(Translation)

Annual Securities Report(The 151st Business Term)
From April 1, 2019 to March 31, 2020

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

Hitachi, Ltd.

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

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

Director, Kanto Local Finance Bureau[Filing Date]

August 31, 2020

[Fiscal Year]

The 151st Business Term (from April 1, 2019 to March 31, 2020)[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

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

03-3258-1111[Contact Person]

Masachika Sawada, Manager, Legal Division[Contact Address]

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

03-3258-1111[Contact Person]

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

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

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

Contents
Part I Information on the Company ……………………………………………………………………………
1
I. Overview of the Company ………………………………………………………………………………
1
1. Key Financial Data …………………………………………………………………………………
1
2. History ………………………………………………………………………………………………
3
3. Description of Business ……………………………………………………………………………
6
4. Information on Affiliates ………………………………………………………………………… 10
5. Employees ………………………………………………………………………………………… 19
II. Business Overview ……………………………………………………………………………………… 20
1. Management Policy, Economic Environment and Challenges Hitachi Group Faces…………… 20
2. Risk Factors …..…………………………………………………………………………………… 26
3. Management's Discussion and Analysis of Consolidated Financial Condition, Results ofOperations and Cash Flows ………………………………………………………………………… 39
4. Material Agreements, etc ………………………………………………………………………… 55
5. Research and Development ……………………………………………………………………… 56
III. Property, Plants and Equipment ……………………………………………………………………… 58
1. Summary of Capital Investment, etc. ……………………………………………………………… 58
2. Major Property, Plants and Equipment …………………………………………………………… 59
3. Plans for Capital Investment, Disposals of Property, Plants and Equipment, etc. ………………… 63
IV. Information on the Company ………………………………………………………………………… 64
1. Information on the Company’s Stock, etc. ………………………………………………………… 64(1) Total number of shares, etc. …………………………………………………………………… 64(2) Information on the stock acquisition rights, etc. ………………………………………………… 65(3) Information on moving strike convertible bonds, etc. …………………………………………… 67(4) Changes in the total number of issued shares and the amount of common stock and other …… 67(5) Shareholders composition ……………………………………………………………………… 67(6) Major shareholders ……………………………………………………………………………… 68(7) Information on voting rights …………………………………………………………………… 70
2. Information on Acquisition, etc. of Treasury Stock ……………………………………………… 71
3. Dividend Policy …………………………………………………………………………………… 72
4. Corporate Governance, etc. ………………………………………………………………………… 73(1) Corporate Governance ……………………………………………………………………............ 73(2) Directors and Senior Management..……………………………………………………………… 78(3) Audit .......................................…………………………………………………………………… 89(4) Compensation to Directors and Executive Officers……………………………………………… 93(5) Information on shareholdings .…………………………………………………………………… 99
V. Financial Information …………………………………………………………………………………… 105
VI. Stock-Related Administration for the Company ……………………………………………………… 105
VII. Reference Information on the Company ……………………………………………………………… 106
Part II Information on Guarantors, etc. for the Company ……………………………………………………… 107[Consolidated Financial Statements] …………………………………………………………………………… F-1
Consolidated Financial Statements. ……………………………………………………………………… F-2
Reports of Independent Registered Public Accounting Firm ……………………………………………… F-82
[Internal Control Report (Translation)] ………………………………………………………………………… A-1[Independent Auditors’ Report (Translation)] ………………………………………………………………… A-3[Confirmation Letter (Translation)] …………………………………………………………………………… A-8

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

Fiscal year
Year end(Millions of yen, unless otherwise stated)
IFRS
147th
148th
149th
150th
151st
business term business term business term business term business term
March 2016
March 2017
March 2018
March 2019
March 2020
10,034,305
9,162,264
9,368,614
9,480,619
8,767,263

Revenues
Income from continuing
517,040
469,091
638,646
516,502180,268
operations, before income taxes
Net income attributable to172,155
231,261
362,988
222,546
87,596
Hitachi, Ltd. stockholders
Comprehensive income
attributable to Hitachi, Ltd.
(127,557)
299,397382,341
171,140(8,465)stockholders
Total Hitachi, Ltd.
2,735,078
2,967,085
3,278,024
3,262,603
3,159,986
stockholders’ equity
Total equity
4,125,570
4,096,995
4,511,671
4,414,403
4,266,739
Total assets
12,551,005
9,663,917
10,106,603
9,626,592
9,930,081
Total Hitachi, Ltd.
stockholders’ equity per share
2,832.39
3,072.79
3,395.00
3,378.81
3,270.43(yen)
Earnings per share attributable
to Hitachi, Ltd. stockholders,
178.27239.49375.93230.4790.71
basic (yen)Earnings per share attributable
to Hitachi, Ltd. stockholders,
178.08239.42375.60230.2590.60
diluted (yen)Total Hitachi, Ltd.
21.8
30.7
32.4
33.9
31.8
stockholders’ equity ratio (%)
Return on equity (%)
6.1
8.1
11.6
6.8
2.7
Price earnings ratio (times)
14.8
12.6
10.3
15.6
34.6
Net cash provided by operating
812,226
629,582
727,168
610,025
560,920
activities
Net cash used in investing(730,799)(337,955)(474,328)(162,872)(525,826)
activities
Net cash provided by (used in)(26,467)(209,536)(321,454)(320,426)
2,837
financing activities
Cash and cash equivalents at
699,315765,242
697,964
807,593
812,331
end of year
Number of employees
335,244
303,887
307,275
295,941
301,056[Average number of part-time[45,111]
employees, etc.](Notes) 1. Our consolidated financial statements have been prepared in conformity with IFRS.
2. Revenues do not include the consumption tax, etc.
3. On October 1, 2018, the Company completed the share consolidation of every five shares into one
share for its common stock. The figures for total Hitachi, Ltd. stockholders’ equity per share andearnings per share attributable to Hitachi, Ltd. stockholders, basic and diluted, are calculated on theassumption that the Company conducted this share consolidation at the beginning of the 147th
business term.
4. Average numbers of part-time employees, etc. are not stated for the 148th, 149th, 150th and 151stbusiness terms since those were less than 10% of the number of employees.

1(2) Financial data etc. of the Company
Fiscal year
Year end
Revenues(Millions of yen, unless otherwise stated)
147th
148th
149th
150th
151st
business term business term business term business term business term
March 2016 March 2017 March 2018 March 2019 March 2020
1,859,605
1,906,532
1,930,293
1,927,241
1,793,250

Ordinary income (loss)(20,944)

71,599131,294

304,069

355,490

Net income
Common stock
Number of issued shares (thousandsof shares)
Total net assets
Total assets
Net assets per share (yen)Dividends per share (yen)[Of the above, interim dividends per
share (yen) ]Net income per share, basic (yen)Net income per share, diluted (yen)Stockholders’ equity ratio (%)
Return on equity (%)
Price earnings ratio (times)
Dividend payout ratio (%)
Number of employees
Total shareholder return (%)[Comparative indicator : TOPIX] (%)

64,934
458,790

97,724
458,790

136,117458,790

174,062
458,790

119,409459,862

4,833,463

4,833,463

4,833,463

966,692

967,280

1,378,441
3,868,633
1,427.49

1,497,428
4,070,247
1,550.49

1,536,018
4,017,373
1,589.79

1,563,456
3,934,118
1,617.32

1,579,058
4,004,408
1,631.97

12
[6]

13
[6]

15
[7]

58
[8]

95
[45]

67.24
35.6
4.7
39.2
89.2
37,35365.4[87.3]

101.20101.17
36.8
6.8
29.8
64.2
35,631
76.2[98.0]

140.97140.85
38.2
9.0
27.3
53.2
34,92598.5[111.2]123.59123.49
39.4
7.6
25.4
76.9
31,44285.7[90.9]

Highest share price (yen)

858.0

679.5

944.2

Lowest share price (yen)

431.0

400.0

566.3

180.26180.09
39.7
11.2
19.9
50.0
33,49094.1[103.1]
3,925.0[873.7]2,767.5[692.1]

4,693.0
2,524.0(Notes) 1. Revenues do not include the consumption tax, etc.
2. Effective from the 150th business term, the Company adopted the "Partial Amendments to AccountingStandard for Tax Effect Accounting" (ASBJ Statement No.28, February 16, 2018) and the“Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No.28, February 16, 2018).
The figures for total net assets, total assets, net assets per share, stockholders’ equity ratio and returnon equity for the 149th business term are restated as the standard and guidance are applied
retroactively.
3. On October 1, 2018, the Company completed the share consolidation of every five shares into one
share for its common stock. The figures for net assets per share and net income per share, basic anddiluted, are calculated on the assumption that the Company conducted this share consolidation at the
beginning of the 147th business term.
4. On October 1, 2018, the Company completed the share consolidation of every five shares into one
share for its common stock. 58 yen of dividends per share for the 150th business term is the sum of 8
yen of the interim dividend per share before the share consolidation and 50 yen of the year-end
dividend per share after the share consolidation.
5. “Net income per share, diluted” is not stated for the 147th business term since there is no dilutive
shares.
6. Average number of part-time employees, etc. is not stated since it was less than 10% of the number of
employees.
7. The highest and lowest share prices are market prices on the first section of the Tokyo Stock Exchange.
On October 1, 2018, the Company completed the share consolidation of every five shares into one
share for its common stock. Regarding the 150th business term, the figures in the upper row are thehighest and lowest prices after the share consolidation and the figures in brackets in the lower row arethose before the share consolidation.
22. History
Month/Year
1910
February, 1920
February, 1921
May, 1935
May, 1937
April, 1939
September, 1940
April, 1942
September, 1943
March, 1944
December, 1944
April, 1947
May, 1949
February, 1950
May, 1955
October, 1956
November, 1956
June, 1957
February, 1959
October, 1959
June, 1960
August, 1960
February, 1961

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

HistoryFounded as a repair shop at Hitachi copper mine of Kuhara Mining Company
Incorporated as Hitachi, Ltd. with the Hitachi and Kameido Works
Acquired the Kasado shipyard from Nippon Kisen Co., Ltd. and established Kasado
Works
Equity participation in Kyousei Reiki Kogyo K.K. (later changed its name to Hitachi
Plant Engineering & Construction Co., Ltd.)
Merged Kokusan Industries, Ltd. and established 7 factories, including Totsuka Works
Established Taga Works, spun off Hitachi Research Laboratory from Hitachi Works
Established Mito Works
Established Central Research Laboratory
Merged Riken Vacuum Industry and established Mobara Works
Spun off Shimizu Works from Kameari Works
Spun off Tochigi Works from Taga Works
Established Hinode Shokai Co., Ltd. (currently Hitachi High-Tech Corporation)
Established Higashi-Nippon Senikikai KK (later changed its name to Hitachi Medical
Corporation)
Established Nitto Transport KK. (currently Hitachi Transport System, Ltd.)
Established Hitachi Sales Corporation
Spun off Hitachi Metals Industries, Ltd. (currently Hitachi Metals, Ltd.) and Hitachi
Cable, Ltd.
Established Hitachi Kiden Kogyo, Ltd.
Spun off Kokubu Works from Hitachi Works
Established Yokohama Works
Established Hitachi New York, Ltd. (currently Hitachi America, Ltd.)
Equity participation in Nippon Business Consultant Co., Ltd. (later changed its name to
Hitachi Information Systems, Ltd.)
Established Hitachi Geppan Corp. (later changed its name to Hitachi Credit Corporation)
Spun off Naka Works from Taga Works;
Equity participation in Maxell Electric Industrial Co., Ltd. (currently Maxell Holdings,
Ltd.)
Established Katsuta Works
Established Kanagawa Works
Spun off Narashino Works from Kameido Works
Spun off Hitachi Chemical Company, Ltd.
Established Mechanical Engineering Research Laboratory
Spun off Sawa Works from Taga Works, spun off Tokai Works from Yokohama Works,
and spun off Odawara Works from Kanagawa Works
Established Software Works
Established Ome Works
Established Omika Works
Spun off Hitachi Construction Machinery Co., Ltd.
Established Takasaki Works
Established Hitachi Software Engineering Co., Ltd.
Acquired Asahi Works from Hitachi Denshi, Ltd.
Established Production Engineering Research Laboratory
Established Systems Development Laboratory
Established Tsuchiura Works
Relocated Kameido Works and renamed to Nakajo Works
Established Hitachi Europe Ltd.
Established Advanced Research Laboratory
Established Hitachi Asia Pte. Ltd. (currently Hitachi Asia Ltd.)
Integrated Sawa Works into Automotive Products Division
Integrated Katsuta Works into Materials Process Technology Division; integrated Totsuka
Works into Information & Telecommunication Division; integrated Naka Works into
Instruments Division3

Month/Year
February, 1992
August, 1992
February, 1993
August, 1993
August, 1994
October, 1994
February, 1995

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

April, 2002

October, 2002

January, 2003
April, 2003

June, 2003
October, 2004

April, 2006

December, 2006
July, 2007
March, 2009

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

4

Month/Year

July, 2009

October, 2009
February, 2010
April, 2010

October, 2010
October, 2011
March, 2012

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

April, 2015

October, 2015
April, 2016
May, 2016
October, 2016
March, 2017
June, 2018
March, 2019
April, 2019
April, 2020
May, 2020
July, 2020

History

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

5

3. Description of Business
As of March 31, 2020, the Hitachi Group, which is comprised of the Company and 1,223 affiliates(814 consolidated subsidiaries and 409 equity-method associates and joint ventures.), positions five sectors:“IT,” “Energy,” “Industry,” “Mobility” and “Smart Life,” as growth areas and allocates related business
units into each sector. Ranging over the ten segments from the five sectors to additional four listed
subsidiary groups as Hitachi High-Tech (Note 1), Hitachi Construction Machinery, Hitachi Metals andHitachi Chemical (Note 2), and Others, the Hitachi Group engages in a broad range of business activities,
from product development and manufacturing to sales and services.
(Notes) 1. Hitachi High-Tech segment was unified to the Smart Life segment as Hitachi High-Tech
Corporation became a wholly-owned subsidiary of the Company on May 20, 2020.
2. Hitachi Chemical segment was deconsolidated as Hitachi Chemical Company, Ltd. has ceased
to be a consolidated subsidiary of the Company as a result of the share transfer on April 20,
2020.
One of the Hitachi’s strengths is the ability to provide solutions that use digital technologies to resolve
issues facing customers and society through our cutting-edge information technology (IT) and ouroperational technology (OT), which runs equipment and systems at production sites, and social
infrastructure such as railways and power plants in addition to the high-quality and highly reliable
products.

At the present time when society and business continue to generate more data, Hitachi’s Lumada acts
as an engine that creates new value from these data and accelerates innovation. Lumada is a general term
for the solutions, services and technologies that utilize Hitachi’s advanced digital technologies to create
value from customers’ data and accelerate digital innovation. It is derived from the words “illuminate” and“data” and was created based on the idea of combining the strengths of OT, IT and products cultivatedwithin Hitachi. Along with the development of IT and the Internet of things (IoT), social and businessactivities continue to generate data at an increasing speed. Hitachi has focused on these data as a newsource of value in future society and launched the Lumada business in 2016 with the goal of using large
volumes of data to create innovation for the world. With Lumada as a common platform, we will create
new value and establish an advanced cyber-physical system that links cyber spaces (digital) and real spaces(physical items) sophisticatedly and in real time.

6The Lumada business provides value by analyzing business issues and combining Hitachi’s digitaltechnologies to solve customer problems with the minimum customization. Rather than relying merely on
product sales, we will strive to expand the Lumada business by leveraging our strengths in OT x IT x
Products, commercializing our expertise in various industries and operations and shifting to digitalsolutions that can be provided to multiple customers in order to build a profit model based on value createdthrough the provision of solutions, such as income from fees.

7

Major business outline for each segment and the positioning of Business Units (BU) of the Company
and principal affiliated companies are described as follows.
(As of March 31, 2020)
Main products and services
IT

Systems Integration, Consulting,Control Systems, Cloud Services,
Software, IT Products (Storage,
Servers), ATMsBU and principal affiliated companies
BU
Financial Institutions BU
Social Infrastructure Systems BU
Services & Platforms BU
Defense Systems BU

EnergyEnergy Solutions (Nuclear,
Renewable Energy, Thermal,
Power Grids)
Industry
Industry Systems, Water &Environment Systems, Industrial
Machinery

Nuclear Energy BU
Energy BU

Mobility
Building Systems (Elevators,
Escalators), Railway Systems

Building Systems BU
Railway Systems BU

Smart Life
Medical Electronics,
Smart Life & Ecofriendly Systems(Refrigerators, Washing Machines,
Room Air Conditioners, AirConditioning Equipment),
Automotive Systems (Powertrain
Systems, Chassis Systems,
Advanced Driver Assistance
Systems)
Hitachi High-Tech
Medical and Life Science Products,
Analytical Equipment,
Semiconductor Processing
Equipment, Manufacturing andInspection Equipment, Advanced
Industrial Products
Hitachi Construction Machinery
Hydraulic Excavators, Wheel
Loaders, Mining Machinery,
Maintenance and Services,
Construction Solutions, MineManagement Systems
Hitachi Metals
Specialty Steel Products,
Functional Components andEquipment, Magnetic Materials
and Power Electronics Materials,
Wires, Cables and Related
Products

Healthcare BU

Industry & Distribution BU
Water & Environment BU

Affiliated companies[Consolidated subsidiaries]
Hitachi Information & Telecommunication
Engineering, Ltd.
Hitachi-Omron Terminal Solutions, Corp.
Hitachi Solutions, Ltd.
Hitachi Systems, Ltd.
Hitachi Computer Products (America), Inc.
Hitachi Global Digital Holdings Corporation
Hitachi Payment Services Private Limited
Hitachi Vantara LLC[Consolidated subsidiaries]
Hitachi-GE Nuclear Energy, Ltd.
Hitachi Plant Construction, Ltd.
Hitachi Power Solutions Co., Ltd.
[Consolidated subsidiaries]
Hitachi Industrial Equipment Systems Co.,Ltd.
Hitachi Industrial Products, Ltd.
Hitachi Industry & Control Solutions, Ltd.
Hitachi Plant Services Co., Ltd.
JR Technology Group, LLC
Sullair US Purchaser, Inc.
[Equity-method associates]
Hitachi Kokusai Electric Inc.
[Consolidated subsidiaries]
Hitachi Building Systems Co., Ltd.
Hitachi Elevator (China) Co., Ltd.
Hitachi Rail Ltd. (Note 5)[Consolidated subsidiaries]
Hitachi Automotive Systems, Ltd.
Hitachi Global Life Solutions, Inc.
Hitachi Automotive Systems Americas, Inc.
Hitachi Consumer Products (Thailand), Ltd.
[Equity-method associates]
Johnson Controls-Hitachi Air Conditioning
Holding (UK) Ltd-[Consolidated subsidiaries]
Hitachi High-Tech Corporation-[Consolidated subsidiaries]
Hitachi Construction Machinery Co., Ltd.

-[Consolidated subsidiaries]
Hitachi Metals, Ltd.

8

(As of March 31, 2020)
Main products and services
Hitachi Chemical
Functional Materials (Electronics
Materials, Printed Wiring Boards
Materials, Electronics
Components), Advanced
Components and Systems(Mobility Components, Energy
Storage Devices, Life Sciencerelated Products)

BU and principal affiliated companies
BU-

Affiliated companies[Consolidated subsidiaries]
Hitachi Chemical Company, Ltd.

[Consolidated subsidiaries]
Hitachi-LG Data Storage, Inc.
Hitachi Life, Ltd.
Hitachi Urban Investment, Ltd.
Hitachi America, Ltd.
Hitachi Asia Ltd.
Hitachi (China), Ltd.
Hitachi Europe Ltd.
Hitachi India Pvt. Ltd.
(Notes) 1. Hitachi America, Ltd., Hitachi Asia Ltd., Hitachi (China), Ltd., Hitachi Europe Ltd. and Hitachi India Pvt. Ltd. are the
Hitachi Group’s regional supervising company for Americas, Asia, China, Europe and India, and they sell the HitachiGroup’s products.
2. Defense Systems BU merged with Social Infrastructure Systems BU on April 1, 2020.
Others
Optical Disk Drives, Property
Management-

3. Sullair US Purchaser, Inc. changed its name to Hitachi Industrial Holdings Americas, Inc. on April 1, 2020.
4. Hitachi High-Tech Corporation became a wholly-owned subsidiary of the Company on May 20, 2020. As a result,
Hitachi High-Tech segment was abolished and merged into Smart Life segment.
5. Hitachi Chemical Company, Ltd. has ceased to be an affiliate of the Company through the share transfer on April 20,
2020. As a result, Hitachi Chemical segment was abolished.
6. Hitachi Urban Investment, Ltd. merged with Hitachi Life, Ltd. and changed its name to Hitachi Real Estate Partners,
Ltd. on April 1, 2020.
7. In addition to the table above, the major equity-method associates are Hitachi Capital Corporation and Hitachi Transport
System, Ltd.

9

4. Information on Affiliates(1) Consolidated subsidiaries(As of March 31, 2020)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

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

1,350

IT

100.0

Hitachi-Omron
Terminal Solutions,Corp.

Shinagawaku, Tokyo

8,500

IT

55.0

Hitachi Solutions,Ltd.

Shinagawaku, Tokyo

20,000IT

100.0

Hitachi Systems, Ltd.

Shinagawaku, Tokyo

19,162

IT

100.0

10

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

(As of March 31, 2020)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

Hitachi Computer
Products (America),
Inc.

of
Oklahoma, (Thousands
US dollars) IT
U.S.A.
14,000[100.0]100.0**Hitachi Global
Digital Holdings
Corporationof
California, (Thousands
US dollars) IT
U.S.A.
1,442,641

100.0

Hitachi Payment
Services Private
LimitedChennai,
India**Hitachi Vantara LLC

ofCalifornia, (Thousands
US dollars)
U.S.A.
929,482 IT

Hitachi-GE Nuclear
Energy, Ltd.

Hitachi,
Ibaraki

5,000 Energy

80.0

Hitachi Plant
Construction, Ltd.

Toshimaku, Tokyo

3,000 Energy

100.0(Thousands ofIndian rupee) IT[58.8]
100.0

79,158[100.0]100.0

11Relationship
The Company
supplies parts forcomputer peripherals.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Holding company for
Hitachi Vantara LLC,
etc. The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Offering the HitachiGroup's payment
services for financial
institutions in India.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Sales company for theCompany's storage, etc.
The Company
outsources consulting
services. The
Company's Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company delivers
nuclear power
generation equipment,
etc. The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Construction of theCompany’s power andindustrial plants, etc.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2020)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

Hitachi Power
Solutions Co., Ltd.

Hitachi,
Ibaraki

4,000 Energy

100.0

Hitachi Industrial
Equipment Systems
Co., Ltd.

Chiyodaku, Tokyo

10,000 Industry

100.0

Hitachi Industrial
Products, Ltd.

Chiyodaku, Tokyo

10,000 Industry

100.0

Hitachi Industry& Control Solutions,Ltd.

Hitachi,
Ibaraki

3,000 Industry

100.0

Hitachi Plant Services
Co., Ltd.

Toshimaku, Tokyo

3,000 Industry

100.0

12

Relationship
The Company
purchases power plantparts, and outsources
maintenance of power
generation equipment
and control
equipment, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
purchases industrial
equipment. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
purchases industrial
equipment. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
outsources
development of
information control
systems, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Construction of theCompany’s industrial
and public plants, etc.
The Company
outsources the services
for them. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.

(As of March 31, 2020)
Company nameLocation

JR Technology Group, Michigan,
LLC
U.S.A.

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

Commonstock

Principal business- Industry

Ownership
percentage ofvoting rights(%)[100.0]
100.0(Thousands of
US dollars) Industry[100.0]100.0517,977

Hitachi Building
Systems Co., Ltd.

Chiyodaku, Tokyo

5,105 Mobility

100.0

Hitachi Elevator(China) Co., Ltd.

of
Guangzhou, (Thousands
Chinese yuan) Mobility
China
538,806[70.0]
70.0**Hitachi Rail Ltd.

London,U.K.

(Thousandsof Sterlingpounds) Mobility

100.0

Hitachi Automotive
Systems, Ltd

Hitachinaka,Ibaraki

878,181

15,000 Smart Life

13

100.0

Relationship
Holding company for
JR Automation
Technology, LLC, etc.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Holding company for
Sullair LLC, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
Design, manufacturing,sales, installation andmaintenance, etc. ofthe elevators andescalators theCompany developed.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Sales, installation andmaintenance, etc. of
the Hitachi Group’s
elevators andescalators in China.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Manufacturing, sales,
engineering andmaintenance of theCompany’s railsystems products. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
purchases parts forrailway vehicles, etc.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2020)
Company nameLocation

Hitachi Global Life
Solutions, Inc.

Minato-ku,
Tokyo

Hitachi Automotive
Systems Americas,
Inc.

Kentucky,
U.S.A.

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

20,000 Smart Life

100.0

(Thousands of
US dollars) Smart Life

[100.0]
100.0

Hitachi Consumer
Products (Thailand),Ltd.

of
Prachinburi, (Thousands
Thai Baht) Smart Life
Thailand
2,472,000[80.1]
80.1*Hitachi HighTech Corporation

Minato-ku,
Tokyo7,938 Hitachi High-Tech

51.8

**
*Hitachi Construction
Machinery Co., Ltd.

Taito-ku,
Tokyo

Hitachi
81,576 Construction
Machinery

[0.6]
51.5

Minato-ku,
Tokyo26,283 Hitachi Metals

[0.5]
53.5

*Hitachi Metals, Ltd.

86,27814

Relationship
Manufacturing andsales of the HitachiGroup's home
appliances, and sales,
system installation andmaintenance of theGroup’s airconditioning andrefrigerating products.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Manufacturing andsales company inNorth America for the
Hitachi Group’s
automotive systems
products.
Manufacturing andsales company for the
Hitachi Group’s
refrigerators andwashing machines,
etc. in Thailand.
The Company sells andpurchases informationequipment and powerrelated parts, etc.
through this company.
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
purchases specialty
steel products,
functional components
and equipment,
magnetic materials andpower electronics
materials and wires,
cables, and related
products. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.

(As of March 31, 2020)
Company nameLocation

Commonstock

Principal business*Hitachi Chemical
Company, Ltd.

Chiyoda-ku,
Tokyo

15,454 Hitachi Chemical

Hitachi-LG Data
Storage, Inc.

Minato-ku,
Tokyo

4,800 Others

Hitachi Life, Ltd.

Hitachi,
Ibaraki

1,000 Others

Hitachi Urban
Investment, Ltd.

Chiyoda-ku,
Tokyo

2,000 Others**Hitachi America,Ltd.

California,
U.S.A.

(Thousands of
US dollars) Others

3,245,764

15

Ownership
percentage ofvoting rights(%)

Relationship

The Company
purchases electronicparts, molding products
and energy storage
devices and systems,[0.1]
etc. The Company’s
51.4
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Development,
manufacturing andsales company for the
Hitachi Group’s
optical disk drives.
51.0 The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
outsourcesmanagement ofwelfare facilities, etc.
The Company’s
100.0
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
outsourcesmanagement ofwelfare facilities, etc.
The Company’s
100.0
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Hitachi Group’s
regional supervising
company in Americas,
and sells the HitachiGroup’s plant-,
industrial machinery-,healthcare- anddigital media-related
100.0
products, etc., as wellas promotes R&D in
Americas. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.

(As of March 31, 2020)
Company name

Hitachi Asia Ltd.

Location

Singapore

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)(Thousandsof Singapore
dollars) Others

100.0(Thousands of
US dollars) Others

100.0(Thousandsof Sterlingpounds) Others

100.0

186,231

Hitachi (China), Ltd.

Beijing,
China

Hitachi Europe Ltd.

Maidenhead,
U.K.

226,380

263,349

16

Relationship
The Hitachi Group’s
regional supervising
company for Asia, andsells the HitachiGroup’s industrial
machinery andtrain-, healthcare- andinformation-related
products, etc. The
Company’s Directors,
Executive Officers or
employees
concurrently holdposition of directors orofficers.
The Hitachi Group’s
regional supervising
company for China,
and sells the HitachiGroup’s plant,
industrial machineryand train-, healthcareand information-related
products, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Hitachi Group’s
regional supervising
company for Europe,and sells the HitachiGroup’s plants,
industrial machineryand digital media- andinformation-related
products, etc. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.

(As of March 31, 2020)
Company name

Hitachi India Pvt. Ltd.

Location

Commonstock

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

Ownership
percentage ofvoting rights(%)

Relationship

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

Others- 778 companies(Notes) 1. The unit of amounts and currency shown in the “Common stock” column are in millions of yen, unlessotherwise specified.
2. The common stock of JR Technology Group, LLC is not shown since it is a limited liability company
under the U.S. law, and does not have the “common stock”.
3. Companies with two asterisks (**) in the “Company name” column are specified subsidiaries.
4. Companies with one asterisk (*) in the “Company name” column submit Securities Registration
Statement or Annual Securities Report.
5. The name of segment in which the companies classified is shown in the “Principal business” column.
6. The amounts in brackets in upper row of the “Ownership percentage of voting rights” column represent
the percentage of voting rights owned indirectly by subsidiaries, of the total ownership percentage.
7. Companies with negative net worth are shown below, along with the amount of liabilities in excess ofassets.
Hitachi Power Europe GmbH112,446 million yen
8. Sullair US Purchaser, Inc. changed its name to Hitachi Industrial Holdings Americas, Inc. on April 1,
2020.
9. Hitachi High-Tech Corporation became a wholly-owned subsidiary of the Company on May 20, 2020.
10. Hitachi Chemical Company, Ltd. has ceased to be a consolidated subsidiary of the Company as aresult of the share transfer on April 20, 2020.
11. Hitachi Urban Investment, Ltd. merged with Hitachi Life, Ltd. and changed its name to Hitachi Real
Estate Partners, Ltd. on April 1, 2020.

17

(2) Equity-method associates and joint ventures(As of March 31, 2020)
Company nameLocation

Commonstock

Principal business

Hitachi Kokusai
Electric Inc.

Minato-ku,
Tokyo

Johnson ControlsHitachi Air
Conditioning
Holding (UK) Ltdof
Hampshire, (Thousands
US dollars) Smart Life
U.K.
935,107*Hitachi Capital
Corporation

Minato-ku,
Tokyo

9,983

*Hitachi Transport
System, Ltd.

Chuo-ku,Tokyo

16,802 Logistics services

1,000

Industry

General leasing,installment sales,
and other financial
services

Ownership
percentage ofvoting rights(%)

Relationship

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

Others- 405 companies(Notes) 1. The unit of amounts and currency shown in the “Common stock” column are in millions of yen, unlessotherwise specified.
2. Companies with one asterisk (*) in the “Company name” column submit Securities Registration
Statement or Annual Securities Report.
3. The names of segment in which Hitachi Kokusai Electric Inc. and Johnson Controls-Hitachi Air
Conditioning Holding (UK) Ltd are classified are shown in the “Principal business” column.
4. Companies with negative net worth are shown below, along with the amount of liabilities in excess ofassets.
Agility Trains East (Holdings) Limited
82,965 million yen
Agility Trains West (Holdings) Limited
70,644 million yen
GE-Hitachi Nuclear Energy Holdings LLC
16,738 million yen

18

5. Employees(1) Consolidated basis(As of March 31, 2020)
Number of employees
72,999IT[15,839]
8,876
Energy[1,468]24,215
Industry[2,773]
46,847
Mobility[2,644]45,371
Smart Life
[2,403]
10,954
Hitachi High-Tech[-]
24,274
Hitachi Construction Machinery[-]
29,677
Hitachi Metals[-]
21,852
Hitachi Chemical[-]
12,890
Others[3,214]
3,101
Corporate (Head Office and others)[3,101]
301,056
Total[31,442](Note) The number in brackets in the lower row of the “Number of Employees” column is the number of
employees of the Company included in each of the numbers in the upper row.
Name of segment(2) The Company
Number of employees
Average age
Average length of service
31,442
42.3
19.1 years(Note) Average annual salary includes bonuses and extra wages.

(As of March 31, 2020)
Average annual salary
9,026,872 yen(3) Relationship with labor union
The Company’s labor union, Hitachi Workers Union, is a member of the Japanese ElectricalElectronic & Information Union.
The relationship between management and labor unions in the Hitachi Group is stable and smooth.

19II. Business Overview
1. Management Policy, Economic Environment and Challenges Hitachi Group Faces(1) Management Policy
The Hitachi Group aims to achieve further development by delivering competitive products andservices, thereby creating higher value for customers, following its Mission: to contribute to society
through the development of superior, original technology and products. By taking full advantage of thediverse resources of the Hitachi Group, while at the same time reviewing and restructuring businesses,
Hitachi aims to bolster its competitiveness and achieve growth in global markets. This process will beconsistent with Hitachi’s basic management policy, which is to increase shareholder value by meetingthe expectations of customers, shareholders, employees and other stakeholders.
(2) Economic Environment and Challenges Hitachi Group Faces
1) Hitachi Group
In today’s world, the future is increasingly difficult to foresee. Myriad changes are taking place,including climate change, resource shortages, aging populations and problems of urbanization. The
spread of COVID-19 (the new coronavirus infection) is bringing dramatic changes to society andeconomies worldwide, with its profound, adverse economic repercussions. As these changes happen,
innovations to solve social issues are emerging across the globe.
In this economic environment, under the 2021 Mid-term Management Plan announced in May
2019, we will continue to improve three areas of customer value, namely social value, environmental
value and economic value, and contribute to the realization of a human-centric society by offeringsolutions to solve the various issues our society faces through the provision of the social innovation
business.
We will focus on the following policies in particular.
i) Contributing to society through business activities
We will accelerate value creation in the new society brought about by COVID-19 through thesocial innovation business utilizing digital technologies.
We will be among the first to respond to rapid changes and new challenges in society such as
demands for remote solutions, non-contact applications and automation, and seek to develop andseize upon business opportunities by achieving the value society demands.
In particular, we will enhance the provision of solutions in areas where our strengths lie, suchas manufacturing industry automation, supply chain optimization, data utilization in the field ofgovernment & public corporation, social infrastructure and healthcare, and support for workstylereforms such as remote work utilizing IT. In catering to new needs, we will also seek to fully
utilize Lumada, the core of our digital business, and strive to expand our business.

20ii) Continued efforts to strengthen the management base
By utilizing the human capital, technologies and customer bases in the digital field acquired
through investments focused on the IT and Industry sectors, as well as the acquisition andintegration of ABB’s power grid business in the Energy sector, we will further promote the reformof our business portfolio.
We will also promote the streamlining and optimization of business operations at thecompany-wide level, by utilizing digital technologies such as by reviewing business processes
adapted for remote work. At the same time, we will continue to promote investment yield
management using return on investment capital (ROIC), inventory asset reduction and reduced
working capital by each sector, in an effort to boost profitability and the ability to generate cash.

iii) Further initiatives to gain the trust of society
We reaffirm that gaining and maintaining the trust of society in quality, safety, andcompliance is one of the top priorities. In addition, we will proactively and continuously makeefforts to meet such needs of society or the times as promoting diversity in our workplace,
speeding up work-style reforms, and contributing to the environment and local communities.
To contribute to the creation of a sustainable society, we will newly established the advanced
goal of becoming “carbon neutral in in-house production by Fiscal 2030” in an effort to transform
ourselves into a leading company in the creation of environmental value. In addition to internal21

efforts to reduce carbon dioxide emissions by reviewing product designs, adopting energy-efficientmanufacturing equipment and other measures, we will also support customers and procurement
partners in their environmental efforts and accelerate initiatives to realize environmental value
through the entire corporate activities.

2) 5 focused sectors
Economic environment and challenges which five focused sectors as IT, Energy, Industry,
Mobility and Smart Life face are as follows.
(IT)
A great deal of attention is focused on digital transformation (hereinafter “DX”), an
initiative aimed at transformation of every corporate economic activity, business models that
underpin these activities and their organizations, cultures and systems by leveraging digitaltechnologies such as AI, IoT, robotics and next generation network standard, 5G, from theperspective of responding to market environment digitization. Due to the spread of the COVID19 pandemic since the beginning of 2020, the concept and value of businesses, as they pertain toconsumer activities and supply chains in particular, have hit a turning point globally, whilelifestyles and workstyles have undergone significant changes from a personal perspective. In thisnew normal, DX is expected to be accelerated even further amid growing needs for remotesolutions, non-contact applications, and automation such as the elimination or reduction of labor.
In the IT sector, we will aim to become one of the top-tier solution providers in the world
while simultaneously seeking to meet the expectations of domestic and overseas customers andcreate a sustainable society by leveraging digital technologies. There is concern about sluggish
demand for IT going forward due to the spread of COVID-19. However, momentum forinvestments is growing as DX is being accelerated on a global basis, facilitating thetransformation of corporate management and business models through digital technologies. We
will respond to these needs and enhance social value by promoting the digital solution business inthe areas of advanced financial institutions and social infrastructure while simultaneously seeking
to improve environmental efficiency throughout the life cycle of products and services, and create
environmental value.
The IT sector drives all of our business areas as the core of the Lumada business. During theterm of the 2021 Mid-term Management Plan, the IT sector continues to pursue essential
investments for growth while seeking M&A and strategic partnering opportunities to acquirebusiness resources such as human capital and business bases and striving for the promotion ofdigital talents training and expansion, development of progressive digital technologies among
other things as a reinforcement of organization for global expansion of Lumada business.
(Energy)
Energy demand is growing globally against the background of social innovations, such as arise in the size of data centers, industrial electrification and the introduction of EV for more
applications, in addition to an increase in population and economic growth. Given the need for22measures against climate change, there is global acceleration in the movement toward the
reduction of CO2 emissions and de-carbonization. On the other hand, more than one billion
people are forced to live without electricity due to a serious shortage of electric power indeveloping countries. To address these challenges, Hitachi seeks to offer energy solutions bytaking advantage of the combination of OT, IT and products in a range of business areas,
including those of renewable energy and power grids.
In the Energy sector, we will provide energy solutions, such as nuclear power generation
systems, renewable power generation systems, power grid systems, and predictive diagnosis andremote monitoring services for plants by taking advantage of a combination of OT, IT andproducts to help customers provide energy stably and reduce CO2 emissions, and contribute to
the creation of a low carbon/decarbonized society. The sector that plays a central role in Hitachi’s
Social Innovation business will continue to contribute to the creation of environmental value.
The Energy sector will develop sophisticated energy management systems such asenhancement of management and optimization of maintenance and inspection at energy-related
facilities with Lumada, leveraging expertise and digital technologies which Hitachi has beencultivating. The Energy sector will also strengthen the Lumada-based grid solutions and services
business through the integration of the ABB's power grid business with the global top technology
and a track record, while accelerating the expansion of the global business by leveraging its
expertise and resources.
(Industry)Markets have been changing more rapidly and complexly than ever in many industries due
to a decrease in the working-age population, the intensification of global competition, climatechange and resource shortages. In this situation, significant changes are occurring in people’s
lifestyles and corporate activities due to the impact of COVID-19, resulting in an unprecedented
increase in expectations for the creation of new services and innovations that use advanced digitaltechnologies, such as AI, IoT and robotics, in a variety of areas.
In the Industry sector, we will seek to become the best solution partner for industrial sector
customers by taking advantage of a combination of OT, IT and products, namely, a uniquestrength that the Hitachi Group offers. We will aid customers from the manufacturing anddistribution industries to “implement production and provide services more efficiently” byoffering solutions that contribute to the enhancement of productivity and quality, “create a secureand safe water environment” for 70 million people per day globally by improving the watersupply and sewerage infrastructure and using seawater desalination technologies, and “reduce
CO2 emissions” by facilitating product energy-saving to create social value, environmental value
and economic value.
To meet these goals, the Industry sector, utilizing Lumada, will globally provide total
seamless solutions that resolve and optimize the challenges underlying the value chain frommanagement to field operations, and from procurement to manufacturing, distribution, sales,
services and maintenance with digital technologies.
(Mobility)
In the building systems business, demand for maintenance and renovation services andexpectations for new solutions that enhance buildings’ added value through the use of digitaltechnologies are rising, in addition to demand for the installation of new elevators and escalators.
The railway system business is expected to grow in the long term against the background of anincrease in the global population, urbanization and climate change.
In the Mobility sector, we provide solutions that will be part of clean and highly efficient
smart cities to people around the world, including smart solutions to facilitate faster, more ecofriendly movement between cities, to reduce the level of dependency on vehicles in cities and toorganize the flow of people in high-rise buildings. We will provide social value through safe,
secure and comfortable mobility services, and products/services that solve issues which arise inurban space including buildings. In addition, we will reduce CO2 emissions by realizing services
that facilitate movements with a low level of environmental loads, and in so doing, strive tocreate environmental value.
23

In particular, in the building systems business, the Mobility sector will upgrade andexchange solutions utilizing Lumada by taking advantage of the Hitachi Group’s strong resources
for digital technologies such as IoT and AI in addition to offering products such as elevators andservices boasting excellent technical capabilities and competitiveness. In the railway systems
business, the Mobility sector will enhance added value of maintenance services by analyzing thedata collected from railway vehicles, as well as providing safe, secure and comfortable mobility
services through contributing to total solutions such as operational management and unmannedautonomous driving.
(Smart Life)The automotive industry, to which the automotive systems business provides products andservices, is bracing for an era of revolution reputedly for the first time in the last one hundredyears against the background of growing social needs for a reduction in the environmental load,
further improvement in comfort, and curbing of traffic accidents through safety enhancements ,and consequently, competition is intensifying in areas related to core automotive technologies,
such as those associated with electrification, internet connectivity and self-driving. With respect
to the life science area, for which the healthcare business is responsible, strong growth isexpected to continue because there are many unmet potential needs.
In the Smart Life sector, under the key concepts of health, safety and comfort, we will createsocial value, environmental value and economic value by forming livable communities for all andcontributing to the improvement of the quality of people’s lives. Through the provision of theparticle beam cancer therapy system, we will ensure that people can undergo cancer treatment
while living ordinary lives; through the provision of connected home appliances, we will help
people around the world enjoy rich lives; through auto driving technologies, we will contribute to
the elimination of traffic accidents; and through electrification and IoT technologies, we will
reduce CO2 emissions from products and contribute to the prevention of global warming. In
addition, we will improve profitability by replacing businesses and implementing operational
reforms, and move forward with business structural reforms.
As described above, the Smart Life sector will contribute to more convenient and enrichedlives through connecting automobiles, home appliances, healthcare devices and other equipmentthat supports people’s daily lives to the Internet and utilizing data analysis technology of Lumada
for remote operation and management and the automation while striving to expand the Lumada
business mainly in the smart city market in Asia amid growing urbanization. The Smart Life
sector leads itself to the next growth of digital services business expansion through establishingsuch Lumada business models.
(3) Targets under the mid-term management plan
Under the "2021 Mid-term Management Plan," the Hitachi Group utilizes the following
targets to measure performance in terms of meeting its strategic and operational goals:
Fiscal 2021
TargetReason for selection as indicators

Over 3%

Indicator to measure growthOver 10%

Indicator to measure profitability

Annual growth rate for revenues
Adjusted operating income margin(Note 1)
Operating cash flow: cumulative
for 3 years
Return on invested capital (ROIC)(Note 2)
Overseas revenue ratio

Over 2.5 trillion yen
Over 10%
Over 60%

Indicator to measure ability togenerate cash
Indicator to measure investment
efficiency
Indicator to measure globalization(Notes) 1. Adjusted operating income is presented as revenues less cost of sales as well as selling,
general and administrative expenses. Adjusted operating income margin is the ratio
calculated by dividing adjusted operating income by revenues.
24

2. ROIC (Return on Invested Capital) = ("NOPAT" + Share of profits (losses) ofinvestments accounted for using the equity method) / “Invested Capital” x 100
NOPAT (Net Operating Profit after Tax) = Adjusted Operating Income x (1 – Taxburden rate)
Invested Capital = Interest-bearing debt + Total equity
In addition to providing the economic value described above, under its Mid-Term
Management Plan the Group aims to provide social value, including safe and comfortable mobile
services, a safe and secure water environment and support for accelerating innovation, as well as
environmental value, including a reduction in CO2 emissions in the value chain, an improvement
in water-use efficiency and an improvement in resource-use efficiency.

25

2. Risk Factors(1) About Risk Management
We aims to understand and analyze the changing business environment every day, and to create newrevenue opportunities while controlling risk. To do this, we maintain a clear understanding and analysis of
the operating environment, taking into account social issues as well as our competitive advantages andmanagement resources, and conduct risk management with an eye toward the many risks the Company
should be prepared for as well as opportunities for growth..
With respect to such various risks, each department strives to appropriately grasp and respond to risks
and opportunities, and reflects them in reporting to management executives and management strategies.
As a major, we have the following initiatives:
Risks related to investments, etc.
In order to accelerate the global social innovation business under the situation of structuralchanges and uncertainties in the global economy, it is increasingly important to understand the risks
and opportunities of investments, etc such as M&A and large-volume project orders and to respond
appropriately.
While we make flexible decision-making by transferring authority according to the importancesuch as the scale of the project, we deliberate and make decisions about the risks and opportunities forinvestments, etc. in the Senior Executive Committee and Board of Directors, based on the report ofInvestment Strategy Committee.
After the execution of investments, etc., we monitor the situation such as achievement of the
purpose, business growth, improvement of asset efficiency, etc. In addition, we have established"EXIT rules" to determine business investment destinations that may have an important impact onmanagement due to the expression of risk events, and to improve capital efficiency by managing
business continuity including withdrawal.
Through the above process, we are striving to further strengthen asset profitability and risk
tolerance, while grasping the risks before and after execution of investments.
Risks related to sustainability
Social and environmental issues, including climate change, resource depletion, the curtailment ofbusiness activity due to significant disasters, and social instability due to growing inequality, arehaving a substantial impact on corporate value creation and business models. And such a drasticchange in the business environment, companies must have a clear understanding of opportunities andrisks and take appropriate measures if they are to achieve sustainable growth over the long term.
The company is able to gain a clear understanding of sustainability-related risks, and accordingly
take appropriate action, thanks to the efforts of the Executive Sustainability Committee and otherrelated committees. We remain actively engaged in promoting our own sustainable growth while
contributing to the realization of a sustainable society by seeking out business opportunities
contributing to the resolution of important domestic and overseas issues, including those relevant to
the UN Sustainable Development Goals (SDGs) and Society 5.0., which is a human-centered societythat balances economic advancement with the resolution of social problems by a system that highly
integrates cyberspace and physical space.
(2) Risk Factors
We conduct business on a global scale across a broad range of business areas and utilize sophisticated,
specialized technologies to carry out our operations. Therefore, we are exposed to risks attributable to theeconomic environment, risks inherent in individual industrial sectors and business lines and risks related toour operations. Investment in our securities also involves risks.
The following risks and countermeasures are based on assumptions we consider reasonable as of thedate of submission of this report. The countermeasures below will not necessarily eliminate the effects of
the risks and may not effectively mitigate the effects.

261) Risks Related to COVID-19
The spread of COVID-19 has caused restrictions on movement, including lockdowns on cities and stay-at-home orders and requests, closures of business establishments, restrictions on production activities,
decreases in consumer spending and capital expenditure, supply chain disruptions, sporadic violent
fluctuations on capital markets worldwide and deterioration in the financing environment. As aconsequence, it has caused economic deterioration of the world and had adverse effects on the Group’sbusinesses, financial position and operating results. The coronavirus may have additional adverse effects
depending on its future course.
The effects that the COVID-19 is expected to have on our business in each segment are as follows.

Effects on results of operations in the fiscal year ended March 31, 2020 are described in “3.
Management’s Discussion and Analysis of Consolidated Financial Condition, Results of Operations andCash Flows.” Accounting estimates policy is described in “Consolidated Financial Statements ― Notes toConsolidated Financial Statements ― (2) Basis of Presentation.” and “Basis of Presentation and Financial
Statements.”
In response to those risks, we are continuing manufacturing activities as far as safety is ensured,making preparations to resume manufacturing activities promptly after COVID-19 subsides, bringing indiverse ways of working, including remote work, while enhancing the digital environment, strengthening
cash management, and cutting cost by changing the business structure.
2) Risks Related to Market
Economic Trends
Our business is influenced by the global economy and economic conditions in certain regions orcountries. We are affected by downward economic trends in regions, countries and Japan. Such economic
conditions could cause decline in consumer spending or capital investment and subsequently reduced
demand for our products, systems and services, which could adversely affect our business, financial
condition, and results of operations.
In response to this risk, we combine the many different aspects of the Social Innovation Business in arange of business fields and regions.

27

Currency Exchange Rates Fluctuations
Since we conduct business in many foreign countries, our business activities are exposed to risks fromfluctuations in foreign currency exchange rates. We sell products, provide services and purchase raw
materials and components in local currencies. Therefore, fluctuations in foreign currency exchange rates
may result in lower revenues or higher costs in yen to us and thus affect our results of operations, which arereported in Japanese yen. Our price competitiveness may decline if we seek to increase prices in local
currencies to compensate for lower revenues or to increase prices in yen to absorb the higher cost, and thus
our results of precautions may be harmed. In addition, since we hold assets and liabilities denominated inforeign currencies, fluctuations in foreign currency exchange rates may adversely affect our financial
condition presented in Japanese yen through foreign currency translation.
The table below shows the foreign exchange sensitivity for the fiscal year ending March 31, 2021
(impact of exchange rate fluctuation by one-yen fluctuation from the forecasted rate) estimated as of June30, 2020.
Foreign exchange sensitivity (Billions of yen)
Currency

Forecast

Revenues

Adjusted Operating Income

U.S. dollar

105 yen／U.S. dollar

17.0

1.5

Euro

120 yen／Euro

4.0

1.0

To mitigate the risk, we hedge the foreign exchange risks using forward exchange contracts andcurrency swap agreements and promotes our strategy of selling locally produced goods and services.
Access to Liquidity and Long-term Financing
Our primary sources of funds are cash flows from operations, borrowings from banks and otherinstitutional lenders, and funding from capital markets, such as offerings of commercial paper and otherdebt securities, as well as equity securities. We need liquid funds to pay our operating expenses, theprincipal of and interest on our debt and dividends on our capital stock. We also need long-term financing
to fund, among other things, capital expenditures and research and development expenses. We currently
believe our cash flows from operations, borrowings from banks and other institutional lenders and funding
from the capital markets can provide sufficient funding for our operations and other liquidity needs.
However, a global economic downturn could adversely affect our cash flows from operations, businessresults and financial condition and may adversely affect our credit ratings. If our ratings are downgraded,
our ability to obtain additional financing on terms we consider favorable may be negatively affected.
Our reliance on banks and institutional lenders exposes us to risks related to rising interest rates, andwe may need to increase our reliance on external sources of funding. An increased reliance on debt
instruments may adversely affect our credit ratings, which might affect our ability to successfully obtain
additional financing on terms we consider favorable. The inability to successfully obtain such financing
may increase our financing costs, and therefore could adversely affect our financial condition and results ofoperations. To reduce risks related to rising interest rates, we enter into interest rate swap agreements
Furthermore, failure of one or more of our major lenders or a decision by one or more of them tochange the terms and conditions of their loans or to stop lending to us could have an adverse effect on ouraccess to funding.

