Annual Report 2015
Year ended March 31, 2015

SOCIAL INNOVATION
IT’S OUR FUTURE

Contents

1
		

SOCIAL INNOVATION –IT’S OUR FUTURE

2	Hitachi‘s History of Transformation(Fiscal 2005 – Fiscal 2014)4

To Our Shareholders

6

Outline of 2015 Mid-termManagement Plan

		

8
		

Progress of 2015 Mid-termManagement Plan

12	Interview with
the President & COO

16

Board of Directors

18

Executive Officers

19

Corporate Governance24

Message from Outside Directors

26

Risk Management

28

CSR Management

30

10-Year Financial Data

32
34

36

Financial Section
36		Operating and Financial Review
42		Consolidated Statements ofFinancial Position
		 44		Consolidated Statements ofProfit or Loss /Consolidated Statements ofComprehensive Income		 45		Consolidated Statements of
Changes in Equity
		 46		Consolidated Statements of				 Cash Flows		
48		Summarized Consolidated
Statements of Financial
Position by Manufacturing,Services & Others andFinancial Services
		
		

		

49		Consolidated Statements ofProfit or Loss by Manufacturing,Services & Others and Financial
Services / Consolidated
Statements of Cash Flows by
Manufacturing, Services &Others and Financial Services

Financial Highlights

50

Segment Information

		

Corporate Data /Stock Information

Cautionary Statement
Certain statements found in this document 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 with respect to certain future events andfinancial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,”“believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may
identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks anduncertainties 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 beaccurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from
historical trends include, but are not limited to:• economic conditions, including consumer spending and plant andequipment investment in Hitachi’s major markets, particularly
Japan, Asia, the United States and Europe, as well as levels of
demand in the major industrial sectors Hitachi serves, including,
without limitation, the information, electronics, automotive,
construction and financial sectors;• exchange rate fluctuations of the yen against other currencies inwhich Hitachi makes significant sales or in which Hitachi’s assets
and liabilities are denominated, particularly against the U.S. dollar
and the euro;• 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;• uncertainty as to Hitachi’s ability to continue to develop andmarket products that incorporate new technologies on a timely
and cost-effective basis and to achieve market acceptance forsuch products;• the possibility of cost fluctuations during the lifetime of, or
cancellation of, long-term contracts for which Hitachi uses thepercentage-of-completion method to recognize revenue from sales;• credit conditions of Hitachi’s customers and suppliers;• fluctuations in the price of raw materials including, without
limitation, petroleum and other materials, such as copper, steel,aluminum, synthetic resins, rare metals and rare-earth minerals,
or shortages of materials, parts and components;• fluctuations in product demand and industry capacity;• uncertainty as to Hitachi’s ability to implement measures toreduce the potential negative impact of fluctuations in productdemand, exchange rates and/or price of raw materials or
shortages of materials, parts and components;• increased commoditization of and intensifying price competition
for products;• uncertainty as to Hitachi’s ability to achieve the anticipatedbenefits of its strategy to strengthen its Social Innovation Business;• uncertainty as to the success of acquisitions of other companies,
joint ventures and strategic alliances and the possibility of
incurring related expenses;• uncertainty as to the success of restructuring efforts to improve
management efficiency by divesting or otherwise exiting
underperforming businesses and to strengthen competitiveness;• uncertainty as to the success of cost reduction measures;• general socioeconomic and political conditions and the regulatory
and trade environment of countries where Hitachi conducts
business, particularly Japan, Asia, the United States and Europe,
including, without limitation, direct or indirect restrictions byother nations on imports and differences in commercial andbusiness customs including, without limitation, contract terms
and conditions and labor relations;• uncertainty as to the success of alliances upon which Hitachi
depends, some of which Hitachi may not control, with othercorporations in the design and development of certain key products;• uncertainty as to Hitachi’s access to, or ability to protect, certain
intellectual property rights, particularly those related to electronics
and data processing technologies;• uncertainty as to the outcome of litigation, regulatory
investigations and other legal proceedings of which theCompany, its subsidiaries or its equity-method associates andjoint ventures have become or may become parties;• the possibility of incurring expenses resulting from any defects in
products or services of Hitachi;• the potential for significant losses on Hitachi’s investments inequity-method associates and joint ventures;• the possibility of disruption of Hitachi’s operations by natural
disasters such as earthquakes and tsunamis, the spread of
infectious diseases, and geopolitical and social instability such as
terrorism and conflict;• uncertainty as to Hitachi’s ability to maintain the integrity of its
information systems, as well as Hitachi’s ability to protect its
confidential information or that of its customers;• uncertainty as to the accuracy of key assumptions Hitachi uses toevaluate its significant employee benefit-related costs; and• uncertainty as to Hitachi’s ability to attract and retain
skilled personnel.
The factors listed above are not all-inclusive and are in addition toother factors contained in other materials published by Hitachi.

1Hitachi’s History of Transformation(Fiscal 2005 – Fiscal 2014)

In fiscal 2014, ended March 31, 2015, Hitachi achieved record-high operating income for the second consecutive year.
Targeting the achievement of the goals outlined in the 2015 Mid-term Management Plan as well as further growth in the years
ahead, Hitachi will work to accelerate its transformation into a company that is a leader in global markets, and will strive to increase
corporate value.
Transformation of Business Portfolio

Fiscal 2005 – Fiscal 2009
Strengthening Initiatives• Made Clarion a consolidated subsidiary• Established joint venture with GE
in nuclear power generation systems
business• Made Hitachi Kokusai Electric a

Fiscal 2010 – Fiscal 2012
Rebuilding Initiatives• Sold precision small motor business to
Nidec Corporation• Withdrew from consumer PC business• Transferred semiconductor manufacturing

Strengthening Initiatives• Established joint venture in the hydroelectric
power generation systems business with
Mitsubishi Electric Corporation and
Mitsubishi Heavy Industries, Ltd.

subsidiary in Singapore to a semicon-

consolidated subsidiary• Acquired BlueArc, a network storage

ductor foundry

solution business in the United States• Made Hitachi Koki a consolidated• Dissolved joint venture in the transmission

subsidiaryand distribution systems business• Made five listed companies* wholly• Acquired a nuclear energy company in theowned consolidated subsidiaries

United Kingdom* Hitachi Information Systems, Hitachi Software
Engineering, Hitachi Systems & Services, Hitachi
Plant Technologies, and Hitachi Maxell(Millions of yen)

600,000

25.0%
22.9%
20.6%

500,000

400,000

Stockholders’ equity ratio
Operating income (left scale)

11.2%

14.3%

EBIT (earnings before interest and taxes)* (left scale)
300,000

Fiscal 2008
• Financial crisis caused by Lehman Shock• One-off write-down of deferred tax assets

200,000

100,000

0–100,000

Net income (loss) attributable to Hitachi, Ltd.
stockholders per share(right scale)–200,000–300,0002005

Fiscal 2006
• Recorded additional costs due to turbine
damage at a nuclear power station in Japanand to thermal power plant construction
overseas• Falling sales prices for hard disk drives anddigital media
2006* EBIT is presented as income before income taxes less interest income plus interest charges.
Note: All figures are based on U.S. GAAP.

2

Fiscal 2007
• Implemented one-off
write-down of deferred tax
assets due to worsening of conditions in digital media field2007

Fiscal 2009
• Raised funds through theissuance of new shares• Introduced in-housecompany system

2008

2009

Hitachi, Ltd. | Annual Report 2015

Fiscal 2013 – Fiscal 2014
Rebuilding Initiatives• Transferred plasma display panel plant toSolar Frontier K.K.
• Integrated Renesas Technology, an equity
method company in the semiconductorbusiness, with NEC Electronics Corporation• Transferred business in large LCD panels forTVs to Panasonic Corporation• Casio Hitachi Mobile Communications,an equity method company in the mobile
phone business, integrated mobile phone
operations with NEC Corporation• Transferred hard disk drive businessto Western Digital Corporation• Integrated small and medium-sized LCD
business with Japan Display Inc.
• Stopped in-house production of flat-panel TVs

Strengthening Initiatives• Absorbed Hitachi Plant Technologies• Hitachi Metals and Hitachi Cable were merged• Established joint venture with Mitsubishi
Heavy Industries, Ltd. in thermal power
generation systems business• Made Hitachi Medical a wholly owned
subsidiary• Acquired Prizm Payment Services, a providerof payment services to financial institutionsin India• Signed a basic agreement to establish a
joint venture with Johnson Controls, Inc.
in the air-conditioning systems business• Built a strategic partnership with ABBin the high-voltage direct current powertransmission business in Japan• Hitachi Data Systems reached agreement
to acquire Pentaho Corporation,a big-data analytics software company
in the United States• Agreed to acquire the signalling and rollingstock operations of Finmeccanica S.p.A.

Rebuilding Initiatives• Transferred printed circuit board production
equipment business to an investment fund
• Relisted Hitachi Maxell shares• Discontinued production of semiconductors
for information & telecommunications
equipment

(Yen)

120

24.1%
23.6%
21.2%

15.7%

100

18.8%
80

60

40

20

0

Fiscal 2010
• Celebrated 100th
anniversary of founding

2010

Fiscal 2011
• Achieved new record high in net income• Transferred hard disk drive business• Started cost structure reform project

2011

Fiscal 2012
• Introduced Group system• Increased number of non-Japanese
directors, outside directors
became majority

2012

Fiscal 2013
• Achieved new record
high in EBIT

Fiscal 2014
• Achieved newrecord high inoperating income

〜
〜
–200

–220

2013

2014
(FY)

–240

3

To Our Shareholders

Hiroaki Nakanishi
Chairman & CEO

Toshiaki Higashihara
President & COO

4

Hitachi, Ltd. | Annual Report 2015

Overall, we are pleased to report that our growth strategies continue to bear fruit and that fiscal 2015 is shaping up
to be a good year in terms of performance and growth.
Under the 2015 Mid-term Management Plan, which was launched in May 2013, we continue to work closely withour customers, identifying their challenges and providing innovative solutions through our Social Innovation Business.
Performance figures point to a steady rise in earning power for the entire Hitachi Group. In fiscal 2014, Hitachi
recorded revenues of ¥9,761.9 billion, operating income of ¥600.4 billion, and EBIT (earnings before interest andtaxes) of ¥551.0 billion (U.S. GAAP). This marked the second year in a row that the Company achieved a record highoperating income.
Fiscal 2015, the final year of the 2015 Mid-term Management Plan, is an important year in our ongoing efforts topromote further growth. Accordingly, we are responding swiftly to emerging challenges and continue to implement
specific growth strategies.
In fiscal 2014, we implemented a number of measures to achieve the targets of the 2015 Mid-term Management
Plan and to accelerate further growth in the years ahead. Front-line functions, which include sales, engineering, SI,
and consulting, play an indispensable role in our efforts to create social innovation solutions specifically tailored tomeet the increasingly diverse issues faced by our customers and societies. Accordingly, we have strengthened thesefunctions, establishing the Energy Solutions Company, which caters to the growing demand for electric power,
while reducing its environmental impact. We have also integrated the resources of our Systems Solutions divisions
so that they may better cater to the ever increasing demand for large-scale solutions in finance, public & governmentand social infrastructure. Furthermore, we have strengthened our platform functions and product functions, which
support the front line. Toward that end, we acquired a U.S. data analytics company and have integrated Hitachi’s
industrial products operations.
To implement these initiatives on a global scale, we appointed Chief Executives in four key regions outside Japan—
the Americas, China, Asia-Pacific, and EMEA-CIS (Europe, the Middle East and Africa, and the Commonwealth of
Independent States). In each of these regions, we are promoting reforms to establish Autonomous Decentralized
Global Management, a structure in which each regional Chief Executive devises and implements his own independent
business initiatives. We also reorganized our R&D operations to create a structure that allows customers to share
their needs directly with our front-line.
Furthermore, under the Hitachi Smart Transformation Project, our ongoing cost structure reform initiative, we are
optimizing the efficiency of our end-to-end business processes, thereby enhancing our ability to generate cash for
future growth.
As a current group-wide effort, we and our Hitachi Members are each striving to achieve the targets of the 2015
Mid-term Management Plan while further enhancing Hitachi’s corporate value.
Last but not least, we would like to thank you, our shareholders, for all your understanding and encouragement,
and we look forward to your ongoing support in the years to come.
July 2015

Hiroaki Nakanishi

Toshiaki Higashihara

Chairman & CEO

President & COO

5

Outline of 2015 Mid-term Management Plan (Fiscal 2013 – Fiscal 2015)
Management Focus

Achieving Growth and Hitachi’s Transformation
Deliver innovation to customers and society globally• Enhance engineering teams to strengthen

EMEA
CIS

solutions-provision structure and accelerate

Chinaglobal business initiatives• Sales growth in North America and China

GLOBAL

Americasin addition to Asia
• Globalization of management and use

Japanof global resources in R&D
Asia
Pacific

Promote Social Innovation
Business Globally

Strengthen service businesses
that maximize the utilization of
IT and bring about innovation• Grow the Social Innovation Business by working
with customers to identify their challenges and by

INNOVATION

providing innovative solutions• Strengthen and expand service businesses by
providing solutions for customers’ issues andproduct services

Transform to deliver innovation
by standardized and speedy
operation• Advancing the Hitachi Smart Transformation

TRANSFORMATION

Drive business growth by strengthening
the Social Innovation Business

Innovation
GlobalProject, a cost structure reform project (reevaluating

STP*1

operations to strengthen competitiveness andgenerate cash)• Leverage global talent to lead businesses

Investment• Cost structure reform• CCC*2 reforms• Establish
a business baseEarnings and cash
generation*1 STP: Hitachi Smart Transformation Project*2 CCC : Cash Conversion Cycle

6

Hitachi, Ltd. | Annual Report 2015

Fiscal 2015 Forecast
Revenues / Net income attributable
to Hitachi, Ltd. stockholders
Revenues

EBIT margin / Operating income margin

Net income attributable to Hitachi, Ltd. stockholders

EBIT margin

Operating income margin

Fiscal 2015

Fiscal 2015

Revenues(Revenues (IFRS))

Forecast

Initial target¥9.9 trillion(¥9.95 trillion)¥10 trillion

Net income attributable toOver ¥350.0¥330.0 billion
Hitachi, Ltd. stockholders
billion(Net income attributable to(¥310.0 billion)
Hitachi, Ltd. stockholders (IFRS))¥9,041.0
billion¥9,563.7
billion¥9,761.9
billion¥9,900.0
billion

EBIT margin(EBIT margin (IFRS))
Operating income margin(Adjusted operating income
margin (IFRS))Over 7%

6.7%Over 7%(6.8%)

6.7%¥264.9billion¥241.3billionOver¥350.0billion¥330.0billion
0.3

FY2012
ResultInitial target

6.6%(6.2%)¥10 trillion
6.1%¥175.3billion

Forecast

FY2013Result

FY2014
Result

FY2015
Forecast

6.6%
4.7%

Over 7%

6.2%

5.6%

5.6%

FY2013Result

FY2014
ResultOver 7%4.0%
FY2015Initial Target

FY2012
Result

FY2015
Forecast

FY2015Initial Target(U.S. GAAP)(U.S. GAAP)Net income attributable to Hitachi, Ltd.
stockholders per share

Stockholders’ equity ratio(Manufacturing, Services and Others)

Fiscal 2015

Net income attributable to Hitachi,Ltd. stockholders per share(Earnings per share attributable
to Hitachi, Ltd. stockholders,
basic (IFRS))

Forecast

Initial target¥68.3

Over ¥70(¥64.2)

¥68.3
¥54.9

Fiscal 2015
Forecast

Initial target

Stockholders’ equity ratio(Manufacturing, Services and Others)

29.0%Over 30%(Total Hitachi, Ltd. stockholders’equity ratio (Manufacturing,
Sergvices and Others) (IFRS))(29.0%)

Over ¥70

¥50.0

¥37.3

27.4%

27.3%

FY2013Result

FY2014
Result29.0%Over 30%

23.2%

FY2012
Result

FY2013Result

FY2014
Result(U.S. GAAP)FY2015
Forecast

FY2015Initial Target

FY2012
Result

FY2015
Forecast

FY2015Initial Target(U.S. GAAP)
7

Progress of 2015 Mid-term Management Plan

Progress until end of Fiscal 2014

Measures for Fiscal 2015

GLOBAL
Global business expanded steadily,
especially in the North American market

Acceleration of global business development
initiatives through the use of IT• Expanded financial solution services- Payment services, ATM (India, China)•	Gained first contract to provide “AT-200”commuter train (Europe)•	Launched demonstration of “CrystEna“ energy storage system(North America)•	Expanded business in growing North American auto market- Expanded customer base for automotive cast products byacquiring Waupaca Foundry, Inc. (Hitachi Metals)• Business rollout in IoT market-A cquire Pentaho Corporation, which has advanced data analytics
software technologies and an extensive customer base (North America)• Expand solutions using IT (analytics)
Overseas revenue ratio (U.S. GAAP)FY2013 Result

FY2014 Result

FY201545%

47%

Forecast
50%

Initial target
Over 50%INNOVATION
O&M services revenue expanded

Strengthen profitable service businesses•	Strengthened maintenance service by cloud remote monitoring
system•	Expanded operation services of information business including BPO•	Expand long-term fee service business (Train and Energy)•	Utilize telecommunication technology in social infrastructure field➞ Expand IoT service business• Create new service business utilizing IT (analytics)
Provide comprehensive services to customers combining
the Hitachi Group’s assets and capabilities through IT
China Smart
Logistics

Procurement Service: VMI Operation / Factoring
Procurement EDI Service: e-commerce for
procurement business
Logistics Service: 3PL, JIT delivery

TRANSFORMATION
Achieved cost reductions exceeding targets in
Fiscal 2014

Strengthen measures aimed at increasing cash•	Achieved cost reduction of 320 billion yen as a cumulative total

