Ltd.
Acquired Asahi Works from Hitachi Denshi, Ltd.
Established Production Engineering Research Laboratory
Established Systems Development Laboratory
Established Tsuchiura Works
Relocated Kameido Works and renamed to Nakajo Works
Established Hitachi Europe Ltd.
Established Advanced Research Laboratory
Established Hitachi Asia Pte. Ltd. (currently Hitachi Asia Ltd.)
Integrated Sawa Works into Automotive Products Division
Integrated Katsuta Works into Materials Process Technology Division; integrated Totsuka
Works into Information & Telecommunication Division; integrated Naka Works into
Instruments Division-4-Month/Year
February, 1992
August, 1992
February, 1993
August, 1993
August, 1994
October, 1994
February, 1995

April, 1995
April, 1999
October, 2000
October, 2001

April, 2002

October, 2002

January, 2003
April, 2003

June, 2003
October, 2004

April, 2006

December, 2006
July, 2007
March, 2009

History
Integrated Yokohama Works and Tokai Works into AV Products Division
Changed operation unit of home appliances, computers and electronic devices businesses
from factory to business division
Integrated Semiconductor Technology Development Center, Musashi Works andTakasaki Works into Semiconductor Division
Integrated Shimizu Works into Air Conditioning Division, integrated Nakajo Works andNarashino Works into Industrial Equipment Division
Integrated Consumer Products Group and Image & Information Media Division andrenamed to Consumer Products & Information Media Systems Group
Established Hitachi (China), Ltd.
Reorganized business groups as Power & Industrial Systems Group, Consumer Products& Information Media Systems Group, Information Systems Group and Electronics
Components Group; integrated a part of R&D division and sales division into the businessgroupsMerged Hitachi Sales Corporation
Reorganized business groups into de facto companies to independently operate eachbusiness group
Merged Hitachi Credit Corporation with Hitachi Leasing Corp. and changed its name to
Hitachi Capital Corporation
Split Instruments Group and Semiconductor Manufacturing Equipment Group via
company split and reorganized as Hitachi High-Technologies Corporation;
Split Industrial Machinery Systems Division via company split and reorganized as Hitachi
Industries Co., Ltd.
Split Home Appliance Group via company split and reorganized as Hitachi Home & Life
Solutions, Inc.;
Split Industrial Equipment Group via company split and reorganized as Hitachi Industrial
Equipment Systems Co., Ltd.
Split Display Group via company split and established Hitachi Displays, Ltd.;
Split Telecommunication Equipment Division via company split and reorganized as
Hitachi Communication Technologies, Ltd.;
Turned Unisia Jecs Corporation (later changed its name to Hitachi Unisia Automotive,Ltd.) into a wholly owned subsidiary via share exchange
Acquired HDDs business from IBM Corp., and commenced operations as Hitachi Global
Storage Technologies Netherlands B.V.
Split semiconductor business, centering on system LSIs, via company split andestablished Renesas Technology Corp. (merged with NEC Electronics Corporation andchanged its name to Renesas Electronics Corporation in April 2010, and ceased to be anaffiliate of the Company due to a decrease in the Company’s ownership percentage ofvoting rights in September 2013)
Adopted committee system as the Company’s corporate governance structure
Merged TOKICO, Ltd. and Hitachi Unisia Automotive, Ltd.;
Split Mechatronics System Division, centering on ATMs, via company split andestablished Hitachi-Omron Terminal Solutions, Corp.
Split Social & industrial infrastructure business via company split and integrated with
Hitachi Plant Engineering & Construction Co., Ltd., Hitachi Kiden Kogyo, Ltd. andHitachi Industries Co., Ltd. and reorganized as Hitachi Plant Technologies, Ltd.; Merged
Hitachi Home & Life Solutions, Inc. with Hitachi Air Conditioning Systems Co., Ltd. andchanged its name to Hitachi Appliances, Inc.
Turned Clarion Co., Ltd. into a consolidated subsidiary via tender offer
Split nuclear power systems business via company split and reorganized as Hitachi-GE
Nuclear Energy, Ltd.
Turned Hitachi Koki Co., Ltd. into a consolidated subsidiary via tender offer; Turned
Hitachi Kokusai Electric Inc. into a consolidated subsidiary via tender offer-5-

Month/Year

July, 2009

October, 2009
February, 2010
April, 2010

October, 2010
October, 2011
March, 2012

April, 2013
July, 2013
February, 2014
March, 2014

April, 2015

October, 2015
April, 2016
May, 2016
October, 2016
March, 2017
June, 2018

History

Merged Hitachi Communication Technologies, Ltd.;
Split Automotive Systems Group via company split and established Hitachi Automotive
Systems, Ltd.;
Split Consumer Business Group via company split and established Hitachi Consumer
Electronics Co., Ltd.
Reorganized business groups into in-house companies with independent accounting topromote quick business operation
Turned Hitachi Information Systems, Ltd., Hitachi Software Engineering Co., Ltd. andHitachi Systems & Services, Ltd. into wholly owned subsidiaries
Turned Hitachi Plant Technologies, Ltd. and Hitachi Maxell, Ltd. (currently Maxell
Holdings, Ltd.) into wholly owned subsidiaries via share exchanges (turned Hitachi
Maxell, Ltd. into an equity-method associate of the Company via selling its shares inMarch 2014, and ceased to be an affiliate of the Company in March 2017 due to selling its
shares)Merged Hitachi Software Engineering Co., Ltd. with Hitachi Systems & Services, Ltd.
and changed its name to Hitachi Solutions, Ltd.
Merged Hitachi Electronics Services Co., Ltd. with Hitachi Information Systems, Ltd. andchanged its name to Hitachi Systems, Ltd.
Transferred HDDs business to Western Digital Corporation via share sale of Viviti
Technologies Ltd., a holding company for Hitachi Global Storage Technologies Inc., etc.
Transferred small and medium-sized displays business via share sale of Hitachi Displays,
Ltd.
Merged Hitachi Plant Technologies, Ltd.
Merged Hitachi Metals, Ltd. with Hitachi Cable, Ltd.
Split thermal power generating systems business via company split and transferred to
MITSUBISHI HITACHI POWER SYSTEMS, LTD.
Turned Hitachi Medical Corporation into a wholly owned subsidiary via share exchange(changed its name to Hitachi Healthcare Manufacturing, Ltd. following the reorganizationof Hitachi’s healthcare business in April 2016)
Reorganized Central Research Laboratory, Hitachi Research Laboratory, Yokohama
Research Laboratory, Design Division and overseas R&D facilities into Global Center forSocial Innovation, Center for Technology Innovation and Center for Exploratory
Research to establish global R&D structure from the customers’ perspective
Hitachi Appliances, Inc. transferred its air-conditioning systems business to a joint
venture established with Johnson Controls Inc.
Reorganized in-house companies into business units as a market-specific businessstructure
Turned Hitachi Transport System, Ltd. into an equity-method associate of the Company
via sale of a part of its shares
Turned Hitachi Capital Corporation into an equity-method associate of the Company via
sale of a part of its shares
Transferred power tools business via share sale of Hitachi Koki, Co., Ltd.
Sold semiconductor manufacturing equipment business of Hitachi Kokusai Electric Inc.
and also turned it into an equity-method associated of the Company.

3. Description of Business
The Hitachi Group, which is comprised of the Company and 1,286 affiliates (879 consolidated
subsidiaries and 407 equity-method associates and joint ventures.), engages in a broad range of businessactivities, from product development and manufacturing to sales and services, in 8 segments of Information& Telecommunication Systems, Social Infrastructure & Industrial Systems, Electronic Systems &Equipment, Construction Machinery, High Functional Materials & Components, Automotive Systems,
Smart Life & Ecofriendly Systems and Others.
Major business outline for each segment and the positioning of principal affiliated companies aredescribed as follows. The Company mainly engages in manufacturing and sales of products and providing
services in the segments of Information & Telecommunication Systems, Social Infrastructure & Industrial
Systems and Electronic Systems & Equipment.
-6-

(As of March 31, 2018)
Main products and services

Positioning of principal affiliated companies

Information & Telecommunication
Systems
Systems Integration, Consulting,
Cloud Services, Servers, Storage,
Software, Telecommunications &Network, ATMs

Manufacturing[Consolidated subsidiaries]
Hitachi Information & Telecommunication
Engineering, Ltd.
Hitachi-Omron Terminal Solutions, Corp.
Hitachi Computer Products (America), Inc.
Hitachi Financial Equipment System (ShenZhen) Co., Ltd.

Social Infrastructure & Industrial
Systems
Industrial Machinery and Plants,
Elevators, Escalators, Railway
Systems, Thermal, Nuclear andRenewable Energy Power
Generation Systems, Transmission& Distribution Systems[Consolidated subsidiaries]
Hitachi-GE Nuclear Energy, Ltd.
Hitachi Industrial Equipment Systems Co.,Ltd.
Hitachi Elevator (China) Co., Ltd.
[Equity-method associates]
MITSUBISHI HITACHI POWER
SYSTEMS, LTD.

Electronic Systems & Equipment
Semiconductor Processing
Equipment, Test and Measurement
Equipment, Advanced Industrial
Products, Medical Electronics
Equipment
Construction Machinery
Hydraulic Excavators, Wheel
Loaders, Mining Machinery
High Functional Materials &Components
Semiconductor and Display
Related Materials, Circuit Boards
and Materials, Automotive Parts ,Energy Storage Devices, Specialty
Steel Products, Magnetic Materials
and Applications, Functional
Components and Equipment,
Wires, Cables and Related
Products
Automotive Systems
Engine Powertrain Systems,
Electric Powertrain Systems,
Integrated Vehicle Control
Systems, Car Information Systems
Smart Life & Ecofriendly Systems
Air-Conditioning Equipment,
Room Air Conditioners,
Refrigerators, Washing Machines[Consolidated subsidiaries]
Hitachi High-Technologies Corporation
Hitachi Kokusai Electric Inc.

Sales and services[Consolidated subsidiaries]
Hitachi Solutions, Ltd.
Hitachi Systems, Ltd.
Hitachi Consulting Corporation
Hitachi Information & Telecommunication
Systems Global Holding Corporation
Hitachi Payment Services Private Limited
Hitachi Vantara Corporation[Consolidated subsidiaries]
Hitachi Building Systems Co., Ltd.
Hitachi Industry & Control Solutions, Ltd.
Hitachi Plant Construction, Ltd.
Hitachi Plant Services Co., Ltd.
Hitachi Power Solutions Co., Ltd.
Hitachi Rail Europe Ltd.
Horizon Nuclear Power Limited
Sullair US Purchaser, Inc.

[Consolidated subsidiaries]
Hitachi Construction Machinery Co., Ltd.
[Consolidated subsidiaries]
Hitachi Chemical Company, Ltd.
Hitachi Metals, Ltd.

[Consolidated subsidiaries]
Clarion Co., Ltd.
Hitachi Automotive Systems, Ltd.
Hitachi Automotive Systems Americas, Inc.

[Consolidated subsidiaries][Consolidated subsidiaries]
Hitachi Consumer Marketing, Inc.
Hitachi Appliances, Inc.
Hitachi Consumer Products (Thailand), Ltd. [Equity-method associates]
Johnson Controls-Hitachi Air
Conditioning Holding (UK) Ltd
Others[Consolidated subsidiaries][Consolidated subsidiaries]
Optical Disk Drives, Property
Hitachi-LG Data Storage, Inc.
Hitachi Life, Ltd.
Management
Hitachi Urban Investment, Ltd.
Hitachi America, Ltd.
Hitachi Asia Ltd.
Hitachi (China), Ltd.
Hitachi Europe Ltd.
Hitachi India Pvt. Ltd.
(Notes) 1. Hitachi America, Ltd., Hitachi Asia Ltd., Hitachi (China), Ltd., Hitachi Europe Ltd. and Hitachi India Pvt. Ltd. are the
Hitachi Group’s regional supervising company for Americas, Asia, China, Europe and India, and they sell the HitachiGroup’s products.
2. Hitachi Information & Telecommunication Systems Global Holding Corporation changed its company name to Hitachi
Global Digital Holdings Corporation on April 1, 2018.
3. The Company transferred all shares of Hitachi Kokusai Electric Inc. stock owned by the Company on May 31, 2018, andthen, the Company partially re-acquired shares of Hitachi Kokusai Electric Inc. stock on June 4, 2018. As a result, Hitachi
Kokusai Electic Inc. turned into an equity-method associate of the Company.
4. In addition to the table above, the major equity-method associates are Hitachi Capital Corporation and Hitachi Transport
System, Ltd.

-7-

4. Information on Affiliates(1) Consolidated subsidiaries(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

Hitachi Information & Nishi-ku,
Telecommunication
Yokohama,
Engineering, Ltd.
Kanagawa

1,350

Information &Telecommunication
Systems

100.0

Hitachi-Omron
Terminal Solutions,Corp.

Shinagawaku, Tokyo

8,500

Information &Telecommunication
Systems

55.0

Hitachi Solutions,Ltd.

Shinagawaku, Tokyo

20,000Information &Telecommunication
Systems

100.0

Hitachi Systems, Ltd.

Shinagawaku, Tokyo

19,162

Information &Telecommunication
Systems

100.0

-8-

Relationship
The Company
outsources design,development,
manufacturing,evaluation andvalidation of storages,
servers andtelecommunication
networks equipment,
etc. The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
purchases ATMs andother informationequipment. The
Company’s Directors,
Executive Officers or
employees
concurrently
hold position of
directors or officers.
The Company
outsources
development of
information systems
and software, etc. The
Company’s Directors,
Executive Officers or
employees
concurrently
hold position of
directors or officers.
The Company
outsources
calculation,
development ofsoftware, installationand maintenance of
telecommunicationequipment andcomputers. The
Company’s Directors,
Executive Officers or
employees
concurrently
hold position of
directors or officers.

(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

Hitachi Computer
Products (America),
Inc.

of Information &Oklahoma, (Thousands
US dollars) Telecommunication
U.S.A.
14,000 Systems**Hitachi Consulting
Corporation

Texas,U.S.A.

Hitachi Financial
Equipment System(Shen Zhen) Co., Ltd.

Shenzhen,
China**Hitachi Information&
Telecommunication
Systems Global
Holding Corporationof Information &California, (Thousands
US dollars) Telecommunication
U.S.A.
1,415,799 Systems

Hitachi Payment
Services Private
LimitedChennai,
India**Hitachi Vantara
Corporationof Information &California, (Thousands
US dollars)
U.S.A.
931,646 Telecommunication
Systems(Thousands of Information &US dollars) Telecommunication

830,493 Systems(Thousands of Information &US dollars) Telecommunication

3,480 Systems(Thousands of Information &Indian rupee) Telecommunication

47,500 Systems-9-

Ownership
percentage ofvoting rights(%)[100.0]100.0[100.0]100.0[100.0]
100.0

100.0

[97.5]
100.0[100.0]100.0

Relationship
The Company
supplies parts forcomputer peripherals.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
outsources consulting
services. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Manufacturing andsales company inChina for the HitachiGroup’s information
products such as
ATMs.
Holding company for
Hitachi Consulting
Corporation and
Hitachi Vantara
Corporation, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Offering the HitachiGroup's payment
services for financial
institutions in India.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Sales company for theCompany's storage, etc.
The Company's
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

Hitachi Building
Systems Co., Ltd.

Chiyodaku, Tokyo

Social5,105 Infrastructure &Industrial Systems

100.0

Hitachi-GE Nuclear
Energy, Ltd.

Hitachi,
IbarakiSocial5,000 Infrastructure &Industrial Systems

80.0

Hitachi Industrial
Equipment Systems
Co., Ltd.

Chiyodaku, Tokyo

Social
10,000 Infrastructure &Industrial Systems

100.0

Hitachi Industry& Control Solutions,Ltd.

Hitachi,
IbarakiSocial3,000 Infrastructure &Industrial Systems

100.0

Hitachi Plant
Construction, Ltd.

Toshimaku, Tokyo

Social3,000 Infrastructure &Industrial Systems

100.0

-10-

Relationship
Design, manufacturing,sales, installation andmaintenance ofthe elevators andescalators theCompany developed.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company delivers
nuclear power
generation equipment,
etc. The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
purchases industrial
equipment. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
outsources
development of
information control
systems, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Construction of theCompany’s power andindustrial plants, etc.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

Hitachi Plant Services
Co., Ltd.

Toshimaku, Tokyo

Social3,000 Infrastructure &Industrial Systems

Hitachi Power
Solutions Co., Ltd.

Hitachi,
IbarakiSocial4,000 Infrastructure &Industrial Systems

Hitachi Elevator(China) Co., Ltd.

of Social
Guangzhou, (Thousands
US dollars) Infrastructure &China
64,880 Industrial Systems**Hitachi Rail Europe
Ltd.

London,U.K.

**Horizon Nuclear
Power Limited

Gloucester,U.K.

**Sullair US Purchaser, Indiana,
Inc.
U.S.A.

(Thousands Socialof Sterlingpounds) Infrastructure &878,181 Industrial Systems(Thousands Socialof Sterlingpounds) Infrastructure &876,000 Industrial Systems(Thousands of Social
US dollars) Infrastructure &517,977 Industrial Systems-11-

Ownership
percentage ofvoting rights(%)

Relationship

Construction of theCompany’s industrial
plants, etc. The
Company’s Directors,
100.0
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
purchases power plantparts, and outsources
maintenance of power
generation equipment
and control
100.0 equipment, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Sales, installation andmaintenance, etc. of
the Hitachi Group’s
elevators andescalators in China.
[70.0]The Company’s
70.0
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Manufacturing, sales,
engineering andmaintenance of theCompany’s railsystems products. The
100.0 Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Nuclear power
production company
in the U.K. The[100.0] Company’s Directors,
100.0 Executive Officers or
employees concurrently
hold position of
directors or officers.
Holding company for
Sullair LLC etc. The
Company’s Directors,[100.0]Executive Officers or
100.0
employees concurrently
hold position of
directors or officers.

(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)*Hitachi HighTechnologies
Corporation

Minato-ku,
Tokyo

7,938

Electronic Systems& Equipment

51.8*Hitachi Kokusai
Electric Inc.

Minato-ku,
Tokyo

10,058

Electronic Systems& Equipment

75.0

**
*Hitachi Construction
Machinery Co., Ltd.

Taito-ku,
Tokyo

81,576

Construction
Machinery

[0.6]
51.5

*Hitachi Chemical
Company, Ltd.

Chiyoda-ku,
TokyoHigh Functional
15,454 Materials &Components

[0.1]
51.4

*Hitachi Metals, Ltd.

Minato-ku,
TokyoHigh Functional
26,283 Materials &Components

[0.5]
53.5

*Clarion Co., Ltd.

Chuo-ku,
Saitama,
Saitama

20,346

Automotive
Systems

-12-

64.0

Relationship
The Company sells andpurchases informationequipment and powerrelated parts throughthis company. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
purchases
electronic equipment
and parts, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
purchases electronicmaterials and parts,
energy storage
devices and systems,
etc. The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
purchases specialty
steel products,
magnetic materials andapplications, functional
components andequipment, and wires,
cables, and related
products. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
supplies parts for car
navigation systems, etc.

(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

Hitachi Automotive
Systems, Ltd.

Hitachinaka,Ibaraki

Hitachi Automotive
Systems Americas,
Inc.

Kentucky,
U.S.A.

Hitachi Appliances,
Inc.

Minato-ku,
Tokyo

Smart Life &20,000 Ecofriendly
Systems

Hitachi Consumer
Marketing, Inc.

Minato-ku,
Tokyo

Smart Life &3,000 Ecofriendly
Systems

Hitachi Consumer
Products (Thailand),Ltd.

of Smart Life &Prachinburi, (Thousands
Thai Baht) Ecofriendly
Thailand
2,472,000 Systems

Hitachi-LG Data
Storage, Inc.

Minato-ku,
Tokyo10,362 Others

Hitachi Life, Ltd.

Hitachi,
Ibaraki

1,000 Others

15,000Automotive
Systems(Thousands of
US dollars) Automotive

86,278 Systems-13-

Ownership
percentage ofvoting rights(%)

Relationship

The Company
purchases parts forrailway vehicles, etc.
The Company’s
100.0 Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Manufacturing andsales company in[100.0] North America for the
100.0 Hitachi Group’s
automotive systems
products.
Manufacturing andsales of the HitachiGroup's home
appliances, and sales,
system installation andmaintenance of theGroup’s refrigerating
100.0
and air-conditioning
products. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Sales company for the
100.0 Hitachi Group’s home
appliances in Japan.
Manufacturing andsales company for the[80.1] Hitachi Group’s
80.1 refrigerators andwashing machines,
etc. in Thailand.
Development,
manufacturing andsales company for the
Hitachi Group’s
optical disk drives.
51.0 The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
outsourcesmanagement ofwelfare facilities, etc.
[21.8] The Company’s
100.0 Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2018)
Company nameLocation

Hitachi Urban
Investment, Ltd.

Chiyoda-ku,
Tokyo**Hitachi America,Ltd.

California,
U.S.A.

Hitachi Asia Ltd.

Singapore

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

2,000 Others

100.0(Thousands of
US dollars) Others

100.0(Thousandsof Singapore
dollars) Others

100.0(Thousands of
US dollars) Others

100.0

3,245,764

186,231

Hitachi (China), Ltd.

Beijing,China

226,380-14-

Relationship
The Company
outsourcesmanagement of welfare
facilities, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Hitachi Group’s
regional supervising
company in Americas,
and sells the HitachiGroup’s plant-,
industrial machinery-,healthcare- anddigital media-related
products, etc., as wellas promotes R&D in
Americas. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Hitachi Group’s
regional supervising
company for Asia, andsells the HitachiGroup’s industrial
machinery andtrain-, healthcare- andinformation-related
products, etc. The
Company’s Directors,
Executive Officers or
employees
concurrently holdposition of directors orofficers.
The Hitachi Group’s
regional supervising
company for China,
and sells the HitachiGroup’s plant,
industrial machineryand digital media-,
train-, healthcare- andinformation-related
products, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.

(As of March 31, 2018)
Company name

Hitachi Europe Ltd.

Hitachi India Pvt. Ltd.

Location

Maidenhead,
U.K.

Commonstock

Principal business(Thousandsof Sterlingpounds) Others

263,349

of
New Delhi, (Thousands
Indian rupee) Others
India
344,000

Ownership
percentage ofvoting rights(%)

Relationship

The Hitachi Group’s
regional supervising
company for Europe,and sells the HitachiGroup’s plants,
industrial machineryand digital media- and
100.0
information-related
products, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Hitachi Group’s
regional supervising
company for India,
and sells the HitachiGroup’s plants,
industrial machinery[100.0] and digital media100.0 related products, etc.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

Others- 839 companies(Notes) 1. The unit of amounts and currency shown in the “Common stock” column are in millions of yen, unlessotherwise specified.
2. Companies with two asterisks (**) in the “Company name” column are specified subsidiaries.
3. Companies with one asterisk (*) in the “Company name” column submit Securities Registration
Statement or Annual Securities Report.
4. The name of segment in which the companies classified is shown in the “Principal business” column.
5. The amounts in brackets in upper row of the “Ownership percentage of voting rights” column represent
the percentage of voting rights owned indirectly by subsidiaries, of the total ownership percentage.
6. Companies with negative net worth are shown below, along with the amount of liabilities in excess ofassets.
Hitachi Power Europe GmbH ¥108,573 million
Hitachi Vehicle Energy, Ltd.
¥43,069 million-15-(2) Equity-method associates and joint ventures(As of March 31, 2018)
Company nameLocation

Commonstock

Principal business

MITSUBISHIHITACHI POWER
SYSTEMS, LTD.

Nishi-ku,
Yokohama,
Kanagawa

Johnson ControlsHitachi Air
Conditioning
Holding (UK) Ltd

of Smart Life &Hampshire, (Thousands
US dollars) Ecofriendly
U.K.
935,107 Systems*Hitachi Capital
Corporation

Minato-ku,
Tokyo

9,983

*Hitachi Transport
System, Ltd.

Chuo-ku,Tokyo

16,802 Logistics services

100,000

SocialInfrastructure &Industrial Systems

General leasing,installment sales,
and other financial
services

Ownership
percentage ofvoting rights(%)

Relationship

The Company
supplies equipments
for thermal power
generation system.
The Company’s
35.0
Directors, Executive
Officers or employees
concurrently holdposition of directors
or officers.
Holding company for
air-conditioning
systems business[40.0] companies from40.0 which the HitachiGroup purchases airconditioning systems
devices.
Leases manufacturing
equipment, industrial
equipment, officeequipment, etc. to theCompany, andengages in leasing andinstallment sales of the
33.4
Company’s businessequipment, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
outsources
transportation andstorage of products.
The Company’s
30.0
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

Others- 403 companies(Notes) 1. The unit of amounts and currency shown in the “Common stock” column are in millions of yen, unlessotherwise specified.
2. Companies with one asterisk (*) in the “Company name” column submit Securities Registration
Statement or Annual Securities Report.
3. The names of segment in which MITSUBISHI HITACHI POWER SYSTEMS, LTD. and Johnson
Controls-Hitachi Air Conditioning Holding (UK) Ltd are classified are shown in the “Principal
business” column.
4. Companies with negative net worth are shown below, along with the amount of liabilities in excess ofassets.
Agility Trains East (Holdings) Limited¥71,260 million
Agility Trains West (Holdings) Limited¥70,058 million
GE-Hitachi Nuclear Energy Holdings LLC¥23,230 million-16-

5. Employees(1) Consolidated basis(As of March 31, 2018)
Number of employees
73,388[15,605]
77,476Social Infrastructure & Industrial
Systems[10,284]
20,006
Electronic Systems & Equipment[3,041]
23,469Construction Machinery[-]
51,709High Functional Materials &Components[-]
33,958Automotive Systems[-]
11,290Smart Life & Ecofriendly Systems[-]
13,286
Others[3,302]2,693
Corporate (Head Office and others)[2,693]
307,275
Total[34,925](Note) The number in brackets in the lower row of the “Number of Employees” column is the number of
employees of the Company included in each of the numbers in the upper row.
Name of segment
Information & Telecommunication
Systems(2) The Company
Number of employees
Average age
Average length of service
34,92541.7
18.8 years(Note) Average annual salary includes bonuses and extra wages.

(As of March 31, 2018)
Average annual salary¥8,715,191(3) Relationship with labor union
The Company’s labor union, Hitachi Workers Union, is a member of the Japanese ElectricalElectronic & Information Union.
The relationship between management and labor unions in the Hitachi Group is stable and smooth.

-17-II. Business Overview
1. Management Policy, Economic Environment and Challenges Hitachi Group Faces(1) Management Policy
Amid intensifying competition in global markets, the Hitachi Group has been expanding its
business through development of Hitachi and its related companies (subsidiaries and affiliatedcompanies). Hitachi aims to achieve further development by delivering competitive products andservices, thus creating higher value for customers. By taking full advantage of the diverse resources ofthe Hitachi Group, while at the same time reviewing and restructuring businesses, Hitachi aims tobolster its competitiveness and achieve growth in global markets. This process will be consistent with
Hitachi’s basic management policy, which is to increase shareholder value by meeting the expectationsof customers, shareholders, employees and other stakeholders.
By fully capitalizing on the business base it has built over the years, the Hitachi Group aims toachieve sustainable growth through global expansion of the Social Innovation Business to provide
solutions driven by collaborative creation with customers in a range of areas, including Power / Energy,
Industry / Distribution / Water, Urban Development, and Finance / Social / Healthcare. At the sametime, the Hitachi Group will work to establish an even more solid management base by pushing ahead
with ongoing business portfolio reforms and cost structure reforms. Under the "2018 Mid-termManagement Plan," the Hitachi Group utilizes the following indicatior targets to measure performancein terms of meeting its starategic and operational goals: adjusted operating income (margin) (Note 1);
EBIT (margin) (Note 2); net income attributable to Hitachi, Ltd. stockholders; front revenue ratio (Note3); overseas revenue ratio; operating cash flow margin (Note 4); and return on assets (ROA) (Note 5).
(Notes) 1. Adjusted operating income is presented as revenues less cost of sales as well as selling,
general and administrative expenses. Adjusted operating income margin is the ratio
calculated by dividing adjusted operating income by revenues.
2. EBIT represents earnings before interest and taxes, which is presented as income fromcontinuing operations, before income taxes less interest income plus interest charges. EBIT
margin is the ratio calculated by dividing EBIT by revenues.
3. Front revenue ratio is the ratio of revenues from front-line busiensses to total revenues.
4. Operating cash flow margin is the ratio calculated by dividing operating cash flows by
revenues.
5. Return on assets (ROA) is the ratio of net income to average total assets of the beginning ofand the end of fiscal year.
(2) Economic Environment
We conduct business operations such as manufacturing, marketing, and research and development
activities throughout the world. Therefore, the economic conditions in global markets where the HitachiGroup conducts business, in particular Japan, Asia, North America and Europe, affect its results ofoperations.
During the year ended March 31, 2018, the global economy expanded at a moderate pace. The U.S.
economy soundly improved, in particular, consumer spending underpinned by improving employment
and capital investment. In Europe, the economy continued to expand slowly, led by the German
economy. The Chinese economy continued steady growth due to increases in infrastructure investments
made by the government and consumer spending. The Japanese economy has continued its moderate
recovery trend, reflecting firm consumer spending due to improving employment and income andupward trend in capital investment.
(3) Business and Financial Challenges Hitachi Group Faces
During fiscal 2017, the Hitachi Group geared up for its growth and had its sights set on achieving
targets associated with the “2018 Mid-term Management Plan.” The Hitachi Group will focus on thefollowing measures for fiscal 2018 in order to lead changes in social life through its social innovation
business in a society where people seek to realize "Society 5.0" to develop innovative solutions withnew technologies and resolve various social challenges. Based on this approach, we aim to evolve into
an excellent global company.
- Become the best innovation partner with digital technologies-18-

We will further enhance our digital business by expanding co-creation with customers which
utilizes synergetic effects of operational technologies, information technologies and products,
based on the Lumada IoT platform, one of the top level IoT platforms. We will seek to become thebest innovation partner for the IoT era and, as a leading company, solve social challenges withdigital technologies, by accumulating use cases of the Lumada IoT platform and globally
expanding applications.
- Expand further businesses globally
We will accomplish growth of our social innovation business globally and evolve into a truly
excellent global company. We will further expand each of our core businesses with regional focus:
financial/social solutions business and industrial equipment/solutions business in North Americaand Asia, railway business in North America and Europe, and elevators/escalators business in Asia
and China.
- Strengthen cash flow generating capability
We will reinforce our capability to generate cash flows and strengthen management base to
evolve into a world class global company by ensuring funds necessary to grow the Hitachi Groupthrough optimizing our business portfolio, reducing or withdrawing from unprofitable businesses,
promoting selective investment, and implementing cost reduction initiatives.
Besides the above, the Hitachi Group will proactively and continuously make efforts to meet suchneeds of societies or the times as ensuring quality assurance and compliance with laws, promoting work
-style reforms and contributing to the environment and communities.
(4) Fundamental Policy on the Conduct of Persons Influencing Decision on the Company’s Financial andBusiness Policies
The Group invests a great deal of business resources in fundamental research and in thedevelopment of market-leading products and businesses that will bear fruit in the future, and realizing
the benefits from these management policies requires that they be continued for a set period of time. For
this purpose, the Company keeps its shareholders and investors well informed of not just the businessresults for each period but also of the Company’s business policies for creating value in the future.
The Company does not deny the significance of the vitalization of business activities andperformance that can be brought about through a change in management control, but it recognizes thenecessity of determining the impact on company value and the interests of all shareholders of thebuying activities and buyout proposals of parties attempting to acquire a large share of stock of theCompany or a Group company by duly examining the business description, future business plans, past
investment activities, and other necessary aspects of such a party.
There is no party that is currently attempting to acquire a large share of the Company’s stocks nor
is there a specific threat, neither does the Company intend to implement specified so-called antitakeover measures in advance of the appearance of such a party, but the Company does understand that
it is one of the natural duties bestowed upon it by the shareholders and investors to continuously
monitor the state of trading of the Company’s stock and then to immediately take what the Company
deems to be the best action in the event of the appearance of a party attempting to purchase a large shareof the Company’s stock. In particular, together with outside experts, the Company will evaluate thebuyout proposal of the party and hold negotiations with the buyer, and if the Company deems that saidbuyout will not maintain the Company’s value and is not in the best interest of the shareholders, thenthe Company will quickly determine the necessity, content, etc., of specific countermeasures andprepare to implement them. The same response will also be taken in the event a party attempts toacquire a large percentage of the shares of a Group company.
2. Risk Factors
We conduct business on a global scale across a broad range of business areas and utilize sophisticated,
specialized technologies to carry out our operations. Therefore, we are exposed to risks attributable to theeconomic environment, risks inherent in individual industrial sectors and business lines and risks related toour operations. Investment in our securities also involves risks. The following risks are based on theassumption we consider reasonable as of the filing date of this report.

-19-

Risks Related to Operations
Economic Trends
Our business is influenced by the global economy and economic conditions in certain regions orcountries. We are affected by downward economic trends in the U.S., Europe, China, emerging countries
and Japan. Such economic conditions could cause decline in consumer spending or capital investment andsubsequently reduced demand for our products and services, which could adversely affect our business,financial condition, and results of operations.
Currency Exchange Rates Fluctuations
Since we conduct business in many foreign countries, our business activities are exposed to risks fromfluctuations in foreign currency exchange rates. We sell products, provide services and purchase raw
materials and components in local currencies. Therefore, fluctuations in foreign currency exchange rates
may result in lower revenues or higher costs in yen to us and thus affect our results of operations, which arereported in Japanese yen. Our price competitiveness, and thus our results of operations, may be harmed if
we seek to increase prices in local currencies to compensate for lower revenues or to increase prices in yen
to absorb the higher cost. In addition, since we hold assets and liabilities denominated in foreign currencies,
fluctuations in foreign currency exchange rates may adversely affect our financial condition presented inJapanese yen through foreign currency translation. While we take measures to reduce the risks fromfluctuations in foreign currency exchange rates, such measures may not be effective.
Access to Liquidity and Long-term Financing
Our primary sources of funds are cash flows from operations, borrowings from banks and otherinstitutional lenders, and funding from capital markets, such as offerings of commercial paper and otherdebt securities, as well as equity securities. We need liquid funds to pay our operating expenses, theprincipal of and interest on our debt and dividends on our capital stock. We also need long-term financing
to fund, among other things, capital expenditures and research and development expenses. We currently
believe our cash flows from operations, borrowings from banks and other institutional lenders and funding
from the capital markets can provide sufficient funding for our operations and other liquidity needs.
However, a global economic downturn could adversely affect our cash flows from operations, businessresults and financial condition and may adversely affect our credit ratings. If our ratings are downgraded,
our ability to obtain additional financing on terms we consider favorable may be negatively affected.
Our reliance on banks and institutional lenders exposes us to risks related to rising interest rates, andwe may need to increase our reliance on external sources of funding. An increased reliance on debt
instruments may adversely affect our credit ratings, which might affect our ability to successfully obtain
additional financing on terms we consider favorable. The inability to successfully obtain such financing
may increase our financing costs, and therefore could adversely affect our financial condition and results ofoperations.
Furthermore, failure of one or more of our major lenders or a decision by one or more of them tochange the terms and conditions of their loans or to stop lending to us could have an adverse effect on ouraccess to funding.
Marketable Securities Risks
We invest in marketable securities to maintain or promote our business or other relationships withother companies. These marketable securities are exposed to the risk of declining stock market prices. Suchdeclines may require that we write down equity securities that we hold. Further, contractual and otherobligations may require us to maintain our holdings of these securities despite declining share prices andthis may lead to material losses.

-20-

Material and Component Procurement
Our manufacturing operations rely on external suppliers for supplies of materials, parts, components
and services of adequate quality and quantity, delivered in a timely manner at a reasonable price. External
suppliers may not have sufficient capacity to meet all of our needs during periods of excess demand.
Shortages of materials, parts, components and services may cause a sharp rise in their prices. In addition,
prices of certain raw materials, parts and components which we purchase in local currencies, principally the
U.S. dollar and the euro, could be adversely affected by fluctuations in foreign currency exchange rates.
Increases in the market price of petroleum and other materials, such as copper, steel, synthetic resins, rare
metals and rare-earth minerals, can increase our production costs and may adversely affect our results ofoperations. Conversely, decreases in commodity prices, such as for raw materials, parts and components,
can result in write-downs of inventory.
If natural disasters disrupt the operations of our suppliers and damage supply chains, it may adversely
affect our production. Although we generally maintain multiple sources of supply and work closely with
our suppliers to avoid supply-related problems, such problems, including shortages and delays, may
continue to occur, which could harm our business, financial condition and results of operations.
Estimates, Fluctuations in Cost and Cancellation of Long-term Contracts
We enter into a substantial number of long-term contracts, particularly in connection with theconstruction of infrastructure systems. When the outcome of a construction can be estimated reliably, we
recognize revenue and expenses by reference to the stage of completion of the contract activity. In this case,
we recognize revenue in an amount equal to estimated total revenue from the arrangement multiplied by thepercentage that costs incurred to date bear to estimated total costs at completion based upon the mostrecently available information. When the outcome of a construction cannot be estimated reliably, we
recognize revenue only to the extent of contract costs incurred that it is probable will be recoverable, andrecognize contract costs as expenses in the period in which such costs are incurred. The revenue recognition
for such long-term contracts requires us to make significant assumptions about estimates of total contract
costs, remaining costs to completion, total contract revenues, contract risks and other factors. We charge
any anticipated losses on fixed price contracts to operations when we are able to estimate such losses.
While we employ our best judgment based on available information, there can be no assurance that theseestimates will, ultimately, prove to be correct. We regularly review these estimates and adjust them as wedeem necessary. Fluctuations in costs can occur for a variety of reasons, many of which are beyond ourcontrol. In addition, we or our counterparties may cancel these contracts. These factors would require us torevise our initial assumptions regarding a particular contract, and may adversely affect our business,financial condition and results of operations.
Credit Risks Arising from Business Transactions
We make transactions with diverse customers and suppliers in Japan and other countries. We sell our
products to certain customers on credit and pay in advance for products or services provided by certain
suppliers. While we take measures to manage counterparty credit risk, such as regularly monitoring credit
conditions of such customers or suppliers and setting a limit on transaction amount according to their credit
conditions, credit deterioration or failure of one or more of them could adversely affect our financial
condition, results of operations and cash flows.
Supply and Demand Balance
Oversupply in the markets in which we compete may lead to declines in sales prices, revenues andprofitability. In addition, adjustment to demand may force us to dispose of excess supply or obsolete
equipment or reduce production, which can result in losses. For example, the imbalance between supply
and demand in construction machinery and automotive equipment industries and a resultant deterioration inmarket conditions could negatively affect our businesses, financial condition and results of operations.

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Rapid Technological Innovation
New technologies are rapidly emerging in the segments in which we conduct business, with the paceof technological innovation. The development of new and advanced technologies, the continuous, timely
and cost-effective incorporation of such technologies into products and services and the effective marketingof such products and services are indispensable to remaining competitive. While introducing such products
and services requires significant resource commitment to research and development, there can be noassurance that our research and development will be successful. Failure in our endeavors to develop andincorporate such advanced technologies into products and services in a timely manner, or to achieve market
acceptance for such products and services, may negatively affect our business, financial condition andresults of operations.
Dependence on Specially Skilled Personnel
We believe recruiting and retaining additional people who are highly skilled in connection with ouroperations is indispensable to remaining competitive. However, the number of skilled personnel is limited
and the competition for attracting and maintaining such personnel is intense. We cannot ensure that we will
be able to successfully attract new or maintain our current skilled personnel.
Intense Competition
We are subject to intense competition in many of the markets in which we operate, and this may
adversely affect our results of operations. The industrial sectors and business lines in which we are engaged
are experiencing increasingly intense competition. We compete with diverse competitors ranging from huge
global corporations to specialized companies. Competitors are increasingly manufacturing products,
including sophisticated electronic products, and developing IT services in low-cost jurisdictions. Low-cost
manufacturing and the globalization of world markets have accelerated the commoditization of certain
products or services, which has resulted in increasingly intense price competition for many of our products.
To succeed in this competitive environment, we believe that our products and services must be pricecompetitive. The commoditization of such products affects our ability to set prices for our products. If weare unable to charge comparable prices to those of our competitors, our competitiveness and overallprofitability may be harmed. On the other hand, charging comparable prices to those of our competitors
may require us to sell products and services at a loss. Our products and services must also be competitive interms of engineering sophistication, quality and brand value. We must introduce our products and services
to the markets in a timely manner. There can be no assurance that the products or services that we offer will
be competitive. The failure of such products or services to be competitive may negatively affect ourbusiness, financial condition and results of operations.
Our Strategy to Strengthen Our Social Innovation BusinessOur business strategy seeks to build our business portfolio and achieve a stable and profitable businessstructure mainly by strengthening our Social Innovation Business, which supplies advanced social
infrastructure supported by information and communication technology. We plan to devote significant
resources including capital expenditures and R&Ds and are making investments in mergers and acquisitions
and in new projects to strengthen our Social Innovation Business. In addition, we attempt to design suitableorganizational structure for promoting our Social Innovation Business more effectively in response tomarket changes. To implement this strategy, we have incurred and may continue to incur considerable
expenses. Our efforts to implement this strategy may be unsuccessful or less successful than we currently
anticipate. Even if these efforts are successful, there is no assurance that we will be able to sustain or
increase profitability.

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Acquisitions, Joint Ventures and Strategic Alliances
In every operating sector, we depend to some degree on acquisitions of other companies, joint venturesand strategic alliances with outside partners to design and develop key new technologies and products, tostrengthen competitiveness by scaling up and to expand into new regions through acquiring local bases or
distribution channels. Such transactions are inherently risky because of the difficulties in integrating
operations, technologies, products and personnel and achieving return of the investment. Integration issues
are complex, time-consuming and expensive and, without proper planning and implementation, could
adversely affect our business. Decisions made by or the performance of alliance partners that we cannot
control or adverse business trends may also negatively affect the success of our alliances. We may incur
significant acquisition, administrative and other costs in connection with these transactions, including costs
related to integration or restructuring of acquired businesses. If it is expected that the amount invested isirrecoverable due to a decline in the profitability of an investee, we may incur siginificant losses, including
impairment loss for goodwill. There can be no assurance that these transactions will be beneficial to ourbusiness or financial condition. Even assuming these transactions are beneficial, there can be no assurance
that we will be able to successfully integrate acquired businesses or achieve all or any of the initial
objectives of these transactions.
Restructuring of Our BusinessOur business strategy seeks to build our business portfolio and achieve a stable and profitable businessstructure in part by:・ closing unprofitable operations;・ divesting our subsidiaries and affiliated companies;
・ reorganizing production bases and sales networks; and・ selling select assets.
Our restructuring efforts may not be implemented in a timely manner or at all, including due togovernmental regulations, employment issues or a lack of demand in the M&A market for businesses wemay seek to sell. In addition, we have listed subsidiaries and from time to time the interests of these listed
subsidiaries’ shareholders may conflict with our interests. Such conflicts of interest may result indifficulties in timely implementing group-wide policies, including mergers, company splits and othersimilar transactions to which the listed subsidiaries are parties. Restructuring efforts may also bring about
unintended consequences, such as negative customer or employee perceptions, and have caused and may
continue to cause us to incur significant expenses and other costs, including additional impairment losses on
our fixed assets and intangible assets, write-offs of inventory and losses on the disposal of fixed assets andlosses related to the sale of securities.
Current and future restructuring efforts may be unsuccessful or less successful than we presently
anticipate and may adversely affect our business, financial condition and results of operations.
Worsening of Business Performance of Equity-Method Associates and Joint Ventures
We use the equity-method to account for a number of associates and joint ventures. If one or more ofsuch associates or joint ventures, accounted for using the equity-method, records a loss during a given
period, we must record that loss in a manner proportionate to our ownership interest in our consolidated
financial statements. In addition, if the carrying amount of our equity-method investments in associates orjoint ventures is below the recoverable amount of the investments, we could be required to record an
impairment loss.

