[Translation]

Quarterly Report(The Third Quarter of 150th Business Term)
From October 1, 2018 to December 31, 2018

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

Hitachi, Ltd.

[Cover][Document Filed]

Quarterly Report (“Shihanki Hokokusho”)[Applicable Law]

Article 24-4-7, Paragraph 1 of the Financial Instruments and Exchange Act of Japan[Filed with]

Director, Kanto Local Finance Bureau[Filing Date]

February 13 , 2019

[Fiscal Year]

The Third Quarter of 150th Business Term (from October 1, 2018 to December 31, 2018)[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name of Representative]

Toshiaki Higashihara, President & CEO[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 for PublicTokyo Stock Exchange, Inc.

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 Quarterly 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 of Japan.
The translation of the Confirmation Letter for the original Quarterly Report is included at the end of this document.
Unless the context indicates otherwise, the term “Company” refers to Hitachi, Ltd. and the term “Hitachi” refers to theCompany and its consolidated subsidiaries.
Unless otherwise stated, in this document, where we present information in millions or hundreds of millions of yen, we havetruncated amounts of less than one million or one hundred million, as the case may be. Accordingly, the total of figures presented incolumns or otherwise may not equal the total of the individual items. We have rounded all percentages to the nearest percent, onetenth 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 and Exchange Act
of Japan and other laws and regulations amending and/or supplementing the Financial Instruments and Exchange Act of Japan.

Contents
Part I Information on the Company ………………………………………………………………………………………………

1

I. Overview of the Company ……………………………………………………………………………………………………
1. Key Financial Data ………………………………………………………………………………………………………

1
1

2. Description of Business ……………………………………………………………………………………………………
II. Business Overview …………………………………………………………………………………………………………

1
2

1. Risk Factors ………………………………………………………………………………………………………………
2. Management’s Discussion and Analysis of Consolidated Financial Condition, Results of Operations and Cash Flows …

22

3. Material Agreements, etc. …………………………………………………………………………………………………
III. Information on the Company ………………………………………………………………………………………………

7
8

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

88(2) Information on the stock acquisition rights, etc. ………………………………………………………………………
(3) Information on moving strike convertible bonds, etc. …………………………………………………………………

88(4) Changes in the total number of issued shares and the amount of common stock and other …………………………
(5) Major shareholders ……………………………………………………………………………………………………

99(6) Information on voting rights …………………………………………………………………………………………
2. Changes in Senior Management …………………………………………………………………………………………

9
10

IV. Financial Information ……………………………………………………………………………………………………… 10
Part II Information on Guarantors, etc. for the Company ………………………………………………………………………… 10[Condensed Quarterly Consolidated Financial Statements] ……………………………………………………………………… F1[Confirmation Letter] ……………………………………………………………………………………………………………… A1

Part I Information on the Company
I. Overview of the Company
1. Key Financial Data
Consolidated financial data, etc.
(Millions of yen, unless otherwise stated)
Nine months ended
December 31, 2017

Nine months ended
December 31, 2018

6,674,028

6,782,969[2,297,561][2,291,135]

Income from continuing operations, before
income taxes

468,152

306,761

638,646

Net income (loss) attributable to Hitachi, Ltd.
stockholders

258,582[97,969]

82,627[(110,368)]

362,988324,628

25,247382,341

Total Hitachi, Ltd. stockholders’ equity

3,220,508

3,142,280

3,278,024

Total equity

4,449,438

4,298,371

4,511,671

Total assets

10,196,152

9,693,492

10,106,603

267.80[101.46]

85.57[(114.30)]

375.93267.5585.50

375.60

31.6

32.4

32.4

Net cash provided by operating activities

473,210202,351

727,168

Net cash used in investing activities(314,238)(175,495)(474,328)(142,413)

3,857(321,454)

811,324

708,745697,964

Revenues

Comprehensive income attributable to Hitachi,Ltd. stockholders

Earnings (loss) per share attributable to Hitachi,Ltd. stockholders, basic (yen)Earnings per share attributable to Hitachi, Ltd.
stockholders, diluted (yen)Total Hitachi, Ltd. stockholders’ equity ratio (%)

Net cash provided by (used in) financing
activities
Cash and cash equivalents at end of period

Year ended
March 31, 2018
9,368,614(Notes) 1. Hitachi's consolidated financial statements have been prepared in conformity with the International Financial ReportingStandards (“IFRS”) as issued by the International Accounting Standards Board.
2. Revenues do not include the consumption tax, etc.
3. The figures of “Revenues,” “Net income (loss) attributable to Hitachi, Ltd. stockholders” and “Earnings (loss) per share
attributable to Hitachi, Ltd. stockholders, basic” in square bracket are those for the three months ended December 31,
2017 and 2018, respectively.
4. On October 1, 2018, the Company completed the share consolidation of every five (5) shares of common stock into one(1) share. The figures for basic and diluted earnings (loss) per share attributable to Hitachi, Ltd. stockholders arecalculated on the assumption that the Company conducted this share consolidation at the beginning of the fiscal year
ended March 31, 2018.
2. Description of Business
There were no material changes in principal businesses of Hitachi during the nine months ended December 31, 2018. The
Hitachi Group is comprised of the Company, 840 consolidated subsidiaries, and 416 equity-method associates and joint-ventures.
Changes in principal affiliated companies during the nine months ended December 31, 2018 were as follows.
・ Hitachi Information & Telecommunication Systems Global Holding Corporation in the Information & Telecommunication
Systems segment changed its company name to Hitachi Global Digital Holdings Corporation on April 1, 2018.
・ The Company transferred all shares of Hitachi Kokusai Electric Inc. stock owned by the Company on May 31, 2018, andthen Hitachi Kokusai Electric Inc. transferred its semiconductor manufacturing equipment business to HKE Holdings K.K.
Subsequently, the Company partially re-acquired shares of Hitachi Kokusai Electric Inc. stock on June 4, 2018. As a resultof these transactions, Hitachi Kokusai Electric Inc. in the Electronic Systems & Equipment segment turned into an equitymethod associate of the Company and belongs in the Social Infrastructure & Industrial Systems segment.

1II. Business Overview
1. Risk Factors
There were no new risk factors recognized during the nine months ended December 31, 2018.
There were no material changes in the risk factors stated in the Annual Securities Report for the 149th business term
pursuant to the Financial Instruments and Exchange Act of Japan.
2. Management’s Discussion and Analysis of Consolidated Financial Condition, Results of operations and Cash Flows(1) Analysis of Results of Operations
Results of Operations
The results of operations in the nine months ended December 31, 2018 were as follows.
Revenues increased 2% to ¥6,782.9 billion, as compared with the nine months ended December 31, 2017. This increase wasdue mainly to the increased revenues from the railway systems business for Europe and the acquisition of the Sullair brand air
compressor business (Sullair business) in July 2017 in the Social Infrastructure & Industrial Systems segment, higher revenues inthe High Functional Materials & Components segment owing to corporate acquisitions by Hitachi Chemical Company, Ltd. andHitachi Metals, Ltd., and increased revenues, mainly overseas, in the Construction Machinery segment.
Cost of sales increased 1% to ¥4,948.0 billion, as compared with the nine months ended December 31, 2017, and the ratio of
cost of sales to revenues was 73%, which was the same level as for the nine months ended December 31, 2017. Gross profit
increased 3% to ¥1,834.9 billion, as compared with the nine months ended December 31, 2017.
Selling, general and administrative expenses (“SG&A”) was ¥1,300.4 billion, which was the same level as for the ninemonths ended December 31, 2017, and the ratio of SG&A to revenues decreased 1% to 19%, as compared with the nine months
ended December 31, 2017.
Adjusted operating income (presented as revenues less cost of sales as well as selling, general and administrative expenses)
increased ¥59.9 billion to ¥534.5 billion, as compared with the nine months ended December 31, 2017, despite the lower profits
in the Automotive Systems segment, High Functional Materials & Components segment and Smart Life & Ecofriendly Systems
segment. This increase was due mainly to higher profits because of increased revenues and improved profitability in the
Information & Telecommunication Systems segment, Social Infrastructure & Industrial Systems segment and Construction
Machinery segment.
Other income increased ¥104.1 billion to ¥108.7 billion, as compared with the nine months ended December 31, 2017, due
mainly to gains on business reorganization and others by selling shares of Hitachi Kokusai Electric Inc. stock and a part of sharesof Agility Trains West (Holdings) Limited stock for the railway systems business. Other expenses increased ¥307.9 billion to¥360.6 billion, as compared with the nine months ended December 31, 2017, due mainly to impairment losses recognized as theresult of the suspension of the UK nuclear power stations construction project in the power and energy business.
Financial income (excluding interest income) increased ¥7.2 billion to ¥14.3 billion and financial expenses (excludinginterest charges) decreased ¥4.2 billion to ¥2.0 billion, as compared with the nine months ended December 31, 2017,
respectively.
Share of profits of investments accounted for using the equity method decreased ¥34.9 billion to ¥10.4 billion, as comparedwith the nine months ended December 31, 2017.
EBIT (earnings before interest and taxes, which is presented as income from continuing operations, before income taxes lessinterest income plus interest charges) decreased ¥167.3 billion to ¥305.4 billion, as compared with the nine months ended
December 31, 2017, despite the increase in adjusted operating income and posting of gains from sale of shares of Hitachi
Kokusai Electric Inc. stock and a part of shares of Agility Trains West (Holdings) Limited stock. The decrease was due mainly tothe recognition of impairment losses for the suspension of the UK nuclear power stations construction project.
Interest income increased ¥5.8 billion to ¥16.7 billion and interest charges decreased ¥0.1 billion to ¥15.4 billion, as
compared with the nine months ended December 31, 2017, respectively.
Income from continuing operations, before income taxes decreased ¥161.3 billion to ¥306.7 billion, as compared with thenine months ended December 31, 2017.
Income taxes increased ¥21.0 billion to ¥137.5 billion, as compared with the nine months ended December 31, 2017.
Income (loss) from discontinued operations was net loss of ¥4.4 billion for the nine months ended December 31, 2018, ascompared with net income of ¥98 million for the nine months ended December 31, 2017.
Net income decreased ¥186.9 billion to ¥164.8 billion, as compared with the nine months ended December 31, 2017.
Net income attributable to non-controlling interests decreased ¥11.0 billion to ¥82.1 billion, as compared with the ninemonths ended December 31, 2017.
As a result of the foregoing, net income attributable to Hitachi, Ltd. stockholders decreased ¥175.9 billion to ¥82.6 billion,
as compared with the nine months ended December 31, 2017.
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 3% to ¥1,450.8 billion, as compared with the nine months ended December 31, 2017, due mainly tohigher revenues from system integration business, despite the effect of transfer of a subsidiary operating communication network
equipment business.
2