Reduction of Cost of Sales
Further cost reduction throughout the entire value chain / Improve
operational efficiency; e.g., design and manufacturing operations

for FY2014•	CCC (Manufacturing, Services and Others) is on par with theprevious year, due to increased inventory resulting from changes in
the market environment and concentration of sales at the end of
the fiscal year
(81.3 days in FY2013 ➞ 81.5 days in FY2014)

Reduction of cost of sales and SG&A* (+100 billion yen)

Reduction of SG&A
Review all aspects of fixed costs in Japan / Reduce indirect materials
Improvement of CCC (Manufacturing, Services and Others)(5-day reduction, +130 billion yen)
Review inventory assets / Improve cash flow / Improve cash management /Business process reforms* SG&A: Selling, General & Administrative expenses

8

Hitachi, Ltd. | Annual Report 2015

Overseas revenue (Billion yen)

* CAGR: Compound Annual Growth Rate

Europe

China

Asia

North America

CAGR*: 6.4%

CAGR: 7.5%

CAGR: 5.4%

CAGR: 16.2%

1,073.6759.7

FY2013Result

844.7

860.0

FY2014
Result

FY2015
Forecast

1,157.2

FY2013Result1,240.0
989.9

FY2014
Result

FY2015
Forecast

FY2013ResultService revenues / Service revenues ratio(U.S. GAAP)¥3,100 billion
32%¥3,400 billion
35%¥3,800 billion
38%

1,230.0

1,059.4 1,100.0

1,060.4
910.2

FY2014
Result

FY2015
Forecast

FY2013ResultCost reduction effects(U.S. GAAP)FY2014
Result

FY2015
Forecast

Single-year benefit (billion yen)
Cumulative benefit (billion yen)Over
¥4,000 billion
Over 40%

420.0

400.0

320.0
100.0
220.0
110.0
110.0
75.0
35.0

FY2013Result

FY2014
Result

FY2015
Forecast

FY2015InitialTarget

FY2011Result

FY2012
Result

FY2013Result

FY2014
Result

FY2015
Forecast

FY2015InitialTargetFuture plans of cost structure reform
Reap benefits to achieve the targets of the 2015 Mid-term Management Plan and commence initiatives in anticipation of
the next mid-term plan
FY2014FY2015FY2016

Cost structure reform
CCC reforms
Establish business base
Cost structure reform

Production
costs
DirectMaterials costs

Global SCM reforms
Modular design and globally decentralized design
Accelerate centralized purchasing
Strengthen engineered sourcing
Global logistics reforms

Indirectcosts

Centralize common operating expenses
Expand introduction of shared services in Japan and overseas

Process-focused reforms

Headquarters reforms / Group structure reforms
Reforms focused on cost areas and functions
CCC reforms

Strengthen pipeline and phase gate management processes
Improve payment conditions
Strengthen coordination between divisions, increase operational efficiency and improve accuracy
Build a management visualization platform

Establish business base

Establish a business base to support the Social Innovation Business9

Progress of 2015 Mid-term Management Plan

Hitachi toward Social Innovation Business
Hitachi is accelerating global business development initiatives in the Social Innovation Business, which
identifies and resolves the problems faced by society and customers. These problems are growing moreadvanced and complex, and to address them Hitachi places high priority on front-line capabilities, whichenable us to work side-by-side with customers in each industry and region to create solutions. Moreover,
we believe that the realization of our future vision will require the establishment and reinforcement of
three levels of capabilities. In addition to front-line function, these include analytics / control function(common platforms), which enables the realization of higher-value-added solutions through the use of big
data and other initiatives, and product function, which supports solutions.

Basic Approaches

Customer• Create innovation with customer-oriented
approach“Front-line” Function•	Concentrate and strengthen front-line
resources, including sales, consulting, andengineering•	Deliver solutions under regional autonomous management(Sales, Engineering, SI, Consulting)

Healthcare

EnergyFinance

Region(North America,
China, etc.)• Unified development of IT / OT platforms
to deliver Innovation as a Service“Platform” Function(Analytics, OT*)

• Acquire technology base for innovation(Acquisition of Pentaho, etc.)(Common Platform)
IT Platform Business
OT Platform Business* Operation Technology• Provide cutting-edge products, softwareand service that bring about innovation“Product / Software /Service” Function• Provide globally-competitive products(Globally-Competitive Business)
Industrial Products Business
IT Products / Software Business
O&M Service Business

10

Hitachi, Ltd. | Annual Report 2015

Front-line capabilities by industry•	Establishing business entities for the provision of solutions — established healthcare and energy solutions companies and consolidated front-line capabilities•	Consolidating systems integration capabilities in the financial, public sector, and social fields — strengthened systems integration capabilities, such as byabsorbing businesses in the financial, public sector, and social fields into Hitachi Solutions

Global Management•	Appointment of Chief Executives in four regions: the Americas, China, Asia-Pacific, and EMEA-CIS (Europe, Russia, Middle East, and others)•	Transition to system of “autonomous distributed global management” under which each region autonomously takes the lead in the Social Innovation
Business and works to create value
Global Region

Countries / Regions covered

Chief Executive

Business areas

The Americas

North, Central, and South America

John Domme

Energy, Communications, Healthcare, Connected cars, Security

Europe / Russia / Middle Eastand other areas (“EMEA･CIS”)

Europe, Russia･CIS,
Middle East, Turkey, Africa

Klaus Dieter Rennert

Production / SCM, Energy, Healthcare

China

China

Kenichi Kokubo

Urban planning / development and building facility management,
Finance, Healthcare, Smart logistics

Asia / Pacific

ASEAN, India, Oceania, Korea

Ichiro Iino

Healthcare, Finance, Developers and conglomerates

Global R&D•	Reorganized R&D structure in April 2015 to promote R&D from the customer’s perspective•	Established Global Center for Social Innovation to lead from the front with new solutions, working together with customers to visualize issues

Hitachi’s New R&D Structure
R&D GroupTechnology Strategy OfficeCentral Research Laboratory

R&D GroupTechnology Strategy Office
Global Center for Social Innovation
Global Center for Social Innovation(Tokyo, North America, China, Europe) (Approx. 500 people)

Hitachi Research Laboratory
Yokohama Research Laboratory

Center for Technology Innovation
Center for Technology Innovation (Information & Telecommunications,

Design Division
Overseas research centers

Mechanical engineering, Energy, etc.) (Approx. 2,000 people)

Center for Exploratory Research (Approx. 100 people)

Supply core products that support the Social Innovation Business

Consolidate our industrial
products business

Strengthen and Optimization• Strengthen product competitiveness• Optimize sales, service, and production
structures• Invest in priority areas, etc.

Industrial
Products
Company

Infrastructure
Systems
Company• Compressors (large)• Pumps (large-medium)• Inverters (high and medium voltage)• Power electronics products (UPSs, etc.)

Power Systems • Motor (high-medium voltage)
Company• Substation control devices

Hitachi Industrial
Equipment Systems• Compressors (medium-small)• Motors and inverters (low voltage)• Transformers (low voltage), etc.

11Interview with the President & COO

We take on
the challenge of creating
future innovation.
Toshiaki Higashihara
President & COO

What is your opinion about the progress of the 2015 Mid-term Management Plan?
The Hitachi Group is recording steady gains in earning power, andAnother urgent issue is the bolstering of our ability to generate

we have achieved record-high operating income for two consecutive

cash. Since October 2014, we have been working to further deepen

years. We are currently targeting an overseas revenue ratio of moreand enhance the Hitachi Smart Transformation Project and implement

than 50%, and this is within our reach. Also, regarding the Hitachi

initiatives focused on cash generation. Accordingly, we are reevaluat-

Smart Transformation Project, a cost structure reform project, theing business processes from demand forecasting to service provision

cumulative cost reduction benefits from this project for five years arefrom an end-to-end perspective. We are also promoting reforms in

expected to exceed our target of ¥400.0 billion.

supply chain management to increase overall operational efficiency.

As a result, I have had a profound sense that the Hitachi Group has

flow and to optimize collection and payment periods for accounts

the issues we face in recording additional growth have also become

receivable and accounts payable as well as inventory levels. In theseclear. First, we must achieve further improvement in our earningways, we will improve the cash conversion cycle. By further raising ourpower. Single-digit profit margins will not be sufficient for the Hitachi

earning power and strengthening our ability to generate cash that is

Group to succeed in competition, record growth, and thereby increase

the source of growth, we will accelerate Hitachi’s growth trajectory.

its corporate value. The 2015 Mid-term Management Plan is amilestone on the path to future growth. We will enhance the earning
power of the Hitachi Group by implementing aggressive initiatives on
a global basis and by steadily advancing reforms during ordinary
times, such as rigorous structural reforms for certain businesses forwhich growth is not expected.

12

At the same time, we are taking steps to visualize our overall cash

started to see results from its reform initiatives. On the other hand,Hitachi, Ltd. | Annual Report 2015

Hitachi is focusing on the Social Innovation Business. Specifically, could you describe what typesof businesses are involved in this field?
Even on a worldwide basis, Hitachi is a unique company because we

reductions in operating costs are realized. In 2009, we supplied thehave both IT and social infrastructure businesses. The Social Innovation

U.K. with Class 395 high-speed trains, which have sustained stable

Business resolves issues faced by society and customers throughoperations since that time. This rolling stock significantly reduces theinnovation that combines both IT and social infrastructure, thereby

amount of time passengers spend on trains. As a result, we havecontributing to improvements in people’s quality of life.

received favorable feedback from many customers. One gratefulFor example, we are providing packages that combine rolling stock

commuter said, “I am now able to spend more time enjoying breakfast

and maintenance services for a railway project in the U.K., which is awith my family thanks to substantial reduction in commuting time.”good example of the integration of the IT and social infrastructure

In these ways, the Social Innovation Business simultaneously

businesses. Through the collection and analysis of big data from therealizes both economic value and social value by resolving problems

hundreds of sensors that are installed on each train set, we can offer

faced by society and customers. In addition, it is a business that canadvanced maintenance services, such as predictive diagnostics that

ultimately contribute to improving the quality of life for individuals

can help prevent breakdowns. In this way, stable operations andwho are the customers of our customers.

To enhance and expand the Social Innovation Business, the Company will strengthen three functional
layers: front-line function; analytics and control function, which form a common platform; and product,
software, and service function (hereafter, product function). Would you describe the background to thisapproach and the specific initiatives that will be implemented in the future?
Strengthening front-line capabilities

business activities. The Chief Executives are implementing projects

Previously, Hitachi was a “product-out” type of company that madewith the authority to make investments and the responsibility forhigh-quality products and then, subsequently, sold them to customers.

profit and loss. In regard to R&D, project finance, procurement, andHowever, to resolve the issues faced by customers and society, it isother areas, we will maximize utilization of the Hitachi Group’s sharedessential that we take a “market-in” approach, where we first identify

resources on a global basis.

what customers need and which direction we should take, and thenWe have also reorganized the R&D structure to reflect a “market-in”

create solutions through a process of collaborative creation. Front-line

approach. The Global Center for Social Innovation, which has beenfunctions play the lead role in these initiatives and, accordingly, we areestablished in Tokyo, North America, China, and Europe, is not a placestrengthening these functions in each industry and region.

for technical development but rather a place to work together with

Applying this approach to business sectors, we have integrated ourcustomers on the front-line in order to identify issues and find solutions.

various front-line functions and established new in-house companies

We will promote collaborative creation with customers by utilizing a

in the fields of healthcare and energy. Also, for IT services in fields suchvariety of means and tools. These include “Kizashi,” by which we canas finance, public & government and social infrastructure, we haveforecast future social trends and search for new business areas, based

consolidated the front-line functions including sales, engineering, andon political, economic, social, and technological factors in a region,

consulting units, which had previously been distributed throughoutand “Cyber PoC*,” a simulation tool for verifying total return on

the Hitachi Group. Through these initiatives, we have reinforced ourinvestment, such as the capital expenditures and operating costs

ability to address challenges.

necessary for solutions.

We are also using this approach with regard to global management.

* POC: Proof of Concept

On April 1, 2015, I appointed Chief Executives to serve as representatives of the Hitachi Group in four regions: the Americas, China,

Strengthening analytics and control capabilities

Asia-Pacific, and EMEA-CIS. We are accelerating the establishment of

We are moving ahead with establishing and strengthening common

a system for Autonomous Decentralized Global Management, under

platforms, such as those for big data analytics and control, which arewhich each regional Chief Executive autonomously takes the lead in

the source of competitiveness for the solutions we provide on thefront-line.

13

Regarding the analytics function, in May 2015, we acquired

Strengthening product capabilities

Pentaho Corporation, a big data analytics software company in the

If a business has products that can succeed on a global basis, then the

U.S. Moving forward, we will increase the value of our solutions bycompetitiveness of solutions that utilize those strong products will all

applying Pentaho’s common platform for big data utilization to

be enhanced.

a variety of industries, such as healthcare and energy.
In the control function, Hitachi has the technologies and know-how

With this in mind, in May 2015, we established the Industrial
Products Company, which incorporates the medium-scale and large-

to create autonomous decentralized systems. These systems canscale industrial equipment businesses that had previously been spread

continue to operate even if a portion of a system breaks down, andthroughout the Hitachi Group. Products include motors, inverters,

they can also be expanded in a phased manner. Hitachi has alreadysubstation control devices, compressors, and pumps, which are theachieved strong results with these systems in a variety of fields. These

core components of infrastructure systems.

include East Japan Railway Company’s Autonomous Decentralized

In addition to promoting product businesses that have a compara-

Transport Operation Control System (ATOS), in which I was previously

tively short cash conversion cycle, we will create optimal combinations

involved, as well as systems for the steel industry. In the future, weof these businesses and social infrastructure businesses, which have awill work to generate more sustained, efficient solutions throughlong cash conversion cycle. This approach will contribute to the stable“symbiotic autonomous decentralized” systems, where systems ingeneration of cash over the medium-to-long term.

different fields, such as railways, energy, and water, are connectedin stages and work together on an overall basis.

What is the Hitachi Group’s approach to the optimal business portfolio?
Business portfolio reevaluation is a never-ending process. Can wetake steps to increase the competitiveness of our product businesses

increase value through combinations with IT? And by doing so, canwhile working aggressively to incorporate external resources, such thewe resolve the issues faced by society and customers and contributeacquisition of Italian companies that manufacture rolling stock andto improvements in people’s quality of life? We are continually

signaling systems.

reevaluating our business portfolio to further strengthen our front-line

On the other hand, in regard to businesses where a certain scale isfunction, analytics and control function, and product function, allneeded on a global basis, we will aggressively advance partnerships with

with these questions in mind.

companies that are global leaders. For example, we have established a

In product businesses, in addition to taking steps to enhance our

joint venture with Mitsubishi Heavy Industries, Ltd., in the thermal

own competitiveness, we have the option of collaborating withpower generation systems business and will establish another joint

partners or utilizing joint ventures. For example, in the railway business,

venture with Johnson Controls, Inc. of the U.S. in the air-conditioning

the Hitachi Group provides a comprehensive range of services, including

systems business. In addition to raising the competitiveness of therolling stock, signals, operational management, maintenance, IC tickets,

products themselves, we will increase the value of the total solutions

and seat reservation systems. In these types of businesses, we willthat utilize those products.
In this way, with an ongoing focus on businesses that we need tostrengthen on our own and businesses for which we will increase
competitiveness through partnerships, we will move forward withbusiness portfolio reforms that are more transparent to external
stakeholders.

14Hitachi, Ltd. | Annual Report 2015

Acquire necessary resources (customer base, sales channel, technologies) for growth,
optimize business portfolios and increase revenue

Strengthen Front-line Function• Prizm Payment Services:
Finance (India)• Stone Apple Solutions:
Finance / Industry customer (Asia)

Strengthen Analytics Function• Pentaho: Data analytics

Strengthen Product Function• AnsaldoBreda / Ansaldo STS:
Railway business (Europe, Australia, etc.)• Waupaca Foundry:
Casting (Automotive, etc.)

Strengthen Product Function(JV, Alliance)• ABB (JV):
High-voltage DC powertransmission, etc.
• Mitsubishi Heavy Industries (JV):
Thermal power generation
systems business• Johnson Controls (JV):
Air-conditioning systems business

Finally, what is Hitachi’s approach to strengthening corporate governance, andwhat is its shareholder return policy?
Hitachi adopted a committee system in 2003 and, since that time,

open manner, and the opinions of the outside directors are actively

we have worked continuously to strengthen corporate governance.

reflected in management, without being restricted to the status quo.

Outside directors have been a majority of the Board of Directors since

In regard to shareholder return, in fiscal 2014, against a backdrop

June 2012 and, currently, 8 of the 12 directors are outside directors.

of steady gains in earning power, we raised the annual dividend ¥1.5

Moreover, four of the outside directors are non-Japanese. The outside

per share, to ¥12.0. Moving forward, we will strive to improve ourdirectors have extensive knowledge, including management experience

profitability and strengthen our financial position. Our policy will be toat global companies. They offer frank opinions, ranging from corporate

target sustained growth through continued investment and to provide

strategy to issues of each business and product such as growthstable returns to shareholders. We will respond appropriately to thescenarios for the Hitachi Group, cash flow, and market positioning.