28Marketable Securities Risks
We invest in securities to maintain or promote our business or other relationships with othercompanies. These securities are exposed to the risk of declining stock prices. Such declines may requirethat we write down equity securities that we hold. Further, contractual and other obligations may require us
to maintain our holdings of these securities despite declining share prices and this may lead to material
losses.
The table below shows the number of stock names and balance sheet amount of the stocks theCompany owned at the end of the fiscal year ended March 31, 2020.
Number of

Total amount recorded

stock names(stock names)in the balance sheet(millions of yen)

Unlisted stocks

178

39,925

Others55

101,934

To deal with those risks, we, under the basic policy, will not acquire and hold other companies’
shares except for cases where acquiring or holding such shares is necessary in terms of transactions orbusiness relationship. The Company also promotes reducing shares that it already owns unlesssignificance of holding shares and economic rationales of holding are confirmed. Policy forshareholding and examination of the reasonableness of holding Equity securities held for purposes
other than pure investment are described in “Ⅳ. Information on the Company - 4. Corporate
Governance, etc. - (5) Information on shareholdings.”
3) Risks Related to Business Environment
Material and Component Procurement
Our manufacturing operations rely on external suppliers for supplies of materials, parts, components
and services of adequate quality and quantity, delivered in a timely manner at a reasonable price. External
suppliers may not have sufficient capacity to meet all of our needs during periods of excess demand.
Shortages of materials, parts, components and services may cause a sharp rise in their prices. In addition,
prices of certain raw materials, parts and components which we purchase in local currencies, principally the
U.S. dollar and the euro, could be adversely affected by fluctuations in foreign currency exchange rates.
Increases in the market price of petroleum and other materials, such as copper, steel, synthetic resins, rare
metals and rare-earth minerals, can increase our production costs and may adversely affect our results ofoperations. Conversely, decreases in commodity prices, such as for raw materials, parts and components,
can result in write-downs of inventory. If natural disasters disrupt the operations of our suppliers anddamage supply chains, it may adversely affect our production. If there are violations of laws or regulations
at suppliers, including infringements of rights of workers such as child labor and forced labor, ourreputation as an entity that places orders may decline and the stable procurement of raw materials or parts
from the suppliers may be hindered, which may adversely affect our business, financial condition andresults of operations.
To deal with those risks, we establish close relationships with suppliers, appropriately react tochanges in demand in different regions, promoting a strategy of selling locally produced goods andservices, formulates a business continuity plan (BCP) at domestic bases and major bases overseas tostrengthen the abilities to deal with business interruption risk and use and strengthen the procurement
function of our entire group. To prevent violations of laws and regulations at suppliers, we carry out
inspections and audits using questionnaires and initiatives to promote their understanding.

29

Estimates, Fluctuations in Cost and Cancellation of Long-term Projects
We enter into a substantial number of long-term projects, particularly in connection with theconstruction of infrastructure systems. When the outcome of a construction can be estimated reliably, we
recognize revenue and expenses by reference to the stage of completion of the contract activity. In this case,revenue is recognized mainly based on the progress of the project mostly based on the cost incurred relative
to the estimated total cost. When the outcome of a construction cannot be estimated reliably, we recognize
revenue only to the extent of contract costs incurred that it is probable will be recoverable, and recognize
contract costs as expenses in the period in which such costs are incurred. The revenue recognition for suchlong-term projects requires us to make significant assumptions about the estimated total cost, estimatedtotal selling price, contract risks and other factors. However, these estimates are subject to change. We
regularly review these estimates and adjust them as we deem necessary. We charge any anticipated losses
on fixed price contracts to operations when we are able to estimate such losses. While we employ our best
judgment based on available information, these estimates are subject to change. Fluctuations in costs canoccur for a variety of reasons, many of which are beyond our control. In addition, we or our counterparties
may cancel these contracts. These factors would require us to revise our initial assumptions regarding aparticular contract, and may adversely affect our business, financial condition and results of operations.
To deal with those risks, we aim to identify and manage risks before the execution of contracts, andour operating division and finance division continue to manage and share identified risks after the executionof contracts for accurate estimates in a timely manner.
Intense Competition
We are subject to intense competition in many of the markets in which we operate, and this may
adversely affect our results of operations. We compete with diverse competitors ranging from huge global
corporations to specialized companies. Advanced products, systems and services are becoming general use
products. The production and development of them and the provision of services in low-cost regions, anduse of the cloud and automation are expanding. As a result, price competition is intensifying. To succeed inthis competitive environment, we believe that our products, etc. must be price competitive. The
commoditization of such products, etc. affects our ability to set prices for our products, etc. If we are unable
to charge comparable prices to those of our competitors, our competitiveness and overall profitability may
be harmed. On the other hand, charging comparable prices to those of our competitors may require us tosell products and services at a loss. Our products, etc. must also be competitive in terms of engineeringsophistication, quality and brand value. We must introduce our products and services to the markets in atimely manner. There can be no assurance that the products, etc. that we offer will be competitive. The
failure of such products, etc. to be competitive may negatively affect our business, financial condition andresults of operations.
To deal with those risks, we promote enhancing innovation through research and development,
expansion of digital solutions with Lumada, collaborative creation with customers and strives to produce
high value-added products.
Dependence on Specially Skilled Personnel
We believe recruiting and retaining additional people who are highly skilled in connection with ouroperations is indispensable to remaining competitive. We look particularly for human resources who canwork globally, those who can identify customer needs, working near them, and provide optimal solutions
and services and those who can take the lead in digital transformation. However, the number of skilled
personnel is limited and the competition for attracting and maintaining such personnel is intense. We cannot
ensure that we will be able to successfully attract new or maintain our current skilled personnel.
To deal with the risk, we expand overseas direct recruitment of digitally savvy human resources to hire
human resources needed in Japan and overseas in a timely manner. We create employee-friendly
workplaces where diverse human resources work and employs excellent global human resources in a
globally common personnel system. Using a group-wide, globally common learning management system
and an in-house education program, we aim to maintain and cultivate excellent human resources.

30

Rapid Technological Innovation
New technologies are rapidly emerging in the segments in which we conduct business, with the paceof technological innovation. The development of new and advanced technologies, the continuous, timely
and cost-effective incorporation of such technologies into products, systems and services and the effective
marketing of such products, etc. are indispensable to remaining competitive. It is important to respond totechnological innovations, including 5G (fifth-generation mobile communications system), automation andelectrification using the technologies such as AI, the IoT and robots, remote and non-contact technologies
and environmentally friendly technologies. While introducing such products, etc. requires significant
resource commitment to research and development, there can be no assurance that our research anddevelopment will be successful. Failure in our endeavors to develop and incorporate such advanced
technologies into products and services in a timely manner, or to achieve market acceptance for suchproducts, etc., may negatively affect our business, financial condition and results of operations.
To mitigate those risks, we promote open innovation involving industry, government and academia,
recruit and cultivate digitally savvy human resources and strengthens Lumada. Through those activities, wework to create an innovation ecosystem.
Supply and Demand Balance
Oversupply in the markets in which we compete may lead to declines in sales prices, revenues andprofitability. In addition, adjustment to demand may force us to dispose of excess supply or obsolete
equipment or reduce production, which can result in losses. For example, the imbalance between supply
and demand in information systems, construction machinery and automotive equipment industries and a
resultant deterioration in market conditions could negatively affect our businesses, financial condition andresults of operations.
To deal with those risks, we work to strengthen the competitiveness of our products, etc. and control
the supply and inventory of products, etc. based on demand forecasts.
Credit Risks Arising from Business Transactions
We make transactions with diverse customers and suppliers in Japan and other countries. We sell our
products to certain customers on credit and pay in advance for products or services provided by certain
suppliers. Credit deterioration or failure of one or more of them could adversely affect our financial
condition, results of operations and cash flows.
To deal with those risks, we take measures to manage counterparty credit risk, such as regularly
monitoring credit conditions of such customers or suppliers and setting a limit on transaction amountaccording to their credit conditions.
4) Risks Related to Management Policy and Strategy
Our Strategy to Strengthen Our Social Innovation BusinessOur business strategy seeks to build our business portfolio and achieve a stable and profitable businessstructure mainly by strengthening our Social Innovation Business, which supplies advanced social
infrastructure supported by information and communication technology. We plan to devote significant
resources including capital expenditures and R&Ds and are making investments in mergers and acquisitions
and in new projects to strengthen our Social Innovation Business. In addition, we attempt to design suitableorganizational structure for promoting our Social Innovation Business more effectively in response tomarket changes. To implement this strategy, we have incurred and may continue to incur considerable
expenses. Our efforts to implement this strategy may be unsuccessful or less successful than we currently
anticipate. Even if these efforts are successful, there is no assurance that we will be able to sustain or
increase profitability.
To deal with those risks, we work to manage implementation in a phase gate process in each business
unit (BU) and analyze and discuss market trends, trends at competitors, technological trends and potential
risks, among other issues, from a range of perspectives, in the Investment Strategy Committee, Business
Strategy Committee, Senior Executive Committee, the Board of Directors and Audit Committee.

31Acquisitions, Joint Ventures and Strategic Alliances
In every operating sector, we depend to some degree on acquisitions of other companies, joint venturesand strategic alliances with outside partners to design and develop key new technologies and products, tostrengthen competitiveness by scaling up and to expand into new regions through acquiring local bases or
distribution channels. The matters which may have adverse effects on our financial condition or
profitability are described in “Consolidated Financial Statements - Notes to Consolidated Financial
Statements - (5) Business Acquisitions and Divestitures.” Such transactions are inherently risky because of
the difficulties in integrating operations, technologies, products and personnel and achieving return of theinvestment. Integration issues are complex, time-consuming and expensive and, without proper planningand implementation, could adversely affect our business. Decisions made by or the performance of alliancepartners that we cannot control or adverse business trends may also negatively affect the success of ouralliances. We may incur significant acquisition, administrative and other costs in connection with thesetransactions, including costs related to integration or restructuring of acquired businesses. If it is expectedthat the amount invested is irrecoverable due to a decline in the profitability of an investee, we may incur
significant losses, including impairment loss for goodwill. There can be no assurance that these transactions
will be beneficial to our business or financial condition. We recorded goodwill of 204,243 millions of yen
in the IT segment and 158,010 millions of yen in the Industry segment as of March 31, 2020. The amountof goodwill in each segment is described in “Consolidated Financial Statements - Notes to Consolidated
Financial Statements - (4) Segment Information.” Even assuming these transactions are beneficial, there
can be no assurance that we will be able to successfully integrate acquired businesses or achieve all or anyof the initial objectives of these transactions.
To deal with those risks, we work to manage implementation in a phase gate process in eachbusiness unit (BU) and analyze and discuss market trends, strategies, purchase prices, PMI (post-merger
integration) processes and potential risks, among other issues, from a range of perspectives, in theInvestment Strategy Committee, Senior Executive Committee, the Board of Directors and Audit
Committee.
Restructuring of Our BusinessOur business strategy seeks to build our business portfolio and achieve a stable and profitable businessstructure in part by:・ closing unprofitable operations;・ divesting our subsidiaries and affiliated companies;
・ reorganizing production bases and sales networks; and・ selling select assets.
Our restructuring efforts may not be implemented in a timely manner or at all, including due togovernmental regulations, employment issues or a lack of demand in the M&A market for businesses wemay seek to sell. In addition, we have listed subsidiaries and from time to time the interests of these listed
subsidiaries’ shareholders may conflict with our interests. Such conflicts of interest may result indifficulties in timely implementing group-wide policies, including mergers, company splits and othersimilar transactions to which the listed subsidiaries are parties. Restructuring efforts may also bring about
unintended consequences, such as negative customer or employee perceptions, and have caused and may
continue to cause us to incur significant expenses and other costs, including additional impairment losses on
our fixed assets and intangible assets, write-offs of inventory and losses on the disposal of fixed assets andlosses related to the sale of securities. Current and future restructuring efforts may be unsuccessful or lesssuccessful than we presently anticipate and may adversely affect our business, financial condition andresults of operations.
To deal with those risks, we analyze and discuss market trends, strategies, sale prices, processes andpotential risks, among other issues, from a range of perspectives, in the Investment Strategy Committee,
Senior Executive Committee, the Board of Directors and Audit Committee.

32

Our Overseas Growth Strategies
We seek to expand our business, including our Social Innovation Business, in overseas markets as partof our business strategy. Through such overseas expansion, we aim to increase our revenues, reduce ourcosts and improve profitability. In many of these markets, we face barriers in the form of long-standing
relationships between our potential customers and their local suppliers. In addition, various factors inforeign countries where we operate may adversely affect our overseas business activities. These factors
include:・ changes in regulations relating to investments, exports, tariffs, antitrust, anti-bribery, consumer andbusiness taxation, intellectual property, foreign trade and exchange controls, human rights, employment
and labor, environmental and recycling requirements;
・ differences in commercial and business customs such as contract terms and conditions;・ changes in labor relations and practices;
・ public sentiment against Japan and local residents’ sentiment against us, various groups’ criticism ofus; and・ other political and social factors as well as economic trends and currency exchange rate fluctuations.
Because of these factors, there can be no assurance that we will be able to achieve the aims of ouroverseas growth strategy. This may adversely affect our business growth prospects and results of operations.
For example, the discussion about the future relations after Brexit in the UK could have significant adverse
effects on our railway system business, which operates there.
To deal with those risks, we constantly determine global political and economic conditions andanalyze their effects on our businesses. Based on the analysis, we take group-wide steps.
Worsening of Business Performance of Equity-Method Associates and Joint Ventures
We use the equity-method to account for a number of associates and joint ventures. If one or more ofsuch associates or joint ventures, accounted for using the equity-method, records a loss during a given
period, we must record that loss in a manner proportionate to our ownership interest in our consolidated
financial statements. In addition, if the carrying amount of our equity-method investments in associates orjoint ventures is below the recoverable amount of the investments, we could be required to record an
impairment loss.
The table below shows investments accounted for using the equity method as of March 31, 2020.
Millions of yen
Segment

March 31, 2020

IT46,430

Energy22,819Industry

20,835

Mobility

56,782

Smart Life

66,801

Hitachi High-Tech

1,792

Hitachi Construction Machinery

32,866

Hitachi Metals

29,076

Hitachi Chemical

8,922

Others6,025

Subtotal

292,348

Corporate items and Eliminations

188,027

Total

480,37533

To deal with those risks, we promote investment income management using return on invested
capital (ROIC) and concentrate investment in fields where profitability and growth are high. We monitor
achievement of business plans and financial position at equity method affiliates in which we invest and sellbusinesses with low profitability and investee companies whose competitiveness we are concerned about.
Overhaul of Cost Structure
We implement “the Hitachi Smart Transformation Project,” which promotes cost reductions in all
activities of our value chain by thoroughly overhauling our cost structure across our group. We seek tostabilize earnings and generate strengthen cash flows by improving our management efficiency through the
Project. The Project may be less successful than we currently anticipate. Even if the Project is successful,there is no assurance that we will be able to sustain or increase profitability.
5) Other Risks Affecting the Overall Management
Significant Disasters, climate change and Similar Events
We have many facilities, including our R&D facilities, manufacturing facilities and our headquarters
in Japan. Historically, Japan has experienced numerous natural disasters such as earthquakes, tsunamis andtyphoons. Natural disasters in the future may have a significantly adverse effect on an array of ourcorporate activities, from production to sales. We also have overseas facilities in Asia, the U.S. and Europe,
which are also subject to similar natural disasters. Natural disasters in each of the areas may cause damage
on certain of our plants and offices and the operations of our suppliers and customers. Due to climatechange, large-scale natural disasters, including drought, rising sea levels, long heat waves and floods, may
become more serious. Such significant natural disasters may directly damage or destroy our facilities,
which could disrupt our operations, delay new production and shipments of existing inventory or result incostly repairs, replacements or other costs, all of which would result in significant losses. Furthermore,even if such significant natural disasters do not directly affect our facilities, they could result in disruptions
in distribution channels or supply chains. The spread of infectious diseases (see “1) Risks Related to
COVID-19”) and geopolitical and social instability, such as terrorism, crime, civil disturbance and conflict,etc., may also disrupt our operations, render our employees unable to work, reduce consumer demand forour products or disrupt our supply and distribution channels. In addition, we are not insured against all
potential losses, and even losses that insurance covers may not be fully covered and may be subject tochallenges of or delays in payment. Direct and indirect disruption of our operations as a result of natural
disasters or other events could have a negative impact on our operating activities, results of operations andfinancial condition.
To deal with those risks, we work to strengthen its ability to deal with business interruption risk byformulating BCPs. When we build a new plant, we determine the layout, taking into consideration possible
floods.

34

Litigation and Regulatory Investigations
We face risks of being involved in litigation and alternative dispute resolution and regulatory
investigation and actions in connection with our operations. Lawsuits or any other legal procedures forresolving disputes and regulatory actions may seek payment of large, indeterminate amounts or otherwise
limit our operations, and their existence and magnitude may remain unknown for substantial periods oftime.
In past, we have been the subject of several investigations of alleged antitrust violations in relation tocertain product markets in Japan, Europe and North America, etc. and received claims for damages fromour customers, etc., which may have adverse effects on our financial condition or profitability. See“Consolidated Financial Statements - Notes to Consolidated Financial Statements - (30) Commitments andContingencies.” These investigations or disputes may result in significant penalties or compensation fordamages, etc. Such substantial legal liability or regulatory action could have an adverse effect on ourbusiness, results of operations, financial condition, cash flows, reputation and credibility.
In addition, our business activities are subject to various governmental regulations in countries where
we operate, which include investments, exports, tariffs, antitrust, anti-bribery, consumer and businesstaxation, intellectual property, foreign trade and exchange controls, human rights, employment and labor,
environmental and recycling requirements. These regulations limit, and other new or amended regulations
may further limit, our business activities or increase operating costs. In addition, the enforcement of such
regulations, including the imposition of fines or surcharges for violation of such regulations, may adversely
affect our results of operations, financial condition, cash flows, reputation and credibility. For example,
environmental regulations in response to climate change and tax related to carbon emissions for shifting toa low carbon society and energy consumption tax could adversely affect, our business and results ofoperations chiefly by increases in operating costs due to tax and emissions trading and losses ofopportunities due to delays in technology development for environmentally friendly products and services.
Regulations for protecting personal data also could adversely affect our business.
To deal with those risks, we work to identify operations where regulations are applied, assess risks,
take steps in response to risks and provide education to employees. Responding to environmental
regulations, we work to improve efficiency in production and promotes use of no-carbon and low-carbon
energy and strive to develop and expand sales of innovative products and services that will reduce CO2
emissions.
Product Quality and Liability
We increasingly provide products and services utilizing sophisticated technologies. Reliance on
external suppliers reduces our control over quality assurance. The occurrence of defects in our products andservices could negatively affect our reputation for quality of products and services, expose us to liability fordamages caused by such defects and negatively affect our ability to sell certain products. A significant
product defect could adversely affect our results of operations, financial condition and future businessprospects.
To deal with those risks, in addition to strengthening our quality assurance system, we conduct
activities to prevent accidents and comply with technical laws and regulations. We provide education on
thorough risk assessment, quality, reliability and reactions when product accidents occur.
Dependence on Information Systems
With the increased importance of information systems to our operating activities, disruptions in such
systems due to computer viruses and other factors could have a negative impact on our operating activities,
results of operations and financial condition. The expansion of remote work is at risk of generating new
security risks, including information leakage.
To deal with those risks, we continuously promote cybersecurity measures and strictly prescribe andimplement rules, products and procedures that apply to remote work. However, they may not be effective if
unprecedented cyberattacks occur, such as cyberattacks targeting the Tokyo Olympic and Paralympic
Games planned in 2021, or there are any vulnerabilities in systems that are not managed by us.

35

Management of Confidential Information
We maintain and manage personal information obtained from our customers, as well as confidential
information relating to our technology, research and development, or R&D, production, marketing andbusiness operations and those of our customers and clients, in various forms. Unauthorized disclosures ofsuch information could subject us to complaints or lawsuits for damages or could otherwise have a negative
impact on our business, financial condition, results of operations, reputation and credibility.
To deal with those risks, we establish and implement rules on the management of confidential
information and implement identity management and access control through encryption and the building ofauthentication infrastructure. We also examine information security at suppliers.
Intellectual Property
We depend in part on proprietary technology and our ability to obtain patents, design right, trademarks
and other forms of intellectual property rights covering our products, product design, manufacturing
processes and software-based services in Japan and other countries. The fact that we hold such intellectual
property rights does not ensure that they will provide a competitive advantage to us. Various parties may
challenge, invalidate or circumvent our patents, design right, trademarks and other intellectual property
rights. There can be no assurance that claims allowed on any future patents will be sufficiently broad toprotect our technology. Effective patent, design right, copyright and trade secret protection may be
unavailable or limited in some of the markets in which we operate, and our trade secrets may be vulnerable
to disclosure or misappropriation by employees, contractors and other persons.
To deal with those risks, we search known examples before applying for intellectual property rights toincrease the probability of obtaining rights and to obtain rights suitable for business. In countries whereintellectual property protection is unavailable or limited, we strive to curb unauthorized use of intellectual
property primarily through contracts with employees and contractors.
We design many of our products to include software or other intellectual property licenses from third
parties. Competitors may not make their protected technology available to us, or may make it available tous only on unfavorable terms and conditions. There can be no assurance that we will be able to maintain alicense for such intellectual property if obtained, for economic or other reasons, or that such intellectual
property will give us the commercial advantages that we desire.
To deal with those risks, we endeavor to maintain good relations with the third parties throughcontracts and negotiations to exercise intellectual property rights.
From time to time, we are sued or receive notices regarding patent, design right and other intellectual
property claims. Whether or not these claims have merit, they may require significant resources to defend
against and may divert management attention from our business and operations and result in harm to our
reputation. In addition, a successful infringement claim and our inability to obtain the license for the
infringed technology or substitute similar non-infringing technology may adversely affect our business.
To deal with those risks, we work to avoid disputes with other companies chiefly by conducting apatent clearance study before selling a new product or providing a new service and by changing the designof products or services if necessary.

36

Employee Retirement Benefits
We have a significant amount of employee retirement benefit costs that we derive from actuarial
valuations based on a number of assumptions. Inherent in these valuations are key assumptions used inestimating pension costs including mortality, withdrawal and retirement rates, changes in wages and thediscount rate. We are required to make judgments regarding the key assumptions by taking into accountvarious factors including personnel demographics, market conditions and expected trends in interest rates.
Although management believes that its key assumptions are reasonable in light of the various underlying
factors, there can be no assurance that the key assumptions will correspond to actual results. If our key
assumptions differ from actual results, the consequent deviation of actual pension costs from estimatedcosts may have an adverse effect on our financial condition and results of operations. A decrease in the
discount rate may result in an increase in the amount of projected benefit obligations. In addition, we may
change these key assumptions, such as the discount rate. Changes in key assumptions may also have an
adverse effect on our financial condition and results of operations.
To mitigate the risk, on April 1, 2019, we changed the corporate pension plan for employees of theCompany from a defined contribution plan to a risk-sharing corporate pension plan to fix the Company’s
premium payments and reduce investment risks.

376) Risks Related to Our American Depositary Shares
Rights of ADS holders
The rights of shareholders under Japanese law to take actions, including voting their shares, receiving
dividends and distributions, bringing derivative actions, examining our accounting books and records andexercising appraisal rights are available only to shareholders of record. Because the depositary, through its
custodian agents, is the record holder of the shares underlying the American Depositary Shares, or ADSs,
only the depositary can exercise those rights in connection with the deposited shares. The depositary will
make efforts to vote the shares underlying ADSs in accordance with the instructions of ADS holders andwill pay dividends and distributions collected from us as and to the extent provided in the deposit
agreement. However, ADS holders will not be able to bring derivative actions, examine our accounting
books and records, or exercise appraisal rights through the depositary.
We are incorporated in Japan with limited liability. A significant portion of our assets are locatedoutside the United States. As a result, it may be more difficult for investors to enforce against us judgments
obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of theUnited States or judgments obtained in other courts outside Japan. There is doubt as to the enforceability inJapanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil
liabilities predicated solely upon the federal securities laws of the United States.
Unit Share System
The Companies Act allows companies to establish a “unit” of shares for the purpose of exercising
voting rights at the general meetings of shareholders. Under our articles of incorporation, one unit of ourshares is composed of 100 shares, equivalent to 50 ADSs. Each unit of our shares has one vote. A holder
who owns shares or ADSs in other than multiples of 100 or 50, respectively, will own less than a whole unit
(i.e., for the portion constituting fewer than 100 shares, or fewer than 50 ADSs). Our articles ofincorporation, in accordance with the Companies Act, impose significant restrictions on the rights ofholders of shares constituting less than a whole unit, which include restrictions on the right to vote, toattend a shareholders meeting and to bring derivative actions. In addition, less than whole unit sharescannot be traded on Japanese stock markets. Under the unit share system, holders of our shares constituting
less than one unit have the right to require us to purchase their shares and the right to require us to sell them
additional shares to create a whole unit of 100 shares. However, holders of our ADSs are unable towithdraw underlying shares representing less than one unit and, as a practical matter, are unable to require
us to purchase those underlying shares. The unit share system, however, does not affect the transferabilityof ADSs, which may be transferred in lots of any number of whole ADSs.
Dilution of Your Shares by Issuances of Additional Shares
We may issue additional shares in the future within the unissued portion of our authorized sharecapital and sell shares held as treasury stock, generally without shareholder vote unless the subscription orsale price is significantly lower than the market price. Issuances and sales of our shares in the future may beat prices below the prevailing market prices and may be dilutive.
Foreign Exchange Fluctuations
Market prices for our ADSs may fall if the value of the yen declines against the U.S. dollar. In
addition, the amount of cash dividends or other cash payments made to holders of ADSs will decline if thevalue of the yen declines against the dollar.

38

3. Management’s Discussion and Analysis of Consolidated Financial Condition, Results of Operations andCash Flows(1) Progress of Management Plan
1) Status of Key Indicators laid out as Strategic and Operational Targets
The year ended March 31, 2020 was the first year of "2021 Mid-term Management Plan". While thebusiness environment deteriorates due to the spread of COVID-19, the Hitachi Group maintained its
profitability (adjusted operating income ratio of 7.5%) close to the level in the previous fiscal year andcash flows from operating activities reached a little more than 560.0 billion yen. It progressed theenhancement of our profitability and the ability to generate cash, as a result of strengthening the businessfoundation by focusing on the Social Innovation Business since the global financial crisis of 2007 to2008 and promoting business portfolio reforms. The key indicators to measure performances in terms ofmeeting our strategic and operational goals are as follows.
Year ended March 31, 2020
(Fiscal 2019)
Annual growth rate forrevenues
Adjusted operating income
marginOperating cash flow

Fiscal 2021 Target(7.5%)

Over 3%

7.5%

Over 10%(Fiscal 2019)
560.9 billion yen（Cumulative for three years from

Fiscal 2019 to Fiscal 2021）
Over 2.5 trillion yen

Return on invested capital(ROIC)

9.4%

Over 10%

Overseas revenue ratio

48%

Over 60%

2) Global Business Expansion‒ Acceleration of the reorganization to become a global leader
In the Energy sector, we acquired the power grid business from ABB, Ltd in Switzerland andcommenced its operation as Hitachi ABB Power Grids Ltd with the aim of global expansion andstrengthening of the energy solution business.
In the Industry sector, we acquired JR Automation Technologies, LLC in the United Statesthat builds production lines and logistics systems by utilizing industrial robots. We will strengthen the
robot systems integration business in North America, for which high growth can be expected.
In the automotive systems business, we acquired Chassis Brakes International B.V. in the
Netherlands and made a decision on management integration among three affiliates of Honda MotorCo., Ltd. and Hitachi Automotive Systems, Ltd. We will strengthen our competitiveness in theindustry where competition will be intensified toward next-generation technologies such as
autonomous driving and electrification.
We also promoted selection and concentration to build an optimum business portfolio, which
Hitachi aims for, including the sale of diagnostic imaging systems-related businesses in the healthcare
business, in addition to the reorganization of listed subsidiaries including the conversion of Hitachi
High-Tech Corporation with strengths in measurement and analysis technologies into a wholly-owned
subsidiary and the sale of Hitachi Chemical Company, Ltd.
‒ Progress in the Lumada businessIn the Lumada business that analyzes issues of customers from their data and provides
solutions by using advanced digital technologies of the Hitachi Group, we steadily expanded the areasof provision from the manufacturing industry to financial services, building systems and theentertainment industry. In Fiscal 2019, the Lumada business grew to make up 12%, or 1,037.0 billion
yen, of total revenues of the Hitachi Group.

39

In January 2020, our two subsidiaries in the United States were integrated to a new company,"Hitachi Vantara." The new company will drive the Lumada business by playing a central role inproviding sales, consulting and services globally as a one-stop company.
‒ Strengthening of the business foundation and response to management issues
We have been promoting the focus on the Social Innovation Business and the businessportfolio reforms for the last 10 years and built a strong business structure that is able to make a profit
and generate cash even under the effects of COVID-19.
In Fiscal 2019, we strengthened our ability to generate cash and the earnings structure bypromoting the sophistication of our business processes and production systems and cost structuralreforms, including the streamlining of sales and indirect operations. In addition, we also reached asettlement with Mitsubishi Heavy Industries, Ltd. regarding the dispute over the South African
projects conducted by Mitsubishi Hitachi Power Systems, Ltd. (“MHPS”) which had been one of ourmajor management issues.
(2) Analysis of Results of Operations
1) Analysis of Statement of Operations

40

Revenues decreased 8% to 8,767.2 billion yen, as compared with the year ended March 31, 2019
(Fiscal 2018). Revenues in all segments were adversely affected by the COVID-19. Revenues fellparticularly in Hitachi Metals, where demand declined in the automobile, semiconductor and factory
automation, in the Other segment where Hitachi Kokusai Electric Inc. became an equity-method
associate in June 2018, in the Energy sector, where projects related to new regulations in nuclear power
generation systems business declined and in the Smart Life sector, where business sell-off of car
information systems, etc. in automotive systems business.
Cost of sales decreased 8% to 6,396.8 billion yen, as compared with Fiscal 2018, and the ratio of
cost of sales to revenues was 73%, which was the same level as for Fiscal 2018. Gross profit decreased
6% to 2,370.3 billion yen, as compared with Fiscal 2018.
Selling, general and administrative expenses decreased 3% to 1,708.4 billion yen, as comparedwith Fiscal 2018, and the ratio of selling, general and administrative expenses to revenues was 19%,
which was the same level as for Fiscal 2018.
Adjusted operating income decreased by 93.0 billion yen to 661.8 billion yen, as compared with
Fiscal 2018. The decrease was due mainly to the lower profits in Hitachi Construction Machinery and
Hitachi Metals. The decrease was partially offset by increased profits in the Industry sector and the IT
sector.
Other income decreased 154.3 billion yen to 51.9 billion yen and other expenses increased 127.9
billion yen to 570.6 billion yen, as compared with Fiscal 2018, respectively. The main components are
as follows;- Net gain on sales and disposal of fixed assets was increased by 11.4 billion yen to 29.9 billion
yen, as compared with Fiscal 2018.
- Impairment losses decreased 208.0 billion yen to 136.9 billion yen, as compared with Fiscal
2018. This mainly reflected impairment losses recognized as the result of the suspension of the
UK nuclear power stations construction project posted in Fiscal 2018. The decrease waspartially offset by impairment losses owing to the lower than expected revenues for themagnetic material business in Hitachi Metals.
- Net gain on business reorganization and others decreased 164.9 billion yen to 19.6 billion yen,
as compared with Fiscal 2018, due mainly to net gain by selling shares of Hitachi Kokusai
Electric Inc. stock, shares of Clarion Co., Ltd. stock posted in Fiscal 2018 and decreased gains
by selling a part of shares of Agility Trains West (Holdings) Limited stock.
- Special termination benefits decreased 0.9 billion yen to 21.4 billion yen, as compared with
Fiscal 2018.
- The loss due to the settlement of the South African project conducted by MHPS was 375.9
billion yen- The settlement gain recognized at the time of the shift to a risk-sharing corporate pension plan
was 21.2 billion yen
Financial income (excluding interest income) decreased 7.9 billion yen to 5.7 billion yen andfinancial expenses (excluding interest charges) increased 5.5 billion yen to 9.0 billion yen, as comparedwith Fiscal 2018, respectively.
Share of gains (losses) of investments accounted for using the equity method improved 58.6 billion
yen to the gains of 43.6 billion yen from Fiscal 2018.
As a result of the foregoing, EBIT* decreased 330.2 billion yen to 183.6 billion yen, as comparedwith Fiscal 2018.
*EBIT (Earnings before interest and taxes) are the earnings before interest and taxes, which ispresented as income from continuing operations, before income taxes less interest income plus interest
charges.
Interest income decreased 2.4 billion yen to 20.6 billion yen, as compared with Fiscal 2018 andinterest charges increased 3.4 billion yen to 23.9 billion yen, as compared with Fiscal 2018.

41

Income from continuing operations, before income taxes decreased 336.2 billion yen to 180.2
billion yen, as compared with Fiscal 2018.
Income taxes decreased 135.0 billion yen to 51.2 billion yen, as compared with Fiscal 2018.
Loss from discontinued operations decreased 7.3 billion yen to 1.7 billion yen, as compared with
Fiscal 2018.
Net income decreased 193.7 billion yen to 127.2 billion yen, as compared with Fiscal 2018.
Net income attributable to non-controlling interests decreased 58.8 billion yen to 39.6 billion yen,
as compared with Fiscal 2018.
As a result of the foregoing, net income attributable to Hitachi, Ltd. stockholders decreased 134.9
billion yen to 87.5 billion yen, as compared with Fiscal 2018.
2) Operations by Segment
The following is an overview of results of operations by segment. Revenues for each segment
include intersegment transactions.
(IT)

Revenues decreased as compared with Fiscal 2018, due mainly to the lower sales of storage
systems for overseas market in the services & platforms business, despite higher revenues due mainly tothe increase in the domestic IT service in the front business.
Adjusted operating income increased as compared with Fiscal 2018, due mainly to the increase inoperating income in the front business, reflecting an improvement in profitability mainly through cost
cutting, despite the decrease in operating income in the services & platforms business due mainly to anincrease in strategic investment for expanding the digital solution business.
EBIT increased as compared with Fiscal 2018. EBIT in the services & platforms businessdecreased due mainly to the decrease in adjusted operating income, the recording of expenses forbusiness structure reform and the gain from selling the land of former production basis posted in theyear ended March 31, 2018. EBIT in the front business increased due mainly to the increase in adjusted
operating income.

42

(Energy)

Revenues decreased as compared with Fiscal 2018, due mainly to the effect of business transfer of
power receiving and transforming facilities business for industry field in the energy business as well as
the impact of COVID-19 and decrease of projects related to new regulations in nuclear energy business.
Adjusted operating income decreased as compared with Fiscal 2018, due mainly to the decreased
revenues and decline in profitability of some projects in the energy business.
EBIT worsened as compared with Fiscal 2018, due mainly to the loss due to the settlement of theSouth African project conducted by MHPS, despite the absence of impairment losses recognized as theresult of the suspension of the UK nuclear power stations construction project posted in Fiscal 2018.
(Industry)

Revenues decreased from as compared with Fiscal 2018. Revenues in the industrial products
business increased due mainly to a result of the business transfer of power receiving and transforming
facilities business from the Energy sector. Revenues increased also in the water & environment
business. Revenues decreased in the industry & distribution business due mainly to the impact of
COVID-19 and sales from an overseas EPC project posted in Fiscal 2018, despite increased revenues by
the acquisition of JR Technology Group, LLC.
Adjusted operating income increased as compared with Fiscal 2018, due mainly to an
improvement in income in the industry & distribution business, where provision for risk related to theoverseas EPC project was posted in Fiscal 2018.
EBIT increased as compared with Fiscal 2018, due mainly to the increased adjusted operating
income.

43

(Mobility)

Revenues decreased as compared with Fiscal 2018. Revenues in the railway systems businessdecreased, due mainly to the decreased revenues in the U.K. and the impact of foreign currencytranslation. Revenues in the building systems business decreased, due mainly to the impact of foreign
currency translation. In addition to the above, revenues were adversely affected by the COVID-19.
Adjusted operating income decreased as compared with Fiscal 2018, due mainly to the decreased
income in the railway systems business mainly due to a fall in revenues, despite increased income in thebuilding systems business due mainly to profitability improvement resulted from cost reduction, etc.
EBIT decreased as compared with Fiscal 2018, due mainly to the decreased gains by selling a partof shares of Agility Trains West (Holdings) Limited stock in the railway systems business.
(Smart Life)

Revenues decreased as compared with Fiscal 2018, despite increased revenues in the healthcare
business. This decrease due mainly to the lower revenues in the automotive systems business owing to
the impact of COVID-19 and business sell-off of car information systems, etc. and in the smart life &
ecofriendly systems business owing to the impact of COVID-19, respectively.
Adjusted operating income decreased as compared with Fiscal 2018, due mainly to the decreased
income in the automotive systems business owing to the decreased revenues, etc., despite increased
income in the healthcare business and the smart life & ecofriendly systems business.
EBIT decreased as compared with Fiscal 2018, due mainly to the business sell-off of car
information systems, etc. in the automotive systems business posted in Fiscal 2018 as well as thedecreased adjusted operating income.

44

(Hitachi High-Tech)

Revenues decreased as compared with Fiscal 2018, due mainly to a decrease in demand forindustrial materials, etc. and lower sales of liquid crystal display exposure systems as well as theadverse impact of COVID-19, despite higher sales of semiconductor processing equipment.
Adjusted operating income and EBIT respectively decreased as compared with Fiscal 2018, due
mainly to the decreased revenues.
(Hitachi Construction Machinery)

Revenues decreased as compared with Fiscal 2018, due mainly to the lower sales mainly in China
and India as well as the adverse impact of COVID-19 and foreign currency translation.
Adjusted operating income decreased as compared with Fiscal 2018, due mainly to the impact offoreign currency translation and increased indirect expenses as well as decreased revenues.
EBIT decreased as compared with Fiscal 2018, due mainly to the decreased adjusted operating
income and posting of business reorganization expenses, despite posting of gain on businessreorganization and others.

45

(Hitachi Metals)

Revenues decreased as compared with Fiscal 2018, due mainly to the adverse impact of COVID19 and a decrease in demand for products for automobile, semiconductor and factory automation as wellas the effect of business transfer of aluminum wheel business.
Adjusted operating income decreased as compared with Fiscal 2018, due mainly to the decreased
revenues as well as posting revaluation losses on inventories.
EBIT decreased as compared with Fiscal 2018, due mainly to the decreased adjusted operating
income as well as posting of impairment losses in the magnetic material business.
(Hitachi Chemical)

Revenues decreased as compared with Fiscal 2018, due mainly to the adverse impact of COVID19 and the foreign currency translation as well as a decrease in demand for products for semiconductor
and automobile.
Adjusted operating income and EBIT decreased as compared with Fiscal 2018 due mainly to thedecreased revenues.
(Others)
Revenues decreased 14% to 484.8 billion yen, adjusted operating income decreased 8.9 billion yen
to 23.3 billion yen and EBIT increased 1.0 billion yen to 31.2 billion yen, as compared with Fiscal
2018, respectively.

463) Revenues by Geographic Area
The following is an overview of revenues attributed to geographic areas based on customer location.

Japan
Revenues in Japan decreased as compared with Fiscal 2018. This was due mainly to thedecreased revenues in the Smart Life sector, where the automotive systems business recorded lower
revenues owing to business sell-off, a decrease in demand for products for the domestic market, and a
decline in operating rate, and in the Energy sector mainly due to a decline in projects in response to
new regulatory standards in the nuclear energy business, despite increased revenues in the IT sector
and the Industry sector.
Overseas
Revenues in Overseas decreased as compared with Fiscal 2018, and the ratio to total revenues
was 48%, which was 3% decrease as compared with Fiscal 2018. Revenues in each area are as
follows;(North America)
Revenues in North America decreased as compared with Fiscal 2018, due to the decreased
revenues in Hitachi Metals and the Smart Life sector, etc., despite increased revenues in Hitachi High-Tech and the Industry sector, etc.
(Europe)
Revenues in Europe decreased as compared with Fiscal 2018, due to the decreased revenues in
the Mobility sector and the IT sector, etc., despite increased revenues in the Smart Life sector.
(Asia)
Revenues in Asia composed of “China” and “ASEAN, India and other areas” decreased ascompared with Fiscal 2018. Revenues in China decreased due to the decreased revenues in the
Mobility sector and Hitachi Construction Machinery, etc. Revenues in ASEAN, India and other areas
also decreased due to the decreased revenues in Hitachi High-Tech and Hitachi Metals, etc., despite
increased revenues in the Energy sector and the Mobility sector, etc.
(Other Areas)
Revenues in other areas decreased as compared with Fiscal 2018, due mainly to the decreased
revenues in the Mobility sector and Hitachi Construction Machinery, etc., despite increased revenues
in the Mobility sector, etc.
47

(3) Analysis of Financial Condition and Cash Flows
1) Liquidity and Capital Resources
Policies for Financing Activities
We consider maintaining an appropriate level of liquidity and securing adequate funds for current
and future business operations to be important financial objectives. Through efficient management ofworking capital, we are working to optimize the efficiency of capital utilization throughout our business
operations. We endeavor to improve our group cash management by centralizing such management
among us and our overseas financial subsidiaries.
Under the “2021 Mid-term Management Plan”, we will introduce ROIC as a management
indicator and promote the improvement of capital efficiency and the growth of highly profitablebusinesses through our management. ROIC is an indicator that evaluates returns generated by invested
capital calculated by dividing business profit after taxes by invested capital. To increase returns, ROIC
needs to exceed the weighted average cost of capital (WACC), which is the cost of raising invested
capital.
Going forward, aiming for ROIC above 10%, we will strive to increase shareholder value by
strengthening profitability and reducing WACC through the use of financial leverage. To achieve this,we will improve adjusted operating income, while at the same time continuing to promote thedisposition and sales of owing shares as well as real estate and other idle assets aimed at improving
business asset efficiency with the aim of appropriately structural reforms of unprofitable businesses andcountermeasures to businesses with challenges.
Trends in the Funding Demands
Our major uses of funds are M&A for growth, investment in human resources, capital investment
and research and development investment, and shareholder return, etc. In the “2021 Mid-termManagement Plan,” investment for further growth, capital investment and shareholder return, etc., andresearch and development investment are planned to be 2 - 2.5 trillion yen, 1.8 trillion yen, and 1.2
trillion yen, respectively.
The major transactions of M&As, etc. are described in “Consolidated Financial Statements －Notes to Consolidated Financial Statements － (5) Business Acquisitions and Divestitures.” The results
and plan of the capital investments are described in “III. Property, Plants and Equipment.” The policy
and results of shareholder return are described in “ IV. Information on the Company - 3. Dividend
Policy.”Capital Resources
Our internal sources of funds include cash flows generated by operating activities and cash on
hand. Our management also considers short-term investments to be an immediately available source offunds. In addition, we raise funds both in the capital markets and from Japanese and internationalcommercial banks in response to our capital requirements. Our management’s policy is to financecapital expenditures primarily by internally generated funds and to a lesser extent by funds raised
through the issuance of debt and equity securities in domestic and foreign capital markets.
When procuring funds through borrowing, our financial discipline policy is to maintain theappropriate financial condition by considering the financial indicators such as a D/E ratio and aninterest bearing debt/EBITDA ratio.
In order to flexibly access funding, we registered our shelf registration with the maximum
outstanding balance of 300.0 billion yen, and issued the unsecured straight bond of 200.0 billion yen in
March, 2020 in order to raise the finance to be used for the investment.
We maintain commitment line agreements with a number of domestic banks under which we may
borrow in order to ensure efficient access to necessary funds. These commitment line agreements
generally provide for a one-year term, renewable upon mutual agreement between us and each of thelending banks, as well as another commitment line agreement with a contract term of three years endingon July 29, 2022. As of March 31, 2020, our unused commitment lines totaled 569.7 billion yen,including those of 500.0 billion yen which the Company maintained.

48

We receive debt ratings from Moody’s Japan K.K. (Moody’s), S&P Global Rating Japan Inc.
(S&P), as well as Rating and Investment Information, Inc. (R&I). Our debt ratings as of March 31, 2020
were as follows.
Rating Company
Long-term
Short-term
Moody’s
A3
P-2
S&P
A
A-1
R&I
AAa-1+
With our current ratings, we believe that our access to the global capital markets will remain
sufficient for our financing needs. We seek to improve our credit ratings in order to ensure financial
flexibility for liquidity and capital management, and to continue to maintain access to sufficient funding
resources through the capital markets.
2) Cash Flows(Cash Flows from Operating Activities)
Net cash inflow from a change in trade receivables and contract assets increased by 184.1 billion
yen, as compared with Fiscal 2018. Net cash outflow from a change in inventories decreased by 6.4
billion yen, as compared with Fiscal 2018. However, net cash outflow from a change in trade payables
and a change in accrued expenses increased by 98.9 billion yen and 32.8 billion yen, respectively, as
compared with Fiscal 2018. Furthermore, the Company paid the settlement money on the South Africa
projects conducted by Mitsubishi Hitachi Power Systems, Ltd. As a result of the foregoing, net cash
provided by operating activities was 560.9 billion yen in Fiscal 2019, a decrease of 49.1 billion yen
compared with Fiscal 2018.
(Cash Flows from Investing Activities)
Net amount of investments related to property, plant and equipment* was 338.7 billion yen in
Fiscal 2019. This net sum decreased by 71.8 billion yen compared with Fiscal 2018. Proceeds from saleof investments in securities and other financial assets (including investments in subsidiaries andinvestments accounted for using the equity method) in Fiscal 2019 decreased by 249.3 billion yen, as
compared with Fiscal 2018, in which the sale of shares of Clarion Co., Ltd. was proceeded. Purchase ofinvestments in securities and other financial assets (including investments in subsidiaries andinvestments accounted for using the equity method) in Fiscal 2019 increased by 164.7 billion yen, as
compared with Fiscal 2018, due mainly to the purchase of interest of JR Technology Group, LLC. As aresult of the foregoing, net cash used in investing activities was 525.8 billion yen in Fiscal 2019, an
increase of 362.9 billion yen compared with Fiscal 2018.
* The sum of the purchase of property, plant and equipment and the purchase of intangible assets,less the proceeds from sale of property, plant and equipment, and intangible assets.
(Cash Flows from Financing Activities)
Net cash outflow related to purchase of shares of consolidated subsidiaries from non-controllinginterests decreased by 160.3 billion yen, as compared with Fiscal 2018, in which expenses related to theadditional acquisition of shares of Hitachi Rail STS S.p.A. were paid. Proceeds related to short-term
debt in Fiscal 2019 increased by 77.1 billion yen, as compared with Fiscal 2018. Net cash inflow related
to long-term debt** in Fiscal 2019 was 55.4 billion yen, as compared with 45.9 billion yen of net cash
outflow related to long-term debt in Fiscal 2018, due mainly to an issuance of the unsecured straightbonds. As a result of the foregoing, net cash provided by financing activities was 2.8 billion yen in
Fiscal 2019, as compared with 320.4 billion yen of net cash outflow in Fiscal 2018.
** 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 March 31, 2020 were 812.3 billion
yen, an increase of 4.7 billion yen from March 31, 2019. Free cash flows, the sum of cash flows fromoperating and investing activities, were an inflow of 35.0 billion yen in Fiscal 2018, a decrease of 412.0
billion yen compared with Fiscal 2018.