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Our Overseas Growth Strategies
We seek to expand our business, including our Social Innovation Business, in overseas markets as partof our business strategy. Through such overseas expansion, we aim to increase our revenues, reduce ourcosts and improve profitability. In many of these markets, we face barriers in the form of long-standing
relationships between our potential customers and their local suppliers. In addition, various factors inforeign countries where we operate may adversely affect our overseas business activities. These factors
include:・ changes in regulations relating to investments, exports, tariffs, antitrust, anti-bribery, consumer andbusiness taxation, intellectual property, foreign trade and exchange controls, environmental andrecycling requirements;
・ differences in commercial and business customs such as contract terms and conditions;・ labor relations;・ public sentiment against Japan and local residents’ sentiment against us; and・ other political and social factors as well as economic trends and currency exchange rate fluctuations.
Because of these factors, there can be no assurance that we will be able to achieve the aims of ouroverseas growth strategy. This may adversely affect our business growth prospects and results ofoperations.
Overhaul of Cost Structure
We implement “the Hitachi Smart Transformation Project,” which promotes cost reductions in all
activities of our value chain by thoroughly overhauling our cost structure across the Group. We seek tostabilize earnings and generate cash flows by improving our management efficiency through the Project.
The Project may be less successful than we currently anticipate. Even if the Project is successful, there is no
assurance that we will be able to sustain or increase profitability.
Intellectual Property
We depend in part on proprietary technology and our ability to obtain patents, trademarks and otherforms of intellectual property rights covering our products, product design, manufacturing processes andsoftware-based services in Japan and other countries. The fact that we hold such intellectual property rights
does not ensure that they will provide a competitive advantage to us. Various parties may challenge,
invalidate or circumvent our patents, trademarks and other intellectual property rights. There can be noassurance that claims allowed on any future patents will be sufficiently broad to protect our technology.
Effective patent, copyright and trade secret protection may be unavailable or limited in some of the markets
in which we operate, and our trade secrets may be vulnerable to disclosure or misappropriation by
employees, contractors and other persons.
We design many of our products to include software or other intellectual property licenses from third
parties. Competitors may not make their protected technology available to us, or may make it available tous only on unfavorable terms and conditions. There can be no assurance that we will be able to maintain alicense for such intellectual property if obtained, for economic or other reasons, or that such intellectual
property will give us the commercial advantages that we desire.
From time to time, we are sued or receive notices regarding patent and other intellectual property
claims. Whether or not these claims have merit, they may require significant resources to defend against
and may divert management attention from our business and operations and result in harm to our
reputation. In addition, a successful infringement claim and our inability to obtain the license for the
infringed technology or substitute similar non-infringing technology may adversely affect our business.

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Litigation and Regulatory Investigations
We face risks of being involved in litigation and alternative dispute resolution and regulatory
investigation and actions in connection with our operations. Lawsuits or any other legal procedures forresolving disputes and regulatory actions may seek payment of large, indeterminate amounts or otherwise
limit our operations, and their existence and magnitude may remain unknown for substantial periods oftime.
In the past several years, we have been the subject of several investigations of alleged antitrust
violations in relation to certain product markets in Japan, Europe and North America, etc. and received
claims for damages from our customers, etc., which may have adverse effects on our financial condition or
profitability. See “Consolidated Financial Statements－Notes to Consolidated Financial Statements－(30)Commitments and Contingencies.” These investigations or disputes may result in significant penalties orcompensation for damages, etc. Such substantial legal liability or regulatory action could have an adverse
effect on our business, results of operations, financial condition, cash flows, reputation and credibility.
In addition, our business activities are subject to various governmental regulations in countries where
we operate, which include investment approvals, export regulations, tariffs, antitrust, anti-bribery,
intellectual property, consumer and business taxation, foreign trade and exchange controls, andenvironmental and recycling requirements. These regulations limit, and other new or amended regulations
may further limit, our business activities or increase operating costs. In addition, the enforcement of such
regulations, including the imposition of fines or surcharges for violation of such regulations, may adversely
affect our results of operations, financial condition, cash flows, reputation and credibility.
Product Quality and Liability
We increasingly provide products and services utilizing sophisticated technologies, including but notlimited to components of power stations. Reliance on external suppliers reduces our control over quality
assurance. The occurrence of defects in our products and services could negatively affect our reputation for
quality of products and services, expose us to liability for damages caused by such defects and negatively
affect our ability to sell certain products. A significant product defect could adversely affect our results ofoperations, financial condition and future business prospects.
Significant Disasters and Similar Events
We have many facilities, including our R&D facilities, manufacturing facilities and our headquarters
in Japan. Historically, Japan has experienced numerous natural disasters such as earthquakes, tsunamis andtyphoons. Natural disasters in the future may have a significantly adverse affect on an array of ourcorporate activities, from production to sales. We also have overseas facilities in Asia, the U.S. and Europe,
which are also subject to similar natural disasters. Natural disasters in each of the areas may cause damage
on certain of our plants and offices and the operations of our suppliers and customers. Such significant
natural disasters may directly damage or destroy our facilities, which could disrupt our operations, delay
new production and shipments of existing inventory or result in costly repairs, replacements or other costs,
all of which would result in significant losses. Furthermore, even if such significant natural disasters do notdirectly affect our facilities, they could result in disruptions in distribution channels or supply chains. The
spread of infectious diseases and geopolitical and social instability, such as terrorism, crime, civil
disturbance and conflict, etc., may also disrupt our operations, render our employees unable to work, reduce
consumer demand for our products or disrupt our supply and distribution channels. In addition, we are notinsured against all potential losses, and even losses that insurance covers may not be fully covered and may
be subject to challenges of or delays in payment. Direct and indirect disruption of our operations as a resultof natural disasters or other events could have a negative impact on our operating activities, results ofoperations and financial condition.

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Dependence on Information Systems
With the increased importance of information systems to our operating activities, disruptions in such
systems due to computer viruses and other factors could have a negative impact on our operating activities,
results of operations and financial condition.
Management of Confidential Information
We maintain and manage personal information obtained from our customers, as well as confidential
information relating to our technology, research and development, or R&D, production, marketing andbusiness operations and those of our customers and clients, in various forms. Although we have
implemented controls to protect the confidentiality of such information, there can be no assurance that suchcontrols will be effective. Unauthorized disclosures of such information could subject us to complaints or
lawsuits for damages or could otherwise have a negative impact on our business, financial condition, resultsof operations, reputation and credibility.
Employee Retirement Benefits
We have a significant amount of employee retirement benefit costs that we derive from actuarial
valuations based on a number of assumptions. Inherent in these valuations are key assumptions used inestimating pension costs including mortality, withdrawal and retirement rates, changes in wages and thediscount rate. We are required to make judgments regarding the key assumptions by taking into accountvarious factors including personnel demographics, market conditions and expected trends in interest rates.
Although management believes that its key assumptions are reasonable in light of the various underlying
factors, there can be no assurance that the key assumptions will correspond to actual results. If our key
assumptions differ from actual results, the consequent deviation of actual pension costs from estimatedcosts may have an adverse effect on our financial condition and results of operations. A decrease in the
discount rate may result in an increase in the amount of projected benefit obligations. In addition, we may
change these key assumptions, such as the discount rate. Changes in key assumptions may also have an
adverse effect on our financial condition and results of operations.

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Risks Related to Our American Depositary Shares
Rights of ADS holders
The rights of shareholders under Japanese law to take actions, including voting their shares, receiving
dividends and distributions, bringing derivative actions, examining our accounting books and records andexercising appraisal rights are available only to shareholders of record. Because the depositary, through its
custodian agents, is the record holder of the shares underlying the American Depositary Shares, or ADSs,
only the depositary can exercise those rights in connection with the deposited shares. The depositary will
make efforts to vote the shares underlying ADSs in accordance with the instructions of ADS holders andwill pay dividends and distributions collected from us as and to the extent provided in the deposit
agreement. However, ADS holders will not be able to bring derivative actions, examine our accounting
books and records, or exercise appraisal rights through the depositary.
We are incorporated in Japan with limited liability. A significant portion of our assets are locatedoutside the United States. As a result, it may be more difficult for investors to enforce against us judgments
obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of theUnited States or judgments obtained in other courts outside Japan. There is doubt as to the enforceability inJapanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil
liabilities predicated solely upon the federal securities laws of the United States.
Unit Share System
The Companies Act allows companies to establish a “unit” of shares for the purpose of exercising
voting rights at the general meetings of shareholders. Under our articles of incorporation, one unit of ourshares is composed of 1,000 shares, equivalent to 100 ADSs. Each unit of our shares has one vote. A holder
who owns shares or ADSs in other than multiples of 1,000 or 100, respectively, will own less than a wholeunit (i.e., for the portion constituting fewer than 1,000 shares, or fewer than 100 ADSs). Our articles ofincorporation, in accordance with the Companies Act, impose significant restrictions on the rights ofholders of shares constituting less than a whole unit, which include restrictions on the right to vote, toattend a shareholders meeting and to bring derivative actions. In addition, less than whole unit sharescannot be traded on Japanese stock markets. Under the unit share system, holders of our shares constituting
less than one unit have the right to require us to purchase their shares and the right to require us to sell them
additional shares to create a whole unit of 1,000 shares. However, holders of our ADSs are unable towithdraw underlying shares representing less than one unit and, as a practical matter, are unable to require
us to purchase those underlying shares. The unit share system, however, does not affect the transferabilityof ADSs, which may be transferred in lots of any number of whole ADSs.
Dilution of Your Shares by Issuances of Additional Shares
We may issue additional shares in the future within the unissued portion of our authorized sharecapital and sell shares held as treasury stock, generally without shareholder vote unless the subscription orsale price is significantly lower than the market price. Issuances and sales of our shares in the future may beat prices below the prevailing market prices and may be dilutive.
Foreign Exchange Fluctuations
Market prices for our ADSs may fall if the value of the yen declines against the U.S. dollar. In
addition, the amount of cash dividends or other cash payments made to holders of ADSs will decline if thevalue of the yen declines against the dollar.

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3. Management’s Discussion and Analysis of Consolidated Financial Condition, Results of Operations andCash Flows(1) Progress of Management Plan
1) Status of Key Indicators laid out as Strategic and Operational Targets
During the year ended March 31, 2018, we realized gearing up for its growth and made steadyprogress toward achieving more than 8% of adjusted operating income margin, more than ¥400.0 billionof net income attributable to Hitachi, Ltd. stockholders and more than 5% of ROA laid out as targets
under the "2018 Mid-term Management Plan." The key indicators to measure performances in terms ofmeeting our strategic and operational goals are as follows.
Year ended March 31 2018

Fiscal 2018 Target(Fiscal 2017)
Revenues
Adjusted operating income
Adjusted operating income margin

9,368.6 billion yen

10,000.0 billion yen

714.6 billion yen

Over 800.0 billion yen

7.6%

Over 8%EBIT
EBIT margin

644.2 billion yen
6.9%

Over 800.0 billion yen
Over 8%Net income attributable to Hitachi,Ltd. stockholders

362.9 billion yen

Over 400.0 billion yen

Overseas revenues ratio

50%Over 55%

ROA

5.0%

Over 5.0%

2) Global Business Expansion
We have strived to expand our business globally by making main line of our businesses further
grow with regional focus. The main results for the year ended March 31, 2018 are as follows.
Railway business- Expanded sales in the U.K. in particular rolling stocks for the Intercity Express Programme- Began delivering rolling stocks for Miami Dade metro and accepted orders for rolling stocks andsignaling systems for Baltimore metro in North America.
Industrial equipment business- Built sales channels in North America by acquiring air compressors business under the "Sullair"brand.
IT products business- Strong sales for flash storage products in North America
Construction machinery business- Expanded sales in response to the market recovery in China
3) Business Reorganization
We continuously reorganize our business in order to further focus our business resources on theSocial Innovation Business. The important business reorganizations conducted in the year ended March
31, 2018 are as follows:
In April 2017, the Company concluded an agreement with Accudyne Industries Borrower, S.C.A.
(hereinafter referred to as “Accudyne”) regarding the Company’s acquisition of the Sullair business,
which is operated by Accudyne’s subsidiaries with certain related assets, and which manufactures andsells air compressors under the “Sullair” brand. In July, 2017, the Company completed the acquisition of
the Sullair business.
In April 2017, the Company concluded a basic agreement with HKE Holdings G.K. (hereinafterreferred to as “HKE”), all issued shares of which is held entirely by a related investment fund that isindirectly owned and operated by Kohlberg Kravis Roberts & Co. L.P. and with HVJ Holdings Inc.
(hereinafter referred to as “HVJ”), which is invested by funds that are managed, operated, and provided
with information and the like by Japan Industrial Partners, Inc. regarding (i) a tender offer (hereinafterreferred to as “the tender offer”) scheduled to be conducted by HKE for the common shares of Hitachi-28-

Kokusai Electric Inc. (hereinafter referred to as “Hitachi Kokusai”) (hereinafter referred to as “the shareof Hitachi Kokusai”), and a share consolidation of the share of Hitachi Kokusai, and the acquisition oftreasury shares by Hitachi Kokusai, through which Hitachi Kokusai becomes a wholly-owned subsidiaryof HKE, (ii) an absorption-type company split of the thin-film process solutions business of Hitachi
Kokusai (hereinafter referred to as “the company split”), whereby HKE will be the company succeedingin absorption-type split, to be conducted by HKE and Hitachi Kokusai after Hitachi Kokusai becomes awholly-owned subsidiary of HKE, and (iii) the transfer by HKE of 20% of the share of Hitachi Kokusai
to the Company and 20% of the share of Hitachi Kokusai to HVJ that is scheduled to take place after thecompany split, and other transactions that are incidental or related to those transactions. The abovetransactions (i) through (iii) were completed until June 2018.
We also continuously promote business resutructuring in order to address challenges we face suchas improving profitablity of unprofitable businesses and downsizing of or withdrawal from them, andredeploying employees.

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(2) Analysis of Results of Operations
1) Analysis of Statement of Operations
Revenues increased 2% to ¥9,368.6 billion, as compared with the year ended March 31, 2017,
despite the effect of the move to transform business portfolio such as conversion of Hitachi Capital
Corporation and Hitachi Transport System, Ltd., into equity-method affiliate and deconsolidation of
Hitachi Koki Co., Ltd. in the year ended March 31, 2017. This increase was due mainly to higher
revenues in the Construction Machinery segment, in which overseas sales increased mainly in China,
and in the High Functional Materials & Components segment, in which sales of the electronics- andautomotive-related products increased.
Cost of sales increased 1% to ¥6,866.5 billion, as compared with the year ended March 31, 2017,
and the ratio of cost of sales to revenues was 73%, a decrease of 1% from the year ended March 31,
2017. Gross profit increased 5% to ¥2,502.0 billion, as compared with the year ended March 31, 2017.
Selling, general and administrative expenses were ¥1,787.4 billion, which was the same level as
for the year ended March 31, 2017, and the ratio of selling, general and administrative expenses torevenues was 19%, as compared with 20% for the year ended March 31, 2017.
Adjusted operating income increased by ¥127.3 billion to ¥714.6 billion yen, as compared with theyear ended March 31, 2017. The increase was due mainly to higher profits owing to increased revenues
in the Construction Machinery segment, profitability improvement for the industry & distribution field,
the power and energy business, and the industrial equipment business in the Social Infrastructure &Industrial Systems segment. The increase was also attributable to higher proftis in the Information &Telecommunication Systems segment owing to an improvement in the profitability of the system
integration business in Japan and the effect of the structural reform implemented in the year ended
March 31, 2017.
Other income decreased ¥88.6 billion to ¥12.0 billion and other expenses decreased ¥5.8 billion to¥140.6 billion, as compared with the year ended March 31, 2017, respectively. The details are as
follows. Net gain on sales and disposal of fixed assets was worsened by ¥17.6 billion and turned to lossof ¥2.5 billion, as compared with the year ended March 31, 2017. Impairment losses decreased ¥19.9
billion to ¥48.6 billion, as compared with the year ended March 31, 2017. This mainly reflected
impairment losses on intangible assets, etc. in the Information & Telecommunication Systems segment.
Net gain on business reorganization and others decreased ¥71.5 billion to ¥9.7 billion, as compared withthe year ended March 31, 2017, due mainly to the absence of partial sale of the shares of Hitachi
Transport System, Ltd. and the sale of Hitachi Koki Co., Ltd. shares recorded in the year ended March
31, 2017. Special termination benefits decreased ¥8.9 billion to ¥15.7 billion, as compared with the year
ended March 31, 2017. Expenses related to competition law and others increased ¥7.5 billion to ¥14.2
billion, as compared with the year ended March 31, 2017.
Financial income (excluding interest income) was ¥7.0 billion, the same level as for the year ended
March 31, 2017, and financial expenses (excluding interest charges) decreased ¥14.9 billion to ¥11.2
billion, as compared with the year ended March 31, 2017.
Share of gains of investments accounted for using the equity method was ¥62.4 billion, an
amelioration of ¥109.6 billion from the year ended March 31, 2017, for which an impairment loss forthe uranium enrichment business at an U.S. equity-method associate was posted in the Social
Infrastructure & Industrial Systems segment.
As a result of the foregoing, EBIT increased ¥169.0 billion to ¥644.2 billion, as compared with theyear ended March 31, 2017.
Interest income increased ¥2.0 billion to ¥14.9 billion and interest charges increased ¥1.5 billion to¥20.5 billion, as compared with the year ended March 31, 2017, respectively.
Income from continuing operations, before income taxes increased ¥169.5 billion to ¥638.6 billion,
as compared with the year ended March 31, 2017.
Income taxes increased ¥6.5 billion to ¥131.7 billion, as compared with the year ended March 31,
2017, due mainly to increased income from continuing operations, before income taxes.
Loss from discontinued operations increased ¥10.0 billion to ¥16.0 billion, as compared with theyear ended March 31, 2017.
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Net income increased ¥152.8 billion to ¥490.9 billion, as compared with the year ended March 31,
2017.
Net income attributable to non-controlling interests increased ¥21.1 billion to ¥127.9 billion, as
compared with the year ended March 31, 2017.
As a result of the foregoing, net income attributable to Hitachi, Ltd. stockholders increased ¥131.7
billion to ¥362.9 billion, as compared with the year ended March 31, 2017.
2) Operations by Segment
The following is an overview of results of operations by segment. Revenues for each segment
include intersegment transactions.
(Information & Telecommunication Systems)
Revenues increased 1% to ¥2,008.9 billion, as compared with the year ended March 31, 2017, due
mainly to higher revenues from system integration business in Japan and the impact of foreign currencytranslation.
Adjusted operating income increased ¥36.2 billion to ¥189.2 billion, as compared with the year
ended March 31, 2017, due mainly to profitability improvement in system integration business in Japanand the effect of structural reform for the IT platform & products business.
EBIT increased ¥62.8 billion to ¥139.2 billion, as compared with the year ended March 31, 2017,
due mainly to a decrease in business structural reform expenses as well as the increase in adjusted
operating income.
(Social Infrastructure & Industrial Systems)
Revenues increased 2% to ¥2,375.0 billion, as compared with the year ended March 31, 2017,
despite lower revenues from the power & energy business and shrink of less profitable business inindustry & distribution field. This mainly reflected increased revenues from the railway systems
business for the U.K. and that in the industrial products business due to the acquisition of Sullair brand
air compressor business.
Adjusted operating income increased ¥38.5 billion to ¥115.5 billion, as compared with the year
ended March 31, 2017, due mainly to an improvement in profitability of business for the industry anddistribution field, power & energy business and industrial products business, despite a decrease inaverage sales price and an increase in procurement cost in elevators and esclators business in China.
EBIT was ¥101.2 billion, an improvement of ¥121.2 billion from the year ended March 31, 2017,
because of the absence of impairment loss recognized in the preceding fiscal year in relation to theuranium enrichment business at an equity-method associate in the U.S.
(Electronic Systems & Equipment)
Revenues decreased 7% to ¥1,086.5 billion, as compared with the year ended March 31, 2017, due
mainly to the impact of deconsolidation of Hitachi Koki Co., Ltd. in the preceding fiscal year, despite
higher sales of semiconductor production equipment at Hitachi Kokusai Electric Inc. and Hitachi HighTechnologies Corporation.
Adjusted operating income increased ¥5.3 billion to ¥86.9 billion, as compared with the year ended
March 31, 2017, due mainly to an increase in profit of Hitachi Kokusai Electric Inc. as a result of higher
sales of semiconductor production equipment.
EBIT increased ¥22.0 billion to ¥88.8 billion, as compared with the year ended March 31, 2017,
due mainly to the increased adjusted operating income as well as a decrease in business structuralreform expenses of Hitachi Kokusai Electric Inc.

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(Construction Machinery)
Revenues increased 27% to ¥959.1 billion, as compared with the year ended March 31, 2017, due
mainly to increased sales in China and other overseas countries, the effect of corporate acquisitions inAustralia and the U.S. conducted by Hitachi Construction Machinery Co., Ltd. in the preceding fiscal
year, and the impact of foreign currency translation.
Adjusted operating income increased ¥66.2 billion to ¥92.5 billion, as compared with the year
ended March 31, 2017, due mainly to the increased revenues because of higher sales and the effect of
the corporate acquisitions.
EBIT increased ¥74.3 billion to ¥97.0 billion, as compared with the year ended March 31, 2017,
due mainly to the increased adjusted operating income as well as an increase in profit of an equitymethod associate.
(High Functional Materials & Components)
Revenues increased 13% to ¥1,657.5 billion, as compared with the year ended March 31, 2017,
due mainly to increased sales of electronics- and automotive-related products at Hitachi Metals, Ltd.
and Hitachi Chemical Company, Ltd., the effect of acquisitions in Italy, etc. by Hitachi Chemical
Company, Ltd., and the increase in sales price linked to higher raw material costs for Hitachi Metals,
Ltd.
Adjusted operating income increased ¥1.9 billion to ¥121.8 billion, as compared with the year
ended March 31, 2017, due mainly to increased revenues, despite of Hitachi Metals, Ltd. having a dropin profitability of heat-resistant exhaust casting components business and aluminum wheels business,and rise in raw materials prices.
EBIT decreased ¥24.6 billion to ¥98.6 billion, as compared with the year ended March 31, 2017,
due mainly to recognition of impairment loss at Hitachi Metals, Ltd. in relation to deteriorated
profitability of the aluminum wheel business as well as absence of gain on business reorganization andothers recorded in the previous fiscal year, and due to posting expenses related to competition law andothers at Hitachi Chemical Company, Ltd.
(Automotive Systems)
Revenues increased 1% to ¥1,001.0 billion, as compared with the year ended March 31, 2017, due
mainly to increased sales in China, despite of sales decrease of car information systems business anddemand decrease in North America.
Adjusted operating income decreased ¥6.7 billion to ¥49.5 billion, due mainly to profitability
deterioration of car information systems business and sales decrease in North America of Clarion Co.,Ltd.
EBIT decreased ¥23.4 billion to ¥42.4 billion, as compared with the year ended March 31, 2017,
due mainly to the decrease in adjusted operating income as well as absence of gain on sales anddisposals of fixed assets in the preceding fiscal year.
(Smart Life & Ecofriendly Systems)
Revenues decreased 3% to ¥540.1 billion, as compared with the year ended March 31, 2017.
Adjusted operating income increased ¥2.6 billion to ¥25.1 billion, due mainly to effects of cost
reduction and structural reform, despite the decline in revenues.
EBIT increased ¥1.5 billion to ¥33.3 billion, as compared with the year ended March 31, 2017, due
mainly to the increase in adjusted operating income and an increase in profit of an equity-method
associate on air compressor business, depite the absence of gain on sales and disposals of fixed assets
posted in previous fiscal year.

-32-

(Others)
Revenues decreased 15% to ¥557.7 billion and adjusted operating income decreased ¥0.9 billion to¥21.4 billion. This was due mainly to the conversion of Hitachi Transport System, Ltd. to an equitymethod associate. EBIT increased ¥1.2 billion to ¥21.8 billion, as compared with the year ended March
31, 2017, due to an improvement on gain and loss on sales and disposals of fixed assets.
3) Revenues by Geographic Area
The following is an overview of revenues attributed to geographic areas based on customer location.
Japan
Revenues in Japan decreased 2% to ¥4,643.0 billion, as compared with the year ended March 31,
2017. This was due mainly to reduced revenues in the Social Infrastructure & Industrial Systems
segment, etc. and due to the conversion of Hitachi Transport System, Ltd. and Hitachi Capital
Corporation to equity-method associates in the previous fiscal year, despite increased revenues in theHigh Functional Materials & Components segment.
Overseas(Asia)
Revenues in Asia increased 12% to ¥2,081.1 billion, as compared with the year ended March 31,
2017. This was due mainly to higher revenues in the Electronic Systems & Equipment segment,
Construction Machinery segment, and High Functional Materials & Components segment, etc.,
despite reduced revenues as result of the conversion of Hitachi Transport System, Ltd. and Hitachi
Capital Corporation to equity-method associates.
(North America)
Revenues in North America increased 3% to ¥1,177.5 billion, as compared with the year ended
March 31, 2017. This was due mainly to the higher revenues in the Social Infrastructure & Industrial
Systems segment gained by the industrial products business expansion by acquisition and higher
reveneues in the Construction Machinery segment, despite reduced revenues in the Electronic
Systems & Equipment segment due to impact of deconsolidation of Hitachi Koki Co., Ltd.
(Europe)
Revenues in Europe decreased 1% to ¥964.4 billion, as compared with the year ended March 31,
2017. This was due mainly to the impact of deconsolidation of Hitachi Koki Co., Ltd. and theconversion of Hitachi Capital Corporation to an equity-method associate. This decrease was almost
partially offset by higher revenues in the Social Infrastructure & Industrial Systems segment,
reflecting substantial sales growth in the railway systems business, and higher revenues in the High
Functional Materials & Components segment due mainly to acquisitions.
(Other Areas)
Revenues in other areas increased 18% to ¥502.3 billion, as compared with the year ended
March 31, 2017. This was due mainly to higher revenues in Construction Machinery segment owing
to acquisitions, etc.
As a result of the foregoing, overseas revenues increased 7% to ¥4,725.5 billion, as comparedwith the year ended March 31, 2017, and the ratio to total revenues was 50%, which was 2% increase
as compared with the year ended March 31, 2017.

-33-

(3) Analysis of Financial Condition and Cash Flows
1) Liquidity and Capital Resources
Our management considers maintaining an appropriate level of liquidity and securing adequate
funds for current and future business operations to be important financial objectives. Through efficientmanagement of working capital and selective investment in new plants and equipment, we are working to
optimize the efficiency of capital utilization throughout our business operations. We endeavor to improve
our group cash management by centralizing such management among us and our overseas financial
subsidiaries. Our internal sources of funds include cash flows generated by operating activities and cashon hand. Our management also considers short-term investments to be an immediately available sourceof funds. In addition, we raise funds both in the capital markets and from Japanese and internationalcommercial banks in response to our capital requirements. Our management’s policy is to finance capital
expenditures primarily by internally generated funds and to a lesser extent by funds raised through theissuance of debt and equity securities in domestic and foreign capital markets. In order to flexibly accessfunding, we maintain our shelf registration with the maximum outstanding balance of ¥300.0 billion.
We maintain commitment line agreements with a number of domestic banks under which we may
borrow in order to ensure efficient access to necessary funds. These commitment line agreements
generally provide for a one-year term, renewable upon mutual agreement between us and each of thelending banks, as well as another commitment line agreement with a contract term of three years endingon July 29, 2019. As of March 31, 2018, our unused commitment lines totaled ¥503.2 billion, includingthese of ¥400.0 billion which the Company maintained.
We receive debt ratings from Moody’s Japan K.K. (Moody’s), Standard & Poor’s Rating Japan(S&P), as well as Rating and Investment Information, Inc. (R&I). Our debt ratings as of March 31, 2018
were as follows.
Rating Company
Moody’s
S&P
R&I

Long-term
A3
AA+

Short-term
P-2
A-2
a-1

With our current ratings, we believe that our access to the global capital markets will remain
sufficient for our financing needs. We seek to improve our credit ratings in order to ensure financial
flexibility for liquidity and capital management, and to continue to maintain access to sufficient funding
resources through the capital markets.

-34-2) Cash Flows(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2018 increased by ¥152.8 billion, as compared with theyear ended March 31, 2017. Net cash outflow from a change in inventories increased by ¥158.4 billion,
as compared with the year ended March 31, 2017. Net cash flow from a change in trage payables
deteriorated by ¥13.6 billion. Net cash flow from a change in trade receivables improved by ¥244.0
billion. As a result, net cash outflow from changes in working capital decreased. As a result of theforegoing, net cash provided by operating activities was ¥727.1 billion in the year ended March 31,
2018, an increase of ¥97.5 billion compared with the year ended March 31, 2017.
(Cash Flows from Investing Activities)
Net amount of investments related to property, plant and equipment* was ¥406.4 billion, adecrease of ¥56.1 billion as compared with the year ended March 31, 2017. Proceeds from sales ofinvestments in securities and other financial assets (including investments in subsidiaries andinvestments accounted for using the equity method) decreased by ¥70.7 billion compared with the year
ended March 31, 2017 for which partial sales of the shares of Hitachi Transport System, Ltd. andHitachi Capital Corporation, and the sale of all shares of Hitachi Koki Co., Ltd were conducted.
Purchase of investments in securities and other financial assets (including investments in subsidiaries
and investments accounted for using the equity method) increased ¥65.8 billion, compared with the year
ended March 31, 2017, due mainly to payment for the acquisition of "Sullair" air compressor business.
As a result of the foregoing, net cash used in investing activities was ¥474.3 billion in the year ended
March 31, 2018, an increase of ¥136.3 billion compared with the year ended March 31, 2017.
* The sum of the purchase of property, plant and equipment, the purchase of intangible assets andthe purchase of leased assets, less the proceeds from sale of property, plant, equipment andintangible assets, the proceeds from sale of leased assets and the collection of lease receivables(Cash Flows from Financing Activities)
The net cash outflow from a change in short-term debt decreased by ¥128.9 billion compared withthe year ended March 31, 2017. Payments related to long-term debt** in the year ended March 31, 2018
were ¥113.5 billion, as compared with ¥115.5 billion of proceeds related to long-term debt in the year
ended March 31, 2017. As a result of the foregoing, net cash used in financing activities was ¥321.4
billion in the year ended March 31, 2018, an increase of ¥111.9 billion compared with the year ended
March 31, 2017.
** The proceeds from long-term debt, less the payments on long-term debt
As a result of the above items, as of March 31, 2018, cash and cash equivalents amounted to¥697.9 billion, a decrease of ¥67.2 billion from March 31, 2017. Free cash flows, the sum of cash flows
from operating and investing activities, were an inflow of ¥252.8 billion in the year ended March 31,
2018, an decrease of ¥38.7 billion from the year ended March 31, 2017.
3) Assets, Liabilities and Equity
As of March 31, 2018, total assets amounted to ¥10,106.6 billion, an increase of ¥442.6 billion
from March 31, 2017. This was due mainly to the acquisition of "Sullair" air compressor business in theSocial Infrastructure & Industrial Systems segment and corporate acquisitions undertaken by Hitachi
Chemical Company, Ltd. in the High Functional Materials &Components segment. Cash and cash
equivalents as of March 31, 2018 amounted to ¥697.9 billion, a decrease of ¥67.2 billion from theamount as of March 31, 2017.

-35-

As of March 31, 2018, total interest-bearing debt, the sum of short-term debt and long-term debt,
amounted to ¥1,050.2 billion, a decrease of ¥126.3 billion from March 31, 2017 as a result of bondredemption and repayment of borrowings. As of March 31, 2018, short-term debt, consisting mainly ofborrowings from banks and commercial paper, amounted to ¥121.4 billion, a decrease of ¥74.9 billion
from March 31, 2017. As of March 31, 2018, current portion of long-term debt amounted to ¥117.1
billion, a decrease of ¥73.0 billion from March 31, 2017. As of March 31, 2018, long-term debt
(excluding current portion), consisting mainly of debentures, and loans principally from banks andinsurance companies, amounted to ¥811.6 billion, an increase of ¥21.6 billion from March 31, 2017.
As of March 31, 2018, total Hitachi, Ltd. stockholders’ equity amounted to ¥3,278.0 billion, an
increase of ¥310.9 billion from March 31, 2017. This is due mainly to posting net income attributable to
Hitachi, Ltd. stockholders. As a result, the ratio of total Hitachi, Ltd. stockholders’ equity to total assets
as of March 31, 2018 was 32.4%, compared with 30.7% as of March 31, 2017.
Non-controlling interests as of March 31, 2018 was ¥1,233.6 billion, an increase of ¥103.7 billion
from March 31, 2017.
Total equity as of March 31, 2018 was ¥4,511.6 billion, an increase of ¥414.6 billion from March
31, 2017. The ratio of interest-bearing debt to total equity was 0.23, compared with 0.29 as of March
31, 2017.
(4) Production, Order Received and Sales
The Hitachi Group does not present production and orders received in amount or volume terms foreach segment since it produces and sells a wide variety of products, there are variety of specifications insame kinds of products and certain products are mass-produced. Regarding sales, see “(2) Analysis ofResults of Operations.”(5) Important Accounting Policies and Estimates
The preparation of the consolidated financial statements in conformity with IFRS requires ourmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Management considers that certain
accounting estimates to be critical, and that their significance to the financial statements and thepossibility that future events affecting the estimate may differ significantly from management’s current
assumptions could have a material impact on the presentation of our financial condition, changes infinancial condition or results of operations. First, the estimates require us to make assumptions about
matters that are highly uncertain at the time the accounting estimates are made. Second, there could be
different estimates that we reasonably could have used for the accounting estimate in the current period,or changes in the accounting estimate that are reasonably likely to occur as time proceeds. Details ofimportant accounting policies and estimates are described in “Consolidated Financial Statements －Notes to Consolidated Financial Statements －(3) Summary of Significant Accounting Policies.”(6) Forward-Looking Statements
Certain statements found in “1. Management Policy, Economic Environment and Challenges
Hitachi Group Faces,” “2. Risks Factors” and “3. Management's Discussion and Analysis ofConsolidated Financial Condition, Results of Operations and Cash Flows” and other descriptions in thisreport may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation
Reform Act of 1995. Such “forward-looking statements” reflect management’s current views withrespect to certain future events and financial performance and include any statement that does notdirectly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,”“estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future eventsand trends may identify “forward-looking statements.” Such statements are based on currently available
information and are subject to various risks and uncertainties that could cause actual results to differ
materially from those projected or implied in the “forward-looking statements” and from historical
trends. Certain “forward-looking statements” are based upon current assumptions of future events-36-

which may not prove to be accurate. Undue reliance should not be placed on “forward-looking
statements,” as such statements speak only as of the date of this report.
Factors that could cause actual results to differ materially from those projected or implied in any“forward-looking statement” and from historical trends include, but are not limited to:・ economic conditions, including consumer spending and plant and equipment investment in Hitachi’smajor markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in
the major industrial sectors Hitachi serves;
・ exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant
sales or in which Hitachi’s assets and liabilities are denominated;
・ uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term
financing;・ uncertainty as to general market price levels for equity securities, declines in which may require
Hitachi to write down equity securities that it holds;
・ fluctuations in the price of raw materials including, without limitation, petroleum and othermaterials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, orshortages of materials, parts and components;
・ the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts forwhich Hitachi uses the percentage-of-completion method to recognize revenue from sales;・ credit conditions of Hitachi’s customers and suppliers;
・ fluctuations in product demand and industry capacity;・ uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact offluctuations in product demand, exchange rates and/or price of raw materials or shortages ofmaterials, parts and components;
・ uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate newtechnologies on a timely and cost-effective basis and to achieve market acceptance for suchproducts;
・ uncertainty as to Hitachi’s ability to attract and retain skilled personnel;
・ increased commoditization of and intensifying price competition for products;
・ uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its
Social Innovation Business;
・ uncertainty as to the success of acquisitions of other companies, joint ventures and strategic alliances
and the possibility of incurring related expenses;
・ uncertainty as to the success of restructuring efforts to improve management efficiency by divestingor otherwise exiting underperforming businesses and to strengthen competitiveness;・ the potential for significant losses on Hitachi’s investments in equity-method associates and joint
ventures;・ general socioeconomic and political conditions and the regulatory and trade environment ofcountries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe,
including, without limitation, direct or indirect restrictions by other nations on imports anddifferences in commercial and business customs including, without limitation, contract terms andconditions and labor relations;・ uncertainty as to the success of cost structure overhaul;・ uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property;
・ uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings ofwhich the Company, its subsidiaries or its equity-method associates and joint ventures have become
or may become parties;
・ the possibility of incurring expenses resulting from any defects in products or services of Hitachi;
・ the possibility of disruption of Hitachi’s operations by natural disasters such as earthquakes andtsunamis, the spread of infectious diseases, and geopolitical and social instability such as terrorism
and conflict;・ uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as
Hitachi’s ability to protect its confidential information or that of its customers; and・ uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its employee benefitrelated costs.
The factors listed above are not all-inclusive and are in addition to other factors contained
elsewhere in this report and in other materials published by Hitachi.
-37-

4. Material Agreements, etc.
Cross License Agreement
Country

Item undercontract

Contract
description

U.S.A.

Information
handling
systemsCrosslicense ofpatents

Hitachi, Ltd.
(The Company)

HP Inc.
Hewlett Packard
U.S.A.
Enterprise Company

Allproducts
and services

Crosslicense ofpatents

Hitachi, Ltd.
(The Company)

EMC Corporation

U.S.A.

Information
handling
systemsCrosslicense ofpatents

Hitachi-GE
Nuclear Energy,
Ltd.
(Consolidated
subsidiary)

GE-Hitachi
Nuclear Energy
Americas LLC

U.S.A.

NuclearreactorsystemsCrosslicense ofpatents andtechnology

Party

Party

Hitachi, Ltd.
(The Company)

International
Business Machines
Corp.

-38-

Contract period
From January 1, 2008
to the expiration ofpatents applied on or
before January 1,
2023
From March 31, 2010
to the expiration ofpatents applied on or
before December 31,
2014
From January 1, 2003
to the expiration ofpatents applied on or
before December 31,
2002
From October 30,
1991 to June 30, 2023

5. Research and Development
The Hitachi Group (the Company and consolidated subsidiaries) is conducting business in a broad
range of fields, from information and telecommunications systems to automotive systems. The HitachiGroup places priority on allocating R&D resources on the Social Innovation Business, a core business ofthe Hitachi Group, and makes efforts for continuing and developing business.
In order to strengthen the global competitiveness of the business, the Hitachi Group works in R&D
activities to identify, share and resolve the customers’ problems, and is focusing on developing competitive
products and services to lead globalization of operations. In addition, the Hitachi Group conducts advanced
research to cultivate future core businesses.
The Hitachi Group also works to improve the efficiency of R&D through close coordination between
the R&D divisions of the Company and group companies. Furthermore, the Hitachi Group is actively
expanding collaborations with universities and other research institutions as well as with outside firms.
The Company has established an R&D framework to accelerate global growth through the Social
Innovation Business. In order to support the global growth, it aims to promote R&D that can meet local
needs quickly by expanding R&D facilities and personnel in North America, Europe, China, Asia, India andSouth America and accelerating locally-led R&D. The Company reorganized its R&D facilities in Japanand overseas to establish an R&D structure comprising the “Global Center for Social Innovation,” which
discovers customers’ issues and creates new solutions in collaboration with customers, the “Center forTechnology Innovation,” which creates innovative products and services and supports development of new
solutions by applying and integrating technology platforms in focused areas, and the “Center for
Exploratory Research,” which cultivates new areas through exploratory basic research based on our creative
vision in the form of open innovation. With this R&D structure, the Company aims to further promote R&D
that will contribute to solving customers’ issues.
The Hitachi Group’s R&D expenditures for the fiscal year ended March 31, 2018 were ¥332.9 billion,
3.6% of revenues. A breakdown of R&D expenditures by segment is shown below.
(Billions of yen)Segment

AmountInformation & Telecommunication Systems

48.0

Social Infrastructure & Industrial Systems

56.1

Electronic Systems & Equipment

52.1

Construction Machinery

24.0

High Functional Materials & Components

48.5

Automotive Systems

69.2

Smart Life & Ecofriendly Systems

7.2

Others4.4

Corporate Items

22.9
Total

332.9

Notable achievements of R&D activities in the fiscal year ended March 31, 2018 are as follows.
-

Demonstration of the contribution that work style advice provided by an AI can make to improving anorganization’s activities (Information & Telecommunication Systems segment)
We developed technology that involves an Artificial Intelligence (AI) automatically creating anddistributing, on a daily basis, individually customized advice that is useful for improving anorganization’s activities. This was accomplished by organizing activity data collected by a wearable
sensor into subsections such as time and conversation partner, and then inputting said data into the AI.
Using this technology, we demonstrated that work style advice for employees provided by the AI cancontribute to improving an organization’s activities and that there is a correlation between the amount ofchange in an organization’s activities and its purchase order achievement rate.
-39-

-

Development of business-oriented AI technology that utilizes competitive self-play learning(Information & Telecommunication Systems segment)
We developed business-oriented AI technology that learns with the intent of producing better
results. This was accomplished by using a group of multiple interconnected AIs to represent a businessenvironment that has a significant number of uncertainties and then organizing competitive self-playlearning with other groups of AI in a computer simulation that does not rely on actual data provided bypeople.

-Development of technology that enables the observation of magnetic fields at the highest resolution in
the world (Electronic Systems & Equipment segment)
We developed technology that enables the observation of magnetic fields at the world’s highest
resolution (magnetic field distribution within magnetic multilayer materials at 0.67nm) using an atomicresolution holography electron microscope. This technology reverses the magnetic field in a material
after applying a high-intensity pulsed magnetic field to the material to eliminate the electric field
information with high precision, and automatically compensates for the effect of the high-intensity
pulsed magnetic field. (This is the result of development with RIKEN. This research was supported inpart by the Cabinet Office’s Funding Program for World-Leading Innovative R&D on Science andTechnology and by the Japan Science & Technology Agency’s Core Research for Evolutional Scienceand Technology (CREST) Program).

-

Development of ink that uses color to visualize temperature management aberrations, which contributes
to safe and reliable quality control (Social Infrastructure & Industrial Systems segment)
We developed ink that changes color based on any deviation from the temperature range set for eachproduct, and, as this process is irreversible, cannot change back to its original color even if thetemperature returns to the preset range. The goal of this development was to create and apply IoT
services that enable uninterrupted temperature management on an individual product level from theproduction through to the consumption of products such as fresh foods and medical supplies.

-

Development of ultrasound measurement technology that enables simple, painless and highly accurate
breast cancer screening (Electronic Systems & Equipment segment)
We developed ultrasound measurement technology capable of detecting very small tumors without
relying on examiner skill level. This was accomplished by transmitting ultrasonic waves, which do not
involve irradiation or pain, from 360°, receiving and analyzing the sound waves that are reflected, andcompensating for the effect of the vessel on ultrasonic wave propagation in the measurements.

-40-

III. Property, Plants and Equipment
1. Summary of Capital Investment, etc.
The Hitachi Group (the Company and consolidated subsidiaries) selectively invests in R&D andproduct fields expected to grow over the long term, and it also invests to streamline manufacturing process,etc. and to improve the reliability of its products.
Capital investment (based on the amount recorded as tangible fixed assets and the investment
property) in the fiscal year ended March 31, 2018 was ¥374.9 billion. A breakdown of capital investment
by segment is as follows.