Corporate Governance Code that was applied in Japan in June 2015,

As a result, other Company executives and I have become aware of

and we will implement management with a greater awareness of ROE

a wide range of issues, and we have been able to utilize these find-and other indicators of capital efficiency. In these ways, we will strive

ings in management initiatives. The executive officers, who fulfill theto strengthen corporate governance in an ongoing manner and tobusiness execution function, and the outside directors, who fulfill theincrease shareholder value.

management oversight function, conduct deliberations together in an

15

Board of Directors
As of June 30, 2015

Outside Directors

Nobuo Katsumata

Cynthia Carroll

Sadayuki Sakakibara

George Buckley

2003	Representative Director, President andCEO, Member of the Board, Marubeni
Corporation
2008	Chairman, Member of the Board,
Marubeni Corporation2011 Director, Hitachi, Ltd.
2013	Senior Corporate Advisor, Member ofthe Board, Marubeni Corporation
	Senior Corporate Advisor, Marubeni
Corporation (Currently in office)1991	General Manager, Foil Products, Alcan Inc.
1996	Managing Director, Aughinish Alumina
Ltd., Alcan Inc.
1998	President, Bauxite, Alumina andSpeciality Chemicals, Alcan Inc.
2002	President & CEO, Primary Metal Group,
Alcan Inc.
2007	CEO, Anglo American plc.
(Retired in April 2013)2013 Director, Hitachi, Ltd.

2002	President and Representative Member ofthe Board, Toray Industries, Inc.
2010	Chairman of the Board and Representative Member of the Board, Toray
Industries, Inc.
2013 Director, Hitachi, Ltd.
2014	Chairman of the Board and Member ofthe Board, Toray Industries, Inc.
2015	Chief Senior Advisor and Chief SeniorCounselor, Toray Industries, Inc.
(Currently in office)1993	Chief Technology Officer, Motors,
Drives and Appliances, Emerson ElectricCompany
1994	President, US Electrical Motors, Emerson
Electric Company
1997	President, Mercury Marine Division andCorporate Vice President, Brunswick
Corporation
2000	President and Chief Operating Officer,
Brunswick Corporation
	Chairman and Chief Executive Officer,
Brunswick Corporation2005	Chairman of the Board, President andChief Executive Officer, 3M Company
2012	Executive Chairman of the Board, 3M
Company (Retired in May 2012)
Chairman, Arle Capital Partners Limited(Currently in office)Director, Hitachi, Ltd.

Hiroaki Nakanishi*

Toshiaki Higashihara*

Takashi Miyoshi

Nobuo Mochida

Chairman & CEO

President & COO

1970 Joined Hitachi, Ltd.
2003 General Manager, Global Business
Vice President and Executive Officer
2004	Senior Vice President and Executive Officer
2005	Senior Vice President and Executive
Officer, Hitachi, Ltd.
Chairman and Chief Executive Officer,
Hitachi Global Storage Technologies, Inc.
2006	Executive Vice President and Executive
Officer, Hitachi, Ltd. (Retired in
December 2006)
2009	Executive Vice President and Executive
Officer, Hitachi, Ltd.
2010 President, Hitachi, Ltd.
President and Director, Hitachi, Ltd.
2014	Chairman & CEO and Director, Hitachi, Ltd.

1977 Joined Hitachi, Ltd.
2006	Chief Operating Officer, Information &Telecommunication Systems
2007	Vice President and Executive Officer(Retired in March 2008)
2008	President, Hitachi Power Europe GmbH2010	President and Chief Executive Officer,
Hitachi Plant Technologies, Ltd.
President and Representative Director,
Hitachi Plant Technologies, Ltd.
2011	Vice President and Executive Officer,
Hitachi, Ltd.
2013	Senior Vice President and Executive
Officer, Hitachi, Ltd.
2014	President & COO, Hitachi, Ltd.
President & COO and Director,
Hitachi, Ltd.

1970 Joined Hitachi, Ltd.
2003	General Manager, Finance
Executive Officer
2004	Senior Vice President and Executive
Officer
Senior Vice President, Executive Officer
and Director
2006	Executive Vice President, Executive
Officer and Director
2007	Director (Retired in June 2007)
Chairman of the Board, Hitachi Global
Storage Technologies, Inc.
2008	Executive Vice President and Executive
Officer, Hitachi Systems & Services, Ltd.
(Currently Hitachi Solutions, Ltd.)
President, Chief Executive Officer andDirector, Hitachi Systems & Services, Ltd.
2009	Executive Vice President and Executive
Officer, Hitachi, Ltd.
Executive Vice President, Executive
Officer and Director, Hitachi, Ltd.
2012 Director, Hitachi, Ltd.

1970 Joined Hitachi Metals, Ltd.
2006	President and Chief Executive Officer
and Director, Hitachi Metals, Ltd.
2010	Executive Vice President and Executive
Officer, Hitachi, Ltd. (Retired in March
2014)
Chairman of the Board, Hitachi Metals, Ltd.
2013	Director, Hitachi Metals, Ltd.
(Retired in June 2014)2014 Director, Hitachi, Ltd.

Directors

16

Hitachi, Ltd. | Annual Report 2015

Louise Pentland

Harufumi Mochizuki

Philip Yeo

Hiroaki Yoshihara

1997 Admitted as a Solicitor (UK)2001	Senior Legal Counsel, Nokia Networks,
Nokia Corporation
2004	Vice President and Head of Legal,Enterprise Solutions, Nokia Corporation2007	Vice President, Acting Chief Legal Officer
and Head of IP Legal, Nokia Corporation
2008	Senior Vice President and Chief Legal
Officer, Nokia Corporation2009	Admitted to New York State Bar
Association2011	Executive Vice President and Chief Legal
Officer, Nokia Corporation(Retired in May 2014)2015 	General Counsel, PayPal, eBay Inc.
(Currently in office)Director, Hitachi, Ltd.

2002	Director-General for Commerce andDistribution Policy, Minister’s Secretariat,
Ministry of Economy, Trade and Industryof Japan (“METI”)
2003	Director-General, Small and Medium
Enterprise Agency, METI
2006	Director-General, Agency for Natural
Resources and Energy, METI
2008	Vice-Minister of Economy, Trade andIndustry of Japan
2010	Special Advisor to the Cabinet of Japan(Retired in September 2011)
Senior Adviser to the Board, Nippon Life
Insurance Company (Retired in April 2013)2012 Director, Hitachi, Ltd.
2013	President and Representative Director,
Tokyo Small and Medium Business
Investment & Consultation Co., Ltd.
(Currently in office)1970	Joined Ministry of Defense of Singapore
1979	Permanent Secretary, Ministry of Defenseof Singapore
1986	Chairman, Economic Development Boardof Singapore
2001	Chairman, Agency for Science,
Technology and Research of Singapore
2007	Senior Advisor for Science and Technology
to the Ministry of Trade & Industry,
Singapore (Retired in September 2008)
Special Advisor in Economic ­Development,
Prime Minister’s Office, Governmentof Singapore (Retired in August 2011)
Chairman, SPRING Singapore(Currently in office)2012 Director, Hitachi, Ltd.

1978 Joined Peat Marwick Mitchell & Co.
1996	National Managing Partner, the Pacific
Rim Practice, KPMG LLP
1997 The Board Member, KPMG LLP
2003	Vice Chairman and Global Managing
Partner, KPMG International (Retired in
April 2007)2014 Director, Hitachi, Ltd.

Name

Reasons for appointment

Nobuo Katsumata

Mr. Katsumata was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective based on his rich experience and insight as the top
executive of a major global company.

Cynthia Carroll

Ms. Carroll was selected as an outside director, since she was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective as well as reflecting her global viewpoint to theCompany’s Board of Directors based on her rich experience and insight as the top executive of major global companies.

Sadayuki Sakakibara

Mr. Sakakibara was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective based on his rich experience and insight as the top
executive of a major global company.

George Buckley

Mr. Buckley was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to theCompany’s Board of Directors based on his rich experience and insight as the top executive of major global companies.

Louise Pentland

Ms. Pentland was selected as an outside director, since she was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective as well as reflecting her global viewpoint to theCompany’s Board of Directors based on deep insight into corporate legal matters and corporate governance gained through her rich experience as
the chief legal officer of major global companies.

Harufumi Mochizuki

Mr. Mochizuki was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective based on his rich experience and insight in the areaof public administration, etc.

Philip Yeo

Mr. Yeo was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors by supervising
the execution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to the Company’s Boardof Directors based on his broad experience and insight in such areas as public administration.

Hiroaki Yoshihara

Mr. Yoshihara was selected as an outside director, since he was expected to reinforce the functional aspects of the Company’s Board of Directors bysupervising the execution of duties by Executive Officers and others from an independent perspective as well as reflecting his global viewpoint to theCompany’s Board of Directors based on his rich experience and insight in the area of global corporate management and accounting.

Note: Directors are listed by position and in Japanese alphabetical order within each grouping.
* Denotes directors who serve concurrently as executive officers.
Each committee is composed of the following members (Chair underlined):
Nominating Committee: Nobuo Katsumata, Sadayuki Sakakibara, Harufumi Mochizuki, Hiroaki Nakanishi
Audit Committee: Takashi Miyoshi, Nobuo Katsumata, Harufumi Mochizuki, Hiroaki Yoshihara, Nobuo Mochida
Compensation Committee: Harufumi Mochizuki, Nobuo Katsumata, Sadayuki Sakakibara, Toshiaki Higashihara

17

Executive Officers
As of June 30, 2015

Chairman & CEO

President & COO

Toshiaki Higashihara*

Hiroaki Nakanishi*

Overall operations andenergy solutions business

General management

Executive Vice President and Executive Officers

Shinjiro Iwata*

Yutaka Saito*

Cost structure reform
and information
technology strategies

Ryuichi Kitayama*
Marketing and sales

Koji Tanaka*

Toyoaki Nakamura*Power & infrastructure
systems business

Finance and corporate
pension system

Information &telecommunication
systems businessToshikazu Nishino*
Management strategies

Senior Vice President and Executive Officers
Toshiaki Kuzuoka*

Masahiro Kitano

Corporate communications
and CSR, legal matters,
government & external
relations, risk management
and corporate auditing

Information &telecommunication
systems business(platform business)

Infrastructure systems
business (urban planningand development
systems business)

Information &telecommunication
systems business

Infrastructure systems
business

Keiichi Shiotsuka

Hiroshi Sato

Kaichiro Sakuma

Kunizo Sakai

Information &telecommunication
systems business(system solutions andservice business)

Vice President and Executive Officers
Masakazu Aoki

Kaoru Kawano

Yasuo Tanabe

John Domme

Isao Narukawa

Industrial products business

Power & infrastructure systems
business (sales operations) andenergy solutions business(sales operations)

Government & external
relationsRegional strategies (Americas)

Power systems business(sales operations) and energy
solutions business(sales operations)

Ryuichi Otsuki
Social innovation businesspromotion

Shinichiro Omori
Supply chain management(procurement)

Kenichi Kokubo
Regional strategies (China)

Yoshitaka Tsuda
Information &telecommunication systems
business (sales operations)

Keiji Kojima

Alistair Dormer

Research & development

Infrastructure systems business(rail systems business)

Human capital

Hiroshi Nakayama
Cost structure reform andsupply chain management(MONOZUKURI and quality
assurance)

Mitsuaki Nishiyama
Finance and corporate
pension system

Masaya Watanabe
Healthcare businessAkira Shimizu

Katsumi Nagasawa

Marketing and sales

Power systems businessNote: Executive officers are listed by position and in Japanese alphabetical order within each grouping.
* Denotes executive officers who are representative executive officers.

18

Hidenobu Nakahata

Hitachi, Ltd. | Annual Report 2015

Corporate Governance

Hitachi and eight of its listed subsidiaries are companies with Nominating

management oversight of Group companies. In these ways, Hitachi is

Committee, etc. under the Companies Act of Japan. By demarcating

working to increase corporate value.

responsibilities for management oversight and those for the execution

Starting in June 2015, the Japan’s “Corporate Governance Code”

of business operations, Hitachi is working to create a framework forapplies to companies listed on domestic stock exchanges in Japan.

quick business operation, while making management highly transparent.

Hitachi agrees with the basic approach of the Code, which is that theIn addition, Hitachi is executing business strategies formulated to

Code’s appropriate implementation will contribute to the development

enable the Group to demonstrate its collective strengths. Moreover,and success of companies, investors and the Japanese economy as asome of Hitachi’s Directors and Executive Officers serve concurrently

whole through individual companies’ self-motivated actions so as to

as Directors and Executive Officers at Group companies, thereby

achieve sustainable growth and increase corporate value over thestrengthening integrated management of the Group and improving

mid- to long-term. Moving forward, Hitachi will work to further
strengthen corporate governance.

Initiatives to Strengthen Corporate Governance
1. Realizing quick, highly transparent management

2. Accelerating global management, strengthening oversight function

Transition to a company with Committee System

Increased number of outside directors including
non-Japanese directors; outside directors became
majority (June 2012~)(currently a company with Nominating Committee, etc.)(June 2003~)
Major Points of Change•	Establishment of three committees in the Board of Directors(Nominating, Audit, and Compensation Committees), and appointment
of Executive Officers (separation of oversight and execution).
•	The Board of Directors approves basic management policy for theGroup and implements oversight of the execution of the duties of
Executive Officers and Directors.
•	Appointment of outside directors is required (with outside directors
as a majority of each committee).

Generalmeetingofshareholders

Appointment /dismissal

Oversight

Appointment /dismissal

Board ofDirectors

Execution

Executive
Officers

Nominating Committee:
Determines director candidates
Audit Committee: Audits execution of
Directors and Executive Officers

Major Aims
•	Reflect global, diverse viewpoints in management, further
strengthen oversight function
Composition of Board of Directors
June 2011 (13 elected)

June 2015 (12 elected)

Outside directors

48Inside directors(non-executive)

7

2

Inside directors(serving concurrently
as executive officers)22

Non-Japanese directors

Female directors

Compensation Committee:
Determines remuneration for Directors
and Executive Officers

3. Clarification of responsibility / authority

Introduced in-house company system (October 2009~) and in-house rating system (April 2010~)
Major Aims
•	Clarify responsibility and authority for total of 40 in-house companies and Group companies, take thorough approach to rapid management throughindependent profitability•	Determine scope of delegation of investment authority to each in-house company in accordance with in-house rating, increase management speed•	Hold Hitachi IR Day, an IR event at which the leaders of each in-house company explain principal business strategies and management initiatives that
support the achievement of the goals of the Mid-term Management Plan

19

Corporate Government Framework

Appointment

Accounting Auditors

ReportGeneral Meeting of
Shareholders

Audit

Senior Executive Committee

Appointment / Oversight

Board of Directors

Chairman & CEO

ReportPresident & COO

Nominating Committee

Executive Vice President andExecutive Officers /Senior Vice President andExecutive Officers

Audit

Compensation Committee

Audit Committee
ReportInternal
Auditing
OfficeExecutive
Officers
Department
in charge

Executive
Department
in charge

Officers
Department
in charge

Department
in charge

Audit

Board of Directors
The Board of Directors approves basic management policy for the

Attendance at meetings of the Board of Directors by each

Hitachi Group and supervises the execution of the duties of Executive

outside director in the fiscal year ended March 31, 2015

Officers and Directors to sustainably enhance corporate value andName

Attendance

Nobuo Katsumata

9 out of 9 days

compilation. The Board of Directors focuses on strategic issues related

Cynthia Carroll

9 out of 9 days

to the basic management policy as well as other items to be resolved

Sadayuki Sakakibara

8 out of 9 days

that are provided in laws, regulations, the Articles of Incorporation,

George Buckley

9 out of 9 days

and Board of Directors Regulations. As of June 30, 2015, the Board of

Harufumi Mochizuki

9 out of 9 days

Directors was made up of 12 Directors, and two of them concurrently

Philip Yeo

9 out of 9 days

Hiroaki Yoshihara

8 out of 8 days

shareholders’ common interests. The basic management policy
includes the medium-term management plan and annual budget

serve as Executive Officers. Hitachi aims to reinforce the supervisory
function of the Board of Directors, of which eight outside Directors,
including non-Japanese, account for the majority, reflecting theirglobal and diverse viewpoints.
Within the Board of Directors, there are three statutory committees—
the Nominating Committee, the Audit Committee, and the Compensation Committee—with outside Directors accounting for the majorityof members of each committee. The Board of Directors meetings
were held 9 days during the fiscal year ended March 31, 2015, andthe attendance rate of Directors at these meetings was 99%. To assist
with the duties of the Board of Directors and each committee, staffs
who are not subject to orders and instructions of Executive Officers
are assigned.

20

Hitachi, Ltd. | Annual Report 2015

Furthermore, Hitachi formulated and published Corporate(1) Nominating Committee

Governance Guidelines outlining the framework of corporate

The Nominating Committee has the authority to determine particulargovernance, such as the function and composition of the Board

proposals submitted to the general meeting of shareholders for theof Directors, qualifications for Directors, and criteria for assessing theelection and dismissal of Directors. The Nominating Committee

independence of outside Directors.

consists of four Directors, three of whom are outside Directors.

Corporate Governance Guidelines of Hitachi, Ltd.

the fiscal year ended March 31, 2015.

The Nominating Committee meetings were held seven days during
http://www.hitachi.com/IR-e/corporate/governance/guidelines.html(2) Audit Committee
Qualification for the outside Directors and criteria for the

The Audit Committee has the authority to audit the execution of

independency

duties of Directors and Executive Officers and to determine on

In regard to the election of an outside Director, the Company’s

proposals submitted to the general meeting of shareholders for the

Nominating Committee considers the following criteria for indepen-

election and dismissal of accounting auditors. The Audit Committee

dence. In addition, the Committee also considers whether the outside

consists of five Directors, including three outside Directors and two

Director has outstanding character and insight and whether the

standing Audit Committee members.