Adjusted operating income increased ¥38.7 billion to ¥157.0 billion, as compared with the nine months ended December 31,
2017, due mainly to improved profitability in system integration business and IT platform & products business.
EBIT increased ¥60.5 billion to ¥164.9 billion, as compared with the nine months ended December 31, 2017, due mainly tothe increased adjusted operating income and posting of gains on sales of land formerly used as production site fortelecommunication network products.
(Social Infrastructure & Industrial Systems)
Revenues increased 5% to ¥1,698.2 billion, as compared with the nine months ended December 31, 2017, due mainly torevenue increase in railway systems business for Europe and that in industrial products business owing to the acquisition of aircompressor business with Sullair brand (Sullair Business).
Adjusted operating income increased ¥34.2 billion to ¥97.7 billion, as compared with the nine months ended December 31,
2017, due mainly to revenue increase in railway systems business and industrial products business, and improved profitability inbusiness for industry & distribution field and industrial products business.
EBIT was net loss of ¥153.7 billion for the nine months ended December 31, 2018, as compared with net earnings of ¥57.5
billion for the nine months ended December 31, 2017, despite the increased adjusted operating income and posting of gains on
business reorganization and others for partial sales of shares of Agility Trains West (Holdings) Limited stock. The decrease wasdue mainly to impairment losses recognized as the result of the suspension of the UK nuclear power stations construction project.
(Electronic Systems & Equipment)
Revenues decreased 9% to ¥693.0 billion, as compared with the nine months ended December 31, 2017, despite increased
revenues at Hitachi High-Technologies Corporation owing to higher sales of clinical analyzers and semi-conducter processing
equipment and increased revenues in healthcare business owing to higher sales of radiation therapy systems. The decrease wasdue mainly to conversion of Hitachi Kokusai Electric Inc. into an equity-method associate.
Adjusted operating income decreased ¥0.7 billion to ¥55.1 billion, as compared with the nine months ended December 31,
2017, due mainly to conversion of Hitachi Kokusai Electric Inc. into an equity-method associate, despite increased revenues at
Hitachi High-Technologies Corporation and in healthcare business.
EBIT decreased ¥4.7 billion to ¥51.9 billion, as compared with the nine months ended December 31, 2017.
(Construction Machinery)
Revenues increased 9% to ¥743.1 billion, as compared with the nine months ended December 31, 2017, due mainly toincreased sales of construction machinery in Asia-Pacific and North America.
Adjusted operating income increased ¥19.0 billion to ¥84.3 billion, as compared with the nine months ended December 31,
2017, due mainly to the increased revenues.
EBIT increased ¥9.6 billion to ¥80.1 billion, as compared with nine months ended December 31, 2017, due mainly to theincreased adjusted operating income, despite the effect of posting of exchange loss and structural reform expenses.
(High Functional Materials & Components)
Revenues increased 5% to ¥1,297.8 billion, as compared with the nine months ended December 31, 2017, due mainly to theeffect of corporate acquisition by Hitachi Chemical Company, Ltd. and Hitachi Metals, Ltd., and sales price rise linked to higher
raw material costs at Hitachi Metals, Ltd.
Adjusted operating income decreased ¥11.1 billion to ¥82.0 billion, as compared with the nine months ended December 31,
2017, due mainly to effects of changes in product mix and an increase in raw material costs at Hitachi Chemical Company, Ltd.,and decrease in demand for factory automation-related materials and materials for semiconductors and electronics products at
Hitachi Metals, Ltd.
EBIT decreased ¥12.5 billion to ¥72.6 billion, as compared with nine months ended December 31, 2017, due mainly to thedecreased adjusted operating income and posting of impairment losses at Hitachi Metals, Ltd.
(Automotive Systems)
Revenues decreased 2% to ¥726.8 billion, as compared with the nine months ended December 31, 2017, due mainly to sales
decrease in China and North America and lower sales of car information systems.
Adjusted operating income decreased ¥14.7 billion to ¥18.6 billion, as compared with the nine months ended December 31,
2017, due mainly to the decrease in revenues and deteriorated profitability in North America.
EBIT was net loss of ¥16.4 billion for the nine months ended December 31, 2018, as compared with net earnings of ¥30.1
billion for the nine months ended December 31, 2017, due mainly to the decreased adjusted operating income and posting ofstructural reform expenses.
(Smart Life & Ecofriendly Systems)
Revenues decreased 12% to ¥352.8 billion, as compared with the nine months ended December 31, 2017.
Adjusted operating income decreased ¥5.8 billion to ¥9.6 billion, as compared with the nine months ended December 31,
2017, due mainly to an increase in raw material price, the impact of foreign currency translation, and declines in prices of home
appliances in Japan.
3