Segment

CapitalChange frominvestment
preceding fiscal(Billions of yen)year (%)

Information &Telecommunication
Systems

35.5

112

Social Infrastructure &Industrial Systems

79.9

127

Electronic Systems &Equipment

19.4

83

Construction Machinery

18.5

132

High Functional Materials& Components

131.3

131

Automotive Systems

66.1

131

Smart Life & Ecofriendly
Systems

8.5

149

Others13.1

73

Main purpose of investment
Data center equipment, streamline
development and production of other products
Facility for nuclear power generation system,
streamline development and production ofother products
Increase production of semiconductor
processing equipment, streamline development
and production of other products
Streamline production of construction
machinery, opening and relocation of offices
Increase and streamline production of specialty
steel products, magnetic materials andapplications, functional components andequipment, wires, cables and related products,
etc.
Increase production of automotive equipment,
etc.
Streamline development and production of
products
System development facilities

Subtotal
372.5
100
Corporate Items &2.3
64
Eliminations
Total
374.9
99
(Notes) 1. The figures in the above table include the amount of the tangible fixed assets leased under finance leasetransactions and the investment property, each of which is recorded as property, plant and equipment
and other non-current assets, respectively.
2. These investments were mostly financed with the Hitachi Group’s own capital.

-41-

2. Major Property, Plants and Equipment
The Hitachi Group (the Company and consolidated subsidiaries) engages in diverse business
operations in Japan and overseas. It discloses information on major property, plants and equipment
represented in breakdown by segment and major facilities of the Company and consolidated subsidiaries.
The situation at the end of the fiscal year ended March 31, 2018 is as follows.
(1) Breakdown by Segment(As of March 31, 2018)
Book value (Millions of yen)Segment

Information &Telecommunication
Systems

Land[Area inthousandsof m2]
28,373[1,095]Social Infrastructure &Industrial Systems

95,845[12,703]

Electronic Systems &27,455Equipment[1,055]Construction Machinery
High Functional
Materials &Components
Automotive Systems

58,950[10,622]84,425[17,189]
50,793[5,877]

Buildings
andstructures

Machineryand vehicles

Tools,
furnitureandfixturesOther

71,52325,09245,411

20,514

1,805

192,718

73,388135,034

48,72725,2898,730

131,694445,319

77,47651,05917,56914,690

3,323

3,349

117,445

20,006

104,580

55,645

8,030

66,135

6,647

299,987

23,469144,476

244,701

29,915

3,369

62,628569,51451,70978,493

146,21222,916

1,046

32,907332,367

33,958Constructionin progress

Total

Number of
employees

Smart Life &Ecofriendly Systems

8,532[2,254]

14,03814,440

10,571139

3,217

50,937

11,290

Others36,636[1,858]60,967

4,756

12,006709

1,036

116,110

13,286

391,009[52,652]

660,170

557,142

168,828

103,965

243,283 2,124,397

304,582

26,386434

4,121(1,281)

686,556

557,576

172,949

102,684

Subtotal
Corporate Items &Eliminations
Total(29,251)[942]
361,758[53,594]

21

430

2,693

243,304 2,124,827

307,275(Notes) 1. The “Book value - Other” column includes the amount of finance lease assets, etc.
2. The figures in the above table include ¥73,415 million of operating lease assets for leasing business.
3. The figures in the above table include ¥25,122 million of finance lease assets leased externally.
4. Except for the figures in the above table, there are operating lease assets leased, mainly machinery, etc.
The annual lease fee for such assets was ¥125,000 million.

-42-

(2) The Company(As of March 31, 2018)
Facility(Main location)

Segment

Book value (Millions of yen)
Details ofLand
Tools,
Number ofmajor facilities [Area in Buildings Machinery furniture
Construction
and
Other
Total employees
and equipment thousands andandin progressstructures vehicles
fixturesof m2]

Financial
Institutions
Business Unit,
SystemGovernment,
development
Public Corporation
Information & facilities,& Social
Telecommuni- manufacturing
Infrastructure
cationfacilities for
Business Unit andSystemsservers,
Systems &mainframes,
Services Business
etc.
Division(Kawasaki,
Kanagawa)
Research &Development
Group
Others
R&D facilities(Kokubunji,
Tokyo)
Manufacturing
Railway Systems Social
Infrastructure facilities for
Business Unit
& Industrial railway(Kudamatsu,
Systems
vehicles, etc.
Yamaguchi)
Head Office(Chiyoda-ku,
Corporate
Other facilities
Tokyo)
Corporate HospitalGroup
Corporate(Hitachi, Ibaraki)

Medicalfacilities

Nuclear Energy
Business Unit,
SocialPower Business
Infrastructure
Unit, and Energy& Industrial
Solutions Business
Systems
Unit(Hitachi, Ibaraki)

Manufacturing
facilities for
power
generating
equipment,
etc.

Manufacturing
facilities for
medicalequipments
Manufacturing
facilities forindustiralmachinery andServices &Socialplants,Platforms
Infrastructure switchboards
Business Unit
& Industrial and calculation(Hitachi, Ibaraki) Systems
controlequipment,
systemdevelopment
facilities
IT Services
SystemDivision
Othersdevelopment(Chiyoda-ku,
facilities
Tokyo)
Defense Systems Social
SystemBusiness Unit
Infrastructuredevelopment(Yokohama,& Industrial
facilities
Kanagawa)
Systems
Healthcare
Electronic
Business Unit
Systems &(Taito-ku, Tokyo) Equipment

15,307[553]

49,852

1,444

24,420 1,433

864

93,321

9,861

6,017
[776]

13,833

2,524

3,482

-

368

26,225

2,599

846
[666]

14,162

5,115

1,170

6

1,583

22,885

2,272

5,234
[849]

8,940

387

2,180

-

2

16,743

1,122

63
[53]

14,672

35

1,629

192

19

16,613

1,473

9,803
[3,315]

2,931

717

905

673

1,213

16,245

1,577

5,557
[86]

3,584

901

1,198

954

448

12,645

3,038

635
[206]

5,597

1,192

297

238

257

8,219

5,950

[-]

1,393

0

6,067

-

21

7,482

384

107
[7]

5,839

361

707

154

-

7,170

451

-43-

(3) Domestic subsidiaries(As of March 31, 2018)
Facility(Main location)

Segment

HitachiAutomotive
Automotive
Systems, Ltd.
Systems(Hitachinaka,Ibaraki)
Hitachi Metals,
HighLtd., Yasugi
Functional
Works
Materials &(Yasugi, Shimane) Components
HitachiConstruction
Machinery Co.,
Construction
Ltd., HitachinakaMachinery
Rinko Works(Hitachinaka,Ibaraki)
HitachiConstruction
Machinery Co.,
Construction
Ltd., Tsuchiura
Machinery
Works(Tsuchiura,
Ibaraki)Book value (Millions of yen)
Details ofLand
Tools,
Number ofmajor facilities [Area in Buildings Machinery furniture
Construction
and
Other
Total employees
and equipment thousands andandin progressstructures vehicles
fixturesof m2]
Manufacturing
facilities forautomotive
equipment

9,496[2,538]31,10650,6027,674

07,747 106,625

9,014

Manufacturing
facilities for
specialty steel
products

8,568[1,108]10,05132,286

2,009

-

4,727

57,641

1,612

Manufacturing
facilities forconstruction
machinery

12,330[495]

13,878

3,205

64

-

0

29,479306

Manufacturing
facilities forconstruction
machinery

5,840[5,068]

11,417

9,393

1,677

-

541

28,8703,017Electronic
Systems &Equipment

Manufacturing
facilities forsemiconductor
processing
equipment andtest andmeasurement
equipment,
etc.

82
[115]

15,157

2,656

5,794

-

352

24,042

2,394

Hitachi Chemical High
Functional
Company, Ltd.,
Shimodate Works Materials &(Chikusei, Ibaraki) Components

Manufacturing
facilities forcircuit board
materials, etc.

4,538
[678]

7,749

9,712

648

50

537

23,234

1,666

Hitachi Chemical
Company, Ltd.,
Yamazaki Works(Hitachi, Ibaraki)

High
Functional
Materials &Components

Manufacturing
facilities forsemiconductormaterials, etc.

892
[453]

10,891

8,862

618

38

520

21,821

971

Hitachi Metals,Ltd., Ibaraki
Works(Hitachi, Ibaraki)

High
Functional
Materials &Components

Manufacturing
facilities forwires andcables andrubberproduct, etc.

4,682
[1,197]

7,653

2,279

742

114

3,733

19,203

1,503

Hitachi Building
SocialSystems Co., Ltd.,Infrastructure
Head Office
Other facilities& Industrial(Chiyoda-ku,
Systems
Tokyo)

7,711
[108]

9,193

536

948

-

499

18,887

1,712

High
Hitachi Metals
Functional
Neomaterial, Ltd.
Materials &(Suita, Osaka)
Components

11,207
[124]

1,987

3,392

604

-

400

17,590542

Hitachi HighTechnologies
Corporation,
Naka Area(Hitachinaka,Ibaraki)

Manufacturing
facilities for
specialty steel
products-44-

(4) Overseas subsidiaries(As of March 31, 2018)
Subsidiary(Main location)

Segment

Book value (Millions of yen)
Details ofLand
Tools,
major facilities [Area in Buildings Machinery furniture
Construction
and
Other
and equipment thousands andandin progressstructures
vehiclesfixturesof m2]

SocialHorizon Nuclear
Land, etc. forInfrastructure
Power Limited
nuclear power& Industrial(Gloucester, U.K.)
plant
Systems
Waupaca Foundry, HighManufacturing
Inc.
Functional
facilities for(Wisconsin,
Materials & automotive
U.S.A.)
Components components
HitachiAutomotive
Manufacturing
Systems Mexico, Automotive facilities for
S.A. de C.V.
Systems
automotive(Querétaro,
equipment
Mexico)HitachiAutomotive
Manufacturing
Systems Americas, Automotive facilities for
Inc.
Systems
automotive(Kentucky,
equipment
U.S.A.)
Information &Hitachi Vantara
TelecommuniCorporation
Other facilities
cation(California,
Systems
U.S.A.)

Total

Number of
employees

58,995[4,430]

314

11

1,032

-

120,977

181,329295

746[5,740]

16,63935,197

3,244

-

3,342

59,168

4,246

3,016
[488]

8,710

27,720

2,183

-

5,965

47,594

3,670

362[1,242]

8,417

15,170

4,601

-

7,324

35,874

3,626

[-]

-

17,494

12,7165,53
7-35,747

8,051(Note) The figures for Horizon Nuclear Power Limited and Hitachi Vantara Corporation are presented inconsolidated basis of each company.

-45-

3.Plans for Capital Investment, Disposals of Property, Plants and Equipment, etc.
The Hitachi Group (the Company and consolidated subsidiaries) engages in diverse operations inJapan and overseas, and has not decided on specific plans to newly install or expand each of facilities as ofthe end of the fiscal year. For this reason, it discloses amounts of capital investment by segment.
The amount of capital investment for the fiscal year ending March 31, 2019 will be ¥420.0 billion(new installation and expansions, based on the amount recorded as tangible fixed assets and the investment
property), and a breakdown by segment is as follows.
Segment
Information &Telecommunication Systems

Amount(Billions of yen)

Main purpose of investment

40.0

Renewal of data center equipment, streamline
development and production of other products

Social Infrastructure &Industrial Systems

80.0

Facility for nuclear power generation systems,
manufacturing facilities for railway systems,
streamline development and production of otherproducts

Electronic Systems &Equipment

20.0

Development of semiconductor processing equipment,
streamline development and production of otherproducts

Construction Machinery

30.0

Streamline production of construction machinery,
opening and relocation of offices

High Functional Materials& Components

150.0

Increase and streamline production of specialty steel
products, functional components and equipment, wires,
cables and related products, increase production ofmagnetic materials and applications

Automotive Systems

70.0

Increase production of automotive equipment, etc.

Smart Life & Ecofriendly
Systems

15.0

Streamline development and production of products,
delivery center

Others15.0

System development facilities

Subtotal

420.0

-

0.0

-

420.0

-

Corporate Items &Eliminations
Total(Notes) 1. The figures in the above table include the amount of the tangible fixed assets leased under finance leasetransactions and the investment property, each of which is recorded as property, plant and equipment
and other non-current assets, respectively.
2. These planned investments are expected to be mostly financed with the Hitachi Group’s own capital.
3. There are no plans to dispose or sell principal facilities, with the exception of disposing and selling
facilities due to routine upgrading.

-46-

IV. Information on the Company
1. Information on the Company’s Stock, etc.
(1) Total number of shares, etc.
1) Total number of shares
Class

Total number of shares authorized to
be issued (shares)

Common stock

10,000,000,000

Total

10,000,000,000(Note) Since the item of share consolidation (to consolidate every five Hitachi shares into one share and to change the total sharesauthorized to be issued by the Company from 10 billion shares to 2 billion shares) was approved at the general meeting ofshareholders held on June 20, 2018, the toal shares authorized to be issued by the Company shall be 2,000,000,000 shares on
October 1, 2018.

2) Issued shares
Number of sharesissued as of the endof fiscal year (shares)(March 31, 2018)

Class

Number of sharesissued as of thefiling date (shares)(Note 1)
(June 29, 2018)

Commonstock

4,833,463,387

4,833,463,387

Total

4,833,463,387

4,833,463,387

Stock exchange on which
the Company is listed

Tokyo, Nagoya-

Description

The number of shares
per one unit of sharesis 1,000 shares.
(Note 2)-

(Notes) 1. The "Number of shares issued as of the filing date" does not include shares issued upon exercise of stock acquisition rightsfrom June 1, 2018 to the filing date.
2. At the Board of Directors meeting held on April 27, 2018, the Company decided to change the number of shares per one
unit from 1,000 shares to 100 shares on October 1, 2018.

-47-

(2) Information on the stock acquisition rights, etc.
1) Details of stock option plans

Name
Date of resolution
Category andnumber of person towhom stockacquisition rights are
grantedNumber of stockacquisition rights
Class, detail andnumber of shares tobe issued upon
exercise of stockacquisition rights
Amount to be paid in
upon exercise ofstock acquisitionrightsExercise period ofstock acquisitionrightsIssue price for sharesissued upon exerciseof stock acquisitionrights and amount of
capitalization
Conditions for the
exercise of stockacquisition rights
Matters regarding
acquisition of stockacquisition rights
through transfer
Matters regarding
substitute payment
Matters regarding
grant of stockacquisition rights
upon organizational
restructuring

The First Stock
Acquisition Rights ofHitachi, Ltd.
(Note 1)The Second Stock
Acquisition Rights ofHitachi, Ltd.
(Note 1)The Third Stock
Acquisition Rights ofHitachi, Ltd.
(Note 2)June 29, 2016

April 6, 2017

April 11, 2018

31 Executive Officers of
the Company
42 Corporate Officers of
the Company

33 Executive Officers of
the Company
37 Corporate Officers of
the Company

33 Executive Officers of
the Company
35 Corporate Officers of
the Company

21,731[15,750]
Common stock
2,173,100 shares(Note 3)
[1,575,000 shares](Note 3)22,758[17,090]
Common stock
2,275,800 shares(Note 3)
[1,709,000 shares](Note 3)

¥1 per share¥1 per share¥1 per share

From July 15, 2016
to July 14, 2046

From April 27, 2017
to April 26, 2047

From April 27, 2018
to April 26, 2048

Issue price: ¥269
(Note 4)
Amount of capitalization:(Note 5)

Issue price: ¥368.6(Note 4)
Amount of capitalization:(Note 5)

Issue price: ¥486.2(Note 4)
Amount of capitalization:(Note 5)(Note 6, 7)(Note 6, 7)(Note 6, 7)

Acquisition of stockacquisition rights throughtransfer shall be subject
to the approval of theBoard of Directors.

Acquisition of stockacquisition rights throughtransfer shall be subject
to the approval of theBoard of Directors.

Acquisition of stockacquisition rights throughtransfer shall be subject
to the approval of theBoard of Directors.

－

－

－

(Note 8)(Note 8)17,399Common stock
1,739,900 shares(Note 3)(Note 8)(Notes) 1. The information regarding the First Stock Acquisition Rights and the Second Stock Acquisition Rights are that as ofthe end of fiscal year (March 31, 2018). The number of stock acquisition rights and the number of shares to be issued
upon exercise of stock acquisition rights in brackets in the lower row is information as of the end of the last month
ended before the filing date (May 31, 2018). With regard to the other items, there is no change from the information asof the end of fiscal year.
2. The information regarding the Third Stock Acquisition Rights, information as of the last month ended before the filingdate (May 31, 2018).
3. If the Company implements a stock split (including gratis allotment of shares of common stock; the same shall apply
to references to a stock split hereinafter) or a reverse stock split with respect to common stock of the Company after-48-

the date of allotment of the stock acquisition rights, the Number of Shares to be Issued with respect to the stockacquisition rights not exercised at that time will be adjusted in accordance with following formula:
Number of Shares to be Issued
Number of Shares to be
Ratio of stock split or=×after adjustment
Issued before adjustment
reverse stock split
In addition, if there is an unavoidable ground requiring an adjustment of the Number of Shares to be Issued, theNumber of Shares to be Issued may be adjusted to the extent necessary by a resolution of the Board of Directors.
Any fractions of less than one share resulting from the adjustment will be rounded down.
4. Issue price for shares issued upon exercise of stock acquisition rights is the sum of the amount to be paid in upon
exercise of each of the stock acquisition rights (¥1 per share) and the fair value of each of the stock acquisition right ascalculated at the date of allotment.
5. The amount of common stock to be increased upon issuing shares through the exercise of stock acquisition rights shallbe one half of the maximum amount of common stock, etc. to be increased calculated in accordance with Article 17,
Paragraph 1 of the Ordinance on Company Accounting. Any fractions of less than one yen resulting from thecalculation shall be rounded up to the nearest yen.
6. A holder of stock acquisition rights may exercise all the stock acquisition rights together only within 10 days (in casethe last day is not a business day, the following business day) from the day immediately following the date on which
he/she ceases to be an Executive Officer, a Director or a Corporate Officer of the Company.
7. The number of stock acquisition rights which a holder of stock acquisition rights may exercise shall be determinedbased on the ratio of (i) the total shareholder return for shares of Hitachi for three years from the beginning of the
fiscal year in which the date of allotment of the stock acquisition rights falls to (ii) the growth rate of TOPIX (Tokyo
Stock Price Index) for the same period (the “TSR/TOPIX Growth Rate Ratio”), in accordance with the stock priceconditions:a. In case the TSR/TOPIX Growth Rate Ratio is 120% or more
All the stock acquisition rights allotted (the “Allotted Rights”) may be exercised.
b. In case the TSR/TOPIX Growth Rate Ratio is 80% or more but less than 120%
Only a part of the Allotted Rights may be exercised according to the degree of the TSR/TOPIX Growth Rate
Ratio (*).
*Number of stock acquisitionrights exercisable=

Number of
TSR/TOPIX×{(× 1.25) – 0.5}
Allotted Rights
Growth Rate Ratio

Any fraction less than one stock acquisition right will be rounded down.
c. In case the TSR/TOPIX Growth Rate Ratio is less than 80%
No Allotted Rights may be exercised.
8. In the event that the Company engages in a merger (only if the Company is to be dissolved as a result of the merger),an absorption-type company split or incorporation-type company split (in each case, only if the Company is to be a
split company), or share exchange or share transfer (in each case, only if the Company is to be a wholly-owned
subsidiary) (hereafter all of which are collectively referred to as “Corporate Reorganization”), then stock acquisitionrights for the entities specified under Article 236, Paragraph 1, Item 8 (a) through (e) of the Companies Act (suchentity hereinafter referred to as the “Reorganized Company”) shall be issued to the Stock Acquisition Right Holders
holding stock acquisition rights remaining in effect (the “Remaining Stock Acquisition Rights”) immediately prior to
the effective date of the Corporate Reorganization (hereinafter respectively referring to an effective date of absorptiontype merger in case of an absorption-type merger, a date of incorporation of a company incorporated through aconsolidation-type merger in case of a consolidation-type merger, an effective date of absorption-type company split
in case of an absorption-type company split, a date of incorporation of a company incorporated through anincorporation-type company split in case of an incorporation-type company split, an effective date of a share exchange
in case of a share exchange, or a date of incorporation of a wholly owning parent company incorporated through sharetransfer). However, these stock acquisition rights shall be granted only if provisions for issuing the stock acquisitionrights of the Reorganized Company in accordance with the following conditions are included in an absorption-typemerger agreement, a consolidation-type merger agreement, an absorption-type company split agreement, anincorporation-type company split plan, a share exchange agreement, or a share transfer plan.
(1) The number of stock acquisition rights of the Reorganized Company to be issued
The number of stock acquisition rights equal to the number of Remaining Stock Acquisition Rights held byrespective Stock Acquisition Right Holders shall be issued.
(2) The class of shares of the Reorganized Company to be issued upon exercise of stock acquisition rights
Common shares of the Reorganized Company shall be issued.
(3) The number of shares of the Reorganized Company to be issued upon exercise of stock acquisition rights
The number shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights, taking into account the conditions and other factors concerning Corporate Reorganization.
(4) Amount of assets to be contributed upon the exercise of stock acquisition rights
The amount of assets contributed upon the exercise of stock acquisition rights to be issued shall be amountderived by multiplying the amount to be paid in per share to be delivered upon exercise of stock acquisitionrights of the Reorganized Company (the “Post-reorganization Exercise Price”) prescribed below by the numberof shares of the Reorganized Company to be issued determined in accordance with paragraph (3) of this section.
The Post-Reorganization exercise price shall be one yen.
(5) Exercise period of stock acquisition rights
The exercise period of stock acquisition rights shall be from the later of the first day of the exercise period ofstock acquisition rights or the effective date of the Corporate Reorganization to the expiration date of theexercise period of stock acquisition rights.
(6) Matters concerning common stock and capital reserve to be increased due to the issuance of shares upon theexercise of stock acquisition rights
The matters shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights.
(7) Restrictions on acquisition of stock acquisition rights through transfer
The acquisition of stock acquisition rights through transfer shall be subject to the approval of the ReorganizedCompany.
(8) Conditions for the exercise of stock acquisition rights-49-

The matters shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights.
(9) Matters concerning the acquisition of stock acquisition rights
The matters shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights.

2) Details of shareholder right plans
Not applicable.
3) Details of other stock acquisition rights, etc.
Not applicable.
(3) Information on moving strike convertible bonds, etc.
Not applicable.

-50-(4) Changes in the total number of issued shares and the amount of common stock and other
Change in
the total
number ofissued shares(shares)

Date

From April 1, 2013
to March 31, 2014
From April 1, 2014
to March 31, 2015
From April 1, 2015
to March 31, 2016
From April 1, 2016
to March 31, 2017
From April 1, 2017
to March 31, 2018

Change in Balance of Change in Balance ofBalance of thecommon common capital
capitaltotal number of
stock
stock
reserve
reserveissued shares(Millions (Millions (Millions (Millions(shares)of yen)of yen)of yen)of yen)-4,833,463,387-

458,790-

176,757-

4,833,463,387-

458,790-

176,757-

4,833,463,387-

458,790-

176,757-

4,833,463,387-

458,790-

176,757-

4,833,463,387-

458,790-

176,757(5) Shareholders composition(As of March 31, 2018)
Status of shares (one unit of stock: 1,000 shares)
Foreign corporations,
Financial
Class ofGovernment
etc.
Individuals
Other
Financial instruments
shareholders
andand others
institution business institution
Nonmunicipality
Individuals
operator
individuals

Total

Number ofshareholders

2

Number ofsharesless than one
unit (shares)

236

76

2,505

1,061

123

261,271265,274-

46 1,502,220

111,30975,784

2,165,509

441

957,520 4,812,829

20,634,387

2.31

1.57

44.99

0.01

Share
ownership(units)Ownership
percentageof shares
(%)

0.00

31.21

19.90

100.00-(Notes) 1. Of 5,735,947 shares of treasury stock, 5,735 units are included in the “Individuals and others”
column, while 947 shares are included in the “Number of shares less than one unit” column.
2. Of the shares registered in the name of Japan Securities Depository Center, Incorporated (account for
managing stocks whose shareholders have not transferred titles), 26 units are included in the “Other
institution” column and 827 shares are included in the “Number of shares less than one unit” column.

-51-

(6) Major shareholders(As of March 31, 2018)

Name

Address

The Master Trust Bank ofJapan, Ltd. (Trust Account)
Japan Trustee Services Bank,
Ltd. (Trust Account)Hitachi Employees’
Shareholding Association
Nippon Life Insurance
Company
Japan Trustee Services Bank,
Ltd. (Trust Account 9)
State Street Bank West ClientTreaty 505234(Standing proxy: Mizuho Bank,Ltd.)

11-3, Hamamatsucho 2-chome,
Minato-ku, Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
6-6, Marunouchi 1-chome, Chiyodaku, Tokyo
6-6, Marunouchi 1-chome, Chiyodaku, Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
1776 Heritage Drive, North Quincy,
MA 02171, U.S.A.
(15-1, Konan 2-chome, Minato-ku,
Tokyo)

Japan Trustee Services Bank,
Ltd. (Trust Account 5)

Share
Ownership(shares)

Ownership
percentage to thetotal number ofissued shares(excluding treasury
stock) (%)

315,175,000

6.53

289,061,315

5.99

99,765,384

2.07

93,264,995

1.93

92,858,000

1.92

92,679,162

1.92

8-11, Harumi 1-chome, Chuo-ku,
Tokyo91,756,000

1.90

The Dai-ichi Life Insurance
Company, Limited

13-1, Yurakucho 1-chome, Chiyodaku, Tokyo

71,361,222

1.48Japan Trustee Services Bank,
Ltd. (Trust Account 7)
Japan Trustee Services Bank,
Ltd. (Trust Account 1)

8-11, Harumi 1-chome, Chuo-ku,
Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo70,797,000

1.47

68,201,000

1.41

1,284,919,078

26.62

Total

-

(Notes) 1. The number of shares held by The Dai-ichi Life Insurance Company, Limited includes its contributionof 6,560,000 shares to the retirement allowance trust (the holder of said shares, as listed in the
Shareholders’ Register, is “Dai-ichi Life Insurance Account, Retirement Allowance Trust, Mizuho
Trust & Banking Co., Ltd.”).
2. Some reports on substantial shareholdings regarding the Company under the Financial Instruments andExchange Act are available for public inspection. However, the information in the reports is notdescribed in the above table since the Company does not confirm the actual status of shareholdings asof the record date for the annual general meeting of shareholders held on June 20, 2018. The major
contents of the reports are as follows.
Holders
Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued shares

Mitsubishi UFJ Trust and Banking Corporation and twoother persons
November 13, 2017
266,423,703 shares
5.51%
-52-

Holders
Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued shares
Holders
Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued sharesBlackRock Japan Co. Ltd and seven other persons
April 14, 2017
304,755,969 shares
6.31%
Sumitomo Mitsui Trust Bank, Limited and two otherpersons
July 31, 2014
244,372,374 shares
5.06%

The following report on substantial shareholding regarding the Company under the Financial
Instruments and Exchange Act has become available for public inspection from April 1, 2018 to thefiling date.
Holders
Asset Management One Co., Ltd. and three other persons
Date on which the duty to file report May 15, 2018
Number of shares
242,554,448 shares
Ownership percentage to the total
5.02％
number of issued shares-53-

(7) Information on voting rights
1) Issued sharesClassification(As of March 31, 2018)
Number of voting
Description
rightsNumber of shares (shares)

Shares without voting right
Shares with restricted voting right(treasury stock, etc.)
Shares with restricted voting right(others)
Shares with full voting right (treasury
stock, etc.)

－

－

－

－

－

－

－

－

－

－

－

Common stock

5,901,000

Shares with full voting right (others)

Common stock

4,806,928,000

Shares less than one unit

Common stock

20,634,387－－

Number of issued shares

4,833,463,387－－

Total number of voting rights－

4,806,928

4,806,928－－(Note) The “Shares with full voting right (others)” column includes 26,000 shares registered in the name of Japan
Securities Depository Center, Incorporated (account for managing stocks whose shareholders have nottransferred titles) and 26 voting rights for those shares.
2) Treasury stock, etc.
(As of March 31, 2018)

Name ofshareholder

Hitachi, Ltd.
Aoyama Special
Steel Co., Ltd.
ISHIIDENKOSHA
Co., Ltd.
SAITAKOUGYOU CO.,LTD.
Nitto Jidosha
Kiki K.K.
Mizuho Co., Inc.
Total

Address

Number of
Ownership
Number ofshares held
percentage toshares held
under the Total shares
the total
under own name names of held (shares) number of(shares)othersissued shares(shares)(%)

6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
1-12, Minato 1-chome,
Chuo-ku, Tokyo
1-11, Oroshishinmachi 3chome, Higashi-ku, Niigatashi, Niigata
5-3, Takinogawa 5-chome,
Kita-ku, Tokyo
3268, Nagaoka,
Ibarakimachi,
Higashiibaraki-gun, Ibaraki
4-1, Koishikawa 5-chome,
Bunkyo-ku, Tokyo
－-54-

5,735,000－

5,735,000

0.12

10,000－10,000

0.00

1,000

－

1,000

0.00

88,000－88,0000.00

52,000－52,0000.00

15,000－15,0000.00

5,901,000－

5,901,000

0.12

2. Information on Acquisition, etc. of Treasury StockClass of shares
Acquisition of common stock under Article 155, Item 7 of the Companies Act(1) Acquisition of treasury stock resolved at the general meeting of shareholders
Not applicable.
(2) Acquisition of treasury stock resolved at the Board of Directors meetings
Not applicable.
(3) Details of acquisition of treasury stock not based on the resolutions of the general meeting ofshareholders or the Board of Directors meetings
Acquisition of stock less than one unit shares due to purchase requests from shareholders under
Article 192, Paragraph 1 of the Companies Act
Classification

Number of shares (shares)

Treasury stock acquired during the
fiscal year ended March 31, 2018

Total amount (yen)375,918

292,870,934

Treasury stock acquired during the
25,53820,835,823
current period (Note)(Note) The number of treasury stock acquired due to requests to purchase stock less than one unit shares from June
1, 2018 to the filing date is not included.
(4) Status of the disposition and holding of acquired treasury stock
Fiscal year ended March 31, 2018
Classification
Acquired treasury stock which wasoffered to subscribers
Acquired treasury stock which wascanceled
Acquired treasury stock which wastransferred due to merger, shareexchange or company split
Others (Acquired treasury stock
which was transferred upon exerciseof stock acquisition rights, andwhich was sold due to requests fromshareholders holding shares less than
one unit shares to sell additional
shares)Total number of treasury stock held

Current period (Note)

Number of shares Total disposition Number of shares Total disposition(shares)amount (yen)(shares)amount (yen)
-

-

-

-

-

-

-

-

-

-

-

-

100,543

72,189,610

577,885

416,845,993

5,735,947-

5,183,600-(Note) The follwings are not included: the number of treasury stock which was transferred upon exercise of stock
aquisition rights from June 1, 2018 to the filing date; the number of treasury stock which was sold due torequests from shareholders holding less than one unit shares to sell additional shares from June 1, 2018 to
the filing date; and the number of treasury stock acquired due to purchase requests from shareholders
holding shares less than one unit shares from June 1, 2018 to the filing date.

-55-

3. Dividend Policy
The Company views enhancement of the long-term and overall interests of shareholders as animportant management objective.
The industrial sector encompassing energy, information systems, social infrastructure and otherprimary businesses of the Company is undergoing rapid technological innovation and changes in market
structure. This makes vigorous upfront investment in R&D and plant and equipment essential for securingand maintaining market competitiveness and improving profitability. Dividends are therefore decided
based on medium-to-long term business plans with an eye to ensuring the availability of internal funds forreinvestment and the stable growth of dividends, with appropriate consideration of a range of factors,
including the Company’s financial condition, results of operations and dividend payout ratio.
The Company provides in its Articles of Incorporation that distribution of surplus will be made toshareholders of record as of March 31 and September 30 of each year and that the Company may makefurther distribution of surplus to shareholders of record as of another record date for the purpose of
distributing surplus. The Company also provides in its Articles of Incorporation that the Company may
make distribution of surplus by resolution of its Board of Directors, without resolution at the General
Meeting of Shareholders.
The Company believes that the repurchase of its shares should be undertaken, when necessary, as partof its policy on distribution to shareholders to complement the dividend payout. In addition, the Company
will repurchase its own shares in order to flexibly implement a capital strategy, including businessrestructuring, to maximize shareholder value so far as consistent with the dividend policy. Such action will
be taken by the Company after considering its future capital requirement under its business plans, market
conditions and other relevant factors.
Based on the above policy, annual dividends of ¥15.0 per share were paid for the fiscal year ended
March 31, 2018. At the Board of Directors meeting held on October 26, 2017, it was resolved to pay
interim dividends of ¥7.0 per share, resulting in the total amount of interim dividends of ¥33,795 million.
In addition, at the Board of Directors meeting held on May 10, 2018, it was resolved to pay year-end
dividends of ¥8.0 per share, resulting in the total amount of year-end dividends of ¥38,621 million.
4. Changes in Share Prices(1) Highest and lowest share prices in each of the recent five fiscal years
Fiscal year

145th
146th
147th
148th
149th
business term business term business term business term business term

Year end

March 2014

March 2015

March 2016

March 2017

March 2018

Highest (yen)

877

939.9

858.0

679.5

944.2

Lowest (yen)

508

660

431.0

400.0

566.3

(2) Highest and lowest share prices in each of the recent six months
Month

October
2017

November
2017

December
2017

January2018

February
2018

March
2018

Highest (yen)

900.0

908.7

894.7

944.2

899.1

830.2

Lowest (yen)

793.1

825.2

813.5

863.0

789.0

736.7

(Note) The share prices are market prices on the first section of the Tokyo Stock Exchange.

-56-

5. Directors and Senior Management
Men: 43 persons, Women: 2 persons(Women’s percentage to total number of Directors and Senior Management: 4%)
The Company is a company with Nominating Committee, etc. pursuant to the Companies Act. (See“ 6. Corporate Governance, etc. - (1)Corporate governance - 1) Outline of corporate organizations.”)
The information on its Directors and Executive Officers is as follows.
(1) Directors
Position

Director

Director

Director

Responsibility

NameDate ofbirth

Business experience, including experiencein Hitachi, and functions

Share
Term ofownership
office(shares)

6/2005 Executive Deputy President,
Representative Corporate Executive
Officer, Member of the Board, Sony
Corporation
4/2009 Executive Deputy President, Corporate
Executive, Sony Corporation
Member of
6/2009 Executive Vice President, Representative
Audit
Director, Sony Financial Holdings Inc.
Sept. 24
Committee and Katsumi Ihara(Note 1)6/2010 President, Representative Director, Sony1950
Compensation
Financial Holdings Inc.
Committee
6/2011 President, Representative Director, Sony
Life Insurance Co., Ltd.
4/2015 Charman, Director, Sony Life InsuranceCo., Ltd. (Retired in June 2017)
6/2016 Chariman, Director, Sony Financial
Holdings Inc. (Retired in June 2017)
6/2018 Director, Hitachi, Ltd.
10/1991 General Manager, Foil Products, Alcan
Inc.
1/1996 Managing Director, Aughinish Alumina
Ltd., Alcan Inc.
10/1998 President, Bauxite, Alumina and Speciality
Member of
Nov. 13,
Chemicals, Alcan Inc.
(Note 1)
Nominating
Cynthia Carroll
1956
1/2002 President & CEO, Primary Metal Group,
Committee
Alcan Inc.
3/2007 CEO, Anglo American plc. (Retired in
April 2013)
6/2013 Director, Hitachi, Ltd.
9/1999 Vice President and Chief Financial Officer,
Lighting Business, General ElectricCompany (USA)
9/2001 Vice President, Corporate Financial
Planning and Analysis, 3M Company(USA)
11/2002 President and Chief Executive Officer,
Sumitomo 3M Ltd.
10/2004 Executive Vice President, Electro andCommunications Business, 3M Company(USA)
10/2009 Executive Vice President, Consumer andOffice Business, 3M Company (USA)May 5, 9/2011 Executive Vice President, Performance
Joe Harlan(Note 1)
1959
Materials, The Dow Chemical Company(USA)
9/2012 Executive Vice President, Chemicals,
Energy and Performance Materilas, The
Dow Chemical Company(USA)
10/2014 Chief Commercial Officer and Vice
Chairman, Market Business, The Dow
Chemical Company (USA)
10/2015 Vice Chairman and Chief Commercial
Officer, The Dow Chemical Company(USA) (Retired in August
2017)
6/2018 Director, Hitachi, Ltd.

-57-

0

4,000

0

Position

Responsibility

Director

Director

Director

Member of
Audit
Committee,
Nominating
Committee(Chair) andCompensation
Committee(Chair)Name

Date ofbirth

Business experience, including experiencein Hitachi, and functions

Share
Term ofownership
office(shares)

2/1993 Chief Technology Officer, Motors, Drives
and Appliances, Emerson ElectricCompany
9/1994 President, US Electrical Motors, Emerson
Electric Company
7/1997 President, Mercury Marine Division andCorporate Vice President, Brunswick
Corporation
4/2000 President and Chief Operating Officer,
GeorgeFeb. 23,(Note 1)
Brunswick Corporation
Buckley1947
6/2000 Chairman and Chief Executive Officer,
Brunswick Corporation
12/2005 Chairman of the Board, President andChief Executive Officer, 3M Company
2/2012 Executive Chairman of the Board, 3M
Company (Retired in May 2012)
6/2012 Chairman, Arle Capital Partners Limited(Retired in December 2015)
Director, Hitachi, Ltd.
8/1997 Admitted as a Solicitor (UK)
7/2001 Senior Legal Counsel, Nokia Networks,
Nokia Corporation
9/2007 Vice President, Acting Chief Legal Officer
and Head of IP Legal, Nokia Corporation
7/2008 Senior Vice President and Chief Legal
Officer, Nokia Corporation
6/2009 Admitted to New York State Bar
Association
Apr. 11,2/2011 Executive Vice President and Chief Legal (Note 1)
Louise Pentland
1972
Officer, Nokia Corporation (Retired inMay, 2014)
4/2015 General Counsel, PayPal, eBay Inc.
6/2015 Director, Hitachi, Ltd.
7/2015 Senior Vice President and Chief Legal
Officer, PayPal Holdings, Inc.
9/2016 Executive Vice President and Chief
Business Affairs & Legal Officer, PayPal
Holdings, Inc. (Currently in office)7/2002 Director-General for Commerce andDistribution Policy, Minister’s Secretariat,
Ministry of Economy, Trade and Industryof Japan (“METI”)
7/2003 Director-General, Small and Medium
Enterprise Agency, METI
7/2006 Director-General, Agency for Natural
Resources and Energy, METI
7/2008 Vice-Minister of Economy, Trade andIndustry of Japan
Harufumi
Jul. 26,(Note 1)8/2010 Special Advisor to the Cabinet of Japan
Mochizuki
1949(Retired in September 2011)10/2010 Senior Adviser to the Board, Nippon Life
Insurance Company (Retired in April
2013)
6/2012 Director, Hitachi, Ltd.
6/2013 President and Representative Director,
Tokyo Small and Medium Business
Investment & Consultation Co., Ltd.
(Currently in office)-58-

22,0002,000

11,000Position

Responsibility

Name

Director

Member of
Audit
Takatoshi
Committee andYamamoto
Compensation
Committee

Director

Member of
Nominating
Committee and Hiroaki
Audit
Yoshihara
Committee(Chair)Director

Member of
Audit
Committee

Kazuyuki
TanakaChairmanof theBoard

Member of
Nominating
Committee

HiroakiNakanishi

Date ofbirth

Business experience, including experiencein Hitachi, and functions

Share
Term ofownership
office(shares)

12/1995 Managing Director, Morgan Stanley Japan
Limited6/1999 Managing Director and Vice Chairman,
Tokyo Branch, Morgan Stanley Japan
Limited
Oct. 20, 7/2005 Managing Director and Vice Chairman,(Note 1)
1952
UBS Securities Japan Co., Ltd.
6/2009 Managing Director, CASIO COMPUTER
CO., LTD.
6/2011 Advisor, CASIO COMPUTER CO., LTD.
(Retired in June 2012)
6/2016 Director, Hitachi, Ltd.
11/1978 Joined Peat Marwick Mitchell & Co.
7/1996 National Managing Partner, the Pacific
Rim Practice, KPMG LLP
Feb. 9, 10/1997 The Board Member, KPMG LLP(Note 1)1957 10/2003 Vice Chairman and Global Managing
Partner, KPMG International (Retired in
April 2007)
6/2014 Director, Hitachi, Ltd.
4/1977 Joined Hitachi Chemical Company, Ltd.
4/2005 Executive Officer, Hitachi Chemical
Company, Ltd.
4/2006 Senior Executive Director, Hitachi MediaElectronics Co., Ltd.
6/2006 Representative Director and President,
Hitachi Media Electronics Co., Ltd.
4/2008 Vice President and Executive Officer,
Hitachi Chemical Company, Ltd.
Apr. 29,(Note 1)4/2009 Representative Executive Officer,
1953
President & Chief Executive Officer,
Hitachi Chemical Company, Ltd.
6/2009 Director, Representative Executive Officer,
President & Chief Executive Officer,
Hitachi Chemical Company, Ltd.
4/2016 Chairman of the Board, Hitachi Chemical
Company, Ltd. (Currently in office)6/2016 Director, Hitachi, Ltd.
4/1970 Joined Hitachi, Ltd.
4/2003 General Manager, Global Business
6/2003 Vice President and Executive Officer
4/2004 Senior Vice President and Executive
Officer
6/2005 Senior Vice President and Executive
Officer, Hitachi, Ltd.
Chairman and Chief Executive Officer,
Hitachi Global Storage Technologies, Inc.
4/2006 Executive Vice President and Executive
Mar. 14,
Officer, Hitachi, Ltd. (Retired in December(Note 1)
2006)
1946
4/2009 Executive Vice President and Executive
Officer, Hitachi, Ltd.
4/2010 President, Hitachi, Ltd.
6/2010 President and Director, Hitachi, Ltd.
4/2014 Chairman & CEO and Director, Hitachi,
Ltd.
4/2016 Chairman of the Board and Representative
Executive Officer, Hitachi, Ltd.
4/2018 Chairman of the Board and Executive
Officer, Hitachi, Ltd.

-59-

30,0007,000

14,000149,000

Position

Responsibility

Name

Director

Member of
Audit
Committee(Standing)

ToyoakiNakamura

Director

Member ofCompensation
Committee

ToshiakiHigashihara

Date ofbirth

Business experience, including experiencein Hitachi, and functions

4/1975 Joined Hitachi, Ltd.
1/2006 General Manager, Finance Department I
4/2007 Senior Vice President and Executive
Officer
6/2007 Senior Vice President, Executive Officer
Aug. 3,and Director
1952
6/2009 Senior Vice President and Executive
Officer
4/2012 Executive Vice President and Executive
Officer (Retired in March 2016)
6/2016 Director
4/1977 Joined Hitachi, Ltd.
4/2006 Chief Operating Officer, Information &Telecommunication Systems
4/2007 Vice President and Executive Officer(Retired in March 2008)
4/2008 President, Hitachi Power Europe GmbH
4/2010 President and Chief Executive Officer,
Hitachi Plant Technologies, Ltd.
6/2010 President and Representative Director,
Feb. 16,
Hitachi Plant Technologies, Ltd.
1955
4/2011 Vice President and Executive Officer,
Hitachi, Ltd.
4/2013 Senior Vice President and Executive
Officer, Hitachi, Ltd.
4/2014 President & COO, Hitachi, Ltd.
6/2014 President & COO and Director, Hitachi,
Ltd.
4/2016 President & CEO and Director, Hitachi,
Ltd.
Total

Share
Term ofownership
office(shares)(Note 1)

76,000(Note 1)67,000382,000(Notes) 1. The term of office of the Directors starts upon the election at the Annual General Meeting of
Shareholders on June 20, 2018 and expires at the close of the Annual General Meeting of Shareholders
for the fiscal year ending March 31, 2019.
2. Messrs. Katsumi Ihara, Joe Harlan, George Buckley, Harufumi Mochizuki, Takatoshi Yamamoto andHiroaki Yoshihara and Mses. Cynthia Carroll and Louise Pentland are directors who fulfill thequalification requirements to be outside directors as provided for in Article 2, Item 15 of theCompanies Act.