Outside Director has worked in a leadership position in such fields as
business, law, administration, accounting or education or has experi-

The Audit Committee meetings were held 14 days during the fiscal
year ended March 31, 2015.

ence at policy-making levels.
In regard to the independence of an outside Director, the Company(3) Compensation Committee

considers an outside director to be independent if none of the

The Compensation Committee has the authority to determine

following items are applicable.

remuneration policies for Directors and Executive Officers and remuneration for individuals based on these policies. The Compensation• 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 orCommittee consists of four Directors, three of whom are outside
Directors.
The Compensation Committee meetings were held seven days
during the fiscal year ended March 31, 2015.

an employee of a company that has made payments to, or received
payments from, the Company for property or services in an amountComposition of the Board of Directors and Each Committee

which, in any of the last three fiscal years, exceeds 2% of any of the

Numberof persons

OutsideDirectors

Directors

Board of Directors

12

8*1

4

Director

than ¥10 million in direct compensation for his or her service as a

Nominating Committee

4

3

1

Outside Director

specialist in law, accounting or tax, or as a consultant from the

Audit Committee

5

3

2

Director

Company, other than director compensations; orCompensation Committee

4

3

1

Outside Director

companies’ consolidated gross revenues;• He or she has received during any of the last three fiscal years more

• He or she serves as an executive officer or director of a not-for-profit
organization, and the Company’s discretionary charitable contributions

Chairman*1. In regard to the outside directors, Hitachi has notified all outside Directors as independent
directors to each of the stock exchanges in Japan where the Company is listed.

to the organization in any of the last three fiscal years are more than
¥10 million and 2% of that organization’s annual gross revenues.

Executive Officers
Executive Officers decide on matters delegated to them by the Boardof Directors and execute Hitachi’s business affairs within the scope ofassignments determined by the Board of Directors. As of June 30,
2015, Hitachi had 31 Executive Officers.

Senior Executive Committee
The Senior Executive Committee is a council to ensure that the
President deliberately decides on important managerial matters, which
may affect the business of Hitachi or the Hitachi Group, throughdiscussing these matters from diverse viewpoints. This committee
consists of nine members as of June 30, 2015: Chairman & CEO,President & COO, six Executive Vice President and Executive
Officers, and one Senior Vice President and Executive Officer.

21Director and Executive Officer Compensation
Compensation for Directors and Executive Officers is commensurate

The compensation for Executive Officers consists of a monthly

with the ability required of them as well as their responsibilities, whilesalary and a performance-linked component. The monthly salary iscompensation packages at other companies are also taken into

decided by adjusting a basic amount set in accordance with theconsideration.

relevant position to reflect the results of an assessment. The perfor-

The compensation for Directors consists of a monthly salary andmance-linked component is set within a range equivalent to abouta year-end allowance. The monthly salary is decided by making adjust-

40% of the Executive Officer’s annual income, adjusted based onments to the basic salary that reflects full-time or part-time status,

Hitachi and individual performance.

committee membership and position, and travel from place of residence,

The compensation structure for Directors and Executive Officers

among other factors. The year-end allowance is a pre-determined amount

was re-examined starting with compensation for the fiscal year ended

equivalent to about 20% of the Director’s annual income based on

March 31, 2009, and the retirement allowance was abolished.

the monthly salary, although this amount may be reduced depending

Compensation for Directors and Executive Officers for the fiscal

on Hitachi’s performance. Directors concurrently serving as Executive

year ended March 31, 2015, is as follows:

Officers are not paid compensation as Directors.

Total amount of each type (Millions of yen)
Total amount of compensation,etc. (Millions of yen)

Category

Year-end allowance andNumber of persons
performance-linked component

Monthly salary

Directors (excluding outside Directors)

127*3

114*3

13

6*2

Outside Directors

247*3

234*3

13

9

Executive Officers

1,946

1,329

616

29

Total

2,322

1,678

644

44

*2 The number of Directors excludes two Directors who concurrently serve as Executive Officers.
*3 The amount of compensation to Directors and outside Directors respectively includes the monthly salary for three Directors and two outside Directors who retired due to expiration of theirterm of office at the close of the 145th Annual General Meeting of Shareholders held on June 20, 2014.

In addition, Directors or Executive Officers for whom compensation from Hitachi and its subsidiaries is not less than ¥100 million and theamount of their compensation are as follows:
Total amount of each type (Millions of yen)
Total amount of compensation,etc. (Millions of yen)MonthlysalaryPerformance-linked
component

Name

Company

Category

Hiroaki Nakanishi

Hitachi, Ltd.

Executive Officer*4

192

132

60

Toshiaki Higashihara

Hitachi, Ltd.

Executive Officer

143

99

44

Junzo Nakajima*5

Hitachi East Asia Ltd. (Consolidated subsidiary)*6

Director

103

75

28

*4

*4 Although concurrently serving as Director, Messrs. Hiroaki Nakanishi and Toshiaki Higashihara do not receive compensation as Director.
*5 Although concurrently served as Executive Officer of Hitachi for the fiscal year ended March 31, 2015, Mr. Junzo Nakajima did not receive compensation as Executive Officer of Hitachi.
*6 The compensation paid in Hongkong dollar is converted into yen by average exchange rate for each quarter of the fiscal year ended March 31, 2015.

22

Hitachi, Ltd. | Annual Report 2015

Internal Control over Financial Reporting
To ensure the reliability of the financial reporting for the Group as aestablishment of systems for objective assessment at each in-housewhole, the Hitachi Group has documented control procedures, fromcompany and major Group company. The J-SOX Committee’s Officecompany-level controls to process-level controls, in accordance withsummarizes the assessment results of each company to confirm thepolicies determined by the J-SOX Committee. In regard to assessment

effectiveness of internal control on a Group-wide, consolidated basis.

of the internal control over financial reporting, Hitachi is advancing the

Hitachi Group Internal Control Assessment Framework (As of March 31, 2015)
Financial Services
AgencyHitachi, Ltd. President and CFO
Internal
ControlReportReportReportReportJ-SOX Committee
J-SOX Committee’s Office

Audit Committee
Independent

Collaboration

Auditors

ReportInternal Auditing

In-house and major Group companies

OfficeReportExternal
Audit

Subsidiary companies

Accountability
In accordance with its disclosure policy, Hitachi is implementing the fair

Hitachi is working to utilize the opinions obtained through these IR

and appropriate disclosure of such information as management strategies

activities as feedback within the Company and to reflect them inand financial information. In addition, Hitachi is aggressively conducting

management and business administration.

dialogues through such means as meetings with shareholders andinvestors, IR events, and the general meeting of shareholders.
In the fiscal year ended March 31, 2015, the Company held quarterly
results presentations, as well as a presentation on the progress of the

Hitachi is taking steps to implement aggressive information
disclosure, such as providing presentation materials, videos, andperformance and stock price graphs on our website for shareholders
and investors.

2015 Mid-term Management Plan. In addition, continuing on from thefiscal year ended March 31, 2014, the Company held Hitachi IR Day

Information for shareholders and investors

2014, an IR event at which leaders explained principal business

http://www.hitachi.com/IR-e/strategies and management initiatives in accordance with the Mid-termManagement Plan. Furthermore, to deepen understanding of the rail

Major information disclosure publications

systems business, Hitachi offered tours of the Kasado Works, and in

Financial results / Quarterly financial results

addition the Company held approximately 740 individual meetings
with institutional investors and analysts in Japan and overseas.
Moreover, twice per year management leaders visit institutional

Annual securities reports / Quarterly reports
Business reports / Interim business reports

investors in North America, Europe, and Asia to explain management

Annual reports

policies, business trends, and other matters.

Hitachi Group sustainability reports

23

Message from Outside Directors

George Buckley

Impressions of Hitachi’s Corporate Governancethreaten our survival. Japanese companies need to push harder for

Corporate governance is a topic some aspect of which is discussed atbetter growth, better margins and better cash management, while

every board meeting. I believe the Company has made great strides in

not forgetting the many good aspects of their work culture. Hitachi

recent years regarding corporate governance. Hitachi formulated andneeds to retain the good aspects of Japanese culture, while adopting

disclosed its Corporate Governance Guidelines which outline qualifi-

some new behaviors and methodology.

cations for outside directors, etc. in May 2012, to increase thetransparency of its management. I think the governance of Hitachi isvery positive. The Board meetings are conducted very openly andworld. Yet today, many have been overtaken by their foreign contem-

great credit is due to the chair of the Board for encouraging this.

poraries. These competitors adapted and learned from Japanese

Furthermore, I think the corporation is very open to different reforms
and different standards of governance. For example, in 2014, wecompanies and, in some cases, the “students” are now doing better
than their “teachers.” We must not allow that to happen at Hitachi.

changed the committee structure. Under the new structure, outside

Going forward, we therefore need to pursue efforts to makedirectors became chairs of the nominating committee and compensation

Hitachi a more sustainably- competitive company. If we become acommittee. In this way, we are adopting a more western-style gover-more sustainably-competitive company, we become more prosperous;

nance. I believe we have carried out reforms effectively, and accordingly

and if the company becomes more prosperous, the company becomes

our corporate governance is being modeled by other companies.

more secure for everyone; employees, investors, customers andWhen I have spoken to investors in Hitachi, they really admire what

suppliers alike. Faster, profitable growth must be our goal, inside an

Hitachi is doing and say they wish other companies would do more.

ethical and legal framework.

Issues to Address

Approach to Value Creation

As an outside director of Hitachi, I think Hitachi’s strengths are its

I believe there are five great value-creating activities that will help us

magnificent technology and the breadth of its business. It is one of the

become a globally competitive company; sales growth, margin enhance-

10 greatest modern companies in the world. It has enormous strengths.

ment, improving working capital terms, legally and morally lowering our

However, we still don’t always leverage those strengths as effectively as

taxation burden, and working to improve our P/E (price/earnings) ratio.

we could. This is an important issue we need to address. What I recom-

Each of these previous activities contributes to value creation.

mend to companies is that our main mission is to create increasing

Then, we should approach these activities with six competitive

shareholder value every year. That’s the real mission. But, of course, we

vectors, six sets of tools if you like. These tools are the cost of thealso need to make Hitachi a happy place to work, a secure place for

product, technology and innovation, distribution, customer service,employees, and a good place for customers and all stakeholders. We

brand and marketing, and people. We always have to remember

need to keep the interests of all of our stakeholders in mind, not just one.

nothing in the company would get done if it wasn’t for the people.

I think another issue, not only for Hitachi, but for many Japanese24

We can see the reason for this very clearly. Thirty five years ago,
Japanese companies were the most creative and competitive in theSo, it’s people who change the company, and people who drive

companies is a cultural one. Japanese people rightly have a strong

reforms. It’s people who will innovate. It’s really the people and how

positive belief in their society and in the power of the group. But a

we inspire, motivate and reward them that are the keys to this wholedownside of this is that it sometimes slows action and our willingness

puzzle. It’s the single most important thing, people.

to adapt to changing economic and competitive circumstances. Since

To truly become a sustainably-competitive company, we can’t just be

the world outside is changing ever faster, to remain competitive, wegood at technology, but bad at cost. We can’t just be good at cost, andhave to be willing to change more, to adapt better and to reform

bad at technology. We can’t just have great distribution, but have badfaster. If we reform slower than our competitors, they will overtake us

products. Therefore, I believe that a balanced approach to these six vectors

and, ultimately, that could be very hard for the corporation andwill allow us to accomplish this difficult but essential task going forward.

Hitachi, Ltd. | Annual Report 2015

Cynthia Carroll

Impressions on Change at Hitachi

Becoming a Global Company

Over the last couple of years, Hitachi has broadened the makeup

Our objective of having over 50% of our revenues from outside ofof the board, where today, the majority of the board is comprised ofJapan has now been achieved this year, and this demonstrates

outside directors and is functioning under international governance

Hitachi’s ability to become a global company. The Social Innovation

standards. Hitachi’s executive team aims to be world-class in all

Business is the business platform for further global growth. Acrossaspects of the Hitachi businesses. There is clear recognition that in

Hitachi, we need to leverage the scale, scope and expertise of theorder to become truly global, diversity of thinking and experiences iscompany to ensure organizational efficiency (reducing redundancy),

key, as the executives seek input from the board. The breadth of theagile decision making and responsiveness to the needs of our customers

board discussions and the level of engagement and interaction have

while constantly seeking innovative solutions for today and for thecontinually progressed as we often challenge and debate issues. The

future. Our ability to integrate our marketing and sales of our products

executives are listening, reflecting, and responding to input.

across customers and geographies is an enormous opportunity andAnother change relates to the development of the Social Innova-

this will take creativity and teamwork.

tion Business. I attended the Hitachi Social Innovation Forum in Las

In promoting globalization to achieve higher profit ratios and cash

Vegas, and was impressed by the diversity of solutions being developed

flow levels than our competitors, Hitachi is supporting more diversifi-

by Hitachi in conjunction with our customers and suppliers from

cation. There is a recognition that globalization starts with the top

across an enormous range of businesses, industries and social envi-

team in exposing people to alternative perspectives in various parts ofronments. In my opinion, no other company in the world has thethe world. Many of the newcomers at Hitachi are speaking English

expertise and the technical and innovative capability to serve such

while Hitachi is recruiting people from different backgrounds, different

a broad consumer base. The Social Innovation Business represents thenationalities, different experiences, and different educational exposures,catalyst in becoming a truly global corporation.

which I believe is very important. This is particularly critical withrespect to marketing and commercial matters. The board members

Hitachi’s Strengths

themselves are worldly and recognize the need to diversify in order toI have been hugely impressed with the people that I have met atbecome truly global.

Hitachi. The leadership of the company is dedicated and has vast

It is up to everyone in the Hitachi Group to achieve success as One

experience. In addition, the receptiveness and openness of the

Hitachi. Each of us has a role to play in this endeavor. Creating One

Chairman & CEO and President & COO are evident as they actively

Hitachi will happen by working together, respecting input from one

seek different perspectives and inputs. Hitachi employees haveanother and working as a team, both within each business and acrossenormous opportunities to learn and develop across businesses andthe Hitachi Group.

across geographies in a company that has the potential to be the

Finally, I believe Hitachi must have a keen awareness of ourleader in virtually all of its businesses. I can’t imagine a more exciting

competition, constantly driving towards outperformance and seeking

place to work as a young person beginning a career.

opportunities for growth and value creation. We need to be aware ofAnother strength of Hitachi is that the company produces theour strengths and where we need to improve. The recent decision onhighest quality products and is very sophisticated in its technology andthe acquisition of the rail business in Italy is an example of how weinnovation. It is a company with name recognition and is respected

identified a complementary business to the broader rail business thatthroughout the world. Together, these strengths represent enormous

would catapult us into an improved market position while capturing

levers for further value creation and enhancement.

synergies. This kind of strategic initiative will clearly enhance our
global position.

25

Risk Management

Hitachi conducts business activities in a wide range of fields in markets around the world.
To prevent a variety of risk factors from having adverse effects on business continuity, the Hitachi Groupis taking steps to strengthen risk management, such as utilizing a system with overall responsibility forcompliance for the Hitachi Group.

Reinforcement of Risk Management System

Preventing Bribery and Corrupt Practices

The entire Hitachi Group is reinforcing its risk management system to

To deal with global bribery and corruption risks, in fiscal 2013 weaddress increasingly globalized and complex risks.

referred to the US Foreign Corrupt Practices Act Resource Guide*1

Under Hitachi, Ltd.’s Head of Risk Management, each businessand other documents to develop various corruption risk scenarios.

operation assigns an executive as its risk management officer to

These were used as the basis for a survey conducted at Hitachi Groupmanage risks mainly concerned with compliance, export control,

companies outside Japan. By analyzing the survey results, we identified

disasters, and crime, and to respond adequately in coordination

several companies at risk from corruption. We are monitoring andamong the entire Group. Furthermore, Hitachi has started to build aworking with those companies with the goal of reducing corruption

comprehensive risk management system that contains standards andworldwide.

procedures for evaluating any risks that may affect business.
Risk Management System
Risk Management Group• Compliance*1 T he US Foreign Corrupt Practices Act consists of antibribery provisions regarding foreign
government officials and transparent accounting provisions within the Securities ExchangeAct. Enforced by the Department of Justice, it prohibits bribes to foreign government
officials. Transparent accounting, enforced by the Securities and Exchange Commission,requires companies to show transactions fairly and accurately in their accounting records
and to maintain effective internal control over accounting.

• Export Control

Preventing Violations of Fair Competition Laws

• Crisis Management and BCP

Hitachi engages in business based on the principles of conformance• Internal Audits, etc.

with the law and business ethics and fair and disciplined competition.
However, Hitachi, Ltd. was found to have impaired the fairness of apublic bid in fiscal 2002 and was penalized in September 2006,
October 2008, and March 2009 for violating the Japanese Antimo-

Standards and systems for evaluating business and other risks

nopoly Law. In November 2012, a subsidiary dealing in automotive
components was penalized by the Japan Fair Trade Commission forviolating the Antimonopoly Law. In September 2013, the same
company was prosecuted by the US Department of Justice for violating

Comprehensive risk management system at the management level

American antitrust laws, resulting in a plea bargain.
We are working to prevent further violations and to broaden
awareness of compliance issues, including publicizing messages from

Compliance Reporting System
Hitachi has instituted a Group-wide whistleblowing system to prevent
illegal and unethical behavior, to promptly address infractions, and toenhance our ability to self-regulate. In this system, reports go directly
to the Compliance Department at Hitachi or to an outside attorney.
This system can be used not only by Hitachi employees but also by
former employees, temporary staff, and suppliers.
In addition, we have implemented the Channel to the Board of
Directors system to allow employees to directly report problems
anonymously to Hitachi directors. The facts related to all reports are
subject to thorough investigation and checking, and people who haveidentified themselves in the reports are informed of the investigation
results. We make every effort to appropriately deal with situations,
including taking remedial action where necessary.

26

top executives, developing company regulations, conducting regular
audits, and providing education and training to employees based on acompliance manual. In fiscal 2014, we held group education sessions
on the Antimonopoly Law for all Hitachi sales managers, with 957
taking part.
Through these initiatives we will continue working to improve andenhance our compliance framework.