EBIT decreased ¥6.2 billion to ¥18.3 billion, as compared with the nine months ended December 31, 2017, due mainly tothe decreased adjusted operating income.
(Others)
Revenues decreased 2% to ¥395.3 billion, as compared with the nine months ended December 31, 2017.
Adjusted operating income increased ¥6.1 billion to ¥22.0 billion, and EBIT increased ¥6.6 billion to ¥24.2 billion, as
compared with the nine months ended December 31, 2017, respectively.
Revenues by Market
Revenues in Japan increased 1% to ¥3,221.5 billion, as compared with the nine months ended December 31, 2017, due
mainly to increased revenues in the Information & Telecommunication Systems segment and High Functional Materials &Components segment.
Overseas revenues increased 2% to ¥3,561.4 billion, as compared with the nine months ended December 31, 2017, due
mainly to increased revenues in Europe, particularly in the Social Infrastructure & Industrial Systems segment due mainly to thesales growth in the railway systems business and increased revenues in North America mainly in the Social Infrastructure &Industrial Systems segment and Construction Machinery segment.
As a result, the ratio of overseas revenues to total revenues increased 1% to 53%, as compared with the nine months ended
December 31, 2017.
(2) Analysis of Financial Condition and Cash Flows
Liquidity and Capital Resources
During the nine months ended December 31, 2018, there were no major changes in the Company’s policies of maintaining
liquidity and ensuring funds, efforts for improvement in fund management efficiency, and ideas regarding funding sources andfundraising.
Cash Flows(Cash Flows from Operating Activities)
Net income in the nine months ended December 31, 2018 decreased by ¥186.9 billion, as compared with the nine months
ended December 31, 2017. Net cash inflow from a change in trade receivables and contract assets* decreased by ¥102.5 billion,
as compared with the nine months ended December 31, 2017. Net cash outflow from a change in trade payables and inventories
increased by ¥102.4 billion and ¥32.1 billion, respectively, as compared with the nine months ended December 31, 2017.
As a result of the foregoing, net cash provided by operating activities was ¥202.3 billion in the nine months ended December
31, 2018, a decrease of ¥270.8 billion, compared with the nine months ended December 31, 2017.
* Due to the implementation of IFRS 15, "change in trade receivables" is presented as "change in trade receivables and contract
assets" from the nine months ended December 31, 2018.
(Cash Flows from Investing Activities)
Net amount of investments related to property, plant and equipment** was ¥293.5 billion in the nine months ended
December 31, 2018. This net sum decreased by ¥4.4 billion compared with the nine months ended December 31, 2017. Proceedsfrom sale of investments in securities and other financial assets (including investments in subsidiaries and investments accounted
for using the equity method) in the nine months ended December 31, 2018 increased by ¥1.6 billion, as compared with the ninemonths ended December 31, 2017. Purchase of investments in securities and other financial assets (including investments in
subsidiaries and investments accounted for using the equity method) in the nine months ended December 31, 2018 decreased by¥123.9 billion, as compared with the nine months ended December 31, 2017, in which expenses related to acquiring Sullair
bussiness were paid.
As a result of the foregoing, net cash used in investing activities was ¥175.4 billion in the nine months ended December 31,
2018, a decrease of ¥138.7 billion compared with the nine months ended December 31, 2017.
** The sum of the purchase of property, plant and equipment and the purchase of intangible assets, less the proceeds from sale ofproperty, plant and equipment, and intangible assets.
(Cash Flows from Financing Activities)
Net cash inflow from a change in short-term debt in the nine months ended December 31, 2018 increased by ¥231.3 billion,
as compared with the nine months ended December 31, 2017. Net cash outflow related to long-term debt*** in nine months
ended December 31, 2018 decreased by ¥64.4 billion, as compared with the nine months ended December 31, 2017. Net cash
outflow related to purchase of shares of consolidated subsidiaries from non-controlling interests increased by ¥132.6 billion, due
mainly to the additional acquisition of shares of Ansaldo STS S.p.A.
As a result of the foregoing, net cash flows provided in financing activities was ¥3.8 billion in the nine months ended
December 31, 2018, as compared with ¥142.4 billion of net cash outflow in the nine months ended December 31, 2017.
*** The proceeds from long-term debt, less the payments on long-term debt
As a result of the foregoing, cash and cash equivalents as of December 31, 2018 was ¥708.7 billion, an increase of ¥10.7
billion from March 31, 2018. Free cash flows, the sum of cash flows from operating and investing activities, were an inflow of4¥26.8 billion in the nine months ended December 31, 2018, a decrease of ¥132.1 billion in the nine months ended December 31,
2017.
Assets, Liabilities and Equity
The following is an overview of Hitachi’s assets, liabilities and equity as of December 31, 2018.
Total assets were ¥9,693.4 billion, a decrease of ¥413.1 billion from March 31, 2018. This was due mainly to impairment
losses recognized owing to the suspension of the UK nuclear power stations construction project, the conversion of Hitachi
Kokusai Electric Inc. to an equity-method associate, and cash collection of trade payables.
Total interest-bearing debt, the sum of short-term debt and long-term debt, was ¥1,324.8 billion, an increase of ¥274.5
billion from March 31, 2018. This was due mainly to an increase in short-term debt.
Total Hitachi, Ltd. stockholders’ equity decreased by ¥135.7 billion from March 31, 2018, to ¥3,142.2 billion. The ratio of
total Hitachi, Ltd. stockholders’ equity to total assets was 32.4%, which was the same level as of March 31, 2018.
Non-controlling interests were ¥1,156.0 billion, a decrease of ¥77.5 billion from March 31, 2018.
Total equity was ¥4,298.3 billion, a decrease of ¥213.3 billion from March 31, 2018. The ratio of interest-bearing debt tototal equity was 0.31, as compared with 0.23 as of March 31, 2018.
(3) Management Policy
There were no material changes in Hitachi’s management policy during the nine months ended December 31, 2018.
(4) Challenges Hitachi Group Faces
1) Business and Financial Challenges Hitachi Group Faces
There were no material changes in Hitachi’s business strategy during the nine months ended December 31, 2018.
2) Fundamental Policy on the Conduct of Persons Influencing Decision on the Company’s Financial and Business Policies
The Group invests a great deal of business resources in fundamental research and in the development of market-leading
products and businesses that will bear fruit in the future, and realizing the benefits from these management policies requiresthat they be continued for a set period of time. For this purpose, the Company keeps its shareholders and investors wellinformed of not just the business results 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 and performance that can be brought
about through a change in management control, but it recognizes the necessity of determining the impact on company value
and the interests of all shareholders of the buying activities and buyout proposals of parties attempting to acquire a large shareof stock of the Company 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 specificthreat, neither does the Company intend to implement specified so-called anti-takeover measures in advance of the appearanceof such a party, but the Company does understand that it is one of the natural duties bestowed upon it by the shareholders andinvestors 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 share of the Company’s
stock. In particular, together with outside experts, the Company will evaluate the buyout proposal of the party and holdnegotiations with the buyer, and if the Company deems that said buyout will not maintain the Company’s value and is not in
the best interest of the shareholders, then the Company will quickly determine the necessity, content, etc., of specificcountermeasures and prepare to implement them. The same response will also be taken in the event a party attempts to acquirea large percentage of the shares of a Group company.

5(5) Research and Development
There were no material changes in the research and development of the Hitachi Group (the Company and consolidated
subsidiaries) stated in the Annual Securities Report for the 149th business term pursuant to the Financial Instruments andExchange Act of Japan. The Hitachi Group’s R&D expenditures in the nine months ended December 31, 2018 were ¥234.1
billion, 3.5% of revenues. A breakdown of R&D expenditures by segment is shown below.
(Billions of yen)Segment

Nine months ended
December 31, 2018

Information & Telecommunication Systems

34.6

Social Infrastructure & Industrial Systems

40.2

Electronic Systems & Equipment

32.7

Construction Machinery

18.0

High Functional Materials & Components

38.3

Automotive Systems

47.6

Smart Life & Ecofriendly Systems

5.9

Others0.4

Corporate Items (Head Office and others)

16.0

Total

234.1

(6) Property, Plant and Equipment
The Company decided to suspend the UK nuclear power stations construction project on January 17, 2019. Consequently,
impairment losses of ¥206.7 billion on the related assets of the project, including property, plant and equipment of Horizon
Nuclear Power Limited, were recognized in the Social Infrastructure & Industrial Systems segment for the nine months ended
December 31, 2018.
Details of impairment losses recognized for the project are described in “Condensed Quarterly Consolidated Financial
Statements －Notes to Condensed Quarterly Consolidated Financial Statements －(10) Other Income and Expenses.”(7) Forward-Looking Statements
Certain statements found in “2. Management’s Discussion and Analysis of Consolidated Financial Conditions, Operating
Results and Cash Flows” and other descriptions in this report 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 not directly relate to any historicalor current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar
expressions which indicate future events and 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 “forwardlooking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue relianceshould 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’s major 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 other materials, such as copper, steel,aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components;• the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses thepercentage-of-completion method to recognize revenue from sales;• credit conditions of Hitachi’s customers and suppliers;• fluctuations in product demand and industry capacity;6• uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in productdemand, exchange rates and/or price of raw materials or shortages of materials, parts and components;• uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely
and cost-effective basis and to achieve market acceptance for such products;• 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 divesting or 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 of countries where Hitachi
conducts business, particularly Japan, Asia, the United States and Europe, including, without limitation, direct or indirect
restrictions by other nations on imports and differences in commercial and business customs including, without limitation,
contract terms and conditions 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 of which 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 and tsunamis, 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 benefit-related costs.
The factors listed above are not all-inclusive and are in addition to other factors contained elsewhere in this report and inother materials published by Hitachi.
3. Material Agreements, etc.
(1) Absorption-type Company Split
On October 25, 2018, the Company decided to transfer its electrical systems business and machinery systems business to
Hitachi Industrial Products, Ltd. by way of an absorption-type company split (the “Company Split”) in order to strengthen the
product business and executed an absorption-type company split agreement with Hitachi Industrial Products, Ltd. on February 6,
2019.
The details of the Company Split are as follows.
1) Company Split Method
This is an absorption-type company split under which the Company is the transferring company and Hitachi Industrial
Products, Ltd. is the successor company.
2) Effective Date of the Company Split
April 1, 20193) Assets and Liabilities Transferred to the Successor Company (As of April 1, 2019 (forecast))
Assets:¥68.5 billion
Liabilities: ¥37.0 billion
4) Details of Allotments
Hitachi Industrial Products, Ltd., the successor company, will issue 199,200 shares of common stock on April 1, 2019 andallocate all the shares to the Company, the transferring company.
5) Basis of Calculation for Allotment
As the Company holds all of issued shares of Hitachi Industrial Products, Ltd., it is considered appropriate that Hitachi
Industrial Products, Ltd. issues 199,200 shares of common stock and allots all the shares to the Company.

76) Profile of the Successor Company after the Company Split
Name

Hitachi Industrial Products, Ltd.

Head office

3 Kanda Neribei-cho, Chiyoda-ku, Tokyo

Representative

President Keizo Kobayashi

Capital¥10.0 billion
Development, manufacture and sales of products and provision

Businessof services in the electrical system business and the machinery
system business(2) Business Acquisition
On December 17, 2018, the Company decided to acquire the power grids business from ABB Ltd (ABB) in order tostrengthen and expand energy solutions business globally and executed an agreement regarding the acquisition with ABB. The
Company plans to acquire an 80.1% stake in the company operating the power grids business that will be divested by ABB andmake it a consolidated subsidiary of the Company in the first half of 2020. The amount of consideration is expected to beapproximately USD 6.4 billion (approximately ¥710.4 billion).
III. Information on the Company
1. Information on the Company’s Stock, etc.
(1) Total number of shares, etc.
1) Total number of shares

Total number of shares authorized to
be issued (shares)

Class
Common stock

2,000,000,000

Total

2,000,000,000(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 total shares authorized to be issued by the Company decreased 8,000,000,000 sharesand became 2,000,000,000 shares on October 1, 2018.
2) Issued shares

Class

Number of sharesissued as of the end of
third quarter (shares)(December 31, 2018)

Number of sharesissued as of thefiling date (shares)(Note 1, 2)(February 13, 2019)

Commonstock

966,692,677

966,692,677

Total

966,692,677

966,692,677

Stock exchange on which
the Company is listed

Tokyo, Nagoya-

Description

The number of shares
per one unit of sharesis 100 shares.
(Note 3)-(Notes) 1. The "Number of shares issued as of the filing date" does not include shares issued upon exercise of stock acquisition rightsfrom February 1, 2019 to the filing date.
2. On October 1, 2018, share consolidation was completed and the total number of issued shares became 966,692,677.
3. The number of shares per one unit changed from 1,000 shares to 100 shares on October 1, 2018.
(2) Information on the stock acquisition rights, etc.
1) Details of stock option plans
Not applicable.
2) Details of other stock acquisition rights, etc.
Not applicable.
(3) Information on moving strike convertible bonds, etc.
Not applicable.
8(4) Changes in the total number of issued shares and the amount of common stock and other