493) Assets, Liabilities and Equity
As of March 31, 2020, total assets amounted to 9,930.0 billion yen, an increase of 303.4 billion
yen from March 31, 2019. This was due mainly to impairment gains recognized for the impact of adopting
IFRS 16 "Leases" and an acquisition of JR Technology Group, LLC, etc. Cash and cash equivalents as ofMarch 31, 2020 amounted to 812.3 billion yen, an increase of 4.7 billion yen from the amount as ofMarch 31, 2019.
As of March 31, 2020, total interest-bearing debt, the sum of short-term debt and long-term debt,
amounted to 1,485.0 billion yen, an increase of 480.2 billion yen from March 31, 2019 as a result of anissuance of the unsecured straight bonds and the impact of adopting IFRS 16. As of March 31, 2019,short-term debt, consisting mainly of borrowings from banks and commercial paper, amounted to 183.3
billion yen, an increase of 72.2 billion yen from March 31, 2019. As of March 31, 2020, current portionof long-term debt amounted to 231.2 billion yen, an increase of 45.9 billion yen from March 31, 2019.
As of March 31, 2020, long-term debt (excluding current portion), consisting mainly of debentures, andloans principally from banks and insurance companies, amounted to 1,070.5 billion yen, an increase of
362.0 billion yen from March 31, 2019, due mainly to an issuance of the unsecured straight bonds.
As of March 31, 2020, total Hitachi, Ltd. stockholders’ equity amounted to 3,159.9 billion yen, adecrease of 102.6 billion yen from March 31, 2019. As a result, the ratio of total Hitachi, Ltd.
stockholders’ equity to total assets as of March 31, 2020 was 31.8%, compared with 33.9% as of March
31, 2019.
Non-controlling interests as of March 31, 2020 was 1,106.7 billion yen, a decrease of 45.0 billion
yen from March 31, 2019.
Total equity as of March 31, 2020 was 4,266.7 billion yen, a decrease of 147.6 billion yen fromMarch 31, 2019. The ratio of interest-bearing debt to total equity was 0.35, an increase of 0.12 pointfrom March 31, 2019.
(4) Production, Order Received and Sales
The Hitachi Group does not present production and orders received in amount or volume terms foreach segment since it produces and sells a wide variety of products, there are variety of specifications insame kinds of products and certain products are mass-produced. The balance of unsatisfied performanceobligations for the segments that have contracts under which revenues are recognized over a long periodof time is described in “Consolidated Financial Statements － Notes to Consolidated Financial
Statements － (20) Revenues.” Regarding sales, see “(2) Analysis of Results of Operations.”(5) Important Accounting Policies and Estimates
The preparation of the consolidated financial statements in conformity with IFRS requires ourmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Management considers that certain
accounting estimates to be critical, and that their significance to the financial statements and thepossibility that future events affecting the estimate may differ significantly from management’s current
assumptions could have a material impact on the presentation of our financial condition, changes infinancial condition or results of operations. First, the estimates require us to make assumptions about
matters that are highly uncertain at the time the accounting estimates are made. Second, there could be
different estimates that we reasonably could have used for the accounting estimate in the current period,or changes in the accounting estimate that are reasonably likely to occur as time proceeds. Importantaccounting policies that require management to make estimates and assumptions are as follows.

50

Estimates, Fluctuations in Cost and Cancellation of Long-term Projects
We enter into a substantial number of long-term projects, particularly in connection with theconstruction of infrastructure systems. For a performance obligation satisfied over time, we measure 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 we cannot reasonably measure the progress, revenue is recognized only to the extent of the costs
incurred. The revenue recognition for such long-term projects requires us to make significant
assumptions about the estimated total cost, estimated total selling price, contract risks and other factors.
However, these estimates are subject to change. We charge any anticipated losses on fixed pricecontracts to operations when we are able to estimate such losses. While we employ our best judgment
based on available information, these estimates are subject to change. We regularly review theseestimates and adjust them as we deem necessary. Fluctuations in costs can occur for a variety ofreasons, many of which are beyond our control. In addition, we or our counterparties may cancel thesecontracts. These factors would require us to revise our initial assumptions regarding a particular
contract, and may adversely affect our business, financial condition and results of operations.
Business Combinations
Business combinations are accounted for using the acquisition method. Consideration ismeasured as the sum of the fair value of the consideration transferred on the acquisition date and thenon-controlling interests in the acquiree. In addition to tangible assets of the acquiree, intangible assets
such as technologies, brands, and customer lists are valuated at fair value. In these valuations, estimates
are made based on appropriate assumptions and future projections according to each case. Independent
external experts are usually involved in the valuation process, but significant estimates and assumptionsin the valuation include inherent uncertainty. We considers the estimates of the key assumptions to bereasonable, but actual results may differ.
Impairment of Assets
We review the carrying amounts of assets that it owns and uses whenever events or changes incircumstances indicate that the carrying amounts may be unrecoverable, to determine whether there is
any indication of impairment. If the carrying amount of an asset is judged to be impaired, the amountthat exceeds the recoverable amount is recognized as an impairment loss. We measures the recoverable
amount of an asset or a CGU (or a group of CGUs) as the higher of fair value less costs of disposal andvalue in use.
In measuring fair values, we primarily use the income approach (present value technique) based on theestimated future cash flows expected to result from the use of the asset and its eventual disposal or themarket approach to derive reasonable estimates of values in orderly market transactions, such ascomparisons of similar public companies and the current gross value of the asset. Value in use iscalculated using the estimated future cash flows based on business plans approved by management,
discounted at the discount rate, which is derived from the weighted average cost of capital. It is basedon certain assumptions that it is considered reasonable as of the filing date of this report, but actual
results may differ significantly depending on market risks, business environment risks, and so forth. The
discount rate used to calculate the value in use is affected by stock market trends and interest rate
fluctuations. We believes that the estimates of future cash flows and value in use are reasonable, butchanges in estimates resulting from unpredictable changes in the business environment that lead todecreases in future cash flows or value in use can adversely affect the valuation of assets. We
appropriately employs external experts depending on the complexity of calculating fair value and value
in use.

51

Goodwill is the source of excess earning power based on the market competitiveness acquired throughbusiness acquisition, and the difference between the net assets of the acquiree and the consideration for
acquisition is recorded as goodwill except for the amount recorded as intangible assets. Goodwill is notamortized in accordance with IFRS. Irrespective of any indicators of impairment, we tests assets for
impairment annually, mainly in the fourth quarter, by estimating the recoverable amount of each CGU
or a group of CGUs to which such assets are allocated. We continuously monitors the comparison
between the initial estimate and the most recent estimate, and conduct impairment tests if there are signs
that the value will fall below the original estimate and the carrying amount will not be recoverable, due
to changes in events or circumstances such as in business strategies or in the market environment. Suchchanges in the events or circumstances include crises in the global economy and financial markets, andif the carrying amount of each CGU or a group of CGUs to which such assets are allocated exceeds therecoverable amount, the excess amount is recognized as an impairment loss.
The breakdowns of impairment and goodwill by segment are described in “Consolidated Financial
Statements ― Notes to Consolidated Financial Statements ― (4) Segment Information.” The maincontent is described in “Consolidated Financial Statements ― Notes to Consolidated Financial
Statements ― (9) Property, Plant and Equipment and (10) Goodwill and Other Intangible Assets."
Deferred Tax Assets
Deferred tax assets are the amounts of taxes that will be recovered in future periods. In assessing
the realizability of deferred tax assets, we consider whether it is more likely than not that some portionor all of the deferred tax assets will not be realized. Although realization is not assured, we consider thescheduled reversals of deferred tax liabilities and projected future taxable income when assessing
realizability. The outlook for future performance, which is the basis for estimating future taxable
income, may differ from the actual one due to unforeseen events such as economic trends, supply anddemand trends in markets, sales prices of products and services, procurement prices of raw materials
and parts, fluctuations in exchange rates, and rapid technological innovations, and may be corrected in
the future. As a result, the amounts of deferred tax assets that are determined to be recognizable may be
adversely affected. The realizability of deferred tax assets is evaluated for each tax payment in each tax
jurisdiction, and even if running similar businesses, the evaluations can differ depending on the productand the tax jurisdiction. The ultimate realization of deferred tax assets is dependent upon the generationof future taxable income in specific tax jurisdictions during the periods in which these deductible
differences become deductible. Based on these factors, we believe it is more likely than not it willrealize the benefits of these deducible differences as of March 31, 2020. However, the amounts ofdeferred tax assets may vary if we fail to record future taxable income as expected.
Employee Retirement Benefits
We have a significant amount of employee retirement benefit costs that we derive from actuarial
valuations based on a number of assumptions. Inherent in these valuations are key assumptions used inestimating pension costs including mortality, withdrawal and retirement rates, changes in wages and thediscount rate. We are required to make judgments regarding the key assumptions by taking into accountvarious factors including personnel demographics, market conditions and expected trends in interest
rates. Although management believes that its key assumptions are reasonable in light of the various
underlying factors, there can be no assurance that the key assumptions will correspond to actual results.
If our key assumptions differ from actual results, the consequent deviation of actual pension costs fromestimated costs may have an adverse effect on our financial condition and results of operations. A
decrease in the discount rate may result in an increase in the amount of projected benefit obligations. In
addition, we may change these key assumptions, such as the discount rate. Changes in key assumptions
may also have an adverse effect on our financial condition and results of operations. Details of theevaluation of employee retirement benefits are described in “Consolidated Financial Statements ―Notes to Consolidated Financial Statements ― (3) Summary of Significant Accounting Policies ― (j)Retirement and Severance Benefits.”
The impact of COVID-19 in accounting estimates
Details of the impact of COVID-19 in accounting estimates are described in “Consolidated
Financial Statements ― Notes to Consolidated Financial Statements ― (2) Basis of Presentation.”52

(6) Forward-Looking Statements
Certain statements found in “1. Management Policy, Economic Environment and Challenges
Hitachi Group Faces,” “2. Risks Factors” and “3. Management's Discussion and Analysis ofConsolidated Financial Condition, Results of Operations and Cash Flows” and other descriptions in thisreport may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation
Reform Act of 1995. Such “forward-looking statements” reflect management’s current views withrespect to certain future events and financial performance and include any statement that does notdirectly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,”“estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future eventsand trends may identify “forward-looking statements.” Such statements are based on currently available
information and are subject to various risks and uncertainties that could cause actual results to differ
materially from those projected or implied in the “forward-looking statements” and from historical
trends. Certain “forward-looking statements” are based upon current assumptions of future events
which may not prove to be accurate. Undue reliance should not be placed on “forward-looking
statements,” as such statements speak only as of the date of this report.
Factors that could cause actual results to differ materially from those projected or implied in any“forward-looking statement” and from historical trends include, but are not limited to:• exacerbation of social and economic impacts of the spread of COVID-19;• economic conditions, including consumer spending and plant and equipment investment in Hitachi’smajor markets, as well as levels of demand in the major industrial sectors Hitachi serves;• exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant
sales or in which Hitachi’s assets and liabilities are denominated;• uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term
financing;• uncertainty as to general market price levels for equity securities, declines in which may require
Hitachi to write down equity securities that it holds;• fluctuations in the price of raw materials including, without limitation, petroleum and othermaterials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, orshortages of materials, parts and components;• estimates, fluctuations in cost and cancellation of long-term projects for which Hitachi uses thepercentage-of-completion method to recognize revenue from sales;• increased commoditization of and intensifying price competition for products;• uncertainty as to Hitachi’s ability to attract and retain skilled personnel;• uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate newtechnologies on a timely and cost-effective basis and to achieve market acceptance for suchproducts;• fluctuations in demand of products, etc. and industry capacity;• uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact offluctuations in demand of products, etc., exchange rates and/or price of raw materials or shortages ofmaterials, parts and components;• credit conditions of Hitachi’s customers and suppliers;• uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its
Social Innovation Business;• uncertainty as to the success of acquisitions of other companies, joint ventures and strategic alliances
and the possibility of incurring related expenses;• uncertainty as to the success of restructuring efforts to improve management efficiency by divestingor otherwise exiting underperforming businesses and to strengthen competitiveness;• general socioeconomic and political conditions and the regulatory and trade environment ofcountries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe,
including, without limitation, direct or indirect restrictions by other nations on imports anddifferences in commercial and business customs including, without limitation, contract terms andconditions and labor relations;• the potential for significant losses on Hitachi’s investments in equity-method associates and joint
ventures;53• uncertainty as to the success of cost structure overhaul;• the possibility of disruption of Hitachi’s operations by natural disasters such as earthquakes andtsunamis, the spread of infectious diseases, and geopolitical and social instability such as terrorism
and conflict;• uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings ofwhich the Company, its subsidiaries or its equity-method associates and joint ventures have become
or may become parties;• the possibility of incurring expenses resulting from any defects in products or services of Hitachi;• 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;• uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property; and• uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its employee benefitrelated costs.
The factors listed above are not all-inclusive and are in addition to other factors contained
elsewhere in this report and in other materials published by Hitachi.

54

4. Material Agreements, etc.
(1) Absorption-type Company Split and Share Transfer
On December 18, 2019, the Company decided to execute an absorption-type split (the “Company Split”)
involving the diagnostic imaging-related business (the “Business”), currently undertaken by the Company andits consolidated subsidiaries and affiliate companies, through which the Business will be transferred to
FUJIFILM Healthcare Corporation as a successor company (the “New Company”), and transfer all shares in
the New Company to FUJIFILM Corporation (such share transfer, the “Share Transfer”) after the Company
Split in order to strengthen competitiveness of the healthcare business.
The overview of the Company Split and Share Transfer is as follows.
1) Company Split Method
An absorption-type split under which the Company will be the splitting company and the New Company
will be the succeeding company.
2) Effective Date of the Company Split and Share Transfer
To be determined
3) Assets and Liabilities Transferred to the Succeeding Company
To be determined4) Details of Allotments
To be determined5) Basis of Calculation for Allotment
To be determined
6) Profile of the Successor Company after the Company Split and Share Transfer
Name
FUJIFILM Healthcare Corporation
Head office
2-1 Shintoyofuta, Kashiwa, Chiba
Representative To be determined
Capital
To be determined
Research and development, manufacturing, sales and maintenance service of diagnostics
Business
imaging systems (CT, MRI, X-ray systems, Ultrasound) and electronic health records(2)Settlement
On December 18, 2019, the Company and Mitsubishi Heavy Industries, Ltd. (“MHI”) reached a settlement
relating to a transfer of the boiler construction projects in the Republic of South Africa conducted by
Mitsubishi Hitachi Power Systems, Ltd. (“MHPS”), the joint venture company that integrated the respective
thermal power generation systems businesses of MHI and the Company.
The overview of the settlement is as follows.
・The Company will transfer all of its shares of MHPS (share-holding ratio of 35%) to MHI. In addition, theCompany will recognize settlement money of 200.0 billion yen as a debt for MHI, offset the amount bytransferring its credit for a subsidiary of MHPS to MHI at 70.0 billion yen and make a payment of 130.0
billion yen to MHI in March, 2020.
・The Company and MHI will promptly request Japan Commercial Arbitration Association (the “JCAA”) tostop the progress of the arbitration. MHI will withdraw the request for arbitration in JCAA after thecompletion of the payment and the transfer of shares mentioned above.
(3) Cross License Agreement
Party

Party

Country

Item undercontract

Contract
description

U.S.A.

Information
handling
systemsCrosslicense ofpatents

Hitachi, Ltd.
(The Company)

International
Business
Machines Corp.

Hitachi, Ltd.
(The Company)

HP Inc.
Hewlett Packard
U.S.A.
EnterpriseCompanyAllproducts
andservices

Crosslicense ofpatents

Hitachi, Ltd.
(The Company)

EMC
Corporation

U.S.A.

Information
handling
systemsCrosslicense ofpatents

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

GE-Hitachi
Nuclear Energy
Americas LLC

U.S.A.

NuclearreactorsystemsCrosslicense ofpatents andtechnology

55

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

5. Research and Development
The Hitachi Group (the Company and consolidated subsidiaries) is conducting business in a broad
range of fields, from information and telecommunications systems to automotive systems. The HitachiGroup places priority on allocating R&D resources on the Social Innovation Business, a core business ofthe Hitachi Group, and makes efforts for continuing and developing business, improving social value,environmental value and economic value.
In order to strengthen the global competitiveness of the business, the Hitachi Group works in R&D
activities to identify, share and resolve the customers’ problems, and is focusing on developing competitive
products and services to lead globalization of operations and strengthening its core technologies for the
expansion of the Lumada business. In addition, the Hitachi Group conducts advanced research to cultivate
future core businesses.
The Hitachi Group also works to improve the efficiency of R&D through close coordination between
the R&D divisions of the Company and group companies. Furthermore, the Hitachi Group is actively
expanding collaborations with universities and other research institutions and also actively working tocollaborate with startup companies, such as the establishment of Corporate Venturing Office in April 2019.
The Company has established an R&D framework to accelerate global growth through the Social
Innovation Business. In order to support the global growth, it aims to promote R&D that can meet local
needs quickly by expanding R&D facilities and personnel in North America, Europe, China, Asia and India
and accelerating locally-led R&D. In 2015, The Company reorganized its R&D facilities in Japan andoverseas to establish an R&D structure comprising the “Global Center for Social Innovation,” which
discovers customers’ issues and creates new solutions in collaboration with customers, the “Center forTechnology Innovation,” which creates innovative products and services and supports development of new
solutions by applying and integrating technology platforms in focused areas, and the “Center for
Exploratory Research,” which cultivates new areas through exploratory basic research based on our creative
vision in the form of open innovation. Furthermore, the Company has launched "Kyōsō-no-Mori," as a newresearch initiative to accelerate innovation through open collaborative creation with customers and partners
in April, 2019. With this R&D structure, the Company aims to further promote R&D that will contribute tosolving customers’ issues.
The Hitachi Group’s R&D expenditures for the fiscal year ended March 31, 2020 were 293.7 billion
yen, 3.4% of revenues. A breakdown of R&D expenditures by segment is shown below.
(Billions of yen)Segment

Fiscal Year ended
March 31, 2020

IT

53.2

Energy7.7

Industry

11.6

Mobility

29.4

Smart Life

61.8

Hitachi High-Tech

32.9

Hitachi Construction Machinery

23.7

Hitachi Metals

15.9

Hitachi Chemical

32.2

Others3.8

Corporate Items

21.3
Total

293.7

Notable achievements of R&D activities in the fiscal year ended March 31, 2020 are as follows.

56

-

Use of artificial intelligence for credit analysis for consumer loans, which has improved the precision of
the analysis (IT segment)
We developed Hitachi AI Technology/Prediction Rare Case, artificial intelligence, for precise
screening of loans using internal data (data on credit card loans and housing loans, etc.) possessed byfinancial institutions and external data (economic indicators and GIS information, etc.) and accumulated
business know-how as Lumada use cases. Hitachi will promptly provide digital solutions that will create
solid value, using Lumada and use cases suitable for customers’ issues.

-

Demonstration of detection of signs of cyberattacks using Darknet communications analysis technology(IT segment and Energy segment)
To prevent block sophisticated cyberattacks, we developed a technology to analyze Darknet
communications (communications to addresses to which no specific computers are allocated), which are
not carried in the network for general communications, of suspicious communications observed bymultiple organizations. Using this technology, we demonstrated that signs of cyberattacks, which havebeen difficult to detect, can be detected. (Joint research with Keio University and Chubu Electric Power
Co., Inc.)-

Commencement of a demonstration experiment for optimization of non-life insurance portfolios using a
new type of computer (IT segment)
To meet the need for optimization of large, complicated non-life insurance portfolios against the
backdrop of frequent occurrences of large natural disasters and increasing numbers of insurance
schemes, we commenced a demonstration experiment using s new type of computer (CMOS annealing)that can solve combinatorial optimization problems at a higher speed than conventional computers. We
aim for sophistication of risk control by combining insurance and IT (joint experiment with Sompo
Japan Nipponkoa Insurance Inc. (currently Sompo Japan Insurance Inc.) and Sompo Risk Management
Inc.).

-

Winning the Ichimura Prize in Industry against Global Warming for Excellent Achievement for thedevelopment and practical use of an energy-saving industrial motor(Industry segments)
The development and practical use of an energy-saving industrial motor using amorphous magnetic
alloy foil won the Ichimura Prize in Industry against Global Warming for Excellent Achievement. The
motor has achieved the highest level of international efficiency standards, IE5 class. By reducing energy
consumption, we contribute to the realization of SDGs by contributing to the reduction of significant
CO2 emissions.

-

Winning the Imperial Invention Prize of the National Invention Awards for its design of UK high-speed
rolling stock (Class 800) (Mobility segment)
We won the Imperial Invention Prize of the National Invention Awards for its design of UK highspeed rolling stock (Class 800). We overcame the difference in specifications between Japan and the
UK due to a difference in running environment and designed the cars, taking into comprehensive
consideration usability for the operating company and the visual appeal and comfort of cars that aresuitable for the life and culture of local users. The Imperial Invention Prize is awarded to the best
invention or design.

-

Development of 3D cell culture automation technology to promote regenerative medicine (Smart Lifesegment)
Using Hitachi’s large-scale automated iPS cell culture equipment, we developed 3D cell culture
automation technology that can solve existing issues. We have automated both 2D culture and 3D
culture methods and can automatically produce large numbers of different types of cells, including
cardiac muscle cells, to meet different needs. (Joint research with Myoridge Co. Ltd.)57

III. Property, Plants and Equipment
1. Summary of Capital Investment, etc.
The Hitachi Group (the Company and consolidated subsidiaries) selectively invests in R&D andproduct fields expected to grow over the long term, and it also invests to streamline manufacturing process,etc. and to improve the reliability of its products and services.
Capital investment (based on the amount recorded as tangible fixed assets and the investment
property) in the fiscal year ended March 31, 2020 was 399.6 billion yen. A breakdown of capital investment
by segment is as follows. Effective from April 1, 2019, the Company reclassified its reportable segments.
Accordingly, the amounts previously reported for the fiscal year ended March 31, 2019 have been restatedin conformity with the new segments.

Segment

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

IT

63.8

180

Energy6.7

15

Industry

12.8

145

Mobility

16.7

96

Smart Life

79.8

89

Hitachi High-Tech

28.0

156

Hitachi Construction
Machinery

47.1

155

Hitachi Metals

51.6

55

Hitachi Chemical

45.3

92

Others39.1

158

Main purpose of investment
Assets for leasing business,
Streamline development and production of
products
Facility of production for nuclear power andwind power generation system
Streamline development and production of
products
Facility of production for railway systems,
Antiseismic reinforcement
Increase production of automotive equipment,
Streamline development and production ofother products
Relocation of offices, Increase production ofsemiconductor processing equipment, etc.
Streamline production of construction
machinery, relocation of offices
Increase production of specialty steel products,
magnetic materials, power electronics
materials and applications, wires, cables andrelated products, etc.,
Streamline production of functional
components and equipment
Streamline development and production of
products
Rent offices, R&D facilities

Corporate Items &8.2
597
Eliminations
Total
399.6
96
(Notes) 1. From the beginning of the fiscal year ended March 31, 2020, the Company has adopted IFRS 16“Leases,” and the capital investment in the fiscal year ended March 31, 2020 includes 87.4 billion yenof the investment in the right-of-use assets.
2. The figures in the above table include the amount of the investment property which is recorded as othernon-current assets.
3. These investments were mostly financed with the Hitachi Group’s own capital.

58

2. Major Property, Plants and Equipment
The Hitachi Group (the Company and consolidated subsidiaries) engages in diverse business
operations in Japan and overseas. It discloses information on major property, plants and equipment
represented in breakdown by segment and major facilities of the Company and consolidated subsidiaries.
The situation at the end of the fiscal year ended March 31, 2020 is as follows.
(1) Breakdown by Segment(As of March 31, 2020)
Book value (Millions of yen)Segment

Land
Tools,[Area in Buildings Machinery furniture Right-of-use
andandthousands
and
Assetsstructures vehicles
fixturesof m2]
25,461

IT

[861]

Other

Constructionin progress

Total

Number of
employees

76,61023,326

46,51576,841

8,907

3,146

260,806

72,999Energy13,749[8,532]

11,119

3,573

2,365

3,174

198

881

35,0598,876

Industry

9,444[2,024]

26,491

14,817

4,721

18,484-

2,745

76,702

24,21576,73324,25317,01013,710794

7,692

153,496

46,847

Mobility

13,304[2,159]Smart Life

51,035[7,394]

105,989

161,218

31,454

16,331-

39,990406,01745,371

Hitachi High-Tech

8,047
[608]

29,47913,906

16,977

13,968-2,797

85,174

10,954

90,61252,488

8,868

57,85391,82415,157373,318

24,274

97,312

170,248

15,578

16,719-21,447384,732

29,677

Hitachi Construction

56,516

Machinery[10,177]

Hitachi Metals

63,428[13,535]

Hitachi Chemical

24,806[3,391]

66,72785,58819,37623,47463

20,298240,332

21,852Others37,236[1,858]72,636

3,428

10,31535,803-

1,948

161,366

12,890303,026[50,539]653,708552,845

173,179

276,357

101,786

116,101 2,177,002

297,955

21,844303

3,569(9,078)343

675,552

553,148

176,748

267,279

102,129

Subtotal
Corporate Items &Eliminations
Total(28,920)[854]
274,106[51,393]248(11,691)

3,101

116,349 2,165,311

301,056(Note) The “Book value - Other” column includes the amount of operating lease assets for leasing business.

59(2) The Company(As of March 31, 2020)

Facility(Main location)

Segment

Book value (Millions of yen)
Details ofLand
Tools,
major facilities [Area in Buildings Machinery furniture Right-ofand
and
use
Other
and equipment thousands
andstructures vehicles
Assetsfixturesof m2]

Constructionin progress

Total

Number of
employees

Financial
Institutions
Business Unit,
SocialInfrastructure
Systems Business IT
Unit and Systems& Services
Business Division(Kawasaki,
Kanagawa)

Systemdevelopment
facilities,
manufacturing
facilities forservers,
mainframes, etc.

12,810[115]

43,152102

22,00823,887

5,057

622

107,6419,507

Head Office(Chiyoda-ku,
Tokyo)

Corporate

Other facilities

4,930
[782]

6,485

269

1,678

25,005-248

38,617

1,591

Research &Development
Group(Kokubunji,
Tokyo)

Others

R&D facilities

6,063
[776]

20,918

1,196

4,160

2,188

-

94

34,623

2,532

Railway Systems
Business Unit
(Kudamatsu,
Yamaguchi)

Mobility

Manufacturing
facilities forrailway
vehicles, etc.

1,013
[666]

14,725

5,120

613

4,677

-

486

26,638

2,546

9,603
[3,309]

3,722

720

945

1,818

-

752

17,562

1,266

4,489
[84]

3,545

1,269

1,629

4,117

-

304

15,356

2,018

Nuclear Energy
Business Unit andEnergy Business Energy
Unit(Hitachi, Ibaraki)
Healthcare
Business Unit
Smart Life
(Taito-ku, Tokyo)

Manufacturing
facilities for
power
generating
equipment, etc.
Manufacturing
facilities for
medicalequipment

Corporate HospitalGroup
Corporate(Hitachi, Ibaraki)

Medicalfacilities

63
[53]

12,955

26

1,701

38

-

-

14,785

1,804

Services &Platforms
Business Unit
(Hitachi, Ibaraki)

IT

Manufacturing
facilities forindustrial
machinery andplants,switchboards
and calculation
controlequipment,
systemdevelopment
facilities

607
[203]

5,774

847

1,393

2,133

11

146

10,914

5,432

Defense Systems
Business Unit
(Yokohama,
Kanagawa)

IT

Systemdevelopment
facilities

107
[7]

5,224

77

744

1,987

62

2

8,206

483

Manufacturing
facilities forindustrial
solution andwater solution
equipment

165
[89]

1,018

738

929

1,844

-

931

5,629

640

Industry &Distribution
Business Unit andWater &
Industry
Environment
Business Unit
(Toshima-ku,
Tokyo)

60

(3) Domestic subsidiaries(As of March 31, 2020)
Book value (Millions of yen)
Details ofLand
Tools,
major facilities [Area in Buildings Machinery furniture Right-ofandanduse
and equipment thousands
andstructures vehicles
Assetsfixturesof m2]

Other

Constructionin progress

Total

Number of
employees

Manufacturing
facilities forautomotive
equipment

7,077[2,494]37,39059,246

6,650

-

4,177

11,857

126,399

9,534

Hitachi Metals,Ltd., Yasugi
Hitachi Metals
Works(Yasugi, Shimane)

Manufacturing
facilities for
specialty steel
products

8,340[1,108]13,51634,917

1,941

18

-

2,650

61,382

1,662

Hitachi Metals
Neomaterial, Ltd. Hitachi Metals(Suita, Osaka)

Manufacturing
facilities for
specialty steel
products

11,160
[121]

3,807

15,538

1,056

297

-

203

32,061

1,047

HitachiConstruction
Machinery Co.,
HitachiLtd., Hitachinaka- Construction
Rinko Works
Machinery(Hitachinaka,Ibaraki)

Manufacturing
facilities forconstruction
machinery

12,334[495]

13,771

4,397

321

-

-

363

31,186

558

HitachiConstruction
Machinery Co.,
Ltd., Tsuchiura
Works(Tsuchiura,
Ibaraki)

HitachiConstruction
Machinery

Manufacturing
facilities forconstruction
machinery

5,902[5,068]

7,188

7,144

1,927

6,339

-

2,444

30,944

3,049

Hitachi HighTech Corporation,
Hitachi HighNaka Area
Tech
(Hitachinaka,Ibaraki)

Manufacturing
facilities forsemiconductor
processing
equipment andtest andmeasurement
equipment, etc.

2,116
[241]

13,787

3,155

8,648

1,056

-

1,345

30,107

2,539

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

Hitachi
ChemicalManufacturing
facilities forsemiconductormaterials, etc.

890
[448]

10,608

9,326

949

2,582

-

494

24,8491,040

Hitachi Chemical
Company, Ltd.,
Hitachi
Shimodate Works Chemical(Chikusei, Ibaraki)

Manufacturing
facilities forcircuit board
materials, etc.

4,535
[677]

7,137

8,611

811

78

-

286

21,458

1,645

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

Manufacturing
facilities forwires and cables
and rubber
product, etc.

4,643
[1,181]

7,701

5,730

751

1,028

-

271

20,124

1,410

Other facilities

6,843
[108]

8,248

432

818

-

-

719

17,060

1,502

Facility(Main location)

HitachiAutomotive
Systems, Ltd.
(Hitachinaka,Ibaraki)Segment

Smart Life

Hitachi Metals

Hitachi Building
Systems Co., Ltd.,
Head Office
Mobility(Chiyoda-ku,
Tokyo)

61

(4) Overseas subsidiaries(As of March 31, 2020)
Book value (Millions of yen)
Subsidiary(Main location)

Segment

Details ofLand
Tools,
major facilities [Area in Buildings Machinery furniture Right-ofandanduse
and equipment thousands
andstructures vehicles
Assetsfixturesof m2]

Other

Constructionin progress

Total

Number of
employees

Waupaca Foundry,Inc.
Hitachi Metals(Wisconsin,
U.S.A.)

Manufacturing
facilities forautomotive
components

758[5,754]

17,43034,372

2,850

1,568

-

3,475

60,453

4,400

Hitachi Vantara
LLC(California,
U.S.A.)

Other facilities

[-]

1,957

13,67813,87230,15925112860,045

13,103

Manufacturing
facilities forautomotive
equipment

3,025
[426]

4,938

26,785

1,680

-

-

2,799

39,227

4,365

Manufacturing
facilities forautomotive
equipment

371[1,242]

7,873

9,960

888

462

-

7,541

27,095

3,017

Manufacturing
facilities forautomotive
equipment

[-]

6,683

11,508

1,054

1,697

-

5,977

26,9194,368

IT

HitachiAutomotive
Systems Mexico,
Smart Life
S.A. de C.V.
(Querétaro,
Mexico)HitachiAutomotive
Systems Americas,
Smart Life
Inc.
(Kentucky,
U.S.A.)
Chassis Brakes
International B.V.
Smart Life
(Eindhoven,
Netherlands)(Note) The figures for Hitachi Vantara LLC and Chassis Brakes International B.V. are presented in consolidated basis of eachcompany.

62

3. Plans for Capital Investment, Disposals of Property, Plants and Equipment, etc.
The Hitachi Group (the Company and consolidated subsidiaries) engages in diverse operations inJapan and overseas, and has not decided on specific plans to newly install or expand each of facilities as ofthe end of the fiscal year. For this reason, it discloses amounts of capital investment by segment.
The amount of capital investment for the fiscal year ending March 31, 2020 will be 386.0 billion yen(new installation and expansions, based on the amount recorded as tangible fixed assets and the investment
property), and a breakdown by segment is as follows. From the beginning of the fiscal year ending March
31, 2021, the Hitachi High-Tech segment is abolished and reclassified in the Smart Life segment and the
Hitachi Chemical segment is abolished. Figures shown below is presented on the basis of the new
segmentation.
Segment

Amount(Billions of yen)

Main purpose of investment

IT

90.0

Assets for leasing business,
Streamline development and production of products

Energy25.0

Facility of production for nuclear power generation
systemIndustry

23.0

Manufacturing facilities for industrial products,
Antiseismic reinforcement

Mobility

25.0

Facility of production for railway systems

Smart Life

110.0

Increase production of automotive equipment andproduction of Semiconductor Processing Equipment,
Streamline development and production of otherproducts

Hitachi Construction
Machinery

65.0

Facility of production for construction machinery

Hitachi Metals

33.0

Increase and streamline production of specialty steel
products, magnetic materials and applications, functional
components and equipment,
Streamline production of magnetic materials and powerelectronics materials

Others12.0

Rent offices, R&D facilities

Corporate Items &Eliminations

3.0

-

386.0

-

Total

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

63

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

Total number of shares authorized to
be issued (shares)

Common stock

2,000,000,000

Total

2,000,000,0002) Issued shares

Class

Number of sharesissued as of the end of
fiscal year (shares)(March 31, 2020)

Number of sharesissued as of thefiling date (shares)(Note)(August 31, 2020)

Stock exchange on which
the Company is listed

Description

The number of shares per

Commonstock

967,280,477

967,885,277

Tokyo, Nagoya

Total

967,280,477

967,885,277-

one unit of shares is 100
shares.
-(Note) The "Number of shares issued as of the filing date" does not include shares issued upon exercise of stock acquisition rightsfrom August 1, 2020 to the filing date.

64

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

The First Stock
Acquisition Rights ofHitachi, Ltd.
(Note 1)The Second Stock
Acquisition Rights ofHitachi, Ltd.
(Note 1)The Third Stock
Acquisition Rights ofHitachi, Ltd.
(Note 1)

June 29, 2016

April 6, 2017

April 11, 2018

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

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

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

13,794[11,717]

15,062[12,766]

15,692[12,094]

Common stock
275,880 shares[234,340 shares](Note 2)

Common stock
301,240 shares[255,320 shares](Note 2)

Common stock
313,840 shares[241,880 shares](Note 2)

¥1 per share¥1 per share¥1 per share

From July 15, 2016
to July 14, 2046

From April 27, 2017
to April 26, 2047

From April 27, 2018
to April 26, 2048

Issue price: ¥1,345(Note 3)
Amount of capitalization:(Note 4)

Issue price: ¥1,843(Note 3)
Amount of capitalization:(Note 4)

Issue price: ¥2,431(Note 3)
Amount of capitalization:(Note 4)(Note 5, 6)(Note 5, 6)(Note 5, 6)

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

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

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

－

－

－

(Note 7)(Note 7)(Note 7)(Notes) 1. The information is that as of the end of fiscal year (March 31, 2020). The number of stock acquisition rights and the numberof shares to be issued upon exercise of stock acquisition rights in brackets in the lower row is information as of the end of
the last month ended before the filing date (July 31, 2020). With regard to the other items, there is no change from theinformation as of the end of fiscal year.
2. If the Company implements a stock split (including gratis allotment of shares of common stock; the same shall apply toreferences to a stock split hereinafter) or a reverse stock split with respect to common stock of the Company after the dateof allotment of the stock acquisition rights, the Number of Shares to be Issued with respect to the stock acquisition rights
not exercised at that time will be adjusted in accordance with following formula:65

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

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

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

662) Details of shareholder right plans
Not applicable.
3) Details of other stock acquisition rights, etc.
Not applicable.
(3) Information on moving strike convertible bonds, etc.
Not applicable.
(4) Changes in the total number of issued shares and the amount of common stock and other
Balance of thetotal number ofissued shares(shares)

Change incommonstock(Millionsof yen)Balance ofcommonstock(Millionsof yen)Change incapitalreserve(Millionsof yen)Balance ofcapitalreserve(Millionsof yen)-4,833,463,387-

458,790-

176,757-

4,833,463,387-

458,790-

176,757-

4,833,463,387-

458,790-

176,757(3,866,770,710)

966,692,677-

458,790-

176,757-

966,692,677-

458,790-

176,757

587,800

967,280,477

1,072

459,862

1,072

177,828-

967,280,477-

459,862-

177,828

Change in
the total
number ofissued shares(shares)

Date

From April 1, 2015
to March 31, 2016
From April 1, 2016
to March 31, 2017
From April 1, 2017
to March 31, 2018
October 1, 2018

(Note 1)

From April 1, 2018
to March 31, 2019
May 31, 2019

(Note 2)

From April 1, 2019
to March 31, 2020

(Notes) 1. The Company completed the share consolidation of every five shares into one share for its common stock.
2. This increase is due to the issuance of new shares as restricted stock compensation.
Issue price: 3,647 yen per share
Amount by which stated capital is to be increased: 1,823.5 yen per share
Allottees: 37 Executive officers of the Company and 34 Corporate officers of the Company
3. The Company issued its new shares on May 27, 2020. The total number of issued shares, common stock and capitalreserve increased 604,800 shares, 928 million yens and 928 million yens respectively.

(5) Shareholders composition(As of May 28, 2020)
Status of shares (one unit of stock: 100 shares)
Class ofGovernment
Financialshareholders
andinstitution
municipality
Number ofshareholders

Foreign corporations,
Financial
etc.
Individuals
instruments
Other
and others
business institution
NonIndividuals
operator
individuals

Total

Number ofsharesless than one
unit (shares)

2

213

74

2,345

1,078

127

244,688248,527-92

2,977,508

62,020140,3444,695,954

1,909

1,776,259

9,654,086

2,476,677

0.00

30.84

0.64

1.45

48.64

0.02

18.40

100.00-Shareownership(units)Ownership
percentageof shares(%)(Notes) 1. Of 1,021,739 shares of treasury stock, 10,217 units are included in the “Individuals and others”
column, while 39 shares are included in the “Number of shares less than one unit” column.
2. Of the shares registered in the name of Japan Securities Depository Center, Incorporated (account for
managing stocks whose shareholders have not transferred titles), 53 units are included in the “Other
institution” column and 65 shares are included in the “Number of shares less than one unit” column.
67

(6) Major shareholders(As of May 28, 2020)

Name

Address

The Master Trust Bank of Japan, Ltd.

11-3, Hamamatsucho 2-chome,(Trust Account)

Minato-ku, Tokyo

Share
Ownership(shares)

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

80,038,600

8.28

8-11, Harumi 1-chome, Chuo-ku, Tokyo

50,707,500

5.24

State Street Bank and Trust
Company 505001

P.O. Box 351
Boston, Massachusetts 02101 U.S.A.

21,410,695

2.21(Standing proxy: Mizuho Bank, Ltd.)(15-1, Konan 2-chome, Minato-ku, Tokyo)

State Street Bank and Trust

P.O. Box 351

Company 505223(Standing proxy: Mizuho Bank, Ltd.)

Boston, Massachusetts 02101 U.S.A.
(15-1, Konan 2-chome, Minato-ku, Tokyo)

20,467,984

2.12

Hitachi Employees’ Shareholding

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

AssociationTokyo

20,372,176

2.11

20,000,099

2.07Japan Trustee Services Bank, Ltd.
(Trust Account)

Nippon Life Insurance Company

6-6, Marunouchi 1-chome, Chiyoda-ku,
TokyoJapan Trustee Services Bank, Ltd.
(Trust Account 5)

8-11, Harumi 1-chome, Chuo-ku, Tokyo

19,644,000

2.03

NATS CUMCOC/O City Bank, New York 111
Wall Street, New York, NY, U.S.A.

19,068,454

1.97

16,119,812

1.67

15,169,300

1.57

282,998,620

29.27(Standing proxy: Mizuho Bank, Ltd.)JP Morgan Chase Bank 385781(Standing proxy: Mizuho Bank, Ltd.)
Japan Trustee Services Bank, Ltd.
(Trust Account 9)
Total(15-1, Konan 2-chome, Minato-ku, Tokyo)
25 Bank Street, Canary Wharf,
London, E14 5JP, United Kingdom(15-1, Konan 2-chome, Minato-ku, Tokyo)
8-11, Harumi 1-chome, Chuo-ku, Tokyo-(Notes) 1. NATS CUMCO is the nominee name of the depositary bank, Citibank, N.A., for the aggregate of theCompany’s American Depositary Receipts (ADRs) holders.
2. Some reports on substantial shareholdings regarding the Company under the Financial Instruments andExchange Act are available for public inspection. However, the information in the reports is notdescribed in the above table since the Company does not confirm the actual status of shareholdings as of
the record date for the annual general meeting of shareholders held on July 30, 2020. The major contentsof the reports are as follows. On October 1, 2018, the Company completed the share consolidation of
every five shares into one share for its common stock. The reports whose date on which the duty to filereport is prior to the effective date of the share consolidation show the number of shares before the shareconsolidation.

68Holders
Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued shares
Holders
Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued sharesBlackRock Japan Co. Ltd and seven other persons
April 14, 2017
304,755,969 shares
6.31%
Sumitomo Mitsui Trust Asset Management Co., Ltd. andone other person
February 15, 2019
48,728,827 shares
5.04%

Holders

Asset Management One Co., Ltd. and four other persons

Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued shares

September 13, 201949,553,000 shares
5.12%

69

(7) Information on voting rights
1) Issued shares(As of May 28, 2020)
Classification

Number of voting
rightsNumber of shares (shares)

Description

Shares without voting right

－

－

－

Shares with restricted voting right (treasury
stock, etc.)

－

－

－

Shares with restricted voting right (others)

－

－

－

－

－

Shares with full voting right (treasury stock, etc.)

Common stock

1,054,900

Shares with full voting right (others)

Common stock

964,353,700

Shares less than one unit

Common stock

2,476,677－－

967,885,277－－

Number of issued shares
Total number of voting rights

9,643,537

9,643,537－－－(Note) The “Shares with full voting right (others)” column includes 5,300 shares registered in the name of Japan
Securities Depository Center, Incorporated (account for managing stocks whose shareholders have nottransferred titles) and 53 voting rights for those shares.
2) Treasury stock, etc.
(As of May 28, 2020)

Name ofshareholder

Hitachi, Ltd.

Address

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

Aoyama Special Steel

9-11, Shinkawa 2-chome, Chuo-

Co., Ltd.

ku, Tokyo

SAITA KOUGYOU
CO., LTD.

5-3, Takinogawa 5-chome, Kitaku, Tokyo

Nitto Jidosha

3268, Nagaoka, Ibarakimachi,

Kiki K.K.

Higashiibaraki-gun, Ibaraki

Mizuho Co., Inc.
Total

Number ofshares held
under own name(shares)

4-1, Koishikawa 5-chome,
Bunkyo-ku, Tokyo
－

70

Number ofshares held
under thenames ofothers(shares)

Total shares
held (shares)

Ownership
percentage tothe total
number ofissued shares(%)

1,021,700－

1,021,700

0.11

2,100

－

2,100

0.00

17,600－17,6000.00

10,500－10,500

0.00

3,000

－

3,000

0.00

1,054,900－

1,054,900

0.11

2. Information on Acquisition, etc. of Treasury StockClass of shares
Acquisition of common stock under Article 155, Item 7 and 13 of the Companies Act(1) Acquisition of treasury stock resolved at the general meeting of shareholders
Not applicable.
(2) Acquisition of treasury stock resolved at the Board of Directors meetings
Not applicable.
(3) Details of acquisition of treasury stock not based on the resolutions of the general meeting ofshareholders or the Board of Directors meetings
Acquisition of common stock under Article 155, Item 7 (Note 1)
Classification

Number of shares (shares)

Treasury stock acquired during the
fiscal year ended March 31, 2020

Total amount (yen)41,098

166,997,643

Treasury stock acquired during the
8,321
28,127,793
current period (Note)(Notes) 1. Acquisition of stock less than one unit shares due to purchase requests from shareholders under Article
192, Paragraph 1 of the Companies Act.
2. The number of treasury stock acquired due to requests to purchase stock less than one unit shares from
August 1, 2020 to the filing date is not included.
Acquisition of common stock under Article 155, Item 13 (Note)
Classification

Number of shares (shares)

Treasury stock acquired during the
fiscal year ended March 31, 2020

Total amount (yen)--Treasury stock acquired during the
97,000current period(Note) Acquisition without consideration of a part of common stock allotted to the Company’s Executive Officers
and Corporate Officers as restricted stock compensation (Article 27, Paragraph 1 of the Order for
Enforcement of the Companies Act).

71

(4) Status of the disposition and holding of acquired treasury stock
Fiscal year ended March 31, 2020
Classification
Acquired treasury stock which wasoffered to subscribers
Acquired treasury stock which wascanceled
Acquired treasury stock which wastransferred due to merger, shareexchange or company split
Others (Acquired treasury stock
which was transferred upon exerciseof stock acquisition rights, andwhich was sold due to requests fromshareholders holding shares less than
one unit shares to sell additional
shares)Total number of treasury stock held

Current period (Note)

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

-

-

-

-

-

-

-

-

-

-

-

77,024

277,878,794

129,478

468,812,953

1,050,741-

1,026,584-(Note) The followings are not included: the number of treasury stock which was transferred upon exercise of stockacquisition rights from August 1, 2020 to the filing date; the number of treasury stock which was sold due
to requests from shareholders holding less than one unit shares to sell additional shares from August 1,
2020 to the filing date; and the number of treasury stock acquired due to purchase requests fromshareholders holding shares less than one unit shares from August 1, 2020 to the filing date.

3. Dividend Policy
The Company views the return of profits to shareholders through enhancing corporate value frommid- to long-term perspective and paying dividends continuously as an important managerial issue.
The policy of the Company regarding dividends is to aim for stable growth of dividends while also
securing funds necessary for investment, and the dividends are determined by comprehensively taking into
account factors such as financial performance trends, the financial situation, and the dividend payout ratio.
To complement its dividends, the Company flexibly conducts repurchase of its shares depending on
factors such as capital needs and the business environment.
In accordance with mid- to long-term management strategy, the Company utilize undistributed profits
in areas such as M&A, research and development, and capital expenditure, in order to securecompetitiveness and aim for growth of the business as global enterprise.
Based on the above policy, annual dividends of 95.0 yen per share were paid for the fiscal year ended
March 31, 2020. It was resolved to pay interim dividends of 45.0 yen per share at the Board of Directors
meeting held on October 30, 2019, resulting in the total amount of interim dividends of 43,481 million
yen. In addition, it was resolved to pay year-end dividends of 50.0 yen per share at the Board of Directors
meeting held on May 13, 2020, resulting in the total amount of year-end dividends of ¥48,311 million.