Hitachi, Ltd. | Annual Report 2015

Export Control

On top of these efforts, since fiscal 1998, Hitachi, Ltd. has held

For basic export control policies, we adopt the Hitachi Standards ofannual earthquake simulation drills at key operations in Japan. In

Corporate Conduct,*2 which state: “We shall help maintain interna-

March 2015, Hitachi High-Technologies Corporation in the Naka area

tional peace and security through compliance with trade-related lawsof Ibaraki Prefecture held a drill simulating a potential large-scaleand regulations.” We established the Corporate Regulations concerning

earthquake. Directed by the head of the Naka area, managers in

Security Export Control based on this policy in 1987. We carry out

charge of their divisions confirmed the action plans in emergency

strict export control practices according to laws and regulations,situations based on BCPs.

screening all goods and technologies intended for export for such

In fiscal 2013, Hitachi appointed personnel in charge of risk-response

factors as destination countries and regions as well as intended end

policies at its main overseas bases and around 300 companies prepared

use and end users. We provide guidance and educational support to

BCPs with the goal of completing them for key operations by the end

Hitachi Group companies to ensure that all Group companies follow

of fiscal 2013. These BCPs are aimed at strengthening our ability to

the same export control policies. In fiscal 2014, we held workshops

respond to business risks, including large disasters, novel strains offor Group companies in the United States, Europe, and China andinfluenza, political instability, and social disruption, as well as acts ofother Asian countries providing practical training on export control.

terrorism. Moving forward, we intend to further expand the scope ofE-learning programs on export control basics and US re-export

our BCPs.

controls were introduced and taken by around 22,000 employees at*3 BCP: Business Continuity Plan

106 Group companies worldwide.
*2 Hitachi Standards of Corporate Conduct: Created by Hitachi, Ltd. to ensure full awarenessof Hitachi’s mission and role and to enable Hitachi to continue to grow as a truly global
enterprise.

Creating BCPs*3 in Key Operations Worldwide
Given the close relation of our business to social infrastructure, we areenhancing our BCPs to ensure that the impact of risks does not disrupt
our business and thereby significantly affect society. In December
2006, we issued the Hitachi Group Guidelines for Developing BusinessContinuity Plans in Japanese. In fiscal 2010 these were translated into
English and Chinese for distribution to all Hitachi Group companies
worldwide to ensure our response readiness for large disasters andother risks.
When the Great East Japan Earthquake struck in March 2011, ourBCPs enabled quick responses and swift decision making. However,issues emerged including identification of secondary and othersuppliers, cloud storage and multiplexing of production information,and the need to secure alternate transportation and fuel sources.
Based on the lessons learned from this disaster, in October 2011
we released and distributed new BCP guidelines for departmental
implementation to further improve our BCPs. Hitachi Group operationsin Japan completed their preparation and review of BCPs, based on
applicability to their operations, by the end of fiscal 2011. BCPs forlarge earthquakes and novel strains of influenza have been preparedfor 49 Hitachi, Ltd. business sites and 96 Group companies.

Improving Safety for Employees Sent
to Dangerous Regions
Responding to the hostage incident in Algeria in January 2013,*4
President Hiroaki Nakanishi reinforced his policy in February 2013 of
ensuring the safety of employees sent outside Japan. Survey missionsof in-house and outside experts are now sent beforehand to areas at
high risk of war, terrorism, and other threats. Even after employees aredispatched to such areas, we conduct additional local surveys every
six months as a means of confirming the effectiveness of our safety
policies. In fiscal 2014, survey missions were sent to several countries
in Africa and the Middle East. In addition, we have introduced a rangeof safety measures in the light of recent terrorist incidents involving
Japanese and other nationals, including providing timely alerts toemployees. These and other steps underscore our commitment toensuring the safety of our employees working around the globe.
Hitachi is also contributing to safety measures at other Japanese
corporations operating outside Japan. To help enhance collaboration
between the private and public sectors in this area, Hitachi executives
participated in the Council for Public-Private Cooperation for Overseas
Safety organized by Japan’s Ministry of Foreign Affairs, and in June2014 Hitachi took part in a public-private kidnap incident preparatory
training exercise.
*4 Incident in January 2013 in which an armed terrorist group attacked a natural gas refining
plant in Algeria. There were more than 30 victims, including 10 Japanese.

27

CSR Management

As a global company, we share our stakeholders’ values and pursue sustainable growth by integrating
management strategies and CSR. We align our CSR activities with our Mid-term Management Plan torealize the Hitachi Group Vision, creating both social and economic value.
Management Strategies and CSR
Hitachi’s Vision
We created our Group Vision in May 2013, at the start of the 2015

cycle to ensure execution of our activities and to improve the quality

Mid-term Management Plan, with the aims of delivering innovationsof our management.

that help to answer society’s challenges and of building a safe, secure,

CSR Management Framework

comfortable, and fair society. The Group Vision indicates the path to
the next stage of growth.

Hitachi delivers innovations that answer society’s challenges.
With our talented team and proven experience in global
markets, we can inspire the world.

For Hitachi, CSR is about realizing the world we envision in ourGroup Vision.
Hitachi’s CSR Activities
To realize the Hitachi Group Vision, which draws on our Corporate
Credo and Founding Spirit that form the core of our CSR, we havebeen sharing throughout the Group our CSR policy, created in 2005,
as the basis of our CSR activities. Looking toward the next Mid-term

2015 Mid-term Management Plan and Non-financial Performance

Management Plan that will start from fiscal 2016, we have shifted theIn addition to financial activities, improved non-financial performance

CSR policy to a framework based on ISO 26000 to further integrate

aimed at addressing Hitachi’s key issues plays a crucial role in achiev-

management and CSR strategies. From fiscal 2014, we have been

ing the 2015 Mid-term Management Plan goals. We set targets forfurther improving communications with our stakeholders to recognize

non-financial activities related to key management policies and started

and fulfill our social responsibilities. We will also reinforce the PDCA

these activities in fiscal 2013.

Material Issues for Hitachi

Management Focus

Fiscal 2015 Targets

Fiscal 2014 Results
Sustainable Business

Innovation:
Expand R&D centers
Strengthen service
Increase R&D staff by 500 peoplebusinesses that maximize
Strengthen Open Innovation
IT utilization and bringabout innovation
Eco-Product sales ratio: 90%

Promoted R&D in 7 areas globally (as of June 2015)
Japan: about 200 people   Outside Japan: about 300 people
Japan: 246 cases   Outside Japan: 85 cases
Caring for the Environment
93%
Diversity Management

Global:Deliver innovation tocustomers and society
globally

Diversity among directors

Outside directors: 8   Non-Japanese: 4 (of which 2 are women)   (as of June 2015, out of 12 directors)

Female senior executives

Appointed female head of CSR and Environmental Strategy Division as senior executive-level director
on April 1, 2015. Complete appointment by fiscal 2015

Female managers (Hitachi, Ltd.) Fiscal 2020 target: 1,000 women

434 women
Respect for Human Rights

Implement due diligence on business and human rights

Created guide for conducting human rights due diligence and shared with Group companies
Public Policy Initiatives

Engage in dialogue with government officials
Provide forums for stakeholder dialogue

Policy council participation
Events held in Europe and Australia
Diversity Management

Transformation:
Promotion of global human capital management strategy
Transform Hitachi: To
deliver innovation bystandardized and speedy
operation
Promotion of Hitachi Smart Transformation Project
Target outcome (aggregated fiscal 2011–15): 400 billion yen

28

Introduction of Global Grading System, which applies to all managers in the Hitachi Group worldwide,
as a common platform for job evaluations, assessing the value of management duties against acommon standard
Sustainable BusinessTotal up to fiscal 2014: 320 billion yen

Hitachi, Ltd. | Annual Report 2015

Environmental Activities

Environmentally Conscious Production

Accompanying economic and social development around the world,

We have set targets for efficient energy use, waste amounts, chemicala range of environmental problems, such as climate change, resource

substance emissions, and water use to reduce the environmental

depletion, and ecosystem destruction, are becoming increasingly

burden of our business activities.

severe. At Hitachi, we aim to achieve the environmental management
described in our Environmental Vision—which in turn aspires to help

Promoting Global Warming Countermeasurescreate a sustainable society—by employing our company’s resources

Hitachi is working to reduce the energy use per unit as one way toto reduce the burden of human activities on the environment. We areuse energy more efficiently to reduce the environmental burden ofcommitted to global warming prevention, resource conservation, andour business activities. To achieve further reductions, we are system-

ecosystems preservation as the three pillars of our vision. Our goal is toatically installing high-efficiency equipment and devices, from LED

achieve a more sustainable society by promoting global production thatlighting to inverter air conditioners, and increasing the efficiency of

reduces the environmental burden of a product throughout its life cycle.

our energy usage by improving manufacturing processes.

Hitachi’s Environmental Vision

Reduction in Energy Use per Unit

From base year

16%
reduction• FY2005 (base year)• FY2014

Energy Used
1,746ML

Energy Used
1,683ML

Activity Amount*=100%

Activity Amount= 84%* A value closely related to the emission factor numerators (environmental burden) ofenergy use from business activities (for example, production quantity, output, building
floor space, and number of employees).

Environmentally Conscious Products and Services

Waste Reduction Initiatives

We develop environmentally conscious products called Eco-Products

Hitachi has set targets for waste and valuables generation in factories

as part of our initiative to reduce the environmental burden of ourand offices around the world.

products and services as much as possible. Eco-Products must meetcriteria used in the design and development stages, when we evaluate

Reduction in Waste and Valuables Generated per Unit

the extent to which their environmental burden can be reduced. To
promote their development, we have set targets for raising the
Eco-Product sales ratio, a figure measuring Eco-Product sales against

From base year

total product sales. Eco-Products that meet even more demanding

25%

requirements are designated as Eco-Products Select. We are also

reduction

working to produce more of these products.
In fiscal 2014, our Eco-Product sales ratio reached 93% and weincreased the number of Eco-Products Select models by 133, bringing
the total to 343 products.

• FY2005 (base year)• FY2014

Amount Generated
782kt

Amount Generated
692kt

Activity Amount=100%

Activity Amount

=75%

29

10-Year Financial Data
Hitachi, Ltd. and subsidiaries

U.S. GAAPFor the year:

FY2005

FY2006

FY2007

FY2008FY2009FY2010

Revenues¥9,464,801¥10,247,903¥11,226,735¥10,000,369¥8,968,546¥9,315,807

Operating income

256,012

182,512345,516

127,146

202,159444,508

EBIT (earnings before interest and taxes)

289,959214,218

335,729(275,239)

77,815443,812Net income (loss) attributable to Hitachi, Ltd.
stockholders

37,320(32,799)(58,125)(787,337)(106,961)

238,869

Cash flows from operating activities

690,875

615,042

791,837

558,947

798,299

841,554

Cash flows from investing activities(501,362)(786,170)(637,618)(550,008)(530,595)(260,346)

Free cash flows

189,513(171,128)

154,219

8,939

267,704

581,208

Cash flows from financing activities(261,638)

121,259(185,556)

284,388(502,344)(584,176)

Cash dividends declared

36,641

19,974

19,947

9,971—

36,133Capital expenditures (Property, plant andequipment)

954,706

1,048,572

969,087

788,466

546,326

556,873Depreciation (Property, plant andequipment)

451,170

472,175

541,470

478,759441,697382,732

R&D expenditures

405,079

412,534

428,171416,517372,470

395,180

Total assets

10,021,195

10,644,259

10,530,847

9,403,709

8,964,464

9,185,629

Property, plant and equipment

2,460,186

2,688,977

2,653,918

2,393,946

2,219,804

2,111,270

Total Hitachi, Ltd. stockholders’ equity

2,507,773

2,442,797

2,170,612

1,049,951

1,284,658

1,439,865

Interest-bearing debt

2,419,044

2,687,450

2,531,506

2,820,109

2,367,143

2,521,551

Number of employees

327,324

349,996

347,810

361,796359,746

361,745

		Basic¥11.20¥(9.84)¥(17.48)¥(236.86)¥(29.20)¥52.89		Diluted

10.84(9.87)(17.77)(236.87)(29.20)

49.38

11.0

6.0

6.0

3.0

­—

8.0

752.91734.66652.95315.86287.13318.73Operating income ratio

2.7

1.8

3.1

1.3

2.3

4.8

EBIT ratio

3.1

2.1

3.0

–2.8

0.9

4.8

Return on revenues

0.4

–0.3

–0.5

–7.9

–1.2

2.6

Return on equity (ROE)

1.5

–1.3

–2.5

–48.9

–9.2

17.5

Return on assets (ROA)

0.4

–0.3

–0.6

–8.4

–1.2

2.6

D/E ratio (including noncontrollinginterests) (times)

0.68

0.76

0.76

1.29

1.04

1.03

Total Hitachi, Ltd. stockholders’ equity ratio

25.0

22.9

20.6

11.2

14.3

15.7

At year-end:

Per share data:Net income (loss) attributable to Hitachi, Ltd.
stockholders:Cash dividends declared
Total Hitachi, Ltd. stockholders’ equity

Financial ratios:

Notes: 1. In order to be consistent with financial reporting principles and practices generally accepted in Japan, operating income is presented as total revenues less cost of sales and selling,
general and administrative expenses. The Company believes that this is useful to investors in comparing the Company’s financial results with those of other Japanese companies.
Under accounting principles generally accepted in the United States of America, restructuring charges, net gain or loss on sales and disposal of rental assets and other property andimpairment losses for long-lived assets are included as part of operating income.
2. The restructuring charges mainly represent special termination benefits incurred with the reorganization of our business structures, and as the result of the Company and its subsidiaries
reviewing and reshaping the business portfolio.
3. EBIT is presented as income before income taxes less interest income plus interest charges.
4. The Company has changed the number of employees to exclude temporary employees starting from the year ended March 31, 2010. The figures for the prior years have been restatedto reflect the current year’s presentation.
5.	Effective from FY2014, a part of the thermal power generation systems business is classified as a discontinued operation in accordance with the provision of ASC 205-20,“Presentation of Financial Statements - Discontinued Operations,” which was not transferred to MITSUBISHI HITACHI POWER SYSTEMS, LTD. for the business integration in the thermal
power generation systems with Mitsubishi Heavy Industries, Ltd. The results of the discontinued operation are reported separately from continuing operations. In line with thisclassification, “Revenues” and “Operating income” for FY2013 are reclassified.

30

Hitachi, Ltd. | Annual Report 2015

Millions of yen

Millions of yen

IFRS

FY2011FY2012FY2013

FY2014

For the year:

FY2013

FY2014¥9,665,883¥9,041,071¥9,563,791¥9,761,970

Revenues¥9,666,446¥9,774,930

412,280

422,028

538,288

600,479

Adjusted operating income

604,798

641,325

573,218

358,015585,662551,018

EBIT

691,230

534,059

241,301Net income attributable to Hitachi, Ltd.
stockholders

413,877

217,482

347,179

175,326

264,975

447,155

583,508

439,406

447,348

Net cash provided by operating activities

306,777

451,825(195,584)(553,457)(491,363)(610,255)

Net cash used in investing activities(550,179)(612,545)

251,571

30,051(51,957)(162,907)

Free cash flows(243,402)(160,720)(167,838)(180,445)

32,968250,335

Net cash provided by financing activities

228,840

233,206

36,727

47,69050,711

57,944

Cash dividends declared

50,711

57,944

848,716Capital expenditures (Property, plantand equipment)

849,864

850,953

331,228

350,783

354,487

334,814649,234

742,537

849,877

360,358

300,664

329,833

349,614Depreciation (Property, plant andequipment)

412,514341,310351,426

335,515

R&D expenditures

9,418,526

9,809,230

11,016,899

12,395,379

Total assets

11,098,191

12,433,727

2,025,538

2,279,964

2,342,091

2,564,105

Property, plant and equipment

2,258,933

2,472,497

1,771,782

2,082,560

2,651,241

2,930,309

Total Hitachi, Ltd. stockholders’ equity

2,668,657

2,942,281

2,396,454

2,370,079

2,823,049

3,354,616

Interest-bearing debt

3,033,985

3,557,356

323,540

326,240

320,725

333,150

Number of employees

323,919

336,670

At year-end:

Yen

Yen

Per share data:Earnings per share attributable to
Hitachi, Ltd. stockholders:¥76.81¥37.28¥54.86¥49.97

71.86

36.29

54.85

49.93

8.0

10.0

10.5

12.0

382.26431.13549.02606.87

Basic

				Diluted
Cash dividends declared
Total Hitachi, Ltd. stockholders’ equity¥85.69¥45.04

85.66

45.00

10.5

12.0

552.62609.35%%

Financial ratios:
4.3

4.7

5.6

6.2

Adjusted operating income ratio

6.3

6.6

5.9

4.0

6.1

5.6

EBIT ratio

7.2

5.5

3.6

1.9

2.8

2.5

Return on revenues

4.3

2.2

21.6

9.1

11.2

8.6

Return on equity (ROE)

17.5

7.8

3.7

1.8

2.4

1.9

Return on assets (ROA)

3.7

1.7

0.78

0.83

24.0

23.7

0.86

0.75

0.73

0.78

D/E ratio (including noncontrollinginterests) (times)

18.8

21.2

24.1

23.6

Total Hitachi, Ltd. stockholders’ equity ratio

Notes: 1. In order to be consistent with financial reporting principles and practices generally
accepted in Japan, adjusted operating income is presented as total revenues lesscost of sales and selling, general administrative expenses. The Company believes
that this is useful to investors in comparing the Company’s financial results withthose of other Japanese companies.
2. A part of the thermal power generation systems business is classified as a discontinued operation in accordance with the provision of IFRS 5, “Non-current Assets
Held for Sale and Discontinued Operations,” which was not transferred to
MITSUBISHI HITACHI POWER SYSTEMS, LTD for the business integration in thethermal power generation systems with Mitsubishi Heavy Industries, Ltd. The
results of the discontinued operation are reported separately from continuing
operations.