Date

From October 1, 2018
to December 31, 2018

Change in
the total
number ofissued shares(shares)

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)(3,866,770,710)

966,692,677－

458,790－

176,757(Note) As the result of the share consolidation on October 1, 2018, the total number of issued shares decreased 3,866,770,710 andbecame 966,692,677.
(5) Major shareholders
Not applicable.
(6) Information on voting rights
1) Issued sharesClassification

Number 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.)(As of September 30, 2018)
Number of voting
Description
rights

－

－

－

－

－

－

－

－

－

－

－

Common stock

5,446,000

Shares with full voting right (others)

Common stock

4,807,648,000

Shares less than one unit

Common stock

20,369,387－－

Number of issued shares

4,833,463,387－－

Total number of voting rights－

4,807,648

4,807,648－－(Notes) 1. 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 not transferred titles) and 26 voting
rights for those shares.
2. On October 1, 2018, share consolidation was completed and the total number of issued shares became 966,692,677.
3. The number of shares per one unit changed from 1,000 shares to 100 shares on October 1, 2018.

92) Treasury stock, etc.

(As of September 30, 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
9-11, Shinkawa 2-chome,
Chuo-ku, Tokyo
1-11, Oroshishinmachi 3chome, Higashi-ku, Niigatashi, Niigata

5,280,000－

5,280,000

0.11

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

5,446,000－

5,446,000

0.11

5-3, Takinogawa 5-chome,
Kita-ku, Tokyo
3268, Nagaoka,
Ibarakimachi,
Higashiibaraki-gun, Ibaraki
4-1, Koishikawa 5-chome,
Bunkyo-ku, Tokyo－

2. Changes in Senior Management
Changes in senior managements from the filing date of the Annual Securities Report for the 149th business term to
December 31, 2018 were as follows.
1) Resignation [Effective November 22, 2018]
Position
Director

Responsibility

Name

Member of Audit Committee Kazuyuki Tanaka

2) The Number of Men and Women and Women's Percentage after Changes in Senior Management
Men: 42 persons, Women: 2 persons(Women’s percentage to total number of Directors and Executive Officers: 5%)
IV. Financial Information
Refer to the condensed quarterly consolidated financial statements incorporated in this Quarterly Report.

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

10Condensed Quarterly Consolidated Financial Statements
Condensed Quarterly Consolidated Statement of Financial Position
Millions of yen
AssetsCurrent assets
Cash and cash equivalents
Trade receivables (notes 3 and 6)
Trade receivables and contract assets (notes 3 and 6)
Inventories
Investments in securities and other financial assets (notes 3 and 7)
Other current assets
Total current assets
Non-current assets
Investments accounted for using the equity method
Investments in securities and other financial assets (notes 3 and 7)
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Short-term debt
Current portion of long-term debt (note 7)
Other financial liabilities (notes 3 and 7)
Trade payables
Accrued expenses
Advances received (note 3)
Contract liabilities (note 3)
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt (note 7)
Retirement and severance benefits
Other non-current liabilities (note 3)
Total non-current liabilities
Total liabilities
EquityHitachi, Ltd. stockholders’ equity
Common stock
Capital surplus
Retained earnings (notes 3 and 8)
Accumulated other comprehensive income
Treasury stock, at cost
Total Hitachi, Ltd. stockholders’ equity
Non-controlling interests

December 31, 2018

March 31, 2018708,745
2,212,661
1,586,428
321,812250,177

697,964
2,501,414
1,375,232
373,324
203,866

5,079,823

5,151,800

735,139564,530
1,948,086
990,261
375,653

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

4,613,669

4,954,803

9,693,492

10,106,603

397,391
177,789
261,324
1,354,388
571,403606,306
376,043

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

3,744,644

3,795,394

749,640
538,947
361,890811,664
575,156
412,718

1,650,477

1,799,538

5,395,121

5,594,932

458,790
489,060
2,134,435
63,888(3,893)458,790575,809
2,105,395
142,167(4,137)

3,142,280

3,278,024

1,156,091

1,233,647

Total equity

4,298,371

4,511,671

Total liabilities and equity

9,693,492

10,106,603

See accompanying notes to condensed quarterly consolidated financial statements.

F-1

Condensed Quarterly Consolidated Statement of Profit or Loss
Nine months ended December 31, 2018 and 2017
Revenues (notes 3 and 9)
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income (note 10)
Other expenses (note 10)
Financial income (note 11)
Financial expenses (note 11)
Share of profits (losses) of investments accounted for using the equity method
EBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income from continuing operations, before income taxes
Income taxes
Income from continuing operations
Income (loss) from discontinued operations (note 12)
Net income
Net income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
Earnings per share from continuing operations,
attributable to Hitachi, Ltd. stockholders (note 13)
Basic
DilutedEarnings per share attributable to Hitachi, Ltd. stockholders (note 13)
Basic
DilutedMillions of yen
2018
6,782,969(4,948,029)
1,834,940(1,300,400)
108,784(360,615)
14,349(2,077)
10,473
305,454
16,711(15,404)
306,761(137,541)
169,220(4,404)
164,8162017
6,674,028(4,896,973)
1,777,055(1,302,504)
4,613(52,624)
7,142(6,302)
45,469472,849
10,821(15,518)
468,152(116,464)
351,68898351,786

82,627
82,189258,582
93,204

90.13
90.06

Yen
267.70267.45

85.57
85.50

267.80267.55Condensed Quarterly Consolidated Statement of Comprehensive Income
Nine months ended December 31, 2018 and 2017

Millions of yen

Net income

2018
164,8162017
351,786

Other comprehensive income (OCI)
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(60,405)(1,488)(61,893)

13,632(505)
1,438
14,565

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(24,881)(1,855)20,192(6,544)

82,3381,426(12)83,752(68,437)
96,37998,317450,103

25,247
71,132

324,628
125,475

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

F-2

Condensed Quarterly Consolidated Statement of Profit or Loss
Three months ended December 31, 2018 and 2017
Revenues (note 3)
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income
Other expenses
Financial income
Financial expenses
Share of profits (losses) of investments accounted for using the equity method
EBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income (loss) from continuing operations, before income taxes
Income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)
Net income (loss) attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
Earnings (loss) per share from continuing operations,
attributable to Hitachi, Ltd. stockholders (note 13)
Basic
DilutedEarnings (loss) per share attributable to Hitachi, Ltd. stockholders (note 13)
Basic
DilutedMillions of yen
2018
2,291,135(1,668,547)
622,588(432,638)
73,202(316,279)
858(1,918)7,307(46,880)
6,473(5,752)(46,159)(44,790)(90,949)(401)(91,350)2017
2,297,561(1,691,374)
606,187(434,879)
2,604(11,685)
2,277(12,124)
23,977
176,357
4,097(5,364)
175,090(43,609)
131,481
1,372
132,853(110,368)
19,01897,96934,884(113.88)(113.88)

Yen
100.0499.95(114.30)(114.30)

101.46101.37

Condensed Quarterly Consolidated Statement of Comprehensive Income
Three months ended December 31, 2018 and 2017

Millions of yen

Net income (loss)

2018(91,350)

2017
132,853

Other comprehensive income (OCI)
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(36,655)(1,909)(38,564)

7,210
(505)
588
7,293

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(59,269)
1,376
9,550
(48,343)

25,8792,098(9,496)18,481(86,907)(178,257)

25,774
158,627(179,221)964

112,368
46,259Other comprehensive income (OCI)
Comprehensive income(loss)
Comprehensive income(loss) attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
See accompanying notes to condensed quarterly consolidated financial statements.

F-3

Condensed Quarterly Consolidated Statement of Changes in Equity
Nine months ended December 31, 2018

Millions of yen
2018

Commonstock

Capitalsurplus(note 5)Retainedearnings(note 8)

Accumulated
othercomprehensive
income458,790575,809

2,105,395

142,167

Balance at beginning of period
Cumulative effects of changes inaccounting policies (note 3)

Treasurystock,
at cost(4,137)

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

Total equity

3,278,024

1,233,647

4,511,671

-

-

3,209

-

-

3,209

(1,406)

1,803

458,790575,809

2,108,604

142,167(4,137)

3,281,233

1,232,241

4,513,474

Reclassified into retained earnings--

20,450(20,450)

-

-

-

-

Net income--

82,627--

82,627

82,189164,816

Other comprehensive loss

-

-

-

(57,380)-(57,380)(11,057)(68,437)

Dividends to Hitachi, Ltd. stockholders--(77,246)--(77,246)-(77,246)

Restated balance
Changes in equity

Dividends to non-controlling interests

-

-

-

-

-

-

(37,940)(37,940)

Acquisition of treasury stock

-

-

-

-

(198)

(198)

-

(198)

Sales of treasury stock

-

(237)

-

-

442

205

-

205

Changes in non-controlling interests-(86,512)

-

(449)

-

(86,961)(109,342)(196,303)

Total changes in equity-(86,749)

25,831(78,279)244(138,953)(76,150)(215,103)

Balance at end of period

458,790

489,060

2,134,435

63,888(3,893)

3,142,280

1,156,091

4,298,371

Nine months ended December 31, 2017

Millions of yen
2017
Accumulated
othercomprehensive
incomeNoncontrollinginterests

Total equity

Commonstock

Capitalsurplus458,790

577,573

1,793,570

141,068(3,916)

2,967,085

1,129,910

4,096,995

Reclassified into retained earnings--

11,048(11,048)

-

-

-

-

Net income--

258,582--

258,582

93,204

351,786

Other comprehensive income

-

-

-

66,046-

66,04632,271

98,317

Balance at beginning of period

Treasurystock,
at cost

Total
Hitachi, Ltd.
stockholders’equityRetainedearnings(note 8)Changes in equity

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

Dividends to non-controlling interests

-

-

-

-

-

-

(31,427)(31,427)

Acquisition of treasury stock

-

-

-

-

(232)

(232)

-

(232)

Sales of treasury stock

-

(24)

-

-

56

32

-

32

Changes in non-controlling interests-(1,575)-(1,839)-(3,414)

4,972

1,558

Total changes in equity-(1,599)202,039

53,159(176)

253,423

99,020352,443

Balance at end of period

458,790575,974

1,995,609

194,227(4,092)3,220,508

1,228,930

4,449,438

See accompanying notes to condensed quarterly consolidated financial statements.