-60-

(2) Executive Officers
Position

Responsibility

NameDate ofbirth

Representative
Executive
OfficerPresident &CEOOverall management

ToshiakiHigashihara

Feb. 16,1955

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President (businessfor industry anddistribution sectors,
water business andindustrial products
business)

Assistant to the
President (building
systems business,
Representative
railway systems
Executive
business, smart life
Officer& ecofriendlty
Executive Vicesystems businessPresident andand atuomotive
Executive
systems business)
Officerand information
security
management

Masakazu
Aoki

Jun. 23,
1954

Business experience, including
experience in Hitachi, and functions

See “(1)Directors”

Share
Term ofownership
office(shares)(Note 2)67,000(Note 2)

13,000(Note 2)26,0004/1977 Joined Hitachi, Ltd.
4/2012 Chief Operating Officer, System
Solutions Business, Information& Telecommunication Systems
Company, Information &Telecommunication Systems
Group(Note 2)4/2013 Vice President and Executive
Officer
4/2015 Senior Vice President andExecutive Officer
4/2017 Executive Vice President andExecutive Officer

25,0004/1977 Joined Hitachi, Ltd.
4/2012 President and Director, Hitachi
Industrial Equipment Systems
Co., Ltd.
10/2014 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/2017 Executive Vice President andExecutive Officer, Hitachi, Ltd.
Chairman of the Board, Hitachi
Industrial Equipment Systems
Co., Ltd.
4/1982 Joined Hitachi, Ltd.
4/2011 General Manager, Hitachi
Research Laboratory

Keiji Kojima

Assistant to the
President (systems
Representative& services business,
Executive
healthcare business
Officerand defense systems Keiichi
Executive Vicebusiness), systems & Shiotsuka
President andservices business
Executive
and social
Officerinnovation businesspromotion

Oct. 9,1956

May 8,
1954

4/2012 Vice President and Executive
Officer
4/2016 Senior Vice President andExecutive Officer
4/2018 Executive Vice President andExecutive Officer-61-

Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Assistant to the
President (cost
Representative structure reform andsupply chain
Executive
management), cost
Officer
HideakiExecutive Vice structure reform and
Takahashi
supply chain
President andmanagement
Executive(MONOZUKURI
Officerand quality
assurance)

Aug. 20,1952

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President (nuclear
Toshikazuenergy business and Nishino
power business)

Jan. 9,1955

Senior Vice
President andExecutive
Officer

Cost structurereform andShinichiro
information
Omori
technology strategies

Feb. 6,
1956

Management
strategies,
investment strategies Yoshihikoand strategies for
Kawamuranext generation
business

Aug.20,1956

Senior Vice
President andExecutive
Officer

Share
Term ofownership
office(shares)

4/1978 Joined Hitachi, Ltd.
4/2005 President, Hitachi Building
Systems Co., Ltd.
4/2007 Vice President and Executive
Officer, Hitachi, Ltd. (Retired in
March 2011)
4/2011 President and Chief Executive
Officer, Hitachi Cable, Ltd.
6/2011 President and Chief Executive
Officer, Director, Hitachi Cable,
Ltd.
(Note 2)6/2013 Director, Hitachi Metals, Ltd.
7/2013 Executive Vice President andExecutive Officer, Director,
Hitachi Metals, Ltd.
4/2014 President and Chief Executive
Officer, Director, Hitachi Metals,
Ltd.
4/2017 Chairperson of the Board,
Hitachi Metals, Ltd. (Retired inJune 2018)
4/2018 Executive Vice President andExecutive Officer
4/1980 Joined Hitachi, Ltd.
4/2010 Senior Manager, Strategy &Project Office, Supervisory
Office for Management Reforms
4/2011 Vice President and Executive(Note 2)
Officer
4/2013 Senior Vice President andExecutive Officer
4/2015 Executive Vice President andExecutive Officer
4/1978 Joined Hitachi, Ltd.
9/2008 General Manager, Corporate
Procurement Division
4/2012 Vice President and Executive(Note 2)
Officer
4/2016 Senior Vice President andExecutive Officer
4/1979 Joined Mitsubishi Corporation
4/2010 Senior Vice President, Division
COO, IT Service Division,
Mitsubishi Corporation (Retired
in March 2015)
4/2015 Joined Hitachi, Ltd.
Executive Strategist, Information& Telecommunication Systems(Note 2)Group
4/2016 Deputy General Manager of IoTBusiness Promotion Division andGeneral Manager of Incubation
Division, Hitachi, Ltd.
4/2017 Vice President and Executive
Officer, Hitachi, Ltd.
4/2018 Senior Vice President andExecutive Officer, Hitachi, Ltd.

-62-

24,00015,00029,00012,000Position
Senior Vice
President andExecutive
Officer

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Regional strategies(China)Kenichi
KokuboNov. 25,
1955

Senior Vice
President andExecutive
Officer

Services &platforms business

SetsuoShibahara

Feb. 3,
1958

Senior Vice
President andExecutive
Officer

Building systems
business

Hideaki Seki

Mar. 10,1957

Representative
Executive
Officer
Senior Vice
President andExecutive
OfficerMarketing & sales,
regional strategies
and social
innovation
business promotion

Yoshitaka
Tsuda

Jul. 3,
1955

Share
Term ofownership
office(shares)

4/1979 Joined Hitachi, Ltd.
4/2011 President, Hitachi (China) Ltd.
4/2014 Vice President and Executive(Note 2)
Officer
4/2018 Senior Vice President andExecutive Officer
4/1982 Joined Hitachi, Ltd.
4/2014 Chief Operating Officer ofSystems & Solutions Business,
and General Manager of Service
Division Group, Information &Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2015 Chief Strategy Officer ofInformation &Telecommunication Systems(Note 2)Company, and Chief Operating
Officer of Systems & Services
Business, Information &Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2016 Vice President and Executive
Officer
4/2018 Senior Vice President andExecutive Officer
4/1979 Joined Hitachi, Ltd.
4/2011 Board Director, Hitachi
Automotive Systems, Ltd.
4/2013 Vice President, Board Director,
Hitachi Automotive Systems,
Ltd.
4/2014 Executive Vice President, Board
Director, Hitachi Automotive
Systems, Ltd.
(Note 2)4/2015 President & COO, Director,
Hitachi Automotive Systems,
Ltd.
4/2016 President & CEO, Representative
Director, Hitachi Automotive
Systems, Ltd. (Retired in March2018)
4/2018 Senior Vice President andExecutive Officer
4/1979 Joined Hitachi, Ltd.
4/2012 Chief Marketing Officer,
Information &Telecommunication Systems
Company
4/2014 Vice President and Executive(Note 2)
Officer
4/2017 Senior Vice President andExecutive Officer
4/2018 Senior Vice President andExecutive Officer-63-

20,00031,00017,00061,000Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Senior Vice
President andExecutive
Officer

Railway systems
business

AlistairDormerAug. 29,
1963

Representative
Executive
Officer
Senior Vice
President andExecutive
Officer

Corporate
communications,
legal matters, risk
management,
corporate auditing
and human capital

Hidenobu
Nakahata

Jan. 24,
1961

Representative
Executive
Officer
Senior Vice
President andExecutive
Officer

Finance andcorporate pension
systemMitsuakiNishiyama

Sep. 25,
1956

Vice President
and Executive
OfficerMarketing & sales(business forfinancial institutions,
government, public
Keiichicorporation andAkino
social infrastructure
systems, healthcare
business and defense
systems business)

Vice President
and Executive
OfficerBusiness forindustry &distribution sectors

Jun AbeOct.13,
1958

Jun. 14,
1961

Share
Term ofownership
office(shares)

2/2001 Director of Business
Development, Alstom Transport
U.K. Ltd.
6/2003 Joined Hitachi Europe Ltd.
10/2009 Managing Director, Hitachi RailEurope Ltd.
9/2012 Executive Chairman and CEO,
Hitachi Rail Europe Ltd. (Retired (Note 2)
in April 2018)
4/2014 Global CEO of Rail Systems
business, Hitachi, Ltd.
4/2015 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/1983 Joined Hitachi, Ltd.
10/2013 Deputy General Manager,
Human Capital Group
4/2014 Vice President and Executive(Note 2)
Officer
4/2018 Senior Vice President andExecutive Officer
4/1979 Joined Hitachi, Ltd.
4/2008 General Manager, Finance
Department I
4/2011 Executive Officer, Hitachi Cable,
Ltd. (Currently Hitachi Metals,
Ltd.)
6/2012 Executive Officer, Board
Director, Hitachi Cable, Ltd.
4/2013 Vice President and Executive
Officer, Board Director, Hitachi(Note 2)
Cable, Ltd.
7/2013 Vice President and Managing
Officer, Hitachi Metals, Ltd.
4/2014 Vice President and Executive
Officer, Hitachi Metals, Ltd.
(Retired in March 2015)
4/2015 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/1981 Joined Hitachi, Ltd.
4/2016 General Manager, Kansai Area
Operation
4/2018 Vice President and Executive
Officer(Note 2)

4/1984 Joined Hitachi, Ltd.
4/2016 Senior General Manager, Control
System Platform Division,
Services & Platforms Business(Note 2)Unit
4/2018 Vice President and Executive
Officer

-64-

2,000

29,00013,00014,00021,000Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Vice President
and Executive
Officer

Governments &external relations

Hitoshi Ito

Feb. 19,
1959

Vice President
and Executive
Officer

Water business

Kenji Urase

Jun. 18,
1961

Vice President
and Executive
Officer

Regional strategies

RyuichiOtsukiMar. 15,
1958

Vice President
and Executive
Officer

Power business

AtsushiOda

Feb. 19,
1958

Vice President
and Executive
Officer

Legal matters, risk
management andcorporate auditing

Kohei
KodamaMay 24,1961

Vice President
and Executive
OfficerIndustrial products
business

Keizo
KobayashiJan. 23,
1960

Share
Term ofownership
office(shares)

4/1982 Joined Ministry of International
Trade and Industry
8/2011 Councillor, Cabinet Secretariat
1/2013 Director-General, Reconstruction
Agency7/2014 Commissioner, Japan Patent(Note 2)
Office (Retired in June 2016)10/2016 Advisor, Tokio Marine &Nichido Fire Insurance Co., Ltd.
(Retired in December 2017)
1/2018 Joined Hitachi, Ltd.
4/2018 Vice President and Executive
Officer
4/1986 Joined Hitachi, Ltd.
3/2015 President, Hitachi Power
Solutions Co., Ltd. (Retired in(Note 2)
March 2017)
4/2017 Vice President and Executive
Officer, Hitachi, Ltd.
4/1981 Joined Hitachi, Ltd.
4/2014 Chief Strategy Officer andGeneral Manager of Group
Business Development Division,
Information &Telecommunication Systems(Note 2)Company, Information &Telecommunication Systems
Group
4/2015 Vice President and Executive
Officer
4/1980 Joined Hitachi, Ltd.
4/2015 General Manager ofTransmission & Distribution
Systems Division, Energy
Solutions Company and Chief(Note 2)
Operating Officer of Power
Systems Company, Power &Infrastructure Systems Group
4/2016 Vice President and Executive
Officer
4/1987 Joined Hitachi, Ltd.
4/2017 Chief Business Risk management
Officer, Systems & Services(Note 2)Business Division
4/2018 Vice President and Executive
Officer
4/1983 Joined Hitachi, Ltd.
5/2015 Chief Operating Officer ofIndustrial Products Company,
Power & Infrastructure Systems (Note 2)Group
4/2016 Vice President and Executive
Officer-65-

0

15,00031,00028,0000

11,000Position

Responsibility

NameDate ofbirth

Vice President
and Executive
Officer

Research &development

Norihiro
SuzukiDec. 5,
1961

Vice President
and Executive
Officer

Nuclear energy
business

Hidetoshi
Takehara

Jun. 25,
1957

Vice President
and Executive
Officer

Governments &external relations,
CSR &environmental
strategy andexecutive support

Osamu Naito

Feb. 6,
1959

Business experience, including
experience in Hitachi, and functions

4/1986 Joined Hitachi, Ltd.
10/2014 General manager of Central
Research Laboratory
4/2015 General Manager of Global
Center for Social Innovation,(Note 2)
Research & Development Group,
and General Manager of Central
Research Laboratory Group
4/2016 Vice President and Executive
Officer
4/1981 Joined Hitachi, Ltd.
4/2013 President, Hitachi-GE Nuclear
Energy, Ltd.
4/2017 Chief Operating Officer of(Note 2)
Nuclear Power Business Unit,
Hitachi, Ltd.
4/2018 Vice President and Executive
Officer, Hitachi, Ltd.
4/1983 Joined Hitachi, Ltd.
4/2016 General Manager of Board of
Directors Office(Note 2)4/2018 Vice President and Executive
Officer

Vice President
and Executive
OfficerBusiness forgovernment, public
corporation andsocial infrastructure
systems

Katsuya
NaganoAug. 30,
1958

Vice President
and Executive
OfficerMarketing & sales(nuclear energy
business and powerbusiness)

Isao
Narukawa

Sep. 8,
1955

Vice President
and Executive
Officer

Supply chain
management(MONOZUKURI
and quality
assurance)

KentaroMasai

May 22,
1959

Vice President
and Executive
OfficerMarketing & sales(business forindustry &distribution sectors, Yasushi
Manabewater business,building systems
business and railway
systems business)

Dec. 15,
1956

Vice President
and Executive
Officer

Railway systems
business

Jul. 5,
1958

ShinyaMitsudomi

Share
Term ofownership
office(shares)

4/1983 Joined Hitachi, Ltd.
4/2016 General Manager of Social
Infrastructure Information
Systems Division, Information &(Note 2)
Communication Technology
Business Division
4/2017 Vice President and Executive
Officer
4/1978 Joined Hitachi, Ltd.
4/2013 General Manager, Chubu Area
Operation(Note 2)4/2015 Vice President and Executive
Officer
4/1982 Joined Hitachi, Ltd.
4/2014 President & CEO of Rail
Systems Company, Infrastructure(Note 2)
Systems Group
4/2016 Vice President and Executive
Officer
4/1979 Joined Hitachi, Ltd.
4/2016 Deputy General Manager ofCorporate Sales & MarketingGroup and Chief Marketing
Officer of Industry &(Note 2)Distribution, Water and Urban
businesses
4/2017 Vice President and Executive
Officer
4/1982 Joined Hitachi, Ltd.
4/2017 Group Head of Sales andManaging Director, Japan / Asia
Pacific, Railway Systems(Note 2)Business Unit
4/2018 Vice President and Executive
Officer

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6,000

23,00020,00017,00034,00020,00027,0007,000

Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Vice President
and Executive
OfficerManagement
strategies

Vice President
and Executive
OfficerBusiness for
Tsugiofinancial institutions Yamamoto

Aug. 27,
1959

Vice President
and Executive
Officer

Healthcare business

MasayaWatanabeJan. 31,1958

Executive
Officer

GeneralHiroakiNakanishi

Mar. 14,
1946
Total

MamoruMoritaApr. 12,1959

4/1983 Joined Hitachi, Ltd.
4/2015 General Manager of Strategy
Planning Division
4/2016 Vice President and Executive
Officer
3/1978 Joined Hitachi, Ltd.
4/2016 CEO of Financial Institutions
Business Unit and CEO of
Government & Public
Corporation Business Unit
4/2017 Vice President and Executive
Officer
4/1982 Joined Hitachi, Ltd.
4/2011 Chief Strategy Officer,
Information &Telecommunication Systems
Company
4/2012 Vice President and Executive
Officer
See “(1)Directors”

Share
Term ofownership
office(shares)(Note 2)42,000(Note 2)8,000

(Note 2)56,000(Note 2)

149,000
913,000(Notes) 1. The “Responsibility” column describes matters delegated to each of the Executive Officers by the
Board of Directors.
2. The term of office of the Executive Officers expires on March 31, 2019.

-67-

6. Corporate Governance, etc.
(1) Corporate governance1) Outline of corporate organizations
The Company is a company with Nominating Committee, etc. under the Companies Act, aiming
to establish a framework for quick business operation and to realize highly transparent management byseparating responsibilities for management oversight and those for execution of business operations.
Board of Directors
The Board of Directors approves basic management policy for the Hitachi Group and supervises
the execution of the duties of executive officers and directors in order to sustainably enhance corporate
value and the shareholders’ common interests. The basic management policy includes medium-term
management plan and annual budget compilation. The Board of Directors focuses on strategic issues
related to the basic management policy as well as other items to be resolved that are provided in laws,
regulations, the Articles of Incorporation and Board of Directors Regulations. As of June 29, 2018, theBoard of Directors was made up of 12 Directors, and eight of whom are outside Directors and two
concurrently serve as Executive Officers. Within the Board of Directors, there are three statutory
committees of the Nominating Committee, the Audit Committee and the Compensation Committeewith outside Directors accounting for the majority of members of each committee. The Board of
Directors meetings were held 9 days during the fiscal year ended March 31, 2018, and the attendance
rate of Directors at those meetings was 97%. The Nominating Committee meetings were held 8 days,
the Audit Committee meetings were held 14 days, and the Compensation Committee meetings were
held 4 days during the fiscal year ended March 31, 2018.
The Nominating Committee has the authority to determine particular proposals submitted to thegeneral meeting of shareholders for the election and dismissal of Directors, and consists of four
Directors, three of whom are outside Directors.
The Audit Committee has the authority to audit the execution of duties of Directors and Executive
Officers and to determine on proposals submitted to the general meeting of shareholders for theelection and dismissal of accounting auditors, and consists of six Directors, including four outside
Directors and one standing Audit Committee member. Mr. Hiroaki Yoshihara, the Chair of the Audit
Committee, has considerable knowledge of finance and accounting based on his long experience at
KPMG Group with businesses related to accounting, etc. Mr. Toyoaki Nakamura, the member of the
Audit Committee, has considerable knowledge of finance and accounting due to his long experience as
the General Manager of accounting and finance of the Company as well as Executive Officer
responsible for accounting and finance for many years.
The Compensation Committee has the authority to determine remuneration policies for Directors
and Executive Officers and remuneration for individuals based on them. The Compensation
Committee consists of four Directors, three of whom are outside Directors.
With regard to the number of Directors and their election, the Company stipulates in its Articles
of Incorporation that the Company shall have no more than 20 Directors. With regard to the adoptionof resolution for the election of Directors, the Company stipulates in its Articles of Incorporation thatthe presence of shareholders representing one-third or more of the voting, that resolutions for theelection of Directors shall be approved by attending shareholders possessing one-third or more of all
voting rights of the shareholders who are entitled to exercise their votes, and that the resolution shallnot be made by cumulative voting.
The Company maintains a limited liability agreement (hereinafter referred to as “Agreement”)
stipulated in Article 427, Paragraph 1 of the Companies Act with each director (excluding Executive
Director, etc.) The general intent of the Agreement is to limit the liability of Directors to the aggregate
amount stipulated in each item under Article 425, Paragraph 1 of the Companies Act.

-68-

Executive Officers
Executive Officers decide on matters delegated to them by the Board of Directors and execute theCompany’s business affairs within the scope of assignments determined by the Board of Directors. As
of June 29, 2018, the Company has 35 Executive Officers.
The Company stipulates in its Articles of Incorporation that the Company shall have no morethan 40 Executive Officers.
Senior Executive Committee
The Senior Executive Committee is a council to ensure that President deliberately decides onimportant managerial matters, which may affect the Company or the Hitachi Group business, throughdiscussing from diverse viewpoints. It consists of 12 members as of June 29, 2018; President & CEO,five Executive Vice President and Executive Officers, five Senior Vice President and Executive
Officers and one Vice President and Executive Officer.
2) Matters determined by resolution of the Board of Directors without resolution at the general meetingof shareholders pursuant to the provisions of the Articles of Incorporation
The Company stipulates in the Articles of Incorporation that it may, unless otherwise provided in
the applicable laws, determine on matters specified in each item of Article 459, Paragraph 1 of theCompanies Act by the resolution of the Board of Directors, without resolution at the general meetingof shareholders.
For the repurchase of the company’s own shares (Article 459, Paragraph 1, Item 1 of theCompanies Act), the Board of Directors shall determine on the matter in order to enable timely
implementation of capital strategies.
Regarding reduction of capital reserve or earned surplus reserve (Article 459, Paragraph 1, Item 2of the Companies Act), appropriation of surplus (excluding dividends of surplus and disposal of theproperty of the Company) (Article 459, Paragraph 1, Item 3 of the Companies Act) and dividends ofsurplus (Article 459, Paragraph 1, Item 4 of the Companies Act), since the Company was a company
with committees as of the date of enforcement of the Companies Act, it was deemed that its Articles ofIncorporation had stipulations that the Board of Directors was able to decide the above matters without
resolution at the general meeting of shareholders and that it should not stipulate that such matters shallbe resolved at the resolution of the general meeting of shareholders, in accordance with Article 57 of
the Act on Arrangement of Relevant Acts Incidental to Enforcement of the Companies Act (July 26,
2005, Act No. 87). Even after the enforcement of the Companies Act, the Company has made it a rule
to timely decide on these important business judgments by the Board of Directors to enhance theshareholders’ common interests.
The Company has stipulated in its Articles of Incorporation that it may, by resolution of theBoard of Directors, exempt any Director (including former Director) and Executive Officer (including
former Executive Officer) from liabilities as provided Article 423, Paragraph 1 of the Companies Act
to the extent as provided in laws or regulations.
3) Requirement for special resolution of the general meeting of shareholders
To enable to securely meet the quorum of the general meeting of shareholders under Article 309,
Paragraph 2 of the Companies Act, the Company stipulates in its Articles of Incorporation that any
resolution as provided in Article 309, Paragraph 2 of the Companies Act shall be adopted at a general
meeting of shareholders where shareholders representing one-third or more of the voting rights of all
the shareholders shall be present, by a majority of two-thirds or more of the voting rights of theshareholders who are present in such meeting and are entitled to vote.

-69-4) Internal control system and risk management system
Outlines of the internal control system and the risk management system of the Company are as
follows. In addition, these systems were resolved by the Board of Directors as the basic policy forinternal control system under the Companies Act.
i) The following measures shall be taken to ensure the effectiveness of audits by the Audit Committee.
(a) When necessary, the Board of Directors may appoint one or more director(s), who does notserve concurrently as an executive officer, as a director responsible for assisting with the dutiesof the Audit Committee. In addition, the Board of Directors’ Office (the “Office”) shall beestablished specifically to assist with the duties of each Committee and the Board of Directors.
(b) In order to ensure the independence of the Office personnel from Executive Officers and theeffect of instructions by the Audit Committee, the Office is staffed with personnel who work
only for the Office and are not subject to orders and instructions of Executive Officers, and the
Audit Committee shall be informed in advance of planned transfers of the Office personnel.
(c) Executive Officers and employees shall report without delay to the members of the Audit
Committee significant matters affecting the Company and its subsidiaries, results of internal
audits, and the implementation status of reporting under the internal reporting system. It shallbe provided for in the company regulation that reporters using the internal reporting system,
which applies to the employees of the Company and its subsidiaries, shall not receive
disadvantageous treatment for reason of having made a report, and the secretariat of the systemshall thoroughly administer this provision.
(d) The Office shall be in charge of payment for the expenses incurred in connection with theexecution of the duties of the Audit Committee members and other administrative duties, andshall promptly process the payment for the expense or debt except in the case where theexpense or debt of the claim is clearly found to be unnecessary to the execution of the duties ofthem.
(e) Standing Committee member(s) shall be appointed to the Audit Committee, and activity plansof the Audit Committee shall be prepared in coordination with the audit plans of Internal
Auditing Office.
ii) The following measures shall be effective to ensure the adequacy of business operations within the
Company and the Hitachi Group.
(a) Such fundamental policies as the emphasis of the social responsibilities of businessenterprises shall be shared with the subsidiaries of the Company.
(b) Each subsidiary of the Company shall develop systems to ensure the appropriateness ofoperations corresponding to its size and other characteristics, basic framework of which issimilar to ones employed in the Company. In order to ensure development of such systems ineach subsidiary, directors and auditors shall be sent from the Company to its subsidiary, andregular audits shall be conducted for the subsidiary.
(c) A reporting system to Directors shall be established to ensure that the execution of duties by
Executive Officers of the Company is in compliance with laws, regulations, and the Articles ofIncorporation.
(d) Information pertaining to the execution of duties by Executive Officers of the Company shall be
prepared and maintained in accordance with internal rules.
(e) A structure shall be established in which each relevant department shall establish regulations
and guidelines, conduct training, prepare and distribute manuals, and carry out other suchmeasures with respect to various risks. Efforts shall be made to identify possible new risks
through such things as progress reports on business operations and, should it become necessary
to respond to a new risk, an Executive Officer responsible for responding thereto shall be
appointed promptly.

-70-

(f) Efficient performance of duties of the Executive Officers of the Company, and Directors andExecutive Officers of the subsidiaries shall be ensured through the following business
management systems.
- The Senior Executive Committee shall be established in order to deliberate on and facilitate
the formulation of decisions based on due consideration of diverse factors regarding
important issues that affect the Company and/or the Hitachi Group.
- Based on the management policy, medium-term business plans and annual budgets, on which
performance management is based, shall be prepared in order to operate business in aplanned and efficient manner.
- Internal audits of the Company and its subsidiaries shall be conducted to monitor and identify
the status of their business operations and to facilitate improvements.
- The Audit Committee shall receive the audit plans of the accounting auditors in advance, andthe prior approval of the Audit Committee shall be required with respect to the fees to be
paid to the accounting auditors.
- Documented business processes for matters to be reflected in financial reports shall be
executed at the Company and its subsidiaries, and internal and external auditors shall
examine said processes in order to ensure the reliability of financial reports.
- A structure for the adequate and efficient conduct of business operations common to the
Hitachi Group companies shall be established.
(g) Continuous maintenance of a legal and regulatory compliance structure shall be ensured throughthe following business management systems.
- Internal audits shall be conducted, and various committees shall be established for legal andregulatory compliance activities. Furthermore, an internal reporting system for employees of
the Company and its subsidiaries shall be established and education on legal and regulatorycompliance shall be provided.
- Various policies and rules on compliance with laws shall be established, aiming to ensurethat the employees are aware of the internal control systems overall and that the systems are
effective.
(h) A system shall be established, in which the subsidiaries report on important issues and theprogress in measures for operations to the Company through the Company’s Senior Executive
Committee, medium-term business plans and the budget system.
(i) The policy on transactions within the Hitachi Group is to trade fairly based on market prices.
5) Internal audit and audit by the Audit Committee(a) Internal audit
The Internal Auditing Office is in charge of internal audit within Hitachi Group and audits
business units, corporate divisions of headquarters and subsidiaries and affiliates. The number of staffof the Internal Auditing Office is 39 as of March 31, 2018.
The Internal Auditing Office monitors and assesses whether overall business operations,
including marketing, personnel management, labor management, compliance, procurementtransactions, production, environment, disaster prevention, export regulations, information system,
accounting and financing activities, and property management of Hitachi Group are properly carriedout pursuant to audit standards established by the Company, and points out items required to be
improved based on the results of auditing and follows up their improvements. The Internal Auditing
Office reports in advance its internal audit plan to the Audit Committee, and reports results of auditing
to the President & CEO and the Audit Committee. Furthermore, relating to the internal control overfinancial reporting, the internal control division in the Internal Audit Office promotes to establish andmaintain the internal control systems pursuant to the Company’s guideline, assesses its effectiveness,and reports the results to the President & CEO and the Audit Committee.

-71-

(b) Audit by the Audit Committee
The Audit Committee conducts audits for whether corporate administration by Directors andExecutive Officers are properly carried out under appropriate internal control systems.
The Audit Committee develops the audit policy and the audit plan, and periodically receives
reports or conducts hearing for execution of duties from Directors and Executive Officers. In addition,
the members of the Audit Committee, who are in charge of internal investigation, investigate business
units of the Company and receive reports from subsidiaries in order to check whether business
transaction and property management are properly carried out, and then report the results to the Audit
Committee. Furthermore, such members of the Audit Committee attend the important meetings
including the budget meeting, the Senior Executive Committee and the Disclosure Committee, inspect
audit reports from internal audit divisions, and provide internal audit divisions with instructions about
divisions to be subject to auditing and items to be focused, if necessary.
The Audit Committee receives reports and explanations about the audit plan and results of theaudit from the accounting auditor, and based on the reports, verifies results of financial audits andinternal control audits. In addition, the Audit Committee receives reports and explanations of quality
control systems of the accounting auditor. Furthermore, the Company makes it a rule to obtain theprior approval of the Audit Committee for remuneration to the accounting auditor.
6) Outside Directors(a) Qualification for the outside Directors and criteria for the independency
For electing an outside Director, the Nominating Committee of the Company considers, inaddition to the following criteria for the independency, whether the outside Director has the highest
personal and professional ethics, integrity and insight, and distinguished records of leadership orexperience at policy making levels in business, law, administration, accounting or education, etc.
For the independency of an outside Director, the Company considers the outside director to be
independent unless:- his or her immediate family member* is, or has been within the last three years, a director or an
executive officer, of the Company or any of its subsidiaries;- he or she is currently an executive director, an executive officer or an employee of a company
that has made payments to, or received payments from, the Company for property or services
in an amount which, in any of the last three fiscal years, exceeds 2% of any of the companies’
consolidated gross revenues;- he or she has received during any of the last three fiscal years more than ¥10 million in directcompensation for his or her service as a specialist in law, accounting or tax, or as a consultant
from the Company, other than director compensations; or- he or she serves as an executive officer or director of a not-for-profit organization, and theCompany’s discretionary charitable contributions to the organization in any of the last threefiscal years are more than ¥10 million and 2% of that organization’s annual gross revenues.
* An “immediate family member” includes a person’s spouse, parents, children, siblings, grandparents, grand-children, mothers and fathers-in-law, sons and daughters-in-law, spouses ofsiblings, grand-children-in-law, and brothers and sisters-in-law.
(b) Function of the outside Directors
Following the policy stated in “(a) Qualification for outside Directors and criteria for the
independency,” the Company has elected eight persons; Messrs. Katsumi Ihara, Joe Harlan, George
Buckley, Harufumi Mochizuki, Takatoshi Yamamoto and Hiroaki Yoshihara and Mses. Cynthia
Carroll and Louise Pentland, as outside Directors under Article 2, Item 15 of the Companies Act. Eachoutside Director is expected to enhance functions of the Company’s Board of Directors throughsupervising execution of duties of Executive Officers and others from an independent perspective,
based on rich experiences and insights in the area of global corporate management in the cases ofMessrs. Katsumi Ihara and Joe Harlan, based on rich experiences and insights as top executive ofmajor global companies in the cases of Ms. Cynthia Carroll and Mr. George Buckley, based on deep
insight into corporate legal matters and corporate governance gained through her rich experience as
the chief legal officer of major global companies in the case of Ms. Louise Pentland, based on diverse
experiences and insights in such areas as public administration in the cases of Mr. Harufumi-72-

Mochizuki, based on a broad range of insight in business and management gained through his
experience in the area of corporate analysis and global corporate management in the case of Mr.
Takatoshi Yamamoto and based on rich experiences and insights in the area of global corporate
management and accounting in the case of Mr. Hiroaki Yoshihara.
(c) Supervising by the outside Directors
Outside Directors, comprising of majority of Directors, supervise execution of duties of
Executive Officers from an independent perspective. As described in the item “5) Internal audit andaudit by the Audit Committee” above, the Audit Committee, of which majority members are outside
Directors, receives reports and explanations about results of internal audits, accounting audit andinternal control audit, and verifies the matters reported or explained. In addition, the Audit Committee
reports the results of its verification to the Board of Directors.
(d) Relationship between outside Directors and the Company
Each of outside Directors has no relationship with the Company regarding his or her
independency as described in “(a) Qualification for the outside Directors and criteria for the
independency.” In addition, there is no particular conflict of interest between each of outside Directors
and the Company.
The Company considers that all outside Directors are independent, and therefore has notified
them as independent directors to each of the Company’s listing stock exchanges in Japan.
In addition, the number of shares of the Company owned by each outside Director is described in“5. Directors and Senior Management.”7) Status of accounting audit
Certified public accountants (CPAs) who executed accounting audit of the Company are as follows.
In addition, other CPAs and staff belonging to Ernst & Young ShinNihon LLC assisted execution of
accounting audit works as instructed by the three CPAs.
CPA having executed accounting audit works
Takashi Ouchida
Takuya Tanaka
Ken Sudo

Audit corporation to which CPA belongs
Ernst & Young ShinNihon LLC
Ernst & Young ShinNihon LLC
Ernst & Young ShinNihon LLC

8) Compensation to Directors and Executive Officers(a) Policy on the determination of Compensation of Directors and Executive Officers[Method of Determination of Policy]
The Company’s Compensation Committee sets forth the policy on the determination of theamount of compensation, etc. of each Director and Executive Officer pursuant to applicableprovisions of the Companies Act.
[Basic Policy]
Compensation for Directors and Executive Officers shall be determined in accordance withthe following basic policy.
- Compensation shall be such that it enables the company to attract necessary personnel toachieve an improvement in corporate value through global business growth.
- Compensation shall be commensurate with roles and responsibilities of each Directors andExecutive Officers.
- Compensation for Directors shall be such that it enables them to exercise functions ofsupervision of management effectively.
- Compensation for Executive Officers shall be such that it enables them to contribute tosustained improvement in corporate value through the execution of business and employs anappropriate balance between short-term performance and medium and long-term
performance.
- The level of compensation shall be determined taking into account compensation levels atother companies as well as economic and market trends.
- The Compensation Committee utilizes external experts to gain expert advice and an objective
viewpoint, if necessary, for considering the details and amounts of compensation.
-73-

[Compensation Structure](i) Matters relating to Directors
Compensation for Directors will consist of a basic remuneration and a year-end allowance.
- Basic remuneration will be decided by adjusting basic amount that reflect full-time or parttime status, committee membership and position, travel from place of residence, etc.
- Year-end allowance will be a pre-determined amount equivalent to about 20% of the
Director’s annual income based on basic remuneration, although this amount may be reduced
depending on financial results.
A Director concurrently serving as an Executive Officer will not be paid compensation as a
Director.
(ii) Matters relating to Executive Officers
Compensation for Executive Officers will consist of a basic remuneration, a performancelinked compensation and a medium and long-term incentive compensation. The higher position
Executive Officers hold, the higher proportion of variable pay (the sum of performance-linked
compensation and medium and long-term incentive compensation, except basic remuneration as
fixed pay) will be set to the total annual compensation.
- Basic remuneration will be decided by adjusting a basic amount to reflect the results of anassessment. The basic amount is set in accordance with the relevant position.
- Performance-linked compensation will be decided within the range of 0 to 200% of a basic
amount by adjusting that amount to reflect financial results and individual performance. The
basic amount is set within the range of about 25 to 35% of the total annual compensation ofeach Executive Officer in accordance with the relevant position.
- Medium and long-term incentive compensation will be stock options as stock-based
compensation with share price conditions (stock acquisition rights with the strike price of oneyen), the number of which to be granted will be determined within the range of about 10 to
40% of the total annual compensation of each Executive Officer in accordance with therelevant position. The number of stock acquisition rights that may be exercised will be
determined within the range of 0 to 100% of the stock acquisition rights granted inaccordance with the conditions.
(iii) Miscellaneous
It was decided at the Compensation Committee meetings held on December 18, 2007 andMarch 26, 2008 that the compensation structure for Directors and Executive Officers will be reexamined starting with the compensation for fiscal 2008 and that the retirement allowance will beabolished. The payment of retirement allowance to Directors and Executive Officers due to theabolition of the retirement allowance system will be in an amount determined by the Compensation
Committee at the time of the retirement of a relevant Director or Executive Officer.
(b) Amount of compensation

Category

Total amount of each type(Millions of yen)
Total amount ofYear-end
Medium and Number ofcompensation, etc.
allowance andpersons
Basic
long-term(Millions of yen)
performanceremuneration
incentive
linkedcompensationcompensation

Directors－(excluding outside
65
58
6
2
Directors)－
Outside Directors
355
338
16
9
Executive Officers
3,285
1,488
1,189
607
35
Total
3,705
1,885
1,213
607
46
(Notes) The number of Directors indicated excludes two Directors who concurrently serve as
Executive Officers.

-74-

In addition, Directors or Executive Officers whose compensation from the Company and its
subsidiaries is not less than ¥100 million and the amount of their compensation are as follows:Totalamount ofcompensaIncentives
Name
Company
Category
Basic
Medium and Year-end Others tion, etc.
remuneration Short-term Long-term allowance (Note 3) (Millions(Note 1)of yen)(Note 2)
Executive
Toshiaki
Hitachi, Ltd.
Officer
107
83
113
303
Higashihara (The Company)(Note 4)
Hitachi, Ltd.
Executive
30
29
21(The Company) Officer
HitachiIndustrial
Masakazu
Chairman
141
Equipment
Aoki
of the30
29
Systems Co.,
Board
Ltd.
(Consolidated
subsidiary)
Hitachi, Ltd.
Executive
53
44
30(The Company) Officer
Hitachi HighRyuichi
132
Technologies
Kitayama
Corporation
Director
30(Consolidated
subsidiary)
Hitachi, Ltd.
Executive
49
44
30(The Company) Officer
Hitachi Kokusai
ChairmanElectric Inc.
of the71(Consolidated
Board
subsidiary)
Yutaka Saito
138
HitachiConstruction
Machinery Co.,
Director
50Ltd.
(Consolidated
subsidiary)Keiichi
Hitachi, Ltd.
Executive
61
58
21
141
Shiotsuka(The Company) Officer
Hitachi, Ltd.
Executive
59
46
30(The Company) Officer
HitachiKoji Tanaka Chemical
137
Company, Ltd. Director
1(Consolidated
subsidiary)
Total amount of each type (Millions of yen)-75-

Totalamount ofcompensaIncentives
Name
Company
Categorytion, etc.
Year-end
OthersBasic
Medium andremuneration Short-term Long-term allowance (Note 3) (Millions(Note 1)of yen)(Note 2)
Hitachi, Ltd.
Executive
56
43
30(The Company) Officer
HitachiToshikazu
138
Automotive
NishinoDirector
4
3
Systems, Ltd.
(Consolidated
subsidiary)
Hitachi, Ltd.
Executive
46
38
12(The Company) Officer
Hitachi
Shinichiro
100
ChemicalOmori
20Company, Ltd. Director(Consolidated
subsidiary)
Toshiaki
Hitachi, Ltd.
Executive
51
39
12
104
Kuzuoka(The Company) Officer
Hitachi, Ltd.
Executive
37
35
12(The Company) Officer
Hitachi Vantara
Keiji Kojima Corporation
114(Consolidated Chairman
14
13
subsidiary)(Note 6)
Hitachi, Ltd.
Executive
26
18
12(The Company) Officer
Hiroshi Sato Hitachi
101
President
Building
and24
18
Systems Co.,
Director
Ltd.
Yasuo
Hitachi, Ltd.
Executive
51
39
12
104
Tanabe(The Company) Officer
YoshitakaHitachi, Ltd.
Executive
51
49
11
112
Tsuda
(The Company) Officer
Hitachi Rail
AlistairEurope Ltd.
Executive
Dormer(Consolidated Chairman
79
82
85
247
(Note 5)subsidiary)
and CEO(Note 6)
Mitsuaki
Hitachi, Ltd.
Executive
51
42
12
107
Nishiyama (The Company) Officer
Total amount of each type (Millions of yen)-76-

Totalamount ofcompensaIncentives
Name
Company
Categorytion, etc.
Year-end
OthersBasic
Medium andremuneration Short-term Long-term allowance (Note 3) (Millions(Note 1)of yen)(Note 2)
Hitachi, Ltd.
Executive
8(The Company) Officer
Hitachi Vantara
Ryuichi111
Corporation
Otsuki68
33
1(Consolidated CEO
subsidiary)(Note 6)
Hitachi, Ltd.
Executive
8(The Company) Officer
Hitachi (China),
Kenichi
100
Ltd.
Kokubo59
31(Consolidated Chairman
subsidiary)(Note 6)
Executive
Hiroaki
Hitachi, Ltd.
Officer
97
75
70
243
Nakanishi(The Company)(Note 4)(Notes) 1. Compensations from the Company and consolidated subsidiaries paid depending on finacial results andindividual performances in the short term are collectively called.
2. Medium and long-term incentive compensation for Executive Officers of the Company is stock options
as stock-based compensation, etc.
3. The "Others" column shows the fringe benefit equivalent.
4. Although concurrently serving as Director for the fiscal year ended March 31, 2018, Messrs. Toshiaki
Higashihara and Hiroaki Nakanishi did not receive compensation as Director.
5. Although concurrently served as Executive Officer of the Company for the fiscal year ended March 31,
2018, Mr. Alistair Dormer did not receive compensation as Executive Officer of the Company.
6. The amount of the remuneration, etc. from foreign subsidiaries shows yen equivalent.
Total amount of each type (Millions of yen)-77-9) Information on shareholdings(a) Equity securities held for purposes other than pure investment
Number of stock names:
288 stock names
Total amount recorded in the balance sheet:¥270,336 million(b) Stock name, number of shares, amount recorded in the balance sheet, and purpose of holding
regarding equity securities held for purposes other than pure investment(Fiscal year ended March 31, 2017)
Specified investment securities
Stock nameRenesas Electronics
Corporation

Number ofshares(shares)

Balance sheet
amount(Millions of yen)

127,725,748

149,055

6,250,000

57,869Central Japan Railway
Company

900,000

16,326

Hitachi Maxell, Ltd.

7,797,100

15,835

812,400

7,875

Yungtay Engineering Co.,Ltd.

31,817,168

6,160

Shin-Etsu Chemical Co., Ltd.

521,000

5,024

Electric Power Development
Co., Ltd.

980,780

2,554

Seibu Holdings Inc.

1,286,900

2,364

The Chiba Bank, Ltd.

3,269,000

2,337

Sapporo Holdings Limited

597,600

1,798West Japan Railway
Company

215,000

1,556

NGK INSULATORS, LTD.

607,000

1,529

Ono Pharmaceutical Co., Ltd.

600,000

1,382

Benefit One Inc.

400,000

1,366

1,524,471

1,199

eREX Co., Ltd.

750,000984

Keio Corporation

1,032,873

910

505,000

905

Western Digital Corporation

East Japan Railway Company

Toho Gas Co., LTD.

The Japan Steel Works, LTD.

-78-

Purpose of holding
Received in relation to the reorganization,etc. of Renesas Technology Corp. which
was an affiliate of the Company
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining business relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions

Stock name
Kintetsu Group Holdings Co.,Ltd
Chubu Electric Power Co.,Inc.

Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Purpose of holding

Maintaining and enhancing business
transactions
Maintaining and enhancing business
600,254894
transactions
Maintaining and enhancing businessJapan Tobacco Inc.
225,000
814
transactions
Maintaining and enhancing business
Sotetsu Holdings, Inc.
1,570,518
811
transactions
Maintaining and enhancing businessShowa Denko K.K.
400,000
794
transactions
Maintaining and enhancing business
Seiko Electric Co., Ltd.
1,180,320
790
transactions
Tohoku Electric Power Co.,
Maintaining and enhancing business
505,000
761
Inc.
transactions
DAIICHI SANKYO
Maintaining and enhancing business
300,000
752
COMPANY, LIMITED
transactions
Kyushu Electric Power
Maintaining and enhancing business
592,500
702
Company Inc.
transactions
Maintaining and enhancing businessTosoh Corporation
657,000
642
transactions
Maintaining and enhancing business
TOKYU CORPORATION
788,032620
transactions(Note) Since the number of stock of which balance sheet amount exceeds 1% of the amount of the Company’scommon stock on the balance sheet is less than 30, the top 30 stocks in balance sheet amount are listed.
2,242,913

899(Fiscal year ended March 31, 2018)
Specified investment securities
Stock name

Number ofshares(shares)

Balance sheet
amount(Millions of yen)Renesas Electronics
Corporation

92,530,648

99,007

Western Digital Corporation

6,250,000

61,267

Central Japan Railway
Company

900,000

18,117

East Japan Railway Company

812,400

8,011

Yungtay Engineering Co.,Ltd.