31Financial Highlights

Revenues

Operating income (Adjusted operating income) /Operating income (Adjusted operating income) ratio

Millions of yen

Millions of yen

12,000,000

10,000,000%

700,000

7

600,000

6

500,000

5

400,000

4

300,000

3

200,000

2

100,000

1

8,000,000

6,000,000

4,000,000

2,000,000

0

Japan

05

Asia

06

07

08

09
10
U.S. GAAP

North America

Europe

11

12

13

14

13

14
IFRS

0

05

06

07

08

(FY)

Other Areas

Operating income (left scale)

Total Hitachi, Ltd. stockholders’ equity /Total Hitachi, Ltd. stockholders’ equity ratio

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

0

(FY)

Operating income ratio (right scale)

Return on equity (ROE) / Return on assets (ROA)

Millions of yen%

3,000,000

30

2,500,000

25

2,000,000

20

%
30

20

10

0

1,500,000

15

1,000,000

10

500,000

5

-10

-20

-30

-40

0

05

06

07

08

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

0

-50

05

06

07

08

(FY)

Total Hitachi, Ltd. stockholders' equity (left scale)
Total Hitachi, Ltd. stockholders’ equity ratio (right scale)

ROE

09
10
U.S. GAAP11

12

Capital expenditures / Depreciation

YenYenMillions of yen

16

0

12

14

13

14
IFRS

(FY)

14
IFRS

(FY)

ROA

Net income (loss) attributable to Hitachi, Ltd. stockholders per
share, basic / Cash dividends declared per share100

13

1,200,000

800,000

–100

8

–200

4

400,000

–300

05

06

07

08

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

Net income (loss) attributable to Hitachi, Ltd. stockholders per share, basic (left scale)
Cash dividends declared per share (right scale)

32

0

0

05

06

(FY)
Capital expenditures

07

08

09
10
U.S. GAAP

Depreciation

11

12

13

14

13

Hitachi, Ltd. | Annual Report 2015

EBIT / EBIT ratio

Net income (loss) attributable to Hitachi, Ltd. stockholders /Return on revenues

Millions of yen%

800,000

8

600,000

6

400,000

4

200,000200–200,000–2–400,000

05

06

EBIT (left scale)

07

08

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

–4

Millions of yen6400,000

4

200,000200–200,000–2–400,000–4–600,000–6–800,000–8–1,000,000

EBIT ratio (right scale)Times

900,000

3,000,000

1.2

450,000

2,000,000

0.8

01,000,000

0.4–450,000

0–900,000

08

Interest-bearing debt (left scale)

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

D/E ratio (right scale)

09
10
U.S. GAAP

06

07

08

09
10
U.S. GAAP

Cash flows from operating activities

Millions of yen

11

12

13

14

13

14
IFRS

–10

(FY)

11

12

13

14

Cash flows from investing activities

13

14
IFRS

(FY)

Free cash flows

Number of employees%

500,000

5.0

500,000

400,000

4.0

400,000

300,000

3.0

300,000

200,000

2.0

200,000

100,000

1.0

100,000

05

05

(FY)

R&D expenditures / R&D expenditures as a percentage ofconsolidated revenues

008Millions of yen

1.6

07

07

Cash flows

4,000,000

06

06

Net income (loss) attributable to Hitachi, Ltd. stockholders (left scale)
Return on revenues (right scale)Millions of yen

05

05

(FY)

Interest-bearing debt / D/E ratio

0%

600,000

06

07

08

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

0

(FY)

0

05

06

07

08

09
10
U.S. GAAP

11

12

13

14

13

14
IFRS

(FY)

R&D expenditures (left scale)R&D expenditures as a percentage of consolidated revenues (right scale)33

Segment Information

Revenues (left scale)

Information & Telecommunication
Systems

Operating income ratio (Adjusted operating income ratio) (right scale)

Main products and services

Revenues and Profit

Systems Integration,(Billions of yen)

Consulting,

1,934.9
2,000

Storage,
Software,

7

6.8%
6.6%

Cloud Services,
Servers,

Share of Revenues
(%)

3,000

2,032.1
5.7%

5.5%

2,034.0

1,943.9
5.9%

6

5.2%

5.0%
1,000

5

Telecommunications & Network,
13

14

13

U.S. GAAP

14
IFRS

0
(FY)

Hitachi Virtual Storage Platform G1000

Power Systems

Main products and services

Revenues and Profit

Thermal, Nuclear and(Billions of yen)

Renewable Energy Power
Generation Systems,
Transmission & Distribution
Systems

800

727.8
24.5%

600

Social Infrastructure & Industrial Systems

466.7

400
3.1%

5MW Downwind-type Wind Turbines
Hitachi Wind Power Ltd.
Fukashiba wind power station in Kashima

0

–0.6%

4.1%

13

14

13

14
IFRS

Main products and services

Revenues and Profit

Industrial Machinery and Plants,(Billions of yen)

20

4%
Overseas Revenue Ratio
FY2014 (IFRS)

–10

8

6.7%

6.2%
1,200

5.5%

5.2%

6

4.7%

4.1%

FY2014 (IFRS)

0

(%)

5.1%

33%

10

(FY)

1,599.5

1,506.2

1,501.4

Overseas Revenue Ratio

11%
Share of Revenues

1,646.8

1,800

Escalators,
Rail Systems

0.8%
0.1%

–1.3%

U.S. GAAP

Elevators,

30

472.6

200

19%
Share of Revenues

(%)

724.9
21.9%

FY2014 (IFRS)FY2014 (IFRS)

4.6%

ATMs
0

EBIT ratio (right scale)

FY2014 (IFRS)

15%
Overseas Revenue Ratio

600 3.9%4FY2014 (IFRS)
0Class800 train for the UK Intercity Express
Programme (IEP)Electronic Systems & Equipment

13

14

13

U.S. GAAP

Main products and services

Revenues and Profit

Semiconductor Manufacturing(Billions of yen)

Equipment,

Medical Electronics Equipment,

1,132.3

1,131.6
6.4%

1,117.6

6.1%
1,000

5.3%

5.3%
4.7%

5.6%

5.5%

6

4.7%

Construction Machinery

4

13

14

13

U.S. GAAP14IFRSMain products and services

Revenues and Profit

Hydraulic Excavators,(Billions of yen)

(%)

779.9

815.7

802.9

10
9.2%

8.3%

7.9%

400

7.4%
7.3%

7.1%
7.0%

34

13
U.S. GAAP

1456%
Share of Revenues

12

767.3
800 9.6%

0

0
(FY)

1,200

Mining Machinery

Hitachi Construction Machinery’s Ultra Large
Hydraulic Excavator and Mining Dump Truck

10%
FY2014 (IFRS)

0

Wheel Loaders,

FY2014 (IFRS)

Overseas Revenue Ratio

500

Power Tools
Proton Beam Therapy System “PROBEAT-RT”
Proton Beam Therapy Center, Hokkaido University
Hospital

40%
Share of Revenues(%)
8

1,116.7

Advanced Industrial Products,

0
(FY)

1,500

Test and Measurement
Equipment,

14
IFRS

13

14
IFRS

8

FY2014 (IFRS)

7%
Overseas Revenue Ratio
FY2014 (IFRS)

0
(FY)

73%

Hitachi, Ltd. | Annual Report 2015

Revenues (left scale)High Functional Materials & Components

Main products and services

Operating income ratio (Adjusted operating income ratio) (right scale)

Share of Revenues

Revenues and Profit

Semiconductor and Display(Billions of yen)

Related Materials, Circuit Boards

ＥＢＩＴ率

and Materials, Automotive Parts

営業利益率(Molded Plastics, etc.), Energy

(%)

1,800

8.6%
1,504.5
8.2%

1,363.2

1,529.4

Magnetic Materials and91,385.1
8.1%
7.9%

1,200

Storage Devices, Specialty Steels,

7.5%

7.5%

7.1%

7.1%

8

14%

7

FY2014 (IFRS)Casting Components andAutomotive Systems

FY2014 (IFRS)

Overseas Revenue Ratio

600

Components, High Grade

Hitachi Chemical’s Molded Plastic Rear Door Modules
for Automotive

EBIT ratio (right scale)0

Materials, Wires and Cables

13

14

13

U.S. GAAP14IFRSMain products and services

Revenues and Profit

Engine Management Systems,(Billions of yen)

(%)
9
936.9

892.1

Drive Control Systems,

936.9

892.4

6.0%

Car Information Systems

800 5.3%

50%
Share of Revenues

1,200Electric Powertrain Systems,

0
(FY)

5.1%

4.9%

6

3.7%

3.7%
400

3

FY2014 (IFRS)

9%Overseas Revenue Ratio
FY2014 (IFRS)

0.6%
0

13

14

ＥＢＩＴ率

Refrigerators,

営業利益率

900
740.0

5

3.6%

300

0

3.8%

3.8%

13

14

Overseas Revenue Ratio

13

14
IFRS

Revenues and Profit(Billions of yen)

0
(FY)

1,800

6
1,454.9

1,388.9

4.2%
1,210.7
3.3%

1,274.2
4.0%
3.3%

4

2.9%

0

Financial Services

FY2014 (IFRS)

13

14

13

14
IFRS

Main products and services

Revenues and Profit

Leasing,(Billions of yen)

(%)
10.7%
10.2%

10.2%
9.8%
338.5

0
(FY)

355.5

30%
Share of Revenues

600

400

12%

2

1.6%

U.S. GAAP

Loan Guarantees

FY2014 (IFRS)

Overseas Revenue Ratio

2.2%
1.4%

41%
Share of Revenues

(%)

1,200

Hitachi Transport System’s truck and Metropolitan
East Distribution Center

7%
FY2014 (IFRS)

Logistics,

600

FY2014 (IFRS)

3Main products and services

Property Management

4

3.3%

2.7%

U.S. GAAP

Optical Disk Drives,

4.6%
754.2

744.0

4.1%
600

52%
Share of Revenues

(%)
780.1

3.4%

Hitachi Appliances’ Large
Capacity Refrigerator “Vacuum
Compartment” X series

0(FY)(Billions of yen)

Room Air Conditioners,
Washing Machines

14
IFRS

Revenues and Profit

Main products and services
Air-Conditioning Equipment,

Others (Logistics and Other services)

13

U.S. GAAP

Hitachi Automotive Systems’ Inverter

Smart Life & Ecofriendly Systems

0.4%

10.9%
9.7%
9.6%

12

9.9%
356.2

342.6

9

FY2014 (IFRS)

3%
Overseas Revenue Ratio

6200

FY2014 (IFRS)
0

Hitachi Capital’s Hitachi Corporate Card

13
U.S. GAAP

14

13

14
IFRS

0
(FY)

38%
35

Financial Section

Operating and Financial Review

Operating Results
The Company’s consolidated financial statements have been preparedin conformity with IFRS since the year ended March 31, 2015. The
figures in the year ended March 31, 2014 are also based on IFRS.

Summary
Billions of yen

Years ended March 31:
Revenues

2014

2015

Percentchange¥9,666.4¥9,774.9

1%

EBIT*

691.2

534.0

–23%

Income fromcontinuing operations,
before income taxes

678.4

518.9

–24%

Net income attributable
to Hitachi, Ltd.
stockholders

413.8

217.4

–47%

* EBIT represents earnings before interest and taxes, which is presented asincome from continuing operations, before income taxes less interest income
plus interest charges.

Analysis of Statement of Operations
Revenues increased 1% to ¥9,774.9 billion, as compared with theyear ended March 31, 2014. This increase was attributable toincreased revenues in every segment, particularly the Information &Telecommunication Systems, Social Infrastructure & Industrial Systems
and High Functional Materials & Component segments, except for thePower Systems and Others (Logistics and Other services) segments.
Selling, general and administrative expenses increased 3% to¥1,935.3 billion, as compared with the year ended March 31, 2014,
and the ratio of selling, general and administrative expenses to revenues was 20%, which was the same level as the year ended March
31, 2014.
Other income decreased ¥199.1 billion to ¥9.4 billion and otherexpenses increased ¥3.2 billion to ¥167.7 billion, as compared withthe year ended March 31, 2014. The details are as follows.
Net loss on sales and disposal of fixed assets increased ¥9.7 billion
to ¥16.8 billion, as compared with the year ended March 31, 2014.
This increase was due mainly to loss on disposal of fixed assets related
to software in the Information & Telecommunication Systems segment.

36

Impairment losses decreased ¥1.0 billion to ¥42.1 billion, as
compared with the year ended March 31, 2014. The Power Systems
segment recognized impairment losses for the transmission &distribution equipment business.
Net loss on business reorganization and others in the year ended
March 31, 2015 was ¥55.0 billion, as compared with net gain of¥198.0 billion in the year ended March 31, 2014 owing to the effectsof the integration of the thermal power generation systems business
into MITSUBISHI HITACHI POWER SYSTEMS, LTD.
Restructuring charges was ¥26.6 billion, which was almost thesame as the year ended March 31, 2014. This mainly consisted of
special termination benefits expensed for the voluntary early retirement
program to rationalize the domestic workforce at Hitachi Chemical
Company, Ltd. in the High Functional Materials & Components segment.
Expenses related to competition law and others decreased ¥50.9
billion to ¥25.8 billion, as compared with the year ended March 31,
2014, despite posting expenses in relation to settlements of certain
losses involving dispute with customers. This decrease was due mainly
to the absence of expenses related to a plea agreement with theUnited States Department of Justice regarding alleged violations of
U.S. antitrust laws in the Automotive Systems segment in the year
ended March 31, 2014.
Financial income (excluding interest income) decreased ¥25.7
billion to ¥7.7 billion and financial expenses (excluding interest
charges) increased ¥1.3 billion to ¥3.2 billion, as compared with theyear ended March 31, 2014, respectively. This was due mainly to theloss on financial instruments measured at fair value through profit orloss (“FVTPL financial instruments”) and exchange loss in the year
ended March 31, 2015, while net gain on FVTPL financial instruments
and currency exchange gain were recorded in the year ended March
31, 2014, respectively.
Share of profits of investments accounted for using the equity
method increased ¥35.7 billion to ¥46.6 billion due mainly to profits
of investments in MITSUBISHI HITACHI POWER SYSTEMS, LTD.,as compared with the year ended March 31, 2014.
EBIT decreased ¥157.1 billion to ¥534.0 billion, as compared withthe year ended March 31, 2014.
Interest income decreased ¥1.6 billion to ¥12.5 billion and interest
charges increased ¥0.6 billion to ¥27.5 billion, as compared with theyear ended March 31, 2014, respectively.

Hitachi, Ltd. | Annual Report 2015

Income from continuing operations, before income taxes decreased¥159.5 billion to ¥518.9 billion, as compared with the year ended
March 31, 2014.
Income taxes decreased ¥24.4 billion to ¥122.0 billion, as compared with the year ended March 31, 2014, due mainly to deferred
tax assets newly recognized in the year ended March 31, 2015.
Loss from discontinued operations increased ¥46.5 billion to¥53.5 billion, as compared with the year ended March 31, 2014.
Net income decreased ¥181.5 billion to ¥343.4 billion,
as compared with the year ended March 31, 2014.
Net income attributable to non-controlling interests increased¥14.8 billion to ¥125.9 billion, as compared with the year ended
March 31, 2014.
As a result of the foregoing, net income attributable to Hitachi, Ltd.
stockholders decreased ¥196.3 billion to ¥217.4 billion, as comparedwith the year ended March 31, 2014.

Operations by Segment
The following is an overview of results of operations by segment.
Revenues for each segment include intersegment transactions.
Segment profit is measured by EBIT.
(Information & Telecommunication Systems)
Revenues increased 5% to ¥2,034.0 billion, as compared with theyear ended March 31, 2014, due mainly to solid performances bysystem solutions business centered on public systems and financial
systems and higher revenues from storage solutions business as aresult of the effects of foreign exchange rate fluctuations. This
increase was also attributable to the positive impact of the consolidation of Prizm Payment Services Pvt. Ltd. in India and the establishmentof Hitachi Systems Power Services, Ltd., both of which were implemented in March 2014. However, the increase in revenues waspartially offset by decreased revenues in the telecommunications &network business owing to lower demand.
Segment profit decreased ¥8.9 billion to ¥106.0 billion, as comparedwith the year ended March 31, 2014. This decrease was due mainly
to significantly lower profits in the telecommunications & network
business and posting of loss on sales and disposal of fixed assets andimpairment loss, which was partially offset by the effect of terminationof unprofitable projects in the system solutions business.
(Power Systems)
Revenues decreased 36% to ¥466.7 billion, as compared with theyear ended March 31, 2014, due mainly to the effect of the transferof the thermal power generation systems business. This decrease waspartially offset by an increase in preventive maintenance services fornuclear power generation systems business.
Segment profit decreased ¥174.7 billion to ¥3.8 billion, as
compared with the year ended March 31, 2014, due mainly to lower
revenues. This decrease was also attributable to increased losses andposting impairment losses on property, plant and equipment in thetransmission & distribution business, and the absence of net gain on
business reorganization and others associated with the transfer ofthermal power generation systems business in the year ended March
31, 2014. However, the decreased profit was partially offset byposting of share of profits of investments accounted for using theequity method for MITSUBISHI HITACHI POWER SYSTEMS, LTD.