F-4

Condensed Quarterly Consolidated Statement of Cash flows
Nine months ended December 31, 2018 and 2017

Millions of yen
2018

2017

164,816

351,786

270,807322,335
134,935(10,473)(4,872)(82,376)(24,139)
266,479(353,866)(40,865)(101,345)(23,916)(162,777)(1,441)

271,944
2,297
116,473(45,469)(2,200)(2,746)73
369,035(321,693)(28,153)
1,146(20,484)(36,370)(9,984)353,30215,806
16,552(17,099)(166,210)

645,655
10,815
16,695(16,746)(183,209)

202,351473,210(293,081)(60,830)
60,349(253,310)(62,860)
18,172(41,149)(165,074)

161,237(2,021)

159,572(10,738)(175,495)(314,238)

278,748
84,724(109,023)
4,949(77,264)(39,363)(198)
205(138,894)(27)

47,405
137,479(226,223)
3,953(67,614)(31,126)(232)
37(6,234)
205
(63)

3,857

(142,413)

Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents(19,932)

29,523

10,781

46,082

Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

697,964

765,242

708,745

811,324

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) loss on business reorganization and others(Gain) loss on sale of property, plant and equipment
Change in trade receivables
Change in trade receivables and contract assets
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:
Purchase of property, plant and equipment (note 2)
Purchase of intangible assets (note 2)
Proceeds from sale of property, plant and equipment, and intangible assets (note 2)
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:
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

See accompanying notes to condensed quarterly consolidated financial statements.

F-5

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
(1) Nature of Operations
Hitachi, Ltd. (the Company) is a corporation domiciled in Japan, whose shares are listed on the Tokyo Stock Exchange. The
condensed quarterly consolidated financial statements of the Company as of and for the nine months ended December 31, 2018
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 informationand telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction
machinery, high functional materials and components, automotive systems, smart life and ecofriendly 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 Quarterly Consolidated
Financial Statements (Cabinet Office Ordinance No.64 of 2007), the condensed quarterly consolidated financial statements of theCompany have been prepared in accordance with International Accounting Standards (IAS) 34 “Interim Financial Reporting,” aspermitted by the provision of Article 93 of the Ordinance. They do not include all the information and disclosures required for acomplete set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS), and should
be read in conjunction with the financial statements and notes included in the Company’s annual consolidated financial statements
for the year ended March 31, 2018.
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 condensed quarterly
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.
Judgments, estimates and assumptions that could have a material effect on these condensed quarterly consolidated financial
statements are basically the same as those disclosed in the Company’s annual consolidated financial statements for the year ended
March 31, 2018.
Regarding the condensed quarterly consolidated statement of cash flows, changes in presentation have been made effective thefiscal year beginning April 1, 2018 due to materiality of some cash-flow items as a result of business reorganization and others.
“Purchase of leased assets”, which was separately presented, has been included in “Purchase of property, plant and equipment” or“Purchase of intangible assets”. “Proceeds from sale of leased assets”, which were separately presented, have been included in“Proceeds from sale of property, plant and equipment, and intangible assets”. The condensed quarterly consolidated statement ofcash flows for the nine months ended December 31, 2017 has been reclassified in order to reflect these changes in presentation.
As a result, regarding the condensed quarterly consolidated statement of cash flows for the nine months ended December 31, 2017,“Purchase of leased assets” of ¥2,205 million and ¥448 million has been reclassified as “Purchase of property, plant andequipment” and “Purchase of intangible assets” respectively. In addition, “Proceeds from sale of leased assets” of ¥7,118 million
have been reclassified as “Proceeds from sale of property, plant and equipment, and intangible assets”.

F-6Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(3) Significant Accounting Policies
Significant accounting policies adopted in preparation of the condensed quarterly consolidated financial statements are consistent
with those used in the preparation of the Company’s annual consolidated financial statements for the year ended March 31, 2018,
except for the following matters.
(a) Financial Instruments(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
the contractual rights to receive cash flows from the financial assets are transferred in transactions where the risks andeconomic rewards of owning the financial assets are substantially transferred. In transactions where the risks and economic
rewards of owning the financial assets are neither substantially transferred nor retained, the Company continues torecognize the financial assets to the extent of its continuing involvement and derecognizes such financial assets only if its
control is transferred.
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
and interest 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
are recognized 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
On a regular basis, but no less frequently than at the end of each quarterly reporting period, the Company evaluatesallowance for doubtful receivables based on expected credit losses on accounts receivable, contract assets, and otherreceivables depending on whether the credit risk has increased significantly since initial recognition.
If the credit risk has increased significantly since initial recognition, the allowance for doubtful receivables is measured at
the amount equal to the lifetime expected credit losses on the financial assets. If the credit risk has not increased
significantly since initial recognition, the allowance for doubtful receivables is measured at the amount equal to 12-month
expected credit losses. However, for accounts receivable, contract assets, and lease receivables, allowance for doubtfulreceivables is always measured at the amount equal to the lifetime expected credit losses.

F-7

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
Whether credit risk has increased significantly is determined based on changes in the risk of default. Default is defined as
the state in which a critical problem with debtor’s payment of contractual cash flows has been identified and there are no
reasonable expectations of recovering the financial assets in its entirety or a portion. To determine whether there have been
any changes in the risk of default, external credit ratings, past due information and other factors are mainly taken into
consideration.
Expected credit losses are measured by taking the probability weighted average of the discounted present values ofdifferences between the total amount of the contractual cash flows and the total amount of cash flows expected to bereceived in the future from the financial assets. If one or more events occur, such as overdue payments, extended payment
terms, negative evaluation by third party credit rating agencies, and/or a deterioration in financial position and operating
results, including capital deficit, the financial assets are individually assessed as credit-impaired financial assets andexpected credit losses are measured based mainly on historical credit loss experience, future collectible amounts and otherfactors. The expected credit losses on the financial assets that are not credit-impaired are measured through collective
assessment based mainly on provision rates depending on historical credit loss experience adjusted by the current and future
economic situation and other factors, if necessary.
For the expected credit losses on accounts receivable, contract assets, and other receivables, the allowances for doubtfulreceivables are recorded instead of directly reducing the carrying amounts. Changes in expected credit losses are recognizedin profit or loss as impairment losses and are included in Selling, general and administrative expenses in the consolidated
statement of profit or loss. For financial assets, after all means of collection have been exhausted and the potential forrecovery is considered remote, it is determined that there are no longer any reasonable expectations of recovering thefinancial assets in their entirety or a portion and the carrying amounts are generally written off.
(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 theliability 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
are both recorded in profit or loss if the hedge is considered 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 inother comprehensive income (OCI) if the hedge is considered effective. This treatment continues until profit or loss isaffected by the variability of cash flows or the unrecognized firm commitment of the designated hedged item, at which
point changes in fair value of the derivative are recognized in profit or loss. If a non-financial asset or a non-financial
liability is recognized due to a hedged forecast transaction, the changes in the fair value of the derivative recognized in
OCI are included directly in the acquisition cost or other carrying amount of the asset or liability at which point the asset
or liability is recognized.