72

4. Corporate Governance, etc.
(1) Corporate governance1) Basic policy about corporate governance
The Company considers growth of profits for shareholders and investors from long-term
perspective as one of its important managerial objectives. As there are wide range of stakeholders for
the Company and Hitachi group from shareholders and investors to customers and clients, theCompany realizes that building good relationships with such stakeholders forms an important part ofits corporate value.
The Company is a company with Nominating Committee, etc. under the Companies Act, aiming
to establish a framework for quick business operation and to realize highly transparent management byseparating responsibilities for management oversight and those for execution of business operations.
The Company attempts to have appropriate composition of the Board of Directors aiming to ensure theeffectiveness of management function in addition to reflect global and various perspective to the
management. The Company set the Corporate Governance Guidelines as basic framework of its
corporate governance including functions of the Board of Directors.
In addition, the Company set Hitachi Group Codes of Conduct as behavior disciplines to beshared among Hitachi group to generate common values for the Hitachi group and promote
understanding of social responsibilities to be fulfilled by the Company.
2) Outline of corporate organizations
Board of Directors
The Board of Directors approves basic management policy for the Hitachi Group and supervises
the execution of the duties of executive officers and directors in order to sustainably enhance corporate
value and the shareholders’ common interests. The basic management policy includes medium-term
management plan and annual budget compilation. The Board of Directors focuses on strategic issues
related to the basic management policy as well as other items to be resolved that are provided in laws,
regulations, the Articles of Incorporation and Board of Directors Regulations. As of August 31, 2020,
the Board of Directors was made up of 13 Directors, and 10 of whom are Independent Directors* andtwo concurrently serve as Executive Officers.
* The "Independent Directors" in this report are the directors who fulfill the qualification
requirements to be outside directors as provided by the Companies Act of Japan and also meet theindependence criteria defined by the Company and those as provided by Japanese stock exchanges
where the Company is listed, unless otherwise stated.
Within the Board of Directors, there are three statutory committees of the Nominating
Committee, the Audit Committee and the Compensation Committee with Independent Directors
accounting for the majority of members of each committee. The Board of Directors meetings were
held 9 days during the fiscal year ended March 31, 2020, and the attendance rate of Directors at thosemeetings was 98%. The Nominating Committee meetings were held 8 days, the Audit Committee
meetings were held 15 days, and the Compensation Committee meetings were held 4 days during the
fiscal year ended March 31, 2020.
The Nominating Committee has the authority to determine particular proposals submitted to thegeneral meeting of shareholders for the election and dismissal of Directors, and consists of four
Directors, three of whom are Independent Directors.
The Audit Committee has the authority to audit the execution of duties of Directors andExecutive Officers and to determine on proposals submitted to the general meeting of shareholders forthe election and dismissal of accounting auditors, and consists of five Directors, including four
Independent Directors and one standing Audit Committee member.
The Compensation Committee has the authority to determine remuneration policies for
Directors and Executive Officers and remuneration for individuals based on them. The Compensation
Committee consists of four Directors, three of whom are Independent Directors.
The members of the board of directors and each committee are described in "(2) Directors andSenior Management - 1) Lists of directors and senior management - (a) Directors."73

With regard to the number of Directors and their election, the Company stipulates in its Articles
of Incorporation that the Company shall have no more than 20 Directors. With regard to the adoptionof resolution for the election of Directors, the Company stipulates in its Articles of Incorporation thatthe presence of shareholders representing one-third or more of the voting, that resolutions for theelection of Directors shall be approved by attending shareholders possessing one-third or more of all
voting rights of the shareholders who are entitled to exercise their votes, and that the resolution shallnot be made by cumulative voting.
The Company maintains a limited liability agreement (hereinafter referred to as “Agreement”)
stipulated in Article 427, Paragraph 1 of the Companies Act with each director (excluding Executive
Director, etc.) The general intent of the Agreement is to limit the liability of Directors to the aggregate
amount stipulated in each item under Article 425, Paragraph 1 of the Companies Act.
Executive Officers
Executive Officers decide on matters delegated to them by the Board of Directors and execute
the Company’s business affairs within the scope of assignments determined by the Board of Directors.
As of August 31, 2020, the Company has 33 Executive Officers (See "(2) Directors and Senior
Management - 1) Lists of directors and senior management - (b) Executive Officers.")
The Company stipulates in its Articles of Incorporation that the Company shall have no morethan 40 Executive Officers.
Senior Executive Committee
The Senior Executive Committee is a council to ensure that President deliberately decides onimportant managerial matters, which may affect the Company or the Hitachi Group business, throughdiscussing from diverse viewpoints. It consists of 11 members as of August 31, 2020; President &CEO (Toshiaki Higashihara), six Executive Vice President and Executive Officers (Masakazu Aoki,
Ryuichi Kitamura, Keiji Kojima, Keiichi Shiotsuka, Alistair Dormer and Toshikazu Nishino), three
Senior Vice President and Executive Officers (Yoshihiko Kawamura, Hidenobu Nakahata andMamoru Morita) and one Vice President and Executive Officer (Kohei Kodama).
3) Matters determined by resolution of the Board of Directors without resolution at the general meetingof shareholders pursuant to the provisions of the Articles of Incorporation
The Company stipulates in the Articles of Incorporation that it may, unless otherwise provided
in the applicable laws, determine on matters specified in each item of Article 459, Paragraph 1 of theCompanies Act by the resolution of the Board of Directors, without resolution at the general meetingof shareholders.
For the repurchase of the company’s own shares (Article 459, Paragraph 1, Item 1 of theCompanies Act), the Board of Directors shall determine on the matter in order to enable timely
implementation of capital strategies.
Regarding reduction of capital reserve or earned surplus reserve (Article 459, Paragraph 1, Item
2 of the Companies Act), appropriation of surplus (excluding dividends of surplus and disposal of theproperty of the Company) (Article 459, Paragraph 1, Item 3 of the Companies Act) and dividends ofsurplus (Article 459, Paragraph 1, Item 4 of the Companies Act), since the Company was a company
with committees as of the date of enforcement of the Companies Act, it was deemed that its Articles ofIncorporation had stipulations that the Board of Directors was able to decide the above matters without
resolution at the general meeting of shareholders and that it should not stipulate that such matters shallbe resolved at the resolution of the general meeting of shareholders, in accordance with Article 57 of
the Act on Arrangement of Relevant Acts Incidental to Enforcement of the Companies Act (July 26,
2005, Act No. 87). Even after the enforcement of the Companies Act, the Company has made it a rule
to timely decide on these important business judgments by the Board of Directors to enhance theshareholders’ common interests.
The Company has stipulated in its Articles of Incorporation that it may, by resolution of theBoard of Directors, exempt any Director (including former Director) and Executive Officer (including
former Executive Officer) from liabilities as provided Article 423, Paragraph 1 of the Companies Act
to the extent as provided in laws or regulations.
744) Requirement for special resolution of the general meeting of shareholders
To enable to securely meet the quorum of the general meeting of shareholders under Article 309,
Paragraph 2 of the Companies Act, the Company stipulates in its Articles of Incorporation that any
resolution as provided in Article 309, Paragraph 2 of the Companies Act shall be adopted at a general
meeting of shareholders where shareholders representing one-third or more of the voting rights of all
the shareholders shall be present, by a majority of two-thirds or more of the voting rights of theshareholders who are present in such meeting and are entitled to vote.
5) Internal control system and risk management system
Outlines of the internal control system and the risk management system of the Company are as
follows. In addition, these systems were resolved by the Board of Directors as the basic policy forinternal control system under the Companies Act.
i) The following measures shall be taken to ensure the effectiveness of audits by the Audit Committee.
(a) When necessary, the Board of Directors may appoint one or more director(s), who does notserve concurrently as an executive officer, as a director responsible for assisting with the dutiesof the Audit Committee. In addition, the Board of Directors’ Office (the “Office”) shall beestablished specifically to assist with the duties of each Committee and the Board of Directors.
(b) In order to ensure the independence of the Office personnel from Executive Officers and theeffect of instructions by the Audit Committee, the Office is staffed with personnel who work
only for the Office and are not subject to orders and instructions of Executive Officers, and the
Audit Committee shall be informed in advance of planned transfers of the Office personnel.
(c) Executive Officers and employees shall report without delay to the members of the Audit
Committee significant matters affecting the Company and its subsidiaries, results of internal
audits, and the implementation status of reporting under the internal reporting system. It shallbe provided for in the company regulation that reporters using the internal reporting system,
which applies to the employees of the Company and its subsidiaries, shall not receive
disadvantageous treatment for reason of having made a report, and the secretariat of the systemshall thoroughly administer this provision.
(d) The Office shall be in charge of payment for the expenses incurred in connection with theexecution of the duties of the Audit Committee members and other administrative duties, andshall promptly process the payment for the expense or debt except in the case where theexpense or debt of the claim is clearly found to be unnecessary to the execution of the duties ofthem.
(e) Standing Committee member(s) shall be appointed to the Audit Committee, and activity plansof the Audit Committee shall be prepared in coordination with the audit plans of Internal
Auditing Office.
ii) The following measures shall be effective to ensure the adequacy of business operations within the
Company and the Hitachi Group.
(a) Such fundamental policies as the emphasis of the social responsibilities of businessenterprises shall be shared with the subsidiaries of the Company.
(b) Each subsidiary of the Company shall develop systems to ensure the appropriateness ofoperations corresponding to its size and other characteristics, basic framework of which issimilar to ones employed in the Company. In order to ensure development of such systems ineach subsidiary, directors and auditors shall be sent from the Company to its subsidiary, andregular audits shall be conducted for the subsidiary.
(c) A reporting system to Directors shall be established to ensure that the execution of duties by
Executive Officers of the Company is in compliance with laws, regulations, and the Articles ofIncorporation.
(d) Information pertaining to the execution of duties by Executive Officers of the Company shall be
prepared and maintained in accordance with internal rules.

75

(e) A structure shall be established in which each relevant department shall establish regulations
and guidelines, conduct training, prepare and distribute manuals, and carry out other suchmeasures with respect to various risks. Efforts shall be made to identify possible new risks
through such things as progress reports on business operations and, should it become necessary
to respond to a new risk, an Executive Officer responsible for responding thereto shall be
appointed promptly.
(f) Efficient performance of duties of the Executive Officers of the Company, and Directors andExecutive Officers of the subsidiaries shall be ensured through the following business
management systems.
- The Senior Executive Committee shall be established in order to deliberate on and facilitate
the formulation of decisions based on due consideration of diverse factors regarding
important issues that affect the Company and/or the Hitachi Group.
- Based on the management policy, medium-term business plans and annual budgets, on which
performance management is based, shall be prepared in order to operate business in aplanned and efficient manner.
- Internal audits of the Company and its subsidiaries shall be conducted to monitor and identify
the status of their business operations and to facilitate improvements.
- The Audit Committee shall receive the audit plans of the accounting auditors in advance, andthe prior approval of the Audit Committee shall be required with respect to the fees to be
paid to the accounting auditors.
- Documented business processes for matters to be reflected in financial reports shall be
executed at the Company and its subsidiaries, and internal and external auditors shall
examine said processes in order to ensure the reliability of financial reports.
- A structure for the adequate and efficient conduct of business operations common to the
Hitachi Group companies shall be established.
(g) Continuous maintenance of a legal and regulatory compliance structure shall be ensured throughthe following business management systems.
- Internal audits shall be conducted, and various committees shall be established for legal andregulatory compliance activities. Furthermore, an internal reporting system for employees of
the Company and its subsidiaries shall be established and education on legal and regulatorycompliance shall be provided.
- Various policies and rules on compliance with laws shall be established, aiming to ensurethat the employees are aware of the internal control systems overall and that the systems are
effective.
(h) A system shall be established, in which the subsidiaries report on important issues and theprogress in measures for operations to the Company through the Company’s Senior Executive
Committee, medium-term business plans and the budget system.
(i) The policy on transactions within the Hitachi Group is to trade fairly based on market prices.

766) Fundamental Policy on the Conduct of Persons Influencing Decision on the Company’s Financial andBusiness Policies
We invest a great deal of business resources in fundamental research and in the development ofmarket-leading products and businesses that will bear fruit in the future, and realizing the benefits fromthese management policies requires that they be continued for a set period of time. For this purpose, theCompany keeps its shareholders and investors well informed of not just the business results for eachperiod but also of the Company’s business policies for creating value in the future.
The Company does not deny the significance of the vitalization of business activities andperformance that can be brought about through a change in management control, but it recognizes thenecessity of determining the impact on company value and the interests of all shareholders of thebuying activities and buyout proposals of parties attempting to acquire a large share of stock of theCompany or a Group company by duly examining the business description, future business plans, past
investment activities, and other necessary aspects of such a party.
There is no party that is currently attempting to acquire a large share of the Company’s stocks nor
is there a specific threat, neither does the Company intend to implement specified so-called antitakeover measures in advance of the appearance of such a party, but the Company does understand that
it is one of the natural duties bestowed upon it by the shareholders and investors to continuously
monitor the state of trading of the Company’s stock and then to immediately take what the Company
deems to be the best action in the event of the appearance of a party attempting to purchase a large shareof the Company’s stock. In particular, together with outside experts, the Company will evaluate thebuyout proposal of the party and hold negotiations with the buyer, and if the Company deems that saidbuyout will not maintain the Company’s value and is not in the best interest of the shareholders, thenthe Company will quickly determine the necessity, content, etc., of specific countermeasures andprepare to implement them. The same response will also be taken in the event a party attempts toacquire a large percentage of the shares of a Group company.

77

(2) Directors and Senior Management
1) Lists of directors and senior management
Men: 46 persons, Women: 2 persons(Women’s percentage to total number of Directors and Senior Management: 5%)
The Company is a company with Nominating Committee, etc. pursuant to the Companies Act. The
information on its Directors and Executive Officers is as follows.
(a) Directors
Position andResponsibility

Director
Member of Audit
Committee andCompensation
Committee

Name

Katsumi Ihara

Director

Ravi Venkatesan

Director
Member of
Nominating
Committee

Cynthia Carroll

Date ofbirth

Business experience, including experiencein Hitachi, and functions

Term ofofficeShareownership(shares)

Sept. 24,1950

6/2005 Executive Deputy President,
Representative Corporate Executive
Officer, Member of the Board, Sony
Corporation
4/2009 Executive Deputy President, Corporate
Executive, Sony Corporation
6/2009 Executive Vice President, Representative
Director, Sony Financial Holdings Inc.
6/2010 President, Representative Director, SonyFinancial Holdings Inc.
6/2011 President, Representative Director, Sony
Life Insurance Co., Ltd.
4/2015 Chairman, Director, Sony Life InsuranceCo., Ltd. (Retired in June 2017)
6/2016 Chairman, Director, Sony Financial
Holdings Inc. (Retired in June 2017)
6/2018 Director, Hitachi, Ltd.

(Note 1)600

(Note 1)0(Note 1)

1,200

Jan. 12,
1963

Nov. 13,1956

7/1999 Chairman of the Board of Directors,
Cummins India Ltd. (Retired in March
2004)
1/2004 Chairman, Microsoft India Pvt. Ltd.
(Retired in September 2011)
4/2011 Independent Director, Infosys Ltd. (Retired
in May 2018, served as Co-Chairman from
April 2017 to August 2017)
4/2013 Venture Partner, Unitus Ventures LLC.
(Currently in office)8/2015 Chairman (Non-Executive), Bank of
Baroda (Retired in August 2018)
9/2018 Special Representative for Young People& Innovation, UNICEF (Currently in
office)7/2020 Director, Hitachi, Ltd.
10/1991 General Manager, Foil Products, Alcan
Inc.
1/1996 Managing Director, Aughinish Alumina
Ltd., Alcan Inc.
10/1998 President, Bauxite, Alumina and Specialty
Chemicals, Alcan Inc.
1/2002 President & CEO, Primary Metal Group,
Alcan Inc.
3/2007 CEO, Anglo American plc. (Retired in
April 2013)
6/2013 Director, Hitachi, Ltd.

78

Position andResponsibility

NameDate ofbirth

Director

Joe Harlan

May 5,
1959

Director

George Buckley

Feb. 23,
1947

Director

Louise Pentland

Apr. 11,1972

Business experience, including experiencein Hitachi, and functions
9/1999 Vice President and Chief Financial Officer,
Lighting Business, General ElectricCompany
9/2001 Vice President, Corporate Financial
Planning and Analysis, 3M Company
11/2002 President and Chief Executive Officer,
Sumitomo 3M Ltd.
10/2004 Executive Vice President, Electro andCommunications Business, 3M Company
10/2009 Executive Vice President, Consumer andOffice Business, 3M Company
9/2011 Executive Vice President, Performance
Materials, The Dow Chemical Company
9/2012 Executive Vice President, Chemicals,
Energy and Performance Materials, The
Dow Chemical Company
10/2014 Chief Commercial Officer and Vice
Chairman, Market Business, The Dow
Chemical Company
10/2015 Vice Chairman and Chief Commercial
Officer, The Dow Chemical Company(Retired in August 2017)
6/2018 Director, Hitachi, Ltd.
2/1993 Chief Technology Officer, Motors, Drives
and Appliances, Emerson ElectricCompany
9/1994 President, US Electrical Motors, Emerson
Electric Company
7/1997 President, Mercury Marine Division andCorporate Vice President, Brunswick
Corporation
4/2000 President and Chief Operating Officer,
Brunswick Corporation
6/2000 Chairman and Chief Executive Officer,
Brunswick Corporation
12/2005 Chairman of the Board, President andChief Executive Officer, 3M Company
2/2012 Executive Chairman of the Board, 3M
Company (Retired in May 2012)
6/2012 Chairman, Arle Capital Partners Limited(Retired in December 2015)
Director, Hitachi, Ltd.
8/1997 Admitted as a Solicitor (UK)
7/2001 Senior Legal Counsel, Nokia Networks,
Nokia Corporation
9/2007 Vice President, Acting Chief Legal Officer
and Head of IP Legal, Nokia Corporation
7/2008 Senior Vice President and Chief Legal
Officer, Nokia Corporation
6/2009 Admitted to New York State Bar
Association
2/2011 Executive Vice President and Chief Legal
Officer, Nokia Corporation (Retired in
May 2014)
4/2015 General Counsel, PayPal, eBay Inc.
6/2015 Director, Hitachi, Ltd.
7/2015 Senior Vice President and Chief Legal
Officer, PayPal Holdings, Inc.
9/2016 Executive Vice President and Chief
Business Affairs & Legal Officer, PayPal
Holdings, Inc. (Currently in office)79

Term ofofficeShareownership(shares)(Note 1)600

(Note 1)

6,200

(Note 1)900

Position andResponsibility

NameDate ofbirth

Chairman of the
Board
Nominating
Committee(Chair),Member of Audit
Committee andCompensation
Committee(Chair)Harufumi
Mochizuki

Jul. 26,
1949

Director
Member of Audit
Committee andCompensation
Committee

Takatoshi
Yamamoto

Oct. 20,1952

Director
Member of
Nominating
Committee andAudit Committee(Chair)Hiroaki Yoshihara

Feb. 9,1957

Director

Helmuth Ludwig

Sept. 19,
1962

Business experience, including experiencein Hitachi, and functions
7/2002 Director-General for Commerce andDistribution Policy, Minister’s Secretariat,
Ministry of Economy, Trade and Industryof Japan (“METI”)
7/2003 Director-General, Small and Medium
Enterprise Agency, METI
7/2006 Director-General, Agency for Natural
Resources and Energy, METI
7/2008 Vice-Minister of Economy, Trade andIndustry of Japan
8/2010 Special Advisor to the Cabinet of Japan(Retired in September 2011)10/2010 Senior Adviser to the Board, Nippon Life
Insurance Company (Retired in April
2013)
6/2012 Director, Hitachi, Ltd.
6/2013 President and Representative Director,
Tokyo Small and Medium Business
Investment & Consultation Co., Ltd.
(Currently in office)12/1995 Managing Director, Morgan Stanley Japan
Limited6/1999 Managing Director and Vice Chairman,
Tokyo Branch, Morgan Stanley Japan
Limited7/2005 Managing Director and Vice Chairman,
UBS Securities Japan Co., Ltd.
6/2009 Managing Director, CASIO COMPUTER
CO., LTD.
6/2011 Advisor, CASIO COMPUTER CO., LTD.
(Retired in June 2012)
6/2016 Director, Hitachi, Ltd.
11/1978 Joined Peat Marwick Mitchell & Co.
7/1996 National Managing Partner, the Pacific
Rim Practice, KPMG LLP
10/1997 The Board Member, KPMG LLP
10/2003 Vice Chairman and Global Managing
Partner, KPMG International (Retired in
April 2007)
6/2014 Director, Hitachi, Ltd.
6/2001 President, Software and System House
Division, Siemens AG
8/2002 President, Systems Engineering Division,
Automation and Drives Group, Siemens
AG
8/2007 President, Siemens PLM Software, Inc.
10/2010 Global Head of Communications, Industry
Automation, Siemens Corp.
10/2011 President and CEO, Industry Sector, North
America, Siemens Industry, Inc.
10/2014 Executive Vice President and Chief Digital
Officer, Digital Factory Division, Product
Lifecycle Management, Siemens Corp.
10/2016 Chief Information Officer, Siemens AG(Retired in December 2019)
1/2020 Professor of Practice in Strategy and
Entrepreneurship, Cox School of Business,
Southern Methodist University (Currently
in office)7/2020 Director, Hitachi, Ltd.

80

Term ofofficeShareownership(shares)(Note 1)3,800

(Note 1)9,700

(Note 1)2,200

(Note 1)1,500

Position andResponsibility

NameDate ofbirth

Director
Member of Audit
Committee(Standing)Hideaki Seki

Mar. 10,1957

Executive
ChairmanMember of
Nominating
Committee

Hiroaki NakanishiMar. 14,
1946

Director
Member ofCompensation
Committee

ToshiakiHigashihara

Feb. 16,
1955

Business experience, including experiencein Hitachi, and functions
4/1979 Joined Hitachi, Ltd.
4/2011 Board Director, Hitachi Automotive
Systems, Ltd.
4/2013 Vice President, Board Director, Hitachi
Automotive Systems, Ltd.
4/2014 Executive Vice President, Board Director,
Hitachi Automotive Systems, Ltd.
4/2015 President & COO, Representative Director,
Hitachi Automotive Systems, Ltd.
4/2016 President & CEO, Representative Director,
Hitachi Automotive Systems, Ltd.
4/2018 Senior Vice President and Executive
Officer, Hitachi, Ltd.
President, Representative Director, Hitachi
Building Systems Co., Ltd. (Retired in
March 2020)
4/2020 Associate, Hitachi, Ltd.
7/2020 Director, Hitachi, Ltd.
4/1970 Joined Hitachi, Ltd.
4/2003 General Manager, Global Business
6/2003 Vice President and Executive Officer
4/2004 Senior Vice President and Executive
Officer
6/2005 Senior Vice President and Executive
Officer, Hitachi, Ltd.
Chairman and Chief Executive Officer,
Hitachi Global Storage Technologies, Inc.
4/2006 Executive Vice President and Executive
Officer, Hitachi, Ltd. (Retired in December
2006)
4/2009 Executive Vice President and Executive
Officer, Hitachi, Ltd.
4/2010 President, Hitachi, Ltd.
6/2010 President and Director, Hitachi, Ltd.
4/2014 Chairman & CEO and Director, Hitachi,
Ltd.
4/2016 Executive Chairman and Representative
Executive Officer, Hitachi, Ltd.
4/2018 Executive Chairman and Executive
Officer, Hitachi, Ltd.
4/1977 Joined Hitachi, Ltd.
4/2006 Chief Operating Officer, Information &Telecommunication Systems
4/2007 Vice President and Executive Officer(Retired in March 2008)
4/2008 President, Hitachi Power Europe GmbH
4/2010 President and Chief Executive Officer,
Hitachi Plant Technologies, Ltd.
6/2010 President and Representative Director,
Hitachi Plant Technologies, Ltd.
4/2011 Vice President and Executive Officer,
Hitachi, Ltd.
4/2013 Senior Vice President and Executive
Officer, Hitachi, Ltd.
4/2014 President & COO, Hitachi, Ltd.
6/2014 President & COO and Director, Hitachi,
Ltd.
4/2016 President & CEO and Director, Hitachi,
Ltd.
Total

Term ofofficeShareownership(shares)(Note 1)

11,200(Note 1)

117,900(Note 1)

135,400

291,200(Notes) 1. The term of office of the Directors starts upon the election at the Annual General Meeting of
Shareholders on July 30, 2020 and expires at the close of the Annual General Meeting of Shareholders
for the fiscal year ending March 31, 2021.
2. Messrs. Katsumi Ihara, Ravi Venkatesan, Joe Harlan, George Buckley, Harufumi Mochizuki,
Takatoshi Yamamoto, Hiroaki Yoshihara and Helmuth Ludwig and Mses. Cynthia Carroll and Louise
Pentland are directors who fulfill the qualification requirements to be outside directors as provided forin Article 2, Item 15 of the Companies Act.
81

(b) Executive Officers
Position and Responsibility
Representative Executive
Officer, President & CEO
Overall management

Name

Date ofbirth

ToshiakiHigashihara

Feb. 16,1955

Representative Executive
Officer, Executive Vice
President and Executive
Officer
Masakazu Aoki
Assistant to the President(business for industry &distribution sectors, water &environment business, andindustrial products business)

Representative Executive
Officer, Executive Vice
President and Executive
Officer
Assistant to the President(marketing & sales andregional strategies),
marketing & sales andregional strategies

Ryuichi Kitayama

Representative Executive
Officer, Executive Vice
President and Executive
Officer
Assistant to the President(smart life & ecofriendly
systems business,
automotive systems
business and healthcare
business) and smart life &
ecofriendly systems
business

Keiji Kojima

Representative Executive
Officer, Executive Vice
President and Executive
Officer
Assistant to the President(systems & services
Keiichi Shiotsuka
business and defense
systems business), systems& services business, defense
systems business and social
innovation businesspromotion

Jun. 23,
1954

Feb. 4,1952

Oct. 9,1956

May 8,
1954

Business experience, including
experience in Hitachi, and functions
See “(a) Directors”
4/1977 Joined Hitachi, Ltd.
4/2012 President and Director, Hitachi
Industrial Equipment Systems
Co., Ltd.
10/2014 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/2017 Executive Vice President andExecutive Officer, Hitachi, Ltd.
Chairman of the Board, Hitachi
Industrial Equipment Systems
Co., Ltd.
4/1976 Joined Hitachi, Ltd.
10/2009 Chief Marketing Officer,
Information &Telecommunication Group,
Information &Telecommunication Systems
Company
4/2010 Vice President and Executive
Officer
4/2014 Senior Vice President andExecutive Officer
4/2015 Executive Vice President andExecutive Officer (Retired in
March 2018)
6/2017 Director, Hitachi HighTechnologies Corporation
6/2018 Chairman of the Board, Hitachi
High-Technologies Corporation
4/2020 Executive Vice President andExecutive Officer, Hitachi, Ltd.
4/1982 Joined Hitachi, Ltd.
4/2011 General Manager, Hitachi
Research Laboratory
4/2012 Vice President and Executive
Officer
4/2016 Senior Vice President andExecutive Officer
4/2018 Executive Vice President andExecutive Officer

4/1977 Joined Hitachi, Ltd.
4/2012 Chief Operating Officer, System
Solutions Business, Information& Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2013 Vice President and Executive
Officer
4/2015 Senior Vice President andExecutive Officer
4/2017 Executive Vice President andExecutive Officer
82

Term ofofficeShareownership(shares)(Note 2)

135,400(Note 2)48,800(Note 2)

49,660(Note 2)

51,900(Note 2)50,800Position and Responsibility

NameDate ofbirth

Representative Executive
Officer, Executive Vice
President and Executive
Officer
Assistant to the President(building systems businessand railway systems
business)

Alistair Dormer

Aug. 29,
1963

Representative Executive
Officer, Executive Vice
President and Executive
Officer
Assistant to the President(nuclear energy businessand energy business)

Toshikazu
NishinoJan. 9,1955

Senior Vice President andExecutive Officer
Atsushi Oda
Nuclear energy business andenergy businessFeb. 19,
1958

Representative Executive
Officer, Senior Vice
President and Executive
Officer
Finance, corporate pension
system and investment
strategies

Aug. 20,
1956

Yoshihiko
Kawamura

Business experience, including
experience in Hitachi, and functions
2/2001 Director of Business
Development, Alstom Transport
U.K. Ltd.
6/2003 Joined Hitachi Europe Ltd.
10/2009 Managing Director, Hitachi RailEurope Ltd.
9/2012 Executive Chairman and CEO,
Hitachi Rail Europe Ltd.
4/2014 Global CEO of Rail Systems
business, Hitachi, Ltd.
4/2015 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/2019 Executive Vice President andExecutive Officer
4/1980 Joined Hitachi, Ltd.
4/2010 Senior Manager, Strategy &Project Office, Supervisory
Office for Management Reforms
4/2011 Vice President and Executive
Officer
4/2013 Senior Vice President andExecutive Officer
4/2015 Executive Vice President andExecutive Officer
4/1980 Joined Hitachi, Ltd.
4/2015 General Manager ofTransmission & Distribution
Systems Division, Energy
Solutions Company and Chief
Operating Officer of Power
Systems Company, Power &Infrastructure Systems Group
4/2016 Vice President and Executive
Officer
4/2019 Senior Vice President andExecutive Officer
4/1979 Joined Mitsubishi Corporation
4/2010 Senior Vice President, Division
COO, IT Service Division,
Mitsubishi Corporation
4/2015 Joined Hitachi, Ltd.
Executive Strategist, Information& Telecommunication Systems
Group
4/2016 Deputy General Manager of IoTBusiness Promotion Division andGeneral Manager of Incubation
Division, Hitachi, Ltd.
4/2017 Vice President and Executive
Officer, Hitachi, Ltd.
4/2018 Senior Vice President andExecutive Officer, Hitachi, Ltd.

83

Term ofofficeShareownership(shares)(Note 2)

1,900

(Note 2)

48,500(Note 2)35,400(Note 2)33,700Position and Responsibility

Senior Vice President andExecutive Officer
Services & platforms
business

Name

Date ofbirth

ToshiakiTokunaga

Mar. 15,1967

Representative Executive
Officer, Senior Vice
President and Executive
Hidenobu
Officer
Corporate communications, Nakahata
corporate auditing,corporate export regulationand human capital

Jan. 24,
1961

Senior Vice President andExecutive Officer
Management strategies andstrategies for next
generation business

Mamoru Morita

Vice President andExecutive Officer
Marketing & sales (businessfor financial institutions,
Keiichi Akino
government, public
corporation and social
infrastructure systems anddefense systems business)

Apr. 12,1959

Oct.13,
1958

Vice President andExecutive Officer
Business for industry &distribution sectors

Jun AbeJun. 14,
1961

Vice President andExecutive Officer
Government & external
relations and CSR &environmental strategies

Hitoshi Ito

Feb. 19,
1959

Vice President andExecutive Officer
Energy business

Kenji Urase

Jun. 18,
1961

Business experience, including
experience in Hitachi, and functions
4/1990 Joined Hitachi, Ltd.
4/2017 President, Hitachi Appliances,Inc.
4/2018 General Manager, Smart Life &Ecofriendly Systems Division,
Hitachi, Ltd.
4/2019 Vice President and Executive
Officer, Hitachi, Ltd.
4/2020 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/1983 Joined Hitachi, Ltd.
10/2013 Deputy General Manager,
Human Capital Group
4/2014 Vice President and Executive
Officer
4/2018 Senior Vice President andExecutive Officer
4/1983 Joined Hitachi, Ltd.
4/2015 General Manager of Strategy
Planning Division
4/2016 Vice President and Executive
Officer
4/2020 Senior Vice President andExecutive Officer
4/1981 Joined Hitachi, Ltd.
4/2016 General Manager, Kansai Area
Operation
4/2018 Vice President and Executive
Officer

4/1984 Joined Hitachi, Ltd.
4/2016 Senior General Manager, Control
System Platform Division,
Services & Platforms Business
Unit
4/2018 Vice President and Executive
Officer
4/1982 Joined Ministry of International
Trade and Industry
8/2011 Councillor, Cabinet Secretariat
1/2013 Director-General, Reconstruction
Agency7/2014 Commissioner, Japan Patent
Office10/2016 Advisor, Tokio Marine &Nichido Fire Insurance Co., Ltd.
1/2018 Joined Hitachi, Ltd.
4/2018 Vice President and Executive
Officer
4/1986 Joined Hitachi, Ltd.
3/2015 President, Hitachi Power
Solutions Co., Ltd.
4/2017 Vice President and Executive
Officer, Hitachi, Ltd.

84

Term ofofficeShareownership(shares)(Note 2)

26,900(Note 2)37,300(Note 2)32,500(Note 2)

20,700(Note 2)22,800(Note 2)

17,900(Note 2)

20,900Position and Responsibility

NameDate ofbirth

Vice President andExecutive Officer
Investment strategies

Ryuichi Otsuki

Mar. 15,
1958

Vice President andExecutive Officer
Nuclear energy business

Tadashi Kume

Jan. 4,
1963

Vice President andExecutive Officer
Legal matters, risk
management and corporate
auditing

Kohei Kodama

May 24,1961

Vice President andExecutive Officer
Research & development

Norihiro Suzuki

Dec. 5,
1961

Vice President andExecutive Officer
Marketing & sales (businessfor industry & distributionsectors, water &Yoji Takeuchi
environment business,building systems business,railway systems businessand healthcare business)

Jul. 1,
1958

Vice President andExecutive Officer
Kojin Nakakita
Regional strategies (APAC)

Sept. 28,
1963

Vice President andExecutive Officer
Business for government,
public corporation and
Katsuya Naganosocial infrastructure systems
and defense systems
business

Aug. 30,
1958

Business experience, including
experience in Hitachi, and functions
4/1981 Joined Hitachi, Ltd.
4/2014 Chief Strategy Officer andGeneral Manager of Group
Business Development Division,
Information &Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2015 Vice President and Executive
Officer
4/1986 Joined Hitachi, Ltd.
4/2019 COO, Nuclear Energy Business
Unit
4/2020 Vice President and Executive
Officer
4/1987 Joined Hitachi, Ltd.
4/2017 Chief Business Risk management
Officer, Systems & Services
Business Division
4/2018 Vice President and Executive
Officer
4/1986 Joined Hitachi, Ltd.
10/2014 General manager of Central
Research Laboratory
4/2015 General Manager of Global
Center for Social Innovation,
Research & Development Group,
and General Manager of Central
Research Laboratory Group
4/2016 Vice President and Executive
Officer
4/1981 Joined Hitachi, Ltd.
4/2018 CMO of Building Systems
Business Unit, General Manager
of Global Business Strategy
Planning Division, Building
Systems Business Unit
4/2019 Vice President and Executive
Officer
10/1988 Joined Hitachi, Ltd.
4/2017 Chairman of Hitachi Asia Ltd.
(Currently in office)6/2017 Chairman of Hitachi India Pvt.
Ltd. (Currently in office)4/2019 Vice President and Executive
Officer, Hitachi, Ltd.
4/1983 Joined Hitachi, Ltd.
4/2016 General Manager of Social
Infrastructure Information
Systems Division, Information &Communication Technology
Business Division
4/2017 Vice President and Executive
Officer

85

Term ofofficeShareownership(shares)(Note 2)25,800(Note 2)

14,000(Note 2)

17,100(Note 2)

18,300(Note 2)

18,300(Note 2)

17,800(Note 2)

20,500Position and Responsibility

NameDate ofbirth

Vice President andExecutive Officer
One Hitachi actions
promotion

Seiichiro Nukui

Jan. 3,
1965

Vice President andExecutive Officer
Information technology
strategies

Yasushi Nomura

Aug. 21,
1957

Vice President andExecutive Officer
Railway systems businessAndrew Barr

Jan. 9,1973

Vice President andExecutive Officer
Marketing & sales andregional strategies (Japan)

Masahiko
Hasegawa

Sept. 17,
1964

Vice President andExecutive Officer
Supply chain management(MONOZUKURI and
quality assurance)

Kentaro Masai

May 22,
1959

Vice President andExecutive Officer
Building systems businessShinya Mitsudomi

Jul. 5,
1958

Vice President andExecutive Officer
Cost structure reform andinformation security
management

Masashi
Murayama

Dec. 23,
1961

Vice President andExecutive Officer
Business for financial
institutions

Tsugio Yamamoto

Aug. 27,
1959

Business experience, including
experience in Hitachi, and functions
4/1988 Joined Accenture, Ltd. (Japan)
2/2010 Vice President of Company
Executive, and General Mangerof Communication, Electric,
Media and High-tech Industry,Power & Industrial Equipment
Division, Accenture Ltd. (Japan)
4/2015 Joined Hitachi, Ltd.
Executive IT Strategist, Hitachi,
Ltd.
4/2017 Urban Mobility Project Leader,
Future Investment Division,
Hitachi, Ltd.
4/2019 Vice President and Executive
Officer, Hitachi, Ltd.
4/1980 Joined Hitachi, Ltd.
4/2018 General Manager of IT Strategy
Division
4/2019 Vice President and Executive
Officer
1/2002 Engineering Manager, Rolling
Stock, UK Government Strategic
Rail Authority
1/2005 Head of Maintenance Delivery[Rail Business], Hitachi EuropeLtd.
1/2014 COO, Hitachi Rail Europe Ltd.
5/2016 CEO, Ansaldo STS S.p.A.
(Currently Hitachi Rail STS
S.p.A.)
4/2019 Vice President and Executive
Officer, Hitachi, Ltd.
4/1987 Joined Hitachi, Ltd.
4/2018 General Manager of Kansai Area
Operation
4/2020 Vice President and Executive
Officer
4/1982 Joined Hitachi, Ltd.
4/2014 President & CEO of Rail
Systems Company, Infrastructure
Systems Group
4/2016 Vice President and Executive
Officer
4/1982 Joined Hitachi, Ltd.
4/2017 Group Head of Sales andManaging Director, Japan / Asia
Pacific, Railway Systems
Business Unit
4/2018 Vice President and Executive
Officer
4/1985 Joined Hitachi, Ltd.
4/2016 CPO and General Manager,
Value Chain Integration Division
4/2019 Vice President and Executive
Officer
3/1978 Joined Hitachi, Ltd.
4/2016 CEO of Financial Institutions
Business Unit and CEO of
Government & Public
Corporation Business Unit
4/2017 Vice President and Executive
Officer
86

Term ofofficeShareownership(shares)(Note 2)

17,900(Note 2)

21,100(Note 2)300

(Note 2)

14,300(Note 2)

21,100(Note 2)

18,700(Note 2)

19,900(Note 2)

18,700Position and Responsibility

Name

Vice President andExecutive Officer
Regional strategies (China)

Takashi Yoda

Executive Officer
GeneralHiroaki Nakanishi

Date ofbirth

Business experience, including
experience in Hitachi, and functions

Term ofofficeShareownership(shares)Aug. 22,1966

4/1990 Joined Hitachi, Ltd.
4/2018 General Manager of Energy
Business Co-Creation &Promotion Division, Power andEnergy Business Administration
Division
4/2019 Vice President and Executive
Officer(Note 2)

18,200(Note 2)

117,900

Mar. 14,
See “(a) Directors”
1946
Total

1,034,960(Notes) 1. The “Position and Responsibility” column describes positions and matters delegated to each of the
Executive Officers by the Board of Directors.
2. The term of office of the Executive Officers expires on March 31, 2021.
2) Independent Directors(a) Qualification for the Independent Directors and criteria for the independency
For electing an Independent Director, the Nominating Committee of the Company considers, inaddition to the following criteria for the independency, whether the Independent Director has thehighest personal and professional ethics, integrity and insight, and distinguished records of leadershipor experience at policy making levels in business, law, administration, accounting or education, etc.
For the independency of an Independent Director, the Company considers the Independent
director to be independent unless:- his or her immediate family member* is, or has been within the last three years, a director or an
executive officer, of the Company or any of its subsidiaries;- he or she is currently an executive director, an executive officer or an employee of a company
that has made payments to, or received payments from, the Company for property or services
in an amount which, in any of the last three fiscal years, exceeds 2% of any of the companies’
consolidated gross revenues;- he or she has received during any of the last three fiscal years more than 10 million yen in
direct compensation for his or her service as a specialist in law, accounting or tax, or as aconsultant from the Company, other than director compensations; or- he or she serves as an executive officer or director of a not-for-profit organization, and theCompany’s discretionary charitable contributions to the organization in any of the last threefiscal years are more than 10 million yen and 2% of that organization’s annual gross revenues.
* An “immediate family member” includes a person’s spouse, parents, children, siblings, grandparents, grand-children, mothers and fathers-in-law, sons and daughters-in-law, spouses ofsiblings, grand-children-in-law, and brothers and sisters-in-law.
(b) Function of the Independent Directors
Following the policy stated in “(a) Qualification for Independent Directors and criteria for the
independency,” the Company has elected ten persons; Messrs. Katsumi Ihara, Ravi Venkatesan, Joe
Harlan, George Buckley, Harufumi Mochizuki, Takatoshi Yamamoto, Hiroaki Yoshihara and Helmuth
Ludwig and Mses. Cynthia Carroll and Louise Pentland, as outside Directors under Article 2, Item 15of the Companies Act. They are expected to enhance functions of the Company’s Board of Directors
through supervising execution of duties of Executive Officers and others from an independent
perspective, based on rich experiences and insights in the area of global corporate management in thecases of Messrs. Katsumi Ihara and Joe Harlan, based on rich experiences and insights in the area ofglobal corporate management, digital business and emerging markets in the case of Mr. Ravi
Venkatesan, based on rich experiences and insights as top executive of major global companies in thecases of Ms. Cynthia Carroll and Mr. George Buckley, based on deep insight into corporate legal
matters and corporate governance gained through her rich experience as the chief legal officer ofmajor global companies in the case of Ms. Louise Pentland, based on diverse experiences and insights
87

in such areas as public administration in the case of Mr. Harufumi Mochizuki, based on a broad range
of insight in business and management gained through his experience in the area of corporate analysis
and global corporate management in the case of Mr. Takatoshi Yamamoto, based on rich experiences
and insights in the area of global corporate management and accounting in the case of Mr. Hiroaki
Yoshihara and based on rich experiences and insights in the area of global corporate management anddigital business in the case of Mr. Helmuth Ludwig.
(c) Relationship between Independent Directors and the Company
Each of Independent Directors has no relationship with the Company regarding his or her
independency as described in “(a) Qualification for the Independent Directors and criteria for the
independency.” In addition, there is no particular conflict of interest between each of Independent
Directors and the Company.
The Company considers that all Independent Directors are independent, and therefore has notified
them as independent directors to each of the Company’s listing stock exchanges in Japan.
In addition, the number of shares of the Company owned by each Independent Director isdescribed in “1) Lists of directors and senior management.”(d) Supervising by the Independent Directors
Independent Directors, comprising of majority of Directors, supervise execution of duties of
Executive Officers from an independent perspective. As described in the item “(3) Audit,” the Audit
Committee, of which majority members are Independent Directors, receives reports and explanations
about results of internal audits, accounting audit and internal control audit, and verifies the mattersreported or explained. In addition, the Audit Committee reports the results of its verification to theBoard of Directors.

88

(3) Audit
1) Audit by the Audit Committee
The Audit Committee consists of five Directors, including four outside Directors and one standing
Audit Committee member.
Mr. Hiroaki Yoshihara, the Chair of the Audit Committee, has considerable knowledge of financeand accounting based on his long experience at KPMG Group with businesses related to accounting, etc.
The Audit Committee conducts audits for whether corporate administration by Directors andExecutive Officers are properly carried out under appropriate internal control systems.
The Audit Committee develops the audit policy and the audit plan, and periodically receives reports
or conducts hearing for execution of duties from Directors and Executive Officers. In addition, themembers of the Audit Committee, who are in charge of internal inspection, examine business units of theCompany and receive reports from subsidiaries in order to check whether business transaction andproperty management are properly carried out, and then report the results to the Audit Committee.
Furthermore, such members of the Audit Committee attend the important meetings including the budget
meeting, the Senior Executive Committee and the Disclosure Committee, inspect audit reports frominternal audit division, and provide internal audit division with instructions about divisions to be subject
to auditing and items to be focused, if necessary.
The Audit Committee receives reports and explanations about the audit plan and results of the audit
from the accounting auditor, and based on the reports, verifies results of financial audits and internal
control audits. In addition, the Audit Committee receives reports and explanations of quality control
systems of the accounting auditor. Furthermore, the Company makes it a rule to obtain the prior approvalof the Audit Committee for remuneration to the accounting auditor.
The attendance record of each member of the Audit Committee during the fiscal year ended March
31, 2020 is as follows.

Katsumi Ihara

Attendance / Number of days held the
Audit Committee (Note)
15 days / 15 days

Harufumi Mochizuki

15 days / 15 days

100%

Takatoshi Yamamoto

15 days / 15 days

100%

Hiroaki Yoshihara

15 days / 15 days

100%

Name

Attendance rate (Note)100%

Toyoaki Nakamura
15 days / 15 days
100%
(Note) They are based on the days held the Audit Committee during each member's term of office.

During the fiscal year ended March 31, 2020, the Audit Committee engaged in a variety ofactivities as a whole Hitachi Group and by each business segment to study priority matters such as
strengthening of collaboration and the facilitation of information sharing under a “tripartite audit” (audit
by the Audit Committee, internal audit and audit by accounting auditors), and auditing of theestablishment and operation of internal control systems from the perspective of risk management andvalidity of execution of duties. In addition, a standing committee member worked to obtain information
as needed in a timely and accurate manner, mainly by collaborating with the Internal Auditing Office,among other departments, and attending important internal meetings such as the Senior Executive
Committee, and facilitated information sharing with other committee members.
The spread of the COVID-19 brought an impact on the schedule for the settlement of accounts andaudits including the change of the date for audits and visit for audits around the end of the fiscal year
ended March 31, 2020.
2) Internal audit
The Internal Auditing Office is in charge of internal audit within Hitachi Group and audits business
units, corporate divisions of headquarters and subsidiaries and affiliates. The number of staff of theInternal Auditing Office is 44 as of March 31, 2020.
The Internal Auditing Office monitors and assesses whether overall business operations, including
marketing, personnel management, labor management, compliance, procurement transactions,production, environment, disaster prevention, export regulations, information system, accounting andfinancing activities, and property management of Hitachi Group are properly carried out pursuant to audit
standards established by the Company, and points out items required to be improved based on the resultsof auditing and follows up their improvements. The Internal Auditing Office reports in advance its
89internal audit plan to the Audit Committee, and reports results of auditing to the President & CEO and the
Audit Committee. Furthermore, relating to the internal control over financial reporting, the internal
control division in the Internal Audit Office promotes to establish and maintain the internal control
systems pursuant to the Company’s guideline, assesses its effectiveness, and reports the results to the
President & CEO and the Audit Committee.
Due to the spread of the COVID-19, it has become impossible to visit locations that are subject tointernal audits and it has become difficult to check physical assets and original documented evidence, andthus the Company has been using IT technologies, including online meetings, and, especially to carry out
audits overseas, has been commissioning audit divisions of Group companies and auditing firms.
3) Accounting audit(a) Name of accounting auditor
Ernst & Young ShinNihon LLC(b) Consecutive term of service of the certified public accountants
The Fukase accounting firm of certified public accountants carried out an accounting audit of
the Company in 1970 and, subsequently, accounting audits were conducted by Musashi Audit
Corporation, which was established by Fukase certified public accountant etc., from 1971, Century
Audit Corporation, into which Musashi Audit Corporation was merged, from 1986 and Ota Showa
Century Audit Corporation, into which Century Audit Corporation was merged, from 2000, andcurrently Ernst & Young ShinNihon LLC, which was renamed from Ota Showa Century Audit
Corporation, conducts the accounting audits of the Company. Since 2003 when Ernst & Young(“EY”) has become the network firm partnering with the accounting auditor, Hitachi Group
companies, including overseas companies, have selected EY as the accounting auditor uniformly on a
global basis and the Company has been striving to ensure that the accounting auditor performs its
duties properly from an independent standpoint, maintaining a proper degree of tension with theCompany through mutual assessment between the Company’s finance division and internal audit
division and the accounting auditor and the Audit Committee’s strong cooperation with theaccounting auditor and examination of selection of an accounting auditor and reappointment of theaccounting auditor.
At Ernst & Young ShinNihon LLC, certified public accountants are rotated and no certified
public accountants are involved in accounting audits of the same company for more than sevenconsecutive fiscal years. No lead certified public accountants are involved in accounting audits of thesame company for more than five consecutive fiscal years. If a certified public accountant is involvedin accounting audits of the same company for seven consecutive years, he or she will be involved inaccounting audits of that company only after an interval of five fiscal years. No lead certified public
accountants who are involved in accounting audits of the same company for five consecutive fiscal
years will be involved in accounting audits of that company again.
(c) Certified public accountants (CPAs) who executed accounting audit
Takashi Ouchida, Takuya Tanaka, Yoshitomo Matsuura(d) Assistants for audit works
41 CPAs and 76 staffs belonging to Ernst & Young ShinNihon LLC assist execution of
accounting audit works as instructed by the three CPAs mentioned in (b).
(e) Policy and reason for the selection of accounting auditors
With a view to ensuring the appropriate execution of duties by accounting auditors, the Audit
Committee selects accounting auditors by considering such factors as quality control systems foraccounting auditors, implementation systems for auditing and the level of audit fees.
In addition, the Audit Committee has prepared the following policies with respect to “policies
for determination of removal and non-reappointment of accounting auditors” set forth in Item 4 of
Article 126 of the Ordinance for Enforcement of the Companies Act.
- In the event the Audit Committee determines that the causes provided for in each item of
Paragraph 1 of Article 340 of the Companies Act apply to an accounting auditor and theaccounting auditor needs to be removed immediately, the Audit Committee shall remove theaccounting auditor by unanimity. Should this occur, the Audit Committee member selected by
the Audit Committee shall give a report on the removal of the accounting auditor and the reason
therefor at the first general meeting of shareholders to be convened after the said removal.
90

- Besides the case above, it is determined that an accounting auditor should be replaced for suchreason as the difficulty of ensuring an adequate performance of duties by the accounting
auditor, the Audit Committee shall determine the contents of the agenda item on the nonretention of the accounting auditor to be submitted to the general meeting of shareholders.
The Audit Committee comprehensively evaluated and studied Ernst & Young ShinNihon LLC
from the perspectives of its history, business size, past performance of auditing and efforts tofacilitate communication with the Audit Committee and other internal divisions, among other factors.
As a result, the Audit Committee decided to select Ernst & Young ShinNihon LLC as the accounting
auditor since the Audit Committee judged that none of the abovementioned policies applies to Ernst& Young ShinNihon LLC and therefore adequate performance of duties by Ernst & Young
ShinNihon LLC is continuously secured.
(f) Evaluation for accounting auditor by the Audit Committee
The Audit Committee evaluated the appropriateness and relevance of auditing conducted byaccounting auditor from the perspectives of the effectiveness of initiatives to facilitatecommunication with the Audit Committee and the top management in particular, the details andimplementation of audit systems and auditing manuals and remuneration for auditing in accordancewith evaluation criteria the Audit Committee formulated in advance. For evaluating the accounting
auditor, the Audit Committee gathered information on matters such as the independence of theaccounting auditor, audit systems and the implementation of audits and audit quality thereof from the
Accounting Control Department and the Internal Auditing Office. The Audit Committee also received
reports from the accounting auditor regarding compliance with laws and regulations, including theaccounting auditor’s independence, methods for evaluating risks with respect to the acceptance andcontinuation of audit services, audit and inspection systems and quality control systems, and detailed
audit plans based on the accounting auditor’s evaluations for risks pertaining to the Company, as well
as results of audits and details of and progress on plans for improving business operations andauditing efficiency at the time of the completion of quarterly reviews and annual audits. Based onsuch reports, the Audit Committee concluded that the accounting auditor conducted highly
transparent audits and its activities were appropriate and relevant.
4) Audit Fees(a) Fees to Certified Public Accountants
Fiscal year ended March 31, 2020
Category

Fees for audit
services(Millions of yen)

Fiscal year ended March 31, 2019

Fees for non-audit
services(Millions of yen)

Fees for audit
services(Millions of yen)

Fees for non-audit
services(Millions of yen)

The Company

515 (Note 1)

71

497 (Note 1)

80

Consolidated
subsidiaries

939 (Note 2)28

888 (Note 2)

85

Total

1,454

99

1,385

165

(Notes) 1. The non-audit services were basically assurance engagements and various consulting services.
2. The non-audit services were basically various consulting services.

91

(b) Audit fees (excluding the amount mentioned in (a)) to the Company’s accounting auditor, Ernst &Young ShinNihon LLC Group (including Ernst & Young and its group firms which belong to thesame network as Ernst & Young ShinNihon LLC)
Fiscal year ended March 31, 2020
Category

Fees for audit
services(Millions of yen)

Fiscal year ended March 31, 2019

Fees for non-audit
services(Millions of yen)

Fees for audit
services(Millions of yen)

Fees for non-audit
services(Millions of yen)

The Company- (Note 1)

6- (Note 1)

6

Consolidated
subsidiaries

2,723 (Note 2)596

2,800 (Note 2)

489

2,723

602

2,800

495

Total

(Notes) 1. The non-audit services were basically various consulting services.
2. The non-audit services were basically assurance engagements and various consulting services.
(c) Policy on determination of audit fees
For determining the amount of audit fees, the Company conducts hearing of the audit plan andverify efficiency of audit services, including the number of days, hours for auditing, the number ofsubjects to be audited and the scope of audit, etc., and appropriateness of the estimate. The Company
also discusses with the accounting auditor taking into consideration the formation of auditors andaudit fees for the preceding fiscal year. In addition, the Audit Committee receives the audit plans of
the accounting auditors and the results of discussion between the auditors and Executive Officers of
the Company and approves the amount of the fees in advance of the Company’s decision.
(d) Reasons why the Audit Committee accepted the audit fees
The Audit Committee has obtained necessary information and examined the status of theexecution of duties by the accounting auditor, content of the audit plan, and grounds for calculating
the estimated amount of fees, etc. and concluded that these are reasonable. Therefore, the Audit
Committee has given the consent with regard to the fees etc. to accounting auditor, in accordancewith Article 399, Paragraph 1 of the Companies Act.