37

Financial Section(Social Infrastructure & Industrial Systems)
Revenues increased 6% to ¥1,599.5 billion, as compared with theyear ended March 31, 2014. This was due mainly to higher sales inthe elevators and escalators business mainly in China, the industrial
equipment business, and the railway systems business in the U.K.
Segment profit increased ¥28.5 billion to ¥106.5 billion, as
compared with the year ended March 31, 2014. This increase wasdue mainly to higher profits in the elevators and escalators businessand the industrial equipment business associated with higher revenues,
reduced effect of unprofitable overseas infrastructure projects that
occurred in the year ended March 31, 2014 and posting of net gain
on business reorganization and others related to Mitsubishi-Hitachi
Metals Machinery, Inc.
(Electronic Systems & Equipment)
Revenues increased 1% to ¥1,131.6 billion, as compared with theyear ended March 31, 2014. This increase was attributable to higher
revenues at Hitachi Kokusai Electric Inc., resulting primarily fromhigher sales of semiconductor manufacturing equipment, and higher
revenues at Hitachi Koki Co., Ltd., resulting from higher sales in Asia
and North America and the effect of foreign exchange rate fluctuations. On the other hand, revenues at Hitachi High-Technologies
Corporation decreased due mainly to winding down the LCDs manufacturing equipment business and lower sales of advanced industrial
products and of mobile phones in the U.S., which was partially offset
by higher sales of medical analysis systems and semiconductor
manufacturing equipment.
Segment profit increased ¥11.4 billion to ¥63.7 billion, as comparedwith the year ended March 31, 2014. This increase was due mainly toincreased revenues and the effects of business restructuring.
(Construction Machinery)
Revenues increased 2% to ¥815.7 billion, as compared with the year
ended March 31, 2014. This increase was due mainly to the positive
impact of foreign exchange rate fluctuations and higher sales ofhydraulic excavators and other items in North America and Europe,
partially offset by lower demand in China and Southeast Asia.
Segment profit decreased ¥2.5 billion to ¥60.5 billion, as comparedwith the year ended March 31, 2014. This decrease was due mainly
to substantially lower sales in China and decline in profitability owing
to changes in product mix.

38

(High Functional Materials & Components)
Revenues increased 10% to ¥1,529.4 billion, as compared with theyear ended March 31, 2014. This increase was due mainly to theeffects of the consolidation of Waupaca Foundry Holdings, Inc. byHitachi Metals, Ltd. and solid performances for automobile products foroverseas including North America and China and certain electronicsrelated materials.
Segment profit increased ¥19.7 billion to ¥123.9 billion, as
compared with the year ended March 31, 2014. This increase wasdue mainly to higher revenues, posting gain on sale of shares ofa consolidated subsidiary by Hitachi Metals, Ltd., the effect of cost
reduction and an increase in exchange gain, partially offset by postingof restructuring charges associated with the voluntarily early retirement
program implemented by Hitachi Chemical Company, Ltd.
(Automotive Systems)
Revenues increased 5% to ¥936.9 billion, as compared with theyear ended March 31, 2014. This increase was attributable to robust
demand in overseas automobile markets, such as North America
and China.
Segment profit increased ¥31.5 billion to ¥35.0 billion, as comparedwith the year ended March 31, 2014, due mainly to the increased revenues and a decrease in expenses related to competition law and others.
(Smart Life & Ecofriendly Systems)
Revenues increased 1% to ¥754.2 billion, as compared with the year
ended March 31, 2014. This increase was attributable to higher sales
in overseas markets for the air-conditioning business and the home
appliance business, partially offset by the decreased sales due to theeffects of the consumption tax rate increase.
Segment profit increased ¥6.4 billion to ¥34.5 billion, as comparedwith the year ended March 31, 2014, due mainly to the increase inrevenues.

Hitachi, Ltd. | Annual Report 2015

(Others (Logistics and Other services))
Revenues decreased 12% to ¥1,274.2 billion, as compared with theyear ended March 31, 2014. This decrease was attributable to theconversion of Hitachi Maxell, Ltd., which had been a consolidated
subsidiary, into an equity-method affiliate, which was partially offset
by increased revenues at Hitachi Transport System, Ltd. due mainly tolaunch of large-scale projects and the consolidation of domestic andoverseas companies in the year ended March 31, 2014.
Segment profit increased ¥28.2 billion to ¥51.0 billion, as comparedwith the year ended March 31, 2014, despite lower revenues. This
increase was due mainly to a decrease in expenses related to businessrestructuring and posting of gain on sales and disposal of fixed assets.
(Financial Services)
Revenues increased 4% to ¥356.2 billion, as compared with the year
ended March 31, 2014. This increase was due mainly to strong performance in the overseas business, particularly in Europe.
Segment profit increased ¥2.6 billion to ¥35.4 billion, as comparedwith the year ended March 31, 2014, due mainly to the increase inrevenues.

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

2014

2015

PercentchangeJapan¥5,310.3¥5,220.3−2%

Overseas Revenues
Subtotal

4,356.1

4,554.5

5%

Years ended March 31:

Asia2,127.4

2,178.2

2%

North America

914.5

1,064.1

16%

Europe

772.6

841.9

9%

Other Areas

541.3

470.2

−13%

¥9,666.4¥9,774.9

1%

Total Revenues

Japan
Revenues in Japan were ¥5,220.3 billion, a decrease of 2% comparedwith the year ended March 31, 2014. This decrease was due mainly
to the decrease in revenues in the Power Systems segment owing to
the effects of the integration of the thermal power generation systems
business, and the decrease in revenues in the Others (Logistics andOther services) segment owing to the conversion of Hitachi Maxell,
Ltd. into an equity-method affiliate, partially offset by the increases inrevenues in the Information & Telecommunication Systems segment.

Overseas
Overseas revenues increased 5% to ¥4,554.5 billion, as comparedwith the year ended March 31, 2014, and the ratio to total revenues
was 47%, compared with 45% for the year ended March 31, 2014.
(Asia)
Revenues in Asia were ¥2,178.2 billion, an increase of 2% comparedwith the year ended March 31, 2014. This increase was due mainly tothe increases in revenues in the Social Infrastructure & Industrial
Systems segment, which reported higher sales of elevators and escalators in China, and in the Information & Telecommunication Systems,
High Functional Materials & Components and Smart Life & Ecofriendly
Systems segment, partially offset by the decreases in revenues in thePower Systems, Construction Machinery and Others (Logistics andOther services) segments.
(North America)
Revenues in North America were ¥1,064.1 billion, an increase of
16% compared with the year ended March 31, 2014. This increase
was due mainly to the increase in revenues in the High Functional
Materials & Components segment as a result of the effects of theconsolidation of Waupaca Foundry Holdings, Inc. by Hitachi Metals,Ltd., and in the Information & Telecommunication Systems,
Construction Machinery and Automotive Systems segments, partially
offset by the decreases in revenues in the Power Systems and Others(Logistics and Other services) segments.
(Europe)
Revenues in Europe were ¥841.9 billion, an increase of 9% comparedwith the year ended March 31, 2014. This increase was due mainly tothe increases in revenues in the Social Infrastructure & Industrial
Systems segment, which reported increased revenues from the railway
systems business in the U.K., in the Electronic Systems & Equipment
segment, which reported higher sales of semiconductor manufacturing
equipment and medical analysis systems at Hitachi High-Technologies
Corporation, and in the Financial Services segment, which reported
increased revenues in the U.K.
(Other Areas)
Revenues in other areas were ¥470.2 billion, a decrease of 13%
compared with the year ended March 31, 2014. This decrease wasdue mainly to the decrease in revenues in the Power Systems segmentowing to the effects of the integration of the thermal power generation systems business, partially offset by the increase in revenues in
the Construction Machinery segment due to increased sales of mining
machinery in Africa and Australia, etc.

39

Financial Section

Liquidity and Capital Resources
Our management considers maintaining an appropriate level ofliquidity and securing adequate funds for current and future business
operations to be important financial objectives. Through efficientmanagement of working capital and selective investment in newplants and equipment, we are working to optimize the efficiency of
capital utilization throughout our business operations. We endeavor
to improve our group cash management by centralizing suchmanagement among us and our overseas financial subsidiaries. Ourinternal sources of funds include cash flows generated by operating
activities and cash on hand. Our management also considers shortterm investments to be an immediately available source of funds. In
addition, we raise funds both in the capital markets and fromJapanese and international commercial banks in response to ourcapital requirements. Our management’s policy is to finance capital
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. In order to flexibly
access funding, we maintain our shelf registration with the maximum
outstanding balance of ¥300.0 billion and issued the straight bondsof ¥60.0 billion on December 13, 2013 for the purpose of repaying
short-term debts (commercial paper) and meeting demand for funds
for growth of the Social Innovation Business.
We maintain commitment line agreements with a number ofdomestic 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 the lending banks, as well as anothercommitment line agreement with a contract term of three years andtwo months ending in July 2016. These committed credit arrangements are, in general, subject to financial and other covenants andconditions both prior to and after drawdown, the most restrictive of
which require maintenance of minimum issuer rating or long-term
debt ratings from Rating and Investment Information, Inc. (R&I) of
BBB-. As of March 31, 2015, our unused commitment lines totaled¥524.7 billion, including these of ¥400.0 billion which the Company
maintained.

40

We receive debt ratings from Moody’s Japan K.K. (Moody’s),Standard & Poor’s Rating Japan (S&P), as well as R&I. Our debt ratings
as of March 31, 2015 were as follows.
Rating Company

Long-term

Short-term

Moody’s

A3

P-2

S&P

A–

A-2

R&I

A+

a-1

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

Cash Flows
Billions of yen

2014

2015

Net cash provided by operating activities¥ 306.7¥ 451.8Net cash used in investing activities(550.1)(612.5)Net cash provided by financing activities

228.8

233.2

Effect of exchange rate changes
on cash and cash equivalents

51.8

68.5

Net increase in cash and cash equivalents

37.3

141.0

Years ended March 31:

Cash and cash equivalents at
beginning of yearCash and cash equivalents at end of year

523.3

560.6

¥ 560.6¥ 701.7(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2015 decreased ¥181.5
billion to ¥343.4 billion, as compared with the year ended March 31,
2014. Increase in trade receivables in the year ended March 31, 2015
decreased ¥199.1 billion to ¥201.4 billion, as compared with the year
ended March 31, 2014, due mainly to promoting collection. Increase
in inventories in the year ended March 31, 2015 increased ¥74.0
billion to ¥116.3 billion, as compared with the year ended March 31,
2014. Decrease in trade payables was ¥18.0 billion in the year ended
March 31, 2015, compared with the increase in trade payables of¥33.7 billion in the year ended March 31, 2014. As a result of theforegoing, the net cash provided by operating activities was ¥451.8
billion in the year ended March 31, 2015, an increase of ¥145.0
billion compared with the year ended March 31, 2014.

Hitachi, Ltd. | Annual Report 2015

(Cash Flows from Investing Activities)
A net sum of ¥568.6 billion in the year ended March 31, 2015 wasrecorded as investments related to property, plant and equipment,
where the proceeds from sale of property, plant, equipment andintangible assets, the proceeds from sale of leased assets and thecollection of lease receivables were subtracted from the amount of
the purchase of property, plant and equipment, the purchase of intangible assets and the purchase of leased assets, a decrease of ¥39.0
billion from the year ended March 31, 2014. Purchase of investments
in securities and other financial assets (including investments in
subsidiaries and investments accounted for using the equity method)
increased by ¥57.3 billion and amounted to ¥152.8 billion, due
mainly to the acquisition related to Waupaca Foundry Holdings, Inc.
in the year ended March 31, 2015. Proceeds from sale of investments
in securities and other financial assets (including investments in
subsidiaries and investments accounted for using the equity method)
decreased by ¥8.0 billion and amounted to ¥121.6 billion in the year
ended March 31, 2015. As a result of the foregoing, the net cashused in investing activities was ¥612.5 billion in the year ended March
31, 2015, an increase of ¥62.3 billion compared with the year ended
March 31, 2014.
(Cash Flows from Financing Activities)
Net increase in short-term debt in the year ended March 31, 2015was ¥136.9 billion, whereas net decrease of ¥66.2 billion was recordedin the year ended March 31, 2014. A net sum of ¥206.0 billion wasrecorded as proceeds related to long-term debt, where the payments
on long-term debt were subtracted from the proceeds from long-term
debt, a decrease of ¥192.2 billion from the year ended March 31,
2014. As a result of the foregoing, the net cash provided by financing
activities was ¥233.2 billion in the year ended March 31, 2015, anincrease of ¥4.3 billion from the year ended March 31, 2014.
As a result of the above items, as of March 31, 2015, cash andcash equivalents amounted to ¥701.7 billion, net increase of ¥141.0
billion from March 31, 2014. Free cash flows, the sum of cash flows
from operating and investing activities, represented an outflow of¥160.7 billion in the year ended March 31, 2015, a decrease of ¥82.6
billion from the year ended March 31, 2014.

Assets, Liabilities and Equity
As of March 31, 2015, total assets amounted to ¥12,433.7 billion,
an increase of ¥1,335.5 billion from March 31, 2014. This increase
was due primarily to increases in the value of assets denominated inforeign currency owing to the depreciation of yen, the acquisition of
Waupaca Foundry Holdings, Inc. and increases in trade receivables
resulting from increased revenues. Cash and cash equivalents as ofMarch 31, 2015 amounted to ¥701.7 billion, an increase of ¥141.0
billion from the amount as of March 31, 2014.
As of March 31, 2015, total interest-bearing debt, the sum ofshort-term debt and long-term debt, amounted to ¥3,557.3 billion,
an increase of ¥523.3 billion from March 31, 2014. As of March 31,
2015, short-term debt, consisting mainly of borrowings from banks
and commercial paper, amounted to ¥977.7 billion, an increase of¥202.1 billion from March 31, 2014, due mainly to the issuance ofcommercial paper by the Company. As of March 31, 2015, long-term
debt (excluding current portion), consisting mainly of debentures,
debentures with stock acquisition rights, medium-term notes andloans principally from banks and insurance companies, amounted to¥2,096.1 billion, an increase of ¥379.1 billion from March 31, 2014,
due mainly to increased demand for investment funds to achieve
growth in the Social Innovation Business, funding for the acquisitionof Waupaca Foundry Holdings Inc., and higher demand for funds inline with business expansion in the Financial Services segment.
As of March 31, 2015, total Hitachi, Ltd. stockholders’ equity
amounted to ¥2,942.2 billion, an increase of ¥273.6 billion fromMarch 31, 2014, due primarily to posting of net income attributable
to Hitachi, Ltd. stockholders and an increase in the accumulated othercomprehensive income owing primarily to the depreciation of yen. As
a result, the ratio of total Hitachi, Ltd. stockholders’ equity to total
assets as of March 31, 2015 was 23.7%, compared with 24.0% as ofMarch 31, 2014.
Non-controlling interests as of March 31, 2015 was ¥1,354.0 billion,
an increase of ¥153.8 billion from March 31, 2014.
Total equity (the sum of total Hitachi, Ltd. stockholders’ equity andnon-controlling interests) as of March 31, 2015 was ¥4,296.3 billion,
an increase of ¥427.5 billion from March 31, 2014. The ratio of interestbearing debt to total equity increased to 0.83, compared with 0.78 asof March 31, 2014.

41

Financial Section

Consolidated Statements of Financial Position
Hitachi, Ltd. and Subsidiaries
March 31, 2015 and 2014

Millions of yen

AssetsCurrent assets
Cash and cash equivalents

2014

2015

¥   560,657¥   701,703

Trade receivables

2,573,386

2,870,042

Lease receivables

321,438

337,353

Inventories

1,339,001

1,458,119

Other current assets

467,601

515,195

		 Total current assets

5,262,083

5,882,412

Investments accounted for using the equity method

599,490681,623

Investments in securities and other financial assets

1,291,000

1,449,734

610,830

680,620

2,258,933

2,472,497

Non-current assets

Lease receivables
Property, plant and equipment
Intangible assets

732,238

933,582

Other non-current assets

343,617333,259

		 Total non-current assets

5,836,108

6,551,315¥11,098,191¥12,433,727

			Total assets

42

Hitachi, Ltd. | Annual Report 2015

Millions of yen

Liabilities
Current liabilities
Short-term debt

2014

2015

¥   775,516¥   977,701

Current portion of long-term debt

541,449

483,521

Other financial liabilities

269,501

296,425

Trade payables

1,347,184

1,426,523

Accrued expenses

709,671759,191

Advances received

296,265374,241

Other current liabilities

360,858

461,876

		 Total current liabilities

4,300,444

4,779,478

1,717,020

2,096,134

Non-current liabilities
Long-term debt
Other financial liabilities

99,742

117,535

Retirement and severance benefits

779,876

724,223

Other non-current liabilities

332,278

420,015

		 Total non-current liabilities

2,928,916

3,357,907

			Total liabilities

7,229,360

8,137,385

Common stock

458,790458,790

Capital surplus

617,496

608,416

1,277,970

1,477,517

317,547

401,100(3,146)(3,542)

		 Total Hitachi, Ltd. stockholders’ equity

2,668,657

2,942,281

Non-controlling interests

1,200,174

1,354,061

		Total equity

3,868,831

4,296,342¥11,098,191¥12,433,727

EquityHitachi, Ltd. stockholders’ equity

Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost			 Total liabilities and equity

43

Financial Section

Consolidated Statements of Profit or Loss
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2015 and 2014

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 of investments accounted for using the equity method
EBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income from continuing operations, before income taxes
Income taxes
Income from continuing operations
Loss from discontinued operation
Net income
Net income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests

2014

2015

¥ 9,666,446(7,173,747)
2,492,699(1,887,901)
208,531(164,537)
33,446(1,931)
10,923
691,230
14,181(26,913)
678,498(146,540)
531,958(6,955)¥  525,003¥ 9,774,930(7,198,232)
2,576,698(1,935,373)
9,415(167,781)
7,727(3,284)46,657534,059
12,529(27,594)
518,994(122,075)
396,919(53,501)¥  343,418