F-8

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The Company follows the documentation requirements as prescribed by IFRS 9 “Financial Instruments” (amended in July2014), which includes the risk management objective and strategy for undertaking various hedge transactions. In addition, aformal assessment is made at the hedge’s inception and subsequently on a periodic basis, as to whether the derivative usedin hedging activities is effective in offsetting changes in fair values 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.
(v) Changes in Accounting Policies
While the Company had historically adopted IFRS 9 (issued in November 2009, amended in October 2010), it has adopted
IFRS 9 (amended in July 2014) from the beginning of the fiscal year ending March 31, 2019. IFRS 9 (amended in July2014) amends guidance for hedge accounting and classification and measurement of financial instruments and introduces
impairment guidance based on expected credit losses on financial assets. As a transitional measure upon the adoption of
IFRS 9 (amended in July 2014), the Company applies this standard and recognizes the cumulative effect of the initial
application as an adjustment to the beginning balance of retained earnings for the current fiscal year. The effect of adopting
this standard on the Company’s financial position and operating results is not material.
(b) Revenue Recognitions
The Company recognizes revenue in accordance with the following five-step approach.
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation
The Company offers multiple solutions to meet its customers’ needs which may involve the delivery or performance ofmultiple elements, such as goods or services. When the Company enters into multiple contracts for providing the goods orservices, related contracts are combined based on interdependencies between each contract’s consideration and the time theCompany entered into such contracts, and the transaction price is allocated to each performance obligation on the basis of therelative stand-alone selling prices of each distinct good or service for the purpose of recognizing revenue.
In estimating the stand-alone selling price, the Company considers various factors such as market conditions, entity-specificfactors and information about the customer or class of customer.
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferringpromised goods or services to a customer. Variable consideration, such as discounts and rebates, is included in the transaction
price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will
not occur when the uncertainty associated with the variable consideration is subsequently resolved. The promised amount ofconsideration does not include a significant financing component.
For a performance obligation satisfied over time, the Company measures its progress towards complete satisfaction of that
performance obligation on the basis of output or input methods in consideration of the nature of the goods and services for the
purpose of recognizing revenue. When the Company cannot reasonably measure the progress, revenue is recognized only to theextent of the costs incurred.
The Company recognizes the incremental costs of obtaining a contract with a customer and the costs directly related tofulfilling a contract as an asset if those costs are expected to be recovered, and those assets are amortized based on the methods
used to recognize revenue of the goods or services to which the assets relate. The Company recognizes the incremental costs ofobtaining a contract as an expense when incurred if the amortization period of the assets is less than one year.
Changes in Accounting Policies
From the beginning of the fiscal year ending March 31, 2019, the Company has adopted IFRS 15 “Revenue from Contracts
with Customers.” IFRS 15 provides a comprehensive framework for recognizing revenue. In accordance with the five-step
approach, revenue is measured based on changes in assets and liabilities arising from contracts with customers and recognizedwhen control over goods or services is transferred to the customer.
As a transitional measure upon the adoption of IFRS 15, the Company applies this standard retrospectively and recognizes the
cumulative effect of the initial application as an adjustment to the beginning balance of retained earnings for the current fiscal
year.

F-9

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
Primarily in a transaction whereby the Company provides a customer with a combination of multiple elements such as goods,
services or right to use assets, the transaction price is allocated to each performance obligation based on the stand-alone selling
price then revenue is recognized in accordance with the five-step approach even if no fair value is available. However, theeffect of adopting this standard on the Company’s financial position as of December 31, 2018 and operating results for the ninemonths then ended is not material, compared with the application of the previous accounting standard.
In addition, due to the application of IFRS 15, unbilled receivables, which were previously included in Trade receivables, havebeen reclassified as contract assets, and billed receivables have been classified as trade receivables and presented as Trade
receivables and contract assets. Advances received from customers, which were previously presented as Advances received, arepresented as Contract liabilities.
.(c) Income Taxes
Income taxes for the nine months ended December 31, 2018 are computed using the estimated annual effective tax rate.
(4) Segment Information
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, Telecommunication & 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

F-10Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The following tables show business segment information for the nine months ended December 31, 2018 and 2017.
Revenues from Outside Customers
Millions of yen
2018

2017

Information & Telecommunication Systems

1,361,333

1,320,736

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

1,547,312
615,917

1,465,037
683,546

Construction Machinery
High Functional Materials & Components

742,898
1,256,425

683,503
1,191,538

721,254329,572

735,479
377,093

Automotive Systems
Smart Life & Ecofriendly Systems
Others

199,450

212,199

Subtotal

6,774,161

6,669,131

Corporate items
Total

8,808

4,897

6,782,969

6,674,028

Revenues from Intersegment Transactions
Millions of yen
2018

2017

Information & Telecommunication Systems
Social Infrastructure & Industrial Systems

89,497150,943

92,312
157,913

Electronic Systems & Equipment
Construction Machinery

77,115294

79,714399

High Functional Materials & Components
Automotive Systems

41,472
5,617

39,361
2,936

Smart Life & Ecofriendly Systems
Others23,324
195,921

22,464
192,984

Subtotal
Corporate items and Eliminations

584,183(584,183)

588,083(588,083)

-

-

Total
Total Revenues

Millions of yen
2018

2017

Information & Telecommunication Systems

1,450,830

1,413,048

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

1,698,255
693,032

1,622,950
763,260

Construction Machinery
High Functional Materials & Components

743,192
1,297,897

683,9021,230,899

726,871352,896

738,415
399,557

Automotive Systems
Smart Life & Ecofriendly Systems
Others395,371405,183

Subtotal

7,358,344

7,257,214

Corporate items and Eliminations(575,375)(583,186)

Total

6,782,969

6,674,028

F-11

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
Segment Profit (Loss)
Millions of yen
2018

2017

Information & Telecommunication Systems

164,920

104,419

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment(153,773)
51,94257,52656,677

Construction Machinery
High Functional Materials & Components

80,15372,64470,51885,204

Automotive Systems
Smart Life & Ecofriendly Systems(16,485)
18,34630,122
24,623

Others

24,267

17,577

Subtotal

242,014446,666

Corporate items and Eliminations

63,44026,183

Total
Interest income

305,454
16,711

472,849
10,821

Interest charges(15,404)(15,518)

Income from continuing operations, before income taxes

306,761

468,152

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 (loss)
on business reorganization and share of profits (losses) of investments accounted for using the equity method, and others.
(5) Business Acquisitions and Divestitures
The following are the main Business Acquisitions and Divestitures for the nine months ended December 31, 2018, including theperiod up to the approval date of the condensed quarterly consolidated financial statements.
(a) Acquisition of ABB's power grids business
On December 17, 2018, the Company decided to acquire the power grids business from ABB Ltd (ABB) and signed anagreement with ABB in order to strengthen and expand energy solutions business globally. The Company plans to acquire an
80.1% stake in the company operating the power grids business that will be divested by ABB in the first half of 2020 and makeit a consolidated subsidiary of the Company. The consideration is expected to be approximately USD 6.4 billion(approximately ¥710.4 billion).
(b) Additional acquisition of shares of Ansaldo STS S.p.A. (STS)On October 29, 2018, the Company and Hitachi Rail Italy Investments S.r.l. (HRII), a consolidated subsidiary of the Company
in the Social Infrastructure & Industrial Systems segment, signed an agreement with Elliott International, L.P., Elliott
Associates, L.P. and The Liverpool Limited Partnership (together, “Elliott Selling Entities”), and Elliott Management
Corporation for HRII to acquire the 31.8% stake in STS, a consolidated subsidiary of the Company in the Social Infrastructure& Industrial Systems segment, owned by Elliott Selling Entities. On November 2, 2018, the transaction was settled.
Furthermore, HRII later acquired additional outstanding issued shares of STS. As a result, during the nine months ended
December 31, 2018, the ownership ratio of shares of STS increased from 50.8% to 92.5%. The total consideration paid was
EUR 1,060 million (¥135,335 million), and the Company recognized a decrease in the total of capital surplus and noncontrolling interest by the same amount during the nine months ended December 31, 2018.
Additionally, HRII subsequently acquired all remaining outstanding issued shares of STS, and as a result, the ownership ratioof shares of STS increased to 100% on January 30, 2019.

F-12

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(c) Sale of all shares of Clarion Co., Ltd. (Clarion)
On October 26, 2018, the Company signed a tender offer agreement with Hennape Six SAS (Hennape), a subsidiary ofFaurecia S.A. (Faurecia), and Faurecia under which the Company agrees to tender all shares of common stock in Clarion heldby the Company, in response to a tender offer to be carried out by Hennape for the shares of common stock of Clarion, a
consolidated subsidiary of the Company in the Automotive Systems segment. Hennape commenced the tender offer on January
30, 2019, and the consideration to be received by the Company will be approximately ¥89.9 billion. The tender offer has notbeen completed as of the approval date of the condensed quarterly consolidated financial statements.
Assuming the tender offer is completed successfully, it is expected that the Company's ownership ratio of shares of Clarion will
decrease from 63.8% to 0%, and Clarion will be deconsolidated. An expected gain on the sale of shares of Clarion in theamount of approximately ¥65 billion will be recognized in Other income in the consolidated statement of profit or loss.
On December 26, 2018, Faurecia S.A. changed its name to Faurecia S.E..
(d) Acquisition of Yungtay Engineering Co., Ltd. (Yungtay)
On October 26, 2018, the Company decided to conduct a tender offer to acquire all issued shares of Yungtay, an elevator andescalator company in Taiwan to enrich its product lineup and expand its new installation business with improved costcompetitiveness in China and Asia and improve its profitability through increasing the number of maintenance units, andsubmitted a binding letter to Yungtay. Additionally, the Company signed a contract with Yungtay’s Honorary Chairman who isa member of its founding family, whereby he will tender his 4.3% of shares in Yungtay, in the case of the tender offer by theCompany. On January 17, 2019, the Company commenced the tender offer at a price of TWD 60.0 per share, through Hitachi
Elevator Taiwan Co., Ltd., a consolidated subsidiary of the Company in the Social Infrastructure & Industrial Systems
segment; however, the tender offer has not been completed as of the approval date of the condensed quarterly consolidated
financial statements.
Assuming the tender offer is completed successfully, Yungtay will become either a consolidated subsidiary or an equitymethod associate of the Company.
(e) 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. A gain on the sale of shares of Hitachi Kokusai in the amount of¥32,049 million was recognized in Other income in the condensed quarterly consolidated statement of profit or loss. Changes
in non-controlling interests in the condensed quarterly consolidated statement of changes in equity include derecognition of non-controlling interest in Hitachi Kokusai as a result of its deconsolidation.
On June 1, 2018, HKE changed its name to Kokusai Electric Corporation.