92

(4) Compensation to Directors and Executive Officers
1) Policy on the determination of Compensation of Directors and Executive Officers[Method of Determination of Policy]
The Company’s Compensation Committee sets forth the policy on the determination of theamount of compensation, etc. of each Director and Executive Officer pursuant to applicable provisionsof the Companies Act.
[Basic Policy]- Compensation shall be such that it enables the company to attract necessary personnel to achieve an
improvement in corporate value through global business growth.
- Compensation shall be commensurate with roles and responsibilities of each Directors andExecutive Officers.
- Compensation for Directors shall be such that it enables them to exercise functions of supervision ofmanagement effectively.
- Compensation for Executive Officers shall be such that it enables them to contribute to sustained
improvement in corporate value through the execution of business and employs an appropriatebalance between short-term performance and medium- and long-term performance.
- The level of compensation shall be determined taking into account compensation levels at othercompanies as well as economic and market trends.
- The Compensation Committee utilizes external experts to gain expert advice and an objective
viewpoint, if necessary, for considering the details and amounts of compensation.
[Compensation Structure](i) Matters relating to Directors
Compensation for Directors is basic remuneration as fixed pay. The amount of basic
remuneration is decided by adjusting a basic amount to reflect full-time or part-time status, committee
membership and position, and travel from place of residence, etc. A Director concurrently serving as
an Executive Officer is not be paid compensation as a Director.
(ii)Matters relating to Executive Officers
Compensation for Executive Officers consists of basic remuneration as fixed pay, and shortterm incentive compensation and medium- and long-term incentive compensation as variable pay. The
basic amount of basic remuneration, short-term incentive compensation, and medium- and long-term
incentive compensation is set based on the ratio of 1:1:1 as the standard, taking into account thecomposition of executive compensation for major global companies, in order to improve corporate
value through the growth of global businesses. The higher position Executive Officers holds, thehigher proportion of variable pay is set to the total annual compensation.
The method of determination of each type of compensation is as follows.
Basic remuneration- The amount of basic remuneration is decided by adjusting a basic amount set in accordance with therelevant position to reflect the results of an assessment.
Short-term incentive compensation- The amount of short-term incentive compensation is decided within the range of 0 to 200% of abasic amount set according to the relevant position by adjusting that amount to reflect financial
results and individual performance. Evaluation items and proportion of evaluation item are as shownin the following table.
Evaluation items
Performance- Company performancelinkedDivision performancecomponent

Proportion of evaluation item
Executive Officers that
constitute the Senior
Other Executive Officers
Executive Committee (Note)
80%
30%
-

50%

Individual target-linked component
20%
20%(Note) In case that an “Executive Officers that constitute the Senior Executive Committee” is incharge of business units or businesses, the same proportion of evaluation item as for “Other
Executive Officers” is used.

93

- The amount of the performance-linked component varies according to the evaluation of company
performance and division performance.
- Company performance is evaluated referring to consolidated revenues, adjusted operating income,
EBIT, and net income attributable to Hitachi, Ltd. stockholders in order to measure the level ofachievement of consolidated financial forecasts disclosed to stakeholders, including shareholders
and investors.
- Division performance is evaluated referring to adjusted operating income and operating cash flows
for each division, among other indicators, to measure the level of achievement of targets under the
Mid-term Management Plan and the annual budgets for divisions.
- The amount of the individual target-linked component varies according to the evaluation of the levelof achievement of individual target for each Executive Officer determined based on his/her
responsibility.
Medium- and Long-term incentive compensation- The shares of restricted stock are granted in order to propel management from a medium- and longterm perspective and to provide incentives to bring about a sustainable increase in enterprise value
by further promoting senior management’s shared values with shareholders through the holding ofshares during their term of office.
- The restriction on transfer shall be lifted if executive officers resign from all of the positions of theCompany’s executive officer, director, and corporate officer.
- With regard to one-half of granted shares of restricted stock, the number of shares whose transfer
restriction is lifted shall be determined after ex-post evaluation. In the ex-post evaluation, the total
shareholder return of Hitachi stock over the three years from the beginning of the fiscal year whenthe medium- and long-term incentive compensation is granted is compared with growth rate of
TOPIX over the same period.
- Lifting of transfer restrictions shall apply to all granted shares if the TSR/TOPIX Growth Rate
Ratio is 120% or more.
- Lifting of transfer restrictions shall apply to part of granted shares if the TSR/TOPIX Growth
Rate Ratio is between 80% or more but less than 120% (*).
- Transfer restrictions shall not be lifted for any shares if the TSR/TOPIX Growth Rate Ratio is lessthan 80%.
* Number of shares whose transfer restrictions are lifted= Number of granted shares × {(TSR/TOPIX Growth Rate Ratio × 1.25) － 0.5}
Shares whose transfer restrictions are not lifted shall be acquired by the Company without
consideration.
- If it is deemed to be inappropriate to grant shares of restricted stock due to laws and regulations in
the country of residence, etc., cash award based on the value of the Company’s share price shall be
substituted for restricted stock.
- From the fiscal year that commenced in April 2019, shares of restricted stock are granted in place ofthe stock options as stock-based compensation the Company has granted previously.
If it is found that an executive officer has been engaged in misconduct during his/her term ofoffice, compensation for Executive Officers that has been already paid shall be returned to theCompany.
With regard to persons who are hired externally such as foreign persons, a compensation
package could be individually determined based on the level of compensation in a job market which isconsidered for compensation benchmarking while referring the above policy. From Fiscal 2020, theCompany has granted restricted stock units to non-Japanese Executive Officers as medium- and longterm incentive compensation. One third of vested restricted stock units are delivered in the form ofshares of common stock of the Company and cash each fiscal year over three years from the beginningof the fiscal year containing the day on which restricted stock units are granted.
(iii) Miscellaneous- It was decided at the Compensation Committee meetings held on December 18, 2007 and March 26,
2008 that the compensation structure for Directors and Executive Officers will be re-examined
starting with the compensation for fiscal 2008 and that the retirement allowance will be abolished.
The payment of retirement allowance to Directors and Executive Officers due to the abolition of theretirement allowance system will be in an amount determined by the Compensation Committee atthe time of the retirement of a relevant Director or Executive Officer.

942) Amount of compensation
Total amount of each type(Millions of yen)
Category

Total amount ofcompensation,
etc.
(Millions of yen) Fixed pay

Variable pay
Short-term
incentivecompensation

Medium- andlong-term
incentivecompensation

Other

Numberofpersons

Directors－－－(excluding
54
54
1
outside Directors)－－－
Outside Directors
310
310
8
Executive
4,592
1,738
1,682
1,166
4
37
Officers
Total
4,957
2,103
1,682
1,166
4
46
(Notes) 1. The number of Directors indicated excludes two Directors who concurrently serve as
Executive Officers.
2. The "Others" column shows the fringe benefit equivalent.
Performance indicators referred to in company performance evaluations for short-term
incentive compensation are as follows.
(Unit: billions of yen)
Fiscal year ended March 31, 2020
Indicators
TargetResults
Revenues

9,400.0

8,767.2

Adjusted Operating Income

750.0

661.8

EBIT
Net income attributable to
Hitachi, Ltd. stockholders

750.0

183.6

400.0

87.5

The TSR/TOPIX Growth Rate Ratios defined in conditions for exercising stock option as stock-based compensation (stock acquisition rights) and in conditions for lifting transfer restrictions ofrestricted stock issued as medium- and long-term incentive compensation are as follows.
Total shareholder return
Name
Term
/ TOPIX Growth Rate Ratio
The First Stock Acquisition
From April 1, 2016125.8%
Rights of Hitachi, Ltd.
to March 29, 2019The Second Stock Acquisition
From March 31, 2017112.8%
Rights of Hitachi, Ltd.
to March 31, 2020
The Third Stock Acquisition
From March 30, 201886.2%
Rights of Hitachi, Ltd.
to March 31, 2020 (Note 1)
Restricted Stocks issued in May
From April 1, 2019
86.8%
2019
to March 31, 2020 (Note 2)(Notes) 1. The ratios are calculated to determine the number of stock acquisition rights that can be
exercised by persons who retire from Executive Officers, Directors or Corporate Officers
before the expiration of the waiting period (three years from the beginning of the fiscal year
in which the allocation date of stock acquisition rights falls).
2. The ratios are calculated to determine the number of stock acquisition rights that can be
exercised by persons who retire from Executive Officers, Directors or Corporate Officers
no later than March 31, 2020.

95

In addition, Directors or Executive Officers whose compensation from the Company and its
subsidiaries is not less than ¥100 million and the amount of their compensation are as follows:
Total amount of each type (Millions of yen)
Name

Company

Toshiaki
Hitachi, Ltd.
Higashihara (The Company)

Category

Executive
Officer(Note 4)
Executive
Officer

Hitachi, Ltd.
(The Company)
Masakazu Hitachi Industrial
Chairman
Equipment
Aoki
Systems Co., Ltd. of the
Board(Consolidated
subsidiary)
Hitachi, Ltd.
Executive(The Company) Officer
Hitachi Global
Life Solutions,Inc.
Director
Keiji(Consolidated
Kojimasubsidiary)
HitachiAutomotive
Systems, Ltd.
Chairman(Consolidated
subsidiary)Keiichi
Hitachi, Ltd.
Executive
Shiotsuka(The Company) Officer
Hitachi, Ltd.
Executive(The Company) Officer
Hitachi
HideakiConstruction
Chairman
Takahashi Machinery Co.,of theLtd.
Board(Consolidated
subsidiary)
Alistair
Hitachi, Ltd.
Executive
Dormer(The Company) Officer
Hitachi, Ltd.
Executive(The Company) Officer
Toshikazu Hitachi Metals,
Chairman
NishinoLtd.
of the(Consolidated
Board
subsidiary)
Hitachi, Ltd.
Executive
Atsushi Oda(The Company) Officer
Yoshihiko Hitachi, Ltd.
Executive
Kawamura (The Company) Officer

Variable pay
Total amount ofcompensation,
Medium andShort-term
Othersetc.
Long-term
Fixed pay
incentive
incentive (Note 3) (Millions of yen)compensationcompensation(Note 1)
(Note 2)
148

150

197

-

30

39

58

-

30

39

-

-

50

57

49

-

4

3

-

-

495

197

172

4

3

-

-

60

96

58

-

54

55

42

-

5

1

-

-

228

124

31

4

58

63

58

-

1

-

-

-

47

47

26

-

121

48

48

28

-

124

96

214

159

389

181

Total amount of each type (Millions of yen)
Name

Company

Category

Variable pay
Total amount ofcompensation,
Medium andShort-termetc.
Long-term Others
Fixed pay
incentive
incentive (Note 3) (Millions of yen)compensationcompensation(Note 1)
(Note 2)

Hitachi, Ltd.
Executive
8(The Company) Officer
Hitachi (China),
Kenichi169
Ltd.
KokuboChairman
59
48
48(Consolidated
subsidiary)(Note 5)
SetsuoHitachi, Ltd.
Executive
48
74
28
151
Shibahara(The Company) Officer
Hitachi, Ltd.
Executive
24
37
23(The Company) Officer
Hideaki Seki Hitachi Building President
146
Systems Co., Ltd.
and
24
37
(Consolidated
Director
subsidiary)
YoshitakaHitachi, Ltd.
Executive
44
49
31
125
Tsuda
(The Company) Officer
Hidenobu
Hitachi, Ltd.
Executive
48
48
28
124
Nakahata(The Company) Officer
Mitsuaki
Hitachi, Ltd.
Executive
48
48
31
127
Nishiyama (The Company) Officer
Hitachi Global
Digital Holdings Chairman
Toshiaki
Corporationof the53
43
27
125
Tokunaga(Consolidated
Board &
subsidiary)CEO(Note 5)
Hitachi Rail Ltd.
(Consolidated
Andrew Barr
Director
65
48
13
5
133
subsidiary)(Note 5)
Executive
Hiroaki
Hitachi, Ltd.
Officer
104
104
124
332
Nakanishi(The Company)(Note 4)(Notes) 1. Compensations from the Company and consolidated subsidiaries paid depending on financial results
and individual performances in the short term are collectively called.
2. Medium and long-term incentive compensation is stock options as stock-based compensation, restricted
stock compensation or cash award based on the value of the Company's share price.
3. The "Others" column shows the fringe benefit equivalent.
4. Although concurrently serving as Director for the fiscal year ended March 31, 2020, Messrs. Toshiaki
Higashihara and Hiroaki Nakanishi did not receive compensation as Director.
5. The amount of the remuneration, etc. from foreign subsidiaries shows yen equivalent.

973) Authorities, roles and activities of the Compensation Committee
The Compensation Committee, which was established under the Companies Act, includes
independent outside directors that have majority in the number of committee members, holds the legal
authority to determine remuneration for Directors and Executive Officers, and strives to ensure theobjectivity, transparency and fairness of the remuneration determination processes. The Compensation
Committee has the authority to determine remuneration policies and the details of remuneration(amount of compensation, etc.) of Directors and Executive Officers individually based on the policies.
To determine the details of remuneration individually, the Committee confirms and reviews processes
and details with respect to the assessment of basic remuneration amounts, evaluation of performanceand individual targets related to short-term incentive compensation.
For the fiscal year ended March 31, 2020, based on policies for determining compensation for
Directors and Executive Officers, the Compensation Committee determined amounts of remuneration
for Directors and Executive Officers individually including short-term incentive compensation of
Executive Officers in conjunction with which the Compensation Committee confirmed and reviewed
the process and details of performance and individual target evaluations. Furthermore, theCompensation Committee re-examined the executive compensation system from the viewpoint of
remuneration for top management at global enterprises and sharing of values with shareholders, anddecided on policies for determining remuneration for Directors and Executive Officers that is appliedin the fiscal year ending in March 2021, including the introduction of the restricted stock units
compensation to non-Japanese Executive Officers.

98(5) Information on shareholdings(a) Criteria for classification of investment securities
The Company classifies investment securities that it holds into two types. If investment
securities are held for the purpose of receiving benefits exclusively through stock price fluctuations
and dividends, those are classified as investment securities for pure investment and the rest ofinvestment securities are classified as investment securities owned for other purposes than pureinvestment.
(b) Equity securities held for purposes other than pure investment(i) Policy for shareholding and examination of the reasonableness of holding
Under the basic policy, the Company will not acquire and hold other companies’ shares except
for cases where acquiring or holding such shares is necessary in terms of transactions or business
relationship. The Company will promote reducing shares that it already owns unless significance ofholding shares and economic rationales of holding are confirmed.
The Board of Directors verifies whether it is appropriate to hold shares for all stock theCompany owns ever year. In such verification, each individual stock was re-examined as to the
purpose of holding the shares and whether benefits from holding shares are in line with target level ofcapital efficiency. As the result of verification, the Company promotes the sales of shares for whichsignificance of holding shares and economic rationale are not confirmed. Details of shares sold in thefiscal year ended March 31, 2020, are presented in (ii) below.
(ii) Number of stock names and balance sheet amount
Number ofstock names

Total amount recordedin the balance sheet(stock names)(millions of yen)

Unlisted stocks

178

39,925

Others55

101,934<Stocks increased in the fiscal year ended March 31, 2020> (Note)
Number ofstock names

Total purchase price forthe shares increased(stock names)(millions of yen)

Reasons of increase

Unlisted stocks

1

450

Others--Purchasing for strengthening therelationship for business-(Note) In addition to the stocks in the above tables, the Company holds three unlisted stocks whoseclassifications in accounting were changed from affiliated company's common stocks toinvestment securities due to sales of a part of the shares or decreased ownership percentages.
<Stocks decreased in the fiscal year ended March 31, 2020> (Note)
Number ofstock names

Total selling price forthe shares decreased(stock names)(millions of yen)

Unlisted stocks

25

1,753

Others155,635(Note) In addition to the stocks in the above table, there are one listed stock whose classification inaccounting was changed from investment securities to affiliated company's common stock
due to increased ownership percentage and three unlisted stocks which were succeeded by theCompany’s consolidated subsidiary through the company split.

99

(iii) The number and the amount recorded in the balance sheet, etc. of specified investment securities
Specified investment securities
Fiscal year ended Fiscal year ended
March 31, 2020
March 31, 2019
(Note 1)
(Note 2)
Stock nameWestern Digital
Corporation

Renesas Electronics
Corporation

Number ofshares(shares)Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Balance sheet
amount(Millions of yen)

6,250,000

6,250,000

28,30933,33861,990,548

61,990,548

24,11431,739Central Japan Railway
Company

900,000

900,000

15,58823,139

East Japan Railway
Company

812,400

812,400

6,642

8,676

521,000

521,000

Shin-Etsu ChemicalCo., Ltd.

DAIICHI SANKYOCOMPANY,
LIMITED
Maxell Holdings, Ltd.

West Japan Railway
Company

The Chiba Bank, Ltd.

Seibu Holdings Inc.

Ono PharmaceuticalCo., Ltd.

Keio Corporation

5,590

4,834

300,000

300,000

2,230

1,530

1,603,000

1,603,000

1,705

2,516

215,000

215,000

1,590

1,792

3,269,000

3,269,000

1,546

1,964

1,286,900

1,286,900

1,528

2,492

600,000

600,000

1,491

1,301

206,574

206,574

1,320

1,477

100

Purpose of holdings
and reasons for increases(Note 3)

Holding
shares of
Hitachi, Ltd.

Maintaining and enhancing business
relationship

No

Received in relation to thereorganization, etc. of Renesas
Technology Corp. which was anaffiliate of the Company

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
relationship

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

YesFiscal year ended Fiscal year ended
March 31, 2020
March 31, 2019
(Note 1)
(Note 2)
Number ofshares(shares)Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Balance sheet
amount(Millions of yen)

Sapporo Holdings
Limited597,600

597,600

1,191

1,444

Electric Power
Development Co., Ltd.

523,280

653,980

1,139

1,763

400,000

400,000

894

1,556

830,320

830,320

767

645

TOKYU
CORPORATION

394,016

394,016

669

761

Keihan Holdings Co.,Ltd.

121,927

121,927

585

567

Kintetsu Group
Holdings Co., Ltd

104,291

104,291

521

538

Kyushu Electric Power
Company Inc.

474,000

474,000

411

619

328,500

328,500

404

565

The Bank of Kyoto,Ltd.

100,000

100,000

344

463

Yamaguchi Financial
Group, Inc.

484,310484,310296

454

550,275

550,275

293

355

375,000

375,000

259

257

TOMONY Holdings,
Inc.

679,200

679,200

243

285

Hokuriku ElectricPower Company

233,300

466,560

176

404

Stock nameShowa Denko K.K.

Seiko Electric Co., Ltd.

Tosoh Corporation

The Keiyo Bank, Ltd.

euglena Co., Ltd.

101

Purpose of holdings
and reasons for increases(Note 3)

Holding
shares of
Hitachi, Ltd.

Maintaining and enhancing business
transactions of selling products andproviding services

Yes(Note 4)Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of purchasing raw
materials and components, etc.

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

Yes(Note 4)Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes(Note 4)Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing
cooperative relationship in the area of
R&DNo

Maintaining and enhancing business
transactions of selling products andproviding services

Yes(Note 4)Maintaining and enhancing business
transactions of selling products andproviding services

NoFiscal year ended Fiscal year ended
March 31, 2020
March 31, 2019
(Note 1)
(Note 2)
Number ofshares(shares)Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Balance sheet
amount(Millions of yen)

Nankai Electric
Railway Co., Ltd.

71,49471,494

175

218

Kita-Nippon Bank,
Ltd.

73,50073,500144

144

358,220

612,520137

249

300,000

300,000

133

153

ANA HOLDINGS
INC.

50,000100,000

131

405

THE TAIKO BANK，
LTD．

88,00088,000

127

143

TOYO ELECTRIC
MFG. CO., LTD.

100,000

100,000

112

121

San ju San Financial
Group, Inc.

73,62373,623

109

113

THE SHIGA BANK，
LTD．

40,00040,000102

105

Taiwan High Speed
Rail Corporation

957,361

957,361

98

123

Taragaon Regency
Hotel508,030

508,03094

121

513,150

513,150

79

120

Tokyo Electric Power
Company Holdings,
Inc.

187,500

187,500

70

131

Nippon Yakin Kogyo
Co., Ltd.

40,425404,250

68

101

THE DAITO BANK,
LTD.

110,000

110,000

6270

Stock name

Glosel Co., Ltd.

Daido Signal Co., Ltd.

Tochigi Bank, Ltd.

102

Purpose of holdings
and reasons for increases(Note 3)

Holding
shares of
Hitachi, Ltd.

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of purchasing raw
materials and components, etc.

Yes

Maintaining and enhancing business
transactions of purchasing raw
materials and components, etc.

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
relationship

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

Yes(Note 4)Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Received as a result of substituteperformance for accounting
receivables

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

NoFiscal year ended Fiscal year ended
March 31, 2020
March 31, 2019
(Note 1)
(Note 2)
Number ofshares(shares)Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Balance sheet
amount(Millions of yen)

16,250

16,25051

55

Senshu Ikeda
Holdings, Inc.

315,327

315,327

51

89

THE BANK OF
KOCHI, LTD.

69,90069,900

44

56

THE CHUKYOBANK, Ltd.

20,00020,00043

45

50,00050,00039

57

32,00032,00036

52

30,00030,00034

46

30,00030,00031

3138,00038,0003042300,000

300,000

27

34

Nishi-Nippon Railroad
Co., Ltd.

6,000

6,000

15

16

The Michinoku Bank,
Ltd.

11,33011,33013

18

THE
NAGANOBANK,
LTD.

6,900

6,900

7

11

－

31,817,168

Stock name

The Aichi Bank, Ltd.

Ricoh Company, Ltd.

ISEKI&CO., LTD.

Tokyo Kiraboshi
Financial Group, Inc.

Tomato bank, Ltd.

Zeon Corporation

Jimoto Holdings, Inc.

Yungtay Engineering
Co., Ltd.

7,313

－

103

Purpose of holdings
and reasons for increases(Note 3)

Holding
shares of
Hitachi, Ltd.

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

No

Maintaining and enhancing business
transactions of selling products andproviding services

Yes

Held for maintaining and enhancing
business relationship
The issuer has turned it into an equitymethod associate of the Company asof March 31, 2020.

No

Fiscal year ended Fiscal year ended
March 31, 2020
March 31, 2019
(Note 1)
(Note 2)
Number ofshares(shares)Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Balance sheet
amount(Millions of yen)－

800,000－

1,737

Chubu Electric Power
Co., Inc.

－

600,254－

1,037

NGK INSULATORS,
LTD.

－

607,000－

976－

225,000－

617－

114,103－

388

BANDAI NAMCO
Holdings Inc.

－

37,000－192

Nippon Shinyaku Co.,Ltd.

－

12,000－96－

100,000

Stock nameBenefit One Inc.

Japan Tobacco Inc.

Sotetsu Holdings, Inc.

Yashima Denki Co.,Ltd.

Yodogawa SteelWorks, Ltd.

－

82

－

34,040－69

Purpose of holdings
and reasons for increases(Note 3)

Holding
shares of
Hitachi, Ltd.

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services

No

Held for maintaining and enhancing
business transactions of selling
products and providing services
This stock has been succeeded by aconsolidated subsidiary of theCompany as of March 31, 2020.

Yes

Held for maintaining and enhancing
business transactions of selling
products and providing services

Yes(Notes) 1. Since the number of stock which the Company owned as of March 30, 2020 is less than 60, all of
the stocks are listed.
2. Since the number of stock of which balance sheet amount as of March 31, 2019 exceeds 1% of theamount of the Company’s common stock on the balance sheet is less than 60, the top 60 stocks inbalance sheet amount are listed.
3. Since it is hard to state quantitative effects of holding the investment securities, such effects are notdescribed. Regarding the way to verify significance and relations of holding shares are described in"(i) Policy for shareholding and examination of the reasonableness of holding."
4. Shareholding by major subsidiaries of the issuers of each stock is counted.
(c) Equity securities held for pure investment
None.

104

V. Financial Information
Refer to the consolidated financial statements incorporated in this Annual Securities Report.
VI. Stock-Related Administration for the Company
Fiscal year

From April 1 to March 31

Annual General Meetingof Shareholders

To be held within three months from the following day of the end of every fiscal
year (Note 1)

Record date

End of every fiscal year (Note 1)

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

End of March and end of September (Note 2)
100 shares(Special account)
11, Kanda Nishikicho 3-chome, Chiyoda-ku, Tokyo
Main Office, Tokyo Securities Transfer Agent Co., Ltd.
(Special account)
Tokyo Securities Transfer Agent Co., Ltd.

Forward office-

Purchasing and selling fee

Free of charge

Method of public notice

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

Special benefit for
None
Shareholders(Notes) 1. Regarding to the annual meeting of share holders for the fiscal year ended March 31, 2020, theCompany established the record date as May 28, 2020 and held it on July 31, 2020.
2. Under the Articles of Incorporation, distribution of surplus through dividend payment, if any, will bemade to shareholders of record as of March 31 and September 30 of each year. In addition, theCompany may make further distributions of surplus to shareholders of record as of another recorddate.
3. The Articles of Incorporation provide that a holder of shares representing less than one unit does nothave any other rights of a shareholder in respect of those shares, other than those specified in the
Articles of Incorporation. This includes:(1) Rights under each item of Article 189, Paragraph 2 of the Companies Act;
(2) Rights to be allotted rights to subscribe for free for new shares and stock acquisition rights whensuch rights are granted to shareholders; or(3) Rights stipulated in the Articles of Incorporation

105VII. Reference Information on the Company
1. Information on a Parent Company, etc. of the Company
The Company has no parent company.
2. Other Reference Information
The Company filed the following documents during the period from the commencing date of the fiscal
year ended March 31, 2020 to the filing date of this Annual Securities Report.
(1) Annual Securities Report and documents attached, and Confirmation
Letter(The 150th business term (from April 1, 2018 to March 31, 2019))

Filed with the Director of the
Kanto Local Finance Bureau
on June 19, 2019(2) Internal Control Report

Filed with the Director of the
Kanto Local Finance Bureau
on June 19, 2019(3) Amended Annual Securities Report and Confirmation Letter(Amendment to Annual Securities Report filed on June 21, 2017)

Filed with the Director of the
Kanto Local Finance Bureau
on June 19, 2019(4) Amended Annual Securities Report and Confirmation Letter(Amendment to Annual Securities Report filed on June 29, 2018)

Filed with the Director of the
Kanto Local Finance Bureau
on June 19, 2019(5) Shelf Registration Statement and documents attached

Filed with the Director of the
Kanto Local Finance Bureau
on June 20, 2019(6) Quarterly Report and Confirmation Letter(The First Quarter of the 151st business term (from April 1, 2019 toJune 30, 2019))

Filed with the Director of the
Kanto Local Finance Bureau
on August 7, 2019(7) Amended Annual Securities Report and Confirmation Letter(Amendment to Annual Securities Report (1) above)

Filed with the Director of the
Kanto Local Finance Bureau
on August 7, 2019(8) Quarterly Report and Confirmation Letter(The Second Quarter of the 151st business term (from July 1, 2019 to
September 30, 2019))

Filed with the Director of the
Kanto Local Finance Bureau
on November 12, 2019(9) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 12 and 19 of the Cabinet
Office Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on December 18, 2019(10) Extraordinary Report
Filed with the Director of the(pursuant to Article 19, Paragraph 2, Item 7 and 12 of the Cabinet Office Kanto Local Finance Bureau
Ordinance Concerning Disclosure of Corporate Affairs, etc.)
on December 18, 2019(11) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 3 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on December 18, 2019(12) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 6, 12 and 19 of the Cabinet
Office Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on December 19, 2019(13) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 9 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on January 31, 2020(14) Quarterly Report and Confirmation Letter(The Third Quarter of the 151st business term (from October 1, 2019
to December 31, 2019))

Filed with the Director of the
Kanto Local Finance Bureau
on February 10, 2020(15) Amended Extraordinary Report(Amendment to Extraordinary Report (9) above)

Filed with the Director of the
Kanto Local Finance Bureau
on February 28, 2020106

(16) Shelf Registration Supplements and documents attached

Filed with the Director of the
Kanto Local Finance Bureau
on March 5, 2020(17) Securities Registration Statement

Filed with the Director of the
Kanto Local Finance Bureau
on April 21, 2020(18) Amended Securities Registration Statement(Amendment to Securities Registration Statement (17) above)

Filed with the Director of the
Kanto Local Finance Bureau
on April 24, 2020(19) Amended Extraordinary Report(Amendment to Extraordinary Report (10) above)

Filed with the Director of the
Kanto Local Finance Bureau
on May 28, 2020(20) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 8-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on July 2, 2020(21) Amended Extraordinary Report(Amendment to Extraordinary Report (20) above)

Filed with the Director of the
Kanto Local Finance Bureau
on July 2, 2020(22) Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 9-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on July 31, 2020(23) Amended Shelf Registration Statement(Amended Shelf Registration Statement concerning the Shelf
Registration Statement filed on June 20, 2019)

Filed with the Director of the
Kanto Local Finance Bureau
on August 7, 2019
December 18, 2019
December 19, 2019
January 31, 2020
February 28, 2020
May 28, 2020 andJuly 2, 2020
July 31, 2020

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

107Consolidated Financial Statements
Page
NumberConsolidated Financial Statements of Hitachi, Ltd. and Subsidiaries:
Consolidated Statement of Financial Position as ofMarch 31, 2020 and 2019

F-2

Consolidated Statement of Profit or Loss andConsolidated Statement of Comprehensive Income for the years ended
March 31, 2020 and 2019

F-3

Consolidated Statement of Changes in Equity for the years ended
March 31, 2020 and 2019

F-4

Consolidated Statement of Cash Flows for the years ended
March 31, 2020 and 2019

F-5

Notes to Consolidated Financial Statements

F-6

Reports of Independent Registered Public Accounting Firm

F-1

F-82

Consolidated Financial Statements
Consolidated Statement of Financial Position
Millions of yen
Note
AssetsCurrent assets
Cash and cash equivalents
Trade receivables and contract assets
Inventories
Investments in securities and other financial assets
Other current assets

26
6,20,26
7
11,26
5

Total current assets
Non-current assets
Investments accounted for using the equity method
Investments in securities and other financial assets
Property, plant and equipment
Goodwill
Other intangible assets
Other non-current assets

5,8
5,11,26
3,92,5,10
2,3,5,10
12

Total non-current assets
Total assets
Liabilities
Current liabilities
Short-term debt
Current portion of long-term debt
Other financial liabilities
Trade payables
Accrued expenses
Contract liabilities
Other current liabilities

26
3,11,26
26
13
20
5,14

Total current liabilities
Non-current liabilities
Long-term debt
Retirement and severance benefits
Other non-current liabilities

3,11,26
15
8,12,14,26

Total non-current liabilities
Total liabilities
EquityHitachi, Ltd. stockholders’ equity
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost

16
16,19
16,18
17
16

Total Hitachi, Ltd. stockholders’ equity
Non-controlling interests

March 31, 2020

March 31, 2019

812,3312,260,205
1,408,937
279,951
456,165

807,5932,399,933
1,356,762
284,267
187,238

5,217,589

5,035,793

480,375
440,5142,165,311
635,927
479,794
510,571

724,461
568,349
1,956,685
561,936
398,080
381,288

4,712,492

4,590,799

9,930,081

9,626,592

183,303
231,237
252,403
1,270,668
604,415615,096
576,056

111,031
185,250
257,792
1,406,012
653,676
553,510438,289

3,733,178

3,605,560

1,070,502
514,375
345,287

708,490526,688371,451

1,930,164

1,606,629

5,663,342

5,212,189

459,862
464,795
2,296,208(57,070)(3,809)458,790
463,786
2,287,587
56,360(3,920)3,159,986

3,262,603

1,106,753

1,151,800

Total equity

4,266,739

4,414,403

Total liabilities and equity

9,930,081

9,626,592

See accompanying notes to consolidated financial statements.

F-2

Consolidated Statement of Profit or Loss
Years ended March 31, 2020 and 2019

Millions of yen

Revenues
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
methodEBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income from continuing operations, before income taxes
Income taxes
Income from continuing operations
Loss from discontinued operations
Net income
Net income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
Earnings per share from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic
DilutedEarnings per share attributable to Hitachi, Ltd. stockholders
Basic
DilutedNote
20

5,15,21
5,21
22
22

2020
8,767,263(6,396,895)
2,370,368(1,708,485)
51,992(570,635)
5,768(9,033)

2019
9,480,619(6,964,635)
2,515,984(1,761,008)
206,371(442,659)
13,693(3,459)8

43,639(15,016)

183,614
20,638(23,984)
180,268(51,246)
129,022(1,776)
127,246

513,906
23,122(20,526)
516,502(186,344)
330,158(9,136)
321,02287,59639,650222,546
98,476

92.55
92.43

Yen
239.93239.70

90.71
90.60

230.47230.25

12
14,23

24

24

Consolidated Statement of Comprehensive Income
Years ended March 31, 2020 and 2019

Millions of yen
Note

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

2020
127,2462019
321,022(17,207)(8,396)(963)(26,566)(45,356)(11,881)(1,964)(59,201)(111,323)
13,173(13,609)(111,759)(4,175)(6,274)12,0091,560(138,325)(11,079)(57,641)
263,381(8,465)(2,614)

171,140
92,241

17

Consolidated Statement of Changes in Equity

Year ended March 31, 2020

Millions of yen
2020

Balance at beginning of year

Commonstock(note 16)

Capitalsurplus(note 16)

Retainedearnings(notes 16
and 18)458,790

463,786

2,287,587

Cumulative effects of changes inaccounting policies (note 3)

Accumulated
othercomprehensive
income(note 17)56,360Treasurystock,
at cost(note 16)
(3,920)

Total
Hitachi, Ltd.
stockholders’equityNoncontrollinginterests

Total equity

3,262,603

1,151,800

4,414,403--(2,596)--(2,596)(1,075)(3,671)

458,790

463,786

2,284,991

56,360(3,920)3,260,007

1,150,725

4,410,732

Reclassified into retained earnings--

15,382(15,382)

-

-

-

-

Net income--

87,596--87,59639,650127,246

Other comprehensive income

-

-

-

(96,061)-(96,061)(42,264)(138,325)

Dividends to Hitachi, Ltd. stockholders--(91,761)--(91,761)-(91,761)

Restated balance
Changes in equity

Dividends to non-controlling interests

-

-

-

-

-

-

(47,361)(47,361)

Acquisition of treasury stock

-

-

-

-

(166)

(166)

-

(166)

Sales of treasury stock

-

(138)

-

-

277

139

-

139

1,072

1,072

-

-

-

2,144

-

2,144

-

75

-

(1,987)-(1,912)

6,003

4,091

Total changes in equity

1,072

1,009

11,217(113,430)

111(100,021)(43,972)(143,993)

Balance at end of year

459,862

464,795

2,296,208(57,070)(3,809)3,159,986

1,106,753

4,266,739

Issuance of new shares (note 19)
Changes in non-controlling interests

Year ended March 31, 2019

Millions of yen
2019

Balance at beginning of year
Cumulative effects of changes inaccounting policies (note 3)
Restated balanceCommonstock(note 16)

Capitalsurplus(notes 5
and 16)

Retainedearnings(notes 16
and 18)

Accumulated
othercomprehensive
income(note 17)458,790575,809

2,105,395

142,167

Treasurystock,
at cost(note 16)
(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

Changes in equity
Reclassified into retained earnings--

33,683(33,683)

-

-

-

-

Net income--

222,546--

222,546

98,476

321,022

Other comprehensive income

-

-

-

(51,406)-(51,406)(6,235)(57,641)

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

Dividends to non-controlling interests

-

-

-

-

-

-

(42,968)(42,968)

Acquisition of treasury stock

-

-

-

-

(231)

(231)

-

(231)

Sales of treasury stock

-

(237)

-

-

448

211

-

211

Changes in non-controlling interests-(111,786)

-

(718)

-

(112,504)(129,714)(242,218)

Total changes in equity-(112,023)

178,983(85,807)217(18,630)(80,441)(99,071)

Balance at end of year

458,790

463,786

2,287,587

56,360(3,920)3,262,603

1,151,800

4,414,403

See accompanying notes to consolidated financial statements.

F-4

Consolidated Statement of Cash Flows
Years ended March 31, 2020 and 2019

Millions of yen
Note

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 and contract assets
Change in inventories
Change in trade payables
Change in accrued expenses
Change in retirement and severance benefits
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid

3

2
2,5

Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of property, plant and equipment, and intangible assets
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
Other
Net cash provided by (used in) financing activities

2020

2019

127,246

321,022433,158
136,993
51,244(43,639)870(19,650)(30,370)
185,935(143,072)(115,086)(47,575)(22,483)
224,378

368,044344,997
183,699
15,016(6,387)(184,630)(18,966)
1,793(149,500)(16,107)(14,769)(38,461)(29,982)

737,949
23,607
13,362(24,885)(189,113)

775,769
22,34322,710(22,530)(188,267)

560,920

610,025(322,894)(98,382)
82,539(382,351)(89,898)
61,623(237,172)(72,422)57,624(7,541)

306,971
13,205(525,826)(162,872)

80,849334,919(279,446)
5,004(91,699)(43,926)(166)
139(2,345)
(492)

3,706
87,636(133,581)
5,149(77,194)(43,375)(231)
211(162,692)
(55)

2,837

(320,426)25

3Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents(33,193)(17,098)

4,738

109,629

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

807,593
812,331

697,964
807,593

See accompanying notes to consolidated financial statements.

F-5

Notes to Consolidated Financial Statements(1) Nature of Operations
Hitachi, Ltd. (the Company) is a corporation domiciled in Japan, whose shares are listed on the Tokyo Stock Exchange. The
accompanying consolidated financial statements comprise the Company, its subsidiaries and the Company’s interests in associates
and joint ventures. The Company’s and its subsidiaries’ businesses are global and diverse, and include manufacturing and services
in ten segments consisting of IT, Energy, Industry, Mobility, Smart Life, Hitachi High-Tech, Hitachi Construction Machinery,
Hitachi Metals, Hitachi Chemical and Others.
(2) Basis of Presentation
As the Company meets the requirements of a “Specified Company applying Designated International Financial ReportingStandards” pursuant to Article 1-2 of the Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial
Statements (Ordinance of the Ministry of Finance of Japan No. 28 of 1976), the consolidated financial statements of the Company
have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International AccountingStandards Board (IASB), as permitted by the provision of Article 93 of the Ordinance. The Company’s fiscal year begins on April
1 and ends on March 31 of the following calendar year.
The Company’s consolidated financial statements have been prepared on a historical cost basis, except for derivative assets andliabilities, financial assets and liabilities measured at fair value through profit or loss (FVTPL), financial assets measured at fairvalue through other comprehensive income (FVTOCI) and assets and liabilities associated with defined benefit plans.
The consolidated financial statements are presented in millions of Japanese yen, the functional currency of the Company.
Management of the Company has made a number of judgments, estimates and assumptions relating to the application of
accounting policies, reporting of revenues and expenses and assets and liabilities in the preparation of these consolidated financial
statements. Actual results could differ from those estimates.
Estimates and assumptions are continually evaluated. The effect of a change in accounting estimates, if any, is recognized in thereporting period in which the change was made and in future periods.
The information regarding judgments used in applying accounting policies that could have a material effect on the Company’s
consolidated financial statements is included in the following notes:
・note 3. (a) Basis of Consolidation・note 3. (d) Financial Instruments and note 26. Financial Instruments and Related Disclosures
The information regarding uncertainties arising from assumptions and estimates that could result in material adjustments in thesubsequent consolidated financial statements is included in the following notes:
・note 3. (i) Impairment of Non-financial Assets, note 9. Property, Plant and Equipment and note 10. Goodwill and Other
Intangible Assets
・note 3. (j) Retirement and Severance Benefits and note 15. Employee Benefits
・note 3. (k) Provisions, note 3. (l) Contingencies, note 14. Provisions and note 30. Commitments and Contingencies
・note 3. (m) Revenue Recognition and note 20. Revenues
・note 3. (n) Income Taxes and note 12. Deferred Taxes and Income Taxes
For the fiscal year ended March 31, 2020, the Company tested fixed assets, such as goodwill, for impairment and assessed therealizability of deferred tax assets, etc., which require management to make estimates of future cash flows or future taxable
income, based on the assumption that most of the impact of the slowdown in the global economy caused by the spread of COVID19 would occur in the first half of the fiscal year ending March 31, 2021, with the decrease in demand to continue in the second
half of the fiscal year in part of the business, but would not be material in the longer term, although the situation varies from one
segment or region to another since the Company is engaged in a wide range of business activities around the globe. The Company
judged that this is the best assumption as of March 31, 2020. However, if the impact lasts longer or is wider than the assumption
described above, it could affect significant accounting estimates or judgements regarding impairment of fixed assets, such as
goodwill, and assessments of the realizability of deferred tax assets, etc.

F-6Notes to Consolidated Financial Statements
Regarding the consolidated statement of financial position, changes in presentation have been made effective the fiscal year
beginning April 1, 2019 due to materiality of an account balance as a result of business reorganization and others. “Goodwill,”
which was included in “Intangible assets” as of March 31, 2019, has been reclassified and separately presented and “Intangible
assets” has been renamed to “Other intangible assets.” The consolidated statement of financial position as of March 31, 2019 has
been reclassified in order to reflect these changes in presentation, and “Other intangible assets” of 561,936 million yen has been
reclassified as “Goodwill.”
Regarding the consolidated statement of cash flows, changes in presentation have been made effective the fiscal year beginning
April 1, 2019 for improved clarity. “Change in accrued expenses,” which was previously included in “Change in other liabilities,”
has been reclassified and separately presented. “Change in other assets” and “Change in other liabilities,” which were separately
presented, have been included in “Other” under cash flows from operating activities. The consolidated statement of cash flows forthe year ended March 31, 2019 has been reclassified in order to reflect these changes in presentation.
As a result, regarding the consolidated statement of cash flows for the year ended March 31, 2019, “Change in other liabilities” of(14,769) million yen has been reclassified as “Change in accrued expenses.” In addition, “Change in other assets” of (13,419)
million yen and “Change in other liabilities” of (20,488) million yen, which were separately presented, have been reclassified as“Other” under cash flows from operating activities.

F-7

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

F-8

Notes to Consolidated Financial Statements(d) 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 thecontractual rights to receive cash flows from the financial assets are transferred in transactions where the risks and economic
rewards of owning the financial assets are substantially transferred. In transactions where the risks and economic rewards ofowning the financial assets are neither substantially transferred nor retained, the Company continues to recognize thefinancial assets to the extent of its continuing involvement and derecognizes such financial assets only if its control istransferred.
The classification and measurement model of non-derivative financial assets is summarized as follows:
Financial Assets Measured at Amortized Cost
Financial assets are subsequently measured at amortized cost in case they meet the following requirements:
・The financial asset is held within a business model with the objective of collecting contractual cash flows.
・The contractual terms of the financial asset provide cash flows on specified dates that are solely payments of principal andinterest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The
carrying amount of financial assets measured at amortized cost is subsequently measured using the effective interest method.
Interest accrued on financial assets measured at amortized cost is included in Interest income in the consolidated statement of
profit or loss.
FVTOCI Financial Assets
The Company holds certain equity instruments with the purpose of expanding its revenue base by maintaining andstrengthening business relations with the investees. These equity instruments are classified as FVTOCI financial assets bydesignation. They are initially and subsequently measured at fair value, and the changes in fair value are recognized in OCI.
The cumulative amount of OCI is recognized in equity as AOCI. Dividends on equity instruments designated as FVTOCI arerecognized in profit or loss, except where they are considered to be a return of the investment.
FVTPL Financial Assets
Equity instruments not designated as FVTOCI financial assets and debt instruments not classified as financial assets
measured at amortized cost are classified as FVTPL financial assets. These instruments are subsequently measured at fairvalue and the changes in fair value are recognized in profit or loss.
Impairment of Financial Assets
On a regular basis, but no less frequently than at the end of each quarterly reporting period, the Company evaluates theallowance for doubtful receivables based on expected credit losses on trade receivables, contract assets, and other receivables
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 theamount 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 trade receivables, contract assets, and lease receivables, allowance for doubtful receivables is always
measured at the amount equal to the lifetime expected credit losses.
Whether credit risk has increased significantly is determined based on changes in the risk of default. Default is defined as thestate 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 asset 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.

F-9

Notes to Consolidated Financial Statements

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 be received
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 and expected credit
losses are measured based mainly on historical credit loss experience, future collectible amounts and other factors. 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 situationand other factors, if necessary.
For the expected credit losses on trade receivables, 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 the liability
is discharged, cancelled or expires.
Non-derivative financial liabilities the Company holds include bonds, debts, trade payables and other financial liabilities.
They are initially measured at fair value (less direct transaction costs), and bonds and long-term debt are subsequently
measured at amortized cost using the effective interest method. Interest accrued on these financial liabilities is included inInterest charges in the consolidated statement of profit or loss.
(iii) Derivatives and Hedge Accounting
The Company uses derivative instruments including forward exchange contracts, cross currency swaps and interest rate
swaps in order to hedge foreign currency exchange risks and interest rate risks. All derivatives are measured at fair valueirrespective of the objective and intent of holding them.
The Company accounts for hedging derivatives as follows:・Fair value hedge: a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment. Thechanges in fair value of the recognized assets or liabilities or unrecognized firm commitments and the related derivatives areboth recorded in profit or loss if the hedge is considered 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, when changes
in fair value of the derivative are recognized in profit or loss. If a non-financial asset or a non-financial liability isrecognized 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 when the asset or liability isrecognized.
The Company follows the documentation requirements as prescribed by IFRS 9 “Financial Instruments” (amended in
October 2017), which includes the risk management objective and strategy for undertaking various hedge transactions. In
addition, a formal assessment is made at the hedge’s inception and subsequently on a periodic basis, as to whether thederivative used in 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.

F-10

Notes to Consolidated Financial Statements(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.
(e) Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification method or by
the moving average method for finished goods, semi-finished goods and work in process, and generally by the moving averagemethod for raw materials. Net realizable value is the estimated selling price in the ordinary course of business less the estimatedcosts of completion and the estimated costs necessary to sell.
(f) Property, Plant and Equipment
Property, plant and equipment are measured using the cost model and stated at cost less accumulated depreciation andaccumulated impairment losses. Acquisition cost includes direct costs of acquisition, costs of dismantling, removing andrestoration of the assets. Each asset is depreciated mainly using the straight-line method over the following estimated useful
lives for major classes of assets:
Buildings and structures
2 to 60 years
Machinery, equipment and vehicles
2 to 17 years
Tools, furniture and fixtures
Right-of-use assets

2 to 20 years
2 to 40 years

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

2 to 10 years
2 to 20 years

Goodwill and Other intangible assets with indefinite useful lives are stated at cost less accumulated impairment losses.