31,817,168

6,543

Shin-Etsu Chemical Co., Ltd.

521,000

5,733

Maxell Holdings, Ltd.

1,603,000

3,321

The Chiba Bank, Ltd.

3,269,000

2,794

Seibu Holdings Inc.

1,286,900

2,383

Benefit One Inc.

800,000

2,354

Ono Pharmaceutical Co., Ltd.

600,000

1,976
-79-

Purpose of holding
Received in relation to the reorganization,etc. of Renesas Technology Corp. which
was an affiliate of the Company
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions

Stock name

Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Purpose of holding

Maintaining and enhancing business
transactions
Maintaining and enhancing businessShowa Denko K.K.
400,000
1,800
transactions
Electric Power Development
Maintaining and enhancing business
653,980
1,753
Co., Ltd.
transactions
Maintaining and enhancing business
The Japan Steel Works, LTD.
505,000
1,714
transactionsWest Japan Railway
Maintaining and enhancing business
215,000
1,597
Companytransactions
Maintaining and enhancing business
NGK INSULATORS, LTD.
607,000
1,113
transactions
DAIICHI SANKYO
Maintaining and enhancing business
300,000
1,057
COMPANY, LIMITED
transactions
Maintaining and enhancing business
Seiko Electric Co., Ltd.
1,030,320
971
transactions
Maintaining and enhancing business
Keio Corporation
206,574938transactions
Chubu Electric Power Co.,
Maintaining and enhancing business
600,254902
Inc.
transactions
Kyushu Electric Power
Maintaining and enhancing business
592,500
751
Company Inc.
transactions
Tohoku Electric Power Co.,
Maintaining and enhancing business
505,000
717
Inc.
transactions
Maintaining and enhancing businessJapan Tobacco Inc.
225,000
689
transactions
Maintaining and enhancing businessTosoh Corporation
328,500
685
transactions
Kintetsu Group Holdings Co.,
Maintaining and enhancing business
164,291680
Ltdtransactions
Maintaining and enhancing business
TOKYU CORPORATION
394,016653
transactions
Yamaguchi Financial Group,
Maintaining and enhancing business
484,310623
Inc.
transactions
Maintaining and enhancing business
eREX Co., Ltd.
750,000
621
relationship
Maintaining and enhancing business
Sotetsu Holdings, Inc.
214,103605
transactions(Note) Since the number of stock of which balance sheet amount exceeds 1% of the amount of the Company’scommon stock on the balance sheet is less than 30, the top 30 stocks in balance sheet amount are listed.
Sapporo Holdings Limited

597,600

1,852(c) Equity securities held for pure investment
None.

-80-

(2) Audit Fees
1) Fees to Certified Public Accountants
Fiscal year ended March 31, 2017

Fiscal year ended March 31, 2018

Category

Fees for audit
services(Millions of yen)

Fees for non-audit
services(Millions of yen)

Fees for audit
services(Millions of yen)

Fees for non-audit
services(Millions of yen)

The Company

485

34

502

58

Consolidated
subsidiaries

1,009

118

914

61

Total

1,494

152

1,416

119

2) Other fees
Audit fees paid by the Company and its consolidated subsidiaries to the Company’s accounting
auditor, Ernst & Young ShinNihon LLC Group (including Ernst & Young and its group firms which
belong to the same network as Ernst & Young ShinNihon LLC), were ¥2,993 million for the fiscal year
ended March 31, 2017, and ¥3,166 million for the fiscal year ended March 31, 2018, respectively.
These fees are mainly paid for audit services to its overseas consolidated subsidiaries.
3) Descriptions of non-audit services to the Company
Non-audit services to the Company in the fiscal year ended March 31, 2017 and the fiscal year
ended March 31, 2018 were various consulting services.
4) Policy on determination of audit fees
For determining the amount of audit fees, the Company conducts hearing of the audit plan andverify efficiency of audit services, including the number of days, hours for auditing, the number ofsubjects to be audited and the scope of audit, etc., and appropriateness of the estimate. The Company
also discusses with the accounting auditor taking into consideration the formation of auditors and audit
fees for the preceding fiscal year. In addition, the Audit Committee receives the audit plans of theaccounting auditors and the results of discussion between the auditors and Executive Officers of theCompany and approves the amount of the fees in advance of the Company’s decision.
V. Financial Information
Refer to the consolidated financial statements incorporated in this Annual Securities Report.

-81-VI. Stock-Related Administration for the Company
Fiscal year

From April 1 to March 31

Annual General Meetingof Shareholders

To be held within three months from the following day of the end of every fiscal
year

Record date

End of every fiscal year

Record date for
distribution of surplus
Number of sharesconstituting one unit
Purchase and sale ofshares less than one unit
Handling officeTransfer agent

End of March and end of September
1,000 shares(Special account)
11, Kanda Nishikicho 3-chome, Chiyoda-ku, Tokyo
Main Office, Tokyo Securities Transfer Agent Co., Ltd.
(Special account)
Tokyo Securities Transfer Agent Co., Ltd.

Forward office-

Purchasing and selling fee

Free of charge

Method of public notice

The Company’s method of public notice is through electronic public notice.
However, if the Company cannot use the above-mentioned method of public
notice due to an accident or other inevitable reasons, Nihon Keizai Shimbun will
be adopted as its medium.

Special benefit for
None
Shareholders(Notes) 1. Under the Articles of Incorporation, distribution of surplus through dividend payment, if any, will bemade to shareholders of record as of March 31 and September 30 of each year. In addition, theCompany may make further distributions of surplus to shareholders of record as of another record date.
2. The Articles of Incorporation provide that a holder of shares representing less than one unit does nothave any other rights of a shareholder in respect of those shares, other than those specified in the
Articles of Incorporation. This includes:(1) Rights under each item of Article 189, Paragraph 2 of the Companies Act;
(2) Rights to be allotted rights to subscribe for free for new shares and stock acquisition rights whensuch rights are granted to shareholders; or(3) Rights stipulated in the Articles of Incorporation-82-VII. Reference Information on the Company
1. Information on a Parent Company, etc. of the Company
The Company has no parent company.
2. Other Reference Information
The Company filed the following documents during the period from the commencing date of the fiscal
year ended March 31, 2018 to the filing date of the Annual Securities Report.
(1) Annual Securities Report and documents attached, and Confirmation
Letter(The 148th business term (from April 1, 2016 to March 31, 2017))

Filed with the Director of the
Kanto Local Finance Bureau
on June 21, 2017(2) Internal Control Report

Filed with the Director of the
Kanto Local Finance Bureau
on June 21, 2017(3) Shelf Registration Statement and documents attached

Filed with the Director of the
Kanto Local Finance Bureau
on June 22, 2017(4) Quarterly Report and Confirmation Letter(The First Quarter of the 149th business term (from April 1, 2017 toJune 30, 2017))

Filed with the Director of the
Kanto Local Finance Bureau
on August 7, 2017(5) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 6 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on August 22, 2017(6) Quarterly Report and Confirmation Letter(The Second Quarter of the 149th business term (from July 1, 2017 to
September 30, 2017))

Filed with the Director of the
Kanto Local Finance Bureau
on November 14, 2017(7) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 9 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on January 31, 2018(8) Quarterly Report and Confirmation Letter(The Third Quarter of the 149th business term (from October 1, 2017
to December 31, 2017))

Filed with the Director of the
Kanto Local Finance Bureau
on February 7, 2018(9) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 2-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on April 11, 2018(10) Amended Extraordinary Report(Amendment to Extraordinary Report (9) above)

Filed with the Director of the
Kanto Local Finance Bureau
on April 27, 2018(11) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 9-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on June 21, 2018(12) Amended Shelf Registration Statement(Amended Shelf Registration Statement concerning the Shelf
Registration Statement (3) above)

Filed with the Director of the
Kanto Local Finance Bureau
on July 6, 2017
August 9, 2017
August 22, 2017
October 12, 2017
January 31, 2018
April 11, 2018
April 27, 2018 andJune 21, 2018

Part II Information on Guarantors, etc. for the Company
Not applicable.

-83-Consolidated Financial Statements
Page
NumberConsolidated Financial Statements of Hitachi, Ltd. and Subsidiaries:
Consolidated Statement of Financial Position as ofMarch 31, 2018 and 2017

F-2

Consolidated Statement of Profit or Loss andConsolidated Statement of Comprehensive Income for the years ended
March 31, 2018 and 2017

F-3

Consolidated Statement of Changes in Equity for the years ended
March 31, 2018 and 2017

F-4

Consolidated Statement of Cash Flows for the years ended
March 31, 2018 and 2017

F-5

Notes to Consolidated Financial Statements

F-6

Reports of Independent Registered Public Accounting Firm

F-1

F-74

Consolidated Financial Statements
Consolidated Statement of Financial Position
Millions of yen
AssetsCurrent assets
Cash and cash equivalents (note 26)
Trade receivables (notes 6, 7 and 26)
Inventories (note 8)
Investments in securities and other financial assets (notes 2, 9 and 26)
Other current assets (note 2)
Total current assets
Non-current assets
Investments accounted for using the equity method (note 10)
Investments in securities and other financial assets (notes 2, 9 and 26)
Property, plant and equipment (note 11)
Intangible assets (note 12)
Other non-current assets (note 13)

March 31, 2018

March 31, 2017697,964
2,501,414
1,375,232
373,324
203,866

765,2422,433,149
1,225,907
388,792
189,516

5,151,800

5,002,606

743,407
716,431
2,124,827
1,054,370
315,768

691,251
758,350
1,998,411
919,201
294,098

Total non-current assets
Total assets

4,954,803

4,661,311

10,106,603

9,663,917

Liabilities
Current liabilities
Short-term debt (note 26)
Current portion of long-term debt (notes 9 and 26)
Other financial liabilities (note 26)
Trade payables (note 14)
Accrued expenses
Advances received (note 7)
Other current liabilities (notes 15 and 30)

121,439
117,191
254,735
1,536,983
697,185
551,182
516,679

196,357
190,233
274,270
1,402,233
687,905
472,132
497,729

Total current liabilities

3,795,394

3,720,859

811,664
575,156
412,718

790,013635,684
420,366

1,799,538

1,846,063

5,594,932

5,566,922

458,790575,809
2,105,395
142,167(4,137)458,790
577,573
1,793,570
141,068(3,916)

3,278,024

2,967,085

Non-current liabilities
Long-term debt (notes 9 and 26)
Retirement and severance benefits (note 16)
Other non-current liabilities (notes 2, 13, 15 and 26)
Total non-current liabilities
Total liabilities
EquityHitachi, Ltd. stockholders’ equity
Common stock (note 17)
Capital surplus (notes 17 and 20)
Retained earnings (notes 17 and 19)
Accumulated other comprehensive income (note 18)
Treasury stock, at cost (note 17)
Total Hitachi, Ltd. stockholders’ equity
Non-controlling interests

1,233,647

1,129,910

Total equity

4,511,671

4,096,995

Total liabilities and equity

10,106,603

9,663,917

See accompanying notes to consolidated financial statements.

F-2

Consolidated Statement of Profit or Loss
Years ended March 31, 2018 and 2017

Millions of yen

Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income (note 21)
Other expenses (note 21)
Financial income (note 22)
Financial expenses (note 22)
Share of profits (losses) of investments accounted for using the equity method(note 10)
EBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income from continuing operations, before income taxes
Income taxes (note 13)
Income from continuing operations
Loss from discontinued operations (notes 15 and 23)
Net income
Net income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
Earnings per share from continuing operations,
attributable to Hitachi, Ltd. stockholders (note 24)
Basic
DilutedEarnings per share attributable to Hitachi, Ltd. stockholders (note 24)
Basic
Diluted2018
9,368,614(6,866,522)
2,502,092(1,787,462)
12,068(140,686)
7,005(11,243)2017
9,162,264(6,782,677)
2,379,587(1,792,278)
100,742(146,568)
7,091(26,206)

62,483(47,186)

644,257
14,928(20,539)
638,646(131,708)
506,938(16,020)
490,918

475,182
12,923(19,014)469,091(125,112)
343,979(5,950)338,029

362,988
127,930

231,261
106,768

78.50
78.43

Yen
49.13
49.12

75.19
75.12

47.90
47.88

Consolidated Statement of Comprehensive Income
Years ended March 31, 2018 and 2017

Millions of yen

Net income

2018
490,9182017
338,029

Other comprehensive income (OCI) (note 18)
Items not to be reclassified into net income
Net changes in financial assets measured at fair value through OCI
Remeasurements of defined benefit plans
Share of OCI of investments accounted for using the equity method
Total items not to be reclassified into net income

1,530
22,753
3,302
27,58559,93446,086(1,887)104,133

Items that can be reclassified into net income
Foreign currency translation adjustments
Net changes in cash flow hedges
Share of OCI of investments accounted for using the equity method
Total items that can be reclassified into net income(8,042)5,703(45)(2,384)(64,761)
21,303
1,166(42,292)

25,201
516,119

61,841
399,870

382,341
133,778

299,397
100,473

Other comprehensive income (OCI)
Comprehensive income
Comprehensive income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
See accompanying notes to consolidated financial statements.
F-3

Consolidated Statement of Changes in Equity

Year ended March 31, 2018

Millions of yen
2018

Balance at beginning of year

Accumulated
othercomprehensive
income(note 18)

Commonstock(note 17)

Capitalsurplus(note 17)

Retainedearnings(notes 17
and 19)Treasurystock,
at cost(note 17)458,790

577,573

1,793,570

141,068(3,916)

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests

Total equity

2,967,085

1,129,910

4,096,995

Changes in equity
Reclassified into retained earnings--

16,428(16,428)

-

-

-

-

Net income--

362,988--362,988

127,930

490,918

Other comprehensive income

-

-

-

19,353-

19,353

5,848

25,201Dividends to Hitachi, Ltd. stockholders--(67,591)--(67,591)-(67,591)

Dividends to non-controlling interests

-

-

-

-

-

-

(34,395)(34,395)

Acquisition of treasury stock

-

-

-

-

(292)

(292)

-

(292)

Sales of treasury stock

-

(27)

-

-

71

44

-

44

Changes in non-controlling interests-(1,737)-(1,826)-(3,563)

4,354

791

Total changes in equity-(1,764)

311,825

1,099

(221)

310,939

103,737

414,676

Balance at end of year

458,790575,809

2,105,395

142,167(4,137)

3,278,024

1,233,647

4,511,671

Year ended March 31, 2017

Millions of yen
2017
Accumulated
othercomprehensive
income(note 18)

Commonstock(note 17)

Capitalsurplus(note 17)

Retainedearnings(notes 17
and 19)458,790586,790

1,609,761

83,543

Reclassified into retained earnings--

10,486

Net income--

Other comprehensive income (loss)--

Balance at beginning of year

Treasurystock,
at cost(note 17)

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests(note 5)

Total equity(3,806)

2,735,078

1,390,492

4,125,570(10,486)

-

-

-

-

231,261--

231,261

106,768

338,029-

68,136-

68,136(6,295)61,841

Changes in equity

Dividends to Hitachi, Ltd. stockholders--(57,938)--(57,938)-(57,938)

Dividends to non-controlling interests

-

-

-

-

-

-

(38,283)(38,283)

Acquisition of treasury stock

-

-

-

-

(153)

(153)

-

(153)

Sales of treasury stock

-

(15)

-

-

43

28

-

28

Changes in non-controlling interests-(9,202)

-

(125)

-

(9,327)(322,772)(332,099)

Total changes in equity-(9,217)

183,80957,525(110)

232,007(260,582)(28,575)

Balance at end of year

458,790

577,573

1,793,570

141,068(3,916)

2,967,085

1,129,910

4,096,995

See accompanying notes to consolidated financial statements.

F-4

Consolidated Statement of Cash Flows
Years ended March 31, 2018 and 2017

Millions of yen

Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Impairment losses
Income taxes
Share of (profits) losses of investments accounted for using the equity method
Financial income and expenses
Net gain on business reorganization and others(Gain) loss on sale of property, plant and equipment
Change in trade receivables
Change in inventories
Change in other assets
Change in trade payables
Change in retirement and severance benefits
Change in other liabilities
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities (note 25):
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of leased assets
Proceeds from sale of property, plant and equipment, and intangible assets
Proceeds from sale of leased assets
Collection of lease receivables
Purchase of investments in securities and other financial assets(including investments in subsidiaries and investments accounted for using the equity method)
Proceeds from sale of investments in securities and other financial assets(including investments in subsidiaries and investments accounted for using the equity method)Other
Net cash provided by (used in) investing activities
Cash flows from financing activities (note 25):
Change in short-term debt, net
Proceeds from long-term debt
Payments on long-term debt
Proceeds from payments from non-controlling interests
Dividends paid to Hitachi, Ltd. stockholders
Dividends paid to non-controlling interests
Acquisition of common stock for treasury
Proceeds from sales of treasury stock
Purchase of shares of consolidated subsidiaries from non-controlling interests
Proceeds from partial sales of shares of consolidated subsidiaries to non-controlling interests
Other
Net cash provided by (used in) financing activities

2018

2017

490,918

338,029

364,432
48,656
131,659(62,483)(862)(9,774)
2,395
47,216(181,207)(17,321)97,923(40,137)
44,320(7,743)415,183
68,587124,039
47,186324(81,369)(15,103)(196,824)(22,731)
13,299111,589(56,539)
16,408
1,050

907,992
9,767
17,902(21,582)(186,911)

763,128
13,307
14,113(20,664)(140,302)

727,168

629,582(349,388)(90,924)(3,263)27,4489,628-(316,116)(101,034)(292,943)
52,208
14,539180,726(243,124)(177,303)

178,188(2,893)248,956
53,012(474,328)(337,955)(104,819)
143,354(256,944)
3,953(67,568)(32,066)(292)
49(6,982)205(344)(233,818)
512,898(397,394)
7,638(57,935)(36,508)(153)
28(4,305)60(47)(321,454)(209,536)

Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents

1,336(16,164)(67,278)

65,927

Cash and cash equivalents at beginning of year

765,242699,315

Cash and cash equivalents at end of year

697,964

765,242

See accompanying notes to consolidated financial statements.

F-5

Notes to Consolidated Financial Statements(1) Nature of Operations
Hitachi, Ltd. (the Company) is a corporation domiciled in Japan, whose shares are listed on the Tokyo Stock Exchange. The
accompanying consolidated financial statements comprise the Company, its subsidiaries and the Company’s interests in associates
and joint ventures. The Company’s and its subsidiaries’ businesses are global and diverse, and include manufacturing and services
in eight segments consisting of information and telecommunication systems, social infrastructure and industrial systems, electronicsystems and equipment, construction machinery, high functional materials and components, automotive systems, smart life andecofriendly systems and others.
(2) Basis of Presentation
As the Company meets the requirements of a “Specified Company applying Designated International Financial ReportingStandards” pursuant to Article 1-2 of the Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial
Statements (Ordinance of the Ministry of Finance of Japan No. 28 of 1976), the consolidated financial statements of the Company
have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International AccountingStandards Board (IASB), as permitted by the provision of Article 93 of the Ordinance. The Company’s fiscal year begins on April
1 and ends on March 31 of the following calendar year.
The Company’s consolidated financial statements have been prepared on a historical cost basis, except for derivative assets andliabilities, financial assets and liabilities measured at fair value through profit or loss (FVTPL), financial assets measured at fairvalue through other comprehensive income (FVTOCI) and assets and liabilities associated with defined benefit plans.
The consolidated financial statements are presented in millions of Japanese yen, the functional currency of the Company.
Management of the Company has made a number of judgments, estimates and assumptions relating to the application of
accounting policies, reporting of revenues and expenses and assets and liabilities in the preparation of these consolidated financial
statements. Actual results could differ from those estimates.
Estimates and assumptions are continually evaluated. The effect of a change in accounting estimates, if any, is recognized in thereporting period in which the change was made and in future periods.
The information regarding judgments used in applying accounting policies that could have a material effect on the Company’s
consolidated financial statements is included in the following notes:
・note 3. (a) Basis of Consolidation・note 3. (d) Financial Instruments and note 26. Financial Instruments and Related Disclosures
The information regarding uncertainties arising from assumptions and estimates that could result in material adjustments in thesubsequent consolidated financial statements is included in the following notes:
・note 3. (h) Impairment of Non-financial Assets
・note 3. (i) Retirement and Severance Benefits and note 16. Employee Benefits
・note 3. (j) Provisions, note 3. (k) Contingencies, note 15. Provisions and note 30. Commitments and Contingencies
・note 3. (l) Revenue Recognition and note 7. Construction Contracts
・note 3. (m) Income Taxes and note 13. Deferred Taxes and Income Taxes
Regarding the consolidated statement of financial position, changes in presentation have been made effective the fiscal year
beginning April 1, 2017 due to materiality of some account balances as a result of business reorganization and others. “Investments
in securities and other financial assets,” which were included in “Other current assets” as of March 31, 2017, have been
reclassified and presented separately. “Lease receivables,” which were separately presented under current and non-current assets,
have been included in “Investments in securities and other financial assets” under current and non-current assets, respectively.
“Other financial liabilities,” which were separately presented under non-current liabilities, have been included in “Other noncurrent liabilities.” The consolidated statement of financial position as of March 31, 2017 has been reclassified in order to reflect
these changes in presentation.
As a result, regarding the consolidated statement of financial position as of March 31, 2017, “Other current assets” of ¥346,427
million have been reclassified as “Investments in securities and other financial assets.” In addition, “Lease receivables” of ¥42,365
million and ¥38,646 million, which were presented separately under current and non-current assets, have been reclassified as“Investments in securities and other financial assets” under current and non-current assets, respectively. “Other financial
liabilities” of ¥53,422 million, which were presented separately under non-current liabilities, have been reclassified as “Other noncurrent liabilities.”
F-6

Notes to Consolidated Financial Statements(3) Summary of Significant Accounting Policies(a) Basis of Consolidation(i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control is obtained when the Company has risks or rights to variable
returns from its involvement with the entity and has the ability to use its power over the entity to affect the variable returns.
The Company consolidates all subsidiaries from the date on which the Company acquires control until the date on which theCompany loses control.
Subsidiaries’ financial statements are adjusted as necessary if their accounting policies differ from those of the Company.
Changes in ownership interests in subsidiaries without a loss of control are accounted for as equity transactions. Changes inownership interests in subsidiaries with a loss of control are accounted for by derecognizing assets and liabilities, noncontrolling interests, equity and accumulated other comprehensive income (AOCI) attributable to the subsidiaries.
(ii) Associates and Joint Ventures
Associates are entities over whose operational and financial policies the Company has the ability to exercise significant
influence but which are not controlled by the Company.
Joint ventures are jointly controlled by more than one party, including the Company, and require unanimous agreement of allparties in deciding operational and financial policies of the entity.
Investments in associates and joint ventures are accounted for using the equity method. The consolidated financial statementsof the Company include changes in profit or loss and other comprehensive income (OCI) of these associates and joint
ventures from the date on which the Company obtains significant influence or joint control to the date on which it loses
significant influence or joint control. The financial statements of the associates and joint ventures are adjusted as necessary if
their accounting policies differ from those of the Company.
(iii) Structured Entities
The Company consolidates structured entities in case it is exposed or has rights to variable returns from its involvement withsuch entities and has the ability to affect those returns through its power over the entities.
(b) Cash Equivalents
Cash equivalents are highly liquid investments with insignificant risk of changes in value, with original maturities of threemonths or less from the date of acquisition.
(c) Foreign Currency Translation
The consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency.
(i) Foreign Currency Transactions
Foreign currency transactions are converted into the functional currency of each company using the exchange rate prevailingat the transaction date or a rate that approximates such rate. Monetary assets and liabilities denominated in foreign currencies
are converted into the functional currency using the exchange rate at the end of the reporting period. Foreign exchange gains
and losses resulting from the currency conversion and settlement are recognized in profit or loss, except where gains andlosses on assets or liabilities are recognized in OCI, foreign exchange effects relating to such assets or liabilities are also
recognized in OCI, and presented in AOCI.
(ii) Foreign Operations
Assets and liabilities of foreign entities are translated into Japanese yen using the exchange rate at the end of the reporting
period, and revenue and expense items are translated using the average exchange rates during the period. Gains or losses
derived from translating foreign entities’ financial statements are recognized in OCI, and presented in AOCI.
(d) Financial Instruments
The Company has adopted IFRS 9 “Financial Instruments” (IFRS 9) (issued in November 2009, amended in October 2010).
F-7

Notes to Consolidated Financial Statements(i) Non-derivative Financial Assets
The Company initially recognizes trade and other receivables on the date such receivables arise. All other financial assets are
initially recognized at the transaction date, on which the Company becomes a party to the agreement.
The Company derecognizes financial assets when contractual rights to cash flows from the financial assets expire or when thecontractual rights to receive cash flows from the financial assets are transferred in transactions where the risks and economic
rewards of owning the financial assets are substantially transferred. In transactions where the risks and economic rewards ofowning the financial assets are neither substantially transferred nor retained, the Company continues to recognize thefinancial assets to the extent of its continuing involvement and derecognizes such financial assets only if its control istransferred.
The classification and measurement model of non-derivative financial assets is summarized as follows:
Financial Assets Measured at Amortized Cost
Financial assets are subsequently measured at amortized cost in case they meet the following requirements:
・The financial asset is held within a business model with the objective of collecting contractual cash flows.
・The contractual terms of the financial asset provide cash flows on specified dates that are solely payments of principal andinterest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The
carrying amount of financial assets measured at amortized cost is subsequently measured using the effective interest method.
Interest accrued on financial assets measured at amortized cost is included in Interest income in the consolidated statement of
profit or loss.
FVTOCI Financial Assets
The Company holds certain equity instruments with the purpose of expanding its revenue base by maintaining andstrengthening business relations with the investees. These equity instruments are classified as FVTOCI financial assets bydesignation. They are initially and subsequently measured at fair value, and the changes in fair value are recognized in OCI.
The cumulative amount of OCI is recognized in equity as AOCI. Dividends on equity instruments designated as FVTOCI arerecognized in profit or loss, except where they are considered to be a return of the investment.
FVTPL Financial Assets
Equity instruments not designated as FVTOCI financial assets and debt instruments not classified as financial assets
measured at amortized cost are classified as FVTPL financial assets. These instruments are subsequently measured at fairvalue and the changes in fair value are recognized in profit or loss.
Impairment of Financial Assets Measured at Amortized Cost
On a regular basis, but no less frequently than at the end of each quarterly reporting period, the Company evaluates financial
assets measured at amortized cost for impairment. Impairment is deemed to have occurred if there is an objective evidence ofimpairment after initial recognition and in case the estimated future cash flows from the financial assets falls below theirrespective carrying amounts. Objective evidence of impairment includes historical credit loss experience, existence of
overdue payments, extended payment terms, negative evaluation by third party credit rating agencies, and deteriorated
financial position and operating results, such as a capital deficit.
Impairment losses on debt securities are recognized if the carrying amount of the financial asset exceeds either its estimatedfuture cash flows discounted by the initial effective interest rate or its estimated fair value using the observable market price,and measured as the difference.

F-8

Notes to Consolidated Financial Statements

Assessing impairment losses on trade receivables and other receivables requires a considerable amount of judgment,
involving historical experience and analysis, including the current creditworthiness of each customer. The Company
measures an impairment loss based on the credit loss ratio calculated taking into consideration factors including historicalexperience or the estimate of collectible amount after assessing multiple potential risks associated with the country in which a
debtor conducts business or business environment including special business customs particular to the region.
Impairment losses on debt instruments directly reduce the carrying amount of the assets, while the impairment losses on tradereceivables and other receivables indirectly reduce the carrying amount through the use of an allowance account. For tradereceivables and other receivables, account balances are generally written off against the allowance only after all means ofcollection have been exhausted and the potential for recovery is considered remote. In case that subsequent events orcircumstances decrease the amount of the impairment loss recognized, the impairment loss is reversed through profit or loss.
(ii) Non-derivative Financial Liabilities
The Company initially recognizes debt instruments on the date of issuance. All other financial liabilities are initiallyrecognized at the transaction date, on which the Company becomes a party to the agreement.
The Company derecognizes financial liabilities if extinguished, or if the obligation in the contract is redeemed or the liability
is discharged, cancelled or expires.
Non-derivative financial liabilities the Company holds include bonds, debts, trade payables and other financial liabilities.
They are initially measured at fair value (less direct transaction costs), and bonds and long-term debt are subsequently
measured at amortized cost using the effective interest method. Interest accrued on these financial liabilities is included inInterest charges in the consolidated statement of profit or loss.
(iii) Derivatives and Hedge Accounting
The Company uses derivative instruments including forward exchange contracts, cross currency swaps and interest rate
swaps in order to hedge foreign currency exchange risks and interest rate risks. All derivatives are measured at fair valueirrespective of the objective and intent of holding them.
The Company accounts for hedging derivatives as follows:・Fair value hedge: a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment. Thechanges in fair value of the recognized assets or liabilities or unrecognized firm commitments and the related derivatives areboth recorded in profit or loss if the hedge is considered highly effective.
・Cash flow hedge: a hedge of a forecast transaction or of the variability of cash flows to be received or paid related to arecognized asset or liability. The changes in fair value of the derivatives designated as cash flow hedges are recorded in OCI
if the hedge is considered highly effective. This treatment continues until profit or loss is affected by the variability of cash
flows or the unrecognized firm commitment of the designated hedged item, at which point changes in fair value of thederivative are recognized in profit or loss.
The Company follows the documentation requirements as prescribed by International Accounting Standards (IAS) 39“Financial Instruments: Recognition and Measurement,” which includes the risk management objective and strategy forundertaking various hedge transactions. In addition, a formal assessment is made at the hedge’s inception and subsequently
on a periodic basis, as to whether the derivative used in hedging activities is highly effective in offsetting changes in fairvalues or cash flows of the hedged items. Hedge accounting is discontinued if a hedge becomes ineffective.
(iv) Offsetting Financial Assets and Liabilities
Financial assets and liabilities are offset and reported as net amounts in the consolidated statement of financial position, only
if the Company currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis
or to realize the asset and settle the liability simultaneously.

F-9Notes to Consolidated Financial Statements(e) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification method or by
the moving average method for finished goods, semi-finished goods and work in process, and generally by the moving averagemethod for raw materials. Net realizable value is the estimated selling price in the ordinary course of business less the estimatedcosts of completion and the estimated costs necessary to sell.
(f) Property, Plant and Equipment
Property, plant and equipment are measured using the cost model and stated at cost less accumulated depreciation andaccumulated impairment losses. Acquisition cost includes direct costs of acquisition, costs of dismantling, removing andrestoration of the assets. Each asset is depreciated mainly using the straight-line method over the following estimated useful
lives for major classes of assets:
Buildings and structures
2 to 60 years
Machinery, equipment and vehicles
Tools, furniture and fixtures

2 to 17 years
2 to 20 years

Estimated useful lives and the method of depreciation are reviewed at the fiscal year end. Changes in estimated useful lives ordepreciation method are accounted for on a prospective basis as a change in accounting estimate.
(g) Intangible Assets
Intangible assets with finite useful lives are measured using the cost model and stated at cost less accumulated amortization andimpairment losses. Each asset is amortized mainly using the straight-line method over the following estimated useful lives for
major classes of assets:
Software for internal use
2 to 10 years
Software for sale
Other

2 to 10 years
2 to 20 years

Intangible assets with indefinite useful lives and goodwill are stated at cost less accumulated impairment losses.
(h) Impairment of Non-Financial Assets
For each non-financial asset, the Company reviews the carrying amount and tests for impairment if there are events orcircumstances indicating an asset’s carrying amount may not be recoverable. For an asset that does not generate cash flows thatare largely independent of the cash flows from other assets, the Company considers indicators of impairment based on a cash
generating unit (CGU) or a group of CGUs. Irrespective of any indicators of impairment, the Company tests intangible assets
with indefinite useful lives and goodwill for impairment annually, mainly in the fourth quarter, by estimating the recoverable
amount of each CGU (or group of CGUs) to which such assets are allocated.
The Company measures the recoverable amount of an asset or a CGU (or a group of CGUs) as the higher of fair value less costsof disposal and value in use. In measuring fair values, the Company and its subsidiaries primarily use the income approach(present value technique) based on the estimated future cash flows expected to result from the use of the asset and its eventual
disposal or the market approach to derive reasonable estimates of values in orderly market transactions, such as comparisons ofsimilar public companies and the current gross value of the asset. The Company consults with outside specialists, as appropriate,
depending on the complexity of estimating fair values. Value in use is calculated by the estimated future cash flows based on
business plans approved by management, discounted at the discount rate which is derived from the weighted average cost ofcapital. The business plan used is based on external information, reflects historical experiences, and generally has a maximum of
five years. Since the Company and its subsidiaries are engaged in a wide range of business activities from development,
production and sales of diverse products and the provision of various services, appropriate external information for eachbusiness activity is used for evaluating value in use for each business. Estimated cash flows beyond the period covered by thebusiness plan are calculated using the estimated growth rate not exceeding the long-term average growth rate of the market towhich the asset belongs.
If the carrying amount of the asset or the CGU (or the group of CGUs) exceeds its recoverable amount, an impairment loss isrecognized at the excess amount.

F-10

Notes to Consolidated Financial Statements
For an asset or a CGU (or a group of CGUs) other than goodwill, its recoverable amount is subsequently estimated if there is asignificant change in facts and circumstances and there is an indication that an impairment loss previously recognized on theasset may no longer exist or has decreased. If the estimated recoverable amount exceeds the carrying amount, the impairment
loss recognized previously is reversed to the extent of the carrying amount that would have been recorded, net of depreciation oramortization, if impairment had not been recognized previously.
(i) Retirement and Severance Benefits
The Company and certain subsidiaries have defined benefit pension plans and severance lump-sum payment plans to provide
retirement and severance benefits to employees. The present value of defined benefit obligations and retirement benefit costs aremeasured based on the projected unit credit method.
The present value of defined benefit obligations and the fair value of plan assets are remeasured as of the end of reporting
period. Actuarial differences arising during the year and changes in fair value of plan assets (excluding interest income) arerecognized in OCI and are not subsequently reclassified into profit or loss. Any prior service cost, which arises at the time of aplan amendment, is recognized immediately in profit or loss when such an amendment occurs.
The present value of defined benefit obligations less the fair value of plan assets is presented as the net amount of defined
benefit liability or asset in non-current liabilities or assets.
(j) Provisions
The Company recognizes provisions if it has a present obligation (legal or constructive) as a result of past events, it is probablethat an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of obligation
can be reliably estimated.
In case that the time to settle an obligation is expected to be long, and thus the time value of money is material, the amount of aprovision is measured at the present value of the amount of expenditures expected to be required to settle the obligation.
(k) Contingencies
The Company discloses contingent liabilities in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent
Assets” if an obligation does not meet the recognition criteria of provisions prescribed above in (j) Provisions, excluding thosewhere the possibility of an outflow of resources is remote.
The Company and its subsidiaries have financial guarantee contracts that require them to make payments to compensate theholder for a loss it incurs if a specified debtor defaults on payment based on the terms of a debt instrument.
(l) Revenue Recognition(i) Sale of Goods
Revenue from the sale of goods is recognized when all of the following conditions are met.
・The significant risks and rewards of ownership of the goods have been transferred to the customer
・The Company has neither continuing managerial involvement nor effective control over the goods sold・The amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably
・It is probable that the economic benefits associated with the transaction will flow to the Company
Revenue from the sale of goods is recognized upon delivery of goods to the customer. Typical revenue is from the sale ofinformation technology system products, software licenses, construction equipment, disk drives, air conditioners, highfunctional materials, cable products, automotive equipment, semiconductor processing equipment, test and measurement
equipment, railway vehicles, medical devices, industrial machinery and equipment, elevators and escalators. Revenue from asoftware arrangement that requires significant production, modification or customization of software is recognized using thepercentage of completion method, provided that there are reasonable and reliable estimates related to contract revenue, cost
and the extent of progress toward completion.

F-11

Notes to Consolidated Financial Statements(ii) Rendering of Services
Revenue from the rendering of services is recognized when all of the following conditions are met.
・The stage of completion of the transaction at the end of the reporting period can be measured reliably
・The amount of revenue and the costs incurred for the transaction at the end of the reporting period can be measured reliably
・It is probable that the economic benefits associated with the transaction will flow to the Company
Service revenues from facility maintenance, facility operations, outsourcing, logistics and others are recognized as services
are provided. Revenue from long-term fixed price service contracts such as support or maintenance contracts is recognized
ratably over the contractual period. If historical data shows that service cost does not accrue ratably over the contractual
period and the service is rendered in proportion to the accrual of the cost for the service, revenue is recognized based on thepattern of the cost accrual. Finance lease income is recognized using the effective interest method, and operating lease
income is recognized on a straight-line basis over the term of the lease.
(iii) Construction Contracts
The operating cycles of construction contracts, such as infrastructure systems, are generally greater than one year. Revenues
from these long-term construction contracts are recognized using the percentage of completion method, provided that the
progress of the construction can be reliably estimated. Revenue under the percentage of completion method is calculated by
the latest estimate of the total selling price multiplied by the ratio of the cost incurred to date to the estimated total cost of
the construction. Any anticipated losses on fixed price contracts are expensed in profit or loss when such losses are
estimated. If the outcome of a construction contract cannot be reliably estimated, revenue is recognized only to the extent
that the recoverability of contract costs incurred is highly probable, and contract costs are recognized as an expense in the
period in which they are incurred.
(iv) Multiple Element Transactions
The Company offers multiple solutions to meet its customers’ needs. Those solutions may involve the delivery or
performance of multiple elements, such as goods and services, and performance may occur at different points in time orover different periods of time. When one element is delivered prior to the other in an arrangement, revenue is deferred until
the last element is delivered, unless transactions are such that the delivered item has value to the customer on a standalone
basis, or delivery or performance of the undelivered item is considered probable and substantially in the control of theCompany if the arrangement includes a general right of return relative to the delivered item.
If both described conditions above are met, each element in an arrangement is considered to be separately identifiable, andconsideration is allocated to the separately identifiable components of a single arrangement based on the relative selling
price of each component. The Company determines the relative selling price by taking into account various factors such as
an overall market conditions, including geographically or regionally specific market factors, competitors’ prices for similar
items, profit objective and pricing practices.
(m) Income Taxes
Deferred tax assets and liabilities resulting from temporary differences and others are accounted for based on a liability method.
A deferred tax liability is not recognized for temporary differences arising from goodwill, temporary differences arising froman asset or liability in a transaction other than a business combination, which at the time of transaction affects neither
accounting nor taxable income and future taxable difference arising from investments in subsidiaries, associates and joint
ventures where that the Company is able to control the timing of reversal of the temporary difference while it is probable thatthe temporary difference will not reverse in the foreseeable future. A deferred tax asset is recognized to the extent that it isprobable that future taxable income will be available against which unused tax loss carryforwards, unused tax credits and future
deductible temporary differences can be utilized. Current tax and deferred tax on items recognized in OCI are also recognizedin OCI.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change intax rates is recognized in profit or loss and OCI in the period that includes the enactment date.
(n) Consumption Tax
Consumption tax collected and remitted to taxing authorities is excluded from revenues, cost of sales and expenses in the
consolidated statement of profit or loss.

F-12

Notes to Consolidated Financial Statements(o) Earnings per Share
Basic earnings per share (EPS) for net income attributable to Hitachi, Ltd. stockholders is calculated based on the weighted
average number of ordinary shares outstanding during the period. Diluted EPS for net income attributable to Hitachi, Ltd.
stockholders is calculated based on the sum of weighted average number of ordinary shares outstanding during the period andthe conversion of securities with dilutive effects or the number of authorized shares.
(p) Business Combinations
Business combinations are accounted for using the acquisition method. Consideration is measured as the sum of the fair value ofthe consideration transferred at acquisition date and the non-controlling interests in the acquiree. The Company determines, on atransaction by transaction basis, whether to measure non-controlling interests at fair value or by the appropriate share in the fairvalue of identifiable net assets of the acquiree. Acquisition related costs are expensed in the period in which the costs are
incurred.
(q) New Accounting Standards not yet Adopted by the Company
The following table lists the principal new accounting standards and interpretations issued or amended prior to the approval dateof the consolidated financial statements that are not yet adopted by the Company as of the reporting date. The impact of
adopting IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” on the Company’s financial
position and business performance will not be material. The Company is currently evaluating the potential impact of adopting
IFRS 16 “Leases” on its financial position and business performance.
IFRSs

Title

IFRS 9Financial Instruments

Mandatory effective
To be adopted by
Description of new standards anddate
the Company
amendments(Fiscal year beginning (Fiscal year beginningon or after)on)
January 1, 2018
April 1, 2018
Amendments for hedge accounting(amended in November 2013)
Amendments for the classification andmeasurement of financial instruments,
and adoption of expected credit loss
impairment model for financial assets(amended in July 2014)

IFRS 15

Revenue fromContracts with

January 1, 2018

April 1, 2018

Revised accounting standard forrevenue recognition and disclosure

January 1, 2019

April 1, 2019

Revised lease definition and mainly

Customers
IFRS 16

Leaseslessee accounting

F-13

Notes to Consolidated Financial Statements(4) Segment Information
Business Segments
The operating segments of the Company are the components for which separate financial information is available and which isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company discloses its business in eight reportable segments, corresponding to categories of activities classified primarily by
the similarities for the nature of markets, products and services, and economic characteristics. Several operating segments areaggregated into Social Infrastructure & Industrial Systems, Electronic Systems & Equipment and High Functional Materials &Components for financial reporting purposes so that users of the financial statements better understand the Company’s financial
position and business performance. The Company aggregates operating segments based on the similarities of economic
characteristics mainly using profit margin ratios of operating segments. The primary products and services included in eachsegment are as follows:
Information & Telecommunication Systems:
Systems integration, Consulting, Cloud services, Servers, Storage, Software, Telecommunications & network and ATMs
Social Infrastructure & Industrial Systems:
Industrial machinery and plants, Elevators, Escalators, Railway systems, Thermal, Nuclear and Renewable energy power
generation systems and Transmission & distribution systems
Electronic Systems & Equipment:
Semiconductor processing equipment, Test and measurement equipment, Advanced industrial products and Medical electronics
equipment
Construction Machinery:Hydraulic excavators, Wheel loaders and Mining machinery
High Functional Materials & Components:
Semiconductor and display related materials, Circuit boards and materials, Automotive parts, Energy storage devices, Specialty
steel products, Magnetic materials and applications, Functional components and equipment and Wires, cables and related products
Automotive Systems:
Engine powertrain systems, Electric powertrain systems, Integrated vehicle control systems and Car information systems
Smart Life & Ecofriendly Systems:
Air-conditioning equipment, Room air conditioners, Refrigerators and Washing machines
Others:
Optical disk drives, Property management and others
In October 2016, the Company sold a certain number of shares of Hitachi Capital Corporation (Hitachi Capital). As a result,
Hitachi Capital and its subsidiaries, which were included in the Financial Services segment, became equity-method associates of
the Company. Accordingly, total assets and investments accounted for using the equity method of the Financial Services segment
as of March 31, 2018 and 2017 are left blank "-". From the beginning of the third quarter of the year ended March 31, 2017, theCompany includes its share of profits (losses) of investments accounted for using the equity method of Hitachi Capital and its
subsidiaries in Corporate items and Eliminations.