F-13

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The following are the main Business Acquisitions and Divestitures for the nine months ended December 31, 2017.
(a) 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
9,341
9,351
7,409
790
10,102

Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Non-current assets (excluding intangible assets)
Intangible assets
Goodwill (deductible for tax purposes)
Goodwill (not deductible for tax purposes)
Other intangible assets
Total

16,29455,361
52,709161,357

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 December 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
the Sullair business of April 1, 2017 would not differ materially from the amounts reported in the condensed quarterly
consolidated financial statements for the nine months ended December 31, 2017.

F-14

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(6) Trade Receivables, Trade Receivables and Contract Assets
The components of trade receivables, trade receivables and contract assets are as follows:
Millions of yen
December 31, 2018
Accounts receivable

March 31, 2018

1,545,470

2,322,554

Contract assets

471,869-

Others

195,322

178,860-

2,501,414

2,212,661-

Total trade receivables
Total trade receivables and contract assets

Trade receivables, trade receivables and contract assets are stated as net of the allowance for doubtful receivables.
Others include notes receivable and electronically recorded monetary claims.
(7) Fair Value of Financial Instruments(a) 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 accounts receivable, Short-term debt,
Other accounts payable 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 of years
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 notdistressed 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 areunobservable, the Company uses price information provided by financial institutions to evaluate such investments. The
information provided is corroborated by the income approach using its own valuation model, or the market 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 rateapplicable 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 ininactive markets, or based on models using interest rate curves and forward and spot prices for currencies and commodities. 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 themarket 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 and commodities. 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-15

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

March 31, 2018

Estimated
fair values

Carrying amounts

Estimated
fair values

AssetsInvestments in securities and otherfinancial assets
Lease receivables

88,227

89,16592,19893,165

Debt securities

72,136

72,140120,915

120,920

Long-term loans receivable

106,514108,374

95,37396,859Liabilities
Long-term debt [1]Lease obligations

51,256

51,42049,47849,723

Bonds

170,616

174,467

149,837

153,614Long-term borrowings

705,557

710,055

729,540

734,912[1] Long-term debt is included in Current portion of long-term debt and Long-term debt in the condensed quarterly consolidated
statement of financial position.
(c) Financial Instruments Measured at Fair Value
Financial instruments measured at fair value on a recurring basis after the initial recognition are classified into three levels of thefair 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 thelowest level in the fair value measurement as a whole.
Transfers between levels are deemed at the beginning of each quarter period.

F-16

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The following tables present the assets and liabilities that are measured at fair value on a recurring basis as of December 31 andMarch 31, 2018.
December 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

-

-

2,136

2,136

9,731

4,848

10,60525,184-45,626

6,907

52,533

175,311-111,121286,432

185,042

50,474

130,769

366,285-

28,069-28,069-28,069-28,069Derivatives
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, 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
Derivatives

-

-

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

476,013-35,791-35,791-35,791-35,791FVTOCI 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-17

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The following tables present the changes in Level 3 instruments measured on a recurring basis for the nine months ended
December 31, 2018 and 2017.
December 31, 2018
Level 3 financial assets

Millions of yen
Equitysecurities

Debt
securities

Derivatives

Total

Balance at beginning of period

114,734

9,590

7,760

132,084

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

68
3,316

67
-

(853)
-

(718)
3,316

Purchases
Sales and redemption

2,032(1,244)2,413(1,216)-

4,445(2,460)Acquisitions and divestitures
Transfer from Level 3 [3](5,232)
(378)

(51)
-

-

(5,283)
(378)

Other
Balance at end of period(39)
113,257(198)
10,605

6,907

(237)
130,769

68

66

(853)

(719)

Unrealized gain (loss) relating tofinancial assets held at end of period [4]December 31, 2017
Level 3 financial assets
Balance at beginning of period
Gain (loss) in profit or loss [1]Millions of yen
Equitysecurities

Debt
securities

Derivatives

Total

110,470
35

8,991
(60)

6,061
72

125,52247

Gain in OCI [2]Purchases

6,262
3,148

593

1,706

6,262
5,447

Sales and redemption
Acquisitions and divestitures(4,736)
254

(595)
(20)

-

(5,331)234

Other
Balance at end of period

231
115,664

23
8,932

7,839

254
132,435

35

7

72

114

Unrealized gain relating tofinancial assets held at end of period [4][1] Gain (loss) in profit or loss related to FVTPL financial assets is included in Financial income and Financial expenses in thecondensed quarterly consolidated statement of profit or loss.
[2] Gain in OCI related to FVTOCI financial assets is included in Net changes in financial assets measured at fair value throughOCI in the condensed quarterly 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 period is included in Financial income andFinancial expenses in the condensed quarterly 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 December 31 and March 31, 2018 were ¥16,383 million and ¥17,098
million, respectively, included in Other financial liabilities in the condensed quarterly 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 most appropriately. The
finance departments continually examine changes in important inputs that could affect the fair value. In case the fair value of afinancial instrument was significantly impaired, administrators review and approve the impairment loss.

F-18

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(8) Dividends
Dividends paid on the Company’s common stock for the nine months ended December 31, 2018 are as follows:

Decision
The Board of Directors
on May 10, 2018
The Board of Directors
on October 26, 2018

Cash dividends(millions of yen)

Appropriation
fromCash dividends
per share (yen)Record date

Effective date

March 31, 2018

May 29, 2018

38,621Retained earnings

8.0

38,625Retained earnings

8.0 September 30, 2018 November 27, 2018

Dividends paid on the Company’s common stock for the nine months ended December 31, 2017 are as follows:

Decision
The Board of Directors
on May 12, 2017
The Board of Directors
on October 26, 2017

Cash dividends(millions of yen)

Appropriation
fromCash dividends
per share (yen)Record date

Effective date

March 31, 2017

May 29, 201733,796

Retained earnings

7.0

33,795Retained earnings

7.0 September 30, 2017 November 28, 2017

Note : Dividends per share do not reflect the share consolidation effective on October 1, 2018, since the record date was September
30, 2018.

F-19

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
(9) Revenues(a) Disaggregation of revenue
The Company’s revenue primarily arises from contracts with customers. The following table shows the disaggregation ofrevenue attributable to each reportable segment and geographic area.
(Millions of yen)
December 31, 2018

Overseas
Revenues
Subtotal

Total
Revenues

32,586436,698

1,450,830

295,925

56,395

843,365

1,698,255

64,24991,96825,307

419,618

693,032

194,602124,207

101,074

177,763597,646

743,192

532,683

384,468

268,410

91,29021,046765,214

1,297,897

Automotive Systems

316,006

131,074

195,740

43,19740,854

410,865

726,871

Smarts Life & Ecofriendly
Systems

281,986

54,599

1,061

2,450

12,80070,910352,896

Others316,390

51,36015,279

7,661

4,681

78,981

395,371

Subtotal

3,735,047

1,588,509

904,541

758,815

371,432

3,623,297

7,358,344(513,511)(41,782)(8,554)(8,656)(2,872)(61,864)(575,375)

3,221,536

1,546,727

895,987

750,159

368,560

3,561,433

6,782,969

Japan

Asia

North
America

Europe1,014,132

129,221

149,641

125,250

854,890405,091

85,954273,414238,094

Construction Machinery

145,546

High Functional Material &Components

Information &Telecommunication Systems
Social Infrastructure &Industrial Systems
Electronic Systems &Equipment

Corporate items andEliminations
Total

Other
Areas

The Information & Telecommunication Systems segment consists of Front Business and IT Platform & Products, for whichrevenue amounted to 1,023,178 million yen and 537,787 million yen, respectively (including intersegment transactions). Front
Business is operated mainly in Japan, and IT Platform & Products is operated mainly in Japan, North America and Europe.
(b) Information about satisfaction of performance obligations
The following is information about satisfaction of performance obligations related to major goods and services of eachreportable segment.
(Information & Telecommunication Systems)
Front Business primarily provides services such as system integration, consulting and cloud services. The business provides
goods and services according to customers’ specifications over a specified period of time, and revenue is recognized based on
the pattern of the cost accrual or the passage of time as performance obligations are satisfied over time.
Many of the contracts require payments based on milestones, and in some cases, payments are made before performanceobligations are satisfied.
IT Platform & Products primarily sells server, storage, telecommunication network equipment and related software. Revenue
is recognized when control over the goods is transferred to customers as performance obligations are satisfied at the point intime upon the completion or upon delivery of the goods. The Company’s general terms and conditions apply, and there are no
significant transactions in which payment terms include deferred payments, etc.