F-11

Notes to Consolidated Financial Statements(h) Leases(i) Lessee
The Company and certain subsidiaries lease facilities, mainly buildings, machines, and vehicles, and recognize a right-of-use
asset, a right to use the underlying asset, and a lease liability, an obligation to make lease payments, and recognize lease costs
as depreciation charges for right-of-use assets and interest expenses on lease liabilities. Lease payments for short-term leases
with a lease term of 12 months or less are recognized in profit or loss on a straight-line basis.
Right-of-use asset
A lessee shall apply a cost model to measure the right-of-use asset, and shall present the corresponding amount in Property,
Plant and Equipment or Other intangible assets as the amount of the right-of-use asset at cost at the commencement date of
the lease less any accumulated depreciation and any accumulated impairment losses. The right-of-use asset at cost includes
the amount of the initial measurement of the lease liability and the initial direct cost incurred by the lessee. The lessee shalldepreciate the right-of-use asset from the commencement date of the lease to the earlier of the end of the useful life of theunderlying asset or the end of the lease term on a straight-line basis. Changes in the useful life or the lease term are accounted
for on a prospective basis as a change in accounting estimate.
Lease liability
The lease liability is measured at the present value of lease payments that are not paid at the commencement date of the lease,
discounted using the interest rate implicit in the lease or the lessee’s incremental borrowing rate, and is included in the
Current portion of long-term debt or Long-term debt. Interest expense on the lease liability in each period during the leaseterm that produce a constant periodic rate of interest on the remaining balance of the lease liability is recognized in profit orloss over the lease term and is included in Interest charges in the consolidated statement of profit or loss.
(ii) Lessor
The Company and certain subsidiaries, as lessors, lease facilities, mainly buildings, machines, and equipment, whereby
substantially all the risks and rewards incidental to the ownership of items of property, plant and equipment are transferred to
the lessee. Therefore, such leases are classified as finance leases with the recognition of the underlying asset discontinued andthe present value of the total amount of lease payments is used to recognize and measure the net investment in the lease.
If substantially all the risks and rewards incidental to the ownership remain with the lessor in a lease, it is classified as an
operating lease, and the underlying asset is continuously recognized, and lease income is recognized over the lease term on astraight-line basis.
(i) Impairment of Non-Financial Assets
For each non-financial asset, the Company reviews the carrying amount and tests for impairment if there are events orcircumstances indicating an asset’s carrying amount may not be recoverable. For an asset that does not generate cash flows thatare largely independent of the cash flows from other assets, the Company considers indicators of impairment based on a cash
generating unit (CGU) or a group of CGUs. Irrespective of any indicators of impairment, the Company tests intangible assets
with indefinite useful lives and goodwill for impairment annually, mainly in the fourth quarter, by estimating the recoverable
amount of each CGU (or group of CGUs) to which such assets are allocated.
The Company measures the recoverable amount of an asset or a CGU (or a group of CGUs) as the higher of fair value less costsof disposal and value in use. In measuring fair values, the Company and its subsidiaries primarily use the income approach(present value technique) based on the estimated future cash flows expected to result from the use of the asset and its eventual
disposal or the market approach to derive reasonable estimates of values in orderly market transactions, such as comparisons ofsimilar public companies and the current gross value of the asset. The Company consults with outside specialists, as appropriate,
depending on the complexity of estimating fair values. Value in use is calculated by the estimated future cash flows based on
business plans approved by management, discounted at the discount rate which is derived from the weighted average cost ofcapital. The business plan used is based on external information, reflects historical experiences, and generally has a maximum of
five years. Since the Company and its subsidiaries are engaged in a wide range of business activities from development,
production and sales of diverse products and the provision of various services, appropriate external information for eachbusiness activity is used for evaluating value in use for each business. Estimated cash flows beyond the period covered by thebusiness plan are calculated using the estimated growth rate not exceeding the long-term average growth rate of the market towhich the asset belongs. The business plan may be affected by risks related to market or economic environment, and actual
result may differ from the estimates. In addition, the discount rate used to calculate the value in use is affected by stock market
trends and fluctuations in interest rates.
F-12

Notes to Consolidated Financial Statements
If the carrying amount of the asset or the CGU (or the group of CGUs) exceeds its recoverable amount, an impairment loss isrecognized at the excess amount.
For an asset or a CGU (or a group of CGUs) other than goodwill, its recoverable amount is subsequently estimated if there is asignificant change in facts and circumstances and there is an indication that an impairment loss previously recognized on theasset may no longer exist or has decreased. If the estimated recoverable amount exceeds the carrying amount, the impairment
loss recognized previously is reversed to the extent of the carrying amount that would have been recorded, net of depreciation oramortization, if impairment had not been recognized previously.
(j) Retirement and Severance Benefits
The Company and certain subsidiaries have defined benefit pension plans, severance lump-sum payment plans and defined
contribution plans to provide retirement and severance benefits to employees.
(i) Defined Benefit Plans
Defined benefit pension plans include defined benefit pension plans and severance lump-sum payment plans. The present valueof defined benefit obligations and retirement benefit costs are measured based on the projected unit credit method. The present
value of defined benefit obligations and the fair value of plan assets are remeasured as of the end of reporting period. Actuarial
differences arising during the year and changes in fair value of plan assets (excluding interest income) are recognized in OCI and
are not subsequently reclassified into profit or loss. Any prior service cost, which arises at the time of a plan amendment, isrecognized immediately in profit or loss when such an amendment occurs. The present value of defined benefit obligations lessthe fair value of plan assets is presented as the net amount of defined benefit liability or asset in non-current liabilities or assets.
Actuarial assumptions are determined based on the best estimates and judgments, but may be affected by variance of uncertain
economic conditions in the future or by amendments or issuance of related laws.
(ii) Defined Contribution Plans
Defined contribution pension plans are post-employment benefit plans in which the employer pays a certain amount ofpremiums to the third-party asset manager but has no legal or constructive obligation to pay in excess of such contributions.
Contributions to the defined contribution plans are recognized in profit or loss in the period when the service is provided by theemployees.
(k) Provisions
The Company recognizes provisions if it has a present obligation (legal or constructive) as a result of past events, it is probablethat an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of obligation
can be reliably estimated. Provisions may be affected by unexpected events or changes in circumstances, and actual payments
may differ from the estimates.
In case that the time to settle an obligation is expected to be long, and thus the time value of money is material, the amount of aprovision is measured at the present value of the amount of expenditures expected to be required to settle the obligation.
(l) Contingencies
The Company discloses contingent liabilities in accordance with International Accounting Standards (IAS) 37 “Provisions,Contingent Liabilities and Contingent Assets” if an obligation does not meet the recognition criteria of provisions prescribedabove in (k) Provisions, excluding those where the possibility of an outflow of resources is remote.
The Company and its subsidiaries have financial guarantee contracts that require them to make payments to compensate theholder for a loss it incurs if a specified debtor defaults on payment based on the terms of a debt instrument.
(m) Revenue Recognition
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

F-13

Notes to Consolidated Financial Statements

The Company offers multiple solutions to meet its customers’ needs which may involve the delivery or performance of multiple
elements, such as goods or services. When the Company enters into multiple contracts for providing the goods or services,
related contracts are combined based on interdependencies between each contract’s consideration and the time the Company
entered into such contracts, and the transaction price is allocated to each performance obligation on the basis of the relative 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 to fulfillinga contract as an asset if those costs are expected to be recovered, and those assets are amortized based on the methods used torecognize revenue of the goods or services to which the assets relate. The Company recognizes the incremental costs of obtaining
a contract as an expense when incurred if the amortization period of the asset is less than one year.
Revenue recognition under long-term projects, etc. requires significant assumptions about the estimated total cost, estimated total
selling price, risk associated with the contract, and other factors. These estimates are subject to variance of uncertain economic
conditions in the future and may variance for a variety of reasons beyond our control. The Company reviews these estimates on
an ongoing basis and reflects them in accounting practices.
(n) Income Taxes
Deferred tax assets and liabilities resulting from temporary differences and others are accounted for based on a liability method.
A deferred tax liability is not recognized for temporary differences arising from goodwill, temporary differences arising froman asset or liability in a transaction other than a business combination, which at the time of transaction affects neither
accounting nor taxable income and future taxable difference arising from investments in subsidiaries, associates and joint
ventures where that the Company is able to control the timing of reversal of the temporary difference while it is probable thatthe temporary difference will not reverse in the foreseeable future. A deferred tax asset is recognized to the extent that it isprobable that future taxable income will be available against which unused tax loss carryforwards, unused tax credits and future
deductible temporary differences can be utilized. The times and amounts of taxable income occurrence may be affected byvariance of uncertain economic conditions in the future, and the actual times and amounts may differ from the estimates.
Current tax and deferred tax on items recognized in OCI are also recognized in OCI.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change intax rates is recognized in profit or loss and OCI in the period that includes the enactment date.
(o) Consumption Tax
Consumption tax collected and remitted to taxing authorities is excluded from revenues, cost of sales and expenses in the
consolidated statement of profit or loss.
(p) Earnings per Share
Basic earnings per share (EPS) for net income attributable to Hitachi, Ltd. stockholders is calculated based on the weighted
average number of ordinary shares outstanding during the period. Diluted EPS for net income attributable to Hitachi, Ltd.
stockholders is calculated based on the sum of weighted average number of ordinary shares outstanding during the period andthe conversion of securities with dilutive effects or the number of authorized shares.

F-14

Notes to Consolidated Financial Statements(q) Business Combinations
Business combinations are accounted for using the acquisition method. Consideration is measured as the sum of the fair value ofthe consideration transferred at acquisition date and the non-controlling interests in the acquiree. The Company determines, on atransaction by transaction basis, whether to measure non-controlling interests at fair value or by the appropriate share in the fairvalue of identifiable net assets of the acquiree. Acquisition related costs are expensed in the period in which the costs are
incurred.
(r) Changes in Accounting Policies(i) Adoption of IFRS 9 “Financial Instruments” (amended in July 2014)
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 ended March 31, 2019. IFRS 9 (amended in July 2014)
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 applied this standard and recognized the cumulative effect of the initial application
as an adjustment to the beginning balance of retained earnings for the fiscal year ended March 31, 2019. The effect of
adopting this standard on the Company’s financial position and operating results was not material.
(ii) Adoption of IFRS 15 “Revenue from Contracts with Customers”
From the beginning of the fiscal year ended 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 andrecognized when control over goods or services is transferred to the customer.
As a transitional measure upon the adoption of IFRS 15, the Company applied this standard retrospectively and recognized
the cumulative effect of the initial application as an adjustment to the beginning balance of retained earnings for the fiscal
year ended March 31, 2019.
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,
the effect of adopting this standard on the Company’s financial position and operating results was not material, comparedwith the application of the previous accounting standard.
(ⅲ) Adoption of IFRS 16 “Leases”
From the beginning of the fiscal year ended March 31, 2020, the Company has adopted IFRS 16 “Leases”. IFRS 16 sets out
the principles for the recognition, measurement, presentation and disclosure of leases, and lessees are required to account for
all leases under a single on-balance sheet model.
As a transitional measure upon the adoption of IFRS 16, the Company applies this standard and the method of recognizing
the cumulative effect of the initial application as an adjustment to the beginning balance of retained earnings at the date ofinitial application.
The Company’s leases consist mainly of the leasing of real estate, and the impact of adopting IFRS 16 on the consolidated
statement of financial position at the beginning of the fiscal year ended March 31, 2020 includes an increase in assets of
218,161 million yen associated with the recognition of right-of-use assets, an increase in liabilities of 221,832 million yen
associated with the recognition of lease liabilities, and a decrease in equity of 3,671 million yen associated with therecognition of an adjustment to the beginning balance of retained earnings, etc. at the date of initial application. The impact
on the consolidated statement of profit or loss was not material. In addition, with respect to the consolidated statement of cash
flows, while lease payments for operating leases were previously included in cash flows from operating activities,
adjustments for depreciation charges for right-of-use assets are included in cash flows from operating activities and paymentsof lease liabilities are included in cash flows from financing activities as a result of adopting IFRS 16; therefore, comparedwith the previous accounting standard, cash flows from operating activities increased while cash flows from financing
activities decreased.

F-15

Notes to Consolidated Financial Statements
The Company elects to use the practical expedient under which it is not required to perform a review for the existence of alease in a contract judged under IAS 17 “Lease” and IFRIC 4 “Determining whether an Arrangement contains a Lease” inprior periods at the commencement date of IFRS 16. In addition, when IFRS 16 is applied to a lease that is classified as an
operating lease under IAS 17, the following practical expedients are mainly elected to use.
・A lessee accounts for the leases for which the lease term ends within 12 months of the date of initial application, in thesame way as short-term leases.
・A lessee uses hindsight, in determining the lease term if the contract contains options to extend or terminate the lease.
The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized in the consolidated statementof financial position at the beginning of the fiscal year ended March 31, 2020 is 1.46%.
The difference between the future minimum lease payments of 135,963 million yen under non-cancelable operating leases asof March 31, 2019 disclosed in accordance with IAS 17 and the lease liabilities of 273,812 million yen recognized in the
consolidated statement of financial position at the beginning of the fiscal year ended March 31, 2020 is 137,849 million yen.
The main factors for the reconciliation from the future minimum lease payments based on non-cancelable operating leases asof March 31, 2019 to lease liabilities recognized in the consolidated statement of financial position at the beginning of the
fiscal year ended March 31, 2020 include decreases of 32,940 million yen due to the application of the practical expedientrelated to short-term leases, 17,980 million yen due to the separation of non-lease components of the contract and 9,456
million yen due to the measurement of the discounted present value of lease liabilities, and increases of 149,026 million yen
due to the impact of periods covered by extension options and termination options included in the lease term and 49,199
million yen due to the inclusion of lease liabilities classified as finance leases under IAS 17.
(s) New Accounting Standards not yet Adopted by the Company
The impact of adopting the principal new accounting standards and interpretations issued or amended prior to the approval dateof the consolidated financial statements that is not yet adopted by the Company as of the reporting date on the Company’s
financial position and business performance will not be material.

F-16

Notes to Consolidated Financial Statements(4) Segment Information
Business Segments
The operating segments of the Company are the components for which separate financial information is available and which isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company discloses its business in ten reportable segments, corresponding to categories of activities classified primarily by thesimilarities for the nature of markets, products and services, and economic characteristics. Several operating segments areaggregated into IT, Industry, Mobility and Smart Life 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 basedon the similarities of economic characteristics mainly using gross profit margin ratios of operating segments. The primary products
and services included in each segment are as follows:IT:
Systems integration, Consulting, Control systems, Cloud services, Software, IT products (Storage, Servers) and ATMs
Energy:Energy solutions (Nuclear, Renewable energy, Thermal, Power grid)Industry:
Industry & distribution systems, Water & environment systems and Industrial machinery
Mobility:
Building systems (Elevators, Escalators) and Railway systems
Smart Life:
Medical electronics, Smart life & ecofriendly systems (Refrigerators, Washing machines, Room air conditioners, Air-conditioning
equipment) and Automotive systems (Powertrain systems, Chassis systems, Advanced driver assistance systems)
Hitachi High-Tech:
Medical and life science products, Analytical equipment, Semiconductor processing equipment, Manufacturing and inspection
equipment, and Advanced industrial products
Hitachi Construction Machinery:Hydraulic excavators, Wheel loaders, Mining machinery, Maintenance and services, Construction solutions and Mine management
systems
Hitachi Metals:
Specialty steel products, Functional components and equipment, Magnetic materials and power electronics materials, and Wires,
cables and related products
Hitachi Chemical:
Functional materials (Electronics materials, Printed wiring boards materials, Electronics components) and Advanced components
and systems (Mobility components, Energy storage devices, Life science-related products)
Others:
Optical disk drives, Property management and others
Effective from April 1, 2019, the Company changed its business structure in order to increase customer’s social, environmental
and economic values by accelerating the Social Innovation Business. Accordingly, the Company reclassified its reportablesegments in ten segments which include five focused areas as IT, Energy, Industry, Mobility and Smart Life, four listed subsidiarygroups as Hitachi High-Tech, Hitachi Construction Machinery, Hitachi Metals and Hitachi Chemical, and Others. Figures for theyear ended March 31, 2019 have been restated on the basis of the reclassification.
The Company has changed its segment name from High-Technologies segment to High-Tech segment effective from February
2020. This change in segment name does not affect segment information.
F-17

Notes to Consolidated Financial Statements
The following tables show business segment information for the years ended March 31, 2020 and 2019.
Revenues from External Customers
Millions of yen
2020

2019

IT
Energy1,945,282
334,220

1,951,433
377,855

Industry
Mobility

663,912
1,132,944

720,955
1,199,737

Smart Life
Hitachi High-Tech

1,432,624
604,645

1,607,599
629,088

Hitachi Construction Machinery
Hitachi Metals

930,966
851,224

1,033,342
989,515

Hitachi Chemical
Others612,061
247,997

659,968
298,489

8,755,875

9,467,981

11,388

12,6388,767,263

9,480,619

Subtotal
Corporate items
Total
Revenues from Intersegment Transactions

Millions of yen
2020

2019

IT
Energy154,144
65,034

170,252
76,142

Industry
Mobility

176,837
11,503

174,451
14,420Smart Life
Hitachi High-Tech

40,36889,97941,758102,015

Hitachi Construction Machinery
Hitachi Metals

381
30,178361
33,906

Hitachi Chemical
Others

19,372
236,833

21,057
262,825

Subtotal

824,629

897,187

Corporate items and Eliminations(824,629)(897,187)

-

-

Total
Total Revenues

Millions of yen
2020
IT

2019

2,099,426

2,121,685

EnergyIndustry

399,254
840,749

453,997
895,406

Mobility
Smart Life

1,144,447
1,472,992

1,214,157
1,649,357

Hitachi High-Tech
Hitachi Construction Machinery

694,624
931,347

731,103
1,033,703

Hitachi Metals
Hitachi Chemical

881,402631,433

1,023,421
681,025

Others484,830

561,314

Subtotal

9,580,504

10,365,168

Corporate items and Eliminations(813,241)(884,549)

Total

8,767,263

9,480,619

F-18

Notes to Consolidated Financial Statements
Segment Profit (Loss)
Millions of yen
2020

2019

IT

214,449

212,607

EnergyIndustry(375,781)
57,858(298,041)
19,112

Mobility
Smart Life

112,349
29,548

127,455
116,981

Hitachi High-Tech
Hitachi Construction Machinery

60,46870,55164,223
104,515

Hitachi Metals
Hitachi Chemical(57,274)
24,80645,343
41,109Others31,29430,253

Subtotal

168,268

463,557

Corporate items and Eliminations

15,34650,349Total

183,614513,906

Interest income
Interest charges

20,638(23,984)

23,122(20,526)

Income from continuing operations, before income taxes

180,268

516,502

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 advanced 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.
Total Assets
Millions of yen
March 31, 2020

March 31, 2019

IT
Energy1,988,750
686,524

1,881,233
796,692

Industry
Mobility

972,119
1,557,964

765,139
1,521,735

Smart Life
Hitachi High-Tech

1,300,787
712,009

1,180,962
667,574

Hitachi Construction Machinery
Hitachi Metals

1,199,917
988,2091,219,806
1,123,105

Hitachi Chemical
Others706,638
1,915,616

710,508
1,653,523

Subtotal
Corporate assets and Eliminations

12,028,533(2,098,452)

11,520,277(1,893,685)

Total

9,930,081

9,626,592

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

F-19

Notes to Consolidated Financial Statements
Investments Accounted for Using the Equity Method
Millions of yen
March 31, 2020

March 31, 2019IT

46,43045,850

EnergyIndustry

22,81920,835

307,057
32,613

Mobility
Smart Life

56,782
66,801

19,064
63,832

Hitachi High-Tech
Hitachi Construction Machinery

1,792
32,866

1,060
32,317

Hitachi Metals
Hitachi Chemical

29,076
8,922

29,285
8,046

Others

6,025

5,740

Subtotal

292,348544,864

Corporate items and Eliminations

188,027

179,597

Total

480,375

724,461

Goodwill
Millions of yen
March 31, 2020

March 31, 2019

IT
Energy204,243-

214,855-

Industry
Mobility

158,01052,56570,62754,714

Smart Life
Hitachi High-Tech

49,047
1,312

1,041
6,023

Hitachi Construction Machinery
Hitachi Metals

45,707
90,53450,791
131,727

Hitachi Chemical
Others34,509-32,158-Subtotal
Corporate items

635,927-

561,936-

Total

635,927

561,936

F-20

Notes to Consolidated Financial Statements
Depreciation and Amortization
Millions of yen
2020

2019

IT

112,485

89,030

EnergyIndustry

4,870
22,2595,416
17,483

Mobility
Smart Life

28,47364,45924,204
68,336

Hitachi High-Tech
Hitachi Construction Machinery

16,36847,124

13,15537,987

Hitachi Metals
Hitachi Chemical

55,18043,96850,90037,400

Others29,471

20,057

Subtotal

424,657

363,968

Corporate items and Eliminations
Total

8,501

4,076

433,158

368,044

Depreciation consists of that of property, plant and equipment and investment properties.
Impairment Losses
Millions of yen
2020

2019

IT
Energy18,8382,827

14,676279,619

Industry
Mobility

5,409
3,238

1,128
1,315

Smart Life
Hitachi High-Tech

18,034
6,021

27,799357

Hitachi Construction Machinery
Hitachi Metals

6,002
70,198

2,143
9,700

Hitachi Chemical
Others

6,022
404

5,266
2,994

Subtotal
Corporate items and Eliminations

136,993-344,997-

Total

136,993344,997

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

F-21

Notes to Consolidated Financial Statements
Share of Profits (Losses) of Investments Accounted for Using the Equity Method
Millions of yen
2020

2019

IT

1,648

2,019

EnergyIndustry(9,204)8,353(45,096)(3,470)

Mobility
Smart Life

3,029
10,351

3,716
11,561

Hitachi High-Tech
Hitachi Construction Machinery

139
2,682

143
4,716

Hitachi Metals
Hitachi Chemical

1,667
4,541

2,063
3,690

Others337

143

Subtotal

23,543(20,515)

Corporate items and Eliminations

20,096

5,499

Total

43,639(15,016)

Share of profits (losses) of investments accounted for using the equity method include impairment losses on investments accounted
for using the equity method.
Capital Expenditures
Millions of yen
2020

2019

IT

104,406

77,856

EnergyIndustry

8,222
15,314

48,934
10,363

Mobility
Smart Life

28,121
94,737

25,696102,688

Hitachi High-Tech
Hitachi Construction Machinery

34,89854,50821,40437,857

Hitachi Metals
Hitachi Chemical

53,01949,641

95,38952,819Others

46,95730,077

Subtotal

489,823

503,083

8,473

2,117

498,296505,200

Corporate items and Eliminations
Total

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

F-22

Notes to Consolidated Financial Statements
Geographic Information
The following table shows revenues attributed to geographic areas based on the location of the customers for the years ended
March 31, 2020 and 2019.
Millions of yen
2020

2019

Japan

4,529,095

4,664,535

Asia

1,767,537

2,019,598

North America
Europe1,102,987
924,499

1,205,628
1,018,542

Other Areas

443,145572,316

Overseas Revenues Subtotal

4,238,168

4,816,084

Total Revenues

8,767,263

9,480,619

Revenues in China for the years ended March 31, 2020 and 2019 were 871,125 million yen and 1,009,855 million yen,respectively. Revenues in the U.S.A. for the years ended March 31, 2020 and 2019 were 1,017,351 million yen and 1,095,428
million yen, respectively. Revenues from external customers attributable to any individual country and region other than Japan,
China and the U.S.A. were not material for the years ended March 31, 2020 and 2019.
The following table shows the balances of property, plant and equipment, investment properties, goodwill and other intangible
assets for each geographic area as of March 31, 2020 and 2019.
Millions of yen
March 31, 2020
Japan

March 31, 2019

1,733,369

1,638,996

Asia
North America

391,393664,242

374,490565,961

EuropeOther Areas

324,088
178,139

227,402130,869

3,291,231

2,937,718

Subtotal
Corporate items and Eliminations
Total

36,602

23,217

3,327,833

2,960,935

The balances of property, plant and equipment, investment properties, goodwill and other intangible assets in the U.S.A. as ofMarch 31, 2020 and 2019 were 651,290 million yen and 553,796 million yen, respectively. The balances of property, plant andequipment, investment properties, goodwill and other intangible assets in any individual country and region other than Japan andthe U.S.A. were not material as of March 31, 2020 and 2019.
Significant Customer Information
There was no concentration of revenues from a specific customer for the years ended March 31, 2020 and 2019.

F-23

Notes to Consolidated Financial Statements(5) Business Acquisitions and Divestitures
The following are the main Business Acquisitions and Divestitures and other related transactions for the year ended March 31,
2020, including the period up to the approval date of the consolidated financial statements.
(a) Sale of Diagnostic Imaging-related Business
On December 18, 2019, the Company signed an agreement with FUJIFILM Corporation (Fujifilm) regarding the transfer of the
Diagnostic Imaging-related Business included in the Company, the Company’s subsidiaries and associates in the Smart Lifesegment to Fujifilm.
The Company plans to transfer all shares of common stock of a new company established by the Company to Fujifilm after the
Diagnostic Imaging-related Business is succeeded to the new company from the Company through an absorption-typecompany split. The consideration is expected to be approximately 179 billion yen.
Assuming the transaction is settled, it is expected that the Company’s ownership ratio of shares of the new company will
decrease from 100% to 0%, and the new company will be deconsolidated. An expected gain on the sale of shares of the newcompany in the amount of approximately 111 billion yen will be recognized in Other income in the consolidated statement of
profit or loss.
(b) Reorganization of automotive systems business
On October 30, 2019, the Company and Hitachi Automotive Systems, Ltd. (HiAMS), a consolidated subsidiary of theCompany in the Smart Life segment, signed an agreement with Honda Motor Co., Ltd. (Honda), and Keihin Corporation,
Showa Corporation, and Nissin Kogyo Co., Ltd. (together, “the Associates of Honda”), to integrate management of HiAMS
and the Associates of Honda, in order to strengthen development and distribution of global and competitive solutions in the
CASE area.
HiAMS and the Associates of Honda plan to conduct an absorption-type merger in which HiAMS will be the surviving
company (the Integrated Company) and each of the Associates of Honda will be the disappearing companies after they become
wholly-owned subsidiaries of Honda through tender offers to be conducted by Honda for the common shares of the Associatesof Honda. The consideration will be the common shares of the Integrated Company. After the merger, the Company’sownership ratio of shares of the Integrated Company will become 66.6% and the Integrated Company will become aconsolidated subsidiary of the Company. The effects of this transaction on the Company’s consolidated financial statements are
currently being evaluated.
(c) Acquisition of ABB's power grids business
On December 17, 2018, the Company decided to acquire the power grid business of ABB Ltd (ABB) and signed an acquisition
agreement with ABB in order to strengthen and expand energy solution business globally. Pursuant to this agreement, theCompany invested 80.1% in Hitachi ABB Power Grids Ltd (Hitachi ABB Power Grid), which was spun off from ABB, and theacquisition was completed on July 1, 2020. As a result, Hitachi ABB Power Grid became a subsidiary of the Company. The
Company has a call option to purchase 19.9% of the shares of Hitachi ABB Power Grid held by ABB, and ABB has a put
option to sell 19.9% of the shares of Hitachi ABB Power Grid held by ABB to the Company exercisable after 2023.
The consideration for the acquisition of Hitachi ABB Power Grid was 6,850 million U.S. dollars (722,062 million yen).
Acquisition related costs included in other expenses in the consolidated statement of profit or loss for the years ended March
31, 2020 and 2019 were 2,358 million yen and 3,032 million yen, respectively. Furthermore, approximately 3,000 million yen
is expected to be recorded as acquisition related costs in the year ending March 31, 2021. In addition to this acquisition, theCompany repaid 3,000 million U.S. dollars (323,190 million yen) of certain loans owed by Hitachi ABB Power Grid from
ABB's subsidiary, ABB Capital B.V.
Due to a time constraint between the acquisition date and the filing date of the annual securities report, the initial accounting
treatment for the acquisition of Hitachi ABB Power Grid has not been completed. Accordingly, no disclosure has been made to
the amounts of assets acquired and liabilities assumed that were recognized at the date of acquisition, the amounts of noncontrolling interests, or the balances of goodwill. The consideration may vary due to transaction price adjustment.

F-24

Notes to Consolidated Financial Statements(d) Additional acquisition of shares of Hitachi High-Tech Corporation (Hitachi High-Tech)
On January 31, 2020, the Company decided to conduct a tender offer to acquire all issued shares of Hitachi High-Tech, aconsolidated subsidiary of the Company in the Hitachi High-Tech segment, to establish the measurement and analysis platform
to strengthen Lumada. The Company commenced the tender offer on February 17, 2020, and the tender offer was completed on
April 6, 2020.
Furthermore, the Company conducted a series of procedures to make Hitachi High-Tech a wholly-owned subsidiary of theCompany. As a result, the Company’s ownership ratio of shares of Hitachi High-Tech increased to 100% on May 20, 2020.
The total consideration paid was 531,084 million yen, and the Company will recognize decreases in capital surplus of 321,627
million yen and non-controlling interest of 209,457 million yen, respectively, for the year ending March 31, 2021.
(e) Sale of all shares of Hitachi Chemical Company, Ltd. (Hitachi Chemical)
On December 18, 2019, the Company signed a tender offer agreement with Showa Denko K.K. (Showa Denko) and HC
Holdings K.K. (HC Holdings), a wholly-owned subsidiary of Showa Denko, under which the Company agrees to tender all
shares of common stock in Hitachi Chemical held by the Company, in response to a tender offer to be carried out by HC
Holdings for the shares of common stock of Hitachi Chemical, a consolidated subsidiary of the Company in the Hitachi
Chemical segment. HC Holdings commenced the tender offer on March 24, 2020, and the tender offer was completed on April
20, 2020. The consideration to be received by the Company was 495,145 million yen.
As a result, the Company’s ownership ratio of shares of Hitachi Chemical decreased from 51.4% to 0%, and Hitachi Chemical
was deconsolidated. A gain on the sale of shares of Hitachi Chemical in the amount of 278,839 million yen will be recognizedin Other income in the consolidated statement of profit or loss for the year ending March 31, 2021. Furthermore, noncontrolling interest in Hitachi Chemical will decrease 220,402 million yen in the consolidated statement of changes in equity
for the year ending March 31, 2021 as a result of its deconsolidation.
(f) Settlement regarding the South African projectAt the meeting of the Board of Directors held on December 18, 2019, the Company approved a settlement with Mitsubishi
Heavy Industries, Ltd. (MHI) regarding the transfer price adjustment, etc. for the South African project previously in theprocess of arbitration based on economic rationality and business strategy, etc., and reached a settlement agreement with MHI
on the same day. As a result of the conclusion of this settlement, it was agreed that all common shares of Mitsubishi Hitachi
Power Systems, Ltd. (MHPS) held by the Company would be transferred to MHI, and the Company would pay 130,000 million
yen to MHI comprising a settlement payment of 200,000 million yen offset by a consideration of 70,000 million yen in loans
receivable to Mitsubishi Hitachi Power Systems Africa Proprietary Limited (MHPS Africa) to be transferred to MHI.
Accordingly, the Company recorded other accounts payable of 200,000 million yen related to the settlement payment to MHI
and other provision of 273,272 million yen related to the transfer of shares of MHPS. The Company also reversed the provisionof 105,041 million yen related to the transfer price adjustment, etc. of the South African project, which had been recorded prior
to the conclusion of this agreement. As a result of the above, the Energy segment recorded a loss of 375,967 million yen due tothe settlement, which is included in Other expenses in the consolidated statement of profit or loss for the year ended March 31,
2020. Other provision related to this agreement is included in Other current liabilities in the consolidated statement of financial
position as of March 31, 2020, and the change in the provisions, including the reversal of the provision related to the transfer
price adjustment, etc. of the South African project, which had been recorded prior to the conclusion of this agreement, is
included in Other under cash flows from operating activities in the consolidated statement of cash flows for the year ended
March 31, 2020. Regarding the assets to be transferred to MHI under this agreement, the shares of MHPS previously included
in Investments accounted for using the equity method and the loans receivable to MHPS Africa previously included in
Investments in securities and other financial assets classified as non-current assets in the consolidated statement of financial
position, the total of which was 333,614 million yen, were reclassified to Other current assets in the consolidated statement offinancial position since they met the criteria as held-for-sale assets in accordance with IFRS 5 “Non-current Assets Held forSale and Discontinued Operations.” Furthermore, on March 30, 2020, the Company transferred to MHI, the loans receivable to
MHPS Africa, and paid 130,000 million yen to MHI comprising the settlement payment offset by the consideration in loans
receivable. As of March 31, 2020, the corresponding amount of assets meeting the criteria as held-for-sale assets included in
Other current assets is 263,614 million yen. The shares of MHPS will be delivered to MHI on September 1, 2020, as theprocedures required for the transfer were completed.

F-25

Notes to Consolidated Financial Statements(g) Acquisition of robotic systems integration business
On April 23, 2019, the Company signed an agreement with JR Intermediate Holdings, LLC (JR Intermediate) to acquire allinterests of JR Technology Group, LLC (JR Technology), a subsidiary of JR Intermediate, in order to expand the robotic
systems integration business globally. On December 27, 2019, Hitachi America, Ltd., a consolidated subsidiary of theCompany, executed the acquisition. As a result, the Company’s ownership ratio of interests of JR Technology became 100%and JR Technology turned into a subsidiary of the Company. Furthermore, Hitachi America, Ltd. repaid 231 million U.S.
dollars (25,304 million yen) of certain loans owed by JR Technology, in addition to the acquisition cost.
The following table summarizes the fair value of the consideration paid for JR Technology and the amounts of the assets
acquired and liabilities assumed recognized as of the acquisition date.
Millions of yen
3,056
26,315
433
871
9,352

Cash and cash equivalents
Trade receivables and contract assets
Inventories
Other current assets
Non-current assets (excluding intangible assets)
Intangible assets
Goodwill (deductible for tax purposes)
Other intangible assets
Total

84,33456,008180,369

Current liabilities
Non-current liabilities
Total

18,382
31,88350,265

Cash paid for the acquisition

130,104

The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
The operating results of JR Technology for the period from the acquisition date to March 31, 2020 were not material.
On a pro forma basis, revenues and net income using an assumed acquisition date for JR Technology of April 1, 2019 would
not differ materially from the amounts reported in the consolidated financial statements for the year ended March 31, 2020.

F-26

Notes to Consolidated Financial Statements(h) Acquisition of Chassis Brakes International B.V. (Chassis Brakes)
On July 24, 2019, the Company and HiAMS, a consolidated subsidiary of the Company in the Smart Life segment, signed anagreement with Caliper Acquisition International S.à r.l. (Caliper), a special purpose vehicle of KPS Capital Partners, for
HiAMS to acquire all shares of Chassis Brakes in order to further strengthen core businesses and build HiAMS’s global
presence. On October 11, 2019, the acquisition was executed. As a result, the Company’s ownership ratio of shares of Chassis
Brakes became 100% and Chassis Brakes turned into a subsidiary of the Company. Furthermore, Hitachi International(Holland) B.V., a consolidated subsidiary of the Company, repaid 194 million euro (23,066 million yen) of certain loans owed
by Chassis Brakes, in addition to the acquisition cost.
The following table summarizes the fair value of the consideration paid for Chassis Brakes and the amounts of the assets
acquired and liabilities assumed recognized as of the acquisition date.
Millions of yen
3,666
13,815
10,894
5,940
28,548Cash and cash equivalents
Trade receivables and contract assets
Inventories
Other current assets
Non-current assets (excluding intangible assets)
Intangible assets
Goodwill (not deductible for tax purposes)
Other intangible assets
Total

47,66334,139144,665

Current liabilities
Non-current liabilities
Total

50,07434,51384,587

Cash paid for the acquisition

60,078The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
The operating results of Chassis Brakes for the period from the acquisition date to March 31, 2020 were not material.
On a pro forma basis, revenues and net income using an assumed acquisition date for Chassis Brakes of April 1, 2019 would
not differ materially from the amounts reported in the consolidated financial statements for the year ended March 31, 2020.
(i) Other
To implement the growth investments necessary to strengthen and expand the Social Innovation Business globally, theCompany entered into loan agreements totaling 439,878 million yen with several financial institutions and borrowed money inJune 2020. Also, Commercial paper was issued from June 4, 2020 to August 26, 2020 at a total issue price of 500,000 million
yen. All interest rates reflect market interest rates and maturities are within one year. There are no collateral or other importantriders.
The following are the main Business Acquisitions and Divestitures for the year ended March 31, 2019.
(a) 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 Smart Life segment. Hennape commenced the tender offer on January 30, 2019,
and the tender offer was completed on February 28, 2019. The consideration to be received by the Company was 89,908
million yen.
As a result, the Company's ownership ratio of shares of Clarion decreased from 63.8% to 0%, and Clarion was deconsolidated.
A gain on the sale of shares of Clarion in the amount of 67,918 million yen was recognized in Other income in the consolidated
statement of profit or loss. Changes in non-controlling interests in the consolidated statement of changes in equity include
derecognition of non-controlling interest in Clarion as a result of its deconsolidation.
On December 26, 2018, Faurecia S.A. changed its name to Faurecia S.E..

F-27

Notes to Consolidated Financial Statements(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 Mobility 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 Mobility 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, the Company’s ownership ratio of shares of STS increased to 100% on January 30, 2019. The total consideration
paid was 1,250 million euro (159,031 million yen), and the Company recognized a decrease in the total of capital surplus andnon-controlling interest by the same amount for the year ended March 31, 2019.
On April 1, 2019, STS changed its name to Hitachi Rail STS S.p.A.. Additionally, on October 31, 2019, STS and HRII
conducted an absorption-type merger in which STS was the surviving company and HRII was the disappearing company.
(c) 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 included in Others under segment information 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 yen was recognized in Other income in the consolidated statement of profit or loss. Changes in non-controllinginterests in the 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.
(6) Trade Receivables and Contract Assets
The components of trade receivables and contract assets are as follows:
Millions of yen
March 31, 2020
Accounts receivable
Contract assets

March 31, 2019

1,684,225

1,790,520

429,117432,881

Others146,863

176,532

Total

2,260,205

2,399,933

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

F-28

Notes to Consolidated Financial Statements(7) Inventories
The components of inventories are as follows:
Millions of yen
March 31, 2020

March 31, 2019

Finished goods

606,158

567,454

Semi-finished goods and work in process

539,634

522,308

Raw materials

263,145

267,000

1,408,937

1,356,762

Total

For the years ended March 31, 2020 and 2019, the amounts of inventories expensed and included as cost of sales were 5,367,710
million yen and 5,749,913 million yen, respectively, and the write-downs of inventories were 52,054 million yen and 35,542
million yen, respectively.
(8) Investments Accounted for Using the Equity Method
The aggregated carrying amounts of investments accounted for using the equity method as of March 31, 2020 and 2019, and theCompany and certain subsidiaries’ share of total comprehensive income of equity-method associates and joint ventures for theyears ended March 31, 2020 and 2019 are as follows:
Millions of yen
Associates
March 31, 2020
Carrying amount of investments

Joint ventures

March 31, 2019

428,067

March 31, 2020

669,349

March 31, 201952,30855,112As of March 31, 2020 and 2019, the Company and certain subsidiaries’ interests in certain joint ventures operating at a loss havethe cumulative loss exceeding the Company and certain subsidiaries’ investments, and thus the negative amounts of 76,745
million yen and 79,747 million yen, respectively, were recognized in other non-current liabilities.
Millions of yen
Associates
2020

Joint ventures
2019

2020

2019

Net income (loss) fromcontinuing operations

34,811(23,644)

8,828

8,628

Other comprehensive income(14,177)

11,098(395)(1,053)

Total comprehensive income

20,634(12,546)

8,433

7,575

In addition to the share of Net income (loss) from continuing operations of equity method associates and joint ventures,
impairment losses on investments accounted for using the equity method were recognized in Share of profit (loss) of investments
accounted for using the equity method. The amount of impairment losses recognized in the consolidated statement of profit orloss for the year ended March 31, 2020 and 2019 were 4,442 million yen and 20,274 million yen.

F-29

Notes to Consolidated Financial Statements(9) Property, Plant and Equipment
The following table shows the changes in the net carrying amounts of property, plant and equipment.
Millions of yen
Tools,
furnitureandfixtures

Right-of-use
assetsLand

Buildings Machineryandandstructures
vehicles

361,758

686,556

557,576

172,949

Other

Constructionin progress

Total

-

102,684

243,304

2,124,827

Net carrying amountMarch 31, 2018
Additions

1,755

8,169

27,86623,550-12,476339,246

413,062

Transfers between
accounts

855

78,592140,258

46,776-2,809(269,290)-

Sales and disposals(1,169)(3,242)(8,579)(4,791)-(3,673)(4,530)(25,984)-(54,567)(124,182)(66,822)-(24,470)-(270,041)

Impairment losses(54,208)(9,103)(29,470)(5,729)-(4)(155,439)(253,953)

Acquisitions anddivestitures(10,100)(25,823)(13,518)(5,177)

-

(761)

(545)

(55,924)

Currency translation
effect(3,644)(1,431)

3,030

4,404

-

(340)

(8,561)(6,542)Other(4,373)736(1,864)

9,313-

30,684(3,256)

31,240March 31, 2019
(Before restatement)

290,874

679,887

551,117

174,473-

119,405

140,929

1,956,685

-

-

-

-

259,992(39,083)-

220,909290,874

679,887

551,117

174,473

259,992

80,322140,929

2,177,594

Additions

1,278

8,162

29,884

23,68587,445-244,986

395,440

Transfers between
accounts

3,540

59,562

146,169

44,599

3,862

1,861

(259,593)-

Sales and disposals(14,114)(5,913)(5,947)(4,004)(3,779)(4,769)(1,999)(40,525)-(54,043)(125,980)(67,857)(76,825)(16,144)-(340,849)

Impairment losses(4,255)(12,287)(41,511)(3,297)(3,029)-(2,525)(66,904)

Acquisitions anddivestitures

153

7,380

11,242

2,150

6,286

88

4,708

32,007(2,910)(12,436)(12,727)(3,868)(7,177)(942)(4,085)(44,145)

(460)

5,240

901

10,867504

41,713(6,072)

52,693274,106

675,552

553,148

176,748

267,279

102,129

116,349

2,165,311

Depreciation

Cumulative effects ofchanges in accounting
policies
April 1, 2019
(After restatement)

Depreciation

Currency translation
effectOther
March 31, 2020

The amount of depreciation recognized is included in Cost of sales and Selling, general and administrative expenses in the
consolidated statement of profit or loss. Impairment losses are included in Other expenses in the consolidated statement of profit
or loss.
The Company had applied IAS 17 in the fiscal year ended March 31, 2019. Finance lease assets are included in Other in the table
above, and their carrying amount as of March 31, 2019 was 31,461 million yen.

F-30

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

Buildings Machineryandandstructures
vehiclesTools,
furnitureandfixtures

March 31, 2018

383,862

1,760,206

2,475,707

961,975

March 31, 2019

366,350

1,747,110

2,475,446

937,581-249,976

300,0076,076,470

March 31, 2020

346,566

1,767,093

2,525,387

938,059

535,682

187,168

264,2936,564,248

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

March 31, 2019(75,476) (1,067,223) (1,924,329)(763,108)-(130,571)(159,078) (4,119,785)

March 31, 2020

(72,460) (1,091,541) (1,972,239)(761,311)(268,403)(85,039)(147,944) (4,398,937)

Right-of-use
assets-Other

Constructionin progress

Total

230,553245,630

6,057,933

Gross carrying amount

Accumulated
depreciation andimpairment losses

Impairment Losses Recognized for the Year Ended March 31, 2020:
The Hitachi Metals segment recognized impairment losses of 31,188 million yen, mainly attributable to the lower than expected
future revenue projected for the magnetic materials business consisting of impairment losses on property, plant and equipment of
22,479 million yen relating to business assets of machinery and on goodwill and other intangible assets of 38,952 million yen.
The recoverable amount was determined on the basis of value in use, which was measured at 106,313 million yen as of
September 30, 2019, the date on which impairment losses were recognized. The value in use was discounted at 9.6% (before tax),
which was derived from the weighted average cost of capital.
The Smart Life segment recognized impairment losses of 17,480 million yen, of which 7,743 million yen was attributable to thelower than expected future revenue at one of factories of a subsidiary in the U.S.A. relating to business assets of machinery in the
Automotive Systems business. The recoverable amount was determined on the basis of fair value less costs of disposal. The costsof disposal exceeded the fair value thus the recoverable amount was recorded at nominal value as of March 31, 2020. A market
approach was used in measuring the fair value of the relevant assets. These fair value measurements were based on observable
market transactions, and thus classified as Level 2 of fair value hierarchy.
Impairment Losses Recognized for the Year Ended March 31, 2019:
The Energy segment recognized impairment losses of 209,145 million yen, of which 206,799 million yen was attributable to thesuspension of the UK nuclear power stations construction project (the project) relating to construction in progress and land etc.
The recoverable amount was determined on the basis of fair value less costs of disposal, which was measured at 2,494 million yen
as of December 31, 2018, the date on which impairment losses were recognized. A market approach was used in measuring thefair value of the relevant assets. These fair value measurements were based on real estate appraisal value, and thus classified as
Level 3 of fair value hierarchy. Details of the project are described in note 21.
The Smart Life segment recognized impairment losses of 25,120 million yen, of which 10,590 million yen was attributable to thedecrease in productivity at one of factories of a subsidiary in Mexico relating to business assets of buildings and machinery in the
Automotive Systems business. The recoverable amount was determined on the basis of value in use, which was measured at
10,812 million yen as of September 30, 2018, the date on which impairment losses were recognized. The value in use wasdiscounted at 13.5% (before tax), which was derived from the weighted average cost of capital.
The Hitachi Metals segment recognized impairment losses of 12,569 million yen, of which 6,975 million yen was attributable tothe lower than expected future revenue projected for its heat-resistant exhaust casting components business relating to businessassets of buildings and machinery. The recoverable amount was determined on the basis of fair value less costs of disposal, which
was measured at 7,394 million yen as of December 31, 2018, the date on which impairment losses were recognized. A market
approach was used in measuring the fair value of the relevant assets. These fair value measurements were based on real estateappraisal value, and thus classified as Level 3 of fair value hierarchy.

F-31

Notes to Consolidated Financial Statements(10) Goodwill and Other Intangible Assets
The following table shows the changes in the net carrying amounts of Goodwill and Other intangible assets.
Millions of yen
Other intangible assets
Software for Software forinternal use
sale

Goodwill

Other

Total

Net carrying amountMarch 31, 2018588,165

108,325

41,038316,842466,205

Internal developments

-

886

1,852

47,01249,750Purchases
Transfers between accounts

-

9,851
30,3391,045
22,33129,806(52,670)

40,702-

Amortization
Impairment losses(43,853)(42,925)(1,093)(23,253)(6,888)(30,184)(38,610)(96,362)(46,591)

Disposals
Acquisitions and divestitures

11,425(1,980)(9,041)

(66)
(31)

(672)
(4,684)(2,718)(13,756)

Currency translation effect
Other

5,823
376

152
224

(167)
(363)

1,912
(908)

1,897
(1,047)561,936

94,73835,498267,844

398,080

accounting policies

-

-

-

103

103

April 1, 2019
(After restatement)

561,936

94,73835,498267,947

398,183

Internal developments
Purchases-

805
11,212

1,891
410

56,626
27,701

59,322
39,323

Transfers between accounts
Amortization-

34,432(38,749)

22,270(21,877)(56,702)(30,082)(90,708)

Impairment losses
Disposals(51,861)-(1,094)(2,147)(4,122)(65)(11,451)(886)(16,667)(3,098)Acquisitions and divestitures
Currency translation effect140,590(14,606)

984
(764)

2
(80)

100,593(7,250)101,579(8,094)

March 31, 2019
(Before restatement)
Cumulative effects of changes in

OtherMarch 31, 2020

(132)

(498)

(67)

519

(46)

635,927

98,91933,860347,015

479,794

The amount of amortization recognized is included in Cost of sales and Selling, general and administrative expenses in the
consolidated statement of profit or loss. Impairment losses are included in Other expenses in the consolidated statement of profit
or loss.

F-32

Notes to Consolidated Financial Statements
The following table shows the gross carrying amount and accumulated amortization and impairment losses of goodwill and otherintangible assets.
Millions of yen
Other intangible assets
Goodwill

Software for Software forinternal use
sale

Other

Total

Gross carrying amountMarch 31, 2018592,870

617,264

530,778

606,406

1,754,448

March 31, 2019568,643

590,831544,840

590,367

1,726,038

March 31, 2020

689,504

602,425565,416707,0311,874,872(4,705)(508,939)(489,740)(289,564)(1,288,243)

Accumulated amortization andimpairment losses
March 31, 2018
March 31, 2019

(6,707)(496,093)(509,342)(322,523)(1,327,958)

March 31, 2020

(53,577)(503,506)(531,556)(360,016)(1,395,078)

The Company writes off goodwill if it has been fully impaired.
Impairment Losses Recognized for the Year Ended March 31, 2020:
The Hitachi Metals segment recognized impairment losses of 39,011 million yen, of which 38,952 million yen was attributable tothe lower than expected future revenue projected for the magnetic materials business. Details of these impairment losses aredescribed in note 9.
The IT segment recognized impairment losses of 16,751 million yen, mainly due to the lower than expected future revenue on
software for sale and other intangible assets as a result of changes in market trends.
Impairment Losses Recognized for the Year Ended March 31, 2019:
The Energy segment recognized impairment losses of 72,912 million yen, of which 70,409 million yen was attributable to thesuspension of the UK nuclear power stations construction project (the project). The amount of goodwill and other intangible
assets related to the project was fully written off. Details of the project are described in note 21.
The carrying amounts of other intangible assets with indefinite useful lives as of March 31, 2020 and 2019 amounted to 6,757
million yen and 6,265 million yen, respectively. The main components of such assets are acquired brands. They are assessed tohave indefinite useful lives because there is no foreseeable limit to the period over which such assets are expected to generate net
cash inflows for the entity.
Expenditures on research activities aimed at obtaining new scientific or technical knowledge or understanding are expensed whenincurred. Expenditures on development activities for a new or major improvement of production plan or design prior to thebeginning of commercial production or use are capitalized as an internally generated intangible asset only when such
expenditures attributable to the intangible asset can be reliably measured, it is feasible for the Company to complete thedevelopment, and it is highly probable that the Company will obtain the future economic benefit. Otherwise, the expenditures arerecognized as an expense when incurred.
The carrying amounts of internally generated other intangible assets (at cost less accumulated amortization and impairment
losses) as of March 31, 2020 and 2019 amounted to 142,845 million yen and 122,238 million yen, respectively. These assets aremainly included in software for internal use or software for sale.
Research and development expenditures recognized as an expense for the years ended March 31, 2020 and 2019 were 293,799
million yen and 323,145 million yen, respectively, and they are included in Cost of sales and Selling, general and administrative
expenses in the consolidated statement of profit or loss.

F-33

Notes to Consolidated Financial Statements
The Company tests goodwill acquired through business combinations for impairment by comparing the carrying amount and therecoverable amount per CGU (or group of CGUs).
As of March 31, 2020 and 2019, the group of CGUs with a significant proportion of goodwill allocated was the System & Service
Business Division, which belongs to the IT segment, and the carrying amounts of goodwill allocated to the System & Service
Business Division were 190,978 million yen and 200,282 million yen, respectively. The recoverable amount used for the
impairment test of goodwill of the System & Service Business Division for the years ended March 31, 2020 and 2019 were
calculated based on the fair value less costs of disposal and the value in use, respectively. The value in use was calculated by theestimated future cash flows based on the business plans approved by the management, discounted at the discount rate which wasderived from the weighted average cost of capital. The business plan reflected past experience based on external information. For
the year ended March 31, 2019, cash flows were projected over three years, the discount rates (before tax) used was 7.69%, andthe growth rate used was 1.0%. The fair value less costs of disposal was calculated by the market approach based on EV/EBITDA
valuation multiples of similar companies that were comparable to the System & Service Business Division. The fair value
hierarchy classification was level 3 measured by unobservable inputs.
The Company considers it unlikely for the carrying amount of each CGU (or group of CGUs), together with allocated goodwill,
would exceed the respective recoverable amounts of the CGU (or group of CGUs) even if the primary assumptions used for the
impairment test changed within a reasonable range.