F-14

Notes to Consolidated Financial Statements
The following tables show business segment information for the years ended March 31, 2018 and 2017.
Revenues from Outside Customers
Millions of yen
2018
Information & Telecommunication Systems
Social Infrastructure & Industrial Systems

1,888,394
2,136,313

1,815,085
2,053,607

976,252
958,630

1,067,237
747,122

1,603,582
996,202

1,408,622
988,928

509,442
292,402528,633
375,903

Electronic Systems & Equipment
Construction Machinery
High Functional Materials & Components
Automotive Systems

2017

Smart Life & Ecofriendly Systems
Others-170,583

Subtotal
Corporate items

Financial Services

9,361,217
7,397

9,155,720
6,544

Total

9,368,614

9,162,264

Revenues from Intersegment Transactions
Millions of yen
2018

2017

Information & Telecommunication Systems

120,513167,736

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

238,699
110,299

278,324
103,138

Construction Machinery
High Functional Materials & Components

523
53,955

6,825
56,065

Automotive Systems
Smart Life & Ecofriendly Systems

4,834
30,7103,356
28,682OthersFinancial Services

265,374-

277,891
8,629

Subtotal

824,907930,646

Corporate items and Eliminations(824,907)(930,646)

-

-

Total
Total Revenues

Millions of yen
2018

2017

Information & Telecommunication Systems

2,008,907

1,982,821

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

2,375,012
1,086,551

2,331,931
1,170,375

Construction Machinery
High Functional Materials & Components

959,153
1,657,537

753,947
1,464,687

Automotive Systems
Smart Life & Ecofriendly Systems

1,001,036
540,152

992,284
557,315557,776-

653,794
179,212Subtotal
Corporate items and Eliminations

10,186,124(817,510)

10,086,366(924,102)

Total

9,368,614

9,162,264

OthersFinancial Services

F-15

Notes to Consolidated Financial Statements
Segment Profit (Loss)
Millions of yen
2018

2017

Information & Telecommunication Systems

139,279

76,458Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

101,257
88,852(19,993)
66,772

Construction Machinery
High Functional Materials & Components

97,09598,672

22,735
123,342

Automotive Systems
Smart Life & Ecofriendly Systems

42,42933,352

65,83031,840

OthersFinancial Services

21,874-

20,63022,841

Subtotal
Corporate items and Eliminations

622,810
21,447

410,455
64,727

Total
Interest income

644,257
14,928475,182
12,923

Interest charges(20,539)(19,014)

Income from continuing operations, before income taxes

638,646

469,091

Segment profit (loss) is measured by EBIT.
Intersegment transactions are generally recorded at the same prices used in arm’s length transactions. Corporate items include
corporate expenses not allocated to individual business segments, such as expenditures for leading-edge R&D, a part of net gain on
business reorganization and share of profits (losses) of investments accounted for using the equity method, and others.
Total Assets
Millions of yen
March 31, 2018

March 31, 2017

Information & Telecommunication Systems

1,729,842

1,672,386

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

3,430,705
1,050,025

3,205,656
967,731

Construction Machinery
High Functional Materials & Components

1,125,791
1,787,348

1,036,800
1,666,879

797,101
331,810743,095
326,373

OthersFinancial Services

1,581,745-

1,552,003-

Subtotal
Corporate assets and Eliminations

11,834,367(1,727,764)

11,170,923(1,507,006)

Total

10,106,603

9,663,917

Automotive Systems
Smart Life & Ecofriendly Systems

Corporate assets mainly consist of cash and cash equivalents, investments in securities and other financial assets, and investments
accounted for using the equity method.

F-16

Notes to Consolidated Financial Statements
Investments Accounted for Using the Equity Method
Millions of yen
March 31, 2018

March 31, 2017

Information & Telecommunication Systems

15,414

14,523Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

407,923
1,221

390,653385

Construction Machinery
High Functional Materials & Components

29,23836,136

22,81536,501

Automotive Systems
Smart Life & Ecofriendly Systems

5,217
58,877

5,213
50,715

OthersFinancial Services

6,126
-

6,607
-

Subtotal
Corporate items and Eliminations

560,152
183,255

527,412
163,839

Total

743,407691,251

Depreciation and Amortization
Millions of yen
2018

2017

Information & Telecommunication Systems

87,493

95,921Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

47,58320,04644,64624,325Construction Machinery
High Functional Materials & Components

38,833
81,10535,84371,549Automotive Systems
Smart Life & Ecofriendly Systems

53,524
10,12251,656
11,791OthersFinancial Services

21,580-26,07849,559Subtotal
Corporate items and Eliminations

360,286
4,146

411,368
3,815

Total

364,432

415,183

Depreciation consists of that of property, plant and equipment and investment properties.
Impairment Losses
Millions of yen
2018

2017

Information & Telecommunication Systems

22,37037,579Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

3,073
2,579

10,0838,272

Construction Machinery
High Functional Materials & Components

549
11,088

3,883
2,732

Automotive Systems
Smart Life & Ecofriendly Systems

613
6

691
4,862

OthersFinancial Services

467
-

854
-

Subtotal
Corporate items and Eliminations

40,745
7,911

68,956
(369)

Total

48,656

68,587

Impairment losses mainly consist of those recognized on property, plant and equipment, investment properties and intangible
assets.

F-17

Notes to Consolidated Financial Statements
Share of Profits (Losses) of Investments Accounted for Using the Equity Method
Millions of yen
2018

2017

Information & Telecommunication Systems

1,252

1,657

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

18,844
220(73,986)142

Construction Machinery
High Functional Materials & Components

4,355
6,654

(311)
4,703

Automotive Systems
Smart Life & Ecofriendly Systems

100
10,798

562
8,253

167
-

292
995

Subtotal
Corporate items and Eliminations

42,39020,093(57,693)
10,507

Total

62,483(47,186)

OthersFinancial Services

Share of profits (losses) of investments accounted for using the equity method include impairment losses on investments accounted
for using the equity method.
Capital Expenditures
Millions of yen
2018

2017

Information & Telecommunication Systems
Social Infrastructure & Industrial Systems

81,346
98,62980,56885,436

Electronic Systems & Equipment
Construction Machinery

23,93923,93329,606
17,312High Functional Materials & Components
Automotive Systems

135,385
72,434

104,417
59,418Smart Life & Ecofriendly Systems
Others9,173
18,984

7,186
22,218Financial Services
Subtotal
Corporate items and Eliminations
Total

-

76,645463,823

482,806

2,792

3,883

466,615

486,689

Capital expenditures represent additions to property, plant and equipment, investment properties and intangible assets.

F-18

Notes to Consolidated Financial Statements
Geographic Information
The following table shows revenues attributed to geographic areas based on the location of the customers for the years ended
March 31, 2018 and 2017.
Millions of yen
2018

2017

Japan

4,643,080

4,757,685

Asia

2,081,150

1,860,716

North America
Europe1,177,581
964,474

1,144,029
972,661

Other Areas

502,329

427,173

Overseas Revenues Subtotal

4,725,534

4,404,579

Total Revenues

9,368,614

9,162,264

Revenues in China for the years ended March 31, 2018 and 2017 were ¥1,041,046 million and ¥928,983 million, respectively.
Revenues in the U.S.A. for the years ended March 31, 2018 and 2017 were ¥1,082,593 million and ¥1,051,535 million,
respectively. Revenues from outside customers attributable to any individual country and region other than Japan, China and the
U.S.A. were not material for the years ended March 31, 2018 and 2017.
The following table shows the balances of property, plant and equipment, investment properties and intangible assets for eachgeographic area as of March 31, 2018 and 2017.
Millions of yen
March 31, 2018
Japan

March 31, 2017

1,684,732

1,627,391

Asia
North America

383,729531,270

365,774
445,119

EuropeOther Areas

459,968
142,922360,991
127,551

3,202,621

2,926,826

Subtotal
Corporate items and Eliminations
Total

22,79834,7913,225,419

2,961,617

The balances of property, plant and equipment, investment properties and intangible assets in the U.S.A. as of March 31, 2018 and2017 were ¥519,432 million and ¥431,364 million, respectively. The balances of property, plant and equipment, investment
properties and intangible assets in any individual country and region other than Japan and the U.S.A. were not material as of March
31, 2018 and 2017.
Significant Customer Information
There was no concentration of revenues from a specific customer for the years ended March 31, 2018 and 2017.

F-19

Notes to Consolidated Financial Statements(5) Business Acquisitions and Divestitures
The following are the main Business Acquisitions and Divestitures for the year ended March 31, 2018, including the period up to
the approval date of the consolidated financial statements.
(a) Sale of shares and business reorganization of Hitachi Kokusai Electric Inc. (Hitachi Kokusai)
On April 26, 2017, the Company signed a basic agreement with HKE Holdings K.K. (HKE), which is indirectly held andoperated by a related investment fund whose equity interests are wholly owned by Kohlberg Kravis Roberts & Co. L.P. andwith HVJ Holdings Inc. (HVJ), in which is invested by funds which are managed, operated, provided with information and thelike by Japan Industrial Partners, Inc., regarding (i) a tender offer to be conducted by HKE for the common shares of Hitachi
Kokusai, which was a consolidated subsidiary of the Company in the Electronic Systems & Equipment segment and a shareconsolidation of the share of Hitachi Kokusai, and the acquisition of treasury shares by Hitachi Kokusai, through which Hitachi
Kokusai becomes a wholly-owned subsidiary of HKE, (ii) an absorption-type company split of the thin-film process solutions
business of Hitachi Kokusai, whereby HKE is the company succeeding in the absorption-type split, to be conducted by HKE
and Hitachi Kokusai after Hitachi Kokusai becomes a wholly-owned subsidiary of HKE, and (iii) the transfer by HKE of 20%of the share of Hitachi Kokusai to the Company and 20% of the share of Hitachi Kokusai to HVJ to take place after theabsorption-type company split, and other transactions that are incidental or related to those transactions. Furthermore, on
October 11, 2017, on November 24, 2017 and on March 30, 2018, the Company signed a memorandum of understanding toamend the basic agreement (the Amendment Memorandum) with HKE and HVJ.
HKE commenced the tender offer on October 12, 2017 pursuant to the Amendment Memorandum, and the tender offer wascompleted on December 8, 2017. Following the completion of the tender offer, the above related transactions, such as the shareconsolidation of Hitachi Kokusai shares, took place and the all related transactions were completed on June 4, 2018. As aresult, the Company's ownership ratio of shares of Hitachi Kokusai decreased from 51.7% to 20.0% and Hitachi Kokusai
turned into an equity-method associate of the Company. The effects of this transaction on the Company’s consolidated
financial statements are currently being evaluated.
On June 1, 2018, HKE changed its name to Kokusai Electric Corporation.
(b) Acquisition of “Sullair” business
On April 25, 2017, the Company signed an agreement with Accudyne Industries Borrower, S.C.A. (Accudyne) to acquire
Accudyne’s subsidiaries and certain related assets that manufacture and sell air compressors under the “Sullair” brand mainly
in North America, in order to expand global business of industrial equipment business. In accordance with the agreement, on
July 12, 2017 (the acquisition date), the Company and Hitachi America, Ltd., a subsidiary of the Company, acquired the Sullairbusiness by acquiring all the shares of holding companies of the Sullair business.
The following table summarizes the fair value of the consideration paid for the Sullair business and the amounts of the assets
acquired and liabilities assumed recognized as of the acquisition date.
Millions of yen
Cash and cash equivalents
9,341
Trade receivables
9,351
Inventories
7,409
Other current assets
790
Non-current assets (excluding intangible assets)
10,102Intangible assets
Goodwill (deductible for tax purposes)
16,294
Goodwill (not deductible for tax purposes)
55,361Other intangible assets
52,709161,357
Total
Current liabilities
Non-current liabilities
Total

66,805
1,264
68,069Cash paid for the acquisition

93,288The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
Hitachi America, Ltd. repaid USD 517 million (¥57,502 million) of loans which were included in the Sullair business, inaddition to the acquisition.
The operating results of the Sullair business for the period from the acquisition date to March 31, 2018 were not material.
F-20

Notes to Consolidated Financial Statements
On a pro forma basis, revenues and net income attributable to Hitachi, Ltd. stockholders using an assumed acquisition date for
the Sullair business of April 1, 2017 would not differ materially from the amounts reported in the consolidated financial
statements for the year ended March 31, 2018.

The following are the main Business Acquisitions and Divestitures for the year ended March 31, 2017.
(a) Sale of all shares of Hitachi Koki Co., Ltd. (Hitachi Koki)
On January 13, 2017, the Company and Hitachi Urban Investment, Ltd., a subsidiary of the Company, signed an agreementwith HK Holdings Co., Ltd., all of whose issued shares are owned by investment funds controlled by Kohlberg Kravis Roberts& Co. L.P., regarding a tender offer made by HK Holdings Co., Ltd. The objective of the tender offer was to acquire common
stock of Hitachi Koki, a subsidiary of the Company in the Electronic Systems & Equipment segment, and stock acquisitionrights issued based on a resolution at the Hitachi Koki’s board of directors’ meeting held on July 28, 2015. The agreement
provided that the Company and Hitachi Urban Investment, Ltd. would subscribe all shares of common stock of Hitachi Koki
owned by the Company and Hitachi Urban Investment, Ltd. to the tender offer and in accordance with this agreement, thetransfer of shares was completed on March 29, 2017.
As a result of this transfer of shares, the Company’s ownership ratio of shares of Hitachi Koki decreased from 51.2% to zero,and Hitachi Koki was deconsolidated. A gain on the sale of shares of Hitachi Koki in the amount of ¥28,097 million wasrecognized in Other income in the consolidated statement of profit or loss. Changes in non-controlling interests in the
consolidated statement of changes in equity include derecognition of non-controlling interest in Hitachi Koki as a result of its
deconsolidation.
On June 1, 2018, Hitachi Koki changed its name to Koki Holdings Co., Ltd.

F-21

Notes to Consolidated Financial Statements(b) Acquisition of Bradken Limited (Bradken)
On October 3, 2016, Hitachi Construction Machinery Co., Ltd. (HCM), a subsidiary of the Company in the Construction
Machinery segment, signed a bid implementation agreement with Bradken to implement a tender offer for all issued shares ofcommon stock of Bradken, which conducts metal casting and operates manufacture and distribution services for metal castingproducts, in order to complement and bolster the parts service business in the mining business of HCM. The tender offer was
executed from November 1, 2016 to April 7, 2017, and HCM had acquired the majority of the ownership ratio of voting rights
in Bradken and Bradken became a consolidated subsidiary of HCM on March 20, 2017.
As a result of the tender offer, HCM acquired over 90% of the total number of issued shares of Bradken. Since HCM proceededwith a squeeze-out procedure to acquire the remaining shares of Bradken held by its minority shareholders aiming to makeBradken a wholly owned subsidiary, HCM accounted for the acquisition as if it had substantially acquired 100% of the sharesof Bradken.
The following table summarizes the fair value of the consideration paid for Bradken and the amounts of the assets acquired andliabilities assumed recognized as of the acquisition date.
Millions of yen
Cash and cash equivalents
3,572
Trade receivables
7,950
Inventories
17,593
Other current assets
3,895
Property, plant and equipment
36,188Intangible assets
Goodwill (not deductible for tax purposes)
20,792Other intangible assets
19,870
5,562
Other non-current assets
115,422
Total
Current liabilities
Non-current liabilities
Total

43,15013,65856,808

Consideration for the acquisition

58,614

The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
The consideration, paid in cash, for the 68.62% ownership interest by March 31, 2017 was ¥40,336 million. Unpaid
consideration of ¥18,278 million as of March 31, 2017 was recognized in Other financial liabilities in the consolidated
statement of financial position. HCM paid the remaining amount in full during the year ended March 31, 2018.
The results of operations of Bradken for the period from the acquisition date to March 31, 2017 were not material.
On a pro forma basis, revenues and net income attributable to Hitachi, Ltd. stockholders using an assumed acquisition date for
Bradken of April 1, 2016 would not differ materially from the amounts reported in the consolidated financial statements for theyear ended March 31, 2017.
Since these adjustments to the amounts of assets acquired and liabilities assumed recognized as of the acquisition date are notmaterial, the amounts as of March 31, 2017 disclosed as comparative information in the consolidated statement of financial
position have not been retrospectively adjusted.

F-22

Notes to Consolidated Financial Statements(c) Sale of shares of Hitachi Capital
On May 13, 2016, the Company concluded an agreement regarding the transfer of common stock of Hitachi Capital, asubsidiary of the Company in the Financial Services segment, in order to strengthen finance functions and accelerate theconcentration of management resources in the Social Innovation Business. In accordance with this agreement, a certain numberof shares of Hitachi Capital common stock owned by the Company were transferred to Mitsubishi UFJ Financial Group, Inc.
and Mitsubishi UFJ Lease & Financial Co., Ltd on October 3, 2016.
As a result of this transfer of shares, the Company’s ownership ratio of shares of Hitachi Capital decreased from 60.6% to33.4%, and Hitachi Capital ceased to be the Company’s consolidated subsidiary and became its equity-method associate. The
resulting loss on the sale of the shares of Hitachi Capital was not material. Changes in non-controlling interests in the
consolidated statement of changes in equity include derecognition of non-controlling interest in Hitachi Capital as a result of its
deconsolidation.
The following table shows the assets, liabilities and equity of Hitachi Capital as of March 31, 2016.
Millions of yen
March 31, 2016
AssetsCurrent assets
Cash and cash equivalents [1]157,091
Trade receivables [1]710,713
Lease receivables [1]311,992
Inventories
3,701
73,316
Other current assets
Total current assets
1,256,813
Non-current assets
Investments accounted for using the equity method
20,457
Investments in securities and other financial assets
675,964
Lease receivables
729,876
Property, plant and equipment
307,582
Intangible assets
62,65638,139Other non-current assets
Total non-current assets
1,834,674
Total assets
3,091,487
Liabilities
Current liabilities
Short-term debt [1]497,695
Current portion of long-term debt [1]485,611
Other financial liabilities
40,121
Trade payables [1]228,989
Accrued expenses
15,581
Advances received
23,26931,974
Other current liabilities
Total current liabilities
1,323,240
Non-current liabilities
Long-term debt [1]1,356,212
Other financial liabilities
28,717Retirement and severance benefits
9,540
26,698Other non-current liabilities
Total non-current liabilities
1,421,167
Total liabilities
2,744,407
EquityHitachi, Ltd. stockholders’ equity
201,349
145,731
Non-controlling interests
Total equity
347,080
Total liabilities and equity
3,091,487

F-23

Notes to Consolidated Financial Statements[1] In the above table, the amounts corresponding to internal transactions are as follows:
Millions of yen
Cash and cash equivalents (deposits to the Company)
Trade receivables
Lease receivables
Short-term debt
Current portion of long-term debt
Trade payables
Long-term debt

March 31, 2016
118,701
152,078
59,56937,36817,36730,03624,871(d) Sale of shares of Hitachi Transport System, Ltd. (HTS)On March 30, 2016, the Company concluded an agreement regarding the transfer of common stocks of HTS, a subsidiary of
the Company included in the Others in segment information, in order to expand the scope of the Social Innovation Business byenhancing logistics platforms. In accordance with this agreement, a certain number of shares of HTS common stock owned by
the Company were transferred to SG Holdings Co., Ltd. on May 19, 2016.
As a result of this transfer of shares, the Company’s ownership ratio of shares of HTS decreased from 59.0% to 30.0%, andHTS ceased to be the Company’s consolidated subsidiary and became its equity-method associate. A gain on the sale of sharesof HTS in the amount of ¥44,958 million was recognized in Other income in the consolidated statement of profit or loss.
Changes in non-controlling interests in the consolidated statement of changes in equity include derecognition of noncontrolling interest in HTS as a result of its deconsolidation.
(6) Trade Receivables
The components of trade receivables are as follows:
Millions of yen
Accounts receivable

March 31, 2018

March 31, 2017

2,322,554

2,295,199

Others

178,860

137,950

Total

2,501,414

2,433,149

Trade receivables are stated as net of the allowance for doubtful receivables.
Others include notes receivable and electronically recorded monetary claims.

F-24

Notes to Consolidated Financial Statements(7) Construction Contracts
Total costs incurred and profits recognized, advances received and retentions for construction contracts in progress as of March 31,2018 and 2017 are as follows:
Millions of yen
Total costs incurred and profits recognized

March 31, 2018

March 31, 2017

2,985,931

2,589,474

Advances received

242,157

195,847

Retentions

13,976

14,938Gross amount due from and due to customers for contract work as of March 31, 2018 and 2017 are as follows:
Millions of yen
Gross amount due from customers forcontract work
Gross amount due to customers forcontract work

March 31, 2018

March 31, 2017

456,856

506,086

345,978

276,270

Revenues recognized from construction contracts for the years ended March 31, 2018 and 2017 were ¥1,130,748 million and¥1,096,376 million, respectively.
(8) Inventories
The components of inventories are as follows:
Millions of yen
March 31, 2018

March 31, 2017

Finished goods

561,548

512,539

Semi-finished goods and work in process

554,354492,284

Raw materials

259,330

221,084

1,375,232

1,225,907

Total

For the years ended March 31, 2018 and 2017, the amounts of inventories expensed and included as cost of sales were ¥5,821,340
million and ¥5,598,611 million, respectively, and the write-downs of inventories were ¥52,407 million and ¥27,444 million,
respectively.

F-25

Notes to Consolidated Financial Statements(9) Leases(a) Lessee
The Company and certain subsidiaries use leased facilities and equipment, including buildings, machinery and equipment andvehicles under finance leases or operating leases.
The following table shows the undiscounted amounts and present value of minimum lease payments under finance leases as ofMarch 31, 2018 and 2017.
Millions of yen
March 31, 2018
Minimum
Present value
leaseof minimum
payments
lease
payments

March 31, 2017
Minimum
Present value
leaseof minimum
payments
lease
payments

Within 1 year

16,98815,537

16,447

15,198After 1 year but not more than 5 years

33,81730,84034,241

31,496More than 5 years

4,254

3,101

4,007

3,009

Total

55,05949,47854,69549,703Finance charges(5,581)(4,992)49,47849,703Present value of minimum lease payments,
total

The following table shows the future minimum lease payments under non-cancelable operating leases as of March 31, 2018and 2017.
Millions of yen
March 31, 2018

March 31, 2017

Within 1 year

30,09821,391After 1 year but not more than 5 years

61,77759,307More than 5 years

33,45821,516

Total

125,333

102,214

Total operating lease expenses for the years ended March 31, 2018 and 2017 are as follows:
Millions of yen
2018
Operating lease expenses

2017
125,000

F-26

121,135

Notes to Consolidated Financial Statements(b) Lessor
The Company and certain subsidiaries lease certain assets such as manufacturing machinery and equipment under finance andoperating lease arrangements.
The following table shows the undiscounted amounts and present value of minimum lease payments receivable under financeleases as of March 31, 2018 and 2017.
Millions of yen
March 31, 2018
Gross
Present value
investmentof minimumin leaselease
payments
receivable

March 31, 2017
Gross
Present value
investmentof minimumin leaselease
payments
receivable

Within 1 year

51,46747,90345,62042,788After 1 year but not more than 5 years

46,48843,90841,57939,327More than 5 years

1,532

1,301

219

210

Total

99,487

93,11287,41882,325

Unearned income(5,518)(4,130)Net investment in the lease

93,96983,288Unguaranteed residual value

(857)

(963)

93,11282,325Present value of minimum lease payments
receivable, total

The amounts of the allowance for uncollectable minimum lease payments receivable as of March 31, 2018 and 2017 were
¥1,771 million and ¥2,277 million, respectively.
The following table shows the future minimum lease payments receivable under non-cancelable operating leases as of March 31,2018 and 2017.

March 31, 2018
Within 1 year
After 1 year but not more than 5 years

5,361
5,938

Millions of yen
March 31, 2017
3,034
3,782

More than 5 years

4,280

15

Total

15,579

6,831

F-27

Notes to Consolidated Financial Statements(10) Investments Accounted for Using the Equity Method
The aggregated carrying amounts of investments accounted for using the equity method as of March 31, 2018 and 2017, and theCompany and certain subsidiaries’ share of total comprehensive income (loss) of equity-method associates and joint ventures forthe years ended March 31, 2018 and 2017 are as follows:
Millions of yen
Associates
March 31, 2018
Carrying amount of investments

Joint ventures

March 31, 2017

712,406

March 31, 2018

664,857

March 31, 2017

31,001

26,394As of March 31, 2018 and 2017, the Company and certain subsidiaries’ interests in certain joint ventures operating at a loss havethe cumulative loss exceeding the Company and certain subsidiaries’ investments, and thus the negative amounts of ¥99,276
million and ¥104,176 million, respectively, were recognized in other non-current liabilities.
Millions of yen
Associates
2018
Net income (loss) fromcontinuing operations

Joint ventures
2017

2018

2017

51,890(8,193)

10,593

5,849

Other comprehensive income (loss)

330(7,116)

2,927

6,395

Total comprehensive income (loss)

52,220(15,309)

13,52012,244

In addition to the share of Net income (loss) from continuing operations of equity method associates and joint ventures,
impairment losses on investments accounted for using the equity method were recognized in Share of profit (loss) of investments
accounted for using the equity method. The amount of impairment losses recognized in the consolidated statement of profit orloss for the year ended March 31, 2017 was ¥44,842 million.
Share of profit (loss) of investments accounted for using the equity method in the year ended March 31, 2017 includes ¥66,477
million of losses related to the exit from the commercial development of a laser-based uranium enrichment technology by anassociate in the U.S.A. in the Social Infrastructure & Industrial Systems segment. The losses include ¥39,659 million of
impairment loss on the investment accounted for using the equity method. The recoverable amount was determined based onvalue in use, which was measured at ¥9,536 million as of March 31, 2017. In assessing value in use, future cash flows werediscounted using a discount rate of 11.1% (before tax).

F-28

Notes to Consolidated Financial Statements

Of the associates and joint ventures accounted for using the equity method, Hitachi Capital is the only associate that is material to
the Company’s consolidated financial statements. Hitachi Capital provides a diverse range of leasing and financial services to theCompany and other customers. Hitachi Capital’s summarized financial information is as follows, and it includes fair value
adjustments on assets and liabilities of Hitachi Capital.
Millions of yen
March 31, 2018

March 31, 2017

Total assets

3,411,017

3,177,606

Total liabilities
EquityEquity attributable to owners of the parent
Non-controlling interests

3,072,962

2,879,127

323,765
14,290285,142
13,337

Year ended March 31, 2018Year ended March 31, 2017

Income from continuing operations

404,087
42,737371,11042,549Other comprehensive income (loss)

8,779(8,546)Comprehensive income

51,51634,003

Revenues

The amount of dividends the Company has received from Hitachi Capital during the year ended March 31, 2018 was ¥3,356
million. Hitachi Capital became an equity-method associate of the Company during the year ended March 31, 2017, and theCompany has received no dividends from Hitachi Capital as an equity-method associate during the year ended March 31, 2017.
Reconciliation of Equity attributable to owners of the parent in the above summarized financial information to the carrying
amount of the investment in Hitachi Capital is as follows.

Equity attributable to owners of the parent
Share (%)
Carrying amount of the Company’s investment
in Hitachi Capital

March 31, 2018323,765

Millions of yen
March 31, 2017
285,142

33.4

33.4

108,105

95,209The fair values of the Company’s investment in Hitachi Capital based on the market price of its shares as of March 31, 2018 and2017 were ¥104,644 million and ¥105,074 million, respectively.

F-29

Notes to Consolidated Financial Statements(11) Property, Plant and Equipment
The following table shows the changes in the net carrying amounts of property, plant and equipment.
Millions of yen
Land

Buildings
andstructures

MachineryandvehiclesTools,
furnitureandfixtures426,569

748,656

560,791

193,440

426,681

144,089

2,500,226

Additions

601

5,793

25,54424,45572,839245,446

374,678

Transfers between accounts

955

64,398109,796

38,966(1,021)(213,094)

-

Other

Constructionin progress

Total

Net carrying amountMarch 31, 2016

Sales and disposals(4,055)(7,677)(4,614)(7,201)(14,447)(4,758)(42,752)-(53,951)(113,101)(71,104)(62,294)-(300,450)

Impairment losses(2,598)(6,989)(10,992)(4,070)

(10)

(185)

(24,844)

Acquisitions and divestitures(50,749)(57,374)(26,622)(7,176)(321,190)(5,643)(468,754)

Currency translation effect(9,364)(6,730)(5,526)(1,860)(24,005)(8,180)(55,665)

Other(1,029)1,116(1,754)

6,223

16,475(5,059)15,972

March 31, 2017

360,330

687,242

533,522

171,673

93,028

152,616

1,998,411

1,192

5,919

25,04925,781

10,926

303,375

372,242

Transfers between accounts

1,990

42,024130,842

35,776

216(210,848)-

Sales and disposals(3,882)(6,178)(4,913)(3,598)(4,059)(3,557)(26,187)-(52,859)(118,324)(69,027)(23,899)-(264,109)

Impairment losses(5,658)(6,077)(8,286)(1,133)(1,238)(2,313)(24,705)

Acquisitions and divestitures

1,720

5,525

4,438

1,662

1,784

1,330

16,459Currency translation effect

3,596

1,944

(5,526)

(24)

(559)

4,133

3,564

Other

2,470

9,016

774

11,83926,485(1,432)

49,152361,758

686,556

557,576

172,949

102,684

243,304

2,124,827

Depreciation

Additions

Depreciation

March 31, 2018

The amount of depreciation recognized is included in Cost of sales and Selling, general and administrative expenses in the
consolidated statement of profit or loss. Impairment losses are included in Other expenses in the consolidated statement of profit
or loss.
Finance lease assets are included in Other in the table above, and their carrying amounts as of March 31, 2018 and 2017 were¥29,269 million and ¥28,032 million, respectively.

F-30

Notes to Consolidated Financial Statements
The following table shows the gross carrying amounts and accumulated depreciation and impairment losses of property, plant andequipment.
Millions of yen
Land

Buildings
andstructures

Machinery
Tools,
andfurniturevehicles and fixtures

March 31, 2016

446,536

1,900,807

2,362,660

975,628

1,498,628

146,260

7,330,519

March 31, 2017377,817

1,723,950

2,391,448

937,139

216,120

153,0075,799,481

March 31, 2018

383,862

1,760,206

2,475,707

961,975

230,553245,630

6,057,933

OtherConstructionin progress

Total

Gross carrying amount

Accumulated depreciation andimpairment losses
March 31, 2016

(19,967) (1,152,151) (1,801,869)(782,188) (1,071,947)(2,171) (4,830,293)

March 31, 2017(17,487) (1,036,708) (1,857,926)(765,466)(123,092)(391) (3,801,070)

March 31, 2018(22,104) (1,073,650) (1,918,131)(789,026)(127,869)(2,326) (3,933,106)

Impairment Losses Recognized for the Year Ended March 31, 2018:
The High Functional Materials & Components segment recognized impairment losses of ¥11,012 million, of which ¥8,011
million was attributable to the lower than expected future revenue projected for its aluminum wheel business relating to businessassets of buildings and machinery. The recoverable amount was determined on the basis of fair value less costs of disposal, which
was measured at ¥3,514 million as of March 31, 2018. A market approach was used in measuring the fair value of the relevant
assets. These fair value measurements were based on real estate appraisal value, and thus classified as Level 3 of fair value
hierarchy.
Impairment losses of ¥7,910 million were recognized on corporate assets, of which ¥7,717 million was attributable to the lower
than expected future revenue projected for the office leasing business, due to a decrease in the number of occupants of a part ofrental assets. The recoverable amount of the CGU was largely determined on the basis of fair value less costs of disposal. The
costs of disposal exceeded the fair value thus the recoverable amount of the CGU was recorded at nominal value as of March 31,
2018. A market approach was used in measuring the fair value of the relevant assets. These fair value measurements were basedon real estate appraisal value corresponding to the selling prices of comparable properties, or published market prices, and thusclassified as Level 2 of fair value hierarchy.
Impairment Losses Recognized for the Year Ended March 31, 2017:
The Social Infrastructure & Industrial Systems segment recognized impairment losses of ¥8,097 million, of which ¥6,129 million
was attributable to the lower than expected future revenue projected for its compressor business, mainly due to the downturn inthe oil and gas market. The recoverable amount of the CGU was largely determined on the basis of fair value less costs ofdisposal, which was measured at ¥3,427 million as of March 31, 2017. A market approach was used in measuring the fair value ofthe relevant assets. These fair value measurements were based on real estate appraisal value, and thus classified as Level 3 of fairvalue hierarchy.
The Information & Telecommunications Systems segment recognized impairment losses of ¥5,685 million, mainly due to thelower than expected future revenue from the Telecommunications & Network Systems business as a result of changes in market
trends.
The Smart Life & Ecofriendly Systems segment recognized impairment losses of ¥4,846 million, mainly due to the lower than
expected future revenue because of severe competition in the home appliances market.

F-31

Notes to Consolidated Financial Statements(12) Intangible Assets
The following table shows the changes in the net carrying amounts of goodwill and other intangible assets.
Millions of yen
Software for Software forinternal use
sale

Goodwill

Intangible
lease assets

Other

Total

299,735

1,070,403

Net carrying amountMarch 31, 2016

528,565

136,438

57,21348,452

Internal developments

-

1,541

2,123

-

64,176

67,840Purchases
Transfers between accounts-

10,02630,914849
33,564

8,045-

21,727(64,478)

40,647-

Amortization
Impairment losses(3,062)(49,616)(1,285)(28,005)(19,182)(9,097)-(25,708)(12,115)(112,426)(35,644)

Disposals
Acquisitions and divestitures

14,473(2,934)(9,622)(432)(2,150)(539)(45,974)(3,091)(40,774)(6,996)(84,047)

Currency translation effectOther(12,729)
-

(218)
(376)

(370)
1,595

(1)
487

(8,227)(737)(21,545)
969

March 31, 2017527,247

114,868

45,205

1,373

230,508919,201

Internal developments
Purchases

-

2,032
7,170

1,632
1,595

597

53,141
24,56156,80533,923

Transfers between accounts
Amortization-

34,118(46,704)

20,218(22,629)7(532)(54,343)(29,154)(99,019)(922)-(2,367)(1,233)(3,981)
(150)

(15)
(20)

(16,194)(1,732)(23,479)(3,135)100,125(10,066)

406
297

(978)
145

-

90,833(4,953)

190,386(14,577)

Impairment losses
Disposals
Acquisitions and divestitures
Currency translation effectOther(28,219)

(262)

(19)

36

22,729(5,735)

March 31, 2018588,165

108,325

41,0381,446

315,396

1,054,370

The amount of amortization recognized is included in Cost of sales and Selling, general and administrative expenses in the
consolidated statement of profit or loss. Impairment losses are included in Other expenses in the consolidated statement of profit
or loss.
The following table shows the gross carrying amount and accumulated amortization and impairment losses of goodwill and otherintangible assets.
Millions of yen
Goodwill

Software for Software forinternal use
saleIntangible
lease assets

Other

Total

Gross carrying amountMarch 31, 2016

534,533

648,278

540,503

253,706

528,1392,505,159

March 31, 2017536,277

593,412552,868

2,807

485,123

2,170,487

March 31, 2018592,870

617,264

530,778

3,292

603,1142,347,318

March 31, 2016

(5,968)(511,840)(483,290)(205,254)(228,404)(1,434,756)

March 31, 2017

(9,030)(478,544)(507,663)(1,434)(254,615)(1,251,286)

March 31, 2018

(4,705)(508,939)(489,740)(1,846)(287,718)(1,292,948)

Accumulated amortization andimpairment losses

The Company writes off goodwill if it has been fully impaired.

F-32

Notes to Consolidated Financial Statements
Impairment Losses Recognized for the Year Ended March 31, 2018:
The Information & Telecommunication Systems segment recognized impairment losses of ¥22,007 million, of which ¥6,425
million was attributable to the lower than expected future revenue projected for its ATM service business in India as a result ofchanges in market trends relating to other intangible assets. The recoverable amount of the CGU was determined on the basis ofvalue in use, which was measured at ¥4,050 million as of March 31, 2018. The value in use was discounted at 22.1% (before tax),
which was derived from the weighted average cost of capital.
Impairment Losses Recognized for the Year Ended March 31, 2017:
The Information & Telecommunication Systems segment recognized impairment losses of ¥29,068 million, mainly due to thelower than expected future revenue on software for sale and other intangible assets as a result of changes in market trends.
The Electronic Systems & Equipment segment recognized impairment losses of ¥6,098 million, mainly due to the lower than
expected future revenue on software for sale because of severe competition in the Medical Information Systems business.
The carrying amounts of intangible assets with indefinite useful lives as of March 31, 2018 and 2017 amounted to ¥9,952 millionand ¥9,932 million, respectively. The main components of such assets are acquired brands and trademarks. They are assessed tohave indefinite useful lives because there is no foreseeable limit to the period over which such assets are expected to generate net
cash inflows for the entity.
Expenditures on research activities aimed at obtaining new scientific or technical knowledge or understanding are expensed whenincurred. Expenditures on development activities for a new or major improvement of production plan or design prior to thebeginning of commercial production or use are capitalized as an internally generated intangible asset only when such
expenditures attributable to the intangible asset can be reliably measured, it is feasible for the Company to complete thedevelopment, and it is highly probable that the Company will obtain the future economic benefit. Otherwise, the expenditures arerecognized as an expense when incurred.
The carrying amounts of internally generated intangible assets (at cost less accumulated amortization and impairment losses) as ofMarch 31, 2018 and 2017 amounted to ¥173,267 million and ¥174,840 million, respectively. These assets are mainly included insoftware for internal use or software for sale.
Research and development expenditures recognized as an expense for the years ended March 31, 2018 and 2017 were ¥332,920
million and ¥323,963 million, respectively, and they are included in Cost of sales and Selling, general and administrative
expenses in the consolidated statement of profit or loss.
The Company tests goodwill acquired through business combinations for impairment by comparing the carrying amount and therecoverable amount per CGU (or group of CGUs).
As of March 31, 2018 and 2017, the group of CGUs with a significant proportion of goodwill allocated was the System & Service
Business Division, which belongs to the Information & Telecommunication Systems segment, and the carrying amounts ofgoodwill allocated to the System & Service Business Division were ¥184,530 million and ¥191,251 million, respectively. Fromthe beginning of the year ended March 31 2018, the System & Service Business Division changed its name from the Information& Communication Technology Business Division. The recoverable amount used for the impairment test of goodwill of the
System & Service Business Division for the years ended March 31, 2018 and 2017 was calculated based on the value in use. The
value in use was calculated by the estimated future cash flows based on the business plans approved by the management,
discounted at the discount rate which was derived from the weighted average cost of capital. The business plan reflected pastexperience based on external information. For the years ended March 31, 2018 and 2017, cash flows were projected over three
years, the discount rates(before tax) used were 6.90% and 7.61%, respectively, and the growth rate used was 1.0% for both years.
The Company considers it unlikely for the carrying amount of each CGU (or group of CGUs), together with allocated goodwill,
would exceed the respective recoverable amounts of the CGU (or group of CGUs) even if the primary assumptions used for the
impairment test changed within a reasonable range.

F-33

Notes to Consolidated Financial Statements(13) Deferred Taxes and Income Taxes
The components of income taxes recognized in the consolidated statement of profit or loss and deferred taxes recognized in the
consolidated statement of comprehensive income are as follows:
Millions of yen
2018

2017

Income taxes
Current tax expense

160,514

178,405

Temporary differences originated and reversed

10,110(18,950)

Changes in realizability of deferred tax assets(38,916)(34,343)

131,708

125,112Deferred tax expense

Total
Deferred taxes recognized in OCI
Net changes in financial assets measured at fair value through368

30,685Remeasurements of defined benefit plans

OCI

4,766

1,960

Net changes in cash flow hedges

1,222

6,553

-

(364)

6,356

38,834Foreign currency translation adjustments
Total

The Company and its Japanese subsidiaries were subject to a national corporate tax, an inhabitant tax and business tax, for theyears ended March 31, 2018 and 2017, which in the aggregate resulted in a combined statutory income tax rate of approximately
30.8%.
The Company and certain subsidiaries file consolidated income tax returns in certain jurisdictions.
On November 18, 2016, amendments to corporation tax law were enacted in Japan, resulting in reclassifying the combined
statutory income tax rate without changing the total tax rate. The effect of those changes on the Company’s deferred tax balances
as of March 31, 2017 amounted to ¥451 million of additional expenses and is included in Temporary differences originated andreversed under Income taxes.

F-34

Notes to Consolidated Financial Statements
Reconciliations between the combined statutory income tax rate and the effective income tax rate are as follows:
2018

2017

Combined statutory income tax rate

30.8%

30.8%

(3.0)

3.1

0.2

(9.5)

(0.1)

10.3

0.9

1.2

Impairment of goodwill
Change in realizability of deferred tax assets

0.1
(6.1)

0.2
(7.3)

Difference in statutory tax rates of foreign subsidiaries
Other, net

(2.5)
0.3

(2.3)
0.2

20.6%

26.7%

Share of profits of investments accounted for using the equity method
Change in excess amounts over the tax basis of investments in
subsidiaries and investments accounted for using the equity method
Gain or loss on sale of investments in subsidiaries and investments
accounted for using the equity method
Expenses not deductible for tax purposes

Effective income tax rate
Changes in deferred tax assets and liabilities are as follows:

Millions of yen
March 31, 2018

March 31, 2017

Deferred tax assets, net at beginning of year

114,811

112,446

Recognized in profit or loss

28,80653,293

Recognized in OCI
Acquisitions, divestitures and others(6,356)(8,193)(38,834)(13,280)

Discontinued operations
Deferred tax assets, net at end of year

37

1,186

129,105

114,811Significant components of the deferred tax assets and liabilities are as follows:
Millions of yen
Consolidated statement offinancial position
March 31,2018
Deferred tax assets
Retirement and severance benefits

March 31,2017

Consolidated statement of
profit or loss
2018

2017

75,55367,719(1,198)(7,545)

Accrued expenses
Depreciation of property, plant and

107,954

105,384

11,63034,323equipment
Net operating loss carryforwards

11,384
9,665

12,605
12,2607,280(4,618)2,472(9,925)

Net intercompany profits oninventories, P.P.E. and others

35,361

27,245

2,984

(145)

Deferred revenues
Other

20,65938,89526,82857,886(632)(22,459)

1,168(32,994)

Total deferred tax assets

299,471309,927(7,013)(12,646)

Deferred tax liabilities
Deferred profit on sale of properties(8,837)(4,457)(1,126)(1,618)Investments in securities
Tax purpose reserves regulated by(92,258)(83,680)

1,735

31,425

Japanese tax laws
Intangible assets(13,468)(38,494)(30,367)(42,028)

13,57913,405

13,680
8,871

Other

(17,309)(34,584)

8,226

13,581

Total deferred tax liabilities(170,366)(195,116)

35,81965,939Net deferred tax assets

129,105

114,81128,80653,293F-35

Notes to Consolidated Financial Statements
Net deferred tax assets are included in the following accounts in the consolidated statement of financial position.