413,877
111,126

217,482
125,936Yen

Earnings per share from continuing operations, attributable to
Hitachi, Ltd. stockholders
Basic
DilutedEarnings per share attributable to Hitachi, Ltd. stockholders
Basic
Diluted¥87.1387.10¥56.12
56.08

85.69
85.66

45.04
45.00

Consolidated Statements of Comprehensive Income
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2015 and 2014

Millions of yen

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

44

2014

2015

¥525,003¥343,418

102,732
64,206280
167,218

57,95727,0395,633
90,629122,114(20,014)
26,093
128,193

188,619(16,850)(74,604)
97,165295,411¥820,414

187,794¥531,212

665,372
155,042

337,578
193,634

Hitachi, Ltd. | Annual Report 2015

Consolidated Statements of Changes in Equity
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2015 and 2014

Millions of yen

2014

Commonstock

CapitalsurplusRetainedearnings

Accumulated
othercomprehensive
income¥458,790¥622,946¥  907,970¥ 70,567¥(1,565)

Reclassified into retained
earnings

–

–

4,427

(4,427)

–

–

–

–

Net income––

413,877––

413,877

111,126

525,003

Other comprehensive income

–

–

–

251,495–

251,495

43,916295,411

Dividends to Hitachi, Ltd.
stockholders––(48,304)––(48,304)–(48,304)

Dividends to non-controllinginterests

–

–

–

–

–

–

(26,345)(26,345)

Acquisition of treasury stock

–

–

–

–

(4,431)(4,431)–(4,431)

Sales of treasury stock

–

429

–

–

2,850

3,279

–

3,279

Balance at beginning of year

Treasurystock,
at costTotal Hitachi, Ltd.
stockholders’Noncontrolling
equityinterests¥2,058,708¥1,098,859

Total
equity¥3,157,567

Changes in equity

Changes in non-controllinginterests–(5,879)

–

(88)

–

(5,967)(27,382)(33,349)

Total changes in equity–(5,450)370,000

246,980(1,581)

609,949

101,315

711,264

Balance at end of year

¥458,790¥617,496¥1,277,970¥317,547¥(3,146)¥2,668,657¥1,200,174¥3,868,831

Millions of yen

2015

Commonstock

CapitalsurplusRetainedearnings

Accumulated
othercomprehensive
income¥458,790¥617,496¥1,277,970¥317,547¥(3,146)Reclassified into retained
earnings––

37,597(37,597)

–

–

–

–

Net income––

217,482––

217,482

125,936

343,418

Other comprehensive income

–

–

–

120,096–

120,096

67,698

187,794Dividends to Hitachi, Ltd.
stockholders––(55,532)––(55,532)–(55,532)

Dividends to non-controllinginterests

–

–

–

–

–

–

(32,578)(32,578)

Acquisition of treasury stock

–

–

–

–

(421)

(421)

–

(421)

Sales of treasury stock

–

3

–

–

25

28

–

28

Changes in non-controllinginterests

Balance at beginning of year

Treasurystock,
at costTotal Hitachi, Ltd.
stockholders’Noncontrolling
equityinterests¥2,668,657¥1,200,174

Total
equity¥3,868,831

Changes in equity–(9,083)

–

1,054

–

(8,029)(7,169)(15,198)

Total changes in equity–(9,080)199,547

83,553(396)

273,624

153,887

427,511

Balance at end of year

¥458,790¥608,416¥1,477,517¥401,100¥(3,542)¥2,942,281¥1,354,061¥4,296,342

45

Financial Section

Consolidated Statements of Cash Flows
Hitachi, Ltd. and Subsidiaries
Years ended March 31, 2015 and 2014

Millions of yen

2014

2015

¥ 525,003¥ 343,418

455,343

481,021

Cash flows from operating activities:
Net income
		 Adjustments to reconcile net income to net cash provided byoperating activities
		 Depreciation and amortization
		Impairment losses

43,116

42,109

		Income taxes

146,543

121,467

		 Share of profits of investments accounted for using the equity
method(10,892)(46,589)

		 Financial income and expenses(11,939)

7,897

		 Net (gain) loss on business reorganization and others(198,032)

55,016

		 Losses on sale of property, plant and equipment

4,597

16,355

		 Increase in trade receivables(400,550)(201,423)

		 Increase in inventories(42,265)(116,328)

		 Increase in other assets(80,315)(19,724)

		 Increase (decrease) in trade payables

33,739(18,041)

		 Decrease in retirement and severance benefits(66,086)(65,602)

		 Increase in other liabilities

84,1507,608

		Other(56,702)4,278

			Subtotal

425,710

611,462Interest received

14,58013,423

Dividends received

13,972

14,525Interest paid

(27,517)(28,225)

Income taxes paid

(119,968)(159,360)

306,777

451,825

Purchase of property, plant and equipment(391,598)(358,141)

Purchase of intangible assets(119,386)(128,808)

Purchase of leased assets(432,871)(444,223)

40,84032,528Net cash provided by operating activities
Cash flows from investing activities:Proceeds from sale of property, plant and equipment, andintangible assets
Proceeds from sale of leased assets

35,634

27,122

Collection of lease receivables

259,697

302,899Purchase of investments in securities and other financial assets(including investments in subsidiaries and investments accounted
for using the equity method)(95,509)(152,842)

Proceeds from sale of investments in securities and other financial
assets (including investments in subsidiaries and investments
accounted for using the equity method)

129,677

121,616

Other

23,337(12,696)(550,179)(612,545)

Net cash used in investing activities

46

Hitachi, Ltd. | Annual Report 2015

Millions of yen

2014

2015

Cash flows from financing activities:
Increase (decrease) in short-term debt, net(66,270)

136,973

Proceeds from long-term debt

777,069

835,140

Payments on long-term debt

(378,741)(629,063)

Proceeds from payments from non-controlling interests

5,602

3,171

Dividends paid to Hitachi, Ltd. stockholders(48,194)(55,443)

Dividends paid to non-controlling interests(25,882)(32,143)

Acquisition of common stock for treasury(4,431)

(421)

16

28

Purchase of shares of consolidated subsidiaries from non-controllinginterests(29,450)(25,232)

Proceeds from partial sales of shares of consolidated subsidiaries tonon-controlling interests

−

427

(879)

(231)

Net cash provided by financing activities

228,840

233,206

Effect of exchange rate changes on cash and cash equivalents

51,862

68,560Net increase in cash and cash equivalents

37,300141,046

Cash and cash equivalents at beginning of year

523,357

560,657¥ 560,657¥ 701,703

Proceeds from sales of treasury stock

Other

Cash and cash equivalents at end of year

47

Financial Section

Summarized Consolidated Statements of Financial Position by
Manufacturing, Services & Others and Financial Services
Hitachi, Ltd. and Subsidiaries
March 31, 2015 and 2014
Billions of yen

As of March 31, 2014
Manufacturing,Services andOthersFinancial
Services¥4,596.9¥1,082.2

As of March 31, 2015

Total*

Manufacturing,Services andOthersFinancial
Services

Total*¥ 5,262.0¥5,115.2¥1,184.8¥ 5,882.4

AssetsCurrent assets
		 Cash and cash equivalents

521.4

156.7

560.6

654.7

119.7

701.7

			Trade receivables

2,221.6

588.7

2,573.3

2,448.9695.2

2,870.0

			Lease receivables

69.8

266.9

321.4

55.9

299.5

337.3

1,335.5

2.6

1,339.0

1,447.8

3.3

1,458.1

448.4

67.0

467.6

507.7

66.9

515.1

			Inventories
			Other current assets
		Non-current assets

4,409.7

1,513.3

5,836.1

4,869.2

1,768.8

6,551.3

			 Investments accounted for using theequity method

600.3

18.3

599.4

682.2

19.4

681.6

			 Investments in securities and otherfinancial assets

743.3

588.3

1,291.0

772.6

709.8

1,449.7

			Lease receivables
			 Property, plant and equipment
			Intangible assets
			Other non-current assets

65.3

574.8

610.8

47.3

669.7

680.6

2,019.6

235.3

2,258.9

2,204.7

268.0

2,472.4

679.3

52.8

732.2

873.7

59.8

933.5

301.7

43.6

343.6

288.4

41.8

333.2

¥9,006.7¥2,595.6¥11,098.1¥9,984.4¥2,953.6¥12,433.7

Current liabilities¥3,591.9¥1,157.1¥ 4,300.4¥3,962.9¥1,270.5¥ 4,779.4

		Short-term debt

501.8

422.5

775.5

574.4

514.3

977.7

		 Current portion of long-term debt

250.3

347.9

541.4

193.0

357.9

483.5

		 Other financial liabilities

249.1

43.5

269.5

262.8

58.5

296.4

		Trade payables

1,279.6

276.3

1,347.1

1,388.5

273.0

1,426.5

		 Other current liabilities

1,310.9

66.7

1,366.7

1,544.0

66.7

1,595.3

Non-current liabilities

1,842.2

1,130.1

2,928.9

2,049.6

1,346.2

3,357.9

		Long-term debt

714.0

1,039.9

1,717.0

860.2

1,266.3

2,096.1

		 Other financial liabilities

55.8

45.1

99.7

77.7

42.2

117.5

		 Retirement and severance benefits

772.1

7.7

779.8

717.9

6.2

724.2

				Total assets
Liabilities and Equity

		 Other non-current liabilities

300.2

37.2

332.2

393.7

31.3

420.0

5,434.2

2,287.2

7,229.3

6,012.5

2,616.8

8,137.3

Hitachi, Ltd. stockholders’ equity

2,503.4

178.5

2,668.6

2,760.3

195.3

2,942.2

Non-controlling interests

			Total liabilities

1,069.0129.8

1,200.1

1,211.5

141.4

1,354.0

			Total equity

3,572.5

308.4

3,868.8

3,971.9336.8

4,296.3

			 Total liabilities and Equity¥9,006.7¥2,595.6¥11,098.1¥9,984.4¥2,953.6¥12,433.7

Interest-bearing debt

¥1,466.1¥1,810.4¥ 3,033.9¥1,627.7¥2,138.6¥ 3,557.3

27.8%

6.9%

24.0%

27.6%

6.6%

23.7%

0.41

5.87

0.78

0.41

6.35

0.83

Total Hitachi, Ltd. stockholders’ equity ratio
D/E ratio (including non-controllinginterests) (times)* Total figures exclude inter-segment transactions.
48

Hitachi, Ltd. | Annual Report 2015

Consolidated Statements of Profit or Loss by
Manufacturing, Services & Others and Financial Services
Hitachi, Ltd. and Subsidiaries
March 31, 2015 and 2014
Billions of yen

As of March 31, 2014
Manufacturing,Services andOthersFinancial
Services¥9,467.7

EBIT(Earnings before interest and taxes)Income from continuing operations,
before income taxes

RevenuesNet income attributable to Hitachi, Ltd.
stockholders

As of March 31, 2015

Total*

Manufacturing,Services andOthersFinancial
Services

Total*¥342.6¥9,666.4¥9,569.8¥356.2¥9,774.9

659.5

32.7

691.2

499.9

35.4

534.0

647.1

32.7

678.4

485.5

35.4

518.9

  403.7

12.5  413.8  206.0

14.3  217.4* Total figures exclude inter-segment transactions.

Consolidated Statements of Cash Flows by
Manufacturing, Services & Others and Financial Services
Hitachi, Ltd. and Subsidiaries
March 31, 2015 and 2014
Billions of yen

As of March 31, 2014
Manufacturing,Services andOthersFinancial
Services

Cash flows from operating activities¥ 460.8

Cash flows from investing activities
Free cash flows
Cash flows from financing activities

As of March 31, 2015

Total*1

Manufacturing,Services andOthersFinancial
Services

Total*1¥(125.0)¥ 306.7¥ 586.4¥ (85.9)¥ 451.8(387.7)(187.8)(550.1)(449.1)(191.3)(612.5)73.1(312.9)(243.4)137.2(277.3)(160.7)(103.7)

326.6

228.8

(69.1)

236.8

233.2

Effect of exchange rate changes on cash
and cash equivalents

55.6

1.3

51.8

65.1

3.4

68.5

Net increase (decrease) in cash and cash
equivalents

25.0

15.0

37.3

133.2

(37.0)

141.0

Cash and cash equivalents at beginningof the year

496.4

141.7

523.3

521.4

156.7

560.6

Cash and cash equivalents at end of the year

¥ 521.4¥ 156.7¥ 560.6¥ 654.7¥ 119.7¥ 701.7

Core free cash flows*2    (9.2)(366.5)(377.3)138.1(292.1)(176.4)*1 Total figures exclude inter-segment transactions.
*2	Operating cash flows plus collection of lease receivables less cash outflows for the purchase of property, plant and equipment, intangible assets, and leased assets.
Note: Consolidated Financial Statements by Manufacturing, Services & Others and Financial Services represent unaudited financial information prepared by theCompany for the purpose of this supplementary information.

Role of the Financial Services Segment
Hitachi’s Manufacturing, Services & Others segments and its Financial Services segment are each clearly positioned and managed as distinct
businesses with different characteristics. The Manufacturing, Services & Others segments work in coordination with the Financial Services
segment to expand the Social Innovation Business.
Increasing the financing receivables owned by Hitachi Capital Corporation, which constitutes the Financial Services segment, is the basis for
growth in the financing business and regarded as investment to generate higher returns on equity. Credit rating agencies typically permit a higher
level of interest-bearing debt and D/E ratio for financial services companies than for manufacturing and services companies. The credit ratings ofHitachi, Ltd. are assigned by credit rating agencies on the basis of key financial indicators that exclude Hitachi’s financial services business.
49

Corporate Data / Stock Information
As of March 31, 2015

Corporate Name

Number of Employees (IFRS)Stock Exchange Listings

Hitachi, Ltd. (Kabushiki Kaisha Hitachi

336,670

Tokyo, Nagoya

Number of Shares Issued

Accounting Auditor

Common Stock: 4,833,463,387 shares

Ernst & Young ShinNihon LLC

Number of Shareholders

Investor Relations Contacts

379,564

JAPAN

Seisakusho)
URL
http://www.hitachi.com/
Principal Office
6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo, 100-8280, Japan

Hitachi, Ltd.
Administrator of Shareholders’

6-6, Marunouchi 1-chome,

Register

Chiyoda-ku, Tokyo, 100-8280

FoundedTokyo Securities Transfer Agent Co., Ltd.

TEL: +81-3-3258-1111

1910 (Incorporated in 1920)

Nippon Building 4th Floor, 6-2, Otemachi

E-mail: IR@hdq.hitachi.co.jp

2-chome, Chiyoda-ku, Tokyo, 100-0004,

U.S.A.

Japan

Hitachi America, Ltd.

Capital Stock458,790 million yen

50 Prospect Avenue,
Tarrytown, NY 10591
TEL: +1-914-333-2987
E-mail: investor.info@hal.hitachi.com
U.K.
Hitachi Europe Ltd.
Whitebrook Park, Lower Cookham Road,
Maidenhead Berkshire SL6 8YA
TEL: +44-1628-585714

10 Largest Shareholders
Share Ownership
Number of Shares(shares)

Percentage ofTotal (%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

301,833,000

6.24Japan Trustee Services Bank, Ltd. (Trust Account)

221,101,215

4.57

Hitachi Employees' Shareholding Association

99,966,384

2.07

Nippon Life Insurance Company

93,265,195

1.93

NATS CUMCO*1

84,223,880

1.74

STATE STREET BANK AND TRUST COMPANY 505225

78,072,703

1.62

THE BANK OF NEW YORK MELLON SA/NV 10

74,820,713

1.55

The Dai-ichi Life Insurance Company, Limited

71,361,222*2

1.48

STATE STREET BANK WEST CLIENT-TREATY 505234

64,907,327

1.34

STATE STREET BANK AND TRUST COMPANY

58,732,405

1.22

Name

*1 NATS CUMCO is the nominee name of the depositary bank, Citibank, N.A., for the aggregate of Hitachi’s American Depositary Receipts (ADRs) holders.
*2 The number of shares held by The Dai-ichi Life Insurance Company, Limited includes its contribution of 6,560,000 shares to the retirement allowance trust (the holder of said shares, as listed
in the Shareholders’ Register, is “Dai-ichi Life Insurance Account, Retirement Allowance Trust, Mizuho Trust & Banking Co., Ltd.”).

50

Hitachi, Ltd. | Annual Report 2015

Ratings
Rating Agency

Long-term

Short-term

Moody’s

A3

P-2

Standard & Poor’s (S&P)

A-

A-2

Rating and Investment Information, Inc. (R&I)

A+

a-1

Government and Municipality

0.00%

Shareholder Composition
Number of
Shareholders

Share Ownership(shares)408

1,479,129,762

374,327

1,088,836,131

Foreign Investor

1,323

2,172,972,552

Other

3,502

92,478,374

4

46,568379,564

4,833,463,387

Class of Shareholders
Financial Institution and Securities Firm
Individual

Other

Financial Institution and
Securities Firm

1.91%

30.60%

Shareholder Composition
4,833,463,387

Government and Municipality
Total

ForeignInvestor

Individual

22.53%

44.96%* Treasury stock is included in “Other.”

Stock Price and Trading Volume
Hitachi Stock Price  

Nikkei Stock Average (225)

Trading Volume (1,000 shares)

200

2,400,000

150

1,800,000

100

1,200,000

50

600,00000Year ended
March 31,2006

Year ended
March 31,2007

Year ended
March 31,2008

Year ended
March 31,2009

Year ended
March 31,2010

Year ended
March 31,2011

Year ended
March 31,2012

Year ended
March 31,2013

Year ended
March 31,2014

Year ended
March 31,2015

High (Yen)

874

936

947

843

404

523

547

578

877

939.9

Low (Yen)

604

644

569

230

227

313

360

401

508

660

Price at end of March

833

914

591

266

349

433

531

543

762

823.2

* The closing price on March 31, 2005 equals 100.

51