F-34

Notes to Consolidated Financial Statements(11) Leases(a) Lessee
The Company and certain subsidiaries use leased facilities and equipment, including buildings, machinery and equipment andvehicles.
The Company had applied IAS 17 in the fiscal year ended March 31, 2019. The following table shows the undiscounted
amounts and present value of minimum lease payments under finance leases as of March 31, 2019.
Millions of yen
March 31, 2019
Minimum
Present value
leaseof minimum
payments
lease
payments
Within 1 year

19,29017,933After 1 year but not more than 5 years

30,87328,322More than 5 years

3,541

2,944

Total

53,70449,199Finance charges(4,505)Present value of minimum lease payments,
total

49,199The following table shows the future minimum lease payments under non-cancelable operating leases as of March 31, 2019.
Millions of yen
March 31, 2019
Within 1 year

36,879After 1 year but not more than 5 years

70,083More than 5 years

29,001

Total

135,963

Total operating lease expenses for the year ended March 31, 2019 is as follows:
Millions of yen
2019
Operating lease expenses

132,336

F-35

Notes to Consolidated Financial Statements
From the beginning of the fiscal year ended March 31, 2020, the Company has adopted IFRS 16. The following table shows
the carrying amount of right-of-use assets at the end of March 31, 2020 by class of underlying asset.
Millions of yen
Class of underlying asset
Buildings
andstructures
March 31, 2020

179,476

Tools,
furnitureandfixtures

Machineryandvehicles34,69923,625

Land

Total

Other

29,322

608

267,730

The following table shows the expense relating to leases and cash outflow for the fiscal year ended March 31, 2020.
Millions of yen
2020
Depreciation for right-of-use assets
Buildings and structures

53,866

Machinery and vehicles

12,322Tools, furniture and fixtures

7,601

Land

2,895

Other

503
Total

77,187

Interest charges on lease liabilities

3,675

Expense relating to short-term leases, etc.

32,787

Expenses relating to leases

113,649
Millions of yen
2020

Total cash outflow for leases

115,315Additions of right-of-use assets for the fiscal year ended March 31, 2020 is disclosed in note 9.
Maturity analysis of lease liabilities at the end of March 31, 2020 is disclosed in note 26.

F-36

Notes to Consolidated Financial Statements(b) Lessor
The Company and certain subsidiaries lease certain assets such as manufacturing machinery and equipment under finance andoperating lease arrangements.
The Company had applied IAS 17 in the fiscal year ended March 31, 2019. The following table shows the undiscounted
amounts and present value of minimum lease payments receivable under finance leases as of March 31, 2019.
Millions of yen
March 31, 2019
Gross
Present value
investmentof minimumin leaselease
payments
receivable
Within 1 year

54,70551,033After 1 year but not more than 5 years

46,351

43,519More than 5 years

1,528

1,317

Total

102,584

95,869Unearned income(6,157)

Net investment in the lease

96,427

Unguaranteed residual value(558)

Present value of minimum lease payments
receivable, total

95,869The amounts of the allowance for uncollectable minimum lease payments receivable as of March 31, 2019 was 1,354 million
yen.
The following table shows the future minimum lease payments receivable under non-cancelable operating leases as of March
31, 2019.

Within 1 year

Millions of yen
March 31, 2019
4,137

After 1 year but not more than 5 years
More than 5 years

6,545
5,245

Total

15,927

F-37

Notes to Consolidated Financial Statements
From the beginning of the fiscal year ended March 31, 2020, the Company has adopted IFRS 16. The following table showslease income for the year ended March 31, 2020.
Millions of yen
2020
Lease income from finance leases

4,879

Lease income from operating leases

52,059Total lease income

56,938

A significant component of lease income from finance leases represents finance income on the net investment in the lease.
(i) Finance leases
The following table shows the maturity analysis of the finance lease payments receivable as of March 31, 2020.
Millions of yen
March 31, 2020
Undiscounted lease payments to be received
Within 1 year

46,166After 1 year but not more than 5 years

43,157More than 5 years

2,610
Total

91,933

Unearned finance income relating to the lease payments
receivable(5,907)

Discounted unguaranteed residual value

436

Net investment in finance leases

86,462(ii) Operating leases
The following table shows the maturity analysis of the undiscounted operating lease payments to be received as of March 31,
2020.
Millions of yen
March 31, 2020
Within 1 year

4,836

After 1 year but not more than 5 years

3,341

More than 5 years

962
Total

9,139

F-38

Notes to Consolidated Financial Statements(12) Deferred Taxes and Income Taxes
The components of income taxes recognized in the consolidated statement of profit or loss and deferred taxes recognized in the
consolidated statement of comprehensive income are as follows:
Millions of yen
2020

2019

Income taxes
Current tax expense

175,072

201,204

Temporary differences originated and reversed(69,717)(91,528)

Changes in realizability of deferred tax assets(54,109)76,66851,246

186,344

Deferred tax expense

Total
Deferred taxes recognized in OCI
Net changes in financial assets measured at fair value through(8,019)(13,928)

Remeasurements of defined benefit plans

OCI

(937)

(44)

Net changes in cash flow hedges

5,752(2,549)Foreign currency translation adjustments(1,009)-Total(4,213)(16,521)

The Company and its Japanese subsidiaries were subject to a national corporate tax, an inhabitant tax and business tax, for theyears ended March 31, 2020 and 2019, which in the aggregate resulted in a combined statutory income tax rates of approximately
30.5%.
The Company and certain subsidiaries file consolidated income tax returns in certain jurisdictions.

F-39

Notes to Consolidated Financial Statements
Reconciliations between the combined statutory income tax rate and the effective income tax rate are as follows:
2020

2019

Combined statutory income tax rate

30.5%

30.5%

Share of (profits) losses of investments accounted for using the equity
method(7.4)

0.9

Change in excess amounts over the tax basis of investments in
subsidiaries and investments accounted for using the equity method

33.1

0.1

Gain or loss on sale of investments in subsidiaries and investments
accounted for using the equity method(4.3)(10.6)

Expenses not deductible for tax purposes
Impairment of goodwill

3.3
8.8

1.1
2.6

(30.0)
(6.5)

14.8
(3.5)

0.9

0.2

28.4%

36.1%

Change in realizability of deferred tax assets
Difference in statutory tax rates of foreign subsidiaries
Other, net
Effective income tax rate
Changes in deferred tax assets and liabilities are as follows:

Millions of yen
March 31, 2020

March 31, 2019

Deferred tax assets, net at beginning of year

161,691

129,105

Recognized in profit or loss
Recognized in OCI

123,826
4,213

14,86016,521

Acquisitions, divestitures and others
Discontinued operations(6,732)-(1,351)
2,556

Deferred tax assets, net at end of year

282,998

161,691

Significant components of the deferred tax assets and liabilities are as follows:
Millions of yen
Consolidated statement offinancial position
March 31,2020

Consolidated statement of
profit or loss

March 31,
2019

2020

2019

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation of property, plant andequipment
Net operating loss carryforwards
Net intercompany profits oninventories, P.P.E. and others
Deferred revenues

75,974
255,71174,693
103,685(214)
157,157(2,482)685

8,343

12,565(3,201)

1,911

17,603

10,156

7,641

491

28,14131,018(2,453)(2,442)

21,454

20,814(1,486)

(425)

Other

49,18240,327

6,505(2,349)Total deferred tax assets

456,408

293,258

163,949(4,611)(8,014)(102,280)(8,506)(66,953)206(38,928)

124
(614)

Deferred tax liabilities
Deferred profit on sale of properties
Investments in securities
Tax purpose reserves regulated by
Japanese tax laws

-

-

-

13,468Intangible assets
Other(34,864)(28,252)(32,619)(23,489)

3,948(5,349)

5,418
1,075

Total deferred tax liabilities(173,410)(131,567)(40,123)

19,471

Net deferred tax assets

282,998

161,691

123,826

14,860F-40

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

March 31, 2020
330,680

Millions of yen
March 31, 2019
205,809

Other non-current liabilities(47,682)(44,118)

Total

282,998

161,691

Other non-current assets

Deferred tax liabilities are not recognized for excess amounts over the tax basis of investments in subsidiaries and investments
accounted for using the equity method that are considered to be reinvested indefinitely, for such differences will unlikely reversein the foreseeable future. The temporary differences related to undistributed earnings of subsidiaries for which deferred tax
liabilities are not recognized were 660,886 million yen and 794,022 million yen, respectively, as of March 31, 2020 and 2019.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generationof future taxable income in specific tax jurisdictions during the periods in which these deductible differences become deductible.
Although realization is not assured, the Company carries out an assessment of the scheduled reversals of deferred tax liabilities
and projected future taxable income, including the execution of certain available tax strategies if needed. Based on these factors,
the Company believes it is more likely than not it will realize the benefits of these deductible differences as of March 31, 2020.
Deductible temporary differences and net operating loss carryforwards for unrecognized deferred tax assets are as follows:
Millions of yen
March 31, 2020

March 31, 2019

Deductible temporary differences

1,243,180

1,447,286

Net operating loss carryforwards

484,130

505,514

1,727,310

1,952,800

Total

Net operating loss carryforwards for unrecognized deferred tax assets will expire as follows:
Millions of yen
March 31, 2020

March 31, 2019

Within 5 years

164,465

160,567

After 5 years but not more than 10 years

119,047

111,682

More than 10 years

200,618

233,265

Total

484,130

505,514

F-41

Notes to Consolidated Financial Statements(13) Trade Payables
The components of trade payables are as follows:
Millions of yen
March 31, 2020

March 31, 2019

1,118,467

1,224,454

Others152,201

181,558

Total

1,270,668

1,406,012

Accounts payable

Others include electronically recorded monetary claims and notes payable.
(14) Provisions
Changes in the balance and components of provisions for the year ended March 31, 2020 are as follows:
Millions of yen

March 31, 2019

Provisions for
Provisions related
Asset retirement
Product warranty expected losses on
to restructuring
obligations
provisions
construction(structural reform)
contracts
25,75811,45332,668102,985

Other
provisions
160,034

Additions (a)6,407

21,422

5,209

48,680282,030

Utilized(866)(22,449)(9,578)(59,840)(11,314)Acquisitions and divestitures

(146)

265

330

3,154

9,726

Currency translation effects,
and others (a)

(183)

(493)

(1,586)(504)(114,690)

March 31, 2020

30,97010,19827,043

94,475

325,786

Current

3,316

10,197

18,59691,442

314,361

Non-current

27,654

1

8,447

3,033

11,425(a) Additions of other provisions include recording the provision of 273,272 million yen regarding the settlement of the South
African project, and Currency translation effects, and others include reversal of the provision of 105,041 million yen related
to the transfer price adjustment, etc. of the South African project, which had been recorded prior to the conclusion of thesettlement agreement.
Asset Retirement Obligations
The Company and its subsidiaries recognize asset retirement obligations principally based on the estimated future expendituresusing historical experience when the Company and its subsidiaries have a legal or contractual obligation associated with theretirement of tangible fixed assets used in normal operations, such as lease dilapidations of factory facilities and premises.
Provisions Related to Restructuring (Structural Reform)
Provision related to restructuring (structural reform) is recognized when the Company and its subsidiaries have a detailed formal
plan for the restructuring of the business or a part of business and have raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan or announcing its main features to those affected. The provision isrecognized based on the estimated amount of direct expenditures attributable to restructuring.
Provisions related to restructuring (structural reform) mainly include special termination benefits for restructuring (structuralreform).
Product Warranty Provisions
The Company and its subsidiaries provide warranties for certain products and services. Product warranty provisions arerecognized by estimating future expenditures based principally on historical experience of warranty claims.
Provisions for Expected Losses on Construction Contracts
Provisions for expected losses on construction contracts are recognized based on future estimated losses as the Company and its
subsidiaries fulfill long-term project requirements.
F-42

Notes to Consolidated Financial Statements(15) Employee Benefits(a) Retirement and Severance Benefits
The Company and certain subsidiaries have defined benefit pension plans and severance lump-sum payment plans, as well as
defined contribution pension plans to provide retirement and severance benefits to substantially all employees.
The principal defined benefit pension plan is a corporate pension plan based on the Japanese Defined Benefit Corporate
Pension Plan Act (the Act). Additionally, certain corporate pension plans adopt cash balance plans. Benefits under cash
balance plans are calculated per each plan participant with a notional account balance, based on the contribution credits per
salary level and interest credits based on market interest rate trends.
Pursuant to the Act, the Company has an obligation to make contributions to the Hitachi Pension Fund (the Fund) thatmanages the corporate pension plans. The directors of the Fund are responsible for faithfully executing operations incompliance with laws and regulations, and any orders issued by the Minister of Health, Labor and Welfare, and the directorgenerals of Regional Bureaus of Health and Welfare based on laws and regulations, as well as the rules of the Fund and theresolution of the Board of Representatives. The Fund prohibits the directors from acts that constitute conflicts of interests inthe management and operation of the funds contributed for benefit payments (the contributions). If breached, the board
members are jointly and severally held responsible.
The Fund is legally independent from the Company. The Board of Representatives comprises an equal number ofrepresentatives selected by the company and certain subsidiaries and representatives from the employee side. The proceedingsof a Board of Representatives are decided by a majority vote of the members attending. In case of a tied vote, the chairman
has the power to decide, except for exceptionally significant matters.
The actual management of the contributions is conducted by trustees in accordance with rules approved by the Board ofRepresentatives. The Fund is responsible for managing the contributions to safely and efficiently manage the contributions by
establishing the basic management policy of the contributions and preparing the management guidance in line with the policy
submitted to the trustees.
The Company has future obligations to make contributions as defined by the Fund. The amount of contribution is periodicallyreviewed to the extent allowed by law.
On April 1, 2019, for current employees participating in the defined benefit pension plan managed by the Hitachi Pension
Fund, the Company and Hitachi Industrial Products, Ltd., a consolidated subsidiary of the Company in the Industry segment,
introduced a risk-sharing corporate pension plan. Under this plan, contributions to the risk-sharing corporate pension plan aredetermined in advance in accordance with the rules governing the plan, and pension benefits are adjusted annually based on
the financial position of the plan to maintain balanced finance.
The risk-sharing corporate pension plan introduced by the Company and Hitachi Industrial Products, Ltd., is a mechanism inwhich management and labor unions share risks. At the time of the transfer to this system, the employer bears certain risks bymaking fixed contributions, including contributions to the risk-sharing corporate pension plan, in accordance with agreements
between management and labor unions. In the event of a financial imbalance, the plan participants also bear certain risks byadjusting benefits. Under the previous defined benefit pension plan, employers were required to make additional contributionsin the event of a funding shortfall. The risk-sharing corporate pension plan, however, measures the risks that may arise in the
future, and sets contributions to the risk-sharing corporate pension plan within the scope of the agreement between
management and labor unions in advance to balance contributions. The amount equivalent to the contributions made to risksharing corporate pension plan determined based on the level of the fiscal deterioration risk, which is calculated at the time oftransfer, shall be contributed to the plan on a straight-line basis over five years from the date of transfer, and no additional
contributions are required.

F-43

Notes to Consolidated Financial Statements
In terms of the corresponding accounting treatment for retirement benefits, risk-sharing corporate pension plans, for which anentity accepts contribution obligations to the extent stipulated in the rules but has no further obligations to make any
additional contributions, are classified as defined contribution plans. Since this risk-sharing corporate pension plan imposesno additional contribution obligations, at the time of the shift to the revised plan, the difference between the defined benefit
obligations related to the portion transferred to the revised plan and the amount of assets transferred to the revised plancorresponding to the decrease in defined benefit obligations, 21,206 million yen, was recognized as a settlement gain in Other
income in the consolidated statement of profit or loss for the year ended March 31, 2020, and Retirement and severance
benefits in the consolidated statement of financial position decreased by 21,206 million yen as of April 1, 2019.
The severance lump-sum payment plans provide a lump-sum payment at the time of retirement, and the benefit is calculated
based on factors such as the salary level at retirement and the years of service. The Company and certain subsidiaries have an
obligation to pay benefits directly to beneficiaries.
Defined contribution plans require companies to make contributions over a participation period, and plan participants
themselves are responsible for the management of plan assets. Benefits are paid by the trustee, and the Company and certain
subsidiaries’ responsibility is limited to making contributions.

F-44

Notes to Consolidated Financial Statements
Changes in the present value of defined benefit obligations and the fair value of plan assets for the years ended March 31,
2020 and 2019 are as follows:
Millions of yen
March 31, 2020

March 31, 2019

Defined benefit obligations
At beginning of year
Service cost

2,160,054
63,7952,246,857
78,260Interest cost
Plan amendments

9,562
2,310

12,31132

Actuarial losses
Benefits paid

(13,877)(106,972)

24,523(117,277)

Acquisitions and divestitures
Transfer to defined contribution pension plan

(1,049)(11,672)(78,868)(633)

Settlements/curtailments
Effect of shift to risk-sharing corporate pension plan

(312)
(260,900)(6,146)-

Currency translation effectAt end of year

(4,338)
1,836,601

995
2,160,054

Fair value of plan assets
At beginning of year

1,671,976

1,711,076

Interest income
Return on plan assets (excluding interest income)

9,840(18,579)

10,255
13,312

Employers’ contributions
Employees’ contributions

44,058
470

90,427281

Benefits paid
Acquisitions and divestitures(82,766)(1,834)(87,550)(57,375)

Transfer to defined contribution pension plan
Settlements/curtailments(11,577)(1,176)(84)(7,089)Effect of shift to risk-sharing corporate pension plan
Currency translation effect(239,694)(2,812)(1,277)

At end of year

1,367,906

1,671,976

12,107

7,476

480,802495,554

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

Millions of yen
March 31, 2020

March 31, 2019

Arising from changes in financial assumptions

11,566(22,225)

Arising from changes in demographic assumptions
Other

(83)
2,394

6,748
(9,046)The Company and certain subsidiaries remeasure the defined benefit obligations and plan assets at the end of the fiscal year.
The discount rates used in actuarial calculation of defined benefit obligations are as follows:
Percentage
March 31, 2020
Discount rate

0.6

F-45

March 31, 2019
0.5

Notes to Consolidated Financial Statements
If, at March 31, 2020, the discount rate rose by 0.5%, the defined benefit obligations would decrease by 100,911 million yen,
and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by 109,930 million yen.
The sensitivity analysis is based on an assumption that all other variables other than the one analyzed are held constant; inreality, changes in other assumptions may impact the outcome of the analysis.
The Fund’s plan asset management is based on the safe and efficient management of the contributions, diversified
investments and determination of the investment ratio that should be sustained over the long term. The Fund seeks to maintaincurrent value of assets sufficient for future obligations. A target rate of return is established to ensure a stable long term rateof return on assets. A diversified investment strategy is carried out while a target asset allocation is established to achieve thetarget rate of return. The target asset allocation is based on the expected rate of return by each class of asset, the standard
deviation of the rate of return and the correlation coefficient among the assets. It is currently approximately 20% in equity,
50% in public and corporate bonds, and 30% in hedge funds, securitization products, life insurance general accounts andother assets. If market values fluctuate exceeding certain levels, the investment ratio is adjusted to the target allocation ratio inorder to control risks.
In selecting trustees or asset management companies, the Fund takes into account appropriate quantitative and qualitativeevaluations. The Fund also presents its management policies to the trustees or asset management companies, and periodicallyreceives asset management reports.
The fair values of plan assets invested as of March 31, 2020 and 2019 are as follows:
Millions of yen
March 31, 2020
With quoted market
price in an active
marketEquityGovernment bonds and municipal
debt securities
Corporate bonds and other debt securities
Hedge funds
Securitization products
Cash and cash equivalents
Life insurance general accounts
Commingled funds
Other
Total

With no quoted market
price in an active
market

Total

8,241

2,122

10,363112,158
46,887
2,312
169,598

850
39,58946,63442,283
134,909903,713
28,208
1,198,308

113,008
39,58946,63442,28346,887
134,909903,71330,5201,367,906
Millions of yen

March 31, 2019
With quoted market
price in an active
marketEquityGovernment bonds and municipal
debt securities
Corporate bonds and other debt securities
Hedge funds
Securitization products
Cash and cash equivalents
Life insurance general accounts
Commingled funds
Other
Total

With no quoted market
price in an active
marketTotal

12,552

2,233

14,785

118,71451,023
2,091
184,380

1,031
52,76755,21759,326
170,974
1,118,967
27,081
1,487,596

119,745
52,76755,21759,32651,023
170,974
1,118,967
29,172
1,671,976

F-46

Notes to Consolidated Financial Statements
As of March 31, 2020, investments in equity were allocated to approximately 40% in stocks listed in Japan and 60% in stocks
listed in foreign markets. As of March 31, 2019, investments in equity were allocated to approximately 50% in stocks listed inJapan and 50% in stocks listed in foreign markets.
As of March 31, 2020 and 2019, Japanese government bonds made up approximately 95% of the government bonds andmunicipal debt securities, the majority of which were Japanese national bonds. Foreign public bonds, as of March 31, 2020
and 2019, took approximately 5%, the majority of which were foreign national bonds.
As of March 31, 2020, investments in corporate bonds and other debt securities were allocated to approximately 20% inJapanese corporate bonds and debt instruments, and 80% in foreign corporate bonds and debt instruments. As of March 31,
2019, investments in corporate bonds and other debt securities were allocated to approximately 5% in Japanese corporate
bonds and debt instruments, and 95% in foreign corporate bonds and debt instruments.
Hedge funds primarily consist of investments in relative value strategy funds, event driven funds, equity long or short funds,
and macroeconomic and Commodity Trading Advisor (CTA) funds.
Securitization products primarily consist of investments in equity of Japanese real estate funds, and debt and equity ofcollateralized loan obligations (CLO).
Commingled funds represent pooled institutional investments. As of March 31, 2020, commingled funds were allocated to
30% in listed stocks, 40% in government bonds, 10% in corporate bonds and other debt securities, 10% in cash and cash
equivalents and 10% in other assets. As of March 31, 2019, commingled funds were allocated to 30% in listed stocks, 45% ingovernment bonds, 10% in corporate bonds and other debt securities, 10% in cash and cash equivalents and 5% in otherassets.
Funding by the Fund is conducted by taking into account various factors such as funded status, the limit of tax deductions,and actuarial calculations. For the purpose of maintaining balanced finance into the future, the bylaws of the Fund require
recalculation of the contribution amounts at the end of fiscal year every five years. Basic assumptions (expected interest rates,
mortality rates, withdrawal rate, etc.) are reviewed to recalculate the appropriate level of contribution.
The amount of contributions expected to be paid by the Company and its subsidiaries to the plan assets for the year ending
March 31, 2021 is 56,830 million yen.
The weighted average duration (expected average maturity) of defined benefit obligations as of March 31, 2020 and 2019were 12.1 years and 12.6 years, respectively.
Contributions made to defined contribution plans and expensed in profit or loss in the years ended March 31, 2020 and 2019were 28,505 million yen and 27,601 million yen, respectively.
In addition, contributions made to the risk-sharing corporate pension plan and expensed in profit or loss in the year ended
March 31, 2020 were 16,324 million yen. The amount of the contributions to the risk-sharing corporate pension plan expected
to be paid by the Company and its subsidiaries from the year ending March 31, 2021 is 26,686 million yen.
(b) Employee Benefit Expenses
The aggregated amounts of employee benefit expenses including salary recognized in the consolidated statement of profit orloss for the years ended March 31, 2020 and 2019 were 2,282,736 million yen and 2,336,033 million yen, respectively.

F-47

Notes to Consolidated Financial Statements(16) Equity(a) Common Stock
Number of shares
March 31, 2020
Total number of authorized shares

March 31, 2019

2,000,000,000

2,000,000,000

Note: Since the item of share consolidation (to consolidate every five the Company's shares into one share and to change the total
shares authorized to be issued by the Company from 10 billion shares to 2 billion shares) was approved at the general
meeting of shareholders held on June 20, 2018, the total shares authorized to be issued by the Company decreased
8,000,000,000 shares and became 2,000,000,000 shares on October 1, 2018.
Issued shares outstanding(Number of shares)

Capital amount(Millions of yen)March 31, 2018

4,833,463,387

458,790

March 31, 2019

966,692,677

458,790

March 31, 2020

967,280,477

459,862

Note: As a result of the share consolidation on October 1, 2018, the total number of issued shares decreased 3,866,770,710 sharesand became 966,692,677 shares. Also, on May 31, 2019, the Company issued new shares as restricted stock compensation,
the total number of issued shares increased 587,800 shares and became 967,280,477 shares.
Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. The changes
in treasury stock for the years ended March 31, 2020 and 2019 are as follows:
Treasury stock(Number of shares)
March 31, 2018
Acquisition of treasury stock
Sales of treasury stock
March 31, 2019

(Millions of yen)

5,735,947

4,137

178,520231(4,827,800)(448)

1,086,667

3,920

Acquisition of treasury stock

41,098

166

Sales of treasury stock(77,024)(277)

1,050,741

3,809

March 31, 2020

Note: Sales of treasury stock for the year ended March 31, 2019 include the decrease in treasury stock of 4,224,140 shares as aresult of the share consolidation on October 1, 2018.
The number of shares of the Company held by the Company’s associates as of March 31, 2020 and 2019 were 33,400 shares.
(b) Surplus(i) Capital Surplus
The Companies Act of Japan mandates that at least half of paid-in capital be appropriated as common stock and the rest be
appropriated as legal reserve within capital surplus.
The changes in capital surplus include the effect of changes in the Company’s ownership interest in its consolidated
subsidiaries. For the year ended March 31, 2019, the changes in capital surplus were due mainly to the decrease of 104,507
million yen in capital surplus in additional acquisition of shares of STS by HRII.
(ii) Retained Earnings
The Companies Act of Japan requires that ten percent of retained earnings appropriated for dividends be retained until the
total amount of earned reserves included in capital reserve and retained earnings reaches a quarter of the nominal value ofcommon stock. Earned reserves may be available for dividends by resolution at the shareholders’ meeting.

F-48

Notes to Consolidated Financial Statements(17) Accumulated Other Comprehensive Income (AOCI) and Other Comprehensive Income (OCI)
Components of AOCI, net of related tax effects, presented in the consolidated statement of changes in equity, and changes in eachcomponent for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
2020

2019

Foreign currency translation adjustments
Balance at beginning of year

52,16660,807

OCI, net of reclassification(82,819)(7,836)

Net transfer of non-controlling interests

(33)

(805)

(30,686)

52,166

Balance at beginning of year

10,312

22,675

OCI(6,101)(12,887)-(401)

Reclassified into retained earnings(2,253)925

Balance at end of year

1,958

10,312

Balance at beginning of year

95,725

174,588

OCI(16,225)(44,255)

2-

Reclassified into retained earnings(13,129)(34,608)

Balance at end of year

66,373

95,725

Balance at beginning of year

(101,843)(115,903)

OCI, net of reclassification

9,084

13,572-(664)

Others(1,956)

1,152

Balance at end of year

(94,715)(101,843)

Balance at beginning of year

56,360142,167

OCI, net of reclassification(96,061)(51,406)(31)(1,870)

Balance at end of year
Remeasurements of defined benefit plans

Net transfer of non-controlling interests

Net changes in financial assets measured at FVTOCI

Net transfer of non-controlling interests

Net changes in cash flow hedges

Net transfer of non-controlling interests

Total AOCI

Net transfer of non-controlling interests
Reclassified into retained earnings(15,382)(33,683)

Others(1,956)

1,152

Balance at end of year

(57,070)

56,360F-49

Notes to Consolidated Financial Statements
The following shows a reconciliation of OCI, including non-controlling interests, to profit or loss items and deferred income tax
effect per components of OCI during the years ended March 31, 2020 and 2019.
Millions of yen
2020
Before tax

Tax effect

After tax

OCI arising during the year:
Foreign currency translation adjustments(112,823)

1,009(111,814)

Remeasurements of defined benefit plans(9,333)937(8,396)

Net changes in financial assets measured at FVTOCI(25,226)

8,019(17,207)

Net changes in cash flow hedges

15,021(4,665)

10,356

Share of OCI of investments accounted for using the equity method(20,202)

3,861(16,341)

Total(152,563)

9,161(143,402)

491

-

491

Net changes in cash flow hedges

3,904(1,087)

2,817

Share of OCI of investments accounted for using the equity method

1,772

(3)

1,769

Total

6,167

(1,090)5,077(112,332)

1,009(111,323)

Reconciliation of OCI to profit or loss:
Foreign currency translation adjustments

OCI, net of reclassification adjustments:
Foreign currency translation adjustments
Remeasurements of defined benefit plans(9,333)937(8,396)

Net changes in financial assets measured at FVTOCI(25,226)

8,019(17,207)

Net changes in cash flow hedges

18,925(5,752)

13,173

Share of OCI of investments accounted for using the equity method(18,430)

3,858(14,572)

Total(146,396)

8,071(138,325)

OCI, net of reclassification adjustments, attributable tonon-controlling interests:
Foreign currency translation adjustments(37,815)

Remeasurements of defined benefit plans(2,802)

Net changes in financial assets measured at FVTOCI(1,438)Net changes in cash flow hedges

(209)

Total

(42,264)

OCI, net of reclassification adjustments, attributable to
Hitachi, Ltd. stockholders:Foreign currency translation adjustments(73,508)

Remeasurements of defined benefit plans(5,594)

Net changes in financial assets measured at FVTOCI(15,769)

Net changes in cash flow hedges

13,382

Share of OCI of investments accounted for using the equity method(14,572)

Total(96,061)

F-50

Notes to Consolidated Financial Statements

Millions of yen
2019
Before tax

Tax effect

After tax

OCI arising during the year:
Foreign currency translation adjustments(5,979)-(5,979)Remeasurements of defined benefit plans(11,925)

44(11,881)

Net changes in financial assets measured at FVTOCI(59,284)

13,928(45,356)

Net changes in cash flow hedges(9,449)2,874(6,575)

Share of OCI of investments accounted for using the equity method(10,211)

1,502(8,709)Total(96,848)

18,348(78,500)

1,804

-

1,804

626

(325)

301

Share of OCI of investments accounted for using the equity method

23,699(4,945)18,754

Total

26,129(5,270)20,859Foreign currency translation adjustments(4,175)-(4,175)Remeasurements of defined benefit plans(11,925)

44(11,881)

Net changes in financial assets measured at FVTOCI(59,284)

13,928(45,356)

Net changes in cash flow hedges(8,823)

2,549(6,274)

Share of OCI of investments accounted for using the equity method

13,488(3,443)

10,045

Total(70,719)

13,078(57,641)

Reconciliation of OCI to profit or loss:
Foreign currency translation adjustments
Net changes in cash flow hedges

OCI, net of reclassification adjustments:

OCI, net of reclassification adjustments, attributable tonon-controlling interests:
Foreign currency translation adjustments(3,286)

Remeasurements of defined benefit plans

162

Net changes in financial assets measured at FVTOCI(2,221)

Net changes in cash flow hedges

(890)

Total

(6,235)

OCI, net of reclassification adjustments, attributable to
Hitachi, Ltd. stockholders:Foreign currency translation adjustments(889)

Remeasurements of defined benefit plans(12,043)

Net changes in financial assets measured at FVTOCI(43,135)

Net changes in cash flow hedges(5,384)

Share of OCI of investments accounted for using the equity method

10,045

Total(51,406)

F-51

Notes to Consolidated Financial Statements(18) Dividends
Dividends paid on the Company’s common stock for the years ended March 31, 2020 and 2019 are as follows:
Cash dividends(millions of yen)

Appropriation from

Cash dividends
per share (yen)The Board of Directors
on October 30, 2019

43,481Retained earnings

The Board of Directors
on May 10, 2019

48,280

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

Decision

Record date

Effective date

45.0

September 30, 2019

November 29, 2019

Retained earnings

50.0

March 31, 2019

May 31, 2019

38,625Retained earnings

8.0

September 30, 2018

November 27, 2018

38,621Retained earnings

8.0

March 31, 2018

May 29, 2018

Note: Dividends per share for the year ended March 31, 2019 do not reflect the share consolidation effective on October 1, 2018.
The dividends on the Company’s common stock whose record date falls in the year ended March 31, 2020 and the effective datefalls in the next fiscal year is as follows:

Decision
The Board of Directors
on May 13, 2020

Cash dividends(millions of yen)

Appropriation from

Cash dividends
per share (yen)48,311Retained earnings

50.0

F-52

Record date

Effective date

March 31, 2020

June 8, 2020

Notes to Consolidated Financial Statements(19) Stock-based Compensation
The Company introduced a restricted stock compensation plan as stock-based compensation in place of the stock option plan andgrants shares of restricted stock in place of the existing stock options as stock-based compensation from the year ended March 31,
2020.
Stock-based compensation expenses recognized for the years ended March 31, 2020 and 2019 were 724 million yen and 684
million yen, respectively.
(a) Restricted stock compensation plan
In accordance with the restricted stock compensation plan (hereinafter the “Plan”) to be introduced by the Company, Executive
Officers and Corporate Officers (hereinafter the “Eligible Persons”) will receive shares of common stock to be newly issued or
disposed by the Company by making contributions in kind of the monetary compensation claims which are granted in order toallot the shares of restricted stock to the Eligible Persons. In addition, with respect to the issuance or disposition of shares ofcommon stock of the Company under the Plan, the Company and each Eligible Person executes an agreement on allotment of
restricted stock (hereinafter the “Allotment Agreement”).
Outline of the Allotment Agreement(1) Transfer restriction period
From the payment date relating to the issuance or disposition of the shares of restricted stock to the date on which the Eligible
Person ceases to be an Executive Officer, Director or Corporate Officer of the Company.
(2) Acquisition by the Company without consideration
If certain events set out in the Allotment Agreement occur, the Company will acquire the shares without any consideration
promptly on or after a date notified to Eligible Persons. The Company will also acquire the shares for which the transfer
restrictions are definitely not lifted at the time of such determination, without any consideration.
The outline of issuance for the year ended March 31, 2020 is as follows.
March 31, 2020
Payment date

May 31, 2019

Class and number of shares to be issued

587,800 shares

Issue price per share [1]3,647 yen

[1] The issue price for the year ended March 31, 2020 is the closing price per share for the Company’s common stock on April
22, 2019 (preceding business day of the date upon the decision by the President regarding the issuance of new shares) in thefirst section of the Tokyo Stock Exchange, Inc.
(b) Stock option plan
Under the Company’s stock option plan, Executive Officers and Corporate Officers are granted the right to purchase shares ofcommon stock of the Company (stock acquisition rights).
Details of the Company’s stock option plan for the years ended March 31, 2020 and 2019 are as follows.
Fiscal Year of Issuance and Name

Grant Date

Exercise period

Year ended March 31, 2019
The Third Stock Acquisition Rights of Hitachi, Ltd.

April 11, 2018

From April 27, 2018
to April 26, 2048

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

April 6, 2017

From April 27, 2017
to April 26, 2047

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

June 29, 2016

F-53

From July 15, 2016
to July 14, 2046

Notes to Consolidated Financial Statements
Conditions for the exercise of stock acquisition rights(1) During the above exercise period, a holder of stock acquisition rights may exercise all the stock acquisition rights
determined in accordance with the provisions of paragraph (2) or (3) below in a lump sum only within ten days (in case thelast day is not a business day, the following business day) from the day immediately following the date on which he/sheceases to be an Executive Officer, a Director or a Corporate Officer of the Company.
(2) The number of stock acquisition rights that a holder of stock acquisition rights may exercise, shall be determined based on
the ratio of (i) the total shareholder return (TSR) for shares of the Company for three years from the beginning of the fiscal
year in which the date of allotment of the stock acquisition rights falls (Waiting Period) to (ii) the growth rate of TOPIX(Tokyo Stock Price Index) for the same period (TSR/TOPIX Growth Rate Ratio): market condition.
(3) The number of stock acquisition rights, that a holder of stock acquisition rights who has left his/her position in the
Company before the end of the Waiting Period (Resignee) may exercise, shall be determined by reducing the number ofstock acquisition rights allotted to him/her in proportion to the term of office of the Resignee in the Waiting Period, andapplying the TSR/TOPIX Growth Rate Ratio for the period from the beginning of the fiscal year in which the date ofallotment of the stock acquisition rights falls to the time of resignation in accordance with the provision of paragraph (2)above.
A summary of stock option activity for the years ended March 31, 2020 and 2019 is as follows. The number of stock options istranslated into their equivalent number of shares (20 shares per stock option).

Outstanding at beginning of year

2020
2019
Weighted average
Weighted average
Number of shares
Number of shares
exercise priceexercise price（shares）(shares)
(yen)
(yen)
1,004,780
1889,7801Granted

--347,9801

Forfeited [1](39,580)

1(118,240)

1

Exercised(74,240)

1(114,740)

1

-

-

-

-

Outstanding at end of year

Expired890,960

1

1,004,780

1

Exercisable at end of year

-

-

-

-

[1] Including the stock acquisition rights which became non-exercisable because of the market condition.
The weighted average share prices at the date of exercise for the years ended March 31, 2020 and 2019 were 3,677.0 yen and
3,871.0 yen.
The range of exercise price as of March 31, 2020 and 2019 was 1 yen. The weighted average remaining contractual lives of stock
options outstanding as of March 31, 2020 and 2019 were 27.2 years and 28.2 years, respectively.
The weighted average fair value (per share) at the measurement date of stock options issued under the Company’s stock option
plan for the years ended March 31, 2019 was 2,426.0 yen.

F-54

Notes to Consolidated Financial Statements
Fair value of stock options is estimated using Monte Carlo simulation based on the following assumptions.
March 31, 2019
Exercise price

1 yen

Expected life [1]Stock price at the measurement date [2]3.2 years
4,044.5 yen

Expected volatility [3]29.582%

Expected dividends [4]65 yenRisk-free rate [5](0.121%)

Average value of the normal distribution of
TSR/TOPIX Growth Rate Ratio [6]103.8%

Standard deviation of the normal distribution of
TSR/TOPIX Growth Rate Ratio [6]39.6%[1] Based on the expected term of office of each grantee.
[2] Based on the closing prices of the Company's stocks on the Tokyo Stock Exchange at the measurement date.
[3] Based on historical volatility of weekly stock price fluctuations during a directly preceding period that is equal to the expected
life of the stock options.
[4] Based on actual annual dividends in the fiscal year preceding that of the measurement date.
[5] Calculated based on the yield of a Japanese government bond with a term to maturity that is equal to the expected life of thestock options.
[6] Calculated based on historical data in fiscal years preceding that of the measurement date.

F-55

Notes to Consolidated Financial Statements(20) Revenues(a) Disaggregation of revenue
The Company derives revenues primarily from contracts with customers. The following table shows the disaggregation ofrevenue attributable to each reportable segment and geographic area.
Effective from April 1, 2019, the Company reclassified its reportable segments. Accordingly, figures for the year ended March
31, 2019 have been restated on the basis of the reclassification. Details of the reclassification are described in note 4.
Millions of yen
2020
Overseas
Revenues
Subtotal

Total
Revenues

38,907552,994

2,099,426

4,369

2,692

48,893399,254

59,631

13,27521,028

178,663

840,749

368,985

44,518299,543

46,773759,819

1,144,447

826,159

239,053

224,743

112,558

70,479646,833

1,472,992

Hitachi High-Tech

253,628

216,004

110,664

94,43519,893440,996694,624

Hitachi Construction Machinery

205,604

211,663

173,426

136,197

204,457

725,743

931,347

Hitachi Metals

405,410

166,137

245,349

44,542

19,964475,992

881,402

Hitachi Chemical

229,823

272,241

48,021

63,113

18,235

401,610

631,433

Others408,869

49,097

13,405

7,247

6,212

75,961

484,830

Subtotal

5,273,000

1,817,821

1,111,013

930,030

448,640

4,307,504

9,580,504

Corporate items and Eliminations(743,905)(50,284)(8,026)(5,531)(5,495)(69,336)(813,241)

Total

4,529,095

1,767,537

1,102,987

924,499

443,145

4,238,168

8,767,263

Japan

Asia

North
America

Europe

Other
Areas

1,546,432

176,337

182,999

154,751

Energy350,361

33,575

8,257

Industry

662,086

84,729

Mobility

384,628

Smart Life

IT

Millions of yen
2019
Overseas
Revenues
Subtotal

Total
Revenues

45,694606,991

2,121,685

6,148

3,268

47,765453,997

53,371

14,717104,275

262,253

895,406

393,13151,641

368,734

43,593857,099

1,214,157

921,253

273,890

285,148

92,18076,886728,104

1,649,357

Hitachi High-Tech

283,026

256,833

62,017

98,81230,415448,077

731,103

Hitachi Construction Machinery

206,075

276,356

168,668

146,034

236,570827,628

1,033,703

Hitachi Metals

448,986

200,703

310,875

50,40812,449574,435

1,023,421

Hitachi Chemical

251,636

293,546

48,87970,491

16,473429,389

681,025

Others440,544

80,72822,457

10,273

7,312

120,770

561,314

Subtotal

5,462,657

2,076,347

1,217,441

1,031,788

576,935

4,902,511

10,365,168

Corporate items and Eliminations(798,122)(56,749)(11,813)(13,246)(4,619)(86,427)(884,549)

Total

4,664,535

2,019,598

1,205,628

1,018,542

572,316

4,816,084

9,480,619

Japan

Asia

North
America

Europe

Other
Areas

1,514,694

181,737

205,569

173,991

Energy406,232

29,533

8,816

Industry

633,153

89,890

Mobility

357,058

Smart Life

IT

F-56

Notes to Consolidated Financial Statements
The IT segment consists of Front Business and Services & Platforms, for which revenue amounted to 1,421,595 million yen
and 780,599 million yen for the year ended March 31, 2020 and 1,393,019 million yen and 817,630 million yen for the year
ended March 31, 2019, respectively (including intersegment transactions). Front Business is operated mainly in Japan, andServices & Platforms 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.
(IT)
Front Business primarily provides goods and services such as system integration, consulting and cloud services. These longterm projects provide goods and services according to customers’ specifications over a specified period of time, and revenue
is recognized mainly based on the pattern of the cost accrual (the progress of the project mostly based on the cost incurred
relative to the estimated total cost) 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.
Services & Platforms primarily sells control systems, software and IT products. Revenue is recognized when control over the
goods is transferred to customers as performance obligations are satisfied at the point in time upon the completion or upondelivery 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.
(Energy, Industry and Mobility)
The Energy segment includes revenue from businesses such as energy solutions, and the Industry segment includes revenue
from businesses such as industry & distribution systems. These segments are operated mainly in Japan. The Mobility
segment includes revenue from building systems and railway systems businesses. The building systems business is operated
mainly in China and the railway systems business is operated mainly in Europe.
Long-term projects related to contracts such as construction in these segments involve manufacturing and providing goods
based on customers’ specifications over a specified period of time. As performance obligations are satisfied over time,revenue is recognized mainly based on the pattern of the cost accrual (the progress of the project mostly based on the cost
incurred relative to the estimated total cost). In addition, these segments provide certain services promised in the contracts
such as maintenance throughout the duration of the contract, and recognize 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 performanceobligations are satisfied.
Further, in the sale of industrial equipment, etc. included in the Industry segment, and in the sale of elevators, etc. included in
the Mobility segment, revenue is recognized when control over the goods is transferred to customers as performanceobligations are satisfied at the point in time upon the completion or upon delivery of the goods. The Company’s generalterms and conditions apply, and there are no significant transactions in which payment terms include deferred payments, etc.
(Other)In the Smart Life, Hitachi High-Tech, Hitachi Construction Machinery, Hitachi Metals, and Hitachi Chemical segments,
performance obligations are generally satisfied at a point in time upon completion or upon delivery of the goods, and revenue
is recognized when control over goods is transferred to customers. The Company’s general terms and conditions apply, andthere 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.

F-57

Notes to Consolidated Financial Statements(c) Information about contract balances
The following table shows the beginning and ending balances of Trade receivables, Contract assets and Contract liabilities fromcontracts with customers for the fiscal years ended March 31, 2020 and 2019.
Millions of yen
2020
March 31, 2020

2019
April 1, 2019

March 31, 2019

April 1, 2018

Trade receivables

1,846,078

1,980,165

1,980,165

2,139,961

Contract assets

484,999

484,120484,120

443,031

Contract liabilities

707,352

654,536

654,536712,354

Of the revenue recognized during the fiscal years ended March 31, 2020 and 2019, the amount included in Contract liabilities atthe beginning of the fiscal years were 292,613 million yen and 399,256 million yen, respectively. And the amount related toperformance obligations satisfied in the past periods were not material.
(d) Transaction price allocated to remaining performance obligations
The following table shows the balance of unsatisfied performance obligations by reportable segment for the fiscal years ended
March31, 2020 and 2019.
Millions of yen
March 31, 2020

March 31, 2019

Intersegment

Balance of unsatisfied

Intersegment

Balance of unsatisfied

transactions

performance obligationstransactions

performance obligations

IT53,577

1,068,472

59,7081,017,357

Energy27,348625,730

39,172681,234

Industry

86,941

441,956

50,182

374,667

Mobility

5,713

3,692,326

9,790

3,410,275

Segments of the Company and its subsidiaries that have contracts under which revenue is recognized over a long period of time
are primarily the IT segments, Energy segments, Industry segments and Mobility segments.
Approximately 90% of the balance of unsatisfied performance obligations of the IT segment was expected to be satisfied within
three years and approximately 10% after three years but no more than five years.
Approximately 60% of the balance of unsatisfied performance obligations of the Energy segment was expected to be satisfied
within three years and approximately 20% after three years but no more than five years.
Approximately 90% of the balance of unsatisfied performance obligations of the Industry segment was expected to be satisfied
within three years.
Approximately 50% of the balance of unsatisfied performance obligations of the Mobility segment was expected to be satisfied
within three years and approximately 10% after three years but no more than five years.
The remaining segments have contracts whose initial expected terms are generally one year or less. Accordingly, related
information is excluded from this disclosure in accordance with the practical expedient.
(e) Assets recognized from the costs incurred for obtaining or fulfilling contracts with customers
The Company and its subsidiaries recognize the costs incurred for obtaining or fulfilling contracts with customers as an asset tothe extent those costs are expected to be recovered. Such costs recognized as an asset as of March 31, 2020 and 2019 were notmaterial.

F-58

Notes to Consolidated Financial Statements(21) Other Income and Expenses
The main components of other income and expenses for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
2020
Net gain (loss) on sales and disposals of fixed assets

2019

29,92018,460(136,993)(344,997)

19,650184,630

Special termination benefits(21,422)(22,376)

Loss due to the settlement of the South African project(375,967)-

Impairment losses
Net gain (loss) on business reorganization and others

Impairment losses are mainly recognized on property, plant and equipment, investment properties, goodwill and other intangible
assets. Net gain (loss) on business reorganization and others include gains and losses related to obtaining and losing control ofinvestees and gains and losses related to obtaining and losing significant influence over investees.
Restructuring charges (structural reform expenses) included in other expenses for the years ended March 31, 2020 and 2019 were159,086 million yen and 380,846 million yen, respectively. Restructuring charges (structural reform expenses) mainly include
impairment losses and special termination benefits.
Restructuring charges (structural reform expenses) for the year ended March 31, 2019 include expenses 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 clearthat further time is needed to develop a financial structure for the project and conditions for building and operating the nuclear
power stations to secure its business continuation. Consequently, the Energy segment recognized restructuring charges (structuralreform expenses) of 294,613 million yen including impairment losses of 277,208 million yen on the related assets of the project.
The detail of loss due to the settlement of the South African project is disclosed in note 5.
(22) Financial Income and Expenses
The main components of financial income and expenses for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
2020

2019

Dividends received

5,531

6,054

Exchange gain (loss)(4,493)

7,640

Dividends received for the years ended March 31, 2020 and 2019 are from FVTOCI financial assets.

F-59

Notes to Consolidated Financial Statements(23) Discontinued Operations
In the Energy segment, the Company classified the part of thermal power generation systems business which was not transferredto Mitsubishi Hitachi Power Systems, Ltd. for business integration in the thermal power generation systems business with
Mitsubishi Heavy Industries, Ltd. but was operated by the Company and certain subsidiaries as discontinued operations in the
consolidated statement of profit or loss since the projects were completed in the year ended March 31, 2015.
Profit or loss and cash flows from the discontinued operations for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
2020

2019

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

48(10,123)(1,826)(1,658)(1,778)(11,781)

2

2,645(1,776)(9,136)
Millions of yen

2020

2019

Cash flows from discontinued operations
Cash flows from operating activities(2,981)(18,074)

Cash flows from investing activities--

Cash flows from financing activities

2,745

17,671F-60

Notes to Consolidated Financial Statements(24) Earnings Per Share (EPS) Information
The calculations of basic and diluted EPS attributable to Hitachi, Ltd. stockholders are as follows:
Number of shares
2020
Weighted average number of shares on which basic EPS is calculated

2019

965,708,920

965,630,489

832,420

911,653

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

339,060-

966,880,400

966,542,142
Millions of yen

2020

2019

Net income from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted89,372

231,682--

89,372

231,682(1,776)(9,136)--(1,776)(9,136)87,596

222,546--

87,596

222,546

Net 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

Yen
2020

2019

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

92.55

239.93

Diluted

92.43

239.70Basic(1.84)(9.46)

Diluted(1.84)(9.45)

Basic

90.71

230.47

Diluted90.60

230.25

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 assumption that
the Company conducted this share consolidation at the beginning of the fiscal year ended March 31, 2019.