March 31, 2018180,781Millions of yen
March 31, 2017
171,612

Other non-current liabilities(51,676)(56,801)

Total

129,105

114,811

Other non-current assets

Deferred tax liabilities are not recognized for excess amounts over the tax basis of investments in subsidiaries and investments
accounted for using the equity method that are considered to be reinvested indefinitely, for such differences will unlikely reversein the foreseeable future. The temporary differences related to undistributed earnings of subsidiaries for which deferred tax
liabilities are not recognized were ¥700,901 million and ¥638,458 million, respectively, as of March 31, 2018 and 2017.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generationof future taxable income in specific tax jurisdictions during the periods in which these deductible differences become deductible.
Although realization is not assured, the Company carries out an assessment of the scheduled reversals of deferred tax liabilities
and projected future taxable income, including the execution of certain available tax strategies if needed. Based on these factors,
the Company believes it is more likely than not it will realize the benefits of these deductible differences as of March 31, 2018.
Deductible temporary differences and net operating loss carryforwards for unrecognized deferred tax assets are as follows:
Millions of yen
March 31, 2018

March 31, 2017

Deductible temporary differences

1,191,495

1,294,211

Net operating loss carryforwards

568,783

522,8811,760,278

1,817,092

Total

Net operating loss carryforwards for unrecognized deferred tax assets will expire as follows:
Millions of yen
March 31, 2018

March 31, 2017

Within 5 years

190,765

283,452

After 5 years but not more than 10 years

133,072

90,726More than 10 years

244,946

148,703

Total

568,783

522,881F-36

Notes to Consolidated Financial Statements(14) Trade Payables
The components of trade payables are as follows:
Millions of yen
March 31, 2018

March 31, 2017

1,267,047

1,220,236

Others269,936

181,997

Total

1,536,983

1,402,233

Accounts payable

Others include electronically recorded monetary claims and notes payable.
(15) Provisions
Changes in the balance and components of provisions for the year ended March 31, 2018 are as follows:
Millions of yen
Asset retirement
obligations

Provisions related torestructuring(structural reform)

Product warranty
provisions

March 31, 201718,0549,859

36,580Additions

8,518

15,72817,336

48,067

Utilized
Acquisitions and divestitures

(371)
41

(16,585)
11(16,761)556(17,817)(722)

Currency translation effects,
and others

(103)

133

452

13,163

March 31, 201826,139

9,146

38,163215,298

Current
Non-current

2,481
23,658

7,477
1,669

25,685
12,478203,118
12,180

Other
provisions
172,607

Other provisions include provisions made for expenses including competition law and others. As information required by IAS 37
could adversely affect the outcome of litigations and other disputes, the details of these provisions are not disclosed.
Asset Retirement Obligations
The Company and its subsidiaries recognize asset retirement obligations principally based on the estimated future expendituresusing historical experience when the Company and its subsidiaries have a legal or contractual obligation associated with theretirement of tangible fixed assets used in normal operations, such as lease dilapidations of factory facilities and premises.
Provisions Related to Restructuring (Structural Reform)
Provision related to restructuring (structural reform) is recognized when the Company and its subsidiaries have a detailed formal
plan for the restructuring of the business or a part of business and have raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan or announcing its main features to those affected. The provision isrecognized based on the estimated amount of direct expenditures attributable to restructuring.
Provisions related to restructuring (structural reform) include special termination benefits for restructuring (structural reform).
Product Warranty Provisions
The Company and its subsidiaries provide warranties for certain products and services. Product warranty provisions arerecognized by estimating future expenditures based principally on historical experience of warranty claims.

F-37

Notes to Consolidated Financial Statements(16) Employee Benefits(a) Retirement and Severance Benefits
The Company and certain subsidiaries have defined benefit pension plans and severance lump-sum payment plans, as well as
defined contribution pension plans to provide retirement and severance benefits to substantially all employees.
The principal defined benefit pension plan is a corporate pension plan based on the Japanese Defined Benefit Corporate
Pension Plan Act (the Act). Additionally, certain corporate pension plans adopt cash balance plans. Benefits under cash
balance plans are calculated per each plan participant with a notional account balance, based on the contribution credits per
salary level and interest credits based on market interest rate trends.
Pursuant to the Act, the Company has an obligation to make contributions to the Hitachi Corporate Pension Fund (the Fund)that manages the corporate pension plans. The directors of the Fund are responsible for faithfully executing operations incompliance with laws and regulations, and any orders issued by the Minister of Health, Labor and Welfare, and the directorgenerals of Regional Bureaus of Health and Welfare based on laws and regulations, as well as the rules of the Fund and theresolution of the Board of Representatives. The Fund prohibits the directors from acts that constitute conflicts of interests inthe management and operation of the funds contributed for benefit payments (the contributions). If breached, the board
members are jointly and severally held responsible.
The Fund is legally independent from the Company. The Board of Representatives comprises an equal number ofrepresentatives selected by the company and certain subsidiaries and representatives from the employee side. The proceedingsof a Board of Representatives are decided by a majority vote of the members attending. In case of a tied vote, the chairman
has the power to decide, except for exceptionally significant matters.
The actual management of the contributions is conducted by trustees in accordance with rules approved by the Board ofRepresentatives. The Fund is responsible for managing the contributions to safely and efficiently manage the contributions by
establishing the basic management policy of the contributions and preparing the management guidance in line with the policy
submitted to the trustees.
The Company has future obligations to make contributions as defined by the Fund. The amount of contribution is periodicallyreviewed to the extent allowed by law.
The severance lump-sum payment plans provide a lump-sum payment at the time of retirement, and the benefit is calculated
based on factors such as the salary level at retirement and the years of service. The Company and certain subsidiaries have an
obligation to pay benefits directly to beneficiaries.
Defined contribution plans require companies to make contributions over a participation period, and plan participants
themselves are responsible for the management of plan assets. Benefits are paid by the trustee, and the Company and certain
subsidiaries’ responsibility is limited to making contributions.

F-38

Notes to Consolidated Financial Statements
Changes in the present value of defined benefit obligations and the fair value of plan assets for the years ended March 31,2018 and 2017 are as follows:
Millions of yen
March 31, 2018

March 31, 2017

Defined benefit obligations
At beginning of year
Service cost

2,247,924
79,4102,416,920
81,431

Interest cost
Plan amendments

13,917449

12,468153

Actuarial losses
Benefits paid

25,055(121,751)

5,781(117,606)

Acquisitions and divestitures
Transfer to defined contribution pension plan

2,364
(203)

(113,180)(1,268)Settlements/curtailments
Currency translation effect(3,388)3,080(19,913)(16,862)2,246,857

2,247,924

1,643,638
12,397

1,662,642
9,607

Return on plan assets (excluding interest income)
Employers’ contributions

53,521
99,20452,991
103,289

Employees’ contributions
Benefits paid

609
(96,942)249(88,338)

Acquisitions and divestitures
Settlements/curtailments

928(4,331)(70,695)(18,852)

2,052
1,711,076(7,255)
1,643,638

6,762

5,815

542,543

610,101

At end of year
Fair value of plan assets
At beginning of year
Interest income

Currency translation effectAt end of year
Effect of asset ceiling
Net liability amount recognized in the consolidated statementof financial position
The components of actuarial gain or loss are as follows:

Millions of yen
March 31, 2018

March 31, 2017

Arising from changes in financial assumptions
Arising from changes in demographic assumptions(11,551)(5,995)

10,253(8,752)

Other(7,509)(7,282)The Company and certain subsidiaries remeasure the defined benefit obligations and plan assets at the end of the fiscal year.
The discount rates used in actuarial calculation of defined benefit obligations are as follows:
Percentage
March 31, 2018
Discount rate

0.6

F-39

March 31, 20170.6

Notes to Consolidated Financial Statements
If, at March 31, 2018, the discount rate rose by 0.5%, the defined benefit obligations would decrease by ¥134,538 million,
and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥145,902 million.
The sensitivity analysis is based on an assumption that all other variables other than the one analyzed are held constant; inreality, changes in other assumptions may impact the outcome of the analysis.
The Fund’s plan asset management is based on the safe and efficient management of the contributions, diversified
investments and determination of the investment ratio that should be sustained over the long term. The Fund seeks to maintaincurrent value of assets sufficient for future obligations. A target rate of return is established to ensure a stable long term rateof return on assets. A diversified investment strategy is carried out while a target asset allocation is established to achieve thetarget rate of return. The target asset allocation is based on the expected rate of return by each class of asset, the standard
deviation of the rate of return and the correlation coefficient among the assets. It is currently approximately 20% in equity,
50% in public and corporate bonds, and 30% in hedge funds, securitization products, life insurance general accounts andother assets. If market values fluctuate exceeding certain levels, the investment ratio is adjusted to the target allocation ratio inorder to control risks.
In selecting trustees or asset management companies, the Fund takes into account appropriate quantitative and qualitativeevaluations. The Fund also presents its management policies to the trustees or asset management companies, and periodicallyreceives asset management reports.
The fair values of plan assets invested as of March 31, 2018 and 2017 are as follows:
Millions of yen
March 31, 2018
With quoted market
price in an active
marketEquityGovernment bonds and municipal
debt securities
Corporate bonds and other debt securities
Hedge funds
Securitization products
Cash and cash equivalents
Life insurance general accounts
Commingled funds
Other
Total

With no quoted market
price in an active
marketTotal

18,7482,613

21,361

148,356
55,093
2,468
224,665

2,028
31,59550,35071,281
160,733
1,142,694
25,117
1,486,411

150,384
31,59550,35071,28155,093
160,733
1,142,694
27,585
1,711,076
Millions of yen

March 31, 2017
With quoted market
price in an active
marketEquityGovernment bonds and municipal
debt securities
Corporate bonds and other debt securities
Hedge funds
Securitization products
Cash and cash equivalents
Life insurance general accounts
Commingled funds
Other
Total

With no quoted market
price in an active
marketTotal

26,892730

27,622

121,797
37,028
5,079
190,796

16,09035,636
43,62360,852
247
145,118
1,127,172
23,374
1,452,842

137,887
35,636
43,62360,85237,275
145,118
1,127,172
28,453
1,643,638

F-40

Notes to Consolidated Financial Statements
As of March 31, 2018, investments in equity were allocated to approximately 35% in stocks listed in Japan and 65% in stocks
listed in foreign markets. As of March 31, 2017, investments in equity were allocated to approximately 30% in stocks listed inJapan and 70% in stocks listed in foreign markets.
As of March 31, 2018, Japanese government bonds made up approximately 75% of the government bonds and municipal debt
securities, the majority of which were Japanese national bonds. As of March 31, 2017, Japanese government bonds made up
approximately 70% of the government bonds and municipal debt securities, the majority of which were Japanese nationalbonds. Foreign public bonds, as of March 31, 2018, took approximately 25%, the majority of which were foreign nationalbonds, and as of March 31, 2017, foreign public bonds took approximately 30%, the majority of which were foreign nationalbonds.
As of March 31, 2018 and 2017, investments in corporate bonds and other debt securities were allocated to approximately 5%
in Japanese corporate bonds and debt instruments, and 95% in foreign corporate bonds and debt instruments.
Hedge funds primarily consist of investments in relative value strategy funds, event driven funds, equity long or short funds,
and macroeconomic and Commodity Trading Advisor (CTA) funds.
Securitization products primarily consist of investments in equity of Japanese real estate funds, and debt and equity ofcollateralized loan obligations (CLO).
Commingled funds represent pooled institutional investments. As of March 31, 2018 and 2017, commingled funds wereallocated to 30% in listed stocks, 45% in government bonds, 5% in corporate bonds and other debt securities, 10% in cash andcash equivalents and 10% in other assets.
Funding by the Fund is conducted by taking into account various factors such as funded status, the limit of tax deductions,and actuarial calculations. For the purpose of maintaining balanced finance into the future, the bylaws of the Fund require
recalculation of the contribution amounts at the end of fiscal year every five years. Basic assumptions (expected interest rates,
mortality rates, withdrawal rate, etc.) are reviewed to recalculate the appropriate level of contribution.
The amount of contributions expected to be paid by the Company and its subsidiaries to the plan assets for the year ending
March 31, 2019 is ¥86,733 million.
The weighted average duration (expected average maturity) of defined benefit obligations as of March 31, 2018 and 2017 was
12.7 years.
Contributions made to defined contribution plans and expensed in profit or loss in the years ended March 31, 2018 and 2017
were ¥28,212 million and ¥29,033 million, respectively.
(b) Employee Benefit Expenses
The aggregated amounts of employee benefit expenses including salary recognized in the consolidated statement of profit orloss for the years ended March 31, 2018 and 2017 were ¥2,323,429 million and ¥2,363,880 million, respectively.

F-41

Notes to Consolidated Financial Statements(17) Equity(a) Common Stock
Number of shares
March 31, 2018
Total number of authorized shares

March 31, 2017

10,000,000,000
Issued shares outstanding(Number of shares)

10,000,000,000
Capital amount(Millions of yen)March 31, 2016

4,833,463,387

458,790

March 31, 2017

4,833,463,387

458,790

March 31, 2018

4,833,463,387

458,790

Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. The changes
in treasury stock for the years ended March 31, 2018 and 2017 are as follows:
Treasury stock(Number of shares)
March 31, 2016

(Millions of yen)

5,247,929

3,806

Acquisition of treasury stock

271,523

153

Sales of treasury stock(58,880)(43)

5,460,572

3,916

Acquisition of treasury stock

375,918

292

Sales of treasury stock(100,543)(71)

5,735,947

4,137

March 31, 2017

March 31, 2018

The number of shares of the Company held by the Company’s associates as of March 31, 2018 and 2017 were 167,000
shares, respectively.
(b) Surplus(i) Capital Surplus
The Companies Act of Japan mandates that at least half of paid-in capital be appropriated as common stock and the rest be
appropriated as legal reserve within capital surplus.
The changes in capital surplus include the effect of changes in the Company’s ownership interest in its consolidated
subsidiaries. For the year ended March 31, 2017, the changes in capital surplus were due mainly to the granting of a written
put option on FIAMM Energy Technology S.p.A. (FET) stock to the owner of the non-controlling interests of FET in
acquiring FET by Hitachi Chemical Company, Ltd.
(ii) Retained Earnings
The Companies Act of Japan requires that ten percent of retained earnings appropriated for dividends be retained until the
total amount of earned reserves included in capital reserve and retained earnings reaches a quarter of the nominal value ofcommon stock. Earned reserves may be available for dividends by resolution at the shareholders’ meeting.

F-42

Notes to Consolidated Financial Statements(18) Accumulated Other Comprehensive Income (AOCI) and Other Comprehensive Income (OCI)
Components of AOCI, net of related tax effects, presented in the consolidated statement of changes in equity, and changes in eachcomponent for the years ended March 31, 2018 and 2017 are as follows:
Millions of yen
2018

2017

Foreign currency translation adjustments
Balance at beginning of year

78,987

118,635

OCI, net of reclassification(18,032)(39,526)

Net transfer of non-controlling interests

(148)

(122)

60,80778,987(847)(42,337)

22,05936,815--

Reclassified into retained earnings

1,463

4,675

Balance at end of year

22,675(847)

192,110

147,852

369

59,422-(3)

Balance at end of year
Remeasurements of defined benefit plans
Balance at beginning of year
OCI
Net transfer of non-controlling interests

Net changes in financial assets measured at FVTOCIBalance at beginning of year
OCI
Net transfer of non-controlling interests
Reclassified into retained earnings(17,891)(15,161)

Balance at end of year

174,588

192,110

Balance at beginning of year

(129,182)(140,607)

OCI, net of reclassification

14,957

11,425--(1,678)-(115,903)(129,182)

Balance at beginning of year

141,068

83,543

OCI, net of reclassification

19,353

68,136

(148)

(125)

Net changes in cash flow hedges

Net transfer of non-controlling interests
OthersBalance at end of year
Total AOCI

Net transfer of non-controlling interests
Reclassified into retained earnings(16,428)(10,486)

Others(1,678)-

Balance at end of year

142,167

141,068

F-43

Notes to Consolidated Financial Statements
The following shows a reconciliation of OCI, including non-controlling interests, to profit or loss items and deferred income tax
effect per components of OCI during the years ended March 31, 2018 and 2017.
Millions of yen
2018
Before tax

Tax effect

After tax

OCI arising during the year:
Foreign currency translation adjustments(5,671)-(5,671)Remeasurements of defined benefit plans

27,519(4,766)22,753

Net changes in financial assets measured at FVTOCI

1,898

(368)

1,530

Net changes in cash flow hedges

14,530(3,686)

10,844

Share of OCI of investments accounted for using the equity method

6,922(3,632)

3,290

Total

45,198(12,452)

32,746

Foreign currency translation adjustments(2,371)-(2,371)

Net changes in cash flow hedges(7,605)2,464(5,141)

Reconciliation of OCI to profit or loss:

Share of OCI of investments accounted for using the equity method

(33)

-

(33)

(10,009)

2,464(7,545)

Foreign currency translation adjustments(8,042)-(8,042)Remeasurements of defined benefit plans

27,519(4,766)22,753

Net changes in financial assets measured at FVTOCI

1,898

(368)

1,530

Net changes in cash flow hedges

6,925(1,222)

5,703

Share of OCI of investments accounted for using the equity method

6,889(3,632)

3,257

Total

35,189(9,988)25,201

Total
OCI, net of reclassification adjustments:

OCI, net of reclassification adjustments, attributable tonon-controlling interests:
Foreign currency translation adjustments

435

Remeasurements of defined benefit plans

2,819

Net changes in financial assets measured at FVTOCI

2,338

Net changes in cash flow hedges

256

Total

5,848

OCI, net of reclassification adjustments, attributable to
Hitachi, Ltd. stockholders:Foreign currency translation adjustments(8,477)

Remeasurements of defined benefit plans

19,934

Net changes in financial assets measured at FVTOCI(808)

Net changes in cash flow hedges

5,447

Share of OCI of investments accounted for using the equity method

3,257

Total

19,353F-44

Notes to Consolidated Financial Statements

Millions of yen
2017
Before tax

Tax effect

After tax

OCI arising during the year:
Foreign currency translation adjustments(78,898)

340(78,558)

Remeasurements of defined benefit plans

48,046(1,960)46,086

Net changes in financial assets measured at FVTOCI

90,619(30,685)

59,934

Net changes in cash flow hedges

1,700

488

2,188

Share of OCI of investments accounted for using the equity method(2,835)401(2,434)

Total

58,632(31,416)

27,216

Foreign currency translation adjustments

13,77324

13,797

Net changes in cash flow hedges

26,156(7,041)

19,115

Share of OCI of investments accounted for using the equity method

1,713

-

1,713

Total

41,642(7,017)

34,625

Foreign currency translation adjustments(65,125)364(64,761)

Remeasurements of defined benefit plans

48,046(1,960)46,086

Net changes in financial assets measured at FVTOCI

90,619(30,685)

59,934

Net changes in cash flow hedges

27,856(6,553)

21,303

Share of OCI of investments accounted for using the equity method(1,122)

401

(721)

Total

100,274(38,433)

61,841

Reconciliation of OCI to profit or loss:

OCI, net of reclassification adjustments:

OCI, net of reclassification adjustments, attributable tonon-controlling interests:
Foreign currency translation adjustments(14,950)

Remeasurements of defined benefit plans

7,100

Net changes in financial assets measured at FVTOCI796

Net changes in cash flow hedges

759

Total

(6,295)

OCI, net of reclassification adjustments, attributable to
Hitachi, Ltd. stockholders:Foreign currency translation adjustments(49,811)

Remeasurements of defined benefit plans

38,986

Net changes in financial assets measured at FVTOCI

59,138Net changes in cash flow hedges

20,544

Share of OCI of investments accounted for using the equity method
Total

(721)
68,136F-45

Notes to Consolidated Financial Statements(19) Dividends
Dividends paid on the Company’s common stock for the years ended March 31, 2018 and 2017 are as follows:
Cash dividends(millions of yen)

Appropriation from

Cash dividends
per share (yen)The Board of Directors
on October 26, 201733,795Retained earnings

The Board of Directors
on May 12, 201733,796The Board of Directors
on October 28, 2016
The Board of Directors
on May 13, 2016

Decision

Record date

Effective date

7.0

September 30, 2017

November 28, 2017

Retained earnings

7.0

March 31, 2017

May 29, 2017

28,968Retained earnings

6.0

September 30, 2016

November 28, 2016

28,969Retained earnings

6.0

March 31, 2016

May 30, 2016

The dividend on the Company’s common stock whose record date falls in the year ended March 31, 2018 and the effective datefalls in the next fiscal year is as follows:

Decision
The Board of Directors
on May 10, 2018

Cash dividends(millions of yen)

Appropriation from

Cash dividends
per share (yen)38,621Retained earnings

8.0

F-46

Record date

Effective date

March 31, 2018

May 29, 2018

Notes to Consolidated Financial Statements(20) Stock-based Compensation
The Company introduced a stock option plan as stock-based compensation. Under the Company’s stock option plan, Executive
Officers and Corporate Officers are granted the right to purchase shares of common stock of the Company (stock acquisitionrights).
Details of the Company’s stock option plan for the year ended March 31, 2018 are as follows.

Fiscal Year of Issueance and Name

Grant Date

Exercise period

April 6, 2017

From April 27, 2017
to April 26, 2047

Year ended March 31, 2018
The Second Stock Acquisition Rights of Hitachi, Ltd.
Year ended March 31, 2017
The First Stock Acquisition Rights of Hitachi, Ltd.

From July 15, 2016

June 29, 2016

to July 14, 2046

Conditions for the exercise of stock acquisition rights(1) During the above exercise period, a holder of stock acquisition rights may exercise all the stock acquisition rights
determined in accordance with the provisions of paragraph (2) or (3) below in a lump sum only within ten days (in case thelast day is not a business day, the following business day) from the day immediately following the date on which he/sheceases to be an Executive Officer, a Director or a Corporate Officer of the Company.
(2) The number of stock acquisition rights that a holder of stock acquisition rights may exercise, shall be determined based on
the ratio of (i) the total shareholder return (TSR) for shares of the Company for three years from the beginning of the fiscal
year in which the date of allotment of the stock acquisition rights falls (Waiting Period) to (ii) the growth rate of TOPIX(Tokyo Stock Price Index) for the same period (TSR/TOPIX Growth Rate Ratio): market condition.
(3) The number of stock acquisition rights, that a holder of stock acquisition rights who has left his/her position in the
Company before the end of the Waiting Period (Resignee) may exercise, shall be determined by reducing the number ofstock acquisition rights allotted to him/her in proportion to the term of office of the Resignee in the Waiting Period, andapplying the TSR/TOPIX Growth Rate Ratio for the period from the beginning of the fiscal year in which the date ofallotment of the stock acquisition rights falls to the time of resignation in accordance with the provision of paragraph (2)above.
Stock-based compensation expenses recognized for the years ended March 31, 2018 and 2017 were ¥625 million and ¥401
million, respectively.
A summary of stock option activity for the year ended March 31, 2018 and 2017 is as follows. The number of stock options istranslated into their equivalent number of shares (100 shares per stock option).

Outstanding at beginning of year

2018
2017
Weighted average
Weighted average
Number of shares
Number of shares
exercise priceexercise price（shares）（shares）
(yen)
(yen)
2,421,900
1-Granted2,290,600

1

2,421,9001

Forfeited (a)(184,500)

1--

Exercised(79,100)

1

-

-

-

-

-

-

Outstanding at end of year

Expired

4,448,900

1

2,421,900

1

Exercisable at end of year

-

-

-

-

(a) Including the stock acquisition rights which became non-exercisable because of the market condition.
The weighted average share price at the date of exercise for the year ended March 31, 2018 was ¥633.2.
The range of exercise price as of March 31, 2018 and 2017 was ¥1. The weighted average remaining contractual lives of stock
options outstanding as of March 31, 2018 and 2017 were 28.7 years and 29.3 years, respectively.

F-47

Notes to Consolidated Financial Statements
The weighted average fair values (per share) at the measurement date of stock options issued under the Company’s stock option
plan for the years ended March 31, 2018 and 2017 were ¥367.6 and ¥268.0, respectively.
Fair value of stock options is estimated using Monte Carlo simulation based on the following assumptions.
March 31, 2018

March 31, 2017

1 yen

1 yen

Expected life (a)3.2 years

3.3 years

Stock price at the measurement date (b)618.5 yen449.3 yen

Expected volatility (c)31.528%33.444%

Expected dividends (d)12 yen12 yen(0.184%)(0.355%)104.1%

105.6%

39.5%

38.1%

Exercise priceRisk-free rate (e)Average value of the normal distribution of
TSR/TOPIX Growth Rate Ratio (f)Standard deviation of the normal distribution of
TSR/TOPIX Growth Rate Ratio (f)(a) Based on the expected term of office of each grantee.
(b) Based on the closing prices of the Company's stocks on the Tokyo Stock Exchange at the measurement date.
(c) Based on historical volatility of weekly stock price fluctuations during a directly preceding period that is equal to the expected
life of the stock options.
(d) Based on actual annual dividends in the fiscal year preceding that of the measurement date.
(e) Calculated based on the yield of a Japanese government bond with a term to maturity that is equal to the expected life of thestock options.
(f) Calculated based on historical data in fiscal years preceding that of the measurement date.
(21) Other Income and Expenses
The main components of other income and expenses for the years ended March 31, 2018 and 2017 are as follows:
Millions of yen
2018

2017

Net gain (loss) on sales and disposals of fixed assets(2,535)15,094

Impairment losses(48,656)(68,587)

9,774

81,369Special termination benefits(15,728)(24,665)

Expenses related to competition law and others(14,280)(6,730)Net gain on business reorganization and others

Impairment losses are mainly recognized on property, plant and equipment, investment properties and intangible assets. Net gain
on business reorganization and others include gains and losses related to obtaining and losing control of investees and gains andlosses related to obtaining and losing significant influence over investees.
Restructuring charges (structural reform expenses) included in other expenses for the years ended March 31, 2018 and 2017 were¥64,384 million and ¥96,289 million, respectively. Restructuring charges (structural reform expenses) mainly include impairment
losses and special termination benefits.

F-48

Notes to Consolidated Financial Statements(22) Financial Income and Expenses
The main components of financial income and expenses for the years ended March 31, 2018 and 2017 are as follows:
Millions of yen
2018
Dividends received
Exchange loss

2017
6,227

6,919

(10,587)(25,238)

Dividends received for the years ended March 31, 2018 and 2017 are from FVTOCI financial assets.
(23) Discontinued Operations
In the Social Infrastructure & Industrial Systems segment, the Company classified the part of thermal power generation systems
business which was not transferred to Mitsubishi Hitachi Power Systems, Ltd. for business integration in the thermal power
generation systems business with Mitsubishi Heavy Industries, Ltd. but was operated by the Company and certain subsidiaries as
discontinued operations in the consolidated statement of profit or loss since the projects were completed in the year ended March
31, 2015.
Profit or loss and cash flows from the discontinued operations for the years ended March 31, 2018 and 2017 are as follows:
Millions of yen
2018

2017

Profit or loss from discontinued operations
Revenues
Cost of sales and expenses
Loss from discontinued operations, before income taxes
Income taxes
Loss from discontinued operations

1,077

1,358

(17,146)(8,381)(16,069)(7,023)49

1,073(16,020)(5,950)Millions of yen

2018

2017

Cash flows from discontinued operations
Cash flows from operating activities

2,000(9,097)

Cash flows from investing activities(5)-

Cash flows from financing activities(1,299)

8,294

F-49

Notes to Consolidated Financial Statements(24) Earnings Per Share (EPS) Information
The computations of net income attributable to Hitachi, Ltd. stockholders used to derive basic and diluted EPS are as follows:
Number of shares

Weighted average number of shares on which basic EPS is calculated

2018

2017

4,827,874,323

4,828,127,659

4,288,188

1,530,325

4,832,162,511

4,829,657,984

Effect of dilutive securities
Stock options
Number of shares on which diluted EPS is calculated

Millions of yen
2018

2017

Net income from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic379,008

237,211

Other

-

(0)

Diluted

379,008

237,211(16,020)(5,950)

Other

-

-

Diluted(16,020)(5,950)362,988

231,261

Other

-

(0)

Diluted362,988

231,261

Effect of dilutive securities

Net loss from discontinued operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities

Net income attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities

Yen
2018

2017

EPS from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic

78.50

49.13

Diluted

78.43

49.12

Basic

(3.32)(1.23)

Diluted(3.32)(1.23)

Basic

75.19

47.90

Diluted

75.12

47.88

EPS from discontinued operations,
attributable to Hitachi, Ltd. stockholders

EPS attributable to Hitachi, Ltd. stockholders

F-50

Notes to Consolidated Financial Statements(25) Supplementary Cash Flow Information
Non-cash investing and financing activities for the years ended March 31, 2017 are as follows:
Millions of yen
2017
Finance lease assets acquired and obligations incurred

4,464

Changes in liabilities from financing activities for the year ended March 31, 2018 are as follows:
Millions of yen
Short-term debt

Bonds

Long-term
borrowings

Lease payables

Total

March 31, 2017

196,357

159,820

770,723

49,703

1,176,603

Cash flows(104,819)(9,649)(89,957)(13,984)(218,409)---

13,46913,46913,297-

59,7791,787

74,863

Non-cash changes
Finance lease payables incurred
Acquisitions and divestitures
Currency translation effect and others
March 31, 2018

16,604(334)(11,005)(1,497)

3,768

121,439

149,837

729,540

49,4781,050,294

F-51

Notes to Consolidated Financial Statements(26) Financial Instruments and Related Disclosures(a) Capital Management
The Company manages its capital under the policy of maintaining appropriate level of assets, liabilities and capital for current
and future business operations, as well as optimizing the efficiency of capital utilization throughout the business operations.
The Company uses the total Hitachi, Ltd. stockholders’ equity ratio as an important indicator in capital management. The
target is set in the mid-term management plan and is regularly monitored. The total Hitachi, Ltd. stockholders’ equity ratio asof March 31, 2018 and 2017 were 32.4% and 30.7%, respectively.
The Company is not subject to any capital requirements except for the general rules such as the Japanese Company Law.
(b) Financial Risks
The Company is engaged in business activities world-wide, and constantly exposed to various risks such as market risks(mainly currency exchange risk and interest rate risk), credit risk and liquidity risk. The Company implements risk
management policies to avoid or mitigate these financial risks.
(i) Currency Exchange Risk
The Company and its subsidiaries hold assets and liabilities exposed to currency exchange risk. In order to hedge this risk,
the management uses forward exchange contracts or cross currency swaps.
For trade receivables and payables denominated in foreign currencies, the Company and its subsidiaries measure the net
future cash flows per currency on a monthly basis, and enter into forward exchange contracts using a constant ratio withthe purpose of fixing the future cash flows arising from receivables and payables and forecasted transactions denominatedin foreign currencies. The terms of forward exchange contracts are largely within one year. If necessary, the Company andits subsidiaries establish a risk control policy and a risk management approach specific to each transaction by reviewing
the business characteristics, the structure of income and expenditure, and conditions of the contract. The Company and its
subsidiaries hedge the risk exposure arising from specific transactions based on the risk control policy and the risk
management approach.
To fix cash flows from long-term debt denominated in foreign currencies, the Company and its subsidiaries enter intocross currency swap agreements with the same maturities as the underlying debt. The hedging relationship between theforward exchange contracts or cross currency swaps and the underling hedged items is highly effective in offsetting theimpact from changes in foreign currency exchange rates.
The sensitivity analysis for currency exchange rates shown below indicates the impact on income from continuing
operations, before income taxes, in the Company’s consolidated statement of profit or loss, if the Japanese yen depreciatedby 1% on the foreign-currency denominated financial instruments held by the Company and its subsidiaries as of March
31, 2018 and 2017, while all other variables are held constant.
Millions of yen
Currency
Impact on income from continuing
operations, before income taxes

2018

2017

US Dollar

696

515

Euro

139

194

British Pound

340

63

F-52

Notes to Consolidated Financial Statements(ii) Interest Rate Risk
The Company and its subsidiaries are exposed to interest rate risk related principally to long-term debt obligations. In
order to minimize this risk, the Company and its subsidiaries enter into interest rate swap agreements to control fluctuation
risk of cash flows. The interest rate swaps entered into are mainly receive-variable, pay-fixed interest rate swaps. Under
the interest rate swaps, the Company and its subsidiaries receive variable interest rate payments on long-term debt andmake fixed interest rate payments, thereby creating fixed interest rate long-term debt.
Certain financing subsidiaries raise funds by issuing long-term debt with a fixed interest rate and lending it at variableinterest rates, creating interest rate risk. In order to minimize this risk, interest rate swaps are used to convert, in effect, thefixed rate to a variable rate to manage fluctuations in fair value resulting from interest rate risk. The hedging relationshipbetween the interest rate swaps and the underlying hedged items is highly effective in offsetting the impact from changes
in cash flows and fair value resulting from interest rate risk.
The sensitivity analysis for interest rate shown below indicates the impact on income from continuing operations, before
income taxes, in the consolidated statement of profit or loss, if interest rates increased by 1% on the financial instruments(floating-interest financial assets and liabilities measured at amortized cost, FVTPL financial assets and liabilities andderivatives) held by the Company and its subsidiaries as of March 31, 2018 and 2017, while all other variables are held
constant.
Millions of yen
2018
Impact on income from continuing operations,
before income taxes

2017
(684)

(1,082)(iii) Credit Risk
Trade receivables and other receivables resulting from operating activities of the Company and its subsidiaries are exposedto credit risk of the customers. Investments in debt securities held for managing cash surplus and equity instruments held
for strategic purposes are exposed to credit risk of the issuers. Derivative transactions entered into in order to lower market
risks are exposed to credit risk of the counter-party financial institutions.
For credit risk of customers, the Company conducts periodic credit checks as appropriate for the products sold and thecustomers’ financial conditions and credit ratings. A credit limit is set according to the credit risk. For cash surplus,
investment is restricted to low risk debt securities, and derivative transactions are entered into with financial institutions
with high credit rating only.
No significant concentration of credit risk is present in a particular region or a customer, as the Company and its
subsidiaries are engaged in diverse industries worldwide.
The maximum exposure to the credit risk equals the financial assets’ carrying amount after impairment in the consolidated
statement of financial position, if collateral held is not included. The maximum exposure to the credit risk from guarantee
obligations is disclosed in note 30.
The Company considers that trade receivables and other receivables neither past due nor impaired as of the end of eachfiscal year are all collectible.

F-53

Notes to Consolidated Financial Statements
The following table presents the aging of trade receivables and other receivables past due but not impaired as of March 31,2018 and 2017.
Millions of yen
March 31, 2018

March 31, 2017

Past due within 30 days

39,38639,856

Past due between 31 and 90 days

31,16533,616

Past due between 91 days and 1 year

23,21429,859

Past due over 1 year

10,84733,057

Total

104,612

136,388

When trade receivables and other receivables are impaired, the Company reduces the receivable balance through the use ofan allowance account, instead of directly reducing the carrying amount. The changes in the balance of allowance for
doubtful receivables are as follows:
Millions of yen
Trade receivables

Other receivables

40,96910,28051,249Impairment loss
provision or reversals

401

(431)

(30)

Amounts written off(2,629)(961)(3,590)Other(9,518)(5,422)(14,940)

March 31, 2017

29,223

3,466

32,689Impairment loss
provision or reversals

(873)

(178)

(1,051)

Amounts written off(1,489)(357)(1,846)

March 31, 2016

Other
March 31, 2018

Total

779

107

886

27,6403,038

30,678Other includes the impact from business acquisitions and divestitures and currency translation effect. Decreases of ¥8,843
million out of ¥9,518 million in trade receivables and ¥5,354 million out of ¥5,422 million in other receivables during the
fiscal year ended March 31, 2017 were attributable to changes in the scope of consolidation including Hitachi Capital
Corporation.
As of March 31, 2018 and 2017, the total balances of trade receivables and other receivables individually determined to be
impaired were ¥71,321 million and ¥75,210 million, respectively, and the allowance for doubtful receivables
corresponding to such receivables was recorded in the amounts of ¥18,951 million and ¥23,697 million, respectively.

F-54

Notes to Consolidated Financial Statements(iv) Liquidity Risk
Trade payables and financial liabilities, such as long-term debts, held by the Company and its subsidiaries are exposed toliquidity risk. With respect to this risk, the Company and its subsidiaries try to optimize capital efficiency through efficientmanagement of working capital, and maintain cash control through a centralized cash management system. They are alsoable to raise funds, as necessary, from capital markets through the issuance of debt and equity securities, and fromcommercial banks through borrowings and commitment lines. The total unused commitment lines as of March 31, 2018
are disclosed in note 30.
The following tables present the maturities of non-derivative financial liabilities. Trade payables are not included in thetables since the carrying amounts agree with the contractual cash flows and they all mature in less than one year.
Millions of yen
Carrying
amountShort-term debt

Contractual
cash flows

March 31, 2018
Within 1 year

After 1 year
but not morethan 5 years

More than 5
years

121,439

122,436

122,436--

55,05916,98833,817

4,254

Long-term debt
Lease payables

49,478

Bonds

149,837

156,168

20,97962,951

72,238Long-term borrowings

729,540

746,161

95,227436,967

213,967
Millions of yen

Carrying
amountShort-term debt

Contractual
cash flows

March 31, 2017
Within 1 year

After 1 year
but not morethan 5 years

More than 5
years

196,357

197,828

197,828--

Lease payables

49,70354,695

16,44734,241

4,007

Bonds

159,820

166,474

41,15872,91052,406Long-term borrowings

770,723

792,830

146,060

424,487

222,283

Long-term debt

The weighted average interest rate for short-term debt is 1.6%, and the weighted average interest rate for long-termborrowings is 0.9% with maturities ranging from 2018 to 2031.

F-55

Notes to Consolidated Financial Statements
The details on each bond issued are provided below.

Issuer

The Company
The Company
The Company

Subsidiaries

Name of bondMarch 31,
2018

2013

10,00010,000 Unsecured

0.3

2018

2013

30,00030,000 Unsecured

0.8

2023

Unsecureddebenture #17

2013

20,00020,000 Unsecured

1.4

2028

Unsecured

2011-

89,837

99,820 Unsecured

0.2
-

2018
-

1.2

2027

Unsecureddebenture #15
Unsecureddebenture #16

debentures

March 31,2017

Security

Millions of yen
Interest
Mature
rates
in
(%)

Issued

2017

Total

149,837

159,820

The following table shows the maturities of the main types of derivatives, expressed in gross amounts, even though they
are net settlement derivatives.
Millions of yen
Within 1 year

Forward exchange contracts
Cross currency swaps
Interest rate swaps
Option contracts

March 31, 2018
More than 5
After 1 year
years
but not morethan 5 years

Total

In

11,891

9,421-

21,312

Out

19,8687,489-

27,357

In

164

30

4,648

4,842

Out

98

5,234

746

6,078

In

13

1,403

-

1,416

Out

86

2,091

1

2,178

In

75

7,760

-

7,835

Out

10

-

-

10
Millions of yen

Within 1 year

March 31, 2017
More than 5
After 1 year
but not more
years
than 5 years

Forward exchange contracts

In

13,02018,137

Out

25,703

Cross currency swaps

In

296

Out
In

Interest rate swaps
Option contracts

Total

-

31,157

24,070-49,773

318

8,300

8,914

797

3,994

269

5,060

18

501

-

519

Out

60

2,159

637

2,856

In

122

6,061

-

6,183

Out

-

-

-

-

F-56

Notes to Consolidated Financial Statements(c) Fair Value of Financial Instruments(i) Fair Value Measurements
The following methods and assumptions are used to measure the fair value of financial assets and liabilities.
Cash and cash equivalents, Trade receivables, Short-term loans receivable, Other receivables, Short-term debt,
Other payables and Trade payables
The carrying amount approximates the fair value because of the short maturity of these instruments.
Investments in securities and other financial assets
The fair value of lease receivables is based on the present value of lease payments receivable calculated for each group ofyears to maturity using discount rates that reflect the time to maturity and credit risk.
Investment securities with quoted market prices are estimated using the quoted share prices. In the absence of an active
market for investment securities, quoted prices for similar investment securities, quoted prices associated with transactions
that are not distressed for identical or similar investment securities or other relevant information including market interest
rate curves, referenced credit spreads or default rates, are used to determine fair value. If significant inputs of fair value
measurement are unobservable, the Company uses price information provided by financial institutions to evaluate suchinvestments. The information provided is corroborated by the income approach using its own valuation model, or themarket approach using comparisons with prices of similar securities.
The fair value of long-term loans receivable is estimated based on the present value of future cash flows using the interest
rate applicable to an additional loan of the same type.
Derivative assets are measured at fair value based on quoted prices associated with transactions that are not distressed,
prices in inactive markets, or based on models using interest rate curves and forward and spot prices for currencies andcommodities. If significant inputs are unobservable, the Company mainly uses the income approach or the market
approach to corroborate relevant information provided by financial institutions and other available information.
Long-term debt
The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using
the market interest rates applicable to the same contractual terms.
Other financial liabilities
Derivative liabilities are measured at fair value based on quoted prices associated with transactions that are not distressed,
prices in inactive markets, or based on models using interest rate curves and forward and spot prices for currencies andcommodities. If significant inputs are unobservable, the Company uses mainly the income approach or the market
approach to corroborate relevant information provided by financial institutions and other available information.

F-57

Notes to Consolidated Financial Statements(ii) Financial Instruments Measured at Amortized Cost
The carrying amounts and estimated fair values of the financial instruments measured at amortized cost as of March 31,2018 and 2017 are as follows.
The fair value estimated for financial assets and liabilities measured at amortized cost is classified in Level 2 of the fairvalue hierarchy.
Millions of yen
March 31, 2018
Carrying amounts

March 31, 2017

Estimated
fair values

Carrying amounts

Estimated
fair values

AssetsInvestments in securities and otherfinancial assets
Lease receivables

92,19893,16581,01182,007

Debt securities

120,915

120,920

155,745

155,751

Long-term loans receivable

95,37396,859102,384

103,257

Liabilities
Long-term debt [1]Lease obligations

49,47849,72349,70350,027

Bonds

149,837

153,614

159,820

164,037

Long-term borrowings

729,540

734,912770,723

777,341[1] Long-term debt is included in Current portion of long-term debt and Long-term debt in the consolidated statement offinancial position.
(iii) Financial Instruments Measured at Fair Value
Financial instruments measured at fair value on a recurring basis after the initial recognition are classified into three levelsof the fair value hierarchy based on the measurement inputs’ observability as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: Valuations measured by direct or indirect observable inputs other than Level 1
Level 3: Valuations measured by significant unobservable inputs
When several inputs are used for a fair value measurement, the level is determined based on the input that is significant
with the lowest level in the fair value measurement as a whole.
Transfers between levels are deemed at the beginning of each quarter period.