F-20

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
(Social Infrastructure & Industrial Systems)
This segment includes revenue from businesses such as building systems, railway systems, and power and energy. The
building system business is operated mainly in China, the railway system business is operated mainly in Europe, and thepower and energy business is operated mainly in Japan.
Contracts such as construction in this segment involve manufacturing and providing goods based on customers’
specifications over a long period of time. As performance obligations are satisfied over time, revenue is recognized based on
the pattern of the cost accrual. In addition, the segment provides certain services promised in the contracts such as
maintenance throughout the duration of the contract, and recognizes revenue over time based on the passage of time. Many of
the contracts require payments based on milestones, and, in some cases, payments are made before performance obligations
are satisfied.
Further, in the sale of industrial equipment, etc., revenue is recognized when control over the goods is transferred tocustomers as performance obligations are satisfied at the point in time upon the completion or upon delivery of the goods.
The Company’s general terms and conditions apply, and there are no significant transactions in which payment terms include
deferred payments, etc.
(Other)In the Electronic Systems & Equipment, Construction Machinery, High Functional Materials & Components, Automotive
Systems, and Smart Life & Ecofriendly Systems segments, performance obligations are generally satisfied at a point in timeupon completion of the sale and customers’ acceptance and inspection of the goods, and revenue is recognized when control
over goods is transferred to customers. The Company’s general terms and conditions apply, and there are no significant
transactions in which payment terms include deferred payments, etc.
These segments provide certain services promised in the contracts such as maintenance throughout the duration of thecontract, and they recognize revenue over time based on the passage of time. The Company’s general terms and conditions
apply, and there are no significant transactions in which payment terms include deferred payments, etc.
(10) Other Income and Expenses
The main components of other income and expenses for the nine months ended December 31, 2018 and 2017 are as follows:
Millions of yen
2018
Net gain (loss) on sales and disposals of fixed assets

2017

23,668(137)(322,335)(2,297)

Net gain (loss) on business reorganization and others

82,376

2,746

Special termination benefits(9,584)(5,493)

Expenses related to competition law and others(1,730)(13,839)

Impairment losses

Impairment losses are mainly recognized on property, plant and equipment, investment properties and intangible assets. Net gain
(loss) on business reorganization and others include gains and losses related to obtaining and losing control of investees and gains
and losses related to obtaining and losing significant influence over investees.
Restructuring charges (structural reform expenses) included in other expenses for the nine months ended December 31, 2018 and2017 were ¥332,462 million and ¥7,790 million, respectively. Restructuring charges (structural reform expenses) mainly include
impairment losses and special termination benefits.
Impairment losses for the nine months ended December 31, 2018 include impairment losses due to the suspension of the UK
nuclear power stations construction project (the project). The Company decided to suspend the project from the view point of its
economic rationality as a private enterprise at the Board of Directors meeting held on January 17, 2019, as it is clear that further
time is needed to develop a financial structure for the project and conditions for building and operating the nuclear power stations tosecure its business continuation. Consequently, the Social Infrastructure & Industrial System segment recognized impairment lossesof ¥277,208 million on the related assets of the project. These consisted of impairment losses on property, plant and equipment of¥206,799 million and on intangible assets of ¥70,409 million. The recoverable amount of the CGU was measured at ¥2,494 million
on the basis of fair value less costs of disposal as of December 31, 2018. A market approach was mainly used in measuring the fairvalue of the relevant assets. These fair value measurements were based on real estate appraisal value, and thus classified as Level 3of fair value hierarchy.

F-21

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The amounts of contract termination costs, etc. due to the suspension of the project that the Company plans to post for the threemonths ending March 31, 2019 are currently being evaluated.
(11) Financial Income and Expenses
The main components of financial income and expenses for the nine months ended December 31, 2018 and 2017 are as follows:
Millions of yen
2018

2017

Dividends received

5,060

5,515

Exchange gain (loss)

9,289(5,537)

Dividends received for the nine months ended December 31, 2018 and 2017 are from FVTOCI financial assets.
(12) 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 condensed quarterly 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 nine months ended December 31, 2018 and 2017 are as
follows:
Millions of yen
2018

2017

Profit or loss from discontinued operations
Revenues
Cost of sales and expenses
Income (loss) from discontinued operations, before income taxes
Income taxes
Income (loss) from discontinued operations(6,429)

452

(581)

(345)

(7,010)

107

2,606

(9)

(4,404)98
Millions of yen

2018

2017

Cash flows from discontinued operations
Cash flows from operating activities(17,236)

1,929

Cash flows from investing activities-(5)

Cash flows from financing activities

16,793(1,037)

F-22

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(13) Earnings Per Share (EPS) Information
The calculations of basic and diluted EPS attributable to Hitachi, Ltd. stockholders for the nine months ended December 31, 2018and 2017 are as follows:
Nine months ended December 31
Number of shares
2018
Weighted average number of shares on which basic EPS is calculated

2017

965,637,627

965,584,079

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

759,283

887,751

966,396,910

966,471,830
Millions of yen

2018

2017

Net income from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic87,031

Effect of dilutive securities
Diluted258,484--

87,031

258,484(4,404)98--(4,404)

98

82,627

258,582

Net income (loss) from discontinued operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted
Net income attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted--82,627

258,582
Yen

2018

2017

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

90.13

267.70

Diluted

90.06

267.45Basic(4.56)

0.10

Diluted(4.56)

0.10

Basic

85.57

267.80

Diluted85.50

267.55

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

EPS attributable to Hitachi, Ltd. stockholders

Note : On October 1, 2018, the Company completed the share consolidation of every five (5) shares of common stock into one(1) share. The figures for basic and diluted EPS attributable to Hitachi, Ltd. stockholders are calculated on the assumptionthat the Company conducted this share consolidation at the beginning of the previous fiscal year.

F-23

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
The calculations of basic and diluted EPS attributable to Hitachi, Ltd. stockholders for the three months ended December 31,
2018 and 2017 are as follows:
Three months ended December 31
Number of shares
2018
Weighted average number of shares on which basic EPS is calculated

2017

965,617,891

965,562,937-

896,080

965,617,891

966,459,017

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

Millions of yen
2018

2017

Net income (loss) from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted(109,967)

96,597--(109,967)

96,597

(401)

1,372

-

-

(401)

1,372

(110,368)

97,969--(110,368)

97,969Net income (loss) from discontinued operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted
Net income (loss) attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted

Yen
2018

2017

EPS from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic(113.88)

100.04

Diluted(113.88)

99.95

Basic

(0.42)

1.42

Diluted(0.42)

1.42

Basic

(114.30)

101.46

Diluted(114.30)

101.37

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

EPS attributable to Hitachi, Ltd. stockholders

Note : 1. On October 1, 2018, the Company completed the share consolidation of every five (5) shares of common stock into one(1) share. The figures for basic and diluted EPS attributable to Hitachi, Ltd. stockholders are calculated on theassumption that the Company conducted this share consolidation at the beginning of the previous fiscal year.
2. Stock options are excluded from the calculations of diluted EPS attributable to Hitachi, Ltd. stockholders for the threemonths ended December 31, 2018 because they are antidilutive.

F-24

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(14) Contingencies(a) Litigation
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.
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 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 July 2018, the compensation claim against these three companies was amended to approximately ¥51.0
billion by the contractee.
In relation to the aforementioned lawsuit, in April 2018, the subsidiary in Japan received a complaint that was filed against
the subsidiary and 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. In July
2018, the compensation claim against these two companies was amended to approximately ¥54.8 billion by the construction
company of the condominium complex. Although the subsidiary in 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 (¥33,407 million) and interest allegedly incurred by performance
defects of a power plant. In addition, in July 2018, the subsidiary and the associate in Europe received a complaint requesting
additional compensation for consequential losses of EUR 6 million (¥881 million). Although the subsidiary and the associate
in Europe will vigorously defend themselves against this lawsuit, 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.

F-25

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018
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 condensed quarterly consolidated
financial statements of the Company and subsidiaries.
(b) 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.
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. Given the circumstances,
Hitachi Chemical set up a special investigation committee in July 2018, and its investigations have revealed that, in addition
to the cases for certain lead-acid batteries for industrial use, product testing, etc. for certain other products had been also
inappropriately performed. Hitachi Chemical has provided successive explanations to customers, and received aninvestigation report from the special investigation committee in November 2018. Hitachi Chemical has been conducting aninternal investigation into its subsidiaries, etc. as the investigation report specified that it proceed with such an investigation.
The outcome of the internal investigation 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 condensed quarterly consolidated financial statements.

F-26

Notes to Condensed Quarterly Consolidated Financial Statements
December 31, 2018(15) Approval of Condensed Quarterly Consolidated Financial Statements
The condensed quarterly consolidated financial statements were approved on February 13, 2019 by Toshiaki Higashihara,
President and CEO of the Company.

F-27

[Cover][Document Filed][Applicable Law]

Confirmation Letter
Article 24-4-8, Paragraph 1 of the Financial Instruments and Exchange Act of Japan[Filed with][Filing Date]

Director, Kanto Local Finance Bureau
February 13, 2019

[Company Name][Company Name in English]

Kabushiki Kaisha Hitachi Seisakusho
Hitachi, Ltd.

[Title and Name of Representative][Name and title of CFO]

Toshiaki Higashihara, President & CEO
Mitsuaki Nishiyama, Senior Vice President and Executive Officer[Address of Head Office][Place Where Available for Public Inspection]

6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo
Tokyo Stock Exchange, Inc.
(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 Adequacy of Statements Contained in the Quarterly Report
Mr. Toshiaki Higashihara, President & CEO, and Mr. Mitsuaki Nishiyama, Senior Vice President and Executive Officer,
confirmed that statements contained in the Quarterly Report for the third quarter of the 150th fiscal year (from October 1, 2018 to
December 31, 2018) were adequate under the Financial Instruments and Exchange Act.
2. Special Notes
None.

A-2