F-61

Notes to Consolidated Financial Statements(25) Supplementary Cash Flow Information
Changes in liabilities from financing activities for the years ended March 31, 2020 and 2019 are as follows:
Millions of yen
Short-term debt

Long-term
borrowings

Bonds

Lease liability

Total

March 31, 2018

121,439

149,837

729,540

49,4781,050,294

Cash flows

3,706

20,032(49,326)(16,651)(42,239)---

13,522

13,522Acquisitions and divestitures(4,156)

1,010(11,758)(1,419)(16,323)

Currency translation effect and others(9,958)

(381)

5,587

4,269

(483)

111,031

170,498

674,043

49,1991,004,771---

224,613

224,613

111,031

170,498

674,043

273,8121,229,384

80,849215,205(77,369)(82,363)

136,322---87,71587,715

5,793-

48,5306,583

60,906(14,370)(410)(7,556)(6,949)(29,285)

183,303385,293

637,648

278,798

1,485,042

Non-cash changes
Finance lease liability incurred

March 31, 2019
(Before restatement)
Cumulative effects of changes inaccounting policies
April 1, 2019
(After restatement)
Cash flows
Non-cash changes
Finance lease liability incurred
Acquisitions and divestitures
Currency translation effect and others
March 31, 2020

F-62

Notes to Consolidated Financial Statements(26) Financial Instruments and Related Disclosures(a) Capital Management
The Company manages its capital under the policy of maintaining appropriate level of assets, liabilities and capital for current
and future business operations, as well as optimizing the efficiency of capital utilization throughout the business operations.
The Company uses the total Hitachi, Ltd. stockholders’ equity ratio as an important indicator in capital management and it isregularly monitored. The total Hitachi, Ltd. stockholders’ equity ratio as of March 31, 2020 and 2019 were 31.8% and 33.9%,
respectively.
The Company is not subject to any capital requirements except for the general rules such as the Japanese Company Law.
(b) Financial Risks
The Company is engaged in business activities world-wide, and constantly exposed to various risks such as market risks(mainly currency exchange risk and interest rate risk), credit risk and liquidity risk. The Company implements risk
management policies to avoid or mitigate these financial risks.
(i) Currency Exchange Risk
The Company and its subsidiaries hold assets and liabilities exposed to currency exchange risk. In order to hedge this risk,
the management uses forward exchange contracts or cross currency swaps.
For trade receivables and payables denominated in foreign currencies, the Company and its subsidiaries measure the future
cash flows per currency on a monthly basis, and enter into forward exchange contracts using a constant ratio with the
purpose of fixing the future cash flows arising from receivables and payables and forecasted transactions denominated inforeign currencies. The terms of forward exchange contracts are largely within one year. If necessary, the Company and its
subsidiaries establish a risk control policy and a risk management approach specific to each transaction by reviewing thebusiness characteristics, the structure of income and expenditure, and conditions of the contract. The Company and its
subsidiaries hedge the risk exposure arising from specific transactions based on the risk control policy and the risk
management approach.
To fix cash flows from long-term debt denominated in foreign currencies, the Company and its subsidiaries enter intocross currency swap agreements with the same maturities as the underlying debt. The hedging relationship between theforward exchange contracts or cross currency swaps and the underlying hedged items is highly effective in offsetting theimpact from changes in foreign currency exchange rates.
The sensitivity analysis for currency exchange rates shown below indicates the impact on income from continuing
operations, before income taxes, in the Company’s consolidated statement of profit or loss, if the Japanese yen depreciatedby 1% on the foreign-currency-denominated financial instruments held by the Company and its subsidiaries as of March
31, 2020 and 2019, while all other variables are held constant.
Millions of yen
Currency

2020

2019

Impact on income from continuing

US Dollar

330

307

operations, before income taxes

Euro

156

172

F-63

Notes to Consolidated Financial Statements(ii) Interest Rate Risk
The Company and its subsidiaries are exposed to interest rate risk related principally to long-term debt obligations. In
order to minimize this risk, the Company and its subsidiaries enter into interest rate swap agreements to control fluctuation
risk of cash flows. The interest rate swaps entered into are mainly receive-variable, pay-fixed interest rate swaps. Under
the interest rate swaps, the Company and its subsidiaries receive variable interest rate payments on long-term debt andmake fixed interest rate payments, thereby creating fixed interest rate long-term debt.
Certain financing subsidiaries raise funds by issuing long-term debt with a fixed interest rate and lending it at variableinterest rates, creating interest rate risk. In order to minimize this risk, interest rate swaps are used to convert, in effect, thefixed rate to a variable rate to manage fluctuations in fair value resulting from interest rate risk. The hedging relationshipbetween the interest rate swaps and the underlying hedged items is highly effective in offsetting the impact from changes
in cash flows and fair value resulting from interest rate risk.
The sensitivity analysis for interest rate shown below indicates the impact on income from continuing operations, before
income taxes, in the consolidated statement of profit or loss, if interest rates increased by 1% on the financial instruments(floating-interest financial assets and liabilities measured at amortized cost, FVTPL financial assets and liabilities andderivatives) held by the Company and its subsidiaries as of March 31, 2020 and 2019, while all other variables are held
constant.
Millions of yen
2020
Impact on income from continuing operations,
before income taxes

2019(2,421)(584)(iii) Credit Risk
Trade receivables and contract assets, and other receivables resulting from operating activities of the Company and its
subsidiaries are exposed to credit risk of the customers. Investments in debt securities held for managing cash surplus andequity instruments held for strategic purposes are exposed to credit risk of the issuers. Derivative transactions entered into
in order to lower market risks are exposed to credit risk of the counter-party financial institutions.
For credit risk of customers, the Company conducts periodic credit checks as appropriate for the products sold and thecustomers’ financial conditions and credit ratings. A credit limit is set according to the credit risk. For cash surplus,
investment is restricted to low risk debt securities, and derivative transactions are entered into with financial institutions
with high credit rating only.
No significant concentration of credit risk is present in a particular region or a customer, as the Company and its
subsidiaries are engaged in diverse industries worldwide.

F-64

Notes to Consolidated Financial Statements
The changes in the balance of allowance for doubtful receivables for trade receivables, contract assets and otherreceivables, and the changes in the gross carrying amounts of trade receivables and contract assets, and other receivables
corresponding to the allowance for doubtful receivables for the years ended March 31, 2020 and 2019 are as follows.
Other receivables mainly consist of lease receivables and financial assets measured at amortized cost such as short-termloans receivable, other accounts receivable, debt securities measured at amortized cost and long-term loans receivable.
Millions of yen
Trade receivables and contract
assetsAllowance for doubtful receivables
Collective
assessment

Individual
assessment

11,271Gross carrying amount

Total

Collective
assessment

Individual
assessment

16,36927,6402,518,227

63,066

2,581,293

Total

March 31, 2018
(Before restatement)
Cumulative effects of changes
in accounting policies

14

-

14

-

-

-

April 1, 2018
(After restatement)

11,285

16,36927,6542,518,227

63,066

2,581,293

Change, net

4,694(1,263)3,431(121,272)

42,951(78,321)

Credit-impairment [1]

(765)

765

-

(2,266)

2,266-

Write-off [2](511)(1,530)(2,041)(853)(1,531)(2,384)

Other [3]

3,917

(439)

3,478

(2,197)(1,584)(3,781)March 31, 201918,62013,90232,522

2,391,639

105,168

2,496,807

Change, net

3,332

5,825

9,157

(77,943)(38,890)(116,833)

Credit-impairment [1]

(21)

21

-

(1,443)

1,443-

Write-off [2]

(635)

(343)

(978)

(2,599)(752)(3,351)Other [3]

(472)

(578)

(1,050)(1,619)(4,276)(5,895)20,824

18,82739,651

2,308,035

62,6932,370,728

March 31, 2020

F-65

Notes to Consolidated Financial Statements
Millions of yen
Allowance for doubtful receivables
Other receivables

Collective
assessment

Individual
assessment

456

2,582

-

(After restatement)
Change, net

Gross carrying amountCollective
assessment

Individual
assessment

3,038

519,135

8,255

527,390

-

-

-

-

-

456

2,582

3,038

519,135

8,255

527,390

(63)

202

139

(15,987)

8,232(7,755)Credit-impairment [1]

-

-

-

-

-

-

Write-off [2]

(6)

(727)

(733)

(299)

(727)

(1,026)

Other [3]

(2)

(170)

(172)

1,137

(347)

790

March 31, 2019

385

1,887

2,272

503,986

15,413519,399

Change, net

71

2,458

2,529

(115,816)

1,404(114,412)

March 31, 2018
(Before restatement)
Cumulative effects of changes
in accounting policies

Total

Total

April 1, 2018

Credit-impairment [1]

-

-

-

(26)

26

-

(176)

(195)

(371)

(1,097)(195)(1,292)Other [3]

(8)

(38)

(46)

(1,239)(441)(1,680)March 31, 2020

272

4,112

4,384

385,808

16,207402,015

Write-off [2][1] The Company measures the allowance for doubtful receivables relating to credit-impaired financial assets based on
individual assessment and, therefore, transfers them from collective assessment.
[2] The Company generally writes off and derecognizes the corresponding carrying amount when it has no reasonable
expectations of recovering the financial asset in its entirety or a portion.
[3] Other mainly includes the impact of acquisitions and divestitures and currency translation effect.
The maximum exposure to the credit risk equals the financial assets’ carrying amount, net of allowance for doubtfulreceivables, in the consolidated statement of financial position, if collateral held is not included. The maximum exposure
to the credit risk from loan commitments is disclosed in note 30. The maximum exposure to the credit risk from guarantee
obligations is disclosed in note 30.

F-66

Notes to Consolidated Financial Statements(iv) Liquidity Risk
Trade payables and financial liabilities, such as long-term debts, held by the Company and its subsidiaries are exposed toliquidity risk. With respect to this risk, the Company and its subsidiaries try to optimize capital efficiency through efficientmanagement of working capital, and maintain cash control through a centralized cash management system. They are alsoable to raise funds, as necessary, from capital markets through the issuance of debt and equity securities, and fromcommercial banks through borrowings and commitment lines. The total unused commitment lines as of March 31, 2020are disclosed in note 30.
The following tables present the maturities of non-derivative financial liabilities. Trade payables are not included in thetables since the carrying amounts agree with the contractual cash flows and they all mature in less than one year.
Millions of yen
Carrying
amountShort-term debt

Contractual
cash flows

March 31, 2020
Within 1 year

After 1 year
but not morethan 5 years

More than 5
years

183,303

184,667

184,667--

83,918144,837

62,071Long-term debt
Lease liabilities

278,798

290,826

Bonds

385,293

395,427

1,721

185,624

208,082Long-term borrowings

637,648

647,959

153,052

373,149

121,758
Millions of yen

Carrying
amountShort-term debt

Contractual
cash flows

March 31, 2019
Within 1 year

After 1 year
but not morethan 5 years

More than 5
years

111,031112,072

112,072--

Lease liabilities

49,19953,704

19,29030,873

3,541

Bonds

170,498

176,594

31,66478,071

66,859Long-term borrowings

674,043

685,412

144,386

346,677

194,349

Long-term debt

The weighted average interest rate for short-term debt is 1.9%, and the weighted average interest rate for long-termborrowings is 0.5% with maturities ranging from 2020 to 2039.

F-67

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

Issuer

The Company
The Company

Name of bondUnsecureddebenture #16
Unsecureddebenture #17

March 31,2019

Security

Millions of yen
Interest
Mature
rates
in
(%)

IssuedMarch 31,
2020

2013

30,00030,000 Unsecured

0.8

2023

2013

20,00020,000 Unsecured

1.4

2028

The Company

Unsecureddebenture #18

2020

90,000- Unsecured

0.1

2023

The Company

Unsecureddebenture #19

2020

20,000- Unsecured

0.2

2027

2020

90,000- Unsecured

0.3

2030

0.1

2021

135,293

120,498 Unsecured

2.8

2030

385,293

170,498

The Company

Subsidiaries

Unsecureddebenture #20

2012

Unsecureddebentures

2020

Total

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

Forward exchange contracts
Cross currency swaps
Interest rate swaps
Option contracts

March 31, 2020
More than 5
After 1 year
years
but not morethan 5 years

Total

In

36,128321

136,450Out

13,664749-

14,413

In

1,253

6,296

-

7,549

Out

4,398

1,599

-

5,997

In

-

390

-

390

Out

252

2,594

-

2,846

In

6,081

86

-

6,167

Out

197

10

-

207
Millions of yen

Within 1 year

March 31, 2019
After 1 year
More than 5
but not more
years
than 5 years

Forward exchange contracts

In

14,9281,606

Out

13,824

Cross currency swaps

In

57

Out
Interest rate swaps
Option contracts

Total

1

16,535

3,200-

17,024

432

7,448

7,937

36

3,185

699

3,920

In

272

468

-

740

Out

149

1,899

7

2,055

In

387

6,707

-

7,094

Out

29

-

-

29

F-68

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

F-69

Notes to Consolidated Financial Statements(ii) Financial Instruments Measured at Amortized Cost
The carrying amounts and estimated fair values of the financial instruments measured at amortized cost as of March 31,
2020 and 2019 are as follows.
The fair value estimated for financial assets and liabilities measured at amortized cost is classified in Level 2 of the fairvalue hierarchy.
Millions of yen
March 31, 2020
Carrying amounts

March 31, 2019

Estimated
fair values

Carrying amounts

Estimated
fair values

AssetsInvestments in securities and otherfinancial assets
Lease receivables

83,55384,834

95,07396,377

Debt securities

73,04873,051

72,41872,422Long-term loans receivable

26,642

28,576

105,061

106,390

Bonds

385,293

386,082

170,498

174,747

Long-term borrowings

637,648

640,929674,043

678,481

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

F-70

Notes to Consolidated Financial Statements
The following tables present the assets and liabilities that are measured at fair value on a recurring basis as of March 31,
2020 and 2019.
March 31, 2020
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

-

-

4,001

4,001

8,638

4,550

8,617

21,805-44,4096,147

50,556

135,452-

108,884

244,336

144,090

48,959127,649

320,698-

24,021-

24,021-

24,021-

24,021

Derivatives
FVTOCI financial assets:
Investments in securities and otherfinancial assets
Equity securities
Total financial assets at fair value
FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value
March 31, 2019
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

-

-

2,743

2,743

10,127

4,895

9,344

24,366-25,2697,059

32,328

183,585-

102,334

285,919

193,71230,164

121,480

345,356-

23,078-23,078-23,078-23,078FVTOCI 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-71Notes to Consolidated Financial Statements
The following tables present the changes in Level 3 instruments measured on a recurring basis for the years ended March
31, 2020 and 2019.
2020

Millions of yen
Level 3 financial assets

Equitysecurities

Debt
securities

Derivatives

Total

Balance at beginning of year

105,077

9,344

7,059

121,480

Loss in profit or loss [1]Gain in OCI [2]

(124)
1,871

(54)
-

(912)
-

(1,090)
1,871

Purchases
Sales and redemption

3,839(2,393)455(1,032)-

4,294(3,425)Acquisitions and divestitures
Other

(505)
5,120

(46)
(50)

-

(551)
5,070

112,885

8,617

6,147

127,649

(124)

(31)

(912)

(1,067)

Balance at end of year
Unrealized loss relating tofinancial assets held at end of year [4]2019Millions of yen
Level 3 financial assets

Balance at beginning of year

Equitysecurities

Debt
securities

Derivatives

Total

114,734

9,590

7,760

132,084

(58)
6,241

55
-

(1,053)-(1,056)
6,241

Purchases
Sales and redemption

5,301(14,961)

3,040(3,251)-

8,341(18,212)Acquisitions and divestitures
Transfer from Level 3 [3](5,405)
(378)

(78)
-

-

(5,483)
(378)

Other
Balance at end of year

(397)
105,077

(12)
9,344

352
7,059

(57)
121,480(58)

59(1,053)(1,052)Gain (loss) in profit or loss [1]Gain in OCI [2]Unrealized gain (loss) relating tofinancial assets held at end of year [4][1] Gain (loss) in profit or loss related to FVTPL financial assets is included in Financial income and Financial expenses
in the consolidated statement of profit or loss.
[2] Gain in OCI related to FVTOCI financial assets is included in Net changes in financial assets measured at fair value
through OCI in the consolidated statement of comprehensive income.
[3] Transfer from Level 3 is mainly the result of an investee being listed on the stock market.
[4] Unrealized gain (loss) relating to FVTPL financial assets held at the end of year is included in Financial income andFinancial expenses in the consolidated statement of profit or loss.
Written put options on non-controlling interests of subsidiaries are not included in the above table. Such put options areclassified as Level 3 financial liabilities measured on a recurring basis, and changes in fair value are recognized in Capitalsurplus. The fair value of the put options above as of March 31, 2019 was 17,678 million yen included in Other financial
liabilities in the consolidated statement of financial position.
Fair values are measured by the finance departments in accordance with the Company’s policies and procedures.
Valuation models are determined so that they reflect each financial instrument’s nature, characteristics and risks mostappropriately. The finance departments continually examine changes in important inputs that could affect the fair value. Incase the fair value of a financial instrument was significantly impaired, administrators review and approve the impairment
loss.

F-72

Notes to Consolidated Financial Statements
Equity instruments held with the objective of maintaining and strengthening business relations with the issuers areclassified as FVTOCI financial assets. The following is a list of principal equity instruments designated as FVTOCI andtheir fair values.
March 31, 2020

Millions of yen

Principal FVTOCI financial assets

Fair value

Western Digital Corporation

28,309Renesas Electronics Corporation

24,114JECC Corporation

21,591

Central Japan Railway Company

15,588

Nippon Steel Kowa Real Estate Co., Ltd.

9,012

Shin-Etsu Chemical Co., Ltd.

7,083

East Japan Railway Company

6,642

Nippon Tochi-Tatemono Co., Ltd.

4,899

Honda Motor Co., Ltd.

4,860

Dalian Hi-Think Computer Technology Corporation

4,644

March 31, 2019

Millions of yen

Principal FVTOCI financial assets

Fair value

Western Digital Corporation

33,338Renesas Electronics Corporation

31,739Central Japan Railway Company

23,139JECC Corporation

20,942

Yungtay Engineering Co., Ltd.

10,978

East Japan Railway Company

8,676

Nippon Steel Kowa Real Estate Co., Ltd.

7,909

Shin-Etsu Chemical Co., Ltd.

6,126

Honda Motor Co., Ltd.

5,990

Nippon Tochi-Tatemono Co., Ltd.

4,945

See note 22 for dividends received from investment securities classified as FVTOCI financial assets.
Accumulated gains and losses on valuation of FVTOCI financial assets are reclassified into retained earnings when
derecognized during the fiscal year. The net gains reclassified, net of taxes, for the years ended March 31, 2020 and 2019were 13,129 million yen and 34,608 million yen, respectively. These financial assets were derecognized upon disposal ofshares after reviewing particular business relations, or acquisitions and divestitures.
The information on FVTOCI financial assets that were derecognized for the years ended March 31, 2020 and 2019 is asfollows:
Millions of yen
2020

2019

Fair value at the time of derecognition

24,302

69,821

Accumulated gains at the time of derecognition

16,221

46,677

F-73

Notes to Consolidated Financial Statements(d) Derivatives and Hedging Activities(i) Fair Value Hedge
Changes in the fair value of recognized assets and liabilities, and of derivatives designated as a fair value hedge of these assets
and liabilities are recognized in profit or loss for the period in which the changes occur. Derivatives designated as a fair value
hedge include forward exchange contracts associated with operating transactions, cross currency swaps agreements and interest
rate swaps associated with financing transactions.
(ii) Cash Flow Hedge
Foreign Currency Risk
A portion determined as an effective hedge with respect to changes in the fair value of forward exchange contracts designatedas an effective cash flow hedge of forecasted foreign-currency-denominated transactions are recognized in OCI. AOCI issubsequently reclassified into profit or loss when the hedged items affect profit or loss for the period. If a non-financial asset ora 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.
Interest Rate Risk
A portion determined as an effective hedge with respect to changes in the fair value of interest rate swaps designated as a hedgeof the variability of cash flows associated with long-term debt are recognized in OCI. AOCI is subsequently reclassified tointerest charges over the period in which the interest on the debt affects profit or loss.
When applying hedge accounting, the Company assesses hedge effectiveness through a qualitative assessment of whether thecritical terms of the hedged item and the hedging instrument match or are closely aligned and whether changes in the fair value
or cash flows of the hedging instrument offset changes in the fair value or cash flows of the hedged item in order to confirm thatan economic relationship exists between the hedged item and the hedging instrument. The Company also sets appropriate hedge
ratios based on the economic relationship between the hedged item and the hedging instrument and the Company’s risk
management policies. For the year ended March 31, 2020 and 2019, hedge ineffectiveness recognized in profit or loss were notmaterial.
The notional amounts and carrying amounts of hedging instruments as of March 31, 2020 and 2019 are as follows. The carrying
amount of hedging instruments is included in Investments in securities and other financial assets and Other financial liabilities
or Other non-current liabilities in the consolidated statement of financial position.
March 31, 2020
Hedging instruments

Millions of yen
Carrying amount

Notional amountMore than 1 year

AssetsLiabilities

Fair value hedge
Foreign currency risk

533,740

75,431

11,941

5,715Interest rate risk

57,30047,657390

1,712

Cash flow hedge
Foreign currency risk

887,165

24,02328,561

8,477Interest rate risk

175,663

116,325-

1,134

1,653,868

263,436

40,892

17,038

Total
March 31, 2019
Hedging instruments

Millions of yen
Carrying amount

Notional amountMore than 1 year

AssetsLiabilities

Fair value hedge
Foreign currency risk

621,771

109,001

9,120

6,273

Interest rate risk

55,672

26,138382

120

Foreign currency risk

328,148

64,96013,0495,489Interest rate risk

209,317

188,357

358

1,935

1,214,908

388,456

22,90913,817

Cash flow hedge

Total

F-74

Notes to Consolidated Financial Statements
The carrying amounts of hedged items related to fair value hedges as of March 31, 2020 and 2019 are as follows.
March 31, 2020

Millions of yen

Hedged items related tofair value hedges

Recognized in statement offinancial position

Foreign currency risk

Trade receivables and contract assets,
Investments in securities and other financial assets,

Interest rate risk

Investments in securities and other financial assets

Carrying amount
AssetsLiabilities

375,960

157,780

41,52015,780417,480

173,560

Short-term debt and Long-term debt
Total
March 31, 2019

Millions of yen

Hedged items related tofair value hedges

Carrying amount

Recognized in statement offinancial position

AssetsLiabilities

Trade receivables and contract assets,
Foreign currency risk

Investments in securities and other financial assets,
Trade payables and Long-term debt

Interest rate risk

Investments in securities and other financial assets

468,967

Total

152,804

55,672-524,639

152,804

For the years ended March 31, 2020 and 2019, changes in the fair value of hedging instruments and hedged items related to fairvalue hedges and the accumulated amount of fair value hedge adjustments on hedged items included in the carrying amount of
the hedged items were not material.
For the years ended March 31, 2020 and 2019, changes in the fair value of hedging instruments related to cash flow hedges
recorded in Accumulated other comprehensive income are as follows.
Millions of yen
Changes in fairAmount directly
value of hedging
included in
instruments
carrying amount ofrecognized in otherhedged assets orcomprehensive
liabilities
incomeApril 1,2019

Price risk

Amountreclassified to
profit or loss
[1]

March 31,
2020

(36)

(698)

162

-

(572)

Foreign currency risk

(4,204)15,303(2,902)

3,881

12,078Interest rate risk

(1,583)

416

-

23

(1,144)

Total(5,823)15,021(2,740)3,904

10,362Millions of yen

Changes in fairAmount directly
value of hedging
included in
instruments
carrying amount ofrecognized in otherhedged assets orcomprehensive
liabilities
incomeApril 1,
2018

Amountreclassified to
profit or loss
[1]

March 31,2019

Price risk

(111)

(462)

539

(2)

(36)

Foreign currency risk

2,943

(8,976)

1,252

577

(4,204)

Interest rate risk

(1,623)

(11)

-

51

(1,583)

Total

1,209

(9,449)

1,791

626

(5,823)[1] In the consolidated statement of profit or loss, the amount reclassified to profit or loss is included mainly in Revenues andFinancial expenses for hedges of foreign currency risk and mainly in Interest charges for hedges of interest rate risk.
F-75

Notes to Consolidated Financial Statements(e) Securitization of Financial Assets
For the purpose of providing diversified and stable financing, the Company and certain subsidiaries securitize certain financial
assets, and transfer trade and lease receivables through certain third-party financial institutions or structured entities formed bythese financial institutions. The Company does not consolidate such structured entities used for securitization purposes since it has
been determined that they are not controlled by the Company.
These unconsolidated structured entities used for securitization purposes are operated in the ordinary course of business of thefinancial institutions, and they procure funds by issuing commercial paper and other borrowings. Basically, investors in thesestructured entities only have recourse to the assets owned by the entity itself, but not to any other assets held by the Company or its
subsidiaries. The amount of assets transferred by the Company and certain subsidiaries is considerably small compared to the total
assets of the structured entities sponsored by the financial institutions that purchase a large amount of assets from entities otherthan the Company and certain subsidiaries. The Company and certain subsidiaries have only limited exposure to the risks borne bythese structured entities. The majority of the involvement with these structured entities used for securitization purposes by theCompany and certain subsidiaries concerns the servicing of assets. The Company and certain subsidiaries do not provide any noncontractual support to the structured entities and have not made any implicit support arrangements with them.
For the securitizations of financial assets by the Company and certain subsidiaries, which resulted in derecognizing the financial
assets in their entirety, the Company and certain subsidiaries retain no significant continuing involvement. For other securitizationsof financial assets, the Company and certain subsidiaries do not derecognize the financial assets in their entirety when they retain
substantially all credit risks and economic value related to the transferred financial assets through holding subordinated interests,
and the carrying amounts of these financial assets are not material.
(27) Pledged Assets
As a general contractual term for long-term and short-term debt, banks may demand collateral and guarantees for present andfuture obligations, and retain rights to offset the liabilities with bank deposits when repayment is overdue or any breach ofcontract occurs.
Per trustee agreements of secured bonds and particular secured or unsecured loan agreements, trustees or lenders generally havethe right to pre-approve profit distributions including dividend payments and new stock issues, as well as the right to demand
additional collateral or mortgage.
The Company and its subsidiaries pledged a portion of their assets as collateral primarily for bank loans as follows:
Millions of yen
March 31, 2020

March 31, 2019

Trade receivables and contract assets

9,958

6,057

Inventories

16,671

16,535340

681

Investments in securities and other financial assets
Land

-

177

Buildings and structures

1,111

1,327

Machinery and other property, plant and equipment

50,12543,738

Total

78,20568,515F-76

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

Reporting segment
IT

Name of subsidiary
Hitachi Information & Telecommunication

Business location

Ownership
percentage
of votingrights (%)

Yokohama, Kanagawa

100.0

Engineering, Ltd.
IT

Hitachi-Omron Terminal Solutions, Corp.

Shinagawa-ku, Tokyo

55.0

IT

Hitachi Solutions, Ltd.

Shinagawa-ku, Tokyo

100.0

IT

Hitachi Systems, Ltd.

Shinagawa-ku, Tokyo

100.0

IT

Hitachi Computer Products (America), Inc.

Oklahoma,

100.0

U.S.A.
IT

Hitachi Global Digital Holdings Corporation

California,

100.0

U.S.A.
IT

Hitachi Payment Services Private Limited

Chennai,
India

100.0

IT

Hitachi Vantara LLC

California,
U.S.A.

100.0

EnergyHitachi-GE Nuclear Energy, Ltd.

Hitachi, Ibaraki

80.0

EnergyHitachi Power Solutions Co., Ltd.

Hitachi, Ibaraki

100.0

EnergyHitachi Plant Construction, Ltd.

Toshima-ku, Tokyo

100.0

Industry

Hitachi Industrial Equipment Systems Co., Ltd.

Chiyoda-ku, Tokyo

100.0

Industry

Hitachi Industrial Products, Ltd.

Chiyoda-ku, Tokyo

100.0

Industry

Hitachi Industry & Control Solutions, Ltd.

Hitachi, Ibaraki

100.0

Industry

Hitachi Plant Services Co., Ltd.

Toshima-ku, Tokyo

100.0

Industry

JR Technology Group, LLC.

Michigan,
U.S.A

100.0

Industry

Sullair US Purchaser, Inc.

Indiana,
U.S.A.

100.0

Mobility

Hitachi Building Systems Co., Ltd.

Chiyoda-ku, Tokyo

100.0

Mobility

Hitachi Elevator (China) Co., Ltd.

Guangzhou,

70.0

China
Mobility

Hitachi Rail Ltd.

London,
U.K.

100.0

Smart Life

Hitachi Automotive Systems, Ltd.

Hitachinaka, Ibaraki

100.0

Smart Life

Hitachi Global Life Solutions, Inc.

Minato-ku, Tokyo

100.0

Smart Life

Hitachi Automotive Systems Americas, Inc.

Kentucky,

100.0

U.S.A.

F-77

Notes to Consolidated Financial Statements

Reporting segment

Name of subsidiaryBusiness location

Ownership
percentage
of votingrights (%)

Smart Life

Hitachi Consumer Products (Thailand), Ltd.

Prachinburi,

80.1

Hitachi High-Tech

Hitachi High-Tech Corporation

Minato-ku, Tokyo

51.8

Hitachi Construction
Machinery

Hitachi Construction Machinery Co., Ltd.

Taito-ku, Tokyo

51.5

Hitachi Metals

Hitachi Metals, Ltd.

Minato-ku, Tokyo

53.5

Hitachi Chemical

Hitachi Chemical Company, Ltd.

Chiyoda-ku, Tokyo

51.4

OthersHitachi-LG Data Storage, Inc.

Minato-ku, Tokyo

51.0

OthersHitachi Life, Ltd.

Hitachi, Ibaraki

100.0

OthersHitachi Urban Investment, Ltd.

Chiyoda-ku, Tokyo

100.0

OthersHitachi America, Ltd.

California,

100.0

Thailand

U.S.A.
OthersHitachi Asia Ltd.

Singapore

100.0

OthersHitachi (China), Ltd.

Beijing,
China

100.0

OthersHitachi Europe Ltd.

Maidenhead,
U.K.

100.0

OthersHitachi India Pvt. Ltd.

New Delhi,
India

100.0

-

Other 778 companies

F-78

-

-

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

March 31, 2020

Trade receivables and contract assets

March 31, 2019

104,011

119,236544

70,55874,578102,256

Other accounts payable [2]5,694

16,397

Lease obligations [3]34,827

19,177Long-term loans receivable [1]Trade payables

Millions of yen
With joint ventures

March 31, 2020

March 31, 2019

Trade receivables and contract assets

42,43588,294Long-term loans receivable [1]21,92030,696

Trade payables

10,757

10,771[1] Included in Investments in securities and other financial assets in the consolidated statement of financial position.
[2] Included in Other financial liabilities in the consolidated statement of financial position.
[3] Included in Current portion of long-term debt and Long-term debt in the consolidated statement of financial position.
Revenue and purchase transactions of the Company and its subsidiaries with associates and joint ventures are as follows:
Millions of yen
With associates

2020

2019

Revenues

452,098444,744

Purchases

308,101

357,317
Millions of yen

With joint ventures

2020

2019

Revenues

90,287

160,777

Purchases

20,25917,058(b) Compensation for Directors and Executive Officers of the Company
Millions of yen
2020

2019

Basic remuneration, year-end allowance andperformance-linked compensation
Medium and long-term incentive compensation(Stock options as stock-based compensation,
etc.)
Total

F-79

3,651

3,251

676

574

4,327

3,825

Notes to Consolidated Financial Statements(30) Commitments and Contingencies(a) Loan Commitments(i) Loan Commitments to Associates and Others
The Company provides loan commitments to associates and others. The outstanding balance of loan commitments as ofMarch 31, 2020 is as follows:
Millions of yen
March 31, 2020
Total commitments available

3,072

Less amount utilized

49

Balance available

3,022

Since some loan commitments require credit approval before execution, the amount of total commitments available may
not be necessarily utilized in full.
(ii) Commitments with Financial Institutions
The Company and certain subsidiaries have line of credit arrangements with banks in order to secure efficient financing forbusiness operations. The total unused line of credit as of March 31, 2020 amounted to 569,735 million yen, primarily
belonging to the Company. The Company has commitment line agreements with a number of banks and pays commitment
fees as consideration. These commitment agreements generally provide a one year term with renewal at the end of theterm. The unused line of credit under these arrangements as of March 31, 2020 amounted to 300,000 million yen. The
Company also maintains other commitment line agreements with several financial institutions, with terms of three years
ending in July 2022. The unused line of credit under these arrangements as of March 31, 2020 amounted to 200,000
million yen.
(b) Commitments for Acquisition of Assets
As of March 31, 2020, outstanding commitments made to purchase property, plant and equipment were 75,214 million yen.
(c) Guarantee Obligations
The Company and certain subsidiaries provide debt guarantees to their associates, joint ventures and third parties. As of
March 31, 2020, the balance of the guarantee obligations was 63,108 million yen. It consisted of guarantees to associates of
48,966 million yen, to joint ventures of 2,646 million yen and to third parties of 11,496 million yen.
(d) Litigation
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 yen in compensation for expenses allegedly incurred arising from concerns over partial
deficiencies of 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 toapproximately 51.0 billion yen 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 yen 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 yen by theconstruction 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 263 million euro (31,447 million yen) and interest allegedly incurred by
performance defects of a power plant. As of March 31, 2020, the amount of compensation claimed by the customer waschanged to 270 million euro (32,281 million yen). 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.

F-80

Notes to Consolidated Financial Statements
The Company and its subsidiaries execute a number of business reorganizations, including mergers, acquisitions anddivestitures. Contracts for these reorganizations include clauses for transaction price adjustments subsequent to thereorganizations. There is a possibility products or services provided by the Company and its subsidiaries contain defects. As
the result of price adjustments, or in compensation for defects in products or services etc. there is a possibility that theCompany pays for any amounts.
Depending upon the outcome of the above legal proceedings, there may be an adverse effect on the consolidated financial
position or results of operations. Currently, the Company is unable to estimate the adverse effect, if any, of many of theseproceedings. The actual amount of fines, surcharge payments or any other payments resulting from these legal proceedings
may be different from the accrued amounts.
In addition to the above, the Company and its subsidiaries are subject to legal proceedings and claims which have arisen in
the ordinary course of business and have not been finally adjudicated. These actions when ultimately concluded anddetermined will not, in the opinion of management, have a material adverse effect on the consolidated financial statements of
the Company and subsidiaries.
(31) Approval of Consolidated Financial Statements
The consolidated financial statements were approved on August 31, 2020 by Toshiaki Higashihara, President and CEO of theCompany.

F-81

Independent Auditor’s Report
To the Stockholders and Board of Directors ofHitachi, Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Hitachi, Ltd. and its subsidiaries (theGroup), which comprise the consolidated statement of financial position as of March 31, 2020, and theconsolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the year
then ended, and notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Group as of March 31, 2020, and its consolidated financial performance andits consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards(IFRSs).
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the ethicalrequirements that are relevant to our audit of the financial statements in Japan, and we have fulfilled our otherethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. These matters were addressed in the context of the audit of
the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do notprovide a separate opinion on these matters.
Accounting treatment of settlement regarding South African project
Description of Key Audit Matter
The Company reached a settlement agreement with Mitsubishi Heavy Industries, Ltd. (hereinafter referred to as“MHI”) on December 18, 2019, regarding the transfer price adjustment, etc. for the South African project, which
was in the process of arbitration. The Company recorded a loss in the amount of 375,967 million yen as a result of
the settlement (See Note (5) Business Acquisitions and Divestitures, (f) Settlement regarding the South African
project).
Under the settlement, the Company agreed to transfer all common shares of Mitsubishi Hitachi Power Systems,
Ltd. (hereinafter referred to as ‘MHPS’) held by the Company upon completion of certain required procedures, aswell as make a settlement payment and transfer related loans receivable to MHI. In determining the accounting
treatment of the settlement, additional considerations were given to the application and interpretation of relevant
accounting standards on the amounts of the shares of MHPS and related liabilities.
We determined that the accounting treatment of the settlement is a key audit matter because of the significance ofthe related loss on settlement and the additional considerations required in applying and interpreting the accounting
standards.

F-82

Auditor’s Response
We primarily performed the following procedures to address the matter:
・ We examined the settlement agreement between the Company and MHI.
・ We examined related minutes from the meeting of the board of directors in which the settlement was approved.
・ We made inquiries of management and obtained an understanding of the terms and conditions of the settlement
and the circumstances under which the Company and MHI reached to the settlement.
・ We obtained an understanding from management of the underlying economic rationality and the businessstrategy behind the settlement and assessed whether the accounting treatment was consistent with these facts.
・ We examined the Company’s position paper about the corresponding accounting treatment, inquired ofmanagement about their considerations, and evaluated their application and interpretation of the accounting
standards related to the amounts recognized for the shares of MHPS and related liabilities.
・ We performed independent assessments of the application and interpretation of the accounting standards
considering the possibility of alternative accounting treatments.
Estimation of total cost of long-term projects
Description of Key Audit Matter
The Group has long-term projects involving the manufacture and provision of goods in accordance with customer
specifications that are completed over specified periods of time to customers in a broad range of business areas
across the world.
The Group recognizes revenues from long-term projects by measuring the progress of the project mostly based on
the cost incurred relative to the estimated total cost to satisfy the performance obligations (See Note (20) Revenues,(b) Information about satisfaction of performance obligations). Furthermore, the Group recognizes provisions for
expected losses on construction contracts based on the estimated amount of losses associated with fulfilling the
project requirements (See Note (14) Provisions).
Estimations of total cost of long-term projects affect the corresponding amounts of revenues and provisions. Eachof the Group's long-term projects is distinct in terms of customer requirements, such as detailed specifications andscheduling, and therefore estimations of total cost depend on management judgements. Estimations of total cost are
particularly complex in relation to large-scale projects.
We determined that the estimation of total cost of long-term projects is a key audit matter because auditing
estimations of total costs of long-term projects requires consideration of various factors affecting such estimations
corresponding to each project as a result of the nature of the Group's long-term projects.
Auditor’s Response
We obtained an understanding of the project management systems utilized by the Group as well as its processes for
estimating total costs, and tested the relevant internal controls, including the approval of initial and revised
operating budgets that serve as the basis of estimating total cost.
We selected samples of long-term projects, such as those projects whose total contract value exceeded certain
materiality thresholds and projects involving qualitative risks, including delays in the progress of the project, and,on a quarterly basis, performed selected procedures from the following considering the status of each project:
・ We identified the significant factors influencing the estimates, including those related to customer specifications
on goods and the timing of delivery, by examining contracts and project management materials and making
inquiries of management, and evaluated management judgement on the effects of estimation uncertainty
inherent in those significant factors influencing the estimates. In addition, we compared specific line items in
the estimated total cost with corresponding quotations from suppliers.
・ We evaluated management judgement on whether to revise estimates of total cost considering the status of eachproject based on inquiries of management and by examining project management materials.
・ We assessed the accuracy of total cost estimates by comparing initial and previous period estimates with actual
total cost for completed projects and with the latest estimates for projects in progress.
・ We additionally made separate inquiries to project managers for projects that were considered particularly
significant to corroborate management explanations of their status.

F-83

Responsibilities of Management and Audit Committee for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with IFRSs, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability tocontinue as a going concern and disclosing, as required by IFRSs, matters related to going concern.
Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
・ In making those risk assessments, we consider internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, while the purpose of the audit of the consolidated financial
statements is not expressing an opinion on the effectiveness of the Group’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the Group to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation in accordance with IFRSs.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide the Audit Committee with a statement that we have complied with the ethical requirements
regarding independence that are relevant to our audit of the financial statements in Japan, and to communicate withthem all relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with the Audit Committee, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicatedin our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.

F-84

Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to bedisclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
August 31, 2020

Takashi Ouchida
Designated Engagement Partner
Certified Public Accountant

Takuya Tanaka
Designated Engagement Partner
Certified Public Accountant

Yoshitomo Matsuura
Designated Engagement Partner
Certified Public Accountant

F-85

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

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

Director, Kanto Local Finance Bureau[Filing Date]

August 31, 2020

[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Name and title of CFO]

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

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

1. Matters Related to Basic Framework of Internal Control over Financial Reporting
Mr. Toshiaki Higashihara, President & CEO, and Mr. Yoshihiko Kawamura, Senior Vice President andExecutive Officer, are responsible for establishing and maintaining internal control over financial reporting of
Hitachi, Ltd. (the “Company”) and have established and maintained internal control over financial reporting inaccordance with the basic framework for internal control set forth in the “On the Revision of the Standards andPractice Standards for Management Assessment and Audit concerning Internal Control Over Financial
Reporting (Council Opinions)” published by the Business Accounting Council.
The internal control over financial reporting is designed to achieve its objectives to the extent reasonablethrough the effective function and combination of its basic elements. Therefore, there is a possibility that internal
control over financial reporting may not completely prevent or detect misstatements.
2. Matters Related to Scope of Assessment, Record Date, and Assessment Procedure
We assessed the effectiveness of our internal control over financial reporting on the record date as of March
31, 2020. We made this assessment in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan.
In making this assessment, we evaluated internal control which may have a material effect on the entire
financial reporting on a consolidated basis (“company-level controls”) and based on the result of this assessment,
we appropriately selected business processes to be evaluated, analyzed these selected business processes,
identified key controls that may have a material impact on the reliability of our financial reporting, and assessed
the design and operation of these key controls. These procedures have allowed us to evaluate the effectiveness of
our internal controls.
We determined the required scope of assessment of internal control over financial reporting for theCompany, as well as its consolidated subsidiaries, equity-method associates and joint ventures, from theperspective of the materiality that may affect the reliability of our financial reporting. The materiality that may
affect the reliability of our financial reporting is determined taking into account the materiality of quantitativeand qualitative impacts. We confirmed that we had reasonably determined the scope of assessment of internal
controls over business processes in light of the results of assessment of company-level controls conducted for theCompany, its consolidated subsidiaries, equity-method associates and joint ventures. We did not include a partof consolidated subsidiaries, equity-method associates and joint ventures which do not have any quantitatively or
qualitatively material impact on the consolidated financial statements in the scope of assessment of companylevel controls.
Regarding the scope of assessment of internal control over business processes, we accumulated business
units in descending order of total revenues (after elimination of intercompany transactions) for the previous
fiscal year, and those business units whose combined amount of revenues reaches approximately 80% of total
revenues on a consolidated basis were selected as “significant business units.” In addition, some of our equitymethod associates and joint ventures which have a significant effect to our consolidated financial statements
were selected as “significant business units.” At the selected significant business units, we included, in the scopeof assessment, those business processes leading to revenues, accounts receivables and inventories and thosebusiness processes relating to greater likelihood of material misstatements and significant account involving
estimates or forecasts as significant accounts that may have a material impact on our business objectives.
Further, not only at selected significant business units, but also at other business units, we added to the scope ofassessment, as business processes having greater materiality considering their impact on the financial reporting,those business processes relating to businesses or operations dealing with high-risk transactions.
3. Matters Related to Results of Assessment
As a result of the assessment above, we concluded that our internal control over financial reporting was
effective as of March 31, 2020.
4. Supplementary Matters
None.
5. Special Notes
None.
A-2

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

Independent Auditors’ Report(filed under the Financial Instruments and Exchange Act of Japan)
August 31, 2020
Mr. Toshiaki Higashihara, President & CEO
Hitachi, Ltd.

Ernst & Young ShinNihon LLC
Tokyo Office, Japan
Designated Engagement Partner,
Certified Public Accountant:

Takashi Ouchida

Designated Engagement Partner,
Certified Public Accountant:

Takuya Tanaka

Designated Engagement Partner,
Certified Public Accountant:

Yoshitomo Matsuura[Audit of Financial Statements]
OpinionPursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements of Hitachi, Ltd. and its subsidiaries (the Group), which comprise the consolidated
statement of financial position as of March 31, 2020, and the consolidated statements of profit or loss,
comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Group as of March 31, 2020, and its consolidated financial performance andits consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards(IFRSs) prescribed in Article 93 of the Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the ethicalrequirements that are relevant to our audit of the financial statements in Japan, and we have fulfilled our otherethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
A-3

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. These matters were addressed in the context of the audit of
the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do notprovide a separate opinion on these matters.
Accounting treatment of settlement regarding South African project
Description of Key Audit Matter
The Company reached a settlement agreement with Mitsubishi Heavy Industries, Ltd. (hereinafter referred to as“MHI”) on December 18, 2019, regarding the transfer price adjustment, etc. for the South African project, which
was in the process of arbitration. The Company recorded a loss in the amount of 375,967 million yen as a result of
the settlement (See Note (5) Business Acquisitions and Divestitures, (f) Settlement regarding the South African
project).
Under the settlement, the Company agreed to transfer all common shares of Mitsubishi Hitachi Power Systems,
Ltd. (hereinafter referred to as ‘MHPS’) held by the Company upon completion of certain required procedures, aswell as make a settlement payment and transfer related loans receivable to MHI. In determining the accounting
treatment of the settlement, additional considerations were given to the application and interpretation of relevant
accounting standards on the amounts of the shares of MHPS and related liabilities.
We determined that the accounting treatment of the settlement is a key audit matter because of the significance ofthe related loss on settlement and the additional considerations required in applying and interpreting the accounting
standards.
Auditor’s Response
We primarily performed the following procedures to address the matter:
・ We examined the settlement agreement between the Company and MHI.
・ We examined related minutes from the meeting of the board of directors in which the settlement was approved.
・ We made inquiries of management and obtained an understanding of the terms and conditions of the settlement
and the circumstances under which the Company and MHI reached to the settlement.
・ We obtained an understanding from management of the underlying economic rationality and the businessstrategy behind the settlement and assessed whether the accounting treatment was consistent with these facts.
・ We examined the Company’s position paper about the corresponding accounting treatment, inquired ofmanagement about their considerations, and evaluated their application and interpretation of the accounting
standards related to the amounts recognized for the shares of MHPS and related liabilities.
・ We performed independent assessments of the application and interpretation of the accounting standards
considering the possibility of alternative accounting treatments.
Estimation of total cost of long-term projects
Description of Key Audit Matter
The Group has long-term projects involving the manufacture and provision of goods in accordance with customer
specifications that are completed over specified periods of time to customers in a broad range of business areas
across the world.
The Group recognizes revenues from long-term projects by measuring the progress of the project mostly based on
the cost incurred relative to the estimated total cost to satisfy the performance obligations (See Note (20) Revenues,(b) Information about satisfaction of performance obligations). Furthermore, the Group recognizes provisions for
expected losses on construction contracts based on the estimated amount of losses associated with fulfilling the
project requirements (See Note (14) Provisions).
Estimations of total cost of long-term projects affect the corresponding amounts of revenues and provisions. Eachof the Group's long-term projects is distinct in terms of customer requirements, such as detailed specifications andscheduling, and therefore estimations of total cost depend on management judgements. Estimations of total cost are
particularly complex in relation to large-scale projects.
We determined that the estimation of total cost of long-term projects is a key audit matter because auditing
estimations of total costs of long-term projects requires consideration of various factors affecting such estimations
corresponding to each project as a result of the nature of the Group's long-term projects.
A-4

Auditor’s Response
We obtained an understanding of the project management systems utilized by the Group as well as its processes for
estimating total costs, and tested the relevant internal controls, including the approval of initial and revised
operating budgets that serve as the basis of estimating total cost.
We selected samples of long-term projects, such as those projects whose total contract value exceeded certain
materiality thresholds and projects involving qualitative risks, including delays in the progress of the project, and,on a quarterly basis, performed selected procedures from the following considering the status of each project:
・ We identified the significant factors influencing the estimates, including those related to customer
specifications on goods and the timing of delivery, by examining contracts and project management materials
and making inquiries of management, and evaluated management judgement on the effects of estimation
uncertainty inherent in those significant factors influencing the estimates. In addition, we compared specificline items in the estimated total cost with corresponding quotations from suppliers.
・ We evaluated management judgement on whether to revise estimates of total cost considering the status of eachproject based on inquiries of management and by examining project management materials.
・ We assessed the accuracy of total cost estimates by comparing initial and previous period estimates with actual
total cost for completed projects and with the latest estimates for projects in progress.
・ We additionally made separate inquiries to project managers for projects that were considered particularly
significant to corroborate management explanations of their status.
Responsibilities of Management and Audit Committee for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with IFRSs, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability tocontinue as a going concern and disclosing, as required by IFRSs, matters related to going concern.
Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
・ In making those risk assessments, we consider internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, while the purpose of the audit of the consolidated
financial statements is not expressing an opinion on the effectiveness of the Group’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the Group to cease to continue as a going concern.
A-5

・

・

Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation in accordance with IFRSs.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide the Audit Committee with a statement that we have complied with the ethical requirements
regarding independence that are relevant to our audit of the financial statements in Japan, and to communicate withthem all relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with the Audit Committee, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicatedin our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
[Audit of Internal Control]
OpinionPursuant to Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited theinternal control report of Hitachi Ltd. and its subsidiaries (the Group) as of March 31, 2020.
In our opinion, the internal control report, which states that the internal control over financial reporting was
effective as of March 31, 2020, presents fairly, in all material respects, the results of the assessments of internal
control over financial reporting in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan.
Basis for Opinion
We conducted our audit of the internal control report in accordance with auditing standards for internal control
over financial reporting generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Internal Control Report section of our report. We
are independent of the Group in accordance with the ethical requirements that are relevant to our audit of theinternal control report in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Responsibilities of Management and Audit Committee for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the
preparation and fair presentation of the internal control report in accordance with assessment standards for internal
control over financial reporting generally accepted in Japan.
Audit Committee is responsible for overseeing and examining the design and operation of internal control overfinancial reporting.
Internal control over financial reporting may not completely prevent or detect financial statement misstatements.

A-6

Auditor’s Responsibilities for the Audit of the Internal Control Report
Our objectives are to obtain reasonable assurance about whether the internal control report is free from material
misstatement based on our audit of the internal control report and to issue an auditor’s report that includes ouropinion.
As part of our audit in accordance with auditing standards for internal control over financial reporting generally
accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit.
We also:・ Perform procedures to obtain audit evidence regarding the results of the assessments of internal control overfinancial reporting in the internal control report. The procedures for the audit of the internal control report are
selected and performed, depending on the auditor’s judgment, based on significance of effect on the reliabilityof financial reporting.
・ Evaluate the overall presentation of the internal control report, including the appropriateness of the scope,
procedures and results of the assessments that management presents.
・ Obtain sufficient appropriate audit evidence regarding the results of the assessments of internal control overfinancial reporting in the internal control report. We are responsible for the direction, supervision andperformance of the audit of the internal control report. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of ouraudit of the internal control report, the results thereof, material weaknesses in internal control identified during our
audit of internal control report, and those that were remediated.
We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence that are relevant to our audit of the internal control report in Japan, and to communicate
with them all relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to bedisclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
(The above represents a translation, for convenience only, of the original report issued in the Japanese language.)A-7

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

Confirmation Letter[Applicable Law]

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

Director, Kanto Local Finance Bureau[Filing Date]

August 31, 2020

[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Name and title of CFO]

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

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

1. Matters Related to Adequacy of Statements Contained in the Annual Securities Report
Mr. Toshiaki Higashihara, President & CEO, and Mr. Yoshihiko Kawamura, Senior Vice President andExecutive Officer, confirmed that statements contained in the Annual Securities Report for the 151st fiscal year
(from April 1, 2019 to March 31, 2020) were adequate under the Financial Instruments and Exchange Act.
2. Special Notes
None.

A-9