F-58

Notes to Consolidated Financial Statements
The following tables present the assets and liabilities that are measured at fair value on a recurring basis as of March 31,2018 and 2017.
March 31, 2018
Class of financial instruments

Millions of yen
Level 1

Level 2

Level 3

Total

FVTPL financial assets:
Investments in securities and otherfinancial assets
Equity securities
Debt securities

-

-

1,114

1,114

10,749

6,535

9,590

26,874-

27,6697,760

35,429298,307669

113,620

412,596

309,056

34,873132,084

476,013-35,791-35,791-35,791-35,791

Derivatives
FVTOCI financial assets:
Investments in securities and otherfinancial assets
Equity securities
Total financial assets at fair value
FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value
March 31, 2017Class of financial instruments

Millions of yen
Level 1

Level 2

Level 3

Total

FVTPL financial assets:
Investments in securities and otherfinancial assets
Equity securities
Debt securities
Derivatives

-

-

704

704

11,593

6,814

8,991

27,398-40,724

6,061

46,785355,310

104

109,766

465,180

366,903

47,642

125,522

540,067-

57,763-57,763-57,763-57,763

FVTOCI financial assets:
Investments in securities and otherfinancial assets
Equity securities
Total financial assets at fair value
FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value

F-59

Notes to Consolidated Financial Statements
The following tables present the changes in Level 3 instruments measured on a recurring basis for the years ended March
31, 2018 and 2017.
2018

Millions of yen
Level 3 financial assets

Balance at beginning of year

Equitysecurities

Debt
securities

Derivatives

Total

110,470

8,991

6,061

125,522

Gain (loss) in profit or loss [1]Gain in OCI [2]

66
5,329

(62)
-

(7)
-

(3)
5,329

Purchases
Sales and redemption

3,876(5,349)

1,350
(652)

1,706
-

6,932
(6,001)

254
88

(190)
153

-

64
241

114,734

9,590

7,760

132,084

66

5

(7)

64

Acquisitions and divestitures
Other
Balance at end of year
Unrealized gain (loss) relating tofinancial assets held at end of year [4]2017Millions of yen
Level 3 financial assets

Equitysecurities

Debt
securities

Derivatives

Total

Balance at beginning of year

117,317

38,025

6,061

161,403

Gain (loss) in profit or loss [1]Loss in OCI [2]16(1,386)

(192)
-

-

(176)
(1,386)

Purchases
Sales and redemption

2,471(3,949)2,535(11,365)-

5,006(15,314)Acquisitions and divestitures
Transfer from Level 3 [3](4,532)(168)(19,548)--(24,080)
(168)

Other
Balance at end of year

701
110,470

(464)
8,991

6,061

237
125,522

40

(197)

-

(157)

Unrealized gain (loss) relating tofinancial assets held at end of year [4][1] Gain (loss) in profit or loss related to FVTPL financial assets is included in Financial income and Financial expenses
in the consolidated statement of profit or loss.
[2] Gain (loss) in OCI related to FVTOCI financial assets is included in Net changes in financial assets measured at fairvalue through OCI in the consolidated statement of comprehensive income.
[3] Transfer from Level 3 is mainly the result of an investee being listed on the stock market.
[4] Unrealized gain (loss) relating to FVTPL financial assets held at the end of year is included in Financial income andFinancial expenses in the consolidated statement of profit or loss.
Written put options on non-controlling interests of subsidiaries are not included in the above table. Such put options areclassified as Level 3 financial liabilities measured on a recurring basis, and changes in fair value are recognized in Capitalsurplus. The fair value of the put options above as of March 31, 2018 and 2017 were ¥17,098 million and ¥14,495 million,
respectively, included in Other financial liabilities in the consolidated statement of financial position.
Fair values are measured by the finance departments in accordance with the Company’s policies and procedures.
Valuation models are determined so that they reflect each financial instrument’s nature, characteristics and risks mostappropriately. The finance departments continually examine changes in important inputs that could affect the fair value. Incase the fair value of a financial instrument was significantly impaired, administrators review and approve the impairment
loss.

F-60

Notes to Consolidated Financial Statements
Equity instruments held with the objective of maintaining and strengthening business relations with the issuers areclassified as FVTOCI financial assets. The following is a list of principal equity instruments designated as FVTOCI andtheir fair values.
March 31, 2018

Millions of yen

Principal FVTOCI financial assets

Fair value

Renesas Electronics Corporation

99,007

Western Digital Corporation

61,267JECC Corporation

20,139Central Japan Railway Company

18,117

Yungtay Engineering Co., Ltd.

9,823

World Trade Center Building, Inc.

9,214

East Japan Railway Company

8,011

Honda Motor Co., Ltd.

7,468

Shin-Etsu Chemical Co., Ltd.

7,265

Nippon Steel Kowa Real Estate Co., Ltd.

7,214

March 31, 2017

Millions of yen

Principal FVTOCI financial assets

Fair value

Renesas Electronics Corporation

149,055

Western Digital Corporation

57,869JECC Corporation

19,298Central Japan Railway Company

16,326

Hitachi Maxell, Ltd.

15,835

Yungtay Engineering Co., Ltd.

9,252

World Trade Center Building, Inc.

9,214

Nippon Steel Kowa Real Estate Co., Ltd.

8,693

East Japan Railway Company

7,875

Honda Motor Co., Ltd.

6,830

See note 22 for dividends received from investment securities classified as FVTOCI financial assets.
Accumulated gains and losses on valuation of FVTOCI financial assets are reclassified into retained earnings when
derecognized during the fiscal year. The net gains reclassified, net of taxes, for the years ended March 31, 2018 and 2017
were ¥17,891 million and ¥15,161 million, respectively. These financial assets were derecognized upon disposal of shares
after reviewing particular business relations, or acquisitions and divestitures.
The information on FVTOCI financial assets that were derecognized for the years ended March 31, 2018 and 2017 is asfollows:
Millions of yen
2018

2017

Fair value at the time of derecognition

60,044

42,482

Accumulated gains at the time of derecognition

23,44921,802

F-61

Notes to Consolidated Financial Statements(d) Derivatives and Hedging Activities(i) Fair Value Hedge
Changes in the fair value of recognized assets and liabilities, and of derivatives designated as a fair value hedge of these assets
and liabilities are recognized in profit or loss for the period in which the changes occur. Derivatives designated as a fair value
hedge include forward exchange contracts associated with operating transactions, cross currency swaps agreements and interest
rate swaps associated with financing transactions.
(ii) Cash Flow Hedge
Foreign Currency Risk
Changes in the fair value of forward exchange contracts designated as an effective cash flow hedge of forecasted transactions
are recognized in OCI. AOCI is subsequently reclassified into profit or loss when the hedged items affect profit or loss for theperiod.
Interest Rate Risk
Changes in the fair value of interest rate swaps designated as a hedge of the variability of cash flows associated with long-term
debt are recognized in OCI. AOCI is subsequently reclassified to interest charges over the period in which the interest on thedebt affects profit or loss.
As of March 31, 2018, the period in which the cash flows from the hedged items are expected to occur and in which they are
expected to affect profit or loss is between April 2018 and March 2025.
The fair values of the main types of derivatives designated as hedging instruments are as follows:
Millions of yen
March 31, 2018
Asset

March 31, 2017

Liability

Asset

Liability

Fair value hedge
Forward exchange contracts

3,610

1,175

1,450

3,527

Cross currency swaps

4,119

4,671

8,774

4,339

Interest rate swaps
Total

798

42

352

69

8,527

5,888

10,576

7,935

16,046

13,75528,651

27,666

Cash flow hedge
Forward exchange contracts
Cross currency swaps

718

602

-

721

Interest rate swaps

618

2,136

167

2,787

17,382

16,49328,81831,174Total

The fair values of derivative assets and liabilities for which hedge accounting was not applied as of March 31, 2018 and 2017
were ¥9,507 million and ¥7,383 million for derivative assets, and ¥13,245 million and ¥18,626 million for derivative liabilities,
respectively.
The contract amounts and notional amounts of the main types of derivatives are as follows:
Millions of yen
March 31, 2018

March 31, 2017

Forward exchange contracts
To sell foreign currencies

716,035

717,979

To buy foreign currencies

188,085

168,406

To sell foreign currencies

17,786

13,187

To buy foreign currencies

108,760

129,875

Interest rate swaps

274,490324,772

Cross currency swaps

F-62

Notes to Consolidated Financial Statements
The following table, “Effective portion of derivatives designated as hedging instruments and related hedged items” shows theeffects of derivative instruments for fair value hedges in the consolidated statement of profit or loss for the year ended March
31, 2018.
Effective Portion of Derivatives Designated as Hedging Instruments and Related Hedged Items
Hedging instruments

Millions of yen Hedged items
Recognized in
profit or loss

Derivatives
Forwardexchange contracts
Cross
currency swaps

Amountrecognized

Financial expenses(13,136)

Millions of yen

Recognized instatement of financial
position
Trade receivables,
other current assets

Recognized in
profit or loss

Amountrecognized

Financial expenses

12,493Financial expenses

5,580

and Short-term debt
Financial expenses

Total(5,515)Long-term debt

(18,651)

Total

18,073

The amounts recognized in the consolidated statement of profit or loss and consolidated statement of comprehensive income forthe year ended March 31, 2018, related to cash flow hedges are detailed in the following tables:“Gain (loss) recognized in OCI, Effective portion of derivatives designated as hedging instruments,”“Gain (loss) reclassified from OCI into profit or loss, Effective portion of derivatives designated as hedging instruments,” and“Gain (loss) on derivatives designated as cash flow hedging instruments, ineffective portion.”
Gain (Loss) Recognized in OCI, Effective Portion of Derivatives Designated as Hedging Instruments
Derivatives

Millions of yen

Forward exchange contracts(6,464)

Cross currency swaps

837

Interest rate swaps

2,184

Total

(3,443)Gain (Loss) Reclassified from OCI into Profit or Loss, Effective Portion of Derivatives Designated as Hedging
Instruments
Derivatives
Forward exchange contracts
Interest rate swaps

Recognized in profit or loss
Cost of sales and Financial
expenses
Cost of sales and Interest charges

Total

Millions of yen
9,429(1,075)
8,354

Gain (Loss) on Derivatives Designated as Cash Flow Hedging Instruments, Ineffective Portion
Derivatives
Forward exchange contracts

Recognized in profit or loss
Financial expenses

Millions of yen
4,085

Total

4,085

F-63

Notes to Consolidated Financial Statements
The following table, “Effective portion of derivatives designated as hedging instruments and related hedged items” shows theeffects of derivative instruments for fair value hedges in the consolidated statement of profit or loss for the year ended March
31, 2017.
Effective Portion of Derivatives Designated as Hedging Instruments and Related Hedged Items
Hedging instruments

Millions of yen Hedged items
Recognized in
profit or loss

Derivatives

AmountrecognizedMillions of yen

Recognized instatement of financial
position

Recognized in
profit or loss

Amountrecognized

Trade receivables,

Forwardexchange contracts

Financial expenses

18,495other current assets
and trade payables

Financial expenses(19,246)

Cross
currency swaps

Financial expenses

12,973Long-term debt

Financial expenses(13,242)

31,468

Total

Total

(32,488)

The amounts recognized in the consolidated statement of profit or loss and consolidated statement of comprehensive income forthe year ended March 31, 2017, related to cash flow hedges are detailed in the following tables:“Gain (loss) recognized in OCI, Effective portion of derivatives designated as hedging instruments,”“Gain (loss) reclassified from OCI into profit or loss, Effective portion of derivatives designated as hedging instruments,” and“Gain (loss) on derivatives designated as cash flow hedging instruments, ineffective portion.”
Gain (Loss) Recognized in OCI, Effective Portion of Derivatives Designated as Hedging Instruments
Derivatives

Millions of yen

Forward exchange contracts

34,558Cross currency swaps

24,354

Interest rate swaps

7,754

Total

66,666

Gain (Loss) Reclassified from OCI into Profit or Loss, Effective Portion of Derivatives Designated as Hedging
Instruments
Derivatives

Recognized in profit or loss

Forward exchange contracts

Cost of sales and Financial
expenses

Cross currency swaps

Financial expenses

Interest rate swaps

Cost of sales and Interest charges

Millions of yen
1,512(11,353)

Total(2,364)(12,205)

Gain (Loss) on Derivatives Designated as Cash Flow Hedging Instruments, Ineffective Portion
Derivatives
Forward exchange contracts

Recognized in profit or loss
Financial expenses

Millions of yen(6,569)

Total(6,569)F-64

Notes to Consolidated Financial Statements(e) Securitization of Financial Assets
For the purpose of providing diversified and stable financing, the Company and certain subsidiaries securitize certain financial
assets, and transfer trade and lease receivables through certain third-party financial institutions or structured entities formed bythese financial institutions. The Company does not consolidate such structured entities used for securitization purposes since it has
been determined that they are not controlled by the Company.
These unconsolidated structured entities used for securitization purposes are operated in the ordinary course of business of thefinancial institutions, and they procure funds by issuing commercial paper and other borrowings. Basically, investors in thesestructured entities only have recourse to the assets owned by the entity itself, but not to any other assets held by the Company or its
subsidiaries. The amount of assets transferred by the Company and certain subsidiaries is considerably small compared to the total
assets of the structured entities sponsored by the financial institutions that purchase a large amount of assets from entities otherthan the Company and certain subsidiaries. The Company and certain subsidiaries have only limited exposure to the risks borne bythese structured entities. The majority of the involvement with these structured entities used for securitization purposes by theCompany and certain subsidiaries concerns the servicing of assets. The Company and certain subsidiaries do not provide any noncontractual support to the structured entities and have not made any implicit support arrangements with them.
For the securitizations of financial assets by the Company and certain subsidiaries, which resulted in derecognizing the financial
assets in their entirety, the Company and certain subsidiaries retain no significant continuing involvement. For other securitizationsof financial assets, the Company and certain subsidiaries do not derecognize the financial assets in their entirety when they retain
substantially all credit risks and economic value related to the transferred financial assets through holding subordinated interests,
and the carrying amounts of these financial assets are not material.
(27) Pledged Assets
As a general contractual term for long-term and short-term debt, banks may demand collateral and guarantees for present andfuture obligations, and retain rights to offset the liabilities with bank deposits when repayment is overdue or any breach ofcontract occurs.
Per trustee agreements of secured bonds and particular secured or unsecured loan agreements, trustees or lenders generally havethe right to pre-approve profit distributions including dividend payments and new stock issues, as well as the right to demand
additional collateral or mortgage.
The Company and its subsidiaries pledged a portion of their assets as collateral primarily for bank loans as follows:
Millions of yen
March 31, 2018

March 31, 2017

Trade receivables

9,349

6,013

Inventories

10,292

13,528Other current assets

37

575

Investments in securities and other financial assets

890

882

Land

185

639

Buildings and structures

1,592

8,802

Machinery and other property, plant and equipment

37,161

38,443

Total

59,506

68,882F-65

Notes to Consolidated Financial Statements(28) Principal Subsidiaries
The Company’s consolidated financial statements include the following subsidiaries listed below.

Reporting segment

Name of subsidiary

Information &Hitachi Information & Telecommunication

Telecommunication Systems

Engineering, Ltd.

Information &Business location

Ownership
percentage
of votingrights (%)

Yokohama, Kanagawa

100.0

Hitachi-Omron Terminal Solutions, Corp.

Shinagawa-ku, Tokyo

55.0

Information &Telecommunication Systems

Hitachi Solutions, Ltd.

Shinagawa-ku, Tokyo

100.0

Information &Telecommunication Systems

Hitachi Systems, Ltd.

Shinagawa-ku, Tokyo

100.0

Information &Hitachi Computer Products (America), Inc.

Oklahoma,

100.0

Telecommunication Systems

Telecommunication Systems
Information &U.S.A.
Hitachi Consulting Corporation

Telecommunication Systems

Texas,

100.0

U.S.A.

Information &Telecommunication Systems

Hitachi Financial Equipment System (Shen Zhen)
Co., Ltd.

Shenzhen,
China

100.0

Information &Telecommunication Systems

Hitachi Information & Telecommunication
Systems Global Holding Corporation

California,
U.S.A.

100.0

Information &Hitachi Payment Services Private Limited

Chennai,

100.0

Telecommunication Systems
Information &India
Hitachi Vantara Corporation

California,

Telecommunication Systems

100.0

U.S.A.

Social Infrastructure &Industrial Systems

Hitachi Building Systems Co., Ltd.

Chiyoda-ku, Tokyo

100.0

Social Infrastructure &Industrial Systems

Hitachi-GE Nuclear Energy, Ltd.

Hitachi, Ibaraki

80.0Social Infrastructure &Industrial Systems

Hitachi Industrial Equipment Systems Co., Ltd.

Chiyoda-ku, Tokyo

100.0

Social Infrastructure &Hitachi Industry & Control Solutions, Ltd.

Hitachi, Ibaraki

100.0

Hitachi Plant Construction, Ltd.

Toshima-ku, Tokyo

100.0

Social Infrastructure &Industrial Systems

Hitachi Plant Services Co., Ltd.

Toshima-ku, Tokyo

100.0

Social Infrastructure &Industrial Systems

Hitachi Power Solutions Co., Ltd.

Hitachi, Ibaraki

100.0Social Infrastructure &Hitachi Elevator (China) Co., Ltd.

Guangzhou,

70.0

Industrial Systems
Social Infrastructure &Industrial Systems

Industrial Systems
Social Infrastructure &China
Hitachi Rail Europe Ltd.

London,Industrial Systems

100.0

U.K.

Social Infrastructure &Industrial Systems

Horizon Nuclear Power Limited

Gloucester,
U.K.

100.0

Social Infrastructure &Industrial Systems

Sullair US Purchaser, Inc.

Indiana,
U.S.A.

100.0

Electronic Systems &Equipment

Hitachi High-Technologies Corporation

Minato-ku, Tokyo

51.8

F-66

Notes to Consolidated Financial Statements

Reporting segment
Electronic Systems &Name of subsidiaryBusiness location

Ownership
percentage
of votingrights (%)

Hitachi Kokusai Electric Inc.

Minato-ku, Tokyo

75.0

Construction Machinery

Hitachi Construction Machinery Co., Ltd.

Taito-ku, Tokyo

51.5

High Functional Materials &Components

Hitachi Chemical Company, Ltd.

Chiyoda-ku, Tokyo

51.4

High Functional Materials &Components

Hitachi Metals, Ltd.

Minato-ku, Tokyo

53.5

Automotive Systems

Clarion, Co., Ltd.

Saitama, Saitama

64.0

Automotive Systems

Hitachi Automotive Systems, Ltd.

Hitachinaka, Ibaraki

100.0

Automotive Systems

Hitachi Automotive Systems Americas, Inc.

Kentucky,
U.S.A.

100.0

Smart Life & Ecofriendly
Systems

Hitachi Appliances, Inc.

Minato-ku, Tokyo

100.0

Smart Life & Ecofriendly

Hitachi Consumer Marketing, Inc.

Minato-ku, Tokyo

100.0

Hitachi Consumer Products (Thailand), Ltd.

Prachinburi,

80.1

Equipment

Systems
Smart Life & Ecofriendly
Systems

Thailand

OthersHitachi-LG Data Storage, Inc.

Minato-ku, Tokyo

51.0

OthersHitachi Life, Ltd.

Hitachi, Ibaraki

100.0

OthersHitachi Urban Investment, Ltd.

Chiyoda-ku, Tokyo

100.0

OthersHitachi America, Ltd.

California,

100.0

U.S.A.
OthersHitachi Asia Ltd.

Singapore

100.0

OthersHitachi (China), Ltd.

Beijing,
China

100.0

OthersHitachi Europe Ltd.

Maidenhead,
U.K.

100.0

OthersHitachi India Pvt. Ltd.

New Delhi,

100.0

India
-

Other 839 companies

F-67

-

-

Notes to Consolidated Financial Statements(29) Related Party Transactions(a) Related Party Transactions
The Company’s and its subsidiaries’ receivable and payable balances with associates and joint ventures are as follows:
Millions of yen
With associates

March 31, 2018

March 31, 2017

Trade receivables

121,759

115,583

Short-term loans receivable [1]10,015

6,983

Long-term loans receivable [2]73,951

83,502

Trade payables

103,553

118,666

Other payables [3]12,56318,369Lease obligations [4]17,592

18,230Millions of yen

With joint ventures

March 31, 2018

March 31, 2017

Trade receivables

101,388

184,491

Long-term loans receivable [2]18,07916,036

Trade payables

14,341

4,358[1] Included in Investments in securities and other financial assets in the consolidated statement of financial position.
[2] Included in Investments in securities and other financial assets in the consolidated statement of financial position.
[3] Included in Other financial liabilities in the consolidated statement of financial position.
[4] Included in Current portion of long-term debt and Long-term debt in the consolidated statement of financial position.
Revenue and purchase transactions of the Company and its subsidiaries with associates and joint ventures are as follows:
Millions of yen
With associates

2018

2017

Revenues

409,826

298,387

Purchases

364,490

191,408
Millions of yen

With joint ventures

2018

2017

Revenues

150,675

137,077

Purchases

15,68428,989(b) Compensation for Directors and Executive Officers of the Company
Millions of yen
2018
Basic remuneration, year-end allowance andperformance-linked compensation

2017
3,054

2,437

etc.)

490

300

Total

3,544

2,737

Medium and long-term incentive compensation(Stock options as stock-based compensation,

F-68

Notes to Consolidated Financial Statements(30) Commitments and Contingencies(a) Loan Commitments(i) Loan Commitments to Associates and Others
The Company provides loan commitments to associates and others. The outstanding balance of loan commitments as ofMarch 31, 2018 is as follows:
Millions of yen
March 31, 2018
Total commitments available

73,002Less amount utilized

71,040

Balance available

1,962

Since some loan commitments require credit approval before execution, the amount of total commitments available may
not be necessarily utilized in full.
(ii) Commitments with Financial Institutions
The Company and certain subsidiaries have line of credit arrangements with banks in order to secure efficient financing forbusiness operations. The total unused line of credit as of March 31, 2018 amounted to ¥503,280 million, primarily
belonging to the Company. The Company has commitment line agreements with a number of banks and pays commitment
fees as consideration. These commitment agreements generally provide a one year term with renewal at the end of theterm. The unused line of credit under these arrangements as of March 31, 2018 amounted to ¥200,000 million. The
Company also maintains other commitment line agreements with several financial institutions, with terms of three years
ending in July 2019. The unused line of credit under these arrangements as of March 31, 2018 amounted to ¥200,000
million.
(b) Commitments for Acquisition of Assets
As of March 31, 2018, outstanding commitments made to purchase property, plant and equipment were ¥98,978 million.
(c) Guarantee Obligations
The Company and certain subsidiaries provide debt guarantees to their associates, joint ventures and third parties. As of
March 31, 2018, the balance of the guarantee obligations was ¥76,097 million. It consisted of guarantees to associates of¥29,779 million, to joint ventures of ¥28,791 million and to third parties of ¥17,527 million.
(d) Litigation
In June 2009, a subsidiary in Japan received a grand jury subpoena in connection with the investigation conducted by the
Antitrust Division of the U.S. Department of Justice and received requests for information from the European Commission in
respect of alleged antitrust violations relating to optical disk drives. In November 2011, the subsidiary in Japan paid a fine in
relation to the investigation from the Antitrust Division of the U.S. Department of Justice. In July 2012, the subsidiary inJapan received a statement of objections from the European Commission in respect of alleged antitrust violations. In October
2015, the European Commission announced the amount of the fine for the subsidiary in Japan in respect of alleged antitrust
violations, and in June 2016, two subsidiaries in Japan and Korea paid the fines.
In July 2011, a subsidiary in the U.S.A. received a grand jury subpoena from the Antitrust Division of the U.S. Department ofJustice, the Company and a subsidiary in Europe received requests for information from the European Commission, and a
subsidiary in Canada received requests for information from the Canadian Competition Bureau, all in respect of alleged
antitrust violations relating to automotive equipment. In November 2013, a subsidiary in Japan, which had been also primarily
responsible for responding to the investigation from the Antitrust Division of the U.S. Department of Justice, paid fines. In
January 2016, the Company and the subsidiary in Japan which had been also primarily responsible for responding to theinvestigation from the European Commission reached a settlement with the European Commission, and paid fines in April
2016.
In April 2014, a subsidiary in the U.S.A. received a grand jury subpoena in connection with the investigation conducted by
the Antitrust Division of the U.S. Department of Justice in respect of alleged antitrust violations relating to automotive
equipment. In August 2016, a subsidiary in Japan, which had been also primarily responsible for responding to theinvestigation, concluded an agreement in which the subsidiary will pay fines, and paid fines in March 2017.
F-69

Notes to Consolidated Financial Statements

In June 2014, a subsidiary in Japan was investigated by the Japan Fair Trade Commission in respect of alleged antitrust
violations relating to capacitors. In March 2016, the subsidiary received a notice that the investigation was over from theJapan Fair Trade Commission. The subsidiary in Japan and subsidiaries in Europe, the U.S.A., and others are being
investigated by competition authorities in each country or region, all in respect of alleged antitrust violations relating tocapacitors. In April 2016, the subsidiary in Japan concluded an agreement in which the subsidiary will pay fines, and in June
2016, the subsidiary in Japan paid the fines. In March 2018, the subsidiary in Japan, which had been also primarily
responsible for responding to the investigation from the European Commission, got the decision that the subsidiary was
charged fines, and paid fines in June 2018.
In addition to the above, the Company, its subsidiaries and associates have cooperated with the competent authorities.
Depending upon the outcome of these matters, fines or surcharge payments, the amount of which is uncertain, may be
imposed on them. Also, in connection with pending and settled antitrust violations, civil disputes, including class action
lawsuits, involving the Company and some of these companies have arisen in a number of countries, including in the U.S.A.
and Canada. An amount, which was considered to be a reasonable estimate in respect of these claims, was accrued for the
potential losses in relation to certain of these civil disputes.
In August 2012, a subsidiary in Europe received a complaint filed by a customer in Europe seeking compensation forconsequential losses of EUR 1,058 million (¥138,167 million), additional costs and interest allegedly incurred by the delay inthe construction process of a power plant against, jointly and severally, the Company, the subsidiary in Europe, a consortium
including the Company and the subsidiary in Europe, and two other companies. In addition, in October 2013 and February
2016, the subsidiary in Europe received additional complains requesting compensation for consequential losses of EUR 239
million (¥31,258 million) and EUR 105 million (¥13,657 million), respectively. In June 2016, the Company was informedthat the customer added an associate in Europe as one of the defendants. Although the Company, the subsidiary and theassociate in Europe and the consortium will vigorously defend themselves against this lawsuit, there can be no assurance thatthey will not be held liable for any amounts claimed.
In December 2013, the Company, a subsidiary in Europe and a consortium consisting of the Company and the subsidiary inEurope, jointly and severally received a request from a customer in Europe to refer a dispute to arbitration demanding EUR
637 million (¥83,163 million) in compensation for consequential losses allegedly incurred by the delay in the construction
process of a power plant. In November 2016, an arbitral award was issued by an arbitral tribunal and the award was paid in
February 2017. In addition, a settlement regarding a part of unsettled matters was paid in July 2017. The customer, theCompany, the subsidiary in Europe and the consortium consisting of the Company and the subsidiary in Europe continue theirnegotiations to achieve a final settlement regarding other unsettled matters.
In addition, in December 2015, these companies, jointly and severally received a request for arbitration from the customer
demanding EUR 161 million (¥21,056 million) in compensation primarily for performance related deficiencies of a power
plant. As of March 31, 2018, the amount of compensation claimed by the customer was changed to EUR 101 million(¥13,299 million). Although, the Company, the subsidiary in Europe and the consortium consisting of the Company and thesubsidiary in Europe will vigorously defend themselves against this lawsuit, there can be no assurance that they will not beheld liable for any amounts claimed.
In January 2016, a subsidiary in Europe notified its customer in Europe that the subsidiary had commenced arbitration
proceedings to resolve a disagreement about construction of a power plant, and then the arbitration was going. Although a
counterclaim was filed by the customer, the subsidiary concluded a settlement in April 2018. Thus, the subsidiary and thecustomer settled their claims in May 2018.
In November 2017, a subsidiary in Japan received a complaint that was filed against three companies, namely a construction
company of a condominium complex, the subsidiary and a secondary subcontractor, by a contractee in Japan seeking
approximately ¥45.9 billion in compensation for expenses allegedly incurred arising from concerns over partial deficienciesof piling work during the construction phases of the condominium complex, which the subsidiary contracted as the primary
subcontractor.
In relation to the aforementioned lawsuit, the subsidiary in Japan received a complaint that was filed against the subsidiaryand the secondary subcontractor, by the construction company of the condominium complex seeking approximately ¥49.6
billion in compensation for expenses allegedly incurred arising from the aforementioned lawsuit. Although the subsidiary in

F-70

Notes to Consolidated Financial Statements
Japan will address these claims and explain its position, there can be no assurance that it will not be held liable for any
amounts claimed.
In December 2017, a subsidiary and an associate in Europe received a complaint filed by a customer in Europe seeking
compensation for consequential losses of EUR 263 million (¥34,333 million) and interest allegedly incurred by performance
defects of a power plant. Although the subsidiary and the associate in Europe will vigorously defend themselves against thislawsuit, there can be no assurance that they will not be held liable for any amounts claimed.
The Company and its subsidiaries execute a number of business reorganizations, including mergers, acquisitions anddivestitures. Contracts for these reorganizations include clauses for transaction price adjustments subsequent to thereorganizations. There is a possibility products or services provided by the Company and its subsidiaries contain defects. As
the result of price adjustments, or in compensation for defects in products or services etc. there is a possibility that theCompany pays for any amounts.
Depending upon the outcome of the above legal proceedings, there may be an adverse effect on the consolidated financial
position or results of operations. Currently, the Company is unable to estimate the adverse effect, if any, of many of theseproceedings. The actual amount of fines, surcharge payments or any other payments resulting from these legal proceedings
may be different from the accrued amounts.
In addition to the above, the Company and its subsidiaries are subject to legal proceedings and claims which have arisen in
the ordinary course of business and have not been finally adjudicated. These actions when ultimately concluded anddetermined will not, in the opinion of management, have a material adverse effect on the consolidated financial statements of
the Company and subsidiaries.
(e) Other
On February 1, 2014 (hereinafter the “effective date of company split”), the Company and Mitsubishi Heavy Industries, Ltd.
(hereinafter “MHI”) integrated their thermal power generation systems businesses into MHI’s consolidated subsidiary,
MITSUBISHI HITACHI POWER SYSTEMS, LTD. (hereinafter “MHPS”), through a spin-off in the form of an absorptiontype company-split. As part of this business integration, assets and liabilities associated with boiler construction projects forMedupi and Kusile Power Stations for which the Company’s consolidated subsidiaries in the Republic of South Africa,
Hitachi Power Africa Proprietary Limited (hereinafter “HPA”) and other companies received orders in 2007, as well as theircontractual status in relation to customers, and rights and obligations thereof were transferred from HPA to MHI’s
consolidated subsidiary, Mitsubishi Hitachi Power Systems Africa Proprietary Limited (hereinafter “MHPS Africa”)(hereinafter, the “Transfer of South African Business”).
Under the agreement executed between the Company and MHI regarding the Transfer of South African Business, theCompany and HPA shall be liable for contingent liabilities resulting from events that occurred before the effective date ofcompany split as well as claims that had already been made as of the said date, while MHPS and MHPS Africa shall be held
responsible for the execution of business on and after the effective date of company split. Given these conditions, it has been
agreed upon to determine the final transfer price upon agreement on future construction schedule as of the effective date ofcompany split and confirmation of estimated project cash flows based on such schedule between the parties, and settle thedifference with the provisional price.
On March 31, 2016, MHI requested the Company to pay ZAR 48,200 million (approximately ¥379.0 billion when ZAR 1 =¥7.87) to MHPS Africa as a portion of transfer price adjustment, etc. The Company replied to MHI on April 6, 2016 that thedetails of the demand letter lacked legal grounds under any agreement and thus the Company cannot accept it.
On January 31, 2017, MHI extended the amount above and requested the Company to pay ZAR 89,700 million(approximately ¥763.4 billion when ZAR 1 = ¥8.51). The Company again replied to MHI that the Company cannot accept therequest since it lacks legal grounds under any agreement as does the request of March 2016. On August 21, 2017, theCompany received a notice from the Japan Commercial Arbitration Association (hereinafter, the “JCAA”) stating that MHI
had filed a request for arbitration with the JCAA on July 31, 2017 in order to claim for payment of ZAR 90,779 million(approximately ¥774.3 billion when ZAR 1 = ¥8.53) as the said transfer price adjustment, etc. against the Company. The
Company will address this claim and explain its position in the arbitration proceedings.

F-71

Notes to Consolidated Financial Statements
The Company has recorded provisions based on reasonable estimates for the aforementioned agreement related to the South
African Business. The amount of the said transfer price adjustment, etc. to be determined under the agreement may bedifferent from the accrued amount.

In June 2018, Hitachi Chemical Company, Ltd. (hereinafter “Hitachi Chemical”), a consolidated subsidiary of the Company,
found that, for certain products of the industrial-use lead-acid batteries business, pre-shipment testing to measure battery
capacity was performed in a different manner from that which had been originally agreed upon with customers, andinspection reports containing different data from measurement results were provided to customers. Hitachi Chemical plans to
set up a special investigation committee in order to investigate related facts and causes as well as to notify customers, etc. The
outcome of the investigation by the committee or discussions with customers may adversely affect the consolidated financial
position or results of operations in the future. As it is not possible to reasonably estimate the impact on the consolidated
financial statements at this time, no amount has been reflected in the consolidated financial statements for the fiscal year
ended March 31, 2018.

(31) Subsequent Events
The Company announced that the Board of Directors held on April 27, 2018, resolved to partially amend the Company's
Articles of Incorporation to change the number of shares per one unit, and to propose a share consolidation to the 149th
Annual General Meeting of Shareholders of the Company held on June 20, 2018. The proposals were approved at the Annual
General Meeting of Shareholders.
(a) Change in the number of shares per one unit(i) Reasons for change
Based on the “Action Plan for Consolidating Trading Units,” Japanese stock exchanges promote the standardization of
trading units for common shares issued by all listed domestic companies at 100 shares, in order to improve convenience
for investors and other market participants and has set the deadline for the transition to the 100-share trading unit on
October 1, 2018.
Following this decision, the Company decided to change the number of shares per one unit from 1,000 shares to 100
shares.
(ii) Details of change
The number of shares per one unit stipulated in the Company’s Articles of Incorporation will be changed from 1,000
shares to 100 shares.
(b) Share consolidation(i) Reasons for consolidation
The Company decided to consolidate every five Hitachi shares into one share (hereinafter the “share consolidation”) inorder to adjust the investment unit (price of shares per one unit) following the change in the number of shares per one unit
from 1,000 shares to 100 shares.
(ii) Details of consolidation(a) Class of shares to be consolidated: Common stock(b) Consolidation ratio: On October 1, 2018, shares owned by shareholders recorded in the latest register ofshareholders as of September 30, 2018, will be consolidated at the ratio of five (5) sharesto one (1) share.

F-72

Notes to Consolidated Financial Statements(iii) Number of shares reduced through consolidation
Total number of outstanding shares before shareconsolidation (as of March 31, 2018)

4,833,463,387 shares

Number of shares reduced through share consolidation

3,866,770,710 shares

Total number of outstanding shares after share consolidation

966,692,677 shares

Note: “Number of shares reduced through share consolidation” and “Total number of outstanding shares after
share consolidation” are theoretically calculated based on “Total number of outstanding shares before
share consolidation (as of March 31, 2018)” and the consolidation ratio of share consolidation, which
may differ from the actual figures.

(iv) Treatment of fractional shares less than one share
If any fractional shares less than one share arise as a result of the share consolidation, in accordance with the provisions of
the Companies Act of Japan, the Company will sell all such fractional shares and distribute the proceeds to theshareholders holding such fractional shares on a pro rata basis.

(v) Change in total shares authorized to be issued
Total shares authorized to be issued will be changed from 10,000,000,000 shares to 2,000,000,000 shares on October 1,
2018.
(c) Effects on per share information
Assuming that the share consolidation was effective at the beginning of the fiscal year ended March 31, 2017, per share
information for the fiscal year ended March 31, 2018 and 2017 are as follows.
Yen
2018

2017

EPS from continuing operations, attributable to Hitachi, Ltd. stockholders
Basic
Diluted392.52392.17245.66245.58EPS from discontinued operations, attributable to Hitachi, Ltd. stockholders
Basic
Diluted(16.59)(16.58)(6.16)(6.16)EPS attributable to Hitachi, Ltd. stockholders
Basic375.93239.49Diluted375.60239.42(32) Approval of Consolidated Financial Statements
The consolidated financial statements were approved on June 29, 2018 by Toshiaki Higashihara, President and CEO of theCompany.

F-73

Independent Auditor’s Report
To the Stockholders and Board of Directors ofHitachi, Ltd.
We have audited the accompanying consolidated financial statements of Hitachi, Ltd. and its consolidated
subsidiaries, which comprise the consolidated statement of financial position as at March 31, 2018, and theconsolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the year
then ended and notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with International Financial Reporting Standards, and for designing and operating such internal control
as management determines is necessary to enable the preparation and fair presentation of the consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain 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 the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. 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 referred to above present fairly, in all material respects, theconsolidated financial position of Hitachi, Ltd. and its consolidated subsidiaries as at March 31, 2018, and theirconsolidated financial performance and cash flows for the year then ended in conformity with International
Financial Reporting Standards.
/s/ Ernst & Young ShinNihon LLC
June 29, 2018
Tokyo, Japan

F-74

(Translation)
Following is an English translation of the Internal Control Report filed under the Financial Instruments andExchange Act of Japan. We have made the assessment of internal control over financial reporting in accordancewith assessment standards for internal control over financial reporting generally accepted in Japan.
[Cover][Document Filed]Internal Control Report[Applicable Law]

Article 24-4-4, Paragraph 1 of the Financial Instruments and Exchange Act ofJapan[Filed with]

Director, Kanto Local Finance Bureau[Filing Date]

June 29, 2018

[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Name and title of CFO]

Mitsuaki Nishiyama, Senior Vice President and Executive Officer[Address of Head Office]6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo[Place Where Available forTokyo Stock Exchange, Inc.

Public Inspection](2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)A-1

1. Matters Related to Basic Framework of Internal Control over Financial Reporting
Mr. Toshiaki Higashihara, President & CEO, and Mr. Mitsuaki Nishiyama, Senior Vice President andExecutive Officer, are responsible for establishing and maintaining internal control over financial reporting of
Hitachi, Ltd. (the “Company”) and have established and maintained internal control over financial reporting inaccordance with the basic framework for internal control set forth in the “On the Revision of the Standards andPractice Standards for Management Assessment and Audit concerning Internal Control Over Financial
Reporting (Council Opinions)” published by the Business Accounting Council.
The internal control over financial reporting is designed to achieve its objectives to the extent reasonablethrough the effective function and combination of its basic elements. Therefore, there is a possibility that internal
control over financial reporting may not completely prevent or detect misstatements.
2. Matters Related to Scope of Assessment, Record Date, and Assessment Procedure
We assessed the effectiveness of our internal control over financial reporting on the record date as of March
31, 2018. We made this assessment in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan.
In making this assessment, we evaluated internal control which may have a material effect on the entire
financial reporting on a consolidated basis (“company-level controls”) and based on the result of this assessment,
we appropriately selected business processes to be evaluated, analyzed these selected business processes,
identified key controls that may have a material impact on the reliability of our financial reporting, and assessed
the design and operation of these key controls. These procedures have allowed us to evaluate the effectiveness of
our internal controls.
We determined the required scope of assessment of internal control over financial reporting for theCompany, as well as its consolidated subsidiaries, equity-method associates and joint ventures, from theperspective of the materiality that may affect the reliability of our financial reporting. The materiality that may
affect the reliability of our financial reporting is determined taking into account the materiality of quantitativeand qualitative impacts. We confirmed that we had reasonably determined the scope of assessment of internal
controls over business processes in light of the results of assessment of company-level controls conducted for theCompany, its consolidated subsidiaries, equity-method associates and joint ventures. We did not include a partof consolidated subsidiaries, equity-method associates and joint ventures which do not have any quantitatively or
qualitatively material impact on the consolidated financial statements in the scope of assessment of companylevel controls.
Regarding the scope of assessment of internal control over business processes, we accumulated business
units in descending order of total revenues (after elimination of intercompany transactions) for the previous
fiscal year, and those business units whose combined amount of revenues reaches approximately 80% of total
revenues on a consolidated basis were selected as “significant business units.” In addition, some of our equitymethod associates and joint ventures which have a significant effect to our consolidated financial statements
were selected as “significant business units.” At the selected significant business units, we included, in the scopeof assessment, those business processes leading to revenues, accounts receivables and inventories and thosebusiness processes relating to greater likelihood of material misstatements and significant account involving
estimates or forecasts as significant accounts that may have a material impact on our business objectives.
Further, not only at selected significant business units, but also at other business units, we added to the scope ofassessment, as business processes having greater materiality considering their impact on the financial reporting,those business processes relating to businesses or operations dealing with high-risk transactions.
3. Matters Related to Results of Assessment
As a result of the assessment above, we concluded that our internal control over financial reporting was
effective as of March 31, 2018.
4. Supplementary Matters
None.
5. Special Notes
None.
A-2

TRANSLATION
Following is an English translation of the Independent Auditors’ Report filed under the Financial Instruments
and Exchange Act of Japan. This report is presented merely as supplemental information.
There are differences between an audit of internal control over financial reporting under the Financial
Instruments and Exchange Act and an audit of internal control over financial reporting conducted under theattestation standards established by the American Institute of Certified Public Accountants.
In an audit of internal control over financial reporting under the Financial Instruments and Exchange Act, theauditors express an opinion on management’s report on internal control over financial reporting, and do not
express an opinion on the Company’s internal control over financial reporting taken as a whole.

Independent Auditors’ Report(filed under the Financial Instruments and Exchange Act of Japan)
June 29, 2018
Mr. Toshiaki Higashihara, President & CEO
Hitachi, Ltd.

Ernst & Young ShinNihon LLC
Designated and Engagement Partner,
Certified Public Accountant:

Takashi Ouchida

Designated and Engagement Partner,
Certified Public Accountant:

Takuya Tanaka

Designated and Engagement Partner,
Certified Public Accountant:

Ken Sudo[Audit of Financial Statements]
Pursuant to the Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements included in the Financial Section, namely, the consolidated statement of financial
position as at March 31, 2018 of Hitachi, Ltd. (the “Company”) and its consolidated subsidiaries, and the related
consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year thenended, including notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with International Financial Reporting Standards pursuant to the provision of Article 93 of theRegulation for Terminology, Forms and Preparation of Consolidated Financial Statements, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial statements thatare free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
A-3

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments, the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. 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 an appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of the Company and its consolidated subsidiaries as at March 31, 2018, and theresults of their operations and their cash flows for the year then ended in conformity with International Financial
Reporting Standards.
[Audit of Internal Control]
Pursuant to the Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited
management’s report on internal control over financial reporting of the Company and its consolidated subsidiaries
as of March 31, 2018.
Management’s Responsibility for the Report on Internal Control
The Company’s management is responsible for designing and operating effective internal control over financial
reporting and for the preparation and fair presentation of its report on internal control in conformity withassessment standards for internal control over financial reporting generally accepted in Japan. There is a possibility
that misstatements may not be completely prevented or detected by internal control over financial reporting.
Auditors’ Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal
control audit as independent position. We conducted our internal control audit in accordance with auditing
standards for internal control over financial reporting generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether management’s report on internal control isfree from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of theassessment of internal control over financial reporting in management’s report on internal control. The procedures
selected depend on the auditors’ judgment, including the significance of effects on reliability of financial reporting.
An internal control audit includes examining representations on the scope, procedures and results of the assessmentof internal control over financial reporting made by management, as well as evaluating the overall presentation ofmanagement’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

A-4

Audit Opinion
In our opinion, management’s report on internal control referred to above, which represents that the internal control
over financial reporting of the consolidated financial statements of the Company and its consolidated subsidiaries
as of March 31, 2018 is effectively maintained, presents fairly, in all material respects, the results of the assessmentof internal control over financial reporting in conformity with assessment standards for internal control overfinancial reporting generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required
under the provisions of the Certified Public Accountants Act.
(The above represents a translation, for convenience only, of the original report issued in the Japanese language.)A-5

(Translation)
Following is an English translation of the Confirmation Letter filed under the Financial Instruments andExchange Act of Japan.
[Cover][Document Filed]

Confirmation Letter[Applicable Law]

Article 24-4-2, Paragraph 1 of the Financial Instruments and Exchange Act ofJapan[Filed with]

Director, Kanto Local Finance Bureau[Filing Date]

June 29, 2018

[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Name and title of CFO]

Mitsuaki Nishiyama, Senior Vice President and Executive Officer[Address of Head Office]6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo[Place Where Available forTokyo Stock Exchange, Inc.

Public Inspection](2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)
Nagoya Stock Exchange, Inc.
(8-20, Sakae 3-chome, Naka-ku, Nagoya)A-6

1. Matters Related to Adequacy of Statements Contained in the Annual Securities Report
Mr. Toshiaki Higashihara, President & CEO, and Mr. Mitsuaki Nishiyama, Senior Vice President andExecutive Officer, confirmed that statements contained in the Annual Securities Report for the 149th fiscal year
(from April 1, 2017 to March 31, 2018) were adequate under the Financial Instruments and Exchange Act.
2. Special Notes
None.

A-7